Hello, this is Georgia bankruptcy attorney, Jeff Kelly and today is May the 11th, 2020. Today I would like to talk about how an ex can sneak up on you and put stinky shoe-shoe on your Chapter, 13 bankruptcy case. Is there anything worse than some hated ex coming back into your life? No, there’s not, but in some bankruptcy cases, it happens. You know that yuck feeling that you get when you hear that voice inside your head say, “Oh no. Now I have to deal with – fill in the blank.” It makes my stomach hurt when I give people the bad news. The number one way that an ex can cause problems in your Chapter 13 bankruptcy case is when they have co-signed on a car with you. Now, in most Chapter 13 cases, we are able to lower interest rates on automobile debt down to around 6% ish.
This feature of Chapter 13 is awesome and is particularly wonderful when you have an interest rate of 30% and we’re knocking it down to 6%. What a relief, right? But all this can go out the window, if you have an ex that was involved in the purchase of your car. If an ex is co-signed on the car with you, this is super problematic because if we try to lower the contract interest rate, the creditor will be able to sue the ex for the eliminated portion of the debt. As you can imagine, they will scream and holler to the hilltops. To protect any co-signer from being pursued by a creditor, we can take advantage of the co-sign and protection provision of the bankruptcy code as long as we pay the full contract amount in the Chapter 13 plan. Ugh! Can you imagine trying to pay 30% compound interest in the Chapter 13 plan? That makes the payments go up a lot. It could, in some cases, double somebody’s payments. So that stinks. It doesn’t matter who signed first or who signed second. People always want to point that out to me. “Well, I signed second and I didn’t sign first.” It doesn’t matter. If two people signed it, then two people who can get pursued for 100% of the debt by the creditor. A lot of times people will say, “Well, hey, this car or whatever, the divorce judge said that I had to pay it a 100%. So it’s all on me. It’s not on them.”
No, no, no, no. That doesn’t affect a creditor’s rights. That just means that your ex could sue you if you don’t indemnify them if that’s what the divorce judge ordered. A second, very common way than an ex sneaks on you in your Chapter 13 bankruptcy case, is income taxes. When you sign a joint tax return, you are jointly liable for the taxes. The most common case of this happening is when the ex is self-employed and some shady tax preparer, not a CPA, files the tax returns. I have seen Chapter 13 cases where we get the case filed and the client has a reasonable monthly payment amount. Then a few months later, after the case is filed, the Internal Revenue swoops down from nowhere and files a claim for a $100,000.
This could potentially increase the client’s Chapter 13 payment by an extra $1,793 per month. How can you avoid these nightmare exes from hell scenarios? And the answer, never sign a joint tax return and never co-sign for any person’s car and never ask anyone to co-sign for you. So when the car salesman says, “All you need to do is get your boyfriend or your girlfriend to sign with you and we have a deal.” Run away, run away, run away as fast as you can. If you’ve got any questions, send me an email firstname.lastname@example.org or check out my main website www.kellycanhelp.com or you can give us a call at (770) 881-8449. Thank you for tuning in. Have a great day.