I know, I know. Halloween was a few days ago. I missed the prime opportunity to post this blog. Nonetheless, I wanted to do a post about whether filing bankruptcy is scary from the prospective of a bankruptcy attorney. While I don’t find myself to be a very intimidating or scary person, people often tell me that they were afraid to come to our initial consultation. While I understand that no one is particularly excited to talk about their finances and discuss the possibility of bankruptcy, most people I meet with leave my office feeling a lot better than they did before they came. So, lets talk about whether bankruptcy is “scary.”
Overall, bankruptcy is not scary. Bankruptcy is a legal process through which people either discharge their debt (Chapter 7) or pay back some of their debt (Chapter 13) and the remainder is typically discharged at the end of three to five years. The fact is that bankruptcy laws that allow debtors to discharge some or all of their debt is there because sometimes it is necessary. I am involved with the bankruptcy process on a day to day basis, so it is easy for me to say it isn’t scary. But, I want to explain to people who are out there googling this why it is worth calling a bankruptcy attorney (even if it isn’t me or if you don’t live in Indiana.
The first place you will have contact with is an attorney’s office. In my experience, bankruptcy attorneys are almost always nice and non-judgmental toward their clients. My personal style is to try to focus on how to fix the current financial problem with laying blame. That doesn’t mean that I won’t have ideas about how to better your financial life in the future, but I’m certainly not here to give you a lecture. I, and most bankruptcy attorneys, understand that financial problems cause a huge amount of stress. My goal is to help ease the stress for my clients by finding a solution. Sometimes the solution involves bankruptcy, sometimes it involves a recommendation that one spouse obtains a second job, or that an adult child contribute to household expenses. The possibilities are really endless, but all of the suggestions I’m going to make are suggestions. It is your life and you can to all or none of the things I suggest.
The next part of bankruptcy, after meeting with an attorney, that I believe people fear, is going to Court. Since a lot of my clients have never been in a court room they are nervous. They imagine a judge asking them why they aren’t going to pay their bills and telling them that since they can’t pay their bills that they must give back their home. I’m sure that there are more images running in people’s minds when they decide to file bankruptcy. However, this is far from the truth. Most Chapter 7 clients never see a judge or a Courtroom. In Indianapolis, bankruptcy hearings are about 5 minutes in length. There are 2 different Chapter 13 trustees and approximately 16 Chapter 7 trustees. The trustees are attorneys….not judges. These attorneys are very familiar with the bankruptcy process and, in almost all cases, are looking to get the information from you that they need to do their jobs. Rarely does this include giving you a lecture or “reading you the riot act” about having filed bankruptcy. In addition, your bankruptcy attorney will prepare you for the hearing and should be able to tell you most of the questions that the trustee will ask.
And, no one is going to take all of your stuff. In Indiana you are allowed to exempt quite a bit of property, including personal property and equity in your home. You are not, however, allowed to exempt a lot of cash. In my experience it is uncommon for a client to lose an asset that they would like to keep because it is too valuable. So, please don’t worry that bankruptcy will leave you penniless and homeless. In fact, bankruptcy typically assists people in freeing up cash flow to pay for their living expenses, medical needs, etc., instead of using all of their funds to pay past-due bills.
Finally, I think people are afraid of the “stigma” of bankruptcy. They are afraid that their name will be printed in the newspaper stating they filed bankruptcy (which I have not seen happen in an individual filing in Indianapolis). More often, they tell me that their parents taught them to pay their bills and that is why they cannot file bankruptcy. In my opinion, if you have tried to pay your bills and are not able to do so without having significant hardship to you and your family then there is no shame in getting assistance through bankruptcy. I have seen far too many people who are not taking medications prescribed by their physicians or are eating pasta every night so that they can pay a Visa bill. If you would pay your bills if you could and have truthfully disclosed all of your assets and income through your bankruptcy schedules then you should have a clear conscience. While I agree that people should try to pay their bills if they are able, there is a point at which it makes more sense to hit the reset button so that you are not caught in a cycle of debt for your entire life.
Instead of the fear, I prefer to use bankruptcy as an opportunity to assist my clients with a better financial future. We often speak about retirement savings, life insurance and home ownership. In fact, I have worked with many mortgage brokers, life insurance agents and financial planners in the Indianapolis area and am happy to refer my clients to them so that their post-bankruptcy financial life will hopefully be very smooth.
If you live in Fishers, Indiana, Noblesville, Indiana, Zionsville, Indiana, Indianapolis, Indiana, Westfield, Indiana or the surrounding areas and would like to talk about bankruptcy call me at (317) 575-8222 or click here. I will certainly try to take the fear out of talking about your finances.