Northern California Bankruptcy Lawyer

On The Bankruptcy Soapbox

The Soap Box

Bankruptcy Schedules Are More Than Just Paperwork

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Bankruptcy paperwork can make you feel like you are drowning in paper.

There’s your paper; there’s the paper your lawyer needs.  And there’s the paper the court insists on.

Why bankruptcy schedules worth the work

It’s easy to try to skate. To cut corners.  To shut down.

But that paper is critical.

Nearly every question, benefit, or dispute in an individual’s bankruptcy case starts with the bankruptcy papers.

Those papers are called the schedules.  The schedules form the heart of a bankruptcy case.  They lay out what the person filing the case owns, owes, and spends.

And most debtors (those who file bankruptcy) have little idea how much paper is involved til they see the schedules and sign them in their lawyer’s office.

Before they get to the signing, debtors chafe at the endless questions from their attorney about the nature of the debt, who is liable, and whether the debt is disputed.

Is all this effort really needed?

First impressions matter

Your schedules constitute  the trustee’s first look at you. Well-done schedules project engagement with the process and they tend to limit digging by the trustee.

The creditor schedules control who gets notice of your case and notice of the automatic stay.

Notice to all affected assures that anyone with a right to challenge the discharge of your debt to them is bound by the timelines of the Bankruptcy Code.

Creditors who don’t get notice may reopen the bankruptcy case later to assert that their debt isn’t dischargeable.

Omit assets and you may lose them, as case law limits your right to claim an exemption in an asset you didn’t disclose in the first place.

List it or lose it

Leave out a legal right or pending lawsuit and the defendant in that suit can have your lawsuit dismissed.

Then, there’s the matter of perjury:  the law provides for fines and imprisonment for deliberate untruths on the bankruptcy schedules.  Not something you want to expose yourself to.

What the schedules contain

Seen broadly, bankruptcy schedules list the debtor’s assets; debts; projected budget; and recent financial history.

Asset forms

Secured creditor form

Priority & unsecured creditor form

Since 2005, there’s a schedule for the means test.

You file proof of having taken prebankruptcy credit counseling and statement of your intentions with respect to debts secured by personal property, like your car.

Helping you get them right is part of the job of a bankruptcy attorney.

New bankruptcy forms

The courts are rolling out new versions of the bankruptcy forms which claim to be more “modern” and user friendly.

I find them verbose and impossible to scan easily to get the big picture in a bankruptcy filing.

The new forms read like tax forms and they suggest that you could competently file bankruptcy without a lawyer.  My experience is that, since 2005, it is the rare individual who can correctly file out the forms, much less understand the implications of those forms.

Enlist a professional to assess whether bankruptcy is right for you and whether now is the right time, before you file.  Afterward, it may be too late.

More

How to find the right bankruptcy lawyer

Understand exemptions

What debts don’t get wiped out

Image:  weatbix

Get A Deal On Your Car After Bankruptcy

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wheels after bankruptcy

How are you going to keep your car after you file Chapter 7 bankruptcy?

Here in California , little is more essential to holding a job and really getting a fresh start than a car to get to work in.  

While the bankruptcy discharge will relieve you of liability for the loan on the car, the lender’s lien on the car survives the bankruptcy.

OK, let’s think. Who besides you wants the car?

If the car is worth less than you owe on it, the Chapter 7 trustee isn’t interested in it.

So, it’s you vs. the car lender.  What happens to the car after the bankruptcy case?

An underused section of the Bankruptcy Code  allows you to buy your car outright from the lender at its value today.

Your car loan in bankruptcy

So, what can you do about the lien on the car that survives the discharge? The car lender can repossess the car without violating the bankruptcy discharge.

The Bankruptcy Code gives you some choices for the car loan:

  • surrender the car;
  • reaffirm the loan; or
  • redeem the car.

We’re going to talk about redemption, and my recent client who saved more than $11,000 by redeeming the car.

How redemption works

In a nutshell, redemption in bankruptcy allows you to pay the lender the value of the car as of the filing of the case in a single payment, and get clear title.

It’s grounded in the idea that if you surrender the car, it’s only worth what it’s worth in the market to the lender.  Your discharge keeps the lender from looking to you for the difference between the loan balance and the car’s value.

A single payment is required for redemption:  you can’t buy the car back, and make the lender take payments over time.

So the availability of cash can limit the usefulness of redemption.  There are also commercial lenders whose business is financing redemptions.

Clear title versus more debt

The advantages of redemption hit me and my client in the face recently when we reviewed a proposed reaffirmation agreement for her car.

The lender prepared a reaffirmation agreement for her signature with the required disclosures.  Reaffirmation would have effectively waived the discharge as to the car loan.

With reaffirmation, the lender was bound to accept payments despite the bankruptcy.  The debtor became exposed to personal liability for a deficiency judgment should she default in the future.

Not a great deal for the debtor, but sometimes you have to choose between unattractive options.

What grabbed our attention was the gap between the $11,000 value of the car and the $22,000 balance on the loan.

Sign the reaff, and the client would pay twice what the car is worth, plus interest, to keep the car.

We chose to redeem the car instead.

The judge approved our motion to redeem.  Once the order is entered, my client must have $11,000 in hand to get title to the car.

In this case, she could come up with the money necessary.

The unpaid balance of the car loan is gone forever.  She has title to the car.

Fresh start ahead!

More

Reaffirming car loans

House after bankruptcy

Who needs to be paid after you file bankruptcy?

Image courtesy of Peter and Flickr.

California Homestead Works In Other States, Too

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California homestead law drives bankruptcy exemptions even for those who no longer live in California.

Strange, when the homestead statute was state law originally written for Californians.

Two things have expanded its reach:  bankruptcy “reform” and the concept of extraterritoriality.

The third driver, of course, is mobility:  we seem much more likely these days to have moved between states.

I was reminded of the long reach of the homestead last week by a call from a couple in Colorado.

They used to live here,  were filing bankruptcy in Colorado, and wondered if they could use the California homestead to protect their Colorado home.

The answer, on their facts, is YES.

So here’s how that works.

California exemptions for former residents

The 2005 amendments to bankruptcy law tried to limit debtors from moving to a state with more generous exemptions before filing bankruptcy.

Several states, most notably Texas and Florida, have an unlimited exemption for the value of your home. Shack or Taj Mahal, if you live there, it’s protected from creditors.

So the Congressional “fix” was to say that if you hadn’t lived for two years in the state where you filed bankruptcy,  you must use the exemptions from the state in which you lived two years ago.  (It has a few more wrinkles, but broadly, that’s the new law.)

The folks on the phone were California residents two years ago.  They “must” use California exemptions to protect their home in Colorado, where they will file.

Instead of the $75,000 homestead in Colorado, they can claim the $100,000 exemption provided in California law at the time.

Neat.

Homestead beyond California

Extraterritorial is a long word for the idea that the state law in question applies to property outside the territory of the state.

The concept gained importance with the 2005 changes to bankruptcy law.  What if the state you lived in two years ago doesn’t allow extraterritoriality?

Some states hold their exemptions have extraterritorial effect;  other deny extraterritoriality.

North Carolina, for example, limits use of its state exemptions to residents of North Carolina.  See the lawyerly piece by my friend Billy Brewer.

By contrast, California’s exemption laws are available for property  outside the state.  The 9th Circuit case of Arrol, decided long before bankruptcy “reform”, allowed the debtor who had just moved back to Minnesota to claim a homestead the Michigan house in which he lived in a bankruptcy filed in California.

More on where you file and what you claim exempt

Bankruptcy law required that he file in California, having just moved back to Michigan less than six months ago.  The appeals court said that California law, where his case was filed, applied to the home he was living in when he filed, even if it was outside the state of California.

California allowed extraterritorial application of its exemptions.

If Arrol had moved from North Carolina to California, he couldn’t use North Carolina exemptions because they don’t apply to non residents.  The laws of North Carolina aren’t extraterritorial.

In that case, the debtor can use the federal bankruptcy exemptions if the exemptions of the required state aren’t available.

Home truths

The moral of this piece is bankruptcy can be complicated for the well-traveled debtor.

Choose an experienced bankruptcy lawyer; share the tale of your travels; and explore your exemption options.

More

California homestead is a superpower

A homestead isn’t what you think

Secret bankruptcy exemptions

Can A Trust Protect You In Bankruptcy?

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protect assets

Can a trust protect your assets from loss?

According to the lawyer advertising and the self-help books, everyone needs a revocable trust.

The asset protection industry loves irrevocable trusts to get assets out of your name so your creditors can’t reach your wealth.

So, do trusts work in bankruptcy to change the rights of debtors and their creditors?

Not so much.

What’s a revocable trust

A revocable trust is also called a living trust.  It’s created during the lifetime of the person putting their assets in trust.

The settlor, the person creating the trust, can unwind the trust altogether.  Or, the settlor can extract one or more assets from the trust.  It’s revocable.

The appeal of a revocable trust is that assets owned by a trust don’t need to be probated at the settlor’s death.  The terms of the trust determine who gets the trust assets.

I find revocable trusts useful to manage assets of the aging or the incapacitated.

Title to trust assets in a revocable reads:  George Smith, Trustee.  The asset appears to no longer be George’s asset, personally, but the asset of his trust.

Many people would like to think that George’s creditors can’t reach the asset if George doesn’t pay his debts.  Is it so?

Revocable trust and creditors

The very quality that makes a revocable trust appealing, that it can be revoked in whole or in part, is what defeats it as an asset protection tool.

The law says, if the settlor, the person who settles assets on the trustee, can revoke the trust, the settlor is treated as the absolute owner of the assets.

The trust changes nothing as far as the settlor’s exposure to his creditors.

California law puts it this way:

If the settlor retains the power to revoke the trust in whole or in part, the trust property is subject to the claims of creditors of the settlor to the extent of the power of revocation during the lifetime of the settlor.  Ca. Prob. Code § 18200

So when bankruptcy schedules ask for a list of your assets, the property in your revocable trust must be listed.

If the trust is irrevocable

An irrevocable trust is one where the trust can’t be revoked.  Assets that flow into the trust can’t be extracted by the settlor.

With an irrevocable trust, you’ve traded flexibility as to your assets for protection.

So, some see the irrevocable trust as the answer to creditor problems:  put the money in trust, let the trustee pay it out to you, and thumb your nose at creditors.

But there’s this pesky idea called the law against fraudulent transfers.

In this case, the law protects creditors who have a claim at the time the trust is funded.  The theory of law is that you can’t defeat the claims of your creditors by giving your property to a trust without getting back reasonably equivalent value.

If you got nothing for giving away your assets to the trust, it’s a fraudulent transfer.

State law, and bankruptcy law, have rules about how long a fraudulent transfer can be challenged by creditors.

Further, state law and the terms of the trust itself will determine the rights of creditors to monies paid out from an irrevocable trust.

Make sure your expectations about trusts, creditors, and bankruptcy are grounded in law.

More

Asset protection for cheapskates

The dangers of giving

Before you clean your financial house

What you keep through bankruptcy

 

File bankruptcy tomorrow?

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Clients clearly have little sense of how long it takes to file bankruptcy.

alarm clock flickr jonathan bliss_opt

Proof is what happened Monday: there’s an email the morning’s inbox from a client whom I first met weeks ago.

He tells me they want to file before Wednesday’s mediation in state court!

I have no creditor information, representation agreement, money, or credit counseling certificate.

Just as inconvenient, I’m not sure I have staff who can drop everything (related to clients who planned ahead and played by our rules) to make this happen.

Clearly I’m not communicating to clients what is involved in getting even a skeleton petition on file.  

Why it takes so long to file

Lots of clients seem to think that I may be able to file the petition without any involvement on their part beyond providing the decision to file and money.

Wrong.

The bankruptcy paperwork is filed with both the client’s signature and my signature We are both attesting to the accuracy of the information and the debtor’s eligibility for bankruptcy relief.

What your signature means on bankruptcy schedules

The full filing is even more information intense: budgets looking forward and backward; recent financial history; intentions with respect to secured debts.

All of it is doable, just not with a snap of the fingers.

More on bankruptcy schedules

Got to go: got a skeleton to assemble before Wednesday.

Image courtesy of Jonathan Bliss and Flickr.

The Means Test: Badly Mangled

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Another purported financial professional has confidently and conclusively gotten the bankruptcy means test absolutely dead wrong.

And used that wrong conclusion to steer someone away from bankruptcy.

Mt. St. Helens has nothing on me in terms of venting.

How can financial professionals get this so wrong, more than a decade after the means test was enacted?

Mangling the law

It started off innocently enough when a reader asked financial columnist Jane McNamara on FoxBusiness about the impact of settling an old debt  versus filing bankruptcy.

She noted the possible tax consequences of a settlement and asked whether the money was really available to fund the settlement.

So far, so good.

But then she blew it, big time.

To qualify for a Chapter 7 filing in most cases your income must be lower than the median income for your state

Wrong, wrong, wrong.

An income over the median income for your state just means you have to complete the means test.  It’s largely another form requiring more figures about your income and your projected expenses.

The means test is another hoop to jump through.  It is not a barricade.

The vast majority of above median income debtors pass the means test and successfully file Chapter 7.

In my view, this misstatement is unforgivable.  If you hold yourself out to offer financial advice, you at least should have mastered the basics.

Then you wonder about the independence of the piece when you note a connection to creditcards.com. Who benefits if cardholders don’t file bankruptcy? Card issuers.

Bankruptcy means test in the real world

The man in my office recently made me worry about the means test.

Because passing the means test often relies on deducting certain living expenses from their income such as payments on back taxes and secured debts, this man appeared exposed.

His car was paid for, he had no dependents, he rented, paid his taxes, and had no toys bought on credit.  All of the usual deductions that get people with high incomes through the means test and into bankruptcy were missing.

But it didn’t matter.

Even with an annual income of $7000 above the median California income for a single person, he qualified for Chapter 7, just based on the standard expense allowances provided for in the means test.  In fact, he qualified with $650 a month cushion.

The means test wasn’t even close to knocking him out of bankruptcy.

He’s living proof that McNamara’s statement that you have to have a below median income to file bankruptcy is just plain wrong.

Just because someone wrote it

The internet is marvelous for making information easily available.  But just because it’s in print, it isn’t necessarily correct.

Unfortunately, lots of people will read the FoxBusiness article and conclude that they aren’t eligible for bankruptcy.

They’ll struggle on unnecessarily at financial and personal cost because some writer got it wrong, and they believed.

You can read more about how the means test in bankruptcy really works here:

Image courtesy of Wikimedia and USGS

How A Careless Bankruptcy Can Bite Your Family

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Your bankruptcy can affect your family even though they haven’t filed bankruptcy.

Transfer assets or repay debts , and you can expose family to attack by the bankruptcy trustee.

Even if not fatal, the trustee’s bite can  leave scars.

How family gets sucked in

I sat waiting for my turn at a bankruptcy hearing last week and watched a series of other cases that left blood in the water.

The trustee’s feeding frenzy in at least three cases centered on payments or transfers the debtor  made to family before they filed their bankruptcy case.

In some cases, the debtor was repaying money lent by family.  In others, it appeared the debtor had simply made a gift to family.

In the worst case, it looked like the debtor had transferred a car to keep it out of the bankruptcy.

All of those transfers spelled trouble.

In each case I watched, the Chapter 7 trustee continued the hearing for the production of documents, the amendment of schedules, or further questioning.

In several, she wanted the debtor to agree to give her a longer period to challenge their very right to a bankruptcy discharge.

None of this bodes well for the debtor.

Here’s why.

The long arm of bankruptcy law

Bankruptcy law gives the trustee legal rights to recover, for the benefit of creditors, property or money the debtor has transferred.  Collectively, those are the avoiding powers.

Payments on existing debts to ordinary creditors can be recovered from the creditor where the payment was within 90 days of the bankruptcy filing.

If the  payment  was to a family member.  the look back period is  four times as long:  a full year.

So, if you paid on that loan from your sibling or your parent in the year before you file a Chapter 7, the trustee can sue your family member to get the money back.

Why preferences matter

Most people find it hard to understand why payments on genuine debts can trigger trustee lawsuits to retrieve the money.  The debt is real, they say.

It’s not wrong to have paid a real debt.  The idea is fairness among creditors, looking out for the creditors who didn’t get paid back before filing.

It’s also to take the profit, if you wish, out of aggressive collection tactics by some creditors:  no point in levying the debtor’s account if it triggers a bankruptcy filing and a lawsuit to get the money back.

Gifts are worse

In legal speak, a gift is a fraudulent transfer.  The person making the gift didn’t get anything in exchange.

The gift leaves him poorer than he was before.

That’s fine if you have enough remaining to pay your creditors, but not so if the gift damages your creditors.

When the debtor starts giving significant stuff away to family, his later bankruptcy sets those family members up for a lawsuit.

Now, I’ve never seen a bankruptcy trustee try to unwind ordinary birthday gifts or the like.

But start giving away cars, businesses, or houses and things change.  And in California, the look back period for recovering those gifts is four years.

We take care of family

Our desire to take care of those close to us is natural and admirable.

When you’re considering bankruptcy, however,  you need to stifle those caring impulses til after the bankruptcy.

After the bankruptcy, you are free to repay any creditor you wish to.  You can take care of those who took care of you when you needed it without any negative consequences.

Assuming the discharge wiped out all your debts, you can give anything you have away, since no creditor is harmed.

Tell the whole story

As I sat there, I wondered whether each of those debtors in the hot seat had told the whole story to their attorney.

Did the bankruptcy papers they filed reveal these transfers, or had the trustee found out some other way?

The problem even a good bankruptcy lawyer can’t fix

If the debtors didn’t take full disclosure seriously, they brought trouble on themselves.  Even if the trustee doesn’t sue their family, they may not get a discharge because they concealed the transfer.

The bankruptcy papers you file to start a case ask all the pertinent questions about transfers and payments.  If it was debtor carelessness or deceit that kept the truth out of the record, then I have little sympathy for the debtors.

If, however, the problem was created by lousy lawyering, then I watched  innocent debtors pay the price.

Lousy lawyering takes several forms,

  • failure to counsel the client fully about the need to be transparent
  • failure to insist on full answers to questions
  • failure to recognize avoidable transfers
  • failure to consider Chapter 13 where family isn’t exposed to suit

This day in court was unusual:  most 341 meetings are dull as dishwater.

But anyone watching this collection of troubled cases was reminded about the benefits of good representation and the importance of telling the whole story.

More

Questions to ask a bankruptcy lawyer before you sign up

Rules for testifying when you go to bankruptcy court

Bankruptcy not a do-it-yourself project

When bankruptcy blesses your family

What Your Signature On Your Bankruptcy Papers Really Says

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filler-150980_1280Wish I had a buck for every time a client has told me, “Yes, I signed it, but I didn’t read it”.

This is usually delivered as though the signature had no meaning if it wasn’t coupled with actual reading.

Unfortunately, it isn’t so.

Not true in commerce in general, and certainly not true when signing your bankruptcy papers.

Signatures identify

Why does the Bankruptcy Code require the debtor to sign the documents filed to initiate the case?

First, the signature serves to identify the person who is taking this action. Signatures are unique, or nearly so.

The signature then allows us to determine that the person who signed is the same person as the one whose name is on the schedules.

Signatures vouch for the document

More significantly, the signature of the debtor serves to authenticate the information in the bankruptcy schedules.

It is the debtor’s shorthand way of saying “I own this information”.

This becomes important in bankruptcy cases if there is a claim that the debtor misstated or omitted something. The signature, right below the declaration that the document is signed under penalty of perjury, commits the debtor to that version of the facts.

Errors not irreversible

This is not to say that innocent errors cannot be corrected once the schedules are signed  filed.

Schedules are amended all the time, usually without challenge.

The lack of challenge however, is generally related to the magnitude of the change presented in the amended schedule.

Try telling a judge you “forgot” about the two carat diamond ring or the power boat, and you may have credibility problems.

Engage brain

Most omissions in the schedules come about because the debtor sees the signature as a meaningless flourish.  It’s just one last thing to get this job done.

And the signature doesn’t take any time at all.  It’s the time to both read, and think, about the question asked and the answer proposed by counsel, that’s critical.

Carelessness about the completeness of the schedules at best increases the cost of a bankruptcy proceeding; at worst, carelessness puts the discharge at risk.

Bankruptcy is a serious step, which should return a significant benefit to the debtor.

It is worth the time to read before you sign.

More

What should bankruptcy cost

Questions for your bankruptcy lawyer

What’s included in bankruptcy

Image courtesy of Pixabay.

What’s Included In Bankruptcy?

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included in bankruptcy

People ask, all the time, what’s included in bankruptcy?

What do I list in my bankruptcy paperwork?

Think of it like this: bankruptcy is a snapshot of your situation on the day the bankruptcy case is filed.

Maybe, you think of your bankruptcy like the Clampett’s Buick,  arriving in Beverly Hills, crating all their stuff.

For bankruptcy purposes, your case includes your financial “stuff”,  debts and  assets.

  • The debts that are included in the case are those existing on the day you file.
  • The assets that are included are the things you owned when you filed bankruptcy.

Bankruptcy doesn’t include

The bankruptcy filing draws a line between your pre bankrutpcy life and your life after bankruptcy.

With a couple of exceptions, whatever you earn after the date you file bankruptcy is not included in your bankruptcy.

Likewise, if you cause an accident or incur a debt after your case is begun, those debts will not be discharged in your bankruptcy case.  They weren’t in the snapshot of your situation when you filed your case.

The exceptions

The Bankruptcy Code has three exceptions to the rule that the bankruptcy estate is made up of what you owned when you filed.

They are

  • Assets acquired by inheritance, bequest or devise
  • Life insurance proceeds by reason of someone’s death
  • Assets acquired by a marital property settlement or judgment

If you acquire the right to any of these kinds of assets within 6 months of the commencement of the case, they are treated as if you had them when your case began.  The debtor has an obligation to report such acquisitions to the trustee.

Creditors not debt balances

Bankruptcy acts on the debtor/creditor relationship.  That’s why listing all those who have claims against you is so important in getting your bankruptcy schedules right.

It isn’t generally important to list exactly what you owe a creditor in your schedules.  The bankruptcy discharge will wipe out whatever it is you owe on a dischargeable debt.

Remember, you can list and discharge debts where you dispute your liability, so long as you give the creditor notice of your case.

Chapter  13

If your bankruptcy case is a Chapter 13, the rules are a lot less clear.

One part of the law says the rights of creditors to repayment are determined by the property you have at filing; another part of the bankruptcy code says that your earning during the case are property of the estate.

While lawyers can spend lots of time parsing the law, for the debtor in 13, the rule that is clear is that dramatic changes in your income may trigger a change to your plan payments.

Elusive assets

The biggest trouble debtors have in listing their assets in the bankruptcy schedules involves intangible assets, like the right to sue for an accident that has already happened, or a claim in a class action.

Tragic consequences of filing bankruptcy without listing her mother’s house

Even though it’s not known at filing whether you will win such a claim, and if you win, how much you will get, the claim is still an asset you own.  It has to be listed or you may lose it because you didn’t disclose it.

New day

So your fresh start really begins on the day you file your bankruptcy, not when you get the discharge.  Every dollar you now earn is yours.

More

If you miss a creditor

How to review your bankruptcy papers

Debts that survive your bankruptcy

Image courtesy of prewarbuick.com.

The Zero Interest Get-Out-Of-Debt Tool: Bankruptcy For The Solvent

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chapter 13 rescue

Once again, Chapter 13 rescued a client.

He’ll get out of debt and pay off credit cards with no interest going forward.

So many people tell me they could pay off the credit card balance if it wasn’t for the high interest.

This client owned a home, had a job, and was solvent on paper, but he couldn’t sleep for worry about his debts.

Despite having lots of equity in a house, there wasn’t not enough income to retire the debt when the mortgage resets in the spring.

Chapter 7 would get rid of the debt, but cost him his house.

Thank goodness for Chapter 13, where you

  • keep your assets,
  • propose a plan, and
  • get a discharge.

Chapter 13 gets my client out from under credit cards with ruinous interest rates, reduces the interest rate on his high interest car loan, and lets him sleep at night knowing he won’t lose his house to unsecured creditors.

A pretty good deal for a $310 filing fee.

Interest free debt repayment

The good news is that the equity in his house requires that his Chapter 13 plan pay his debts in full. But, “in full” does not mean “with the usual credit card interest”.

Pay off the cards in full in Chapter 13 and you pay only the federal judgment rate.  Currently , that’s little more than  one half of one percent, instead of 18-34% due under the credit card agreements.

To pay off the cards according to their terms outside of bankruptcy, most of each payment for a long while goes to interest.  That’s why credit card issuers are content to have you carry a balance.

For this client, we figure that a 100% repayment plan for the cards and the tax debt will require a payment about 1/3 of what he currently pays each month on the cards.

No need to be broke to file bankruptcy

This client looks good on paper.  He’s solvent due to lots of equity in his house.   He’s current on his bills.

He just sees the freight train coming down the tracks when he reaches the end of the interest-only feature on his home equity loan.

You don’t have to be upside down, financially, to file bankruptcy.  You only need to be willing to play by the rules of the Bankruptcy Code for dealing with your creditors.

The applicable rule for this client says:  if you keep your house with that much equity, you must pay the creditors in full.

Bankruptcy won’t change the terms of his home loan, it will just spread out and pay off the other debts that have a claim on his monthly income.

And, he can stop underwithholding on his taxes.  He had increased his exemptions to get more cash monthly, leaving him owing taxes at the end of the year.

Part of our plan is making the withholding match the taxes owed, so we don’t have a recurring tax problem.

13 was my client’s lucky number.

More

Why I love Chapter 13

Update on California homestead

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

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