I was recently retained by a client who – like many people struggling nowadays – tried to tackle their mounting financial problems by going to a debt settlement company. I’ve said it once, and I’ll say it again: debt settlement companies are a rip-off. The proof is in how empty my client’s wallet is now, and where my client is now.
Posts Tagged ‘Chapter 7’
Debt: The Prices You Pay
Wednesday, August 4th, 2010
Some espouse the belief that if you’re up to your eyeballs in debt, it’s better to eat beans and rice for weeks, months and years until the debt is paid. I won’t mention names. This isn’t about them. While it’s pretty indefensible to live a lifestyle you cannot afford at the expense of creditors, it’s even worse to lead a lifestyle that can be downright counterproductive and harmful when you’re trying to pay your creditors. There’s being “super frugal” and then there is being “stupid frugal.” So today, I want to cover a few things I’ve noticed people doing while they are trying to pay down their debt. I sharing my observations, but I think it’s good if you consider it food for thought.
Do It Yourself Chapter 13: The Road To Failure
Wednesday, June 2nd, 2010
Through Twitter, I came across this article “How to File Chapter 13 Bankruptcy Without a Lawyer.” Since I wrote a book about chapter 13 – where I emphasize the need for competent representation – and, since I am also a lawyer, the title alone intrigued me. So I clicked and read the article. Then, I got steamed because not only was the article excruciatingly inaccurate, in some instances it was flat out wrong. So, I’ve copied and pasted each of the “9 Steps,” and offered my response and I grade each answer.
Wondering What a Bankruptcy Attorney Really Does?
Sunday, June 21st, 2009
Thursday I was in Bankruptcy Court waiting for my client’s case to be called. Before the judge took the bench, a gentleman sat behind me and tapped me on the shoulder.
“You a bankruptcy lawyer?” he asked.
“I am.”
“How easy is it for me to convert my case from Chapter 13 to Chapter 7?”
I asked if he had an attorney, and he replied that he did not. He was representing himself (which is not a good idea in Chapter 13, by the way… I’ll talk about that another day).
I told him that the Bankruptcy Court had a Pro Se Law Clerk and that he should direct his questions to the law clerk, who can then either answer the question or direct him to a resource that can.
“Oh, I see,” he replied. “You want to get paid, huh?.”
Imagine if you were walking down the street and you saw a person who you knew to be a dentist. Would you go up to him or her, peel back your lips to show a molar and ask “excuse me, but do know how easy it would be to but a cap on this? Or a porcelain veneer?” No respectable dentist would give you an answer. In fact, some might flee. A disreputable dentist might say “it will be very easy, here’s my card, let’s make an appointment, and be sure to bring your insurance card or check book.”
As I said, while I sort of felt a bit insulted, that feeling was quickly quelled with the realization that this pro se debtor had no clue what it was I did, and why I could not answer his question. So I told him:
“Actually, the reason why I cannot answer your question is because I do not know anything about your case, or about your circumstances. I cannot begin to think about the your question and give you any answer you can rely on unless I do that. Right now, I cannot. The Pro Se Law Clerk however, can.”
The debtor thanked me, and left the courtroom. I do hope that he paid a visit to the Pro Se Law Clerk, and I do hope he got some better direction than I could have given him.
This all got me thinking: there are some people who believe that you don’t need a bankruptcy lawyer to get through the process. There are also some people who believe that lawyers are only out to get paid, and don’t do anything but fill out forms and, on occasion, dress nicely. There’s an assumption that I am a walking fount of information, and the only thing preventing me from sharing it is getting paid.
All of those assumptions make me feel dirty.
All of those assumptions are also completely unfounded.
There’s no way I could have answered this debtor’s question accurately. I could have said “when the judge takes the bench, ask her to convert your case.” That answer would have been the equivalent of the dentist saying “sure, make sure you use good glue and don’t drink hot liquids for 24 hours.”
But I had not reviewed the petition and schedules. I don’t know what the exemptions are, and what issues might arise in a 7 that might not otherwise arise in 13. I don’t know why the debtor is changing course and whether that might open up a whole host of issues. I also don’t know whether the judge – who I bet knows the history of the case and why it’s on the docket that day – doesn’t have some assumptions or questions about the case. In other words, I don’t know a lot. I do know the law.
Yet merely knowing the law is not enough for me to do my job. A good lawyer takes the facts of the client’s case, applies it to the law, and then proceeds while mindful of the client’s goals. A good lawyer is not merely a resource of legal information available to answer questions at the drop of a hat knowing that people will rely on those answer and make important decisions with significant legal consequences. My job requires thought and analysis.
And on a good day, that actually is what I get paid for. Keep this in mind if you’re thinking about filing bankruptcy with or without a bankruptcy attorney.
The Handwriting on the Wall
Saturday, June 13th, 2009
Over the last two years or so, I’ve seen a particularly troubling trend with homeowners seeking bankruptcy protection. It is making bankruptcies unnecessarily complicated and expensive. It also puts them at a greater risk of failing – at least once (which at the very least, makes it more expensive). It’s the trend for them to wait until the very last minute to actually consider bankruptcy as an option. This is a bad, bad idea.
Years ago, I would hear from callers who had oppressive credit card debt, medical bills and had experienced some sort of major life event: job loss, medical crisis, death in the family, or divorce. That debt was getting out of control, but their real estate was usually current….or perhaps was approaching default but not in foreclosure. They could see the handwriting on the wall; they could see the storm clouds on the horizon. They needed to prepare for what they thought was inevitable. Nowadays, it’s usually quite different.
Now I typically hear from callers who are facing foreclosure within 2-3 weeks, and if they (and I) are lucky, they have more than a month before the scheduled auction. The reasons are essentially the same: many are losing jobs, wages and overtime is getting frozen or eliminated, mortgage payments and other debts have creeped up. There is also the occasional debtor with a health care issue or some other extraordinary set of circumstances. The bankruptcy filing can delay the sale, and give the debtor an opportunity to reorganize finances or even secure a loan modification. But think about this – if you Google “GM Bankruptcy” you will see that pundits were talking about GM’s bankruptcy last fall (look under archives). I am willing to bet GM was at least thinking about it was well. I’m also willing to venture that GM was preparing for the possibility of having to file bankruptcy. For homeowners, there’s no good excuse to be waiting until the auction has been scheduled and the notice has been published to be at least considering and planning a bankruptcy filing. Think of it as Plan B.
Unfortunately, to homeowners who are attempting to secure a modification of their loan, I have some bad news. Lenders are not all that organized themselves: it’s not altogether uncommon for the foreclosure department who is handling the auction not to be speaking to the loss mitigation department who is handling the modification and vice-versa. Perhaps this is what happens when we let companies get too big to fail. I realize that this lack of communication protocol may seem strange if not completely asinine, but this has been my experience, and my colleagues who represent lenders have shared their frustrations with me on this issue as well. Thus, your request for modification will not necessarily stall a foreclosure.
Of course, filing a properly prepared chapter 13 bankruptcy petition takes quite a bit of work. And documents. And information. And good counsel. Tax returns need to be filed. Pay stubs or payment advices need to be gathered. Property needs to be valued. The Bankruptcy Code requires that documents be filed within a certain period of time after the case is filed. A typical bankruptcy petition – along with a chapter 13 plan – can exceed well over 45 pages. And chapter 13 plans require some thought, strategy and expertise.
If a debtor seeks bankruptcy protection but does not have this information properly prepared when the case needs to be filed, an Order to Update will enter. The Bankruptcy Court will order that the debtor file all documents by a date certain: anywhere from 3-14 days. Need an extension? You might get one. You also might not.
I am increasingly finding that debtors simply do not have the information needed within the 3-14 day period. Sometimes I can get an extension. Sometimes I cannot. Sometimes the pro se debtor cannot get one and that is the first time they pick up the phone and speak to a bankruptcy attorney. The delay, the motions, and frankly, the hunt for this information under the pressure of a strict time deadline only adds to the expense and increases the risk for error. It also does nothing to quell the anxiety of what is undeniably a stressful situation. Sadly, this is all fueled by debtors who are considering bankruptcy only within weeks, days or in worse case scenarios hours before a foreclosure auction is scheduled to move forward. And in many cases, their delays prove costly, and may also lead to their case imploding.
If you are a homeowner who is serious about saving their home and attempting to keep what you have worked hard for, then you must consider bankruptcy as an option at the earliest opportunity. This way, you can start gathering information and be ready to go if the mortgage modification doesn’t come through.
Of course, there are others out there who I know are telling folks not to think about bankruptcy. There are others who mislead with claims that bankruptcy protection is harder to get now. If you rule it out the bankruptcy option without getting the facts, speaking with a bankruptcy attorney, and understanding process and what will be expected of you in that process, I promise you this: you will regret it.
Anyone that tells you differently is selling you something.
Clean Up
Thursday, April 23rd, 2009
No one likes cleaning up a mess that someone else made, especially lawyers. I’ve coined the term “clean up” to describe a particular type of case – whether it be debtor or creditor. In most cases however, it’s a debtor’s case that was handled by an attorney who is no longer returning phone calls, or has informed the debtor that they can no longer handle the case. The debtor is extremely concerned, and is usually in a very difficult position. And unfortunately, I’m seeing these types of cases with greater frequency.
There are many reasons why a debtor’s case may not be progressing the way they expected. But in many cases I am seeing, when a debtor is contacting me to either get a second opinion, or to get a new attorney it’s because something in the case is going dreadfully wrong. It could be an improperly completed form, or a complete lack of understanding of how bankruptcy works. It could also be a little of both.
The economy is drying up legal work in other areas and this may be pushing attorneys who do not know bankruptcy law into the practice in an effort to their own ends meet. However, attorneys who do this with an assumption that bankruptcy is “easy” or is just about filling forms will soon realize that this is not the case.
Before Foreclosure Rescue Scammers Start Knocking…
Friday, January 23rd, 2009
I came across an interesting story (and video) over at CNBC.com: Fraud at your Front Door which discusses foreclosure rescue scam artists who are knocking at the front door of homeowners facing foreclosure. I have met clients who have told me they have been approached by individuals how have been at their doors offering assistance. But there’s no rescue. They’s only a rip-off.
Not only do the homeowners lose money, they lose time to productively work with their lender. I heard a lender attorney recently say that homeowners have told them that “…we paid this person to help us.” But the person is not helping them, and as this CNBC story points out, in many cases, the “helper” doesn’t even contact the lender. In addition to losing valuable time and money, the homeowner may also lose credibility with the lender.
The story recommends that if your lender is unwilling to relax the payments to help you, seek a qualified real estate attorney or non-profit credit counselor. But there are also local mortgage counselors who will help you with a modification request (click here for ESAC located in Boston). And I also think you should not rule out speaking to a bankruptcy attorney so you can discuss your options. Or, I encourage you to contact us if your lender is unwilling to work with you.
A Holiday Shopping Tip (or Warning)
Wednesday, November 26th, 2008
With Black Friday soon upon us, and the holiday shopping season, I want to get a message out to those folks who are struggling. Perhaps there are folks who know they are going to lose their jobs after the New Year. Perhaps there are folks who have been using credit to get by and now see a bankruptcy petition on the horizon. Perhaps these folks are figuring that they will have one last holiday with really great gifts courtesy of their credit card companies. If you’re reading this, and you’re thinking “wow, he’s totally speaking to me (or about my friend or relative)!” please keep reading.
One thing many consumers do not know is that when you buy “large-ticket” item, it may also come with it a security interest. In other words, that purchase may be a gift, but it may also be collateral. The lender (the store, or the bank that finances the store’s credit cards or credit lines) assumes a security interest. This is something to think about as you’re eyeing that appliance or jewelry. Will it prevent you from filing bankruptcy? Probably not. Will it complicate things? It just might. You may have to pay the debt even if you file bankruptcy or you may have to surrender the collateral. Or you might hear from the creditor months or years after the bankruptcy is over.
Last minute purchases can also get you into hot water. Using a credit card when you have no intention of paying the debt back can be considered fraud. Debts incurred through fraud cannot be discharged. In addition, such actions could be considered bad faith, and might lead to a dismissal or a denial of discharge, depending on the circumstances. What does any of this mean? The short answer is more attorney fees, more anxiety and the possibility that the bankruptcy case will not go as smooth as it otherwise could.
If you’re contemplating bankruptcy, don’t use credit cards for holiday shopping. Speak with an attorney. The last thing any debtor needs is to make a tough situation even worse.
Debtor Can’t Reopen Case to Enforce Discharge. Yet.
Wednesday, October 15th, 2008
In an October 3 decision, a Massachusetts Bankruptcy Court ruled that a debtor could not reopen her chapter 7 bankruptcy to commence an adversary proceeding to enforce the discharge.
The debtor was involved in an auto accident in 2003 which resulted in the death of another person. Later in the year, the Administrator of the Estate accepted $100,000 from the debtor’s insurance company and signed a release. In December 2004, the debtor filed her chapter 7 bankruptcy petition and received a discharge in April 2005. In the petition, she did not list the Estate as a creditor. There were no assets to distribute to creditors.
Then, in January 2006 the debtor heard from the “successor” Administrator of the Estate.
2009: Perchance to Dream
New Years is a time when many make resolutions. Some resolve to quit smoking. Some resolve to lose weight. The list of resolutions is endless. Personally, I think many resolutions are pretty useless. I didn’t stop smoking because of a resolution (but I did quit… a few Novembers ago), and I have not exactly kept up with resolution diets. I’ve been racking my brain trying to come up with something appropriate to write about for New Years. The last thing I want to do, especially today, is sound trite. It’s not like you can simply “resolve” to get out of bad mortgage or you can “resolve” to get a better job when companies are laying off. But then yesterday, I had a surprise visit from an old client who helped my thought process move along.
My client went through a long chapter 13. At times, it was not particularly pleasant. But all plan payments were paid and the discharge was received a few years ago. Now, she’s dedicated to her business and determined to keep make it grow in a difficult economy.
During our brief meeting, I noticed something different. Was it the hair color, I thought? No. Did she have her teeth done? No, not that. Then it dawned on me. It was something more.
She was happy. She was smiling. While she was not a particularly unhappy person while the case was open, I think it’s fair to say the chapter 13 was not a particularly happy period in her life. But now, the chapter 13 case is behind her and yesterday she sat before me smiling, happy, and talking about the future.
As an attorney, while I try to get my client’s perspective, I really can only get so much. I can only put myself so far into a client’s shoes. So I asked her, now that her case is behind her, now that she is moving forward with her life in new directions, what were her feelings about the bankruptcy process now that she was “on the other side of it.”
She didn’t hesitate with her response. (I can’t quote, but I did take a few notes.) She told me that going through that difficult process allowed her to dream again. That now she could dream and that making those dreams a reality again seemed possible. Her dreams were no longer mired down in a chaos created by debt that had spiraled out of control. She told me that she felt freer than she had felt in a very long time.
The minute these words flowed, I could feel a smile growing on my face….and a bit of a lump in my throat. And then, it dawned on me: ‘this is what I’ve been itching to write about for the New Year.’
Many are looking at 2009 with a sense of foreboding and trepidation. World events are not exactly fueling optimism about the future. Perhaps 2009 will not be a year when dreams will come true. Perhaps things may get worse.
Or perhaps in spite of that, you can find a way to knuckle down, stand straight, bite your lower lip, bide your time, and get through a journey that brings you to the other side of it: a side where you can dream once again. I know it may all sound silly, but I know this place exists. Yesterday, I was fortunate to be reminded that for my clients in or facing bankruptcy, there can be a life afterwards. And that life can be wonderous. The only assurance I can give you is that the big smile on my client’s face proves that anything is possible.
With that, I wish you all a very Happy New Year.
Tags: Chapter 13, Chapter 7, Commentary, Life After Bankruptcy
Posted in Bankruptcy, Chapter 13 | No Comments »