Bankruptcy is not part of anyone’s life plan, but insurmountable financial crises are as old as the Old Testament and were even contemplated by the Framers of the U.S. Constitution. Leviticus 25 commanded periodic debt forgiveness, and Article I of the Constitution gave Congress the power to establish “uniform Laws on the subject of Bankruptcies.”
The Work Wife reached out to Danyelle Walker, a Little Rock attorney who represents debtors in bankruptcy proceedings, for some bankruptcy basics that everyone should understand.
Ideally, when should someone consult a bankruptcy lawyer in order to avoid bankruptcy?
DW: Sometimes they come in because they see things on the horizon — hours being reduced at work or medical debt. But most of my clients don’t come to me until they are behind the eight-ball.
Sometimes we do suggest financial planning and ways to avoid falling into these financial pitfalls. It would be great if students were taught in schools about financial pitfalls they may face and how to avoid them. There are options out there that can assist you in rectifying the issues, whether it be financial counseling, debt consolidation or bankruptcy.
But bankruptcy is still quite taboo. When people come to visit us, it is for most people a last resort. When they come to my office they are in fairly dire straits. And it is rare to be able to avoid filing.
If it’s too late, what are the advantages of seeking protection in bankruptcy court?
DW: The advantages are being able to keep what you’ve worked hard for — not losing your house, your vehicle, your wages to garnishment, your peace of mind. The advantage of consolidating debts and seeing a light at the end of the tunnel, seeing a way to resolve this financial issue. Different things coming from different directions can seem overwhelming.
What are the disadvantages?
DW: Of course, filing for bankruptcy does affect your creditworthiness. On occasion it can prevent you from moving forward in your life. You may have to wait some time before you can do that. It stays on your credit for 10 years, but it’s just not the roadblock it used to be.
And because bankruptcy is still quite taboo, people are upset because it is public knowledge and shows up in the paper. It’s a place people never intended to be.
But people rebound so much quicker versus just not doing anything and letting the debts hang out there. There are many, many, many more advantages than disadvantages.
What debts push people over the edge?
DW: Credit cards and medical bills. It’s not that they have a lot of credit card debt or a lot of medical debt. With unsecured debt, the creditor’s only recourse is to get a judgment against you and start garnishing wages. And when those creditors collect is when debtors fall behind.
Bankruptcy is absolutely an option that individuals should consider versus losing what they’ve worked for. And people recover. And sometimes it’s better to be proactive versus just letting those liabilities linger. That’s an albatross.
Danyelle Walker graduated from Pine Bluff High School and the University of Arkansas at Pine Bluff before earning a law degree from the Bowen School of Law at the University of Arkansas at Little Rock.
