It happens all the time. We receive phone calls from anxious Minnesotans looking at their bills and wondering how in the world am I going to pay these? I am continually amazed at how long good people can hang onto a seemingly hopeless financial situation. It is not that uncommon to see people do it for years, decades even.
When it comes to debt, human nature has a common thread that runs through all of us: we want to pay it. We want to pay all of our monthly bills and yet still have enough left over to eat, keep the lights on, and make the rent/mortgage payment to keep the roof over our heads. Most of us don’t want much beyond this.
And then the event happens-
We lose income for a short period of time, or the market takes a down turn and we think it will turn back around soon. So, we borrow money to bridge the gap, and tell ourselves that once we are back on our feet, we can pay the loans back we used to bridge the gap. Sound familiar? We all have done it.
But then the amount we have to borrow is a little more than we thought, and the duration of the down turn and less income is longer than we thought, and the use of credit cards becomes an easy and necessary crutch to pay the reasonable and necessary expenses just to eat and keep the lights on. You become a little panicky at the size of the mounting debt but what are you to do? You want to keep paying your bills so life becomes a juggling act, using one card to pay down another and using the equity on one card to pay the bills for the months.
This process repeats itself until you are in so deep or the equity on any credit lines is used up to the point where there is no where left to turn to, so you call a bankruptcy lawyer. But the first question you have is can you file bankruptcy when you are current on all of your payments? It seems weird to you that you could file bankruptcy when you are current on all your debts. After all, wouldn’t the creditors wonder why you are filing bankruptcy if you are current on your bills? Wouldn’t the trustee in bankruptcy question why you are filing the bankruptcy when you are current? Would the trustee, could the trustee deny your bankruptcy because you are current?
The short answer is no
You can not be denied a bankruptcy simply because you are current on all of your bills. We meet with Minnesotans all the time who are current on their bills when they call us.
Tony and Marcia are from Maple Grove, Minnesota. They own a small antique store. They have owned this antique store for nearly 25 years. They made a decent living selling antiques and enjoyed what they did. They were not getting rich but they raised 4 children and lived a fairly good lifestyle.
When 2008 rolled around, they were taken back by the recession. When the recession first hit, Tony and Marcia thought, well, we have ridden the storm out before, this will last about a year and then we will be ok. They had no idea how deep the recession was really going to be. The phones stopped ringing and people stopped coming in the store. Times were sparse and income dropped like a rock.
To supplement their income, they used credit cards to bridge the gap and ride out the storm- a storm they thought would pass in about a year. Three years later, the storm still had not passed. By now, their credit card debt had risen to 60k and the income to the business was still terribly low.
The size of their credit card payments had risen dramatically and defaulting on the credit cards was not an option. If they had defaulted on their credit cards would have increased their interest rates something terrible and their monthly payments would have exploded. So, they keep making their payments, borrowing from one card to pay the other, and then reversing the process the next month.
eventually this all takes a toll.
There is no more room to make this work anymore. They need credit card debt help. Tony calls me and asks me what they should do. Yes, they are current on all of their cards. However, they definitely should be considering bankruptcy. Why? Because even though they are current on their cards, they see the freight train coming down the tracks. They know, with the store income so low, and no room left on their credit cards, and no where else to borrow money, they must seek out their other options, including bankruptcy.
So, in 2014, after enduring the downturn they thought would last for one year, they made it 6 years before they did file a chapter 7 bankruptcy. Now, they have their lives back and they can start fresh again. Tony and Marcia were so relieved to have the weight overwhelming debt removed from their lives. When we filed their bankruptcy case, I asked them if they caused the great recession that started in 2008? They assured me they had not- but they were certainly casualties of the great recession! I knew they had not, but I wanted to take some of the stress off right away. Thousands and thousands of businesses fail during a recession- they were one of many.
Or, what about Tom.
Tom was married with two kids. He was a successful salesman. Tom was very kind and easy going and likable. I get how he could sell so much- heck I would have bought from him too.
Tom made a lot of money- had a good life and had no debt. One day he discovered his son was using drugs and his world came crumbling down. His marriage broke apart, his job was lost due to the recession, and his son, his son lost his life to drugs. Tom called me and we set up an appointment for him to come see me.
After taking one look at Tom you could tell this was a nice man who had just been through a war. He told me the entire story and I patiently listened to all of it. I really wondered how a man like this could go through this and not burst into tears. And then Tom did cry, and he told me he was sorry and I told him don’t you dare apologize for this Tom.
Life is so very humbling.
Here was a man who had it all- wife, kids, money, and in the end he had nothing. It was all a mirage masked by gobs and gobs of money coming in and a really good lifestyle- or so he thought. And through it all, he managed to stay current on his mounting credit card bills!?
How I wondered, did he do that? Well, when you are as smart as Tom, you find a way to make it work. The awakening Tom went through was more humbling than you can imagine. Nothing hurt worse than losing his son, losing his son and feeling the guilt of not spending more time with the family all of those years. The money, in retrospect, meant very little to Tom. At the time, the money was primarily what motivated Tom.
Today, what motivates Tom is much different. Tom filed a chapter 13 bankruptcy, got control over his finances and is slowly rebuilding his life again. If you ask Tom, the pressure to make money, and a lot of it, was not worth the sacrifice he and his family went through to have it.
In Tom’s case, the fact that he remained current on his debt is almost a miracle in light of what he went through. Filing a chapter 13 bankruptcy, reducing his monthly payment to what he could afford, was the medicine he needed to cure the overwhelming debt. Like so many before him his only regret, is he waited to long to file the bankruptcy.
