Let's take a look at a fictional consumer living just outside Los Angeles, CA. For purposes of this article, let's call her "Angie."

Angie is a 35 year old single mother of two. She was employed as a realtor from 2000 to 2007. During the early 2000s, both home ownership rates and prices set historical records in Angie's local market.

Then, cracks started to appear in the market & values started to slide. As 2007 ended, her local real estate market went into a slump with no end in sight. In fact, things have gotten slowly, but progressively, worse. And, as the reader might imagine, Angie's volume of business slowed considerably. Since the outlook was bleak in real estate, Angie quit her job to find a new career doing something else. She'd had enough of real estate to last a lifetime, and was interested in trying a new career...

Since that time, Angie has been unemployed. But, Angie didn't adjust her lifestyle and spending habits to her new financial situation. Angie's bills have continued to pile up. She's since racked up more than $12,000 in fresh credit card debt and her house's value (like the rest in her neighborhood) has fallen more than 20% from it's peak. In early 2008, Angie took out a $100,000 home equity loan to live off. This adds to the $230,000 primary mortgage that her house is still subject to. So, it's questionable whether Angie has any equity in her house today, given the falling values. To compound these issues, Angie has large student loans obligations that need to be paid monthly.

Angie really wants to repay her debts, but is it realistic that she'll be able to?

Is she going to be able to repay these debts that seem to only be increasing? Or will Angie have to file for bankruptcy as her debts continue to mount? Is it realistic to think that filing for bankruptcy will have any effect on Angie's situation? Finally, what will be the effect on Angie's credit if she has to file for bankruptcy?

For some consumers, filing for bankruptcy might be an option that they consider when debts skyrocket & income plummets. If they can't realistically repay their debts, the alternatives start to look limited.

In 2005, the bankruptcy law was substantially changed with the alleged intent to stop some people from abusing the bankruptcy process. The Bankruptcy Abuse Prevention and Consumer Protection Act, or BAPCPA for short, was passed in 2005. Since it went into effect, there has been substantial debate as to what kind of effect it will have on consumers like Angie (or what the magnitude of the problem there really was to begin with) and others.

Even post BAPCPA, many bankruptcy cases filed are still regular Chapter 7 bankruptcies filed by legitimate debtors who can't repay their debts and need to discharge some of them. Many debtors need "fresh starts" due to financial circumstances that are beyond their control.

So, what about Angie? Is bankruptcy in her future? And, if so, will she be able to discharge some of her debts in a Chapter 7 proceeding or will she be forced to file for Chapter 13 & design a repayment plan for her debts?
Who knows. But, this is a situation that seems to be becoming more common, given the recent bankruptcy and debt statistics that have recently surfaced in the news...