Cheap Bankruptcy? You Get What You Pay For

May 30, 2017 | Bankruptcy, Chapter 13 Bankruptcy, Chapter 7 Bankruptcy, Credit

Once there was a barbecue restaurant. It’s closed now, but back when it was open years ago tucked away in the corner of nowhere they hung a sign above the counter. That sign said “Good food ain’t cheap and cheap food ain’t good.” It’s probably the reason the proprietor of the restaurant used to emphasize the fact that you would get “A” refill with a beverage purchase. The capital “A” indicated one, single refill. But the barbecue was good. It was also plenty spicy. That single refill usually turned into a few more drink purchases just to quench the fire, although they say milk works better for that, or maybe a Dairy Queen Blizzard.
So what does all this barbecue talk have to do with bankruptcy?

That’s a good question isn’t it? It’s one that can easily be answered in a brief article. And that’s what we’re here to do now. You’ll see why a cheap bankruptcy is a lot like cheap barbecue. It ain’t good. And unlike barbecue, instead of indigestion you’re going to end up with some lost assets, lost money, and lost opportunity to ever eliminate those debts again.

You Get What You Pay For

Have you ever wondered why a mobile home on the beach in Malibu costs a few million dollars while a mobile home out in Death Valley costs a few thousand? No it’s not that the one in Malibu is plated with gold. And no it’s not that it’s tornado-proof, or made from some sort of special insulating material. The difference is the location.

The mobile home in Malibu overlooks the ocean, and you can walk out your front door and down to the beach. It’s not just any Beach either. It’s the beach where all of Hollywood’s elite want to take their stroll as well. It’s a place where it’s 68 degrees all year around and it hardly ever rains. it’s a place where your address makes your friends jealous.

How about that home in Death Valley? Let’s make it the same exact mobile home. You just drove it east for a while and parked it in Death Valley. How did that mobile home manage to depreciate millions of dollars with just a quick trip down the freeway?

Well now instead of celebrities on beaches and fine weather, you’ve got tumbleweed out your front door (if you’re lucky) and you’ve got 115 degree mornings. You’re lucky if the nearest grocery store isn’t on fire from the heat when you get there to buy yourself some jugs of precious drinking water.

So if money were no object, which one would you buy? I doubt too many people would pick Death Valley. As they say in Latin, “de gustibus non disputandum est” Someone out there will probably reject the Malibu home, but I doubt it would be you or me.

Welcome to Death Valley

Cheap bankruptcy is the Death Valley of legal actions. Just like the hot wind that slaps you in the face, a cheap bankruptcy slaps you right in the wallet.

You may ask yourself, “How is this possible?” If I’m spending less money to file my bankruptcy, shouldn’t that actually save me money?

That might be the conclusion to which you would jump. But that would mean you either didn’t read the last 500 words or so, you didn’t understand them because you aren’t too great at analogies, or you just didn’t care to think about it.

If you’re the latter – shame on you!

Nobody wants a rack of ribs that some cook just tossed in the oven to bake for ½ hour, only to slather them with some KC Masterpiece and slap them on a plate. No. You want ribs that are first sprinkled with dry rub and then left to marinate overnight. Next, you want those ribs slow smoked for hours and hours over some smoldering chips of pecan or hickory. Then, you want some artfully applied, handcrafted sauce delicately layered on top of those ribs. Or maybe you don’t want any sauce at all, or just a tad on the side for dipping.

When you pay a premium for BBQ, you get that extra time, attention and care to ensure that you’re getting the best ribs in town. And when you pay a bit extra for an experienced, highly qualified, well-respected and rated bankruptcy attorney, you get that same degree of tender loving care as those award-winning baby backs.

It may be hard to believe, but paying a bit extra for outstanding bankruptcy service is even better than paying more for good BBQ. The only real reward for shelling out extra dough for BBQ is that your tongue is extremely happy. Other parts of you as a matter of fact, might be a bit hurt by those ribs, like your heart valves and arteries. But paying more for bankruptcy is a win win situation. In fact there is no downside, and it will more than likely save you money in the long run. Paying extra for bankruptcy usually means you’ll be left with more money in the end.

Money in the Pocket

So we’ve already seen some reasons why paying more to file a bankruptcy is not unlike a trailer in Malibu or an award-winning rack of ribs. The level of service you get is going to far outweigh the cheaper competition. However, we haven’t really discussed how spending money at the outset on quality bankruptcy services can save you money in the long run. Let’s take a look at that now.

So here’s the part you’ve all been waiting for. How spending extra money on your bankruptcy attorney saves you money in the long run.

Assets. Yes, you have assets. No matter how destitute you are, you’ve got them. The only exception is if you are walking around stark naked with no clothes on your back. And if that’s you, you’ve got bigger problems than bankruptcy. Hypothermia comes to mind.

So if you’ve got assets, we can safely assume you want to protect them. This is where using a quality attorney makes tremendous sense. When you file for bankruptcy, all of your possessions become the court’s possessions.

You may ask, “Then how am I allowed to keep anything? Won’t they just sell all of my stuff and give it to my creditors since filing bankruptcy makes my stuff the court’s stuff anyway?”

The bankruptcy rules allow for things called “exemptions.” They are specific legal rules that vary from state to state that grant you the ability to keep certain property up to a given dollar amount. For example, an exemption might allow you to keep $4,000 worth of household goods and furnishings. This might include the used value of all of your furniture, decorations, dishes, cooking utensils etc. Another exemption might allow you to keep $500 worth of clothes.

This is where your highly-qualified bankruptcy attorney steps in to save the day. He or she will know the ins and outs of the law as it pertains to your assets. Consequently your attorney will be able to ensure that all of your assets are protected. This requires your bankruptcy petition to be presented to the court in a way that the court and trustee will not question the value of your assets and whether or not they are protected. It also may require some pre-bankruptcy planning that might involve you selling some assets and then spending the cash you received on living expenses that are allowed by the court. And that brings us to our next topic – cash money, and what to do with it if you actually have some.

Cash Money

Cash money, (as opposed to non-cash money?) is something so easily lost when filing. An inexperienced (read “cheap”) bankruptcy attorney may not be adept at knowing how to protect your cash when you file. If he or she doesn’t know the fine details of the law and the nuances of the trustee/court system, you could end up losing more than just a little cash. How about losing a car or a home? How about having your entire case dismissed? And how about after getting it dismissed, being unable to ever file bankruptcy on those debts again?

Does a cheap bankruptcy still sound like a bargain? If so, read on to get the nitty gritty details. If not, read on anyway. It’s a fun article.

So how exactly can an inexperienced, bargain-basement bankruptcy attorney or (heaven forbid) a document preparation service (who aren’t allowed to provide you any legal guidance whatsoever) lose the cash that you have in your account?

You are only allowed to have a certain amount of cash on hand when you file for bankruptcy. The amount varies depending on your state, but they all have restrictions. After all, would it make much sense to allow you to file for bankruptcy if you’ve got stacks of cash under your mattress or floating around in your checking account? Hence, you’ve got to be cash-poor when you file for bankruptcy.

The date on which you file is highly critical in accomplishing the goal of preventing money loss. The bankruptcy court is going to look at your exact date of filing and see how much money you had in your checking account, savings account, and also what you reported having at home. If it’s over the restricted amount, guess what? You get to pay the excess to the court, and they will give the money to the rest of your creditors.

Cash that you have in the form of retirement is supposed to be protected, at least in most states, and at least up to a certain, maximum dollar amount. This money still has to be characterized in the proper way in order for it to be protected when you file for bankruptcy. Would you care to leave all of that hard-earned retirement money in the hands of someone who might not know all that there is to know about bankruptcy? But hey, you got a gonga deal on the legal fees, so that ought to make up for it don’t you think? Who needs all of that retirement money anyway? You could just work for a few more years to make up for it. And what 70 year old doesn’t like working 40 hours per week? Retirement is overrated.

Here’s a real tricky one. Here’s where you can get yourself into all kinds of trouble without proper legal guidance. Here’s a place where your cash can go “poof” just like you’ve been taken by some sort of frustrating magic trick con game. This not-so-fun game is called pre-bankruptcy planning.

Let’s say you have an asset that is not protected, or at least some of it is not protected. For example, you are allowed to have a vehicle with some equity in it and still protect it when you file. The amount of equity varies depending on the state, but for the sake of example let’s say you can protect up to $5,000 in equity in a vehicle. If your car is worth $7,000, the court could force the vehicle to be sold. They would give you the protected $5,000 amount and the court would give the rest (minus the trustee’s cut) to your creditors.

A quality bankruptcy attorney will know how to handle the above situation creatively. It might require that you get some sort of lien on the vehicle to reduce the value, or you might have to sell the vehicle and buy something with less equity. Either situation might result in having some extra cash that you’ll have to spend before filing or you’ll lose it. Do you think you might want some guidance from a highly-skilled expert when dealing with this situation? Do you think the highly-skilled expert will be the cheapest guy or girl in town?

And speaking of spending cash prior to filing, you’ve got to do this in a very specific way. You can’t just hide it in your wall safe. The trustee will figure that out, take the money, and give it to your creditors. The bankruptcy court might also go after you for committing fraud. You could even end up in jail like some celebrities we’ve heard about. You can’t just give the money to a friend, or use it to take that Tahitian vacation you’ve dreamed about. You’ll just have to give that money over to the court. What if you’ve spent it already? You’ll have to figure out a way to get it to the court, or your case is going to be dismissed.

So what can you do with the extra money? This is where your highly-qualified bankruptcy attorney comes in. He or she will guide you on what you can actually spend the money on without getting in trouble and without losing a dime of it. Again, is this something you want to leave to an inexperienced newbie? How about a document preparation service? They’ll violate the law the moment they offer you any kind of advice. Think you’ll get good info out of them?

When the Music’s Over

When your case is over and the fat lady sings, is that all she wrote? Not hardly. You’ve got a meeting of creditors you’ll have to attend (a quality attorney will make sure he goes with you to represent you, without charging you extra). You’ll have to wait for your debt to be discharged and your case to be closed. You could have issues with assets that come up after filing your case. A trustee might find that something you own is not protected and that it should be sold off to pay your creditors. Wouldn’t you like an expert attorney to defend you and protect you?

One way discount bankruptcy firms sometimes charge less is by not providing post-filing services for you without charging a lot of money in extra fees. And it should be obvious by now that a document preparation service would be completely useless in any situation that could occur after filing, just as they are for any legal advice prior to filing. Why not pay extra to be sure your case is handled right, from start to finish. The alternative could cost you – and cost you big.

The Last Chapter

In conclusion, it should be obvious by now that cheap bankruptcy ain’t good, and good bankruptcy ain’t cheap. In fact, it turns out that cheap bankruptcy can actually be very expensive, while pricier bankruptcy can be a downright bargain.


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