Dom: Like I said as we started the broadcast… there are individuals across the city sitting in and not busy and, obviously, there’s a lot of people out of work.
These (Sadek and Cooper) guys are probably working harder than anybody at any point in their life. And it’s my pleasure to bring into the broadcast Sadek and Cooper’s Brad Sadek. This is information that our listeners really need to hear…it’s extremely important.
So, Brad, you’re a bankruptcy attorney…If you could tell us, what’s going on in your world?
Sadek: Well, I’m getting a lot of questions right now about the stimulus and people want to know what it is. They want to know if it’s enough money.
They want to know whether they should file right away or whether they should wait to file.
Clients who are in bankruptcy right now, unfortunately, if they were working and paying back towards their creditors…you know, a lot of questions are coming up. We’re going through times that we’ve never seen before and hopefully never will again.
As you know, we have two really big things at play – we have our health and we have our finances. The government has done a lot and they’ve stepped in financially to help us through.
How does the stimulus work?
Sadek: The main thing is the most recent stimulus, which gave us a lot of money. You have somebody who’s single and making less than $75,000 per year, they’re going to get $1,200.
If you’re married and you make less than $150,000 per year, you’re going to get $2,400. And for every child (you receive) another $500 per child up to the age of 17.
So, a family of five making under $150,000 with three kids under 17 would get (a stimulus of) $3,900 in total.
Will the stimulus last?
Sadek: Now, the problem is unemployment. We’re at record rates. “Is that money going to go far enough?”
And that’s the question I’m getting from a lot of clients, and potential clients, and it really depends on their circumstance. Whether they are working, how much savings they have, do they have debt?
Usually (with) the people I talk to it’s (a conversation) about debt.
It’s about credit card debt or personal loans or medical debt. Or, you know, are they facing mortgage foreclosure?
So, usually, the people that have debt also don’t have savings. They’re paying towards the debt.
The average person that I talked to has about $30,000 in old-fashioned credit card debt. The problem there is that $30,000 costs about $1,200 per month in minimum payments. At $1,200 per month, we’re talking about $14,400 per year.
That’s a lot of money on an after-tax basis.
What are my options?
Sadek: Somebody could either decrease that amount through a Chapter 13 Bankruptcy or, alternatively, if they qualify file a Chapter 7 Bankruptcy and eliminate that debt. Then, have that money in their pocket to do with what they want.
Hopefully, getting to go to Ocean City during the summer and walking on the boardwalk without having to worry about how they’re paying for it.
And that’s what we try to do – give people that financial freedom and flexibility through bankruptcy.
It is on a case-by-case basis, but those are the types of phone calls that I’ve been fielding. And we’re doing it all over the phone while working out of our houses.
Will you get to keep your stimulus?
Dom: Brad, let me ask you one question (in) reference to the stimulus checks and then applying that into the scenario that you described. I remember reading a story where somewhere in the stimulus conversation (they said) once the checks were starting to be released there were creditors who were able to take the stimulus checks.
I don’t know how accurate that story is, and I don’t know if that’s a reality that people are concerned about, but is it, and should they be?
Sadek: It’s an unfortunate reality and people should be concerned.
If someone owes child support, their stimulus check under the Treasury Offset Program (known as TOP) can be taken.
Let’s say somebody owes money to whoever their local bank is and they have an overdraft on their bank account for a few hundred dollars. Let’s say $400. And they’re (supposed to) get a $1,200 stimulus check. Well, they’re only going to get $800 because it’s going into the bank they owe money to. I always tell my client, “never keep money where you owe money.”
Another thing is, what about if somebody had a credit card or a personal loan or a medical bill and that collector sued that person?
If they do that in one of our municipal courts or district courts, or the Court of Common Pleas, and they get a judgment and that judgment lien is attached to the bank account. Any money that goes into that bank account is privy to the collection of creditors.
Now, if a person is in an active bankruptcy, of course, their stimulus check is protected – except for (in the case of) child support. It’s protected due to the automatic stay in bankruptcy.
Also, you know, I’ve gotten this question a lot, “What about if I owe taxes?” or “If I owe $10,000 in taxes or IRS debt, can my stimulus check be used to pay the taxes?”
This is actually a tax-free stimulus. Not only is the income not taxable, but it can not be used to offset taxes due and owed to the IRS.
What comes next?
Dom: How easy is it to take the first step to call you?
Sadek: Sometimes I feel as though that might be the biggest hurdle.
Dom: I agree, and I hear that from people all the time.
Sadek: I mean, it’s very easy to say, “oh, just call our office.”
Well, the thing is, if let’s say my knee hurts. Well..I’m still going to run on it and if it hurt bad enough I’m going to start walking. If it hurts bad enough, I would take Advil. I (like many of you) probably wouldn’t go to a doctor until I’m dragging my leg into the office.
So, I understand that (it’s difficult to make the first call), and that’s one thing that I hear all the time (from clients).
“I didn’t know what to expect. I didn’t want to call.”
“I didn’t want to come in.”
I look at my job – yes, I need to solve people’s financial issues and develop a legal strategy for them that best fits their situation.
But I look at my job, as far as when someone calls or they come into my office, which hopefully we’re there sooner than later, they can end that conversation. And there can be a plan. And they could feel better.
People always say something to the effect of “well, I look forward to this being over but I feel better already.”
People need to know what the benefits of bankruptcy are compared to the situations that they’re (currently) in. I think a lot of people here are obviously (scared) and in a total panic.
We all grew up watching a TV show where if the needle on the wheel lands on a certain spot everyone screams “Oh no!”
But in reality, bankruptcy is here for somebody to keep their assets and get rid of their debt.
And when I say keep their assets – that’s from their home, if they’re behind on it or even if they’re not behind on it but want to make sure their home is protected.
Bankruptcy does protect. It protects houses. Bankruptcy protects people’s cars. The goal of bankruptcy is for somebody to reduce or eliminate their debt. And when I say eliminate their debt, that’s a Chapter 7 Bankruptcy where you can walk away from your debt.
Hopefully, as time goes on, that money – that they would otherwise pay towards their creditors – is reallocated into savings.
A Chapter 13 Bankruptcy is for somebody that generally fits one of these three different buckets:
- Somebody has to know their affordability – after their expenses.
- Have the income to repay their creditors.
- They’re expecting money or they have equity in an asset.
Based on one of those buckets, (if) there is affordability to pay a portion to their creditors then the goal there is saving money on a monthly basis (when) compared to what they were otherwise spending.
I have clients that were spending thousands of dollars on credit cards – $24,000 or $36,000 per year – who are now in plans (paying) $200 or $300 per month (instead of paying in the thousands).
It really depends on your own financial circumstance, but that’s the goal and that’s what prepares people for a time like this.
So that money is in their pocket, and it continues to be in their pocket, and not to the creditors. Unfortunately, people become very used to paying their creditors. Which makes that initial phone call even harder.
Dom: Brad, (what would be your) closing statement?
Sadek: Well, thank you guys very much for having us. I thank the listeners for listening to (and) giving us their time.
All the people out there that are worried, we are here for you. My friends and neighbors, we’re a great community and we’re going to get through this.
Dom: Brad I want to say, if you don’t mind me saying, I watched the video of you on your website and I must confess my friend…that you come across on the radio as real as you do in the video.
The two are the same – you’re a real person, you’re a real Philadelphian. And your heart’s in the right spot. I appreciate very much the work that you and Patrick are doing on a daily basis.