California Bankruptcy Lawyer Blog

Sacramento Bankruptcy Attorney Discusses Chapter 7 Bankruptcy Exemptions

Many people believe that once you decide to file for bankruptcy you will lose everything, The images of the Repo-Man coming in and taking all your worldly possessions always haunts the minds of many bankruptcy clients. However, these images rarely ever happen. In fact, most people do not know most people are abke to keep most of their personal items, their cars, and even their homes. In California, if you qualify as a Chapter 7 bankruptcy, there are two exemptions that you can qualify for in order to keep some of the more substantive things in your life.

Under the first exemption, you would be allowed to keep the following:

- Your home, if you don't have more than $50,000 in equity in the house (today's value less costs of sale less payoff balances on all liens and mortgages); if single and not disabled or $75,000 for families if no other member has a homestead; $125,000 if 65 or older or disabled; $100,000 if 55 or older, single and earned less than $15,000 or married and earned less than $20,000 and creditors forced the sale. Sale proceeds are exempt for 6 months after received.

- Up to $2,000 in building materials to improve your home

- Your motor vehicle, if you don't have more than $1,900 in equity in the vehicle (today's value less costs of sale less payoff balances on all liens and mortgages).

- Appliances, furnishing, clothing and food needed

- Jewelry, family heirlooms and art up to a total of $5,000 in value

- Burial plots

- Health aids

- Unemployment, disability, veterans', workers' compensation and social security benefits

- Alimony

- Retirement plan and life insurance proceeds

- Business partnership property

- Tools of your trade, up to $5,000 in value

- Bank deposits from Social Security Administration up to $2000

Under the second exemption, you can keep the following:

- Your home, if you don't have more than $18,450 in equity in the house (today's value less costs of sale less payoff balances on all liens and mortgages).

- Your motor vehicle, if you don't have more than $2,950 in equity in the vehicle (today's value less costs of sale less payoff balances on all liens and mortgages).

- Appliances, furnishings. Books and musical instruments, up to $475 in value per item

- Jewelry, up to $1,225 in value

- Burial plots up to $18,450, instead of $18,450 in your home

- Health aids

- Unemployment, disability, veterans', workers' compensation and social security benefits

- Alimony

- Retirement plan and life insurance proceeds

- Tools of your trade, up to $1,850 in value

- Up to $925 "wild card" exemption of any property, unused portion of home exemption or burial plot exemption.

If you have a question regarding bankruptcy, please contact our office at 1-800-941-6730 for a free consultation or visit www.sagarialaw.com. Our team of bankruptcy attorneys can assist you with all aspects of your case. We have attorneys in San Mateo, Monterey, Fremont, Salinas, Sacramento and San Jose.

Sacramento Bankruptcy Attorney Discusses Bankruptcy Facts:

Chapter 7 Bankruptcy, sometimes called a “straight bankruptcy”, is basically a liquidation proceeding. The debtor turns over all non-exempt property to the bankruptcy trustee who then converts it to cash for distribution to creditors. The debtor receives a discharge of all dischargeable debts usually within 3 to 4 months. In the vast majority of cases, the debtor has no assets that he would lose so Chapter 7 will give that person a relatively quick “fresh start.”

Chapter 13 bankruptcy is also known as a “reorganization bankruptcy”. Chapter 13 bankruptcy is filed by individuals who want to pay off their debts over a period of 3 to 5 years. This type of bankruptcy appeals to individuals who have non-exempt property that they want to keep. It is also only an option for individuals who have predictable income and whose income is sufficient to pay reasonable expenses left over to pay off their debts.

The most common reasons for filing bankruptcy are: unemployment, large medical expenses, seriously overextended credit, and marital problem. A Harvard Study reported that half of the US bankruptcies were caused by medical bills (50.4% of the 1,458,000 personal bankruptcies in 2001).

Bankruptcy gives a person who is hopelessly burdened with debt, a fresh start by wiping out their pre-existing debt.

If you have questions about bankruptcy, please contact Sagaria Law at 1-800-941-6730 or visit us at www.sagarialaw.com for a free consultation. Our team of Bankruptcy Attorneys can assist you with all aspects of your case. We have attorneys in San Mateo, Monterey, Fremont, Salinas, and San Jose.

Sacramento Bankruptcy Attorney Talks About Chapter 13 Bankruptcy Eligibility

There are two common bankruptcies for individuals, Chapter 7 bankruptcy and Chapter 13 bankruptcy. The difference between the two is based both on the financial situation of the debtors as well as the solution the debtor is searching for. While everybody can ask for a Chapter 7 bankruptcy (although negative ramifications can apply) not everybody can apply for a Chapter 13 bankruptcy.

As a reminder, a Chapter 13 bankruptcy is a request to the court to allow the debtor to repay their debts on a payment “plan.” The plan can be 36 or 60 months in length. The amount of the plan is based on the debtor’s income, expenses and the debts to be paid. The court is very specific about the order of debts to be paid, which debts can be paid, and how much each debtor gets. A Chapter 13 plan is useful and favored by creditors because a creditor will usually get some of their bills paid, even if they have to wait 60 months to get it. A Chapter 13 plan is useful and favored by debtors because it will allow a debtor a payment plan more attuned to their income and certain assets can be preserved. For example, if possible, debtors can keep their family residence or car much easier in a Chapter 13 than in a Chapter 7 due to the fact that any late or missed payments on the house or car may be “repaid” through the plan instead of all at once. (exceptions apply).

To qualify for a Chapter 13 bankruptcy, a debtor must have a regular source of income so that they can make the plan payments. This must be income and cannot be from unreliable sources (for example, third parties like parents cannot agree to pay the plan for you). The income must be high enough to cover the debtors own living expenses (such as mortgage) with enough left over to make the plan worthwhile. Please note, the term “worthwhile” is not a legal term but a descriptive term because any plan needs to be approved by the court. The court will not approve a plan that fails to repay certain creditors. Finally, there are certain limits for debts that be covered in a Chapter 13 bankruptcy. Secured debts such as real estate cannot exceed $1,010,650 and unsecured debt such as credit cards, cannot exceed $336,900.00. (As of April 1, 2007) Please note, this is a total of debts and not a limit for a single creditor.

If you have further questions or wish for a consult for a chapter 13 bankruptcy, please contact Sagaria Law at 1-800-941-6730 or www.sagarialaw.com for an appointment.

Sacramento Bankruptcy Attorney Talks About The New Bankruptcy Seeker

Few years ago, bankruptcy was a means for homeowners to preserve their property. Specifically, a homeowner could use the bankruptcy protections to realign their finances into a structure that they could handle which included a payment plan to pay off any missed payments in a Chapter 13 Bankruptcy and keep the house. Alternatively, the debtors could discharge their unsecured debt which allowed them to pay for secured debt such as the family residence in a Chapter 7 Bankruptcy. However, due to the subprime mortgage practices, a new kind of bankruptcy story has become common.

Today, which reflects the hangover from easy credit, bankruptcy has become a finite way for debtors to shed properties they no longer can afford (as opposed to keeping the properties). For example, a middle class family who were enticed into real estate speculation now has 2 investment properties that have no equity (or negative equity) due to dropping housing prices with an adjustable mortgage set to increase within the year (or already has). Such a couple cannot afford the new monthly mortgage payments and they cannot sell their property since there is no equity. Over the next two years, such a couple has no choice but to file bankruptcy or risk years of financial oppression that should never had happened to them. The key is how soon such a couple will realize that bankruptcy will help them.

The usual pattern is that the couple will begin to deplete their savings to make up the mortgage payments. There is hope that the market will turn or that somebody will bail them out which never materializes. Once the savings are gone, the couple may cannibalize their retirement accounts which destroys their future savings and then begin to heavily use credit cards for quick cash which locks them into a cycle of servitude to the credit card companies. Eventually, the higher debt begins to negatively affect their credit score which may cause the interest rates on their credit cards to skyrocket. Sometimes the interest will be over 20% a year. During all this time, the couple is paying out more than 50% of their income to lenders of one sort or another. Two years later, the couple still owes the mortgage, still has no equity, and no has incredible credit card debt.

Finally, when all the savings is gone, their retirement evaporated, and credit cards maxed out, the couple will look into bankruptcy. At which time they will discover that bankruptcy will allow them to surrender the bad investment homes, discharge the credit card debts, and save whatever retirement funds they have left. Could this couple have avoided this scenario by looking into bankruptcy sooner? Contact Sagaria Law at 1-800-941-6730 or www.sagarialaw.com for a consultation to find out.

Sacramento Bankruptcy Attorney Talks About Automatic Stays

When a debtor files a petition for bankruptcy, many things happen right away. First of all, the Bankruptcy Court will assign the debtor an official case number and schedule a date for a meeting of creditors. (This is often called a 341 Creditor meetings) Secondly, the Bankruptcy court places an Automatic Stay on all creditors which forbids any creditors from trying to collect on the debts without the court permission.

The Automatic Stay is a very powerful right given to the debtors. For instance, the Automatic Stay will stop any foreclosure sales that are about to come up. They will stop any repossession of vehicles. They will stop any wage garnishments or levies on bank accounts. The Automatic Stay should also stop any lawsuits that are pending. The Automatic Stays even forbids creditors from calling to ask for payment.

The Automatic Stay is necessary because when a debtor files for bankruptcy, the debtor surrenders all ownership of their assets to the Bankruptcy Court. The government will now decide what to do with the property. Since the government is now in control of the fate of the debtor’s assets, the creditors cannot touch it without permission. Since the government owns the property, the creditors may not even call the debtor to ask for repayment. If a creditor does call or move against the debtor’s assets, then the creditor faces possible sanctions which may have them paying the debtors.

Then, as the Bankruptcy progresses, the government will slowly release assets back to the debtor or the creditor as the law dictates. If you are facing a foreclosure, repossession, wage garnishment, or bank levy, please call Sagaria Law at 1-800-941-6730 for a consultation to see if Bankruptcy’s Automatic Stay can help you. Please visit www.sagarialaw.com for more information.

San Jose Bankruptcy Attorney Talks About Dismissal

When a debtor files a petition for bankruptcy, the debtor may go for several weeks without hearing anything about their papers. This is typical because once filed, the US Trustee’s office must review the petition for accuracy and completeness and creditors get a chance to object, file proof of claims, or file adversary proceedings. During this time, the debtors can usually voluntarily dismiss their bankruptcy petition.

Why would a debtor dismiss their petition? There can be many reasons. The most common one is that their major creditor, who had previously refused to even to answer phone calls, suddenly has an interest in settling. For example, a mortgage lender who had declared that no relief could be given, may suddenly decide that the debtor’s do qualify for a drop in interest rates or are willing to extend the loan on more favorable terms. Alternatively, a credit card company may decide that they only want half of their bill paid. In those cases, the debtor may not be able to agree to such a deal without first dismissing the bankruptcy.

Another common reason is that the debtor’s situation has changed. For example, the debtors may have lost their job or just had a baby. The debtors may have come into money or found a new job. Either one of these situations may affect their bankruptcy and the debtor may be better served to dismiss their current case so that they may refile later.

Finally, the US Trustee may want the debtors to dismiss their case. The Trustee, upon review of the papers, may believe that the debtors do not qualify for bankruptcy and may file a motion to dismiss. To avoid a court hearing, the debtors may decide to dismiss their petition rather than have a judge decide the outcome.

If you are in the middle of bankruptcy and wish to dismiss so that you can refile, please consider contacting Sagaria Law for a consultation 1-800-941-6730 or www.sagarialaw.com.