A Responsible Way to Deal With Overwhelming Debt
Since Old Testament times an escape has been provided from the crushing burden of debt which cannot be repaid. “At the end of every seven years you shall grant a release of debts.” Deuteronomy 15:1-11. The Year of Jubilee every 50 years was a special time in ancient Israel for the return of property sold or lost through mortgage, and was when freedom was granted to slaves and indentured servants. Leviticus 25. The corollary in American law, which was originally based on Biblical principles, is the law of bankruptcy.
Overwhelming debt can come from many directions. It may be a business failure, or a medical problem from a serious injury or illness not covered by insurance, or a divorce, or getting in too deep with credit cards freely dispensed by a bank. But nobody should allow themselves and their families to be destroyed by debt. Paying your bills is the best way to go. But if you simply can’t and you need the fresh start which bankruptcy offers, a bankruptcy proceeding is an honorable way to start over, and can give you peace of mind.
There are currently two forms of bankruptcy used for most individuals: chapter 7 which completely wipes out all dischargeable debts, and chapter 13 which is used to stretch out and reduce but not eliminate the repayment of debts. Chapter 7 bankruptcy is sometimes known as a “straight” bankruptcy. All non-exempt property is sold by the bankruptcy trustee to pay off the debts, but in most all cases when we file a chapter 7 we see that all of the property is classified as exempt, and hence kept by the debtor. All debts are completely discharged under chapter 7 except certain taxes, student loans, alimony, child support and fines. Chapter 7 is the better way to go, provided that there are not extenuating reasons why a chapter 13 should be used instead. We review each client’s particular circumstances to see which way is best. We also explore non-bankruptcy ways to deal with debt.
Sometimes creditors will reorganize debt without a bankruptcy proceeding. If it can be avoided, we like to avoid bankruptcy for a client. We will refer clients to organizations which can reschedule and reduce debt, or we can assist clients to do it themselves. But if bankruptcy is warranted, we can bring you through it with a minimum of pain, and in most cases without losing any of your property.
Certain situations require immediate bankruptcy proceedings, such as when the client has had property or bank accounts seized, when a mortgage foreclosure is on the horizon, or when wages are being garnisheed.
Surprisingly to many clients, after bankruptcy it is possible to re-establish credit. We advise a “go slow” approach so as not to get back into deep debt, but we have represented clients in bankruptcy proceedings, and then a few years later also represented them as they purchase a house and get a mortgage to finance it. There is financial life after bankruptcy, provided one acts prudently.
Frequently we can tell a you on the phone whether bankruptcy is appropriate for you. It costs nothing to call and find out.
The Bankruptcy Court for the Northern District of New York http://www.nynb.uscourts.gov