People file because they are in financial trouble; they have a lot of credit card debt and/or medical bills, their bill collectors are sending them letters and calling and harassing them. They are a few months behind on their car and worried about getting repossessed or the IRS and California Franchise Tax Board are breathing down their necks about taxes they owe or they have a notice of default on their house and face foreclosure unless they do something and they just do not see a way out. Those are just a few of the reasons people come and see me, but there are many more.
Do Clients Generally Feel Relieved When Retaining Your Services?
Once the clients realize that my job is to make their life better, they are willing to do whatever I ask them to do to make that happen. One thing people appreciate about me is that I have everything organized; I have seen situations in which the law firm asks for this and that and two days later, they are asking for something else, and people become frustrated by that. The way I have things structured, I have a questionnaire that gives me all the information I need and a document production sheet that lists exactly what documents they need to bring to me.
Once they provide those items to me, we process their case, then they come in and sign their bankruptcy petition and schedules and they are on their way.The biggest issue that I have seen over the years between attorneys and clients is that it is like a never-ending process that never gets done. If the attorney has his or her practice organized properly and makes it as easy as possible on the clients, then the clients are generally a lot happier with their attorney and they feel more confident with the process.
Do You Recommend that Clients Get Credit Counseling Before Filing for Bankruptcy?
When people come to me, they are generally really upset about what is going on and they know they are in trouble; a lot of people will do things online now to figure out where they are. Often, the credit counseling services do more harm than good because they tell these people if they just manage their budget better or if they do this or that, they will have a good quality of life. The reality is that they are putting these people in debtor’s prison for 5 or 6 years because they have so much debt that they need to file bankruptcy and get on with their lives. If a client walks in with $20,000 or more in credit card debt, with no disposable income and no family to help them, and they have no 401(k) to borrow from to make this all go away, it is pretty obvious to me they will not get out of their debt no matter how hard they try, and bankruptcy generally is the best thing for them.
A lot of people talk about these debt settlement and debt consolidation programs, but those programs have problems and the impact on your credit is just as bad as if you file bankruptcy. I am not a huge fan of the credit counseling companies because what I do in my office is about the same as what they do.
One problem is that there are bankruptcy firms that really do not practice law, which means you are supposed to be there as an advisor to people to guide them in terms of whether or not they should file bankruptcy. At many big firms, you are talking to a salesperson who is there to sell you on bankruptcy and get your money and your case. I do not really find that to be professional, or ethical, but that is what goes on in the marketplace.
When someone walks in to my office, my job is to advise them, not to tell them if they want to file bankruptcy, I explain to them what are their choices and options, and that is it. Many people who come through my office do not file bankruptcy because I present them with another way out. If more attorneys practiced properly, there would be no need for credit counseling agencies.
What is a Chapter 11 Bankruptcy?
Chapter 11 is a plan of reorganization. The only reason that a consumer would ever file a Chapter 11 is if they have too much secured and unsecured debt. In Chapter 13 you can only have a certain amount of secured and unsecured debt and if you are over those limits, then you would file a Chapter 11. For example, If you are a very wealthy person and you have a half million dollars in credit card debt, you cannot do Chapter 13; you can only do Chapter 11. For the most part, Chapter 11 is what big corporations and developers file. Chapter 11 is a very complex and convoluted reorganization program, it is extremely expensive, it is time-consuming, the reporting requirements are unbelievable and the vast majority of attorneys do not even practice in Chapter 11 because they are just so expensive and to find someone with the ability to actually reorganize and be successful is very difficult.
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