BK Question

[Myles]

I've recently started looking into filing Bankruptcy for my father. He currently has no income, no job, nothing. I take care of him and pay for everything besides his food. He has food stamps for that. I was recently told about a non for profit firm for people with low income that need legal help. My father spoke with them and what they told him kind of sounded like a catch 22. I was just hoping I could bounce it off someone that knows what they're talking about so I can advise him what to do.

The legal advise they gave him was to not file for bankruptcy until he has a job. They said it would do more damage to his credit if he files with no job(does it really matter at this point?). I also guess the reason for this was so they could take funds from his wages? However they also told him that once he has a job that pays over $375/week they can't assist him anymore and he'd have to look for another lawyer. Wouldn't it make sense to have the low income attorneys file for him while he doesn't have a job so we won't have to pay whatever attorney fees someone else would charge?

Any advise would be greatly appreciated. Thanks ahead!

[brokejoker]

If he files with no job and then something happens like a medical bill or something like that then he would have no way to pay that new bill and no option for bankruptcy for another 8 years. As it is, with no income no one can garnish his wages or attach his bank accounts. It would make sense to file after you gain employment and have something to lose to the creditors. Right now what are they going to take? Why risk filing BK now if there may be more bills on the horizon with no job to pay them in sight?

[chicagoannie]

I've recently started looking into filing Bankruptcy for my father. He currently has no income, no job, nothing. I take care of him and pay for everything besides his food. He has food stamps for that. I was recently told about a non for profit firm for people with low income that need legal help. My father spoke with them and what they told him kind of sounded like a catch 22. I was just hoping I could bounce it off someone that knows what they're talking about so I can advise him what to do.

The legal advise they gave him was to not file for bankruptcy until he has a job. They said it would do more damage to his credit if he files with no job(does it really matter at this point?). I also guess the reason for this was so they could take funds from his wages? However they also told him that once he has a job that pays over $375/week they can't assist him anymore and he'd have to look for another lawyer. Wouldn't it make sense to have the low income attorneys file for him while he doesn't have a job so we won't have to pay whatever attorney fees someone else would charge?

Any advise would be greatly appreciated. Thanks ahead!

My immediate thought is that perhaps the advice not to file until he has a job is because right now he is judgment proof? If he has no assets and no income, there's nothing with which to pay creditors. Also, in IL, employers can still run credit reports on prospective employees until 1-1-2011, so perhaps they are thinking a bankruptcy may negatively impact his chance of securing a job.

I live in IL, too, and am also unemployed and receiving public aid (which is tough, let me say!) I filed before obtaining another job because I do not want creditors hitting a new employer's HR department with any wage garnishments once I start a new job. Plus, ComEd was going to disconnect my electricity so things were getting rather serious!

My experience with the IL non-profit - I am pretty sure I know the group - is that they will represent a low income person in serious, i.e. criminal or DV cases. They will assist low income folks over the phone with just about any legal matter under the sun and their services are free and EXCELLENT! It's just that for most cases they do not actually go to court with you.

[frogger]

Don't file until there begins to be an improvement in his financial affairs. Many things could happen (financially) that could make you wish you had waited to file.

[Myles]

Thanks for your replies guys. I guess I don't really understand how bankruptcy works. Even if you file the creditors still have to get paid? My father has all kinds of debt. Credit card, medical, rent etc... I'm not sure how much worse things can get. He's applying for jobs but I don't really see him getting anything soon.

chicagoannie - How hard was it to get public aid. My father has an application and is all stressed out about some of the things they request. It would be really nice if he could get some sort of government money. Because he hasn't paid into unemployment in the last two years he can't file for that after having to close his private practice. And trying to convince him that he should try applying for some sort of disability has been a major PITA.

[DebtEnder]

with chapter 7, which you can do if you are lower then median income, which he clearly is, most debts are wiped out. Rent for current residence and such is still owed but any back credit card debt old bills etc are done. However if he has no income then he is Collection proof, no so much judgement proof. Creditors can sue all day long but if you have no income or bank accounts there is nothing they can do to you. You don't go to jail for being unable to pay your bills. As such until an income stream is stable filing now means any future bills that he still can't pay for will have to be dealt with and then any income he does make ends up paying the new debts.

[Myles]

So what future bills are we talking about? Just rent and utilities? Or if a credit card bill appears out of nowhere after filing? I think I'm confused as to how filing now will effect him if he has no job but then gets a job. I'd hope he could pay for his rent and utilities on his own after getting a job so I don't have to pay them anymore.

[DebtEnder]

Medical bills for medical issues that might come up. Your dad's issue now is lack of income, not debt. BK does not improve your income, only remove debt

[tcreegan]

Hi Myles,

I think folks are saying 'you only got one bullet, don't pull the trigger till the last minute'

The way a BK works: There are protections for a certain amount of income and assets. (exemptions)
If you have more than what is protected, it gets divided up amongst all your creditors. (an 'asset case' obviously not your Dads case)
If you don't have more than what is protected, the creditors get nothing and have to go away. (a 'no asset' case, your Dads case)

In either case, all of your Dads debt before the date you file is 'discharged' (goes away). Anything after the filing date stays for at least 8 yrs.

So with no income and no assets there is nothing for a creditor to get their hands on, so the BK isn't needed to protect anything. Any future mishap, medical, auto accident, that sort of thing, can get added to the debt pile. Then, when income or assets come back into the picture, the BK is there to protect the income and assets.

Of course your Dad can file anytime, he is about as down-and-out as they come. Concerns about his credit are probably moot, like you said 'does it really matter at this point?'

For most employment, having a BK is not as bad as having a bunch of unpaid credit accts. In fact, if there is nothing much positive on the credit report, a BK might actually raise your score, the debt to income ratio gets about as good as it gets...

Good luck with your Dad, you get points for being a good son!

Tom in Colo

[despritfreya]

There is one aspect of this thread that has not been explored. The premise behind filing a Chapter 7 is filing when you are at the bottom of the "bell curve", not when you are making your way up. Why? What happens if you wait until you have employment and that employment earns you enough money so that Schedule I and J show that you can afford to pay your creditors? Do we not have a potential substantial abuse issue?

I mention this because I recently had a client who waited over a year to file. When this person originally came to see me he/she was unemployed. This person, recently having found good employment, is now earning a decent living and, while the means test worked, Schedule I and J did not.

Just a thought.

Des.

[Peeps]

And trying to convince him that he should try applying for some sort of disability has been a major PITA.

What does "some sort of disability" mean? Does your father have a disability that could potentially qualify for state or federal assistance? If so, it is potentially a long road, with some cases stretching 3ish years for approval, at least at the federal level (but don't let that stop you... my disability case took 6 months for approval so it CAN happen faster). If there IS some kind of disability and if it potentially affects his ability to work, then it really should be explored. The sooner he starts, the sooner he'll have some documentation. Also, if there is an issue with a disability, diagnosed or not, it needs to be factored into financial planning a little bit differently than a standard BK. The income and benefits are treated differently than normal income.

[frogger]

There is one aspect of this thread that has not been explored. The premise behind filing a Chapter 7 is filing when you are at the bottom of the "bell curve", not when you are making your way up. Why? What happens if you wait until you have employment and that employment earns you enough money so that Schedule I and J show that you can afford to pay your creditors? Do we not have a potential substantial abuse issue?

I mention this because I recently had a client who waited over a year to file. When this person originally came to see me he/she was unemployed. This person, recently having found good employment, is now earning a decent living and, while the means test worked, Schedule I and J did not.

Just a thought.

Des.

That is where proper planning comes into play. If you have your act together, it doesn't take long to file. The bottom of the curve is the best place to file.

[Myles]

So just an update and another cry for help/advice. My father still hasn't filed for bankruptcy and hasn't gained employment. It's really seeming very hopeless on the employment side and his depression/unmotivated attitude is keeping him from proactively searching for jobs. And now on top of it all. He totaled my car that I was storing at his apartment until he had a job so he could insure and drive it. I own the car and it's uninsured. The other persons insurance is saying they will come after me since I'm the owner. I have nothing and don't really know what to do. There's a court date next Monday and I'm not sure if I should go or not. Would filing for Bankruptcy now help at all for this?

Thanks in advance.

[ashleywatson]

It would be best if you file no income so that no one can garnish his wages.

[btbeme]

My two cents...

If he has no real assets, why bother with a BK at this point? His credit (debt?) score is already toast, and we do not have debtor's prisons or Shaira Law. Nobody will come to get him if he does not pay up. If he has no assets, and you haven't co-signed anything for him, he is simply a walking bad debt.

So what?

Save the BK for a time when it might really matter. I vote with tcreegan in this matter.