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Over the past three years, a series of impactful events have significantly influenced the housing market. In response to the economic challenges posed by the COVID-19 pandemic, the Federal Reserve injected unprecedented amounts of money into circulation. This infusion of funds gave more individuals cash in hand to make down payments on homes. 

Why Did California Home Prices Rise So Fast? 

Simultaneously, the widespread adoption of WFH (work from home or remote work) reshaped living preferences, prompting a shift from urban to suburban and rural areas. People realized that if they didn’t need to consider commuting, they saw their relationship with work differently and could make lifestyle choices accordingly. Those who made a home purchase in 2020 or 2021 likely secured favorable fixed-interest rates, while those with adjustable rates may find themselves facing financial challenges. With interest rates at historic lows during the 2020-2021 period, the National Association of Realtors (NAR) highlighted in a report that the qualifying income for a median-priced home in America was approximately $50,000. Fast forward to 2023, and this figure has surged to around $107,000. This means that prospective homebuyers, who would have met the criteria for a home loan just a few years ago, now need significantly higher incomes to afford a similar property. This makes the number of possible home buyers shrink immensely over just a few years, not because they don’t want to buy a home but because they are no longer able to qualify for the mortgages. There are even stories floating around online that people who no longer qualify for the mortgage they already have, are being forced to refinance under the new interest rates simply because they no longer qualify based on the current conditions. That means theoretically people who had a 3.5% fixed mortgage could be forced into a 7.5% mortgage simply because they don’t make enough money after inflation. America has a habit of charging people more money when they can’t afford their current situation. 

If you are a resident of the state of California you can take advantage of the state’s generous exemption laws to protect your property and other assets but it is important to understand the limitations of these laws and how they apply to your specific situation. When filing a Chapter 7 bankruptcy it is important to note that the majority of Chapter 7 bankruptcies are no-asset cases where the trustee does not make any attempt to sell your personal property. With that said, if you own a home or have other expensive assets you want to protect you will want to understand all of the rights you have under California law and apply them when possible. California has created bankruptcy laws in order to protect people and their property allowing them to become debt free and get their finances back on track. Exemptions enable you to retain specific assets following bankruptcy. It’s essential to choose the set of exemptions that aligns with your particular requirements. You cannot blend exemptions from both sets; rather, you must exclusively utilize exemptions from one set or the other. For married filers, both spouses must utilize the same set of exemptions without the option to double their exemptions.

Homestead Exemption:

Most states in the United States offer homestead exemptions to safeguard one’s primary residence in the event of bankruptcy. Unlike some other states, California does not permit the utilization of Federal exemption laws in a California bankruptcy proceeding. Instead, California offers two distinct exemption schemes as specified in Section 703 and Section 704 of the California Code of Civil Procedure. When deciding whether you should be Using California’s 703 vs. 704 Exemptions you need to understand the difference between and what best applies to your situation.  While it is possible to negotiate with your mortgage lender to bring your delinquent mortgage up to date in Chapter 7, it’s crucial to recognize that the lender is not obligated to cooperate, and a significant number choose not to. To safeguard your home from potential loss in Chapter 7, it is advisable to ensure that your mortgage payments are up-to-date, that you can shield all equity through a homestead exemption, and that you are capable of maintaining your mortgage payments even after the bankruptcy process.

You can put overpayments of EDD or Unemployment in to a chapter 7 bankruptcy and discharge the debt. EDD overpayments happen when people are collecting unemployment when possibly working or other issues that allow the EDD to come after you. They can garnish wages to recoup the overpayment. These overpayments by the EDD are absolutely dischargeable in Chapter 7 bankruptcy. If you make too much money to file chapter 7 bankruptcy 50k for an individual, 63k if you are married, then you can discharge them in a chapter 13 bankruptcy as well.


Today is memorial day and a day to reflect on how people in uniform give back to our country by facing the ultimate sacrifice. Being a bankruptcy attorney in the coachella valley I have assisted many clients who serve in the 29 Palms area. I always take there cases for the cheapest that I will do any bankruptcy for which leaves me very little if any profit after you take all of my expenses into consideration. That charge is $1000 dollars for attorney fees. I am always amazed that the people who are willing to go to war and move there families all over the country are paid a low as they are and yet still come into the army many time with car repossessions and other debt problems. I recently had a client that makes a net pay $1500 a month but spends close to 900 to service an unsecured debt load. He had a wife and a child as well. Fortunately for him he only had to not pay his creditors for a month and he had my fee taken care of. Some people who have called me talk to their superior officers who tell them that bankruptcy can have potential clearance and security issues in their future and seem to try to dissuade them from a law that is here to benefit all citizens.

To me its not fathomable to try to keep someone living in poverty over mistakes they have made in the past or just the effects of the economy which have seen people left with bad 2nd mortgages after foreclosure or job loss leading to not being able to make good on car financing contracts etc. In my experience I have filed bankruptcy for managers of city’s, heads of police departments, multi-million dollar business creators. They have all used the bankruptcy code to their benefit so to see people in uniform dissuaded from using bankruptcy is something that I don’t agree with. If you are military and stationed in Twenty-nine palms please call me for a fair evaluation of how bankruptcy can effect you. Call an experienced Riverside County Bankruptcy Attorney. You’ll be glad you did. Happy memorial day and thank you for your service.

Today was my 2nd client within two months where we have filed an emergency chapter 13 to stop a foreclosure where unsecured debt is not a problem and its simply arrears or a foreclosure on a hard money loan that has come due and cannot be paid immediately. The goal is to buy enough time for a seller in distress when the foreclosure comes before a buyer or the right market. I filed one case in San Diego a few months ago and my client who was a contractor was adamant that houses sell for more in the summer. He owed 700k on the house with 50k in arrears. The house according to zillow is worth 850k. He thinks this summer he will get 900k for it so instead of letting the bank sell it or buy it back from itself at 700k and flip it at 900 this summer, my client takes the reigns back and does it himself. We make a motion in the bankruptcy court to sell real property and as long as the creditors get paid there is no issue. He has no unsecured debt so its no issue. For people with unsecured debt, there is always an option of voluntarily dismissing the case and then closing escrow before a new foreclosure date comes up. It leaves you with your unsecured debt in that scenario but allows you to make the money that your house is potentially worth a year down the line. Chapter 13 has many options and can be a great tool. Call me if you have any questions when facing an imminent foreclosure.

As a Palm Springs and Riverside County Bankruptcy attorney I have been getting more and more calls from Weltman, Weinberg & Reis and other firms which claim they have a purchase money security interest in my clients items that we have listed to discharge on schedule F. Typically they are Best buy cards, K jewelers or other Dept. store cards where when you buy things they claim that their security is what you buy and therefore is not unsecured credit card debt. Usually I ignore them and they go away and if they don’t file a proof of claim or an objection to discharge then the items are my clients. They will typically give me an offer to knock down the price to 40% of what they owe and ask us to sign a reaffirmation agreement but many of these creditor attorneys are so busy and getting sloppy when I ask what my client bought that they are claiming a security interest in the creditors don’t even know so how can we return things that they don’t know what they are. Therefore I ignore them and so far they have yet to file an objection to discharge. One creditor was able to figure out that my client bought a fridge at Best buy and they claimed an interest in the fridge where as if this was a chase visa or bank of america card its unsecured debt and therefore no security, but being a best buy card they claimed it was their fridge or we could pay $200. It would cost a lot to get a truck out to my clients house to pick up a fridge and then they have to sell the fridge and according to my clients it was a crappy fridge and they didn’t care if they came and picked it up. Needless to say my clients got there discharge and the fridge is there. Don’t be intimidated and reaffirm debts that you can probably ignore and get discharged. Its consistently worked for me.

Foreclosures currently represent 45% of all existing sales in California while nationally the number is at 28%. There are 3 years of inventory for foreclosed homes that will clog the market and keep the housing market from jumping back. As a bankruptcy attorney in Palm Springs and Palm Desert I have seen the banks continually postpone foreclosures as they do not want to release more homes into an already depressed and saturated housing market. I have had multiple cases that I was about to file and consistently the banks postpone the foreclosure month after month. Its good for my clients who are living Mortgage free for months but will probably create a slower recovery so I am torn on this issue. Bankruptcy can stop a foreclosure on the brink of a trustee sale and keep the home from being foreclosed on for at least an additional 3 months and I have seen it take 6 months after filing a bankruptcy (chapter 7) for a foreclosure to start again. This is for people with no intentions of keeping there home but who need to save money and buy time in their current homes. Chapter 13’s are for people who just need time to get caught up on arrears but want to save their homes. Chapter 7 you can keep your home but if you have arrears you’ll have to get caught up quick or the bank can move forward with general foreclosure guidelines.

Foreclosed homes really drag the market down and can help with Comps if you want to strip an upside down mortgage. When junior liens no longer have value because current maket value on homes is below what the first is owed, we can strip those liens in a chapter 13 and treat them as unsecured debt and have them discharged. Foreclosed homes and so called REO’s are usually sold for 35% below market value where as short sales are sold around 10% below current market value. All these conditions lead me to believe that Bankruptcy will continue to be a way out and relief for home owners. Talk to a riverside county bankruptcy attorney in regards to options that you have in saving your home or buying time to live in your home so to save money and move forward with your fresh start.

Foreclosures have slowed down this month across the nation not because people are staying current on their mortgages but because the banks are facing scrutiny over their foreclosure proceedings. This is really a big issue for states that use judicial foreclosure which California does not, but Californian’s are getting the benefit from the slow down as some banks have voluntarily stopped foreclosures for this month. I was going to file a chapter 7 case in which we surrendered the house last week a day before the date of sale at a trustee sale but a day before that the title company halted the foreclosure. It is now scheduled one month out which buys my client another month to live in his house for free and once he files he’ll get another 2-4 months before they can foreclose again. In his case he can’t afford his house and its 50% underwater so he had not intention of trying to keep it but it will allow him to save some money and be in a better position to move and get a fresh start once his bankruptcy case is filed and he gets a discharge. For people trying to save money to get caught up in their arrearages and still be able to file a chapter 7 this moratorium is a blessing, for others it just stalls the inevitable but gives them a place to stay for longer.

If you have recently been sued or have a judgment against you its only a matter of time before a sheriff will be contacting your employer and levying your wages through a garnishment. In California a creditor can take 25% of your net wages. If you make under the median income I can wipe away your debt through a chapter 7 bankruptcy and if you are a high wage earner or have too many assets to file a chapter 7 and be able to keep everything then we can lower your payment to your disposable monthly income which is almost always considerably lower than 25% of your wages. I would say 5-10 % is much more common when you are doing a chapter 13 bankruptcy and I have got plans confirmed with 1-2 % of income going into the plan. Call me to get a free case evaluation.

I am predicting that the tide of bankruptcies will not be falling anytime soon based on the new numbers that came out in June 2010. Overall California’s unemployment rate decreased to 12.3% according to data that was released by the California unemployment development department. That’s a .1% decrease and a year ago the unemployment rate was 11.6%. Riverside county’s unemployment rate grew to 14.5% which is .5% up from a month before. I also recently read that 10% of homes in Riverside county are 90 days or more deliquent on their mortgage payments. The data spells trouble for people who have lost their jobs or who are currently working with lenders on modifications. Remember that bankruptcy is a right and is something that should be considered a tool to help move out of the current situation that we are in. Our economy is based on consumer spending and when consumers can’t open their wallets due to old obligations that are unlikely to be paid its better to take the pain quickly then to walk around on a broken leg for years. My personal feeling is that the banks are dragging people along and giving them false hope of a modification which are often meaningless so that they don’t have to dump all these excess properties on the market which will depress prices even more and affect the banks. Bankruptcy needs to be looked at as a business decision and people have to let the negative emotions and connotations that are associated with it fall by the wasteside. Getting your family back on track from a new starting point in my opinion is better for the economy than allowing modifications, late payments and collection companies to prosper in an environment that ultimately hurts everyone.

Frequently Asked Questions: Debt Consolidation in California
How does debt consolidation affect credit scores?

Initially, it might cause a slight dip due to credit inquiries. However, consistent payments can improve your credit score over time.

What is the difference between debt consolidation and debt settlement?

Debt consolidation involves taking a new loan to pay off debts, while debt settlement is negotiating to pay less than you owe. Settlement can negatively impact your credit score.

What are secured vs. unsecured debt consolidation loans?

Secured loans require collateral (like a house or car), usually with lower interest rates. Unsecured loans don't require collateral but typically have higher rates.

Is debt consolidation right for me?

It depends on your total debt, interest rates, credit score, and payment capability. It's suitable if you can pay off your debt within five years and secure a lower interest rate than your current debts.

Should I consider long-term financial planning?

Yes, debt consolidation should be part of a broader financial strategy including budgeting, cutting expenses, and building an emergency fund.

How do Chapter 7 and Chapter 13 bankruptcies in California differ?

Chapter 7 involves liquidating assets to pay off debts, while Chapter 13 allows debt restructuring over a set period, usually three to five years.

Can my spouse's bank account be garnished for my debt?

Bankruptcy laws offer protections against such actions, but specifics depend on individual cases and state laws.

How can I learn more about my options?

Consulting a California bankruptcy attorney can provide clarity. Firms like The Law Offices of Christopher Hewitt offer free consultations to explore debt relief paths.

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