How Do I Make Myself “Look Better” To Qualify For Bankruptcy?

In bankruptcy consultations, we are often asked “What can I do to qualify for bankruptcy?” or the related question “Should I quit my job, get a divorce, incur more debt, etc. to be able to file bankruptcy?”

My first full year as a solo practitioner was 2005. The firm did well and I was able to make a good salary as a single guy with little debt and less responsibilities. I mentioned to my father, who is a CPA, that I was worried about the amount of taxes I would have to pay based on a salary that, at that time, was the most I had ever made at that point in my life. I could feel my father’s urge to reach through the phone and smack me upside the head. “Why would you want to make less money?” He asked, while grinding his teeth in frustration. “You’ll be able to pay the taxes if you’re making good money.” That lesson has stuck with me and applies to my clients also. We counsel them to avoid confusing the income issues in bankruptcy by trying to determine “how much do I have to make to qualify?” Our advice to clients is for them to make as much money as they can, and the bankruptcy and creditors will work out fine.

The answer to the latter question is a resounding “NO!” For a few different reasons:

Debtors and counsel have a duty of honesty to the bankruptcy court and trustee. Bankruptcy documents are signed under oath under penalty of perjury, so doing things like intentionally cutting hours, quitting, getting a divorce, etc., could open up a debtor to criminal liability for perjury, which is much worse than a bankruptcy.

Therefore, we advise clients to be an open book to the bankruptcy court and trustee; hide nothing. There will be obvious red flags that the court and trustee will see when a debtor cuts hours intentionally, quits their job, gets a divorce, etc.

For the debtor who wants to intentionally cut their hours or quit their job, why? Typically, we tell clients to make as much money as they can and it’s our job to use the data to advise on the possibility of bankruptcy versus another debt settlement option.

With the divorce question specifically, we are of the opinion that you don’t get married for money, so don’t get divorced for money either. Plus, in order to “sell” the trustee on the financial hardship because of the divorce the loving couple will now have to pick up an additional rent payment, utility bills, moving expenses, and other factors related to running two separate households.

Advising a client to incur more debt is specifically prohibited by the Bankruptcy Code, so as attorneys we are unable to ethically and legally provide that type of advice.

Sometimes, we get the related “how much debt do I need to have to be able to file bankruptcy?”

The answer is easy – there is no threshold amount of debt necessary to file bankruptcy. In our opinion, the debtor need only have more debt than he or she can afford to repay. For example, $10,000 of debt to someone who makes $100,000 per year is manageable, but devastating to someone who makes $40,000 a year, and not even on the radar to someone who makes $1,000,000 per year.

For more information on Chapter 7 or Chapter 13 Bankruptcy, please follow us on Facebook, Google+ or YouTube. Please also subscribe to the Yesner Law Podcast, on iTunes and Stitcher, where we cover a variety of topics including issues in bankruptcy. If you prefer, please contact us to schedule a free initial consultation to discuss your options at 727-261-0224 or email me directly at shawn@yesnerlaw.com.

Shawn M. Yesner, Esq., is the founder of Yesner Law, P.L., a Tampa-based boutique real estate and consumer law firm that helps clients eliminate debt by providing options, so they can live the lifestyle of their dreams. We assist clients with Chapter 7 liquidation, Chapter 13 reorganization, bankruptcy, foreclosure defense, debt settlement, the sale and purchase of real property, landlord/tenant issues, short sales, loan modifications, and asset protection in Tampa, Westchase, Odessa, Oldsmar, Palm Harbor, Clearwater, Pinellas Park, Largo, St. Petersburg, and throughout the greater Tampa Bay area.