What About After a Chapter 7 or Chapter 13 Bankruptcy Discharge?

By Ryan C. Wood

Once your debts are discharged in your bankruptcy case and the case is closed you would think that it is all over and you can start fresh.  Well, that is in a perfect world and most of the time this is definitely true.  However, once in a while, your creditors believe they have never heard of the bankruptcy code, your order of discharge and try to collect from you even after receiving your fresh start.  So what do you do to protect yourself?

Under 11 U.S.C. §727, all your dischargeable unsecured debts that were incurred prior to the filing of your Chapter 7 bankruptcy case are discharged, therefore you are no longer personally liable for those debts.  Creditors are prohibited from collecting those debts from you after your order of discharge is signed and entered.  All collection activities are prohibited, including but not limited to, contacting you by phone, sending collection letters to you, suing you, or continuing a lawsuit against you.  You can always pay for the discharged debt if you wish to, but you are under no obligation to do so, and creditors cannot force you to do so.  If creditors have a valid lien against you, however, they can still enforce those liens if those liens were not avoided in your bankruptcy case.  Examples of valid liens are mortgage or vehicle liens.  Some of the debts that are not dischargeable, however, are debts such as alimony/child support, recent taxes owed, student loans, debts incurred fraudulently, and debts for personal injuries caused by the debtor when operating vehicles while intoxicated.  These debts would still need to be paid by the debtor after the Chapter 7 bankruptcy discharge.

Under 11 U.S.C. §1328, you will receive a discharge of all your dischargeable unsecured debts once you successfully complete your Chapter 13 bankruptcy plan.  Similar to a Chapter 7 bankruptcy, the discharge applies to all your unsecured debts that were incurred prior to filing your bankruptcy case.  Since creditors receive a percentage of your Chapter 13 plan payments, the only creditors you receive a discharge from are the ones scheduled in your Chapter 13 bankruptcy petition.  The creditors that you inadvertently failed to disclose did not receive notice of your bankruptcy case, and thus you may not receive a discharge from those undisclosed debts.

Once you receive a Chapter 7 or Chapter 13 bankruptcy discharge, if creditors continue their prohibited collection activity against you, you need to notify them that you have already received a discharge of the debt they are trying to collect on.  If they still continue to harass you or try to collect from you, it is time to contact your bankruptcy attorney to have them put a stop to these actions.  These creditors may be sanctioned by the court for violating the discharge order.

As bankruptcy attorneys know it can be challenging to obtain sanctions and have attorneys fee and costs paid for by the offending creditor.  Most bankruptcy judges believe there is some sort of duty to give creditors bites of the apple over and over again for violating the order of discharge.  Generally bankruptcy attorneys have to send letters, call or fax information to the creditor that they are violating the automatic stay and to stop immediately.  There is no such obligation under the law to do this.  Creditors rarely if never call or email me before filing an objection to confirmation of a chapter 13 plan or filing a motion for relief from stay adding in attorneys fees and costs for doing such things.  It is a troubling double standard that continues to persist.  The pendulum has swung too far towards big business rights instead individual human rights.  

If you are being pursued by an overzealous creditor that is still trying to collect on a discharged debt, and if you did not have a bankruptcy attorney, contact a Fremont bankruptcy attorney or Union City bankruptcy lawyers today at 877-9NEW-LIFE or 877-963-9543 to protect your rights.

CA Bankruptcy Lawyer

By Ryan C. Wood, Attorney at Law

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

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

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

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

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

Is it Important How Expenses are Calculated When Filing Bankruptcy?

By Ryan C. Wood

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

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

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

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

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

Principal Paydown Plan, What is It?

By Ryan C. Wood, Attorney at Law

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

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

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

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

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

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

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

By Ryan C. Wood, Attorney at Law

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

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

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

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

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

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