Can Bank Take IRA Account When You File Bankruptcy San Diego

When you file bankruptcy San Diego, if you have money in a bank account and you owe a debt to that same bank (for example, you have a credit card with that bank), then the bank can take the money in your account as an offset against (in repayment of) the debt that you owe.  For example, if you owe money on a Chase credit card and you have money in a Chase bank account, then Chase can take the money in your bank account on the day that you file bankruptcy San Diego.  A bank can do this only one time, on the day that you file for bankruptcy, and the bank cannot touch your money in the bank after bankruptcy.  But what if your money is in an IRA account, can the bank still use the right of set off to take the money in your IRA account?  Under San Diego bankruptcy law, if your IRA is truly an IRA account formed pursuant to the Internal Revenue Code governing IRA accounts, then your bank cannot take your IRA account because pursuant to the Internal Revenue Code your bank is really holding your money as a trustee.

Bank Holds IRA Funds As Trustee

Under the Internal Revenue Code provisions governing the set up of IRA accounts, the bank at which you hold your IRA account holds your IRA account funds as a trustee.  The bank acts as trustee, holding the funds for you, the beneficiary, until you reach the age of retirement when you can withdraw the funds without penalty.  This is in contrast to ordinary deposit accounts, in which the bank is free to use the money while on deposit and does not hold the funds as trustee.

Trustee Bank Cannot Offset Debt

Because your bank is holding your IRA account funds as trustee, San Diego bankruptcy law provides that your bank cannot offset a debt by taking the money from your retirement account in bankruptcy.  Therefore, so long as your IRA account was formed pursuant to the Internal Revenue Code provisions governing IRA accounts, then your bank cannot take your IRA account when you file bankruptcy San Diego.
 
 

Factors that Affect Average FICO Credit Score After Bankruptcy

While most people will end up with a credit score within a specific and narrow range, there are factors that can cause your credit score to be lower or higher than the average credit score.   If you have a home loan or a car loan and you reaffirm it, that will certainly help you to rebuild your credit score faster than someone who does not have a home loan or a car loan.  If you obtain credit cards after bankruptcy and practice good spending habits, making charges and paying off your balances at the end of each month, your credit score will rise faster. If your credit score was extremely high before bankruptcy San Diego, then you are likely to enjoy a much higher credit score that the average credit score enjoyed by most people.

Home Loans and Car Loans

Home loans and car loans, if paid in time, will help you increase your credit score regardless of bankruptcy.  Just like a home loan or car loan can help you build credit before bankruptcy, so too can these types of loans help you to build up your credit score after bankruptcy.  Therefore, a home loan or car loan that is reaffirmed will tend to cause you to have a higher credit score than the average credit score after bankruptcy San Diego.

Credit Cards

Just like credit cards help you to build credit from the time you enter college or university, so too will credit cards help you to build up your credit after bankruptcy. The more cards you have, and assuming you pay off your balances each month, then generally the faster you can expect to see your credit score rise.

What Is the Average Credit Score After Bankruptcy?

So back to the million-dollar question:  what is the average credit score after bankruptcy in San Diego.  With the above disclaimers given, in my experience, after a San Diego bankruptcy, most clients will have a credit score somewhere in the low 600s within one to two years after bankruptcy, and many clients can obtain a 700 credit score after bankruptcy within about four to five years after bankruptcy.  So is this good news, or bad news? Well, if your credit score is 800, then it’s a drop in your score.  But if your credit score is in the 400s or 500s, like many people filing bankruptcy in San Diego, then it is a big increase, and that’s definitely good news.

The Importance of Income in Your San Diego Bankruptcy Case

The importance of income in your San Diego bankruptcy case affects whether you qualify for Chapter 7 bankruptcy, and how much money you will have to repay to the Court in a Chapter 13 repayment bankruptcy, should Chapter 13 be the route recommended by your attorney.  The importance of consulting with a skilled attorney cannot be overstated.  By anticipating the potential issues that may arise with respect to your income, you can be better prepared for bankruptcy so that your San Diego bankruptcy filing is as painless as possible. 

Chapter 7 Bankruptcy in San Diego

In order to qualify for bankruptcy in San Diego under Chapter 7,  your total household income must not be greater than the California median household income for a household of your size.  The median income is a moving target.  The number changes regularly, since it is based on the actual income of Californians, which fluctuates based on how much money Californians’ are making in a given month, quarter or year.   This is a relatively black and white test.  You calculate your income over the past 6 months, divide by 6 to get a monthly figure and multiply by 12 to get an annual figure (or just multiply the 6-month figure by 2 to get an annual figure), then compare your annualized income to the annual median household income for a household of your size.  This is referred to as taking the Means Test.

Chapter 13 Bankruptcy in San Diego

If your bankruptcy attorney recommends that you file for bankruptcy under Chapter 13, then your income will also be important for determining how much of your unsecured debt (credit card, medical bills, and other similar types of debts) you will have to repay in a Chapter 13 bankruptcy case.  This will affect how much it will cost you to get out of debt.

In a Chapter 13 case, your income is also important because in order to have your Chapter 13 plan confirmed, you will need to demonstrate that you have regular income.  Also, your regular income must be sufficient to be able to repay all of the monthly expenses that you proposed to repay during the term of your Chapter 13 case.  Your disposable income (income minus expenses) must be enough to make your Chapter 13 plan payments so that you can get out of debt San Diego.  Otherwise, you will not be able to demonstrate that you have enough regular income to qualify for bankruptcy under Chapter 13.

Good Faith Always a Consideration

Regardless of what Chapter of the bankruptcy code you file under, you must always pass a good faith test.  When dealing with income and expenses, good faith is always a consideration.  In a Chapter 7 case, even if you can pass the Means Test, if you have disposable income in your actual budget each month, then the Court will consider your Chapter 7 case abusive and force you to file under Chapter 13 and devote your disposable income to making Chapter 13 plan payments for 3 to 5 years.   In a Chapter 13 case, if you have more disposable income than your proposed Chapter 13 plan payment, the Court will force you to increase your Chapter 13 plan payments by the amount of additional disposable income that you possess each month.

Pay for Day Care or Child Care in Bankruptcy San Diego

If you have children and pay for daycare or childcare, you may be paying anywhere from $500 to $1,000, or more, each month.  If you have such a substantial day care or child care expense and are considering bankruptcy, you may be asking, “Can I pay for day care or child care in bankruptcy in San Diego?”  The short answer is, “yes.”  But in reality the answer is a bit more complex, as there are important factors to consider and discuss with your bankruptcy attorney.

Child Care in Chapter 7 Bankruptcy

In most cases, you can pay for child care in a Chapter 7 bankruptcy San Diego.  The bankruptcy court and bankruptcy trustee will usually respect your decision to pay for childcare, even up to $1,000 per month, or more.  The court and trustee will consider your overall circumstances, such as the number of kids you have, the cost of the day care or child care, and whether both parents have full time jobs, thus making the cost of the child care an unavoidable expense.  Reasonableness is always a consideration.

Proof of Day Care Expense in Chapter 7

In Chapter 7 cases, for Means Test purposes, if you are claiming child care or day care expenses in order to qualify for bankruptcy, then the childcare or daycare expenses must be expenses that you actually pay each month and that you actually paid each month during the 6-month period prior to your bankruptcy filing (the Means Test period).  If the expense is rather large, then frequently the San Diego bankruptcy trustee will require proof. 

Child Care in Chapter 13 Bankruptcy

In Chapter 13 bankruptcy, similar to Chapter 7 cases, the San Diego bankruptcy court and bankruptcy trustee will usually permit payment of child care or day care.  In Chapter 13 cases, it is not essential that the childcare or daycare expenses have existed during the six months prior to filing (although that is preferable), because the Means Test calculations can be redone based on your expenses going forward. 

What is perhaps most important in Chapter 13 cases, is how much longer the daycare or childcare expense will last.  You see, in a Chapter 13, the child care or day care expense will often end before your three-year or five-year Chapter 13 plan term.  For example, kids grow older, attend kindergarten, and day care expense goes down.  Once the daycare or childcare expense ends, or is reduced, then based on your budget given to the bankruptcy court at the time of case filing, you will have more money available, more disposable income (since you no longer have the daycare or childcare expense).  It takes a skillful San Diego bankruptcy attorney to: (1) foresee this issue in the first instance; and (2) propose your Chapter 13 plan to the court in a way that takes into account the dropping of expenses without increasing your disposable monthly income.

Federal Government Help has Failed and Consumers Are Resorting Bankruptcy

Most Federal Government programs to help distressed borrowers get out of debt have largely failed.  As a result, more and more consumers are resorting to bankruptcy as a means of obtaining debt relief.  As a San Diego bankruptcy attorney who handles hundreds of bankruptcy and foreclosure cases, I can see that more and more clients are calling each day and asking to explore their bankruptcy options.  This confirms my belief and analysis that the Federal Government programs have not been successful in providing debt relief to distressed San Diego borrowers.

Many consumers endure multi-year struggles to reduce their credit card debt, medical bills and unsecured loans and lines of credit.  They ensure debt repayment programs for years, only to find that years later they owe the same amount of debt they did when they started repayment.  They realize that in order to have a realistic change of getting out of debt, they need to start with a clean slate.  That’s the exactly the type of relief provided by filing bankruptcy.

Another factor pushing more borrowers into bankruptcy, is the increase in lender lawsuits against consumers.  The Federal Government bailouts were only temporary.  They did not last.  The finance companies did not get all of the help they needed.  They need money, so they turn to suing consumers.  Consumers get sued, and in turn file bankruptcy.  Had the Federal Government done more to help the finance companies, they finance companies could have withstood their losses and written off bad debt, as they used to in the past.  It’s only in the recent years, that credit card lenders and finance companies have gotten so aggressive and are suing every borrower who defaults on their credit card or loan obligations.

Legal Protection of Bankruptcy

In a very real sense, a bankruptcy filing gives you the legal protection that the Federal Government was unable to do with its debt relief programs.  Bankruptcy turns the tables on your creditors who are suing you.  The filing of a bankruptcy petition instantly stops creditors and offers instant liberation from those sleepless nights caused by the fear of harassing phone calls, a repossession, a lawsuit, a bank levy, or a wage garnishment.  By giving you breathing room from your creditors, filing bankruptcy will give you a chance to get out of debt San Diego and rebuild your credit.  You can then avoid a wage garnishment and liens that otherwise would have crippled you financially for years to come.

When you file bankruptcy in San Diego, creditors must immediately cease all debt collection attempts, or risk being sanctioned by the bankruptcy court.  But that’s not all. Upon the entry of your discharge, which eliminates your debts that can be eliminated in bankruptcy, a discharge injunction goes into effect by law that continues to stop creditors from harassing you and attempting to hold you personally liable for a debt.

As a result of the Federal Government’s failed efforts, overwhelming public consensus today has changed drastically with regard to the former stigma of bankruptcy.  The unyielding stereotypes about bankruptcy no longer exist.  People of all walks of life are filing bankruptcy.  Many good and hard-working people are filing bankruptcy to protect their families.  The branch manager of your bank, your supervisor at your place of employment, the police officers of your local police force, and the court personnel at your local courthouse are all filing bankruptcy.  Just ask around and you will be surprised how candidly people will tell you of their financial troubles and how bankruptcy helped get them and their families out of debt. Begin building the foundation for a better future and financial success for your family by contacting a qualified bankruptcy attorney today.

Can I Keep My Stocks in Bankruptcy in San Diego?

If your stocks are held in a retirement account, then the retirement account exemption will apply and you will most likely get to keep all of your stocks.  If your stocks are not in a retirement account, then they will be treated similar to cash in your bank accounts.  You will be able to keep as much of the stocks as are covered by your bankruptcy exemptions. 

Retirement Accounts

Retirement accounts have a special bankruptcy protection.  The bankruptcy retirement account exemption protects your retirement accounts up to about a million dollars.  This figure is subject to change but traditionally has been in the $1 million range.  The retirement account protection covers most tax-exempt retirement accounts.  It covers IRAs, 401Ks, and most other types of retirement accounts.  If your stocks are held in a retirement account, then the bankruptcy retirement account exemption will apply to protect your stocks. 

Non-Retirement Accounts

If your stocks are not in a retirement account, then they will be treated similar to cash in your bank accounts.  You will be able to keep as much of the stocks as are covered by your bankruptcy exemptions.  Because the exemptions for cash in bank accounts is very small relative to the retirement account exemption, stocks in non-retirement accounts will be more difficult to protect when you file bankruptcy in San Diego.

Valuation

Treatment of your stocks in bankruptcy may also turn on valuation.  If you own stocks in publicly traded company, valuation will be relatively simple.   But if you own stocks in a company that is not publicly traded, valuation will be much more difficult.  You will have to place a value on the stocks and it will up to the bankruptcy trustee to decide whether he or she agrees with your valuation or wants to contest the valuation.  

By hiring a reputable San Diego bankruptcy attorney that the San Diego bankruptcy trustees know will provide a good faith valuation, you can increase your chances of the bankruptcy trustee agreeing with your valuation, hence your bankruptcy case being handled more smoothly and achieving your desired result.  An experienced attorney will also be able to tell you how you can expect your stocks to be treated in bankruptcy in San Diego, so that there are no surprises.  Bankruptcy may not be the safest option, or you may need to do some bankruptcy planning to ensure that your stocks are fully protected.

Can I File Bankruptcy In San Diego If I Have Equity In My Home?

If you have equity in your home, then it is imperative to: (1) determine how much equity you have; and (2) discuss with a bankruptcy lawyer whether or not your equity exceeds the amount of equity you are permitted to have when you file bankruptcy San Diego.   If you have too much equity in your home, the San Diego bankruptcy trustee will liquidate (sell) your home, and use the proceeds to pay your creditors.  Clearly, you don’t want that to happen.  So, it cannot be stressed enough, you must discuss with a bankruptcy attorney the amount of equity in your house and the effect it can have on your bankruptcy filing.

Equity Within Your Exemption Limits

If the amount of equity in your home is within the equity limits permitted by your applicable bankruptcy exemptions, then you can keep your home and the equity in it.  Your exemption limits will depend on whether you are claiming the federal bankruptcy exemptions or the California bankruptcy exemptions.  The California exemptions provide for a much more generous homestead exemption protecting the equity in your home.

Equity In Excess of Your Exemption Limits

If the amount of equity in your home exceeds your exemption limits, either under the federal exemptions or California exemptions (depending on which exemptions you choose), the bankruptcy trustee in San Diego will take control of, and sell, your house.  In some cases, if the amount of equity you have in your home is only slightly greater than your exemption limits, the San Diego bankruptcy trustee may not sell your home.  Also, you can propose to pay the trustee an amount of money equity to the amount of excess equity in your house that is not covered by your exemptions.

Do I Need an Appraisal?

Many clients ask me, “do I need an appraisal?”  If there is little dispute as to the value of your property, according to publicly available sources (there are several free web sites that publish real estate values), then an appraisal typically is not needed.  But if the publicly available sources point to a value that is substantially higher than what you believe is the fair market value of your property, then your bankruptcy attorney will usually recommend that you obtain an appraisal before filing bankruptcy.

Benefits of Filing a Homestead Declaration in San Diego Bankruptcy Cases 

A homestead exemption refers to the amount of equity in your home that is protected in San Diego bankruptcy cases.  A homestead exemption gives you the same amount of protection, even if you have not filed a Homestead Declaration.  But there are other benefits to filing a Homestead Declaration, other than simply being able to exempt a certain amount of equity in your home.

Abstract Will Not Create Judgment Lien Unless Surplus Equity Exists

One of the most important reasons for recording a Homestead Declaration is that if an abstract of judgment is filed against you, the judgment lien will not attach to the property, and will not even create a judgment lien, unless there is surplus equity over and above your homestead exemption. In contrast, if you did not have a recorded Homestead Declaration, the judgment lien would immediately create a lien and would attach to any equity upon being filed with the County recorder.

Can Sell and Keep Proceeds, If Reinvest

Another big advantage is that if you sell your home, your proceeds, up to your homestead exemption amount, are protected from judgment creditors if you reinvest the proceeds into another homestead within 6 months, and provided certain conditions are met.

Can Keep Proceeds If Property Sold In Bankruptcy Cases

Similarly, in San Diego bankruptcy cases, if the bankruptcy trustee wanted to sell your property to pay creditors, you would be entitled to the same protection as if you were to voluntarily sell your home, and provided certain conditions are met.

Can Sell Property In Chapter 13 Bankruptcy and Keep Proceeds

If you want to sell your home in a Chapter 13 bankruptcy, the San Diego bankruptcy trustees will require that your bankruptcy attorney provide a copy of a properly recorded homestead declaration before any proceeds of the sale are released to you. (If there is no equity in your property, then you would not need to be concerned with protecting proceeds of sale, since there wouldn't be any proceeds.)

Can Play a Crucial Role in Helping You Get Out of Debt

There are other advantages to filing a Homestead Declaration in San Diego bankruptcy cases.  Recording a Homestead Declaration may play a crucial role in helping you get out of debt San Diego and protect the equity in your home.  You should discuss with a bankruptcy attorney whether filing a homestead declaration before bankruptcy would be beneficial for your case.

Typically, individuals wanting to file for bankruptcy in San Diego choose between Chapter 7, and Chapter 13, the second most common type of bankruptcy filing.  The 5 key benefits of Chapter 7 bankruptcy are as follows:

1. The process is quicker.  The entire Chapter 7 bankruptcy process lasts for about 90 days, from the date of filing until the date of discharge.  If your bankruptcy is prepared and executed by a skilled San Diego bankruptcy attorney, and the bankruptcy trustee and creditors do not raise any objections, the court will grant you a speedy discharge.

2. Future income is protected.  In a Chapter 7 case, the income that you earn in the future does not become part of your bankruptcy proceedings. Typically, only the income that you earned in the six months prior to bankruptcy filing is considered in your bankruptcy case.  By contrast, in a Chapter 13 case, you have to contribute your disposable income to your bankruptcy plan for three to five years.

3. No monthly payments to the Court.  In a Chapter 7, there is no need to worry about making monthly payments to the bankruptcy court.  Payments to the Court are only made in repayment bankruptcies, such as Chapter 13, and Chapter 11 and 12.  Moreover, monthly reports are not required to be submitted, as they are in Chapter 11 and 12 cases.

4. Legal fees are less.  In a Chapter 7 bankruptcy, legal fees typically are less than in Chapter 13 or any other chapter.  This is because you would usually hire an attorney only for a period of three to six months.  Depending on your circumstances, however, a Chapter 7 fee may be greater than a Chapter 13 fee.  If your case involves a significant amount of pre-bankruptcy planning, then the fee would be adjusted to account for the addition time spent by your bankruptcy attorney making sure that you obtain the best results from your San Diego bankruptcy filing.

5. Buy back your car for its current value.  Unique to Chapter 7 is the ability to buy back a secured asset for the current retail market value.   For example, if you have a car worth $5,000 but you owe $12,000 on it (not an uncommon scenario if you have a high interest rate and put little money down), then you can buy back your car for $5,000.  If you don’t have the money to buy back your car, you can borrow it.  There are companies that will lend you money, while you are in bankruptcy, for the specific purpose of buying back your car through a redemption.

Summarizing, a Chapter 7 bankruptcy filing is more advantageous to individuals because it enables them to recover quickly, protect their income, avoid making monthly payments to the Court, pay less in legal fees, and buyback a car for its retail market value.

Can Bankruptcy Stop an Eviction in San Diego?

Filing bankruptcy can stop an eviction in San Diego, but if your landlord will not agree to a pay and stay, then in most cases your bankruptcy will only temporarily stop the eviction.  The eviction action will ultimately proceed and a judgment evicting you and returning possession back to your landlord will be inevitable at some point.  The effect of a bankruptcy filing on a pending eviction lawsuit depends on certain factors, and there are important issues to consider.  A San Diego bankruptcy lawyer can advise you as to the effect that your bankruptcy filing will have on an eviction, and only after thoroughly assessing your entire financial situation.  Here are some general principles that your bankruptcy attorney will want to consider.

Pay and Stay

When you file bankruptcy in San Diego, all lawsuits, including an eviction (which is a type of lawsuit filed against you in Superior Court), will freeze by virtue of the bankruptcy stay. But your landlord can, and usually will, go to the bankruptcy court and ask for permission to continue the eviction lawsuit notwithstanding your bankruptcy filing.  Absent highly unusual circumstances, the bankruptcy court will grant your landlord permission to continue with the eviction. Once the permission, called "relief" from the bankruptcy stay, is granted, your landlord will continue to evict you.  If you can get your landlord to voluntarily agree to a pay and stay, you can remain at your rented home.  Otherwise, you will be forcefully evicted.

I Need to File Bankruptcy Anyway?

Because a San Diego bankruptcy filing usually results in only a temporary delay of an eviction, your San Diego bankruptcy attorney generally will not recommend that you file a bankruptcy solely to stop an eviction.  But if you are facing an eviction, it is likely that you have suffered one or more financial setbacks, which made it difficult for you to pay your rent on time.  You may need to file bankruptcy anyway.  In such a case, and assuming you qualify for bankruptcy, you may want to accelerate your bankruptcy filing, so that it has the added effect of stopping an eviction.  That way, you will get the debt relief you need by filing bankruptcy, and your bankruptcy filing will have the added effect of temporarily stopping the eviction lawsuit, giving you some more breathing room.  It may be valuable to you to have some more time to weigh your options and possibly find the money to be able to negotiate a pay and stay with your landlord.  If you can't negotiate a pay and stay, or if your landlord just does not want to deal with you, it may be prudent to voluntarily leave the property soon so that you do not incur liability for fair market rent after bankruptcy.  You will want to remain debt free after bankruptcy so that you can rebuild credit.

Other Tenants or Parties to Lease

If there are other tenants or parties to the lease, then you’ll want to carefully consider the ramifications of your actions.  The harder your landlord’s attorney has to work to evict you, the more attorney’s fees your landlord will incur.  For example, if you file bankruptcy and your landlord’s attorney has to go to the San Diego bankruptcy court to obtain permission to continue the eviction action, then that means more attorney’s fees and costs that your landlord incurs and all tenants to the lease will ultimately be liable for, assuming the lease has an attorney's fees clause.  If there are other tenants, and you care about their interests, you’ll want to keep the landlord’s costs and attorney’s fees to a minimum.

Judgment Already Entered

If a judgment for possession has already been entered, then a San Diego bankruptcy filing won’t stop an eviction.  An eviction judgment granting possession of the property back to your landlord is an exception to the bankruptcy stay.  It is a unique type of judgment that the bankruptcy stay does not affect.  That means that if your bankruptcy attorney files your case after your landlord has a judgment of possession, your landlord can have the sheriff forcefully remove you from the premises even though you hired an attorney to file a bankruptcy for you.  But there is an exception to this rule, under which you can stop an eviction by depositing rent with the San Diego bankruptcy court.

Depositing Rent With Bankruptcy Court

If your landlord has a judgment for possession, and you in good faith believe that you are legally entitled to cure the entire monetary default that gave rise to the judgment for possession, after the judgment for possession was entered, then bankruptcy can stop an eviction.  To exercise this right, at the time that you file bankruptcy, your bankruptcy lawyer will have to deposit with the San Diego bankruptcy court any rent that would become due during the 30-day period after your bankruptcy is filed and your bankruptcy attorney will have to give proper notice to your landlord.  It is rare, though, that you’ll have a right to cure default after a judgment of possession.  If you feel that you do, discuss this with your bankruptcy lawyer.

The entire premise behind debt consolidation is that you will ultimately pay off all of your debt.  Theoretically, you would think that debt consolidation works.  But as any experienced San Diego bankruptcy attorney can tell you, clients who attempt debt consolidation usually end up filing bankruptcy.  The reason that debt consolidation usually does not work is that while you are making payments toward a pot of money that is they used to settle individual debts, your balances keep rising.  Then you have to pay a larger amount of money to settle the debts.  Meanwhile, you are paying monthly fees to the debt consolidation company.  The result is that, in most cases, one to two years into the process you realize that you are still where you started.  Had you file bankruptcy two years earlier, you could have been working on rebuilding your credit for the past two years. 

A different, but less common, type of debt consolidation involves taking out a new loan to pay off all of your debts, and then making payments on the new loan.  The problem with taking out a new loan is that if you file bankruptcy after taking out a new loan, the lender who gave you the new loan can claim that you obtained the loan without the intention to repay it, which is a type of fraud (a promise without intention of performing it).   This option assumes that you even qualify for a loan.  If you are close to bankruptcy, you might have trouble qualifying for a personal loan.

So if you need to get out of debt San Diego, talk to an experienced attorney about all of your options.  If you are considering consolidating your debts, make sure you understand the downside risks involved and weigh your options carefully. If you have high interest credit cards, it is very unlikely that debt consolidation will be a good solution for your situation.

How to Postpone a Foreclosure Sale – Bankruptcy in San Diego

Among the most common ways to postpone a foreclosure with or without bankruptcy in San Diego, include: loan modification, short sale, Chapter 7 bankruptcy, and Chapter 13 bankruptcy.  If you have a house in foreclosure, you may have tried one or more of these methods.  If you have been denied a loan modification, or were unable to complete a short sale, you may be at risk of losing your home any day.  If you are facing an imminent foreclosure sale date and want to know your options to postpone a foreclosure, here are your options, how they work, and whether or not you’ll need a lawyer.

Loan Modification

With loan modification, you submit an application to your lender requesting that your loan be modified.  Many people are able to do this without the help of an attorney, but obtaining the advice of a lawyer may significantly increase your chances of success.  Typically, but not always, while your lender is reviewing your application, it will postpone your foreclosure sale date.  If your lender grants you a modification, it will typically apply your missed payments to the back end of your loan, resulting in your loan becoming current.  The problem is, that most loan modification applications are denied.  Many large institutional lenders have reported modifying only 5% of modification applications.  If your application is denied, your house goes to foreclosure, sometimes with only days notice and not enough time even to file a bankruptcy San Diego.  Because of the high likelihood of a modification request being denied, a loan modification application usually results in only a temporary postponement of your foreclosure and ultimately end up losing your home.

Short Sale

A short sale is where you sell your property even though you owe more on your loan(s) than what your property is worth.  Because the sale price of your house will not cover all of the outstanding loans, you need to obtain your lender’s consent to do the sale.  After you’ve found a qualified buyer, while your lender is reviewing your short sale request, your lender will typically, but not always, postpone your foreclosure.  You won’t need a lawyer, but you will likely need a good short sale broker.  You should ask a San Diego bankruptcy attorney for a referral for a good short sale broker in San Diego.  Bankruptcy attorneys frequently deal with short sale brokers and will know who the best brokers in town are.  The granting of short sale requests is more common than the granting of loan modification application.  So your chances are usually better that you can obtain short sale approval than a loan modification.  However, a short sale, by definition (it is a “sale” of your home), means that you will ultimately be losing your home.  Therefore, a postponement of a foreclosure sale based on a short sale, is always a temporary postponement.

Chapter 7 Bankruptcy

A Chapter 7 bankruptcy will postpone a foreclosure.  You will definitely need a San Diego bankruptcy lawyer to assist you.  Upon the filing of a Chapter 7 bankruptcy, the bankruptcy stay goes into effect and stops any foreclosure sale.  Your lender will usually continue the foreclosure sale date one month at a time, so that it can complete the foreclosure sale once your Chapter 7 bankruptcy is completed, or until your lender’s bankruptcy attorney obtains permission from the San Diego bankruptcy court to do a foreclosure notwithstanding your Chapter 7 bankruptcy filing.  Obtaining permission to go forward with a foreclosure is called obtaining “relief” from the bankruptcy stay.  When your bankruptcy is completed, or if your lender obtains relief from the bankruptcy stay, the foreclosure sale can go forward.   So a Chapter 7 bankruptcy will only temporarily postpone a foreclosure sale.

Chapter 13 Bankruptcy

The filing of a Chapter 13 bankruptcy, can postpone a foreclosure sale permanently and let you save your home from foreclosure.  As with Chapter 7, you will definitely need a good bankruptcy attorney to assist you.  You will also want to make sure you select a bankruptcy attorney who is a Chapter 13 specialist.  In a Chapter 13 bankruptcy, you repay your missed mortgage payments over time, thus bringing your loan current.  When you file a Chapter 13 bankruptcy in San Diego, and assuming that you file it with the help of a San Diego bankruptcy lawyer who is an experienced Chapter 13 specialist, you can save your home.  If your bankruptcy attorney knows what he or she is doing, and executes your Chapter 13 filing flawlessly, your Chapter 13 will do more than postpone your foreclosure sale.  It will permanently stop foreclosure and save your house.

Can I do a Loan Modification In Bankruptcy in San Diego?

It’s a question I am frequently asked by clients who are about to file bankruptcy: Can I do a loan modification in bankruptcy in San Diego?  Whether you can do a loan mod in bankruptcy in San Diego, depends on several factors, such as your monthly income and expenses, your lender’s desire (or lack thereof) to do a loan modification, and the type of bankruptcy that your bankruptcy lawyer files for you.

Income and Expenses

Your monthly income and expenses are one of the biggest factors in your lender’s determination as to whether to give you a loan modification.  If you don’t have sufficient income to make even a modified payment under the debt-to-income (DTI) ratio used by your lender, then it will be a waste of both your lender’s time and your time for your lender to go through the effort of giving you a loan mod.   Similarly, if your expenses exceed your income such that you cannot afford even a modified mortgage payment and all of your other expenses, then it will not make sense for your lender to spend the time to modify your loan.

Your Lender’s Discretion

Perhaps the biggest factor in determining whether you get a loan mod is your lender’s discretion.  Despite what many people may tell you, the plain fact is: you cannot force your lender to give you a loan mod.  If your lender want’s to give you a loan mod, it will.  If it doesn’t, it won’t.  If you’ve been denied, you can try to submit and resubmit your loan modification application a dozen times, and your lender’s answer will still be “no.”  Often, a “no” suggests that there is an investor that simply does not want to modify your loan.   Many times, the denial may reflect your lender’s desire to clean up its loan portfolio, so that it has fewer defaulted loans and therefor looks more attractive to potential investors.

Loan Mod in Chapter 7 Bankruptcy

If you are in a Chapter 7 bankruptcy in San Diego, then your lender might decide to modify your loan.  You will have to submit a loan modification application either before or during bankruptcy.   Your lender may tentatively grant your loan modification request while you are in bankruptcy and then finalize the documents the moment your bankruptcy is completed.  During your bankruptcy, your bankruptcy attorney should review the loan modification documents with you to ensure that all of your rights and interests are protected. 

Chapter 7 Can Help Modification

A Chapter 7 bankruptcy can actually increase your chances of obtaining a loan modification because you can eliminate your credit card debts and associated payments, so that your monthly expenses no longer exceed your monthly income.  Lenders will often tell customers that if they file Chapter 7 bankruptcy in San Diego, then they may have a better chance of obtaining a loan modification.  I have had many clients whose lenders told them to file bankruptcy to increase their chances of obtaining a loan mod, then I filed their bankruptcy, and then they received a loan modification.  Some lenders will want you to wait until your bankruptcy is completed before they proceed with a loan modification application.  Each lender is different, and the lenders change their procedures regularly. You will have to consult with your lender to see what its current position is on modifying loans in Chapter 7 bankruptcy, and discuss this fully with your San Diego bankruptcy attorney.

Loan Mod in Chapter 13 Bankruptcy

If you are in a Chapter 13 bankruptcy in San Diego, it is usually less likely that you will be able to modify your loan.  The reason: in your Chapter 13 bankruptcy, your San Diego bankruptcy lawyer will file a Chapter 13 plan for you, in which you must agree to resume making you regular monthly mortgage payments and make a separate payment to the bankruptcy court to repay all of your pre-bankruptcy mortgage arrears (payments you had missed).   So your lender has little incentive to modify your loan.  It can just back and watch you pay your payments as well as the arrears, all as a mandatory condition of your Chapter 13 bankruptcy proceeding.

Can I Keep My Tax Refund If I File Bankruptcy?

When you file bankruptcy, you have to disclose to the Court all of your assets, including any anticipated tax refund, which is treated as just another asset I your bankruptcy.  If you are expecting a tax refund, you need to know,  “can I keep my tax refund if I file bankruptcy?” The answer to this question will depend partly upon whether you are filing Chapter 7 bankruptcy or Chapter 13 bankruptcy. 

Tax Refund in Chapter 7 Bankruptcy

When you file Chapter 7 bankruptcy, your bankruptcy attorney will first examine all of your assets, and then apply your bankruptcy exemptions to determine whether your tax refund is covered by your applicable bankruptcy exemptions.  If your tax refund is covered by your exemptions, then you can keep it.  If your tax refund is not covered by your bankruptcy exemptions, then you will have to give it to the bankruptcy trustee. 

Tax Refund in Chapter 13 Bankruptcy

When you file Chapter 13 bankruptcy, your future tax refunds (for future tax years) are treated as your future income.  In determining how much income you earn for purposes of funding your Chapter 13 bankruptcy plan.  This is one important reason why in Chapter 13 cases you need a skillful Chapter 13 lawyer who will be able to anticipate the appropriate amount of tax refund you are to receive and have your income and expenses reflect the tax refund appropriately.  Otherwise, you may receive an unwelcome surprise when the bankruptcy trustee objects to your bankruptcy and demands that you give the trustee all of your tax refunds for the full 5-year duration of your Chapter 13 plan.

Bankruptcy Planning

So in doing your bankruptcy planning, be sure to discuss with your bankruptcy lawyer any anticipated tax refund.  Whether the bankruptcy court and bankruptcy trustee allow you to keep your tax refund in bankruptcy, can mean the different between whether you are able to provide pay for necessities, food and shelter for your family.  Make sure that your bankruptcy attorney fully considers your tax refunds in bankruptcy and properly accounts for them in the bankruptcy planning process.

Chapter 7 and Chapter 13 Bankruptcy in San Diego

For most people in San Diego, you will file bankruptcy under one of two bankruptcy filing chapters: Chapter 7 and Chapter 13.  The chapters refer to the chapters under Title 11 of the United States Code.  In total, there are six bankruptcy filing chapters, but the other four chapters are mainly used for: (i) businesses, mainly large corporations (Chapter 11), (ii) farmers (Chapter 12), (iii) municipalities (Chapter 9), and (iv) cross-border cases (Chapter 15).  So unless you are a large corporation, farmer, municipality, or your are filing a cross-border case, your bankruptcy attorney will recommend that you file under Chapter 7 or Chapter 13.  Chapter 7 bankruptcy is mainly used to eliminate credit card debt, medical bills, judgments, and other types of unsecured debts.  Chapter 13 bankruptcy is a reorganization bankruptcy in which you repay some or all of your debts through a repayment plan, and is typically by your bankruptcy lawyer in order to stop foreclosure of your home or to erase a second mortgage or home equity loan. 

What Are the Main Reasons to File Bankruptcy in San Diego

Many people who are unfamiliar with the bankruptcy process, view bankruptcy simply as a legal proceeding that you file if you have been hard on your luck and need to get out of debt.  While getting out of debt may be a common reason that your bankruptcy lawyer may recommend that you file for bankruptcy relief, there are many other reasons to file for bankruptcy.  Bankruptcy can help you do much more than just get out of debt San Diego.  Bankruptcy offers powerful protections against harassing creditors and debt collectors.  Bankruptcy also offers important benefits that can really help you build a better financial future for your family.

Stop Home Foreclosure

Once of the most powerful bankruptcy protections is the ability to stop a home foreclosure.  The filing of a bankruptcy instantly imposes an automatic bankruptcy stay that stops creditors from taking legal actions against you or your assets.  The filing of a bankruptcy can stop foreclosure of your home, even on the day before a foreclosure sale date.   You may be behind on your mortgage payments and cannot catch up before the sale date.  Were it not for your bankruptcy rights, you would lose your home.   If you are facing a foreclosure, your bankruptcy attorney may recommend that you file for Chapter 13 bankruptcy protection, so that you can have some breathing room and pay back your missed mortgage payments over time.  Like most other laws, there are exceptions where a Chapter 13 bankruptcy won’t stop foreclosure of your house.  Be sure to discuss your situation with a San Diego bankruptcy lawyer to make sure that bankruptcy will stop your home foreclosure.

Erase Second Mortgage

One of the biggest benefits of bankruptcy is the ability to completely wipe out your 2nd mortgage or home equity loan.  There is no other proceeding that gives you an absolute right to do this, over the objection of your lender.  Under certain circumstances, your bankruptcy lawyer will be able to erase a 2nd mortgage or home equity loan, and actually remove the lien that encumbers your home, without paying any money whatsoever to your 2nd mortgage lender.  Unlike loan modification and debt settlement, which are entirely dependent upon the whim of your lender, with bankruptcy you can eliminate a 2nd mortgage or home equity loan over the objection of your lender.  If you qualify to wipe out your 2nd mortgage or home equity loan, your lender has no say in the matter.  You get to do it. 

Increase Credit Score

Another benefit that most people are unaware of is that bankruptcy can improve your credit score, often dramatically.  Where your credit score ends up a year or two after bankruptcy, has a lot to do with where your credit score is today.  In most cases, if you are seeking bankruptcy relief your credit score will be less than perfect and bankruptcy may give your credit score a significant boost.  At Bankruptcy Legal Center, the experience of the majority of our clients is that bankruptcy does increase credit score within one or two years after filing for bankruptcy in San Diego.

Stop a Lawsuit

If you have been sued, bankruptcy can offer you powerful legal protection from the party who is suing you.  Unless the lawsuit involves allegations of fraud, bankruptcy will put the lawsuit to an end.  If the lawsuit involves allegations of fraud, the party who is suing you may continue the lawsuit in San Diego bankruptcy court after you have filed for bankruptcy.  As long as there are no allegations of fraud, bankruptcy will stop a lawsuit.  Once you receive a discharge of your debts, the underlying debt upon which the lawsuit was based is eliminated.  Therefore, the lawsuit and claim of your creditor goes away forever.

Avoid Wage Garnishment

If your wages have been garnished, the filing of a bankruptcy will stop the garnishment of your wages.  Similar to stopping of a lawsuit, unless there are allegations of fraud, filing bankruptcy in San Diego will permanently stop wage garnishment.  Once you receive a discharge of your debts, the underlying debt upon with the judgment and wage garnishment were based will be eliminated.  Therefore, the wage garnishment will be stopped for good.

Your Legal Right

So what is bankruptcy?  First and foremost, it is your constitutional right.  It is also your Federal right: the entire Title 11 of the United States Code (Federal law) is devoted to setting forth your bankruptcy rights.  There is an entire set of rules called the Federal Rules of Bankruptcy Procedure that sets forth the procedure rules for exercising your constitutional right to seek bankruptcy relief.  Bankruptcy offers you many important protections from creditors and harassing debt collectors, and has important benefits that you can only obtain through the bankruptcy process.  For many people who need San Diego debt relief, bankruptcy is a practical and responsible way to get back on the road to secure financial future.  Bankruptcy is your legal right to help you protect yourself and your family.

Can I Include Property Taxes in Bankruptcy in San Diego?

In order to include property taxes in bankruptcy in San Diego, the property taxes must be more than one year old.  More specifically, property taxes are discharged (eliminated) in San Diego bankruptcy cases if your case is filed more than 1 year after the date that your property tax first became due.   If it has been less than one year since the property taxes first became due, in most cases you will still avoid paying the property taxes because either: (A) your lender will cure the property taxes and add the property taxes to your mortgage loan; or (B) you will get rid of your home and the new buyer will pay the taxes.  So, like most taxes in bankruptcy, property taxes can be eliminated in bankruptcy.

Lender Adding Property Taxes to Loan

Under California law, property taxes are a first position lien against your property, in front of all mortgage lenders.  That means that in San Diego County, property taxes are a lien in front of your home loan, even if the property taxes are for years after you took out your home loan.  If you don’t pay your property taxes in San Diego, the County of San Diego Tax Collector typically will not sue you.  Instead, the Tax Collector will hold a tax sale and sell your property at auction.  Because a tax sale would wipe out your mortgage lender’s lien, your mortgage lender will, in most cases, pay your property taxes and then add the property taxes to your loan.   If you don’t pay your lender back for the property taxes that it paid on your behalf, your lender will foreclose on your property.

New Buyer Paying Property Taxes

If you are filing bankruptcy in San Diego and no longer want to keep your property, you will either sell it, do a short sale, or let your lender foreclose.  Either way, the property taxes will remain a first position lien against the property until they are paid by someone.  If you sell or short sale your home, then as a condition of the new buyer’s home loan, the new lender will require it to obtain a loan sufficient to bring the property taxes current.   If you let your home go to foreclosure, the lender who foreclosed will usually pay the property taxes.  If it doesn’t, then the new buyer of the property will pay the property taxes, either as a condition of its new loan, or if it is a cash buyer, then it will pay the property taxes to avoid a tax sale.  

Tax Sale

If nobody pays the property taxes (not your lender, not a new buyer, etc.), then the San Diego County Tax Collector will conduct a tax sale.  However, this rarely happens in San Diego County, because there will usually be a buyer or other interested party who wants the property.  Before the Tax Collector can do a tax sale, somebody will usually pay the property taxes.

How to Respond to a Summons for Credit Card Debt in San Diego

You must timely respond to a summons for credit card debt.  Otherwise your credit card lender, or its debt collector who sued you, will obtain a judgment against you and collect its judgment through various judgment collection legal processes.  Common judgment collection legal processes include a bank levy, in which your creditor takes all of the money in your bank accounts, and a wage garnishment, in which your creditor forcefully takes your wages that you receive from employment.  It is therefore imperative that you understand how to respond to a summons for credit card debt so that your bank accounts are not levied upon and your wages are not garnished.

Defending a Credit Card Lawsuit

If you want to defend a credit card lawsuit, you have to file an answer to the lawsuit within the time frame stated in the summons delivered to you with the credit card lawsuit.  Typically, a summons gives you 30 days to respond.  In order to file an answer, you need to have a good faith defense.  Otherwise, the Court may view your answer as a frivolous answer filed solely to delay the case and could impose sanctions upon you or your attorney who helped you file the answer.  The most common legitimate defense to a credit card lawsuit is that your creditor’s accounting is inaccurate, provided you have such evidence and an accounting of your own to support your position.  Still, such a defense only affects the amount of the judgment that our creditor will ultimately obtain.  Your creditor will still obtain a judgment for an amount that is determined by the judge to be correct based upon a correct accounting.  Once your creditor obtains a judgment, your assets are at risk.  This typically means that you will be subject to a bank levy or a wage garnishment.

Bankruptcy to Respond to Summons for Credit Card Debt

If you don’t have a legitimate defense to the credit card lawsuit (in most cases, you won’t), then you may want to consider filing bankruptcy to respond to a summons for credit card debt.  The filing of a bankruptcy will stop a lawsuit for credit card debt.  Successful completion of a bankruptcy will eliminate credit card debt, and will put an end to the lawsuit seeking to collect the credit card debt.   If you plan to file bankruptcy to respond to a summons for a credit card lawsuit, you’ll need to talk to a San Diego bankruptcy attorney immediately.  You need time to schedule a consultation where you can sit down with a bankruptcy lawyer and review your options, and then your lawyer will need time to prepare and file your bankruptcy.  If your bankruptcy is filed before you are required to respond to the summons for credit card debt, you won’t have to spend the time or money on an attorney to respond to a credit card lawsuit.  Instead, the bankruptcy will end the lawsuit.  You can just file bankruptcy and let your bankruptcy lawyer handle responding to the summons for credit card debt through the bankruptcy process.

Responding to Summons in San Diego for Other Types of Debts

Your options for responding to a summons for other types of debts, are, for the most part, the same as your options for responding to a summons for credit card debt.  One possible difference is that, depending upon the type of lawsuit that is filed, your response deadline may be sooner than 30 days.  You have to read the summons.  Also, the particular type of claim sued upon may not be the type of debt that you can discharge (eliminate) in bankruptcy.  Credit card debt can be eliminated in bankruptcy, provided that there is no evidence of fraud in connection with the incurring of the credit card debt.  If you have received a summons for a lawsuit alleging fraud, and the allegations have any merit, then bankruptcy may not put an end to the lawsuit.  You may need to hire an attorney to respond to the summons and the lawsuit.  Absent such allegations, most types of debts can be eliminated in bankruptcy, and filing bankruptcy will be an effective means for responding to the summons.

Keep an Education IRA in Bankruptcy San Diego

The means by which you protect and keep an education IRA in bankruptcy is different than with other types of accounts.  With bank accounts and retirement accounts, you protect them in bankruptcy by claiming them as exempt under a particular law specifying how much you are allowed to keep in the particular type of account when you file bankruptcy.  With an educational IRA, there is no bankruptcy exemption. Instead, you protect an education IRA by specifying how much of the money in the educational IRA is, or is not, legally included as part of your bankruptcy case.  That is, an education IRA is protected not by a bankruptcy exemption, but rather by excluding some or all of it from your bankruptcy case.

Excluded from Bankruptcy Estate

When you file bankruptcy San Diego, all of your interests in your assets, including any money in your bank accounts or other types of accounts, that you own as of the filing of your bankruptcy, become part of what is called your “bankruptcy estate.”  There are certain items that are excluded from your estate.  One of these excluded items is an education IRA.  Bankruptcy law specifically provides that an education IRA is not part of your bankruptcy estate.  Only the most experienced bankruptcy lawyers will fully understand this concept. The other day, I spoke to a San Diego bankruptcy lawyer who had filed a bankruptcy for his client and mistakenly claimed the bankruptcy exemption for an IRA in an attempt to protect an education IRA, only to later learn from the San Diego bankruptcy trustee that the IRA exemption does not protect the education IRA.  Clearly, the client was not happy, and the lawyer had sought my help to rectify the situation, which may not be rectified.

Limits for Education IRA Deposit

There are strict limits on how much money you can deposit into an education IRA each year.  As of 2011, you can put up to $2,000 in an education IRA each year, for each child.  You can put money in the education IRA each year, up to the yearly maximum, until your child turns 18 years old.

How Much Can I Keep in an Education IRA?

The bankruptcy laws limit how much of the money in your education IRA is excluded from your bankruptcy estate.  If you can exclude the money, then it will not be affected by your bankruptcy and you can keep it free from the claims of your creditors.

Timing

For the education IRA to be excluded from your bankruptcy estate, you have to make the deposits at least one year before your lawyer files your bankruptcy case. That means that any amounts deposited into the educational IRA in the last year (365 days) before your case is filed, are included in your bankruptcy estate.  Only amounts deposited into your education IRA more than one year before your case is filed are excluded from your bankruptcy estate.

Disclosure in Bankruptcy

Even if your education IRA is excluded from property of your bankruptcy estate, your attorney must still disclose your interest in the education IRA in your bankruptcy case.   Your attorney is required to do this so that the bankruptcy trustee can make his or her own determination as to whether, and to what extent, the account is excluded from your estate.   Remember, not all funds in an educational IRA are protected.  For example, funds deposited in the last 365 days are included in your bankruptcy estate. 

Protect With Wildcard Exemption

If some or all of the money in your educational IRA is included in your bankruptcy estate (for example, money deposited within the last year), you still have an option for protecting the money.  You can use the Wildcard bankruptcy exemption to protect it, assuming you have not used up that exemption and you are using the Federal exemptions that include the Wildcard exemption.  A San Diego bankruptcy attorney can help you use the Wildcard exemption to protect your money in an education IRA.

Cannot Pledge as Security

In order to exclude the funds in an education IRA from your bankruptcy estate, the funds cannot be pledged as security.  Otherwise the education IRA will not be excluded from your bankruptcy estate, and your only means for protecting the funds will be the Wildcard exemption.

Rules are Complex

The rules covering education IRAs are very complex and it takes a skillful lawyer to properly protect your education IRA.  Before filing bankruptcy San Diego, talk to an experienced San Diego bankruptcy lawyer about how to protect your education IRA.

How to do a Short Sale After Bankruptcy in San Diego

How to do a short sale after bankruptcy in San Diego, depends on whether you filed a Chapter 7 or Chapter 13 bankruptcy.  If you filed a Chapter 7 bankruptcy, you can generally proceed with a short sale just as if you had never filed for bankruptcy, provided you wait until the bankruptcy trustee abandons any interest in your property.  If you filed a Chapter 13 bankruptcy, which generally takes 3 to 5 years to complete, your bankruptcy lawyer will have to obtain a Court order allowing the sale.  An experienced bankruptcy attorney should have no problem obtaining such a court order for you.

Short Sale a House after Chapter 7 Bankruptcy

If you file for Chapter 7 bankruptcy in San Diego, your house is generally treated as if you never filed for bankruptcy.  This assumes that the equity in your property does not exceed the amount allowed by your bankruptcy exemptions, and if you are considering a short sale, then by implication you do not have any equity at all in your house.  If you stay current on your mortgage payments, you will continue to be the owner of your home, subject to a mortgage.  If you fall behind on your payments, your mortgage lender will foreclose, similar to the case as if you had never filed for bankruptcy relief.  After you file a Chapter 7 case, the San Diego bankruptcy trustee will abandon any interest in your property, since you have no equity in it.  Once the trustee abandons any interest in your property, you can do a short sale whenever you want to do it.

Short Sale After Chapter 13 Bankruptcy

When you file a Chapter 13 bankruptcy in San Diego, you must decide, and affirmatively tell the Court, whether you want to keep your house, or give it up.  If you want to keep your house, then your attorney will draft a Chapter 13 plan in which you will repay all of your missed mortgage payments over a 3-5 year period.  Also, you will need to resume making your regular monthly mortgage payment as well.  If you want to give up your house, then your lawyer will inform the court of your decision and you don’t make any more payments and your lender will foreclose on your property. To short sale your property during your Chapter 13 case, your lawyer will obtain the Court’s approval to do the short sale.  Your lawyer can do this by obtaining the bankruptcy trustee’s approval and then the Court will sign an order based on the trustee’s approval.  Alternatively, your attorney can file a motion and go directly to the judge and request approval of the sale.  After your chapter 13 case is concluded, you can do what you want with your property, just as is the case after the trustee abandons property in a Chapter 7 case.

Bankruptcy Trustee Will Not Want a House With No Equity

If you don’t have any equity in your property, which will be the case if you are considering doing a short sale, then your property cannot be liquidated (sold) to generate any money to pay creditors.  Therefore, the trustee and Court won’t have any interest in your property.  The only exception would be a property that generates positive cash flow.  When the Trustee has no interest in your property, obtaining the Court’s approval serves mostly to ensure that you are not personally profiting from the short sale.   If you are somehow profiting from the short sale, the Court won’t necessarily disapprove of the sale, but it might require you to pay some or all of the profits to your creditors.   So if you need to short sale of your house after bankruptcy, in most cases you can.  With the help of a good bankruptcy attorney to guide you through the process, you can successfully do a short sale after bankruptcy.

How To Get Out of An HOA Lawsuit in San Diego

If you don’t pay your HOA dues or HOA fees, then your HOA can, and will, hire a lawyer to sue you to obtain a judgment for the unpaid HOA assessments.  It used to be that HOAs would not pay an attorney to sue you and instead would record a lien against your property, which cost significantly less than filing a lawsuit.  But as property values plummeted with the last market downturn, HOAs realized that recording a lien is often worthless.  As a result, HOAs started hiring attorneys to file lawsuits against homeowners to obtain judgments against homeowners.  To get out of an HOA lawsuit in San Diego, you'll want to talk to an attorney.  If you have already filed bankruptcy, your best option will be to settle the case and get on a payment plan.  If you have not filed bankruptcy, you should consult with a San Diego bankruptcy lawyer and get rid of the lawsuit with your bankruptcy filing.

Do I Have a Defense to an HOA Lawsuit?

In most cases, there isn't any defense to an HOA lawsuit.  It is very easy for the HOA to win the lawsuit.  The HOA simply has to prove that you are an owner and that you didn’t pay your HOA dues.  The HOA proves you are an owner by showing that you are on title as reflected in the records of the San Diego County recorder, and they prove that you didn’t pay your HOA assessments by producing an accounting.  The result is: the HOA wins and you lose.  What is more, under most CC&Rs, you are also liable for the HOA’s attorneys fees and costs incurred in collecting the delinquent HOA assessments.  That means that if you are in an HOA lawsuit, there is a very good chance that a judgment will be entered against you, not only for the HOA fees for the time that you are an owner of the property but also for the attorney’s fees that the HOA paid to its attorney who is suing you.

Should I Respond to an HOA Lawsuit?

Because an HOA lawsuit is usually very easy for the HOA to win, you will usually be harming yourself by responding, since you will only cause the HOA’s lawyer fees to increase.  The result will be a larger lawyer fee award added to the judgment against you.

Ignoring an HOA Lawsuit

Ignoring the HOA lawsuit is also a bad idea because the HOA will automatically obtain a default judgment against you, plus an award of its lawyer fees.  Then the HOA will proceeding to attempt to enforce its judgment against you, by doing a bank levy, a wage garnishment, or other judgment collection remedy.  This means more lawyer’s fees that you will ultimately have to pay for.

Settlement of an HOA Lawsuit

You can try to enter into a settlement with your HOA or its attorney.  However, most HOA lawyers will demand full payment of the delinquent HOA assessments, plus any attorney’s fees incurred to date, through a payment plan.  So unless you are willing to repay all of the HOA dues plus lawyers fees, settlement is not your best option.

File Bankruptcy on an HOA Lawsuit

Often, HOA lawsuits arise after you abandon a property that you no longer want, only to be surprised down the road that you are now on the hook for HOA fees.  For many people who have been served with an HOA lawsuit, they are facing financial hardship and could benefit from obtaining bankruptcy debt relief.  You can file bankruptcy on an HOA lawsuit.  Bankruptcy will stop a lawsuit instantly, including an HOA lawsuit.  Bankruptcy can be a good option to help you get out of an HOA lawsuit in San Diego.

Talk to a Lawyer

If you have received an HOA lawsuit you are likely asking yourself, “what can an HOA do to me?”  The best advice is to talk to a lawyer immediately and discuss your options for dealing with the HOA lawsuit.  Without the help of an attorney, there is little you can do and you are almost certain to lose the HOA lawsuit.  If you wait too long, you may lose important legal rights.  With the help of a bankruptcy lawyer, you can get out of debt San Diego, stop an HOA lawsuit, and get a fresh start.

How Can I Claim a Homestead Exemption for a Trailer or Mobile Home?

When you file bankruptcy in San Diego, the property you get to keep is dictated by California's set of bankruptcy exemptios.  California has 2 sets of exemptions: (1) the California exemptions; and (2) California's Federal-like exemptions, which I will refer to simply as the Federal exemptions.  Both the California exemptions and the Federal exemptions have a homestead exemption, that allows you to keep a certain amount of equity in your home when you file bankruptcy. 

California Homestead Exemption

The California homestead exemption specifically allow you to claim any real estate or personal property where they live as a homestead.  The exemption states that it applies to any "dwelling" (a place that you live), and further states that a dwelling includes, but is not limited to, a mobile home, together with the land on which it sits.  The intention of the statute is to include any real property or personal property, just like the Federal exemptions.  So a trailer is covered by the exemption as well.  When you file bankruptcy, your lawyer can claim the California homestead exemption for your trailer or your mobile home.

Federal Homestead Exemption

The Federal homestead exemption specifically states that you can claim a homestead exemption for any real property or personal property that you use as a residence. Real property is a term lawyers use to refer to real estate, whether the real estate is developed with a house or other structure situated on it, or even if it is just undeveloped, raw land. Personal property is a term attorneys use to refer to any asset that you own other than real estate. For example, your car, a motorcycle, your personal belongings, a camper, a trailer, etc., would all be your personal property.  Even the Federal exemptions, just like California's Federal-like exemptions, provide for a similar homestead exemption.  This is important because if you have not resided in California for the past 2 years, the exemption laws of a different state may apply, or the Federal exemptions may apply.

Your San Diego Bankruptcy Attorney Must Claim Your Exemptions

When you file bankruptcy, your San Diego bankruptcy attorney must claim the appropriate homestead exemption in order for you to keep your property where you live.  So if you live in a trailer or a mobile home in the greater San Diego area, you can claim the homestead exemption for your trailer or mobilehome, so long as your lawyer claims the homestead exemption that is applicable to your situation.  With the help of an experienced bankruptcy attorney, you can file bankruptcy San Diego and keep your trailer or your mobile home.

What Happens to My Inheritance in Bankruptcy in San Diego?

When you receive inheritance, it becomes one of your assets.  If you receive money, then the money deposited in your bank account is one of your assets.  If you receive real estate as inheritance, then the moment you are put on title to the real estate, it becomes one of your assets.  In addition, for bankruptcy purposes, once you acquire a right to inheritance where someone has died, that right to acquire inheritance is treated as one of your assets in your bankruptcy.

Inheritance Before Bankruptcy

If you receive any money, property or other asset by way of inheritance before bankruptcy, then the money, property or asset that you received is treated just like any other asset in your bankruptcy case. To determine whether the item acquired through inheritance will be property you keep in bankruptcy San Diego, you will have to assess the value of the equity in the property or asset.  If the equity property or other asset is covered by your applicable bankruptcy exemptions, you’ll get to keep it.  Otherwise, the San Diego bankruptcy trustee will take control of it, sell it, and use the money to pay your creditors.

Inheritance After Bankruptcy

If you receive, or become entitled to receive, any property, money or other assets by way of an inheritance within 180 days after your bankruptcy filing, then the property, money or other asset you received becomes part of your bankruptcy.  It is treated as if you had the property, money or asset prior to filing bankruptcy. For example, if you are a beneficiary entitled to receive a home in San Diego under a will, and the person who willed the home to you dies 179 days after your bankruptcy, then the home is treated as if you owned it prior to filing bankruptcy.  If the equity in the home is covered by your applicable exemptions, you’ll get to keep it.  Otherwise, the bankruptcy trustee will take control of it, sell it, and use the money to pay your creditors.

Inheritance More Than 180 days After Bankruptcy

If you receive the money, property, or other assets through inheritance more than 180 days after your bankruptcy filing, then the items you receive are not part of your bankruptcy case.

Duty to Inform San Diego Bankruptcy Court

If you receive any property or other asset through inheritance within 180 days after you file bankruptcy, you have a duty to inform the San Diego bankruptcy court.  In practice, you would tell your bankruptcy lawyer, and your bankruptcy lawyer would relay the information to the San Diego bankruptcy trustee and the court.

Planning

Part of bankruptcy planning may involve planning to keep your inheritance.  For example, if you expect inheritance from someone who is ill and may soon pass on, you should discuss this with your attorney.  Depending upon the circumstances, your attorney may recommend that you not hold off on your bankruptcy filing (unless there is a reason to hold off), to increase your chances that the inheritance will be acquired more than 180 days after your bankruptcy filing and thus excluded from your bankruptcy.

Talk to a San Diego Bankruptcy Lawyer

If you are entitled to receive an inheritance and you need to file bankruptcy to get out of debt, talk to a San Diego bankruptcy lawyer as soon as possible to protect your interests.

How To Respond to a Credit Card Lawsuit in San Diego

To respond to a credit card lawsuit in San Diego, you can file an "answer" to the lawsuit, or you can file a variety of motions, provided you have legal grounds to do so. For example, if you were not properly served, you could file a motion challenging the service. If the lawsuit is not properly pleaded (it lacks the proper legal information that must appear in the lawsuit to make it a viable lawsuit), then you can file a "demurrer" (in state court) or a "motion to dismiss" (in Federal court), requesting that the lawsuit be dismissed.

Answer or Other Response to Credit Card Lawsuit

When you file an answer or response, you'll need to have a defense.  Otherwise, you could get sanctioned from filing an answer or response in bad faith just to delay the case.  You will also have to pay a substantial fee, called a first appearance fee.  If you want to have a prayer of winning the lawsuit, you will also want to hire an experienced lawyer who specializes in defending the type of lawsuit that you are faced with.  That means lots of money paid in lawyer fees.

Don’t Do Anything

If you ignore the credit card lawsuit and don’t do anything, then your time to respond will expire and your credit card lender, or its debt collector, will automatically win the credit card lawsuit by what is called a “default judgment.”  A default judgment carries the same weight as an ordinary judgment obtained after trial.  Once the party obtains a default judgment against you, then can proceed to collect the judgment, including doing a bank levy or a wage garnishment of your wages that you receive from employment.

Settlement of Credit Card Lawsuit

You can try to enter into a settlement with your creditor or its debt collector.  Most creditors will entertain a settlement where you pay a discounted amount in a lump sum, or pay the entire amount in payments. The problem is: once a creditor has hired an attorney to sue you, the attorney will typically push to have the entire amount be paid in full (as opposed to a discounted settlement), because the lawyer wants to bring back a successful result for his or her client.  That is, the lawyer wants to show his or her client that the lawyer was able to obtain a judgment for the full amount demanded. In addition, the attorney who filed the lawsuit will typically encourage his or her client to also require payment of the attorney’s fee, in order to justify the lawyer’s fee that was charged for filing the credit card lawsuit.

File Bankruptcy on Credit Card Lawsuit

Perhaps the most powerful and most cost-effective option you have for responding to a credit card lawsuit is to file bankruptcy on a credit card lawsuit.  Your bankruptcy lawyer will first have to make sure that you can qualify for bankruptcy, and that bankruptcy is the right San Diego debt relief solution for your overall financial situation.  When you file bankruptcy, any credit card collection lawsuits that were filed against you will disappear, assuming that there are no allegations of fraud or other wrongdoing in connection with the incurring of your credit card debt.  Bankruptcy can put an immediate end to a credit card lawsuit, and help you get out of debt San Diego and get a fresh financial start.

Talk to an Attorney

If you have been served with (delivered) a credit card lawsuit and summons, contact an attorney right away and discuss your options for how you can respond to a lawsuit and respond to a summons for credit card debt.  Time is of the essence.  You must act fast to protect your rights.

Do I Have to File a Homestead Declaration to Claim a Homestead Exemption?

San Diego residents can choose from one of two sets of bankruptcy exemptions: (1) the California exemptions; or (2) California’s Federal-like exemptions, which for the most part mirrors the Federal exemptions and will hereafter be referred to as simply the Federal exemptions.  Both the California exemptions and California's Federal-like exemptions have a homestead exemption.  The homestead exemption is automatic for your home, and a homestead declaration is not needed to claim the exemption.  But filing a homestead declaration does have important benefits.

The Homestead Exemption

The homestead exemption is the particular exemption that states how much in equity in your home you are allowed to have, and still keep your home when you file bankruptcy.  If your equity in your home exceeds your homestead exemption amount, then you would have to give up your home if you file bankruptcy.  Both the California exemptions and the Federal exemptions have a homestead exemption.  California’s homestead exemption is much more generous than the Federal homestead exemption. The Federal homestead exemption protects $22,075 in equity in your home, where as the California exemption protects $75,000, $100,000, or $175,000 in equity in your home depending upon your marital status and other factors.

Automatic For Your Home

Frequently, a new client will call me and ask whether they need to file a “Homestead Declaration” or “Declaration of Homestead” in order to claim a homestead exemption in bankruptcy their my home. In California, the homestead exemption is automatic when you file bankruptcy, by virtue of your ownership of your home, provided that you are living at your property at the time of your bankruptcy filing and you continue to live there during the pendency of your bankruptcy case.  You don’t always need to have your attorney file a Homestead Declaration prior to bankruptcy to claim the exemption when you file bankruptcy San Diego.  As far as claiming the homestead exemption in bankruptcy San Diego, so long as you reside at your property on the day you file bankruptcy and continue to reside there during your bankruptcy, the homestead exemption is automatic for residents of San Diego, California, and provided that your bankruptcy lawyer properly claims the automatic homestead exemption for you in your bankruptcy schedules.  But there are advantages to filing one. 

Important Benefits to Filing Homestead Declaration

There are certain important advantages to filing (recording) a Homestead Declaration.   These are discussed in our blog post entitled "Benefits of a Homestead Declaration."

Residency Requirement for Bankruptcy in San Diego, California

For many years, people would move to San Diego and file bankruptcy in San Diego, only to take advantage of California’s generous set of exemptions.  In an effort to curtail what the California legislature perceived as abuse of the Federal bankruptcy system, in 2005 the federal bankruptcy laws were amended to set forth a residency requirement.  Under the residency requirement, your bankruptcy exemptions are determined by the exemption laws of the state where you lived for the two-year period prior to the date that you filed for bankruptcy.  So, if you lived out of state for the last two years and you just moved to San Diego, you will not be able to use California’s exemptions until you have lived in San Diego (or in the State of California) for at least two years.

Residence in Multiple States 

If you have lived in more than one state during the last two years, then your exemptions are determined by the laws of the state where you resided during the 180 period prior to the last two years.  So, for example, if you lived in San Diego for the past year and you lived out of state for the year before that, then you have to look back to where you lived in the 6-month period before the last two years.  That will determine the state’s exemption laws that apply to your bankruptcy in San Diego.

All States Have Exemption Laws 

The mere fact that another state’s exemption laws apply will not necessarily be detrimental to your case.  All states have exemption laws, and you may find that the exemption laws of another state are sufficient to protect all of your assets.  What is critical, is that before filing bankruptcy in San Diego, if you have lived in more than once state during the last two years, you consult with a San Diego bankruptcy lawyer and discuss what exemption laws will apply to your case and what is the best course of action to protect all of your assets.  

Out of State Expertise 

The legal expertise of many San Diego lawyers does not extend past the legal universe of California law; not all San Diego lawyers will understand the bankruptcy exemption laws of other states.  But the most experienced San Diego bankruptcy lawyers will have a firm understanding of how the exemption laws of all the 50 states work and will be able to give you sound legal advice even if you have resided in multiple states over the past few years.  Also, when residency is an issue, a good bankruptcy lawyer will consult with a lawyer from another state to verify that your assets will be protected under the other state's bankruptcy exemptions.

Can I File Bankruptcy If Somebody Owes Me Money? 

When you file bankruptcy, all of your assets are included in your bankruptcy, and you are only allowed to keep a certain amount of assets when you file bankruptcy.  This includes money owed to you such as written promissory notes or oral promises by others to pay you a certain sum of money.  The amount of property you keep when you file bankruptcy is determined by your applicable bankruptcy exemptions. 

If somebody owes you money, whether in the form of a promissory note, or simply an oral promise to pay you, then the money owed to you is just another asset in your bankruptcy case and will be listed by your attorney in your bankruptcy schedules as one of your assets.  If the amount of money owed to you is within the amount permitted by your applicable bankruptcy exemption, then you can file bankruptcy and retain the right to the money owed to you.  If, or to the extent that, the money owed to you is more than what you are allowed to keep under your bankruptcy exemptions, then the bankruptcy trustee will have the right to collect the excess money and distribute it to your creditors.
 

For example, lets say you file bankruptcy and somebody owes you $25,000, and your applicable bankruptcy exemptions allow you to keep $23,000.  In that case, if you file bankruptcy, you will retain the right to $23,000 of the owed to you and the bankruptcy trustee would acquire the right to collect the other $2,000 for the benefit of your creditors.  If the money owed to you was only $20,000, then you would retain the right to keep it all.

Even in cases where the money owed to you exceeds your applicable bankruptcy exemptions, you can pay the trustee, in cash, an amount equal to the non-exempt amount ($2,000 in the example above) and retain the right to the entire amount owed to you.  This is referred to in bankruptcy as “buying back your nonexempt equity” from the bankruptcy trustee.

There may be other ways to protect your right to collect the money, or the person or entity who owes you money may be a secured creditor, in which case the bankruptcy trustee may not even be able to assert rights over the nonexempt equity.  If you have money owed to you, then you should consult with a San Diego bankruptcy attorney to discuss your available options and the recommended course of action for protecting your interest.

Do I Have to File a Tax Return If I Did Not Make That Much Money?

A question that is more common than you may think is: Do I have to file taxes?  Believe it or not, some people actually don't have to file taxes.  Depending upon your income level, you may be exempt from the requirement of filing a tax return.  So how do you know if you make enough money to that you have to file taxes?  Here are the general rules:

Employment Classification

First, you need to consider your employment classification: are you an employee, or are you self-employed?  Self-employed means you have your own business or you work as independent contractor and receive a 1099 each year?  If you are an employee, then there is a much higher threshold, in the $10,000 to $20,000 range, depending upon your age and filing status.  If you made less than the threshold, you don't have to file. 

Filing Income Threshold

To get the exact figures, which change each year, simply go to the IRS website and look at the instructions to the Form 1040 for the particular year for which you are filing.  The instructions to Form 1040 will have a chart that will set forth the threshold numbers for your tax year.  The chart is usually located in the beginning of the Form 1040 instructions, under the section, “Do you have to file?” For example, for the 2010 tax year, the instructions to Form 1040 provide that you only have to file a tax return if you made at least $9,350 in gross income (if you are single) or $18,700 in gross income (if you are married).  If you are over 65, these numbers increase to $10,750 gross income (if you are single), $19,800 gross income (if you are married), or $20,900 gross income (if you are married and your spouse is also over 65). 

Does Social Security Income Count?

If you receive social security income (SSI), then you do not count the SSI income toward the threshold limits.  For example, for the 2010 tax year, if you received $12,000 in social security income plus $9,000 in employment income, you would be under the $9,350 threshold and you don't have to file taxes.

Self-employed

If you are self-employed, then there is a very low threshold point at which you must file taxes. For example, for the 2010 tax year, the threshold number is $400. If you are self-employed and you made at least $400 during the year, then you have to file a tax return.

You May Want to File Taxes

Even if you don't have to file, you may still want to file.  For example, if you were an employee and you made $8,000, you may want to file to receive a tax refund check for any amounts that were deducted from your paycheck throughout the year.  In addition, you may be entitled to a tax credit, which, again, could mean receiving a refund check from the IRS.  You may be entitled to various tax credits, including but not limited to, earned income credit, child tax credit, adoption credit, health insurance coverage tax credit, first-time home buyers credit, or other tax credits. 

Consult with a Lawyer

Most importantly, do not take it upon yourself to determine whether you need to file taxes.  Talk to a lawyer.  The threshold numbers are always changing, and as with most areas of the law, there frequently are exceptions to the general rules.   Also, you should have a lawyer determine whether you should file to receive tax creditors.

Can a Creditor Garnish My Social Security Income? 

Pursuant to federal law, social security income (SSI) is exempt (protected) from garnishment, and is exempted from bank account levy by ordinary creditors.  In fact, ordinary creditors cannot use any judgment collection remedy to take your social security income.  That means that an ordinary creditor cannot garnish your SSI by serving a wage garnishment order upon the Federal Government and cannot serve a bank levy upon your bank account in which you deposit your SSI income.

Government As Creditor

But what if your creditor is a government entity?  There are certain government debts that can be collected through garnishment of social security.  The most common of these include, back taxes to the IRS, federal student loans, and VA loans.  If you don’t pay these types of debts, your social security income can be garnished and your social security income in your bank account can be levied upon and seized. Past due child support and alimony are another type of debt that can be collected by garnishing your social security or doing a bank levy on the account where your social security is deposited, though it is less common for the government to take your social security for these types of domestic support obligations. If it decides to take your social security income, typically the Federal Government will garnish your social security by simply deducting a certain amount and then sending you the remainder in the form of a smaller social security check or direct deposit.

How Much Social Security Is Garnished?

When social security is garnished, typically 15% of your social security check or deposit is taken each month until the debt is paid in full.  This is not as harsh as an ordinary wage garnishment, in which 25% of your wages are garnished, but it still is a signifcant drain on your income.  Depending on the amount of the garnishment, the 15% garnishment per check may last for many years to come.

Bank Levy on Social Security Deposit Account

In some situations, the government will do a bank levy. The IRS especially, has been known to frequently to a bank levy and take the money in your bank account, even if it is social security income, in repayment of back taxes. Remember, ordinary creditors cannot levy on your account in which only your social security is deposited?  If a creditor does a bank levy and seized social security income in your bank account, you need to have your lawyer file appropriate paperwork with the San Diego sheriff or the court and request for the return of your social security income. And if an ordinary creditor is threatening to levy on your bank account in which your social security is deposited, your lawyer should provide them with a formal written notice to cease and desist.

700 Credit Score After Bankruptcy

Once you file bankruptcy and start with a clean slate, your next goal will be, to increase credit score.  A lot of where your credit score is, and where you can get it to, will depend on where your credit score is before you file for bankruptcy.  For example, if you maintained all of your accounts in perfect status and had a credit score in the 800s on the day that you file for bankruptcy, then you may have a 700 credit score one year after you file bankruptcy.  Now you may ask, “who would file bankruptcy with an 800 credit score?”  Well, you’d be surprised.  Imagine that you have a $700,000 mortgage and took out a $200,000 home equity loan, and the value of your home has dropped to $450,000.  You can’t just walk away from your property and let it go to foreclosure, because you’ll end up being liable for a $250,000 home equity loan that is wiped out by the foreclosure.  You’ll have to file bankruptcy to eliminate the home equity loan debt.

When faced with a situation where you have excellent credit and are considering bankruptcy to get rid of a home equity loan debt, most people would just let their property go to foreclosure and live there for as long as possible without making mortgage payments.  But if you have excellent credit, that may not be the best plan of action.  If you file bankruptcy while you have excellent credit, your credit score will be high at the time you file bankruptcy.  If you miss some mortgage payments, your credit score will suffer and be lower at the time that you file bankruptcy, and your after bankruptcy credit score will suffer. 

So, lets go back to how you can attain a 700 credit score after bankruptcy.  One way would be starting with a score in the 800s on the day that you filed bankruptcy, as in the scenario described above.  The other way, would be to work on gradually and steadily rebuild credit.

It has been my experience, in the San Diego bankruptcy process, that clients who steadily rebuild their credit after bankruptcy, on average, enjoy a credit score in the low 600s within one to two years after bankruptcy.  In my blog 600 Credit Score, I explained how many bankruptcy filers have a 600 credit score within a couple of years after filing bankruptcy.  These same clients, if they continue to practice good credit habits and rebuild credit, can often attain a 700 credit score after bankruptcy within about 4-5 years, even while a bankruptcy is still on their credit report.

Now there is no guarantee that just because you practice good credit habits you’ll have a 700 credit score five years after bankruptcy in San Diego, and there is no guarantee that the FICO scoring system will not change significantly over the years. 

Also, the more loans you have in good repayment status, the faster you’ll be able to raising your credit score.  If you don’t have any car loans or home loans, it will take you longer to raise your credit score to the 700s than someone with a home loan and two car loans that pays all of those loans on time after bankruptcy. 

The best you can do is talk to a San Diego bankruptcy attorney, review your situation in detail, and see what clients in your similar situation have been experiencing with their credit score after bankruptcy.  If people in your similar situation are enjoying a 700 credit score within 4-5 years after bankruptcy, then you can reasonably hope for the same result.

Pass Means Test When Over Median With the Help of a Bankruptcy Lawyer

Just what does it mean to be over or under median?  The “median” income, for bankruptcy purposes, means the median family income (published by the U.S. Census Bureau) for a household of your size.  For example, if you are married and have two kids, you would be a household of 4 people and you would need to look to the median income for a household of 4 to see if you are above or below the median income.  If you are under median, you automatically pass the bankruptcy Means Test.  If you are over median, you can still pass, but you will definitely need the help of an experienced San Diego bankruptcy lawyer.

Passing When Over Median

If you are over median, your bankruptcy lawyer can sometimes still get you to pass the Means Test, depending upon your expenses. If you have a large mortgage payment, or several car loans, or pay a lot of money each month for child care, you may be able to pass the Means Test.  Similarly, if you have a large child support or alimony payment, your bankruptcy attorney may still be able to get you to pass.  The higher your income is above the median income, the harder it will be, even for the most skillful attorney, you get you to pass the Means Test. 

Home Loans Help You Pass

The reason that a home loan can help you pass is that whatever the amount of your mortgage payments and property taxes, you get to deduct from your income to see if you pass the Means Test.  The Means Test gives you a certain allotment for home mortgage or rent expense.  If you rent your home, then you simply get the mortgage/rent allowance.  If you own your home and have a mortgage, you get to deduct the entire mortgage payment, no matter the amount.  For example, if you are a household of 2 people and you rent, you would receive the mortgage/rent allowance of, let’s say, $1,700 (this is strictly for the sake of example).  But if you owned your home and had a $5,000 mortgage payment, you would be able to deduct $5,000 per month from your income to see if you can pass the test.

Car Loans Help You Pass

Similar to home loans, car loans let you pass.  If you don’t have a car loan, you get a small allowance for transportation expenses.  But if you have a car loan, you get both the transportation expense allowance, plus your car loan payment as a deduction from your income in determining if you can pass the Means Test.

Child Car Helps You Pass

For many people who pay for childcare, this can be a huge expense.  The bankruptcy Means Test allows you to claim your entire child care expense as a deduction to help you pass the Means Test.  That means that if you pay $1,000 per month for day care, you could be $1,000 over the median income (on a monthly basis), and still pass the means test.

Schedule a Consultation

To truly determine if you can pass the Means Test you should schedule a consultation with a San Diego bankruptcy attorney.  An attorney can sit down with you and actually calculate your disposable income based upon the bankruptcy court test to see if you pass or fail the Means Test.

Should I File for Chapter 13 Bankruptcy In San Diego

So, why would someone want to file for Chapter 13?  Chapter 13 is a repayment bankruptcy.  It is used to repay part or all of your debts over time, or to seek debt relief in cases where you cannot qualify for bankruptcy under Chapter 7. In a Chapter 13, you propose a repayment plan and repay a percentage of your debts over a three to five-year period.   Once you complete your Chapter 13, you remaining debts (the ones that you did not repay in your Chapter 13 case) can be eliminated.

Protections of Chapter 13

Among the protections of bankruptcy, the main protections are found in Chapter 13.  While Chapter 13 has many special protections, the protections often come at a price, because in a Chapter 13 case you will typically be required to making payments (it is a repayment bankruptcy) to a bankruptcy trustee for a three to five year period.  Perhaps the most important protection of Chapter 13 is that you can permanently stop foreclosure of your home by repaying your missed home loan payments over time.

Benefits of Chapter 13

There are special benefits of bankruptcy that are only available in a repayment bankruptcy such as Chapter 13.   One of these benefits is called lien stripping.  In a Chapter 13 case, you can wipe out your 2nd mortgage or home equity loan through the lien stripping process.  Another huge benefit of Chapter 13 is that you can spread out the payments on your car loan over 5 years.  So, for example, if you have only 2 years left on your car loan, you can spread out the repayment term over 5 years, which will result in lowered payments.  Plus, depending on how long it was since you took out your car loan, you can repay on the value of the car instead of the car loan balance.

Eliminate Credit Card Debt in Chapter 13 

Similar to Chapter 7, you can eliminate your credit card debt too, but how much of your credit card debt you will be able to eliminate in a Chapter 13 case depends upon your available disposable income.  The bankruptcy court will apply a disposable income test to determine how much of your credit card debt, if any, you will have to repay in a Chapter 13 case.   If your income is really low, you may not have to pay anything.  If your income is really high, you may have to repay all of your credit card debt.   If you have average income, you may have to pay 25% or 50% of your credit card debt, or whatever percentage the bankruptcy test requires you to pay. 

Chapter 13 Attorney

A Chapter 13 attorney that specializes in Chapter 13 bankruptcy can explain the protections and benefits of Chapter 13, and advise you if you should file Chapter 13 relief.  If you are facing a home foreclosure, or need to wipe out a second mortgage or home equity loan, talk to a Chapter 13 bankruptcy attorney San Diego, to see if Chapter 13 is the right remedy for your situation.

Should I File for Chapter 7 Bankruptcy in San Diego?

Chapter 7 bankruptcy will usually be recommended by your bankruptcy lawyer when you need to get rid of unsecured debts.  Common types of unsecured debts that are eliminated in a Chapter 7 case include credit cards, medical bills, and judgments.  Filing for Chapter 7 bankruptcy in San Diego can help you expeditiously eliminate credit card debt and other unsecured debt, so you can have a fresh start.

Benefits of Chapter 7

Of the important and main benefits of bankruptcy, the main benefit of Chapter 7 is that you can eliminate your credit cards, your medical bills, and any judgments, and most other types of unsecured debts, so that you can start with a clean slate. Another important, and often overlooked, benefit of Chapter 7 is the ability to lower car loan payments by buying back your car for its value through the redemption process.  Redemption allows you to purchase your car for its value, instead of paying off the current loan balance.  If you don’t have the money to repurchase your car, there are companies that will give you a loan for that purpose.  If the value of your car is a lot less than the loan balance, then redemption can be  huge benefit.

Protections of Chapter 7

The main protection of Chapter 7 bankruptcy is that upon the filing of your case an automatic bankruptcy stay goes into effect that will stop phone calls from harassing creditors and debt collectors.  Foreclosure is also stopped temporarily, but to permanently stop a foreclosure, you would need to file a Chapter 13 case.

Credit Card Bankruptcy

Chapter 7 is frequently referred to as a credit card bankruptcy, since one of the main reasons that people file for Chapter 7 is to eliminate your credit card debt.  If your credit card debt is out of control, you may want to consult with a bankruptcy attorney to see if a Chapter 7 credit card bankruptcy is the best solution to help you get debt relief.

Talk to a Chapter 7 Lawyer

A Chapter 7 lawyer that specializes in Chapter 7 bankruptcy, can determine if Chapter 7 is right for you.  If you are suffering from unmanageable credit card debt, medical bills, judgment debt, or other types of unsecured debts, talk to a Chapter 7 bankruptcy lawyer in San Diego to see if you should file for Chapter 7 bankruptcy.

Bad Credit and Bankruptcy and Military Security Clearance 

Security clearance allows you to access and review classified government information when accessing or reviewing such information is a necessary part of your job with the military or as government contractor.  Because you are accessing such sensitive information, the government wants to make sure that you to be a responsible citizen, so that you will handle the sensitive information in a responsible manner. Military security clearance therefore commands great responsibility.  For this reasons, having bad credit, by itself, can have a significant adverse effect upon your military security clearance. If you have bad credit, the military can, and often does, revoke your security clearance as a result of having bad credit. Your security clearance can also be revoked for ignoring your debts, which is both equivalent to bad credit and shows a lack of financial responsibility.

Bankruptcy Can Save Security Clearance

Often, in a situation where the military is about to revoke your military clearance due to bad credit, filing a bankruptcy can save your security clearance.  A military bankruptcy, that is, filing a bankruptcy while you are in the military, shows that you are tackling your debt problems head on.  It shows that you are a responsible person, much more than a person who is in the military and is ignoring his or her debts.

How Bankruptcy Affects Security Clearance

Filing bankruptcy, by itself, will not automatically disqualify you from keeping your security clearance.  The right to file bankruptcy is your legal right stemming from the U.S. Constitution and spelled out by Federal law.  The filing of a bankruptcy prompts the security section to review your financial situation and the circumstances that led to your bankruptcy filing to see whether you are still are a responsible person that can be trusted to responsible handle sensitive classified information.

Mitigating Factors 

If you filed bankruptcy as a result of an unanticipated, unforseen event, then that would be a mitigating factor showing that you even though you filed bankruptcy you still are a responsible person.  For example, a family member may have been involved in an accident and incurred unplanned medical bills that you cannot pay.  If you file bankruptcy to eliminate the medical debt, this wouldn’t necessarily be irresponsible.

Abusive Bankruptcy 

If your bankruptcy is abusive, such as if you clearly planned a bankruptcy filing, that would tend to show you are not a responsible person.  For example, if you charged up $50,000 in charges in one year on your credit card for luxuries and then filed a credit card bankruptcy, the security section would likely view this as very irresponsible behavior.  Using your credit cards to buy expensive luxuries that you cannot afford and then filing bankruptcy to eliminate credit card debt is not a responsible behavior.

Case-By-Case 

There is no hard and fast rule as to how bankruptcy affects security clearance.  The security section will look at bankruptcy filing on a case-by-case basis to see if you have been financially responsible or not. 

Job Performance

Your job performance will also be a big factor.  If you are a valued worker, then you will be more likely to retain your security clearance after bankruptcy.

Relationship With Command

Your job performance and your relationship with your chain of command will also be a big factor. If you are a valued worker and you have a good relationship with your command, then you will be more likely to retain your security clearance after bankruptcy. 

Level of Clearance

Your level of clearance will also be a factor.  Whether you have top secret clearance versus a lower level clearance, such as secret clearance or confidential clearance, will be a weighing factor.

When You Have a House In Foreclosure, Talk to a San Diego Bankruptcy Attorney

When you fall behind on your mortgage payments, your mortgage lender cannot just foreclose on your house without notice.  Your lender must record a Notice of Default and give you 90 days to bring your loan current and avoid a foreclosure.  Once you receive a Notice of Default, it means that your house is in foreclosure.  The most important thing you can do if you is to immediately seek the assistance of an attorney.  Many people put all of their eggs in one basket, and hope to obtain a loan modification that will save their home in foreclosure.  But loan modifications are hard to get, and if you don’t get one you may lose your home in a foreclosure.

Notice of Default Cure Period

One of the main protections provided by law to protect you is the Notice of Default cure period.  Your mortgage lender cannot just foreclose on your house without notice.  Your lender must strictly follow detailed statutory procedures, including the filing of a Notice of Default and then giving you a statutory, 90-day period to bring your loan current and avoid a foreclosure.

Loan Modifications are Very Hard to Get

If you have ever tried to get a loan modification, you will know first-hand that loan modifications are hard to get.  A very small percentage of loan modification requests are granted.  If you are pursuing a loan modification in hopes that a medication will save your house in foreclosure, you should simultaneously meet with a bankruptcy attorney, so that you have a back up plan to save your home.

Notice of Trustee Sale

After the 90-day Notice of Default period expires, your mortgage lender cannot just run down to the courthouse steps and conduct an auction sale of your home.  There is another measure of protection provided in the statutory procedures regulating foreclosure, which requires that your lender file Notice of Sale.  The Notice of Sale, once filed, formally sets a date for the foreclosure sale of your home, and gives notice of the foreclosure sale.  Usually, the sale date is set for 20-30 days after the day that the Notice of Sale is filed.  If you have received a Notice of Sale and you still have not consulted with a lawyer, you need to pick up the phone immediately and call a lawyer now.

Chapter 13 Bankruptcy

The bankruptcy laws provide you with a powerful legal remedy when you have a home in foreclosure.  Specifically, by filing a Chapter 13 bankruptcy, you can repay your missed payments over time, or at least until you can come up with the money and dismiss your Chapter 13.  By repaying your missed payments, you bring your loan current and therefore avert a foreclosure of your home.

Complete Chapter 13, or Get Out of Chapter 13 Early

One of the great things about Chapter 13 is that you can either complete your Chapter 13 bankruptcy and bring your mortgage loan by repaying all of the missed payments, or if you can get a loan modification or somehow come up with the money required to bring your loan current, you can dismiss and end your Chapter 13 case.  You can dismiss a Chapter 13 case practically as a matter of right, provided there are no allegations of fraud or abuse of the Chapter 13 process.  Once dismissed, you are no longer in bankruptcy and no longer have to make Chapter 13 plan payments to a bankruptcy trustee.   So if you have to file Chapter 13 to save your home in foreclosure, you now know that it doesn't mean that you're stuck in Chapter 13 for the next 5 years.  If you are able to bring your loan current, your San Diego bankruptcy attorney can end your Chapter 13 case at any time.

Bankruptcy Can Stop a Foreclosure Notice of Default

If you have received a Notice of Default, followed by a Notice of Sale, then your house is facing an imminent foreclosure.  You have to either pay all of your missed payments, or file a bankruptcy before the sale date.  Otherwise, you will lose your home.  When you have a house in foreclosure, filing bankruptcy can stop foreclosure of your home, even if you file on the eve before the foreclosure sale date.

Why Your Lender Has a Right to Foreclose

When you take out a home loan, you sign two separate documents (among a stack of other documents) that give your lender the right to foreclose on your house if you don’t timely repay your loan as agreed. You sign a promissory note agreeing to repay your home loan, and you sign a deed of trust that is recorded against your house as security for the loan. It is important to understand how the promissory note and deed of trust work together. 

In California, the deed of trust that you sign, also called a trust deed, gives your lender what is called a power of sale.  The power of sale is to the effect that if you don’t pay your home loan as agreed under the terms of the promissory note, then your lender can foreclose on your house to collect the loan, or as much of it as possible with the proceeds yielded by the foreclosure sale.

California has strict statutory procedures that your lender must follow in order to conduct a foreclosure of your house pursuant to a power of sale in a deed of trust.  This includes the obligation to give you certain notices prior to the foreclosure sale date.   

How Chapter 13 Bankruptcy Stops Foreclosure

In a Chapter 13 bankruptcy, you repay your missed payments over time and permanently save your home from foreclosure.  The promissory note is the document that says your bank is lending you a certain sum of money and spells out the repayment terms (for example, $2,500 per month for 360 months, i.e., 30 years).

Promissory notes go by many different names, including a note, a fixed rate note, an adjustable rate note, or some other variation of terms that almost always includes the word “note” in the title. If you don’t repay the loan as required by the promissory note, you will be in default of the promissory note and your lender can exercise its legal remedies to collect the note.

Talk to a Bankruptcy Attorney

If you have received a Notice of Default, your house is in jeopardy of being lost to foreclosure.  You should immediately contact an attorney who is both a San Diego bankruptcy attorney and foreclosure attorney to discuss your options for saving your home from foreclosure.

600 Credit Score After Bankruptcy

There is a huge misconception out there that bankruptcy always ruins your credit and prevents you from being able to increase your FICO credit score.  This simply is not true.  Sure, if you have flawless credit with a score of 800, then bankruptcy will lower your credit score.  But if you are like most people considering bankruptcy, you probably don’t have an 800 credit score. If, as is more common with most San Diego bankruptcy filers, you are behind on your credit card payments and other bills, then you probably have a credit score in the 500s, or even the 400s.  If that is the case, then a bankruptcy can, and usually will, help you increase credit score.     

Think of it this way.  Fast forward your credit report to 2 years from now.  Which would be worse: (a) 2 years of continued 30, 60 and 90 day late reports on your credit, or (b) all of your accounts eliminated in bankruptcy, followed by 2 years of perfect, on time payments?  A bankruptcy followed by two years of perfect, on time payments, is a better and shows that you are more responsible financially.

If you have 2 years of missed payments and repeated late reports, you will look very irresponsible to a prospective lender from whom you are seeking to obtain credit.  If you filed bankruptcy and thereafter maintain good credit history for a couple of years, then you will look like someone who had unexpected financial trouble and was responsible enough to meet your financial obligations head on by filing bankruptcy to get a fresh start.

If you are considering bankruptcy and want to know the effect it will have on your credit score, talk to a bankruptcy attorney.  You may be surprise to learn that your credit score will actually go up, and with proper guidance from a San Diego bankruptcy lawyer, you credit score can improve to much higher than 600.

Can Student Loans or IRS Take My Social Security Benefits By Garnishment?

The Social Security Act provides that money payable under the Social Security Act is not subject to execution or legal process, including a bank levy or a garnishment.  That means that an ordinary creditor cannot take your social security from your bank account by doing a bank levy and an ordinary creditor cannot garnish your future SSI payments.  Government creditors may be able to garnish social security.

Government Creditors

There is an exception for certain government debts.  If you owe a debt for certain government debts, then your social security income can be taken through a bank levy, a wage garnishment, or through other legal process.   This most commonly happens with student loans and IRS back taxes.  It can also happen with past due child support or spousal support, although that is less common.

Student Loans

Student loans, specifically federally backed student loans, can garnish your wages to collect a past due student loan.  These days, student loans are handled almost exclusively through the federal government.  That means that if you have a past due student loan, the government most likely will garnish your wages to repay the student loan debt.  The government or its agents may also levy on your bank account and take your money in your account in repayment of your student loans.

IRS Back Taxes

If you owe back taxes to the IRS, then your social security benefits can be garnished to repay your back taxes.  Frequently, the IRS will just take a percentage of your social security, including SSI and SSDI, before you even get it, and apply it to your back taxes.  The IRS also can, and frequently does, wait levy on your bank account and take the money in your bank account, even if all of the money in your account consists of your social security benefit payments.

Filing Bankruptcy

If you owe back taxes, filing bankruptcy on taxes may result in a discharge of your taxes depending upon the treatment of your back taxes in bankruptcy.  If the taxes are discharged, then your social security benefits are protected.  But if the back taxes are not discharged, then your social security remains subject to levy and garnishment.

If you owe student loan debt, you usually cannot file bankruptcy on student loans.  Student loans are typically not discharged in bankruptcy.  After your bankruptcy, you will still owe the debt and if you have not paid the debt your social security benefits can be taken, by levy or garnishment, to satisfy the student loan debt. 

Can I Take Out a Car Loan Before Bankruptcy?

Taking out a loan to buy a car before bankruptcy raises a couple of legal issues that could affect your bankruptcy filing.  But if you follow a few simple rules, you can buy a car before bankruptcy and still have your bankruptcy filing proceed smoothly.  Evidence of good faith will be important. Also, you must consider your lender's potential limited right to rescind the loan.  Finally, whether your lender timely perfects its lien may affect you positively or negatively.

Good Faith

Good faith is always a consideration in bankruptcy cases.  If your car loan was taken out in good faith, you can usually keep your car in bankruptcy by reaffirming your car debt in a Chapter 7 bankruptcy or by repaying your car loan debt in a Chapter 13 bankruptcy.

Under certain circumstances, taking out a loan to buy a car before bankruptcy could point to lack of good faith.  For example, if you have a car that is in perfect working condition and before bankruptcy you take out a $40,000 loan with $800 per month payments, this could point to bad faith. If you didn’t take out the loan, you would have an additional $800 per month in available cash each month that you could use to pay your creditors.  The United States Trustee’s view is that an honest debtor would not take out the loan for the extra, unnecessary car, and would try and repay his or her creditors.  

Loan Rescission

Many car purchase contracts that you sign at a dealership have standard language in their contracts, usually on the back side in small print, that says they have a set number of days (example, 10 days) to cancel the vehicle purchase contract if they cannot secure financing.

If you file bankruptcy within that period (example, within 10 days of the day you bought the car), then the dealer may claim, truthfully or not (if would be difficult for you to determine their true intentions), that it could not obtain financing and therefore cancel the contract.

Lien Perfection

If you take out a loan to buy a car before bankruptcy, your lender has a short amount of time (example, 30 days) to perfect its lien.  If it doesn’t, then the bankruptcy trustee can avoid the lien.  This can work out to your advantage, or your disadvantage.

If the bankruptcy trustee avoids the lien, then your car becomes property of your bankruptcy estate and you can buy it back from the trustee usually for its fair market value, which is usually less than what you were paying to your creditor.  So this would be to your advantage.

But if you don’t have the cash to buy the car back from the bankruptcy trustee, then you may lose your car.  You could possibly obtain a loan at a very high interest rate to buy back the car with a loan.  If you did that, your payments may be the same, or higher, than the original loan you took out just before bankruptcy.

To determine if your lender has properly perfected its lien, you can look on the registration and see when your lender registered itself as the lienholder of the vehicle.  If you have not received your registration yet, you can ask the DMV for a “bundle” report that shows if and when your lender registered itself as the lienholder of your vehicle.

Can I Put Money in the Bank After Bankruptcy?

Money deposited into your bank account after bankruptcy is not part of your bankruptcy.  Bankruptcy deals with the assets and debts you had before you filed your case.  Essentially, after the date you file your case, you begin a brand new financial life, new assets, and new debts, plus you get to keep as much of your assets as allowed by your bankruptcy exemptions.  Under San Diego bank law and San Diego bankruptcy law, the bank is prohibited from taking money deposited into your account during bankruptcy or after bankruptcy.  So you can put money in the bank after bankruptcy. But be careful: your bank may have "set off" rights to money existing in your bank account on the day that you filed for bankruptcy.  If you have money in the bank and are considering bankruptcy, be sure to discuss this with a San Diego bankruptcy attorney during your initial consultation so that you and your attorney can have adequate time to protect your interests.

Set Off Rights To Money Deposited Before Bankruptcy

If you have money in an account at a particular bank that you owe money too, that bank may be able to keep the money under what are called "set off" rights.  Set off means that if you owe the bank money, and the bank has your money in an account, the bank may be able to keep some or all of the money as a set off against the debt that you owe to your bank.  The set off rights can only be asserted against money that you had in the bank account prior to filing bankruptcy.  Any money that you put in the account after the date that you file bankruptcy does not fall within the set off rule.

Creditors Going After Money In Bank After Bankruptcy

Creditors are prohibited from going after money in your bank account after bankruptcy, in two respects.  First, the bankruptcy stay that goes into effect when you file bankruptcy, prevents collection action.  Second, once you obtain a discharge, all of your dischargeable debts are eliminated. Any creditors whose debts were discharged may not attempt to take the money in your bank accounts.   However, if a creditor’s debt is not discharged, then that creditor can continue to attempt to collect the debt.  Also, if the bankruptcy stay does not apply to your case, creditors could continue to do a bank levy on your account.  For example, if you have filed multiple bankruptcies in the last year, the bankruptcy stay may not apply.

Corporate Bank Account

If you own a corporation, the debts of the corporation are distinct from your debts.  If, for example, a creditor has a judgment against both you and your corporation for an unpaid debt, after you file bankruptcy your creditors can still attempt to collect a judgment by levying on the corporate bank account of your corporation.

Will Filing Bankruptcy in San Diego Wipe Out a 2nd Trust Deed?

When you buy real estate, unless you are paying for it in full and in cash, you will typically pay a small down payment and take out a mortgage loan for the balance of the purchase price.   You will give the mortgage lender a trust deed (a deed of trust) securing the loan so that if you don’t pay the loan your mortgage lender can foreclose on your property.  The trust deed you give to this mortgage lender will be 1st in position and is referred to as a 1st position trust deed.

If you take out a 2nd loan, whether it is a loan to pay for part of the purchase price or a home equity loan taken out at a subsequent date to draw from the equity in your home, you will also give the lender a trust deed.  That trust deed will be 2nd in position to the 1st position trust deed.  Hence, the trust deed will be referred to as a 2nd trust deed.

So a 2nd trust deed simply means that the lender’s deed of trust is 2nd in position to another lien, typically the 1st position deed of trust, that was previously given to another lender and filed with the county recorder.

Chapter 7 Bankruptcy

The filing of a Chapter 7 bankruptcy in San Diego will not wipe out a 2nd trust deed.  A Chapter 7 filing simply eliminates your personal liability for a mortgage loan or home equity line of credit, but the deed of trust still remains as an encumbrance against your property.  In order to get rid of a 2nd trust deed you will need to file a repayment bankruptcy, such as Chapter 13, and eliminate the trust deed through the lien stripping process.

Chapter 13 Bankruptcy

Similar to a Chapter 7 bankruptcy, filing a Chapter 13 bankruptcy in San Diego will eliminate your personal liability for a mortgage loan or home equity line of credit.  But Chapter 13 offers an added benefit.

In a Chapter 13 repayment bankruptcy you can use the lienstripping process to lien strip a 2nd mortgage and wipe out the 2nd trust deed securing it.  When you do a lien strip of your 2nd mortgage loan or home equity line, the 2nd position trust deed is wiped out so that it no longer is an encumbrance against your property.  Assuming your lien strip is done correctly, you will actually get a court order stating that the 2nd trust deed against your property is stripped off and wiped out from title.

Chapter 11 and 12

Similar to Chapter 13, in Chapter 11 and Chapter 12 bankruptcy you can do a lien strip of your 2nd trust deed.

Online Bankruptcy Filing In San Diego Is a Requirement

The online bankruptcy filing requirement represents a growing shift by bankruptcy courts toward simplifying the process of scanning documents into court records as well as a movement in the Federal court system toward continually striving to employ a more green policy.

In the San Diego bankruptcy court, it used to be that bankruptcy attorneys would print out stacks of bankruptcy schedules and statements and send a messenger to the bankruptcy court to hand-deliver the documents to the bankruptcy court clerk.  The court clerk would then manually scan all of the documents into the bankruptcy court’s computer systems.  It would then take a few days before the filed documents would be accessible to attorneys viewing the court’s electronic record management system.

There were three problems with the old system.  First, the manual scanning of documents was a waste of court resources because the court personnel would have to spend time scanning documents into the court system at the expense of devoting time expeditiously processing case files.  Second, the printing out of documents and sending them to the Court was a waste of paper and conflicted with the court’s effort to employ a more green policy.  Third, during the few days it would take for court personnel to scan documents into the court’s record management system, bankruptcy attorneys could not access, or even see, case documents that were filed with the court. 

The requirement of online bankruptcy filing remedied all of these problems.  Now, every bankruptcy attorney in San Diego must file bankruptcies online through the internet.  Upon the filing, the records become part of the court’s electronic records and are accessible immediately by all attorneys with access to the court’s records system. 

With the implementation of the online filing system, the Court is able to conserve its resources, paper is conserved as well, and San Diego bankruptcy cases are administered more efficiently.   Bankruptcy lawyers have instant access to documents the moment the documents are filed with the bankruptcy court.

So all that online bankruptcy filing means is that your bankruptcy, once prepared by your lawyer and signed by you, is going to be filed with the bankruptcy court through the internet instead of over-the-counter at the bankruptcy courthouse.

Is Online Bankruptcy Filing Reliable?

Online bankruptcy filing is actually more reliable than hand-delivering documents to the court.  With a hand-delivery filing system, there is a potential for many things to go wrong: a messenger could deliver the documents to the wrong court; the messenger could get into a car accident; the messenger could quit his or her job and never make it to the courthouse; important pages of your bankruptcy documents could fall out due to carelessness while your documents are en route to the courthouse, or a whole slew of other potential problems could occur.  Although such problems are unlikely and would rarely be expected to occur, they are nonetheless possibilities when doing over-the-counter filings.

With online bankruptcy, there is no potential for any of the issues associated with hand-delivery.  Your bankruptcy documents go straight from your attorney’s computer to the court’s electronic record system.  Moreover, upon the filing of your bankruptcy or any related documents, the court records are updated and your attorney can actually see how the document was filed and see it exactly as the bankruptcy judge will see it.  Your San Diego bankruptcy lawyer can also verify that the filed document appearing before the judge’s eyes has all intended pages attached to it and is otherwise correct and in order.  Furthermore, if there is any error with the filing, your attorney can immediately correct the problem by amendment, instantly update the court records, and then verify that the court records have been updated correctly.

Will My Employer Find Out that I Filed Bankruptcy in San Diego?

So you still want to know, "will my employer find out that I filed bankruptcy in San Diego?"  The short answer, is that it is highly unlikely.  There are three principal ways that an employer could typically come to learn of an employee's San Diego bankruptcy filing.

The first way is if your bankruptcy lawyer lists your employer as a creditor in your bankruptcy.  All creditors listed in your bankruptcy will be notified of your bankruptcy filing.  Assuming that your employer is not listed as a creditor (usually your employer is not going to be a creditor), then your employer will not receive notice of your bankruptcy filing.  If your employer is a creditor, discuss your options with your bankruptcy attorney before your case is filed. 

The second way that your employer could learn about your San Diego bankruptcy filing is if your employer is checking your credit report on a regular basis and sees your bankruptcy filing show up as a public record on your credit report.  The only way that someone can legally check your credit report is if you gave them advance permission to check your credit report in the future.  Since, in most cases, employees do not give their employer permission to check their credit report in the future, it is unlikely that your employer will be checking your credit report in the future and discover your bankruptcy filing.

The third way that a San Diego bankruptcy filing could typically be discovered is if your employer, for some reason, was actively investigating to determine if you had filed bankruptcy.  Any San Diego bankruptcy attorney with access to the bankruptcy court’s electronic records (or non-attorney with such access) can search a person’s name on the San Diego bankruptcy court’s electronic records and in such a search your bankruptcy filing would show up. 

But not to worry, your employer won't see your bankruptcy filing in the latest issue of the newspaper that he or she just picked up, nor will your employer be able to do a Google search and see your bankruptcy filing, at least not as of the time of the posting of this blog.  If a significant amount of time has passed between the posting of this blog and the time that you are reading it, you should confirm with a San Diego bankruptcy lawyer that bankruptcy filings still are not showing up on a Google internet search. 

In order to discover your bankruptcy filing through the internet, the search typically would need to be done by a San Diego bankruptcy attorney or other person with access to the bankruptcy court’s electronic records and the ability to search within the court’s electronic records system.

Finally, even if your employer were to somehow find out about your bankruptcy filing, Federal law, specifically the Bankruptcy Code, protects you from “discriminatory treatment” (such as your employer attempting to fire you) simply because you filed for bankruptcy.

I Can’t Afford to File Bankruptcy

If you are under the pressure of overwhelming financial debt and need to file bankruptcy in San Diego, you may find yourself saying, “I can’t afford to file bankruptcy.”  Bankruptcy payment plans allow you to take action and get out of debt by making payments toward your bankruptcy case, instead of making the entire payment in one lump sum.

What Is a Bankruptcy Payment Plan?

Just what is a bankruptcy payment plan and how does it work?  It depends on whether you are filing a Chapter 7 bankruptcy or Chapter 13 bankruptcy.  (Chapter 7 and 13 are the most common types of bankruptcies filed by consumers, accounting for more than 99% of all bankruptcies).

Chapter 7 Payment Plan

If you are filing bankruptcy under Chapter 7 bankruptcy, then your attorney can put you on a Chapter 7 bankruptcy payment plan where you make small payments each month. 

Once you get started on your Chapter 7 payment plan, you can tell all of your creditors to stop calling you and call your bankruptcy attorney.   Your attorney can handle the phone calls so that you will no longer have to be afraid of your phone ringing. 

While you are making payments on your Chapter 7 payment plan, your attorney can prepare your bankruptcy so that once your payments are completed your bankruptcy can be filed immediately.

Chapter 13 Payment Plan

If you are filing bankruptcy under Chapter 13 bankruptcy, then your Chapter 13 plan (your debt repayment plan in a Chapter 13 repayment bankruptcy) can also serve the function of a bankruptcy payment plan. 

After preparing your Chapter 13 repayment plan, which typically repays home loan arrears and car loans, among other things, you can add the unpaid balance of your attorney’s fees to your Chapter 13 plan payment that you make to the bankruptcy court appointed trustee each month. 

Because a Chapter 13 repayment plan usually lasts 3-5 years, paying your payments through a Chapter 13 plan will result in a very small increase to your Chapter 13 monthly plan payment.

Affordable Bankruptcy

So if you are worried that you can’t afford a bankruptcy, don’t worry, you can pay for your bankruptcy with a payment plan.  A bankruptcy payment plan can be tailored to your individual situation and budget, giving you an affordable bankruptcy solution so that you can exercise your bankruptcy rights when you need to get out of debt San Diego and get a fresh start.

When Will Credit Cards Garnish Wages?

If you are behind on your credit cards, you have likely been receiving constant telephone calls from your credit card lender or its debt collectors.  Often these calls are in the form if harassment, and sometimes the calls may be innocent attempts just to find out your intentions.  Whatever the intention behind the calls, you probably have realized that before your credit cards initiate legal action against you there will be a series of invasive phone calls.

Credit card lenders cannot call you endlessly (even though sometimes it feels that way).  A credit card company has a four (4) year Statute of Limitations to sue you for breach of a credit card agreement, or else it will forever forfeit its legal right to sue you. 

It used to be that credit card lenders would wait until just before the 4-year Statute of Limitations expired and then sue you.  But with the downturn of the economy, and the credit card lenders struggling to make money just like the rest of the businesses in the nation, credit card lenders have started suing customers much, much sooner than they used to.  No longer do credit card lenders wait until just before the Statute of Limitations expires to sue you.  

Credit card companies have started transferring customer accounts to aggressive debt collectors and collection law firms who will sue you as soon as they are legally allowed to sue you under your credit card agreement.  Under most credit card agreements, once you have missed a payment and are 30 days late, and your credit card lender and declare the entire outstanding balance of your credit card due and payable in full and sue you immediately. 

As an economic decision to avoid incurring legal costs and/or losses, your credit card lender will typically make several attempts to contact you, and if unsuccessful it will typically transfer the account to its legal department, or if it does not have a legal department, then to a debt collector or collection law firm.

Before suing you, as an economic decision to save costs, the debt collector or collection law firm will typically make a certain number of attempts to contact you and demand that you pay off your balance, then transfer the file to a debt collector or collection law firm who may try calling you for another couple of months to demand that you pay off your balance.

When Does Credit Card Garnishment Usually Begin? 

Similar to other creditors garnishing wages, credit card companies, or their debt collectors or law firms, have to first sue you and obtain a judgment against you before the can garnish your wages that you receive from employment.

Once your credit card lender obtains a judgment against you, credit card garnishment can begin immediately, that is, your credit card lender can immediately proceed to garnish your wages from employment.

Bankruptcy Will Stop Garnishment

Filing bankruptcy will both stop wage garnishment and will eliminate credit card debt forever so that your credit card lender is never again able to garnish your wages.  Bankruptcy stops the garnishment and eliminates the debt, giving you a chance to have a fresh financial start and start rebuilding your credit.

Attorney Can Help You Do a Short Sale In Bankruptcy San Diego

Before asking an attorney to help you do a short sale in bankruptcy San Diego, first determine whether you really need to do a short sale in bankruptcy, or whether you can do a short sale before or after bankruptcy.  There are different strategies you will want to employ depending in whether you do your short sale before, during or after the San Diego bankruptcy process. 

Short Sale Before Bankruptcy 

Doing a short sale before bankruptcy does not require bankruptcy court permission, however you may need to disclose the short sale to the bankruptcy court and depending on the circumstances it could affect your case. 

If you did a short sale within two years of the date you file bankruptcy in San Diego, then your lawyer will have to disclose the short sale in your bankruptcy petition and schedules.  More specifically, you will have to list the short sale in your Statement of Financial Affairs as a transfer of property occurring during the two-year period prior to your bankruptcy filing.

If you did a short sale more than two years ago but less than four years before the date your file bankruptcy, then your attorney will have to disclose the short sale to the bankruptcy trustee at your meeting of creditors on a questionnaire that you must complete in connection with your meeting of creditors.

If the short sale was more than four years prior to your bankruptcy filing, then your lawyer won’t even bring it up and typically will be a nonissue.

Short Sale During Bankruptcy

How a short sale is dealt with during bankruptcy depends largely upon the type of bankruptcy that you file.

In a Chapter 7 bankruptcy, if your property is underwater (you owe more on your loans than what your property is worth, which will typically be the case if you are trying to do a short sale), then the bankruptcy trustee will usually not assert any interest in your property and you can do whatever want with it, including a short sale.

In a Chapter 13 bankruptcy, again if your property is underwater, the bankruptcy trustee will typically consent to you doing a short sale.  You can either file a motion to allow a short sale, or ask the San Diego bankruptcy trustees to stipulate (agree) to the short sale and the Court will allow the short sale.

Short Sale After Bankruptcy

After bankruptcy, that is, once your case is completed, you can short sale your property provided that you did not give it up or lose control through the bankruptcy process.

If you are trying to do a short sale after bankruptcy, then it usually means that your property is upside down (you owe more on your loans against the property than what your property is worth), therefore the bankruptcy trustee likely will not assert any interest in it.   You will remain on title as owner and after bankruptcy, as owner, you can do whatever you want with the property, including doing a short sale.

HOA Fees After Bankruptcy

Why would you want to do a short sale after bankruptcy?  Well, there actually is a very good reason to do so. 

After bankruptcy, if you remain on title to your property, you continue to be liable for HOA fees after bankruptcy.  So if you are planning to give up your property, you want to get off title as soon as possible. 

Sometimes lenders will delay foreclosures for months or even years.  By doing a short sale, you can have some control over how quickly your property is sold and title transferred out of your name.

Lender’s Discretion

The foregoing all assumes that your lender is willing to agree to a short sale.  If your lender does not agree to a short sale, then you cannot forcefully do a short sale against your lender’s will. 

Also, if you are behind on your payments, your lender can foreclose on your property, so if you want to do a short sale you have to either stay current on your payments or convince your lender to voluntarily forbear from doing a foreclosure of your property.

There are two issues to consider, depending upon what type of San Diego bankruptcy filing is most appropriate for your situation, Chapter 7 vs. Chapter 13.  Each chapter raises its own issues when filing bankruptcy while you are on unemployment.

In order to qualify for Chapter 7 bankruptcy, you must take and pass the bankruptcy Means Test, which based on your household income determines if you qualify to file a Chapter 7 bankruptcy. 

All of your income, from all sources, is factored into the Means Test equation in determining if you qualify for bankruptcy, with the exception of Social Security Income. 

If you are on unemployment, your unemployment income counts as income in determining if you pass the Chapter 7 bankruptcy means test.  And it’s your gross unemployment income before taxes are taken out, if you have taxes automatically taken out of your unemployment benefits.

In order to qualify for Chapter 13 bankruptcy, you must show, among other things, than you have regular income and your regular income must be sufficient to pay all of your expenses that you propose to pay in your Chapter 13 repayment plan.

If your only source of income is unemployment, then in most cases you will have a difficult time qualifying for Chapter 13 bankruptcy because you won’t have sufficient regular income to be able to afford to pay all of the expenses that you would be required to repay in a Chapter 13 case.

If you are married filing bankruptcy and your spouse is employed, then your combined joint income may be sufficient to qualify for Chapter 13 bankruptcy.  Similar to Chapter 7 bankruptcy, your unemployment income counts as income for purposes of qualifying for bankruptcy.

Do I Have to Pay HOA Fees After Bankruptcy?

It used to be that if you gave up your property (said you no longer wanted it) when you file bankruptcy, then you no longer were liable for HOA fees after bankruptcy.  This all changed in 2005 with the enactment of the New Bankruptcy Law.  Because of the old law, many people mistakenly believe that if you file bankruptcy and give up your home you are no longer liable for HOA fees.  This is not at all the case.

With the enactment of the New Bankruptcy Law in 2005, another exception to discharge of debts was added to the bankruptcy laws providing that as a homeowner you are liable for all HOA dues incurred after the date you file bankruptcy so long as you maintain a "legal, equitable, or possessory ownership interest" in your property.  In almost all cases, you will retain at least legal title to your property (meaning you will remain on title until a foreclosure or other type of sale occurs), and legal title is a legal ownership interest.

I have encountered legal treatises and articles on the internet that, citing to old case law decisions, mistakenly state that as a homeowner you are only liable for HOA dues after bankruptcy if you reside at your property or rent it out.  These treatises and articles are wrong.

In fact, when it comes to HOA fees and bankruptcy, the bankruptcy law could not be more explicit.  The New Bankruptcy Law makes a clear and unequivocal statement that as long as you remain on title you remain responsible for HOA fees after bankruptcy. 

HOAs and HOA attorneys familiar with the new law are increasingly suing homeowners for past due HOA fees after bankruptcy, especially since many homeowners are walking away from homes and not paying HOA fees and the HOAs are suffering financially. 

So what can you do to protect yourself?  If you want to keep your home when you file bankruptcy, pay the HOA fees accruing after your bankruptcy filing date.  If you want to give up your property, the best thing you can do is to let your property go to foreclosure as soon as possible because until the foreclosure sale date you will remain liable for the HOA dues. 

Trying to short sale your property may prolong the foreclosure sale and cause to be liable for HOA fees accruing after bankruptcy. 

Another good option would be to deed the property back to the bank (if they will accept the transfer), thus taking yourself off title and ending your liability for HOA dues.

When Should You Stop Charging Credit Cards Before Bankruptcy?

If you know you are filing bankruptcy, that means you know you are not going to pay your credit card debt.  If you want to file bankruptcy to obtain debt relief, you have to act honestly with respect to your creditors.  If you keep charging your credit cards, knowing you don’t plan on paying your credit card charges, that is not honest and is a type of fraud under bankruptcy law.  The “fraud” is in the nature of a promise without the intention to perform it.  You are making charges on your card, promising to repay the charges, but in fact you have no intention to repay the charges because you’ve already decided to file bankruptcy.  The law defines such a false promise as a type of fraud and engaging in such acts will prevent you from obtaining debt relief San Diego when you file for bankruptcy San Diego.

If you have already made charges on your credit cards in the past month or two, and you now need to file bankruptcy, you must be careful to avoid any implications of fraud.  Just how long should you wait between the time that you stop charging your credit cards, and the time that you file bankruptcy?  Each person’s situation will be different and how soon you can file bankruptcy, or what the ramifications of a bankruptcy filing might be, will depend on several factors.  Factors include: the amount that you charged, when you made the charges on your credit card, how much time has passed since you charged your credit cards, and how many payments you have made and the amounts of the payments.  You must sit down with a bankruptcy attorney and only after a review of the totality of the circumstances can a bankruptcy attorney properly advise you as to when you can file bankruptcy and what will happen to your credit card debt in your San Diego bankruptcy filing.

So if you’ve been wondering when you should stop charging your credit cards before bankruptcy, stop charging your credit cards immediately.  The simple fact that you are thinking about the issue means you are possibly contemplating bankruptcy and therefore you should not make any more charges.   Then, immediately contact a San Diego bankruptcy attorney and discuss your situation, including the totality of the circumstances, to determine your best course of action.  By stopping charges on your credit card immediately, you will maximize your chances to achieve your goal to eliminate credit card debt in your bankruptcy filing.

How to Stop a Foreclosure Sale Date

Bankruptcy does stop the foreclosure process, at least temporarily, even if you file the day before a foreclosure sale date, and even if you are a year or more behind on your payments.  This is because upon the filing of a bankruptcy, any bankruptcy, the automatic bankruptcy stay immediately goes into effect by operation of law.  But if you are like most people, "temporarily" stopping foreclosure is not good enough.  You want to keep your house.

Stopping Foreclosure Permanently

Just because you file a bankruptcy and the automatic bankruptcy stay operates to stop foreclosure of your house, does not necessarily mean that the foreclosure sale will be stopped permanently.   Depending upon the type of case that your San Diego bankruptcy lawyer files, and whether you have the financial ability to repay your missed payments, you may or may not be able to permanently stop foreclosure of your house.

How Far Behind On Payments Are You?

If you have missed on a couple of payments and your lender has only given you written warnings of its intent to foreclose but has not yet filed a Notice of Default with the county recorder, you may be able to file any kind of bankruptcy and stop foreclosure.  If you have missed several payments and your lender has already filed Notice of Default, you will likely have to file a repayment bankruptcy to stop foreclosure of your house.

Chapter 7 Bankruptcy Before Notice of Default

Once you file bankruptcy, any bankruptcy, even a Chapter 7 bankruptcy, the automatic bankruptcy stay prohibits your lender from filing a Notice of Default unless your lender first obtains Court permission to do so. 

By that time your lender obtains permission to record a Notice of Default, and then files the Notice of Default giving you the statutory 90 day periods to bring your loan current, you will have received about 5-6 months of relief from the foreclosure process.  (In California, your lender cannot foreclose on your house until it files a Notice of Default and then gives you 90 days to bring your loan current, and only then can it file a Notice of Sale setting a sale date of your house.)

If you were only a couple of payments behind, 5-6 months should be enough time to bring your loan current.

The Chapter 7 bankruptcy will eliminate all of your credit card debt and other debt, so you can more easily manage your house loan payments.

Chapter 13 Bankruptcy Before or After Notice of Default

If you are several payments behind, a Chapter 7 bankruptcy generally does not permanently stop foreclosure of your house.  Upon filing a Chapter 7 bankruptcy, your lender’s attorney will usually file what is called a Motion for Relief from Stay, requesting that it be permitted to continue the foreclosure proceedings of your house notwithstanding that you file bankruptcy San Diego.

Instead, what you need to do is to file a repayment bankruptcy, such as a Chapter 13 bankruptcy, and in that bankruptcy repay all of your missed payments over time.  By repaying all of your missed payments over time, you bring your house loan current and thus permanently stop foreclosure of your house.  

Filing a Chapter 13 bankruptcy works whether you file it before or after a Notice of Default has been filed.  If you propose a Chapter 13 plan that repays all of your missed payments, and you qualify for Chapter 13 relief and your Chapter 13 plan meets all other statutory requirements for being approved by the San Diego bankruptcy court, your Chapter 13 bankruptcy will operate to permanently stop foreclosure of your home.  Your lender will not even be able to obtain relief from the automatic bankruptcy stay; it will not be permitted to continue the foreclosure of your house.

What About a Loan Modification

A loan modification could theoretically work to stop foreclosure of your home, but here is the problem with loan mods.  During the loan modification process, you will always be up against a foreclosure sale date.  Your lender will not tell you whether it will continue the sale or take the sale date off calendar until days before the sale.  Then, a couple of days before the sale date, your lender will typically continue the sale for 30 days, and in another month you are back up against another sale date.

Because during the loan mod process lenders typically will not continue a foreclosure sale date until just days before the sale, if you are facing a foreclosure a loan mod is both a very stressful and very risk method to try and stop the foreclosure.   You could wait until 2 days before the foreclosure sale date only to have your lender decide, on a whim, that it will not continue the foreclosure sale date.  Then you have 2 days to try and file a bankruptcy or else lose your home to foreclosure, which is commonly what will happen.

And let’s face it, many institutional lenders are notorious for routinely deny the great majority of loan modification requests.   Many lenders deny as much as 95% of all loan mod requests, meaning that you have to be in the lucky 5% to get a loan mod.  That’s a risky gamble to take when trying to stop foreclosure of your most valuable asset, your house.

The Most Reliable Solution

Because of the problems and uncertainties with loan modifications, a San Diego bankruptcy filing is the safest and most reliable means for stopping foreclosure of your San Diego property.
 

Can My Lender Sue Me After Foreclosure?

In California, there are what is called “antideficiency” laws that protect you in the event of a foreclosure.  (Other states also may have different rules, and the “antideficiency” laws of many states are very similar to California law.)  Antideficiency laws curtail your lender’s ability to sue you for a deficiency balance after a foreclosure sale of your home.  A deficiency balance means the difference between the amount that you owed on your home loan or equity line of credit and the amount your lender was able to obtain by selling your home at foreclosure.

Fair Value Limitation Rule

The way the antideficiency laws protect you is through the Fair Value Limitation rule.  The rule essentially states that if your loan was a purchase money loan (that means you used the money to purchase your home), which is typically the case, then your lender cannot sue you after a foreclosure sale in San Diego. 

Your lender is limited to collecting the loan balance by selling your home at a foreclosure sale and recovering whatever it can obtain through the foreclosure.  That’s it.

The reason for the Fair Value Limitation rule is to place a check on brokers and lenders so that they are not writing loans for more than the value of the real estate security for the loan.   By placing the risk of inadequate security on the lender, the Fair Value Limitation rule aims to ensure that brokers and lenders to not overvalue real estate when making a loan. 

Fair Value Limitation Not Applicable for Rental

If your loan was for a rental property or other property that was not used as your home, then the Fair Value Limitation rule does not apply.  In such a situation, your lender has two options.  

Option 1: Your lender can foreclose by private foreclosure sale under the Deed of Trust that you gave your lender, in which case it cannot later come and sue you because the antideficiency laws also provide that one your lender elects to foreclose and does foreclose your lender cannot later sue you for a deficiency.  

Option 2: Your lender can bring an action in Court for judicial foreclosure, which is a very rare occurrence (lenders usually elect to conduct private foreclosure sales under a deed of trust), and in such an action can obtain both a judgment of foreclosure and a money judgment for a deficiency against you.

1st Mortgage – Home Loan

Because of the Fair Value Limitation rule, your lender will never sue you on a 1st mortgage home loan. It will simply foreclose.

2nd Mortgage – Sold Out Junior Lender

If you have a 2nd mortgage or equity line of credit, the Fair Value Limitation rule usually will not apply.

The test is to see whether the loan was for purchase money or not.  If the 2nd mortgage was a purchase money loan, for example 100% financing (also called 80/20 financing, referring to a 1st position mortgage loan for 80% of the value of the property, and a 2nd position loan for 20% of the property value), then the Fair Value Limitation rule applies.

But if you had a 2nd position loan, such as a home equity line, that was not used for purchase money, the Fair Value Limitation rule does not protect you.  After your 1st mortgage lender does a foreclosure of your home, the sold out junior lender (who had the 2nd position loan) can sue you in Court and obtain a judgment against you for the full unpaid balance of the loan.

If your lender has already sued you, filing bankruptcy will stop the lawsuit and eliminate the debt, assuming that you qualify for bankruptcy relief.  By eliminating the underlying debt, filing bankruptcy will protect you from any future lawsuits as well.

Exception to Sold Out Junior Lender Rule

There is one little known exception to the sold out junior lender rule.  The sold out junior lender rule was created to protect junior lenders whose liens were wiped out due to no fault of their own.  If both the 1st and 2nd position loans are held by the same lender, the lender cannot foreclose on the 1st loan and then sue you for the balance of the 2nd loan.   In that case, the holder of the 2nd loan is not sold out through no fault of their own.  The lender had full control of whether or not to foreclose, and was wiped out by their own doing.  

So, a lender holding both a 1st and 2nd position loan cannot do a foreclosure sale, knowing that its 2nd loan will be wiped out, and then turn around and sue you for the balance of the 2nd loan.

But if the holder of a 2nd loan or equity line of credit was wiped out based on the foreclosure of another lender, and the loan was not for purchase money, then the sold out 2nd mortgage or home equity line lender can sue you after foreclosure.  In that case, you will need to file bankruptcy in San Diego to eliminate your liability to the sold out junior lender.

Tax Liability

Even if your lender does not sue you, it may still write off the 2nd mortgage and issue you a 1099C for the canceled debt, in which case you may incur tax liability.  By filing bankruptcy San Diego, you will eliminate 1099C liability.

Does a Bankruptcy Stop a Foreclosure Sale? 

Whether bankruptcy can stop a foreclosure sale date of your house depends on whether you want to stop foreclosure for good, or just for a few months and then move to another home.  Filing bankruptcy will always stop foreclosure for the near future, by virtue of the bankruptcy stay. 

For some of my clients, a few more months of staying in their home is all they are looking to accomplish.  But for many of my clients, their goal is to keep their home.  Temporarily stopping a foreclosure does not give them the result they need.  They need a permanent solution, so they can save their home.

If you are behind on your payments, your lender can obtain relief from the bankruptcy stay and foreclose on your home notwithstanding that you filed for bankruptcy, unless you file a repayment bankruptcy, such as a Chapter 13 bankruptcy and repay all of your missed payments over time.

So bankruptcy will always stop foreclosure for the short term, but if by stopping foreclosure you mean that you want to stop a foreclosure long term, you will have to file a repayment bankruptcy and you will have to talk to a lawyer to make sure that you qualify for a repayment bankruptcy.  Repayment bankruptcies have strict qualification requirements.

Other Ways to Stop Foreclosure

There are other ways to stop a foreclosure, such as a loan modification or a short sale. But these remedies are not your right.  They are totally discretionary with your lender.  These remedies are also very risky and many people lose their homes during the process.   Here’s why:

When you are facing a foreclosure sale and apply for a loan modification or short sale, your lender will typically continue the foreclosure sale each month, and only for one month, while it reviews your loan mod package or short sale proposal.

Your lender will typically make you wait until 2-3 days before the scheduled foreclosure sale date before it continues the sale date, and then it will typically continue the sale for only 30 days.  So the next month you’re in the same situation, you’re waiting to the last minute to see if your lender continues the sale date. 

What happens many times is that after a few continuances of the sale date, your lender informs you that your loan mod request or short sale proposal is denied.  You receive this notice 2-3 days before the sale date and that may be too little time to prepare and file a bankruptcy, depending upon your circumstances and attorney availability.  The result, you lose your most prized possession, your home.

Bankruptcy: The Reliable Solution

Because of the uncertainties and high risk of foreclosure associated with the loan modification and short sale processes, bankruptcy, by far, is the most reliable solution for saving your home.  You have a Constitutional Right and Federal Right to file bankruptcy. If you talk to an experienced San Diego bankruptcy attorney, and your attorney determines that you are qualified to file and obtain the type of bankruptcy relief that you need, then you can use the protections of bankruptcy to save your home.

7 Reasons Why You Should Not Feel Guilty about Bankruptcy

1.  It’s Your Constitutional Right

Simply put, bankruptcy is your constitutional right written into the U.S. Constitution by our founding fathers who founded the United States over 200 years ago.  Why feel guilty about exercising your constitutional right?  It’s your legal right created with the intention that you’ll use it when you need it.

2.  Credit Card Companies Expect You to File

It’s no secret that the United States economy is driven by consumer spending.  Lenders spend billions of dollars to advertise with subliminal messages that encourage us to purchase items we cannot afford on credit.  Over a billion credit card solicitations are mailed out in the United States each year.  Solicitations often begin from the tender age of 18, when the credit card company representatives swarm colleges campuses to promote their credit cards.  The credit card companies then continue to extend us credit to the point that all of our excess disposable income is being spent on minimum payments.  There is no question that the credit card companies play a role in pushing consumers into a situation where a bankruptcy filing is inevitable.  The credit card companies expect you to file bankruptcy. 

3.  Credit Card Companies Have Factored in Your Filing

The fact is, the lending industry has already factored and accounted for your bankruptcy filing.  Lenders charge the high interest rates that they demand because they expect that many borrowers they lend money to will become unable to repay and will have no choice but to file bankruptcy.  That’s why they charge the exorbitant interest rates that you are paying, so that they can absorb the elimination of debt that happens with your bankruptcy filing.    

Who knows, with all those finance charges you’ve paid over the years you’ve probably already paid, all by yourself, for the entire loss your lender will sustain by your bankruptcy filing. Go through your credit card records when you have time and add up how much you’ve paid just in interest charges.  It may exceed your entire credit card balances. 

4.  Credit Card Companies Suddenly Hiked Rates

In 2009, many credit card companies increased their interest rates to the 29% range, forcing many borrowers to file bankruptcy on credit cards, even for borrowers who had good credit and were making their payments on time.  Why did they do this?  Because a law went into effect that limited how often and how fast credit card companies could increase interest rates.  So credit card companies just hiked the rates up to the 29% range before the law took effect.  While this may not be that big of an issue for someone whose balances are low or close to zero, for those borrowers with high balances who were planning to pay down their balances over a couple of years, the increased interest rates caused their minimum payments to double, or even triple.  At 29% interest, without making any payments your credit card balance will double in 3 years.  So if you owe $50,000, at 29% interest your balance will become $100,000 in 3 years.  This reality is making it impossible for many borrowers to repay their credit card debt and is forcing many borrowers to file for bankruptcy to eliminate their credit card debt and obtain a fresh financial start. 

5.  You Need to Get Out of Debt

For many borrowers, if they do not file for bankruptcy they may never get true debt relief and they will be stuck in a downward spiral of debt that they cannot escape.  Without filing bankruptcy, they will never be able to get out of the hole they are in- they will never be able to get out of debt and have a real chance at future financial stability.  Being in a situation where your payments have become unaffordable doesn’t make you a bad person.  It just means that financially times got tough.  And in such times you often have to make the difficult, but financially logical decision, even if it means filing bankruptcy.

6.  It’s Your Turn for a Bailout.

In this age of billion dollar bailouts, where the big banks and credit card lenders received 700 billion dollars in bailout funds to help them recover from their mistakes and bad financial decision, you really have to stop and ask yourself: Should I feel guilty now that it is my turn to ask for debt relief?  Should I feel guilty for exercising my constitutional right and my federal right to file bankruptcy and receive a fresh start?  The banks got their bailouts and are financially successful today.  It’s your turn for a bailout so that you too can get on the road to a more secure financial future.

7.  Don’t Feel Guilty, Feel Liberated

The social stigmas that used to surround bankruptcy no longer exist.  Bankruptcy is now viewed as a positive decision. It's often one of the most financially responsible things that you can do for you and your family so that you can get out of debt and get a fresh start.  Making such a positive financial decision can really be liberating.  So if you are in a situation where you need to file bankruptcy to protect yourself and your family, don’t feel guilty.  Feel liberated!  Exercise your constitutional and federal right to receive debt help and have a fresh start in life.

Do I Make Too Much Money To File Bankruptcy?

Some clients just make too much money to file bankruptcy, or, more precisely, to file a Chapter 7 bankruptcy and eliminate all of their debts.  If you are a high income earner, you may actually make too much money to file bankruptcy.

The limits on how much money you can make when you file bankruptcy were intended to curtail what the drafters of the bankruptcy laws perceived as the potential for abuse of the bankruptcy system by high income earners who would rack up credit card debt and file bankruptcy, which enjoying a high income. 

Prior to 2005, you could have made tens of thousands of dollars per month and qualified to file bankruptcy and eliminate all of your debts.  The lawmakers perceived this as a potential for abuse.  So when they redrafted the bankruptcy laws in 2005, they added an income qualification limit that made bankruptcy filing more difficult for high income earners. 

The income qualification limit was established through creation of what is called the Means Test.   Today, in order to qualify for bankruptcy relief, you must take and pass the Means Test. 

If you pass the Means Test you can file a Chapter 7 bankruptcy.  Your Chapter 7 bankruptcy is presumed to be filed in good faith and not abusing the bankruptcy law and bankruptcy system

If you do not pass the Means Test, then it will be presumed that a Chapter 7 bankruptcy filing is in bad faith, hence you will be required to file a repayment bankruptcy such as Chapter 13 bankruptcy. 

In a Chapter 13 bankruptcy, you will still take the Means Test, however the test is used for a different purpose.  It is used to determine if you have to pay any money to your unsecured creditors and if so how much. 

Unsecured creditors are credit card lenders, medical service providers, phone bills, and the like.  These are creditors who do not have a liens against your assets.

Whereas in a Chapter 7 bankruptcy, assuming you qualify, you do not have to pay any of your unsecured creditors, in a Chapter 13 you may have to pay part or all of your unsecured creditors. 

How do you determine if you have to pay your unsecured creditors in a Chapter 13?  Well, you take the means test and see how much disposable income you have left each month under that test.  Whatever disposable income you have left, you have to pay that amount each month to the bankruptcy court, for a 3-5 year period, in repayment of as much of your unsecured debt as it will pay.

So if you’re a high income earner and are wondering if you make too much money to file bankruptcy, call a bankruptcy attorney and ask them to apply the Means Test to your situation and see what the result is.   Without taking the Means Test, you cannot determine if you make too much money to file bankruptcy.

How to Decide If You Should File for Bankruptcy

Many people mistakenly assume that bankruptcy ruin your credit.  That is simply false.  In fact, bankruptcy can help you rebuild your credit.  Think of it this way.  If you stop paying your credit cards so that you can try to settle your credit card debt, then you will be receiving late reports on your credit every month.  If you file bankruptcy, your creditors can no longer report late payments but must report that the credit card was included in bankruptcy. 

Bankruptcy Can Help Your Credit 

Which do you think is worse: going the next 7 years with late reports on your credit each month, or having a bankruptcy on your credit but no late payments over the next 7 years. In case you are still wondering, I will tell you. Definitely, the bankruptcy is better for your credit score.  Many of my clients who have late payments on their credit report come and see me with a credit score in the 400s or 500s.  Most of these same clients have a credit score in the low 600s one to two years after bankruptcy.  For these clients, they have witnesses for themselves that a bankruptcy looks better on your credit than repeatedly late reports each month.  In fact, even before your bankruptcy filing we can pull your credit report along with a projected 15 month credit score, which for most clients is higher than their credit score before bankruptcy.

Social Stigma 

If you’re worried about what you perceive as a social stigma about bankruptcy, don’t be.  It just plain doesn’t exist anymore.  Chances are your friend, your boss, your coworker, or the teller at your bank, has needed debt relief and filed bankruptcy.

Bankruptcy is what everybody’s doing but nobody is telling you about.  There are almost $2 million bankruptcy files each year.  After 10 years, that’s $20 million bankruptcies.  One out of six of all of these bankruptcies is filed in California.  That is almost half the population of the entire State of California.  This makes it likely that one or more persons where you work, or people you know, have filed bankruptcy. 

Sure, in the past, the word bankruptcy was sometimes stereotyped as taboo and was thought of as the unthinkable result of financial irresponsibility.  Today, bankruptcy is being seen by more and more people as a positive solution to help you get out of debt.  The word bankruptcy has transformed into what it was intended by our founding fathers: a legal form of debt relief.  Indeed, filing bankruptcy is today viewed as a common, responsible, and very socially acceptable form debt relief. 

As more Americans file bankruptcy every day, the shock value of the word bankruptcy no longer exists.  More and more people are starting to accept that filing bankruptcy just may be the most financially responsible things that they can do to help themselves and their families and get out of debt and get started on the road to a more secure financial future.  Bankruptcy definitely is no longer taboo.  Instead, bankruptcy is now viewed as a financially logical and necessary solution to attaining real debt relief.

Your Constitutional Right

You should also know that bankruptcy is your constitutional right, given to you by our founding fathers who gave vision to our country over 200 years ago.  When our founding fathers drafted the U.S. Constitution, they foresaw that bad things can happen to good people and sometimes good people need a fresh start.  You may buy a home at the top of the market or taken out a home equity line and now your home is upside down (you owe more than what it’s worth) as the result of the bursting of the real estate bubble.  You may have been working hard at your job but were laid off due to budget cuts.  There are an endless variety of situations in which good, honest people are in a situation where they have more debt than they can afford to repay and need debt relief.  If this describes your situation, don’t be afraid to exercise your constitutional bankruptcy right.  It’s there so you can use it when you need it most.  Use it. 

Continuing to Pay High Interest Debt

If you have high interest credit cards with payments that are breaking your back, the worse thing you can do is to continue paying on them for the next several years.  For starters, you’ve probably already paid the balances in full through all the finance charges you’ve paid.  What’s worse, if you have high interest credit cards and can only afford to make the minimum payments, your balances will not go down.  You’ll make minimum payments for the next 5 years and still be in the same boat you are today.  If you file bankruptcy, you can become debt free and start rebuilding your credit immediately.  You can have less debt (actually, no debt) and have a better credit score.

I Need a Fresh Start

In the end, it comes down to this one question.  You have to ask yourself, do I need a fresh start for me and my family?  If you need a fresh start, then you should do the financially responsible thing (for you and your family) and file bankruptcy and eliminate credit card debt and other unwanted debt.  Your credit score may improve substantially, depending upon where it is now, and you won’t have to worry about the outdated social stigma that you might have encountered in the past.  If you need a fresh start, exercise your constitutional right to file bankruptcy and obtain debt relief.

How to Stop an IRS Wage Garnishment

What is an IRS Garnishment?

When you owe taxes, the Internal Revenue Service (IRS) can garnish your wages without even going to court and obtaining a garnishment order.   This is in contrast to ordinary creditors, who must sue you, get a judgment against you, and then enforce the judgment though the remedy of wage garnishment.

Technically, the IRS does not do a wage garnishment.  Rather, the IRS does a levy on your wages.  The effect, though, is the same as a wage garnishment.  The effect is that your employer receives the levy on your wages and then must pay a percentage of your wages each pay period to the IRS in repayment of your back taxes that you owe.

The IRS can do more than garnish your wages through a levy on your wages.  If you don’t pay your taxes on time, the IRS can levy on your bank accounts and take all of the money in your accounts (and it will), or place a lien against your home or other property, among other things.

IRS Levy Process

Any IRS levy on your wages or other assets is typically preceded by a Notice and Demand for Payment of tax that has been assessed for a particular tax year, which is typically followed by a Final Notice of Intent to Levy and Notice of Your Right to A Hearing.  Usually, if you don’t pay your back taxes within 30 days of the final tax notice, the IRS will proceed without further notice to garnish your wages through a levy on your employer, as well as levying on your bank accounts.

Will Bankruptcy Stop IRS Garnishment?

Similar to an ordinary wage garnishment, filing bankruptcy will stop an IRS garnishment, that is, an IRS levy on your wages.

With an IRS levy on your wages, though, your bankruptcy may or may not eliminate the tax liability, depending on how old the tax debt is and how your taxes are treated in bankruptcy.

If the tax debt can be eliminated in bankruptcy, you simply stop paying the IRS tax debt and you’ll become debt free, free from the back taxes for good. 

If the IRS tax debt cannot be eliminated in bankruptcy, then you can file a Chapter 13 bankruptcy and repay the back taxes over a 3-5 year period.  Repayment over 3-5 years will usually be much better than having your wages garnished each pay period.

Disclose Trust Assets In Bankruptcy 

When you file bankruptcy, you must disclose to the bankruptcy court ALL of your assets. This includes the requirement that you must disclose trust assets in bankruptcy.  Trust assets encompass all of your interests in a trust or property that is held in trust.  Even if you have an interest in a trust that was created by someone else, such as a trust created by your mother, your father, a relative, or a friend, you must still list that interest.For example, a relative may have created a trust, and placed their home in that trust, and the trust provides that upon their death the property goes to you or partly to you and partly to somebody else. 

Even if your interest is merely contingent, you still must list that interest.  A contingent interest means that whether or not you get that interest in property depends on the occurrence or nonoccurrence of some event.  For example, the trust may provide that you acquire an interest in certain real estate if you remain married to a certain person or if you complete your doctorate degree by a certain age.  If you don’t remain married, or you don’t complete your doctorate degree, then you would never acquire the interest in the real estate that is the subject of the trust.  Such an interest is called a contingent interest.  You must list such a contingent interest in your bankruptcy schedules.

It is quite common, as a homeowner, to place your home in a trust.  In that case, when you file bankruptcy, you have an interest in real estate, that you list on Schedule A (real estate) of your bankruptcy schedules, plus you have an interest in a trust that you list on Schedule B (personal property) of your bankruptcy schedules.  The question then is how to not double list your real estate interest.  This is usually accomplished by listing your real estate interest on Schedule A of your bankruptcy schedules as if your (not the trust) own the property, and then disclosing your interest in the trust on Schedule B of your bankruptcy schedules and placing a zero value on the trust since you have already once listed the real estate and its value on Schedule A.

The fact that your real estate is in a trust is usually of no consequence to the bankruptcy court.  Whether or not you keep your real estate, and whether or not you can remove any liens against it, are analyzed just as if you (and not the trust) are the owner of your property.  The important thing is that you must disclose all of your interests in ANY property, including a trust, when you file bankruptcy.  Failure to disclose trust assets in your bankruptcy disclosures carries severe penalties.  When in doubt, always err on the side of disclosing everything to your attorney and let your attorney make the call as to whether to disclose a potential trust asset in bankruptcy.

The Most Qualified Attorneys Helping San Diego Get Out of Debt

In selecting the most qualified attorneys in San Diego to help you get out of debt, you'll want to consider several factors.  You'll want an attorney whose practice is limited to bankruptcy law.  You'll also want an attorney who exclusively practices within your county, so that he or she will be experienced with the local attitudes of judges and trustees.  Another important factor is to select an attorney whose office is near the San Diego bankruptcy courthouse.  Such a location demonstrates a commitment to handling your case as efficiently as possible, resulting in better service and lower attorney fee rates.  Finally, make sure that when you call the bankruptcy law firm, you can speak with an attorney.  The treatment you receive when you first call is a good indication of what you can come to expect from the firm.

Practice Limited to Bankruptcy Law

Often you may find a bankruptcy attorney on the internet and go to their website, only to discover that in addition to bankruptcy law they practice DUI law, personal injury, immigration, business litigation, and generally any type of legal matter that comes in their door.

It goes without saying that such an attorney will not possibly be able to display the same level of expertise, skill and efficiency in bankruptcy law and practice as a bankruptcy law firm whose practice is exclusively limited to bankruptcy law.

In this respect, hiring an attorney is akin to hiring a doctor.  If you need to get rid of an aching tooth that is causing you pain, you would go to see a “Doctor of Dental Surgery (D.D.S.),” more commonly called a “dentist.”  You wouldn’t go to a family doctor who practices in general medicine, right?  

Similarly, if you need to get out of debt and eliminate your credit card debt and other unwanted debt, you need to go to a San Diego bankruptcy attorney who specializes in bankruptcy law and debt relief.  You don’t want to go to a general practice attorney that handles any type of matter comes in his or her door.

Attorney Exclusively Practices In Your County

The next thing to do is to narrow down the pool of attorney candidates to those who practice exclusively in your County. For example, if you live in San Diego and need to get out of debt, you wouldn’t want to hire an attorney who files bankruptcies in multiple counties, from Los Angeles County, to Riverside County, to San Diego County.

Filing bankruptcy successfully in the San Diego County bankruptcy court requires not just technical knowledge of the bankruptcy laws and bankruptcy rules, but also a familiarity with the local attitudes and practices of the San Diego bankruptcy courts and bankruptcy trustees in San Diego County.

Having personally spoken to attorneys in Los Angeles County and Riverside County, to whom I refer clients who live in those counties (I do not handle bankruptcies outside of San Diego County), I know that the attitudes and practices of the bankruptcy courts and trustees in these other counties can differ significantly from the local practice in San Diego County.

So if you need to get out of debt in San Diego, start by narrowing down your pool of candidates to bankruptcy attorneys who serve only the greater San Diego area, that is, within the boundaries of San Diego County.

Location Near Bankruptcy Courthouse

A great way to quickly ascertain the dedication and commitment of your bankruptcy attorney to making sure that your bankruptcy filing proceeds as smoothly as possible through the bankruptcy process, is to find out how close the firm is to the bankruptcy courthouse and location of the bankruptcy hearings (which in San Diego are two blocks away from the bankruptcy courthouse). 

Just as you would expect the most dedicated and committed criminal defense attorneys to be right next to the criminal courthouse (so that they can go and visit their clients on a moment's notice), the most dedicated and committed bankruptcy attorneys are located right next to the bankruptcy courthouse, so that they can quickly and efficiently make appearances before the bankruptcy court and in bankruptcy hearings.

For example, Bankruptcy Legal Center, a firm whose sole mission is to help San Diego get out of debt and get a fresh start, is located just two blocks from the San Diego bankruptcy courthouse and the bankruptcy hearings.  This critical location, which carries a significant cost (location, location, location), is a sign of the dedication of the firm, to go that extra step, to ensure that the firm can help you get out of debt as quickly and smoothly as possible.

Make Sure You Talk to An Attorney 

Perhaps the most telling sign of what you can come to expect from a bankruptcy law firm is whether you can speak with a San Diego bankruptcy attorney when you first call the firm.  As a new client, the firm and bankruptcy attorney would naturally be putting their best foot forward.  This is human nature.

If you call, as a new client, and you feel resistance when asking to speak to an attorney, or the firm has a policy that it will not let you speak to an attorney until you are pre-qualified by a sales associate (or legal assistant), then that is a telltale sign of what you can expect once you have hired the firm.  Expecting anything less would be foolish, right?  An attorney who really cares to help you will be approachable and speak to you personally during your initial call.  You deserve nothing less. 

So, in selecting your attorney to help you get out of debt and get a fresh start, try this simple, reliable test.  Call the firm and ask to speak to an attorney.  Get a true glimpse of what you can expect to encounter once you hire the firm.

Pace of San Diego Bankruptcy Filings Is Remaining Steady in 2011

A report has recently been released by various newspapers sources stating that bankruptcy filings are down about 8% for the time period covering the first 6 months of 2011, as compared to the same period in 2010.  While this may be true for the United States as a nation, it is entirely accurate for California.

One out of every six bankruptcy cases (1/6 of all bankruptcies) that are filed in the United States are filed in California, at least for the period covering January 2011 through June 2011.  Because of the high rate of bankruptcies filed in California, even though bankruptcy filings were down 8% for the rest of the nation, in California, including in San Diego County, the pace of bankruptcy filings does not show such a dramatic decline.  

In San Diego County, there approximately 11,700 bankruptcies filed during the first half of 2010, that is, from January 2010 through June 2010.  During the same period in 2011, from January 2011 through June 2011, there were approximately 11,100 bankruptcies filed in San Diego County, a much more modest, 5% decline.  That is not quite as dramatic as the 8% decline reported across the nation.

Why aren’t California bankruptcy filings down 8% along with the rest of the nation?  The answer is because California has been hit a lot harder by the bursting of the housing bubble.   California home prices skyrocketed a lot higher than housing prices across the nation.  People in California took out a disproportionately high (compared to the rest of the nation) amount of equity lines of credit from their newfound equity in their homes.  When the housing bubble burst, the people of California were hit the hardest.

In addition, Californians had to incur a disproportionately high amount of credit card debt to try to save their homes.  As the housing market continued to decline, and the economy slowed down, Californians were unable to repay their credit card debt.   To compound this issue, banks raised their interest rates, causing minimum payments to double or even triple.  Again, California was among the hardest hit of all states.  

It is interesting to note that two factors tend to indicate that bankruptcy filings in San Diego County are not necessarily decreasing at all.  First, during the first three months of 2011, there were over 5,500 bankruptcies filed in San Diego County, versus about 5,400 bankruptcies filed during the first three months of 2010.  So, as of March 2011, just three months ago, San Diego bankruptcy filings were on the rise as compared to the same period the year before.  Second, the pace of San Diego bankruptcy filings has picked up in the first week of July 2011 as compared to July 2010.  If the pace continues, bankruptcy filings in July 2011 may equal or exceed the pace in July 2010, again indicating that the pace of bankruptcy filings in San Diego County is remaining steady in 2011.

Famous People Who Declared That They or Their Business Was Bankrupt

In my blog entitled Our Bankrupt Presidents, I mentioned four U.S. Presidents whose faces grace our money and have all declared at some point that they were bankrupt.  It’s not just our U.S. Presidents who have had money troubles.  Esteemed authors, revered movie directors, and famous celebrities, have all declared that they were bankrupt.  I’m referring to people whose books you’ve read, whose movies you’ve watched, people who you see in your favorite movies or TV shows, and athletes whose teams you may be a fan of.  There are so many famous bankruptcies that this blog can only give you a small glimpse of the many famous people who have declared that they were bankruptcy, due to the customarily short commentary associated with a blog post. Here are just a few examples, starting from the 1800s and going through the present:

Mark Twain was a renown author whose books are usually mandatory reading in school.  Twain is perhaps most famous for writing the great American novel, Adventures of Huckleberry Finn.  Twain was also a friend to presidents and European royalty; he had good connections.  Despite all of his opportunities and good fortunes, Twain also fell victim to money troubles and declared that he was bankrupt in 1893.

Henry Ford was the founder of the automobile company Ford.  He and his company, Ford, radically changed the way we get around from place to place by starting to mass produce automobiles, including the Ford “Model T.”  Despite his huge success and revolutionizing transportation in America, Ford also had money troubles and Ford declared that his company was bankrupt in 1901.

Walt Disney was a famous American film screenwriter, director, producer, and founder of The Walt Disney Company (which owns Disneyland).  Disney was perhaps one of the most innovative people in the field of character animation and created fictional characters we all grew up with, such as Mickey Mouse.  Despite his huge success on many different levels, Disney had money troubles too and declared that his studio was bankrupt in 1923.

Francis Ford Coppola is one of the greatest screenwriters and movie directors of all time.  He is perhaps most famous for creating The Godfather trilogy (The Godfather, The Godfather II, and The Godfather III), starring, in different parts, such famous actors as Marlon Brando, Al Pacino, Robert De Niro, and Andy Garcia, among many other famous actors.  Coppola also built the Coppola winery in Napa Valley, which he purchased with the help of the proceeds from his The Godfather trilogy sales.  Despite his huge successes, Coppola too had money troubles and had to file bankruptcy for his business in the 1980s and 1990s.

Willie Nelson is an American pop culture Icon.  He is a singer-songwriter, author, and poet.  If you listen to Country music, then you know Willie Nelson.  Despite making millions from album sales and concerts, Nelson ran into money troubles, including a large tax debt, and had to file bankruptcy to obtain debt relief in the 1990s.

And perhaps the most interesting of all is Donald Trump, famous billionaire, and more recently famous for The Apprentice and telling contestants “you’re fired.”  Trump is a great example showing that no matter how financially successful you are, you or your business may still run into money troubles and need the assistance of the federal bankruptcy laws.  One of the things that we all know Donald for, in addition to his fame and success, is that he has experienced money troubles for his business and as a result has filed bankruptcy for his business more than once!   Donald is no doubt a smart businessman.  Donald knew when his business needed debt relief and he utilized the protection of the bankruptcy court when appropriate.  Today, Trump is doing well and enjoys insane financially success and well being, proving in a convincing fashion that there is life after bankruptcy.

The people mentioned on this blog are all highly regarded today.  They knew when it was time for a fresh start.  How is this information useful to you?  Well, you need to ask yourself, “do I need debt relief and a fresh start?”  If you need a debt relief and a fresh start, remember that you are NOT alone… you're in the company of some very interesting people!

Bankruptcy Crime of Failure to Disclose Assets

The bankruptcy laws are designed to give the honest debtor (someone who has filed bankruptcy) a fresh start.  There are severe sanctions for failing to honestly disclose all of your assets, liabilities, income, expenses, and financial affairs when you file bankruptcy.  Without exception, I always advise all of my clients to be painstakingly honest and disclose everything to your bankruptcy lawyer.  Your lawyer can then determine which information needs to be included in the papers filed with the bankruptcy court. Usually, it means disclosing everything.  However, there are technical exceptions where certain items or information need not be disclosed. 

Failure to disclose all of your assets, liabilities, income, expenses, and financial affairs can result in you being denied bankruptcy relief and you to be charged with a bankruptcy crime. You could possibly be charged with a felony and imprisoned for up to 5 years, and you could be fined up to $250,000 (for individuals) or $500,000 (for corporations).  There’s no doubt: honest is the best policy.  Just tell the truth, as any honest debtor would. 
   

As a practical matter, not disclosing your assets and other financial information may not always land you in jail for 5 years and can result in imposition of a $250,000 fine.  Sentencing guidelines are usually based on the facts of the case, such as the amount of loss suffered by parties affected by the nondisclosure, whether any court orders were violated, the extent of involvement or active concealment, and other matters.  Nondisclosure may only result in the dismissal of your bankruptcy case or forced sale of assets.  Still, the possibility of significant jail time as well as the possibility of a very large fine is real and is a strong deterring factor (against nondisclosure) that, hopefully, ensure that in each case all assets and other information are fully disclosed. 

When you disclose your assets, liabilities, income, expenses, and financial affairs to your lawyer, disclose them fully and completely and accurately as possible.  Disclose the replacement value (or current market value) of each of your assets after reasonable inquiry to establish such value.  Disclose your currently monthly income, and your current monthly expenses, after reasonably inquiry to establish the same. 

Your duty to truthfully disclose all of your assets and other financial information extends beyond the context of your bankruptcy petition and schedules filed with your case.  Honestly testify regarding your assets and other financial information at any hearing. If information you provided is audited by the bankruptcy trustee, cooperate in providing additional documents needed to complete the trustee’s investigation.

The bankruptcy crime of nondisclosure or concealment of assets may also take the form of transferring or concealing property before you file for bankruptcy and then not disclosing the transferred or concealed assets when you were supposed to disclose it in your bankruptcy filing. 

So do you need to worry or fret about the possiblity of jail time?   No.   Just be 100% forthcoming in disclosing all information to your lawyer and let your lawyer make the call as to whether the information must be disclosed in your bankruptcy papers.  When in doubt, always err on the side of disclosure.

What is a Bankruptcy Credit Counseling Class?

During the initial consultation with my clients, I always advise my clients that they need to complete a bankruptcy credit counseling class.  The reaction of my clients is always interesting. For a split second, before I can even finish explaining the credit counseling course requirement, I get a momentary look of discontentedness, as though I just told them they needed to go school and take a full semester course.  I always follow up my introduction of the bankruptcy credit counseling course requirement with something to the effect of, “don’t worry, it’s just a one hour course that you take on the internet.” And you can take the 1 hour credit counseling class from the comfort of your own home.

There are no assignments and no right or wrong answers. There are no quizzes and you are not tested on any of the material.  It’s more of an educational lecture that tells you how to better manage your credit debt because the federal government felt that it was important for all people filing bankruptcy to be better informed about credit and debt management.

While the bankruptcy credit counseling class is a very simple process to complete, the requirement should be taken seriously.  Completing your 1 hour credit counseling course on the internet is an absolute requirement prior to filing for bankruptcy relief.   You must complete the credit counseling course within the 180 day period before the date of your bankruptcy filing. 

There are exceptions to the credit counseling class requirement, but the exceptions are so rare that you might as well consider the credit counseling requirement an absolute requirement unless your lawyer tells you otherwise.  Exceptions include where the person filing bankruptcy: (1) is in the military in an active combat zone, (2) has a mental illness or disability that makes them incapable of making rational decisions with respect to financial responsibilities, or (3) is so physically impaired that they cannot participate in bankruptcy credit counseling, whether on the internet or by phone or in person.

So when you’re in your bankruptcy consultation and your bankruptcy lawyer mentions that you need to complete a bankruptcy credit counseling class, you’ll know it doesn’t mean going back to school, or taking pop quizzes, or doing any of those things that many people don’t like about school. 
  

The credit counseling course providers have actually made the process very streamlined and simple for you.  When you complete the course, most providers let you enter an email address where you would like your certificate of completion to be email to.  You can have your certificate instantaneously emailed to you and then forward the email to your lawyer so your lawyer will have the certificate.
 

It’s best to complete your bankruptcy credit counseling class the first opportunity that you have in order to avoid any possible delays with filing your bankruptcy, since you cannot file bankruptcy until you have completed your credit counseling course.  Just go on the internet, select an online credit counseling provider from the list of government approved providers, spend an hour reading through the informative material, and then have your certificate emailed to you. 

If you live in San Diego, California, make sure to complete your bankruptcy credit counseling class for the Southern District of California, which is the bankruptcy district that covers all of San Diego County, CA.

When you take your credit counseling class, don't look at it as a burden.  It’s just one hour of your life and it can be a valuable opportunity to learn something new about credit and debt management.  Many of our clients find that reading through the informative material on the online credit counseling course to be an enjoyable learning experience. Hopefully, you'll find the experience a positive one too.

Charging Credit Cards Before Bankruptcy Can Be a Form of Bankruptcy Fraud

Debts incurred through fraud are nondischargeable (they are not discharged) in bankruptcy, provided that your creditor files an adversary lawsuit and proves that the debt was incurred through fraud.  The fraud refers to a legal definition of fraud within the context of bankruptcy law.  Bankruptcy fraud includes, among other things, the making of a promise without the intention of performing it.

Some people are under the mistaken belief that the only prohibition on charging credit cards is that they are prohibited from purchasing luxury goods on credit cards before bankruptcy, but that it is permissible to purchase ordinary, non-luxury goods.  This is a common misconception. 

Definitely, purchasing luxury goods on credit before bankruptcy is a bad idea.  As explained in my blog post entitled Laving Spending, if you purchase luxury goods on credit cards during the 90-day period before filing bankruptcy and your creditor files an adversary lawsuit alleging fraud, then the bankruptcy law creates a presumption that the charges were incurred through fraud.  This is a presumption that shifts the burden of proof onto, so that you have to prove that you did not have fraudulent intent or else the credit card debt is presumed to be incurred through fraud.  If you cannot prove lack of fraudulent intent, then your creditor wins the adversary lawsuit and the credit card charges become nondischargeable and you will owe them forever.  Clearly, you do not want to be purchasing luxury goods on credit cards before bankruptcy.

But even if you buy ordinary, non-luxury goods on credit before bankruptcy, this can be a big problem.  While there is no presumption of fraud, your credit card lender can still file an adversary lawsuit against you and affirmatively prove (the burden of proof would be on your creditor) that at the time that you incurred the debt you did not have the intention to repay it, which is a form of bankruptcy fraud.  How would your lender prove this?  It may not be that difficult.  For example, if you retained a lawyer to file bankruptcy and during the time between when you retained your lawyer and the date that you filed bankruptcy you made credit card charges, any reasonable person would agree that when you made the charges you already knew that you were going to file bankruptcy.  Hence, your creditor could argue, and the bankruptcy court could make a determination, that at the time that you made the credit card charges you did not have an intention to repay the charges, or, otherwise stated, when you charged your credit card you were making a false promise to repay the charges.
 

So, in conclusion, you should not charge up your credit cards before filing bankruptcy.  From the point that you know you are going to file bankruptcy, you should immediately stop using your credit cards.  Otherwise, you could be found to have made the charges without the intention of repaying them, and your lender could plead and prove that in an adversary lawsuit and obtain a ruling that your credit card debt is nondischargeable in your bankruptcy case.  So before going and charging credit cards before bankruptcy, think twice.  You could be jeopardizing your ability to eliminate your credit card debt and get a fresh start.

Lenders Filing Lawsuits to Collect Debts

Initially, when they were receiving TARP money, lenders were less aggressive in the collection efforts.  The federal government was buying back their defaulted loans in their portfolios and they were effectively collection on troubled loans.  The troubled assets held by lenders clearly exceeded the $700 billion in TARP funds pledged by the federal government. Eventually, TARP money ran out.  Sadly to say, some of it went to pay huge bonuses and expensive vacations for CEOs and other management executives of lenders.

It seems that now that the TARP money has run out, lender lawsuits to collect bad debts are on the rise.  I see more and more clients each day who are getting sued by their lenders for unpaid credit card debt and personal loans, sometimes debts as small as $2,000 in credit card debt.  My opinion is that there is an increase in lender lawsuits against consumers because after the TARP funds ran out, lenders, who are plagued by troubled assets and bad debt, had to resort to collecting money any way they could to keep investors happy.  One way for a lender to collect money is to sue everyone for anything and everything that they can.

In-House Collection Departments

Lenders such as Chase have an in-house legal department set up that files and handles credit card collection lawsuits.  This means that Chase doesn’t even have to hire a law firm to sue you.  All they have to do is press a button.  They hand your file to their in-house legal department and shortly thereafter you have somebody knocking on your door and handing you a collection lawsuit that you have to answer in 30 days or file bankruptcy to stop a lawsuit, or else Chase can get a judgment and garnish your wages.

What You Can Do

So what can you do to protect yourself?  You have to decide whether you are going to pay off all of your debts, either in full or by settling your debts, or you need to decide that you’re going to file a San Diego bankruptcy and get a fresh start.  You can’t just stop paying your credit cards and other debt and just sit back and hope you don’t get sued.  If the lenders keep filing lawsuits at the current rate that they are filing them, you will likely get sued, perhaps multiple times on most or all of your debts, and even on small debts such as a $2,000 credit card debt. 

Any One of Your Creditors Can Garnish Your Wages

Perhaps the most daunting debt collection practice is wage garnishment, a process by which your creditor can takes your wages from your paycheck in repayment of a debt.  Can any creditor garnish wages when you fall behind on your payments, for example, on credit cards or other personal debt?  The short answer is yes.  But there is a bit more to it than that.

Preliminarily, this blog related to all debts other than purchase money home loans.  Under California’s anti-deficiency laws, mortgage lenders cannot sue you personally on account of a loan that you used to purchase your home.  If the home loan was a home equity loan taken out subsequent to the purchase of your home, for example money you pulled out from your home to pay for bills, then your mortgage lender can personally sue you.  So the remainder of this blog refers to loans other than purchase money home loans.

When you fall behind on your credit card payments or other debt payments, your creditors will first call you repeatedly, often daily, asking for payment.  Your creditors will then transfer your file to a third-party debt collector who will call you incessantly, in the morning, during the day, at dinner, and late at night, often using intimidation tactics.  When the debt collector’s tactics, often illegal and harassing collection practices, don’t result in bringing your account current, your creditors will resort to suing you.

When a creditor files a collection lawsuit against you, frequently you will not respond because a response typically requires retaining a lawyer, paying a lawyer fee, paying court filing fee to file your response, and in the end you will probably lose the lawsuit since it is a lawsuit to collect based on money that you actually borrowed.  When you don’t respond in the required time, usually 30 days in most courts, your creditor will win the lawsuit by default, which means it will win automatically because you did not respond.   Your creditor then is awarded a judgment and can proceed to garnish your wages to pay off your judgment debt owed to your creditor.

Even if you were to hire a lawyer, pay a lawyer fee, pay a court filing fee, and appear and defend the collection lawsuit, you will only delay the inevitable.  In a typical collection lawsuit, you will lose the lawsuit because you did, in fact, receive the money or credit that was extended to you.  Your creditor will obtain a judgment against you and will be able to garnish your wages to pay off the judgment debt.  

So, yes, your creditor definitely can garnish your wages in order to forcefully have your debt repay by deducting money from your wages received from employment.  What can you do about it?  Well, you have the option of filing bankruptcy to eliminate the debt and thereby avoid any wage garnishment.  Even if a garnishment has started, filing for bankruptcy protection will put an end to the garnishment and restore your full income to pre-garnishment levels so that you can resume being able to pay your bills.

Do I Qualify for Bankruptcy in San Diego?

A common question that I’m asked by many of my new clients is, “Do I qualify for bankruptcy?” I always begin by explaining to my clients that there are different types of bankruptcy and depending on their individual situation they may qualify to file one type of bankruptcy but not another type.  I then talk to them, determine what their needs and goals are, and then lay out their options and give my recommendation.  In the most basic terms, here are the main points to consider.

Amount of Assets

The first point to consider is the nature and amount of assets that your own.  When you file bankruptcy, you can only keep a certain amount of assets.  How much you can keep is determined by your applicable bankruptcy exemptions. 

Residency

The next point to consider in determining if you qualify for bankruptcy is where your state of residency is for bankruptcy purposes, that is, the place where you have lived for the past 2 years.  You must file bankruptcy in the district where you resided for the greater part of the 180-day period before you file bankruptcy.  Also, your bankruptcy exemptions are determined by the state where you resided during the last 2 years.  If you resided in more than one state during the last 2 years, then your exemptions are determined by the place you lived during the 180 period prior to the last 2 years, which means the time period between 2 to 2 1/2 years ago.  Your residency can be very important because different states have different bankruptcy exemptions that will affect what property you get to keep when you file bankruptcy.

Means Test

The next point to consider is whether you can pass the Means Test.  If you can pass the Means Test, then you can file Chapter 7 bankruptcy or Chapter 13 bankruptcy, which are by far the most common types of bankruptcies filed each year and account for more than 99% of all bankruptcy filings.  If you cannot pass the Means Test, then you do not qualify for bankruptcy under Chapter 7 and instead will be required to file a Chapter 13 (instead of a Chapter 7) and repay a portion or all of your debts through a Chapter 13 plan.

Income

If you are filing under Chapter 7, then to qualify for bankruptcy your income needs to be low enough so that you can pass the means test.  If you are filing under Chapter 13, then you will need sufficient income to be able to repay all of your obligations that you propose to repay through your Chapter 13 plan.  Ideally, your income should be just enough to repay all of the debts you would propose to repay, because if your income is any higher then you will be required to contribute all of your excess disposable income to repay your credit card debt and other unsecured debt.

Married

Then next to point to consider is whether you are married.  If you are married, you don’t necessarily have to include your spouse in your bankruptcy, although if it is in your best interest then you do have the option to file bankruptcy as a married couple.  Also, if you are married, your spouse’s income will be taken into account in determining whether you qualify for bankruptcy and your spouse’s income just be disclosed to the bankruptcy court.

Chapter 13 Debt Limits

If you absolutely need to file under Chapter 13 to repay missed mortgage payments and save your home from foreclosure, or to erase a 2nd mortgage through lienstripping, your total debt must not exceed the Chapter 13 debt limits.

Exceptions to Rules 

There are nuances and exceptions to the rules for qualifying for bankruptcy.  To truly determine if you qualify for bankruptcy under a particular Chapter, you need to discuss your specific situation with a bankruptcy attorney.

What is the Bankruptcy Wildcard Exemption?

Your bankruptcy exemptions provide for what property you get to keep when you file bankruptcy.  There are federal exemptions provided for by the federal bankruptcy law, and state exemptions provided for by the laws of various states.  Federal exemptions have a "wildcard" exemption that you can apply to practically anything you want to apply it to.

The federal bankruptcy law gives the states the option of opting out of the federal exemptions so that the residents of that state are required to select the state’s exemption scheme when they file for bankruptcy relief.  Many states have opted out of the federal exemptionsCalifornia is one such state that has opted out of the federal exemption scheme.  But not to worry, California has also enacted an alternative set of exemptions that is almost identical to the federal exemptions.  If you are a California resident you can select either: (A) the California state exemptions; or (B) California’s federal-like set of exemptions.

So why all the fuss about federal exemptions?  Well, state exemptions typically provide a large protection of equity in your home through a homestead exemption, but they don’t protect much personal property assets, such as your car and money in your bank accounts.  If you don’t have any equity in your home, then you’re not concerned with protecting equity in your home.  If there is no equity in your home, then as long as you stay current on your home loan payments generally, you can keep your home.  If you don’t have equity in your home, you are likely more concerned about protecting your equity in your personal property assets. 

When it comes to protecting personal property, the federal bankruptcy exemptions, or in the case of California residents California’s federal-like exemptions, truly shine.  Both have what is called a wild card exemption that you can apply to pretty much any property or asset that you like.  California’s wild-card exemption allows you to protect, as of the date of this blog, equity of up to $23,250 in your personal property.  This means that, theoretically, you could have $23,250 cash in your bank account and file bankruptcy and keep the cash.  The analysis is a bit more complicated than that, and having such a large sum of cash in your bank account when you file bankruptcy could raise concerns of lack of good faith, but, theoretically, under the plain language of the bankruptcy law, you could do that. 

The analysis of what you can keep with the wild card exemption is a bit more complicated than discussed in this blog.  There are a multitude of factors that must be considered, such as whether you have equity in your other assets, such as your home or car, that you also need to protect when you file bankruptcy.  Before assuming that you can make full use of the wildcard exemption towards protecting any property that you want to keep, you should discuss your situation with an experienced bankruptcy attorney.  Remember, if the wild card applies to your unique situation, then knowing you have it and knowing you can use it can make your bankruptcy petition play out like a pair of pocket aces. 

Can a Gay Married Couple File Bankruptcy Together?

Bankruptcy law allows a couple who is “married” to file a joint bankruptcy petition with his or her “spouse.”  How is this law applied to a gay marriage and can a gay married couple file bankruptcy together?  Until recently it was undecided whether a gay or lesbian couple who is legally married in California can file a joint bankruptcy together.  If you’re one of the roughly 18,000 gay or lesbian couples who were married during the 6 month period prior to the passage of Prop 8 and thus have a legally recognized valid marriage in California, you may be asking yourself, can a legally married gay couple file bankruptcy jointly as a couple?  The answer, according to a recent decision of the United States Bankruptcy Court, Central District of California (covering Los Angeles County and several of its surrounding counties), in the case of In Re: Gene Douglas Balas and Carlos A. Morales, is yes.

The root of the issue stems from the legal definition of marriage under federal law, since bankruptcy law is federal law.  Under the federal Defense of Marriage Act, marriage is defined as a legal union between one man and one woman as husband and wife.  So, under the strict language of the federal law, that is, the Defense of Marriage Act, a marriage between a same-sex couple (or same-gender couple) does not fit the legal definition of marriage.
   

California has taken a similar stance on the definition of marriage.  In 2000, Proposition 22 defined marriage as the union between one man and one woman.  Although in May 2008 the California Supreme Court overturned Prop 22, holding it was unconstitutional in violation of California’s own constitution, 6 months later Proposition 8 came along.  Prop 8, passed in November 2008, amended the California Constitution to provide that only a marriage between a man and a woman is valid or recognized in California. 

Currently, notwithstanding the passage Prop 8, a same-sex marriage performed in California during the 6 month period between the overturning of Prop 22 and the passing of Prop 8 continues to be recognized as a legally valid marriage in California, and a same-sex couple who did not marry within the narrow 6 month window can still form a legally recognized domestic partnership.

Gene Balas and Carlos Morales are a gay married couple who were married during the 6 month period prior to the passage of Proposition 8.  So when they decided to file for bankruptcy in early 2011, they filed jointly as a married couple.  The United States Trustee asked the bankruptcy court to dismiss the joint bankruptcy case on the asserted ground that Balas and Morales were ineligible to file bankruptcy together because, the U.S. Trustee alleged, a gay marriage did not match the federal legal definition of a married couple or comport with the definition of a spouse.  The bankruptcy court disagreed with the U.S. Trustee and held that because Balas and Morales were legally married in California, denying them the right to file a joint bankruptcy, a right enjoyed by opposite-sex married couples, would be unconstitutional in violation of the equal protection clause of the 5th Amendment to the United States Constitution.

In an extraordinary showing of support, the bankruptcy court’s decision was signed onto by 20 different bankruptcy judges, including the judge who rendered the decision and 19 other judges who signed the order as a showing of support.  A decision or order is typically signed only by the judge that heard the case and decided the matter.  The entire Central District of California, covering Los Angeles County, Orange County, Riverside County, San Bernardino County, Ventura County and Santa Barbara County, has 24 bankruptcy judges. The act of 19 judges from different counties throughout the Central District of California taking the affirmative act of signing onto another judge's order clearly demonstrates that most, if not all, of the bankruptcy judges in the Central District would have reached the same decision and share the view that a legally married same-sex couple should be permitted to file a joint bankruptcy petition together.  The overwhelming showing of support for the decision would tend to indicate that judges in other California bankruptcy districts, such as the Southern District of California, covering San Diego County, would follow suit and reach the same decision if presented with the issue.

Can I Keep My Credit Card in My Bankruptcy in San Diego?

The bankruptcy laws require you to list all of your existing debts, including all of your outstanding credit card debt.  You do this in Schedule F of your bankruptcy schedules, which is the bankruptcy schedule where you are required to disclose and list all of your nonpriority unsecured claims (debts), including all unsecured credit card debt.  If your credit card has a zero balance, then you don't owe any credit card debt.  It's just a card, a piece of plastic, and a credit card account.  You only have credit card "debt" if you have a balance on your card.  If you have a small balance and want to pay off the balance before filing bankruptcy, then you won't have to include the card in bankruptcy.  But before paying off a credit card balance, talk to a bankruptcy lawyer about the issues that may arise from doing so.

Credit Cards With a Balance

If you owe money on a credit card, then you must list it on Schedule F.  You don’t get to choose which outstanding debts, such as credit card balances, you want to list in your bankruptcy.  In fact, when you sign your bankruptcy schedules you sign a declaration under penalty of perjury stating that you have accurately disclosed all of your debts.  Also, when during your meeting of creditors the bankruptcy trustee will ask you affirm that you have accurately listed all of your debts.

Credit Card That Has Zero Balance

If you have a credit card that has a zero balance, either because it has a zero balance now or because you pay off the balance before you file bankruptcy, then you don’t have to list that credit card.  You can keep your credit card and not list it in your bankruptcy because, technically, you don’t owe that creditor any money.  Since you don't owe any money, there is no debt to list or disclose.

Reasons Not to Pay Off Credit Card 

I usually caution my clients against paying off a credit card before they file bankruptcy for the sole purpose of being able to keep a credit card after bankruptcy, for three reasons. 

First, even if your balance is zero, credit card lenders periodically may run your credit and if they see that you filed bankruptcy they may close down your credit card account, in which case you will have spent money to pay off a credit card that you can no longer use. 

Second, if you pay a credit card a payment outside the ordinary course of business (within the meaning of the bankruptcy laws), the bankruptcy trustee could theoretically recover the payment as a preference payment and distribute the funds among all of your creditors in proportion to the relative amounts of their claims in your bankruptcy.  If that were to happen, then the credit card you paid off would no longer be paid off and you could still owe money on a credit card that you did not include in your bankruptcy.

Third, once your bankruptcy is completed, you will likely get bombarded with new credit card offers.  If the fees associated with the new credit cards are less than what it would cost you to pay off the balance on an existing card, then it may make more sense, financially, to include your credit card in your bankruptcy and just get a new card after bankruptcy.

Cost-Benefit Analysis 

So if you’re considering paying off a credit card just so that you don’t have to include that credit card in your bankruptcy, you may want to think twice.  In most cases, I advise my clients against doing that.  This is not to say that it is a bad idea in every case.  Determining whether or not you should pay off a credit card before you file bankruptcy requires a consideration of the totality of your circumstances, including a cost-benefit analysis, and such a determination can only be made after a careful consideration of your unique situation.

Attorney Bankruptcy Commercials on Television Are Expensive

If you do any amount of TV watching, you have likely seen the same attorney bankruptcy law firm TV commercials over and over again.  Perhaps the ones that immediately come to your mind, the ones you've seen time and time again, are Pacific Law Center and Golden State Law Group. As you would probably imagine, bankruptcy commercials on television, like all TV commercials, are expensive.  If they weren't so expensive, you'd see a lot more of them.  Because of the high cost of advertising on television, a bankruptcy law firm that runs bankruptcy ads on TV is likely to have a much higher advertising cost than a comparable law firm that does not run a bankruptcy advertisement on TV.

Pacific Law Center

During 2009 it seemed as though every time your favorite show would pause for a commercial break, you saw a bankruptcy TV commercial for Pacific Law Center in San Diego.  You don't see Pacific Law Center bankruptcy TV ads anymore because the firm ceased doing business.  Part of the reason Pacific Law Center went out of business could be due to the high cost of advertising and not being able to charge enough money to stay in business, even though the firm charged much higher rates than many other bankruptcy law firms.

Golden State Law Group

Subsequent to the difficulties arising with Pacific Law Center, Golden State Law Group was formed, in approximately August 2010.  After the demise of Pacific Law Center, it seemed as if, overnight, every bankruptcy attorney commercial on your local TV stations in San Diego was replaced with a bankruptcy TV ad for Golden State Law Group.  As far as I know, bankruptcy TV commercials are still very expensive.

No TV Advertising Is Not a Bad Thing

So what's the point of all this?  The point is that not running bankruptcy TV ads, is not necessarily a bad thing.  TV ads are expensive and the more a firm spends the more overhead it has.  By keeping overhead lower an attorney is able to charge less for legal services.  This does not necessarily mean that firms like Pacific Law Center and Golden State Law Group will charge more.  It is possible that they may even charge less.  We cannot predict how much another firm will decide to charge.  They are free to set whatever rates they deem necessary.  What we do know is that if we, Bankruptcy Legal Center, advertise on TV at this time, based on current TV ad rates, we would have to raise our rates significantly to accommodate for the increased expenses and we do not want to do that.  So you won't be seeing our ads during the commercial break of your favorite TV shows.  We have made a calculated decision to refrain from running television commercials in an effort to keep our rates as low as possible and we intend to keep it that way.

Do You Have to Disclose All Assets When You File Bankruptcy?

You absolutely must disclose all of your assets when you file bankruptcy.  Your real estate, including your home, rental property, commercial property, or vacant land, is disclosed in your Schedule A.  You must list all of your interests in real estate, even if you are not on title and have only an “equitable” interest, meaning that record ownership is not in your name but in actually you have an interest in the property.  For example, you may have purchased a home using a family member’s credit and the property is in a family member’s name, but in reality it is your property and you make the loan payments.  In such a case, while you are not on title, you still have an equitable interest in the property that you must disclose.  Similarly, if title is in your spouse’s name and the payments are made from community funds (money earned by either spouse during marriage), you have a community property interest in the real estate and must list that interest on Schedule A of your bankruptcy schedules.

You must disclose all of your other assets (other than real estate), which in legal terms is called your personal property, on Schedule B.  You must list: (a) how much cash on hand you have; (b) your bank accounts and how much money you have in your accounts or other financial accounts; (c) the value of your household goods and personal effects; (d) stocks that you own and how much value they have; (e) tax refunds owed to you and how much is owed; (f) cars and trucks that you own and their value; and (g) anything else that you own.  Your attorney can help you with valuation of your various items according to commonly accepted bankruptcy law standards.

It is very important that you honestly disclose all of your assets. The bankruptcy laws afford the honest debtor a fresh start.  The bankruptcy laws provide stiff penalties for hiding or not disclosing assets, including a fine of up to $250,000 and possibly jail time.  It is absolutely recommended that you truthfully disclose all of your assets when you file bankruptcy.  As long as you accurately disclose all of your assets on Schedule A and Schedule B, your bankruptcy filing should go smoothly, assuming you have an attorney that knows how to perfectly prepare and flawlessly execute your bankruptcy, which an experienced and reputable bankruptcy attorney that specializes in bankruptcy law would be expected to be able to accomplish.

When You Buy Luxuries Before Bankruptcy in San Diego

Charging credit cards before bankruptcy is generally a bad idea.  When you charge your credit card before you file bankruptcy your credit card lender could ask the bankruptcy court to make a determination that the charges were made through actual fraud and ask for an order that your credit card debt survive your bankruptcy.  In that case, you will not be able to eliminate credit card debt, which may be one of the main reasons you are filing bankruptcy in San Diego. In order to do that, your credit card lender's bankruptcy attorney would need to file appropriate paperwork with the bankruptcy court requesting a determination that your credit card debt owed to that lender is nondischargeable.  On what basis would a lender to this? 

When you entered into a credit card agreement with your lender your lender agreed to extend you credit to make purchases and you agreed to pay for the charges that you make on your credit card.  So each time you make a charge there is an actual and implicit promise that you are going to pay back those charges.  If you are out in the department stores lavishly spending on your credit cards before you file bankruptcy, the bankruptcy court could find that at the time that you made the charges you already knew you were going to file bankruptcy and not pay the charges. Therefore, the court could find that, at the time that you ran the charges on your credit card, you were making a false promise to repay the charges.  A false promise is a form of fraud under San Diego bankruptcy law.  Debts incurred through fraud can survive your San Diego bankruptcy case.

Charging up credit cards for luxuries has even more severe consequences.  Under San Diego bankruptcy law, if you buy luxury goods on credit cards before you file bankruptcy in San Diego, the burden of proving fraud, or lack thereof, falls on you.  Where as in the case of making charges on your credit card before bankruptcy the burden of proving fraud is on your creditor, if the charges are for items that are considered luxuries and the luxury items are purchased within 90 days prior to filing bankruptcy the charges are presumed to be fraudulent.  "Presumed" means that there is a presumption of fraud that shifts the burden of proof to you to show that the charges were not incurred through fraud.

A detailed discussion of what constitutes luxury goods is very technical and is beyond the scope of this blog post, but generally speaking luxuries items that are not ordinary and necessary expenses.  A good rule of thumb is to stop spending on credit cards once you know that you are going to file bankruptcy.  Of course, the shorter the time span between when you stop using your creditors cards and stop paying on them, and the day you file bankruptcy, the greater the implication of fraud in the legal sense, meaning you knew you were going to file bankruptcy but keep running up charges without the intent to repay them. 

Transfer of Assets Before Filing Bankruptcy in San Diego

When you have creditors on the horizon and you transfer an asset to someone without receiving reasonably equivalent value in exchange for the transfer, the transfer can be deemed “fraudulent” as a matter of law as to your creditors.  This is different from what you would typically think of as fraud, which occurs if you misrepresent a fact to someone and they detrimentally rely on your misrepresentation and suffer financial harm as a result.   A fraudulent transfer, in the strict legal sense, is fraudulent without receiving fair value in return for the transfer.

Lets say, for example, that you have a car worth $25,000 and you own it free and clear without a car loan.  If prior to bankruptcy you transfer title to your friend without receiving any money, then the San Diego bankruptcy trustee could file an action to have the transfer deemed fraudulent as to your creditors.  Had you not transferred the car to your friend, it would be an asset that your creditors could use to satisfy part or all of the debt that you owe them.  By transferring the car to your friend, you deprived your creditor of the ability to satisfy its claim from that asset.  This makes the transfer legally fraudulent as to your creditor.  Had you received $25,000 in exchange for the transfer, then you would have $25,000, or whatever remained of it, in your bank account and your creditors could satisfy part or all of their claim from the money in your account.

In the example above, even if you received $15,000 in exchange for the transfer, the transfer could still be deemed fraudulent because the amount paid was $10,000 short of the fair market value of the car.  The idea is that you did not receive the fair value for the assets.  You received $10,000 short of the fair value, and, as a result, you have $10,000 less in your account.  That is $10,000 less money that your creditors could have used to satisfy their claims.

Transferring assets can become a critical issue for you and your lawyer during the bankruptcy planning process.  When you file bankruptcy in San Diego, you can only keep a certain amount of assets, which is determined by your applicable bankruptcy exemptions.  If your assets exceed the amount you are allowed to keep under your applicable bankruptcy exemptions, then you may need to do some transferring of assets or else risk having the bankruptcy trustee liquidate and sell some of your assets.  There are legal ways to transfer assets (to a certain extent) in order to protect them from your creditors and without the transfer being deemed a fraudulent transfer.  Legal transferring of assets, often a critical part of the pre-bankruptcy planning phase and an experienced lawyer will be well versed in.

So in conclusion, you can transfer assets before you file bankruptcy San Diego, you just better make sure it’s done properly, after discussion with an experienced San Diego bankruptcy attorney, so that it is not deemed a fraudulent transfer that can be set aside by the trustee or by your creditors.  All of the laws regulating assets transfers before bankruptcy must be considered.  Otherwise, you may be in for a big shock when the San Diego bankruptcy trustee recovers your transferred assets and starts selling them to pay off your creditors.

Propose the Perfect Chapter 13 Bankruptcy Plan in San Diego

When you file Chapter 13 bankruptcy you have to propose a Chapter 13 bankruptcy plan that will ultimately be "confirmed" (approved) by the San Diego bankruptcy court.  If your Chapter 13 plan is not confirmed, then all the hard work of you and your attorney results in nothing.Your entire Chapter 13 bankruptcy will be dismissed and you and your lawyer will have to start over.  What’s worse, the court may bar you from filing for 180 days.  If you had filed bankruptcy to stop foreclosure of your home, you could end up losing your home.

The fact is, a large number of Chapter 13 cases are dismissed for failure to present a confirmable plan.  One reason for this is that recently there has been a large influx of attorneys who have added bankruptcy law to the broad range of practice areas that they handle.  It is very unlikely that an attorney who does not specialize in Chapter 13 practice could propose a Chapter 13 plan that would be confirmed by the court.

Preparing the perfect Chapter 13 plan truly requires hiring a lawyer that is a Chapter 13 specialist, as it requires a consideration of many different factors that only a Chapter 13 specialist is qualified to do, including consideration of your disposable income under bankruptcy standards, your current income and expenses, any arrears on your home loan, the amount of your car balance(s) and when you took out your car loan(s), whether you qualify for a lien strip, and a multitude of other factors.

Equally important, preparing the perfect plan in San Diego bankruptcy cases requires familiarity with the local attitudes and practices of the San Diego Chapter 13 trustees and bankruptcy judges.  Such familiarity is not magically acquired by an attorney simply by adding Chapter 13 practice to the list of practice areas that an attorney has decided to practice.   Rather, it requires a high frequency of communication with the San Diego Chapter 13 trustees, both inside and outside bankruptcy hearings.  In addition, it requires substantial experience appearing before bankruptcy judges for the specific purpose of arguing Chapter 13 cases in order to know the judges’ positions on issues where the attorney disagrees with the practices or views of the Chapter 13 trustees.

If done correctly, you can propose a Chapter 13 plan that will be approved by the Court.  An experienced Chapter 13 specialist can prepare the perfect plan that will have a very high likelihood of success and being confirmed by the court.

Banks That Close Your Account When You File Bankruptcy 

I could give you a list of banks in San Diego that will not close your account when you file bankruptcy.  For example, as of the writing of this blog, both Chase Bank and CitiBank are banks in San Diego that have a policy of not freezing or closing your account when you file bankruptcy.  However, by the time you read this blog, the policies of Chase and CitiBank  could have changed.  As a bankruptcy attorney, I believe that the best advice I can give my clients is to always check with the branch manager of your bank to make sure their policy has not changed.  Ask both a San Diego bankruptcy lawyer, and confirm with your bank's branch manager what their current policy is with respect to treatment of a bank account in bankruptcy.  That way, you will be sure of whether or not your bank will close your account when you file bankruptcy San Diego.

Why Banks Freeze Accounts

Under the bankruptcy law your creditors may, under certain circumstances, have what is called a right to setoff.  If your bank has setoff rights it means that if you owe the bank money, for example you have credit card debt with the same bank, your bank may be able to freeze your account and take any funds you had in your account as of the date you file bankruptcy and apply the funds to your debt owed to the bank. The main reason that banks freeze accounts is to give the bank a chance to have its legal department or lawyers determine if they have any setoff rights. Even if you don’t owe your bank any money, your bank could conceivably freeze your account while it determines whether or not it has setoff rights.

Why Banks Close Accounts

Most banks don't close accounts.  It is usually the credit unions that close accounts.  The reason that they do this is that the agreement you signed when you joined the credit union often says that you cannot be a member of the credit union if you file for bankruptcy.

Talking to Your Branch

There are a number of banks that have a general policy of not placing a freeze on your bank accounts when you file bankruptcy.  Pinning down the banks that employ such a policy is like trying to hit a moving target.  The banks are constantly changing their policies and standards, including how bankruptcy affects your account. There are literally thousands of banks.  No bankruptcy lawyer in San Diego can be an expert on the policy of every single bank. 

Therefore, the best advice that a competent lawyer can give you is that before you file bankruptcy you should walk into your branch and talk to the branch manager and get a clear answer on the bank’s current policy with regard to treatment of bank accounts when you file bankruptcy.  You will have to do this within a short period of time before you file bankruptcy because of the constantly changing bank policies.  If your bank has a policy of freezing or closing bank accounts, then you can simply open up a bank account at a bank that has a bankruptcy friendly policy and stop sending your direct deposits to a bank that may freeze or close your account.

What Are the Bankruptcy Trustees?

Many of our clients come to us thinking that when they file bankruptcy they will have to appear before a bankruptcy judge.  In the vast majority of cases, you will never have to appear before  a bankruptcy judge.  Instead, you will make an appearance, usually just a single appearance, before a bankruptcy trustee.  The meeting before the bankruptcy trustee is in a rather informal room.  It is not a courtroom.  Your bankruptcy attorney will be there with you.  The meeting will usually last about 2-5 minutes.  Depending upon the number of cases set for the particular calendar date and time of your appearance, you may have to wait anywhere from 1 minute to 60 minutes until your case is called. 

The bankruptcy trustees are appointed by the Court and United States Trustee and have a fiduciary duty to review your bankruptcy schedules and the supporting due diligence documents that you provided to your attorney as part of the documents needed to file bankruptcy.  Assuming that all your documents are in order and your bankruptcy is prepared properly and flawlessly, as an experienced bankruptcy attorney will be able to do, the bankruptcy trustee will give his or her stamp of approval to your bankruptcy.  In a Chapter 7 bankruptcy, once the Chapter 7 trustee gives his or her approval to your bankruptcy and your documents it generally means that your bankruptcy will be completed and you will receive a bankruptcy discharge in about 90 days after you filed bankruptcy, assuming that there are no other objections by creditors. 

In a Chapter 13 bankruptcy, the Chapter 13 trustee's role will also include making sure that your plan is prepared flawlessly and that all confirmation requirements are met.  And here I should mention that preparation of a perfect plan is a tall order and many Chapter 13 plans are routinely rejected.  Indeed, Chapter 13 plans often rise and fall depending on the level of experience of the lawyer that you choose.  There are usually two extremes.  You can hire an inexperienced lawyer who offers a reduced fee (commensurate with his or her experience) and expect a plan that will be rejected, or you can hire an experienced bankruptcy law firm that has a slightly higher fee and will prepare a plan that will be confirmed (accepted).

Some attorneys fear the bankruptcy trustees because they have the power to object to a bankruptcy and the judges will give great weight to the objections of the bankruptcy trustee. However, the bankruptcy trustee should be viewed as friend not foe.  Bankruptcy trustees only object to improper bankruptcies or improperly prepared bankruptcies.  If your bankruptcy is prepared properly, executed flawlessly, and brought in good faith, there is no reason to fear the trustee.  To the contrary, the trustee can be very helpful by giving his approval to your bankruptcy, leading to a quick and timely granting of your discharge by the Court.

An experienced bankruptcy lawyer in your bankruptcy district (example, the Southern District of California, covering all of San Diego County, California) will have appeared many times before all of the Chapter 7 trustees and Chapter 13 trustees in your bankruptcy district and will know their attitudes and beliefs, all of which must be taken into account in preparing your bankruptcy.  Make sure your bankruptcy attorney is familiar with the local practices of the trustees in your district and do not fear but rather look forward to joining your attorney in making your appearance before the benign bankruptcy trustee.

Benefits of Married Person Filing Bankruptcy Alone

One of the main benefits of filing bankruptcy alone, without your spouse, is that your spouse does not have to be involved in the bankruptcy proceeding.  If your spouse has excellent credit and you don’t, your spouse may want to maintain their excellent credit by not being a part of your bankruptcy. You will still have to disclose your spouse’s income for purposes of establishing your household income but this is only relevant to determining whether you, by yourself, qualify to file for bankruptcy.  If, for example, your spouse earns $200,000 per year, you likely would not qualify for bankruptcy relief, regardless of your income, because the bankruptcy court would say that your household income is too high and with the help of your household income you can afford to repay your debts.

Small Amount of Debt 

Also, if your spouse has a very small amount of debt in comparison to your debts, for example you have $20,000 in credit card debt and your spouse has only $2,000, your spouse may want to just repay her credit cards so that he or she does not have to join in your bankruptcy.  That way, the one of you with the larger amount of debt can file bankruptcy and then use the other spouse’s good credit for the next few years while you rebuild your credit.

Discharge Protection

Another benefit of filing bankruptcy alone is that, in certain cases, the filing of a bankruptcy and obtaining a bankruptcy discharge by a married person will provide both of the married couples with all the protection they need.  The rule of law regarding a bankruptcy discharge protecting married couples is quite complex and discussion of that rule is beyond the scope of this blog.  Proper analysis truly requires discussing your situation in great detail with an experienced bankruptcy attorney.  In many cases, the filing of a bankruptcy by one married person can fully protect both spouses. Under an appropriate set of facts, which must be fully and properly analyzed by a San Diego bankruptcy lawyer, the filing of a bankruptcy by one married person can protect both married persons even though only one spouse files bankruptcy and the other spouse is not involved, at all, in the bankruptcy case proceedings.

The Drawback of Married Person Filing Bankruptcy Alone 

The main drawback to a married person filing alone is that the non-filing spouse may not receive the same protections he or she would have received had both married couples filed bankruptcy together. Much of this depends on the nature of the debts involved as well as the type of bankruptcy that is filed.  Depending upon your situation, filing bankruptcy without your spouse many not fully protect your spouse and he or she will continue to receive harassing phone calls from debt collectors and may even be sued during the pendency of your bankruptcy.

Lien Stripping or Loan Stripping of Home Equity Loan

To perform a lien strip on your home, your bankruptcy lawyer will file a special motion with the San Diego bankruptcy court in order to that the value of your property is less than the balance owed on your 1st mortgage loan, thereby rendering your 2nd loan an unsecured loan under San Diego bankruptcy law because there is no equity securing it.  The special motion also asks the Court to actually modify and convert the 2nd loan or home equity loan into unsecured debt so that effectively it is treated just like credit card debt.  Having converted your 2nd loan to unsecured status, we then ask the Court to “strip” (remove) your 2nd mortgage or home equity loan. Thus, through this whole process your bankruptcy attorney is able to erase a second mortgage that is encumbering your home, so that you are left with only your 1st position mortgage loan.

Partial Lienstrip

On many occasions I have spoken to clients that were misinformed that they could do a partial lienstrip and remove part of their 1st mortgage and bring the 1st mortgage balance down to the value of their property.  To the novice practitioner, in theory, if you just read the black letter law, this would seem possible.  But to the experienced San Diego bankruptcy attorney, he or she knows that there is San Diego bankruptcy case law providing that when you partially lienstrip a loan, then the new loan amount must be paid off during the course of your Chapter 13 bankruptcy.  So, for example, if you wanted to do a partial lienstrip of your 1st mortgage balance from $600,000 down to $500,000 based upon a $500,000 value of your property, you would have to pay off the new $500,000 loan balance within 5 years. That would translate into payments of about $10,000 per month for 5 years.  If you were paying the $600,000 loan over 360 months, your payments would be about $4,000 per month.  Partial lienstrip just doesn't work.

Lien Stripping on Rental Property

While in theory lien stripping on a rental property is permissible, in reality lien stripping on a rental property rarely works.  There are several reasons for this, but the main reason is that most rental properties will still remain cash flow negative if you do a lienstrip, and the San Diego bankruptcy trustees will typically object to you being able to keep a cash flow negative property.  The San Diego bankruptcy court will support the trustee and expect you to let go of the cash flow negative property and take whatever money you save (the amount that you were cash flow negative) and pay that money each month to your creditors in your Chapter 13 bankruptcy.  Even if you could make the rental property cash flow positive, you would most certainly have to pay all of the positive cash flow to the bankruptcy trustee so that the money could be used to pay your creditors. 

Loan Stripping

If you have been looking into your mortgage debt relief options, you may have heard of a loan strip.  Loan stripping is simply another term for lien stripping.  The more technical terminology used by lawyers is lien stripping.  Because a lien strip results in eliminating a loan and the lien provided in security, a lien strip is sometimes referred to be nonlawyers as a loan strip and the process is sometimes referred to as loan stripping. 

Talk to a Lien Stripping Expert

So now you know what all the lien stripping buzz is about.  You know what works and what doesn’t work.  If you have a 2nd mortgage or home equity loan against your home, you just may be able to do a lien strip and strip off the loan and lien encumbering your home through the Chapter 13 lienstripping process.  Most importantly, if you are considering doing a lien strip on your home, talk to a lienstrip expert, that is, an experienced Chapter 13 bankruptcy lawyer who has lots of experience performing lien strips.

Can I File Bankruptcy If I Have a Business?

If you are a business owner then continued operation of your business is your livelihood.  You may need to file bankruptcy but if it means giving up your business then bankruptcy is not an option.  For this reason, in bankruptcy businesses can be a sensitive subject.

Frequently I speak with new clients who are operating a business and are worried about what will happen if they file bankruptcy on their personal debt such as personal credit cards.  They know that they need to file bankruptcy on their personal debt but don’t want to include their business in their bankruptcy filing. 

The good news is that in most cases you can file bankruptcy and keep your business.  There are three common situations in which a business can be protected in bankruptcy and you can keep your business when you file bankruptcy.
 

First, if the business net assets are within your allowable bankruptcy exemptions (exemptions refer to property that you get to keep when you file bankruptcy), then you can keep your business and business assets.  In such a case, the business and its assets are termed exempt assets, which means you get to keep the business and its assets in bankruptcy.  

Second, even if your business has substantial assets that exceed your applicable bankruptcy exemptions, such as substantial business equipment or a full liquor license, there may be liens, such as tax liens or UCC Financing Statements that encumber those assets.  To the extent that the assets of your business are encumbered by liens, then the net value of the business may be reduced to the point that it will fall within your allowable bankruptcy exemptions and hence the business is protected when you file bankruptcy.

Third, for married couples, often upon further examination your lawyer may determine that the business is really the separate property of your spouse who is not filing bankruptcy or does not necessarily need to file bankruptcy.  In other words, you may “have a business” but technically, under bankruptcy law and under California community property law, you don't have a community property or separate property ownership interest in the business.  Rather, the business is the separate property business of your spouse.  For example, your spouse may have owned or acquired the business prior to your marriage, or your spouse may have received the business as a gift or inheritance from a family member before or during your marriage.  In such a case, the business would not be treated as an asset of your bankruptcy since your spouse's separate property assets are not included in your bankruptcy.

Proper characterization of a business requires careful examination of the fact and legal analysis by an experienced attorney.  Depending upon the facts of the case, you may have acquired a partial community property interest in the business and to the extent that you have a community property interest or your own separate property interest, that interest would be part of your bankruptcy.

If you have a business and need to file bankruptcy, talk to an attorney.  Chances are that you will find, as many of our clients do, that you can file bankruptcy and keep your business.

Exemptions Let You Keep Property and Assets

Many people are under the mistaken belief that you have to give up your home, your car, or your other assets when you file bankruptcy.  That is not at all the case.  Others are uncertain about that happens to your belongings when you file bankruptcy.  You may be wondering, “can I keep my home if I file bankruptcy?” or “can I keep my car if I file bankruptcy?”

You’ll be glad to know that, in most cases, you will keep your home, car, personal effects, and other assets and belongings when you file bankruptcy.  In fact, both the federal bankruptcy laws and the California bankruptcy laws specifically provide for what property you keep when you file bankruptcy by giving you a set of bankruptcy exemptions.  Exemptions, in the simplest form, refer to the amount of “stuff” that you are allowed to keep when you file bankruptcy.   

You see, when you file bankruptcy you don’t have to give up the shirt off your back.  You don’t have to give up your car and ride the bus.  If you did, it would be very hard to truly get a fresh start.  To help you get a fresh start, in most cases, you can keep your home, car, and other assets and belongings, up to your exemption limits, when you file bankruptcy.

So if you need to file bankruptcy, you don’t necessarily need to fret about losing your home, car, or your other belongings.  Instead, talk to a bankruptcy lawyer and go through your assets and belongings and see if they are within your allowable bankruptcy exemptions.  If they are- and in most cases they will be- you get to keep your belongings when you file for bankruptcy.

Credit Counseling Course Before You File Bankruptcy

Practically every day when I mention to a new client that they have to complete a bankruptcy credit counseling course before they can file bankruptcy, I get a momentary look of discontentment, that is, until I explain that the credit counseling course is not exactly a class.  It is an online course that can take about an hour to complete.  You can have your certificate of completion of the bankruptcy counseling course emailed directly to your lawyer and then you’re done.

While the online credit counseling class is a cinch, it should not be taken lightly.  It is an absolute requirement to complete the online bankruptcy counseling course before you file bankruptcy, unless you are exempted from the credit counseling requirement.  Because the exceptions are so rare, in almost all cases credit counseling will be an absolute requirement before you can file bankruptcy.  The three main exemptions are: (1) you are in the military in an active combat zone, (2) you have a mental illness or disability that makes you incapable of making rational decisions with respect to financial responsibilities, or (3) you are so physically impaired that you cannot participate in a credit counseling course, whether on the internet or by phone or in person.

So when you are meeting with your bankruptcy lawyer and hear the words “credit counseling course,” don't be alarmed.  Know that you will not have to attend classes anywhere.  There won't be any teachers, homework, quizzes, or exams.  All you have to do is go on the internet for about an hour, read some material, and then you're done.  There is no exam.  You just flip through the pages, read the material, and then the course provider will email you a certificate of completion.

You must complete bankruptcy credit counseling within 180 days of the day that you file bankruptcy.  So it's best to complete credit counseling the first chance that you have in order to avoid a delay with filing your bankruptcy.  Just sit behind a computer, log into an online course, read through the informative material, and have your certificate emailed to you.  Many of my clients have actually found that the material they read on the online course to be information and valuable and say that they would have been willing to take the online course even if it wasn’t necessary for filing bankruptcy.  Hopefully, you will find the experience a positive one too.

Bankruptcy Can Increase Your FICO Credit Score

The effect that bankruptcy has on your credit score depends a lot on where your credit score is to begin with, that is, what your FICO score is before you file bankruptcy.  If you have a FICO score in the 400-500 range before bankruptcy, then your bankruptcy filing can really help to clear up your credit report and increase your score.  In such a case, assuming you practice good credit habits after bankruptcy, you may find that within a year or two after bankruptcy your FICO credit score is in the 500-600 range, or higher.

If you have late payments on your credit report and your credit score is already really low, bankruptcy may be a good option for increasing your credit score. If you didn’t file bankruptcy, you’ll keep receiving late payment reports and your credit score will never increase.  Filing bankruptcy, in contrast, gives you a fresh start and a chance to really improve your credit and lift your credit score.

In fact, many of my clients who have credit scores in the 500 range have a credit score in the law 600s just 1-2 years after bankruptcy.  Their credit score after bankruptcy is significantly higher then what it was before bankruptcy.  

If you currently have an excellent credit score in the 700 to 800 range, your credit score one year after bankruptcy will likely be lower, and it may take you 5 years to get your score back up to the range of where it was.

No matter what your current credit score is, the key thing to understand is that after bankruptcy you can rebuild your credit score by making all of your payments on time.  That way, your bankruptcy serves as your fresh start and then you will have maintained perfect credit after your bankruptcy filing, helping you to rebuild credit and causing your credit score to go up.

To give you something concrete to wrap your hands around, your bankruptcy attorney can pull a credit report before you file bankruptcy that shows what your projected after bankruptcy FICO score would be one year or so after filing bankruptcy.  Armed with your projected after bankruptcy credit score you can confidently file bankruptcy knowing that ultimately bankruptcy will lift your FICO.

Can You File Bankruptcy Twice?

Limits on Filing Bankruptcy

Often times I am asked by a new client who has filed bankruptcy before, "can I file bankruptcy twice?"  First, I always explain to my clients that the bankruptcy law does place certain limits on repeat bankruptcies but those limits are more on the amount of times that you can obtain a discharge of debts within a given period and not the number of times that you can file for bankruptcy.

Chapter 7 vs. Chapter 13

Whether you file under Chapter 7 versus 13 will affect your eligibility to obtain a discharge. 

If you are filing Chapter 7 you will generally have to wait to file until it has been 8 years from the time that you filed your prior case if the prior case was a Chapter 7 or 6 years if the prior case was a Chapter 13 in order to be eligible to obtain a discharge in your subsequent Chapter 7. 

If you are filing Chapter 13 you will generally have to wait to file until it has been 4 years from the time that you filed your prior case if the prior case was a Chapter 7 or 2 years if the prior case was a Chapter 13 in order to be eligible to obtain a discharge in your subsequent Chapter 13. 

Exceptions 

There are nuances and exceptions to these rules.  So if you have filed a prior bankruptcy and you're wondering, can you file bankruptcy twice, talk an experienced bankruptcy lawyer to determine your eligibility to obtain a discharge in your second bankruptcy.

Stop Home Foreclosure

You may need to file bankruptcy just to stop a threatened foreclosure of your home and repaying your missed payments over time.  In such a case, you will not necessarily be concerned with whether you can obtain a discharge, so theoretically you could file bankruptcy twice even if you filed a bankruptcy only a year ago. 

If, however, you need to obtain a discharge, such as in order to erase a second mortgage or just to eliminate your credit card debt, you will have to wait a certain number of years from the time that you file bankruptcy before you will be eligible to receive a discharge of your debts in your subsequent bankruptcy case. 

Also, if your second bankruptcy is filed within less than one year of your last bankruptcy, you may not receive the same protections in your bankruptcy case as you enjoyed in your prior bankruptcy.  When you file bankruptcy twice within a one year period the automatic bankruptcy stay that will usually stop home foreclosure and other adverse creditor actions will automatically terminate after 30 days unless you get a special order from the Bankruptcy Judge extending the bankruptcy stay in your case.

You Can Keep Your Car When You File Bankruptcy

A common concern I hear during an initial bankruptcy consultation is “can I keep my car if I file bankruptcy?”  You can keep your car when you file bankruptcy provided you stay current on your payments. If you are behind on your payments, you can keep your car by filing a Chapter 13 bankruptcy and repay your missed payments through a Chapter 13 repayment plan.

Many people are under the mistaken belief that if they file bankruptcy they have to give up their car.  This is not true.  You car loan lender does not want to own your car.  Your car loan lender is in the business of lending money, not owning cars.  Even if you have a very expensive car, as long as the equity in your car does not exceed your allowable bankruptcy exemptions (exemptions refer to what you are allowed to keep when you file bankruptcy; you are not expected to give up the shirt off your back), you will likely be able to keep your car. 

Case in point: a client of mine recently expressed concern as to whether he would be able to keep his top of the line Mercedes-Benz if he filed bankruptcy.  This seemed to be one of my client's biggest concerns.  He really loved his car.  My client needed to file bankruptcy to get out of debt and get a fresh start but he really wanted to keep his car.  As with most of my clients, this client had little to no equity in his car.  So I explained to him that yes, he can file bankruptcy and still keep his car.  He was so relieved.  It was as though a huge weight was lifted from his shoulders.  He had been given bad information and had been worrying about nothing.  He was not prepared to meet his debts head on by filing bankruptcy.

But that’s not all… in addition to being able to keep your car when you file for bankruptcy you may also be able to rebuild your car loan.  In a Chapter 7 bankruptcy, you can rebuild your car loan by reaffirming your loan on better terms or redeeming your car for the retail market value, which can be a great deal if you owe a lot more on your car than what it is worth.  In a Chapter 13 bankruptcy, depending on how long ago you took out your car loan you can repay only the retail market value, instead of the loan balance, over a 3-5 year period.

If your car is leased, a different rule applies.  You can keep the car so long as you assume the lease and continue to make your regular monthly lease payments, the same payments you were making before you filed bankruptcy.

So keep driving your car.  Drive it to your consultation with your bankruptcy lawyer and drive it to your hearing at the San Diego Bankruptcy Court.  Drive it as you please and when you’re done with your bankruptcy hearing, thank your bankruptcy lawyer, sit behind the wheel of your car you love, and drive outta bankruptcy!

Almost all individuals and couples who file for bankruptcy file under either Chapter 7 Bankruptcy or Chapter 13 bankruptcy, which are by far the most common types of bankruptcies.  Chapter 7 Bankruptcy gives you a more immediate fresh start by eliminating most or all of your debts.  Chapter 13 Bankruptcy also allows you to eliminate most or all of your debts, under appropriate circumstances, and it has the added benefit of allowing you to permanently stop foreclosure of your home by paying back your missed payments over a three to five years repayment plan.  Chapter 13 also allows you to eliminate a second mortgage through the Lienstripping process.

Here are some of the most common myths and misconceptions:

1.  Filing for bankruptcy eliminates your rights and control over your assets and finances.  Actually, in most cases the opposite is true. Bankruptcy is a form or protection for you and your assets and finances. Under bankruptcy code, by filing you are automatically given certain legal rights.  For example, you can immediately stop a home foreclosure that’s already in process by filing for Chapter 13 bankruptcy.  Both Chapter 7 and 13 require creditors to stop contacting you as soon as you file.  Bankruptcy is a good option for people who are in danger of losing their assets because of debt, so it’s actually a way to regain control over your finances, property, and life.

2.  Filing for bankruptcy will permanently ruin my credit.  Bankruptcy will be on your credit record for seven to ten years, but not permanently. On the other hand, unpaid debts will lower your credit score, but the act of filing for bankruptcy will not. If you’re filing for bankruptcy, chances are your credit score is not in very good shape, but the sooner you file, the sooner it will improve. Your credit score can begin to repair itself in as little as two years, and you may be able to receive a new mortgage loan from a bank under special conditions within the same time frame.  Although you will only be able to get a credit card with a very low limit, if at all, staying current with your payments will raise your credit limit with time.  

3.  Only lower-income or irresponsible people file bankruptcy.  One of the biggest reasons many people hesitate to file for bankruptcy relief is because of their egos.  People of all income levels from all walks of life choose to file for bankruptcy, as each person’s situation is different.  There are at least four bankrupt U.S. Presidents and many more bankrupt millionaires, billionaires, and famous celebrities.  In fact, people in higher income brackets frequently file bankruptcy because these people tend to have more assets and property to both lose and protect. And while being irresponsible with money and making reckless purchases can get you into big trouble with debt, it’s more common to be faced with bankruptcy after losing a high-paying job, or being laid off through no fault of your own.

4.  You can only file bankruptcy once.  Legally, you can file for bankruptcy multiple times within your lifetime. However, second or subsequent bankruptcies are far less common than first ones, because bankruptcy terms are designed to keep you within your spending limits.  Having said that, it is certainly possible for a person who’s filed for bankruptcy to get back on their feet and be doing quite well, only to be faced with the sudden loss of a job, a medical condition, or other life circumstances that render them unable to pay their bills.

The type of bankruptcy that you choose to file for will depend on your individual circumstances, including the amount of debt, assets, and income you have, and how important it is to you to protect your assets.  So it’s best to consult a San Diego bankruptcy attorney for advice on which type to file and how bankruptcy will affect you and more importantly how bankruptcy will protect you. 

Can I Keep My Liquor License If I File Bankruptcy In San Diego?

Treatment of a liquor license in bankruptcy in San Diego depends largely on the type of license that you have.  Full liquor licenses have a substantial value, often in excess of your applicable bankruptcy exemptions, and if you filed bankruptcy the San Diego bankruptcy trustee could take control of and sell your license to generate funds to pay your creditors.

If you have a beer and wine license, this type of license generally has a much lower value to the bankruptcy trustee than a full liquor license and, moreover, due to the lower value it is more likely to be covered (protected) by your applicable bankruptcy exemptions.

Frequently, I speak with business owners who have been misinformed that their liquor license is immune in bankruptcy proceedings because it is a license.  This is not the case.  There seems to be a lot of inaccurate information out there.

Most liquor licenses are transferrable, meaning that you can sell your license to a qualified buyer provided that the buyer is approved by the California Department of Alcoholic Beverage Control (the ABC) to have the license assigned to him or her or their company.

Because your liquor license has a cash value, the San Diego bankruptcy trustee could exercise control over it and sell it in order to generate funds to pay off part of your debts in your bankruptcy proceeding, or if you file a repayment bankruptcy the trustee would require you to pay to your creditors through your bankruptcy plan the same amount that could have been realized if your liquor license were sold to pay off your creditors.

There are ways to protect your liquor license in bankruptcy in San Diego, and frequently you can file bankruptcy and keep your liquor license.  You should consult with an experienced San Diego bankruptcy lawyer to determine how your liquor license will be treated in bankruptcy.

Is Filing Bankruptcy Right for Me?

Erasing your debts and starting over financially can be very appealing when you’ve been struggling with bills and averting creditors for years. Anyone considering bankruptcy should be aware of the pros and cons of filing or not filing before making a decision.

Although you must pay the fees for a bankruptcy attorney out of your own pocket, this is the best money you can spend when you think you’re facing bankruptcy. If you file, an attorney will protect you and help you keep your most valuable assets and possessions; if you don’t file, an attorney will advise you of the best course of action to take to protect yourself while getting back on your feet.

Bankruptcy is your legal right, and bankruptcy laws begin protecting you and your assets from creditors the moment you file. However, bankruptcy is not without costs and consequences, which should be weighed against the benefits when you’re making this life-changing decision.

You must receive formal credit counseling within the six months prior to the date you file, in order to qualify for bankruptcy. Credit counseling will help you understand your alternative options and ensure that you’re taking the right step if you decide to proceed with filing.

You must also pass a means test in order to qualify for bankruptcy. The means test determines whether your income is over a certain limit that renders you ineligible for bankruptcy, which is different in each state.

Reasons to File Bankruptcy

If your liabilities exceed your assets, bankruptcy is a viable solution for getting you out of debt, and in some cases it may be the only solution. When you owe more money in unpaid debts than you have in liquid cash or assets, you are in danger of losing everything and being left with nothing to help you start over. Liabilities exceeding assets is the foremost reason to file for bankruptcy. Other reasons include:

1. When you’re facing bank foreclosure on your home. Once your mortgage lender has decided to foreclose, there are only two surefire ways to keep your home: either immediately pay off your unpaid mortgage debt or file bankruptcy. Even if you file the day before a foreclosure is finalized, you will legally stop the foreclosure.

2. To eliminate debts. Filing Chapter 7 bankruptcy can eliminate many of your outstanding debts. You can eliminate your credit card debt, erase your second mortgage though lienstripping, and revise your car loan to a lower principal balance and monthly payment.  Bankruptcy can help you get out of debt and get a fresh start.

3. You want to keep your IRA. The older you are, the more difficult it will be to rebuild your retirement savings, so it’s important that you protect your IRA, which could be liquidated by creditors to pay your debts. IRAs are protected by bankruptcy law from being used to pay off overdue debts.

4. To begin rebuilding your credit. Unpaid debts result in a poor credit score very quickly, affecting your ability to borrow money and obtain lines of credit that could help you get out of debt. While filing for bankruptcy will certainly affect your credit as well, the sooner you take this step the sooner you’ll begin to rebuild your credit. A low credit score can begin to go back up in as few as two years after filing.

5. When creditors are taking action against you. When creditors are proceeding with liquidating your assets in order to get the money you owe them, rather than just threatening and harassing you, you need to take action to stop them. By the time this happens, bankruptcy may be the only solution, which legally protects creditors from continuing to contact you or from taking your assets.

6. To protect your family. If you lose everything, you may not be able to take care of your dependents or yourself. Married couples can have just one person file—usually the main breadwinner—in order to avoid ruining the credit lines of both, making it possible for the family to still borrow money and obtain lines of credit.

7. To relieve stress. Stress is significantly harmful to both mental and physical health and can make it impossible for you to work or take steps to eliminate your debts. Stress can cause an array of health problems that can result in even more unpaid bills. Filing for bankruptcy is often a big relief and worth the stress reduction.

Credit Card Bankruptcy in San Diego, California

When you file a credit card bankruptcy in San Diego, which technically is a Chapter 7 bankruptcy filed for the main or sole purpose of eliminating credit card debts, your lawyer must include all of your debts in your bankruptcy filing.  You don't get to select who to include.  You include all debts, including all credit card debts.

Not only is it a requirement that your lawyer list all of your credit card debts, but it is smart and competent lawyering. You want to get a fresh start, and coming out of bankruptcy with credit card debt is not really a fresh start, is it?  Emerging from bankruptcy with credit card debt is actually negative start.  It will inhibit your ability to establish rebuild credit after bankruptcy. 

If you live in San Diego County, then you can expect that shortly after receiving your discharge in your Chapter 7 credit card bankruptcy, you'll start receiving credit card solicitations.  You see, the credit card companies know that you cannot file bankruptcy twice for years to come, and you are living in San Diego (which consists of a relatively high income earning population), so they calculate that you are a good credit risk and they extend credit cards to you.  Sure, the credit cards will have high interest rates, but if you start practicing good credit card spending habits, which means using the credit card only if you have the money to pay for what you are buying and then paying off your balance before the end of your grace period (usually about one month), you will not incur any finance charges.  So it won't matter what the interest rates are.

So if you are filing a credit card bankruptcy in San Diego, be sure to provide your attorney with a list all of your credit cards so that you can list them all in your bankruptcy case.  Get a fresh start, then start practicing good spending habits and you'll be on the road to financial success.

Freeze is what you get to shout out to your creditors when you file bankruptcy San Diego.  Once your bankruptcy lawyer files your bankruptcy, an automatic freeze of collection activity, called a bankruptcy stay, goes into effect by operation of law.  The bankruptcy freeze stops most creditors actions against you.  It will stop harassing phone calls and it can stop foreclosure of your home.  The bankruptcy stay is so powerful that it can stop a threatened foreclosure sale of your home on the eve of the sale date, though it is much safer and better practice to consult with a bankruptcy lawyer and file bankruptcy much earlier than the eve of a foreclosure sale.

There are exceptions to the bankruptcy freeze so don’t just assume the bankruptcy freeze will stop the adverse collection actions you are facing without first consulting with your bankruptcy lawyer.  For example, if you have already filed bankruptcy in the past one year period, the bankruptcy freeze may last for a very short time or not at all.  Also, under certain circumstances your creditors could have grounds to undo the bankruptcy freeze.  Again, you should consult with a San Diego bankruptcy lawyer. 

Despite the exceptions, the general rule is that the bankruptcy freeze does apply and your bankruptcy attorney will be able to advise if and to what extent the bankruptcy freeze will stop adverse creditor actions against you and your property.

So if you are facing a home foreclosure or you have had enough of the harassing phone calls, or are facing any other type of adverse creditor action, remember that: Bankruptcy is your legal right.   Protect yourself.  When you exercise your legal right to file bankruptcy San Diego, you become armed with the protection and the power to protect yourself from creditors and yell “freeze!”

Thomas Jefferson was a national leader.  He drafted the Declaration of Independence.  He became the 3rd President of the United States.  Jefferson, like many San Diego residents and homeowners who acquire credit card debt and home equity lines of credit, acquired a wine bill that was over $10,000 (in 1809 dollars) and $100,000 in real estate debt for his luxurious estate Monticello.  Jefferson became overwhelmed with debt and had to declare that he was bankrupt.  Today, Jefferson is widely considered a genius and one of the most influential founding fathers.  His portrait is on the $2 bill and the Nickel, and his face is sculpted in a 60 foot sculpture on Mount Rushmore.  When Jefferson helped create our country he had a vision of the positive benefits of bankruptcy.

Abraham Lincoln was instrumental in the struggle to end slavery in this country.  He ordered an end to slavery via the Emancipation Proclamation.  He became the 16th President of the United States.  Lincoln obtained business inventory on credit much like many San Diego business owners run their business.  Lincoln acquired too much business debt and had to declare that he was bankrupt.  Today, Lincoln is respected by all for his accomplishments. His birthday is national holiday.  His portrait is on the $5 bill and the Penny, and his face too is sculpted in a 60 foot sculpture on Mount Rushmore.

Ulysses S. Grant was a Commander in the Civil War.  Grant led the Union Army to defeat the Confederate militia.  Grant became the 18th President of the United States.  After his presidency, and after a 2 year world tour that depleted most of his savings, Grant bought a home in New York and, like many San Diego business owners, invested all he had into a business partnership.  Grant’s partner swindled Grant and the other investors and Grant was forced to declare that his business was bankrupt.  Today, Grant is highly respected as an important figure in U.S. History and his portrait is prominently displayed on the $50 bill.

William McKinley was a Major in the Civil War.  He became a lawyer.  He was then elected to the U.S. House of Representatives.  He then served as Governor of Ohio.  McKinley became the 25th President of the United States.  During his run to the top, while serving as Ohio’s Governor, McKinley’s debts had accumulated to $130,000 and he had to declare that he was bankrupt.  Today, Grant is a highly respected figure in U.S. History and his portrait is the face on the $500 bill, which is still good legal tender but is no longer in circulation.

So if you need to file bankruptcy in San Diego but you're worried about what people may think, just remember the Bankrupt U.S. Presidents.  Very smart and respectable people who notwithstanding their intelligence and great vision acquired too much debt and had to declare that they were bankrupt.  Presidents Jefferson, Lincoln, Grant and McKinley are still so highly respected that their faces continue to grace our U.S. Currency.

Can I File File Bankruptcy on My Taxes? 

Over 200 years ago, Benjamin Franklin, one of our Founding Fathers, uttered those famous words, “in this world nothing can be said to be certain, except death and taxes.”  True, at some point for each of us, hopefully after a long and healthy life, death is certain.  But taxes, unlike death, are not certain. 

The fact is that you can file bankruptcy on taxes.  Income taxes, especially if they are over 3 years old, frequently are eliminated in bankruptcy.  If you pass the Income Tax Discharge Rule, you can file bankruptcy on your taxes and receive a discharge of your tax debt.

Even if you pass the Income Tax Discharge Rule, there may be facts triggering an exception to the rule thus preventing you from discharging your taxes in bankruptcy.  For example, if the IRS has not yet made an assessment the IRS could make an assessment after you file bankruptcy, posing an obstacle to your bankruptcy filing.  

Other types of taxes can also be discharged in bankruptcy.  Property taxes, employment taxes, and other types of tax debt can be discharged in bankruptcy if certain tests are met.  Usually, the older the taxes, the better your chances of being able to file bankruptcy on the taxes.

How can you be sure your taxes will be wiped out in a bankruptcy filing?  It is important to discuss your situation with a bankruptcy attorney and to do so as early as possible in case there are any bankruptcy planning issues that need to be addressed before you file.  In many cases, the only thing certain about taxes is that they are certain to be eliminated in bankruptcy!

Nothing could be more indicative of the intent of our founding fathers in establishing that Americans should have the right to file bankruptcy than Article 1, Section 8, Clause 4 of the United States Constitution.  This clause authorizes Congress to enact "Uniform Laws on the subject of Bankruptcies throughout the United States.”  The Constitution unmistakably sets forth an intention by our founding fathers that you shall have a bankruptcy legal right, a right to get out of debt and get a fresh start.

Several times since the drafting of the Constitution, Congress has exercised its authority to enact bankruptcy laws.  In 1978, Congress adopted the Bankruptcy Reform Act of 1978, codified in Title 11 of the United States Code, commonly referred to as the Bankruptcy Code ("Code"). The Code has been amended several times since 1978, most recently in 2005 through the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 or BAPCPA.

Bankruptcy is a positive solution to your debt problem.  Chances are you are financially responsible but like most people today, events have occurred in your life that have left you overwhelmed with debt or being harassed by creditors.  If you are in such a situation, you have to ask yourself, "Do I need a fresh start?"  If you do, then bankruptcy may be the solution to your debt problems.  Bankruptcy is your legal right.  Protect yourself.  When you need debt help, exercise your constitutional right to obtain debt relief.  Call 800 44DEBTS for help today.

San Diego Bankruptcy Law Blog

The Bankruptcy Legal Center blog features commentary, by a San Diego bankruptcy lawyer, on important and interesting issues in bankruptcy law that are frequently encountered by our clients, both before and during the bankruptcy process.  Here you may find answers to your specific bankruptcy questions.

Legal Issues

The legal issues in our San Diego bankruptcy law blog are mainly focused on San Diego bankruptcy law, though some of our blog posts will discuss issues involving general bankruptcy law.  Where pertinent, reference will be made to San Diego bankruptcy law versus general bankruptcy law issues. 

The aim of this blog is to take the issues that our clients at Bankruptcy Legal Center encounter on a daily basis and comment on the issues in such a way that will be valuable to you.  We provide useful examples, often in the form of a bankruptcy attorney's response to a specific client question.

If you are considering bankruptcy or exploring your debt relief options, you will find this bankruptcy blog to be very informative and enlightening, and, hopefully, enjoyable to read.

Bankruptcy Questions

Many of our blog posts are written so as to answer bankruptcy questions commonly asked by our clients at Bankruptcy Legal Center.

If you have any bankruptcy questions that you would like to be addressed in our blog, or if you have any suggestions for a blog topic, please call Bankruptcy Legal Center at 1-800-44-DEBTS (1-800-443-3287).