|Katherine:||We’re getting ready to talk with Attorney Christian Felden, who’s a bankruptcy attorney. At this time, I’d like to welcome Mr. Felden to the show, Attorney Felden to the show. How are you?|
|Christian:||Good Katherine, how are you today?|
|Katherine:||I am wonderful. Now, I’ve heard a lot of theories about bankruptcy, so I’m happy to have you on today to dispel this, and with over 30 years of experience, I’m sure you’ve seen a lot of different things. I see that you are also an author. I can imagine that.
I do want you to share with me, and it’s not on my topic, my question list, but I do want you to share with me the strangest thing that has happened over 30 years in your practice.
|Christian:||The strangest things …|
|Christian:||Probably the strangest things have to do with disclosure, because when you file bankruptcy, the name of the game is disclosure. You are supposed to disclose all of your assets and all of your debts, or you get in a lot of trouble.
I remember one time I had a client who actually supposedly forgot that he owned an airplane. I think that was probably was the strangest.
|Christian:||Yeah, a whole airplane. I thought that was probably the strangest thing I’ve seen.
Probably, if I thought about it a little bit more, I could probably think of some other, but that one’s fixed onto my mind, because that’s a pretty big thing to forget about.
|Katherine:||Yeah, that’s not a pair of shoes for sure. You have over 30 years of experience and you’re also an author of “Do You Need to Make a Financial U-Turn”. You’re here to help us to discover the truth about bankruptcy laws.
Introduce yourself. I’ve read a couple of bullet points, but talk to us a little bit about why you got into it, and has it been all you wanted it to be as an attorney? What have you learned? What has been your most valuable lesson? Share some of that with us before we get into the interview.
|Christian:||Sure. I have been doing this. It’s my 32nd year of doing this stuff. Bankruptcy is, to me, it’s a very rewarding type of a practice. Because as an attorney, there’s lots of things, different things you can do as an attorney, and you can deal with big companies or you can deal with just the individuals.
One of the things I really like about bankruptcy work is, we’re dealing with real people and helping out real people with real problems. Somebody once described it to me as blue collar. Well, which I think is a really good way to describe it.
Because we’re very often taking people, if it’s not the lowest point in their life, it’s certainly one of the lowest points in their lives and we’re giving them their life back. That’s actually very rewarding and our clients really appreciate it.
To me, that’s the best part about this. I don’t even feel like I’m working. It’s not work, it’s actually fun. Yeah, it’s fun to help people like that.
|Katherine:||What made you go to school for that? Or, tell me what was the journey? Did you always want to be an attorney? You went to school for this? Or did you change midstream?|
|Christian:||I wanted to be … My father was a policeman, so I grew up around policemen and law enforcement and lawyers all the time. I certainly was thinking about being a lawyer as I was growing up, but then it wasn’t until I was near the end of my college, I thought about actually doing it.
How I actually got into bankruptcy is a little bit by accident, because when you go to law school, you don’t see too many TV’s ads about bankruptcy attorneys. You see about criminal attorneys, and all sorts, divorce attorneys and everything else, but there’s so many different aspects of law that you’re not really given information about as you’re growing up. You never know what you’re going to find interesting.
I found as I was going to law school, I always thought I’d be a criminal attorney or something similar. Then it was more of the commercial aspects of it, and bankruptcy in particular, that interested me.
I’ve done a lot of different types of work over the years, but always did a lot of bankruptcy work. For the last 10 or 15 years, I’ve been doing nothing but bankruptcy work now.
|Katherine:||I talk with different professions all the time, like doctors and everything. They say, “Well, I wanted to be a doctor,” but then they didn’t know what area they wanted to go into until they got into school. Then, also, do you feel like you got real life experience in school or you had to wait until you got out of school to get it? Because I’ve heard different stories about that too.|
|Christian:||Yeah. I think you probably, in terms of law school in general, I think you probably learn about 50% of what you need to actually practice law in law school. Most of us are on the job training.
One thing that law school does do, that it trains you how to think like an attorney. How to analyze different difficult situations and can break them down into the several issues. The basic training that you get in law school is very helpful. Then, you take that basic training and your client, whatever area of law you want to go to. Bankruptcy is not one of those areas of law that require class in law school. It’s something that’s an elective type class. It’s a very specialized practice of law. There’s not a lot of people who do bankruptcy work.
|Katherine:||You enjoy what you do and …|
|Christian:||It’s one of those areas of law where sometimes, and I apologize for interrupting, but when it comes to the legal work, there’s some work that’s going to be very complex and very specialized.
It’s one of those areas of law where a little bit of knowledge is a dangerous thing. It’s one of those areas- You can’t dabble in bankruptcy law. You either have to jump in all the way or you just stay out of it.
Like tax work for me, I don’t like to do tax work and it’s complicated and I wouldn’t even think about doing a tax issue, because it’s one of those things again, where you need to really know your stuff or you just stay out of it.
|Katherine:||Yeah, we do have some situations where people can get hemmed up. It is during tax season that someone’s been given a little bit of knowledge to go and do a basic tax return. They run it through something that’s a little more complicated and they mess up the person they’re preparing for.
How about this, we’ve got to get into the interview because I can sit and ask you questions about what you do. Actually, I want to know, have you run into someone who has done it themselves.
Then when you talked about a little bit of knowledge can be dangerous, have you run into someone who has tried to do the bankruptcy process on their own and then they came to you and they were a mess?
|Christian:||Yeah. I’ve ran into several people like that over the years. You do have to be careful. It’s just like any other legal proceeding. From a technical standpoint, nobody ever needs to get an attorney to do anything in court.
You’re not required to get an attorney ever for anything. Unless you know what you’re doing, you can do more harm than good. It’s just like anything else. I mean, I could probably do surgery on my own foot, but I wouldn’t do it, because I don’t know anything about surgery, so I’m going to hire a doctor to do it.
You see a legal profession the same way. There’s obviously some things in the legal profession where you can do on your own. A simple dispute, a small claim score or something like that, but something as important as bankruptcy …
When it comes to bankruptcy, usually it’s something you do once in your lifetime. If you mess it up, you can really do some damage to yourself. It’s not one of the areas of law that I would really recommend doing on your own.
Most of the time you don’t know that much about bankruptcy, let alone private citizens.
|Katherine:||Mm-hmm. (Affirmative) With that being said, because I’ve heard that you have to give up everything left. You want a bankruptcy, it sounds like you don’t have anything. You’re down and you look like you’re just done. Homeless, without anything.
How true is that? If it is true, what’s the process for a person to come back from something like that?
|Christian:||That’s actually a common misconception about bankruptcy. One of the most common misconceptions about bankruptcy is that, there’s all sorts of prerequisites that you have to be in order to qualify for bankruptcy.
Then, that’s actually not true. There are no prerequisites to signing bankruptcy. Everybody at every stage of their life, believe it or not, qualifies for at least one type of bankruptcy. The only question of course is, whether, which type or types they may qualify for. Whether it would actually be beneficial for them.
There actually are no requirements and of course, I’d represent all different sorts of people in bankruptcy. There are people who are virtually homeless who have nothing, but then there are people who have a lot of assets.
You don’t have to be poor to file bankruptcy. You just don’t have enough money to go around. That can range the people who have a lot of money. They spend a lot of money too, and they get in financial trouble just as much as somebody who doesn’t have any money.
I’ve seen all different types of people who file bankruptcy.
|Katherine:||Let’s say the scenario is, I’m married. Do both people have to file bankruptcy? Or can you do one or the other?|
|Christian:||It depends. The technical answer to that question is, no. You do not have to do both of them. Just because you’re married doesn’t mean that you have to file a joint bankruptcy, but it does mean though that you can file a joint bankruptcy if you need to. Therefore, essentially get two bankruptcies for the price of one.
The thing is, when it comes to married people, most married people think that they’re automatically responsible for each other’s debts. That’s not true. The fact that you’re married doesn’t mean you’re responsible for somebody’s debts.
The question is, whether you actually signed off on a debt. If you have two joint debtors on a particular debt, you would want them, they both would need to have to file bankruptcy. Because they are two joint debtors on a particular debt and only one of them files bankruptcy, then the one that didn’t file is still responsible for the debt.
Now the thing is, most married couples do end up filing joint bankruptcies because most of the time, they do have joint debt. You’d be surprised, there’s quite a few people that I filed bankruptcy for who are married, and their debts are in just one spouse’s name for various reasons.
Sometimes, it’s a second marriage and a lot of the debt is carried over from the first marriage, and the new spouse has nothing to do with this debt. Again, if married couples need to file joint bankruptcies, they can. They’re the only ones who really can file joint bankruptcies right now, is married couples.
|Katherine:||I’ve heard, and once again, I’m thinking credit repair now with this next question. Filing bankruptcy is a way to get a clean slate to get … Just to start over from scratch and you can get rid of all of your debts and you’d be in a better space credit wise.
How legal and how true is that?
|Christian:||That is true. You do get a clean slate when you file bankruptcy. That’s the one of the reasons obviously why you file it. You can think about it, if you’ve got a mess on your credit report, there’s really only two ways of getting rid of the mess. Either you pay everybody off, or you file bankruptcy. There really aren’t too many other options.
Of course, sometimes, you can just wait out your creditors, but that takes years and years and years before things eventually drop off. During that time period, you can’t really do much. The nice thing about bankruptcy, it does give you the chance to get a clean slate and allows you to start up fresh again and get back on your financial feet, so to speak.
|Katherine:||You have a clean slate now, is that like starting bad credit or is that starting with no credit? Say I filed bankruptcy, I have this clean slate and I want to go out and apply for a home or get another car, or anything that’s going to require them pulling up the fact that I have a bankruptcy on my credit report. What am I up against?|
|Christian:||First of all, there’s nothing in the bankruptcy laws that prevents you from going out and get a new credit pretty much right away. There’s nothing in the bankruptcy laws that prevents that.
The question of course is, whether or not somebody is going to give you credit. When you file bankruptcy, it is allowed to remain on your credit report for several years, but to tell you the truth, that’s really not much of an issue for most of the people I filed bankruptcy for though.
Because for most of the people I filed bankruptcy for, their credit situation is so bad that nobody is going to give them credit. Most of the people I file bankruptcy for, filing bankruptcy actually improves their chance of getting credit because it gets rid of the mess.
If you think about it, when you clean … When you go apply for a loan somewhere, basically what a bank is looking at, they look at cash flow and they look at risk. They look at cash flow from the standpoint that you want to borrow … I mean, can you afford to repay the money you want to borrow from them?
Then, how risky is it to give you the loan? Of course, when you file bankruptcy, usually everybody’s cash flow is improved by bankruptcy because you have an amount of money coming in than you did before you filed bankruptcy, and now you have less cash outflow.
Then when it comes to the risk, once you filed bankruptcy and you get your discharge in bankruptcy, you’re not allowed to file bankruptcy for several more years. After you file bankruptcy and get your discharge, you’re really absolutely no risk to a lender.
There are actually very few lenders these days who will refuse to talk to you just because they see a bankruptcy on your record. It’s obviously something that they consider, but they still have a tendency to look at the big picture and look at all of the factors.
They take into consideration the fact that you filed bankruptcy of course, but then they also still look at your income situation and your debt to equity ratio, and your cash flow and things like that. The same things that a bank would normally look at before you file bankruptcy.
|Katherine:||When someone is filing bankruptcy, and they’re looking at having a clean slate, they have more cash flow than what’s going out now as what you stated. What’s your recommendation on how they cannot get themselves in that situation?
Because sometimes, it’s very basic, the living things they had. Maybe they had mortgage they couldn’t afford. Or, a car that they couldn’t afford because maybe they lost their job or medical issues or whatever.
They still need to do the basic things, how the client with the airplane, that’s something different. For people who, they just have basic living things. What do you recommend for them? What’s their next step? Because it would be a bit of a challenge to get a new place to stay if they’re renting a credit check. Or, they have to pull, if you have any judgments or bankruptcies against you.
What have some of your clients done in the past to get back on their feet? Because if they claimed bankruptcy, it’s going to be a bit of a challenge, from what I’m hearing you said.
|Christian:||From the credit standpoint, it’s not unlike, you just came out of high school. What do you get when you first start applying for credit. You got whatever credit you could and you paid it back and you slowly built up your credit. That’s the same process you would use after filing bankruptcy.
Bankruptcy, of course, helps you with your debts and then, it will improve your cash flow, but it’s still not going to be more money into your pocket. If your problem is, you don’t have enough income, then, you’re going to have to do something about that.
Of course, the nice thing about the bankruptcy is, at least, whatever additional money you make, you’re going to be able to keep and not worry about losing it to your old creditor. That’s the basic process.
As strange as it sounds, most of my … Yeah.
|Katherine:||Looking at it as you’re beginning again? Like you’re beginning from scratch? Literally.|
|Christian:||That’s pretty much it. Yeah. What I was going to say is, believe it or not, most of my bankruptcy clients don’t really have that much trouble getting credit. If you look at the ones that do, it’s easy to see that it’s not really the bankruptcy that’s hurting the chance of you getting credit.
It’s maybe the fact that they’re out of work still, or maybe they’ve had six jobs in the last three months. Just the usual stuff that makes the bank nervous about giving you a loan. It’s the same things that will make a bank nervous if you just walked in there applying for credit today before bankruptcy. Or the same ones that are going to make a bank nervous after you file bankruptcy. It’s just the common sense stuffs.
|Katherine:||Now, isn’t it … I guess, how I want to put this, is it embarrassing if someone’s having to file bankruptcy? Is it something like everybody now knows?|
|Christian:||The only people that will get official notification of your bankruptcy are your creditors. Just like any other court proceeding, and bankruptcy is a court proceeding in the federal bankruptcy courts.
It is public records, so anybody who wanted to go down and check out your bankruptcy file, could go down to the bankruptcy clerk’s office and do that. On the other hand, in most places, they don’t publish bankruptcy filings in newspapers and, or anything like that.
The only people who actually get official notification obviously, are your creditors. Even your employer doesn’t get official notification of the bankruptcy. The only other entity that does monitor bankruptcy situations is the IRS, but other than that, nobody has to know you filed bankruptcy unless you tell them.
|Katherine:||That’s good to know. It’s a relief. Now, do you find that people try to file bankruptcy just to get out of paying bills?|
|Christian:||There’s lots of different reasons why people file bankruptcy. I’ve seen everything from people … There has certainly been people that filed bankruptcy through all the years, who, for them, it was just a business decision to make.
Those kind of people are actually even far between. Those are the kinds of things that make headlines in newspapers. The average bankruptcy filer, to tell you the truth, is just the average citizen who’s living pretty much paycheck to paycheck. Or maybe they have a little saving, and they have, either a temporary disruption in their income or an unusual debt occurred. It’s just enough to throw them over the edge.
Everybody out there listening, I’m sure, if they haven’t experienced yet during their lifetime, they’re going to have a temporary disruption in their income or an unusual expense. Of course, most people don’t file bankruptcy because the temporary income problem or debt problem is not enough to put them over the edge.
For a lot of people, it is. That’s the average bankruptcy, but the vast majority of people that file bankruptcy for, just had a situation like that occur. Especially when the economy is bad, people lose jobs or have a medical thing.
Of course, divorce is another problem, especially these days, because so many households or two income households these days, they have two incomes paying for the same household. Then, all of a sudden, people get divorced and they have the same two incomes, but now they have two household expenses and they can’t afford it.
Those are the most common situations. That probably takes care about 80% of the bankruptcies I file for. On the other hand, you have people who have …
|Katherine:||That doesn’t make a person a bad person right?|
|Christian:||No. That’s right.|
|Katherine:||It doesn’t make a person Yeah.|
|Christian:||The public policy behind the bankruptcy laws … When congress first enacted the bankruptcy laws, they didn’t want people’s lives to be ruined over money. As I’m sure, everybody realizes that, once you come into financial stress, it could be very bad.
You become unproductive to yourself, your family and society in general. Again, congress didn’t want people’s lives to be ruined, so they give people the opportunity to file bankruptcy, get back on their feet again.
The theory behind it is, they do become productive to themselves, their family and society in general, then anybody, everybody benefits. Then, believe this too, if you think about it these days, most creditors that people have these days are a large institutional type creditors.
Credit card companies, big hospitals, finance companies, things like that. Therefore, those types of large institutional entities, they automatically assume that a certain amount of their debt is going to go bad every year.
They plan for it and they price their products accordingly. When you think about it, those types of people that are involved in most bankruptcies are those types of creditors who really aren’t going to be that negatively impacted by the bankruptcy because they’re already going to assume that a certain amount is going to go bad each year.
|Katherine:||Mm-hmm. (Affirmative) That’s good to know.|
|Christian:||You never heard of a credit card company going out of business do you?|
|Katherine:||I haven’t and they seem to be popping up everywhere, like there are more credit card companies. I think that clears it up for a lot of people when they’re thinking about, is that even and a viable option for them. They may have not even known to look into it. They may have been afraid of what that looks like, does everybody know?
Like, “Okay, do I have to give up my home in the case of filing bankruptcy? “I can’t keep everything. Do I have to give up my home? Will my car have to go back?” Because those will be obvious things. I think people will know you had to move.
How often are people having to leave their home? Or is that part of it?
|Christian:||Actually, that’s actually not true. That’s another common misconception about bankruptcy. Is that, you necessarily have to lose assets. That’s actually not the case. When it comes to bankruptcy, there are two … The two most common types of bankruptcies for individuals are Chapter 7 bankruptcies and Chapter 13 bankruptcies.
When it comes to bankruptcy, first of all, most people when they think about bankruptcy, they automatically think of something that gets rid of debt. Which of course, any type of bankruptcy will do, but they don’t realize that you can do more than just get rid of debt in bankruptcy.
For instance, that’s where Chapter 13 bankruptcies come in. Chapter 7 bankruptcies are very basic, plain, vanilla type bankruptcies. They are what we call liquidation type bankruptcies, and they are asset-based. They’re good for pretty much exclusively getting rid of unsecured debt.
Unsecured debt, for most people, will be credit cards and medical bills and things of that nature. Which is a good portion of most people’s debts. When you file a Chapter 7 bankruptcy, they do look at your assets.
Then, the way Chapter 7’s work, when you file a Chapter 7, they say, “Look at your assets.” They total off your assets, but then in each state has what they call exemption laws. Because each state’s legislature has gotten together and decided that there are certain assets that they want protected for their citizens, that they ought to protect from their creditors.
Those exempt assets. They vary from state to state, but those exempt assets, you get to keep. For most of the people that file Chapter 7 bankruptcy cases, the assets that they own all fit within those exemption limits. Therefore, most people who actually file Chapter 7 bankruptcies, don’t have to hand over any of their assets, because they are qualified as exempt.
Now, the thing is, if you’ve got a situation where you did have assets that you might lose if you file the Chapter 7, that’s where a Chapter 13 bankruptcy can help you. Because what a Chapter 13 bankruptcy can help you with, a Chapter 13 bankruptcy is what we call a reorganization type bankruptcy.
It’s not a debt consolidation. You still get rid of debts in a Chapter 13, but Chapter 13’s are a more comprehensive approach to bankruptcy. In Chapter 13’s, you can keep all of your assets, even the ones that you would normally lose if you file the Chapter 7.
The thing about Chapter 13’s is, they’re a very interesting type of bankruptcy because, and they’re actually the most popular type of bankruptcy these days and in most areas of the country.
What a Chapter 13 bankruptcy does, a Chapter 13 bankruptcy will get rid of all or at least substantially, all of your unsecured debt, just like a Chapter 7 case will. In Chapter 13 cases, you can also stop foreclosures and use them to help catch up on your mortgage payments.
You can actually restructure car loans and lower your car payments. You can defer student loans in Chapter 13 cases. You can also get some assistance in paying off taxes if you owe any money to IRS. That’s something that most people don’t realize a bankruptcy can do.
|Katherine:||I have a caller on the line that has a question for you. Is that all right?|
|Katherine:||Marie, you had a question for Attorney Felden. Go ahead.|
|Marie:||Yes. I’ve recent- Not recently, I, in the past, filed bankruptcy when I was married. I’ve been divorced now for about four years, and the bankruptcy that I previously filed with my ex, was almost ten years ago.
Hence the divorce, I’ve had a very difficult time trying to get my affairs in order. I wanted to find out, would it be an option, a good option, if I tried to file bankruptcy now.
|Christian:||You said your first bankruptcy ended about ten years ago?|
|Marie:||Ten, close to 11 years.|
|Christian:||If your first bankruptcy filing was that long ago, then you are eligible to file again. Would it be a … What types of debts do you have currently?|
|Marie:||Most of them are old credit card, plus I have some taxes that are past.|
|Christian:||How old are the tax debts?|
|Marie:||Tax debts are old as the divorce. About four years.|
|Christian:||Now, all of these taxes were assessed at least three years ago?|
|Christian:||How much money do you and your husband, new husband, currently earn between the two of you?|
|Marie:||I’m not currently remarried.|
|Christian:||Not currently married. How much income do you have right now from all sources on a monthly basis?|
|Marie:||On a monthly basis? Probably 2,500.|
|Christian:||Do you own any significant assets?|
|Marie:||No. Not at this time.|
|Christian:||You sound like a prime candidate for a Chapter 7 case, because if all you have is the credit card, the old credit card debt and old tax debts, old tax debts that they’re more than three years from the day of assessment can be discharged in bankruptcy as well.
The typical Chapter 7 bankruptcies filer would be somebody who is dealing with mostly unsecured debt and has a limited number of assets. Which it sounds like you do. The reason I was asking you about your income level, is because they did change the bankruptcy laws a bit in 2005.
One of the changes that they made in 2005 was to try to prevent certain people from being able to file Chapter 7 cases. The way they did that was, once you make over a certain dollar amount, you’re not eligible for Chapter 7.
It sounds like, whatever jurisdiction you’re in, $2,500 a month for a single individual, you’re probably eligible for a Chapter 7. That sounds like a reasonable option for you. There’s no reason why you shouldn’t look into filing bankruptcy again.
|Marie:||Okay. All right. Thank you.|
|Katherine:||All right, Attorney Felden. Thank you for that taking that call. I want you to tell us a little bit about your book that you have, and give your website, and how people can connect with you outside of this, needs to be said.|
|Christian:||Our website, is just … Our law firm is Felden & Felden, P.A., and our website is really easy. It’s just our law firm name. It’s Feldenandfelden.com. Felden is F as in Frank, E-L-D-E-N-A-N-D-F-E-L-D-E-N.com. That’s our website. Our toll-free number is 888-808-9291.
The book that you’re referring to is available for free on my website. Go to our website or you can call our number. Either one. You can order a free copy of the book.
The reason I wrote the book, quite frankly, is because, with the internet these days and Google and everything else, there’s actually a lot of good information about bankruptcy online.
The stuff online has a tendency to make bankruptcy sound about ten times more complicated than it really is. For most of the people, it’s a very simple, straight procedure, and I wanted to write a book that was written in plain English that people could understand, that dealt with the major problems that most consumers deal with and explain to them their different options in bankruptcy in easy to understand terms. That’s why I wrote the book.
It’s not a long book. It’s only about 75 pages, but it covers all of the different ways you can deal with your house, your cars, taxes, student loans and all of the things that we’ve talked about today, are all answered in the book.
|Katherine:||The book he’s referring to is called “Do You Need to Make a Financial U-Turn?” Discover the truth about using bankruptcy to point your finances in the right direction. That book can be found at www.feldenandfelden.com. You said you’re offering it for free?|
|Christian:||Yeah. If you go to our website. Actually, it’s for sale on Amazon, but if anybody goes to our website and fills out the book order form on the website, we actually give it out for free. No postage. We even pay for the postage. No charge, whatsoever.|
|Katherine:||All right. There you have it. I want to say, thank you so much for being a part of this show today. I think it’s helped quite a few people on today, from the messages that I’ve received. Thank you for the caller that shared that scenario as well, because I’m sure that helped somebody other than just the caller.
Thank you Attorney Felden for being a part of this show. I hope that we get the opportunity to have you back on, because there’s so many other questions that people have. I know it’s not a one size fits all.
It could be just one thing that’s different in my world than someone else’s world that could make the situation different, but only you would know that if we had the opportunity to spend more time together. I hope that I can get you back on at some time in the near future.
|Christian:||You’re very welcome Katherine. I enjoyed it immensely and I’d be happy to come by and talk to you anytime.|
|Katherine:||Thank you and have a great day.|
|Christian:||Okay, you too. Bye-bye.|