Bankruptcy vs Other Options

When you think about filing bankruptcy you really want to understand all your options. This is the quick overview of bankruptcy vs other other options.

If you are considering whether bankruptcy is right for you, solid information is needed before making a decision. You may be considering doing nothing, debt consolidation, or even litigating with creditors. Today, we are going to compare bankruptcy with other options.home-bankruptcy

Bankruptcy vs Doing Nothing

If you are in debt and it is bad enough to start research on the internet, doing nothing is not the best option for you to consider. Not really knowing about what your options is never a good idea Consider if you were sick, you would get an opinion about the outcome.The same goes for bankruptcy. At some point with money problems there is only so much you can do yourself. This applies to all of us. Money is difficult for most of us to manage. Sometimes you are going to need advice about the pros and the cons of your specific situation. If you are starting to get harassed by the creditors and debt collection agencies, you can leave yourself open to a lawsuit. If you are sued for whatever reasons you have just a few weeks to determine how you are going to respond. Doing nothing means that assets that you can protect go unprotected.Not protecting your 401k or the equity in your homes to try desperately to pay off bills has a devastating on your retirement . You need to start with getting some advice before, due to lack of information, you can make a bad thing worse.

Bankruptcy vs Debt Consolidation

First of all, no one wants to file bankruptcy. It is an urban legend that people who file bankruptcy are doing so lightly ..they are not. But, if you are driving down the road thinking about the money issues and you hear the advertisements for debt consolidation ..it sounds like a good thing.The Great Recession is still plaguing many of us. News outlets are reporting that jobs aren’t being created and that the only reason unemployment claims are down is that for many, their benefits are exhausted. With all these stressors, one might think people would be flocking to bankruptcy protection in droves.In proportion to the economy, the upswing in bankruptcy filings has been fairly modest.

Is debt consolidation ever a good idea?
The question I ask is: Will the borrowers have a lower monthly payment over the next five years in their proposed debt consolidation than in bankruptcy Chapter 13 ? If the answer is yes, they should consider debt consolidation. If they may be unable to qualify for Ch. 7 or 13 (i.e would have to be in a Ch. 11!) or for other reasons bankruptcy would have serious and unwelcome consequences like sacrificing property the borrowers own, they should consider debt consolidation. Disqualifying factors can be that the borrowers are over the debt limit for a Ch. 13. Yes, there is a debt limit for Ch. 13. Two limits, actually; one for secured debt and one for unsecured. [Chapter 7 has no debt limit.] Those are the two conditions under which I refer a potential bankruptcy client to a debt consolidator. Otherwise, typically a Ch. 7 bankruptcy gives the client a fresh start, and the problem can be solved years earlier than other options.

Bankruptcy-Chapter 7 VS Chapter 13

Chapter 13 bankruptcy usually runs five years, which is about the same or longer than debt consolidation. This type of bankruptcy provides you protection from creditors while the outstanding debt is settled through a repayment plan. It can be used to halt home foreclosure. Filing Chapter 13 is sometimes called the home-saver bankruptcy. Depending on what the debts are for, the court may reduce the amount repaid to some creditors. However, once the creditors have received the agreed upon payment via the court, the debt is considered paid in full. This will mean that your credit rating will stay low for the period of time of the Chapter 13 length. Furthermore, Chapter 13 requires a monthly repayment of 100% of your disposable monthly income.

Chapter 7 bankruptcy is shorter, less complicated, and less expensive. It allows you to have all of your unsecured debt wiped clean. The process usually takes no more than three months and it is the most common type of bankruptcy. Compared to Chapter 13, which takes three to five years, Chapter 7 is the best option for those who qualify. Furthermore, Chapter 13 requires a monthly repayment of 100% of your disposable monthly income. A “fresh start” or “clean slate”, Chapter 7 is a form of bankruptcy designed to let people (and sometimes businesses) get out of debt without repaying any of the “unsecured” creditors. While Chapter 7 also requires the person(s) filing go turn over to the bankruptcy trustee all “non-exempt” assets, skilled planning with an experienced bankruptcy lawyer can usually ensure all the filer’s assets are exempt (i.e., the filer gets to keep the property.)

With Chapter 7, the Court, not the creditors, decides whether any assets should be sold to pay creditors. While there is both an art and a science to actually completing the documents to be filed in a Chapter 7, much greater skill is needed to plan for minimum loss to the person filing. If the person filing Chapter 7 can’t pay reasonably necessary living expenses and pay something to the unsecured creditors, the Chapter 7 filer should sail through the process pretty smoothly. However, with Chapter 7, Debt consolidation cannot even do this.

What Happens in a Debt Collection Lawsuit?

Concept keyDebt collection companies are often given a specific protocol to follow when collecting debts. Their owners may set out specific rules for these transactions. Additionally, federal and state laws often impose additional requirements regarding the collection of debt.

Common Collection Procedure

When a debtor is delinquent on his or her account, the original creditor will attempt to collect the debt on its own. However, if the attempts go unanswered and the debtor does not respond by paying the bill in full, the creditor may submit the debt to a third party debt collector. When a creditor refers a debt to a third party collector, it usually does so by selling the debt to the third party collector for cents on the dollar. The debt collector becomes the new owner of the debt and receives the rights of the original creditor to the balance owed. In other situations, the original creditor remains the creditor and pays the debt collection company a portion of the amounts collected on delinquent accounts.

Debt Collection Law Firm

If the third party collector is not able to collect on the debt, the debt may be sent to a debt collection law firm. The debtor is often made aware of the assignment to the debt collection law firm by receiving a letter. State and federal rules and regulations sometimes dictate the information and documents that must be included with this communication. The letter will usually state that the creditor has retained the law firm in order to represent it in collecting the debt. The letter also demands payment.

Normally, the letter will also state that the debtor has 30 days to dispute the debt and gives instructions on how such a dispute is commenced. The letter may also state that the debtor may face a civil lawsuit if he or she fails to respond and pay off the debt.

Role of the Debtor’s Attorney

Individuals who receive notice of involvement by an attorney may choose to seek their own legal counsel. A debt settlement attorney will handle all communications with the collection firm once he or she is retained and the firm receives notice of his or her involvement. Once the debt collection firm receives this notice, the attorney is authorized to act on behalf of the debtor. If the debt collection firm communicates with the debtor after notice of the debt settlement attorney’s appointment, such communication will likely be deemed improper.

The debt settlement attorney handles all negotiations with the debt collection firm. In many cases, a settlement can be reached in which the debtor pays a portion of the debt in satisfaction of the debt.

Filing of a Lawsuit

If the debt collection firm and debt settlement attorney cannot reach a settlement, an attorney for the debt collection firm will file a lawsuit in the state where the debtor resides. The debtor has a limited amount of time to respond to the legal complaint. If he or she does not file this response within the provided time, the debt collection firm can seek a default judgment against the debtor in which the court can rule in favor of the creditor who can then take steps to collect on the judgment.

Pleadings and Motions

A debt settlement lawyer can help protect the debtor’s rights by providing a response, filing certain motions and responding to certain motions and requests. If there are any applicable defenses, the attorney will raise them. For example, a statute of limitations may apply that bars recovery for an unpaid debt. A statute of limitations is the time limit in which a legal action must be filed in order for the court to provide relief. Other potential legal motions may include motions for discovery purposes, motion to quash the summons or a motion to dismiss the complaint.

Judgment

If the court rules in favor of the creditor, the creditor may then take steps to collect on the judgment. The creditor can take steps to receive the money it is owed by asking for a lien on un-exempted real estate owned by the debtor, the sale of the debtor’s property or a garnishment on the debtor’s wages. The debtor’s attorney may be able to work out a consent judgment in which some of these actions are avoided. Such a judgment may be the result of a repayment plan that the debtor and creditor agree to.

Individuals facing a debt collection lawsuit may wish to talk to a debt settlement attorney in order to learn about their rights and responsibilities.

What is the Role of a Bankruptcy Attorney?

Bankruptcy is a complex procedure that requires you to make a host of critical decisions from before the time you file straight through to the time your debts are discharged and the bankruptcy procedure concludes. An experienced bankruptcy attorney can guide you through the dizzying maze of decisions, paperwork and procedure that marks a bankruptcy filing, whether it is a chapter 7 or chapter 13.Bankruptcy-1024x678

At the outset, a bankruptcy attorney is there to counsel you on the bankruptcy process and whether it is right for you. They serve to help you take a critical look at your debts and assets and determine if bankruptcy is the path that will best help you or if a smarter approach is to attempt to improve your circumstances from a different angle. For instance, the bulk of your debts may be ones ineligible for bankruptcy protection, such as student loans, and an attorney can help you weigh whether you would truly benefit from bankruptcy.

If bankruptcy does appear to be the right solution for you, an attorney then can help you
compare the chapter 7 and chapter 13 options. This is a critical decision and will involve you and your attorney examining the size and makeup of your debt, the assets you are willing to risk in a bankruptcy, and your ability to repay your debts or a portion of your debts, among many other considerations.

Once you have selected your specific filing plan, an attorney can help you make key decisions beforehand. For instance, if you file for chapter 7, an attorney can provide you with your best options for keeping any assets that you do not want to lose to help pay off creditors. If you file for chapter 13, an attorney can work with you to figure out an ideal payment plan that you would be able to afford. Attorneys can also help you consider aspects of your bankruptcy such as the impact on your co-signers on any loans that will fall under your bankruptcy filing or whether to file jointly with a spouse or as an individual. In order to be a trustworthy guide for this aspect of your decision-making, an attorney needs to have a thorough understanding of federal bankruptcy laws.

During the filing process, your attorney will help you gather and prepare the necessary
paperwork, which largely focuses on your income, assets, debts and expenses. Once the
documents are filed and the bankruptcy is in motion, your attorney will be your key guide in ensuring that you file any additional documents and respond to necessary deadlines on time.

Bankruptcy requires court hearings, including a meeting of your creditors, and your attorney will represent you at these procedures and ensure that your best interests are pursued. This is one reason that it is important to have an attorney with deep knowledge of local court procedures and the bankruptcy trustees in your region, because approaches can vary from locality to locality. These hearings could prove especially consequential if one of your creditors challenges the filing, making your attorney’s experience and understanding of your specific case crucial.

Throughout, a bankruptcy attorney should be readily available when you have questions or need a consultation as you navigate the process. A bankruptcy can be a challenging, confusing experience, but a good attorney can bring a measure of clarity and comfort and help ensure that it serves its chief purpose—helping you regain your financial footing.

Chapter 13 Bankruptcy

When individuals have accumulated so much debt that it overwhelms them and they are unable to repay all of their debt according to the original terms of the contract, they may seek bankruptcy relief. Chapter 13 bankruptcy may be one option for them.

Features

In Chapter 7 bankruptcy, debtors liquidate their assets and pay off as much debt as they can. Secured debts receive priority over unsecured debts. There are a number of exemptions that people can claim during these proceedings.21970042_s

Chapter 13 bankruptcy allows individuals with regular income to restructure their debt. They are placed on a debt repayment plan and make installment payments to their creditors. They pay off all or most of their debts usually within three to five years, based upon the amount of their monthly income in comparison to the state income median. Federal law prohibits a plan for more than five years.

This type of bankruptcy is available for individuals who have secured debts and unsecured debts under a certain amount, based on federal law that adjusts periodically.

Advantages of Chapter 13 Bankruptcy

Creditors are not permitted to commence or continue efforts to collect debts while a person is in Chapter 13 bankruptcy. Potentially most importantly, debtors can often save their homes from foreclosure and may be able to cure delinquency in their accounts with time as long as they make scheduled payments on time while they are on the Chapter 13 plan. Additionally, individuals are able to create a new schedule for their debts, potentially lowering them during the life of the plan. Because a trustee is responsible for making the payments, the debtor does not need to have direct contact with the creditors.

Chapter 13 Bankruptcy Process

Before a debtor can file for bankruptcy, he or she must complete credit counseling within six months of the filing date unless the bankruptcy trustee determines that there are insufficient approved agencies that could provide the requisite counseling. Sometimes a repayment plan is worked up during credit counseling.

Because bankruptcy forms must contain detailed and accurate information regarding debts and other financial data, debtors must compile a certain information to prepare for the completion of forms the bankruptcy court will require. For example, the debtor must prepare a list of all creditors that he or she owes, whether the debts are secured or unsecured and the amount of each debt. Additionally, the debtor should retain documentation that helps show the amount of regular income the debtor receives and typical living expenses such as shelter, utilities, taxes, transportation, clothing and medical expenses. Married individuals have to gather this type of information regarding their spouse, too, whether filing only an individual petition or joint petition.

The case officially commences when the debtor files a petition with the bankruptcy court that has jurisdiction of the case. The debtor usually must file certain documents with the court, including schedules of assets, liabilities, expenses, current income, unexpired leases, executory contracts and a financial statement. If credit counseling resulted in developing a repayment plan, this plan is filed with the court. The debtor must usually file a statement regarding any income received within two months of filing for bankruptcy. The debtor must provide the trustee with additional documentation, including tax returns and other documents that he or she requests.

The debtor must pay all necessary filing and administrative fees. The bankruptcy court appoints a neutral trustee to administer the case. The trustee is responsible for collecting payments from the debtor and disbursing them to creditors. Once the petition is filed, an automatic stay is issued that stops most collection efforts, including debts for past-due mortgage payments. Some collection efforts are not automatically stopped. The bankruptcy clerk provides notice to the creditors listed on the schedule of debts prepared by the debtor.

The trustee is also responsible for scheduling a special meeting between the debtor and his or her creditors in which the creditors can ask the debtor questions under oath. A hearing is later held that the trustee, the debtor and any creditors who want to be there attend. The bankruptcy court determines whether or not to approve the repayment plan during the hearing. Due to the complexity of bankruptcy law, many individuals going through Chapter 13 bankruptcy seek the advice and assistance of an attorney licensed to practice bankruptcy law.

What is the Role of a Bankruptcy Attorney?

Bankruptcy is a complex procedure that requires youc5 to make a host of critical decisions from before the time you file straight through to the time your debts are discharged and the bankruptcy procedure concludes. An experienced bankruptcy attorney can guide you through the dizzying maze of decisions, paperwork and procedure that marks a bankruptcy filing, whether it is a chapter 7 or chapter 13.

At the outset, a bankruptcy attorney is there to counsel you on the bankruptcy process and whether it is right for you. They serve to help you take a critical look at your debts and assets and determine if bankruptcy is the path that will best help you or if a smarter approach is to attempt to improve your circumstances from a different angle. For instance, the bulk of your debts may be ones ineligible for bankruptcy protection, such as student loans, and an attorney can help you weigh whether you would truly benefit from bankruptcy.

If bankruptcy does appear to be the right solution for you, an attorney then can help you
compare the chapter 7 and chapter 13 options. This is a critical decision and will involve you and your attorney examining the size and makeup of your debt, the assets you are willing to risk in a bankruptcy, and your ability to repay your debts or a portion of your debts, among many other considerations.

Once you have selected your specific filing plan, an attorney can help you make key decisions beforehand. For instance, if you file for chapter 7, an attorney can provide you with your best options for keeping any assets that you do not want to lose to help pay off creditors. If you file for chapter 13, an attorney can work with you to figure out an ideal payment plan that you would be able to afford. Attorneys can also help you consider aspects of your bankruptcy such as the impact on your co-signers on any loans that will fall under your bankruptcy filing or whether to file jointly with a spouse or as an individual. In order to be a trustworthy guide for this aspect of your decision-making, an attorney needs to have a thorough understanding of federal bankruptcy laws.

During the filing process, your attorney will help you gather and prepare the necessary
paperwork, which largely focuses on your income, assets, debts and expenses. Once the
documents are filed and the bankruptcy is in motion, your attorney will be your key guide in ensuring that you file any additional documents and respond to necessary deadlines on time.

Bankruptcy requires court hearings, including a meeting of your creditors, and your attorney will represent you at these procedures and ensure that your best interests are pursued. This is one reason that it is important to have an attorney with deep knowledge of local court procedures and the bankruptcy trustees in your region, because approaches can vary from locality to locality. These hearings could prove especially consequential if one of your creditors challenges the filing, making your attorney’s experience and understanding of your specific case crucial.

Throughout, a bankruptcy attorney should be readily available when you have questions or need a consultation as you navigate the process. A bankruptcy can be a challenging, confusing experience, but a good attorney can bring a measure of clarity and comfort and help ensure that it serves its chief purpose—helping you regain your financial footing.

Things to Consider when Selling Assets before Filing Bankruptcy

Bankruptcy1Many debtors try to sell off at least some off their assets in order to have money to pay their creditors and to live but there are risks in selling off assets too. This is because assets are supposed to be used to pay off your creditors and not favor one creditor over another unreasonably.

Selling assets before Bankruptcy

The US Bankruptcy Trustee will examine transfers and sales that you made before you filed for bankruptcy. In some situations, the Trustee may try to seize those assets from the people who received them. The trustee may also penalize the debtor by refusing to accept a reorganization plan, disallowing some exemptions or even denying the debtor the right to discharge the debts.

There are many factors the Trustee will review. Here are some of those factors:

The value of the property sold

Sale of assets (home, cars, personal possessions and other assets) are more likely to be approved if the seller/debtor got fair market value for the sale. If the debtor got a reduced price or gave a discount, then the sale will likely be questioned. Debtors are often pressured to come up with money so they are tempted to make bad deals.

The Trustee will review the assets sold, determine the fair market price and compare that to that actual proceeds. While the Trustee is acting on behalf of the creditors, this can actually be a good thing for the debtor. If the Trustee is able to invalidate the sale and get the right price, then the creditors will get more money which helps the debtor meet his/her obligations.

Secured assets cannot be sold without the consent and approval of the creditor that has the security home. For homes, the mortgage holders have security interests. A seller cannot give clear title to the property unless the mortgage holders agree.

Because mortgage holders need to approve the sale, many home sales prior to bankruptcy are approved. Still the sale may be questioned if the debtor didn’t get fair market value. Cars are often subject to a security interest too and require approval from the finance company that holds the rights to the car.

Is the property protected by exemptions?

Debtors are entitled to state or federal exemptions. There are different exemptions for homes, cars, tools of the trade, household goods and other assets. If the debtor had a personal exemption in an asset and the property is worth less than the personal asset, then the Trustee will be likely to favor the sale.

The same idea holds true for equity in assets that are sold to pay off secured creditors. If the value of the property after the secured creditors are paid is less than the exemption for that asset, then the Trustee will likely approve the sale. Essentially, the Trustee will likely approve this type of sale because if the Trustee had done the sale, creditors wouldn’t have gotten any money from it.

If the value of the property or the equity in the property is more than the personal exemption, then the Trustee may question the sale unless the asset was sold for fair market value and the proceeds are available.

Available means they are in a bank or financial instrument like a CD. If the debtor spent the money, then the debtor will likely have a problem.

One point to consider is that if the debtor wants to use the exemptions to keep the property, then there’s really no reason to sell it before bankruptcy.

When the Property was Sold

Generally, the Trustee has authority to look at sales that were made within two years of the bankruptcy filing date. The Trustee can sue to recover property that was improperly sold. The buyer of the property may then become a creditor and have a claim against the debtor in bankruptcy court. Sometimes, when fraud is suspected, for example, the Trustee can look back much more than two years.

What Happened to the Proceeds

If the debtor just puts the proceeds in the bank or stores it in some way so the Trustee can readily get it, then that’s a reason to favor the sale. But if the debtor spends the money, the Trustee is likely to contest the sale to try to get the money back and also penalize the debtor for improper use of the proceeds.

Did you use the money to pay off another creditor? If you did, the Trustee will likely try to recover the money from the one creditor so he/she can use it on behalf of all the creditors.

Did you use the money to buy exempt property? If you did (and the asset wasn’t originally exempt), then the Trustee will likely disallow the exemption and seize the asset.

Additional considerations

As with most legal matters, every case is reviewed individually. The trustee will look to see if the sale was done with the intent to defraud creditors or if it was just an unwise understanding of the laws. The trustee may look to what debts were paid with the funds. If the money was used to pay child support, a student loan or some other non-dischargeable debt – that’s better for the debtor than paying off an unsecured consumer loan.

Your attorney will work to show the debtor received true value for the asset, that the assets was already exempt and that the proceeds were used properly. The best course of action, though, is to review the sale of any assets when you’ve thought about bankruptcy, by seeing a bankruptcy lawyer before you sell the asset.

Call to Action: California Exemption Improvements Coming Up For Vote This Week

English: Seal of the Senate of California

English: Seal of the Senate of California (Photo credit: Wikipedia)

Senator Bob Wieckowski has introduced a bill in the California State Senate that provides significant improvements to our current exemptions including:

  • Increasing the homestead to $300,000 for all individuals
  • Removing the 6 month reinvestment requirement
  • Increasing the exemption for vehicles to $6000
  • Establishing that bankruptcy alone is not an event of default
  • Creating a grubstake of $5000 for self-employed individuals, etc.

We need you to contact your state senator this week to voice strong support for this bill!

Here are the easy steps you can take to show your support:

  1. Visit http://findyourrep.legislature.ca.gov/ and enter your home address to determine who your CA state senator is.
  2. Using our template letter of support below, “CA AB 308 Attorney Letter of Support,” address your letter to your senator and fill in the fields in red.
  3. Submit your letter via email or fax. To fax, please refer to the fax number listed in your state senator’s website.
  4. To email your letter – which we recommend – please refer to the chart below for your senator’s Chief of Staff. Email your letter to this individual by using this email address format: Firstname.Lastname@sen.ca.gov
  5. Please also email a copy of your letter to Julie Seger at jseger@hastingsgroup.com so we can track which senators have been contacted and by whom.
  6. If you have any questions or difficulties with identifying your senator or sending your letter to their office, please contact Julie at jseger@hastingsgroup.com and she will be happy to assist you.

Thank you for your support!

-TMLG

2015 SENATE SCHEDULER & COS ROSTER
DIST SENATOR CHIEF OF STAFF PHONE

26

Ben Allen

Colleen Beamish

4026

38

Anderson, Joel

Collin Mcglashen

4038

36

Pat Bates

Kevin Bassett

4036

15

Beall, Jim

Sunshine Borelli

4015

8

Berryhill, Tom

Laura Ortega

4008

39

Block, Marty

Margaret Pena

4039

12

Cannella, Anthony

Brett Michelin

4012

24

DeLeon, Kevin

Dan Reeves

4024

16

Fuller, Jean

Julie Sauls

4016

1

Gaines, Ted

Steve Davey

4001

5

Galgiani, Cathleen

Trent Hager

4005

35

Hall, Isadore

Terry Schanz

4035

9

Hancock, Loni

Hans Hemann

4009

22

Hernandez, Ed

Tim Valderama

4022

18

Hertzberg, Bob

Dianne Griffths

4018

13

Hill, Jerry

Nathan Solov

4013

40

Hueso, Ben

Ana Molina-Rodriquez

4040

29

Huff, Bob

Junay Gardner

4029

19

Jackson, Hanna-Beth

Jennifer Richard

4019

11

Lara, Ricardo

Erika Contreras

4033

20

Leno, Mark

Bob Hartnagel

4011

25

Leyva, Connie

Cori Ayala

4020

2

Liu, Carol

Susanne Reed

4025

32

McGuire, Mike

Jason Liles

4002

30

Mendoza, Tony

Eusevio Padilla

4032

17

Mitchell, Holly

Tiffani Alvidrez

4030

23

Monning, William

Jodi Fujii

4017

34

Morrell, Mike

Mark Timmerman

4023

4

Nguyen, Janet

Mark Reeder

4034

6

Nielsen, Jim

David Reade

4004

27

Pan, Richard

Crystal Strait

4006

31

Pavley, Fran

Liz Fenton

4027

28

Roth, Richard D.

Chuck Dalldorf

4031

14

Stone, Jeff

Chris Wysocki

4028

37

Vidak, Andy

Jim Kjol

4014

10

Wieckowski, Bob

Derek Chernow

4010

3

Wolk, Lois

Craig Reynolds

4003

7

Vacant

21

Vacant

37

Vacant

 

1/15/2015

+++

CA AB 308 Attorney Letter of Support (Template)

May XX, 2015

 

Senator NAME

California State Senate

State Capitol

Sacramento, CA 95814

Re: S.B. 308

 

Dear Senator NAME:

As a CITY, California bankruptcy attorney, constituent, and member of the National Association of Consumer Bankruptcy Attorneys (“NACBA”) I am writing to express my strong support for S.B. 308, introduced by Sen. Wieckowski.

As a California bankruptcy attorney, I work with clients every day who continue to struggle in the wake of the 2008 financial crisis and great recession, which continues to present serious challenges for our state’s honest, hardworking men and women. Long-term unemployment and underemployment have devastated the financial health of families throughout the state. For these families who face collection lawsuits, home foreclosures, and garnished wages, bankruptcy is the final and best hope for protecting most basic household assets and modest incomes. S.B. 308 is an important piece of the legislative protections desperately needed by those families struggling to recover from the downturn and restructuring of our economy.

I urge you to support S.B. 308 as it enhances protections for Californians in financial distress. S.B. 308, in a measured manner, increases values of certain types of personal property that may be retained by a bankruptcy debtor. Importantly, this Bill would create a new, modest exemption to help small business owners get their fresh start. Specifically, it would allow small business owners to claim up to a total of $5,000 for cash or deposit accounts, accounts receivable, and business inventory for those debtors using the exemptions under CCP § 704, et. seq.

Unfortunately, under current law, while wage-earners can exempt paid and unpaid earnings under CCP § 704, there is no corresponding protection available for small business debtors. Adding this new protection for small business owners will allow them to retain a modest amount of assets which are essential to resume business operations. This change is particularly important given the fact that many underemployed workers attempt to start home-based businesses in order to put food on the family table.

S.B. 308 also importantly addresses California’s presently inadequate designations for homestead exemptions. Past legislative increases in the homestead dollar amounts have fallen dramatically behind the increased cost of housing in California. Consequently, the current homestead exemption fails to achieve its purpose – to provide protection from creditors for a typical home in California. However, S.B.308 would, in fact, increase the value of the exemption to more accurately reflect the rising cost of housing today.

In conclusion, I strongly support this effort to strengthen the safety net for so many Californians who are struggling as they face today’s challenging and changing economy. As a bankruptcy attorney, NACBA member, and California resident, I urge to you to support S.B. 308 as a responsible approach to improving the conditions of financially distressed Californians in need of the “fresh start” bankruptcy can provide.

Sincerely,

 NAME

 PRACTICE

 STREET ADDRESS

 PHONE 

John’s Installation as President of the Santa Clara County Bar Association

We are honored to share that our founding attorney, John Mlnarik, was installed last week as President of the Santa Clara County Bar Association, which represents approximately 3,400 attorneys in Santa Clara County. 

Congratulations to John SCCBAOathas well as the other SCCBA officers! -TMLG

SCBASignCropped

 

How Filing Bankruptcy in 2013 Provides Enhanced Asset-Protection

Happy New Year! New Year New Life

Many individuals will start the New Year resolving to improve their financial affairs. Though bankruptcy is a great tool, which generally includes benefits such as the discharge of credit card and medical debt, a new exemption scheme, effective January 1, 2013, will give potential filers even more to be excited about.

Exemption Basics

A key protection offered by the Bankruptcy Code is found in Section 522. This section details a debtor’s rights regarding exempt property—property that is shielded from liquidation.

Exemptions are statutory provisions that generally protect individual assets from liquidation based on an assigned dollar value. For example, pursuant to CCP § 703.140(b)(3), debtors are permitted to shield up to $600 per “household” item.  In other words, you can prevent creditors from seizing any of your appliances or furnishings if they are worth less than $600/item.  Under CCP § 703.140(b)(2), you can shield up to $4,800 of the fair market value of your motor vehicle.  There are numerous exemptions that apply in different contexts and can even apply in conjunction with each other.  A vehicle that is valued at $6,000 can be fully protected by combining the Motor Vehicle (b)(2) exemption with the “Grubstake” (b)(5) exemption (see below).

The bottom line is that a careful application of the exemption statutes can often allow debtors to retain their assets during and after a bankruptcy filing.

The 2013 Exemptions

The assigned exemption values change every three years to account for inflation. On January 1, 2013 a new exemption scheme became effective allowing debtors to take advantage of even stronger protections. Whereas a person filing for bankruptcy protection in California on December 20, 2012 would have been able to exempt up to $23,250 in “any property” under CCP § 703.140(b)(5) & (1), a debtor that filed on January 15, 2013 would have been able to exempt up to $25,340 under the same statutes—a $2,090 difference!

More Than a “Fresh Start”

The Bankruptcy Code and the attendant exemptions were created to give filers a “fresh start.”  They were designed with the idea that a person free from burdensome debt would be a more productive member of society.  But the protections offered by the exemptions, particularly the new valuations, provide more than a fresh start—they provide an invaluable tool and an opportunity.  Instead of rewinding and requiring individuals to begin their lives anew, the exemption scheme allows debtors to carry on—without the worry of losing invaluable possessions.

-Caroline M. Reebs, Attorney-at-Law