Actual Attorney/Client Dialogue: Debt Consolidation, Keeping a Car & Bankruptcy
Below is an actual e-mail response to questions I received from my client. Her questions are so relevant to most people's concerns, I had to re-print the entire dialogue. As I am licensed only in NY, this is not legal advice for anyone else that I have not personally met with, and simply should just be used for educational purposes:
1. What recourse do my creditors have-- if I am on social security and do not have any money, which is the case. They can sue me but how does that effect me if I have NO money and own nothing.
If you are on SS and have no money, they really have no recourse. If you are retired, and have no assets, doing nothing is your best option. However, if you are working and deposit a check, they can take that money, which is non-exempt, not to mention potentially taking your car and selling it at auction to recover any equity (not likely, but possible). Thus, for peace of mind, as you are still working, bankruptcy is not only a viable option, but your best option. If you told me that you planned to retire and that all your assets had been previously transferred to your children years ago, doing nothing would be your best option.
2. What is this hype about, that I have been hearing on the radio, " if you are a US citizen and owe more than $10,000, you my be eligible for a credit card relief program, where you can settle you debt for a fraction of what you owe".
All Hype…what you are hearing is advertising, pure advertising, for debt consolidation, the biggest scam on the planet. With debt consolidation, you avoid bankruptcy (as if bankruptcy was evil…its roots are traced to the bible…credit card companies charging 30% interest is not), but you pay back 100% of what you owe, plus interest until the debt is paid in full. The commercial you hear is simply a scam. There is no government program, it is not a “bailout” of individuals, it is simply a way for the credit card companies to sucker people into paying what they owe by spreading out the payments over time. You can do that with a Chapter 13 bankruptcy, and not pay any additional interest. And this would be the worst case scenario. A Chapter 7 filing would eliminate your repaying any of the debt. In fact, even with a Chapter 13, depending on your income and expenses, you may pay back only a small percentage of the outstanding balance. Thus, debt consolidation should not even be an option as it is nothing more than a scam! Banks, credit card companies and debt consolidation companies (which, I suspect, might be sometimes owned by the banks or credit card companies) spend billions on advertising as well as lobbying politicians to justify their existence. It is nothing more than a scam. Bankruptcy is your God given and Constitutionally protected right…and the best option for most people who are being crushed by a mountain of debt and do not know what to do.
3. My concern is mainly losing my car, which is akin to being legless. I can count on trouble free transportation now, but if I have to scrap up another car I do not have the resources to pull it off.
What makes you think you will lose your car? You are allowed $2,400 in equity. If your car is worth 15,000 and you owe $12,000, you will not lose your car. At most, you will have to pay the trustee some cash in exchange for keeping the additional equity in your car. Alternatively, if you are working and owe zero, and adopt responsible spending habits and credit borrowing, you can always get another car if you have tremendous equity in your current vehicle and no way to pay the trustee to permit you to keep the vehicle. By having zero debt, other than a car, a proper budget will ensure that you can not only pay for this car, but also save money in the bank to make you more financially stable.
4. My job ended yesterday, I need to line up the next one before I can afford to pay you. I can not assume how long this will take, I can only be proactive, and hope for the best.
I understand that your financial situation is highly tenuous, and I have already advised you that I will set up a payment plan. Because you are currently working, and appear to be at the age that you will be working for several more years, doing nothing will not solve your problems. You are legally entitled to file bankruptcy. But you must decide for yourself that taking such action is necessary. What I have found is that most times, people are so afraid of the unknown, that they let fear prevent them from taking action. The unknown for you, involves what bankruptcy will do to you, specifically, can you keep your car. I cannot tell you for sure until we look at your entire financial profile and determine what assets you have, the actual “private party” value for your vehicle at the time of filing, the amount you owe, if any, on your automobile loan, and determine the equity in your vehicle. Once we have all of that, we can formulate a LEGAL strategy to help you keep your car. Legal is capitalized, because I am not advising you on how to commit bankruptcy fraud, but rather on how we lawfully look at your exempt and non-exempt assets and devise a strategy that will help you keep your car. Sometimes you might be able to sell something exempt, in order to raise cash to pay over to the trustee. Other times this is not possible. Any attorney can file bankruptcy (well almost any). Coming from an education background, I teach people how to understand how money works and how to protect their credit and assets, even if we have to file bankruptcy, but bankruptcy is not right for everyone. Only after a thorough analysis can any attorney offer a realistic assessment…otherwise, it is only a guesstimate.
Sincerely,
John M. Crane
[URL Removed]
John M. Crane, P.C.
342 North Main Street
Port Chester, NY 10573
(914) 937-7272
(914) 937-7277 fax.
1. What recourse do my creditors have-- if I am on social security and do not have any money, which is the case. They can sue me but how does that effect me if I have NO money and own nothing.
If you are on SS and have no money, they really have no recourse. If you are retired, and have no assets, doing nothing is your best option. However, if you are working and deposit a check, they can take that money, which is non-exempt, not to mention potentially taking your car and selling it at auction to recover any equity (not likely, but possible). Thus, for peace of mind, as you are still working, bankruptcy is not only a viable option, but your best option. If you told me that you planned to retire and that all your assets had been previously transferred to your children years ago, doing nothing would be your best option.
2. What is this hype about, that I have been hearing on the radio, " if you are a US citizen and owe more than $10,000, you my be eligible for a credit card relief program, where you can settle you debt for a fraction of what you owe".
All Hype…what you are hearing is advertising, pure advertising, for debt consolidation, the biggest scam on the planet. With debt consolidation, you avoid bankruptcy (as if bankruptcy was evil…its roots are traced to the bible…credit card companies charging 30% interest is not), but you pay back 100% of what you owe, plus interest until the debt is paid in full. The commercial you hear is simply a scam. There is no government program, it is not a “bailout” of individuals, it is simply a way for the credit card companies to sucker people into paying what they owe by spreading out the payments over time. You can do that with a Chapter 13 bankruptcy, and not pay any additional interest. And this would be the worst case scenario. A Chapter 7 filing would eliminate your repaying any of the debt. In fact, even with a Chapter 13, depending on your income and expenses, you may pay back only a small percentage of the outstanding balance. Thus, debt consolidation should not even be an option as it is nothing more than a scam! Banks, credit card companies and debt consolidation companies (which, I suspect, might be sometimes owned by the banks or credit card companies) spend billions on advertising as well as lobbying politicians to justify their existence. It is nothing more than a scam. Bankruptcy is your God given and Constitutionally protected right…and the best option for most people who are being crushed by a mountain of debt and do not know what to do.
3. My concern is mainly losing my car, which is akin to being legless. I can count on trouble free transportation now, but if I have to scrap up another car I do not have the resources to pull it off.
What makes you think you will lose your car? You are allowed $2,400 in equity. If your car is worth 15,000 and you owe $12,000, you will not lose your car. At most, you will have to pay the trustee some cash in exchange for keeping the additional equity in your car. Alternatively, if you are working and owe zero, and adopt responsible spending habits and credit borrowing, you can always get another car if you have tremendous equity in your current vehicle and no way to pay the trustee to permit you to keep the vehicle. By having zero debt, other than a car, a proper budget will ensure that you can not only pay for this car, but also save money in the bank to make you more financially stable.
4. My job ended yesterday, I need to line up the next one before I can afford to pay you. I can not assume how long this will take, I can only be proactive, and hope for the best.
I understand that your financial situation is highly tenuous, and I have already advised you that I will set up a payment plan. Because you are currently working, and appear to be at the age that you will be working for several more years, doing nothing will not solve your problems. You are legally entitled to file bankruptcy. But you must decide for yourself that taking such action is necessary. What I have found is that most times, people are so afraid of the unknown, that they let fear prevent them from taking action. The unknown for you, involves what bankruptcy will do to you, specifically, can you keep your car. I cannot tell you for sure until we look at your entire financial profile and determine what assets you have, the actual “private party” value for your vehicle at the time of filing, the amount you owe, if any, on your automobile loan, and determine the equity in your vehicle. Once we have all of that, we can formulate a LEGAL strategy to help you keep your car. Legal is capitalized, because I am not advising you on how to commit bankruptcy fraud, but rather on how we lawfully look at your exempt and non-exempt assets and devise a strategy that will help you keep your car. Sometimes you might be able to sell something exempt, in order to raise cash to pay over to the trustee. Other times this is not possible. Any attorney can file bankruptcy (well almost any). Coming from an education background, I teach people how to understand how money works and how to protect their credit and assets, even if we have to file bankruptcy, but bankruptcy is not right for everyone. Only after a thorough analysis can any attorney offer a realistic assessment…otherwise, it is only a guesstimate.
Sincerely,
John M. Crane
[URL Removed]
John M. Crane, P.C.
342 North Main Street
Port Chester, NY 10573
(914) 937-7272
(914) 937-7277 fax.