Hello everyone. And thank you so much for joining us on “This Needs to Be Said”. Our attorney friend, Ron Drescher is here with us today, and he’s going to share with us, of course, another topic in the field of bankruptcy. But today we’re going to talk about the pros and cons or the good and bad. What is it going to be Ron? What are we talking about today?
We’re going to talk about the pros and the cons.
Okay, Chapter 13. All right, I see I’m hot on the trail. I can follow instructions. Well, I have my pen and paper out, Ron, and I’m ready to hear, I’m ready to hear this. I was excited about this topic because whenever I hear someone talk about a topic, they is like, they pick a side and you have to go just this way or just that way. So what, what I think you’re going to share with us today is a way for us to make an informed decision. So I’m looking forward to it.
That’s right. So, you know, there are, there are really two main consumer sections of the bankruptcy code that you know, that my clients want to talk about when they come to see me. And those are chapter seven and chapter 13 and chapter seven is great if you can get in and make that work for you. That’s great. The typical chapter seven cases doe’s take about 90 to 100 days. You, you discharge all your credit cards, your personal loans. If you had a car repossessed, if you were fixated from a house, you had a house for clothes, medical debts, all of those kinds of deaths that, that typically get people in trouble. They get wiped out in a chapter seven and you know, nine times out of 10, or even more than that, you walk away with all of the assets that you brought in with you to bankruptcy.
So yeah, chapter seven is great. If you can do it, some people just can’t do chapter seven for a number of reasons. Maybe they filed it, you know, within the last eight years or their income is too high or they have too much equity in their assets so those are reasons why they can’t file for chapter seven. And then there are other things where you can only get benefits by chapter 13. For example, if you wanted discharge toll violations or parking tickets, or if you want to cure an arrear on your home mortgage, or if you want to, you know, pay down the value of your car over, over 60 months, those are the things you can only do in chapter 13. So for people in that situation, chapter 13 is wonderful. It’s great that you have the ability to, for example, cure your rears over 60 months, in the event that your lender doesn’t give a loan modification, or let’s say you’re paying 24% on your car. You can go into bankruptcy and get it down to 5%, which is pretty miraculous. So though, that’s one of the reasons why chapter 13 is so wonderful because it really allows you to do some pretty miraculous things.
Do I chapter Right? Doesn’t that sound great?
It does. Yeah. All I heard while you were talking was keep the stuff that you had when you went to bankruptcy. So I was like, yeah, all of this sounds great, you know, but there are pros and cons of that as we’re talking. So that sounds really good. So, what’s the, what’s the bad side. Well,
After 13 you’re required to pay over all of your net disposable income over the life of your plan, which is, you know, 36 months to 60 months. And for had the bankruptcy trustee, the chapter 13 trustee is going to take a preliminary look at your monthly income and expenses. And if that trustee says, you know, what this particular expense I don’t think is reasonable then you’re going to have to have a fight and see if the judge agrees with you. The judge almost always agrees with the chapter 13 trustee, almost always. So, you know, if you, if you’re a high income person and we have a lot of them that get into trouble financially, and you’re used to making certain payments, you know, your kid’s private school, maybe mortgage on a second home, you know, maybe, you know, different household expenses, then, then you’re going to have a lot of trouble because you’re going to have to let go of some of those expenses and pay that over to creditors. Like I’ve got, I’ve got clients who have children who are in college and generally, and they’re paying their children’s, you know, living expenses. You’re not allowed to do that. And in chapter 13, and that’s a real, that’s a real hardship. Those are those, you know, your child is over 18, they’re considered an adult. You’re not allowed to, in the absence of extraordinary circumstances, you’re not allowed to pay their expenses while they’re in town.
I don’t know. That might be a good thing. That might be a good cause. You know, if parents have a hard time saying no to their children, they can put it on the, you know, the attorney, listen, I can’t bake. So some parents are looking for a way to say no, that might actually be a good thing. I don’t know.
I don’t think you’re wrong about that, but it, but it does as a real shock to my client, it is a shock, you know and so they say, wow, you know what I, you know, look high. Some people are, are often used to going out for a meal or, you know, going on, you know, expensive vacations or, or doing these things. And you could still go out to a restaurant. You could still take a vacation but you know your expenses there, they’re going to be looked at by the trustee and potentially by the court. So that’s hard. It’s very hard to dedicate all your net disposable income for five years.
Yeah. Yeah. Yeah. The part about the kids, I think, and, and I’m at the age where I have adult children and I have friends with adult children. And the expectation is that, you know, we are an ATM for the children. Well, I’m real good at saying no. Anyway, I say no. Before I even hear what the request is, what is it And then, you know, we kind of know we’re working our way out of a note, but more than likely it’s no, but my friends, I was like, Oh my why, why are you stressing over that Why can’t you just tell your child No, and I, they don’t have a good reason. And I think you’ve just given like a good reason, you know, it’s on you to reset their life. Listen, you know, mom’s trying to get back on track and, and it’s not a lie, but it’s your way out because some adults don’t know how to say no to their adult children. So I don’t know. I think that can go on the pro list.
Sure. And that’s, and you know, and that’s a big deal cause that comes up a lot. you know, so, you know, another thing is, you know, if you have equity in your property, that now if you have sufficient equity in your property that could even drive your payments above your debt, disposable income right. And so that can be a real problem. Sometimes I’ve got clients who have just too much equity in their property. So they ended up having to pay all of their creditors in full. and, and that’s a hardship for them to they, then what they have to do is they’ve really got to cut back on even normal, monthly expenses for that period of time so that they can become debt free. That’s, that’s a hard thing for them to,
But the thing really is that bankruptcy is a privileged, just the right. Or is it a difference between a privilege and a right, right.
This sure is in bankruptcy privilege and it’s not a right. Okay.
So it’s a privilege that we get to reset ourselves. So it is hard to even be in the space to face. I have to reset myself and I can imagine the rest of the shocks that other people feel going through bankruptcy. I’ve gone through one and I didn’t have an attorney like yourself, so it was, I mean, the person was nice and they did, they did, they did their job, get my tongue together, but it was still, it was hard. It was hard to do. It was hard to go through that. It was hard to feel everything that I was feeling and, and make a decision about what I must do to get back on track. So I get all of that is a shot, but the fact that we have the opportunity to reset ourselves, I think is the big outcome. And that’s what you talk about. You know, we get through the emotional part of it or the shame on me, part of it. And now we can really see the bright side and reset ourselves. And you’ve also talked about the good of coming out of bankruptcy that we could come out better than we were before we went in. So
Yeah, that happens a lot, you know, for the people who can, find the discipline to make it work. Those people are going to be in great shape at the end of their chapter 13 plan because they’ll have established great habits and they can, they can start a pattern of savings wishes, which is really where you want to go. The, to me, the whole point of bankruptcy is not just to solve one problem, but to, but to create a lifestyle where you can, where you can build financial security.
Yeah. Yeah. It’s hard. It’s hard. I’m just, I’m thinking about it. I’m like, yeah, it was hard for me. And that was many years ago. And I, I just imagined, cause even now when I can’t do something because of something else that has to be done, even if it’s a little thing, like I can’t go get coffee or I can’t go to the store as opposed to I’m doing what I need to do. It’s just that thought that I can’t do it as opposed to it’s an option. And we can really, you know, it, realigns your thinking and bankruptcy reset will shake you up. So I think if you have to practice something for five years, you’ll definitely have a good, good habit. Sure. You have a good one. That’s definitely
That’s, that’s actually right. And you know, during the time of you’re in a chapter 13, if you want to buy or sell a car or you want to buy or sell a house or do anything like that you’ve got to get bankruptcy court permission to do it and that is a hardship for people who are used to just kind of managing their affairs as they please, as adult citizens in the world. No, while you’re in bankruptcy, chapter 13, you have to get permission from the court. A lot of times clients don’t like that. The chapter 13 world prefers that you have wage orders in place so that when you file the chapter 13, instead of voluntarily making that monthly payment to the trustee, the trustee has it deducted from your pay on a, you know, weekly, biweekly, monthly basis, which is the cases that have, that have a much higher degree of success.
Then when the clients meet to write the check because that’s a painful check to write nowadays it’s a little easier because most trustees have enacted a, a system where they can automatically debit the money from the bank account and they, and they just set that up to, you know, they set it and forget it. And that’s great thing too. That’s almost as good as the wage garnishment, but people, they, they want to know that they’ve got that ability to manage their finances, in the case of an emergency and I totally understand that, but it does increase the likelihood that your case won’t succeed.
So these are I’ve been talking about the pros and the cons. The pros are, of course, at the end of the five years, you’re going to get a discharge of your debt. You’re going to be more or less debt-free unless you have, you know, student loans and you know, and you’re, you’re in great shape at the end of those five years. That’s, that’s the reward, but the price of, of paying over that net disposable income every month and being under the, under the scrutiny of the bankruptcy world for those five years, that is a hard road for a lot of people.
It is, it is. Cause it’s something that we, we haven’t done. We say the word budget, but it’s not really that budget is what I have until I don’t have it in a, in a sense as opposed to really setting things aside for rainy days, sometimes quotes don’t really do what they’re supposed to do. Cause what is rainy day, if you don’t have a purpose for it. And so people miss the point of it until we do find ourselves having to sit with you, and it’s a new way of thinking. It feels like punishment until it’s not. So I mean, you absolutely, right. This is great. I’ve enjoyed it as always. I enjoy when you come on now, are you working on any new programs Do you have a book coming out What’s going on What else do you have coming out
You know, I actually, where we’re at an end of the summer period, you know, I’m still selling my course, called complete bankruptcy for attorneys that want to get into the bankruptcy world. and I, you know, I wrote a book, a single mom’s guide to, financial recovery and I’m probably going to start, you know, accelerating, sending that out to the moms out there who are probably struggling with this whole COVID mess.
Awesome. Awesome. Awesome. Well, how do people get in touch with you outside of this interview
The best way is to go to the website, www dot Drescher law.com. That’s D R E S C H E R L a w. From there you can schedule an appointment, you could do a chat, you can check out what we’re working on and you could even make a call to the office.
Fantastic! Until our next time have a super day. Ron. Thanks a lot.
I really enjoyed it.