It is so common in my practice to meet with clients who have been experiencing financial distress for a long time. The clients have been fighting to keep their financial heads above water for, it seems to them, forever. I’ve told many people I meet in conference that my best clients are the people who have fought hard to stay out of a bankruptcy and resolve their financial issues informally with their creditors.
But the instinct to try to power one’s way through financial difficulty without legal help can often have a negative consequence: by the time the client comes to see one of our attorneys at Kain & Scott, it’s almost, or sometimes already, too late to stop creditor actions that can be truly damaging to a client’s ability to lead a dignified life. When that happens - when the client comes to see us right on the edge of a dramatically bad action by a creditor - such as a wage garnishment, home foreclosure or vehicle repossession - one of the questions that inevitably comes up in our conversation is “how long will it take to file a case?”
The answer at Kain & Scott is “not long.” In this blog I will write about why being able to file a sound chapter 13 bankruptcy petition, schedules, statements and plan quickly can help people in financial distress stabilize their finances.
The Advantage of Filing Quickly
Chapter 13 bankruptcies are often “emergency” bankruptcies - something profoundly bad is about to happen to a debtor, and chapter 13 offers that debtor the ability to not only stop whatever act the creditor may be about to take, but to “fix” the financial problem. Two situations are common in cases where chapter 13 is the bankruptcy chapter of choice.
The first is a mortgage default in which a foreclosure sale has been scheduled. Clients looking at a foreclosure who want to keep their home will typically choose a chapter 13 bankruptcy since the filing of the bankruptcy will stop the scheduled foreclosure sale, and the chapter 13 payment plan will propose a way for the debtor to make up the pre-filing mortgage default through monthly payments made to a chapter 13 bankruptcy trustee for a minimum period of 36 months (three years), up to a maximum of 60 months (five years).
All that is required to stop a mortgage foreclosure sale is the filing of a bankruptcy case. Even if the case is filed at 9:59 a.m. on the morning the sale is scheduled to take place at 10:00 a.m., the filing of the bankruptcy case will stop the sale - the sale is stopped as long as the case is filed prior to the sale. So being timely is crucial. And some clients, particularly those who have been waiting for a modification of their mortgage loan to be approved, will wait until just a few days before the date of the foreclosure sale to see about the status of the modification. In those cases, it might be only 48 or even 24 hours prior to the sale before the client contacts our office to see if chapter 13 will work for them.
Does the timing of filing for bankruptcy matter?
The other common situation in which filing a chapter 13 bankruptcy case quickly is where a client has defaulted on a car loan and the lender has recently repossessed the car. If the client can file a chapter 13 bankruptcy case prior to the redemption period required by statute (typically 10 to 14 days after the repossession) expiring, the debtor can get the repossessed car restored to her possession. The chapter 13 plan can then propose to pay off the car loan at a low interest rate through the 36-to-60 month plan. So just like the mortgage foreclosure sale, being timely in filing a chapter 13 case for a client who has already had a car repossessed is crucial.
So being able to file a chapter 13 bankruptcy case quickly can be a real life saver for clients. At Kain & Scott, we have the ability to file your case quickly. How we do that will by the topic of my next blog.