True Stories Archives - Page 4 of 5 - Northern California Bankruptcy Lawyer

Free Legal Advice: Consider The Source

Who gets their legal advice from their adversary?

My client did.

My client insisted that his tenant’s debt to him survived the tenant’s bankruptcy “because it was listed on Schedule G“.

The tenant had “explained” to my client that Schedule G was the list of debts the debtor didn’t seek to discharge. So, my client continued, he was legally free to collect the back rent from the debtor after bankruptcy.

I had to explain it wasn’t so.

Get your legal advice from your adversary, your brother in law, or the internet and be prepared to get a surprise.

Schedule G is not a list of debts the debtor wants to continue paying on; it’s a list of executory contracts and unexpired leases. The debtor’s obligation for each of those debts is discharged just as the debts listed on Schedule F.

Reaffirmation is the only way that a dischargeable debt survives the discharge. Reaffirmation requires a timely written agreement made after the bankruptcy is filed and approved by the bankruptcy judge.

None of that had happened in this case.

Law in the information age

The fund of information in our world is immense, and more accessible with the advent of the internet.

Not all of that information , however, is equally reliable.

The law is often complicated and dependent on the facts. Information gets stale. Not all bloggers know what they’re talking about.

I cringe when a client tells me that he’s “researched bankruptcy on the internet“. Too often, the client’s full of misinformation complicated by erroneous assumptions.

I applaud the proactive consumer. Just take what you read on the internet with a grain of salt. There’s a reason that lawyers go to school for three years before they can take the bar exam.

If anything important to you rides on the information you seek, seek out a lawyer for some input.

Free legal advice can be really costly, and the cost of a lawyer to fix the situation is usually far greater than the cost of getting it right the first time.

Do it yourself bankruptcy

How to interview a lawyer

What should you pay a lawyer

Are you stuck with your current lawyer

Image: ©VERSUS studio

Bankruptcy alternatives are costly

By Cathy Moran

Bankruptcy alternatives often suck.

The story of one customer of a debt settlement company sticks with me.

Using the “services” of this company, the poster now has six judgments of record and two garnishments in process. The debt settlement company, however, has its full fee.

One man I represented went to a debt management company before he found me. The “plan” to get him out of debt was that he send the company 50% of his gross income (that’s before taxes and any other deductions) every month.

I have never seen a client who could keep body and soul together in the Bay Area on 50% of their gross income.

When his “plan” collapsed, he was meeting with a bankruptcy lawyer. The debt management company was counting its fees.

Getting fat on fear

Such stories, and there are lots of them, are emblematic of the profit that debt settlement firms and credit management outfits make on the consumer’s fear of bankruptcy. [Read more…]

Tax Liens Live On After Bankruptcy, Unless….

By Cathy Moran

You mean the tax liens won’t go away when I get a bankruptcy discharge?

The client was startled that the lien would live on beyond his bankruptcy.

So, if all my debt doesn’t go away, what do I get from the bankruptcy discharge? he asked.

I thought the tax debt went away when I filed.

It’s your personal liability that is wiped out when you get a bankruptcy discharge.

Liens live on.

What’s personal liability for debt

In a nut shell, personal liability is the right of your creditor to use the powers of the law to reach your wages and your assets to satisfy a debt.

When you get a bankruptcy discharge, that personal liability is erased. The discharged creditors can’t reach assets that you acquire after the bankruptcy, nor the assets that you exempted in your bankruptcy case.

So, get a bankruptcy discharge that wipes out older taxes and the IRS can’t garnish your future wages or levy your bank accounts. Further, the existing tax lien won’t attach to assets you acquire in the future.

Tax liens on current assets

But liens, which are rights that others have in your property, survive a Chapter 7 bankruptcy. Your property doesn’t necessarily get a discharge when you do.

Stripping tax liens in Chapter 13

By “property”, we mean personal property and real estate. A properly perfected tax lien attaches to all your personal property and to real estate in the county where it’s recorded.

The critical question is: what is that tax lien worth? Does it really attach to anything of value? [Read more…]

Dead Debts Haunt Home Purchase

By Cathy Moran

Eternal vigilance is the price of freedom.

It’s also the price of freedom from old debts, as my former bankruptcy client learned.

He was about to close escrow on a new home a couple of years after his discharge.

But the sale came to a screaming halt when an old, discharged debt reappeared on his credit report.

It hadn’t been there before; it shouldn’t have reappeared. But “shouldn’t” didn’t keep it from happening.

Meet zombie debt

As we fought to save the deal for his new home, we figured out that the debt that had reappeared long after the bankruptcy was a junior loan on a property he’d owned before bankruptcy.

The servicer on the loan had changed, and the servicer was clueless

That the property had been foreclosed years ago; and
That the bankruptcy had eliminated my client’s liability for the debt

But being clueless didn’t keep the servicer from reporting that this mortgage debt was enforceable and delinquent. All of which threatened my client’s ability to get a new loan, or the price he’d pay for that loan. [Read more…]

Facing Foreclosure? Your Kids Can Cope

By Cathy Moran

I talk with clients about walking away from underwater houses day after day. *

The mortgage payments on their home eat up fifty percent or more of their income.
They’re struggling now, and the mortgage will reset soon.
Attempts to modify the mortgage are fruitless.
They expect a foreclosure notice any day.

Yet despite the pain and the roadblocks, these clients express reluctance to move because of the impact on their children.>

It’s our home, they intone.

It’s as though there can be only ONE home, and it’s this piece of real estate.

They imagine that moving will scar the kids and render them insecure and vulnerable.

Leaving a home that offers nothing but debt nonetheless seems to be a horrendous and overwhelming prospect.

More than their stressed-out selves can manage.

Stress makes you stupid. Really.

Moving away from bad mortgage

That’s the parade of horrors that march through the minds of those facing decisions about a bad housing situation.

I got a peek at the actual impact of moving from a former client last week: sheer and utter delight!

[Read more…]

The Means Test: Badly Mangled

By Cathy Moran

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, ten years after the means test was enacted?

Mangling the law

It started off innocently enough when a reader asked 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. [Read more…]

Chapter 13 To The Rescue In Ruinous Business Lawsuit

By Cathy Moran

Twice in the last six months, Chapter 13 bankruptcy has saved clients facing catastrophic lawsuits arising out of business.

And because the targets of these lawsuits filed bankruptcy before they’d spent a fortune on lawyers and before the court had a chance to award huge damages, they fit beneath the Chapter 13 debt limits.

We think of Chapter 13 as a consumer tool. It’s designed for those with a regular income. It’s sometimes called a wage earner plan. The amount of debt involved has to be below certain limits.

So, Chapter 13’s application to business litigation isn’t obvious.

But it works like a charm.

Here’s how Chapter 13 rescued one client sued about a business dispute.

Chapter 13 filed before judgment

[Read more…]

The Struggle To Surrender Underwater Real Estate

By Cathy Moran

How difficult it can be to surrender real property in bankruptcy when you have no hope of paying for it.

After all, the lender takes a mortgage on the property so they can take it from you if you don’t pay.

My client’s bankruptcy plan said he would make no payments on the rental’s mortgage and would surrender it to the lender.

More than two years later, the lender refused to do anything to take back the property. The property ran up bills and became run down.

And still the lender did nothing.

So I reacted as most good attorneys do: I sued.

And, it seems, won.

All this in a fight that my client was willing to lose from the beginning.

Here’s the story.

Debtor proposed surrender

My client owned two out-of-state rental properties when he filed Chapter 13. His plan told one and all that he did not propose to cure the mortgage defaults on the properties.

Rather, the plan said he would surrender them. They were vacant and remained vacant throughout.

One lender held a foreclosure sale and the title to the property was transferred to the bank.

But inexplicably, two and a half years into the Chapter 13, the second lender had not even started foreclosure. [Read more…]

Terminate Cell Phone Penalties in Bankruptcy

By Cathy Moran

I’m accustomed to advising those on the verge of filing bankruptcy about big ticket debts like mortgages, student loans, and back taxes.

I was surprised when a client, resigned to letting her house go to foreclosure after the bankruptcy, was absolutely delighted to know that she could free herself from her unhappy relationship with Verizon Wireless at the same time.

She had a two year contract with fees and charges for early termination.

Bankruptcy terminates executory contracts in force when the case is filed.

So the balance of the two year contract with the unsatisfactory provider could be terminated, and the early cancellation penalty treated just like any other unsecured creditor.

The same legal principle applies to cable or other TV subscriptions. Or a too-expensive business lease.

Get out from under pricey services you don’t need or don’t like, without penalty.

I’m adding to my list of things to do before you file, like change banks and cancel automatic payments from your checking account, ? consider dumping your cell phone provider.