Janice: Good afternoon Atlanta and welcome to News & Talk 1380 WAOK. This is Janice Mathis and we’re here this afternoon and every Sat. afternoon at 1pm to talk with one of our lawyers who’s an expert in a particular field. Today we’re going to be talking about a topic that interests lots of you, more of you than would like to admit it, need to file some type of debt relief. We’ve got Mr. Roger Ghai in the studio and he’s going to talk to us today about filing Chapter 7 bankruptcy. We’re going to walk right through and find out what IS a Chapter 7 bankruptcy how’s it diff. from a Chapter 13 bankruptcy and what should YOU do if your debts have become so burdensome that you can no longer manage them. Hi Roger, how are you today?
Roger: Fine, thank you.
Janice: We appreciate you coming in today.
Roger: I appreciate you having me.
Janice: Now you’ve got a firm that’s called Chapter 7 attorneys.
Roger: www.Chapter7attorneys.com, Yes, I do
Janice: All right, and in order to get in touch with you what should people do?
Roger: You can go ahead and go to the website or call me at 678-302-6555.
Janice: All right, now I promised the people an answer. What IS Chapter 7?
Roger: Chapter 7 bankruptcy is known commonly as ‘straight bankruptcy.’ Basically, you’re discharging most of your obligations and getting a fresh financial start. That’s the idea behind it. There are certain types of debts that you cannot discharge such as student loans, alimony, and child support — all those types of things. If you obtain money by fraudulent pretenses, those types of things you cannot discharge. But, you know, for the most part, credit cards you can discharge, medical bills. Chapter 7 does provide temporary relief from foreclosure actions. In fact, in this economy because a lot of the mortgage companies want to do modification, a lot of times clients can go ahead and do a modification and then do the Chapter 7 bankruptcy and they can get rid of all their other debts and come out pretty clean.
Janice: I want to back up a minute and ask you, what is a discharge?
Roger: A Chapter 7 bankruptcy discharge just means that if that’s what the court order is that you do not have a legal obligation to repay that creditor the money that you owed them before you filed the case.
Janice: The debt is gone away.
Roger: The debt is wiped out.
Janice: Now, what does it do to your credit?
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Roger: Actually, in a strange sort of way, it can actually improve your credit and I’ll tell you why. A lot of times when clients come in they have late pays, they have judgments, they have this or that and they get comments on their credit report file. Let’s say for example you have a judgment, maybe a garnishment, well within in the bankruptcy contacts we can go ahead and do away with the judgment so that when you come out of the bankruptcy you do not have the judgment on your credit record. The late pays, those come off too. One of the interesting things is that to rebuild the credit is not really that big of a deal and I’ll tell you why. The credit card companies know that a client cannot get a discharge in the Chapter 7 bankruptcy case more frequently than 8 years. So you can only get a discharge every 8 years. You get your discharge and 4 or 5 months later credit card companies are already soliciting you like nuts for credit cards at, of course, they’re terrible interest rates – 20%, 30%.
Why are they doing that? They are doing that because they know that if you get hooked back into the debt load again you can’t get another discharge for 8 years, but if you have to you would have to file a Chapter 13 bankruptcy case and pay it in full or they can garnish your wages. You have to be careful about that. But one of the good things is, a lot of clients are concerned about being able to buy a home after filing that Chapter 7. What are the regulations on that? Under the current FHA regulations, if you file a Chapter 7, and you’ve gotten your discharge, you can go ahead and get financing within 2 years. In some instances, depending on the particular facts of your circumstances, you may be able to even refinance a home sooner than that.
Janice: Now you’ve mentioned that there are some debts that don’t qualify for discharge… and you’ve mentioned a couple of well known ones. Taxes owed to the government, is that one or not?
Roger: That depends. There are some specific rules on the taxes. For example, with taxes, generally speaking, if it’s a personal income tax and you owe the IRS for your personal income taxes and those are for 3 years or more, then we can wipe those taxes out.
Janice: Ok. So taxes CAN be discharged in a bankruptcy.
Roger: They can be discharged sometimes, yes.
Janice: What about child support?
Roger: Child support can never be discharged. Alimony can never be discharged. The laws changed 4 years ago, so that property settlements in a divorce decree proceeding, in a divorce context, some property settlements can no longer be discharged. That has to be looked at as to your own circumstances.
Janice: What about student loans?
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Roger: Student loans generally cannot be discharged in bankruptcy. There is also what’s known as a ‘hardship discharge’ and the court is going to have to look at whether if not discharging this student loan is going to be a hardship upon you and your family. But it is very difficult to meet that legal standard. But it can be done. In some cases you might even have a trial in front of the bankruptcy judge on the discharge-ability of student loans. It has been done before.
Janice: Ok. We’re seeing people with tens of thousands of dollars in student loan debt with no practical to pay it off even in a Chapter 13. So you’re saying that there may be some circumstances. What would the court consider in determining in whether there’s a hardship sufficient to justify.
Roger: Well, they’re going to look at the nature of the degree that the person obtained. So, for example, if you’ve got a doctor who has incurred $250k worth of debt but wants to go ahead and file a Chapter 7 and discharge that…that’s probably not going to work because the court is going to look at the earning potential of that individual. But if you’ve got somebody else that has, maybe $50k in debt and they’re just not making it, and they can’t make it, and there’s no possibility of them ever making it. Or, perhaps, that person might now have a medical problem. So it would be a hardship to try to deny the discharge of that debt.
Janice: We’re giving you the information that you need to be a savvy consumer. This is 1380 News and Talk WAOK.
Janice: Good afternoon Atlanta and welcome back to 1380 News and Talk WAOK. This is Law Talk and I am Janice Mathis. This is not a taped program. We are live in the studio today with our friend and expert in bankruptcy, Mr. Roger Ghai. We will be here until 2pm taking your calls and questions about Chapter 7 bankruptcy. We do have a caller on the line. Hello Jay, how are you?
Jay/Caller #1: Hey, how are you doing Ms. Janice?
Janice: I’m doing just fine, thanks for calling.
Jay/Caller #1: I have a question.
Janice: Ok, go ahead.
Jay/Caller #1: I was wondering… how much would it cost and also the procedures of how long does it take and does the cost entitle like, a payment plan, like half down and so forth?
Roger: The cost usually is about $1,000 I would say for a Chapter 7 bankruptcy.
Jay/Caller #1: Right
Roger: I will say this, and you’ll just probably be shocked at it, but in some of the outlying counties some of the attorneys are trying to charge $3000 to $4000 for a Chapter 7, which is, in my opinion, outrageous!
Jay/Caller #1: Man! You are telling the truth!
Roger: What, now?
Janice: He says, “Man! You are telling the truth!”
Jay/Caller #1: Yea!
Roger: Well, that’s what I’m here for I hope — all right?
Jay/Caller #1: Yeah, that’s all I need to hear. I’ll just keep listening and get ya’ll name and numbers and thank you Ms. Mathis.
Janice: You’re more than welcome! We have a couple of other questions which was ‘how long does it take?’ He got excited about that $1000! (Laughter)
Roger: Yea, he got me off track there. All right, what were the other questions?
Janice: How long does it take?
Roger: Ok, usually what happens is, typically, you’re in and out of a Chapter 7 case, I would say from the date of filing the case, within 5 months. Typically, procedurally, the most important thing for you to do if you’re thinking about filing a Chapter 7 is get a free consultation from an attorney. There are plenty of them out there that will do it, including me of course. But, if you’re going to go ahead and make it a productive consultation, the most important piece of information that you can have available for your attorney is the creditor list. A lot of times people get scared because they think that if they list their car or their house, or something, on that creditor list that they’re going to lose the property. That’s not the case. But it IS a felony and it really will make a very difficult and very painful process if you do not list ALL your creditors. You and your attorney can decide how you’re going to treat the creditors.
Usually about 30 days after we file the case, at least in the Atlanta division here, we’re seeing that the hearing, and that’s a pretty perfunctory hearing, and what I mean by that is, basically, the Chapter 7 bankruptcy trustee is going to ask you, as the client, did you provide the information to your lawyer and is it true and accurate? You’re usually in and out of that hearing within 5 minutes if the case is properly prepared. From that time forward there should be no further hearings unless you’ve done something bad and you haven’t told your attorney about it. This happened to me in a case about 2 years ago. Then from that hearing date, about 4 months later, you’ll get your piece of paper from the court saying that your debts are discharged. Once the case is filed, though, this is the beauty about it, once the case is filed there’s an injunction that goes up. That is, there is absolute protection, it’s a shield between you and your creditors so those creditors can no longer call you, they can’t threaten you, they can’t sue you, they can’t garnish you, they can’t do any of that stuff because it is all a violation of Federal law.
Janice: So that is the benefit of filing.
Janice: Now that $1,000, that doesn’t include the filing fee, does it?
Roger: No ma’am, the court cost is $299 for Chapter 7. Sometimes husbands and wives will file together, so there’s no additional court cost for that, it’s just one $299 fee even if you’re married. Sometimes it’s not advisable for a husband and wife to file together and sometimes one spouse doesn’t want to and that’s perfectly fine. So we have to look at each case individually and their debts.
Janice: Now, the other question that the gentlemen had was whether you could break that payment down into installments?
Roger: Sure. A lot of times attorneys will allow installment plans
Janice: And do you offer installment plans?
Roger: Yes, we do
Janice: So, if someone wants to come down, what is the bare bones minimum, they’ve got to have?
Roger: Probably $400.
Janice: Ok. Enough to cover the filing fee and a little bit for your time?
Roger: Well, we do the filing fee plus the $400.
Janice: Filing fee plus — ok, so you’re looking at least $700 to get you in the door? Then you can pay the rest of it over the next 30-60 days.
Roger: Yes ma’am.
Janice: If I’m sitting at home and I’m listening to you… what, in my situation, should make me think, you know, maybe I better call Mr. Ghai?
Roger: Well, that’s a good question. You see and hear a lot of things as far as debt consolidation, you know, all these advertisements on TV and frankly, those programs, for the most part; they don’t work a lot of times. They are basically a rip-off for the client. The second thing is, even in a Chapter 13 bankruptcy context you really have to think about, do you want to be in a Chapter 13 bankruptcy for the next 3 to 5 years and paying back a significant amount of debt and delaying repairing your credit… that type of thing. If you’re thinking about filing a Chapter 7, or any type of a bankruptcy, you have to remember if your $30k in debt and you want to repay it in the Chapter 13, that’s fine, but you’re going to have to remember you’re going to have to earn probably $50k to repay the $30k because of the tax consequences.
I’m not one to say that there’s never a circumstance that you should not file a Chapter 13. Chapter 13 bankruptcies are fine for specific purposes. But what I believe is that if you’re truly going to get your financial freedom, as a lot of people are advertising, Chapter 7 really should be at the foremost of your considerations. At the end of the day, 4-5 months later, you’re done. It may mean a little change in your lifestyle but is it worth it? Yes, I think it is worth it in the end. You might be driving a used car, or borrowing a friend’s or family member’s car, or making those temporary things until you can start, you’re debt free now, you can start putting away that money for yourself and your retirement and truly have piece of mind.
Janice: You know you mentioned earlier that you should not be afraid to list all your debts because you, the client and the lawyer, can decide how to treat those debts. Talk about reaffirmation and when it’s appropriate.
Roger: well, the court requires a reaffirmation. Let’s back up here…if you have a car, for example, that’s known as a secured creditor because if you don’t pay that creditor they can take that property back. So even if you file a Chapter 7 bankruptcy we have to make a decision, do you want to keep that car and pay for it or do you want to surrender it back to the creditor? Now, a reaffirmation agreement, basically, what is says is that you will continue to make the same contractual payments that you made to that creditor prior to filing your Chapter 7 case. However, one of the other benefits that we want to look at in a Chapter 7 case is what’s known as a ‘redemption.’ A redemption means that even if it’s a secured property, such as a vehicle, and you owe, let’s say, $15k, but the car is only worth $10k, we might be able to get court approval that you just, through the creditor that you only pay back the $10k, which is beautiful for you. You come out in really good shape in that instance.
Janice: And are you able to make that redemption not in a lump sum, but by continuing to make periodic payments to the creditor?
Roger: Not usually. What happens is that there are companies out there that do the actual funding for the redemption and they pay, then, your original creditors.
Janice: Say that again now.
Roger: All right. Usually on a redemption there’s different companies out there that you go to… (Interrupted)
Janice: Like lenders?
Roger: Lenders, yes.
Roger: That lender will pay off the original creditor and then you’re all done.
Janice: And then you pay back that lender that came in and paid the redemption fee for you?
Janice: I’m just trying to make sure I understand it. You’re being perfectly clear, but I want to make sure that I’m offering explanations so that people get it. Ok, well now if they do that… but you’re in bankruptcy, how do you qualify for a lender to come in and pay your redemption?
Roger: It’s done all the time, like I said, there’s lenders out there doing it and then we have to get court approval for the redemption, but that’s typically not a problem.
Janice: And that works for automobiles and other types of secured debt. Does it work on real estate?
Roger: No, not on real estate. Real estate would be an exception to that.
Janice: Right. And that’s one of the things that some of us have been trying to get Congress to think about changing… is to permit a redemption in bankruptcy for real estate which would make all these crazy modifications and modification applications unnecessary. But so far we can’t get the Democrats in Congress to vote with us. I’m going off on a tangent, but ya’ll have heard me do this before. We really need Johnny Isakson and Saxby Chambliss to think about why we treat automobiles differently than we treat homes in bankruptcy. It would save people a whole lot of time and they’d get to stay in their homes…. But, we’ve got some calls for you and those are more important than my musings! So let’s go to Reginald on line 2, good afternoon! How are you?
Reginald/Caller #2: Good afternoon Attorney Mathis, how are you doing?
Janice: I’m doing fine. Oh, Reginald, it’s good to hear from you!
Reginald/Caller #2: Good to hear from you and good to have you having the expert on this whole bankruptcy. The thing is, I’ve filed a Chapter 13 bankruptcy and I’ve got some properties involved in it. I wanted to ask the attorney if, and I have, the bank has now filed a motion to remove one of the properties that I had in the Chapter 13 protection to try to get it out of there so they can continue their foreclosure. How successful are they going to be with that because I have a hearing coming up soon with that? How will that work and do you think that they will be successful? What usually happens in a process like that?
Roger: Ok, I would really need to know… how far are you behind on that particular property, as far as the delinquency?
Reginald/Caller #2: At least, we’re talking about a good 6 or 6 months, and that’s because they’re refusing to renegotiate the mortgage… I’m in on a hard money loan on the property, and that is opposed to them wanting to give me a reasonable mortgage on the property with a lower interest rate and they’re refusing to do that.
Roger: Alright, what’s going to happen is this: You’re probably going to go into court and you’re going to have to come up with some partial payments because what you’re saying is that after you filed this bankruptcy case, you’re now 6 or 7 months delinquent. Is that right?
Reginald/Caller #2: Yes sir.
Roger: Ok. So, normally what happens is a motion is filed that’s called ‘A motion for relief from the automatic stay’ because the creditor is saying we don’t have adequate protection for our security because we’re not getting paid and the value of our property is depreciating. So, what happens is you probably are going to have to come up with some sort of repayment plan. Now that’s called consensual… (Interrupted)
Reginald/Caller #2: Well, when would they do that? Because in, with the other properties that I had, I was thinking that the trustee, once they start paying the trustee, because this is a fairly new, I only filed it about 2 weeks ago. With the other properties I know I have to pay the trustee and I was thinking that the trustee would be paying all my creditors with the money that I’m paying them, the thousands of dollars that I’m paying them per month. Is that the case?
Roger: It would depend on how much that particular creditor is receiving. The other thing that you might want to consider is you could always try, I don’t know if you have enough time to do it, but you could always try to sell the property. You have to do a motion to sell real estate but if you can get any purchaser in there that would be much better perhaps than to have it actually foreclosed on.
Reginald/Caller #2: Ok, well now let me ask you this. Now, if I have a Chapter 13 already and it’s part of my Chapter 13, you’re saying that I can still legally attempt to sell it — even if I have it under the bankruptcy protection?
Roger: Yes, you can, you just have to have a purchaser lined up and your bankruptcy lawyer will have to file a motion with the court and schedule a hearing. As long as it’s a sound financial deal the judge will probably approve it.
Reginald/Caller #2: Oh ok, I see what you’re saying. Again, going back to my initial question so…. (Interrupted)
Janice: Unfortunately, Reginald, I hate to interrupt you, but that music means we have to go to a break.
Reginal (Interrupted): Ok
Janice: But if you hang on, we’ll take another question and then I’ll give you his number so you can call him off the air and answer all your questions. Ok?
Reginald/Caller #2: Ok
Janice: All right, this is News and Talk 1380 WAOK. We’ll be right back with more information you can use.
Janice: Welcome back to Law Talk. This is Janice Mathis here this Saturday live, and every Saturday from 1pm to 2pm. The number is 404-892-2703. We know that you’re used to us being taped on Saturday, but we’ve got a brand new show. It’s been on now for about five weeks and so we’ll hope that you’ll join us. A great guest today, Mr. Roger Ghai, who is a real expert in the various kinds of bankruptcies and he says that there are lots of benefits to filing Chapter 7 liquidation bankruptcy and getting a discharge and walking away from those debts that you ought to consider. If I am contemplating filing bankruptcy, or getting any type of debt relief, what are some questions I should ask my lawyer?
Roger: I think that you would want to know what type of experience he or she has, how long have they been doing it? Do they recommend that you have a certain debt load before you do decide to file, which I do. As an individual I always look at the income and how much debt they have. I sometimes get folks calling me with 10k in debt and, in my opinion, that’s not worth filing. I think that most bankruptcy lawyers would agree with me on that simply because you cannot get a discharge for another 8 years. If you’ve got $20k or $30k in credit card debt then that’s a completely different story, and if you’re making only $20k a year, that’s a completely different picture.
Janice: Compare the difference between what happens to credit card debt in Chapter 7 versus what is likely to happen to it in Chapter 13.
Roger: Well, a lot of times even in a Chapter 13, the credit card debt may be paid at 0%. There are two types of Chapter 13’s. One is called a full repayment plan — also called an extension plan. The other type of Chapter 13 is called a composition plan, which simply means that you’re unsecured creditors in a Chapter 13, if it’s a composition plan, might get zero cents on the dollar.
Janice: Or anything between zero and 100.
Janice: Based on your what — ability to repay?
Roger: Your ability to repay, the income you might have. One of the things that the court looks at determining your eligibility for either a Chapter 7 bankruptcy or a Chapter 13 bankruptcy would be how much money do you have left at the end of the month to pay your creditors. That’s called disposable income. There are instances where you just might not be able to qualify for a Chapter 7 bankruptcy. You may not meet those requirements. There are lots of ways to finagle legally to determine if we can fit you in to a Chapter 7, but sometimes there’s not a way to do it and you’re forced to do a Chapter 13 sometimes.
Janice: You don’t have to give up everything you own in a Chapter 7. You can claim some exemptions. What are Georgia’s exemptions like right now?
Roger: In Georgia if you own real estate, and you own a home, you can, as an individual, protect $10k in equity in your residence. If you do not have a residence, the law allows you to use $5k to protect any other type of property. In addition to that, for example, jewelry can be protected up to $500. A vehicle can be protected up to $3500.
Janice: And now that’s the equity in the vehicle, that’s not the total value, right?
Roger: That is the equity in it. Let’s say for example, I had a case that the client had a car that was worth $8500, but you can only protect $3500 but he had a lien against the car of $2500 so we used part of that extra $5k because he didn’t have a residence to protect the car. So, even though the car was over the exemption amount in that case, we were able to protect it for the client.
Janice: Alright now guys you might not have followed everything that Mr. Ghai just said about the value of the vehicle, the lien, and the equity… but what’s important is not so much that you understand all the ins and outs of bankruptcy… what we’re trying to show you is that there are options that you have and you need somebody on the other side of that desk or sitting in that courtroom with you who DOES understand all of the bankruptcy options and protections that are available to you. I’m convinced that Roger Ghai, bad pun coming — is one of those guys who does understand. If you need information about debt relief, I would suggest strongly that you call him at 678-302-6555. I get calls all the time from people who want to file bankruptcy. I don’t file bankruptcies. I am so delighted to meet you because I didn’t know anyone, frankly, that I would recommend anyone to. But now finally I’ve got a guy that I can recommend people to talk to about their debt relief issues and that is Roger Ghai, 678-302-6555. Now we’ve got a good friend of this station on the line and we want to go to Gideon. Good afternoon, how are you?
Gideon/Caller #3: Peace and blessings on this Sabbath to you and your guests. How are you esquires doing today?
Roger: Excellent, thank you
Gideon/Caller #3: Now, for our children’s sake, can you explain why I called you an esquire?
Roger: Esquire is a term, I think it is an English term actually, that just means attorney or attorney at law.
Gideon/Caller #3: Ok, all right, excellent. Now I’ve got a couple of questions briefly and one that is not actually dealing with your field, but of course, Attorney Mathis is an attorney extraordinaire so I’m sure she’ll be able to give us some valuable input. We have so many of our children that are incarcerated for little or nothing from being profiled, but here we have a professional athlete, Mr. (Jonathan) Babineaux, who is caught being without license and his tag expired and with enough marijuana for it to be classified as a felony. But this young man was bonded out and will be playing football tomorrow, or today. How is it that he can do that when the law is supposed to be equal in this country and we are teaching our children that…and yet we have so many of our sons and daughters in jail right now trying to contact momma and daddy to get out but cannot as a result of having less charges than he had.
Roger: Well, number one is due process. Number two is money. Due process means that he’s not been convicted yet, so he has the right to a probation hearing and have the evidence presented. It could be that, you and I don’t know, I mean, I don’t know anything about this particular case but that’s the first thing I would say. The second thing is he’s got the money to bond out. If he didn’t have had the money he would still be sitting in jail just like everyone else. The ball is going to run its course and he may well end up not playing football. That’s what I would think at this point.
Gideon/Caller #3: Now, how is it that the poor are expected to receive and believe that they can receive equal treatment, for lack of a better word, under the law when we’re told in school that it’s all equal, but yet, we see case after case… and I would encourage you guys to see ‘Capitalism,’ Michael Moore’s new movie, it really explains the whole thing. I mean, we’re told on one hand that it’s equal, but yet, on case after case we see it’s not equal. How do we get our children to wrap their minds around that?
Roger: Well, I think you’re going to see a change and there is a change coming about in the country. That movie ‘Inconvenient Truth’ has exposed different power structures within the United States. If you look at, really, what has happened to average working folks in the last 30-40 years the opportunity for a lot of people isn’t there. It’s going to be very interesting to see, actually, how that plays out, once we, eventually, God willing, get through these economic times.
Janice: We want to thank you for your call Gideon. We’re going to take a break right now. You’re listening to News and Talk 1380 WAOK. Maurice, we’ll be right back with you in just a moment.
Janice: Good afternoon Atlanta. This is Janice Mathis and I’m here at News and Talk 1380 WAOK. We’re taking your questions about debt relief, specifically about Ch 7 bankruptcy. If you want to visit for more information, visit www.Chapter7attorneys.com, if you want to email our guest Roger you can do that at firstname.lastname@example.org. We’ve got a caller who’s been patient, good afternoon Maurice, how are you?
Maurice/Caller #4: Just fine. I’d like to thank you Attorney Mathis and Roger for taking my call. My question is my home value has plummeted. I have a first and second mortgage and my home value had decreased by $500k. I have a second mortgage, which is on a home equity loan of credit and I’m considering filing Chapter 7 bankruptcy to be able to walk away from my home and discharge the second mortgage, the home equity line. Is that possible?
Roger: It’s possible, but I would need to know a little bit more, for example, what’s your income right now?
Maurice/Caller #4: My income is well over six figures.
Roger: Ok, you’re probably not going to be able to qualify for a Chapter 7 bankruptcy. I’ve done this for 20 years and filed a few thousand cases and I’ll tell you why. You’re probably going to have what’s known as too much disposable income at the end of the month to be able to qualify for a Chapter 7. The court is going to look at your reasonable and normal living expenses. They’re not going to allow you to have exorbitant, for your family size, expenses and still discharge your debt. They’re going to look at that, so I don’t think… you can call me later, but I don’t think you’re going to qualify for a Chapter 7 bankruptcy.
Janice: What option might be available Roger? Let me say that, maybe some kind of composition where he ends up paying 20% or ….
Roger: That’s probably where you’re going to end up. You’re probably going to end up doing a Chapter 13 bankruptcy where you pay a certain percent. My gut is telling me the percent is going to depend, in a large part, on what your disposable income is and then that’s going to be used to calculate a formula as far as the actual percent of the dividend of the unsecured creditors.
Janice: Does that make sense Maurice?
Maurice/Caller #4: It makes sense but what if I’m unemployed?
Roger: Well you just told me …
Maurice/Caller #4: There’s nothing that says I have to work…
Janice: You can’t voluntarily quit though.
Maurice/Caller #4: Actually it’s not voluntary. (Laughs)
Maurice/Caller #4: I’m just… I’m just looking at the case as if I’m unemployed.
Roger: Ok, and how much assets do you have?
Maurice/Caller #4: Just … my car is paid off, it’s 20 years old but just the items in my house, no jewelry, no art, nothing like that.
Roger: Ok, one of the things is, and I’m not saying you’re doing this, but we have to be very careful because there’s such a thing as bankruptcy fraud. And I’m not saying that you’re trying to do that at all, but we have to be careful because somebody that goes from making well over six figures and now you’re telling me you’re unemployed, it gives me a little uneasiness. And so, if you’re truly bona fide unemployed in that context, then yea, there’s probably not going to be a problem in getting you a Chapter 7 bankruptcy discharge. Each case has to be looked at on an individual basis but if that’s the case we might be able to get a discharge if you’re surrendering everything.
Maurice/Caller #4: I have one last question. How soon before foreclosure do I have to file a Chapter 7?
Roger: I file them, sometimes, on the day of foreclosure and I’ll tell you why. Because it buys the client more time and a lot of times the client needs that extra, we’ve been lucky so far this year, that is, let’s say I file, I think foreclosure last month was December 1st, the first Tuesday of December, the creditor then has to go file a motion for relief from the stay to take the property back. There’s been such a huge amount of filings that they haven’t been doing that as rapidly as they used to so the clients are getting the benefit of being able to stay in their house for 3 or 4 months without making a mortgage payment. Sometimes longer, but it’s usually 3 or 4 months.
Maurice/Caller #4: Ok
Janice: Before the lender gets around to a motion for relief from the stay…
Roger: Advertising all over again and then foreclosure finally.
Janice: Right. Ok, well thank you for your call Maurice. It was a great call. We want you to visit www.Chapter7attorney.com and you can present your questions to Roger Ghai. You can email him at email@example.com and you’ll find lots of great information on that website. We have another guest in the studio and his name is Phillip Ghai and I believe he’d like to say hello.
Phillip: Hi everyone, my name is Phillip Ghai and I just wanted to say that I go to MCAA Rockets and my dad is a very good lawyer!
Janice: Oh! Okay! Hooray for Phillip! And, of course, that was Roger Ghai’s son, Phillip. He’s been in the studio with us here today and who knows? He may end up being a broadcaster, he certainly is a cute kid with dimples and we want to shout out to everyone at Marietta Center for Advanced Academics, which I’m sure, is a great, great school! Well, we’ve got a little more time left. The number here is 404-892-2703. You’ve stressed at the beginning and I know sometimes clients want you to stretch the truth or massage the truth, but you said at the very beginning it’s important to be candid about who your creditors are, what your income is… Talk a little about the reasons for that, the ethics involved in bankruptcy.
Roger: Well, you’re asking for the court to grant a discharge from obligations that you legally incurred and you have an obligation legally to pay back. For that right, the court and your creditors are entitled to know your assets. That’s just the basic premise behind it. You’re asking for relief, it’s a special relief that’s not normally granted. In this country we have that protection by virtue of the Constitution, but in other countries you don’t always have that debt relief.
There’s still, in some countries, debtor’s prison, believe it or not. So if you’re going to go ahead and be granted that right, you have to be truthful. It’s not an absolute right and in fact, a lot of times even in Chapter 13 bankruptcy cases clients think, ok well, I have X number of dollars and therefore I should be able to file my Chapter 13. That’s not how it works. You have to — it has to be known as a ‘feasibility standard.’ That is, in the total picture of all of your debts and everything and based on your particular amount of income, do you have enough money to pay a reasonable amount to those creditors over time? When I say reasonable, it’s not what YOU think is reasonable. There are certain legal requirements as to what the court and the law considers reasonable for those creditors.
Janice: You mean, there are even standards of what it should take to feed a family of 4 or what their utility bill should be. Of course in Chapter 13, I believe, there used to be a requirement that the plan be filed in good faith.
Roger: Absolutely. Good faith is a big part of any bankruptcy case – Chapter 7 or Chapter 13.
Janice: And some of those schedules that you have to file are verified under penalty of perjury…
Roger: Perjury, federal prison, that type of thing. I had, unfortunately, a client who, I guess I didn’t see it… she never told me, but sometimes these issues are litigated in front of a bankruptcy judge. She filed a Chapter 7 case and she wasn’t truthful with me and it ended up with having the court rule that she couldn’t get a discharge. I’ll never for this, but as we got out of the court house last summer, two summers ago, she told me of some assets that she had hidden in some Central American country… it was just like out of a John Grisham movie…
Janice: (laughs) and I’m laughing because that’s the lawyer’s nightmare right?
Janice: Because you really don’t want the trustee calling you up and saying… I mean, you could have been disbarred if you had known about that and participated in it and…
Roger: If I had known about it and yeah, but I didn’t and like I say, she told me afterward. But still, it was not a very easy feeling for me.
Janice: Well, if you want to know more about debt relief. If you want to know about Chapter 7 bankruptcy if you want to understand how bankruptcy works we encourage you to visit the website www.Chapter7attorneys.com to find out more. Once you visit the website if you still have questions you can call Roger Ghai at 678-302-6555 to find out whether your situation is one that might benefit from bankruptcy. I heard the gentlemen earlier say that his housing value has plummeted and you just say that value going off the cliff, and maybe it was a half million-dollar house. I think he said it had declined by $500k, which means, you know, maybe a quarter million dollars to 3/4 million dollar house and you still owe that money. But you can’t hope to get that property value back, at least not in the near term. It’s a tough situation.
Roger: It’s a tough situation and it really is a situation that, if you’re in that type of circumstance, then you really need to consider just walking away from everything and getting a fresh start and building up from there.
Janice: And when you say walking away from everything is that where a Chapter 7 bankruptcy would give you some relief?
Roger: Yes, absolutely.
Janice: I notice now that some banks, and this used to not happen years ago, some banks are coming back against home owners saying we repossess this property, we sold it at auction, we put it with a realtor, we put it our portfolio, we sold it, but we didn’t get all our money back. You still owe us because you signed a personal note.
Roger: Then what they’ll do is they’ll try to 1099 the individual for any, for what’s known as a deficiency balance just like the credit card companies do. Let’s say, for example, the credit card company and you owe them $10k and you settle for $2k, well you’ll get an income statement from them at the end of the year. Now, depending on your circumstances, if you’re insolvent, my CPA informs that you’re not going to have to pay tax on it. But there could be an instance, as Janice explained, that a mortgage company is still coming after you for the deficiency and it could, in some instances, I believe, be construed as income. So you really need to just walk away from it, file a Chapter 7 before they try that nonsense.
Janice: All right, we’ve given you information that we hope is useful to you. We’ll be back here next Saturday at 1pm. I’m Janice Mathis, our guest was Mr. Roger Ghai. This was News & Talk 1380 WAOK.