Northern California Bankruptcy Lawyer

On The Bankruptcy Soapbox

The Soap Box

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

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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

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Does your business partnership have a prenup?

Image courtesy of Pixabay and Nemo.

Bankruptcy Changes Your Life, Only Not The Way You Think

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How will filing bankruptcy change my life?

My clients ask all the time.  They imagine the remainder of their life after bankruptcy with neither credit cards nor credit.  Outcasts in our economy.  Shunned by all.  Crippled by bankruptcy.

They can see a scarlet “B” tattooed on their foreheads to mark them forever as Bankrupts.

My short, irreverent answer to that question is that they will sleep better at night.

Other side effects of bankruptcy include a drop off in telephone calls from collectors and shrinkage of the amount of mail they get.

They get smarter; debt makes you dumb.

All true, but probably not the answer they expected from a bankruptcy lawyer.

Life after bankruptcy

At the superficial level, life continues only slightly changed after bankruptcy.

Your credit score probably goes up a bit, in the short run.  Credit is more expensive shortly after bankruptcy, becoming more available and more affordable as time goes on.  With time and a down payment, you can buy a house.

Credit heals

Your ability to borrow too much on student loans endures.

Most important, in my view, is that eliminating debt means that you can take responsibility for providing for your old age.  A frightening slice of Americans have nothing more than Social Security to support themselves as they age.  And age they will, even if they believe they will never “retire”.

An equal number of people couldn’t handle a $400 emergency without borrowing money.

You drive change

The more serious answer has to reflect what brought them to me to file bankruptcy in the first place.

When the driving force was gambling or some other irresponsible behavior, I tell them that I can dig them out of this hole with bankruptcy relief, but positive change for the future requires that they change their behavior.

When the current crisis is  created by events beyond their control, like job loss, divorce or illness, bankruptcy is likely to put their financial lives back on track.

For those in business,  failure is one of the risks that we take when we sign up to be entrepreneurs.  Bankruptcy clears the financial decks so we can go forward with life.

Life after bankruptcy can be what you make it.  Bankruptcy makes it possible;  you color in the details.

More

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Bankruptcy myths

What Bankruptcy’s Automatic Stay Doesn’t Stop

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bankruptcy stay exceptions

The automatic stay is the signature feature of American bankruptcy.

Just by filing a bankruptcy case, a federal court injunction instantly prohibits your creditors  from actions to collect a debt from you or your assets.

But, there’s a whole list of actions that aren’t included in the stay;  we forget that some kinds of lawsuits with a financial aspect get excluded from the stay.

How the stay works

The automatic stay applies in all bankruptcy cases (unless you’ve filed more than two bankruptcy cases in the last year).

Outside of bankruptcy, you have to prove that you are entitled to an injunction that stops some otherwise lawful action.  In bankruptcy the injunction is granted automatically, just because you filed.

The burden is then on creditors to take action to extract themselves from the stay.

The stay has its limits

The list of exceptions is long and many of the excluded actions are very specific and technical. See 11 U.S.C. 362(b).

But there are some biggies there too among the exceptions.

Here are the ones of most interest to the typical bankruptcy filer.

Family law issues

Actions to establish or modify support are not stayed.  Neither are proceedings involving custody, marital status or paternity.

Support can be collected from property that isn’t “property of the estate” without violating bankruptcy law.  And state issued licenses can be suspended for failure to pay support.  That’s subsection (b)(2).

Law enforcement

The stay doesn’t stop criminal prosecutions.  Nor does it stop the enforcement of actions grounded in the public health and safety; that’s called the government regulatory exemption.  More about that below.

Tax administration

Your state tax folks and the feds can legally demand the filing of a tax return; audit returns you’ve filed; and assess taxes they claim you owe.

Government can’t, however, record liens or levy assets to collect a tax you owed when you filed bankruptcy.

Private rights

A landlord under a lease that expired according to its terms before the bankruptcy case was filed can proceed to get possession of non residential property.

Civil contempt sanctions

Collection of court-ordered sanctions for misconduct in litigation is not prohibited by the stay.

The 9th Circuit Court of Appeals recently decided that the public’s interest in making parties to a lawsuit play by the rules outweighed the sanctioned party’s interest in getting complete protection from collection action.  The fact that the sanctions might be payable to the other party to the litigation didn’t change the state’s interest in enforcing its sanction for bad behavior in court.  The case is Dingley.

More

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What litigators must know about bankruptcy

When your ex files bankruptcy

Fearmongering and The Decision to File Bankruptcy

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The unknown is often fearful.

My colleague Peter Orville wrote

It is natural to be afraid of doing something you’ve never done before, like filing for bankruptcy protection. This is especially true if you’ve heard stories about why you shouldn’t file bankruptcy.

Peter has it right.  Some trepidation is natural.

My beef is that the fear of bankruptcy is promoted by those with something to gain by demonizing bankruptcy.

Fearmongers hope to profit

The stories about why you shouldn’t file are plants.

Not growing plants, but like planted evidence:  something intended to trap, decoy, or lure, as criminals.

It’s the creditors, their cohorts, the credit scoring folks, and the debt settlement companies who want you to think that filing bankruptcy is the end of life as we know it.

You know why they do it?

Each of those sources profit if consumers are scared off from filing bankruptcy.

If they can keep you paying the debt, whether or not you can ever pay it off, or keep you scared enough to pay them to make it go away, they prosper.

No one sits in judgment 

My charge to clients is that bankruptcy is not painful.  Or at least, any pain  you experience is self inflicted.

You can make yourself (or allow yourself) to feel as miserable and worthless as you choose to do so.  No one associated with the courts, including trustees, is judgmental.

A debtor does not have to justify his choice of bankruptcy relief and does not have to prove he is “worthy” of a discharge.  Eligibility for a discharge, even after bankruptcy reform, is presumed.

I have a perverse admiration for clients who have endured the pain and despair of financial distress for as long as most of them have before seeking me out.

But life does not have to be that way;  bankruptcy is an honest and effective choice.

There is nothing to be afraid of.

More

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Bankruptcy No Place For DIY

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price tag public domainThe do- it- yourself spirit seems especially strong in bankruptcy courts these days.

Only it often comes with a big price tag.

Nearly 45% of the Central District CA Chapter 7 cases were filed by individuals doing it themselves.  The national rules committee drafted the new bankruptcy forms with the unrepresented in mind.

Why do people take such a momentous step as filing bankruptcy without an attorney?

They go it alone, without a lawyer, for three reasons:

  1. They assume they can’t afford a lawyer.
  2. They assume that there are no consequences for doing it badly.
  3. They assume it’s “just filing out forms”.
All of these assumptions are wrong.  But let’s look at the third assumption, that it’s “just filling out forms”.

What bankruptcy filing entails

Southern California bankruptcy lawyer Jay Fleischman outlined the steps in a bankruptcy case.  Each of those decisions is one a pro per ( a person representing themselves in court) has to make  to file their own bankruptcy case.

It’s a pretty daunting list.

You have to

  • decide if bankruptcy is the best choice;
  • choose a chapter;
  • list all your tangible and intangible assets and your property transfers
  • get the right credit counseling

An industry has sprung up to “serve” those bankruptcy filers who don’t want to do it entirely alone, but think they don’t need, or can’t afford a bankruptcy lawyer.  They’re called petition preparers.

Enter the petition preparer

It takes no training or competence to hang out a shingle as a petition preparer.  Anyone can call themselves a bankruptcy petition preparer.

A petition preparer is supposed to do nothing but type up the information provided by the debtor.  They are not supposed to explain the forms or the choices those forms require.  To do more than type is the unauthorized practice of law.

The wide spread harm that untrained preparers caused to their customers triggered special provisions in the 2005 bankruptcy “reform” law.  At least now they have to disclose their involvement in drafting the bankruptcy schedules.

Special local rules limit what a preparer can charge and require that they identify themselves on the cases they handle or, more often, mishandle.

Sometimes, to avoid exposure, they coach their clients to lie about their involvement in the case.

Just for the record:  lying in a bankruptcy case is never a good thing.

Exposed in public

So I get a  really mixed feeling when  a debtor appears at a 341 meeting in Oakland without a lawyer.

What happens when you go to court for bankruptcy

The trustees there ask the debtor to turn to Schedule C, read the code sections from the California Code of Civil Procedure  beside each asset they’ve claimed exempt and tell him how they chose that exemption.

The trustee usually gets a blank stare or some confused stammering.  The debtor has no idea how to answer.

Most people who have filed bankruptcy are scared to death about the first meeting of creditors anyway.  But this question from the trustee is designed to flush out the fact that either, the debtor had “help” with their petition that wasn’t disclosed, or that the preparer did more than they are legally allowed to.

The preparer obviously told the debtor what exemption choices there were, and selected exemptions for the client.

This scene is particularly painful, since badly done exemptions may cause unrecoverable damage to the debtor.

While it’s the petition preparer who has broken the law, it’s the debtor who may pay for the bad advice.

My advice:  confine your do-it-yourself inclinations to craft projects.  Get competent legal help before filing bankruptcy.

Without a lawyer you may find you can’t get out of bankruptcy, no matter the cost of remaining.

More

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Should you wait to file bankruptcy

 

Image courtesy of  Crisg and OpenClipArt

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

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