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Roger
Roger, Attorney
Category: Bankruptcy Law
Satisfied Customers: 26141
Experience:  BV Rated by Martindale-Hubbell; SuperLawyer rating by West
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I filed for Chapter 13 bankruptcy in Oct 2005. My laywer told

Customer Question

I filed for Chapter 13 bankruptcy in Oct 2005. My laywer told me my wife did not have to file, although some credit cards were in her name. My wife had one court date my attorney told me she didn't have to attend. We were not notified of a second date. He is now telling me she is liable for the credit cards becasue she didn't attend the hearing. The bankruptcy was the result of a failed residential rental property business (I had some houses I rented out). Some creditors are coming after my wife for credit cards that were in her name. My attorney told me they could go after her, but not me. She is a housewife and has no income. We are renting because our home went into foreclouser. What are my options? John
Submitted: 5 years ago.
Category: Bankruptcy Law
Expert:  Roger replied 5 years ago.
Your wife is only responsible for her debts and you are only responsible for yours. Marriage does not make one liable to the other's creditors. However, any debts/accounts that are joint accounts are different. Either of you are liable for those debts. Even if your liability on a joint debt is discharged with the bankruptcy, the creditor still has the ability to attempt to collect from her.

If a judgment was rendered against her, the creditor can garnish wages, bank accounts, etc. However, if she has no income, and has no other property or money to pay the debt, the judgment is really not worth the paper it is written on. She's what people call "judgment proof". Besides causing her credit problems, there's no huge consequence to this. The botXXXXX XXXXXne is that if she has no money to pay - the debt won't get paid.

Customer: replied 5 years ago.

We had a second mortgage on our home. It is included in the bankruptcy that is to discharged in October of this year. Because she didn't file, it sounds like she is still liable. Is that correct?

 

Also, what about my attorney telling me she didn't have to file and not responding to my concerns?

Expert:  Roger replied 5 years ago.
If she signed the second mortgage as well, she will be liable even if you are discharged - unless your attorney has worked out some kind of agreement with the lender. You'd have to check with him on that.

I'm not sure why your attorney advised that she didn't need to file if you had several joint debts.
Customer: replied 5 years ago.

 

If he failes to respond my questions, what recourse do I have?

 

I'm signing of now and will be back on in the morning. I am satisfied with what I you have told me so far, but still don't know how to handle my attorney's failure to respond to me.

Expert:  Roger replied 5 years ago.
The best course of action is to file a complaint with the state bar association.
Roger, Attorney
Category: Bankruptcy Law
Satisfied Customers: 26141
Experience: BV Rated by Martindale-Hubbell; SuperLawyer rating by West
Roger and other Bankruptcy Law Specialists are ready to help you
Customer: replied 5 years ago.
Thank you!!
Customer: replied 5 years ago.
Thank you!!
Expert:  JoeLawyer replied 5 years ago.
Hi Veryworried:

I agree with everything Adam told you. And, since I had a similar issue come up recently, I thought I would give you one more piece of information that may be helpful to you that maybe no one else has considered yet since it is a somewhat rarely used option...

In Chapter 13, 11 U.S.C. 1301 (which you can view by clicking here) provides a "co-debtor stay," which means creditors cannot pursue someone who is jointly liable on a debt with the debtor in bankruptcy, even if that jointly-liable person did not also file bankruptcy, as long as the debtor pays the claim in full in the Chapter 13 bankruptcy case.

Now, depending on the amounts owed on the joint cards, this may not be feasible for you, but it may be worth going to your attorney and asking if you can amend your Chapter 13 Plan to pay the joint debts in full through the Plan. If you do this, then the co-debtor stay in 11 U.S.C. 1301 will likely protect your wife and you can get the lawsuits/collections off her back.

For example, say she is jointly liable on $10,000 worth of credit cards. Plus interest over 20 months, paying those cards may actually require $13,000 to be paid. So, if you have say, 21 months left in your Chapter 13 Plan, then if you increase your monthly payments by around $619, then you could pay them in full and the co-debtor stay would protect them from coming after her. I used 21 months in the hypothetical example since you may be able to modify your Plan to go another 21 months or so since the Plan can be extended all the way to 60 months, and if you filed in October 2005, then you could potentially go to October 2010, which is about 21 months away if my math is right.

Also, if you are already paying a large amount to unsecured creditors through your Plan, then the increase may not have to be 100% of the joint debt amount. For example, if your Chapter 13 Plan is already paying unsecured creditors (which includes credit cards, even the joint ones), say, 30% of their claims, then when applying that to my example above, that means the joint credit cards are already getting $3,000 of the $10,000 they are owed, so your Plan payments may only have to increase by around $453 for the remaining 21 months to pay them in full and protect your wife.

Of course this will vary depending on the joint amount of credit card debt, what percentage of unsecured debt your Plan is already paying, and how many months you have left in your Plan, but you get the idea. I'm not saying the increase in your Plan payment is necessarily feasible to pay, but I wanted you to know it is an option in case the amounts are something you can work with.

Furthermore, if the credit card company sued her without first obtaining relief from the co-debtor stay in Bankruptcy Court, then they may be illegally pursuing her. Credit card companies have to first request relief from the co-debtor stay in Bankruptcy Court before they can pursue collections, so you may want to confirm with your attorney that they did that first, or you may be able to get their collection attempts stopped, at least temporarily. I say temporarily because if they didn't, then they will once you raise the issue, but it would at least potentially buy you some time to modify the plan and get them off her back!

One potential glitch with this plan is that the Bankruptcy Code says you have to treat all general unsecured creditors the same in your Plan. So, some trustees object if the debtor says they want to pay some credit cards in full (to protect a co-debtor) while only paying a small percentage to others. But, some courts allow debtors to do this because they believe the justification of protecting a co-debtor is sufficient to permit treating creditors differently. I don't know what your jurisdiction's take on this is.

Now, while this may work for credit cards if the amounts are smallish, it is not likely feasible for you to do it with the mortgages which I assume you surrendered and are discharging since you are now renting. So, if your wife is also liable on the mortgages, then like Adam said, this may be a big problem since they can still probably come after her even if you discharge it in your Chapter 13 unless your attorney made some other arrangements, so you should clear this up with your attorney. It might be the case that your wife will need to file her own Chapter 7 or something if all this debt is going to fall back on her. Like Adam pointed out, she may be judgment proof since she does not have income to garnish, but lawsuits against her may attach to your real estate as judgment liens, so she may need to do something if all these issues are not straightened out during your Chapter 13.

What seems like a bad idea is to modify your Plan and increase payments to get the credit cards off her back, then she winds up filing Chapter 7 anyway because the mortgage lenders are after her, thus making your increase in payments a waste since she dicharged the debts anyway.

Maybe it is the case in Michigan that mortgage lenders cannot pursue a deficiency balance after a home is sold in foreclosure and so this is a non-issue, but I would clear that up with your attorney. But, I think mortgage lenders are allowed to pursue deficiency balances in Michigan according to here.

I suggest setting up a face-to-face appointment with your lawyer to go over these issues so you can sleep at night!

My two cents.

LEGAL NOTICE: I am only licensed to practice law in certain state(s) and I cannot give legal advice to someone who does not reside in a state in which I am licensed, nor shall anything I say in the above answer or elsewhere on this site be deemed legal advice, even to someone who resides in a state in which I am licensed. Fees I receive for answering questions are paid for information, not for legal advice. This forum is designed to provide general information only, and information herein is not warranted to be correct or applicable in any way since laws may have been misinterpreted herein, since laws change from time to time, and since the impact of those laws on any particular situation varies. The information presented in this site shall not be construed to be formal legal advice nor the formation of an attorney-client relationship. Persons accessing this response are encouraged to seek independent legal counsel in their jurisdiction for guidance regarding their individual circumstances. Do not take any action or inaction based on information presented herein since it is informational and may not be accurate or applicable to you; it merely attempts to give you a basis of knowledge to help you formulate questions to ask a legal or other professional in a face-to-face meeting in your jurisdiction. Joseph Ross does not hold himself out to be a specialist or expert in any area, regardless of assertions made by any third party, and any implication of being an expert or specialist herein is made in error. I hope the information presented above is useful to you. Answer above is (c) Joseph Ross. All rights reserved.
Customer: replied 5 years ago.
Hi, I'm back with additional concerns on this case. My wife and I have a appointment to meet with the attorney on Friday. I did some research and found he was disciplined last June, suspension & fine, for misrepresentation and failure to communicate, along with some other things. In August he was disciplined for driving while visibly impaired. I don't trust him for the way he handled my case and his record backs that feeling up. I don't know if I should continue with him, because he has all the records or seek another attorney. How did I originally find him? He was recommended by a Michigan law group who I found on line. From the first he told me all would be fine, even when we discussed my wife filling. She was scheduled for a court date, Chapter 7. She couldn't make it due to an illness and he said it was ok. No second date was scheduled, however he says there was. Yesterday, he confirmed she can be held liable for our 2nd mortgage, 200K+, that was included in my bankruptcy. He never told me that before. My wife does not have a job and hasn't worked for 30 years. Her only income is my income. What if we ignore possible creditors? ... What can they do to make life difficult? We want to buy a house after my case is discharged. How will this affect that possibility? I know I have asked a lot of questions and thank you in advance for your help! John
Expert:  Roger replied 5 years ago.
Ignoring creditors is like ignoring the fact that you've got cancer - it will kill you! You can't ignore them, you must address any claims and deal with them. If your wife has no income or assets, they probably can't get anything from her, but it could prevent the both of you from purchasing anything on credit. Also, they'll call you 100 times a week about the bills.

Purchasing a house would be tricky with this bankruptcy and an outstanding $200K debt showing up on her credit with no income.

I think your best course of action is to see about her filing bankruptcy as well. That's the only way the both of you can make a fresh start.
Customer: replied 5 years ago.
Is ChapterXXXXXwe she should go? Also, do you think we should get a new attorney, or stick with our present one? I don't know how the Chapter 7 laws have changed. Does she have to go on a payment plan? Without an income? John
Expert:  Roger replied 5 years ago.
<p>If you're not happy with the current attorney, my suggestion would be to find another one. Also, a Chapter 7 is a complete liqidation - she won't have a payment plan. If there any debts she wants to keep, she can reaffirm them. </p><p> </p><p>She would not be eligible for a Chapter 13 because she has no income. </p>
Customer: replied 5 years ago.
Are you in Michigan? If not, can you recommend an attorney, or a way to find a good one?
Expert:  Roger replied 5 years ago.
I'm not in Michigan, but you can visit www.martindale.com to find a bankruptcy attorney by location. These are the best attorneys as voted on by their peers.
Roger, Attorney
Category: Bankruptcy Law
Satisfied Customers: 26141
Experience: BV Rated by Martindale-Hubbell; SuperLawyer rating by West
Roger and other Bankruptcy Law Specialists are ready to help you
Customer: replied 5 years ago.
Thank you very much!
Expert:  Roger replied 5 years ago.
No problem and good luck!

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