Whether a particular debt is dischargeable or not is typically a straightforward question. However, the dischargeability of several types of debts are not always easy to ascertain. One such debt is condominium association dues. The Ninth Circuit Court of Appeals recently decided the issue in favor of debtors. Read on to learn more.

Not All Debts are Dischargeable in a Bankruptcy

The starting point for this discussion is this: not all types of debts can be extinguished in a bankruptcy. There is a whole list of debts that the court cannot discharge, including, but not limited to, child support obligations, some types of tax debts, and debts related to DUI injuries.

Accordingly, a debtor must carefully consider all of their debts when deciding whether to file for bankruptcy. You don’t want to find out that the main debt that drove you into bankruptcy is not dischargeable after your case is over!

Adding to the confusion, the bankruptcy court can discharge some types of debts in a Chapter 13 that are not eligible for a discharge in a Chapter 7.

Condo Association Dues & Chapter 13

The general rule that I have always been taught is that condo association dues are not dischargeable in a bankruptcy if they accrue after the bankruptcy was filed. This is consistent with other areas of discharge law. The general rule is that only debts that existed before the date the bankruptcy is file are eligible for discharge.

This rule creates some problems in one specific scenario. A Chapter 13 bankruptcy lasts three to five years from start to finish. In some Chapter 13 cases, the debtor asks the court to surrender a condo back to the lender. While the case proceeds, the condo is still in the debtor’s name. And condominium association dues continue to accrue until the condo is foreclosed upon by the lender or the HOA itself.

That leaves the bankruptcy filer in a difficult position. The debtor is in bankruptcy to reorganize and potential discharge some of their debts. But during that reorganization process, additional HOA dues continue to accrue. This is where the new law helps!

Post-Petition Condo Dues are Now Dischargeable!

The relevant case is titled In re Goudelock. The citation is 895 F.3d 633 and the decision was issued July 10, 2018. The Ninth Circuit held that condominium association assessments that become due after a debtor has filed for bankruptcy under Chapter 13 are dischargeable under 11 U.S.C. § 1328(a). If you are interested in the legal reasoning, it comes down to the fact that the court ruled that the HOA assessment really arose prior to the bankruptcy petition. Moreover, the court concluded that condo HOA dues are not among exceptions listed in § 1328(a).

This is great news for debtors that are attempting to surrender their condo in a Chapter 13 bankruptcy plan. The new decision will prevent the HOA from attempting to assert post-petition HOA dues against the bankruptcy filer after their bankruptcy case is discharged by the court.

My law practice represents both debtors and creditors in bankruptcy matters in Sacramento. Please contact us at (916) 333-2222 if you have questions related to bankruptcy. 

It is not often that the United States Supreme Court decides a bankrutpcy related case. Yesterday, the Supreme Court issued a ruling in an important cases that bankruptcy practitioners have been watching for some time. In fact, the case of Midland Funding v. Johnson decides an important question for Chapter 13 lawyers nationwide.

Not All Claims in Chapter 13 Are Valid

A debtor in Chapter 13 is repaying some or all of their debts over time. The Chapter 13 Trustee is responsible for distributing funds to each creditor. Only creditors that file a “proof of claim” will receive distributions from the Trustee.

Believe it or not, creditors often file invalid claims in Chapter 13 cases. These creditors hope that nobody notices the defects in their claims. A party to a bankruptcy can object to time barred claims. If not, the Chapter 13 trustee will pay the claim.

Statute of Limitations and Chapter 13 Claims

The most common defect in a Chapter 13 claim is something called the statute of limitations. The statute of limitations is an absolute defense to the enforceability of a debt in court. Basically, a creditor cannot enforce a debt in court that is too old.

Most consumer debts are governed by a four year statute of limitations in California. That means that a creditor must sue a debtor four years after the debtor defaults on the debt. A creditor that waits too long waives its right to collect the debt in court.

The same statute of limitations defense applies in bankruptcy as well. A debtor can object to a Chapter 13 claim that is too old under the applicable statue of limitations. Again, this does not happen automatically. A debtor, trustee, or creditor must take affirmative action to object to invalid claims in bankruptcy.

Midland Funding v. Johnson

The United States Supreme Court answered a very important question in Chapter 13 cases. Is the filing of a proof of claim that is obviously time barred a false, deceptive, misleading, unfair, or unconscionable debt collection practice within the meaning of the Fair Debt Collection Practices Act (“FDCPA”)?

Midland Funding presented a obviously time barred debt in the Johnson bankruptcy case. Johnson turned around and sued Midland Funding for a violation of the FDCPA. Courts throughout the country were split on whether this type of lawsuit by a debtor was allowed.

The Supreme Court ruled “no.” This means that a debtor can still object to time barred debts. But debtors cannot sue creditors under the FDCPA for filing time barred claims.

There are other procedural tools that debtors can use to fight back against creditors trying to sneak time barred claims into Chapter 13 cases.

Are you considering Chapter 13 bankruptcy? Contact my office at (916) 333-2222 to discuss your bankruptcy options.

Not all claims filed in Chapter 13 bankruptcy cases are valid. In most situations, invalid claims will be paid by the Trustee unless a party in interest objects. This blog post will focus on time-barred Chapter 13 claims and claim objection.

What are Chapter 13 Claims?

A Chapter 13 claim is a document filed by a creditor that establish the creditor’s right to be paid money through the Chapter 13. A creditor that does not file a claim in a Chapter 13 will not be paid any money. That creditor may also be prohibited from ever asking the debtor for money after the Chapter 13 is discharged.

Surprisingly, not all creditors will file claims in a Chapter 13. Even more surprising, some creditors file claims that are clearly invalid. This is where claim objection comes into play.

What is a Time-Barred Claim in Chapter 13?

To establish a valid Chapter 13 claim, a creditor must establish their legal right to seek money from the debtor. This makes sense. Not just anyone can show up to a Chapter 13 bankruptcy case and demand money from the debtor.

Typically, a creditor will file a claim that demonstrates that the debtor borrowed money and later defaulted on their payment obligations.

However, just as in a civil lawsuit, the creditor must establish a valid legal claim against the debtor.

The most common way a Chapter 13 claim fails is if it is time-barred. In other words, the debt is too old to legally collect. For most debts based upon a written contract in California, four years is the statute of limitations.

How Chapter 13 Claim Objection Works

If a creditor files an invalid claim in a Chapter 13, it is up to the debtor, the Chapter 13 Trustee, or some other party-in-interest to object to that claim.

Claim objections in bankruptcies can be filed both as “contested matters” as well as “adversary proceedings.”

Once the claim objection is filed with the court, the bankruptcy judgement will ultimately decide if the claim is valid or invalid.

The bottom line is that parties to a Chapter 13 need to carefully review all claims to ensure that only valid claims are paid. Special attention needs to be paid to the supporting documents that are filed with each claim to ensure that the debts are not time-barred.

I represent bankruptcy filers in Chapter 13 matters in Sacramento. Please contact my office at (916) 333-2222 to discuss whether Chapter 13 bankruptcy is right for you. 

Sacramento Bankruptcy Lawyer Rick MorinA very important part of building a Chapter 13 Plan is figuring out the plan length. The length of a Chapter 13 plan determines much of the math in a case. It also is a big part of determining whether Chapter 13 will work for a debtor.

Chapter 13 is a Reorganization

The entire purpose of Chapter 13 is to allow a debtor to reorganize their finances under court supervision. This means repaying certain debts over time. Most Chapter 13 debtors just need some breathing room to get their financial house in order. The court protects the debtor from collection activity such as lawsuits, garnishments, and foreclosures during the pendency of the Chapter 13.

The bottom line in Chapter 13 is simple: debtors are given the chance to get things on track by making monthly payments to a Chapter 13 Trustee.

Picking the Right Chapter 13 Plan Length is Critical

After 2005, the rules are simple. If the debtor earns more than median household income for their area, they will be in a 60-month Chapter 13 plan. If the debtor earns less than median household income, they can be in a 36-month Chapter 13 plan.

A person that qualifies for a 36 month plan can extend their plan to 60 months. However, the opposite is not true. In most cases, a person that qualifies for a 60 month plan cannot shorten their plan to 36 months.

A debtor that proposes the wrong plan length risks their case being dismissed by the court. Or, the debtor might pay more into the Chapter 13 plan than they would otherwise be required to pay.

60 Month Plans Can be the Best Option

Five years in bankruptcy may sound like a long time. But 60 months gives a debtor a lot of options when calculating an affordable plan payment. The trick in Chapter 13 is to obtain a good result at the end of the case. Sometimes the payments required in a 36 month plan are unaffordable. This causes the debtors to fail out of bankruptcy. Spreading those same payments out over 60 months can result in a more affordable payment. Remember, slow and steady wins the race. This is true for bankruptcy.

My law firm helps people all over Northern California successfully declare bankruptcy. If you need a fresh start, please call us at (916) 333-2222 to schedule a consultation. Don’t delay!

Sacramento Bankruptcy Lawyer Rick MorinBankruptcy comes in several flavors. Each bankruptcy “chapter” has its own advantages and disadvantages. What type of bankruptcy is best for foreclosure? Read on and I will tell you.

Bankruptcy Stops Foreclosure

A bank starts foreclosure proceedings when a borrower defaults on the terms of their home loan. Each lender is different, but getting past 90 days late on a mortgage puts the borrower in the danger zone.

In order to prevent a bank from selling a home at a foreclosure sale, the borrower must bring their mortgage account current. This usually means paying the missed mortgage payments, plus penalties, interest, and sometimes even attorney’s fees. This can be a substantial amount of money. Not everyone can just write a check to bring the mortgage account current.

The good news is that all types of bankruptcy halt foreclosure proceedings. This means that bankruptcy is an effective tool to stop a foreclosure. What happens next depends on the type of bankruptcy being filed.

Chapter 13 Bankruptcy is Best for Foreclosure

Filing Chapter 13 bankruptcy stops a foreclosure sale dead in its tracks. That is just a temporary solution to a much larger problem. Chapter 13 has a borrower covered with a long-term solution as well.

In Chapter 13 bankruptcy, a debtor repays some or all of their bills over time. Included in the list of debts that must be repaid in full during a Chapter 13 is mortgage arrears.

Mortgage arrears is the fancy name for the amount of money a borrower must repay to bring their mortgage account current. Most mortgage companies will not let a delinquent borrower repay their arrears over time. Pay up, or get out, is what the mortgage companies say.

Chapter 13 bankruptcy allows a delinquent borrower to repay their mortgage arrears over time. Up to 60 months, in fact. Spreading mortgage arrears payments out over 5 years is a huge benefit to a borrower that cannot come up with the full payment in a lump sum.

Chapter 13 is a tricky bankruptcy to get right. When done correctly, Chapter 13 is a very powerful tool. Saving a home from foreclosure is just one benefit of Chapter 13 bankruptcy.

I have helped delinquent homeowners all over Northern California save their homes from foreclosure with Chapter 13 bankruptcy. Please call my office at (916) 333-2222 to discuss your bankruptcy options.  

Sacramento Bankruptcy Lawyer Rick MorinThis is third in a series of articles I have wrote about dismissed bankruptcy cases. The first article discusses how to dismiss a bankruptcy. The second article discuss what happens after bankruptcy dismissal. This article will tell you all about what happens to your credit report after a dismissed bankruptcy. This article may suprise you!

Bankruptcy Means Bankruptcy

Many people believe that a dismissed bankruptcy “doesn’t count.” Nothing could be further than the truth. A bankruptcy filing is a public record and is accessible pretty much in perpetuity. Once filed, a case number is established along with a public docket of information. The court will not erase the case number or docketed items when a bankruptcy is dismissed.

Dismissed Bankruptcy and Credit Reporting

As you probably know, the major credit bureaus report bankruptcy filings. You will see a bankruptcy filing reported under the “public records” section of a credit report. As a general rule, a bankruptcy filing will remain on your credit report for 7 to 10 years. Credit reporting agencies make no distinction between a discharged and dismissed bankruptcy when it comes to how long the bankruptcy will remain on the credit reports.

Credit scoring models take bankruptcy filings into account when calculating credit scores. This means that even a dismissed bankruptcy will impact your credit score. As you can see, filing bankruptcy is not a decision to take lightly. The consequences can be long-lasting.

Conclusion

The point of this article should be clear. You should only declare bankruptcy if you really need to. Moreover, you should carefully consider your bankruptcy options before filing to ensure the success of your case.

I help consumers and business owners all over the Sacramento area with bankruptcy. Please call my office at (916) 333-2222 to discuss your bankruptcy options. 

Sacramento Bankruptcy Lawyer Rick MorinNot all bankruptcy cases end in a bankruptcy discharge. For various reasons, some bankruptcy cases are dismissed prior to discharge. What happens after a bankruptcy is dismissed? Read on to learn more.

Some Bankruptcy Cases Are Dismissed

Bankruptcy can be very complicated. Not all debtors make it all the way through their bankruptcy to discharge. The bankruptcy court dismisses most bankruptcies. Other times, debtors themselves request that their bankruptcy case be dismissed.

Dismissal prior to discharge does not necessarily mean that the bankruptcy failed. A debtor may utilize a bankruptcy filing to delay a foreclosure or other legal event until such time that they can make other arrangements. This strategic use of the bankruptcy code is not explicitly forbidden, but is generally frowned upon. However, that does not stop it from happening. This is especially true in Chapter 13 court where a majority of dismissals occur.

Failing to file the required paperwork will also result in case dismissal. Occasionally the debtor does not show up to court when ordered. The bottom line is that not all cases end in a discharge.

Post-Dismissal

What happens after a bankruptcy dismissal depends on the chapter under which the bankruptcy case was filed.

In Chapter 7 cases, the court will dismiss the debtor and the automatic stay will terminate. The court will likely close out the case fairly quickly thereafter.

In Chapter 13 cases, the court will dismiss the debtor and the automatic stay will terminate — just like in the Chapter 13. If the Chapter 13 plan was no confirmed, the Chapter 13 Trustee will refund any Chapter 13 payments received back to the debtor. If the Chapter 13 plan was confirmed, the Chapter 13 Trustee will wrap up the administration of the bankruptcy case and issue a final report to the court. The court will proceed to officially close the case once the Chapter 13 Trustee’s administrative duties are resolved. Timing here could be 30-60 days from dismissal to closure, depending on the circumstances of the case.

Important to remember: dismissal terminates the automatic stay! You may need to make alternative arrangements to protect property once your bankruptcy case is dismissed.

My office handles Chapter 7 and Chapter 13 bankruptcy cases in the Sacramento area. Please call us at (916) 333-2222 to schedule a friendly bankruptcy consultation. 

Sacramento Bankruptcy Lawyer Rick MorinChapter 13 bankruptcy lasts between three and five years in Sacramento. For many reasons, not everyone wants to stay in Chapter 13. This article will tell you how to dismiss Chapter 13 bankruptcy in Sacramento.

Why Dismiss Chapter 13?

The number one reason why debtors dismiss their Chapter 13 bankruptcy is because of a change in circumstances. A job loss, promotion, divorce, injury, or relocation all are circumstances that could make Chapter 13 infeasible. On the other hand, non-bankruptcy options might be more realistic if a debtor’s financial situation dramatically changes during the course of the Chapter 13.

Whether good or bad, a debtor’s change in circumstances will often result in a request to dismiss their Chapter 13 bankruptcy.

How to Dismiss Chapter 13

There are two options here: the “official” way, and the “non-official” way.

The easiest option way out of Chapter 13 is to simply stop making your Chapter 13 payments. The Chapter 13 Trustee will soon make their own motion to dismiss your Chapter 13 bankruptcy. Some Trustees may try to force you into a Chapter 7 liquidation, depending on your financial circumstances. Because this creates uncertainty, it is better to take the official route.

11 U.S.C. § 1307(b) allows a Chapter 13 debtor to ask the court to dismiss their Chapter 13 case at nearly any time. This privilege is not absolute. The court can deny this request if it believes that the dismissal motion was made in bad faith. But in all other cases, the court quickly dismisses the Chapter 13 case upon request by the Debtor.

What Happens Next

After the Court officially dismisses your Chapter 13 bankruptcy, a few other things will happen. Your Chapter 13 Trustee will wrap up the administration of your bankruptcy case. The “automatic stay” will no longer protect you or your property from your creditors. The Chapter 13 Trustee will also file a final report with the Court. Only once the administrative aspects are complete will the court “close” your bankruptcy case.

My law firm handles Chapter 13 cases in Sacramento from start to finish. Please call us at (916) 333-2222 to discuss Chapter 13 bankruptcy representation. 

Sacramento Bankruptcy Lawyer Rick MorinChapter 13 bankruptcy cases contain many important deadlines. Chapter 13 cases can last anywhere from three to five years. The Chapter 13 Trustee issues a “notice of filed claims” after several of these Chapter 13 deadlines. Read on for more information about this critical document.

Creditors Have Limited Time to File Claims in Chapter 13

Debtors reorganize their finances in Chapter 13. This typically means that debtors are repaying some of their debts over time. But which creditors get paid in Chapter 13?

Importantly, only creditors that file formal claims with the court will be paid. Creditors must file their claims within certain deadlines established by the bankruptcy court at the start of every Chapter 13. The court will not pay a a creditor unless the creditor files their claim within the allowed time.

The Notice of Filed Claims Specifies Who Gets Paid What

Your Chapter 13 Trustee will issue a “notice of filed claims” after the claim submission deadlines have passed. The report specifies which creditors filed claims. Here in Sacramento, the report will also specify the nature of the distribution that each creditor should receive over the life of the bankruptcy.

Carefully Review the Notice of Filed Claims

Don’t just assume that the notice of filed claims is accurate. Carefully review the document along with your attorney. Taking an active role in your Chapter 13 case will ensure the best possible result at the end of your long bankruptcy journey.

Typical issues discovered in the report are:

  1. Creditor submitting duplicate claims
  2. Creditor claiming too much money is owed
  3. Mortgage or car creditor not filing a claim that should have been filed
  4. Aggregate claims higher than anticipated at the time of filing

Your attorney can resolve these issues. But only if everyone is paying attention. It may be difficult or impossible to resolve these problems if your attorney waits until the last year of your bankruptcy case to take action.

Please call my office you are considering Chapter 13 bankruptcy in Sacramento. You can reach my office by calling (916) 333-2222. Don’t delay. 

ARAG Legal PlansA good portion of my clients are state employees in Sacramento. And a big portion of these clients have ARAG legal insurance to help with their legal bills. Read on to know more about this great program.

ARAG Helps Pay Your Legal Bills

Insurance, whether it be car insurance, medical insurance, or even legal insurance, helps cover unexpected large financial commitments. ARAG insurance is specifically geared towards making access to lawyers cost effective for its members.

ARAG plans cover some or all of the member’s legal bills for certain types of law. I have found that their coverage is very fair and easy to utilize.

How to get Started with ARAG

The first thing an ARAG member needs to do is to call ARAG and start a claim. This will tell the member what, if any, coverage they have for their legal need. Each plan is different, so it is important to check with ARAG regarding coverage early on.

After the member confirms coverage, the ARAG member needs to meet with a qualified attorney that accepts the insurance. My office proudly accepts ARAG members into our practice.

After an ARAG member retains my law firm, my office bills ARAG directly for attorney’s fees in most cases. ARAG requires that the members pay for their own filing fees and costs. The good news there is that we have options to help spread out these costs to make filing for bankruptcy easy.

ARAG Insurance and Bankruptcy

I have found that most insurance plans provided by state agencies and departments cover the attorney’s fees in full. This is true for both Chapter 7 and the initial Chapter 13 attorney fees.

Some plans have a 6-month waiting period for bankruptcy coverage. Not all plans have this requirement. Again, it is important to check with your legal insurance provider once you know that you want to meet with a bankruptcy attorney.

Please contact my office at (916) 333-2222 to discuss your bankruptcy options. We gladly accept ARAG legal insurance as a part of our Better Bankruptcy package.