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Texas is fertile ground for bankruptcy

Posted on 04/10/2004 10:48:08 PM PDT by lewislynn

April 10, 2004, 11:32PM

Texas is fertile ground for bankruptcy

By PURVA PATEL
Copyright 2004 Houston Chronicle

Three years ago Adrian Gaspar could easily supplement his $45,000 Houston police officer's salary by moonlighting as a security guard at local construction sites. At one point he made as much as $100,000.

Last year the 39-year-old found himself fighting off creditors.

"I'm here from Romania, and I thought, 'Hey, this is the American Dream I'm living.' And then all of a sudden I was filing for bankruptcy," Gaspar said.

The economic slump that worsened following the 2001 terrorist attacks dried up new construction and left Gaspar without a second job. The Manvel resident drained his savings, sold his two extra cars and a Harley-Davidson, hawked car parts on eBay and cashed in his gun collection to pay his bills. He resorted to bankruptcy when he ran out of things to sell.

"I'll have a bad mark on my credit report for several years, but at least I can feed my family," he said. "Family comes first."

Gaspar was one of 25,210 individuals who filed for personal bankruptcy last year in the U.S. Southern District of Texas, helping to make it the nation's top judicial district in terms of the percentage increase in filings.

The number who filed in 2002 was 20,459.

Personal bankruptcy filings increased 5.3 percent nationwide, but they jumped 23.2 in the Southern District of Texas and 15 percent statewide. Nationally, personal bankruptcy filings edged up to 1,625,208 from 1,539,111.

Gaspar's situation is typical of most personal bankruptcies, where consumers have financially overextended themselves. But Joyce Cavanagh, a family economics specialist at Texas A&M University, says South Texas' high 2003 unemployment figures may be why the number of bankruptcy filings in the area grew.

The Southern District includes 43 counties in southeast Texas, including the Houston, Galveston, Victoria, Corpus Christi, Laredo, McAllen and Brownsville areas.

The national unemployment rate last year stood at an average 6.0 percent. Houston's was 6.9 percent, and McAllen's was as high as 13.6 percent, according to the Texas Workforce Commission.

"Those numbers don't include people who have gotten discouraged and stopped looking," Cavanagh added. Some of those frustrated job seekers are still living off credit cards and other debt.

As the unemployed ran through their savings and started racking up debt, many were likely forced to file for bankruptcy.

Bankruptcy lets those mired in debt declare financial insolvency through the court and be freed of financial obligations.

But the process is noted on credit reports, which can make it harder or more expensive to get loans, credit cards or auto insurance.

Declaring bankruptcy won't wipe out all of a person's debt. Filers still have to pay money owed for child support or alimony, fines and some taxes, as well as student loans owed to a school or government agency, unless the court decides that payment would be an undue hardship.

Layoffs in the energy sector in 2002 have especially affected Houston, said Kelly Rote, spokeswoman for Money Management International, a Houston-based consumer credit counselor. Mergers in the petrochemical industry have also left a number of people displaced, she added.

"I've known some relatively wealthy people forced into unemployment for a long time," Rote said. "Even they are forced into bankruptcy to survive."

Texans in the southern region of the state also tend to have lower incomes and may not be insured, making them more inclined to take out cash advances or payday loans at high interest rates.

"Medical costs facing our seniors as well as those uninsured are making it more challenging for families throughout Texas," Rote said.

Between 750,000 and 1.1 million people in Harris County are uninsured or underinsured, according to Gateway to Care, which works to increase health care access in the county. As unemployment grows, so does the number of people losing their health insurance. The numbers are likely greater farther south, experts said.

Others said news about pending reforms to bankruptcy laws also usually cause a spike in filings as people rush to the courts before changes take effect.

One bankruptcy attorney said filings were on the rise in Kingwood because many home buyers had taken out mortgages in the area that they couldn't afford and couldn't keep up with the payments.

"It's different here," said Peter Bergman, a bankruptcy attorney in Kingwood. "People bought more house than they should have."




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1 posted on 04/10/2004 10:48:08 PM PDT by lewislynn
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To: lewislynn
My mom taught me to live within my means. Don't spend what I don't have.

I'm a broke college student, but still manage to pay rent, bills, and even have a couple (not many) luxeries. (I consider 'net access a necessity!!)

IF I had to however, I would glady give up my luxuries if I found that my income could not support it.

God provides my necessities.

I hate that people end up going the bankruptcy route, but jeez, people. Don't assume more debt than you can handle!!!

2 posted on 04/10/2004 10:54:11 PM PDT by PurVirgo (If you give a lawyer viagra, he only grows taller)
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To: lewislynn
blah blah

People go bankrupt in boom times too.

Of course, I am sure this is Bush's fault.

3 posted on 04/10/2004 10:56:44 PM PDT by GeronL (Hey, I am on the internet. I have a right (cough, cough) to write stupid things.)
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To: GeronL
Personal bankruptcy filings increased 5.3 percent nationwide, but they jumped 23.2 in the Southern District of Texas and 15 percent statewide

That's pretty hard to ignore. I know you'd rather this article be about California, but it's about Texas.

4 posted on 04/10/2004 11:03:07 PM PDT by lewislynn (Free traders know it isn't , they just believe cheap popcorn makers raises their living standards.)
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To: PurVirgo
I've known some very good people that have gone through it. I have a friend that was making a lot of money for several years and then all of a sudden his career crashed because he was over qualified for most jobs and he couldn't ger an offer. It wasn't like the guy wasn't willing to work. He held two full-time jobs at once but it still wasn't close to what he was making before.

Unfortunately, bad things do sometimes happen to good people.
5 posted on 04/10/2004 11:09:18 PM PDT by boycott
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To: lewislynn
The economic slump that worsened following the 2001 terrorist attacks dried up new construction ...

And housing boomed just about everywhere else.

6 posted on 04/10/2004 11:11:03 PM PDT by Moonman62
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To: lewislynn
Hey Houston Chronicle, how about a more accurate title like: "Dumb Texans blow their money".

sold his two extra cars and a Harley-Davidson, hawked car parts on eBay and cashed in his gun collection to pay his bills. He resorted to bankruptcy when he ran out of things to sell.

The "spend it on material goods as fast as you make it" mentality is rampant all across this country. Had he invested in some quality cash flow real estate instead of depreciating goods he might not have to work by now. (Ha, can you tell what I do with my money?) I hate to see people waste their money on excesses that don't bring any return. Been there, done that, never again.

7 posted on 04/10/2004 11:14:54 PM PDT by Reagan is King (The modern definition of 'racist' is someone who is winning an argument with a liberal.)
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To: Reagan is King
The "spend it on material goods as fast as you make it" mentality is rampant all across this country. Had he invested in some quality cash flow real estate instead of depreciating goods he might not have to work by now. (Ha, can you tell what I do with my money?) I hate to see people waste their money on excesses that don't bring any return. Been there, done that, never again.

Some gun collections increase in value the longer you keep them. :p

Yeah, from reading the article, it sounds as if Adrian Gaspar is not living within his means. $45,000, in Texas.

8 posted on 04/10/2004 11:39:23 PM PDT by Frohickey
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To: boycott
Good people make bad decisions. My sister's family make 100K a year but are seriously one paycheck away from bankruptcy. Shopping is recreation to them. My sister is quoted as saying that "We don't do 401(k), it eats up too much of your check". Well, good luck with that, I may be able to slide your hubby a few dollars for mowing the yard when he's 70. They are the no payments, no interest kings. I'm a Dave Ramsey guy, I pay cash.
9 posted on 04/11/2004 1:10:26 AM PDT by SoDak (I'm a monthly, how about you?)
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To: Reagan is King
The Harley isn't a bad luxury, it won't soak you as bad as the cars, which are the biggest waste of money for most families.
10 posted on 04/11/2004 1:13:06 AM PDT by SoDak (I'm a monthly, how about you?)
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To: SoDak
"My sister's family make 100K a year but are seriously one paycheck away from bankruptcy."

These apparently are people who feel they must live the image of well to do folks.
11 posted on 04/11/2004 4:32:55 AM PDT by B4Ranch (“WE OFTEN GIVE OUR ENEMIES THE MEANS FOR OUR OWN DESTRUCTION.”)
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To: lewislynn
The conveniently omitted the value of his home from the story.
12 posted on 04/11/2004 6:59:01 AM PDT by Ben Chad
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To: lewislynn
The country is awash in cheap money. Credit is everywhere. Too much credit chasing too few good credit risks. My credit card company called before the holidays offering to cut me a check for over $8000. The reason they offered is the reason that I refused. I was satisfied with my debt free position and did not need the money. But it is a sad that there is so much money that banks are begging good credit risks to go into unneccessary debt. It is too bad all this capital could not be put to work to invest in productive businesses in this country that would pay taxes and create jobs.
13 posted on 04/11/2004 7:32:32 AM PDT by Biblebelter
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To: lewislynn
The average consumer credit score nationally was 678. Boston's average score was 705, second only to Minneapolis at 707. Texans fared the worst in the Experian survey, with Dallas coming in last out of 20 metropolitan areas at 643, preceded by Houston at 655.
14 posted on 04/11/2004 7:35:02 AM PDT by sarcasm (Tancredo 2004)
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To: sarcasm
WOW!
15 posted on 04/11/2004 7:44:34 AM PDT by lewislynn (Free traders know it isn't , they just believe cheap popcorn makers raises their living standards.)
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Comment #16 Removed by Moderator

To: CapnBarbossa
Hmmm... April 7, 2004... Interesting.

Doom, indeed.
17 posted on 04/11/2004 9:07:31 AM PDT by Texas_Dawg
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To: SoDak
Ha, I almost excluded the Harley from the "bad purchase" rant. I want one too, lol. It was the two "extra" cars that really got me.
18 posted on 04/11/2004 10:44:09 AM PDT by Reagan is King (The modern definition of 'racist' is someone who is winning an argument with a liberal.)
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To: boycott
=/ And I'm very sorry that it happens.

Not to minimize your friend's plight, but I think that maybe he is in the minority of those that do end up filing for bankruptcy.

19 posted on 04/11/2004 5:39:16 PM PDT by PurVirgo (If you give a lawyer viagra, he only grows taller)
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To: B4Ranch
Certainly. When I want new furniture, I wait til my sister makes a trip to Ethan Allen to replace something that is out of style this year. I just got a new 19" TV for my garage from them this weekend for $50 as they replaced the 19" in my nephew's room with a new 32" Wega. Keep in mind that my nephew is THREE years old, and is well on his way to becoming criminally spoiled, and a burden to society eventually. Actually bodes well for me though, as you can see.
20 posted on 04/11/2004 6:55:36 PM PDT by SoDak (I'm a monthly, how about you?)
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