Bankruptcy and Debt Relief – Interview with Attorney Christine A. Kingston

Katherine:

Hello everyone, today we have a special guest, Ms. Christine Kingston. She is a bankruptcy attorney and she talks about non-bankruptcy options as well. I want to welcome her to “This Needs To Be Said” as she answers some questions for me and talks a bit about her book. Welcome, Christine to “This Needs To Be Said”, how are you?

Christine:

I’m doing great, Katherine, thanks for having me.

Katherine:

You’re absolutely welcome. People are always nervous when it comes to things that kind of, the perception is you get shamed about it. Bankruptcy, to the consumer feels like a failure. Feels like, “I’ve done something wrong and I can’t handle my adult things that I’m doing. Something’s just not right, I’m out of whack.” When people come to you, do you have to … I guess my best question is, “How do you get people to come to you?” Because I can only imagine that they’re thinking of, somebody’s going to tell me, “You did that wrong.” “I know that.” “I feel like that already.” How do you get people to come into you to get these solutions that they so badly need?

Christine:

You know Katherine, if I had the answer to that I would probably be a multi-millionaire. We know people need our services as bankruptcy attorneys but somehow I feel like I’m the black sheep of the financial world. I’m maybe the last person anybody wants to see when they’re struggling with their debts because I think the mass hysteria is bankruptcy is the worst thing for you. Your family is going to tell you, “Don’t do bankruptcy.” Like you said, it’s the shame and the guilt that’s associated with it so I think what really gets people to pick up the phone and call me is probably a huge mountain of courage to even get a consultation with a bankruptcy lawyer.

What’s interesting though is most of my clients after they’ve spoken with me wish they would have done it sooner.

Katherine:

I bet. I bet.

I was preparing to speak with you today and talking with one of my friends. She was thinking about the shaming of it but she also said, “People don’t do it because the repercussions but again we’re regular people, we’re not bankruptcy attorneys.” She was saying, “It’s the repercussions of it.” I said, “Yeah, I get that you don’t have any education of what to do next.” You brought up talking to your family and friends, it just jarred my memory that I was saying, “I have this great interview coming up today.” She was like, “Yeah I think more people would do it but it’s the repercussions. You got seven or ten years of something negative.”

What do you say to that? We’re doing water cooler attorneys are doing.

Christine:

Oh absolutely, okay. Water cooler talk. Here’s what happens. What’s interesting is everybody thinks, “Oh my God, it’s going to ruin my credit.” Right? So everybody think it affects their credit score which I think is pretty funny because your blood pressure is actually more important than the credit score, but I digress.

What’s important to understand about debt and the credit score is, the credit score is impacted more by late payments and collections that are sitting out on the credit report. Your debt to credit line ratio, meaning if you’ve maxed out that credit line it will actually drive the credit score down. It’s counter-intuitive to even think that filing bankruptcy might actually improve your credit but it actually does. Here’s why. When we get rid of the debt, we’ve wiped the slate clean on the credit report and now you have even the credit lines being closed because of the bankruptcy case. You have no debt. That in and of itself drives the credit score up.

Let’s say for example all of those lates might have hit on the credit score, a couple hundred points maybe. Then the bankruptcy, filing bankruptcy might drive that credit score down by, I don’t know, fifty points at the most. But getting rid of the debt might drive the score back up by two hundred so you know, the counter-intuitive is, “Well the bankruptcy causes it to down but I’m getting rid of the debt which should drive it back up again.”

Actually, people come out of bankruptcy with better credit scores than when they came in and that is not marketed to you because Bank of America, NBNA, all those people with tons of lobbyist in the government are not going to tell you that.

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Katherine:

I’m thinking about, okay that part is good, the credit score. Then I do have the bankruptcy sitting out there so whoever does pull my credit report, that’s what I’m afraid of. How do I navigate that? We’re thinking about places to stay, necessary things, not unnecessary things like getting a credit card of something like that which could be unnecessary but I’m talking about a place to stay or getting transportation for fear of being turned down. I think people don’t even go apply for things because they know they have this out here and for ten years or seven years I’m going to have to just wait it out. What do you say to that?

Christine:

What I say to that is number one there are credit card companies out there that will issue a credit line to anyone who’s filed bankruptcy within a minute and a half even after filing. You can get credit. Within about five years after bankruptcy my bankers tell me and I bank at Bank of America, I’m not bragging about it because it’s a big bank and I’m on the consumer side of things, but that’s just to say where I’m getting my information. My bankers at Bank of America tell me that after about five years out of bankruptcy you are back on what’s called “standard credit.”

You know we have prime rates, which are the standard rates that someone with good credit would be issued on a credit card. Then you have what’s called “sub-prime” which is for the people with the lower credit scores. You start out at bankruptcy, you’re on sub-prime credit which means your interest rates are going to be high for any money you want to borrow but it’s going to get better and better and better the further out away from the bankruptcy case you get. After five years have passed you’re back on what’s called standard credit which means you can go get a regular MasterCard and Visa at that point.

On top of that, I network with mortgage brokers and real estate professionals because people always want to know, “When can I buy a house after bankruptcy?” My first question because I’m in California, “How long is it going to take you to save up a down payment?” Probably the rest of your life out here because our homes are so expensive. Within about a year to two years out of bankruptcy you can also be eligible to get on a regular mortgage again.

Bankruptcy is not the big problem it used to be. It’s not going to completely stall out your credit world. It’s something that if people were to understand that there might be a cheaper, better, faster way to get out of debt and if they look at the time value of money, they’re going to see how bankruptcy then becomes a more powerful tool to solve the problem. Completely eliminate the debt today and jet propel me onto my financial future of home ownership, buying a car, saving for retirement, going to college. Whatever those financial goals are, the last thing you want to be doing is stalling yourself out for another five years or more to get out of debt, then only start saving for your future. Why not start saving for your future today and just get out of debt?

Katherine:

How many ways are there to get out of debt?

Christine:

Generally there … Let’s see, you pay if off the old-fashioned way. That’s one. You could do nothing and not pay it off and just let them come after you. Some will and some won’t. That’s another thing, you could do nothing. You could borrow more money and you could do debt consolidation, right? You could go get another loan and roll all our debts into one loan. So that’s another option. There’s three there so far. You could do debt settlement, that negotiation. That’s a fourth option.

On top of that, you also have two different chapters of the bankruptcy code for consumers. You have individual Chapter 7 which is a liquidation bankruptcy where you don’t pay any of the debts at all and we get rid of them. Some debts as you know are not dischargeable but that’s a separate conversation. Maybe we could talk about that on another occasion.

Then the Chapter 13 bankruptcy would be a payment plan. That’s a real fascinating tool that I like because most of the people come to me and say, “I feel like I have a moral obligation to pay my debts and I would feel better. I want to pay my debts.” I say, “Fine, let’s put you into a payment plan in Chapter 13 of the bankruptcy code.” It’s a beautiful thing. There’s no interest that’s accruing on the debt that you’re paying back. It’s a fixed number over five year and you’re completely done. Out of debt. Whatever is left over and you may not have to pay back a hundred percent of what you owe, again depending on the circumstances.

I find that Chapter 13 payment plans are really good because it satisfies their moral compass, wanting to pay the debt back. It gets them the debt back and that’s actually better for the credit score than a Chapter 7 bankruptcy is. It’s only because most people feel like they have to pay their debts back. They have a really hard time with this. Going through bankruptcy and not paying the debt. Which is interesting. Especially when I’m telling them, “You can’t afford it.” They still …

Katherine:

That conversation that we had. Here’s the thing, at least they came to see you because some people are not coming to see you because they’re having another conversation, “This is bad.” It’s interesting to think that are told and you’ve gotten the experience and the schooling and you know what we can and cannot do. People are still apprehensive about it so it’s interesting.

You have this phrase that I’ve grown fond of just in preparing to interview with you called “debt jubilee”. Tell me about that because that sounds fun and I like a party. It just sounds precious to me.

Christine:

I think any of my clients are ex-tactic because they feel like it’s a debt jubilee after they’ve worked with me because I do make bankruptcies smooth and fun. Not that it’s pleasant to go through it as a client but it’s when they get that different perspective of, “How are you going to feel when you’re completely debt free?” What does that feel like?

I don’t know that any of us, certainly right now I’m not debt free. There’s mortgages and I’m still paying back a student loan but being debt free for the most part because I’m not trying to rob Peter to pay Paul. To borrow money from one credit card to pay the next credit card. I’m not wondering how am I going to pay back my payday loan. Inside that conversation of debt jubilee its people … You know what Katherine? I’ve found it. I was reading a blog article, I think it was in the Huffington Post or someplace like that and it was in the Sunday paper and I said, “Debt Jubilee.” I’m like, “Wow, isn’t that interesting?” That goes way back to Babylonian days. If you think about it, bankruptcy is in the Bible. It’s in the constitution. In the Bible it says in Deuteronomy, every seven years you should forgive them of their debt.

It’s no coincidence that the bankruptcy code says you can file bankruptcy every eight. We don’t make this stuff up. It comes out of the original documents. We used it to create the laws of the country that we happen to live in. This is what the rules are that we get to play by. As you know, one of our presidential candidates, Donald Trump is actually fond of filing for bankruptcy, I believe he’s done it six times. He’s an expert.

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Katherine:

Very, very fond. Yep.

Christine:

If the majority of the American people were to see that why is it okay for him to do it and not for me? It’s so ingrained in us. We’ve got much pride as American people. I love it. I think it’s fantastic but you really need to set that aside when you’re looking at when is it best to go through bankruptcy. Should I even consider that as a possibility?

I look at it as a cost benefit. I help my clients a lot of times with a cost benefit analysis. Like if I’m going to go to the grocery store and I’m going to negotiate and I want to get those carrots for a discount and I ask the farmer’s market guy, “Hey, I’ll give you ten cents for the carrots.” He’s like, “Yeah, that’s no problem.” I got myself a deal and I’m real excited about it. Why don’t people consider asking, “What is the cheaper, better, faster way for me to get out of debt?” They don’t consider that and every choice we make is a financial consequence that these are going to make or break our future.

In my debt jubilee article, I talk about the example of the person that goes through, someone has thirty thousand dollars right? Let’s say they have thirty thousand dollars and they want a full repayment and they’re going to pay it back at fifteen percent interest. It’s going to take them about a little over nine years to get out of debt if they’re making five hundred dollar a month payments. The total amount of those payments is going to cost them like fifty-five thousand dollars to pay off the thirty grand because they’re paying that interest over time right?

That’s fifty-five thousand dollars over nine years and if that same person were to file bankruptcy and do the payment plan I was talking about in Chapter 13, the example there is no interest. Five hundred dollars a month, and they’re done in five years. We’ve just shaved off twenty-five thousand dollars and over four years of time. If more people knew about that wouldn’t you think that they would consider a bankruptcy payment plan?

Katherine:

It’s interesting because we’ll like you said, whether it’s buying groceries. We’re looking to clip coupons or find discounts and other things so the long answer is “yes”. More people would, we just … It’s an emotional thing so we are wanting to avoid bankruptcy because of our emotions or our shame. Once we find out, “Hey, it’s okay. You’re going to get a discount to pay your bills off because you said you’d feel better if I did. Well let me help you get a discount.”

It’s funny. It sounds like an emotional response to me.

Christine:

Yeah, Uncle Ralph is telling you not to file bankruptcy. Why? He has no idea why. He was just told that it was bad and wrong. He doesn’t know and then here’s me, the bankruptcy attorney saying, “I can save you over four years and twenty-five thousand dollars.” But go ahead and listen to your Uncle Ralph. He’s the one that told you not to do it.

People would be lining up to file bankruptcy if they knew. But they don’t and it’s because of the large amount of money being spent on the credit card companies’ side. Marketing to you every day. Capital One says, “What’s in your wallet?” My answer to that is, “Cash is in my wallet.” That’s what’s in there, not your frickin’ credit card.

Katherine:

All this sounds good. I’m encouraged that when I go back to the water cooler I’m going to have a different conversation because of you. However, are there times when you have to turn people down for bankruptcy? Or this a everybody gets in kind of thing?

Christine:

It is an everybody gets in kind of thing, but you’re right. It’s not for everyone. I also see people that come in, I’ll call them “house rich and cash poor”. The example being, they have maybe their house is completely paid off and there’s not mortgage, okay? They’re unemployed and they’re flat broke and they have no idea what to do. They come to me and they want to get rid of their debt but they want to keep their house, okay?

Those people out there that have the opinion that people that file bankruptcy, they’re flagrant, they run up their debts. That’s not exactly true. As a matter of fact, most of my clients are not the kind that run up their credit card debts and then seek bankruptcy protection as a tool. A lot of people end up in bankruptcy because of a medical problem. Lost job and a length of time where they couldn’t go back to work. Most of it’s because something happened. They lost their ability to earn money and it took them longer than expected to get back. They lost all their savings and now they’re having to consider it.

The people that it’s not right for are the people that have a ton of equity in their house because they could always sell the house. Take the equity and pay their debt and go on with their lives. The biggest problem is now people are emotionally attached to the place that they live in. I raised my babies in this house. I did this in this house and I say, “Okay, but you can’t eat your house and your house is not going to feed you and your house is not going to generate income unless you go rent out some rooms.” What are you going to do to keep the house and get rid of the debt because if I put them in a Chapter 7 bankruptcy where it’s liquidation. You don’t make any payments, the trustee wants that house. They’re going to sell it and pay your creditors.

In Chapter 13, if you want to make a payment plan you can keep the house but you’re going to have to pay the cash equivalent which looks more like a hundred percent repayment plan. The good news is again, no interest. Beautiful. It’s controlled. It’s a good number. You’re done after five years. When I’ve got someone that comes in that has a house with no money, you can’t make a payment plan unless you have income. Then we talk about what are the alternatives, non-bankruptcy?

I have to sometimes convince people that they need to look at the option of selling their home. They’re crushed. What are you going to do? When we look at it from a basic standpoint, Kathryn, it’s simple income and expenses. Do you have enough money coming in to pay the bills or do you need to cut your life style? What do you need to do, right? We live and die by the budget. When we live inside the budget all is well in the kingdom. When something goes wrong and we don’t have enough money, that’s when things go terribly wrong.

The sooner people consult with a bankruptcy attorney I think, the more options they have to consider. When people come to me at the last minute, wage garnishment, foreclosure, lawsuits being filed, they lose many of those options. Then it’s almost like I have to tell them, “This is the only way. A bankruptcy is going to stop this.” Anything other than the bankruptcy it’s going to cost you a lot more money and so they never want to hear that bankruptcy’s the right choice. When I start having this conversation with them about how they can save money, how they can save time, and why wouldn’t they want to do it? It just makes perfect sense. That’s really what I look at is that cost … A lot of people are not doing that cost benefit analysis.

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Katherine:

The emotions keep us in a lot of situations. As I’m hearing you I’m like, “I really feel that because do your own best and you’re told if you do good, you get rewarded.” Doing good doesn’t account for the trial and errors that you go through. We’re thinking about only getting it right. We advise those people who are not experts which leads me to our final question. I’m going to wrap up for this month with you.

Why do we not go to the experts? Why are we talking to Uncle Ralph? If he’s not a bankruptcy attorney why are we asking him what does he think?

Christine:

Pride, ego. You think about it. We would rather talk about our medical conditions than our financial conditions. Which is very interesting because money is still the big stigma. I think we have to talk about money and I think that we all need to get real. We need to get authentic because the Jones’s do not exist and what I find is and I live here in the beautiful Huntington Beach California community where I see a lot of people that look like they have a lot of money and then what’s really funny when I go out and network I come back and I sit in my office. They call me. They want to consult with me.

Don’t think for one minute that someone driving a Maserati or a really fancy car is wealthy because quite frankly they’re probably just one trip and fall accident away from bankruptcy. They’re living on the edge. A lot of people live above their means and they just seem to carry debt around like it’s normal. We’re so used to it. Those are problems.

Here’s the other thing too Kathryn and then I will be finished as well. I think that when we’re trying to look at it from the emotional standpoint we get completely confused. I think it stops our brain’s ability to think wisely or to make those well informed decisions. We get stuck and I think that the financial part of it is just a symptom of something emotional that’s gone wrong. Some people will overeat. Some people will over shop. A lot of people just bury their heads in the sand when something goes wrong with their finances and they just don’t deal with it until it gets completely out of control. I think it’s just a symptom of maybe something else.

Katherine:

You have to forced. You have to be forced to do it when logically without having to have pressure on you, you could make a better decision. Like you said, come to you early and you have more options. A lot of people just wait until their back is against the wall and they’re forced to do it. Now they don’t have to be accountable, Christine made me do it.

Christine:

Exactly. Throw me under the bus.

Katherine:

I want to say thank you so much. Before you go, tell people about your book and how they can get in touch with you outside of “This Needs to Be Said”.

Christine:

Absolutely. The book is “Five Steps to Freedom From Debt”. It’s also available on Amazon.

For my perspective clients, if you just go over to http://www.attorneychristine.com and Christine is spelled C-H-R-I-S-T-I-N-E.com you can go ahead and make a request. If you’re in California we’ll send that out to you.

Katherine, I thank you very much. It’s been a pleasure speaking with you.

Katherine:

Awesome. Have a good day.

Christine:

Thank you. You as well.

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