How Cognitive Biases Lead You Towards Bankruptcy

How Cognitive Biases Lead You Towards Bankruptcy

The term cognitive bias defines an error in decision making or reasoning. This means disregarding an accurate, as well as, objective information in favor of subjective preferences and believes. In other words, people exhibit cognitive behavior when they go with their gut feeling, and overlook the objective information that is essential for the smart decision-making process. Adding to this, such persistent irrational behavior or bad choices can lead you to bankruptcy. Let’s have a look at the examples of cognitive bias.

  • Sunk Cost Fallacy

Sunk cost fallacy means that your decisions are tainted by the emotional attitude. The more you feed your mind for emotional decision making, the harder it becomes to abandon it. To avoid bankruptcy situations, one needs to make a rational decision with emotional intelligence. Therefore, the frequent cognitive bias which is usually visible in bankruptcy practice is the Sunk Cost Fallacy. In which the client normally refused to surrender an expensive house or car because they have put a hefty amount into that asset. Also, surrendering that asset means throwing away their money. Obviously, in crippled financial times, the sane mind says, that, you need to re-evaluate your situation and analyze what you can comfortably afford and what you cannot. Further, if you are considering bankruptcy then you need to fight against the sunk cost fallacy. There is a famous saying, that: “don’t throw your good money after bad”, which is a right approach if you are struggling with a sunk cost decision.

  • Framing Effect

Yet another example of cognitive bias is called “Framing Effect”. In which people responded to multiple choice in different ways depending upon how it is presented, either as a gain or as a loss. A case in point is when a salesperson utilizes selective facts to tempt their customer to make a purchase, which they really don’t need. Some slick salesman used the framing effect to convince their potential customers that they will save tens of thousands of dollars on their vacation by buying a timeshare in Orlando in comparison to the cost of staying in a hotel for a unique vacation, every year. After making the said purchase they are bombarded with multiple maintenance fees, which eat up their savings. Families who are victims of this framing effect still stuck with multiple timeshares. Besides this, some aggressive salespersons force a customer to make purchases on things they don’t need them such as carpet shampooing system, solar panel installations or water purification systems.

How Bankruptcy Can Help Undo Bad Decisions

In a nutshell, there are many more cognitive biases, identified by the experienced psychologists, which can lead you towards bankruptcy but you get the picture. There is no doubt that anyone can fall prey to lapses in judgment, though we need rationalization in the greater interest of ourselves. But, if you are unable to pay for your basic necessities like clothing, food, and shelter because the disposable income is allocated for the payment of housing and transportation. Then, in such a scenario, payment of non-necessities like timeshare or water purification system is not a good idea, and need of a bankruptcy lawyer is a must. A Detroit bankruptcy lawyer can save your financial condition by taking you out of the bad deal as well as poor decision making. Last but not least, it can help you in regaining your peace of mind.

Is bankruptcy the best option for me to handle debt?

Is bankruptcy going to be the best option for me ?

One, of the most common cases to be filed in US, bankruptcy is the last resort for debtors who are facing an extreme situation of debt. Yet often the suitability of filing bankruptcy under certain situation is questioned and many debtors try and avoid filing bankruptcy as long as possible.

What choices does one have in Michigan for managing debts apart from bankruptcy filing?

Bankruptcy filing is the last resort in extreme situation. One can also go for debt settlement, reaffirmation plans and negotiate with the creditors and lastly debt consolidation. Each of these choices will require good negotiating skills and you have to pay off whole or a part of the debt you have incurred. Managing the money for paying off is the most crucial part. While you can pay off the amount over a certain span of time, the amount of debt that you are paying is an important factor to be taken into account.

How can I understand whether bankruptcy is the best option or not for me?

There are a lot of factors that should be considered in deciding whether bankruptcy is the best option for you. The amount of your debt is a major factor to be considered. If it is too huge to be paid through any of the choices mentioned above then bankruptcy should be considered and is the only choice that is left to you. The type of debt that you have incurred is also another that decide whether bankruptcy is your best choice. While credit card debts and similar one can be wiped out through bankruptcy, student loans, and child support cannot so choose accordingly. The last thing that you should consider is whether you are ready for taking a step as crucial as bankruptcy filing as there is no turning back once the procedure begins.

Consult a professional bankruptcy lawyer

While you can make a basic judgment of your situation, a bankruptcy lawyer who has been in the bankruptcy business for long can analyze your situation far more critically and minutely. Every case of debt is different from one another and hence requires handling in the right way and a professional can do exactly that and provide you the necessary advice.

File bankruptcy when there is still time

Filing bankruptcy within a certain period of time is ideally the most advantageous choice that you can make, so while pondering and considering every available option is necessary, be sure not to take up too much time and miss out on the best time for filing your case. Your bankruptcy attorney can decide when filing bankruptcy would be the best for you.

At A Better way Bankruptcy (Affordable Detroit Bankruptcy Attorney) , we strongly advise our clients to get an appointment for a consultation early even if you are not very interested with bankruptcy. This way while providing you sound advice we can also let you know the best time for filing bankruptcy if you finally resort to it. So book your consultation with us at the toll free number 844-372-7324.

What Can you do to Save your house in Bankruptcy ?

How do I Save my Home in Bankruptcy ?

save home in bankruptcy

Our home is our most important asset of all that we own. It represents everything from our personal taste to our financial and economical position as well as is deeply entwined with our sentiments and emotions. So by all means, securing our home is always a priority for us. When you are considering filing for bankruptcy, the security of your home is one of the vital doubts that are bound to come in your mind. Losing your house in any ways- be it through foreclosure or selling it to pay your creditors through a trustee, is not desirable. So what can you do to save your house? Do keep in mind that while you may be able to keep your house in some way or the other, whether you can maintain it in the long run is actually the factor to be considered.

Can I keep my house if I file for Chapter 7 Bankruptcy ?

If your house’s equity is exempt and you can afford the necessary payments then you can keep your house. However if there is some amount of non exempt equity in your home, keep chapter 13 bankruptcy in consideration as well. It is less than likely that you have some nonexempt equity on your house and the trustee is not going to attempt to sell off your house to pay the creditors.

Saving your house and the automatic stay :

The automatic stay will give you temporary relief from the lenders as they will be prevented from carrying on with the foreclosure proceedings under the court’s order of the automatic stay. The lender can appeal to the court for removal of the automatic stay and the court may accept that in case you are behind your payments which will eventually lead to losing your home.

Consider chapter 13 instead of Chapter 7 Bankruptcy :

Chapter 13 or Repayment plan bankruptcy is designed so that you can repay a portion of your debt through a plan of three to five years. This way you do not need to sell any of your property to afford the payment and hence keep your home.

Some other ways where you can save your home during bankruptcy :

Consider contacting your lender and discuss on entering into a reaffirmation agreement for your home. Reaffirmation agreement is like a contract between the lender and debtor by virtue of which the debtor can keep his or her home in lieu of regular payments of mortgage related loans in the future.


If you are indebted to the verge of losing your house, it is high time to put a check on your financial issues. If you cannot afford to maintain your house, however difficult the decision may sound, you should actually consider selling it. The house is an asset that has a lot of attachments with our life and losing it will definitely bring a huge change in one’s life. Contact your lawyers for the best advices on this issue in further details.

Filing for Bankruptcy online – Is it possible ?

How to file Bankruptcy Online ?

Filing for bankruptcy online in michigan

Keeping pace with the ever-evolving technology, today almost everything we can think of doing is possible online. Hardly a handful few still prefer the usual conventional ways of life over the virtual comfort.  When the services are available within the comfort of one’s home it would be an unnecessary trouble to seek the same service manually. Today, even legal aid is made available online, as law firms all over Michigan reach out to their clients through websites, blogs etc. Bankruptcy, which is the most common type of case filed all over US, is now also possible to be filed online.  In this section, we will discuss the necessary basic knowledge to be aware of before filing for bankruptcy online and clear any query that you may have regarding the aid that our clients receive from our office regarding the same.

Is it necessary to seek professional advice while filing for bankruptcy online ?

If you are thoroughly at par with the legal requirements and the paper-works following the petition and procedures of filing for bankruptcy, you may feel confident enough to file without professional help but it is strongly advised to seek help of a specialized bankruptcy attorney. The whole procedure starting right from the time of filing petition to the bankruptcy discharge is thoroughly complex and often consists of intricate details that only an experienced professional can recognize.

Public Access to Courts Electronic Records system or PACER system allows individuals and businesses to file for bankruptcy through relevant courts online since 2001. One can register through them and proceed accordingly. But consulting a bankruptcy attorney is strongly recommended to get expert opinions as every case is unique in its own way and only a professional can understand the exact requirements of your case.

At A Better Way Bankruptcy, provide a free consultancy to anyone based in Michigan particularly all over Detroit and the suburbs, so you can actually access your present situation. You can seek appointment for FREE Consultation on phone through our Toll Free number 1-844-ERASE-BILLS or by registering with our site for your free consultation.

Filing for bankruptcy online or the conventional way- which is preferable ?

While the concept of filing and completing the whole procedure online is tempting in many ways there is really no substitute for meeting your attorney in person and seeking the answers to your doubts from an expert first-hand. Online filing has gained popularity on the grounds of privacy and economical convenience as one can skip the fees of the attorney. But the basic question is evaluating one’s situation to understand whether you are at all eligible for filing for bankruptcy. Our free bankruptcy evaluation option is always at your aid. Our clients are always advised by us to seek expert guidance even if they are choosing to file for bankruptcy online. We are always at your service, now seven days a week.

Bankruptcy is a complex legal procedure and will be best handled by a professional experienced in this field.

Our Attorney at A Better Way Bankruptcy, Lyle Lieberman, with his excellent expertise gained over 24 years of practice and specializing in Bankruptcy filed under Chapter 7 and 13, is always happy to help anyone who seeks for it.

How to Manage Overwhelming Debts in Detroit Metropolitan Area-(Michigan) ?

Erase Debt Detroit Bankruptcy attorney

Detroit is the largest city in Michigan with a population over 5.3 million and working population of 2.6 million in approximately 247,000 businesses. However, economy of Michigan went under a tumultuous phase from 2001-2010 and steadily downward until the epic municipal bankruptcy filing by the city which is the largest in the history of U.S.A. There was a decline of 18.5% in the job opportunities from 2001 to 2010. The problem of unemployment combined with the large population influx of the city led to an overwhelming situation of debt that was never seen before.

Filing for Bankruptcy in Metropolitan Detroit:

Unlike the myths revolving around bankruptcy, it is not always the result of reckless and unlimited expenditure but a situation that has arisen from medical issues, national crisis or any unfortunate and often un-foreseen circumstances. It should be kept in mind that bankruptcy is being filed by millions of Americans all over US and more so in Michigan and Detroit  and is one of the most popular debt relief support system practiced in the country.

How should I proceed while filing for Bankruptcy in Detroit ?

If you are considering filing for bankruptcy in metropolitan Detroit, the first and foremost step you should take is contacting an experienced and knowledgeable bankruptcy lawyer of Detroit within your financial limit. One need to understand their circumstances in order to make decision about the correct proceedings to be followed while filing for bankruptcy. Chapter 7 and Chapter 13 are the most popular of the bankruptcy laws practiced in and around Detroit but not everyone is eligible for applying for them. So it is important for one to consult a bankruptcy lawyer to understand which option is the best for them. A Detroit Bankruptcy Attorney is your best choice when you are in doubts of any sort regarding bankruptcy.

What is the cost of filing for Bankruptcy in Michigan?

When you are decided about filing for bankruptcy, the next point to be considered is the cost involving the procedures. Here,at A Better Way Bankruptcy, we aim to meet exactly this quality- Affordable Detroit Bankruptcy Attorneys who can help you terminate all your debts with his or her sound advices and legal expertise so that your current financial situation improves for the very best. We also offer free consultation and we are available now 7-days a week.We do our very best to guide you in case you are opting for Chapter 7 or “liquidation Bankruptcy” and chapter 13 or ”Wage Earner’s Bankruptcy”. Our assistance is always there for you from the time you choose to file your petition and all the way through your credit repair.

Bankruptcy is certainly a major financial and legal decision as well as a emotionally draining tumultuous event, but here we aim to ease that out for you as much as we can do possibly. With our experience and skills gathered over 40 years, and offices at Southfield and Sterling Heights, we serve large areas of Michigan including families and individuals residing in Detroit and the suburbs. Our lead attorney,Lyle Leiberman has been specializing in the field of bankruptcy for the past 24 years and is always there to help out anybody who needs it.

*** We handle your financial conditions with utmost care, consideration and thoroughness because we believe seeking a better way!

How can one rebuild credit after filing Bankruptcy in michigan

Rebuild Your Credit After Filing Bankruptcy


The moment the debtor files for bankruptcy, he or she should start considering ways of rebuilding their credits lost in the whole procedure. Though bankruptcy will stay for around ten years on your credit record does that does not mean that you cannot indulge in any financial plans such as buying a car or student’s loan. In fact foreclosure actually brings about changes that are for the good. However there would be hardship as one has to keep check on their extravagance for sometimes in near future in order to build a strong financial base and recover from the crisis that has aroused from the Bankruptcy. There are several ways to rebuild credits by one aims to choose that mode through which rebuilding credits would be quickest as well as secure and steady.

What is Credit Score and how it works?

One can keep record of his or her credit score in order to undergo a self-analysis of their present financial state. FICO score or Fair Isaac Corporation is the most commonly used credit score recorder that scores your credit in a scale ranging from 300(worst) to 850(the best). There is a belief among many that there is no way to improve your credit score after bankruptcy till 10 years while in reality the records after bankruptcy equally matter hence one should be careful not to repeat all that initially led to the bankruptcy and the score will eventually increase.

How can one rebuild Credits after Bankruptcy?

  • Availing a secure credit card can help in boosting your credit score. It is possible for a person to apply for a credit card soon after foreclosure of the bankruptcy filing. However one should be careful to avoid applying for credit cards that includes an annual fee or application fee. But most important of all, one must make sure that they can clear their monthly dues in time.

  • Refrain from using your entire credit limit as it affects your credit score.

  • Obtaining a car loan or any other installment loan is another way in which you can rebuild your credit limit.While installment loans are harder to get after filing bankruptcy but not altogether impossible. Making timely payment on installment plans help you rebuild your credit score as well.

  • One should however limit the use of credit cards after going through bankruptcy and should not apply for too many credit cards.

  • Try and don’t miss payments as this can become a major setback in your credit records.

  • However you cannot obtain a home for a while after Bankruptcy. It is recommendable to wait for at least 5 years before taking up the decision of getting a mortgage because it will take quite a long time to rebuild enough credit score to make sure that your mortgage terms are within your limits.


One should rebuild their credit slowly but steadily. Last but not the least, do not forget of your bankruptcy history even if it is no longer recorded on your credit report but in case you are asked of it while applying for new credit cards you have to answer “yes” as saying otherwise is illegal and considered fraud.

We do more than help provide affordable debt relief – we help you find a better life.

 Call For a FREE CONSULTATION: 1-844-ERASE-BILLS (844-372-7324)Call NOW !!!!!!

Affordable Bankruptcy Lawyer- Detroit’s Premier Bankruptcy Firm Now Open 7 Days A Week to Serve Your Better.

Detroit’s Premier Bankruptcy Firm Now Open 7 Days A Week to Serve Your Better.

Medical Bankruptcy :Could Bankruptcy Eliminates My Medical Bills ?

Could Chapter 7 Bankruptcy Eliminates My Medical Bills ?

The heavy medical cost and less coverage insurance is burning issue in America. The total system unfairly affects the middle class people. The losers are patient’s approx sixty percent. In  US people are facing the burden of  excessive medical bills.

Medical Bankruptcy

Medical Bankruptcy

Types of debt

But there are some ways also to get rid of heavy burden of medical bill. There are two types of chapters for avoiding this problem. One is chapter 7 medical debt and another one is chapter 13 medical debt. Let’s discuss the matter ,

Chapter 7  Medical Debt– This may be a good choice for the persons who don’t earn a lot of money and have little assets or no equity. This is a four to five month process. In this process there are four types of medical debt. Let’s discuss the matter-

  1.   Secured DebtA creditor has a secured debt if he or she has property and can foreclose it if you fail to make your loan payments. This is because the debt is treated to be secured by the property which acts as a collateral. The most common example is mortgage and car loan. Medical debts are normally not secured by any property so they are not considered secured debts.
  2.    Unsecured Debt This type of debt is not secured by a piece of property which is further divided into priority and non priority categories.
  3.    Priority Debt  These types of debt are usually non dischargeable as and paid before most other debt in chapter 7 bankruptcy.Though medical debts are not included in this category.
  4.    Non Priority General Unsecured Debts This type of debt like as unsecured personal loan, credit card and medical debt  are relieved without any  re payment in bankruptcy.

Chapter 13 Medical Debt-It is good plan for those who don’t have any assets and in that case they will have to pay back a portion of the medical debt through the repayment plan and then the rest of the money will be discharged.

Medical Debt Treated in Chapter 7  Bankruptcy &  Solution

So medical debt is treated in chapter 7 bankruptcy as it falls under the category of non priority general unsecured debt in chapter 7 bankruptcies. If you are struggling with heavy medical debt then chapter 7 bankruptcy is the easiest way to get relief from this heavy burden of debt. Your medical debt will not receive priority if the trustee is able to make your payments to creditors and the rest of the money is relieved when you get discharged.

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Bankruptcy Process In Michigan – Get To know The Laws

Residents of Michigan who are facing debt can obtain relief under the federal bankruptcy laws. Chapter 7 and chapter 13 are two main types of bankruptcy outlined by the US code that halt creditors and help you to protect your exempt property.

Bankruptcy lawyer

Michigan Bankruptcy Lawyer

The Federal Bankruptcy Process in Michigan

It is mandatory for all individual debtors to complete a credit counseling course within six months before filing for bankruptcy, and to go through a financial management course within 45 of  filing bankruptcy.

Means Test

If you want to file a bankruptcy under chapter 7 you need to qualify the Michigan “Means Test”. Basically the bankruptcy court will see your average income for 6 months before filing for bankruptcy and compare this income with Michigan median income. If your income is below the median income you are free to choose chapter 7. But if your income is over the median income then you need to complete the means test by calculating your income and expense information and the test will determine if you can fill for chapter 7 or you must file chapter 13.


Initially you need to show your attorney your current income sources, your expenses, debts, property. The other information you need to collect is your major financial transactions for the last 2 yrs, documents for any loan etc. Once you have all this information you should go through Michigan exemptions.


These are the exemptions or the properties you can protect from your creditors and hence you can keep this property with you and you have the option to use the federal exemption also in addition to your Michigan exemptions. Thus through this exemptions you can keep a certain amount of your assets safe with you in bankruptcy. The exemptions work differently on whether you are filing for chapter 7 or chapter 13 bankruptcies. Sometimes it protects the entire value of your asset or sometimes it protects up to a certain dollar amount of an asset. To keep non exempt property, a debtor must generally pay the trustee the value of the non-exempt property.

The amount of property you can exempt depends on which state’s exemption laws are you using. There are also federal non bankruptcy exemptions but you cannot combine federal non bankruptcy with non bankruptcy exemptions.

Filing Forms

Your attorney will fill out the required Bankruptcy forms using the information provided by you. These forms include information regarding where you live, your assets (any property you have such as bank accounts, books, vehicles, etc), your income and expenses, and who you owe money to. At your signing appointment you and your attorney will review these documents to make sure everything is correct, you will sign them, and the attorney will file them with the court.

 Chapter 7 or 13 which one to select :

A repayment plan needs to be submitted if you all filing under chapter 13 bankruptcy. And the plan should be delivered in good faith. Generally these payments will be withdrawn directly from your wages. A bankruptcy judge who will either confirm or deny the repayment plan. If your plan is confirmed the dischargeable debts that you need to pay will be eliminated. Chapter 7 and chapter 13 bankruptcy filing have its own advantages and disadvantages which your attorney will discuss with you.

As soon as you file for bankruptcy an automatic stay goes into effect which prevents creditors from any foreclosure proceedings, garnishments, or filing any lawsuits against you. After filing a trustee will be appointed to you by the court. The trustee will go through all your papers and, in a chapter 13, will ensure that the creditors are paid as much as is fair and can challenge any element of your case. The trustee calls a meeting nearly a month after filing. This meeting – called the 341 Meeting of Creditors – is a short hearing with you, your attorney, and the Trustee. The Trustee makes sure you are who you are, the assets listed are all the assets you have, that your social security number is correct, and that you did sign your bankruptcy papers.

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Stop Creditor Harassment

As soon as you file  your bankruptcy, the automatic stay offers immediate legal protection against creditors.

From the moment you file your bankruptcy, the “automatic stay” goes into effect and immediately stops collection efforts and legal proceedings by the creditors,collection agencies etc.Also, once you hire a law firm/attorney, you should refer your creditors to that attorney/firm. Under the Fair Debt Collection Practices Act, the creditors are not allowed to contact you and they must go through your attorney.This immediately stops those harassing phone calls! Now you are free to reorganise your finances in a chapter 13 bankruptcy or quickly discharge your debts in a chapter 7 bankruptcy without any pressure from your creditors. Your attorney will advice you on which chapter is the most beneficial for you.

It is not actually the attorneys that stop legal actions against you but is, in fact, “The Automatic Stay” protection afforded everyone in bankruptcy under the bankruptcy code that stops all efforts from your creditors.

Automatic stay stops >> Law Suits , Collections and Garnishments


Lawsuits: It is deemed illegal as per “automatic stay” for a creditor to file and pursue a lawsuit and thus make any judgment obtained after your bankruptcy, filing void. If there is a court date and you want it to be stopped immediately, then your attorney can quickly send the creditor a notice of your filing and mostly after this you don’t have to appear in the court.

Collections: Collectors are trained to worry and harass you in order to try and get as much money as early as possible. These collectors will do whatever without worrying and won’t even give it a second thought even if you cannot afford food, shelter and other basic amenities.
Bankruptcy stops all collection calls or letters and stops any action being taken to take your money or property.

Garnishments: The bankruptcy puts a stop on garnishment at any point , if you are worried that you will be garnished in the near future or already being garnished then by filing bankruptcy it will put an immediate stop to any more money being taken from you and in many cases your attorney can even get your money back.

Utility Disconnections: If this is your situation that you are not able to pay your utility bill and the utility bill company is threatening you to that it will disconnect your gas or telephone services immediately then in such a situation filing bankruptcy will stop the disconnection for a minimum of 20 days.

  • Bankruptcy filing immediately stops foreclosure and Repossession
  • Bankruptcy allows you to make your payments over an extended definite period in a bankruptcy payment plan so you can keep your property.
  • A creditor who wants to foreclosure on your home or vehicle after you fill your bankruptcy can no longer do so.
  • The automatic stay stops eviction from your home and gives you great help.
  • Lien Stripping , with the help of this you are allowed not to pay your second or higher mortgage from your home etc

Exceptions to the automatic stay :

The automatic stay does not apply to criminal actions, domestic support obligations such as Divorce or child support. As a result if your wages are being garnished to satisfy domestic support obligations, the garnishment will not stop if you fill bankruptcy.
The Automatic Stay will not stop

  • Domestic violence
  • Child support
  • Divorce
  • Spousal support
  • Criminal actions
  • Traffic Violations