They say “Timing is everything,” and, after more than 25 years as an Indianapolis lawyer for bankruptcy, I can tell you – they’re absolutely right!
A recent Illinois bankruptcy case was the subject of a long discussion the other day at the Zuckerberg bankruptcy law offices, and the story is well worth sharing with Bankruptcy in Indiana readers:
Mrs. P. borrowed money on a Monday, then on Thursday of the same week, filed personal bankruptcy. What’s wrong with that? Why did that almost get her bankruptcy case denied?
The amount borrowed was $1,500, and Mrs. P agreed to make ten installment payments of $319.89 apiece, giving the lender five post-dated checks as security. This amounts to an annual rate of 395%, not uncommon for me to see when debtors come to me needing payday loan debt help. She also signed a statement saying she was not intending to file individual bankruptcy.
That Thursday, Mr. and Mrs. P. signed a petition under Chapter 13 bankruptcy law.
The payday lending company, I Need cash, Inc., sued, claiming that Mrs. P. had committed fraud. The company claimed Mrs. P. had signed the agreement promising not to file bankruptcy, and then used the money they lent her to pay her bankruptcy attorney’s fee. In fact, they said, Mr. P. had met with the bankruptcy attorney even before his wife had taken out the payday loan.
Mrs. P. responded by saying that the money she borrowed had gone towards catching up on late car payments, and that her decision to file bankruptcy was not made until after a later discussion with her husband.
You can see how sensitive the timing was – the loan and the bankruptcy were only three days apart. It’s easy to see why the bankruptcy court might have questioned Mrs. P’s motivation.
But to me, having helped tens of thousands of people file personal bankruptcy in Indiana and small business bankruptcy in Indiana, it was no big surprise that the court ruled in favor of Mr. & Mrs. P. and denied the suit of the payday lending company. Here’s why:
Despite the pervasive myth about “bankruptcy being for deadbeats”, I know the opposite is the case, and that the majority of people who come seeking Indiana bankruptcy help, do it as an absolute last resort, after they’ve tried every possible way they can think of to avoid it.
I’ve never met Mr. & Mrs. P., of course, but I can readily picture them trying to explore every possible way, even when it was beyond hope, to keep their debts paid – the husband went to find out about bankruptcy, while the wife concentrated on saving their car from repossession and staving off bankruptcy. Every good bankruptcy attorney in Indiana knows, too, that husbands and wives don’t always agree on the best way to handle a crisis.
The fact is, though, that the bankruptcy safety net needs time to work, and there are rules that must be followed, rules about mandatory credit counseling and rules about borrowing money, that must be done at the right time and in the right order. Indiana bankruptcy law is very much a matter of timing!
Categorised in: Bankruptcy Indiana
This post was written by Mark Zuckerberg