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Property You Can Protect When You File for Bankruptcy (Interview Part 2 of 3)

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Retirement accounts are exempt from creditors when filing for bankruptcy, but an inherited IRA is not. A recent ruling extending the time to cure arrearage might help you save your house after a tax sale.

Editor: We recently discussed the changes in the bankruptcy laws with Christopher Holmes, Jess M. Smith, III, partners at Tom Scott & Associates, P.C., along with associate attorney Andrew DeYoung. Below is Part 2 of 3 of the transcript of the conversation.

Q: Can you mention some of the things you can protect and some that you cannot protect when filing for bankruptcy?

Chris Holmes: Real estate. If it is your residence, you can protect up to $19,300 of equity. If it’s a joint filing and the property is owned jointly by a husband and wife, they can protect up to $38,600. Sometimes, when only one of them files, the property owned by a husband and wife is totally off limits to the creditors. That comes in handy sometimes.

Q: Based on cases you’ve dealt with, what are examples of the types of property people will include in their bankruptcy filing?

Jess Smith, III: The cash value of life insurance polices.

Andrew DeYoung: 401k accounts. IRA accounts. It can be as general as the clothing on your back. It’s what the exemptions apply to.

CH: But inherited IRAs are not exempt.

JS: It’s complicated and that’s why you should consult with an attorney.

CH: In general, retirement accounts—IRAs, 401Ks, defined benefit pension plans—are exempt, off-limits, no matter how much money is in there. But there was a recent decision where someone inherited a person’s IRA. The person who had the IRA died; someone inherited the IRA. The person who died could have protected that in its entirety from his or her creditors, but when it was inherited by the recipient—the debtor— it wasn’t off-limits to the creditors. It became subject to being taken and liquidated for the benefit of the debtor’s creditors.

Q: Was this decision a case you worked on or a precedent-setting case?

CH: It was a precedent-setting case in the 7th Circuit Court of Appeals in 2013, Clark (debtor) v. Rameker (trustee), in which a decision was made by the judges that an inherited IRA is not exempt in certain circumstances. (ed., The Supreme Court affirmed this decision by unanimous vote in 2014: Funds held in inherited Individual Retirement Accounts are not “retirement funds” within the meaning of 11 U.S.C. §522(b)(3)(c) and therefore not exempt from the bankruptcy estate.)

JS: And there was the case of someone buying a new car on the eve of bankruptcy to protect the lien, or affecting the lien. If the creditor does not affect the lien on the title, sometimes the trustee can take the car itself.

CH: Right. I recently had a case where right before the people came in to sign the paperwork, just two days before, they went out and bought two cars. So I had to change the paperwork and their list of creditors, but then the problem was that we had to know for certain that the creditor had put their lien on the title to each vehicle—and they had to do that within 30 days of whenever the people got the car. Otherwise, in a Chapter 7 bankruptcy, or even in a Chapter 13, the trustee could void the lien, take the car and liquidate it. Unless we did something else to prevent that, we would have to wait 91 days from the transfer of the title to file the bankruptcy. Otherwise, it creates what’s called a “preferential transfer.” With that situation, a trustee could set aside that preferential transfer and try to confiscate and liquidate that car.

There is another recent precedent-setting case that has changed in bankruptcy law. Previously, when a house had been sold by the county treasurer for delinquent taxes, the debtor had one year to redeem the property—pay the taxes plus a rate of interest—to keep the house from going to the tax sale purchaser. In the bad old days, we would have to tell people, "You’ve got to file a Chapter 13 bankruptcy before the tax sale to get the benefit of the three- to five-year Chapter 13 plan, to cure that real estate tax arrearage and save the house. If the tax sale had occurred, we couldn’t use a Chapter 13 plan to give them three to five years to cure that problem. They still had this one-year statutory redemption period, but luckily one of our judges, Judge Carr, ruled that you can now use a Chapter 13 plan after the tax sale has taken place to force everyone to back off for three to five years, to give that debtor ample time to cure that arrearage. So that is a new development we can use to save houses after tax sales.

Part 1 of Interview: What’s New in Bankruptcy Law in Indiana

Part 3 of Interview: Accruing Post-Petition Interest on Unpaid Federal Taxes

What’s New in Bankruptcy Law in Indiana (Interview Part 1 of 3)

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The official bankruptcy forms changed as of December 1, 2015, which will impact pro se debtors filing Voluntary Petitions. Mistakes made by pro se debtors include handling of tax refunds and submission of the document production form. Indiana bankruptcy exemption limitations have also changed.

Editor: We recently discussed the changes in the bankruptcy laws with Christopher Holmes, Jess M. Smith, III, partners at Tom Scott & Associates, P.C., along with associate attorney Andrew DeYoung. Below is Part 1 of 3 of the transcript of the conversation.

Q. What’s new in bankruptcy law in Indiana?

Chris Holmes: First of all the official bankruptcy forms changed as of December 1, 2015, so the forms are much more complicated. I think they require much greater sophistication. It’s probably going to impact the pro se debtor — the people who want to represent themselves in a bankruptcy. The forms are supposed to be simpler, but I believe they are much more complicated and perhaps will drive some people to attorneys to have them filled out properly.

Q: What are the different types of information that those forms are now asking people to include?

CH: The same information is being requested, but in a much more confusing way.

Q: Let’s start with that information. What types of information do the forms require?

Andrew DeYoung: The Voluntary Petition, for example, used to be a three-page document. Now, it’s an eight-page document. They’ve taken the old forms and added more language to read and understand, and it’s increased the size of the paperwork in a petition package to 23 pages per case. (Reference: United States Bankruptcy Court Southern District of Indiana Pro Se Debtor Packet)

Q: What kind of information is included in that Voluntary Petition?

AD: All of the property that a debtor owns; all of the creditors that a debtor owes money to; their income; their place of employment; and money they spend on a monthly basis for their household expenses, so it forces debtors to come up with a budget.

CH: People who think they can do it themselves might be fooling themselves, because the paperwork has become so much more complicated and the law imposes so many more requirements on debtors and their counsel to provide certain information and documents. I saw a story today where a woman was trying to do it herself. She had filed her tax returns, but then she had filed her bankruptcy before she had received and spent her tax refund money. So, the trustee was telling her that he was going to be suing her for his fair share of those refunds, because she had not received and spent them before she filed for bankruptcy. As of the date of filing, the refund was an asset of the bankruptcy estate, and the bankruptcy trustee, on behalf of all of the creditors, is entitled to take his fair share of it and distribute that money amongst the creditors. So, she didn’t know that, because she was doing it herself, and now her case is threatened with dismissal and her debts may never be dischargeable. She’ll be denied a discharge if she doesn’t turn over that money to the trustee.

Q: What other common mistakes do people make when they file for bankruptcy for themselves?

AD: We actually had a client, who retained us at our Shadeland Ave. office last week, whose petition I review at our free consultation. She had done everything correctly, but she paid a petition preparer to get it together, which cost her $300. She showed up at the meeting of creditors, but the trustee sent her home because she did not provide him with the document production form, which is required in Chapter 7 cases. So even though this particular person did everything correctly, it still resulted in the hearing not being held and her coming to retain us to get together her document production and fix the different things in her petition that a trustee may want to see perfected. So, she wound up financially in exactly the same place she would have been, minus $300, if she had just hired us to begin with.

Q: It sounds like cases in which people who file their taxes by themselves receive a letter from the IRS that states they owe thousands of dollar in unpaid taxes, plus interest and penalties, and then they hire an accountant to help them resolve the situation.

CH: Yes. I probably could do my own taxes, but I choose to pay someone to do it for me because it’s complicated and I want it done right. I like to use another analogy. I used to change the oil in my car. It’s doable, but I’d rather pay someone to do it because I want it done right, they can dispose of the oil more efficiently that I can, and I’m also afraid I might not get the lug nut in properly. Who knows what could happen then?

Also in regard to the bankruptcy forms is that the exemptions have changed. Indiana has a statute, Indiana Code 34-55-10-2: Bankruptcy exemptions; limitations, which tells people how much property they can protect from their creditors—or in the bankruptcy context, from the trustee who represents their creditors. Those numbers recently increased. It used to be you could protect $17,600 in equity and real estate; that number has gone up to $19,300. Or people could protect $9350 of tangible personal property; that’s now $10,250. So these are important details. Some people who represent themselves perhaps have valuable property that could be taken by the trustee. Like that tax refund situation, they could protect $400 of the tax refund now, as opposed to only $350 previously. There are some sections in the code that tell you some things that you can protect and some things that you can’t protect that are very critical in determining whether you file a Chapter 7 or Chapter 13 bankruptcy. That’s because something might be lost and liquidated in a Chapter 7, but you can pay your creditors enough money to protect those assets in a Chapter 13 case.

Part 2 of Interview: Property You Can Protect When You File for Bankruptcy

Part 3 of Interview: Accruing Post-Petition Interest on Unpaid Federal Taxes

Bankruptcy Strategy for Client with Chronic Medical Condition and No Health Insurance

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Medical Bills Past Due

A remedy is available for a man without medical insurance who has a serious medical condition that prevents him working. Many people with medical conditions seek debt relief through a Chapter 13 bankruptcy plan, with the option of converting that to a Chapter 7 bankruptcy later, if medical bills become overwhelming while the plan is in effect.

We recently discussed how medical issues and bills impact bankruptcy filings with Christopher Holmes and Jess M. Smith, III, partners at Tom Scott & Associates, P.C. Below is a transcript of that portion of the conversation.

Chris Holmes: I have a current client who lives in the near-north side of Indianapolis. He is in his 40s and has children. He recently had undergone some medical treatment for a chronic, persistent problem. Unfortunately, he didn’t have any insurance. He couldn’t work and he didn’t have any accrued sick time, so he couldn’t earn any money. As a result, he couldn’t pay his monthly bills and couldn’t make payment on his medical bills. All of his creditors are now coming after him. Some people in this type of situation might file a Chapter 7 bankruptcy and wipe the slate clean. The medical problem has not yet been resolved and he is going to need additional medical treatment for which he does not have medical insurance.

What we do sometimes in cases like this is to put someone into a Chapter 13 plan, which would last, at a minimum, three years. If, during that three year period after filing the Chapter 13 case, he incurs an extraordinary amount of uninsured or unreimbursed medical bills he can’t handle, we have the luxury of switching or converting the Chapter 13 case to a Chapter 7 case. Whereas you can only list the debts that are incurred as of the time of the filing for bankruptcy, you can move that line down the road to the point of conversion. So, if between the filing of the Chapter 13 and the conversion of the case he incurs all of those unreimbursed medical bills, we can add them to the list. If those medical bills are dischargeable, we’ll discharge them in that converted Chapter 7. It’s a way to insure against uninsured medical bills during that three year time-frame.

Jess Smith: That is a legitimate reason for people to file Chapter 13. Don’t take garnishment now, with the right to convert later.

CH: So, for a minimum payment of $125 a month, which is probably cheaper than any insurance premium, people in this position insure against those uninsured medical bills during that three year timeframe. Now, if they don’t incur any additional medical bills, they can complete their plan and get their discharge, but if those medical bills are more than they can handle, that’s a reason to switch it over to a Chapter 7.

This particular client can’t go back to work for a couple of more months, so we are going to wait to file the case until that time. Chapter 13 used to be referred to as a wage earner plan and was designed for people who had regular steady income above and beyond their monthly living expenses. Without that regular steady income, he can’t propose a feasible plan. So, he is going to be released by his doctor and go back to work and that is when we are going to file. He’s still worried that he is still going to have this persistent problem that would require additional medical treatment and incur those unreimbursed medical bills.

If a medical condition and medical bills are causing severe financial hardship, contact us to discuss possible options that will allow you to get back on your feet and out of debt.

Foreclosure, Second Mortgage, and Bankruptcy

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Avoid Foreclosure and Keep Your HouseWhen foreclosure of a house is a threat, many homeowners seek debt relief through bankruptcy. A fairly common theme in this type of situation is the presence of a second mortgage. Another common aspect in this scenario is that homeowners are unaware of the second mortgage on their home. How does this happen?
We recently discussed foreclosure and second mortgages with Christopher Holmes and Jess M. Smith, III, partners at Tom Scott & Associates, P.C. Below is a transcript of that conversation.
Jess Smith: We’ve recently had several clients come to us with a foreclosure problem. We’ve been ready to file their bankruptcy, thinking they only have one mortgage on the property that is under water, and it turns out they actually have a second mortgage, because they’ve been in trouble before and entered loss mitigation. They basically granted a second mortgage that is now held by the U.S. Department of Housing and Urban Development (HUD) with no minimum payment and no interest. But, the loan is due either in 30 years or upon sale of the house or upon refinancing of the existing note. The majority of people who come to us to get help with their first mortgage have no recollection of this second mortgage.
Q: These are secured loans?
Chris Holmes: Yes, these are secured loans. They were behind right before closure so they took the arrearage and made it into a note and second mortgage with no payment due.
JS: So they don’t get a monthly bill. They didn’t do a loan modification on the original mortgage, they default on it again, and so they’re sitting here in a foreclosure and they bring in the foreclosure documents and we have to tell them they have a second mortgage. If we can prove they are still under water with the first mortgage, we can get rid of that HUD mortgage in Chapter 13.
Q: Can you expand on the different types of second mortgages you can acquire other than from a bank?
JS: What was probably more common 10 to 15 years ago was when people would get what was called an 80-20 mortgage. If they didn’t put enough money down to qualify for a certain loan, so they would get a loan for 80% of the total amount financed and then get a subsequent loan for 20% of the amount financed, in order to get the lower rate on the first mortgage. So they would have two mortgages basically granted at the same time when they purchased the house.
CH: Instead of borrowing 100% from the first lender, the lender would let them borrow 80% as a first mortgage. They would then borrow the other 20% and turn that into a second mortgage. The loans were then recorded within minutes or seconds of each other. We saw that quite a bit 10 to 15 years ago. Now, we hardly see that at all.
Q: Are there any other agencies besides HUD that provided those types of second mortgages?
JS: It’s usually just the Department of Housing and Urban Development. I think the way these mortgages are created is when the homeowner gets in trouble the first time, HUD will cut a check to the original lender to bring the debt as current; they’ll restructure the interest rate and the payment terms, but HUD just doesn’t give the default amount to the lender. They hold that as a second mortgage. Most people either just forget about it or they have so many pieces of paper shoved in their face – when they know this is how much I have to pay on the first mortgage – they have no recollection that there is a second mortgage out there. So they come see us very late in the foreclosure process.
Q: You mentioned that they may not even be making payments on the HUD loan. What are the various types of terms that could be applied to that second loan?
JS: Typically, the terms are no interest, a maximum maturity of 30 years, or the loan becomes due upon sale of the real estate or the refinancing of the first mortgage.
Q: If it is a no interest loan, does the borrower need to be making monthly payments on that amount?
JS: They are not required to, but the odd thing is that they can get rid of it in Chapter 13 bankruptcy. if when they file the bankruptcy they owe more on the first mortgage than what the house is worth.
Q: What exactly does “get rid of” mean in regards to the second mortgage?
JS: Basically, a lien strip.
CH: It’s called a motion to avoid a wholly unsecured mortgage. So as long as we can persuade the judge that the value of the home is exceeded by the payoff on the first mortgage, there’s no equity to which the second mortgage can effectively attach, because they are wholly unsecured, the law says you can get rid of, or as we say, strip, or avoid that – turn them from a secured creditor into an unsecured creditor, so down the road when the house is to be sold, there is no need to pay that second mortgage. It’s wiped out just like a credit card debt is wiped out.
Q: is that for both Chapter 7 and Chapter 13?
JS: That’s only available in Chapter 13.
CH: That’s one of the primary reasons we recommend Chapter 13 for some people in that circumstance. In a Chapter 7, you’re stuck with that second mortgage. Only in Chapter 13 do we have the clout to get rid of it.
JS: I met with a gentleman earlier today whose house on the east side of Indianapolis is up for Sherriff’s sale in a couple of weeks. He can’t find his foreclosure complaint. All he brought in was the notice of the sale. I went to the state court chronological case summary, and the Department of Housing and Urban Development is named as a defendant in the foreclosure. So, before we file the case, I have to see if there is a second mortgage, and if there is, I need to pay real close attention to what his house is worth to see if there is the possibility of eliminating this debt he didn’t even know he had.
Q: In a Chapter 7, they’re going to lose the house?
CH: It’s either make arrangements to pay all mortgages to keep the home or surrender the home to get rid of the debt.
Q: In a Chapter 13, is that second mortgage, which you’re stripping from being secured, rolled over into the pool of creditors so that you’ll still eventually pay pennies on the dollar for that amount?
JS: It’s converted into unsecured debt – lumped together with credit cards and medical bills, etc. – that you might eventually pay anywhere from 1-cent to 100-cents on the dollar. It just depends on what your income ability is to pay back back the debt. But it is converted to an unsecured debt.
Q: Is there a lesson a reader might learn from this case? Why is he filing for bankruptcy?
JS: The gentleman is about 50 years old and currently employed as a machine operator. He earns about $45,00 a year. His wife, who is not filing for bankruptcy, is employed by the government. She earns about $50,000 annually. The primary reason for his financial problem is that he and his wife don’t communicate about income and expenses. The house and the mortgage are both in his name. Her money is her money and his money has to pay for the house. They’ve only had the house for three years, so maybe they just bought too much house. I suspect it is a pattern of lack of communication that has put them in this spot, because he doesn’t seem to know much about her bills and expenses, but she makes over half of the household income.
Q: Did this gentleman come in to see you at you at your East Indy office?
JS: Actually, he came into the North Indy office, because it’s open on Saturday.
If your mortgage lender is threatening foreclosure on your house, contact us to discuss possible options that will allow you to stay in your home while you work to get out of debt.
Additional Resource from HUD: Avoiding Foreclosure

Auto Loans and Bankruptcy: How to Avoid Repossession of Your Vehicle

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We Can Help You Keep Your Car

Are you behind in your monthly car or truck payments to the point where you are unable to satisfy your bank or financial institution and they’ve placed the loan in default? If you answered “Yes,” there may be a way out of your tough situation.

If you’re having financial troubles and are desperate to avoid repossession of your car or truck, filing for a Chapter 13 bankruptcy may be the solution that can help you keep your vehicle. In this type of situation, you would be consider the “debtor” and the lender would be considered the “creditor.”

How Your Auto Loan Became Upside-Down

Let’s assume the loan is more than 2 ½ years old (at least 910 days before filing date) and the debt is “upside-down,” which means the unpaid balance of the loan is more than the value of the vehicle. Also, we’ll assume the loan is at a high rate of interest, perhaps 18-21%.

An example of this type situation could be that you bought a new $35,000 car three years ago on a six-year loan. The value of the car has since depreciated to only $12,000. However, because of the high interest rate, you still owe a loan principal amount (i.e., balance before monthly interest is added) of $22,000. In this case the “secured” value of the vehicle is only $12K, because that is the current replacement value if the car was repossessed and sold by the creditor.

Thanks to Chapter 13 of the U.S. Bankruptcy Code, you can force the bank to let you keep your car and, in effect, refinance the loan for the current replacement value. This process is known as a “cramdown” and it is not available in a Chapter 7 bankruptcy.

How a Cramdown Helps You Keep Your Vehicle

In a cramdown, the creditor would need to accept only the value of the vehicle as the principal amount for the refinanced loan ($12K in the example described above), plus only about 4.75% interest per month. This would significantly reduce your monthly auto loan payment.

The lending institution would then discharge the additional amount you owed, as well as the interest due based on the original higher rate. The court will determine the actual interest rate you’ll pay, which will be based on the current prime rate when that is determined.

The remaining amount of the loan principal that is not crammed down will be lumped into the pool of your other nonpriority unsecured debts ($10K in the above scenario). You will only pay back pennies on the dollar of the discharged amount, as part of your monthly payment to your bankruptcy trustee, which is distributed to all of your creditors.

At the end of the Chapter 13 plan, which will last 3-5 years, the creditor must provide you with a lien-free title to your car or truck.

Learn More Auto Loan Cramdowns and Bankruptcy

To learn more about how filing for bankruptcy and pursuing a cramdowm can help you avoid having your car or truck repossessed, and the other ways it can you relieve the pressure of your financial situation, submit the form above or contact us to schedule a free consultation.

Tax Returns, the Affordable Care Act (Obamacare), and Bankruptcy

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We recently interviewed Christopher Holmes and Jess M. Smith, III, the senior partners at Tom Scott & Associates, P.C. Below is Part 3 of that interview, which focuses on filing your taxes in relation to when you file for bankruptcy, as well as how a subsidize premium for health insurance purchased through the Healthcare.gov website can affect your taxes.
Q: On another topic, what happens when someone who has filed for bankruptcy has not been filing their taxes on time every time?
JS: A hot issue is tax returns in Chapter 13 filed late.
CH: Pre-2005, if you filed bankruptcy first and you had a bunch of unfiled tax returns, you could turn them in after your bankruptcy and basically all of the taxes were going away except for the ones from the last three years. That gave great incentive for people to get right with the IRS after they’ve file for bankruptcy. Now, they’ve reversed the law to make it much more harsh on debtors. If you don’t file your taxes within two years of the bankruptcy the taxes due are never going away.
Here is a horror story example: A salesman in his late 50s, who lived in Noblesville in Hamilton County, came to us in 2009 with a bunch of letters and documents from his accountant. Based on his recollection and the documents, he thought his taxes from 2000 through 2005 had been filed in 2005. So we were getting ready to file his bankruptcy case in 2009, we made sure he paid his taxes for 2006, 2007, and 2008, which were the three years before his bankruptcy filing. We went through the bankruptcy and he paid those taxes, and then he eventually obtained his bankruptcy discharge.
About two months after his discharge, the IRS started coming after him saying that his returns from 2000 through 2005 weren’t filed until 2008. Because they were filed within two years of the bankruptcy, they were had not been discharged. He swore those returns had been filed and said, “I know my accountant mailed these in.” he gave me power of attorney and I got on the phone with the IRS in Sacramento. Unfortunately for the client, the IRS had scanned the envelopes, with the postmarks, of all of those returns, so they had image files that showed that for some reason the returns had not been mailed in until 2008.
So, he had misrepresented to me the status of those returns when we filed his case in 2009, so as soon as he was out of his bankruptcy when we paid his 2006 through 2008 taxes, we now had to file another bankruptcy to deal with these old taxes, because the IRS was starting to levy his pension.
CH: His old taxes would have been discharged because they were more than three years old, except for the fact that those taxes were filed within two years of the day of the filing of the bankruptcy case, so you don’t get the benefit of that so-called three-year rule, which meant the taxes didn’t go away as they would have back in the good old days before 2005.
JS: Looking back, he had to file his case in 2009, because he had another creditor pursuing him in court, so he didn’t have the luxury of waiting two years and a day to file for bankruptcy. That’s important for people to understand now, if you have not filed your taxes and you want to get resolution on them. Usually, the recommendation is to get them done sooner rather than later to have any hope of discharging them in a bankruptcy.
CH: The moral of the story is to file your taxes every year to avoid that sort of problem.
JS: Another issue that is moving to the forefront of bankruptcy cases – and I don’t know yet how we’re going to resolve it because it is such a new issue – is that people have been signing up for personal health insurance under the recently legislated Affordable Care Act – otherwise known as Obamacare – and then it is turning out that their annual income is too high, so when they file their taxes they no longer qualify for the subsidized premiums they received. they are then getting nailed by the IRS with huge liabilities. I have client coming in tomorrow who owes over $3000 on his 2014 taxes.
CH: So he had a subsidy that was bigger that it should have been because it was based on his current income?
JS: Correct.
CH: So they projected his income as less than what it proved to be, so he received a bigger subsidy than he would otherwise.
JS:  I don’t yet know all of the details, but instead of receiving the refund his accountant projected, the IRS said, “No, you owe us a little over $3000.” What I currently know is that it has something to do with Form 8962 Insurance Premium Tax Credit, referred to as the PTC form. Moving forward, that is probably going to be a common issue that triggers tax liabilities the people don’t anticipate.
CH: Because the subsidy is based on an income means tests.
JS: I don’t know for sure yet, but apparently he sought out a subsidize premium when he applied through the Healthcare.gov website in 2013 for healthcare insurance coverage for 2014. When tax time came in 2015 to recapture, he got nailed. We’ll have to wait and see how this situation gets resolved, but it is an issue that will likely come up more frequently in years to come.

Parts 1 and 2 of This Interview

Part 1: Divorce and Bankruptcy
Part 2: An Experienced Bankruptcy Attorney Can Help You Keep Your Personal Property

An Experienced Bankruptcy Attorney Can Help You Keep Your Personal Property

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We recently interviewed Christopher Holmes and Jess M. Smith, III, the senior partners at Tom Scott & Associates, P.C. Below is Part 2 of that interview, which focuses on keeping your property when you file for bankruptcy, as well as the benefits of a bankruptcy attorney who has other types of legal experience.
Q: What is the difference between a Chapter 7 bankruptcy and a Chapter 13 bankruptcy in regards to keeping your property and assets?
CH: Chapter 13 of the bankruptcy code gives us the clout to do things that you can’t do in a Chapter 7. For example, in a Chapter 7 bankruptcy a debtor can only protect a certain amount of assets from his or her creditors and a trustee has the power to “take” certain property, liquidate it, and use those net proceeds from the sale of those assets to pay back a certain amount of debt.
I have a case right now in which a man has too much equity in his home, so in a Chapter 7 a trustee could conceivable take the house, liquidate the house, pay off the mortgage, and with the money that’s left over pay a certain percentage of all of the different debts. So what we are going to do is put him into a Chapter 13 bankruptcy, so as long as he pays back to his creditors, through this three- to five-year plan, as much money as those creditors would have received in the Chapter 7 had his house been taken and sold, he then gets to protect and keep his house. That requires him to be in that plan for three to five years and to pay a certain amount each and every month, to make sure those creditors once again receive as much money as they might have received had his assets been liquidated.
JS: Keep in mind that this case is very fact-sensitive, There is no one-size-fits-all plan. That’s why you need to have an experienced attorney on your side.
CH: Some lawyers don’t even meet with the clients to have a consultation. They have a paralegal or some other non-lawyer handle the situation. We think that we provide a better service to the clients, because it’s a real live lawyer who does the initial consultation. We get certain facts and certain circumstances from them, and then we diagnose the problem and then we can better prescribe the remedy for them, because we get more information from them. Then, we can filter the information that through the lens of our expertise to figure out whether a Chapter 7 or a Chapter 13 is the more-appropriate remedy for that particular person. Given the number of years we’ve been practicing bankruptcy law, we’ve experienced so many different circumstance that we can reflect back on to say, “This case is like that previous case and the circumstances from that case apply here.”
JS: Also worth mentioning is that while our practice is now largely devoted to bankruptcy, it hasn’t always been exclusively devoted to bankruptcy. You find a lot of these bankruptcy firms have attorneys that don’t know anything other than bankruptcy. They don’t have that broad base of experience that Chris and I have in areas family law, personal injuries, estates, probate, where those area all impact how bankruptcy cases are decided.
CH: Back in the day we were general practitioners and handled just about any type of legal issue that came through the door.
JS: Chris has over 30 years of experience and I have 22 years of experience. Chris had done bankruptcy for about 17 years exclusively and I’ve done it for about 12, so I had about a decade of handling other type of legal work. I think we can offer the benefits of those other experiences, whereas some of the other bankruptcy offices in Indianapolis can’t offer that broad base of experience.
CH: Every once in a while something comes up and I harken back to those days when I did divorce law or criminal law or probate, and something comes up where a previous experience helps me devise a remedy in bankruptcy court that fits the situation. Some of these young whippersnappers out of law school who have done nothing but a little bit of bankruptcy, there’s no way they can handle a case like we can handle it having done thousands and thousands of bankruptcies on top of all of our other legal casework. It easy to think we’ve seen it all in the world of bankruptcy, but every one in a while something comes up where we tap into those previous experiences to device a remedy for that new wrinkle.
Q: Hearing you say that, reminds me that you do other things for your clients beside just handling bankruptcy issues.
JS: Correct. We do some wills, some life planning documents, power of attorney, along with divorces and non-contested child custody cases.
CH: Yes, everybody needs a Last Will and Testament, so do offer that service for a reasonable fee, so if someone is interested should contact us. We also do living wills and durable powers of attorney, documentation of healthcare representatives.
JS: We also co-counsel. We’ve recently had a few cases where people come to us with a personal injury claim where we co-counsel with other firms to obtain settlement for our clients. I’m not an expert in medical malpractice, but I know someone who is, so I can help you find the right attorney for you particular circumstances.

Parts 1 and 3 of This Interview

Part 1: Divorce and Bankruptcy
Part 3: Tax Returns, the Affordable Care Act (Obamacare), and Bankruptcy