In last Sunday's New York Times Magazine, Times economics reporter Edmund Andrews wrote a piece about how irresponsible lenders had essentially ruined his family's life titled, "My Personal Credit Crisis." Megan McArdle of the Atlantic then went digging around and found some major issues with Andrews' story.
Andrews, who is also the author of a book titled Busted: Life Inside the Great Mortgage Meltdown, from which the Times Magazine article sprung, essentially paints a picture of he and his wife, Patricia Barreiro, being burned by evil mortgage brokers and bankers who held guns to their heads and made them take out loans and make purchases they couldn't afford. However, McArdle discovered that Barreiro had another undisclosed bankruptcy in her past, leading one to believe that Andrews and Barreiro aren't so much innocent victims as they are people who can't stop living beyond their means, which, of course, completely alters Andrews' narrative.
In September 1998, California bankruptcy court records indicate that Patty and her first husband declared bankruptcy. The financial statement they filed with the court indicated family income of $174,000 in 1996, $87,000 in 1997, and $126,000 in the first nine months of 1998. The income fluctuations are not surprising, given that her husband was in the film production industry. By the time of the filing, the couple owed about $30,000 on 8 credit cards, over $200,000 in back taxes, and almost $15,000 in private school tuition, as well as substantial car and mortgage payments.
In 2007, nearly as soon as she was eligible, Patty Barreiro filed again in Montgomery Country. When called for comment yesterday, Andrews was unavailable, but there is no question that it is his wife: his income and occupation are prominently featured in the docket.
This is really highly unusual. For starters, the overwhelming majority of people who file bankruptcy do not make anything close to $100,000 a year—the standard estimate when the 2005 bankruptcy reform was passed was that about 80% of filers had household incomes below the median income in their state. The number of affluent people who file twice is even smaller, and has presumably gone down since the 2005 filing largely eliminated abusive serial Chapter 13 filings, which used to be used, often by quite wealthy people, to forestall evictions or foreclosure.
The bankruptcy code requires filers to wait 8 years after a previous Chapter 7 discharge. Barely four months after she became eligible, Patty Barreiro filed again. And the filing shows some suggestion of strategic debt management.
The point McArdle makes from here is this: Multiple bankruptcies do happen to some people, usually those with the shittiest of luck who happen to be living paycheck to paycheck, not people living with six figure personal budgets. Edmund Andrews seems to be out there peddling a tale of woe brought upon by bad luck, when in reality his wife has spent years living beyond her means and then seeking shelter in bankruptcy court when everything came crashing down around her. All of this, of course, paints a very different picture than the one laid out by Andrews in his book and Sunday Magazine article. To which McArdle says this:
"If you structure your finances so that absolutely everything has to go right, it's hard to blame the mortgage company when you don't quite make it."
The only issue we take with McArdle's post is this: She actually lauds Andrews' desire to "shield his wife" from the embarrassment of the first bankruptcy being made public in his book and subsequent article, an assumption that presumes the best of intentions on Andrews' part. However, we don't see it the same way. You see, if Andrews includes the details of the first bankruptcy in his story, as we noted earlier, it completely changes the tone of his "the bad finance people did this to us" narrative to the point where it leaves him devoid of a story compelling enough to sell. Therefore, we feel Andrews' motivations for leaving this little detail out are, shall we say, less than innocent, and most definitely not rooted in chivalry.
Regardless, in the wake of the Maureen Dowd plagiarism flap and the "oh this is nothing" company response that soon followed earlier in the week, it'll be interesting to see how the Times addresses this, if they even bother to address it at all.
The Road to Bankruptcy [Megan McArdle/Atlantic]