You can do everything right, but certain things are beyond your control. Job loss when a company relocates/closes offices or streamlines for cost savings is one. In Topeka and the surrounding areas, it can be a challenge to find another position with the same pay.
If you start to hit the limits on credit lines or have to juggle payments, collections companies may start contacting you. In our January blog post, we discussed what they can and cannot do. In this post, we want to discuss some history behind bankruptcy.
The first bankruptcy laws date back to Henry VIII in England. In the 1500's these laws were designed to help creditors. The creditor was the one who commenced the bankruptcy proceeding. All the person's possessions were sold with the proceeds being divided between the creditors - in some ways this was similar to a Chapter 7 bankruptcy today.
Two important differences existed. Remaining debts were not forgiven. Debt could follow you to the grave. And many debtors went to prison. Discharge of debts was introduced in the 1700s, but only with approval from a creditor.
The founders of our country looked back to English law when writing our bankruptcy laws. The great depression brought the first pro-debtor laws. For instance in 1933, the federal government prohibited imprisonment related to debt.
Ever since, major re-writes have come about every 30 or 40 years. The most recent changes enacted in 2005, included a Chapter 7 "means test" and pre-filing counseling requirements. While the changes were not as regressive as imprisoning people who couldn't pay all their bills, they did make it harder to file.
Harassment and misinformation
Since the 2005 reforms, many people mistakenly believe they need to qualify for bankruptcy. This is not the case. Everyone can qualify for bankruptcy - your financial situation will determine which chapter you choose.
In addition, third party collection companies have come onto the scene. These companies buy debt for pennies or the dollar. Often whatever they collect is pure profit. They put in place aggressive goals for the people they hire.
While it might not be prison, these people can make your life miserable. Calling before 8:00 am and after 9:00 pm may be forbidden, but there is nothing to stop them from calling constantly between these hours. They cannot threaten to have you arrested, but they can pressure you to cash out retirement to pay a debt. What no one tells you is that your retirement accounts are generally protected if you file for bankruptcy.
Where can you to turn for help? At Wiechman & Gasper, P.A., we like to say that it would have been better if you had called us yesterday. But today is really the best time to call. We will explain current laws and how they might provide you a financial restart.