Rising Gas Prices Explode Family Budgets: Will Chapter 13 help?

Gas Prices Hit Historic Highs in California

Gas prices in California have risen an average of 60 cents as gallon in the last week. 19 Costco gas stations and numerous others ran out of gas entirely. Lines at pumps were longer than they have been seen since the 70’s. The price for premium grade of gasoline in Los Angeles are reported to have reached  $6.00 per gallon! Various “so called” explanations for this massive increase range from refinery fires, changing from summer grade to winter grade gasoline, to oil company conspiracies. The Governor is seeking emergency action to reverse the trend but admits it will not be a quick fix. Sadly, the net result of rising gas prices to California residents is that family budgets are being stretched beyond the breaking point. How are people going to be able to cover the extra  costs of commuting to work, taking the children to school, running necessary errands such as going to the grocery store and getting medical care?

People Turn to Chapter 13 for Debt Relief

Because of this increased expense caused by rising gas prices, more and more people are turning to Chapter 13 of the Bankruptcy Code. Chapter 13 was designed by Congress to help people reorganize their credit card debts  to stop interest and lower, or in some cases completely eliminate, their monthly payments. People’s goal under Chapter 13 is to free up more budget money each month for their family to live and meet their necessary obligations.

Chapter 13 May Help You Deal with Increased Costs of Living

When wages are still stagnant in the aftermath of the worst recession since the great depression, and costs such as gas prices are rising to historic highs, people are seeking relief from a federal law called Chapter 13, provided for under the United Constitution, to reorganize their finances. If you would like to explore that possibility and see if you can qualify for this unique law, contact my office for a free in-office consultation. I  have been helping the citizens of Oceanside, Carlsbad, Escondido, San Marcos, and Vista for over 30 years. I will be please to meet with you and analyze your financial situation.

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California Homeowner Bill of Rights: Helps Avoid Foreclosure!!

Avoid Foreclosure

Homeowner Bill of Rights Helps Avoid Foreclosure
(Picture credited to http://www.flickr.com/photos/respres/ / CC BY 2.0)

I have spent the last several years as a Vista California bankruptcy lawyer listening to homeowners’  horror stories and frustrations with mortgage lenders’ while attempting to get modifications and avoid foreclosure of their homes. So you can imagine my joy after hearing what the state of California has just done to protect its homeowners who want to avoid foreclosure.

The New Homeowner Bill of Rights

Yesterday, Governor Jerry Brown signed the California Homeowner Bill of Rights. It is designed to stop abusive tactics of mortgage loan servicers and protect homeowners who are trying to modify their mortgages and avoid foreclosure.

Often in the past loan servicers would appear to be trying to help a homeowner renegotiate his or her mortgage. But sometimes they were actually going behind the homeowners back and foreclosing on their home. Also homeowners often keep getting shifted around to different agents of the servicer every time they called.  So no single loan servicer representative would ever know the status of the modification or the foreclosure process. This led to great frustration and in some cases even lose of the home. No more.

Going into effect January 1, 2012, the new law:

  • Forbids foreclosure while a homeowner works with a lender on a modification or a short sale;
  • Requires the mortgage company to provide a single point of contact to work with the homeowner on a modification;
  • Increases the notice requirements that must be provided to the borrower before taking action on a loan modification application or pursuing foreclosure;
  • Permits homeowners to seek injunctions against mortgage servicers until violations are corrected and permitting monetary penalties up to $50,000 against servicers who file multiple  inaccurate mortgage documents or commit reckless or willful violations of law.

The Goal of the New Homeowner Bill of Rights: Chance to Modify Before Foreclosure

The goal of the new law is to insure that the homeowner’s mortgage modification application receives full and fair consideration before foreclosure can occur. It also provides a legal remedy for mortgage companies who violate the rules.

Single point of Contact

Having a single point of contact will make the mortgage companies more accountable. It will avoid the current practice of shuttling modification applications and phone calls to various departments and employees. This has been a nightmare for modification applicants in the past.

New Notice Requirements

Under the new notice requirements the mortgage company is required to notify the homeowner the due dates for the modification application. They also have to be told whether their foreclosure has been put on hold, and whether or not the application has been denied.

Kudos to Governor Jerry Brown and Attorney General Kamala Harris for providing these “first in the nation” protections to California homeowners seeking to avoid foreclosure of their homes. (For the full text of the new law (numbered SB 900 and AB 278) see : leginfo.ca.gov/bilinfo.html).

I help people in Vista, Oceanside, Carlsbad, Escondido, San Marcos, Fallbrook, and the entire North San Diego County save their homes and get debt relief through Chapter 7 or Chapter 13 bankruptcy. Contact me today for a free office consultation to find out how.

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Bankruptcy Exemptions: Can I Protect My Property If I File For Bankruptcy?

Bankruptcy Exemptions“Can I save my car if I file for bankruptcy?” “Can I save my house?” These are two of the most common questions I get as a bankruptcy lawyer. Fortunately, the answer usually is yes. And the reason you can protect your property: bankruptcy exemptions!!

Bankruptcy Exemptions Protect Your Stuff

Exemptions are the key to saving your property if you need to file bankruptcy. That is because the instant a person files for bankruptcy the title or ownership of all their property is transferred by operation of law to the court appointed bankruptcy trustee. By property I mean your things like clothes, jewelry, furniture, cars, houses, etc. The trustee’s job is to sell the property of the filer’s bankruptcy estate and give the proceeds to the person’s creditors.

However, since the purpose of a Chapter 7 bankruptcy is to get a fresh start, and a Chapter 13‘s purpose is to reorganize your finances, if the filer actually lost ALL his or her property it would not be a fresh start or successful reorganization because they would then need to buy necessary replacement property. So, bankruptcy laws provide for statutory exemptions, which are state and federal laws that specifically “exempt” or “protect” certain property from being sold by the trustee. Whether the property is exempted is usually determined either by:

  1.  the type of property, or
  2.  the value of the property.

The good news is that usually a person following the guidance of an experienced bankruptcy attorney will not lose any property by filing bankruptcy. But it is not automatic and exemptions must be thoroughly planned before filing.

What Bankruptcy Exemptions Are Available for California Residents?

Federal bankruptcy laws allow the individual states to “opt out” of the standard federal bankruptcy exemptions that Congress designed to accompany a person’s bankruptcy filing. California has indeed “opted out” of those federal exemptions. However, in its place California has enacted its own set of exemptions under California Code of Civil Procedure §703 which closely mirror the federal exemptions. Further, this state gives its residents the ability to claim either the §703 exemptions or another set of exemptions under section §704 of the Code of Civil Procedure which is the same set it gives to people who have court judgments entered against them. But not both. In other words, you can’t mix and match exemptions from each set.

Which Set of California Bankruptcy Exemptions Should I Use?

The decision as to which set of California exemptions you will use is generally influenced greatly by the amount of equity in your family residence. If you have a lot of equity in your residence you may well need the “homestead” exemption available under the §704 exemptions and which can protect equity of between $75,000 and $175,000 depending on your family and filing status. On the other hand, if you rent or have little or no equity in your residence, your attorney may advise you to use the §703 “wildcard” exemption.  This versatile exemption can protect at present about $23,250 in any property that needs protecting, and this is in addition to specific property exemptions such as the standard household goods, automobile, or wearing apparel type exemptions.

Residency Requirement for Bankruptcy Exemptions

Your bankruptcy attorney will also determine if you have lived in the state of California for at least two years which is required in order to utilize the California exemptions. Otherwise, you will have to use the exemptions provided by the state in which you lived for 180 days or the longest portion of 180 days before the last two years. Yes, applying the correct set of exemptions can be confusing.

Bankruptcy Exemption Planning

Lastly, if any of your property turns out to not be protected by your exemptions, your bankruptcy attorney can assist you in exemption planning designed to maximize your exemptions and in some case making legal and safe changes in your assets that can transform nonexempt assets into exempt assets. But please, do not be tempted to make any title changes in your assets yourself, such as transferring property to a friend, family member, or business associate, as that will not work and is the easiest way to completely lose the ability to protect the asset and could even jeopardize your ability to get successful bankruptcy discharge.

The bottom line: Bankruptcy exemptions can protect your property. But be certain to get an experience bankruptcy lawyer that understands exemptions and will work with you to guide you through bankruptcy and protect your assets along the way.

If you would like a free office consultation to discuss your situation please contact my office. I am located in Vista serving all North San Diego County.

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Don’t Let Debt Worries Ruin Your Life!! Find Out How Chapter 7 or Chapter 13 Can Reduce Your Stress

Stop Debt Worries

Stop Debt Worries with Bankruptcy

As a bankruptcy attorney for the last 30 years my clients often tell me about laying awake at night worrying about not being able to pay their bills. I have seen grown men and women cry over the stress and frustration of not being able to pay their bills and feed their families. They feel helpless and despair of ever finding a way out of their financial nightmare. Their feelings range from depression, anxiety, and loneliness, to feeling angry and even ashamed for their inability to pay bills as they come due. All too often they tearfully tell me about venting their anger and frustration on family, friends, and co-workers, the people closest to them.

Debt Worries Can Impact Your Health

A 2002 research study conducted at Ohio State University concluded that people who are worried about debt and money problems are just not as healthy as people who have no debt worries. The toll these debt worries take on people runs the gamut from physical or mental breakdowns to weight gain (or loss), sleeplessness, heart attacks and strokes, migraines, ulcers, and even suicidal thoughts.

Debt worries are a major cause of feelings of guilt, shame, failure, and loss of self-esteem.  It should come as no surprise that debt worries are a major cause of marital problems.

Your Debt Problems Are Probably Not Your Fault

And all this is true even though 99% of the time the debt problems have not really been caused by the person.  The usual causes are job loses, reduced hours, illnesses, injuries, deaths, recessions, judgments, divorces, adjustable mortgages, retirements, or other factors completely outside the control of the individual.

Bankruptcy Can Eliminate Debt Worries

Now, for the good news! Almost always, after my first office consultation with new clients and after I have explained how Chapter 7 and Chapter 13 under the United States bankruptcy laws can solve debt worries, clients leave my office with hope, a smile, a bounce in their step, and a pathway to having their financial burden lifted.

Everybody’s situation is different. And bankruptcy is not a one size fits all solution. However, I give a free office consultation so my North San Diego clients can have an opportunity to find out if Chapter 7 or Chapter 13 can help them solve their debt worries. Call today for yours. Don’t let debt worries ruin your life! Learn if you can stop debt worries with bankruptcy.

My office is located in Vista just a short drive from Oceanside, Carlsbad, San Marcos, Escondido, Fallbrook, and Camp Pendleton.


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What Is a Bankruptcy Lien Strip, and Can It Save My House?

Sucessful lien strip

Strip the lien off your house

A lien strip in Chapter 13 bankruptcy is one of the very few “silver linings” for the homeowner who has experienced the shock of seeing the equity in his or her home fall “underwater” due to the recession. It works on the concept that if the amount owed on a person’s first mortgage is greater than the fair market value of the home, then any second or “junior” mortgage has no equity to attach to and thus, under bankruptcy rules, is totally and completely unsecured. And since it is unsecured it is not entitled to protection of its lien under bankruptcy law and the lien may thus be eliminated by the bankruptcy discharge.

After the Chapter 13 is completed your house no longer has the junior lien on it and is on its way to regaining its equity and back on the path to again being a viable investment.

A lien strip will only work in a Chapter 13 Bankruptcy not a Chapter 7

The United States Supreme Court has ruled in Dewsnup v. Timm, 502 U.S. 410 (1992),  that lien strips are not appropriate in Chapter 7. However, the Ninth Circuit Court of Appeals, applicable to us here in California, later approved lien strips for Chapter 13 in the case of Zimmer v. PSB Lending Corp., 313 F.3d 1220 (9th Cir. 2002).

Lien Strip Requirements:

  • You qualify for Chapter 13;
  • the fair market value of your house is less that the present balance on your first mortgage lien; and
  • you have a second (or junior) mortgage lien on your house.

Here is an example of how a lien strip works:

Assume your house is worth $300,000 but you owe $325,000 on your first mortgage. Your house is thus $25,000 “underwater” when considering only the first mortgage. Assume further that you have a $100,000 equity line or HELOC loan also secured by a lien on your house. So, with two mortgage liens on your house you are now $125,000 underwater. Assuming you want to keep your house what can you do?

The answer is, if you can qualify for Chapter 13, under the above facts you can strip off the second lien and just continue making  payments on the first. Your Chapter 13 plan will treat the second mortgage just like an unsecured credit card, so, for example, if your plan calls for paying a 10% repayment to unsecured debts you will also pay only 10% to the second mortgage over the course of the plan, which is usually 36 to 60 months.

At the successful conclusion of your Chapter 13 payment plan you will received a Chapter 13 discharge and the right to remove the second lien from your house. In our hypothetical example, your Chapter 13 lien strip just put you $100,000 closer to positive equity in your home.

Contact my office for a free office consultation to learn if you can qualify for Chapter 13 and a lien strip. It just may help you save your house.

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What is Bankruptcy and How Can It Help You?

My Tools of the TradeBankruptcy is a court authorized procedure that helps honest people handle serious debt problems by either:

  • eliminating the debts, or
  • reorganizing the debts into manageable monthly payments.

Authorized by the United States Constitution, Article 1, Section 8, bankruptcy is a recognition in our country that sometimes bad things happen to good people. The recent recession and current economic slowdown have caused millions of lost jobs. Many people have been laid off, suffered a reduction of pay, or reduction of their retirement funds. The Wall Street banks,  including the ones that got bailed out by taxpayer dollars, have cut back drastically in lending to the extent that individuals and small businesses can’t get money to cover the slow periods. Adjustable mortgage loans have reset and prevented homeowners from being able to make the increased payment triggering foreclosures. And then their lenders refuse to refinance the loans. Other good people get hurt, sick, divorced, sued, or grow old with a fixed income, all of which can stop or reduce their ability to pay back debts. How do they survived?

Bankruptcy Is a Safety Net

Bankruptcy provides a safety net for people to get on with their lives, jobs,  and businesses without losing everything they have worked so hard for. First, it STOPS CREDITORS. Filing bankruptcy will cause a federal restraining order, called the “Automatic Stay,” to be issued immediately upon filing that will stop all collection efforts by creditors including telephone calls, collection letters, lawsuits, garnishments, or foreclosures and trustee sales. The Automatic Stay will even stop the IRS from collecting taxes and in some cases the bankruptcy may permanently eliminate income taxes all together. What happens next depends on which Chapter of the Bankruptcy Code you qualify for to fit your personal financial circumstances. I’ll discuss both consumer options Chapter 7 and Chapter 13.

Chapter 7 Eliminates Debts

Chapter 7 is designed to eliminate your obligation to pay all unsecured debt, that is, debt that is not secured by your property. It usually consists of credit cards, medical bills, deficiency on repossessed cars, personal loans, and the like. The goal of Chapter 7 is to “get a fresh start” financially. However, you must be very careful to get a good experienced lawyer before you attempt a Chapter 7. This is because Chapter 7 is, in reality, a liquidation. This means that care must be taken to insure that all your property including clothes, furniture, tools, car, house, etc.,  is protected BEFORE you file Chapter 7. Your attorney protects all your property through the process of claiming “bankruptcy exemptions.” These exemptions are a collection of state and federal laws that allow you to protect your assets, but please remember that these exemptions are not automatic, and you and your lawyer must claim them specifically in writing. In my 30 years of bankruptcy experience, it is very rare  for people to lose any property they want to keep IF proper legal precautions are taken. Chapter 7  normally last about 4 1/2 months and at the end you receive from the Court a Bankruptcy Discharge certificate verifying that you have no legal obligation to pay the discharged debts. Please keep in mind that not all debts are discharged in Chapter 7 including student loans, family support, court fines, etc. There is also a “means test” that I’ll discuss in a subsequent post which everyone must pass in order to file Chapter 7.

Chapter 13 Reorganizes Your Debt

A Chapter 13 plan is a court approved repayment plan that allows you to repay your creditors  a monthly payment amount that fits your personal financial situation.  It basically subtracts your reasonable living expenses like housing, food, clothes, transportation, insurance, charitable contributions, etc., from your net (after tax) monthly income, and uses the difference, called your “disposable income,” to make your monthly Chapter 13 plan payment to a court trustee who in turn pays your creditors. These plans usually last a minimum of 36 months but could last up to 60 months. If your monthly plan payment paid out over the period of the plan was enough to repay, for example, 20% of your unsecured debts, and that payment was your “best effort,” then that’s all you would have to repay. And at the end of the plan, the other 80% of your unsecured debt would be discharged. The bankruptcy court’s automatic stay would protect you from the creditors the whole time you are in your Chapter 13 plan. Other things that might be accomplished in a Chapter 13 (and not Chapter 7) include:

  • stop a foreclosure or trustee’s sale, and cure the default by paying the mortgage arrears in the plan;
  • strip off the lien of a second mortgage if your house is completely underwater, i.e., you owe more on the first mortgage than the house is worth;
  • “cram down” or reduce your car balance to what the car is worth and reduce the car loan interest rate;
  • protect a cosigner; or
  • protect a non-exempt asset , etc.

Chapter 13 law and related procedures are very complex and require the assistance of an attorney experienced in Chapter 13.

 What to Do Next?

Contact my office at 440 Civic Center Drive, Vista, CA 92084-6144, for an office meeting with me so I can personally analyze your financial circumstances.  I’ll see if you qualify for either Chapter 13 or Chapter 7 and, if you do, help you decide which one may offer you the most help. There is no charge for your first office visit. I help people with bankruptcy from all over North San Diego County. Our phone is 760-758-3043.


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