Los Angeles Bankruptcy Law Monitor : Los Angeles Bankruptcy Lawyer & Attorney : Christine Wilton Law Firm : Southern California Chapter 13 & Chapter 7 Bankruptcy, Foreclosure

It's Super Bowl Sunday in our great nation. I've got a bowl of chips and salsa next to me as I write about the connection between football and bankruptcy.  Yep. Let this be our little secret that in the world of football, bankruptcy is not an uncommon decision.

Leigh Steinberg, was once one of football's most powerful agents and the real life Jerry McGuire, now battles alcoholism and bankruptcy. Raiders legend Ray Guy was forced to sell his Super Bowl rings after filing bankruptcy.  Even former Baltimore Colt quarterback Johnny Unitas once filed for bankruptcy protection back in 1991. Philadelphia Eagles quarterback Michael Vick was touted as being the "Richest Bankrupt Dude Ever."

The financial problems that most people face are magnified by celebrity status and more money to lose. There are dozens of football players who can't seem to manage those millions.  It doesn't matter that the median annual salary for NFL players is $900,000 because nearly 80% ( as some estimate) squander their fortunes shortly after their retirement.

Former Pittsburgh Steeler lineman Dermontti Dawson listed $69 million in debts when he filed for Chapter 7 in 2010. He was reported as "following in the footsteps of Kentucky Wildcat Antoine Walker, former National Football League center."  New York Jets backup quarterback Mark Brunell, filed bankruptcy while still on the field. Why do you suppose the NFL is plagued with financial problems among their players and agents? It's simply a combination of their risk-taking DNA, coupled with poor investment choices, frivolous spending, hiring friends and family as financial advisors and falling victim to financial predators.

The lesson here is that we all need to learn life skills and managing what we do have. It is so basic to accounting principles that you absolutely MUST have a budget that lists all your income and expenses.  When you know where all your money goes to expenses, only then can you adjust, shop for cheaper expenses like insurance and cell phones, etc. Learn to distinguish between a "need" and a "want."  Get your emotions out of your bank account!  If you spend your monthly income on paper before the money even comes in, you've created a budget.  Using the budget as your plan you can eliminate emotional spending by simply transferring the money where you've intended it.

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Taking my cue from Cathy Moran's blog article entitled, "C is for Counseling," where she wrote "Maybe my “C” word should have been “Congress” who created this travesty," I will discuss.

On a dark and stormy night on April 20, 2005, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 was passed by Congress and enacted into law by then President Bush. Bankruptcy practitioners, courts throughout the nation and even the U.S. Supreme Court have been scratching their heads to interpret these changes ever since.  The changes are too numerous to list, but you can check out the FAQ page at the U.S. Courts website for key changes.

We all see BAPCPA as a boon to the creditors to make it more difficult for the consumer to even file for bankruptcy with the installation of the Means Test to qualify to file under Chapter 7 of the Bankruptcy Code. I see it as yet another strategic maneuver by the banks and Creditors to reduce losses and increase profits.

Consider that the banks knew that the housing bubble was likely to burst and that our economic growth was due to our nation's proportional rising DEBT, the banks scrambled for a solution.  They decided to make it more difficult for consumers to file bankruptcy and so they created BAPCPA with its Means Test.  MBNA America Bank, N.A. was a major financial contributor to the Act and the top contributor to George W. Bush's presidential campaign.  Does that answer your question as to whom Your Congress works for?

What the BANKS failed to consider in all this strategic planning was the increased unemployment rate, and underemployment rate that would take away many American incomes, allowing many more people to now pass the Means Test and qualify to file under Chapter 7 of the Bankruptcy Code. Kiss your government goodbye by getting your FRESH START today and kick debts to the curb for good.  Your financial freedom from debts will choke the banking system because We the People choose to pay ourselves by saving rather than spending our way out of this mess!

Check out other Blogs discussing Bankruptcy Alphabet and the letter "C"

Collection Agencies, Cramdown, Creditor's Meeting

 Photo Credit:  Leo Reynolds

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Here's the case:

A debtor's discharge in bankruptcy would not do her much good if her prepetition creditors could still garnish her wages to pay their claims. The creditor in this case has a creative theory for doing just that: he argues that her discharge did not affect his claim against her husband, that her husband had an interest in her wages as community property, and that her husband fraudulently transferred that interest to her by entering into a postnuptial agreement. The creditor's fraudulent transfer claim, besides being untimely, is barred by [**2] Section 524(a)(3), n1 which enjoins holders of pre-petition community claims from collecting or recovering from community property acquired post-petition. Rooz v. Kimmel (In re Kimmel), 367 B.R. 166, 167 (Bankr. N.D. Cal. 2007)

11 U.S.C.S. § 524(a)(3) protects a discharged spouse in a community property state from any action, process, or act to collect or recover from, or offset against her wages on account of a Judgment against the other spouse. 11 U.S.C.S. § 524(a)(3). After-acquired community property will be free from prebankruptcy creditor claims against either spouse even when only one spouse has filed a bankruptcy case. California is community property state.

With every bit of good news comes a CAVEAT:  The Community Property discharge will protect the non-filing spouse so long as the spouses remain MARRIED. We all know that you can only file bankruptcy once every eight years.  Another benefit to having only one spouse file bankruptcy is that not only do you eliminate all the community's debts, your spouse can file bankruptcy at any time during the next eight years, should your financial situation worsen. 
 

Photo Credit: ngillespiephoto

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We have a serious issue here in the Central District with the BPP ["Bankruptcy Petition Preparer"].  The Central District of California has more than 25% of the entire nation's Pro Se Debtors, which are Debtors that file their bankruptcy case without an attorney.  That's a whopping 38,667 cases filed without an attorney.  This volume of self-represented parties in bankruptcy has a significant impact on judicial resources and access to justice for all in bankruptcy.  Extra time is required of the court's clerks, judges and attorneys to provide assistance and correct errors when these self-represented parties make mistakes in their papers.  A significant portion of these Debtors seek the assistance of a Bankruptcy Petition Preparer, The BPP.  Problems can and do occur when Consumers use non-lawyers to assist them.  You may be saving money now, but might need to hire an attorney later to fix mistakes if you hire the wrong BPP.  Last week, I posted a warning in, Attention Debtors Without an Attorney, and provided important information on where to get help for FREE.

11 U.S.C. Section 110 provides for penalties for persons who negligently or fraudulently prepare bankruptcy petitions.  The bankruptcy courts are now tracking BPPs and prohibiting those that frequently make mistakes from filing cases within the district.  The most common mistakes made by the BPP is the wrong exemptions are used to protect assets of the debtors from being taken by the Trustee.  So, when you hear horror stories of someone who filed bankruptcy and the trustee took their property to pay creditors, it could be they hired someone who incorrectly applied exemptions and the Debtor suffered the consequences.  This usually can be corrected, and this a good reason to hire an attorney from the beginning of your case.

Remember that a BPP cannot give you legal advice or tell you which set of exemptions to use in preparing your bankruptcy case and, if they do, they are engaging in the practice of law without a license to do so.  Cal. Bus. & Prof Code Sections 6125-6128 define what constitutes the practice of law and persons authorized. There is no substitute for proper advice from an attorney.  I cannot emphasize enough that many of our local practitioners will provide a FREE consultation to help you choose whether to file bankruptcy, if so, which Chapter to file under and what you can expect from the bankruptcy process.  Only a licensed attorney can provide such advice. 

There is help if you've been defrauded by a BPP.  We have fee shifting remedies where the fees paid can be diverted to the attorney you retain to correct the BPP's mistakes under 11 U.S.C. Sections 523, 526 and 110.  It's important to cooperate with the attorney and sign a declaration that states the problems you've had and why you had to hire an attorney.  Then, be sure to attend the hearing on that matter and explain the situation to the judge.  This will help you obtain the assistance from this attorney, perhaps without any additional money being paid out of pocket for the much needed service. 

Other B Words in the Bankruptcy Alphabet: Beware of These Credit Card Offers, Bar Date, and Bank Account Levy.

Photo Credit: Leo Reynolds

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New data from the Central District of California was posted on Prof. Jonathon Hayes, Bankruptcy Prof. Blog:

• Pro per filings for the Jan through Sept, 2011 period were 28.3% of the total.  The national average is 7.9%. 
• The central district clerk's office processes one bankruptcy petition every 3 minutes, 44 seconds. 
• The next highest number of filings after the central district is the middle district of Florida.  The C.D. Cal has 146% more filing than M.D. Fl. 
• The central district expects 141,000 filings this year, up from 109,000 in 2009, and 66,000 in 2008.  

From the looks of those numbers above, we have a large population of debtors filing bankruptcy without an attorney.  I wonder if people are just trying to save what little money they have left, or do they just think filing bankruptcy is little more than filling out forms anyway, so you don't need a lawyer?  I know it's hard to pass that freeway billboard that says, "Bankruptcy $799."  However, if you read the fine print, even though it shows a man's picture and has the name of a law firm, it says that hiring the attorney will cost more.  I find advertising like that to be misleading the public.

The Office of the United States Trustee for the Central District of California has placed informational fliers inside the courtrooms in Los Angeles, warning debtors without attorneys that some debtors have been victimized by unscrupulous practices on the part of those who assisted them in preparing their bankruptcy petitions.

FEDERAL LAW REQUIRES: all non-lawyers who assist debtors in the preparations of bankruptcy petitions to: (1) sign the bankruptcy documents; (2) provide their names, addresses and social security numbers; (3) have debtors review all documents before they are signed; and (4) disclose any fees they have paid or are still owed.  Remember that only a licensed attorney can answer your legal questions that includes help with properly completing the petition, schedules and bankruptcy papers, which set of exemptions to use, etc.

There is a Bankruptcy Self-Help Desk located at the Federal Building, 300 N. Los Angeles Street, 1st Floor, Los Angeles, CA 90012 on Mondays and Wednesdays from 10:00 a.m. to Noon and from 2:00 p.m. to 4:00 p.m., except for court holidays.  The Self-Help desk can provide information about Chapter 7, Chapter 13, bankruptcy forms and access to reference material and more importantly, referrals for additional legal assistance.  Income eligible individuals can apply to attend the Chapter 7 Bankruptcy Self-Help Clinic. This project is sponsored by Public Counsel, Central District Consumer Bankruptcy Attorneys Association ("CDCBAA"), and the Los Angeles County Bar Association Commercial Law & Bankruptcy Debtor Assistance Project Subcommittee.

If you simply cannot afford an attorney, FREE legal help may be available to you.  For more information, contact Public Counsel's Debtor Assistance Project Hotline: 213-385-2977, ext. 704.  Some of our local bankruptcy practitioners will also offer their services on a low or pro bono basis. Hiring a competent lawyer is worth their price so your case moves smoothly through the bankruptcy process and you're not faced with losing your discharge, an inquiry from the U.S. Department of Justice, or countless hours in trying to correct errors in your bankruptcy papers.

Photo Credit: Eversheds, LLP.

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Many Consumer Debtors have a difficult time understanding how their attorney gets paid in a Chapter 13 case. So, today I want to discuss what is called an Application for Compensation. When you first meet with your attorney to retain them to represent you in your Chapter 13 Bankruptcy case, you are retaining that lawyer for a period of three to five years depending upon the length of your case.  You are also retaining them to not only manage the underlying case, but to provide ongoing counsel to you, and provide additional services that may give rise to their filing an application for compensation with the court in your case.

Here in the Central District of California, attorneys will enter into a fee agreement with their clients and most will also enter into a Rights and Responsibilities Agreement or "RARA." However, the RARA is optional and some attorneys choose to charge only an hourly rate and will file an application for compensation with the court for managing the case from the start. The RARA will provide a flat fee arrangement with our clients for the work in preparing your case, filing with the court, representing you at your meeting of creditors, and your confirmation hearing.  There is a lot of work involved in managing a Chapter 13 case, which is why additional fees can be incurred for managing the case and filing required motions, etc.

The fee agreement and the RARA will outline how your attorney gets paid in your bankruptcy case.  Once your case is filed with the court, your counsel cannot collect their fees directly from you and must file an Application for Compensation with the court, which is a motion. If you receive a letter and invoice from your attorney, it should state that it was submitted in conjunction with a Supplemental Fee Application and filed with the court.  You MUST read and review the information because you have only 20 days to OBJECT to the fees your attorney is asking for.  If you object, you must notify your assigned Chapter 13 Trustee.  If you do not object, the trustee still may object.  The judge assigned to your case will always get the final say in whether your attorney is entitled to the amount they seek. It's important to understand how your attorney is compensated for all the hard work they put in on your behalf so that you're not caught off guard when you see their application for compensation.

Once approved, the Chapter 13 Trustee will pay your attorney from the money you pay into your Chapter 13 Plan.  Your Plan payment will not be impacted by additional fees being sought by your attorney, if you are paying some money to your unsecured creditors.  Remember to call your attorney with questions or concerns you may have about your case.

Photo by:  Leo Reynolds

Learn more about the Bankruptcy Alphabet with Consumer Bankruptcy attorneys throughout the country.  Other Lawyers Playing the Alphabet Game with the Letter A:

Abandonment, Abuse, Adversary Proceeding, Asset, Alimony, Arrest, Ask, Assumption, Attorney, Automatic Stay, and Avoidance.

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Each year I gaze once again into my crystal ball of clarity and make my predictions for the economy and declare my bankruptcy trends for 2012.  Here's last year's trends, to refresh your memory. I continue to debunk the myth that bankruptcy is the last stop to financial freedom because the American people have been brainwashed into thinking bankruptcy is a dirty word. Bankruptcy filings for 2011 dropped 8% to 1,467,221, for the fiscal year ending September 30th, according to U.S. Courts. Here in the Central District of California, year-to-date through October, 2011 total filings were 115,717, down 3.9% from the same time, 2010. I predict these numbers will remain constant through the middle of next year with a spike toward the end of 2012 if the homeowners seeking short sales no longer get the tax waivers.

This year, Kamala D. Harris, California attorney general, broke from the herd of all 50 states because she was not satisfied with the settlement negotiations with the banksters for their participation in the housing bubble burst, foreclosure crisis and near collapse of our entire economy. I applaud her departure from what I would consider a "sweep the problem under the carpet" quick and dirty settlement. 

 Foreclosures have an impact on every aspect of our recovery. Until we solve the housing crisis our economy will continue to sputter.  In fact, I predict we have yet to see the peak of foreclosure season with the increasing so-called "shadow inventory," and variable loans that have yet to adjust.  Then, there is the amusing and confusing and ever-changing foreclosure process that forces me to continually advise my clients that I cannot tell them how long it will take for them to be removed from their home after foreclosure, let alone when the bank may foreclose.

I agree with this Goldman Sachs economic outlook that we will see higher unemployment. Don't get excited about the present decline because those that have gone back to work are not getting paid nearly enough.  Unemployment reports fail to include the underemployed part-time workers, those that have taken pay cuts and those that have simply left the job search to go back to school.

Okay, enough doom and gloom.  The bright point is that 2012 is an election year.  What do you mean you're not excited about an election cycle? Over at the Wall Street Journal, four financial advisers gave their opinions on the Markets for next year. They tell us that we've got political propaganda that will give us anxiety and an aging population that is sure to burden our health care system.  All of this means that bankruptcy filings will continue at the million filings annually mark as the middle class continues to be trampled on and forced into the lower class.  As more baby boomers look to retire, they too will be forced into bankruptcy because they haven't been able to pay off all their debts and probably still have yet to recover their retirement losses from the crash in 2008.

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On September 20, 2011 I was a speaker for Law Review CLE on the topic of Foreclosure Defense in Orange, California and again on November 10, 2011 in Riverside. My perspective is always from the bankruptcy side where we will file under Chapter 13 of the Bankruptcy Code to initially stop the foreclosure sale. The benefit to this strategy is, the moment the bankruptcy case is filed, the Debtor's mortgage becomes current and the Debtor will make up the mortgage arrears through trustee payments in their Chapter 13 Plan.

Many practitioners in attendance practice in state court's, and it was depressing to hear their state court hurdles of having to file bonds with the court that are prohibitive to the homeowners and the level of difficulty in moving their cases to the discovery phase. Ironically, our bankruptcy judges continue to tell bankruptcy counsel that the foreclosure defense issues like, "who owns the note" argument needs to be addressed in state court.  It's as if the two benches are pointing fingers and neither wants to take the time to learn about the mortgage securitization issues because their calendars are packed.

Never fear that I shared my Max Gardner Bootcamp wisdom, some of my most recent moving papers, and cutting edge legal arguments we are making that we hope will persuade the bench that mortgage creditors are committing fraud upon our courts, every time. There is hope through the bankruptcy process and it's important to hire competent counsel to assist you when facing these complex issues.

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Last Holiday Season, I wrote about ways to keep your spending down if you're planning a New Year bankruptcy, Article. This year I turn your focus on the best gifts to give YOU and your family this year. When you take care of yourself, everyone around you benefits. Every positive step you take is like a ripple in a pond when a pebble is dropped into it.  Allow yourself to be touched, moved and inspired by MY Top 10 Best Holiday Gifts to give YOU this season:

1.  Give yourself the gift of TRANSFORMATION and check out Landmark Education's courses on living your life powerfully and living a life you love.  Take their entree course, The Landmark Forum and give up your past stories about how you don't have "enough ______[fill in the blank]" and get in action in your life NOW;

2. Give yourself the gift of FREEDOM FROM DEBT and file bankruptcy already. I know your savings is gone, you may have already given your finances a heart attack by borrowing from your retirement account with no way to pay it back. CALL YOUR LOCAL BANKRUPTCY ATTORNEY today for a FREE consultation and let go of your debts this season;

3.  Still think Bankruptcy is a dirty word? Then get on board with Dave Ramsey's gazelle-like program of creating your own Debt snowball and sign up for his Financial Peace University, or start with his book, "Total Money Makeover;"

4.  AUDIT YOUR LIFE: Take the role of "observer" and look at your life currently. Take stock of your successes and failures and set a 5-year course for where you want to be. Do one thing today, like the previous ideas to propel you in this new direction.  Never give up. If you choose only one aspect of your life, like MONEY, then just know that how you are with your finances, so you are in every other aspect of your life.  Sorry about the bad news.

5.  BE GRATEFUL: Gratitude for all that you have now will open the door for more gratitude to follow. Start with, "The Best that Life Has to Give is Mine Now" and live into this statement; begin your gratitude journal today;

6.  GET REAL: Being inauthentic about who you are, where your life is headed and especially your finances will only create more drag on your joy. Get Real about every aspect of your life and begin the work to clean your "house" from the inside out. If you're debts will take more than 5 years to payoff, consider a Chapter 13 bankruptcy to restructure them.  Chapter 13 Plans last no more than 5 years and whatever unsecured debts remain at the end are permanently discharged. It's better than debt settlement because

(a) You don't have to pay them in full; and

(b) any debts discharged in bankruptcy have NO INCOME TAX liability;

7.  SEEK ADVICE: Your emotional health depends upon your seeking advice from those you trust. I have created my own "board of advisers" who are made up of very close friends and some family members. When you allow others to come along side you, they can show you your blind spots. Give them permission to be authentic with you and you will begin to see what's missing in your life. Your biggest fans and greatest supporters will also cheer you on to success.

8.  EXERCISE: Remember I mentioned "bad news" earlier in that your life is where it is today because YOU created it?  Now, for the good news; since you are the creator of your life, the architect of your destiny, then you can alter and transform your very nature. This includes your physical body. Start by ignoring what ever voice stops you and get your walking shoes on and go for a walk. Baby steps in all things will carry you to your goals.

9. BE GUIDED BY SPIRIT: Everyone has Spirit; a wise Self. You have probably heard this voice of wisdom when you give someone advice. It's time to turn your wise Self onto YOU. Close your eyes and turn within and quiet your mind long enough and you'll hear this voice. Listen to this guide.

10.  TAKE ACTION: Take the first step into the rest of your life and consult with Your Local Bankruptcy Lawyers to transform your personal financial crisis into FREEDOM FROM DEBTS. Every client that my office has worked with has been transformed financially and are on track with their financial goals. Every other aspect of their lives are altered by their new found FREEDOM and everyone around them benefits.  Get yours this Holiday Season.

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     Chances are the answer is going to be a YES. The relationship between married persons and creditors is separated by individual or joint debt. Individuals are personally liable for their debts and may be jointly liable with others for their debts. See Division 9 of the Code of Civil Procedure; CCP Section 680.010 et seq. An obligation may belong to an individual or to two or more individuals per CC Section 1429.

     Personal liability for the debt of your spouse is found in Part 3 of Division 4 of the Family Code Sections 900-1000. For spousal liability purposes, "debt" is defined as an obligation incurred by a married person before or during marriage, whether based on contract, tort or otherwise (Fam. Code Section 900). A spouse is personally liable for the debts of the spouse in only three circumstances: (1) the debt of one spouse is assigned to the other spouse in the context of divorce proceedings, (2) the spouse becomes personally liable under the necessaries doctrine, and (3) a surviving spouse has liability for the debts of their deceased spouse up to certain limits.

     In bankruptcy we view these debts in terms of individual and community debts and have some flexibility in whether we advise our clients to file an individual or joint bankruptcy when working with married couples. Remember that we cannot represent married couples when a conflict arises, so it's important to cooperate with your bankruptcy counsel and disclose everything to them, including whether or not you're contemplating divorce so that they can properly represent you in obtaining the fresh start that you deserve.

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     If you're an attorney who decided to practice consumer bankruptcy law here in the Central District of California, then you absolutely MUST join the Central District Consumer Bankruptcy Attorney Association ("CDCBAA"). It is NOT just a matter of filling out forms, the petition being the forms to be completed are just the starting point. There are so many considerations to be made when representing consumer debtors in bankruptcy that every counsel needs guidance and direction from their established peers. Here are just some of the many benefits to joining this incredible grass-roots organization from their brochure:

1. A DIRECT OPPORTUNITY FOR PROFESSIONAL NETWORKING WITH YOUR PEERS: You'll have a free exchange of ideas common legal and business matters.

2. "Local Local" RULES AND PRACTICE TIPS: Get the inside scoop on what judges and trustees want at our meetings instead of learning the hard way.

3.  MENTORSHIP: Opportunities to get good advice on troublesome issues in tough cases; hone practice skills & avoid malpractice.

4. AN INCREDIBLY ACTIVE LIST-SERVE: email questions to the whole bankruptcy community online and get answers quickly--worth the price of admission.

5. MARKETING MUSCLE: Advertise your services on their website and link to your website for improved search engine ranking.

6.  MCLE UNITS OF REAL USE IN YOUR CONSUMER BANKRUPTCY PRACTICE: 16 MCLE hours each year (approximate) in 8 seminars on Saturday mornings--with judges, experts, and our awesome clerks.

7.  FREE ANNUAL AWARDS AND CELEBRATION DINNER: Rub elbows with your peers, the trustees & the Court. Included in membership dues.

8.  EARN ADDED CREDIBILITY WITH YOUR CLIENTS AND THE COURT: Put CDCBAA on your resume', website and promotional materials to increase your credibility.

     The members meet about eight Saturdays during the year to address changes in the Central District, statistics, judges preferences, local rules, and volunteer opportunities. After each member meeting there is usually a 2 hour MCLE topic of interest. Their list-serve is incredible and worth your membership alone, but the added MCLE programs and the awards dinner make for a great group of consumer bankruptcy practitioners that care about our field of law, the consumers and efficiency in our courts.

     Just remember this is very grass roots. Membership dues are based upon calendar year at $250.00 per attorney, so it's best to join in January to get the best bang for your dollars. I can tell you that within the last two years of my association with this group that they are willing to share their information, papers, wisdom and time for those that ask and are nice. Combined experience of the core group has got to be more than 1,000 years!

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GREIFENDORFF LAW OFFICES, PC just announced they're celebrating their First Anniversary by having a Huntington Beach Chamber of Commerce Ribbon Cutting gathering. Partners John Greifendorff and Christine Wilton have more than 14 years combined experience in the practice of consumer bankruptcy. 

The office is centrally located in the City of Garden Grove, which is convenient to Lakewood, Long Beach and Orange County areas. The firm provides services to consumers from pre-bankruptcy planning, Chapter 7, 11, and 13 cases, bankruptcy litigation, through discharge and rebuilding credit after bankruptcy. Their dedication to rebuilding the American Dream is centered upon every household having financial freedom from their debts.

The celebration is scheduled for October 19, 2011 from 5 p.m. to 7 p.m. at their office located in Building 8, 12646 Hoover Street, Garden Grove, CA 92841; just north of Garden Grove Blvd., west of Beach Blvd.

The firm is hosting a 50/50 raffle where I hear some great prizes await.  BBQ will be provided by fellow HB Chamber member Steiner's Original BBQ [the picture is of the founders of Steiner's BBQ, Jason and Kristen Steiner] I'll have to look into wine pairing because theirs a hosted wine bar too. A special musical guest will also being appearing.

As a business gathering, business cards are a must to bring for the networking opportunity. The firm's current vendors will be on hand and there are many partners that have helped along the way that the partners are grateful for all their support.  My personal Thank You goes out to the firm's clients who have placed their Trust in us; We appreciate the opportunity to serve You. I will be reporting back after the event to let you know the turnout. If you're in the area, come on by and introduce yourself.  You'll be glad you did.

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Apparently most Americans are still feeling the pressure to avoid bankruptcy so much so that they are continuing to turn to any open source of credit they can find. According to the Federal Reserve, credit card debt was up $3.3 billion to $793.1 billion in May and June shows an even greater jump up by $7.7 billion to billion totaling $798.3 billion.  Overall consumer credit is up to $2.4 trillion in May.

Here is what's happening. After consumers have filed for bankruptcy, all of their debts are discharged. Creditors know that consumer debtors are only eligible for a bankruptcy discharge after 8 years. Creditors also know that many who have filed bankruptcy have a taste for credit and will go to many lengths to rebuild their precious FICO score. So, at least for 8 years the creditors can get YOU to pay them high interest rates on your credit card balances until you qualify to file bankruptcy again. They want to keep YOU addicted to CREDIT.

Subprime consumers with poor credit or fresh out of bankruptcy are receiving more credit card offers according to this article. So, don't tell me you can't get credit after bankruptcy. In fact, the creditors encourage this irresponsible behavior and welcome you into high interest credit cards by telling you that this will rebuild your good credit. NO IT WON'T!!!!

Stop being a victim of circumstances and transform your financial life once and for all. You're better off following the principles of our Depression Era elders by keeping your emergency fund in CASH, at least $1000.00 in reserves as our friends at Dave Ramsey suggest. If you've filed bankruptcy and want to rebuild your credit, work with our friends over at FortressCreditPro and tell them Christine sent you.

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Bob Lawless over at Credit Slips posted this blog article recently, Cultures, Attitudes, and Debt. What's great is that he focused more on asking questions of his readers, rather than providing his answers.  You'll have to check out the comments for yourself on this one as they're fantastic.

We each bring to the table of society, our judgments, opinions and circumstances about how others should live their lives and condemn those that live out of control. Addictions and debt uncontrolled will ruin families, communities and even countries as we are seeing.  Debt can be a good thing to help society progress, but when the lenders get greedy and set consumers up for failure, then what? Well, you have an economic crisis heard throughout the world with unstable markets and high unemployment.

I believe that we each do the best we can with what we have been dealt in life. We also have the ability to transform our circumstances with education. I also believe in sharing information to those who don't know and help them to make right choices for their lives financially.

What I don't get is that why do so many Americans believe in increasing the government's debt ceiling and allowing our country to fall further in debt? Even after this poor decision we still had our credit downgraded. How are average Americans supposed to live within their means and stay out of debt when the leaders of our free world think it's a good idea? What hypocrisy.

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Many a wary debtor find themselves embroiled in problems in their bankruptcy cases when they hire a bankruptcy petition preparer, incompetent attorney, or go it alone 'Pro Se' in preparing and filing their own bankruptcy case. Why? The reason is Judicial Admissions. You would think that bankruptcy is a simple process to discharge your debts, but consumers and practitioners alike are overwhelmed with so much misinformation it's making my head dizzy.

When you sign your bankruptcy papers, you're signing under penalty of perjury that you have told the truth and admitted all of your assets and your debts.  Your bankruptcy papers are deemed admissions under the Federal Rules of Evidence, which are used in federal bankruptcy court. See FRE 801(d)(2).

In a prior article, "Judicial Estoppel: Why You Should Disclose All Your Assets, Claims and Debts," I discussed the reason for disclosing assets and debts to protect your legal rights to sue later. Here, we're adding to that conversation and protecting your legal rights against creditors from trying to stop their particular debt from being discharged or from the court allowing your petition papers to establish standing just because you listed that particular creditor even though you're disputing that debt.

The solution lies in the details. You can file bankruptcy without an attorney, but why would you when your financial freedom is at stake? Mistakes made on your bankruptcy papers can cause assets to be exposed to the trustee's taking, cases where you might collect can be dismissed on judicial estoppel, you expose yourself to potential criminal fraud charges, and could be liable for debts that would have otherwise been discharged.

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You've been planning and saving for retirement and doing everything "right" according to the financial gurus.  Then, in 2008 when the economy tanked, you're now left with a home with no value, credit lines cut-off and closed, and wondering if you'll even have a job in the next year. Or worse, you've just been laid off.  What do you?  First, you immediately consult with a bankruptcy attorney, your tax advisor and financial planner before the first unemployment check arrives. Why?

Because tempting as it is to tap into that nice nest egg you've been so diligently building, its sole purpose is for your retirement and unless you're 65 you don't want to touch it at all costs. It's alarming for me to see an increase in 401k loans according to this article,  Loans From 401(k)s Are on the Rise As Investors Tap Their Inner Banker. Besides the income tax consequences in pulling funds from a tax deferred retirement account, its one of the worst financial mistakes you can make that will still land you in bankruptcy.

When you're faced with declining or non-existent income, you 

FIRST must cut your expenses immediately and consult with your professionals.

SECOND, consider whether this is short term or long term and make your decisions based upon your financial goals and what you have to work with. 

THIRD, create and live by a BUDGET.  Cut expenses and then cut them again. You cannot afford to borrow from your 401k to support the lifestyle you had when you're working, now that you're unemployed.  You simply cannot sustain any negative budget.  If you don't take these necessary steps, you'll land in my office with no retirement and still needing to file bankruptcy.

the absolute LAST thing you want to do is continue to pay unsecured credit card debts, especially with a 401k loan.

In fact, if you would consider bankruptcy as a powerful tool instead of the last stop to financial freedom from debts, then we could get this economy propped by by spending again. I would much rather see bankruptcy filings on the rise than 401k loans. Be sure to consult with your professionals before making any important financial decisions and do it now to save you from disaster later.

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I just returned from a workshop held by Fico Certified Credit Professional Rondi Lambeth, owner of Fortress Credit Pro where I gained some great information I want to pass along to you here. He cleverly coins the name of his workshops as, Fico Score Up Yours!  The negative connotation of sticking it to Fico always makes me giggle.  So, you want to know how to improve your credit score after bankruptcy?  I have great news. If you go to Rondi's website, you can pay $50.00 for him to audit your credit report and point out all the errors. He will tell you himself that you can do this on your own and don't need to hire him, but if you do, he will have you sign a statement that you knew this and requested his services anyway. 

Here's the myth I outlined last year in, Filing Bankruptcy Will Ruin My Credit. Rondi says that he can actually achieve greater results, much faster for those who have filed bankruptcy. Usually in about 90 days you can have good credit again. In many cases, you can even have your bankruptcy removed from your credit report.  What? Read that again.  You can actually have your bankruptcy removed from your credit report! 

Under the Fair Credit Reporting Act, any information provided on your credit report must be accurate, meaning 'freedom from error.' Accurate information means that the creditors must report complete, full and accurate account numbers, which Rondi says, they rarely do. Also, those who have filed bankruptcy will know that their bankruptcy case always ends in two letters, which represent the Judge's initials of the Judge assigned to their case. What this means is that if the Judge's initials are missing, the credit bureau MUST remove this erroneous information all together. What's even better is that once you've filed bankruptcy and received your discharge, your debts must show as discharged on your credit reports.  White v. Experian is our case on point with this issue.

Another nifty trick provided by Rondi was the use of IRS Form 12277 to remove a tax lien from your credit report by simply completing the form and sending it to the IRS with the box marked under Section 8(d) that "withdrawal is in the best interest of the debtor and the government." 

My advice from this article, How To Use Credit Wisely After Bankruptcy on May 17,2010 still holds merit, but with Rondi Lambeth in your corner, helping you to clear the errors from your credit report and improving your score will put you back on the right path of financial freedom while being fiscally responsible with your money.  Not to mention that with great credit comes the better job, and rewards programs and discounts only offered to those with the best credit. Now that's a Winning Formula!

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From the moment you filed bankruptcy, your creditors were legally forced to cease all collection efforts against you. Now, you've probably sailed past your Section 341(a) Meeting of Creditors with the trustee when all of a sudden you're served a Notice and Summons in your bankruptcy case. You're being sued!

Keep in mind that a discharge of your debts voids any judgment at any time obtained. It also operates as a permanent injunction against the commencement or continuation of an action to collect on any debt as a personal liability of yours and any community property, if you're married. The failure by creditors to raise a non-dischargeability and discharge objection issues timely will forever bar them when your discharge is issued. There are two types of objections:

The first type is where the creditor or trustee objects to the discharge of all debts under 11 U.S.C. §727. This adversary complaint must be based upon proof that you, the debtor, fraudulently transferred or concealed property; failure to keep or preserve books or records; made a false oath or account; or failed to explain loss of assets or insolvency.

The second is where a creditor objects to the debtor's right to receive a discharge of a particular debt rather than the entire case and can be found in 11 U.S.C. §523. Some of the more common grounds for objecting to the discharge of certain debts are if those debts were obtained by false pretense or actual fraud; making false financial statements to obtain debt; embezzlement or larceny; willful or malicious injury; or for fraud or defalcation while acting in a fiduciary capacity.

If you're issued a notice and summons during your bankruptcy case; don't panic. Call your bankruptcy attorney and they will either handle the case for you and explain your rights, or make a referral to a colleague who handles these types of cases. Don't delay because you only have 30 days to respond or the plaintiff could get a default judgment against you.

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Memorial Day, originally called Decoration Day, is a day of remembrance for those who have died in our nation's service. As we remember those who have died for our freedoms and those who continue to serve our nation, let's remember that we have the freedom to be DEBT FREE!

You have a biblical right to absolve yourself of your debts according to the bible. Remembering our service men and women who have also made the ultimate sacrifice of their lives so that we are FREE should inspire us all to take action in our lives to live as free people.  Free from being a slave to debts by filing bankruptcy would be an honor. Exercising your freedoms that cost so many lives is the least we can do as Americans to honor those who fought so hard for us.

If you're suffering from harrassing creditor calls, wage garnishments, a foreclosure looming, no savings and not enough income to pay your debts in full within 5 years, then do yourself a favor and call a bankruptcy attorney for a FREE consultation. 

You can keep your real and personal property and still eliminate your debts in many cases.  Stop sacrificing your freedom to pursue Life, liberty and HAPPINESS!

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I see it every day. Potential clients who have spent their savings and borrowed against their retirement accounts because they're told that,

"Bankruptcy is the worst thing for your credit,"

"It's rarely the best option," etc.

The shame and guilt that go into financial problems compounds the negative stigma that bankruptcy holds and by the time my clients come to my office, they have nothing left to protect.

I like this article by Angie Mohr over at Financial Edge, but she is incorrect in saying that bankruptcy is "rarely" the best option.  The problem with that statement is that people will hesitate to even consult with a bankruptcy lawyer to determine whether filing is right for them. With the economy still flat-lining and California unemployment holding steady at 12%, we cannot afford to maintain our current way of life for much longer.  What I did like about Ms. Mohr's article entitled, 5 Myths About Personal Bankruptcy was her helpful information about how consumers can keep much of their assets while still discharging their debts. She's correct in that your credit will not be ruined. Our friend and Fico Trained Credit Expert Witness friend, Rondi Lambeth over at Fortress Credit Pro explains that the late payments have a greater impact on your credit score than filing bankruptcy. 

The 6th Myth is Don't Wait Until You're Broke To Talk To Your Bankruptcy Lawyer. Like hiring any professional you want to look for an attorney who will take time to talk personally with you and answer all your questions to provide you with enough information to make a well informed decision for yourself. Then, if bankruptcy is your choice, which Chapter is right for you. Your choices may be limited depending upon your circumstances, but your lawyer will explain what options are available. Also, avoid these 7 Mistakes when considering bankruptcy and you'll be well on your way to your own FRESH START.

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I'm a member of a Credit Union and have several accounts with them.  I've heard of this mysterious 'cross-collateralization' CLAUSE and thought I would do some investigation so we can all sleep better.  Arizona Bankruptcy Attorney John Skiba wrote, Bankruptcy, Credit Unions & Cross Collateralization Agreements, over at JDSupra, which provides a very brief and technically incorrect overview of Credit Union's dirty little tricks to get you to pay all your debts owed to them.  What we all need to know is, Can they get away with it?

The term cross-collateralization is not an agreement on its own, but rather it is a clause contained in other agreements that you might enter into with your credit union.  A contract clause is a term or condition that is written into the agreement that becomes part of the contract.  The trouble with these nasty little clauses is that credit unions are the only entities that think they're a good idea and these clauses are not disclosed to the consumer and buried in the fine print or what we call 'boilerplate' language. I liken this baby clause as happy when you're paying your debts and an incessant whiner when you stop.

Whenever you borrow money to buy say an automobile, or home, you list that property as collateral. The promissory note you sign has certain Truth in Lending Act ("TILA") Disclosures that are required. The problem comes in when you obtain unsecured credit lines with the credit union that contain this cross-collateralization clause that says that they can attach other debts to any collateralized loans obtained from this credit union.  This clause is buried in the credit agreements that are usually discarded by debtors without so much as a glance and do not contain any TILA disclosures. At their most fundamental level, these clauses violate Truth in Lending.

What also jumps out to me is Unfair and Deceptive Trade Practices in the Credit Union's use and enforcement of these junk clauses. It is patently offensive and unconscionable to include this cross-collateralization clause buried in a consumer loan agreement that is not disclosed to the consumer prior to entering into that agreement.  Then, when a consumer defaults on the loan or credit, then the Credit Union violates Fair Debt Collection Practices in their attempts to enforce this clause.

What happens in bankruptcy is that we must look at whether the agreements are enforceable.  If they are enforceable, then the debts owed are secured.  If the agreements are unenforceable, we will treat them as unsecured debts. 

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I don't know about you, but I'm tired of seeing those bankruptcy lawyer advertisements that say, "Low Cost," "Cheap Bankruptcy," and "$100.00 Starts."  For $100.00 dollars that lawyer will do nothing more than deposit your money into their business account. Always remember that advertising is advertising even when a lawyer does it.  We just have more rules than the rest of the marketplace.  I start with the fact that we must declare that,

"We are a debt relief agency.  We help people file under the Bankruptcy Code,"

in all our advertising because Congress said so and the Supreme Court upheld this in a recent decision.

The truth is that there are costs that you must pay when filing bankruptcy. First, you must take a pre-filing credit counseling course that costs anywhere from $5.00 to $50.00 depending upon whether you're filing a single or joint case, or on an emergency basis.  There is also a post-filing financial management course that is required with costs in the range of $25.00 to $50.00.  Then, there is your filing fee of $299.00 for a Chapter 7 case, and $274.00 for a Chapter 13 case.  The total so far is over $300.00 and we haven't even begun to talk about whether you'll hire a petition preparer or an attorney. 

Remember that you can file bankruptcy without a lawyer, but I suggest that you at least get a free consultation before you go it alone, or Pro Se. You can also find important information from our local court's website to guide you along this process; just click on "don't have an attorney?". 

You can hire someone to prepare your petition that is not a lawyer.  A petition preparer service has pitfalls to it because they cannot tell you how to answer the questions and what information to include in your petition. Also on the court's website, under news and publications, you can locate a list of enjoined petition preparers that have fowled up many a debtors cases.  Be sure to do your research before you hire someone to prepare your petition for you.

If you decide to hire an attorney to represent you, be sure you meet with them personally.  Many of these low cost starting campaigns are run by law firms that mill you through the process and have you work with non-lawyer staff.  They're a breeding ground for malpractice and you miss out on having an attorney review your entire financial situation to partner with you toward your strategic goal of financial freedom from your debts.  You need a partner, not another creditor. 

Caveat Emptor~~Buyer Beware!

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Are you one of those people that gets a large tax refund every year and you pay bills; or take a vacation with it?  You're providing the federal government with a free, no interest loan on YOUR money if you do. MSN posted this article, How to Adjust your Tax Withholdings, which provides a step-by-step guide to show you how to adjust your tax withholdings to put more money each paycheck in your pocket.  Why should you do this you ask? 

Besides the fact that you're loaning your money to the government free of interest and you know they would never reciprocate the sentiment, you're needlessly tying up your money in an account you cannot access but once a year when your big fat refund arrives. Besides, if you need to file bankruptcy, the trustee has the power to take that tax refund to pay creditors.

Taking charge of your money requires a disciplined approach.  Creating a budget  that includes your monthly bills is the first step.  You also need to include those annual bills like insurance and taxes and set up a savings account, making regular monthly deposits to be sure the money is there when the bills arrive.  I know savings rates are low, but it's better than tying up your money for a year and making nothing for handing it over to the feds for a while.

When it comes to filing bankruptcy under Chapter 7, the trustee's job is to look for assets to take from you to pay your creditors.  Any tax return greater than $500.00 can and will be taken by the trustee.  Adjusting your income tax withholding is an easy remedy for you to not only break even at tax time, but leave nothing for the trustee to take to pay creditors.  Consult your tax advisor and your bankruptcy lawyer  to create the best strategy for you.

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Every time I sit in court on confirmation hearings there are at least a few cases that get dismissed because the debtor's did not complete their court required pre-filing credit counseling course before they filed their bankruptcy case. The Bankruptcy Code is very clear on this and

Your case will get dismissed if you fail to complete the course prior to filing your bankruptcy case.

There are plenty of courses to choose from and a few will provide you with a completion certificate on an emergency basis.  You can file your bankruptcy case, the moment your course is complete and can file the certificate at a later time.  Since the course certificate is date and time stamped, the court will be able to confirm that you've completed the course before your bankruptcy case was commenced.

Here's a list of approved credit counseling agencies.  Just click on your state from the drop down menu and you can choose from any company on the list.  Here in California, we have the best deal in the market for pre-filing credit counseling courses.  This course was once offered for free, but now the certificate costs $5.00.  For this low cost course, go to Consumer Bankruptcy Counseling. Save yourself the hassle of filing twice and comply with the rules.  Call your local bankruptcy attorney for a free consultation if you're not sure what course of action is right for you.

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By Christine A. Wilton, Esq.

Los Angeles County Economic Development Corporation recently rolled out their 2011-2012 Economic Forecast & Industry Outlook. I was privileged to attend our the Lakewood 2011 Economic Forecast Luncheon hosted by the Greater Lakewood Chamber of Commerce and other local business supporters.  There is the agreement reality that the recession ended in 2009 and economic recovery is underway. I see several problems with this report.

This forecast is overly optimistic and underestimates the realities of  the employment marketplace, housing and the increased debt load of both Americans and its governments. The employment or unemployment numbers fail to include the underemployed who still work for less pay and those that have simply given up looking for work. The other sector that is not being considered in these numbers are the young people looking to get into the workplace, but cannot due to the competition for jobs. Unemployment is at

18.3% in the City of Paramount, and

Norwalk, Bellflower and Long Beach are hovering over 13%, according to Dr. Sidhu's report.

As I have said before, the housing market will continue to stay in a slump as the sub-prime mortgage crisis continues, the Adjustable Rate Mortgage notes adjust upwards and homeowners continue to avoid bankruptcy like the plague for fear of their precious credit scores. We're currently hearing rumblings of another wave of forclosures.  Since California courts don't really care who forecloses or even whether they have perfected their security interest against the Debtor's real property, then we will continue to lose our American Dream en masse.

Consumer spending remains low and the government spending has been propping up this flailing economy. The recession is not over and the lies to the American public must stop. Every one of us must take swift action in terms of dealing with our individual debts before this economy will recover. As my favorite bankruptcy guru Max Gardner always says, "Praise the Lord and pass the bankruptcy petitions."

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I remember watching the Wizard of Oz movie every Thanksgiving Day as a child growing up here in the southland.  After sticking my fingers into the black olives and then eating them from my fingertips and stuffing my belly fully of all the trimmings that make up every traditional holiday meal, the family would then gather around the television and watch the Wizard of Oz. I always looked forward to eating my piece of pumpkin pie with whipped cream while watching this classic film.

Now, as a bankruptcy lawyer, I find myself breaking every illusion I can find about money, the banking system, wall street and the government. Last week, I was pointed to the Secrets of the Wizard of Oz and Our Current Economic Crisis. This article breaks down the symbolism presented in the original book and the movie and explains the entire illusion and how all the systems play a roll in keeping the American people in slavery (Debt).

I see a sequel to this: Dorothy (a baby boomer) is dying and her children take up her cause and become the hero protagonists that lead the munchkins (American public) out of debt and liberate the masses from the wicked witches (banks and wall street) through bankruptcy. In order to do this, they must break the illusion that bankruptcy is the worst thing for their credit scores because the masses still believe FICO is really important.  They must learn that the only thing their credit score tells them is how well they manage DEBT (how ridiculous is this illusion now?).  If there is no individual debt then what importance does their credit score hold?

One of Dorothy's children is a bankruptcy lawyer in southern California (I volunteer to be a hero) who, through her blog, continues to break down the walls and expose the lies being told about bankruptcy and one client at a time, she leads the people to FREEDOM (financially speaking). The moral of the story is that the banks won't win in the end and the monetary system as we know will implode if the Wizard does not retire and if we don't kill the Wicked Witch of the East (again).

Bankruptcy is a valuable tool that dates back to the Bible. Financial freedom from debts permanently is the level of transformation that is needed here. If the American people take back Oz by refusing to do business with them (MasterCard and Visa) then they will "melt."

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 Back in July, 2010 I reported on the 9th circuit case of Mwangi v. Wells Fargo Bank, N.A., "Wells Fargo Won't Stop Freezing Bank Accounts." Our local group of attorneys here in the Central District of California have it on good word from sources inside Wells Fargo's bankruptcy department that the bank continues to freeze accounts while the litigation case is reviewed by the bankruptcy court in Nevada.  The Mwangi case has been remanded back to the bankruptcy court to determine whether Wells Fargo's continuation of the administrative freeze and retention of the account funds claimed exempt, in the absence of instructions from the trustee, was reasonable in light of the debtor's demand that the subject account funds be released for their use.

This is a case to watch as it affects all debtors filing bankruptcy, clients of Wells Fargo Bank, N.A. and the Automatic Stay under 11 U.S.C. § 362(a).  On January 21, 2011 Christopher P. Burke, Esq. and Scott C. Borison, Esq. attorneys for Eric Mwangi and Pauline Mwicharo [Plaintiffs] filed case no. 11-01022-bam in U.S. Bankruptcy Court for the District Court of Nevada this Adversary Class Action Proceeding.  

The allegation from the complaint alleges that Wells Fargo Bank acted in Willful Violation of 11 U.S.C. §362(a)(3).  If the court determines Wells Fargo's conduct was a willful violation of the stay under §362(a), then the bankruptcy court will need to determine what, if any, damages the debtors are entitled to under §362(k)(1).  We will keep you posted on the progress of this pending case and the outcome.  In the meantime, don't bank where you owe money.

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Today is all about love. As I stroll through my local grocers, I am swimming in a sea of red; red roses, balloons and candies all remind me that it's Love Day.  So, why is a bankruptcy lawyer writing about love?  Well, I'm a compassionate soul and I believe that Money is a Matter of the Heart.  So much so, that I wrote a white paper on this very subject apropriately entitled, Money Is A Matter Of The Heart.

As a practicing attorney in consumer bankruptcy, I hear your stories and cries for help. I hear, "I've done everything right," "I always pay my bills," "I can't believe I'm in this mess," "I don't want to file for bankruptcy."  You're not alone and you're not entirely to blame for your situation. The question is not, "How did we get here?," but rather, "What do we do with this situation we're in?"

Too often people spend down savings, borrow against a 401k or cash in retirement plans to support a lifestyle that can no longer be afforded. What is important to remember is that the moment your income drops, you absolutely must preserve your cash. If you don't, you'll end up filing bankruptcy broke. The truth is, you can keep the trustee from taking retirement savings and other savings accounts and still file bankruptcy. Talk to your local bankruptcy lawyer today if you've experienced a significant loss in income. I call this Self Love.

The reason why so many people delay the inevitable bankruptcy is the moral and emotional stigma attached. One has failed if they must file bankruptcy is such a misnomer. While bankruptcy is not the right choice for everyone, it is a powerful tool to provide a fresh start to those facing a complete inability to pay their debts, or those looking to restructure their debts and stop foreclosure on their home.

It's time to stop the vicious cycle and feelings of "moral obligation" to pay your debts.  If you cannot afford it, then you must file bankruptcy. Remember that indecision is also a decision and you must take action to resolve your current situation. Money is a Matter of the Heart  will take you on a journey from your head to your heart and bring your wallet with you. I hope you enjoy reading it.  Happy Valentine's Day.

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 Have you heard of Judicial Estoppel?  Well, you need to if someone owes you money and you're thinking of suing while contemplating bankruptcy. The doctrine of Judicial Estoppel generally prevents a party from prevailing in one phase of a case on an argument and then relying on a contradictory argument to prevail in another phase. What this means is that what you disclose on your bankruptcy papers become public record in a legal proceeding; a judicial record.  So, if you're owed money or have a potential creditor harassment suit and you fail to list these potential claims on your bankruptcy papers and later file suit, that subsequent lawsuit can be dismissed on a judicial estoppel theory.

A recent 6th Circuit case, White v. Wyndham Vacation Ownership, 617 F.3d 72 (6th Cir. August, 2010) illustrates this point.  The question presented before the court was whether the failure of the debtor to disclose in her schedules, a sexual harassment claim she had was grounds to dismiss the harassment case on the basis of judicial estoppel.  The court held yes. In this case, the Debtor filed bankruptcy under Chapter 13 but did not list a sexual harassment claim she had against the defendants in this district court action. About a week after the plan confirmation hearing, she file a lawsuit in district court seeking more than $1 million in damages. A month later, the defendants filed a motion to dismiss the harassment case on the basis of judicial estoppel. The Debtor later filed an amendment to her schedules disclosing the case, but not the amount. 

The court cited two  circumstances in which a debtor's failure to disclose might be deemed inadvertent or mistake as:

1.  Where Debtor lacks knowledge of the factual basis of the undisclosed claims; and

2.  Where the debtor has no motive for concealment and an absence of 'bad faith.'

The reasoning behind this important decision is that your creditors should be entitled to any proceeds or the value thereof in your bankruptcy case.  So, while you will likely be able to keep your stuff and claims too, it's wise to disclose potential claims to preserve your right to sue later. Remeber that you sign your bankruptcy papers under penalty of perjury that you have fully disclosed all assets, claims, debts and liabilities, so there's no having it both ways in bankruptcy.

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Married couples facing tough financial decisions must also face eachother. Here in California, we are in what is called a community property state.  That means that income earned during marriage and debts incurred during marriage are part of the marriage community. In contemplating bankruptcy, couples must know that the act of filing a bankruptcy case creates an estate for the purposes of liquidation under Chapter 7, or reorganization under Chatpers 13 or 11.

The bankruptcy estate consists of all the assets and debts of that estate.  So, your spouse's income, expenses and debts will come into the bankruptcy case even if they do not sign the bankruptcy papers. The bad news is that you're in this together. The good news is that you can also rebuild your credit quicker after bankruptcy.

Depending upon how the assets of your community estate are set up, will depend on how you should best proceed in bankruptcy. So, talk to your spouse first about your finances and set a goal for yourselves. Once you're teamed up and have your goal in mind, consult with your tax professional, financial planner and your local bankruptcy lawyer  to determine which direction is best for you.  There are many solutions to your current situation and the best strategy is to stay united and enlist help from several professional resources. Most professionals will consult with you for free, so take their advice and then make your decision from a well informed position.

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It's that time of year again where I gaze longingly into my crystal ball and make my predictions for the future of the American Dream; America's fresh start; and the demise of our mountain of debts.  Despite the continued negative stigma of bankruptcy and it's "last resort" paradigm, bankruptcy filings in the U.S. continue to rise during this depressed economy. 

According to the statistics found at the Bankruptcy Court's website, total bankruptcy filings in the U.S. during the 12-month period ending December 31,  2009 totaled 1,473,675.  This year, the year hasn't ended quite yet, but we have the 12-month period ending September 30, 2010 and the numbers total 1,596,355 for all bankruptcy filings in the U.S.; an 8% increase in filings throughout the country.  The folks over at Credit Slips predict a slight decline according to their recent post, "Projected Filings for 2011."

In California, we will see the slippery banks unleash a flurry of foreclosures as investigations into their business practices continue to mount.  More consumers will fight back against their securitized mortgages through chapter 13 bankruptcy litigation.  Here in the Central District of California, we will continue to see an increase in filings as the state of California struggles with its deficit and government workers are forced to take pay cuts and furloughs.  I disagree with Credit Slip's comment about lending beginning to open and any talk about economic improvement in 2011 because we still have 95 million securitized mortgages that have yet to be dealt with and the modifications of American homes has failed. We won't see an economic turnaround until well into 2015. 

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A fundamental part of deciding to file bankruptcy is helping our clients achieve their financial goals.  One of the toughest decisions clients struggle with is deciding whether to keep their homes.  Many Californians are faced with underwater property values; denied loan modifications; falling behind on mortgage payments when their teaser rate terms end; and the fact that we live in a non-judicial foreclosure state where a home can be foreclosed without notice to the courts.

The short answer to this daunting question is Yes you can keep your home and file for bankruptcy. Under Chapter 7 liquidation bankruptcy, it is always recommended that you be current on your mortgage payments and have equity within the California Exemption limits.  If you're behind on your mortgage payments, the most effective way to deal with the "mortgage arrears", as they are called, is to file bankruptcy under Chapter 13 where you get to make up those past due payments over a period of 3-5 years.

The deeper question is whether you're trying to save the impossible American Dream of owning a home and at what price are you willing to pay to have it?  Unless you're stripping off a second mortgage and willing tolitigate against your loan servicer or lender on the securitized mortgage issues, then you may be better off walking away from your home completely because the values will increase over time, but this recovery will take a very long time; 10 years or more.

The numbers are staggering when you look at what you currently owe against a continuing decline in property values and what your home may be worth by the time you're finished paying on that outrageous mortgage.  If you're determined, committed and willing to go the distance and keep your home, the most economical method of saving your home is by filing bankruptcy under Chapter 13 if you're behind on your payments. 

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At times our clients will sail through their bankruptcy case without any offense from their creditors.  At other times, it seems that our clients must fight for their rights. If you're among the unfortunate debtors who find themselves being sued in their Chapter 7 bankruptcy case you cannot ignore the Summons and Complaint.  If you've hired an attorney to represent you in your bankruptcy case, their firm may not be equipped to defend your litigation case and may need to refer you to an attorney prepared to litigate your dischargeability action.

The most important thing you should know is that you need to act quickly as the Rules require an answer usually within 30 days.  The more you know, the better your defense strategy will be.  It's interesting to note that as the economy continues to weaken our bankruptcy courts are being clogged up with more frivolous complaints than ever before.  Our bankruptcy judges are taking notice of this trend here in the Central District.  A Savvy litigation attorney will not only effectively defend you against any Creditor opposing your discharge, they may also be able to recoup your fees and costs to defend your case.

I know you're first reaction is to panic and think that your bankruptcy case will fail because you're being sued.  Relax and be sure you obtain competent counsel to represent and defend your case.  The law is on your side in most cases. 

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The new debt limits under Chapter 13 effective April 1, 2010 pursuant to 11 U.S.C. 109(e) were increased to $1,081,400 for secured debt and $360,475 for unsecured debt. This change represents about a 7% increase in the allowed debt limits. However, this increase still excludes many California homeowners who bought into the Jumbo loans sold during the bull market up to the crash in 2008. This means that if you’re a homeowner owing more than $1,081,400 on your mortgage(s), then you are not eligible to file under Chapter 13. Now what do you do? Well, unfortunately, you have the option of either filing under Chapter 7, if you pass what is called the Means Test; or, you must file under Chapter 11, if you want to save your home.
 

Many of these high debt homeowners have been short selling their homes as a means to eliminate or effectively deal with their underwater mortgages mostly because the IRS, in 2007 enacted The Mortgage Forgiveness Debt Relief Act and Debt Cancellation.  Now, I am not a tax adviser and encourage you to consult with your own tax adviser to determine your eligibility for income tax forgiveness. The problem with this remedy is that in a short sale, you’re giving up your home. What do you do if you want to keep your home and stop the foreclosure process? You will need to file bankruptcy under Chapter 11.
 

An individual considering filing bankruptcy under Chapter 11 faces both legal fees obstacles and lack of attorneys willing to perform the complex case requirements of a Chapter 11 bankruptcy case. Additionally, there are more complex and detailed reporting requirements to the Court. Just to get started in Chapter 11, you’ll be required to complete a prefiling credit counseling course; provide income tax returns; insurance policies; complete a real property questionnaire; and you must open new bank accounts, three in fact before your case is filed. The great news is that debts discharged through bankruptcy are not considered canceled debts by the IRS.

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Every year, the members of the Central District Consumer Bankruptcy Attorneys Association recognizes an attorney, trustee, or judge for their exemplary efforts affecting consumer debtors. The award presented is the Calvin Ashland Award.    This year's honor was awarded to Chapter 13 Trustee of the year, Kathy A. Dockery. 

Aside from the incredible honors, I noted the scuttle but about bow ties being appropriate for this occasion.  So, I took on creating my own award for this year; "Bow Ties: Who Wore It Best."  This year's semifinalists are pictured throughout.  These gentlemen take their ties very seriously.  Most notably was the confidence brought to the evening by the Honorable Judge Robles as he displayed the traditional, "tie-to-tie," style of bow tie.  Above, we feature an icon among bankruptcy attorneys, Mr. Dennis McGoldrick with his, "Wild," print yellow tie. 

Everywhere I turned, my colleagues all appeared jovial and celebratory; proudly displaying their ties in good faith.  Featured to the left are current CDCBAA President, Pat Green showing our past President, Jim King last year's bow tie.  These gentlemen display the "clip-on" version of bow tie.

Brazen color, bold patterns and polka dots were among this year's contenders.  Speaking of brazen, to the right, you will see Hale Andrew Antico with his tilted passionate red bow tie as he explains to anyone that will listen, why red is the best color for bow ties.  Below and to the left is Jason Wallach sporting the light yellow, polka dot bow tie.  His smile proves that wearing a bow tie makes you happy. 

All in all, it was a dazzling display of silk and what ever other fabric these accessories are weaved from.  This was an enjoyable evening to honor our colleagues for their incredible contributions to the thankless and tireless work in the field of bankruptcy law.  Please vote by comment and remember to have your bow tie photographed at next year's event for your entry into this underground category! 

Photos taken by famed photographer:  Will Taylor

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Debt settlement requires that you negotiate with creditors to settle debts for less than what you owe. Once an agreement is reached, you pay the agreed amount and your liability for that debt goes away. What these debt settlement companies don’t tell you is that you will also receive a 1099 tax form they filed with the IRS. Now that the debt is gone, you’ve got a tax bill for that settled debt. So, not only have you paid to get rid of the debt, you owe income taxes too.

Too often, hiring a debt settlement company to help you negotiate with creditors can cost in the thousands of dollars. What happens is that they set you up on their payment plan and then the debt settlement company begins taking your money first for their fees and never paying a dime to your creditors until their fees have been paid in full.  Many consumers end up in litigation with their creditors and these companies do nothing to assist consumers until they've been fully paid.

Here’s an example: Say you owe $5000.00 to credit card and you’ve done well and negotiated this debt down to $500.00. You must pay $500.00 to get rid of the debt. At year’s end you will receive a tax bill for $4500.00 and you must pay income tax on that amount; perhaps another 15% depending upon your tax bracket. You’ve paid a total of $1175.00 to settle that account. Simply follow this plan until each credit account has been eliminated and you get the picture.  Add to that cost, the fees for hiring a debt settlement company and you have nothing left.

Bankruptcy, on the other hand, effectively eliminates all debts, without any income tax liability. Usually, you are charged a flat fee for services. Once you’ve received your discharge, your debts are gone forever. Isn't that your goal? So, you pay nothing to your creditors, have no income tax liability and pay one flat fee to file your bankruptcy case and your debts are permanently eliminated.  There's no sense in foregoing a free consultation with a bankruptcy lawyer because you can generally keep your cash and belongings and still eliminate your debts.

Your credit score is the last thing you should be thinking about during any financial crisis. Besides your credit score only measures how well you manage DEBT and isn’t that what you’re working so hard to get out of? We have generally found that most people who file for bankruptcy have their credit score actually increase because the debts are gone. Soon after, you’ll receive offers for credit because the creditors know that you cannot file bankruptcy for another 8 years, making you a prime candidate for high interest credit cards. But why would you want to create debt ever again?
 

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Tune in to AM830 this Sunday morning from 10 a.m. to 11 a.m. when my partner John Greifendorff and myself, Christine Wilton guest on Real Estate Radio-Southern California with our host, Ron Siegel!

Ron Siegel is host of "Real Estate Radio - Southern California" on ESPN Radio AM 830 KLAA Sunday's from 10-11AM. Every Sunday, Ron discusses current events, real estate, and various other financial topics.  Mr. Siegel runs the Real Estate and Mortgage Resource Center at Stearns Lending and his radio show explores this topic from every angle.

The Real Estate Radio Network, hosted by Ron Siegel, is designed to help Consumers in Southern California understand the HOW and the WHY in our incredible Real Estate Market. Southern California is a unique place to live and an incredible place to invest. If you don’t own a piece of Southern California yet, make sure you tune in and gain all the knowledge you need to make an educated decision about when to enter the market. If you already own a home, listening to the Show will help you understand when it’s a good time to sell or refinance. Either way, the show is for you and we hope you’ll join us this Sunday at 10am on ESPN Radio AM 830 KLAA!

This Sunday morning from 10 a.m. to 11 a.m. we will answer questions that will effectively assist southern California homeowners deal powerfully and effectively with their lenders through bankruptcy.  Bankruptcy is a powerful tool for homeowners and is often overlooked and considered a last resort, yet the injunction that is the automatic stay is enforceable from the moment a bankruptcy case is filed, and Stops foreclosure dead in its tracks.  No other remedy is as effective or as economical to the homeowner.  Send us your questions and we'll do our best to get them all answered.  Thanks for listening!

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The foreclosure crisis is heating up in the media.  Last Friday, Attorney General Jerry Brown issued this Press Release saying,

"All lenders should halt foreclosures until they clear up this mess and ensure that the process is fair and complies with California law,"  Brown said. "Bank of America has taken an important step, and the other major lenders should follow its lead."

Brown called on all banks to halt foreclosures here in California, after the GMAC Mortgage deposition of a robo-signer from Florida was exposed. 

Consumer attorneys nationwide have been attacking this problem since the economic crisis began and we're not about to give up.  When it comes to fighting this fraud in bankruptcy, our fearless leader, O. Max Gardner is leading an army of more than 200 attorneys nationwide through his Bankruptcy Litigation Model Bootcamps.  The news has even reached Edmonton where one graduate's case was recently highlighted,  "'Robo signer' ruling gives owners loophole in foreclosure cases."

Other news releases show that, like dominos, other banks are falling in line and halting their foreclosures under the pressure of the media attention being spotlighted on the industry's careless practices.  The  trust of the American people has eroded as the American dream of homeownership turns into our nation's nightmare because of corporate greed.  The question of whether the foreclosure crisis is slowing the economic recovery is addressed at Daily Finance.

The foreclosure crisis has not slowed recovery, it's the denial of the federal government that this is a problem at all that's causing us to sink deeper into economic uncertainty.  Here's another great article that exposes the Rot from Within the Foreclosure Mess.

It's time for the American people to take back our country.  Make your Vote count!  If you suspect fraud, report it!  Call your local bankruptcy attorney and take a stand to stop your dream from being stolen from you.

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Here's a tip; if you're going to live extravagantly, don't make that lifestyle the focus of a reality show. Teresa Guidice starred in the reality show, Real Housewives of New Jersey, with her husband Giuseppe.  Mrs. Guidice was often featured on the Bravo show going on outlandish spending sprees to furnish their newly constructed and underwater, $1.7 million dollar home. Now, the Chapter 7 bankruptcy trustee is alleging the debtors hid more than $250,000 in assets in their bankruptcy petition filed in November, 2009. 

You don't have to look very far to see the cash fly.  Teresa Guidice has a book, Skinny Italian; an online clothing boutique, T.G. Fabulicious LLC.; and the couple is also accused by the trustee of having an interest in a pizza parlor and laundromat.  They also mysteriously made more luxurious purchases after their bankruptcy filing.  Apparently, the online company made these purchases for their household goods totaling more than $60,000.  The trustee is seeking a preclusion of discharge and/or a dismissal of the bankruptcy case that would deny the debtors the benefits of bankruptcy.  The drama unfolding in federal Bankruptcy Court is worthy of a reality show all its own. 

There is a lesson in here somewhere I just know it.  I suspect that hiding assets from the bankruptcy trustee is never a wise idea.  Remember that you are signing your bankruptcy petition and schedules under penalty of perjury that you have disclosed all of your assets and all of your debts.  Bankruptcy Fraud is Prosecuted and is a Crime. 

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Let’s talk about Mr. Money today. This weekend, I decided to take in the movie, Maxed Out. What an awakening to see that over the years, we have been sold a load of crap about the economy. We are continually told to go out and spend. Again, in this recession, the people are being told to go out and spend money to stimulate the economy. Small business is being told to spend their capital as a means to stimulate the economy. Our government is spending the People's money because we can't and won't. The federal government is living in Fantasyland and the last time I checked, Fantasyland was a place I’d seen only at Disneyland.
 

An alarming statistic presented from this movie was the most popular customers of credit card companies are people who have been through bankruptcy. The reason cited was that the credit card companies know two things about people who have a prior bankruptcy;

1. First, they can’t file for bankruptcy again (or at least for 8 years), and
2. Second, they have a taste for credit. They’re willing to make minimum monthly payments forever. That’s where the banks make their money.
    

Professor Elizabeth Warren, Harvard Law School, spoke to executives at Citigroup and was told by one participant, that if you cut out the most marginal borrowers to reduce the risk of bankruptcy, you cut out the largest percentage of the bank’s income. Mr. Money was a character from a movie about money in the 1950's and excerpts from this classic film were strewn throughout. Mr. Money said that we have to ‘earn’ credit. However, many banks have found that ‘giving’ credit to college students is the same as recruiting young smokers; they’re loyal to their first credit card issuer.

I’m completely unnerved by the data collection companies such as ChoicePoint that collect data on each of us and then sell that data to the federal government. Just a reminder; you're right to privacy as provided in the Constitution, is only a right to privacy from the federal government and not private businesses.  Corporate America has been collecting information about YOU and is using it to take your money! 
 

Between 1994 and 2004 over ten million Americans filed for bankruptcy. Then, there was another rush to file bankruptcy, with more than one million bankruptcy filings just before the Bankruptcy Abuse Prevention and Consumer Protection Act, known as BAPCPA passed in 2005. This bill was promoted by the credit card issuers. The bill was written by MBNA, the primary contributor to George W. Bush’s presidential campaign. With the collapse of the economy in 2008, we are once again experiencing a historical number of bankruptcy filings in American history. A total of 781,150 consumer bankruptcy petitions were filed during the first six months of 2010. As I have been saying, we need to clear our debts and declare, “Never Again!.” Pass the bankruptcy petitions now please.
 

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I was privileged to attend an insider’s breakfast briefing with guest speaker Congressman Ed Royce of the 40^th District a couple weeks ago. This event was hosted by the Fullerton Chamber of Commerce. When Congressman Royce spoke about the impact of economic reform and healthcare, as it relates to small business here in California, he mentioned that businesses were hoarding capital and not spending because of the uncertainty in Washington. We all know that the economic recovery is primarily dependent upon spending, but most Americans are still working on paying down their debt.   Adding to the lack of consumer spending is the national jobless rate holding at 9% and here in California, we rank third with 12.3% unemployment rate.

Ironically, as Mr. Royce was speaking, his colleagues in the Senate blocked a bill to aid small business. The problem with most bills though, is the cost of such legislation. We can all agree that government spending must end and the private sector needs to pick up the slack, but with political rhetoric at an all-time high and legislation costing trillions of dollars, paid for by cuts in Medicare and increased fees; the Congressman explained that this would have erected a new entitlement program.

Congressman Royce explained that Healthcare and taxes are the two major expenses to small business in America. The hoarding of capital by American businesses is due to the long range rule changes creating uncertainty in Washington. Congressman Royce explained, “We must eliminate uncertainty first, then small business will begin to spend capital.”  We need to eliminate our debts and the uncertainty in Washington, along with the toxic mortgages.  This is a marathon recovery, not a sprint to the economic finish line.

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Last week, Yves Smith caused a stir with this post, "Fannie and Freddie Continue to Rely on Foreclosure Mills Despite Evidence of Fraud."  The 64 comments are worth a read, if anything to ferret out the boys from the men in terms of skill level in dealing with the legal issues.  Smith gives acknowledgment to O. Max Gardner, who is the nation's go-to bankruptcy litigation attorney and, I am proud to say that, I am a Lieutenant in his army.  So, what's all the scuttle butt about? 

Smith's post referred to another piece published by Mother Jones, "Fannie and Freddie's Foreclosure Barons," which provides a peek inside the shady document fabrication operations to cover up past mistakes in the mortgage industry and post foreclosure clean-up.  What a mess.

Looking at the securitization issues from a California standpoint, we have both federal and state law to contend with.  From a bankruptcy position, here in the Central District we have the In re Foreclosure cases , In re Hwang, In re Walker, and In re Vargas.  Since the mortgage follows the note, we need a complete, and unbroken chain of custody of the note and adherence to the California Commercial Code.  We are arguing the Creditor has no standing and even if they did, there are major computation errors in their claims. The fight goes on for now.  Results may vary in California.  Side effects include general frustration; nausea; possible foreclosure; and guilt for not paying your mortgage. 

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Let's face it, we are in tough financial times throughout our country.  There are many options to dealing with money issues.  Along with tough financial times comes stress, even depression, anxiety and fear.  Our emotions are tied very closely to our relationship with money.  Here are a few tools that just might help you gain some perspective.

Take a look at this WebMD article, The Debt-Stress Connection and notice where you might be in terms of your stress level about your current financial situation.  Your life is much too precious to lose over your debts.  It's important to start right where you are and decide to take action; whatever action is necessary to change the outcome. What is the worst that could happen to you financially?  Most people don't answer the question with any health issues, but that's what you're facing if you remain paralyzed about the situation.

Take action and get help.  I'm a big fan of the Dave Ramsey program for those of you that have the ability to climb out of debt without bankruptcy.  Learn about financial planning and get yourself on a budget today.  Have a reality check with your doctor, your tax professional, financial planner and your bankruptcy lawyer.

Vision your life in five years.  What does your life in the future look like?  Where will you live?  How will you provide for your self?  Your family?  Imagine what that looks like and then decide the path that is right for you to get there.  For some, it's creating a budget and sticking to it.  For others, it means filing for bankruptcy. The sooner you commit to your future, the sooner you'll feel better.

Remember that financial responsibility requires that we make some tough choices in our lives.  Filing bankruptcy is not the end, but a process toward a new beginning.

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I know what you've been told because I have heard it all too.  The government wants you to do your very best to avoid bankruptcy at all cost.  Bankruptcy is bad; or at least, a harsh remedy to dealing with debt, and should be your last resort.  We have all bought into this 'agreement reality' and it couldn't be further from the truth.

I assert, bankruptcy is a powerful tool that should be considered in your overall financial plan that includes eliminating debts.  Adrian Lapas, over at Bankruptcy Law Network explained the pitfalls of debt settlement by warning of 1099 tax bills for canceled debts; and even creditor's unwillingness to negotiate a settlement at all.  Oh, and I'm really tired of discussing your credit  score because it's already been adversely affected by your not making your payments on time. In fact, filing bankruptcy might actually improve your credit score once all that bad debt is cleared from your credit report. 

I've had clients come to me after signing up with these debt settlement companies and spending nearly $10,000 on fees, only to find themselves in lawsuits with their creditors that these companies warned them about and would not help them with.  Remember that if you negotiate your settled debts, you're still paying money toward them and you'd better have some cash saved up to pay it in full if they accept your offer.  Also, you must be prepared for that 1099 tax bill at the end of the year because you'll wind up paying taxes on that can celled debt.

Bankruptcy not only eliminates the debt without any payments from you, it will eliminate your liability entirely and you won't owe taxes on the debts that were discharged in the bankruptcy.  That's where bankruptcy as a tool, is more efficient and not only a powerful tool, but a cost saving device for you as well.

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Recently, Katie Porter, over at Credit Slips, reported that Bank of America (BOA) reached a settlement with the Federal Trade Commission regarding certain mortgage overcharges, including overcharges in bankruptcy once serviced by Countrywide. Henry Sommer joined the conversation, asking if the Bank of America Settlement is a sign of true progress.

After reading the consent judgment and order provided by Katie, followed with Henry's entertaining summary of the requirements set forth in that order that include BOA's agreeing to not lie, cheat, or steal from consumers, I am not getting that warm feeling like we've accomplished much.  Did I miss anything?

Those homeowners that can afford to make a mortgage payment seek Chapter 13 where they are given time to make up the arrears on their mortgage and get their finances back on track.  What has been happening though is that many receive their discharge only to be served a Notice of Foreclosure soon after for charges on their mortgage. I'm even seeing this when the servicer files their proof of claim, declaring that "hey, we're going to do this up front and charge attorneys fees and costs to even file this proof of claim."  They'll also usually include inflated arrears, inspection fees they did not conduct, and other fees and costs that are superfluous to your mortgage. 

It is imperative that debtor's counsel in chapter 13 practice, scrutinize every proof of claim in every case and hold these Creditors to account for their willful failure to follow the law.  If you're a homeowner seeking to stop a foreclosure and you know that you've been overcharged and your loan servicer adding charges incorrectly, don't file under Chapter 13 without a competent attorney that not only practices Chapter 13, but really understands this mortgage mess we're in. 

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Many a Creditor has driven us bankruptcy lawyers and our clients nuts with their antics, but freezing a client's bank account after their case has been filed takes the cake.  The Ninth Circuit BAP just released In re Mwangi Case No. 09-1408 (9th Cir.B.A.P., June 30, 2010), which held that Wells Fargo's national policy of placing administrative holds on accounts of persons filing a bankruptcy petition violates the automatic stay by exercising control over property of the estate.  The issue in Mwangi was their national procedure of running a computerized comparison of all newly filed Chapter 7 bankruptcy cases against Wells Fargo's list of account holders.  If they found a match of one of their account holders who had also filed bankruptcy, then Wells Fargo would immediately 'freeze' that account, preventing the debtor from having access to their money. 

It's no secret that Wells Fargo has been notorious for freezing the accounts of debtors filing bankruptcy under Chatper 7.  We also have it on good word that Wells Fargo will continue to hold funds while they appeal the Mwangi case. 

Keep in mind that your bank account is property of the estate upon filing your bankruptcy case that presumably includes the cash in your bank accounts.  So, don't go on a spending spree just yet.  Any Exempt funds are not exempt until 60 days after the conclusion of your meeting of creditors.  Technically, all of your assets, including cash on hand must be turned over the trustee to administer your estate, but that is just not practical.  This means that the law is not on your side here and while Wells Fargo can put a freeze on your accounts, they also must act prudently by asking for guidance and direction from the Trustee and/or Court as to what to do with your funds.

This reminds me of the term "vicious compliance."  This term seems to crop up in certain union worker circles when they don't like a particular ruling or law, they will strictly comply with it and demonstrate that it doesn't work and then use it against management by knowing it better.  So, if Wells Fargo wanted to 'viciously' comply with the law, they would stop freezing accounts and simply send all the money to the trustee.  No matter how you slice this ruling, Wells Fargo is still a big bully.

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As debtor's counsel, I get the sense that many Americans who need to file for bankruptcy are avoiding it still because of its stigma and the myths fed to them by their government, creditors, family and friends.  In spite of the 'file bankruptcy as a last resort' method to financial reform for American households, filings are soaring in 2010.

Liz Pullium Weston wrote about it in her article, Bankruptcy filings soaring again.  I can't tell when that article was written and that bugs me to some extent, but I can move on from that.  In May, the American Bankruptcy Institute issued their first quarter press release, that revealed that bankruptcy filings are up 17% in the first quarter over 2009; and, consumer filings are up 18.2% in the first quarter.  California is 8th on the list of states with the highest per capita filing rate for the 12-month period ending March 31, 2010, with our Central District experiencing a 57.8% increase. So, what does this mean for the remainder of the year?

I predict that you will see California sink into the ocean of financial despair with the continued housing market depression and the banks attempt to control the housing prices by holding inventory of foreclosed homes.  Foreclosures will continue to rise as the asset-backed securitized mortgages continue to reset over the next 7 to 10 years.  Remember that these teaser rate, sub-prime, fancy loans were sold straight into the housing crash in 2008.

When California decides to make the tough decisions in closing their budget gap, you will see more municipalities filing chapter 9, like Valejo, CA, when the state pulls funds from the communities and cuts services.  You see, states can't file bankruptcy like the local governments can.  The problem here is that the federal government can print money when they need it, and municipalities can file bankruptcy under Chapter 9 of the Bankruptcy Code, but the states have no remedial measure other than to cut services and pull funds from the local governments.

The bottom line here is that financial reform starts with every American taking personal responsibility for their own household and taking stock of their options, including the option to choose to file bankruptcy under Chapter 7, 11, or 13, depending upon your own set of circumstances.  Most bankruptcy attorneys offer free consultations by phone and you should take advantage of their advice.  We help our clients steer clear of scams and help you to take stock of your liabilities, depending upon your current situation and your financial goals.  Yes, you can keep your stuff and lose your debts.  You can save your American Dream of home ownership. 

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Are you one of the many Americans caught up in the viscious grip of payday loans?  It seems, these days, that payday loan shops are replacing Starbucks on every corner.  It's the new business to be in with this depressed economy. Here's what happens when you obtain payday loans in your rup-up to filing for bankruptcy.

If you have presented a post-dated check as 'security' for the loan, when you file for bankruptcy, the payday lender will simply cash the check and hang on to the funds.  The lender can do this under 11 U.S.C. Sectioin 362(b)(11), which provides that the automatic stay does not apply to the presentment of a negotiable instrument and the giving of notice and protesting dishonor of such an instrument.

However, the overconfidence on the part of these payday lenders comes with a price.  One decision, In re Thomas, 311 B.R. 75 (W.D. Mo. 2004) provides that a post-petition transfer of funds out of the account by presentment of post-dated payday loan check could be avoided pursuant to 11 U.S.C. Section 549(a).  This means that you could bring an action to recover the funds as an unauthorized post-petition transfer.  Unfortunately, such actions are more costly than the amount transferred; which is why most debtors decline to bring an action under Section 549.

Ask your bankruptcy lawyer about their experience with repeat offenses by payday lenders because the creditor's willful violation of the automatic stay does give rise to actual damages, costs, and attorney fees; even punitive damages in some cases.  Don't think that these payday lenders have the upper hand just because they have your check in their hands.

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California’s mortgage crisis is out of control. The sub-prime lending didn’t end until late 2007 and into early 2008 when the economy collapsed. What further frustrates our sunshine state’s mortgage problems is that we were sold Jumbo loans due to our high property values. A Jumbo loan is a mortgage loan in an amount above conventional conforming loan limits and as of 2010, the limit is $417,000 according to Wikipedia.org. So, many California homeowners are in default on their primary mortgage because their “teaser” rate has ended and they’re now faced with increased interest rates and forced to pay principal and interest on a mortgage that they could not afford, with a jumbo loan that the lender is unwilling to modify.

Homeowners are being led down the primrose path of a modification offer by the lender only as a courtesy due to the HAMP program’s rules and California Law that requires the lender to contact the borrower and attempt a workout. The law, however, does not require a mandatory workout and the sub-prime lender, loan servicers, and asset-backed securitized mortgages will always be refused a modification of their mortgage because the investors don’t want it.

It may seem like we’re in a desperate situation here in California, and that’s why so many scams are cropping up. Recently, I’ve even been marketed to by these forensic mortgage loan audit scammers. They’re a new twist on foreclosure rescue fraud, so be alert to these offers. The envelope looks legitimate, but it’s nothing more than a cleverly disguised marketing piece. They generally target those homeowners in foreclosure, but they’re now starting to target the potential predatory loans too.

If you’re looking for help, avoid:

1. anyone offering guarantees;
2. instructs you not to contact your lender, lawyer, or housing counselor;
3. collects a fee up front; encourages you to lease your home so you can buy it back over time;
4. recommends that you make your mortgage payments to someone other than directly to the lender or loan servicer;
5. offers to buy your home for cash at an amount less than market value; or
6. pressures you to sign papers you haven’t had a chance to read thoroughly or don’t understand. Get Help.

You can always check out the Federal Trade Commission [FTC], the nation’s consumer protection agency for current information and scams to avoid. Contact your lender or loan servicer immediately when you fall behind on your payments. You can also get FREE advice from housing counseling agencies certified by HUD by calling 1-888-995-HOPE. Remember that filing bankruptcy will LEGALLY STOP A FORECLOSURE through the Automatic Stay, 11 U.S.C. §362.

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"If anything good should ever happen in the foreclosure crisis, we should all celebrate now," says Mandelman Matters.  His latest article entitled, HAMP. It's a Real Class ACTion, has me doing the happy dance as I read about the class action law suit that was filed by Boston-based nonprofit, and extremely formidable National Consumer Law Center ("NCLC"). 

NCLC, along with co-counsel has brought four class action lawsuits on behalf of residents of Massachusetts that challenge the failure of Wells Fargo Bank, Bank of America, J.P. Morgan Chase Bank and IndyMac Mortgage Servicers/One West Bank to honor their agreements with borrowers to modify mortgages and prevent foreclosures under the HAMP Program. Get Excited because this is the first step toward national reform!  It may start in Massachusetts, but never fear, California will catch the wave and you can take my words, and Mr. Thompson's to the bank. 

HELP NCLC HOLD THE BANKS ACCOUNTABLE FOR WHAT THEY'VE DONE UNDER HAMP:

                                                                 DONATE TO NCLC!

And, in the “Comments” box on the donate form please type in “Mandelman Matters," because he cared enough to share this priceless update with all of us and I'm only mirroring his sentiment and bringing it to the west coast.  Your Local Bankruptcy Lawyers appreciate the support.

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Whether you're filing bankruptcy under Chapter 7 or 13 in California, you will get to keep most of your belongings and your home.  That is, if you have a home worth keeping.  Under the law, the keeping of assets is known as 'exemptions;' meaning the assets are exempt from being taken to pay your debts.  These exemptions can be found in the California Code of Civil Procedure Sections 703 and 704. 

On Schedule C of the bankruptcy forms, you will be required to state under which law you are applying your exemptions and you must use one or the other and cannot use both.  This is important to keep in mind because even though Bankruptcy Law is federal law, here in California, we have our own unique sets of exemptions that we can apply.

Don't lose your stuff in your attempt to eliminate your debts through bankruptcy by filing your own case.  Now, more than ever before, you need to consult with your local bankruptcy lawyer to protect your rights.

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I always tell my clients that your credit score only tells you one thing; how well you manage DEBT.  So, why would you want to go back into debt again after bankruptcy?  After all, don't you just want to enjoy the feeling of financial freedom from debt for as long as possible?  My first inclination would be  to strongly discourage you from ever getting into debt again, but I know you're an adult and you can do with your life and money as you please.  So, here are some suggestions I found from the folks over at the National Consumer Law Center on Using Credit Wisely After Bankruptcy. 

Lower interest rates. Just because you've filed bankruptcy; it doesn't mean that you will forever be stuck with high interest rate offers on credit.  In fact, I strongly encourage you to avoid those high cost, high interest rate predatory type lenders.  Run, don't walk away from anyone advertising, "Bad Credit?; No Credit? Bankruptcy? No Problem!"  You're guaranteed to get a loan from these lenders, but it will cost you more than it did to file bankruptcy in the first place.  Don't get pressured into signing any contract that you don't understand, or that cost too much just for the credit. 

Here's the deal.  You've worked hard to take responsibility for your financial well-being and now have your bankruptcy discharge.  You'll be able to get credit again and on good terms too, but don't you want better than that for yourself and your family?

Savings accounts.  Instead of debt and credit, consider setting money aside every month in a savings account to save for big ticket items.  Remember layaway?  Be your own lender and save money to buy what you want.  Chances are, if you have the cash in your account and actually have the money to buy that flat screen TV, it will be much harder to part with that cash than it would be to put it on a credit card and pay 29% interest.  There is a dysfunctional psychology to that.  So, if you can't afford it, save your money and pay cash instead.

Shop around.  Rich people do this all the time.  Shop around for services you need and use all the time, like groceries, phone service, insurance, etc. 

Ask for discounts.  I have found that negotiating and asking for discounts on things really makes a difference.  Here's a story:  I was at a do-it-yourself-store a few weeks back.  My boyfriend and I were shopping for area rugs for our living room.  We found one we could both agree on, but the only one left was the hanging sample.  It was in otherwise perfect condition hanging on the display clamps.  So, I told the representative that I would like for him to roll it up, give me a discount and send me on my way with the rug.  Now, mind you, they were already on sale and I was asking for an even greater marked down price.  He went to talk to his manager and brought back a hand written ticket and had taken another $50.00 off the price!  I am telling you that asking for a discount works. 

Read before you sign.  Don't be embarrassed because you don't understand a complex financial document.  You're not a lawyer.  Hey, I know some lawyers that don't understand complex financial products.  Remember that when you sign a legal document and enter into a contract, you're agreeing to what is in that document whether you read it, or understood it.  Be a well informed consumer.  If you don't understand the contract; don't sign it.  Just because something is being sold in the marketplace does not make it a good idea. 

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Your federal government tried to help save your home by creating the Home Affordable Modification Program, or HAMP as we have come to know it.  Too bad it's not working because this program only has a 20% success rate.  Many homeowners who were stuck in the log jam of the HAMP program were forced into bankruptcy, only to find the lenders reject their modification after their case was filed. 

The HAMP administration has created supplemental directives that briefly support modifications for those either in bankruptcy or contemplating filing bankruptcy. These changes become effective June 1, 2010.  Under these new guidelines, servicers must consider borrowers in active bankruptcy for HAMP if a request for modification is received from the borrower, borrower’s counsel or bankruptcy trustee.  Borrowers who are in a trial period plan and subsequently file for bankruptcy may not be denied a HAMP modification on the basis of the bankruptcy filing.  Even if you've received a discharge in your bankruptcy case, you should still be eligible for a HAMP modification. 

Here is some great news for those in a chapter 13 bankruptcy.  As taken directly from the Supplemental Directive 10-02, "When a borrower in an active Chapter 13 bankruptcy is in a trial period plan and the borrower has made post-petition payments on the first lien mortgage in the amount required by the trial period plan, a servicer must not object to confirmation of a borrower’s Chapter 13 plan, move for relief from the automatic bankruptcy stay, or move for dismissal of the Chapter 13 case on the basis that the borrower paid only the amounts due under the trial period plan, as opposed to the non-modified mortgage payments."  This means that if you're in a trial modification and you subsequently file for bankruptcy under Chapter 13, you will continue to pay the modified mortgage payment. 

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In this economy, all cross-sections of our community have been impacted.  Money matters to all of us.  Your local bankruptcy attorneys are working hard to dispel the lies and myths about filing bankruptcy.  It is imperative that the truth be told; bankruptcy is an important tool that will facilitate Economic Recovery for America.  That's why we're coming to the Long Beach Lesbian and Gay Pride Festival, May 15-16, 2010.

Attorney R. Grace Rodriguez is the sponsor of the Financial Wellness Clinic booth inside the festival.  Local Bankruptcy Attorneys will be on hand to answer your questions about debt relief options; fiancial wellness; tips to avoid bankruptcy; the bankruptcy process and life after bankruptcy.  A special note to homeowners:  Filing Bankruptcy Will Stop Foreclosure! 

The lesbian and Gay community has special legal needs when it comes to bankruptcy and financial wellness.  It is more important than ever to know your legal rights.  The attorneys will be dispensing valuable information and providing pricelss resources to the booth's viistors.  Be sure to look for the Financial Wellness Clinic Booth at this year's festival, held in Long Beach on May 15-16, 2010.  Be proud.  Be debt FREE.

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California homeowners don't stand a chance to save their homes outside of bankruptcy because we are in a non-judicial foreclosure state.  This means that lenders can foreclose on a home without going to court.  Filing a civil action in state or federal court is quite costly and, it seems, that many attorneys simply do not recognize a fraudulent claim by a mortgagee when they see it.  So what's a homeowner to do?  File a chapter 13 bankruptcy.

A chapter 13 bankruptcy is a very cost effective device to saving a debtor's home because it immediately brings the mortgage current, and allows the arrears to be paid over time through the plan.  Chapter 13 bankruptcy puts the debtor in control of their case from the very start.

After the case is filed, the mortgagee must file a proof of claim in order to receive any payments under your plan.  The problem starts here.  Professor Katherine Porter, of University of Iowa College of Law wrote and abstract, Misbehavior and mistakes in bankruptcy mortgage claims and says that this misbehavior has largely gone unchecked on a national level.  Scrutinizing the lender's proof of claim is a crucial step to saving your client's home.  Many times there are violations of Federal Rule of Bankruptcy Procedure ("F.R.B.P.") 3001, which requires the use of official court forms and evidentiary requirements. 

We have seen a vast majority of errors in proofs of claims where they fail to properly itemize their fees; or perfect their security interest; or they do not attach any documents at all.  These are just a few reasons counsel should rigorously enforce Rule 3001 and object to any proof of claim that has even the slightest of errors.  As debtor's counsel, it is our duty to preserve the fairness and accuracy of the bankruptcy system because neither  the creditors, nor their counsel seem to be voluntarily complying with all procedures and laws.  Isn't that how we got into this current financial mess in the first place?

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As a consumer debtor, you will usually have two options when deciding to file bankruptcy; Chapter 13 or 7 under the Bankruptcy Code.  The question is which is better?; and which one should you file?  The answers to these questions are as unique as your individual circumstances.

Under Chapter 7 of the Bankruptcy Code, you are declaring that you have no ability to pay your debts at all.  You are, in a sense, liquidating your estate.  From the moment you file your case under chapter 7, the trustee takes control and has the right to take any assets available to pay your debts.  However, you have certain rights to retain assets under California Code of Civil Procedure Sections 703 or 704.  This means, that you will be able to keep your home, cars, retirement accounts, personal belongings, up to the limits pursuant to the law. These cases usually conclude within about six (6) months.

Under Chapter 13, you are declaring that you have some disposable monthly income to apply toward your debts and you are asking the Court to allow you to restructure that debt over time and allow you to pay only what you can afford. 

Chapter 13 is, in my opinion, the best choice to save your home, dispute debts owed, and otherwise hold your creditors accountable for any mistakes in your debt obligations, accounting, collection activity, fraud or abuse.  These cases require a longer period of time, usually up to five (5) years, and there are additional reporting duties involved.  You are strongly discouraged from filing a chapter 13 bankruptcy without an attorney because of the additional local rules, accounting and reporting requirements. 

Most everyone has thought of filing bankruptcy as simply filling out a bunch of forms.  I would have said that before the BAPCPA in 2005.  Now, with the sub-prime mortgage meltdown and their complex financial contracts; scams, despair and desperation of the banking industry; and the complexities of the Bankruptcy Laws, you need to consult with your personal bankruptcy lawyer before your case is filed.  Your bankruptcy lawyer will save you time and money by reviewing your current financial situation and create strategic plan to eliminate your debt with the least amount of money out of your pocket.

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Let's talk about your retirement accounts as they relate to your decision to file for bankruptcy.  There are many varieties and vehicles for retirements savings that include pensions, 401k, 403b, IRA and Roth IRA accounts.  Perhaps there are others that I am not aware of.  As I have said before, DO NOT CASH OUT YOUR RETIREMENT TO PAY YOUR DEBTS.  Your retirement accounts are ONLY for retirement and should NEVER be accessed for any other reason. 

When you file bankruptcy, all of your assets become a part of your estate.  The trustee will have temporary control over that estate and can administer certain assets to pay debts.  However, some assets in your estate, including retirement accounts are exempt from being taken by the trustee. 

One great reason to hire an attorney to assist you in filing bankruptcy is pre-bankruptcy planning.  Your attorney will give you valuable advice before filing your bankruptcy case.  Converting non-exempt assets to exempt assets before filing a bankruptcy is not only non-fraudulent, your attorney has a duty to maximize this type of pre-bankruptcy planning.  Keep in mind the CA IRA has a "reasonably necessary" for retirement limit, in addition to limitations of contributions to only the tax deductible amount for each tax year.

The good news is yes, you can fund that IRA before filing bankruptcy.  Be sure to consult with your personal bankruptcy lawyer to ensure you're taking full advantage of your exemption rights.

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I believe that filing bankruptcy is a compassionate act.  I alleviate the suffering of my clients by assisting them to obtain relief from their debts through bankruptcy.  My clients are good people with severe financial hardship, who seek to transform their financial distress into financial freedom.

In case you haven't heard, bankruptcy has a history as old as religion itself.  The Bible itself even allows for forgiveness of debts, as Matthew B. Tozer and Ben E. Lofstedt wrote so eloquently.  Jill Lepore wrote, Annals of Finance, “I.O.U.,” in The New Yorker, which chronicles how we used to treat debtors in America.  My favorite sentence in that article reads, " . . .most people who fall into debt are victims of the business cycle, and not of fate or divine retribution."  Keep that in mind as you consider that it's okay for the likes of Chrysler, GM, and celebrities to file for bankruptcy, but not you.

I have the hardest time, standing by, watching the incredible suffering of humanity over debt.  Remember when the airline attendant says that in case of emergency you put the oxygen mask on yourself first?  The same applies to your finances.  Loving one's self starts with you.    When you put yourself and your family first, you can transcend the suffering and make your own choices in life, moment to moment. 

Law Professor Brent T. White recently wrote a paper entitled, "Underwater and Not Walking Away:  Shame, Fear and the Social Management of the Housing Crisis."  The media plays a huge role in supporting the "moral responsibility' to pay one's mortgage.  Read his paper and decide for yourself. What will you do in 2010 to put your self and your family first?

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Back in November, I explained to you the complexities involved in discharging student loans in bankruptcy.  These rules have not changed with the latest U.S. Supreme Court ruling in the case of United Student Aid Funds v. Espinoza.  The New York Times article, Bankruptcy Ruling in Student Loan Case points to the brief submitted by United that warned of "open flood gates" if the court were to rule in favor of the debtor in this case.  All this crying on the creditor side reminds me of the story of  the boy who cried wolf.  Unfortunately, this win for the debtors will not likely amount to a broad brush approach or change the dischargeability of student loans in bankruptcy; here's why.

First, we're dealing with the underlying chapter 13 bankruptcy case where neither the Debtor, nor the judge  followed the the "undue hardship" test.  Again, remember the hurdles that I laid out in my last article on this subject, Discharging Student Loans In Bankruptcy, and you will see that the Debtor, Espinoza, did not file or serve an adversary proceeding complaint on United. 

Second, the reason the Supreme Court ruled in favor of the Debtor in this case was simply because the Creditor, United, failed to timely object or appeal the Court's confirmation of the Debtor's plan.  United received notices from the Court regarding the chapter 13 plan and the Court's approval of it, which named the only debt in the plan as the student loan and United neither objected or appealed the Court's ruling.  So, United had notice of the Court's error and took no action.  Years later, when they tried to re-open the case, it was too late.

This decision is not about student loans as much as it is about bankruptcy procedure and that two wrongs don't make a right.  This is just another tool to use to protect consumer's rights where the lenders sit on their thumbs and fail to file timely objections.  As an aside, I must note that this was a unanimous decision by the Supreme Court, which is a very rare occurrence.

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Adversary Proceedings: what are they?  The simple answer to this question is that an adversary proceeding is a civil action in the Federal Bankruptcy Court; it's a lawsuit.  All adversary proceedings are governed by the Federal Rules of Bankruptcy Procedure "F.R.B.P." Part VII.  F.R.B.P. Rule 7001 provides that a party can file an adversary proceeding to recover money or property; to determine the validity, priority, or extent of a lien or other interest in property; to obtain the court's approval to sell property; to object to or revoke a discharge; to object to the an order of confirmation of a chapter 11, chapter 12, or chapter 13 plan; to determine the dischargeability of a debt; to obtain an injunction or other equitable relief; to subordinate any allowed claim or interest; or to obtain a declaratory judgment to any of the foregoing.  There are some exceptions stated in the Rule, but you get the idea.

From the moment you file for bankruptcy, your entire estate comes under the scrutiny of the trustee and the court.  Your bankruptcy lawyer's job is to protect your interests in your estate.  Sometimes this requires the additional work of filing an adversary proceeding.

Why are they used? Adversary proceedings are used to protect your estate.  As an example, I have a client whose home was in foreclosure at the time I filed a chapter 13 case on her behalf.  Upon reviewing her mortgage documents, I determined that I could possibly cramdown her mortgage because some persuasive case law supported this in her situation.  In order to gain the court's approval to cramdown her mortgage, I needed to file an adversary proceeding against the lender.  This is just one example of why we use adversary proceedings in bankruptcy cases.

Who can initiate them? Any party can file an adversary proceeding, but remember that an adversary proceeding has limited scope as discussed above.  Generally, the debtor will initiate an adversary proceeding to protect her estate from creditors who have not followed the law.

How do they affect bankruptcy proceedings?  Generally, an adversary proceeding will cause your bankruptcy discharge to be suspended, or put on hold, until your adversary case has been decided.  This is especially true if the subject of the adversary is to dispute your discharge. 

A knowledgeable bankruptcy attorney will first listen to your unique concerns and create a strategy that will help you to achieve your financial objectives with the least amount of liability.  One of the best reasons to file an adversary case is to protect your home from the predatory lenders who may have lost your note.  Talk to your bankruptcy lawyer today. 

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Let's face it; the economic recession is dragging on and there are no signs of improvement.  The government spending is the only spending that is propping up our economy.  So, when you hear in the news that spending is up, it's your federal government doing the spending with bailout money, and building projects for green technology; that's it.  We consumers are not so fortunate and I'm am proud to be counted with the majority who are paying down our debts, but why?  Why do we continue to be the slaves to our creditors who are increasing interest rates and charging extortion penalties when we're a day late?

Jay Jump, a Washington based consumer bankruptcy attorney addressed this very question in his recent blog post where he discusses, to a group of Realtors, that filing bankruptcy is personal financial responsibility.  His article is pretty lengthy and he admits that at the outset, but he's right on point.  We need to set our emotional high morality aside and look at our own households as small corporations and our families as our shareholders.  When you look at your financial affairs from the perspective of a business owner and who you owe a duty to; your family becomes the priority and your creditors take a back seat.  When you put your priorities in order, filing for bankruptcy makes sense in many cases.

Being financially responsible means cutting your losses before you lose everything.  It means leaving your retirement money where it belongs; for retirement.  When you are financially responsible and know that the numbers don't add up where you can feed your family and pay your debts, then the debts must be discharged in bankruptcy. 

You can transform your financial distress into financial freedom from the moment you sit down with your bankruptcy lawyer.  The stress is further reduced the moment the bankruptcy case is filed on your behalf.  Then, when your discharge notice arrives from the Court, you have done the very best you can and protected your small corporation, Your Family, from financial disaster and made a difference.  Read what Mr. Jump has to say and decide for yourself if filing for bankruptcy is responsible financial behavior because I'm in complete agreement with him.

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I've had several clients come to me after working with debt settlement companies that have provided no service at all, except to take my client's money.  These debt settlement contracts usually provide that the debt settlement company will set up a trust account with your name on it and take their fees and payments first.  Then, when there's enough money in the account, they will begin to negotiate with your creditors.  When you agree to the settlement of the debt, the debt settlement company gets even more money.  To say that they nickel and dime you into further debt is being nice.  I would like to think of it as unconscionable; that's the legal term.

Bruce Weiner, a New York bankruptcy lawyer, points out the pitfalls of working with debt settlement companies in his recent blog, "1099-C and Forgiveness of Debt:  Another Reason to Be Wary of Debt Settlement Companies," and "Wall Street Journal Says, 'Beware of Debt Relief Offers,'"  that these companies make false promises and don't deliver.  Their marketing campaigns invade every inch of the media and they serve to disseminate bad information on a viral level that only confuses the general public and causes many to go further into to debt than needed to avoid the stigma of bankruptcy.

1. Debt Settlement Companies can be scams; and
2. Debt Settlement Companies can cause you to have to pay income taxes on settled debts.

Debt Settlement companies are, generally, not lawyers and cannot give legal advice about your debts, including advising you not to pay your debts.  They cannot stop lawsuits or wage garnishments; or foreclosure on your home.  The automatic stay, is an injunctive statute that stops all attempts to collect a debt from you the moment you file for bankruptcy.  DON'T GET SCAMMED!

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The only reason you should negotiate directly with your creditors, is to avoid bankruptcy.  Remember that working with debt settlement companies is both costly and detrimental to your finances and will likely land you in my office filing for bankruptcy.  If you want to avoid bankruptcy, work directly with your creditors for an agreement on what your debt is worth.  If they even think you're about to file for bankruptcy, they will most likely make some kind of offer.  However, settling debts to avoid bankruptcy comes with a price;  Income Taxes!

Beware that if you settle, or negotiate a debt to avoid bankruptcy, you could end up getting a tax bill.  while the IRS is forgiving settled debt where mortgages are concerned; the California Franchise Tax Board is not because their program has expired.  So, in California, you'll wind up owing state income taxes, if the debt you settled relates to a secured mortgage in a short sale.

But what about your credit cards?  Unsecured debt negotiations and settlements will be taxed by both the state and federal agencies.  So, unless you're prepared to pay taxes on the amount that will be written off by your creditor, then, like Cathy Moran said in her blog, Should I Settle Some Debts Before Bankruptcy, your money could be put to better use, like saving for retirement.

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There are two things that I love; open minds and a captive audience.  On Wednesday, March 3rd, I was invited to speak to the paralegal students at Fremont College in Cerritos, California, on the topic of The Inner Workings of Bankruptcy Practice.  With the current Great Recession in full swing, personal finance and bankruptcy has touched us all.  These students were ripe with personal questions and questions on behalf of clients they have in their respective fields.  Among the students were Realtors and tax preparers who know all too well that the people they meet may well need to file for bankruptcy in order to accomplish their financial goals.

We discussed the history of bankruptcy; the various bankruptcy chapters; the 2005 enactment of the BAPCPA; and what really caused the economic meltdown.  These are unprecedented times, and I felt that during the rapid fire questions brought forth by these eager minds.  I shared my own personal experiences and explained the important role that paralegals have to a bankruptcy practice and the new world of 'virtual paralegals.'  The virtual paralegal can work from any computer to assist our practice without having to sit in our office.  We can cut costs and be more efficient in our work by using virtual paralegals.

I love that Fremont College is an ABA Accredited program in paralegal studies and that they reach out to the community to bring current and relevant information to help prepare their students for life after their degrees are earned.  I just want to give a big Thank You to Fremont College for inviting me to speak to their paralegal students.  I would like to personally thank William Kamstra for making the connection and Gerry Mendoza, Assistant Director of Student and Career Services, for pulling this together and making it happen.

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Over on MSN Money, Liz Pulliam Weston wrote an article entitled, "Are You Foolish to Pay Your Mortgage?"  I get asked this question all the time, is it worth it to keep my home?  I'm passionate about this subject on behalf of my clients, whom I advise whether filing bankruptcy is in their best interests financially.  What really caught my eye about this article was Law Professor Brent White's paper, "Underwater and Not Walking Away: Shame, Fear and the Social Management of the Housing Crisis."  I agree with Liz that this is a must read for the finer points and Liz certainly summarizes his points from her perspective that we all need to do our best to save our homes and we all must make the best of a bad situation and know when it's time to walk away from our mortgages.

The good news is that California is a 'non-recourse' state.  This means that lender cannot pursue defaulting homeowners for deficiency judgments where they owe more than what the house is worth or what the lender might receive in a short sale or foreclosure sale.  For Californian's this is good news too because their will be no income tax on the cancelled debt or capital gains taxes to be paid on the deficiency. 

Knowing that we won't get taxed or sued after we walk away from our mortgages here in California should bring a sigh of relief, but when is it a good financial decision to walk away?  Professor White says that when the net cost of homeownership becomes more expensive than the net cost of renting is when you should walk away.  His article provides in-depth details and citations and even a hypothetical example of a couple who bought their home in 2006, at the height of the real estate boom. To make it easy, I've found a housing cost calculator on the internet that might help, but I wouldn't base any decision solely on this information.

I think the biggest challenge is to walk the imaginary road into the future and ask yourself whether you'll be better off in the long run.  I suggest that if you can afford your mortgage payment now, even though you're home's value is less than what you owe, you may be better off in 20 years than if you had rented.  Why?  In 20 years you will likely have paid down your principal, or even paid off your mortgage and if you've been maintaining your home, you're maintenance costs will likely have dropped.  If you rented for 20 years, you're still a renter and we all know the cost to rent will invariably rise over that time too.

I agree with Liz when she says to "Get Help."  Talk to your HUD Counselor, your tax professional and your local bankruptcy lawyer.  The sooner, the better.  Don't spend down any savings trying to save a sinking ship because you may end up in a worse financial situation. 

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The following information has been provided by the  Insolvency Law Committee - Business Law Section of the State Bar of California.  The bulletin was prepared by Gary Kaplan, Special Counsel at the law firm of Farella Braun + Martel LLP in San Francisco. 

In the bulletin, Gary Kaplan writes, "On November 30, 2009, the Departments of Corporations weighed in with its regulations in support of Assembly Bill 7, referred to as the California Foreclosure Prevention Act, which was enacted on February 20, 2009 and became effective upon the issuance of the first set of regulations in support of it.  This marks the third regulatory agency to do so, following the Departments of Financial Institutions and Real Estate.  The new regulations can be found at http://www.corp.ca.gov/OLP/pdf/rm/0509-2B.pdf.  The Act provides a 90-day foreclosure delay for residential mortgage loans on owner-occupied homes where the first loan was recorded between January 1, 2003 and January 1, 2008, unless the loan is serviced by a financial institution that has a comprehensive loan modification program, as specified.  The provisions of this legislation “sunset” on January 1, 2011."

What this means to you, the homeowner, is that generally, you will notice that after you receive a notice of default on your mortgage, your lender will begin sending you loan workout packages and gather information from you to determine whether you qualify for a loan modification.  This seems to be what the lenders are doing during their 90-day moratorium.  We have already seen that these trial loan modifications are not working to modify the majority of home in distress.  This is either because the loan has been sold as an asset-backed security to investors, or the owner simply cannot afford the mortgage.

As I have said before, in the  5 ways to stop foreclosure, only a bankruptcy and a court ordered injunction will legally stop a foreclosure.  The sooner you talk to a bankruptcy lawyer to discuss your options, the more options you will have in creating the best course of action for your particular circumstances.  Every case is unique.  

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For those attorneys who are new to the area of bankruptcy law and who need to know how to get around in the Central District; here are ten (10) steps you can take to significantly improve your bankruptcy knowledge and practice.

1. Join the Central District Consumer Bankruptcy Attorneys Association and Read the list serv:  As much as you can.  I also create folders in my email account and distinguish them by the chapters so I can later reference them.
2. Read Professor John Hayes Book, A Summary of Bankruptcy Law
3. Buy Practice Guides from the National Consumer Law Center
4. Sign up for the Bankruptcy Mastery Ecourse [FREE]
5. Volunteer for Public Counsel and take their training Course [FREE] contact Marisa Hawkins at: mhawkins@publiccounsel.org
6. Get Your Own Mentor and take them to Lunch!  Be willing to volunteer to help your mentor, co-counsel with them, etc.  Our experts are busy practicing law and have been so generous as to answer our newbie questions . . . lunch is a great way to get questions answered and build your network at the same time. 
7. Read Blogs from NACBA and join NACBA while you're at it.
8. You Must Read the Local Bankruptcy Rules
9. Attend all the MCLE programs put on by the CDCBAA, NACBA, OCBF, ABI, CEB, etc. that are in town. 
10. Volunteer your time to help improve our group because you care! 

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If you have ever found CNBC on television, they have this show called, Til Debt Do Us Part.  It's a great show where the host, Gail Vaz-Oxlade takes a tough love approach to helping couples get out of debt and on the road to financial recovery.  I would say that if your marriage can survive through these tough economic times, then you will make it through anything; together.

Unfortunately, with money being a primary motivator for divorce, many couples are faced with the decision as to whether to file for bankruptcy or divorce first.  My answer will always be on a case by case basis with couples.  I will always support couples to stay together and that money does not have to break a marriage apart.  However, some marriages may have needed  to be ended some time ago and a financial crisis may serve as the perfect issue to end the marriage with.

Because California is a community property state, all property acquired during marriage is community property, while property acquired before marriage or after permanent separation, or by gift or inheritance, is separate property.  The characterization of an asset as community property or separate property depends on three factors: (1) the source of the item; (2) action of the parties which may have altered the character of the item; (3) any statutory presumptions affecting the item.  This means, in general, is that all your assets and all your debts belong to the community and are shared equally between spouses.

So, if you're in a marriage that is facing insurmountable debts and you are trying to determine whether to file for divorce or bankruptcy first, then you will need to consult with your local bankruptcy lawyer.  Your local bankruptcy lawyer will conduct an extensive review of your marital assets and other information, to determine the right strategy for you.

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Nowadays it seems everyone from big business to celebrities is filing for bankruptcy.  While major corporations are getting government bailouts with our tax dollars, wouldn't it seem fair if we could get a bailout too? 

Sure, you can file for bankruptcy and have many of your debts cleared off your books through a bankruptcy discharge.  But, how do you know if you need to file for bankruptcy?  At what point do you throw up the white flag to your creditors and declare bankruptcy?  Here are 10 signs that are strong indicators that you may need to file for bankruptcy:

1.  You've depleted your savings and are considering cashing out your retirement savings to pay your bills;

2.  You're living on credit cards and your debt increases rather than decreases each month;

3.  Your family has given you loans or bought you food;

4.  You're behind on your rent or mortgage, or are in foreclosure;

5.  You're anxious when the phone rings because the only calls you get are from debt collectors;

6.  You can only afford to pay the minimum payments on your debts and have high interest rates;

7.  You're using the legal loan sharks at those payday advance shops to get cash;

8. You know you have a lot of debt, but don't exactly know how much and you're afraid to look;

9.  Your car is about to be repossessed;

10.  You're being sued and you know you cannot afford to pay for any judgment.

If you, or someone you know is experiencing extreme financial hardship during these challenging economic times, it's important to take action sooner rather than later.  The sooner you discuss your situation with a trusted authority, like your local bankruptcy lawyer, the more likely you will be able to have your debts discharged without having to go broke doing it.  This means that you can save your retirement for retirement and still get out of debt.

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We are mesmerized by celebrity here in Los Angeles.  We live, practically next door to some of the nation's wealthiest.  We have Oprah in Santa Barbara and all of Hollywood's elite, hiding up in the hills.  But what happens to those rich and famous when they fall from financial grace and file for bankruptcy?  Do we just like scandal, or can we learn something from these bankruptcies?

 So, what can we learn from the rise and fall of the wealthy and celebrity?  Just ask Carlos Justo, Realtor to the rich and famous in Miami.  Watch his ABC interview on You Tube and you'll see an optimist who learned to focus on one thing and do it well.  Annie Leibovitz avoided bankruptcy in September, when she was able to renegotiate with her creditors, despite earning millions from her photography; much of it for Vanity Fair and Vogue magazines. Ms. Leibovitz, 59, has managed to overstretch herself financially with a taste for lavish living. Nicholas Cage owed millions in back taxes to the IRS and his lavish lifestyle is to blame for bankruptcy.  Do you see a theme here?

The lessons are to live within. No. The lesson is to live below your means.  Create a budget that includes paying yourself first by taking the first 10% of your income and putting it away for retirement.  Create a monthly budget that includes all of your necessary expenses.  As for your debt, pay it off if you have it and if you cannot afford to pay cash, do you really need it anyway?

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Once you've decided that filing personal bankruptcy is the right path toward financial freedom from your debts, you need to know: what is the process? How long does the process last? Do filers have to go to court? Who needs to be informed of the bankruptcy filing?

The process of filing bankruptcy requires that you complete a bankruptcy petition and disclose all of your debts and assets to the bankruptcy court.  Before you file for bankruptcy with the court, you will be required to complete a pre-filing credit counseling course and your certificate of completion of that course must be filed with your bankruptcy petition. 

After you've filed your petition with the bankruptcy court, you must attend a meeting of the creditors as required by 11 U.S.C. 341(a); otherwise known as a 341(a) hearing.  This meeting takes place before your court appointed trustee.  The trustee's job is to verify your identity by viewing your government issued identification card [usually a driver's license] and social security card; and the trustee will ask you some basic questions about your petition.  You must also complete a financial management debtor education course in order to be considered for a discharge of your debts. 

For chapter 7 liquidation cases, the process usually lasts approximately six months with a mandatory meeting of the creditors before the trustees.  Chapter 7 debtors will not see the bankruptcy judge, unless they need a reaffirmation hearing.  Chapter 13 individual debt adjustment cases where a debtor repays a portion of their debts over time, requires considerably more time and expense.  The process for a chapter 13 case lasts between three and five years depending upon the household income and the debtor's ability to repay their debts.  

The fact that you've filed for bankruptcy will appear on your credit report for 10 years if you filed Chapter 7 or Chapter 11 and will appear on your credit report for 7 years if you filed Chapter 13.  Bankruptcy may also affect your ability to lease rental property and find employment; and filing bankruptcy will impact your ability to file again in the future.  

Experiencing extreme financial hardship has emotional costs as well.  That's why it's best to talk to a bankruptcy lawyer so that you can make a well informed decision and lead your family to financial freedom from your debts with a trusted advisor who will inform you of all of your legal rights and remedies available through the bankruptcy process.  

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The last big spike in bankruptcy filings was back in 2005, just before the passage of the Bankruptcy Abuse Prevention Consumer Protection Act ["BAPCPA"] with a record setting 2.04 million filings.  The BAPCPA created more obstacles to obtaining debt relief in 2005 and immediately following its passage, bankruptcy filings dried up.

When the mortgage meltdown of 2008 nearly crumbled the financial sector, the ripple effect on the economy continued to reverberate throughout 2009 and again, we saw a spike in bankruptcy filings throughout the country.  In 2008, bankruptcy filings total led 1.1 million.

Here in the Central District, filings in November total led 9,452.  This figure is more than double that of the entire state of New York with 4,368; and roughly double the entire state of Texas with 4,804 filings.  The U.S. Bankruptcy Court reports the fiscal year ending in September, 2009 total bankruptcy filings at 1.4 million.  So, what can we expect for 2010?

As I gaze into my crystal ball into 2010, I see that the unemployment numbers will continue to drag on as those people regroup, train and educate themselves for new emergent jobs.  Foreclosures will continue on their course until the banks and the government permanently modify the remainder of the 9 million homes in trouble.  I see that consumer spending is nonsensical because we Americans already have too much of everything on the backs of third world countries whose workers live in poverty.  All of this spells more bankruptcies for 2010.

We will see continued high numbers of bankruptcy filings throughout 2010 as consumers unfortunately spend down savings first, which is unnecessary, before deciding that they should file for bankruptcy.  Bankruptcy filings will be a result of more foreclosures rippling through the housing sector and the stagnant unemployment rate of 12.3% here in California.  We will also see more small business bankruptcies as businesses continue to tailspin from the economic recession.

Corporate bankruptcies will rise in 2010 as commercial property foreclosures commence on securitized commercial real estate.  We will not know the legal consequences in the commercial arena for several years to come.  In 2010, bankruptcy will be the new "black" for many Americans seeking financial freedom from debt. 

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The mortgage meltdown and ensuing global financial crisis, in the fall of 2008, still reverberates today.  The New York Times reported on the essentials of the credit crisis and pointed out the breadth and depth origins of this crisis and likened these times to the Great Depression. 

I have previously reported on the financial crisis in The Economy of Bankruptcy ; while The National Association of Consumer Bankruptcy Attorneys [NACBA] has been following SB61 since its inception.  SB61 essentially will allow bankruptcy judges to modify the terms of a mortgage.  Recently, NACBA Director, John Rao testified on the matter in October, before the Senate Judiciary Committee’s Subcommittee on Administrative Oversight and the Courts.

As posted in the New York Times, House Passes Far Reaching Bill Tightening Financial Rules.  Unfortunately, the banking industry struck a win when the House voted to reject the proposed amendment, known as "mortgage cramdown," which is the measure that would allow bankruptcy judges to change the terms of mortgages for distressed homeowners.  This vote reversed the House's passage in March of a cramdown measure that subsequently died in the Senate.

American homeowners need a real solution and based on what I read over at The National Bankruptcy forum, our Bankruptcy Courts may not be equipped to handle the tsunami of bankruptcy cases that would result in the passage of such legislation.  To date, few mortgages are being permanently modified, as reported by the LA Times.  

My solution is for every American to obtain independent financial freedom by paying off their debts outside of bankruptcy, if possible. For those Americans struggling to pay their bills, consider either a chapter 7 or 13 bankruptcy and never look back.  The rules of bankruptcy do not require that you spend down all of your savings and lose your assets in order to file for bankruptcy protection.  The goal here is financial freedom and independence from the banking industry FOREVER.  The new paradigm as Dave Ramsey so eloquently puts it, DEBT IS DUMB AND CASH IS KING!

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From The Hospital to Bankruptcy Court is the title of a recent article in the New York Times that gets to the heart of why we need healthcare reform.  You could have a job that provides health insurance, but that health insurance policy has a cap on how much they will pay over the life of the policy.  Add to that limit, your deductible and co-payment amount of say 20% and you have a recipe for financial disaster and a prime bankruptcy case.

If you're faced with medical debt, do not use your credit cards or home equity or any other financing to pay that debt.  You're only adding interest to that debt and avoiding the most likely inevitable bankruptcy.  What's worse is that if you use home equity, you could lose your home later if you fall behind on your mortgage.  Taking action sooner, on deciding your options, could help you avoid a financial collision with bankruptcy court.

First, be sure you understand the limits on your health insurance plan and if you anticipate any large medical expenses, check to see if your employer offers a benefit plan where cash is taken from your paycheck, in pre-tax dollars, in advance to cover anticipated medical expenses.  What this does is essentially save you from paying income taxes on that money in advance, as opposed to deducting it on your income tax return later. If you've already paid for medical bills with your after tax money, then be sure to deduct it on your tax return.

Second, if you have medical bills that have gone to collections, you can make an effort to negotiate that debt.  Unfortunately, if the bills are completely out of your ability to pay, you need to consult with a bankruptcy lawyer who can help you file the right bankruptcy chapter for you and get that debt discharged.  Remember, you don't have to go broke to file for bankruptcy and you should consult a bankruptcy lawyer before playing debt roulette and using credit cards or savings to pay for medical bills because medical debt can be discharged in bankruptcy.

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The November, 2009 issue of ABA Journal article entitled, The Bad-Debt Blues, explained the need to take federal taxes into consideration when restructuring debt as, "crucial."  The article provides an excellent overview of the federal tax rules that apply to debt workouts, and focuses on the impact to individual debtors.

The recent media blitz touting the end of the recession is an illusion caused only by government spending.  Bankruptcy filings are still up over last year and climbing to record numbers since the BAPCPA in 2005. Americans continue to struggle with what to do about their debt.

The so-called housing bubble we appear to be experiencing is caused by the fact that banks are holding foreclosed homes in their inventory rather than selling them because putting them on the market will only reduce already depressed housing values.  Similarly, the banks are also refraining from foreclosing on homes and moving toward more workout programs and modifications because they're starting to realize the error of their greedy ways. 

When faced with the tax consequences of the restructuring of individual consumer debt; either through foreclosure, repossession, or modification; filing bankruptcy provides a safe harbor and important IRS exclusions.  There is another exclusion under the Mortgage Forgiveness Debt Relief Act of 2007 that applies to Qualified Principal Residence Indebtedness on or after Jan. 1, 2006. 

It is important to remember that most financial transactions have tax consequences and we all know that ignoring the IRS with its hand out is never a good idea.  Consult with your lawyer to fully understand the tax consequences and restructure debt in the way that best minimizes tax liabilities for you. 

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Today I read an article by Katie Adams entitled, Financial Mistakes that Could Haunt You Forever and it got me thinking.  In this unprecedented Economic Depression, we are faced with more difficult decisions about our finances than ever before.  Who can we turn to?  Who do we trust?  I say that now more than ever before we need radical self reliance.  Don't wait for someone else to tell you what you need to do.  Be informed and then decide the proper course of action for your own financial well being. 

I hear it every day.  "We cashed in our savings and retirement to try to stay afloat."  "We lived off our credit cards and now we can't afford the payments."  These 4 financial mistakes can be fatal in the long run and you may land in bankruptcy:

1. Living beyond your means is so yesterday
2. Cashing out retirement accounts to pay bills is fatal
3. Fear, Shame and Guilt will paralyze you financially
4. Never, Ever Co-Sign on a Loan, unless you intend to own it and can afford the payments!

We're not in a recession, we're in a depression.  We need to adjust our lifestyles accordingly and stop creating debt and live within our means.  Never, Never, and I will say it again, Never cash in your savings or retirement accounts to pay bills because you will lose that compound interest, you'll be penalized for early withdrawal and wind up paying taxes.  It's just not worth it.  Besides, you'll most likely get to keep many of your assets in bankruptcy under an exemption. Lastly, you absolutely must not panic.  Don't let your fear paralyze you into inaction.  The last thing you need is to have your wages garnished by a creditor who has sued you before you decide you need to file for bankruptcy. 

I believe that the most important thing to remember is to never co-sign on a loan for anyone, unless you have the ability to pay for it yourself and intend to own it.  Here's the reason for this.  When you co-sign for the debt of another, you are putting yourself on the hook for that debt, in the event  this other person can no longer pay for it.  If the person you've co-signed for ends up in bankruptcy, then the lender can come after you for that debt.  You may find yourself being thrown under the bus, so to speak, and may end up in bankruptcy too, if you did not intend to pay for that debt. 

Don't go broke before you talk to a bankruptcy lawyer about your current financial circumstances.  Every situation is unique and you may have options outside of bankruptcy, but you must act now.

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I am excited to share with you, a new resource for information regarding student loans, as published by the National Consumer Law Center.  The Student Loan Borrower Assistance portal offers answers and and solutions to student loan borrowers, however, they do not provide legal advice. This issue has also attracted the attention of Congress, who recently held an oversight hearing on the matter.

Student Loans, in general, are not dischargeable in bankruptcy, absent undue hardship.  11 U.S.C. Section 523 (a)(8) provides that the debtor must show that the payment of the student loan debt will "impose an undue hardship on the debtor and the debtor's dependents."  Courts have interpreted this standard very restrictively, which makes it very difficult for even the most vulnerable to receive a discharge. A recent case, Booth v. U.S. Department of Education, et al., 10 CBN 1093 (Bankr. E.D. Wash. 2009) held that debtors can prove undue hardship even if their Income Contingent Repayment Loan Program (ICRP) payments are zero.  The Ninth Circuit Court asked, in Craig v. Educational Credit Management Corp., 19 CBN 1039 (9th Cir. 2009), how the bankruptcy court thought the debtor could pay their student loan. 

The Court will apply a three-part test, known as the Brunner test, to determine whether excepting all or part of a student loan debt from discharge will impose an "undue hardship" under § 523(a)(8); Brunner v. New York State Higher Educ. Servs. Corp., 831 F.2d 395, 396 (2d Cir. 1987). Under the Brunner test, a debtor must demonstrate:

(1) that she cannot maintain, based on current income and expenses, a "minimal" standard of living for herself and her dependents if forced to repay the loans;

(2) that additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of the student loans; and

(3) that the debtor has made good faith efforts to repay the loans.

Further, the procedural difficulty level is a general deterrent for most attorneys since the debtor must affirmatively seek this determination in bankruptcy and prove her case.  For more information on this subject, check out Student Loans In Bankruptcy.  Bankruptcy practitioners can purchase Discharging Student Loans in Bankruptcy as a resource.

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The use of bankruptcy as a strategic move in litigation requires a fine line approach.  Susan S. Davis and Alicia N. Vaz wrote, The Impact of Adversary Filing for Bankruptcy during Civil Litigation , Los Angeles Lawyer (Sept., 2009), from a litigation strategy perspective.

As a debtor strategy, the first inclination in seeking bankruptcy protection is to invoke 11 U.S.C. §362(a), known as the “automatic stay.” The automatic stay operates to stop actions or proceedings against the debtor, the moment the bankruptcy petition is filed with the bankruptcy court.

Before continuing any action against the debtor, a party in a pending litigation must obtain relief from the automatic stay. Within the Central District of California, the party seeking relief from the automatic stay would file a Notice of Motion and Motion for Relief From the Automatic Stay under 11 U.S.C. § 362. You can find the forms here. The likelihood of prevailing on a motion for relief is highly dependent upon the type of bankruptcy action filed by the debtor, whether the bankruptcy court is the proper venue for the action and whether any insurance coverage will be afforded to the judgment.

Other considerations include timing, injunctions, removal, forum, varied jury pools and procedural concerns. Keep in mind that the bankruptcy court is a court of special jurisdiction and simply, is not equipped to handle the more complex and varied cases. Much like the law of insurance, if it should be covered elsewhere, then that is where it belongs.

From a debtor standpoint, be wary of using bankruptcy as a strategy in any civil litigation case because you must file bankruptcy in good faith and the other party will most likely be granted relief from the automatic stay where it would be appropriate for the court to do so. 

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In the Central District of California, year-to-date bankruptcy filings are up 70% over last year.  Chapter 7 filings make up 77% of the total filings year to date. Why? Because California’s unemployment rate is at an all time high and holding at 12.1% according to the Bureau of Labor Statistics.   EDD says we’re at 11.9%

Let’s just pour salt upon the open wound and admit that California was also the sub-prime loan mecca all the way into the crash in 2008. These option arm loans were sold here in California well into late 2007 and the "teaser" or introductory rates on these loans sold were 5, 7, and 10 year terms. This means that we have yet to see the end of the foreclosure crisis here in California because these loans have not yet adjusted upward.

With a surplus of uninhabited homes on their hands, banks are left holding the bag in the foreclosure game. Unfortunately, many homeowners could have saved their homes, had they contacted an attorney, who would have determined any legal claims to stop the foreclosure, like Truth in Lending Act (TILA), predatory lending (Fraud), or Real Estate Settlement Procedures Act (RESPA) violations.  However, this is not as easy as it sounds and requires litigation.  A  chapter 13 bankruptcy has been the forum of choice to stop foreclosures and save homes.  Unfortunately, SB 61, has not passed, but is still being discussed.  SB 61 would allow bankruptcy courts to modify mortgages and reduce principal loan balances in bankrutpcy.

We are all in this together and this market affects us all.  At no other time has it become more apparent that we join together for the solution.

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  Yesterday I received an invitation to connect with Steven Horowitz on LinkedIn.  His invitation to connect was unassuming, "I publish the Bankruptcy Bill and BAPCPA Man cartoons and thought it might make sense to link up."  I am open to build my professional network via LinkedIn and you may connect with me directly here.  As I surfed through several groups I belong to on the website, I came accross his blog, BankruptcyBill.  

Considering the negative stigma around bankruptcy law and in light of our nation's economic woes, these cartoons are a refreshing departure.  They're easy to read and understand.  They take the law and break it down into layman's terms; a gift I rather admire.  In BAPCPA MAN #2, he discusses the automatic stay as a force field that protects the debtor from their creditors.  The cartoon is a fun explanation of the law and below the cartoon itself, are links that provide the reader with additional information on the topic discussed.

It's genius!  The blog also provides links to other bankruptcy lawyer blogs and the authors even write Haikus.  You're invited to add your own in the comments section of the website.  What is a Haiku?  Here is my version of a bankruptcy haiku:

I love bankruptcy.  It will get you a fresh start.  A bright future now.

 I am a fan of creativity.  I encourage you to check out the blog.  My only suggestion is that it should be published on LexBlog's platform; I'm biased that way.

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I have been reading everything bankruptcy related lately.  A few weeks ago, M. Jonathon Hayes sent us an email on our listserv for the Central District Consumber Bankrutpcy Attorneys Association, CDCBAA for short, that he had just published a new book entitled, A Summary of Bankruptcy Law.  I am one of those folks who likes summaries or digest versions of anything that cuts to the point and gives me just the meat, hold the potatoes and vegetables. 

The section on chapter 7 bankruptcies takes up a major portion of the summary material.  I would have liked more information regarding chapter 13 processes, but it is a summary, so I let that go.  The material is concise and to the point.  It's an easy read and looks similar to a top tier law student's outline of a subject.  Not that I was a top tier law student, but I've obtained outlines from a few.  Overall, the book holds up to its title as a summary and I would add, a thorough summary at that.

Like kicking the tires on a car you're thinking about buying, I took the book's website citations and case citations for a spin.  The book provides valuable tools, advice on practice materials and case citations that I am still looking up.  I reccommend this book to the new practioner and law student.  Since the book was written by a California attorney,  it is well suited for the California practitioner and more specifically, those of us practicing in the Central District.  I even printed a copy of Judge randall Newsome's Research Notebook and if I ever get a chance to meet the man, I promise to buy him a beer Jonathon.  Thank you for your good work. 

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Generally, taxes are treated the same as other debts in a chapter 7 bankruptcy case.  Taxes may be treated as secured, unsecured, or non-priority unsecured, or some combination.  IRS Code, found in 26 U.S.C. 6321, states that the government is secured if it has recorded a notice of lien.  Taxes that have been recorded as a  lien are a priority and must be paid in bankruptcy and cannot be discharged.  

A colleague of mine,  John Greifendorf, addressed the question, Can I discharge Federal Income Tax in Bankruptcy?  His article is concise and outlines five conditions for discharging what the debtor owes to the IRS and even sets forth and example to follow. 

The Five Conditions are:

1. The due date for filing the tax return was not less than three years ago
2. The tax return was filed at least two years ago
3. The tax assessment is at least 240 days old
4. The tax return was not fraudulent
5. The tax payor is not guilty of tax evasion

If the debtor meets the qualifications, then the tax liability is not a priority and is discharged in bankruptcy; 11 U.S.C. 523(a)(1).  Unsecured taxes that are deemed a priority, fall outside the scope of the conditions discussed by Mr. Greifendorf and cannot be discharged in bankruptcy.

Timing is a critical component in deciding to file for bankruptcy protection and the advice of a bankruptcy attorney will address this issue.  Best practices include filing all tax returns prior to filing a bankruptcy petition with the court.  Seek the advice of a CPA or tax attorney regarding IRS claims. 

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