Why Bankruptcy Is Not a “Bad Word” – April 2017 Interview

Katherine: Hello everyone, thank you so much for joining us for This Needs To Be Said. Our friend, attorney Peter Daigle is joining us and we’re going to continue our conversation about bankruptcy on today. Welcome back, Peter. How are you?
Peter Daigle: Good Katherine, nice to talk to you. Thank you.
Katherine: I want to … We’ve talked about so many things, Peter, and I want us to address where a lot of times we morally feel like bankruptcy is the bad word and I know you’ve told us in every interview that I’ve done with you that it’s not the case. I want us to address that and then we’ll move into who qualifies, because now that we get over the good news that bankruptcy isn’t a bad word and you’re going to explain to us why. Who qualifies? Because while I may say, okay Peter, I agree with you it’s not a bad word, but is there something I can do now that I’m comfortable with talking with you about it? Let’s get to what takes people so long to get to you to put their life back on the right track?
Peter Daigle: Well, thanks Katherine, that’s a great question. I mean, I think most people don’t want to have a sense of failure. They want to feel that they’ve done everything that they can do within their power to satisfy obligations that they incurred. Just whether their upbringing or just innately, they don’t want to feel like they’ve not followed through. What happens is, is a lot of the … Most of the debt that we’re discharging is credit card debt and the credit cards are making their money on the exorbitant interest that they’re charging and most of these cards run anywhere from 18 to 34%. A lot of the times what we’re seeing is that people have been paying those minimum payments and making payments to the credit cards for so long that they’ve long since paid for whatever the item was they purchased. All they’re doing now is enriching the credit card companies on a monthly basis with interest. There’s no cost to the credit card companies at this point, the item’s been paid for and all they’re doing is just making payments that … Which is essentially a lifetime of payments. Once that credit card debt goes above 20,000, it’s really hard to knock down the principal. Those payments that you’re paying each month are only going to pay interest, is where they’re going.
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Katherine: Okay. By the time I get to you, I’m at my last … At my wit’s end and I’m very spent. I’m just, “Please don’t tell anybody that I’m coming … Don’t tell anybody that I’m coming to you for … Don’t tell anybody that I’m coming to you to get a bankruptcy done. I want to come in disguise,” or whatever.
Peter Daigle: Right, right.
Katherine: How do you help people to be comfortable with saying, “Okay. I understand that bankruptcy is a reset button?”
Peter Daigle: Right. I mean, so first of all, anybody who comes to us is going to be treated with kindness and compassion. That’s our mantra here, in that we don’t judge people, even though they’re judging themselves and they’re very hard on themselves, and they beat themselves … We’re not going to add to that and we’re not going to say anything other than to love them and to try to help them heal through this process, because it’s obviously bruised them emotionally for the fact that they … They’ve not been able to do what they feel that they’re obligated to do. It’s all about us trying to nurture them back to health, financial health here by getting rid of their debt and to rebuilding their credit. What we try to do is just try to show there’s life after this, that you are going to get a fresh start, and that the doom and gloom that you’re feeling, that feeling will pass. Once you’ve got the discharge of the creditors, then you’ll be able to start living normally again, because you’ll have disposable income.
Katherine: Peter, I have a question for you, before we move on to who can qualify and how do you qualify, are there people who say, “Okay. I hear you, I’m going to do this. I want to reset my life, but I’m going to pay back those people that I owe once I’m in a better position.” There’s people that do that?
Peter Daigle: They want to pay them back, so … Well, you always have the option to file for chapter 13 and then you pay back all of your debts, but you pay them back with no interest or penalties. The $20,000 that you’ve been paying on for years, let’s say, to MasterCard to give them interest, you could file for chapter 13 and the interest is frozen and penalties are frozen. All you do is for the next 60 months, or five years, you would pay off that 20,000, but you’re enriching the credit card company with interest on interest. That is an option if you want to.
Katherine: Okay. Say someone chose chapter seven, though, where it wipes the slate clean, I think that’s what you taught me, and then they say, “Okay. I did chapter seven, I’m back on the right path, but I want to go back to those people that we wiped clean and pay them back.” Do people do that?
Peter Daigle: Well, usually if you owe a family friend or something like that, if you send money to MasterCard they can’t accept it.
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Katherine: Okay.
Peter Daigle: They can’t …
Katherine: Okay.
Peter Daigle: The financial institutions who are listed on the credit card, on the bankruptcy petition, cannot legally accept the money. If it’s other folks, your dentist, or a family friend, or your doctor or someone like that, I mean, I’m sure they’ll gladly accept it. Not that you want to or are supposed to, but-
Katherine: Okay. I didn’t think about that. Well, I wouldn’t know that because I’m not the expert, but I was thinking that sometimes people … I think I’ve heard, of course I’m reading headlines in the newspaper roughly, somebody says oh they went back and paid all the people that they owed after they filed bankruptcy and I’m going, “Okay, I guess, if you feel bad enough about it,” but you just explained that they’re going to be some cases where legally they can’t accept the money.
Peter Daigle: Exactly.
Katherine: Even if you say, “Okay. I’m still going to go do it, they can’t accept the money.” Okay. Well, that answers the question. See, that’s why we have to always sit one-on-one with someone like attorney Daigle and ask our own questions, because I read that in a headline and I don’t even remember what story it was attached to, but it was about bankruptcy and this person says that they went back and paid all they owed, so it didn’t … That headline did not say if it was grandma, or mom, or a family doctor, or a friend. It had me thinking that you could go back and pay your creditors, like credit cards and stuff like that, so that’s not correct.
Peter Daigle: Right. No, they can’t just … A financial institution is not going to break the law, not over paying a small debt. They could get into tremendous hot water with the bankruptcy court if they kept the money.
Katherine: Well there we have that clarified. Now let’s move onto who qualifies and how to qualify for bankruptcy.
Peter Daigle: In 2006, they amended the bankruptcy laws to prevent people making above a certain amount of money from wiping out all their debt through chapter seven, and so they established chapter 13 guidelines where if you’re making above the median income based upon your family size in each state, you would not be able to qualify for chapter seven. Depending on which state you live in, what the median income is, and you can get those online at the United States Census Bureau, median incomes. If you’re below the median income, you can file for chapter seven. If you’re above the median income, you most likely going to have to file for chapter 13. That means you’re going to have to pay a portion of your debt back and the portion that you pay the debt back is based on what you can afford. Okay, so it’s an affordable payment from looking at all your income and expenses. You also have to live in the same state for six months prior to filing, so if you’re moving to a new state, you’ll have to wait at least a period of time before you can file your case. It’s actually the better part of six months, so if you live 90 plus one days in one area, that would qualify you for filing in that area. You also can’t file more than once every eight years for chapter seven and every four years for chapter 13.
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Katherine: People do file multiple bankruptcies?
Peter Daigle: Yeah. We see a fair amount of that.
Katherine: Okay.
Peter Daigle: You aren’t able to file again, if you’ve had a previous bankruptcy that you have. You also-
Katherine: Within that window. Okay.
Peter Daigle: Yeah. You also can’t file, or you shouldn’t file if you have an amount of debt, a priority debt that you can’t pay back through chapter 13. Let’s just say that you’re living at … Let’s say an income of 20 or $30,000 a year and you owe the Internal Revenue Service $100,000, let’s say, on debt that’s not dischargeable. You wouldn’t be eligible for file for chapter, any kind of bankruptcy, because you wouldn’t have the ability to pay it back. Chapter 13 has to be feasible, you’re not eligible if it’s not feasible, okay.
Katherine: Okay.
Peter Daigle: The lawyer would do the feasibility study and see whether or not the plan would be confirmed. Meaning that, your income could … You could live comfortably off of what your income is, plus pay whatever the portion is to the creditors through the chapter 13 plan. That would a way for other people filing, because they just can’t afford it. Okay.
Katherine: Okay. I think we … Because we’ve covered so many topics, I just wanted to recap the emotional piece of it and then how do people qualify, because we’re looking, again, like I said in the beginning of the interview, at the moral part of it, “I feel bad that I didn’t pay back the people that I owed. I got stuff and services and whatever.” Life happened. Then there’s the legal aspect that allows you to reset your life and to put it back in a better place and what you’ve taught us over these several months together, is not to stay stuck for the sake of, “I feel bad about doing this.” This is going to help you feel better, because I think, in my life I would feel a lot better being able to take care of my basic needs and for my family to be happy with me being able to provide for them.
Peter Daigle: Right.
Katherine: I don’t know that for me, I would be happy with being able to tell them, “Well, I couldn’t pay these people back, so we all have to suffer because I feel bad about it.” That just doesn’t make sense. You’re helping people to get over themselves, basically, and say, “Hey, this is how you reset and you and your family can go on the path … “
Peter Daigle: Right.
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Katherine: I am addressing families, but this could be single people too.
Peter Daigle: Exactly, exactly, yep. Well said.
Katherine: Okay. Peter, tell people how to get in touch with you outside of This Needs To Be Said.
Peter Daigle: Sure. If you’d like to call me, my phone number is 508-771-7444. If you’d like to reach me online, it’s www.DaigleLawOffice.com. You can email me through my website and you can also read any information contained on some of the sections of it, look at the blog, and you can also request a free copy of my book.
Katherine: All right. That’s an awesome book, I have it on my shelf as well and its helped me a lot being able to ask smart questions, I just want you to know that.
Peter Daigle: Okay.
Katherine: Until next time, Peter, until next time have a wonderful day.
Peter Daigle: You too, Katherine. Thanks so much. Goodbye.
Katherine: Thank you. You’re welcome.
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