Top 10 Things You Must Know About Your Chapter 13 Case with Judge Johnson

Posted on by David Nelson

Judge Johnson

“Thus the best laid plans of mice and [attorneys] oft go astray.”

Because Judge Wayne Johnson of the Riverside, CA Bankruptcy Court knows this, he does his best to keep us on our toes. Of course, that’s a good thing. Attorneys who don’t stay on their toes will eventually wish they had.

He’s reviewed the local rules and procedures. He’s done a comparison of those with the Federal Rules of Bankruptcy Procedure and the Bankruptcy Code and found them to be conflicting and confusing.

In his Guidelines for Chapter 13 cases, he’s done his best to resolve the conflicts in a way that will comply with the law and allow for maximum success for chapter 13 cases.

This article is in no way a substitute for reading Judge Johnson’s Guidelines. You must Read them if he is the judge assigned to your case.

Read Them Here: Judge Johnson’s Guidelines for Chapter 13 Cases

Number 1

Deadlines is Deadlines. Miss a deadline and you’re dead, Judge Johnson will dismiss your case. Even simple ones such as turning in your tax returns and employment and income information at least 7 days prior to the hearing date.

In my office, my requirement is at most 7 days after the filing date. So, if you think his is bad, mine is worse. Besides, how could I prepare your case without your taxes and income information in the first place.

Government Austerity Programs and Budget Cuts are ALREADY Coming

Posted on by David Nelson

Government Austerity Programs

I telephoned the Riverside Superior Court this morning. The outgoing message stated that “because of budget cuts, an operator is no longer available.”

 That means that all of the people who used to have jobs answering phones at the Superior Court, no longer do.

How to Find Bankruptcy Attorney David Nelson’s Office

Posted on by David Nelson

David L Nelson
Attorney at Law
24630 Washington Ave 202
Murrieta, CA 92562
951-200-3613 Phone
858-452-4500 Fax

 I’ve been a bankruptcy lawyer since 1994 and I love getting you out of debt.

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There’s One Secret That Matters in Judgment Lien Avoidance

Posted on by David Nelson

The One Secret That Matters

Is Timing, and it’s a HUGE Benefit to creditors if you mess it up.

America’s Funniest Chapter 13 and I Wish It Were On Video!

Posted on by David Nelson

Chapter 13 Hearing

I was a brand new attorney and following the suggestion of a friend of mine, I attended some chapter 13 bankruptcy hearings in Downtown San Diego. Intent on gaining a greater understanding of the process I made my way to Trustee David Skelton’s offices to watch the hearings for a couple of hours.

The audience was made up of people who had filed bankruptcy, their attorneys, some creditors and attorneys for creditors.

Don’t Kiss Your Money Good-Bye!

Posted on by David Nelson

File Bankruptcy Instead.

Did you know that paying off $60,000 in credit cards at 20% interest in minimum payments will take decades and you’ll pay nearly $200,000 back in payments of nearly $2000 per month?

Did you know that if you paid back the whole $60,000 at 0% interest through a Chapter 13 Bankruptcy, you’d pay back about $70,000 at $1,167 per month and be out of debt in 5 years.

With Chapter 13, you might not even have to pay back the whole kit and kaboodle, because it’s based on what you can afford to pay. Of course it also depending on the property you own as well and every case is different.

With Chapter 7, if you qualify, you could have your debt nubbed down to 0% principal and 0% interest. Of course it also depends on the property you own as well and every case is different.

I’m located in Murrieta close to Temecula, Lake Elsinore, Menifee, Winchester, Moreno Valley, Riverside, Corona, and Wildomar.

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Top 10 Attorneys and Law Firms Involved in Debt Collections

Posted on by David Nelson

I have noticed over the last 17 years that the following collection attorneys and law firms are the most likely to drive a lawsuit all the way to a wage garnishment, bank levy or abstract of judgment. You know these guys are good by all the consumer complaints about them. Of course, complaints by their own clients . . . not so much.

Sneakiest or just the best, you make the call! In fact, if one of these guys has sued you, you’d better make the call, to me: 951-200-3613.

People ask me all the time, “why are they suing me? You can’t squeeze blood from a turnip.” And I answer, “But you can eat the turnip.”

Top 10 Collection Attorneys or Law Firms

  1. Capital One’s in house legal department
  2. Hunt & Henriques
  3. Mark D. Walsh / Legal Recovery Law Offices
  4. Nelson & Kennard
  5. Midland Funding LLC
  6. Paris & Paris
  7. The Winn Law Group

10 Things to Know About Wage Garnishments in California

Posted on by David Nelson

1. It’s a Race Against the Clock

From the moment your Human Resources Dept is served the wage garnishment, the service on them creates a lien on your paycheck.

See Collect Access LLC v. Hernandez (In Re Hernandez), BAP Nos. SC 12-1209, SC 12-1217 (9th Cir. BAP, Dec. 14, 2012).

RACE TO YOUR BANK RIGHT NOW. If your wages have been garnished, then there is a high probability that your bank accounts are about to be levied if they haven’t already. Stop what you are doing. But read the Disclaimer first. Then Stop reading this article and RACE to your Bank right now and drain your accounts.

Disclaimer: This is not legal advice and you are not my client. This post is for educational and recreational purposes only. Additionally it may be considered sound medical advice or possibly improve your golf game. Draining your accounts could cause you to bounce checks or other scheduled withdrawals. And you know what else does that, bank levies.

2. Filing Bankruptcy Before the Sheriff Gets your Money

Even if you file bankruptcy quickly, you might not get it back. However, it will stop any further garnishments moving forward. First you must file the bankruptcy. Then that bankruptcy notice must get to the Sheriff’s Office that served the wage garnishment. Additionally, that Sheriff’s Office must then fax or send a Notice of Stay to your payroll Department. ALL OF THAT must happen before the payroll department sends the fourth of your check to the Sheriff’s Office. If all those stars line up in time, then you get to keep your whole paycheck.

We can file the same day you come in to my office in Murrieta which is just North of Temecula. Same is true for Lake Elsinore, Menifee, Hemet, Moreno Valley or anywhere else in Southern California. However, that doesn’t mean that the Sheriff’s Office will serve the notice of stay on your payroll department that same day. They are short staffed and back logged. They’re also not open on the weekends.

3. Serving the Notice of Bankruptcy on the Sheriff

The Los Angeles Sheriff is easy and can be served by email. The Orange County Sheriff responds well to faxed notices of the bankruptcy filing. Sacramento will pick up on their faxes quickly as well. For most Sheriff’s Offices in San Diego County, a fax is probably going to be fine, but if you have the chance to walk them in, you should do it. If the notice is sent in via fax, we follow up with a phone call the Sheriff’s Office to make sure that they did receive it. However, you should also do a follow up phone call too just to be on the safe side.

10 Reasons Why Chapter 13 is Better than Debt Settlements When You Owe a Lot of Money

Posted on by David Nelson

Chapter 13 vs Debt Settlements; a Re-Match

What is a Debt Settlement?

A Debt Settlement is a non-judicial process whereby you or your representative contact your creditors and ask them to take a settlement.

What is a Chapter 13 Bankruptcy?

Chapter 13 bankruptcy is a court process to reorganize your debts over a 3 to 5 year plan of repayment.

 In the rest of this post, I will assume that you do owe a lot of money and that you do not qualify for a chapter 7 straight bankruptcy.

Round 1: Chapter 13 Can Also Cut Your Balances

With a chapter 13 you might not even have to pay all your credit cards in full in the first place. You might be able to cut your balances by more than the settlements.

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

Posted on by David Nelson

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?

8 Chapter 13 Bankruptcy Pitfalls You Can Avoid

Posted on by David Nelson

Chapter 13 is a Great Tool, Unless . . . 


There are pitfalls to avoid. Getting your case dismissed when you thought it was your last hope to save your house is a disaster.  Yet, it happens much more often than not.

Pitfall 1: Losing Your Job

Such a no-brainer, yet it may sound like something you cannot avoid. However, we all know that sometimes it is.  If you don’t get along with your boss, take a deep breath.  Take an anger management course.  Take a Tylenol. Take a break. Take a nap. Because it could be a case of lose your job, lose your house. If you’re in a chapter 13 bankruptcy to catch up the arrears on your house, then you must keep up your mortgage payments current and you must keep up your plan payments.  Quit paying either one and your chapter 13 will be dismissed.  Once it gets dismissed, and you no longer have bankruptcy protection, you go back into foreclosure.

Pitfall 2: Don’t Get a Divorce

Again, while it may sound like something that probably can’t be avoided, often it can be. Be the best spouse that you can be. Bring flowers. Bring chocolates. Bring movie tickets. Read, How Full Is Your Bucket?  On my wedding day, the officiant gave me 5 little magic words for when you come home and find the baby in the highchair, his food is everywhere, the dishes aren’t done, and the other kids have homework, and you’re just back from work and the 5 little magic words are: “What Can I DO To Help?”

Pitfall 3: Re-evaluate Your House Situation Carefully Before You File

Before you file the case, you should reevaluate the house situation carefully. Chapter 13s are designed to put you on a seriously Draconian budget. So, unless you’re making great money, a budget that is too tight will ruin your marriage or your relationship to your significant other in a big fat hurry.  Don’t lose your spouse over a house.

If you DO qualify for a Chapter 7 but want to file a Chapter 13 to try to save the house, then your budget will be under a huge strain, there won’t be any money for fun, recreation or vacations and I’ve seen that lead to divorces and split ups over and over again and then neither of you will end up with the house.

Pitfall 3: Make Your Chapter 13 Plan Payment On Time Every Time

Get behind, you’re toast.  Nuff said.

Pitfall 4: Get Health Insurance If You Don’t Have It Yet

If you’re not properly insured, with health, life, auto and disability, you’re an accident waiting to happen. If you get sick or injured, you’re outta there.  If you cannot pay the plan, then you will lose that house. 

Pitfall 5: Not Filing a Chapter 13 When You Should

If you make great money, and if you could just get all of your credit cards to agree to zero interest (0%), then you’d be able to pay everyone no problem, then do it.  That’s exactly what a Chapter 13 can do for you.  If you pay the regular payments it will take forever and you’ll pay almost 3 times what you owe before you’re through.  If you go to a Debt Consolidation, they’ll be able to reduce your interest rates, but not to zero percent (0%).  Paying at zero percent interest (0%) for 5 years usually will cut your payments by a little under half.  Take the deal.

Pitfall 6: Including Your Car 

If you can file a Chapter 13 without having to include your car, then avoid putting it in the Chapter 13 payment plan like the plague. If your bankruptcy gets dismissed, you’ll find that you’re now perhaps months or years behind on your payments on your car.  You’ll also find that you’ve got mega late fees now attached to the car note.  Also the repo guys will be on their way soon after your Chapter 13 gets dismissed for non-payment. I had clients who wanted save a house, but to do that they had to lower the car payment by including it in the 13.  I suggested that they move out from the beginning.  When the case finally got dismissed the balance on the car was approximately twice what it was before filing.

Pitfall 7: Technical Tricks and Traps

Most of these are things your attorney is going to have to be familiar with and help you avoid them.  However, my favorite is one that you can help avoid: In the Central District of California, in Riverside, you are required to pay your plan payments directly to the Chapter 13 Trustee at the hearings until the judge approves your payment plan. This approval is called a Confirmation Order. Your Chapter 13 plan payments are due 30 days after your case is filed and then ever month on the anniversary of your filing date. However, your hearing date will be approximately 45 days after you file.  If for some reason your judge continues your confirmation hearing, it will most likely be for another 45 days.  When you show up to that hearing, you must bring two (2) payments with you to the 2nd hearing, not just 1.  Because 45 + 45 = 90, your plan requires that you pay 3 plan payments by that 2nd hearing date, not 2.  If you don’t bring the 3rd with you, your case will be dismissed.

Pitfall 8:  Mal-Adjusting Your Tax Withholdings on Your Pay Checks

Whenever you pay less than 100% of your credit cards and medical bills and so on through your Chapter 13 payment plan, the bankruptcy trustee will want to intercept your tax refunds as you get them from the IRS every year until your case is over. Phew!

Many people try to adjust the withholdings so that they end up zeroing out their tax refunds. However, if you reduce it too much, you end up creating a new creditor for yourself, and it’s the biggest most powerful collection agency in the world, the IRS. But at least it’s not the meanest, that distinction goes to the Franchise Tax Board of the State of California.

What pitfalls did you encounter?  Pin, Tweet, Plus and Share This Article.


Call to set an Appointment, 951-200-3613

Image credit: dundanim / 123RF Stock Photo

6 Sneaky Things Collection Agents Do in Lawsuits to Get You to Lose Without a Fight

Posted on by David Nelson

Collection Agents Make Used Car Salesmen Seem Downright Honest

So you’ve been sued by Capital One, Ford Motor, Midland Funding, Midland Credit Management, Cavalry Portfolio Service, Portfolio Recovery, Arrow Financial, Asset Acceptance, Cmre Financial, NCO Financial (insert your collection agent’s name here).

What happens next?

From the moment you are served the Summons and Complaint you have only 30 days to Answer.  If you don’t answer, you lose. The Summons is a court order stating that you must defend yourself in court or you will lose your case. The Complaint is your creditor’s paperwork describing why they think you owe them money. Your Answer is your written explanation which must be filed with the court saying why you don’t owe them the money they say you do, or not as much or not at all. Not filing your answer is called a Default.

Once you have defaulted, your creditor may obtain a Default Judgment against you. If your creditor is on the ball, it could have a judgment against you in about 2 weeks after that first 30 days is over.  But usually that’s going to take more like 4 to 6 weeks. So about 2 months after the date of service you’ve already lost and you didn’t even know it.

Judgments can be used to garnish wages, levy bank accounts, and put judgment liens on houses.  However, creditors cannot take those actions in California until 30 days after they have the judgment.

Most of the 6 sneaky things collection agents do involve getting you to default on each step of the way through the lawsuit until they’ve already levied your bank account.

1. They forget to serve you.

Impossible! They wouldn’t really do that . . . would they? It gets even better, when they’re filling out the proof of service or the paperwork they turn in to the court to say that they did in fact serve you, they forget that they forgot to serve you while filling in that proof of service too.  Okay, lots of people don’t like to talk about this because it’s so heinous but it does happen.

If you ever catch them, get ready to watch the lies fly. Mostly they’ll involve stating that you are lying about their lying. The fact that you were in Pennsylvania for a funeral and even have your cousin’s Facebook pictures to prove it will not deter them from saying you staged it like the Lunar Landing. I do want to stress that this is the rarest of the sneaky things and if it does happen, you’ll probably never prove it.

2. Serve you at your last address instead of your current address. 

This is a sort of No Kidding moment. Most of us have known someone who has had this happen. Or at least there is always someone who will say so. Often this is a mistake on the part of the person saying so, and no offense, but if you had a spouse or boyfriend/girlfriend that wasn’t working out, or roommates or teenage children, then perhaps it happened to you too. They might have lost it, thrown it away or forgotten to give it to you.

Nevertheless, so many of us have lost houses and moved perhaps even several times since 2007. You might have been served at a former address just because your creditor couldn’t find you. However, I know several people who clearly informed their creditors about their new addresses and in spite of that the collection agency digs up an address which was as much as 10 years old.

3. Make sure there is a bogus hearing on top of the summons and complaint for not serving you the summons and complaint on time.

This is in fact easier to do than it sounds. When the creditor is first supposed to serve you the summons and complaint they have only a certain amount of time to do it. If they don’t get it done, then the court issues a court order called an Order to Show Cause, or OSC ordering the creditor/collection agency to explain why it hasn’t served the summons and complaint on you already. When the court does that, it sets an hearing on the Order to Show Cause and that hearing is usually about 10 to 14 months later.  No, it’s not a trial.

Your collection agency knows that you don’t know an OSC from your own earlobes, and conveniently the court’s rules require that they serve the OSC on you too, so when they serve the OSC on you they put that on top of the summons and complaint.

So, what I hear over and over again, is “but my trial date isn’t until next year.” No, that’s not a trial date.  Even if you’re in small claims court, your trial will be in about 2 months. It will not be in 10 months or a year later.

Understand this, any hearing that far down the road which is on top of your summons and complaint is a ploy to lull you into complacency, and you fell for it. Next thing you know your check is a quarter short and your bank account is empty.  Besides which there is probably a judgment lien on your house.

4. Make sure there is a bogus hearing on top of the default judgment paperwork for not processing the default judgment against you on time.

This is in fact easier to do than it sounds. When the creditor is first supposed to process the default judgment against you, they have only a certain amount of time to do it. In processing that paperwork they are required to serve you copies of everything they file with the court. If they don’t get the default processed soon after the 30 days goes by after they served you the summons and complaint, then the court issues a court order called an Order to Show Cause, or OSC ordering the creditor/collection agency to explain why it hasn’t processed the default judgment against you already. When the court does that, it sets an hearing on the Order to Show Cause and that hearing is usually about 10 to 14 months later.  No, it’s not a trial.

Your collection agency knows that you don’t know an OSC from your own elbows, and conveniently the court’s rules require that they serve the OSC on you too, so when they serve the OSC on you they put that right on top of the default judgment paperwork.

So, what I hear over and over again, is “but my trial date isn’t until next year.” No, that’s not a trial date. Even if you’re in small claims court, your trial will be in about 2 months. It will not be in 10 months or a year later.

Understand this, any hearing that far down the road which is on top of your default judgment paperwork is a ploy to lull you into complacency, and you fell for it. Next thing you know your check is a quarter short and your bank account is empty.  Besides which there is probably a judgment lien on your house.

5. Serving your summons and complaint or sometimes even the judgment on you with a copy of the hearing date for the case management conference on top of it.

Some jurisdictions set a case management conference, or CMC when any case is filed in civil court. Some set them shortly thereafter. Some wait for the defendant to answer and then the court sets it and some wait for the plaintiff or defendant to set it. If the court where you live sets a case management conference soon, then the collection agency’s attorney puts it right on top.  Those conferences are usually set about 9 or 10 months later. No, it’s not a trial.

So, what I hear over and over again all the time is, (say it with me) “but my trial date isn’t until next year.” No, that’s not a trial date. Even if you’re in small claims court, your trial will be in about 2 months. It will not be in 10 months or a year later. But you’re not in small claims court, look for that page called Summons and read it carefully.

Remember that any hearing that far down the road which is on top of your summons and complaint or your default judgment paperwork is a ploy to lull you into complacency, and you fell for it. Next thing you know your check is a quarter short and your bank account is empty.  Besides which there is probably a judgment lien on your house.

6. Serve the wage garnishment and bank levy on you a week to 10 days after they serve them on your employer and your bank.

The reason for this is self-evident; Why give you time to empty your bank account or file a bankruptcy? The Court’s rules require that they serve you copies of the wage garnishment and bank levy, but you’re almost never going to get copies of them prior to your bank or your payroll getting the copies first.

There is a reason for this, in California, a served bank levy creates a lien in favor of the creditor against any money you have in your bank accounts. In California, a wage garnishment creates a lien against 25% of your pay check the moment is it served on the payroll department at your work. Even if you file your bankruptcy quickly, you may never get that money back. Don’t get me wrong, there are still a couple of things you can do, but they don’t always work.

By the way, if you’ve been to the bank and found that a judgment creditor has levied your bank account, then most likely your judgment creditor is also about to garnish your wages. Find yourself some money immediately and file a bankruptcy as fast as you can.

Likewise if you go to work today, and the HR Dept tells you your wages about to be garnished, then ask your Boss for a few moments to go to your nearest bank branch and empty your bank accounts. You must do this for all accounts that have your name on them except for limited circumstances such as social security deposit accounts.

If you share an account with your mom because she wants you to be able to access her account if she gets sick, you have to empty that one too. Or at least she does. Time to make some embarrassing phone calls. And I don’t mean later today when you get the chance or on the way home from work when you can get to it, I mean do it right now. Right now this minute. Leave your computer or put down the pad or phone and run to your bank and take out your money, right now.

DISCLAIMER: I’m only licensed in California in the Southern, Central and Northern Districts and this is not legal advice and you’re not my client until you have first called me and we’ve decided that you are and signed retainers.  

CALL 951-200-3613 to set an appointment.

What have sneaky creditors done to you?  Please post your stories in the comments below. Share this page.  

I see so many people who get caught unaware because they don’t know how civil lawsuits work.  Share It, Post It, Tweet It, Pin It, Plus It.

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

Posted on by David Nelson

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.

5 Ways Chapter 13 is Better than Debt Consolidation

Posted on by David Nelson

First Way

Protection of the Automatic Stay when filing your Chapter 13 Bankruptcy is a much better solution than signing up for a traditional debt consolidation. The Automatic Stay is a Temporary Restraining Order prohibiting Collections!  The order comes from a federal court and therefore preempts or supersedes state laws allowing creditors to collect.

A Debt Consolidation program, is a wish and a phone call to beg the creditor not to sue you while you are in repayment.  While most creditors will play along, there are many that will not.

A Debt Consolidation is a mangy dog begging for scraps at the doors of justice.  “Stay Boy! There’s a good doggie!” 

Second Way

When your chapter 13 bankruptcy payment plan is completed in 3 to 5 years, your temporary restraining order is made into a permanent injunction called your Discharge Order. Even better these Court Orders have teeth.  If a creditor violates one of them whether during or after your bankruptcy, you can sue them in the bankruptcy court and they have to pay your attorney to sue them to get them to back off or even pay you back. When you hear the word “stay” think of the word “stop”.  The Automatic Stay stops foreclosures, repossessions, wage garnishments, bank levies, creditor harassment and driver’s license suspensions.  Debt Consolidations do not provide the same protection as that of a Federal Court Order.  Debt Consolidations can possibly help you reduce your interest rates if you beg. 

Third Way

Chapter 13 Bankruptcy forces your creditors to work with you and your attorney whether they like it or not.  While in debt consolidation which is voluntary, some of your creditors aren’t going to work with you.  The debt consolidators pretty much know which ones and under what circumstances they won’t work with you.  The debt consolidators that have been working the deal for a while should already know which ones are not going to play along.  But for some reason, they never tell you:    “Oh and by the by, Equable Ascent Financial (or Asset Acceptance or Your Creditor Here) is not going to take your offer and they’re going to sue you now.  But just keep paying the monthly payment so that I can take my percentage and pay the other creditors slowly but surely while you get sued.  And I also told them that you have a new address, but oh ya, I forgot to tell you that too, even though you didn’t move or anything . . . but just keep paying your monthly payments so that I can get my monthly percentage of your payments, okay, thanks.”  

Fourth Way

The Chapter 13 bankruptcy repayment plan reduces interest rates down ZERO 0% and can reduce principal balances down to as little as ZERO 0% on your credit cards, medical bills, personal loans to private lenders, even older taxes as well.  Debt consolidations outside of bankruptcy can reduce interest rates too, so long as the creditor in question goes along with it.  On rare occasions principal balances might be reduced too for the few creditors who decide to go along with it.

Fifth Way

Chapter 13 Bankruptcy can reorganize all of your debts, such as repaying and restructuring your recent back taxes, your missed house payments, and even spread the last 2 or 3 years on your car payments out over 5 years thereby reducing the car payments by half or more. Often even if you repay your credit cards and medical bills in full but cut the interest rate down to 0%, in every case I’ve seen, you will have a lower payment than if you go to a debt consolidator outside of a bankruptcy.

It seems Bankruptcy Attorney Lorene Lynn Mies has Retired Medically

Posted on by David Nelson

The Bankruptcy Minute

A fine attorney and a nice person, Lorene Lynn Mies of the Bankruptcy Minute, has apparently medically retired.

She was one of Murrieta’s finest bankruptcy attorneys and I hope she’ll be well and back to her old self again soon.

I don’t know Lorene’s condition, but I have great respect for her as a person and attorney. I teased her once in a blog post that a minute was a short consultation and got an earful for it.

Bankruptcy Dismissed No Discharge

Posted on by David Nelson

Case Dismissed without Discharge?

Now what?

You’ve done your whole case and do not have a chapter 7 Discharge because your attorney forgot to tell you that you are required to do a Debtor Education Course. The Debtor Education Course is also called a Financial Management Course. You must file a Financial Management Course Certificate with a coversheet called Official Form B23 prior to the end of your case. If you do not, your case is dismissed, but not discharged. That means that your creditors start coming after you again just like before your case started. They go back to suing you, garnishing your wages, levying your bank account and so on.

Is there anything you can do?

Of course there is, there are at least a couple of options, the first is to file a new bankruptcy case. No this is not the best option, it’s merely an option. Why pay in full over again for a whole case. So, try the second option, if you haven’t waited too long, then reopen your case and file the form. Reopening the case while not overly complicated, can also be done quickly in most cases. A couple came in last Friday, and they had their Discharge Order the following Thursday, today.

To reopen your case I must file a motion with the court, and request a 30 day extension for you to get your Debtor Education or Financial Management Course Certificates filed together with the Official coversheet or Form B23. Most judges will sign the order with their eyes closed unless you’ve waited an extremely long time. However, I’ve seen them routinely granted for cases where the case has been closed less than 4 to 6 months.

Unless you’re my client and you can prove to me that you didn’t know about the requirement to complete the course, then you’ll have to pay me to reopen the case, upload the order and upload the certificates. There is a $260 filing fee (at this writing) and the attorney’s fees for the rest of the work is $500 per case.

If you can prove to your attorney that he or she never told you about the requirement, then he or she should maybe reopen it for you. However, even if your attorney forgot to tell you about it, the Bankruptcy Court itself sent you a notice explaining the requirement. So, you’d have to be able to prove that your attorney didn’t tell you and that you moved and that your attorney knew that you moved and that your attorney knew that the notice was sent from the court and at the same time that he hadn’t sent in a change of address for you and on and on. In addition, many of the Bankruptcy Trustees will explain it to you at the hearings. So, pretty much, you will have to pay the fees to reopen the case. Often the attorney’s fees to reopen cases are high. Some attorneys charge as much as $1000 or $1200 to reopen your case.

Call me Attorney David Nelson 951-200-3613, we’ll get it done fast and affordable and get you your Fresh Start. Creditor phone calls and harassment will stop again, law suits and wage garnishments will go away. I’ve been a bankruptcy lawyer in Murrieta and Temecula area since 1994. I love getting people out of debt. But don’t wait too long, if you’re in this situation, call immediately because procrastination will hurt you if you do not get your discharge completed, creditors get to keep whatever they can collect from you before you get it done.

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Bankruptcy and Income Taxes and Tax Liens

Posted on by David Nelson

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.

Debt Consolidation Loans

Posted on by David Nelson

In Murrieta and Temecula there are great places to obtain debt consolidation loans. In many cases a debt consolidation loan is a fantastic financial tool for restructuring your debt and making life easier and finances manageable. Particularly when your debts are for the types of obligations that are not revolving or renewing.

If you’re considering a debt consolidation loan, a chapter 13 bankruptcy may be just what you need. A chapter 13 bankruptcy allows you to consolidate your debts and separate them into classes. You can reduce a car payment, both by cutting the interest rates and extending the term of the loan and paying it off ahead of the credit cards. You can include child support and income taxes and give them a higher priority in the payment plan so that they get paid off completely and ahead of the credit cards too. Your credit cards and medical bills and gambling markers get paid whatever is left over.

Example: if you owed $15000 on a car, $15000 in back child support and $30,000 to credit cards, and if your budget only allowed a payment of $700. You’d setup a 60 month plan for $700/mo. Normally you’d have to pay probably $1500 to $2000 per month on that debt depending on interest rates and terms. Of the $700/mo that you would pay for the 60 month plan, your credit cards would get approximately only $200/mo. Less in fact because the bankruptcy trustee would take his fees out of that $200 and also the car would have a small interest rate applied but not compounded.

Recent Taxes

While sufficiently old enough income taxes can be discharged in a bankruptcy, more recent income taxes cannot be. Income taxes that date back only one, two or three years cannot be discharged in bankruptcy. This is true in California for the Federal and State income taxes as well as California Sales Taxes. If the debt is sufficently high you may want to consider waiting out the time required and then filing a bankruptcy when they are ripe enough to do a bankruptcy.

However, if the debt would be manageable if you just had a low interest rate and a fixed payment for 36 or 48 or 60 months, then a debt consolidation loan might be right for you. Keep in mind that the interest that the IRS charges is 10% but on top of that, stiff penalties are added whenever the debt has a remaining balance. If you set up a minimum payment plan directly with the IRS, you’re having more than a 20% interest rate and unpaid interest and penalties are capitalized back into the loan. Worse is that if you end up owing money next year your payment plan will be cancelled and the full balance on both years will be immediately required by the IRS.

A Debt Consolidation Loan may be exactly what you need in this situation. As a quick side note there is a special bankruptcy rule which states that if you obtain a loan to pay a tax and then try to discharge the new loan in a bankrutpcy, you must follow the same bankruptcy rules as though it were still a tax in order to discharge it.

Student Loans and Back Child Support

Neither of these is dischargeable in bankruptcy. However, neither Student loans nor Child Support have that same rule as the income taxes. If you obtain a consolidation loan to pay off student loans or child support, and you later find yourself unable to pay off the new loan, there is no bankruptcy rule forcing you to follow the student loan bankruptcy rules nor the child support rules for the consolidation loan. So, they get discharged.

There are plenty of student loan debt consolidation programs and some have 20 year payment plans, or extended plans and some have income contingent plans. However my favorite is to just get a normal consolidation loan. It does better things for your credit files and credit scores and if you fall on hard times afterwards, you can discharge it in a bankruptcy.

Open Credit Cards with Zero Balances

By far the worst thing you can do is to consolidate credit cards with a new loan or line of credit. Examples I’ve seen come into the office include but are not limited to the following, a couple has $60,000 in debt consolidation loans and another $60,000 in revolving credit on 10 different credit cards. Ike, the husband had gambled up $60,000 in credit cards so his wife, Inez went to the bank and got a consolidation loan and paid them off. However, it left 10 credit cards open with zero balances.

That’s like handing an open bottle of Rum to an alcoholic pirate; no impulse control and he gambled them all up again.

In Murrieta and Temecula, if your debts are primarily credit cards consider filing chapter 7 bankruptcy or if you make too much money, file a chapter 13. Imagine how much happier Inez would be if she’d talked him into filing a bankruptcy instead of running up the 10 credit cards over again. How many arguments about money could have been avoided? How many arguments did they have about the low income, the missed vacations, missed investments, missed retirement savings? If those credit cards had been closed permanently, they might have stayed married.

I’ve seen a spouse get a consolidation loan, and then call all the credit card companies and close the accounts. It didn’t work. The other spouse just called all the credit card companies the next day and asked for the cards to be opened back up again. And the credit card companies did it.

If you’re considering a debt consolidation loan, a chapter 13 bankruptcy may be just what you need. A chapter 13 bankruptcy allows you to consolidate your debts and separate them into classes. You can reduce a car payment, both by cutting the interest rates and extending the term of the loan, and you pay it off ahead of the credit cards. You can include child support and income taxes and give them a higher priority in the payment plan so that they get paid off completely and ahead of the credit cards too. Your credit cards and medical bills and gambling markers and whatnot get paid whatever is left over.

All the cards are closed and no one is going to call back and reopen them either. Call me now and lets get you started doing something about your debts. Take action and fix your finances. 951-200-3613.

Debt Consolidation

Posted on by David Nelson

Non-Profit Debt Consolidation

There are tons of non-profit debt consolidators in the Murrieta and Temecula areas. In general what they do is, set you up with a debt consolidation plan. One place put it this way, “You will be able to combine most, if not all of your unsecured debt and make one single monthly payment.” Your accounts don’t vanish, you haven’t done a consolidation loan, but instead the debt consolidators pay your various accounts monthly as you pay the debt consolidation company. They claim that you will become more organized and eventually learn to understand your finances better through participation in the program. Finally they stated that debt consolidation “may reduce” your payments.

You may have heard that “those who can’t, teach.” Well, if someone wants to teach you about your debts, ask yourself how much they can do about it? (As an aside, most of the teachers I know are quite able and deserve more than they’re getting right now, but these debt consolidators are often not even college grads.)

Hmmm, “May Reduce”? Wait a minute, isn’t that why you are thinking about contacting these people in the first place, because you don’t have the income currently to meet all the financial obligations that you have right now? I doubt that’s the deal your looking for. I expect you’re looking for a will-reduce-your-payments type of plan. Certainly there are a few of you who can afford all of your debts and are just looking for a way to get organized and if that’s the case, maybe a debt consolidation company is right for you. But if you’re like most people who are looking into this you’re probably looking to make a bit more progress than that.

What most of these companies will tell you that they do is that they contact your credit card companies and medical bills and what not, and they negotiate a payment for you. Either they are going to try to reduce the principal, interest, extend the term of the contract or a combination of them.

But what they do not tell you is that, if they’ve been doing this for a while, they already know which of your credit cards are going to play ball with them and which will not. How could they not know? Think about it. However, they will never tell you that you have a card or account that won’t want to participate.

So, they set you up with a debt consolidation payment plan and never tell you that one of your accounts didn’t like the terms and decided not to participate. Instead, after getting a reduced payment or even no payment at all, 6 months or 10 months later, that card sues you. You call up and exclaim, Wells The Fargo! Why am I being sued? And the debt consolidators tell you, “oh goodness, it appears that they’ve decided not to participate.” At that point you’re going to have to file bankruptcy before you have your wages garnished or a bank levy hits your checking and savings accounts.

And why does that sweet little old non-profit debt consolidation company do that to you? For the money! Yes, fans that’s right, for the money. Just because they’re not for profit does not mean that the officers of the company don’t take a huge salary. It just means that they cannot declare a dividend to share holders. So, what difference does it make? Answer: You’re paying bankruptcy prices to non-lawyers for a non-legal service without the great results you’d get if you simply filed a bankruptcy instead.

So wait a minute, you’re only paying them $20/mo and about $300 down to set it up, right? (low end some charge you thousands) That’s a lot of months that they’ve set up your payment plan for. How much did they tell you? 48 months? 36 months? 36 x 20 = $720 and if they have 500 of you making payments through this type of plan that’s $10,000/mo plus $150,000 in set up fees. And as one debt consolidator put it, “I keep the float.” Meaning every month he’s got tens of thousands in his accounts collecting interest from his bank and he absorbs that interest for himself. And for all that they “may reduce” your payments which means that one of the credit cards may not participate and will sue you. Maybe not but good luck getting a guarantee out of them.

Chapter 13 Bankruptcy

Do you know what one is? It’s a debt consolidation plan with the Federal Bankruptcy Code behind it backing you up and forcing your creditors to listen up and back down. Creditors must take the plan. I love it, we reduce interest rates on creditors to 0% and often reduce principals down to 5% or 10% of the total balances.

Try as you might, you could pay off all your debts

Fair Debt Collection Practices Act ~ FDCPA

Posted on by David Nelson

Can a creditor call you once you refuse in writing to pay?

You’ve written to the collection agent and told him not to call you anymore, what can you do if they call you anyway?

What if a creditor threatens to sue you?

The creditor has already missed the statute of limitations, can they continue to call you anyway?

How late can a creditor call you?