Sacramento Bankruptcy Lawyer Blog

Under the old bankruptcy law, you could sometimes get your student loan discharged if you (1) obtained your student loan from a non-profit organization, and (2) could show you'd suffer undue hardship if you were forced to repay the loan. The new bankruptcy law doesn't make the distinction between non-profit and commercial enterprise: you must show undue hardship in either case.

If you want to try and get your student loan discharged along with your other debt you'll have to file a separate action at the bankruptcy court where you file your case. This separate action is called the Complaint to Determine Dischargeability of Student Loan. If the court rules in your favor, you'll be able to discharge your student loan, but it's not an easy row to hoe.

Courts usually take one of two approaches when considering these complaints. Either they'll look at your case in the totality of the circumstances, or they'll apply a three-part test to determine the merit of your case (that is, the real extent of your hardship). Under the Totality of the Circumstances test, courts simply look at all the facts surrounding your case and make a judgment call about the difficulty you'd likely face in the event you were forced to repay your loan.

We'll look at the three-part test courts use to determine hardship in tomorrow's post.

Continue reading "What Happens to Student Loans in a Bankruptcy Case?" »

Back before Congress amended the consumer bankruptcy laws in 2005, debtors involved in a bankruptcy case could retain their vehicles if they kept making their regular monthly payments, even if they did not take the positive step of reaffirming the debt. In Dumont v. Ford Motor Credit Company, however, the 9th Circuit negated this practice and opened the door to post-discharge repossession actions by creditors.

The practice of effectively reaffirming a debt (though not explicitly) was known as the ride-through option. It was a practical way for debtors to enjoy the use of their vehicles, but the circuit courts were in disagreement as to the legitimacy of the practice.

The majority view was that the Bankruptcy Abuse Prevention and Consumer Protection Act (or BAPCAP) did away with the ride-through option and the 9th Circuit's decision in this case affirmed this view.

In the case, the plaintiff had stated in her Statement of Intentions that she would keep the vehicle and continue making her monthly payments. However, she never signed the reaffirmation agreement that the creditor proposed. Then, about three months after she received her discharge her vehicle was repossessed without warning, even though she was current on her payments.

This case illustrates the importance of reaffirmation agreements in particular and of being meticulous in completing one's bankruptcy papers in general.

As a Sacramento bankruptcy attorney I sometimes counsel clients who believe that every debt they have will be discharged via bankruptcy. Actually, however, certain debts are non-dischargeable. Liability arising from an accident in which a person kills or injures another and was illegally intoxicated (either by alcohol or drugs) at the time is an example of a non-dischargeable debt.

Note, however, that this rule applies only to debt arising from personal injury; debt related to property damage from the same incident would be dischargeable through bankruptcy.

For example, say you injure someone while driving under the influence of alcohol and are convicted of this offense. In your bankruptcy papers you list the injured party as a creditor. Six months after you receive the discharge in your bankruptcy case, the injured party sues you for personal injuries and property damage related to the accident. You will still be on the hook for the personal injuries portion of the suit. The claim related to the property damage will be dismissed, however, as this debt will have been discharged thanks to bankruptcy.

Remember, while bankruptcy can do away with most of your unsecured debt, there are certain categories of non-dischargeable debt which bankruptcy will not affect.

If you have questions pertaining to bankruptcy please contact our office at 925-932-7086. I am a Sacramento bankruptcy attorney located at 1104 Corporate Way, Sacramento, California 95831. I have additional offices in Fairfield, Oakland, and Walnut Creek. I offer free consultations to people considering bankruptcy.

As a Sacramento bankruptcy attorney I counsel many clients whose primary concern is being able to keep their home. As discussed in an earlier post this week, Chapter 7 can forestall an impending foreclosure sale, but it won't stop it outright. So how can Chapter 7 help homeowners?

The main way Chapter 7 benefits distressed homeowners is by freeing up their income stream, which allows them to stay current on their mortgage payments. Many people have so much debt to service that their mortgage payments take a back seat to the other necessities of life, such as medical or student loan bills. By discharging your unsecured debt, Chapter 7 enables you to concentrate your financial energy on staying current with your mortgage payments and in this way stay in your home.

Another way Chapter 7 can help homeowners is by potentially wiping out a second or third mortgage on their home. This is a possibility if your home has lost a lot of value.

In sum, bankruptcy can be an effective tool which allows debtors to achieve a measure of financial freedom and to concentrate their energies on the things that matter most in life.

I am a Sacramento bankruptcy attorney offering free consultations to people considering filing for bankruptcy. Our Sacramento office is located at 1104 Corporate Way, Sacramento, California 95831. We also have offices in Fairfield, Oakland, and Walnut Creek. Please call us today to schedule your free consultation at 925-932-7086.

As a Sacramento bankruptcy attorney I often encounter clients with one main question on their minds: If I file for bankruptcy will I necessarily lose my home?

To answer this question properly we have to look at your situation from the perspective of the trustee overseeing your case. The trustee's job involves wringing as much value as possible out of your bankruptcy estate in order to pay off your unsecured creditors. In a nutshell, this means that he or she won't attempt to sell your house if it doesn't look like there'll be enough money left over at the end of the day to benefit your unsecured creditors.

First, let's look at what happens if you sell your home without filing for bankruptcy. Your mortgage holder would get the first bite at the proceeds from the sale. That debt must be paid off first (since it's a secured debt). Next in line would be the holders of any liens (such as a tax or mechanic's lien). After that comes the cost of the sale and finally the taxes due as a result of the sale. Anything left over is yours.

If you file for bankruptcy and the trustee overseeing your case sells your house, the order of payees is essentially the same: mortgage holders, lien holders, costs of sale, and taxes. However, instead of you then scooping up the leftovers, the left over proceeds would go to your unsecured creditors.

Keep in mind, however, that many homeowners may qualify for what's known as a Homestead Exemption. This would entitle you to keep some of these left over proceeds. We'll look at this special exemption in more detail in an upcoming post.

I am a Sacramento bankruptcy attorney with additional offices in Fairfield, Oakland, and Walnut Creek. I offer free consultations to people considering filing for bankruptcy. Please call us today to set up your free consultation at 925-932-7086.

In yesterday's post we discussed how bankruptcy will not prevent foreclosure but can forestall a foreclosure action, at least for the amount of time it takes for your case to be decided. (This assumes that your mortgage lender does not obtain a removal of the automatic stay which goes into effect once your case is filed.)

Thus, if homeowners want to stay in their home they'll have to continue to make their monthly mortgage payments, even if they file for bankruptcy. As you're probably aware, if homeowners don't make their monthly payments their mortgage lender has the right to foreclose on their property. Chapter 7 bankruptcy doesn't alter this situation. You'll have to continue to make your payments if it's your ultimate goal to stay in your home.

However, as a Sacramento bankruptcy attorney I sometimes witness the situation where a lender refuses to accept mortgage payments from a person in bankruptcy. What should a person do when faced with this situation?

If your lender refuses to accept your mortgage payment because you filed for bankruptcy I suggest you set up a separate bank account into which you deposit your regular monthly payment. In this way you won't miss a beat when your lender decides to accept your mortgage payments again. If you can make your lender whole once your bankruptcy case is resolved, you should be able to stay in your home. I find that a separate bank account is extremely useful in this regard. It's simply too easy to spend the extra cash lying around in your account if you're not making your regular mortgage payments.

I am a Sacramento bankruptcy attorney with additional offices in Fairfield, Oakland, and Walnut Creek. I offer free consultations to people considering filing for bankruptcy. Please call us today to set up your free consultation at 925-932-7086.

When most people think about divorce they think about the process of dividing assets. Increasingly, however, dividing debt is also a big part of the process and this aspect of a divorce action should not be overlooked.

California is what's known as a Community Property state. In a CP state all assets obtained during marriage belong to the community and are divided equally upon divorce. However, the CP sword cuts both ways: debts incurred during marriage will also be split down the middle. And this holds true even if a debt is in only one spouse's name.

For couples with a heavy debt burden, bankruptcy can offer the hope of a fresh start. But this should be an individual decision, since you can file for bankruptcy jointly (with your spouse) or separately and either before or after a divorce. It can sometimes be best for a couple to file for bankruptcy jointly before they divorce. Not only does this reduce the amount of debt to be divided, but it also seems to reduce the level of acrimony present in a typical divorce proceeding.

One further consideration to keep in mind is that bankruptcy will not affect certain family obligations such as alimony and child support. These debts will not be discharged through bankruptcy.

I am a Sacramento bankruptcy attorney. Our Sacramento office is located at 1104 Corporate Way, Sacramento, California, 95831. We also have offices in Oakland, Fairfield, and Walnut Creek. I offer free consultations in these locations. Please call us at 925-932-7086 if you'd like to schedule an appointment.

As a Sacramento bankruptcy attorney, I'm in a good position to see and correct common misconceptions related to home foreclosure. One of the most common misconceptions out there is that bankruptcy will prevent a foreclosure from going forward.

Chapter 7 bankruptcy will not (by itself) prevent a foreclosure from happening. Ultimately, if you're going to stay in your home you'll have to continue to make your monthly mortgage payments, regardless of your decision to file for bankruptcy.

Filing for bankruptcy protection does offer the benefit of the automatic stay, however. The automatic stay is essentially a time-out period, putting a stop to all collection efforts and other harassment from your creditors once your case is filed. This includes a foreclosure proceeding. Keep in mind, however, that the automatic stay is just a temporary time-out. That is, the foreclosure will just be put on hold while your case works its way through the bankruptcy court.

Chapter 13, a topic for another day, does provide homeowners with more options in terms of being able to keep their home.

Remember, even if you file for bankruptcy you'll have to continue to make your monthly mortgage payments before, during, and after your case is resolved.

I am a Sacramento bankruptcy attorney and I offer free consultations for people considering bankruptcy or facing foreclosure. Our Sacramento office is located at 1104 Corporate Way, Sacramento, California, 95831. We also have offices in Oakland, Fairfield, and Walnut Creek. Please call us at 925-932-7086 if you'd like to schedule an appointment.

As a Sacramento bankruptcy attorney, I sometimes encounter clients who are reluctant to list certain creditors on the proper schedule which accompanies their bankruptcy petition. Their reluctance usually stems from their desire to eventually pay off a specific creditor. The fact is, when your debts are discharged via bankruptcy, certain creditors may be left out in the cold and some debtors may be disinclined to leave friends, family members, or members of their community in this position.

The rules in this regard are very clear, however: all one's creditors must be listed on the creditor schedule. But this does not mean that you cannot eventually pay off a particular debt should you choose to do so. Sure, your debt is legally discharged (meaning you don't have to pay it), but if you choose to pay it off for ethical considerations or to stay in the good graces of a certain creditor no one can stop you.

If you feel you would like to pay off a certain debt, just remember two things: (1) wait until after your bankruptcy case has been filed, and (2) don't use assets belonging to your bankruptcy estate.

Remember, income earned after your filing date is not considered part of your bankruptcy estate. Therefore, you're free to use these funds as you choose. This brings up an important point about bankruptcy: after you file you can still pay off a debt that has been discharged, but that doesn't mean a creditor can harass you about this debt.

Continue reading "Ethical Considerations Regarding Filing for Bankruptcy" »

In previous posts I've been discussing how exemptions play a major role in a bankruptcy case. In many cases, by taking advantage of exemptions debtors are able to hang on to their cherished possessions. However, the exemptions your state offers many not cover all your property. As a Sacramento bankruptcy attorney, I see that, when faced with the prospect of losing certain assets, debtors sometimes consider selling their non-exempt property in order to at least get something in return.

People sometimes sell their presumably non-exempt property in order to buy property that they think would be exempt. In other cases, they use the money gained from selling property in order to pay off preferred creditors.

In both instances, this is a dangerous practice that can backfire and have serious consequences for you and your case.

If the trustee assigned to your case suspects you may have sold property before filing for bankruptcy in an effort to defraud your creditors, he or she can regard items of exempt property which you purchased as non-exempt property in order to make up the difference.

Also, if the court suspects you acted fraudulently your entire case could be thrown out.

Today I'd like to clear up a common misconception relating to non-exempt property. As you may recall from previous posts, exempt property is property you're entitled to keep upon filing for bankruptcy; non-exempt property is property which the trustee will be entitled to sell for the benefit of your creditors once your case is filed.

As a Sacramento bankruptcy attorney I often encounter people who think that if an item of property doesn't fit into an exemption category then they'll definitely have to give it up. In fact, in many instances debtors will not have to surrender their non-exempt property.

The reason why some non-exempt property may be retained by the debtor has to do with the nature of property and how it's valued for purposes of bankruptcy.

The fact is some items of property, while perhaps valuable, are simply cumbersome. For example, say you have an antique mahogany bed whose value exceeds the dollar amount allowed for household goods. Will you have to give it up? Not necessarily.

In assigning a value to property we use what's called the replacement value of the item. If you were to go out and buy this bed new it might cost $2500. However, if the trustee takes custody of your bed and sells it at an auction he may only get $800 for it. Throw in the expense and trouble of moving and storing the bed and you can see why a trustee may be reluctant to take the item even though it's technically considered non-exempt property.

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All Sacramento Bankruptcy Attorneys have seen an influx of new bankruptcy clients.

The number of bankruptcy cases filed in fiscal 2009 increased by 35% over the previous year. According to a report recently published by the Administrative Office of the U.S. courts, over 1,300,000 bankruptcy cases were filed in the year ending June 30, 2009. The previous year saw less than 1,000,000 filings.

Consumer bankruptcy cases accounted for the overwhelming majority of the total tally. In all, more than 1,250,000 new consumer cases were filed - a 34% increase over the previous year. This figure includes a 47% rise in Chapter 7 cases and 12% in Chapter 13 cases. The total numbers for these categories were 907,603 and 384,187 for fiscal 2009.

But Chapter 11 filings saw the sharpest increase. These rose 91% in fiscal 2009. Chapter 12 actions also rose. These cases, brought by farmers, rose 34% in the same period.

Unfortunately, the upward trend of new filings shows no sign of abating. There were over 125,000 new filings in July of this year, according to the National Bankruptcy Research Center. This amounts to the highest monthly total since Congress enacted the new bankruptcy laws in 2005.

Continue reading "2009 Bankruptcy Statistics: is there a trend ?" »

To further this week's discussion of exemptions and how they impact your bankruptcy, today I'd like to outline the first step you need to take once you decide to file - creating an inventory of your property.

Exemptions are important when you file for bankruptcy.

Figuring out just what you own is highly important. It will help you gain an idea of what property you'll be able to hang on to and the list will come in handy when it comes to filling out the forms that supplement your bankruptcy petition.

Your inventory should include cash on hand, bank and brokerage accounts, household goods (such as furniture and kitchen appliances), hobby-related items (such as books and DVDs), clothing, jewelry, equipment of all kind, and non-tangible goods (such as insurance policies, pensions, stock options, and an accounts-receivable balance).

The list should also include vehicles, recreational craft, office equipment, and tools of your trade.

This is just a partial list of the items you'll need to categorize, but it provides an idea of the amount of detail that must go into your inventory. Remember, all this work will pay off in the long run and make the process of filing for bankruptcy go much smoother.

As a bankruptcy attorney in Sacramento I often consult clients on what they can protect in a bankruptcy.

We've been talking about exemptions in the last couple of posts and today I'd like to provide an example of a specific exemption category just so people are clear on how exemptions work.

One exemption category that can be particularly useful in shielding property from the jurisdiction of the court is the Tools of the Trade category. Historically, tools of the trade referred specifically to hand tools, such as a hammer or saw. Today, however, this term has taken on a wider meaning.

This exemption category allows you to set aside that property which you use in your trade up to a certain dollar amount. For example, if you are a hairdresser you could exempt such items as a dryer, curler, chair, and shampoo stock, as well as a cash register and other furniture. The idea behind this exemption is that the bankruptcy court does not want to cut off your means of support and prevent you from being a productive member of society.

The Tools of the Trade exemption category highlights another important aspect of filing for bankruptcy. You can and should be creative when you set about applying the various exemption categories to your property. A lot of strategic decisions need to be made in order to take full advantage of the various exemptions and maximize the amount of property you're able to keep.

Continue reading "What you can protect in a bankruptcy if you file in California" »

In my last post I wrote on the importance of exemptions in a typical bankruptcy case. I discussed what exemptions are and touched on the fact that each state has its own exemption scheme. Today I'll look at what accounts for the differences across state lines.

To review, exempt property is property you're entitled to keep upon filing for bankruptcy. Non-exempt property becomes subject to the trustee's control once you file.

So why do exemptions differ from state to state?

First, it's important to note that a state's exemption scheme covers not only bankruptcy but court-ordered judgments as well. If a creditor obtains a judgment against you and seeks to collect your property in order to enforce its judgment, the state's exemption scheme will determine what property is obtainable and what is considered off limits.

A state's exemption scheme thus encompasses the viewpoint of a state's legislature with respect to property. It codifies attitudes pertaining to the amount and type of property which can be seized when a creditor obtains a court judgment.

Another reason why exemptions differ so much from state to state is that some state legislatures update their exemptions from time to time and others let their system collect dust. States with more current systems tend to allow higher dollar exemption amounts for certain categories of property.

Continue reading "Make sure you are claiming your exemptions when you file" »

Today I'd like to discuss how bankruptcy can affect a foreclosure action.

The great thing about bankruptcy is it allows you to cancel your accumulated debt. By agreeing to give up your non-exempt property you are released from your obligation to repay your unsecured debts.

One thing bankruptcy won't do, however, is cancel an impending foreclosure sale. Why is this? The reason has to do with the difference between secured and unsecured debt.

A typical home sale involves two essential documents: a promissory note and a security agreement. The promissory note is basically a formal IOU. It declares that you will pay back the mortgage loan. The security agreement acts as a lien to ensure that you will actually repay your mortgage loan according to the promissory note. It's what allows your bank or mortgage company to foreclose upon your home if you default on your loan.

Bankruptcy will eliminate your responsibility for the promissory note, but the lien will remain in effect. That is, it will remove your debt but not the lien associated with your debt. In other words, bankruptcy will wipe out your unsecured debt, but not your secured debt.

As a Sacramento Bankruptcy attorney I deal with foreclosures and bankruptcies on a daily basis. Give us a call if you have questions about this blog or would like a free consultation.