Bankruptcy is not a car wash
Posted by Robert Weed / in After Bankruptcy / 4 comments
I don’t take the “car wash” approach to bankruptcy.
Car wash approach? What’s that?
At the car wash, you drive up, pay them, they run your car through, and you drive off. The car wash doesn’t care where you have been, or where you’re going. They don’t care what happens once the car wash is over.
As your lawyer, I do care about those things. I care about where you’ve been and where you are going–that can have a lot of impact on when and how I file your papers. And I certainly care what happens to you afterward: if somebody tries to take away from your the new start, I sue.
Let me give you an example. Late last month a couple came to see me at the recommendation of a friend. They had had the “car wash” experience when they filed bankruptcy in 2009 with another lawyer.
About six months later, they got contacted on a yellow pages account, from a small business they had. The yellow pages said they would sue their business; and sue them personally, as guarantors.
They didn’t even bother to talk to the lawyer who had done their bankruptcy–he had told them (after the personal bankruptcy was over), that they still needed a business bankruptcy, too, and he didn’t do business bankruptcies.
Not knowing where to turn, they decided to try to work something out with the yellow pages company. They weren’t able to work anything out and the yellow pages eventually got a judgment against them and their business. Then a friend steered them to me.
We spent an hour together. I told them they did not need to file a business bankruptcy. A chapter 7 for their business would do exactly nothing for them. A corporation cannot get a Chapter 7 bankruptcy discharge. They did need to set up a new business; and working with their business advisers, select the best time to start doing their business in through the new business. (I gave them my blog on that.)
Second, it was an outrageous violation of the law for the yellow pages to sue them personally! Business debt or not–their personal liability was cleaned up by their personal bankruptcy!
How does this end up? Instead of paying the yellow pages on this debt, the yellow pages will have to pay them–for violating their after bankruptcy rights.
But they would never have found that out–not from a lawyer who handled their case like a car wash.
Hi Mr. Weed,
I have a question. My Modification for my first mortgage was approved on Dec. 2010. I haven’t payed my second mortgage since 2008 because of the bad economy. Around April 2011, I applied for bankrupcy, Chapter 7, I included all my debts including my second mortgage. Then on July 19, 2011, I received the discharge. Everything was going ok until today, October 5. 2011, I received a letter from the second mortgage asking me to sign a Dodd-Frank Certification if i want to keep the property. My question is, do I have to sign it since they said that my participation with the modication program for my first mortgage, I may be eligible to release my second mortgage. If I don’t sign the document, what would happen?
My second mortgage was $51,000 and I live in California.
Thank you for your time and please help me.
I can’t think of any reason not to sign it. Once your bankruptcy is discharged, there is no way you can lose the protection that bankruptcy gave you on that second mortgage. You can move out any time and they cannot come after you for any money. The bankruptcy still protects you. But right now they are still attached to your house–so that you have no equity and probably never will. If you sign their form, they might release your second mortgage. That would mean they aren’t attached to your house and maybe someday you would have some equity. Can’t hurt; can might help.
I filed bankruptcy here in Ohio and it was discharged Dec 29. I am finding that I’m being turned down for credit for things that happened before my bankruptcy
I get a denial letter and it does not even say bankruptcy.
How can I reestablish credit if I can’t get any? What was bankruptcy protecting me from if companies still judge me for what happened before?
You should get a couple pre-approved card offers. You need to start there and build back to good credit–in a few years you’ll find people eager to approve you, but you need to build up.
Bankruptcy causes an immediate improvement in your credit score–but if it was horrible, you only get back to bad. It’s up to you to build back to good.
You should look at your credit reports and make sure everyone is showing bankruptcy, and nobody is still reporting you as late. https://robertweed.com/2013/06/29/after-bankruptcy-credit-reports-why-you-and-your-lawyer-need-to-follow-up/