Northern California Bankruptcy Lawyer

On The Bankruptcy Soapbox

The Soap Box

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

At Risk of Repossession? How To Keep The Car & Pay Less

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car repossessionIf you are one of the  7 million Americans late on your car payments and living in fear that your car will be repossessed, consider how Chapter 13 bankruptcy can save your wheels.

Losing your car can accelerate a torrent of nasty financial consequences.

No car, no way to work.

No work, no income.

So, what can a Chapter 13 bankruptcy do to put you back on the road?

Stop repossession

All chapters of bankruptcy impose an injunction on creditor efforts to collect debts, or enforce liens, automatically when you file.   That automatic stay applies whether or not the creditor knows about it.

So, file bankruptcy and any collection actions taken without court permission are void and legally ineffective.  If they pick up your car after you’ve filed, you can compel its return.

The only exception to the stay applying automatically is if you’ve had two bankruptcy cases dismissed in the past 12 months.  More on multiple dismissals.

Spread out car payments

Chapter 13 allows you to put forward a plan to restructure your car loan.  The remaining payoff balance on your car loan can be spread over 60 months.

Unless your car loan is very new, or the original term very long, that probably lowers what you pay each month through the plan.

Reduce interest rate

You can adjust the interest rate on a car loan paid through the plan to the current day, market rate.  As I write, that interest rate in California is between 4 and 5%.

This power to lower the interest rate is central to a successful readjustment of a high interest car loan.  It’s of little help if your loan is less that today’s market rate.

But Chapter 13 in the states of the 9th Circuit has another trick up its sleeve.

Strip out loan add ons

Part of a Chapter 13 plan can be cutting the car loan down to the portion of the loan that financed the car itself;  you can knock out any part of the loan that paid off an underwater trade-in, or a service contract, or gap insurance.

The 9th Circuit said in Penrod that these additions to the amount financed were not protected by the 2005 bankruptcy amendments that gave special consideration to car lenders.

So, you can pare down the car loan that has to be repaid to just the amount of the loan balance used to buy the car itself, and not all the extras.

Deal with other debts

You don’t just file bankruptcy on one debt; bankruptcy includes all your debts.

Some may be absolutely dischargeable, perhaps without paying anything on them.

Some liens can be wiped out.  Back payments on home loans can be caught up in Chapter 13.

Chances are that there’s more going on in your financial life than just the trouble with  your car loan.

An experienced bankruptcy lawyer can help you look at the big picture and propose a solution to keep you trucking.

More

Your car in Chapter 7 bankruptcy

Is bankruptcy the right choice for you

Interviewing a bankruptcy lawyer

 

 

 

Stupid Moves Before Seeing A Bankruptcy Lawyer

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before bankruptcy

Don’t tidy up your financial affairs before consulting a bankruptcy lawyer.

Your current mess may present opportunities to plan your bankruptcy for a better outcome.

You may waste money or lose bankruptcy options when you make last minute changes to your situation without understanding how that situation plays out in bankruptcy.

You’ll have the widest set of options for a fresh start if your lawyer sees the situation as it is today.

What looks to you like complexity and disorder may look to your bankruptcy lawyer as opportunity and advantage.

The high cost of financial housecleaning

My heart sinks when a new client tells me that they’ve just paid off the loan their parents made them before seeing me.

Why your bankruptcy lawyer shouldn’t fight for you

Or borrowed against their retirement to fund debt management.

Or paid off the taxes so that all the remaining debt is credit cards.

For different reasons in each instance, those actions complicate a bankruptcy or squander assets that could have been saved in bankruptcy.

Payments to family

Paying off a loan from family seems instinctive.

We want to take care of those closest to us.  Sometimes, paying off help from family is driven by the desire to hide a bankruptcy from them.  Sometimes, it’s the desire to make sure they get whatever assets you have before you submit to the scrutiny of a bankruptcy trustee.

But more likely, paying off a debt to an insider (that’s bankruptcy lingo for close relatives, real or business related) hurts more than helps.  The bankruptcy trustee in a Chapter 7 can sue insiders who get paid during the 12 months before the bankruptcy filing to recover the money.

The theory of recovering preferences is to make a fair distribution of your assets to all creditors, not just the ones you favor.

Often, the exemptions that are available in bankruptcy will allow you to keep more money than you expect.  You can repay that debt to Mom after the filing, when it has no adverse consequences to Mom. The California grubstake (or wild card exemption) protects about $28,000 in any kind of property, in addition to other exemptions for specific kinds of property.

So, hold on to your checkbook, until we’ve talked.

Settlements before bankruptcy are wasted

The saddest thing I’ve seen recently was the family that soldiered through a five year debt settlement program before we met.  They had paid tens of thousands of dollars to creditors, but didn’t realize that not all their debts were included in the plan.

We had to file bankruptcy for them despite their heroic efforts to pay their debts.  They got no credit or advantage from the money they spent retiring credit cards while their property taxes and student loan debts fell into default.

The better situations are when clients ask if they should accept a settlement offer from a collector before filing.  There, at least, I get to ask what benefit they get from paying that money, money that could otherwise go to funding an IRA or paying down student loans?

In general, your bankruptcy is no simpler or cheaper or less damaging if you have a few creditors as opposed to many creditors.   If the situation requires bankruptcy, reducing the number of creditors or amount of the debt doesn’t benefit you at all.

Tax debt has its uses

While it isn’t generally thought to be a good thing to owe money to the tax collector, it may be an asset if your income is above the median for your state.

The means test is a formula that is supposed to weed out those families who make too much money to file Chapter 7. One of the ironies is that one of the allowed deductions in figuring whether you have too much income to file Chapter 7 is that you can deduct taxes you owe from the income.

It’s the same with mortgage arrearages and property taxes on your home.

These debts are useful deductions in getting a client into the bankruptcy chapter of their choice.

Pay it off before we meet and I have fewer tools to shape the means test.

Put down that broom

So, resist the temptation to clean up your finances before you meet with a bankruptcy lawyer.  Don’t sweep debts under the carpet or out the door before you understand the bigger picture.

Make any advantageous changes in consultation with your lawyer.

More

What your lawyer can’t tell you

The secret alternative to bankruptcy

Cheat sheet for interviewing a bankruptcy lawyer

 

Image courtesy of Flickr and Spengy. 

 

Credit Reports Heal

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band-24298_1280 (1)_optWill filing bankruptcy hurt my credit? Probably.

Should that hit to your credit keep from filing bankruptcy?  Not by a long shot.

Incredibly, I encounter people drowning in debt who think their credit report is more important than their financial health.

Their thinking seems to be that credit, once damaged, is never the same.

It’s not so.

A blow to your credit is not permanent nor even long lasting.

Your “credit”, or really, your worthiness for new credit, is almost a living, breathing thing.  It can suffer a blow and recover.

Credit hit is like a cut

Whether you choose debt settlement, debt management or bankruptcy, the solution will damage your credit, in the short run.

Think of the damage like a wound.

The wound bleeds, it exposes the rest of your body to infection.  It hurts.

Think of bankruptcy as antiseptic.  Douse the wound with antiseptic to kill infection and promote healing and it hurts…but the hurt fades.

Over time, the wound closes and scabs over.  It isn’t painful most of the time.

When it’s healed, there’s a bit of a scar.

Over time, even the scar fades.

Debt is chronic disease

When your debts are beyond paying off in the normal course, it’s like a disease you can’t beat.  Persistent symptoms, sometimes progressively worse, other times just ever-present.

Debt saps your energy, consumes your thinking and limits your opportunities.

If your debts are such that you’ve considered bankruptcy, your credit worthiness is probably already compromised.  Would any creditor lend you more money at a reasonable rate?

If not, your credit may not be doing you any good at present.

Your balance sheet is what counts

A credit report is a limited history.  As time passes, the oldest history falls off the report to be replaced with the snapshot of today’s finances.

If you use bankruptcy to wipe away your old debts, your balance sheet (assets minus liabilities) improves on the spot.

The bankruptcy filing shows on your credit report, in the rear view mirror, for some time.  But its significance to lenders fades the farther down the road you get from filing.

But with your old debts gone, even right after you file, you no long look like someone who already has as much debt as they can handle  or more.

Take steps to get financially healthy and your credit will recover too.

More

Your right to credit reporting after bankruptcy

Tips for real estate loans after bankruptcy

Life after bankruptcy

Image courtesy of Flickr and RambergMedia Images under a Creative Commons license.

What Small Business Needs From Government

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business challenges

 

This post was first published 10 years ago, in the midst of the Great Recession.  I continue to think about the real challenges of running a small business and the balance needed between simplicity for the business owner and protections for the public.  More below.

Senator McCain this morning on Meet the Press reprised the Republican view of the approach to stimulus:  tax cuts for small businesses.

I thought about the small businesses I had seen in the past couple of weeks.  Not one of them was paying income taxes, and their expenditure on payroll taxes was small, because they’d cut back on  employees.

For the very small business, I don’t see taxes as the culprit.

Everywhere you look you see the impact of credit cards on the economy.  Often it’s suit by American Express that brings a small business owner to my office.

Or the businessman makes a list of their credit card debt and the interest rates after the recent round of increases and realize that they can never pay off the debt at 28% interest.

Credit card merchant fees are a much bigger piece of the small business expense picture than are taxes for most of my clients.  Each merchant pays a percentage of each credit transaction to the card issuer.   7-Eleven store owners are petitioning  Congress for regulation of the fees charged merchants  by the card issuers .

I’m certainly not an economist and don’t have a Moran Plan for reinvigorating the economy, but the people I see in trouble aren’t there because of their tax burden.

Small business wish list

Ten years later, my wish list for entrepreneurs is greater simplicity on the administrative side of the business.

Perhaps fewer jurisdictions to deal with and regulations that the average Joe can understand and follow.  Less need for hired professionals to keep the business out of trouble.

Looking around in 2019, the regulatory changes we’re seeing don’t seem to be helping Mom and Pop businesses.

More

Pitfalls to avoid for small business

Your money needs a prenup

Myth of the business credit card

The Trouble With Your Social Security

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Social Security call

The caller says your Social Security file is incomplete and without more information, your assets, as well as your benefits, will be frozen.

Pretty terrifying if you depend on Social Security checks.

Only, it’s not true.

The caller isn’t from Social Security.

Social Security can’t freeze your assets.

Social Security doesn’t do business by phone.

But scammers love the phone and they love trusting folks and vulnerable elders.

The caller is a thief

The guy, or the automated voice, on the phone really wants you to hand him your information so he can steal money.

It may be your money he wants to steal, if he gets your banking information.  Or, he wants to steal someone else’s money by pretending to be you.

Scammers also use the IRS cover because the IRS is feared;  just another way to get your attention.

The scammers use the Social Security cover story because Social Security impacts almost every American adult.  And, Social Security is trusted.

Through the magic of hacking, they even display the real Social Security phone number.  But it’s only real on your phone’s caller ID.

The other real thing is the threat to your financial wellbeing.

Only scammers make calls

The “fact” that your first contact about a supposedly dire situation comes by phone is a giveaway that the caller is a scammer.

Real government employees write letters.

They write, and write, and write.

They explain the problem.  They suggest what needs to happen next.  And none of their fixes involve providing critical identifying information over the phone.

They make a record that way that they’ve played by the rules.

When scammers call

Your strategy is simple:

clam up,then

hang up.

Tell them nothing.

But do tell the feds.  You can report the crooks online at   https://oig.ssa.gov/report .

If you continue to be worried about your Social Security account, call the real Social Security at 1-800-772-1213 or online at the SSA’s website.

Keep your personal information personal and private.

More

When the IRS is coming to arrest you

Debt collectors exploit elders via phone

Weapons of a debt collector

 

 

 

5 Things To Do When You Have Been Sued

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process server badgeThe ring on the doorbell was a process server.

Bingo!  You’ve been sued.

Now what?

Breathe deeply and work your way through this five step check list.  Then I’ll suggest some options.

Scout the territory

1. Look at the caption:  It identifies the parties to the suit.  It’s right below the centered name of the court involved.  The Plaintiff is the person filing the suit:  they have a comPLAINT for which they want the court’s help.

Do you recognize the plaintiff as one of your creditors?   If you don’t recognize the plaintiff, does the complaint explain how the plaintiff comes to assert someone else’s claim against you?

2.  Find any verification:  Attached to the end of the complaint may be a verification.  This is a sworn statement by someone with personal knowledge of the facts that the facts set out in the complaint are true.  If there is no verification, you can file a simple form called a general denial if you want to contest the suit.

3.  Mark your calendar:  In California, you have 30 days from service of the complaint to file an answer.  If you don’t file an answer, you are sure to lose the suit.

4.  Check whether suit is timely:  The statute of limitations in California is four years.  The four-year clock begins tickling when there was last activity on the account, a purchase or a payment.  If it’s been more than four years since you either paid or charged on a credit card, you can win the suit simply, if you file an answer.

5.  Read the prayer:  The prayer is at the end of the complaint, though maybe not the last page.  Determine how much money is at stake, and whether there is any claim that you have committed fraud.  The consequences of letting a fraud complaint go to judgment are much more serious than just a suit for money.

Plan of attack

Once you’ve taken those five steps to figure out who is suing you and what it takes to oppose the suit, you need to decide what to do.

Do nothing

If you do nothing, chances are real good that the plaintiff will ask the judge to enter your default, stating that you haven’t answered.

When you don’t answer a properly served complaint, the court system assumes you agree that you owe the money.  Sooner or later, the court will enter a judgment against you.

Everything you need to know about judgments

A judgment entitles the creditor to use the power of the government to get its money.  In the Golden State, it means the creditor can levy bank accounts, file a judgment lien, and garnish wages.

A judgment is enforceable for 10 years.

File an answer

If you contest the suit by answering, you at least slow the creditor’s march to getting a judgment.  If you have a good defense, you may actually win.

The California court system provides information and resources for those representing themselves without a lawyer.  But as the Alameda County court’s site says:  You cannot come to Court and tell the judge that you are not a lawyer and do not understand what you are supposed to do.  

If you are going to be your own lawyer, you are charged with knowing what a lawyer knows.

Filing an answer at least gives you a position from which you can negotiate a settlement.  Consider whether you have any resources with which to fund a settlement.  How is it possible to pay the debt now when you couldn’t pay before?

Find global debt solution

Whether or not you have a defense to this suit, the filing of a lawsuit should be a red flag for you.

  • Is this suit the tip of the iceberg?
  • Is this creditor just one of many who are poised to sue you?
  • Will a piecemeal approach to your debts really get you anywhere?

It may be time to see a financial counselor or a bankruptcy attorney.  Even if you don’t expect to file a bankruptcy case, a bankruptcy lawyer deals with debt issues all the time and can help you assess your options.

Look at your calendar: you have 30 days in which to plot your course before you are at risk of having a judgment entered.

Make a plan, now, before the 30th day.

More

California protections from debt buyers

Wage garnishments in California

Are California judgments dischargeable in bankruptcy

Image courtesy of nles.com. 

Surefire Steps To Avoid Bankruptcy

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Naked_Hike-wikimedia-ebdow-cropped

Most people would rather parade naked down Main Street than file bankruptcy.

Bankruptcy makes them feel exposed, defeated, ashamed.

If you don’t want to go there, you can order your life so you don’t ever need bankruptcy relief from debts you can’t pay.

I’ve figured out the formula that assures that you’ll never met me in my professional capacity.

My five easy steps to avoid bankruptcy [Read more…]

How To Write A Contract Without A Lawyer & Make It Stick

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meeting-handshake-pixabay_optEven in a world where people attempt almost any skilled task with the help of Google, YouTube, or Legal Zoom,  people continue to ask: is this contract legal?

They aren’t asking (usually) whether the subject matter of the contract is permitted by law.

They really want to know: will what I’ve written be enforceable.

What makes it a contract

There are no magic words or phrases that make a contract enforceable by a court.

Enforceability is not acquired by adding “whereas” or “notwithstanding“.

A contract need only establish that one party made a promise to the other for consideration. Consideration is legalese for money.  Or something else of value.

If I promise to join you for dinner next Friday, we have not created an enforceable contract, because there was no valuable consideration exchanged.  My promise was gratuitious.  You didn’t offer me anything but your good company over a meal.

If , on the other hand, I promise to speak at the event you’re planning, for which you’ll pay my  fee, then we have an enforceable contract.  I will appear and speak, and you will pay.

If either of us fails to do what we’ve promised, a court will attempt to give the injured party the benefit of the bargain.

So here are four tips on drafting a contract that does the job.

Contract1.  Write out the entire deal

The biggest failing of DIY contracts is incompleteness.  They don’t describe fully the performance that is promised.  They miss one of the essential terms:

  • who
  • what
  • where
  • when

If you hope that a judge will enforce a contract, it has to be written such that an absolute stranger to the deal, the judge, can read the contract and know what was agreed.

Too many self-drafted contracts don’t contain enough for a stranger to understand the deal.

Now, contracts with missing terms or ambiguities can be enforced.  The contract is still “legal”.  It’s just that there is a great risk that the missing terms as the judge fills them in don’t match the intent of the parties.

Enforcement of a fragmentary contract is far more expensive than had the contract been complete.

Enforcement of the unwritten terms becomes victim to what each party remembers but didn’t write down.

2. Flush out & write down assumptions

Often, the contracting parties each come to the table with a collection of assumptions about the arrangement.  And each party assumes that the other party shares their assumptions.

Only, until you articulate your assumptions, you can’t test whether you are both, really, on the same track.

The unwritten assumptions form part of the deal.  A good contract lays the assumption out on paper.  If they aren’t shared when you sit down to write the contract,  discussion or negotiation ensues.

The exercise of writing it out becomes as important as the writing itself.

3.  Explore the “what ifs”

Well crafted contracts provide for the rights of the parties if things don’t go just as hoped when the contract was formed.

What if

  • one party gets sick and performance is delayed
  • the materials aren’t available on schedule
  • the product doesn’t perform as anticipated

My rule of thumb is that the more money that is involved, or the more critical the contract is to your business, the more what ifs the contract should address.

If the consideration is $1000, it’s not worth extended negotiating or drafting to deal with remote possibilities.  If it’s a $100,000, it’s worth more to lay out the details.

4.  Provide for attorney’s fees

If you expect to enforce the contract in court if it’s breached, then your contract should provide that the injured party can collect its attorneys fees from the other in addition to any other damages.

Why?

Because the American Rule about attorneys fees says that each party pays their own attorney, win or lose.  That is, unless the contract, or a statute, says differently.

Without a provision that grants the prevailing party the attorneys fees necessary to enforce the contract, it may simply be too expensive to go to court.  Or, the cost of representation may consume the damage award.

Write on

With these principles in mind, you can draft a contract that is certain and enforceable.  Strive for clarity and completeness.

And if this seem too daunting, take your draft to an attorney and pay only for review and repair of your document.

Because, at the end of the day, a contract only works if you can enforce it.

More

How you sign your name to your corporation’s contract

Benefits of incorporating not what you think

Does your business partnership have a prenup?

Image courtesy of Pixabay and Nemo.

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Suite 403
Redwood City, CA 94063
Phone: (650) 694-4700

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