Chapter 7 Bankruptcy – Page 8 – Law Office of Rick Morin, PC

Bankruptcy Law, Bankruptcy Rules, Chapter 7 Bankruptcy

Bankruptcy and Separate Households

A separated couple have the option of filing a Chapter 7 bankruptcy together. Despite keeping separate households, they can still qualify for bankruptcy. However, there are some important things to be considered. Keep reading to avoid some common problems in these type of cases.

First, separated couples will have to file two Schedule Js. Schedule J is a listing of household expenses. Because each spouse maintains a separate household, the bankruptcy court wants to see the breakdown of expenses. This should not be used as an opportunity to inflate expenses to def

Just like with expenses, each spouse must list their respective incomes on Schedule I. A full and accurate accounting of household income is required in order for the court to determine whether the bankruptcy is an abuse. This can be difficult for some couples who may be living with other folks that are bringing income into the household.

Another trap for the unweary is the listing of assets. Just like with all cases, fulling accounting for assets is extremely important in a Chapter 7 Bankruptcy. You must carefully apply the appropriate exemptions to all of the couple’s assets. If not exempted in the correct manner, assets can be seized by the Bankruptcy Trustee and sold for the benefit of your creditors.

Lastly, family transfers of property need to be fully disclosed on the Statement of Financial Affairs. Occasionally I see transfer of cars or even houses amongst separated spouses in anticipation of becoming divorced. These transfers can be a problem if they are not explained correctly on the Statement of Financial Affairs. This issue also comes up after one person files divorce recently after being divorced. The Bankruptcy Trustee will be looking at the marital settlement agreement and any pre-petition transfers. The Trustee looks at these documents to make sure that any transfers were fairly made, and not intended to defraud creditors in a bankruptcy.

Bankruptcy and Separate Households can be tricky. But it is not impossible to file if you are in this situation. Please call my office at (916) 333-2222 if you have any questions about filing bankruptcy as a separated couple.

September 30, 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

Bankruptcy Law, Chapter 7 Bankruptcy, Creditors

How to Stop Wage Garnishment

Here in California, a judgement creditor can garnish your wages. A creditor can take up to 25% of your gross paycheck each pay period. For many of my clients, this is a disaster waiting to happen. Let me tell you how garnishments start, and how to stop it.

Before a creditor can take money from your bank account your garnish your wages, they must first sue you. Sometimes you might not even be aware that you are being sued. For instance, you might have moved recently, or the creditor failed to serve you properly.

The end result of many of these lawsuits is a “judgement.” When the court issues a judgement against you, it means that you have lost the lawsuit and the court has determined that you legally owe someone else money.

Only after a judgement may a creditor be able to garnish your wages.

After a creditor has its judgement, they can seek a “writ of execution.” This is an order from the judge that tells your employer that they must withhold money from your paycheck. Once your employer is served with the writ of execution and levy instructions, they are required by law to start turning over money to the levying officer.

The levying officer is the Sheriff’s office in the county of your employment. The levying officer is tasked with collecting funds from your employer. Once the levying officer has your funds, they turn over the funds to the judgement creditor to satisfy your debt. This will continue each paycheck until the debt is payed off, or you take action to stop the garnishment.

The most effective way to immediately stop your garnishment is to file bankruptcy. Bankruptcy will not only stop the garnishment in its tracks, but bankruptcy also eliminates your obligation to ever pay the debt again. For these reasons, a good percentage of my clients file bankruptcy just to stop a garnishment.

Once you file bankruptcy, I request that the Bankruptcy Court notify everyone involved in the garnishment process. This means your employer, the judgement creditor, the levying officer, and the court that originally issued the judgement. Once everyone is notified, your garnishment will stop!

Because of the devastating effect that a garnishment may have on your personal finances, I can quickly file your bankruptcy case to stop a wage garnishment. Please call my office if you need help stopping a garnishment. My phone number is (916) 333-2222.

September 2, 2014/by Attorney Rick Morin

Bankruptcy Law, Bankruptcy Rules, Chapter 7 Bankruptcy

How to Keep Your Car in Bankruptcy

Almost everyone that calls my office wants to know whether they can keep their car despite having filed for bankruptcy. The answer is almost always yes!

In a Chapter 7 Bankruptcy, also known as a liquidation, a debtor’s assets are subject to being taken by the Bankruptcy Trustee. However, in most consumer cases, this never happens. This is because California law allows debtors to retain a certain amount of their property. Lawyers refer to this as the “exemption” process.

What really matters when looking at cars and bankruptcy is the amount of equity in the car. For instance, if Kelly Blue Book on your car is $8,000, but the outstanding loan balance is $10,000, you don’t have any equity at all. This is because the car is encumbered by loans more than the value of the car. So if the Bankruptcy Trustee were to take your car and sell it on the market, the Trustee would actually lose money. In cases like this, there is no risk of losing the vehicle.

For debtors with equity in their car, there is good news too. Let’s say you own your car outright and Blue Book on the car is $3,500. Currently, California 703 exemptions allow you to exempt up to $5,100 of equity in your car. That means that $5,100 worth of car is yours to keep — the Bankruptcy Trustee can’t take it from you. So you’re covered here too!

Let’s take an extreme case. You own your car outright and it’s worth $15,100. The car exemption under 703 is only good for $5,100, so does that mean you lose your car? No! There is a “Wildcard” exemption that I can use to exempt the remaining $10,000 equity in the car. Because I can exempt all of that equity in your car, the Trustee can’t take it from you and sell it.

As you can see, there are many ways to keep your car in a Chapter 7 Bankruptcy when using California’s 703 exemptions. The key thing to remember is that it is important to carefully look at all of your property before you file bankruptcy. You must do this to apply your exemptions as needed. It’s not good enough to blunder into your case and clean up the mess afterwards. It might be too late.

If you have questions about how to keep your car in bankruptcy, please call my office at (916) 333-2222.

August 26, 2014/by Attorney Rick Morin

Bankruptcy Law, Bankruptcy Rules, Chapter 7 Bankruptcy

How to File Bankruptcy

Want to file bankruptcy? The bankruptcy process can be very intimidating and confusing. And that’s for good reason. Bankruptcy is a critical life decision that has long-lasting implications. But at its core, the bankruptcy process is comprised of a few important areas.

1. Assets

The bankruptcy court and the bankruptcy trustee want to know about the stuff that you own. Your assets are listed in various bankruptcy schedules. Assets include things like houses, cars, household goods, bank accounts, and even your clothing! Some people make the mistake of not listing certain assets because they don’t think the asset is worth anything. The rule is that you list everything you own, no matter where it is in the world and no matter how much it is worth!

2. Debts

This should be obvious, but it isn’t always so. You need to list every single one of your debts in your bankruptcy case. This includes debts such as student loans that do not get discharged at the end of your bankruptcy. You even have to list loans from family and friends! Another area where people make mistakes is that they want to keep a particular credit card — so they don’t list it. The bankruptcy code is clear: you must list all of your debts, even ones that you want to keep!

3. Income

Your income is important in a bankruptcy because you must first qualify for bankruptcy using the Means Test. The Means Test looks at your prior six months of income to determine your eligibility. The court will also look at the “totality of the circumstances” of your case to make sure that you really do need bankruptcy assistance. By comparing your monthly income with your monthly expenses, the court will determine whether your bankruptcy would be an “abuse” of the bankruptcy process.

4. Transfers of Assets Prior to Bankruptcy

Moving property around prior to a bankruptcy can cause big problems. The bankruptcy petition tries to catch these “pre-petition transfers” using lots of different questions. The court is trying to determine whether you sold or transferred a large asset in order to make yourself appear in need of bankruptcy. Even worse, some people try to move property out of their own name because they would have lost the property in the bankruptcy proceedings. This is illegal and can wreck your bankruptcy from the very beginning.

A typical Chapter 7 bankruptcy petition can easily consist of 60 or more pages. Preparing the bankruptcy petition is very complicated, but the four areas above are where a majority of the action takes place.

If you have any questions about how to file a Bankruptcy in Sacramento, please call my office at (916) 333-2222.

August 18, 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

Chapter 7 Bankruptcy, Creditors

35 Percent in US Facing Debt Collectors

According to this article in the Seattle Times, 35% of Americans have debts that are being reported as delinquent. That means that debts are being pursued by debt collectors.

The article goes on further to say that the amount of debt delinquency has remained constant since the Great Recession. This is concerning because the economy, at least on paper, has been getting better. This tells me that for the average person, the economy hasn’t improved enough to make a real difference.

There are over 140,000 people employed as debt collectors in America. As many of my bankruptcy clients know, these debt collectors can be very persistent. No one likes a debt collector calling, but especially if the collectors are rude, harassing and do not follow the law.

Now one or two past-due credit card bills are not sufficient to force someone into bankruptcy. However, a large amount of unsecured debt that is delinquent is a typical warning flag for me. This is true if you are struggling to make ends meet because of large debt payments.

As a Bankruptcy Attorney in Sacramento, I stand up to annoying debt collectors and banks that charge sky-high interest rates. I can help a family get a fresh start with their finances in less than four months. A typical Chapter 7 Bankruptcy case here in Sacramento will last about 90 days from the day it is filed to the day the bankruptcy discharge is ordered.

Please call my office at (916) 333-2222 if you have any questions about Chapter 7 Bankruptcy. I am happy to help.

July 29, 2014/by Attorney Rick Morin

Chapter 7 Bankruptcy, Creditors

High Interest Car Loans and Bankruptcy

This article from the New York Times confirms what I often see in my office: many people are being put into bad car loans with very high interest rates.

I define a bad car loan as having two main characteristics: 1) the value of the loan is typically much higher than the value of the car itself; and 2) the interest rate charged for the loan is substantially higher than market rates.

Given the extremely low interest rates these days, I would say that anything over 12% is too much to pay for interest on a car loan.

A person with a high interest car loan will pay many times the “real” price of the car over the life of the loan. This hurts the consumer in many ways. High monthly payments can wreck a budget. And overpaying for a car means less money for other things down the road.

Because of the high monthly payments associated with these high interest car loans, people often fall behind on payments. This leads to a repossession of the car and negative marks on credit reports. After repossession, the lender will typically sue to recover the deficiency balance on the loan. And negative marks on credit reports will make it difficult to obtain good car loans later on. It is a vicious cycle.

As I have discussed earlier, bankruptcy can help in this situation. You can surrender your car in a Chapter 7 Bankruptcy and walk away free-and-clear from the bad loan. Bankruptcy will also eliminate any judgements associated with a deficiency balance. After your bankruptcy is over, you can rebuild your credit and qualify for better car loans that will not cost as much.

Some people may want to keep their high interest car loan even after filing bankruptcy. While this is possible, it is not a very good idea. I don’t like leaving my clients with bad debts on the books even after a Chapter 7 Bankruptcy.

Please call my office if you want to find out how Chapter 7 Bankruptcy can help you get rid of high interest car loans. My phone number is (916) 333-2222.

July 20, 2014/by Attorney Rick Morin

Chapter 7 Bankruptcy, Creditors

Wage Garnishments and Bankruptcy

Bankruptcy can stop and eliminate wage garnishments. This is one of the top reasons people call my office for bankruptcy relief.

A wage garnishment is a process by which a creditor can take money from your paycheck. In California, a typical judgement creditor can take up to 25% of your gross wages each paycheck. This can be devastating to a person’s financial situation.

Before a garnishment can start, a creditor must first obtain a money judgement. To obtain a judgement, a creditor must first sue you.

Many of my clients were sued by a creditor but had no idea they were being sued. This can happen when a person moves and the creditor serves a prior address with the lawsuit. This means that the first notification of the lawsuit is a letter or phone call from your employer saying that your wages are about to be garnished.

Don’t ignore a notice of garnishment from your employer. If you take swift action, we can stop your garnishment and make sure that your paycheck is not affected at all.

Filing bankruptcy immediately stops all collection activity. This is known as the “automatic stay.” Federal law is clear that creditors are not allowed to continue collecting money from a person in bankruptcy.

After my office files a bankruptcy, we reach out to all parties that have pending collection activity against a client. This includes wage garnishment situations. We will notify the County Sheriff’s office, the lower court that issued the judgement, along with a client’s employer. These steps are critical to stopping a garnishment before money is taken from your paycheck.

Bankruptcy is one of the best tools that can be used to stop a garnishment from wrecking your finances. Done quickly and correctly, bankruptcy will help preserve your paycheck and will eliminate unsecured money judgements.

Please call me at the office at (916) 333-2222 if you have any more questions about stopping a wage garnishment in Sacramento.

July 13, 2014/by Attorney Rick Morin