Partial Relief for Student Loans in Bankruptcy

You probably already know that most student loans survive bankruptcy. What you may not know is that there still is some hope for relief in bankruptcy. Read on to learn more.

Educational Loans are Tough to Discharge in Bankruptcy

The general rule that most people know is that student loans typically survive a bankruptcy. In other worse, loans used for education are not dischargeable in bankruptcy proceedings.

This probably makes sense. Everyone would go run up large educational debts and immediately declare bankruptcy after graduation. This is not sound public policy.

However, current rules make it incredibly difficult to discharge student loans in bankruptcy. But there is still hope!

Partial Discharge of Student Loans is Possible in Bankruptcy

The good news is that student loan discharge in bankruptcy is not an “all or nothing” proposition. A good bankruptcy attorney will carefully analyze the dischargeability of student loans. It is not all black-and-white.

Let’s use the following example: a debtor takes out $15,000 in student loans per year of college. However, tuition only cost $10,000 per year. The remaining $5,000 per year was used for living expenses. Over for years of college, the student loans total $60,000 — $20,000 of which was not used for the “cost of attendance.”

This is really important! The debt incurred for “cost of attendance” is not dischargeable, but the rest is! In our scenario above, that means that $20,000 of the $60,000 can be discharged in bankruptcy. Even though a total discharge of the educational loans is not possible, a 1/3 discount is still an amazing outcome.

Nothing is Automatic When it Comes to Educational Loans and Bankruptcy

In the scenario above, the bankrutpcy court can discharge 1/3 of the educational loans. However, nothing happens automatically.

A bankruptcy filer must take additional steps in order to qualify for even a partial student loan discharge. This complicated process is known as an “adversary proceeding.”

A good bankruptcy attorney will aggressively prosecute an adversary proceeding for you. Make sure that you ask your bankruptcy attorney about partial student loan discharges in bankruptcy.

My office helps student loan borrowers obtain discharges of student loans in bankruptcies. Please call my office at (916) 333-2222 to schedule a consultation today! 

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Is Child Support Dischargeable in Bankruptcy?

Bankruptcy is an incredibly useful tool for eliminating debt. However, some debts are not excusable in bankruptcy. Did you know that one such debt is child support?

Courts Treat Child Support Differently in Bankruptcy

The bankruptcy code defines child support (also known as a Domestic Support Obligation, or DSO) as an automatically non-dischargeable debt.

This makes sense. Past due child support is a very important type of debt. The bankruptcy code gives honest, but unfortunate debtors an opportunity to obtain a fresh start. However, lawmakers have provided special protections for DSOs in bankruptcy.

Bankruptcy Filers Must List All Debts

A bankruptcy filer must list all debts on the bankruptcy petition and schedules. This includes debts that are not dischargeable in bankruptcy, such as DSOs.

Why is this? The bankruptcy code requires full and complete disclosure. Past due child support is an obligation of the bankruptcy filer, and it must be listed. The bankruptcy court, trustee, and creditors all have a right to understand the full financial picture of the person filing bankruptcy.

One of the consequences is that the bankruptcy court will notify the recipient of the child support of the pendency of the bankruptcy. The Chapter 7 Trustee will also notify the DSO recipient.

On the flip side, if you are owed child support you may receive formal notice that the owing individual is filing for bankruptcy. This does not mean that they no longer owe you child support.

Bankruptcy Can Help Manage Past Due DSO Payments

Chapter 7 bankruptcy eliminates unsecured debts. This will make it easier to manage priority debts such as taxes or past DSOs.

However, Chapter 13 bankruptcy might be a better option. Chapter 13 bankruptcy allows debtors to repay their obligations over time under bankruptcy court supervision. A Chapter 13 reorganization can help a debtor get caught up on past-due DSOs in an orderly fashion.

My law firm helps bankruptcy filers with Chapter 7 and Chapter 13 cases all over Northern California. Call my office at (916) 333-2222 to schedule a bankruptcy consultation today!

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When Does the Automatic Stay End?

The automatic stay is one of the most important provisions of the Bankruptcy Code. The stay halts all collection activity against a bankruptcy filer. But when does the stay end?

The Automatic Stay Protects Debtors

The automatic stay is codified in 11 U.S.C. § 362. With certain exceptions, the stay prohibits parties from taking collection activity against a bankruptcy filer.

The bankruptcy code affords debtors “breathing room” when they declare bankruptcy. The automatic stay gives debtors a chance to either liquidate their debts and assets, or reorganize their finances. Either process would be meaningless without some protection for the debtor.

The stay stops post-filing wage garnishments, bank levies, lawsuits, and even foreclosures. The stay also stops harassing phone calls and collection letters. The bankruptcy court can punish a creditor that violates the automatic.

The Automatic Stay Lasts Until Discharge

In a typical Chapter 7 bankruptcy, the automatic stay remains in effect until the debtor is discharged. See 11 U.S.C. § 362(c)(2)(C). This is not the end of the analysis. With respect to property of the estate, the stay lasts until the property is longer part of the bankruptcy estate. See 11 U.S.C. § 362(c)(1). In most cases, this means that creditors cannot take action against a debtor’s property until the bankruptcy is closed. See 11 U.S.C. § 554(c).

Further complicating things is the fact that not all bankruptcy cases end in a discharge. The stay terminates when a bankruptcy case is closed or dismissed, whichever is earlier. See 11 U.S.C. § 362(c)(2).

The Timing of When the Automatic Stay Terminates is Important

Remember, bankruptcy does not eliminate all debts. A creditor with a non-dischargeable debt will be able to resume collection activity as soon as the stay ends. If the creditor tries to collect prior to the end of the stay, the creditor can be held in contempt of court and punished.

Secured creditors also have to abide by the stay. Typical creditors that have secured debts include car lenders and mortgage companies. A car lender can repossess a bankruptcy filer’s car as soon as the automatic stay ends if the bankruptcy filer isn’t current on his or her car payments.

The automatic stay provides immediate relief to debtors facing imminent collection activity such as lawsuits or garnishments. Call my office today at (916) 333-2222 to discuss your bankruptcy options.

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Do Creditors Take Belongings in Bankruptcy?

Sacramento Bankruptcy Lawyer Rick MorinPotential bankruptcy filers often ask me “can I keep X if I file for bankruptcy?” 9.5 times out of 10 the answer is “yes.” This is where the rubber hits the road in Chapter 7 bankruptcy. Keep reading to learn more about the property you can and cannot keep in a bankruptcy.

Chapter 7 is a Liquidation Bankruptcy

The bankruptcy court discharges unsecured debts in a Chapter 7 bankruptcy. The court can also seize property for the benefit of the bankruptcy filer’s creditors. Property that is taken is called “unexempt” property.

A Bankruptcy Trustee typically sells unexempt property at an auction. The Trustee uses the auction proceeds to pay down some or all of the debts that are being discharged by the court.

Don’t worry though. There is much more to the story.

Most Bankruptcy Filers Don’t Lose Any Property in Bankruptcy

95+ percent of all Chapter 7 filers don’t lose any property during bankruptcy proceedings. A savvy bankruptcy filer can protect most if not all of their property. This is called “exempting” property. In California, a debtor can exempt a home, cars, boats, jewelry, and even cash in the bank. Keep in mind: each case is different.

Property that is fully exempt cannot be seized by the court. Most bankruptcy filers in Califonria don’t have any unexempt property, so they don’t lose anything during their case.

What property is exempt versus non-exempt? Great question!

California Law Specifies Bankruptcy Exemptions

Very specific provisions in California law define which bankruptcy exemptions available to a debtor. A bankruptcy filer should consult with a qualified attorney before deciding which set of bankruptcy exemptions to utilize. One set of exemptions is better for homeowners with equity in their home. Another set of exemptions is better for debtors without a home or without any equity in their home.

Going it Alone in Chapter 7 is Risky

The big risk in a Chapter 7 bankruptcy is not applying the appropriate exemptions to your property. Running out of bankruptcy exemptions can also spell trouble.

Careful pre-petition analysis is required to successfully emerge from Chapter 7 without losing any property. Making the wrong decisions prior to filing can have disastrous consequences. This is one of the reasons why it is so important to hire a great bankruptcy attorney.

Be careful about exempting all of your property prior to filing for Chapter 7 bankruptcy. I can help you with this process from start to finish. Please call my office at (916) 333-2222 to discuss your bankruptcy options. 

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Sued by Sheri Carello Bankruptcy Trustee?

Sacramento Bankruptcy Lawyer Rick MorinNot everybody knows that a significant amount of litigation occurs in the bankruptcy courts in Sacramento. I represent both debtors and creditors in these “adversary proceedings.” Have you been sued by Sheri Carello? Below is some important information for you to consider.

Why am I Being Sued by Sheri Carello?

Sheri Carello is a Chapter 7 bankruptcy trustee in Sacramento. The bankruptcy court assigns her to oversee Chapter 7 cases on a random basis.

Ms. Carello represents the interests of the creditors in bankruptcy cases. She can take legal action against individuals and entities when she believes that she can recover money or property for the benefit of creditors in a bankruptcy.

While it might appear that Ms. Carello is suing you under her own name, she actually is suing on behalf of the bankruptcy estate to which she has been assigned. If you are sued by Ms. Carello, it is important to note that it is not personal. She is just doing her job and following the bankruptcy rules and laws to maximize the recovery for the creditors.

You Have Limited Time to Respond to the Complaint

An adversary proceeding in the bankruptcy court is started by the filing of a formal complaint. The complaint will be assigned its own independent case number. But the case will be attached to the underlying bankruptcy proceeding.

In the Eastern District of California, a defendant in an adversary complaint has just 30 days from the date the summons is issued to respond to the complaint. This is different than most other court procedures. Usually the defendant has a certain amount of time to respond after the complaint is served. In the bankruptcy court, the clock starts ticking once the summons is issued by the court itself.

Bankruptcy procedures are usually more streamlined than procedures in other courts. This is why there is a tighter deadline for a defendant to respond. In any event, don’t miss your 30 day window. Failing to respond to the complaint will mean that the defendant automatically loses the adversary.

Bankruptcy Litigation is Very Similar to District Court Litigation

Some people incorrectly assume that an adversary proceeding in the bankruptcy court isn’t very important. This could not be further from the truth. Both the federal rules of evidence and federal rules of civil procedure apply. In some cases, these rules are modified by the bankruptcy rules. For the most part, any federal litigator will feel right at home in the bankruptcy court.

In most cases, the bankruptcy courts can try matters to a final resolution, issue judgements, and can even sanction parties.

Have you been sued in a Bankruptcy Court adversary proceeding? Call my office at (916) 333-2222 to discuss your legal options. Don’t delay. 

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What is a Bankruptcy Adversary Proceeding?

Sacramento Bankruptcy Lawyer Rick MorinAn Adversary Proceeding in a bankruptcy case is a big deal. You can think of an Adversary Proceeding as a lawsuit that occurs within an existing bankruptcy case. Read on to learn more about this important bankruptcy tool.

In most consumer bankruptcy cases, there isn’t a lot to fight about. The bankruptcy filer discloses all relevant information about their financial affairs, the court reviews their materials, and the case is moved along the process without a lot of friction. Not all bankruptcy cases are so easy.

Some Bankruptcy Cases Involve Litigation

A small percentage of bankruptcies involve legal disputes that must be adjudicated by the court. To do so, a party must file an Adversary Proceeding. These legal cases are filed in the bankruptcy court.

For the most part, litigation surrounding a debtor’s financial affairs is halted when a bankruptcy is filed. This means that most disputes must be shifted to the purview of the bankruptcy court. The idea is simple. Because the bankruptcy court is already handling the debtor’s financial affairs, the court is the best place for any disputes to be heard during the bankruptcy.

Adversary Proceedings are Just Like Lawsuits in Federal Courts

Adversary Proceedings in bankruptcy are very similar to litigation in the federal district courts. The Federal Rules of Evidence apply, as do the Federal Rules of Civil Procedure. Some of these rules are modified by the Bankruptcy Rules. For the most part, a federal litigator would feel right at home in a bankruptcy Adversary Proceeding.

Parties to Adversary Proceedings can file motions, engage in discovery, and have a full trial to the merits of a legal matter. At least here in the Eastern District of California, the bankruptcy judges keep the Adversary Proceedings moving along. Don’t expect a typical Adversary Proceeding to languish on the court docket.

What to do if Served With an Adversary Proceeding

Have you been served with notice of an Adversary Proceeding? Do not ignore the summons. The bankruptcy court will move quickly if you do not participate. Keep this in mind: not all bankruptcy counsel accept representation in Adversary Proceedings. Make sure that you contact a qualified bankruptcy attorney quickly. Not responding to an Adversary Proceeding means that you will give up your rights.

My law firm helps both debtors and creditors litigate complex issues in the bankruptcy court. Please contact my office at (916) 333-2222 to discuss Adversary Proceedings in bankruptcy. 

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How To Amend Bankruptcy List of Creditors

Sacramento Bankruptcy Lawyer Rick MorinYour bankruptcy petition should be as perfect as possible before it is sent to the court. However, issues can arise after filing. A common problem is the failure to list all creditors. Here is how to amend your bankruptcy petition to fix that problem.

Listing All Creditors is Important

When a bankruptcy petition is submitted to the court, the court mails an official notice to your creditors. The court can only send the notice of bankruptcy to creditors that it knows about. The court relies on debtors to supply the list of creditors.

Creditors can be listed on Schedule D or E/F of the bankruptcy petition. Schedule D is reserved for secured creditors. Schedule E/F is reserved for unsecured creditors.

Occasionally, a debtor forgets to list one or more creditors on the initial paperwork. Or maybe a new collection notice shows up after the bankruptcy has been filed. Good news: the courts permit you to amend your bankruptcy petition after filing.

How To Amend Bankruptcy List of Creditors

  1. List the legal name, address, and debt amount of the new debt on the appropriate bankruptcy schedule.
  2. Write a big “A” next to the name of the creditor. This tells the clerk of the court which debts are being added.
  3. In the Eastern District of California, you are required to prepare an Amendment Cover Sheet. You can download this form from the court website.
  4. Prepare a new Master Address List that contains only the name and address of the new creditor. There is a helpful tool on the court website that helps with this.
  5. Prepare a Proof of Service. You are required to mail the amendment and a copy of your 341 Notice to each creditor that you are now including in the bankruptcy along with two other parties listed below. You must file a Proof of Service with the Court to show that you have mailed the notice to the appropriate parties.
  6. Prepare three envelopes: one addressed to the new creditor; one addressed to your bankruptcy trustee; and one addressed to the United States Trustee’s Office. Include a fully copy of the amendment along with an unsigned Proof of Service. Put these in the mail.
  7. Sign your Proof of Service. You can now take your Amendment Cover Sheet, Amended Schedule, Master Address List, and Proof of Service to the Court for filing.

As you can see, making an amendment to your bankruptcy petition does take some work. It isn’t difficult to do, but the right steps must be followed. Skipping a step can result in an invalid amendment. This means that the new debt might not be included in your discharge.

I help make bankruptcy easy by handling the process from start to finish for my clients. Please call my office at (916) 333-2222 if you want to discuss how bankruptcy can help you. 

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4 Common Myths About Sacramento Bankruptcy

Bankruptcy Myths Sacramento

As a bankruptcy lawyer in Sacramento, I hear all kinds of misinformation about bankruptcy. Here are the top five myths about bankruptcy that I hear on a regular basis.

Myth 1. I can’t keep my car when I file bankruptcy

It is extremely rare for a person to lose their car during the bankruptcy process. In a typical bankruptcy, the bankruptcy filer doesn’t lose any of their property, much less their car. In most cases, your car is protected from being taken by the bankruptcy trustee. If you are worried about losing your car when you file for bankruptcy, you should discuss your situation with a qualified bankruptcy attorney.

Myth 2. My wage garnishment won’t stop until the end of my bankruptcy

When a person declares bankruptcy, all collection activity has to stop immediately! This includes wage garnishments and bank levies. A garnishment must cease immediately upon the filing of the bankruptcy case. You don’t have to wait until your bankruptcy discharge (at the end of the bankruptcy) to get relief from garnishments. This is why it is important to file your bankruptcy case as soon as you know that a garnishment is about to hit your paycheck. The sooner you file, the better chance you will have at keeping all of your wages to yourself.

Myth 3. The judge is going to criticize the reasons why I got into bankruptcy

This is completely untrue! For the most part, nobody cares why you are in need of bankruptcy assistance. Bankruptcy filers are there for numerous reasons, including job loss, medical issues, gambling, tax problems, or just making poor financial decisions. The important part is that you “play by the rules” in the bankruptcy court by following the requirements of the bankruptcy code.

Myth 4. Bankruptcy is too expensive for me

My law firm strives to make bankruptcy as affordable as possible. While each bankruptcy case is complex and requires serious work to complete successfully, we are able to provide real value to our clients. Lastly, the cost of not filing for bankruptcy is the real problem. If you’re endlessly paying high interest credit cards, payday loans, having money garnished from your wages, or are facing lawsuits, you should seriously consider whether bankruptcy is a better alternative than doing nothing.

If you have questions about declaring bankruptcy in the Sacramento area, please call my office at (916) 333-2222.

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Uber Bankruptcy Sacramento

Uber Bankruptcy Sacramento

The number of people driving for Uber and Lyft these days is increasing rapidly. I have noticed many bankruptcy filers in my office reporting that they are working, at least part time, for Uber and Lyft. What does this have to do with bankruptcy? Let me tell you!

You Must Disclose All Income in a Chapter 7 Bankruptcy

Failing to disclose a source of income to the bankruptcy court can create some issues. Not everyone considers driving for Uber or Lyft to be a source of income, especially if they are just driving sporadically. However, all sources of income, even minor ones, must be disclosed.

Because there are income limits to Chapter 7 bankruptcy, extra income from Uber or Lyft can create issues. If you’re already close to the Chapter 7 Means Test limits, extra income can push you over the edge and into a Chapter 13 bankruptcy. There are some strategies to deal with this issue, but it is important to disclose all of your income sources to your attorney when you first meet.

Driving for Uber during the middle of your Chapter 7 case can also create some issues. In some cases, the bankruptcy trustee assigned to your case won’t want you running a business during your bankruptcy. This is because the bankruptcy trustee owns your liability during the pendency of your case. If you drive for Uber and file Chapter 7 bankruptcy, your attorney needs to check with your assigned Trustee to determine whether that will be a problem for them.

Extra Income in a Chapter 13 Can Increase Your Monthly Repayment

The goal of a Chapter 13 is to repay at least a portion of your debts over time under the supervision of the bankruptcy court. The court averages your monthly income over the preceding six months to determine what they think you should be able to afford to repay to your creditors.

If you are reporting extra income from Uber or Lyft during this six month look back period, your Chapter 13 payment might have to increase. But not everyone drives for Uber on a regular schedule. If you have sporadic side income from a Uber or Lyft, you should make sure that your attorney understands how often (or not) that you are out there driving.

Details really matter in a Chapter 13 bankruptcy case. You don’t want to be stuck in a Chapter 13 plan that you cannot afford. Make sure you discuss any extra income or side jobs with your attorney before you file your bankruptcy case.

I help consumers and business owners deal with debt and their finances in Sacramento. Please call me at (916) 333-2222 to discuss your bankruptcy options today. 

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5 Bankruptcy Things You Need to Know Before Christmas

Sacramento Bankruptcy Lawyer Rick MorinWith Christmas just around the corner, many of you will be squeezing your paycheck to cover the extra expenses of gifts for friends, family, and coworkers. This struggle can lead to a hard look at your finances for the new year, and maybe even deciding that 2016 if finally the year to become debt free.

However, Christmas can be a tricky time if you are planning on filing for bankruptcy in the new year.

1. Watch Your Spending: Of course, it’s normal to spend more on average during the holiday season. But for many, it is also the time to finally pay back friends and family for help throughout the year. Maybe paying back mom and dad for letting you stay at their house while you were between jobs, or finally paying off that loan to your significant other to fix your car. Giving back to family and friends can feel like the right thing to do, but large payments can be construed as a preferential payment. In some cases the Court will go after loved ones to get that money back during a bankruptcy.

2. Watch Out for That Christmas Bonus: When filing for bankruptcy, the Court will look at your average monthly income for the last 6 months. This average is very important and will determine what chapter of the bankruptcy code under which you are allowed to file. So, if your income is already on the cusp of the means test, a large bonus might push you over the Chapter 7 limits and into a Chapter 13 reorganization.

3. Gifts: Have any gift items that have been passed down to you or inherited? Your great aunt’s fur coat? Your uncle’s signed baseball cards? Well during bankruptcy, you must disclose all of your personal items and their worth. In order to protect these family heirlooms, always inform your attorney of their existence before the signing — even things that you might consider to not have any real value.

4. New Year, New Forms: This last year the US Bankruptcy Court release new bankruptcy filing forms. These new forms went into effect on December 1st of this year.  The Court will not accept bankruptcies submitted using the old forms. Prevent frustration and delay and make sure that your bankruptcy is filed on the correct forms.

5. Increased Prices: Bankruptcy prices might change in 2016. If you want to become debt free in 2016, get started today.

We hope that you have a great Christmas and a happy New Year. Please call the office at (916) 333-2222 if you have any questions about getting a fresh start through bankruptcy in 2016.

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Law Office of Rick Morin, PC. A 5-star law practice serving all of California. 

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500 Newport Center Drive Suite 610
Newport Beach, CA 92660

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The content on this website is intended for informational purposes only and should not be construed as legal advice. Any testimonials or endorsements do not constitute a guarantee, warranty, or prediction regarding the outcome of your legal matter.