I seem to be hearing about or reading a lot of stories these days where someone decides that the legal advice received from an electrician (or CPA or any other non-lawyer) must be true. I decided to do a quick blog post on some of these misconceptions.

I don’t have to list my mortgage company on the bankruptcy schedules.

The theory behind this was that the person was going to pay their mortgage directly, so the mortgage company did not need to know about the bankruptcy. This is absolutely wrong. Everyone you owe must be listed on your bankruptcy schedules. Mortgages are listed as a secured debt and you will have the opportunity to indicate what you intend on doing with the property (either continue making payments, surrender the property, or other options available in a Chapter 13). Intentionally leaving out assets or debts on your bankruptcy petition is fraud and punishable by fine, imprisonment, or both. See also the recent story about Lenny Dykstra and his indictment for bankruptcy fraud.

I can’t file bankruptcy unless I am totally broke.

Another misconception I heard this week was that you have to be flat broke to file for bankruptcy. This is not completely true. In CA, there are fairly generous exemptions that apply to you when you file for bankruptcy. These exemptions allow to retain necessary items and also allow some flexible options for maintaining savings and vehicles. Part of the bankruptcy planning process is to make sure you understand what you can and cannot keep, but you do not need to wait until you have only pennies left to obtain a fresh start.

I know I can’t get rid of taxes.

This one is a fairly big misconception. There are a lot of rules that determine whether a tax is dischargeable or not, but it is not accurate to say that all taxes are nondischargeable. Personal income taxes that are more than 3 years old are taxes that should be analyzed by a bankruptcy attorney to see if they can be discharged in your bankruptcy.

Filing for Chapter 7 means that the court will come to my house and sell everything I own.

This is similar to the one above about being totally broke, but I hear this a lot from people not familiar with bankruptcy. People often ask me if they can keep their beds or if the court is going to sell the household items to pay creditors. The short answer to that is…no, the judge or trustee is not going to show up at your house to sell your bed. You are allowed to keep items necessary for you and your family’s welfare. Again, talking and planning with a bankruptcy attorney will help you keep as many of your assets as legally possible and will also help alleviate some of your concerns in filing for bankruptcy.

Please feel free to contact me at 925-586-6738 or [email protected] if you would like to discuss your situation and the options available to you.

This is just a basic overview and is not legal advice specific to your situation. If you are considering bankruptcy or are feeling overwhelmed by debt, you should speak with an attorney in your area for legal advice. To speak with me regarding your situation, please email me at [email protected] or call 925-586-6738.

Calling a bankruptcy attorney can be a nerve-wracking decision. You feel like a failure just for considering it, right? Because the process is so stressful, I thought I would give you an idea of what to expect during an initial consultation with me. At the beginning of each consultation, you’ll have the chance to read over and sign an initial consultation agreement, which outlines the scope of the meeting and that there is no charge associated with the one-hour consultation. There are also two disclosures that go along with the initial consultation agreement and these disclosures are required under bankruptcy law.

Emotional Feelings
First, I understand that it’s hard to think about and talk about a possible bankruptcy. Bankruptcy is just one of the tools out there to help you deal with a problem and get you back on the right track. There is nothing shameful about using a legal avenue to reorganize your situation and create a better future for you and your family. My approach is to help you feel comfortable talking to me about your situation so we can come up with the best possible solution.

Documentation to Bring to the Initial Consultation
Usually, I will ask you to bring some financial information to the meeting and I will send that list to you in an email prior to the meeting. The most important documents include your recent paystubs (at least for the last two months), your most recent income tax return, mortgage statement, a list of your debts, and the details of any lawsuits that have been filed against you (usually for an unpaid debt, like a credit card).

The Discussion
We will talk about the problems you’re facing and what prompted you to call me. You may have received a foreclosure notice or been served with a lawsuit for a credit card debt. Or, you may be facing a job loss or reduced income. It is important for me to understand the difficulties you are facing so we can come up with a solution that addresses as many of the issues as possible.

The Solution
After we talk about your financial situation and look over the documents you brought in, we will start going over possible solutions to take care of the problems you’re facing. There may be several things we can do and you will always have the option to choose your path. I will tell you what you can expect with each option and if there are any special considerations, such as timing or problems that may arise.

The Conclusion
At the end of the meeting, there will be no pressure to immediately do anything. I will provide you with a folder with a copy of the forms that you signed at the beginning of the meeting and a copy of my fee agreement if you should decide to hire me to implement the solution we discussed.

This is just a basic overview and is not legal advice specific to your situation. If you are considering bankruptcy or are feeling overwhelmed by debt, you should speak with an attorney in your area for legal advice. To speak with me regarding your situation, please email me at [email protected] or call 925-586-6738.

This evening, CBS ran an article about how declaring bankruptcy doesn’t help much with student loans and I have been running into many debtors lately who have significant student loan debt, so I wanted to do a blog post about what happens with student loans in bankruptcy.

Can I Get Rid of My Student Loans in Bankruptcy?
Unfortunately, student loans are in a special category and are generally not dischargeable in bankruptcy. That means that at the end of the bankruptcy process, your student loans are still there and have probably accrued interest and penalties as well. The exception to this is if you can prove that student loans are an undue hardship. This level of undue hardship is a very high standard and very few people qualify.

Some of My Student Loans are Private Loans – Can I Get Rid of Them?
Again, unfortunately when the bankruptcy laws changed in 2005, all debts incurred for higher education expenses were defined as student loans and are not dischargeable in bankruptcy, even if they are private loans.

Can I Still Pay My Student Loans While in Bankruptcy?
Chapter 7 bankruptcies tend to be completed in 3-4 months, so at least penalties and interest are not accruing over 3-5 years, like in a Chapter 13. Many debtors find that once the credit cards and other unsecured debts are eliminated in Chapter 7, they are better able to make regular payments on student loans. If your loans are federally-backed student loans, there are also many repayment options available for coming up with a payment plan outside of the bankruptcy.

Dealing with student loans in a Chapter 13 can be a little trickier. Because student loans are unsecured debt, they cannot be treated any differently than any other unsecured debt (such as your credit cards or medical bills). It is quite possible that your Chapter 13 plan payment is not enough to make the minimum payments on the student loans, so some negotiation or supplementing may be needed to keep up with the interest during the Chapter 13 plan.

If you have student loans, this is something we would talk about planning for during the bankruptcy process and even during the initial consultation. It is important for you to understand your rights and the best way to handle these nondischargeable loans.

This is just a basic overview and is not legal advice specific to your situation. If you are considering bankruptcy or are feeling overwhelmed by debt, you should speak with an attorney in your area for legal advice. To speak with me regarding your situation, please email me at [email protected] or call 925-586-6738.