Episode 14: What To Do When… Bankruptcy is on Your Horizon
See Also: Bankruptcy
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From one of our partners – Jackie Critzer
Consumer bankruptcy is another significant part of my law practice. I am well versed in the crossroads of bankruptcy and divorce and have instructed other attorneys on how to prepare their family law cases when bankruptcy looms on the horizon. I know that choosing to file bankruptcy is a critical decision and I carefully review the entire bankruptcy process with my clients. In many cases I can help you stop a garnishment, stop a foreclosure, and stop a repossession. I represent clients in Chapter 7 and Chapter 13 bankruptcies in both the Eastern and Western Districts of Virginia.
Episode 14: What To Do When… Bankruptcy is on Your Horizon Intro 0:01
Welcome to What To Do When….A podcast from real lawyers with real perspective, where we explore a variety of legal issues and scenarios. Each week we focus on a new topic and discuss What to do When, and if any of these legal scenarios ever happened to you or a loved one. With over 40 years of combined legal experience, our hosts offer their unique perspectives and insights on a range of real life legal situations.
Jackie Critzer 0:30
Scott Cardani 0:31
Scott and Jackie with another episode Critzer Cardani. Jackie, what’s on the docket for today?
Jackie Critzer 0:37
Today, Scott, we’re going to talk about bankruptcy. What To Do When… bankruptcy is on your horizon. And also how to determine whether bankruptcy is on your Horizon.
Scott Cardani 0:48
I don’t know anything about bankruptcy? Is it complex?
Jackie Critzer 0:52
You know, bankruptcy is complex for the practitioner. So for the lawyer doing it, it is complex, it’s a very narrowly tailored area of law. And you really should have someone on your side who knows it well. Try to stay away for I tell people to stay away from people who sort of dabble in bankruptcy or do it just a little little bit. Just like we would say to anybody else in any other area of law, you really need to know what you’re doing when the federal laws aren’t are involved. That’s a it’s a much more formal court. And the the laws are a little differently. They do treat the lawyers and the participants differently in federal court than they do in state court. So first and foremost, you need someone who who knows what they’re talking about, because it is a complex issue.
Scott Cardani 1:37
I had a question. So when I’m, this guy will say it’s me. My main my credit card debts got out of hand, and I’m behind, I can’t make my payments on my mortgage and everything else, because I have all these bills. I see all these credit, fix agencies and all this kind of stuff out there. And there’s bankruptcy and all this stuff. Can you give kind of a high level? What all that means? Or where do we look? How do I how do I figure this out?
Jackie Critzer 2:05
Sure. So so what you’re first talking about is basically a consolidation company. These companies that say, Hey, we can help get you out of debt. We can help you avoid bankruptcy. In fact, they say, and what a consolidation company is going to do is they’re going to try to say you have seven creditors, seven credit cards, visa and Capital One, you’ve got all these different credit cards, and maybe medical debt included in there. And they’re going to talk to all of those creditors. And they’re going to make a proposal that that they send off to these creditors that says we’re offering you a certain percentage at a certain payment each month for a certain period of time. The only problem really with the consolidation company is that they can say no to anyone, to anyone. So let’s say you can say no, the creditor can say no. So let’s say out of the seven, four or five of them four or five, the creditor say yeah, sure, okay, we’ll accept that. And then you’ve got these three or four who do not accept it, you either have to renegotiate with them through this credit, the debt consolidation group, or they sometimes there are some creditors who just will not negotiate at all. And then you’re stuck in this situation where you’re paying this credit, the debt consolidation company, all this money, and you’re not getting your debts paid. So that’s the that’s one option. My I do have some people coming to me from failed debt consolidation. I’ve had that over the years. But if it’s successful, they wouldn’t be coming to me. So I don’t know how often those are successful. And then when you’re examining whether bankruptcy is the next right step, it is it is a process to really consider and you should be talking to someone you should be talking to a bankruptcy attorney. Don’t just Google it. Right. Google has a lot of answers, but they’re not always right. And so you want to talk to a bankruptcy lawyer and find out whether bankruptcy is the right choice. And then if it is, whether which kind of bankruptcy is the best one for you?
Scott Cardani 4:07
Okay, and we’re talking people here. So what are my options when it comes to bankruptcy?
Jackie Critzer 4:13
Well, you really, as a consumer, we’re not talking about businesses, we’re not talking about small businesses. We’re just talking about regular person working a nine to five job, maybe unemployed, okay. There are two options. There’s a chapter seven, and that is the option that discharges all of your debt. There’s no payback period, there’s no repayment of the debts. It is a complete discharge of all the debts that are owed. And you have to qualify for that. And we can get into that. And then there’s a different chapter. There’s a chapter 13. That is a repayment plan, similar to the debt consolidation we just talked about, except no creditor can say no, they all they all have to when you follow the plan and the plan is approved, they get what they get maybe 10 cents on the dollar. Maybe you’re paying a 100% over the five years, but they don’t really have an option of saying no, we don’t want to be a part of that.
Scott Cardani 5:05
Alright. And the reason chapter 13 is like that is because the judge approves the plan, correct? That’s correct, that he says you will do this, or you will do that. It’s a court order. That’s right. Okay. And just so you know, unlike divorce, you can get it. I think that’s important right here. You know, a divorce court can say, you pay one credit card, but that really has no import to the debt holder, say Capital One, they could care less went to court, and the divorce has been in a bankruptcy, it’s a big deal. It’s a different thing.
Jackie Critzer 5:33
Well, it is a different thing. So when when spouses file bankruptcy together, they say they’re in a Chapter 13 together. And before the end, or before the last payment is made in that chapter 13. They decide to separate or divorce for whatever reason, in the middle of their payback period, and the divorce court says, okay, husband, you have to pay American Express and Capital One. Wife you have to pay, you know, to other debts. Even though that’s the case, and the court says that you’re all still obligated, both of you are obligated on the debts for which you’re obligated. But here’s what’s interesting to me, a lot of people think that married people are responsible for each other’s debt. And that’s just not true as a blanket statement. Yeah. Okay. So importantly, if you and your wife have a, you have an American Express, and she has a Capital One, and they’re just individual accounts, you’re not responsible for her that she’s not responsible for your debt from a contract basis with the creditor understand, now it gets really important as marital debt. That’s a little different story. And that’s in the divorce podcast. But what if you’re on a card together? What if you and your wife are on American Express together? Well, you’re both equally responsible for it from the creditors perspective.
Scott Cardani 6:46
Okay – so this is a contractual relationship with your creditors, whoever enters into that handshake agreement, what’s usually over the internet, which none of you read the fine print, nor do we. So my point is, once you enter that agreement, your whoever enters that agreement is with that’s where the contract laws, that’s correct, if it’s seven kids in the mom, they’re all seven involved.
Jackie Critzer 7:09
Sometimes, you’ll have an authorized user. And that’s different than a co applicant. So you and I can be co applicants, you don’t have to be married to do that, right? We can be co applicants with American Express, or you can have an American Express, it’s your card, and you can just make me an authorized user. So
Scott Cardani 7:26
So, if it went bad, I’d still be responsible, even though you’re spending money on my card.
Jackie Critzer 7:30
That’s correct. And I wouldn’t have a responsibility for it.
Scott Cardani 7:33
Okay, good to know, good to know.
Jackie Critzer 7:36
So when you’re determining which chapter is the best for you, you really have to analyze a lot of different moving parts. But income is a significant piece to analyze as well as property and equity in property. So for example, if you own your house by yourself free and clear, there’s no loan on it, there’s no mortgage, you’re going to find yourself hard pressed to get into a chapter seven, just because if you sold that asset, whatever it may be, it’s gold bullion, or maybe it’s your $20,000 Rolex that you could take to the toasts on consignment shop, and sell for $18,000. And you have $15,000 worth of debt, right? If there’s an asset that a trustee a chapter seven trustee could sell to pay your creditors, then you might want to consider doing that before you file Chapter Seven, because they’re going to do that. But the difference between someone taking your home and selling it in a chapter seven bankruptcy or taking your Rolex and selling it is the exemption process. And boy, oh boy, if you don’t have a practitioner, if you don’t have a lawyer who knows how to work, the exemptions, you’re in big trouble, you’re gonna lose the Rolex. You’re gonna lose the house. ?You have a real potential to lose a lot of things that could have been protected. So having a practitioner having a bankruptcy lawyer, who knows how to do all that’s really important.
Scott Cardani 8:56
Let me ask you this, because I had a case like this actually against another attorney years ago, where my client went into the bankruptcy provided all the documents and came out the other side. And wasn’t the plan didn’t include everything he wasn’t free and clear. He actually kind of think was in a worse state than where he started the process. Have you seen that happen?
Jackie Critzer 9:16
I have not seen a lot of that. Partly because what, what I do individual as a practitioner bankruptcy practitioners, we ask the client to provide all the debts that they owe, it’s inevitable. So if somebody gets forgotten, right, that happens. So but we also pull a multi Bureau credit report. So we look at all three credit reports. And there’s a software program made specifically for bankruptcy attorneys to do that. So really, you should be getting everybody included in your chapter 13 And if you have missed somebody there, there are avenues that you can go in and amend your chapter 13. Because you know, sometimes a year later, six months later, two years later, and you’re in this chapter 13 plan that lasts for five yours you go, Oh my gosh, I forgot I didn’t realize I had this $6,000 medical debt. And it was from a hospital say from so long ago, and now they have found me, and now it’s resurfaced. And now what do I do? Well, there’s a way to amend a chapter 13 for that. And quite frankly, in a Chapter Seven, it’s a whole different ball of wax, if you inadvertently or accidentally forget to include a certain creditor, that they’re dealt with very differently between the two chapters, but there are avenues to fix it.
Scott Cardani 10:28
Let me ask this then. So, again, I’m here, I realized that I’m drowning, I can’t get out of it, I need help. Myself, I’m probably not gonna be able to determine whether I need a 13 or a seven, correct? That’s correct. Yeah. So I’m gonna have to come sit down with Jackie Citzer. And say, here’s where I am. This is what I need help with, but you need all the documents, you need a good complete history of their finances. Correct?
Jackie Critzer 10:58
That is true. And during an initial consultation, I and I think a lot of the practitioners here in the Richmond area, sort of have a checklist that we go through and ask the all the questions, and we do require that you provide the supporting documents prior to actually filing the chapter 13. Right? We need to be able to build your petition and support it with the documents, that evidence what you’re reporting. But yes, I do. Like if you if you have a house, I need to have not only just the paperwork from the courthouse that shows you own the house, but also that you owe money on the house. And then I need to pay off from your mortgage company by way of example. So it is a series that is a process. But it is not one that you should do on your own in trying to figure out which chapters are right for you, because quite frankly, sometimes it changes even in the middle of representation, not after you file sometimes after you file. But sometimes in the initial consultation, we’ll go through the very long checklist, Okay, this looks like a chapter seven, and something comes up going through all the evidence and going through all the paperwork and you go, Hey, look, if we file this chapter seven, you’re putting this thing at risk. And it would be better to be in a Chapter 13, that that eliminates that risk. And so sometimes that changes from the beginning of representation, and and to the filing date, filing date.
Scott Cardani 12:16
As a practitioner, what do you find that most people don’t understand? Or what would you say to the common person who’s getting ready to file bankruptcy? What’s the most important thing they need to know?
Jackie Critzer 12:27
Full disclosure… The most important part of bankruptcy is disclosure. Okay? It’s not whether you, you own the 1985 Dodge pickup truck worth $12 for scrap metal may be right. It’s whether you disclosed it, if you hid the asset, that’s what’s going to get you into trouble and bankruptcy. So you have to sign under the penalty of perjury that you’ve disclosed your assets, your liabilities and all of your income from every source. And then and go from there. But disclosure is the a number one top thing in a bankruptcy.
Scott Cardani 13:03
And what you have to remember is sometimes you don’t remember everything, or sometimes you think that cup from the Outer Banks isn’t worth anything. And it’s really important that you kind of do a self examination and be on the side of being way too much to start this process and count everything you got a Gibson guitar that your dad gave you that might be worth, you know, $10 value or 100 dot $100, you at least want to say Jackie, I have this guitar, I have no idea what it’s worth. Let her make that determination. Because if you try to go through your assets and say, well, that’s not worth anything, or that’s not anything and it kind of like Jackie says it comes around and it you didn’t realize you had a stratavarious that you thought it was just a violin, you’re in trouble. So you don’t want to do that. And you really it is time consuming to do it. Right. But when you do it right on the front end, then the rest of the process is much easier, correct?
Jackie Critzer 14:02
That’s absolutely correct. And it can be cumbersome. If it’s not done right at the outset. I mean, that requires multiple hearings, multiple appearances before a bankruptcy trustee sometimes an appearance before one of our bankruptcy judges here in the Eastern District. I also practice for what it’s worth in the Western District. Those are their two separate districts. But I do practice in both the Western District and the Eastern District. And also importantly, how they handle cases is different. It’s all regulated by the same federal law, but how they’re implemented and then the little nooks and crannies and nuances in each district. They are different. And it’s important to have someone who files regularly in your jurisdiction as well.
Scott Cardani 14:45
Alright, so for today, what we are telling you that’s the most important thing is number one, the self assessment. What do I really have what are really my dad’s What are really my assets, what are really the things I have, and putting that information together. So Step two would be what, Jackie?
Jackie Critzer 15:02
I’m contacting a practitioner or bankruptcy attorney who is familiar with your jurisdiction – like myself. But contacting someone who is reputable in the community, check Google reviews. I mean, they’re not always great, but check them out, right? If there are people who are leaving bad reviews, you take it with a grain of salt but but consider that there are some attorneys that have good reviews, and some who who don’t and take that, take that for what it’s worth. So find someone who you’re comfortable with and who you feel like is going to represent you well is the second one, and the third one’s Scott?
Scott Cardani 15:35
The third one is to know you need help in this process, and you trying to do it on your own, it’s just gonna get you in trouble. So realizing that there’s these consumer help people and all these things out there, and we’re not bad mouthing any of them. But the bottom line is, it’s worth a consult to come and talk to a lawyer and say, here’s where I’m at. Here’s the scope of my world. And I’m trying to figure out what to do. Can you help me figure that out? And that’s what our job is.
Jackie Critzer 16:01
You’re absolutely right. And importantly, the consultation for bankruptcy here with me is free. We don’t charge for a consultation for bankruptcy. This is just part of your process. And sometimes people end up going through bankruptcy and sometimes they don’t, sometimes bankruptcy isn’t the right option. So again, point number two, finding someone who can guide you through whether even bankruptcy makes sense for you, just critical critical in this process. I think that’s it that sums it up.
Scott Cardani 16:27
Thank you all for joining us.
What To Do When…Legal Chat Podcast Outro 19:43
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