In the county where I practice law, if anything bad happens, most everyone will hear about it. I’d gone to school with Jimmy Stoneman’s folks, could remember when they married and when Jimmy was born. Later, Jimmy went to vo-tech and opened a garage in the county seat. Not too long after, he married Carla Baker, who’d grown up on a small place near the county line. Like most young people starting out,they both worked. Jimmy at the garage and Carla at one of the banks in town. Things went well for them, and when Carla found out she was expecting a baby boy, Jimmy told it all over town how he’d soon need a new sign for the garage- ”Stoneman & Son”.
But it turned out to be a difficult pregnancy. Carla had to quit her job in her fourth month, and, after the baby came, there was no way of knowing when, or even if, she could go back to work. With the loss of Carla’s income, a new baby and ailing wife to care for, the family fell on hard times. So it was that Jimmy’s call on Monday was not a complete surprise.
When I met with Jimmy, he looked almost desperate. I asked after his folks, Carla and the baby, and then about how his business was going. He began to explain his problem. It was financial. Before the baby, with both their incomes, they had done okay. If Jimmy had a slow month, Carla’s job was a cushion. When his receipts were good, they might put a little away, but more often they spent it. They didn’t spend it recklessly, he explained, but they did buy things, for cash and on installments, and they got credit cards.
Jimmy improved his business with new equipment to provide better and more services. When business increased, he made more but he spent more, including one full time and one part time employee. Then Carla had to stay home. At first, they tried to make it on just his income. They started cutting back, but soon found that with their debt load and mounting medical costs, most months the money from the garage just wasn’t enough.Eventually, Jimmy let both his employees go. This cut costs, but it also reduced his income. Finally, after doing all he could on his own and with the help of family, he was behind on most all his bills. Some of his creditors had tried to work with him, but even these were becoming more insistent. Others had not been so accommodating, and several were becoming abusive, which is why Jimmy was in my office.
Last Friday, a collection agency had called their home. Carla answered and was told that the full amount was due by noon that day, and if it wasn’t paid, they would garnish Carla’s bank account and start taking property. Worse, according to Jimmy, they told Carla they had plenty of experience dealing with dead beats like her. When Carla tried to explain, they said she didn’t sound too sick to work and that paying bills should take priority over personal problems.
Carla had called Jimmy in tears and spent the weekend blaming herself for all their problems. By Sunday night, Carla had to be taken to the ER. Of course, Jimmy and Carla had not been able to pay, and Jimmie wanted to know what was going to happen. I first explained that the noon deadline was artificial. Before any garnishment could be had, suit would have to be filed and notice given, along with a day in court to defend against it. I also told Jimmy that, in my experience, most collection agencies work off a percentage of what they take in, so it was common to do, or say, just about anything to get people to pay as much as possible.
I went on to tell Jimmy that, unless he could work out an agreement with all his creditors, sooner or later one or more would probably take valid, legal action. It was then Jimmy handed me the papers he’d been served Saturday evening. It was a suit by a credit card company. Jimmy asked me what he should do. I told him since he couldn’t catch up all his debts, he either could deal with each creditor as they filed suit, which he felt would be too expensive and drag on too long, or, take formal action by filing in bankruptcy court, which he asked me to explain.
I told Jimmy that there are two basic types, liquidation, or, re-organization. Basically, Liquidation, allows a debtor to keep only certain types and amounts of property not covered by a mortgage, which could be generally described as that necessary to maintain a household or practice a trade or profession, but that, in exchange for this limitation, most types of debt, except for mortgages, are discharged or cancelled. Usually, mortgaged property has to be surrendered, or, the debt on which the mortgage is bad has to be paid after the bankruptcy. In this way, the debtor can gain a fresh start.
Reorganization, on the other hand, essentially allows the debtor to keep all property regardless of type, but requires repayment of nearly all debt, but with repayment at a rate less than originally set up, and some types of interest, penalty or late charges voided. The reduced rate of repayment, however, must be approved by the Court and can only go on for a certain number of years, and creditors may challenge the method of repayment. It was at about this point Jimmy seemed troubled. When I asked, he said he never thought he’d ever have to make such a decision. He never planned to do this. “Jimmy,” I said, “most people don’t plan for bad times.” ‘’It’s usually all they can do to pay the bills, maybe set a little aside for their kid’s college or their retirement, and try to enjoy life a little,” I told him. “Only you and Carla can decide what you can or should do,” I explained, “but remember this. Bankruptcy laws have been a part of this country from its beginning, to protect its citizen from those that would abuse the fact that you are obligated to them.” I went on, “You go home, talk with Carla and call me in a few days, then we’ll decide if there’s some way I can help.”
When Jimmy left he seemed more at ease. I couldn’t guess what they would choose to do, but at least he had some accurate information about his choices from someone who wasn’t just out to push him around. Reminded me of the time some oil men showed up at the door of Minerva Riverton, the eighty year old widow of the man who sold me my first car. Told her they were going to drill a well on her place, there wasn’t a thing she could do about it, and she’d better take what they were offering. She was waiting at the office when I got there the next morning. Now, that was some case.