Bankruptcy

Many law offices do bankruptcies, but few lawyers actually do them. I will personally see your case through from beginning to end. I do not rely on paralegals or software to prepare your case. I do eveything.

When your finances are over-extended, or you face bills that you cannot satisfy, Bankruptcy might be the answer. The United States Bankruptcy Laws create a structured, predictable, and safe way to eliminate or reorganize your debts.

There are various types of bankruptcy cases. Each has its own advantages and disadvantages. The type of bankruptcy must be selected with great care. The decision must be based on many aspects of your unique situation. I offer comprehensive consultations and open access to all of my clients so that we can make an informed decision.

The role of Bankruptcy in the American economy

Although not readily apparent, bankruptcy is an essential component of our economy. Without it, our economy could not function. We Americans are, by tradition and spirit, risk takers and optomists. We build businesses from scratch, invest in untried ideas, we explore and we attempt—sometimes as a nation, always as individuals. Many times, our explorations lead to discoveries, our risks lead to rewards, and our optimism proves well founded. Other times, we are not so lucky.

In feudal England, from wence our legal system traces much of its lineage, the consequence to falling behind on a debt, was time in prison. Given the substantial risk of incarceration or worse, few people in the laboring class had the nerve to even contemplate borrowing. Without borrowing, there is no growth. No business investment, no personal investment. The rich got richer and the workers had few opportunities to advance.

Our American system learned much from those oppressive laws of the old world. We created a society not of classes, but of equals. All persons have the right to progress, to own property, to work for their own advancement, to provide for their families as they see fit, and to take risks without unfair consequences. Bankruptcy is the great leveler between classes. It allows all of us the ability to take chances with investment and spending—two things that are absolutely essential to our economy. Individuals can finance the purchase of a house or a car, businesses can invest in new markets or products. These things would not be realistically possible without the protections afforded by bankruptcy.

The equation is balanced by the fact that creditors will charge you interest and fees on money lent. Whenever a creditor agrees to lend money in an arm’s length transaction, that creditor is calculating the likelihood of a default. The interest rate the creditor charges you is directly related to this calculation. The creditor views the loan purely as a business transaction (which it is). All other things being equal, a creditor will charge more interest for risky loans. It is also very important to remember that if the banks didn’t make money by lending money, they wouldn’t lend money.

The effect of bankruptcy on a creditor

Although it may be hard to believe, the bankruptcy system is actually a tremendous benefit to creditors. Aside from encouraging entrepreneurship, investment and growth, bankruptcy also serves as a fair, predictable, and low cost forum for multiple creditors to settle their accounts with a person or business. Without a bankruptcy process, the creditor who was the first to file a lawsuit would tend to collect the most money. This would pit each of the creditors against each other, and all against you. The bankruptcy process allows for the orderly, non-adversarial closure or satisfaction for each of the creditors. This is the bankruptcy trustee’s job.

If your bankruptcy estate has assets, then the creditors will each receive a share of the value of these assets. If your estate has no assets, then the creditors will receive nothing. However, the creditors are not forced to expend time and money in court.

Perhaps even more revealing is the multi-billion dollar debt collections market. In this industry, creditors will often sell the right to attempt to collect a debt to a third party collector. The creditor will sell the debt for tiny fractions of the amount owing—literally pennies on the dollar. The creditor makes a simple business decision that the tax write-off is more valuable than the debt. Besides, it has likely already received a substantial amount of interest from you and a percentage fee of the original purchase. In a typical loan (credit card purchase, etc.), the fees charged, the interest paid, the proceeds from the sale of the debt, and the cash-equivalent value of the tax deduction will likely add up to significantly more that the principal borrowed. The banks are not losing money on defaulted loans. They are simply not making as much as they wanted to.