Most Chapter 7 clients that I file cases for have one thing in common. They have hit absolute zero financially. What is absolute zero?
In science, absolute zero is where the temperature falls so low that molecules do not move. It is the absence of energy, the absence of a capacity to change.
Absolute zero is a term I started using in 2008 and heard several other attorneys start using soon after.
In personal finance, absolute zero is when you are powerless to change your financial situation. A person is financially at absolute zero when even if they devoted their entire after-tax income to pay off their unsecured debts that they would not be able to pay them off in a year.
Let’s take Sally (the names are changed to protect the innocent) for an example. At the time Sally became my client, she was 26 years old, unmarried, two months pregnant and working full time for a local school district as an 8th grade teacher.
She had $15,000 in non-dischargeable student loan debts but also had $50,000 in credit card debt that was racked up by her ex-husband. Since her name was on the card and he took off (with the babysitter no less) she was paying the minimum payments each month but not making any headway.
Sally was at absolute zero. She had nothing she could sell and no equity in any real estate that she could tap into to pay off her debts. She was an ideal candidate for Chapter 7 bankruptcy. To be a candidate for Chapter 7 bankruptcy, your income needs to be below median (I will explain median in a later post) and you must not have had a bankruptcy discharge in the past 8 years.
That’s it. That’s all it takes.
The press and some in the bankruptcy bar claim that it’s next to impossible to qualify for Chapter 7 bankruptcy. The like to compare it to the Biblical camel going through the eye of the needle.
Its simply not true. A bankruptcy lawyer can navigate through the means test and make sure you qualify for Chapter 7 bankruptcy, but if you do, you can file Chapter 7 bankruptcy and rather than spend the rest of your life making minimum payments and not getting anywhere you can reclaim control of your life.
Absolute zero doesn’t have to be a life sentence.
Sally filed her bankruptcy case, went to the meeting of creditors, completed the required credit counseling and credit management courses and got a discharge. Her debt was wiped out. A bankruptcy discharge means you don’t owe it any more!
If you find yourself at absolute zero financially and don’t see how you could get yourself out of debt, call a bankruptcy attorney, they can help, and if you happen to be in the LehighValley, particularly Lehigh, Northampton, or Berks county, you can call my office at 1-800-801-7427 and set an appointment.
