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 Do I Need To Do To File Bankruptcy in California?

By Ryan C. Wood

When Congress enacted the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (more commonly known as “BAPCPA”), one of the new eligibility requirements to file for bankruptcy was to complete a credit counseling class from a nonprofit organization approved by the United States Trustee within 180 days prior to filing your bankruptcy case. See 11 U.S.C. §109(h). Your bankruptcy attorney will file the certificate completion with the court along with the rest of your bankruptcy paperwork. So what is this credit counseling class and why is it so important?

A lot of people hear the word “class” and shudder. They do not like to take classes and they are afraid they will be tested on information they know nothing about. A credit counseling class is very different. You should know the answers in this class because this class asks information about YOU and your income, expenses and debts. This class is offered in several different mediums: you can take the class in person, by telephone, or even online. Normally people opt for the online version because it is more convenient for them. They can take the class in their pajamas in bed at 1:00 a.m. if they wanted to. The purpose of this class is for you to understand and explore the different options that are available to you besides filing for bankruptcy. There are times when bankruptcy may be the only choice for you due to your financial circumstances but you still need to take the class.

If you took the class and received a certificate of completion, but you are unable to print the certificate and file it along with the rest of your bankruptcy paperwork the court will allow you fourteen days to file the certificate. If you have requested the credit counseling course from an approved credit counseling agency but were unable to complete the class during the seven days from the time you made the request because of an exigent circumstance, you need to provide a certification regarding what the exigent circumstances are. If the court finds that this certification merits a temporary waiver you still need to take the class, but you have 30 days from the date you filed your bankruptcy petition to file the credit counseling certificate with the court. The court may extend an extension of an additional 15 days maximum (making this a total of 45 days from the date you filed your bankruptcy petition).

So what is considered an exigent circumstance? It is something that occurs that is beyond your control that prevents you from taking the course prior to the filing of your bankruptcy petition. The court has the discretion to determine whether your circumstances are considered exigent in nature. A lot of courts have determined that filing your bankruptcy case due to a pending foreclosure sale is not considered an exigent circumstance because you had ample notice that the house was going to be auctioned at a trustee sale. Therefore any exigent circumstances were of your own making. So speak with a bankruptcy lawyer in your area sooner than later. See Dixon v. LaBarge, 338 B.R. 383 (8th Cir. BAP 2006). If the court does find that your circumstances are considered exigent in nature, remember that it is only a temporary waiver and you still need to take the class and file the certificate with the court.

Under 11 U.S.C. §109(h)(4), you can have the credit counseling requirement waived (meaning you do not have to take the course) if: (1) you have a mental illness or mental deficiency that would make you incapable of making rational financial decisions; (2) if you are physically impaired (disabled) and you cannot take the class after a reasonable effort to do so in person, by telephone or on the internet; or (3) you are on active military duty in a military combat zone. If you do not fall in any of these categories you will need to take the credit counseling course. Failure to do so will result in your ineligibility to be a debtor in a bankruptcy case which means that the court will dismiss your case.

What to Look Out for When Hiring a Bankruptcy Petition Preparer

By Ryan C. Wood

When you are looking for help in filing for bankruptcy one important factor is cost. Obviously, if you need to file for bankruptcy you do not have a lot of extra money lying around. A lot of people opt to go with a bankruptcy petition preparer to help them file their bankruptcy case because they believe they are getting a “better deal” than if they were to retain the services of a bankruptcy attorney. A bankruptcy petition preparer is essentially anyone that prepares your paperwork to file bankruptcy that is not listed as your attorney on the petition. Here are some things you need to look out for when determining if your bankruptcy petition preparer is right for you:

Legal Advice

A bankruptcy petition preparer is forbidden from providing you with legal advice. Under 11 U.S.C. §110, bankruptcy petition preparers cannot tell you whether you need to file for bankruptcy or what chapter of bankruptcy to file under. They cannot tell you whether what debts are dischargeable, whether you can keep your car or home or what the tax consequences may be. The bankruptcy petition preparer’s job is to help you prepare your documents based on the information you provide them. When you hire the services of a bankruptcy petition preparer you will be filing the bankruptcy petition “pro se” which means you are representing yourself in the case. If there are any issues based on the information contained in your paperwork you are on your own. That is why it is advisable to retain a bankruptcy lawyer.

Required Notice

Your bankruptcy petition preparer must provide you with notice that they are not attorneys and that they are not authorized to practice law or give you any legal advice. They have to sign and provide their name and address in a document to be filed along with the rest of your bankruptcy paperwork. If your bankruptcy petition preparer does not sign or is unwilling to sign your paperwork, that should be a huge red flag to you. If they are abiding by the laws they have no reason to hide their work from the courts.

Cost

In the Northern District of California bankruptcy petition preparers cannot charge more than $150 for their work. Other jurisdictions may have a different maximum amount the bankruptcy petition preparers may charge. It is a good idea to look up what that maximum limit is before you schedule an appointment to see a bankruptcy petition preparer. This fee covers all costs including but not limited to photocopying, messenger costs, postage, and phone calls. They cannot charge you for the filing fee because you need to pay the filing fee directly with the court, not the bankruptcy petition preparer. I was shocked to hear some of my clients paid $2,000 to $3,000 to a bankruptcy petition preparer to do their paperwork. That is more than what most attorneys would charge for a case! I have heard some of my clients say that they were prepared by an attorney rather than a paralegal and that is why the costs were so high. One critical thing to remember – if they did not file your case as your attorney, they are not considered your attorneys for your particular bankruptcy case and should not charge as such.

It is understandable that you would look for a lower cost alternative to attorneys to file your bankruptcy case. However, keep in mind that if you have significant assets that you need to protect a bankruptcy petition preparer may cost you more than it saves. If your documents are prepared incorrectly, you may be at risk for losing your home, car, or other valuable assets. Additionally, when you turn to an attorney after your case goes downhill it may end up costing you more in the end because it takes more time and money to correct something than it does to file the documents correctly in the first place.

Are Unemployment Insurance Taxes Dischargeable in Bankruptcy?

By Ryan C. Wood

If you own or used to own a business or corporation and you are considered the person responsible for paying the unemployment insurance taxes, one question you may have is whether the unemployment insurance taxes are dischargeable in bankruptcy? This is definitely a concern for business owners that have failing businesses and do not have the resources to pay back the unemployment insurance taxes. Please speak with a bankruptcy lawyer in your jurisdiction before making hard choices. The Ninth Circuit Bankruptcy Appellate Panel (BAP) addressed this issue in State of California Employment Development Department v. Hansen, 470 B.R. 535 (April 2012).

The 9th Circuit BAP in the Hansen case ruled that unemployment insurance taxes were indeed dischargeable in bankruptcy despite the California Employment Development Department (EDD)’s claims. In the Hansen case the EDD claimed that unemployment insurance taxes were considered a priority tax under 11 U.S.C. §507(a)(8)(C), a tax required to be collected or withheld and for which the debtor is liable in whatever capacity, and therefore considered nondischargeable under 11 U.S.C. §523(a)(1)(A). The Hansens argued that unemployment insurance taxes did not fall under §507(a)(8)(C) because the unemployment insurance tax was not a tax that is required to be collected by the debtor from a third party. The unemployment insurance tax is not withheld from employee’s paychecks. Therefore it is not a tax where it is collected from the employee to be paid by the employer to a government agency. The unemployment insurance tax is only paid by the employer to EDD.

The 9th Circuit BAP resolved this issue by taking a look at the legislative history to see if they could determine what Congress meant when they wrote §507(a)(8)(C). We only look at the legislative history when the law itself is ambiguous. The BAP concluded that legislative history showed that under §507(a)(8)(C) the tax must be collected from a third party. In this case, the employer (Hansen) was directly responsible for paying the unemployment insurance taxes to EDD. Since unemployment insurance taxes do not fall under §507(a)(8)(C) it does not fall under the §523(a)(1)(A) category of a nondischargeable debt and therefore unemployment insurance taxes are dischargeable. §523(a)(1)(A) basically states that it must be considered a tax under §507(a)(8) or §507(a)(3).

One thing bankruptcy lawyers should note is that although unemployment insurance taxes do not fall under the §523(a)(1)(A) category of nondischargeability, it must not fall under any other categories of nondischargeability in §523. One category to note is §523(a)(2) which is essentially obtaining credit based on fraud or misrepresentation. If there was no fraud or misrepresentation involved then your unemployment insurance taxes would most likely be dischargeable.

California Bankruptcy Exemptions Increase as of January 2013

By Ryan C. Wood

As we are now beginning the new year you should be aware of the new laws that may affect you. If you are thinking of meeting with bankruptcy lawyers in California and filing for bankruptcy in 2013 one thing you should know is that some bankruptcy exemptions are higher in California as a result of California Assembly Bill AB-929.  Inevitably the exemptions will increase again after the writing of this article.  This bill was approved by the governor and filed with the Secretary of State on September 27, 2012. This means that more of your property can be protected when you file for bankruptcy. California has two exemption statutes. The first exemption statute has a generous wild card exemption, Section 703.140 of the Code of Civil Procedure, and the second exemption statute has a generous homestead exemption, Section 704.730 of the Code of Civil Procedure. Your bankruptcy attorney cannot use both in a bankruptcy petition. California has opted out of using the federal exemption statutes so those are unavailable for people filing for bankruptcy in California.

Here are some of the changes in the exemption statutes as of January 1, 2013:

Section 703.140 of the Code of Civil Procedure:

• $24,060 in homestead or burial plot ($22,075 previously)
• $25,340 wildcard exemption. This consists of $1,280 plus any unused portion of the $24,060 homestead or burial plot exemption. ($23,250 previously)
• $4,800 in one or more motor vehicles ($3,525 for ONE motor vehicle previously)
• $600 in any single household item ($550 previously)
• $7,175 professional books or tools of trade ($2,200 previously)
• $12,860 dividend or interest under unmatured life insurance contract ($11,800 previously)
• $24,060 personal injury payments ($22,075 previously but this did not include pain and suffering compensation)

Section 704.730 of the Code of Civil Procedure:

Homestead exemptions provided to a homeowner would be one of the following:
1) $75,000 unless you are a person described in (2) or (3) below.
2) $100,000 if you are a member of a family unit where one or more members of the family do not have an interest in the homestead or whose only interest is a community property interest
3) $175,000 ($150,000 previously) if you are:
a. 65 years of age or older
b. physically or mentally disabled and as a result cannot work
c. 55 years or older with gross annual income of not more than $25,000 (single) or $35,000 (married) and there is an attempted involuntary sale ($15,000 if single and $20,000 if married previously)

Additionally, on April 1, 2013, (and every three years thereafter) the Judicial Council is required to submit adjusted homestead exemptions based on the change in the annual California Consumer Price Index to the Legislature. The increases will not be in effect until they are approved by the Legislature. This will tie the homestead exemptions to inflation and the rising cost of home ownership.

How Do I Make My Chapter 13 Plan Payments?

By Ryan C. Wood

You are responsible for making your Chapter 13 plan payments on time every month once your Chapter 13 bankruptcy case is filed. You will receive a notice from the trustee’s office in the mail detailing when the first payment is due and how to make the payment. Most bankruptcy lawyers also send you the same information at the time your case is filed. The Chapter 13 trustee that is assigned to your bankruptcy case will be providing you with information on when and where to make your Chapter 13 plan payments. The trustee can and will file a motion to dismiss your case if you fail to make these monthly payments. Some trustees are more lenient than others when it comes to filing a motion to dismiss for nonpayment. Some trustees will file the motion immediately after a missed payment and some trustees will wait until you are a month or more behind before filing a motion to dismiss for nonpayment. However, you should always be aware of how much you owe and when you have made a payment. You cannot rely on the trustee to tell you that you are late on a payment because that may be too late to save your Chapter 13 bankruptcy case from dismissal.

There are several ways to make a plan payment to your Chapter 13 trustee. One way is to have the plan payments be directly deducted out of your paycheck. This way ensures that your plan payments will always be made on time. However, some people just do not like seeing their paychecks decreased for any reason and like to make the payments themselves. That is fine as well. You can personally mail in the payment to the trustee every month. Most trustees require that you pay with cashier’s check or money order only. They do not want to deal with bounced checks. You should keep copies of all payments that you have made so that if there are any errors in accounting you can provide proof of payment. What happens if you mailed your payment into the trustee but the trustee never received your payment? Unfortunately, having your payment lost in the mail is one of the possibilities and risks of mailing in a payment. If the trustee indicates that he or she never received your payment you can look into canceling the cashier’s check or money order that was not received and obtaining a new one to mail to the trustee immediately. One method of ensuring that you know exactly where your payment is would be to purchase a delivery confirmation or some other way of tracking the mail. However, that may be costly and adds up over time. The choice is entirely up to you. Not all trustees have set up or approved paying by ACH, but a third way of making a payment that is becoming more common is to pay the trustee electronically through your checking account. Most trustees do not take regular “bill pay” from your bank since it is similar to a personal check: it could bounce and would be a headache to resolve and would also result in lots of fees that you would need to pay. The electronic payment would most likely be from a third party vendor approved by the trustee that you would need to go through. There are costs involved but it would probably save you a lot of time and would be convenient so you would need to weigh the convenience factor against the cost.

If you are not able to make a payment because of changed financial circumstances you should contact your bankruptcy lawyer immediately to modify your Chapter 13 plan. Do not wait until it is too late before contacting your attorney. If you do not have an attorney you should modify your plan yourself once you know that there will be changed circumstances such as being on disability, less work hours, or being laid off. There are a lot of different ways in which your financial circumstances could change. If you are planning on filing a Chapter 13 it is highly recommended that you seek the services of an experienced attorney to help you through your Chapter 13 bankruptcy case.