Riverside County Bankruptcy Lawyer Blog

I get phone call after phone call where people want to file for bankruptcy and continue to work with their lender on obtaining a loan modification. The problem is that once you file the lender has to stop directly working with you because they are a creditor and to continue on negotiations during the bankruptcy process for three months in a chapter 7 is a violation of the automatic stay.

Should this prevent you from filing bankruptcy? In my opinion, absolutely not.

Getting a loan modification of any substance for most people is a fairy tale. I can tell you more people that I know who have had to re-file paperwork a million times because the bank lost important documents, than the number of people that have got meaningful loan modifications. In my mind, its just a way for the banks to prevent house values to plummet further during this crisis. They keep your foreclosure at bay by tricking you into believing that they will be working on your loan modification. I have had clients that I tried to get loan modifications for over a year ago and still nothing has come of it. I would never take a loan modification again in my life and to advise a client to wait on filing for bankruptcy for the bank to modify your loan, I think should be negligence per se. I understand people wanting to keep their homes and you can in a 13 even if you have several back payments that you need to make good on. In a 7 you can keep your home but only if you remain current so that is part of the problem with this whole loan modification debacle. You have to be behind on your payments to get a loan modification typically so to file chapter 7 and keep your home, you are going to have to get caught up quick. Many people can’t so they will lose their home but remember you wouldn’t be modifying your loan unless your house was completely underwater. The bank would never do it. In my opinion we should make the bank show their hand and get through this housing crisis quicker. All the banks are doing is stalling a lot of people out so that house prices can artificially rise for a short period of time and then they will unload all this shadow inventory for higher prices. I think the likelihood of you getting a loan modification is close to 10%, the rest of you are holding your breath for something that will most likely never be realized.

Don’t feel guilty about filing for bankruptcy.

When forced into dealing with overdue bills and financial problems, many of us bury our head in the sand, stop opening bills and feel anxiety and guilt about the situation that we are in.

Don’t allow those feelings to stop you from finding out your options and your rights before its too late. There are many things that you can do during hard times that sound like the right thing to do but actually could backfire as far as your rights under the bankruptcy code go.

CALIFORNIA BANKRUPTCY FAQs

Question: Can I still file bankruptcy after I’ve been sued or after a creditor has a default judgment against me?

Answer: Yes. You can almost always still file bankruptcy and a judgment creditor will be in the same postiion often times as your other unsecured creditors. A bankruptcy will stop a wage garnishment so if you are about to get garnished or a lien is about to get filed on your property, now is the time to file for bankruptcy.

I now serve clients through the Coachella Valley with a more permanent structure law office in order to help people file for bankruptcy.

I was running a virtual practice out of San Francisco but would take clients all over California. The majority of my clients were coming from the inland empire and I was spending a lot of time at the court in Riverside for trustee hearings.

I have decided to open in a office in the Palm Springs and Palm Desert area so that I can help people who are struggling to pay their bills and having foreclosure problems more directly with easy access to the Riverside Court. My practice is one that allows me to work from afar and gather all your documents that are necessary to file a bankruptcy petition and with fax, internet, scanner technologies all of this can be done very easily, however I think that having a local office can better assist certain clients at times so I will be doing a direct local marketing campaign in Indio, Rancho Marage, Cathedral City, Palm Desert, Redlands, Desert Hot Springs, Blythe, and other desert cities in the Coachella Valley in order to assist one of the hardest hit areas in the country for bankruptcy filings, foreclosures, and high unemployment.

Riverside county has close to 15% unemployment and that doesn’t even count the underemployed and people who have given up on finding a job.

My office will be in Palm Springs starting on August 1, 2010 and I will be traveling there frequently between now and then.
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The bankruptcy process starts with the filing of a petition. In the petition you list all your assets as well as your liabilities. I typically pull a credit report from all three credit bureaus and then review with my clients to ensure that all debts are in there since some creditors don’t necessarily list them with the credit bureaus(personal debts, pay day loans etc, medical debts that aren’t too old etc). In the petition we have to be thorough to be sure that we listed any kind of financial transactions that the trustee would be interested in knowing about. This could include paying back preferred creditors, selling a home within a year and other important financial events. You have to take a mandatory credit counseling class which you can do online before you can file. Most importantly is the pre-bankruptcy preparations that I go through with my clients to make sure all their property is protected and that they are filing at the right time. We have to calculate your income for the last six months to make sure that you qualify for a chapter 7 and if you are well over the median income then we have to do a 13 or some pre-bankruptcy planning to squeeze you into a chapter 7. If you have any questions please call me or fill out your name and I will get back with you to see whether filing for bankruptcy is your best solution.

The first question that I want to answer is that filing for bankruptcy will not stop you from being able to get federal student loans in the future. If somehow(although unlikely) your federal student loans got discharged in a previous bankruptcy then you might have to reaffirm those loans in order to get new loans. What is more important is how you have handled credit after your bankruptcy. As long as your student loans that you currently have(if any) are not in default, then getting federal loans should not be an issue at all. Private loans are different. Its hard to say how easy it will be to get private loans after a bankruptcy because there are many different types of bankruptcy which makes it a complex issue. If you have filed bankruptcy and need private loans for school you might need to find a cosigner. If you filed a chapter 13 and fulfilled your payment plan even if not 100% then you will most likely be a better candidate and qualify for private student loans. A chapter 7 where you liquidated and didn’t pay any unsecured creditors will obviously make it harder to get a private student loan without a cosigner.

Transferring non-exempt property to exempt property is one way to protect value in your estate prior to filing for bankruptcy. There are rules in regarding whether you did so with the intent to hinder, delay or commit fraud on creditors, but these can be overcome. There must be some evidence in the facts or circumstances which are extrinsic to the mere facts of conversion of non-exempt assets into exempt and which are indicative of such fraudulent purpose. It is permissible under the threat of being sued to convert non-exempt assets into exempt assets. Typically this involves paying your mortgage down, but it can also be selling a cheap car and buying a car closer to the exemption value in order to protect cash in the bank. Things you want to stay away from are taking large sums of cash and putting them into IRA accounts on the eve of bankruptcy if you don’t have a history of putting too much money on a regular basis into that protected account. If you put money into another IRA on the eve of bankruptcy the court will most likely find you did so with the intent to hinder, delay or defraud. Things like Section 529 accounts unfortunately are considered to be part of bankruptcy estates even though they are for the benefit of your children.

Medical Debt can be disguised as credit card debt so its hard to get a true hold on whether clients are facing insurmountable credit card debt or medical debt when they file for bankruptcy.
Even in my personal situation I can vogue for this fact. I have three children and my wife lost her job at the end of 2007. We elected not to take COBRA coverage because it was too expensive. Two months later before she was employed again, she got pregnant and we therefore become non-insurable until after we had the baby. This put us in debt close to 20,000 dollars. I put a good portion of this on credit cards as it was easier to negotiate a reduced payment to the hospital if they were paid before check out. If we were put in the position of having to file bankruptcy, the schedules would show that we have credit card debt when in actuality its medical debt.
Fortunately both are unsecured so it wouldn’t be as bad as taking out a second mortgage on the house(who can do that anymore anyways), but nonetheless tracing what is medical debt and what is credit card debt can become hard when credit cards can mask what payments were made on.