I recently posted a request on my Facebook page and my Twitter page soliciting blog ideas and I posed the following question: “So if you could ask a bankruptcy attorney any question, what would it be?” The title for this blog entry is an actual question I received from a Facebook friend.
While the question I received was largely tongue-in-cheek, there are some in society who wonder a how couple can get rid of $150,000 in credit card debt, receive a 2.5% interest rate on a home loan, keep their home and both cars. My response: things are not that simple.
Most of my clients can trace their debt problems to a life changing event such as a divorce or a job loss. For others, their debt problem “snuck up” on them for one reason or another such as not cutting spending after a salary reduction or not communicating with a spouse over budget issues. A significant percentage of my clients had never even considered filing for bankruptcy before they actually called me. They are not like “other people” who don’t pay their debts…until they run out of money.
In reality, most Americans are only 2 or 3 missing paychecks away from financial struggles. The decision to file for bankruptcy protection is not one to be taken lightly and it is not without sacrifice.
While my clients benefit greatly from bankruptcy, it does come at a price. The bankruptcy will be on their credit report for up to 10 years. They will pay higher interest on car loans, often approaching 25%. They will not be able to buy a home for 2-3 years and the bankruptcy make come up any time they try to get credit, apply for a job or try to rent a place to live.
The Supreme Court once stated that the purpose of the Bankruptcy Code was to “relieve the honest debtor from the weight of oppressive indebtedness, and permit him to start a fresh free from the obligations and responsibilities consequent upon business misfortunes.” Though it may seem like some debtors come away unscathed from their bankruptcy, the vast majority are good people that just need a helping hand.
Image credit: alancleaver_2000