Those are the words I hate to hear from a new client.
As bankruptcy attorneys, we are in the business because we truly want to help people. It’s an emotionally tough area of law, dealing all the time with clients who are in financial peril. Usually our clients are also hurting in other ways, related to what caused or contributed to their financial problems—an illness or injury, the end of a marriage or of a business, or the loss of a job. What makes my day—which it does virtually every day—is to give great news to a client, that they will now get relief from their debts, or that there is a feasible plan to save their home, or to deal with their child support arrearage or their income tax debt. Stories of marriages saved, stress lifted and job opportunities discovered after the weight of debt stress is lifted is why we continue in this area of law.
But of course the information we share with clients is not always good news, and the advice We give is not always what my clients want to hear. Tough choices have to be made, and some goals turn out to be unrealistic.
But the most frustrating situations for us and our clients are when we find out that they have self-inflicted some of their own wounds. The easily-preventable-but-now-it’s-too-late bad decisions they’ve made, often just a few months or weeks earlier, without getting legal advice beforehand.
Here are some of the issues:
1) Preferences: If you pay a creditor any significant amount before filing a bankrutpcy—especially a relative you hope not to involve in that bankruptcy—the bankruptcy trustee may well be able to force that relative—through a lawsuit if necessary—to pay to the trustee whatever amount you paid to that relative.
2) Surrendering a “cramdownable” vehicle: If you really needed a vehicle but you owed on it more than it was worth and figured you couldn’t afford the payments anyway, so you either voluntarily surrendered it, or did not file a bankruptcy until after it was repossessed, you may well have been able to keep that vehicle in a Chapter 13 case with much lower payments and total amount paid
3) Squandering exempt assets: Just about every day it seems clients tell me how they’ve borrowed against or cashed in retirement funds in a desperate effort to pay their debts, using precious assets that would have been completely protected in the bankruptcy case they later file, used to pay debts that would have simply been “discharged” (legally written off) in that bankruptcy.
4) Rushing to sell a home: Bankruptcy provides some extraordinary tools for dealing with debts that have attached as liens against your home, such as judgments and 2nd mortgages. If you hurriedly sell your home to avoid involving it in your bankruptcy case, or some other reason, you could lose out on opportunities to save tens of thousands of dollars.
5) Allowing a judgment against you: If you are sued by a creditor, you may assume that the debt or claim from that lawsuit would be discharged in your anticipated bankruptcy case. But in some cases, the judgment from that lawsuit can effectively result in exactly the opposite, a determination which results in the debt NOT being able to be written off in your bankruptcy case.
As you look at this list, notice that the legally and financially wrong choice is often what seems to be 1) the morally right one, and 2) common-sense one. Doing what seems right and sensible can really backfire. But by now it should be clear—nothing takes the place of actual legal advice about your own unique situation from an experienced attorney. So, make your day and mine by coming in to see me. Avoid ever having to say “if only I had gone in sooner.”