Tag Archives: Discharge

Bankruptcy Discharge Injunction

Don’t Forget Your Lawyer

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I know that title looks like I am complaining that most of my clients don’t bother to send me a card at Christmas, but that really isn’t what I am referring to.

What makes me really frustrated is when my Chapter 13 clients, in the middle of a confirmed plan, move and DON’T TELL ME. Sure, from their perspective, everything is done. They are just making their payments until they get to the end. Easy. They can forget all about me, and they do. Then they get to the end of the plan, and I discover that they have also forgotten to do the post-petition, debtor education class. You know, that silly little class that if you don’t take it, you don’t get your discharge – even if you’ve made all your plan payments? Yea, that class.

So, I start frantically trying to get a hold of the clients to remind them. That is when I discover that they’ve moved, and didn’t tell me. Of course, they have also abandoned their old email address, because it was getting too much spam. The address is still live, so nothing bounces, they just don’t check it anymore. So, the email didn’t reach them. They’ve disconnected the house phone, because they only use their cells; and they changed their cell numbers a few years back when they had a stolen phone.

Don’t do that. If you move while your Bankruptcy case is still open, be sure to let your lawyer know. For one thing, if the Court sends you anything, you will want to get it – who knows, it might be important. Your lawyer will do a change of address for you, so that the Court can reach you, the Chapter 13 Trustee can reach you; and this way your lawyer can reach you too.

Elaine

They Said I Can’t Bankrupt That

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I get told this a lot. Someone calls and they have talked to a loan company, a debt collector, or the guy on the next bar stool at a local dive. What I hear is, “They said I can’t bankrupt that.” Well, of course not. Bankrupt is an adjective. To Bankrupt is not a verbal – of any kind. You can be described as bankrupt, but there is no such action as to bankrupt. The moral of this story is, of course, don’t take legal advice from anyone who speaks English this poorly. In fact, don’t take legal advise from non-lawyers – especially when they are trying to get you to pay them for a debt or if you aren’t sure just how many drinks they have already had.

Now, are there debts that cannot be discharged in a Bankruptcy? Sure, and some of them you will kind of know, and there are a few that will probably surprise you.  For instance, most people are pretty comfortable with the idea that you can’t discharge child support in a Bankruptcy.

However, most people probably don’t know that you can’t discharge a debt for willfully or recklessly failing to maintain the capital of a Federally insured financial institution. Don’t worry if you don’t understand what that means, it almost certainly doesn’t apply to you.

I will concede to being a bit silly (or snarky, your call) with that last example, but the fact is that there is a section of the Bankruptcy Code (11 U.S.C. §523) that lists all of the debts you cannot discharge (or get out of) in a Bankruptcy. In the copy of the Code I keep handy, that section is five pages long, and very little of those five pages apply to the vast majority of  people with more debt than they can pay.

In fact, no matter what you have heard about the 2005 Bankruptcy Reform Act there is no general exception from discharge for credit card debt. That’s right. Despite what that debt collector told you, absent certain general restrictions, a Bankruptcy filing will still discharge most, if not all, of your credit card debt – and your medical debt – and pay day loans – and even in many cases old income taxes. Really.

The exceptions to discharge that apply most commonly  are:

  • Child support;
  • Alimony;
  • Property division or other divorce related debt (in a Chapter 7 Bankruptcy);
  • Student loans;
  • Debt incurred by fraud or shortly before a Bankruptcy filing; and
  • Recent taxes (rules are complicated).

Embezzlement? Well, that is a problem. Lying on a loan application or borrowing money with someone else’s identity, forging loan documents, taking the vacation of your lifetime in Paris paid for by Visa with the intention of filing for Bankruptcy before those bills come due?  These are all at least as non-dischargeable as you should think they are.

All silliness aside, here is what you need to remember. Most people who file for bankruptcy can discharge all, or virtually all, of their debt. There is a five-page laundry list of debts that cannot be discharged in a Bankruptcy, and for the most part, none of them are simple; and most of them are not all that common. The odds are very good that no one other than an experienced bankruptcy attorney can discuss any of them with you in any detail. Most people know just enough to be dangerous about Section 523, and that includes a large number of lawyers who don’t practice bankruptcy law on a regular basis.

If you have any questions about whether or not a debt is dischargeable, ask a lawyer who practices in the Bankruptcy Courts regularly. If anyone else tells you that something is not dischargeable, take that advice with a large helping of salt – especially if they think Bankrupt is a verb.

Elaine

 

Student Loan Stupidity

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In 2005 Congress made a few changes to the bankruptcy code.   Some of those changes got a lot of attention.  Others did not.  One of the stealthier changes extended the same protections against discharge in Bankruptcy to private student loans that Federally insured student loans had had for years.  It is probably not a coincidence that the availability of private student loans skyrocketed shortly thereafter, and I don’t think anyone can say that this was really unexpected.

The unexpected part was that Congress had just created a scenario where those newly protected private student loans were going to be getting repaid at the expense of Federally insured student loans. 

Go ahead.  Read it again.  Yes, Congress really did pass a law that encouraged people to repay their private student loans instead of making payments on their federally insured student loans; and you used to wonder why we have a budget deficit.

Here is why.  If you legitimately do not make enough money to repay your student loans, you can put your federally insured student loans into some form of alternative payment system that is income based or income contingent.  In those cases, your payment can be as low as $0.  In many cases the payment will not keep up with the accruing interest, so even though the debtor is making payments, the principal balance is not declining.  Those loans are not getting paid, even if the debtor is keeping up with the accruing interest.  After a long enough number of years, the remaining balance on those loans will be forgiven.  That is an unfairly brief summary, but it covers the high points.

You can’t do that with your private student loans.  They don’t participate in the income based or income contingent repayment programs, and if the debtor doesn’t make the payments, they will proceed with the appropriate legal steps to begin garnishing the debtor’s  wages.  Well, if you can’t afford your loan payments, you really can’t afford to have your wages garnished.  So, the net result of all of this is that people with more student loan debt than they can pay wind up paying their private student loans (at least sometimes) and NOT paying their federally insured student loans.  There are days when I think that I want to know just who thought that was such a great idea.  Then, there is the rest of the time.

There are bills currently pending in Congress to change this.  They are Senate Bill 114 and House Resolution 532.  Last time I checked neither piece of legislation had so much as poked its nose out of committee.  In other words, the private student loan lobbyists are doing their jobs better than the rest of us.  So, if you have a mind to write your Congressmen and request intelligent, sensible governance; this wouldn’t be a bad issue to include.

Elaine

When Creditors Don’t Go Away — Part 1

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In most cases someone files for bankruptcy, he lists all of his creditors with their addresses, account numbers and at least an approximate amount owed; the creditors receive notice of the Bankruptcy, then they receive the discharge; and they go away.  The general rule is that the Debtor will not hear from any of his creditors again once the Bankruptcy is filed.  (This post only pertains to debts that may or may not be included in the discharge.  It does not apply to creditors who don’t comply with the Automatic Stay.)

There are exceptions.  First of all, there are certain debts that are automatically not included in a discharge.  That means that once the Bankruptcy is over the Debtor is still liable for the debt.  The most common examples are recent taxes, child support or alimony and student loans.  These, the debtor can expect to have to deal with once the discharge is entered and are not generally a surprise.

Then there are the others.  There are lots of reasons why a debt will be excepted from the discharge, and some of them aren’t as predictable as recent taxes.  The complete list included in the Bankruptcy Code (and there are a few other provisions elsewhere in Federal Statutes, but they are really rare) is found at 11 U.S.C. Section 523.

If you file for Bankruptcy and a creditor thinks that you have defrauded them, obtained money by embezzlement or false pretenses, or otherwise come within the scope of a Section 523 objection to discharge, then the creditor may decide to ask the Court to exclude this debt from your discharge.  The vehicle for doing this is what is called an Adversary Proceeding, which is essentially a separate lawsuit filed within the scope of the Bankruptcy filing.  Adversary Proceedings are actually quite rare, but they do happen.

This is what can happen when a creditor isn’t willing to go away and wants to try to establish that his debt should be excepted from the discharge.  First, the creditor may appear at your First Meeting of Creditors.  This is not required, but if the creditor is local or has local counsel, it is an easy way to start to feel out the case.  The First Meeting of Creditors exists for creditors and the Trustee to ask questions, and a creditor looking to build a case for an objection to discharge may use this as an opportunity to ask a few, basic questions.  If they want to ask very many questions, the Trustee will tell them to set a 2004 Examination.

A 2004 Exam is the next step, and again it is not mandatory.  A 2004 Examination is basically a deposition.  It is a meeting in a conference room that will be recorded one way or another, it will be under oath, and the creditor who requests the exam asks the Debtor (or other party) questions.  The debtor can be required to bring documents to the meeting, and it can generate a great deal of facts that the Creditor can use to build his case against the debtor.  A 2004 Exam must be authorized by the Court, and the Court has the authority to limit it in scope or duration.

Finally, the creditor must file an Adversary Proceeding (unless his debt is automatically excepted from discharge like child support or student loans).  An Adversary Proceeding is really just a lawsuit, but it is filed inside the Bankruptcy.  Once it is filed it will proceed like any other civil case, with discovery, motions, and it will finally culminate in a trial with witnesses and exhibits but no jury.  One of the important things to remember about an Adversary Proceeding is that it must be filed by a deadline that is set when the Bankruptcy is first filed.  That deadline can be extended, but it cannot be missed – unless the creditor didn’t get notice of the filing.  Yet one more reason why you must give your lawyer a complete list of everybody you owe money to with their addresses!

I cannot repeat strongly enough how rare most of these things really are.  Creditors are not going to spend good money to send someone to a First Meeting of Creditors just because they can.  Likewise, filing an Adversary Proceeding is a significant investment in time and money; and creditors don’t do that without good reason.  There are certain flags that your attorney will be watching for when he prepares your case that indicate an Adversary Proceeding may be likely.  If that is the case, he should go over that with you.  It is incredibly rare for an Adversary Proceeding to be filed that is a real surprise to the debtor and debtor’s counsel – assuming that the Debtor has been fully above board with his lawyer.  So talk openly and honestly with your lawyer, ask if there is a debt you are concerned about.  A big part of your attorney’s role is helping you to evaluate risk and putting you at ease when you are worrying about things that aren’t likely to be an issue.

Elaine

Yes, Virginia, You Can Discharge Taxes in Bankruptcy — Sometimes.

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Taxes and bankruptcy is a complicated subject.  There are multi-volume book sets written on the issue.  Still, there are some general rules that a blog post can cover.

First of all, you have to determine what kind of taxes you owe.  Personal income taxes, business withholding taxes, sales taxes, property taxes; they are all treated differently.

The most common case is personal income taxes.   In order to determine whether or not your personal income taxes are dischargeable, your attorney will need to know four things.

  • When the returns were due, that includes lots of things, but the big one is whether or not you filed for an extension;
  • When the return was actually filed, and that means received by the IRS not just put in the mail;
  • When any taxes were officially assessed by the IRS, and this includes any assessments following audits or revisions to the return;
  • Finally, your attorney will need to know if you have filed a Bankruptcy or made an Offer in Compromise since the time the taxes were incurred.

In order to be absolutely sure about these dates your attorney will probably require a tax transcript that includes all of this information.

The general rule is that personal income taxes become dischargeable in Bankruptcy once the returns have been due for at least three years, the returns have been on file for at least two years and the taxes have been assessed for at least 240 days.  These rules make certain assumptions — the returns were not fraudulent, the taxpayer has not made any attempts at tax evasion, etc.

Then, of course, there are the exceptions; and there are way too many exceptions to go into them here.  Although one exception that is developing rapidly (and not in a good way) is the effect of a late filed return on the ability to discharge taxes.  This is an area where you just have to talk to an attorney, and again this is an area where a tax transcript is invaluable.

You should never assume that taxes will (or won’t) be dischargeable until you have actually talked to an attorney and probably gotten transcripts for the appropriate years.  Still, in most cases where these three rules are met, the taxpayer may file for bankruptcy and discharge his personal liability for the taxes.  That filing will not avoid any tax liens that have attached to property prior to the filing, but it will stop liens from attaching to after-acquired property and it will stop the IRS from attempting to collect from you personally.

It is not uncommon for people to come see me who have many years of past-due taxes owed.  In some cases those taxes add up to hundreds of thousands of dollars.  In many cases they have been making payments for years and have done so without realizing that unless otherwise indicated the IRS will apply payments to the oldest outstanding tax year.  In many cases a Bankruptcy filing will not discharge all of their taxes, but it can convert an unmanageable debt into a manageable one.

So, if you have more tax debt than you can pay, don’t discount the possibility of contacting a bankruptcy attorney.  Do mention when making the appointment the amount of taxes in play.  Not all attorneys are comfortable filing cases with large amounts of tax debt.  So, don’t be surprised if the first attorney you contact refers you to someone else.  Also, don’t expect to get completely out of trouble; but you may be very surprised at what a bankruptcy can do for you.

Oh, and if you remember one thing from all of this, file your tax returns ON TIME.  If you can’t pay, you can’t pay; but file your returns ON TIME.  Extensions are fine, just file before the end of the extension period.  Returns not filed timely can create a problem you can’t change.

Elaine

Old Debt, Foreclosed Home, 1099 in the Mail — Oh NO!

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Once upon a time the start of tax season was heralded by would-be clients who had been to see me sometimes months earlier calling very excited, because they finally have the money to file.  Then, there are the Trustees wanting a share of tax refunds that accrued to debtors prior to the filing of their bankruptcies — those calls are less fun.

Recently, though, tax season has started a bit earlier — in January and early February.  Former clients are calling scared, because they have just gotten a 1099 in the mail for some HUGE amount of money that they thought they had discharged in their Bankruptcy — and they are right.

Any time a creditor “forgives” debt, which is a very broad term and doesn’t necessarily have anything to do with whether or not they still intend to collect it or the Debtor still owes it, the creditor is required to send a 1099 for the amount of the forgiven debt to the Debtor and the IRS.  The IRS is then going to assume (unless told to the contrary) that this amount is to be included in the debtor’s gross income for that taxable year.

Breathe.  I promise, it isn’t nearly this bad.  Go back and read that “unless told to the contrary” part again.  If you have filed for Bankruptcy and discharged your personal liability for debt, it does not have to be included in your taxable income.  There is an IRS form 982 that will solve this problem for you.  Form 982 deals with 1099’s if the debt has been discharged in Bankruptcy or if the Debtor was insolvent at the time the debt was forgiven.  The insolvency exception is considerably more difficult and more treacherous.  The Bankruptcy (Title 11) provision is much more straight forward.

There are different rules if the forgiveness of debt involved your homestead, and the property was foreclosed or the subject of a short sale; but the 1099 may still qualify to be excepted from your taxable income.  In that event, I suggest you talk to a competent CPA.   Likewise, if you have any questions regarding the application or use of Form 982, a CPA is the person to call.

Where those 1099’s can be a real issue is if you did some type of debt management plan where you paid less than 100% of your debt.  If it was a Chapter 13 Bankruptcy, Form 982 may still apply.  Otherwise, you might have a real problem; and you cannot call a CPA for help too soon.  I hate getting calls from people who tried to do the right thing, tried to pay their debt; and then after years of scrimping and suffering find out after the fact that they now owe tax on the total amount (including interest) that they didn’t pay.  A Chapter 13 Bankruptcy would likely have been cheaper, more effective and actually gotten them out of debt instead of into tax debt.

So happy tax refunds, and do not pay tax on discharged debt unnecessarily!

Elaine

Short Answers to Complicated Questions

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Frequently when I get a call from someone considering a bankruptcy filing, the first question I’m asked is — complicated.  Here are a few examples.

Are taxes dischargeable in Bankruptcy?

That depends.  Some taxes, like sales taxes and some withholding taxes are never dischargeable.  More commonly I am asked about income taxes, and not surprisingly the rules are complicated.   The most important thing I can tell you in brief is that when you see tax problems developing (and they usually snowball on you), file your returns on time.  Extensions are fine, as long as you file before theyexpire.  If you can’t pay, well, you can’t pay; but file the return.  There are three time frames that must be met before income taxes can become dischargeable, and one of them runs from the time that the tax return was filed.  There is also some troubling case law developing in other parts of the Country limiting dischargeability for late-filed returns.  Of course, if the IRS has filed a substitute for return, that is a whole different ball game.  Yes, I know, this doesn’t make a lot of sense.  It is a short answer to a very complicated question.  Just remember to file your returns timely, and if you wind up way over your head with tax debt, contact a qualified Bankruptcy attorney in your jurisdiction for a consultation.

If I file for Bankruptcy, can I keep my car?

Well, that depends on a lot of things — is it paid for, are you current on it, how much equity do you have in it, have you maintained insurance, can you afford to make the payments?

Think about this one for a minute.  There were over 6300 people who filed for Bankruptcy in the Western half of Oklahoma last year.  If they were all hitchhiking to work, don’t you think you would have noticed? Generally, the impetus for this question is a deep seated sense of shame and a fear that you have been bad and are going to be punished.  I don’t mean to belittle this, it is very real; and most of us have a voice in the back of our heads that says things like this to us, but bankruptcy isn’t about punishment; and most people who file for Bankruptcy keep their cars.   Are there exceptions?   Yes, but that is a whole different blog post.

I’m married, does my spouse have to file with me?

Probably not.  Now, are there reasons why you may want to file jointly?  Yes.  Are there times when you both need to file in order to get a particular result that you want?  Yes.  If your spouse doesn’t file with you, will your filing affect your spouse?  That really depends, and that is one of many reasons why I require that non-filing spouses attend the initial appointment with the filing spouse.

Is the Trustee going to come to my house?

Well, I don’t know.  Are you inviting him for dinner?  Seriously, now, the Chapter 7 panel trustees are highly compensated professionals who get paid a very small amount of money to administer cases.  They make their money administering non-exempt assets.  No one is paying them to go through your sock drawer.  Now, if a Trustee has reason to believe that you are concealing valuable assets, can a Trustee get a search warrant for your home or office?  Well, yes; and in 22-years of practice, I have seen that happen once.  The Debtor went to prison for a number of years for all kinds of fraudulent behavior.  So, don’t hide uncashed royalty checks; and the Trustee will not be paying you a visit.

Elaine

What if My Bankruptcy is Denied?

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I love questions like this.  My standard answer (if I am feeling obnoxious) is, “Well, I don’t know.  How would that happen?”  The standard response to that is, “Well, I don’t know.  You’re the lawyer.”

Yea, I’m the lawyer; and the fact is, it is possible to have a discharge denied — but that isn’t really the question.  The real question has nothing to do with the Bankruptcy Code and everything to do with the fear of feeling backed into a corner, surrounded and overwhelmed.  This is what I classify as a monster under the bed question, because no matter how old we get, we still have irrational fears that keep us up at night and vanish instantly when hit by the beam of a flashlight.  So, here’s my flashlight.

To be eligible to file for bankruptcy you must meet certain criteria.  The most well known of these is that to file a Chapter 7 Bankruptcy, you must pass the so-called Means Test.  You also must be insolvent; but there are three insolvency tests, and if you don’t meet at least one of them, you aren’t talking to a bankruptcy attorney.

Assuming that you are a human being (and not, say, a non-business trust) and you are not able to pay your bills as they come due, you are going to be eligible to file some chapter of Bankruptcy.  Which chapter may depend on other things, but you will talk to your attorney about those in detail — and this isn’t what people are afraid of.

For most people this really is a monster under the bed fear.  What if the Court just says “NO!  Not YOU!  Anybody else, ok; but not YOU!”  Doesn’t happen that way.  If you are eligible to file, you are eligible to file.

The snag with answering this question is that it is possible to file a bankruptcy successfully and have your discharge denied at the end.  Those are truly extraordinary cases (and not in a good way).  In my 22 years of practicing law, I have never had a client had his discharge denied.  It is a great big, bad thing that doesn’t happen easily.

So, what does that mean?  First of all, it is fairly common for certain debts to be excepted from the discharge.  This is not the same as a denial of discharge.  Most people know that recent taxes, child support and student loans aren’t going away just because they filed for bankruptcy — and they are generally right.  However, if you incur a debt with the expectation of discharging it in bankruptcy (that is called fraud), and the creditor complains about it to the Bankruptcy Court (by filing something called an Adversary Proceeding) and wins; then, that particular debt will be excepted from the discharge, and the Debtor will still have to pay it.

I can hear the chorus now, “But, I’m a good person.  I didn’t plan this.  This debt is all years old, and if I hadn’t lost my job/gotten divorced/ or gotten sick I wouldn’t be here.  Well, then you shouldn’t have to worry about this.  Again, the real fear is that the world won’t see you for who you really are; but only through this stigma of bankruptcy.

Still, this isn’t really what my clients are afraid of.  They aren’t afraid of having to pay their child support or that one credit card that they used right before they filed (knowing good and well they were filing and that they would still have to pay it).

No, my clients are afraid of filing the Bankruptcy and just being told NO.  Go away.  You aren’t good enough, and that doesn’t happen — well, not exactly.

What can happen is a Debtor can get caught hiding assets, not telling the truth, concealing income, not disclosing things he doesn’t want the Trustee to know about.  BOOM!  Thou shalt NOT lie, cheat or steal in connection with a bankruptcy.  Don’t even go there.  That means if you have a nonexempt asset you don’t want the Trustee to administer, well, talk to your lawyer about your legal options.  Just deciding not to disclose it (i.e., Oh, I don’t want to list that) is not a valid response to your lawyer.  Not only will that cost you far more than honesty up front, it can cost you your discharge.  It can also cost you a criminal prosecution and an all-expense paid vacation to a Federal minimum security “camp”.  Don’t go there, because I promise you, your lawyer has no intention of sharing your jail cell.

So, be the person you know yourself to be — honest, above board and cooperative.  A Debtor has a duty to disclose all assets, expenses, debts, liabilities and financial transactions.  Keep your records.  Produce anything requested of you.  If the Trustee wants to see something, hand it over WITH A SMILE.

The name of the Bankruptcy game is disclosure.  It is the ultimate flashlight, and the world is a lot less scary in the light.

Elaine

Foreclosures and What on Earth does “In Personam” Mean Anyway?

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I get to sue a mortgage company.  That always makes for a good Monday.  Here are the facts.  Woman files for Bankruptcy.  She gives her house back to the lender in the Bankruptcy.  She moves out and moves on.  Lender has to obtain clean title to the house, so the Lender files a foreclosure action.  Lender screws up.  Lender is getting sued. 

The rest of the details.  Yes, at least in Oklahoma, the lender is supposed to foreclose on the house; but the lender is only supposed to seek a judgment against the house — or, to use the fancy, Latin, legal phrase — in rem (against the property).  Instead, this lender filed its foreclosure action and sought a judgment in rem (against the property), but also sought a judgment against my client, or in personam (against the person).  So, this foreclosure petition is asking for the property AND the right to pursue my client for money if the house doesn’t sell for enough to pay the total amount due.  That is the problem.

You see, when my client filed for Bankruptcy, she got a discharge.  A discharge is the reason you file for Bankruptcy.  It is what gets you out of all that debt that caused you to file in the first place.  A discharge is a Court Order that means that none of the people that the Debtor owed money to at the time that the Debtor filed for Bankruptcy can ever try to make the Debtor pay them again.  That means no collection calls, no bills in the mail, no nasty letters, no lawsuits and NO in personam liability in a foreclosure. 

Sure, the foreclosure needed to be filed.  In the Petition it should have mentioned the Bankruptcy filing and then said that the lender was seeking the property only, and not seeking a personal judgment against my client.  This one didn’t do that.  Some weeks I really like Mondays. 

Elaine

 

 

Repeat Bankruptcy Filings

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Most people have heard something about only being able to file a Bankruptcy every so many years.  I generally hear seven (which is the Biblical time period (Deut. 15:1).  Although, what most people are thinking of  is the time between Chapter 7 filings, and that is currently eight years.

The truth, like with most things, is more complicated.  I like to refer to the 2-4-6-8 rule.  This assumes, by the way, that every case filed ends in a discharge.  So, it is two years between a 13 followed by another 13 filing (although, you aren’t supposed to be able to complete a 13 plan in less than three years — hey, nobody every said the 2005 reform act made sense); four years between a 7 followed by a 13; six years between a 13 followed by a 7; and 8 years between two chapter 7’s.

So, I got a phone call this week from a man who has filed six Bankruptcies in the last 16 years.  That doesn’t compute.  First of all, only two of them were Chapter 7 cases.  Second, to date, none of the 13 filings have completed and resulted in a discharge — so, they never triggered the relevant waiting periods.

What causes that kind of repeat filing?  Despite what most people will assume, this kind of pattern generally includes a chronic health problem and at least a couple of periods of unemployment.  Those two things manage to cause the accumulation of medical debt, and periods of missed mortgage payments either during illness or following  a job loss.  The four incomplete Chapter 13 filings will almost always be caused by job losses, because you can’t make plan payments without regular income.

So, what does this tell me when I pick up the phone and encounter a would-be client who clearly has a history with the Bankruptcy Court?  The first thing I want to do is pull up his case history on the Court’s web site.  I want to see what was filed, when, and what happened to it.  Is he eligible for another filing, why did prior filings fail, have those problems been addressed, is there a compelling reason to try again?  These are the questions I begin with.

For the would be client there are a number of concerns.  First, is he eligible to refile?  Even if he meets the 2-4-6-8 rule above, if his most recent case was dismissed with a bar against refiling for 180 days (sometimes improperly referred to as a dismissal with prejudice); then, he has to wait out that 180 day period even if he has an aggressive creditor snapping at his heels.

Second, if he has been a debtor in at least one bankruptcy case in the last year, then the automatic stay will only last for 30 days when the case is filed unless the Judge agrees to extend it.  That requires notice to all creditors, an affidavit from the Debtor explaining why he should be given another chance; and possibly a hearing on the issue.  If the would be client has been a debtor in two bankruptcy cases pending in the last year, then there will be no automatic stay at all unless the Judge agrees to impose one.

Third, the would be client is going to have to convince me that he is worth taking on as a client; and he can expect that I will require considerably more cash up front than I would otherwise.  Of course, he may also have to convince the Court of his good faith if any annoyed creditor were to complain.

So, successive filings may be possible.  Oh, and you are always eligible to file a Chapter 13, you just may not be eligible for a discharge at the end.  The time periods above assume that the Debtor will need a discharge at the end of the case.  Without it, the Debtor will need to find a way to pay 100% of his debt in the Chapter 13.  That can be very useful, and a Chapter 7 filed with the intention of following it immediately with a Chapter 13 can be a very useful strategy for dealing with certain kinds of problems.  Oh, that is called a Chapter 20, by the way; and I will blog about it another day.

Elaine