You know when The Who sing Who are You? or The Rolling Stones sing Dylan's Like a Rolling Stone? It's very clever... in a Lady-Gaga-sings, ‘Ga-ga-ooh-la-la!’ kind-of-way.

These curious cases of self-reference are certainly a springboard to discuss:

I. Who can file bankruptcy; and

II. Why a debtor should not gather moss; and

III. Why Ga-ga is a good go-to-lyric

Okay, let’s go.

I. Who can file? The Bankruptcy Code, a voluminous volume of intricate detail, which you don't want to read lays it out as follows.*

A. Who may file chapter 7?**

First of all, a person may file a chapter 7 "only if such person is not a railroad." I assume that if you're reading this, you're not a railroad. This is a good start.***

There is more in the Code on insurance companies, banks, foreign entities, and other things, which you don’t care about. I think.

The relevant answers below are culled from Title 11, §109 and §727. “§” (from the Latin signum sectionis or the Old English squigglius shorthandus), meaning “section.”

1. You must reside, have a domicile, a place of business, or property in the USA. I have just lost my foreign readership.

You guffaw, yet Google Analytics insists I have readers in countries where I know no one and no one knows me. I attribute this to misleading key words and accident. The term domicile is roughly a redundancy of residence.

2. You can’t file**** a chapter 7 if you filed a prior chapter 7 within the last 8 years AND got a discharge from that prior chapter 7. I.e. finished it successfully and wiped out your debts. If your prior case got dismissed or closed without a discharge, then there’s no 8-year bar, but there are other limitations, especially if you had prior filings within one year of filing again.

This 8-year wait period runs from filing date to filing date.

Example:

a. Batman goes through one-too-many Bat-mobiles, Bat-bikes, and bats (which are not indigenous to Gotham City, and must be imported to populate the Bat-cave) and files chapter 7 January 1, 2000.

b. He got his discharge and completed his case in April 2000.

· April isn’t relevant; we only care that he did get a discharge.

c. Batman can file after January 1, 2008.

3. You can’t file a chapter 7 if you filed a chapter 13 within the last 6 years AND got a discharge from that prior chapter 13. I.e. finished it successfully and wiped out your debts. There are exceptions if your prior chapter 13 paid off 100% of the allowed unsecured claims, or 70% of those claims, if the payment was coupled with “good faith” and “best effort.”

If your prior case got dismissed or closed without a discharge, then there’s no 6-year bar, but there are other limitations, especially if you had prior filings within one year of filing again.

Example:

a. Under pretext of saving the world, James drives a borrowed Aston Martin through a storefront window, seriously maiming a family of mannequins.

b. He gets sued for damages he can’t pay and files chapter 13 on January 1, 2000.

c. He gets a discharge in January 2005.

· That’s not relevant; we only care that he did get a discharge.

d. James can file a chapter 7 after January 1, 2006.

B. Who may file chapter 13?

1. The same residency requirements (listed above for chapter 7) likewise apply to chapter 13.

As with chapter 7, there are certain wait periods pursuant to prior bankruptcy discharges. See 11 USC §1328(f).

a. There is a 2-year wait period (from filing date to filing date) to file a second chapter 13 after a prior chapter 13 that ended successfully in a discharge. Weird, because it’s rare that a chapter 13 discharge would be granted within 2 years. There are limitations due to repeat filings pursuant to dismissals (especially if there were dismissals within one year of your new filing).

b. There is a 4-year wait period (from filing date to filing date) to file a chapter 13 after a chapter 7 in order to get a discharge in that new chapter 13. What that means is that if you don’t wait the 4 years after a 7, you can still file the 13, but you won’t get a discharge; in other words, you’ll only get credit for what you pay into the plan and there will be no forgiveness (discharge) of the unpaid balance (that forgiveness is the general outcome in chapter 13, whereby pennies are paid on the dollar). But the discharge may not be important if, for example, you file chapter 13 in order to pay dollar-for-dollar on student loans, which are not dischargeable in bankruptcy (with rare exception).

2. To file a chapter 13, you must have regular income. Indeed, chapter 13 is the Metamucil on the pantry shelf of Title 11.

3. The Code then decrees that chapter 13 is: only for an individual with regular income who has (non-contingent, liquidated) unsecured debts under $360,475 and (non-contingent, unliquidated) secured debts under $1,081,400.

What does this mean? First, notice the term, “individual” as distinct from person. While railroads can be persons, individuals can only be humans. Where lies Thomas the Tank Engine, I do not know. The point, Dear Reader is that business entities cannot file chapter 13. Individual business-men and -women may file, but corporations, partnerships, et al. cannot.

Second, note the debt limits (with regard to non-contingent, liquidated debts). If your unsecured debt is $360,475 or higher, then you cannot do a chapter 13. AND/OR if your secured debt is $1,081,400 or higher, then you cannot do a chapter 13. Now, stop! Check the date of this entry. Are those figures current? They are... until April 2013, when they'll update. I like to stress: when you traverse the Big Bad Web, numbers are subject to change. The Net is a carton of milk that inevitably sours. Many sites are not updated (like the milk left before your 2-week trip), or are just plain wrong (like brand new soy milk).

So what's unsecured, and what's secured? Secured debt is guaranteed by collateral, such as your home or car; a mortgagee or car lender may presumably foreclose or repo upon default. Credit cards and many loans are presumably unsecured... though don't presume. Because Weirdness Happens. Installed-flooring may be counted as collateral. A Petco pooch purchased on credit may be claimed as security.

Yet, even if a security interest is properly perfected, it may be illusory; lenders aren't prone to strip floors or collar dogs. Which... really is a shame. If the urchins scuffed the floors, one might shift removal costs prior to placing new carpet. If one suffers an incorrigible barker and territory marker, one might happily permit its removal. Know, I don't dislike dogs; I sort of tolerate (some) of em. My reticence is not for want of affection, but from devotion to cats: I don't believe one may love one's cats, yet not share their antipathy toward dogs. That's like loving vampires, but having an affinity toward werewolves.

Some clients would cry foul at canine discrimination. But when inventorying personal property (part of the prepetition "homework," one performs), it is THEIR dog-values that range from $0 to $100. Now, in California, if your "normal household" good (including a pet) is $550 or less, then a blanket exemption (protection) applies. For values in excess of $550, one must tap a limited "wildcard" fund, usually allocated to savings and automobiles.***** Personally, I would still price my cat at $1000, at the cost of some wildcard, just to not hurt his feelings.

It is not uncommon that the above debt limits are exceeded, especially for debtors with depreciated real property. After the real estate crisis, once-secured mortgages have become under- or wholly-unsecured. A second mortgage would have originally counted toward the higher (and less-likely-surpassed) secured-debt limit. With values down, a first-mortgage alone may exceed a home's worth. The second mortgage would then be entirely unsecured. In conjunction with credit cards, student loans, and other debt, the $360,475 threshold can frequently preclude chapter 13 eligibility. A decisive factor may be characterization of partially secured mortgages. According to the most recent S. District of CA case-on-point, the unsecured portion of a partially-secured mortgage counts toward the secured-debt limit. This facilitates eligibility. See In Re Munoz Case no. 09-07087-JM13 published 1-12-10 or read Newz from Munoz at: In re Munoz

An esoteric summary:

As Dora the Explorer and Map would put it:

1) First, you need to have regular income;

2) Then, you need to be a human person;

3) And Then your debt can't be too high;

That's how we get to chapter 13!

And along the way, you will encounter the objections of your chapter 13 trustee. So remember to say (all together now): Trustee, No Objecting! Trustee, No Objecting! Trustee, NO OBJECTING!

Thanks for helping!

For those without young children tuned to Nickelodeon, you may cease scalp-scratching and move on to part

II. Why a debtor should not gather moss;

First of all moss has no intrinsic value. It's really not useful at all. This touches upon the principle of Dawdle Not. Too many petitioners squander opportunity through undue delay. There's necessary commitment of time to prepare a bankruptcy petition on the part of both client and attorney. It is incumbent upon the petitioner to provide raw data to her counsel. A do-it-tomorrow approach may translate to shooting oneself in the foot. Income changes, assets change, and a once-promising case becomes a can of worms. The flip side is Haste, just as-- or more dangerous than its Dawdle counterpart. So keep rolling.

III. Why Ga-ga is a good go-to-lyric

It's easy to remember.

Call 858-344-0500 Or email admin@abramslawsd.com to request a free consultation.
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*But really, the Code is brussels sprouts; consume it if only `cause you should. We refer here strictly to chapter 7 and chapter 13 bankruptcy. There are other chapters, such as 11 USC Chapter 12: Adjustment of Debts of a Family Farmer or Fisherman with Regular Annual Income. Fortunately, 11 USC section 109(f) helpfully explains that Chapter 12: Adjustment of Debts of a Family Farmer or Fisherman with Regular Annual Income applies only to "...a family farmer or family fisherman with regular annual income...."

**In this piece, I use the phrase "Who may file?" as synonymous with the statutory language, "Who may be a debtor?" See 11 USC §109.

***Those are real quotation marks. But okay, okay: "person" is a term of art under the Code that refers both to humans as well as to corporations, partnerships, and railroads. 11 USC §101(41)

****See 11 USC §727(a)(8). The Bankruptcy Code articulates this notion in terms of ineligibility for a discharge in chapter 7, rather than plainly stating you can’t file. The distinction is immaterial, since ineligibility for discharge renders a chapter 7 moot.

*****This article applies to CA law. The California Code of Civil Procedure §§703 and 704 provide for mutually-exclusive exemption schemes. The above example applies to a debtor who opted (or was able to opt) for the exemptions under section 703, which has a wildcard provision not available under section 704.