Blog – Mark E. Brenner, Counselor at Law

New Law Gives California Homeowners More Protection from Debt Collectors and Bankruptcy Trustees

Fri, 25 Sep 2020 22:27:00 GMT

On September 18, 2020, Governor Gavin Newsom signed AB 1885 into law. http://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201920200AB1885 . The new legislation gives homeowners added protection against efforts to collect a debt by forcing the sale of the debtor’s home.

Until now only a relatively small portion of the equity in one’s home could be protected from collection of a debt. For example, existing law prescribes that the amount of equity protected (the “Homestead Exemption”) is either $75,000, for singles, $100,000, for married couples, or $175,000, for seniors. These days many homeowners in California have much more than that, Additionally, each year inflation erodes the value of these amounts.

However, the new law, which took effect on January 1, 2021, increases the “collection protection” to the greater of $300,000 or the countywide median sale price of a single-family home in the calendar year prior to the calendar year in which the the homeowner claims the exemption, not to exceed $600,000.

Another plus: these amounts would adjust annually for inflation.

The new law also provides the same protection to individuals who file a bankruptcy. It allows a homeowner to eliminate a greater amount of debt without putting his or her home at risk.

If you’ve been told that you can’t file for bankruptcy because you have too much equity in your home, you may have another chance come January 1, 2021.

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Student Loan Debt Relief is Coming

Mon, 13 May 2019 21:34:00 GMT

If you or someone you know is held back because of suffocating student loan debt, help may be on the way. Lawmakers in Washington introduced a bill last week that would make it easier for student loan borrowers to cancel their debt in bankruptcy. The measure, which is supported by 14 Democrats, one Republican and one independent, is dubbed the Student Borrower Bankruptcy Relief Act of 2019. The bill was introduced Friday, May 10, 2019, by Sens. Elizabeth Warren (D-Mass.) and Dick Durbin (D-Ill.), along with Reps. Jerrold Nadler (D-N.Y.), John Katko (R-N.Y.) and Joe Neguse (D-Colo.). The thrust of the new bill is that student loan debt would be treated like other types of consumer debt. I’ll provide more details as they come out.

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Welcome to our new website!

Tue, 11 Dec 2018 05:41:00 GMT

Welcome to our new website! This site has been professionally designed to be responsive and mobile friendly, so it looks great and is accessible no matter what type or size of device you are using.

Our new website also has an integrated Client Portal, meaning you are able access your case documents, correspondence and calendars directly from our website!

If you have any questions, don’t hesitate to contact us today.

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Do it Yourself Bankruptcy: How to Keep Your Property, Part I

Thu, 12 Mar 2015 16:08:00 GMT

Some people think that when they file for bankruptcy all their property will be sold to pay their creditors and they will be left with nothing. Not true. There are state and federal laws which “protect your stuff.” In most cases, you get to keep everything, and what allows you to do that is called an “exemption.”

What is an Exemption. The legal definition of an exemption in a bankruptcy proceeding is a privilege allowed by law to a debtor, by which (s)he may keep real and personal property worth up to a certain amount. The amount varies depending on the state you live in, the type of property and other factors in the debtor’s financial situation.

A More Practical Definition Think of it this way, if all of your property were plates of food on a picnic table, an exemption would be like a roll of plastic wrap that you could cut and put over each plate to protect it from any insects which might eat the dishes. In this analogy, potato salad might be your car, and the hungry bugs wanting to gobble it up would be the bankruptcy court.

How to Protect Your Property Of course, knowing the best roll of plastic wrap, how much to use and on which foods is the secret for keeping hungry pests from devouring your delicious edibles, in the case of a bankruptcy, which exemptions to use to protect you valued possessions from being sold by the bankruptcy trustee to pay your creditors.

Determine the Value of the Property First you have to know how much the property (dish) is worth. If it is real property, values can sometimes be obtained on line, but if you need a more exact value, asking a real estate agent may be the ticket. If it is a unique parcel of property you may have to hire a certified appraiser. For automobiles there are several sources on the web to determine how much your car is worth. If you have collectables or antiques, consider consulting other collectors or antique dealers, or finding similar items on eBay or similar sites. When valuing your personal effects, use a “thrift shop” value, not what you paid when you bought them.

Choosing the Proper Exemption Once you’ve determined how much your picnic dish is worth, you have to find the proper roll of plastic wrap to cover it. Just as different dishes require different rolls of wrap, you should choose the exemption that best fits your property. You can make this choice by reviewing the law and making up you own mind, or you can consult a lawyer. However, you cannot let a paralegal or petition preparer do it for you. Exemption choices are “legal decisions” and a non-lawyer is not allowed to make it on your behalf.

703 or 704? There are two “sets” of exemptions used in California bankruptcies which are located in sections 703 and 704 of the California Code of Civil Procedure . Choosing between the two depends on whether you have real property with equity or not. Generally, the 704 exemptions are used for debtors with equity in real property and the 703 set is for those who either have no equity or no real property. If you choose the exemptions from one “set”you cannot use those in the other set.

Protecting Your Property After deciding between the two sets of exemptions you then have to use the appropriate exemption in that set for each item of property you have. To follow the analogy, you have to tear off enough plastic from the roll to cover the dish. If you have an 8 inch apple pie on the picnic table, you have to rip off an 8 inch long section of “desert” wrap. If your car is worth $4500, you have to take the same amount of the “automobile” exemption, which at the date of this blog is a maximum of $4,800 in the 703 exemptions and $2,300 in the 704 exemptions. If you’re wondering what happens if the property is worth more than the exemption will allow, read the next installment of this blog.

Disclaimer. The law surrounding exemptions is complicated and only a lawyer can advise you on the proper application in a bankruptcy case after analyzing your particular circumstances. No two cases are alike. The information stated in this blog is informational only and not intended to apply to any individual matter.

Next Blog: the “Wild Card” Exemption

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Do it Yourself: Something to know before filing bankruptcy

Thu, 19 Feb 2015 15:58:00 GMT

Written into the new bankruptcy law is an important message. Section 527(b) of the Bankruptcy Law says If you pay anyone to help you prepare the petition, the law requires that you be given a written contract setting out what that person will do for you and how much it will cost. Generally a non attorney petition preparer may charge no more than $200. Attorneys usually charge more, but depending on the complexity of the case, the expense may be worth it.

Before filing a bankruptcy case, you should determine for which type of bankruptcy you qualify. Be sure you understand the relief you can obtain and its limitations, but don’t let a non-attorney make that decision for you.

To file a bankruptcy case, about 60 pages of documents will need to be filled out and filed with the bankruptcy court. You will have to pay a filing fee, which is presently set at $335 for a Chapter 7, but this fee will likely increase. About 30 days after your case is filed, you will have to attend the required first meeting of creditors where you will be questioned by a court official called a ‘trustee’ and possibly by a creditor or two.

If a chapter 7 case is appropriate, you may be asked by a creditor to reaffirm a debt. Reaffirmation is a procedure which results in you keeping your debt after bankruptcy and the decision to use it should not be made without being informed of the consequences. A creditor is not permitted to force you to reaffirm your debts.

If you choose to file a chapter 13 case in which you repay your creditors what you can afford over 3 to 5 years, you may also want help with preparing your chapter 13 plan and with the confirmation hearing, which will be before a bankruptcy judge. Chapter 13 cases are complicated and I recommend you get professional legal help.

Although bankruptcy can be complex, many cases are routine, but a simple case doesn’t mean that you shouldn’t get help. Only an attorney can give legal advice and a bankruptcy involves making decisions after being informed of one’s legal rights. Paralegals and petition preparers do not have the education or experience to provide this service. At CAOBL you can get this advice from a licensed attorney experienced in bankruptcy law at a very reasonable cost and without the trouble of traveling to the lawyer’s office.

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Bankruptcy Bullets: Debts Not Listed on a Bankruptcy Can Still be Forgiven

Fri, 16 Jan 2015 01:23:00 GMT

Even if you forgot to list a creditor on your Chapter 7 bankruptcy, the debt may still be wiped out.

This statement seems to go against all logic. After all, as most creditors would argue, it doesn’t seem fair that a debt not listed in a bankruptcy should be discharged. Where is the notice, the opportunity to protest, the creditor’s “day in court?”

Some of these questions were answered in 1993 by the case Beezley v. California Land Title Co. (In re Beezley) , 994 F.2d 1433, 1434 (9th Cir. 1993) . The court decided that in a case where there is no money for the creditors, called a “no asset case”, reopening the matter just to add the forgotten creditor would be meaningless, since under bankruptcy law all the debts, even those the Debtor wants to add later, are already discharged. In short, whether or not the debt is listed is not important. What matters is that the case was “no asset” and that the debtor received a discharge.

So what should you do if years after you received a discharge a forgotten creditor “comes out of the woodwork” and sues you for the debt? First, contact the lawyer who handled your case. She’ll know what to do. If you didn’t have a lawyer, or can’t find him, you should consider hiring one. There is a standard legal attack on the creditor’s lawsuit called a demurrer which will end the matter permanently for you, but it needs to be prepared quickly by experienced, trained legal counsel, and the cost is usually minimal.

Mark Brenner has over 38 years of experience and has successfully handled many of these matters by using the ruling in Beezley and other legal authorities to make the creditors go away.

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3 New California Consumer Debt Laws for 2015

Fri, 02 Jan 2015 17:01:00 GMT

While 2015 saw 930 new laws enter the books in California, I found only 3 relate to consumer debt. Here is a summary with links to the actual laws:

Medical Services on Credit (S B 1256 ) makes it illegal for a health care provider to arrange for financing a procedure to a patient who has been received general anesthesia, conscious sedation, or nitrous oxide. The law would also prohibit a healing arts licensee, or employee or agent of a licensee, from charging treatment not yet rendered or costs not yet incurred to an open-end credit extended or a loan by a 3rd party that is arranged for or established in the health care provider’s office without first providing the patient with specified information regarding the treatment and services to be rendered, and ensuring the patient’s receipt of the treatment plan. A person who willfully violates this law is subject to civil liability including actual and punitive damages and, under certain circumstances, seniors and disabled persons may seek additional damages of up to $5,000.

Relief of Debt Income Exclusion ( AB 1393 ) Federal Law providing for exclusion from income the forgiveness of debt related to a mortgage on one’s principal residence was extended to January 1, 2014. This new law would mirror the federal extension for California income tax purposes.

Closing a Line of Credit ( AB 1770 ) If a borrower makes a request to do so, for the next 5 years beginning July 1, 2015, a lender is required to close a borrower’s equity line of credit and to release the lien securing the borrower’s property.

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What is a Lien?

Thu, 01 Jan 2015 22:34:00 GMT

A lien is a legal right to take possession of property belonging to another person until a debt owed by that person is paid, forgiven or discharged. The word comes from an older word meaning “to bind,” which explains how the concept works in today’s world: it “binds” or ties up a debtor’s property until a debt is paid.

A lien is typically a public record. It is generally filed with a county records office (for real property) or with a state agency, such as the secretary of state (for cars, boats, office equipment, and the like). The most common example of a lien is a mortgage or what the bank records with the DMV when it lends you the money to buy a car.
There are generally 3 types of liens: statutory liens, consensual liens, and judgment liens. Statutory liens are liens that are placed on one’s property by law, such as the tax lien on real property that is paid to the county. Consensual liens are those that you allow to be placed on the property like a mortgage or a loan to by a car. Judgment liens, as the name implies, result after a successful creditor obtains a judgment against the debtor.
It is important to realize that when a creditor has a lien, it has 2 rights: the right to be paid (the debt) and the right to bind the property (lien).

In bankruptcy if the debt is removed, the lien is not automatically removed. Under certain conditions, in order to “un bind” the property, the lien must be removed in a separate procedure called a “Motion to Remove Lien.” Please see Removing Liens in Bankruptcy.

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Eliminate Income Taxes in Bankruptcy

Sat, 27 Dec 2014 17:10:00 GMT

One of the most common misconceptions is that a bankruptcy will not eliminate back income taxes. While some taxes. such as payroll taxes and tax penalties for fraud cannot be wiped out, income taxes, both state and federal, can be discharged under certain circumstances.

Assuming no fraud was involved, such as using a false social security number or willful evasion of the tax obligation, here are the elements:

1. The 3 Year Rule. I also call this rule the “ Due Date Rule.” To eliminate a tax debt, the tax return must have been originally due at least three years before you file for bankruptcy. This rule is tricky and requires some explanation. Say you owe $3500 in income taxes for 2011. The taxes would normally be due on April 15, 2012, so, you have to start counting the three year period from 4/15/12. Under this scenario, if you filed a bankruptcy on or after April 16, 2015, you would satisfy this rule. If you asked for an extension to October 15, 2012, then the rule will be observed if the bankruptcy were filed after October 15, 2015.

2. The 2 Year Rule or the “Filing Date Rule.” You must have filed the tax return at least two years before filing for bankruptcy. Expanding the above example, if you requested an extension to October 15, 2012 and didn’t file until April 15, 2014, you will have satisfied the 3 year rule, but not the two year rule. In this scenario, you must wait until April 16, 2016, to file for bankruptcy if you wish to eliminate the taxes. If the IRS files a substitute return, you will not be able to satisfy this requirement.

3. The 240 Day Rule or the “Assessment Date Rule.” The taxing authority must have assessed the tax against you at least 240 days before you filed for bankruptcy. “Assessed” means “entered the liability on the taxing authority’s records.” However, be careful to consider an extension of the 240 day rule. If there was an offer in compromise between the taxing authority and you, or if you had previously filed for bankruptcy, the time will be continued for as long as the offer in compromise process lasted or the previous bankruptcy was open.

Great care should be exercised in analyzing each tax year in question and listing the correct information on the proper schedule in your bankruptcy papers.

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How Often Can a Person File for Bankruptcy?

Sat, 11 Oct 2014 14:44:00 GMT

If you filed a Chapter 7 previously, and received a Discharge, you cannot file again for 8 years from the date of the previous discharge.

If you filed a Chapter 7, and received a Discharge, , you may file a Chapter 13 within the 8 year period, for example to stop the foreclosure on your home, but you may not be able to receive a discharge.

If you previously filed a Chapter 13 and were discharged, you can file a Chapter 7 within the 8 year period.

The fact that you filed is not as important as whether or not a Discharge was entered in your previous case. You can file a second or third Chapter 7 case immediately after the previous one is dismissed, but the subsequent cases may not provide the same protection as the first filing.

Mark Brenner www.caobl.com

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How to eliminate a second or third mortgage in bankruptcy

Wed, 11 Jun 2014 15:00:00 GMT

Whether you can eliminate a second or third mortgage in bankruptcy depends on what type of bankruptcy you qualify for. Yes , if you are in a Chapter 13 (or 11) and the value of your home has decreased to below the balance owed on your first mortgage. No , if you are in a Chapter 7 or the value of your property is more than the balance on the first trust deed. So don’t believe anyone who simply says, “you can wipe out your mortgage in a bk.”

What is it? The procedure is called “lien stripping” and it allows a Chapter 11 or 13 debtor to transform a secured second mortgage or home equity line of credit into an unsecured debt (like a credit card), eliminate a monthly payment, and reduce total debt by tens of thousands of dollars.

Example. Let’s say you own a home worth $500,000. Perhaps that home was worth $850,000 three or four years ago but its market value has dropped for whatever reason. The balance on the first mortgage is $550,000 and the balance on the second mortgage is $150,000. In this case, a Chapter 11 or 13 debtor can ask the bankruptcy judge to “strip away” the second mortgage lien since all of the value in your home is “covered” by your first mortgage. In other words, if you were to sell your house, the first mortgage lender would not be paid in full and the second mortgage lender would get nothing. The second mortgage lender is, therefore, unsecured or “under water.”

Effect. Once “stripped away” a portion of the debt that used to be secured by the lien against the property is paid as if it were an unsecured debt. Depending on the circumstances of the case, this could be as little as $0.00.

What you need to “strip” a junior lien.

In order to take advantage of a lien strip, these two elements must exist:

1. You must be a debtor in a Chapter 11 or Chapter 13 case, and

2. The fair market value of your house is less than the balance due on your first mortgage

Mark Brenner has successfully “stripped” several junior mortgages in Chapter 11 and 13 cases. In cases where the value is several thousand below the balance of the first loan, banks do not usually oppose the motion. In close cases the main problem is proving the fair market value of the home. To do this it is recommended that you pay for an appraisal of your property to convince the judge that the second mortgage is, in fact, fully under water. However, in those cases where the value has dropped dramatically, it can be established by the opinion of a real estate broker or other real estate professional.

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How to Keep Your Car in Bankruptcy

Fri, 30 May 2014 22:33:00 GMT

There are basically two choices if you want to keep your car in a bankruptcy: Reaffirmation and Redemption . Your don’t have to have a lawyer represent you, but you should make an informed decision. At California Online Bankruptcy Lawyer , we advise you as to what is the best option in your case.

Reaffirmation . A reaffirmation agreement is a written contract entered into between the debtor, you, and the creditor, for example a car company, to continue paying the auto loan after the bankruptcy, usually for the purpose of keeping collateral (i.e. the car). If you are paying on a car and want to keep it, you will have to sign an agreement and go to court to convince the judge that to keep paying would not be a hardship. An attorney can represent you for an addition fee, in which case you do not have to appear in court.

Note: If you sign a reaffirmation agreement and it is approved by the court, and later you get into trouble and can’t pay, the creditor can take back the collateral and sue you for any loss.

Redemption. Under this option you can buy the car back from the lender . To redeem the property, the you must pay the creditor the current retail value of the property based on its age and condition. If the vehicle is worth less than what the you owe to the bank, the balance becomes an unsecured debt subject to discharge in bankruptcy. Once the you pay the creditor, the you receive title to the property. Payment is usually in one lump sum. This option is not only available for cars , but is also an option for other types of property, such as household items.

There is a third choice, which is to do nothing and just keep making the payments (its called a “pass through”). However some companies won’t let you do this and will try to take back the car. Under this option, which is not allowed for in the bankruptcy code, some lenders are choosing to look the other way, happy to collect the payments without a reaffirmed loan contract. If the car has a low value relative to the cost of taking it back, you can decline to redeem, reaffirm or surrender and wait to see if the creditor will take action to recover the car after the bankruptcy. In my experience, creditors threaten but do not pursue this kind of collateral after the bankruptcy.

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