Bankruptcy Q & A with Sandy

How do I start the process?  I’ve seen your commercial on TV.  What do I do?

Can I get started with my Bankruptcy if I don’t have the fees in full and up front?

I have a reverse mortgage.  Can I file?

Why do my reverse payments stop after I file?

What is the difference between a Chapter 7 and a Chapter 13?

How can a Chapter 13 prevent foreclosure?

I didn’t know I should have filed a Chapter 13 instead of a Chapter 7 to keep my home.  What do I do now?  Can I convert it?

I just received a Summons and Complaint in the mail from a creditor.  It is for my unpaid debt.

     Should I file bankruptcy?

     How much time do I have?

     Should I answer the Complaint?

Will you negotiate with my creditors so I can try to pay them and avoid bankruptcy?

Where do I file?

How do I start the process?

I’ve seen your commercial on TV. What do I do? First, we schedule a consultation and I ask you a lot of questions. We can schedule a sit down in my office, meet at a mutually convenient location, or schedule your free consultation by phone, skype session, or online chat. I’ve chatted with clients who were temporarily overseas and locally via skype (saves gas!). I will also travel to elderly and disabled clients’ homes. Some of my questions may not seem relevant but they are. I’m not just being “nosy” when I ask, “How many people do you claim on your tax return?” or “How much did you make before you were laid off?” I will ask you questions that are targeted toward figuring out (a) if you really need to file bankruptcy; and (b) which type of bankruptcy is best for you (Chapter 7, Chapter 13 or Chapter 11); and (c) debunking whatever inaccurate beliefs you may have about the process. The key to bankruptcy is disclosure, disclosure, disclosure!

Can I get started if I don’t have the fees in full and up front?

Yes, of course you can. You can structure a payment plan that is comfortable for you. But I must have all fees and costs for filing before we actually file the bankruptcy petition with the court; otherwise, you can include me as a creditor on your petition and I will be working for free. I am not legally or ethically able to demand my fees after the filing date (except under limited circumstances).

Once you file, an automatic stay goes into place against all of your creditors. See 11 USC Section 362. Creditors are prevented from collecting the debts that are properly listed on your bankruptcy petition and all collection activities will stop. For this reason, it is CRITICAL to include ALL creditors when you file a bankruptcy petition. You are required by law to disclose all creditors. After you file, creditors may not seek payment from you without first filing papers with the court asking to lift the automatic stay. This powerful federal rule, the automatic stay, is a bar against me as well, and I cannot request my fees after the filing date (again, except under certain limited circumstances). You can, however, negotiate new business with new vendors and creditors for new consideration (payment) after the filing. Most will not negotiate anything with you until you have received your discharge of debts and the bankruptcy case is closed.

I have a reverse mortgage. Can I file?

Yes. The holder of the reverse mortgage will stop your monthly payments for the duration of the bankruptcy, which is typically four to six months or longer. This means you must plan carefully and prepare for the timing of your filing.

Why do my payments stop?

You are not supposed to incur more debt during the pendency of a bankruptcy. Receipt of those reverse-mortgage payments is the equivalent of incurring additional debt. Your monthly payments should resume as soon as you receive your discharge. You need to speak to an attorney who will properly review your reverse-mortgage paperwork and contact the lender/mortgage-holder before filing. Different districts do different things. It is critical to plan properly with guidance from a competent legal representative.

What is the difference between a Chapter 7 and a Chapter 13?

In a general sense, a Chapter 7 relieves you of personal liability for your debts. After discharge you are free of most, if not all, of your financial burdens. You obtain the fresh start desired and should walk away debt-free. You may keep secured assets if you stay current on payments and inform the creditor of your intentions.

You must first qualify by taking the Means Test. This Means Test determines whether you qualify for a Chapter 7 Bankruptcy Petition or a Chapter 13 Bankruptcy Petition and, among other things, how long your Chapter 13 Plan will last if you file a Chapter 13 Bankruptcy Petition.

A Chapter 13 accomplishes the same goal as a Chapter 7 in that you will be relieved of most, if not all, of your debts. It is known as a “wage-earner’s” bankruptcy and is chosen for many reasons. You may be able to file a Chapter 13 if your income is too high to qualify for a Chapter 7. A common reason to file a Chapter 13 petition (especially since the financial crash of 2008) is to save your home. A Chapter 13 can be a powerful tool for saving a home. Unfortunately too many homeowners are unaware of this useful option. A full explanation is too complicated for this page. But a legitimate Chapter 13 bankruptcy petition will likely stop a foreclosure. Just know that you need to investigate the possibility of filing a Chapter 13 petition if you are behind on your mortgage payments and need time to catch up.

The biggest difference between a Chapter 7 and Chapter 13, in a practical sense, are payments (by you, the Debtor) to the Chapter 13 Trustee for three to five years before discharge and closure of your case. You will, in theory, pay your unsecured creditors on a pro rata basis. Whereas a Chapter 7 Bankruptcy Petition is generally filed and discharge is received within four to six months if there are no major issues, a Chapter 13 requires a Chapter 13 Plan that must be feasible for you to manage over the life of the bankruptcy. We will work together to create a Plan that is feasible. You may have a 0% plan or a 100% plan, depending on your individual facts and circumstances. Don’t let the myths about bankruptcy prevent you from researching all of your options.

How can a Chapter 13 prevent foreclosure?

The automatic stay mentioned above operates against all creditors, including your mortgage lender. A Chapter 13 Plan may allow you to catch up on arrearages (missed payments on your mortgage) if it is feasible. The key to a Chapter 13 Plan is it must be feasible or “doable”; otherwise, it will not be confirmed by the court. A Chapter 13 bankruptcy is a powerful tool toward saving your home, when applicable. Bankruptcy can stop foreclosure. Two things to remember: If neither a Chapter 7 nor a Chapter 13 is an option, you may be able to file an “individual Chapter 11.” WARNING: repeat filings may eliminate the protection of the automatic stay.

I didn’t know I should have filed a Chapter 13 instead of a Chapter 7 to keep my home. What do I do now? Can I convert it? Generally, “Yes.” But you really need to speak to an attorney. If you are current on your mortgage payments, you should be able to keep your home, regardless of what Chapter you file.

I just received a Summons and Complaint in the mail from a creditor. It is for my unpaid debt. Should I file bankruptcy?

How much time do I have? Should I answer the Complaint? You must answer the Complaint within thirty days to prevent the creditor from getting a default judgment. If you owe the debt, you owe the debt. What action you should take depends on whether you are employed or unemployed, have assets, are on social security … the list goes on. This is why you should obtain a free consultation with an attorney. You may think you know the law, but you probably don’t. At best, you know elements of the law. Getting proper help gives you a fighting chance toward bettering your situation. I always tell my clients to remain proactive! In general, you usually have a bit of time to plan before a creditor will obtain a judgment allowing collection of the debt through bank levy or wage garnishment. If you have waited this long, NOW is the time to take action and come up with that plan. Not deciding what to do is always deciding to let things get worse!

Will you negotiate with my creditors so I can try to pay them and avoid bankruptcy?

Yes, but you need to know that, even if a creditor offers a reduced amount as settlement, one lump sum or very few payments will be required. Thus, you have to prepare by saving money or borrowing, or taking out a 401k loan before negotiating. If you take out a 401k loan, but it’s only going to keep you above water momentarily until other creditors take action, you are only digging yourself further into a hole. I only advised a 401k loan once. That particular case was unique. The couple had a second mortgage and almost negligible unsecured debt. Trust me, it didn’t seem negligible to them! However, I was able to negotiate the second mortgage to less than 1/5th of the original debt, and I advised the couple to take out a 401k loan with a manageable payment. Bankruptcy was not necessary for them. They were able to negotiate with their largest unsecured creditor and that was it. They had time and used it wisely before lawsuits piled up. This is a perfect example of why a free consultation is important. An experienced attorney will see options that you may not be aware of or have not considered based on lack of knowledge or misinformation. To be clear, it’s great to negotiate a settlement of $1,200 instead of the original $5,000 debt, but if you can’t obtain the money relatively quickly, you will not likely be able to successfully negotiate. And if you take out a 401k loan but can’t afford THAT payment – don’t do it! My client’s situation was unique, but our strategy worked.

Remember, once you fail at a settlement agreement, all bets are off and you are back in the position you were in before negotiations. All late fees, interest, etc. — everything is back in place as if you had never negotiated a settlement. Further, if other creditors pop up demanding payment and filing lawsuits (that you are unable to pay), it isn’t worth negotiating with a single creditor if you are left unable to negotiate with the remaining creditors. You do not want to be brave but end up causing yourself more harm than good. Negotiating is good if you have access to cash (or time to gain access to cash) that will cover all settlements, not just some. My fees are hourly for this service or I charge a percentage of the difference saved. If I save you a total of $1,000 for example, I charge a percentage of the total amount saved.

Where do I file?

I am authorized to practice in the United States Bankruptcy Court, Central District of California, which includes Los Angeles, Ventura, Santa Barbara, Woodland Hills and Riverside. I have clients from Lancaster to Victorville and everywhere in between. I am also admitted to practice in the Eastern District (up North). Click here to find out where we will file your bankruptcy petition.

US Trustee Program

Click on www.justice.gov/ust/eo/bapcpa/meanstesting.htm for Census Bureau, IRS Data, and Administrative Expenses Multipliers, which is the information we will use to fill out your Means Test and scrutinize your expenses.


DISCLAIMER PLEASE READ: Nothing on this web site creates an attorney-client relationship. Until you have signed a client-engagement agreement with Sandra Nutt, Attorney At Law, there is no attorney-client relationship. The information provided is for general informational purposes only and does not constitute legal advice. Readers should not rely on it to solve individual problems. The information should not be a substitute for individualized legal advice based on the unique facts relevant to your personal situation. Such legal advice cannot be given without full consideration of all relevant information relating to a visitor’s individual situation. Sandra Nutt, Attorney at Law, does not owe a duty of confidentiality to individuals who unilaterally email inquiries when the email is unsolicited. However, all information discussed during the free initial consultation is confidential in most circumstances. Providing a phone number and contact information is an invitation only to contact Sandy, not to submit confidential information. If specific legal advice is sought, Sandy will indicate that this requires establishment of an attorney-client relationship, which cannot be carried out through the use of a web page.