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The faces of bankruptcy

by John Bulger
| April 11, 2010 9:00 PM

POCATELLO (AP) - This year, more than 8,000 families in Idaho will be in the unenviable position of having to file for bankruptcy, about a third of them from Southeast Idaho. Jim Pappas, a United States bankruptcy judge for the District of Idaho will preside over many of those cases, helping families regain control of their lives and their dignity.

There is a stigma surrounding bankruptcy, Pappas notes. He also points out that Abraham Lincoln filed for bankruptcy after failing in his bid to become a storekeeper. To Pappas, it reflects this nation's remarkable inclination to allow people to fail in their quest for success, pick themselves up, dust themselves off, and try again.

"It's in our collective interest that we all succeed," he said. "If people can't support themselves, who does?"

Pappas believes bankruptcy provides a critical economic safety net to allow risk taking, to nurture the entrepreneurial spirit that is this country's hallmark. The Lincoln example is but one of many where failure was followed by triumph.

Part of the social shame of bankruptcy is the notion that people are gaming the system, dodging their responsibilities. Pappas disagrees with that premise.

"I think nationwide and in Idaho ... 1 to 3 percent (of bankruptcy petitioners) have questionable motives," he said. "The folks I see in my courtroom want to be anywhere else in the world. They don't come here because it's sport. They're embarrassed."

Pappas said 93 percent of bankruptcy cases involve consumers, rather than big business entities. And the three main triggers for those financial conundrums could befall most anyone.

The primary culprit about half of the cases are precipitated by catastrophic medical bills, Pappas said. Most of those cases involve people who are insured, but have too little insurance.

"Beneath the surface, they're using their credit card to pay their medical bills," he said. "Even the IRS accepts credit cards."

To that end, Pappas feels that health care reform is a necessity, although he is unsure what the recent legislation will eventually morph into.

"I do subscribe to the notion we absolutely had to do something," he said. "We were a terminal patient."

The second most common reason for bankruptcy filing is the loss or interruption of employment.

"If you're off two or three months, you're in the soup," Pappas said.

Third is marital and family problems. He notes that among single filers, the majority are women, likely because they are often the primary custodians of the children and have more limited employment opportunities than men.

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