The bankruptcy alphabet continues with G is for Gumshoe. Why gumshoe? Because you will need to investigate all areas of your finances to gather the information and documents needed to file. Read more to learn about different methods used to find out what you need. 
     H is for Homeowner's Association Dues. Read this article to see what happens to your homeowner's association dues if you file for bankruptcy.
     I is for Income talks about the different income that must be disclosed and where in the bankruptcy you disclose it. 
     If you wonder whether to file bankruptcy with or without your spouse read J is for Joint Filing. This article discusses married couples filing jointly and filing separately.
     K is for 401K warns of the dangers of borrowing from 401K plans and answers the question of whether you can file bankputcy with a 401K plan. 
     L is for Lift the Stay explains what it means to lift the stay. When can you expect someone to bring a motion to lift the stay? Who will attempt to lift the stay and what can you do about it?
     Each article has a list of other bankruptcy attorneys contributions to the Bankruptcy Alphabet and contains a wealth of information.
Image credit: Leo Reynolds

 
 
Friday a car hit my office, collapsing the front of the building and causing it to be boarded up. There were no serious injuries. Police and Firefighters were able to remove the driver, the vehicle and the building’s occupants with little incident. This automobile crash into the office has caused temporary relocation.

Friday afternoon an automobile jumped the curb, drove over the sidewalk, drove through the landscaping and partially entered the front of San Rafael’s Eranthe Law Firm. The impact collapsed the front of the building shattering the windows and door glass. Police and Firefighters were on the scene and assisted the driver in exiting the vehicle. They also removed the doors so that the attorney, staff and clients could exit the building. No one was seriously injured in the accident, which occurred at the corner of Las Gallinas and Miller Creek Road.

Later that afternoon the front of the building was securely boarded up. Please know that business will continue as usual. Until the building damage can be repaired our client appointments will be held in the offices of Derryck J. Dias & Associates at 280 Miller Creek Road, San Rafael, CA 94903. This location is conveniently located across the parking lot from the Eranthe Law Firm offices at 2400 Las Gallinas Avenue, Ste 260B.

 
 
Happy Thanksgiving! I'm looking forward to spending it with family and friends. I'm thankful for the past year, the people in my life and the opportunity to help others through a difficult time.

This morning I received an email from Michele Obama regarding letting our servicemembers know how grateful we are for everthing that they do. The Obamas have partnered with the USO to create a program called Thanks From Everywhere. Visit JoiningForces.gov/Thanks and you can write a quick note that troops and veterans all over the world will be able to see. 


At a time we are focused on gratitude, please take a moment to share with those who have offered so much to our country.
 

Bankruptcy A to Z

11/21/2011

 
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Bankruptcy Alphabet Begins

_    This month I've started a series of articles called Bankruptcy A to Z. Each post will explore bankruptcy from the perspective of a different character of the alphabet for each post.

   A starts with Bankruptcy Assets, B is for Beware of Those Credit Card Offers, and C is for Chapter 7 in bankruptcy.

Bankruptcy D is for Disclose. E is for Equity and F is for Fresh Start.

The series continues on through the alphabet and my goal is to complete it by the last day of November. I'm a little behind so we'll see what happens.

Some of the articles will be short and some will be longer. There will be links to other articles on the same letter by other attorneys. I hope you find some useful information. 
 

Where Can I Bank?

08/25/2011

 
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I've been repeatedly asked, "Where can I bank?" "I like having my credit card, auto loan and savings all at the same institution." I say, "don't keep your money where you owe money."  The response is something like well what about my car loan? Or can't I just have a credit card linked to my bank account.

It's like the facts are covered in clouds. There is a reason the banks offer incentives for tying together different account types. 

The PROBLEM is - if you are on the edge just making your monthly payments and something happens to cause you to fall behind, that helpful institution may just help themselves. In many instances they have a right to offset your debt with your cash.  Even if they make a mistake and you eventually get it corrected, you will be without those funds for at least 30 days. 

The only certain way to protect yourself from this happening is to keep your cash (checking and savings) accounts in a different institution from the bank that has your auto loan, credit card, credit equity line, and any other obligations you've incurred. 

[This discussion grew out of the previous blog warning of Wells Fargo and Wachovia's account freezing practices.]
 
 
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If you are considering bankruptcy, you are advised to move any accounts you may have with Wells Fargo to another institution.

It doesn’t matter if you owe them money or not! It doesn’t matter that you have never bounced a check and never borrowed any money from them.  If you file bankruptcy the corporate policy is to freeze your accounts.

For at least a month you will not have access to your money, your ATM card will not work and any checks that are outstanding will be returned. Eventually the accounts can be unfrozen but meanwhile you won’t be able to pay the mortgage or buy food.

Don’t forget – move your money from Wells Fargo (and Wachovia) to another bank or credit union where you don’t have any loans, lines of credit or credit cards.


 
 
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People often come into my office asking about bankruptcy because they have been sued. It is a stressful and emotional event to have a process server show up at your door to hand you papers letting you know you have been sued. You start to imagine the worst and expect the creditor to take everything you have.

You need to see an attorney right away so they can evaluate the lawsuit. In California you have 30 days to respond. If you do not file an answer within those 30 days the creditor will ask for and receive a default judgment.  That means the creditor does not need to prove you owe the money they are asking for. They will have a judgment that is valid for 7 years and can be renewed every 7 years after that.

Often I see people who have ignored the summons and the 30-day warning. It is human to freeze under stress and think there is nothing you can do. You may think you owe the money due to a deficiency after foreclosure on a house, or a credit card bill that ran up, or medical bills that you were unable to pay. However, there are often mistakes made by creditors with accounting and recording keeping so don’t feel bad making them prove up the claims.

It is also confusing because there are other dates on the papers attached to the summons that refer to status conferences and the like. You may end up with a default judgment that occurs before the status conference date. When that happens none of those later dates matter. The default judgment ends the active case and the creditor will proceed to attempt to collect the judgment.

Bankruptcy will not only stop the pending law suit, but if judgment has already been entered against you it will stop collection efforts on that judgment. When you file for bankruptcy the bankruptcy court will immediately enter an order for an Automatic Stay. This stay order stops any collection efforts from proceeding against you, including any pending lawsuits and collection of judgments.

The Superior Court and the creditors are notified by your bankruptcy attorney that you have filed for the protection of the Bankruptcy Court and no action should be taken against you once they have received the notice. Filing bankruptcy provides immediate relief because the lawsuit will not proceed, you will not incur court costs or attorney’s fees to defend that lawsuit, and your creditors will not be able to collect on judgment and go after any of your assets or income.

If judgment has already been entered the creditor can garnish wages and bank accounts, and take non-exempt property. Filing bankruptcy will stop any type of garnishment or execution on your property. At the completion of the bankruptcy, entry of the bankruptcy discharge and final decree will void the judgment that was entered against you and eliminate the underlying debt.

If you have been sued or are expecting to be, call a bankruptcy attorney in your area immediately.  You can get help and relief from the situation through the protection of the Bankruptcy Courts.

 
 
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We see those 1099 forms and think they are official documents. It says right there on the bottom "Department of the Treasury - Internal Revenue Service." The form was NOT generated by the IRS. It was created by the lender and might be wrong.

According to
Bill Purdy who teaches about Federal Income Tax at Lincoln Law School, these 1099s are often wrong in stating there is a taxable event as a result of foreclosure. When a non-recourse debt is foreclosed in California no cancellation of debt income occurs. If there is no personal liability on the loan, there can be no improvement to the borrower's balance sheet when the collateral is foreclosed.

Non-recourse debt might be statutorily non-recourse, as the purchase money non-recourse provisions of California law; it may be non-recourse by reason of a bankruptcy; or it may be non-recourse because the collateral was acquired subject to the lien.


Bottom line - if you receive one of these 1099s see a knowledgeable attorney before assuming you'll have a large tax bill to pay.
 
 
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When asked what assets they have, most people think of real estate and money.  Those are assets but not the only ones.  All personal property is an asset.  It doesn’t matter what the value is.  Some assets have zero or little dollar value, like that t-shirt or your old shoes.  

Many clients have told me, “I have no assets!”  Yet I’ve never seen one walking around in the buff.  At the very least you have the clothing on your back.  You probably also have a bed and dishes.  You may have a bicycle, a motorcycle or an automobile.  These are all assets.  Your kitchen appliances, musical instruments, the pictures on the wall, the security deposit your landlord has, a cemetery plot, that stuff in the storage locker or your parent’s garage, an upcoming tax refund—all assets.

Full disclosure is required if you file for relief under the bankruptcy code.  In exchange for discharging most if not all of your debts you must fully disclose ALL your financials including your assets.  So think on it.  What do you have that you didn’t think was an asset?

 
 
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The New York Times published an article titled The New Poor - Peddling Relief, Firms Put Debtors in Deeper Hole by Peter S. Goodman.  Please click on the title to read this article if you are considering calling a debt settlement agency or credit services company.  You must do research. 

We have had a number of responsible clients use these services to make payment arrangements thinking they were being honorable and would eliminate their debts through a repayment plan.  One couple spent $5,000 only to have the company go out of business without paying the creditors a dime.  Others made payments and even had some interest charges reduced but ended up filing for bankruptcy relief when an unhappy credit card company sued them. 

Many hard working families have hoped to pay their debts through debt settlement agencies but it just didn’t work for them.  Often there is too much debt and it is simply overwhelming - they seek bankruptcy relief after spending money that could have been used for food or medicine.  Be very wary of any agency that tells you to cut your food budget or seek cheaper or less medical care.  

California has only one approved and registered credit services organization that we know of.  It is called the Consumer Credit Counseling Service of San Francisco.  Be sure the name matches exactly as there are many close variations out there with no affliation.  Explore all your options carefully and be realistic about your ability to pay.  Even if a credit card or other company is willing to settle your debt at a reduced amount will you be able to pay it?

Credit services and debt consolidation is a growth industry with rising allegations of unfair practices. According to the National Association of Attorneys General, since 2004 at least 21 states have brought a minimum of 128 enforcement actions against debt relief companies.  According to the Federal Trade Commission, between 2007 and 2009, states’ consumer complaints more than doubled.  “Consumers rarely emerge from debt settlement programs with their credit card balances eliminated, these critics say, and many wind up worse off, with severely damaged credit, ceaseless threats from collection agents and lawsuits from creditors.”  (Goodman, The New Poor - Peddling Relief, Firms Put Debtors in Deeper Hole, N.Y. Times (Jun. 19, 2010) p. A1).