Report of No Distribution

I am often asked about what a “Notice of Filing Report of No Distribution.” Almost all Chapter 7 debtors will receive such a notice in their Chapter 7 Bankruptcy case. It is an important document that has big implications for your bankruptcy.

As I discussed a few weeks ago, some Chapter 7 cases are “asset” bankruptcies, while most are “no-asset” bankruptcies. In no-asset Chapter 7 cases, the bankruptcy trustee will issue a report that specifies certain information about his or her administration of the bankruptcy.

This “no asset report” is important because it tells all interested parties that there will be no distribution of funds from the debtor’s bankruptcy. A creditor needs this information to know whether they can expect to receive any funds from the bankruptcy trustee.

Once the no-asset report has been issued, the debtor will also be confident that the bankruptcy trustee will not be attempting to seize any of their property. The most common item taken from a debtor in a Chapter 7 is a tax refund. When the report of no distribution comes out, the debtor will know that their case is proceeding without any need for turning over property to the trustee.

The report also contains an important deadline that creditors must follow. The report provides for a “last day to file an objection.” Importantly, this objection deadline is NOT the deadline for a creditor to object to the bankruptcy itself. Rather, it is a deadline for creditors that want to object to the trustee’s no distribution report itself. Many clients confuse this deadline with the deadline for creditors to object to the bankruptcy or the discharge of specific debts.

Please contact Sacramento Bankruptcy Attorney Rick Morin for more information regarding Chapter 7 or Chapter 13 bankruptcy. The office phone number is (916) 333-2222.

Bankruptcy Asset Case

There are two main types of Chapter 7 bankruptcies: asset and no-asset cases. There is a huge difference between the two. Read on to learn more about a bankruptcy asset case.

Legally speaking, a Chapter 7 Bankruptcy is known as a “liquidation” bankruptcy. The bankruptcy court is empowered to liquidate your assets to provide a distribution of funds to your creditors. In more simple terms, your assets can be sold and used to pay off some of your debts in a Chapter 7 bankruptcy. Any debt that remains at the end of your case is discharged and you get a fresh start.

Over 99% of the Chapter 7 bankruptcies that I file are “no asset” bankruptcies. This means that there are no assets for the Chapter 7 Trustee to liquidate. In these cases, no property is taken from the debtor, and creditors receive no distribution of money from the court. Nearly all debts are wiped out and everyone moves on. Simple!

Occasionally a debtor will have too much property to protect (which us lawyers call “exempt”). In this case, the debtor must turn over property to the Trustee. The Trustee then sells the property at an auction, takes a commission, and distributes the rest to creditors.

The thing to remember is that Chapter 7 Trustees earn a commission on any property that they can recover. This incentivizes the Trustees to aggressively root out any hidden assets for the benefit of a debtor’s creditors. A Trustee that can recover property in a case can therefore enhancer his or her own bottom line.

Why would anyone still want to file bankruptcy is they are going to lose property to the Court? Great question! Maybe a debtor will not be able to protect their tax refund, and let’s say it would have been $2,000 this year. But remember, the debtor is discharging their unsecured debt. If they are getting rid of $50,000 in credit cards, this is a good deal! Another favorite asset for Chapter 7 Trustees is a car! Cars are easy to liquidate at auction, so Trustees always enjoy getting their hands on vehicles.

A good Chapter 7 attorney will be able to advise a client before filing whether any funds or property will need to be turned over to the Trustee. This is an important part of deciding whether Chapter 7 or Chapter 13 bankruptcy is appropriate for the client.

Asset Chapter 7 cases can be very complicated. If you need help deciding whether to file for bankruptcy, please call my office and I can walk you through the process. My phone number is (916) 333-222.

Bankruptcy Creditors

Preparing a successful Chapter 7 or Chapter 13 bankruptcy involves many steps. One of the most important steps in any bankruptcy is to ensure that you have listed all of your creditors. Here’s why.

After a Chapter 7 or Chapter 13 bankruptcy is filed, the court will send every creditor a notice of bankruptcy filing. This notice tells your creditors that you have filed bankruptcy. The notice also gives your creditors information about your case such as the date of your bankruptcy meeting of creditors. The notice also contains important deadlines.

The court will only mail this notice to creditors that have been properly listed on the bankruptcy schedules. After all, the bankruptcy court does not know who you owe money to. The court simply takes information that is provided on your bankruptcy paperwork and uses that information to notify all of the relevant parties.

One question that I am often asked is what to do when a creditor has sold a debt or assigned it to a collection agency. My rule is to be as thorough as possible when listing bankruptcy creditors. I prefer to list the original creditor, such as capital one, and also the collection agency that the debt is it assigned to, such as Midland Funding LLC. This ensures that all appropriate parties receive your notice of bankruptcy. It also ensures that each creditor will stop contacting you once your bankruptcy is filed.

Another trick is to make sure that you notify your creditors at the appropriate mailing addresses. Look on your debt statements for a “correspondence address.” This address might be different than the payment address. You also might need to use Google or other tools in order to locate the mailing address for your various creditors. Sometimes this information is not easy to find on a creditor’s website.

The bottom line is that you should take time to ensure that you list all of your creditors at the right address on your bankruptcy paperwork. Bankruptcy law and the rules of the bankruptcy court tell you that only properly listed debts will be discharged in your bankruptcy. The main point of this article is this: list all of your debts, even debts that you are not sure about.

After going through bankruptcy, you don’t want to discover that you forgot to list major creditors. Dealing with creditors after your bankruptcy is over can be difficult. Getting things right at the beginning will help you down the road.

Please call my office if you have any questions about filing bankruptcy in Sacramento. My phone number is (916) 333-2222.

 

 

Sacramento Bankruptcy Lawyer Rick MorinGoing through a Chapter 13 Bankruptcy can be confusing enough without tax season sneaking up behind you. In this post, I will go through some frequent questions regarding Chapter 13 bankruptcy and taxes. 

What returns are due?

According to the Bankruptcy Code, all Chapter 13 debtors must file all required tax returns for the years ending within four years of your bankruptcy filing. If you’re going to be asking the government for assistance in the form of bankruptcy, the IRS expects that you have played by their rules and filed all of your tax returns. Makes sense!

In addition, you’ll also need to stay current with all applicable federal, state, and local tax returns throughout your bankruptcy. A typical Chapter 13 bankruptcy will last between 3 and 5 years, so it is important to stay on top of your taxes during that time. Even one missed return can put your bankruptcy at jeopardy! 

When should I file?

The federal tax returns for the four preceding years must be filed before your Bankruptcy Hearing, or “Meeting of the Creditors”. You can however, apply for an extension for 120 days if you need to. In general though, it’s always best to file as soon as possible so that all debts are known beforehand. (It can also take some time to verify that all the correct returns were filed.)

What will happen if I don’t file?

If for whatever reason you don’t file your tax returns, your Bankruptcy Plan may not be confirmed. This may result in your case being dismissed. You should also note that interest and penalties will be charged on returns not filed by the due date under the Internal Revenue Code. For more than just bankruptcy reasons, it is critical that your taxes are filed on time each year. 

Where can I get proof of filing?

Your bankruptcy trustee may ask you to submit copies of transcripts of your tax returns as proof of filing. If you don’t have the copies you can request a free transcript from the IRS website, www.irs.gov or submit a Form 4506-T, Request for Transcript of Tax Return, with the IRS by calling 1-800-908-9946. Keep in mind this process may take 10 to 15 days after the request is received. When you go to court for your Meeting of Creditors, it is best to have all of your tax-related issues sorted. If not, the bankruptcy trustee may continue your hearing to allow you time to resolve any issues. 

Have more questions?

If you’re planning on filing for a Chapter 13 Bankruptcy and have more questions regarding your situation, please call my office at (916) 333-2222.

Sacramento Bankruptcy Lawyer Rick MorinWhen a person signs their bankruptcy forms, they do so under penalty of perjury. This means that the government can prosecute a bankruptcy debtor for lying on their bankruptcy paperwork. This alone is a good enough reason to tell the truth and not hide anything. Surprisingly, omissions on your bankruptcy paperwork can have effects in other areas too.

A person filing bankruptcy must realize that the entire bankruptcy petition (except for their social security number) becomes a public record. Anyone that wants to have access to the bankruptcy filing can do so by looking at it at the courthouse or even online via PACER. I always tell my clients that they can expect to receive solicitations from car dealerships and credit card companies after they file their bankruptcy. This is because advertisers search the court docket for bankruptcy filings. Interesting, right?

There is a story circulating amongst Sacramento bankruptcy attorneys that illustrates the importance of telling the truth on your bankruptcy. A debtor filed a bankruptcy and failed to list all of their personal property on Schedule B of their petition. Schedule B is the bankruptcy form where the debtor is required to list all of their personal property, no matter how insignificant. In this case, the debtor did not list some “toys” such as expensive cameras and bicycles. Later on, a burglar stole these cameras and bikes from the debtor’s house. When the debtor filed an insurance claim, the insurance company reviewed the debtor’s bankruptcy petition — 3 years after the bankruptcy! Because the debtor did not list these assets in their bankruptcy, the insurance company denied the claim.

Your bankruptcy petition and schedules could also be introduced as evidence in litigation down the road. Again, since you have to sign your paperwork under penalty of perjury, you should make sure that it is true and accurate!

I assist all of my clients with making sure that their paperwork is true, accurate and complete. My office uses proprietary procedures and check lists to ensure that we don’t miss any details, important or not. A bankruptcy filing is a big deal, and we work hard to do the best that we can every time.

If you have any questions about filing for bankruptcy in Sacramento, please call me at (916) 333-2222. Don’t delay!

Sacramento Bankruptcy Lawyer Rick MorinNo one ends their bankruptcy thinking that they will need to do it again. However, as most people facing bankruptcy already know, you can’t plan for everything life throws at you. “Can I file bankruptcy again?” is a question that we get asked quite often. Whether there is a medical emergency, divorce, or if you lose your job – a second bankruptcy may be a viable financial option.

As a reminder, in a Chapter 7 all or most of your debts are discharged. In a Chapter 13, you are focused on reorganization so that you can repay some of your debts over time.

While there aren’t any rules on how many times you can file bankruptcy, the court does limit when you can file again. This can be confusing, because the length of time varies based on what type of bankruptcy you originally filed.

For example, you must wait 8 years in between Chapter 7 bankruptcies. The time is computed from the day that you filed your first bankruptcy.

Let’s say instead that you filed a Chapter 7 and now you need to file Chapter 13. In order to receive a discharge under Chapter 13, you only need to wait 4 years from the day that you filed your first Chapter 13.

If you received a prior discharge under Chapter 13 and now want a Chapter 7, you will need to wait six years. However, there are exceptions to this rule. If during your first bankruptcy, you paid back all of your unsecured creditors OR if you paid back at least 70% of the claims and the plan was made in good faith and was your best effort, you will not need to wait 6 years.

As you can see, the rules for when you are allowed to file subsequent bankruptcies can be difficult and confusing. If you find yourself looking at bankruptcy for a second time, call 5 Star Sacramento Bankruptcy Attorney Rick Morin at (916) 333-2222. We can help you figure out what type of bankruptcy is right for you.

Sacramento Bankruptcy Lawyer Rick MorinA separated couple have the option of filing a Chapter 7 bankruptcy together. Despite keeping separate households, they can still qualify for bankruptcy. However, there are some important things to be considered. Keep reading to avoid some common problems in these type of cases.

First, separated couples will have to file two Schedule Js. Schedule J is a listing of household expenses. Because each spouse maintains a separate household, the bankruptcy court wants to see the breakdown of expenses. This should not be used as an opportunity to inflate expenses to def

Just like with expenses, each spouse must list their respective incomes on Schedule I. A full and accurate accounting of household income is required in order for the court to determine whether the bankruptcy is an abuse. This can be difficult for some couples who may be living with other folks that are bringing income into the household.

Another trap for the unweary is the listing of assets. Just like with all cases, fulling accounting for assets is extremely important in a Chapter 7 Bankruptcy. You must carefully apply the appropriate exemptions to all of the couple’s assets. If not exempted in the correct manner, assets can be seized by the Bankruptcy Trustee and sold for the benefit of your creditors.

Lastly, family transfers of property need to be fully disclosed on the Statement of Financial Affairs. Occasionally I see transfer of cars or even houses amongst separated spouses in anticipation of becoming divorced. These transfers can be a problem if they are not explained correctly on the Statement of Financial Affairs. This issue also comes up after one person files divorce recently after being divorced. The Bankruptcy Trustee will be looking at the marital settlement agreement and any pre-petition transfers. The Trustee looks at these documents to make sure that any transfers were fairly made, and not intended to defraud creditors in a bankruptcy.

Bankruptcy and Separate Households can be tricky. But it is not impossible to file if you are in this situation. Please call my office at (916) 333-2222 if you have any questions about filing bankruptcy as a separated couple. 

Sacramento Bankruptcy Lawyer Rick MorinTo qualify for bankruptcy, there are multiple things to look at. Debt, income, and other factors all play a role. This article will focus on qualifying for Chapter 7 Bankruptcy.

The first qualification is that you must have debt. There is not necessarily a hard and fast rule about how much debt you must have to qualify for bankruptcy. As a general rule, I look to see that a person has at least 25% debt-to-income ratio.

Having a smaller debt-to-income ratio does not automatically disqualify you from bankruptcy. The bankruptcy court looks at each case individually. There are many reasons why a smaller debt-to-income ratio would still result in a successful bankruptcy.

Speaking of income, this is the most important qualification there is for Chapter 7 bankruptcy. If you have too much income, you might not be able to file Chapter 7 bankruptcy. Instead, the law will require you to enter into a Chapter 13 reorganization.

The income limits for Chapter 7 are constantly changing. The limits are based upon the median income for your household size in your state. As of today, the median income in California for a family of two is $62,917. If you have a family of two and less income than that on a yearly basis, then you are presumed to be eligible for bankruptcy. Please call my office for up-to-date income limits for your household size.

Now here’s the interesting part. If you have more income than the median for your household size, you automatically fail. BUT, there is still a possibility that you can qualify for Chapter 7 bankruptcy. In this case, you are required to take the “means test.” The means test is a bankruptcy form that determines whether your case would be an “abuse” of the bankruptcy process. This is a complicated subject that I will discuss in a later blog post.

The thing to remember is that it is still possible to file Chapter 7 bankruptcy even though your income might be “too high” at first glance.

There are other important factors when considering bankruptcy, including, but not limited to: 1) whether you have filed prior bankruptcies recently; 2) where you lived for the past two years; 3) the amount of your assets; 4) whether you have transferred or given any large assets or property to family or close friends recently; and 5) your marital status.

I go over each important bankruptcy consultation with you during your free bankruptcy consultation. I want to make sure that you make best decision possible when considering something as important as bankruptcy.

Please call my office if you have any questions about whether you qualify for Chapter 7 or Chapter 13 bankruptcy. My office phone number is 916-333-2222.

Sacramento Bankruptcy Lawyer Rick MorinAlmost everyone that calls my office wants to know whether they can keep their car despite having filed for bankruptcy. The answer is almost always yes!

In a Chapter 7 Bankruptcy, also known as a liquidation, a debtor’s assets are subject to being taken by the Bankruptcy Trustee. However, in most consumer cases, this never happens. This is because California law allows debtors to retain a certain amount of their property. Lawyers refer to this as the “exemption” process.

What really matters when looking at cars and bankruptcy is the amount of equity in the car. For instance, if Kelly Blue Book on your car is $8,000, but the outstanding loan balance is $10,000, you don’t have any equity at all. This is because the car is encumbered by loans more than the value of the car. So if the Bankruptcy Trustee were to take your car and sell it on the market, the Trustee would actually lose money. In cases like this, there is no risk of losing the vehicle.

For debtors with equity in their car, there is good news too. Let’s say you own your car outright and Blue Book on the car is $3,500. Currently, California 703 exemptions allow you to exempt up to $5,100 of equity in your car. That means that $5,100 worth of car is yours to keep — the Bankruptcy Trustee can’t take it from you. So you’re covered here too!

Let’s take an extreme case. You own your car outright and it’s worth $15,100. The car exemption under 703 is only good for $5,100, so does that mean you lose your car? No! There is a “Wildcard” exemption that I can use to exempt the remaining $10,000 equity in the car. Because I can exempt all of that equity in your car, the Trustee can’t take it from you and sell it.

As you can see, there are many ways to keep your car in a Chapter 7 Bankruptcy when using California’s 703 exemptions. The key thing to remember is that it is important to carefully look at all of your property before you file bankruptcy. You must do this to apply your exemptions as needed. It’s not good enough to blunder into your case and clean up the mess afterwards. It might be too late.

If you have questions about how to keep your car in bankruptcy, please call my office at (916) 333-2222. 

Sacramento Bankruptcy Lawyer Rick MorinWant to file bankruptcy? The bankruptcy process can be very intimidating and confusing. And that’s for good reason. Bankruptcy is a critical life decision that has long-lasting implications. But at its core, the bankruptcy process is comprised of a few important areas.

1. Assets

The bankruptcy court and the bankruptcy trustee want to know about the stuff that you own. Your assets are listed in various bankruptcy schedules. Assets include things like houses, cars, household goods, bank accounts, and even your clothing! Some people make the mistake of not listing certain assets because they don’t think the asset is worth anything. The rule is that you list everything you own, no matter where it is in the world and no matter how much it is worth!

2. Debts

This should be obvious, but it isn’t always so. You need to list every single one of your debts in your bankruptcy case. This includes debts such as student loans that do not get discharged at the end of your bankruptcy. You even have to list loans from family and friends! Another area where people make mistakes is that they want to keep a particular credit card — so they don’t list it. The bankruptcy code is clear: you must list all of your debts, even ones that you want to keep!

3. Income

Your income is important in a bankruptcy because you must first qualify for bankruptcy using the Means Test. The Means Test looks at your prior six months of income to determine your eligibility. The court will also look at the “totality of the circumstances” of your case to make sure that you really do need bankruptcy assistance. By comparing your monthly income with your monthly expenses, the court will determine whether your bankruptcy would be an “abuse” of the bankruptcy process.

4. Transfers of Assets Prior to Bankruptcy

Moving property around prior to a bankruptcy can cause big problems. The bankruptcy petition tries to catch these “pre-petition transfers” using lots of different questions. The court is trying to determine whether you sold or transferred a large asset in order to make yourself appear in need of bankruptcy. Even worse, some people try to move property out of their own name because they would have lost the property in the bankruptcy proceedings. This is illegal and can wreck your bankruptcy from the very beginning.

A typical Chapter 7 bankruptcy petition can easily consist of 60 or more pages. Preparing the bankruptcy petition is very complicated, but the four areas above are where a majority of the action takes place.

If you have any questions about how to file a Bankruptcy in Sacramento, please call my office at (916) 333-2222.