Chapter 7 Bankruptcy – Page 11 – Law Office of Rick Morin, PC

The Bankruptcy Trustee in Sacramento Can Help or Hurt Your Case

The Bankruptcy Trustee plays a vital role in all Chapter 7 Bankruptcy cases in Sacramento. Not be confused with the United States Trustee, the Bankruptcy Trustee is a third party appointed by the Bankruptcy Court in each Chapter 7 case.

At the start of each Chapter 7 Bankruptcy case, the Court randomly assigns a trustee from a list. The list is maintained by the United States Trustee’s office. In Sacramento, there are about 30 trustees currently on the list.

Technically, the Court only appoints trustees in Chapter 7 cases on an “interim” basis. Creditors can elect their own trustee to replace the interim trustee. However, in nearly all consumer cases, this does not happen. The Court’s appointment stands and the trustee fulfills his or her duties.

A typical Chapter 7 consumer bankruptcy case will last around four months. During that time, the Bankruptcy Trustee will perform a few important duties.

The Trustee will review a debtor’s bankruptcy paperwork. In complicated cases, the Trustee may reach out to the debtor’s attorney for more information about the case.

The most important job of the Trustee is to exam each debtor under oath. The bankruptcy code requires each debtor in a Chapter 7 bankruptcy case to be questioned under oath. This happens at the “Meeting of Creditors.” The Trustee will ask basic questions about the debtor’s case.

If a debtor’s bankruptcy estate has any assets (most consumer cases do not have any assets), the Trustee is empowered to sell un-exempt assets. The Trustee then distributes those funds to the debtor’s creditors. Careful planning will ensure that the Trustee does not sell any of your assets.

The Bankruptcy Trustee is compensated primarily in two ways. First, the Trustee receives a small portion of the filing fee. Second, the Trustee earns a percentage commission on all funds distributed to creditors.

Bankruptcy Lawyer Rick Morin can answer any questions you have about the bankruptcy process. Please call the office at (916) 333-2222 for more information about bankruptcy.

December 23, 2013/by Attorney Rick Morin

Chapter 7 Means Test Income Look-Back

Eligibility for Chapter 7 Bankruptcy in Sacramento is governed by two main tests. The Means Test and the Totality of the Circumstances Test. The Chapter 7 Means Test is often understood. But it is a critical component to every Chapter 7 Bankruptcy case.

The Chapter 7 Means Test was imposed by Congress in it’s 2005 revision to consumer bankruptcy laws. The means test is theoretically used to ensure that only debtors truly in need of bankruptcy assistance are eligible to file.

Potential clients often have already attempted to determine their means test results by using an online calculator. Many times, their results are incorrect.

The main piece of information driving means test calculations is the debtor’s “currently monthly income.”

Current monthly income is a term used in the bankruptcy code and is often abbreviated “CMI.” Current monthly income is determined by averaging the debtor’s income over the prior full six months.

For an example, assume that a person will be filing bankruptcy in December 2013. The calculation of current monthly income will be determined by averaging the person’s income over six months. In this case, it would be June through November. Why not include December? Because the definition of “current monthly income” in 11 U.S.C. 101(10A) states that the six months ends on “the last day of the calendar month immediately preceding the date of the commencement of the case…”

As you can see, careful timing of a bankruptcy case can impact a debtor’s eligibility for Chapter 7 Bankruptcy relief. This is especially true for debtor’s with incomes that fluctuate from month to month.

Knowing that the Court will look back six months, a debtor with a large bonus in December or January may wish to wait until such time that the bonus will not factor into the Chapter 7 Means Test.

There is nothing wrong with carefully timing a bankruptcy filing. If you have any questions about your eligibility for Chapter 7 Bankruptcy, please contact Rick Morin at (916) 333-2222 for a free bankruptcy consultation.

December 18, 2013/by Attorney Rick Morin

Chapter 7 Bankruptcy, Local Bankruptcy News

Chapter 7 Bankruptcy Filing Numbers in November

As a Bankruptcy Lawyer, I am always interested in watching the number of Chapter 7 Bankruptcy cases filed in the local court. The final tally is in for November 2013. There were 959 Chapter 7 Bankruptcy filings in Sacramento last month.

Note: the count above is just for the Sacramento division of the Eastern District of California. As you can see below, the judicial district covers more than just the Sacramento area.

The United States Bankruptcy Court for the Eastern District of California covers a large swath of northern California. It reaches from the Oregon border down to Mono County. The District is split into three main divisions: Sacramento, Modesto and Fresno. While there is a Bankruptcy Court in Bakersfield, the caseload for that court has been transferred to the Fresno division for now.

You can find more information about the various divisions and their coverage areas at the US Bankruptcy Court website.

The number of filings each month dictates the pace of the proceedings in the court. For instance, I am finding that simple Chapter 7 bankruptcy cases are taking about 110 days. This is from the date of filing to the date of discharge. This matches the advice that I generally give folks when they ask how long Chapter 7 bankruptcy takes. I usually tell people about 4 months from start to finish.

Please call Sacramento Bankruptcy Attorney Rick Morin at (916) 333-2222 if you are considering filing for bankruptcy in Sacramento.

December 9, 2013/by Attorney Rick Morin

Bankruptcy Law, Chapter 7 Bankruptcy

How to Handle Bitcoins in Bankruptcy

Have you heard of Bitcoins? A Bitcoin is an online currency that is not backed by any government. Bitcoins have been receiving a lot of media attention recently, including extensive coverage in the New York Times. As a Bankruptcy Attorney in Sacramento, I have been following this trend closely. I have also been considering how to treat a debtor in possession of Bitcoins.

A strong case can be made that Bitcoins should be treated just like any asset.

Just like cash in hand, money in the bank, or bearer bonds, Bitcoins represent value to the Debtor and need to be fully disclosed. Once a Chapter 7 Bankruptcy case is filed, the debtor’s Bitcoins would become the property of the Bankruptcy Estate for the duration of the case.

The volatility of Bitcoins poses a problem: how do you value them? Not all assets have steady valuations. Houses and cars change in value over time. Stocks are the asset class most like Bitcoins because the value of a stock could change dramatically day-to-day.

Bitcoins should be listed as personal property on Schedule B of the Bankruptcy Petition. I would list the number of Bitcoins the debtor possesses along with a valuation, the date of the valuation, and the exchange upon which the debtor bases his or her valuation.

For instance, on Schedule B I would list “2.5 bitcoins. Value from mtgox.com on 12/03/2013. Value: $2,750.”

In order to protect the debtor’s interest in his or her Bitcoins, the proper exemption would need to be applied. In California, I would utilize the wildcard exemption to fully protect the debtor’s interest. Without the proper exemption, the debtor’s Bitcoins would be subject to liquidation by the Bankruptcy Trustee.

Given the potential of appreciation for a debtor’s Bitcoins, it is important that they be handled correctly in a Chapter 7 Bankruptcy case.

If you have any questions about Chapter 7 Bankruptcy, please contact Sacramento Bankruptcy Attorney Rick Morin at (916) 333-2222.

December 4, 2013/by Attorney Rick Morin

Bankruptcy Law, Chapter 7 Bankruptcy

Are medical debts considered “Consumer Debts” in Bankruptcy?

My blog today is a bit more in-depth than usual. The purpose of the blog is to consider whether medical debts count as “consumer debts” for purposes of a 707(b) dismissal. As best as I can tell, the answer is not entirely clear.

The Bankruptcy Code defines “consumer debt” in 11 U.S.C. 101(8) as “debt incurred by an individual primarily for a personal, family, or household purpose.”

The leading case interpreting the term “consumer debt” comes from the Ninth Circuit Court of Appeals, In re Kelly. (In re Dickerson (Bankr. M.D. Fla. 1996) 193 B.R. 67.)

It is the purpose for which the debt was incurred that determines whether it is a consumer debt. (In re Kelly (9th Cir. 1988) 841 F.2d 908, 913.) Debt incurred for business s ventures or other profit-seeking activities is plainly not consumer debt for purposes of section 707(b). (Id. at p. 913)

Debts incurred by the debtor with a profit motive are not consumer debts. (In re Stine (9th Cir. BAP 2000) 254 B.R. 244.)

Surprisingly, I could not find a reported case where the issue of medical debt was directly addressed. The following two cases both cite Kelly yet come to different conclusions regarding the classification of medical debt.

In In re Morse, after laying out the Kelly rule regarding substantial abuse, the court stated that “medical debts are personal expenses” in the same way as food and gas. (In re Morse (Bankr. E.D. Wash 1994) 164 B.R. 651.)

In In re Dickerson, after stating that Kelly is the leading case interpreting the term consumer debt, medical debts were listed as “non-consumer debts” in In re Dickerson. (In re Dickerson (Bankr. M.D. Fla. 1996) 193 B.R. 67.)

Dickerson at least gives a debtor a way to argue that medical debts are not consumer debts. With that being said, it would seem like a stretch to argue that medical debts were incurred with a “profit motive” as the Kelly and Stine seem to require.

However, the thought that involuntary medical debt would be lumped into the same category as credit card debt from excessive shopping is troubling.

If you have any questions about including medical debt in bankruptcy, please call Sacramento Bankruptcy Lawyer Rick Morin at (916) 333-2222.

December 2, 2013/by Attorney Rick Morin

Chapter 7 Bankruptcy

Chapter 7 Bankruptcy Filing Fee in Sacramento

For obvious reasons, the cost of bankruptcy is always an important consideration for anyone in need of bankruptcy relief. One large component of the cost of bankruptcy is the Chapter 7 filing fee.

The United States Bankruptcy Court charges a filing fee to initiate a bankruptcy case. A filing fee is standard procedure in non-bankruptcy courts as well. The filing fee helps to pay for the costs of running the court. The fee also makes sure that the litigants have “skin in the game.”

The federal judicial district that covers people wanting to file bankruptcy in the Sacramento area is known as the “Eastern District of California.” The Chapter 7 bankruptcy filing fee in the Eastern District is currently $306. Keep in mind: the bankruptcy filing fee does change from time to time.

Some people think the filing fee for bankruptcy is too high. As a comparison, filing a civil lawsuit in Federal Court currently costs $400. Filing a civil lawsuit in State Court in Sacramento costs up to $439! As you can see, the filing fee for Chapter 7 Bankruptcy in Sacramento is right in that range.

Debtors that represent themselves can petition the court for a waiver of the filing fee. The Court will grant or deny the fee wavier depending on the debtor’s economic circumstances.

A debtor represented by an attorney will not usually be able to obtain a fee waiver. If the debtor has sufficient funds to hire an attorney, then the debtor can pay the filing fee as well. However, a debtor needing to file a case before they have sufficient funds for the filing fee can ask the Court to pay the filing fee in four payments. This helps spread the cost of filing Chapter 7 bankruptcy over time. If it is important to file your case immediately, a fee waiver might help you with the financial aspects of filing for bankruptcy.

If you need help with filing Bankruptcy in Sacramento, please call Bankruptcy Lawyer Rick Morin at (916) 333-2222.

November 18, 2013/by Attorney Rick Morin

Chapter 7 Bankruptcy

Top 3 Reasons to File Bankruptcy

A special video blog! Click through to watch my first video blog that tells you all about the top three reasons folks file Bankruptcy in Sacramento.

You can watch my video by clicking this link to YouTube.

If you have any questions after watching the video, please call my office at (916) 333-2222 for a free bankruptcy consultation!

November 11, 2013/by Attorney Rick Morin

Chapter 7 Bankruptcy

Don’t Make This Mistake Before Chapter 7 Bankruptcy

As a Chapter 7 Bankruptcy Lawyer in Sacramento, I help many people file for bankruptcy relief. From time to time, I see my clients make a simple mistake in the weeks leading up to a bankruptcy filing that is easy to prevent.

Don’t make any large luxury purchases or take any cash advances in the 90 days before filing for bankruptcy.

Large luxury purchases on credit and cash advances are frowned upon by the bankruptcy courts. A creditor can object to the dischargeability of a debt related to these uses of credit, which could unnecessarily complicate your bankruptcy case.

Let’s say that you took a $1,000 cash advance in the week prior to filing bankruptcy. The worse case is that the court would not discharge this $1,000 debt. You would be responsible for paying back the $1,000 cash advance after your bankruptcy case was over.

Common sense prevails in bankruptcy court. A purchase of a car because your old car died or the purchase of a new washing machine because your old one was leaking water are not going to be a problem. But you should avoid making such purchases on credit just to be safe.

The use of credit immediately before the filing of your case is not a problem as long as you did not have any intent to defraud your creditors. Should you be in a situation where you used credit right before a bankruptcy filing, I can work with you to make sure that your credit would not pose a problem in your bankruptcy case.

Ultimately, the courts recognize that most folks filing for bankruptcy are in a tough spot and are in immediate need of relief. Even if you have recent credit use, I will still fight for your right to a fresh start in Chapter 7 Bankruptcy. Don’t delay any further. Call my office today at (916) 333-2222 for a free consultation.

November 4, 2013/by Attorney Rick Morin

Chapter 7 Bankruptcy

You Must Do This One Thing Before Filing Bankruptcy

There are a number of steps involved in filing for bankruptcy. As a Sacramento Bankruptcy Attorney, I help my clients through this process.

When a client first meets with me, I always get asked how long it will take to get the bankruptcy case ready to file. In most cases, your case can be ready in two weeks. Next-day emergency filing is also available. Whether you are filing tomorrow or next month, there is one thing that you must do before filing bankruptcy.

You must complete a pre-filing bankruptcy counseling course.

Congress enacted this requirement as a part of the 2005 overhaul of consumer bankruptcy laws. The course is intended to provide helpful information for people considering filing for bankruptcy. Don’t worry: there is no test and there is no way to fail the course. It is for information purposes only.

The pre-filing counseling course is mandatory, even in emergency bankruptcy cases! There is no way to get around having to take the course. After 2005, the pre-filing counseling is now a fact of life for all consumer that file for bankruptcy.

Bankruptcy law requires that the counseling be one hour long. While that may seem like a long time, most of my clients tell me that they appreciate the information that they learned during the course. For the sake of convenience, I provide my clients with the ability to take the counseling online or over the phone. Most people like taking the course online because they can complete the counseling in more than one sitting if required.

In order to make the process easier and more affordable, I provide my clients with complimentary counseling courses! This saves my clients $60 over other bankruptcy law firms. If you need to file bankruptcy, call my office at (916) 333-2222 and I will get you started on your pre-filing bankruptcy course today. Don’t delay!

October 20, 2013/by Attorney Rick Morin

Chapter 7 Bankruptcy, Meeting of Creditors