And for those of you wondering how the bankers and mortgage lenders sleep at night after the misery they have caused in the housing market through foreclosures and loan modifaction snafus, check out this piece about how a ”business is business” ethos should apply equally to banks and borrowers.

In answer to a few questions:

Yes, you can request that creditors stop calling you at work, bothering your family or neighbors, or calling at inappropriate times by writing a letter to the creditor and telling them to cease contacting you.  The creditor still has the right to contact you if they decide to sue you or pursue other legal means of recovering their debt. You must respond to all legal suits regarding your debt collection. 

It is illegal for a creditor to threaten or verbally abuse you.

There is a statute of limitation on debt collection.  If you are being asked to pay a debt that has been written off under the statute of limitations (in California, creditors have 4 years to collect most debts) then your debt has probably been sold to a scavenger collection agency.  This website has information on handling this type of debt collection and a listing of statute of limitation designations for each state. 

If you wish to contest a debt you must do so in WRITING within 30 DAYS of receipt of the collection notice.

Please complete the document bankruptcy-questionnaire to the best of your ability and bring it with you to your initial consultation.  Carefully read the first three pages of the questionnaire that explain what forms you will need to bring to your meeting as well as the policies and practices of filing for bankruptcy with our office.

What does bankruptcy entail? What is the process for filing bankruptcy?
Bankruptcy is the legal discharge of your debts. In a bankruptcy proceeding, your attorney prepares legal documents (the court refers to these papers as Schedules) that list all of your debts, assets, income, and expenses.   The court then assesses your debt to income ratio and decides if you qualify for a complete discharge of debts or if you will be required to repay a portion of what you owe. Each State offers exemptions for certain assets (California is particularly generous) that allow debtors to retain their possessions.  These exemptions will generally cover the value of an automobile you own, any equity you might have in your home, and your household possessions (including guns, hobby equipment, art, books, music, etc.). Retirement policies (401k, IRA, pensions, etc.) are entirely exempted and therefore protected from bankruptcy. The purpose of bankruptcy is not to rob you of your belongings, but to help you get back on track and manage your finances in a way that will afford you a fresh start. 

Your responsibility in this is to comply with the advice and needs of your attorney. You must disclose all of your assets and debts.  That means you cannot cherry-pick what you want to report to the bankruptcy court. A full accounting of your income and expenses is necessary and does not mean that you will not qualify for a bankruptcy. Hiding assets, making false statement or otherwise deceiving the court will jeopardize your case.

You must also complete two courses of credit counseling. Our office will be able to direct you to one of the numerous independent agencies that offer this service. You can complete these courses either over the telephone or on the Internet.  The first course takes roughly 90 minutes to complete and asks you to make a budget and list your debts and income; the cost of this course is between $30.00 and $50.00. The second course is shorter and costs around $17.50.  Both of these courses must be completed in order for your bankruptcy to be filed & discharged. Our office will send you information on when to take these courses in your bankruptcy process. These courses are nothing to be worried about; there is no passing or failing these courses; you just need to complete them.

Furthermore, you must pay your attorney’s fees and the court filing fees ($299.00).  Your attorney will need current pay stubs for the 6-month period prior to your filing date; a recent credit report and/or your bills; tax returns for the preceding 2 years and any other pertinent information regarding your income or debts. If you receive Social Security or another form of governmental assistance, a statement of deposit from your bank account or a notice of your payment amount from the administering agency will suffice. |

Our office will be happy to guide you through this process at every step.

What is the difference between a Chapter 7 and a Chapter 13 bankruptcy? How will I know which one I qualify for?

Chapter 7  Bankruptcy is appropriate for most people and is the most effective means of “wiping the slate” clean of outstanding debt. Most people with modest incomes qualify for a Chapter 7 bankruptcy. The IRS sets the means standard for income qualifications.

In Chapter 7 you are relieved of all of your unsecured debts (such as: credit card bills, medical bills, deficiency balances or repossessed cars or foreclosed homes, and personal loans) and any secured debts in which you are returning the property to a creditor. Secured debts are those debts that are tied directly to a specific piece of property. For example, a car that you are making payments on is still owned by the bank. If you decide to relinquish this property or it is repossessed the amount that you still owe can be included in your bankruptcy.

If your income precludes you from filing a Chapter 7 bankruptcy you will then file a Chapter 13 bankruptcy. In Chapter 13, a repayment plan is devised between you, the court, and the court’s trustee. In Chapter 13, the amount of your debts that you will have to repay is determined by your income not the total amount of the debt.  Chapter 13 creates a repayment plan that reflects the needs of your current economic situation allowing you to pay back a portion of what is owed to your creditors rather than the full amount. A Chapter 13 Bankruptcy repayment plan lasts for 5 years and is paid directly to the trustee each month on an appointed date.  

Debts that are not discharged in either Chapter 7 or Chapter 13 are:

Student Loans
Child Support
Most Tax Obligations (although, some tax debts that are more than three years old may be discharged)
Court Ordered Restitution

 What is a trustee?

When your case is filed, the court appoints an overseer known as a Trustee. It is the trustee’s responsibility to assess the claims of your assets and debts and act as an agent on behalf of your creditors. If you file a Chapter 13 bankruptcy, the trustee oversees your monthly distribution of payments to creditors.

Are there some types of debts that cannot be discharged in bankruptcy? If so, what kind of debts are these?

Student loans, child support, court ordered restitution and tax obligations less than three years old are not discharged in bankruptcy.  
 

What will be required of me in court? Will I need to speak before the judge?Your court appearance (called a 341 Hearing) is a brief 5-minute affair in which you will be asked to verify the information regarding your assets and debts as filed in your bankruptcy petition.  For most of our clients, the court hearing is held in Redding. Your lawyer is with you the entire time. You are not required to take the stand or “testify.” You can wear casual attire to your court case. We recommend that if you have young children you do not bring them to the court with you. While your interview is brief you may be required to wait up to an hour in the courthouse for your turn before the judge.

YOU MUST HAVE A SOCIAL SECURITY CARD & DRIVER’S LICENSE TO PRESENT AT COURT. If you do not have a Social Security card in your possession you will need to apply for a replacement card as soon as possible. The court will not accept any substitute for a Social Security card.

How soon after I have decided to pursue bankruptcy will my creditors quit harassing me?When you have retained the attorney’s services, you can direct your creditors to our creditor line where we will verify the status of your bankruptcy. Once your case is filed with the bankruptcy court, your creditors are notified of your impending bankruptcy and at that time they should cease calling and mailing you entirely.

Is it possible to make payment arrangements with your office? What types of payment plans are available?

Yes, you can make payment arrangements with my office.  I understand that clients who are seeking assistance with bankruptcy do not always have the means to pay the entirety of their fees up front.  Each month you should pay your rent & car payments before making a payment to my office. 

It is important to understand that no bankruptcy attorney can file your case until he or she is paid in full.  If an attorney did file without receiving full payment, the court would dismiss that debt, like the other unsecured debts in your bankruptcy. Therefore, all attorney and court fees must be paid before your case can be filed.

The timeline for getting in all of your attorney and court fees varies from client to client.  6 months of missed payments will force your status to be reverted from active to inactive, i.e., you will no longer be able to claim attorney representation.

If you are no longer paying your unsecured creditors, it is likely that a creditor will sue you after 6 months to a year of missed payments.  Once you are sued and a judgment is entered against you, your wages can be garnished.  That said, the sooner you have paid off your bankruptcy fees, the sooner your case can be filed with the court.  Furthermore, I accept pink slips as collateral in order to facilitate payment arrangements. There is an additional $15.00 fee to the DMV in order to use your pink slip as collateral. 
 

Will it be possible to reestablish my credit after I have gone through bankruptcy? If so, how long and in what manner will I be able to reestablish my credit?

Credit is reestablished over time. Since each case is different, there is no precise formula to determine the amount of time until your credit will be reestablished.  If your credit is very bad (low FICO score) your credit rating may actually improve after bankruptcy.  In general, most clients who file bankruptcy are able to reestablish their credit in the years following their debt relief.  

 How many times can I file for bankruptcy?

You are permitted to file a Chapter 7 bankruptcy every eight years. If it has been more than four years since a prior Chapter 7 and you are sued, I am permitted to file Chapter 13 Bankruptcy where you make a modest, affordable payment toward your debts until you accumulate eight years since your prior bankruptcy. At that point, I convert your case to a Chapter 7. 
  

What is Credit Counseling and Debtor’s Education and why am I required to complete those courses?

All debtors are required to complete a brief Credit Counseling interview with a credit counselor approved by the US Trustee before their case can be filed.   This course consists of an interview over the telephone or online. Our office will supply you with information on available administrators.  This interview is at an additional charge to you and costs between $30.00 and $50.00.  This course must be completed before your case can be filed with the court.

After your case is filed, you are required to complete a second course called Debtor Education that too can be done online or over the phone.  This course is shorter than the first and runs about $17.50.

Within 45 days of your court hearing a Debtor’s Education Certificate of Completion must be submitted to the court.  You are highly encouraged to sign up and complete the course as soon as your case is filed and before you attend your 341 Hearing.  Failure to complete this course in the allowed 45 days will result in a denial of your discharge at which point creditors will resume phoning and suing you.  

A great article from the New York Times.  An exhaustively researched look into the predatory lending practices of credit card companies and mortgage guarantors that contributed to the current economic instablility in the housing and credit markets.  A must-read for anyone trying to get a better handle on the complicated economic issues of today.

A lot of our clients have questions about Student Loan debt and why it is so infrequently discharged in bankruptcy cases.  The following website, www.studentloanjustice.org, explains much of the politics and backroom deals that went on between fatcat lobbyists and CEO’s at Sallie Mae and the government officials who shielded student loan debt from the laws of bankruptcy.

Take CA-99 North toward Redding / Red Bluff.  Continue for 38 miles.

Merge onto I-5 North; Proceed for 28 miles.

Take the Cypress Avenue Exit, EXIT 677, towards Redding.|

Turn Left onto East Cypress Avenue

Turn Left onto Bechelli Lane; Courthouse is at 2986 Bechelli, at the corner of Hartnell.  

Make sure to arrive at the Courthouse 10 to 15 minutes before your 341 Hearing appointment.  Michael will meet with you on the 2nd floor, outside Room 200. 

YOU MUST BRING YOUR SOCIAL SECURITY CARD AND A DRIVER’S LICENSE TO YOUR HEARING.  THE JUDGES ARE NO LONGER ACCEPTING ANY SUBSTITUTES FOR SOCIAL SECURITY CARDS. IF YOU DO NOT HAVE A SOCIAL SECURITY CARD, PLEASE APPLY FOR ONE AS SOON AS POSSIBLE.  THAT WAY, YOU WILL HAVE IT IN YOUR POSSESSION WHEN YOU GO TO COURT.