Attorney Radmila Fulton has no doubt credit card companies should share some of the blame when individuals slide so hopelessly into debt they need to file for bankruptcy. Fulton talks from personal experience when she says card companies make it far too easy for people to get credit. Her 10-year-old daughter already has received preapproval for a credit card.

Such unsolicited approaches turn up regularly amid the junk mail in most households, and Fulton refers to stories of credit card preapprovals even being sent to family pets. Fulton, a sole practitioner in Mission Valley, reports a sharp increase in personal bankruptcies over the first quarter of this year but thinks this has less to do with the economy than with the Bankruptcy Reform Bill.

In several ways the proposed revision of bankruptcy law would make it more difficult for individuals to file, something Fulton suggests has spurred increasing numbers to jump in now ahead of the law change. However, the recent power shift in the Senate has created considerable uncertainty as to the final content of the bill and the timing of its passage into law.

Fulton says the original proposal contained a provision for means testing that would have established income thresholds above which individuals would not automatically be able to file for Chapter 7 bankruptcy. Instead of being able to clear the slate as best they could and make a fresh start, people would be pushed more toward settling for some type of payment plan under Chapter 13.

The bill also threatens to slim down private property protection under a Chapter 7 liquidation of assets by lowering some of the exemption and equity values applying to homes, cars, furnishings, insurance and retirement funds. Fulton believes the current levels are fair and shouldn’t be reduced. She also disputes another reason for the law reform — the need to stop alleged abuse by people recklessly incurring large debts and then just walking away.

“In my experience people don’t abuse the system,” Fulton says. “Independent studies have also shown that is not the case. The main reasons which bring people to the brink of bankruptcy are loss of their job, divorce or some medical calamity. Nobody comes in (to my office) and wants to file. People are embarrassed about it.” She says that as long as things run smoothly the vast majority of people can cope with their debts and keep making the necessary repayments. Fulton argues that sufficient protection against abuse exists under the law, which enables any creditor who suspects fraud or foul play to file through the court and prevent a debtor’s discharge.

Court-appointed trustees act as another safeguard. They scrutinize the income, expenses and budget of anyone filing under Chapter 7 and would be alerted if someone deliberately tried to avoid debts they had the means to pay.

— Frank Nelson