I am driving to the office yesterday and it is Monday morning and the rain is coming down in torrents and the Boston traffic speaks for itself. I am stressing about all of the things that need to be taken care of including writing this blog. I take a call from a new client and hear her out and advise what Smeloff and Associates can do to assist her. Then I take another call from a first time caller. I am shaking my head at the needless suffering by good people, and how easy it is under the Bankruptcy Law to fix the problem.
So lets take these two calls and use them as an example. Real people, real problems. First there is Susan from Worcester (not her real name). She is 6 months behind on her mortgage ($14,000) and has $35,000 in delinquent credit card debt. The Bank has scheduled an auction for her house in 2 weeks. She has 3 children in high school and her elderly mother lives with her. She is understandably in tears.
Solution: We will file a Chapter 13 reorganization under the federal bankruptcy code. Specifically, upon the filing there is an automatic stay of execution which prohibits the bank from foreclosing. Then we prepare a plan of reorganization that provides Susan 5 years to pay the mortgage arrears without any interest, late fees or penalties. The plan will pay her delinquent credit cards at 1 percent over 5 years. That is correct, one percent or $350 of the $35,000 total. Grand total payment to keep Susan and her family in their home and get rid of her debt: $299 per month for 60 months. I don’t make this stuff up. It’s the law, federal law that is written by your Congress! Score 1 for the good guys 0 for the bank. Susan keeps her home.
The next caller is Jeffy (not his real name). He is in a panic over his credit card debt. He had a job loss but he is back to work as a videographer for a nature education company. Jeffy has a daughter in college and has struggled to help her with tuition. His wife is at home in a wheelchair due to a car accident. His credit cards are delinquent and maxed out at over $70,000 and he is being sued by American Express. He wants to file bankruptcy but fears he will lose his modest home which is valued at $325,000 with a $175,000 mortgage.
Solution: Smeloff and Associates will file a Chapter 7 Bankruptcy for Jeffy and eliminate all of his debt. He has a homestead on his house which under Massachusetts law gives him an equity exemption of $500,000. Thus, he keeps his home and discharges $75,000 in credit card debt. American Express will be required to dismiss their lawsuit against him and go away forever.
End of story. Score 2 for the good guys and 0 for the banks.