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.

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.

Can I Go On Vacation Before Filing Bankruptcy?

By Ryan C. Wood

How do you have money to on vacation but no money to pay your debts? In case you did not know this previously I am going to let you in on a not so secret rule in bankruptcy: it is generally not a good idea to go on vacation right before filing for bankruptcy. Doing so may look like and be an abuse of the bankruptcy process and your case may be dismissed or the discharge of your debts denied.

Pursuant to 11 U.S.C. §707(b)(1) the court may dismiss a case “if it finds that the granting of relief would be an abuse of the provisions of this chapter.” Whether the court finds abuse depends on the circumstances of each case. If the circumstances are the fact that you really needed to have a vacation (with no other explanation) then it probably does not bode well for your bankruptcy case. Essentially you are taking a vacation at the expense of your creditors that you are alleging you cannot afford to pay anymore. Rather than paying for your vacation you could have used those funds to pay some of your creditors. If you are going out of town for a legitimate reason, such as work related reasons (for example, you have to pay all the expenses yourself but your employer will reimburse you in the future) or if there are family emergencies (for example, a loved one is very sick, or you are going to a funeral) then you can explain those reasons to the judge to dispute the motion to dismiss or claim of abuse. If a motion to dismiss is filed in your case pursuant to §707(b), it is highly advisable that you seek the services of a bankruptcy lawyer to help you oppose the motion.

It is generally not a good idea to go on vacation before filing bankruptcy.

It is generally not a good idea to go on vacation before filing bankruptcy.

If you used your credit cards during the vacation right before filing your case the problem may gave just become worse. Creditors could file an adversary proceeding against you to have that debt or all of your debts be deemed nondischargeable pursuant to 11 U.S.C. §523(a)(2) due to fraud or 11 U.S.C. §727. An example of fraud is if you rack up your credit card debt for luxury goods within 90 days prior to filing for bankruptcy. What are considered luxury goods? Luxury goods are anything that is not reasonably necessary for the support or maintenance of you or your dependents. Going on vacation, big screen TVs, electronics, nice purses, jewelry or shoes may be examples of luxury goods.

You may be asking yourself: “How does the United States Trustee or a party in interest find out you went on vacation or spent money on luxury goods?” There are a variety of different ways they may find out. Most Chapter 7 trustees require that your Bay Area or San Jose bankruptcy attorney submit bank statements as part of the documents to be sent to the Chapter 7 trustee after your bankruptcy case is filed and before your meeting of creditors. Even if you paid for your vacation with cash or by debit card from your checking account, the Chapter 7 trustee will see the transactions at the location you are withdrawing the money (for example, if you withdrew cash out of the ATM in Hawaii, it will show cash withdrawal in Hawaii). Or if you withdraw a huge chunk of cash prior to going on vacation the Chapter 7 trustee may question what the huge chunk of cash may be used for. Of course, if you are using your credit cards, it will show up on your credit card statement. If the Chapter 7 trustee finds something suspicious from the documents provided he or she may inform the United States Trustee. The United States Trustee is normally the one who will file motions to dismiss your case for abuse of the bankruptcy process under 11 U.S.C.§ 707. Other parties in interest (i.e. your creditors) may also have the right to file an objection based on abuse of process under 11 U.S.C.§ 707.

Why would buying luxury goods on your credit card before filing bankruptcy be considered fraud? It is presumed to be fraud because it looks like you are taking advantage of your creditors. If you know you are going to file for bankruptcy and you max out your credit card balances it is considered fraud because you “borrowed” the money without ever having any intention of paying the money back. Of course, buying luxury items within the 90 day window is only presumed to be fraud, but you can always dispute the presumption by providing proof that at the time you used the credit cards you had every intention of paying the money back. You can show this in several ways: providing evidence that you have been making your payments every month, providing evidence that you had funds to pay back the credit at the time you made the purchases, or anything else that proves you had the intention of paying back the debt. If something happens afterwards that changes your financial situation such as a decrease in pay or loss of job that makes filing for bankruptcy a necessity you can explain that situation to the judge to dispute the presumption that you committed fraud. You should consult with a bankruptcy attorney to help you if you have an adversary proceeding filed against you for nondischargeability of a debt due to fraud.

Can My EDD Overpayments be Discharged in Bankruptcy?

By Ryan C. Wood

If you received a notice from the California Employment Development Department (EDD) with a bill attached indicating you owe money to the state, you are not alone. Many Californians are issued overpayment notices. To add insult to injury, there are plenty of instances where the overpayment is not your fault. The EDD may have simply incorrectly calculated the amount to pay you and now they want their money back – with interest and penalties. It does not matter that the overpayment was not your fault; you may still be penalized for it. So what can you do about this overpayment? It depends on the circumstances of your case. EDD overpayments can be discharged in bankruptcy.

There are a few things you can try first before seeking the advice of a bankruptcy attorney to file bankruptcy and discharge the EDD overpayment. You can appeal the overpayment if it is within the window of time in which you may do so. If it is past the time where you can appeal or you lost the appeal and you do not have any other debts and the EDD overpayment is a manageable amount then you can try to negotiate or work out a payment schedule with the EDD.

Alleged EDD overpayments can be discharged in bankruptcy.

Alleged EDD overpayments can be discharged in bankruptcy.

If you have other debts in addition to the overpayment from the EDD you may consider bankruptcy as an option. You should consult with a bankruptcy lawyer regarding your situation as the answer always depends on your specific circumstances. If you qualify for Chapter 7 bankruptcy the EDD overpayments are dischargeable along with your other general unsecured debts. If you choose to file a Chapter 13 bankruptcy the EDD overpayments will be treated the same as your other general unsecured creditors. Depending upon your circumstances you may not be paying anything back to general unsecured creditors and the alleged EDD overpayment will be discharged upon completion of the Chapter 13 plan. The dischargeability of your EDD overpayments are dependent on whether there was fraud involved in the accrual of the overpayment. If there was allegedly fraud involved the discharge of the EDD overpayments can be denied pursuant to 11 U.S.C. §523 if the California Employment Development Department files an adversary proceeding and proves the overpayment was due to fraud.

California’s Unemployment Insurance Code §2736 states that in the absence of fraud, misrepresentation or willful nondisclosure, EDD must mail the overpayment notification to the recipient of the unemployment benefits within 2 years after the beginning of the benefit period where the overpayment was made. If there is fraud involved California’s Code of Civil Procedure §338(d) provides for a three-year statute of limitations. The clock starts when the cause of action is discovered (or should have been discovered) by the aggrieved party (in this case, the EDD), of the facts constituting the fraud or mistake. If the EDD knew, or should have known, about the facts constituting fraud for more than three years and they did nothing about it then they can no longer go after the recipient. Statutes of limitations are set up so that the aggrieved party can pursue their rights in a timely manner. If they sleep on their rights they will lose them. It goes with the saying, “You snooze, you lose.” There are time limits set up because the longer the time passes, the harder it is to remember detailed information that may help or hinder the case, witnesses may no longer be able to remember or may no longer be present to provide testimony and records may be destroyed. Therefore it is imperative to move on your rights as soon as you know you have been wronged.

If it has been more than three years since the alleged overpayment has occurred and the EDD has not charged you with fraud then they will not be able to bring fraud up as an exception to your bankruptcy discharge should you decide to file for bankruptcy. There are several issues you may want to be aware of when discharging your EDD overpayments in bankruptcy. The first issue is the offsetting of your tax refund. If the EDD has placed a lien and forwarded information to the taxing authorities to have your refund withheld to pay back the overpayment, you want to be sure the overpayments are discharged in bankruptcy prior to your filing your tax returns. If you file your tax returns after your bankruptcy case has started but before receiving a discharge your tax refunds may still be withheld to pay the pre-petition debt (your overpayment). Before filing your tax return you should contact the taxing authorities to verify the debt has been discharged. If it has not, or even if there is a question about it, you should apply for an extension to file your taxes.

Another issue is the recoupment of the overpayment. Recoupment is when the EDD withholds your unemployment benefits to pay the overpayment that is discharged through bankruptcy. They can do this only if you are currently collecting unemployment and you try to discharge the overpayment in your bankruptcy case. The recoupment and the overpayment have to arise from the same action. If you are not on unemployment when you file your bankruptcy case and your overpayment is discharged through bankruptcy, the EDD cannot recoup those funds from you when you apply for the benefits in the future since those debts were discharged in your bankruptcy case and trying to collect on it is a discharge violation. This matter is not settled, however, so you should contact a bankruptcy attorney to discuss your situation.

Are Expenses Related to My Minor Children’s Incarceration Dischargeable in Bankruptcy?

By Ryan C. Wood

If you have a minor child who is currently or was previously incarcerated you already know that you are responsible for the expenses related to their support while they are incarcerated. But did you also know that those expenses related to the incarceration are not dischargeable in bankruptcy?

This is exactly what the Ninth Circuit Bankruptcy Appellate Panel decided in Rivera v. Orange County Probation Department (In re: Rivera), 13-1476 (BAP, 9th Cir., June 4, 2014). In this case, Maria Rivera’s son was incarcerated in Orange County for close to 2 years from 2008 to 2010. In accordance with Cal. Welf. & Inst. Code §903, the parents of the minor are liable for the reasonable costs of support while the minor is incarcerated. The costs of support are only for the actual costs incurred by the county for food and food preparation, clothing, personal supplies, and medical expenses, not the total cost of the incarceration. Additionally, the costs of support can not exceed $30 per day and the county will be reimbursed for the costs of legal representation. Additionally, the liability is only imposed on people that have the ability to pay. Orange County indicated that the total cost of incarceration for Ms. Rivera’s son was $420 per day. Orange County only tried to collect $23.90 a day from Ms. Rivera. The county represented this was for the “food and food preparation, clothing personal supplies and medical expenses” while he was incarcerated. In addition to the $23.90 per day, the County wanted $2,199 from Ms. Rivera for her son’s legal representation while he was incarcerated. The County sent Ms. Rivera multiple bills as well as court orders that require her to meet with a financial officer to determine her ability to repay the expenses but Ms. Rivera did not respond to any of the communications. She paid approximately half of the amount due to Orange County in May 2010 ($9,508.60). The remaining balance was $9,905.40. Ms. Rivera’s bankruptcy attorneys helped her file for Chapter 7 bankruptcy protection on September 12, 2011. Orange County was listed in Schedule E as a priority unsecured creditor. The Chapter 7 trustee determined it was a no asset case and Ms. Rivera received a discharge of her debt in January 2012. After the case was closed Ms. Rivera continued to receive collection notices from the County and Ms. Rivera’s bankruptcy attorney reopened her case to file a motion for an order directing Orange County to show cause why they shouldn’t be held in contempt for a violation of the discharge order. The judge decided that the debt owed to Orange County was excepted from discharge under §523(a)(5) and therefore the County did not violate the discharge order. Ms. Rivera appealed to the Bankruptcy Appellate Panel (BAP).

The judges in the BAP compared the exception to discharge before and after the BAPCPA amendments to the Bankruptcy Code. BAPCPA is the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 or nicknamed by some bankruptcy lawyers, BARF, for “Bankruptcy Abuse Reform Fiasco.” Prior to BAPCPA, 523(a)(5) provided that debts owed to “a spouse, former spouse, or child of the debtor, for alimony to, maintenance for, or support of such a spouse or child” is not dischargeable in bankruptcy. Under this rule, Orange County would not be included in this exception since Orange County was not a “spouse, former spouse, or child” and therefore their debt would have been discharged along with the rest of Ms. Rivera’s debt. However, since BAPCPA was enacted, §523(a)(5) only states that the debts for a domestic support obligation are not dischargeable. §101(14A) defines “domestic support obligation” to mean debts “(A) owed to or recoverable by (i) a spouse, former spouse, or child of the debtor or such child’s parent, legal guardian, or responsible relative; or (ii) a government unit; (B) in the nature of alimony, maintenance, or support (including assistance provided by a government unit) of such spouse, former spouse, or child of the debtor or such child’s parent…” The new amendments definitely include Orange County since they are a government unit that provided support to the child. The judges held that since the debt was accrued before the bankruptcy petition was filed and owed to a government unit, incurred for the support of the child, was determined by a court order before Ms. Rivera filed for bankruptcy and the debt was not assigned to a nongovernmental entity for collection, the debt was nondischargeable.

If you owe money for the expenses related to a government agency due to the support for the incarceration of your minor child, it is best that you seek the advice of an experienced bankruptcy lawyer in your jurisdiction for advice on how to proceed.

Filing a Stale Proof of Claim in a Bankruptcy Case May be Considered a Violation of the FDCPA

By Ryan C. Wood

What is considered a stale proof of claim? A stale proof of claim is one where a creditor files a proof of claim with the bankruptcy court and the underlying debt is barred from collection because it violates the statue of limitations. The statue of limitations is a law that provides a maximum period of time for someone to take action on a certain claim, whether it is collecting on a debt or filing a lawsuit against someone for certain violations. There is a maximum period of time set up because the longer the wait time, the less accurate the information will be. Evidence supporting the claim may be lost or people’s memories of the event may diminish. There is also the saying, “if you snooze, you lose.” If you sleep on your rights, or wait to long to claim them, you shouldn’t be surprised if you lost them. The statutes of limitations for different actions vary depending on the jurisdiction. You should familiarize yourself with your jurisdiction’s statute of limitation laws. The statute of limitations for a collection activity or breach of contract in California is 4 years. So if you do not collect on a debt before the 4 years is up you are barred from trying to collect on it later.

In a recent 11th Circuit Court of Appeals case, Crawford v. LVNV Funding, LLC, et al., No. 13-12389 (appealed from the US District Court for Middle District of Alabama, July 2014) the court ruled that LVNV violated the Fair Debt Collection Practices Act (“FDCPA”) by filing stale proof of claims in a Chapter 13 case. In this case, Stanley Crawford owed money to a furniture company who then sold the debt to LVNV. The last transaction occurred on October 26, 2001. Alabama’s statute of limitations is 3 years so the debt is time barred by October 2004. Mr. Crawford filed for Chapter 13 bankruptcy protection in February 2008. LVNV filed a proof of claim in the case even though the debt was deemed uncollectible. Mr. Crawford then filed an adversary proceeding against LVNV pursuant to Bankruptcy Rule 3007(b). Mr. Crawford claimed that LVNV routinely filed stale proof of claims in bankruptcy court and that the filing of these stale claims is a violation of the FDCPA. The bankruptcy judge in the case dismissed the adversary and the district court judge affirmed. Mr. Crawford then appealed this case to the appellate court where the judge ruled in Mr. Crawford’s favor.

The FDCPA was enacted to protect consumer’s rights. The FDCPA protects the consumers against debt collectors. “A debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt.” 15 U.S.C. §1692e. “A debt collector may not use unfair or unconscionable means to collect or attempt to collect any debt. Id. §1692f. The court looked at the facts in the case to determine if LVNV’s filing of a claim they know to be time-barred in bankruptcy court would be considered unconscionable, deceiving, or misleading towards the least-sophisticated consumer. See Jeter v. Credit Bureau, Inc., 760 F.2d 1168 (11th Cir. 1985). If LVNV tried to pursue a claim in state court, their case would have been dismissed because it was time-barred and those actions would violate the FDCPA. The judge in this case deemed that to be the case in bankruptcy court as well. If a proof of claim is not objected to in bankruptcy court, the claim is deemed valid and will be paid according to the plan. LVNV tried to slip the claim in the case and they were paid by the Chapter 13 trustee. A least-sophisticated consumer would not know to look and see if the claim was time barred. This was what LVNV was banking on. The court determined that LVNV’s actions a violation of the FDCPA.

Chapter 13 bankruptcy cases are complicated and it is advised you seek the advice of an experienced bankruptcy attorney to file your bankruptcy case. A bankruptcy lawyer is also the best person equipped to protect your rights and ensure the proof of claims filed with the court are not time-barred and stale.