Janice: Good afternoon Atlanta and welcome to Legal Talk. This is News & Talk 1380 WAOK here on every Saturday at 1pm we bring you good expert legal advice on particular areas of the law. Today we’ve got our friend Roger Ghai in the studio. He is the founder of www.Chapter7attorneys.com . You can visit his website, and you really should, there’s lots of good information there. Hello Roger, how are you?
Roger: I’m doing well, how are you?
Janice: Are you enjoying this slightly spring-like weather?
Roger: I am. We keep getting teased so I’m waiting for the real thing.
Janice: I’m looking at your website and it’s really nice looking. It says ‘Call us today 770-792-1000. Only $299 to start and reasonable fees.’ Only $299 to start what, Roger?
Roger: The Chapter 7 bankruptcy case.
Janice: Give us a thumbnail sketch, what is a Chapter 7 bankruptcy case?
Roger: Chapter 7, basically, entails discharging your unsecured debts such as credit cards, medical bills, some other types of general accounts that you might have. Most of the time, if you’re able to continue to make your retail payments, such as a vehicle payment, you’re able to keep that. A lot of times even people that file Chapter 7 bankruptcy, they’re able to keep their home. What I’m finding, interestingly now, is that even when we’re filing a Chapter 7 and the client is behind on their mortgage, the mortgage companies are actually allowing the client to do modifications to retain the house. This would have been unheard of 2 years ago.
Janice: Unheard of even a few months ago!
Roger: Even a few months ago but times have changed.
Janice: If people want more information about what their options and their rights are they can call you at… give us that number again.
Roger: 770-792-1000
For a free legal consultation, call (770) 792-1000
Janice: I like your website. I like the client testimonials. I just want to tell the audience about one of them. This is a client, Mr. and Mrs. Evans, said “we just want to thank you for helping get rid of our financial difficulty. Roger was able to rid us of all of our debt, close to a million dollars, for the best price in town. Thanks again for helping take the weight off our backs.” I know that there’s client confidentiality, but what can you tell us in general about ridding clients of millions of dollars in debt.
Roger: Well, it depends on their own circumstances, but in a Chapter 7 bankruptcy it doesn’t matter how much debt you have. Whether you’ve got $100,000 or $50,000 or $2,000,000, you’re still able to, if you meet the income requirements, are able to actually discharge and obtain a new fresh financial start. Usually what I recommend is that unless someone has $15,000 or more in debt, you shouldn’t be filing a Chapter 7 because you can only discharge your debt every 8 years. If you’ve got a $1 to $14,999 I’d say that you want to strongly consider not filing any type of bankruptcy actually and try to work it out other ways if possible. Now, there are exceptions to that, but those are my general thoughts.
Janice: I notice that your clients seem really relieved after they’ve been through the process. What effect do you think, or have you observed people undergo when facing mountains of debt that they don’t know what to do with.
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Roger: Well, you know that’s something I want to talk about. I’m really happy to be able to say that most of the time, as you might imagine, clients are really stressed out, pulling their hair out, worried, just a lot of fear and a lot of anxiety, which is just unfortunate as to what the economic future holds for them. A lot of times, I’m getting some emails though where the clients don’t want to do the Chapter 13 case because, they know that, generally speaking, most cases fail.
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So, my philosophy has been since I’ve started this, to be able to get people out of debt, get them a fresh start and get them into a situation where they’re able to start rebuilding their credit again. You take your lumps, you file a Chapter 7 bankruptcy and you move on. It’s not something, obviously, that anyone wants to do, first of all, even one time, but if you do have to do it, and you find yourself in that situation, then you’re going to want to do, in my opinion, a Chapter 7. Because, frankly if you’re in a Chapter 13 you’re going to be under economic stress for the next 3 to 5 years depending on how long that case lasts.
Janice: Why is that?
Roger: Well, if you file a Chapter 13 bankruptcy, it’s required by law, there’s only one little exception, generally you’d have to be within at least 2 years. If you pay every single creditor back 100% in full, but generally, people can’t pay everybody back in full. So they end up doing a different type of Chapter 13 bankruptcy where you’re paying some of the creditors in full, and you’re paying some of the creditors not in full. They’re getting less than what you actually owe them. The law says that if you’re in that type of a situation where you’re paying some of the creditors in full and some of them not in full, that the bankruptcy case has to last 3 to 5 years. That’s just the black letter law on that matter.
Janice: What about your living expenses? You’ve still have to buy food. You’ve still have to shelter. You’ve still have to have insurance and clothing and all the other things. Does the court give a generous allowance for that when you’re in a Chapter 13?
Roger: Well, it’s just reasonable and necessary expenses. I mean, you can’t, if you’re a single individual, you can’t have, like, a $600 food bill. That’s not going to fly in a Chapter 13, it just won’t work. For a family, maybe of 3, that’s certainly going to work. So it has to be reasonable and relative based on your own circumstances.
Janice: What’s reasonable to you as a consumer or a potential debtor might be quite unreasonable to the trustee of the bankruptcy.
Roger: Absolutely. A lot of times clients say, “well this is my lifestyle, this is how I’m living, and this is what I want to do and you’re the bankruptcy lawyer and YOU need to get it done. It doesn’t exactly work like that and clients get frustrated with the Chapter 13 bankruptcy process. They get frustrated with their bankruptcy lawyer. The bankruptcy lawyers have to abide by the rules and operate within the confines of whatever the bankruptcy rules are.
The major problem that I see is this, most of the time, and I think this is the reason, really, if one studied it, that the statistics show that 75% to 80% of the Chapter 13 cases fail. It’s because, basically, people are going in to something prolonging the agony, prolonging the stress, trying to struggle for the next 3 to 5 years. Whereas had they had just gone ahead and bit the bullet and decided well, you know, we really can’t afford this $700 car payment or this $500 a month car payment. We really need to get rid of this albatross around our necks and start fresh. They would have been in a much better position. People tend to be clingy to their personal items whether it’s their house, whether it’s their nice, shiny, new vehicle. That type of mentality, I think that hurts people in the long run.
Janice: I do see lots of people who are very emotionally tied to their automobile. How common is that?
Roger: Oh, it’s so common it makes me, it’s so common that I always have to have a heart to heart with the client. A lot of times, when the client is having a situation where the vehicle payment is half of what their house is, or worse yet, the vehicle is 2/3 of what their rent is… I just try to sit down and educate people a little bit about what that’s going to mean for them in the future if they want to hang on to those items. I have to give a lot of the clients credit because I think they’re becoming shrewder, more educated because of the information out there. A lot of times they’ll see it the way I see it and we get on, and we move on to a different era in their life after discharging the debts.
Janice: Well, you’re listening to Roger Ghai who is the founder and principal bankruptcy attorney at www.Chapter7attorneys.com . There’s more information that you can use to get your financial house in order when we return to Legal Talk at News and Talk 1380 WAOK.
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Janice: Good afternoon Atlanta. We’re back with more Legal Talk and Roger Ghai. If you would like to get involved in the conversation, the number here is 404-892-2703. We’ll take any questions that you have about bankruptcy, about bankruptcy debt relief, and what you can do to make your situation a little easier in these difficult times. Let’s go to Gideon in Jonesboro. Good afternoon, how are you?
Gideon/Caller#1: Have the blessing be upon you Attorney Mathis and Attorney Ghai. These blessings be to you.
Roger: You too.
Gideon/Caller#1: You know, it’s interesting, you talk about stress, about having to file Chapter 13 or Chapter 7 and I have filed before. It’s stressful just listening to you talk about it because when we look at our economy in America and how you, through a Chapter 13 or a Chapter 7 or an 11 discharge debt, I’d like to differentiate between public discharge and private discharge. You know, just like, you see some person’s home and it says private, or a license plate that says private. There’s a public side and a private side. So, if you could, explain to me how one would discharge debt, in a bad economy where we’re dealing with credit, not real portable finance. Just a piece of paper that’s printed up in Washington or wherever… how is that related to discharging debt?
Roger: Well let me say this, there’s no real distinction between public and private, as you put it. That’s a straw man… that’s not even an issue. The person, the consumer is able to discharge debt whether they’re a Chapter 11 corporate client, that’s usually, typically a business reorganization. Chapter 13 is more oriented toward the consumer, wage earner repayment plan. Chapter 7, of course, is straight bankruptcy commonly known as obtaining a fresh start. All three discharge debt. There are instances where sometimes governments do file a Chapter 11. Debt is debt and discharge is discharge and bankruptcy is going to be bankruptcy for everybody all around.
Gideon/Caller#1: Well, collateral seems to be the principal issue. You discharge a credit that’s given to you by a piece of paper that mandates that this type of a medium is for exchange, it’s a promissory note just like your house note or your car note. So, again, define what discharge means, and there is a difference between public and private. Maybe you’re not aware of it.
Roger: There’s not really a discharge and I’m going to disagree with you on that. Number two, a discharge of debt means that you are released from the legal obligation to repay your creditors. Ok? So if you have a contract with a creditor, let’s say for example, you’ve purchased a stereo and t.v. over at Best Buy. You have a contract with that creditor to repay that creditor for their merchandise. If you don’t abide by the terms of that contract and pay that creditor back accordingly, they have the right to repossess that property.
Gideon/Caller #1: Ok so that’s like what America is doing with Great Britain, which is why the Queen had Gitener and Paulson arrested.
Roger: (interrupted)
Gideon/Caller #1: America is able to forego debt with the mass League of Nations and they’re the Number One debtor. Explain to me in your understanding of debts and the National debt in relates to America, how is it able to forego its debt but yet creates laws for citizens to have to repay debt.
Roger: Alright, this is not a program on national economics or world economics. I will say this, the League of Nations no longer exists, I think you’re referring to the United Nations. But, I think that we have some other callers too, if you have a specific bankruptcy question then please ask me your specific… (interrupted)
Gideon/Caller #1: Well bankruptcy is the key element!
Janice: Ok ! We always are challenged by Gideon’s point of view. We appreciate the call, I rarely understand the point he’s trying to make… I will ask you this, though, as a sort of related follow-up question, there are some debts that are not dischargeable and those debts may be debt owed to the government by individuals or debt ordered by the government. Talk about those debts that are not discharged.
Roger: Ok. Typically for most people, let’s start with, for example, child support. Child support obligations are non dischargeable under the bankruptcy code, obviously for public policy reasons. Personal income taxes generally are not dischargeable unless they are more than 3 years old from the date that the tax was assessed. What that means is this, that right now we’re in 2010, if your 2006 income taxes were assessed by the government in 2008, you would not be able to discharge those income taxes until 2011.
The other type of debt, which would be non dischargeable, and may, in this economy, be relevant to business owners would be the 941 Employee Withholding Taxes. That is a non dischargeable type of a debt. Property taxes are non dischargeable. Student loans are non dischargeable. Civil actions in lawsuits, in other words, you may have been charged with false pretenses or some type of fraud, embezzlement, could be securities fraud, those types of debt are non dischargeable. If you get convicted of a DUI and you injure somebody, that is also non dischargeable under the bankruptcy code. We all file types of acts against other individuals, whether you go out there and assault somebody and batter them, well that’s an intentional act. That’s non dischargeable under the bankruptcy code.
Janice: Ok, thank you for that summary that was very good. Let’s go to Greg in Atlanta. Good afternoon, how are you?
Greg/Caller #2: How are you doing Ms. Mathis?
Janice: Fine
Greg/Caller #2: I’m alright. My question for the attorney is I’m in bankruptcy right now in a Chapter 13 bankruptcy. I’m in a kind of iffy situation. I had like $6k, maybe $8k in debt. I actually got scared because my home was receiving, well I was like… 4 months of foreclosure letters. Ok? I recently got laid off and now I have a job. I didn’t qualify for a Chapter 7 bankruptcy because I make over a certain amount. So I went to a Chapter 13. Now, I’m looking at my income tax check and I have not gotten a confirmation date, I mean, I have a confirmation hearing, excuse me, to make everything official. But my money is coming out but once I got my income tax I said, ‘Man! All this stuff could have been paid out.’ Yes, I did keep my car. I knew that was a problem, that’s why I love this show. Because the car, yes, you’re right, it’s the car that I really wanted to keep, even though I have a home, but I wanted to keep the car. But I feel like I would rather just get rid of the car because even if you file a Chapter 13 you’re still walking around here pulling your hair out and I just can’t sleep. So I’m just trying to figure out, before this confirmation hearing, what can I actually do because I see that the situation that I’m having right now is trying to deal with the mortgage lenders. Every time I call them to ask about a modification or to see if they can work with me, they keep telling me that your application is under review. This is the reason why I had to file Chapter 13.
Roger: Alright good question. Let’s go back to something that you said at the very beginning. You file a Chapter 13 originally because you were over the means test. That means that when we file these cases we have to look at an individual or a family’s income for 6 months income preceding the filing of the case. If you’re above a certain limit you’re not eligible. But one thing that I picked up was that you said that you were unemployed for a certain point and now you have employment. How long were you unemployed for prior to the time that you filed your case, sir?
Greg/ Caller#2: I was unemployed for 3 months.
Roger: Ok
Greg/Caller #2: About 3 months.
Roger: Are you single or married?
Greg/Caller #2: I’m single.
Roger: Ok. How much money during the 6 months before your case was filed did you earn in that 6 month period?
Greg/Caller #2: Probably about $8,000.
Roger: Ok, you’re not, ok, obviously, now check with your attorney, but $8k within, as far as income within 6 months within filing your case does not disqualify you for filing a Chapter 7. For a single individual, annually, we’re looking at probably about $4k a month and the actual figures are posted on my website. As far as what the median income would be… but it seems to me that you could, actually, even at this point, if you so choose, go ahead and convert the case over to Chapter 7 bankruptcy and get rid of everything. The risk that you’re going to run though is the home. If you’re delinquent on the mortgage payments prior to filing, there’s no guarantee that they will allow you to do a modification. What I have seen though, is that people that are converting over to a Chapter 7, or actually just initially filing a Chapter 7 bankruptcy, even though the mortgage company prior to that time will not work with you as far as doing a modification, they are singing a different tune after the bankruptcy case is filed. The other plus that you have in your circumstances is that perhaps the modification wasn’t working because you just didn’t have the income. I see that a lot. If you’re now employed and you didn’t have any other debts, you might be able to show the mortgage company that you’re fairly stable as far as being a risk and they may want to go ahead and do a modification for you.
Janice: I’m seeing too, and just to agree and piggy back on what you’re saying Roger, often the lenders will tell the consumer that well, you’re under review and put you in what is known sometimes as a trial modification. But they won’t tell you that you’re likely to get a permanent modification and it just leaves the home owner in limbo not knowing what to think. If you want to hand on a second we’ll try to get you some more specific advice. We’ll take your number off the air if that’s something you’d like to do.
Greg/Caller #2: Ok
Janice: And see if we can’t look into your situation. But all of this requires that you have got to have a heart to heart with your lawyer who filed the Chapter 13 because he or she is your principal advisor. Ok?
Greg/Caller #2: Yes ma’am.
Janice: This is News and Talk 1380 WAOK. We’ll be back in just a moment.
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Janice: Welcome back to Legal Talk Atlanta. This is Janice Mathis here with our expert in all matters of bankruptcy, Roger Ghai. He is the founder of www.Chapter7attorneys.com I want you to get a pen and paper handy because in just a minute I’m going to give you a website and phone number that we want you to write down, so get your pen and paper handy. Right now, though, we have a caller on the line who’s been pretty patient. We’ve got Bernard in Mableton. Good Afternoon. How are you?
Bernard/Caller #3: Good, how are you today?
Janice: Doing fine, thanks for calling.
Bernard/Caller #3: I heard the information earlier about filing Chapter 7 bankruptcy and Chapter 13 bankruptcy. That’s not my point, what my situation is, I was in business for, like, 3 years and the business really didn’t do good or anything so we kind of like accumulated credit card debt. Like $13k and right now we had to shut the business down because everything got kind of slow. I want to know what are my options here working with the creditor. I only have one credit card that I’m dealing with right now with all of my expenses and everything. So I want to know what are my options here with trying to settle with the credit card company. Maybe just go ahead and work at something and try to pay it off.
Roger: Well, there’s no easy answer to that question. I would not, for just one credit card, if there’s any possibility of you being able to dissolve it directly with the creditor, I would go ahead and try to do that versus trying to do a bankruptcy. Usually what will happen in this type of a situation, is the more that you’re delinquent, the more leverage that you have, and they’re going to be more agreeable to the terms.
Janice: Let me just interrupt you there and say the more delinquent you are, the more leverage you have with the creditor. Now that seems a little counter intuitive, explain that.
Roger: What that means is that at some point, and this is obviously because of the entire situation in the country, that clients are defaulting on their credit cards primarily. Let’s just use that as an example. Usually in the past the creditor, the credit card company would not negotiate anything at all with you. Maybe 20% down or a reduction or something like that. Now what they’re doing is they’re offering really great terms. Sometimes what they’re doing in your situation is, if it’s far enough delinquent they will go ahead and offer a lump sum settlement. Number two, and sometimes it’s a fairly decent deal of 40 to 60% of what the balance is. The other thing is, if you can’t come up with the lump sum, they will often times go ahead and do a payment plan for you at 0% interest rate. So, those are a couple of your options. If I were in your shoes, I would go ahead and call them and just explain to them the situation. It’s not going to be unheard of and they might be really REALLY receptive to working out a really great deal for you. So I would call them Monday morning if I were you.
Greg/Caller #3: Ok, one last thing. Is that something that I can work out directly with them myself? Because I’ve had people calling me about well, if you pay me this amount of money, I’ll…
Roger: You don’t need anyone to do that for you. That’s just a waste of money in my opinion. You’re a smart guy and you can go ahead and negotiate, you’ve been in business for yourself, you can go ahead and negotiate the best possible deal for yourself and you’re going to be able to do it better than anybody else because it involves you.
Greg/Caller #3: Ok, that’s what I needed to know!
Janice: Well, thank you for calling. We hope to hear from you if that works out. If that doesn’t work, call us and we’ll try to think of something else. But that might work.
Roger: That just might work.
Greg/Caller #3: Alright, bye.
Janice: Alright, let’s go to Malik in Smyrna, good afternoon, how are you?
Malik/Caller #4: Hey, how are you all doing?
Janice: Ok
Malik/Caller #4: Good. My question is this, I am contemplating filing a Chapter 7, I filed a Chapter 13 back in 2008 and it was dismissed because I couldn’t keep up with the trustee payments. Right now I do have a mortgage and a modification with and I’ve been paying that on time. But I want to file a Chapter 7. I’ve got about $50k in other debts that I want to get discharged, but I do want to stay in my house. I’ve been unemployed for awhile now but I’m getting some assistance and keeping up to date with my mortgage payments. I just want to know would I be able to file a Chapter 7 and not have to liquidate my house? I’m negative equity on the home so I just wanted to get an answer to that question.
Roger: Yes, as long as you’re current on the mortgage payments, even if you’re in a modification, there should be no problem with you retaining the house. You should be able to get rid of the other debts. You said something, though, that was interesting that I wish that people might consider a little bit more, which is that you’re under water on that house, right?
Malik/Caller #4: Right.
Roger: There are about 15 million American homes under water right now. It goes back to a little bit of what Janice and I were saying at the beginning of this show. People get attached to their personal things. So, it’s not going to be the end of the world even if you couldn’t keep the house. You have to look at it like this, what are you trying to do for your life? You’re trying to build some sort of economic foundation. If it’s a negative asset, you really have to think about whether you really want to keep it and whether it’s worth it. It’s going to take time for this market to come up real estate wise.
Malik/Caller #4: Yeah, I’m not that far in a deficit. I’m about $8k deficit and a lot of that comes from I have a second mortgage. I want to ask a question about that too. I have a second mortgage on it and that’s really the main thing that keeps me upside down here.
Roger: Sure
Malik/Caller #4: The main reason I’m keeping it is that I know the market is going to bounce back real soon. I’m not that far in the hole as far as negative equity. If I were to go out on my own and get an apartment I would be paying about the same thing so that’s the main reason why I’m staying and not mostly emotional type, it’s just economically I’m going to be in the same monthly payment or worse.
Janice: It sounds like you’ve done a pretty good job of analyzing the various factors. But your question is how would a Chapter 7 treat that second mortgage?
Malik/Caller #4: Yeah, to treat that second mortgage, would I have to continue to pay that or could I get that discharged? I’m assuming not since it is a secured debt but I’m not positive.
Roger: It’s a secured debt. Well, your gut was telling you the right thing. It’s a secured debt, it’s a second deed of secured debt on the residence and so you’ll have to continue paying it.
Malik/Caller #4: Ok. Now how do I go about getting in contact with your firm as far as doing this?
Roger: 770-792-1000 or you can send me an email at www.Chapter7attorneys.com.
Malik/Caller #4: Ok I will do that
Roger: Ok, pleasure speaking to you.
Janice: Well those are some really great questions. I mean, particularly this idea of you negotiating a modification, you like your modification, you’re able to afford it, it sounds like you wouldn’t have any trouble with the means test because he doesn’t really have a lot of income now.
Roger: That’s right
Janice: We’re going to have that question come up more and more as people get beyond the modification but they’ve still got this other credit card debt, medical bills, and other things that are still hanging over them. So that’s a great question.
Roger: It is, yes.
Janice: I promised you that I would give you some numbers if you would like to get involved in the conversation. If you have a question you’d like to ask Roger, I mean, you can just listen to him and tell how expert he is about this area of the law, you can call us right now at 404-892-2703. I’ll repeat it again. 404-892-2703 or, you can call Roger’s office Monday 770-792-1000 and I really encourage you to visit his website. It is www.Chapter7attorneys.com Numeral 7. Click on the FAQ, that’s the Frequently Asked Questions. Not only does Roger have up the Frequently Asked Questions, he’s got the best answers to the FAQ right there on the website so you can see for yourself what the information is that you might need in order to make a good decision about your financial future. We’ve got another caller on the line, and she is Tina from Atlanta. She has a question about a motion of release, I’m not sure what that is, but Tina, why don’t you tell us?
Tina/Caller #5: I’m filing a Chapter 7 bankruptcy, and I’m behind on the mortgage. The mortgage was actually added in. I was willing to walk away from the property but I got a letter from the trustee saying that there had been a motion or the stay had been released on the property?
Roger: Yes
Tina/Caller #5: Because I didn’t actually go to the second meeting with the mortgage company and I wanted to know what does that mean at this point? Because currently I am still in the home. What would that mean?
Roger: That just means that the creditor has, it’s called technically, just for the other listeners, a Motion for Relief from the Automatic Stay. What that means is that a creditor, if they want to try to take your property back and you’re in a bankruptcy, if it’s a Chapter 7 or a Chapter 13, they have to file a certain motion with the court and a hearing has to be held. What they’re asking the court to do, in your particular circumstances, would be to go ahead and be able to advertise the property for foreclosure. Which they’ve already apparently obtained the order and so the next step is for them to go ahead and actually begin advertising. You want to go ahead and contact your mortgage company or your lawyer who assisted you in filing your case if you have any other questions on the next steps. But, you’re not going to have too much more time in that residence.
Tina/Caller #5: Ok. Because, actually, I filed it myself. I didn’t have an attorney.
Roger: Ok
Tina/Caller #5: Ok, so at this point I would need to contact the mortgage company myself to see how much more time I have actually in the property?
Roger: Yes ma’am.
Tina/Caller #5: Alright, well thank you very much.
Janice: Roger, I have a question for you. What does a creditor have to prove in order to get relief from the automatic stay?
Roger: They have to prove that they are not adequately financially protected. What that means is this, if they’ve got a collateral worth $25k and they’re only going to receive $50 in the Chapter 13 case, well the collateral, more likely than not usually it’s a vehicle, is depreciating at a much faster rate and so the $50 that you’re posing to pay them in the Chapter 13 wouldn’t be sufficient to cover their interest. They’re suffering a loss on the value of the collateral while you’re in the Chapter 13. If that’s the case, then the judge is going to go ahead and allow them to take that property back.
Janice: Now, this lady seemed to be saying that she filed a Chapter 7 and yet, her mortgage lender had filed a relief from the stay. What does it mean in that context and we’ll get your answer when we come back from a brief break. Boy this hour sure does go by quickly! You’re listening to Roger Ghai on Legal Talk. 404-892-2703. This is News and Talk 1380 WAOK.
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Janice: Welcome back Atlanta. Thank you so much for listening to Legal Talk. We’re here every Saturday afternoon at 1pm. Today our guest, our expert, really nice man but apart from being a nice man, is a very smart guy about bankruptcy, especially Chapter 7 bankruptcy. If your back is up against the wall, if you’re afraid to answer the telephone because you know it’s your creditors calling you, if you can’t sleep through the night, then you might want to give Roger Ghai a call at 770-792-1000 and find out what the alternatives are. Better yet, visit his website, one of the most thorough bankruptcy websites I’ve ever seen. Click on the section that says FAQ, for Frequently Asked Questions, and get answers to questions that you might have. Then you’ll know, perhaps, whether you need to think about filing a Chapter 7 or not. Before we went to the break we had asked Roger about the, you hear this a lot, about the motion for relief. Why would a Chapter 7 creditor file a motion for relief?
Roger: Well, they would want to file for the same reasons that a Chapter 13 creditor would. It is because their interest, their property, is depreciating. It’s becoming less valuable so long as the client retains that property. So they want to get the property back to sell it to make their profit because that’s what they’re in business for.
Janice: Does that mean that usually the borrower, the debtor, the homeowner, is not able to make those payments as they come due?
Roger: That’s absolutely right. Usually the client has not been able to make the payments, can’t make the payments, and so the creditor has filed that motion to take that collateral back.
Janice: All they have to show then is that the payments are not being made and pretty much, they’re going to get their relief from the stay.
Roger: They’ve got to show that the payments are not being made, that the values of the collateral is depreciating and that they’re just not what we call in the law adequately protected.
Janice: The courts are going to pretty routinely do that but suppose a creditor, and I don’t think this happens often, but suppose a lender decides well I’m not getting my payment so I’m going to go ahead and file for foreclosure and I’m not going to bother about getting relief from the stay. Do they get in trouble?
Roger: If the client is in a bankruptcy, they have to go ahead and file for the motion for relief from the stay. But, in your scenario, were they just decided not to file for it?
Janice: Yea, they just decided they’d ignore that part.
Roger: I haven’t seen that.
Janice: They know better.
Roger: They know better. They’d get sued under Federal law.
Janice: They get in big trouble.
Roger: Yes. If you know of any cases like that, call me and we’ll take care of it.
Janice: Ahh. What Federal law would you sue under?
Roger: Well, the Automatic Stay provisions of 11 U.S.C. 362(a).
Janice: The Automatic Stay is a pretty powerful law isn’t it?
Roger: It is. It’s an injunction. It’s a very inexpensive injunction for people who don’t have protection and don’t have the funds to go into court, civil court or Superior court and get a national injunction because those can be quite costly.
Janice: And an injunction is what?
Roger: It stops all legal adverse activity against you until further notice from the court.
Janice: Tell us some of the things that a creditor can not do while that injunction is in place.
Roger: They can’t call you. They can’t threaten you. They can’t sue you. They can’t garnish you. Any of those things which are the typical collection activities of a creditor, all of those things have to stop. So usually what happens is when we file a bankruptcy case, you have a list of the creditors that’s filed on your bankruptcy case, and so the court clerk, not the attorney’s office, but actually the court clerk sends out a notice to everyone on that creditors list that you’ve filed for Chapter 7 or Chapter 13 bankruptcy protection. That’s how the creditor actually receives notice of your filing. Once you have your case number, usually what I do is I have my clients provide that information to the creditor and they will stop calling at that point.
Janice: I mean, it’ll stop a garnishment?
Roger: To stop a garnishment, we have to do a little more work in that situation, but it does stop garnishment.
Janice: It stops a repossession? They can’t come and get the auto in the middle of the night?
Roger: Absolutely. It stops a lawsuit.
Janice: So it’s a pretty powerful, I mean, it’ll even stop a divorce.
Roger: Technically, it can stop the proceedings of a divorce… but, one of the spouses is probably going to file for a motion of relief from the stay to be able to proceed in the divorce proceedings.
Janice: Well, I mean and that’s why it’s to the advantage of the debtor to seek this injunction.
Roger: Yes. I mean, it depends, circumstance by circumstances, but you have to time, one thing I like about bankruptcy is timing. You have to strategize, you have to figure out when is the best time for the client to file a case, when are they going to have the most leverage. A lot of factors that go into making that decision consulting with the client.
Janice: You’ve got lots of great questions on your website. If you’ve got questions in the audience, we’ve still got a few minutes. You can call us at 404-892-2703. We want to remind you again you can call Roger Ghai directly at 770-792-1000 or you can visit www.Chapter7attorneys.com . Let’s see, we talked about means testing. How is means testing carried out. Does the client have to provide proof of income?
Roger: Yes we do. We have to have your last 6 months of your paycheck stubs or a lot of times nowadays people are on unemployment and so you usually just get a statement from the unemployment office.
Janice: What is a presumption of abuse and how does that affect the case?
Roger: That means that you are making more money than what you are supposed to under the law in order to be able to qualify for a Chapter 7 case. If that presumption arises, that’s what that is. It’s only a presumption, it can be overcome. It can be, evidence can be brought to the contrary, but it’s usually very difficult to overcome that presumption. If there’s a presumption of abuse that arises, you’re not going to be entitle to a Chapter 7 discharge necessarily.
Janice: So if you’re making $10k a month, you’re probably not going to be eligible for a Chapter 7. Is that fair to say?
Roger: That’s fair to say but then it comes back to the timing. I have a couple of clients that were making about $150k or $125k last year and had we filed then, no, they would not have been able to file. But we waited 3 or 4 months until the income dropped off for purposes of the means test. We went ahead and filed and we got them out of all of their debts. So, the answer to your question is if they’re making $10k a month now they’re not going to be able to qualify for a Chapter 7.
Janice: Ok. Let’s get one final caller in before we have to go. Good afternoon Bill, how are you?
Bill/Caller #6: Good afternoon Attorney Mathis and to your guest. I have a question in regards to when someone files. Can a person file bankruptcy twice in a particular period of time?
Roger: Yes, you can. You can file a Chapter 7, for example, and get a discharge. Then you can file a Chapter 13 one day after you get your Chapter 7 discharge, ok?
Bill/Caller #6: Ok
Roger: Ok, but, that’s a different type, if you’re going to do that route, you’re going to have to pay back your creditors 100cents on the dollar.
Bill/Caller #6: Ok. I have another quick question. I won a lawsuit against someone and would my, it’s been, I guess it’s been sanctioned by a magistrate court, and I’m trying to collect. If they claim a Chapter 13 or a 7, would I still be able to collect?
Roger: No. Probably not. Not if you’re in a Chapter 7. If you’re in a Chapter 13 you might be able to, but there are specific procedures. They have to list you as a creditor. You’ll be provided with what’s known as a Proof of Claim form and you have to file the claim with the bankruptcy court.
Bill/Caller #6: I see. Very good. Well, thank you!
Roger: You’re welcome
Janice: We want to thank you for listening today. Roger, I learn something every time I have you on this show and we’re just so grateful that you would come on and share all this great information with our audience.
Roger: My pleasure
Janice: I can tell from the way the questions are going that people are getting more comfortable calling you and asking for advice. How do you feel about that?
Roger: I fell it’s meant to be.
Janice: Ahhh! I want to invite everybody, I’ll take a few minutes and invite you all, on March 23rd , which is a Tuesday, we’re going to have a Town Hall Meeting at Mt. Ephraim about foreclosure. If you’ve got questions about foreclosure, if you’re in foreclosure, listen to Lorraine Jugwhite during the week. Listen to Derek Bozeman and they’ll have all the details. We’re going to try to get Roger to come out and you can meet him in person and see what a great guy he is and answer your questions about foreclosure and tell you what’s going on in the Georgia Legislature about foreclosure. This is News and Talk 1380 WAOK and we’re here every Saturday afternoon at 1pm for Legal Talk. I’m Janice Mathis. Stay positive and be blessed!
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