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Bankruptcy Blog


Bankruptcy: Before and After

Chapter 13 Bankruptcy Petition

People who would benefit from bankruptcy often wade through pretty similar experiences, and by and large those experiences are miserable. In light of that, it's surprising to me how hesitant they are sometimes to come to me for help.  I think people don't appreciate what bankruptcy can do for a struggling individual or family, so here's a before-and-after look into the life of a fictitious but typical family that files bankruptcy.

John and Jane Doe are a married couple with two young kids, a couple of car payments, and a modest house payment. John works in construction and makes a good wage, while Jane works at a grocery store in the evenings so she can be there for the kids during the day.  

One day in early summer, John gets hit on his way to work by an uninsured driver. His car is totaled and he ends up going to the hospital with a back injury. The whole family is grateful he survived, but their struggles are just beginning. His car insurance pays for some of the cost, but between John's medical bills and his lost wages, the Doe family quickly starts to fall behind financially. 

They shut off all but one cell phone and cut the TV and internet. Jane expands her hours to full-time, and her retired mother volunteers to watch the kids. John and Jane trim the food budget and potty-train the older child to reduce the number of diapers they use in a week, but no matter how much they cut back, they can't seem to get their feet under them. John eventually gets a desk job since it doesn't require heavy lifting, but it's half what he was making before.

In August, their only remaining car breaks down. They've maxed out their credit cards trying to pay for John's medical bills, so they decide to skip the car payment and use the money instead to repair the car. They hope to get caught up the next month, but between the late fees and the crushing credit card debt, it's just not possible.

A cold snap hits in early October, and at the end of the month their natural gas bill is through the roof. In desperation, they take out a payday loan to cover it. 

In November, the harassing calls start. The bank threatens to repossess the car, so Jane has to park two blocks away from the grocery store and hope the car will still be there when she gets off work. 

In early December, Jane wakes up to text notifications from the bank that she has bounced several transactions, including the house payment. Furious, she calls the bank to find out John's direct deposit was half of what they expected. John's wage is being garnished, and a lot of what was deposited will be eaten up by the bank fees. There's no way to make the house payment, and with the late fees and other penalties, John and Jane realize they'll never be able to get caught up.

Recognizing that the roof over their head is now in danger, the Does finally decide they need to do something drastic - they call a bankruptcy lawyer and make an appointment for a free consultation.   Their lawyer looks at their financial situation, helps them understand which form of bankruptcy would benefit them most (in their case, it's chapter 13), and reassures them they are far from alone in their struggles. The law firm's staff members help the Does gather the necessary paperwork, and their lawyer files the Does' bankruptcy petition before Christmas. 

When they start the New Year, the Does' phone is blissfully quiet - thanks to the automatic stay, there are no more harassing phone calls. John's direct deposit comes through on the first of the month, and it's the full amount again. Instead of multiple bills - medical bills, car payments, credit card payments, and payday loans - John and Jane look forward to having one monthly plan payment that's just a few dollars more than their old car payment.  Their mortgage is back on track and back to a reasonable payment amount.  Bankruptcy doesn't fix everything - John's back still limits his work options - but it does put them on solid financial ground again. 
If any of this sounds familiar, please don't wait until things are desperate to make the call. The longer you wait, the deeper the financial hole will be. Contact us today to learn more about how we can make your own "before and after bankruptcy" tale a reality.

by Adam Mack, J.D.
Hillary Stirling, research assistant

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Attorney Adam Mack

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