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Will my creditors come to the court if I file bankruptcy?

What many of my bankruptcy clients worry about is that their bankruptcy creditors will be at the banker’s meeting if they file bankruptcy in San Diego and it will be embarrassing for them. The good news is, bankruptcy creditors rarely attend bankruptcy meetings of creditors (also called 341 hearings).  However, this does not mean that your bankers are giving up their right to object to your bankruptcy discharge.

Bankruptcy Bankers are not required to go to the  meeting of bankers

When you file for bankruptcy in San Diego, your creditors receive notice of the date and time of your meeting of bankers. But this does not mean that they will show up. Your creditors are invited, but not required, to attend your hearing. In 98 percent off all bankruptcy cases, no creditors will appear at the meeting of creditors. If a creditor does show up, your attorney will usually know about it and so will you.

Most Bankruptcy Lenders will not appear at the meeting of bankers

Creditors are not allowed to conduct an extensive examination of you and your situation at the meeting of bankers. Mostly creditor questions are limited to the nature and location of the debtor’s assets. In San Diego most creditor meetings are very short over in 5 to 10 minutes so, the bankruptcy trustee only has a few minutes to devote to each case.

As a result, unless a creditor believes that you are committing fraud or hiding assets, it will not benefit from taking the time to come to your hearing. However, even if a creditor does not attend your meeting of creditors, it can still object to your discharge

san diego bankruptcy lawyer Can bankruptcy stop foreclosure?

Can bankruptcy stop foreclosure?

Can bankruptcy stop foreclosure?

One of the most difficult and traumatic challenges that a person can face is the prospect of foreclosure. A person’s home normally is the center of life. The idea that one’s home might be taken away from him or she can be a most bitter pill to swallow. Considering bankruptcy is the next thought. If you have found yourself facing the prospect of a foreclosure on your home — or if you have already found yourself smack dab in the middle of a foreclosure case — you did not necessarily have to assume that all is lost. In this day and age, there are some options available to you should you find yourself involved in foreclosure proceedings.

Bankruptcy can hold the foreclosure

Chapter 7 versus Chapter 13 has very different effects when your house is getting foreclosed on. In  Chapter 7 bankruptcy, if the borrower’s behind on the mortgage, the lender is simply going to ask the bankruptcy court for permission to ahead with the foreclosure. And that’s done by filing a motion. Those motions are routinely granted and then the lender goes ahead with the foreclosure.

Now, that used to be the standard operating procedure for lenders, but that was before the real estate bubble sort of burst and now there are practical considerations coming into the picture as well as legal ones and lenders are prioritizing which foreclosures. Lenders will go after the larger balance mortgages first. So, someone with a relatively modest mortgage loan um, might stay in their home for months. So far the record, in my practice, I’ve seen, I had one client stay in his home for 20 months before even receiving a notice of default.

Chapter 13 is actually designed to be able to help the homeowner stay in the house and catch up on the mortgage payments that they’ve missed. the best case is a borrower who has to be in Chapter 13 because of some kind of temporary financial setback. Because, if it’s a permanent financial setback, in their income flow they’re just not gonna be able to keep up with all the payments. That is because they’ve gotta make not only the entire on-going mortgage payment but, then they’re gonna have to make the Chapter 13 plan payment for the credit payment, bills and to catch up all the missed mortgage payments. But, for someone who’s had a temporary setback, it’s a wonderful thing.


Student tuitions that are charged by credit cards are dischargeable in bankruptcy 

If you have found yourself overwhelmed by your student loans you might wonder if you can discharge any student loan debt in bankruptcy.

There is some student debt that is dischargeable in bankruptcy  

 Student expenses like tuition and books charged on a credit card aren’t treated any differently than other kinds of expenses charged on a credit card .   If you are at a place where you are considering filing bankruptcy for your student loans. You will be well served to go into your records and see what exactly you charged on a credit card while you were in school . . Often the idea, of borrowing on a credit card to finance educational expenses is a “hindsight is 20/20” thing. When the  student borrower on a student loan has completed his / her education, finds himself in a bad financial bind and learns he could have made a different choice from the outset.  

But the uniformity of treatment of is both good news and bad news. As with any other debt incurred on a credit card, if it looks like the borrower never intended to pay it in the first place, the lender can fight back even in a bankruptcy. Any creditor can object to its claim to be discharged in bankruptcy. They do this by filing an “adversary proceeding.”  This doesn’t happen often, but it is  essentially a lawsuit filed within the bankruptcy proceeding itself.  
 
You get the idea. It’s really common sense. If it looks like the borrower has acted reasonably in taking on debt, s/he will not likely face closer scrutiny if s/he later files bankruptcy.  

 Should you charge your student loans on a credit card ?

These days, credit card interest rates are at historic lows. Money is practically free to the banks and they’re passing some of that happiness along to borrowers. It may make sense to many a borrower to finance his/her education on a credit card simply because the rate is so hard to match even under student loan programs.
 
If you think you might need bankruptcy and have student loans -go back in the records and review .What exactly did you charge by credit card.Then call us  to set up a meeting with Paul, he  will be glad to meet with you   

 

What is bankruptcy means testing?

 

Bankruptcy means testing is a mathematical formula used by bankruptcy attorneys to determine what type of bankruptcy relief a debtor can receive. Means testing was created by congress with the help of the credit card lobby to prevent bankruptcy abuse. The most likely mistake potential bankruptcy clients make is to first go online, late at night when they can’t sleep, and try to do means testing online. 95 percent of all San Diego residents who file bankruptcy wouldn’t fit the means test requirements online but still, qualify for bankruptcy. 0The bankruptcy means test is all about the math and how you put it together.

Means testing will determine if you can first even be considered as a candidate for a Chapter 7 bankruptcy, or if instead, you may be required to use a Chapter 13 case. This is an income-based means testing, and debtors who have income above the median income of their state are subject to the unpleasant limitations imposed by the Means Test. However, the analysis doesn’t end there; from the income on the Means Test, one gets to take certain deductions.

  • Taxes: You can deduct your tax obligations from your income on the means test as well.
  • Involuntary deductions: Deductions required for employment such as mandatory retirement plans, union dues, or uniforms.
  • Health, disability, or term life insurance
  • Secured debt payments These include payments on secured debts such as your mortgage or car loan. Even if your mortgage or car payment is above the national or local living standards, you can normally deduct it in full on the means test.
  • Court-ordered payments: If you are required to pay domestic support obligations such as alimony or child support, you can deduct these expenses on the means test.
  • Child care: Expenses for child care such as babysitting, daycare, or preschool.
  • Health care: If you incur more out-of-pocket health care costs (other than insurance) for you or your dependents than the allowed national standard, you may be able to deduct the actual amount you pay.
  • Education for employment or disabled child: You can deduct your education expenses if those expenses are required for your employment or for your mentally or physically disabled child.
  • Charitable contributions: If you regularly made charitable contributions prior to bankruptcy and expect to continue making those contributions, you can deduct them on the means test.
  • Care of elderly, chronically ill, or disabled: You can deduct the amount you contribute towards the care of an elderly or disabled family member or person in your household.

The Means Test determines if a bankruptcy petition must be assigned a “Presumption of Abuse” by the court. If your petition is assigned a presumption of abuse status, you must prove that your bankruptcy petition is not “abusive” or fraudulent. The rule of thumb so far, in practice, is that if the Means Test result is that “The Presumption of Abuse Arises,” it is extremely unwise to try and file the case as a Chapter 7. A bankruptcy attorney can properly do the Means Test for you and let you know what your options are. It’s a bad idea for you to rely on the so-called “Online Means Test Calculators” because the test is highly complex. The key to a thorough, accurate Means Test is not just getting in all the required income; it’s knowing how to apply bankruptcy law in figuring out how to maximize the allowable deductions. That is why just having a calculator isn’t going to do the trick.

Is bankruptcy a public record in San Diego?

Filing for bankruptcy is a matter of public record. So the idea that you can keep bankruptcy secret isn’t really true. It is something that you really have to look for to find out about. Who files bankruptcy in San Diego is not easily accessible knowledge. It is not published in the  San Diego newspaper under notices.

If you file for bankruptcy, you must list all of your creditors. Sometimes those bankruptcy creditors might include family and friends who might have cosigned a loan for you. Those bankruptcy creditors will receive notice that you filed. You can find out about a personal bankruptcy on your credit report so some jobs will know filed bankruptcy.  While filing for bankruptcy is not what anyone wants to do, in today’s modern times, many people have filed for bankruptcy.  The last economic storm we went through included many people got caught in the undertow.

However, if you want to keep your bankruptcy filing a secret from your friends or family, the odds are that they may never know. The Bankruptcy Courts and Trustees do not inform others of your bankruptcy filing unless they are in some way related or involved in your case. There is a good chance that many people you know (family, friends, neighbors, co-workers) have filed for bankruptcy in the past and you were unaware. If filing bankruptcy is a viable option for you, embarrassment should not be a barrier to obtaining relief.

Tax bankruptcy discharge

Some tax debt is not dischargeable through bankruptcy. Tax bankruptcy discharge can happen through  Chapter 7 and Chapter 13 bankruptcy if they meet specific criteria. The criteria include five rules: 1) the due date for filing a tax return is at least three years ago; 2) the tax return was filed at least two years ago; 3) the tax assessment (if any, other than the filing of the return) is at least 240 days old; 4) there is no fraud or willful evasion; and 5) the taxes are income taxes (as contrasted with, say, payroll taxes or sales taxes).  Naturally, the tax bankruptcy discharge is first of all contingent on the taxpayer being eligible for a discharge, period. But that’s a whole ‘another page.
1. The Three Year Rule
The tax return (and therefore payment) for a particular tax year must have been due without penalty at least three years before filing for a tax bankruptcy discharge.
 If you filed an extension, the three years are determined by the extension. For example, Adam Smith’s return would have been due on April 15 – or the next business day thereafter – but he applied for an extension out to October 15. If the tax year was 2010, his return would and payment without penalty would have been due October 15, 2011. Unless October 15 fell on a weekend, which I didn’t bother to verify, but you get the idea. Measuring from October 15, 2011, the earliest date his taxes are dischargeable is October 15, 2014 – three years later. But all this assumes Mr. Smith filed his return.

2. The Two Year Rule
The tax return must have been filed at least two years before filing for a tax bankruptcy discharge. In our hypothetical above, let’s assume Mr. Smith procrastinated in filing his 2010 return. October 15, 2011, comes and goes and, well, no tax return. Maybe he owed more than he could pay and figured if he put his head in the sand it would go away. It didn’t. He comes to his senses in time to get his return filed on October 14, 2012. Dodged a bullet, did Mr. Smith. Come October 15, 2014, he’ll still be able to discharge his taxes if he files bankruptcy on October 15, 2014. His taxes were due without penalty for more than three years (measuring from October 15, 2011-October 15, 2014), his return was filed more than two years prior to his bankruptcy filing.

Let’s see how our favorite capitalist did on the rest of his criteria.

3. The 240 Day Rule
Taxes must have been assessed by the IRS at least 240 days before filing. Poor Adam. His CPA fouled up or somehow or other the IRS found fault with his 2010 return filed on October 14, 2012. On February 14, 2014, the IRS files a NOTICE OF ASSESSMENT (or some similarly named form) informing him that his return had errors and that the IRS has assessed an additional…let’s just say $2500, not that the amount much matters. It’s all about the timing. Now our Mr. Smith must wait 240 days beyond the assessment date before he files for his tax bankruptcy, even though he already has satisfied the two-year and three-year rules.  He breaks out his calendar and counts out the days until October when he can safely file his bankruptcy.
4. Fraud or Willful Evasion Rule The tax return must not be fraudulent, and there can be no willful attempt to evade taxes. These are often described separately (4. Fraud; 5. Willful Evasion), creating six instead of five rules. What’s fun about doing it that way is you end up with the so-called “six-gun rule”, i.e., miss one bullet in the chamber and your discharge of taxes in bankruptcy is D.O.A. It probably goes without saying but I’ll say it anyway: tax fraud and tax evasion are two sure ways to risk not only potential civil and criminal penalties but will forever bar the discharge of taxes in bankruptcy.
5. Other Income Taxes: Taxes other than income taxes, such as Trust Fund Recovery Penalties, payroll taxes, and other types of taxes cannot be discharged.  The good news, though, is that even these taxes have a statute of limitations – of sorts. TEN YEARS the IRS has to collect these. Few of us can hold out for that long with tax liens and levies hanging over our heads.

Will I lose my security clearance if I file bankruptcy?  

Most of the people that I see in San Diego are people like you and me who have fallen upon bad times – not gamblers, shopaholic, or otherwise crazy spenders. They have jobs and many times they own homes. Things happened, they had unexpected things happen in their lives. They have security clearances. They are concerned: Will I lose my security clearance if I file bankruptcy?

  Security clearance and bankruptcy: San Diego is a military town with numerous government contractors

I see at least one client every month with a security clearance and who needs to qualify for bankruptcy protection. Looked at through the prism of your military / federal employer, eliminating your debts through bankruptcy may make you less, rather than more, of a security risk. The everyday pound and stress of bill collectors calling and not knowing what to do next are sometimes worse than just cutting out cancer and moving on.  The Law Office of Paul Staley is proud to represent members of the military, federal employees, and federal contractors who are facing financial difficulties and want to meet them head-on. One of my clients who has been referred to me for bankruptcy services by her employer – a federal contractor – and was instructed that if she DIDN’T file bankruptcy, her security clearance (and therefore her job) would be in serious jeopardy. The happy ending: she got rid of her debts, her security clearance was renewed and she still has her job! If you are considering filing bankruptcy to really put the past behind you, call (619) 235-4095. You will speak to Paul and he can help you come up with a solution on how to move forward.

UPDATE January 3, 2012. Here is what the United States Air Force Academy Legal Office says about bankruptcy: “The status of your security clearance can be affected, but it is not automatic. The outcome depends on the circumstances that led up to the bankruptcy and a number of other factors, such as your job performance and relationship with your chain of command. The security section will weigh whether the bankruptcy was caused primarily by an unexpected event, such as medical bills following a serious accident or illness, or by financial irresponsibility.

The security section may also consider the recommendations and comments of your chain of command and co-workers. This is an issue that can be argued both ways, so as a practical matter your security clearance probably should not be a significant factor in making your decision about whether to file bankruptcy. The number of your unpaid debts, by itself, may jeopardize your clearance, even if you don’t file bankruptcy. In that sense, not filing for bankruptcy may make you more of a security risk due to the size of your outstanding debts. By the same token, using a government-approved means of dealing with your debts may actually be viewed as an indication of financial responsibility. Eliminating your debts through bankruptcy may make you less of a security risk. There is no hard and fast answer there, with one exception: It never hurts to have a good reputation with your co-workers and your chain of command.”  Get the facts, they make up your mind which way is going to work for you

Can creditors stop my bankruptcy?

 
It’s pretty difficult for a creditor and rare  to stand in the way of someone getting through a bankruptcy and getting a discharge. But creditors aren’t always completely out of luck when a customer / borrower files bankruptcy. There are several things a creditor may do to make the best out of what for them is a bad situation. Let’s talk about the most common forms of roadblocks likely to be thrown in the path of the person who files bankruptcy but there are rare.
 
 
 
In a Chapter 13, your creditor may file a “Proof of Claim.” Usually that just means that the creditor stands in the same line as all the other creditors to get the “pro rata” share. That means : they can get out of the Chapter 13 plan payment. No big deal. The plan payment doesn’t change as a function of them being in the line. They’ll just diminish the amount everyone else in that line receives. That’s how that facet of a Ch. 13 works.
 
 
 
In either a Ch. 7 or a Ch. 13, a creditor may file a motion or adversary proceeding in the bankruptcy court to have the bankruptcy court determine that . These are rare and usually you know they are coming.
  • (1) the debtor is a rascal who shouldn’t be allowed to enjoy the benefits of bankruptcy at all (creditor moves to have the court deny discharge of ANY debt; extremely rare, difficult to prove the grounds the creditor alleges which are usually fraud or deliberately dishonest behavior);
  • (2) The debtor is not a complete rascal but is enough of one that at least the complaining creditor should be treated better than the rest, i.e. no discharge as to the debt but only as to the debt owed the one creditor;
  • (3) the creditor is secured (read as in mortgage or car payment lender; occasionally a more exotic instrument like a UCC-1) and is entitled to have its collateral (again, usually a house or car) returned to it because the debtor is in default – this requires a motion for relief from stay, i.e. getting permission from the judge to go forward with a repossession or foreclosure.
 
 
There are some kinds of debts which are automatically nondischargeable. Where Child / Spousal / Family support and / or certain taxes are involved, the creditor doesn’t have to lift a finger to avoid the debt being discharged. It won’t be.
 
 
A word to the fearful and conflict avoidant: It’s common for someone involved in an ongoing lawsuit, feeling like it’s a David vs. Goliath situation then they  think they should sign an agreement, any agreement, to get out of the law suit. If you’re the defendant who owes (or may owe) the money, don’t sign anything until you’ve talked to a really good bankruptcy attorney. I’ve seen stipulated judgments, in a civil suit, which recite facts that amount to my client having confessed to committing fraud. That sticks in bankruptcy.
 

bankruptcy advice Thou Shalt Not: San Diego bankruptcy advice

*Thou Shalt Not: Delay in getting bankruptcy advice if you’re in financial trouble. Lawsuits can be filed and creditors can take advantage of how overwhelmed are most ordinary people when they’re sued. Inaction by you is good for them. Get yourself informed, pronto.

*Thou Shalt Not: Feel guilty about the predicament in which you now find yourself. It’s normal, natural to feel bad, like there is some moral defect in you that caused your economic implosion. This is more than just warm and fuzzy here: very often, debtors continued to go deeper and deeper in debt out of guilt and only making the situation worse.

Examples: Taking balance transfers on credit cards (you know the “victim”, the card to which you transfer a big balance, is not going to go quietly away);

Taking loans or outright withdrawals against retirement plan(s) to make mortgage payments, on homes which now turn out to be either losing value or at best not holding it. Those retirement loans have to be repaid. And retirement withdrawals are a double whammy: you pay taxes, and a 10% penalty right off the top. You may have just poured good money after bad money if it’s to hold onto a home. Especially if you’re already upside down in the home. Lots of people don’t realize that even in bankruptcy, you can usually keep all your retirement.

*Thou Shalt Not: Pay off personal loans to family members, close business associates, or friends.When you think you might have to file bankruptcy. These so-called “insider transactions” are “preferential transfers”, and they really irk the bankruptcy trustees. Such payments can be voided, and the relative, associate, or friend can be forced to hand over the money to the bankruptcy trustee.

*Thou Shalt Not: Take cash advances on credit cards and soon (like, within a year) expect they’ll routinely discharge in bankruptcy.

*Thou Shalt Not: Pay for elective/cosmetic surgery with a credit card, and anticipate the debt will be routinely discharged. If the creditor is paying attention, discharge of that debt could well be challenged.

*Thou Shalt Not: Travel for luxury, or buy luxury goods with a credit card, and anticipate that debt will be routinely discharged in bankruptcy.

*Thou Shalt Not: Use your credit cards for ANYTHING within ten weeks prior to filing bankruptcy (one can sometimes get away with paying for some dire necessities in reasonable amounts.)

*Thou Shalt Not: Say anything to anyone about your finances that is inconsistent with what you said, or will say, in your bankruptcy papers. Example 1: credit application overstates income, bankruptcy papers list accurate (read LESS) income. Result: if the discrepancy is discovered in the bankruptcy proceedings, big trouble. Example 2: you’re involved in litigation over something, most commonly in Family Court, regarding financial issues (support, etc.), and you list information, in writing, signed by you under penalty of perjury, that is inconsistent with the paper submitted or to be submitted to the Bankruptcy Court. People tend to be sort of casual at times, or less than thorough, about the information submitted in Bankruptcy Court. Sometimes they even…GASP! LIE!! I can’t explain why, but sloppiness and downright untruthfulness are common enough that one must be very vigilant to get the information right.

The Law Office Of Paul Staley provides legal advice and representation for residents of San Diego County. The information on this website is for general information purposes only. Nothing on this or associated pages, documents, comments, answers, emails, or other communications should be taken as legal advice for any individual case or situation. This information on this website is not intended to create, and receipt or viewing of this information does not constitute, an attorney-client relationship.
Paul Staley
Bankruptcy Attorney
1901 1st Ave., FLR 1 San Diego, CA 92101
Phone: +619 235 40 95
Email: pstaley@paulstaley.com

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