EXPLAINING BANKRUPTCY TO YOUR LOVED ONES

Marty Long • Jan 25, 2024

Bankruptcy puts your family in a better financial position

                                                         

           It is a common thing for family members to help out other family members with their finances or with larger ticket items, such as a house, a car, large appliances, et cetera. So, it is also natural for some of them to inquire as to why you and/or your spouse are in the process of filing for bankruptcy. Sometimes this may seem intrusive or overly protective but most of the time it is simply your loved one showing interest and concern. In fact, family members are usually all too happy to help pay for the cost of filing for bankruptcy. Explaining bankruptcy to them may help to ease some of the more awkward or uncomfortable conversations that you may have to deal with. It is also important to keep in mind for your own peace of mind that filing for bankruptcy is the proper thing to do and will allow you to help protect your family moving forward. Take the following example:

 

Say you own a small business that relies on you and your intellectual capital and personality alone to generate income. It is no doubt mentally and emotionally challenging to manage just the administrative side of your firm, let alone the necessity to invest your skill and training into the non-administrative side of your firm. After hacking away at it for five years you decide it is best to move on and you get a job elsewhere. You have to unwind your business but find out in the process that you signed a contract for health insurance that lowered your premiums significantly. It is only two years into a five-year contract. Should you keep paying on the contract?

 

Should you be saddled with paying those bills, for employees who no longer even work for you and who will not benefit from the insurance policy? Not many people would argue that bankruptcy is inappropriate to discharge all of the personal guarantees that you signed during your stewardship of your small business. Perhaps you earn your income solely as a result of commissions, such as a car salesperson or real estate agent and you had to take medical leave and were unable to collect disability. During that time your mortgage and car payment went into default status but now you are back at work and earning good money and want to get current. Bankruptcy can help in all of these situations and more. No doubt, bankruptcy does much good for literally millions of law abiding, financially responsible individuals.

 

BANKRUPTCY BASICS

 

           It may also help to explain to your loved ones the basics of bankruptcy. In every bankruptcy case there are at least four different players.     

 

1.     You – the debtor and your attorney. Your role is to be honest and forthcoming in your bankruptcy petition. Your attorney is there to marshal these facts in a specified manner to  enable you to receive a discharge under the bankruptcy code.

 

2.     The Trustee – the Trustee administers the bankruptcy case to make sure it complies with the Bankruptcy Code and determines possible assets of the estate.   Certainly, creditors can enter an appearance and make sure that their specific voice is heard. The trustee looks at the best interests of the creditors in general and seeks to increase any potential recovery of money to distribute to creditors.

 

3.     The United States Trustee – The UST is distinct from the trustee. The United States Trustee is a branch of the Department of Justice that acts as a passive prosecutor. They receive a copy of all documents filed in your case and may receive recordings of your 341(a) creditor’s hearing. They review each case to help make sure that the bankruptcy laws are complied with and there is no evidence of fraud. If there is any evidence of fraud, the trustee or the Trustee's Office will investigate and prosecute as appropriate.

 

4.     The Court – the Court reviews everything and resolves any disputes between the parties that they cannot resolve themselves by way of consent. For example, you default on your car loan and they accelerate the payments on it and file a proof of claim claiming they are owed the full amount due and owing on the promissory note, plus attorney's fees and other incidental costs. You argue that the amount due and owing is not the full accelerated amount and the attorney's fees are unreasonable and burdensome. Both sides file motions and briefs and both make valid legal arguments based on the law. It is up to the Court to determine which side will prevail and on which issue.         

 

           The law firm of Long & Long, P.C. has decades of combined experience in bankruptcy, ensuring that clients rights, property and money are protected from creditors and others. Long & Long, P.C. can be reached at (303) 832-2655.

                                                                                                                                                       

 

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How Does a Joint Petition Work?

09 Nov, 2023
A joint petition is when a married couple together files a single bankruptcy case. Unless noted otherwise in the statutes, if a married couple files jointly in Colorado, each spouse may claim the full amount of each exemption. The favorable effect of this is that the couple can claim twice the amount of exemptions. Unmarried couples, partnerships, and corporations must file separate petitions. If you are an individual and have a business entity, such as an LLC or a partnership, you cannot file a single petition for yourself and that business. In such a case you will note your interest in your company in your individual filing, e.g., John Doe, a member of Doe, LLC. If you are a sole proprietor, however, you may include your 100% ownership of the business in your individual bankruptcy. Once a joint petition is filed, all property and debts between the two individuals in the marriage become part of the bankruptcy filing. Sometimes it may be advisable for one spouse to file a petition alone and without the other spouse. An example is when the debts are owed only by the filing spouse, and not the non-filing spouse. Though the non-filing spouse is not part of the bankruptcy, information regarding the income of the non-filing spouse must be included in the filing spouse’s statements and schedules. Why, you ask? Because the income from the non-filing spouse given for the benefit of the filing spouse may mean the filing spouse has the means to pay some of the debt. The Bankruptcy Process You can start the bankruptcy process by filing a petition with the bankruptcy court serving your area. In addition to the petition, you must also file with the court (1) schedules of assets and liabilities; (2) a schedule of current income and expenditures; (3) a statement of financial affairs; and (4) a schedule of executory contracts and unexpired leases. In addition, you must provide the assigned trustee with a copy of the tax return or returns for the most recent year as well as tax returns filed during the case. These documents must be provided for both husband and wife. Creditors Meeting Between 21 and 40 days after the filing date, the trustee will call a meeting of your creditors. In the case of a joint petition, both husband and wife must attend the creditors’ meeting and answer questions regarding their financial status and property. Within ten days of this meeting, the trustee will communicate to the court whether the case should be presumed to be an abuse under the "means test". Benefits Of Joint Bankruptcy Filing There are benefits to filing jointly. You will save on filing fees, as the fee is the same for both as it is for one. Filing jointly will often give the couple a greater chance of keeping their property because of the “doubling” of exemption amounts; However, in Colorado the homestead exemption amount is not doubled with a total maximum at the time of writing of $75,000, or $105,000 if 60 or over or disabled. In addition, joint filing will save the married couple a lot of time. Determining whether to file together or separately, whether to file for chapter 7 or chapter 13 bankruptcy, and ensuring the protection of as much of your property as possible is a complex process. Each couple’s situation is different, so it is important that a married couple considering a joint or individual petition consult an experienced Bankruptcy Attorney. As a former trustee for the U.S. Bankruptcy Court, with over thirty years experience, Attorney Martin Long is an expert in the industry with decades of experience in Colorado . We also serve Aurora, Centennial, Highlands Ranch, Denver, Lakewood, Englewood, Littleton, Castle Rock, Colorado and the Denver metro area with three convenient locations. For help with your financial matter, call the Law Office of Long & Long for a free initial consultation at 303-832-2655 .

Can I Change From One Bankruptcy Chapter to Another?

09 Nov, 2023
As a Bankruptcy Attorney , I occasionally have clients ask, “Can I change from one chapter to another under the bankruptcy code? And if so, which chapter should I file under?” The short answer is: Yes. You may convert from a Chapter 7 to a Chapter 13, and vice-versa, with certain restrictions and limitations. A Recap of Chapter 7 and Chapter 13 Bankruptcies Chapter 7 bankruptcy provides for complete liquidation of the debtor’s non-exempt assets. This involves the bankruptcy trustee selling all of the debtor’s assets, subject to certain statutory exemptions, and paying the creditors with the liquidation proceeds. However, Chapter 7 cases often result in the debtor keeping all of their assets, in part because they were done correctly by an experienced bankruptcy attorney. If an individual’s current monthly income is more than the state median then the bankruptcy code requires the debtor to meet a “means test” to ensure the Chapter 7 filing is not presumptively abusive. Unless the individual overcomes this presumption, the case will typically be converted to a Chapter 13 bankruptcy or dismissed. Chapter 13 (“wage earner's plan”) is another part of the bankruptcy code that allows individuals to halt collection actions and present a repayment plan to debtors that takes place over three to five years. If a debtor’s current monthly income is less than the state median then the plan will generally be for three years, and if the individual’s current monthly income is greater than the state median, then the repayment plan will be five years. Converting From One Chapter to Another As mentioned, a Chapter 7 filing may be converted to a Chapter 13 bankruptcy proceeding. A debtor may convert a Chapter 7 to a Chapter 13. This may be done for a variety of reasons. For example, a debtor may file under Chapter 7 and realize that Chapter 13 may be a better alternative -- especially if the debtor wishes to keep certain property, does not satisfy the means test, or wishes to consolidate their debts and enter a repayment plan. This will stop collection efforts and allow the debtor to emerge from the bankruptcy plan with a “clean slate.” However, an individual cannot file under chapter 7 or any other chapter if during the preceding 180 days a prior bankruptcy petition was dismissed due to lack of the debtor’s cooperation (including appearances), or the debtor voluntarily dismissed the previous case after lien creditors sought relief from the bankruptcy court to recover property. There are certain eligibility requirements that will not allow conversion to a chapter if that case had previously been converted. Contact a Colorado Bankruptcy Attorney As a former trustee for the U.S. Bankruptcy Court, with over thirty years’ experience, Bankrupcy Attorney Martin Long is an expert in the industry with decades of experience in Bankruptcy Law in Centennial Colorado. We also serve Aurora, Loveland, Highlands Ranch, Denver, Littleton, Castle Rock, Colorado and the Denver metro area and front range with two convenient locations. For help with your financial matter, contact the Law Office of Long & Long P.C. for a free initial consultation at 303-832-2655.
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