Not being able to pay your bills as they become due lowers your score dramatically to the lower 500s, sometimes the 400s. If it is multiplied with a lawsuit, a garnishment, repossession, multiple items with the credit bureau, your score goes down dramatically. If you get rid of all those debts, you start from scratch, you will be able to develop your score to the higher level within six months, and within a year or two if you are somewhat frugal, you will be in the 600s.
WHAT IS THE MENTAL AND PHYSICAL STATE OF PEOPLE WHEN THEY COME IN TO FILE FOR BANKRUPTCY?
People are scared, they are highly stressed, and they seem to be more susceptible to illness. Frequently, it is a cause of the breakdown of marriage, or whatever relations they have. They are frequently in very bad shape and have not been sleeping much at night. If you ponder debt, and collection agencies’, lawsuits, people have trouble sleeping. There is a study that says people who have successfully filed a Chapter 13, this is only for a 13, and they did not even go into Chapter 7, their life expectancy increases by several years.
HOW DO YOU PUT THE CLIENT’S MIND AT EASE WHEN THEY ARE FILING FOR BANKRUPTCY?
We try to take a business look at it when filing for bankruptcy. If you have these debts, and you do not have the ability to repay it, this is the most suitable option for you. We do not tell someone they have to file bankruptcy. We simply give them options. Therefore, it becomes rather clear when we work out a schedule of their debts, and their expenses, it becomes rather obvious what they should do.
WHAT ARE SOME OF THE SIGNS THAT SOMEONE IS HEADED TOWARDS A BANKRUPTCY?
If you cannot even make minimum payments on your debts, on a monthly basis, the balances are going up when you are not paying them.
WHAT ARE THE THINGS THAT SOMEONE SHOULD AVOID PRIOR TO FILING FOR BANKRUPTCY?
One of the things we find when people trust creditors, is they say send a little bit of this, and a little bit of that, and we will not bother you. I think that is rather frequent.
IS IT A GOOD IDEA TO RACK UP DEBT PRIOR TO FILING FOR BANKRUPTCY?
People allude to the expression, “Rob Peter to pay Paul” and it just does not work out very well. Most people just seem to try to avoid filing bankruptcy, and they will max out their credit cards. One of the awful things that people do is use their retirement plans, and that has multiple effects. One, you do not have enough for retirement, and there are severe tax consequences when you do that. There was a young woman, who was in a real bind because of student loans for herself, and her children. She was thinking of withdrawing $50,000 from her retirement. She went to an accountant, and it would only really net her about $26,000, which she was going to use to pay bills. It does not really work out very well.
HOW DO YOU HELP CLIENTS IN DECIDING WHICH BANKRUPTCY IS SUITABLE TO THEIR SITUATION?
If you do not have any assets, a Chapter 7 will probably be the best one, but you may be trying to save something. Maybe you are behind on your house, and you want to keep your house, maybe you have a car loan that you are behind on, then you may have to file a Chapter 13. Then there are a few instances where you cannot beat the so-called Means test.
WHAT IS THE MEANS TEST? HOW DOES SOMEONE BEAT THE MEANS TEST?
The means test is all your gross income for a period, the last six months averages out to whatever it happens to be. This would include people in your family. You would need a certain amount of money to presume that you cannot file a Chapter 7. However, there are many deductions you can take. Sometimes, with a competent attorney who might spend an hour or so going through the process. Sometimes, they can file a Chapter 7, even though your income, I think for one person in Illinois right now, is $47,000, but there are deductions frequently made to reduce that.
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