All items from Northern California Bankruptcy Lawyer

ContractEven in a world where people attempt almost any skilled task with the help of Google, YouTube, or Legal Zoom,  people continue to ask: is this contract legal?
They aren’t asking (usually) whether the subject matter of the contract is permitted by law.
They really want to know: will what I’ve written be enforceable.
No magic words required to contract
There are no magic words or phrases that make a contract enforceable by a court.
Enforceability is not acquired by adding “whereas” or “notwithstanding“.
A contract need only establish that one party made a promise to the other for consideration. Consideration is legalese for money.  Or something else of value.
If I promise to join you for dinner next Friday, we have not created an enforceable contract, because there was no valuable consideration exchanged.  My promise was gratuitious.  You didn’t offer me anything but your good company over a meal.

Posted 5 days 22 hours ago

ThreatThe problem even the best bankruptcy lawyer can’t fix is the one you hide.
Sometimes  it’s a problem you don’t want to face yourself, or a debt your spouse doesn’t know about.
Maybe it’s a claim you hope to bring after the bankruptcy.
You’re tempted just to say nothing to your bankruptcy lawyer.  Who will know?
Think again.
When the truth is threatening
You’ve probably heard lots of the myths about bankruptcy floating around.
Then there are the stories from people who knew someone whose friend’s cousin  filed bankruptcy some time back.
He didn’t tell everything and it worked out.
Maybe or maybe not.
People visiting a bankruptcy lawyer for the first time often are tempted to conceal debts, property, or transactions from their lawyer in the belief that if the lawyer had the facts, they would be barred from bankruptcy relief. That is seldom so.

Posted 1 week 3 days ago

question-mark-public domain-pixabayWhat have they been doing with my mortgage payments?
The client has been making a mortgage payment according to the HAMP formula for almost 18 months of her Chapter 13.
Yet without a 1098 form, her very capable tax preparer told her she couldn’t deduct mortgage interest on her tax return.
Never fear.
We have a new tool to get an answer to her question, thanks to the Consumer Financial Protection Bureau and the Dodd-Frank Act:  the Request For Information.
Your request has clout
The Request for Information is one of the new tools that  sets my heart aflutter.
Unlike previous law where a Qualified Written Request presumed you knew what the problem is, with a RFI you don’t have to know that there’s a problem.

Posted 1 week 5 days ago

metal-keyDischarging tax debt in bankruptcy gets lots of families out of a horrible hole.
Once they fell behind on taxes, the penalties and interest swelled the debt and collection often compromised their ability to stay paid up on more recent years.
Bankruptcy can save their bacon because taxes found on returns due three years ago or more are generally dischargeable in bankruptcy.
When old taxes live on
So the man in my office expected to wipe out his liability for  several years of taxes four and five years old in his Chapter 13 case.  Chapter 13 would allow him five years to pay the more recent, non dischargeable taxes through his reorganization plan.
Only the rule for discharging taxes in bankruptcy has three prongs:  the three year rule, the two year rule, and the 240 day rule.
Turns out that the returns for those four and five year old taxes were never filed.  He prepared the returns, but didn’t file them because he couldn’t pay the tax due.
So those old taxes failed the two year rule:  

Posted 2 weeks 4 days ago

I tallied the readership’s favorite posts of the year and found the list far different than mine.
So here’s the counter-list of my favorite posts of 2014, drawn from material first published this year.
Most impactful appellate decision
airstream trailer-flickr-stephen hillWelsh was decided in 2013, but I talked about it on Soapbox in 2014:  The Most Important Bankruptcy Decision of 2013.  The 9th circuit said that the means test formula, flawed as it is, prevails over the Chapter 13 trustee’s view of how big a house, or how many financed cars you can have and get bankruptcy relief.

Posted 3 weeks 19 hours ago

Here are the ten posts that most intrigued readers of Bankruptcy Soapbox in 2014.
Some are new this year, and others are classics from earlier.
In reverse order, the ten posts that spoke to you.
Reasons Not To File Bankruptcy, Rotten & Wrong10.
Six Rotten Reasons Not To File Bankruptcy   Mortgage law attorney Bill Purdy walks through the misguided reasons his clients give for not filing bankruptcy, when it would help a lot.

Posted 4 weeks 20 hours ago

6535579749_50238f065c_zDespite his bankruptcy discharge, my former bankruptcy client has just been bitten by naughty credit reporting, and the interim results aren’t nice.
When several years passed since the bankruptcy, my client thought he’d caught and controlled the old and the inaccurate credit reporting.
Four years after the discharge was entered,  a mortgage servicer has just begun reporting a hugely negative item  on a mortgage loan cut off by foreclosure and wiped out by bankruptcy.
And my client discovered this when he applied for a new home loan.
Worse yet, the reporting servicer didn’t service the loan when it was discharged.  So, it’s unclear why the old servicer is handing off servicing on a discharged debt.
The likely choices are incompetence and greed.
So, let’s review the law that applies here.

Posted 4 weeks 5 days ago

pickpocketThe right of your bank to take your money when you aren’t looking stops at your credit card.
Your bank may be entitled by common law to setoff what it owes you from what you owe it on the garden variety debt.
But the federal Fair Credit Billing Act  forbids a bank who has issued you a credit card from helping itself to your funds at the bank to pay the credit card.
How bank accounts work
When you deposit money at your bank or credit union, the bank doesn’t really tuck your money away in the vault til you need it.
It makes an entry in its books that it owes you the money.
The deposit creates a debt from the bank to you, the depositor.
When debts run both ways
If you borrow money from the bank on a HELOC or personal loan, you now owe the bank a debt.
Common law allows the off set (or setoff) of one debt against the other, when the parties owe each other.
If you don’t make the payment on your debt to the bank, the bank can reduce the debt it owes you by the delinquent payment.
That’s a setoff.

Posted 5 weeks 4 days ago

Don't gag mortgage servicersLists of stupid laws are lots of fun, when they don’t really touch your life.
But the law that gags secured lenders after bankruptcy isn’t funny.
Preventing lenders from sending mortgage statements to homeowners after bankruptcy just sets families up for foreclosure and rewards servicers with the fees that follow default.
It’s just a stupid result that no one has fixed.
Bankruptcy laws collide
Two clients this week weren’t laughing when two different bankruptcy laws collided:
One law says that the lender’s lien on your home remains enforceable after bankruptcy.
The second law prohibits efforts to collect a debt after bankruptcy.
The survival of the lien after bankruptcy protects the secured lender;  the injunction against post bankruptcy collection protects the debtor.
But what if the debtor wants, and needs, to continuing paying?  The intersection of these two provisions thwarts both.
In one case of mine, Bank of America “service reps”  refused to tell a Chapter 13 debtor how much she had to pay to bring her mortgage current.

Posted 6 weeks 4 days ago

Counting the days in bankruptcy preference ruleMost folks considering bankruptcy know about the 90 day rule in bankruptcy
They’ve talked to friends or read on the internet. 
When they get to a bankruptcy lawyer’s office, they’re eager to tell me they know about the rule, though sometimes they have questions about just how it works.

  • Some think the rule is one prohibiting paying  any bills during the run up to bankruptcy.
  • Others think it is a rule against buying anything.
  • Some are simply unclear how it works.

Which is all very interesting, except that there is no 90 day rule.
Or at least, no rule that makes any difference to debtors.
90 day rule affects creditors
The only bankruptcy rule with a 90 day scope is a rule that allows a bankruptcy trustee to recover money from creditors.

Posted 7 weeks 1 day ago