What Is a 100% Bankruptcy Plan, and When Is It the Right Option for You?

Join us as we sit down with Bankruptcy Attorney, Darin Wisehart, to discuss the specifics of a 100% bankruptcy plan, and when it's an option worth considering. During this interview, Darin discusses the following:

•    What A 100% Bankruptcy Plan Is And How It Works.
 •    Can A Debtor Sue You Or Garnish Your Wages In A 100% Plan? 
 •    Understanding The Benefits And Downsides Of A 100% Plan.
 •    How To Know If It’s A Good Option For You.
 •    Some Alternatives To A Chapter 13 Plan.
 •    …and much more!

If you would like to speak with one of our attorneys, please call our office at (503) 227-0200, or visit our website at https://www.pacificcascadelegal.com.

Disclaimer: Nothing in this communication is intended to provide legal advice nor does it constitute a client-attorney relationship, therefore you should not interpret the contents as such.

Transcript

Intro:
Welcome to Modern Family Matters, a podcast devoted to exploring family law topics that matter most to you. Covering a wide range of legal, personal, and family law matters, with expert analysis from skilled attorneys and professional guests, we hope that our podcast provides answers, clarity, and guidance towards a better tomorrow for you and your family. Here's your host, Steve Altishin.

Steve Altishin  0:32  
Hi, everyone. I'm Steve Altishin, Director of Client Partnerships at Pacific Cascade Legal, and today I'm here with Attorney Darin Wisehart to talk about what a 100% bankruptcy plan is, and if it might be a good option for you. Hey, Darin, how you doing today?

Darin Wisehart  0:49  
I'm doing great. I'm doing great. Thanks for having me today.

Steve Altishin  0:52  
Well, thank you for coming. Interesting, interesting concept. So I'm going to start with the obvious question, what is a 100% bankruptcy plan?

Darin Wisehart  1:03  
So your 100% bankruptcy plan is the plan that--it's determined in the beginning, and it basically sets out that you have to pay 100% of the creditors. And so we will talk a few things through that. So in the beginning, it'll sound like a lot, but it will put it down into what you need. The creditors means any claims that file. And so what we do when we file, when we start a bankruptcy case, we notice all of the creditors, everybody under the sun gets noticed, we want to be sure that anybody that has something to say gets a chance to say it. And then on the 71st day, the normal creditors will have-- their deadline is the 70th day of the case--nd if they do not file a claim in that window of time, then there's a chance that they don't have to be paid. And so there's the beginning benefit to a 100% plan. And we'll talk about what a 100% plan is and why you need to go but we kind of get right in the middle here, off the bat, just to kind of give you an idea of where we're going to go with this. But 100% plan is any claims that show up, we got to pay them, we need to make sure that everybody is paid and satisfied by the end of the case. And that allows you to get into a bankruptcy and just put it out in a nice, even and comfortable payment without having to worry about garnishments or judgments or anything else happening while that's occurring.

Steve Altishin  2:24  
So let's just kind of then start into the workings of it. I come in and we talk and you say well, have you thought about 100% plan? How do they actually work?

Darin Wisehart  2:35  
100% plan, so there's two numbers in bankruptcy chapter 13. And we're talking right here, we're talking about chapter 13. You can talk about chapter seven, when you discuss this kind of thing. But you don't want to, you want to talk chapter 13. Spread the payments out over time, you get up to 60 months to pay off all of the creditors in this one. Now, in chapter 13, there are two numbers that you have to always remember that correlate to your payment. One is what do you have to pay? And one is what can you pay? And so the what do you have to pay number is driven from what secured items do you want to keep? What cars, what RVs? What, you know, what things like that? What tax debt do you have to pay? We have to make sure we pay all of that. So there's the what do you have to pay? And then the other number is what can you pay. And this number is driven off your budget, what income you have coming in household and what expenses you have coming out of the household. And so that number sometimes drives us because we look at the number of what do we have to pay. And that'll be a set dollar amount a lot of times, and you'll just say, Well, you got to pay that if you want to keep the car, you gotta pay off the car. And it has some creativity on things that you can do at times. But for the most part, you got to pay the debt. And that's what you have to pay. But then if your number if your income, say you're making a lot of money per year, and your monthly income is pretty considerable, then the what can you pay is a higher number than that. What do you have to pay? And then we start talking about a possible 100% plan to just get us into a 60 month, nice and easy. We stop garnishments, we stop judgments the moment we file our case, and we just get in and say if they file a claim, we're going to pay them. So everybody's going to be happy with this as long as they don't get lazy and not file a claim.

Steve Altishin  4:28  
So, you know, my first sort of question you explained is, well, I'm filing a bankruptcy, and you're still making me play 100%. You know, are there any other benefits that I'm getting from the bankruptcy?

Darin Wisehart  4:43  
Yeah, there are a bunch of benefits. The biggest benefit is when we file our case, we don't have to worry about a judgment getting filed against our house, maybe a lien on the house. We don't have to consider the continuation of a garnishment that might be happening. 25% of your wages might be going out every pay period, you don't have to worry about any of that, the control comes to you again, and you get to decide how these things are paid. It also could allow you to bump up a payment, let's say this year, you're not making quite as much. And you know, you have to hit this number in order to get through the chapter 13. And next year, you're going to get a huge raise, or maybe you're going to have more income in the household than you can, for 12 months, you can pay this payment, and then, you know, at the 13th month, you can bump your payment up. So it gives you some flexibility on how you deal with these creditors. And there's a lot of things that an experienced attorney can do to get you into and to be creative to get you through a 100% plan. But you really don't want to do a 100% plan unless you need to. And that's where, okay, so we have this number, tax debt is huge, or something that we really have to hit. That's what's going to drive us to determine whether we're going to get in there. But there are pretty distinct benefits. And other good benefits of this is a lot of times people will say, Well, that just sounds like credit consolidation. And it's accurate, that they are comparable. But the big differences with credit consolidation, you likely are reaching out to the companies individually to say, Hey, would you take less money for these payments and this this type of deal, and it's up to the creditor whether they take that deal. So what you'll get is 10 creditors, and seven of them will say, Yeah, I'll take your deal, we'll put it in payments, and three of them will say, No, we're not interested, we're going to take our money, we want all of our money. And in a bankruptcy, they don't get that choice.

Steve Altishin  6:41  
Yeah. So like you said, what I see as a big benefit, like you said, is that you don't have to worry about being sued by somebody and messing up the whole rest of your plan. I kind of liked that. Well, obviously it sounds like it's good for some people. Are there any qualifications? Is there some sort of a qualifying reason that would drive you to that point? 

Darin Wisehart  7:09  
Usually, that's driven on what's called feasibility. And that's what the trustee will throw, the word the trustee will throw that refers to the idea that an individual or household needs to be able to make the payment necessary. And that's what really it comes up to. So in bankruptcy, a lot of times you see a number that what do you have to pay? You can't do much about that, because you either pay it, or you give up the car, or you give up the RV or whatever you're trying to pay off. That's that number, the what can you pay, it could change reasonably your income could shift over the course of the case. And so with that number, you're driving off of the 100% plan and what's, you know, what are you trying to get? Where is your Where does your payment need to be? And where can it go. And that's a lot of the creativity of coming up with a payment that works because you want to obviously you want to get all the way through with all the things paid. Because that's that's the best solution. And that means that those claims that did not file, they don't get paid, and they go away. So they disappear. And sometimes that does happen. It's interesting to see how often because it's hard to predict. But it could be a pretty distinct benefit. Yeah, yeah. Well, how do

Steve Altishin  8:22  
Yeah, yeah. Well, how do I know, or how would I need to tell you what kind of things to know, if, in my particular situation, that's going to be a good option for me?

Darin Wisehart  8:35  
The basic easy break down for a consult has to do with making sure that you have just a short list of what items you have and how much you owe still on them, and maybe how much equity is in them. Okay, so another reason why you might need to do 100% plan is, and I don't want to get too much into the weeds on the different things, but a major one is you have too much equity in your house. And in Oregon, in a lot of states, the exemption protects a certain percentage of your house or a certain dollar amount. In Oregon, it's 40,000 or 50,000. On the biggest side, those are our Oregon State exemptions, and they change in every state. So you want to be sure you update for where your state is. But that's the amount of is protected. Now let's say you have $200,000 in equity in your house. Well, that means $150,000 of equity is not protected. So if you were to file a Chapter Seven, you risk losing your house and nobody, nobody comes to me and says, Hey Darren, I'd like to lose my house. They don't want to say that, you know they're not there to do that. So we go through chapter 13. And then let's say your debt is only $50,000. Now, you can choose to stay out of bankruptcy might be a good move because you've got a lot of equity in your house. But you might look at a possible bankruptcy let's say if they're going to file a lien and they're gonna get a lien on your house. That might be another benefit of of going through that 100% plan and it could drive your hand on getting the process going.

Steve Altishin  10:01  
It feels like it's a matter of control. You have more control over what happens than trying to just say, I'll pay it all, but I'll do it with the creditors without filing.

Darin Wisehart  10:15  
Yeah, and that's a good thing. And a big part of that boils down to what type of personality that the potential client, if I'm consulting, what type of personality is the person, and I usually will bring it up is it is it really weighing on your shoulders so that you're losing sleep, and years are coming off of your life. And if that's the case, then maybe this is a good path, because this just says, Hey, we're going to find the number that we need to pay. And we're going to get there, we're going to figure out how to get that thing paid. And that takes a lot of stress, especially after that first month, off of the clients shoulders. And they'll turn to me very often and say, I'm really glad I did this, because this was I was losing sleep almost every night. And that's the kind of personality Hey, you know, you got to know yourself, you got to understand where you are and what you're looking at. And if that's the situation, then it might be a very good idea to get in and just say, let's just get that number, let's get a number. Let's pay it off over time, let's get to the end of the case and be done with all of this debt. It's hounding me and calling and writing me mail, you know, all the different things. But if you're the personality style, that is, hey, I can tackle this. I don't feel like it's weighing me down. I feel like I can handle it, then maybe you do tackle the consolidation by yourself or the settlement by yourself? Because financially, they have positives on both sides are pretty significant. Interesting to weigh them on both sides.

Steve Altishin  11:45  
Yeah. Speaking of positives. Well, are there any negatives? Are there any downsides to filing a 100% plan?

Darin Wisehart  11:56  
The biggest downside in my mind, I mean, there's probably a bunch of them. And I'll bring a couple of them up as we talk, but the biggest one usually that I float to is, you want to have a really good idea with what the payment is going to need to be. And whether you can, in reality, make that payment. Because if you file a bankruptcy, now it's on your credit report, it's there, it's not going to go away, even if it dismisses. And what happens sometimes is we get into a case, and maybe we need to get in. And maybe we're rushed a little bit for a foreclosure to a house or, you know, or something that really is driving us to get filed quickly. And then we get our hands dirty on what the number needs to be. And I really crunched the math and figure out what things have to be paid and where the budget is, and all the things that as an attorney, I need to look at, to do this job correctly. And I come to a number that I see is pretty hefty. And sometimes the client then will, will come into my office, we'll sit down, we'll chat up through I'll tell them why the payment needs to be that and where I see this going. And then they'll turn to Me square and just say I cannot make that payment. My reality is not as hefty and then maybe we can figure out well, why why not? Is there something there that maybe we can add to the documents to reflect a truth, that is where your budget is or what needs to happen. Or maybe there's just too much debt compared to too much equity. Sometimes that happens and and the problem then is you're you're committed on one small side with some resources, some money, you've spent time you spent effort to get to the point where he maybe realize, hey, we can't make this work, the dollar amounts just don't, they don't match to what I can do. And that hurts because then people feel like they move backwards and they spent money getting to that point. So that's really, that's your biggest negative. The good thing about that is, if you come in with an honest depiction of what assets you have, and and everything is close to accurate, that's huge. And you come in with maybe you know, the income that you're making per month that you're actually seeing and that doesn't change as you get in and look at it deeper than most experienced attorneys can tell you with a ballpark where you're going to end up and that's, that's helpful, because then you can judge it before you file the case. Instead of after you're in and you've only spent a little bit of money figuring out what your number is estimated to be. And then you try to hit that target as the case develops.

Steve Altishin  14:26  
Is there a danger of losing everything? And really what I'm saying is, let's say you follow 100% plan and you're chugging along and you're chugging along and you're chugging along and then something comes up and suddenly you can't finish it as 100% plan. Are you just dead in the water? Are there ways to remedy it? Or alternatives you can go to?

Darin Wisehart  14:51  
So the first one is a very important question. I'm going to answer this, you kind of asked it, but I want to be sure because a lot of clients will ask this: if I get into chapter 13, am I going to lose things? So am I going to lose my house? Am I gonna lose my car? And the answer to that, for the most part, is no, as long as you have an experienced attorney that's moving you towards the goal. And that's big. Because if you get halfway through, and now you're looking at okay, well wait a second things have changed. Maybe my income has gone down. And now I'm not able to do what I need to do. The question is, can you modify that plan? Yes, sometimes it's non modifiable. Sometimes the trustee requires that you can't change it as that three first three months pass. And then you either need to dismiss the case and bring a new one, or you need to evaluate where you're at, so that you can figure out what needs to happen. But it the beauty of a chapter 13 is, oftentimes it allows, it allows for time to pass, it allows for things to change. And and it does take work, it's not something that's incredibly easy in some situations, because the trustee has the goal of making you pay what you should be paying, and they don't want to see that payment change if your income has not changed, or if something hasn't developed to you, you know, requiring that to be different. But there are some things and there are other things too, if you have a lot of equity in your house, you can sometimes you can weigh that against the debt and figure out how to get that taken care of. But that's all with having a good pilot at the front of the ship, just doing what they do. And that's that's having that attorney that understands, here are our options. Now. This is what's changed. And this is what we can do what we can't do. Where do we want to go? 

Steve Altishin  16:32  
Yeah, that's really interesting. And unfortunately, it's about time. I really, really appreciate you coming on for this because it's something I don't think a lot of people know about or have heard about. And it can satisfy some people who have that guilt feeling of not paying everybody their 100%. So I think it can really work. So thank you for bringing this up. Again, you know, you bring that depth of knowledge to everything that you talk about, you make it clear, as usual, create a complex something, understandable. So thank you for being here today, Darin.

Darin Wisehart  17:07  
No problem, thanks for having me.

Steve Altishin  17:09  
Oh, and thanks everyone else for being here today. Until next time, stay safe, stay happy and be well.

Outro:
This has been Modern Family Matters, a legal podcast focusing on providing real answers and direction for individuals and families. Our podcast is sponsored by Landerholm Family Law and Pacific Cascade Family Law, serving families in Oregon and Washington. If you are in need of legal counsel or have additional questions about a family law matter important to you, please visit our websites at landerholmlaw.com or pacificcascadefamilylaw.com. You can also call our headquarters at (503) 227-0200 to schedule a case evaluation with one of our seasoned attorneys. Modern Family Matters, advocating for your better tomorrow and offering legal solutions important to the modern family.