Tag: Bankruptcy Consultation California

Bankruptcy is not a very exciting position to be but there are a lot of choices, questions, problems that have to be addressed almost instantaneously. The first is to identify which Chapter are you looking to file your bankruptcy in. Either Chapter 7 or Chapter 13. Then you have to figure out if you are eligible for Chapter 13 or Chapter 7. If you are eligible, you have to understand the implications of the same and approach the bankruptcy court.

Tests, Chapters and eligibility

There are eligibility factors for each Chapter, and one cannot simply select the Chapter without figuring out the eligibility. Before even getting into eligibility, just outline some key properties of each Chapter for better understanding so that we focus on one Chapter that would suit the most for an individual during bankruptcy. Under the scenario of Chapter 7 bankruptcy, all your non-exempt assets shall be liquidated, and the debts shall be set off by the proceeds of the liquidated assets. The debts shall be prioritized based on secured and unsecured. If the liquidated assets are not able to set-off some debts those shall be written off or released or discharged and no liability carries after the event of bankruptcy.

On the other hand, Chapter 13, is a union of the filer, lenders, bankruptcy trustee and the court, who come together to assess the scenario of the debtor to determine a commonly agreeable plan. This plan usually constitutes of consistent monthly payments for the period of 3-5 years based on the amount of debt. There are clear thresholds mentioned for the amount of limit allowable under each category, secured loans, and unsecured loans. Determine eligibility for Chapter 13 is pretty straight forward. Since the plan is based on future payouts for the period of 3-5 years, the filer might end up paying a good percentage of his debts by the end of the payment plan under Chapter 13. There could be a release of a certain portion of unsecured debt also, depending on the disposable income. Need help to understand more about Chapter 7/13, log on to Recovery Law Group.

Median income and disposable income

The median income is the average income a family/individual makes in California. This used as a standard to determine the eligibility for Chapter 7. The median for a single person is $4,565 per month for the 2018 Financial Year. For a family of four persons, it is $6,097 per month. If your income is above this threshold, which means you do not qualify for the median test, you would have to clear the means test. The means test will let you take an aggregate of last 6 months of income and compare it to the California median. Based on the available disposable income, Chapter 7 or Chapter 13 can be considered.

The disposable income is really important for Chapter 13 as that will be the amount of money to be used to settle the debts. The actual expenses are not allowed but a fixed limit on expenditure has been pre-defined. You can arrive at your disposable income by deducting those fixed limits. For instance, living expenses have been capped to about $650 per individual per month. This includes food, day-to-day expenditures, personal care, apparel, etc. Other expenses can be limited to about $2,500 per month. This would typically include, healthcare costs, car costs/operating expenses, housing expenses, etc. If in the means test, the disposable income figured out is below $128, the filer would qualify for Chapter 7. If you do not qualify for the median income test and means test, Chapter 13 would be the only alternative.

Disqualified Chapter 7 by a hairline? What are the options?

Consulting a qualified and professional lawyer can help in determining the ways to arrive at the lowest possible disposable income in order to gain eligibility to Chapter 7. The number of expert help would be +1 888-297-6203. It has been learned that most people make several errors in calculating their disposable income and file for Chapter 13, ending up with 5 years of payment plans, that can be stressful. The faster way is certainly Chapter 7 that could resolve all your debts in a span of 60-90 days. The following tips could be used to qualify for Chapter 7 if disqualified by a hairline-

• The median income is compared to the average income in California. This might not be that beneficial for people in California but is pretty beneficial for people with a lower cost of living like Dallas, Los Angeles, Austin, etc. California being the costliest states of the United States, most people might be able to meet the eligibility test of median income, which they might assume they will not
• Not qualifying in Means test marginally can still be compelled to Chapter 7 by the bankruptcy court. This differs on a case to case basis and you will need a professional lawyer or an attorney who can find ways to convince the bankruptcy court based on certain valid propositions
• The average of 6 months is used as the figure to arrive at disposable income. If you have lost job or income sources recently and expect the income to decline in the near future, it is advised to then delay bankruptcy filing by 2-3 months. This will further lower your average income and ensure you qualify for the Chapter 7 bankruptcy code
• If you are filing Chapter 7 bankruptcy in Dallas  because of business debt, you would not need to qualify for the means test either. Your business debt, in that case, has to be over 50% of your personal debt. Since a home mortgage is regarded as personal, it is very difficult to breach 50% of the debt. If you do not have a mortgage or any huge personal debt, there are good chances that your business debt shall exceed over 50%. You wouldn’t then need to qualify the means test for eligibility

Bankruptcy laws are not one of the easiest ones to interpret. Professional help can help you in getting out of the not so pleasant situation quicker and better. Reach out to +1 888-297-6203 for best guidance right now!

Bankruptcy is a sure shot way to get rid of huge financial debts. With a bankruptcy discharge, you can wipe off most unsecured debts and get a chance to have a clean financial slate to begin a fresh life. However, secured debts like mortgage and car loans are not discharged during bankruptcy; though, bankruptcy certainly helps you with mortgage debts confirm bankruptcy lawyers of Los Angeles based law firm https://bankruptcy.staging.recoverylawgroup.com/.

Secured debts – Mortgages & Foreclosure

A mortgage loan is a loan taken while purchasing your house. Since it is linked to a specific property, it is a secured loan. The bank has a “lien” or legal right to the property, because of the mortgage loan. If you fail to make payments, the bank can possess your home in lieu of the debt. This is known as foreclosure. When a bank forecloses on any property, it sells it at an auction to recover the dues. In case the home sells for more than what you owe, you are eligible for the extra amount. If it sells for less than what you owe, the difference (between the amount you owe and the selling price of the property) is known as “deficiency.” You might have to pay the deficiency depending on the type of foreclosure.

There are two different kinds of foreclosure proceedings in California: judicial and non-judicial. While a judicial proceeding takes place through the court system, the non-judicial one does not require the creditor a court order to foreclose. In case the property is sold through a non-judicial foreclosure, the lender has no right to collect the deficiency. Thus if the property is sold at a price which is lesser than what you owe, you do not owe the creditor the difference in amounts. However, since judicial foreclosures take place through the legal system, the lender can sue you for any deficiency. Most of the foreclosures taking place in California are non-judicial.

Sometimes, people take out a 2nd or 3rd mortgage loan on their property. In such cases, these lenders have smaller liens on the home, i.e. they have a claim after the original lender’s dues are paid. Thus, if a lender forecloses and sells the home for an amount larger than the primary mortgage, the difference is used to clear the 2nd mortgage and then the 3rd till all the loans are cleared. Once your home is sold through foreclosure all subsequent lenders apart from the primary creditor lose their claim of ownership on the home. The debt, however, remains; for which they can sue you for repayment.

What happens to mortgages during bankruptcy?

In case you are finding it difficult to make your mortgage payments, bankruptcy is an options to delay foreclosure. Different chapters of bankruptcy have a different way to deal with mortgages. To know more about them you can call 888-297-6203 and consult expert bankruptcy attorneys.

• Chapter 7 bankruptcy and mortgages

When you file for bankruptcy under Chapter 7, your assets are sorted into exempted and non-exempted types. The non-exempt property is surrendered to the court, sold and the money recovered is used to pay the unsecured creditors. There are two sets of exemption in the state of California, therefore most property of filers is completely protected. Since you are not required to surrender much property after exemption, any remaining unsecured debts are discharged.

Unlike the unsecured debts, your secured debts like mortgage are treated differently. You have to choose if you wish to keep your house or not. In case you don’t want to keep the home or find it difficult to make mortgage payments, you can surrender it during bankruptcy. When you surrender your home, the bank takes charge and sells it in a manner similar to a foreclosure. With the bankruptcy filing, you have the advantage to let go of personal liability in the debt, i.e. you don’t need to pay deficiency if your home sells for less than the debt.
In case you have any junior mortgages on your home, filing for bankruptcy and its subsequent discharge wipes off any personal liability for them too. Thus you are safe from any collector suing you for personal liability on secondary or tertiary mortgages. However, the lenders still have a lien on your home and can foreclose on it; but to do so, they need to pay off the 1st mortgage and other fees. Thus, for junior lenders, foreclosure is not a particularly lucrative option unless the home is worth more than the loan.

• Chapter 13 bankruptcy and mortgages

A detailed report of your income and expenses is submitted to the court in Chapter 13 bankruptcy. The court and your bankruptcy attorney device a repayment plan based on your earnings, expenditure and the value of your non-exempt assets. As per the repayment plan, payments are made for 3-5 years, after which the unsecured debts which remain are discharged. The repayment plan first caters to the secured debts like mortgage and car loans and the remaining amount goes towards clearing unsecured debts like medical bills, credit cards, etc.
If you wish to keep your home in a Chapter 13 bankruptcy, you need to show that you have means to make regular payments accordingly. If you can do so, the bank allows you to keep your home. At the end of the bankruptcy process, any personal liability for a loan is discharged. Though the bank might be able to foreclose, it can’t sue you for any deficiency.
In case you have any secondary mortgages, you might be eligible for “lien stripping.” In case your home is “underwater”, i.e. worth less than what you owe, the junior liens may be stripped away. When this takes place, the second mortgage holder loses any claim on your home. This way the secondary mortgage debt becomes a normal unsecured debt which can be discharged like other unsecured debts after bankruptcy. If, however, your home is not underwater, you will be required to make payments on secondary mortgages if you wish to avoid foreclosure.

Can some mortgage debt be wiped off?

It is important to note that the primary mortgage is not discharged during bankruptcy. The lender has a lien on the home and can foreclose it. However, with bankruptcy, the lender cannot sue you for any deficiencies. In chapter 13, the only mortgage debt which is wiped off is a junior lien in case of an underwater home. If you qualify and file for Chapter 7 bankruptcy, an infinite number of deficiencies can be wiped out. Unfortunately, Chapter 13 has a limit capped; your secured debts must be less than $1,149,525 and unsecured debts less than $383,175 to qualify for Chapter 13 bankruptcy. In case the figures fit your case, Chapter 13 can help get rid of an indefinite amount of deficiency as well as junior liens.
Mortgages are slightly different and complicated to deal with in a bankruptcy case. In case you are having difficulty managing your finances and also have a mortgage to consider, it is important that you consult a bankruptcy attorney for your case evaluation. Get a better idea of how to deal with mortgages when you file for bankruptcy.

 The law is clear, a spouse’s debts are not reflected on another’s credit. The federal law, as well as basic legal principles, dictate that separate credit files are maintained for both the spouses so that debts of one are not reflected on another’s credit file. It is therefore not mandatory for both husband and wife to file for bankruptcy. However, there are some exceptions to the rule, like when both spouses are co-signers on a personal loan, car loan or mortgage on the house, or they share credit card(s). In case, the California means test affects your bankruptcy filing and if you have filed for divorce prior to or after bankruptcy, then also you might be affected by each other’s bankruptcy filing.

Liability of debt in bankruptcy between co-signers

More often than not, people think that co-signing a debt means that the liability of a co-signer is only when the original borrower is not available or does not fulfill the commitment. Many times spouses co-sign the mortgage of the house or opt for a car or personal loan as co-signers. According to Los Angeles based bankruptcy law firm, https://bankruptcy.staging.recoverylawgroup.com/ signing on the dotted line means that you are equally liable for the debt, i.e. you are joint debtors.

Both the co-signers are equally and fully responsible for the entire balance of the debt and can be pursued by the lender without any prejudice. This principle is applicable for spouses too. When a spouse co-signs any debt with the other, the co-signer is fully responsible for the debt. In case, you co-signed for a house or car loan for your spouse and your spouse files for bankruptcy, then you are fully liable for the balance. This holds true for all kinds of debts including student loan debts which are generally not discharged during bankruptcy!

Credit card debts are slightly tricky, especially if one spouse gets a second credit card for the other. Since the non-filing spouse didn’t sign for the card or anyhow made themselves liable for the debt, they should not be held liable for the debts. In such a case, the non-filing spouse should check their credit report after a few months of bankruptcy case getting over. In case the debt of the second credit card is reflected in their credit report, they should contact, both the bank and the credit agency to remove the said debt from their credit report since they were neither liable for the debt, nor did they file for bankruptcy.

Married couples and Chapter 7 Means test

Chapter 7 or liquidation bankruptcy is preferred by people as you often get all your unsecured debts discharged without losing selling off many assets. However, to qualify for it you have to pass the Means Test. If the debtor has means to pay off debt, they cannot qualify for Chapter 7 bankruptcy and have to opt for Chapter 13 bankruptcy. This chapter of bankruptcy involves repayment of debts via a court-approved repayment plan over a period of 3-5 years.

The means test involves assessing whether the income of a debtor is above the mean income of the state. When the individual is married and living with the spouse the median family income rises. With each addition of family member, the median family income continues rising. In case of a married couple living together, their incomes are added to see if they meet the means test. It may be possible that individually a person’s income is not enough for repayment however, with the combined incomes of both, repayment plan might be necessary.

What happens in case of divorce?

Divorce offers a different scenario. Unless a provision has been made in the divorce settlement regarding any debt co-signed by the spouses, neither spouse is relieved from paying off the debt if either file for bankruptcy. In case the spouses are divorced and if the bankruptcy filing spouse was ordered to pay for a credit card, they will have to clear the debt irrespective of the bankruptcy filing.

In case your spouse is filing for bankruptcy, it is important to know how much of the debts will be discharged and how many need to be paid off amongst the joint liabilities. In case the debts are huge and only one card with joint liability, filing for bankruptcy and paying the debt might well be worth it. In the case of Chapter 13, regular payments are made till the debt is cleared off without having any effect on the credit score of the non-filing spouse. There is no doubt that bankruptcy is complex and it would be better if you keep debts separated from your spouse, with the exception of mortgage of your jointly owned home.

In case you are thinking of filing for bankruptcy, contact expert bankruptcy lawyers at (888-297-6203) to get advice on how to protect your assets as well as those of your spouse.

The bankruptcy process is devised to provide people going through a bad financial situation a fresh start. Simultaneously care is also taken that the creditors are not given a raw deal. The court wishes to be fair in its dealings and therefore does not look kindly to any kind of transfers made to any family member or friend, especially of valuable property. Such transfers particularly prior to bankruptcy filing are considered to be fraudulent in nature.

When can an asset transfer be treated as fraudulent?

While filing for bankruptcy, you have to keep certain things in mind; transferring assets is one of them. The court does not look kindly to any kind of transfer of property (like jewelry, car, home, etc.) being made within two years prior to a bankruptcy filing. In case you have transferred an heirloom piece of jewelry to your child and due to some misfortunate turn of events you had to file for bankruptcy (chapter 7) the court will observe this transfer of jewelry as an act of hiding asset. According to Los Angeles based law firm Recovery Law Group U.S. Bankruptcy Code 11 section 548 views such transfers as fraudulent if the reasonable value of the asset is not provided to the debtor on its transfer. As per California state law, there exists an additional 4 year look back period (not longer than 7 years) under its Uniform Fraudulent Transfers Act (UFTA).

Though you never had any intention of deceiving your creditors, your actions can be viewed as “constructive fraud.” The bankruptcy trustee can sue the beneficiary of the asset to either get the property back (unwinding the transfer). The ones part of your bankruptcy estate and is used to pay back your creditors. It is therefore quite possible that any transfer you made prior to unfortunately hitting a rough financial patch can be viewed suspiciously by the court. The situation can be worse if you made any such transfer within one year prior to your bankruptcy filing. As per U.S. Bankruptcy Court  11 U.S.C. § 727 you could even face denial of bankruptcy discharge!

Getting your affairs in order 

If you wish to file for bankruptcy in California, you need to pay attention to any transfer of asset made within the last four years. In case you had gifted your kids or friends or relatives any jewelry, ensure that you get it back before filing your bankruptcy papers. If there exists a contract or a document trail for any transfer of assets get it annulled or get another contract drawn to have the assets transferred back to your name. Having any and all assets back in your name is essential if you want to be in the good grace of the bankruptcy court. It is also important to note that if you don’t have the asset, a sum of money equivalent to the value of the asset is transferred in your account (or you can account for the money) since selling your assets at a fair value price is allowed.

In case you are unable to get either the property back in your name or get a fair market value price for the same, the options available for you are:

1) postpone the bankruptcy filing till the 4-year look back period has expired;

2) opt for chapter 13 bankruptcy or wage earner’s bankruptcy

Deciding which chapter to file bankruptcy under is an important issue and requires the expert assistance of bankruptcy attorneys. It is very important, to be honest and forthright in your dealings with your attorney so that they can guide you through the process. Make them aware of any transfer of assets that you have indulged in, no matter how insignificant they may seem; as hiding such facts can ultimately be the difference between getting a bankruptcy discharge or getting the case dismissed. In case you still haven’t considered a bankruptcy lawyer, call 888-297-6203 to seek a free consultation with expert lawyers about your case.

There is no second opinion to the fact that it is easy to fall back into debts even if you have had a good financial restart using a Chapter 7 bankruptcy process. Same is the case with debtors who have successfully paid off their creditors using an effective Chapter 13 reorganization plan. Statistics reveal that 16% of the bankruptcy filings are repeat ones and 8% of the filers are the ones who have declared bankruptcy earlier. Imagine the ordeal that one goes through in the bankruptcy process! Hence it is advised that a second time declaring / filing of bankruptcy has to be avoided. One of the other key aspects to keep in mind is that a Chapter 13 bankruptcy remains on your credit report till about seven years from the date of filing and it is ten years in the case of Chapter 7 bankruptcy. We can give you some guidance on how a second-time bankruptcy situation can be avoided. Additional clarifications may be sought from an experienced attorney.

Limit on dischargeable debts

There are no limits associated with filing bankruptcies but there are limits around the discharge of debts that you seek through them. The period shown below indicates the date from the previous bankruptcy:

• Chapter 7 followed by Chapter 7 – Eight years
• Chapter 13 followed by Chapter 13 – Two years
• Chapter 13 followed by Chapter 7 – Ideally Six years, it can be sooner if you have paid the unsecured creditors their full amount or the at least 70% of the claims. The repayment plan should have been proposed and executed in good faith
• Chapter 7 followed by Chapter 13 – Four years

Despite the limit on the time period for dischargeable debts, the debtors are always advised to stay away from situations that can lead them to a second-time bankruptcy filing.

Read through some of the below pointers that can aid you on the same –

1. Don’t purchase homes/properties beyond your capabilities – Most bankruptcies arise due to the fact that home mortgages cannot be paid. So if you have already been through a bankruptcy ordeal, then be wise when making judgments about buying a home that is beyond your payment capacity. If Los Angeles is becoming a costly affair with regards to buying a home, then expand and move to other regions of the California state where your affordability is good.

2. Do not keep credit card dues–The revolving debts of credit cards are a common problem that debtors face after they get a discharge of these dues in bankruptcy. They get flooded with new credit card offers but availing them to the debtor’s benefit will be tricky for the debtor. He needs to show his ability to repay the dues as well as not get too immersed in debts. So if you are having any credit card payments, then get them cleaned regularly (every month)

3. Plan your expenses with a budget–Being in control of your expenditure will be the wisest method to adopt after your bankruptcy situation. Reducing high-cost expenses (around living and food) and loan consolidation of your existing loans like the credit cards/ student loans can be some measures that can be put to use. Also, plan with a budget at hand (one may use any of the available budgeting apps) or seek expert help for managing your post-bankruptcy situation.

4. Save for emergencies–A situation of sudden unemployment or a medical emergency can lead a person to get immersed in further debts. Statistics reveal that 40% of the U.S. population cannot handle an emergency need of $400. So, create an emergency fund and grow it to a value that is enough to cover three months of your expenses. An emergency fund to cover six months or more would be the best case situation for the debtors

5. Co-work with creditors – Though it may sound annoying for a debtor, it is one of the recommended practices to reach out to his creditor. A proper payment plan can be drafted and executed with the help of your creditor when you have successfully explained your situation to them. They can concede on co-working with you and eventually it is benefiting too.

6. Increasing your income source – Another job or a second job option opens up avenues for a higher income. It is a trend in Los Angeles that people are turning towards Uber and Etsy in order to earn a few dollars in addition to their regular pay. It certainly does help to explore the micro-gigs options for you if you are falling short of income

7. Revisiting Chapter 13 plan – If you have earlier raised a Chapter 13 bankruptcy and in the midst of your repayment plan, it is advised to revisit and make amendments based on the current financial condition of yours. This can put you in a better position with clearing your debts and at times of crisis, you can become eligible for a Chapter 7 bankruptcy.

8. Purposeful spending – Be vigilant of the income every month and especially the expenses that you manage. Better tracking can save your financial condition and in adverse conditions, reach out to expert assistance from bankruptcy attorneys. They will work with you well ahead of your bankruptcy conditions.

Recovery Law Group is a law firm in Los Angeles, California. They also handle clients in Dallas, Texas. Call them at 888-297-6203 to know their services around the chapters of bankruptcy.

It is widely known that California has expanded its legitimacy to the California Marijuana business. Hence the question pops up whether the Marijuana or other licensed cannabis businesses will enjoy equal/ same rights under federal law as in the case of other California businesses. That’s is the not case and reading through the below will explain in detail the background of these businesses and how they are restricted from declaring bankruptcy in their businesses.

Cannabis businesses and the California Law

Since 1996, possession of a small amount of marijuana has been decriminalized. Also, medical marijuana has been legalized from the same year. By making recreational marijuana legal in California, the state has become the largest legal market in the country since last year. The Office of Administrative Law (OAL) in the state of California recently approves of certain regulations with regards to the Cannabis businesses. Even though these laws now make the operation clearer and are able to impart stability to the operating vendors, the cost of operating marijuana businesses has shot up significantly. Hence the California Cannabis businesses face several challenges economically and they include regulations related to packaging, high state and local taxes, supply chain issues and loss of the business due to illegal sellers in the market.

Because of the aforementioned challenges, the marijuana market is struggling and running a business is turning tougher than expected. Irrespective of being part of the community that grows marijuana, or distribute or have any role to contribute to the Cannabis sector, it is tough to declare bankruptcy due to operating constraints and start afresh.

Marijuana businesses and the Federal Law

Possessing or selling marijuana is still a violation under the Federal Law, Controlled Substances Act 21, U.S.C. 801 and this is notwithstanding additional state licenses. So in the eyes of federal law, this is still a crime (if you are in accordance with your California state rules and are operating state-licensed marijuana business). The body of Federal court is yet to pursue these businesses that run with the support of state rules and are still violating their law.

A memo released in the last year January by Jeff Sessions indicates that there could be a change in this too. But as of now, the marijuana businesses cannot seek bankruptcy relief since they violate the Controlled Substances Act (CSA) and this has been approved by the Office of the United States Trustee (the OUST). In addition, the OUST also takes the position that if anyone who is renting to a seller or a grower of marijuana is also violating the CSA. So take caution, if you are operating cannabis businesses under the state law or if you are renting to the dealers/ suppliers/ growers of marijuana – you cannot seek bankruptcy relief.

Further to Cannabis related Bankruptcy Restrictions

As per the Section 843(a)(7) of the CSA, “it is a federal crime to “manufacture” or “distribute” any “equipment, chemical, product or material which may be used to manufacture a controlled substance . . . knowing, intending, or having reasonable cause to believe, that it will be used to manufacture a controlled substance.” This was recently seen in the case of Way to Grow, Inc. who sought bankruptcy relief. The bankruptcy court in Colorado declined their petition even though, they were provisioning horticultural supplies to legalized marijuana businesses – this proved that the filers were also violating the CSA.

The court dismissed the case of Way to Grow, Inc. quoting that the filers cannot also make any further changes to amend the violations to the CSA as that would have adverse effects on the income that they are generating. This was a unique situation since the filing business was neither a grower/ supplier of marijuana directly nor were they renting the premises where the marijuana businesses ran. They were just merely supplying the equipment, that will help similar customers also grow other crops.

A different angle – where do the limits stop?

Another queer angle is seen with the Garvin v. Cook Investments case, where the bankruptcy trustee is not favoring a bankruptcy filing of a landlord who has leased the property to a tenant in the marijuana industry. This is a topic of debate where the power of the OUST and the court is questioned with regards to extending the restrictions of bankruptcy relief to beyond the distributors and sellers in the cannabis industry.

Working with bankruptcy attorneys from renowned firms such as Recovery Law Group will aid the process of seeking relief. They have the experience of dealing with clients of the varied portfolio in Los Angeles and Dallas.