Lawyer Lawrence Glueck offers advice about bankruptcy, debt

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Bankruptcy filings

2006

Chapter 7: 7,859

Chapter 13: 1,677

2007

Chapter 7: 12,420

Chapter 13: 2,431

2008

Chapter 7: 17,222

Chapter 13: 2,944

2009 through February*

Chapter 7: 2,616

Chapter 13: 494

Source: U.S. Bankruptcy Courts

*unofficial numbers from the

U.S. Bankruptcy Court in Colorado

Personal bankruptcies

Chapter 7: The chapter of the Bankruptcy Code providing for 'liquidation,' the sale of a debtor's nonexempt property and the distribution of the proceeds to creditors.

Chapter 13: The chapter of the Bankruptcy Code providing for adjustment of debts of an individual with regular income. Chapter 13 allows a debtor to keep property and pay debts over time, usually three to five years.

Source: U.S. Courts,

www.uscourts.gov/bankruptcycourts/bankruptcybasics/glossary.html

Colorado exemptions

This property generally is safe from creditors if you file for bankruptcy.

- $60,000 in home equity for your residence

- $3,000 per person in furniture and household goods

- $2,000 per person in watches and jewelry

- $1,500 per person in clothing

- $600 per person in provisions and food on hand

- $5,000 in equity in automobile or bicycle

- tools and equipment used for work - $20,000 per person or $50,000 per family (farm)

- $1,500 per person in personal or professional library

- $25,000 per person in cash value of life insurance

- 100 percent of 401(k) or retirement plans

- 100 percent of earned income or child tax credit

- 100 percent of child support/maintenance/alimony

- 75 percent of wages owed you at filing date

- 100 percent of professionally prescribed health aids

Debts that must be paid

- taxes

- student loans

- child support

- divorce obligations

- debts incurred through fraud

Source: Bankruptcy lawyer

Lawrence Glueck

If you ask Lawrence Glueck what typically causes bankruptcies, he almost laughs - not because it's funny, but because it's obvious.

"Credit cards," he said.

Glueck is a Steamboat Springs lawyer who handles Chapter 7 and Chapter 13 personal bankruptcies. He does only bankruptcy work, and he's been busy. Personal bankruptcies of those types, the two most common, were up 36 percent in 2008 compared with 2007.

"The number of bankruptcies is probably double what it was two years ago," he said.

Glueck has helped some of those filers navigate through complex bankruptcy law. He sat down last week to share his expertise.

"Their first concern is how is this going to hurt their credit, and it stays on your credit report for 10 years," he said.

But people start getting car and credit card offers sometimes before their bankruptcy is finished, he said.

The biggest single problem is credit cards, Glueck said. When people build up credit card debt, it often affects other areas.

"People have to prioritize their debts," he said. "A lot of times, I see people take out a second mortgage to pay their credit card bills, and I see them a year later in the same place: They still have lots of debt, and now they have a second mortgage they can't afford."

Homeowners need to be mindful of that asset, Glueck said.

"If you have a choice between paying your bills and paying your mortgage, you should pay your mortgage," he said.

Business owners also get into trouble with credit cards.

"I see a lot of people who have used their credit cards to keep their business running when they maybe should have faced the facts and shut it down earlier," Glueck said. "Now, they have no business and credit card debt."

If your business is going under, he said, sometimes it's better to let it die and file for personal bankruptcy.

Chapter 7 vs. Chapter 13

When people step into Glueck's office above Giovanni's Ristorante on 11th Street, they're usually hoping to file a Chapter 7 bankruptcy.

In a Chapter 7, the debtor's assets are used to pay creditors unless the asset is exempt. Exemptions vary among states. In Colorado, for example, a person's residence is exempt only as much as $60,000. In Florida and Texas, 100 percent of a home's value is exempt.

Because of such differences, people must be a resident of the state for two years before they can file for bankruptcy. That's basically so you can't move to Florida, buy a half-million-dollar house, file for bankruptcy and keep the equity safe from creditors.

In a Chapter 7, a state trustee takes over nonexempt assets and pays creditors, many of whom wind up getting nothing. The debt is discharged, sometimes in a few months, Glueck said, and the filer can start fresh.

"If all of your possessions are exempt, you file a Chapter 7, and you don't have to pay anything," he said.

However, not everyone can or should file for a Chapter 7, Glueck said.

The laws changed in October 2005, putting income restrictions on Chapter 7 bankruptcies. People who want to file must prove they make less than the state's median annual income: $46,765 for a single person and $78,905 for a family of four.

The requirements take into account all income during six months. So if you win a few thousand bucks in the lottery in December, that counts toward your income if you file in May.

People who do not meet the Chapter 7 requirements must file a Chapter 13 with a five-year plan. Those who opt for Chapter 13s, despite meeting the Chapter 7 income rules, can file a three-year plan.

In a Chapter 13, Glueck said, the filer proposes a budget and a plan to pay off debt. A state Chapter 13 trustee and creditors must agree to it.

Glueck does more Chapter 7s than 13s, if people can qualify.

"Right now, I'm typing one up where a guy makes good money," Glueck said. "He makes $72,000 a year. He'll be in a 100 percent payment plan; he has to pay all the debt. : But it stops the interest."

Sometimes, people file Chapter 13 if they owe a lot of taxes or to protect nonexempt assets they'd have to give up in a Chapter 7, he said.

"If you have a boat worth $10,000, if you file Chapter 7, you'll have to either turn that boat over to a trustee to sell, or else you can file a Chapter 13 and pay the value of the asset in the Chapter 13," Glueck said.

Chapter 7s are resolved quicker and cost less, he said. They usually take a couple of months to a year, and Glueck charges $1,500 to file them. People also must pay about $300 in filing fees and the cost of two finance-related classes.

Chapter 13s can take five and a half years, and Glueck's fee for filing those is $3,000, which he said was what the court typically allowed.

More advice

Glueck reiterated that people should avoid credit-card debt. Even his business cards convey the message: "They're green because of money, and they're plastic because that's what gets people in trouble," he said.

Glueck advised people to seek a lawyer's advice immediately if they plan to file. Filing on your own is risky, he said, because bankruptcy is complicated and easy to screw up. For example, people don't realize that all the money owed to them is considered an asset. So even if they haven't filed a 2008 tax return yet, the court takes over their refund.

Glueck reminded people not to move assets around to try to protect them before a bankruptcy filing. Sometimes it could result in a challenge from creditors or the person having to wait a year to file for bankruptcy, Glueck said.

"If you're unwary, you can get yourself in trouble," he said. "And then you go see your bankruptcy lawyer, and they say, 'Man, I sure wish you hadn't done that."

Glueck handles cases across Northwest Colorado. He said he was the only lawyer in town who works solely in bankruptcy. Sherman Romney's Craig office also does Chapter 7 and Chapter 13 filings, though representatives there said they were too busy with cases to talk Friday.

Glueck encouraged people to seek help if they're over their heads in debt.

"Usually, people leave my office feeling better than when they came in," he said.

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