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.


  • 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.


  • 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

“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.


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


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.


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.

Transportation Costs For That Car: Landed Costs

little financial advisorIt’s amusing when a friend tells me how much money they’re saving in gas with their brand new hybrid vehicle that they just proudly purchased. I’m sure it’s a much more fuel efficient car, but the question I have, is this: Was total cost important to them? If I bought a used $3k vehicle which got 30 MPG, instead of a $28k hybrid that got 50 MPG, at what point would the hybrid be really saving me in overall costs? Sure, an older car possibly has a higher maintenance cost, and there are a lot of other considerations, but full calculations (with car loan interest also factored in) would yield the break point somewhere years in the future.

In the manufacturing business, it’s called, “Landed Cost”. It describes the total cost (which includes the manufacturing, surcharges, freight, document fees, etc) for a product to be on someone’s dock or doorstep. In your personal finance and budgeting, it comes down to your total cost. However, to figure total cost, it requires the “big picture”.

It seems that we all need our cars here in California, but at what cost?  The next time you’re looking to buy a car, consider these important truths:

  • buying saves money over leasing;
  • buying a used car will save you thousands over new;
  • cut down on transportation costs and live closer to work; or take public transportation

The same can be said with the Bankruptcy option. The “B” word has a negative connotation, but if you do the math, how would you emerge financially with the aid of bankruptcy versus trying to pay a life time of debt off? Have you really considered the “landed cost” 20 or 30 years down the road? Have you created your excel sheet to account for, and analyze those costs and found where the break point is?

50 Cent in One Hand and Half a Dollar . . .

4551670622_970685382c_z . . . in the other.  I’m a bankruptcy lawyer.  There, I said it.  My product is a service that helps my clients save assets and eliminate debt.  The problem with my business model is that it sparks a never ending conversation about morals and character because the stigma is that folks who file for bankruptcy lived a lavish lifestyle and simply spent more than they made.  Now, I can see how that happened during the bull market that led up to the financial crisis that seems so long ago (2008).  I can be a bit biased in my opinion, but I’ll be the first to admit when someone should not file for bankruptcy protection.

It seems perfectly understandable when a celebrity like 50 Cent files for bankruptcy protection.  Our first inclination is that lavish lifestyle excuse.  Over at Fox Rothchild, they left that question open in their recent, article. We have since learned that he’s leveraging a bankruptcy case to stop a lawsuit.  So, once the curtain is pulled back, we see that bankruptcy protection as a tool to use to leverage your financial position. It got me thinking, what life events might be ripe for bankruptcy?

Here are some major life events that my clients have gone through, where bankruptcy has helped:

  • Medical illness/accident
  • Job loss or reduction in pay
  • Law Suit
  • Wage Garnishment
  • Divorce
  • Foreclosure
  • Refusal for a Loan Modification
  • Student Loans
  • Taxes
  • Contracts

This list is not meant to be all inclusive, but rather to give a sense of how life can be expensive and that bankruptcy is not just right for the rich and famous, but the broke and beautiful people too.

Photo credit:  Spare Change