All items from Bay Area Bankruptcy Lawyer Blog

2014 Updates to California Anti-Deficiency RulesWith the new year California homeowners who might suffer a foreclosure now will have enhanced protections against mortgage lenders or debt buyers trying to collect on a foreclosed first mortgage or sold-out junior mortgage. Senate Bill 426, signed into law in July 2013 and effective on January 1, 2014, strengthens California’s existing anti-deficiency statutes. Specifically, SB 426 amends CCP Sections 580b and 580d. This follows on the relatively recent addition of Section 580e applicable to the short sale context, which prevented second mortgage lenders (usually home equity line lenders) from using the short sale as leverage to coerce homeowners into agreeing to remain liable for the balance of the second mortgage after the short sale. SB 426 also follows last year’s amendments to California’s anti-deficiency rules that included refinanced purchase money loans (where there is no advance of principal) to be given the same protections as original purchase money loans.
To understand the new protections afforded to foreclosed homeowners in California, let’s recall what the two existing anti-deficiency statues amended by SB 426 already provided.



Posted 46 weeks 6 days ago

Chapter 13 Bankruptcy After In re Flores2013 saw several major judicial shifts affecting bankruptcy law, and one decision by the Ninth Circuit Court of Appeals affects how Chapter 13 bankruptcy plans are proposed and confirmed in profound ways. In August of this year, the Ninth Circuit published the decision In re Flores, taking away significant flexibility from debtors in Chapter 13 when proposing the length of their Chapter 13 payment plans. The issue before the court was pretty technical and wonky, so bear with me because its effects on debtors and creditors are profound, and I believe, profoundly negative.



Posted 51 weeks 5 days ago

Consumer Protection Bureau Indicts Debt Settlement CompanyIn its first-ever criminal referral, the new Consumer Financial Protection Bureau, the federal consumer watchdog agency mandated by Dodd-Frank, has referred a case for criminal prosecution against a debt settlement company, Mission Settlement Agency. The indictment was filed in the U.S. District Court in Manhattan, charging that the debt settlement company’s manager and three employees “systematically exploited and defrauded” customers who sought to settle their debts. Rather than offering any real debt relief, according to the indictment Mission Settlement Agency, took about $14 million from its customers between mid-2009 and March 2013, keeping the lion share and paying out only $4.4 million to creditors. And of an additional $2.2 million in fees charged to customers, the government’s indictment states that the debt settlement company “never paid a single penny” to creditors. Read more here.



Posted 1 year 33 weeks ago

San Jose Bankruptcy Debtors May Keep Luxury Vehicles in Chapter 13 BankruptcyChapter 13 bankruptcy trustees in California and elsewhere frequently object to debtors’ Chapter 13 plans in which the debtor proposes to pay very little to his general unsecured creditors (like credit card companies), while nevertheless continuing to make payments on secured debts for so-called “luxury items.” Such plans, some Chapter 13 trustees have claimed, were made in “bad faith” because payments on the secured debts for such luxury items take away money that could have been used to pay more toward unsecured debts. I have had many San Jose bankruptcy cases in which I worried that the trustee might object to the debtor’s driving a luxury car, even where that car might arguably be necessary to the debtor’s business as a real estate broker, for example.



Posted 1 year 36 weeks ago

Treatment of Reverse Mortgages in California Chapter 7 bankruptcyAs many of our clients filing personal bankruptcy get older, we often see clients who have taken reverse mortgages on their homes. Either because they needed income to live on or to deal with a spouse’s end-of-life care, I meet with a growing number of bankruptcy clients who have turned to these types of loans in order to get by. And no wonder, the banks have been pushing reverse mortgages aggressively for several years now. Daytime television is now inundated with commercials for reverse mortgages. I’m not going to get into the financial wisdom of these loans in this post, but I do want to focus on how reverse mortgages are treated in bankruptcy, particularly in Chapter 7 bankruptcy.



Posted 1 year 39 weeks ago

California Bankruptcy Attorney Says Short Sale Is Not Mortgage FraudToday’s post isn’t really about bankruptcy per se, but as a bankruptcy attorney in California, as you might imagine, I have had an up front and personal perspective on the mortgage crisis over the last several years. I was listening to the California Report on my San Francisco Bay Area NPR affiliate, KQED, last week when I heard something that struck me as so preposterous, so deceitful in its specious logic, that it stuck with me for days. The reporter, Rachael Myrow, was interviewing one Ed Gerding, the “Senior Fraud & Risk Consultant for CoreLogic,” which, according to its website, supplies “data, analytics and services” to “financial services and real estate professionals.” The piece was about mortgage fraud in California. Again, as a bankruptcy lawyer, my ears pricked up.



Posted 1 year 42 weeks ago

Protecting personal injury settlement or award in California bankruptcyNo one ever wants to be involved in an accident, but unfortunately, they happen all the time. As the medical bills and other expenses start to pile up because of an injury and/or inability to work, many seek relief by filing for bankruptcy to manage all of the debts that they have accumulated during this period. In fact, medical bills and debts arising from medical treatments not fully covered by insurance are among the chief reasons our San Jose bankruptcy attorneys see people needing to file Chapter 7 or 13.



Posted 1 year 45 weeks ago

Personal Bankruptcy Discharge Offers Tax HelpIt’s that time again. Time to explain why filing personal bankruptcy can provide enormous tax savings. Every year, several of our bankruptcy clients contact us in January or February because they have received a 1099-C form filed with the IRS by one of their former creditors. In case you don’t know, debts that are “canceled” or “forgiven” by a creditor may in some cases be treated as though you received that amount as taxable income under IRS rules. While this may seem inherently unfair to the ordinary person who receives a 1099-C—after all, she didn’t actually receive any income—the law can in many circumstances nevertheless treat the benefit she received by not having to pay that “canceled” debt as though it were taxable income.



Posted 1 year 47 weeks ago

California bankruptcy exemptions increased for 2013Those filing personal bankruptcy in California in 2013 can now protect a little more of their assets in a Chapter 7 bankruptcy, and potentially pay a little less into a Chapter 13 plan. That’s because the California bankruptcy exemptions have been increased modestly as of January 1, 2013. I’m not complaining as this is the first increase in the amounts debtors can keep in a Chapter 7 bankruptcy in California since April 2010. And anyone needing to file bankruptcy in California should be grateful to Assembly Member Bob Wieckowski for introducing the bill, AB 929, that raised the bankruptcy exemptions. Unfortunately, the California Bankers Association and the National Association of Bankruptcy Trustees (go figure) opposed the passage of AB 929 and were able to prevent the bill’s originally proposed increase in the homestead exemption.



Posted 1 year 49 weeks ago

New year 2013In April 2005, Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act, or “BAPCPA” as we bankruptcy attorneys call it. On the day BAPCPA passed, I was interviewed by our San Jose CBS affiliate, KPIX, about the sweeping changes to bankruptcy law contained in BAPCPA. Among consumer bankruptcy lawyers everywhere, there was a good deal of handwringing over what the new bankruptcy law would mean for the typical honest debtor needing a fresh start from Chapter 7 bankruptcy.



Posted 1 year 50 weeks ago