Thursday, December 27, 2012

Can Bankruptcy Be A Part Of Wise Financial Planning?

In short, YES.  There are basic commonalities that seem to flow through all financial planning advice – such as, live within your means and save for the future.  The path to reach those goals, however, can be vary greatly depending upon who is giving the advice.
As a bankruptcy attorney who holds an MBA degree and who formally worked as a CPA, I spend many hours a week counseling clients on how to develop a household budget, foster proper spending habits, and develop realistic saving goals.  In working with clients, I try to look at each situation broadly and realistically.  More often than not, the main inhibitor to saving for the future is overbearing debt.  Simply put, once a person sheds their debt, the individual/family will see an immediate increase in disposable income.  Disposable income can then be put to work to build a stronger financial future.

So, why is bankruptcy not on the usual list of discussion topics of financial planners? Well, because these professionals are typically not attorneys and they are prohibited from giving legal advice.  Further, they often lack a solid understanding of how bankruptcy can be used as a positive tool to move someone toward financial freedom.  Lastly, for some, they simply have a financial incentive to steer people away from bankruptcy and into more costly and complex work-out solutions.

To be sure, bankruptcy is not a proper option for everyone.  However, when used appropriately, bankruptcy is an inexpensive and effective tool in well-rounded financial planning.  Consider that Donald Trump, Thomas Edison, Walt Disney, and Benjamin Franklin all filed personal bankruptcy. Where these individuals financially unsuccessful?  Not by any measure.  So, why should you (or anyone) be treated differently? 

My focus as a bankruptcy attorney is to find the best solution(s) for my clients.  In doing so, I will regularly consider many different legal and non-legal options, including non-bankruptcy options.  I look at my role as a bankruptcy attorney to include putting the client on the right track once the case is over so that s/he will have a brighter financial future and be able to reach those long term goals of living within one’s means and saving for the future. 

If you feel a bit overwhelmed by your debt, act now by giving us a call.  We’ll have a frank and candid discussion of all your financial planning options.  The sooner you act the sooner you can map out a plan to get yourself on track for a brighter financial future.

Friday, October 26, 2012




October 2012

Already struggling with home foreclosures, harsh bank and credit card fees, and other
major financial challenges, America’s most deeply indebted consumers are now falling
victim to a major new threat: so-called “debt settlement” schemes that promise to make
clients “debt free” in a relatively short period of time. Unfortunately, most consumers who
pursue debt settlement services find themselves facing not relief but even steeper financial

Even the industry acknowledges – though not in its ever-present radio and online
advertising–that debt settlement schemes fail to work for about two thirds of clients.
Federal and state officials put the debt-settlement success rate even lower – at about one in
10 cases – meaning that the vast majority of unwary and uninformed consumers end up
with more red ink, not the promised debt-free outcome.

There is now widespread documentation of the danger that debt settlement schemes pose to
consumers. The Better Business Bureau has designated debt settlement as an “inherently
problematic business.”1 Similarly, the New York City Department of Consumer Affairs
called debt settlement “the single greatest consumer fraud of the year.” Across the country,
the U.S. Government Accountability Office (GAO),2 the Federal Trade Commission (FTC),
41 state attorneys general,3 consumer and legal services entities,4 and consumer. Comments of Consumer Federation of bankruptcy attorneys have all uncovered substantial evidence of abuses by a wide range of debt settlement companies.


Debt settlement companies are for-profit entities that offer to negotiate with creditors to
reduce the amounts owed by a debt-strapped consumer. They typically charge steep fees for
every settlement they achieve. In some cases, they charge very high fees even without
obtaining any settlements.

Here are the “red flags” that consumers need to know about when dealing with debt-
settlement firms:

Debt-settlement schemes encourage consumers to default on their debts. Because creditors frequently will not negotiate reduced balances with consumers who are still current on their bills, debt settlement companies often instruct their clients to
stop making monthly payments, explaining that they will negotiate a settlement with funds the client has paid in lieu of their monthly debt repayments. Once the client defaults, he or she faces fines, penalties, higher interest rates, and are subjected to increasingly aggressive debt-collection efforts including litigation and wage garnishment. Consequently, consumers often find themselves worse off than when the
process of debt settlement began: They are deeper in debt, with their credit scores severely harmed.

Debt settlement often makes a bad problem even worse. When a consumer defaults on his or her debt, the overall debt burden can rise quickly. As accumulating penalties and interest charges inflate the consumer’s debt-load, creditors begin
collection efforts and many eventually sue. This is why debt settlement is always a gamble: If any of the creditors refuse to settle, the consumer is left worse off than when they started.

The painful bottom line is that most consumers lose the debt settlement gamble. In most cases, the consumer loses the gamble: The debt settlement company is unable to settle with all the consumer’s creditors, so the consumer’s unsettled debts rapidly grow out of control. Even debt settlement companies acknowledge that only about a third (34.4 percent) of debt settlement clients have at least 70 percent of their debts
settled after three years in the program.5 The industry acknowledges that debt settlement is unsuccessful for two-thirds of their clients. According to a Government Accountability Office investigation of debt settlement, even the industry’s extremely low success rate is overly optimistic.6 The FTC and state attorneys general found that less than 10 percent of consumers successfully complete these programs.7

Even “successful” debt settlements can come with a high price. The few consumers who are successful in debt settlement may find themselves with another unexpected bill: tax liability. Depending on the consumer’s financial condition, the amount of savings realized from debt settlement can be considered taxable income. Credit card companies and other creditors may report a debt reduction to the IRS. Unless the consumer is considered insolvent, the IRS considers it income and the consumer will be on the hook to pay taxes on it.

The problem is not limited to “bad actors” since the debt-settlement approach itself is flawed. Debt settlement schemes are a trap for most consumers because inherent in the industry’s standard business model is the requirement that clients breach their contractual obligations with creditors.


When Cipriano and Shelia, of Vallejo, CA, approached a Florida-based debt settlement company, the couple had approximately $60,000 in credit card debt. While grossly
miscalculating the couple’s monthly expenses and income, the firm advised them that they need only pay a total of $31,200.00, including the firm’s fees, and that they’d save
approximately $28,800 as a result. The firm took an initial service fee of $6,900 and continued collecting monthly “set-aside” funds in payments of $460 and later $230. The firm’s method of evaluating the couple’s ability to participate in a debt repayment plan not only was flawed, but the firm never provided any information to prove that they could secure more favorable terms from the settlement than the couple might obtain on their own or through bankruptcy. Ultimately they could not afford to save enough money to settle their debts and received none of the benefits from the debt settlement
program that they expected.

Sewnarine, of Newark, NJ, is a hardworking immigrant limo driver who owns his house and rents out rooms to make ends meet. When he lost his job for a short period, Sewnarine saw an ad by a debt settlement company and called. Sewnarine had limited literacy skills and could not read and understand the agreements he signed. Even though he was unemployed and had no income other than his rental income, the debt settlement company took $1,200 from his account and eventually lowered his payments to $567 per month. Sewnarine paid a total of $5,152 to the debt settlement company. He quit the debt settlement when he was sued by his creditors for debts of $13,000 and $5,000. Despite having paid over $5,000 to the debt settlement company, Sewnarine was told he didn’t have enough funds to settle either debt. The debt settlement company kept over $5,800 in fees when Sewnarine quit the program, despite having settled none of his accounts. Shortly after, the debt settlement company filed for bankruptcy, leaving Sewnarine with no recovery whatsoever.

Perry of Highland Lakes, NJ, is a union glazier who started out with $60,000 in unsecured debt. Although he was current on all of his debts, Perry saw an advertisement for a debt-settlement company in November 2009, and jumped at their
offer that for $500 per month he could be debt free in three to four years. He started paying into their “savings account” and was immediately sued by two large credit card companies. Although Perry paid $9,510 to the debt settlement company, they told him he didn’t have enough money in his “account” to settle so he’d have to have a default entered or file an answer. Perry is now filing a Chapter 13 bankruptcy. His credit has
been ruined as a result of his dealing with the debt-settlement company.


Steer clear of any companies that:

Make promises that unsecured debts can be paid off for pennies on the dollar. There is no guarantee that any creditor will accept partial payment of a legitimate debt. Your best bet is to contact the creditor directly as soon as you have problems making payments.

Require substantial monthly service fees and demand payment of a percentage of what they’ve supposedly saved you. Most debt settlement companies charge hefty fees for their services, including a fee to establish the account with the debt negotiator, a monthly service fee, and a final fee-- a percentage of the money you’ve allegedly saved.

Tell you to stop making payments or to stop communicating with your creditors. If you stop making payments on a credit card or other debts, expect late fees and interest to be added to the amount you owe each month. If you exceed your credit limit, expect additional fees and charges to be added. Your credit score will also suffer as a result of not making payments.

Suggest that there is only a small likelihood that you will be sued by creditors. In fact, this is a likely outcome. Signing up with a debt settlement company makes it more likely that creditors will accelerate collection efforts against you. Creditors have the right to sue you to recover the money you owe. And sometimes when creditors win a lawsuit, they have the right to garnish your wages or put a lien on your home.

State that they can remove accurate negative information from your credit report. No company or person can remove negative information from your credit report that is accurate and timely.


Many different kinds of services claim to help people with debt problems. The truth is that no single solution will work for everyone. Bankruptcy is an option that makes sense for
some consumers, but it’s not for everyone. For example, the National Association of Consumer Bankruptcy Attorneys and its individual consumer bankruptcy attorney members do not encourage every person who looks at bankruptcy to enter into it. What makes sense for each consumer will depend on their individual circumstances:

If you have just a single debt that you are having trouble paying (a single credit card debt for example) and you have cash on hand that can be used to settle the debt, you may be able to negotiate favorable settlement terms with the creditor yourself. Creditors typically require anywhere from 25 to 70 percent on the dollar to settle a debt so you will need that much cash for a successful offer. Be sure to get an explicit written document from the creditor spelling out the terms of the debt settlement and relieving you of any future liability. Also be prepared to pay income taxes on any of the forgiven debt.

If, like most people, you owe multiple creditors and do not have the cash on hand to settle those debts, you may want to consult a non-profit credit counseling agency to see
if there is a way for you to get out of debt. But make sure to check it out first: Just because an organization says it’s a “nonprofit” there is no guarantee that its services are
free, affordable or even legitimate. Some credit counseling organizations charge high fees (which may not be obvious initially) or urge consumers to make “voluntary”
contributions that may lead to more debt. The federal government maintains a list of government-approved credit counseling organizations, by state, at
If a credit counseling organization says it is government-approved, check them out first.

Consult with a bankruptcy attorney about your options. Bankruptcy is a legal proceeding that offers a fresh start for people who face financial difficulty and can’t repay their debts. If you are facing foreclosure, repossession of your car, wage garnishment, utility shut-off or other debt collection activity, bankruptcy may be the
primary types of only option available for stopping those actions. There are two primary types of personal bankruptcy: Chapter 7 and Chapter 13. Chapter 13 allows people with a
stable income to keep property, such as a house or car, which they may otherwise lose through foreclosure or repossession. In a Chapter 13 proceeding, the bankruptcy court approves a repayment plan that allows you to pay your debts during a three-to-five year period. After you have made all the payments under the plan, you receive a discharge of all or most remaining debts. For tax purposes, a person filing for bankruptcy is considered insolvent and the forgiven debt is not considered income. Chapter 7 also eliminates most debts without tax consequences, and without any loss of property in
over 90 percent of cases. To learn more about bankruptcy and whether it makes sense for you, go to



Center for Responsible Lending: Debt Settlement


National Association of Consumer Bankruptcy Attorneys

Wednesday, October 17, 2012

What does the "do nothing" option mean?

When facing insurmountable debt and the stress that comes with it, one option is to do nothing at all. I call this the “do nothing” option.
To understand the “do nothing” option and to consider whether it is a viable choice, one must understand a little about collections law—that is, how does a judgment creditor go about collecting money owed.
Typically, collection begins with “informal” efforts against the debtor.  These efforts include a barrage of telephone calls, letters, contacting others, such as employers, family members, and friends.  If these efforts fail, the lender will likely file a lawsuit.  When that occurs, the debtor will be faced with the choice of defending the case or defaulting.  Defending the lawsuit will require money – and lots of it.  Defaulting will result in a judgment being entered roughly 60 days later.
Once the creditor obtains a judgment against the debtor, a judgment lien will be filed, which attaches automatically to any real estate that the debtor owns in the county in which the judgment is docketed – this applies to all property the debtor owns at the time or may acquire in the future!  In addition, a creditor can have a sheriff’s deputy “execute” or “levy” on certain personal property – including bank accounts, investment accounts, vehicles, motorcycles, boats, etc.  If the attached asset is cash or funds from a bank account, the money will be handed over to the creditor.  If the item is a vehicle, boat, or other non-monetary asset, the property will be sold at a public auction and the net proceeds delivered to the creditor up to the full amount of the debt owing.
In most states, a debtor is allowed to exempt a limited amount of property. For example, in California, a debtor is allowed to claim a homestead exemption in his/her primary residence.  The amount of the homestead depends on several factors, including one’s age and how title is held. With a few other exceptions, however, most property owned by the debtor is subject to levy and/or attachment.  To be sure, there is little to no warning that an attachment order and usually the seizure of the assets comes as a complete surprise to the debtor.  For instance, when the debtor try to withdraw some cash from an ATM and leans that his bank account has been wiped or when the debtor gets ready to leave for work and sees that her can has been taken.  Ouch!
The debtor’s income is also at risk.  The creditor can obtain a garnishment order so that a large amount of money will be taken directly from the debtor’s pay-check pay period.  Having one’s pay-check cut by a third with no prior warning can create some serious problems when it comes to paying rent, a mortgage, a car or food for the family. 
Bankruptcy will stop ALL collection efforts in their tracks.  Once the debtor has filed a voluntary bankruptcy petition, creditors are prohibited by federal law from taking any further collection actions.  No wage garnishments, no levies, no attachments of bank accounts.  Creditors are even prohibited from contacting the debtor by phone or mail.  Depending upon the nature of the debt/judgment, the odds are high that the entire obligation will be wiped out and discharged by the bankruptcy.  There is no doubt that for most people facing a debt problem, bankruptcy will save the debtor significant money, return peace-of-mind, and help avoid a surprise attack by the creditor. Filing bankruptcy may also eliminate judgment liens against real and personal property.   
The “do nothing” option rarely works out well for the debtor.  Ignoring a financial problem does not make the problem go away.  When the alternative is to do nothing, bankruptcy is the far more responsible way of handing a debt problem.  For yourself and your family, you deserve to get out of debt and to have an opportunity to begin building a better financial future. Call us today to arrange a free confidential consultation with an experienced attorney to discuss the pros and cons of filing bankruptcy.

Monday, September 24, 2012

Don't give up the fight to save your home!

The fight to save your home is not easy.  To help, we have gathered some relevant links and points of contact.  Don’t give up.
HAMP stands for Home Affordable Mortgage Program.  The federal government offers the lenders financial incentives to modify mortgages and even reduce principal.
  • Making Home Affordable   Here’s the portal that leads you to different programs within HAMP:  loan modification, foreclosure prevention, etc.
Eligibility starts with home loans with principal balances under $729,750 on single family homes that is your principal residence.  Not all lenders participate, and not all loans qualify.  Here’s the HAMP FAQ
If your loan is insured by the Federal Housing Administration, there’s a separate program for loan modification.  Call FHA’s National Servicing Center at (877) 622-8525 for more information.
National Mortgage Settlement
This isn’t a program so much as a requirement that the five biggest servicers provide billions in concessions to borrowers to atone for their misdeeds. The settlement has its own website and a court appointed monitor to make sure the banks do what they are required by the settlement to do.  The monitor wants to hear about difficulties the public has with the banks involved.  Here’s where to lodge a complaint. If your servicer is one of these banks, you may be eligible for help.
Fannie & Freddie
The settlement does not extend to loans owned by Fannie Mae and Freddie Mac, the giant buyers of home loans.  They are now in government receivership.
Freddie followed suit with its resources for modify Freddie Mac loans.
If your loan doesn’t qualify for any of the above:
The mortgage modification programs above focus on owner occupied homes with mortgages under a certain limit.  Banks have their own modification programs for loans that do not qualify for a “standard” modification.  Contact the lender directly for loss mitigation or foreclosure prevention programs.
Getting the runaround?
Trouble with lenders and servicers seems to be everywhere.  The new Consumer Financial Protection Bureau wants to hear complaints about servicers.
Some people have had some success asking their Representative in Congress and our US Senators for help getting the attention of the lender.
Free counseling
The federal government’s Housing and Urban Development Department certifies counselors who can help you understand your options for your home.  Their services are free and reliable.
The bitter truth about loan modifications is that lenders are largely indifferent to the borrower’s troubles and grossly inefficient in processing applications.  Success requires dogged determination.  Do not take no for an answer.  Reapply, seek help from your governmental representatives, and consider whether a Chapter 13 case and the supervision of a judge would even the odds – it usually does.  In fact, loan modifications are often easier to obtain inside of the protection of a Chapter 13 bankruptcy than outside.  Call us today to learn more.

Wednesday, August 29, 2012

5 Positive Things That Filing Bankruptcy Can Do For You

I am often asked about the pros and cons of filing for bankruptcy protection.  I tell them simply that I can name 5 positive things right off the top of my head that bankruptcy can do.  Of course there are more and this list is not exclusive:
1. The Automatic Stay – Hands down the leading benefit of  filing for bankruptcy protection is the automatic stay, which immediately stops most creditors and collection actions in their tracks. 
2. Debt Relief – A key goal of a bankruptcy filing is often to obtain a Discharge from one’s debts.  A Discharge acts as an injunction to prevent a creditor (or most any other debt collector) from attempting to collect on any dischargeable debt included in the bankruptcy.
3. Stripping a Second Mortgage from One’s Home – The process of “lien stripping” is reserved for Chapter 13 cases – although a recent decision by the 11th Circuit Court of Appeals may pave the way for stripping second mortgages in Chapter 7 bankruptcies as well.
4. Repay Creditors Over Time – Chapter 13 bankruptcy allows debtors the opportunity to repay all or some portion of their debts in a reasonable fashion.  Typically, the Chapter 13 payment is equal to the debtor’s disposable monthly income. 
5. Rebuild Credit – Yes, bankruptcy can actually improve one’s credit worthiness.  Many people may be surprised to learn that obtaining credit after a bankruptcy is easier to obtain than shortly before the filing.  Why? The answer is simple.  First, one may file bankruptcy to discharge debt only once every 8 years (4 years following a Chapter 13 discharge).  As such, a creditor making immediately after a bankruptcy discharge stands a much better chance getting paid in full.  Second, bankruptcy sheds the debtors of overburdening debt, thereby freeing up disposable income to pay new obligations.  Bankruptcy is often the financially responsible step to take and can be a key part of building a strong financial future.

Call us today to learn more about the bankruptcy process.

Thursday, August 16, 2012


In my Bankruptcy practice, I see people every day in the midst of a homeowner’s dilemma. Should one try to save the house, walk away from the home, file bankruptcy, do a modification, or something else?  When I first meet a new client, I often spend considerable time simply dispelling myths.
Here are some of my favorites:
1.    Modification is a federal program – they have to give me one.  Wrong.  The statistics are daunting, fewer than 30% of applications for modification are granted!   And under the best of circumstances, the path to a loan modification is an arduous process, often lasting many months.
2.    Modification will reduce the principal amount owed on the home.  Wrong.  Occasionally, the bank will reduce the principal owed - but it is very rare.  That said, there appears to be some  good news on the horizon though as more lenders appear willing to consider a principal reduction to avoid foreclosure.
3.    I will not be able to modify my loan if I file bankruptcy.  Wrong.  We often see loan modifications given to those in an active bankruptcy or port-Chapter 7.  In fact there are federal laws that typically make loan modifications inside a bankruptcy easier to obtain than outside a bankruptcy.   Moreover, eliminating credit card or other unsecured debt typically helps the loan modification process since it frees income to be used for house payments.
4.    Applying for a modification will stop a foreclosure.  Wrong.   The foreclosure process will usually continue while a modification application is being considered.  Sometimes the sale date will be postponed, but the process will go forward unless the modification is granted,.  Filing bankruptcy always stops (or at least postpones) a foreclosure.
5.    A modification will get eliminate missed payments.  Wrong.  Generally, missed payments will be added on to the loan balance and paid at the end of the term.  Depending on the circumstances, bankruptcy may get rid of or reduce some of the money owed on a house.
6.    Filing bankruptcy causes more damage to one’s credit than foreclosure or shot-sale.  Wrong.  It’s usually just the opposite – a foreclosure or short-sale is worse for your credit score than filing bankruptcy.
7.    If the house is foreclosed, I will have to pay the bank the money that I owed that they didn’t receive when they sold the house.  Wrong.  California has an anti-deficiency statutes, meaning that the bank that holds the first mortgage cannot come after the homeowner post foreclosure.  Many states do not have these statutes, but filing bankruptcy will get rid of anything owed the bank.
Give us a call to arrange a time to have a substantive conversation with an experience bankruptcy and real estate attorney.


A chapter 13 debtor cannot continue payroll deductions for a voluntary retirement account, such as a 401(k), during a chapter 13 case, according to a recent appeals court ruling.  In re Parks, No. 11-60050 (9th Cir. BAP Aug. 6, 2012), also ruled that 401(k) loan repayments could, however, continue during a chapter 13 plan.  While In re Parks shows that courts around the nation continue to be split on the chapter 13 voluntary retirement account contribution question, Parks also preserves the unanimity among courts that retirement account loans can continue to be repaid during a chapter case.
The debtor in the Parks case had included in his “means test,” or Form B22C, and also on his Schedule I, a monthly deduction of $318.00 for ongoing contribution to his 401(k) plan.  This deduction left him with a negative $40.04 on the means test, but with a positive $886.97 on his Schedules I and J.  He proposed a monthly chapter 13 payment of $475.03.
The chapter 13 trustee objected, arguing that sections 541(b)(7)(A) and 1306 of the bankruptcy code should read together to forbid a debtor from continuing to make voluntary retirement account contributions while in chapter 13.  The trustee asked the court to rule that such contributions should instead be paid into the chapter 13 plan, in order to make additional payments to creditors of the debtor.
The appeals court agreed with the trustee.  It noted that although section 541(b)(7)(A) excludes retirement account contributions from the bankruptcy estate, and excludes such contributions from section 1325′s definition of disposable income, the exclusion only applies to funds already contributed to the retirement account on the date of the filing of the chapter 13 case.  Thus, ongoing retirement account contributions were not within the scope of section 541(b)(7)(A) and were forbidden.
The appeals court also found it persuasive that while section 1322(f) specifically allows for the repayment of retirement account loans during chapter 13, section 1322(f) is silent on the subject of ongoing retirement account contributions.  The court therefore ruled that although Congress had chosen to allow repayments of retirement loans during chapter 13, the omission of ongoing payments into retirement accounts from section 1325 demonstrated that Congress had chosen not to allow them.

Tuesday, July 17, 2012

Can I keep my credit cards in Bankruptcy?

The Bankruptcy Code requires a debtor to list all creditors in her bankruptcy schedules.  However, a “creditor” is typically defined as someone to whom the debtor owes money.  Specifically, 11 U.S.C. § 101(10)(a) defines a creditor as an “entity that has a claim against the debtor that arose at the time of or before the order for relief concerning the debtor.”
So, if the debtor has a credit card with a zero balance, the issuer of that card is NOT a creditor, and therefore, the debtor need not disclose her bankruptcy to that credit card company.  However,  that’s not the end of the story.  Card issuers write very one-sided credit card agreements that seem to get modified all the time.  The Terms and Conditions always include the following language:

“Default – You and your Account will be in default of this Agreement if:  . . . you become insolvent, assign any property to your creditors, or go into bankruptcy or receivership . . .
Cancellation of your Account – We may cancel your Account or suspend your ability to use the Account at any time, with or without any specific reason and with or without prior notice to you as permissible by applicable law.”
               So, even if a debtor has a zero balance credit card, the issuer has the absolute right to cancel it.  But how does the credit card issuer know that a debtor filed bankruptcy if the debtor does not give the issuer notice of the bankruptcy?  The answer comes from modern-day technology.
Credit card companies use sophisticated systems, like Automated Access to Court Electronic Records (AACER), to provide virtually instant data of new bankruptcy filers.  They compare multiple pieces of debtor information with their account holder databases.  If enough pieces of a debtor’s data match an active account, the credit card issuer assumes a match. 
Once the credit card company has a match, does the card issuers always close the credit account?   The answer is usually, but not always.  I am aware of occasions in which the debtor used a zero balance credit cards after the bankruptcy filing.  Perhaps in those instances the card company made a decision to keep the account open or maybe it simply failed to make a match.  In either case, it is important to know that, despite not listing a zero balance credit card in the bankruptcy schedules, the credit card can get cancelled.
Typically, this is a short-term issue.  For the vast majority of people, once the bankruptcy is over, the credit card companies will inundate the freshly discharged person with pre-approved credit card applications.   It seems that the credit card companies, even those which were wiped out in the bankruptcy, want the discharged debtor to quickly get back into debt.  Use caution.  Debtor cards with the VISA or MASTERCARD emblem work just like credit cards, with the added benefit that the client will have a better chance of avoiding unwanted debt.  Call us for more information. 

Thursday, July 12, 2012

Chapter 13 – The Final Chapter

When your Chapter 13 was filed five years ago, the goal was to complete the plan and receive a discharge.  A “discharge” is the legal determination that essentially all of your unsecured debts that remain after the plan are simply wiped out.  With a discharge, the collection companies and bill collectors that once harassed you may no longer contact you or elicit payment for those debts from you.
So, what must occur to receive a discharge in a Chapter 13?
Like so many of the bankruptcy processes, the answer will vary from bankruptcy court to bankruptcy court, even in the same state.  The answer may also vary depending on the particularities of the case.  For instance, if you own a home and were using the Chapter 13 to eliminate or “strip” a junior mortgage, then extra steps may be required to ensure that removal of the lien is actually recorded with the county recorder’s office – this may be a challenge if the junior lien holder is out of business or sold the loan to any lender.  Your attorney may wish to work with a title company on this issue to ensure that public record reflects the elimination of the lien.
Under current bankruptcy law, you may also get a statement, signed by the court, that your mortgage is up to date. This is a great thing to have if you started the Chapter 13 when you were behind on your house payments.  Without that determination, the lender will often come back after the Chapter 13 plan is over and claim that you have other charges that have not been paid, like “attorney’s fees incurred to review the bankruptcy” or “property valuation charges.”  It is certainly better to have the court resolve those issues before closing the case rather than fight with the lender after the fact.
There is much to consider before the case is closed.  At Speckman Law Firm, we work with our clients throughout the process.  Near the end of the case, we re-visit the reasons for the filing and cover with the client the steps that must be taken before the case closes.  Paying that extra attention to the client’s case not only makes the process smoother, it better ensures that the client received all of the benefits afforded by the Chapter 13 bankruptcy.  A discharge and the closing of your bankruptcy is a great thing. We make sure it is done right.

Friday, July 6, 2012


Bankruptcy may be something that you believe you can avoid.  After all, you don’t owe too much money or you believe you can manage your debts – except for your car.  So what to do? Well, perhaps your plan is simply to voluntarily surrender the car to the finance company. No need to file bankruptcy, right? Wrong!
A car lender which believes that it is not going to get paid wants to get its collateral back as quickly as possible - with as little fuss as possible. Sometimes this leads to the finance company telling the borrower - “don’t worry, the car will be sold and you’ll get a credit for the sale price.” To be sure, the finance company does not want to pay the “repo man” to chase around the borrower, so the lender will often make it sound as though it is sympathetic with your situation or even trying to help you.  What is left out of the message is that the vehicle will be sold at an auction, yielding a very low sale price. 
Voluntary surrender is a repossession and is a default of your credit agreement. Repossession is repossession, whether done in the middle of the night by a tow truck, or voluntary turnover by the borrower.  It will not only harm your credit rating, but it will result in a repossession sale of your car no matter how the lender gets it, and usually for much less than you could have sold it for yourself …and you will owe the lender the deficiency balance, which is the difference between the price it sold for and the balance on the loan.
If you believe that you can no longer afford your car payments, if you feel your car is worth less than you owe, or you simply need time to get caught up on a few missed payments, bankruptcy may be the right answer.  Depending upon what YOU want, you may be able to surrender the vehicle without any risk of a deficiency.  You may be able to lower your payments or the balance you.  You may be able to “re-purchase” the car for its current market value, no matter how much you owe.  Or, you may be given time to get caught up.  Bankruptcy is a power tool and it is designed to help good people stabilize their financial situation – including car loans.

Do yourself a favor. 
Call Speckman Law Firm before you loose your car to the Repo-Man.  If your car is taken, you may wind up having to file bankruptcy to get rid of the deficiency balance; you might as well explore how bankruptcy may be able to allow you to keep the car.


Tuesday, June 26, 2012

Did You Co-Sign A Loan?

Having a co-signer is a good way to get more credit.  However, there is a dark side – especially when it comes to filing bankruptcy. There are several ways to address these types of debts, but careful planning is required before embarking on a bankruptcy.
Becoming a co-signer is easy and at one time often meant that the borrower(s) received better loan terms - after all, the bank received another target to go after if the loan was not paid.  Nowadays, a co-borrower often does little to enhance the ability to obtain credit and in fact can hinder the process.
Co-signed obligations receive special treatment in bankruptcies.  For instance, there are several unique disclosure requirements that must be satisfied.  From the standpoint of the law, your co-obligor has a right to know that you filed bankruptcy.  Why? Because s/he is now a creditor of yours.
Seem strange? The reason your family member or friend is now your creditor is due to the fact that s/he is still obligated on a loan for which you were equally liable.  So, to the extent the co-signer pays more than “her share” she would have a claim against your bankruptcy estate. Put differently, while your bankruptcy may result in a discharge for you, the co-signer’s obligation will survive and s/he would still be liable for the obligation.  
There is good news. In the context of a Chapter 13 bankruptcy, a recent appellate court decision held that a debtor may be permitted to pay the full amount of co-signed obligation through the Chapter 13 plan, while not paying the full amount of other unsecured obligations.  This is a rare exception to the rule that a debtor may not discriminate as between unsecured creditors.  Moreover, a Chapter 13 provides a special co-debtor stay — similar to the automatic stay — which protects your co-signer like you from collection efforts while the plan is going forward.
Another critical issue is how that co-signed debt was being paid prior to bankruptcy. If the court considers your co-signer an “insider” then a bankruptcy trustee might be empowered to get the money paid on that obligation back on the theory that the creditor received preferential treatment. That’s correct - the trustee could take back payments made to the bank within 90-days prior to the bankruptcy filing.  The trustee could also go after you co-signer for a year’s worth of payments — because you “preferred” your co-obligor by paying this obligation rather than paying other creditors.
There are important pre-bankruptcy steps we will generally take to help ensure that the client’s former payment on a co-signed debt does not raise the interest of the trustee.  As well, we will explore various scenarios of discharging a co-signed obligation and how those options may impact the other responsible obligors. Working intelligently, we find the best solutions for our clients. 
Bankruptcy laws are very powerful, but these laws can also be complicated – especially for the unwary.  Hiring skilled counsel is the first step to securing the life changing benefits that a well-managed bankruptcy offers.  

Call us today for a free confidential consultation with Attorney David Speckman.
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An Overview of Liens in Bankruptcy

Liens come in many different forms. Some common examples of liens include purchase money security interests, pledges, mortgages, deeds of trusts, and judicial liens - which is a type of non-consensual that arises when a creditor sues and gets a judgment.  An execution lien prevents one from passing clean title on the effected property without first satisfying the lien. It can also lead to a forced “sheriff’s sale” of your property, including one’s house in some circumstances.  It is important to identify such liens before filing a bankruptcy so that a property analysis can be completed.  For instance, Section 522(f) of the Bankruptcy Code allows you to eliminate a judicial lien if it impairs a valid bankruptcy exemption. The lien may also be eliminated in many instances by filing a Chapter 13 bankruptcy, even if the property has no equity.  It is important that you work with counsel who understands the complexities of lien avoidance. 

 At Speckman Law Firm, we have eliminated millions of dollars in unwanted liens. 
We can help you eliminate yours as well.

For More Information or to schedule a free consultation with David L. Speckman, visit our website below!

Monday, June 11, 2012


Most people must at some point interview for a job.  As the interviewee, you come prepared to answer questions and make a case why you are the right person for the job.
Naturally, the pressure is on the interviewee to make the right impression and convey important facts into the conversation as well as to project competence and confidence.
Now, turn the table.  How would you like to be the one conducting the interview?  That is the case when you are considering which attorney to hire to represent you in a bankruptcy, or any case.  The decision to hire is yours.
The challenge of course is that you may not know the details of the bankruptcy process or about the legal field.  Chances are that much of what you have been told or read on the internet is wrong or does not fit with your unique situation.  This is, after all, your situation, not your neighbor’s or that of the hypothetical client.  You need someone who can customize the representation to fit your particular needs.

To be sure, lawyers are not interchangeable.  One lawyer is not necessarily as good as another.  Price is almost always the poorest basis on which to choose an attorney.  Any single error in the process can have lasting consequences, impacting your financial wellbeing for years to come. 
A well-managed bankruptcy begins long before any forms are completed or schedules are filed with the court.  The process begins with understanding the client’s situation, goals and challenges and then taking the appropriate steps to ensure the best outcome possible for the client.  To be successful, one must have an attorney working for his/her benefit - someone who takes the time to listen to the client, develop a winning strategy and explain that strategy to the client.
Here is a checklist one might consider when evaluating a prospective bankruptcy lawyer.
1.       Is the lawyer’s practice focused on representing consumer’s in bankruptcy?
2.      Did the lawyer ask about your goals in filing?
3.      Did you have an opportunity to speak with the attorney – and did he listen to you?
4.      Dis the attorney explain your choices and the legal process in plain English?
5.      Were you comfortable asking questions and disclosing the difficult and messy situations in your financial life?
6.      Did you get real and unrushed face time with the lawyer?

The hiring of an attorney is a big decision.  You may well have a professional relationship with the individual for many years.  Be sure that you hire the best person you can and someone whom you believe will always be there for you. 

Tuesday, June 5, 2012

Is Pride Preventing You From Speaking With A Bankruptcy Attorney?

For many, bankruptcy is not a pleasant option to consider.  Neither is simply ignoring the financial problem one faces. Oddly many are more likely to simply struggle with their debt rather than take the proactive role consulting with a bankruptcy lawyer.
The irony is that the bankruptcy option may be easier, and certainly less problematic than simply ignoring the problem.
·  The first misconception to overcome: Bankruptcy is about failure. Bankruptcy is about renewal. Business ventures fail and are liquidated in bankruptcy. But people go into it for a fresh start. They may have fallen upon hard times and are unable to pay debts back. That’s the cause but the point of the process is to get one back on his/her feet.

· The second misconception: Bankruptcy is a punishment. Even though they have done nothing wrong, some expect that their creditors, the trustee, or the judge will ridicule or torment them. In actuality, bankruptcy is more like closing a loan, where someone simply verifies the information provide.  Truly, if you do your part, the system will do its part to get you through safe and sound.

· The third misconception: You’re the only one. Let’s do some basic math. In almost every year going back about 20 years, more than one million cases have been filed – and many of those involved a husband & wife.  To be sure, you already know someone who has filed bankruptcy – and I sure that they are glad they did.

Today, right now, thousands — possibly millions — of folks just like you are doing something foolish to avoid calling someone just like me, a bankruptcy lawyer. They might be about to cash out their 401(k) or IRA account, even though I can save it for you. They might be hiring a debt settlement company to negotiate ridiculously unlikely deals with creditors who will sue before the end-game is played. They might even be considering taking cash out of their home by way of a new mortgage.
And today, right now, millions of Americans believe that they are doing just fine financially, mostly because they’re keeping up on the minimum payment on all their debt.  The reality is that every day that goes by their chances of getting out of debt grow slimmer and slimmer.

It takes courage to talk to speak with a bankruptcy attorney – just as is takes courage to speak with a surgeon about a health problem. But deep down you know it really is not going to get better, right? If your debts are now keeping you from important things — like your kids’ education, replacing your car, or being able to retire — or even critical things — like your health care — then why haven’t you already called a bankruptcy lawyer? And if your answer is that you’re afraid or you’re too proud to “ever do that” then think again. Fear and pride are hard to eat sometimes. It might just be time to find out what you don’t know. 

Monday, April 30, 2012

Bankruptcy and Access to Future Credit

Bankruptcy clients are always concerned about how a bankruptcy filing affects their credit history and ability to obtain new credit.  One of the most frequent issues is whether bankruptcy will disqualify the debtor when trying to buy a home in the future.  This question is particularly pertinent for clients considering whether to try to remain in a current home where the payments have become very burdensome.  Sometimes the best long-term strategy is to walk away and start over as part of the debtor's fresh start.
You may qualify to purchase a home as early as one year after filing Chapter 13 (while the plan is still being funded), or one year after discharge in Chapter 7, depending upon the circumstances.  The more customary period is two years.  Whether you can qualify for FHA or VA loan guarantees may be a determining factor in your ability to obtain a home loan.
FHA will insure mortgages to individuals who have filed Chapter 7 liquidation bankruptcy two years after the discharge if "the borrower has re-established good credit (or has chosen not to incur new credit obligations), and has demonstrated an ability to manage financial affairs."
To obtain a loan within one year after the discharge, the borrower must show that "the bankruptcy was caused by extenuating circumstances beyond his or her control and has since exhibited an ability to manage financial affairs and the borrower's current situation is such that the events leading to the bankruptcy are not likely to recur." 
FHA will consider approving a borrower who is still paying on a Chapter 13 Bankruptcy if those payments have been satisfactorily made and verified for a period of one year.   The Chapter 13 trustee’s written approval is required in order to proceed with the loan. You will have to give a full explanation of the bankruptcy with the loan application and must also have re-established good credit, qualify financially and have good job stability.
FHA insured mortgages are generally not available to borrowers whose property was foreclosed on or given a deed-in-lieu of foreclosure within the previous three years.  If the foreclosure was the result of extenuating circumstances, however, an exception may be granted if you have since established good credit. This does not include the inability to sell a home when transferring from one area to another.
VA has similar regulations: 
  • If the bankruptcy was discharged more than 2 years ago, it may be disregarded
  • If the bankruptcy was discharged within the last 1 to 2 years, it is probably not possible to determine that you and/or your spouse are a satisfactory credit risk unless both of the following requirements are met:
    • you and/or your spouse have reestablished satisfactory credit, and
    • the bankruptcy was caused by circumstances beyond your and/or your spouses control (such as unemployment, medical bills, etc.)
  • If the bankruptcy was discharged within the past 12 months, it will not generally be possible to determine that you and/or your spouse are satisfactory credit risks.
VA regulations allow granting of the loan guarantee to a person in a Chapter 13 when the plan payments are finished satisfactorily, or after 12 months payments and the trustee or the court approves of the new credit.
If you obtain home loan financing with a loan guarantee, the loan rate should be based on the guarantee status of the loan.  As a result, the interest rate should not be significantly affected by the bankruptcy.
Cleaning up Your Credit Report
The fact that you filed a bankruptcy will stay on your credit report for up to 10 years after the date of last action in the bankruptcy case. Credit bureaus, however, often show debts you discharged in a bankruptcy on your credit report. If your credit report does not show the fact that you received a discharge in bankruptcy, notify the credit bureau in writing that you received a discharge, giving them the details and a copy of it. Within 30 days, that discharge should show on your credit report.

If Debts You Discharged Appear on Your Credit Report
A recent decision in the U.S. District court for the Central District of California gives Experian, Equifax and TransUnion until October 1, 2008 to properly show discharge of debt in bankruptcy, and the discharged status of a debt that was discharged, on your credit report. Discharged debts should NOT show up as late or active or overdue. Those debts should be reported as "discharged". If this decision is not appealed, you may see your credit report reporting discharged debts correctly. If you see a discharged debt reported any other way, you should notify the credit bureau in writing.

You Want Discharged Debt Reported Correctly on Your Credit Report
If you don't owe a debt, you want that reflected on your credit report, because unpaid debt pulls down your credit score. You filed bankruptcy to get a fresh start, and it is not fair for them to report debts you discharged as active. That practice has led to the practice of collectors buying "zombie debt" and trying to guilt trip you into paying it to get it off. You need not do that. Simply notify the credit bureau to report discharged debt as discharged, and you will improve your post-bankruptcy credit score!

Bankruptcy and Student Loans

Since 2005 there is no distinction between the dischargeability in bankruptcy of private vs government-backed student loans. To discharge a student loan in bankruptcy, most courts use the test set forth in what is called the "Brunner" case. It involves 3 steps. You must prove (1) if forced to repay the student loans, you would be unable to maintain even a minimum standard of living; (2) this situation will continue for all or most of the student loan repayment period; and (3) you have made good faith efforts to repay the student loans.
Many debtors can prove elements 1 and 3.  Proving the second prone, that your current financial situation is going to continue for a prolonged period can be tough. Also, many courts add a requirement that you show a "certainty of hopelessness" and prove that there is really no possible way that you could ever repay the loans.  A very high standard in deed.

Adding insult to injury, student loan creditors are aggressively arguing in bankruptcy courts that there are other repayment alternatives available that a debtor should try before seeking to discharge the debt in bankruptcy, such as "income based repayment" or IBR, which is at least available on federal loans.

On private loans, one may be able to negotiate settlements with some creditors to reduce the balance due. If it does not appear that you can discharge the loans in bankruptcy, you may wish to try to resolve the loans through a settlement of some kind.