It’s the middle of the week, and I have met with a lot of people who are looking for bankruptcy help. Some of them are going to become our clients while others will not.
It’s not because we are snobs at Steidl & Steinberg, but because our bankruptcy lawyers know the time is not right for our involvement. Sometimes, there are alternatives out there that are better than the ones we can provide.
And sometimes, the chance of success is so low that we don’t want you to pay us when we know we most likely won’t be successful.
When Bankruptcy Isn’t Right
I recently met with clients who owned a house worth in excess of $140,000 and only owed about $20,000 on the mortgage. But they also had about $50,000 in credit card debt.
Their income was limited, and the payments they were making on the credit cards were going to interest alone. Even then, they were falling behind.
The equity in their home made filing bankruptcy an option they could not afford. The house has $120,000 in equity though, too much for the clients to protect under bankruptcy law regulations. In the Court’s eyes, the clients could pay their creditors by selling their house and using it to pay the bills.
If they would have filed for Chapter 7 bankruptcy, the Court would have sold their house, paid off the mortgage, given the clients about $45,000 and paid off their creditors with the rest of the proceeds from the sale of the house.
The clients wanted to keep their house, so we looked at a Chapter 13 bankruptcy filing. But once again, the equity in the home would have made a Chapter 13 payment plan difficult for the clients to afford.
Because of the $120,000 in equity in the home, under Chapter 13, these clients would have to pay their creditors in full over five years if they wanted to keep their house.
In many Chapter 13 plans, clients pay much less. But in this situation, the clients didn’t have the income to pay back 100 percent of their debt over five years.
I recommended they refinance their house, if possible, and not use our office. I don’t know how this is going to turn out, but if there is a solution that is better for you that doesn’t involve us, that is what we are going to suggest. That is what we do at Steidl and Steinberg.
We’re Here to Help, Any Way We Can
Coming to us will not enclose you in some attorney’s web that you can’t escape. Instead, it will give you a chance to see if one of our bankruptcy lawyers can help you. If we can’t, we’ll help point you in the right direction. Schedule a free consultation today!