Ed Boltz on-air interview with Michael Cohen
On September 11, 2014, attorney Ed Boltz from the law offices of John T Orcutt was interviewed by Michael Cohen of WILS 1320 for his Michigan radio program, Capital City Recap, to discuss bankruptcy topics and student loans. This was a great Q&A on bankruptcy in general, so we're presenting the transcript in full here for your enjoyment. Click here to listen along while you read.
As a bankruptcy attorney, do people come to you when they're about to file?
They come to me when they're about to file or when they're thinking about it or trying to figure out what their options are. Sometimes it takes a while for people to come to the conclusion or for their situation to deteriorate enough where they want to file or they come to figure out where the road ahead might lie.
So are you like half attorney, half accountant? How does your job work?
Yeah. Maybe a third attorney, a third accountant and a third psychologist or counselor because my work involves a lot of hand-holding and getting people through what's a really hard time in their life.
Do you look at their finances and really try to evaluate what they should try to do next?
As a bankruptcy attorney, that's really what we do a lot of. The bankruptcy a lot of time is just one step in the solution for people to get out of debt. Whether it's that they need help with their mortgage beyond what bankruptcy can provide or help with the various student loan programs that they can get enrolled in and things like that.
When they're in your office, is it pretty much certain that they're going to end up filing for bankruptcy? How often are they avoiding it?
Of the people that come to my office, probably a third end up filing a bankruptcy pretty shortly after they see me within a month or two or three. A third think about it and come back maybe in the next year or so if things don't get better. And a third finds bankruptcy either doesn't have the solutions that they need or we're able to give them advice that keeps them from having to file bankruptcy.
What do you mean the solutions aren't there for some? When you file bankruptcy, basically you are able to unload almost all of your debt aren't you?
You're able to unload some of your debts. You're not able to unload student loans. You're not able to get rid of some of your taxes and you're able, through a bankruptcy, to get caught up on your mortgage if you're behind. But, for some folks, they don't have the income necessary to catch up on the mortgage for the house they want to keep so it might not be feasible at that point. They need to get more income.
There're really two kinds of bankruptcy. Chapter 7 bankruptcy, where people are able to eliminate or discharge a lot of their debt and get a fresh start right away. And a Chapter 13 is a reorganization, which is where they have a plan where they're repaying debt for some things that they want to keep, like their house or their car that they're behind on. And there are other debts like credit cards and medical bills that are eliminated.
With a 13, do you end up better off in terms of your credit?
That's a really hard question to answer, partly because the credit scoring is kind of a black box that isn't revealed.
Is there an advantage to 13 versus 7 or vice-versa?
There are advantages and disadvantages of both. Chapter 7 wipes out all your unsecured debts and very quickly so you're able to get started again. But it's little more detrimental on your credit score perhaps, where a Chapter 13 shows that you tried to do the best you could with your creditors. You may not pay them back any more than you did with a Chapter 7, but it was at least a commitment of time, but you are under a court supervision as long as five years.
4% of seniors have federal student loan debt up from 1% six years ago. What do seniors do? Is there any help they can get at that point?
Yes, there are many things that can be done in terms of bankruptcy and non-bankruptcy. A bankruptcy won't necessarily eliminate your student loan debt. It might. Student loans can be eliminated in bankruptcy. The standard you have to meet is to show that it's an undue hardship to repay those student loans, which doesn't sound that bad off the bat. But the way the courts have interpreted it is a pretty high standard. One court has called it a “certainty of hopelessness,” which is a pretty bleak situation to be in.
So do most seniors qualify for that undue hardship?
No, unfortunately not. But the bankruptcy can nonetheless hold the collection of those student loans off for as long as five years so that you're not repaying those for a period of time. It's basically a court mandated forbearance. It gives you breathing room to try and find a better solution.
If you're 70, are you really going to pay off the student loans?
Well, one of the solutions, without sounding too morbid, is that you're just going to ride out it out until you get sort of the ultimate discharge that comes for everybody, right? You just can't pay it now and you can't ever pay it. There just isn't a better solution that the federal government has where they say, “You're 70, you're never going to pay this and we're not going to force you into bankruptcy for all of your golden years.” Unfortunately, that's not what the federal government does now.
Once you have somebody filing for bankruptcy, how often is it that the rest of their financial life is better moving forward versus them being in the same spot in the future?
A lot of times it depends on what happens to the person after bankruptcy. Bankruptcy eliminates some debts and gets other debts under control. If you still continue to live beyond your means or you have further catastrophic events like medical problems, which, unfortunately, happens to seniors more than younger people, or job loss or divorce, your financial situation can get worse. But I think, generally, bankruptcy helps people who are in a bad situation improve that, including being able to get a fresh start and even improve their credit score.
If you file for bankruptcy, when's the next time you can do it again?
It depends on the kind of bankruptcy you file. You can only file Chapter 7 every eight years, but you can file Chapter 13 every two years.
So do you have people come back every couple of years to do it again?
You know, I've been a bankruptcy attorney for 16 years so there are some people I've seen a couple of times and other people who, when I run into them in the grocery store, they come up and say “Thank you,” and I haven't seen them for 10 years, and they tell me how much better off they are now.
When you're a bankruptcy attorney, how financially conservative do you become yourself?
Pretty financially conservative. You learn what insurance you should and shouldn't have, what credit cards you should and shouldn't have and how to make sure you're not getting over-extended. It's one of the things you learn and then you become really strict with your kids about it, too.
You said 'psychologist' – what is the psychology? Briefly, give me the psychology of bankruptcy.
I think we see people that are at a really low point. We often see couples and you can see when they first come in the tension between them because finances are one of the big causes of marital strain.
Do they take responsibility? Do they say they screwed up?
Well, some do. Sometimes it's their responsibility to take and sometimes they'll tell you the story and it's just a story of bad luck. Other times, with married couples, it's one blaming the other and really they're probably both at fault, and you have to coach them through and help them see where their problems arose and what they can do to fix those. A lot of times, the bankruptcy can relieve a lot of those stresses so that when I see them a month or two later when they go to court, they're holding hands and things are even much better at that point.
No kidding. That's all it takes? Well at least there's some light at the end of that tunnel. How long does it take? Walk me through the process.
Typically, for a bankruptcy, somebody walks in my office, and we generally (and I think this is true for most bankruptcy attorneys I know across the country) can get a case filed within a month and, in an emergency, even faster than that.
And it all gets resolved how quickly after that?
Well, for a Chapter 7 bankruptcy, a case that goes without any problems – which is 99% of them – they file it and they go to court about a month later. No judge in that court hearing. It's just a room full of folks like them for the most part. Then four or five months after that, it's done, so six months maybe, they've got their discharge and they're done with the bankruptcy.
That's not bad at all. Ed Boltz, bankruptcy attorney. He's also the President of the National Association of Consumer Bankruptcy Attorneys. Ed, thank you.
You're very welcome.
If you're struggling with your finances and need a financial fresh start, contact the law offices of John T Orcutt for a free consultation with Ed Boltz or one of our other North Carolina bankruptcy experts.