Davina: Good morning you’re here with Davina Mathis, I’m sitting in for Janice Mathis for Legal Talk. We’re here with Roger Ghai of www.Chapter7attorneys.com . He’s going to talk to us about Chapter 7 bankruptcy and all of the issues related to it here on Legal Talk this morning. Good morning Roger.
Roger: Hey, good afternoon actually.
Davina: Hey! It’s afternoon!
Roger: Yes
Davina: I slept through some of it
Roger: Alright, you were driving I guess from South Carolina?
Davina: I came from South Carolina to talk to you Roger because Chapter 7 is a big deal.
Roger: It is. It’s a big deal. One of the issues that I wanted to talk to people about today is Chapter 7 bankruptcy and modifications and foreclosure and that type of scenario. In the past, a Chapter, well, let me back up because some of our listeners may not know what a Chapter 7 is so we’ll start a little bit this afternoon with some fundamentals. Basically, a Chapter 7 is known as a fresh start bankruptcy. If you qualify you wipe out a lot of your debts, not all of the debts, secured debts, that is property that you’re making payments on such as a vehicle or furniture.
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You either have to decide to give up that property or keep that property and continue paying for it. Now, in the past what was happening, and I want to talk about this because so many people are in this situation, is that if you filed a Chapter 7 bankruptcy and you were behind on your mortgage payments there was no way on God’s green earth that the mortgage company was going to allow you to keep the home. Now, in the last month or two, this is what I’ve seen as a development in my practice which is this: We are filing these Chapter 7 bankruptcy cases and the clients are behind on their mortgage and guess what’s happening?
Davina: What’s that Roger?
Roger: Well, the mortgage company now, all of a sudden, wants to go ahead and do a workout or a modification with the client. The interesting part about that is this, that I have so many of those clients have come to me and said to me that Roger, we’ve already tried to do a modification and so forth and so forth umpteenth times. Whether it be Bank of America, Wells Fargo or any of the other major mortgage companies and they just won’t do it. Well, lo and behold, when you file a Chapter 7, guess what? Bank of America, Wells Fargo and some of the others are going ahead and contacting us to see whether the client wants to do a modification.
Davina: Well surprise surprise!
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Roger: Surprise Surprise. The same thing is also happening to my existing Chapter 13 bankruptcy clients. They’re in a Chapter 13, they’ve fallen behind on their mortgage payments and now, instead of filing for the motion for relief, we’re getting correspondence from all the major mortgage companies that says hey, do you guys want to go ahead and modify? You know, years ago that simply just would not have happened.
Davina: Absolutely not but with the whole foreclosure crisis I’m seeing a lot of people wanting to modify and I’m working with some people that are trying to modify and it’s very difficult. It’s like pulling teeth to get the mortgage companies to work attorneys even.
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Roger: It seems like that the only thing that grabs their attention nowadays is filing a bankruptcy case, whether it’s a 7 bankruptcy or a 13 bankruptcy. My advocacy on behalf of these bankruptcy clients a lot of times is aimed at getting clients out of debt, starting fresh, getting rid of that credit card debt, trying to keep a roof over their heads and that type of a thing. So, Chapter 7, a lot of the times, is a good option. The Chapter 13 bankruptcies, as you may know since you practice in South Carolina, but they’re basically the same all over the country. The Chapter 13’s are a very frustrating experience for the clients because I think that bankruptcy lawyers sometimes mean well but they don’t properly explain to the client up front that you either have the money, most instances, to be able to pay on property in a Chapter 13 or you don’t. If you don’t, basically, you’re just prolonging the inevitable or the agony because most of the Chapter 13’s end up in a Chapter 7 proceeding. That’s true with about 75% of the cases. There are legal reasons with that being said why people have to file for a Chapter 13 and they just can’t qualify for a Chapter 7 bankruptcy.
Davina: Well, a lot of people don’t want to file for Chapter 7. I don’t do bankruptcies but people don’t want to file for Chapter 7 because they think it means that they lose everything like the house, the car, everything. Is that correct?
Roger: No. I tell you, boy, that’s a myth and I think I need to write an article on the myths of filing bankruptcy. Because one of the myths is that you’re going to lose your property. Another myth is that your credit is forever going to be damaged. If you look at my website www.Chapter7attorneys.com you’ll find a whole bunch of information as far as reestablishing your credit and that type of a thing. In fact, I have clients right now who are in Chapter 7 proceedings, the case is not even closed out, and they’ve already filed bankruptcy against their credit cards and guess what has happened. The credit card companies are now soliciting those very same clients for new credit cards. My understanding is we’ve got about 3 callers waiting… So if we want to take Wayne, Wayne, this is Roger Ghai.
Wayne/Caller #1: How you doin’ Roger? There having some kind of event at the World Congress, do you know, can you explain what that’s for?
Roger: Yea, I have heard about that just coming in from somebody who is familiar with that program. It is a modification program, if I’m understanding it right. Is that right?
Wayne/Caller #1: Yea, I think so.
Roger: Yea, I’ve heard not real good things… I don’t know personally but I will tell you for a fact but I’ve heard not good things about modification companies that are out there.
Wayne/Caller #1: Well actually one of them is my lender, Wells Fargo
Roger: Ok
Wayne/Caller #1: They’ve already sent me a list of options but my understanding is the only qualification that you need out here is that you don’t have the ability to make the payment. That’s my understanding.
Davina: Well, that’s not the only qualification. This is Davina Mathis. I’ve been working with Wells Fargo and a few other banks, Bank of America and a couple of others since January and there are several pages worth of qualifications that you must have in order to do the modifications. That’s just not true that it is just that you can’t pay. I’m not saying that you can’t do it or you shouldn’t try to do it…
Wayne/Caller #1: Well can you just tell me briefly, give me an overview of what it is you need. Do they need financials or taxes and stuff?
Davina: Well what I’ve seen is taxes, financial statement, which is very detailed about all of your income, all of your assets, all of your monthly expenses for your entire family, what you’re paying for each and everything that you’re paying for. That’s a very difficult concept because most people pay things as they have to and they don’t really gage what it is and how much it is every month and you have to prove that. You have to prove that you do not have the ability to raise the money in some other way. That takes a lot of doing and I’ve seen people who are working on it for months.
Wayne/Caller #1: It’s just me so, you know, I don’t have to get information for anybody else.
Davina: Well, give it a try.
Roger: If it doesn’t work, get in and contact a bankruptcy lawyer. That’ll increase your leverage and they might want to talk to you more seriously about favorable terms (interrupted)
Wayne/Caller #1: Well actually, to be honest with you, I won’t be able to keep the house regardless of what they do.
Davina: If that’s the case then modification is probably not for you.
Wayne/Caller #1: Ok. Why do you say that Davina?
Davina: Because if you can’t prove it’s impossible for you to pay it, then you haven’t met the one criteria that you were aware of.
Wayne/Caller #1: So that’s the main criteria then? There’s no way that you can keep this house other than a modification?
Davina: That’s correct.
Wayne/Caller #1: Ok alright you have answered my question.
Davina: Thanks for the call
Wayne/Caller #1: Thank you
Roger: Are we going for a break now? Ok we will be back shortly.
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Davina: You are listening to Legal Talk on News and Talk 1380 WAOK. We’re talking to Roger Ghai of www.Chapter7attorneys.com . We’re talking about Chapter 7 bankruptcies.
Roger: That’s right and I think we have Edward on the line right now.
Edward/Caller #2: Hey, how are you doing Davina?
Davina: I’m fine
Edward/Caller #2: Hey I’ve got a question. I am in a Chapter 13 bankruptcy right now and I’m almost finished. I’m interested in possibly buying a home. Do you recommend I file a Chapter 7, uhh, or do an amendment to my Chapter 13 and do a Chapter 7 bankruptcy? Or just stay in it for the long haul and wait til next year?
Davina: What about that Roger Ghai? Tell us.
Roger: Well sir, I don’t know enough about your case but I would definitely contact your lawyer. You know, I can’t give you legal advice because you are represented. He or she should be able to tell you what’s going to best in your interest at this moment and time. But it gets to be a little more complicated and it’s not something that I can answer without knowing.. (interrupted)
Edward: I wanted to say that my lawyer died.
Roger: Ok
Edward: Early this year so… so I’m somewhat on my own.
Roger: Ok you may want to try to see if there’s another lawyer that you can go in and talk to who does that type of work and explain the situation in your community. That’s what I would do. I would try to find someone in your community that you could talk to and who can review the file.
Davina: Are you in the Atlanta area?
Edward: Yeah
Davina: You might want to give Roger a call.
Roger: You can give me a call on Monday or after the show. The best thing to do is probably on Monday. 770-792-1000.
Edward: Alright. Thank you.
Davina: Thank you
Roger: I guess we have now Charlotte on the line.
Charlotte: Hello, how are you doing?
Davina: Hi Charlotte
Charlottte: Hi. I just want to confirm something. After you file a Chapter 13 bankruptcy, if you don’t pay all of your collectors off and after 10 years is it just forgiving, do you have to worry about it after 10 years? From 2000? That’s what I wanted to know, I just wanted to hear you all say it again. I filed Chapter 13 in 2000 and they didn’t pay all the collectors off, but it’s been 10 years and that’s my question.
Davina: I guess your question, Charlotte, is does it magically disappear after 10 years even if you don’t pay it off.
Roger: It depends on the type of Chapter 13, it should show if you fully complied with the Chapter 13 bankruptcy plan, and it’s been more than 10 years it should be removed from the credit file so long as every creditor was listed on your original petition. So you’ll have to go back and check to make sure everybody was listed. The other factor was did you successfully complete the Chapter 13 and actually obtain a discharge.
Davina: I think Roger, that she was saying that she did not complete paying off what she should have paid under the Chapter 13. Is that right Charlotte? I think she hung up but I think that was her question.
Roger: Alright, I guess we’re going to go to Anne next.
Anne: I would have loved to have heard what Charlotte would have had to say about that because that’s something I’ve inquired about myself. I keep hearing almost a kind of glorification of filing bankruptcy, but I’m wondering about the negative repercussions. Now, I’ve only known a few people that have filed it and they just say it is an awful result. Why would we want to file if you’re going to have the same results as if you didn’t file it and you’re still struggling and you still have the same bad negative credit score and from what these people, there are 2 of them I can think of are telling me, nobody wants to lend you anything because you didn’t pay off before. Also one of the questions I’ve been seeing on some job applications is ‘have you ever filed a bankruptcy?’ So, apparently this is not the panacea you are presenting but I’m certainly interested in the time frame. What’s the problem with trying to just sit down and consult with you to find out, just to get more information on the timeframe?
Roger: Well, let me ask you and make a couple of points. Number one, it depends on what type of bankruptcy you file as to whether you are going to have an easier road to rehabilitating yourself or not. Let’s say, for example, you filed a Chapter 13 bankruptcy and you did not complete the payments or you actually did a Chapter 13. Chapter 13’s last for 3 to 5 years, ok? So you’re going to have a difficulty during that time period. One of the reasons that I don’t do many Chapter 13 bankruptcies is simply because there’s a lot of frustration by the clients. The clients have, in my opinion, unless you sit down and explain, they have unrealistic expectations as to what a Chapter 13 bankruptcy is going to do. It is a long process. It is a frustrating process. It is a stressful process.
Unless the lawyer sits down and has that candid conversation with the client up front, I think that you’re absolutely right, that you’re going to have people out there who think it’s a panacea and it’s simply not. Now, if we compare a Chapter 7, we’re talking apples and oranges. In a Chapter 7 bankruptcy the client is in and out of the bankruptcy case, typically, in 4 to 5 months. A lot of times in a Chapter 7 actually, the clients already have bad credit. So, you’ve got a judgment or you’ve got a delinquency on your credit report or you have negative credit history. Your credit score is very very low.
In some instances, filing a Chapter 7 and getting debt free actually will improve your credit score because those negative items are removed. Furthermore, in a Chapter 7 case most people don’t know but they think ok, I’m never going to qualify again for a house. That’s simply not true. I have clients right now who are qualifying within 2 years of their discharge because that’s what the current FHA guidelines are. As long as after 2 years after your Chapter 7 discharge you’ve kept your credit clean. If you’ve paid your bills on time and you have not gotten yourself into further financial debt and you’ve not been delinquent and you don’t have any judgments, clients are qualifying for a Chapter 7 case. So, you know, your question is well taken but further analysis really has to be done as to whether the people that you’re referring to, did they do a Chapter 7 bankruptcy or a Chapter 13 bankruptcy and did they keep their credit history on time after they completed the case or not.
Anne: Ok well that’s one of the best definitions I’ve heard in awhile and I appreciate that. Would you take, just somebody’s call, just to get a consultation with you just to get information?
Roger: Sure. I always give free consultations. Just call me Monday please at 770-792-1000.
Anne: Well that’s very generous, thank you.
Roger: You’re welcome
Davina: Thank you for your call.
Roger: I think now we have Greg on the line.
Greg: Hey, how you doing?
Davina: Good afternoon Greg, what’s your question?
Greg: Yeah, mine is in regard to credit cards. For example, if your balance were or your credit limit were, say, $1500 and you didn’t pay and they charged the account off. Then when the collectors deal with it, it’s like $3000.
Davina: Right
Greg: Why is it so hard to negotiate from the principal, you know from the principal of what you owe versus twice that much when you’re dealing with a collection agency?
Davina: Well Greg, the simple answer is because the creditors don’t have to. One reason that there is Chapter 7 is that there has to be a way out or there should be a way out. The government has said that there should be a way out of that situation.
Greg: But I tried to go that route but I was kind of afraid of that. I went to a bankruptcy attorney and all of the paperwork you gotta fill out, and then the fees are astronomical, then it just seemed like there is just not a fair way out. They would deal with you if you’ve got all of the money available TODAY, not next week, not next month.
Davina: Right. But if you had all the money you would have paid it in the first place.
Greg: That’s the problem I’ve been having.
Davina: Right. That is the classic dilemma. You have to weigh the cost. Is it too costly to have to fill out the paperwork and pay the attorney or is it too costly to have poor credit and be bound by this debt? You really have to consider that and talk to an attorney who’s skilled in Chapter 7 bankruptcy and Chapter 13 bankruptcy and weigh your options.
Greg: Ok. Thank you
Davina: Thank you
Roger: One of the areas I wanted to talk to you about today, too, is student loans. Normally, student loan debts are non dischargeable. There is an exception to that and it’s known as a hardship discharge but that’s virtually impossible, it’s not impossible, but it’s virtually impossible to prove and it’s very time consuming and it’s very expensive actually. Interestingly, Congress finally has a bill in which they are thinking about making student loans dischargeable. It will mean taking it out of the category as other non dischargeable debts such as criminal actions or child support or fraud. Let’s hope and cross our fingers and hope that the bill actually makes it through Congress and we do get some relief for clients who have significant amounts of student loan debt. I think our next caller is Charlotte.
Charlotte: Hi. I’m just asking, this is Charlotte, I’m asking if my girlfriend, is all forgiven after 10 years? So where does she stand now?
Davina: I think that you said that your friend had not paid off the Chapter 13 bankruptcy?
Charlotte: Yes ma’am. She didn’t finish paying them off after 10 years but they said they dismissed. I mean it’s not on her credit report.
Roger: It is or it’s not?
Charlotte: It’s not
Roger: Well that’s good for her then!
Charlotte: Ok well thank you sir, thank you.
Roger: You’re welcome
Roger: Alright, sometimes clients have questions of should I file? I think that whatever I tell clients as far as whether they’re considering filing, is to sit down at the kitchen table, look at your monthly expenses. If you’re continuing to go in a negative direction each month, then you may want to consult with a bankruptcy attorney. Now bankruptcy, let’s be clear, it is not for everybody. There are other options out there available. One option might be debt consolidation but people really have to be careful with those companies because those advertisements for those debt consolidation companies sound really great and everything… but the reality is that you not only have to pay the debt consolidation company you also have to pay on the debts themselves. There’s a lot of fraud that’s going on with regard to those types of companies.
Davina: And I understand, Roger, a lot of times they end up paying a lot more than they would have if they had just paid the debt.
Roger: Absolutely. I think we’re going to a break now.
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Davina: We’re back with Legal Talk with Roger Ghai and Davina Mathis, sitting in for Janice Mathis. Roger, we’re talking about Chapter 7 bankruptcies. How do you know whether you qualify for a Chapter 7 bankruptcy?
Roger: We have to look at the income that you’ve made over the last 6 months. That’s what we have to input into the bankruptcy petition when we file the case. We have to see whether under the current guidelines you are over or below the median income. For example, for a person of one in Georgia, the current limit that you can make for income to be able to qualify for a Chapter 7 bankruptcy is $40,760 and it goes up from there. There are other factors that go into that too. So, even if initially, let’s say you’re a single individual and you’re making $48k, but you have mortgage payments or you have car payments or you have child support obligations, those things would be deducted and you would probably be able to qualify for filing a Chapter 7.
Davina: What about people who are self employed? How do they prove their income? What do they need?
Roger: We have to go by checking deposits, bank deposits, that type of a thing. I usually have them sign an affidavit saying what they’ve made after going through the bank deposits for the preceding 6 months. That’s normally what I have to do.
Davina: Would that include business expenses? Would that be deducted from their income?
Roger: What we have to do is we have to list the Gross income on the statement of financial affairs which is question #1 as far as what the Gross income was. But then, we meet for business and then as far as the means test we would use the actual Net income from the business after the operating expenses. So, for example, if the person had Gross income in the business each month of $10k and business expenses would be $5k, then we would be inputting $5k into the, as far as for purposes of means testing, into the means testing aspect of the case.
Davina: Does Chapter 7 bankruptcy have any affect on your personal income taxes?
Roger: It can, if you have an income tax return coming in, it depends on the amount, we need to go ahead and protect it as an exemption. Sometimes you are able to protect it, sometimes you’re not. Most bankruptcy lawyers are just going to time it until after you receive the return so you’ve got the money… because we might have already used up all of your exemptions. Just so everybody knows, an exemption is the, even though you’re filing a bankruptcy case, that does not mean that you’re going to lose your property necessarily. It just means that we have to be truthful on the bankruptcy schedules and list each and every creditor and the assets that you have. Depending on the value of those assets most instances you are able to protect those assets. It’s very rare that you can’t protect an asset. If you cannot protect something of significant value we just do not file the case.
Davina: What about people who are in foreclosure, I know that we talk about this a lot on Sisters in Law, South Carolina has a better law regarding foreclosure. It takes about a year or a year and a half to foreclose on a property. But in Georgia, I understand, foreclosure happens very quickly. Is there anything about Chapter 7 that can be done to stop a foreclosure?
Roger: Well, all bankruptcy, whether you’re filing a Chapter 7 or a Chapter 13, as long as it’s filed prior to the actual foreclosure sale, will stop the foreclosure. The other thing is that currently in the legislature there is legislation pending, I don’t know the details of it, but it is trying to change the remedy that the mortgage company has as far as trying to foreclose once the loan has become delinquent. So I think that there’s now, if I’m remembering correctly, a 90 day period that they’re talking about as far as providing a notice to the consumer and then waiting 90 days after that before they can actually foreclose.
Davina: Well, I know you’re right because we’ve been talking about foreclosure for about a year. But that bill has been pending and kind of languishing in the legislature and I don’t know if it’s going to get to some people quickly enough. So, are you saying that if a sale is scheduled, you have a date given, whatever I think it’s the first Tuesday of each month…
Roger: It’s the first Tuesday of each month here in Georgia. For example, the next foreclosure date will be July 6th. So if we filed the case on July 5th that would stop the foreclosure. Now, don’t wait until the last minute because there’s a bunch of documents that have to be gathered by your lawyer and in addition to the fact that there’s an online consumer credit counseling class you must complete before the case can be filed. Your pay advices have to be gathered up. Your tax return has to be gathered up in order to be able to file. We don’t need that immediately upon filing, but we do need to provide that tax return to the Chapter 7 or Chapter 13 trustees’ office within 10 days of the actual hearing. So it’s not something, if you’re in that foreclosure mode right now, it’s not something that you want to lie around or wait until the day before and think that your lawyer can file the day before foreclosure.
Davina: Now how long does it take to file a Chapter 7?
Roger: You know it’s really beautiful now because all of the cases are filed electronically. So to file a Chapter 7 bankruptcy, it depends a lot of times on the information that you’re providing to your lawyer. My office orders the credit reports and I also usually ask the clients to provide a list of creditors to be able to compare it. So that’s a critical piece of information. The client intake has to be done and sometimes if the client is super prepared, and they sometimes are, we can file it within a day or that day.
Davina: Well that’s great news for a lot of people.
Roger: It is.
Davina: Now, you brought up an interesting subject about modifications. That’s one of my pet peeves. The banks got the bail out but they didn’t’ have a requirement to modify the loans with the money that they got from us. I’m not trying to get political on you, but where do the people come in there? The people who are struggling to pay their mortgages…
Roger: That’s going to be an interesting issue here. I think that the only thing that is going on right now on that issue, well number one, that bill did not go through the Senate. There was going to be legislation to that effect but it never made it through Congress. People seem to be able to have to take things into their own hands right now. Obviously it’s not getting done through the legislation and so the only remedy the people have right now is probably filing if you want to remain in the house.
Davina: You mean filing bankruptcy.
Roger: Filing bankruptcy. That’s the only thing that seems to be turning the leverage in this scenario. Like I said in the beginning of the program, it used to be you’d file a Chapter 7 bankruptcy for a client and you’d tell them that they’re going to lose the house or they already knew or they had already made a decision to give up the home. Now, you file a Chapter 7 bankruptcy and instead of having to tell that to the client, there’s a good possibility that the client is going to be able to keep the house.
Now, doing that strategy can be a little risky because if the client really does want to keep the house and, God forbid, you get one out of a blue moon where the mortgage company says no, you’re behind on your mortgage payments and you can’t keep it. So there is a little risk to doing that strategy, but you can always file a Chapter 13 if you’re behind on your mortgage payments and the Chapter 13 bankruptcy is designed specifically to allow you to have the time to cure that mortgage arrearage, that is, any missed payments prior to filing your bankruptcy case, that would get paid back over time in a Chapter 13 bankruptcy proceeding. That is, a lot of times, what Chapter 13 bankruptcy is used for.
Davina: That is great information. We’ll be back after a break with Legal Talk on News and Talk 1380 WAOK.
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Davina: We’re back with Legal Talk. This is Davina Mathis, one of the Sisters in Law. I’m here with Roger Ghai of www.Chapter7attorneys.com . We’re talking about a very important issue, very important to people who may be facing foreclosure or people that are seeking modifications but are not getting a response from their banks. We’re talking about Chapter 7 bankruptcy. Who should file, how to file, who to call. Roger Ghai has been giving us some great information. You can reach him at 770-792-1000.
Roger: If any listeners have any questions as to what is a Chapter 7 bankruptcy and how it works or what is a Chapter 7 discharge? A lot of people don’t know what a discharge is. If anyone has any questions as to how does a person obtain a Chapter 7 discharge? Who is permitted to file a Chapter 7 case? What is means testing and how is it carried out? If anyone has any questions as to who is eligible for a Chapter 7, or how much is the filing fee and attorneys fees? Those are good questions. Where should a Chapter 7 case be filed? The question of whether or not you have to file with your husband or wife. That’s a question that we get quite frequently. The answer is no, you do not have to file jointly. If you have those types of questions… are employers notified that you’re filing a Chapter 7? Can I be discriminated against because I’ve filed a bankruptcy case? If you have these sorts of questions please give us a call.
Davina: I find that, I do a lot of divorces, Roger, and I find a lot of shame associated with people consulting with an attorney about bankruptcy. I don’t do bankruptcies, but at the end of divorce cases, often times, my clients need to consult with a bankruptcy attorney. Is there any particular reason why people should be ashamed to talk to a bankruptcy attorney?
Roger: No, and what you say is true, a lot of times people, this is probably the last thing that they want to do is to have to talk to a bankruptcy lawyer about possibly filing a bankruptcy case. I don’t think there’s as much stigma as there was in the past about it. But still, nonetheless, it’s pretty prevalent in some communities where they just don’t want to, people just don’t want to do it. They feel ashamed. They feel like they failed.
You know, the bankruptcy code provides for the discharge and that relief for certain reasons. In fact, actually going all the way back to biblical times, every 7 years people were allowed to discharge their debts. So there’s sort of an ancient history going back to the ancient world as far as filing bankruptcy. I don’t think that, obviously, that it’s something that somebody actually wants to do. Most people don’t want to do it. Most people do not try to get around the system. It’s just something that people, their backs are against the walls, they’ve lost their job, there’s been a divorce that’s gone on, there’s been humongous medical bills and the client doesn’t have insurance… those are the types of things that really force people a lot of times, plus, just the current economic times right now go into this bankruptcy situation.
Davina: You bring up an interesting point. The question that Charlotte asked about her friend makes me think about that biblical, every 7 years discharging the debts. I think one thing that Charlotte raised was that her friend didn’t complete her Chapter 13, didn’t finish paying it off, but she didn’t see a particular creditor on her credit report. Does that mean that it went away?
Roger: No, that creditor might rear its ugly head at any time. Who knows? They may or may not. The fact that it was not paid off does not release her from her obligation to pay. The only thing that’s going to release her, in most instances, is going to be the payment.
Davina: Now, can a person file a Chapter 7 after having unsuccessfully filed a Chapter 13 or unsuccessfully attempted to pay off under a Chapter 13?
Roger: Yes, and that’s a big point I try to make with people is that 75% of the Chapter 13 cases do not work, they fail. So the clients end up filing a Chapter 7 case anyhow. So the answer to your question is can somebody’s Chapter 13 case get dismissed and are you then still eligible for relief? The answer is absolutely. There’s a variety of reasons that the Chapter 13’s don’t work but it’s primarily because somebody’s lost their job, there’s been a downsize, something of that nature and they just can’t, you know, it’s a hand to mouth, day to day, week to week situation and the clients are just over stretched.
Over time, something inevitably happens… a car has to get repaired or something like that. The money is not there. So what happens? They are not able to make their Chapter 13 payments and pretty soon the Chapter 13 bankruptcy trustees office is filing a motion because the client is unable to pay the Chapter 13 payments. Most of the time Chapter 13 bankruptcies are more expensive than a Chapter 7 bankruptcy fee. Generally you’re going to look at a $3,000 to $4,000 in metro Atlanta for a Chapter 13 fee for most lawyers. In a Chapter 7 case you’re looking at probably between $1,000 to $1,200, or in that ballpark range. If you’re going to end up, if it looks like realistically you’re probably going to end up in a Chapter 7 case anyhow… I guess my question, or food for thought for my listeners, is why are you trying to do the Chapter 13 when it’s going to cost you more and it’s going to prolong the time in which you can rehabilitate yourself and you’re going to have to pay more attorney fees? So there are reasons, again, that people do want to file a Chapter 13 and sometimes they do warrant. They do not always fail. Sometimes people are not, they do not qualify for filing a Chapter 7 so there’s no other legal option. It’s just a decision as to the type of bankruptcy when you’re contemplating it that you really need to think long and hard about which route do you want to go.
Davina: Typically, how long does it take from the time of filing a Chapter 7 bankruptcy to the time that there’s a complete discharge and the case is over?
Roger: Usually it’s about 5 months and then the case is completed. Normally from a timeline perspective, let’s say for example, if the case were filed July 1. The meeting of creditors hearing which the client has to attend is going to be approximately 30 days after the case is filed. So by August 1 there’s going to be that hearing, and then about 4 months after that time then you’re going to receive a piece of paper in the mail from the bankruptcy court saying that your debts are discharged. Clients are pretty relieved at that point and time when that occurs.
Davina: You’re saying that they’re not offering this as a panacea, as one of our callers said, there are some stark differences between Chapter 7 bankruptcy and Chapter 13 bankruptcy.
Roger: There are stark differences between those two types of bankruptcy and also, the fact of the matter is that the reality is bankruptcy is not for everybody. So if you’re thinking about it you need to find out what all of your options are. I’m not saying that every person that’s thinking about it should file, by any stretch of the imagination. People just need to be aware. They need to educate themselves. You can go to my website www.Chapter7attorneys.com or call me at 770-792-1000. I give free office consultations and a lot of lawyers around town do the same thing so you might want to pick a lawyer in your area, or just however you decide to do that.
Davina: It’s always better to talk to an attorney, I think.
Roger: It is. It’s better to talk to an attorney, not a paralegal. So make sure that whoever you’re talking to is actually an attorney.
Davina: I find a lot of people have a problem with property taxes where their property is up for sale or subject to be sold because of unpaid property tax. Does Chapter 7 have any affect on that situation?
Roger: Well, if the government is trying to foreclose because of unpaid taxes you can stop the sale, any bankruptcy is going to stop the sale, but the taxes are going to have to get paid on property taxes if you’re trying to keep the property.
Davina: So what’s the difference between filing and not filing? Is there a timeframe that they’re given to pay the taxes?
Roger: You’d have to work out a payment plan with them on the taxes, on the property taxes.
Davina: Is that possible under Chapter 7 bankruptcy?
Roger: That’s a voluntary type of a situation where you’d have to get an agreement from the taxing authority versus a Chapter 13. If you’ve got delinquent property taxes it’s not going to have to be a voluntary thing with the taxing authority. So you just spread that out over time, propose a repayment plan in a Chapter 13 that is actually approved by the court and then the creditor has to accept the payment.
Davina: I think what you’ve been saying this whole time is that it’s not a magic solution. There’s no magic about getting rid of debts. There’s no magic about filing bankruptcy but it could help in some situations.
Roger: It could help. A lot of times it does help. Everybody knows from listening to me that Chapter 7 bankruptcy clients, a lot of times, are just doing a lot better. I’ll run into them months later and they’re just doing a lot better psychologically because they don’t have that burden on their shoulders anymore.
Davina: That could be a heavy burden. Roger Ghai, you’ve given us some great information, a lot of things that I didn’t even know. I hope our listeners were really listening. If you’d like to visit Roger’s website it’s www.Chapter7attorneys.com . His phone number is 770-792-1000.
Roger: Thank you
Davina: Thank you Roger
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