There is no Chapter 20 in the bankruptcy code, and you can't go file a "Chapter 20." But for many people, what we call a Chapter 20 is the best solution.
What is a Chapter 20? A Chapter 7 plus a Chapter 13 (7 + 13 = 20). First, you file a Chapter 7 to discharge personal liability on secured debts and discharge unsecured general creditors. Then, we file a Chapter 13 to reorganize what is left over. The Chapter 13 doesn't result in a discharge, but that is alright - the Chapter 7 provides that protection.
So, why bother? For many folk, the debt limits in Chapter 13 prevent them from filing -- they owe too much on their bills, and would be forced into a Chapter 11, and a Chapter 11 isn't worth the headache, costs, and struggle. So, the Chapter 7 gets filed, and we get rid of that debt.
However, maybe you really need the tools Chapter 13 affords you - stripping a second mortgage, paying off taxes, modifying a horrendous interest rate on your vehicle. So once the Chapter 7 is completed, the (now eligible) Debtor files for Chapter 13 reorganization to help get their affairs in order.
One of the biggest misconceptions about bankruptcy is that you're not able to have credit for any number of years after filing; that you have to wait until your Chapter 7 or Chapter 13 is off your credit report to rebuild your credit, buy a car, or even buy a house.
That just isn't true. The purpose of a bankruptcy is to give you a fresh start - and that means going out and living life, not sitting on your hands in penance for years. We want to be able to put the past in the past, and have a productive future.
Yes, A Chapter 7 should appear on your credit report for 10 years, and a Chapter 13 should appear for 7 years. But for many people, the trade off is in getting all the other negative stuff - credit card bills, medical bills in collections, pay day loans - off your credit. By giving yourself a blank slate, when you engage in activities that build credit, you can improve your credit score, instead of just having the old, negative accounts drag you down.
So, how does this work?
First, when your bankruptcy is filed, the automatic stay goes into effect. Because your debts are no longer collectible, those debts should stop reporting on your credit report. Wait a few months after filing your Chapter 13* to see, or wait until after your Chapter 7 discharge.
Second, dispute improperly reporting creditors. Experian, Transunion, and Equifax all have online dispute websites. By filling out a brief form, you can explain why a negative account no longer should be shown on your credit report ("stayed in bankruptcy, not collectible" or "discharged in bankruptcy"). This starts a short process with the credit agency will contact the creditor to verify or dispute your allegation.
And finally, with your cleaned up credit report, build credit. The key here is to be smart - view this as a game, and to win a game learn the rules. You don't need to spend huge sums of money. You certainly shouldn't be carrying balance month to month on any new credit cards. For many debtors, because of the years of abuse their credit reports have suffered, they can see substantial improvements by taking simple steps.
* Whether or not the reporting of debts staying in bankruptcy is a violation of the automatic stay appears to be open to some dispute; however, in my experience, most creditor's don't consider this a hill worth dying on, and will stop reporting once the issue is raised. If you file a dispute and the creditor continues to report, speak with your attorney.
Not all debts are made equal. For many people, they continue to have old, no longer collectable debts harrass them and report on the credit, dragging them down. This is despite the fact there is no longer an enforceable obligation - in other words, any money collected is basically a gift to a debt collector.
The most common situation is debt where the statute of limitations has expired (generally 4 years). Once the creditor has lost its right to sue you, it has no mechanism for collection beyond harrassment. Even a judgment, if the creditor fails to renew it in a timely manner, can lapse into nothingness.
So, how does this matter in bankrutpcy? For most people, it is simple - their discharge will steamroll all their debt, old and new, into non-existance, and make any future attempt to collect illegal. Phone calls, letters, candygrams... whatever. It all has to end. the most important thing is making sure we notify everyone who has a claim, or believes they have a claim, that they are owed money. The Judge doesn't pronounce "speak now or forever hold your peace," but that is essentially what happens.
For other folk, they can use bankruptcy to force their creditors to come forward with proof they are entitled to payment, and eliminate anyone who can't. It's incumbent upon the creditor to file a Proof of Claim demonstrating why they are owed money.
John Oliver did a great segment on this not to long ago, linked to below (warning: its from HBO, so foul language can be used).
The holidays mark the first anniversary of this law firm, so it seems like a good time to look back and reflect on the year that was.
There's been some major changes in the Chapter 13 world here in Northern California - firstly, Judge Weissbrodt (who I had clerked for) retired. Bankruptcy Judges are appointed (as opposed to some state judges who are elected, or federal judges who are appointed but Congress confirms that appointment) for a term of 13 years. We haven't had a replacement appointed for Judge Weissbrodt, and don't anticipate one. The existing Judges are splitting up and sharing his case load.
There was a new Chapter 13 plan - gone is the old short form (1 page) plan, and in is a new 4 page plan. The new plan has advantages, but is much more complicated and difficult to deal with. This won't affect attorneys that much - we have the time and resources to educate ourselves and become familiar with it. The real sufferer in this situation is the pro se (self filing) debtor. It is going to be even more difficult for someone who is not a bankruptcy professional to succeed in Chapter 13, no matter how much they try.
Given almost all pro se Chapter 13s fail, maybe this isn't a big deal. But personally, I found the old plan easier for a non-attorney to read and understand at a glance, which was a benefit to both people filing and their creditors.
As far as the practice goes - opening my own law firm has been a great experience. I enjoy working with my clients, and really focusing on getting them the fresh start that they are looking for. Being small and nimble, and able to work personally with all my clients is nice. So many people work so hard, and really need a way to get back on their feet. It is a good feeling seeing people be rewarded for their hardwork, not constantly held down by past misfortune or mistake.
Finally, operating this firm has given me some additional perspective. Many of my clients are either self employed either part time or full time, taking on driving for lyft, a small catering business, or other home based business to supplement their income. Working for yourself can be challenging, but when you have success is incredibly rewarding.
I hope everyone has a bright and cheerful 2017.
Former OJ Simpson attorney F. Lee Bailey just filed for Chapter 7 bankruptcy; according to schedules, the assets appear to be pretty minimal, but the debts substantial -- over 5 million in tax debts to the IRS.
This isn't the start of Mr. Bailey's problems (he had previously been disbarred); but what is interesting is based on the information available, how typical the situation is. Poor record keeping meant that when he fought over his tax bill, he was unable to offer enough evidence to prevail. The tax bill - too large to handle right away- ballooned as interest and penalties piled up over time.
Many small business owners find themselves in a similar situation - some hardship occurs, and the bills start running away from them. Income withholdings are reduced to make it through the month, but that leads to a hefty tax bill down the line. Rinse and repeat, and you find yourself drowning in debt.
What many people don't know (but F. Lee Bailey does) is that bankruptcy gives you some powerful tools for dealing with taxes. In the best scenarios, taxes can be discharged like other bills. Other situations might call for a partial repayment or reducing the value of liens.
Article avilable here
Bankruptcy isn't just an option for people and business - cities (and other government entities) can file. It doesn't happen too often, but since the financial crisis we're seeing it more and more.
San Bernadino appears to be on its way to succeed, The city is moving towards a confirmation hearing, on a case that began in 2012. Nearly 4 years to come up with a plan to handle the debt and obligations of the city - not something you'll see in Chapter 13. The most famous civic bankruptcy is Detroit's.
Even though the language is the same (confirmation, discharge), different chapters of bankruptcy operate very differently. For most of my clients, Chapter 13 ends up being their best option - the simple reorganization. It gives them the chance to payoff a car, get caught up on a house, deal with back taxes, AND get rid of debt. Unlike bigger reorganizations, they are not forced to get votes from creditors - so long as everyone is treated fairly under the law, there's nothing to complain about.
Kanye West recently announced (rather confusingly) that he had $53,000,000.00 of "personal debt", and the debt burden was crushing him.
December 1 saw the roll out of new national bankruptcy forms, replacing most of the petition. The goal is to make the forms easier for non-bankruptcy folk to decipher and use.
There are appears to be some hits and misses. The prior form packet, while sparse on instructions. was pretty straightforward. A pro se debtor could take a packet, fill everything out, and probably submit the documents mostly correct. The new forms are easier to fill out, but their are now different forms for different types of debtors, so that adds a layer of complication.
Additionally, the same challenges remain - bankruptcy is more than just filing a few forms. The procedures and dangers are unchanged, and many of the pitfalls are just as easy for the unwary to stumble into. Because the forms are federal, exceptions (which are determined by the state), remain just as difficult.
Every time I have transitioned jobs, the question always came up -- why not just open your own firm? Before, it just never felt like the right time. Now, it feels like the appropriate thing to do -- it just feels right.
So what kind of firm is this going to be? First, I want to bring the level of service I have brought to my clients, both in bankruptcy and as a public defender, to my new clients in this firm. Being responsive to their needs, and aware of my clients goals. Not everyone files bankruptcy for the same reason, and its important to keep our eyes on why we're here, and where we want to be. Bankruptcy isn't an end in and of itself - its a tool to help people get back up on their feet, move on with their lives, support their families, or just get some peace and quiet. Getting rid of debt is a tool towards the larger goals.
Second, it is important to me to have good communication and get to know my clients, not just as case numbers. To be fair, I know some folk want a purely transactional relationship with their attorneys - the attorney does his job, the client does theirs, and if something happens, the attorney will call or write. But the advantage of being a small practice is having the opportunity to get to know my clients a bit better than that. Folk come to attorneys because they don't know everything, and many people don't know the right questions to ask, or think they know what they want. and omit information they think isnt important - which turns out to be important later. Communication is key.
Lastly, I want to be able to reach out to people that aren't aware of all their options. So many people labor under impossible debt loads for months (or years!) before seeking help; after all, I've never heard anyone say that the first person they talked to when they hit a rough patch was a bankruptcy attorney. But bankruptcy gives so many earnest folk powerful tools for getting their lives back, and doing it sooner than they thought possible.