My clients feel that they’ve lost control of their lives and they are embarrassed by that. Many of my clients know that filing a bankruptcy case will be the best approach to solving the debt problems that they face. But there is a feeling common among them that bankruptcy itself is a bad thing - they believe there’s a stigma of failure that goes with being a bankruptcy debtor. I’ve been practicing for a long time. I know that this feeling is real, and that this feeling is difficult to dislodge. But I also know this - the stigma of bankruptcy is misplaced. My clients, and anyone who is thinking about becoming my client, need to know two important things: First, Bankruptcy is a social insurance program. Second, bankruptcy law is designed to be protective, not punitive.
Many of the Bankruptcy Attorneys in Maple Grove, MN and my clients struggle with the idea that they should file a bankruptcy to discharge debt that they incurred knowingly, fully understanding the terms of the credit they were using. The client agreed to the loan/line of credit/credit card. Many clients believe because they knew what they were doing, they are bound to repay the debt, no matter how difficult the repayment is for them. My argument is that belief is not correct. The bankruptcy law exists to act as an insurance program for honest debtors who find themselves in a difficult financial situation. This is one of the Top 5 Reasons Minnesotan's Meet With Our Maple Grove Bankruptcy Attorneys.
Here’s an easy way to understand bankruptcy as a social insurance program: When someone is driving down the road, the last thing that person wants is to be involved in a traffic accident, and most certainly not to have caused the accident. But as we all know, traffic accidents happen. And sometimes the accident is our fault. When a traffic accident happens, and it’s our fault that it did - none of us ever go home from the accident scene with the belief that we now must empty out our savings and checking account, or our retirement account, or that we need to sell our house or some other valuable piece of personal property in order to pay for the property damage and/or personal injury that we caused. No - we call our insurance agent and report the accident. Our car insurance will cover the expenses - the repairs of the cars involved in the accident and, if necessary, the treatment of any personal injury that resulted from the accident. Having insurance doesn’t make any of us feel better about the fact an accident occurred, but that insurance means that we won’t be financially ruined simply because we weren’t as careful as we should have been in the moments before the accident.
In this car accident scenario, the claims will be adjusted and the insurance company will issue checks for repairs and medical treatment. Drivers will have to absorb a deductible expense, but most of the damages will be paid for. The insurance company will pay what the driver could reasonably never afford to pay. And who funds this payment? We all do when we pay our monthly premiums. We spread the risk, and we share in the payment of the claims because our society will not be able to function if individuals are required to pay thousands of dollars that they don’t have to compensate other drivers.
What we do as Bankruptcy Attorneys in Maple Grove, MN is comparable to what the insurance company does in an accident case. Bankruptcy is an insurance program for single parents who don’t receive child support, people who don’t have medical insurance, or not enough medical insurance, unemployment insurance for self-employed or short-term employed people. And it’s insurance for people who make bad financial decisions (and we all do) in just the same way that auto insurance covers people who make bad driving decisions.
The difference is that an insurance company issues a check to the drivers when the insurance company compensates the people involved in a car accident. There’s no check issued in a bankruptcy case. Rather, bankruptcy debtors receive a discharge of their debts - an order by the bankruptcy court that they are no longer responsible for the debt they’ve incurred.
But the theory behind car insurance and bankruptcy is very similar. A bankruptcy debtor finds himself in a financial situation that he can’t handle: he can’t afford to pay his bills. Because he can’t afford to pay his bills, his financial well-being is threatened. If an individual goes into default on a credit account, the creditor can obtain a judgment against him, docket the judgment and collect on the judgment. Collection can take many forms: wage garnishment, levies on bank accounts, the seizure and sale of non-exempt items of personal property. And once collection begins on one account, most people find that the financial dominoes begin to fall: because their wages are being garnished, or their bank account has been frozen. They are now not able to pay their other bills, and the cycle of default and collection intensifies. The same way that a driver can be left in a situation of looking at paying damages he has no way of affording, the debtor is looking at paying bills he has no way of affording.
So we have bankruptcy to insure the financial stability of the debtor. By filing a bankruptcy case in Maple Grove, the debtor can either wipe the slate clean and get a fresh start in a chapter 7 case, or construct a repayment plan that fits into a household budget in a chapter 13 plan. Either chapter accomplishes the same result - financial safety and security - the same result the insured driver achieves.
Unlike the insurance company, the bankruptcy court does not issue checks to creditors. Instead it tells creditors that they can no longer collect the debt. The driver involved in the accident will be protected from the loss of his car, the loss of income that comes with an injury and the cost of treatment of that injury. The bankruptcy debtor is protected from the loss of a paycheck, the loss of a bank account and the loss of real estate or personal property.
It is very common for me to meet with clients who believe that they will lose all of their valuable property if they file a bankruptcy case, or that they will never again be able to access credit to finance the purchase of real estate, or a vehicle, or some other item of personal property. And many of my clients believe they deserve that, since they are going to file a bankruptcy case. These clients are wrong. The bankruptcy law is not intended or designed to punish people who find themselves in a difficult financial situation. It’s designed to protect individuals and their property. This protection takes two main forms:
First, as soon as a bankruptcy case is filed, the bankruptcy court issues an “order for relief” - a court order that requires all creditors to stop any attempts to collect on an account against an individual who has filed a bankruptcy case. This protection is called the automatic stay. By filing a bankruptcy case, and receiving the automatic stay, debtors are protected from any collection activities - harassing phone calls, threatening letters, lawsuits, the entry of judgment and any of the collection options available to a creditor who has obtained a judgment against a bankruptcy debtor. Collection has to stop, and it has to stop right away. So many of our clients have been besieged by collectors. When a bankruptcy case is filed our clients are protected from this.
Second, the bankruptcy code provides for extensive exemptions designed to protect the property that bankruptcy debtors own from seizure by creditors. Minnesota is one of 14 states that allow bankruptcy debtors to select one of two statutes - either from the bankruptcy code, or from Minnesota’s state law - to protect the assets that they own. Your home, you cars, the property inside your home, and in most cases, even recreational equipment and vehicles can be protected from creditors through the application of either federal bankruptcy or state law exemptions. The vast majority of our clients never have to worry about losing property if they choose to file a bankruptcy case. But this is not an iron-clad rule. Some people own property that is not exempt - that can’t be protected in a bankruptcy case. Typically, non-exempt assets include non-homestead real estate, expensive, later-model year recreational vehicles or extensive hobby or recreational equipment. If that is the case, the debtors with non-exempt assets have to turn the assets over to the bankruptcy trustee, or the debtors need to reach a negotiated agreement with a bankruptcy trustee to “buy back” the non-exempt asset. While this can happen, it doesn’t happen often. And in every case, by definition, Congress or the State Legislature has determined that the non-exempt asset is not necessary to an individual’s well-being.
The issue of non-exempt assets comes up in chapter 7 cases. For people who are looking at the possibility of having non-exempt assets, they have another option: those individuals can file a chapter 13 case, since the chapter 13 trustee does not liquidate assets. So in a chapter 13 case, individuals can retain their non-exempt assets without having to worry that they are going to lose the asset. It’s clear, from a review of the exemption statutes available to debtors as well as the existence of a “safe harbor” for asset ownership in a chapter 13 case, that Congress did not intend bankruptcy to act as a punitive law. Congress had no intention of fashioning a law designed to punish individuals with debt problems. Congress intended to offer people faced with overwhelming debt security and protection.
Bankruptcy offers insurance and protection to individuals with debt problems, but there is one constant requirement: debtors have to be honest in disclosing and valuing the property that they own. It’s a two-way street: there is a lot of protection available in bankruptcy law for people who need it. But those people have to be complete and accurate in disclosing and valuing the property they own. Failure to list an asset can result in a bankruptcy trustee seeking to have your discharge denied or revoked. When people file a bankruptcy case, they sign a document that declares, under the penalty of perjury, that the information in the bankruptcy papers is true and correct. Debtors can put their discharge at risk by not answering trustee questions truthfully. So all of our clients understand that accuracy is vital to the bankruptcy process, and difficult complications arise for people who are not completely honest in their schedules.
If you are dealing with overwhelming debt, and you need assistance to resolve your debt problems, by all means contact our office there are 5 Easy Steps To File With Our Bankruptcy Attorneys in Maple Grove, MN. We offer a free, no obligation initial consultation where we will review your financial circumstances and work together to figure out the best approach to take to solve your problems. We offer a money-back guarantee: you will find us to be the nicest bankruptcy law firm in Minnesota or we will refund your fee if you let us know within 30 days of filing your case. Not only that - we’ll pay your fees to file with another attorney’s office. We’re here to protect your paycheck and your property. We’re here to resolve your debt issues so you can provide for your family. We’re here to help you get your life back.