Written by Charleston Bankruptcy Lawyer, Russell A. DeMott
Chapter 13 bankruptcy is a tool of sorts. You can do some things in Chapter 13 you just can’t do in Chapter 7–stripping mortgages, for example.
And then there’s what I call the “Mulligan Rule”–you get a do over in Chapter 13.
Let me explain.
Bankruptcy can be a lot like golf
If you get to know me, you’ll discover that I dislike golf. In fact, I hate it. During my summers in high school and college, I worked at Warwick Hills Country Club in Grand Blanc, Michigan. (For those of you who don’t know, that’s where the PGA hosts the Buick Open.) I got to work at 5:45 a.m. and mowed four or five greens by about 8:30 a.m. I then worked mowing tees, fairways, edging sand traps, watering, digging holes, and doing anything else the boss asked me to do. It was hot, tedious work. And I did it for several years. I’ve mowed more grass than most people have seen.
And now I don’t want to go near a golf course. (It occurs to me now that having the job has probably saved me a fortune in golf-related expenses!)
I’m also dangerous with golf clubs–on one Bar golf outing I hit one through another foursome’s cart–a head injury narrowly averted. Another time, I sliced a drive and put in onto the interstate. Thankfully, I heard no screeching tires or crunching metal.
But I do know one thing: the Mulligan Rule. A do over. Another try. It’s my favorite rule when I’m forced to play golf.
What’s this mean for bankruptcy?
In Chapter 7 bankruptcy, once you file, you’re in. You can’t get out. I won’t say it’s like getting out of the mob. It’s not like there’s no gettin’ out. But let’s just say it’s difficult. And if you want out because the Chapter 7 trustee is going to take some of your property you thought was protected, well, you’re out of luck. The bankruptcy judge isn’t letting you out.
True, you should know about problems like this before you file bankruptcy, but not always. Law isn’t like engineering where formulas and math yield the same results. And this is why engineers go bonkers when I explain some bankruptcy concepts to them! Sometimes we don’t know exactly how things will turn out. Is our valuation correct? Will the trustee want to sell this asset? Which state’s exemptions do we claim? And on and on.
This is where Chapter 13 bankruptcy comes in. If you have a case where there’s an asset you really want to keep and you don’t know how the judge will rule on that exemption, you can file a Chapter 13. If the trustee objects, you can fight in a safe environment.
Why is it safe?
Because if it goes bad, you can voluntarily dismiss the case. You can say, “the medicine’s worse than the disease, and I want out.” And then–maybe a year or two later–file again when that issue (whatever it might be) isn’t an issue anymore. Or you could even do something entirely different than bankruptcy to deal with the debt problem. The Mulligan Rule and Chapter 13 just might be the answer.
Postscript: If you are into golf trivia, you should know that Jerry Barber recorded the first televised hole-in-one in at the 1962 Buick Open on the 17th hole at Warwick Hills. I remember that hole well. I mowed that green many times. And then there were those sand traps…