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Posts Tagged ‘filing’

Too Many Benjamins for Chapter 7?

Monday, April 19th, 2010

If you’ve done some light reading on the subject of bankruptcy, you may have come across the “Means Test” and all the confusion it brings.  The idea that you might be struggling under a six figure load of debt, but make too much to file for chapter 7 bankruptcy appears to be an oxymoron like jumbo shrimp, pretty ugly, and kosher ham.  The means test does not preclude bankruptcy filing, but requires debtors (with primarily consumer debt) with good incomes to file under chapter 13 rather than 7.

Here are the three steps in the overarching aerial view of the means test.  To get a hard and fast answer, you need to lace up your hiking boots and walk the terrain of specifics, but this will give you a good idea of where you stand.  The first step compares your income to the median income in your state for the same sized family over the last six months.  You can find the current tables here.  If your income is lower than the median, you are free to file chapter 7.  If your income is higher, you move on to the next step, the means test.

In the means test, you determine if you have extra money left over at the end of each month to pay creditors.  Here’s where your research and further math skills come into play, because it’s the IRS standards that determine the budget categories and amounts.  You can find those numbers here.  If you have less than $100 left at the end of the month, you are free to file chapter 7.  If you have more than $166.67, you’ll be a chapter 13.  If you fall between the two, you carry on to the third and final step.  For the third step, you compare the monthly amount paid over 5 years to the total amount of your unsecured debt.  If it’s less than 25%, you can file chapter 7.  If it’s more than 25%, you are a chapter 13.

As you can see, the means test with its multiple questions and heavy reliance on math can be overwhelming for anyone without a PhD in differential equations or a seat in Congress.  If your head is spinning and your calculator is smoking, you can come see us at the Doan Law Firm and we’ll do the calculations for you.  As a bonus, we’ll answer all your other Orange County and los Angeles bankruptcy questions and prove the oxymoron – honest lawyers.

Reese’s, the Staple of Procrastination

Friday, April 16th, 2010

I spoke with Michael today.  Michael is one of the guys that talks to people the very first time they call our Orange County bankruptcy law firm.  After finding out that he doesn’t like Reese’s Peanut Butter Cups, I decided I liked him anyway and was struck when he said that a common theme in 90% of all calls is procrastination.  The person knows there’s a problem, but lets the problem grind on and on until they’re really trouble.  They wait until the last possible moment to call and there are sometimes tears.

Utilizing, “the early bird may get the worm, but it’s the second mouse that gets the cheese” logic, a client waits and lives in torment until something terrible happens before their fingers start dialing a Los Angeles bankruptcy attorney. It’s like having a severe toothache and thinking, I’ll go to the dentist next month.  It’s also like leaving your broken-down truck on the side of the freeway to go home to watch re-runs of Bonanza, planning on picking it up next week when you have more time.

The big difference between your aching molar and defunct F-150 is that bankruptcy advice with an experienced Orange County or Los Angeles bankruptcy lawyer is free at The Doan Law Firm.  Free is statistically less than a tow truck or a filling.  When you sit down with one of our bankruptcy attorneys, you’ll get advice, a comprehensive plan and hope.  You’ll also avoid nasty surprises like a big chunk out of your paycheck via a garnishment – that would put a bite in your Reese’s consumption (for everyone except Michael).

Party Hearty Pre-Bankruptcy?

Wednesday, April 14th, 2010

It’s a tall tale, a myth if you will, that if you plan to file for bankruptcy, you should find the absolute limit of your credit cards.  The logic is there – waste not, want not, right?  Just like you eat the last bit of crème brulee on the plate, pick up the $10 bill on the sidewalk, sleep an extra hour during daylight savings time, you shouldn’t leave any available credit when you file for bankruptcy.

Nope, the Bankruptcy Code is ahead of you.  Incurring debt you don’t intend to pay off is fraud and the court can deny discharge of the debt.  This means your last few months of living the high life can follow you for years to come, with or without the help of an Orange County or Los Angeles bankruptcy law firm.  Legitimate debt is dischargeable in bankruptcy (with some exceptions like taxes, child support, student loans, etc), but the trustee always has his/her eye open for recent Hawaiian vacations.

A retainer worth more than the one you lost in Middle School

Monday, March 29th, 2010

Attorneys use the word retainer, what exactly does it mean?  Put aside your lunchtime fears of leaving a retainer in your napkin because when you retain a bankruptcy attorney, it’s a positive thing, not something you need to remember before running off to play handball.

At the Doan Law Firm, a retainer means we represent you.  We’ve entered into a contract and we are your attorneys beginning that day and for the entire length of your bankruptcy.  We’re now on your speed dial.

One of the unique features of retaining the Doan Law Firm, the premiere Southern California Bankruptcy Lawyers, is that all disruptive, annoying, disturbing calls from creditors are directed to us.  You receive a specific script to use with all your creditors that directs them to call us with all their inquiries and general abuse.  This happens on day one, relief from creditor calls, even though you haven’t yet filed the bankruptcy case.

The extra great news is once you’ve read the script to a creditor, by law they are no longer permitted to call you.  If they do call, you notify us because we have a stable of attorneys that just love to take law violating creditors to court (think junkyard dogs).  We’ve been known to have a creditor or two pay for a client’s bankruptcy.  Now that’s a retainer worth having!

11 USC 523(a)(4) – EXCEPTION TO BANKRUPTCY DISCHARGE

Wednesday, March 17th, 2010

Speaks of fraud as a fiduciary (among others).

Fiduciary status and bankruptcy law are more common than people might think.

Think of a realtor. Think of business partners. Think of an investment advisor/broker. These are all common examples of fiduciaries. These are also all common examples of people who are needing bankruptcy relief in today’s sagging economy.

What is a fiduciary? The general definition and one used by state courts, including California, is a person who owes a client “undivided loyalty” and in whom “trust” is placed. A fiduciary must act in the “interest of their client.” A breach of such duty can lead to legal action.

However, what does this mean with regards to 523(a)(4) and whether a debt “fraudulently” incurred by a fiduciary is dischargeable? The consensus of the federal courts, including the 9th circuit, conclude that the state law definition is not binding on the bankruptcy court. This applies no matter where you file the bankruptcy case, a Los Angeles Bankruptcy, an Orange County Bankruptcy, or a Riverside Bankruptcy.

The federal courts will look to state law definitions as a guide, but all hold that fiduciary is defined more narrowly than the state’s definition. The reason being, a debtor filing for bankruptcy protection should be afforded relief, and any argument to the contrary will weigh heavily as the creditor’s burden.

In most federal courts, including the 9th circuit, a “trust res” is required to establish fiduciary status for section 523(a)(4). Trust res is property, either money or otherwise, that is entrusted to the “agent” for the benefit of the client. Without this trust res (usually money), there can be no fiduciary status under this section, even though the general trust created by a fiduciary relationship exists. Without an established fiduciary status under 523(a)(4), the allegations of fraud do not enter the discussion.

If an alleged creditor is attempting to argue that they were defrauded by a fiduciary and that their “claim survives bankruptcy”, then they must first show that they entrusted money or other property to the debtor in an otherwise recognizable fiduciary capacity before they can attempt to prove whether the debtor engaged in fraud with regards to this trust res.

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