Author Archives: Ryan C. Wood

About Ryan C. Wood

Ryan C. Wood is a California attorney practicing primarily in the areas of Bankruptcy Law, Business Law and generally seeking justice for under represented clients in the Bay Area.

What Happens if I Do Not Disclose All Assets in my Bankruptcy Petition?

By Ryan C. Wood

When you file for bankruptcy you are obligated to disclose all of your assets and all of your debts in your bankruptcy petition truthfully and under penalty of perjury. Failure to disclose may have many negative consequences such as the trustee in a Chapter 7 bankruptcy case liquidating your undisclosed asset and providing it to your creditors or the denial of a bankruptcy discharge. A debtor can also be sentenced to prison and fined. Just ask ex-Philly baseball player Lenny Dyskstra. Mr. Dykstra was sentenced to six months in federal prison and ordered to pay $200,000 in restitution in 2012. This article focuses on less substantial bankruptcy fraud.

You must disclose all of your assets when filing for bankruptcy.

You must disclose all of your assets when filing for bankruptcy.

Take the case of In re: Gronlund (No. 13-1566, B.A.P. 9th Circuit, August 2014). In this case, Mr & Mrs. Gronlund filed for Chapter 7 bankruptcy protection. They were overly detailed in listing their personal property, down to where their pots and pans were listed in their house. They did not list their interest in real estate in Mexico. The Ch. 7 trustee noticed income on their tax returns that was not disclosed in their bankruptcy petition. During their 341 meeting of creditors, Mr. Gronlund admitted to receiving $2,500 in interest only payments each month from the note derived from the Mexican property (“Mexican Note”). Mr. Gronlund testified that he did not think to list the Mexican Note because he already sold the property to a Mr. Rezai. Mr. Gronlund was not consistent on where Mr. Rezai lived. The trustee continued the meeting of creditors to give the Gronlunds an opportunity to amend his schedules. The Gronlunds never did so and the trustee filed an adversary complaint to deny the Gronlunds their bankruptcy discharge under 11 U.S.C. §727(a)(2)(A) and (a)(4)(A) indicating the Gronlunds concealed their interest in the Mexican property and making false oaths. The Gronlunds filed their amended schedules after the adversary complaint was filed. The schedules indicated that even though the Gronlunds have an interest in the Mexican Note, the Note had more encumbrances than it was worth (the Gronlunds indicated the Note was worth about $450,000 and the encumbrances were around $470,000). There were no proof of claims filed for the encumbrances and Mr. Gronlund tried to introduce documents that he believed would prove the existence of the encumbrances, but the bankruptcy court did not find the documents credible. A Special Mexican Real Estate Counsel testified for the trustee indicating that there were no encumbrances recorded against the Mexican property and that the property was actually worth about $530,000. Mr. Rezai consistently paid the Gronlunds $2,500 every month for the past four years. For the Gronlund’s defense, Mr. Gronlund indicated he was very stressed during that time due to family illnesses, supporting injured family members, had to testify as a witness in a trial that was prosecuting his friend for murder, and business losses. He hired an affordable bankruptcy attorney and asked his bookkeeper and employee to assist in his bankruptcy case rather than take care of it himself. He indicated his bankruptcy attorney received all the information and already told the attorney to fix the first two drafts. He did not review the third draft because he thought his bankruptcy attorney had everything fixed and all his schedules were accurate.

Pursuant to 11 U.S.C. §727(a)(2), a debtor will not receive a discharge if he has concealed property within one year before filing of the petition or property of the estate after filing the petition with the intent to hinder, delay, or defraud a creditor or an officer of the estate. The bankruptcy court indicated the Gronlunds concealed the Mexican Note because they failed to list the asset in the initial schedules, didn’t list the $2,500 payments, being evasive at the meeting of creditors and later claimed that the Mexican Note was over-encumbered. The bankruptcy court based their findings of the Gronlund’s intent to hinder, delay or defraud based on their conduct and circumstances surrounding the filing of the petition and how they acted afterwards. Given the Gronlunds were very sophisticated in business it was very suspicious the only thing left out of the schedules was their only asset with significant value.

Pursuant to 11 U.S.C. §727(a)(4)(A), a debtor will not receive a discharge if they “knowingly and fraudulently, in or in connection with the case made a false oath or account.” The bankruptcy court indicated that the Gronlunds failed to list the $2,500 payments received and failed to list the Mexican Note in their schedules and meeting of creditors. Since the note was a valuable asset worth between $450,000 – $530,000, the fact was very material in the case. Failure to list this as an asset was detrimental to the estate. The court believed the Gronlunds knowingly made those statements since they revised two previous drafts of the petition and just didn’t review the third one, especially when the $2,500 was a significant amount of their monthly income. The bankruptcy court also believed that the Gronlunds had the fraudulent intent to deceive their creditors and therefore denied the Gronlunds discharge. The Gronlunds appealed the bankruptcy court’s ruling but the 9th Circuit Bankruptcy Appellate Panel agreed with the bankruptcy court’s rulings.

The moral of the story is to always disclose everything to your bankruptcy lawyer and in your bankruptcy petition. You may think that an asset is not worth anything or that something is not important enough to disclose to your bankruptcy attorney. Something may seem insignificant to you but may have huge consequences in your bankruptcy case.

Is A Car Loan Company Violating The Automatic Stay If They Disable My Car While I Am In Bankruptcy?

By Ryan C. Wood

Do you know anyone that has a disabling device in his or her car or do you yourself have a disabling device in your car? These devices are showing up in more and more states. The disabling device is installed in your car when you purchase a car, most likely at dealerships that act as the finance company as well. The dealerships normally install these devices on buyers who have low credit scores to protect the dealership/lender’s investment. These disabling devices act as an anti-theft device but also have GPS capabilities. What normally happens is that the consumers who purchase the car will have to pay on time each month to get a code from the lender. This code will allow the buyers to keep the car running another month. If the buyer misses a payment the lender will disable the device and the buyer will not be able to start the car and the GPS will provide the lender with the location of where to pick up the car to repossess it. This sounds incredibly dangerous. What if you were driving in the middle of the freeway and your car is disabled? If you have one of these devices on your car you need to know what your rights are after you file for bankruptcy.

In the case of In re Hampton (Hampton v. Yam’s Choice Plus Autos, Inc.), 319 B.R. 163 (Bankr. E. D. Ark. 2005), Toni Hampton purchased a car from Yam’s Choice Plus Autos, Inc. (“Yam’s”). There was a PayTeck device installed on the car. Ms. Hampton thought that it was only an anti-theft device and only learned that she would need a new code to start the car each month after she made her first payment. She made her payments on time and had no issues with her car. She filed for Chapter 13 bankruptcy protection on October 8, 2002. Ms. Hampton’s Chapter 13 plan included payments to the lender for her car. Her plan was confirmed and she made her Chapter 13 payments on time. After she filed for bankruptcy Ms. Hampton indicated she was barely able to get her car working for more than 2 weeks at a time. In the beginning, her bankruptcy lawyer’s employee tried to call Yam’s to get the correct codes. Yam’s indicated Ms. Hampton would need to call in to get the code. Ms. Hampton called in every month to get the code but most of the codes were incorrect and her car was shut off. It made her constantly late for work and there were times when she had to get rides from co-workers and friends and family because her car just would not start. Yam’s was aware of the issues but did nothing to help Ms. Hampton. The bankruptcy court in this case concluded that Yam’s violated the automatic stay. Under 11 U.S.C. §362(a)(3) filing bankruptcy acts as a stay of “any act… to exercise control over property of the estate…” Installing a device in a car which prevents the bankruptcy filer from starting the car is an exercise of control over the estate property which violates the automatic stay. The court awarded Ms. Hampton damages she incurred during this period but did not award punitive damages. The court clarified that while Yam’s violated the automatic stay in this situation, the existence of the disabling device would not in itself violate the automatic stay if Yam had taken proper precautions and provided Ms. Hampton with the correct codes every month. If there were issues with the device itself, Yam’s should have fixed it.

In a similar case, In re Crawford (Crawford v. Credit Acceptance Corporation), 2008 WL5427713 (Bankr. S.D. Ill. December 2008), Ms. Crawford’s finance company repossessed her car. She filed for Chapter 13 bankruptcy and the car was returned to her but she started having problems with her car immediately after because of the malfunction of the disabling device on her car. She sued the finance company for violation of the automatic stay for not repairing the disabling device and the courts agreed with her. The court held that the finance company violated the automatic stay because they failed to ensure the car “operated free from any interference from the disabling device.”

So the bottom line is this: you have the right to drive your car free from worry that it will stop at any time and to also drive your car without having to worry that your car will not start so long as you continue making your payments on time either on your own or through your Chapter 13 plan. If your lender deliberately provides you with the wrong start codes or does not help you if there is a malfunction of the disabling device they are violating the automatic stay and your bankruptcy lawyer will be able to file a motion or adversary proceeding for violating the automatic stay.

Damages for the Willful Violation of Automatic Stay

By Ryan C. Wood

The general rule is that once you file for bankruptcy protection you are free from creditor harassment and collection activity. This is because once you file bankruptcy there is the automatic stay. This automatic stay stops all collection activity including creditor calls, letters, wage garnishments, levies, and/or continuation or start of any lawsuit in an attempt to collect a debt. There are some exceptions to the automatic stay as listed in Section 362 of the Bankruptcy Code. So before threatening a creditor with sanctions make sure one of the exceptions does not apply. The automatic stay is one of the most powerful tools in the bankruptcy arsenal. But what happens if creditors ignore the automatic stay and continue to try to harass you and attempt to collect a debt from you anyway? What rights do you have?

This is what happened in In The Matter of Rupanjali Snowden (No. 13-35291, 9th Circuit Court of Appeals, September 2014). In this case, Ms. Snowden, the bankruptcy filer, took out a payday loan from Check Into Cash of Washington (“CIC”) in the amount of $575. She was unable to make the payment and advised CIC that she was thinking of filing for bankruptcy and provided her bankruptcy attorney’s contact information to them. Despite having this information, CIC would constantly contact Ms. Snowden at work (she is employed as a nurse at a hospital). Every time she heard her name over the intercom she thought she was being called regarding an emergency with her daughter and she became very stressed out. CIC is the original creditor and may contact someone at work, but they cannot harass her. If CIC was a collection agency Ms. Snowden may have a claim under the Fair Debt Collections Practices Act.

Ms. Snowden filed for bankruptcy protection shortly after with a Chapter 7 bankruptcy lawyer. CIC was listed as a general unsecured creditor in the bankruptcy petition. A little over a month after her bankruptcy filing, CIC cashed her post-dated check causing Ms. Snowden’s bank account to become overdrawn and charged additional bank fees as well. Ms. Snowden became panicked and was crying and feeling miserable. Her good bankruptcy lawyer filed a motion for sanctions against CIC for violation of the automatic stay, seeking return of the funds, overdraft fees, emotional distress, punitive damages and attorney fees. CIC disputed the fact that they violated the automatic stay. Ms. Snowden offered to settle the case for $25,000 which CIC rejected. CIC proposed to pay her $1,445, which Ms. Snowden rejected. The bankruptcy court found that CIC willfully violated the automatic stay and awarded Ms. Snowden $12,000 for emotional distress, $12,000 in punitive damages, $575 for the loan amount, $370 in bank fees, and $2,538.55 in attorney fees, totaling $27,483.55. CIC appealed the case to the district court. The district court remanded the case back to the bankruptcy court to determine emotional distress damages and reevaluate punitive damages based on change in the emotional distress damages. The bankruptcy court did not change its judgment after reconsideration. CIC appealed the case again and Ms. Snowden cross-appealed.

The Ninth Circuit upheld Ms. Snowden’s emotional distress award and punitive damages. The court also rejected CIC’s argument that the attorney fees stopped accruing once CIC offered to settle the case with Ms. Snowden for $1,445. The court indicated that CIC never admitted to the violation of the automatic stay and therefore the stay was not cured. The court determined the proper date the violation of the automatic stay ended on December 10, 2009 when the bankruptcy court determined that the automatic stay was violated. Of course, Ms. Snowden would not receive all of the attorney fees up to that date. She would only receive the fees that are related to curing the stay violation itself. Since some of the attorney fees were related to recovering damages, those attorneys’ fees would be disallowed.

This case provides a guideline of what damages can be obtained when there is a willful violation of the automatic stay. As with each case, however, the rulings are heavily dependent on the specific circumstances of each case. You have to provide facts to prove you are eligible for actual damages, emotion distress damages, punitive damages, attorney fees and other damages.

What Happens if I Make Payments to a Creditor After Receiving a Discharge in Bankruptcy?

By Ryan C. Wood

You just received your discharge order from the bankruptcy court indicating your debts are now discharged and your case is closed. Congratulations! You now have a fresh start free from burdensome debts. What do you do now? Some people want to pay back some of their creditors due to a sense of obligation (for example, some people want to pay back their dentist who they have been going to for years and who has never hounded them for payment, or their friends or family members who have loaned them money to get by throughout the years). Whatever the reason, there is no law against voluntarily repaying a debt from post-petition funds (meaning money you obtained from whatever source after you filed your bankruptcy case). Does repaying that debt mean you re-obligated yourself to that debt, essentially reaffirming the debt? The short answer is no. In order to reaffirm a debt you have to follow the strict guidelines outlined in 11 U.S.C. §524(c). See In re Charles Lopez 345 F.3d 701 (2003).

When your experienced bankruptcy attorney files your bankruptcy case and you receive a discharge of your debts your personal obligation to repay that debt is discharged. This applies to even secured debts such as your car or home mortgage. Don’t get me wrong, this does not mean you do not have to repay your car loan or home mortgage to keep the car or home. Since the car loan is a secured debt, if you do not repay the debt your car loan lender can repossess your car. However, given your personal obligation was discharged in the bankruptcy case the car loan lender cannot go after you for any deficiency balance if there are any. If you sign a reaffirmation agreement as part of your bankruptcy, this is essentially a new contract in which you are re-obligating yourself to that debt. If you sign the reaffirmation agreement and then you cannot make payments on that debt the car loan lender can repossess your car and go after you for any deficiency balance.

You filed bankruptcy to get rid of your personal liability to repay your debts. Why would anyone sign any reaffirmation agreement? Unfortunately, in the Ninth Circuit, In re Dumont (581 F. 3d 1104, 9th Cir, 2009) holds that a car loan creditor can repossess your car if you did not sign a reaffirmation agreement. It does not matter even if you are current on the loan – your creditor can still repossess your car. You have essentially 3 different options after you file your bankruptcy case regarding secured debts: 1) surrender the car; 2) redeem the car for the fair market value (meaning you pay your lender a lump sum payment of what the car is worth rather than pay what you owe on the car – this is only good if your car is heavily upside down); and 3) reaffirm the debt. The good bankruptcy lawyer unspoken 4th option to keep the car and continue making payments on it (sometimes called a “ride through”) is no longer available to consumers based on In re Dumont. However, it is still advisable to speak with your car loan lender to see if they are wiling to offer you that option. Most lenders still can offer it. Some lenders, like Ford, will require you sign a reaffirmation agreement in order to keep the car. Keep in mind, you should not and you do not have to reaffirm huge debts like mortgages on your house because you do not know what the future holds. You do not want to be in a situation where you cannot pay your mortgage and your mortgage holder comes after you for the debt in the future.

Once you have finally made a decision to reaffirm the debt, your lender has to follow the strict guidelines of §524(c) to reaffirm the debt. Essentially they have to provide you with full disclosure of what the terms are and the reaffirmation agreement has to be signed completely voluntarily and cannot be an undue hardship for you. Once you sign the reaffirmation agreement the creditor files it with the court. If you sign the reaffirmation agreement without the representation of a bankruptcy lawyer, there is a hearing in front of the judge. This hearing is to protect you and to make sure the creditors are not taking advantage of you. If the judge thinks it is an undue hardship for you to reaffirm the debt he or she can reject the reaffirmation agreement. The judge can also sign off on the reaffirmation agreement if he or she believes it is in your best interest. The reaffirmation agreement has to be filed with the court before the case is closed. Once the case is closed no further reaffirmation agreements can be entered into. Therefore, you do not have to “accidentally” enter into a reaffirmation agreement because it has to follow these guidelines.

How Can I Pay Bankruptcy Attorneys Fees to File a Chapter 7 Bankruptcy Case?

By Ryan C. Wood

It is inevitable that my clients ask me the question of whether I can file their bankruptcy case for them with $0 money down or at least a partial payment with the rest to be paid after their case is filed. I understand the need some of my clients have when they are asking this question. Obviously if they have to file for bankruptcy they may not have the funds to hire an attorney but they may still need to urgently file, either because they have a looming wage garnishment or their car was repossessed and they need to file their bankruptcy case before their car is auctioned off. They are stuck in a catch 22: if they do not file for bankruptcy, their wages get garnished or their car is auctioned off and they will have even less money. It is a never-ending vicious cycle. Filing for bankruptcy immediately and then paying the bankruptcy attorney back after the case is filed may seem to be a solution. Unfortunately that solution is not a viable option in Chapter 7 bankruptcy cases for several reasons:

Violation of Automatic Stay

The automatic stay prevents all collection activity against you after your bankruptcy case is filed. That means no creditor can call you, harass you, go after you for any debt, file or continue a lawsuit against you, continue any wage garnishments, repossess your car, or any other activity that is considered trying to collect a debt from you. Whomever you owe money to is considered a creditor. That includes your bankruptcy lawyer if you still owe him or her money after your bankruptcy case is filed. Your legal obligation to repay the dischargeable unsecured debt in your bankruptcy case is gone. You are therefore not legally obligated to pay your bankruptcy attorney and they will be essentially working for free in your case. If they try to collect from you they are violation the automatic stay. This is not to say that they cannot charge you for any post-petition work that comes up in your case that was not bargained for in your initial contract (such as representing you in an adversary proceeding in your bankruptcy case). The attorneys just cannot charge you for the work they did prior to the filing of your bankruptcy case.

Conflict of Interest

Another reason why attorneys cannot accept no money down or partial payment option is the fact that it is a conflict of interest for them to do so. How is it a conflict of interest? As indicated previously if you owe money to your bankruptcy attorney they are considered a creditor in your case. Well, you cannot be both an attorney and a creditor in the Chapter 7 case because there is potential for conflict to arise. How will you know whether the attorney is acting in your best interest (to discharge all your dischargeable unsecured debts) or in their best interest as a creditor (to collect what is owed to them)? It is an ethical violation for them to represent you in your bankruptcy case if there is a conflict of interest.

Attorney Fees Can Be Paid By a Third Party

If you need to file for bankruptcy under Chapter 7 and do not have the money to pay attorney fees you can have a third party pay the fees and costs. A friend or family member may help you and pay your attorney fees and costs. It has to be disclosed that a third party paid the fees and the third party cannot have any control of the bankruptcy case. Sometimes when a party pays the fees and costs they think they have a right to be involved and influence the bankruptcy filers decisions. Just because someone pays the fees and costs of another does not mean they are a client. The third party payor is not the client. It is a good idea to have the third party payor and client sign a disclosure regarding the payment of the attorney fees and costs.

File A Chapter 13 Case Instead

Payment of attorneys’ fees and costs is different in a Chapter 13 reorganization case. In a Chapter 13 case attorneys’ fees can be paid through the Chapter 13 plan. If the attorneys’ fees are $4,000 and the Chapter 13 plan is 60 months, then about $67 of your Chapter 13 plan payment will go to your attorney to pay their fees once the Chapter 13 plan is approved by the bankruptcy court. Most bankruptcy lawyers will ask for a portion of the attorneys’ fees upfront ($1,000 before filing the case for example) and then rest of and the majority of the attorneys’ fees in the Chapter 13 plan (Remaining $3,000 in Chapter 13 plan). So, you may be able to find an attorney that is willing to do a lot of work for a very little amount of money, then be paid the rest of the attorneys’ fees through the Chapter 13 plan.

If you cannot pay your bills on time each month do not wait to speak with a bankruptcy attorney

If you cannot pay your bills on time each month do not wait to speak with a bankruptcy attorney

Do Not Wait Until The Last Minute to Seek Counsel

So how can you avoid this impossible situation of needing to file bankruptcy immediately but not having enough money for a bankruptcy attorney? The best way to go about filing for bankruptcy is to plan it in advance. Do not wait until the last minute to file for bankruptcy. At the first sign that you are having financial difficulties and may not be able to repay your obligations you should consult with a bankruptcy lawyer. Many law firms provide payment options so you can pay them in installments. They can file your bankruptcy case after all the fees are paid. It may take several months, but you can file for bankruptcy afterwards and obtain that coveted fresh start. If you wait until you receive the wage garnishment orders it will be too late. While there are plenty of lawyers that accept installment payments, there are also plenty of law firms that do not. You should ask the firm before scheduling an appointment with them whether they accept installment payments or not.