NEW YORK -- Three years ago, life looked awfully bleak to Carmine Warren.
While undergoing surgery and chemotherapy for cancer, Mr. Warren and his wife, Lynette, found that the insurance payments they were getting didn't make up for his inability to work for weeks at a time, and their bills began piling up.
"It got to the point of: 'Do we pay the bills, do we pay for medicines or do we pay for food for us and our boys?' " Mr. Warren remembers.
When creditors threatened to put liens on their home in Orlando, Fla., the Warrens felt they had no choice but to file for bankruptcy.
Bankruptcy is a scary word for many families, who often associate it with failure. Experts, however, say the majority of people who seek bankruptcy protection have suffered a severe financial setback.
The "big three" causes: they've lost a job, their spouse has divorced them or died, or they are hit with heavy medical bills, according to Cleveland bankruptcy attorney Alan Kopit.
Though the bankruptcy law that goes into effect Oct. 17 aims to stop consumer abuse of the system by making it harder to wipe out debts, it also can be a lifeline for families such as the Warrens, who are overwhelmed by situations beyond their control.
"Unexpected things happen in life," said Mr. Kopit, who is the legal editor of the Lawyers.com Web site. "Life throws you a curve ball, and you can swing and miss. You should be able to get another chance, a fresh start, and the bankruptcy law allows you to do that."
Today the Warrens are rebuilding their financial lives. Carmine Warren, now 40 with his cancer in remission, has started a computer repair business, HomeorofficePC.com, and his wife has been promoted at her job and is bringing in more money.
Bankruptcy attorney Brad Botes, whose firm Bond, Botes and Neway PC handled the Warrens' case, worries that the new bankruptcy law will make it more difficult for financially devastated families to get relief through bankruptcy.
All applicants will be required to pass a lengthy "means test" to determine whether they can repay creditors. They'll have to come up with more documents, including tax returns and wage statements, and pay higher fees to attorneys, who must certify the debtors' financial statements. They'll also have to undergo credit counseling.
In many cases, they won't be eligible for a Chapter 7 bankruptcy, which discharges their unsecured debts; instead they'll be forced into a Chapter 13 bankruptcy, which basically is a repayment plan.
"Six months from now, many of the people who were devastated by Hurricane Katrina and Hurricane Rita will have to seek bankruptcy protection," Mr. Botes said. "Adding hoops these people need to jump through to get a fresh start, that's going to create problems."
He also says he resents the "mean-spirited" assumption in the new law that most bankruptcy filers dug their financial graves.
He described the case of a factory worker in his 50s from Birmingham, Ala.
"The guy did everything right," Mr. Botes recalled. "He saved, he put his kids through college, he had a good pension."
Then the factory shut down. The man went to work pumping gasoline to bring in money for himself and his wife, but the work and the stress led to a heart attack. Eventually, the hospital that treated him came looking for $100,000 for his medical bills.
"When he came into my office to talk about bankruptcy, he broke down in tears," Mr. Botes said. "It wasn't his fault, and there are so very many people like that out there."Cutlinephelan m. ebenhack/associated press
Carmine Warren, a self-employed computer technician, removes a virus from a client's computer in Orlando, Fla. Mr. Warren had to declare bankruptcy after going into debt as he battled cancer.