If we can shift the focus to that, people say, “Well, okay. I can put the thoughts about what the effect’s going to be on the back burner and just look forward rather than look behind.”
Neil Howe: Other than the credit issue, what are some other fears clients have?
Matthew Cherney: A lot of it has to do with rehabilitating. Where am I going to be a month after bankruptcy? A year after bankruptcy? What is my credit going to look like and what are ways that I can rehabilitate my credit?
Those are certainly concerns but might be better explained as misconceptions. A lot of times, people feel that well, if I file bankruptcy, I’m going to lose everything that I have. I’m going to lose my car, I’m going to lose my house. Frankly, that’s more the exception than it is the rule. People in the immediate sense worry about what bankruptcy is going to do to their current circumstance, but they are also concerned about rehabilitation and where they’ll find themselves after bankruptcy is over.
Neil Howe: How do you save those kind of assets like the cars and the homes?
Matthew Cherney: Well, if someone is delinquent on their vehicle payment or if they are delinquent on their home mortgage, we accomplish that through chapter 13. In a chapter 13, the client needs to meet the requirements, which ultimately is that they have regular income.
Regular income could be classified in many different ways. It’s not just having W2 wages. It could be self-employment, it could be fixed income, social security, child support income, rental income if they rent out a room in their house or if they have property that they lease to another individual. Regular income is the criteria.
What we’re able to do specifically with those debts where the individual has a delinquent vehicle or house note, we’re able to take those debts and pay them back through a chapter 13. Vehicles specifically would be paid in full, subject to certain modifications perhaps to the interest rate but generally, the vehicle would be paid in full through the chapter 13 plan.
With house notes, the plan is to be able to take those mortgage arrears, the amount that the individual’s currently behind at the time of filling and propose to pay those arrears back through the chapter 13 plan. Certain districts in the US are different as to how the mortgage lender is paid going forward.
Here in the northern district of Georgia where I practice, the plans are structured in such a way to where the plan only contemplates paying back the arrears. The individual’s then obligated to make those mortgage payments going forward with the next consecutive month.
For example, if an individual filed chapter 13 on the third of the month, the chapter 13 plan would cover paying back all mortgage arrears through December. The individual would then be responsible to maintain and resume making mortgage payments in January.
By having a plan that contemplates paying back those debts, it prevents a vehicle creditor from repossessing the vehicle. It also prevents a mortgage lender from foreclosing on the property.
Neil Howe: What are some of the warnings signs of bankruptcy?
Matthew Cherney: It comes in many different ways. As I said earlier, it’s not always just going to be about missing a payment or having a creditor that is calling or sending letters. A lot has to do with the emotional side of it too.
If someone is getting anxious about a particular bill they have coming up and whether or not they should make their payment to a particular creditor on a credit card or if I do that, how am I going to pay my light bill or pay my gas bill? Those are warning signs. Or, if you’re using your credit cards to pay your normal household expenses and juggling balances between one card to the next. Or, stressing about having the ability to meet your financial obligations when that time of the month comes. I think those would qualify as some warning signs.
Neil Howe: Do you feel right now that most people are living above their means?
Matthew Cherney: That is always going to be relative to their financial circumstances. What I’m seeing currently is that incomes are starting to rebound. People are starting to recover just purely from employment. People are going from being unemployed to being employed so, that doesn’t always mean that your current employment situation is sufficient enough to maintain your debt and make those payments each month. Your income before might have been considerably more. Your income now might be less than it was and you just can’t afford to do it. I don’t necessarily see that people are living above their means as much as they’re really scratching and crawling to be able to make their payments as they are now.
Neil Howe: Give me some examples of people that you have dealt with. What kind of position were they in? How were you able to help them and ultimately, what was the outcome for their lives?
Matthew Cherney: As I said earlier, I have clients that run the gambit from unemployment, underemployment, medical related issues, tax-related issues, mortgage, and vehicle-related issues. One thing I try to convey to all of my clients or people that I meet with is that ultimately, bankruptcy can be an option.
