Fix the Hole First, Then Bail the Water

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You’ve read in the past about signs that might warrant delaying a bankruptcy.  In this article, I want to focus more on unresolved addiction or behavioral issues. Sometimes you need to fix the hole in your boat before you can get rid of the water that’s in it.

When I review a client’s matter for a possible bankruptcy, I really dig into the client’s income and expenses.  Where is the money coming from?  Where is it going?  What can I learn from how they spend their money that could help them?  After 20+ years of practicing law, you get a pretty good sense for what most people spend on things like food, rent, utilities and entertainment.

The bankruptcy forms require that same level of detail. Sometimes I can spot areas where clients should cut spending and I can sometimes identify areas where they should be spending more such as setting aside money for car repairs. In some cases, there simply is no clear explanation for where the money goes.

Sometimes the issue is poor records and lack of budgeting.  Sometimes the issue is drugs, alcohol or gambling. If I don’t identify the root cause of the client’s financial problems, the bankruptcy might only be a temporary solution.  It would be like taking painkillers for an extended period of time without asking the doctor to diagnose and treat the cause of the pain.

Helping a client plan for future financial success with proper budgeting is part of my job. If a client cannot or will not follow my advice, then I cannot help them. If a client files for Chapter 7 bankruptcy, it will be 8 years before they can file for Chapter 7 again. If they incur gambling debt 6 months after their case is filed, there is very little I can do to help beyond a Chapter 13 that pays their debts in full.

The best thing a client can do is be honest with me. If a client hides an addictive behavior from me, there is little I can do to help. A client’s honest is the best tool that I have to be able to help them.

Carl Starrett

Carl Starrett is a consumer bankruptcy attorney in San Diego, California helping debtors file for protection under Chapter 13 and Chapter 7 of the Bankruptcy Code.

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