Those are the words I hate to hear from a new client.
Bankruptcy attorneys are in the business because we truly want to help people. It’s an emotionally tough area of law, dealing all the time with clients who are financially hurting. Usually my client are also hurting in other ways, related to what caused or contributed to their financial problems—an illness or injury, the end of a marriage or of a business, the loss of a job or, these days for many people, the loss of an entire career. What makes my day—which it does virtually every day—is to give great news to a client, that they will now get relief from their debts, or that there is a feasible plan to save their home, or to deal with their child support arrearage or their income tax debt. Every day we see people transformed in front of our eyes as impossible burdens are lifted from their fatigued shoulders.
But of course the information I share with clients is not always good news, and the advice I give is not always what my clients want to hear. Tough choices have to be made, and some goals turn out to be unrealistic. That’s all part of life.
But the most frustrating for both me and my clients are the self-inflicted wounds. The easily-preventable-but-now-it’s-too-late bad choices. The goal of my next few blogs is to help you avoid those.
Here’s a taste of some of what we will be covering.
1) Preferences: If you pay a creditor any significant amount before filing a bankrutpcy—especially a relative you hope not to involve in that bankruptcy—the bankruptcy trustee may well be able to force that relative—through a lawsuit if necessary—to pay to the trustee whatever amount you paid to that relative.
2) Surrendering a “cramdownable” vehicle: If you really needed a vehicle but you owed on it more than it was worth and figured you couldn’t afford the payments anyway, so you either voluntarily surrendered it, or did not file a bankruptcy until after it was repossessed, you may well have been able to keep that vehicle in a Chapter 13 case with much lower payments and total amount paid
3) Squandering exempt assets: Just about every day it seems clients tell me how they’ve borrowed against or cashed in retirement funds in a desperate effort to pay their debts, using precious assets that would have been completely protected in the bankruptcy case they later file, used to pay debts that would have simply been “discharged” (legally written off) in that bankruptcy.
4) Rushing to sell a home: Bankruptcy provides some extraordinary tools for dealing with debts that have attached as liens against your home, such as judgments and 2nd mortgages. If you hurriedly sell your home to avoid involving it in your bankruptcy case, or some other reason, you could lose out on opportunities to save tens of thousands of dollars.
5) Allowing a judgment against you: If you are sued by a creditor, you may assume that the debt or claim from that lawsuit would be discharged in your anticipated bankruptcy case. But in some cases, the judgment from that lawsuit can effectively result in exactly the opposite, a determination which results in the debt NOT being able to be written off in your bankruptcy case.
As you look at this list, notice that the legally and financially wrong choice is often what seems to be 1) the morally right one, and 2) common-sense one. Doing what seems right and sensible can really backfire. In the next few blogs I explain these so they make sense to you, along with other avoidable mistakes. In the meantime, make your day and mine by coming in to see me to avoid ever having to say “if only I had gone in sooner.”