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Fair Debt Collection Practices Act ~ FDCPA

Can a creditor call you once you refuse in writing to pay?

You’ve written to the collection agent and told him not to call you anymore, what can you do if they call you anyway?

What if a creditor threatens to sue you?

The creditor has already missed the statute of limitations, can they continue to call you anyway?

How late can a creditor call you? 

How early can a creditor call you?

How often can they call you during a day?

Can they call you at work?

How often can they call you at work?

Can a creditor tell your neighbor that you haven’t paid your bills?

DOWNLOAD: What Creditors Can Do under the Fair Debt Collection Practices Act Published by the Federal Trade Commission
THE FAIR DEBT COLLECTION PRACTICES ACT

Table of Contents
§ 801 Short title
§ 802 Congressional findings and declaration of purpose
§ 803 Definitions
§ 804 Acquisition of location information
§ 805 Communication in connection with debt collection
§ 806 Harassment or abuse
§ 807 False or misleading representations
§ 808 Unfair practices
§ 809 Validation of debts
§ 810 Multiple debts
§ 811 Legal actions by debt collectors
§ 812 Furnishing certain deceptive forms
§ 813 Civil liability
§ 814 Administrative enforcement
§ 815 Reports to Congress by the Commission
§ 816 Relation to State laws
§ 817 Exemption for State regulation
§ 818 Exception for certain bad check enforcement programs operated by private entities
§ 819 Effective date
§ 801 15 USC 1601 note

§ 801. Short Title

This title may be cited as the “Fair Debt Collection Practices Act.”

§ 802. Congressional findings and declaration of purpose

(a) There is abundant evidence of the use of abusive, deceptive, and unfair debt collection practices by many debt collectors. Abusive debt collection practices contribute to the number of personal bankruptcies, to marital instability, to the loss of jobs, and to invasions of individual privacy.
(b) Existing laws and procedures for redressing these injuries are inadequate to protect consumers.
(c) Means other than misrepresentation or other abusive debt collection practices are available for the effective collection of debts.
(d) Abusive debt collection practices are carried on to a substantial extent in interstate commerce and through means and instrumentalities of such commerce. Even where abusive debt collection practices are purely intrastate in character, they nevertheless directly affect interstate commerce.
(e) It is the purpose of this title to eliminate abusive debt collection practices by debt collectors, to insure that those debt collectors who refrain from using abusive debt collection practices are not competitively disadvantaged, and to promote consistent State action to protect consumers against debt collection abuses.

§ 803. Definitions

As used in this title—
(1) The term “Commission” means the Federal Trade Commission.
(2) The term “communication” means the conveying of information regarding a debt directly or indirectly to any person through any medium.
(3) The term “consumer” means any natural person obligated or allegedly obligated to pay any debt.
(4) The term “creditor” means any person who offers or extends credit creating a debt or to whom a debt is owed, but such term does not include any person to the extent that he receives an assignment or transfer of a debt in default solely for the purpose of facilitating collection of such debt for another.
(5) The term “debt” means any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance or services which are the subject of the transaction are primarily for personal, family, or household purposes, whether or not such obligation has been reduced to judgment.
(6) The term “debt collector” means any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another. Notwithstanding the exclusion provided by clause (F) of the last sentence of this paragraph, the term includes any creditor who, in the process of collecting his own debts, uses any name other than his own which would indicate that a third person is collecting or attempting to collect such debts. For the purpose of section 808(6), such term also includes any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the enforcement of security interests. The term does not include—
(A) any officer or employee of a creditor while, in the name of the creditor, collecting debts for such creditor;
(B) any person while acting as a debt collector for another person, both of whom are related by common ownership or affiliated by corporate control, if the person acting as a debt collector does so only for persons to whom it is so related or affiliated and if the principal business of such person is not the collection of debts;
(C) any officer or employee of the United States or any State to the extent that collecting or attempting to collect any debt is in the performance of his official duties;
(D) any person while serving or attempting to serve legal process on any other person in connection with the judicial enforcement of any debt;
(E) any nonprofit organization which, at the request of consumers, performs bona fide consumer credit counseling and assists consumers in the liquidation of their debts by receiving payments from such consumers and distributing such amounts to creditors; and
(F) any person collecting or attempting to collect any debt owed or due or asserted to be owed or due another to the extent such activity
(i) is incidental to a bona fide fiduciary obligation or a bona fide escrow arrangement;
(ii) concerns a debt which was originated by such person;
(iii) concerns a debt which was not in default at the time it was obtained by such person; or
(iv) concerns a debt obtained by such person as a secured party in a commercial credit transaction involving the creditor.
(7) The term “location information” means a consumer’s place of abode and his telephone number at such place, or his place of employment.
(8) The term “State” means any State, territory, or possession of the United States, the District of Columbia, the Commonwealth of Puerto Rico, or any political subdivision of any of the foregoing.

§ 804. Acquisition of location information

Any debt collector communicating with any person other than the consumer for the purpose of acquiring location information about the consumer shall—
(1) identify himself, state that he is confirming or correcting location information concerning the consumer, and, only if expressly requested, identify his employer;
(2) not state that such consumer owes any debt;
(3) not communicate with any such person more than once unless requested to do so by such person or unless the debt collector reasonably believes that the earlier response of such person is erroneous or incomplete and that such person now has correct or complete location information;
(4) not communicate by post card;
(5) not use any language or symbol on any envelope or in the contents of any communication effected by the mails or telegram that indicates that the debt collector is in the debt collection business or that the communication relates to the collection of a debt; and
(6) after the debt collector knows the consumer is represented by an attorney with regard to the subject debt and has knowledge of, or can readily ascertain, such attorney’s name and address, not communicate with any person other than that attorney, unless the attorney fails to respond within a reasonable period of time to the communication from the debt collector.

§ 805. Communication in connection with debt collection

(a) COMMUNICATION WITH THE CONSUMER GENERALLY. Without the prior consent of the consumer given directly to the debt collector or the express permission of a court of competent jurisdiction, a debt collector may not communicate with a consumer in connection with the collection of any debt—
(1) at any unusual time or place or a time or place known or which should be known to be inconvenient to the consumer. In the absence of knowledge of circumstances to the contrary, a debt collector shall assume that the convenient time for communicating with a consumer is after 8 o’clock antimeridian and before 9 o’clock postmeridian, local time at the consumer’s location;
(2) if the debt collector knows the consumer is represented by an attorney with respect to such debt and has knowledge of, or can readily ascertain, such attorney’s name and address, unless the attorney fails to respond within a reasonable period of time to a communication from the debt collector or unless the attorney consents to direct communication with the consumer; or
(3) at the consumer’s place of employment if the debt collector knows or has reason to know that the consumer’s employer prohibits the consumer from receiving such communication.
(b) COMMUNICATION WITH THIRD PARTIES. Except as provided in section 804, without the prior consent of the consumer given directly to the debt collector, or the express permission of a court of competent jurisdiction, or as reasonably necessary to effectuate a postjudgment judicial remedy, a debt collector may not communicate, in connection with the collection of any debt, with any person other than a consumer, his attorney, a consumer reporting agency if otherwise permitted by law, the creditor, the attorney of the creditor, or the attorney of the debt collector.
(c) CEASING COMMUNICATION. If a consumer notifies a debt collector in writing that the consumer refuses to pay a debt or that the consumer wishes the debt collector to cease further communication with the consumer, the debt collector shall not communicate further with the consumer with respect to such debt, except—
(1) to advise the consumer that the debt collector’s further efforts are being terminated;
(2) to notify the consumer that the debt collector or creditor may invoke specified remedies which are ordinarily invoked by such debt collector or creditor; or
(3) where applicable, to notify the consumer that the debt collector or creditor intends to invoke a specified remedy.
If such notice from the consumer is made by mail, notification shall be complete upon receipt.
(d) For the purpose of this section, the term “consumer” includes the consumer’s spouse, parent (if the consumer is a minor), guardian, executor, or administrator.

§ 806. Harassment or abuse

A debt collector may not engage in any conduct the natural consequence of which is to harass, oppress, or abuse any person in connection with the collection of a debt. Without limiting the general application of the foregoing, the following conduct is a violation of this section:
(1) The use or threat of use of violence or other criminal means to harm the physical person, reputation, or property of any person.
(2) The use of obscene or profane language or language the natural consequence of which is to abuse the hearer or reader.
(3) The publication of a list of consumers who allegedly refuse to pay debts, except to a consumer reporting agency or to persons meeting the requirements of section 603(f) or 604(3)1 of this Act.
(4) The advertisement for sale of any debt to coerce payment of the debt.
(5) Causing a telephone to ring or engaging any person in telephone conversation repeatedly or continuously with intent to annoy, abuse, or harass any person at the called number.
(6) Except as provided in section 804, the placement of telephone calls without meaningful disclosure of the caller’s identity.

§ 807. False or misleading representations

A debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt. Without limiting the general application of the foregoing, the following conduct is a violation of this section:
(1) The false representation or implication that the debt collector is vouched for, bonded by, or affiliated with the United States or any State, including the use of any badge, uniform, or facsimile thereof.
(2) The false representation of—
(A) the character, amount, or legal status of any debt; or
(B) any services rendered or compensation which may be lawfully received by any debt collector for the collection of a debt.
(3) The false representation or implication that any individual is an attorney or that any communication is from an attorney.
(4) The representation or implication that nonpayment of any debt will result in the arrest or imprisonment of any person or the seizure, garnishment, attachment, or sale of any property or wages of any person unless such action is lawful and the debt collector or creditor intends to take such action.
(5) The threat to take any action that cannot legally be taken or that is not intended to be taken.
(6) The false representation or implication that a sale, referral, or other transfer of any interest in a debt shall cause the consumer to—
(A) lose any claim or defense to payment of the debt; or
(B) become subject to any practice prohibited by this title.
(7) The false representation or implication that the consumer committed any crime or other conduct in order to disgrace the consumer.
(8) Communicating or threatening to communicate to any person credit information which is known or which should be known to be false, including the failure to communicate that a disputed debt is disputed.
(9) The use or distribution of any written communication which simulates or is falsely represented to be a document authorized, issued, or approved by any court, official, or agency of the United States or any State, or which creates a false impression as to its source, authorization, or approval.
(10) The use of any false representation or deceptive means to collect or attempt to collect any debt or to obtain information concerning a consumer.
(11) The failure to disclose in the initial written communication with the consumer and, in addition, if the initial communication with the consumer is oral, in that initial oral communication, that the debt collector is attempting to collect a debt and that any information obtained will be used for that purpose, and the failure to disclose in subsequent communications that the communication is from a debt collector, except that this paragraph shall not apply to a formal pleading made in connection with a legal action.
(12) The false representation or implication that accounts have been turned over to innocent purchasers for value.
(13) The false representation or implication that documents are legal process.
(14) The use of any business, company, or organization name other than the true name of the debt collector’s business, company, or organization.
(15) The false representation or implication that documents are not legal process forms or do not require action by the consumer.
(16) The false representation or implication that a debt collector operates or is employed by a consumer reporting agency as defined by section 603(f) of this Act.

§ 808. Unfair practices

A debt collector may not use unfair or unconscionable means to collect or attempt to collect any debt. Without limiting the general application of the foregoing, the following conduct is a violation of this section:
(1) The collection of any amount (including any interest, fee, charge, or expense incidental to the principal obligation) unless such amount is expressly authorized by the agreement creating the debt or permitted by law.
(2) The acceptance by a debt collector from any person of a check or other payment instrument postdated by more than five days unless such person is notified in writing of the debt collector’s intent to deposit such check or instrument not more than ten nor less than three business days prior to such deposit.
(3) The solicitation by a debt collector of any postdated check or other postdated payment instrument for the purpose of threatening or instituting criminal prosecution.
(4) Depositing or threatening to deposit any postdated check or other postdated payment instrument prior to the date on such check or instrument.
(5) Causing charges to be made to any person for communications by concealment of the true propose of the communication. Such charges include, but are not limited to, collect telephone calls and telegram fees.
(6) Taking or threatening to take any nonjudicial action to effect dispossession or disablement of property if—
(A) there is no present right to possession of the property claimed as collateral through an enforceable security interest;
(B) there is no present intention to take possession of the property; or
(C) the property is exempt by law from such dispossession or disablement.
(7) Communicating with a consumer regarding a debt by post card.
(8) Using any language or symbol, other than the debt collector’s address, on any envelope when communicating with a consumer by use of the mails or by telegram, except that a debt collector may use his business name if such name does not indicate that he is in the debt collection business.

§ 809. Validation of debts

(a) Within five days after the initial communication with a consumer in connection with the collection of any debt, a debt collector shall, unless the following information is contained in the initial communication or the consumer has paid the debt, send the consumer a written notice containing—
(1) the amount of the debt;
(2) the name of the creditor to whom the debt is owed;
(3) a statement that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector;
(4) a statement that if the consumer notifies the debt collector in writing within the thirty-day period that the debt, or any portion thereof, is disputed, the debt collector will obtain verification of the debt or a copy of a judgment against the consumer and a copy of such verification or judgment will be mailed to the consumer by the debt collector; and
(5) a statement that, upon the consumer’s written request within the thirty-day period, the debt collector will provide the consumer with the name and address of the original creditor, if different from the current creditor.
(b) If the consumer notifies the debt collector in writing within the thirty-day period described in subsection (a) that the debt, or any portion thereof, is disputed, or that the consumer requests the name and address of the original creditor, the debt collector shall cease collection of the debt, or any disputed portion thereof, until the debt collector obtains verification of the debt or any copy of a judgment, or the name and address of the original creditor, and a copy of such verification or judgment, or name and address of the original creditor, is mailed to the consumer by the debt collector. Collection activities and communications that do not otherwise violate this title may continue during the 30-day period referred to in subsection (a) unless the consumer has notified the debt collector in writing that the debt, or any portion of the debt, is disputed or that the consumer requests the name and address of the original creditor. Any collection activities and communication during the 30-day period may not overshadow or be inconsistent with the disclosure of the consumer’s right to dispute the debt or request the name and address of the original creditor.
(c) The failure of a consumer to dispute the validity of a debt under this section may not be construed by any court as an admission of liability by the consumer.
(d) A communication in the form of a formal pleading in a civil action shall not be treated as an initial communication for purposes of subsection (a).
(e) The sending or delivery of any form or notice which does not relate to the collection of a debt and is expressly required by the Internal Revenue Code of 1986, title V of Gramm-Leach-Bliley Act, or any provision of Federal or State law relating to notice of data security breach or privacy, or any regulation prescribed under any such provision of law, shall not be treated as an initial communication in connection with debt collection for purposes of this section.

§ 810. Multiple debts

If any consumer owes multiple debts and makes any single payment to any debt collector with respect to such debts, such debt collector may not apply such payment to any debt which is disputed by the consumer and, where applicable, shall apply such payment in accordance with the consumer’s directions.

§ 811. Legal actions by debt collectors

(a) Any debt collector who brings any legal action on a debt against any consumer shall—
(1) in the case of an action to enforce an interest in real property securing the consumer’s obligation, bring such action only in a judicial district or similar legal entity in which such real property is located; or
(2) in the case of an action not described in paragraph (1), bring such action only in the judicial district or similar legal entity—
(A) in which such consumer signed the contract sued upon; or
(B) in which such consumer resides at the commencement of the action.
(b) Nothing in this title shall be construed to authorize the bringing of legal actions by debt collectors.

§ 812. Furnishing certain deceptive forms

(a) It is unlawful to design, compile, and furnish any form knowing that such form would be used to create the false belief in a consumer that a person other than the creditor of such consumer is participating in the collection of or in an attempt to collect a debt such consumer allegedly owes such creditor, when in fact such person is not so participating.
(b) Any person who violates this section shall be liable to the same extent and in the same manner as a debt collector is liable under section 813 for failure to comply with a provision of this title.

§ 813. Civil liability

(a) Except as otherwise provided by this section, any debt collector who fails to comply with any provision of this title with respect to any person is liable to such person in an amount equal to the sum of—
(1) any actual damage sustained by such person as a result of such failure;
(2) (A) in the case of any action by an individual, such additional damages as the court may allow, but not exceeding $1,000; or
(B) in the case of a class action,
(i) such amount for each named plaintiff as could be recovered under subparagraph (A), and
(ii) such amount as the court may allow for all other class members, without regard to a minimum individual recovery, not to exceed the lesser of $500,000 or 1 per centum of the net worth of the debt collector; and
(3) in the case of any successful action to enforce the foregoing liability, the costs of the action, together with a reasonable attorney’s fee as determined by the court. On a finding by the court that an action under this section was brought in bad faith and for the purpose of harassment, the court may award to the defendant attorney’s fees reasonable in relation to the work expended and costs.
(b) In determining the amount of liability in any action under subsection (a), the court shall consider, among other relevant factors—
(1) in any individual action under subsection (a)(2)(A), the frequency and persistence of noncompliance by the debt collector, the nature of such noncompliance, and the extent to which such noncompliance was intentional; or
(2) in any class action under subsection (a)(2)(B), the frequency and persistence of noncompliance by the debt collector, the nature of such noncompliance, the resources of the debt collector, the number of persons adversely affected, and the extent to which the debt collector’s noncompliance was intentional.
(c) A debt collector may not be held liable in any action brought under this title if the debt collector shows by a preponderance of evidence that the violation was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid any such error.
(d) An action to enforce any liability created by this title may be brought in any appropriate United States district court without regard to the amount in controversy, or in any other court of competent jurisdiction, within one year from the date on which the violation occurs.
(e) No provision of this section imposing any liability shall apply to any act done or omitted in good faith in conformity with any advisory opinion of the Commission, notwithstanding that after such act or omission has occurred, such opinion is amended, rescinded, or determined by judicial or other authority to be invalid for any reason.

§ 814. Administrative enforcement

(a) Compliance with this title shall be enforced by the Commission, except to the extent that enforcement of the requirements imposed under this title is specifically committed to another agency under subsection (b). For purpose of the exercise by the Commission of its functions and powers under the Federal Trade Commission Act, a violation of this title shall be deemed an unfair or deceptive act or practice in violation of that Act. All of the functions and powers of the Commission under the Federal Trade Commission Act are available to the Commission to enforce compliance by any person with this title, irrespective of whether that person is engaged in commerce or meets any other jurisdictional tests in the Federal Trade Commission Act, including the power to enforce the provisions of this title in the same manner as if the violation had been a violation of a Federal Trade Commission trade regulation rule.
(b) Compliance with any requirements imposed under this title shall be enforced under—
(1) section 8 of the Federal Deposit Insurance Act, in the case of—
(A) national banks, and Federal branches and Federal agencies of foreign banks, by the Office of the Comptroller of the Currency;
(B) member banks of the Federal Reserve System (other than national banks), branches and agencies of foreign banks (other than Federal branches, Federal agencies, and insured State branches of foreign banks), commercial lending companies owned or controlled by foreign banks, and organizations operating under section 25 or 25(a) of the Federal Reserve Act, by the Board of Governors of the Federal Reserve System; and
(C) banks insured by the Federal Deposit Insurance Corporation (other than members of the Federal Reserve System) and insured State branches of foreign banks, by the Board of Directors of the Federal Deposit Insurance Corporation;
(2) section 8 of the Federal Deposit Insurance Act, by the Director of the Office of Thrift Supervision, in the case of a savings association the deposits of which are insured by the Federal Deposit Insurance Corporation;
(3) the Federal Credit Union Act, by the Administrator of the National Credit Union Administration with respect to any Federal credit union;
(4) the Acts to regulate commerce, by the Secretary of Transportation, with respect to all carriers subject to the jurisdiction of the Surface Transportation Board;
(5) the Federal Aviation Act of 1958, by the Secretary of Transportation with respect to any air carrier or any foreign air carrier subject to that Act; and
(6) the Packers and Stockyards Act, 1921 (except as provided in section 406 of that Act), by the Secretary of Agriculture with respect to any activities subject to that Act.
The terms used in paragraph (1) that are not defined in this title or otherwise defined in section 3(s) of the Federal Deposit Insurance Act (12 U.S.C. 1813(s)) shall have the meaning given to them in section 1(b) of the International Banking Act of 1978 (12 U.S.C. 3101).
(c) For the purpose of the exercise by any agency referred to in subsection (b) of its powers under any Act referred to in that subsection, a violation of any requirement imposed under this title shall be deemed to be a violation of a requirement imposed under that Act. In addition to its powers under any provision of law specifically referred to in subsection (b), each of the agencies referred to in that subsection may exercise, for the purpose of enforcing compliance with any requirement imposed under this title any other authority conferred on it by law, except as provided in subsection (d).
(d) Neither the Commission nor any other agency referred to in subsection (b) may promulgate trade regulation rules or other regulations with respect to the collection of debts by debt collectors as defined in this title.

§ 815. Reports to Congress by the Commission

(a) Not later than one year after the effective date of this title and at one-year intervals thereafter, the Commission shall make reports to the Congress concerning the administration of its functions under this title, including such recommendations as the Commission deems necessary or appropriate. In addition, each report of the Commission shall include its assessment of the extent to which compliance with this title is being achieved and a summary of the enforcement actions taken by the Commission under section 814 of this title.
(b) In the exercise of its functions under this title, the Commission may obtain upon request the views of any other Federal agency which exercises enforcement functions under section 814 of this title.

§ 816. Relation to State laws

This title does not annul, alter, or affect, or exempt any person subject to the provisions of this title from complying with the laws of any State with respect to debt collection practices, except to the extent that those laws are inconsistent with any provision of this title, and then only to the extent of the inconsistency. For purposes of this section, a State law is not inconsistent with this title if the protection such law affords any consumer is greater than the protection provided by this title.

§ 817. Exemption for State regulation

The Commission shall by regulation exempt from the requirements of this title any class of debt collection practices within any State if the Commission determines that under the law of that State that class of debt collection practices is subject to requirements substantially similar to those imposed by this title, and that there is adequate provision for enforcement.

§ 818. Exception for certain bad check enforcement programs operated by private entities

(a) In General.—
(1) TREATMENT OF CERTAIN PRIVATE ENTITIES.—Subject to paragraph (2), a private entity shall be excluded from the definition of a debt collector, pursuant to the exception provided in section 803(6), with respect to the operation by the entity of a program described in paragraph (2)(A) under a contract described in paragraph (2)(B).
(2) CONDITIONS OF APPLICABILITY.—Paragraph (1) shall apply if—
(A) a State or district attorney establishes, within the jurisdiction of such State or district attorney and with respect to alleged bad check violations that do not involve a check described in subsection (b), a pretrial diversion program for alleged bad check
offenders who agree to participate voluntarily in such program to avoid criminal prosecution;
(B) a private entity, that is subject to an administrative support services contract with a State or district attorney and operates under the direction, supervision, and control of such State or district attorney, operates the pretrial diversion program described in subparagraph (A); and
(C) in the course of performing duties delegated to it by a State or district attorney under the contract, the private entity referred to in subparagraph (B)—
(i) complies with the penal laws of the State;
(ii) conforms with the terms of the contract and directives of the State or district attorney;
(iii) does not exercise independent prosecutorial discretion;
(iv) contacts any alleged offender referred to in subparagraph (A) for purposes of participating in a program referred to in such paragraph—
(I) only as a result of any determination by the State or district attorney that probable cause of a bad check violation under State penal law exists, and that contact with the alleged offender for purposes of participation in the program is appropriate; and
(II) the alleged offender has failed to pay the bad check after demand for payment, pursuant to State law, is made for payment of the check amount;
(v) includes as part of an initial written communication with an alleged offender a clear and conspicuous statement that—
(I) the alleged offender may dispute the validity of any alleged bad check violation;
(II) where the alleged offender knows, or has reasonable cause to believe, that the alleged bad check violation is the result of theft or forgery of the check, identity theft, or other fraud that is not the result of the conduct of the alleged offender, the alleged offender may file a crime report with the appropriate law enforcement agency; and
(III) if the alleged offender notifies the private entity or the district attorney in writing, not later than 30 days after being contacted for the first time pursuant to clause (iv), that there is a dispute pursuant to this subsection, before further restitution efforts are pursued, the district attorney or an employee of the district attorney authorized to make such a determination makes a determination that there is probable cause to believe that a crime has been committed; and
(vi) charges only fees in connection with services under the contract that have been authorized by the contract with the State or district attorney.
(b) Certain Checks Excluded.—A check is described in this subsection if the check involves, or is subsequently found to involve—
(1) a postdated check presented in connection with a payday loan, or other similar transaction, where the payee of the check knew that the issuer had insufficient funds at the time the check was made, drawn, or delivered;
(2) a stop payment order where the issuer acted in good faith and with reasonable cause in stopping payment on the check;
(3) a check dishonored because of an adjustment to the issuer’s account by the financial institution holding such account without providing notice to the person at the time the check was made, drawn, or delivered;
(4) a check for partial payment of a debt where the payee had previously accepted partial payment for such debt;
(5) a check issued by a person who was not competent, or was not of legal age, to enter into a legal contractual obligation at the time the check was made, drawn, or delivered; or
(6) a check issued to pay an obligation arising from a transaction that was illegal in the jurisdiction of the State or district attorney at the time the check was made, drawn, or delivered.
(c) Definitions.—For purposes of this section, the following definitions shall apply:
(1) STATE OR DISTRICT ATTORNEY.—The term “State or district attorney” means the chief elected or appointed prosecuting attorney in a district, county (as defined in section 2 of title 1, United States Code), municipality, or comparable jurisdiction, including State attorneys general who act as chief elected or appointed prosecuting attorneys in a district, county (as so defined), municipality or comparable jurisdiction, who may be referred to by a variety of titles such as district attorneys, prosecuting attorneys, commonwealth’s attorneys, solicitors, county attorneys, and state’s attorneys, and who are responsible for the prosecution of State crimes and violations of jurisdiction-specific local ordinances.
(2) CHECK.—The term “check” has the same meaning as in section 3(6) of the Check Clearing for the 21st Century Act.
(3) BAD CHECK VIOLATION.—The term “bad check violation” means a violation of the applicable State criminal law relating to the writing of dishonored checks.

§ 819. Effective date

This title takes effect upon the expiration of six months after the date of its enactment, but section 809 shall apply only with respect to debts for which the initial attempt to collect occurs after such effective date.

Legislative History

House Report: No. 95-131 (Comm. on Banking, Finance, and Urban Affairs)
Senate Report: No. 95-382 (Comm. on Banking, Housing and Urban Affairs)
Congressional Record, Vol. 123 (1977)
April 4, House considered and passed H.R. 5294.
Aug. 5, Senate considered and passed amended version of H.R. 5294.
Sept. 8, House considered and passed Senate version.
Enactment: Public Law 95-109 (Sept. 20, 1977)
Amendments: Public Law Nos.
99-361 (July 9, 1986)
101-73 (Aug. 9, 1989)
102-242 (Dec. 19, 1991)
102-550 (Oct. 28, 1992)
104-88 (Dec. 29, 1995)
104-208 (Sept. 30, 1996)
109-351 (Oct. 13, 2006)
Revised January 2009

SALES TAXES

If you’ve been thinking what a great idea! Let’s increase the sales tax by 1%, let’s tax the rich businesses or if you’ve been thinking, well because I’m the 99%, I won’t notice a 1% increase as I’m buying groceries, think again.

Remember that a 1% increase in SALES TAXES might mean a 10% decrease in the your employer’s net business income. That could be equal to your SALARY.

But don’t worry, you won’t even notice that 1% when you’re buying your groceries . . oh, unless you don’t have a job . . .

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Post Filing Pre Hearing

After you File Your Case you MUST also do a Debtor Education Course (CLICK HERE FOR THE $15 COURSE) prior to the hearing date.

Give them my email: David@Murrieta-Bankruptcy.com  and Fax: 8582289763

If your case was filed in San Diego, then your case is in the SOUTHERN DISTRICT of California.  If your case is in San Francisco, then your case is in the NORTHERN DISTRICT of California.  If your case is in Riverside, Santa Ana, Los Angeles, then your case is in the CENTRAL DISTRICT of California.

When it asks you to put in your case number, just enter the numbers and leave out the letters.


I Buy Gold

“Sell Your Gold”

By now you have seen numerous advertisements to “sell your unwanted Gold for cash,” or to “Sell your unwanted silver for cash.” Since you’re at this site, then you probably are also wondering how you can pay for your attorney’s fees.  It’s easier than it sounds.  Trade your unwanted gold and silver to me as a trade against your attorney’s fees.  Save the middle man.  I will take your gold and silver as a trade against your attorney’s fees for more than the local coin shops will pay you for it, and save you trouble of going through the middle man.   

Gold Into Cash

You don’t need to turn your gold and silver into cash if you’re going to use that cash to pay your bankruptcy attorney anyway.  And this way the middle man doesn’t need to profit off of you on top of paying an attorney to handle your case.  If you have more gold than the price of your bankruptcy, then I can at least give you an idea what you can expect to get paid for it. 

I Buy Gold

I was listening to an I Buy Gold radio commercial the other day, and the radio voice said that a person had sold a gold coin that cost $20 in 1927 and received over $1400 when they sold it. 

Here’s the ridiculous thing about this commerical, of course it cost $20 in 1927, back then your gold coins were worth face value.  In 1927 it was a $20 gold peice.  When that person sold that coin, and got only $1400 gold was probably trading at $1500 which just on the value of the gold was a cut in price of $100.  But more importantly, the value of the rare coin was probably ignored.  If it was in bad condition it would still sell for a couple hundred more than price of the gold in it. 

Additionally, any gold and silver you have left over is an asset that you must declare in your bankruptcy petition.  I can tell you how much of you can keep and still file your bankruptcy.  In most cases, you can keep all of it, file your bankruptcy, and get out of debt.

Lastly if you’d prefer to go to a dealer or if you have a rare coin in good condition or if your coin is worth more than the value of your bankruptcy, then you’ll need a reputable dealer to help evaluate the value of your coin and who can afford to pay you cash immediatley.  I recommend Chapparal Coin Company in Murrieta, CA.  Located on Washington Ave in Old Town Murrieta, their shop is right by me.   

Inflation

FINANCIAL APOCALYPSE

I feel like the fool on the hill shouting and no one can hear me.

I love our country and its social programs, and I wish we could pay for them.

HERE IS SOMEONE WHO AGREES WITH ME, You’ll want to have a look at what this guy has to say because if he’s right, your world is about to dramatically change forever in every way.

If our country were like a family, it would have an income of $22K/yr and expenses of $38K/yr. If we cut out the wars, we’re still in the hole because before we started borrowing the $16K/yr difference from China we were already borrowing from our retirement funds, (or social security trust funds).

Have you known anyone who borrowed from their 401k to save their house? I see it almost daily. And the wars cost our family less than the $16K/yr so we’d still be negative.

Here’s the kicker, our little family has $140K in credit card debt to the bank of China, and several other major banks around the world.

If it was a client of mine I’d say file bankruptcy; but only after you have found a way to cut your budget so that your expenses are less than your income first.

Once you file a bankruptcy what happens to your credit, no one will lend to you anymore. That’s about to happen. We can’t file as a country but our creditors have noticed we’re printing play money to pay the debts. That causes the value of the money we make our payments with to drop. If our hypothetical family printed counterfeit money as their “income from home”, then they’d all go to federal prison. Our president does it and people want to reelect him?

In any case, creditors are figuring out our country’s diabolical plan and they’re now moving to charge us more interest and in a short time, they’ll cut us off. Like a bartender kicking a drunk out the door.

The extra printed money means that if our family’s creditors expected to receive a $100/mo payment, well guess what, now they’re getting $89/mo. But we’re telling our creditors to look at the paper the money’s printed on and that the paper says $100. But they know better. Meanwhile the value of the money is still dropping because we keep printing more.

A country’s currency has a fixed value based on imports/exports/GDP and the like, but it’s relatively fixed. It’s like having a bowl of peanuts. The bowlful is worth $100 no matter how many nuts are in the bowl. 100 peanuts and each is worth a dollar. Add 100 more peanuts and the value of each drops down to 50cents. We’re constantly adding more peanuts.

Eventually they’re going to treat us as though we’ve filed a bankruptcy and stop lending us money.

Then the reserve currency status is going to go away. Basically it means that when a country buys oil it must first buy dollars and then use the dollars to buy oil. We just print more in the US. But when we have to turn around and buy Euros or Yuan to buy our oil, our price for gas in the US is going to equalize to European prices or something like about $6 to $8/gallon.

Buy Gold

A lot of people say buy gold, but if you do and anything like what I’ve described happens, then the US government will do something like what it did in 1933, historical fact I’m not making this up; the US Gov made it illegal to own more than 5 oz of gold. They didn’t buy it from you they just took it. They literally went bank to banks and emptied out safe deposit boxes.

This is coming my friend. It’s happening all around us right now.

The US Gov’s credit rating is already slipping, it’s already been downgraded. We couldn’t pay off all that debt if we wanted to. When China stops lending us money, even if the wars are over, we won’t have the money to pay for most of the social services that the government is paying for. Anyone whose parents are on social security is going to be moving in with them because it’s going to be cut, maybe by a 4th, half?

They didn’t kick 4% of the prison population out for good behavior, they just can’t afford to house those prisoners anymore.

The least bad thing that will happen, and perhaps the best we can hope for, is that they will start charging us a much higher interest rate which will drastically increase our government’s monthly/weekly operating expenses.

Have you had any friends whose mortgages adjusted up 1% or 2% ? Their mortgage payments went up from $1200 to $1400 or $1600 or even up to $1800/mo. In my experience my client’s monthly payments we up an average of about $300/mo per percentage point increased. 

Imagine if our government’s monthly operating expenses went up by $300Billion with NO more money coming in and a limit on the amount it could borrow per month. 

They wouldn’t be able to borrow more money to make up the $300Billion so that $300Billion would just eat into the operating expenses.  $300Billion less in Social Security and Food Stamps and medical services all cut all at once without any recourse.

If the government’s monthly expenses went up by 10% then automatically 10% of our government services would be cut that month. Some more than others. Of course we could try to borrow even more money, but I don’t think the lenders would approve the credit increase.

The Bankruptcy Minute

I heard from Attorney Lorene Mies who runs the Bankruptcy Minute ads.  She was unequivocal that she spends as much time as she needs to with you in your consultations.  I want to add that here.  A little while ago, an attorney who knows her well, Bankruptcy Attorney Michael Gouveia, just out of the blue expressed to me that he has great respect for her and her professionalism and her practice.  Rather than change this post, I’ve decided to add these two paragraphs. 

I believe that if you are considering Ms Mies as your attorney, then you should go for it.  I am adding my recommendation to that of Bankruptcy Attorney Mike Gouveia who stated that she’s professional and very good at what she does.  What I noticed recently about her is that she shows up to her own hearings.  A great many attorneys will never go the hearing with you and will hire another attorney to go to your hearing for you.  Sometimes we have to, but there are some attorneys who do it for every hearing just as a matter of routine.  I don’t think that’s fair to the client and clearly she doesn’t think so either.  Not only that, she was way early.  That day she didn’t beat me to the court house but she was dressed better.  To sum up, I apologize to Ms. Mies who didn’t like the way this post sounded without these two paragraphs. If you’ve already decided to use Ms. Mies, then be assured, you’ll be well taken care of.

Because I like her radio commercials, and the sound of her voice, I mentioned her here so you can ask her yourself.

Bankruptcy and Tax Refunds

Tax Refunds and Bankruptcy

Soon you’ll have your tax refunds. Many of you have expressed an interest in paying me with your tax refunds once you get them. That’s great. I’m all for it. However, keep in mind who has sued you? Sometimes a remedy that your creditors have is to attach your tax refunds before you even get them. For instance if you owe a tax from a prior year or if you owe a social security overpayment or a student loan on which you have defaulted.

Bankruptcy Estate

In a chapter 7, keep in mind also that a tax refund is part of the bankruptcy estate until you have proven that you have an exemption statute that protects it for you. Things that are exempt are the things that you get to keep. If you cannot protect/exempt it, then you will lose it. Most of the time you probably can protect it and keep it. Anything that you cannot protect or exempt for yourself is part of the bankruptcy estate. The Bankruptcy Trustee’s job is to administer that estate and sell that portion of your property off to pay your creditors. Most of the time, there is nothing for the Bankruptcy Trustee to sell.

If you get it before you file your case and you spend it, then you already got to keep it. However, if you’re going to have any of it left over when you file or if you’re going to receive it after you file, you MUST tell me about it, and it must be listed as an asset in your bankruptcy petition.

Federal Prison

If you don’t tell me about any asset that you own, or have a right to, even if you don’t have possession of it right now, that’s called concealing an asset. Assets also include things you might get, or you might not, such as winning a lawsuit that you’ve filed against your neighbor because his tree busted up your driveway. You might get a few thousand dollars or you might lose and get nothing but a ticked off neighbor.

Fill out the Questionnaire carefully and when you get to the question about tax refunds, don’t just forget about it or pretend it will be forgotten. It won’t. The bankruptcy trustee assigned to your case will remember to ask you if you will get one or if you have recently gotten one.

Penalty of Perjury

You must answer the questions put to you at the hearing under the penalty of perjury and you must be honest. If not, you could be facing up to 5 years in the Federal Prison or up to $500,000 in fines. Usually what happens is they confiscate the object you’ve hidden, or forgotten about accidentally on purpose and then fine you a few thousand and put you away for a couple to a few months. So, there’s no tax refund big enough to make that worth it, and as I said, almost all of the time you can keep it.

Tax Refunds and Chapter 13

You will lose your tax refunds in chapter 13. Maybe you can time the filing of the chapter 13 in order to collect the next one coming but you must in most cases, pledge all of the subsequent tax refunds to your bankruptcy payment plan for the duration of the plan which will be 3 to 5 years. Your Bankruptcy Trustee assigned to your case to use them to pay your creditors.

If you want to total your bankruptcy

TotalBankruptcy.com

From their website:

“PAID ATTORNEY ADVERTISEMENT: THIS WEB SITE IS A GROUP ADVERTISEMENT AND THE PARTICIPATING ATTORNEYS ARE INCLUDED BECAUSE THEY PAY AN ADVERTISING FEE. It is not a lawyer referral service or prepaid legal services plan. Total Bankruptcy is not a law firm. Total Bankruptcy does not endorse or recommend any lawyer or law firm who participates in the network.” (Emphasis Added).

I’d call it an Enough-Said moment.

But I still have this to add, at the bottom of their website it says that you can “connect with a local attorney, it’s free.” How can it possibly be free if it’s advertising? It’s not. They charge the attorneys in their network per lead. The attorney pays for the leads even if you file with someone else. That’s a lot of advertising. It’s expensive too.  Trust me, they’re passing that onto you.

Because who pays for attorney advertising? The clients do, you do.

LoanMart-Car Title Loans | 800loanmart.com

800LoanMart

Keep Your Car, if you pay the usurious interest rates on time foreverDo you need some quick money fast? If you’re robbing Peter to pay Paul, don’t bother. You don’t create debt to pay debt. It doesn’t work. Never works. Just ask anyone who was refinancing houses to buy houses in the last 10 years. How did that work out? Well it didn’t.

You see, it’s like this, for some reason people think that bankruptcy is bad. But if you’re willing to go to LoanMart and get a Car Title Loan against a car that’s already paid for, you’re already bankrupt and you just don’t know it yet. It bugs me to no end how many people will spend all their savings, then their CDs, then their IRAs to try to keep a home when the home is upside down by half and if somehow they could figure out how to pay the payments long term, they’ll never have any equity in their lifetimes again. Why do it?

You can file a bankruptcy and keep your IRA, keep your 401k, and probably keep most of your savings!

A friend of mine did this in the early 90s, her home had been worth $500K and was down to 250K. She let it go. A while later, she was able to buy another house again. Almost the same model, she picked a house in the same neighborhood for $270K. It was about 2 years later and prices were going back up.

Short time later she met an old friend, he’d been her next door neighbor to the house that she had short sold. Thankfully he’d been able to “save” his house and still owned it. Yes, he’d weathered through the short recession, however, he still had a mortgage of $500K. My friend’s house now had a mortgage $270K.

Car Title Loans

The best thing about a car title loan if you have to get one, you can bankrupt it later if your circumstances don’t improve. Your interest rates will be usurious by any standards and frankly it would serve them right. But there is a problem with it, you’d have to give them the car or make a deal with them to pay the loan off through a Reaffirmation Agreement. Interest rates, principals and length of contract can all be renegotiated at that time, but only if the lender agrees to it. What if they don’t? You lose your car.

Pre-Bankruptcy Credit Counseling

Before you can file your case, you must submit yourself to credit counseling. It’s called Pre-Bankruptcy Credit Counseling or Pre-Filing Credit Counseling.  Most people do it online. I’ve seen companies that charge $75 per couple or $50 per person.  However, these are my current favorites.

WARNING: 

IF YOU ARE MARRIED, YOU MUST BOTH OF YOU DO THE CREDIT COUNSELING TOGETHER.  IF YOU DO IT ONLINE, YOU MUST STILL DO THE COUNSELING ONLINE AND DO IT TOGETHER.  IF ONE OF YOU IS IN THE HOSPITAL, TAKE A LAPTOP TO THE HOSPITAL AND DO IT TOGETHER.  IF I LEARN THAT ONE OF YOU WAS NOT PRESENT FOR THE CREDIT COUNSELING, THEN THE ONE WHO WAS NOT PRESENT WILL HAVE TO DO IT AGAIN.

For only $16 per case Urgent Credit Counseling which is also reliable and quick. This outfit doesn’t use law firm codes but instead wants you to enter my email AttorneyDavidNelson@gmail.com and my fax 858 228 9763.

This one is only $5 but is clunky to navigate and takes a long time to complete. Pre-Filing Bankruptcy Credit Counseling for $5 or possibly as low as $0ONLY If you have some extra time before your case is filed, can you use this one.

POST FILING PRE-HEARING DEBTOR EDUCATION COURSE

After you File Your Case you MUST also do a Debtor Education Course, If you filed individually then (CLICK HERE FOR THE $15 COURSE) use code 357892 and it MUST be done prior to the hearing date.

If you filed a joint bankruptcy case, use Urgent Credit Counseling for the $24 course which covers the two of you or $12 each.

How to get Credit Reports?

EXPENSIVE CREDIT REPORTS

If you walk in with 3 credit reports that are a mile long each, I’m going to get your credit reports from my service, download them directly into my software and charge you for it. For a married couple for 3 a source report it is $53 and single $33 at this writing.

But don’t worry about that because my attorney’s fees are downright affordable compared to everyone else.

Free Credit Report

A great way to know how many creditors you have is to go to AnnualCreditReport.com to get your free annual credit reports. Make sure that you check mark all three credit reports on the page that asks which ones you want. Last I saw if you tried to check one at a time, it wouldn’t let you go back again unless you cleared your cookies first.

Also FreeCreditReport.com is a good place to go. They charge for a credit rating monitoring service but then allow you to get a free credit report with all three merged reports, once you have that, go back immediately and cancel the service before they charge you. You may have noticed that their link doesn’t work, they recently wrote to me and asked me to delink this post, I guess they didn’t like it that I was telling people to cancel their worthless service. 

Having your credit report is a great tool for assisting your bankruptcy attorney to process your bankruptcy petition whether in chapter 7 bankruptcy or chapter 13 bankruptcy. However, it doesn’t end there, you may have received collection letters, or letters from attorneys, or even a summons and complaint. Make sure that you bring those to your attorney because he or she doesn’t know about them unless you tell him. And if you verbally tell him and don’t provide it in writing, you may be wasting your breath.

Documentation Beats Conversation Every Time.

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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Bankruptcy Documentation

Supporting Documentation To properly evaluate your case I require the following:
(If you can’t get it all together prior to our initial free consultation, show up anyway with whatever you can find)

0. Spousal Waiver
If you are married and if you are going to file an individual case, then you must both of you sign a Spousal Waiver. Click to download, it should be self evident where to put the names of the spouses.  Then print, sign and fax to 858 228 9763.  Or drop it at the office, or scan and email it to me.

1. INCOME
60 days of pay stubs or pay advices from all sources provided you have a lower income (ask me if you don’t know).
7 months of pay stubs or pay advices from all sources if you have a higher income. You must include your disability, social security, retirement, worker’s comp, unemployment, general relief, spousal and child support which you receive as well. I must have all sources of income.
Self-Employed, then I require a completed Profit & Loss for the 6 months prior to the month in which you file your case.  So, for instance, if you filed your case in August, I must have a profit and loss from January 1st through July 31st.  If you filed your case in September then I would need a profit and loss from March 1st through August 31st.

2. CARS
Car Registrations
Car Insurance Policy Declarations Page
Car Billing Statements showing the pay offs
Print Outs from the Kelly Blue Book showing the trade in value of the vehicles.

3. ANNUITIES, MUTUAL FUNDS, CERTIFICATES OF DEPOSIT, STOCKS, BONDS, OR INVESTMENTS OF ANY SORT.

INVESTMENTS:  Provide statements showing what type of investment it is, and how much is in the account.  Just so you know, a reverse mortgage is not a mortgage at all, it is an annuity.  If you have any ANNUITIES at all for any reason from whatever source, you must tell me about it.  This is very very important.  You must tell me about the ANNUITY immediately, do not fail.

4. HOUSES
Statements showing the balances on the loans for all loans for all houses.
Statements from the HOAs showing the monthly payments.
Statements (usually shows in the impounds) showing how much the home owner’s insurance and property taxes are.
Recent Comparable Sales or a recent appraisal on the real estate. If you have equity, then probably an appraisal will be helpful if there is a substantial amount. However, if you are interested in a chapter 13 where you can strip the 2nd mortgage lien off of your house, then an appraisal is a must. Call my friend Bruce Adams 858-442-4666 for an appraisal. Do not discuss the mortgages or liens on the property with him.

Grant Deed – If your real estate is co-owned with someone to whom you are not married, then I also need the grant deed proving the joint ownership, unless there is no equity in which case, it doesn’t matter.

5. TAXES
The most recently required to be filed tax returns. If you own a corporation, then we must turn those in as well. If you are doing a chapter 7 then I only need the most recent tax returns which were required to be filed, and if you are doing a chapter 13, then I need the most recent two years.

If you do not have the returns – “You can obtain a free transcript on the IRS.gov Website (www.irs.gov) by clicking Order a Transcript under the Online Services option, or by calling 800-908-9946 and following the prompts in the recorded message, or by completing and mailing a request for a transcript to the address listed in the instructions.

The IRS has created a new Form IRS Form F4506 Tax Transcripts EZ Form, it is Short Form Request for Individual Tax Return Transcript, to order a transcript of a Form 1040 series return. The IRS created this streamlined form to help those taxpayers trying to obtain, modify or refinance a home mortgage.”

The attached instruction page indicates where to fax the form to the Fresno Office of the IRS.

6. BANK STATEMENTS
PERSONAL ACCOUNTS: The most recent 60 days worth of bank statements for any and all bank accounts.  BUSINESS ACCOUNTS: Bring all the bank statements for all the business accounts for most recent 7 months.

7. RETIREMENT ACCOUNTS
Statements or administrative documentation stating what kind of retirement account you have, whether it’s an IRA or a 401k or something else.

8. UCC1 STATEMENTS
Must be provided with filed stamps from the County Recorder’s if it applies. If you don’t know what it is, probably it doesn’t apply.

9. BUSINESS
Insurances – If you own a business, then proof of all the insurances required in the industry for that business, such as premises liability insurance, general liability, errors and omissions, worker’s compensation, etc.
Shares – Proof of the percentage of ownership or numbers of shares and who are the other share holders.
Corporate Taxes – The most recently required to be filed tax returns.
Corporate Assets – If the corporation owns anything, a list of what it owns, and all the applicable stuff above if the corp owns any of those types of items.
Corporate Debts – A list of all the corporation’s debts. How much and to whom owed, and any evidence of those debts such as bank statements, credit card statements, contracts and so on.

10. YOUR DEBTS
One statement from each account that you owe money or property to. I only need one from each company, but also include the collection agencies, collection attorneys, law suits, judgments, wage garnishments, bank levies, notices of trustee sale, notices of default, and foreclosure and eviction information too.
Taxes – not just one statement, bring me the whole box of every statement or letter ever received from the taxing authority in question for as many years as you have on the subject.
Support, child, spousal or family – bring a copy of the support order or judgment or divorce decree showing how much and for how long you have to pay.
AnnualCreditReport.com will give you all three of your credit reports for free once per year if you haven’t already gotten free credit reports so far this year. However, when you get to the page that have the three options for each of the three credit reports, Equifax, Experian and Trans Union, make sure that you check each of them off the first time that you get there. You can only do one credit report at a time, but if you only check one off that first time that you’re there, they will assume that you only wanted one of them and won’t let you apply for the others anymore.
FreeCreditReport.com requires that you sign up a service that will monitor your credit ratings and reports for you. I believe it still costs $60, but it gives you your credit reports for free. Once you have immediately downloaded your credit reports, (all three in one merged file), because the monitoring service is free the first month, you go back and cancel the service before they have a chance to charge you for it.

11. TITHING and CHARITY
Your church or your favorite charity probably give you at least annually a statement which shows how much you have paid to them. Bring that with you too. It may show on your tax returns. However, if your circumstances have changed and your income has gone up or down, it may not reflect correctly in your last years tax return so you’ll want to bring the statement from your church, pastor or favorite charity.

If this is not a make or break issue for your Means Test, for instance, if you only pay $20 or $40/mo, then it’s going to be less critical that you are able to provide the documentation. If your tax returns are close to what you currently pay, then it’s going to be less critical that you get something from your church. However, if you do pay 10% or more to your church, you’re probably going to have to prove it even if your income is already below the Median Income.

12. INHERITANCE
If anyone has died and left you any money or property that you haven’t yet received, bring all the documentation that you have on it with you.

For instance, if you received a life insurance payment, how much is it, where is it, and was it already given to you or is it being administered by some sort of annuity plan etc?

If an estate is in probate, you must tell me about it.

If someone has died and left you a trust, bring the trust with you. I require access to the trustee to find out exactly how the money or property is held and how much you expect to get and when.

If someone is in ill health and might die and leave you any money or property, let me know.

Again, if you if turned any life insurance money into an ANNUITY, you must let me know.

13. DO YOU HAVE THE RIGHT TO SUE ANYONE FOR MONEY OR PROPERTY WHERE YOU MIGHT WIN
Bring all of the documentation of your claim with you. This possible lawsuit is one of your assets, whether you want to press it forward in court or not, and once you file the bankruptcy, it no longer belongs to you, it belongs to your bankruptcy trustee unless you can protect it and keep it. That may be possible. It may also be possible that the Trustee will decline to pursue it in which case it will revert back to you, but you must give him or her the choice, if you do not and you later change your mind and sue and win, you can be fined or even jailed for stealing from the bankruptcy trustee.

For instance, if you have a personal injury lawsuit or if you previously had one and received a structured settlement, you must let me know immediately, if your insurance company has said that they will pay you or have already paid you with an ANNUITY you must let me know immediately.

14. QUESTIONNAIRE
Remember to Fill Out My Online QuestionnaireTo make a Payment go Here. However, do not make any payments until you have signed your retainers.

15. CREDIT COUNSELING
Before you can file your case, you must submit yourself to credit counseling. It’s called Pre-Bankruptcy Credit Counseling or Pre-Filing Credit Counseling.

Most people do it online. I’ve seen companies that charge $75 per couple or $50 per person. This is my current favorite.

For only $16 per case Urgent Credit Counseling which is also reliable and quick. This outfit doesn’t use law firm codes but instead wants you to enter my email AttorneyDavidNelson@gmail.com and my fax 858 228 9763.

This one is only $5 but it is clunky and takes a long time to complete.  Most people find that their time is worth more than the $9 they saved over the Urgent counseling site.  But if you’re on a really tight budget, here it is.  Pre-Filing Bankruptcy Credit Counseling for $5 or possibly as low as $0 ONLY If you have some extra time before your case is filed, use this one.

Which Chapter in Bankruptcy is Right For Me?

Chapter 7 vs Chapter 13

Automatic Stay

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

Chapter 7

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

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

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

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

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

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

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

Chapter 13

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

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

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

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

Volker Pispers bespricht Schulden

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

Volker Pispers über Schulden (19.11.2011)

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

799bk.com

$799 Bankruptcy

Sometimes you can find it.

Most of the time however, like what I’ve encountered here in Southern Riverside area of California, usually, it’s a bait and switch. They claim that you’ll get a cheap bankruptcy and when you get there, or when you call, it turns out that it gets you the most minimal bankruptcy ever, and probably you won’t even meet an attorney. When I occasionally charge only $700 plus the filing fee, it’s because the client is a widow or a cancer patient and when I do charge so little, guess what? You won’t meet a paralegal, I still go to the hearing with you, and unless I’m sick or on vacation, I’ll be the attorney at your hearing, and you’ll meet me when you get to the office, and I will be the one who types your bankruptcy.

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

I’ve called similar cheap ads before, and other bankruptcy attorneys I know have called similar ads. Here’s what we’ve found:

Most of the cheap bankruptcy guys don’t go to the hearing with you unless you pay them more. Even then they probably don’t go themselves but hire a pinch hitter attorney to go for them and that guy won’t have read your file, and doesn’t know you or your case. At least in Riverside the pinch hitters are good attorneys who take good notes, but they can’t fight for you on the spot because they have so little knowledge of the case, the file or you. In fact, often you’ll find that the first phone call you’ve made was to a paralegal and he has an attorney who “supervises” him. If that’s the case, run the other direction. In that situation, if you want to meet with an attorney, you can, but only if you pay them more. If your income approaches the median income for your jurisdiction, it will cost you more. If they have to do the whole means test calculation for you at the consultation, it will cost you a lot more. If you have a house, it will cost you more. If you owe any taxes even property taxes, it will cost you more. If you have more than 10 or 15 creditors/accounts/collection agents/attorneys who must be listed in your bankruptcy petition, it will cost you more. If there is a judgment against you, and your bank accounts have been levied, it will cost you more. If your wages are about to be garnished or are being garnished, it will cost you more. If you have a car or a refrigerator that must or might need to be reaffirmed, it will cost you more. If the attorney or his paralegal fart while you’re in the office, that’s a value added perk and it will cost you more.

Most of us who have called this or similar ads have found that by the time the average bankruptcy client’s consultation is over, it will cost the retail price of $2000 or more to go bankrupt, plus the filing fee. Incidentally, the filing fee currently for a chapter 7 bankruptcy is $306 at this writing.

Even worse, many unscrupulous or lazy attorneys (and I haven’t heard or seen that the $799.com guys do this) will try to

upsell a chapter 13 bankruptcy

to you with a payment plan where the attorney makes at least $3500 to $4500 per case. Lovely isn’t it?

Bankruptcy attorneys who don’t do the careful analysis will advise a chapter 13 because your income is “too high.”

You require a careful analysis of your income and expenses in order to know if you really qualify for a chapter 7 or not. There are a lot of frequently overlooked factors or factors that require a lot of documentation. Some attorneys just don’t know what they are, especially if they were doing divorces a year ago and decided to get into the bankruptcy boom. I’ve been doing bankruptcy since 1994. Some attorneys are just too lazy to amass the required documentation in order to prove your case for you. Of course, some just want more money per case.

Will everyone do this? Of course not, will the cheap bankruptcy guys do this to you? I haven’t head that they do and I believe that most won’t based on what I’ve heard and the calls I’ve made, just that by the time you get done, they’re charging you retail for your discounted bankruptcy. Possibly some of them have changed their ways since I and my colleagues telephoned to ask about prices, I don’t know. In fact, I’m writing in the hope that it will spawn a reformation in the practice of the bait and switch statewide.

The firms that will more likely try to get you into a chapter 13 are the big ones. Several names on the door that sort of thing. Trust me, if you go in for a bankruptcy consultation to a Victorian building on the outside of downtown and the lawyer(s) have several support staff and a few new Mercedes in the lot, guess who’s paying for all that? Are they better at bankruptcy than me? Nope. Better looking, yes, and they’ll charge you more for that too. They are better at marketing, their websites cost them mega-bucks per year in upkeep and they pay huge rents and payrolls and their personal expenses are more than many of you make in a month or a quarter.

Don’t get me wrong, if you make a good bit more money than the average bear, then you have a higher than average probability of having to do a chapter 13. That’s what it’s for, if your income is significantly above the median, you might not be able to avoid a 13, but I’ve also seen cases where the income was a good bit over the median which qualified for a chapter 7. Did they qualify because I’m some bankruptcy wizard or a debt vampire who suck the vacuum of your finances away? No. Those clients qualified because once the analysis was done and the documentation gathered to prove the analysis, they did in fact qualify for a chapter 7.

Congress hasn’t left any wiggle room in the Means Test.

Means Test

Either you have passed your means test and you qualify for a chapter 7 or you didn’t. What the right attorney brings to the table is the analysis, not a way to fudge the numbers and make you qualify but the proper analysis based on the right reasons that show that you do qualify when you in fact already do.

Because every case is different, you must get the right consultation. Yes, even at chez moi it will cost you more than the average 7 but it will still be less than a firm with several names on the door. Possibly less than the guys with the cheap bankruptcy advertising.

Discharging Taxes

When discharging taxes, the right attorney can make all the difference. Especially if you call early. See this article. If you owe a lot of taxes, and I’m not talking about property taxes, but the board of equalization taxes, federal income taxes, self employment taxes and the like. And if you do, expect to pay more if you want your attorney to tell you that you have a high probability of discharging them in a bankruptcy.

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

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

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

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

I’ve heard all of this before.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

How to Discharge Income Taxes in Bankruptcy

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

Chapter 7

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

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

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

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

The Rules

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

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

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

Chapter 13

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

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

Cash for Keys

If you lose your home to Foreclosure . . .

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

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

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

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

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

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

Your Landlord has a Foreclosure

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

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

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

Rebuilding Credit After Bankruptcy

David,

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

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

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

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

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

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

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

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

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

We’ll cover that now.

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

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

Sincerely,Jessica Ryan
Zodiac Publishing

Recent Client Testimonial

David and Anna,

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

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

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

Sincerely,

Mr. & Mrs. Ochoa

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

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

Bankruptcy Means Test Basics

Bankruptcy Means Test Basics

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

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

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

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

Reaffirmation Agreements

REAFFIRMATION AGREEMENTS

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

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

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

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

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

MORTGAGES

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

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

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

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

CARS AND VEHICLES

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

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

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

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

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

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Bankruptcy Attorney David Nelson

Temecula Bankruptcy Attorney David NelsonTEMECULA BANKRUPTCY ATTORNEY DAVID NELSON

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

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

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

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

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

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

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

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

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

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

Chapter 13 2nd Mortgage Lien Stripping

Chapter 13 2nd Mortgage Lien Stripping

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

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

IT WORKS PRETTY MUCH LIKE THIS:

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

*****
a) the have the note that you signed promising to pay
b) they have a deed of trust or trust deed on the house which is a lien on the house
*****

Chapter 7 Bankruptcy discharges the Note or the Loan, but you still have the Lien or Trust Deed on your house.  Even after your bankruptcy, your 2nd mortgage lender can foreclose the lien, but in order to do so, it must first pay off the 1st mortgage and any unpaid property taxes.

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

So, what you do is:

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

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

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

Caution

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

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

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

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

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

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

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

How Much Will My Chapter 13 Plan Payment Be?

Plan payments depend on a couple things

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

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

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

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

Debt Freedom and Retirement

Debt Freedom is Required for Retirement

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

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

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

RETIREMENT AND KEEPING YOUR HOME:

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

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

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

$5300 Net Pay Less
$2000 Mortgages
$500 Debts and Credit Cards
$2,800 Left after that. (the rest of the budget must be calculated.)
$700 Two Car Payments
$500 Gas and Travel for the two cars
$100 Car Insurance
$40 Medical Expenses out of pocket
$800 Groceries (and everything that comes from the store) and Fast Food on the way to and from work, school and at work and school.
$400 Day Care
$400 All Utilities including Internet $30, Cell Phones $150, Home Heating & Cooking $100,  TV $50, Water $70
___________________________________

You can see that this family’s budget is already negative.  Add clothing & shoes $150 (for four), life insurance $80, hair cuts & beauty shop $40, tithing/charitable giving $40, laundry/dry cleaning $35 and home maintenance $20 and you’re toast.

____________________________

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

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

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

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

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

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

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

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

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

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

It depends on the value of the house.

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

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Chapter 7 and Your 2nd Mortgage

Updated on June 13th, 2018.

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

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

has two things over you

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

In Summary:

Offer to Settle Your 2nd Mortgage

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

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

Or Refinance Your Second Mortgage

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

YOUR HOA MAY SUE YOU EVEN AFTER YOUR BANKRUPTCY

YOUR HOA MAY SUE YOU EVEN AFTER YOUR BANKRUPTCY:

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

YOUR HOME OWNER’S ASSOCIATION CAN SUE YOU IF:

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

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

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

FORECLOSURE AFTER BANKRUPTCY:

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

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

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

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

Bankruptcy Attorney David Nelson

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