California’s “Wild Card” Exemption Protects Miscellaneous Assets in Chapter 7 Bankruptcy

By Jon G. Brooks | Published: February 20, 2012
Share|

California Chapter 7 bankruptcy wild card exemptionMyths and misunderstandings about bankruptcy abound among the general public. In fact, misinformation about bankruptcy law is so prevalent that it often seems that I spend much of the time I offer in free bankruptcy consultations just dispelling such myths. Countering bankruptcy myths served as my major motivation in starting this bankruptcy blog.

One of the most common myths surrounding bankruptcy is the idea that one cannot file Chapter 7 bankruptcy if he has a home, a car, any savings, or any assets at all. Or, put another way, that if he does file Chapter 7, he will lose all of these assets to the bankruptcy trustee. Well, I’m here to tell you that it just isn’t so. Everyone filing Chapter 7 bankruptcy in California is entitled to claim assets up to certain values as exempt from seizure by the bankruptcy trustee. In California, we have two sets of such exemptions available in Chapter 7 bankruptcy—the “704″ or “homestead” exemptions and the “703″ or “wild card” exemptions. Ever since home values in the Bay Area began their precipitous decline, however, we rarely need to claim the homestead exemptions because our Chapter 7 clients rarely have any home equity left to protect. So, in this post I’ll focus on the California wild card exemptions. Read More »

Posted in Bankruptcy Exemptions, Chapter 7 Bankruptcy | Tagged , , | Comments closed

Debt Limits in Chapter 13 Can Prevent the Stripping of Second Liens by Homeowners Filing Bankruptcy in Bay Area

By Jon G. Brooks | Published: February 17, 2012
Share|

Chapter 13 Debt Limits Prevent Some Bay Area Homeowners from Stripping LiensOf those who come into our offices seeking bankruptcy advice in the Bay Area, and who ultimately file for bankruptcy protection, around one third qualify for a Chapter 13 case, while around two thirds are best suited to Chapter 7 bankruptcy. Although it requires repayment of some portion of one’s debts over time, Chapter 13 bankruptcy allows the debtor to keep all of his assets and also offers a number of powerful tools that are unavailable in Chapter 7 bankruptcy such as the possibility of removing secured junior liens from one’s home or reducing the principal balance on a car loan in certain cases. However, Chapter 13 isn’t for everyone, and the Bankruptcy Code as well as a variety of practical considerations together determine who can feasibly qualify for Chapter 13 and who cannot.

Chapter 13 Bankruptcy is a repayment plan in which the debtor pays back a certain amount of his or her debt over a three or five year period. One important factor in determining whether one can qualify for Chapter 13 is the overall amount of one’s debts. In order to make the Chapter 13 repayment plan feasible, bankruptcy law requires that the Chapter 13 petitioner’s total debts cannot exceed certain maximum dollar amounts for both secured and unsecured debts in order to conform with the Bankruptcy Code. Read More »

Posted in Chapter 13 Bankruptcy, Chapter 13 Lien Stripping | Tagged , , | Comments closed

Does My Spouse Have to File Bankruptcy with Me?

By Jon G. Brooks | Published: February 11, 2012
Share|

Can I File Bankruptcy in San Jose without my Spouse?The short answer is: No. Spouses do not necessarily have to file bankruptcy together. I’ve represented scores of Bay Area bankruptcy clients over the years where only one spouse has chosen to file personal bankruptcy. However, there are a number of important caveats that we as bankruptcy attorneys must discuss with any married debtor considering filing bankruptcy without his or her spouse. Additionally, if the idea is to avoid disclosure of a non-filing spouse’s high income, forget it. All married bankruptcy petitioners must disclose their spouse’s income as well, and household income, not just that of the spouse filing bankruptcy, is used to determine his eligibility for Chapter 7 or Chapter 13 bankruptcy.

At the outset the bankruptcy lawyer must establish whether both spouses are jointly liable for their debts. For example, if the marriage is a relatively new one, and one spouse came to the marriage with his own large credit card balances and poor credit, and this is the spouse considering filing bankruptcy, then it may make a good deal of sense for only that spouse to file. One spouse’s bankruptcy will not harm the credit of the other, non-filing spouse. But if the credit cards or other loans involved are joint accounts, then a bankruptcy discharge for only one of these co-debtor spouses will provide no real debt relief at all to the couple since that creditor can still collect from the non-filing spouse. Read More »

Posted in Automatic Stay, Bankruptcy Discharge, Chapter 13 Bankruptcy, Chapter 7 Bankruptcy | Tagged , , , , , | Comments closed

If I File Bankruptcy in the Bay Area Can My Employer Do Anything to Me?

By Jon G. Brooks | Published: February 4, 2012
Share|

Will Employer Find Out About Bay Area Bankruptcy FilingWhen prospective clients come to me seeking bankruptcy advice in San Jose, they are often concerned that if they file bankruptcy, their employer might find out about their bankruptcy filing and that this might adversely affect their employment. This is a very real concern on the part of many folks considering filing bankruptcy in the Bay Area. After all, these prospective clients already need debt relief and are unable to pay their debts even though they have a job. If they lost their job as a result of filing personal bankruptcy, what then?

First of all, even if your employer did learn of your bankruptcy filing, it is illegal to fire someone merely because they file bankruptcy. Anyone filing Chapter 7 bankruptcy, Chapter 13, or under any other chapter of the Bankruptcy Code is protected from being fired because of bankruptcy.  11 USC §525(a) and (b) protect employees from bankruptcy discrimination.  The former applies to government jobs, and the latter applies to private employers. Read More »

Posted in Bankruptcy and Employment, Bankruptcy Basics | Tagged , , , | Comments closed

It Is Possible to Avoid Foreclosure in Chapter 13 Bankruptcy

By Jon G. Brooks | Published: January 27, 2012
Share|

Chapter 13 Can Avoid Foreclosure in San JoseLong before the current foreclosure crisis in California, I met with hundreds of San Jose homeowners desperate to save their home from foreclosure. Yes, even when times were relatively “good” for many, there have always been many Californians who have faced foreclosure due to job loss, sudden illness, failure of a small business, and other factors. Of course, back in the early and mid 2000s, when everyone, it seemed, had lots of equity in their homes, San Jose foreclosures tended to move a good deal more swiftly. After all, the lender could be assured of receiving the full balance of the mortgage loan from the Trustee Sale. So they generally did not delay the foreclosure sale beyond the minimum time period allowed for a California foreclosure—90 days from the Notice of Default for the homeowner to reinstate the loan plus three weeks from the subsequent Notice of Trustee Sale.

That was then. What hasn’t changed is that the only way to truly avoid foreclosure is to bring the mortgage loan current. Unless you are one of the relative few whom the big banks have decided to help with a HAMP loan modification, Chapter 13 bankruptcy may provide the only avenue to avoid foreclosure. That’s because Chapter 13 bankruptcy can, in many cases, help a homeowner catch up on his mortgage payments, and bring a mortgage loan current. And after all, the only way to permanently stave off foreclosure is to remain current with your payments on your mortgage loan. Read More »

Posted in Chapter 13 Bankruptcy, Chapter 13 Lien Stripping, Foreclosure | Tagged , , , , | Comments closed

Bankruptcy “Credit Counseling” and “Debtor Education” Course Requirements Don’t Have to Be a Drag

By Jon G. Brooks | Published: January 21, 2012
Share|

Filing Personal Bankruptcy Credit Counseling RequirementsBankruptcy information is everywhere on the Internet. In recent years many more prospective clients come into my office already armed with a good deal of knowledge about filing personal bankruptcy. Many have read online articles about Chapter 7 bankruptcy, stopping a wage garnishment, Chapter 13 lien stripping, and many other issues of bankruptcy debt relief. No wonder, as bankruptcy lawyers in the bay area and across the country have made unprecedented amounts of bankruptcy information available to consumers through blogs and elsewhere.

One aspect of filing bankruptcy, though, that often still comes as a surprise to some is the requirement that before filing personal bankruptcy, everyone must take a credit counseling course from a non-profit credit counseling agency approved by the United States Trustee. This is actually one of two courses that every person filing bankruptcy must take—the second, “debtor education” course must be taken after we file the client’s bankruptcy case before he or she can get a discharge. We must receive a certificate to file with the court for each of these courses. Those filing a business bankruptcy do not have to take these courses. Read More »

Posted in Bankruptcy Basics, Chapter 13 Bankruptcy, Chapter 7 Bankruptcy, Credit Counseling and Debtor Education | Tagged , , , , | Comments closed

How to Find a Great Bankruptcy Attorney in San Jose

By Jon G. Brooks | Published: January 15, 2012
Share|

Finding a Great Bankruptcy Attorney in San JoseIf you’re struggling with debt that you cannot afford to pay, whether it’s a mortgage payment greater than one third your monthly income, high credit card balances, a home equity line from a foreclosed property, medical bills, or whatever the source, you are most likely being bombarded by collection bullies who lie and browbeat you and try to make you feel like an irresponsible person. Add to that the barrage of tv commercials from debt consolidation outfits who further try to steer you into paying more than you can afford by painting personal bankruptcy in a bad light, as though it were not a right guaranteed by the U.S. Constitution (Article I, Section 8). The last thing you want, once you do decide to explore bankruptcy options, is to meet an inexperienced or unsympathetic bankruptcy lawyer who makes you feel like a bad person.

Interviewing a bankruptcy lawyer may sound about as much fun as a colonoscopy. Call me an idealist if you like, but I believe meeting with a bankruptcy attorney should be an uplifting experience. Since I offer more than five hundred free bankruptcy consultations every year, I don’t think I can be fairly accused of naïveté in this regard. Read More »

Posted in Bankruptcy in General, Chapter 13 Bankruptcy, Chapter 7 Bankruptcy | Tagged , , , , | Comments closed

Why Small Business Failures So Often Trigger a Personal Bankruptcy

By Jon G. Brooks | Published: January 7, 2012
Share|

Personal Bankruptcy for Guaranteed Business DebtsI regularly meet with prospective clients who want to file a bankruptcy for their failing small business who believe that they themselves have little or no debt. Perhaps they own a small dry cleaner, convenience store, or retail store front. Given that I practice bankruptcy in Silicon Valley, many of these small business owners have other jobs as engineers, academics, or other professionals. Commonly, the owners of failing small businesses believed they did everything to shield themselves from the liabilities of their business by forming a corporation or LLC to operate the business and avoid personal liability for potential debts of the business. They never believed that if their business failed, this would necessitate a personal bankruptcy filing.

Unfortunately, these business owners did something early in the process of starting their business that they either took far too lightly or for which they did not appreciate the potentially disastrous consequences—they signed a personal guaranty for a business liability. Most often they signed a personal guaranty on a commercial lease, on a business line of credit, or when applying for a corporate credit card. By signing such a personal guaranty for a corporate or LLC debt, the business owner has forever agreed to be personally liable for that debt, in effect waiving the very personal liability protection that the corporation or LLC was intended to provide. Read More »

Posted in Bankruptcy in General, Personal Liability for Business Debts | Tagged , , , | Comments closed

Why You Should Never Repay Money You Owe Mom Before Filing Bankruptcy

By Jon G. Brooks | Published: January 1, 2012
Share|

Avoid Making Preferential Payments to Insiders Before Filing BankruptcyGiven the choice of paying back debts to strangers, like credit card companies, and paying back a debt to a family member, friend, or other “insider,” nearly everyone would of course choose to pay back the family member first, right? Of course they would. Doing so within one year before filing bankruptcy, however, may be the single most damaging action a debtor can take before filing his bankruptcy case, at least as far as his family member is concerned. This is because the Bankruptcy Code, in Section 547(b), provides the bankruptcy trustee with the power to recover or “avoid” such “preferential payments” to creditors prior to a bankruptcy filing. With respect to “insiders” (including the bankruptcy debtor’s family members, friends, business partners, and businesses owned by the debtor), the preference period is one year prior to the bankruptcy filing.

The concept underlying Bankruptcy Code Section 547(b) is supposed to be an equitable principle aimed at requiring a more “fair” distribution of a bankruptcy debtor’s assets to all of his creditors so that some creditors do not receive “preferential” repayment while others receive nothing.  Payments of over $600 to unsecured creditors who are strangers to the bankruptcy debtor, like credit card companies, can be “avoided” by the bankruptcy trustee if made within 90 days before the bankruptcy filing.  Creditors who are family members and other “insiders” of the debtor, however, who may not be in much better financial straits than the debtor himself, often suffer tremendous collateral damage because any money repaid to them within one year before the bankruptcy filing can be clawed back by the bankruptcy trustee. Read More »

Posted in Chapter 7 Bankruptcy, Chapter 7 Trustee | Tagged , , , , | Comments closed

What Happens if I Forget to List a Debt or Creditor in My California Bankruptcy?

By Jon G. Brooks | Published: December 22, 2011
Share|

Leaving a Debt Out of California Bankruptcy FilingAs I discussed in my last post “Can I Leave My House or My Car Out of My Bankruptcy?” the Bankruptcy Code requires that a debtor truthfully disclose all of his debts, assets, income, and expenses. One cannot choose to leave a given debt or asset “out” of her bankruptcy case. Not only is the bankruptcy debtor required to sign his bankruptcy petition, affirming under penalty of perjury that it truthfully and accurately discloses all assets, debts, creditors, income and expenses, but the debtor is again required to testify under oath at his section 341 Meeting of Creditors that he has truthfully listed all of these items in his bankruptcy petition.

But what happens if a debtor unintentionally omits a particular debt or creditor from her bankruptcy filing? Although our San Francisco Bay Area bankruptcy attorneys take great care to help our clients list every debt—we purchase an up-to-date, comprehensive credit report for every client, for example—there are valid reasons why a particular creditor may be unknown to the debtor, and may not even appear on his credit report. Some claims against the debtor may be dubious or disputed. Some debts may have been bought and sold so many times by third party bill collection agencies that the most recent collector hasn’t even yet identified itself to the three credit bureaus. Read More »

Posted in Bankruptcy Basics, Bankruptcy Discharge, Chapter 7 Bankruptcy, Meeting of Creditors | Tagged , , , | Comments closed