File Bankruptcy Without A Lawyer? New, Longer Forms Not Helpful

New Bankruptcy Forms are overwhelming.

New Bankruptcy Forms are overwhelming.

Here in the Central District of California, nearly 25% of all bankruptcy filings are made without a lawyer.  Things recently got a little bit easier for this crowd in our courts; allegedly.  This is an important issue with our courts as demonstrated by this open letter to our attorneys to volunteer to help these folks; Open Letter from Chief Judge Sheri Bluebond. I am happy to report that I intend and have already sent my E-mail to give some of my time this year, so look for me in Santa Ana, if you’re without a lawyer. Last month, in an effort to “help” the growing population of debtors filing bankruptcy without a lawyer, our Courts have decided that longer forms, with more self help is the answer.  Many consumer lawyers disagree that this will ease the burden on our courts.  Be sure to see the comments section of this article by Steve Rhodes (@getoutofdebtguy) over at the Huffington Post.

Here’s what’s new:  FORMS.  That’s right, we have new, “easier to read” forms, allegedly.  These new forms provide a substantial amount of self help because when an individual files bankruptcy without an attorney, they burden the court system by taking more time at hearings and in the courtroom in educating and assisting these individuals.  The additional support provided in these forms makes them longer and more laborious. I assert that with these new forms, I suspect that debtors without lawyers will now be held to a higher standard due to the additional information given. This means that trustees will continue to direct these debtors to consumer attorneys when their homes, cars and bank accounts are in jeopardy of being sold to pay creditors.  What about that vacation rental you forgot to list?  Did you forget to list all your debts?  Any changes to your bankruptcy schedules is not as simple as whiting out the prior form and resubmitting it, but rather a complex process with cover sheets, service forms, additional filing fees, and the knowledge of how to correct or what changes to make. Correcting mistakes yourself may end up costing more than hiring an attorney to help you from the start.  Yes we make it look easy, but that’s only because we do it professionally, know the rules and have relationships that you don’t.

Another great new tool is now available to Pro Se (meaning, without a lawyer) debtors:  eSR (Electronic Self Representation). This process is intended to help navigate through the forms more easily. Now, you can file your bankruptcy case online, without an attorney.  Keep in mind this path is for Chapter 7 bankruptcy ONLY.  The reason for this is that filing a Chapter 13 Bankruptcy case is strongly discouraged, due to the complexity and statistically, there is a nearly 100% fail rate for those debtors without a lawyer.  Here are just a few of the common problems in filing bankruptcy without a lawyer:  the failure to file required documents, resulting in dismissal; filing a chapter which may not be correct for the debtor’s circumstances; choosing incorrect property exemptions; unnecessarily filing bankruptcy in the first place; not filing the required credit counseling or financial management certificate; being unable to answer or adequately defend an action seeking to deny discharge; and not understanding the significance of certain motions or adversary actions. There are so many pitfalls that I have not listed here that would likely scare the pants off a scarecrow!

Lastly, we also have for you, Notice and Service by Electronic Transmission.  This means that you can elect to have bankruptcy notices sent to you via E-Mail.  A review of our Local Bankruptcy Rule 9036-1, a debtor requesting notice delivery by email vial the Debtor Electronic Bankruptcy Noticing (DeBN) program only consents to delivery of orders and notices delivered by the Bankruptcy Noticing Center.  All other parties, including trustees and attorneys, must continue to serve you via the U.S. Mail. If you are married, it may be wise to only sign one spouse for this service and keep the other spouse on regular mail service so you get the best of both worlds here and won’t miss any important information about our bankruptcy case.

Here are my pro tips for the “Do-it-yourself” folks:  You must complete the prefiling credit counseling course BEFORE you file your bankruptcy case.  For a list of court approved courses, click here. If you choose to go it alone, you’ll need to understand the processes and procedures, so watch those videos and read the rules of the court.  If you get into trouble at any time during your case, you can always consult with an attorney.  THE TRUSTEE MAY BE A LAWYER, BUT THEY ARE NOT YOUR LAWYER.  Do not ask the trustee for advice, they won’t and cannot give you any.

I recently received a call from a women who had been trying to stop a foreclosure sale and filed a Chapter 7 bankruptcy case without a lawyer. When the lender came in to her case, asking the court for relief from the automatic stay so they could continue the foreclosure sale, the woman lost on that motion and the Order included “in rem” language, which meant that any other bankruptcy proceeding would NOT apply to her property, IF the order is recorded in the county records.  Before the Order was recorded by the lender, she had her husband file a Chapter 13 case without an attorney.  He filed a skeleton petition, which gives him 14 days to complete the remainder of required schedules or his case would be dismissed.  After she had done all this herself, she called me for a consultation.  During our conversation, I discovered that she had failed to disclose assets of her husband in her bankruptcy case and that the house that they are trying to save has no equity.  I declined to offer representation in her Chapter 7 case because I know that if the trustee found out about the home that was not disclosed, that they would likely take and sell it to pay creditors. Still interested in going to court without a lawyer?

I’m just waiting for the day that Costco opens up a law school and gets into the business of legal forms, like Legal Zoom because I somehow fear that the movie, Idiocracy from 2006 will come true.  There, I just revealed my secret fear.  I feel better now. Try the new forms for yourself and get back to me on how your bankruptcy case went.  I would love to hear from you.  Lawyers across the country are standing by to assist you when things don’t go the way you thought they would.  Many consumer protection, debt relief, bankruptcy lawyers offer free consultations to their prospective clients.

2016 New Year’s Resolutions Infographic

Treat your New Year’s resolutions like goals and then take regular action steps each day to help you reach your goals this year. It’s important to write your goals down and then take some action toward those goals.  For instance, if you’re desire is to get out of debt, then you must write down how much debt you have and to whom that debt is owed.  Then, look at your household budget, which is your income and then your expenses.  Working within your budget, you’re looking for where you can cut expenses, so that you’ll have extra money to pay down debts.  If there is no money left over, then you should consider filing bankruptcy to end to pain and suffering of being in debt without a way out. A Chapter 7 Bankruptcy case will get you a fresh financial start within 4 to 6 months without any payment plan.

Maybe you’ve worked your budget, but can only squeeze $100.00 a month to pay down your debts and you know it’s not enough to pay off your debts within five (5) years.  There’s a second reason to consider a bankruptcy repayment plan under Chapter 13 of the Bankruptcy Code.

Whether you have no money or very little money in that budget, you can still get out of debt in less than five years by choosing your goal, talking with a professional that can help you get there and decide how quickly you want to get there.  I recommend getting out of debt quickly to save for what really matters in life.

Pros & Cons: Married Filing Separately

tumblr_mqt36aMAmv1qhub34o1_540If you are married and considering Chapter 7 or Chapter 13 bankruptcy, you have additional issues to think about. To start, you’ll have to decide which option works best for you: filing a joint bankruptcy or an individual bankruptcy petition. For most couples, joint bankruptcy will protect more of your property and discharge more debts. But not always. And if you are divorcing or already divorced, you should know how bankruptcy will affect things like child support and debts you both cosigned.  Here are my Pros and Cons of being married and filing an individual bankruptcy case.

Pros

  • The non-filing spouse gets their debts discharged like a “free ride” through bankruptcy, without having to participate.
  • The benefit to having only one spouse file bankruptcy is that the non-filing spouse remains eligible to file bankruptcy and can do so during the time her spouse is ineligible because you can only file bankruptcy once every eight (8) years.
  • The non-filing spouse gets rid of debt while maintaining a higher credit score and preserving at least one spouse’s credit score.

Cons

  • The creditors don’t seem to get it right and may go after the non-filing spouse to collect on debt that has been discharged in their spouse’s bankruptcy filing.  Never fear, here in the Central District, we have case law that supports the non-filing spouse.
  • If, and/or when the creditors mess up, then it takes a little effort to get them to stop and cooperate.
  • All of your spouse’s assets and their income are part of the bankrupt estate and must be listed on your bankruptcy papers.

It’s important to explore all of your options for getting out of debt as quickly and economically as possible to begin saving for the important things in life. While it is possible to file an individual bankruptcy case without your spouse, they may still feel the impact of a bankruptcy filing.  A free consultation with a bankruptcy attorney will help clarify your best strategy.

Photo source:  Jimmy Fallon (@jimmyfallon) of The Tonight Show

Options For 2nd Mortgages After Bankruptcy

Here’s a question posted recently over at AVVO.com.:

“We had a Chapter 7 bankruptcy discharged two(2) years ago. We have a second mortgage that we haven’t paid on in 2.5 years that has a $95,000 balance. We have not had any communication with the lender. Would like to know what our options are and the repercussions that are in the future.”

Here are some options when there is a second mortgage lien lingering after discharge. CAVEAT:  I am only licensed in California and have just learned that laws vary by state.  Please contact a local attorney in your area for more details and perhaps even more options.  Find a local lawyer here.

It’s important to know that a bankruptcy discharge eliminates your legal obligation to pay debts owed.  When it comes to mortgages, there are two parts:  the mortgage debt, and a lien against the property.  What this means is that the mortgage debt is discharged, but the lien will survive, unless it has been avoided (“stripped”), or otherwise ordered by the court to be removed.

  • Negotiate The Removal of the Lien:  After bankruptcy we no longer consider the balance owed as the negotiation point, but rather, the price to get the lender to strip the lien because the debt is no longer owed.  That’s why the borrowers in this scenario have gotten away with not paying this second mortgage for more than two years after a bankruptcy discharge.  I’ve seen as much as 90% discount on these loans, regardless of how much equity the home has. The goods news here is that all debts discharged in bankruptcy incur NO TAXES.  So, you won’t have to pay taxes on this cancelled debt AFTER BANKRUPTCY.
  • File a Chapter 13 to Fully Remove the Lien:  If the value of your home is equal to or less than what you owe on the First Mortgage, then you can qualify to Avoid the Junior Lien (also known as a “Lien Strip”) in a Chapter 13 bankruptcy case.  You’ll treat the junior mortgage like any other unsecured creditor and make payments over five (5) years.  Once complete, the lien will be removed; whether you get a discharge or not.
  • Do Nothing and the Lien Will Be Paid Upon Sale of the Home:  The mortgage debt obligation may be gone, but the lien can sit there indefinitely until you either sell or refinance the house. So, if there is no money to negotiate and pay to have the lien remove, just leave it alone.  Call an attorney immediately, if you receive any legal notices regarding this mortgage, or, if the lender tries to foreclose.
  • Refinance:  Why would you pay full price to refinance a loan you’re not obligated to pay after discharge?  The answer lies in whether there are funds available to negotiate.  Can you tell I’m a big fan of negotiation?

I believe that making a well informed decision requires the gathering of all the facts and consulting with professionals to get the best possible outcome as economically possible.  In other words, I prefer the cheaper, better, faster way to get to a goal, but that usually comes after I have explored all options and potential outcomes.

Strip Your Lien Upon Completion of Chapter 13 Plan Payments

Observing an “emerging consensus in this Circuit” that lien stripping can be accomplished through Chapter 13 Plan Completion, the court in Litton Loan Servicing, et al v. Robert Blendheim, et. al, In re Blendheim, Nos. 13-35354, 13-35412, U.S. Court of Appeals For the Ninth Circuit, 2015. You can watch oral arguments here. So, what do you get when you already have a Chapter 7 Bankruptcy Discharge and subsequently file a Chapter 13 Bankruptcy Case to avoid a mortgage lien?  You get a Chapter 20 case that, upon completion you don’t get a discharge, but rather, a permanent mortgage lien strip!  Strip away those unwanted mortgage liens; now available in Chapter 20!

For those new to the bankruptcy community, you will not find the term, “Chapter 20” in the Bankruptcy Code, but rather, it is only spoken of in the hallways of our courtrooms and near law firm water coolers.  It’s called a “chapter 20” bankruptcy case if, a consumer files a Chapter 7 bankruptcy case, followed by a Chapter 13 case.  See, 13 plus 7 equals 20; simple. Consumer attorneys now have another powerful tool to assist their clients in opening the door to freedom from debt.

I think the entire decision is worth a read to all our practitioners.  You can read the entire decision here. As a consumer advocate, it’s a great day to help clients get that fresh start they deserve.  Now, avoiding liens can be accomplished by discharging all debts under Chapter 7, then file a chapter 13 case to strip those unwanted liens.  Complete the plan and the lien is void!

Retirement Planning Through Bankruptcy

My husband is at it again; writing blog articles for me that is. Here are his thoughts on retirement planning and bankrutpcy:

It surprises me that many people are not as concerned as retirement as I am. I guess my “normal” is just not quite aligned with other people’s “normal”.  I recently heard of a friend of a friend, who took out a fairly large sum of money out of their 401k to by a new sports car that they just had to have. I’m a car fanatic myself, but I’d never bring myself to do such a thing. Later, I heard they took more money out for a motor home, all in keeping up with their neighbors.

The problem they will face is the ability to keep up with their neighbors when they attempt to retire later. They would either continue working until their death or retire with such meager funds that would make working at a job more fun than retirement. Besides the 15% penalty on the sum withdrawn from the 401k, it’s just doesn’t make good family financial sense. Who is ready to withdraw $100k, and give away $15k, only netting less than $85k of your own money (take out another $22k in income taxes)?

I’ve heard a few similar stories from other people, and it amazes me that this sort of financial failure happens. It makes me wonder if the people are not well informed, or they just don’t have the fore thought to see the possibilities of their future.

I think that life happens when we’re trying to plan for retirement.  That big fat nest egg begins to look pretty tempting when the balance grows.  I never advise clients to tap a retirement account to get out of debt because that money is 100% protected from creditors taking it.  So, if you’re tempted to tap your retirement account to get out of debt, consider bankruptcy as an option.

Get out of debt and retire!

Just Got Sued? Do This First . . .

If you’ve just gotten served court papers, indicating that a debt collector has sued you, you must act quickly to develop the best strategy in defending this law suit. You only have 3o days to respond to this lawsuit, so time is of the essence. Making the right decision as to your options must be explored immediately.

FIRST

You’ll need to decide whether to fight the law suit or not.  If you choose to fight the law suit, you’ll need to consult with a lawyer to determine whether you have any legal arguments that would support the fight.  Here are some strong legal defenses:

  • Statute of Limitations
  • Identity Theft (The Debt is Not Mine)
  • Already paid in full
  • Make them prove they have the right to collect on the debt

SECOND

Consider other options besides defending the law suit; like, bankruptcy or negotiating a settlement of the  law suit and getting on an affordable payment plan. If you have more debts in addition to the collections law suit, then a bankruptcy case may actually make the debt elimination process more cost effective by eliminating all your debts, while stopping the law suit too.

FINALLY

After you’ve carefully weighed your options, then you’ll need to take action immediately to hire the right attorney to help you with the strategy that is right for you.  It’s important to avoid a judgment because then the creditor has the power to collect on it by garnishing wages, levy bank accounts and lien real property.

Student Loan Debt Crisis; Fix Undue Hardship

In a recent Los Angeles Times article, entitled Degree of Debt, soaring student loan debt burden poses risk to economic growth.  The article states that student loans can’t be discharged in bankruptcy, which is simply untrue. My firm alone, has discharged two student loans to date and many colleagues across the country are now taking up these issues.  Check out these success stories here and here.

However, in order to discharge student loans in bankruptcy, the borrower must prove they have an Undue Hardship. The Undue Hardship standard requires not only filing bankruptcy, but also filing a law suit, known as an adversary proceeding, against the creditor and proving your case.  The standard is by a preponderance of the evidence, or a totality of the circumstances, depending where you live and I think it needs fixing.

I think that private student loans should be permitted in a standard bankruptcy discharge, which takes us back before the Bankruptcy Code changes in 2005.  I know that federal student loans provide many repayment alternatives, including a total and permanent disability discharge, so for these loans to be discharged in bankruptcy, there should remain a standard.  However, debtors should not

A Bankruptcy Expedites Financial Success

I’m so tired of hearing that “bankruptcy is failure.”  It’s simply not true, and yes, I am biased.  However, I have seen bankruptcy success stories, like Dave Ramsey, Walt Disney, J.C. Penny, darn near every football player ever, and more are listed in this article. If bankruptcy works for successful business folks, then why are you still sitting there believing that you should do everything you can to avoid it?

Bankruptcy can lay the foundation for future financial success, according to my friend and Milwakee bankruptcy lawyer Jamie Miller.  I too, have seen success stories in my practice that range from changing habits to changing lives.  Here’s what bankruptcy really does; it gets the debt out of the way so you can immediately move on with your financial life and save for what’s really important, like a home, car and RETIREMENT.  I’m actually quite nervous about how little Americans save for retirement and I suspect you’re all struggling to repay your debts and losing time and compound interest.

Time is a precious commodity.  Spending too much time eliminating debt, takes time away from building a nest egg for your future.  Bankruptcy is success, not failure.

A Simple Formula For Kick-Ass Car Buying

The next time you’re looking for a new or newer car, remember to consider the landed costs, which include the taxes, annual registration, maintenance costs, insurance, gas consumption costs, and the like.  For more information on landed costs, check out this recent article. But wait, there’s more.  I’m now even more fired up about car buying from a recent article entitled, “No, You Don’t Have To Be A Millionaire And Pay Cash To Buy A New Car.” You can read the full article, here.

The article, written by a Tom McParland (@TomMcParland), makes a good point about news cars and their depreciation.  He even points out several vehicles that are pretty good at holding their value over time.  This makes his article a good read.  However, I think he completely missed the point when discussing Dave Ramsey’s (@Daveramsey) recent advice to a 61 year old millionaire. Check out this article, here.

Dave rightly points out that leasing is more expensive and I agree. I disagree that Dave gave the woman “permission” to pay cash for a car when she’s a millionaire.  Remember that people call him for advice, not the other way around.  Apparently, she was a follower of his program and wanted to know whether she should pay cash, lease, or finance a new car.  I see nothing wrong with people seeking input before making major financial decisions because I’m a bankruptcy lawyer and a firm believer in exploring options and gathering the facts BEFORE making any major financial decision.

Now, since I’m an equal opportunity offender, I will point out the fact that Dave Ramsey filed for personal bankruptcy before he became the nation’s “guru” for financial advice.  I know he also advises his listeners to buy used cars, but then he himself buys a new Corvette and gets to pick it up directly from the factory, but then again, he doesn’t have to follow his own advice anymore because he’s rich from selling his advice to his listeners.  Again, I emphasize my philosophy of knowing your own numbers, getting all the facts, seeking the input from professionals, then make your financial decision, what ever it is.

LexBlog