Northern California Bankruptcy Lawyer

On The Bankruptcy Soapbox

The Soap Box

The Foreclosure That Was Longer Than War & Peace

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Foreclosure is coming.  Whether by choice or circumstances, you know the bank will take the house.

Should you start packing immediately?

The way banks are currently operating, the answer is:  not yet, not soon, not for a long time.

For one of my clients, the answer to how long was well more than 735 days.  And they did nothing to delay the inevitable.

Here’s the foreclosure timeline for this California couple.

A year of missed payments

When they filed bankruptcy in June, 2013, they were 13 months behind on their mortgage.  That’s 390 days without paying.

The house was waaaaay underwater and they decided upfront to let it go.  And said so in the Chapter 13 plan.

From bankruptcy filing to relief from stay

[Read more…]

The New Rules Of Asset Protection

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I coined a new rule about asset protection schemes after meeting with a bankruptcy prospect:

If the asset protection plan is too complicated for the owner to explain, it probably won’t stand up to challenge.

This man had paid an attorney a fistful of money to create LLC’s and limited partnerships, each of which held fractional interests in the other entities.  Some pieces of real estate were owned outright by one entity or another; others were held jointly.  One LLC was the general partner in another entity.

The client came with a chart, with arrows running back and forth.  He couldn’t explain how it worked, or why it was structured that way, other than to make it difficult to reach his wealth.

But it came down to this:  if there is no explicable business reason for this arrangement, it probably represents a scheme to hinder, delay, and defraud creditors.  One a bankruptcy trustee could penetrate.

What fraud?

One of the hardest concepts of debtor/creditor law for the public to grasp is that of fraudulent transfers.  Here’s the rule:  you cannot legally transfer property for less than its present value in order to keep the asset from creditors.

Put another way:  you can’t give your assets away to keep them from creditors.

At law, there are two kinds of fraudulent transfers:  ones with actual intent to hinder creditors, and ones that are constructively fraudulent. [Read more…]

Zombie Debt is Naughty, Not Nice

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6535579749_50238f065c_zDespite his bankruptcy discharge, my former bankruptcy client has just been bitten by naughty credit reporting, and the interim results aren’t nice.

When several years passed since the bankruptcy, my client thought he’d caught and controlled the old and the inaccurate credit reporting.

Four years after the discharge was entered,  a mortgage servicer has just begun reporting a hugely negative item  on a mortgage loan cut off by foreclosure and wiped out by bankruptcy.

And my client discovered this when he applied for a new home loan.

Worse yet, the reporting servicer didn’t service the loan when it was discharged.  So, it’s unclear why the old servicer is handing off servicing on a discharged debt.

The likely choices are incompetence and greed.

So, let’s review the law that applies here.

Junior liens destroyed by foreclosure

The zombie loan was a line of credit on my client’s California home.  During the bankruptcy case, the mortgage lender, whose lien was senior, got relief from the automatic stay, and foreclosed. [Read more…]

Free Retirement Advice By Professional Advisor Comes Up One Tool Short

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missing toolThe 65 year old woman featured in the newspaper’s Money Makeover series got a  free review of  her financial situation by a professional financial advisor.

Over her working lifetime, she’s been the source of financial support for an extended family, including her aged mother and a disabled sister.

Her aid to her family has come at the expense of her retirement planning.

Expecting that she may live into her 90’s, she needs to increase her retirement savings, as she has no equity in her home to provide a cushion, says the professional.

He advises her to pay off the $35,000 high interest credit card debt within two years and to eliminate the $750/1000 of new monthly charges to her credit card.

She’ll need to work at least part time for another 10 years, he projects, to accomplish her goals.

Hello?

The goals are great.  However, there is no discussion about how this woman, whose hours at work have just been cut in half, is to accomplish this.

The fact pattern screams at me:  file bankruptcy!

Is there something about being a professional financial advisor that bars one from proposing bankruptcy?

If “Capital Advisors” is in your business name, can you not suggest a consumer remedy?

But, in the story as reported, there is no hint from the “expert” that bankruptcy might be an appropriate tool.

Facts point to bankruptcy

Let’s review the facts:

  • the lady is 65
  • her house has no equity
  • she cares for a 91 year old mother in declining health
  • her work hours have been halved
  • she has a modest 401(k)
  • the credit card balances are $35,000

From where I sit, it appears that the assets she has can be protected in bankruptcy by exemptions.

I can’t imagine that advising a woman who has historically cared for all of those around her to stop caring for her aged mother.  What if her health declines?  She loses her job altogether?

What does paying off the credit cards get her?  Wasted effort, in my book.  Or worse, a dangerous gamble that nothing changes for the worse.

And if her income is shrinking, where is the money to come from to pay off $35,000 in credit cards?

Advantages of bankruptcy

A Chapter 7 bankruptcy would eliminate the credit card debt within a couple of months.

If 7 wasn’t suitable,  a Chapter 13 would allow her to pay off the credit cards with virtually no interest.

She could start seriously saving for retirement, freed from the credit card debt and the credit card interest rates.

The financial advisor who did this evaluation for free presumably isn’t a lawyer.

But he should have enough of a grasp of the range of options to suggest his client get some input from a bankruptcy lawyer.

Otherwise, his advice is worth just exactly what this woman paid for it.

 Image courtesy of Chovee and Flickr.

Taking my own advice Part Two

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The return receipt on my “do not contact” letter to ATT arrived at my office showing receipt on July 6th.

Between July 7 and July 10, we got seven calls at home about the disputed account; on July 12th, we got a call from NCO who announce that the account has been turned over to them for collection.

As of yet, I have no contact information for NCO. When I get it, I will repeat my “do not contact” letter, invoking my rights to be free of collection calls under FDCPA and California’s Rosenthal Act.

They’ll get an invitation to call my lawyers, Moran Law Group, to discuss resolution of the dispute.

Check back for updates. The beginning of the tale.

Read the conclusion.

643 Bair Island Road
Suite 403
Redwood City, CA 94063
Phone: (650) 694-4700

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