Northern California Bankruptcy Lawyer

On The Bankruptcy Soapbox

The Soap Box

File bankruptcy tomorrow?

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It’s happened again: there’s an email in Monday morning’s inbox from a client whom I first met weeks ago.

He tells me they want to file before Wednesday’s mediation in state court!

I have no creditor information, representation agreement, money, or credit counseling certificate.

Just as inconvenient, I’m not sure I have staff who can drop everything (related to clients who planned ahead and played by our rules) to make this happen.

Clearly I’m not communicating to clients what is involved in getting even a skeleton petition on file.  

What’s required to file bankruptcy

Lots of clients seem to think that I may be able to file the petition without any involvement on their part beyond providing the decision to file and money.

Wrong.

The bankruptcy paperwork is filed with both the client’s signature and my signature We are both attesting to the accuracy of the information and the debtor’s eligibility for bankruptcy relief.

What your signature means on bankruptcy schedules

The full filing is even more information intense: budgets looking forward and backward; recent financial history; intentions with respect to secured debts. All of it is doable, just not with a snap of the fingers.

More on bankruptcy schedules

Got to go: got a skeleton to assemble before Wednesday.

Image courtesy of Jonathan Bliss and Flickr.

The Means Test: Badly Mangled

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Another purported financial professional has confidently and conclusively gotten the bankruptcy means test absolutely dead wrong.

And used that wrong conclusion to steer someone away from bankruptcy.

Mt. St. Helens has nothing on me in terms of venting.

How can financial professionals get this so wrong, more than a decade after the means test was enacted?

Mangling the law

It started off innocently enough when a reader asked financial columnist Jane McNamara on FoxBusiness about the impact of settling an old debt  versus filing bankruptcy.

She noted the possible tax consequences of a settlement and asked whether the money was really available to fund the settlement.

So far, so good.

But then she blew it, big time.

To qualify for a Chapter 7 filing in most cases your income must be lower than the median income for your state

Wrong, wrong, wrong.

An income over the median income for your state just means you have to complete the means test.  It’s largely another form requiring more figures about your income and your projected expenses.

The means test is another hoop to jump through.  It is not a barricade.

The vast majority of above median income debtors pass the means test and successfully file Chapter 7.

In my view, this misstatement is unforgivable.  If you hold yourself out to offer financial advice, you at least should have mastered the basics.

Then you wonder about the independence of the piece when you note a connection to creditcards.com. Who benefits if cardholders don’t file bankruptcy? Card issuers.

Bankruptcy means test in the real world

The man in my office recently made me worry about the means test.

Because passing the means test often relies on deducting certain living expenses from their income such as payments on back taxes and secured debts, this man appeared exposed.

His car was paid for, he had no dependents, he rented, paid his taxes, and had no toys bought on credit.  All of the usual deductions that get people with high incomes through the means test and into bankruptcy were missing.

But it didn’t matter.

Even with an annual income of $7000 above the median California income for a single person, he qualified for Chapter 7, just based on the standard expense allowances provided for in the means test.  In fact, he qualified with $650 a month cushion.

The means test wasn’t even close to knocking him out of bankruptcy.

He’s living proof that McNamara’s statement that you have to have a below median income to file bankruptcy is just plain wrong.

Just because someone wrote it

The internet is marvelous for making information easily available.  But just because it’s in print, it isn’t necessarily correct.

Unfortunately, lots of people will read the FoxBusiness article and conclude that they aren’t eligible for bankruptcy.

They’ll struggle on unnecessarily at financial and personal cost because some writer got it wrong, and they believed.

You can read more about how the means test in bankruptcy really works here:

Image courtesy of Wikimedia and USGS

How A Careless Bankruptcy Can Bite Your Family

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Your bankruptcy can affect your family even though they haven’t filed bankruptcy.

Transfer assets or repay debts , and you can expose family to attack by the bankruptcy trustee.

Even if not fatal, the trustee’s bite can  leave scars.

How family gets sucked in

I sat waiting for my turn at a bankruptcy hearing last week and watched a series of other cases that left blood in the water.

The trustee’s feeding frenzy in at least three cases centered on payments or transfers the debtor  made to family before they filed their bankruptcy case.

In some cases, the debtor was repaying money lent by family.  In others, it appeared the debtor had simply made a gift to family.

In the worst case, it looked like the debtor had transferred a car to keep it out of the bankruptcy.

All of those transfers spelled trouble.

In each case I watched, the Chapter 7 trustee continued the hearing for the production of documents, the amendment of schedules, or further questioning.

In several, she wanted the debtor to agree to give her a longer period to challenge their very right to a bankruptcy discharge.

None of this bodes well for the debtor.

Here’s why.

The long arm of bankruptcy law

Bankruptcy law gives the trustee legal rights to recover, for the benefit of creditors, property or money the debtor has transferred.  Collectively, those are the avoiding powers.

Payments on existing debts to ordinary creditors can be recovered from the creditor where the payment was within 90 days of the bankruptcy filing.

If the  payment  was to a family member.  the look back period is  four times as long:  a full year.

So, if you paid on that loan from your sibling or your parent in the year before you file a Chapter 7, the trustee can sue your family member to get the money back.

Why preferences matter

Most people find it hard to understand why payments on genuine debts can trigger trustee lawsuits to retrieve the money.  The debt is real, they say.

It’s not wrong to have paid a real debt.  The idea is fairness among creditors, looking out for the creditors who didn’t get paid back before filing.

It’s also to take the profit, if you wish, out of aggressive collection tactics by some creditors:  no point in levying the debtor’s account if it triggers a bankruptcy filing and a lawsuit to get the money back.

Gifts are worse

In legal speak, a gift is a fraudulent transfer.  The person making the gift didn’t get anything in exchange.

The gift leaves him poorer than he was before.

That’s fine if you have enough remaining to pay your creditors, but not so if the gift damages your creditors.

When the debtor starts giving significant stuff away to family, his later bankruptcy sets those family members up for a lawsuit.

Now, I’ve never seen a bankruptcy trustee try to unwind ordinary birthday gifts or the like.

But start giving away cars, businesses, or houses and things change.  And in California, the look back period for recovering those gifts is four years.

We take care of family

Our desire to take care of those close to us is natural and admirable.

When you’re considering bankruptcy, however,  you need to stifle those caring impulses til after the bankruptcy.

After the bankruptcy, you are free to repay any creditor you wish to.  You can take care of those who took care of you when you needed it without any negative consequences.

Assuming the discharge wiped out all your debts, you can give anything you have away, since no creditor is harmed.

Tell the whole story

As I sat there, I wondered whether each of those debtors in the hot seat had told the whole story to their attorney.

Did the bankruptcy papers they filed reveal these transfers, or had the trustee found out some other way?

The problem even a good bankruptcy lawyer can’t fix

If the debtors didn’t take full disclosure seriously, they brought trouble on themselves.  Even if the trustee doesn’t sue their family, they may not get a discharge because they concealed the transfer.

The bankruptcy papers you file to start a case ask all the pertinent questions about transfers and payments.  If it was debtor carelessness or deceit that kept the truth out of the record, then I have little sympathy for the debtors.

If, however, the problem was created by lousy lawyering, then I watched  innocent debtors pay the price.

Lousy lawyering takes several forms,

  • failure to counsel the client fully about the need to be transparent
  • failure to insist on full answers to questions
  • failure to recognize avoidable transfers
  • failure to consider Chapter 13 where family isn’t exposed to suit

This day in court was unusual:  most 341 meetings are dull as dishwater.

But anyone watching this collection of troubled cases was reminded about the benefits of good representation and the importance of telling the whole story.

More

Questions to ask a bankruptcy lawyer before you sign up

Rules for testifying when you go to bankruptcy court

Bankruptcy not a do-it-yourself project

When bankruptcy blesses your family

What’s Included In Bankruptcy?

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included in bankruptcy

People ask, all the time, what’s included in bankruptcy?

What do I list in my bankruptcy paperwork?

Think of it like this: bankruptcy is a snapshot of your situation on the day the bankruptcy case is filed.

Maybe, you think of your bankruptcy like the Clampett’s Buick,  arriving in Beverly Hills, crating all their stuff.

For bankruptcy purposes, your case includes your financial “stuff”,  debts and  assets.

  • The debts that are included in the case are those existing on the day you file.
  • The assets that are included are the things you owned when you filed bankruptcy.

Bankruptcy doesn’t include

The bankruptcy filing draws a line between your pre bankrutpcy life and your life after bankruptcy.

With a couple of exceptions, whatever you earn after the date you file bankruptcy is not included in your bankruptcy.

Likewise, if you cause an accident or incur a debt after your case is begun, those debts will not be discharged in your bankruptcy case.  They weren’t in the snapshot of your situation when you filed your case.

The exceptions

The Bankruptcy Code has three exceptions to the rule that the bankruptcy estate is made up of what you owned when you filed.

They are

  • Assets acquired by inheritance, bequest or devise
  • Life insurance proceeds by reason of someone’s death
  • Assets acquired by a marital property settlement or judgment

If you acquire the right to any of these kinds of assets within 6 months of the commencement of the case, they are treated as if you had them when your case began.  The debtor has an obligation to report such acquisitions to the trustee.

Creditors not debt balances

Bankruptcy acts on the debtor/creditor relationship.  That’s why listing all those who have claims against you is so important in getting your bankruptcy schedules right.

It isn’t generally important to list exactly what you owe a creditor in your schedules.  The bankruptcy discharge will wipe out whatever it is you owe on a dischargeable debt.

Remember, you can list and discharge debts where you dispute your liability, so long as you give the creditor notice of your case.

Chapter  13

If your bankruptcy case is a Chapter 13, the rules are a lot less clear.

One part of the law says the rights of creditors to repayment are determined by the property you have at filing; another part of the bankruptcy code says that your earning during the case are property of the estate.

While lawyers can spend lots of time parsing the law, for the debtor in 13, the rule that is clear is that dramatic changes in your income may trigger a change to your plan payments.

Elusive assets

The biggest trouble debtors have in listing their assets in the bankruptcy schedules involves intangible assets, like the right to sue for an accident that has already happened, or a claim in a class action.

Tragic consequences of filing bankruptcy without listing her mother’s house

Even though it’s not known at filing whether you will win such a claim, and if you win, how much you will get, the claim is still an asset you own.  It has to be listed or you may lose it because you didn’t disclose it.

New day

So your fresh start really begins on the day you file your bankruptcy, not when you get the discharge.  Every dollar you now earn is yours.

More

If you miss a creditor

How to review your bankruptcy papers

Debts that survive your bankruptcy

Image courtesy of prewarbuick.com.

The Zero Interest Get-Out-Of-Debt Tool: Bankruptcy For The Solvent

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chapter 13 rescue

Once again, Chapter 13 rescued a client.

He’ll get out of debt and pay off credit cards with no interest going forward.

So many people tell me they could pay off the credit card balance if it wasn’t for the high interest.

This client owned a home, had a job, and was solvent on paper, but he couldn’t sleep for worry about his debts.

Despite having lots of equity in a house, there wasn’t not enough income to retire the debt when the mortgage resets in the spring.

Chapter 7 would get rid of the debt, but cost him his house.

Thank goodness for Chapter 13, where you

  • keep your assets,
  • propose a plan, and
  • get a discharge.

Chapter 13 gets my client out from under credit cards with ruinous interest rates, reduces the interest rate on his high interest car loan, and lets him sleep at night knowing he won’t lose his house to unsecured creditors.

A pretty good deal for a $310 filing fee.

Interest free debt repayment

The good news is that the equity in his house requires that his Chapter 13 plan pay his debts in full. But, “in full” does not mean “with the usual credit card interest”.

Pay off the cards in full in Chapter 13 and you pay only the federal judgment rate.  Currently , that’s little more than  one half of one percent, instead of 18-34% due under the credit card agreements.

To pay off the cards according to their terms outside of bankruptcy, most of each payment for a long while goes to interest.  That’s why credit card issuers are content to have you carry a balance.

For this client, we figure that a 100% repayment plan for the cards and the tax debt will require a payment about 1/3 of what he currently pays each month on the cards.

No need to be broke to file bankruptcy

This client looks good on paper.  He’s solvent due to lots of equity in his house.   He’s current on his bills.

He just sees the freight train coming down the tracks when he reaches the end of the interest-only feature on his home equity loan.

You don’t have to be upside down, financially, to file bankruptcy.  You only need to be willing to play by the rules of the Bankruptcy Code for dealing with your creditors.

The applicable rule for this client says:  if you keep your house with that much equity, you must pay the creditors in full.

Bankruptcy won’t change the terms of his home loan, it will just spread out and pay off the other debts that have a claim on his monthly income.

And, he can stop underwithholding on his taxes.  He had increased his exemptions to get more cash monthly, leaving him owing taxes at the end of the year.

Part of our plan is making the withholding match the taxes owed, so we don’t have a recurring tax problem.

13 was my client’s lucky number.

More

Why I love Chapter 13

Update on California homestead

Getting Excused From Bankruptcy’s Means Test

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rp_800px-Chihuahua_portrait-300x225.jpgYou can get a pass on the means test without claiming your dog ate your homework. 

If your debt is not “primarily consumer debt”,  you don’t have to pass the means test to file bankruptcy.

So, you need to total up the consumer debt you have and compare it to the rest of your debts.

Don’t miss the fact that tort claims aren’t  “consumer debts” under the means test.

So if tort judgments or even unliquidated tort claims total more than your consumer debt, you don’t have to take the means test.

Check the box, and come on in and file the bankruptcy chapter of your choice.

Tort explained

Let’s start by defining a “tort”.  A tort is a civil wrong, other than a breach of contract, that causes injury or damage to another without excuse.

Automobile accidents make up the largest group of torts.  The law requires everyone to conduct themselves so that others are not hurt.  One who negligently fails to use appropriate care such that someone else is hurt has committed a tort.

Whereas people choose to enter into contracts, and the contract can specify the remedy if one breaches the contract, tort liability is imposed by law.

It is that imposition of liability that courts have looked to in finding that tort damages are not consumer debts for the purposes of bankruptcy law.

Means test controls access to bankruptcy

Virtually everyone who comes into my office has heard about, and obsesses over, the means test.

Often they assume that merely making more than the median income disqualifies them from bankruptcy relief.

Cheat sheet to pass the means test

I remind even bankruptcy lawyers that debt incurred for business or investment purposes and tax debt is not “consumer debt”.  If non-consumer debt predominates,  the means test does not apply.

Now, the logic of giving a pass in bankruptcy to those who don’t pay their taxes eludes me, but that’s Congress for you.

Not consumer debt

But there is a little discussed additional category of debt that is not debt “incurred for personal, family or household” purposes (§ 101(8)) :  tort claims.  The reported cases hold that these sorts of debts aren’t incurred in the manner of contract debts like credit cards and medical bills.

The client in my office had no contractual debt, other than a tiny student loan.  But the pending lawsuit accused him of harboring a dangerous dog.

Now mind you, the dog didn’t weigh 5 pounds and the wound it inflicted was objectively insignificant.  The suit, nonetheless, was expensive to defend, stressful, and could blight an otherwise sound financial life.

The bankruptcy case became just that much simpler  when I recognized that we could bypass the means test.

Tort claims aren’t consumer debts; since the dog bite claim dominated the client’s list of debts, it became irrelevant how much money the client made.

The best way to ace the means test is to avoid it altogether.

More

Even High Income Families Pass The Means Test

The Problem Even A Good Bankruptcy Lawyer Can’t Fix

Discharging Taxes In Bankruptcy

Image courtesy of Wikimedia Commons.

How To Wipe Out Tax Penalties In Bankruptcy

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217/365 August 5 - Found MoneyTax penalties seem like a further insult when you’re having trouble paying the tax itself.

Everything seems subject to an additional penalty:  failure to file timely;  failure to pre pay sufficiently;  failure to be accurate.

They mount up quickly, often equaling the unpaid tax.

Bankruptcy can not only eliminate your liability for certain taxes, it can wipe out the tax penalties as well.

Here’s how it works.

Three rules for discharging tax penalties

Penalties for dischargeable taxes are dischargeable

Tax penalties are tied to a particular tax year.  If the tax for that year is dischargeable in bankruptcy, the discharge wipes out the penalties too.

The formula for a dischargeable tax, roughly speaking, says you can get rid of an unsecured tax if  1) the return for that year was due more than three years before the bankruptcy was filed;  2) if the return wasn’t filed on time, it’s been on file for at least two years; and 3) the tax for that year was assessed at least 240 days before bankruptcy.

Discharge the tax, discharge the penalty.

Penalties tied to events more than three years before filing are dischargeable

If the failure that triggered the penalty happened more than three years before filing, the penalty is dischargeable.

It’s dischargeable even if the the tax for that year isn’t dischargeable, for instance, because the returns weren’t filed on time. see 11 U.S.C. 523(a)(7).

All tax penalties wiped out in Chapter 13

That’s right:  all tax penalties are discharged by a Chapter 13 discharge.  Hard to beat, right?

Chapter 13 requires that you pay in full the priority taxes and the interest that accrued up to the date the bankruptcy case was filed.  But at the end of the case, all tax penalties are wiped out, even on the priority taxes.  More on taxes in Chapter 13.

Fraught with rules

So much of discharging taxes depends on knowing the maze of rules that apply to taxes in bankruptcy.  It’s critical to get a tax transcript to verify the dates of all the important transactions.

Get experienced legal help if you want to discharge taxes and tax penalties.  This is not the time or place for the cheapest or closest bankruptcy lawyer in town.

Image courtesy Flickr and Sharon Drummond

When Can I File Bankruptcy Again

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calendarYou can file bankruptcy tomorrow, so long as you don’t currently have a bankruptcy case pending.

When you can get a discharge in that case is a different story.

The Bankruptcy Code limits the frequency of getting a discharge, not the filing and completion of the bankruptcy case.

My friend Gene Melchionne wrote a marvelous piece about the timing of the bankruptcy discharge that conjures up the old high school cheer:  2, 4, 6, 8, who do we appreciate.

The waiting period between cases, if you want a discharge, can be 2 years, 4 years, 6 years or 8 years, depending on what kind of case you filed before and what kind of case you want to file now.

You count those years from the filing of the first case to the filing of the second case.

But, contrary to the usual thinking, the discharge isn’t everything.

Sounds like heresy from a bankruptcy lawyer, doesn’t it,  but let me tell you a couple of stories.

The no discharge Chapter 7

My client had a house with equity, a recent bankruptcy discharge, and a criminal conviction that had him heading to prison, soon.

He faced a future with no income and no way to pay the mortgage.  And at the point he didn’t live in the property, his right to claim a California homestead in the property was in doubt.

But the recent bankruptcy case meant he couldn’t get a discharge in a new Chapter 7 case; and prison wages were not going to support a Chapter 13.

But what we wanted was the automatic stay, the sale of the house, and the homestead paid to the client.

The balance of the equity was beyond saving, on these facts.  We were content to have the balance go to pay toward the restitution judgment.

So, we filed a Chapter 7.  The fact that my client wasn’t eligible for a discharge wasn’t important .  What we needed was a sale managed by the trustee while my client was behind bars and the homestead carved out and paid to the debtor.

No discharge Chapter 13

Much more common than prison-bound debtors are no-discharge Chapter 13 cases.  When they follow hard on a Chapter 7, we sometimes call them Chapter 20 cases:  7 + 13=20.

After BAPCPA’s changes to the bankruptcy code in 2005, the four year rule applies to getting a Chapter 13 discharge after a Chapter 7.  There must be four years between the filing of the 7 and the filing of the 13 in order to get a discharge of your debts in the Chapter 13.

But the discharge isn’t everything.

Pay debts that survived

Often what you need in a Chapter 20 is the automatic stay and time to pay debts that didn’t get discharged in the Chapter 7.  Those debts might be priority taxes, back family support, or even student loans.

It is the payment plan and the predictability that you need, not necessarily the discharge.

Catch up mortgage

Chapter 13 works to give you time and protection to bring a mortgage current.  Because the mortgage is a lien and wasn’t wiped out in the Chapter 7,  failure to get right with the lender will lead to foreclosure.

Liens that survive the discharge

File a Chapter 13, and you’ve got time to get current.

Strip off the worthless lien

While you can’t strip off liens in Chapter 7 unless they impair an exemption, in Chapter 13 you can void an utterly underwater mortgage AND  strip or bifurcate a tax lien.

Two recent 9th Circuit decisions make it clear that it is completion of the Chapter 13 plan, not the discharge, that entitles you to strip a lien, and that the balance on a lien that survived the Chapter 7 doesn’t count for the Chapter 13 debt limits.

When can you file

So, like lots of legal questions, it depends.  It depends on whether you can achieve your goal without getting a discharge.

More

When another bankruptcy case doesn’t protect you

Steps before you meet a bankruptcy lawyer

Why I love Chapter 13

Image courtesy of Flickr and Hichako.

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Chapter 13 Keeps You In Control

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steering your financial course

You can’t decide between bankruptcy chapters until you really understand how Chapter 13 works to keep you in control.  

Control of your assets, control of your payment plan, control of who gets paid.

You want to be at the helm of your case.  Chapter 13 can do that.

Chapter 13 works to protect more than assets

Chapter 13 bankruptcy is about protecting assets, I read somewhere on the internet.

That sells Chapter 13 short by half in my view.

It’s not just about assets.

Many of my Chapter 13 clients have no meaningful assets to protect.  Assets to protect isn’t what made 13 right for them.

It’s that Chapter 13 kept them in control.

  • Control of creditor interaction.
  • Control of income.
  • Control of whether to stay in bankruptcy

In the face of a creditor who is entitled to levy, garnish, and harass, Chapter 13 lets the debtor-client stay at the helm of their financial life.

You call the shots

The basic difference between Chapter 7 and Chapter 13 is the role of the bankruptcy trustee.  In 7, the trustee may take possession of your non-exempt assets to sell for benefit of creditors.

A Chapter 7 trustee is entitled to sue people you’ve paid off just before bankruptcy and to assert his own view of the value of your assets.  Chapter 7 can be uncomfortable and risky.

In 13, you commit to a payment plan that gives creditors at least what they would have gotten if a Chapter 7 trustee scooped up your stuff, sued your family members, and otherwise wreaked havoc in your life.

How a Chapter 13 plan is calculated

You stay in possession of your assets and in control of your income.

You write the plan that says how much you pay into your plan a month, within the requirements of the law.  The Chapter 13 trustee just cashes your check, and pays creditors as the plan directs.

The automatic stay prevents the continuation of litigation or collection action outside the court.

You’ve rounded up all the folks to whom you owe money and corralled them in the bankruptcy court, where the bankruptcy rules apply.

You’re on your way to getting control of the situation.

Even judgment creditors bound

The appeal of Chapter 13 for several of my recent clients involves the way Chapter 13 limits how much of their income going forward is exposed to judgment creditors.

Outside of bankruptcy, a creditor with a California judgment can reach 25% of a person’s after-tax paycheck.  I don’t know many individuals who can meet their other financial obligations with only 75% of their paycheck.

Sure, you can argue that you can’t live on 75%, but you have to work through the state courts to reduce the amount a judgment creditor can get.

In Chapter 13, the means test, which I usually detest, saves the day.  It has a formula for calculating what is genuinely available to pay run-of-the-mill creditors.

That’s creditors as a whole.

Lumped together, creditors share their slice of the available pie.

General unsecured creditors in Chapter 13, under the means test, get what’s left after:

  • Rent or mortgage payments
  • Car payments
  • Health care
  • Child care
  • Delinquent taxes
  • Support of dependent elders

I don’t think I’ve ever seen a Chapter 13 payment to general unsecured creditors that equaled 25% of my client’s after tax income.

So in addition to simplifying the process of how much a legitimate creditor gets, almost invariably, Chapter 13 reduces the absolute amount that the creditors get.

And the Chapter 13 debtor is assured of having control of his paycheck so his current living expenses are met.

Note that this analysis applies even to debts like student loans:  while the student loan may survive the Chapter 13 discharge, the amount paid out on the loan is limited by the means test and the claims of other creditors.

Time is on your side

Chapter 13 has a maximum length of 5 years.  The life of a judgment is generally far longer.  A California judgment is good for 10 years, and can be renewed for another 10.

So a Chapter 13 plan can halve the length of time your earnings are exposed to your creditor.

It may not be pleasant to be in bankruptcy for 5 years, but it shortens duration of the pain considerably.

Another time-related benefit of 13 is the durability of the Chapter 13 plan.   Plan terms are worked out and approved by the court at the beginning of the case.  Absent a marked improvement in your ability to pay creditors, the plan controls.

Chapter 13 has none of the periodic  judgment-debtor examinations that are features of state law.  Your time commitment to managing old debts is limited.

Chapter 13 keeps you in control

So, Chapter 13 isn’t just about protecting assets.  If you have a paycheck, or a small business, and have creditors you can’t pay, Chapter 13 works to let you to chart a course out of debt, on your terms.

Image courtesy of Terence Faircloth under a Creative Commons license.

How Long Does Bankruptcy Take?

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Every client filing bankruptcy asks that question: how long will bankruptcy take?

Probably, the real question is “when will this be over?”

Like so many questions in the law, the answer is “it depends.”

From filing bankruptcy to discharge

In a Chapter 7, filing to discharge is about four months;  in Chapter 13 it’s three to five years.

But, too often, the real gating issue is getting ready to file.  

How long will it take you to get your attorney all the needed information.

And that’s a timeline that you, the client, control.

The source of delay

The real slow-down in most cases is getting the raw information to us.

Cases stall when the client

  • fills out as much of our questionnaire as they find convenient;
  • provides most of the paystubs;
  • promises the tax return; and
  • has to search for information on the insurance policy.

We hustle to get the schedules done, and the client then doesn’t have all the necessary funds to finish paying us.

After the case is filed

Once filed, a Chapter 7 marches fairly predictably to discharge.  Most cases get a discharge in 3-4 months.

The debtor’s obligations after filing are few:  show up at the 341 meeting, and complete the post bankruptcy education class.

Chapter 13 is different:  13 is a payment plan stretching over 3-5 years.  The discharge comes when the plan payments are complete.

But in most districts, Chapter 13 debtors have few action items:  make the payments to the trustee, provide requested updated information, and take the debtor education class.

What if I can’t make the plan payments

But back to the original question:  how long does bankruptcy take?

The time required for the debtor to empower the attorney with a full deck of cards is unknowable, to the attorney, and is within the control of the client.

It seems to depend on how committed the debtor is to get out from under the financial problem.

More

Understanding your bankruptcy schedules

Interviewing a bankruptcy lawyer

After your case is filed

Image courtesy of Pixabay.

 

643 Bair Island Road
Suite 403
Redwood City, CA 94063
Phone: (650) 694-4700

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