How much money can you keep when you file bankruptcy?

It’s not as though you won’t have living expenses after you file bankruptcy.

You need to know how you’ll manage and what you’ll have to manage with.

Funding that fresh start is what exemptions are all about.

We are talking here about California because exemptions, the laws that govern what you can keep for your fresh start., are unique to each state.

Exemptions are the one part of bankruptcy that is explicitly different from state to state.  So, recognize that the rules we’re talking about here apply in California.

California exemption systems

California has two distinct exemption schemes that you can choose from.  And you have to choose one or the other.

You can’t take one exemption from one set and another exemption from the other set.

The exemptions originally enacted in California were big on protecting homes, so we have generous homestead exemptions under generally applicable state law.  That system is found in California Code of Civil Procedure 704 and the statutes that follow it.

All about the California homestead

California also has a second system of exemptions available only for its residents who file bankruptcy.  These are found in CCP 703.140.

We’re going to look closely at the California bankruptcy exemptions (CCP 703.140)  on the question of how much cash you can protect, because the 704 exemptions aren’t very generous once you move beyond protecting equity in a house and retirement payments.  Here’s an online summary of these exemptions. [Read more…]

A prospective bankruptcy client often arrives in my office because a creditor is hot on their heels.

A collection lawsuit has been filed and they’re panicked.

Almost invariably, the client has leapt to two incorrect assumptions: one is that the world as they know it is coming to an end; and two, they don’t have to do anything until the date set for the case management conference, months down the road.

Judgments take time

The filing of a lawsuit is a step toward a judgment in favor of the creditor. A judgment is a determination that the debtor owes the amount of the debt and usually the creditor’s expenses to get the judgment.

A judgment entitles the judgment creditor to enlist the coercive power of the state to collect that judgment by levy, lien or garnishment.

All about California judgments

A judgment in California does not automatically constitute a lien on the debtor’s assets, as it does in some states.

In California a creditor with a judgment must take an additional step to create a judgment lien. A judgment lien on real estate is created when an abstract of judgment, issued by the court after entry of judgment, is recorded in the records of the county recorder.

A judgment lien on personal property is created by filing a notice of judgment with the Secretary of State.

A judgment lien allows a creditor to execute on that lien through the courts. In that process, even outside of bankruptcy, the judgment debtor may claim an exemption in certain kinds of property. The California state exemptions are set out in Bankruptcy in Brief.

In short, getting a judgment is just a step toward actually taking something from the judgment debtor. All these steps take time and cost the creditor something.

Time to consider your options

The filing of a suit may be a good indicator that the client needs to do something proactive about their financial situation but it is not an emergency.

About that second assumption, that you don’t need to act before the court date, you must read this.

More

California judgments are dischargeable in bankruptcy

Avoiding liens in bankruptcy

Do you need to file bankruptcy

What’s the difference between a good bankruptcy lawyer and a great one?

Baffled by California community property?

Think it makes you personally liable for the debts of your spouse?

California has been a community property state since it became a state in 1850.

You would think we’d have gotten the hang of it long ago.

But the community property system  continues to confound some married folks, not to mention lots of debt collectors outside of California,

Let’s review 7 basic facts about California community property.

1  Property acquired during marriage is presumed to be community

Wages, benefits, lottery winnings:  if they are earned or acquired during marriage, they are community property. [Read more…]

Debt collectors have noticed the growing understanding of debtors about their rights to fair debt collection.

And they aren’t happy.

Federal law in the form of the Fair Debt Collection Practices Act regulates the conduct of third party collectors. Those protections apply everywhere and more and more attorneys are learning how to assert those rights on behalf of their clients.

But the FDCPA applies only to the hired debt collector.  It doesn’t apply to the original creditor.

Original creditors are free from federal scrutiny.

California’s Fair Debt Collection Act

It’s better in California.

Californians have an expanded set of rights as debtors under the Rosenthal Fair Debt Collection Act: this law applies the rights created in the federal FDCPA to the original creditor as well as the third party collector.

One of the most useful aspect of the California statute  is the right it creates to be left alone: the right to be free of collection calls and letters.

You have to claim that right not to be contacted, though.  Like most things in the law, to be effective, your claim for peace needs to be in writing.

There are a couple of limited exceptions for things creditors can contact you about, but overall,  the Rosenthal Act  empowers the debtor to escape incessant collection efforts.

The Rosenthal Act doesn’t eliminate your liability for your debt.  It doesn’t keep the creditor or collector from suing you.

But it does prevent them from using tactics that are harassing and intimidating short of a law suit.  At least, if they actually do file suit, there are rules and judges to make them play by the rules.

Exercising your debt collection rights

If you need freedom from debt collectors, write them invoking your right not to be contacted;  cite  the Rosenthal Act.

Use the CFPB model collection defense letters as a guide

Date your letter; sign it; keep a copy, and send it off, by a form of delivery that gets you a receipt showing they got it:  US mail, return receipt requested; Fed Ex, or something similar.

Two things may happen: the creditor obeys the law and you get peace at home; or they violate the law, and you have a right to sue for the violation, including the right to collect your attorneys fees to do so.

Won’t the role reversal of debtor becoming creditor really make the collectors mad?

Image:  grin and openclipart.