Legal and policy debates aside, it’s pretty clear to Linda Maraman what’s driving people in Nebraska to bankruptcy court. 

And it’s not so much wild  spendthriftiness and irresponsible abuse of credit card debt,  the accepted wisdom used to justify reform of the bankruptcy laws more than a year ago. 

No, it’s the same thing national studies have shown: Medical costs from health troubles almost always lead to misfortune in employment and loss of income.    Then comes bankruptcy. 

“Medical is huge,” said Maraman, Lincoln office manager for Consumer Credit Counseling Services of Nebraska, one of the groups authorized to counsel people required by the new bankruptcy law to seek counseling before they file.  “People are upside down on their finances, and they’re not trying to get by with anything,  they’re just really in trouble.   With or without the law, they were still going to have to file.”

Maraman’s assessment is fairly consistent with a new study, “Debt Trends in Nebraska, done by the Nebraska Appleseed Center for Law in the Public Interest.”

Appleseed surveyed 15 bankruptcy trustees in Nebraska, the people appointed by the government to supervise bankruptcy proceedings in federal court.  

“They’re definitely the experts,” said Danielle Nantkes, staff attorney for the Appleseed Center. 

That study showed bankruptcy filings rising in Nebraska faster than in the 8th federal appeals court circuit and  faster than the nation in 2004 and 2005. 

What’s moving these circumstances?

A combination of poverty, low income, high costs  and misfortune, according to the study.

One trustee said, “You can link credit card debt and over-consumption together… medical expense comes in second.”   Among some other trustees, medical costs came in first.   

Another influence cited by trustees was the high cost of operating an automobile in a state where public transportation isn’t always convenient, and entirely absent in wide portions of the state.

Low-rent jobs don’t help.

“One trustee in particular noted that the low wages in Nebraska, especially western Nebraska, contribute to increased (bankruptcy) filings,” the report said.

“I guess to really put in a nutshell our research has demonstrated  what we hear from low-income working families,” said Nantkes.  “No amount of sound budgeting helps to stretch those minimum-wage incomes to extend to necessities like health care. Thus,  they’re forced to turn to bankruptcy.”  

“Hopefully, we as a state can do  more to provide critical work support, child care and Medicaid, to help them from falling off the cliff.”

Maraman sees about 30 or 40 cases a month at the Lincoln office of Consumer Credit Counseling Services of Nebraska.

The new bankruptcy law requires debtors to undergo credit counseling before they file for bankruptcy, with the hope that they can work out their debts without filing.

But Maraman says most of the people she sees are too far under to escape filing.

“Most of the people, not all of them, are going ahead and filing Chapter 7,” she said.

Typically, people she sees have been trying to pay their way and just can’t do it, Maraman said.

“I can look at their  budget, debt, goals, and I always tell them,  ‘Look, if you file bankruptcy, can you make it after bankruptcy?   That’s the scary part. With some I’m not really sure.   Some, maybe they can.

“People in this country are in a lot of debt.”

After overwhelming medical expenses, another common issue Maraman sees is the attempt to salvage home equity.

“People are coming in to file to save their home,” she said.  “They are getting ready or are in foreclosure and the only way is to go into Chapter 13, to reorganize.”

What she doesn’t see, Maraman said, is wild, irresponsible spending forcing bankruptcies.

“I just don’t see that,” she said. “We just don’t see that happening.  It’s people who are hardworking people.  Circumstances beyond their control have forced them to go into bankruptcy,  because of foreclosure, loss of job, accelerating medical bills.

Certainly credit card spending is often rampant, but necessities like medical care sometimes force the use of the credit card, according to Maraman.

“They’ve paid their house payment, they’re doing whatever they can do to survive,” she said. “That’s exactly what we see.  They’re wonderful people.  What we do is try to help them to look forward after bankruptcy, so they don’t get in trouble again.”

Reach Richard Piersol at 473-7241 or at dpiersol@journalstar.com