Chapter 7: Time To File?
David Siegel: When would somebody want to file a Chapter 7 bankruptcy as opposed to not filing at all? What is the reason why someone would file a Chapter 7?
Jesse Barrientes: I guess there are a lot of different reasons. One would be for example if somebody filed a lawsuit against you and what somebody gets a judgment, and I think we talked about that at one of our programs. We have gone through the small claims process and some other processes. But once a creditor obtains a judgment, than they do what they call supplementary proceedings that include the possibility of attaching of lean to your wages, wage garnishment or of attaching to your bank account or any other assets that you may have. So if I’m struggling check to check to try to pay my family and I know here, boy, I’m going to get hit, it’s going to be at least 15% take it out of my paycheck, I’m not going to be able to make ends meet here. And that would be a good idea, that would be a reason why people would file a Chapter 7. But I’m not going to do it for $1500, okay, if that’s the extent of my debt. There has to be some kind of threshold. What that is, it’s up to each individual but I think perhaps that it might be a little bit more than that.
David Siegel: Why not allow that creditor to take that 15% on an ongoing basis and not file?
Jesse Barrientes: Well, you are allowed to discharge that debt and generally, people have a lot of other debt as well. In most of the time, they are lined up. The way that it works with the garnishments is the first one through the door, that’s one until that’s satisfied and then the next one is right behind that stacked up. And a lot of times that’s what happens. So you can never really, really get ahead.
David Siegel: So it’s not just one creditor, there’s usually a series of creditors, there might be past due medical bills, past-due utilities, maybe a foreclosure or repossession in their history.
Jesse Barrientes: Exactly, or it could also be a car accident because if for example you didn’t have insurance and of course, it’s the law and everybody needs to have at least liability insurance, then your license can be suspended. And then, now you are in a real spot because how do you get to work? Obviously people in that position in my experience still drive when they’re not supposed to. But their license gets suspended and then the only way to take care of it is to satisfy the judgment or to file a bankruptcy.
