Here’s the scenario: Potential client qualified for a Chapter 7 two years ago but, for reasons I was never clear on, decided not to file. Now, her creditors filed suit and received a judgment against her, so she reaches out to me again. We talk, and it turns out that her home now has a good deal of equity, so a Chapter 7 is no longer feasible. Now, she’ll have to file a Chapter 13. Though that option offers some relief, it will cost her more in legal fees, she’ll have to make monthly payments to the court to pay her creditors, and because her income fluctuates, it will be a challenge filing a Chapter 13 to begin with. I don’t currently handle Chapter 13’s but I know it is going to be a tough road for her ahead. Had she only….
Here’s another one: Potential client could have filed a Chapter 7 about a year ago but kept having other expenses come up, so he never got around to committing to paying the legal fee. I recognize that coming up with the fees for a bankruptcy is a big challenge (I even wrote a post a couple of years back on how people can come up with legal fees) but this particular person simply decided to postpone filing. Fast-forward to a year later. I’m getting emails and calls from this person, who desperately wants to file bankruptcy because his bank account has been levied (meaning, a creditor has court permission to take money out of his account). By this point, the potential client was in what I call a “reactive mode” trying to stop the bleeding of losing even more money. Though a bankruptcy can stop creditors from further collection efforts, I wasn’t able to handle his case because he had moved out of the state and was now in a whole different jurisdiction. Hopefully, he was able to connect with an attorney that could help him out. Had he only…
I’ve had probably another half dozen similar scenarios this year alone - where people come back to me only to find that the options they had months back no longer are available because their financial circumstances have changed. The irony is that while equity in a home or an increase in salary might mean folks can pay some of their debts, it also means that they may not qualify for a Chapter 7.
No one ever really wants to file bankruptcy - but as I often find myself saying, they might actually need to. If you have that need, please - don’t hesitate; otherwise you might miss your chance to file a Chapter 7.