Kingcade & Garcia, P.A. - Filing Bankruptcy | Video Transcript

MALE VOICE: This is NBC 6, South Florida today.

TRINA: Choosing to file bankruptcy can be a very difficult choice with so many myths and misconceptions. Some people back away from filing because they're confused or embarrassed. And sometimes, they really should file. But before you file, weigh all of your options. Here today with us to help us sort all of this out is attorney Timothy Kingcade with some answers for those who are dealing with devastating debt and really need some options. Welcome.

TIMOTHY KINGCADE: Good morning. Thank you for having me.

TRINA: Let me ask you this. Who should file bankruptcy? When is it, you know, something that somebody should really consider?

TIMOTHY KINGCADE: Well, there's two things you should think about.

If creditors are suing you in court, if your wages are being garnished, that's obviously an emergency situation. Bankruptcy is critical at that point to preserve your family's finances. Another situation that people should think about bankruptcy is I tell people it's a quality of life decision. If you're getting a lot of phone calls from creditors, if you're losing sleep, if you're fighting with your spouse, bankruptcy is designed to help.

TRINA: --go to an attorney and have this process I guess initiated.

TIMOTHY KINGCADE: Our oldest bankruptcy judge in South Florida has an interesting saying. He says don't walk into an operating room without a surgeon. Don't walk into court without an attorney. Most bankruptcy attorneys offer free consultations in South Florida. And I strongly recommend that if--even if you want to file alone, see an attorney for a consultation to determine if it's right for you and to get some ideas.

TRINA: Now let me ask you this. Now last year, we had sweeping changes in the bankruptcy laws.

And it sounded as though a lot of people wouldn't even be--you know, it wouldn't be something they could do because they no longer qualified. Is that the case?

TIMOTHY KINGCADE: Well, the bankruptcy--the new bankruptcy law took effect October 7th, 2005.

It was two years ago yesterday.

And that's a great point, Trina. The myth out there is that bankruptcy doesn't exist anymore. And initially when the bankruptcy laws were passed, the Congress anticipated that about 15 percent of the people that needed to file would be affected. Those statistics have been in fact revised. Five to ten percent of the people who need to file bankruptcy are affected by the new law. That doesn't mean they don't qualify. That means that we have to scrutinize their expenses before we can file their case.

TRINA: Now I understand that, for example, if you do file bankruptcy, your debt is forgiven in some cases.

TIMOTHY KINGCADE: There are two types of bankruptcy, very good point.

TRINA: Explain.

TIMOTHY KINGCADE: Chapter 7 is the type of bankruptcy that we prefer our clients to go through.

That's the type of bankruptcy you're relieved from all of your debts, save student loans, drunk driving, child support, certain IRS debts. But you do wipe out all of the credit card debts, all of the medical bills. Chapter 13, on the other hand, is the type of bankruptcy where you enter into a repayment plan. The new bankruptcy law was designed to push people into the repayment plan type of bankruptcy. But unfortunately for the credit card industry, who really pushed these changes, the law changes were not as strong as they propagandized.

And most people still qualify for Chapter 7.

TRINA: Now but there are some repercussions in filing bankruptcies. We shouldn't let people think that, okay, if you're in trouble with your debt, then just, you know, file bankruptcy and get out of it.

TIMOTHY KINGCADE: Very good point. However, most people who come to see me don't have that attitude. That's another myth.

People who file bankruptcy are usually very traumatized by it. They're upset. They're crying. The repercussions of bankruptcy is that it will be on your credit report for ten years. But remember, after bankruptcy, the credit card companies, who get most people into the bankruptcy problem, give you brand new credit cards. It's a rather bizarre landscape.

TRINA: Yeah, but we can't totally blame the bankrupt--I mean, the credit card companies because people spend and use the products, so--

TIMOTHY KINGCADE: [Interposing] There's no doubt.

TRINA: --I mean, there's got to be some, you know.

TIMOTHY KINGCADE: There's no doubt. People need to be responsible for their own actions.

But my point in being here today is that if you're in trouble, if the credit cards are calling, if you're having marital problems because of financial pressures, think about bankruptcy. It still works.

TRINA: Is there any short I guess stop gap prior to bankruptcy--because that is a pretty serious step--that people should do before they go to bankruptcy?

TIMOTHY KINGCADE: No doubt, try credit counseling. There's--if you run through the internet credit counseling. There's some really good nationwide credit counselors out there. Try it. Look at the formula. The formula standard--the standard formula for credit card counseling is 2.5 percent per month of the outstanding debt. So if you had $100,000 in credit card debt, your payment would be $2,500 per month. Note also that with credit counseling, you cannot put medical bills or other types of debts. For instance, if your car's been repossessed and you still owe the bank money, those types of debts don't go into credit counseling.

TRINA: You know what I always wondered? For example, okay, if you're filing bankruptcy, obviously, you're in financial trouble. So how do you get paid?

TIMOTHY KINGCADE: Well, most bankruptcy lawyers are rather cheap.
TRINA: Oh, really?

TIMOTHY KINGCADE: An average bankruptcy is $1,000 to $1,500.

Most bankruptcy attorneys have to take payments. We do take payments. The federal law contemplates that. For instance, if you hired me today for a bankruptcy, we would contact all of your credit card companies right away. Once you hire an attorney, they can't call you anymore. So you get a little bit of relief just by hiring the lawyer. And the most bankruptcy--most bankruptcies are filed three to four months later after the clients pay off the fees.