Although there are differing opinions about when the optimal time to file for bankruptcy is, attorney John Morgan says there is no harm in contacting a bankruptcy lawyer for guidance as soon as you foresee a problem with your personal finances. In practice at John Carter Morgan, Jr. PLLC, Morgan is a bankruptcy attorney in Fairfax, Virginia, with a proven track record of helping people filing for Chapter 7 and Chapter 13 bankruptcies.
He explains that the most common reason why people will file for bankruptcy immediately after financial hardship sets in is because they are facing some other emergency situation that can be helped by filing. “Either they have got a foreclosure coming, they are being sued and the court date is next week, or they have a garnishment of their wages,” Morgan says. When someone is fighting to get a repossessed car back or to stop creditors from garnishing his wages, filing for bankruptcy can be one way to do it.
Typically, however, when someone comes in to see Morgan and talk about filing for bankruptcy, he will tell him to hold off. Morgan says that most of the people that he sees would be better off waiting four or five months before filing for a Chapter 13 or Chapter 7 bankruptcy in Fairfax, VA, and that an attorney should let clients know which options are available in the meantime.
Although Morgan says his No. 1 rule in bankruptcy is that people must be sure that they are listing all of their debts, his second rule applies more to this particular scenario. He says that he advises people not to pay anyone they don’t have to in their months leading up their bankruptcy filings. “Pay your mortgage, pay your rent, pay your electricity, put gas in your car, put food on your table, but do not pay your credit cards,” he says. He also recommends not paying your doctor’s bills—not even $5 or $15. “People think that a small payment will get the collectors to shut up, but it won’t. They are just going to keep bugging you,” he says.
Instead, Morgan says he tells his clients who are planning on filing for bankruptcy to tell any debt collectors who call four simple things:
1) Tell them you have an attorney.
2) Give them your attorney’s phone number.
3) Tell them you are filing for bankruptcy.
4) Tell them not to call you again.
Morgan says one of the reasons he advises people to take four or five months before filing for bankruptcy is because it usually takes people that long to save up enough money to actually file. Bankruptcy fees and attorney costs can add up quickly, but most people can save up enough money over the period of five months to be able to afford it, he says.
In addition, he says that there are other advantages to waiting to file, especially for anyone who owns a home and might possibly be entering into a foreclosure sale. Morgan explains that Virginia is what is known as “gavel state.” That means that it is a non-judicial state where there is no court process necessary for foreclosure. Instead, all a bank needs to do to foreclose on a home is to publicize an auction in a newspaper for four consecutive weeks, and then hold the auction on the courthouse steps, the church steps, or another public location.
Morgan says that if your bank has yet to schedule your actual foreclosure sale, then his best advice is simply to wait for a while. In the meantime, he recommends that people consider not paying their mortgages and just live in their houses for free. “Take that money that you would be paying to your mortgage and stick it in a coffee can to pay your attorney,” he says. Other things that Morgan recommends using the saved money for are to get caught up on necessary bills like car payments, and to pay for necessities like gas and food.
Essentially, he explains that this process will buy the homeowner time. Then, when the bank does choose a day and schedules the foreclosure sale, it’s at that point when he would advise a client to officially file for bankruptcy. “My experience is that filing for bankruptcy usually gives a person anywhere from six to 18 months of additional time in his house,” he says.
Rather than rushing into a filing, Morgan recommends that clients in Fairfax, VA, contact a bankruptcy attorney to determine their options in a Chapter 7 or Chapter 13 case. He advises clients to find an attorney they can trust, and to use the time before filing for bankruptcy to save as much money as possible to use for paying off other fees and debts down the road.
This article is for informational purposes only. You should not rely on this article as a legal opinion on any specific facts or circumstances, and you should not act upon this information without seeking professional counsel. Publication of this article and your receipt of this article does not create an attorney-client relationship.
