Chapter 13 Bankruptcy – Page 6 – Law Office of Rick Morin, PC

Bankruptcy Horror Stories

Halloween Living with out-of-control-debt has its own monsters: creditors calling at all hours, lurking lawsuits, bank levies, and garnishments that suck the earnings right out of your paychecks. Bankruptcy can offer a way out, a last minute exit from the debt-collection horror house.

However, the safe path is not always clear. Here are some bankruptcy horror stories that you should avoid:

When filling out her bankruptcy petition, Wendy accidentally provided the wrong Social Security number. She was shocked to learn weeks later that her debts were not getting discharged unless she quickly amended her bankruptcy paperwork to correct this huge mistake.

Brad works the graveyard shift. He knew he might miss his 8:00 am bankruptcy hearing, but he thought, “My attorney would be there. What’s the worst that could happen?” When the court date arrived, Brad’s attorney was frantic. He did his best to delay, but the trustee dismissed his case.

Freddy forgot that his uncle had recently turned into a zombie. Even the undead have wills, and Freddy inherited a ghoulish castle worth over a million dollars. When he didn’t list this large asset on this bankruptcy petition, the Bankruptcy Trustee seized the scary property without delay and sold it for the benefit of Freddy’s creditors.

Sabrina is always looking for a bargain. So, when she reviewed her bankruptcy options she decided to do it herself. A week after she submitted her petition, Sabrina was informed by the court that she did not qualify for a Chapter 7 and that her case was going to be thrown out! Instead of saving money by not using an attorney, she is now accountable for thousands and she will have to deal with negative consequences if she tries to file a subsequent bankruptcy.

Don’t let a botched bankruptcy ruin your fresh start. Avoid the tricks and hire experienced bankruptcy attorney Rick Morin. Call the office now at (916) 333-2222!

October 28, 2014/by Attorney Rick Morin

Bankruptcy Law, Chapter 13 Bankruptcy, Chapter 7 Bankruptcy

How to Get a Student Loan Bankruptcy Discharge

For the 40 million Americans who currently have student loans, many assume that student debt cannot be discharged through bankruptcy. However, this is simply not true.

Receiving a student loan bankruptcy discharge can be difficult. However, in some cases student loan debt can be discharged during a Chapter 7 or a Chapter 13 bankruptcy.

First, the debtor must file an adversary proceeding, which is a separate lawsuit within their bankruptcy. During this proceeding, the court will decide if the debtor faces an “undue hardship” in repaying their student loans. Bankruptcy courts have been very strict in determining if debtors meet this qualification. Typically, the Brunner Test, or a similar evaluation, will be used. It states that a debtor faces “undue hardship” when they answer, “yes” to these 3 questions:

1. Is it impossible for the debtor to maintain a “minimal” standard of living?

2. Will the debtor be stuck in this situation for the foreseeable future?

3. Has the debtor actually attempted to repay their loans?

Debtors rarely meet all of these criteria and the court proceeding alone can be intimidating enough. To the majority of filers, the process seems impossible.

Yet, these are the main factors that promote the student loan myth. According to a 2011 study cited in US News & World Report and published by Jason Iuliano, of all the debtors with student loans, only 0.1% attempted to include their student loan debt in their bankruptcies. Of that tiny percentage, at least 40% got some or all of their student debt discharged. This shows that while discharging student loan debt may be difficult to do through bankruptcy, it is not impossible.

If you are struggling with your student loan debt or have questions bankruptcy, please call our office at (916) 333-2222.

October 7, 2014/by Attorney Rick Morin

Bankruptcy Law, Bankruptcy Rules, Chapter 13 Bankruptcy, Chapter 7 Bankruptcy

Qualify for Bankruptcy

To qualify for bankruptcy, there are multiple things to look at. Debt, income, and other factors all play a role. This article will focus on qualifying for Chapter 7 Bankruptcy.

The first qualification is that you must have debt. There is not necessarily a hard and fast rule about how much debt you must have to qualify for bankruptcy. As a general rule, I look to see that a person has at least 25% debt-to-income ratio.

Having a smaller debt-to-income ratio does not automatically disqualify you from bankruptcy. The bankruptcy court looks at each case individually. There are many reasons why a smaller debt-to-income ratio would still result in a successful bankruptcy.

Speaking of income, this is the most important qualification there is for Chapter 7 bankruptcy. If you have too much income, you might not be able to file Chapter 7 bankruptcy. Instead, the law will require you to enter into a Chapter 13 reorganization.

The income limits for Chapter 7 are constantly changing. The limits are based upon the median income for your household size in your state. As of today, the median income in California for a family of two is $62,917. If you have a family of two and less income than that on a yearly basis, then you are presumed to be eligible for bankruptcy. Please call my office for up-to-date income limits for your household size.

Now here’s the interesting part. If you have more income than the median for your household size, you automatically fail. BUT, there is still a possibility that you can qualify for Chapter 7 bankruptcy. In this case, you are required to take the “means test.” The means test is a bankruptcy form that determines whether your case would be an “abuse” of the bankruptcy process. This is a complicated subject that I will discuss in a later blog post.

The thing to remember is that it is still possible to file Chapter 7 bankruptcy even though your income might be “too high” at first glance.

There are other important factors when considering bankruptcy, including, but not limited to: 1) whether you have filed prior bankruptcies recently; 2) where you lived for the past two years; 3) the amount of your assets; 4) whether you have transferred or given any large assets or property to family or close friends recently; and 5) your marital status.

I go over each important bankruptcy consultation with you during your free bankruptcy consultation. I want to make sure that you make best decision possible when considering something as important as bankruptcy.

Please call my office if you have any questions about whether you qualify for Chapter 7 or Chapter 13 bankruptcy. My office phone number is 916-333-2222.

September 15, 2014/by Attorney Rick Morin

Bankruptcy Law, Chapter 13 Bankruptcy, Chapter 7 Bankruptcy

Can Bankruptcy Stop Lawsuits?

Can bankruptcy stop lawsuits? Yes! This is one of the most powerful features of filing bankruptcy.

The instant a person files a bankruptcy case, the “automatic stay” goes into effect. The automatic stay is intended to give a debtor (the person that filed bankruptcy) some breathing room to sort out his or her finances. Crucially, the automatic stay immediately pauses all civil legal proceedings against the debtor.

Lawsuits are complex and time-consuming. Defending a lawsuit in court will cost a substantial amount of money. Some defendants prefer to file bankruptcy to avoid the consequences associated with protracted litigation.

A typical lawsuit that I see in this office is a debt collector suing someone over a defaulted credit card. Lawsuits from auto repos are also very common. Most of the time there is not a good basis to defend the lawsuit. The defendant probably has to admit that they owe the money. Despite the liability, the person can not afford to pay the debt associated with the lawsuit. Bankruptcy can help.

Many times a judgement in a debt-collection lawsuit will be significantly larger than what was originally owed. This is because a plaintiff may add on certain costs to the judgement. Typical costs included: 1) court filing fee; 2) process server fees; 3) back interest; and 4) attorney’s fees. These various add-ons can easily double the amount of the judgement once your lawsuit is over!

Once your bankruptcy case is filed, the plaintiff in your original lawsuit will have to seek permission from the court to proceed. This almost never happens.

Filing bankruptcy to stop a lawsuit will have the additional benefit of eliminating your other unsecured debts.

As you can see, filing bankruptcy to stop a lawsuit and has many benefits. Please contact my office if you have any questions about filing bankruptcy to stop a lawsuit. My office number is (916) 333-2222.

September 8, 2014/by Attorney Rick Morin

Chapter 13 Bankruptcy, Chapter 7 Bankruptcy, Creditors

Credit Karma Now Offers Full Credit Reports!

One important part of filing bankruptcy is listing all of your debts. Many of my client ask whether Credit Karma is a good tool for determining their creditors. In the past, I have said no. This was because Credit Karma did not provide enough information about your creditors.

This has changed. Credit Karma is now offering access to your full Trans Union credit report — for free!

If you do not already have a Credit Karma account, you might consider signing up. I use it for my own personal finances. Now that they offer access to your full Trans Union credit report, it is even better.

For each creditor listed in a bankruptcy, I need the following information:

Name of the Creditor
Mailing address
Amount owed
Approximate dates that the debt was incurred
Type of debt

All of this information can easily be found on a full credit report! Therefore, it saves a lot of time for both me and my clients if I have an up-to-date credit report.

Another great resource for free credit reports is www.annualcreditreport.com. This is the government-sponsored website where you can get each of your credit reports once a year for free.

Do not search for “free credit reports” online. Many of the websites that you come across will charge you a fee or even enroll you in monthly credit monitoring. The resources above are the best options for getting your real credit reports for free!

Please call me at (916) 333-2222 if you need help getting your credit report. A credit report is a critical part of preparing to file Chapter 7 or Chapter 13 bankruptcy.

August 3, 2014/by Attorney Rick Morin

Bankruptcy Law, Chapter 13 Bankruptcy

Benefits of Chapter 13 Bankruptcy

Chapter 13 bankruptcy can be complicated and confusing. But it doesn’t have to be. There are many benefits to Chapter 13 Bankruptcy that are not always immediately obvious. Do you know what these benefits are?

Chapter 13 bankruptcy is considered a “reorganization.” This is is different than Chapter 7 bankruptcy which is typically called a “liquidation.” Under Chapter 7, most of a debtor’s unsecured debts are eliminated in just a few months. While Chapter 13 does allow for debts to be discharged, this is not the main goal. The main goal is to reorganize.

Unlike a fast Chapter 7 bankruptcy, Chapter 13 will last anywhere from three to five years. During that time, a debtor is under the protection of the bankruptcy court. The debtor can not be sued for pre-petition debts, and collection activity from those pre-petition debts must stop. This is great because it provides a long period of “breathing room” for the debtor to figure out their financial situation.

During the life of the Chapter 13 case, the debtor will make monthly payments to the Bankruptcy Trustee. The Trustee then distributes funds to creditors according to the Chapter 13 plan. The Chapter 13 plan is proposed by the debtor and his or her attorney. If the math makes sense and creditors do not object, the Court will enforce the debtor’s payment plan.

Depending on the Chapter 13 plan, some percentage of a person’s debt will be paid during the bankruptcy. It might be 1% or it might be 100% — or anywhere in between.

Calculating a Chapter 13 plan is very complicated. Most people contemplating Chapter 13 want to know what their plan would be. I have some basic guidelines that allow me to “ballpark” a plan payment. But really dialing in the plan requires the completion of all of a debtor’s bankruptcy paperwork. A lot of work indeed!

Because Chapter 13 is intended to allow a debtor to reorganize, it can do things such as pay delinquent IRS taxes without the constant threat of enforcement by the IRS. It can also allow a person to make up an arrearage on a house or other secured loan (such as car loans). A debtor can not do these things in a Chapter 7 case.

Chapter 13 is also great for debtors that can not qualify for Chapter 7. The typical reasons a person will not qualify for Chapter 7 are because their income is too high or because they have too much assets. Most of my clients do not run into asset problems when trying to qualify for Chapter 7. However, when it does come up, it is usually because of equity in a debtor’s home.

This is just a brief overview of Chapter 13. There are many more benefits — some quite complicated — that I intend to discuss in the future. Stay tuned!

If you have any questions about Chapter 13 Bankruptcy in Sacramento, please call my office. I can be reached at (916) 333-2222.

June 22, 2014/by Attorney Rick Morin

Bankruptcy Law, Chapter 13 Bankruptcy, Chapter 7 Bankruptcy

Bankruptcy Can Get Your Driver’s License Back

Chapter 7 Bankruptcy is an important tool that can get you a fresh start. But did you know that bankruptcy can help you get your driver’s license back here in California?

NOTE: Many people call my office not having read this entire post. This trick works only for civil judgements, NOT criminal restitution, unpaid child support, traffic tickets or parking tickets.

The DMV has the authority under California Vehicle Code section 16370 to suspend your driver’s license for the non-payment of certain auto-related judgement debts.

These types of debts are typically related to a car accident where the drive did not have insurance. California law requires that all drivers have the appropriate level of insurance to be on the road.

When a non-insured driver causes an accident and is later sued for damages, this can result in a judgement. If the person does not pay the judgement, the DMV can be notified. This will lead to the suspension of your driver’s license until you pay the judgement.

Most judgements are considered unsecured debts. All unsecured debts are wiped out (called a discharge in legal terms) in a Chapter 7 Bankruptcy. This means that even though you were sued and the state court ordered you to pay someone else, this debt will be discharged in your bankruptcy case.

Remember: Federal bankruptcy law prohibits any person or entity from taking collection activity against a person that has discharged their debts. Withholding a driver’s license against a person merely because they owe a debt can be considered a collection activity. Because Federal law trumps California law, the DMV can not hold up your driver’s license merely because you owe a debt from a car accident. Therefore, filing bankruptcy can help you get your driver’s license back.

Once your Chapter 7 Bankruptcy case is complete, you can contact the DMV to inform them that your judgement has been discharged. The DMV will ask for proof of insurance and some other paperwork. Once this paperwork is complete, the DMV will lift the 16370 hold on your license.

It is important to note that this process does not apply to judgement debts from DUI accidents. Bankruptcy law is clear that DUI-related debts are not discharged in a Chapter 7 Bankruptcy case.

If you need help filing bankruptcy to get your California Driver’s License back from the DMV, please contact my office. I can be reached at (916) 333-2222.

June 9, 2014/by Attorney Rick Morin

Chapter 13 Bankruptcy, Chapter 7 Bankruptcy, Local Bankruptcy News

Medical Bills: The Top Cause of Bankruptcy

According to this article from CNBC, medical bills are the biggest cause of bankruptcies. There are many reasons why people seek bankruptcy protection. Unexpected medical bills can be especially devastating. Why struggle with medical debt if you don’t have to?

Medical bills can be difficult to deal with for a number of reasons. First, they typically come as a large surprise. A person might be involved in a bad car accident or fall victim to a devastating illness. These events are impossible to plan for. Second, unless a person has good insurance coverage, serious injury or illness can be very expensive.

I have seen clients with medical bills well over $100,000. It can take a very long time to pay off such a large debt. And that is if your medical provider will let you make payments without interest. Most won’t.

Filing bankruptcy because of medical debt is a difficult decision. If your medical bills are a large burden on your life and impacting your recovery, bankruptcy can help alleviate this stress.

A person thinking about bankruptcy because of medical debt has a very important decision to make. No one should take the decision to file bankruptcy lightly. However, bankruptcy is an effective tool that allows a person to get their life back on track.

Some people think that medical bills are not dischargeable in bankruptcy. This is not true. Almost all medical debt is considered “unsecured debt.” With a few exceptions, all unsecured debt is wiped out in Chapter 7 bankruptcy — including medical bills.

A fresh financial start is critical for people recovering from catastrophic injury or illness. Don’t let the stress and uncertainty of large medical bills delay your recovery. Bankruptcy can provide immediate relief.

Please contact my office if you have any questions about bankruptcy and medical bills. I can be reached at (916) 333-2222.

May 26, 2014/by Attorney Rick Morin

Chapter 13 Bankruptcy, Chapter 7 Bankruptcy, Local Bankruptcy News

Increased Bankruptcy Filing Fees in Sacramento

The Bankruptcy Court in Sacramento recently alerted Sacramento Bankruptcy Attorneys to changes to the bankruptcy filing fees for Chapter 7 and Chapter 13 bankruptcy cases.

Effective June 1, 2014, the bankruptcy filing fee will go up for the most commonly filed bankruptcy cases in Sacramento.

The filing fee for a new Chapter 7 case will be $335. The old filing fee was $306.

The filing fee for a new Chapter 13 case will go up to $310. Previously, the Chapter 13 filing fee was $281.

You can see a list of all of the changes made to the fee schedule at the Eastern District of California’s website.

As a service to my clients that have signed up for their bankruptcy prior to the fee change, I will be crediting the filing fee difference. Clients retain my firm after the June 1, 2014 date will be required to pay the increased filing fee for their Chapter 7 or Chapter 13 bankruptcy.

Please contact my office should you have any questions about the new bankruptcy fee schedule in Sacramento. I can be reached at (916) 333-2222.

May 20, 2014/by Attorney Rick Morin

Chapter 13 Bankruptcy, Chapter 7 Bankruptcy

Don’t Bank at Wells Fargo

There are many moving parts when a person is considering filing a Chapter 7 or Chapter 13 bankruptcy. One important consideration is where you have bank accounts.

To be blunt: Wells Fargo is the worst bank on the planet. Just this week Wells Fargo repossessed a car of one of my clients. They did so without warning, despite telling both me and my client that they would set up a time to voluntarily surrender the car.

By taking my client’s car without warning, my client was stranded with no way to pick up her children from school. Thanks, Wells Fargo.

Adding insult to injury is the fact that my client and I had tried for months to surrender this car. Wells Fargo insisted upon receiving the Court’s permission before doing so. That’s fine. But then swooping in during the middle of the day and taking my client’s car full of her personal property? That’s not OK.

Wells Fargo “customer service” and their “bankruptcy department” were of absolutely no help. Dealing with mega banks like Wells Fargo is only slightly more fun than hitting your hand with a huge hammer.

The story above is just one reason why you should not bank at Wells Fargo, especially if you are filing bankruptcy. I advise all of my clients to close any bank accounts at which the client owes money. This is because most banks will close your accounts anyways. Some, like Wells Fargo, are known to freeze any money in your accounts upon the filing of a bankruptcy.

It is important to get all of your ducks in a row prior to filing your case. As you can see, banking arrangements should be at the top of your list. It may be difficult to open a new bank account after the filing of your case. It is a good idea to open your new checking and savings accounts prior to filing.

Please call my office if you have any questions about the steps you should take prior to filing Chapter 7 or Chapter 13 Bankruptcy in Sacramento. I am happy to help. I can be reached at (916) 333-2222. And remember, don’t bank at Wells Fargo.

April 26, 2014/by Attorney Rick Morin