Chapter 13 Bankruptcy – Page 7 – Law Office of Rick Morin, PC

Bankruptcy Law, Chapter 13 Bankruptcy, Chapter 7 Bankruptcy

Spousal Waiver in Bankruptcy: What Happens if Your Spouse Won’t Sign?

Spousal waivers in California bankruptcy cases are not an issue when both spouses file bankruptcy together. However, bad things can happen when one spouse files bankruptcy on their own without first having the non-filing spouse sign the waiver.

As I covered back in January, California law requires that the non-filing spouse sign a spousal waiver if the filing spouse elects to use California’s 703 bankruptcy exemptions. The waiver is there to prevent two spouses from filing separate bankruptcy cases and electing two use California’s 703 and 704 exemptions at the same time.

Occasionally, a person will want to file bankruptcy when they are separated, but not yet divorced. A debtor in this situation must be careful. There can be grave consequences in a Chapter 7 Bankruptcy if the debtor can not obtain their spouse’s signature on the spousal waiver.

A majority of my bankruptcy clients elect to use California’s 703 exemptions because of the “wildcard exemption.” The wildcard exemption can be used to protect any asset in a bankruptcy, including cash in bank accounts and impending tax refunds.

The problem that can arise with spousal waivers is this: a debtor files a Chapter 7 bankruptcy using California’s 703 exemptions. The debtor files the case without first obtaining the signed spousal waiver. After filing the case, the debtor is unable to get the non-filing spouse to sign the spousal waiver.

The non-filing spouse may object to the waiver for any number of reasons, including that they just don’t want to get along with their spouse.

Without a valid spousal waiver signed and submitted to the Court, the Bankruptcy Trustee can object to the debtor’s use of the California 703 exemptions. This would force the debtor to switch to California’s 704 exemptions. As an example, if the debtor was attempting to exempt a $5,000 tax refund, being forced to use the California 704 exemptions would result in the debtor losing the tax refund.

Before filing a Chapter 7 Bankruptcy with only one spouse, it is critical to obtain the non-filing spouse’s signature on the spousal waiver. This can prevent the loss of assets to the Bankruptcy Trustee. As a bankruptcy attorney, I will not rely on a promise from one spouse that they will sign. I will not file the case without first obtaining the signature.

If you have any questions about Spousal Waivers in Chapter 7 Bankruptcy cases in Sacramento, please contact my office. I can be reached at (916) 333-2222.

April 22, 2014/by Attorney Rick Morin

Chapter 13 Bankruptcy

How is Chapter 13 Bankruptcy different than Chapter 7?

Most people know that there are two main types of bankruptcy for your average person: Chapter 7 and Chapter 13. Do you know the differences?

Chapter 13 Bankruptcy is considered a “reorganization.” This is different than Chapter 7 which is considered a “liquidation.” In a Chapter 13, the goal is to allow the debtor some time (typically 3-5 years) to reorganize his or her finances under the protection of the Bankruptcy Court.

What that means is that the debtor will be repaying at least a portion of their unsecured debts, along with all of their secured and priority debts, over the course of the bankruptcy case.

A typical Chapter 13 Bankruptcy will last anywhere from 3-5 years. Sometimes it can be shorter than 3 years. In almost all cases, the debtor will be making a monthly payment each and every month to repay some of his or her debts.

The monthly Chapter 13 “plan” payments will be made to the Bankruptcy Trustee. Here in the Eastern District of California, the bankruptcy trustees require that the debtor pay each month with certified funds. This can be a cashier’s check or money order. Some trustees are moving to electronic payments as well.

The Bankruptcy Trustee distributes the monthly payment according to the terms of the Chapter 13 Plan. The “plan” is a document filed by the debtor’s attorney. The plan specifies how each class of creditors is to be treated during the case.

The Chapter 13 plan must be confirmed by the Bankruptcy Court. This means that the Court must hold a hearing before it is approved. If any creditors come to court to object, the Court can order the debtor to file an amended plan to address any deficiencies.

A debtor considering filing Chapter 13 must prove to the Court that he or she has sufficient monthly income to afford the proposed Chapter 13 plan payment. If the debtor doesn’t have enough income to pay each month, the Chapter 13 will fail.

Chapter 13 bankruptcies are much more complex than Chapter 7. They also last much longer than a Chapter 7. I will be blogging more in the future about the specific reasons why a person might decide to file Chapter 13.

Please do not hesitate to contact my office if you have any questions about Chapter 13 or Chapter 7 bankruptcy. I can be reached at (916) 333-2222.

March 23, 2014/by Attorney Rick Morin

Chapter 13 Bankruptcy, Chapter 7 Bankruptcy, Creditors

Bankruptcy Alternatives: You Have Options

Bankruptcy isn’t always the right fit for people in financial distress. Luckily, there are bankruptcy alternatives that can provide relief under the right circumstances.

Bankruptcy is intended to provide relief for innocent people who find themselves in unfortunate circumstances. Typical issues that lead to bankruptcy include the loss of a job, an investment gone south, or the cumulative effects of too much debt.

Not everyone wants to file bankruptcy. Others don’t qualify for a Chapter 7 Bankruptcy and Chapter 13 Bankruptcy isn’t the right fit. Luckily, there are alternatives that might provide some relief.

Bankruptcy Alternative: Voluntary Debt Repayment Plan

One alternative is to work out a debt repayment plan directly with your creditors. Depending on your creditor, this might be a viable option. Other creditors aren’t so willing to help a distressed consumer.

The time to work out a repayment plan is prior to the creditor filing a lawsuit. Without proper representation, a lawsuit by your one of your creditors will typically result in a judgement including attorney’s fees, interest, and court costs. With a judgement in hand, not many creditors will be willing to work out a favorable deal.

Bankruptcy Alternative: Restructure Your “Bad” Debt

Another option is restructuring your debt. This is an option for a person that finds him or herself with too much “bad” debt. When I say bad debt, I mean high-interest debt or debt that is draining too much of your monthly income.

A person in this situation may try to restructure the debt by obtaining a new loan at more favorable terms from a different creditor, and then using those funds to pay off the other loan. A high interest car loan comes to mind. A person seeking to restructure their debt must do so before their credit is impacted by late pays, no pays or collection activity. So it isn’t always an option.

Bankruptcy Alternative: Do Nothing!

This other bankruptcy alternative might sound like bad advice. But sometimes it is the best option: do nothing. You might have heard a lawyer say that a person is “judgement proof.” What they are really saying is that the person has no assets or income worth taking. All the judgements in the world won’t get any money out of such a person.

Ignoring the phone, changing bank accounts, or even moving, can help provide short-term relief from your creditors. But beware: I have seen judgement creditors come back 10 years post-judgement and wipe out thousands of dollars from a client’s bank account. Without any warning! Hiding only works for so long.

Choosing the right tool for a given task is very important. Ultimately, it is up to you to determine how best to manage your finances and legal affairs. I really enjoy answering questions regarding Chapter 7 or Chapter 13 bankruptcy or bankruptcy alternatives. Please call my office at (916) 333-2222 for a free bankruptcy consultation.

March 16, 2014/by Attorney Rick Morin

Bankruptcy Law, Chapter 13 Bankruptcy, Chapter 7 Bankruptcy

Don’t Qualify for Chapter 7? You Have Options

Sacramento Bankruptcy Lawyer Rick Morin When thinking about bankruptcy, most folks think of Chapter 7 Bankruptcy. Chapter 7 provides a “fresh start” by wiping out unsecured debt. The process takes about 3-4 months. For most people, the Chapter 7 bankruptcy process is relatively painless.

However, because of how the bankruptcy code is written, not everyone will qualify for Chapter 7 bankruptcy.

As an initial matter, a lot of people call my office worried that they don’t qualify for Chapter 7. As it turns out, most of them end up qualifying. If you have questions about your eligibility for bankruptcy, it is important that you talk to an attorney.

There are many reasons why Chapter 7 bankruptcy might not be the right fit. Typical hurdles include business ownership, too much equity in a home, or too much household income.

While there are ways of getting around common disqualifying factors, sometimes Chapter 7 just won’t work. In that case, a person in need of bankruptcy assistance should consider Chapter 13 bankruptcy.

Chapter 13 bankruptcy is considered a “reorganization.” It allows a debtor an opportunity to reorganize his or her finances over the course of 3-5 years. During that time, the debtor makes a monthly payment to the Bankruptcy Trustee. The Trustee uses the monthly payment to repay a portion of the debt. Any debt not paid off after the 3-5 year period is discharged.

Chapter 13 bankruptcy has some positive features not found in Chapter 7 bankruptcy. In Chapter 13, you can strip certain liens off of a house. That means that you can eliminate a second mortgage in Chapter 13 bankruptcy. You can’t do that in Chapter 7. Also, certain debts that can’t be discharged in Chapter 7 can be discharged in a Chapter 13.

Chapter 13 is much more complex than Chapter 7. Done correctly, it can provide just as much benefit to a debtor as Chapter 7. It is especially useful for people that don’t qualify for Chapter 7.

Bankruptcy in any form is an important decision. Please call me at (916) 333-2222 to discuss your bankruptcy options. Don’t delay any longer.

February 24, 2014/by Attorney Rick Morin