J: Please take a seat, Mr. Jordan. Can I get you something? Coffee? Tea?
B: Please, call me Bill. Nothing for me, thanks. I have to tell you, I’m not used to being so well served by a lawyer. First, you answer your own phone, and now this!
J: Well, as a sole proprietor, you know what it’s like to have to take care of business yourself.
B: I’m afraid that taking care of business has become a real challenge lately. As I said when I called the other day, I’m beginning to think that declaring bankruptcy is the only way out.
J: It might be, but let’s take a good look at your situation before you make any decisions. What’s been happening with your business?
B: Well, as I mentioned, I’m a sports photographer, and I’ve built up quite a nice portfolio. The local newspapers buy a lot of my photos, and over the past year some of the big sports weeklies have taken an interest.
J: That sounds promising.
B: It was going great. I’d got a loan from the Neighborhood Savings Bank and invested almost $100 000 in the cameras, printing machine and supplies. But then about six months ago I was in a car accident and really messed up my right leg. It’s still hard for me to walk or even stand for long periods. In fact, my doctor tells me I may never get back to where I was.
J: I’m sorry to hear that. Have you got a good insurance policy?
B: No, I haven’t got any insurance. I’m single, and well...I figured it was a low priority.
J: So, your business is in trouble.
B: You said it. I’ve fallen behind on my payments and my credit cards are at their limits. My business isn’t incorporated, so I’m afraid I’m going to be sued any day.
J: Filing a bankruptcy petition will certainly help you in that regard. As soon as you file, an automatic stay goes into effect that prohibits creditors from going after you in any other court proceedings—at least temporarily.
B: So once I file, I can get out from under my debts completely?
J: Well, you should be aware that some debts are non-dischargeable. That is, not all debts can be eliminated through bankruptcy. But in general, the goal is to give people in situations like yours a “fresh start.” That means if you qualify to file what we call a Chapter 7 petition, you may be able to liquidate any assets you have and immediately discharge your debts.
B: Hmm. And if I don’t qualify?
J: Then you can at least try to get permission to adjust your debts and pay them back in part. You do that with a Chapter 13 Adjustment of Debts. You propose a repayment plan that the court would have to confirm.
B: Well, it sounds like what I want is a Chapter 7 petition. But how do I find out if I qualify to file one?
J: First we need to see what kind of debts you have and take a look at your assets and disposable income. The law requires that petitioners undergo a means test. The idea is that if debtors have the ability to repay their debts, they should be required to commit to a repayment plan under Chapter 13.
B: This is beginning to sound complicated.
J: Don’t worry. Let’s get started by identifying all your creditors. Before our next meeting, I’ll need you to prepare a complete list of all your debts. You’ll also have to make a list of all your income, property and any other assets. I need this information in order to fill out the schedules that have to be filed along with the bankruptcy petition.
B: So I should list it all—even my car payments? My student loan payments?
J: At this point, you should include everything.
B: Okay. Then what comes next?