Government Budget Cuts and Austerity Programs ARE Already Here

Government Austerity Programs

I telephoned the Riverside Superior Court this morning. The outgoing message stated that “because of budget cuts, an operator is no longer available.”

That means that all of the people who used to have jobs answering phones at the Superior Court, no longer do. 

A little while ago they instituted electronic filing in the Federal Courts, not because it’s convenient, but so that they could fire all the filing clerks at the front counters of the courts. Not every one of them of course, but they’ve let them go through attrition.

The Chief Judge of the Central District of California Bankruptcy Court said the same thing: Big budget cuts are coming.

We are heading into a government austerity program; and no one is reporting it. It’s going to get a lot worse before it gets better.

Call for a Free Consultation 951-200-3613

How to Find Bankruptcy Attorney David Nelson’s Office

David L Nelson
Attorney at Law
24630 Washington Ave 202
Murrieta, CA 92562
951-200-3613 Phone
858-452-4500 Fax

I’ve been a bankruptcy lawyer since 1994 and I love getting you out of debt.

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5 Ways Chapter 13 is Better than Debt Consolidation

First Way

Protection of the Automatic Stay when filing your Chapter 13 Bankruptcy is a much better solution than signing up for a traditional debt consolidation. The Automatic Stay is a Temporary Restraining Order prohibiting Collections!  The order comes from a federal court and therefore preempts or supersedes state laws allowing creditors to collect.

A Debt Consolidation program, is a wish and a phone call to beg the creditor not to sue you while you are in repayment.  While most creditors will play along, there are many that will not.

A Debt Consolidation is a mangy dog begging for scraps at the doors of justice.  “Stay Boy! There’s a good doggie!” 

Second Way

When your chapter 13 bankruptcy payment plan is completed in 3 to 5 years, your temporary restraining order is made into a permanent injunction called your Discharge Order. Even better these Court Orders have teeth.  If a creditor violates one of them whether during or after your bankruptcy, you can sue them in the bankruptcy court and they have to pay your attorney to sue them to get them to back off or even pay you back. When you hear the word “stay” think of the word “stop”.  The Automatic Stay stops foreclosures, repossessions, wage garnishments, bank levies, creditor harassment and driver’s license suspensions.  Debt Consolidations do not provide the same protection as that of a Federal Court Order.  Debt Consolidations can possibly help you reduce your interest rates if you beg. 

Third Way

Chapter 13 Bankruptcy forces your creditors to work with you and your attorney whether they like it or not.  While in debt consolidation which is voluntary, some of your creditors aren’t going to work with you.  The debt consolidators pretty much know which ones and under what circumstances they won’t work with you.  The debt consolidators that have been working the deal for a while should already know which ones are not going to play along.  But for some reason, they never tell you:    “Oh and by the by, Equable Ascent Financial (or Asset Acceptance or Your Creditor Here) is not going to take your offer and they’re going to sue you now.  But just keep paying the monthly payment so that I can take my percentage and pay the other creditors slowly but surely while you get sued.  And I also told them that you have a new address, but oh ya, I forgot to tell you that too, even though you didn’t move or anything . . . but just keep paying your monthly payments so that I can get my monthly percentage of your payments, okay, thanks.”  

Fourth Way

The Chapter 13 bankruptcy repayment plan reduces interest rates down ZERO 0% and can reduce principal balances down to as little as ZERO 0% on your credit cards, medical bills, personal loans to private lenders, even older taxes as well.  Debt consolidations outside of bankruptcy can reduce interest rates too, so long as the creditor in question goes along with it.  On rare occasions principal balances might be reduced too for the few creditors who decide to go along with it.

Fifth Way

Chapter 13 Bankruptcy can reorganize all of your debts, such as repaying and restructuring your recent back taxes, your missed house payments, and even spread the last 2 or 3 years on your car payments out over 5 years thereby reducing the car payments by half or more. Often even if you repay your credit cards and medical bills in full but cut the interest rate down to 0%, in every case I’ve seen, you will have a lower payment than if you go to a debt consolidator outside of a bankruptcy.

45 Famous Celebrity Bankruptcies

45 Celebrities and Entrepreneurs who Filed Bankruptcy

For many people, filing a Bankruptcy is the last thing they ever wanted to do. In fact, they probably never imagined that they would have ended up needing to file a Bankruptcy.They had always planned to pay their debts. They are the hard working American people.

The Key Word: Need

The key word is “need”. When you have tried everything else and still can’t fix your financial life, a Bankruptcy  is a wonderful relief. Maybe some unexpected life event has taken place such as medical bills, divorce, loss of job or any myriad of circumstances. What if your business partner steals all the money in your business bank accounts and flies off to Tahiti?  What if your album sales slow down and you can no longer afford to pay your tiger handlers and at the same time pay the employees who run the roller coaster and the carousel?  Or if your child support gets raised and you can’t pay your credit cards anymore?

Don’t Sweat the Small Stuff, and it’s All Small Stuff

If that is the case, that you find yourself needing to file a Bankruptcy, then there is no reason to feel bad for having to file. You will find yourself in good company! Here is a partial list of some of the famous and important members of the history that have had to do just that, file a Bankruptcy. Just seeing Walt Disney on the list, isn’t it a comfort to realize that filing a Bankruptcy didn’t put a stop to everything in his life, on the contrary, what a legacy he left to the whole world!

Historical figures that changed the world such as Walt Disney, Wolfgang Amadeus Mozart, Oscar Wilde, Mark Twain, PT Barnum, Milton Hershey. Celebrities such as Larry King, Anna Nicole Smith, Gary Busey, Kim Bassinger, Mickey Rooney, Debbie Reynolds, Burt Reynolds, Don Johnson. Worldclass Singers such as Michael Jackson, M C Hammer, Dionne Warwick, Wayne Newton, Cyndi Lauper, Tammy Wynette, Willie Nelson, Mick Fleetwood, Wayne Newton, Merle Haggard. Sports figures Mike Tyson, Dorothy Hamill, Tony Gwynn. Presidents of the United States  Abraham Lincoln, Thomas Jefferson, and World renown businessman (who some excepted to run for President) Donald Trump. Trump didn’t personally file, but four of the companies that bear his name filed. He understands business, and he understood it was necessary in order to be able to rebuild.

Of course if we are doing something unreasonable that makes us end up having to file, then we might feel bad that we didn’t change our life style and prevent it in time. An example would be Michael Jackson who filed because it was taking $10 Million dollars a month to run his Neverland Ranch. Is it really necessary to maintain a lifestyle that requires that much money per month? Wouldn’t it be possible to scale back and prevent having to file ahead of time?

But Don’t Do Something Stupid Either!

Wait, if someone was caught lying to the Bankruptcy Court they would feel bad! But really, with the penalties faced for lying to the Bankruptcy Court or for hiding Assets why would anyone do this? Teresa Giudice

(Reality TV Show Real Housewives of New Jersey) and her husband Joe are in plenty of hot water with the Bankruptcy Court, they are accused of hiding major assets and lying on their bankruptcy petition. Of course, at this point, we cannot say that they did lie, only that they’re accused of it.  They are facing more than 50 years in federal prison, and not the club fed version of it where we send regular white collar criminals and politicians.  Additionally they face Millions in fines. They have pleaded not guilty to charges of Fraud. That would be the moment when lying about the lavish lifestyle doesn’t make the fraud worth the time in court, the hassle, or prison.

If convicted you are not able to discharge your debts. This doesn’t mean your case is dismissed, you will still be turning over your property to the Trustee so the stuff you own can be auctioned off. And you can’t discharge your debts in future bankruptcies either. There is a big sign in the hearing room with the reminder that you are under penalty of perjury, you need to be telling the truth, and that the penalty for making a false statement or concealing property is a fine of up to $500,000 or imprisonment for up to five years, or both.
Call for set an appointment for a Free Consultation 951-200-3613

Lorene Lynn Mies of the Bankruptcy Minute appears to have Medically Retired

The Bankruptcy Minute

A fine attorney and a nice person, Lorene Lynn Mies of the Bankruptcy Minute, has apparently medically retired.

She was one of Murrieta’s finest bankruptcy attorneys and I hope she’ll be well and back to her old self again soon.

I don’t know Lorene’s condition, but I have great respect for her as a person and attorney. I teased her once in a blog post that a minute was a short consultation and got an earful for it.  Once I got to know her I realized that she’s a good person as well as a good attorney. Keep her in your prayers.

There are a couple of things that come to mind, first, if you don’t have life insurance, you need it.  Second if  you don’t have disability and long term care insurance, you need that too.

Three quarters of us will require care before we die.  Yet, less than about 25% of us even have life insurance and fewer still have disability and long term care. Requiring such care when uninsured for it will devastate your family’s finances. Don’t let that happen to you.

Update as of 10/30/13 

I’ve heard just this morning on 10/30/2013 that the Travis Law Firm is no longer taking Lorene Mies’ clients unless those client’s cases have already been filed with the court. I also understand that Ms. Mies has in fact herself filed for bankruptcy. Her bankruptcy attorney is Carey Pickford.

Carey C Pickford 
Pickford Law Office
38975 Sky Canyon Dr Ste 112
Murrieta, CA 92563
951-677-5156

If you have already paid her a retainer but your bankruptcy case has not been filed, and therefore she owes you your money back, then I suggest you check with Attorney Pickford.

However, if you have paid for your bankruptcy to Ms. Mies and if your case has not yet been filed and you still want to file it, I recommend you telephone me directly at 951-200-3613 to file your case. While I cannot credit you any of the fees you have paid to her, my prices are competitive.

Bankruptcy Dismissed with No Discharge

Case Dismissed without Discharge?

Now what?

You’ve done your whole case and do not have a chapter 7 Discharge because your attorney forgot to tell you that you are required to do a Debtor Education Course. The Debtor Education Course is also called a Financial Management Course. You must file a Financial Management Course Certificate with a coversheet called Official Form B23 prior to the end of your case. If you do not, your case is dismissed, but not discharged. That means that your creditors start coming after you again just like before your case started. They go back to suing you, garnishing your wages, levying your bank account and so on.

Is there anything you can do?

Of course there is, there are at least a couple of options, the first is to file a new bankruptcy case. No this is not the best option, it’s merely an option. Why pay in full over again for a whole case. So, try the second option, if you haven’t waited too long, then reopen your case and file the form. Reopening the case while not overly complicated, can also be done quickly in most cases. A couple came in last Friday, and they had their Discharge Order the following Thursday, today.

To reopen your case I must file a motion with the court, and request a 30 day extension for you to get your Debtor Education or Financial Management Course Certificates filed together with the Official coversheet or Form B23. Most judges will sign the order with their eyes closed unless you’ve waited an extremely long time. However, I’ve seen them routinely granted for cases where the case has been closed less than 4 to 6 months.

Unless you’re my client and you can prove to me that you didn’t know about the requirement to complete the course, then you’ll have to pay me to reopen the case, upload the order and upload the certificates. There is a $260 filing fee (at this writing) and the attorney’s fees for the rest of the work is $500 per case.

If you can prove to your attorney that he or she never told you about the requirement, then he or she should maybe reopen it for you. However, even if your attorney forgot to tell you about it, the Bankruptcy Court itself sent you a notice explaining the requirement. So, you’d have to be able to prove that your attorney didn’t tell you and that you moved and that your attorney knew that you moved and that your attorney knew that the notice was sent from the court and at the same time that he hadn’t sent in a change of address for you and on and on. In addition, many of the Bankruptcy Trustees will explain it to you at the hearings. So, pretty much, you will have to pay the fees to reopen the case. Often the attorney’s fees to reopen cases are high. Some attorneys charge as much as $1000 or $1200 to reopen your case.

Call me Attorney David Nelson 951-200-3613, we’ll get it done fast and affordable and get you your Fresh Start. Creditor phone calls and harassment will stop again, law suits and wage garnishments will go away. I’ve been a bankruptcy lawyer in Murrieta and Temecula area since 1994. I love getting people out of debt. But don’t wait too long, if you’re in this situation, call immediately because procrastination will hurt you if you do not get your discharge completed, creditors get to keep whatever they can collect from you before you get it done.

Riverside Bankruptcy

Is a Riverside Bankruptcy looming on the horizon for Riverside?  In the wake of Stockton’s Bankruptcy Chapter 9 and the San Bernardino Bankruptcy filed just this morning, also a chapter 9, who’s next? 

You Can’t Squeeze Blood From a Turnip.

My inquiry is simple, if Riverside’s next door neighbor, San Bernardino, can file a bankruptcy and restructure its debts and contracts, how much does it owe to Riverside as a creditor?  Riverside Bankruptcies are about to start flowing like opening a vein.  You’ve heard that you can’t squeeze blood from a turnip, but I’ve learned from my bankruptcy practice of 16 years, sometimes you eat the turnip.

If you’re a turnip, how do you prevent creditors from eating you?  Bankruptcy is your pesticide.  Now that San Bernardino is going to refuse to pay many of its vendors, contractors and creditors, many of them are going to have to file bankruptcy.  People who did contract work for the city installing infrastructure on a contract basis or who work for San Bernardino but live in Riverside are going to feel the pinch.

City workers are going to be the biggest losers in this. Even though they do most of the best work for the city, who else does the city have to cut.  Furlough days are coming, pay cuts and pension restructuring as much as they can get away with.  However, there is good news, Chapter 9 Bankruptcy is not nearly as nice as the other chapters are to individuals.  Bankruptcy gives individuals fresh starts but a city / municipality, how much of a fresh start do they need?  Not as much.  This is a case where you can fight city hall.  Thankfully the unions will do most of that fighting for you and you’ll be happier you’re in a union than ever.  Still the ultimate defaults will be rampant.

If you end up having to file bankruptcy because you were owed money by San Bernardino and/or you work for San Bernardino and San Bernardino’s Bankruptcy cuts your pay or your job, call me, David L Nelson, Bankruptcy Attorney and I’ll make sure to give you my widows and orphans price for your bankruptcy.

Which Chapter in Bankruptcy is Right For Me?

Chapter 7 vs Chapter 13

Automatic Stay

The moment that you file your case, whether in chapter 7 or chapter 13, a temporary restraining order is issued by the bankruptcy court prohibiting collections of any type with a few exceptions. Exceptions include things like child and spousal support and certain types of government debts.

Chapter 7

A chapter 7 bankruptcy, also called a straight bankruptcy, and also called a liquidation bankruptcy is the one that most people are thinking of and talking about when they discuss bankruptcy. Over in about 4 months, this is it’s primary advantage, you’re in and you’re out again.

In a chapter 7, you’re allowed to keep only so much property. Whatever you own over and above what you get to keep, the bankruptcy trustee takes away from you, liquidates or sells it, and uses the proceeds to pay your creditors a pro rata or proportional share of the funds based on the percentages of the total debt that’s owing from you to your creditors. Suffice it so say that if you owe $100,000 and the Trustee is able to collect $25,000 from your property, then your creditors will get about 25% of the debts that you owe them.

Most of you will keep everything you own and your creditors will get nothing.

Any portion of the debt left over after the trustee administers your case, whether it’s 95% of the balance or 100% of the balance that’s unpaid, that portion is discharged by the bankruptcy.

So in a small nutshell a Chapter 7 is a bankruptcy where the bankruptcy trustee may take property away from you (if there’s any to take) and when it’s over, your consumer debts are discharged or in other words, you receive a court order which is a permanent injunction prohibiting collections.

Remember that there are exceptions to the discharge. Certain kinds of debts are exempt from the discharge and will remain a personal obligation for you to have to pay once your case is over. Child Support, Spousal Support, Student Loans, Recent Income Taxes, and a number of things which are similar in nature are not discharged. You will still have to pay your mortgage if you want to keep your house, you will have to pay for your car if you want to keep your car as well. For more details (but only if you’re in California) and to discuss specific debts, call me 858 452 4500.

You must qualify for a chapter 7 by showing that your income is sufficiently low or that certain expenses are sufficiently high or both. This test is called the Means Test.

Chapter 13

With Chapter 13 you get to keep everything. If you would have lost it in the chapter 7, you can still keep it in the chapter 13 as long as you pay the bankruptcy trustee for it instead of giving it to him and letting him sell it. A chapter 13 case is a bankruptcy with a payment plan. Payment plans last from 3 to 5 years.

If you file in Riverside, the Trustee is Riverside has produced a Chapter 13 Handbook to help guide you through your case. Read it. It is specifically for the Riverside cases, and much of the information is tailored specifically and applies only to Riverside. If you file in Santa Ana, LA, San Diego or San Francisco, ask if there is a different handbook. There may be by then.

The payment is determined by your income and expenses. If you don’t qualify for a chapter 7, then your payment is determined by what the means test states you have to pay.

There are other reasons you might file a chapter 13 instead of a chapter 7, in a chapter 13, you are able to propose a payment plan that allows you to catch up unpaid payments on your home and thus at the end of the payment plan, you are current on your first mortgage again. If you have a 2nd mortgage and your home’s value is lower than the balance on the first mortgage, then you may qualify to have the 2nd mortgage removed from your home.

Volker Pispers bespricht Schulden

If you don’t understand about debt, trust me, it’s not because you don’t speak German, it’s because you grew up in a world where debt is a drug and we’re all addicted.

Volker Pispers über Schulden (19.11.2011)

So we have a debt crisis, and how do we get out of it, with growth. And how do we support the growth? With Debt. Do you know the song, “there’s a hole in the bucket?”

Because Friends Don’t Let Friends Pay Credit Cards From Savings

Why Bankruptcy? Because Friends Don’t Let Friends Pay Credit Cards From Savings
Legal Notice: You are not my client, this is not legal advice, it’s a bunch of codswallop and hogwash, rely on it at your own peril, nor does reading this article make you my client. If you rely on this information and use it in your case and it goes badly for you, tough noogies.

So you’ve lost your job, broken your leg, gotten a divorce or someone has died.

You find out that on top of the $20K in credit card bills that you knew about, there’s another $30K that you didn’t.

I’ve heard all of this before.

Let this be a lesson to you, if you are letting your spouse do all of the finances, stop, wake up and smell the plastic. Go into the bills and read each one. If English is not your strong suit, bring a friend. Chances are, if only one spouse is ever doing all the accounting then that person may have bad things hiding in that pile of papers that he or she refers to affectionately as the bills.

No, it’s probably not a girlfriend or boyfriend, could be but probably not, but it could be a gambling problem or worse. And it could just be that after 15 years of spending $200 more per month than you earn, the total balances on all credit cards is now $36,000 higher than you thought. ($200 x 12months) x 15 yrs = $36,000. Of course it will be a bit smaller because of monthly payments or it could be a lot higher if some cards were used to pay other cards which usually happens after a few years of living that way.

I once had a client whose spouse had a gambling problem, that spouse had a friend who was a notary, who also had a gambling problem. They were partners in crime. While the innocent spouse was out to sea double entendre intended with the Navy, the stateside spouse and the in-cahoots-notary got together and created a 2nd mortgage and pulled all the equity out of the house and gambled it away while the innocent spouse was gone. Needless to say the innocent spouse also asked me if I do divorces, I don’t.

Face it, if you’re letting your spouse handle all of your finances, then guess what, eventually you’re going to end up alone and living la vida broke-a because you’ve only got a 50-50 chance of not getting divorced, but the other half end in death and either way, one or both of you ends up alone. I cannot begin to tell you how many widows and widowers I’ve met with who had no idea that the life insurance hadn’t been paid, had no idea that the cash value in the life insurance had been withdrawn and spent on girls, guns, boys, gambling, drugs, alcohol, and good times. More often, it’s like I stated in the first place, you’ve been living on $100 to $200 less per month and paying that difference with credit cards for the last 15 years, and I’ve seen that go on for 25 years as well. You’ve been just living a bit above your means, or your income.

So, you’re broke and alone and you realize that you’re not completely destitute, there’s some savings socked away somewhere.

Let’s say you find you’re left with $50K in debts on credit cards and unsecured loans, such as signature loans.

You’ve got $100K in your 401k plan, $20K in cash in the bank, some clothes, some furniture (no antiques or heirlooms), one 12 year old Honda Accord with a big rumple in the fender, you’ve got wedding rings that are 20 years old and you only paid $1000 for them back then (retail), your home is worth $200K and you’ve got a loan on it for $150K. And that’s all you’ve got.

You don’t have a job, you’re alone and you’re 50 years old, and you if you could get a job, you have no currently usable skills. Your only income is your dead spouse’s retirement which pays $1500/mo. What should you do? Please realize I can’t fit every scenario into one blog article. If you have specific questions you’ll have to call.

Most of your friends, Suze Orman and that buckets of money guy will probably tell you to pay off the credit cards with the cash and then tap into the 401k or pull some equity out of the house. Some of the financial pundits will get a little cheeky and say you should offer each credit card 30% or 40% and try to settle them for an average of about 35cents on the dollar. That way you could use the cash, not tap into the 401k or the house and still have a little left over. While it’s not a bad solution, remember that you still only have an income of about $1500/mo and your mortgage probably comes to about between $800/mo to $1200/mo depending on when it was refinanced last and many other factors. Even if your mortgage is low, how do you live on only $700/mo. It can be done but that’s a different article coming soon.

Why pay them even 35% when you could pay them 0%? After paying your bankruptcy attorney approximately $1500 in attorneys fees and the $300 filing fee for the case, you’ve only paid out about 3.5% of the total balances on the cards and loans. In CALIFORNIA you can keep the 401k, you can keep the equity in the house, you can keep the $20K in cash, you can keep the clothes and furniture, you can keep the little bit of jewelry, and yes, you can keep the old beater car. Is 3.5% better than 35%? No brainer.

In other words, you keep everything except the cost of filing the case. If any of the credit cards comes forward and says that that debt was created via fraud, you can say that it wasn’t your fraud, the missing spouse did it. And yes, even if the card is in your name, if it was identity theft, (your spouse stole your identity to create a card in your name), that’s not you committing fraud, it was your spouse. So sue him or her.

Bottom line, you’ve still got your 401k, your cash savings which must guard with your life because you don’t have a job. If you only spend $500/mo of it, it will last you 40 months on top of the $1500/mo in income that you do have in our little example above. You can see that if you can’t find a job in the next 40 months, then at least you had that much breathing room. If you paid out a 3rd of your savings to pay off credit cards then you’d have a year less than 40 months to find the next job. How much of a cushion is enough? With 40 months you could go back to school and finish a degree.

Sure they’ll tell you that employers are looking at your credit scores, and some do, but not if you have no interesting skills other than how to raise a family. I’ve got friends older than me who are working at Home Depot now. Great way to supplement the income but after years of raising a family there’s no other jobs they can do. I’m pretty sure credit was not an issue.

I’ll tell you about identity theft in another article.

For now, just realize that if you can keep all of your savings and file bankruptcy, why would you ever, ever do what the financial pundits tell you and pay off credit cards with savings when you don’t have a job? Anyone telling you to do that must have a freaking hole in their head. DON’T DO IT. Just Say NO. If you are not in California, go to the attorney of your choice and ask what you could keep if you filed a bankruptcy in that state. Also, if you live in Arizona, move to El Centro or the nearest California City closest to you and commute to work if you have a job or whatever you commute to and then file. That way you won’t be an Arizona resident when you file and, while you won’t get to keep $20K in cash like you would if you were from California, it will at least be substantially more than what Arizona will allow you to keep when you file.

How to Discharge Income Taxes in Bankruptcy

Before we get started, Disclaimer: Nothing in this article may be mistaken as legal advice. Attorney David Nelson, is licensed only in California, and this article is intended only for readers in California. This article is for entertainment, educational, extra-curricular, and medical purposes only.  If you decide to rely on this, heaven help you.

Chapter 7

Yes, you can discharge taxes in bankruptcy.  No, not all of them but some of them.  I hate to mention this part, when it comes to credit cards, medical bills and collection agencies, I only want one statement so that I have the addresses, account numbers and balances.  But with the IRS, Franchise Tax Board and Board of Equalization, I want you to bring every letter with you that they ever sent you.  In those letters are the answers to many of the questions and rules we will go over below.  California sales taxes are calculated against gross receipts and therefore discharge in bankruptcy under the same rules.

To discharge income taxes, whether Federal, State, or California Sales Taxes, many rules have to be followed.  Because this article only discusses income taxes, then it is important to remember that these are taxes that are assessed against gross income or gross receipts. See 11 USC 507 a 8 and 11 USC 523 a 1

There are several rules involved.  What’s worse is that the rules all involve the timing of the bankruptcy.  Often you’re in my office because of a lawsuit or a wage garnishment, or your bank account has recently been levied and you want to file immediately in order to stop the bank or your employer from sending your money to the Sheriff’s Office.

Problem is this, if you owe a bunch of money to the IRS and have to wait to file your bankruptcy in order to get rid of the tax, you’re going to have to decide whether the amount of tax to be discharged is more or less important than the amount of money the Sheriff is about to take away from you.  Notice that I said more important not bigger.

The Rules

  1. The tax year must be over.  Kind of a “No Duh” moment.
  2. The tax return (if required) must have been filed.  This is also a “No Duh” moment.  Prior to 2005 you used to be able to discharge the tax even you hadn’t filed if you chose to file a chapter 13 bankruptcy instead of a 7.  Many great things about the bankruptcy code were eviscerated in 2005 when republicans and democrats who had taken hundreds of millions of dollars in lobby money over the course a decade finally gave us bankruptcy reform.  Conveniently this happened right at the start of the economic downturn. Literally, the housing market went flat one month before the bankruptcy reforms went into effect. Hmm, I wonder how the banks knew it was finally time to get the bankruptcy reforms passed? Bottom line is, if you owe federal or state income taxes in California and you haven’t filed your returns, your bankruptcy is not going to help you get out of paying your taxes.  So file your tax returns, make sure you get proof that they received them, and call back in two years.  DISCLAIMER: Make sure that you speak with an attorney now and get this advice from an attorney as bona fide legal advice before you make your decision.  This article is not your legal advice.
  3. The tax return’s due date must have been more than 3 years prior to the filing date of your bankruptcy petition.  Notice it says “Return’s Due Date”. Commonly called the 3 year rule, this is where most people stumble and file their bankruptcy petition too early.  Tax Returns are due in April!  On top of that, if you got an extension to August, then they were due to be filed in August.  What if you extended to October?  If you cannot remember if you extended, contact the IRS and get an IRS Transcript for the tax year or years in question.  You can download the Transcript request from the IRS website. Alternatively if there is nothing else pressuring you to file you could just wait until October 20th to file.  I assume you can get a tax transcript from the Franchise Tax Board or Board of Equalization if you need one.
  4. If you filed your tax returns late, your returns had to have been filed with the IRS or other taxing agency at least 2 years prior to filing your case.  This is true whether you owe income taxes to the IRS or the State of California or whatever state you owe taxes too.
  5. Assuming you have beaten the 3 year rule, and the late filing rule, you still have to have beat this one.  The tax must be assessed at least 240 days prior to filing your bankruptcy petition. That’s about 9 months. Assessed means that they have decided you owe, how much and told you so.  In California, you get a letter that says: Notice of tax due.  It won’t say “assessment” and probably won’t say “assessed” either.  California’s notice of tax due is a weird animal, it does not become effective until 60 days after they send it.  So, in California, it’s a 300 day rule from the first letter.  Our Franchise Tax Board will send a 2nd letter stating that the notice is “final” and from there your 240 days starts. At this point people often ask the IRS, Franchise Tax Board or Board of Equalization if they will take less, give them a break.  Called an offer to compromise, if you’re going to file a bankruptcy, DON’T DO IT.  An offer to compromise delays the 240 day rule.  Sort of like the extensions on filing your tax returns under the 3 year rule.  You have to add 60 days to the time that your offer is pending plus the time that your offer is pending to the 240 days.  That can extend your 240 days automatically by 60 days even if you withdraw the offer to compromise the tax debt on the same day as you make the offer.  If you filed a bankruptcy previously during the 240 day period and it was dismissed and now you have to refile, you must add the amount of time your bankruptcy was pending to the 240 days plus another 90 days.  So, even if your previous bankruptcy was dismissed after a month you must add 4 months to the 9 months.  That’s an overdue baby.

A client, and no kidding his real name was Groucho Marx, (the names were changed to protect the innocent) owed $50,000 to the Board of Equalization, and $250,000 to the IRS. And no kidding, his rich uncle, (it wasn’t his uncle) died and left him some money, 15% of the total taxes owing.  After calling the IRS and talking them into taking a 15% pay off, the IRS put a condition on the deal, he had to get the State of California’s Board of Equalization to take the same deal.  Stupid condition but that’s what they told him.  So, he calls the BOE and says hey they’ll take 15% if you do, what do you say?  Unfortunately, they said, “we’ll get back to you.”  A week later they answered by taking all of his money out of his bank account.

The Board of Equalization and Franchise Tax Board in California are a bunch of rats clamoring over a cadaver with very little meat left on it’s bones.  If you ever make an offer to compromise a debt, never have the money in an account with your name on it.  Never have it in your wife’s account.  Never have it in your S Corp’s or your LLC’s name.  In fact, you might want to have it in a hole in your back yard before you make the call.

Chapter 13

The rules are nearly the same but you get to put the taxes you owe into a payment plan.  Plan details can be tricky but you no longer get the good benefits such as discharging taxes without filing the returns and so on.  Good luck to you.

Disclaimer: Nothing in this article may be mistaken as legal advice. Attorney David Nelson, is licensed only in California, and this article is intended only for readers in California. This article is for entertainment, educational, extra-curricular, and medical purposes only. If you decide to rely on this, heaven help you.

Cash for Keys

If you lose your home to Foreclosure . . .

If you cannot afford to pay for your home, if you cannot eventually get a loan modification, if a Chapter 13 just won’t work for you, then you will lose your home.  Even if you do a chapter 7 and avoid a foreclosure for a little while, if none of those other options will eventually work for you, then you will lose your home.

Keep in mind that a fantastic option is available but only if you start early enough.  Short Sale can help you immensely by avoiding a foreclosure which means a much smaller hit on your credit than a foreclosure.  Your realtor who is probably a relative or close friend will get a commission, the bank will get paid better than it would have if you’d gotten foreclosed and it’s a win win win situation.  If your Realtor is a close relative or family friend, then think of what it means to keep the business in the family.  Because if you’re going to lose the property anyway, why wouldn’t you help your siblings and friends pay their bills too.

At that point, once the home has foreclosed and/or been repossessed by the bank, within a few days, usually only 2 or 3, a Realtor working for the bank will show up and ask you to move.  When they do, they’ll often offer you some moving money.  Usually it’s about $3000.  I believe there’s an Obama stimulus plan which reimburses the bank up to $3000.  A client of mine told me that his offer went like this: $3000 if they were out in 2 weeks, $2000 if out in 3 weeks and No thousand dollars if longer than 3 weeks. Behind the money is the hope on the part of the bank that if you expect to get paid, you’ll have to leave the property in a livable condition, not scrubbed but clean, carpets not shampooed but the house broomed out.  Above all, they want the sinks, faucets, toilets and carpets to still be in the place once you’re gone.

Most of you in this situation have probably already started looking and maybe even found a place to go.  I recommend you keep enough furniture in the house to make it look like you still live there, if you have moved, they won’t offer you anything.

Broom cleaning is usually all that’s required and sometimes they’ll ask you to leave the major appliances behind.  If they are yours and you cannot afford to replace them, let the realtor know that you have take them with you.  Usually you can work something out and these are much less critical than are the sinks, faucets, doors, door knobs, carpets and toilets.

The agreement between you and the real estate agent for the bank will state that you must have the place empty on the last day, and that the real estate agent will inspect the property before turning over the check.  If you haven’t cleaned all the trash out of the garage, you’re not getting the check.  If you have packed up the sinks, faucets, carpet and toilets, you might as well not both showing up to ask for the check.  Besides you don’t want to walk out with fixtures because there’s a good chance the bank will sue you.

Your Landlord has a Foreclosure

If your landlord has a foreclosure on the property that you’re living in, you have a unique situation.  Now the bank must be really nice to you.  The law requires that they give you the cash for keys and that they give you more time to move.

My personal favorite part is this: the landlord can no longer do an inspection and determine how much of your deposit he has to pay you back.  If you are paid current on the rents, he still must send you a settlement letter within 3 weeks and pay back your deposit.  However, you and I both know he doesn’t have it.  If he doesn’t send the settlement letter and payment on time, you can sue him for 3 times the balance due to you.  If your deposit with $1500 you sue him for $4500 in small claims.

If he files a bankruptcy on it, and tries to say that the deposit is discharged in bankruptcy, you tell him that it was money held in trust and therefore not dischargeable.  You will want a bankruptcy attorney who does creditor’s work to help you and you will have to do it during the bankruptcy or you may lose your rights.

Rebuilding Credit After Bankruptcy

David,

If you or anyone you know has ever file bankruptcy than for them to get back on their feet [fast] they MUST know…

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How to Rebuild Credit After Bankruptcy Copyright 2011 / All Rights Reserved
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See the video article here:
http://www.creditrepairpublishing.com/rebuild-credit-after-bankruptcy

In this article we’re going to cover what I believe to be the best strategy for rebuilding credit after bankruptcy.

If you stick to some basic rules and follow some very basic steps you may be surprised to find that you can have a very healthy credit score within a relatively short amount of time after your bankruptcy. Before we get into the method itself, let’s talk a little about why it works. This “credit after bankruptcy” strategy works because of a special aspect of the credit scoring system known as “scorecards”.

In credit scoring, a “score card” categorizes and scores consumers based on their credit performance compared to others in their same category. It’s kind of like the credit world’s equivalent of “grading on a curve”, but this “grading curve” can hurt you just as much as it can help you.

Both FICO and the newer Vantage score use scorecards, so the general discussion here should apply to both. A scorecard might, for example, look at patterns for consumers who have filed bankruptcy. Statistics might show that if a consumer has late payments within a few months of bankruptcy, hey are highly likely to have even worse credit problems in the future. Statistics might also show that consumers who keep their credit clean after bankruptcy for at least a year or two are much less likely to default on loans.

This means that consumers on the bankruptcy scorecard who have late payments popping up within a year or two of their bankruptcy will likely see their score drop even more and will have an extremely difficult time bringing it up from there. Why? Because it looks like they haven’t learned their lesson, and they’re continuing with their old ways.

On the other hand, a consumer who takes good care of their credit and starts building a positive payment history after their BK could see a seemingly disproportionate jump in their credit score.

What does this mean for your efforts to rebuild credit after bankruptcy?

We’ll cover that now.

The #1 most important rule that you absolutely must follow after your bankruptcy is to keep your credit SQUEEKY CLEAN.

Seriously, you cannot allow yourself a single slip up. If you do, the scorecard effect is going to work against you and your score will suffer more and for a longer period of time than it would otherwise. The next thing that you have to do is to make sure any negative items on your credit report that were included in the bankruptcy are being reported as such. As included in the bankruptcy. Again, because of the scorecard effect, these incorrectly reported negative items can wreak havoc on your credit score. The third and final thing to do is to start the process of rebuilding credit after bankruptcy by opening up NEW positive primary credit accounts (NOTICE IT DOES NOT SAY REAFFIRM A DEBT DURING YOUR BANKRUPTCY! ~David L Nelson, Bankruptcy Attorney) and building a positive payment history. The best place to start is probably with secured credit cards, sub-prime credit cards or merchandise cards (or all three), and then slowly build your credit score by building up balances and paying them off over time. This will build new payment history which is very important after a bankruptcy. Again, the scorecard effect will come into play here and as long as you’ve kept your credit clean, it’s highly possible you’ll see a good jump in your credit score in a relatively short amount of time. Also remember that while these credit building tools might not seem too great in and of themselves, they are a stepping stone to better forms of credit that you will soon get offers for and qualify for if you stick to this plan. It might sound like it would take a lot of time but if you are proactive and start immediately after discharge, you can actually see your credit score reach the “good” range in as little as a year or two after your bankruptcy.

Sincerely,Jessica Ryan
Zodiac Publishing

Recent Client Testimonial

David and Anna,

My husband and I wanted to express our sincerest ‘thank you’ for your depth of preparation, and guidance prior to our hearing date.

While awaiting our turn with the trustee it was unsettling to witness not only individuals  whom paid outside parties for assistance assuming they’d save money yet receive the same level of service which was definitely not the case. It was far more disappointing observing the trustee extend many hearing dates to petitioners whom already had attorney representation. We both realized after observing, and listening to others prior to our hearing that we made the absolute best choice in representation.

We will highly recommend your services not because of your preparedness, and knowledge, but more importantly we will recommend your services because you’ve afforded us peace of mind in a dignified manner to move forward…

Sincerely,

Mr. & Mrs. Ochoa

If you’d like to use this on your website please feel free to do so.

It would be nice for others to know they too can find some peace with a kind hearted professional person that deserved of more business.

Bankruptcy Means Test Basics

Bankruptcy Means Test Basics

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Bankruptcy Means Test is the Chapter 7 Qualification Test. However, if you do not qualify for a 7, it is also used to determine the amount of your chapter 13 plan payment. Additionally, it determines the duration of you chapter 13 plan.

If your income is above the median income your chapter 13 payment plan must last for 5 years.  If below then only 3 years.

You can always file a chapter 13 which is often a much better idea than a debt consolidation. A chapter 13 is a type of debt consolidation however, you as the consumer have the upper hand.  You have the power.

Attorney David Nelson, Bankruptcy Attorney, temecula bankruptcy attorney, murrieta bankruptcy attorney, Menifee bankruptcy attorney, Lake Elsinore bankruptcy attorney, Lake Elsinore Bankruptcy, Canyon Lake bankruptcy attorney, bankruptcy, canyon lake, canyon lake bankruptcy, chapter 7, chapter 13, corona bankruptcy, corona bankruptcy attorney, lake elsinore, menifee, menifee bankruptcy, menifee bankruptcy attorney, murrieta bankruptcy, murrieta bankruptcy attorney, perris bankruptcy attorney, riverside bankruptcy attorney, wildomar bankruptcy, San Diego Bankruptcy Attorney, San Diego bankruptcy

Reaffirmation Agreements

REAFFIRMATION AGREEMENTS

A Reaffirmation Agreement is a new promissory note to keep paying on an old contract for the purchase of goods where the lender can repossess or foreclose the goods.  Because you have signed a security agreement the lender has the right to repossess or foreclose if you do not pay for it.

Chapter 7 bankruptcy discharges your personal obligation to pay the loan, or in other words, you no longer have to legally pay on the note.  However, the lender still has a lien on the object(s) in question. Jewelry, refrigerators or large appliances, and most notably cars can be repossessed in this way.

What a reaffirmation agreement does: It allows you and the lender to agree that you may keep the goods so long as you continue to pay for them.  When executing a reaffirmation agreement with the lender sometimes the lender will reduce the balance owing, the interest rate or both.  As a result the payment and term can be reduced.

Nowadays most lenders will not reduce the interest rates and balances on cars.  Home mortgages never do.  You can often reduce the balance and interest rates on appliances, jewelry, computers and motorcycles.

If you do sign a reaffirmation agreement, you will have 60 days to change your mind and rescind it.  Rescissions must be in writing, served on the creditor and preferably filed with the court.

MORTGAGES

You would never reaffirm a mortgage.  Never.  Seldom but sometimes a mortgage lender will tell a client that the client’s post bankruptcy mortgage account would show up as good credit on their credit report if the client had just done a reaffirmation agreement.  It’s all the bankruptcy attorney’s fault that the client’s credit is not better than it is right now because he didn’t tell the poor client to reaffirm the mortgage.

Most mortgage companies will not do this to you, just a few.  Ones that do are unscrupulous and are aiming to get you to sign your life away.  They want you tied to that mortgage through the reaffirmation agreement come hell or high water.  If they can just do that, then if you foreclose, maybe they can sue you.  If you are in a worse position later, maybe you have to short sell, and when you do, they will ask you to pay them back sometimes, $10,000 to $50,000 in order for them to approve the short sale.

No, we don’t know what will happen, but I have a client right now who is being sued by a lender, his former first mortgage, who asked him to sign just such a promissory note in order to approve his short sale.  Fortunately for him, he did not do a reaffirmation on his mortgage during his bankruptcy.  Therefore, his mortgage company cannot in fact stick him with the debt, but for some reason they think that they can.  Wrong, they cannot.  We will be suing them soon for violating the Bankruptcy Discharge Order.

Because we do not have a crystal ball, and because the length of the term of a mortgage is so long, we NEVER sign a reaffirmation agreement on a mortgage.  This is the industry standard.

CARS AND VEHICLES

Legally, WITHOUT a reaffirmation agreement the lender can repossess your car, even if the car payments are current.  However, at this writing, the only companies who do are Ford Motor Credit & Jaguar Credit & California Coast Credit Union.   I cannot promise that other companies will not change their policies and begin behaving like Ford.

WITH a reaffirmation agreement, as long as the payments are current, then they cannot take the car just as before the bankruptcy.  However, just as before the bankruptcy, if you get behind in payments they will take the car AND sue you for a deficiency balance.

If you get behind, WITH or WITHOUT a reaffirmation agreement, they will definitely repossess the car.  So, the thing to do is to ask yourself, is the economy getting better or worse?  Answer:  Worse, my business is constantly picking up.  Everyone who comes in tells me that the business they work for is dropping off.  Fewer orders, fewer sales, employees are being let go.

So, if you just keep making the payments and don’t worry about it, you have a great probability of nothing changing, and eventually once the vehicle is paid off, they will still have to give you the pink slip.

If you sign and file a reaffirmation agreement, and then change your mind, you have 60 days to do so in writing and it must be in writing, signed and filed with the court.

Temecula bankruptcy attorney, Murrieta bankruptcy attorney, Lake Elsinore bankruptcy attorney, Canyon Lake bankruptcy attorney, Menifee bankruptcy attorney, Perris bankruptcy attorney, Riverside bankruptcy attorney, Corona bankruptcy attorney, San Diego bankruptcy attorney, Los Angeles bankruptcy attorney, LA, and Orange County bankruptcy attorney

Bankruptcy Attorney David Nelson

Temecula Bankruptcy Attorney David NelsonTEMECULA BANKRUPTCY ATTORNEY DAVID NELSON

I have been a Bankruptcy Attorney since the very beginning. Having graduated in the top 15% of my class I passed bar the first time and in June of 1994 I opened my law office.  Back then there was a recession and it was just natural to open a bankruptcy practice.  I saw a need and was able to fill it.

I’m an expert in the field of bankruptcy.  Since 1994, I have been passionate about getting my clients out of the troubles they find themselves in.  Certainly many of us might think that if we’d just planned better, we would have been able to avoid the challenges facing the country right now.  While it might be true, it’s probably more accurate to say that there was no way to plan our way out of the whole economy crashing down on us.

I’ve seen first hand the blessing that Bankruptcy can bring to individuals and families.  Think about this for a moment:  What is it that you fight about the most?  Is it too much money, “Dang what are we going to do with all these 20s honey?”  No, it’s the lack of money.

But what if we could cut the arguments in half?  What if we could at least take the arguments from: which debts do we pay this month with the little bit of money we have? and transform those to: how do we set up a savings for the little that we have?  That’s what Bankruptcy can do for you.

If you could start the day knowing that your credit cards, medical bills, repossessed cars, 2nd mortgages, and so on were all going to just disappear, how would you feel the rest of the day?

Wouldn’t you treat your spouse better?  Wouldn’t you be kinder to your children and co-workers?  Wouldn’t you have a better marriage, family, career?

I’ve probably saved more marriages than most marriage counselors over the same time period. You don’t need to know how to talk to each other about money, you must do something about it.

What if you could go back to paying your tithing or your favorite charity again?

Do something about it.  Make the Call Right now to set the Appointment that will change your lives.  Call 800 FILE AWAY or 800 345 3292, call right now.

Temecula bankruptcy attorney, Murrieta bankruptcy attorney, Lake Elsinore bankruptcy attorney, Canyon Lake bankruptcy attorney, Menifee bankruptcy attorney, Perris bankruptcy attorney, Riverside bankruptcy attorney, Corona bankruptcy attorney, San Diego bankruptcy attorney, Los Angeles bankruptcy attorney, LA, and Orange County bankruptcy attorney

Chapter 13 2nd Mortgage Lien Stripping

Chapter 13 2nd Mortgage Lien Stripping

You may be able to strip your 2nd mortgage or home equity line of credit, Heloc, off of your home in a Chapter 13.  Not only can you discharge the loan, or promissory note that you signed when you executed the loan docs, but you may also be able to remove the lien from your home as well.  If the Bankruptcy Judge assigned to your case agrees, then once your chapter 13 case is over, the creditor must release the lien.

You may also be able to remove the 2nd mortgage from a rental property and in addition, you may also be able to reduce the 1st mortgage as well.  Rental property properties have different rules than residences do.  An important distinction, you must remember that if you live in the house, you have fewer options than if you have moved out and rented the place.

IT WORKS PRETTY MUCH LIKE THIS:

A 2nd mortgage, or home equity line of credit, has two things over you:

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a) the have the note that you signed promising to pay
b) they have a deed of trust or trust deed on the house which is a lien on the house
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Chapter 7 Bankruptcy discharges the Note or the Loan, but you still have the Lien or Trust Deed on your house.  Even after your bankruptcy, your 2nd mortgage lender can foreclose the lien, but in order to do so, it must first pay off the 1st mortgage and any unpaid property taxes.

This is a big difference between the two chapters of  Consumer Bankruptcy.  After a chapter 7 is over and completed, the 2nd mortgage could still foreclose on the house later.  Over time, the value of the property will go up. The house will appreciate.  After it’s value increases to a point where the value of the house is greater than the balance on the first mortgage, the 2nd mortgage would be in a position to foreclose the property.

So, what you do is:

1.  Get an appraisal.  We must be able to credibly state that the value of the home is significantly lower than the balance on the 1st mortgage.   If your value is lower but close, you run the risk of expensive litigation in order to strip your 2nd mortgage or home equity line of credit.  Of course, if the balance on the 2nd is large compared to the cost of the litigation, then it’s worth the effort.  As long as you know that the attorney’s fees could be significant as you’re going into the deal, then it’s fine if you want to spend the money.  Nevertheless, those attorney’s fees would be on a three to five year payment plan so it should be manageable.

2.  If the value of the home is lower than the balance on the first and it is significantly lower, then the mortgage lender on the 2nd mortgage or Heloc, Home Equity Line of Credit, won’t fight it, and you’ll win by default.

3.  If the value of the home is greater than the balance on the first, even just a little bit, then you lose and you’re stuck with the whole 2nd mortgage.   Remember however, there is a difference between your primary residence and your rental properties.  Respecting your primary residence, you can only remove your 2nd mortgage, or not.  Rental properties however, can have 2nd mortgages removed, 1st mortgages reduced, or if the value of the home is above the balance on the 1st mortgage, the 2nd mortgage (or heloc) could be reduced so that the total balances on all mortgages are equal to the value of the property.

Caution

Chapter 7s are risky. We don’t know how long it will take the values of our real estate to increase.  If you do a chapter 7, you will discharge the loan, or promissory note.  Nevertheless, you will still have the deed of trust still attached to the house.  So at some point you must settle that 2nd mortgage with that bank.

Chapter 13s are risky too.  They can allow you to strip the 2nd mortgage off the house completely.  Risky because chapter 13 (on your primary residence) requires that you immediately go back to paying your regularly scheduled monthly mortgage payments on your 1st.  If the 1st mortgage has not yet been modified on the date of filing the bankruptcy, then you’d be stuck with the unmodified mortgage payments.

All chapter 13s must be approved by the judge assigned to your case.  Called a confirmation order, many cases end up falling short because people who want to remove the 2nd mortgage often propose payment plans that are unrealistic.  In other words the budgets they propose for themselves are just too tight.  Your attorney will refer to such a budget as unfeasible.  Feasibility just means that you really can afford to make the monthly payment to the bankruptcy trustee on your case.  To be confirmed, a case must be feasible, and you must convince your judge and your bankruptcy trustee that you can afford to to make the chapter 13 plan payments.

Additionally, most chapter 13s never get completed once they are confirmed.  More than 70% don’t get a chapter 13 discharge because something happens that derails the payment plan such as a work stoppage or an illness, or even just a busted transmission.  Either your earning capacity has been reduced or your ability to pay has been eclipsed by a more pressing expense.

Stripping the 2nd mortgage off in a chapter 13 requires that you complete the payment plan.  If your hypothetical plan payment is $350/mo and you pay it for 2 1/2 years that’s a total of $350 x 30 months = $10,500.  What if you cannot pay it anymore because of a work stoppage, you get fired or laid off, you break your leg, your transmission goes bad? You’re not going to complete your chapter 13 payment plan.  Guess what, you just tossed $10,500 out the window.

So, to strip a 2nd mortgage off of your primary residence,

  1. the value of the property must be lower than the balance on your first mortgage
  2. you must be able to pay the 1st mortgage payment,
  3. you must get the judge to agree that you are able to afford the plan payment,
  4. and you must complete the plan which will be 3 to 5 years long.

How Much Will My Chapter 13 Plan Payment Be?

Plan payments depend on a couple things

  1. how much excess income you have at the end of the month
  2. how much the means test says you must pay
  3. how much you owe on unpaid mortgage payments from previously unpaid months called arrears
  4. back taxes and child support
  5. the balance owing on your car
  6. how much of your attorney’s fees were paid in advance
  7. how much you usually get as tax refunds
  8. and several other possible issues

You will have to call for a consultation on the issue in order to get an estimate.

Call 800 FILE AWAY or 800 345 3292, call right now for a consultation.

David L Nelson
Temecula Bankruptcy Attorney
Temecula bankruptcy attorney, Murrieta bankruptcy attorney, Lake Elsinore bankruptcy attorney, Canyon Lake bankruptcy attorney, Menifee bankruptcy attorney, Perris bankruptcy attorney, Riverside bankruptcy attorney, Corona bankruptcy attorney, San Diego bankruptcy attorney, Los Angeles bankruptcy attorney, LA, and Orange County bankruptcy attorney

Debt Freedom and Retirement

Debt Freedom is Required for Retirement

If you’re like most of us, you’re planning to retire on your 401k or other similar Retirement plan. And you’re wondering if Walmart and McDonalds will have too many “senior” team members when you get there.  Because you’re going end up with a lower income than the one that you presently cannot live on, you wonder what will you do then?  Do you really think social security will be available?  Even if it is, how much buying power will it have?  My mom used to get the equivalent of groceries and utilities, and that was it.

I will teach you how a 2nd Mortgage can be treated as though Stripped Off your home even in a Chapter 7, and how you can in fact strip a 2nd Mortgage off your home with a Chapter 13.

Because your retirement income will most likely be lower, than your current income: If you’re still in debt at retirement time, you’re going to file Bankruptcy.  Why not file right now?  Put those credit card payments into your retirement accounts instead.  I realize that for most of you, if you didn’t have to pay consumer debts, you would not likely be able to just switch portions of your budget over to retirement planning.  You’re eating white bread from Albertsons with non-fat milk and telling yourself that it’s because the non-fat is healthier.  Just to pay the gas expense, you’re wearing sweaters at night and walking to the not as good park because you can’t afford to drive to the nice one with the lake.  Telling yourself and your kids that walking is good for you even though the slides are broken isn’t making you feel any better. I get it.  However, what if you could have a more normal budget and maybe put at least some into savings?

RETIREMENT AND KEEPING YOUR HOME:

YOU MUST GET OUT OF DEBT. When it comes to Retirement, or Wealth Building, getting out of debt is not the FINAL step but the FIRST. Mortgages must be part of the formula. How can you Retire when you’re in debt?

Here’s what I see everyday: Your Mortgage payment is $1500/mo and your 2nd is $500/mo.  In Credit Cards you have $25,000 with payments of another $500/mo.  Both Mortgages have 30 year terms.  At year 10 you start up a 401k plan and a personal IRA.  But how much can you put into either?  You’ve got $1000 in debt service going out of your budget every month.  Each month before you eat, you have to pay $1000 to cyberspace or “The Man”.

Assuming you have an income of $6500/mo and take home $5300 after taxes and insurances, and that you’re married and you have 2 children living at home.  First, I’d recommend, one of you must get a better job or another job as soon as possible.

$5300 Net Pay Less
$2000 Mortgages
$500 Debts and Credit Cards
$2,800 Left after that. (the rest of the budget must be calculated.)
$700 Two Car Payments
$500 Gas and Travel for the two cars
$100 Car Insurance
$40 Medical Expenses out of pocket
$800 Groceries (and everything that comes from the store) and Fast Food on the way to and from work, school and at work and school.
$400 Day Care
$400 All Utilities including Internet $30, Cell Phones $150, Home Heating & Cooking $100,  TV $50, Water $70
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You can see that this family’s budget is already negative.  Add clothing & shoes $150 (for four), life insurance $80, hair cuts & beauty shop $40, tithing/charitable giving $40, laundry/dry cleaning $35 and home maintenance $20 and you’re toast.

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Bankrupt already, and you just didn’t know it.

Filing bankruptcy for this family would be a fantastic idea.  Just think about it.  Even if they were stuck with the 2nd mortgage when it was over, how much better off would they be if they could just get out of under the credit cards payments.

In a Chapter 7 Bankruptcy they must Qualify.  Called the Means Test, the qualification test starts with your gross income and asks first are you above it or below it?  If above, then there is an 8 page questionnaire that you must go through to see if you qualify or not, and in my experience, 97% of my clients have qualified by the time we are done with the 8 page questionnaire.  In our current test case, the family makes $6,500/mo which is $78,000/yr.  The Median Income for a family of 4 this year is $78,869.00 and they get to skip the 8 page test.  Part three of the Qualification Test, we go their budget to see if they have any money left over when it is all said and done.  Even adding that $500 from the credit cards back in leaves them negative $5.00/mo so they have qualified for a Chapter 7 Bankruptcy.

In Chapter 13 you must also Qualify, but the test is basically this, can you afford to make a payment?  Why would you want to do a Chapter 13?  If the value of the home is lower than the balance on the 1st mortgage, then this family could do a chapter 13 bankruptcy and strip that 2nd mortgage off of the house.  In this case, they would divert the $500/mo that they are paying to their 2nd mortgage, or perhaps even a bit less depending on circumstances, and at the end of three short years, (in this hypothetical case) the 2nd mortgage is gone, the lien is released, and that $500/mo payment is gone forever starting 17 years earlier than planned.

I cannot stress this enough, what happens in month 37?

Okay, probably after a short vacation so probably in Month 40 or 45, they can now put that $500/mo that had been going into the 2nd mortgage into their retirement planning.  If it goes into an IRA, Life Insurance, 401k, or whatever, at least it is now going into their future rather than huge bonuses to Citibank and Chase Mastercard’s CEOs.

I would pay the 1st Mortgage off at this point. 17 years x 12 months is 204 months x $500/mo is $102,000.  Any mortgage with a $1500 payment could probably be paid off before the 17 years is over when you combine the 2nd mortgage payment with the first and pay down the first with $2000/mo instead of only $1500.

If you put the $102,000 into an IRA or a 401k how much would you have at the end of 17 more years, it’s hard to say, it could easily be only the $102,000 or it could be $250,000.  What will the monthly payments be from a pot of $250,000 when you retire?  I’m not a retirement planner but I’m sure it would be less than $1500/mo.

So with a chapter 7 our hypothetical family might have some breathing room.

With a chapter 13 they might be able to pay off their 1st mortgage and save for retirement. HERE’S A CREDIBLE PLAN TO RETIRE EARLY THAT CAN ACTUALLY WORK WITHOUT SELLING STUFF TO YOUR FAMILY AND FRIENDS.  (Not that there’s anything wrong with that.)

It depends on the value of the house.

DO NOT WAIT, FILE NOW.  YOUR HOME’S VALUE WILL START HEADING BACK UP SOON IF IT HAS NOT ALREADY.  YOU MUST FILE NOW TO TAKE ADVANTAGE OF THIS.

Temecula bankruptcy attorney, Murrieta bankruptcy attorney, Lake Elsinore bankruptcy attorney, Canyon Lake bankruptcy attorney, Menifee bankruptcy attorney, Perris bankruptcy attorney, Riverside bankruptcy attorney, Corona bankruptcy attorney, San Diego bankruptcy attorney, Los Angeles bankruptcy attorney, LA, and Orange County bankruptcy attorney

Chapter 7 and Your 2nd Mortgage

Updated on June 13th, 2018.

While it is true that you may be able to strip these off of your home in a Chapter 13, in a Chapter 7, you may still be able to effectively ignore it (for a while) and keep your home.  However, the 2nd Mortgage or Heloc would still have a lien on the property.  You would then have to settle the lien or deal with it in some manner later on.

Your 2nd Mortgage or Home Equity Line of Credit – Heloc

has two things over you

a) they have the promissory note that you signed promising to pay

b) they have a deed of trust or trust deed on the house which is a lien on the house also called a mortgage. 

If you have filed a Chapter 7 Bankruptcy, then the Chapter 7 discharges the Loan or Promissory Note, which means that the mortgage company or lending bank cannot collect money from you directly. They cannot sue you, garnish your wages, levy your bank account, or even ask you for money or anything like that.

If you still own the home, then you still have that 2nd Mortgage Lien called a Trust Deed or Mortgage on your property. Chapter 7 Bankruptcy does not remove that kind of lien from your house, not in the 9th Circuit Appeals Court’s jurisdiction. Therefore, if the value of the house is high enough, then your 2nd mortgage lender can foreclose that lien, but in order to do so, it must pay off the 1st mortgage and any unpaid property taxes first.

Some Things You Can Try Include, But Are Not Limited To: 

1.  Refinance Your Second Mortgage: Yes, it may be an actual option. And as unlikely as it may seem or feel, if you have home equity now (at this writing in 2018) then a refinance may work but only if you have good enough credit. But how do you manage that after having filed a Chapter 7 Bankruptcy? Believe it or not, most credit repair services use the same techniques outlined in this Guide. In fact many use the very same Guide. Follow this guide to repair your credit including how to write letters to settle debts such as mentioned below. Download the Following Link Now and Get Started Right Away with The Attorney’s Guide to Credit Repair. It’s Fast, Easy and Guaranteed.

2.  If the Value of the house is higher than the balance on your 1st mortgage then you must deal with your 2nd mortgage now.  If it is lower than the balance on your first, then you don’t have to deal with them immediately, but you must deal with them eventually, because, remember, they have a lien on the house.

3.  If the value is relatively close to the balance on 1st mortgage then you will have to deal with the 2nd mortgage sooner rather than later because in not too much time, the value of the house will go up high enough for the 2nd mortgage company to be able to foreclose. If you cannot afford to settle it, you should consider trying a loan modification. 

4.  What most clients will do is make an offer to settle the 2nd mortgage lien in one payment, one time with no balance owing afterwards, and you must get that in writing from the bank before you mail your cashier’s check. You might have to take a massive 401k loan in order to be able to make such an offer, but if they take it, it would be worth it. 

5.  If you have previously filed a bankruptcy and then the 2nd mortgage lender cancels the debt and sends a 1099 for the “forgiven” balance next year, then you are able to deduct the amount because it was already previously “forgiven” or when you filed your chapter 7 bankruptcy and received your chapter 7 bankruptcy discharged. 

6.  Most clients will save as much as possible and then when they get a tax refund next year, they add that with the savings, and if possible, sell a car or some jewelry and then use that to make an offer to settle the lien. (Dear Reader, when I originally wrote this several years ago, most homes had much lower values and so it was so much easier to offer to settle such a second mortgage. However because home values have gone up considerably, it’s nearly impossible to do now.) 

7.  In any case, your Discharge Order from your Chapter 7 Bankruptcy prohibits  all kinds of collections.  Therefore, they cannot hound you, dunn you, or bother you, whether by phone, email or letters demanding payment of the loan or promissory note.  They have only one legal option, they can foreclose. It doesn’t mean that they won’t but knowing your rights, that they cannot, at least you can protect yourself.  REMEMBER however, that the 2nd Mortgage must pay off the 1st Mortgage in order to foreclose.

8.  If your home has significant value which it probably does, the loan modifications are an option to protect your home, and if necessary, selling your home as a method of preserving the home equity is also a great option. Not that those are the best options, but they are options. Additionally, Chapter 13 Bankruptcy may be a viable option as well.

THEREFORE, the probability of them foreclosing is lower and lower when the value of the house is lower than the balance on the 1st mortgage.  It’s simple math, they won’t pay off a $200K loan to get a $150K asset that they can then resell and only recoup $150K and they’d have to pay closing costs to sell it so they’d only net $120K. That would be a loss of $80K plus they would also lose all of the 2nd mortgage too which is probably another $50K or more on top of the $80K.

HOWEVER, when the 1st and 2nd are held by the same company and particularly if that company is a credit union, it may be possible that they’d foreclose anyway but if the payment on the 1st is getting paid, then it’s still not very likely.

Overall, when dealing with a 2nd mortgage, it’s risky, no matter what happens. A chapter 13 which would allow stripping off the 2nd mortgage, is risky too.  Even more so because your Chapter 13 Bankruptcy requires that you immediately go back to paying your regularly scheduled monthly mortgage payments on your 1st mortgage, and if the 1st was not yet modified on the date of filing the bankruptcy, then you’d be stuck with the unmodified mortgage payments. Also, most Chapter 13 Bankruptcies never get completed.  More than 70% don’t get a chapter 13 discharge because something happens that derails the payment plan such as a work stoppage or an illness, or even something unexpected such as a busted transmission. Stripping the 2nd mortgage off in a chapter 13 requires that you complete the three to five year payment plan, so it’s majorly risky because if you have a hypothetical plan payment of $350/mo and you pay it for 2 1/2 years and then if you cannot pay anymore and you don’t get your plan completed, guess what, you just tossed $350 x 30 months out the window.  That’s $10,500 that you’ll never get back, and that’s only if you get a payment that low to begin with.  Most are higher.

In Summary:

Offer to Settle Your 2nd Mortgage

So, in summary, making an offer to settle the balance on the 2nd after a Chapter 7 Bankruptcy, should aim to pay (I originally wrote 10% of the balance or less, but nowadays the percentage at this writing in 2018, must be much higher). However if the house is seriously upside down on the 1st mortgage already, you may be able to offer lower. But it does have to be paid in one payment once they accept and you must get them to accept it in advance in writing. You must not pay them unless you have it from them in writing that they will accept your settlement offer and that they will RELEASE the lien once they get the payment.

I’ll say it again just in case you didn’t hear me, they must agree to RELEASE the lien in writing once they get your payment. If they don’t agree to release the lien, don’t send the check.

Or Refinance Your Second Mortgage

1.  Refinance Your Second Mortgage: Yes, it may be an actual option. And as unlikely as it may seem or feel, if you have home equity now (at this writing in 2018) then a refinance may work but only if you have good enough credit. But how do you manage that after having filed a Chapter 7 Bankruptcy? Believe it or not, most credit repair services use the same techniques outlined in this Guide. In fact many use the very same Guide. Follow this guide to repair your credit including how to write letters to settle debts such as mentioned above. Download the Following Link Now and Get Started Right Away with The Attorney’s Guide to Credit Repair. It’s Fast, Easy and Guaranteed.

YOUR HOA MAY SUE YOU EVEN AFTER YOUR BANKRUPTCY

YOUR HOA MAY SUE YOU EVEN AFTER YOUR BANKRUPTCY:

THE BANKRUPTCY CODE SPECIFICALLY ALLOWS IT!  The Rule is that you can eliminate your personal liability to pay your Home Owner’s Association up to the date that you file your case.  But what happens AFTER?

YOUR HOME OWNER’S ASSOCIATION CAN SUE YOU IF:

FILING BANKRUPTCY STOPS FORECLOSURE, BUT YOU MUST STILL EITHER WORK OUT A LOAN MODIFICATION OR SETUP A CHAPTER 13 PAYMENT PLAN IN ORDER TO STRIP OFF THE 2ND AND CATCH UP YOUR FIRST. IF ALL GOES WELL YOU WON’T THINK ABOUT YOUR HOA, YOU JUST CONTINUE TO PAY IT.

IF THE ABOVE DOESN’T WORK OUT, YOUR AIM MUST BE FOR A SHORT SALE to avoid a Foreclosure after Bankruptcy.  Doing a Short Sale will take the Home Owner’s Association into account as part of the final deal and that will be that.

But if you end up with a Foreclosure after Bankruptcy . . .

FORECLOSURE AFTER BANKRUPTCY:

If you know that you can’t pay a Chapter 13 payment (YOU MUST CONSULT A BANKRUPTCY ATTORNEY TO BE SURE, NEVER ASSUME ONE WAY OR THE OTHER WITHOUT A CONSULTATION FIRST), & if you cannot pay your 1st, you are going to lose your property.  So, File a Chapter 7 Bankruptcy: Your 2nd or HELOC will no longer be able to sue once your Chapter 7 has discharged.  You can stay in the property a bit longer while saving up to move. You could get a couple or even several extra months Rent-Free! But if you don’t do a short sale, you will eventually have a foreclosure.

Your HOA will be able to sue you from the date that you filed your Bankruptcy until the day your property is foreclosed.  I have seen this more than once, a couple assumes that a short sale is on track, and then it doesn’t go through.  Meanwhile they have not been paying the Home Owner’s Association fees.  Probably they haven’t paid for a year prior to filing the bankruptcy so they are out of the habit of paying it.  Once the bankruptcy took place, they still didn’t pay because they couldn’t afford to, or they assumed that the short sale would take care of it.

But if you don’t pay, and there’s a foreclosure, you’re going to owe all HOA fees and assessments from the day that you filed until the day that you no longer owned the property. Because they banks don’t want to pay the HOA fees either, I have seen them take a couple years to actually repossess a house, especially if the family has already moved out.  $150/mo in HOA fees plus special assessments, attorney’s fees and costs adds up pretty quickly.

SO CONTINUE TO PAY THE HOME OWNERS ASSOCIATION FEES UNTIL THE PROPERTY IS SOLD OR FORECLOSED.  If you don’t want to pay the HOA Fees to the HOA because you expect a short sale to take care of it, put the HOA Fees into a savings account just in case the short sale doesn’t go through.  If it doesn’t go through you just pay them.  If it does go through, you have a small savings account to use as moving money, or maybe replacing your appliances.

Bankruptcy Attorney David Nelson

Temecula bankruptcy attorney, Murrieta bankruptcy attorney, Lake Elsinore bankruptcy attorney, Canyon Lake bankruptcy attorney, Menifee bankruptcy attorney, Perris bankruptcy attorney, Riverside bankruptcy attorney, Corona bankruptcy attorney, San Diego bankruptcy attorney, Los Angeles bankruptcy attorney, LA, and Orange County bankruptcy attorney

Why Bankruptcy?

Ever considered it?

Because Friends Don’t Let Friends Pay Credit Cards From Savings!

You may either make too much money or have too much equity in your assets, in which case, why bother?  You may have no job and nothing to take away from you, in which case, why bother?

However, if you are like most families and people, you have an average income, average sized family and not enough income.  An average income would have been fine some years ago, but now, you’re making less and spending more, even if you have the same job.

As the price of gas goes up, while that might be good for the country if it forces us off of gas, it also means that your discretionary spending is shrinking faster than we can rebudget the little that’s left over.  Trust me, if the price of gas does go back down, it’s going to bottom out at about $4.00 to $4.25/gallon because that’s how markets work.

What are you going to do?

If you’re thinking that it’s immoral, stop it.  Two things, first look up the Jubile (Jubilee in Modern English) in your bible dictionary.  Second, think of the parable that ends with the statement that you cannot serve two masters, you cannot serve God and Mammon. You will want to Google the meaning of Mammon but it translates as ill-gotten gains, (some translations just say wealth).  So, you cannot serve God and sin.  Kind of a no duh moment.

But watch what the servant did. In that parable the servant was told by the Lord of the House that he was going to be fired because he hadn’t collected on the accounts.  As the accounts manager of the House, (think of House the way the English use it to mean business) he was a bad servant because he hadn’t collected.

So, upon learning that he was about to be fired, he settled several of the accounts.  Inquired of several of the Lord’s debtors, he’d ask how much do you owe? Answer received, he’d settle the account.  Accounts of 100 measures of oil, or 50 bushels of wheat, or 100 buckets of barley, he settled for between 50% to 80% of the balance.

But what happened to him?  From the man who had threatened to fire him, he received a commendation.  Think about this.  Almost a promotion, he gets an “Attaboy” from his boss.  The business owner  actually thanks him.

Serving Mammon

Serving mammon is to try to get the last penny out of your debtors when in a tough economy no one can afford to pay. Wise action is when the accounts manager has enough sense to settle the accounts and at least get some money back into the business in order to continue operations.  In doing so, he made his boss happy to get at least something instead of nothing which is what he was getting when the accounts manager was holding out for full price.  In doing so, he also made friends outside the business just in case he did in fact get fired and had to leave.

What are your Creditors doing to you?  They’re trying to get the last penny out of you when in a tough economy no one can afford to pay. If they wont’ be the wise servant and settle the accounts with you, then you be the wise servant and settle the accounts with them.  If you can afford to pay a little, you do a chapter 13 and pay a payment plan.  If you cannot afford to pay, then this is your JUBILEE year, and you do a chapter 7.

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