CHAPTER #26 What Bankruptcy Won’t Solve

Sometimes I see people who are "TPTGB". That is, they are "too poor to go bankrupt." You generally think of some who has filed a bankruptcy as someone walking down the street with their pockets turned inside out, and a barrel hanging over their shoulders by straps because they have no clothing. That is absolutely wrong. It is amazing how ignorant most journalists are about bankruptcy. My clients are most middle class, with incomes from $35,000 to $65,000 per year. Their problems are usually overspending, credit card fever, or reduction in income to a level that permits them to live, and pay necessities, but does not permit them to continue to service their credit card debt.

A person who can't pay credit card debt is easily helped with a Chapter 7 discharge of debts. But a person who can't pay their rent is not helped by bankruptcy. If your income is just too low to live normally, part of your problem may be bill payments, but after the bills are gone, will you have enough income to pay your regular living expenses? If not, bankruptcy will only solve part of your problem.

I see this sometimes with people who have large student loans and just got out of school. They make only enough to live, and cannot make a $300 per month student loan payment. There is no excess income available. There is nothing the bankruptcy laws can do for that person. The only solution for them is to make more money, because most times their student loans have to be paid. Of course, every situation is different, so it is best to get proper advice from an experienced bankruptcy attorney.

Here is an example of a problem that looked impossible, but we did find a Bankruptcy Solution.

Problem: Kimberley had a $260 per month car payment, and need her car to get to work. She had no money left over to make a payment on $10,000 in government insured student loans which became due first last year, and also had about $5000 in other bills. On top of that, her car was only worth $5000, but she owed $10,000 on it because she put no money down when she bought it.

The Peter Francis Geraci Chapter 7 or 13 Solution: I filed a Chapter 13 Plan for her, since her job is very steady. Her payment was $260 per month for 60 months. Her car will get the first money, she will pay only the market value at 9% instead of full price, the other creditors will get only 10% of their money and the rest will be forgiven, and the student loan will get paid just about everything.