In continuation of my last post, here are additional statements that I hear clients say all the time, that are just not true:
3) I can’t file a Bankruptcy, I feel obligated to pay my creditors back: That’s great that you feel the need to pay your creditors back, and guess what the filing of a bankruptcy does not prevent you from doing so. A Bankruptcy Discharge means that you have no legal obligation to pay your discharged debts back. It means that a discharged creditor is not able to ever seek repayment of the debt owed from you. A Discharge does not mean that you cannot voluntarily pay any creditor back if you were so inclined. Effectively, the discharge takes the pressure off of you. You will never have to field a collection call again or receive a statement or a threatening letter from any of those discharged creditors, but if your financial situation turns around and you decide to payoff all of those debts you had previously discharged there is nothing preventing you from doing so.
Now having said that, I would suggest that you first ask yourself, did any of these creditors try to help you out when you inevitably, made those calls to them to explain the situation that caused your financial distress? Did any of those creditors offer to lower your interest rate or put your delinquent payments on the back end of the loan or how about lowering your monthly payment for a period of time? I didn’t think so! I would also suggest that you think about how long you have been paying on your credit cards and how much interest you have paid to those creditors over that time, and I would suggest that you have probably paid each of those creditors back much more than you ever borrowed. And now I would suggest, if you still feel inclined to pay back that discharged debt, by all means go ahead, there is nothing preventing you from doing so.
4) Bankruptcy should be a last resort: That is absurd, Bankruptcy is not a last resort, it is an option period! The biggest mistake I see people make is waiting too long to file a bankruptcy. Due to the fact, that so many people think that bankruptcy is a last resort or is taboo, they don’t explore the option of filing for bankruptcy. Instead they sell all their assets, liquidate retirement accounts, borrow money from family and friends; do anything they can to prevent them from filing for bankruptcy. And after all of that, nine times out of ten, those people still end up sitting in an attorney’s office discussing bankruptcy. But instead of working on a strategy to save all of those assets, they are kicking themselves for not having sought the advice of a bankruptcy attorney sooner.
Seeking advice of a Bankruptcy Attorney is the course of action taken by a responsible person that is taking charge of their life. The best results that are achieved in Bankruptcy are by clients that come in at the beginning of their financial crisis, when the first lose a job, or first incur the tremendous medical bills, or first fall behind on their mortgage. All of these things can be dealt with and it is easier to do before you have creditors suing you, garnishing wages, foreclosing on your home or levying your bank accounts. Coming in early on allows a bankruptcy attorney like myself, to plan when is the best time to file your case rather than having to file an emergent petition to stop a garnishment or get a repossessed vehicle back, etc. This allows you to obtain the best result possible in your case.
Even if you don’t end up filing for bankruptcy right away or at all, you owe it to yourself and your family to seek a consultation with an experienced bankruptcy attorney so that you understand what a bankruptcy can do for you. This is your life, you need to take charge and seek the information that you need to make the best decision for your financial future. i have seen way too many people lose everything because they thought bankruptcy was a last resort, don’t be one of those people.
5) I’ll lose my house or my car if i file for Bankruptcy: In 23 years, I have never had a client lose a house or vehicle in a Bankruptcy, unless they wanted to. Yes, a Chapter 7 trustee can force the sale of your home, if you have more equity in your home then you are able to exempt. However, if that were the case, an experienced Bankruptcy attorney would never file a chapter 7 for you. You can instead file a Chapter 13, in which a Trustee cannot force the sale of your home. In a Chapter 13 you are what’s called a Debtor in Possession, which means that you keep possession of all of your assets. In return, you file a plan of reorganization to repay some of your debt over a period of time.
As for your vehicles, if you have a lien on it, it would be highly unlikely that a Chapter 7 Trustee would have any interest in trying to sell it. In order to keep the vehicle in a chapter 7, you would just have to sign an agreement with the lien holder, which reaffirms the debt. This just means that you are going to continue to pay that creditor even though you filed for bankruptcy. This agreement effectively takes the creditor out of the bankruptcy and allows you to keep the vehicle as long as you continue to make the monthly payment.
Of course, if you do not want to keep either your home or your car, you can simply indicate that in your bankruptcy petition and the creditor will ultimately foreclose on the home and/or repossess the vehicle. You will be discharged of any personal obligation on those Notes.