Not Your Father’s Bankruptcy: Stereotypes Then and Now
Nearly all of our bankruptcy clients are good, honest, hardworking people who have suffered some type of major unexpected life-changing event affecting their finances. They are often people who have lost work due to the recession, people who have incurred unaffordable medical bills through no fault of their own, or families that have been separated or divorced.
Three quarters of Americans live paycheck to paycheck, and many have little to no savings in order to account for unexpected expenses. When they suffered an unexpected hardship, we have found that many of our clients initially resorted to credit cards just to pay the bills. Over time, because credit card companies are allowed to charge interest rates that an individual would not be allowed to charge on a personal loan, the minimum payments on these cards increase as the outstanding balances increase. It is not uncommon for these minimum payments to quickly become unaffordable.
Many of our clients have attempted to resolve these debts on their own, either with the credit card companies directly, or though a debt settlement company. Unfortunately, these options can sometimes be unaffordable or create unaffordable tax consequences. Debt settlement companies also cannot prevent a creditor from suing you if they are not being paid.
[pullquote align=”left”]”Today’s bankruptcy filer is someone who tends to agonize over the decision to file, only to come to the logical conclusion that it is best for them and their family in the long run. The stereotypes surrounding bankruptcy in the past simply no longer exist.”[/pullquote]Although millions of people have filed for bankruptcy in the last few years, many people continue to believe that there is a negative social stigma associated with filing. Due to this fear, many people try to avoid bankruptcy at all costs. Unfortunately, this can be very detrimental to the individual and their family.
The vast majority of Chapter 7 cases are “no asset” cases in which the debtor retains all of their assets and discharges all of their debts. Social Security benefits and most retirement accounts are completely protected. In Massachusetts, you can protect up to $500,000 in equity in your home, as well as several thousand dollars in a checking or savings account.
Despite these protections, all too often we meet clients who decided to file for bankruptcy only once their savings and or retirement accounts were completely depleted. Although we can still assist them with discharging their debts, those savings are likely gone forever, needlessly. Depending on their age, responsibility for the care of these individuals can often fall to their children.
Today’s bankruptcy filer is someone who tends to agonize over the decision to file, only to come to the logical conclusion that it is best for them and their family in the long run. The stereotypes surrounding bankruptcy in the past simply no longer exist.
If you believe that bankruptcy may be a good option for you, do not wait to call until all of your savings are depleted. We offer a free consultation customized to your needs. Contact us today.