Bankruptcy is it Right for You

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Welcome to finances the other F word, a JEN X or podcast from musicians and music lovers where we discuss money and music without all the pretentious bullshit. Here are your host, Zoe Terry, attorney at large, and mellow, certified financial planner and author of finances the other F word. Listener discretion is advised.

Hey, guys, and welcome to finances the other effort, and today on the show we have Troy Fox, who is a bankruptcy attorney. Now he is hands down the best dressed person on the show today, even though Zoe is looking pretty spiffy. If I do spind the I usually don’t make an effort for our guests and for our audience, but if you look at our youtube channel then you know that that’s usually the case. But let me it introduced troy to so Troy Fox is the managing partner at Crosby and Fox. He specializes in bankruptcy and has been doing it for over a decade. He is also a chapter seven trustee for just over two years now.

So for listeners, you’re hearing that finely edited voice introduction that I just did not realizing that it literally I tripped over it like four different times because for some reason I cannot pronounce simple words like Chapter Seven. But let me explain to you. There’s been on the source. Personally, I wish I could be on the sauce COM Mord. Every time I drink now I get sick. But I know that this might seem slightly odd you guys, as far as why we’re covering bankruptcy, but there’s a couple reasons why I wanted to cover this and I wanted to get good information from somebody who does this for a living, and the reason being is because I have clients who have filed for bankruptcy before and they just felt humiliated and they felt less than and they were really down on themselves, and so I want everybody to be able to understand what’s the goods, bads and the uglies out of doing bankruptcy. And also, you guys need to know that we are in tightening, a monetary tightening right now, which means that the Fed is going to be very aggressively increasing interest rates this year, and what that means is that you’re going to see your credit card rates go up, you’re going to see your variable lines of credit rates go up and there’s a lot of people who have been carrying debt on variable accounts that my might find it a little overwhelming at some point to handle.

And so this is the reason why I wanted to have troy on so he could talk to us a little bit about it, so if you happen to be in a tough financial situation, you can kind of get a little bit more information on it so you can see if this is something that maybe you need to pursue in your state, because troy is an attorney in Nevada, so the information he will be providing is for Nevada. As you know, all the disclosure same thing that Zoe always gives every time that she has to talk about anything legal. So, Troy, thank you so much for coming on. Sorry I kept messing up your intro. Ridiculous at time. There are times a charm. You did great. Yeah, threat t having me on. Yes, absolutely.

So let’s start with so what I guess the first question is is I know that a long time ago there used to be certain things that you could write off in a bankruptcy and now those things have changed. So can you just kind of use that as a launch pad about things? It typically you can. You can ride off in a bankruptcy and then kind of go from there. Okay. So, and it’s been this way for a while now. So generally in bankruptcy there are three types of debts that you deal with. There is what’s called secured debts, there is what’s called priority debt and there is what’s called unsecured debt. So to kind of talk about each one of those, secured debt is where the debt is attached to an asset. So your mortgage is secured debt, your car loan is a secured debt. It can also include things that you don’t expect when you go to best buy and you buy that, you know, sixty five inch TV with the best buy credit card, usually that is secured. If you’re using the stores card to purchase an item in the store, usually there’s security agreement in that credit card agreement, whereas if you use your capital one or your chase or not to you know, any other banking card, typically credit card debt is not secured. But if you’re using store financing, it often is same thing. If you go to sears or if you you know those kind of places where you get in house financing, usually there’s security interest. Priority debt is typically types of debt that, for various reasons, the government has said is special and usually does not get discharged. That can include certain tax liabilities, so money you owe the IRS, student loans and domestic support obligations like child support and alimony, or probably the three most common. And then there is unsecured debt, and that’s what most people have. So when you use a credit card, that’s unsecured debt. You borrow money on a personal loan, that’s generally unsecured debt. If you you know, even short term lending is usually unsecured debt. So you know, paid a loans. Most kind of things are usually unsecured.

In a bankruptcy you can get rid of unsecured debt and there is some exceptions. Usually you cannot get rid of priority debt, though there are sometimes some ways you can discharge student loans. I guess priority gets a little complicated, but as a general rule it won’t go away. It’s going to be there after the bankruptcy is done. And then with secured debt you choose to either return the item or keep the debt. So if you want to keep paying on your house, as long as you keep paying the mortgage, you can keep your house. If You keep paying on your car payment, you can keep your car. What you can’t do is say I want to keep the car but I don’t want to pay anymore. So either you return the item or you the the asset and keep paying on it. That’s generally how you deal with secured debt. We touched on this a little bit in our episode number fifty six. How does credit work? And so you guys can go there and we talked a little bit about the difference between secured debt and unsecured debt. So what I would recommend a is you guys who are curious about learning how, wanting to learn how to use your credit and understand a little bit better. You check out an episode number fifty six.

So let’s say that you have there’s there’s certain kinds of debt that that you said that they cannot dismiss. Did you mention hospital bills in there and I missed it? I didn’t. Usually medical debt is unsecured and typically it is dischargeable. It will go way. Okay, so medical bills, because of with it, with my experience with my clients, the biggest issues that they have are typically medical bills are the the biggest that ends up putting them in a situation where they might have to do bankruptcy, and then that would be followed by student loan debt. But student don’t loan. That doesn’t sound like it is dischargeable. It is generally not. There are there’s all kinds of things going on in student loan debt and bankruptcy and there have been various pushes to change the rules to make it dischargeable, but as of right now, student loan debt is presumptively non dischargeable unless you can prove that failure to discharge it will cause an extreme hardship. And to prove whether or not there’s an extreme hardship, there’s this thing called the Bruner test, which is a test that came out of a circuit court decision. Almost all the circuits have now followed it. I quite frankly don’t think it follows what the code says, but every Circuit Court tends to disagree with me, so they win. But it basically sets a certain standards and bars you have to meet for the debt to be dischargeable. You have to show things like you’d be unable to maintain a minimal standard of living while continuing to pay the debt. You have to show that you’ve made reasonable attempts to repay the debt. You have to show that there is a change in financial circumstances that is unlikely to change in the future. So it’s rare but not impossible.

I did have a case where I represented a lady who was a veteran, had been injured as part of her service and was literally unable to kind of stay in the same position, sitting, standing or otherwise, for more than about an hour, hour and a half. We were able to discharge student loans for her and show that you know she was not going to be able to make enough money to reasonably repay them, so it can be discharged. It’s very difficult test, it’s very difficult process. Generally speaking, you’re not going to get your student loans to go away. That’s also true if you have cosigned a student loan, even if the underlying borrower may be able to discharge a debt, and I’m dealing right now with a case where there’s that kind of an issue and it’s actually now state court matter. But yeah, so you be real careful. Student loans generally are not going to go away, but hospital that does. Almost always you’re getting rid of your hospital debt and that is one of the biggest reasons people file. Usually it’s divorce, medical or loss of job. Are the three big ones. Yeah, and with the as far as the the medical debt being the primary one and then the student loans specifically not being dischargeable. What when do typically so you said just right now that people typically come to see you when they have medical debt.

So how can you tell if somebody is, if you know, filing? And we’ll get into the chapters here in a minute. But how can you tell if somebody, because we know troy and so I’m sure there’s a lot of bankruptcy attorneys out there that would probably just take your money and, you know, file bankruptcy, but he goes through any make sure that it’s going to be the right thing for you. So what are the indicators that you would say, because my understanding is after you file bankruptcy, your credit goes to shit right and then it takes at least a year before you can get an unsecured card or some other type of parts. So I mean, filing bankruptcy is a big deal. It is a big decision that happens. So how do you weed out somebody who maybe just seems to do a debt consolidation loan versus going into a fullblown bankruptcy? Okay, so there’s about ten things there. Let me see if I can pick a part a little bit by little bit. Let me start with this. So the impact of a bankruptcy is not always catastrophically bad. In fact, there are some people who will come out with higher credit scores after the bankruptcy than they went or then they had going into the bankruptcy. So and the reason that happens is if you have multiple debts that you are defaulting on.

So let’s say you have, you know, six credit cards and you know you’re trying to pay one and then you try to pay another and you drop one right one of them. You’re like, I can’t pay credit card a this month. Credit card a now starts to report to your credit report that you have defaulted. Often they have. Those reports have universal default provisions. So now your interest rates are going to skyrocket on your other seven credit cards. So now you can’t make credit card payment number two. So now credit card B or two or what you know is defaulted, and then three and then four, and you don’t have just one credit or badly reporting. You have three, four, five creditors. Every month you didn’t pay your farther behind you did and that tanks your score. That hits your score. When you file a bankruptcy, all of that stops, all of the negative reporting stops every one of those cards. Put The little stamp on there that says bankruptcy or discharged in bankruptcy or something, you know, with a bankruptcy reference, and they stop the negative reporting. And so then you’re left with some of your secured debts and sometimes they even may’ll stop reporting as well, but you stop getting the constant negatives every single month.

So they’re actually are people who will have, you know, literally a four hundred, four ten, fo hundred and fifteen credit score who come out of bankruptcy see and bounce up into the five, five fifties, you know, and go higher. As to unsecured debt once you get a discharge, depending on the chapter of bankruptcy, a typical chapter seven, which is what most people think of in bankruptcy. You file a bankruptcy, you’re usually done in about four months. You get your discharge, meaning the court says you don’t have to pay it back. You’re done. You will get credit card offers the next week they will come in the mail. They will be very low balanced and very high interest and they’re terrible credit cards, but you can get one the following, I mean literally the week after. Their companies that search. They want to know everybody who’s getting a discharge. They get your name and address because it’s public information when you file, and these companies will start sending you credit card offers. Hey, welcome back, here’s a five hundred dollar credit card, you know, with a thirty percent introductory interest rate. They’re terrible cards. But you can get unsecured debt fairly quickly. Usually it’s secured debt houses, cars, larger purchases. That takes you a year to anywhere from a year to large items up to two or three years, and so you know it doesn’t take quite as long as you think, but it does and it can be. It is a negative impact on your credit. It is isn’t going to be something that’s good and it’s not a decision that you should look at easily.

How do you know if a person should file? Well, the first thing I’m going to look at generally is what kind of assets does the person have to protect or key? And this is where individual states matter, because the assets that you get to keep very state to state. Nevada has some incredibly generous what they call exemptions or things that you get to keep, protections and bankruptcy. Some states are very, very stingy. Some states have some areas where they’re even more liberal or more flexible than we are, more generous than we are, but Nevada is definitely one of the most generous states as far as what you get to keep.

So the first thing you got to look at what do you have to keep? What do you have to lose? If the person is judgment proof, meaning they’re on a fixed income, social security or ssdi or something like that, and they don’t have a whole lot of non exempt assets, they don’t have a lot of stuff that people are going to be trying to take, they may not need to file a bankruptcy. It may not make sense, for they can a lot of times just tell their creditors to go pounds and look, I’m on a fixed income, you can’t take it from me. I don’t have anything you can take. I can’t pay you back. Sorry, thanks for the call, you know, but don’t hold me.

And what happens? If they do that, then typically they have to ignore phone calls for a while, and a lot of times you pay the fifty dollar fee to change your phone numbers so they stop asking you. Your worst-case scenario is they get a judgment against you, they can never collect until either you die or something happens. Okay, or you hit the lottery, either way, and one of the two write. But we know which one’s most likely. Right. Yeah, right, what? Yeah, one’s more likely than one’s definite the others unlikely anyway. So I mean there’s not a lot they can do to you at that point. Yeah, your own money, maybe even they have a judgment. Yeah, but if they can’t collect it, sits there and rocks. Some of them will just write it off. Once they kind of realize there’s nothing there, they’ll write it off and I’ll never come after you again. Right. So it varies. Usually the worst part is is it hits your credit of Maga your credit negatively. But you’re not looking to rush out to buy a car or House and you’re not you know credit scores.

I find a lot of times people have a lot of reliance on credit scores, like they think, oh, it’s so important only if you’re trying to buy something large on credit, you need a really good credit score. If you’ve got your house and you’ve got a decent car and you’re going to be okay, excuse me, then who cares what your credit score is, but it’s one hundred or one million, who cares? You know, it’s not a value judgment on you as a human being.

So I have a question for you, and I know you don’t under you don’t know the specifics of verse situation. But this is something that I found really odd. I had a client who fell victim to a very, very bad fraud scam and she wasn’t specifically smart and what she did. So I mean there’s, you know, I guess there are two sides of it, but it involved her pulling off cash advances, off for credit cards to pay for something that was fraudulent and I actually recommended that she talked to because she is a retiree who was in her S, who’s on a fixed income. And you want to talk about being fucking pissed, I wanted to go. I was. I was upset with them for not calling me first and then, at the same time I was upset at the people that did this to my client. And when they went to go talk to a bankruptcy attorney, the bankruptcy attorney said we can’t help you because none of the stuff they would be able to discharge. Now, is that because maybe it was done like this happened at the beginning of the end of November, I think it was, and I think she in January. She tried, she went to the BK Attorney in the attorney was like, Nope, we can’t do anything for you and what ended up happening, and this is why you guys got to watch this stuff with your older parents. She ended up having to pull out money out of her retirement account, which, of course, was taxes ordinary income, which of course affected her distribution amount, her distribution rate.

We’ve talked about this on the show before, and in order to get out from under the cash advance fees on the credit cards. So do you know, maybe just from the information I gave you, why that might have been the case? Because she did a police report. I mean, she literally got screwed. It was a fraud. So it’s always hard to second guess another attorney without getting all the details. What I will say is, if the person had come to me, the concern I would have is timing. There is a presumption that debt with incurred within the ninety days before you file bankruptcy is presumptively abusive. Right. The rules there to stop exactly what you think. You don’t want people going I’m going to file bankruptcy, so I’m going to run out and buy the nicest stove and Nicist, you know, fridge and a bunch of jewelry and load my house down with electronics and then I’m going to file bankruptcy say I can’t pay it all back.

Right, so DA incurred within at least three months before filing is presumptively abusive. And cash advances, they’ll look back as far as six months, because there’s a presumption. If you’re pulling cash out, where’s it going? What’s it doing? But there’s it’s a presumption. So what it means is if she were to file, it is likely that the credit card company, at least one of them, possibly more. She’s used multiple cards, will show up and say hey, you got twenty. You know, I don’t know how much. We’re talking two thousand and five thousand, ten thousand whatever in cash advances. That’s presumptively abusive. We’re going to file an adversary and ask the court to force you to repay that. But if she’s got a good explanation and a good kind of where it went and what happened to it, and she’s a seven year old, fairly sympathetic case. I mean I what I would probably have told her is don’t touch your retirement accounts. One she sounds almost judgment proof anyway.

Right, she doesn’t have she’s got a fixed income. She’s got retirement accounts, at least in Nevada. That would probably be exempt. So I would tell her wait, wait a few more months, let some time pass, put some time between you and the events and don’t touch your retirement accounts because those that’s your money, that’s protected money, you know, unless you have to take a distribution for some reason. You know, don’t, don’t use it. I tell people all the time never, never, never, never, turn an unsecured debt into something better. Don’t use your house refinance to pay off credit cards. You’ve now taken unsecured debt and turn it into secured debt. Don’t get a car tight Alan instead of a paid a loan, because unsecured versus secured debt. And don’t use exempt assets like retirement accounts to pay off stuff that is dischargeable like credit cards. It just doesn’t make sense. So my guess is it would have something to do with that. But I again, I would have told her weights and time, file it and will fight the abuse if the argument, if it comes up.

Yeah, and I told her that the reason why they probably said that was because of the ninety day rule, because I was aware of that rule. But I had told them that I wasn’t sure if it was still around. But my my recommendation was not touch her retirement and instead I think she was just so at a fluster over the whole thing because she saw these these credit card statements coming in and she pulled it. And you know, unfortunately, just like Zoe knows as well as you do, people don’t always take your advice. So it is what it is. So who? And I want to get onto the chapters after this so you can start kind of explaining to us the difference between the chapters. But I this is kind of rhetorical and maybe a foolish question, but who pays for the bankruptcy? Like now, I understand that the that the person doing the bankruptcy paid for it, and I understand that like the the credit card companies, I’m assuming, discharge it, and so they discharge it from like the person and then they take it as a loss on their books, which might end up meaning higher interest rates for other people, depending on your credit, and it kind of flows out from there. But in these really big things, like is everybody who has the debt that you that the money that they gave you.

Everybody’s just on their own, as far as they just they all eat it. As far as okay, it’s a bankruptcy, that means this person doesn’t have to pay it and they owe it to you. So now you just have to figure it out yourself and you eat it. Or do they in turn get to write that off on taxes? or I mean, is it that? I guess I want to where does the debt stop rolling, you know what I mean? Does that? Does it make sense? So, I mean I think the short answer is yes, the creditor ultimately is going to eat it. So if if I represent a client, let’s say in a civil suit, and I rack up, you know, Twentyzero and attorneys fees and they file a bankruptcy, more often than not I, as the attorney, eat the fee. There’s nothing that unless it’s somehow security or otherwise. You know, that’s it. I eat it. I take it as a loss on my taxes. I get whatever benefits or, you know, perks I can get from the fact that I’ve had to take it as a loss. But yeah, I mean, ultimately it’s they eat it and and a lot of times people will. That’s one of the concerns they have when they file bankruptcy is.

Well, I really like my worth adonist, I don’t want to have to include the two thousand dollars I owe to him or her. or well, I really like this person. Or, you know, my mother lent me five thousand dollars. I don’t want to put her in the bankruptcy. Unfortunately, bankruptcy is an all or nothing deal. You list all of your debts or none of you. You don’t do it now, if you choose to, you pay people after the bankruptcy because you want to. Nobody’s going to stop you. They just legally can’t collect from you. Right, okay, but yeah, I mean, you know, you look at big companies, right, and you look at your chase card or your city car or those kind of things.

Well, the reason they charge you interest on those loans is because they’re assuming, look, out of every thousand dollars we lend, we’re going to, you know, a hundred of it’s never going to repay us. Or what are you know? They assume that there’s going to. So they charge interest. And when you’re paying interest, you’re paying interests not just for your risk but really for everybody’s risk. The higher risk you are the more individual interest you may pay. But you know, most credit cards are, you know, nine, ten, twelve, fifteen percent.

Why are they so hard? Why are they so high, even if you’ve got, I’ve got a great credit score? Why is it a twelve percent interest? Well, because they’re assuming that at some point things may happen beyond your control. And you know, their accounting for everybody. So you work that into the process. Yeah, and we’ve discussed that on this show a numerous amount of times and we’ve talked about it from an insurance perspective and it’s called the law of numbers, and so we have touched on that before and so you can go back and you know, find, find those episodes and everything.

So tell me. I know that there’s all kinds of different chapters for bankruptcy, see, and I know that you don’t do business bankruptcy, but, like, I didn’t even know until I talk to you that there was chapter specifically more for personal bankruptcy and then there’s chapters of bankruptcy for businesses. I honestly thought that you had four different types of bankruptcies you could file and, depending on the severity or the the information, you know, the details of your situation was, which one you did? Obviously I’m completely wrong on that. So it educate me on on what the different chapters do so that if we have listeners that are listening, they can start trying to get an idea if this is, if their situation is even something that might be improved by bankruptcy. Sure so, officially, as far as I guess, the available types of bankruptcy you have chapter seven, chapter thirteen, and this isn’t obviously numerical order, but the order. All discuss them in Chapter Seven chapter thirteen, which are generally consumer bankruptcy, chapters chapter eleven, which is usually a business bankruptcy. There’s also, technically chapter not, Chapter Twelve, which is specifically for farmers and fishermen or Fisher persons, and there’s chapter nine for municipalities. So there are some.

We won’t get into nine and we won’t get into twelve, at least I hear in Las Vegas don’t deal with a lot of farmers, for fishermen pot and they have their own chapter, though that’s just intrigues me. Sure. So it’s because of the way that they typically have their income streams. Farmers and fishermen don’t usually have steady month to month income streams. They have very large payments that come in annually or bi annually or very seasonally, and so it’s just because of that they create ways for them to have payments to that fit into that kind of a scheme.

So generally for consumers, for individuals, there are Chapter Seven and chapter thirteen. Chapter Seven most is what most people think of when they can bankruptcy. That’s your kind of quick and dirty bankruptcy. That’s your in and out fairly quickly. You File, you indicate that you just don’t have enough money to repay your creditors. You list all your assets, you list all your debts. A Chapter Seven trustee is appointed to review all the information and make sure you’re not hiding anything. You have a meeting in front of that trustee or they’re going to ask you some general questions under oath and then you get a discharge and you’re done. Now their income limits on that chapter depending on your household size. There are rules about who can and cannot, you know, file.

There are there’s this test that Congress created in two thousand and five called the means test. That’s going to look at your income over the last six months to determine kind of what your annual income likely should be. There’s all kinds of rules. I guess they go into that, but generally chapter seven is what most people file. It’s the most common and it’s what when these most people think bankruptcy, they think chapter seven. Chapter Thirteen is what’s often referred to as a reorganization, and a chapter thirteen is generally used in one of two circumstances. One is if you make too much income to qualify for a chapter seven, then you often have to be a chapter thirteen. This second reason is if you’re trying to preserve secured assets. So this is the bankruptcy thirteen is what people file when they’re six months behind on their home mortgage and they can’t get alone modification and they don’t want to lose their home. Or there, you know, a couple months behind on their car but they really can’t afford to lose it, but they’re back to work and they could catch up at the company’s not getting enough enough time. Those kind of situations. And in a chapter thirteen there is a thirteen trustee who is appointed and as the debt or when you file your case, you propose what’s called a plan and it is, as it suggests, a plan of how you’re going to reorganize and it literally says, look, this is how much money I make every month, here are all my reasonable and necessary expenses, here’s how much money is left over every month and with this money, I’m going to give that to this chapter thirteen in trustee and I want them to take this money and here’s what they’re going to do with it.

They’re going to repay the arrears on my mortgage, they’re going to repay the arrears on my car, they’re going to pay off that tax debt that you know, I have from last year that I haven’t been able to get rid of and it, you know, the money kind of water falls down into who gets paid how much over what kind of period of time. And if you file a thirteen, typically you’re in it for at least three years. You can be in it as much as five years to repay and catch up, and that’s usually when people are filing at thirteen, is because they want to keep something but they need time to get caught up on payments.

Now individuals can file a chapter eleven. There are individual chapter elevens. They’re just really expensive. It’s unusual for an individual to file a chapter eleven. You’re filing fee alone is almost two thousand dollars. To file a chapter eleven it’s a lot more expensive. But there are some individuals, if they have multiple properties, like rental properties or things like that, where they put them in their name instead of an LLC or some kind of entity or for whatever reason may have to file the eleven.

There are also debt limit issues in a chapter. In a thirteen you’re only allowed a certain amount of secured none secured debts, so if you have more than what’s allowed, you have to file it as an eleven. But most of the time chapter eleven is for businesses and it’s for business reorganization. And within chapter eleven there’s now what’s called a sub chapter five, which is specifically a bankruptcy designed as a chapter eleven for smaller businesses.

If you’re a small business, that’s a chapter eleven that’s supposed to be for you. Now I hate the term small business because most of the time I’m not talking about mom and pop. You know, the guy who’s running his own landscaping business or the you know couple who’s doing their own cleaning business. Or those kind of things. You’re still talking about a business, likely with ten or twelve employees, where you’re generating revenue. Even small businesses are small business chapter subchapter five’s costwise on a bankruptcy is still going to run you five figures, ten, twenty, thirtyzero dollars to kind of get through it at least.

So if you’re not a business that can pay that, you really still not a chapter eleven. Otherwise, Chapter Elevens, regular Chapter Elevens, are for businesses, usually much larger businesses, and that can be anything from fifty employees to caesars entertainment, who recently filed, you know, and had to go through a bankruptcy restructuring. So chapter eleven is, though, for those businesses.

So need to ask what are the finding fees fit chapter seven and chapter thirteen bankruptcies? What do they? Vary depend on the I I can tell you in Nevada, I think, because it’s federal, I think it’s fairly standard. If not, you can always check your local bankruptcies website. They have displayed, you know, under there’s a few section in the Vada at least. It’s three and thirty eight for a chapter seven and three hundred and thirteen for a chapter thirteen. I believe the current fees.

Okay, so a big difference between that and the chat to eleven. Yes, one one thousand nine hundred and ninety somethings, the filing keeper Chapter Eleven, one thousand seven hundred and some ninety seven dollars on. So Tony, sort of play a devil’s advocate to this. If you know you’re in everybody’s in different financial places in their life, just as you know there’s different times when you distribute out money for different reasons, when you have, you know, financial portfolios, why not file bankruptcy if, let’s say, the worst thing that happens is that my credit goes to shit, but then I can rebuild it, because people file bankruptcies all the time and then eventually they re Redo their credit.

Why would not everybody just be getting loans and then filing bankruptcy? Well, I think, first of all, I don’t think I’ve ever had anybody come into my office who is using bankruptcy as part of a planned strategy. Most people who borrow money want to repay it. So I guess there’s a certain moral reality that people most of the time are borrowing money with the intent to repay it. They may on something now, but usually, people are in my office because of the unforeseen circumstances, the unexpected medical debt, the unexpected divorce that now to income one household goes to two incomes, two households, or gets you. Now you’re dealing with more expenses or job loss, often you know, long-term job loss that they just didn’t expect. As far as why not do it, well, there are some there are quite a few protections in the bankruptcy system to try to avoid fraud. So if you’re going to file a chapter thirteen or a chapter seven, you have to expose all of your financial information to a trustee who’s going to be looking at is there anything here that I can take in sell? As a chapter seven trustee myself, part of my job, part of what I do, is look for assets that I can take and sand sell or whatever I need to do so that I can distribute to creditors and get them some money back.

In a chapter thirteen, the chapter thirteen trustee is going to look at okay, what can you really really afford to repay to these people? And while you’re in a chapter thirteen, whether it’s three years or five years. During that entire time you’re not allowed to take out debt without permission of the bankruptcy court. You’re turning over your financial information, typically at least your tax returns, every single year. Your subject to a trustee who at any time and can tell you, hey, you know, there’s a real if they have a reason, I suspect you’re making more money or something’s change, they can request that you provide them updated financials and you’re obligated to comply. So you know, and nobody wants to be mannied, I guess, if they don’t have to be. I don’t think there’s a trustee out there that is trying to make people feel bad for filing bankruptcy. Most of them are very respectful, they’re very, you know, honest. They’re decent people. They’re not trying to make the process harder. But who wants to constantly know that I’m making a plan payment every single month in my trustee and if I don’t and I default and my case is dismissed, all of the work I’ve done goes away or in a chapter seven. People don’t file it for fun. Nobody, you know, it’s it’s not meant to be a mean process, but you know, nobody wants to take the credit hit if they don’t have to.

So I mean, I think those are kind of the reasons why people don’t all do it. And at some point sometimes creditors get smarter and stop lending you as much money, and so this is the this is one of the whole reasons why I wanted to talk about personal bankruptcy and you you hit on it versus corporate bankruptcy, because this is what’s always fascinated me and this comes down to behavioral finance. What you’ve talked about a lot on the show is that a personal bankruptcy is a moral decision because you’ve taken out money and you morally most people want to pay it back.

For Business, they get a shit, they will file for bankruptcy protection very fast, at the blink of an eye, although I give you a little bit of pushback on the businesses just file at the drop of the hat, but I love it. I love it. Yes, please give me perspect so, Mel I, I would argue with you a bit on the idea that businesses file bankruptcy at the drop of the hat. There are some, I’m sure, that take advantage of the system, but most companies don’t want to have to expose their financial situation to a bankruptcy court, to a creditors committee, to I mean most of them try to keep very tight.

You know, they only report to even the FCC or other organizations what they have to they don’t want. And when you go into bankruptcy all of that stuff can go into the open and while there are some ways you can keep some of it under seal and some of it underwaps, the reality is you’re showing a lot of people the INS and out to your business and letting them put their two cents into how you’ve been running it and whether all right, I’m sorry, so including your competitives. Right, yeah, so I don’t know that they rush into it. They may take advantage of it and what you often see is larger companies will try to do what’s called a prestructured or a kind of a pre arranged bankruptcy.

In a chapter eleven, you also have to file a plan and you have to file an indication of how you’re going to reorganize and in the bankruptcy in the eleven you have a time frame in which you can kind of get that together. You can negotiate with predators, you can kind of work some of those out. If you’re a larger company, you may work a lot of that out ahead of time with your competitors and say look, we’re not doing so well, we’re going to have to file. Here’s how I’d like to treat how much I owe you. You know, here’s what I’d like to do. And if you’re a vendor or you’re somebody who, let’s say CAESARS, you know, or some large company, owes money to you have to look at the choice and say, all right, I can agree to get x amount and know that at least I’m going to walk away with this, or I can say no and take my chances on what happens when they get in and are dealing with all these other people and you know, and they are all kinds of rules about how many people, how many of your creditors, have to agree to your plan and who votes and and again you do a whole segment, but it’s a complicated little process.

If you’re a big company, you work that out before you go in. So you see large companies, they go into bankruptcy court, and it seems like six months later they’re done and they’re okay, now they’re off to the running. They’ve probably been planning it for a year plus and already trying to negotiate and get people on board before they ever file it. And so you know, and there’s there’s exposure that comes with bankruptcy, but I do agree there’s not the moral implications. People. Nobody shows up to a party and goes, Hey, I just got my bankruptcy discharge, I’m done and Whoo, you know. Companies, on the other hand, Hey, we just got out of bankruptcy. Whoo, you know, we get to move forward. So there is a very different moral lap implication, but I don’t think that any company rushes into it and I love the the pushback and doing what I do for living, I see so many companies that are that have stocks, that go into bankruptcy, that have all of these situations and and they do, and it’s exactly that tour. I see them go in and I see them come out immediately and I’m like, how the hell did that even happen? And so thank you for clearing that up for me. Last thing I would say is this to anybody out there who is sitting there going, you know, feeling bad or you know feeling you unsure about filing a bankruptcy, feeling it’s a moral thing. You’d be amazed how many very wealthy and successful people have, at one point in their life, file the bankruptcy. I mean we all know Donald Trump right.

Numerous Times businesses if filed and all kinds of things, but I mean some of our founding fathers had to go through bankruptcy processes. I believe it was Ford had to file a bankruptcy prior to actually starting the forward company. There’s just you can look it up on the Internet. A lot of people have done it and it’s created an opportunity to restart and rebuild and go do something better. We are saying here at Crosby and boxes the future is a bright light and we believe that bankruptcy is a step to help you move forward. And it’s in the constitution. It’s been there for years. It literally is part of our founding is that the framers of the the of our country said sometimes people need the escape pack, they need to be able to start over. So and a lot of people are filed. Nobody knows right. You don’t ask people, nobody. That’s not something you ever go to a you know a group of setting and be hey, you ever file bankruptcy before? I mean you probably have never even asked your friends. Right. You may have had people you’ve known for twenty years and you’d be shocked how many of them will say I filed bankruptcy if they came down to it. If you have to, it’s there for a reason and you’re not alone and it’s nothing to be ashamed of. If you’re faced with this. I don’t want you to feel bad about yourself and I want you guys to just get your shit together and do what you need to do and move forward so that wherever you are now, you can get to a better place in the future.

So, troy, where can everybody find you if they have questions? Obviously if they’re residents of the Vada where can they get ahold of you? Yeah, so we practice in Nice, last base law and Clark County, kind of that surrounding area, crosby. Our website is www dot crosby foxcom, little in the middle. My email is t fox at Crosby Fox dot com. To is in troy, Fox across the Ash foxcom. You can shoot me an email. Our phone number is seven zero two three, eight two zero seven. You can always call. It’s better to seek advice early then late, because all the time I get people who come in we drained our K, we drained this retirement, we drained this account. We and now we have to file bankruptcy. And I’m like, you would have come seven months ago, you’d still have a k, you’d still have some savings, you’d you know, you’d still have these things. Do it earlier and you’ll be in a better position in the Lama.

We really appreciate you coming on and sharing your knowledge with us. We really appreciate you guys listening and you can find us on our social media’s at finances the other F word. You can find me on Tick Tock, at ftof W underscore podcast and, of course, on our Youtube Channel, and I with that. I think that’s it. Thank you. Thank you absolutely, pm. Thank you for listening. Please check back for upcoming episodes and follow us on twitter, instagram and facebook at finances the other F word.