Debt. It is one of the few things that we all have, but none of us really want. In our fast-paced and materialistic society, where credit is so easily obtainable and everyday goods and services continue to become more expensive, debt has almost by necessity become part of the fabric of our lives. Whether our debt is attributable to mortgages, student loans or credit card spending, we all live on borrowed money to finance our lifestyles and our futures. That’s a fact of life that very few of us can escape.
Although none of us like being in debt, debt is extremely useful to all of us. Without bank loans, few of us would ever be able to afford our homes. Without credit cards, few of us would ever be able to afford the mass of luxuries in those homes. Without student loans, many of us would not be able to afford college and graduate school for ourselves and our children (of course, an argument can be made that the easy availability of student loans is partly the cause of the high cost of education, but that’s another article for another day). In good times, when we have our work, health and personal relationships intact, our debt is manageable, and allows us to live a lifestyle of which many of our grandparents could only dream. When the system works as intended and our debt is manageable, creditors and debtors live in perfect harmony and everybody is happy.
But what happens when debt becomes unmanageable? What happens when you overextend yourself on a construction project that has gone way over budget, or when your boss suddenly tells you that your job has been shipped overseas and you are laid off, or you face a sudden medical catastrophe in your family that is not fully covered by insurance and the medical bills skyrocket out of control? Or all three at the same time? Suddenly, your manageable debt load may become too much for you to bear and you suddenly find yourself in the uncomfortable and unfamiliar territory of being on the other, much more unfriendly and acrimonious side of the creditor-debtor relationship.
When the worst happens, and you have no choice but to default on repayment of your debt, creditors have many remedies under the law to recover what they are owed. Mortgage holders will seek to foreclose on your home. Car lenders will repossess your car. All of your other unsecured creditors (credit cards, medical bills, utilities etc.) will line up to seek judgments against you in state court, which, if ignored, will lead to liens on your property, forced withdrawals through executions on your bank accounts and garnishment of your wages.
So what rights and protections do consumers have when creditors are knocking on the door? There are really only four ways to deal with debt: pay it, settle it, disappear off the grid and live in an igloo in the North Pole for the rest of your life or file bankruptcy. If the first three options are either unavailable or unpalatable (I know that I would not be able to last more than a few minutes in an igloo), then, in the right circumstances, bankruptcy may be an incredible tool to help dig out from under the pile of debt and move on with a fresh start in life.
Bankruptcy is a solution in the law that balances the rights of the honest debtor with those of the honest creditor. Among other things, a bankruptcy stops lawsuits, foreclosures and all collection activity (including those incessant calls and letters), discharges most debt and allows individuals to retain most of their property necessary for a fresh start in life. On the creditor side, bankruptcy provides a mechanism for creditors to achieve the best recovery possible on their debts with the least amount of litigation. Whether an individual or married couple file a Chapter 7 bankruptcy or a Chapter 13 bankruptcy, creditors will receive the most they are entitled to under the law, and debtors can enjoy the peace of mind knowing that they are finally leaving behind the roller coaster of living with unmanageable debt while moving forward out of their financial despair and into a hopefully brighter and better future.
Despite being perhaps the most powerful consumer protection tool available in our country, it is truly unfortunate how much misinformation and negativity exists about our bankruptcy system in our popular culture. This negativity has had the unfortunate effect of scaring away people from discovering the very real relief that bankruptcy may actually be able to provide to those in their most challenging and dire times. Most people would be surprised to learn that many of their neighbors, friends and even relatives have filed for bankruptcy and obtained a fresh start in life. If you are struggling with debt, and especially if that struggle is affecting your relationships both in and out of the home, you owe it to yourself and your loved ones to learn everything you can about all of your options and determine whether bankruptcy can be a way for you to get your fresh start in life.
Bankruptcy is not an easy or simple process, and it certainly is not right for everyone and for every situation. But if you find yourself in financial trouble, or even if you sense that financial trouble may be on the horizon and especially before you flush money down the drain by making monthly payments on high-interest debts that you will never be able to fully pay off, you must protect yourself and your family by consulting with an experienced attorney who can review with you all of your options, thoroughly explain how the bankruptcy process works and determine whether bankruptcy is right for you.
By Moshie Solomon
Moshie Solomon has 18 years of experience practicing bankruptcy law in New Jersey and New York. Moshie is also an adjunct professor of law at New York Law School. He is the principal of Law Offices of Moshie Solomon, P.C., which is based in Hackensack, with an office in Manhattan. Moshie can be reached at (201) 705-1470 or by email at [email protected]. For more information, please visit www.moshiesolomonlaw.com.