Don’t Kiss Your Hard Earned Cash Good-bye

File Bankruptcy Instead.

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

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

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

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

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

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

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

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

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

Debt Consolidation

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

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

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

Chapter 13 Bankruptcy

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

Truly Reorganize Your Debt With Bankruptcy

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

For example

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

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

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

Call for a Free Consultation 951-200-3613

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8 Chapter 13 Bankruptcy Pitfalls You Can Avoid

Chapter 13 is a Great Tool, Unless . . . 


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

Pitfall 1: Losing Your Job

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

Pitfall 2: Don’t Get a Divorce

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

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

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

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

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

Get behind, you’re toast.  Nuff said.

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

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

Pitfall 5: Not Filing a Chapter 13 When You Should

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

Pitfall 6: Including Your Car 

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

Pitfall 7: Technical Tricks and Traps

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

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

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

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

What pitfalls did you encounter?  Pin, Tweet, Plus and Share This Article.


Call to set an Appointment, 951-200-3613

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

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

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

What now?

Get a 2nd Opinion About the Means Test

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

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

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

Sometimes Your Only Bankruptcy Option is Chapter 13

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

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

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

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

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

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

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

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

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

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

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

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

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

5 Ways Chapter 13 is Better than Debt Consolidation

First Way

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

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

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

Second Way

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

Third Way

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

Fourth Way

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

Fifth Way

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

Debt Consolidation

Non-Profit Debt Consolidation

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

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

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

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

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

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

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

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

Chapter 13 Bankruptcy

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

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

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

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

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

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