Interviewer: Could bankruptcy could be the best financial decision someone ever makes?
James Logan: Absolutely. Again, it’s sort of point, you know, if you look at your finances and it’s going to take you more than two to three years to pay off all your debts and you’re behind in your bills already, bankruptcy is absolutely going to help you. Otherwise, you just spend the next two to three years pouring money into these debts and your credit’s still going to be crappy at the end of three years. You file today, put that money into bank account and in two to three years, you have some money saved up and your credit can be good again.
Bankruptcy Allows an Individual to Deal with Past Debts and Move Forward
Interviewer: So, that actually leads you forward ahead financially because let’s say you had, X number of thousands in bills and even though with perfect behavior, it’ll take you 5 or 10 years to pay them off. If you file a bankruptcy, you don’t have to pay them, so you’re actually getting ahead financially by doing it?
James Logan: Absolutely, that’s a great way of looking at it. Yes. Debts are about the past. When you’re paying a debt, you’re paying for something that happened in the past. Bankruptcy is about the future. When you file a bankruptcy, you’re cleaning out the past and you’re moving towards the future. The money you have today, you can either be applying to your past debts or you can be moving forward and using it for your future needs.
It is a Misconception that Bankruptcy will Have an Adverse Effect on an Individual’s Job
Interviewer: Besides that credit being ruined, what other misconceptions do people have about bankruptcy, things that make them afraid to do it when they should?
James Logan: A lot of people are afraid that they’re going to lose their jobs but that’s not true either. We have people down in the DC area that have security clearances and generally, a bankruptcy will help you keep your security clearance because obviously a much more of a risk for being blackmailed if you have a bad credit and if you’ve wiped out all your debts. So, that’s a big misconception that we get. The other misconception is that they’re going to lose everything. The reality is that the idea behind the bankruptcy is to give you a fresh start. So, in order to make you a fresh start at least in Maryland, you’re allowed to keep up to $12,000 worth of “stuff” so basically, your cars, your household goods, your tax refunds, anything up to a limit of $12,000, you can keep that.
Bankruptcy Allows an Individual to Retain Certain Assets and Make a Fresh Start
You can generally keep any pensions or 401(k)’s that you have, retirement plans, you can keep any personal injury settlements you have, any workers comp settlements and that’s all what you’re allowed to keep to make a fresh start with. And you’re also allowed to keep up to $22,000 in equity a house, of course that’s not been an issue in the last couple of years but some day, the market will come back. That’s what you’re allowed to keep and I tell people, “”My job is to make sure you don’t lose anything in a bankruptcy”. So, before we file, we’re going to make sure that we protect everything that you own. Otherwise, we’re not going to file or maybe we’ll file a chapter 13. So, the chapter 7, you can only keep a certain amount of stuff and in chapter 13, which is re-organization, you can keep an unlimited amount of property.
People Mistakenly Believe that They’ll End Up Losing Everything in a Bankruptcy
Interviewer: Do the people believe that they file bankruptcy and they end up naked with the barrel around them and nothing?
James Logan: It’s absolutely not true, no. The idea again is a fresh start and you’re allowed to keep a certain amount of stuff to make a fresh start with and obviously we make sure we plan and protect all those assets, so you will lose nothing in a bankruptcy.