Bankruptcy and the price of procrastination

09 Mar Bankruptcy and the price of procrastination

Waiting to file bankruptcy cost one of my clients over $30,000 in payments to his Chapter 13 plan. Despite having discussed bankruptcy with me for several years, he put his head in the sand and waited until there was a wage garnishment crisis. When the dust settled, the price of his Chapter 13 plan was far higher than if he’d acted earlier.

What made the difference? My client had significant equity in his house and, though he owed taxes on account of a failed business, it was the business vendors who sued first and got judgment liens that attached to the house. So when he could pretend no longer that all would be well, he was left with liens on all the equity in his house to creditors who held dischargeable claims and the taxing authority still needed to be paid.

His Chapter 13 plan, then, had to pay the judgment lien holders and the taxes in order to emerge from bankruptcy with his house free of judgment liens and the taxes paid. Had he filed bankruptcy before the judgment liens were obtained, the plan still would have had to pay the taxes, but not, in all likelihood, the unpaid business vendors.

I honor the impulse in clients that says “I want to pay my debts” but I applaud more loudly the client who accepts that it isn’t possible, and takes the bankruptcy plunge to get that fresh start.

Then there are those who rush to bankruptcy.

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Cathy Moran, Esq.

I'm a certified specialist in bankruptcy law (California State Bar Board of Legal Specialization) practicing in the San Francisco Bay Area for more than 30 years. In addition to practicing bankruptcy law, I train new practitioners at Bankruptcy Mastery.
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