01/06/2016
BANKRUPTCY- MOST FAQ
Two questions that come up frequently: First, Is there a minimum amount of debt I need to have in order to file bankruptcy? When do I know I should file bankruptcy?
I am often surprised about that question, but it is actually one of the most commonly asked questions. I think it is easier to answer the question the other way around. If one has thousands of dollars in their bank and savings account and is able to pay off their credit balances completely at the end of each month, that person wouldn't think about filing.
But, if one carries a credit card balance, does not have surplus each month to put aside for savings or retirement, does not have thousands of dollars in the bank account, is not paying down credit, but instead relying on it, then, it's time to look at the situation. That is the situation actually most people live in. Living pay check to pay check. Paying the minimum payments on credit cards, perhaps taking out a pay day loan ever so often, then yes, it makes sense to look at wiping out the debt and starting fresh.
That makes sense at balances as low as $1500. We had clients who filed bankruptcy with such a low balance. Why? Because of the high interest rate. With their income, there was no way to get out of it. And that's what bankruptcy is about. Clients try to make it work. They feel an obligation to pay their debt. What they often ignore is that the situation is not changing. That's what they tell me, they rob Peter to pay Paul. It's a circle that cannot be broken without filing bankruptcy and starting fresh.
If clients keep paying on their debt, it keeps them down. It takes 18 years to pay on a 5K credit card. If they can wipe it out, they have the chance of getting ahead and lifting themselves out of the debt trap.
Life is too short to have the debt hanging over their lives and feeling being stuck. That's the reason it says in the Bible (Deuteronomy 15): Debt must be cancelled every 7 years. It always have been good for the society if families can prosper and grow financially. They cannot do this if they are in the debt spiral.
People who file bankruptcy in those situation are doing actually the right thing. They have more financial freedom and less stress. Debt also causes stress for the relationship. This is also important to consider.
Second Question: Do I lose my property when I file for bankruptcy? The answer is no, that's the reason clients have an attorney. Never ever file bankruptcy relying on friends or family or doing it alone. We have seen cases in which clients lost property because they weren't advised and represented by an attorney. The attorney will make sure that all property is protected by choosing the right chapter the bankruptcy is filed under and the correct exemptions to protect property. We have handled over 7,000 cases. None of our clients lost any of their property. Sometimes, to protect property, the attorney will do some bankruptcy planning, for example he will suggest to wait with filing or to speed up filing, sometimes to protect tax refunds.
During our consultation, the attorney will provide the clients with the best option and explain the process. The idea that clients would lose their house or car if they file for bankruptcy is a misconception.
Also, that clients don't get credit for 10 years after filing. Most of the clients have better credit within 12 months after filing than the credit was before filing, depending on who credit is used after filing.
If clients are thinking ab filing for bankruptcy, we offer a free consultation in which the attorney will explain the process and go over all options. We have offices in Kansas City at the Plaza and Cameron. Our office can be reached by phone at 816-945-9525 or directly through Facebook.
Thank you!
Tobias Licker
Attorney at Law
