IS THIS THE TIME TO FILE FOR BANKRUPTCY?
SHOULD I CONSOLIDATE MY DEBTS?
Heck, yes. File it, it’s legal.
Perhaps one of the dreaded words we come across as individuals or corporate entities is the word bankruptcy. For the uninformed individuals, it can send shivers down your spines and for a corporation, it may be the end of your public persona as the mega store at major malls around the country.
Often time, you hear President Trump brag about his businesses filing bankruptcy several times; and yes he has. Yet, he is still seen as a successful businessman. Even more recently, companies such as Sears, JC Penny, J Crew and many more have all filed or on the verge of filing for bankruptcy. The corona virus (Covid-19) pandemic has exacerbated the financial struggles of these companies just the same as individual. What many don’t know is that these companies much like individuals can file bankruptcy and still remain in business. Fairly often, customers and the general public don’t even know or hear about the bankruptcy filing.
If you are having financial problems right now, should you file for bankruptcy protection? Yes, you should?
The law office of Aguwa and Metu has represented numerous bankruptcy individuals and businesses for more than 20 years. Frequently I get calls or run into clients years after filing for bankruptcy who would tell me that it was the best decision they made. Some former clients report that they now have good cash flow and no creditor is calling. Even more encouraging is the fact that many of our clients go on to return to good credit rating years after. Yes, you can file bankruptcy and still buy a house or a car shortly thereafter.
Often, clients have to make the tough decision of using a credit consolidation company to attempt to consolidate and repay huge sums of debt. I have in the past argued against trying to repay debts when you have insufficient funds to meet your daily financial needs. Look at it this way – when a ship has taken so much water, do you really want to save it? You are better in a life boat before it’s too late. The consolidation companies are there to make money from you. You will pay them a fee monthly to call your creditors to give you more time to keep the sinking financial ship afloat. They may get a little reduction in your interest rate or buy you more years to repay the debt. You can also get the same deal when you make the call yourself. Trust me, you have very little advantage here. Your credit is bad already, bankruptcy will not make it worse.
Below we will look at some of the advantages of filing for chapter 7 and chapter 13 bankruptcy protections by an individual. To make it even simpler, we will answer a few of the basic questions most people ask before the file bankruptcy. Because it is a huge topic, we will deal with corporate bankruptcies under a different article.
QUESTION – Is bankruptcy legal?
Answer – Yes, it is. Bankruptcy is a legal process under federal law that allows you to get rid of most of you debts.
QUESTION – Should I file chapter 7 or chapter 13 bankruptcy?
ANSWER – If you don’t own a house or other secured assets, you probably want to get a fresh start. To wipe out most of your debts, you have to file chapter 7. However, if you own property such as a house or land, and you want to keep your property, you have to file chapter 13. When you file a chapter 13, you can still wipe out your unsecured debts.
QUESTION – Will bankruptcy spoil my credit.
ANSWER – Yes. However, if you are like most people, your credit is already bad because your payments have been late or you have not paid in a while. So, filing bankruptcy will not make it much worse. A bad credit takes several years to repair even if you pay off all you owe. In the same way, the negative impact of bankruptcy on your credit rating will take up to 10 years. Clearly, if you run into a lot of money as soon as your credit is bad, it will be better to pay what you owe that may get your credit back quicker.
QUESTION – I have a job, can I still file bankruptcy?
ANSWER – Yes, you can. If you don’t make a lot of money or if you have a lot of expenses and dependants, you can still qualify. The bankruptcy trustee will review your financial situation before making a recommendation for your discharge. Your lawyer will also give you a good idea if the bankruptcy will be successful before it is filed.
QUESTION – Will I be able to get all my debts discharged?
ANSWER – Yes, but with few exceptions. While most of your consumer debts can be discharged, there are very few debts that will not. You may not be able get a discharge for some most taxes, child support and student loans.
QUESTIONS – Will I be able to keep my house and car?
ANSWER – Yes, you may but with a few exceptions. Most people are able to keep their houses and other secured property provided you will have enough income to continue to make the payments. If there is no mortgage on the house, then keeping the house or vehicle will depend on the equity or market value of the property. Attorneys in our office will be able to give you a good idea how to navigate this.
QUESTION – Can I file alone even though I am married?
ANSWER – Yes, you can. Married people can file individually or jointly.
In conclusion, you are probably hurting financially due to the current pandemic. Don’t be ashamed of your current situation, it is not your fault. Everyone, including your attorneys, doctors, nail salon, you name it, is struggling. Bankruptcy is your right, take advantage of it.
As the old song by Norman Hutchins goes – “if you didn’t know, now you know.”
Placidus Aguwa, Esq., is a partner in the New York law firm Aguwa & Metu, P.C., We available to answer your questions any day of the week. Give us a call at 718-739-4444 or email us at [email protected].