2018 Archives - Page 3 of 6 - Northern California Bankruptcy Lawyer

Double Dipping On Retirement Savings

Any time you can double your savings and protect your money from creditors is a good time of the year.

The period between New Years and Tax Day is my favorite time of the year, just for that reason.

You can make contributions to your IRA last year AND contribute to this year’s IRA allowance.

You get a scoop of last year’s tax benefits, topped with a scoop of this year’s tax break.

You don’t have to be filing bankruptcy for this to be important. But, this trick is a favorite of mine when I have my bankruptcy-lawyer hat on.

IRAs in bankruptcy

My goal is to maximize the value a bankruptcy client can keep through the case.

Everyone in bankruptcy can protect over a million dollars in IRA savings. Not that I’ve seen an IRA anywhere near that number. But Congress says IRA savings are a good thing, and beyond the reach of your creditors.

And I’ve never faced challenge from a bankruptcy trustee when a client contributed the maximum allowed by tax law to a retirement account, even if they sold other assets to make the contribution.

IRAs for all

Tax advantaged retirement plans are grounded in federal tax law and are available to the solvent as well as the insolvent.

IRA’s are asset protection on the cheap

Too many Americans seem to want to live in a little bubble that tells us that old age will work out OK, (somehow) whether we take responsibility for making it happen or not.

That’s magical thinking at its worst.

Unless you expect to inherit a fortune, you need to take steps now so that you are financially independent then.

Tax break opportunity is fleeting

Old age is inevitable and the tax code has an annual limit for how much you can contribute to a retirement vehicle to grow tax free. If you don’t make a contribution equal to the limit for last year, that unused tax break is lost forever.

Between now and April 15th, take two scoops of retirement savings. Or seed your retirement account with any tax refund from this year.

Don’t Brag About What You Saved Unless It’s True

By Cathy Moran

It’s a mark of our consumer economy that we use the word save in connection with our spending.

I saved $15 on this blouse.

That’s well and good for today. You bought something you wanted, or maybe even needed.

But unless you put the savings aside for later, you did nothing more than spend somewhat less today, without thought for tomorrow.

Your savings on today’s purchases won’t be available to buy necessities in your old age. The money you “saved” is gone, spent today on something else.

Our language doesn’t help

We are aided and abetted in our savings mind-game by English usage. Saving is a virtue we applaud.

But “save” has two, almost opposite, meanings.

According to Merriam Webster, save means both

a: to put aside as a store or reserve : accumulate

saving money for emergencies

b : to spend less by

save 25 percent

Don’t confuse the two.

The more meaningful savings are when money gets set aside for use later,

-to pay for an emergency

-to fund a big purchase

-to support a comfortable old age

We suck at savings

Actually, lots of us are good at “saving” in the Definition B sense. We comparison shop, we follow the sales, we use coupons and garner reward points.

It’s the savings as creating a reserve that we flunk.

Average monthly social security check is $1400.

Too many Americans couldn’t handle a $400 emergency. Half of Americans have less than $1000 in savings. Half of Americans have no retirement savings.

What will we tell ourselves in our old age about our prowess at saving? Will we have a slick word-game that puts food on the table or gas in the car?

How about making Definition A our go-to plan for savings.

The second-best reason to contribute to a retirement plan

But my home is my retirement plan

How to open an IRA account

Best Bankruptcy Advice of The Year

By Cathy Moran

Readers of Bankruptcy Soapbox vote for their favorite bits of bankruptcy and money advice with their eyeballs.

I’ve tallied the eyeballs on the 48 posts written in 2018, and, cue the fanfare, present the top 10 most-read new posts for 2018.

And in fact, this advice will stand you in good stead in 2019.

10 What really causes bankruptcy

The pundit’s proposition that irresponsibility was the cause of bankruptcy made me furious. Four decades of bankruptcy practice suggests that the root causes of bankruptcy relief have much more to do with laudable human activities and unavoidable bad luck. See if you agree.

9 Chapter 13 discharges HOA debts

Thirteen years after the miserably written bankruptcy reform act became law, the 9th Circuit Court of Appeals made one thing clear: the discharge in a Chapter 13 case wipes out the debtor’s personal liability for HOA dues that arose after the filing of the case.

8 What the automatic stay doesn’t stop

Filing bankruptcy automatically makes the continuation of most collection actions unlawful. That’s the power of bankruptcy. But that power has its limits. These five kinds of legal actions can proceed despite a bankruptcy filing.

7 Are you screwed if you omit a creditor from your bankruptcy

What happens if you accidentally leave a creditor out of the list of creditors filed in your bankruptcy case? Having screwed up, can you recover? We look at when you can fix the mistake and whether that fix really solves the problem.

6 True story of a family who settled their debt for 3 cents on the dollar

My client, with a fine income, a home, and a working spouse, escaped $370,000 in credit card debt for pennies. The power of Chapter 13 is that you keep your assets and pay only what your income or your assets allow. Protection while you pay and no tax when debt is discharged. Sweet.

5 What is life REALLY like after bankruptcy?

Creditors and the debt-settlement companies want you to think that life as you know it ends if you seek relief in bankruptcy. Tain’t so. Here is a clear-eyed look at seven ways that your economic life changes after your discharge. None are negative.

4 IRS caught double-dipping

The Affordable Care Act imposed a penalty for not having health insurance, collected by the IRS. I caught the IRS trying to collect that penalty twice: once as a part of my client’s tax debt for the year, and again as a separate tax on the IRS proof of claim. Challenged, the IRS reduced its demand.

3 New law gives heirs and divorced people equal mortgage rights

Homeowners who got title through inheritance or a divorce decree have historically been treated as outsiders by mortgage servicers. If the present owner wasn’t also the sole borrower on the secured loan, mortgage modification and even monthly statements were denied. No more under new federal law.

2 The Motley Fool offers truly foolish advice on filing bankruptcy

In which I go off on a national financial service focusing on all the wrong things when looking at bankruptcy as an option for financial woes. The question of whether to file bankruptcy has no simple or universal answer, and is NOT, in my view, driven by its effect on your credit score.

1 CFPB rule gives all bankruptcy filers a right to monthly mortgage statements

Mortgage servicers can no longer hide behind bankruptcy law to justify withholding monthly mortgage statements to a borrower who wants to pay the home loan. Federal law now requires monthly statements, and protects servicer from a claim that it violates the law by doing so. Score one for homeowners!

Next time, I’ll assemble my personal favorites from this year’s batch of posts.

Have a happy and prosperous New Year.

Fix Mortgage Troubles After Chapter 13

By Cathy Moran

The mortgage servicer took less than 30 days to change its story, big time.

In three weeks time, the servicer went from telling the bankruptcy court, under penalty of perjury, that the loan was current, to telling the homeowner that she was $50,000 behind.

The whole story appears here.

Three weeks!

And there, in a nutshell, you see the utter disarray in mortgage loan accounting when a bankruptcy is involved. (Actually I doubt the accounting is any better outside of bankruptcy, but that’s another story.)

Home loan after Chapter 13

Trouble with your home mortgage right after you’ve completed a Chapter 13 is a real bummer.

You get current through years in Chapter 13, make the payments after you file, and then are slammed with a statement saying you’re behind. Or worse, you get a foreclosure notice.

The problem was widespread enough that the national bankruptcy rules committee wrote a rule trying to head off the problem. That’s how we got FRBP 3002.1.

The rule requires lenders with a lien on your home to provide notice while you’re in Chapter 13 of changes to your payments and of fees and expenses added to your loan. Then, at the end of the case, they need to file a response indicating whether they agree that you are current post – filing on the loan.

Yet time after time, mortgage servicers, the folks who are supposed to keep track of your payments on your loan, tell the bankruptcy court that you’re current in a filing signed under penalty of perjury. Then they turn around within weeks, and sing a different tune. In one of my cases, weeks after telling the bankruptcy court she was current, Big Bad Bank said she was $50,000 behind.

And it’s happened many times just this year. The servicers either don’t know, or don’t care, what they tell the court about the loan.

While it’s supremely galling, you are not without power to sort the situation out. Even though your bankruptcy case is over, you have unexpected friends: bankruptcy law itself; the bankruptcy judge; and your attorney.

How to make your mortgage loan right

The folks who wrote the rule must have had a premonition that the rule requiring disclosure and transparency wouldn’t alway work. Here’s what they wrote in the official comments to the Rule.

If, after the chapter 13 debtor has completed payments under the plan and the case has been closed, the holder of a claim secured by the debtor’s principal residence seeks to recover amounts that should have been but were not disclosed under this rule, the debtor may move to have the case reopened in order to seek sanctions against the holder of the claim under subdivision (i).

In short, get the matter back before the bankruptcy judge.

The Bankruptcy Code contemplates that you might need to reopen a closed bankruptcy case to seek relief. There’s a procedure for reopening the case.

You may have to advance the filing fee, but you should be able to either get it refunded by the court, or collect it from the servicer.

Lender faces trouble in court

In my view, the lender who filed a statement with the court saying the loan was current and then sent a mortgage statement claiming an arrears arising from the period of the bankruptcy has two problems.

One problem is that matter of judicial estoppel, the idea that a party can’t take one position before the bankruptcy court and another in a state law foreclosure action. If there were unpaid amounts at the end of the bankruptcy case, the Rule 3002.1 procedure was supposed to flush those out before the bankruptcy case was closed, and resolve them.

The second problem is that attempts to collect debts discharged in bankruptcy violates the discharge injunction. And there are well established remedies for contempt of a federal court order.

It’s tricky when the lender retains its lien on the property. It’s a central tenet of bankruptcy law that liens pass through bankruptcy unaffected, unless the court takes specific actions to alter the lien.

So, homeowners want monthly statements after their bankruptcy. New rules even require it. But those statements have to be correct and consistent with what the lender told the court under Rule 3002.1.

Relief and recompense in court

The bankruptcy court can award an injured debtor “appropriate relief”. That certainly includes attorneys fees and costs.

It can include an order determining that the loan balance is what the lender first said, or the court later determined. It’s unclear whether the debtor can recover damages for emotional distress or other kinds of economic injury.

If the court finds that the servicer violated the discharge injunction, a wider array of sanctions are available.

But to get relief, you have to get to court. And you have to get there with evidence.

So, save each written communication you get from the servicer after your bankruptcy case closes.

Keep a log of any phone contact with the servicer.

Who called you?
What did they say?
Were they trying to get you to pay?

The more detail you capture, the more compelling your story is in court.

If this happens to you, contact your bankruptcy attorney. If the attorney who handled your case doesn’t feel confident with these kinds of cases, ask for a referral to a lawyer who does.

Watch out for mortgage modifications

Claim a deduction for mortgage arrears paid in Chapter 13

Getting the truth from mortgage servicers

Bankruptcy Without A Discharge: Why Chapter 20 Works

By Cathy Moran

What does a Chapter 13 bankruptcy get you if it doesn’t get you a discharge?

Lots, actually.

It’s complicated. Powerful, but complicated.

Let’s see how all the parts interact when your Chapter 13 is filed before you’re eligible for a discharge.

Law limits discharge

The bankruptcy code doesn’t limit when you can file bankruptcy; it limits when you can get a discharge in bankruptcy. It imposes various interval between discharges in bankruptcy, depending on what kind of a case you filed first.

The nifty, marvelous, no discharge Chapter 7

The discharge is the court order at the end of the case that wipes out debts as a personal liability. Bankruptcy “reform” in 2005 lengthened the intervals between discharges.

But nothing keeps you from filing a bankruptcy case, even when a prior discharge prevents a discharge in the new case.

Automatic stay to the rescue

The debtor’s right to a stay of collection action exists, regardless of whether there will be a discharge at the end of the case.

So even a creditor who holds a debt not discharged in a previous Chapter 7 must cease collection when a new bankruptcy case is filed.

Different rules on automatic stay if the previous case was dismissed short of discharge

Important creditors paid first

Chapter 13 imposes a payment plan on creditors, willing or not. The plan and the underlying law dictate which creditors get paid first through the plan.

The debts most likely to survive a Chapter 7 are recent taxes, family support and home loan delinquencies.

Bankruptcy law dictates the order in which creditors are paid by the Chapter 13 trustee. Generally, secured creditors like mortgage lenders and taxing authorities with surviving liens are paid first by the Chapter 13 trustee.

That benefits the debtor who is often trying to hang on to a house or other assets that a secured creditor could otherwise foreclose or auction off. It keeps the creditor with a non dischargeable debt that is low on the priority list, like a student loan or a restitution order, from garnishing wages or levying bank accounts.

Liens cut down to size

Liens of all kinds are unaffected by the discharge in Chapter 7, with a limited exception. Avoiding judgment liens.

Chapter 13 lets you eliminate tax liens and judgment liens on any of your assets included in the bankruptcy without depending on your eligibility for a discharge.

Mortgage liens on your home get special protection under bankruptcy law; but a mortgage lien behind a senior lien that exceeds the value of the house can be stripped in 13 and nowhere else in the law.

Judges available for nasty fights

Bankruptcy judges stand by to consider and resolve disputes between creditors and the debtor. In my world, that’s most often a fight between a mortgage servicer and the homeowner over what’s really owed on a home loan.

Resolution of that dispute doesn’t require a discharge, since the claim is likely secured by collateral. The issues is how much is owed and can the servicer prove it.

That’s what judges are for.

And at the end of a 13 that cures mortgage default, the homeowner gets a determination about the true state of the debt via Rule 3002.1.

Value beyond discharge

There’s more to Chapter 13 than the discharge and it’s available without reference to prior bankruptcies.

Life After Bankruptcy: What’s It Really Like?

By Cathy Moran

What’s life really like after bankruptcy?

Everyone suffering through financial difficulties wants to know whether filing bankruptcy just trades one form of pain for another.

Will you be shut out of the American dream forever? Unable to function in a world centered on electronic payments?

Here’s a collection of our best stories and advice on the world of your fresh start.

Your credit heals

Damaged credit improves over time, just like wounds heal. A credit report is not like a wine glass that once it’s broken, it’s gone forever.

8 Tasks after bankruptcy

You’ve still got work to do after your bankruptcy to enjoy your fresh start. Figure out where you are, money wise, and apply the lessons of the debtor education class you took to get the discharge.

Renter to homeowner
Even with generous California exemptions, this aging client had nothing coming out of bankruptcy because she had nothing going in. Three years later, she’s a homeowner.

Dealing with debts that survive bankruptcy

A few unsecured debts can’t be discharged in bankruptcy; it’s a short list. Some liens are your assets remain a charge on the collateral for that lien, but not on your new acquisitions.

Getting new wheels
How do you hold on to your ride, or replace your aging car after bankruptcy? Understand the impact of a shedding debts through bankruptcy.

Defending your discharge

The bankruptcy discharge is a federal court order; it has teeth. If creditors ignore your right to be free of collection efforts, you may have to bite back.

Bankruptcy can be a life-changing event, for the positive

Life after bankruptcy can be what you make it. You get a chance to make some new choices and to strip some sources of stress from your life. How will you color it in?

Is it better to just keep making minimum payments?

Secret alternative to bankruptcy

How debt makes you dumb

Why Keep Bankruptcy Off Your Credit Record

By Cathy Moran

We’ll help you do your own bankruptcy, promises the ad.

And for a few dollars more, we’ll sell you the secret to keep your bankruptcy off your credit record.

That pitch plays neatly into the obsession that we have about our credit reports. Even when your financial world is upside down.

But this pitch has it all backward.

Why would you want to omit your bankruptcy discharge from your credit and leave all the debt that necessitated the BR filing showing as if was still enforceable?

Yes, bankruptcy is a black mark on your credit record. But so is old, delinquent debt that you can’t pay. Seeing old debt on your report makes it look like you could still be sued on that debt.

What business wants to make a loan to someone who appears to owe money they aren’t paying?

What consumer wants to look like a dead-beat?

Credit reporting after bankruptcy

What should your credit report look like after a bankruptcy discharge?

When a bankruptcy discharge wipes out a debt, the creditor must report the debt as having a zero balance.

They can report the backstory, but your credit record must show that you no longer owe the money.

That goes a long way to improving your debt-to-income ratio, a central element in credit scoring.

Bad debt appears for 7 years

Delinquent debt can stay on your credit report for 7 years, dragging down your apparent credit worthiness. The seven years doesn’t start running until the debt is sent to collections or is charged off by the creditor.

So, what’s the logic in saying that you’ll take the benefits of the bankruptcy discharge, but, shushhh, don’t tell anyone that I’m really debt free?

Games with your credit report

Bankruptcy is a public record. The docket of the bankruptcy court can be accessed online, if you really want to see who’s filed bankruptcy.

So how likely is it that the credit reporting agencies won’t pick up a bankruptcy filing?

More importantly, if a public record can be hidden from the credit reporting agencies and those who supply information to them, just how accurate is a credit report anyway?

Studies show that at least 20% of all consumer credit reports contain at least one material error.

So, get your head out from under the water and look around with clear eyes about what is important.

Danger in representing yourself

I’ve picked up and run here with just one of the misleading or dangerous claims this “service” purports to provide to people filing bankruptcy without a lawyer.

Admittedly, I’m not disinterested in seeing that people who need bankruptcy relief get a lawyer’s help to get all the relief available. Attorneys fees, after all, are how I make a living.

But I practice this kind of law because it’s a powerful tool for people in financial trouble.

And I’ve sat in too many courtrooms watching debtors without lawyers lose assets to the bankruptcy trustee, or make timing or disclosure errors that cost them big time.

But the cautionary tale about do-it-yourself bankruptcy is told elsewhere on Bankruptcy Soapbox.

Credit reports heal

Credit reports after bankruptcy

How to interview a bankruptcy lawyer

Three Cheers For Entrepreneurs

By Cathy Moran

Let’s hear it for entrepreneurs. Those brave, tireless people with a dream who start or run small businesses.

They possess more energy and perseverance than most of us. They form the backbone of our economy.

In honor of National Entrepreneurs Day, November 20th, let’s recap Soapbox’s best on being in business for yourself.

It’s probably not surprising that I like entrepreneurs, because I’m an entrepreneur too. I opened up my general law practice the day after I was admitted to the California bar.

Over the years, the focus of my law practice has narrowed as I’ve become an insolvency specialist, but I have always worked for myself.

So, small business folk are some of my favorite clients.

Clients I tend to see in my professional role when business struggles. Here’s what I’ve learned about small businesses and the hardy folk who run them.

Your business needs a prenup

Anytime you pool your money with someone else, you need a written agreement about how you unwind the joint venture. Just like marriage, business life changes and today’s partnership may not work at some point in the future.

Five mistakes to avoid for success in your business

Culled from my four decades of advising business people, these five things stand out as reasons businesses don’t succeed. Here’s what NOT to do if you want your business to survive and thrive.

You’re incorporating for the wrong reason

The best reason to incorporate your business isn’t to protect yourself from the debts of the corporation. It’s just the opposite: incorporate to protect the business from your debts.

How to avoid being on the hook for business debts

You incorporate to limit you exposure to debts of the business. Don’t throw the benefits of incorporation away by the way you sign corporate contracts.

Four essential habits for successful entrepreneurship

Here are four unsexy, but absolutely essential, habits to cultivate in business. Adopt them from the start of your business: well begun is half done.

Alternatives when the business struggles

The hardest choice facing an entrepreneur involves failing. Take a look at the alternatives available when it seems the business has no future.

Here’s hoping we never meet professionally. Savor National Entrepreneur Day.

What This Lawyer Is Grateful For At Thanksgiving

By Cathy Moran

This Thanksgiving, I’m grateful for the American judiciary and, particularly, for district court judges.

In these turbulent political times, they’ve been confronted with hard questions arising out of swirling controversies. Their rulings would have national implications.

Decisions were needed on short notice. Partisans gathered on the sidelines, some assured of being bitterly disappointed however the decision came down.

Yet, it seems that they have come through in the finest tradition of the law. My view of the question didn’t always prevail. But I never doubted that their decision was reached after thoughtful analysis of the law and the arguments, independent of the views of the party responsible for their elevation to the bench.

I’m grateful, too, for the lawyers who’ve explained Constitutional principles and the supremacy of the law to nonlawyers. Even as a lawyer, I’ve found myself pulling out my pocket version of the Constitution and looking at exactly how those bedrock provisions were written.

My fellow lawyers have largely made me proud.

We’re Now In Redwood City

By Cathy Moran

Moran Law Group has packed up and moved to Redwood City!

Effective October 1, 2018, Cathy and Renee are holding forth at 643 Bair Island Road, Suite 403, Redwood City. Our phone number and email addresses are the same.

We’re sharing our San Mateo county office with two good friends and marvelous bankruptcy lawyers, Jeff Curl and Wayne Silver. Rubbing shoulders with these guys sharpens our legal thinking and just generally enlivens our days.

We will continue to counsel consumers and small businesses about their financial challenges and provide candid advice on whether bankruptcy is appropriate.

We are focused on insisting that creditors honor the fresh start that a bankruptcy discharge should bring with it. That means we are ready to go to court if necessary to make creditors obey the law and make you whole for the cost of the exercise. We can help you enforce your rights even if we didn’t represent you in your bankruptcy case.

We also tackle mortgage servicing issues that arise after a Chapter 13. All too often, it seems that lenders can’t keep track of the money they’ve collected, nor can they follow the law on being transparent about what they do.

More about us and about bankruptcy law can be found here at BankruptcySoapbox.com and our companion site Bankruptcy In Brief.com

You can make contributions to your IRA last year AND contribute to this year’s IRA allowance.

IRAs in bankruptcy

IRAs for all

Tax break opportunity is fleeting

Our language doesn’t help

We suck at savings

More

Home loan after Chapter 13

How to make your mortgage loan right

Lender faces trouble in court

Relief and recompense in court

More

Law limits discharge

Automatic stay to the rescue

Important creditors paid first

Liens cut down to size

Judges available for nasty fights

Value beyond discharge

More

Credit reporting after bankruptcy

Bad debt appears for 7 years

Games with your credit report

Danger in representing yourself

More

Categories