People often ask if they qualify for bankruptcy. The answer is – everyone qualifies for some type of bankruptcy, it just depends which type. There are a number of different chapters of the bankruptcy code you can file under. The three that consumers might use are Chapter 7, Chapter 13 and in some rare circumstances, Chapter 11.
Chapter 7 is a type of consumer bankruptcy case often called a “straight bankruptcy”. It is the most common way that individuals (or married couples) file personal bankruptcy. In a Chapter 7 case, a bankruptcy petition will be filed asking the Court to give you a discharge (to wipe out) your debt. Almost all debts can be erased in a Chapter 7 case. A few types of debts, like student loans, will usually (but not always) survive a bankruptcy case. Most Chapter 7 cases last about 100 days from filing to finish. During the case there is one hearing called a “341 Meeting” that is recorded and conducted under penalty of perjury where the client must attend. You want a good attorney to be present and represent you at that meeting. Read more here.
A Chapter 13 bankruptcy case is one where an individual (or married couple) file a plan to reorganize their debts over a 3-5 year period. A Chapter 13 case is very different from Chapter 7. Rather than wiping out debt and moving on in 100 days, a person instead is instead in a re-structuring plan for a long time. Why would anyone want to do that? There are lots of reasons – the main being that there are things you can do in a Chapter 13 that you cannot do in a Chapter 7. One of the main reasons people do a Chapter 13 case is because they may be able to get rid of their second mortgage (a procedure known as “lien stripping”). You can also get a mortgage that is in default current in a Chapter 13 plan – you can force a bank to stop foreclosure and make small monthly payments over five years to get current on a mortgage that you’re in default on. Read more here.
Chapter 11 bankruptcy cases are designed primarily for businesses who want to restructure their existing debts. Chapter 11 cases are not normally used (or probably shouldn’t be) for individuals/consumers. In rare scenarios, if neither a Chapter 7 case nor a Chapter 13 case would work for someone, then Chapter 11 may be an option.
The “Means Test” is a test that Congress added to the bankruptcy code in 2005. The test attempts to determine if a household’s income is too high to be allowed to file a Chapter 7 case. The idea is this – if your income is so high that it would be unfair to creditors for you to wipe out your debt, then you should repay a portion of it in a Chapter 13 case. The Means Test, though, is not that simple. There are multiple steps – the first step looks at whether a household is over the median income for the area in which they live. If they are under the median income, then they can do a Chapter 7 case. If they are over the median income, then they have to go to the much more complicated second step of the Means Test. In the second step, a household’s real monthly gross income is calculated and then a mixture of real and hypothetical expenses are deducted.
The hypothetical expenses, however, are not a simple list – complex court decisions have dictated many ways where a client’s Means Test deductions may change based on multiple factors. In fact, the allowances change frequently and new Cases come out all the time that change what deductions can be taken. Attorneys have to be current on recent developments in bankruptcy law to ensure they are properly able to calculate the Means Test. You can have two different attorneys do a means test and get two very different results – and since it dictates what kind of case you’re allowed to do, you want to ensure the attorney analyzing your Means Test knows how to calculate it properly. Our attorneys have literally calculated thousands of Means Tests and are highly skilled at getting the best possible result for you.
Real Estate Law & Foreclosure Defense
Real Estate Law is a complex area of law that is unique to California and the Deed of Trust system used here. When times are good, the intricate items in a note and deed of trust are rarely looked at – they get paid, refinanced, and there are no disputes. But these days, with people in default, issues come up. California has statutes that require strict compliance by lenders who are attempting to foreclose on a note secured by residential real estate. We can analyze whether you have any claim against your lender for not complying with applicable statutes or if they wrongfully foreclosed.
Unfortunately, some times the decision must be made to walk away from underwater real estate. If so, there are options such as short sales, deed in lieu of foreclosure, cash for keys, etc.. that can make the process much easier (and sometimes put money in your pocket!). Here at the Bodie Law Firm we can look at all of these options for you.
Consumer Protection Law
Fair Debt Collection Practices Act Violations (FDCPA)
There are laws that govern how creditors can collect on debts they believe are owed. These laws are very clear about what is allowed and what is not. Unfortunately, many creditors – especially debt collectors – do not follow the law. At the federal level, there is the Fair Debt Collection Practices Act (FDCPA) and a very similar state statute known as the Rosenthal Fair Debt Collection Practices Act (RFDCPA). These laws provide monetary penalties where a creditor may have to pay you if they violate the law in attempting to collect on a debt.
Fair Credit Reporting Act Violations (FCRA)
Debt collectors and credit reporting agencies must comply with the Far Credit Reporting Act (FCRA) but unfortunately, many often do not. The process for disputing credit reporting errors is a nightmare and far too often it only results in a generic answer that the creditor says the information is correct. The problem is discussed in depth in a recent 60 Minutes report. Here at the Bodie Law Firm, we can resolve credit reporting errors for you. We can handle the dispute process for you and if that doesn’t work, we can go to Court to solve the problem.
Creditor Lawsuit Defense
In order to enforce a debt, a lender must sue you in Court, win a judgment against you and then seek to enforce that judgment (usually by garnishment, levy or lien). These lawsuits are not “automatic wins” for the creditors and debt collectors. There are often many ways these suits can be defeated. If you have been sued by a lender and want to fight the suit, contact us today.
Owing the Internal Revenue Service (IRS) or Franchise Tax Board (FTB) is a problem nobody wants to have. The IRS and FTB have special collection powers that make them formidable creditors. There are ways to resolve problems with the IRS and FTB. An Offer in Compromise can allow you to settle tax debt for far less than what the IRS or FTB says you owe. Also, many times tax debts can be wiped out, reduced, or repaid at no interest in a bankruptcy case. We can give you all the options to resolve tax debts.
Disclaimer: We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code. Nothing contained in this website should be construed as legal advice. Consult with an attorney for advice regarding your individual situation. Contacting us through this website does not create an attorney-client relationship. Nothing in this website is intended as tax advice, nor is it intended to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Attorney Brett Bodie is responsible for this website.