I’ll Lose My House and Other Bankruptcy Myths

Texas Debt Lawyer David Shuster Debunks Common Falsehoods

Video Transcript:

David Shuster:

It's just things that happen to good people that they're unable to weather without utilizing the Bankruptcy Code that is here to protect you, it's here to keep you from being stressed out beyond belief.

Rob Rosenthal:

So how much do you really know about bankruptcy? Well, that's what we're gonna find out today because we're gonna bust some myths as we ask the lawyer on today's episode. Hi again, everybody, I'm Rob Rosenthal with AskTheLawyers.com. My guest is Dallas attorney David Shuster. I wanna remind you right at the top that if you'd like to ask David questions about your specific situation, just head over to AskTheLawyers.com, click the button up in the upper right hand corner of the screen that says, Ask a lawyer, and you can do that right there. David, thanks all making some time to bust some myths with us today.

David Shuster:

Yeah, thanks Rob. Happy to be here. 

Rob Rosenthal:

I'm gonna toss out the myth about bankruptcy, you tell me, obviously, it's a myth, you tell me why it's wrong and what the truth is. So let's start with number one: if you file for Chapter 7 or Chapter 13, you're gonna have to give up your house and other personal property. What's the story?

David Shuster:

It's not the case. Especially if you're in Texas, that's where I'm at, I'm in Texas. And the Texas exemptions allow you to keep your home homestead, even if it's paid in full, and so... Yeah, I'll just say this. Obviously, when you file bankruptcy, you need the advice of attorney and an attorney, and obviously you may own property that might not fit in the exemptions, that you might lose, yes. However, in the vast majority of cases filed, and in the vast majority of cases that I file, there's no property lost. The most common example is if somebody had a little too much money in the bank, maybe everyone's paycheck just went in at the exact time of the filing, and those things can almost always be avoided by a proper conversation with the attorney beforehand, so... No, no, you're not gonna lose your house, you're not gonna lose your personal property, by and large, it's business as usual in the household, just without the debt. The debt goes away. Everything else stays the same.

Rob Rosenthal:

Alright, let's talk about myth number two: you're not allowed to file for bankruptcy more than once.

David Shuster:

That's not true. If you actually get a Chapter 7 discharge, which is the best get-out-of debt plan available, it essentially wipes out all of your debt, zeros it out on the credit report, takes only 90 days. If you do get that, if you file for Chapter 7 discharge and get out of debt, wipe everything out in 90 days, then you're gonna get new debt to help rebuild your credit, you're gonna need to utilize the lines of credit in the future to build up a credit score again. God forbid you get into some business venture and you find yourself needing bankruptcy again, You cannot pursue another Chapter 7 discharge for another eight years, and so there are time limitations. Like I said, hopefully, you go through bankruptcy, you never wanna think that you're gonna need the other one, but if something does happen, yeah, then you got eight years to file the Chapter 7. There's no limitation on the Chapter 13, you can get discharges in Chapter 13, You can file from 7 to 13. Six years later, you can get a discharge in a Chapter 13, and so you can definitely file again. Contact an attorney if you filed before.

That's the first thing you need to let them know. We always ask everybody when we talk to them, "Have you ever filed before?" Even if it was 10 years ago, we'd like to know about it, the trustee, we usually ask you, but no, you can do it repeatedly and yeah, if you're behind on your house or something, after you've done a Chapter 7, you can do a Chapter 13 to force the creditor to allow you to get caught up. Chapter 13 is an available remedy to stop creditors from re-possessing your car, taking your home, and so you wanna definitely allow yourself the ability to do that.

Rob Rosenthal:

Great, next up on our list. You gotta take complicated credit counseling tests in order to file for bankruptcy.

David Shuster:

That credit counseling course is mostly a waste of time. It is a full-on rubber stamp, you could do it when you're half awake, and even though you're not supposed to multi-task, you can do that while you're multi-tasking. Now, I'm not trying to diminish the fact that there might be good little nuggets of advice that a person has never heard before in a certain counseling session, there are places that are better than others, but by and large, it's a rubber stamp. It was written into the law, largely by creditor lobbyists wanting everyone to get counseling, however, it's just a rubber stamp, you click through it, do what it says, do a little chat bot at the end, maybe you have a conversation, but... Yeah, no, it's a waste of time. Cost you 10-15 bucks. You'll be done with it in 30-45 minutes. 

Rob Rosenthal:

Alright, next up on our bankruptcy myths, you file for bankruptcy. So you have to expect you're gonna go to court and have adversarial hearings in bankruptcy court in order to file.

David Shuster:

That is one of the many good things about filing bankruptcy is it's a predictable process, like I said, figure out what property you can keep and you can't keep. If you have to sell something before you file to make sure you don't lose it, you can. The court proceeding for bankruptcy is also equally predictable, okay, it's gonna be right at 30 to 40 days after you file, one hearing, and Is it adversarial, meaning is there an opponent interrogating you? No, there may be a creditor that shows up and asks a couple of questions, that's very rare, it's typically held by a trustee whose sole purpose is just to make sure that under oath, you swear that you listed everything correctly, and to ask you a couple of questions about your situation. It's not adversarial. The whole thing usually takes about five to 10 minutes total. Currently, these hearings in the jurisdictions in which I file in Dallas, Fort Worth Metroplex, and any kind of contiguous county around here in Texas, they're by phone. You could do them at home in your pajamas, you just sit there, and you're on mute and they call your name, you unmute, and then I'm on the phone as well, you can also come to my office, by the way, and we can do this together, so you're not nervous about it, but it's strictly by telephone for the Chapter 7s. Chapter 13s use video conferencing, Zoom, or in other jurisdictions use different ones, but yeah, Chapter 7's hearing, they're strictly by phone, which makes it way more appealing and it makes way more sense than driving downtown going through a metal detector, waiting in line, taking a day off work, potentially getting into a car accident, just so someone can look at a driver's license photo from eight years ago, that doesn't even look like you to verify your identity, so yeah, it's by phone, and they have the measures in place where we verify it's the person on the phone, and I think the system's working pretty good that way.

Rob Rosenthal:

Great. Last of our bankruptcy myths David, people who file for bankruptcy have always just been financially irresponsible, and that's why they've gotten in that situation. What's your experience?

David Shuster:

I'll tell you, Rob I didn't know anything about bankruptcy until I started practicing in it quite honestly, this was 15 some odd years ago. But yeah, there's an assumption about that, I'm not saying I had that assumption, but I just... I didn't have any, I didn't know what to think. And that was one of the things that struck me the most when I got to practicing bankruptcy laws. The clients come in and am I gonna be representing your responsible people that constantly are doing the wrong thing. Is that my clientele? And it's absolutely untrue. I would say the vast majority of my clients, most any of them, rare exceptions, of course, though, but they're just good honest people Rob where things have happened, okay. You got a husband and wife both working, supporting a household, and then you have a medical problem where one can't work and they have medical expenses are up and they're half of the income, or they get a divorce, maybe at some point.. any kind of thing that will happen in life and you don't have a cushion, if you do have a cushion to savings, they can get you through a couple of few months, great, but it's just things that happen to good people that they're unable to weather without utilizing the Bankruptcy Code that is here to protect you, it's here to keep you from being stressed out beyond belief, to keep you from being sucked dry by leaching creditors for the rest of your life. Leeching creditors, what I mean by that, Rob is a debt that is probably three years old and is unsecured, and they file a lawsuit adding attorney's fees and they're just going for the jugular to try to make that three-year-old unsecured debt permanent in the form of a judgment, that's what I mean by that term when I say that, because it's not the way society is meant to work where you're having to go back and pay a judgment on a debt from years past that now is accumulating interest and is gonna be permanently there when you have... You're trying to have a family and save money again for the future rather than being held down by this old bad debt, so no, the law is here to serve you, and that's why it's here and it's here so people can move forward, so they're not just kind of weighed down by this old bad debt that's keeping you up every night.

Rob Rosenthal:

It's great myth busting David, and I appreciate you taking some time to help us out. I think you helped a lot of people today. 

I hope so, Rob, thanks. Thank you very much for your time. 

Rob Rosenthal:

And that's gonna do it for this episode of Ask the Lawyer. My guess has been Dallas attorney, David Shuster. I wanna remind you that if you'd like to ask David questions about your specific situation, it's easy to do. Head over to AskTheLawyers.com, click the button at the top of the page that says, Ask a Lawyer. And it doesn't cost anything to ask a question. Thanks for watching, everybody. I'm Rob Rosenthal with Ask the Lawyers.

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