Those Who Filed Chapter 7 Bankruptcy in 2005 May File Again in 2013

New year 2013In April 2005, Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act, or “BAPCPA” as we bankruptcy attorneys call it. On the day BAPCPA passed, I was interviewed by our San Jose CBS affiliate, KPIX, about the sweeping changes to bankruptcy law contained in BAPCPA. Among consumer bankruptcy lawyers everywhere, there was a good deal of handwringing over what the new bankruptcy law would mean for the typical honest debtor needing a fresh start from Chapter 7 bankruptcy.

Sure, BAPCPA introduced the Means Test, thereby supplanting the insight and good judgment of local bankruptcy judges with standardized living expenses gleaned from the IRS, as to whether a Chapter 7 debtor could afford to make payments on her debts. And, yes, it required debtors to reaffirm their car loans, thus waiving part of their discharge. Perhaps most annoyingly, BAPCPA introduced the fairly inane requirement that all individuals filing personal bankruptcy complete credit counseling and debtor “education” courses in order to receive a discharge. But in the end, the sky didn’t fall, and once we bankruptcy attorneys all became familiar with the new requirements, and once the media hype died down, everyone realized that the powerful debt relief afforded by Chapter 7 bankruptcy remained the best option for many families drowning in debt. Read More »

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The Ugly Truth About Debt Settlement Companies and Why Bankruptcy Is Often a Better Option

Why Bankruptcy Is a Better Option than Debt SettlementThe National Association of Consumer Bankruptcy Attorneys (NACBA) recently published a consumer alert report entitled “The Debt Settlement Trap: The #1 Threat Facing Deeply Indebted Americans,” which detailed the stories of debt strapped consumers who have fallen prey to the numerous scams peddled by so-called debt settlement companies. You’ve probably heard their claims on TV and on the radio a million times. Debt settlement companies that promise to settle your debts for pennies on the dollar and to get you out of debt without filing bankruptcy. Their commercials usually feature a handful of earnest folks who claim the debt settlement company saved them from the supposed stigma of bankruptcy by negotiating with their credit card companies and bill collectors. Their commercials bombard the air waves with the message that bankruptcy is somehow morally wrong, and the debt settlement companies offer a more honorable alternative than filing personal bankruptcy.

What they don’t tell you about is the debt settlement industry’s abysmal failure rate. According to a 2010 Government Accountability Office report compiling data from the Federal Trade Commission and 43 state attorneys general, less than ten percent of consumers successfully complete debt settlement programs! Nor does the debt settlement industry explain in their commercials that creditors can and frequently do accelerate their collection efforts once a person enrolls in a debt settlement program. That means they step up their campaigns of harassing phone calls, and will eventually sue the consumer because they have been instructed by the debt settlement company to stop making payments directly to their creditors altogether. Yes, the credit card companies can and do sue you in spite of the fact that you’ve enrolled with a debt settlement company. They then obtain judgments that include all the interest, penalties, and now attorneys’ fees that they’ve racked up against you while the debt settlement company was supposedly negotiating with them. Read More »

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I’ve received an “Objection to Confirmation” of My Chapter 13 Bankruptcy Plan. What Do I Do Now?

Overcoming an Objection to Confirmation of Chapter 13 Plan in San JoseTens of thousands of people in California file Chapter 13 Bankruptcy every year. Filing a Chapter 13 case and getting that case confirmed by your bankruptcy judge, however, are two very different things. The process of getting a Chapter 13 Plan confirmed can be a bit daunting, but like everything else in filing a personal bankruptcy, having an experienced bankruptcy lawyer along with a bit of good humor will make the process smoother. There are many moving parts in getting a Chapter 13 bankruptcy case confirmed, from filing a proper Chapter 13 Plan, to disclosing all of your financial information, to making sure you make your plan payments on time, and all of this can make the confirmation process somewhat dizzying. Because knowledge is power, this post is aimed at arming you with some knowledge about overcoming a Chapter 13 trustee’s objections to confirmation of your Chapter 13 bankruptcy plan.

If you file a Chapter 13 bankruptcy case in the San Jose Division of the Northern District of California, where we primarily practice, then you should know that the trustee assigned to your case, along with her staff of case analysts and staff attorneys, are efficient, fair-minded professionals who work with us to help get your Chapter 13 Plan confirmed. Yes, you may very well receive something called a “Trustee’s Objection To Confirmation” in the early weeks after your Chapter 13 bankruptcy case is filed, and you might be tempted to think that the Chapter 13 Trustee has it out for you and does not want your case to be confirmed. But this is not the case. Yes, the Chapter 13 Trustee does represent the interests of your creditors. But it is also true, that the trustee and her staff generally want your plan to work, as long as it is filed in good faith. Read More »

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A (Very) Brief History of Bankruptcy and Debt in the West

San Jose Chapter 13 Bankruptcy Committee Presentation on History of Bankruptcy and Debt in the WestThe Chair of the San Jose Chapter 13 Committee—a group of bankruptcy attorneys representing debtors in Silicon Valley—recently asked me and several of my colleagues to give presentations to the committee on the history of bankruptcy and debt in various cultures. I was asked to offer a brief history of bankruptcy and debt in Western society, from ancient times to our modern bankruptcy law in America. I’m sure all of my bankruptcy attorney colleagues covering this topic for other ancient and contemporary societies of the world would agree, a talk such as the ones we gave before the San Jose Chapter 13 Committee cannot possibly offer a comprehensive treatment of such a broad topic.

So my presentation was not intended to provide more than a cursory overview of some of the broader themes that have been associated with debt and bankruptcy in the West. The evolution of society’s attitudes toward debtors and bankruptcy through Western history follows a course of evolution from a highly stigmatized, criminal or quasi-criminal treatment of debtors to today’s more enlightened approach that recognizes the social value of offering a discharge of debt to those needing a fresh start. What follows below is a shortened, edited version of that presentation. Read More »

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Make Sure Your Bankruptcy Attorney Is Willing to Defend the Automatic Stay

Our San Jose Bankruptcy Attorneys Defend the Automatic StaySome creditors just don’t get it. They just keep calling and harassing you with demand letters even after you have filed bankruptcy. Sure, the Automatic Stay contained in Bankruptcy Code section 362 is supposed to prevent creditors from continuing with all such collection efforts, but whether due to reckless disregard for bankruptcy law, pure sloppiness, or stubborn willfulness, some creditors just keep right on calling. But that’s a violation of a federal court order, you say, indignantly!

Yes, it is. But the Bankruptcy Court has no idea this is going on unless your bankruptcy attorney is willing and able to do something about it. Sadly, not all self-styled bankruptcy lawyers these days have much experience in what to do to defend and enforce the Automatic Stay for their clients. So, before hiring a bankruptcy attorney, you should ask him or her bluntly: What will you do if one of my creditors keeps up their collection efforts against me after we file bankruptcy? Read More »

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Why Do Big Banks File Frivolous Motions for Relief from Stay in Chapter 7 Bankruptcy Cases?

Frivolous Motion for Relief from Stay in Chapter 7 BankruptcyI’ve written several articles over the years explaining the Automatic Stay in Bankruptcy, but before I get to the subject of this post—when a creditor’s Motion for Relief from Stay is frivolous—a brief refresher on the Automatic Stay is in order. Bankruptcy Code section 362 grants a debtor in bankruptcy an immediate and powerful protection from his or her creditors. When a bankruptcy case is filed, the Automatic Stay goes into effect, well, automatically. The Stay is a temporary injunction against any and all collection efforts against the debtor, such as lawsuits, repossessions, garnishments, evictions, foreclosures, or payment demands of any kind. But certain creditors, like mortgage lenders, can ask the Bankruptcy Court to lift the Automatic Stay so that they can continue with a foreclosure, for example. They do this by filing a Motion for Relief from Stay. In a Chapter 7 Bankruptcy case, courts will generally grant a mortgage lender relief from the Automatic Stay, which means the lender will then be able to pick up where they left off before the bankruptcy case was filed and proceed with foreclosure.

Keep in mind, however, that a Chapter 7 bankruptcy case only lasts ninety days in most cases. Yes, the case can last longer, if for example, the Chapter 7 bankruptcy debtor has non-exempt assets for the Chapter 7 trustee to liquidate, or if the court issues an order delaying the closing of the case pending a hearing on a car loan reaffirmation agreement. But in the majority of Chapter 7 bankruptcy cases, the debtor will receive his discharge and the case will close three months from the filing date. And when the case closes, the Automatic Stay expires, leaving a secured creditor like a mortgage lender free to continue with a foreclosure. Read More »

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Reaffirm a Home Equity Loan in California Bankruptcy? Are You Kidding?

Why You Should Never Reaffirm a Home Equity Lone in California BankruptcyEvery now and then my San Jose bankruptcy law firm still gets a fat letter from one of the Big Banks soliciting to try to convince us and one of our bankruptcy clients to reaffirm a California home mortgage loan. If I’m in a relatively good mood that day, I’ll scan the bank letter and reaffirmation agreement and send the original to my office shredder. I’ll contact my client to inform him or her of the bank’s “offer.” But in reality the idea of reaffirming a first or second mortgage in California bankruptcy is ludicrous. Let me explain why.

It is true that the 2005 changes to the Bankruptcy Code (“BAPCPA”) effectively require bankruptcy debtors to either reaffirm or redeem a loan secured by personal property if the debtor opts to retain that personal property. She can, by the way, always surrender that personal property. Now, any law student who has even a few weeks of law school under her belt has learned in her first year Property class, that “personal property” means property that is not “real property” or real estate. If it’s land or a structure permanently affixed to land, it’s real property, not personal property. The Bankruptcy Code, as amended by BAPCPA, provides in Section 362(h) that the Automatic Stay is terminated as to personal property if the debtor does not timely reaffirm or redeem a loan secured by that personal property. Likewise, Bankruptcy Code §521(a)(6) requires that a Chapter 7 bankruptcy debtor either reaffirm or redeem a purchase money loan secured by (again) personal property if he wants to retain that personal property. Read More »

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Recently Served with a Lawsuit? Another Reason to File Bankruptcy Before Your Creditor Gets a Judgment Against You

File Bankruptcy in California Before Creditor Obtains JudgmentGetting served with a collections lawsuit by a credit card company, auto lender, or any other creditor will certainly ruin anyone’s day. Often it’s the last straw that finally motivates many of my clients to come see me for a free consultation about filing personal bankruptcy here in the Bay Area. The trouble is, many prospective clients procrastinate after being served with a lawsuit before they consider the options of Chapter 7 or Chapter 13 bankruptcy. They wait until after the creditor who sued them has already obtained a judgment by default. When a creditor files a collections lawsuit in California, the defendant has just 30 days to file a formal Answer in the court. Consumers are all too often confused by the papers served on them because this 30 day deadline is printed in tiny print on the face of the summons, while another date is given on something called a Notice of Case Management Conference. That CMC date is irrelevant if no Answer is filed within 30 days because by then the creditor plaintiff has already obtained a default judgment against the debtor.

I’ve written before on this blog that just because a creditor already has a judgment against you, does not meant that you cannot discharge this debt in bankruptcy. Provided that you are eligible for either Chapter 7 or Chapter 13, and that the debt was not incurred through some fraudulent act or other reason that might bar it from being discharged under Bankruptcy Code section 523(a), the judgment debt can be discharged in bankruptcy just the same as it could have been before the creditor ever sued. Read More »

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Making Voluntary Payments to Student Loans During Chapter 7 Bankruptcy

Voluntary Payment of Student Loan During Chapter 7 Bankruptcy to Avoid InterestFrom time to time, I receive a form letter from a student loan servicing company concerning one of my Chapter 7 bankruptcy clients that goes something like this:

“We have received notice that your client has filed for Chapter 7 bankruptcy protection. In response, we have applied a forbearance to the student loan listed below. Automatic debit payments have been suspended. While the forbearance is in effect, interest will continue to accrue on this account. When we receive notice that your client’s bankruptcy case has closed, such interest will be capitalized, increasing the principal balance of the loan. If your client would like to make voluntary payments while the bankruptcy case is remains open, and thus avoid additional interest, your client may do so by sending payments to [address of student loan lender].”

Sometimes a similar letter is mailed directly to my bankruptcy client as well. So, why do student loan servicing companies, including FedLoan Servicing (the student loan servicing arm of the US Dept. of Education) stop making automatic debits from your account when you file Chapter 7 bankruptcy? They do this because they have to. When anyone files any chapter of bankruptcy, the Automatic Stay (Bankruptcy Code Sec. 362) goes into effect immediately. In general, the Automatic Stay prevents creditors, including student loan lenders, from all types of collection activities while the bankruptcy case remains open, unless the Bankruptcy Court grants relief from the stay (or in certain situations involving auto loans, when the Automatic Stay expires earlier). Read More »

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