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SB 308 Update to California Bankruptcy Exemptions

California State Capitol in Sacramento

UPDATE: Unfortunately, SB 308 failed to pass this year. 

The California Legislature is currently debating a bill that would greatly expand legal protections for bankruptcy filers in California. Senate Bill 308, introduced by Senator Wieckowski, would expand and improve upon California’s current two-tier system of bankruptcy exemptions.

Bankruptcy exemptions are laws that allow bankruptcy filers to retain a certain amount of property. In a traditional Chapter 7 bankruptcy, otherwise known as a liquidation bankruptcy, the court is empowered to seize the debtor’s property and sell it for the benefit of the debtor’s unsecured creditors.

All states have bankruptcy exemptions that protect a certain amount of a debtor’s property. For instance, a debtor in California can currently exempt a specified amount of equity in a car or house, tools of the trade, most household goods, clothing, and even some jewelry! In 99% of my bankruptcy cases, the debtor does not have to surrender any property whatsoever.

SB 308 makes several important changes to California exemption laws. As currently drafted, SB 308 would, among other things:

1. Increase the motor vehicle exemption to $6,000.

2. Allow a self employed debtor to exempt up to $5,000 in cash, accounts receivable, and inventory of the business. This is a big change that would provide a huge protection to business owners that otherwise can’t exempt their operating cash, accounts receivable or inventory under current law.

3. Increase the CCP 704 homestead exemption to $300,000.

These are the three main changes in SB 308, but there are others as well. You can click here to go to the legislative digest of the bill to learn more.

SB 308 has already been approved by the Senate and is now pending in the Assembly. The bill must go through the Assembly Judiciary Committee and then to the full Assembly for a floor vote. As long as major changes aren’t made to the bill in the Assembly, the bill would then head to the Governor’s desk for his signature or veto.

If signed into law, SB 308 would take effect January 1, 2016. The bill could also materially change between now and when it is put in front of the Governor for consideration, so I am not recommending that my clients alter their bankruptcy plans at this time. If the bill does become law, I will work with my clients to determine whether delaying their bankruptcy filing would make sense.

I will keep an eye on this bill and track its progress.

I am a Sacramento Bankruptcy Attorney and I am available to answer your questions regarding Chapter 7 and Chapter 13 bankruptcy in Sacramento. Please call my office at (916) 333-2222.

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5 Things You Need to Tell Your Bankruptcy Attorney

Tell Your Sacramento Bankruptcy Attorney

Declaring bankruptcy necessarily requires you to disclose a large amount of information to the bankruptcy court. As your attorney, I work closely with you to ensure that all your bases are covered. Here are some important areas that you should keep in mind when considering bankruptcy.

1. Your Income

This might seem obvious, but you are required to disclose all sources of income to the bankruptcy court. However, the definition of “income” for bankruptcy purposes is much wider than you might imagine. Is someone renting a room in your house? That’s income. What about public benefits? These need to be disclosed as well. Does a relative regularly contribute funds to help you with household expenses? Yup, that’s income too!

2. Your Assets

This is another area that sometimes gets people in trouble. A classic example of missing an asset is when you give a vehicle to a family member or friend without transferring legal title. The vehicle will show up as belonging to you, even though in your head you believe it belongs to someone else. If not accounted for properly, the vehicle could be lost to the bankruptcy trustee.

3. Recent Credit Use

As you might be able to guess, running up your credit cards or taking large cash advances just prior to declaring bankruptcy can have serious consequences. If you had an emergency and had no choice but to use some of your credit right before filing your case, make sure you tell your attorney. There are strategies for dealing with this situation, but only if your attorney knows about your recent credit use.

4. Gifts or Transfers to Family Members

The bankruptcy court has the power to nullify certain gifts or transfers made to family members prior to your bankruptcy. I can help you determine whether any gifts or transfers would be problematic. But disclosing your gifts after filing your bankruptcy case will be too late.

5. Prior Bankruptcies

The bankruptcy code contains several complex rules to determine whether you are eligible to receive a bankruptcy discharge. If you have filed any type of bankruptcy in the previous 8 years, you need to discuss with your attorney whether you would be eligible for a bankruptcy discharge. This is true even if your prior bankruptcy was successful or not. The timing of your prior bankruptcies also determines whether the “automatic stay” will be in effect during your new bankruptcy.

There are many more areas that you need to discuss with your attorney prior to starting your bankruptcy. These are just a few areas that need special attention. If you have any questions about Chapter 7 or Chapter 13 bankruptcy in Sacramento, please call me at (916) 333-2222.

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Four Important Tips for Timing Your Bankruptcy

Sacramento Bankruptcy Timing

Planning your bankruptcy is essential to getting your finances back on track. Consider these tips before you file:

1. Emergency Situations

Have you received notice of a lawsuit, garnishment, bank levy, foreclosure, or repossession? Bankruptcy will immediately stop these actions. In these emergency situations, your bankruptcy should be filed as soon as possible. Don’t just ignore a lawsuit, levy or garnishment. I can stop these things immediately for you.

2. Secure Housing & Transportation

Most bankruptcy filers have the opportunity to keep their cars and houses during the bankruptcy process. However, if you are planning on purchasing a different car or moving, it would be best to do prior to filing your bankruptcy case. Some landlords will not want to rent to you during the pendency of your bankruptcy case — and that can be about 3-4 months for a typical Chapter 7 case. After your bankruptcy is over, you will be back on track.

3. Consider Your Spending

The bankruptcy court will examine ALL of your financial information during your bankruptcy. In other words, one should generally not file for bankruptcy right after paying back their friends or family, making large cash withdrawals, or are expecting to receive an inheritance or legal settlement in the near future. If any of these things have happened recently, you should discuss with a qualified bankruptcy attorney before proceeding with your filing.

4. Check Your Income

The Means Test, which determines what chapter someone can file, will average the past 6 months of a filers income. Some of my clients have seasonal jobs or earn a substantial bonus / commission at the same time every year. In these cases, we can time the bankruptcy filing to optimize the chances of being successful in Chapter 7 or obtaining the lowest possible Chapter 13 monthly repayment. Timing is everything!

For most people, bankruptcy is a viable and compelling option for debt relief. If you have questions about when to file, or how to get the most out of your bankruptcy, please call my office. I can be reached at (916) 333-2222.

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Sacramento Bankruptcy Trustees – What You Need to Know

Sacramento Bankruptcy Trustee

Unlike what you see on TV, in bankruptcy court you rarely meet your judge. Instead the court assigns your case to a “trustee” for administration. Trustees usually have previous experience with bankruptcy court and come from backgrounds in law or accounting. The role of the Sacramento Bankruptcy Trustees is to remain impartial and to ensure that you are playing by the rules.

The bankruptcy trustee assigned to your case will spend most of their time reviewing your bankruptcy paperwork and other required documents. After I file your bankruptcy case, I am required to submit certain financial statements to the trustee. These are things like bank statements, tax returns, and pay stubs. Some trustees in Sacramento require additional documentation, and we comply with each trustee’s specific requests in every case.

In addition to reviewing your documentation, your trustee will also administer your bankruptcy “Meeting of Creditors.” This is an informal court hearing where the trustee will ask you questions about your case. The goal of the trustee at the Meeting of Creditors is to: 1) ensure that you are being truthful with the court; and 2) discover whether there are any assets that could be recovered for the benefit of your creditors.

In fact, the trustee’s most important duty is to evaluate your property and assets. If they find any hidden or assets or “non-exempt” property it is their obligation to tell the court – and your creditors. In the rare case that non-exempt assets are discovered, the bankruptcy court could require you to turn over those assets to the Bankruptcy Trustee. Keep in mind that this happens very rarely. My office evaluates every bankruptcy case carefully for non-exempt assets to ensure that there are no surprises.

Even though they are not judges, bankruptcy trustees have considerable power in a bankruptcy case. The trustees in Sacramento have considerable experience and know their jobs very well. It is best to be proactive and disclose everything to your attorney before filing bankruptcy to avoid issues down the road.

If your looking to file bankruptcy in Sacramento and have questions about filing or your situation, please call our office at (916) 333-2222.

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Credit Reports After Bankruptcy

Sacramento Bankruptcy Lawyer Rick MorinI tell all of my clients to check their credit reports after bankruptcy. There are some dirty tricks that some creditors are using to impact your fresh start. But you don’t have to put up with it. Read on to learn more.

After your bankruptcy has been discharged, your credit report should list your unsecured debts as “discharged in bankruptcy” and the accounts should show a $0 balance. However, this is not always the case.

Some creditors will still report to the credit bureaus that you owe them money — even after your debts have been discharged in a Chapter 7 bankruptcy. They could be doing this because they are lazy, incompetent, or worse. They could be reporting that you owe them money in attempt to get you to repay a debt that you no longer legally owe!

Imagine trying to purchase a car after bankruptcy and being denied for a loan or charged a high interest rate. Not because of your bankruptcy, but because of some delinquent credit accounts still being reported on your credit report.

Some creditors are hoping that you will decide to pay them just so that they will clean up your credit report. This is not acceptable, and it is highly illegal.

My office takes aggressive action against creditors that fail to properly report debts after bankruptcy. Sometimes a warning will suffice. Other times, we can sue the creditor in federal court and obtain monetary sanctions. After all, even large credit card companies and banks are required to comply with the law.

This is why I tell my clients to check their credit reports 3, 6 and 12 months after their bankruptcy. This is the only way to see whether any creditors are misreporting discharged debts. If you see any debts that aren’t properly classified, you should contact my office immediately so that I can help fix this issue.

Having problems with credit reports after bankruptcy? Call me today at (916) 333-2222.

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Waiting to Declare Bankruptcy Could Cost You

Declare Bankruptcy

I often consult with people that have waited far too long to declare bankruptcy in Sacramento. Unnecessary delays can be dangerous for a few reasons. But I want to focus on one reason that could cost you big money.

If you own a home in Sacramento, you are used to wild fluctuations in house values. Property can rapidly appreciate here — and most homeowners don’t complain about that fact. When it comes to filing for bankruptcy, a homeowner needs to pay special attention to the value of his or her house.

House values in Sacramento have come back to the point that many homeowners now have “equity” in their homes again. “Equity” is calculated by subtracting the total loans / liens on your house from the market value. So if your house is worth $300,000 on the market, but your mortgage balance is only $250,000, you would have $50,000 in “equity” in your house.

Home equity is an asset for bankruptcy purposes just like cash in the bank. You must exempt, or protect, this asset when you declare Chapter 7 bankruptcy. If you do not exempt your equity, or if the equity is more than the allowable exemption, the bankruptcy Trustee would have the ability to sell your house for the benefit of your creditors.

Because house prices are appreciating again in Sacramento, waiting too long to declare bankruptcy could result in you having too much equity in your house. If you don’t want the court to sell your house in a Chapter 7 bankruptcy, you would have to consider a Chapter 13 reorganization. In a Chapter 13, you will have to repay a portion of your debts over time. Even with too much equity in your home, everything will be protected in a Chapter 13 — but you do have to repay some debts as a result.

This is why I often tell people not to delay when considering declaring bankruptcy. A delay could price you out of a Chapter 7 bankruptcy, or it could result in an aggressive creditor seizing your assets.

The sooner you start the bankruptcy process, the sooner it will be over! Call my office if you have any questions about Chapter 7 or Chapter 13 bankruptcy in Sacramento. My number is (916) 333-2222.

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Sacramento Wage Garnishment Tips

Sacramento Bankruptcy Lawyer Rick MorinI have said it before and I will say it again: one of the top reasons people seek bankruptcy help is because of a wage garnishment. A Sacramento wage garnishment can have disastrous effects on your finances. Here are some tips that can help you deal with a wage garnishment.

1. Be Proactive

First of all, a creditor may only garnish your wages if the creditor first sues you in court and wins a judgement. Knowing this, your goal should be to prevent the judgement in the first place. Without a judgement, there can be no garnishment!

With the economy improving, creditors are filing more and more lawsuits on defaulted debts. Don’t just ignore lawsuit threats. Try to work out a deal with the creditor before they are forced to sue you. If a creditor thinks that their only choice is to sue you, this is exactly what they will do.

2. Don’t Delay

If a creditor does win a judgement against you, don’t waste any time. They will soon be looking to levy your bank account and garnish your wages. If you can’t afford 25% of each of your paychecks being diverted to your creditor, you should seriously consider bankruptcy as an option.

It is always best to file bankruptcy before a wage garnishment starts. If you act fast enough, you will be able to prevent the creditor from taking any of your wages. If your wages are being garnished, it may be difficult for you to save the money needed to file bankruptcy. It can be a real catch 22.

3. Don’t Ignore the Signs

Many of my clients are not aware that a creditor has sued them and obtained a money judgement. This is often the case because the client has moved and was never served with lawsuit paperwork. However, lack of knowledge of a judgement is not a legal defense if the creditor decides to start collecting.

Keep an eye on your credit reports. You should take a look at your full credit report each year. Your credit reports will clearly indicate any public records, such as judgements. If you discover judgements in your name, don’t ignore them! Collection activity could begin literally any day.

4. Don’t Assume Old Judgements are Safe

Did you know that judgements issued by a California court are good for 10 years? And that a judgement creditor can renew their judgement every 10 years thereafter? In most cases, judgements accrue interest at 10% per year! As you can see, ignoring a judgement will only make the problem more expensive.

5. Bankruptcy Will Eliminate Judgements and Garnishments

Bankruptcy will get rid of most judgements. Bankruptcy in Sacramento will also immediately halt wage garnishments and bank levies! If you are served with a notice of garnishment, you should contact my office immediately to discuss your bankruptcy options. Bankruptcy might be the easiest, fastest and cheapest way to stop your garnishment.

If you have question about stopping a wage garnishment in Sacramento, please contact my office at (916) 333-2222 for a free bankruptcy consultation. 

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Never Do These 5 Things Before Filing for Bankruptcy in Sacramento

Sacramento Bankruptcy Mistakes

DON’T Pay Back Friends or Family Members

In the eyes of the court all creditors are to be treated the same, whether it’s a collection agency, a bank, or your mom. Most people want to pay back their debts, especially to friends and relatives. However, this could create preference issues in your case and the court can demand your relatives to pay the money back. You can do whatever you want after your bankruptcy is over. But repaying debts to family and friends within one year of filing for bankruptcy can create some headaches.

DON’T Go on a Shopping Spree

If all your debt is going to be discharged, why not max out your credit cards, right? WRONG. This is an abuse of the bankruptcy process and the Court takes these matters very seriously. Your creditors can seek a court ruling that says that their debts are not dischargeable in the bankruptcy. Worse yet, they could try to claim that you are abusing the bankruptcy process and that your entire bankruptcy should be dismissed.

DON’T Trust Your Credit Report to List All of Your Debt

Credit reports are a great way to get started when it comes to finding all your creditors. However, you should always review your report and get two if possible. There are many types of debts that won’t be listed on a credit report too. So it is important that you start thinking about who you owe money to well in advance of filing for bankruptcy.

DON’T Try to Cut Corners

My office sees many people who struggle to get by before their bankruptcy, let alone pay for an attorney. However, bankruptcy is an important financial decision. Once you file, you must see the process through. Don’t cut corners by hiring the cheapest attorney you can find or by filing yourself. This is a big decision and you will need an attorney who you can trust.

DON’T Try to Hide Things From Your Attorney

Your attorney is on your side and is there to represent you. Misleading your attorney or leaving out important information is like lying to your doctor. You might be embarrassed at first, but if you don’t tell them the important facts, they might not be able to help you.

Rick Morin is a bankruptcy attorney in Sacramento. He can help you file for Chapter 7 or Chapter 13 bankruptcy. Please call the office (916) 333-2222 to schedule your free bankruptcy consultation today.

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Student Loan Bankruptcy Attorney

Sacramento Bankruptcy Lawyer Rick MorinAs you know, discharging student loans in bankruptcy can be difficult. Current bankruptcy law is set up so that bankruptcy discharges for student loans requires special procedures. I am a Student Loan Bankruptcy Attorney in Sacramento, and I am looking for select student loan cases in Northern California.

Many people believe that student loans cannot ever be discharged in a bankruptcy. This just is not true. This myth is perpetuated because the process to get rid of student loans in bankruptcy is rather complex. In fact, most bankruptcy law firms will not take on the big student loan lenders. I will.

Whether your student loans are with the government, a private lender, or even with a collection agency, there are steps that you can take to discharge your student loans through bankruptcy.

Do you meet the following criteria? If so, you should contact my office immediately to determine whether we can discharge your student loans in a bankruptcy.

1. Your loans were taken out for educational purposes (such as tuition, room and board, books, etc.)

2. You have at least made an attempt to repay your loans.

3. Repaying your student loans would impose an undue hardship on you and your family.

4. There is no reasonable hope of you earning a sufficient income that would allow you to repay your loans.

Numbers 3 and 4 are where all the action is currently. The classic example that the courts have said meet dischargeability standards is when a person becomes permanently disabled after incurring the student loans. In this unfortunate scenario, the debtor will never be able to earn the income that they anticipated when they obtained their student loans. Forcing the person to repay their loans would obviously impose an undue hardship. It is cases like these that are good candidates for bankruptcy relief for student loans.

If you think you have a good case for student loan discharge in bankruptcy, please call my office to set up a consultation. I am a Student Loan Bankruptcy Attorney and I can help. My number is (916) 333-2222.

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What is a Notice of Filing Report of No Distribution?

Report of No Distribution

I am often asked about what a “Notice of Filing Report of No Distribution.” Almost all Chapter 7 debtors will receive such a notice in their Chapter 7 Bankruptcy case. It is an important document that has big implications for your bankruptcy.

As I discussed a few weeks ago, some Chapter 7 cases are “asset” bankruptcies, while most are “no-asset” bankruptcies. In no-asset Chapter 7 cases, the bankruptcy trustee will issue a report that specifies certain information about his or her administration of the bankruptcy.

This “no asset report” is important because it tells all interested parties that there will be no distribution of funds from the debtor’s bankruptcy. A creditor needs this information to know whether they can expect to receive any funds from the bankruptcy trustee.

Once the no-asset report has been issued, the debtor will also be confident that the bankruptcy trustee will not be attempting to seize any of their property. The most common item taken from a debtor in a Chapter 7 is a tax refund. When the report of no distribution comes out, the debtor will know that their case is proceeding without any need for turning over property to the trustee.

The report also contains an important deadline that creditors must follow. The report provides for a “last day to file an objection.” Importantly, this objection deadline is NOT the deadline for a creditor to object to the bankruptcy itself. Rather, it is a deadline for creditors that want to object to the trustee’s no distribution report itself. Many clients confuse this deadline with the deadline for creditors to object to the bankruptcy or the discharge of specific debts.

Please contact Sacramento Bankruptcy Attorney Rick Morin for more information regarding Chapter 7 or Chapter 13 bankruptcy. The office phone number is (916) 333-2222.

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Law Office of Rick Morin, PC. A 5-star law practice serving all of California. 

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