Occasionally, clients will ask me about whether their security clearance is at risk if they file for bankruptcy protection. This came up yesterday when I came across a comment from a reader who expressed real concerns over his fear of losing his clearance if he filed. Why? The simple reason is this: no security clearance = no job. Yet the answer to the question is not an easy one to paint with one large generalized brush. But I’ll do my best.
Archive for the ‘Chapter 7’ Category
Honesty and Bankruptcy, Part III: The Reality Check and the Boy Scout
Monday, November 2nd, 2009
In the last two entries, I shared my observations of honesty and dishonesty in the bankruptcy process. It has been an issue that has been crawling under my skin for many months now. And in this last installment of Honesty and Bankruptcy, I explain why that is.
Honesty and Bankruptcy, Part II: Feeling Dishonest
Sunday, November 1st, 2009
It seems that many people are hypersensitive over H1N1. I was at the market yesterday and an older man sneezed, and by the looks on the faces of those standing around him, you’d have thought someone nearby was pointing and shrieking that he was a leper. Just because someone is sneezing or coughing doesn’t mean they have the swine flu. Just because someone is in bankruptcy or needs bankruptcy protection doesn’t mean they are dishonest. And just because someone feels like they did something dishonest does not mean that they don’t deserve bankruptcy protection. In other words, feeling dishonest is not the same as being dishonest.
Honesty and Bankruptcy, Part I: Day of the Living Dishonest
Saturday, October 31st, 2009
When rapper Chris Brown beat up his then girlfriend Rhianna, there was an odd reaction from much of Hollywood. As Adam Carolla and Dr. Drew were recently discussing on Carolla’s podcast, Hollywood’s reaction – especially at red carpet events – seemed less than honest and at times downright pathetic. Some were praising Brown for being a “good person” who was going through a difficult time. But only a few stood forward and publicly denounced Chris Brown as a pathetic loser who viciously assaulted his girlfriend… something no one can legitimately justify. The podcast echoed in my mind this week when I was faced with a debtor who was – to put it mildly – outrageously dishonest. So much so that I was forced to look this person in the eye and say “you know, you’re not coming across as an honest but unfortunate person entitled to bankruptcy protection.” I thought I was being polite. Their response left me thinking even more.
I cannot share the details. Instead, let me share this clever allegory that I believe aptly illustrates exactly how things went in my meeting with this debtor.
When You Discover that You Are a Creditor in a Bankruptcy Case…
Monday, October 12th, 2009
Last week, I was in the clerk’s office and overheard two people ask the clerk which forms needed to be filed in a bankruptcy case. But this person was not a debtor – they were a creditor. Their landlord had filed bankruptcy. The former tenant was looking for their security deposit back, and was going to sue the debtor in small claims. I couldn’t help myself – and I butted in.
“You need relief from the automatic stay.”
“The stay applies even to me?” one asked.
“It applies to everyone.”
After that short exchange, I thought I would put together a short checklist of things to do when your landlord – or someone else you know who also happens to owe you money – files a petition seeking bankruptcy protection.
Social Networking Sites and Bankruptcy: The Intersection is Dead Ahead
Wednesday, September 30th, 2009
There are a growing number of social networking sites out there on the world-wide-interwebs that people are latching onto. In fact, both the firm and I have latched onto Facebook (we just lauched our Fan page this week!). So I was intrigued after recently reading that a growing number of domestic relations attorneys were beginning to scour sites like Facebook in an effort to get information on opposing parties. At first, I found it merely interesting as I once practiced domestic relations law. But the subject gnawed on me for several days. Then, earlier this week, I read that collection agencies are trolling sites like Facebook looking for debtors. Then it dawned on me: if collectors are doing it, and divorce attorneys are doing it, there really is nothing stopping any party in any legal case from looking into Facebook or other social networking sites in an effort to gain a legal advantage of any opposing party. And this rings true in the world of bankruptcy.
Unintended Consequences in Estate Planning
Wednesday, July 29th, 2009
Remember yesterday when I discussed talking to your parents about their debt? I think it’s important for families to start talking. I also think it may be important for parents to speak to their adult children about debt, especially when you hear what happened to a client of mine.
My client did not know that his parents had gone to an estate planning attorney. The parents created a life estate in their home, leaving a remainder interest to their adult children. The life estate gives the parents the right to live in their home until they die, and then upon their death, the home will pass to the children without having to go through probate. The children have what is called a remainder interest. They do not have the home, but they have a future interest in the home.
This nifty estate planning tool created havoc when one of the parents’ children (my client) filed for chapter 7 bankruptcy protection. In chapter 7, the unexempt assets of the debtor are sold to pay creditors. The debtor did not list the asset because he did not know he had an interest in his parent’s home (neither he nor his then attorney asked). Since it was not known, it was not listed, and since it was not listed, the debtor did not claim it as exempt from liquidation.
The chapter 7 trustee learned about the interest presumably by scouring public records. When the trustee got wind of the future interest, he asked the court for permission to sell the interest to the highest bidder. The Bankruptcy Code allows the trustee too sell the debtor’s interest in the property: something the parents did not plan for when they were putting together their estate plan and trying to preserve their home for all of their children.
I will relay how this saga ended another time. For now, I will say that it ended up costing the debtor a lot of money, and causing the entire family anxiety that they did not need. If the debtor had told his parents that he was in debt and needed to file bankruptcy, there still would have been issues to resolve. However, both the debtor and his parents could have been proactive instead of being reactive. Rather than reacting to the trustee’s attempts to seek an order of sale, they could have taken some time to think through other options before starting the bankruptcy process. These folks never got to that point because no one in the family really talked to each other about what was going on. The parents did not mention the estate plan, and the debtor did not mention the bankruptcy, or the reasons why bankruptcy protection was needed.
It’s hard for adult parents to admit to their kids that they have financial problems, and for very different reasons, it’s hard for adult kids to have to admit it to their parents. But actions have consequences. And as this debtor, his siblings and his elderly parents learned, not talking about it can also have unintended consequences. Be proactive, and don’t let this happen to you, your kids, or your parents. Start talking.
Thinking About a Consult?
Tuesday, July 21st, 2009
Today, as I found myself on the phone repeating myself – a lot. It then occurred to me that I could probably explain how our consult process works here on the website. In other words, how do you get from reading this website and digesting the information to getting some face-time with a lawyer (i.e., me).
Here’s how.
The Sunday News
Sunday, June 14th, 2009
A fellow bankruptcy attorney shared this article that appeared in last month’s New York Times Magazine. I see in it some of the same difficulties I see in clients. It also makes me question how “half-empty” the glass really is. Although in the interest of full disclosure, the writer has a book coming out. In other news…
ONE FLAG! Six Flags Amusement Parks files for Chapter 11 protection.
Nashua NH Telegraph: Welcome to the New Consumer Economy.
Boston Herald: Consumer spending may never be the same as it was.
South Coast: Home values could take years to recover. We also could be hitting bottom (I’m not being sarcastic, it says the market “could be a reading a valley”). I could also be a ledge (ok, that was sarcastic).
Nantucket foreclosures. I wonder if these homeowners claim their loan was predatory? I also have to question whether it was.
A bad apple is removed from the barrel: Brockton lawyer settles fraud suit with the Massachusetts Attorney General’s office.
The Elephant in the Room: Married Same-Sex Debtors
The decision to seek bankruptcy protection is never easy, and when two people are involved, it is not necessarily easier. Married opposite-sex debtors have the option of seeking bankruptcy protection jointly in one case. But as a growing handful of states recognize same-sex marriages or its legal equivalent (“unions”), and as the legitimacy and constitutionality of the Defense of Marriage Act (or DOMA) continues to be litigated in courts across the country, same-sex debtors seeking bankruptcy relief face even tougher decisions.
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Tags: Commentary - Legal, Consumer Rights, Defense of Marriage Act (DOMA), Joint Debtors
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