Sometimes our clients at Steidl and Steinberg clients assume that because we help people out of difficult debt situations, and because we do so much work in the bankruptcy court, that we channel people into bankruptcy, whether they need it or not, because it is what we do.
I guess it is like some people’s criticism of highway departments: they always recommend building more highways to take care of traffic problems because that is all they know. Or other people’s criticism of surgeons because they seem to always recommend surgery because that is what they do.
At Steidl and Steinberg, our job is not to recommend bankruptcy. Our job is to fully analyze your financial condition and to offer you alternatives, sometimes involving bankruptcy and sometimes not, sometimes involving our office and sometimes not.
I met recently with a person who had a lot of credit card debt. The client also had limited income and a home in his name only worth about $150,000 with no mortgage or other liens against it. What were the options?
Under the bankruptcy laws that exist here in Pennsylvania, if the person wished to file for bankruptcy, he would lose his home. I should note here that most people who file for bankruptcy keep their homes because they don’t have $150,000 in equity. The person wanted to keep the home, so this was out.
Another option was to consider getting a mortgage against the home to pay off the debt. There would be a mortgage payment of several hundred dollars, but that would certainly be less than the minimum payments on the charge cards, which was over $1,000.00 per month. And also, if he received a lump sum payment from the mortgage to pay on the debt, he would be free to negotiate with the credit card companies to possibly settle some of the debt for less than 100 cents on the dollar.
He could negotiate the lowest possible payments with each creditor, but I don't think the payments would be low enough to be affordable. He could also use a legitimate credit counseling and consolidation service, like Western Pennsylvania’s own Advantage Consumer Credit Counseling Service, but the payments might still be too high.
When we meet with clients we want to cover all of the bases. This person's health was not great and he was having mobility problems. Getting up and down the stairs was a chore, and not getting easier. I suggested that he consider selling the house and moving into a home or apartment where he wouldn’t have to worry about negotiating steps. He admitted he had been thinking about it. because he could no longer afford the upkeep on the house.
By selling the house, he would have a lump sum of money to use to negotiate payoff amounts with his credit cards. If the creditors came after him prior to the sale of the house, Steidl and Steinberg could get involved by placing him in a bankruptcy to halt all collection activity while his house was on the block. The creditors would get paid once the house was sold, but they would not be able to collect in the meantime and would have to stop contacting him.
This is just one example of how we look at things at Steidl and Steinberg. If one of the types of bankruptcy is the best solution, we will definitely recommend it, but we will not do so without a thorough analysis of your specific situation and without going over all possible reasonable solutions to your problem.
It's called doing the right thing.