Timing Considerations of Bankruptcy

Katherine: Hello everyone. Thank you so much for joining us on, This Needs To Be Said, as we talk with our friend and bankruptcy attorney right here on, This Needs To Be Said, Ron Drescher. He’s going to help us understand this world of bankruptcy because it’s not the bad word that we thought it once was. Ron, thank you for coming back on, This Needs To Be Said. How are you?
Ron Drescher: I’m great. Thank you so much. I always enjoy coming on here.
Katherine: I love it. Ron, what are we going to talk about today?
Ron Drescher: We’re going to talk about what I call timing considerations of your bankruptcy. I’m going to try to translate that into regular, plain talk but it’s about how you have to take a really educated view on when you should pull the trigger on filing your bankruptcy case because there are a lot of timing considerations.
Katherine: This also is a clue … I’m not an attorney, I’m letting you all know that, that’s why we have Ron here. This is also a clue of what not to try to do on your own. Ron, go ahead.
Ron Drescher: Yes, okay thanks. I mean, a lot of times people, they’re facing distress, they have some debt that they just can’t manage, and they make the decision to call an attorney and find out what their options are. Most people want immediate relief. They want to go in there and they want to just get this bankruptcy filed so they can get it behind them and get on with their lives. That’s a totally understandable, emotional desire but the lawyer has to really look carefully at the situation that the client has because sometimes it pays to wait.
It may pay you to wait a week, may pay to wait a month, may pay to wait 90 days, it may pay to wait three years before you file your bankruptcy. I wanted to give you a couple of real life examples to show why it’s so important. For an example …
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Katherine: All right, I’m looking forward to that, taking notes. Go ahead.
Ron Drescher: All right. For example, a lot of people think you can’t discharge your taxes in bankruptcy, you’ll never get out from under it but that’s simply not true. If you have taxes that are due that are about three years old, they will start to become dischargeable on April 15 of that year, that’s three years later. Of course, everybody recognizes April 15 as that magic day when your tax returns are due. That’s a date that has a lot of significance in the bankruptcy world because they go three years back from there.
Now, without explaining too much, on April 15, 2017 taxes from the year 2013 are going to start becoming dischargeable. That means if you owe money for 2013 taxes, all right, and you want to file bankruptcy on April 14, you’ve made a huge mistake. You should wait until April 16 because that’s the difference between getting out from under the taxes and not getting out from under the taxes.
Katherine: Wow.
Ron Drescher: Right? If clients come to me and they say, “Well, I owe $5,000 for 2013 taxes.” I’m going to already start saying, “You know what? Let’s wait. Let’s wait until after April 15 of next year because those taxes are going to become dischargeable then.” That’s a big difference.
Katherine: That is a huge difference. Wow.
Ron Drescher: That’s one time in consideration where it pays to wait. Another one is, let’s say you’re a good earner and you’ve got a job but you’ve got a lot of debt and you want to try to get relief under Chapter 7 of the bankruptcy code and that it gives you the greatest amount of relief as opposed to Chapter 13 where you’ll have to make a payment plan that could be from 36 to 60 months. Almost everybody wants to file a Chapter 7 if you can. What I tell my clients …
Sometimes they’re a good earner but let’s say they got laid off and they got another job or let’s say they got hurt or let’s say they were on a medical leave and for some period of time they weren’t making any money, and then they resumed making their good living. What the bankruptcy world does is they look back six full months to determine whether or not you qualify for Chapter 13. Sometimes I’ll tell my client, “You know what? You want to file so that the months where you weren’t making any money are included in that six month window.”
Sometimes I’ll say to my clients, “You got to file in a hurry so you can take advantage of those six months.” Sometimes I’ll say, “You know what? You should wait, so that a good paying month, that’s six months earlier, drops off and we’re only looking at months where you haven’t made as much money.” That’s another really important timing consideration that could be worth tens of thousands of dollars to you. All right. Those are two … And I’ll give you one last one that I think is really a big one.
Let’s say somebody comes to me and they have a house that’s paid off but they owe a lot of money in credit cards. A possible strategy is to give the house to one of their children, and then file the bankruptcy. Well, if you give that house to your children, and then file bankruptcy, first of all, your children are going to get sued to get that house back because the creditor is going to want that house with all of its equity, and second of all, you’re not going to get a discharge.
What you need to do is, if you want to transfer the house, and I’m not saying don’t transfer the house to your kids, but you’re going to have to wait, in most states, three years before you file bankruptcy, so that, that transfer what will be immune from recovery by your trustee and you won’t be denied a discharge. I give my clients the same advice every time, which is, “You know what? The good news is the bad news, which is that three years go by in a hurry.” Those are three …
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Katherine: This is good. Those are the three …
Ron Drescher: … Timing elements that you consider.
Katherine: And those are three major ones. I’m with my eyes bugging out of my head because these are not things I would find and understand on a Google search. That’s what I do know. This sounds like a lot of if then, then this. There was someone I interviewed a while ago, it’s been a couple of years now, Ron, and they talked about credit and credit repair. The lady said to me, “Yeah, you could do it yourself but there’s timing,” so that’s what keeps popping in my head as I’m hearing you.
Sure, that day that I go and go online and I look up this information and think that I got it and I can do it on my own, what if I drop the ball? What if I do like the person who was going to file on the 14th instead of the 15th for that 2013 tax that they owed? That timing, it gets me, so timing is everything and I don’t know, I don’t know. I think I know, I think I got it and three years, I mean, what could 24 hours hurt? But you just shared with us, a lot. With the six months …
Ron Drescher: Yes, it’s a big deal. I see that all the time, I see … If you’re a bankruptcy lawyer and a client comes to you, and you’ve got them in your conference room, and you want to sign them up, and you want to do their bankruptcy your inclination is to get the fee and to put them into bankruptcy quick, but you’re not serving the client if you don’t really consider that, that client might be better off waiting.
Katherine: Yeah, yeah. That’s a whole other conversation, when I think about business owners as a whole and their clients. Yes, we want to make money. Yes, we work so we can take care of our families and do the things that we love to do, however, how do we get people to come back and refer people to us if we don’t take care of them and really make sure that we have their best interests at heart? Because it is a sense of urgency, knee-jerk reaction for me to get that person to go ahead and sign with me.
Ron Drescher: Absolutely.
Katherine: Let me ask you, how do you work with that? How did you grow in that area of saying, “Okay, wait a minute. Yes, I want them to sign with me, I don’t want them to go to another attorney, but in their best interest, this is what I got to advise them on.” How did you work through that to keep from putting yourself before the client?
Ron Drescher: A few years ago I was listening to a podcast, it was a business podcast, and there was a very respected speaker on the line and he said, “Rule number one, add massive value. Rule number one, if you’re adding value it will come back to you many, many times over.” I believed that and that really rang true to me. For me to advise the client has to be, “What can I do to add the most value for this person or this family?” There’s no other consideration for me, really isn’t. I have reviews …
There’s a lawyer review site called, Avvo.com, A-V-V-O.com, and I’m very proud to tell the world that I have more five star reviews on Avvo.com than any other bankruptcy lawyer in Maryland.
Katherine: Nice.
Ron Drescher: And what I’m most proud of are the reviews from people who … I have a consult with them and I waive my fee for the initial consult, and I tell them, “You know what? You shouldn’t hire me because this is a case that you can resolve on your own,” or, “This isn’t the bankruptcy case for you,” or, “This is a situation where you can save money by doing A, B, and C instead of hiring a lawyer.” Those clients are so appreciative of that, that they go online and they leave me a review that explains that I didn’t charge them and I gave them a course of action that worked for them that didn’t involve hiring me.
Katherine: Wow.
Ron Drescher: I’m extremely proud of that. That’s how I look at it all. If you’re not adding value, you shouldn’t be receiving value.
Katherine: “Don’t hire me.” Wow, that definitely would be a shocking subject line in the email to get.
Ron Drescher: That’s right, “Don’t hire me.”
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Katherine: “Don’t hire me.” Well, it sounds like you are passionate about what you do. You love what you do, you’ve shared with us on the show before many other topics and today we’re talking about the timeliness of filing bankruptcy. Again, I want to put this disclaimer out here, I am the interviewer, I’m not an attorney but I’m smart enough to know when I don’t know stuff. It also alleviates the stress from you trying to figure out the right time, this is what Ron does and let the experts do it.
I heard this years ago, Ron, and I’m thinking, “I don’t have any money for the experts,” but you just said there are some times when you can help a person and it doesn’t cost them money. Again people, if you don’t know how to do something, as you didn’t go to school for it, talk to someone who’s an expert. In this case we’re talking bankruptcy, so talk with Ron, and ask questions, and you never know. I’m not saying that it won’t cost you money but he is going to be up front with you about what’s going to be the best course of action for you and he’s willing to put you first.
He has a site that you can go and hear from other people or read from other people how he has supported them in their situation. We understand that bankruptcy or the thought of having to file bankruptcy can be very stressful. When we started these conversations, Ron, the “B “word … Bankruptcy was the “B” word; it was a bad “B” word and we want people to understand that you go through things in life.
Bankruptcy and maybe one of those things that you’re facing and someone like Ron, who cares about you, would be someone great to sit down and talk with or call on the phone and have a consultation with, so that you don’t go through this time by yourself, I think this is very important. It also takes away the sting of, “Oh, I got to talk to an attorney.” No, no, no, attorneys aren’t bad either. Bankruptcy isn’t bad, attorneys aren’t bad, and they are actually here to help you get through your situation.
I don’t want to call it a crisis, but if feels like that. Ron, I want you to let people know how they can connect with you outside of this interview and ask other questions that we may have not addressed or even to dig deeper into things that we did address in this interview.
Ron Drescher: Well, the easiest and the most direct way is to go onto my website, www.drescherlaw.com , and there you do a … We have a chat line that you can find out. We are very prompt in getting back to our clients on the chat line. You can fill out a web form. You can get our phone number and call us, our main office line is 443-438-1966 and you’ll be able to talk to somebody right away, so that you can have somebody that is going to listen to you and wants to hear what your story is.
Katherine: Absolutely. Ron, I want to say thank you again for coming on, This Needs To Be Said, and helping us to understand that bankruptcy is not a bad word.
Ron Drescher: It was my pleasure. I always enjoy coming back and thank you for having me.
Katherine: Awesome. Have a wonderful day.
Ron Drescher: You too, Katherine.
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