California Bankruptcy Lawyer Blog

San Jose Bankruptcy Attorney Discusses the Chapter 7 Means Test

It is inevitable if you are considering filing bankruptcy that you will hear about the Means Test. Before the bankruptcy laws were changed, a person who wanted to file for bankruptcy could file for a Chapter 7 or Chapter 13 based on their preference. However, under the new laws, the first step in determining if you can file for Chapter 7 bankruptcy is the amount of income you make. It is a measurement of your current monthly income against the median income for a household of your size in your state. If your income is less than or equal to the median, you can file for Chapter 7 bankruptcy. If it is more than the median, however, you must pass the Means Test in order to file for Chapter 7.

The purpose of the means test is to figure out whether you have enough disposable income, after subtracting certain allowed expenses and required debt payments, to make payments on a Chapter 13 plan. To find out whether you pass the means test, you subtract certain allowed expenses and debt payments from your current monthly income. If the income that's left over after these calculations is below a certain amount, you can file for Chapter 7. IF you do not pass the Means Test, you’re unable to file for Chapter 7 bankruptcy, where your debts are discharged, and you may have to file a Chapter 13 bankruptcy where you will have to come up with a payment plan.

If you have a question regarding Bankruptcy please contact Sagaria Law at 1-800-941-6730 for a free consultation or visit us at 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.

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Posted In: Bankruptcy Law , Bankruptcy Trustee , Chapter 13 Bankruptcy , Chapter 7 Bankruptcy

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Sacramento Bankruptcy Attorney Talks about Different Debt

The Bankruptcy Petition is both a scary and a confusing process. There are many forms to complete and the information in the forms come with few instructions. For example, a Debtor is asked to list their monthly “Auto” expenses but does not accurately define if the expenses must include insurance, gas, parking, and maintenance or if the expenses should be a yearly average. An extremely troublesome problem is that a Debtor is asked to classify their debts into three main groups, Secured Debt, Unsecured Debt, and Priority Debt. (There are also Administrative Debt and Consumer Debts which are treated differently and not on the regular debt forms.)

A Secured Debt is debt backed by property. The Debtor has taken money and used a piece of property to secure the debt. That means the creditor has the right to take the property to satisfy the debt if the Debtor fails to repay the loan. The two most common examples are mortgages and auto loans. In a mortgage, the lender has a secured interest in the property (usually recorded as a Deed of Trust) which allows the creditor to foreclose on the property if the Debtor fails to pay the mortgage. In the example of cars, the creditor has a security interest in the car which gives them the right to repossess the car if the Debtor fails to the pay the loan. Secured Debts can rarely be discharged in Bankruptcy without losing the property.

A Priority Debt is debt that government has recognized as special and will be paid ahead of most other debts. (Usually only second to secured debt.) There are many types of priority debts but the most common ones are taxes, wage claims by employees, alimony, child support, and debts incurred pending the bankruptcy. These debts usually cannot be discharged because the government, as a public policy, has decided that the debts need to be repaid.

An Unsecured Debt is debt that is not backed by any property except the Debtor’s promise to repay. This is usually credit card debt and personal loans. When a creditor makes these kinds of loans, the creditor knows that they are taking a risk since there is no security tied to the loan. The creditor, in turn, is allowed to charge a higher interest rate for these debts. It is usually the unsecured loans that drive a debtor to bankruptcy because 25% interest is too high for any reasonable debtor to hope to repay.

The key to remember is that a Debtor must properly classify their debt in the bankruptcy. A misclassification may lead to a delay in the bankruptcy process, an objection to the bankruptcy, a dismissal of the bankruptcy or the survival of the debt through bankruptcy.

If you have a question regarding different debts please contact Sagaria Law at 1-800-941-6730 for a free consultation or visit us at 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.

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Posted In: Bankruptcy Law

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San Jose Bankruptcy Attorney Discusses Pre-Bankruptcy Credit Counseling

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 now requires people who plan to file for bankruptcy protection to get credit counseling from a government approved organization within 180 days before they file. They also must complete a debtor education course to have their debts assigned and discharged.

As a rule, pre-bankruptcy credit counseling and pre-discharge debtor education may not be provided at the same time. Credit counseling must take place before you file for bankruptcy; debtor education must take place after you file.

A pre-bankruptcy counseling session with an approved credit counseling organization should include an evaluation of your personal financial situation, alternatives to bankruptcy, and a personal budget plan. A typical counseling session should last about 60 to 90 minutes, and can take place in person, on the phone, or online. The counseling organization is required to provide the counseling free of charge for those consumers who cannot afford to pay. If you cannot afford to pay a fee for credit counseling, you should request a fee waiver from the counseling organization before the session begins. Otherwise, you may be charged a fee for counseling which will generally be about $50, depending on where you live, the types of services you receive, and other factors.

Once you have completed the required counseling, you must get a certificate as proof. Check the U.S. Trustee’s website to be sure that you receive the certificate from a counseling organization that is approved in the judicial district where you are filing bankruptcy.

If you have a question regarding Bankruptcy please contact Sagaria Law at 1-800-941-6730 for a free consultation or visit us at 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.

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Posted In: Bankruptcy Law , Creditors and Debt

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Fremont Bankruptcy Attorney Talks About Chapter 13 Plan Payments

Debtors in a Chapter 13 bankruptcy have agreed to a repayment plan to their creditors. Specifically, in the bankruptcy petition, the debtors propose a Chapter 13 payment plan. The plan will pay off certain secured and priority creditors in full and then, if feasible, unsecured creditors will get none, some or all of their claims paid off. The amount that unsecured creditors receive varies based on the debtors’ income and expenses. This amount is calculated by a formula that was created by the US Government which severely limits the type of expenses that debtors can claim.

Once a plan payment is proposed in the Chapter 13 Bankruptcy Petition, the US Trustee and court must approve it. There are a few levels of review but, ultimately, a plan is approved for a term of either 36 months or 60 months. Once approved, the Debtors are expected to pay this amount each month, on time, in either a cashier check or money order.

If Debtors cannot make the payments make the payments for any reason, it is much better to be proactive than reactive. The Debtors should contact the Trustee’s office by phone or letter to explain why the payment shall be late. Specifically, the Debtors should explicitly outline when the payment will be made or how the late payment will be repaid at a later date. For example, if the payment will be 1 week late, then a phone call and letter stating that it will be 1 week late is acceptable communication. However, if the Debtor needs to miss a month and wants to make up the payment over a series of payments, the US Trustee should contacted and the repayment plan approved. Finally, if the Debtors can no longer make the payments due to a change in circumstances, such as injury or loss of employment, the US Trustee needs to be contacted so that they can consider their options. The options include permanent modification of the plan, conversion to a chapter 7 bankruptcy, or dismissal of the chapter 13 plan all together.

If you have a question regarding your Chapter 13 Plan please contact Sagaria Law at 1-800-941-6730 for a free consultation or visit us at 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.

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Posted In: Bankruptcy Law , Bankruptcy Trustee , Chapter 13 Bankruptcy

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Sacramento Bankruptcy Attorney Talks About Finishing a Bankruptcy

When a debtor files a Petitioner for Bankruptcy, the US Trustee is now officially the owner of all of the debtor’s assets. The US Trustee is so intertwined with the debtor’s finances that the debtor may not even make a major purchase, such as a new car, without the US Trustee or Court’s permission. This raises the question, once the US Trustee is involved in a debtor’s business, how does one get the US Trustee out?

The real answer is that the US Trustee is involved until the end. The end, in a bankruptcy, is either when the debtor’s bankruptcy case is dismissed or discharged. A dismissal occurs when the debtor’s bankruptcy petition is not granted for various reasons. One reason could be that the debtor voluntarily dismissed because they no longer wanted the bankruptcy. Another reason could be due to noncompliance by the debtor in one shape or form which causes the Court to dismiss the petition. In either case, a dismissal usually means that debtor may refile their bankruptcy petition although a waiting period may be put in place. Once dismissed, the US Trustee no longer has any interest or control over the debtor’s assets.

In a discharge, the Bankruptcy Court makes a final ruling in favor of the debtor and has discharged all remaining debts. For a Chapter 7 bankruptcy, the discharge will occur relatively quickly and can happen within 90 days of the filing. For a Chapter 13 bankruptcy, the discharge is not complete until all the plan payments are done. In either case, once discharged, the US Trustee no longer has any interest or control over the debtor’s assets. That means the debtor is free to go shopping for a new car or sell whatever assets they walk away with.

If you have a question regarding discharge please contact Sagaria Law at 1-800-941-6730 for a free consultation or visit us at 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.

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Posted In: Bankruptcy Law , Bankruptcy Trustee

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Sacramento Bankruptcy Attorney Discusses General Banrkuptcy Procedures

With the economy taking such a fall these days, many people are finding it more and more difficult to pay their bills and keep up with the expenses that living in California demands. Many of these people are turning to bankruptcy in order to start over. The most common filings are for chapter 7 bankruptcy, chapter 13 bankruptcy and chapter 11 bankruptcy. The first steps to bankruptcy starts when the debtor files a petition with the court. The petition consists of financial information about their assets, debts, income, and a list of the assets the debtor claims as exempt. The petition is then filed with the court.

Next, about one month after the initial filing of the petition, the debtor is asked to attend a meeting of creditors. The debtor is put under oath, and the creditors have the right to ask the debtor about the debtor's assets and expenses. The meetings are usually limited to the debtor confirming that the bankruptsy papers contain a true and accurate listing of all of their assets and debts. If complications arise, such as litigation with a creditor or the trustee, the debtor may have to attend a court hearing or additional examintations, and he will receive such notice from the court or his attorney.

Discharge Notice

If there are no objections to the debtor's discharge, then the debtor receives a written notice from the court, stating that he has been discharged of all of his dischargeable debts.

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.

Posted by Scott Sagaria | Permalink | Email This Post | Comments (0)

Posted In: Bankruptcy Law , Chapter 11 , Chapter 13 Bankruptcy , Chapter 7 Bankruptcy

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