It never fails that when you are at a social gathering people are going to ask what you do for a living and I am no exception. I live in Zionsville, where it seems as if every 5th person is an attorney, so it is also common for people to ask me what type of law I practice. Once people find out that I represent consumers and small businesses in bankruptcy they always have a lot of questions. The first of those is what exactly does it mean to be bankrupt?
I believe when people think of those who are bankrupt they are often picturing a homeless person, a person with very little income renting an apartment and getting by on food stamps or a person who is unemployed. Most people see lack of income as the primary cause of bankruptcy. In my experience representing those who need to file bankruptcy and live in such places as Indianapolis, Carmel, Zionsville and Fishers this is an inaccurate picture. Bankruptcy is much more often a product of too much debt than it is of too little income. I have never represented a homeless person. A homeless person would have little to lose and there would be no reason for a homeless person to file bankruptcy. On the other hand, a couple making $120,000.00 per year with 2 vehicles and a mortgage who have two children to support are much more likely to need to file bankruptcy in order to protect their assets from creditors.
Those who need to file bankruptcy in Indiana are typically those who stand to lose something because they owe money to creditors. Examples would include losing a vehicle to repossession because payments have fallen behind, garnishment of 25% of net wages by a credit card company who filed a lawsuit for non-payment, levy of a bank account for failure to pay outstanding taxes or a mortgage foreclosure for a person behind on their mortgage payment. In each one of these examples a person might file either a Chapter 7 or Chapter 13 bankruptcy petition in order to make sure their vehicle is not repossessed, to protect the income they need to pay their living expenses, to make sure a bank account is not levied or to stop a mortgage foreclosure.
Bankruptcy is often referred to as bankruptcy protection because those who file bankruptcy are much more often filing bankruptcy to protect their assets than they are simply because they don’t have any money. In fact, if a person comes to meet with me at Halcomb Singler because they don’t have any money but also don’t have any assets I would advise them that there is likely no reason to file a bankruptcy in the first place because that person doesn’t have anything that a creditor can take. I attribute this common misconception that every person who needs to file bankruptcy is completely broke to Monopoly and nothing could be further from the truth.
Another misconception about people who need to file bankruptcy is that they either own nothing or that they will not own anything after filing bankruptcy. Also not true. The majority of those I represent in bankruptcy own a home and a vehicle. My clients also own furniture, jewelry, tools, clothing, household supplies, appliances and all of the other stuff we Americans tend to have around the house. Additionally, the bankruptcy code both acknowledges that those who need to file bankruptcy own “stuff” and allows bankruptcy debtors to keep a lot of that stuff. Specifically, on the date of filing of a Chapter 7 bankruptcy a single debtor may have $350.00 in cash, $9,350.00 in personal property and $17,600.00 in equity in a home. IRAs and 401ks are also typically completely protected. In fact, the vast majority of those who need to file bankruptcy in Indiana do not lose any of their personal property or assets.
Finally, I am always asked how people who need to file bankruptcy have any money to pay me. The answer to that question depends on the situation. If the person who needs to file bankruptcy has been scraping by on rice and beans so that they can pay their minimum $500.00 credit card payment each month it is simple. Once a person has met with me and has decided they would like to proceed with bankruptcy I likely advise that person to stop paying the credit card bill. At that point the person has enough money to buy proper groceries and some left over to pay my fee each month. In other cases a person will use their income tax refund to pay for bankruptcy. Sometimes a relative or friend of the person will pay for the attorney fee and filing fee associated with bankruptcy. Each case is different.
At Halcomb Singler I meet with people from every walk of life about bankruptcy. One of the few things in common that these people have is that they are having trouble paying their bills each month. They are often robbing Peter to pay Paul and know that they will soon not be able to continue to meet their monthly obligations. Regardless of whether 1 million is owed or $10,0000.00 if that person is having a hard time paying their bills they are under an enormous amount of stress. I enjoy meeting with such people to answer their questions about what a creditor can and cannot do, helping them to figure out a plan to deal with the debt (sometimes this includes bankruptcy and sometimes it doesn’t include bankruptcy) and attempting to put their mind at ease without judgment. I offer a no-cost initial evaluation at our Carmel, Indiana office to those considering bankruptcy. To make an appointment click here or call our office at (317) 575-8222.