A Chapter 13 You Can Afford?

Low Down Payment

I can go as low as required by the case plus filing fee.

I set the down payment on a case by case basis. If you’re under the gun and have to get filed and if you’re serious about debt reorganization, then the down payment is negotiable. However in most cases I won’t go lower than $500.

That can give you a powerful leverage that does the opposite of having to start with a huge pool of cash like when you are trying a debt settlement program.

Chapter 13 Attorney’s Fees

Attorney’s fees for Chapter 13 cases range from $3500 to $5000.  It’s what the US Trustee’s Office allows which in the Southern and Central Districts of California. I consider the final total for your Chapter 13 Attorney’s Fees as a fixed cost, therefore I charge what the US Trustee’s Office allows.

Because think about it, if I reduce my fees by $500 that only reduces your monthly payment by $6.67 per month.

If You Need to Stop Foreclosure for a Short Time

If you’re planning on filing a bankruptcy for the sole purpose of delaying a foreclosure so you can do a loan modification or short sale, then maybe you should do a Chapter 7. Chapter 7 straight bankruptcy gives you the benefit of delaying the foreclosure while discharging your debts at the same time and costing significantly less.

My Bankruptcy Law Office is located in Old Town Murrieta, convenient to Temecula, Menifee, Lake Elsinore, Canyon Lake, Winchester, French Valley, Moreno Valley, Riverside and Palm Desert.

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Why You Should Use Chapter 13 to Consolidate Your Debts When You Have a Higher Income?

What if you make a lot of money but have a lot of debt?

Has a process server shown up at your door yet with a summons and complaint? When you have a higher income, this is a serious problem. If your wages get garnished and you make $9000 per month, then 25% of your check after taxes is a couple of car payments. So now the cars are about to be repossessed. How are you going to get to work? You risk losing that job if you let it move forward.

Have you ever thought that if you could just pay your credit cards what you owe them, you’d be able to handle the payments?  If they just didn’t have 12, 15, or 29% interest rates, you’d be able to eventually pay them off in a reasonable time, right?

Debt Consolidation

For many this would be true. Debt consolidation starts to sound like a great idea at that point. They promise to reduce interest rates for each of your credit cards and accounts, and cut your payments in half and when you get there the numbers just don’t work out.

Once the numbers are all added up, they tell you that you’re going to pay only about 25% to 33% less than you’re currently paying. If honest, they’ll also tell you that some of your creditors won’t play along and will just go ahead and sue you and garnish your wages instead. Some creditors will reduce interest rates to 5% but some will reduce interest rates by 5%.  There’s a huge difference.

Of course if they tell you that, then you won’t sign up and won’t pay them any money and then they won’t make any money on your case.  Clearly that’s why I’m writing this post to you, because I’d prefer you signed up and paid me instead to be perfectly honest.

Chapter 13 Bankruptcy

So, here’s what I can tell you about a chapter 13: Once the chapter 13 payment plan is approved by the Court which is called a confirmation order, none of your creditors are going to opt out and sue you and garnish your wages instead. They can’t.  Basically, you’ve already sued all of them yourself. It’s a pre-emptive strike sort of like suing all of your creditors as a class action lawsuit before they can sue you individually.  So, no lawsuits against you and no wage garnishments or bank levy.

Truly Reorganize Your Debt With Bankruptcy

Additionally, what I usually find is that if you are paying 100% of your credit cards and medical bills and the like, and you’re paying them at 0% interest for only 5 years, then in most cases you cut your payments in half, give or take a few percent. It’s what the debt consolidators promised to reduce your payments to, but couldn’t. The reason it works out though is that the bankruptcy court forces the creditors to take it.  The other reason it works out is that your attorney and your bankruptcy trustee are charging you far less than the interest you would have to pay if you went to a debt consolidation.  Plus the debt consolidators charge you on top of that.

For example

If you owe $60,000 in credit cards and you pay them the regular monthly payments, by the time you’re done you’ll have paid them something like $194,000. That’s a payment of at least $1800 to 2100/mo depending on how many different accounts, who they are with, varying interest rates and so on. Worse it would take 538 months or 44 years to pay it off. I checked the minimum payments at Bankrate.com.

Debt consolidation on the same debts will probably yield a payment plan of $1400 to $1600/mo for about 5 to 6 years and probably at least one lawsuit.

Your chapter 13 bankruptcy plan would pay back about $70,000.  You do that for 5 years only, and your payment is about $1167.

Call for a Free Consultation 951-200-3613

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10 Things You Must Know About Chapter 13 If You Do Not Qualify for Chapter 7

So, Attorney Gandalf has told you that “You Shall NOT Pass!”

That’s what Gandalf in the Lord of the Rings told the Demon-Balrog as it attempted to cross a narrow bridge deep in the Mines of Moria. So now you’ve been told by another attorney that you don’t qualify for a Chapter 7 bankruptcy. You’ve failed the Means Test. Perhaps based on your own research you think your income might be too high. But it’s not like you’re wealthy and or made of money. You’re struggling just like everyone else, just at a higher level of income. At the end of the month, you have the same amount left over as everyone else; nothing.

What now?

Get a 2nd Opinion About the Means Test

I’ve seen cases where a client’s initial consultation with another attorney missed a couple of key items that made all the difference. When you come in for your free consultation, we’ll go over them together. Attorneys are not supermen, we’re fallible.

Okay, I’m not but some are. Some of the lawyers who are newer in the field of bankruptcy might not know all the ins and outs yet. I’ve filed several Chapter 7 cases where the first attorney thought that the clients didn’t pass the Chapter 7 Qualification Test called the Means Test.

Let me have a look at it if you’re in California, maybe I can help you. I’ve been a bankruptcy attorney since 1994 and I’m located in Murrieta conveniently close to Temecula, Riverside, Wildomar, Menifee, Lake Elsinore, Canyon Lake, Santa Ana and San Diego.

Sometimes Your Only Bankruptcy Option is Chapter 13

There are worse things, just ask Gandalf, more importantly ask the Balrog.  But if you have to file a Chapter 13, there are things you must know.  Here are the first 10 that come to mind off the top of my head.
First: It’s not the end of the world.  The sky will not fall. The police will not show up and arrest you (there is no debtor’s prison). Your friends will not laugh at you. In fact more of them have filed or are about to than you might imagine. You won’t walk around with a watermark of a B on your forehead. Frankly, if you make too much money to file a chapter 7 then that’s a good problem to have. You’re going to get to do what you promised to do in the first place; pay your debts.

Second: A Chapter 13 bankruptcy is a bankruptcy with a payment plan attached. If you don’t qualify for a chapter 7, your payment plan must be 60 months unless you’re able to pay it off earlier. You might even be able to strip your 2nd mortgage lien off of your house.

Third: If you don’t qualify for a chapter 7, your chapter 13 bankruptcy has a version of the Means Test too and it is used to determine, at least in part, how much of your unsecured non-priority debts you must pay back through your chapter 13 payment plan.

The definition of unsecured is any debt that is not attached to something that can be repossessed if you don’t make the payments. Priority debts, roughly speaking, are debts that either you owe directly to the government or that the government must pay if you don’t. So for instance, credit cards and medical bills are unsecured. So are student loans. Recent taxes are priority debts, which you do owe directly to the government. Child support is a priority debt too because if you don’t pay, then the custodial parent may be forced to go on welfare. But student loans on the other hand are not priority debts because if they were a lot of people would never qualify for Chapter 13. But that’s a whole nuther ball o’ wax!

Fourth: You may not have to pay all your credit cards, medical bills, student loans, old taxes (under the right circumstances and conditions of which there are many) and so on in full. Depending on your circumstances, you may be able pay off lates on your mortgage, back child support and recent taxes in full while paying only what you can afford to on your credit cards, medical bills, student loans, and old taxes.  Of course, you will still owe any unpaid student loans after your chapter 13 payment plan is over.

So, “it puts a book mark in the student loan.”  ~Anna.

Fifth: The other thing that determines how much of your unsecured non-priority debt is how much stuff you own. If you have accumulated a lot of stuff or a lot of unprotected savings, you may have to buy it back again. So, never ever have unprotected savings. Basically if you could protect only $50,000 worth of stuff but you have $75,000 then you must pay at least $25,000 into your chapter 13 bankruptcy. So, whichever requires you to pay more is the one that you go with.

Sixth:  Even if you have to pay everything in full, 100% of the principal on your unsecured non-priority debts, but if you can do it with 0% interest, then you will most likely have a lower payment than if you go to a debt consolidation program outside of a bankruptcy.

Seventh:  If you pay less than 100% of the principal they will take your tax refunds away from you every year you are in your chapter 13 bankruptcy so sometimes it’s better to bite the bullet do a 100% payment plan.

Eighth: If you owe more than $1,149,525 to secured debts such as your houses and cars, you can’t file a chapter 13.  Or if your credit cards and medical bills and other unsecured non-priority debts come to more than $383,175 then you cannot file a chapter 13. In those circumstances your options are consolidate your debts outside of bankruptcy, settle some of the debt and then file the 13 or try a 7 anyway and hope they don’t try to force you into a chapter 11 where you will have to pay more than $20K in attorney’s fees (and that’s just the beginning).

Ninth: If you’ve been behind on your payments to your houses and cars then in some jurisdictions your bankruptcy judge will require that you pay your regular monthly payment on your mortgage to your bankruptcy trustee rather than directly to your mortgage bank.  In the Central District of California in the Riverside Division, there is one judge that does require this.  Called a conduit payment, it helps to insure that you don’t get into any further trouble with your mortgage payments.  However, if you haven’t been behind in your house payments, then you are still allowed to pay directly even in that Judge’s Court.

Tenth:  A Chapter 13 bankruptcy has a qualification test too, it’s called the feasibility test, which means what it basically sounds like.  You have to be able to pay the payment plan.  If you can’t, then they dismiss your case or suggest that you convert to a chapter 7 bankruptcy.  So, if at a later date you lose a job, or your spouse loses their job or that second job, then maybe you can request that the judge assigned to your chapter 13 reduce your plan payment based on the new lower income or even request a conversion to chapter 7.

I’ll be expanding the list, so if there’s something you think should be on the MUST KNOW List, please put it in a comment below.  I look forward to your thoughts.

Bankruptcy and Income Taxes and Tax Liens

The California Board of Equalization and California Franchise Tax Board are a bunch of rats clamoring over a cadaver with very little meat left on it’s bones. If you ever make an offer to compromise a debt, never have the money in an account with your name on it. Your attorney’s trust account might be a good place.

DISCLAIMER: Nothing in this article OR WEBSITE may be mistaken as legal advice. Attorney David Nelson, is licensed only in California, and this article is intended only for readers in California. This article is for entertainment, educational, extra-curricular, and medical purposes only. If you decide to rely on this, heaven help you. Remember also that I’m not a tax attorney, I’m a bankruptcy attorney in Murrieta near Temecula CA.

Chapter 7

Yes, you can discharge taxes in bankruptcy. No, not all of them but some of them. I hate to mention this part, when it comes to credit cards, medical bills and collection agencies, I only want one statement so that I have the addresses, account numbers and balances. But with the IRS, Franchise Tax Board and Board of Equalization, I want you to bring every letter with you that they ever sent you. In those letters are the answers to many of the questions and rules we will go over below. California sales taxes are calculated against gross receipts and therefore discharge in bankruptcy under ALMOST the same rules. For the specifics of the noticing requirements which you must give the California Board of Equalization in an article written Mark Sharf regarding the Ilko case, Ilko v. California Board of Equalization, click HERE.

To discharge income taxes, whether Federal or State, or California Sales Taxes, many rules have to be followed. Because this article only discusses income taxes, then it is important to remember that these are taxes that are assessed against gross income or gross receipts. See 11 USC 507 a 8 and 11 USC 523 a 1

There are several rules involved. What’s worse is that the rules all involve the timing of the bankruptcy. Often you’re in my office because of a lawsuit or a wage garnishment, or your bank account has recently been levied and you want to file immediately in order to stop the bank or your employer from sending your money to the Sheriff’s Office.

Problem is this, if you owe a bunch of money to the IRS and have to wait to file your bankruptcy in order to get rid of the tax, you’re going to have to decide whether the amount of tax to be discharged is more or less important than the amount of money the Sheriff is about to take away from you. Notice that I said more important not bigger.

The Rules

  1. The tax year must be over. Kind of a “No Duh” moment.
  2. The tax return (if required) must have been filed. This is also sort of a “No Duh” moment. Prior to 2005 you used to be able to discharge the tax even you hadn’t filed your return if you chose to file a chapter 13 bankruptcy instead of a 7. Many great things about the bankruptcy code were eviscerated in 2005 when republicans and democrats who had taken hundreds of millions of dollars in lobby money over the course a decade finally gave us bankruptcy reform. Conveniently this happened right at the start of the economic downturn. Literally, the housing market went flat one month before the bankruptcy reforms went into effect. Hmm, I wonder how the banks knew it was finally time to get the bankruptcy reforms passed? Bottom line is, if you owe federal or state income taxes in California and you haven’t filed your returns, your bankruptcy is not going to help you get out of paying your taxes. So file your tax returns, make sure you get proof that they received them, and call back in two years. But what if you were audited, and at the end of the audit, you signed the audit, that is not a substitute for your filing of your return? What if you didn’t file a return and the IRS files one for you? When it comes to filing returns, YOU must be the one who files it, not the IRS, or other taxing authority. If you cannot remember if you filed the returns, contact the IRS and get an IRS Transcript for the tax year or years in question. You can download the Transcript request from the IRS website.
  3. If it turns out that you didn’t file your return, then you will have to decide if you want to file your tax return now and then wait for just over two years to file your case, can you handle the other wage garnishments, bank account levies and lawsuits that will take place during that time. You will have to weigh the amount of tax you can get rid of compared to the amount of wages that will be garnished and what will happen to your bank accounts and having to go to court for judgment debtor exams, and if you don’t go to the judgment debtor exam, the court will issue a bench warrant for your arrest and on and on.
  4. DISCLAIMER: Make sure that you speak with an attorney now and get this advice from an attorney as bona fide legal advice before you make your decision. This article is not your legal advice.
  5. The tax return’s due date must have been more than 3 years prior to the filing date of your bankruptcy petition. Notice it says “Return’s Due Date”. Commonly called the 3 year rule, this is where most people stumble and file their bankruptcy petition too early. Tax Returns are due in April! On top of that, if you got an extension to August, then they were due to be filed in August. What if you extended to October? If you cannot remember if you extended, contact the IRS and get an IRS Transcript for the tax year or years in question. You can download the Transcript request from the IRS website. Alternatively if there is nothing else pressuring you to file you could just wait until October 20th to file. I assume you can get a tax transcript from the Franchise Tax Board or Board of Equalization if you need one. A little while ago, the IRS decided that all extensions were automatically extended to October 15th, I don’t remember which year that started, but from now on, if you think you filed your extension to August, then you must file your bankruptcy in November 3 years later.
  6. If you filed your tax returns late, your returns had to have been filed with the IRS or other taxing agency at least 2 years prior to filing your case. This is true whether you owe income taxes to the IRS or the State of California or whatever state you owe taxes too.
  7. Assuming you have beaten the 3 year rule, and the late filing rule, you still have to have beat this one. The tax must be assessed at least 240 days prior to filing your bankruptcy petition. That’s about 9 months. Assessed means that they have decided you owe, how much and told you so. In California, you get a letter that says: Notice of tax due. It won’t say “assessment” and probably won’t say “assessed” either. California’s notice of tax due is a weird animal, it does not become effective until 60 days after they send it. So, in California, it’s a 300 day rule from the first letter. Our Franchise Tax Board will send a 2nd letter stating that the notice is “final” and from there your 240 days starts. At this point people often ask the IRS, Franchise Tax Board or Board of Equalization if they will take less, give them a break. Called an offer to compromise, if you’re going to file a bankruptcy, DON’T DO IT. An offer to compromise delays the 240 day rule. Sort of like the extensions on filing your tax returns under the 3 year rule. You have to add 60 days to the time that your offer is pending plus the time that your offer is pending to the 240 days. That can extend your 240 days automatically by 60 days even if you withdraw the offer to compromise the tax debt on the same day as you make the offer. If you filed a bankruptcy previously during the 240 day period and it was dismissed and now you have to refile, you must add the amount of time your bankruptcy was pending to the 240 days plus another 90 days. So, even if your previous bankruptcy was dismissed after a month you must add 4 months to the 9 months. That’s an overdue baby.

A client, and no kidding his real name was Groucho Marx, (the names were changed to protect the innocent) owed $50,000 to the Board of Equalization, and $250,000 to the IRS. And no kidding, his rich uncle, (it wasn’t his uncle) died and left him some money, 15% of the total taxes owing. After calling the IRS and talking them into taking a 15% pay off, the IRS put a condition on the deal, he had to get the State of California’s Board of Equalization to take the same deal. Stupid condition but that’s what they told him. So, he calls the BOE and says hey they’ll take 15% if you do, what do you say? Unfortunately, they said, “we’ll get back to you.” A week later they answered by taking all of his money out of his bank account.

Even if since Bush the IRS is kinder and gentler, the Board of Equalization and Franchise Tax Board in California are a bunch of rats clamoring over a cadaver with very little meat left on it’s bones.

“Maybe you can’t squeeze blood from a turnip, but you can eat the turnip.”
~David L. Nelson and yes, I just quoted myself.
 

If you ever make an offer to compromise a debt, never have the money in an account with your name on it. Never have it in your wife’s account. Never have it in your S Corp’s or your LLC’s name. In fact, you might want to have it in a hole in your back yard before you make the call.

I had another client who back in 2006 owed every year from 1995 to 2000. Turned out he had filed every year except 1996 which the IRS had filed for him. He was dead certain that he had filed it and was totally surprised when it wasn’t he that had done the filing. Fortunately for him there is a 10 year statute of limitations on the collection of federal income taxes. In his case, because he had been sued, the creditor had a big judgment against him and his wife and was about to garnish both their wages he could not file his return himself and wait out that two years. The amount that would have been garnished would have been greater than the amount of tax he would have discharged by waiting. If you cannot remember if you filed or extended, contact the IRS and get an IRS Transcript for the tax year or years in question. You can download the Transcript request from the IRS website.

Chapter 13

The rules are nearly the same but you get to put the taxes you owe into a payment plan. Plan details can be tricky but you no longer get the good benefits such as discharging taxes without filing the returns and so on like you did before the law change.

Tax Liens and Statute of Limitations

Many of you have asked about Tax Liens. Yes, there is a 10 year statute of limitations on the collection of the tax. Tax Liens are only one method of collection. The question of how long is the tax lien enforceable once recorded is a different question which we will get to in a moment. Have a look at Internal Revenue Code IRC 26 USC 2605.

26 USC 2605(a) Length of period

Where the assessment of any tax imposed by this title has been made within the period of limitation properly applicable thereto, such tax may be collected by levy or by a proceeding in court, but only if the levy is made or the proceeding begun—
(1) within 10 years after the assessment of the tax, or
(2) if—
(A) there is an installment agreement between the taxpayer and the Secretary, prior to the date which is 90 days after the expiration of any period for collection agreed upon in writing by the Secretary and the taxpayer at the time the installment agreement was entered into; or
(B) there is a release of levy under section 6343 after such 10-year period, prior to the expiration of any period for collection agreed upon in writing by the Secretary and the taxpayer before such release.
If a timely proceeding in court for the collection of a tax is commenced, the period during which such tax may be collected by levy shall be extended and shall not expire until the liability for the tax (or a judgment against the taxpayer arising from such liability) is satisfied or becomes unenforceable.

So, the date the statute of limitation starts the assessment date and it runs for 10 years from the assessment. Is that true in every case? Of course not. There a few notable exceptions, all of which only add to the 10 years, none of them subtract from it.

The one that matters the most on my page is the bankruptcy extension of the 10 year period. Extensions of statutes of limitations are calling “tolling” of the statute of limitations. It just means that you did something that made it impossible for the IRS to collect for a certain amount of time therefore you have that amount of time added to the total amount of time that they get to collect. The Statute of limitations is extended.

Filing bankruptcy extends that statute of limitations for the amount of time you are in bankruptcy plus six (6) months. If your chapter 7 bankruptcy lasts 4 months and plus 6 more then they get to collect against you for 11 years for any pre-bankruptcy non-discharged taxes.

In the Severo case, Severo v. IRS (9th Cir. 2009) the Severos owed money for 1990 income taxes. They filed an extension on the filing of the tax returns to October 15th 1991. However, they filed their bankruptcy in Sept of 1994. You can see by reading above that they filed about a month too early to discharge the tax. Oops. They also filed a chapter 11, then about a year later converted it to a chapter 7. Just as an aside, the chapter 11 bankruptcy not only extended the 10 years statute of limitations on the collection of the tax, it also extended the “three year rule” listed above. So, if they wanted to discharge the tax in the chapter 7 they would have had to dismiss the chapter 11 and wait a little while then refile as a 7. Sadly they didn’t do that

Also their chapter 7 case lasted until early 1998 when they got the chapter 7 discharge. So, from Sept of 94 to March 1998 they were in a bankruptcy. That gave the IRS an additional 3 1/2 years to collect. In other words the 10 year statute of limitations grew or expanded to a 13 1/2 year statute of limitations. That’s what tolling does.

Notice that during that 10 years, if the IRS sues you and obtains a judgment then they can enforce the judgment for the amount of time that your state allows them to. In California judgments are good for 10 years and may be renewed for an additional 10 years. So, they could conceivably follow after you for 30 years

Length of Time of the Lien

Internal Revenue Code Section 6321 states that the lien is created when the tax is assessed, the IRS has sent you a notice and you don’t pay it. If the lien is created when you don’t pay or it’s inception is at assessment is at present an unresolved issue. In most cases, it’s probably a non-issue because they’re coming to get you either way. Circle the Wagons!

How long does the lien last? Internal Revenue Code Section 6322 states that the lien will continue until the assessed tax is satisfied or becomes unenforceable by reason of lapse of time. So now you can see why I spent so much time on the Statute of Limitations. When the statute runs, the lien expires.

Here’s an excellent discussion of Tax Liens by Attorney Tony Mankus.

Disclaimer: Nothing in this article may be mistaken as legal advice. Attorney David Nelson, is licensed only in California, and this article is intended only for readers in California. This article is for entertainment, educational, extra-curricular, and medical purposes only. If you decide to rely on this, heaven help you.

$100 Starts

Bankruptcy $100 Starts

You may have read this before. But what does it really start? You think you’re getting a cheap bankruptcy or an affordable bankruptcy, but what are you getting really?

Your chapter 7 case will not be filed until you have paid the attorney’s fees, plus the filing fee, plus the credit counseling in full and completed the credit counseling. Period. This is true whether you come to me or anyone else.

Some of the $100 Starts guys (definitely not all) might file your case for you for $100 but only if you pay the $281 filing fee for a chapter 13 bankruptcy which is a bankruptcy with a payment plan for 3 to 5 years. Do you want a bankruptcy with a payment plan for 3 to 5 years just so you can afford to pay your attorney to file the case?

$50 Starts

$100 or $50 starts you making your payment plan against your attorney’s fees to your attorney, and that’s all. In my case it starts me taking your creditor phone calls when they start coming in which is usually the following day. Many attorneys won’t even do that. They say they’ll take the calls but then don’t do it until you’ve paid in at least half of your attorney’s fees. Or they’ll straight up tell you that they won’t take any calls until you’ve paid in half of the attorney’s fees.

For $100 will they send letters or make phone calls to your creditors for you? Of course not, neither will I . . . well, maybe one if it’s urgent. But it sounds like that’s what you’re getting doesn’t it? Immediately a bunch of phone calls and letters going out from the attorney’s office to beat down the bad guys. But all you get for it is a payment plan.

What I will do is this; once you have made the down payment to me, I’ll take your creditor phone calls for you. You must start taking your own calls again and when the collection agents call, tell them that you’re going to file for bankruptcy and that your attorney’s name is David Nelson and ask them to call me and verify it at 951 200 3613. Of course, don’t do this until we have met, signed retainers and you have paid me at least a down payment. 98% of your creditors will never call you back directly once you do that. They call me and verify it then leave you alone. Every now and again, one of them gets overzealous and then I write that one a letter. Once they receive the letter they leave you alone.

Affordable Bankruptcy

But even if all you did was start your payment plan, how much of a dent have you made if the attorney charges you $2000 for your affordable bankruptcy? Nada mucho. My prices generally start from $700 for widows, orphans and cancer patients or disabled folks plus the filing fee, up to My usual range which is $1000 to $1500 in attorney’s fees plus the filing fee for most cases and of course if you have several houses or a ton of cars or a lot of income, it can go up steeply from there.

But even so, I’ve had clients with a half a dozen houses and even those cases were only $2100 in attorney’s fees. So, still a strong affordable price compared to most. Normally, I don’t charge for extra creditors or extra collection agencies. Most people don’t have more than about 50 anyway. So, it’s not that much extra work from 20 or 25 to get to 50 data entries in a keyboard.

Of course, If you have a garbage bag full of unsorted collection agents, it’s going to cost you a bit more if you want me to pick through it, sort the duplicates and type up more than that range. Just bring me one statement from each account. IF you bring me your credit report make sure it has the addresses of the creditors on it so that I don’t have to search the web for them. IF it doesn’t, make sure you seach the web for those addresses and put them on the credit report or make sure you bring extra money to pay me to do it.

A great way to know how many creditors you have is to go to AnnualCreditReport.com to get your free annual credit reports. Make sure that you check mark all three credit reports on the page that asks which ones you want. Last I saw if you tried to check one at a time, it wouldn’t let you go back again. Also FreeCreditReport.com is a good place to go. They charge for a credit rating monitoring service but then allow you to get a free credit report with all three merged reports, once you have that, go back immediately and cancel the service before they charge you.

So what makes more sense to you? $100 starts you on a payment plan to pay off $1500 or $2000 in attorney’s fees or $100 starts you on a payment plan to pay off $700 (if you’re disabled or a widow or sick) to $1200 .

Which Chapter in Bankruptcy is Right For Me?

Chapter 7 vs Chapter 13

I will endeavor to be brief.

The moment that you file your case, whether in chapter 7 or chapter 13, a temporary restraining order is issued by the bankruptcy court prohibiting collections of any type with a few exceptions. Exceptions include things like child and spousal support and certain types of government debts.

A chapter 7 bankruptcy, also called a straight bankruptcy, and also called a liquidation bankruptcy is the one that most people are thinking of and talking about when they discuss bankruptcy. Over in about 4 months, this is it’s primary advantage, you’re in and you’re out again.

In a chapter 7, you’re allowed to keep only so much property. Whatever you own over and above what you get to keep, the bankruptcy trustee takes away from you, liquidates or sells it, and uses the proceeds to pay your creditors a pro rata or proportional share of the funds based on the percentages of the total debt that’s owing from you to your creditors. Suffice it so say that if you owe $100,000 and the Trustee is able to collect $25,000 from your property, then your creditors will get about 25% of the debts that you owe them.

Most of you will keep everything you own and your creditors will get nothing.

Any portion of the debt left over after the trustee administers your case, whether it’s 95% of the balance or 100% of the balance that’s unpaid, that portion is discharged by the bankruptcy.

So in a small nutshell a Chapter 7 is a bankruptcy where the bankruptcy trustee may take property away from you (if there’s any to take) and when it’s over, your consumer debts are discharged or in other words, you receive a court order, called a discharge order, which is a permanent injunction prohibiting collections.

Remember that there are exceptions to the discharge. Certain kinds of debts are exempt from the discharge and will remain a personal obligation for you to have to pay once your case is over. Child Support, Spousal Support, Student Loans, Recent Income Taxes, and a number of things which are similar in nature are not discharged. You will still have to pay your mortgage if you want to keep your house, you will have to pay for your car if you want to keep your car as well. For more details (but only if you’re in California) and to discuss specific debts, call me 858 452 4500.

You must qualify for a chapter 7 by showing that your income is sufficiently low or that certain expenses are sufficiently high or both. This test is called the Means Test.

With Chapter 13 you get to keep everything. If you would have lost it in the chapter 7, you can still keep it in the chapter 13 as long as you pay the bankruptcy trustee for it instead of giving it to him and letting him sell it. A chapter 13 case is a bankruptcy with a payment plan. Payment plans last from 3 to 5 years.

The payment is determined by your income and expenses. If you don’t qualify for a chapter 7, then your payment is determined by what the means test states you have to pay.

There are other reasons you might file a chapter 13 instead of a chapter 7, in a chapter 13, you are able to propose a payment plan that allows you to catch up unpaid payments on your home and thus at the end of the payment plan, you are current on your first mortgage again. If you have a 2nd mortgage and your home’s value is lower than the balance on the first mortgage, then you may qualify to have the 2nd mortgage removed from your home.

If your vehicle is more than 910 past the purchase date, you can cram down or reduce the balance on the car to the car’s value. Arguably, that might not be much of a reduction after 910 days have gone by but I have seen it be as much as $5000 in principal and a reduction in the interest rate of about 5%.