Facing foreclosure is bad enough; worrying about your exposure afterwards is worse.

Breathe deeply.

California laws shield homeowners from further collection by a lender who has foreclosed.

Understanding Foreclosure Sales

To understand California’s protections for homeowners, you have to understand how a typical foreclosure sale works.

The deed of trust, given to the lender when a loan is made, grants the lender a lien on the home.  If the borrower doesn’t pay as promised, the lender can exercise the power of sale in the deed of trust to conduct a public auction of the home that is security for the loan.

The lender can decide where to start the bidding at the foreclosure sale.  While the lender can bid the entire amount that the lender is then owed, the lender can bid less when the property is worth less than the total debt.

So whether because the debt has grown large because it’s been in default for a long time, or whether the value of the house has dropped,  the winning bid at a foreclosure sale may well be less than the total debt.

What happens to the difference between what the sale price at auction and the amount owed to the foreclosing creditor? [Read more…]

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The exemptions originally enacted in California were big on protecting homes, so we have generous homestead exemptions under generally applicable state law.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…]

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.