When Should I file for Bankruptcy?
Bankruptcy should always be your remedy of last resort.
If you are experiencing financial difficulties, you should explore all options. Most lawyers holding themselves out to be ‘bankruptcy lawyers” are that and only that. They only dole out bankruptcy solutions. They thrive on volume. If you walk through their door, they presume you are ready to sign up for bankruptcy. Problem is, most “bankruptcy” lawyers have little experience outside of consumer bankruptcy. Only more sophisticated lawyers who have a thorough working knowledge of commercial law, work out strategies, business distress issues, and restructuring concepts are going to understand the credit markets and lender mentality. They are able to see past your problems and offer solutions. Those options may include a bankruptcy option, but if you are not being made fully versed in the alternatives, how can you make an enlightened decision about whether filing bankruptcy is the right one.
Before hiring a bankruptcy lawyer (or any lawyer for that matter) first understand the questions that you should ask. In any financial distress situation, you should know:
- What exactly will be the repercussions arising from your issues? What can creditors do? How likely are they to do it?
- What will creditors in this situation generally want in order to allow some out of court restructuring? How would such discussions be initiated, and by whom? What kind of information should be made available to the creditor so as to motivate work out discussions?
- What are the risk/cost benefits of dialog with creditors? What will the attorney fees likely be? What are likely settlement scenarios? How long is it likely to take?
- Are there defenses or non bankruptcy legal proceedings that could be used to gain leverage over creditors?
- If you do not file, what will be the long term implications to your credit and what can be done about that outside of bankruptcy?
- If bankruptcy should be considered, what type, why and exactly what is the outcome likely to be?
If a bankruptcy lawyer does not spend the time with you to consider the fine details of your problems, and then present to you non bankruptcy alternatives, you are in the wrong place.
If you call a bankruptcy lawyer, he or she should be more than willing to give you a consultation to discuss all these issues; in fact they should be more than willing…they should encourage it. In my practice, I actually demand it. I am not going to recommend that you file bankruptcy until I know that you are crystal clear about the non bankruptcy alternatives, and your election to file is based on well considered strategic rationales.
Think about all those so called “pain clinics” around the country whose doctors are going to jail, because all the patient had to do was walk through the door, and they were handed an opioid prescription. Bankruptcy lawyers who prescribe bankruptcy to every client so they can pay for their Mercedes…are they any different? OK…so they may not kill you. But if you could avoid permanent damage to your financial life, wouldn’t you want to know all the ways how?
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