Will Geer was featured on The Meriwether & Tharp Show to explain the types of bankruptcy, discuss what you can expect from a bankruptcy court, and answer many divorce-related bankruptcy questions.
Leh Meriwether: Welcome everyone. I’m Leh Meriwether and with me is Todd Orston. Todd and I are partners at the law firm of Meriwether & Tharp, and you’re listening to The Meriwether & Tharp Show. Here you’ll learn about divorce, family law, tips on how to save your marriage if it’s in the middle of a crisis, and even from time to time, tips on how to take your marriage to the next level. If you want to learn more about us you can always check us out online at altantadivorceteam.com.
Leh Meriwether: Well, Todd, kind of excited today. This is a first.
Todd Orston: Yeah. You didn’t flub the intro.
Leh Meriwether: I haven’t flubbed the intro before. No, but this is a first. We have never had four people in the studio at the same time, excluding our producer.
Todd Orston: It is new. You’re right.
Leh Meriwether: So you’re going to have to behave yourself.
Todd Orston: I doubt that’ll happen.
Leh Meriwether: Today’s another one of those days where we’re going to branch out a little bit beyond family law. But what’s lovely about family law or very interesting, makes our jobs challenging often is that family law goes beyond just the context of the family law statutes. We have to deal with bankruptcy law and juvenile law and criminal law. Sometimes we need to deal with bankruptcy law and, oddly enough, this is … Last week we touched on tax law and what to do in tax situations. We had Jason Wiggam come on and he talked about how to deal with different situations that might come up in the divorce that involves the IRS or the Georgia Department of Revenue.
Leh Meriwether: Well, today we’re going to do something similar to that, different area of the law today, bankruptcy law. As we often do, or we do every time because, well, we don’t want to sound stupid, so we bring the smart people on so we sound smarter than we really are. Today we have brought on actually two bankruptcy lawyers because this area is actually it can sound boring sometimes, but it’s quite fascinating.
Todd Orston: It comes up so often in what we do. It’s one of those things like you were saying, in terms of its relation to divorces and family law matters, I mean I can’t even count in my career how many times issues of bankruptcy have come up. Either they came up before the client came to me and there are stays that have to be dealt with and all the underlying bankruptcy issues that have to be dealt with, or even during a divorce where we have to, unfortunately, you dive in. You realize that there are some really deep financial issues. Unfortunately bankruptcy is probably the best option and you have to deal with it at that point.
Leh Meriwether: Right. So today we’ve got Michael Rethinger with us and Will Geer. They’re actually from two different law firms, but sometimes they work together. Michael Rethinger, he’s been in consumer bankruptcy law in Georgia since 2002. He’s been helping Georgia residents protect their property and stop harassment by creditors. His reputation is for being able to handle the most complex personal bankruptcy matters and is well-established in the courts. His expertise is often requested by other debtor attorneys when they run into tough legal issues. You could read more about Michael online at atlantabankruptcylawinfo.com.
Leh Meriwether: Now, Will Geer, you can read about him at wiggamgeer.com. That’s W-I-G-G-A-M-G-E-E-R dot com. He’s a founding partner of Wiggam & Geer. You met his partner last week, if you tuned in last week, who talked about tax law. He helps clients navigate the perils of bankruptcy court, including individuals and businesses seeking relief from their overwhelming financial problems and creditors looking to protect their rights. Will files Chapter 7, 13, and Chapter 11 cases all throughout Georgia, and has consulted with clients across the nation on bankruptcy issues.
Leh Meriwether: Will and Michael, thank you so much for coming on the show.
Mike Rethinger: Thanks so much for having us.
Will Geer: Thanks for having us.
Leh Meriwether: I’m pretty impressed that you were able to talk at the same time.
Will Geer: We try to time it like that.
Leh Meriwether: That was good.
Todd Orston: It’s like synchronized swimming. That was beautiful.
Leh Meriwether: Well, we probably should get started because … Talk about the terms because in bankruptcy laws there’s a lot of terms and there’s chapters. People hear a Chapter 7, Chapter 11. What are all those chapters? Maybe we should start by just breaking down what different types of bankruptcy law there are, what sort of bankruptcy filings there are, because there’s four I’m aware of. Are you starting, Will?
Will Geer: Yeah. I’ll start. I don’t have a problem with that. I mean most people when they think of bankruptcy, they’re thinking of Chapter 7 generally or Chapter 13. But starting with Chapter 7, it’s often referred to as a complete liquidation or a straight bankruptcy. It’s really one of those things where you’re going to be in and out in about four months. You get in, you discharge all your debts. It means you wipe them out. So all of your debts, with the exception of a few, are going to be wiped out in that Chapter 7 bankruptcy.
Leh Meriwether: And we’ll talk about some of those you can’t wipe out later on, right?
Will Geer: That is correct. Exactly.
Todd Orston: Just very quickly, I know we’re going to go into detail, but is there any repayment of any of the amounts that are due on a 7?
Will Geer: Not in a 7, no.
Leh Meriwether: When you out of a 7, with the exception of the exceptions, you are free and clear of all the debts that the court discharges?
Will Geer: That’s a fair assessment, Leh. Yeah, that’s fine. There’s some exceptions.
Leh Meriwether: Well, correct if I’m wrong. That’s why you’re here.
Will Geer: Yeah. There’s a lot of exceptions on what can’t be discharged, but most people’s debts are totally wiped. Now, one of the common things that people don’t realize about Chapter 7 is you’re not going to lose all your property. A lot of people, they ask us this question, me and Mike like, “Hey, if I file a Chapter 7 am I going to lose everything I own? Are people going to come through my house and take my stuff?” That almost never happens because you can, after you hire a competent attorney, they will tell you how to protect that property because you can take certain exemptions in that property that your creditors can’t touch.
Will Geer: Most cases are actually no-asset cases, meaning that no one can touch your property, even in a Chapter 7.
Leh Meriwether: What other chapters are there out there?
Will Geer: Well, there’s Chapter 11, there’s Chapter 12, and there’s Chapter 13. Chapter 11 is something I specialize in a lot. It’s really designed for businesses, but individuals can file, and most of the time if you’re filing a Chapter 11, it’s probably because you have a lot of debt, way too much to file a 13. I’ll let Mike talk about the 13 a little bit more. But in a Chapter 11, for an individual, you’re looking at someone who’s probably got a really high income who a Chapter 13’s not going to be the best for and you need a lot of flexibility with what you want to do.
Todd Orston: Is there a liability threshold to get into Chapter 11 for an individual?
Mike Rethinger: Yeah. There’s a liability threshold for both secured and unsecured debts. You can have a certain amount of unsecured debt. It’s around 400,000. It changes every year based on inflation. And then there’s also a secured debt limit which is around $1.2 million. So if you’re above those, then you’re going to be forced into a Chapter 11 which is a more complex proceeding, as opposed to a Chapter 13, which has been simplified from a Chapter 11 so that an individual or a consumer would be able to more easily navigate that.
Leh Meriwether: So a Chapter 11, that’s a reorganization?
Will Geer: Yes. Yes.
Leh Meriwether: Chapter 7 applies to businesses and individuals?
Will Geer: You can file a Chapter 7 for a business. It has limited usefulness because a business does not receive a discharge. You may be asking, “What’s a discharge?” Well, that’s the legal term for wiping out your debt. So when you file for a business in a Chapter 7, you’re really just having a third party, which is a trustee. They’re just going to take a look at everything. They’re going to see if there’s anything of value and they’re going to sell it for the benefit of your creditors. But there is limited usefulness to that, that kind of goes beyond the scope of what we’re talking about today. But it can file a Chapter 7 if it needs to.
Leh Meriwether: Going back to one of Todd’s favorite examples, if he’s got his million-dollar mansion, his yacht, and his Lambo-
Todd Orston: I can’t believe you referred to it as Lambo. It’s embarrassing. It really is.
Leh Meriwether: His Lamborghini. There’s a threshold as far as the court is going to make you sell certain things if you have a certain level of assets.
Will Geer: Hey, look. If a guy comes in there with a Lamborghini and a million-dollar home, a Chapter 7 most of the time is not going to be right for him or her unless they have a lot of debt on all that property, because a trustee can only sell the equity in the property that you have, because they just step into your shoes in the Chapter 7 basically and they can only sell what you have. So if there’s a secured creditor on it, like a mortgage company, like Todd’s million-dollar home has a $990,000 mortgage on it, no one’s selling it because there’s no equity in it.
Todd Orston: Right. Or the equity you might get from it isn’t even going to make a dent on the tax debt, then it’s not even worth the effort for the IRS to step in or someone to step in to … or the, not talking about taxes now but-
Mike Rethinger: Unsecured creditors.
Todd Orston: Right.
Mike Rethinger: Credit cards and-
Todd Orston: And sell it because they’re not really going to make a dent towards paying down that debt.
Will Geer: No. And then the trustee is really the person who you’re referring to right there. They’re tasked with administering the estate, as we call it. So when you file bankruptcy, a bankruptcy estate is created where that trustee theoretically owns … The estate owns all of your property at this point, but that’s what I was getting into earlier with Mike is that you can protect most of your property from it. Unless there’s significant equity in your property, no one’s going to be interested in it.
Leh Meriwether: Mike, we’re almost out of time for this segment. But real quick, what is Chapter 12?
Mike Rethinger: Chapter 12 is going to be for family farmers or fishermen. So we don’t see a lot of that in metro Atlanta area. We are, with some of the weather events that we’ve had in south Georgia, we’re probably going to see some more Chapter 12s in the Southern District, but there’s not a huge amount of Chapter 12s filed in the Northern District of Georgia.
Todd Orston: By fishermen, we’re not talking about I like to go to the lake and go fishing a little bit so I get to do a 12.
Mike Rethinger: That’s correct.
Todd Orston: You’re talking like commercial fishing companies.
Mike Rethinger: Correct. Where you’re making your living from farming or fishing.
Todd Orston: Got it.
Leh Meriwether: Up next, we’re going to talk about Chapter 13, where we’re going to explain what that is. I’m going to toss out some divorce hypotheticals and let our experts here give us the information we need.
Leh Meriwether: Welcome everyone. I’m Leh Meriwether and with me is Todd Orston. Todd and I are partners at the law firm of Meriwether & Tharp and you’re listening to The Meriwether & Tharp Show. If you want to read more about us, you can always check us out online at atlantadivorceteam.com. Well, today you actually don’t want to hear very much from us because we’ve brought two bankruptcy experts into the room, into the studio with us to talk about bankruptcy law. We’re going to focus on bankruptcy law because, as Todd pointed out in the last segment, every year we run into cases where one or both parties are filing for bankruptcy and it interrupts the family law or divorce case.
Leh Meriwether: It is a very real situation that exists for people. It’s not just people that don’t make very much money. Sometimes you see very high-income earners. I’ve seen situations with two doctors that have lots of assets but unfortunately they’re so heavily leveraged that now they’re looking at bankruptcy because they’re moving from one home to two homes and they doubled their expenses. We were talking about in the last segment, we broke down what Chapter 7, Chapter 11, and Chapter 12 are. But if someone was filing 7, and we talked about how there are limits to how much stuff you can keep. There are certain exemptions, but there’s limits to that. There’s no way Todd’s going to be able to keep his Lamborghini. He’s probably going to have to sell it.
Todd Orston: It’s a Toyota version. It’s a limited edition. Kia Lamborghini.
Leh Meriwether: Michael, I got a question for you. If someone, if they’re on that cusp of whether I should do a 7 or not, what other options do they have?
Mike Rethinger: What a lot of people are looking at in a Chapter 13 is either trying to protect an asset that may have equity. So say Todd has $50,000 of equity in his Lamborghini and the 7 trustee wants to sell that, what Todd could do is instead of filing a Chapter 7, he could file a Chapter 13 and make payments over a period of time in order to protect that equity. The other thing that a 13 is good at allowing you to do is if you are behind on your home or your car and the mortgage company wants to foreclose on you or the auto lender wants to repossess your vehicle, you can file a Chapter 13 in order to protect those and make payments over a period of time in order to be able to protect those assets of yours.
Leh Meriwether: Here’s one of my hypotheticals. I’m in the middle of a divorce and my spouse suddenly files for bankruptcy. What do I do?
Mike Rethinger: Well, it’s going to depend on what type of bankruptcy gets filed.
Leh Meriwether: Let’s assuming they’re a fisherman. No, just kidding.
Todd Orston: The most common of examples, right.
Leh Meriwether: No, probably safe to say we’re not going to cover Chapter 12 because it’s so limited. Let’s talk about the most frequent ones, which would be … What are the most frequent, 7 and a 13, followed by 11?
Mike Rethinger: Yeah. Probably the most frequent bankruptcy is a Chapter 7 bankruptcy. What’s going to happen in a Chapter 7 bankruptcy, because you’re in it for such a short period of time, usually between four to six months, you’re going to want to talk to your family law attorney and have them reach out to a bankruptcy attorney and take a look at the case and see if it makes sense what’s going on in the underlying family law case. Is there a need for immediate child support? Do we need to get right back into state court in order to be able to pursue something?
Mike Rethinger: Or cost-wise, does it make sense? Do we just wait and let that go, let that person get rid of those debts? Maybe then they can afford to pay a higher amount of child support.
Leh Meriwether: So what I’m hearing is do a cost benefit analysis. For instance, if they have very little debt and if the person can get by without child support for a few months, that it may be worth not spending the money going into bankruptcy court because … Well, quickly explain what happens when someone files for bankruptcy? Will, you want to cover that? What happens when someone files for bankruptcy and you’re in the middle of the litigation in your divorce case? What happens to your divorce?
Will Geer: Well, your divorce keeps on going on fortunately. The bankruptcy stays so there’s an automatic stay that happens when you file a bankruptcy. It prevents creditors from foreclosing on your home or repossessing your car or suing you during that process. But fortunately when you do file a bankruptcy, it doesn’t stop your divorce proceeding from going forward. That’s one thing that you need to realize.
Will Geer: In a Chapter 7, I mean, and we’re kind of jumping ahead a little bit. But there’s certain types of claims that you really need to be aware of. But look, a child support obligation, it’s never going to be wiped out. I don’t care what type of bankruptcy you have. If you have child support arrearages, that’s not getting wiped out. That’s one of the good things about that. In Chapter 13, like Mike said, you really need to get in contact with your attorney in a Chapter 13 because it’s a far more complex area of law when it comes to bankruptcy and family law for a lot of different reasons, one of which is property settlements. You guys do that all the time. You can actually get rid of a property settlement in a Chapter 13.
Will Geer: So if that’s an issue, then you definitely need to get in touch with your attorney so you can contact a bankruptcy attorney to see what you need to do to navigate that.
Todd Orston: Well, going to the example, we were talking about, okay, our client, his spouse files for bankruptcy. What are the things that they should do? One of the things, am I correct, one of the things might be that maybe it makes sense for that other spouse to file bankruptcy as well if there’s joint debts and things of that nature that-
Mike Rethinger: It could. One of the things that I see a lot is that because debt can be such a stressful issue, it can be causing a big stressor on the marriage. If you take away that stressor by filing a bankruptcy together, which saves you money rather than filing individually, you’re not paying two filing fees. You’re not paying two attorney fees. Maybe that gives you a little bit of stress relief and maybe you guys can figure out how to take care of some of the other issues that are going on in the marriage once you relieve that stressor. So a lot of times-
Leh Meriwether: I think that’s an important point. I apologize for interrupting you.
Mike Rethinger: No.
Leh Meriwether: But I think people don’t realize that because they don’t deal with lawyers that often. If you have a married couple coming to you, you, a single lawyer can represent both of them without violating any ethical laws?
Mike Rethinger: That’s correct. But if they’re in the process of getting divorced though, at that point then it would be a conflict because-
Leh Meriwether: Because they have competing interests at that point.
Mike Rethinger: That is correct.
Leh Meriwether: That’s what doubles the attorney cost because now they’re adversarial. I just wanted to make sure that … Because I think we talked about this on the telephone a while back. That was a great point I hadn’t thought of was if people are struggling, call either of you, depending on the nature of what’s going on. But call a bankruptcy attorney first because that will save you money ultimately.
Mike Rethinger: Absolutely. If there are debt issues and you know you’re having debt issues and those are causing marital issues, it might make sense to try and take care of one problem at a time. See if you relieve the debt issues, if that relieves some of the stress on the marriage. It also is one less thing that you’re going to fight over in a divorce proceeding is who’s going to pay for what.
Leh Meriwether: So there’s one of those tips for marriages in crisis.
Todd Orston: We’re always thinking about ways to try and avoid the divorce. Sometimes it’s not avoidable. But you’re 100% correct. I mean, one of the biggest stressors that we see is finances. If a bankruptcy can help, meaning help not just on the financial side, but help parties to get past the stressor and hopefully get back to a happy relationship and avoid a divorce, we’re all for it.
Leh Meriwether: I actually have seen judges, and Will, to your point, the divorce should go forward, but where Superior Court judges, they suddenly will get fearful, “Hey, I don’t want to bring up the ire of a federal bankruptcy judge. Why don’t you go to bankruptcy court and get leave to continue the divorce case?” How onerous is that process to get leave to keep going forward in the divorce?
Will Geer: Yeah, Leh, it’s not that bad actually. We would generally file, depending on what you’re trying to do. But if it’s, for instance, let’s say you’re in a Chapter 13 and you maybe need to hold the other party in contempt. That happens a lot. More often than not, you’re going to want to go to your bankruptcy attorney and have them file what’s called a motion for relief from stay. So they’re just going to ask the court for relief so you can go hash out your family law issues in Superior Court.
Will Geer: There’s one thing I can let you take away from this. The bankruptcy court does not want to litigate family law issues. They’re like, “Stay out. No, we don’t want to deal with it. So you go hash out all your family law there. You got a claim. You got money you want to talk about? Yeah. We can do that here. But you want to talk about what actually happened, who did what to who? No. You do that in family law court.” We do that very often.
Todd Orston: Okay.
Leh Meriwether: All right. I’m going to change it and we may have to finish in the next segment. But the next one, what happens if my ex-spouse files for bankruptcy after the divorce is granted and what should I do?
Mike Rethinger: As Will mentioned earlier, if the debt that we’re talking about is a domestic support obligation, child support or alimony, a Chapter 7 is not going to discharge that debt. There’s probably not much you’re going to need to do.
Leh Meriwether: Okay. Does that give him an excuse to stop paying those two debts?
Mike Rethinger: It does not.
Leh Meriwether: Okay.
Mike Rethinger: A lot of times you may want to, if there’s some question as to whether it’s domestic support obligation or a property settlement, then you may want to go ahead and consult with someone to talk about whether or not there’s an argument that could be made or not made about that. Because as you mentioned earlier, Superior Court judges, bankruptcy’s a very niche area of law. Superior Court judges are not experts in bankruptcy law. If they get an order from a bankruptcy court saying it’s okay for them to do their job, they’re a lot happier.
Leh Meriwether: Yeah. The one time I was in bankruptcy court years ago, oh, that was no fun. Let me tell you. I wish I’d known you all back then because … I won. I won the hearing, but man, I-
Todd Orston: He cried for three days straight afterwards. It’s kind of sad.
Will Geer: You got scolded?
Leh Meriwether: I did. I got scolded. even though I followed the law. The judge just wasn’t happen with me. She actually wanted me to get relief from stay even though the statute said I didn’t have to. But lesson learned. Another lesson is we’re out of time for this segment, but don’t go away because we’re going to talk about the types of claims you could see in bankruptcy.
Leh Meriwether: Welcome everyone. I’m Leh Meriwether. With me is Todd Orston. Todd and I are partners at the law firm of Meriwether & Tharp, and you’re listening to The Meriwether and Tharp Show. If you want to read more about us, you can always check us out online at atlantadivorceteam.com. Well, today we are going beyond family law. We are talking about bankruptcy law, which actually touches on family law because often either in the middle of a divorce it happens or after a divorce. Someone thinks they can get out of paying something and so they file for bankruptcy.
Leh Meriwether: We left off talking about what happens if my ex-spouse files for bankruptcy after the divorce is granted. I’m going to give a more specific hypothetical. This hypothetical I’m going to give is, so same scenario, but let’s say there’s a credit card. In the divorce decree, it’s a joint credit card. So there’s settlement agreement, but the husband says, “Well, I’ll make payments on that credit card,” and then he files for bankruptcy. In the settlement agreement in the divorce decree, which is now a court order, it says, “He will indemnify her if he doesn’t pay the credit card.” So then he gets the bankruptcy discharge and then the credit card company starts chasing after her because it was joint debt. He says, “I don’t have to pay it because it was discharged.”
Mike Rethinger: The husband’s responsibility to the credit card issuer was discharged in his Chapter 7, however his responsibility under the divorce decree was not. So therefore that would not necessarily be a bankruptcy issue. That’s a contempt issue arising from the divorce decree.
Leh Meriwether: Okay. So he walks into court. Let’s say that person, they don’t have the money to hire a lawyer. They’re listening and their husband, or let’s say, a wife does it or ex-wife. They can go back to court to have the Superior Court judge enforce that and make him still pay the bill?
Todd Orston: Bottom line, it’s not a defense to say, “I bankrupted out of that debt.” If there’s an obligation pursuant to a divorce settlement agreement, they’re still on the hook per that agreement?”
Mike Rethinger: That’s correct.
Leh Meriwether: Well, that’s comforting news for a lot of people because I know that I have talked to people that have said that, “Well, he’s bankrupted on it, now I got to pay it.” I have to explain to them that’s not the law. I’m glad we had this opportunity to talk about that because people need to know that because a lot of times they just, “Okay. It got discharged. I’m stuck with it.”
Todd Orston: Well, and also the problem that we run into is, and we explain very clearly all the time is that just because we have an agreement that requires one party to be responsible for a joint debt doesn’t mean that that credit card company may not knock on your door. They may come after you.
Mike Rethinger: Well, that’s absolutely right. The credit card company doesn’t know anything about the divorce decree. That’s not the contract they signed. They signed a contract with both of you that you were jointly and separately liable.
Todd Orston: That’s right. That’s right. Okay.
Will Geer: Another important thing to remember is that if it’s a Chapter 7, even if it’s not a domestic support obligation, even if it is a property settlement, it’s still not dischargeable. If they file a Chapter 7, you’re generally okay. Now, even with the credit card and, Mike, maybe you can weigh in on this. We can have a little discussion about that. But in a Chapter 13, it is possible that a hold-harmless could be even seen as a property settlement.
Mike Rethinger: That’s correct. So now we’re getting into the differences between 7 and a Chapter 13. A Chapter 13, what a debtor, someone who’s filed a Chapter 13, is able to do is reorganize debt. One of the debts that they can reorganize is a property settlement arising from a divorce as opposed to an alimony or a child support where you’re basically providing for your ex-partner and the children. A property settlement would be more along the lines of we’ve got this asset and we’re going to make payments over a period of time to pay the other partner for the fact that you no longer have exclusive use of that asset.
Leh Meriwether: If they did that with a credit card or something, have you ever heard of a situation where the credit card came … There’s an order now saying this person has this much time to pay off the credit card. Have you ever heard of the credit card company then suddenly pursuing the other person?
Mike Rethinger: Right. What happens in a Chapter 13 is you also get the benefit of what’s called a co-debtor stay. So if you’re jointly and separately liable on a credit card and your ex-husband files a Chapter 13 bankruptcy, that credit card company can’t contact you either.
Leh Meriwether: Wow. Okay. That’s good to know.
Mike Rethinger: What would happen in that situation is the credit card company, once you’ve finished the Chapter 13 and get a discharge or if the case gets dismissed, the credit card company or, more likely, a debt collector at that point who bought the right to collect that debt is going to come after you for whatever what’s not paid in that Chapter 13.
Will Geer: I’ll say most of the time, given the example you gave about the credit cards, most courts hold that those hold-harmless provisions like that are going to be domestic support obligations because the real question you want to ask is, is it in the nature of support? That’s the ultimate issue. Is it in the nature of support? If it is, I mean, you look at the disparity of earning power of the parties. You look at all those finances. I mean, I had a Chapter 13 once where an ex-wife came in with my client and tried to say that even though it was property settlement in the divorce decree, it was a $70,000 business. But he had to pay her back monthly over 70 months.
Will Geer: I actually had my judge at the time said that, “Well, it’s being paid monthly. It looks like she may need the money to survive, despite it saying property settlement.” He said, “No, that’s a DSO in my mind.” So titles don’t always matter either in the divorce decree.
Leh Meriwether: That’s a good point. It could be important to hire an attorney to come argue that to the judge, because now you know that the judge tends to think that way. So that’s another good reason why it’s important to hire a bankruptcy lawyer if you have this situation. I think that’s a good segue because one of the things I have questions on is, when should someone file a claim at bankruptcy? Is there a point where you just sort of, “I know that’s not dischargeable, I’m okay?” Or should you file something in bankruptcy court if you have a settlement agreement and the other party is filing a bankruptcy trying to get out of an obligation?
Mike Rethinger: Different answer depending on the type of bankruptcy. A Chapter 7, there’s really not a reason to file a proof of claim in a Chapter 7 unless a Chapter 7 trustee has determined that there’s an asset where he’s going to be able to make a distribution to creditors.
Leh Meriwether: Like Todd’s Lambo. Might want to sell it.
Todd Orston: Okay. All right.
Mike Rethinger: As opposed to a Chapter 13 where there are very strict deadlines by which point you have to file a claim. That timeframe is very short. It was recently shortened, and it’s basically two and a half months from the time the case gets filed until you have to file a claim. If you don’t file a claim timely you may be shut out depending on the type of claim.
Leh Meriwether: Wow.
Mike Rethinger: If you get notice of a Chapter 13 filing, then you want to take action fairly quickly because you want to … if there’s a debt that you’re owed, you want to make sure that you’re getting paid, because that’s what a Chapter 13 is. It’s a debt repayment.
Leh Meriwether: Will and Michael, do you y’all focus on different … I mean, I know there’s some overlap in what your practice area is, but one of you focuses on … You do business, Will, right?
Will Geer: Yeah. I do a lot of businesses and a lot of Chapter 11s for individuals. There are specific things like, look, Chapter 11 was designed for businesses in mind, though it can be extremely beneficial for individuals. There is no trustee overseeing you really. You are your own trustee, in a way. One of the biggest differences though is Chapter 13 can actually be better if you need to pay back arrears because in a Chapter 11, you actually have to pay back … If you have child support arrearage in a Chapter 11, you got to pay them all whenever that plan becomes effective in a lump sum.
Will Geer: If you got a guy who has, let’s say he has $100,000 in child support and alimony that he has arrearage on. If he goes to Mike and he files a Chapter 13, he can actually stretch a payment plan out over five years. He has to stay current, but he can pay back the arrearage over five years. You don’t get that same benefit in a Chapter 11. You have to pay it all right when the plan becomes effective, which could be a year away now. Don’t get me wrong. But still, you don’t get that payment plan advantage. That’s probably the biggest takeaway, the difference between an 11 and a 13. I don’t see a lot of people filing 11 though trying to get out of any kind of child support arrears or alimony. It’s just not very common.
Leh Meriwether: So they would most likely in that scenario, what we did a few minutes ago. They’d call you, Michael. Right?
Mike Rethinger: That’s right. With child support, the bankruptcy law is very clear that you’re going to have to remain current on the post-petition, that is, anything after filing you have to stay current on, otherwise you may not be able to successfully complete a bankruptcy. And then the child support arrearage is going to be one of the first debts that gets taken care of in a Chapter 13 plan. So a Chapter 13 can help fix that situation if you have had job loss, illness, something like that that’s caused you to fall behind on your child support and you need a chance to catch up.
Leh Meriwether: Let you ask you a quick question off that. How does the bankruptcy court know that the guy is, or the gal, is current on their support obligation if they filed the bankruptcy, but then they don’t … They’re like, “Well, I’m $50,000 in arrears. I need to repay that.” They file, but then they keep falling in arrears. How does the court find out about that?
Mike Rethinger: Well, A, the person who’s receiving the child support should probably have an attorney that’s representing them in the bankruptcy proceeding.
Leh Meriwether: That’s good to know.
Mike Rethinger: Because what’s going to happen is, is that a Chapter 13 can last for up to five years and if you are sitting on the fact that you’re not getting paid that money, nothing’s going to happen in the Chapter 13 basically until the end of the Chapter 13 when the Chapter 13 trustee has to submit something saying that basically we’ve checked and the child support is up-to-date. But if you’re 60 months into it, there’s no way to fix that at that point.
Leh Meriwether: Right. Okay. Well, that’s good to know, because some people don’t know that they need to call a bankruptcy attorney. They get overwhelmed. I think the best thing to do is to call a bankruptcy lawyer because y’all are going to be able to explain it in simple terms to help people get through that process so they don’t lose anything that they are entitled to.
Leh Meriwether: All right. Well, up next we’re going to talk about different types of claims that can be filed in bankruptcy court and continue to learn more about bankruptcy law.
Leh Meriwether: Welcome everyone. I’m Leh Meriwether and with me is Todd Orston. Todd and I are partners at the law firm of Meriwether & Tharp, and you’re listening to The Meriwether & Tharp Show. If you want to read more about us, you can always check us out online at atlantadivorceteam.com. Before I go any further, I do want to say we have in-studio with us, Will Geer and Michael Rethinger. If you did not get a chance to or you’re listening to this and you want to get their contact information, you can always go to divorceteamradio.com and get a transcript of this show so that you’ll be able to look this up and find links to them.
Leh Meriwether: But real quick before we continue, what would be the best way for someone to reach you, Will?
Will Geer: Well, you can just give us a call at 404-233-9800 or visit our website at www.wiggumgeer.com. It’s a mouthful.
Leh Meriwether: Okay. How about you, Michael?
Mike Rethinger: Telephone number is 770-922-0066. You can always reach me by email, email@example.com. Website’s also a mouthful, www.atlantabankruptcylawinfo.com.
Leh Meriwether: What people are going to remember is mouthful.com.
Mike Rethinger: Probably don’t want to Google that.
Leh Meriwether: No. Probably not.
Todd Orston: That’s a totally different show.
Leh Meriwether: That’s a totally different show. Oh boy. Okay. We had talked about claims. I know there’s what’s called adversarial proceedings in bankruptcy and that sort of thing. Explain to the listeners what claims you might file in bankruptcy. I know we may have touched on it earlier, but what sort of adversarial claims you might see in a bankruptcy action?
Will Geer: Sure, Leh. If you’re in a 13 you would want to file a claim for a domestic support obligation of any arrearage because that’s going to ensure that that’s going to be paid out over those five years. To Mike’s point earlier about the Chapter 13 trustee, they’re actually going to make sure that that’s going to be part of the plan and that it’s going to be paid. So they’re a little bit in that ex-spouse’s corner, so to speak, to make sure that the debtor’s complying with the rules.
Will Geer: As far as adversary proceedings go, one of the most common things you’re going to litigate, and really most of the time it’s the only thing you’re going to litigate. I don’t want to say only, but it’s going to be whether or not the debt you have is a domestic support obligation or whether it’s not. So to your point again, I just actually just had a recent case where we talked about attorney’s fees. All right. Let’s say that the divorce decree says that attorney’s fees, the ex-spouse has to pay them. Well, is that domestic support obligation or is it not? Well, if it’s just attorney’s fees for being stubbornly litigious, under that code section, under that 91415-
Todd Orston: 91514.
Mike Rethinger: 1514.
Will Geer: Yeah. See, I’m putting you off with the test already. That’s not, but if it’s going to be under the other code section in Georgia law, 13-
Todd Orston: 1962.
Will Geer: There you go. And then that one is going to be based on the financial disparity of the parties. There’s actually a decision by one of our judges that said, “If that’s it, if that’s in that order, then my analysis is it stopped. That’s a domestic support obligation. It’s in the nature of support.” I will say, most of the time when you’re looking at attorney’s fees, a lot of times the other party’s attorney’s fees are going to be non-dischargeable. But sometimes they’re not, so you really need to look at that. The debtor’s attorney can make a very good argument that they’re not, so that’s something you need to be careful of.
Mike Rethinger: It’s definitely something. Same sort of thing, talk to your family law attorney. Have them reach out to a colleague who practices regularly in the bankruptcy court in order to make a determination as to whether or not you need to take some action.
Leh Meriwether: So in particular, call y’all.
Todd Orston: I was about to say, “Do you know any people that we can call?”
Leh Meriwether: Now, do y’all practice all around the state of Georgia?
Will Geer: Oh yeah. Yeah. I mean I’ll practice anywhere in Georgia generally.
Leh Meriwether: Okay. With tax law, you can help someone in any state. Are you limited? I know it’s federal courts and it’s federal bankruptcy law, which doesn’t really … I guess there are exemptions that can change from state to state. But are you allowed to practice in any other state in bankruptcy law?
Mike Rethinger: Sort of. You can get admitted in another district pro hac vice, which is not a huge issue. But generally speaking, you want to be in front of judges that you know. If you have a bankruptcy issue in California, you’re going to want to hire a bankruptcy attorney in California who knows that specific set of judges.
Leh Meriwether: Because I guess are the judges in bankruptcy court, they’re given a certain level of discretion about deciding is this a domestic support obligation or is it a property division?
Will Geer: They have to follow the law, but they do have some discretion. That’s a good question, Leh, because I mean really it is like … When you appeal them, it’s very expensive to appeal and bankruptcy court is a court of limited money. So a lot of times that decision is a final decision. I mean, most people don’t have it, but I mean look. We actually are allowed, because of the federal nature of the law, to practice pretty much anywhere. We can get admitted, like Mike said, pro hac.
Will Geer: I just did a case in California actually, where I was suing someone, not related to family laws, for some guy committed fraud against my client. We got that debt held non-dischargeable. But, to Mike’s point, I did have to hire local counsel at $400 an hour to help me navigate the local rules because, again, she knew what to do. She knew it, but the client was in Atlanta, here so it made sense for me to still represent them in California.
Leh Meriwether: When I first got my bar license, this was a long time ago. I was in court and it was for a speeding ticket. I don’t know. It’s been a long time since I had a speeding ticket, but this was 20-something years ago. I’m in court and I knew all the law. I actually ghost-wrote a book on how to beat speeding tickets. So I’m in there. The police officer doesn’t show up with his required paperwork to have the radar admitted, and so I introduced a Supreme Court of Georgia case that said, “Hey. This can’t be admitted into evidence.” And the judge said, “Well, son. You’re just going to have to appeal me because I’m letting it in.”
Todd Orston: It’s good to be the judge, as they say.
Leh Meriwether: But to your point that it’s good to know the judge and understand the judge because he knew there was no way I was going to appeal that.
Todd Orston: I’ve heard in bankruptcy court that it’s very important to have that good trust built with a judge just because you’re trying to deal with the trustee. There’s all this, not red tape, I don’t know how else to put it, but they could ease. They could grease the wheels in the system. Not that you’re going to maybe get favoritism, but you’ll get stuff done.
Mike Rethinger: Again, bankruptcy’s a very niche area of law, so it’s a fairly collegial bar. Most of us get along pretty well together. But it’s very difficult to practice bankruptcy and dabble in it. You’re either there or you’re not. Because it’s kind of one of the reasons why you want to make sure that you have someone who’s familiar with the court system.
Leh Meriwether: I learned that lesson. Like I said, still won.
Todd Orston: And clearly still you’re scarred from that-
Leh Meriwether: I am, actually. I will never forget it. It actually wasn’t my case. I was covering one of the other partners in the firm. Something came up. There was a family emergency, a death in the family and I said, “Bye. I’ll take care of all your hearings.” So that was one of them. I’ll never forget it.
Todd Orston: Clearly not.
Leh Meriwether: I have a war story. Do y’all have any cool war stories?
Will Geer: Man, you already spent me out, Leh. I already gave my war stories. I mean, I will say when you were talking earlier though, the judges in our district are incredibly fair. They’re all great and they know the law like the back of their hands. I’ve had plenty of people come in who have never done bankruptcy before and the judges give them the utmost respect. So I wouldn’t necessarily, you may have had one bad experience and I actually know a lot about-
Leh Meriwether: I will say the current judges up there have never given me grief.
Todd Orston: There you go.
Leh Meriwether: By the way, I’m going to forward this show to the judges.
Mike Rethinger: Yes, absolutely. All of our judges are, like I said, it’s a very collegial atmosphere. Everybody has a lot of respect. We’ve got a couple of new judges who are really doing a great job of learning a little bit more about the consumer side of bankruptcy. A lot of them come from more of a corporate background, but they’re all putting in really good work as far as I’m concerned. The Chapter 13 trustees, Chapter 7 trustees, everybody’s there to try and make sure everybody gets a fair shake. That’s what’s important.
Mike Rethinger: The bankruptcy court’s a court of equity, which means that we’re trying to create a fair outcome for everybody that’s out there.
Leh Meriwether: They’re trying to think of not just the creditors, but I mean the people that owe, the debtors, but also the creditors too.
Will Geer: Oh yeah, oh yeah. It’s a benefit for creditors as well because it prevents that race to the courthouse that people talk about. One creditor gets a judgment over the others and gets all the assets before. This is a way to get a fair distribution to everyone, especially in a 13 or an 11, but I mean I just realized that Mike and I are now, we’re old enough to have known a lot of the judges before they actually became judges. It’s interesting.
Mike Rethinger: It is.
Leh Meriwether: Let me ask this question before we finish up. What are some of the consequences of not fully disclosing everything that needs to be fully disclosed? Because especially for people who are going to be doing this on their own, I know you, as attorneys, have an obligation to basically do your due diligence and make sure that everything you present to the court is accurate. But what bad things can happen?
Mike Rethinger: Those are some of the worst horror stories are people who come into bankruptcy court and file their own Chapter 7s and don’t realize that Grandma left a house to them and they’ve got a one-fourth ownership interest with their brothers. That house is worth a bunch of money. Now, all of a sudden, you’ve just lost the family home because that’s going to get liquidated because there is nothing owed on it. That may be an error of omission. But if you go into the bankruptcy court and you purposely just don’t disclose something, that’s a federal crime. That’s going to be a big problem.
Will Geer: Yeah. We got some criminal law friends who can help you out, if you commit perjury. That’s what that is.
Todd Orston: You know the biggest horror story? We’re done. We’re out of time.
Leh Meriwether: We’re done. We’re out of time. We don’t have enough time.
Leh Meriwether: Hey everyone. Thanks so much for listening. If you want to learn more about Will and Michael, check out divorceteamradio.com.
Mike Rethinger: Thanks so much for having us.