I tried to word this impartially, but what it comes down to is
just dumb financial decisions all because they are afraid of the word Bankruptcy.
THIS IS WHAT HAPPENS WHEN YOU IGNORE OUR ADVICE!!!!
TRANSLATED: IF YOU ASK FOR ADVICE FROM A
30 YEAR ATTORNEY, TAKE IT!!!!!! DON'T IGNORE THE ADVICE
AND THEN ACT ON THE ADVICE OF YOUR HIGH SCHOOL
All of the people described below called me for advice. I did not call or seek them out. In almost every case I would have been able to help them but I cannot overcome someone's personality. These people have serious financial problems that will not go away on their own. Each of them needed some type of professional help, yet chose to ignore the advice, not return calls, or have committed so many irreversible acts before they called that getting them to understand they would have to do things correctly was almost impossible.
Potential Client (PC):
Ok this is one of the dumbest moves by any PC. Client files a Chapter 13 on his own. He does nothing afterwards and gets dismissed. He had not made a mortgage payment in years and was trying to stop the sale of his home. At the hearing on the dismissal the bankruptcy judge specifically tells him to talk to me. I happen to be in the courthouse at the time and the attorney who tried to help him, brings him to me.
We specifically discuss the fact he cannot do this on his own and he has to be in a Chapter 11 not a Chapter 13. He has alot of equity to save in his home and if he can't afford the payments this will give him time to sell the property instead of losing about $300,000 in equity. We talk for about an hour and go over all the options.
The very next day he files in pro per again. He does not file a motion to stop the foreclosure which he must do on a second filing or there is no stay. He does not file schedules. In short he does nothing again.
I repeatedly call and text him and leave messages about what he has to do. He files a motion to file late schedules and the court denies the motion on a Friday. I call him again and he says he will me by noon on Monday. I tell him that may be too late. He does not call Monday, does not return my calls and his case is dismissed again. I call and tell him we have maybe 12 hours to reverse this decision but again no return call.
Now if he files there is no stay of the foreclosure. The bank does not have to do anything. They can just move forward with the sale and there is nothing I can do to stop it. I have heard one very liberal judge say in over 3000 cases he has only granted a motion to extend the stay in 3 cases. With this particular judge, this PC is really out of luck as she is creditor friendly.
As a follow up to this, I found out the house has been foreclosed on and the PC lost $500,000 in equity that I cannot recover.
So as I have said time an again. I can never rescue someone from themselves.
PC calls under stress because he can no longer make his credit card payments. He owes about $45,000 which is very high. Unfortunately he and his wife each about $170,000 a year so the fact that he is in so much debt is unusually bad financial planning.
He is paying almost $2,500 on his cards each month and the balance is not coming down. Because of his high income he does not qualify to file a Chapter 7. I would have to put him in a Chapter 13 and repay all the debt.
The real difference is that in a Chapter 13 he will pay back all the debt over 5 years with no interest. Even with the trustee fee of $4,500.00 his payment would be $825.00 a month and he could pay off the debt anytime during the 5 years and be out of the bankruptcy. He proceeds not to return my calls or text messages and when I do reach him he has no answer to not filing despite the fact his debt goes up every night as interest is added to each credit card.
This is a perfect example of someone who is paralyzed into non-action and who will ultimately be sued, garnished and a lien put on his home, all because he is incapable of acting. Sad. The worse part is that it is his family that will suffer. All his disposable income will go to credit cards not to more enjoyable family events.
PC hears our ad about writing down property to the market value. He says he has a home that he lives in and two rental properties. He does not want to get rid of the mortgages, as he knows that is not possible, but instead just wants the rental properties at market value. He is not concerned about his personal residence.
I tell him that is exactly what we do. I can obtain an appraisal on the rental properties and he can start paying the reduced mortgage payment immediately. He will then only pay a small percent of the portion of the mortgage that is now unsecured. This is the exact outcome he called me for.
He does not call back, does not return text or voice messages. He never contacts me again. Remember he called me, I did not initiate the call to him.
PC calls because he cannot make his credit card payments any longer. Although he and his wife make about $170,000 a year he owes $50,000 in credit cards and loans and is paying about 30% interest. His payments are over $2000.00 a month. I tell him he cannot file a Chapter 7 because he makes too much money and has equity in his home. However, in a Chapter 13 he will pay back all the debt but his payment will be principle only at about $890.00 a month. He will save almost $1,100 a month and be out of debt in 5 years or less. The payments he makes now are only interest and in five years he will owe just as much if not more than he owes now.
He cannot make up his mind. Does not return calls or text messages and has not discussed this with his wife. He says he has made bad financial decisions in the past and is making another. In the now month he has procrastinated his bills have gone up almost $2000.00. Had he filed when he called, he would have saved this $2,000 which is the cost of filing.
PC call s me in July, 2014. She gives me a hard time and infers she knows more than I. I don't pursue it. She then calls me back in March 2015. By this time her situation is worse. She has filed a Chapter 13 with a paralegal. When I look at the documents I see that information has not been disclosed subjecting her to federal prosecution. Further she has not listed the total arrearage on her property. I can see why because her income will not support the plan.
Looking at her case I can see that I can save her $200,000 on her mortgage, which means over $600,000 in payments over the life of here loan. In addition by writing down the mortgage, the property will go up in value and she may have another $200,000 in equity in a couple of years. So she stands to make between $800,000 and $1,000,000 over all counting money she does not have to spend and the increase in value. Her total cost is $25,000. She decides not to convert to a Chapter 11.
Why is this a dumb decision:
First she has already filed the bankruptcy so her credit is already damaged.
Second, she had 8 prior bankruptcy filings. If this one fails she will be barred from filing again for up to a year.
Third she will be in the Chapter 13 for five years. I can have her out of the Chapter 11 in a year.
Finally, her property will have equity in a couple of years. With the current loan there is not likely to ever have equity.
PC calls me for information about bankruptcy. He did not call me to chat, did not call for debt relief etc. After speaking with him for about 45 minutes he ended up screaming at me that he did not want to file for bankruptcy. That's fine except for the following:
1. He owed over $65,000 in credit card bills
2. He had $80,000 in a 401K fund.
3. He had a moderately good income but still qualified to file a Chapter 7 and purge all his debt.
By the end of the conversation he was actually screaming at me that he did not want to file bankruptcy. I'm sorry, who called who???
Well about a year later he calls back. His first words were don't say I told you so. In that year he depleted his entire retirement fund, paid it all to the credit cards, and he still owed as much as he did a year earlier because of the high interest and penalties. So this time he ended up filing but his retirement was gone.
Why is this a dumb decision:
His retirement was entirely safe from creditors. Had he filed when he first called he would have kept his retirement, discharged his debt, and not be able to run up his debt again. He would have over $70,000 in savings instead of -0-.
PC comes to me owing about $69,000 in credit cards. The problem is he owns a house with equity in excess of $100,000 over and above his homestead exemption. Therefore I could only put him in a Chapter 13 and he would have to pay back all his credit card bills. He didn't want to do that. Says he could not afford the $1,265.00 a month payment. I looked at his budget and felt he could.
About six months later he calls back. Now he wants to file. Only by this time his $69,000 in credit card bills has ballooned to about $87,000 with interest and penalties. Now the payment would be $1,595.00 a month, a payment he could not afford. As a result he could not file a reorganization and had to sell the house to pay his bills. This was a result that could have been completely avoided but for the potential client's procrastination and failure to recognize how much filing for bankruptcy would help him.
Why is this a dumb decision:
By doing some work on his budget, he could have made the original payment and kept his home. Because he delayed he could not make payments and lost his home.
PC calls our office in about March of a given year. At the time he has huge IRS debt and owns 9 properties. However most of the debt if very old and would be dischargeable in bankruptcy. Instead of moving forward he waits almost a year. By the time he comes back, the IRS has placed a lien on five of the properties. We file a Chapter 11 before the IRS can lien the other four.
During the course of the bankruptcy proceeding the client loses his job and we are forced to convert to a Chapter 7. Had he filed when he came to us originally, we could have completed the Chapter 7, discharged all the taxes, almost $700,000 of them, and then refiled him as a Chapter 11 to rescue all the properties. Instead, the tax lien remained on the five, and client ended up losing all but one property. Another result that was unnecessary and caused by the failure to recognize the advantages of a bankruptcy.
Why was this a dumb decision?
Had client acted sooner, there would have been no liens on the property and over $700,000 in taxes would have been wiped out.
Clients comes to us a year before we file. He does not want to file. He owns 120 parcels of properties but he has a judgment against him of $3.5M dollars.
After a year of "thinking about it" he comes back two days after a receiver has been appointed to take over his properties. We put him in a Chapter 11 to salvage everything. Sounds good so far, but then things deteriorate.
First, he lies and undervalues the properties. We later have to sell a property he says was worth $750,000 for $1,200,000. Just a little difference. Then we find out a parcel of vacant land which he said was worth $400,000 was actually appraised at $750,000.
Second, he does not do anything we tell him for four months. He does not do Monthly Operating Reports, he does not tell us who all the lenders are, he does not hire an accountant as instructed by the court, he does not obtain appraisals as instructed by the court, and he does not tell us where any of the money is going from this 39 LLC's.
Third, he continually maintains the insurance company that has the judgment against him is not entitled to the money even though the judgment has been final for 6 years. During the time he was fighting them the amount owed climbed from about $1,000,000 to $3,500,000 counting their attorney fees.
Fourth, and this is the kicker, we have a 9 hour mediation. Present at the mediation are three experienced insurance company attorneys, two real estate brokers for value, his wife's family law attorney, his wife, a former bankruptcy judge as a mediator with over 25 years experience on the bench and his own pie in the sky personal attorney because he doesn't believe our advice.
The day before the mediation his personal attorney calls me and ends up yelling at me because I tell him the judgment is non-negotiable. He insists, like my client, that everything is negotiable. So I decide to let him speak first at the mediation.
About 45 seconds after he starts, and the insurance company realizes he wants to negotiate the amount, they get up and walk out. When I say something is non-negotiable, I mean it is non-negotiable. Anyway we get them back in and talk for another 7 hours. At that point I clear the room and have the bankruptcy judge talk to my client alone and tell him the facts of life.
We then resume negotiations for another hour at which point my client announces he cannot settle until he gets "professional advice." We only had about 400 years of experience at that table and I guess it wasn't enough for him.
Result?? The court appoints a trustee who is now selling all of his property and he subs us out because someone told him they could negotiate. Go figure!!!
Some people just don't want to pay their bills. I really don't have much sympathy for those types. I have alot of empathy for people in trouble, but really, if you can afford to pay the bills in some manner, you really should pay them.
PC calls because his wife owes about 40K in credit cards. She works but only makes about $2,000 a month. The problem is that he makes about $8,000 a month. California is a community property state which means no matter who incurs the bills, both spouses are responsible for them, even if one spouse did not sign for them and did not know about them. It's like a general partnership.
Anyway he wants her to file a Chapter 7 and get rid of the debt but is surprised to find out I have to include his income. Duh! She gets the benefit of his income, she lives in the house, eats food that he buys, etc, so we include all household income. Therefore she does not qualify for a Chapter 7. She would have to file a Chapter 13 and pay back all the credit cards. It would be about $733.33 a month for five years. He doesn't want to do that even though she would be the only one filing. He wants to only file if they can get out of everything.
Right now she is paying almost $2,000 a month for the bills and only paying the interest. In the Chapter 13 she would be paying $733.33 a month and it would all be principle. In five years or less if she paid ahead, she would be debt free. Without the Chapter 13 she will never be debt free. He doesn't want to do it. He would rather her stay in debt forever than make arrangements to pay back the debt.
PC owns two houses. He has over 400K equity in each one. He owes 900K in taxes so the IRS is about to take his houses. He bargains with them and they agree to only take one house and put the taxes in an uncollectable status. However, they want their 400K in penalties. In addition, he is about to be sued on a bond which will be about 250K.
Potential client thinks that by the IRS only taking the one house he has the other free and clear since he only has a very small mortgage. He ignores the fact that the IRS wants their 400K in penalties and that he is about to get sued for 250K from the bond. The combination of both of these will eat up any equity in the second house.
He could be saved from this by a Chapter 11. By getting a low appraisal we could limit the money any creditor would receive and also involk his homestead which wipes out most of the equity in one home or the other. Instead of having to pay back 900k in taxes and a 250K judgment he would be limited to paying back about 350 K over five years with little or no interest. Instead he does nothing which will cause him to lose both properties.
The reason he is doing nothing is because when he called he believed he could wipe out his debts and still keep his home that had 400K in equity without paying the creditors.
Does anyone know what planet this person is from? This is why this case is in the dumb decision category.
Potential clients calls to file a Chapter 7 bankruptcy to wipe out all of their debt. However, they don't qualify. One client makes too much money (over $90,000 a year) and one has $500,000 equity in a property and one owns a property free and clear with $150,000 equity over and above their homestead.
The client who makes too much does not call back because she believed her husband filed a few years ago and was able to do a Chapter 7. Obviously there have been changes in the law since then and their income may not be what she remembers. I ask them to send pay stubs to verify the income so I can do my evaluation and they do not call back.
The clients with the equity don't understand that they will not get out of debt on their own. They do not understand that you cannot keep equity in a property and not pay your bills. If you have 100K in equity you cannot just write off 50K in credit cards. Also what people do not realize is that if the creditor obtains a judgment of any size against them, the creditor can sell their home at a judicial foreclosure. I could put both potential clients in a Chapter 13. They would have to pay their bills but over 5 years at no interest. I would bet that each of these clients will be in the same shape in five years just because they won't move forward to protect themselves.
Client owns business and has a judgment against him from five years ago for over 200K. Now the judgment has ballooned to almost 500K. He simply does not want to pay the judgment. However, while his business was not going well the last few years now it is doing almost $1,000,000 a year. His goal is to save the business and sell it to his son. We can accomplish that in a Chapter 11 but he wants to get away without paying much to the lender. Of course the lender has a lien on all his equipment and all his receivables.
Instead of working to improve the business and just paying the debt, or filing the bk and negotiating down the debt, this debtor wants to take in cash and hide the money. He wants to move equipment off site so the lender does not know it exists if the lender takes over. Of course this would be bankruptcy fraud and we cannot be involved in this.
To top it off, the Debtor wants all the work done quickly and after we work on it for a week, then discloses all fo the above and wants his retainer back. We bill for our time and return the balance and send a warning we would not represent him in the future because of what he intends to do and our obligation to report bankruptcy fraud to the United States Trustee. There is no attorney client privilege for bankruptcy fraud.
The worst part of this is had he done everything right, he could have negotiated the debt down, sold the business to his son, solved all the problems and resumed life. Instead, he is incurring debt on the judgment at the rate of $5,000 a month, jeopardizing his freedom and his son's future. Talk about being stubborn. We simply cannot save people from themselves.