Northern California Bankruptcy Lawyer

On The Bankruptcy Soapbox

The Soap Box

What Everyone Knows About Bankruptcy: Not

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torture deviceOther professionals should know better than to advise people about the workings of bankruptcy.

And if they don’t know better, they should be made to pay, in some exquisitely painful way, for the harm they inflict.

The rack seems good to me.

The terrified client in my office was told by her accountant that if she filed Chapter 13 to save her home, the court would not allow her to buy prescription dog food for an ailing 16 year old pet!

Further, the accountant went on to declare that in Chapter 13, the debtor could pay only for housing, food and gas: nothing more. No maintenance for the house, no insurance, no clothes, no medical care.

Of course, the accountant was dead wrong. Articulate but wrong. [Read more…]

Who Gets A Slice Of The Bankruptcy Pie?

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pie-chart-pixabay_opt

“That woman filed a claim in our bankruptcy case, and we don’t owe her any money!”

The next line, or paragraph really, of my client’s email asked what was I, her bankruptcy lawyer, going to do about it.

The short answer was nothing.

Nada.

Not a thing.

I didn’t plan to do anything.

Because when you have a pot plan in Chapter 13, it doesn’t matter who files a claim or for how much.

You pay the same.

Pot or Percentage

When you choose Chapter 13, you get to set the terms of the plan.  The plan  tells creditors and the Chapter 13 how much money you’ll pay the trustee each month and how that money gets distributed.

The claims of creditors are categorized:  secured, priority, co signed, and general unsecured.

You can treat claims of the run-of-the-mill unsecured creditor in two different ways.  You can promise each unsecured creditor a certain percentage of their allowed claim:

Creditors holding unsecured claims shall receive 20% of their claim.

Or, you can propose a “pot” plan.  You fund a pot of a specified number of dollars, to be shared among unsecured creditors according to the percentage of the total claims represented by that creditor’s claim.

When filed claims differ

The difference between the two ways of stating your payment plan comes out when claims are actually filed.  (No creditor gets paid in Chapter 13 without filing a claim.) [Read more…]

Free Bankruptcy Advice: 5 Reasons Why I’m Not Free

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free bankruptcy consultationThere’s no free initial bankruptcy consultation in my office.  Unlike many, we charge for that initial meeting with a lawyer.

(There’s no free lunch either.)

That makes us different from lots of other bankruptcy lawyers.

Different enough to offend a prospective client who called up this week.  He was unwilling to pay for a consultation, and stormed off and wrote a negative review of the firm,  without ever having talked to me.

Apparently I can’t be any good at bankruptcy law if I want to be paid for my expertise.

So, for the man so offended, here are the reasons I charge for that initial consultation.

 1.  Maybe you don’t need to file bankruptcy

I don’t want you to file bankruptcy for me to make a living.

I want to be free to say to a client:  you don’t need me. [Read more…]

Will A Second Bankruptcy Really Protect?

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Immediate protection from collection is at the top of the list for most bankruptcy filers.

They want the lawsuit to stop; the wage garnishment to stop; the debt collectors to stop.

But, if this isn’t your first bankruptcy case, do you get that protection?

What the automatic stay does

The Automatic Stay (or “Stay”) protects the bankrupt consumer from continuing collection actions by his or her creditors.

All creditors are required to cease all actions intended to collect a pre-petition debt from the Debtor.   See 11 United States Code section 362.

The stay  (1) halts a foreclosure sale, (2) stops and eviction, (3) stops an ongoing lawsuit, and (4) gives the Debtor some ‘breathing room’ and allows them to reorganize their financial affairs while under the protection of the bankruptcy court.

In order for a Creditor to take action against a Debtor for debts incurred prior to the bankruptcy filing, the Creditor must come to the Court and request “Relief from Stay”, or ‘permission’ from the Court to continue a legal or collection action against the Debtor.

Violation of the Stay can result in very heavy penalties for a Creditor.  The bankruptcy courts are authorized to treat a violation of the Stay as an act in ‘contempt of court.’  I frequently assist Debtors in seeking damages and compensation from Creditors for violations of this law.

The stay the second time around

In most situations, the Stay comes into effect immediately upon the filing of the bankruptcy petition and lasts until a Debtor’s plan of reorganization is confirmed or the Debtor receives a discharge.  11 USC 524.

However, if a Debtor was involved in a previous bankruptcy case  that was dismissed within a year prior to the current filing, the Stay might only last for 30 days after the filing of the case.

A Debtor can request that the Stay be extended or re-imposed, but that request must be made in a timely fashion; otherwise the Stay will expire and Creditors may then resume their actions against the Debtor.  11 USC 362(c)(3).

I see many cases where I am filing a second or even a third bankruptcy for a Debtor because of the dismissal of a prior bankruptcy filing.  We call these  ‘serial filings.’

But – what happens if the prior case was not dismissed?

Stay limited only when case is dismissed

What if the Debtor received a normal discharge in a prior bankruptcy case within the 1-year time period?

Suppose a Debtor goes through a Chapter 7 and later files for protection under Chapter 13 in an attempt to reorganize his or her remaining debts, catch up on mortgage arrears, or seek a mortgage modification.

I recently filed a Chapter 7 bankruptcy case for a client, who then came back to me several months later to file a Chapter 13 bankruptcy in an attempt to repay his mortgage arrears and save his home.

So the $700,000.00 question was – Does the automatic stay expire after 30 days? 

If the stay expires, then I need to seek a court order extending the stay to keep the Debtor’s home safe.  If the Stay does not expire, then no such order is needed.

If I make the wrong decision, then the Stay will expire 30 days after the filing and the Debtor’s house will no longer be protected from foreclosure.

As a well-known bankruptcy practitioner has told me, repeatedly, bankruptcy attorneys are “People of the Book.”  The “Book” being the bankruptcy code.

So I started my investigation there – in the Book.

According to 11 USC 362(c):

“if a single or joint case is filed by or against a debtor … and if a single or joint case of the debtor was pending within the preceding 1-year period but was dismissed…”

The key phrase here is “but was dismissed“, meaning: If a Debtor was involved a prior case within the 1-year period prior to filing the new case and that case was dismissed, then the Stay expires after 30 days.

In my Debtor’s situation, his prior Chapter 7 was not dismissed; he received an standard discharge.

So my Debtor was safe: in his Chapter 13 case the Stay will continue past the 30-day period, and no Court order is necessary.

The bankruptcy code and rules are intricate, involved, and fraught with anxiety for both Debtors and their Attorneys.

If you are contemplating a second bankruptcy filing, be sure that you  consult with an attorney who understands the details involved.

 geoffGeoff Wiggs focuses his practice on bankruptcy and consumer law as well as general civil law.   In addition to his Juris Doctor (JD), his background includes service in the United States Air Force, a bachelor’s degree in Computer Science and a Master’s in Business Administration (MBA).  His office is in San Mateo.

 

More on dismissal vs. discharge

An earlier version of this post appeared on Wiggslaw.com

Image courtesy of Nemo and Pixabay

Get A Deal On Your Car After Bankruptcy

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wheels after bankruptcy

What happens to your wheels when you file Chapter 7 bankruptcy?

Here in California , tittle is more essential to holding a job and really getting a fresh start than a car to get to work in.  How can you keep the car?

OK, let’s think.

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. [Read more…]

What Your Bankruptcy Lawyer Can’t Tell You

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bankruptcy secret about means testI can share a secret, just between us.

Bankruptcy “reform” in 2005 tried in a number of ways to discredit and gag lawyers from helping debtors.

One of those additions to the Bankruptcy Code prohibits lawyers from advising those filing bankruptcy from incurring new debt.  The statute makes no distinction about the kind of debt involved or the purpose served by the loan.

Lawyers are not to advise incurring new debt.

But I’m not your lawyer, so I can tell you what you need to know about cars.  Or really about car loans, since I know nothing about cars beyond that.

Cars and the means test

Car loans are the most frequently found secured debt.  And secured debts on cars are deductible on the means test introduced by bankruptcy “reform”.

The IRS standards, on which the means test is based, allowed a debtor deduct a certain amount per month to acquire a car.  Courts were split on whether you had to have a car payment to get the ownership allowance.

Then the Supreme Court in Ransom said  the debtor with a paid for car gets no ownership deduction.  But if you have some remaining payments on a car loan, you get to claim the full car ownership deduction  of $517 here in California on the means test.

More deductions on the means test, more likely you qualify for Chapter 7, or for a very cheap Chapter 13. [Read more…]

High Income Earners Pass Bankruptcy’s Means Test

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means test

ALERT:   Being over the median income is not an automatic bar to filing bankruptcy

I’m so used to railing against deliberate campaigns of misinformation about bankruptcy that I forget that there’s a lot of innocent ignorance out there.

Start with “qualifying” for bankruptcy.

A very earnest and ethical financial counselor was telling me about a client of hers trying to find the right moment in time to file bankruptcy.

She was targeting the point in time after the job loss, but before the new business got established.  After the severance pay ran out and before the child left for college.

Yet the story involved a home with a mortgage and tax debts.

I couldn’t get my head around why, on those facts, the means test was a bar to filing a Chapter 7.

Til something she said tipped me off.  She thought the means test barred families with incomes over the median from Chapter 7.

Wrong, wrong,  WRONG. [Read more…]

TImeless Wisdom Doesn’t Apply When Filing Bankruptcy

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“Don’t count your chickens before they hatch”.  It’s a time-tested bit of folk wisdom.

But applying that kind of thinking when you’re filling out bankruptcy schedules is foolish.

Worse, it can get you booted out of court.

Count your “chickens”

Bankruptcy starts with a list of what you own and what you owe when you file your case.

The bankruptcy bargain is this:

  • the debtor ( the person filing for debt relief)  makes full disclosure of all of his assets.
  • creditors may get the value of those assets that aren’t protected by an exemption.
  • the debtor gets a discharge of his debts.

The law deems that a legal claim exists when the facts that give you a right to a recovery happen.

Your personal injury claim comes into existence when the accident happens, not when the lawsuit is filed, or a verdict is reached.

It doesn’t matter that you don’t know if your claim is good or how much it’s worth.  It’s a claim when the accident happens.  (In the words of our proverb, you have a “chicken” at that point).

The bankruptcy bargain requires that you list the claim when you disclose your assets.  Disclosure is the name of the game.

Failure to disclose assets can result in losing your bankruptcy discharge.  More frequently, however, the debtor falls victim in another court.

Sneaky lawyer tricks

Lawyers defending personal injury law suits love to scrutinize the bankruptcy filings of accident victims looking for mention of the legal claim they are fighting.  If it’s missing from the bankruptcy papers filed with the bankruptcy court, an alert defense lawyer will try to throw the personal injury case out of court.

Why?  Because courts have developed a rule to penalize people who take one legal position in one court, and a contrary position in another court.  The principle is called “judicial estoppel“.

It’s a mouthful, but it boils down to this:  if you told one court that you didn’t have a claim for an injury, you can’t come into a second court to recover for that injury.

If the claim was omitted from the bankruptcy papers, it’s treated as if you told the bankruptcy court no such claim existed.

The injured party ends up losing the damage case, not because the case was without merit, but because they didn’t understand that the collection of rights underlying their claim was an “asset” in the thinking of the bankruptcy system.

Keep counting

So, if you’ve suffered a loss or have a claim against another that you haven’t yet filed with a court and are considering bankruptcy,  make sure that you tell your bankruptcy lawyer about your accident.

Capable counsel can help you decide whether your claim is exempt or whether the timing is right to file for bankruptcy relief.

Silence about your accident claim is not golden.

More

Why bankruptcy papers are so complicated

Making sure everything necessary is listed

Image courtesy of Kirsty S.

When Chapter 20 Bankruptcy Adds Up

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looking for Chapter 20

You can look a long time in the Bankruptcy Code without finding Chapter 20.

Chapter 7 is there;  so are Chapters 11 and 13.  But no 20.

But you find it in bankruptcy courtrooms and in the arsenal of good bankruptcy lawyers.

So, what’s up?

Chapter 20 is really bankruptcy slang.  It’s a Chapter 7 case followed by a Chapter 13.  Together the two chapters, 7 plus 13,  make a “Chapter 20” case.

Why would you need two bankruptcy cases?  Let’s explore.

Chapter 20 beats the debt limits

All of the powerful provisions and flexibility of Chapter 13 are only available to individuals whose debts are under the Chapter 13 debt caps.

Go over the limit for either the unsecured or secured debt cap and you aren’t eligible.

Enter Chapter 7. [Read more…]

Speak Fluent Bankruptcy

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bankruptcy terms

If you venture into the special world of bankruptcy, it helps to know the language spoken there.

Master just a couple of words and phrases, and input from a bankruptcy lawyer starts to make sense.

So, in our continuing campaign for better understanding of bankruptcy, here’s a dozen phrases from the language of Bankruptcy for your meeting with a bankruptcy lawyer.

Essential bankruptcy terms

Petition – the first paper filed in a bankruptcy case that initiates the case.  It invokes the automatic stay. 

Automatic stay – an injunction against creditors that halts collection and foreclosure just because the petition has been filed. 

Schedules  = the balance of the papers filed after the petition to flesh out your bankruptcy case.  

Trustee  – the individual appointed by the Department of Justice  to oversee your filing and to represent the interests of creditors as a whole. 

U.S. Trustee – an employee of the Department of Justice who supervises trustees and monitors Chapter 11 cases with no creditors committee

Means test – a form and a formula added to consumer bankruptcy cases supposedly to ferret out bankruptcy filers who are really able to pay creditors without bankruptcy.

Discharge – the court order that makes your dischargeable unsecured debts unenforceable

Dischargeable – debts that may be wiped out in bankruptcy  

Non dischargeable  debts that are excluded from the  discharge by the terms of the Bankruptcy Code.

Reaffirm – an agreement made after filing to waive the discharge as to a particular debt.  Reaffirmation requires court approval  

Transfer  – any act that changes ownership or title to an asset, or creates a lien on an asset.

Post petition – events that happen after the petition for bankruptcy is filed.

Add some numbers to your list

Because bankruptcy is based on the Bankruptcy Code, bankruptcy types tend to use the number of some important statutes as shorthand.

341 – Section 341 requires a first meeting of creditors in every bankruptcy case.  We call that the 341 meeting.

523 –  This is the section that lists the debts that are non-dischargeable.  Several subsections require an affected creditor to prove his debt is non dischargeable.

727 – This section sets out the circumstances when a discharge can be denied altogether.  It can be brought by a creditor or the trustee for the benefit of all creditors.

Bankruptcy chapters come next

Different chapters of the Bankruptcy Code provide for different kinds of bankruptcy cases that may be filed.

Chapter 7  – a liquidation bankruptcy case available to individuals and business entities, but not trusts or estates.

Chapter 13  – a reorganization case for individuals with debts under certain limits.

Chapter 11  – a more complex reorganization case for individuals and business entities without debt limits

Chapter 12  – a simplified reorganization proceeding for family farmers

Use your words

Now that you have a working bankruptcy vocabulary, start talking to a bankruptcy lawyer to find out how these concepts work in real life.

Don’t be afraid to ask questions.  There is no reason why you should immediately understand this very specialized area of law.  Even when you understand the concepts, how those concepts apply to your situation, and how they interact with each other is what’s really important.

Make sure you pick a bankruptcy lawyer willing to take your questions and to deliver answers that you can understand.

More

Questions to ask a bankruptcy lawyer

What makes a bankruptcy lawyer great

What should bankruptcy cost?

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Suite 140
Mountain View, CA 94043
Phone: (650) 694-4700

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