Tuesday, January 10, 2012

Bankruptcy. Is it right for you?

When the economy started to turn in 2007, most people never expected that it would decline to the extent that it did or that it would later be called the "Great Recession." If you are like many Americans, you have a strong work ethic and you take responsibility for your actions and debts. You may see your obligation to pay debts you have incurred as something fundamental, even if it does not make economic sense. For example, if you purchased a home at the top of the real estate market and now find your property underwater, or if you experienced a significant health problem that left you with large medical bills, you now may be faced with debt that far exceeds your assets. If you are hard wired with a sense of responsibility, you may be paying these debts to the detriment of your mental and physical health.

Bankruptcy is not for everyone. For example, people with significant assets, or significant income or those who need to access credit in the foreseeable future are often times not good candidates. In addition, bankruptcy may not be the right choice for people who are seeking employment where their credit report will be viewed by potential employers or those who are in positions of trust and whose creditworthiness is a factor that impacts their employment.

However, people who have lost their jobs, suffered health issues or who are completely overwhelmed by debt and debt collectors should seriously consider if bankruptcy is the right choice for them. The bankruptcy laws are designed to allow people to press the "reset" button. It allows you to stop, assess and reset. It stops creditor harassment, phone calls and persistent letters. Furthermore, it is not as humiliating as one might believe. Indeed, if you are honest with your attorney and the bankruptcy trustee by fully and accurately disclosing your financial information, it is an entirely respectful, appropriate and cathartic process. Bankruptcy is there to protect good people who are thoroughly overwhelmed, who never expected to be in the position they are in, and who just can't make ends meet.

In my practice, I have selectively taken on bankruptcy matters over the years. Many lawyers who focus on bankruptcy practice, in my opinion, are mass producers who do not give individual clients the time and attention they deserve. By this, I mean that they are focused on handling as many cases as possible, thereby leaving the individual needs of their clients largely unattended. Although in California, attorneys are required to meet with their clients and counsel them prior to filing a bankruptcy petition, I have found that some self-proclaimed bankruptcy attorneys never meet with their clients and do not return their telephone calls or emails. Worse, I have attended several meetings of creditors at the court, presided over by the bankruptcy trustee, with clients who later commented to me that they were astonished at the number of other bankruptcy filers at these hearings who were there without the attorney they paid to do the work. Yes, some bankruptcy attorneys do not show up. Imagine, you are there alone, appearing before the bankruptcy trustee and creditors after you paid good money for representation. Mostly though, my clients comment that the attorneys send "special appearance attorneys" to appear on their behalf and represent the client at the meeting of creditors. Typically, the client was not informed that someone that they do not know and have never met will be representing them at a hearing. It is simply reprehensible in my opinion. Indeed, I have postponed a vacation because it was important to me that I be present with my client at a meeting of the creditors.

People need someone to hold their hands when they file bankruptcy. It is not an easy decision and it is not fun. The last thing you need to feel is abandoned. If you are thinking about bankruptcy, consult with an attorney to see whether it is something that is right for you and your circumstances. I am of the opinion that the consultation should be free. Be sure to inquire about whether the attorney will be available to you when you have questions and whether he or she will be there for you at the meeting of the creditors or other scheduled hearings. If you are in financial trouble, the consultation will be worth your while and asking the attorney the right questions will save you a lot of stress. After all, if you are considering bankruptcy - you don't need any added stress!