Sounds a little crazy right? ... Bankruptcy is awesome ???
That's probably the last thing someone would be thinking when they first consider filing for bankruptcy.
Now ... are we saying that everyone should run out and file bankruptcy ? Absolutely not.
Do we tell everyone who comes in see us that they should file for bankruptcy? Not at all. Often times, we may recommend to clients that they hold off on filing for bankruptcy because there may be alternative ways to straighten out their financial problems.
However, the thing we do tell all clients is that, given the right circumstances, filing for bankruptcy relief can be AWESOME and can give YOU the power to turn around your financial worries!
Up until now, you probably feel as though your creditors have had all the power ... they dictate:
how much is due
when it's due
how much you need to pay now for them to consider it current
how fast you need to get it all paid
And you explain to them why you're behind ... and they don't care at all (because you're just another account number to them)
and this is when we say bankruptcy can be AWESOME!
One of the main reasons why we say this is because of the POWER SHIFT that bankruptcy brings about. The way it gives you the power for a change. It gives you the power to:
wipe out their debts entirely; or
tell them how you are going to repay your debts
which can be AWESOME!
When you think about it, that is the reason the bankruptcy laws were written. These laws were put into effect because everyone knows that ... well ... life happens:
people get sick or injured with huge medical bills
folks get laid off after working a job for 10, 20, 30 years!
spouses get divorced and now instead of needing to support one household, there are two and the other bills fall way behind.
or due to illness or unemployment, folks fall behind on their mortgage or car loan ... and are now facing foreclosure or repossession.
or maybe just being young and running up credit card debt because you didn't realize (and the credit card companies certainly never told you!) of the high interest rates, late fees & penalties ... that are basically designed to forever keep you in debt!
These are all examples of things that are:
not your fault
and there is no way to prepare for them
And this is why bankruptcy can be AWESOME!
You shouldn't think of bankruptcy as the low point ... because it's not. You should think of it as a lifeline that's been afforded to folks to help get them out of financial problems and to rebuild.
Bankruptcy can, often times, provide you with an amazing amount of relief ... both financially ... and probably more important ... mentally!
Let us give you a couple of examples of when bankruptcy has been awesome for clients:
EXAMPLE #1 - TOO MUCH UNSECURED DEBT
(i.e. credit cards, medical bills, personal loans)
Clients come in all the time who have a lot of
unsecured debt, and given their current
income, they've only been able to afford to
make minimal payments or are missing payments. So unless some was to drastically change, they are going to have those same debts for years!
Meanwhile, their credit scores are bad, they are being charged huge interest rates and are constantly being hit up with late fees & penalties.
So, unless they had an option available to them to change their situation, they were likely to continue to struggle, never having a chance to make it ahead, continuing to feel constantly stressed out and virtuously powerless against their creditors and ...basically miserable!
THIS IS WHEN A CHAPTER 7 BANKRUPTCY CAN BE AWESOME!
The bankruptcy laws give these clients the power for a change and enable them to change their own situation ... and to simply wipe out all the debt that has been holding them down!
And often times they can get it done in as little as 3-4 months! Then, after their debts are discharged, they can immediately begin to rebuild their credit ... to save them even more money!
EXAMPLE #2 - WAGE GARNISHMENT
A lot of clients who have been sued over unpaid unsecured debts
(i.e. credit cards, medical bills, personal loans, etc.) end up having judgments
entered against them wherein a Court has ruled that the client owes a creditor a
sum of money and now the client has to repay the amount owed, plus attorney fees and continuing interest!
Once the client see that their check is being garnished, they realize they can't live on the amount of money that is now left each paycheck!
Sometimes they call the creditor's attorney, attempting to get them to garnish less from their paychecks, and are told there is nothing that can be done.
So then the client comes in to see me, desperate to stop the garnishments so he/she can continue to put food on the family's table.
THIS IS WHEN A CHAPTER 7 BANKRUPTCY CAN BE AWESOME!
We explain to the client how if this is the only debt that he/she owes, we can often times use the threat of a Chapter 7 to get the creditor's attorney to agree to reduce the amount they are garnishing each paycheck. The creditor's attorney knows that we are a bankruptcy firm and that if they don't agree to reduce the garnishment amount, that we'll simply put the client into a Chapter 7 bankruptcy and entirely wipe out the debt and the creditor will get nothing!
On the other hand, if the client also owes other debts, in addition to the one that is garnishing him/her, we usually go over how they can simply file a Chapter 7 and wipe out (i.e. "discharge") all the unsecured debt (credit cards, medical bills, personal loans) that have been holding them down!
Filing a Chapter 7 gives the CLIENT the power for a change to tell the creditor what they are going to get!
EXAMPLE #3 - FORECLOSURE
Clients often times come in who have recently received a
Notice Of Foreclosure from either their mortgage company
or HOA (homeowner's association).
They've fallen behind on their mortgage or HOA payments because of a loss of a job, or being out of work due to an illness, etc. The mortgage company is now telling them they need to pay all the missed payments plus their attorney fees plus their court costs and filing fees (or maybe the bank is demanding that the entire mortgage balance be paid immediately)!
They're completely stressed out and are desperate to keep their family home because:
they may have lived there for years
they don't have the money to move
they don't want to move
they don't want to take their kids out of their school and away from their friends
They then come in for their free bankruptcy consult and explain how they feel it's "hopeless".
THIS IS WHEN A CHAPTER 13 BANKRUPTCY CAN BE AWESOME!
Because a Chapter 13 is a repayment type of bankruptcy wherein you:
keep and repay any secured debts (home loans, car loans, etc.) that you want to keep; and
repay your unsecured debts (credit cards, medical bills, personal loans) at a certain percentage ... as payment in full (and this can often times be as little as 1-2%) !