Do I Need to File Bankruptcy? Am I “Judgment Proof”?

Written by Kelly M. Resnick, Resnick Law Offices, Serving the Bay Area

Bankruptcy is a very effective tool to eliminate debt.  However, there are times when bankruptcy can be avoided by using a different strategy.  One of these strategies is determining whether or not you are “judgment proof.”

If your sole source of income is derived from Social Security, welfare, unemployment, and/or disability insurance and all of your property is exempt (i.e. property you can keep during and after bankruptcy), you are considered judgment proof.   Creditors, even those armed with a court judgment, cannot collect public benefits to satisfy a debt.  Creditors, however, can still sue you and obtain a judgment against you, and being judgment proof is not a defense to a lawsuit.  Judgment proof refers to the inability of a judgment holder to obtain satisfaction of that judgment.

You should be aware though that your judgment proof status can change.  This means that if you begin receiving other income such as wages, or acquire unexempt assets, then you lose your “judgment proof” status and creditors can begin collecting against you.

Sometimes, a letter to the creditor explaining your status is all you need to stop the harassment.  But, even if you are judgment proof, you may still want to file bankruptcy to stop creditor harassment or to prevent a judgment being entered against you, especially if you think you may lose this status in the future.  Before making the decision to ignore creditor collection efforts and lawsuits, make sure you verify your status with an experienced attorney.

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Why You Should NOT Feel Guilty About Filing Bankruptcy

by Kelly M. Resnick, Managing Attorney, Resnick Law Offices, Serving the Bay Area

Everywhere we turn advertisements are there persuading us to spend our hard-earned dollars on goods and services we deem essential for our everyday lives.  Spending is great for the economy, but sometimes it’s not great for our personal economy.

For those consumers who can not afford to pay cash as we go, credit card companies have been relentless offering credit to everyone and anyone.  Readily available credit has made it very easy to live beyond our means.

It is common to have feelings of fear and guilt when we realize we cannot pay for the things we need, or pay back the debt we have incurred.  The recent housing crisis coupled with skyrocketing interest rates on credit cards have made maintaining debt payments difficult, and sometimes impossible.

Although these are valid feelings, there are a few things you should keep in mind:

  • Bankruptcy is a truly worthy part of our legal system premised on forgiveness, not punishment.  It helps keep families together, frees up income and resources for children and prevents homelessness.
  • Coincidentally, every successful bankruptcy returns a newly empowered consumer back into the economy.  However, this time the consumer is armed with knowledge to avoid financial pitfalls in the future.
  •  Defaults and bankruptcies are the costs of doing business as a creditor.  Even with the largest influx of defaults and bankruptcies in our lifetimes, the large creditors are still going strong.  So do not worry–the banks will survive even after you file bankruptcy!

It is true that there are negative effects of filing bankruptcy, and those should not and can not be ignored.  But it can also be your lifesaver in times of financial crisis.

Always contemplate both the positives and negatives of filing before making the commitment.  With proper guidance, you too can emerge from bankruptcy into a life of financial freedom!

 

 

 

Disclaimer:* This post and all others made on the Internet by Resnick Law Offices attorneys and staff are for informational purposes only. Internet posts that describe the outcome of a case are not a guarantee of a similar outcome in all cases. None of the information or materials posted are legal advice. Nothing posted as blogs, comments, answers, or other communications should be taken as legal advice for any individual case or situation. This information is not intended to create, and receipt or viewing of this information does not create or constitute, an attorney-client relationship. While Resnick Law Offices’ attorneys and staff try to be accurate, we do not guarantee accuracy.

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Bankruptcy: Medicine for the Financially Ill!

Should you consider bankruptcy?  If you’re overwhelmed with financial problems, you may want to consider filing bankruptcy.  Financial issues not only affect your finances–they affect your entire life!  Sometimes the stress from financial issues can cause physical ailments like ulcers and insomnia, marital problems due to the stress of your financial situation, problems concentrating at work due to continuous creditor phone calls, and/or depression.  Think of bankruptcy as medicine for the financially ill!

If you have any of the symptoms of being financially ill, call us today at 510-860-3688 for a free consultation!

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Can I Be Fired From My Job for Filing Bankruptcy?

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by Kelly M. Resnick, Attorney

One question we are often asked is whether someone can be fired from their job if they file for bankruptcy.  The quick answer is, “No.”

The Bankruptcy Code contains specific protections for people who file.  Section 525(b) says:

“No private employer may terminate the employment of, or discriminate with respect to employment against, an individual who is or has been a debtor under this title, a debtor or bankrupt under the Bankruptcy Act, or an individual associated with such debtor or bankrupt, solely because such debtor or bankrupt—
(1) is or has been a debtor under this title or a debtor or bankrupt under the Bankruptcy Act;
(2) has been insolvent before the commencement of a case under this title or during the case but before the grant or denial of a discharge; or
(3) has not paid a debt that is dischargeable in a case under this title or that was discharged under the Bankruptcy Act. “

In other words, if you’re fired solely because you filed for bankruptcy, your employer is breaking the law, and you can sue for losses and damages.

 

Disclaimer: This piece is opinion based and does not guarantee any particular outcome of a case. 

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Can same-sex couples in California file a joint bankruptcy petition?

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by Kelly M. Resnick, Attorney

One of the hot topics of 2013 was the U.S. Supreme Court’s anticipated determination of the constitutionality of the Defense of Marriage Act.   The Defense of Marriage Act (“DOMA”) defines marriage in federal law as a union between opposite sex persons only. 1 USC Sec. 7. It prevents the filing of joint bankruptcy petitions by same sex partners because the debtors are not “spouses” under DOMA.  Joint bankruptcy cases are filed pursuant to 11 USC Sec. 302(a), which states “a joint case under a chapter of this title is commenced by the filing with the bankruptcy court of a single petition…by an individual that may be a debtor under such chapter and such individual’s spouse.”  Therefore, by strictly reading these two descriptions in conjunction, same sex couples are prevented from filing a joint bankruptcy petition.

One of the earliest bankruptcy cases addressing this issue was filed in the Western District of Washington (In re Kandu, 315 B.R. 123 (Bankr. W.D. Wa 2004).  A same-sex couple filed a joint Chapter 7 bankruptcy petition, but was quickly met with a court order to “show cause for improper joint filing of unmarried individuals.”  Although the couple zealously advocated for the right to file jointly, the Court held that DOMA should be strictly applied to this case as it does not violate either the Due Process or Equal Protection Clause of the 5th Amendment.  The Debtors were forced to either dismiss their case or bifurcate their case into two before the dismissal date.

However, there are new legal developments aside from the U.S. Supreme Court’s review.   The leading Ninth Circuit case is in In re Balas, 449 B.R. 2011 (Bankr. CD CA 2011). The bankruptcy court refused to dismiss a joint petition filed by two same sex partners, finding DOMA unconstitutional.  In the end, the Court found that DOMA violated the equal protection rights of the Debtors as recognized under the Due Process Clause of the 5th Amendment.  Therefore, this same-sex couple was given a discharge of their debts after the filing of their joint bankruptcy petition.

One of the most interesting facts about the Balas case is that 20 bankruptcy judges in the Central District of California signed the order approving the joint filing of a same-sex couple!  This is highly unusual.

Although this is a major statement by the Bankruptcy Court, there are no appellate decisions that consider the matter and the cases above are not strong precedent for other judges to follow.   So we’re all waiting to see how the U.S. Supreme Court’s decision related to DOMA effects same-sex couple’s rights under the Bankruptcy Code.

Disclaimer: This piece is opinion based and does not guarantee any particular outcome of a case. 

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Redemption and Chapter 7 Bankruptcy–Options for Overly Burdensome Auto Loans!

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by Kelly M. Resnick, Attorney

Are you struggling with an auto loan with an extremely high balance, extremely high interest rate, or both?   (*Even though I refer to “auto loans” in this post, this information applies to any debt secured by personal property, i.e. not real property.)

A Chapter 7 Bankruptcy discharge eliminates the debtor’s personal liability regarding the debt.  However, a secured debt has two parts–the debt and the lien.  The debt portion is extinguished, but the creditor retains the lien against the vehicle (or other collateral) even after bankruptcy.  When you file a Chapter 7 bankruptcy, you have three options when it comes to secured debt:  surrender, reaffirm, or redeem.

Surrendering requires you to return the vehicle to the lender without having to repay any of the remaining balance.  Reaffirming the debt, in short, removes the auto loan from your bankruptcy and treats the debt like you never filed bankruptcy.  So if you default after reaffirming, the lender can both repossess the vehicle and sue you for any deficiency balance.  Redeeming means paying the lender the value of the vehicle (or collateral) in one lump sum in exchange for the pink slip to the vehicle.  For example, if you owe $10,000 on your car, but the current value of the vehicle is only $4,000.  After filing Chapter 7 bankruptcy, you can file a motion with the court requesting an order setting the value of your car at $4,000 and allowing you to pay only this amount to eliminate the full auto loan.  The creditor does have the opportunity to object if they believe the value of your vehicle is more, but if that happens, then both parties need to submit evidence of the value and the Court will set a value.  However, once you pay the full value approved by the court, the car is yours free and clear of the auto loan!

You might be wondering–this all sounds great, but where do I get the money to do this in one lump sum?  Currently, there are lenders that you can approach before filing bankruptcy to be pre-approved for a new auto loan based on the value of your vehicle.  So, taking the example from above, if you cannot afford $4,000 out of pocket, you can be pre-approved for a $4,000 auto loan before bankruptcy and then take out the loan after bankruptcy.  The new lender pays the old lender the value of the vehicle, and now you have an auto loan for $4,000 and not $10,000.  Usually, this means a reduced monthly payment too.  If using this scenario, you should know that your bankruptcy does not protect you from your new auto loan.  So if you default on the new auto loan, your new lender has the right to both repossess and sue you for the unpaid balance.  But on the other hand, if you remain current on this obligation, it immediately helps you rebuild your credit since it is a debt you incurred after filing bankruptcy.

This option may or may not be a viable option, or the best option, for your particular situation so you always want to consult an experienced bankruptcy attorney before making a final decision.  If, however, this option does work for you, it could save you hundreds if not thousands of dollars in the long run and allow you to keep your vehicle!

Disclaimer: This piece is opinion based and does not guarantee any particular outcome of a case. 

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