Northern California Bankruptcy Lawyer

On The Bankruptcy Soapbox

The Soap Box

Find The Right Cure for Your Debt Problems

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Get-out-of- debt advice and sales pitches abound.

Like this one.

But no one tells you that you need a diagnosis of your financial ills before prescribing the cure.

Is the stomach ache indigestion or appendicitis?

Is it temporary upset or a life threatening money pit?

The answer makes a big difference in how you treat it.

No single prescription

A doctor treating your illness wants to know your age, your medical history, other medical conditions along with your symptoms.

Same sort of questions arise if debt is what ails you.

  • Age
  • Dependents
  • Current income
  • Assets
  • Debt total

All of those factors interact to shape a treatment plan for debt.

If you are on the cusp of retirement, you don’t have time to tackle big debt by cutting out frills in the budget.

If you are young, single, suitably employed, the prescription may be different.

So don’t take to heart every buckle-down-and-pay scheme you find on the internet.

Too little, too late

Most get-out-of-debt advice is better suited for living economically after you’ve solved the debt problem.

Fewer lattes, more eating at home, less entertainment spending.

Compare bankruptcy with payment plans

That may work to get out of debt if you have time, discipline, and modest debt to start with.

But the starting point is comparing your income to your debt, in light of your fixed expenses.

How big is the problem?  To bring it down, do you require a pellet gun or a bazooka?

How precarious are things

The final question is how risky is the treatment?

Think of the endless lists of common side effects and serious complications listed with every medicine you take.

When the ailment is debt, the risk is living with no reserves.  A recent study found 40% of Americans couldn’t pay for a $400 emergency without borrowing.

Four hundred dollars isn’t much in this economy.  Yet a $400 expense would imperil a huge swath of our citizens.

It’s easy to fool yourself into thinking that you aren’t likely to face an emergency.  Yet, look at this list of pretty mundane things that require a $500  fix.

None of those are so far fetched that they couldn’t happen to any of us.

So living without a financial safety net in order to pay of big debt is big-time risky.

Here’s a further discussion of  my diagnostic of your debt alternatives:  when to hold and when to fold.

 

 

Who To Pay After Bankruptcy

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bills after bankruptcy

You’ve filed bankruptcy.

Your creditors are stayed.

A bankruptcy discharge is ahead.

You’re out from under unrelenting pressure to pay creditors.

But don’t let your sense of relief keep you from planning:  who should you pay now that you’re in bankruptcy?

Paying bills after filing bankruptcy

Two legal realities drive who needs to be paid going forward:

  1.   Not all debts are discharged in bankruptcy
  2.   Liens survive bankruptcy, unless there’s a court order otherwise.

Is this debt discharged?

The scope of the bankruptcy discharge is different in Chapter 7 and Chapter 13.

The list of exceptions to discharge that apply in Chapter 7 is longer.  Chapter 13 discharges more debts, but the discharge isn’t effective until the last plan payment is made.

Child and spousal support are not dischargeable in any chapter of bankruptcy.  To the extent not paid in the case, your obligation for delinquent and future support continues.

Student loans are the other blockbuster debts that survive a discharge in either 7 or 13.

Recent taxes are the third common debt excluded from the discharge.

Is the debt secured by a lien?

The discharge wipes out your personal liability for dischargeable debts.  But any lien associated with the debt survives as a charge on property you owned before filing.

So, you need to decide whether this is an asset 1) you want to keep, and 2) is the creditor likely to enforce the lien if you don’t pay?

If you are surrendering real property or a car you can’t really afford, don’t pay because you don’t intend to retain the asset.  If it’s a tax lien that attaches only to your household goods, it’s probably safe to not pay.  The IRS isn’t interested in your dirty socks.

However, if it’s your home or the car that gets you to work every day, then you want to stay current or get current, lest the creditor enforce the lien.

More money, less information

One of the exceptionally frustrating things about filing bankruptcy is that even when you want to keep paying on your home or your car, the creditor doesn’t send a statement so you know when and how much to pay.

While I rail about the insanity of the situation, the creditor who stops sending statements is generally just playing it safe.  Send a statement and you can be accused of violating the automatic stay or the discharge injunction.

Ask the creditor to send statements.  Ask your bankruptcy attorney to get court permission for the sending of statements.

And even if the creditor doesn’t make it easy, be persistent.  You care about keeping your stuff far more than the creditor cares about your convenience.

Most banks terminate automatic payment arrangements or even access to online banking when you file.  Make sure that you are watching your accounts and monitor whether things you want paid are getting paid.

Make and keep a record of having paid;  creditors are notorious for misapplying or not applying payments.

Being “in bankruptcy”

If you filed Chapter 7, I gotta tell you :  there’s no “there there” in bankruptcy.  Chapter 7 is more like an event than like a place.

You file your case:  it affects those you owe when you file, and encompasses what you own at the moment when you file.

There are a couple more steps to take between filing and getting your discharge.  You must appear at the first meeting of creditors; cooperate with the trustee in your case; and complete debtor education.

The trustee may be the nominal owner of your assets until your exemptions become final.  But most Chapter 7 cases are no asset cases where the trustee never takes possession of a single asset.

And whatever you earn after the day on which you file is yours to spend however you choose.

For the vast majority of debtors, life is largely unaltered by filing.  You aren’t really “in” anything.

So, you are both free to, and expected to, continue to make payments on secured debts where you’re keeping the collateral.  If you need to reaffirm a car loan, one of the first questions the judge often asks is whether you are current on payments.  If you want the judge’s approval of the reaffirmation, your answer needs to be “yes”.

You likely want to keep making payments on support obligations and student loans.  If you have taxes that will survive the bankruptcy, nothing prevents you from making payments that chip away at the non dischargeable taxes.

Paying in Chapter 13

Who to pay in Chapter 13 is more complicated.  You start by reading and understanding the plan that you have filed in your case.

It will tell you whether you pay your mortgage directly yourself or pay it through the Chapter 13 trustee.

If you’re in doubt, ask your attorney.

Nothing good happens when you ignore your plan

I’ve encountered more than a couple of Chapter 13 debtors recently who didn’t understand how the mortgage was to be paid, going forward.  A couple of others assumed that in the absence of monthly statements, it was being taken care of.

Not so.

Unless, of course, your plan provides for stripping off a lien.  If a lien is stripped, at best that creditor is treated as a general unsecured creditor.

If in doubt, ask your attorney.

Your plan undoubtedly provides for payment by the trustee of any amounts you owe for taxes as of the filing of your case.  ‘

But your plan deals only with tax years that are complete when you file.  You are expected to pay directly and in full any taxes that come due in the year in which you file your case and years after.

Using taxes to pass the means test

Failure to stay current on taxes is grounds for dismissal of your Chapter 13 case, even if your payments to the trustee are fully current.

Pay yourself after bankruptcy

For me, one of the most compelling reasons to file bankruptcy, even when there is no crisis, is to free up money to provide for your old age.

You do expect to live to a ripe old age, don’t you?

To age in comfort and independence, it requires money.  And Social Security won’t do it:  the average Social Security check is under $1300/month.

Start immediately after filing setting aside money from each paycheck.  Save before you pay anyone else, not after.

Empowering retirement savings is the unsung benefits of bankruptcy.

The Most Powerful Debt Management Tool

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black box croppedThe most powerful debt management tool isn’t a software program.

It isn’t a website, nor a consulting firm.

It isn’t even a calculator.

The most powerful debt management tool is a letter opener.

  • letteropener_tobyotter_FlickrIf you don’t open the mail, you don’t really know where you stand with your creditors.
  • If you don’t open the mail, you don’t know that your lender has instituted foreclosure proceedings.
  • If you don’t open the mail, you don’t know that you’re overdrawn at the bank or over limit on your credit card.

Or, less threateningly, that the lender has transferred the servicing of your loan.

You don’t know anything about your situation except that you are in trouble, if you don’t open the mail.

Now, there is another step:  you need to read what’s in the envelope.

The envelope, please

I know confronting what you owe and your sense that there’s little you can do about it increases your stress.

But, the dunning letter or the lawsuit isn’t itself dangerous.

Creditors don’t lace their missives with ricin or anthrax.  They need you alive to pay them!  They hope, anyway.

What you’re trying to avoid by not opening the mail, or worse, tossing it out, is facing your situation.

What you don’t know can hurt

Ignoring what’s in the mail can make the situation worse.

The only situation in which we throw people in jail for not paying their ordinary bills is when they’ve gotten a court order requiring their appearance and they ignore it.

You’ve got to open up the mail to know if you are at risk.

My friend Jay Fleischman tells a marvelous story of a doctor and the doctor’s lawyers who didn’t open the mail nor read what was inside.  Instead of collecting money from Jay’s client, they ended up paying Jay’s client $20,000 for ignoring the court-ordered bankruptcy stay.

Fight or flee

Whether the solution to your debt problems is a payment plan or a bankruptcy filing, you need to know who you owe money to and where they get their mail.

All that’s contained in your mail.

So, open the mail, know whether there’s a situation that requires your attention.  Then if you want to put the opened mail in a shopping bag to bring to your bankruptcy attorney, that works.

Just don’t show up in my office, deep in debt, and not be able to tell me who to notify about your bankruptcy case.

More

How to weigh whether to file bankruptcy

How to interview a bankruptcy lawyer

The life-threatening cost of stress

Image of black box courtesy of Thierry Ehrmann and Flickr.

Image of letter opener courtesy of tobyotter and Flickr.

Who Owns Your Business When You File Bankruptcy?

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business bankruptcy

The bankruptcy trustee’s question was straightforward (if inartful) yet the business owner nearly blew the answer.

The trustee asked:  are you the sole owner of your business?

When my client hesitated, she followed up:  are you a sole proprietor?

Focusing on the fact that he was the only person with an interest in the business, he said yes.

Wait a minute, was my response. That’s not so.

It took several minutes of sworn testimony at the first meeting of creditors to sort the matter out.

Who owns the corporate business

We were once again experiencing the phenomenon of the shape-shifting business owner.  The businessman had, in his mind, morphed into a sole proprietor rather than a stockholder.

The debtor was the sole owner of the corporation that owned and operated the failed business.

He was correct that no one else had an interest.  He skipped over the part that it was another legal entity, his corporation, that actually owned the assets and owed the debts of the business.

He owned the corporation that owned the business.

Why it matters

A sole proprietor owns a business as a personal asset.  In law, he owns the assets of the business and is liable for its debts.

A sole proprietorship has no legal existence separate from the owner.  The proprietorship may adopt a fictitious business name, but behind that dba is the individual who owns and operates the business.

So, if my client were a sole proprietor, the inventory of the business would have been an asset of the bankruptcy estate created when he filed bankruptcy.  The business bank accounts would fall to the control of the trustee.

When a corporation is created, it becomes a legal entity distinct from the individuals who own the shares in the corporation.  The corporation can have its own debts and its own funds that don’t belong directly to the shareholders.

That’s why business people incorporate:  to create a legal “person” that can take risks without exposing the shareholder’s other assets to that risk.

When my client filed his Chapter 7 case, his stock in the corporation was an asset of the bankruptcy estate, but not the business itself.  The business was owned and operated by the corporation.

Since the corporation had tons of debts, the stock that the bankruptcy trustee could administer had no net value.  That’s because, equity holders get money when a corporation liquidates only after creditors of the corporation have been paid off.

The takeaway

The first meeting of creditors in a bankruptcy case is the trustee’s opportunity to gather more information about what the debtor owns and owes.

Once you focus on what the trustee needs to get from the meeting, it’s easier to answer correctly and avoid the confusion that happened in my case.

When confusion ensues, it’s important to sort it out on the spot.

And that’s how I earned my keep in this case.

More

Rules for testifying at a bankruptcy hearing

How corporate officers can avoid personal liability

When a business needs to wind down

Myth Of The Corporate Credit Card

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business credit cardAs far as myths go, the myth of the business credit card ranks right up there with  unicorns, Big Foot, and leprechauns .

Every struggling small business owner who crosses the threshold of my office believes that his corporate credit card is not a personal debt.

Wrong.

In 39 years of bankruptcy practice, I have never seen a credit card for which a living, breathing human being was not liable.  Not one.

The card may have the corporate business name on it.  Mine says  Cathleen Moran, Moran Law Group.  

But in fact, my corporation is not even jointly liable with me on that card.  It’s just me on the hook.

Which is scary given that these “business” cards are marketed as another form of business financing.  Their debt limits are easily five figures and many businesses have a drawer full of them.

The 23% business loan

What is insidious about business credit cards is their impact on the likelihood of a small business using them becoming profitable.

Just like the consumer credit card, business folks are conditioned to think they’re doing OK in business if they make regular payments on the 23% loan they have from Big Bank on the card.

But it takes a hell of a business to pay 23% for seed capital and make a profit.

Yet few business plans look at the cost of funds when assessing how they’re doing.

Business cards when business craters

There’s a perverse “benefit” to the fact the business isn’t liable for the credit card if the corporate business gets in financial trouble.  The card isn’t a debt of the corporation.

More times than I can count, the corporate business can continue on, assuming that there is a path forward, and the shareholder can file bankruptcy and ditch the credit card balance.

The corporation is a separate legal person and the bankruptcy of its shareholder doesn’t directly impact the corporation.  And it’s far easier and cheaper to reorganize the financial affairs of the shareholder in Chapter 13 than it is to reorganize a corporation in Chapter 11, the only form of bankruptcy that gets a corporation a discharge.

Now, the business has to have a plan for funding operations without the shareholder’s credit cards.  But, if we face the fact that the business doesn’t have to service that debt either going forward, the numbers may look different.

Seems there are two sides to every coin, and every card.

More

“B” is for business in my Bankruptcy Alphabet

How to sign the corporation’s name

Your business needs a prenup

Draft an enforceable contract without a lawyer

Choosing Between Bankruptcy Chapters

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choose bankruptcy chapter

Seven or Thirteen?

13 or 7?

When you have a choice, how do you decide which chapter of bankruptcy works best?

Usually, the choice is driven by the scope of the discharge and the kind of debts you have.

More kinds of  debts are dischargeable in Chapter 13 and the automatic stay protects you for the 60 month duration of the case.

So why did the client this week choose to walk out of Chapter 7 with fewer debts discharged than if he’d chosen 13?

It’s all about his  future.  And who will get to share in his growing earning capacity.

Chapter 7 over Chapter 13

On the surface, this client seemed a great candidate for Chapter 13, which is my favorite  bankruptcy chapter.

Some of his debts were only dischargeable in Chapter 13;  in Chapter 7, he’d emerge still owing some debts from a divorce.

So why choose the smaller discharge?

Because his earnings were likely to double or triple over the life of a Chapter 13 case.

If that happened, we anticipated that a Chapter 13 trustee would move to modify his payment plan to pay more to general unsecured creditors.

Credit card debt, which would get nothing in a Chapter 7, might well get a substantial repayment from his increased earnings.

He’d pay fewer dollars paying directly the non dischargeable debt that survives a Chapter 7  than he would paying in a larger slice of his paycheck  to all of his creditors in a Chapter 13 plan.

Chapter 13 after confirmation

Judges approve Chapter 13 plans based on the situation when the bankruptcy case is filed.  The means test looks at recent income.  The liquidation test looks at non exempt assets at filing.

For this client, each of those numbers was modest and a repayment plan would be relatively cheap.

But Chapter 13 involves committing your future income to the supervision of the Chapter 13 trustee.

Now, that supervision is pretty minimal:  it usually means the trustee monitors your tax returns to see in your income has increased.

If there’s a significant increase, the trustee can file a motion with the court proposing increased monthly payments going forward.

The debtor gets to respond with updated expense schedules, and if the parties can’t reach a deal, a judge decides whether payments change.

In the Bay Area, this happens very infrequently.  I’ve seen it less than a half dozen times in 20+ years of doing lots of 13’s.

But it can happen, and for this client, it seemed quite likely that a new job in his usual profession would dramatically increase his income.

Chapter 7 looks at today

If Chapter 13 is a years long process, Chapter 7 is a single event.

The rights of the debtor and the creditors are determined by the situation on the day the case is filed.

If the means test says that Chapter 7 is an option, then the creditors get only what the debtor owns at the filing of the case.

And what the creditors share in is only what’s left after the debtor chooses his exempt property.  Most Chapter 7 cases make no distribution to creditors.

Future income belongs to the debtor.  The Chapter 7 trustee can’t come back a year later and ask for a slice of a larger paycheck.

So, much to my surprise, when we looked at this client’s current situation and his prospects, the more limited discharge was a better deal than Chapter 13.

He’ll get to enjoy a larger share of his future earnings and a fresh start.

More

Cheat sheet for passing the means test

Figuring what you pay in Chapter 13

How to make your divorce bankruptcy-proof

When your ex files bankruptcy

Dividing debts in divorce

 

Ten Debts That Follow You After Bankruptcy

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debts after bankruptcy

Some debts just follow you out of bankruptcy.

Not many but a few.

These debts continue to be collectible even after a Chapter 7 discharge.  The discharge in Chapter 13 is different and broader:  just another reason to choose Chapter 13.

1.   Family support

Regardless of what it’s called, court ordered payments for support of children or spouses

2.   Recent taxes

Income taxes for tax years  more than three years old, counting from when the return was due

3.   Taxes still assessable

The IRS ability to assess additional tax survives if the tax year was still assessable at filing

4.   Taxes for unfiled years

The clock doesn’t run on tax discharge until an honest return is filed.

5.   Payroll taxes

The trust portion of payroll taxes, federal and state:  that’s what the employer withholds from employee checks

6.   Judgments for drunk driving

Liability for death or personal injury from impaired operation of a vehicle

7.   Debts to spouse or child from divorce

Debts to your own lawyer do get wiped out

8.   Student loans

Unless you file suit in the bankruptcy and prove repayment is an undue hardship

9.   Money borrowed to pay non dischargeable tax

No paying taxes with a loan you want to discharge.

10.  Penalties to governments

This covers fines, penalties and forfeitures that are intended to punish not compensate

Non dischargeable if….

Three additional categories of debts survive bankruptcy only if the affected creditor successfully jumps through some legal hoops in the bankruptcy case.

Debts incurred by fraud; debts for conversion or breach of fiduciary duty; and debts for deliberate injury to person or property require the victim to file suit and prove the operative facts.

There’s a short period for filing a non dischargeability action and the presumptions operate in favor of the debtor.  But if the creditor can establish the bad behavior of the debtor that created the debt, public policy says we don’t want to shelter bad actors.

It’s important to understand that the debt must have been incurred by the bad behavior;  just trying to evade payment of an honestly incurred debt doesn’t make it non dischargeable, in most instances.

Liens survive unless…

How to get rid of liens through bankruptcy

While a bankruptcy discharge wipes out your personal liability for discharged debts, a lien on property you owned when you filed bankruptcy continues to be liable for the debt.  So you aren’t liable but your property can be seized to pay the debt.

Think of your home loan:  your discharge keeps the lender from suing you after bankruptcy for a money judgment, but it doesn’t keep the lender from foreclosing on your house if you don’t pay after bankruptcy..

After bankruptcy, as long as you continue to pay on a secured debt, the creditor is generally happy to take your money and leave you alone.  If you change your mind, or further financial troubles loom, you can walk away from the liened property, losing only the property.

An experienced bankruptcy lawyer can walk you through the bankruptcy discharge and the landscape after your case is over.

More

Interview questions for hiring a bankruptcy lawyer

What to do about tax liens

Reaffirming a car debt

 

Protecting Your Co signor When You Can’t Pay

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cosigned loans

Cosigning a loan links you and your cosignor together for the life of the debt.

If you get in financial trouble, your troubles are your co signor’s troubles too.

If you can’t pay your debts, the standard bankruptcy discharge will get rid of your debt, but it doesn’t help your co signor.

Even while you are protected in bankruptcy by the automatic stay, keeping collectors at bay, and by the discharge at the end of the case, anyone who cosigned for you is exposed.

But Chapter 13 isn’t the “standard” bankruptcy.  It has a special protection for people whose debts are co signed.

Automatic stay covers co signors

Unique to Chapter 13, Section 1301 of the Bankruptcy Code extends the protection of the automatic stay to those who are jointly liable with the debtor on consumer debts.

To qualify, the debt must be for a personal or household purpose.  

So a cosigned car loan is covered;

A cosigned business lease is not.

The benefits of the loan must have flowed to the person who filed bankruptcy.  If you co signed a loan made to a friend, your friend isn’t protected by your Chapter 13 stay.

Finally, to keep the stay in place, the Chapter 13 plan must provide for payment in full of the debt.

Co signed debts get preference

Chapter 13 plans are normally required to treat all unsecured, non priority debts the same.  Each of the general unsecured claims gets the same percentage payment through the plan.

But cosigned debts are excepted.  

The debtor can treat the cosigned debt differently and better than other debts.

It’s OK to separately classify a co signed debt and pay it in full, while other debts get little or nothing in Chapter 13.

So your plan can say:   pay 100% of the allowed claim on the joint credit card claim of BIG BANK, and far less to everyone else.

After the plan is over

The only sticky point for the co signor, who is protected from collection on the co signed debt during the plan, is that interest that may accrue on the debt over the life of the plan.

At the end of the plan, the principal on the debt and any interest owed when the case was filed, will have been paid.  But the bankruptcy case doesn’t stop the accrual of interest at the contract rate during the plan.

The cosignor will remain liable for that interest despite the bankruptcy.

Power of Chapter 13

The co debtor stay and the ability to separately classify co signed debts is just another reason why, as a bankruptcy attorney, I love Chapter 13.

Consider

The secrets of successful Chapter 13 plans

Interviewing a bankruptcy lawyer

Wipe out tax penalties in Chapter 13

What Should Bankruptcy Cost?

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pay for bankruptcyPick the cheapest bankruptcy lawyer and it could really cost you.

How much time and skill does the cut-rate lawyer invest in your case?  Often, not enough to do the case right.

And the  extra cost of getting another lawyer to repair  a case gone bad is only half the problem. Not all the problems created by the bargain basement lawyer can be fixed.

Even when the case can be saved,  the clients will end up paying twice: one to the cheapo lawyer, and again to competent counsel to clean it up.

Undoubtedly, they’ll pay more than if  they’d paid a good lawyer to do it right the first time.

Bankruptcy mistakes

Right now, in my office we have three conversions from Chapter 11 to Chapter 7 involving significant real estate assets.

We have cases where big ticket assets were omitted.  We have cases where the initial attorney just didn’t persist with the debtor to get the schedules right, and ones where counsel didn’t explore the choice of chapter.

Almost without exception, the debtors chose counsel based on price.  They went with the lower price for their bankruptcy case, and they bought a rat’s nest.

Cost conscious only at the end

Why is it that notions of economy only surface after a client has wracked up tens of thousands of dollars in debt?

Many of the debtors gave more thought to credit card expenditures or purchases of investment real estate during the boom than they give to picking a bankruptcy lawyer.

The influx of lawyers to this field and the prevalence of lawyer advertising suggest bankruptcy law is a commodity.

Lawyers with no track record to tout or past clients to spread the word  compete on price.  If you can buy a $15 toaster, why pay $30? goes the thinking.

What a lawyer adds

The existence of non lawyer petition preparers and do-it-yourself books reinforce the idea that bankruptcy is more like playing Go Fish than contract bridge.

Bankruptcy no place for do-it-yourself

Then, there are the official forms, suggesting that filing bankruptcy is all about the paper and not about the disclosure the paper requires.

What the bankruptcy papers require

And disclosure is what the forms are all about, and the system wants disclosure because there may be consequences to the stuff disclosed.

Quality of counsel is not reliably correlated with price:  I’ve seen some utter newbie lawyers charging more than highly skilled veterans for an inferior product.  But capable counsel is seldom the cheapest.

So, my charge to those needing bankruptcy relief is to consider that hiring the least expensive lawyer is a poor bargain.

Figure how much should you pay for bankruptcy

Another time, I’ll talk about how to assess a lawyer’s suitability for your case.

Questions to ask a bankruptcy lawyer before you file

Image courtesy of purpleslog.

Two Strikes & You’re Out (Of Your Home)

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bankruptcy stay

Three strikes and you’re out.  Anyone familiar with baseball knows that one.

The rules are different in bankruptcy.

Two strikes and you’re out.

And for one couple, they’re not only out of bankruptcy, they’re out of their house.

Foreclosed the day after they filed bankruptcy number three.

Because, what they didn’t know is that there is no automatic stay of foreclosure in a third bankruptcy filing.

Without a lawyer, they gambled and lost.

Bankruptcy reform is cruel

When Congress “reformed” bankruptcy law a decade ago, it limited the availability of the automatic stay in cases where the filer had had prior cases dismissed during the year.

Under the new law, the stay is automatic in a first case;  lasts for 30 days in a second case; and doesn’t exist at all in a third case.  See 11 U.S.C. 362(c)(3).

The rule looks at cases pending during the year and dismissed in the twelve months before the case at hand.

The change was intended to stop abuse of bankruptcy law by folks who filed bankruptcy only to get the stay of collection, folks who didn’t intend to follow through with a complete filing in accordance with the rules.

And certainly, there are a few examples of deliberate abuse of the law.

What you don’t know

The elderly couple in this story wanted to put off the foreclosure long enough to sell their home.  For reasons I haven’t figured out, with their house on the line, they opted to file a Chapter 13 without the help of a lawyer.

In each case, they filed a “skeleton” case, the bare bones necessary to initiate a bankruptcy case.

And in each case, they failed to file the balance of the schedules within the two week extension provided by the rules.

Under the “reformed” statute, the filing of their third case within the last 12 months didn’t trigger a stay against foreclosure.

So, when the lender foreclosed the day after they filed the third case, the lender was good under the law.

And the house was gone.

Do it yourself is dangerous

Usually, we admire the independent, the tenacious, the resourceful.  We applaud the d0-it-yourself ethic.

But law is not like carpentry or car maintenance.

Like it or not, law is complicated, rule-driven, and often inflexible.

Hiring a lawyer seems particularly painful when the problem you need to solve is not enough money.

But the pain of paying for help is minor next to losing your house, unnecessarily.

Bankruptcy lawyers are used to clients with few funds.  Chapter 13 provides a way to legally pay  your lawyer after you file your case.  We can often find a way to make it work.

In many ways, bankruptcy is a team sport: you and your lawyer. Victory is unlikely when you take the field short-handed.

More

How much should bankruptcy cost?

Timeline for foreclosure in California

How to interview a bankruptcy lawyer

643 Bair Island Road
Suite 403
Redwood City, CA 94063
Phone: (650) 694-4700

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