If you are struggling with Debt and on the fence about filing bankruptcy and you own a home, now might be the time to really consider the window. In California an individual gets an exemption of 75k or 100k for a married couple. Once you get above that equity your home becomes an asset that is too much to protect in chapter 7. Therefore the trustee would liquidate the home and give you the check for 75 or 100k and pay your creditors the remaining proceeds. That means unsecured creditors collect in a chapter 7 which is unusual but as prices go up the more that scenario becomes a reality. The cost of sale is taken into consideration as well. Usually a fair number for cost of sale analysis is 8-10% with 8% being more common. The reason for this is brokers, escrow and other costs that go into the sale of a house. I’ll do an example with numbers to make it more clear. If you are married you get an exemption of $100k dollars. So lets say you owe the bank 200k as a note against your house. Lets say the house is worth 325. As I mentioned the the exemption is 100k and the cost of sale would be 24k at 8% Under this analysis the trustee would not be enticed to sell your house. The trustees job is to sell assets that are non-exempt to pay unsecured creditors aka credit cards medical bills etc. If they pay realtors and costs 24k that does nothing for them and then they owe the bank 200k on the note and the debtors would get a check for there exemption at 100k since they are entitled to that as a priority before unsecured creditors get paid. I would assume 340k would be the price that would entice them but it doesn’t stop them from strong arming you to pay 15k to not sell it. Therefore since housing prices are going up at least temporarily, if you have equity in a home now might be a good time to get a bankruptcy analysis. I am a riverside country bankruptcy attorney specializing in bankruptcy. I live in Palm Springs and work in Palm Desert but serve all Riverside country and surrounding areas. Feel free to call to speak with an attorney about your debt and home matters as they apply to bankruptcy.
Tax refunds for many chapter 7 clients become the tool that allow them to straighten out there financial affairs. For more and more people straightening out their affairs means discharging unsecured debts and wiping out minimum monthly fees that can strangle a budget. Getting the lump sum money in February or March for those that file early allow them to pay what most bankruptcy attorneys will charge to file a chapter 7. Over the years I have had more and more people who are on payment plans tell me that once they get there tax refund they will finally be able to pay the fees and service fees associated with a bankruptcy. The costs of filing bankruptcy with the court is $306 and most attorneys who use sophisticated software download there credit reports from the 3 bureaus to capture all creditors and get the updated bankruptcy addresses where notices need to be sent. That fee is typically $30 for an individual or $50 for a joint filing(Aka husband and wife). Along with those two fees there are two required credit counseling classes which charge at least $15 and $15 for each although some charge up to $50. As a qualified bankruptcy attorney in Riverside County filing 20 cases a month typically I will direct you to the cheapest and best sites to do the classes. So at a minimum there are $400 dollars in outgoing costs to various vendors to file. I typically charge $1100-$1500 depending on the complexity of a chapter 7 case. Things that make cases more complex are the income that people make if significantly higher than median, analyzing profit and losses for self employed people. Typically though, the type of consumer who is using there tax refund to file are wage earners who are employed and get a w2 and make less than the median income which is 48k for an individual 60k for a couple with each child adding about 6k to the equation. For those people its typically a simple case and I can potentially do it for $1400 which includes all the filing fees and costs that I mentioned above. If you are going to be receiving a refund and are struggling with debt issues, talk with a qualified bankruptcy attorney. I have been practicing law for 10 years and the last 5 have been solely focused on bankruptcy cases with chapter 7 and chapter 13 cases for individuals and businesses. I know all the trustees in Riverside and know what to look for and how to put together a case to sail through the process a smoothly as possible. Wishing you the best in 2013.
Raymond Lee sues a lot of people in southern california and in Riverside county where I typically practice. Most cases in my jurisdiction are heard in Indio and are often brought by American Express who sends a lot of there accounts to Zwicker and Associates. You have many options in how to deal with the law suit that you have recently been served but first thing you need to do is speak with a competent lawyer to examine those options. When you have been sued you have 30 days to answer or you could face a default judgment which essentially says you agree to everything and allow them to collect against you through a judgement. Remember a judgment is good for 10-20 years with a renewal and collects 10% interest plus when they win they tack on attorney fees, costs for bringing the suit etc so now is not the time to put your head in the sand. Many times I negotiate these cases down to 50% of what you owe. Sometimes we have to answer the law suit, other times I call them directly and work on a settlement prior to answering to save money. If they won’t come to the right number then we answer to make them realize they are going to have to work and expend money to get potential money. This often brings them back to the negotiating table quicker. Another option that I have and they realize is that I file chapter 7 or chapter 13 bankruptcy cases which either means they get paid nothing or what you can afford over either three or five years. All of a sudden a settlement sounds good to them. Raymond Lee is located in Pasadena so sending someone out to fight this case with someone that fights them every step on the way in Indio is not cheap. This is done for clients that might not be perfectly situated to file a current bankruptcy. Sometimes filing a bankruptcy case is all about timing depending on where you income is or certain financial things that you have done too recently to filing a bankruptcy case which necessitate waiting. Filing an answer to buy time in these types of cases is critical. Also, sometimes bankruptcy isn’t necessary depending on how old other debt that you have is, if you are about to meet the statute of limitations on your other debt and make above the median income, filing a 13 might not make sense so answering and negotiating becomes advantageous. If you have debt and have been served and wonder your options, call a knowledgeable riverside county bankruptcy attorney who looks at things from all angles before sending you down a one road solution.
When looking at whether you qualify for bankruptcy as a chapter 7 or chapter 13 the size of your household makes a big difference. Chapter 7 allows you to not pay any money back to creditors whereas chapter 13 requires that you do a payment plan that last either 3 or 5 years depending on whether you are above or below the median income. In the central district of california which is the local bankruptcy court for Riverside, San Bernadino County and Los Angeles County, the trustees seem to use a heads on bed approach as opposed to traditional family or what your dependents that you claim on your tax return says. Sometimes there are children that live between to households which can benefit you if you can include them in your bankruptcy even though your spouse claims them on the previous year tax returns and things like that.
In Palm Springs, many of my clients are gay which allow me to find creative ways to qualify people for bankruptcy and determining whether to include a partner or not. Some people are domestic partners, married, or just living together which all have different and varying consequences and allow me to creatively think about how to get the best result. Because bankruptcy is federal most trustees only require federal tax returns which can be helpful to gay couple that are married and file joint returns in California but as single under federal taxes since the federal government does not recognize gay marriage. This can make a big difference in qualifying for chapter 7 since an individual income can be up to 48k a year but when you are a family of two its 62k. By treating to people as single it allows the household unit to make up to 96k which can be a huge benefit.
If you are thinking about bankruptcy and have debt problems and live in Riverside County, talk with a bankruptcy lawyer who deals with our local trustees and knows the in and outs of the bankruptcy court before walking down that path without counsel.
When you have assets that are above the amounts that the california exemptions in chapter 7 are able to protect, it puts property that you have in potential risk of being liquidated. Something that most people don’t understand though is that you have the option to buy it back from the trustee typically at a discounted rate before the trustee puts it on the market. That is what an equity buy back is. In general for most of my bankruptcy clients this is extremely rare because California has extremely generous exemptions which typically allow most debtors to protect all there assets. There are two exemption models that you can use which are known as the 703 or 704 exemptions. 704 exemptions are for people with a lot of equity in there house(not so many in riverside county). Typically for people who have no refinanced in the last 15 years and are older. Most married couples can protect 100k in equity in there home so if your house is worth 300k and you owe 200k your equity interest would be exempt. If you are 55 or older with a certain income you can get 125k in equity and 65 or older can be up to 175k in equity. Since most clients of mine do not have equity we use the 703 exemptions which give you $3500 for a car, 1400 for jewelry, 23,000 as a wildcard which you can use however you want. So if your car is worth 10k and you don’t have a secured creditor through financing then you would have to borrow 6500 from the wildcard which would still leave you with 17k to use how you wish. When you go over the wildcard then the trustee will ask if you want to buy back what he could liquidate to pay your creditors. For example I had a client who owned a 30k dollar car, had an IRA for 100k, jewelry of $1000 and 10k worth of household goods. In this situation the IRA/401k etc is protected 100%. The jewelry is protected up to 1400 so its protected 100%. The household goods are in general protected so no issue. The wildcard and the car exemption equal about 27k so the trustee could send me a letter if they are interested in 3000 dollars and let me know that we need to pay 3000 or else he will sell the car and pay my client 27k and have 3k to pay creditors. For that small of an amount the trustee typically wouldn’t do it as its to much of a pain to administer an estate that small and buy the time he paid auctioneer fees, fees to pick up and store the car etc there truly would be nothing to distribute to creditors. If its closer to 10k then the letter will come for sure. If someone did not want to lose that 10k then they could file a chapter 13 and they would have to pay at least 10k back to creditors over 5 years. If that is your only reason however to file a 13 my typical suggestion would be to do a 7 and pay the 10k over 1 year if they can afford it. These are the general issues in understanding what happens to debtors with more assets than typical and the option of the equity buy back. Call a riverside bankruptcy attorney if you have questions about how a liquidation analysis would unfold in your chapter 7 bankruptcy.
Almost 4000 default notices were mailed out in May 2012 making Riverside County the county with the most foreclosures in California. This is a 12% decrease from March and a lot better than last year but suggests as I know first hand, that things are getting much better and the real estate market for us locally will take more time to bounce back then people anticipate. California in general ranked number 2 in the country for for foreclosures with 39k filed. Statewide its 1- 351 houses in foreclosure. Riverside as you can see is doing much worse. I think its partly because 14% unemployment and many people who moved out to Riverside did so with jobs related to construction and other functions of the economy that have been slammed. Foreclosure can at times be something that you need to put into perspective when it comes to trying to keep a house that will not regain value for so long that its worth letting it go and saving for two years where you could likely be a house similar to yours for 10-15% more than the current market value of your house. If you have a second mortgage then bankruptcy is going to be the way to go without a doubt because a 2nd mortgage has recourse and can sue you personally for not paying it while a first once they foreclose cannot come after you for the difference(deficiency).
My point is I have situations and stories where people come in who have renters and they are getting $2300 for rent on a house that costs them 4400 for the mortgage and $500 for HOA’s. Every month they are losing $2600 dollars on a house that has a 2nd that has been charged off(still collectable) and the first is owed 50k more than the house is worth. To me it makes no sense to continue to lose your money every month on a house that will not regain the 140k it would need to in order to have equity. You can buy a house 2 years after a bankruptcy. So in my analysis it would be you could save close to 30k a year by not making up the difference on the rental house and wipe out your personal liability on the 2nd mortgage. In 2 years you would have 60k saved and could go and put down that towards the same house that would have 60k in equity and no bad 2nd for less than you owed the 1st. Bankruptcy under these types of circumstances needs to be a business decision and not tied to the emotional aspect of losing a house. Thats just my two cents. If you have questions about bankruptcy, foreclosure, and your rights please contact a qualified bankruptcy attorney in Riverside County. I work in Palm Springs and Palm Desert and deal with the Riverside Bankruptcy Trustees on a daily basis. I can help guide your decision.
When it comes to a chapter 13 payment plan for my clients who are well over the median income and clearly have enough money to pay something to creditors it is clearly a balancing act between a debors attorney and the chapter 13 trustee. The means test determines what a food budget, transportation budget, etc. will be and after (mortgage) or standard rent, Health care, taxes, life insurance, financed vehicles etc are taken out that is what your chapter 13 plan will be. 401k loans are repayable as a priority creditor. You can cram down cars to current market value. You can get rid of 2nd liens that are so far upside down that your house is worth less than you owe the first. There are many benefits, but to gain them you have to be willing to pay your disposable monthly income to the trustee. There is no budget for alcohol or vacations or christmas presents but you can find ways in other parts of your budget to fit those things in. For some people 13’s can be extremely easy especially if you are not a lot over the median income and you get the benefit of stripping your 2nd lien while paying 1% to your creditors. For other clients who are used to making alot of money and living the high life it can be difficult.
Every few months the income numbers for bankruptcy get changed based on new figures. May 1st median incomes jumped by over $1000 dollars a year. It was around 47500 which was lower than the 48100 that we had before that. It seems median income are climbing which makes it easier for clients with higher incomes to still fall under the means test for a presumptive chapter 7 filing. For a two family household it is now $63481. and for four family households its now 82,329. Riverside County still has high employment and jobs in the palm springs, palm desert, coachella valley in general are typically service jobs and well below typical california incomes making bankruptcy a good choice for people with debt or who are being sued.
If you are above the median income do not fret that you will not qualify for chapter 7 as things such as financed vehicles, health insurance, child care, mortgage payments, taxes and other expenses can all bring down your income to show that even with a 100k dollar income that your reasonable and necessary expenses which include high mortgage and financed vehicles still leave you with little money to pay unsecured creditors at the end of each month.
To speak with a qualified bankruptcy attorney feel free to call me for a free consultation to determine if bankruptcy is right for you.
Many people are under the mistaken belief that you can only keep one car in bankruptcy. While the bankruptcy code in California only give you an exemption for one car at $3550 this does not mean that you can only keep one car. I have had clients with 8 cars that have filed chapter 7 and kept them all. Because california has a wildcard exemption for 23,500 its not a question of how many cars but how much value in your cars that you can exempt. Many people have financed cars with no equity in them as they owe the banks more than the cars are worth. Under that analysis you can have as many cars as you have financed as its of no value to the estate since its your equity position in the car that the trustee cares about and not the cars that are overly financed. The wildcard exemption can be pieced and parceled however you like so if you have a car worth 10k we would use the 3500 for the car exemption and the 6500 for a wildcard exemption which would still leave 17k on the wildcard. We could then exempt 2000 dollars that you have in the bank which would leave 15k on the wild card. You could have 5 cars worth 3k a piece and then that would use all the exemption amount. So you can see by my examples its not a matter of how many cars but what the values are and if we can protect everything with the wild card exemption as well as the car exemption. Call my office if you have further questions as to what you can keep in bankruptcy.