At the Mark Bamberger Company my staff and I have successfully completed hundreds of Chapter 7 and Chapter 13 bankruptcies over the better part of the last decade. Bankruptcy, though never a thrilling experience, has allowed millions of people to start over (as in Chapter 7 cases) or to reorganize their debt (as in Chapter 13 cases). I have lost track of the number of former clients who have broken into tears and hugged me when they realize they can stop “robbing Peter to pay Paul” and can finally start thinking about the future; perhaps in a new house or car.
However, being an ethical attorney, I have sent some people away with the advice that they should avoid bankruptcy. Generally there are four reasons for this:
- Not enough debt – in some cases, the price of even the cheaper Chapter 7 case makes filing for some clients unnecessary. In those cases we can often represent folks and haggle settlement offers from creditors for the clients to pay off; without having a bankruptcy on their record.
- Too little time – in some cases, clients have filed previous bankruptcies and cannot yet file another. That ranges from eight (8) years between Chapter 7 cases to as little as two (2) years between Chapter 13 cases.
- Too recent debt – for Chapter 7 and some 13 cases, if a client has very recently used credit cards or purchased an expensive item, there would be reason for an objection to the case or even sanctions for abuse of the bankruptcy code if someone incurs significant debt, then turns around and files bankruptcy. In 2005 the federal bankruptcy code changed a lot to make it harder for people to “game the system” when they in fact could pay back at least some of their debt. Those Chapter 7 cases have since been funneled into 13 cases where debtors have to commit to paying back something. For that we are all thankful, as bankruptcy was contemplated by the Founding Fathers to be a step up, not a hand out.
- Too little money – in some instances where the client has too much household income, has filed a Chapter 7 too recently, or else has a house in jeopardy, we recommend filing for a Chapter 13 reorganization. However, if the household income is too little to sustain a monthly payment plan, that is a recipe for default and other problems that can make filing anything problematic.
In general, folks can file a form of bankruptcy that assists them in dealing with their financial problems. But an ethical attorney will know when not to file as well as when to file. Find one of them!