Bankruptcy horror stories (Part 2): Bankruptcy can be a disaster if…

I recently talked about various negative outcomes of failing to seek qualified and experienced attorney help and representing yourself in bankruptcy (with or without help of bankruptcy preparers) or retaining attorneys who do not focus their practice on bankruptcy law. In this post I will continue discussing various bankruptcy pitfall stories that are highly typical when people forgo advice of experienced bankruptcy lawyers.

* A few months ago, “Jeff” started working a lot of overtime and found a second job to stay afloat and save more money. He barely slept, stopped seeing friends, stopped paying for life insurance, retirement plan and cut his other expenses. Jeff thought that his overtime earnings and income from his second job would not count in the bankruptcy case he just filed, and didn’t think his lower expenses made any difference at all. He was wrong. Jeff’s extra earnings and lower expenses, the result of his gruesome working hours and new bare-bones budget, benefited Jeff’s creditors and not Jeff as the court decided that Jeff’s disposable income was now high enough to afford to make payments to creditors. If Jeff had hired a bankruptcy attorney instead of relying on the bankruptcy petition preparer to fill out his petition, if he had been represented in court, he would have saved himself both the funds and the headache and likely would not have had to make any payments to creditors.

* “Melissa” was represented by an attorney who had very little experience in bankruptcy law. At first, everything seemed to go well: Melissa completed her bankruptcy case and received a standard debt discharge. She was very surprised two years later when it turned out that there was still a judgment lien attached to her house, and that she needed to pay off the judgment lien when she was refinancing. An experienced bankruptcy attorney would have filed a special motion with the bankruptcy court to void the judgment lien.

* “Ana” and “Lon” are estranged. They have been married but separated for a couple of years. Ana filed Chapter 7 bankruptcy with the help of a bankruptcy mill – a law firm churning out a high volume of cookie-cutter cases, with the primary focus being on filing as many cases as possible in order to collect more fees. The bankruptcy trustee told Ana she would lose her car unless Lon agreed to sign and file some sort of spousal waiver in her case. Ana is not on speaking terms with Lon; nor does she have his current phone number or know how to find him. A bankruptcy attorney who spends time to study and weigh all circumstances of a case, would have suggested Chapter 13 in Ana’s case, which would not only allow Ana to keep her car, but would also lower her monthly car payments by a third.

* “Vince” filed his Chapter 7 case pro se (without attorney help). He continued to make payments for his Ford Explorer. Understandably, Vince was shocked when Ford Credit repossessed his car as soon as his case was completed. I always advise my clients that Ford Credit is one of the car lenders requiring car loan reaffirmation agreements in Chapter 7 cases, and that without the reaffirmation agreement filed and approved with the bankruptcy court, Ford can repossess the car even if the person is still making payments for it.

The list goes on. Instead of being a safe haven and a fresh start, bankruptcy can be a disaster and has financially crippled a significant number of people.

BUT IT DOESN’T HAVE TO HAPPEN TO YOU!

If you consult an experienced bankruptcy attorney, you will find out if filing bankruptcy will be a good solution in your situation or not. If filing bankruptcy will meet your needs, you will also review and discuss different bankruptcy options and pros and cons of each choice.

Bankruptcy law is complicated.

Do not file on your own, and do not rely on bankruptcy petition preparers who are not attorneys and cannot give you legal advice or represent you in court.

Bankruptcy petition preparers essentially provide a typing service; while they may have the right forms to be filled out, in many cases it seems that they are giving people a false sense of security and imply that they have the legal knowledge regarding which exemptions to claim, and other legal issues.

If you hesitate seeing an attorney because of the amount of the legal fees, consider that most bankruptcy attorneys offer free or low-cost initial consultation, and would give you a fee quote for future services, if you decide to retain them. Bankruptcy fees may turn out to be much more reasonable than you think. Also, if you decide to retain an attorney, bankruptcy fees can be often paid through a payment plan and sometimes through the court after the case is filed. Consider also that without proper representation, you may stand to lose a lot more than the amount of the legal fees. Everybody has something of value, something they would regret losing, and without the right advice and support, chances of losing money or property, and shortchanging your rights, are much higher.

Bankruptcy can be a very powerful financial solution; it can also be straightforward and uneventful and boring (in a good way). If you are in a difficult financial situation, don’t be dissuaded by bankruptcy horror stories, or myths floating around in the media, and don’t rely on tips offered by well-meaning friends and relatives.Bankruptcy Lawyer Victoria Maydanik