Daniel Gershburg

If you have an extraordinary amount of debt and you’re looking at filing for Bankruptcy but you own a car, you likely should still file. Heres why:

I had a client in my Brooklyn office the other day. Debt well in excess of $100,000.00. The client also owned a vehicle outright. It was a pretty new vehicle as well, so it still had some equity in it. If the client filed for Chapter 7 Bankruptcy in Brooklyn, the client would most likely lose the car. I advised the client that because of the amount of debt that client had, it would still be highly beneficial to file for Bankruptcy. Without making minimum payments, he would be able to save several thousand dollars in the coming months, and purchase a vehicle (not a great one, not a sexy one, but one that ran). He didn’t want to do it yet, which is unfortunate.

I’m always very compassionate and understanding with clients, but there are also times when you have to realize that problems simply arent going away. If you’re in over your heard in credit card debt to the tune of $100,000.00, thats not going away. Those creditors aren’t going to stop. They’ll call all day, freeze accounts, garnish wages, for up to twenty years. As I keep saying, this practice has made me understand that Chapter 7 bankruptcy is in fact an emotional decision. You have to be ready to say “This is it. I start fresh now.” Along with that comes the realization that you can’t go bankrupt, and have your debts forgiven, and still have assets that are worth more than you’re allowed to exempt. That car that you’re holding onto is not going to stop your creditors from coming after you for money you owe them. That big bank account that you have, if its less than what you owe, wont pay off your debt. Financially speaking, you need to let go of these things to be able to start anew.

Look, I understand that we have connections to things. Its normal, and natural. But you must understand that this process is allowing you to get rid of thousands upon thousands upon thousands of dollars in debt for close to nothing in many case. If I gave you the opportunity to get rid of 90%-100% of your debt for pennies on the dollar( in the worst case scenario), you’d obviously take it. Anyone would. But if I said to get rid of that debt, you have to get rid of the motorcycle or RV that you love, or the Time share, then that question moves people into two categories. The first realize that there is no way they can pay all that debt back, and they want to be free from credit collectors, from annoying calls, from frozen bank accounts. They want to start fresh. The others….still think that somehow, someway, this will go away. I can’t, no matter what I do, help that latter category. At the end of the day, you need to make this decision for yourself. If you have to give up a car that you have an emotional attachment to, so that you can stop worrying about the thousands of dollars of unpaid bills chasing you, I think the decision is a clear one.