Bankruptcy in California

Wadhwani & Shanfeld, APLC, is a federally designated DEBT RELIEF AGENCY as defined in the 2005 amendments to the US Bankruptcy Code. This law firm provides legal advice regarding the pros and cons of filing bankruptcy and represents people and small businesses in filing for bankruptcy relief under the US Bankruptcy Code.

What is Bankruptcy?

California bankruptcy law is aimed at giving persons burdened by debt the chance to get a fresh start. The reasons for filing are many–and not necessarily anyone’s fault–including job loss, divorce, illness or death of a spouse or breadwinner, debts created by a co-debtor, or excessive credit card charges built up from years of earning less than that person’s living expenses.

What types of bankruptcy in California are there?

Although there are five types of bankruptcy in California, most consumers and small businesses file under either Chapter 7 bankruptcy or Chapter 13 bankruptcy. Under Chapter 7 (liquidation) bankruptcy in California, the debtor is excused from most debts in return for giving up his or her property to creditors. However, since the law also allows the debtors to keep necessary property, such as a home, automobile or other personal property, most debtors, if they have proper planning, will keep most, if not all, of what they already own. For debtors with significant property, Chapter 13 (debt reorganization) is an option. Under Chapter 13, the debtor proposes a plan of affordable monthly payments for three to five years paying back some or all of the debt, depending. This choice is useful for persons who are behind in mortgage or automobile payments, or those that owe past-due income taxes or child support. Chapter 13 allows debtors to repay such debt over a period of three to five years.

How long does a bankruptcy in California take?

Once you file your bankruptcy in California, you will have a creditor’s meeting within 30 to 45 days. After the creditor’s meeting, you will receive your discharge order in about 90 days in Chapter 7, if there are no objections. Chapter 13 usually takes three to five years, depending on the plan proposed by the debtor, but it could be less if you pay 100% to creditors and can afford the higher payments.

What is a creditor’s meeting?

At a creditor’s meeting you meet with the trustee, and any creditors who decide to attend, and go over your bankruptcy in California filing under oath. The trustee is going to want to look through your finances and see whether he can get any money for the creditors.

Will I have to give up all my property?

No. The law will not permit leaving the debtor destitute. California law allows debtors to exempt certain assets. Most bankruptcy cases in California, when planned, are “no asset” cases, in which the debtors have claimed an exemption in everything they own. Thus, there are no assets to distribute to your creditors.

Will I lose my house?

No, not if properly planned. In a Chapter 7, if there is no equity in the house (value of the house today minus costs of sale and payoff balances on all liens) the trustee (a private attorney or accountant appointed by the court to oversee the case) will not bother with attempting to sell your home to pay off your creditors. However, you must make sure that you continue to make your mortgage payments. Even when you are in bankruptcy in California, a lender keeps the right to foreclose on the property if you don’t make the monthly payments. If there is unexempt equity in the house, then you can come up with a lump sum to pay that to the trustee in a Chapter 7 case, a procedure known as “buying the equity.” Or you might want to consider a Chapter 13. In a Chapter 13 you will pay the amount of equity in your home to your creditors, plus catch up if you’re behind on payments to the mortgage lender, over a period of three to five years.

CAN I ELIMINATE MY SECOND OR THIRD MORTGAGE IN A BANKRUPTCY?

In a Chapter 13 Bankruptcy, a debtor may be able to strip off (eliminate) their second or third mortgage if they can prove that their home is worth less than the amount owed against the first mortgage.

Can I keep my car?

Yes. Most people owe more on their car than what the car is worth, especially if you bought it new with a small down payment. Thus, because there is no equity in the car, the trustee will not bother to take your car and sell it. If you owe less on your car than it is worth, you can generally protect most of the equity using your exemptions.

Can the lender take my car back?

If you still owe money on the car, you can choose to reaffirm the debt to the secured lender, keep the car, and continue paying under the existing terms; or you can “buy” the car for its present value from the secured creditor in a single payment using your right of redemption. In many states, including California, you can even keep the car and continue to make your regular payments under the terms of the original agreement without having to reaffirm. If you choose, you can surrender the car and be free of any obligation to pay for it.

Will someone from the court come to my house?

No one will come to your home to examine your personal belongings, unless there is a suspicion that you have hidden assets or undervalued what you own. That is very rare and should not worry you.

In what other ways can bankruptcy in California help?

Bankruptcy is also helpful in giving debtors valuable time to work out solutions. Immediately upon filing, the bankruptcy in California law’s powerful automatic stay goes into effect halting all enforcement actions such as foreclosures on a home, repossessions of an automobile, garnishments of wages or bank accounts, and harassing phone calls from collectors.

Can I discharge my student loans in bankruptcy in California?

Student loans are no longer dischargeable in any chapter of bankruptcy in California unless you can prove that repaying the loan creates an undue hardship on you or your family. Proving hardship usually requires showing that you can’t provide a minimum standard of living for yourself and your dependents if you have to repay the loan. Some courts will discharge part of the loan on a showing that repaying it all would be a hardship. However, this is an extremely difficult showing to make in court. A Chapter 13 bankruptcy in California can get the debtor out of default by paying the delinquent amount over three to five years.

Can I keep a credit card out of the bankruptcy in California for use later on?

If you owe money on a credit card at the time you file bankruptcy in California, you must list the card as a debt. However, if you don’t owe anything on the card, you don’t have to give the credit card company notice of your bankruptcy in California. Note however that they may find out through other means and cancel the card as a precaution. Most credit card companies will allow you to keep their credit card for use after bankruptcy in California if you agree to reaffirm the balance on the card and enter into a new agreement. The decision is up to the creditor, but most creditors will want to avoid the loss when the debt is discharged.

What happens to my credit after I file bankruptcy in California?

Generally, bankruptcy in California is not significantly more harmful than the financial history that led to the bankruptcy filing in the first place. Most debtors prior to bankruptcy in California could not get new credit from a lender who looked closely at their financial condition anyway. Bankruptcy at least makes all the debt shown in the negative history unenforceable. You want to make sure that the bankruptcy discharge also shows on the credit report so that creditors understand that those old creditors have no legal claim remaining. The bankruptcy in California can be on your credit report for up to ten years. However, you are not barred from borrowing. The bankruptcy in California is only one factor in determining credit-worthiness. Lenders take a practical approach looking at a person’s post-bankruptcy in California ability to re-pay. In fact, for many lenders, persons who have been through bankruptcy in California are a better risk because they are now debt-free, and are determined to get a new start.

Can I buy a house after filing bankruptcy in California?

Yes. There are many lenders that have “day out of bankruptcy” loans. Of course, those loans are typically at higher interest rates and costs. However, the longer you rebuild your credit after the bankruptcy, the more likely you will qualify at reduced rates.

How much does it cost?

Presently the court filing fee is $299 for Chapter 7 and $274 for Chapter 13. The attorney’s fee is regulated by the court. Most California bankruptcy attorneys charge within a few hundred dollars of each other –not much of a difference when the total debt discharged runs into the tens of thousands, and even less important when one considers that most low-cost providers make profit by doing cases in volume and spending less time explaining issues to the client. Our office offers a free, no obligation consultation.

What do I need to do?

Call toll-free for a no obligation appointment. If you prefer, you may fill out the enclosed contact form and we will return your call at a time that is convenient for you.

Bankruptcy is not a cure-all, but it is a powerful tool to deal with a number of legal problems. It certainly is an effective way to get you back on your feet.

NOTE: The answers to the FAQs are simplifications intended for a lay person. The facts in your situation may be different and lead to a different outcome. Consult a professional for advice before proceeding.

Feel free to contact the Wadhwani & Shanfeld, APLC for assistance. You will be treated with the dignity and respect that you deserve from the very first phone call.

Contact us for a free consultation.
Call now toll free to speak with an attorney (800) 958-6760 or if you prefer email us for a prompt response.

What is Foreclosure?

When a homeowner defaults by failing to make payments on his or her mortgage, the bank or financial institution that holds the mortgage note may foreclose on the property. Foreclosure gives the legal ownership of a property to the bank (or the highest bidder at the public auction). Foreclosure proceedings vary by state.

California Foreclosure Process:

The primary method of foreclosure in California involves what is known as non-judicial foreclosure.  This type of foreclosure does not involve court action. A lender typically initiates the foreclosure process when the homeowner is several months behind on the mortgage.  Foreclosure proceedings generally start with the lender recording and mailing a document entitled, “Notice of Default and Election to Sell under Deed of Trust.”   The lender must then wait 90 days before it can publish a sale date, which is set forth in a document entitled, “Notice of Trustee’s Sale.”  The sale date must be at least 20 days after the initial publication of the sale.  So, it takes approximately four months to complete a non-judicial foreclosure.  During the foreclosure process, homeowners have numerous options, which are discussed below.  However, time is of the essence, so those facing foreclosure should act quickly.  Feel free to contact us immediately, so that we can assist you with the following options:

Chapter 7 Bankruptcy:

A debtor may file a Chapter 7 bankruptcy in order to discharge certain liabilities, such as credit card debts, personal loans, etc.  Although Chapter 7 bankruptcy does not help a debtor reorganize, or otherwise catch up, on their mortgage payments, the filing of bankruptcy invokes an “automatic stay,” which typically delays the foreclosure process a couple months, and sometimes longer.  By delaying the foreclosure process, and by discharging other obligations, many homeowners are able to save their homes.  Alternatively, if a debtor does not wish to keep his home, he may still benefit from the extra time that the bankruptcy filing will provide.

Chapter 13 Bankruptcy:

A debtor may file a Chapter 13 bankruptcy to reorganize on their delinquent mortgage payments          and other obligations.  The filing of a Chapter 13 case stops the foreclosure process, and allows the debtor to propose a plan to catch up on any delinquent mortgage payments.  As long as the debtor complies with his confirmed plan and makes his mortgage payments that become due after the filing of his bankruptcy, he is able to protect his home.

Chapter 13 Bankruptcy (WITH 2ND MORTGAGE REMOVAL):

A debtor in a Chapter 13 bankruptcy may be able to strip off (remove) his second and/or third mortgage loan if he can prove that his home is worth less than the amount owed against the balance owed against the first mortgage.

Loan Modification:

Loan Modification describes the process by which a lender modifies the terms of a mortgage to help a struggling homeowner.  Many lenders are working with homeowners by lowering interest rates (temporarily or permanently), fixing interest rates that would otherwise adjust, and, in some cases, reducing principal balances.  Homeowners are typically required to prove economic hardship, but that is typically not a problem for those facing foreclosure.

Forbearance:

A forbearance agreement is an agreement made between a mortgage lender and delinquent borrower in which the lender agrees not to exercise its legal right to foreclose on a mortgage, and the borrower agrees to a mortgage plan that will, over a certain time period, bring the borrower current on his or her payments.  A forbearance agreement is typically designed for borrowers who have temporary financial problems caused by unforeseen circumstances, such as short-term unemployment or health problems.

Reinstatement:

A homeowner has the right to reinstate his loan, by bringing it current, up until five days prior to the foreclosure sale date.  Reinstatement typically requires the homeowner to pay a lump sum to the lender equal to the sum of any delinquent payments, late fees and foreclosure fees.  Often, this is not a feasible option for struggling homeowners.

Refinancing:

It is possible for a homeowner facing foreclosure to refinance his or her property, and thereby avoid foreclosure.  However, in order to obtain a new loan, there must be substantial equity in the property.  The terms of the loan would not be less favorable than a conventional loan, as the   loan would be based solely on the equity in the property, as opposed to the credit worthiness of the borrower.

Sale/Short Sale:

If a homeowner is facing foreclosure, he may still have time to sell his property.  If there is no equity in the property (i.e., the value of the home is less than what is owed), the homeowner can pursue a short sale, where the lender agrees to accept less than what is owed.  We work with realtors who can complete short sale transactions very quickly, so feel free discuss this option with us, even if you are well into the foreclosure process.  Short sales are generally viewed more favorably than foreclosures when obtaining future credit.

Deed in Lieu of Foreclosure:

If a homeowner wants to avoid a foreclosure sale, he can simply transfer the property back to the lender by executing a “deed in lieu of foreclosure.”  This process, often referred to as a “friendly foreclosure,” has a negative impact on one’s credit.

Contact us for a free consultation

• Call toll free (800) 958-6760
• Email us at info@thewsfirm.com
• Fill in on-line request form

New Bankruptcy Law in California

The Bankruptcy Abuse Prevention Consumer Protection Act of 2005 (BAPCPA) went into effect on October 17, 2005. It is important to understand the effect of BAPCPA. Below are a few questions and illustrations that may help you better understand the changes under BAPCPA.

However, since each debtor’s facts and circumstances vary, please do not rely on the information below. It is best to consult with an attorney to determine how BAPCPA will affect you. Wadhwani & Shanfeld, APLC, offers a free, in-depth consultation to determine your best option.

Will I Still Be Able To File Chapter 7 Bankruptcy?

Notwithstanding the massive amount of mis-information in the media and on the internet, the federal government estimates that fewer than 20% of the general public will be precluded from filing a chapter 7 bankruptcy under the new laws. The remaining (80% plus) population will likely qualify for a chapter 7 bankruptcy even under the provisions of BAPCPA. Below are some of the changes implemented by BAPCPA.

Means Test Calculation Under BAPCPA

If your income is greater than the median income in your state (see California median income figures below), then there is a presumption of abuse. That does not mean you do not qualify for a chapter 7 bankruptcy. You will be subjected to a means test to determine whether you can rebut the presumption of abuse and still qualify for a chapter 7 bankruptcy.

California Median Income Figures Are as Follows (Effective 03/15/09

If your income falls below the median annual income in California, then there is no presumption of abuse and you will not be subjected to the means test. More importantly, this means that you will likely still be able to file a chapter 7 bankruptcy.

Proof of Income Required

Debtors filing a Chapter 7 or Chapter 13 bankruptcy must provide proof of income for the last six months. Proof of income can be in the form of pay stubs, copies of checks, profit and loss statements, social security / pension statements. If you are a wage earner and do not have proof of income for the prior six months, most payroll departments can provide you with additional copies of your paystubs and/or transcripts thereof.

Income Tax Returns Required

Debtors filing Chapter 7 or Chapter 13 bankruptcy must provide to the trustee a copy of a tax return or transcript of a tax return, for the period for which the return was most recently due well in advance of the 341(a) hearing. Furthermore, the new laws provide that debtors must, on request of a party in interest or the court, file with the court, copies of any federal income tax return (or at the debtor’s option, a transcript of the return) for three years prior to the filing of the bankruptcy.

Mandatory Credit Counseling

Under the new laws, debtors will be required to show the Bankruptcy Court a certificate from a non-profit credit counseling agency, stating that they have completed a credit counseling course prior to the filing of their bankruptcy. This course can be taken telephonically, via the internet or in person and will take approximately 90 minutes to complete.

Mandatory Debtor Education

Under the new laws, debtors will be required to complete a pre-discharge debtors education course. Similarly to the mandatory credit counseling course described above, this course can be taken telephonically, via the internet or in person.

Longer Time Between Filings

Under the new laws, debtors cannot not file a Chapter 7 case if they have received a Chapter 7 discharge within the previous eight years. In addition, the new laws limit serial filings by disallowing a discharge in a Chapter 13 if the debtor obtained a discharge in Chapter 7, 11 or 12 within the 4 years prior to the date of filing of the pending case, or in a Chapter 13 case filed within 2 years of the pending case. This provision, however, does not prevent the debtor from filing a Chapter 13 case, and receiving the benefits of the stay, including the ability to cure arrearages on secured claims over a period of time.

Dischargeability of Certain Debt

Under the new laws, certain obligations are non-dischargeable and may be given a higher priority in repayment. Please consult with our office to determine these changes.

Limits on Certain Exemptions

Under the new laws, certain restrictions are placed on exemptions that debtors may use. For example, if debtors have moved in the last two years prior to the filing of their case, they may not be able to use the exemptions of the state they currently reside in. Please consult with our office for further clarification on the availability of exemptions.

Conclusion

These are just some of the changes that affect individuals and small business wanting to file for bankruptcy. Although it is more difficult to qualify and more documentation is required by the courts, it is important to know that many consumers will still qualify for bankruptcy relief. The only way to determine whether you will qualify is to call now and speak with an attorney.

Contact us for a free consultation

• Call toll free (800) 958-6760
• Email us at info@thewsfirm.com
• Fill in on-line request form

Non-Bankruptcy Alternatives

Workouts / Settlements

In certain circumstances, neither a Chapter 7 nor a Chapter 13 bankruptcy are appropriate. In those circumstances, we can negotiate and settle unsecured debt for a lump sum percentage. Debt Settlement is not the same as Consumer Credit Counseling or Debt Consolidation. Any person owing credit card debt, or any other debt, has the legal right to contact and negotiate with the creditors. However, not everyone has the skills necessary to obtain the maximum benefits.

On average, we reduce your current unsecured debt balances 40-60% by negotiating an agreed settlement amount with your creditors. Possible resources for funding the lump sum settlements include either refinancing your existing loan or making monthly installments into a client trust account.

Offers In Compromise (To Settle Income Tax Debt)

An offer in compromise is an agreement between an individual and the IRS (or the state taxing authority) that resolves the taxpayer’s tax debt. The IRS has the authority to settle, or “compromise,” federal tax liabilities by accepting less than full payment under certain circumstances. A tax debt can be legally compromised for one of the following reasons:

• Doubt as to Liability – Doubt exists that the assessed tax is correct.
• Doubt as to Collectibility – Doubt exists that you could ever pay the full amount of tax owed.
• Effective Tax Administration – There is no doubt the tax is correct, and no doubt that the amount owed could be collected, but an exceptional circumstance exists that allows the IRS to consider a taxpayer’s Offer In Compromise. To be eligible for a compromise on this basis, the taxpayer must demonstrate that collection of the tax would create an economic hardship or would be unfair and inequitable.

Contact us to determine whether an offer in compromise is possible in your circumstance.

Contact us for a free consultation

• Call toll free (800) 958-6760
• Email us at info@thewsfirm.com
• Fill in on-line request form

Following are benefits to our debt settlement program:

* We are a reputable law firm and not a “debt settlement company”
* We will put you on a realistic payment plan that is calculated to work
* We only get paid when we settle your accounts (no massive maintenance fees)
* You will receive routine updates on your funds as held in our client trust account
* All settlements are done in writing

Contact us for a free consultation to determine whether a debt settlement makes sense for you.

The filing of a Chapter 7 bankruptcy invokes an automatic stay, which stops creditors calls and halts collection activity, wage garnishments, bank levies, foreclosures, etc.  A Chapter 7 debtor is required to appear at a brief meeting with the bankruptcy trustee appointed to oversee the case.  A typical Chapter 7 case is discharged and completed within four months after filing.

Chapter 7 is also available to corporations, limited liability companies, partnerships and sole proprietors.  Many of our clients are business owners who continue to operate their businesses without interruption during and after their bankruptcy cases without interruption.

If you are overwhelmed with debt, we encourage you to contact Wadhwani & Shanfeld for a free consultation with an experienced bankruptcy attorney.  If visiting one of our offices is not convenient, we offer same-day telephone consultations.  Our attorneys will educate you on all options, including debt settlement, Chapter 7 and Chapter 13.

At Wadhwani & Shanfeld, attorneys (not paralegals) draft all bankruptcy schedules to ensure that our clients are well-represented and protected.  We provide an easy and painless experience, and we don’t have our clients fill out lengthy intake forms.  Our attorneys are professional, competent, accessible and responsive.

1.     Stop foreclosure and catch up on mortgage payments;

2.     Wipe out 2^nd mortgages;

3.     Lower car payments and interest rates;

4.     Stop garnishments and bank levies;

5.     Create an affordable payment plan to pay off tax debt; and

6.     Wipe out unsecured debt, including credit cards, personal loans, medical bills and other claims.

Chapter 13 provides significant protection to individuals.  Moreover, if the Chapter 13 petitioner no longer wishes to be in Chapter 13, or can no longer afford the plan payments, he or she can dismiss the case or convert it to Chapter 7.

In preparing our clients for Chapter 13, Wadhwani & Shanfeld will create detailed financial reports, including an income and expense analysis, along with a plan of reorganization and other supporting schedules.  Wadhwani & Shanfeld has extensive Chapter 13 experience and knowledge, and that is evidenced by our clients’ results and satisfaction.

Chapter 13 bankruptcies can be complicated, and Wadhwani & Shanfeld urges you to carefully choose a qualified attorney who focuses his or her practice on bankruptcy.  Feel free to contact Wadhwani & Shanfeld for a free consultation with an experienced bankruptcy attorney.  If visiting one of our offices is not convenient, we offer same-day telephone consultations.  Our attorneys will educate you on all options, including debt settlement, Chapter 7 and Chapter 13.

The chamber will reconvene April 20 by taking up a fraud-enforcement bill that authorizes increasing Justice Department funding and authority to crack down on mortgage fraud and other crimes related to federal assistance programs. Those efforts come as more high-profile legislation sits on the back burner in the face of opposition from Republicans and moderate Democrats. Senate Majority Leader Harry Reid (D-Nev.) and Senate Finance Chairman Max Baucus (D-Mont.) have said that they have not dropped efforts to craft a bill slapping heavy taxes on bonuses for firms such as American International Group that received bailout money, but Democrats have no immediate plans to move an AIG bill in the face of White House concerns and strong opposition from the banking industry. Also faltering is mortgage cramdown legislation that lobbyists and some senators say lacks the votes to pass. Reid has said previously that he is prepared to drop the cramdown language provision from a broader housing bill if the votes are not there.

-American Bankruptcy Institue 4/9/2009

In these times of financial and housing crisis, choosing the right bankruptcy attorney is a crucial decision. The following factors should be taken into account when choosing the right bankruptcy attorney for you:

1. Reputation: Choose an attorney with a record of success who has earned the respect of his colleagues.  Since the work done by your bankruptcy attorney will have an impact on your financial life, make sure you choose an attorney with a history of successful bankruptcy filings.
2. Experience and Exclusivity: Choose an experienced attorney who understands the law and the finer aspects of bankruptcy procedure.  Do not choose an attorney who casually practices bankruptcy, among various other areas of practice.  Make sure you choose a seasoned bankruptcy attorney, i.e., one who understands the local rules, the local practices and preferences of trustees and judges preferences, and how to work with the local creditor attorneys.
3. Reasonable fees: Choose an attorney whose fees are fair.  Make sure the attorney offers payment arrangements, if necessary, and they do not wait until being paid in full to begin working for you.  Attorney fees vary across the board.  Your bankruptcy attorney should work with you to establish a fair fee and provide you with a flexible payment plan.  A good bankruptcy attorney can save you much more than you have to pay in fees by structuring cost-saving reaffirmation agreements, settling with creditors as needed and useful exemption planning.
4. Location: Proximity to your home should not be a strong consideration when choosing a bankruptcy attorney.  In today’s electronic age, paperwork can be handled in person, by mail, e-mail or fax.  It is far more important that you choose an experienced, qualified attorney than to choose an attorney because his office is five minutes away from your home.  When you broaden your perimeter, you will have a much larger base of attorneys to choose from and will ultimately find the attorney that is right for you.
5. Accountability: Be careful in choosing an attorney who uses paralegals to consult with and draft the paperwork.  Regardless of the size of the firm, it is always best when the attorney personally consults with you and personally drafts your bankruptcy documents.  There are many firms that use paralegals to draft the paperwork and the paperwork is subsequently signed by an attorney you have never met.
6. No Paralegals: The old adage, “You get what you pay for” certainly holds true in the case of paralegals.  Be wary of paralegals.  In many circumstances, paralegals do not understand the local rules, do not stay up to date with the most recent forms, offer no protection when your case goes sour and have no accountability for the paperwork they draft.  While practicing, I cannot tell you how many times I have come across cases that have been entirely butchered by paralegals.  Unfortunately, in those cases, the debtors ended up paying significantly more in attorneys fees than they would have had they initially consulted with competent legal counsel.
7. Free Consultation: An attorney who places his clients needs first will provide a free consultation.  If an attorney insists on a consultation fee, for bankruptcy legal advice, look for another attorney.
   The Wadhwani Law Firm, APLC offers free in-person or telephonic consultations by experienced, reputable attorneys that draft their own petitions.  If you retain our office, we begin preparing all of your paperwork immediately.  More importantly, you can begin referring your creditors to us immediately.

For a free consultation, call (800) 958-6760 or email info@thewsfirm.com

Following are benefits to our debt settlement program:

• We are a reputable law firm and not a “debt settlement company”
• We will put you on a realistic payment plan that is calculated to work
• We only get paid when we settle your accounts (no massive maintenance fees)
• You will receive routine updates on your funds as held in our client trust account
• All settlements are done in writing

Contact us for a free consultation to determine whether a debt settlement makes sense for you.