Author Archives: Kurt O'Keefe

Filing Bankruptcy – The Smart Move?

Riffing off Steve Rohde on the Huffington Post

on Filing Bankruptcy – The Smart Move?

Detroit Bankruptcy 341 Hearing Room
Detroit Bankruptcy 341 Hearing Room

Of course, it depends on your situation.

Bankruptcy is not a moral decision. It is a legal choice made when the debt situation is hopeless. I am certainly not recommending bankruptcy as a casual solution and I’ve seen very few people who use it that way. In fact the percentage of people who file bankruptcy more than once is very small, that is unless you are a Donald Trump enterprise. They’ve filed four times.

Let me pick apart a few of his bankruptcy points that are, well, wrong.

Preferential Transfers

1. Don’t Pay Creditors
Avoid making any large or unusual payments. This can seem counterintuitive, but is an important point. It may seem like you should pay creditors if you are able, but it can cause problems later on. This is not to say you shouldn’t make routine payments or pay bills. You should still pay your monthly credit card bill, if you can, and your electric bill and so forth. However, large payments to single creditors, or paying off a whole debt, can cause problems after you file. These are called ‘preferential transfers,’ meaning that one creditor has benefited unfairly over others. This is particularly true if the debt you pay off is to a relative or friend. These creditors can be sued later by the court, and have the money taken away.

Mostly correct.

A chapter 7 bankruptcy trustee can bring a lawsuit, adversary proceeding, against a creditor that received a preferential payment.  But, that is not your problem, unless you made a payment on a debt to or for a friend or relative.

Why would you still pay your monthly credit card bill?  This makes no sense.

If you need to file bankruptcy, stop paying the credit cards right away.  You do not get that money back.

Consult an attorney first, but some folks pay the credit cards because they can, when they do not have enough for the house or car or tax payment that is more important.

Don’t Drain Retirement Funds

This one I double down on.  It brings tears to my eyes when clients have borrowed all they can from 401k accounts, and/or pulled out IRA money, which creditors cannot get, to pay debt that can be discharged in bankruptcy.

There is more to this, so I will pick it up next week.

 

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Bankruptcy Fraud

Interesting bankruptcy fraud case in my hometown, Detroit. I frequently blog about telling the truth to your lawyer, and that you are signing your bankruptcy papers under penalty of perjury. Now, these are allegations at this point, so the former Rosa Parks attorney who filed bankruptcy may not be the same form of life asContinue Reading

Bankruptcy Potpourri

Let’s see what I saved in the bankruptcy grab bag this week. Bankruptcy filings follow debt.  Debt goes up, bankruptcy filings go up. How high is our credit card debt now? Maria Lamagna on the Market Watch site: They now collectively have the most outstanding revolving debt — often summarized as credit card debt —Continue Reading

Is Bankruptcy Scary?

Of course, when you don’t know anything about bankruptcy, or, worse, you have read inaccurate stuff online. Thanks to my friend Cathy Moran for the idea for the theme today. Filing Bankruptcy Means I Failed Well, lots of people filed bankruptcy who are considered great successes. Walt Disney and Larry King, for two. Nothing isContinue Reading

Consumer Bankruptcy Update

Bankruptcy Court

Bankruptcy Petition Preparers Bankruptcy petition preparers remind me of the Monty Python “Spam, spam, spam, . . .” song, only, SCAM! SCAM! SCAM! Another one bites the dust. We have had lots of these in Detroit, this one worked in Illinois and Missouri. EAST ST. LOUIS • A woman from St. Peters has been indicted in federalContinue Reading

Bankruptcy News

Stop borrowing! It leads to bankruptcy.

Bankruptcy follows debt as sure as night follows day. After deleveraging in the aftermath of the last U.S. recession, Americans have once again taken on record debt loads that risk holding back the world’s largest economy. Household debt outstanding — everything from mortgages to credit cards to car loans — reached $12.7 trillion in theContinue Reading

Consumer Bankruptcy Update

Consumer Bankruptcy Court

Smorgasboard this week. What the Heck Is Judicial Estoppel? What you need to know is, tell your bankruptcy lawyer EVERYTHING. Every debt, every asset, every claim you have against someone or company, whether a lawsuit has been filed yet or not. Because, you are swearing to the accuracy of your bankruptcy schedules, which are aContinue Reading

Cheaper Way To File For Bankruptcy?

The Wall Street Journal roused varied reactions with its story on a Cheaper Way To File For Bankruptcy by Katy Stech Ferek. First, I am opposed to licensing of most professions, including law. It deceives the public into believing competence exists, where it may, or may not. Take away the licensing, and consumers will have toContinue Reading