Monthly Archives: September 2011

CA Bankruptcy Lawyer

By Ryan C. Wood, Attorney at Law

The process of filing for bankruptcy really should not be attempted without the counsel of an experienced CA bankruptcy lawyer.  Like any area of the law it is best to let someone who has done in hundreds of times help you.  We have filed hundreds of bankruptcy cases for residents of the Bay Area successfully time and time again.  We did not start practicing bankruptcy law as extra income.  This is all we do.

If a chapter 7 bankruptcy is not filed properly you could lose some of your assets like a car or other valuable item.  Worse, your case could be dismissed without receiving a discharge.  This would be terrible given that the whole point in filing for bankruptcy is to get rid of (discharge) your unmanageable debts.  There are certain requirements that must be completed when filing for bankruptcy protection.  You must take the required courses ($14.99 total for a single person) and provide documents to the trustee assigned to your case.  Some chapter 7 bankruptcy cases are somewhat routine, but if anything goes wrong you will seek out an attorney to help you get out of it.  It is prudent to start the process and end the process with the counsel of an experienced bankruptcy attorney.

Filing a chapter 13 bankruptcy case is even more complex and there are almost no chapter 13 bankruptcy cases that are successfully without the assistance of an attorney.  The first issue is the trustee’s offices do not want to deal with bankruptcy filers that do not have attorneys.  It is not their job to make sure you represent yourself correctly or file the necessary documents on time and accurately.  The trustee’s job is to administer the bankruptcy estate.  Formulating a chapter 13 bankruptcy plan of reorganization is challenging even for some attorneys.  If the chapter 13 plan is not correct the trustee’s office will not recommend approval of the plan.

Even if you are successful in having the chapter 13 plan confirmed, what will you do when something comes up during the second year of the plan or reorganization?  You can longer afford to make the chapter 13 plan payment each month?  You have lost your job?  Now what?  Or you won the lottery.  Now what?  What you should have done is retained a bankruptcy lawyer.  Retaining our services will answer each of these questions.  We have the experience you can depend on when an issue arises.

For more information about whether bankruptcy is right for you, contact our Fremont bankruptcy lawyers.  You may also contact our Union City bankruptcy lawyers for additional information about obtaining a fresh start through bankruptcy.

Is it Important How Expenses are Calculated When Filing Bankruptcy?

By Ryan C. Wood

So you just withdrew $100 from your bank account, and by the end of the day you have $12 left, but you have nothing to show for it.  Where did you spend your $88? What did you spend it on?  If you’re like most people you probably do not keep perfect records of where your money goes precisely.  Most people do not have a clue how much they actually spend on their monthly expenses.  If you don’t know how much you’re spending, how do you know how much you should be budgeting?

When bankruptcy attorneys meet with clients during a free bankruptcy consultation most have underestimated their expenses by a quite a bit in certain areas like food and even transportation.  After calculating their income and expenses it appears that they have several hundred dollars left over as disposable income which is normally not the case because they are not saving money each month.  How much do you spend on food each month?  How much do you spend on gas each month?  The answer is usually when I am hungry or need food I buy it.  If my car needs gas I buy it.  What about oil changes and tires?  Our clients look at me in surprise if I ask them about the several hundred dollars disposable income.  The usually response is, “Extra money?  We haven’t had any extra money in years!”  So, what happened in their calculations of expenses?  This is where the memory lapse normally occurs – you spent that $88 you withdrew from your bank account and that money went into a black hole.  You have to think harder about how you are actually spending your income each month.  Most likely it went to items like food, drinks, groceries, and gas.  More and more rent is taking a large percentage of monthly net income.  Healthcare costs are more and more taking a large percentage of monthly net income too.  Most people wouldn’t count that Starbucks drink they get every morning, even though it costs $5.  Or that $10 spent on lunch each.  Every dollar counts when you are making a budget!  You would be surprised by how much those uncounted expenses add up.

So why is it important to make sure that your expenses are calculated correctly, especially if you are filing bankruptcy?  There are several reasons.  One of the most important reasons is that when you file for bankruptcy you need to make sure that you are filing in good faith.  One of the factors in determining whether you filed your bankruptcy case in good faith is whether there is any money left over after deducting your reasonable and necessary expenses from your monthly income.   If you do have money left over, especially if it is a significant amount, then the bankruptcy filer has the obligation to pay what they can afford each month to their creditors in a chapter 13 bankruptcy.

If you are filing a Chapter 13 bankruptcy case, it is even more important that you calculate your expense correctly because you will be in the Chapter 13 plan for 3 to 5 years.  If you underestimate your expenses then you may end up paying more than you can afford in your bankruptcy case which can deeply hurt your pocketbook.  In order to calculate your expenses correctly not only do you need to know how much you are spending on ordinary household expenses, like mortgage, rent, utilities, etc., you also need to estimate how much you spend on things you don’t pay for every month but shell out thousands when it is necessary.  Make your bankruptcy attorneys life a little easier by reviewing your bank accounts statements for the last six months prior to a consultation.

Even if you were not filing a Chapter 13 bankruptcy these budgeting issues are important.  You need to know exactly how much you have left over every month after paying all the necessary expenses so that you can come up with a realistic budget – and be able to stay within that budget – in order to truly receive the “fresh start” that you deserve.

Principal Paydown Plan, What is It?

By Ryan C. Wood, Attorney at Law

Since the beginning of the mortgage crisis there have been more than a few plans to help troubled homeowners.  Unfortunately the only one that is a reality is the HAMP program.  HAMP was supposed to help 9 million or more homeowners keep their homes and obtain loan modifications.  A better solution would have been to allow homeowners to obtain modification of their first mortgages when filing a chapter 13 bankruptcy reorganization case.  First mortgages have always been the sacred cow under the bankruptcy code.  They cannot be changed.  The push to amend the bankruptcy code to allow for the modification of first mortgages was killed in the Senate.

Now the Principal Paydown Plan (PPP) is the latest proposal to try and reduce the number of homeowners with negative equity in their homes.  Having negative equity is typically called having an undersecured or underwater mortgage.  An undersecured or underwater mortgage exists because the value of the property or home falls below what is owed on the mortgage(s).

So how can the PPP help?  First, the PPP would allow borrowers with negative equity to file a chapter 13 bankruptcy and reduce the interest rate on their first mortgage to 0% for the term of the chapter 13 plan.  The advantage of lowering the interest rate to 0% is all of the monthly mortgage payment would then be applied towards principal and not any interest.  This would result in the principal owed on the mortgage being reduced by significantly more than if interest were paid also.  Second, the actual monthly mortgage payment the borrower would have to pay each month could be reduced to a low as 31% of the borrower’s gross monthly income.  The bankruptcy judge would have the final say on how much the monthly mortgage payment would be each month.  The reduced monthly mortgage payment with 0% interest being paid could last a maximum of five years, the longest possible chapter 13 plan of reorganization.  Once the five years is completed, then the total principal balance left is amortized over 25 years with an interest rate based upon the Fredie Mac survey rate.

So why would mortgage companies and servicers want to agree to this program?  As part of the agreement the borrower gives up any future cause of action they may have against the mortgage company or service.  This is a big deal given the recent revelation that mortgage companies have forged documents and not serviced mortgage loans properly.

This plan is not perfect and mortgage companies and servicers would voluntarily agree to allow modification of the first mortgages.  Hopefully sometime soon the PPP will be a reality and we will have another tool in our belt to help homeowners.

For additional information about filing bankruptcy, please contact our Fremont bankruptcy lawyers or Union City bankruptcy lawyers to schedule a free consultation.

Revesting of Property of the Estate Upon Confirmation of the Chapter 13 Plan and the Automatic Stay

By Ryan C. Wood, Attorney at Law

From time to time a great subject comes up while you are sitting at hearing waiting for your case to be called.  Today was one of those days.  Almost every jurisdiction uses a model chapter 13 plan.  There are a few holdouts like the Santa Rosa Division of the United States Bankruptcy for the Northern District of California.  Usually one of the normal plan provisions is that the debtor elects to have the property of the bankruptcy estate revest in the person who files bankruptcy, the debtor, at the time the chapter 13 plan is confirmed.  Right, why not?  The Chapter 13 Trustee does not want the liability of the property continuing to be in bankruptcy estate.  The debtor should have the right to sell or refinance real and personal property after the chapter 13 plan is confirmed.  It is their property.

What Happens When a Debtor Incurs a Post-Petition Debt Though

Well, the property that revested back to the debtor is now available to a creditor, say the Internal Revenue Service, to try and collect on taxes incurred after the petition for bankruptcy protection was filed.  Why, because there is now no automatic stay as to the property that revests in the debtor.  A recent case in the Ninth Circuit did not help this issue any.  It helped to clarify that the Internal Revenue Service could seek payment of unpaid taxes incurred post-petition.  What happens to the confirmed chapter 13 plan then?  The post-petition collection by the IRS may negatively affect the confirmed chapter 13 plan and possibly make the confirmed plan no longer possible.  This also means a mortgage holder on a home does not have to seek relief from the automatic stay to foreclose on a home once the chapter 13 plan is confirmed too.  If a debtor misses payments after the chapter 13 plan is confirmed the mortgage company technically does not have to obtain the bankruptcy court’s permission to foreclose on the house and enforce their lien.

So What Can Be Done to Protect Those Who File Chapter 13 Bankruptcy?

There are debtors’ attorneys trying to insert language into chapter 13 plans to enjoin all creditors from being able to collect on post-petition debts without the bankruptcy court’s permission.  The issues are whether injunctive relief can be provided for in a chapter 13 plan?  If so, how does the balance of benefit and hardships play out to the debtor and creditor involved?  Is the injunctive relief reasonable based upon the timing involved to seek bankruptcy court permission?  How many days of notice must be given for a hearing?  Or must the creditor only provide the debtor with notice and the right to request a hearing?  Does the bankruptcy code even provide for this type of relief?  These questions will be answered in the next couple of months.  It is doubtful that every judge will allow a provision such as this.  A good place to start is Section 1322(b)(11) and FRBP 7001(7).

For more information about the bankruptcy process contact our Redwood City bankruptcy attorney or San Jose bankruptcy lawyer to schedule a free consultation.  You may reach us toll free at 1-877-963-9543.

 

What Happens if You Have Gambling Debts Prior to Filing Bankruptcy?

By Ryan C. Wood

Whether you suffered a huge loss because you have a gambling addiction, or just had bad luck in the casinos that one time you now owe the casino money from a marker received.  The question is: what happens if you are unable to pay the casinos back?  Can you file for bankruptcy to have the debt discharged?  The answer is of course it depends and timing and circumstance are everything.  In a perfect world you will not have to deal with such a thing, but of course nothing is perfect.  This is especially true when talking about gambling.

Credit card used to pay for gambling debt

If credit cards were used to pay for the gambling debt, especially with online gambling sites, then the question of whether that debt is dischargeable in bankruptcy depends on the totality of circumstances.  The bankruptcy court can deny a discharge if they believe that filing the bankruptcy was an abuse of the bankruptcy process based on bad faith.  This is pretty rare in reality.  A discharge can also be denied if a creditor or party-in-interest files an adversary complaint alleging fraud was involved in incurring the debt.  At that time that you used the credit card to pay for the gambling, did you have the intention of paying it back?  Were you going to pocket the winnings, but try to discharge any losses incurred?  There are a lot of factors to look at in determining whether the bankruptcy filing was an abuse of the bankruptcy process.  The bankruptcy trustee will be bringing an action against the bankruptcy filer if they believe there was an abuse of the process.  The credit card lender can file a non-dischargeability action against the bankruptcy filer if they believe that there was fraudulent activity in obtaining the credit to gamble on the credit card.  If you pass the bad faith and fraud test, then the gambling debt should be dischargeable in bankruptcy.

Casino markers/counter checks/post-dated checks

If you are gambling in Las Vegas and a casino issues you a marker, counter check, or if you are signing a post-dated check, what normally happens is the casino would give you credit for a certain dollar amount on the marker.  The casinos will claim that you are promising to repay the amount at a later date and at the time that you sign the marker, counter check, or post-dated check, you are representing to the casino that you have the amount in your bank account.  If you win the money, hopefully you pay them back and they rip up the marker, and you get to keep whatever the remaining winnings are.  However, if you lose the money, a casino will still expect you to pay the amount that you received credit for.  If you do not have the funds in your bank account, then the casinos could turn the case over to the District Attorney’s office, where they could prosecute you not paying back the marker, counter check or post-dated chdeck.  If you do not respond, or if you are not from the Las Vegas area, there could be a felony warrant issued for your arrest.  This would be a criminal prosecution, and not a civil matter that could be dischargeable in bankruptcy. Bankruptcy proceedings would not be able to stop criminal actions against you or discharge potential resulting restitution upon conviction.  Thus, even if you file for bankruptcy, it may wipe out the debts that you have, but the district attorney’s office can still criminally prosecute you.  In addition, if you file for bankruptcy, a casino, at their discretion, can pursue a non-dischargeability action under 11 U.S.C. §523(a)(2) or 11 U.S.C. §523(a)(4).  If they win, and have the gambling debt deemed non-dischargeable, then you would still continue to owe the money even after you receive a discharge of your other debts.

The best you can do is seek to file bankruptcy prior to the filing of criminal charges or referral to the district attorney’s office for prosecution.  If you qualify you will receive a discharge and hopefully life goes on.  It also may be in your best interest to file a Chapter 13 case even if you qualify to file for Chapter 7 and pay something back to your creditors.  The casinos and your other creditors then file proof of claims in the Chapter 13 to prove what they are owed and get what they get via the Chapter 13 plan or reorganization and do not refer you for criminal prosecution.  Beautiful.  Life goes on.

Furthermore, Indian casinos are not subject to the Fair Debt Collection Practices Act (FDCPA).  Indian tribes have sovereign immunity, so you cannot sue them under the FDCPA even if they are calling and harassing you.

If you have gambling debts you need an experienced bankruptcy attorney to help you.  Some attorneys will just say they are not dischargeable without discussing with you the details to make a real determination.  There are all kinds of gamboling debts and how they were incurred and when matter.  While no one really wants to file for bankruptcy protection it can make all of your debt problems go away forever by federal court order.  A beautiful thing.  The best bankruptcy attorneys will usually provide a free consultation to confirm how bankruptcy can help and how much work and fees your case warrants.  You can spend thousands and thousands of dollars treating the cancer; or you can choose to file bankruptcy and cure  the cancer forever by law and receive a federal court order discharging your debts.