07 Dec Bankruptcy: Reality or Fantasy
When you file for bankruptcy you must ask yourself are you in a reality or fantasy frame of mind? When I was young , one of the professions I pursued and dreamed about was being an actress. I trained, auditioned and actually took several classes in college along the way. I am talented enough to be represented by two agents, one in Kansas City and the other in North Carolina. In my fantasy view of my acting ability I am every bit as talented as Angelia Jolie. Even though I have appeared in several national films the reality is that my talent and skills are much more suited to being a bankruptcy attorney than an actress. Facing reality is a hard position for anyone to be in and truly is the first step that one must take when you consider filing for bankruptcy relief.
People often have a fantasy view about what bankruptcy is like and what it will do for them. Please allow me to walk you through an example. A debtor comes to the office and says ” I need help with my bills as I just cannot make ends meet.” This particular debtor has monthly bills of a mortgage payment of $1,000, car payment of $350 and utilities of $200. Additionally this debtor is behind $5,000 in their mortgage and wants to save their home. Keep in mind these expenses do not include other budget items such as fuel, food and clothing.
In examining the budget the debtor tells me that their take home pay is $1800 per month. This is a reduction in pay because they were laid off in 2010 and this is the only job they could obtain. To complete the financial picture they are also looking to discharge $30,000 in credit card debt. Their fantasy is that bankruptcy will resolve all their financial woes and they will magically be able to afford the home, vehicle, make the credit card debt go away while making ends meet. But is this view set in reality? The floor of their budget if they were even is $1550 per month. This total is comprised of the mortgage, vehicle payment and utilities. Subtracting the $1550 from the $1800 net pay leaves $250 a month to cover food, clothing, fuel, medical and other misc. items. So no I do not think that this debtor is set in reality just yet.
The reality outcome of this scenario is that without a loan modification and/or other changes there is no way that this debtor can file a Chapter 13 to save the home. Why? Because the reality is they do not make enough money meet their basic necessities let alone a Plan payment. The reality is that bankruptcy will not re-write the mortgage terms. The reality is mortgage modification and bankruptcy are not the same thing. The reality is that no judge can force the mortgage lenders to issue a modification. And the reality is that some times bad things happen to good people.
Are you stuck in one version of reality and therefore should never consider a fantasy view? Absolutely not! When Walt Disney began to pursue his fantasy of cartooning lovable characters he faced many harsh realities. Walt’s reality in the beginning was that he was not a savvy business person and it cost him dearly. However Walt decided that he could take his fantasy and make it his reality. This process is not one that occurs overnight nor does it occur absent hard work, sacrifice and persistence. Changing one’s financial picture through bankruptcy is the same process.
Let’s take a look at the financial picture again of the debtor outlined above. Would I advise them that a Chapter 13 to save the home is absolutely impossible? No, my analysis would evaluate what is this debtor willing to do to make the fantasy of keeping the home into a reality. Are they willing to do the work to attempt a loan modification? Are they willing to take on a second job or a roommate? Depending on the principal balance of the vehicle are the willing to consider surrendering the vehicle and purchasing a less expensive vehicle? Basically I want to know what are your goals and expectations. I have seen many miraculous things occur in bankruptcy but the bottom line is that debtor MUST be set in reality if they expect to have a successful bankruptcy.
Everyone has a fantasy about their situation. Even my my dog has a fantasy. Chip’s fantasy is that he possesses special Jedi powers and he is able to move his ball about without human intervention. However the reality is that ball is not going to move unless there is an earthquake, tornado or human intervention. Unlike Chip you have the power to change reality into whatever you desire if you willing to do the work. No matter how long Chip stares at his ball it will never move without some intervening force beyond his control.
Would it not be a great Christmas gift to yourself to take control of your financial situation and in turn change your financial reality?
Remember that knowledge is power. The more knowledge you have about of your financial picture the more power you will have in making your fantasy your new reality.