When I tell others outside the office that I am a bankruptcy attorney, they often volunteer that they either should look into bankruptcy or that bankruptcy just isn't for them. It is always one extreme or another. The truth is that many people could use bankruptcy if they understood bankruptcy.
Many people fear bankruptcy because "someone might find out" that they filed. Oh well, so they find out. It is a public court filing, but so is divorce, collection law suits, foreclosure and other "reputation" events that occur.
Bankruptcy can be a tool to rid yourself of debt. It is less known for the ability to repay some creditors over the course of the next three to five years. Sometimes, you may need to restructure your payments on your cars, student loans, court ordered payments, IRS debt, personal loans, second mortgages, or investment properties. Maybe the monthly payments are just too high and you need some relief from the amount being paid each month, even though you still want to keep the property. This can apply to furniture, computers, cars or any other secured debt. Often, we find that people who did well financially a few years ago can barely hang on to what they have, but they still believe they can't file bankruptcy because they still make too much money. It doesn't matter -- they can still file.
When someone wants to get rid of debt, we usually try to liquidate their assets and discharge all of their debts through Chapter 7 bankruptcy -- this simply means you want all of your debt to just go away (usually credit cards, charge cards, payday loans, title loans and medical bills). You have given in to just throw your hands up in the air, give in to whatever needs to be done so that you can just start fresh all over again. You can get your fresh start with Chapter 7 Bankruptcy. There may be income limitations on how much you are permitted to earn to file Chapter 7.
If you make too much money to file Chapter 7, perhaps you want to get a new start with Chapter 13 bankruptcy. There are many ways to reorganize your debt in Chapter 13. Perhaps you want to repay everyone 100% of what they are owed, but you can't afford to do it the way they want you to do it, so Chapter 13 forces them to accept a court ordered plan over the next few years. Perhaps you want to repay everyone, but you cannot afford to do so; a Chapter 13 may be in the mix for you. Chapter 13 will permit you to repay some of your debt to your creditors based upon your income; creditors receive a portion of the debt owed to them, but the balance of it can be discharged if you make all your payments.
Some of our clients pay 100% back to creditors. Others pay 90%, or 50%, or 10%, and then we even have what we call a 0% payout plan. 0% plans are Chapter 13 cases where you have some debt that is secured (cars and houses) or prioritized (taxes, child support arrears, and other government debt) over other unsecured debt (credit cards, charge cards and personal loans), and your plan pays the secured debt and the priority debt, but nothing to your unsecured creditors. Yes, if you earn lots of extra money or you get a refund or inheritance over the next few years, you will probably have to pay those funds over to the Court to give to creditors that were otherwise going to be discharged.
Some cases we see are for people that are a few months or years behind on a mortgage, or a few months behind on a car payment. Perhaps you just overspent and you can't catch up.
Bankruptcy Court cases are FAIR. They are for those who need financial help -- this does not mean the Court pays you money, but it does give you relief from having to make payments. They don't give you extra income or change your spending habits, but they do get rid of debt or allow you to stop collections so that you can restructure your payments. The point is that you can't have your cake and eat it too.
Bankruptcy is for those with resolve and perseverance. If you will do whatever it takes to start over, perhaps you should consider bankruptcy. It is not just for the poor and unlucky. If you cannot pay your bills, whatever they are, and you can't get out of the hole on your own, perhaps bankruptcy can help you. We often tell prospective clients that they do not need bankruptcy, or that they have a variety of alternatives; it is not for everyone; it does not solve every financial problem. Consider a free consultation with your soon to be favorite bankruptcy lawyer. Call my office for a consultation at (703) 880-4881.
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