Bankruptcy – Page 2 – Law Offices of Michael J. Primus

You do not automatically lose your home if you file bankruptcy

January 2, 2023 by Michael Primus

In talking to people about bankruptcy, I have seen time and again the same erroneous assumptions. One common misconception is that people filing bankruptcy automatically lose their home. Many people assume the judge will strip them of their possessions and their dignity, presumable as a punishment. This notion does not exist in the law but stubbornly persists in society. To rectify this misunderstanding, I will first say the purpose of bankruptcy is to offer a fresh start to people in a financial hardship. The law acknowledges that food, shelter and transportation are necessities of life, and provides limited protection for these assets so people can go forward in life after bankruptcy. But wait, maybe you’ve heard of people that filed bankruptcy and lost their home? Alas, there are threats to homeownership.

The single largest threat to the family home is not bankruptcy, it’s foreclosure. Another misconception is to equate foreclosure and bankruptcy. Foreclosure is the procedure for a lender to take a person’s home if the mortgage payments are not paid; foreclosure is not an issue if the mortgage payments are current. Bankruptcy can forgive credit card debts, payday loans, personal loans, lawsuits and much more. Bankruptcy is also a powerful tool to stop foreclosure and give the homeowner an opportunity to make payment arrangements. Usually when mortgage payments are six to twelve months behind the lender will initiate foreclosure. The California foreclosure laws require notices and waiting periods before a lender can actually sell a home to collect the money owed. Filing bankruptcy can give homeowners a last chance to save their home from foreclosure.

Another threat to the family home is filing chapter 7 (sometimes called straight bankruptcy) if you are “land rich” in the eyes of the law. A person is land rich when the equity in their principal residence exceeds the protection provided by the homestead laws. Filing chapter 7 when a person is land rich can result in the home being sold by the bankruptcy trustee. In 2023, the California homestead laws allow a person to protect realizable equity in their principal residence of $678,000 in most Bay Area counties.

Note: realizable equity is the amount you would receive after paying all mortgages, commissions and costs of sale.

In summary, the bankruptcy system will not take your home as a punishment. On the contrary, one of the goals of the law is to protect the family home. If your home is in foreclosure, or if you have substantial equity in your home, you should speak to an attorney and carefully review your options before filing bankruptcy.

At the Law Office of Michael Primus we have helped thousands of clients get out of debt, stop wage garnishments, and start fresh through bankruptcy. If you live in Contra Costa, Alameda or Solano counties and have debt problems, contact us for a free consultation.

Can I File Bankruptcy Again?

October 29, 2022 by Michael Primus

Can I file Bankruptcy Again? Many people assume they can only file bankruptcy once in their lives, other people assume they need to wait until their bankruptcy comes off their credit report before they can file again. The truth is the bankruptcy laws are more flexible than most people think. This article is limited to cases where debts were forgiven in a past bankruptcy.

Chapter 7 After Chapter 7

If a person has filed a chapter 7 and received a discharge (debts forgiven) then section 727(a)(8) of the Bankruptcy Code provides that another chapter 7 within 8 years will not forgive debts.

Chapter 13 After Chapter 7

If a person has filed a chapter 7 and received a discharge (debts forgiven) then section 1328(f) of the Bankruptcy Code provides that a chapter 13 filed within 4 years of the chapter 7 will not forgive debts.

Chapter 13 After Chapter 13

If a person has filed and completed a chapter 13, section 1328(f) of the Bankruptcy Code provides a chapter 13 filed within 2 years of the filing of the prior case will not forgive debts. However, if the original chapter 13 was dismissed (did not complete plan, debts reinstated) then a person can file another chapter 13 almost immediately but must get a court order pursuant to Bankruptcy Code section 362(c)(3) to be protected from creditors. This type of court order generally requires a brief explanation of why the first case failed.

Chapter 7 After Chapter 13

If a person has completed a chapter 13 and received a discharge then section 727(a)(9) provides that a chapter 7 filed within 6 years of the filing of chapter 13 will not forgive debts.

Call now for a free consultation. Offices in Walnut Creek, Antioch and Hercules.

Law Offices of Michael Primus

Does my spouse need to file bankruptcy with me?

February 18, 2022 by Michael Primus

Many people wonder if they can file bankruptcy without including their spouse. The answer is yes. Every individual has the right to bankruptcy so long as he or she can demonstrate financial hardship. A married couple can file bankruptcy together, which is called a joint bankruptcy, but they are not required to. Bankruptcy will only forgive debts for the person who files. If most of the debts are held jointly, a bankruptcy by one spouse would be of little benefit because the other spouse would remain liable. If, however, most of the debts are in the name of one spouse, there may be no point in having the other spouse join in the bankruptcy. Often I am asked, “Can’t bill collectors come after both of us if we’re married?” That’s a good question. The legal theory in California is that both spouses can be liable for debts incurred during marriage, but there are so many exceptions to that rule that consumer creditors rarely seek to collect from a spouse that did not sign the contract. For credit reporting purposes, a bankruptcy will only show on the reports of the person who files. Lastly, a caveat, if a married person files bankruptcy alone, that person must disclose his spouse’s income and assets.

Will I lose my retirement if I file bankruptcy?

October 25, 2021 by primuswebadmin

There are many misconceptions about bankruptcy, amongst them is the notion that people lose everything if they file bankruptcy. Fortunately, the bankruptcy laws are designed to give the honest but unfortunate person a second chance. To facilitate that goal, the law allows bankrupt consumers to retain necessities of life. The legal buzzword for necessities of life is exemptions.

The exemption laws allow people to keep Social Security as well as tax deferred retirement accounts and other assets. Tax deferred retirement accounts include 401k plans, 403b plans, IRA’s, pensions and almost any type of employer or union sponsored retirement. Often in the midst of financial turmoil people consider taking a retirement withdrawal to pay credit cards, payday loans or other debts. For some, taking a retirement withdrawal is the best choice but that choice should be made with a clear understanding of all options including bankruptcy.

What does my ex-spouse have to do with my bankruptcy?

July 25, 2021 by primuswebadmin

Bankruptcy law offers a fresh start to those bogged down by crippling debt. But, alas, there is more to it. To qualify for bankruptcy you need to document your finances and demonstrate a financial hardship. In California, the bankruptcy system can look back four years to see if your divorce was a relatively fair deal between you and your ex-spouse. Why do they care?

In some divorces people are so eager to get out of the marriage they find themselves thinking, and sometimes saying “Take everything, I don’t care just leave me alone.” In other cases, the spouses collude to have one spouse take all the bills and the other take the house, retirement and other assets in order to allow one spouse to avoid bankruptcy altogether. If your ex-spouse got a sweetheart deal that can be unfair to creditors which becomes a problem if you file bankruptcy. The bankruptcy system may question whether you can reopen the divorce to pursue adequate money to resolve your debts. Perhaps you can or should have fought for half the equity in a house. Perhaps you can or should have fought for alimony. In an extreme case your bankruptcy can be dismissed (debts not forgiven) on the basis that your divorce was a scheme to defraud creditors. Conversely, if you ended up with most of the assets from a divorce and nevertheless encounter financial problems and ultimately file bankruptcy, the bankruptcy system will not question the divorce.

That’s quite a bit of scare talk, right? However, there’s no often no reason to worry. The truth is divorce and bankruptcy commonly go hand-in-hand. Financial problems strain a marriage and are often the root cause of divorce. The bankruptcy system will inquire about a divorce but rarely is any action taken and in nearly all cases the bankruptcy is approved.

Another common question is: does my ex-spouse need to know that I filed for bankruptcy? The answer is yes if you owe money to your ex-spouse for any reason including alimony, child support or have joint debts. However, if you have no financial ties to your ex-spouse the court will not notify that person of your bankruptcy and usually that person will not find out.

Can bankruptcy forgive homeowners association dues?

March 23, 2021 by primuswebadmin

Bankruptcy law creates a court order forgiving most debts. Discharge (forgiveness) of homeowners association dues related to California property is governed by a combination of bankruptcy law and California law. Generally, past due HOA dues are dischargeable in either chapter 7 or chapter 13 but only as to dues owed on the bankruptcy filing date. Dues that come due after bankruptcy are owed by the owner of the property, meaning it’s a good idea either sell the property or let it foreclose before filing bankruptcy to avoid being the owner after bankruptcy and owing post-bankruptcy dues. Sounds simple enough, right? I said generally, and unfortunately an HOA can file a lien which alters the result in many cases.

In order to address the impact of an HOA lien, I will first discuss liens in general. A lien is a document giving the lienholder rights to your property which can survive bankruptcy. Car loans are a common example of a lien. The auto lender is entitled to repossess the car if the contractual payments are not made but is required to comply with the procedural requirements of California law. Car loans survive bankruptcy unless the car is returned to the lender. Conversely, a person can file bankruptcy and retain a car by continuing to make payments after bankruptcy. An HOA can record a lien without the owner’s consent if HOA dues become delinquent. Enforcement of an HOA lien is governed by California’s foreclosure laws. Yes, your HOA has the power to foreclose!

Now back to bankruptcy. In chapter 7 (full bankruptcy) an HOA lien filed before bankruptcy will remain after bankruptcy, meaning the HOA dues will need to be paid at some point. In some chapter 13 (reorganization) cases, an HOA lien can be given special priority and paid in full while other debts are paid pennies on the dollar. In other chapter 13 cases, the HOA lien can be removed from the title without payment in full. If you owe delinquent homeowners dues, bankruptcy provides powerful rights to help you deal with the problem.

References: Cal. Civ. Code 5650, 5675, 5680 & Bankruptcy Code 523(a)(16), 1328(a).

You do not automatically lose your home if you file bankruptcy