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Who is the "typical" bankruptcy client?

4/22/2016

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 People often wonder what the "typical" bankruptcy client looks like. I often answer that the "typical" client looks just like you. Many times, the only difference between the person I am speaking to and the client in my office is that the client in my office has been handed an unexpected life challenge.
This challenge could be any of the following: job loss, divorce, child birth, medical issues, and various other unforeseen obstacles. If any of those challenges present themselves in one's life, it often causes a spiral of debt to be incurred. Once the debt is incurred, it is very difficult to pay it off. It is the extraordinary situation that a person stumbles through a life difficult life event and then is able to make more money than before that event. Therefore, the very challenge that led to the debt, often leads to a reduction in earning potential as well. When the earning power is reduced, there is no "extra" money to pay down the debt and so it increases.
In a divorce, two incomes are reduced to one. Housing and food become a greater part of each person's budget because it can no longer be shared. Additionally, attorney fees and moving costs needed to be incurred just to physically and legally separate.
A new child often means expensive medical bills, another mouth to feed, more clothes to buy, and additional furniture. All of this needs to be purchased with a potential reduction in income as the mother needs to stop working to give birth and recover. Even if she goes back to work, there is no extra income available to her but a dramatic increase in expenses.
Other medical issues pose the same problem. When someone is hospitalized or has to take days off to get medical treatment, his employment is threatened. Even if he keeps his job, the person often does not get paid for that time at the hospital. In addition to not getting paid, the person often new medical bills. That missing income is supplemented with credit cards or loans. However, those loans will be hard to repay because the person is not making more money after getting sick and may even be forced to work less.
The one thing that I almost never see is a person who just racked up debt just for the fun of it.
This Atlantic article does a great job of showing how regular middle class people can find their way into debt and live on the edge of insolvency.

For many people, the necessity of filing a bankruptcy is only one life challenge away.

http://www.theatlantic.com/magazine/archive/2016/05/my-secret-shame/476415/#about-the-authors
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What To Do About Wage Garnishments

8/29/2015

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I have been getting  a lot of phone calls lately regarding wage garnishments.  Getting a wage garnishment notice can be a very scary thing.  It can mean that you won't be able to pay for food, rent, or any other household necessities.  It can also cause you to default on other debts you may owe.  In California, the law allows your creditor to take 25% of your net income.  There are a couple of solutions to fighting a wage garnishment. 

First, you should call the creditor.  The creditor will want you to set up an alternative arrangement to the wage garnishment.   The best strategies for speaking to creditors include offering lump sum payments.  Often times the creditor will want to get information about where you bank.  It is not wise to give this information to the creditor, as he may use to levy your bank account.  Just call and see if he will work on an alternative payment arrangement.  If he is unwilling, move onto step two. 

Second, you should file an exemption as soon as your receive the garnishment notice. In California, you are allowed to file an exemption to the wage garnishment.  Click here for the claim of exemption form.  This form is aimed at showing the court that you cannot afford to give the creditor 25% of your net income because then you won't be able to pay for the necessities of life.  In addition to filing the claim of exemption form, you will also have to complete a financial statement.  The financial statement will disclose your income and expenses and show that there is no money available for the creditor because of your necessary expenses.  Once you completely fill out the claim of exemption and financial statement, then you must send those documents to the levying officer.  The levying officer is normally your county sheriff.  I recommend calling your local county sheriff department to determine how many copies of the claim of exemption and financial statement they require. 

Third, you can consider fighting the underlying judgment.  This is typically done by stating to the court that the original summons was not properly served and therefore the judgment that is being enforced is not valid.  In order to succeed on such a claim, you would have to prove that you never received the summons in the first place.  This can be a difficult task.  I suggest you contact an attorney for information if you believe you were never served with notice of the original lawsuit.

Finally, you can consider bankruptcy.  A bankruptcy will stop a wage garnishment in its tracks.  Additionally, any other debts that you may have will also be included in the bankruptcy.  You may be able to file a chapter 7 bankruptcy and eliminate all of your debts without having to pay any creditors back.  If you don't qualify for a chapter 7, then you may be eligible for a chapter 13 bankruptcy which gives you three to five years to pay back your creditors and normally reduces the amount of your debt as well. 

The above information is not intended as legal advice.  Please ensure that you consult with an attorney in regards to your options.
 

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The Chapter 7 Bankruptcy Filing Process

8/15/2015

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To many people, the process of filing bankruptcy is a mystery.  However, it does not have to be that way.  In its simplest form, a bankruptcy petition consists of four parts: a petition, schedules, a statement of financial affairs, and the means test.  

Part One - The Bankruptcy Petition:


The petition is the simplest form to fill out.  It simply states the debtor's name, address, and chapter of bankruptcy that is being filed.  It also includes facts about how much total debt and assets are involved in the case, whether the case is a consumer or non-consumer bankruptcy, and the name of you attorney.  This form is only three pages and it is all that is technically required to file bankruptcy.  The filing of this form alone, will put the automatic stay into effect. 

Part Two - The Bankruptcy Schedules:

The Bankruptcy Schedules list all of the debtor's assets, debts, exemptions, income, and expenses.  This section of the bankruptcy filing will show the court and the bankruptcy trustee what your monthly budget looks like and whether you have any assets that may be seized during the bankruptcy.  The bankruptcy trustee can only seize assets that are not exempt, or protected by law.  You can see a list of the California exemptions here, California Bankruptcy Exemptions.  The idea behind exemptions is that if a debtor has excess property that could be sold to satisfy his debts, then he should be required to do so.  The fact is that most people who are filing bankruptcy do not have property in excess of the allowed exemptions.  If that is a danger, then chapter 13 may be a more appropriate option.  In short, the bankruptcy schedules disclose the debtor's financial condition and support the petition's assertion that a chapter 7 discharge is deserved. 

Part Three - Statement of Financial Affairs:

The purpose of the statement of financial affairs (SOFA) is to discover any potential fraud or dubious past financial transactions.  In this section, the debtor must disclose her income from the past few years, payments to creditors prior to the bankruptcy, any lawsuits she has been apart of recently, and any other transfers of wealth that have occurred in the year prior to the filing of the bankruptcy.  The SOFA is essentially supposed to be able to determine whether the debtor is hiding any assets somewhere.  Again, this is not an issue for most debtors.  If it is an issue, then I suggest you speak to an attorney.  

Part Four - The Means Test:

The means test is essentially a formula that determines whether a debtor qualifies for a chapter 7.  It averages a debtor's income during the six months prior to filing bankruptcy.  Then it takes that average and compares it to the median family income.  If a debtor's income is less than the median family income for his county, then he automatically qualifies for a chapter 7.  If a debtor's income is more than the median family income, then he has to "pass" the means test before he can qualify for a chapter 7 bankruptcy.  To "pass" the means test, a debtor must have less than about $200 left over each month after allowable deductions.  The allowable deductions are a hybrid of IRS standard living expenses and a debtor's actual living expenses.  Calculating the means test can be difficult and I suggest that you speak to an attorney if you are confused on how it works.   Call us at 510-556-1160 or click below to schedule your appointment online.

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50 Cent Files Bankruptcy

7/20/2015

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On July 13, 2015, Curtis Jackson, aka "50 Cent," filed a chapter 11 bankruptcy.  A Chapter 11 bankruptcy allows a debtor such as 50 Cent to restructure his debt obligations while keeping important assets.   It appears that 50 Cent is using the bankruptcy as a way to negotiate down a $5 million dollar judgment against him.  

The bankruptcy allows him to use the automatic stay of the US Bankruptcy Code to prevent collection of the recent judgment against him.  This provides him with the freedom to continue using his assets while holding his creditors at bay until a suitable repayment plan is approved by the bankruptcy court.  

While you you may not have the $10-50 million in assets and debts that 50 Cent is claiming, the same basic principles of bankruptcy can apply to any debtor.  A sudden job loss or judgment can wreck financial havoc on a person's life.  Bankruptcy can help stop any creditors from pursuing further collection activity.   This can help a person create a plan for repayment (Chapter 13) or allows a person to simply get a fresh start (Chapter 7).  

A Chapter 13 Bankruptcy can be useful if you have significant assets or equity that you need to protect.  In that scenario, the asset can be protected if you pay back its value to the creditors.  For example, if you own a home worth $660,000 and have a mortgage balance of $550,000, then you have $110,000 in equity.  In a Chapter 13 Bankruptcy, you would be required to pay the unexempt equity you have in the home.  In California, your homestead exemption can be up to $100,000.  Therefore, of the $110,000 of equity available in the home, only $10,000 would be exposed to creditors.  In such a case, only $10,000 would be required to be paid to the creditors in order to keep the home over a 3-5 year period.  That amounts to about $175.00 per month.  The above scenario is a simplified example.  There are additional factors that apply to how much is to be repaid during a chapter 13 bankruptcy.  As such, I recommend that you speak to an attorney before filing bankruptcy.  




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We are a Consumer Bankruptcy and Federal Debt Relief Law Firm that counsels individuals seeking relief under the Federal Bankruptcy Laws.  Ryan P. Keenan is a licensed attorney in the States of Illinois and California and before the U.S. District Court for the Northern District of Illinois, and the U.S. District Court for the Northern District of California.
The Bankruptcy Attorney in our San Leandro office services clients living in San Leandro, Hayward, Castro Valley, Oakland, Alameda, Pleasanton, Livermore, Fremont, Newark, Union City, Berkeley, Concord, Walnut Creek, Clayton, Pleasant Hill, Martinez, Antioch, Albany, El Cerrito, Richmond, San Pablo, Pinole, Hercules, Orinda, Lafayette, Pittsburg, Brentwood, Danville, Alamo, San Ramon, Dublin, Sunol, Moraga, and other towns and cities in the East Bay Region, Alameda County, and Contra Costa County.
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