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.

Can I Keep An Increase In Income Inheritance and Increases In Equity In My House After Filing Chapter 13 Bankruptcy?

By Ryan C. Wood

Maybe, maybe and yes are the short answers.  Whether the chapter 13 is confirmed or approved is very important.  Below is the relevant law and Bankruptcy Code sections governing these issues when filing a chapter 13 bankruptcy case. 

Income Increases or Windfall of Income After You Confirm Your Chapter 13 Plan

A recent Ninth Circuit Bankruptcy Appellate Panel decision was published addressing this issue. 

In re Steven William Berkeley, BAP No. NC-19-1197-FBTa (April 17, 2020) 

Like many things in life timing is everything.  For Mr. Berkeley he was blessed with owning stock and then receiving $3.8 million from the stock when the company he worked for was purchased. In the real world how wonderful. In the bankruptcy world wait a minute.  The problem was the $3.8 million was received around the 57 month of the 60 month chapter 13 plan.  Mr. Berkeley only had 3 months to go and in theory he could have kept the entire $3.8 million from the stock; in theory. When the chapter 13 case was filed he was getting paid $50,000 a year.  After the chapter 13 plan was confirmed or approved by the Court he received stock options in the company he worked for.  That company was bought out resulting in Mr. Berkeley receiving the $3.8 million.  When something like this comes up notifying the chapter 13 trustee is generally recommended for proper disclosure even if you believe the windfall is not part of the bankruptcy estate.  The trustee’s office in this case argued this increase of income, or windfall, should to go the benefit of his creditors while Mr. Berkeley argued he should not have to pay any of the $3.8 million to creditors.  The lower Bankruptcy Court agreed with the chapter 13 trustee and Mr. Berkeley appealed.  The Ninth Circuit BAP affirmed the lower Bankruptcy Court’s holding that the income derived from the stock options was an increase in income and a change in circumstances.  This means the chapter 13 plan can be modified post-confirmation pursuant to Section 1329 of the Bankruptcy Code to increase the chapter 13 plan payout to creditors.  In this case Mr. Berkeley will have to pay $202,000 into the chapter 13 plan and pay 100% of his debt now.  Prior to this windfall Mr. Berkeley was paying back 1% of his nonpriority general unsecured debts.

Section 1329(a) provides that, “[a]t any time after confirmation of the plan but before the completion of payments under such plan, the plan may be modified” to “increase or reduce the amount of payments on claims of a particular class provided for by the plan[.]” § 1329(a) of the Bankruptcy Code.

Increases in income can be captured by creditors by filing a motion to modify the confirmed chapter 13 plan.  Danielson v. Flores (In re Flores), 735 F.3d 855 (9th Cir. 2013) 

Of course the motion to modify can be opposed by the bankruptcy filer and their bankruptcy attorney.  It is within the Court’s discretion whether the motion to modify is granted or not.  In this appeal Mr. Berkeley was arguing the Bankruptcy Court abused its discretion by granting the motion to modify to include the $3.8 million. 

A wrinkle is the revesting of property of the bankruptcy estate upon confirmation of the chapter 13 plan.  The revesting of the bankruptcy estate to the debtor terminates the bankruptcy estate.  This is true, but

Increase In Value of Houses or Real Property During A Chapter 13 Bankruptcy Case 

In a recent Ninth Circuit Bankruptcy Appellate decision, Black v. Leavitt (In re Black), 609 B.R. 518 (9th Cir. BAP 2019), the Ninth Circuit BAP held and reaffirmed that the estate terminates at confirmation.  The Court provide that “the revesting provision of the confirmed plan means that the debtor owns the property outright and that the debtor is entitled to any post-petition appreciation.”  This means a chapter 13 bankruptcy filer can after confirmation of their chapter 13 plan sell their house, keep the equity, and continue with the chapter 13 plan payments to fulfill their obligation under the confirmed terms of the plan or payoff the chapter 13 plan and receive their discharge early.  This issue has been more of a problem when a chapter 13 is converted to chapter 7.  Section 348 of the Bankruptcy Code, Effect of Conversion, governs this issues though and the plain language of Section 348(f)(2) is not ambiguous regarding this issues.  Section 348(f)(2) provides: (2) “If the debtor converts a case under chapter 13 of this title to a case under another chapter under this title in bad faith, the property of the estate in the converted case shall consist of the property of the estate as of the date of conversion.”  If for some reason it is determine the conversion from chapter 13 to chapter 7 is in bad faith, then and only then, is the property of the estate what exists at the time of conversion.  Otherwise property of the bankruptcy reverts back to the original date the chapter 13 case was filed.  This has been a major issue when converting from chapter 13 to chapter 7 and overzealous chapter 7 trustees seeking to sell homes upon conversion to chapter 7. 

The problem is the misunderstood language in Section 348(f)(1)(B).

Section 348(f)(1) provides: Except as provided in paragraph (2), when a case under chapter 13 of this title is converted to a case under another chapter under this title—

(A) property of the estate in the converted case shall consist of property of the estate, as of the date of filing of the petition, that remains in the possession of or is under the control of the debtor on the date of conversion; (B) valuations of property and of allowed secured claims in the chapter 13 case shall apply only in a case converted to a case under chapter 11 or 12, but not in a case converted to a case under chapter 7, with allowed secured claims in cases under chapters 11 and 12 reduced to the extent that they have been paid in accordance with the chapter 13 plan; and

So 348(f)(1)(A) first provides the property of the estate consists of property of the estate, as of the date of the filing of the petition, original petition, that remains of or is under the control of the debtor on the date of conversion; consistent and the same as 348(f)(2).  The wrinkle and misunderstood language is underlined above regarding valuations of property and of allowed secured claims in the chapter 13 case shall apply only in a case converted to a case under Chapter 11  or Chapter 12, but not in a case converted to a case under chapter 7.  Valuations mean valuations of purposes of reducing the amount a secured creditors claim as part of the plan of reorganization.  In plans of reorganization a secured creditors claim is only secured up to the value of the collateral.  We routinely file motions to value property pursuant to Section 506 of the Bankruptcy Code to reduce the amount of a secured claim to the value of the collateral, not what was owed at the time the case was filed.  A motion to value a car results in a valuation of the car paid via the plan of reorganization.  If the valuation is ordered before the conversion to another chapter that is a reorganization chapter, such as chapter 11 or chapter 12, naturally and according to 348(f)(1)(B) above you would not have to file another motion to value the same collateral.  The valuation already determined would be applicable for purposes of the chapter 11 plan or chapter 12 plan.  However, chapter 7 is not reorganization of debts but liquidation.  So the valuation previously obtained would not be apply in the chapter 7 liquidation.  This unfortunately is mistakenly interpreted as the value of a house in a chapter 13 case is not the value to be used in a case converted from chapter 13 to a chapter 7.  The value of a house  reverts back to when the case was filed when a chapter 13 plan is confirmed and then the case is converted to chapter 7, unless pursuant to Section 348(f)(2) the conversion was in bad faith.  It is all there and makes perfect sense.  Many bankruptcy attorneys fail to understand this dynamic and chapter 7 and judges do not given understand given they have not practiced chapter 13 bankruptcy prior to becoming a chapter 7 trustee or judge.  It is a huge problem.

Inheritance Received After Chapter 13 Case Commenced 

First we must start with the Bankruptcy Code.

Section 541(a)(5) provides in relevant part: (a) The commencement of a case under . . . this title creates an estate.  Such estate is comprised of all the following property, wherever located and by whomever held: . . . . (5) Any interest in property that would have been property of the estate if such interest had been an interest of the debtor on the date of the filing of the petition, and that the debtor acquires or becomes entitled to acquire within 180 days after such date – (A) by bequest, devise, or inheritance.

But then in addition for Chapter 13 case we have Section 1306(a)(1) to consider which provides: (a) Property of the estate includes, in addition to the property specified in section 541 of this title (1) all property of the kind specified in such section that the debtor acquires after the commencement of the case but before the case is closed, dismissed, or converted to a case under chapter 7, 11, or 12 of this title, whichever occurs first.

So does the language in Section 1306 expand the 180 day limitation provided in Section 541(a)(5)?  Courts have overwhelming said yes based upon the legislative history.  So property of the estate in a chapter 13 case is expanded to include property specified in section 541 but without any of the timing limitations.  In a chapter 13 case property of the estate includes property of the kind specified in Section 541 after the commencement of the chapter 13 case but before the chapter 13 case is closed, dismissed or converted to chapter 7, 11 or 12; whichever occurs first as provided above in Section 1306(a).

This issues boils down to statutory interpretation as well.  Section 541 is a general provision governing bankruptcy case while Section 1306 is a specific section dedicated to chapter 13 bankruptcy cases.  If the big umbrella of Section 541 already blocks the rain, the 180 day period, how does the Section 1306 umbrella even get rain that is already blocked and become relevant as to this issue?  I argue that Section 1306 incorporates the 180 day limitation.  So Section 1306 makes the limitation in Section 541 meaningless.  The 180 day limitation and other such limitations are to prevent bankruptcy filers from gaming the system or timing the bankruptcy filing to not include an asset such as inheritance.  If someone knows they have a sick family member and they will receive inheritance timing the bankruptcy is difficult or not possible given the 180 day limitation.  The 180 day limitation is to prevent abuse.  This goal of Section 541 is now rendered meaningless in chapter 13 cases?  

Paradox of The Coronavirus and Severe Economic Consequences

By Ryan C. Wood

So far the response to the Coronavirus is a paradox. Look it up. There is no question the reaction is hysteria. The evidence of this hysteria is the hoarding of toilet paper. That is hysteria. Look it up. It is impossible to know what has happened or what will happen regarding the Coronavirus at this point. What I do know is the response will absolutely cause severe financial hardship for those who can least afford it regardless of the severity of the Coronavirus. Seems like if you have just followed common sense about how not to get sick and if you have a normal immune system you will be just fine. But of course why take the risk. Our leaders are at the damned if you do damned if you don’t and being proactive is about all that can be done now. Bankruptcy attorneys like me will sadly see a spike in bankruptcy filings as a result. I really doubt the proposed government relief will actually prevent an increase in bankruptcy filings as a result of the Coronavirus response. I hope is helpful, but history says otherwise.

Is This Response Worth the Severe Economic Consequences?

The point is there are far more deadly and statistically more deadly issues facing all of us each day that existed yesterday, today and will continue to exist tomorrow. I am trying to shed light on the big picture and ask if the severe economic consequences of what is taking place are on balance with the clear economic consequences. The response is arguably unprecedented in recent times but is the Coronavirus really unprecedented?

I will continue to provide updates regarding what I am experiencing as a professional on the frontline of relief for people caught up in the real economic consequences of what takes place in the world.

Reactions Seems To Be Disingenuous Given The Leading Causes of Death

What about the leading causes of death? For example many of the current restrictions are aimed to safeguard the health and well-being of all. At the same time there are countless other perfectly fine things that are very much not to safeguard the health and well-being of all. So the following may seem a little much. Is it not true though?

Heart Disease, the leading cause of death in the United States, kills 636,000 people each year or 53,000 a month or 1,767 people a day. If you add in the second and third leading causes of death in the United States we are talking about approximately 1,428,000 deaths per year or 119,000 deaths per month or 3,967 deaths per day.

Here is what I know. The leading cause of death in the United States is heart disease. Will society no longer serve deadly food and beverages? Are you really committed to safeguard the health and well-being of all? Will there be a ban on all artery clogging foods served at countless arenas THAT HAVE FOR YEARS AND YEARS contributed to the 53,000 deaths per month of United States citizens? That is 1,709 death each day due to heart disease. Or are you going to disingenuously talk about the public health while continuing to contribute and profit from serving food that contributes to the leading cause of death in the United States?

Wow, the Federal Reserve slashed its benchmark interest rate to near zero on today and said it would buy $700 billion in treasury and mortgage-backed securities in an aggressive bid to prevent market disruptions from aggravating what is likely to be a severe slowdown from the coronavirus pandemic. What about the quiet pandemics that have existed already that kill far more people each day?The point is are all of these private and public entities being disingenuous given the leading causes of death? It sure seems so. There is an entire isle at the grocery store dedicated to CHIPS and SODA. Things that make you go hmmmmmmm. There are at least 6 different burger joints, with drive-throughs, in almost each and every city in the United States. Hmmmmmm.

Are establishments that serve alcohol going to breathalyzer each person before they leave to ensure no one drives a little drunk? Or are you going to disingenuously talk about the public health while continuing to contribute and profit from the leading cause of death in the United States? Statistically over the years how many people have been killed as a result of drunk driving after leaving a restaurant or arena?

Are various arenas going to remove hotdogs, nachos and burgers and all other artery clogging foods from the menu at all arenas to help combat the number one cause of death in the United States, heart disease? Or are you going to disingenuously talk about the public health while continuing to contribute and profit from the leading cause of death in the United States?

If The Leading Causes of Death in the United States Are Heart Disease and Cancer Why Are There Not Free Tests and Better Healthcare

Heart disease and cancer kill about 100,000 Americans each month. Cancer has devastated my personal family yet I could not even get my healthcare provider to conduct any type of test or scan to see if I had any cancer or cancer markers or cancer period given I had no symptoms. I have healthcare and was refused preventative precautionary tests. Crazy. Legislation will be passed for free Coronavirus tests though? Billions of dollars will be spent to combat the economic consequences of a hysterical response to a virus that is actually not new and not as deadly and what we face each day? All this will take place without any substantive change regarding the actually leading causes of death in the United States? Are you okay with this?

Are you okay with severe economic consequences and the no doubt increase in bankruptcy filings as a result? These opinions and commentary hopefully will make you think about what is taking place and are those of Ryan C. Wood. Please take every precaution to ensure your continued health and that of the public.

Hype and Hysteria About The Coronavirus Has Already Caused Bankruptcy Filings

By Ryan C. Wood

The following provides real facts and commentary about how people die each year. I do not want anyone to get sick and die from the Coronavirus though. I do have empathy and do not support the spread the Coronavirus. Please keep reading about the leading causes of death in the United States and worldwide that existed yesterday, today and will exist tomorrow.

Update Number 9 – April 29, 2020

Facts: 320,000 people die each year worldwide from accidental drowning. Total worldwide deaths from Coronavirus as of this writing 218,000. Hospitals get paid more to treat people if they allegedly have the coronavirus. 2,195 children die each day from diarrhea.

Update Number 8 – March 29, 2020 – Preface

Can you hear that? Mother Earth breathed a huge sigh of relief. Mother Earth said to herself: “They are finally taking a break from hurting me. I can recharge and cleanse some of the hundreds of years of damage humankind has inflicted upon me.” In 2020 the world took a pause from normal activity due to the Coronavirus and humankind saw the benefits of truly cleansing their world of their own damaging activity. The world as a result was more clean for benefit of the environment and health of all life on Earth. Surfaces that were supposed to be clean were actually continually cleaned properly. Humans had a greater respect for their shared space. Year 2020 marked a turning point in global total health for the benefit of all living beings.

—————————————————————————————————————————————–

It is unbelievable how social media and the media in general can influence the world today. Please keep reading for statistics about the leading causes of death and what you should be worried about once the coronavirus passes. But yes, of course the Coronavirus is not good.  At the same time there are concerning real threats to our lives we all should be concerned about just as much if not more.  How is there not a cure for cancer yet?  The flu is not good. According to the CDC 80,000 people in the United States died from the flu last year alone.  Vehicle deaths per day are not good.  Pneumonia is not good.  Heart attacks are not good.  Gun violence in the United States is atrocious.  The fact is the Coronavirus is just new and no worse or scary than what we all face each and every day of our life already.  So why are people changing their normal behavior because of the dreaded Coronavirus? Fear sells and it sells like nothing else. How will the fear now created be used?

I am all for warning about health issues. I have read and heard nothing that provides any of us should be worried. There seems to be an explanation for everything even though the mortality rate being reported is 1% or 2%. If new factual information comes out I will modify this article to say how wrong I was to even question any of this and all of the hype was well-founded. I am confident heart disease, cancer, gun violence and vehicle deaths will be far more likely to continue to be real concerns that need our undivided attention once this passes.

Center for Disease Control: “Both MERS-CoV and SARS-CoV have been known to cause severe illness in people. The complete clinical picture with regard to COVID-19 is not fully understood. Reported illnesses have ranged from mild to severe, including illness resulting in death. While information so far suggests that most COVID-19 illness is mild, out of China suggests serious illness occurs in 16% of cases. Older people and people with certain underlying health conditions like heart disease, lung disease and diabetes, for example, seem to be at greater risk of serious illness.”

OMG, you should always regularly wash your hands.  OMG, people should always just cover their mouth when coughing or sneezing. OMG, yeah give people some personal space when standing in line or in a crowd. OMG, if you have a healthy immune system you should be just fine.  OMG, stop wearing a face mask, hoarding hand sanitizer and toilet paper? OMG, if you are sick do not go to work and infect others. HAVE WE LOST ALL COMMON SENSE? NONE OF THIS IS FUNNY.  IT IS HAVING EXTREMELY HARMFUL CONSEQUENCES ON REAL PEOPLE AND THEIR LIVES. Wil all of the deaths that result from the economic fallout be reported? There will be thousands worldwide. These types of deaths are just lumped together in categories such as stroke, suicide or heart attacks. The underlying cause and contributing factor is economic stress though.

Hype, Hysteria and Information Have Already Caused Bankruptcy Filings

Unfortunately people are changing their daily behavior due to information about the Coronavirus whether accurate or not.  I have bankruptcy clients due to an entire company shutting down due to market changes caused by the Coronavirus hysteria.  The entire staff is being laid off at no fault of their own.  As a bankruptcy attorney I know all too well how circumstances that are not in control of my clients determine outcome good or bad.  It is sad that hysteria and misinformation over a not so deadly virus is and will continue to cause financial hardship outside the control of those who will feel the consequences.  I do not know the specifics about this company but the fact is hype and hysteria regarding the Coronavirus is the direct cause of the business no longer being viable.

What about the leading causes of death?  

How sad given the American Cancer Society reports 50,543 people on average die each month in the United States alone from Cancer.

How sad given the Center for Disease Control reports 5,083 people on average die each month in the United States alone from influenza. 

How sad given the Center for Disease Control estimates 4,167 people die each month in the United States alone from pneumonia.

How sad given the Center for Disease Control estimates 53,917 people die each month in the United States alone from heart disease.

How sad given the Highway Traffic Safety Administration estimates 3,054 people die each month in the United States alone in vehicle accidents.

How sad given the Center for Disease Control estimates 3,000 people die each month in the United States alone due to firearms.

How sad given according to the World Health Organization reports the top ten causes of death for the entire world are:

  1. Ischemic heart disease
  2. Stroke
  3. Lower respiratory infections
  4. Chronic obstructive pulmonary disease
  5. Diarrhoeal diseases; 2,195 children alone die each day, CDC provides that is 32 school buses of children dying each day from diarrhea ……… think about that
  6. Tuberculosis
  7. HIV/Aids
  8. Preterm birth complications
  9. Trachea, bronchus, lung cancers
  10. Road Injury

How sad given according to the Center for Disease Control reports the top ten causes of death for the United States are:

  1. Heart disease: 647,457 a year or 53,955 a month
    1. I read a cruise ship cannot enter a San Francisco port until all of the passengers are tested for the Coronavirus yet the food being served on the ship is far more harmful to society; hello heart disease
    1. Should you be more concerned about a burger joint every four blocks?
    1. Should you be more concerned about your lack of exercise ?
  2. Cancer: 599,108 or 49,926 a month
  3. Accidents (unintentional injuries): 169,936 or 14,161 a month
    • Happenstance of life is how many times more likely to kill you then the Coronavirus?  Wrong place wrong time is more likely to kill you.
  4. Chronic lower respiratory diseases: 160,201 or 13,351 a month
  5. Stroke (cerebrovascular diseases): 146,383 or 12,198 a month
  6. Alzheimer’s disease: 121,404 or 10,117 a month
  7. Diabetes: 83,564 or 6,694 a month
    • You should be more concerned about your consumption of soda
  8. Influenza and pneumonia: 55,672 or 4,639 a month
  9. Nephritis, nephrotic syndrome, and nephrosis: 50,633 a year
  10. Intentional self-harm (suicide): 47,173 a year
    • You should be more concerned about mental health and life in general for society and your fellow human

I just read that San Mateo County, where I live, declared an emergency regarding the Coronavirus.  Why do we not have an emergency declaration regarding the leading causes of death that are known? It seems disingenuous.

The Media and Social Media is Out of Control    

At this point I do not believe there is any going back.  The number of influencers and followers of other humans is here to stay.  When it comes to health and something like the Coronavirus the firestorm created by the media is not helpful and full of misinformation. You can form your own opinion of course.   

Rachel Clamp, PhD Candidate in History, Durham University, reports the Coronavirus has killed total globally about 3,000 people.  https://www.yahoo.com/news/coronavirus-black-death-spread-misinformation-143713853.html h

I highly recommend you read this excellent article about historical plagues and public reaction.  The world today seems to never be able to learn from history.  Nothing is new and if we cannot learn from history we are doomed to repeat horrible wrongs.  Horrible discrimination is taking place.    

Tangent: Hype About Bankruptcy Is Wrong Too

I repeatedly communicate that the Bankruptcy Code is the law.  Do not hate the player but hate the game.  Stop believing the hype and hysteria regarding bankruptcy. it is like suffering an illness and not choosing the a cure that exists. You can suffer for years treating the illness or cure your debt problems.  There is way too much hype regarding bankruptcy. If you do not like people filing for bankruptcy protection to seek relief from their creditors the law provides please vote for different politicians and advocate for a change in our laws.  Do not condemn bankruptcy lawyers or bankruptcy filers for merely following the law to obtain a legal discharge of debts.  Can we not all agree that life is short, nothing is perfect and generally we all are doing the best we can and circumstances outside of our control are far more powerful than any single humans’ choices?  A lifetime of hard work and dedication can be wiped out in a blink of an eye?  Hype and unfound hysteria about a virus can lead to behavioral changes that wipe out entire companies overnight?  We all need second chances given we are all imperfect beings.  Whether you file for bankruptcy protection or fail at something you must keep swinging the bat to try and hit a homerun.  Luckily we have laws that allow an orderly and legal method to clean up the mess so the game can continue.

Update Number 1 – March 11, 2020

I have received additional calls from people seeking bankruptcy due to the fallout over the Coronavirus. I file bankruptcy and earn a living doing so but I truly do not like the reality I will get more business as this saga continues. Also today the NBA announced the suspension of the NBA season until further notice. The Coronavirus is not an unprecedented virus but the suspension of the NBA season is unprecedented. This response is unprecedented. Those who work in sport arenas will not be able to pay their bills. They are not rich and are living paycheck to paycheck. Will government aid reach them or bankruptcy attorneys like me be the solution to their bad luck? I wish the world would take gun violence this serious. I wish people would drive safer each day. Why do people drive like maniacs right after getting through a traffic jam caused by a car accident? Will people exercise more and take their health more serious now?

Update Number 2 – March 15, 2020

So at this point there is no going back. Misinformation about elections/politics, health risks and what is going on in the world generally is here to stay. Regardless of the reality of risk the Coronavirus actually posed or poises the response will be the reality of whatever comes next. Deaths from Coronavirus will not be substantial and all the talking heads will cite the response as the reason and we will never actually know what the true risk poised. Do not mistake my tone for lack of empathy or wanting anyone to get sick. I do not. I have to wonder if everyone realizes that the Coronavirus is not going to go away? Are you always going to live in fear from this one way to get sick even though statistically just driving around and living life kills about 11,000 people each month in the United States alone? Wrong place wrong time; 11,000 people a month in the United States. Please research the leading causes of death in the United States versus the entire World. Diarrhea is the 5th leading cause of death worldwide killing approximately 2,195 children each DAY alone. By comparison even if the Coronavirus killed 500 people a day worldwide that would be nothing compared to what humans face everyday to stay alive.

The Federal government is passing legislation to deal with the Coronavirus hype and hysteria. Will that economic relief reach my potential clients and prevent increased bankruptcy filings? What about the top three leading causes of death in the United States: Hearth Disease, Cancer and then Accidental Deaths? Kind of seems like gun deaths in the United States is an emergency as compared to other developed countries in the world.

Update Number 3 – March 16, 2020

So the stock market dropped the most since 1987 today. Let us speculate that there are 5,000 worldwide deaths because by the coronavirus so far or 10 days worth of accidental deaths in the United States alone. Or about two and a half days of heart disease deaths in the United States alone. This is very serious. The Coronavirus. The response and the consequences of the response.

I just heard from the world media (this is a parody/joke) that all sporting event centers will no longer serve artery clogging food given they care about the public health and welfare in an effort to help combat the leading cause of death in the United States; heart disease.

I just heard from the world media (this is a parody/joke) that we will all share the world’s fresh water equally so every person on Earth has fresh water to drink from the moment they are born into this world because the world cares about public health and welfare. It is called “No Human Left Behind.” It will help prevent 2,195 daily child deaths due to diarrhea.

Update Number 4 – March 16, 2020

So this is as far from funny as it can get. In the Bay Area we now have a shelter in place order issued for the six county region that makes up the Bay Area. So does that mean that creditors will stop garnishing my clients wages given my clients have seemingly been told to not come to my office to obtain legal relief from their debts? Uh no!!!

Update Number 5 – March 17, 2020

Hopefully the shelter in place REQUEST will save the lives of the 90 people that die in car accidents each day in the United States. That is about 2,700 people each month. You are more likely to die because of the trash driving so close to you that you cannot see their license plate in your rearview mirror. You know, that person that is in such a hurry to get to the next red light so fast. So after the hype and hysteria passes are you going to drive more safe and help prevent the 2,700 deaths EACH MONTH from car accidents? Are you not going eat artery clogging foods and soda that cause heart disease and diabetes? Are will you have learned nothing from this experience?

Update Number 6 – March 22, 2020

Cannot play basketball at my local park given boards have been bolted to the tops of the basketball rims. Can I not shoot baskets by myself and get exercise?

Can let my dog poop on someone’s lawn, pick up poop, but their kids will get the residue poop on them when they go out and play in their yard next.

Can go to 7-Eleven and buy each and every item that leads to the 1st and 2nd leading causes of death in the United States. Cannot sit down in a restaurant and eat. Can hoard clean water while 2,195 children die each day from diarrhea worldwide.

Can still be one of the 1,314 murders that take place in the United States each month. Total worldwide coronavirus deaths 14,200 or 6.5 days of children diarrhea deaths. How can we share fresh water when toilet paper gets hoarded?

Please research the big picture. Who will get the $3 trillion of economic aid even though the GDP will be less in the United States and the United States is already running a budget deficit? National debt as the writing of this is $23.6 trillion or 108.8 % of GDP. What is the world GDP? $80 trillion or so. United States total population 323 million people. Those that pay taxes 123 million people.

See https://www.usdebtclock.org/

Update Number 7 – March 23, 2020

Can get killed from speeding tailgating drivers with no regard for human life contributing to the 90 people that die in car accidents each day in the United States. Seems the coronavirus scare has not helped people drive safely. Why social distance or take precautions only to drive like a manioc? That is 32,850 people per year die in car accidents in the United States.

Can run over family of eight killing mom for not social distancing contributing to thousands of pedestrians killed each year in the United States. This happened in New York. 17 pedestrians plus cyclists die each day in the United States or 6,205 a year.

I Was Never Served With The Lawsuit


By Ryan C. Wood

Yeah, I know you were not.  That does not mean a judgment, that is, a default judgment was not entered against you accruing judgment interest at 10% per annum (California Law).  You were sued and the process service company committed a fraud when serving you.  They lied about who they served and even possibly when you were allegedly served.   The process service company then sent a proof of service to the attorney that filed the lawsuit against saying you were somehow personally served with the summons and complaint.  The attorney that filed the lawsuit says great and files the proof of service with the court.  You never knew about the lawsuit so time to answer the complaint expired and the plaintiff requested and received a default judgment against your for $11,000.  The original issue was a credit account you stopped paying two or three years ago; breach of contract.  Your bank accounts can be levied on.  Your wages can be garnished.  A judgment lien can be recorded against your home or other real property if you own any.  Not good.

The lawsuit filer does have information about you that may or may not still be accurate.  You filled out an application for the credit card or some other type of credit account.  You also made payments on the debt and your checks provide additional information.  Your address, phone number and bank account information.

You are now finding out about the lawsuit because your employer received a wage garnishment notice or your bank account was levied on.  I know, this is the first you are hearing of this lawsuit.  The lawsuit was probably filed over five years ago and has now grown in amount substantially given the 10% judgment interest and addition of attorneys’ fees and expenses.  So what happened?

Top Five Indicators The Lawsuit Was Served Illegally

1.         The Debt or Judgment Is Being Enforced By a Third-Party

These are in no particular order, but the judgment will probably be held or enforced by a third-party collection agency or debt buying company and not the original creditor you did business with.  I have never dealt with this issue when JP Morgan Chase, N.A. or Wells Fargo, N.A. is the named plaintiff and sued someone for breach of contract for nonpayment on a credit card.  It is always some company you will never have heard of that bought the original debt or was assigned the right to enforce the debt.    

Why is this?  It is called capitalism.  The third-party collection agency purchased the original claim against you for less than the amount originally owed.  It is in their financial interest to make the amount owed as large as possible period.  If you try and settle with them they can ask for more money and they make more money.  If they garnish your wages they can get more money. 

It is like anything with high risk.  They have to balance out all of the claims they purchase that they get nothing on with the ones they do get paid on.   

2.         The Default Judgment Is Being Enforced 5 Years Or More After It Was Entered

Overwhelmingly the default judgment is being enforced as long as possible from the entry of the illegal default judgment.  There are two reasons for this.  The main reason is to make your ability to prove the service of the summons and complaint was illegal.  Obtaining records and other proof of your whereabouts from 7 years ago can be challenging.  If you were working at the time the proof of service says you were served at your home do you still have the pay statement evidencing this?  If you are no longer at that job will your former employer help and provide you pay statements from 7 years ago?  If you were living at an address that is different than the address listed on the proof of service do you have your rental agreement from 7 years ago?  It can be very challenging to obtain evidence of your circumstances from 7 years ago.  So they wait.  The default judgment is good for 10 years and then can be renewed.

The other reason is the judgment interest keeps accruing.  If the default judgment was only $3,500 the judgment interest here in California accrues at 10% per annum.  In 7 years that $3,500 default judgment is now includes $2,450.96 in interest for a total of $5,950.96.  Why enforce the default judgment and only receive $3,500 when we can just wait, let the interest accrue and make your ability to prove the service of the lawsuit was not proper more difficult.  

3.         The Proof of Services Says You Were Served By Substitute Service

So what is substitute service?  It is another form of personal service.  It means someone else was served with the summons and complaint other than you.  In California there are a number of requirements to substitute serve someone, but the general requirements are three or more failed attempts at serving you at your dwelling house or usual place of abode.  Then someone you live with over the age of 18 can be served instead.  The process server will give the summons and complaint to your roommate, spouse or some other person over the age of 18 that also lives in you dwelling house or usually place of abode.  Then the summons and complaint must be mailed to you at that service address as well.  A declaration of due diligence is filed with the court describing all of the attempts at service and a description of who was served on your behalf.

You can be served at your place of employment if the summons and complaint are left with your boss or someone in charge.  There are issues with personal service by substitute service at your place of employment though given the nature of it.  You can even be served personally but publication believe it or not. 

Time and time again there is a description of a human being you have no idea who that person is.  If your name is Maria Rodriguez they will insert a description of a Latino person male or female.  Yeah, I know you have no idea who that person is because they never substitute served them.  It is just a made up person.  The problem is height and age are difficult to know when just looking at someone, so there is some gray area. 

The thing is many times someone is living alone.  Or the substitute service was at an address you no longer lived.  There is absolutely no one to substitute serve.  Nonetheless there is a proof of service signed under penalty of perjury that says you were personally served and a default judgment was entered against you.

4.         The Lawsuit is a Collection Lawsuit For Breach of Contract  

I am talking about primarily collection lawsuits for various debts such as credit cards, medical debts or personal loans.  For whatever reason you stopped making payments therefore breaching the contract.  It is easy to hide a lawsuit for an unpaid debt.  It is not possible to hide a lawsuit between neighbors for building a fence on the others property or a lawsuit that is filed to actually fix a problem in real life.  The problem cannot be ignored for years and a party wants it resolved  and a lawsuit is filed to have the fence removed.  It is very easy to hide a lawsuit for an unpaid bill and have the lawsuit move forward without your knowledge. 

5.         You Find Out About The Lawsuit Due To Collection Efforts

Okay, so now 7 years have gone by and the third party collection company that can enforce the illegal default judgment comes to life.  Seven years of interest has accrued so they can maximize their profit.  You then get notice of wage garnishment from your employer’s payroll department.  Or you get a notice of levy on your bank accounts from your bank.  What is this?  It is the illegally obtained default judgment coming back to haunt you.  In California your wages can be garnished up to 25%.  It is usually crippling to most people.  Deduct 25% of your income and see if you can get by each month.  This is when bankruptcy attorneys usually get wind of this problem. 

So What To Do Now?

The first thing you need to do is investigate how the plaintiff or third-party plaintiff collector obtained the default judgment against you at all.  You will need to obtain the complaint and proof of service that were filed with the Court.  These documents in some jurisdictions were free online.  These days like many things that used to be free from the government there is a fee.  You may have to create an account and then pay around a $1.00 per page for the documents.  You need to know how and when the plaintiff and now judgment creditor alleges you were served with the summons and complaint.  First was the debt your debt?  Do you remember incurring the debt and then not paying it?  Next review the proof of service for the date, time, location and description of the person that was allegedly served.  If there are any inaccuracies or impossible circumstances listed you may or may not want to seek advice of counsel about seeking recourse.     

Getting Rid of the Default Judgment

So this is not so simple and it is not free.  If the service was illegal the process server or plaintiff should have to pay for getting rid of the default judgment.  Nothing is ever that simple though.  The first thing you must consider is what is the recourse if you are successful in getting the default judgment vacated?  Can the plaintiff just turn around and then immediately serve you properly and proceed to collect on the judgment?  If so what good is spending the time and money to get rid of the illegal default judgment?  If you get rid of the default judgment do you have funds to try and settle the debt or make payments so the plaintiff will not continue to seek a judgment against you again?  Can the case be dismissed entirely with prejudice with prejudice so you never have to worry about it again?  There are many issues to discuss as to what to do about an illegally obtained default judgment.  Everything takes time and money and there is no guarantee the Court will vacate the default judgment or make the other party pay for the time and expense to make it right.

Bankruptcy Could Be The Answer

Sadly filing for bankruptcy and obtaining a discharge could be the cheapest, quickest and easiest way to stop the wage garnishment or bank levy.  Filing bankruptcy fast enough can even get back garnished earnings or levied funds.  Please contact a bankruptcy attorney in your jurisdiction for more information about whether you qualify to seek relief from your debts via bankruptcy.  Bankruptcy will make it all go away forever by federal court order; an order of discharge.  You have to file for bankruptcy to get it though………….

Another Victim of the Title Presumption vs. Community Property Presumption

By Ryan C. Wood

While we wait for the California Supreme Court to weigh in on the legal effect of a married couple purchasing real property during marriage but taking title to the property as joint tenants sad cases continue to pile up.  Under California law two parties, whether married or not, may take title to real property as joint tenants.  The main feature or benefit of taking title as a joint tenant is the right of survivorship that comes along with it.  This is particularly beneficial to married couples as it allows them to avoid going through probate upon the death of a spouse.  The real property just passes to the surviving spouse.  California law also provides that when title is as joint tenants the one half interest in the property is the person’s separate property and not community property.  Here is where it gets crazy though.  The real property being separate property is only true under certain circumstances and not all circumstances?  In comes the community property presumption regarding property acquired during marriage.  So far various courts, not the Supreme Court of California, have held in the bankruptcy context the community property presumption wins, not how the actually legal recorded title is taken at the time of purchase.  The actual legal title is not sufficient evidence to show the married couples intent that the real property acquired during marriage be each spouses separate property. 

When married couples get divorced in community property states the community property is supposed to be divided 50/50 unless the spouses agree otherwise or there has been a transmutation of the property from being community property to the separate property of one of the spouses.  Simply put, transmutation laws cannot apply to a piece of real property acquired during marriage.  Spouses are not transferring anything when purchasing a house during marriage.  They are acquiring it and taking title as joint tenants evidencing their intent for the house to be separate property……..  Also, how is a piece of real property titled as joint tenants where each spouse owns a 50 percent interest not consistent with community property law and dividing the community property 50/50 upon divorce?  Seems like it is consistent so what is the problem?  Oh wait, this is only applicable in a divorce and not under other circumstances like filing bankruptcy?       

On November 8, 2018, the Ninth Circuit Court of Appeals entered an order certifying question to the Supreme Court of California as follows:

“Does the form of title presumption set forth in section 662 of the California Evidence Code overcome the community property presumption set forth in section 760 of the California Family Code in Chapter 7 bankruptcy cases where: (1) the debtor husband and non-debtor wife acquire property from a third party as joint tenants; (2) the deed to that property conveys the property at issue to the debtor husband and non-debtor wife as joint tenants; and (3) the interests of the debtor and non-debtor spouse are aligned against the trustee of the bankruptcy estate?”

In the meantime cases are still being decided that provide the community property presumption is what matters and not the clear and convincing evidence of a recorded title as joint tenants giving each spouse a separate property interest in the purchased home.  In a prior blog article I provide all the different cases regarding this issue.  I have listed them again at the end of this article.  A recent Ninth Circuit Bankruptcy Appellate Panel cases provides some additional feedback on this issue a couple interesting twists.  Unfortunately the same result was found; the legal taking of title as joint tenants was trumped by the community property presumption.

Why Do Bankruptcy Attorneys Care So Much About This Issue?

Each spouse has the right to file for bankruptcy protection even if married.  When one spouse files all community property and the separate property of the filing spouse is part of the bankruptcy estate.  The separate property of the non-filing spouse is not part of the assets that must be listed.  If a house of a married couple has equity of $200,000 and the title is held as joint tenants we should only have to list the filing spouse’s portion or $100,000.  Ignoring the title of the house as joint tenants and calling the house community property requires us to schedule the equity in the house as the entire $200,000 interest even though taking title as joint tenants is supposed to provide each spouse has a separate property interest.  As of right now a married couple is only entitled to a homestead exemption to protect equity in a primary residence of $100,000 pursuant to California law.  So an interpretation of the law that says the community property presumption wins instead of the title presumption creates a bankruptcy estate twice as large, not exemptable/protectable under the example above.  This creates a large obligation to creditors that would not exist if the title presumption was properly followed given title as joint tenants under California law provides the spouses interest is their separate property…

Recent Ninth Circuit Bankruptcy Appellate Panel Case

In an unpublished opinion by the Ninth Circuit Bankruptcy Panel a couple in Southern California seemingly did everything to provide the real property they acquired during marriage be held as joint tenants, separate property and not community property.  They even had a post-nuptial agreement providing additional language to strengthen their intent to have the real property be deemed separate property.  The problem is a bankruptcy case under chapter 7 of the Bankruptcy Code was filed and what a family law attorney or estate planning attorney would believe to be true simply is not the case in the context of filing bankruptcy.  There were also some cracks in the documents of this married couple and that is what makes this particular case interesting.

Facts of the Chapter 7 Bankruptcy Case Appealed

The lower bankruptcy court held regarding the character of real property owned by the debtor at the time the bankruptcy case was filed as; (1) the properties were presumed to be community property despite the fact that they were held by the couple as joint tenants, and (2) Non-filing spouse did not produce evidence sufficient to raise a genuine issue of material fact regarding the character of the ownership of the properties.  The Ninth Circuit Bankruptcy Appellate Panel affirmed the decision and agreed with the lower bankruptcy court.

The specific issues that are part of this current appeal involve a postnuptial agreement between the spouses and evidence of third party family members of the filing spouse providing down payments for the properties acquired during the marriage.  While I believe the taking and recording of title as joint tenants is clear and convincing evidence of a married couples’ intent to take the real property acquired during marriage as separate property that is not the current interpretation. 

In this chapter 7 case there were actually two different properties purchased during marriage that added complications.  The couple also entered into the postnuptial agreement after purchasing one property and not before purchasing both properties.  Unfortunately the postnuptial agreement did not include language addressing the purchase of the first property prior to the postnuptial agreement.  If the postnuptial agreement did say the purchase of the first property was to be held as separate property maybe things would have been different.  The postnuptial agreement provided the amounts paid by third party relatives would be part of the equation to determine the spouses interest in the purchased properties.  Again, there was no mention of the first purchased property though…..  The bankruptcy case was originally filed as a chapter 11 reorganization and later converted to a chapter 7 case.  This also is significant but I will not get into that other than the bankruptcy case becomes a liquidation of not exempt/protectable assets such as the two pieces of real property/houses.

Naturally the chapter 7 trustee assigned to the bankruptcy case properly sought to liquidate the bankruptcy estate and the question arose as to what is part of the bankruptcy estate.  The lower bankruptcy court held that the homes were part of the bankruptcy estate and the evidence presented did not overcome the presumption of the community property.  What is a new wrinkle from most cases like this was the postnuptial agreement.  The lower bankruptcy court held and the Ninth Circuit Bankruptcy Appellate Panel agreed that the postnuptial agreement did not apply given it was not recorded pursuant to California Family Code Section 852(b), transmutation law of assets acquired during marriage, and under California Civil Code Section 1217, that unrecorded instruments are only valid between the parties to the instrument and those have notice of it.  So the chapter 7 trustee was not bound by the postnuptial agreement and the spouses intent to hold property as separate property.  Again I argue this is a misapplication of California transmutation laws given these properties are acquired during marriage and the title is taken as joint tenants, separate property, and the recorded title is clear and convincing evidence of their intent.  This of course is not how the law is being interpreted.  So the recorded title as joint tenants does not provide notice of the spouses intent to third parties and the taking of title as joint tenants is not a valid transmutation……..

As a bankruptcy attorney I hope the Supreme Court of California comes to a different conclusion on this issue soon.  As of right now there is no such thing as taking title to property as joint tenants that creates a separate property interest in the property without creating additional documentation as to the spouses intent.  There are also not clear answers to exactly what the documentation should be for a court to hold the property title as joint tenants is separate property.  Whatever that documentation is should be notarized and recorded so that all third parties have notice of the spouses’ intent the hold the property as joint tenants and be entitled to separate property status under any and all circumstances; including filing for bankruptcy protection.    

Brace v. Speier (In re Brace), 566 B.R. 13 (9th Cir. BAP 2017)

Valli v. Valli (In re Marriage of Valli), 58 Cal. 4th 1396, 1400 (2014)

In re Obedian, 546 B.R. 409, 422 (Bankr. C.D. Cal. 2016)

Hanf v. Summers (In re Summers), 332 F.3d 1240, 1243 (9th Cir. 2003)