By Ryan C. Wood

One of the most frustrating challenges bankruptcy lawyers and other legal professionals face is obtaining accurate information from clients or other parties.  During a free consultation we will discuss your income, expenses and assets to determine if bankruptcy can help your circumstances.  What if you do not know or are not sure about something?  Well, that is going to significantly change the answers to your questions.  Some things are more important than others, but not knowing how much money you make each month or whether your name is on title of a house will create huge problems.

For example, we recently had a client come in for a free consultation.  One of the issues in this person’s case was whether they were on title to their parent’s home, on the mortgages or on both or vice a versa.  Initially this person told me they were only on the mortgages.  Okay great.  We discussed whether they had ever made a mortgage payment, whether they had ever paid the property tax or contributed to the down payment to purchase the home.

Unfortunately it turns out this person was not only on the mortgages but on title to the house as well and they were on title and the mortgages from the time the house was purchased.  Now wait a second, this is going to change what we had originally discussed during the initial free consultation.  Bankruptcy attorneys can only base their answers to questions upon the information provide and if the information provided is not accurate the advice or answers will not be accurate either.

How hard is it to understand that if you do not know your financial circumstances how can anyone else?  One of the first steps in getting out of financial difficulties is to review your income and expenses in detail.  Look into what your assets are worth.  Then sit down and start making the hard decisions about how to spend your income.

By Ryan C. Wood

If I file bankruptcy will everyone find out?  The quick answer is no, but like all legal matters, bankruptcy is part of the public record.  The catch is for the public at large to view bankruptcy filings they must have a Public Access to Court Electronic Records (PACER) account and pay $0.08 per page to view the records.  I have never heard of a private individual with a PACER account.  For the most part only attorneys or other legal professionals have PACER accounts.

So who does find out?  The most obvious people that find out are the people or companies that you owe money to.  The underlying goal of bankruptcy is to treat the people you owe money the same depending upon the type of debt that is owed.  All creditors must be listed in the bankruptcy petition schedules to be treated properly.  They will all receive notice of your bankruptcy case directly from the Bankruptcy Court via United States mail.

The next obvious people that find out are those who you give permission to run your credit report after the case is filed or you may have previously given them permission to run your credit prior to filing the bankruptcy case.  Anyone you have given permission for them to obtain your credit report could possibly find out if and when they check your credit.  If you try to purchase a vehicle, apply for credit or purchase a home your credit report will be obtained.

So who else could find out?  In a Chapter 13 bankruptcy you can choose to have the monthly Chapter 13 Plan payment deducted directly from your paycheck each month.  This requires a Wage Order from the Bankruptcy Court and then the order is served on your payroll department.  Whoever handles deductions and making changes to your pay in your payroll department will then know you filed bankruptcy.  Them and everyone they tell.  I in a large company this would probably not matter, but in a small company expect loose lips to pass along that you filed for bankruptcy.

Then there is the long answer.  It depends upon how hard someone searches the internet given how good Google is at their job.  I do not think most bankruptcy lawyers are aware of this, but the Bankruptcy for the Northern District of California posts the Section 341 Meeting of the Creditors calendars on their website.  The calendar lists the name of the person filing bankruptcy, the case number and other information about the date and time of the meeting of the creditors.  The Court’s website only posts these calendars for a limited period of time though.  Once the Section 341 Meeting of the Creditors is complete the Court posts new calendars with the recent cases filed.  The fact remains that Google does find the calendar and if someone Googles your name they could find out you filed bankruptcy.  The Google results showing your name would most likely be buried on page 5 or more of the search results though.

The bottom line is that very few people will ever find out that you have filed bankruptcy unless you tell them, owe them money or they have some reason to deeply search Google results for your name.

By Ryan C. Wood

In 2005 Congress reformed the Bankruptcy Code and created what is called the Means Test.  One of the key components of the Means Test is the calculation of current monthly income to determination if someone has monthly disposable income.  Disposable income is theoretically the amount of money someone can afford to pay back their debts each month.  If there is disposable income, then that income should be paid to creditors in a Chapter 13 bankruptcy case and a Chapter 7 bankruptcy should not be filed.  So what is income when filling out the Means Test?

Generally all income earned or received during the six-month period prior to a bankruptcy case being filed must be included in the Means Test, or “All figures must reflect average monthly income received from all sources, derived during the six calendar months prior to filing the bankruptcy case, ending on the last day of the month before the filing.  If the amount of monthly income varied during the six months, you must divide the six-month total by six, and enter the result on the appropriate line.”  The income listed is therefore a six-month average.  The result of the six-month average can vary widely depending upon whether income is received from self-employment, or someone is employed and receives a salary that stays the same each month.

Income That Should Be Included

There are many types of income that must be listed or counted in the six-month average of income received prior to filing bankruptcy.  The most common are wages, tips, self-employment income, income from operation of business or farm, child support, family support, alimony, pension income or retirement income.  Some of the not so common sources of income are food stamps, rental income, sale of stocks, interest, dividends, royalties, retirement account withdrawals, life insurance income or income from trust accounts.

Income That is Not Included

When creating the Means Test Congress carved out an area that is not included as income in the Means Test.  Social Security Act income is not income that will be counted in the six-month average.  There is a difference of opinion from jurisdiction to jurisdiction whether unemployment income is considered Social Security Act income.  You will need to consult an attorney in your jurisdiction to determine how the Courts make that determination.

Determining whether any monthly disposable income exists is a very important part of deciding what type of bankruptcy case to file.  Filing out the Means Test is a complicated process that is different in each case depending upon sources of income and the specific facts of the case.

For more information regarding income and the Means Test, contact our bankruptcy attorney or bankruptcy attorney.

By Kitty J. Lin, Attorney at Law

After the passage of the Bankruptcy Abuse Prevention and Consumer Protection Act in 2005, consumers have a lot more hoops to jump through to file for bankruptcy.  One of those hoops is the pre and post filing classes that are now mandatory.

Credit Counseling Course

If you want to file for bankruptcy, you first have to complete a credit counseling course within 180 days before filing your bankruptcy petition.  The credit counseling course normally lasts between 1 to 2 hours, and can be completed either by phone, on-line, or in person.  The class asks questions about your financial situation and provides different courses of action that may be available for you, including bankruptcy.  Towards the end of the course you will speak with a counselor, either online, by phone, or in person.  After you complete the class, you receive a certificate to prove you completed the course.  You will need to file this certificate with the court with very few exceptions.

The course providers need to be approved by the Department of Justice US Trustee Program, so you cannot just go to any course provider.  You need to check to see if the provider you are using to take the course is approved by the US Trustees.  The credit counseling courses range in price from Free to $50.  If you are below the poverty level, a lot of the course providers provide fee waivers and offer the course for free.

If you have not taken the pre-filing course prior to filing your voluntary petition, the court will most likely dismiss your case.  It does not matter if you take the course after your case is filed – the case will with very few exceptions still be dismissed, and you will need to re-file your voluntary petition, and pay another filing fee.  There are, however, exceptions to this credit counseling course rule.  One of the exceptions is that a waiver can be obtained if the judge determines, after a hearing, that the person filing the bankruptcy case cannot take the credit counseling course because of incapacity (such as a mental illness), disability (where the person filing the bankruptcy case is physically unable to take the course by phone, online, or in person), illness, or active military duty in a combat zone.  Needless to say, not many people fall in these categories to obtain a waiver of the credit counseling course.

Another exception is the “exigent circumstances” situation, where it was impossible for a bankruptcy filer to take the course prior to filing the voluntary petition due to an emergency.  This is not a waiver of the credit counseling requirement; rather, it is a postponement of the course requirement.  You still need to take the class soon after you file your petition.  Currently, many people file for bankruptcy to halt foreclosure proceedings, most likely filing the day before the foreclosure sale date.  What many do not know is that even if it was an emergency, they need to prove that they had requested the credit counseling course and just did not have the opportunity to take the class yet.

Financial Management/Debtor Education Course

After filing a bankruptcy case, the financial management/debtor education course must be completed to receive a discharge.  The financial management/debtor education course provides information on how to budget and manage money and using credit better in the future.  Similar to the credit counseling course, you may take the course online, in person, or by phone.  The fee for the financial management/debtor education course ranges between $9 to $50.

In a Chapter 7 case, the deadline to take the course is within 60 days after the first date set for the meeting of creditors.  Failure to take the post-filing course during this period could result in the case being closed without a discharge.  The main goal of most people filing a bankruptcy case is to obtain a discharge.  If you do not take this second and final class, then you will have file for bankruptcy protection for nothing.  If you wish take your financial management/debtor education course after your case is closed without a discharge, you will need to re-open your case to file the certificate, and court fee are necessary, both from court filing fees and additional attorney fees, if you have an attorney.

In a Chapter 13 case, you need to take the course prior to the discharge of your case, which normally lasts somewhere between 3 to 5 years.  However, it is advisable to take the course in the beginning, because most people forget the last requirement of taking the course.  You do not want to have made 5 years of Chapter 13 plan payments and not receive the discharge you worked so hard to obtain.

If you have further questions regarding the credit counseling or financial management courses, you may seek the advice of an experienced bankruptcy attorney or bankruptcy attorney at 877-9NEW-LIFE or 877-963-9543, or you can go to www.WestCoastBK.com to schedule a free consultation today.

By Kitty J. Lin, Attorney at Law

In a bad economy, it is not surprising to see an increase in bankruptcy filings.  However, once your debts are discharged in your bankruptcy petition, the law limits your ability to file another bankruptcy petition for a certain number of years.  This law was made to prevent bankruptcy fraud and abuse.  If anyone could discharge debt at any time banks would not want to lend money and would have severed consequences for economy, students and almost everyone.  How would anyone ever buy a home or start a business?  The Bankruptcy Code provides rules for when another bankruptcy can filed and under what chapter of the Bankruptcy Code.

Chapter 7 to Chapter 7

If you have previously filed a Chapter 7 or 11 bankruptcy petition and received a discharge, under §727(8) of the Bankruptcy Code, you cannot receive another discharge in another Chapter 7 bankruptcy petition until at least 8 years after the date you filed your first Chapter 7 petition.

Chapter 7 to Chapter 13

If you have previously filed a Chapter 7, 11, or 12, §1328(f)(1) indicates that you will need to wait at least 4 years from the date to file a Chapter 13 petition.

Chapter 13 to Chapter 7

Under §727(9), you cannot receive a Chapter 7 discharge if you have previously filed a Chapter 12 or 13 petition within 6 years before the date of filing the Chapter 7 petition.  However, the exception to this rule is that you can receive a discharge in the Chapter 7 petition if your previous Chapter 13 petition paid at least 100% of the allowed unsecured claims or 70% of the allowed unsecured claims and the plan was proposed by the debtor in good faith and was the debtor’s best efforts.

Chapter 13 to Chapter 13

§1328(f)(2) provides that if you received a discharge in a previous Chapter 13 petition, you cannot receive a discharge in another Chapter 13 petition filed in the 2 year period preceding the date of the discharge order in the previous Chapter 13 petition.

Thus, in summary, if you want to file a Chapter 7 petition, and you wish to file another Chapter 7 petition, you have to wait 8 years from the date you filed the first Chapter 7 petition before you will be eligible for a discharge.  If you want to file a Chapter 7 petition and you have previously filed a Chapter 13 petition, you have to wait for 6 years.  If you had previously filed a Chapter 7 petition and you wish to file a Chapter 13 petition, you have to wait for 4 years.  Finally, if you filed a previous Chapter 13 petition, you cannot file another Chapter 13 petition in the 2 year period prior to the discharge order of the previous Chapter 13 petition.

Now that you know how long you have to wait before you can file another bankruptcy petition, what happens if you cannot wait for the required 8,6,4, or 2 years?  Can you still file for bankruptcy?  The answer to this question is “Yes.”  However, the catch is that although you can file for bankruptcy, you do not receive a discharge.  This means that you will still be obligated to pay for the debts after your bankruptcy case is completed.  Many people may ask, if I don’t receive a discharge of all my debt, why should I file for bankruptcy?  There are a lot of reasons why people may file for bankruptcy protection: to stop a foreclosure sale on their home, to create a payment plan to pay off their non-dischargeable tax debt, to stop a levy of their bank accounts and many others reasons.

Whatever your reasons may be, you may wish to seek the services of a bankruptcy lawyer or an bankruptcy lawyertoday.  You can contact us today at 877-9NEW-LIFE or 877-963-9543 to schedule a FREE consultation with an experienced attorney today.  You may also go online to www.WestCoastBK.com for more information.

By Ryan C. Wood

Many companies that are publicly held companies and privately held give employees incentive stock options each year.  These shares usually vest at a predetermined percentage each year the employee stays employed by the company.  The company allows the stock to vest over a period of time to ensure the employee to make continued efforts on behalf of the company to receive the full grant of stock options.  The language of incentive plans may differ significantly.  This article discusses how purely incentive stock programs are treated if the stock incentive plan is not a qualified retirement account.  The specific language of a plan may make this article not applicable.  To determine the treatment of your incentive stock options when filing bankruptcy you should seek the counsel of an experienced attorney in your jurisdiction.

Most stock incentive plans have a section which defines the purpose of the plan.  When determining how the stock is treated the purpose section will most likely control.  Many plans will have language that provides the stock incentive plans is to motivate key employees to produce a superior return to the stockholders of the company and promote recruiting and retention of talented key positions.  This means that the plan is most likely not meant for retirement purposes or designed and used for retirement purposes.  The fact that these same companies usually have a 401k plan, or other retirement plan for the employee to participate in, is further evidence that their stock incentive plan is not for retirement purposes.  If the plan is not for retirement purposes or designed and used for retirement purposes the plan cannot be protected or exempted in bankruptcy as a qualified retirement account.

At the same time the stock incentive plan may not have to be solely used for retirement purposes though.  The stock incentive plan may have dual purposes such as supplementing income and to provide for retirement too.  The purpose of the plan must be scrutinized closely to determine if the company has designed for a dual purpose.

The Court will also look to see how the employee has used the stock incentive plan.  If the employee has exercised stock options prior to the filing of the bankruptcy case, the use of the funds received will be a factor as to how the plan is being used.  If the funds are used to improve a home or buy a car, theses uses of the funds are clearly not for retirement purposes.

In addition, a stock incentive plan may still be protected if the plan is subject to ERISA (Employee Retirement Income Security Act).  Whether the plan is subject to ERISA is again a fact based analysis as to how the plan is administered and the purpose and nature of use of the funds.  Factors include if payments under the plan are made after retirement, or skewed towards retirement, communications regarding the plan indicate the plan is maintained for purpose of maintaining retirement, or if the surrounding circumstances provide a reasonable person can ascertain the intended benefits are for retirement purposes.

The bottom line is if you have a stock incentive plan in which you have received stock options a close examination of the stated purpose of the plan, how the plan is administered, and how the funds can be used and when must be reviewed in detail to determine whether the plan can be protected in bankruptcy.

For more information regarding stock incentive plans and bankruptcy please contact our Oakland bankruptcy lawyer or bankruptcy attorney to determine your rights when filing for bankruptcy protection under Chapter 7 or Chapter 13 of the Bankruptcy Code.

By Kitty J. Lin, Attorney at Law

If you have to file for bankruptcy, you probably do not have much money to spend after paying for rent/mortgage, food, utilities, and other necessities.  You may not even have enough money to pay for those necessities.  That is why when people need to file bankruptcy, they try to find the cheapest method.  A lot of people turn to bankruptcy petition preparers to prepare their bankruptcy petition, because they believe that is the lowest cost.  However, bankruptcy petition preparers may end up costing you way more than bankruptcy attorneys may charge if they incorrectly prepare your petition and your assets are not adequately protected.  The Bankruptcy Code tries to protect your rights when it comes to bankruptcy petition preparers.

First, according to 11 U.S.C. §110, bankruptcy petition preparers can not offer you legal advice.  That means they cannot tell you whether you should file for bankruptcy at all, what chapter of bankruptcy to file under, when to file, whether your debts will be discharged, whether you can keep your assets, and other bankruptcy procedures and rights.  All they can do is prepare your petition.

Second, if they do prepare your petition, they have to provide you with notice that they are bankruptcy petition preparer and that they are not allowed to give legal advice, and they need you to sign the document and file it with the court.  They need to provide you with full disclosure.  They also need to provide their information in your bankruptcy filing, such as their name, ID number, address, and other identifying information.  They need to tell the court that they have taken your money to prepare your bankruptcy petition.

Finally, in the Northern District of California, bankruptcy petition preparers cannot charge you more than $150.00 total to prepare your petition.  This includes preparing, photocopying, and forwarding your bankruptcy papers to the bankruptcy court. Bankruptcy petition preparers are not bankruptcy attorneys and cannot provide any legal advice.

So, in summary, if you’ve paid more than $150 to a bankruptcy petition preparer, you have paid too much.  That’s because they cannot do anything for you other than actually preparing your schedules and forms.  If anything goes wrong, you are the one that is left holding the bag.  It is highly advisable that if you need to file for bankruptcy, please consult with an experienced attorney.  Although they cost more than a bankruptcy preparer, they can save you thousands of dollars if something goes wrong, protect your assets, relieve the stress of the process, and save you time.  Peace of mind is sometimes worth more than saving a couple dollars, and as the old saying goes, “You get what you pay for.”

You need to consult our bankruptcy lawyer regarding your financial situation if you are thinking about filing bankruptcy.  Please call us at 877-9NEW-LIFE (877-963-9543) today to schedule a free consultation.  You may also go to our website at www.WestCoastBK.com for more information about the bankruptcy process.

By Ryan C. Wood

This question is asked time and time again by potential clients.  The only accurate answer is maybe, depending on your income, expenses and assets.  Bankruptcy is all about your income, expenses and assets and how they interact to form a financial picture.

Chapter 7 Bankruptcy

To qualify to file a Chapter 7 bankruptcy the means test must be passed or be negative.  If the means test is zero or negative, then that means there is no monthly disposable income to pay back unsecured creditors, and therefore a complete discharge of debts is acceptable.  The means test was created in 2005 when the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) was passed by Congress.  The means test takes the average income for the six-month period prior to the month the bankruptcy case was filed and compares that average to the median income for the county lived in.  The means test then applies certain standard deductions for food, housing, utilities, vehicle expenses, health care costs and other deductions based upon the number of people in the household.  The problem is the means test is a fiction, not actual reality.  The means test attempts to apply a standardized system on households that are far from the same. During your free consultation with our bankruptcy lawyer you will discuss your income, expenses and assets to determine if bankruptcy can help you.

Chapter 13 Bankruptcy

There are quite a few reasons to file a Chapter 13 bankruptcy.  See Chapter 13 Basics for more details about circumstances that a Chapter 13 bankruptcy is helpful.  Just like a Chapter 7 bankruptcy, Chapter 13 bankruptcy is a function of income, expenses and assets.  Chapter 13 bankruptcy also incorporates the means test.  The means test in a Chapter 13 bankruptcy helps to determine how much monthly disposable income is available to pay back unsecured creditors in the Chapter 13 plan of reorganization.  Just like in a Chapter 7 bankruptcy there may not be any monthly disposable income to pay back unsecured debt.

The means test is a very complicated form that is the essential part of filing for bankruptcy protection since the passage of the BAPCPA in 2005.  It is imperative that anyone facing burdensome debt consult with a San Jose bankruptcy lawyer prior to filing for bankruptcy protection.

By Kitty J. Lin, Attorney at Law

If you file for bankruptcy, you need to be aware that under 11 USC §541, all your legal and equitable interests belong to the bankruptcy estate.  This means that all of your assets (such as household goods like furniture and electronics, vehicles, and real estate) no longer belong to you at the time you file for bankruptcy unless they can be protected.  The bankruptcy code usually allows you to keep all of your assets by using exemptions to protect these assets.  Please check our blog shortly for an explanation of the available exemptions to protect your assets in California.

What About Lump Sum Payments from Social Security?

If you receive a lump sum Social Security payment, it may be fully protected, depending on the circumstances.  Under C.C.P. Section 703.140(b)(10)(A) and C.C.P. Section 704.080, Social Security benefits are completely exempt.  See also 42 USC §407 (a), which states, “The right of any person to any future payment under this subchapter (Old-Age and Survivors Insurance Benefit Payments) shall not be transferable or assignable, at law or in equity, and none of the moneys paid or payable or rights existing under this subchapter  shall be subject to execution, levy, attachment, garnishment, or other legal process, or to the operation of any bankruptcy or insolvency law.”

However, you need to be careful.  If you are about to receive a lump sum Social Security payment, in order for the payment to be fully protected, you should deposit the lump sum Social Security payment into a new account that is separate from other accounts and not comingled in your existing bank accounts.  This is advisable for tracing purposes.  You can easily prove that the funds in the new account only came from the Social Security payment, and not for anything else.  If you have your Social Security benefits mixed in with other deposits, it may be harder to prove how much in your account can be fully protected.

Please contact one of our bankruptcy lawyers or bankruptcy lawyers if you have any questions regarding social security benefits, and how they affect your bankruptcy case.  You may also obtain Chapter 13 Bankruptcy information by calling us at 877-9NEW-LIFE or 877-963-9543 or visit us online at www.WestCoastBK.com to schedule a free consultation with an experienced attorney today.