What Not to Do When Considering Bankruptcy
Are You In The Danger Zone?
If you’re looking for a Bankruptcy Attorney in Ohio, you’re probably in the Danger Zone!
But, before you see any bankruptcy attorney,
Before you take any actions,
Before you do anything,
Please read this!
To see if you’re in the Danger Zone.
You wouldn’t believe how many people come to see me AFTER doing something they should not have done, that I could have helped them avoid, if they would just take the time to read this.
So don’t make the same mistakes they did.
Read this and avoid problems.
Are you in the “Danger Zone?”
Trying to solve your money problems by searching online is extremely risky – unless – you know what to look for.
You’re here because:
You need help.
You need answers to your difficult debt questions.
You want the best solution to fix your serious problems.
You’re worried about money.
You have trouble paying your bills.
Honest Truth about being in debt…
Money problems are hard to talk about.
You feel embarrassed.
Even though it’s not your fault, you still feel like a failure, like you did something wrong
Perhaps your income suddenly disappeared.
Maybe you got sick, couldn’t work.
Or maybe your bills just got so far out of hand that it’s impossible to pay them now.
Whether it came on you suddenly, or just developed slowly over time, you feel overwhelmed.
This is not like you, you’re probably thinking.
Normally you figure out your options pretty easily.
Most of the time you know what to do.
But this is different.
You’re unsure. And that makes you uneasy.
You’re afraid, and unable to make a decision because, honestly, you simply don’t know what to do.
So, you start looking on the internet for answers.
And . .. you see all kinds of ads for debt relief programs:
Do they work?
Are they for real?
What about bankruptcy?
There are tons of debt relief programs on the net.
There are lots of Ohio bankruptcy attorneys.
But you’re worried that no matter who you go to – they’ll try to sell you on their “solution.”
When you have a serious problem and need help . . .
you’re in the “Danger Zone”
If you’re in the Danger Zone, you are:
- Vulnerable to bad advice.
- Likely to be taken advantage of.
- In danger of making things worse.
It happens every day.
When you get bad advice, things get worse, not better.
You can get sued.
Your paycheck garnished.
You could lose your home.
Your bank account – gone.
Ok, ok, enough! “I’m in the danger zone!” you say.
What should I do?
You can avoid all this.
If you get the right advice.
So how do you get the right answers?
Where can you find a trusted advisor?
One who will tell you the truth about all your options, and not try to steer you into the only “solution” he sells.
Common sense tells you that if you go to a debt management company – you’ll get one recommendation – their program.
After all . . . they’re not lawyers.
They can’t give you legal advice about bankruptcy.
And, if you do need a bankruptcy, they can’t help you.
They don’t want to lose the sale.
They want your money.
Think about it.
What about the Ohio bankruptcy attorneys?
With one exception, you won’t find any who are also certified credit counselors, and certified debt arbitrators.
They file bankruptcy.
They don’t offer credit counseling or debt management services.
They are not trained and certified in non-bankruptcy options.
Do you think they can (or would?) advise you about your non-bankruptcy options?
Internet search is a helpful tool.
We all use it every day.
I even log on to WebMD when I’m not feeling well.
I look up my symptoms before I decide if I need to see my doctor.
I kid my doctor about it.
But when I know I am sick, I don’t try to be my own doctor.
When it’s serious – I know better than to try to diagnose my own illness.
But, relying on the internet to fix your money problems is like trying to be your own doctor when you’re seriously ill.
Like the lawyer who has himself for a client.
Hazardous to your financial health.
What You Need To Do – First (and What To Do Next)
Before you make any important decision – you always do certain things.
First, you look into all possibilities.
You educate yourself on whatever it is you are trying to decide, so you’ll understand not only the options, but also the consequences of the different options.
This is just common sense.
Do your research, and you will see that there are six main options to deal with debts. (actually – I have already done most of it for you. . . read on . . . )
Six Options for Debt Relief
- Credit counseling
This is potentially useful if your debt problems are not serious.
If you can just spend more wisely, this may be all you need.
Credit counseling helps those who have never really had to figure out a budget. Folks who don’t know their income or expenses and really don’t have a handle on their own financial life.
If this is you, you have a lot of good company.
Most of us are not trained to do this.
I know I never was taught to balance a checkbook in school.
I had to figure that one out myself.
I’ll bet you did too.
If your problems are not serious, credit counseling may be the answer.
These programs can negotiate lower payments and sometimes get your balances lowered.
Sometimes debt management programs have “pre-agreed” with creditors (some, not all) on the amount that the creditor will “write off” for someone in their plans.
There are many fraudulent debt management programs that will take your money and leave you hanging.
They cause more harm than you can dream of.
And, don’t forget, no creditor can be forced to agree to a settlement or payment plan. Further warning!
The debt management programs are not attorneys.
They cannot help you when a creditor decides to sue you.
When this happens, you are on your own.
They drop you like a hot rock.
And you’re there, with a lawsuit, and nobody to defend you, after you spent possibly thousands of dollars and years trying to fix your problem.
All for nothing.
- Debt settlement
Debt settlement is different than debt management. In debt settlement – you turn your bills over to the settlement and start paying them, not your creditors. So you are still paying a monthly amount.
But the money is not paid to your creditors.
Your bills get behind.
That’s the idea.
They start killing your credit.
This is supposed to be explained to you up front.
The bills get further and further behind.
Your bills get turned over to debt collectors.
This is the way it works. The collectors often hound you.
That’s part of it too, sometimes.
You refer the debt collectors to the settlement company.
The settlement company refuses to pay. Not until a settlement is reached.
You are still paying a monthly payment. No payment on your debts is made. Then – at some point – hopefully before you get sued – a compromise can be reached. And the money that you have been paying to the settlement company is hopefully enough to pay a settlement.
But what about all your other bills?
The debt settlement company is supposed to try to do this with all your bills, but what happens when you don’t have enough money put back to pay settlements? You can get sued.(This is where folks often come to see me . . . pretty late in the game)
This is a dangerous game.
It can take a long time to settle debts, and all the while you are at risk.
Most people are not comfortable with debt settlement.
Often the settlement company doesn’t fully explain how it all works, or the very real risks involved.
I am a certified debt arbitrator.
I’ve done many of these for my clients.
Sometimes it’s the best way to handle debts.
Debt settlement is frequently more expensive than bankruptcy, and seriously hurts your credit in the process.
Worse than bankruptcy in most cases.
Knowing when debt settlement is the right option demands extensive knowledge of both debtor/creditor law, and bankruptcy law.
In my opinion, debt settlement should never be considered without talking to both a certified bankruptcy specialist, and a certified and experienced debt settlement professional. (I am both – and can tell you from experience that this is the best option in fewer than 1% of the cases I see).
IRS and State Tax will be owed! (for non-bankruptcy solutions)
You should realize that in any non-bankruptcy debt settlement – whenever the creditor forgives any of your debt, the amount written off is reported to the IRS and treated as if it was actually income to you – even though you never get any money and are actually still paying part of the debt.
You will get a 1099c and you’ll owe tax on the amount of the debt that was written off.
For this reason the actual savings that you get in debt settlement or debt management is always less than it seems at first – because you owe tax on the settlement amount.
- Chapter 7 Bankruptcy
Chapter 7 bankruptcy is the most common bankruptcy.
Most people who file chapter 7 don’t lose any property at all, unless they want to. And most people who file chapter 7 bankruptcy keep their homes and cars, provided that they are up to date on their payments.
Chapter 7 bankruptcy is not a payment plan.
It wipes out, or “discharges” most debts with no payment at all. Your debts on your home and cars must continue to be paid, and kept current, or the creditor can later repossess or file foreclosure.
Not all debts can be discharged.
Alimony, child support, and most of the time, student loan debt is not discharged. There are other debts too, that don’t get discharged.
Taxes are not usually discharged unless they are more than 3 years old and several other conditions must be met as well to discharge taxes.
You may not qualify for chapter 7. Not everybody qualifies. And even if you do qualify for chapter 7, you may still be better off filing a chapter 13 bankruptcy. It’s critical to know the pros and cons of both chapters before you make a decision.
I frequently see people who tell me they saw an attorney who “really quickly told me to file a chapter 7” and, after I carefully reviewed all their circumstances, was able to do much, much more for them (sometimes they were THOUSANDS OF DOLLARS BETTER OFF) by filing chapter 13 instead of chapter 7.
This happens almost every week in my office, so I assure you it happens to a lot of people who never know how much they “left on the table” and had to pay, when I could have done better for them.
If your average income for the last six months is over certain limit, then we will need to do a “means test” analysis to see if you even qualify for a chapter 7. Income alone is not the deciding factor. You have to do the test.
And, to do the test correctly, you need to know how it works.
There are numerous “means test calculators” on the internet. But beware! Just plugging numbers into an internet calculator can quickly get you the wrong answer.
Unless you know how to apply the law to your family situation, you will probably get the wrong answer. Again, it’s like going to WebMD, and trying to diagnose yourself. If something is really important, you need to see a specialist.
- Chapter 13 Bankruptcy
Chapter 13 payment plans are powerful, flexible tools to turn your finances around.
You may think that chapter 13 is the kind of bankruptcy where you pay all your bills through a trustee. And while this is partially true, it’s also partially not true.
In the majority of the chapter 13 cases I file, very little of the unsecured (typically credit cards and medical bills, unsecured signature loans, etc) debt is paid. I often only propose a 1% payment. That’s correct, only a single penny on the dollar.
These are referred to as 1% plans.
Chapter 13 plans have payments that range from 0% to 100%.
You might wonder why someone would bother to file a bankruptcy if you were going to pay back 100% of your debt.
Lots of good reasons!
100% plans let you pay 0% interest on credit card debt, and your car loan will be changed to a 4.75% loan. It gets you out of debt much, much faster than just making minimum payments, or even if you “pay a little extra” each month.
One reason that you would file chapter 13 is to stop a foreclosure or repossession.
When you are behind on your house payments, or even if your home is in foreclosure, or if your car has been repossessed, or is soon going to be, a chapter 13 bankruptcy can help you.
Chapter 13 will give you time – 36 to 60 months – to catch up your missed payments and save your home or car from the creditors.
Your creditors won’t give you this much time, but they have little choice if you file chapter 13.
You are then in control, not your creditors.
What if you got sick, or hurt, or laid off for a while and got behind on your bills? Chapter 13 could be the best way for you to get the time you need to catch up the missed payments when your creditors refuse to be reasonable and work with you.
But, you need to know that Chapter 13 bankruptcy is more complicated than chapter 7.
I personally know many lawyers can file chapter 7 cases but they won’t touch a chapter 13.
And, truthfully, I know some attorneys who file chapter 7 but don’t have the knowledge or experience to properly represent clients in chapter 13.
Chapter 13 plans are long term commitments.
These plans run from 36 to 60 months.
So it’s easy to see why you need an attorney who has a great deal of experience in chapter 13.
The attorney should have a large office with sufficient staff to give you the help you need, when you need it. (we have three paralegals who do nothing but assist our clients in chapter 13 cases).
Chapter 13 is a long-term relationship between you and your lawyer. It’s important to you that your lawyer is going to be here for the long run. I’ve been here for 33 years and have no plans to retire any time soon. Maybe when I hit the 50 year mark. We’ll see.
- Doing nothing is an option, too.
The do-nothing option. It doesn’t seem like an option, does it? Well, in fact, it is.
Actually, it may be the best option in some cases:
If you just lost your job.
If you have no paycheck.
If you don’t have valuable property.
Then you might be “judgment-proof.”
If you are judgment-proof, no protection from creditors may be necessary.
If you have no ability to pay, of course, you would not even consider payment options, like debt settlement, or debt management. Nor would a Chapter 13 bankruptcy make any sense.
You might think about a chapter 7, but if you are without income, you may not be able to afford the legal fees for chapter 7.
In these situations, perhaps the best approach is the “do nothing” approach:
Do not file bankruptcy.
Do not enter a debt settlement program.
Make no payments on debts.
If your creditors sue you – then what?
When they sue, they get a judgment against you, but cannot collect, as you have nothing that, legally, they can take.
Of course, your goal is to end this “judgment-proof” status as soon as possible. You should be thinking ahead.
You should be planning for what you will do when you become re-employed.
You need to protect the paycheck when you get it.
But, sometimes, particularly when you retire, you may not become re-employed. You may be on a fixed income. The income may from disability, retirement, or Social Security.
These forms of income are often protected by law.
If this is your situation, then you might remain judgment-proof for the rest of your life. When this happen, sometimes people chose to just ignore the creditors, let them sue if they want to.
This choice is not without consequences. Creditors don’t give up so easily, and they can make your life difficult. And, sometimes, you may not want a lien on a house or debt to remain after your death to become a burden on your survivors.
Even if you think that the “do-nothing” option is best for you, a consultation with an experienced attorney will answer your specific questions and possibly alert you to some things you did not know.
What you don’t know CAN hurt you.
And those you love.
How you can make the right decision
First, do your homework. That’s what you are doing right now. (Otherwise, you wouldn’t be reading this far!)
Then, you need to “know your numbers.”
This means listing, on paper, all your financial information, your income and all of your expenses.
You MUST know this information BEFORE you start to review your options.
For many of my clients, we do this together and for the first time they realize how bad their situation really is. It’s a real eye-opener! Frightening, in many cases. “I didn’t know how bad it was!” is a common reaction.
Next, use the information in this article to go deeper. You need to read a lot of different articles about the different types of debt relief options.
Don’t worry, it won’t take forever.
Just familiarize yourself with the different options listed here and get a sense of how they work.
The Internet is a great tool, but remember that you can’t necessarily believe everything you read.
There is as much “mis-information” on the net as there is truth. And sometimes it’s hard to tell fact from fiction.
Then, once you know your numbers and have a general idea of how the different options work – you can then discuss your situation with a professional.
This can be the hardest part.
You probably will have significant difficulty finding one professional (with only one exception – see end of this article).
It will be your great and good fortune if you happen to stumble into one professional who will help you to compare and contrast all the options.
Someone who can make a recommendation for the best option, and then actually help you to form a plan to solve your debt problems.
This is not, as a practical matter, possible to do. (except for one exception) Why?
The majority of professionals in this field are not trained, experienced, and licensed to compare all the options and give you a comprehensive review and recommendation.
They know one option, but not the others.
The best bet is a certified and experienced debt relief attorney, one who knows the details of all the non-bankruptcy and the bankruptcy approaches. A specialist who will honestly advise you on the solution that is best for you. And then, help you put that plan into action.
Even I can’t do that in every case, because sometimes I determine that the right option is something I don’t do.
For example, if you need a debt management program, I will probably refer you to Graceworks, because I don’t offer that service. (But they are exceptional for this purpose)
What to do when you can’t find one professional who can “do it all” for you.
You’ll have to travel to different offices and interview more than one. It’s the only way. And, this is what most folks have to do. It takes longer, but it’s your only option. (unless… see below)
After all, this is important, it’s your financial future that’s at stake. You owe it to yourself to do a thorough job of investigation before you make such an important – life changing – choice.
You’ll need to discuss your situation with different counselors, debt management programs, debt settlement companies.
Then you will talk with one or more attorneys (because, remember, the debt management companies and debt settlement companies are not attorneys, and are not permitted to give legal advice).
Finally, after you have done your research, and completed the interview process, you can make an informed choice about the best option for your situation. Sometimes it’s your “best guess” but it will be an informed one.
It is normally pretty clear, once you have done all this, which strategy will be the best for you. Then, once you have identified the best strategy, figure out which attorney or firm will be the best to help you formulate the specifics of the solution and help you carry out the plan.
Or, you could just call me.
I am the only attorney in Ohio who is a board certified consumer bankruptcy specialist (recognized by the Ohio Supreme Court Commission on Certification of Attorneys as Specialists), as well as a Certified Credit Counselor and Certified Debt Arbitrator (certified by IAPDA, a non-attorney debt management certification). For more than 30 years I’ve helped over 20,000 families find the right solution for their needs.
I won’t recommend a bankruptcy solution unless it’s the best one for you. Visiting me doesn’t mean you will get a bankruptcy recommendation.
I actually talk people OUT of filing bankruptcy – when it’s not the best option for them. (It really takes them by surprise, too! And, I end up with the satisfaction of knowing I kept someone out of a bankruptcy that they did not need – which, for me, is very rewarding)
And, I am happy to provide you with a second opinion on debt relief. Sometimes I agree with the recommendation and send folks back to the first attorney that they saw. But sometimes I find things the first attorney missed.
I regularly find problems that were not apparent to the less experienced attorney – and which could have caused big problems, loss of property, loss of thousands of dollars, or, lost opportunity to get a better outcome for the client.
There is an overload of information, good and bad, true and outright false, on the internet.
Lots of websites (even attorney websites) actually tell an incomplete or misleading story.
How do you tell the facts from a clever sales message, designed to “reel you in” and sell you the wrong solution, wreck your finances, and hang you out to dry?
Use your common sense.
Don’t try to be your own doctor.
When you have any serious problem, you need a certified specialist.
Not a “jack of one trade.”
I’ve devoted my entire 30+ year career to helping people just like you find the best solution to difficult debt problems.
Because I’ve been there. I know how you feel.
I’ve lain in bed, night after night, unable to sleep, worrying about how I was going to keep my car in the driveway, or the roof over my family’s heads.
Later, when attorneys I knew sued me, I was devastated.
It was awful. I felt like a complete failure.
I understand how you may feel right now.
I will never forget what it was like.
But I recovered, and so can you. I’ll show you how.
It’s all I do.
And when I explain to you the right solution, and show you why, and compare it to the others, you will know, for sure, beyond any doubt, that you have the RIGHT solution for your problems.
And I’ll help you recover, just like I did.
Get started on the right solution, right now.
Get familiar with the US Bankruptcy Basics