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Bankruptcy Lawyer Explains Chapter 7, Chapter 13 & Getting a Fresh Start
00:23:23
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- [00:04]
A
Kid comes back to do further repair on his computer. Turns out that he found 1807 Bitcoin on his computer. The kid who worked on the computer claims he's the custodian of the bitcoin and has refused to turn it over. My client is in a bankruptcy.
- [00:26]
B
Welcome back to How Much Can I Make? I'm Ravozeri. Today's guest, Sarah, says that since January 2024, he's never been busier. That tells you something about the moment we are in. Barry Levine is a Massachusetts bankruptcy attorney with 45 years of experience helping individuals and small business owners navigate financial collapse. His first job isn't paperwork. It's calming the panic. Then he guides his clients step by step through the legal process towards a discharge. Barry knows the system in and out, so let's turn to him and talk about what financial collapse actually looks like and what recovery truly involves. Well, first of all, Barry, thank you so much for coming on the show.
- [01:15]
A
Glad to be here.
- [01:17]
B
I have a few questions. So why don't we start with you telling me, when did you become a lawyer and why did you choose bankruptcy law?
- [01:25]
A
Hey, I, I've been practicing law for over 45 years now. I had always wanted to be a lawyer growing up. My uncles were lawyers. But how I got into bankruptcy is when I was in, in law school. I wound up working for a guy, well, like a law clerk for a guy who had one of the biggest debtors practices in Massachusetts. And every creditor's attorney hated his guts. And I learned a lot because he started writing books. And I had the privilege of running his practice without getting any of the benefits. I ultimately walked out and went out on my own in 1986, and I've been practicing by myself since then.
- [02:10]
B
I'm very curious. What are the signs, the emotional or psychological signs of somebody that's in trouble and is going to need bankruptcy?
- [02:20]
A
Well, you know, the, the, the typical one is the person who becomes the ostrich. You know, they start getting all this nasty mail from creditors and this and calls and they stick their head into the sand and they figure it's going to go away. What people need to sit down and do is take a look at how much money they're paying their creditors as opposed to the important things like food, car payments, you know, things that you need people, when I explain to them that when you get down to it, you're an indentured and slavery went out in this country at least in 1860, and it suddenly dawns on them that, you know, they have $3,000 a month in income, and 2,500 is going out to pay creditors.
- [03:05]
B
So at that point, they usually decide to declare bankruptcy.
- [03:09]
A
No, it takes a while because, you know, there's so many things. Now, I'm a very nice guy, but they don't want to talk to a bankruptcy attorney. They'd rather do other things. So the best I find that they tried, which is a total waste of time, is the debt settlement companies. What they do, they hook these people into. Now instead of paying their creditors, they're paying the debt settlement company a monthly fee. And maybe the debt settlement company settles cases and maybe they don't. But the thing is, if you go to a debt settlement company and you have like 25 or 30 thousand dollars worth of debt and they managed to settle five grand, what have they done for you?
- [03:48]
B
But usually with debt settlement, what do they do? Like, how many cents per dollar they
- [03:55]
A
negotiate with each creditor.
- [03:57]
B
Okay.
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A
And the thing about debt settlement is that if they do settle something, you get a forgiveness of debt, a 1099, which can result in what the CPAs call a taxable event. Whereas you file the bankruptcy, it's discharged by operation of law, life goes on.
- [04:17]
B
What if you owe money to the irs?
- [04:21]
A
Well, if it's income taxes and it's more than three years since you filed your tax returns with or without a check, it may be dischargeable.
- [04:32]
B
How do you make sure when somebody go bankrupt and has no money that you will get paid?
- [04:38]
A
It's like some of the cartoons I have hanging on the wall here that says, I'm thinking about filing bankruptcy. Well, that's expensive. Well, you know, the bankruptcy courts don't let us be creditors of our own debtors. And what I do is, you know, it's not really no money. I mean, listen, in a perfect world, when I quote them the fee for the chapter seven, they'll say, barry, who do I make the checkout? But I'm an inveterate cynic and I'm from Brooklyn, if you can't tell from my accent. There is no such thing as a perfect world. So how we generally do it, because what is aggravating for debtors is the creditors nudging them all the time. You know, calling them, sending letters and this, that, and the other thing, once we've been retained, all that stuff starts getting directed to me.
- [05:26]
B
Oh.
- [05:26]
A
And I deal with it until we file the case. And generally, I mean, listen, people who file bankruptcy, if they had money, they wouldn't be filing bankruptcy. You know, usually we Ask for a small payment down and then the balance, we let them pay over six months without fees or interest or anything. But in the meantime, and for lack of a better word, we're jerking around their creditors until we file. You know, most of the credit card debt is incurred by people just making ends meet or having to pay medical bills that are not covered by insurance.
- [05:58]
B
Do you see more cases now that the economy is bad?
- [06:01]
A
I tell you something, since my assistant Kathy has pointed out Since January of 2024, we've been the busiest we've been ever.
- [06:12]
B
Wow.
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A
And I've been filing bankruptcies. You know, there was a time if some young kid came to me, you know, stunk with $10,000 worth of debt, I'd say, hey, you know, you don't want to file bankruptcy. It's, you know, think about it. But now the. My debtors run the gamut from in their early 20s, just starting out to people in their 80s, you know, to me, if you're that age, you know, God willing, you're al living well. But on the other hand, you're going to live until the creditors get something from you. But you can't say that to them. You know, you'll probably die before you pay. So what bankruptcy does for so many people is it gives them peace of mind.
- [06:52]
B
Walk me through the process of going bankrupt. What is the process?
- [06:57]
A
Well, I mean, if you retain us, you'd meet with my. When we file a bankruptcy on your behalf, we complete what are called schedules and statements of affairs.
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B
Okay?
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A
The schedules are a list of your assets and liabilities and your income and expenses. And the statement of affairs is how much money you've made in the three calendar last three calendar years. Have you been sued? Do you have a safe deposit box? Are you involved in a business? Nothing particularly intrusive. What we need from the debtor is their income and expenses. And then before they can file a case, while we prepare the schedules, we pull their credit report so we get the updated info on that. They have to take a credit counseling course that they take online that is
- [07:40]
B
given by the state.
- [07:41]
A
Well, no, somebody's cousin got the contract. I have no idea. But you have to take it in every state. It's been around for over 20 years now. It's easy. It takes an hour. Most people finish it in 25 minutes. They used to make you wait until the hour elapsed, but now they let you go to the next part right away. They'll ask you some questions, they'll take your check online, They'll Send us the certificate. At that point in time, you'll have met with my assistant, have gone over everything we need for the bankruptcy. We'll have sent you copies of the schedules and statements of affairs to review. If everything's copacetic, you'll come in the next day or the day after, sign everything, we upload it to the bankruptcy court. And then what happens is the court schedules, what's called the Section 341 meeting. If I filed your case today, your 341 meeting would probably be the beginning of April.
- [08:31]
B
Okay?
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A
It takes place by zoom. You'd actually be sitting behind me. We'd be looking at my monitor on the monitor, or other debtors and their attorneys and your chapter seven trustee. And then when you're done with the 341 meeting, there's a second course they have to take. This one takes two hours. You take it with the same people, same thing. When you're done, they send us the certificate, we upload it to the bankruptcy court, and now you're primed to get your discharge. What happens is after the 341 meeting, the trustee will report the case as an assetless one. And having taken that second course, you'll get your discharge. And from beginning to end, four months
- [09:10]
B
from file, what do you charge? Is it a flat fee or is it a typical?
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A
I charge about $2,500 for my typical chapter 7. The filing fee is 338 and we pull a credit report which is 50, and for 13.
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B
For chapter 13,
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A
my. I usually my fee is double. I get 2,500 before the filing. And why should I be different than any of the other creditors? I get paid another $2,500 after the filing.
- [09:41]
B
What is the difference between Chapter 7 and Chapter 13?
- [09:45]
A
Chapter 7 is a straight liquidation. If you were going to File A Chapter 7 Today, four months from now, you would get your discharge and life would go on, basically. And 1313 is a wage earner plan. There are two reasons for 13s. One is income wise, you're over the limit. And to give you an example, you know, if you're a household of two in Massachusetts and you make almost $110,000 a year gross, you have to consider being a Chapter 13 candidate. What happens in a Chapter 13? You're tied into a five year payment plan to your credit. We go through your income and expenses and then our little program determines what your disposable income is and you pay that for five years. The other reason people file chapter 13s is you can you Know, nowadays people get in arrears on their mortgages, you know, two years, three years, and all this other stuff. And through a chapter 13, provided you keep your mortgage payments current, you can pay your mortgage arrears out over five years. And lots of people file because of that.
- [11:02]
B
So meanwhile, the people that are in the bankruptcy process, they cannot use credit cards. They cannot.
- [11:08]
A
Oh, you'd be surprised. You know, it's one of the reasons I keep Kafka's biography on my desk. When you're in a bankruptcy and, you know, a lot of people make a decent living once you get your discharge, creditors look at Chapter 7 debtors who've been discharged as decent credit risks, because a lot of them make, not hundreds of thousands, but they make decent livings and they can't file a bankruptcy again for eight years. So they're willing to give you a small line of credit. And if you make the payments, fine. If you don't, you'll never get another credit card.
- [11:44]
B
And how long the bankruptcy stays on your record?
- [11:48]
A
Bankruptcy stays on your record for 10 years. But it's not the end of the world because I encourage clients to try to develop new credit. Like, you know, if you have an existing car loan, well, I won't get into the technicalities of it, but if you reaffirm the debt, those payments will show up on your credit report going forward. If you have a house with a mortgage, if you reaffirm that debt, they'll show up on your credit report.
- [12:18]
B
So is that a way to repair your credit?
- [12:22]
A
Well, through bankruptcy, it gives people a fresh start. I mean, you know, you have to work at it. You know, you have to. You know, what I suggest, and now it's easier said than done, is to try to develop a relationship with a small bank, you know, a credit union or somebody who can look at you as an individual who lost a job, who, God forbid, had medical problems that weren't covered by insurance, and that's why you filed the bankruptcy. Not that you went to the Caribbean and spent six months there and had a great time and trying to discharge all the debt, that's more like the typical debtor nowadays. So you will find you will not necessarily get the best interest rate in the future for a few years. You know, the banks have A rates, B rates, C rates for 10 years, probably, right? No, no, no. You'll find that within a few years, it'll come down.
- [13:19]
B
Oh, what was the most interesting case you had?
- [13:22]
A
My most interesting case right now is some can tell you the whole story. He Was at a Hanukkah party back about 15, 16 years ago and he got loaded and he and his brother talked him into buying $60,000 worth of bitcoin. Oh, and he's, he's Jewish, but his wife isn't. She's a native born Greek lady. And she heard about him buying the bitcoin and before you can say sell it, the bitcoin was sold. The next year he was at another, you know, soft gan yot you. I like those donuts too. He was at a party and he bought more bitcoin. And a decade passed. And in the meantime, he had been the victim of an identity theft. Oh, he's an engineer and he was going into business with somebody and it never happened, but the somebody was going into business with. And evidently this guy using my client's computer traded in bitcoin. So after this whole thing ended, he has having problems with this laptop and he has some computer maven come in and work on it. And the kid says to him, have you ever dealt with bitcoin? And by this time, the hanukkah party was 15 years ago. He forgot. He has no idea. He said no. Kidd comes back to do further repair on his computer. Turns out that he found 1807 Bitcoin on his computer. The kid who worked on the computer claims he's the custodian of the bitcoin and has refused to turn it over. My client is in a bankruptcy and it's a very interesting case because you know, most debtors, when you consider their assets, their assets are worth nothing, what their liabilities are.
- [15:11]
B
Right.
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A
In his case, his bitcoin is worth about, I think today maybe $160 million.
- [15:17]
B
Oh my God.
- [15:19]
A
And on a good day, he has $5 million worth of debt. What the trustee is trying to do is sell all the bitcoin, including my clients, $175 million interest. It's going to be a movie. I don't know if I'm gonna play myself, but.
- [15:37]
B
So what was the result?
- [15:38]
A
It's still going on. Oh, right now there are people looking to buy the whole shmeea. People who just may buy the rights to it. And it's just, it's, it's been. You know what a fishlette crank is?
- [15:53]
B
No.
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A
You're Israeli. You don't really know Yiddish, right? Ongoing saga. Fishlet, the crank. A crank is an ailment. And that's what this has been going on with my poor client now for three years. I had another one where he was working here for the Commuter rail. He was an engineer or something. And he and all the other engineers decided to set up their own business. And while they were working for the train, they were doing all sorts of side jobs. And he got indicted right before the 341 meeting. And the interesting. And I've had a few where they've taken the fifth amendment, but we didn't even go forward because nobody wanted to get into the fifth Amendment. And having him even say something, and he's, I think, sitting in jail now, but.
- [16:42]
B
Oh, yeah, yeah, yeah. What's the biggest misconception people have about going bankrupt?
- [16:47]
A
The assumption that somebody comes to your house, somebody looks somebody, you know, And I shouldn't be so glib about it, but the bottom line is the creditors don't care. And what generally in a person's bankruptcy is. Your Chapter 7 trustee can maybe ask more questions. But they're all looking for money, assets. And when you get down to it, unless you have something, a Picasso in which you probably wouldn't be filing bankruptcy, I would even say years ago, I'd say a grand piano, but you can't even give those away now. Nobody wants them, you know, so most people go through a bankruptcy and don't lose anything.
- [17:28]
B
So looking for money, if you own a home and you have equity in your home, but you are filing for bankruptcy, can they take your home?
- [17:37]
A
Well, you know, the best example I can give in Massachusetts, Massachusetts, probably after Florida, has, in my opinion, I think, the best homestead protection. Now, when you record a homestead, like in Florida, you record a home. I don't even think you have to record it down there. It's automatic and it covers the full value of your house. Creditors can't touch it. In Massachusetts, it's a million dollars for one piece of real estate. That's your primary residence.
- [18:08]
B
So once people file and all the bankruptcy, they got the judgment and all of that, do you keep in touch with them? Do you have more work to do once the process is done?
- [18:19]
A
Well, I will say that over the decades, I filed bankruptcies for some people four times. What? Well, you know, the thing is, if a person is an entrepreneur or likes to go into business, you know, 90% of them fail, so, you know, they come back with something else and try again.
- [18:36]
B
So at what point do you think, if I have a business, a small business, and I'm in trouble, do I do something for the business or do I just go bankrupt?
- [18:47]
A
Well, it depends. You know, a lot of what, you know, going back to Covid, you know, the government largess was Terrific. They were giving money to all sorts of businesses that really, they had no business giving the money to. But that's the way the government works. And a lot of these businesses were able to get through Covid, but the businesses themselves were not meant to be. And what's been happening is they. I've been liquidating the businesses. And lots of people don't realize that SBA debt can be discharged in a personal bankruptcy. It's not like, oh, yeah, it's not like the irs. And what happens is we liquidate the business. Sometimes we may arrange it to set up a new business that keeps something going, but oftentimes now, they're not meant to be. But then we file a bankruptcy for the individual who saddled with all the personal guarantees to the SBA and all the other creditors, and it all goes away.
- [19:50]
B
Now, you said before about the guy that filed four times for bankruptcy. Is there a limit of time between bankruptcies that you can file or the.
- [20:00]
A
The. Every eight years? Well, it used to be six years, but now it's eight. Where they put a limit on it is in people who are, I would say, frequent filers of chapter 13.
- [20:13]
B
I want to turn a little bit. First of all, does it take any emotional toll on you working with people that are, like, freaking out constantly?
- [20:21]
A
No, because I'm very mellow guy. I'm like an old hippie.
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B
And you're used to it.
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A
I'm an old hippie who practices law. I have a collection of glass pipes on my desk. You know, I. We have a very good ability to assuage people's nerves because. Right. They get, you know, their heads are blowing off. But, you know, I ultimately get across that, you know, when you get down to it, it's only money. And it's not your health, it's not family, which. But it's only money. And the creditors, American Express, bank of America, all this other. They can well afford it. And you know, what adds insult to injury is, you know, people don't realize. They think when they get a notice that the debt has been charged off, that it no longer exists, they just forgave the debt. No, they don't. They sell it to somebody else. Oh, they're not going to collect it. It's uncollectible. But what they do is, you know, my clients, you know, that's for them, aggravating. Usually get it on a Saturday. They'll get letters from some creditor who purchased this portfolio of bad debt from bank of America. And according to this, you owe us ten Grand. They have no idea that the person went bankrupt. I send them a nice, very nice letter telling them to go take a walk. But that is one of the aggravating things, because it's a commodity. You know, I was just telling somebody before, I don't know if it still exists. There used to be a website that you could buy debt in any state at 10 cents on the dollar.
- [21:46]
B
Yeah, but they can be bad debt. But anyway, what's the most rewarding part of your job?
- [21:52]
A
Every time my client gets a discharge, I'm pleased. I mean, I've done what I'm supposed to do when they thank me, you know, I'm an inveterate cynic. But when they thank me, I feel good.
- [22:03]
B
Do you see yourself doing it for many more years?
- [22:06]
A
My lease here is up in another three years, and right now I'm actually enjoying it. You know, I'm doing a lot of guesting. I do my own podcast.
- [22:16]
B
What's your podcast about? Is about bankruptcy.
- [22:19]
A
Bankruptcy. If you look.
- [22:20]
B
What is the name of it?
- [22:22]
A
Bankruptcy under the Looking Glass. I wrote a book and my podcasts are all involved with. You can see me. I ran rant about debt settlement companies. I rant about everything. So check them out. You know, I'm really. My Kathy and I, and we. We actually just took on another person, Jody, who's helping us out. We have it down almost to a science. She does most of the work, so, you know.
- [22:48]
B
All right, well, Barry, thank you. That's very good to know. All this information, you never know. Hopefully I'll never need it. All right, take care.
- [22:59]
A
Take care.
- [22:59]
B
Bye bye. Well, I hope you never need a bankruptcy lawyer, truly. But if life throws something at you, I hope this conversation gave you clarity instead of fear. And if you do find yourself needing help, Barry's contact information is in the show notes as well as the link to his podcast. See you next week on how much can I make?