“I was taught growing up that if you incur a debt, you’re responsible for paying it.”
“I always pay my bills. I never wanted to have to file for bankruptcy.”
“I could have avoided this if only my credit card company would drop my interest rate.”
Despite all of the jokes and political rhetoric about people who welch on their debts, deadbeats, welfare recipients, the “moocher class”, etc., the fact of the matter is – the stigma associated with bankruptcy and not paying one’s bills is extremely prevalent. These are ethical principles that are ingrained into our minds at an early age, and difficult to overcome.
Unfortunately, some people get so bogged down by these dogmas, that they delay doing anything about their finances until it’s too late – and they are faced with imminent invasive collection actions such as wage garnishments, bank levies, utility shut-offs, lawsuits, repossessions, and foreclosures.
Instead of getting the fresh start they needed, they dragged their heels until their debts spiraled out of control.
For those of you that believe that bankruptcy is morally repugnant, I urge you to consider Chapter 13 Bankruptcy.
Some debtors are required to file for Chapter 13 instead of Chapter 7 because they are ineligible to file Chapter 7 due to a prior bankruptcy or their income disqualifies them. Others file Chapter 13 to obtain extra protections for assets or to avoid foreclosure.
As your bankruptcy attorney, I owe you a fiduciary duty. In the past, I’ve discouraged people from filing Chapter 13 unless they absolutely had to. Let’s be honest – Chapter 13 is longer, more difficult, and requires adherence to a disciplined budget. But if someone insists on filing Chapter 13 strictly for moral reasons, I would rather they do that than not do anything at all, which would only make financial matters worse in the long run.
What is Chapter 13? Generally-speaking, it is a 3 to 5 year debt consolidation and repayment program. We take all of your debts, pool them together, and break them up into different categories. Based on the types of debts you have and the circumstances of your case, certain types of debts must be paid in full while most of your debts are paid pennies on the dollar. That percentage is based primarily on income, but sometimes other non-income factors come into play. The unpaid percentage is usually discharged (with the exceptions of certain non-dischargeable debts, such as student loans) just like in Chapter 7 Bankruptcy.
Debts that are not dischargeable in Chapter 7 Bankruptcy – such as domestic support obligations, taxes, and student loans – can be rolled into and paid in a Chapter 13 Bankruptcy. Virtually everyone qualifies for Chapter 13 Bankruptcy (there are debt limitations that few people ever come close to breaching – $383,175 unsecured debt and $1,149,525 secured debt, as of the date of this post).
And if you absolutely, positively are unwilling to do bankruptcy at all, consider alternative debt relief options, such as Chapter 128 or our Budget Counseling Services.