Episode 194: Bankruptcy Unveiled: Debunking Myths with Adrienne Hines

David Chudyk
00:00:00

Hey, everybody. Hey. I need to tell you that I learned a lot from this episode. I learned a lot about bankruptcy.

I learned a lot about what it is, I learned a lot about what it isn't, and I learned a lot about what happens to you financially after bankruptcy. So I hope that you find it as interesting as I did. And I also hope that you will like and subscribe to this podcast on the platform where you listen.

And also make sure to tell your friends, your family, your colleagues, and your co workers about the weekly wealth podcast. Like I always say, I believe that how we handle our money should positively impact our lives and the lives of those around us.

And I hope that this podcast can be a small piece of the puzzle in your life. Okay, here we go.

David Chudyk
00:00:44

Welcome to the weekly wealth podcast. I am certified financial planner David Chudyk.

This podcast and my wealth management practice are both designed to help the mass affluent to live better lives by how they handle their money. We talk about financial strategies, prosperous mindsets, and simply how to build true wealth. So come on and let's enjoy this journey together.

David Chudyk
00:01:07

Hey, everybody. Welcome to this week's episode. I'm really excited to talk about a financial topic that may be misunderstood, maybe even has a negative connotation.

So today we have Adrienne Hines, and she is the bankruptcy attorney. You've probably seen her on TikTok and Instagram, and for almost 30 years, she's been Ohio's trusted bankruptcy expert.

So she's trying to make bankruptcy a more understood topic. But before we get going, I do want to say that this is general information. This is not legal advice.

So if you have any deep questions about bankruptcy, contact Adrienne or contact a licensed attorney in your state. So, hey, Adrienne, how did I do for a legal disclaimer there? You're the lawyer.

Adrienne Hines
00:01:54

Well, I love that it's really important to let everybody know all the time, especially as I'm on social media, that I'm only licensed in the state of Ohio, and my. My information that I give out is information only, not advice. But I have been doing this a long time, so I've got a. Got a lot to say.

David Chudyk
00:02:10

Awesome. Awesome. So one thing that always fascinates me with attorneys is the law is, like, such a broad topic.

So, you know, there may be attorneys that they might be licensed to practice bankruptcy law, but they don't even know anything about it. And you may. There's probably a lot of fields of law that you have no idea about or very little expertise.

So how did you get into the bankruptcy part of law?

Adrienne Hines
00:02:33

Wow. That's a great question.

When I first came out of law school, I went to work for a firm that my stepfather was a senior partner in a small hometown firm. And my stepfather was a worker's compensation, a worker's compensation attorney.

And I actually followed him into the practice and I put my head down and for the first several years of my practice I was only a workers compensation attorney. I actually became an. A certified expert in that. In that area in the state of Ohio.

But along the way, our Ohio workers comp system is extremely fragile. And I learned that individuals who get hurt can oftentimes start missing paychecks as we're arguing about injuries and that type of thing.

And I saw a great need in my own practice to send people to bankruptcy attorneys.

And it just so happened that while I wasn't doing bankruptcy at that time, I had interned for the federal bankruptcy judge in my home district while I was in law school. I never thought I would be doing it, but he and I remained friends and he had recommended that I start doing it in order to assist my own clients.

And so he was a mentor to me. I began to take on a lot more bankruptcy work and I continued to basically go half and half for most of my career.

And recently I decided that I enjoyed the bankruptcy side of my practice so much more than the confusing, disappointing workers comp practice. And I left my workers comp practice and I turned and went all in. In bankruptcy because I think it's amazing and I love this practice of law.

David Chudyk
00:04:18

So that is really interesting. Now explain to me, like I'm five, what is bankruptcy?

Because I think there's a lot of misconceptions and so what's like a legal definition of bankruptcy and also kind of talk to us about the real world ramifications of bankruptcy.

Adrienne Hines
00:04:34

Thank you. I think bankruptcy is greatly misunderstood and I like to, I like to have people think of bankruptcy as simply a tool in the financial toolbox.

It is a big tool, it is sharp and it is scary looking. But in the hands of somebody who knows what they're doing, I think it's an extremely valuable tool.

Essentially, bankruptcy is a legal way to get rid of, of or let me, let me see, let me explain this better.

Bankruptcy is a legal way by which you can discharge unsecured, general non priority debt either in part or all of it, depending on financial situations that you come to the table with. There are two different types of bankruptcy. The first kind is a Chapter 7 bankruptcy. It's the type that most people understand or think of.

And a Chapter 7 bankruptcy is when you get rid of all of your unsecured, general non priority debt. It's going to be credit cards, medical bills, personal loans, those types of debt.

To qualify for a chapter seven and to be able to get rid of all of your credit card bills and your medical bills without having to pay any of them back, you have to be under an income limit. So in order to file that type of bankruptcy, your household income must be below a certain number based on the number of people in your home.

David Chudyk
00:05:56

Does that vary by state?

Adrienne Hines
00:05:57

It does vary by state, but not by much.

Um, and for example, in the state of Ohio, a single house, a single person household, can earn up to $61,000 per year and qualify to file a Chapter 7. And for example, in, in my, in, in the state of Ohio, a household is of four is going to be like around $113,000.

So that is the general, general numbers that we're looking at. We're talking about middle class, middle class, category of income.

And below, if that's you, you're going to qualify in theory to file a Chapter 7 based on your income. But a Chapter 7 bankruptcy is called a liquidation.

And so while you might pass the income test, the next thing we look at are all of the things that you own. We call them assets. We look at all of your assets, and one of the most important things to do is for us to calculate your equity.

Something a lot of people don't completely understand. But equity is how much value you have in something.

So every state has a list of exemptions, things you're allowed to keep if you file bankruptcy in your state. So in the state of Ohio, we have an exemption in our home of $161,000.

So if I'm under the limit and my, I don't have more than $161,000 in equity in my home, I would be safe to file a Chapter 7 bankruptcy. The other type of bankruptcy is called a Chapter 13 bankruptcy. And a Chapter 13 bankruptcy is not a liquidation, it's a reorganization.

And a Chapter 13 bankruptcy is what you file when you either A make too much money to file, Banker, file chapter 7 based on your estate's income limit, or B because you have an asset, a home or a valuable vehicle that exceeds your state's equity exemption and you would lose it.

If you filed a chapter 7 in a chapter 13, you may be paying back small amounts of money, or you might be paying back all of the money that you owe in a chapter 13 because you're over the Income limit. You're going to pay what a formula tells us you can afford to pay.

If you are filing because you have equity in something you want to save, you must pay the value of the equity that would have been taken if you had filed a seven. So basically a chap.

Basically bankruptcy is a federally protected right to file into federal court a petition asking a court to discharge some or all of your general unsecured non priority debt. And that is a very important part that bankruptcy is dealing with a very specific type of debt that we deal with in America.

David Chudyk
00:08:38

Okay? So let's play devil's advocate here. And I'm sure you've heard all the lawyer jokes, but you actually are like a decent human being that's a lawyer.

So we cannot even make jokes about you. But if anybody's listening and they're like, you know what? She is just helping people to not pay their bills.

She's helping people who just, they should just get a job. They should pay their bills. I mean, yes, some people have life comes at them, but most people just don't want to pay their bills back.

And bankruptcy is a way around that. And it's a bad thing. So tell me your answer to that.

Adrienne Hines
00:09:08

Well, I think that is a result of a lot of propaganda and things that we've been told over the years.

I think most people think bankruptcy is bad and that's really a function of, of, you know, the fact that the consumer lending industry has worked really, really hard to make you think that. And the reality here is that there are really seven primary reasons why people end up in debt.

And those are going to be the death of a spouse, job loss, divorce, major medical event for either you or a family member or child, financial abuse scams. Those are, those are going to be in a category failed businesses. And the last, which is the seventh, is overspending.

And usually we see overspending in connection with those other six things. Right. We're going to use a credit card if we've lost our job, but we still need to pay our car payment and make rent and our kids are hungry. Right.

If we have a major medical event, you're going to have a parent that might have to step away from work in order to care for a child that's just been diagnosed with, you know, an illness. And now we have to take the child to, you know, the Cleveland Clinic and we got to stay overnight and we've got it.

We've got expenses and a reduction of income. Financial. Anytime we have a domestic violence situation or domestic abuse Those people are almost always involved in financial abuse as well.

And really, businesses, I think it's important to understand that bankruptcy laws were actually first generated as a result of America's desire to be risky and to be entrepreneurial. See businesses in order. No, nobody is successful without failure first. Right.

Like we don't just step up to the plate and know exactly how to run a business. Most people try and fail, but that is, that is what America really is. America is taking risks and sending you across the way.

And that's why businesses are one of the most common reasons for filing bankruptcy.

I would like to just point out to you, David, that if bankruptcy were truly bad, we wouldn't have Disney World and we wouldn't have ketchup and we wouldn't have cars because Walt Disney and H.J. hines and Henry Ford all filed bankruptcy. And if they hadn't filed bankruptcy, they wouldn't have gone on to do the amazing things that they did.

David Chudyk
00:11:32

And the thousands of jobs and billions of dollars of wealth that was created. Well, correct.

Adrienne Hines
00:11:39

Exactly, exactly. And so while people say that this is a very.

People make assumptions about why people are filing for bankruptcy, most of the time somebody on the outside looking in does not really understand what the person is dealing with, how that person walks in their own shoes. And it's very frustrating because we live in an environment that tells us that it's our personal responsibility to deal with all of our debt.

But yet the type of debt that goes away in bankruptcy is called general unsecured non priority debt for a reason. You don't get a free house in bankruptcy and you don't get to get out of paying your child support or your taxes.

Usually these are very important debts. But the kind of debts that go away are the ones where the consumer lenders are lending in the most risky and dangerous environment.

There's no cap on interest and consumer interest in most states. In the state of Ohio, there's no cap on consumer interest.

And so these are the lenders who are the most predatory, the most manipulative and they put themselves at risk. This is their business model. This is your credit cards, this is your payday lenders.

This is, you know, these, these are the lenders who are enjoying tremendous profits in this space while also understanding that they're lending to a very, a fragile group of people.

And so to that extent, I think it's important that we all recognize that the type of debt that's going to go away is the type of debt that other businesses have created a business model to make a Lot of money off of us. And we have to kind of fight for ourselves here and understand what's important.

David Chudyk
00:13:23

Sure. Can a court deny a bankruptcy?

So if there's a scenario where let's say I did not have a medical emergency, I did not lose my job, I did not have any of those seven issues and I just, for lack of a better term, just bought above my budget, can a court deny a bankruptcy or how might that happen if one of those seven causes of bankruptcy was just not an issue in my life?

Adrienne Hines
00:13:50

Yeah, the bankruptcy court is very clinical and non emotional. Nobody really cares how you got there. Nobody. The court doesn't, sadly. I mean, very straight across the board.

There's just no, there's just no emotion. Nobody is going to feel sorry for you because a bad thing happened to you. And nobody is going to be punitive because you were wild and reckless.

And again, the reality is there is a belief that people are just going out to the mall and just putting things on credit cards all day long, never believing that they're going to pay that back. And that is not my experience. My experience is that most people find themselves in trouble a nickel at a time.

It's like walking down a path in the forest and you think you're following the path, but at some point you took one tiny step off of it, right. And five miles later and 10 hours later, you find yourself miles away from where you were supposed to be.

I think that's really more indicative of the type of bankruptcy or the type of spending that most people think of. Most of us take on debt at a time when we think we're going to pay it back.

We buy the car, we finance the car, when we are, you know, happily married and we both have jobs.

But if, if my husband, you know, picks up and leaves with the girl from work and I'm now taking care of the entire household and the children and I'm not receiving child support. I cannot manage that. All of these expenses and I might be left holding the bag. And so that's the type of things that we're talking about.

But the answer is no. Your bankruptcy cannot be denied unless you've committed fraud or you're trying to hide something. Bankruptcy is a very transparent process.

One of the reasons why I love it, because I know exactly what's going to happen. I don't have to wonder, right?

David Chudyk
00:15:46

So what is the process? Let's say someone is thinking, you know, I'm not sure if bankruptcy is right for me. I'm scared.

You know, I have some Medical bills, I've lost a job, there's a divorce, or any combination of those things. But I'm afraid that I'll never be able to get credit again. I can never get a mortgage again. I'm going to be looked down upon.

This is going to be a long, expensive process. So somebody comes to you or any other bankruptcy attorney and says, look, I just need a consultation. I need to understand this process.

Like, just what's the CliffsNotes version of the whole process from start to finish.

Adrienne Hines
00:16:19

First and foremost, I'm a very unique attorney. Obviously, I'm extremely proud of what I do.

And the first thing I usually tell people who've made their way to me is, number one, you're not in trouble, you're not in trouble, and this is fixable. It's just money. Right. I'm not an oncologist. You're not here talking about, you know, something really bad.

We're talking about money, and we need to take the emotion out of it, and we need to look at the realistic options that you have. I think far too often, David, people bring emotion into money and that's our failure, right?

That's our failures by thinking that money is love, is happiness, is embarrassment, is shame, and money is. That is not what money is.

And we need to take shame and embarrassment away from the discussion of debt so that people will stop and listen to what their options really are. If somebody's made their way to me and had the. Had the courage to call me, I'm going to walk them through the process.

We're going to determine really what kind of bankruptcy is going to be best suited for them. And I'm going to walk them through why it is best suited for them.

I'm also usually going to walk them through the alternatives so they understand what taking a 401 loan out would do in this situation or. Or what they could expect with a debt settlement or a debt consolidation company.

And I give them my thoughts and opinions on those and my worldview about money.

David Chudyk
00:17:54

I like it. And after a bankruptcy is finalized, talk to me a little bit about what might happen to my credit. How long does it take to get built up?

How long might it be before I can get a credit card or a mortgage? I would bet that if we have a hundred people listening to this show, 99, there.

There are a hundred different, different beliefs on what happens after bankruptcy to your credit.

Adrienne Hines
00:18:18

Absolutely.

And I think that is the reason why my social media accounts have really grown as quickly as they have, is because so many people think that if you file bankruptcy, your life is ruined, your financial life is over.

And it's funny because if you talk to a hundred people, actually 50 of them are going to tell you that bankruptcy is the easy way out and 50 of them are going to tell you that it will ruin your life.

And so that's the odd part because it's actually neither in my practice, if my client, if I have a client who qualifies for a Chapter 7 bankruptcy, my client can potentially purchase a car the day after we file. Literally the day after.

I have very specific car dealerships that only sell people cars who are in bankruptcy or coming out of bankruptcy, because there are very specific lenders who lend in this, in this area and they can pre approve you and get everything taken care of and they ship the car. So the point here is that if you think you're not going to be able to get a car, it happens. It can happen literally the next day.

My clients get credit cards.

I tell them to wait a couple of months to get credit cards because they want them to get one that they will, that is a quality card that they'll keep for longevity is going to help them with their credit score.

But my clients can have a 720 credit score within 12 to 18 months if they're working on their credit and they can purchase a home in two to four years. And so again, this is very illustrative of the fact that most people think it bankruptcy ruins your life.

But the reality is, wherever you are right now, if you think you can buy a house in two to four years with the debt that you've got without somehow taking care of it, you're not going to be able to buy a house in two to four years. Your debt to income ratio is going to impair your credit and your credit score is going to continue to fall.

And I oftentimes describe what this situation is by using a metaphor.

The metaphor is that we get into our financial cars when we're 18 years old and we start driving that financial car away from our family's home, away from our community. We're learning the ropes. We, we make our way to the highway. We get onto the highway and you know, we're in that right lane, way far over.

It's a four lane highway, but we're way over the right. Everyone's flying past us. We're starting to learn the ropes. We're starting to feel a little bit more comfortable.

We start to move over, pass a few people, and suddenly we're in that third lane. Not, not the fourth lane, we're in that third lane and we're fine. We're passing people and the only people passing us are the crazies, right?

But we're passing people and all of a sudden your lights come on on the dash of your car, smoke starts coming out of your hood. And this is the moment where in this metaphor, your car is your, is your debt, right? Your car is your financial life.

If you are not stopping and dealing with the problem, you're putting your foot on the gas, right? Most of us put the foot on the gas and try and keep going. So bankruptcy is not a crack. And bankruptcy isn't.

Isn't that if you don't do something, you're going to end up in that third lane with your flashers on, in a very dangerous position with trucks on your left and right, no fasties on your right. Bankruptcy is putting your blinker on, moving over, getting off on the ramp, calling AAA and fixing the car, getting back on the highway.

You haven't lost time. You're not back in your. In your community. You're not back in your own, your family's driveway. You're where you got off.

Only you're a lot smarter and you're a lot more nimble because you don't have debt. And the whole purpose of getting through debt is so that we can get to the other side and build wealth. And that's really the point here, no question.

David Chudyk
00:22:05

So is bankruptcy a matter of public record? Can I go to some courthouse and look up your name and see if you filed for bankruptcy? Or is it, is it anonymous?

Adrienne Hines
00:22:14

It is. It is public record. It's absolutely public record.

I have, I think back in the day, right, I guess they used to publish people who filed bankruptcy, their names in the local newspaper. And I've been practicing law for 28 years. And so in my early days, that was a question literally everybody asked me.

And it was very dated at the time, and it's exceptionally dated at this point in time. Whenever somebody asks me is, you know, will my neighbors know? Will anybody find out? The.

My answer is usually, well, who do you know that filed bankruptcy? Because I know that a lot of people they know have filed. And it's just, nobody talks about it.

And it's, you know, it's not easy to find if you filed a bankruptcy, but, you know, it's, it's, it will be on your credit. And if anyone ever did a background check, they'd see it. But it doesn't mean what a lot of people think it means.

It doesn't mean you can't get a car or have a good credit score or buy a house. We've just talked about that. Right.

So the consequence of having a bankruptcy on your credit is not nearly as significant as most people assume that it is. And frankly, it is substantially less of a world problem for you than having the debt.

David Chudyk
00:23:32

Fascinating. Fascinating.

So somebody who's maybe listening to this show and they're thinking, I don't know, like this might be my answer, this might be something I need to learn more about. This might be something that potentially is the route I need to go. But I just, I don't understand it.

How do you help those people and what would you like for that person to do in order to contact you?

Adrienne Hines
00:23:56

Well, first off, I have a very clear point of view when I think somebody should consider talking to a bankruptcy lawyer. And my point of view is this.

If you have more than $10,000 in that general unsecured, non priority debt category, and that's going to be credit cards, medical bills, personal loans, payday loans, old Verizon contracts, debt collectors chasing you, if you have more than $10,000 in that category and you do not have a plan using paper and pen to get yourself out of debt in three years or less without borrowing any more money, then you should be talking to a bankruptcy lawyer and you should do so before you take money out of your 401k. Why? Because a 401k, any retirement plan is 100% protected in bankruptcy.

We want to talk to a bankruptcy lawyer before you take out a home equity line of credit. Why? Because your equity might be protected in part or in all in your state.

You want to talk to a bankruptcy lawyer before you take out a consolidation loan. Because guess what, you've got a lot of debt. And the last thing we do for alcoholics is give them more alcohol.

You don't need more debt to get out of debt. Right.

And number four, I want them to talk to a bankruptcy lawyer before they go to a debt settlement or debt negotiation company because they are not governed by laws that will actually assist you moving forward. A creditor, your credit card company will never have to take less than what you owe without a judge telling them that.

So your debt consolidation company can never force your creditors to take less.

And what happens is a lot of times people don't realize that all of their creditors are not involved in this delightful plan that a debt settlement company has come up with.

And I file bankruptcy every single week for people who've been in a debt settlement program and who have been sued by one of their credit cards that they never knew was not on board with the program. So I have very clear positions here. I think bankruptcy is one of the safest legal options to deal with this type of debt.

And again, we started this out by saying it's just a financial tool in the toolbox. I want to remind everybody I'm afraid of chainsaws.

It may seem very scary to me, but if a tree needs to come down, we're not going to use a butter knife. And it's time to open up the toolbox and look at what these things do. Just because it's scary doesn't mean it's bad.

And this can be exceptionally life changing for most people.

David Chudyk
00:26:26

Very, very interesting. And how can people find you on the Internet, on social media and those kind of things?

Adrienne Hines
00:26:32

Thank you. They can find me at www.theladylikelawyer.com if you go to my website, I have lots of resources.

I have ways to help you find a bankruptcy lawyer near you who will offer free consultation. I have information about, you know, car dealerships I work with and with credit repair programs and stuff like that.

You can also find me on the socials, on Instagram, Facebook and TikTok at theladylikelawyer. And I'm also on YouTube. A ladylikelawyer.

David Chudyk
00:27:07

I love it. No, you put out a lot of really, really cool content, so. But now is for the question that I did not tell you that I was going to ask you.

I always have a zinger in there to give everybody a little bit of surprise. But we are the weekly wealth podcast. So we talk about the mindsets, the tactics and the strategies that can help you to build and maintain wealth.

So let's hear your definition of wealth. What does wealth mean to you, to the people in your life that you care about? What is wealth to Adrienne?

Adrienne Hines
00:27:37

Wealth to me is contentment, having enough to be content.

I chased money most of my life and I came to the conclusion that once your primary needs are met, when you have a comfortable place to live and you can get from point A to point B, and you have people in your life whom you love and who love you, then being able to spend time with them and engage with them, that is the most important thing to me. I am never going to be that person who needs to dominate the space and make all of the money.

But wealth to me is being able to take my headphones off after this podcast and leave my home office in the upstairs bedroom and head down and have lunch with my husband in the middle of the day on a weekday. That's wealth to me.

David Chudyk
00:28:34

I've asked that question to probably 120 guests so far, and nobody's ever given me a dollar amount. Everybody has always had some version of freedom and, you know, happiness and things like that. So it's really interesting how, you know, wealth.

I mean, yes, there is a financial component to it, obviously, because you need to pay your bills, you need to, you know, pay for your house, but it also is kind of like what the money does for you. So I love it. But anybody who's, who's thinking about if bankruptcy is something to discuss or pursue.

Www.theladylikelawyer.com Debt Relief with dignity is a great starting place.

And Adrienne clearly knows what she's doing and has been doing this for a long, long time and really can start to point you in the right direction and this big decision, I think.

But I think that when we're making big decisions in life, I think we need wise counsel and I think we're all very smart to pursue wise counsel with regard to most of our financial decisions. So did you have anything else to add before we close out the episode?

Adrienne Hines
00:29:49

I just want to point out that shame lives in darkness. And so much of a, so much of America is very shameful about the debt that they're carrying.

And when we, when we have a lot of shame, we are embarrassed and we don't seek out the wisdom that we need in order to make logical, thoughtful, clinical financial choices. It's really important that we take the shame and embarrassment away from debt because everybody's got it.

And it's important that we know we have to move through it quickly, we have to get through it fast because time is money. The longer we spend in debt, the less money we're going to have to be able to robustly save for retirement and to start that business.

So this is really a wealth building activity and it helps your future self. So we need to take the shame and embarrassment away so everybody understands that we're doing what we need to do to take care of our future selves.

And that's going to help you make the choices that are best suited for you and your family.

David Chudyk
00:30:49

Well, thank you for coming on and thank you for giving a spin. Not, not a spin, but given a perspective to a subject that is probably misunderstood.

And quite frankly, I would guess there's a lot of judgment with regards to bankruptcy.

And I think you've given me a different perspective, and I really appreciate that, because who knows when any one of us might hit one of those seven roadblocks that you talked about and have an illness or have a business fail? I mean, things happen to all of us. So I appreciate your expertise and this perspective on this subject. So.

And until next episode, I wish everybody a blessed week. Thanks, Adrienne.

Adrienne Hines
00:31:30

Thank you.

David Chudyk
00:31:31

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