The Flypaper Concept When It Comes to Debt and Bankruptcy

Katherine:

Hello everyone. Thank you so much for joining us today on This Needs To Be Said. We’re being joined by our friend; attorney Ron Drescher, and he’s going to talk with us about a concept that’s very unfamiliar to me and I am sure we’re going to learn a lot today. He’s going to talk about the flypaper concept when it comes to debt and bankruptcy. Welcome back, Attorney Drescher, how are you?

Ron Drescher:

Thank you, I’m great, how are you doing?

Katherine:

I’m wonderful, and I was like, okay flypaper? And the first thing that came to my mind probably has nothing to do with what you said; I was thinking about fly fishing. Anyway, so…

Ron Drescher:

Yes, I understand that.

Katherine:

That’s what popped into my head and it’s maybe totally random but tell us about this concept. What is it, of course, where did that name come from, and then, how do people benefit from it?

Ron Drescher:

Well, flypaper is very sticky, it’s one of the stickiest things that people think about. It hangs from the ceiling and it’s there to catch flies that are flying around, usually like in a mountain cabin, or someplace like that.

Katherine:

Right.

Ron Drescher:

So, I think of debt as flypaper. It sticks to you and when you have a debt that becomes a lien, like a judgment can become a lien on real estate, or like a car loan could be a lien, or a mortgage could be a lien. They stick like flypaper to property.

Katherine:

I got it.

Ron Drescher:

Okay, so now, when you go into bankruptcy, the number one reason you go into bankruptcy is to peel that flypaper off of you, and that’s what the bankruptcy discharge does. You go through bankruptcy, you fill out your papers under penalty of perjury, you disclose everything to the trustee, you do your courses, and about 90 to 100 days later, at the end, you’ve gotten rid of all of your debt. The flypaper has been ripped off of you.

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Katherine:

Mm-hmm (affirmative), gotcha.

Ron Drescher:

If you have property that you bring into bankruptcy that has a lien on it, it’s also got that flypaper. It’s got its own flypaper, you’ve got flypaper, and your property has flypaper. When you take your assets through bankruptcy, the bankruptcy does not strip off that flypaper. The flypaper stays on the asset unless you do something specific and affirmative in the bankruptcy case. See, as far as the flypaper that attaches to you, you don’t really have to do anything. You just go through the bankruptcy process, doing the thing you’re supposed to do and it peels the flypaper off of you. But, it doesn’t work the same way with property.

And that really mixes up a lot of people that think, well wait a second, I had a judgment against me, judgment became a lien against my home, I went through bankruptcy, flypaper got stripped off of me, why it didn’t get stripped off my home? The answer is; because it doesn’t work that way. The flypaper’s going to stick to your assets, if it’s there; when you bring it into bankruptcy, unless you do something affirmative to strip it off. And some things you just can’t strip off, but other things you can, and it’s really important that you not be caught off guard in your bankruptcy by just assuming that you go through bankruptcy and the flypaper comes off you, so it automatically comes off your assets. Doesn’t work that way.

Katherine:

Yeah, I can see how that would be confusing, because my mind would think; I think what you’re saying to us Attorney Drescher is that; I believe I filed bankruptcy so I have a clean slate, but there’s still something sticking there, that’s still holding me back? Am I understanding that right?

Ron Drescher:

That’s exactly right. For example, you know what? If somebody sues you, let’s say you own a home, and somebody sues you and they get a judgment against you, and that judgment becomes a lien against your home.

Katherine:

Okay.

Ron Drescher:

You go into bankruptcy, your obligations, your personal obligations under that judgment are going to become stripped off like flypaper, and that means that after the bankruptcy is over they can never sue you for that, they can’t garnish your wages, they can’t seize your bank account they can’t go and take other assets that they don’t already have rights to, where that flypaper debt isn’t already sticking to. But, let’s say it sticks to your house and you go into the bankruptcy, it’s still going to be sticking to your house when you get out of the bankruptcy, and if you don’t do anything, you’re going to have a very nasty surprise if you go to sell that house years later, or you go to refinance that house years later, and that judgment lien is still sticking to the house.

So, you have to be very careful. What you have to do then, is you have to reopen the bankruptcy case, sometimes years later, and you have to ask the judge to strip off that judgment lien, which under the right circumstances, you can do in bankruptcy. But, the judge doesn’t have to let you do it years later. The judge could say, no I will not allow it because it’s unfair, because we don’t know if all of the circumstances that have to be in place for you to strip off that judgment lien are still in place. And it’s not fair to the creditor now to have to reconstruct what the situation was years ago because you, Mr. Debtor, didn’t do what you were supposed to do at the time. So, it’s a real gotcha if you’re not careful and if you’re not aware of that quality of debt as it relates to your assets.

That’s why I call it the flypaper concept. Because you’re going to peel the flypaper off yourself, without having to do anything special, but it won’t peel off your assets unless you do something special. And you know what? Sometimes you can’t peel it off at all. I mean a home mortgage; you can’t peel that off most of the time in a Chapter 7, but sometimes you can peel off or you can affect the flypaper of a car loan in a Chapter 13, under the right circumstances.

Your ability to peel off the flypaper from your assets in a Chapter 7, a straight liquidation, is limited. You have more right to affect it in a Chapter 13. So, that’s the flypaper theory of debt and bankruptcy.

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Katherine:

Attorney Drescher, while we would love for everybody to come and have their bankruptcies discharged with you, if someone decides not to come and work with you, is there a possibility that their attorney would not know about this flypaper concept? Is this a question that they need to be asking?

Ron Drescher:

It is a question that must be asked because first of all, not every lawyer finds out if you’ve got a judgment lien, because you may not even know, and a lot of lawyers just… Bankruptcy is one of those things that not everybody is an expert, and so some people will do a little criminal, they’ll do personal injury, they’ll do disability, and they’ll do bankruptcy. And those lawyers, in particular, usually do not understand this.

Katherine:

Okay. I’m glad I did ask that question because I was wondering how would I come to a bankruptcy attorney and they not know this, but if they’re doing a little of this and that, that could be concerning. And that’s with any industry, I have to just bring this point out; if you work with someone who doesn’t specialize in something it does make it hard for them to know everything about everything that they’re dabbling in, because that’s what it becomes, because you can never fully know all the changes at all the times, of any particular thing, and in this case, what’s allowed for bankruptcy, or how to research it, if you’re dabbling in those things. Your mind is just too busy to if someone’s in this situation, which, I would find delicate, first of all I would find people who are considering bankruptcy are feeling bad about themselves until they realize that this is a way to reset their lives, they’re already feeling bad about themselves, so they’re already going through a bunch of emotional stuff. Go to someone who, this is what they study, this is what they do, this is what they specialize in.

We’re talking about resetting your life, this is, to me, to make it very dramatic, it’s life or death, because you are drowning in a financial situation, not being able to move forward in life and you say, okay I’m going to hit the reset button, and I’m going to file bankruptcy, and get with an attorney and figure out which chapter works best for me, and I want to be able to be able to move forward in life. But, you’re telling us today if we’re not careful, if we’re not with an attorney who understands the flypaper concept, we still are not being reset. We still have some residue from things that are dragging us down, and it doesn’t sound like it’s 100% guarantee that some things will get unstuck, but at least know about it. Don’t be blind about it. Am I understanding you right?

Ron Drescher:

You know what? A 100% Katherine; and you can’t always peel off the flypaper from the assets, but sometimes it’s worth filing that bankruptcy anyway. It’s important, just as you said, to know what you’re getting into so that you can do the correct planning.

Katherine:

Mm-hmm (affirmative). I know that when we’re talking that we’re covering a broad stroke here in the information, and no two situations are going to be alike, so people need to be able to get in touch you themselves and say, hey Attorney Drescher, this is my situation, or they need to be able to visit you at your website, or however you prefer. So, at this time I’d like for you to share with the This Needs To Be Said audience, how they can get in touch with you outside of this interview.

Ron Drescher:

Well, you can always give us a call at 443-438-1966 or you can go to Drescherlaw.com, D-R-E-S-C-H-E-R-L-A-W.com, those are the two best ways to find us.

Katherine:

Awesome, until next time, Attorney Drescher, have a wonderful day.

Ron Drescher:

Thank you so much, I always enjoy coming here.

Katherine:

I love it, thank you.

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