Silicon Valley is booming; our highways are so full of people getting to work that we can’t get to work.
Employment is approaching the level of the dot.com bubble. Property values are outrageous.
So who files bankruptcy in this pocket of prosperity?
All kinds of people, it turns out.
Let’s look at the people who sought me out last month to explore what bankruptcy could do about their crisis.
I’ve smudged the stories just enough to preserve privacy but still tell their stories. See if any story resonates with you.
Foreclosure threatens elder
The mortgage mess lingers on around the Bay Area: this single elder had been advised to miss mortgage payments in order to qualify for a loan modification.
Then, you guessed it, he didn’t get the loan modification and was stuck with a defaulted mortgage.
Chapter 13 will allow another attempt at modification, out from under the foreclosure threat, and a payment plan to get current if no modification is forthcoming.
Lawsuit cripples contractor
A lawsuit by a customer threatened to ruin the business this corporation owned. Even if the legal defense was successful, the legal fees and the time away from work would sink the business.
While usually a bankruptcy doesn’t do much for a corporation, in this case a Chapter 7 stopped the litigation and freed up the owner of the business to start a new operation in the same field.
There are contractor licensing issues and cash flow challenges when the existing receivables belong to the entity and the individual needs to start over, but, with planning, it can be done.
Old taxes cloud retirement
Several clients brought tax troubles. For one couple, it was taxes that one spouse brought to the marriage from a previous life. The age of the taxes will permit an immediate discharge of the tax in Chapter 7 and only one spouse needs to file.
Another couple came with hundreds of thousands in taxes, some dischargeable and some that will survive Chapter 7. Wiping out the old taxes makes sure that their payments going forward get applied to the most recent taxes that won’t go away in bankruptcy.
A third couple will be paying the non dischargeable taxes through a Chapter 13, paying off the tax liens that actually attach to value, and eliminating the older taxes at the end of the payment plan.
Underemployment and credit cards
Failed self employment efforts and continuing underemployment lead to credit card debt that my last client couldn’t manage.
She hopes for a fresh start next year, free from the collectors that are now hounding her.
Not all are equally lucky
Silicon Valley is world renowned for start ups and technical innovation. The successes are widely heralded.
But for every success, there are far more ideas and efforts that didn’t make it big or failed spectacularly. The ability to try, fail and start over is one of the strengths of our approach to financial distress.
For individuals, illness, divorce and job loss magnify the economic challenges of living in the Bay Area.
The chance to put the debts of the past behind us fuels creativity, productivity and a good home life.
Bankruptcy can set the stage for good things.