Why Hire an Experienced Chapter 7 Bankruptcy Lawyer
Chapter 7 bankruptcies can be extremely easy. If you own little property, pass the means test and have mostly credit card debt, Chapter 7 is probably a no-brainer. I know a lot of general practitioners who file Chapter 7s like this. For purposes of this discussion, let’s call such lawyers “dabblers.” The difference between a good bankruptcy lawyer and a “dabbler” is knowing what to do when a case doesn’t fit the mold of the easy Chapter 7. Perhaps the client can’t pass the means test. Maybe he has property with too much equity, or has the kind of debt that Chapter 7 doesn’t do much for–secured debt, student loans or priority debt, for example. Dabblers don’t know what to do with these cases. For these lawyers, it’s Chapter 7 or bust. But a good bankruptcy lawyer can explain your options if Chapter 7 doesn’t work for you. He can recognize that even when Chapter 7 is available, another chapter may be better. Let me give you a hypothetical. You bought a car 3 years ago. You financed the vehicle and rolled a prior car loan into the deal, leaving you upside down from the start. Your financing is for 7 years, which means you’ve made little headway into the principal of the loan and have 4 years to go. You drive a lot to get to and from work, and the mileage is causing your vehicle’s value to depreciate at an alarming rate. You need your car, but aren’t sure it’s worth the money. You have $30,000 in credit card debt, $10,000 in personal loans and $5,000 in medical debt. You also have $2,000 in unpaid tolls and municipal traffic violations (e.g., red-light camera tickets) that you’ve racked up driving back and forth to work. You own no property that would be subject to liquidation in a Chapter 7 case, and you pass the means test. A dabbler will advise you to file a 7 and reaffirm on the car, because he doesn’t know any better, and the mere mention of chapters other than 7 makes him nervous. But a good bankruptcy lawyer will tell you that while Chapter 7 is available, a better choice may be Chapter 13, where you can restructure the debt on the vehicle over a five-year payment plan, reduce the amount owed to its value, and reduce the interest rate, resulting in a substantially lower payment. You can still discharge most (if not all) of the credit card debt, personal loans and medical debt. You also can discharge the tolls and local ordinance citations, which are not dis-chargeable in Chapter 7. And, if the car breaks down and you decide not to continue paying on it, you can convert the case to 7 and surrender it. If you are considering bankruptcy, you want an experienced bankruptcy lawyer who can advise you as to the pros and cons of Chapter 7, 11 and 13. She should be able to explain why any particular chapter is best for you. Don’t settle for a dabbler who thinks whether you file or not comes down to passing the means test.
WHERE YOU FILE BANKRUPTCY CAN MATTER A LOT
Lawyers love to tell “war stories” about their achievements in the courtroom. Many lawyers are splendid orators and story tellers, so these can be entertaining. Unfortunately, bankruptcy law is dry stuff and generally not conducive to such things. I got to elect the Wisconsin exemptions over the Illinois ones! The trustee ignored the asset and filed an NDR! But I have one you might enjoy. A client, a married retiree who wanted to file by himself, passed the means test for Chapter 7 but had a bit more property than I was comfortable with. He owned a car outright that was worth $5,000. He had a few thousand bucks in his bank accounts. And he owned two homes–one in Cook County and the other in Kankakee County. The Cook County property was being rented and had no equity. The Kankakee County property was his principal residence and had a little bit of equity. I knew that if we filed a Chapter 7 in the district encompassing the client’s residence (the Central District of Illinois), a trustee there likely would demand turnover of the car and some of the money in the bank accounts. He might even threaten to sell the Kankakee County residence to liquidate the equity there. Our exemptions were insufficient to protect all of this property, so we would have to pay up or convert to Chapter 13 to avoid losing it. Ordinarily, you file your bankruptcy in the district where you have lived the last 180 days. But under the bankruptcy code, a debtor can elect to file in a district where he owns real estate. The client owned property in Cook County, which is encompassed by the Northern District of Illinois. In my experience, the Chapter 7 trustees there are much more likely to abandon assets, because they have a heavier caseload and don’t have the time to chase down and liquidate property. I advised the client accordingly, and we filed in the Northern District. We had to go to Chicago instead of Kankakee for our creditor meeting, but sure enough, after a five-minute inquiry, the trustee declared our case to be “no asset” and sent us on our way. My client didn’t have to turn over a cent. Sometimes where you file bankruptcy matters a lot. Trustees and judges vary from district to district, and even within your district. This isn’t something you will have control of very often. But if you have a choice of venues–because you moved within the last 180 days, or because you own property apart from where you reside–you should seize the opportunity to take advantage. In my case, it saved my client thousands of dollars and allowed him to enjoy a no-sweat Chapter 7.