CHAPTER #37 Professional Persons

I represent a good number of doctors, dentists, lawyers, and other professionals. Just because you have a professional degree, you are not immune from money problems. Many professionals spend years in school, get out in their middle twenties or later in life, and find that their first job just pays living expenses. They may have large student loans, and big charge card bills. Especially if they set up their own practice, money may be tight for quite a few years.

Professionals often have tax problems, and student loan problems. If none of the above problems have prevented any bankruptcy relief, taxes and student loans can be paid with no interest over as long as five years in a Chapter 13 Plan. The limit for such debt is currently no more than about $1.3 million in secured debt, and $325,000 in unsecured.

Bankruptcy means your Series 7 license may be revoked. Other professional licenses usually are not affected. The exception is if you are a CROOK and are trying to use bankruptcy to discharge fraud, and lie on your petition.

We also see professionals who have had to change employment or move to another state, and have been out of work, or people who owe a lot of income taxes because of mismanagement of their professional practice.

Professionals who are salaried use the same rules as any other working person. But professionals who have their own practices, being self-employed, often have several specific problems.

First, the income may not be sufficient to propose a repayment plan that creditors will accept, or that will do the debtor any good.

Second, the income may not be sufficiently steady to propose a Chapter 13 Debt Repayment plan that will be accepted by the Court, the Trustee or the creditors.

In the two situations above, the only way left to get rid of debt is under Chapter 7. If the professional practice has no resale value, the debtor will be allowed to keep it. If there are no assets, such as receivables, property, or paid for equipment, the professional can continue to practice after a Chapter 7, with no effect on the professional license.

Third, professionals may have too much income to do a Chapter 7, or too much debt to reorganize under a Chapter 13, due to the debt limits that are revised yearly.