Bankruptcy Blog

Real Housewife of New Jersey's Bankruptcy, and Why It Hurts the Rest of Us

            In the last month, Real Housewife of New Jersey (“RHONJ”) star Teresa Giudice has been given the OK to move forward with a malpractice lawsuit against her former bankruptcy attorney. She is alleging that her attorney’s negligence and misconduct led to her spending a year in prison. This all stems from 2009 when she and her husband filed bankruptcy in Federal Court. In 2011, the star allowed her bankruptcy to be dismissed. At this point she was fine, but because of her stardom, her bankruptcy case drew the attention of many interested spectators. Investigators reviewed her bankruptcy papers and realized that she and her husband had not been honest about their income; to include they had not reported over $100,000 of income from being on the TV show RHONJ. Federal prosecutors pursued indictment on bankruptcy fraud, among other crimes.

            Being a TV star can be a double-edged sword, ESPECIALLY if you’re dishonest; the fame can make you money, but it can also shed unwanted light on the less-than-upstanding areas of your life. But, as with nearly everything in life, you can’t have your cake and eat it too. Here, Teresa Giudice can’t exploit her fame (garnered from putting her personal life on display on TV’s RHONJ) for fortune, and then complain that her personal affairs are in the spotlight.

            My issue with this RHONJ story is that it affects the rest of us that have not voluntarily displayed our personal lives to the world, and are not becoming rich celebrities. Teresa Giudice put the bankruptcy code in the national spotlight for all the wrong reasons. The bankruptcy code is a set of laws that are rooted in the Constitution and even alluded to in The Bible. The bankruptcy code is designed to help out individuals, farmers, corporations, and others from financial trouble. In my experience, from filing hundreds and hundreds of individual bankruptcies, is that nearly every single one of them was an honest bankruptcy. My clients disclosed their incomes, disclosed their assets, and so forth. My clients came to me after having already borrowed from family, consolidated debts, sold stock, cashed-out 401(k)s, put their vehicle title up as collateral, etc., all in an attempt to climb out of the cycle of debt.

            The bankruptcy code was designed for individuals like my clients, who lived by a budget, but life came at them fast: They lost a job or got injured (or both at the same time). Now, the individual has astronomical (criminal, in my opinion) medical bills, has no income because they cannot work while injured, and still has their car payment, mortgage, utilities, kids’ school expenses, food, etc. What kind of society would we be if we condemned these individuals to a lifetime of debt? A lifetime of trying to dig out of this hole? A lifetime of phone calls, interest-only payments, and wage garnishments? We would not be a society that our Constitution, nor the Bible, envisioned.

            The bankruptcy code offers these individuals a way out from under these debts. Whether they pay a portion back in Chapter 13, or reset it in Chapter 7; one way or another, the debt goes away and the individual gets a fresh start. The laws are set up so that you pay back what you can afford, and it offers great benefits to millions of qualifying individuals. BUT, when someone like Teresa Giudice comes along and attempts to makes a mockery of the system on a national scale, it puts a stigma on it for the rest of us that are trying to make it honest. All of the sudden, the only exposure the national public gets to the world of bankruptcy is that someone tried to abuse it and defraud it. The public relates “bankruptcy” with “fraud.”

            The bankruptcy code is offering so many indivuals a deserved fresh start, but a bad apple like Teresa Giudice from RHONJ is giving bankruptcy a bad name and bad publicity.

Lucas Ruffing