When most Americans think about someone who needed to file bankruptcy I believe that a few images come to their minds. First, I think they imagine a homeless family living in their car with little to eat. Second, I think they imagine a person who files bankruptcy and the bankruptcy court comes and takes all of their personal belongings in order to sell them an pay creditors. As an attorney who has represented debtors in bankruptcy for approximately 9 years, I can say that in my experience neither of these images are true.
The fact is that bankruptcy (whether it be Chapter 7, 11 or 13) is not much help to what I will refer to as the truly poor. What I mean when I say the truly poor is a person who doesn’t own a home, either doesn’t own a car or owns a car that is more then 15 years old, and doesn’t have employment. These are the people that really are struggling to feed their children, are going to food pantries for assistance and who haven’t had cable television or internet service in their home ever.
Bankruptcy is a much more useful tool for middle class to lower middle-class people. Most of the clients I represent in bankruptcy are working, own a home, own at least one car that is only 5 years old and who go out to eat once or twice a week. However, these people fall behind when a life event impacts their finances. Common examples include temporary job loss or decrease in income, medical emergency resulting in significant hospital bills and/or the inability to work or a slow state of overspending on credit cards.
My point is that bankruptcy can’t do much for people with little or no income. Bankruptcy is really much more about protecting people from their creditors so that they are able to get some breathing room to and either pay back their creditors some amount over time (Chapter 13) or get a fresh financial start without paying creditors any money (Chapter 7). Bankruptcy can stop lawsuits, wage garnishments, stop collections on income taxes, prevent a creditor from freezing a bank account and relieve individuals and married couples from the strain of most of their debt. Contrary to popular belief, those people who file bankruptcy do not typically lose everything. It is really quite the opposite. Without bankruptcy many people who do file Chapter 7 or Chapter 13 would potentially lose a significant portion of their income or assets to creditors.
The point is that bankruptcy is often referred to as “bankruptcy protection” for a reason. It protects people from losing their vehicles so that they are able to go to work, allows for people to remain in their homes longer when there is an impending mortgage foreclosure, and stops creditor harassment. Bankruptcy can clear off debts that people are not able to pay so that they are able to get current on their house payment, car payment, utility bills and have the money left over to buy groceries.
The truth is that bankruptcy is much more a protector of the standard of living to the middle-class than any other group of people. If people are poor and have very limited or no income and no property whatsoever there is no point in filing bankruptcy because there is no stuff to protect. On the other side of the spectrum, bankruptcy typically will not benefit the wealthy who live in homes that are paid off, own their cars outright and have thousands of dollars in a bank account. It is likely in that situation that some stuff would seized by the bankruptcy trustee in order to sell it and turn over the proceeds to creditors.
At Halcomb Singler we certainly do not expect you to know whether or not your are a good candidate for bankruptcy. Our attorneys can make a recommendation for or against bankruptcy after meeting with potential clients for a free initial consultation. If you are struggling with debt payments and would like to schedule an appointment to meet at our Carmel, Indiana office please call (317) 575-8222.
Halcomb Singler, LLP, is a debt relief agency. It helps people file for bankruptcy under the bankruptcy code. No attorney-client relationship with the firm of Halcomb Singler, LLP, is created through this blog. Also, please note that Erika Singler is an attorney licensed in Indiana and does not seek to practice law in any jurisdiction in which they are not properly authorized to do so. The information contained in this blog is general in nature and should not be relied upon for the circumstances of any individual(s) or businesses.