One of the common misconceptions about bankruptcy is that you are going to lose everything.
My response in almost all bankruptcy cases is simple: Wrong!
The attorneys at Steidl and Steinberg will not put any client into a bankruptcy if there is the possibility they will lose any item of value unless that client wants to get rid of that item, or the client is aware they may lose the item before we file any papers with the court. And in virtually every single case, the client will not lose anything at all if they file
After all of these years, I still don’t know why this misconception about bankruptcy exists. Maybe it starts when someone you know says they know someone who has actually lost a house or car in a bankruptcy. Other than the normal rumor mill that is more often wrong than right, what could have happened here to start this misconception? Here is an example.
Perhaps the person who filed for bankruptcy used to make a lot of money, purchased a $300,000 house, and was paying a huge mortgage payment. And let’s suppose that the same person became ill or lost their job and was no longer able to pay anywhere near the mortgage payment needed. They wanted to get rid of that big house and go into something more affordable.
The bankruptcy filing helps that client because, in most instances, they can walk away from the house without having to worry about making those huge payments they cannot afford at this time. And by walking away, they no longer have a responsibility to pay the mortgage and they can avoid what can be severe tax consequences which could result from the mortgage company “forgiving” the mortgage debt, a subject for another column.
What about giving up a car? In many instances, our clients owe much more money on a car than the actual value of the vehicle. We have seen instances of a client who has a car that is valued at $7,000.00 owing $12,000.00, or $14,000.00. The bankruptcy filing often offers the opportunity to give up that car and the debt while, at the same time, clearing the client’s credit enough so they can purchase a car the day they are finished with the bankruptcy.
And they can generally hold onto the old vehicle until they are into the newer one, so they don’t have to worry about getting to work or taking care of their elderly parents.
I also want to dispel the rumor that the trustees of the United States Bankruptcy Court go into your houses and look at everything. Let me put it this way: if you tell the truth, there would be no reason for a trustee to do this. In the thousands of cases I have handled, there has never been a need for a Trustee to go into any one of my client’s houses.
Here's the bottom line. Steidl and Steinberg will not let you file for bankruptcy if there is the possibility that you might lose anything at all, except, in the extremely rare case, we see something about your situation where we think this would be a possibility. If that possibility exists, you will know about it long before we would consider filing any papers.