Debt, Debt Consolidation, Debt Repayment, Bankruptcy, 7, 13, Creditors, Bankruptcy Attorney, Income, Payment Plan.

What To Do When… You Are Drowning in Debt.

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WTDW Podcast | Episode 53: What To Do When… You Are Drowning In Debt.

What To Do When… Intro 00:01
Welcome to What To Do When… A podcast from real lawyers with real perspective, where we explore a variety of legal issues and scenarios. Each week we focus on a new topic and discuss what to do when and if any of these legal scenarios ever happened to you or a loved one. With over 40 years of combined legal experience, our hosts offer their unique perspectives and insights on a range of real life legal situations.

Jackie Critzer 0:28
Hi, welcome back to the Critzer Cardani podcast here in Richmond, Virginia. I’m Jackie…

Scott Cardani 0:33

I’m Scott. Jackie, what is on the docket for today?

Jackie Critzer 0:37
What To Do When… You Are Drowning In Debt.

Scott Cardani 0:41
That sounds like a topic you would know well.

Jackie Critzer 0:43
Not sure how to to take that really. Ha.

Scott Cardani 0:47
Ha Ha… You’ve represented a lot of people in that area, Jackie. So what do I do when I’m starting to get that you start to get that feeling? Because we’ve all had it, whether it’s in college, or high school, or wherever, but yesterday, what do you get when you get that feeling? And you start to feel that way? You’re like, Ah, this is?

Jackie Critzer 1:04
I mean, what we’re really talking about is people who are living paycheck to paycheck probably, and spending all their money on their living expenses, their car payment, car insurance, yes. Which thank you that price is still up. And groceries.

Scott Cardani 1:19
That price is still up.

Jackie Critzer 1:21
That price is definitely still up. And what they’re finding is there isn’t enough money left at the end of the month to pay for the credit card debt they’ve accumulated. Maybe since COVID, started, maybe even maybe there was a loss of a job, maybe there was a medical disaster that caused an increase in medical expenses. Maybe a car accident that that’s something you know, we’ve seen much longer than just a couple of years. But what we’re seeing the what, what do you do? What how do I how do I overcome this credit car, I can’t make it all work. I can’t, I can’t go to work. I don’t have a car. But I can’t make my credit card payments. And now I’m getting phone calls and Discover’s calling an American Express is calling? The short answer is, if you can’t afford to repay your debt, you need to really consider looking at either restructuring your debt in a Chapter 13 or filing for bankruptcy and chapter seven and trying to wipe away that debt and just getting a clean slate.

Scott Cardani 2:14
We get all these ads all the time I get on my computer like 25 times a day and phone and TV and debt consolidation programs. And what are those like? Are those good, bad, indifferent? What’s your opinion?

Jackie Critzer 2:25
So a debt consolidation is going to work like this, you call me I’m debt consolidation group. And I’m Caleb, and Caleb calls me up. And Caleb says, I have debt with seven different creditors and it totals $19,000. But I can’t afford to pay minimum payments, can you help me out? And credit consolidation person says, Oh, I absolutely, I’m going to do my very best, here’s what we’re going to do. Here’s the plan, we’re going to work out, I’m going to call each of your creditors. And I’m going to offer them a percentage of what you owe them. And we’re going to pay it out over a period of time. And the idea is, we’re going to develop a payment plan for Caleb to pay to me, the debt consolidation person that I’m going to then turn around and pay to the creditors. Not a bad idea. In theory, the problem is you get a lot of creditors who say no, thank you. Number one, I don’t want to get paid out over more time than my contract permits. They also don’t want you they don’t want to take the hit. They don’t want to take of 75% 60% 80% some of them just say no, thank you. So what happens is you get some creditors who say sure will participate in your plan, we’ll play your silly game. And then you get some creditors who say forget it. Well, what happens in that scenario, now you’re stuck. Now you’re only paying back some of your creditors, it hasn’t really solved your problem. And you’re still in the mess that you’re in. So can it be successful? Yes. Is it often successful? They’re in business, I guess they they they do work for some people.

Scott Cardani 3:55
But that’s what people need to know. They need to know that background. So can anybody qualify for bankruptcy?

Jackie Critzer 4:02
I mean, I suppose anybody can qualify for bankruptcy. There are some things you have to look at when determining whether bankruptcy is right for you your income is is an important factor. Chapter Seven has really income limits depending on the size of your family. And so you’ll need to speak with a bankruptcy attorney to really figure that out. But these are federal limits, and they’re based on your essentially your zip code. And so you start there and it’s not just your income, but it’s your household income you and your spouse, okay? Even if your spouse isn’t filing for bankruptcy, it does require an analysis of the household income.

Scott Cardani 4:36
Unlike child support, your spouse’s income matters.

Jackie Critzer 4:40
That’s right, your spouse’s income does matter. And on a side note, there’s wagon a lot of questions about well, if my husband files for bankruptcy, is that gonna mess up my credit? No. And here’s why. Bankruptcy is based on your individual social security number it’s not based on your social security numbers are gonna cross over with your wife unless you have joint debt. But even then, even when spouses who shared joint debt in one person files and one person doesn’t, as long as the the non filing spouse continues to make the payment, they’re their credits not impacted by the filing spouse. Okay, good. Good to know. Yep. So really what you’re wanting to look at in chapter seven is income household and husband and wife income, number of heads on bed makes a difference. And your zip code makes a difference. So again, you need to speak with a qualified bankruptcy attorney. I think I’m I think I’m qualified. And then you also need to figure out whether you have assets with significant equity, right? Some people have homes with 50 or $100,000 worth of equity that maybe you can’t protect. So what do you do in that situation? Well, I have equity in my house, do I borrow against the equity in my house and pay my unsecured creditors? You know, I’ll tell you that’s a dangerous, that’s a dangerous game to play unless you can really get your your spending under control, the problem we used to see is that people would take out an equity line, they’d pay their unsecured creditors, and then they’d run that debt up again. So now they’ve got their mortgage, they have an equity line they’re paying for and they’ve run their credit cards back up. And now what are they to do? So most of the time, you’re not going to find that that’s going to be the top choice is to take an equity line for unsecured debt, you’re making unsecured debt now secured debt when you do that with an equity line on your house.

Scott Cardani 6:21
Okay, do they have to take it? If I come to you? Do I have to take like a informational kind of credit thing for bankruptcy? I forget about that. Is there something I don’t have take a little class?

Jackie Critzer 6:33
So, every person who files bankruptcy, regardless of the chapter has to do credit counseling, and it has to be approved by the Federal District where you live, okay. And they’re an hour, hour and 15 minutes, maybe an hour and a half. But you actually don’t do it just once you have to do it twice. You have to do first when you file and then you have to do it a second time. It’s a little bit different financial management, financial education. The second time is to get really your ticket out of bankruptcy, you have to do twice.

Scott Cardani 6:59
Okay, good deal. Now, what about a 13? Is that different than a 7?

Jackie Critzer 7:02
Well, the 13 is really the chapter of bankruptcy, you want to talk about when you’ve got that client who has equity in their house? Well, I have equity in my house. So I really shouldn’t file Chapter Seven, because maybe my chapter to chapter seven trustee wants to sell my house and pay my creditors and wait a second, I don’t want to lose my house. And so we say, well, let’s look at chapter 13. And we have to figure out what sort of payment plan you need to be in. And that depends on how much equity you have versus how much unsecured debt you have. And, and that’s called a liquidity ratio or your liquidation ratio. And so you need to talk with this is not a something you should do on Dr. Google. You really need to talk to someone who knows what they’re doing when it comes to bankruptcy. And there are plenty of bankruptcy attorneys here in Richmond. Certainly, I’ve been in bankruptcy since since I began – almost 19 years ago. So it’s just important that you seek counsel, when you’re getting ready to file and you need to go with someone who’s reputable and someone that you certainly feel comfortable with. Because it’s a long process. It’s not something that you’re just in and out of it typically takes 90 days, sometimes more – depending on how complicated your case is.

Scott Cardani 8:15
It’s good, it really is what she saying there. It’s really good to check out that lawyer that you’re going to hire and make sure they have a good reputation. Because, you know, and talking to people matters, because, you know, we’ve had cases where we’ve had to deal with the the bad side of the bankruptcy where things weren’t handled correctly, and they had to be fixed or, you know, litigated and things like that. And you don’t want to be in that situation you want to you’re going into bankruptcy to bring yourself peace, bring yourself closure and to be in a better place than you were before the last thing you want to do is get to the end and be in a worse place.

Jackie Critzer 8:44
Absolutely. And it happens.

Scott Cardani 8:47
Right – so, what are our takeaways?

Jackie Critzer 8:48
Your main takeaways are this if you are drowning in debt, and you are not able to make your monthly living expense payments as well as your credit card payments or your debt payments, it’s time to consider bankruptcy as an option. So number one haven’t haven’t have a real look at how you’re spending your money and what kind of money you have leftover. Number two, you need to really consider finding an attorney that you trust that has a good reputation that specifically does bankruptcy and has done so for a long time. Who can guide you in what chapter bankruptcy works for you. What makes the most sense for you, and to help you determine which chapter works for you chapter seven or chapter 13. Again, those are those are detailed issues and detailed matters and you really need to find someone who can help you walk through that process.

Scott Cardani 9:37
All right, thank you! Like and subscribe. We had fun today. Hope you have a good week. Thanks.

What To Do When… Outro 9:42

We hope you’ve enjoyed this episode of What To Do When… For more episodes, be sure to subscribe to our podcast and we encourage you to check archives to listen to previous topics. Tune in next week for a new episode and some fresh perspective from Critzer Cardani.

Need Legal Representation? Contact Critzer Cardani.

We look forward to helping you in this venture and Good Luck!