Bankruptcy

If bills are piling up, it is time for a personal financial audit. You must determine where your hard earned money is really going?

For some people, small daily purchases can become enslaving and lead to big financial problems. These “vices” can include daily coffee purchases, lottery tickets and alcohol.  Bigger still is the habit of SMOKING.

I remember a neighbor in her late 70?s who smoked her whole life and still went out dancing every Friday night. She is not typical though and most of us would agree with the Surgeon General that smoking has consequences.   Here are a just a few facts:

• the average smoker started at age 15 and smoked daily by age 18
• the average smoker loses more than 13 years off of his life
• smoking causes hundreds of thousands of preventable deaths in the US each year
• one in five deaths is smoking related
• most who smoke, do so for the purpose of relaxation

Even if cigarettes were not a health concern, they certainly are a wealth concern for both consumers and the government. With the average name brand selling for $ 8.35 a pack, the federal cigarette tax accounts for $ 1.01 of the cost. Each state then adds its own tax.  Rhode Island has the highest cigarette tax at $ 3.47/ pack plus a 7% sales tax.  I can’t imagine forking over $ 8.35 a day just to relax.

So we agree . . . .smoking is expensive.  But is smoking a proper excuse for not having enough money to pay your bills? In other words, can a debtor file a Chapter 7 bankruptcy and blow smoke rings at the same time?

I recall a bankruptcy trustee getting angry when he saw cigarettes listed as an expense on Schedule J of a Chapter 7 bankruptcy petition. He asked the debtors whether they would “continue using creditor?s money to buy their cigarettes.” Clearly, cigarette expense should never be the primary reason that credit card bills remained unpaid.

I counseled a couple who were spending more than $ 1,000 on cigarettes each month. Each smoked two packs a day. ($ 8.35 X 4 packs X 30 days = $ 1,002 a month) Under the circumstances, there is no way they would have qualified for a Chapter 7 bankruptcy.  It would be an abuse of the bankruptcy process.

Keep in mind that the trustee’s job is to determine if there is any money to finance a Chapter 13 plan. If $ 100 a month is available to repay unsecured creditors, $6,000 will be repaid in a 5 year plan.  Not bad.

Bottom line:  you never want to file a Chapter 7 bankruptcy relying on cigarettes as the reason your are unable to pay your bills.  Make sure you have considerable additional expenses that make your case convincing. 

The only smoker who can truly “relax” is someone rich, not in a committed relationship, and not afraid to stare death in the eye.

I could only think of . . . .  James Bond.