“So, if someone is bankrupt they are broke right? If so, how do they pay you to file for bankruptcy?” This is a very common question that I get when I tell people what I do for a living. Believe it or not, the answer to the question is relatively simple and straightforward. It often elicits a reaction that goes something like, “Oh, that makes perfect sense. I never thought about it that way before.” Allow me to explain.
Contrary to popular belief, most people who file for bankruptcy aren’t dead beats who run up a ton of debt with the intention of not paying it back at some point. In my experience, people who file for bankruptcy had every intention of paying the debt back but for one reason or another got in over their head. Look at it this way; many people who file for bankruptcy have between $10,000 and $100,000 of unsecured debt (credit cards, personal loans etc.). The minimum monthly payment on this amount of debt is probably somewhere between $300 and $2,500. These individuals have been paying their bills. Do you know how I know? Because you don’t get offered large amounts of unsecured debt without paying your bills on time!
Once you have made the decision to file for bankruptcy, it makes very little sense to continue to pay your credit card and personal loan bills. You are just going to eliminate them anyways! So, if the minimum monthly payments on the debt are around $500 per month, by not paying them for three months you would have $1,500. That money can go straight to your attorney for their fees for representation.
Yes, you may have to deal will some collection calls for a few months in the interim. However, would you rather have the cash and deal with the phone calls or not have the money and be no further ahead at all? The vast majority of my clients choose to halt the payments even if it means dealing with a few phone calls.
All of this being said, DO NOT halt your payments (unless you truly can’t make them and don’t have a choice) until you consult with an attorney. You need to make sure that bankruptcy is a viable option before taking those measures. Otherwise, you may have even bigger problems.
So, now you know how many people pay their attorney to file for bankruptcy. Even though it may seem illogical for one to be able to do so at first, hopefully now it makes perfect sense.