Top 10 Things You Must Know About Your Chapter 13 Case with Judge Johnson

Judge Johnson

“Thus the best laid plans of mice and [attorneys] oft go astray.”

Because Judge Wayne Johnson of the Riverside, CA Bankruptcy Court knows this, he does his best to keep us on our toes. Of course, that’s a good thing. Attorneys who don’t stay on their toes will eventually wish they had.

He’s reviewed the local rules and procedures. He’s done a comparison of those with the Federal Rules of Bankruptcy Procedure and the Bankruptcy Code and found them to be conflicting and confusing.

In his Guidelines for Chapter 13 cases, he’s done his best to resolve the conflicts in a way that will comply with the law and allow for maximum success for chapter 13 cases.

This article is in no way a substitute for reading Judge Johnson’s Guidelines. You must Read them if he is the judge assigned to your case.

Read Them Here: Judge Johnson’s Guidelines for Chapter 13 Cases

Number 1

Deadlines is Deadlines. Miss a deadline and you’re dead, Judge Johnson will dismiss your case. Even simple ones such as turning in your tax returns and employment and income information at least 7 days prior to the hearing date.

In my office, my requirement is at most 7 days after the filing date. So, if you think his is bad, mine is worse. Besides, how could I prepare your case without your taxes and income information in the first place.  

So you have to bring that to your first meeting with me unless your taxes were extended and you haven’t prepared them yet. In that case, if you can, bring everything you’re going to have to use to prepare your taxes with you to my office.

Think of it this way, if you turn your taxes into your attorney on the 7th day before the hearing date, how is he going to mail it to the Trustee so that it arrives at the Trustee’s Office 7 days prior to the hearing?

Then there are deadlines that your attorney must comply with, such as serving your chapter 13 plan on your creditors. She or he must do it 28 days prior to your hearing date. Your hearing will in most cases be at least 45 days after your filing date, but not always. The form which must be used is HERE, and your chapter 13 plan must be attached. The form was recently updated, review it.

If your attorney misses the deadline, Judge Johnson will dismiss your case.

Number 2

See Number 1. If you are allowed to pay your mortgage payments directly to your mortgage lender, remember that your mortgage payment is a payment made “under the plan” and as such, it must be made on time. In other words you must pay it early from now on.

“Either the due date for all post-petition mortgages payments should be the original due date in the loan documents or the last date on which the payment may be made without penalty (i.e. at the end of the grace period). In cases governed by this standing order, the former shall apply and not the latter . . .”
                          ~Judge Johnson, Standing Order, page 33.

The Payment History Declaration, must be filled out if you are attempting to modify any debt secured by any real estate. “The “Payment History Declaration” should be completed, filed and served between seven to fourteen days prior to the confirmation hearing. It should be served upon the chapter 13 trustee and all creditors holding consensual liens against the property identified in the declaration. As set forth in the form, the Payment History Declaration must provide information regarding the amount of any and all monthly payments covering the period from (1) January 1st of the calendar year preceding the year in which the bankruptcy case is filed to (2) the date of the filing of the declaration.”
                          ~Judge Johnson, Standing Order, page 34.

If you miss the mortgage deadline, Judge Johnson will “generally” dismiss your case, although he could require conduit payments instead, see below.

Number 3

I’m tempted to say see Number 1 again, but there’s a lot more. For instance, many chapter 13 bankruptcies are filed to get caught up on your mortgage. You pay a payment to the bankruptcy trustee and he pays your mortgage arrears to the bank for you.

However, chez Judge Johnson, if you are more than 3 months behind in your mortgage payments, then you must also pay your regular mortgage payment to your bankruptcy trustee. Called a conduit payment, when you pay your regular payment to the bankruptcy trustee, you are less likely to get behind again because of the oversight. So, you are more likely to succeed in your chapter 13 case.

Because your payment will go up 5%, you may not want to do this. However, if you don’t want to pay your regular mortgage payment to the Trustee, Judge Johnson will dismiss your case.

Number 4

Appearance at your creditor meeting hearings is required, it is not optional.

If you’re one of these people who files a chapter 13 in order to stop a foreclosure while attempting a loan modification or short sale, and then you don’t show up to your hearing, Judge Johnson will dismiss your case and order that you are prohibited from refiling another case for 180 days.

So, if you find yourself in a similar situation 8 weeks later and you want to file again, you’re toast. But hey, that’s just what the rules and cannons of ethics require anyway.

Number 5

If you file an emergency case or bare bones case which doesn’t have all the schedules and statements because well, it was an emergency, you have 14 days to file the rest of those statements.

If you can’t get it done, then you might consider asking for an extension on those 14 days. However, if you do, then you will blow out the other deadlines such as serving the plan 28 days prior to the hearing. So, if you’re thinking of asking for that extension, don’t bother.

My office’s policy is to simply stay late and do the whole petition front to back and file the whole thing the first time. If it turns out that something must later be amended, then at least you’ve filed the whole thing on time.

If you file a bare bones emergency case and then file your balance of schedules after the 14 day deadline, Judge Johnson will dismiss your case.

Number 6

Your income schedule, called Schedule I, must match your proof of income. Trustee Danielson uses a Julian Calendar to calculate your income. We use them to determine how much money you will be making moving forward. In chapter 7, the means test looks backwards, but in chapter 13s we are looking forward.

Assuming that your weekly paycheck times 4 is your monthly income is an error. There are 4.33 weeks in a month. But more accurate is to use the Julian Calendar. That calendar shows how many pay periods you’ve had, then divide that into the gross income for that pay date. Then once you have the pay per pay period, multiply by 26 or 52. Then you divide by 12 to get your monthly income.

If you have to amend your income schedule, or schedule I, then it must be amended, filed and served, 7 days prior to your hearing, or Judge Johnson will dismiss your case.

If your income and your proof of income don’t match, Judge Johnson will dismiss your case.

Number 7

Your Attorney’s appearance at the Confirmation Hearing is required, and is not optional. That’s the hearing where the judge gives his or her final approval of your case. If your attorney does not show up to the confirmation hearing, Judge Johnson will dismiss your case. 

If you do not have an attorney, then you must show up, or Judge Johnson will dismiss your case.

However, even if you have an attorney, you should plan on being at the confirmation hearing as well. If your attorney has a car accident on the way there, then at least you were there, and you’d have a fighting chance.

Number 8

You MUST Read Judge Johnson’s Guidelines for Lien Strip Motions. Motions to Value Real Property also known as Lien Stripping Motions must be filed and served in time for the hearing on the motion to occur either before or during the confirmation hearing. If you miss the deadline, Judge Johnson will dismiss your case.

Motions to Avoid Judgment Liens on your real estate, also known as Lien Stripping Motions must also be filed and served in time for the hearing on the motion to occur either before or during the confirmation hearing. If you miss the deadline, Judge Johnson will dismiss your case.

Motions to to Value Personal Property also known as Cram Down Motions such as when you’re trying to reduce the balance on a car to its value must also be filed and served in time for the hearing on the motion to occur either before or during the confirmation hearing. If you miss the deadline, Judge Johnson will dismiss your case.

Number 9

The Motions to value in Number 8 are granted only conditional status and can only be made unconditional at the end of the case after you have completely performed all of your plan obligations and you have obtained a discharge. An adversary proceeding is required to obtain the final unconditional order.
Review Judge Johnson’s guidelines before you file your request as a motion or as an adversary proceeding. An adversary proceeding in bankruptcy is fancy way of saying lawsuit.

Number 10

So, let’s say you or your attorney blows a deadline and figures it out at the last minute the day before the hearing. You know that the case is going to be dismissed. Your attorney, bright guy that he is says, “Hey let’s just file a voluntary dismissal and then we can skip the hearing tomorrow. And then we’ll refile the case next week and not make any mistakes or get anything wrong this time!”

Nope, voluntary dismissals are not immediately effective. It takes a day or even a few for the judge assigned to your case to be told that it is there by his clerks, and to act on it.

Next day at your hearing, your trustee and your judge probably won’t even know that you’ve filed the voluntary dismissal. If you don’t show up to your hearing, SAY IT WITH ME! Judge Johnson will dismiss your case, and he will order that you are prohibited from refiling another case for 180 days.

“Thus the best laid plans of mice and attorneys go oft astray.”

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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.

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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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The One Secret That Matters in Judgment Lien Stripping

The One Secret That Matters

Is Timing, and it’s a HUGE Benefit to creditors if you mess it up. 

The value of your house that matters is the value of the house on the day of the petition was filed.1 If houses are going up in value fast, you may be out of luck by the time you file your case. If you cannot afford to file right away, sell something fast!

If you’re in a rapidly rising market, then between the day you filed your bankruptcy, and the day you file your motion to avoid the judgment lien, the value of the home could go up 2, 5 or 10%. If you don’t have solid evidence of the value on the day that you filed your case, you could have big problems.

Avoiding a Judgment Lien is a basic math problem, example: You own a house and it’s worth $295,000 and you owe $200,000. That’s $95,000 in equity. If you’re married and you reside in California you can protect $100,000 in equity in your home.

So you can protect $100,000 and your actual equity is $95,000 so it’s less than $100,000 so you can protect all of the $95,000. So the judgment gets removed or avoided completely.

So, let’s say that Hunt & Henriques have sued you for $20,000 on behalf of Capital One, gotten a judgment, then recorded an abstract of judgment with the County Recorder in the county where you own your home, so they have put a judgment lien on your home.

In the example, if you can prove the value of the house on the date of filing, then you’re good and the whole judgment gets avoided. 

However, in the example, if your motion gets filed 2 and half months later and the value has gone up by 5% which is a rounded $15,000, and if you cannot prove the value of the property on the filing date, then the amount that Capital One’s judgment would be reduced (stripped down) would only be $10,000 if the creditor decided to fight you. 

IF THE MARKET IS RISING OR IS A CLOSE CALL, YOU NEED AN APPRAISAL

Appraisals in Southern California can run you between $300 to $700 depending on the property. But in close cases, you have to spend it. Sorry.

Judgment lien avoidance is an extra service that costs you extra money. Most attorneys won’t file the motion for you until you have already paid for it, including me. I charge an affordable flat fee for these motions if they are unopposed and if opposed then be prepared to spend some real money. I will also allow you to pay for these motions after your case has already been filed.

But what if your attorney wants to be paid for the judgment lien avoidance prior to filing the case? 

What if that makes you not able to file for an extra month or two while you try to save up that extra amount of money? You may want to find another attorney who will be willing to wait for you to be able to pay for those motions a month later, or two. Of course not later than that or the case may close before the motion gets filed, and then you have another problem.

If the market is rising fast or you have a high amount of equity to begin with, you could be in real trouble if your attorney wants you to pay for the motion to avoid the judgment in addition to the initial bankruptcy fees prior to filing the case. 

A Couple of Housekeeping Secrets

First: If your judgment creditor is a bank, you must serve the motion on the bank’s CEO, CFO or some other Oh Oh Oh, at the bank’s corporate address.

Second: If the creditor is say, Walmart, or a Collection Agency such as Midland Funding, then of course you have to serve the attorneys who obtained judgment against you, but your creditor could have changed attorneys.  So, that’s not enough. You have to do a Business Search to find the company’s Agent for Service of Process.

Third: Serve the Banks and Agents for Service of Process via Certified Mail and include the code numbers for the certification right into the Proof of Service.

Fourth: Walk into the County Recorder’s Office and get copies of the Abstract of Judgment. The Abstract of Judgment which is another name for a Judgment Lien must be attached to the Motion to Avoid the Judgment Lien. For a list of County Recorder’s Offices, see below.

Title 11 United States Codes § 522(f) 

Allows you to strip a judgment lien off of house and home once you have filed a bankruptcy under specific circumstances. The analysis boils down to basic math.

(f) (1) Notwithstanding any waiver of exemptions but subject to paragraph (3), the debtor may avoid the fixing of a lien on an interest of the debtor in property (aka real estate) to the extent that such lien impairs an exemption to which the debtor would have been entitled under subsection (b) of this section, if such lien is—

(A) a judicial lien, other than a judicial lien that secures a debt of a kind that is specified in section 523 (a)(5); . . . 

(f)(2)

(A) For the purposes of this subsection, a lien shall be considered to impair an exemption to the extent that the sum of—

(i) the lien;

(ii) all other liens on the property; and

(iii) the amount of the exemption that the debtor could claim if there were no liens on the property;

exceeds the value that the debtor’s interest in the property would have in the absence of any liens.

1. In re Chiu, 266 B.R. 743, 751 (9th Cir. BAP 2001) aff’d, 304 F.3d 905 (9th Cir. 2002) (stating “[i]t is well-established that the nature and extent of exemptions is determined as of the date that the bankruptcy petition is filed.”) (citing White v. Stump, 266 U.S. 310, 313 (1924))

Not sure if you’ve been sued?

But have you been delinquent on your debt payments for a while? Have you moved or had your house foreclosed?

You’d better Check the Courts and County Recorder’s Offices:

Check the County Recorder’s Offices to see if a creditor has recorded a judgment lien against you:

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Funniest Chapter 13 Ever!

Chapter 13 Hearing

I was a brand new attorney and following the suggestion of a friend of mine, I attended some chapter 13 bankruptcy hearings in Downtown San Diego. Intent on gaining a greater understanding of the process I made my way to Trustee David Skelton’s offices to watch the hearings for a couple of hours.

The audience was made up of people who had filed bankruptcy, their attorneys, some creditors and attorneys for creditors.  There were probably about 60 to 70 people there that day. I sat about 5 rows back on the right side, aisle seat. Next to me sat a tall man with a congenial smile who was African American and slightly balding.

Typical for the First Half Hour

I sat through at least a half hour or some fairly typical cases. People were paying the arrears on houses or the payments they were behind on their homes, managing car payments and paying off the principal of their credit cards interest free. All the benefits of typical Chapter 13 cases.

Funniest Case I’ve Ever Seen

I can’t remember the debtor’s name anymore, (for the purposes of this story). But he had a gotee and the first thing that struck me was that Trustee Skelton, just said, “Hello, I’m Trustee Skelton, and my attorney will be taking over now,” and he got up and left. Wow, what was happening? Maybe he just had to go relieve himself, I didn’t know, I’d never been to a chapter 13 hearing before.

With this particular debtor, (or person who files a bankruptcy), sitting in font of him, the trustee’s attorney asked a lot of the more usual questions, did the debtor understand the penalty of perjury, did he list everything he owned, did he list all of his debts, did he understand that the penalty for perjury is up to 5 years in prison and or $500,000 in fines, blah blah blah . ..  What?  I had’t heard the Trustee ask those extra perjury questions of anyone else.

Then the attorney moved onto more specific questions such as, how did he choose values for his cars? How did he look up the value of his house?  Whom did he owe the mortgage to?  Had he transferred any money to anyone prior to filing? Had he ever been married to Dagmar Coleridge (name changed)?

Now, the debtor had been sitting there with his chin resting on his thumb and his fingers kind of resting over his chin. He was silent. The room fell silent. During the silence his head dropped slowly until he was looking down at his feet. Then slowly he spoke and said only the word: “No.”

I could not have laughed harder or louder if the man had been Eddie Murphy. All of the audience laughed. After almost falling out of my chair, the tall man next to me said with a big grin, “I’m the other Chapter 13 Trustee and I’d heard this one was going to be good.” And that was my introduction to Trustee Billingslea.

So remember out there, tell the truth, you want your case to be nice and boring.

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Don’t Kiss Your Hard Earned Cash Good-bye

File Bankruptcy Instead.

Did you know that paying off $60,000 in credit cards at 20% interest in minimum payments will take decades and you’ll pay nearly $200,000 back in payments of nearly $2000 per month?

Did you know that if you paid back the whole $60,000 at 0% interest through a Chapter 13 Bankruptcy, you’d pay back about $70,000 at $1,167 per month and be out of debt in 5 years.

With Chapter 13, you might not even have to pay back the whole kit and kaboodle, because it’s based on what you can afford to pay. Of course it also depending on the property you own as well and every case is different.

With Chapter 7, if you qualify, you could have your debt nubbed down to 0% principal and 0% interest. Of course it also depends on the property you own as well and every case is different.

I’m located in Murrieta close to Temecula, Lake Elsinore, Menifee, Winchester, Moreno Valley, Riverside, Corona, and Wildomar.

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A Chapter 13 You Can Afford?

Low Down Payment

I can go as low as required by the case plus filing fee.

I set the down payment on a case by case basis. If you’re under the gun and have to get filed and if you’re serious about debt reorganization, then the down payment is negotiable. However in most cases I won’t go lower than $500.

That can give you a powerful leverage that does the opposite of having to start with a huge pool of cash like when you are trying a debt settlement program.

Chapter 13 Attorney’s Fees

Attorney’s fees for Chapter 13 cases range from $3500 to $5000.  It’s what the US Trustee’s Office allows which in the Southern and Central Districts of California. I consider the final total for your Chapter 13 Attorney’s Fees as a fixed cost, therefore I charge what the US Trustee’s Office allows.

Because think about it, if I reduce my fees by $500 that only reduces your monthly payment by $6.67 per month.

If You Need to Stop Foreclosure for a Short Time

If you’re planning on filing a bankruptcy for the sole purpose of delaying a foreclosure so you can do a loan modification or short sale, then maybe you should do a Chapter 7. Chapter 7 straight bankruptcy gives you the benefit of delaying the foreclosure while discharging your debts at the same time and costing significantly less.

My Bankruptcy Law Office is located in Old Town Murrieta, convenient to Temecula, Menifee, Lake Elsinore, Canyon Lake, Winchester, French Valley, Moreno Valley, Riverside and Palm Desert.

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Top 10 Collection Attorneys and Law Firms in California

I have noticed over the last 17 years that the following collection attorneys and law firms are the most likely to drive a lawsuit all the way to a wage garnishment, bank levy or abstract of judgment. You know these guys are good by all the consumer complaints about them. Of course, complaints by their own clients . . . not so much.

Sneakiest or just the best, you make the call! In fact, if one of these guys has sued you, you’d better make the call, to me: 951-200-3613.

People ask me all the time, “why are they suing me? You can’t squeeze blood from a turnip.” And I answer, “But you can eat the turnip.”

Top 10 Collection Attorneys or Law Firms

  1. Capital One’s in house legal department
  2. Hunt & Henriques
  3. Mark D. Walsh / Legal Recovery Law Offices
  4. Nelson & Kennard
  5. Midland Funding LLC
  6. Paris & Paris
  7. The Winn Law Group 
  8. Patenaude & Felix
  9. Mandarich Law Group
  10. Bleier & Cox

Not sure if you’ve been sued? But have you been delinquent on your debt payments for a while? Have you moved or had your house foreclosed?

You’d better Check the Courts and County Recorder’s Offices:

Check the County Recorder’s Offices to see if a creditor has recorded a judgment lien against you:

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10 Things to Know About Wage Garnishments in California

1. It’s a Race Against the Clock

From the moment your Human Resources Dept is served the wage garnishment, the service on them creates a lien on your paycheck.

See Collect Access LLC v. Hernandez (In Re Hernandez), BAP Nos. SC 12-1209, SC 12-1217 (9th Cir. BAP, Dec. 14, 2012).

RACE TO YOUR BANK RIGHT NOW. If your wages have been garnished, then there is a high probability that your bank accounts are about to be levied if they haven’t already. Stop what you are doing. But read the Disclaimer first. Then Stop reading this article and RACE to your Bank right now and drain your accounts.

Disclaimer: This is not legal advice and you are not my client. This post is for educational and recreational purposes only. Additionally it may be considered sound medical advice or possibly improve your golf game. Draining your accounts could cause you to bounce checks or other scheduled withdrawals. And you know what else does that, bank levies.

2. Filing Bankruptcy Before the Sheriff Gets your Money

Even if you file bankruptcy quickly, you might not get it back. However, it will stop any further garnishments moving forward. First you must file the bankruptcy. Then that bankruptcy notice must get to the Sheriff’s Office that served the wage garnishment. Additionally, that Sheriff’s Office must then fax or send a Notice of Stay to your payroll Department. ALL OF THAT must happen before the payroll department sends the fourth of your check to the Sheriff’s Office. If all those stars line up in time, then you get to keep your whole paycheck.

We can file the same day you come in to my office in Murrieta which is just North of Temecula. Same is true for Lake Elsinore, Menifee, Hemet, Moreno Valley or anywhere else in Southern California. However, that doesn’t mean that the Sheriff’s Office will serve the notice of stay on your payroll department that same day. They are short staffed and back logged. They’re also not open on the weekends.

3. Serving the Notice of Bankruptcy on the Sheriff

The Los Angeles Sheriff is easy and can be served by email. The Orange County Sheriff responds well to faxed notices of the bankruptcy filing. Sacramento will pick up on their faxes quickly as well. For most Sheriff’s Offices in San Diego County, a fax is probably going to be fine, but if you have the chance to walk them in, you should do it. If the notice is sent in via fax, we follow up with a phone call the Sheriff’s Office to make sure that they did receive it. However, you should also do a follow up phone call too just to be on the safe side.  The squeaky wheel gets the grease.

However, in the Southern Riverside Sheriff’s Office on Auld Road in Murrieta, because they are short staffed, I’ve found that it’s better to walk in to their civil office with your bankruptcy paperwork in hand. Ask them to fax a notice of stay on the wage garnishment to your payroll department. Be sure to have your payroll department’s fax number with you when you go in.

If you’re lucky they’ll do it while you wait. If not, they might get to it that afternoon or the following day. This is the moment where my father’s relationship advice might kick in, “Sometimes you’ve just gotta cry some real tears.” Of course, in your case, they will in fact be real.

One client who was close with the people in her payroll department was able to obtain a hard copy of the notice of stay from the Sheriff and drive it to her payroll department that same day. That “saved her bacon,” to quote my mom.

4. Filing a Claim of Exemption

If your HR Department has already sent the money or if there is not enough time to both file the bankruptcy and get a notice of stay faxed from the Sheriff’s Office to your payroll before the payroll sends the money to the Sheriff, then another option is to file a claim of exemption. Exemptions are the legal protections that allow you to keep certain items of property when someone sues you. You must file a financial statement with it.

Basically, in your claim of exemption, you state that you must have all of your income to support yourself and your dependents and ask the judge to prohibit the garnishment or to reduce it.

In your financial statement you explain your income, expenses and your net worth to show why the wage garnishment must be stopped or reduced. It may be advisable to attach receipts for your rents, statements for car payments, receipts for medical expenses etc in order to prove up your expenses.

A claim of exemption filed can allow a Superior Court judge to reduce the wage garnishment to 20% or 15% or even 0%. A reduction to 0% is rare though.

5. A Claim of Exemption Takes Time to Work

Be patient. Once you file the claim of exemption you must serve it on the SHERIFF ONLY. You are not required to serve the creditor, the Sheriff’s Office does that for you.

Once you serve the sheriff with your claim of exemption, the sheriff will send a notice of claim of exemption to the creditor. From that date, the creditor has 10 days to file an objection to your claim of exemption. 

The creditor must notify you of the hearing date at least 3 weeks prior to the hearing. The hearing will be about 30 days he files his opposition paperwork with the court. If the creditor does not oppose it, then you win by default and in that case the Sheriff’s Office will send the money back.

Keep in mind that you’re dealing with a government bureaucracy that is short staffed and has a mountain of paperwork. It may take weeks to get your money back . . . even if you win.

Because collection attorneys prefer easy pickin’s, they might just ignore you rather than setting up and attending a hearing on your claim of exemption. However, if your creditor is a former friend or a former landlord and has sued you without an attorney, then you can expect to be notified of a hearing.

6. Filing Bankruptcy After the Sheriff Already Has Your Money

This is going to be long, but you should read it to the end because it concerns both bank levies and wage garnishments, and you probably have both.

Because of recent case law, your Bankruptcy Judge has limited options to order the Sheriff to give your money back. In Collect Access v. Hernandez the appellate court ruled that your creditor has a lien on your pay check from the moment the wage garnishment is served.

There are two ways to protect your property in California. Both are found in the Code of Civil Procedure. However, you must elect one list of protections or the other, but you may not mix and match the two lists of protections.

  • CCCP Section 704 and the associated list of protections that follow it, is great if you have a lot of home equity to protect. I call it the Home Owner’s List.
  • CCCP Section 703.140(b) and the list contained in that section are great if you have little or no home equity. This list can only be used to protect your assets when you file a bankruptcy. I call it the Renter’s List.

In each list, your clothing, furnishings, work tools, jewelry, retirement and so on are all protected. Neither has a protection for money you’ve just socked into your savings account. However, there are differences between the two.

The Renter’s List has no specific protection for your recently earned wages or income, and none for your savings. What it does have is a much higher protection for automobiles.  At this writing the protection is $5100. There is a homestead protection which at this writing is $22,075 to $25,575. The lesser number can be used to protect anything you want. If you have 5 year old paid for Mercedes C230, and an old project car such as a 1968 Mustang, then you can protect them both with the Renter’s homestead protection.

The Home Owner’s List allows you to protect 75% of your recently earned income, but none of your savings. Your home equity protection, at this writing, is $75,000 to $175,000 but your auto protection is only $2900. You do not get to spread your home equity protection around. That can only be used to protect your home and nothing else. So, if you have significant home equity to protect, and your car is a 5 year old paid for Mercedes C230 and you also have a 1968 Mustang in the garage with a smoking engine and a leaking transmission, you’re probably going to lose both cars.

You see, under the ruling of Collect Access v. Hernandez your bankruptcy judge can only order the Sheriff’s Office to turn the money over to you based on non-bankruptcy law.

Because the 703 Renter’s List of Exemptions was created by California specifically to protect your property in bankruptcy, your judge cannot order the return of your money unless you have used the other list of property protections under Section 704.

So, you can see your dilemma; the Renter’s List can’t help you, but the Home Owner’s List only protects 75% of your wages and your check was only garnished by 25% to begin with.

So, that’s a really long explanation to say that you’re up a creek without a paddle. However, the analysis is basically the same for bank levy, and in a bank levy this analysis works to your favor.

7. Claim of Exemption Revisted

Because you can only use the Home Owner’s list of property protections in a claim of exemption and because the only property in question in your claim of exemption is your income, then you are not risking your cars if you file a claim of exemption.

However, if you have a savings, you have to tell them about it in the financial statement, and now your savings and your bank accounts may be at risk for bank levy.

Sometimes the best thing to do is to file a bankruptcy and forget about the money that was garnished. This is especially true if you are paid weekly instead of monthly.

8. Sometimes You Get Lucky

If the Creditor sends a release to the Sheriff’s Office voluntarily once the bankruptcy is filed, you get lucky. The sheriff will not release the funds without a court order.

If no order comes from the superior court or a bankruptcy judge directly to the sheriff, then at the end of your case, it just so happens that your discharge order is a court order. If your case is dismissed rather than discharged, it also turns out that your dismissal order is a court order too.

If the Sheriff hears nothing prior to getting the discharge or dismissal order, the Sheriff will forward the money to your judgment creditor. However, if the creditor has sent a release to the Sheriff’s Office, then you just got lucky, and the Sheriff will send the money back to you instead.

So, once your bankruptcy is filed, send a fax to your creditor requesting that they comply with the bankruptcy code and send a release to the Sheriff’s Office. However, by now, most creditors know about Collect Access v. Hernandez.

9. They Must Serve the Wage Garnishment on You Too

When the wage garnishment is served on your Payroll Department, they are required to serve you too, and they will, of course. But it won’t be until after the Sheriff’s Office has had time first to serve the wage garnishment on your Payroll Department.

10. Why Didn’t You File Bankruptcy a Long Time Ago?

You can check the Courts’ online websites to see if your creditors have sued you. If you are seriously delinquent on your debts, if your creditors include deficiencies on repossessed cars, or Capital One Visa, or if you’ve received collection letters from Midland Funding or attorneys such as Nelson & Kennard or Hunt & Henriques, then if you haven’t been sued yet, you will be soon.

Check the Courts, if you find your name listed as a defendant, you may still want to go to the Court Clerk’s Office. Just to make sure that it’s not someone with the same name who was sued.

Check the County Recorder’s Offices to see if a creditor has recorded a judgment lien against you:

 

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10 Reasons Why Chapter 13 is Better than Debt Settlements When You Owe a Lot of Money

Chapter 13 vs Debt Settlements; a Re-Match

What is a Debt Settlement?

A Debt Settlement is a non-judicial process whereby you or your representative contact your creditors and ask them to take a settlement.

What is a Chapter 13 Bankruptcy?

Chapter 13 bankruptcy is a court process to reorganize your debts over a 3 to 5 year plan of repayment.

In the rest of this post, I will assume that you do owe a lot of money and that you do not qualify for a chapter 7 straight bankruptcy.

Round 1: Chapter 13 Can Also Cut Your Balances

With a chapter 13 you might not even have to pay all your credit cards in full in the first place. You might be able to cut your balances by more than the settlements.  On top of that Chapter 13 gives you up to five years to pay them off too.

If you don’t own a lot of property and if your income is too high to file a chapter 7 but not high enough to pay your debts in full, then in your chapter 13 plan you pay your debts whatever you can afford. Take that Debt Settlements!

Of course, you’ll have to ask your attorney how much you can reduce your debts with bankruptcy. Know your options because knowledge is power.

Round 2: No Need for Large Up-Front Cash Pool

To do a debt settlement you have to have access to a large amount of cash. Usually, 40% to 50% of the total balances on your credit cards. That’s got to come from somewhere. Often people pull it from savings, their 401k plan, or other retirement plans. Sometimes you have to borrow it from someone else like your parents or grandparents.

In a chapter 13 you set up a payment plan to pay back your credit cards. You don’t have to liquidate your family heirlooms, cars, trucks, jewelry, wedding rings and 401k plan in order to pay your chapter 13 payment plan. You pay it out of your regular earnings.

Round 3: Attorney’s Fees

Attorney’s fees in debt settlements are determined by the number of accounts settled plus the percentage of the amount saved. If the person doing the offers to settle your debts saves you 50% of a $10,000 credit card, they’re going to charge you from 10 to 20% of the $5000 savings. Plus you’re going to pay a flat amount per account up front usually from $100 to $500 per account.

For instance, if he saves you 70% of a $10,000 account, then the savings is $7,000 and 20% of that is $1400. You’re going to pay $3000 on the account, + $1400 in fees, + you paid a down payment. That’s 38% to 45% of the debt. You could have probably gotten that same deal or better yourself to begin with.

In a chapter 13, it’s $4000 to $5000 to handle all of the debts en masse.  So, if you owe a lot of money and have a lot of different accounts to settle, then file a chapter 13.

Round 4: Certainty

In a chapter 13 bankruptcy, you know how much you’re going to pay and for how long.

Debt Settlements can take a long time. You won’t know how long until it’s done. While settling one account here or there, the other accounts might sue you in the mean time too. Uncertainty leads to stress in the home and domestic quarreling.

Round 5: Your Credit Is Toast Either Way

Trading your nest egg of savings away in order to settle your debts for less than full value because you think it will preserve your credit rating is a lie. Don’t believe it.

Round 6: Retirement

If you get to retirement age with a lot less money because you liquidated your retirement savings to pay debts, you’ll kick yourself all the way to the Walmart where you’ll be applying for a door greeter job. Ooohh, Debt Settlements takes a black eye, and the crowd goes wild!

If you borrow against your 401k plan and even if you pay it back, you still lose money. If you borrowed $30,000 and if you pay it back on time at 7% but if you would have earned 10% then you’re going to lose more than $40,000 even if you do pay it back on time. If you end up defaulting on the 401k loan instead of paying it back, you would lose over a Million Dollars.

You realize that your retirement savings is protected in a bankruptcy whether in chapter 13 or chapter 7. You could keep all of your 401k plan’s savings when you file bankruptcy.

Round 7: 401k Loans Cost More Than Chapter 13 Payments

If you “borrow” from your 401k plan in order to pay your credit cards, how much does that cost? If you borrow $30,000 from your 401k plan, what is the 401k loan payment?

ANSWER: Borrowing $30,000 at 7% interest for 60 months at 26 pay periods per year yields a $541 payment per check.  That’s over $1100/month.  60 months later you’ve paid back $66,000. This is the real cost of your 401k loan and it’s ugly.

Depending on how much money you owe, your chapter 13 plan payment may very well be lower.

Round 8: You Borrow From Your 401k then Lose Your Job

You’re screwed to put it mildly. Imagine you’ve settled $60,000 with the $30,000 you’ve borrowed from your 401k plan. You’re out of debt, sort of. Except that you’re paying the $30,000 back. If you’re on an 8 year repayment plan at 7% then your payment will be $355/check based on biweekly pay periods. Then you lose your job.

First you’ve taken a humongous hit on the amount of retirement you thought you’d have, and that’s going to be in the hundreds of thousands of dollars, and you’re going to be applying at Walmart.

Second, if you had been in a chapter 13 bankruptcy and lost your job, you’d convert to a chapter 7 and discharge the debt. Your retirement savings would still be preserved and you’d be out of debt.  Debts Settlements takes a Right Cross to the Jaw!

Round 9: TAXES

In a chapter 13 bankruptcy, you just pop them into the plan, recent taxes will have to be paid in full, however, while paying those in full, you can also reduce your payments on your credit cards to as little as 0%.  (Depending on your circumstances). Older taxes may be lumped in with the credit cards and given as little as a 0% pay out too.

Debt settlements cannot touch this with a 10 foot pole. Debt Settlements gets a body shot and is going down!

Round 10: Rental Property Mortgage Benefits in Chapter 13

Imagine stripping the 2nd and 3rd mortgages off of your rental properties and at the same time, cutting the 1st mortgage down to the value of the property and rewriting the mortgage. Can your purveyor of Debt Settlements do that?

Chapter 13 gives Debt Settlements a rabbit punch on the way down, but the referee misses it!  Debt Settlements is down!

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Why You Should Use Chapter 13 to Consolidate Your Debts When You Have a Higher Income?

What if you make a lot of money but have a lot of debt?

Has a process server shown up at your door yet with a summons and complaint? When you have a higher income, this is a serious problem. If your wages get garnished and you make $9000 per month, then 25% of your check after taxes is a couple of car payments. So now the cars are about to be repossessed. How are you going to get to work? You risk losing that job if you let it move forward.

Have you ever thought that if you could just pay your credit cards what you owe them, you’d be able to handle the payments?  If they just didn’t have 12, 15, or 29% interest rates, you’d be able to eventually pay them off in a reasonable time, right?

Debt Consolidation

For many this would be true. Debt consolidation starts to sound like a great idea at that point. They promise to reduce interest rates for each of your credit cards and accounts, and cut your payments in half and when you get there the numbers just don’t work out.

Once the numbers are all added up, they tell you that you’re going to pay only about 25% to 33% less than you’re currently paying. If honest, they’ll also tell you that some of your creditors won’t play along and will just go ahead and sue you and garnish your wages instead. Some creditors will reduce interest rates to 5% but some will reduce interest rates by 5%.  There’s a huge difference.

Of course if they tell you that, then you won’t sign up and won’t pay them any money and then they won’t make any money on your case.  Clearly that’s why I’m writing this post to you, because I’d prefer you signed up and paid me instead to be perfectly honest.

Chapter 13 Bankruptcy

So, here’s what I can tell you about a chapter 13: Once the chapter 13 payment plan is approved by the Court which is called a confirmation order, none of your creditors are going to opt out and sue you and garnish your wages instead. They can’t.  Basically, you’ve already sued all of them yourself. It’s a pre-emptive strike sort of like suing all of your creditors as a class action lawsuit before they can sue you individually.  So, no lawsuits against you and no wage garnishments or bank levy.

Truly Reorganize Your Debt With Bankruptcy

Additionally, what I usually find is that if you are paying 100% of your credit cards and medical bills and the like, and you’re paying them at 0% interest for only 5 years, then in most cases you cut your payments in half, give or take a few percent. It’s what the debt consolidators promised to reduce your payments to, but couldn’t. The reason it works out though is that the bankruptcy court forces the creditors to take it.  The other reason it works out is that your attorney and your bankruptcy trustee are charging you far less than the interest you would have to pay if you went to a debt consolidation.  Plus the debt consolidators charge you on top of that.

For example

If you owe $60,000 in credit cards and you pay them the regular monthly payments, by the time you’re done you’ll have paid them something like $194,000. That’s a payment of at least $1800 to 2100/mo depending on how many different accounts, who they are with, varying interest rates and so on. Worse it would take 538 months or 44 years to pay it off. I checked the minimum payments at Bankrate.com.

Debt consolidation on the same debts will probably yield a payment plan of $1400 to $1600/mo for about 5 to 6 years and probably at least one lawsuit.

Your chapter 13 bankruptcy plan would pay back about $70,000.  You do that for 5 years only, and your payment is about $1167.

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8 Chapter 13 Bankruptcy Pitfalls You Can Avoid

Chapter 13 is a Great Tool, Unless . . . 


There are pitfalls to avoid. Getting your case dismissed when you thought it was your last hope to save your house is a disaster.  Yet, it happens much more often than not.

Pitfall 1: Losing Your Job

Such a no-brainer, yet it may sound like something you cannot avoid. However, we all know that sometimes it is.  If you don’t get along with your boss, take a deep breath.  Take an anger management course.  Take a Tylenol. Take a break. Take a nap. Because it could be a case of lose your job, lose your house. If you’re in a chapter 13 bankruptcy to catch up the arrears on your house, then you must keep up your mortgage payments current and you must keep up your plan payments.  Quit paying either one and your chapter 13 will be dismissed.  Once it gets dismissed, and you no longer have bankruptcy protection, you go back into foreclosure.

Pitfall 2: Don’t Get a Divorce

Again, while it may sound like something that probably can’t be avoided, often it can be. Be the best spouse that you can be. Bring flowers. Bring chocolates. Bring movie tickets. Read, How Full Is Your Bucket?  On my wedding day, the officiant gave me 5 little magic words for when you come home and find the baby in the highchair, his food is everywhere, the dishes aren’t done, and the other kids have homework, and you’re just back from work and the 5 little magic words are: “What Can I DO To Help?”

Pitfall 3: Re-evaluate Your House Situation Carefully Before You File

Before you file the case, you should reevaluate the house situation carefully. Chapter 13s are designed to put you on a seriously Draconian budget. So, unless you’re making great money, a budget that is too tight will ruin your marriage or your relationship to your significant other in a big fat hurry.  Don’t lose your spouse over a house.

If you DO qualify for a Chapter 7 but want to file a Chapter 13 to try to save the house, then your budget will be under a huge strain, there won’t be any money for fun, recreation or vacations and I’ve seen that lead to divorces and split ups over and over again and then neither of you will end up with the house.

Pitfall 3: Make Your Chapter 13 Plan Payment On Time Every Time

Get behind, you’re toast.  Nuff said.

Pitfall 4: Get Health Insurance If You Don’t Have It Yet

If you’re not properly insured, with health, life, auto and disability, you’re an accident waiting to happen. If you get sick or injured, you’re outta there.  If you cannot pay the plan, then you will lose that house. 

Pitfall 5: Not Filing a Chapter 13 When You Should

If you make great money, and if you could just get all of your credit cards to agree to zero interest (0%), then you’d be able to pay everyone no problem, then do it.  That’s exactly what a Chapter 13 can do for you.  If you pay the regular payments it will take forever and you’ll pay almost 3 times what you owe before you’re through.  If you go to a Debt Consolidation, they’ll be able to reduce your interest rates, but not to zero percent (0%).  Paying at zero percent interest (0%) for 5 years usually will cut your payments by a little under half.  Take the deal.

Pitfall 6: Including Your Car 

If you can file a Chapter 13 without having to include your car, then avoid putting it in the Chapter 13 payment plan like the plague. If your bankruptcy gets dismissed, you’ll find that you’re now perhaps months or years behind on your payments on your car.  You’ll also find that you’ve got mega late fees now attached to the car note.  Also the repo guys will be on their way soon after your Chapter 13 gets dismissed for non-payment. I had clients who wanted save a house, but to do that they had to lower the car payment by including it in the 13.  I suggested that they move out from the beginning.  When the case finally got dismissed the balance on the car was approximately twice what it was before filing.

Pitfall 7: Technical Tricks and Traps

Most of these are things your attorney is going to have to be familiar with and help you avoid them.  However, my favorite is one that you can help avoid: In the Central District of California, in Riverside, you are required to pay your plan payments directly to the Chapter 13 Trustee at the hearings until the judge approves your payment plan. This approval is called a Confirmation Order. Your Chapter 13 plan payments are due 30 days after your case is filed and then ever month on the anniversary of your filing date. However, your hearing date will be approximately 45 days after you file.  If for some reason your judge continues your confirmation hearing, it will most likely be for another 45 days.  When you show up to that hearing, you must bring two (2) payments with you to the 2nd hearing, not just 1.  Because 45 + 45 = 90, your plan requires that you pay 3 plan payments by that 2nd hearing date, not 2.  If you don’t bring the 3rd with you, your case will be dismissed.

Pitfall 8:  Mal-Adjusting Your Tax Withholdings on Your Pay Checks

Whenever you pay less than 100% of your credit cards and medical bills and so on through your Chapter 13 payment plan, the bankruptcy trustee will want to intercept your tax refunds as you get them from the IRS every year until your case is over. Phew!

Many people try to adjust the withholdings so that they end up zeroing out their tax refunds. However, if you reduce it too much, you end up creating a new creditor for yourself, and it’s the biggest most powerful collection agency in the world, the IRS. But at least it’s not the meanest, that distinction goes to the Franchise Tax Board of the State of California.

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6 Sneaky Things Collection Agents Do in Lawsuits to Get You to Lose Without a Fight

Collection Agents Make Used Car Salesmen Seem Downright Honest

So you’ve been sued by Capital One, Ford Motor, Midland Funding, Midland Credit Management, Cavalry Portfolio Service, Portfolio Recovery, Arrow Financial, Asset Acceptance, Cmre Financial, NCO Financial (insert your collection agent’s name here).

What happens next?

From the moment you are served the Summons and Complaint you have only 30 days to Answer.  If you don’t answer, you lose. The Summons is a court order stating that you must defend yourself in court or you will lose your case. The Complaint is your creditor’s paperwork describing why they think you owe them money. Your Answer is your written explanation which must be filed with the court saying why you don’t owe them the money they say you do, or not as much or not at all. Not filing your answer is called a Default.

Once you have defaulted, your creditor may obtain a Default Judgment against you. If your creditor is on the ball, it could have a judgment against you in about 2 weeks after that first 30 days is over.  But usually that’s going to take more like 4 to 6 weeks. So about 2 months after the date of service you’ve already lost and you didn’t even know it.

Judgments can be used to garnish wages, levy bank accounts, and put judgment liens on houses.  However, creditors cannot take those actions in California until 30 days after they have the judgment.

Most of the 6 sneaky things collection agents do involve getting you to default on each step of the way through the lawsuit until they’ve already levied your bank account.

1. They forget to serve you.

Impossible! They wouldn’t really do that . . . would they? It gets even better, when they’re filling out the proof of service or the paperwork they turn in to the court to say that they did in fact serve you, they forget that they forgot to serve you while filling in that proof of service too.  Okay, lots of people don’t like to talk about this because it’s so heinous but it does happen.

If you ever catch them, get ready to watch the lies fly. Mostly they’ll involve stating that you are lying about their lying. The fact that you were in Pennsylvania for a funeral and even have your cousin’s Facebook pictures to prove it will not deter them from saying you staged it like the Lunar Landing. I do want to stress that this is the rarest of the sneaky things and if it does happen, you’ll probably never prove it.

2. Serve you at your last address instead of your current address. 

This is a sort of No Kidding moment. Most of us have known someone who has had this happen. Or at least there is always someone who will say so. Often this is a mistake on the part of the person saying so, and no offense, but if you had a spouse or boyfriend/girlfriend that wasn’t working out, or roommates or teenage children, then perhaps it happened to you too. They might have lost it, thrown it away or forgotten to give it to you.

Nevertheless, so many of us have lost houses and moved perhaps even several times since 2007. You might have been served at a former address just because your creditor couldn’t find you. However, I know several people who clearly informed their creditors about their new addresses and in spite of that the collection agency digs up an address which was as much as 10 years old.

3. Make sure there is a bogus hearing on top of the summons and complaint for not serving you the summons and complaint on time.

This is in fact easier to do than it sounds. When the creditor is first supposed to serve you the summons and complaint they have only a certain amount of time to do it. If they don’t get it done, then the court issues a court order called an Order to Show Cause, or OSC ordering the creditor/collection agency to explain why it hasn’t served the summons and complaint on you already. When the court does that, it sets an hearing on the Order to Show Cause and that hearing is usually about 10 to 14 months later.  No, it’s not a trial.

Your collection agency knows that you don’t know an OSC from your own earlobes, and conveniently the court’s rules require that they serve the OSC on you too, so when they serve the OSC on you they put that on top of the summons and complaint.

So, what I hear over and over again, is “but my trial date isn’t until next year.” No, that’s not a trial date.  Even if you’re in small claims court, your trial will be in about 2 months. It will not be in 10 months or a year later.

Understand this, any hearing that far down the road which is on top of your summons and complaint is a ploy to lull you into complacency, and you fell for it. Next thing you know your check is a quarter short and your bank account is empty.  Besides which there is probably a judgment lien on your house.

4. Make sure there is a bogus hearing on top of the default judgment paperwork for not processing the default judgment against you on time.

This is in fact easier to do than it sounds. When the creditor is first supposed to process the default judgment against you, they have only a certain amount of time to do it. In processing that paperwork they are required to serve you copies of everything they file with the court. If they don’t get the default processed soon after the 30 days goes by after they served you the summons and complaint, then the court issues a court order called an Order to Show Cause, or OSC ordering the creditor/collection agency to explain why it hasn’t processed the default judgment against you already. When the court does that, it sets an hearing on the Order to Show Cause and that hearing is usually about 10 to 14 months later.  No, it’s not a trial.

Your collection agency knows that you don’t know an OSC from your own elbows, and conveniently the court’s rules require that they serve the OSC on you too, so when they serve the OSC on you they put that right on top of the default judgment paperwork.

So, what I hear over and over again, is “but my trial date isn’t until next year.” No, that’s not a trial date. Even if you’re in small claims court, your trial will be in about 2 months. It will not be in 10 months or a year later.

Understand this, any hearing that far down the road which is on top of your default judgment paperwork is a ploy to lull you into complacency, and you fell for it. Next thing you know your check is a quarter short and your bank account is empty.  Besides which there is probably a judgment lien on your house.

5. Serving your summons and complaint or sometimes even the judgment on you with a copy of the hearing date for the case management conference on top of it.

Some jurisdictions set a case management conference, or CMC when any case is filed in civil court. Some set them shortly thereafter. Some wait for the defendant to answer and then the court sets it and some wait for the plaintiff or defendant to set it. If the court where you live sets a case management conference soon, then the collection agency’s attorney puts it right on top.  Those conferences are usually set about 9 or 10 months later. No, it’s not a trial.

So, what I hear over and over again all the time is, (say it with me) “but my trial date isn’t until next year.” No, that’s not a trial date. Even if you’re in small claims court, your trial will be in about 2 months. It will not be in 10 months or a year later. But you’re not in small claims court, look for that page called Summons and read it carefully.

Remember that any hearing that far down the road which is on top of your summons and complaint or your default judgment paperwork is a ploy to lull you into complacency, and you fell for it. Next thing you know your check is a quarter short and your bank account is empty.  Besides which there is probably a judgment lien on your house.

6. Serve the wage garnishment and bank levy on you a week to 10 days after they serve them on your employer and your bank.

The reason for this is self-evident; Why give you time to empty your bank account or file a bankruptcy? The Court’s rules require that they serve you copies of the wage garnishment and bank levy, but you’re almost never going to get copies of them prior to your bank or your payroll getting the copies first.

There is a reason for this, in California, a served bank levy creates a lien in favor of the creditor against any money you have in your bank accounts. In California, a wage garnishment creates a lien against 25% of your pay check the moment is it served on the payroll department at your work. Even if you file your bankruptcy quickly, you may never get that money back. Don’t get me wrong, there are still a couple of things you can do, but they don’t always work.

By the way, if you’ve been to the bank and found that a judgment creditor has levied your bank account, then most likely your judgment creditor is also about to garnish your wages. Find yourself some money immediately and file a bankruptcy as fast as you can.

Likewise if you go to work today, and the HR Dept tells you your wages about to be garnished, then ask your Boss for a few moments to go to your nearest bank branch and empty your bank accounts. You must do this for all accounts that have your name on them except for limited circumstances such as social security deposit accounts.

If you share an account with your mom because she wants you to be able to access her account if she gets sick, you have to empty that one too. Or at least she does. Time to make some embarrassing phone calls. And I don’t mean later today when you get the chance or on the way home from work when you can get to it, I mean do it right now. Right now this minute. Leave your computer or put down the pad or phone and run to your bank and take out your money, right now.

DISCLAIMER: I’m only licensed in California in the Southern, Central and Northern Districts and this is not legal advice and you’re not my client until you have first called me and we’ve decided that you are and signed retainers.  

CALL 951-200-3613 to set an appointment.

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10 Things You Must Know About Chapter 13 If You Do Not Qualify for Chapter 7

So, Attorney Gandalf has told you that “You Shall NOT Pass!”

That’s what Gandalf in the Lord of the Rings told the Demon-Balrog as it attempted to cross a narrow bridge deep in the Mines of Moria. So now you’ve been told by another attorney that you don’t qualify for a Chapter 7 bankruptcy. You’ve failed the Means Test. Perhaps based on your own research you think your income might be too high. But it’s not like you’re wealthy and or made of money. You’re struggling just like everyone else, just at a higher level of income. At the end of the month, you have the same amount left over as everyone else; nothing.

What now?

Get a 2nd Opinion About the Means Test

I’ve seen cases where a client’s initial consultation with another attorney missed a couple of key items that made all the difference. When you come in for your free consultation, we’ll go over them together. Attorneys are not supermen, we’re fallible.

Okay, I’m not but some are. Some of the lawyers who are newer in the field of bankruptcy might not know all the ins and outs yet. I’ve filed several Chapter 7 cases where the first attorney thought that the clients didn’t pass the Chapter 7 Qualification Test called the Means Test.

Let me have a look at it if you’re in California, maybe I can help you. I’ve been a bankruptcy attorney since 1994 and I’m located in Murrieta conveniently close to Temecula, Riverside, Wildomar, Menifee, Lake Elsinore, Canyon Lake, Santa Ana and San Diego.

Sometimes Your Only Bankruptcy Option is Chapter 13

There are worse things, just ask Gandalf, more importantly ask the Balrog.  But if you have to file a Chapter 13, there are things you must know.  Here are the first 10 that come to mind off the top of my head.
First: It’s not the end of the world.  The sky will not fall. The police will not show up and arrest you (there is no debtor’s prison). Your friends will not laugh at you. In fact more of them have filed or are about to than you might imagine. You won’t walk around with a watermark of a B on your forehead. Frankly, if you make too much money to file a chapter 7 then that’s a good problem to have. You’re going to get to do what you promised to do in the first place; pay your debts.

Second: A Chapter 13 bankruptcy is a bankruptcy with a payment plan attached. If you don’t qualify for a chapter 7, your payment plan must be 60 months unless you’re able to pay it off earlier. You might even be able to strip your 2nd mortgage lien off of your house.

Third: If you don’t qualify for a chapter 7, your chapter 13 bankruptcy has a version of the Means Test too and it is used to determine, at least in part, how much of your unsecured non-priority debts you must pay back through your chapter 13 payment plan.

The definition of unsecured is any debt that is not attached to something that can be repossessed if you don’t make the payments. Priority debts, roughly speaking, are debts that either you owe directly to the government or that the government must pay if you don’t. So for instance, credit cards and medical bills are unsecured. So are student loans. Recent taxes are priority debts, which you do owe directly to the government. Child support is a priority debt too because if you don’t pay, then the custodial parent may be forced to go on welfare. But student loans on the other hand are not priority debts because if they were a lot of people would never qualify for Chapter 13. But that’s a whole nuther ball o’ wax!

Fourth: You may not have to pay all your credit cards, medical bills, student loans, old taxes (under the right circumstances and conditions of which there are many) and so on in full. Depending on your circumstances, you may be able pay off lates on your mortgage, back child support and recent taxes in full while paying only what you can afford to on your credit cards, medical bills, student loans, and old taxes.  Of course, you will still owe any unpaid student loans after your chapter 13 payment plan is over.

So, “it puts a book mark in the student loan.”  ~Anna.

Fifth: The other thing that determines how much of your unsecured non-priority debt is how much stuff you own. If you have accumulated a lot of stuff or a lot of unprotected savings, you may have to buy it back again. So, never ever have unprotected savings. Basically if you could protect only $50,000 worth of stuff but you have $75,000 then you must pay at least $25,000 into your chapter 13 bankruptcy. So, whichever requires you to pay more is the one that you go with.

Sixth:  Even if you have to pay everything in full, 100% of the principal on your unsecured non-priority debts, but if you can do it with 0% interest, then you will most likely have a lower payment than if you go to a debt consolidation program outside of a bankruptcy.

Seventh:  If you pay less than 100% of the principal they will take your tax refunds away from you every year you are in your chapter 13 bankruptcy so sometimes it’s better to bite the bullet do a 100% payment plan.

Eighth: If you owe more than $1,149,525 to secured debts such as your houses and cars, you can’t file a chapter 13.  Or if your credit cards and medical bills and other unsecured non-priority debts come to more than $383,175 then you cannot file a chapter 13. In those circumstances your options are consolidate your debts outside of bankruptcy, settle some of the debt and then file the 13 or try a 7 anyway and hope they don’t try to force you into a chapter 11 where you will have to pay more than $20K in attorney’s fees (and that’s just the beginning).

Ninth: If you’ve been behind on your payments to your houses and cars then in some jurisdictions your bankruptcy judge will require that you pay your regular monthly payment on your mortgage to your bankruptcy trustee rather than directly to your mortgage bank.  In the Central District of California in the Riverside Division, there is one judge that does require this.  Called a conduit payment, it helps to insure that you don’t get into any further trouble with your mortgage payments.  However, if you haven’t been behind in your house payments, then you are still allowed to pay directly even in that Judge’s Court.

Tenth:  A Chapter 13 bankruptcy has a qualification test too, it’s called the feasibility test, which means what it basically sounds like.  You have to be able to pay the payment plan.  If you can’t, then they dismiss your case or suggest that you convert to a chapter 7 bankruptcy.  So, if at a later date you lose a job, or your spouse loses their job or that second job, then maybe you can request that the judge assigned to your chapter 13 reduce your plan payment based on the new lower income or even request a conversion to chapter 7.

I’ll be expanding the list, so if there’s something you think should be on the MUST KNOW List, please put it in a comment below.  I look forward to your thoughts.

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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.

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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
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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.

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What to do When You’ve Forgotten a Creditor

FORGOTTEN CREDITORS

Chapter 7

If you forgot a creditor, do you still owe it when your case is over?  In most Chapter 7 cases, no you don’t.

Of course the analysis is different for the different chapters of bankruptcy.  In Chapter 7 bankruptcy if you inadvertently leave a creditor off your petition, whether you have to pay them back or not depends on two things:  1. Did you rip this creditor off or cheat them out of their money or intentionally injure their person or property? OR 2. Did the Trustee assigned to your case set a deadline for creditors to submit claims for money.

Pretty much, if a creditor is left off your chapter 7 bankruptcy and if you didn’t cheat them out of their money in some way or intentionally harm them, then in most cases your debt will be discharged even though it was left out of the petition.

This is true only when your bankruptcy trustee did NOT set a deadline for creditors to make claims for money. The debt is automatically discharged. You don’t even have to reopen your case and add them to it, you just send them a copy of your discharge and remind them that you owed them before you filed your bankruptcy.  See Beezley v. California Land Title Co, (In re Beezley), 994 F.2d 1433, 1434 (9th Cir. 1993) (per curiam).

A bankruptcy trustee will only set that deadline if you have money or property that he can take away from you, sell, and pay the proceeds to your creditors.  For the vast majority of you, this will never happen.

To make the issue just a little clearer than mud, here’s a copy of the statute, 11 USC Section 523(a)(3):

[A debt is not discharged in bankruptcy if it is]

(3) neither listed nor scheduled . . .  with the name . . . of the creditor to whom such debt is owed, in time to permit—
(A) . . . timely filing of a proof of claim, unless such creditor had notice or actual knowledge of the case in time for such timely filing; OR
(B) [if you did commit fraud, embezzlement or intentional injuries or damage] . . . . , timely filing of a proof of claim AND timely request for a determination of dischargeability of such debt . . . unless such creditor had notice or actual knowledge of the case in time for such timely filing and request; 

11 USC Section 523(a)(3)(A)

ON THE LIGHTER SIDE: A bankruptcy trustee only sets a deadline for creditors to submit proofs of claim when he finds that you property that he can take away from you, sell, and pay your creditors.  This deadline is called a claims bar date.  So, for instance, you have a house with $50,000 in equity and you also have a cabin in the woods worth $10,000.  More typical is your home has $50,000 in equity and when that happens you can only protect about $3000 in cars.  If your car is worth $10,000 then your trustee is going to sell it and pay you a $3000 check.  You won’t be able to keep both the house and the car.

Your bankruptcy trustee will sell your car or cabin and split the proceeds among your creditors and that is true even if it would only pay your creditors 1% of what you owe them. Of course, if your cabin really is only worth $10,000 then he might not find a buyer.  What if he doesn’t?  Your trustee will still have already set the claims bar date anyway because he sets that long before he finds out that no one wants to buy your cabin afterall.

Your bankruptcy trustee might not set the claims bar date until months after your case has already discharged.  Once the trustee notifies the court that there may be assets, a claims bar date is set.  That date is usually 90 days after the bankruptcy trustee notifies the court.  At that point, you should definitely make sure that every creditor listed in your case is listed with the correct address.  Double check all of your records to make sure none were left out.  If you listed a creditor at the wrong address, then they won’t know about the bankruptcy and won’t get a share. So, Google all their corporate addresses.  Go to AnnualCreditReport.com or FreeCreditReport.com and to help make sure no one is missing.

If your creditor was not notified or if you used the wrong address, or if you found the right address but notified them too late to submit a proof of claim, then that creditor will not be discharged and you will owe them in full.  That is the start of a bad day.

Unless you can prove that the creditor had notice or actual knowledge.  So, for example, you had a business partnership and you listed both of your partners as creditors.  If however one of them moved but then he finds out that you filed from the other partner who didn’t move . . . then you just have to be able to prove that he knew in spite of the move.

It could be as simple as getting the one to testify and say that he told the other. Good luck with that one, they’ll probably collude to testify that he didn’t and then split what you owe the guy who moved.  Or if the move-away partner telephoned and left a snarky or nasty message about it.  You’ve got him.  If you scanned the notice of commencement of case and emailed it to him, then you’d be able to prove that you’d done that.

Best of course, if you realize that a creditor has been left out, and if you know that the bankruptcy trustee is setting the claims bar date, double check everything and amend your bankruptcy as necessary.  That’s going to cost some money, but it’s better than paying them back.

11 USC Section 523(a)(3)(B)

THE DARK SIDE: Basically the gist of this is: If you cheated a creditor either by fraud, theft, embezzlement, or intentional injury to person or property, then leaving them off your bankruptcy is not going to protect you from them.  You cannot beat these kinds of creditors by adding them late by amendment with only a week or two to go to the end of your case.  If a creditor would have a claim for this kind of debt, they must ask a judge to exclude them from your discharge.  But they must make that request in writing and file it with the court during the 60 days after your first hearing date.

Your first hearing date is called your first meeting of creditors.  The request that a creditor must file against you is a special type of lawsuit called an Adversary Proceeding.  If they were notified properly AND don’t file this lawsuit, then they have already lost.  It’s like a mini-Statute of Limitations, but it only works if they in fact knew about it.  If the creditor knew that you filed, and does not sue, then they lose by Default.

But subsection (B) of the statute has that little word, “and” in the text, what does that do?  “filing of a proof of claim and timely request for a determination of dischargeability”.  Does that mean that if you cheated a creditor out of money that the bankruptcy trustee must still file a notice to set a deadline to file proofs of claim in order for their claim to survive the bankruptcy discharge order?

Basically it works this way: Above on the lighter side, where there was NO fraud, NO embezzlement,  and NO intentional harm, the debt was discharged with nothing more happening.  In the dark side, where you DID cheat the creditor or you DID intentionally harm the creditor, the debt is NOT discharged.  However, the creditor has the same requirement to file an adversary proceeding to prove it.

When do they have to file that lawsuit though?  Since they didn’t get notice, then whenever they file it, it will be timely.  So, my recommendation is to reopen the case, add the creditor, and ask the court to determine a last date for that creditor to file their lawsuit against you.

Most creditors even when they have pretty good cases will still never bother to sue you in the bankruptcy court.  Especially when we’re talking about institutional creditors like the big banks.  A small creditor like The Piano Credit Company will sue you for fraud even when anyone can see that you never did it.  Your best friend who lent you some money or your former business partner, those are the ones that sue you.

Chapter 13

In chapter 13 bankruptcy, every case is an asset case and every case has a deadline set automatically for creditors to submit proofs of claim.

So, it is very important to make sure that your addresses are all correct, and that you have listed every one you might owe money or property.  You can download each of your three credit reports for free at AnnualCreditReport.com, and for a small fee you can download them at FreeCreditReport.com.  Keep in mind however that not all of your creditors will have reported to the credit reporting agencies and sometimes they are temporarily off of the reports.

If you are in bad financial circumstances, do not throw anything away.  Keep every invoice or billing statement that you ever get.  Keep every collection letter and every letter from an attorney.  If ever have to come and see me, you may wish you still had them someday.  Do not throw them away.

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Bankruptcy Attorney’s Fees in Chapter 7 and Chapter 13

Chapter 7

Chapter 7 is a short procedure.  Also called a straight bankruptcy, it lasts about 4 months.  You pay for it in advance to your attorney via cash, check or money order.  I no longer take checks. I’ve learned something: Every time a client  makes the effort to tell me that his check is good, it isn’t.  And that’s the case so far, every single time that a client has told me that.  So most of us won’t ever take a check.

Reasonable Fees

Sometimes your bankruptcy will cost a pretty penny even with me.  Whether you file in Riverside, San Diego, Santa Ana or Los Angeles, whether you live in Murrieta, Temecula, Menifee, Wildomar, Lake Elsinore, or Canyon Lake, I’m nearby and my fees are reasonable.  I aim to keep things affordable by basing my fees on your income.  If you’re on social security disability my current fees are $800 + the Filing Fee for a chapter 7.

Higher fees are what you will usually find with the other guys.  If your attorney has a big expensive office or several names on the door, you’re going to pay more.  Sometimes that’s what you want, if you’ve committed fraud or basically if you’ve cheated a few people or banks out of money, then you may want a law firm with that kind of litigation support.  However, remember that defending against creditors that you cheated out of money is going to cost you a lot extra, so having a higher priced firm might be a bad idea. If you cannot afford to defend yourself for your misdeeds then if you get sued, you’re going to lose no matter who your attorney is, because we don’t defend those for free.

And if you’re just a regular person who got caught in bad circumstances such as a divorce, medical emergency, death in the family, your company closed etc, then a boutique firm is probably going to be a better option.  However, attorney’s fees in any bankruptcy case must be reasonable.

Within the bankruptcy petition, the fees must be disclosed on two different forms.  If the fees disclosed are not reasonable the bankruptcy trustee assigned to your case is supposed to ask your attorney about it.  Make sure as you review your petition that the fees disclosed match the fees you paid.  If they don’t, you might bring it up to your bankruptcy trustee at the hearing.  If for instance your attorney charged you $4000 for a chapter 7 bankruptcy then listed that he’s charged you only $2500, then he’s trying to hide the actual fees from the bankruptcy trustee.  If he says he’s charged you $700 when he charged you $900 it’s an insignificant typo.  Don’t sweat it.

Fees in California must be not “Unconscionable” which basically means something to the effect of does the fee charged shock the conscience of the court.  But in Bankruptcy, the fees must be reasonable even in California.  This is a safeguard for you to protect you from unscrupulous attorneys.

UNPAID Attorney’s Fees

Listen, this is my favorite issue:  If at time of filing of your Chapter 7 bankruptcy, there are any unpaid attorney‘s fees, they are added to your credit card balances and are discharged. From the moment of filing your attorney can never ask you to pay your balance of attorney’s fees ever again. Your attorney knows that of course, better than anyone, and therefore your attorney can never ask for you to ever pay your fees ever. Never, never, never.  Is that enough Nevers yet?

If he does you can most likely get the bankruptcy judge to order your attorney to pay you punitive damages.  See In Re Waldo, 417 B.R. 854 (Bankr. E.D. Tenn., 2009) and this Article. So, if an attorney suggested filing your Chapter 7 case without paying any attorney‘s fees prior to filing the case, take it.  If he then asks you to pay your attorney‘s fees after filing your case, let me know, and I’ll sue him for you, where he will lose and he will pay my attorney‘s fees to sue him and he may also be required to pay you punitive damages.  

Chapter 13

In Chapter 13 instead of a straight bankruptcy you are in a Chapter 13 reorganization plan where you pay a portion of your debts back usually over a 3 to 5 year period.  For attorney‘s fees you pay a down payment to your attorney via cash, check or money order, it could be as little as the filing fee, but could more.  I’ve seen a case where an attorney takes only $75 against the filing fee then he asks the court to allow you to pay your filing fee in installment payments.  Personally, I find that odd because if you can’t afford to pay even the filing fee how are you going to pay your chapter 13 plan payments?I usually charge as up front fees the same amount as a chapter 7 and of course you must also pay the filing fee for the chapter 13 prior to filing the case.  The balance of the $4000 in attorney‘s fees (standard for a chapter 13) are paid through the monthly payment plan.  So, if you put down $1000 plus the fling fee then the other $3000 would be divided by 60 months and added to your monthly payment.

These are Rare But I have Seen Them Happen

Often attorneys who have no morals will put you into a payment plan type bankruptcy, or chapter 13 when you cannot afford to pay your attorney‘s fees prior to filing the case.  That way they get more attorney‘s fees out of you.  It’s an Up-Sell to a chapter 13.  You cannot afford the $1000 or $1200 for a chapter 7 but your house is about to be foreclosed or your wages are about to be garnished or your bank account is about to be taken by a creditor called a bank levy.  Rather than suggesting you sell something or borrow from your mom, he just charges you the filing fee for a chapter 13, and presto your case is filed.  Your bankruptcy protection is started.

Is it just to get you to pay the $4000 in attorney‘s rather than the closer to  $1000 for a chapter 7?  Sometimes yes.  But if you easily qualify for a chapter 7 then filing a 13 is a disservice to you because you will not be able to sustain the plan payment in the long run, not even a little one, and then you’ll be wishing for a chapter 7 anyway.  Then he can charge you to convert your bankruptcy case to a chapter 7 and get coming and going.

I’ve met clients of an attorney who actually told people that their county, San Bernardino, only allowed a minimal amount of rent on the chapter 7 qualification test (means test) as an expense regardless of family size and that therefore those 4 clients could not file a chapter 7.  I went to the US Trustee’s Main Office in Riverside and told them so because this is patently false.  The housing expense in the means test increases as your family size increases in every state and county in the country.There was another attorney who told an old lady from Menifee that she could pay her attorney‘s fees after the case had been filed.  She paid her filing fee but after her case was over she could still not afford to pay.  So, that attorney’s paralegal called her and told her that her bankruptcy Trustee was going to reopen the case and start investigating assets again, however, the paralegal continued, the little old lady’s attorney could make it go away if the little old lady would just pay him $1000 in cash by the following Tuesday.So I telephoned her bankruptcy Trustee and found out that it was all a lie and that her bankruptcy trustee had not even contacted the attorney.  I suggested that the little old lady turn him in to bar, her bankruptcy Trustee, the US Trustee’s Office and to write a letter to the judge assigned to her case.  She did.

I’ve also seen attorneys who would file an emergency filing or “bare bones” case for you real cheap. When you do that you must within 14 days file the balance of the schedules and statements i.e. the pages of the petition which explain who your creditors are and what your income and expenses are and if you pass the means test or not.  So, what the attorneys did was to charge you a mere pittance to file the emergency case but an arm and a leg to file the balance of schedules.  The emergency case was $200 plus the filing fee but the balance of schedules was another $3500, and you’re over a barrel, you must file the balance or your case will be dismissed by the court.  

I recently saw a case where a client’s bankruptcy attorney was suspended by the California bar during their chapter 13 and they didn’t even get notified by their attorney.  They went to that attorney‘s former office and found out about it.  The new attorney working in the office offered to take over the case for $500 which they were supposed to pay to that attorney.  However, in a chapter 13, only the initial payment of attorney‘s fees is ever paid directly to the attorney by the client.  After that, no fees get paid without court approval.  I told them that.  They went back to that attorney in Temecula and that attorney “just stared at me blank faced”.  Once a chapter 13 plan is confirmed by a bankruptcy court judge, you can never accept any fees directly from the client without a court order.  Then the bankruptcy trustee on your chapter 13 case pays those attorney‘s fees to your attorney through the chapter 13 plan as a plan distribution.  

If you have any other concerns, questions or comments please write back back in the comments section below.

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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.

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Lake Elsinore Chapter 13 Bankruptcy

A Chapter 13 Bankruptcy can make it possible for you to hold on to your Lake Elsinore real estate. Did you know that rather than losing your home in a foreclosure or short sale there is a better plan?  If you’ve been out of work for a while and recently started working again, and if you’re behind on your house payments, a chapter 13 bankruptcy may be the right plan for you. 

If the mortgage company won’t give you enough time to pay off the missed payments and if it won’t give you a loan modification, then ask yourself, can you pay the regular mortgage payments if they’d just let you?  Do you owe credit cards or have a high car payment?  Because if you could pay the mortgage payment if they would just let you and if you could reduce your car payment and slash your credit card payments, then those payments could be used to pay off the missed house payments over 5 years at 0% interest.

You can restructure all of your debt including your mortgages, and with this strategic move you can get your life back. Meeting with the attorney will take less time than fitting all those game pieces together from the grocery store to see if you won the million dollars. The difference is you never win at those games, even after all of the money you’ve spent.

Unlike the lottery, you always win with a Lake Elsinore Chapter 13 Bankruptcy. 13 is your lucky number.  If you haven’t been a Bankruptcy Attorney for the past 17 years, you will probably not be skillful enough to carefully fit your financial circumstances together with the complicated Chapter 13 Bankruptcy rules. You need expert help. 

Putting your head in the sand is the easy way out, but things will not get better while waiting things out. You need to get in there to speak with the Attorney while there is still time to actually help you.  He will give you different strategies because he can see things in a way that you can’t. He has helped thousands of people with their bankruptcies already so he won’t be experimenting on you to “see if this might work”.

Who you choose as your attorney matters.  You wouldn’t go to a dermatologist for brain surgery. So don’t go to your uncle’s divorce lawyer for a bankruptcy.  Don’t go to your sister’s car accident attorney reorganize and consolidate your debts.  Mr. Nelson has done Bankruptcy for the entire existence of his practice, he didn’t just try a few cases out for the first time when the economy went sour.

Lots of Attorneys have come at the last minute from other areas of practice such as family law, business planning and construction defect.  Trying their hand at doing Bankruptcy because people with no home equity and no 401k left have no money to pay a divorce lawyer and less need to see one.  Not only has Mr. Nelson been a bankruptcy attorney since 1994, he lived in Tuscany Hills in Lake Elsinore for two years and knows the area.  Knows what the properties are worth.

Chapter 13 Bankruptcy could even make it possible to remove your second mortgage from your home while still holding on to ownership of your property. You want to keep your car and your things while at the same time getting rid of a ton of your debt.  So call to speak with the Attorney to hear about your options. It’s how to “Get Your Life Back”. Remember, faith and fear cannot exist together at the same time, call 951-200-3613 to see Mr. Nelson so you can stop worrying. 

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Bankruptcy and Income Taxes and Tax Liens

The California Board of Equalization and California Franchise Tax Board 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. Your attorney’s trust account might be a good place.

DISCLAIMER: Nothing in this article OR WEBSITE 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. Remember also that I’m not a tax attorney, I’m a bankruptcy attorney in Murrieta near Temecula CA.

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 ALMOST the same rules. For the specifics of the noticing requirements which you must give the California Board of Equalization in an article written Mark Sharf regarding the Ilko case, Ilko v. California Board of Equalization, click HERE.

To discharge income taxes, whether Federal or 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 sort of a “No Duh” moment. Prior to 2005 you used to be able to discharge the tax even you hadn’t filed your return 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. But what if you were audited, and at the end of the audit, you signed the audit, that is not a substitute for your filing of your return? What if you didn’t file a return and the IRS files one for you? When it comes to filing returns, YOU must be the one who files it, not the IRS, or other taxing authority. If you cannot remember if you filed the returns, 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.
  3. If it turns out that you didn’t file your return, then you will have to decide if you want to file your tax return now and then wait for just over two years to file your case, can you handle the other wage garnishments, bank account levies and lawsuits that will take place during that time. You will have to weigh the amount of tax you can get rid of compared to the amount of wages that will be garnished and what will happen to your bank accounts and having to go to court for judgment debtor exams, and if you don’t go to the judgment debtor exam, the court will issue a bench warrant for your arrest and on and on.
  4. 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.
  5. 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. A little while ago, the IRS decided that all extensions were automatically extended to October 15th, I don’t remember which year that started, but from now on, if you think you filed your extension to August, then you must file your bankruptcy in November 3 years later.
  6. 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.
  7. 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.

Even if since Bush the IRS is kinder and gentler, 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.

“Maybe you can’t squeeze blood from a turnip, but you can eat the turnip.”
~David L. Nelson and yes, I just quoted myself.
 

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.

I had another client who back in 2006 owed every year from 1995 to 2000. Turned out he had filed every year except 1996 which the IRS had filed for him. He was dead certain that he had filed it and was totally surprised when it wasn’t he that had done the filing. Fortunately for him there is a 10 year statute of limitations on the collection of federal income taxes. In his case, because he had been sued, the creditor had a big judgment against him and his wife and was about to garnish both their wages he could not file his return himself and wait out that two years. The amount that would have been garnished would have been greater than the amount of tax he would have discharged by waiting. If you cannot remember if you filed or 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.

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 like you did before the law change.

Tax Liens and Statute of Limitations

Many of you have asked about Tax Liens. Yes, there is a 10 year statute of limitations on the collection of the tax. Tax Liens are only one method of collection. The question of how long is the tax lien enforceable once recorded is a different question which we will get to in a moment. Have a look at Internal Revenue Code IRC 26 USC 2605.

26 USC 2605(a) Length of period

Where the assessment of any tax imposed by this title has been made within the period of limitation properly applicable thereto, such tax may be collected by levy or by a proceeding in court, but only if the levy is made or the proceeding begun—
(1) within 10 years after the assessment of the tax, or
(2) if—
(A) there is an installment agreement between the taxpayer and the Secretary, prior to the date which is 90 days after the expiration of any period for collection agreed upon in writing by the Secretary and the taxpayer at the time the installment agreement was entered into; or
(B) there is a release of levy under section 6343 after such 10-year period, prior to the expiration of any period for collection agreed upon in writing by the Secretary and the taxpayer before such release.
If a timely proceeding in court for the collection of a tax is commenced, the period during which such tax may be collected by levy shall be extended and shall not expire until the liability for the tax (or a judgment against the taxpayer arising from such liability) is satisfied or becomes unenforceable.

So, the date the statute of limitation starts the assessment date and it runs for 10 years from the assessment. Is that true in every case? Of course not. There a few notable exceptions, all of which only add to the 10 years, none of them subtract from it.

The one that matters the most on my page is the bankruptcy extension of the 10 year period. Extensions of statutes of limitations are calling “tolling” of the statute of limitations. It just means that you did something that made it impossible for the IRS to collect for a certain amount of time therefore you have that amount of time added to the total amount of time that they get to collect. The Statute of limitations is extended.

Filing bankruptcy extends that statute of limitations for the amount of time you are in bankruptcy plus six (6) months. If your chapter 7 bankruptcy lasts 4 months and plus 6 more then they get to collect against you for 11 years for any pre-bankruptcy non-discharged taxes.

In the Severo case, Severo v. IRS (9th Cir. 2009) the Severos owed money for 1990 income taxes. They filed an extension on the filing of the tax returns to October 15th 1991. However, they filed their bankruptcy in Sept of 1994. You can see by reading above that they filed about a month too early to discharge the tax. Oops. They also filed a chapter 11, then about a year later converted it to a chapter 7. Just as an aside, the chapter 11 bankruptcy not only extended the 10 years statute of limitations on the collection of the tax, it also extended the “three year rule” listed above. So, if they wanted to discharge the tax in the chapter 7 they would have had to dismiss the chapter 11 and wait a little while then refile as a 7. Sadly they didn’t do that

Also their chapter 7 case lasted until early 1998 when they got the chapter 7 discharge. So, from Sept of 94 to March 1998 they were in a bankruptcy. That gave the IRS an additional 3 1/2 years to collect. In other words the 10 year statute of limitations grew or expanded to a 13 1/2 year statute of limitations. That’s what tolling does.

Notice that during that 10 years, if the IRS sues you and obtains a judgment then they can enforce the judgment for the amount of time that your state allows them to. In California judgments are good for 10 years and may be renewed for an additional 10 years. So, they could conceivably follow after you for 30 years

Length of Time of the Lien

Internal Revenue Code Section 6321 states that the lien is created when the tax is assessed, the IRS has sent you a notice and you don’t pay it. If the lien is created when you don’t pay or it’s inception is at assessment is at present an unresolved issue. In most cases, it’s probably a non-issue because they’re coming to get you either way. Circle the Wagons!

How long does the lien last? Internal Revenue Code Section 6322 states that the lien will continue until the assessed tax is satisfied or becomes unenforceable by reason of lapse of time. So now you can see why I spent so much time on the Statute of Limitations

Here’s an excellent discussion of Tax Liens by Attorney Tony Mankus.

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.

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Murrieta Chapter 13 Bankruptcy

In Murrieta and Temecula a chapter 13 bankruptcy is a fantastic financial tool for restructuring your debt and making life easier and finances manageable. You could potentially reduce your monthly payments by several hundred or more than a thousand dollars.  Particularly when your debts are for the types of obligations that are revolving or renewing. 

If you’re considering a debt consolidation loan, a chapter 13 bankruptcy may be just what you need.  A chapter 13 bankruptcy allows you to consolidate your debts and separate them into classes.  You can reduce a car payment, both by cutting the interest rates and extending the term of the loan and paying it off ahead of the credit cards.  You can include child support and income taxes and give them a higher priority in the payment plan so that they get paid off completely and ahead of the credit cards too.  Your credit cards and medical bills and gambling markers get paid whatever is left over. 

Example: if you owed $15000 on a car, $15000 in back child support and $30,000 to credit cards, and if your budget only allowed a payment of $700.  You’d setup a 60 month plan for $700/mo.  Normally you’d have to pay probably $1500 to $2000 per month on that debt depending on interest rates and terms.  Of the $700/mo that you would pay for the 60 month plan, your credit cards would get approximately only $200/mo.  Less in fact because the bankruptcy trustee would take his fees out of that $200 and also the car would have a small interest rate applied but not compounded.

Call now to get started today or to see if a chapter 13 bankruptcy is right for you. Call 951-200-3613.

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Debt Consolidation Loans

In Murrieta and Temecula there are great places to obtain debt consolidation loans.  In many cases a debt consolidation loan is a fantastic financial tool for restructuring your debt and making life easier and finances manageable.  Particularly when your debts are for the types of obligations that are not revolving or renewing. 

If you’re considering a debt consolidation loan, a chapter 13 bankruptcy may be just what you need.  A chapter 13 bankruptcy allows you to consolidate your debts and separate them into classes.  You can reduce a car payment, both by cutting the interest rates and extending the term of the loan and paying it off ahead of the credit cards.  You can include child support and income taxes and give them a higher priority in the payment plan so that they get paid off completely and ahead of the credit cards too.  Your credit cards and medical bills and gambling markers get paid whatever is left over. 

Example: if you owed $15000 on a car, $15000 in back child support and $30,000 to credit cards, and if your budget only allowed a payment of $700.  You’d setup a 60 month plan for $700/mo.  Normally you’d have to pay probably $1500 to $2000 per month on that debt depending on interest rates and terms.  Of the $700/mo that you would pay for the 60 month plan, your credit cards would get approximately only $200/mo.  Less in fact because the bankruptcy trustee would take his fees out of that $200 and also the car would have a small interest rate applied but not compounded.

Recent Taxes

While sufficiently old enough income taxes can be discharged in a bankruptcy, more recent income taxes cannot be.  Income taxes that date back only one, two or three years cannot be discharged in bankruptcy.  This is true in California for the Federal and State income taxes as well as California Sales Taxes.  If the debt is sufficently high you may want to consider waiting out the time required and then filing a bankruptcy when they are ripe enough to do a bankruptcy. 

However, if the debt would be manageable if you just had a low interest rate and a fixed payment for 36 or 48 or 60 months, then a debt consolidation loan might be right for you.  Keep in mind that the interest that the IRS charges is 10% but on top of that, stiff penalties are added whenever the debt has a remaining balance.  If you set up a minimum payment plan directly with the IRS, you’re having more than a 20% interest rate and unpaid interest and penalties are capitalized back into the loan.  Worse is that if you end up owing money next year your payment plan will be cancelled and the full balance on both years will be immediately required by the IRS.

A Debt Consolidation Loan may be exactly what you need in this situation.  As a quick side note there is a special bankruptcy rule which states that if you obtain a loan to pay a tax and then try to discharge the new loan in a bankrutpcy, you must follow the same bankruptcy rules as though it were still a tax in order to discharge it.

Student Loans and Back Child Support 

Neither of these is dischargeable in bankruptcy.  However, neither Student loans nor Child Support have that same rule as the income taxes.  If you obtain a consolidation loan to pay off student loans or child support, and you later find yourself unable to pay off the new loan, there is no bankruptcy rule forcing you to follow the student loan bankruptcy rules nor the child support rules for the consolidation loan.  So, they get discharged.

There are plenty of student loan debt consolidation programs and some have 20 year payment plans, or extended plans and some have income contingent plans.  However my favorite is to just get a normal consolidation loan.  It does better things for your credit files and credit scores and if you fall on hard times afterwards, you can discharge it in a bankruptcy. 

Open Credit Cards with Zero Balances

By far the worst thing you can do is to consolidate credit cards with a new loan or line of credit.  Examples I’ve seen come into the office include but are not limited to the following, a couple has $60,000 in debt consolidation loans and another $60,000 in revolving credit on 10 different credit cards.  Ike, the husband had gambled up $60,000 in credit cards so his wife, Inez went to the bank and got a consolidation loan and paid them off.  However, it left 10 credit cards open with zero balances.  

That’s like handing an open bottle of Rum to an alcoholic pirate; no impulse control and he gambled them all up again.  

In Murrieta and Temecula, if your debts are primarily credit cards consider filing chapter 7 bankruptcy or if you make too much money, file a chapter 13Imagine how much happier Inez would be if she’d talked him into filing a bankruptcy instead of running up the 10 credit cards over again.  How many arguments about money could have been avoided?  How many arguments did they have about the low income, the missed vacations, missed investments, missed retirement savings? If those credit cards had been closed permanently, they might have stayed married. 

I’ve seen a spouse get a consolidation loan, and then call all the credit card companies and close the accounts.  It didn’t work.  The other spouse just called all the credit card companies the next day and asked for the cards to be opened back up again.  And the credit card companies did it.

If you’re considering a debt consolidation loan, a chapter 13 bankruptcy may be just what you need.  A chapter 13 bankruptcy allows you to consolidate your debts and separate them into classes.  You can reduce a car payment, both by cutting the interest rates and extending the term of the loan, and you pay it off ahead of the credit cards.  You can include child support and income taxes and give them a higher priority in the payment plan so that they get paid off completely and ahead of the credit cards too.  Your credit cards and medical bills and gambling markers and whatnot get paid whatever is left over. 

All the cards are closed and no one is going to call back and reopen them either.  Call me now and lets get you started doing something about your debts.  Take action and fix your finances.  951-200-3613.

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Debt Consolidation

Non-Profit Debt Consolidation

There are tons of non-profit debt consolidators in the Murrieta and Temecula areas.   In general what they do is, set you up with a debt consolidation plan.  One place put it this way, “You will be able to combine most, if not all of your unsecured debt and make one single monthly payment.” Your accounts don’t vanish, you haven’t done a consolidation loan, but instead the debt consolidators pay your various accounts monthly as you pay the debt consolidation company.   They claim that you will become more organized and eventually learn to understand your finances better through participation in the program.  Finally they stated that debt consolidation “may reduce” your payments. 

You may have heard that “those who can’t, teach.” Well, if someone wants to teach you about your debts, ask yourself how much they can do about it? (As an aside, most of the teachers I know are quite able and deserve more than they’re getting right now, but these debt consolidators are often not even college grads.)

Hmmm, “May Reduce”?  Wait a minute, isn’t that why you are thinking about contacting these people in the first place, because you don’t have the income currently to meet all the financial obligations that you have right now?  I doubt that’s the deal your looking for. I expect you’re looking for a will-reduce-your-payments type of plan.  Certainly there are a few of you who can afford all of your debts and are just looking for a way to get organized and if that’s the case, maybe a debt consolidation company is right for you.  But if you’re like most people who are looking into this you’re probably looking to make a bit more progress than that.

What most of these companies will tell you that they do is that they contact your credit card companies and medical bills and what not, and they negotiate a payment for you.  Either they are going to try to reduce the principal, interest, extend the term of the contract or a combination of them. 

But what they do not tell you is that, if they’ve been doing this for a while, they already know which of your credit cards are going to play ball with them and which will not.  How could they not know?  Think about it.  However, they will never tell you that you have a  card or account that won’t want to participate. 

So, they set you up with a debt consolidation payment plan and never tell you that one of your accounts didn’t like the terms and decided not to participate.  Instead, after getting a reduced payment or even no payment at all, 6 months or 10 months later, that card sues you.  You call up and exclaim, Wells The Fargo!  Why am I being sued? And the debt consolidators tell you, “oh goodness, it appears that they’ve decided not to participate.”  At that point you’re going to have to file bankruptcy before you have your wages garnished or a bank levy hits your checking and savings accounts. 

And why does that sweet little old non-profit debt consolidation company do that to you?  For the money!  Yes, fans that’s right, for the money.  Just because they’re not for profit does not mean that the officers of the company don’t take a huge salary.  It just means that they cannot declare a dividend to share holders.  So, what difference does it make?  Answer: You’re paying bankruptcy prices to non-lawyers for a non-legal service without the great results you’d get if you simply filed a bankruptcy instead.

So wait a minute, you’re only paying them $20/mo and about $300 down to set it up, right? (low end some charge you thousands)  That’s a lot of months that they’ve set up your payment plan for.  How much did they tell you?  48 months?  36 months?  36 x 20 = $720 and if they have 500 of you making payments through this type of plan that’s $10,000/mo plus $150,000 in set up fees. And as one debt consolidator put it, “I keep the float.” Meaning every month he’s got tens of thousands in his accounts collecting interest from his bank and he absorbs that interest for himself.  And for all that they “may reduce” your payments which means that one of the credit cards may not participate and will sue you.  Maybe not but good luck getting a guarantee out of them.

Chapter 13 Bankruptcy

Do you know what one is?  It’s a debt consolidation plan with the Federal Bankruptcy Code behind it backing you up and forcing your creditors to listen up and back down.  Creditors must take the plan.  I love it, we reduce interest rates on creditors to 0% and often reduce principals down to 5% or 10% of the total balances. 

Try as you might, you could pay off all your debts if only you didn’t have those pesky 20% to 29% interest rates.  With interest rates like that it will take decades to pay off your debt if you paid only the minimum payments.  They will just never let you pay down the principal. And it will be literally decades.

What if you owed say $60,000 in credit cards, medical bills, a repossessed car, and a student loan?  That would cost you $1000/mo . . . if you didn’t have to pay all that interest.  But with all the interest, late fees and penalties, you’re looking at monthly payments of $1500 to $2000/mo.  Maybe more.  Without the interest, penalties and late fees aren’t things tough enough already in Murrieta or Temecula?

A Chapter 13 bankruptcy gives you leverage that the debt consolidators only wish for.  You can force the credit cards, student loans and medical bills to take 0%.  If that’s all you can afford, then 0% interest.  If you can afford only $500/mo, guess what, then they get only about 50% of the principal. 

And none of them can sue you either, and if they want to opt out and not participate, they can, but what they’ll get is 1) they can’t sue you and 2) they get paid nothing at all.  Call me for more information on how to you might qualify for this type of bankruptcy debt consolidation.

Oh, and let’s keep it real, yes I do it for the money, but I’m also an attorney with years of experience offering a real solution to a very real problem. Not a way to “learn about” or “understand” your debts.  Let’s do something about it.  Call now 951-200-3613.

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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.

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Hemet Bankruptcy

Hemet is a “best kept secret” for affordable housing, and many people may not realize what is available for just a little more of a drive past Temecula Wine Country. With the housing market the way it is, and the prices of housing at the lowest they have been in 10 years, but housing prices are on the rise. Interest rates are the lowest they have been in a generation, and as the housing becomes less available, interest rates and prices are bound to go up.

What if you filed a bankruptcy and now you want to buy?  I get calls all the time from clients who filed bankruptcy two years ago, three years ago and now after a bankruptcy in Hemet, they’re ready to buy a house.  Usually two to three years after a bankruptcy, you can be in a position creditwise to buy another house.  Foreclosures take four to five years to rehabilitate your credit enough to buy another house. 

Take advantage now of the current market low.  But what if you’re still in debt?  You lost a house and a car and the banks are still coming for you.  You’ll need a bankruptcy attorney so you can file your bankruptcy right now.  Don’t hesitate, your credit’s not going to get any better on its own and it won’t get better if you can’t pay it.  But a bankruptcy will give you a court order which is a permanent injunction prohibiting collections called a discharge order.  From the time of that court order, your credit starts getting better on its own.  I’ve been a bankruptcy attorney serving Hemet for several years now.  Call me 951-200-3613.

Approximately two years from now, the housing market will most likely still be at a buy point.  Naturally the recovery should be on its way by then, however, you never know, things might take that double dip recession like in 1933 and give you a secondary buy point in two more years. 

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Father’s Day

Have you ever noticed that there are a lot of foreclosure sales scheduled exactly on the day after any Sunday Holidays. Sunday holidays like Father’s Day and Mother’s Day, they probably have the highest number of foreclosure sales than any other day of the year.  You probably haven’t noticed, why would you?  That’s my job.

Usually what happens is that your realtor, who is doing a short sale or a loan modification for your is told on Thursday or Friday that your deal is not going to go through and wouldn’t you know it, your foreclosure sale date is Monday.  Good grief. 

If you’re a bank, happiness is a Trustee’s sale on a Monday. 

Foreclosure companies are counting on the idea that attorneys will be too busy to file a bankruptcy on a Saturday or a Sunday Night especially if that Sunday Night is also Father’s Day. 

They assume that bankruptcy attorneys won’t take time away from their families to help a person who is in financial need and about to lose their house.  But they didn’t count on me.  I’m there to help you when you need me the most.

Not only because it will help your family to save a home though sometimes it’s only for a few more months, and not only because it’s a pay day for me.  But the real reason I do it, and take a bit of time away from my family on a father’s day is to shove in the foreclosure company’s face!

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Pre-Bankruptcy Counseling

I just recently came across a new one, or at least new to me. 

DebtorEdU.com

I like this one so far because of the price:  $9.95 per household.  For both the Pre-Filing Bankruptcy Credit Counseling and for the Post-Filing Debtor Education Course which is also called by the US Trustee’s Office a course in financial management. 

While it’s an insult to most of us, that we should have to take a course in financial management after Wall Street’s greedy bankers duped the Real Estate Industry into helping them tank the entire world’s economy, it’s still a requirement at this time.  You cannot get a Bankruptcy Discharge without it.

Prior to filing your bankruptcy, you must do a Pre-Filing Credit Counseling course and receive a certificate at the end of the counseling and you must do this prior to filing your case.  If you are under exigent circumstances and you do not have the time to complete the pre-filing counseling, you may petition the Court by filing a request to allow the filing of your bankruptcy petition to move forward and then you may be given by the court, some extra time to complete it.  However, if you file it without the extra paperwork or motion to extend the time to file the certificate, then your case will immediately be dismissed and all your money tossed out the window.  Besides, it only takes about 30 to 45 minutes to do it.  I have people do it in my office while I am typing their bankruptcy petition which in most cases will take at least 2 hours minimum anyway.  There’s really no excuse to not get this done prior to filing your bankruptcy. 

Post Filing Debtor Education Course or Financial Management Course Certificate

Prior to attending your bankruptcy hearing, y0u must complete the Debtor Education Course.  The Debtor Education Course or Financial Management Course is the true class or education course that you have to take.  Prior to filing you have counseling, which is designed to see if you can avoid a bankruptcy in the first place.  Behind the Education Course is the purpose to help you avoid ever filing another bankruptcy again.  If anything, this course should be required when you’re in college before they give you a student visa card. 

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Facebook

I just watched a bankrupt debtor in a bankruptcy 341a creditors meeting get punked by his own Facebook post. 

He put on Facebook that he had to get “his boat” ready for a party with 12 people.  When his Facebook Friend (and it turns out, also a guy that he owed money to) asked about it, the bankrupt guy said he wasn’t the primary owner. 

Oops.  Turns out he also has a motorhome too.  Neither is listed in his bankruptcy petition. 

Damn you Facebook!!

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