Don’t Delay Seeking Bankruptcy Advice

Most people who meet with me for a bankruptcy consultation have had financial problems for months or years.  

Many of these clients should have filed bankruptcy long before they came in to meet with me. If they had filed bankruptcy sooner, they could have avoided foreclosures, repossessions, wage garnishments, state income tax intercepts, bank levies, retirement account withdrawals, sky-high interest payments, and useless payments to debt settlement companies. I can help these clients, but I could have helped them more if they had sought help sooner.  

The most common reason people delay seeking bankruptcy assistance is fear of the unknown. It's natural for someone to feel afraid of filing bankruptcy if they haven't taken the time to find out the facts about bankruptcy.  
 

The truth is that while bankruptcy is not right for everyone, it is the best option for many people, and the bankruptcy process, once understood, is not very scary at all.  It gives honest debtors the chance to get rid of debts and to reorganize their affairs if they need to.

If you are having financial problems, you owe it to yourself to explore bankruptcy as an option.  As I say in another post, you need to put yourself and your family first.

My initial consultation on bankruptcy matters is free and I take the time to fully-answer all of a client’s questions during the initial consultation. My goal for an initial consultation is to make sure that a potential client leaves with a full understanding of what bankruptcy can and cannot do for them, so they can make a rational and informed decision about a bankruptcy filing. There is no obligation to do anything further after the initial consultation unless the client chooses to do so.

Put The Family First!

Most people who contact me about bankruptcy have financial trouble because of unemployment, marital difficulty, serious illness, a business failure, or some combination of these problems. 

Contrary to what you may have heard, in my experience, it is uncommon for a person to file bankruptcy because he or she has been over spending and living a lavish lifestyle.

People with severe financial difficulties are under a lot of stress. They face a debt collection process which can be merciless – at a time when their self-esteem may already be undermined by a difficult life experience such as a job loss or a divorce.  The stress may be so strong that it is damaging the person's relationships with his or her family members and friends. 

If bankruptcy is the right option for a person in these circumstances, he or she should pursue it,  sooner rather than later. 

Fear of what others may hear, think, or say is not a good reason for avoiding bankruptcy. Filing bankruptcy is fairly common and is not shameful. Bankruptcy is provided for in the Constitution of the United States. The Bankruptcy Code exists to help people who need a “fresh start” or the time and flexibility to reorganize their affairs. If anything, bankruptcy is underused, not overused, by ordinary people.

If bankruptcy is not a good option for a client, I do not hesitate to say so and I suggest other options. But  bankruptcy is often the best option.

A person who is deeply in debt needs to put the family first - our strongest obligations are to ourselves and to those closest to us. Credit card companies and other lenders can look out for themselves. Delaying what needs to be done often makes problems worse.  Inaction can be a disservice to a debtor and to the debtor's family.

My initial bankruptcy consultation is free and confidential.  If you are currently overwhelmed by debt, please contact me by phone or email for an appointment.

Introduction to Individual Bankruptcy

Individuals typically file bankruptcy under Chapter 7 or Chapter 13 of the Bankruptcy Code, although in some circumstances, an individual may file under Chapter 11. This article only discusses Chapter 7 and Chapter 13, since they are by far the most common.

 

The automatic stay

Collection calls and ongoing collection litigation are required to stop after a bankruptcy is filed. This is called the "automatic stay" of proceedings. The automatic stay provides you and your family with some immediate relief from the fear and anxiety associated with being in debt.

 

Chapter 7
 

Chapter 7 is for debtors needing a "fresh start" due to circumstances such as unemployment, medical bills, business failure, or divorce. Chapter 7 bankruptcy is the preferred choice for most individual debtors in the Upper Peninsula.

Eligibility for Chapter 7 bankruptcy most depends on the debtor's income and expense levels. Most debtors I have seen in my practice are eligible to file Chapter 7; however, there is a waiting period for filing Chapter 7 if a debtor has previously filed bankruptcy. 

The vast majority of Chapter 7 cases are completed in a few months with the debtor retaining all of the property he or she had prior to filing bankruptcy.

A successful Chapter 7 debtor receives a "discharge" (elimination) of debts when all requirements have been satisfied. Dischargeable debts, such as most medical debt and most credit card debt, are no longer owed after the court enters a discharge order. Discharge of debts is the principal goal of Chapter 7 bankruptcy.

Not all debts are dischargeable. Alimony and child support are examples of debts which are not dischargeable. Student loan debt is very difficult to discharge in bankruptcy, although administrative discharges may be available if a borrower has become disabled. Income taxes are only dischargeable in bankruptcy under limited circumstances. There are also some special categories of debts - such as those arising from fraud - which cannot be discharged.

If a Debtor retains a home subject to a mortgage, and the Debtor wishes to keep the home, he or she will need to keep paying on the mortgage in order to do so. Keeping a motor vehicle may also require that payments on the loan be continued on the original contract terms.

Chapter 13

Chapter 13 requires a debtor to live on a restricted budget and to make monthly payments to a trustee for 3-5 years.

Some debtors should consider filing Chapter 13 bankruptcy even if they are eligible for Chapter 7. Reasons for a debtor to file Chapter 13 instead of Chapter 7 include, but are not limited to, the following: the debtor wants to avoid foreclosure by bringing a past-due mortgage up to date; the debtor wants to eliminate a second mortgage on his or her home; the debtor wants to protect a co-signer on a loan; the debtor wants to modify the payment terms on a vehicle; the debtor has more property than he or she would be allowed to keep in a Chapter 7, or the debtor has a type of debt which can only be discharged through Chapter 13 and not through Chapter 7.

Because of the requirement to make payments to a trustee for 3-5 years, Chapter 13 is generally only feasible for debtors with regular income in excess of what is needed to maintain a basic standard of living. Chapter 13 cases are often dismissed or converted to Chapter 7 due to inability to make plan payments.

Successful Chapter 13 debtors receive a discharge of debts, but only if they complete the required Chapter 13 payments and satisfy other post-filing requirements. As with Chapter 7, not all debts are dischargeable in Chapter 13, although a few more categories of debt are dischargeable in Chapter 13 than Chapter 7.

More detailed general information about bankruptcy is given in these Notices and in this Bankruptcy Basics publication.