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Can I keep my house in bankruptcy? Another exciting installment of “Ask Doan Law Firm” (Part 1).

Wednesday, September 29th, 2010

Q:  Can I keep my house in bankruptcy?

A:  As with most bankruptcy questions, the answer is a hearty, “it depends”.  Let’s narrow it down a bit.

The day you file a Chapter 7 bankruptcy, you receive an automatic stay.  The automatic stay prevents any creditor from taking any action against you.  This means your mortgage company, cannot foreclose no matter where they were in the process.  In your bankruptcy petition (paperwork) you indicate if you plan to surrender the home or keep it.  In bankruptcy, the general rule is if you keep the asset you keep the debt.

If you are current on your mortgage payments, you can continue to make those payments and take the house through the bankruptcy, paying all the way.  If you are not current, you need a plan that will get you current.  The key is usually in the automatic stay.  As we mentioned, when you file, every one of your creditors must stop all collection action.  You won’t be paying your credit cards and wage garnishments and bank levies will stop.  That can give you just the breathing room you need to catch-up your home.  Some clients borrow the back amount from a family member or friend.  If the house makes sense once you jettison all the other debt, it can be a good idea to borrow to catch up the back payments.

The reason you need a plan for bringing your house current and a time frame on the plan is that the bank can potentially file a Motion for Relief from Stay.  When you file bankruptcy, the bank has two options, (i) wait for the bankruptcy to be complete and proceed with the foreclosure; or (ii) file a Motion for Relief from Stay asking the court to allow them to proceed with the foreclosure.  There’s no way to predict which path the bank will take.  On one hand, if you’re not going to bring the house current, the bank wants the property.  On the other hand, it will take about 2 months for the court to hear a Motion for Relief from Stay and the bank knows the bankruptcy will be complete in about 6 months.  A Motion for Relief from Stay costs the bank attorney and filing fees, so they may decide to wait.

Another important thing to note at this juncture is that if you keep the asset (house) and keep the debt (mortgage), you keep the debt as it is.  The bankruptcy court doesn’t have the power to modify a home loan.  There’s been some discussion among the powers-that-be about grating the court that power, but for now they don’t have it.  If you keep the house, it will be with the current mortgage.  You do still, however, have the right to continue to engage in any loan modification discussions with the bank.

In the next post we will look at keeping your home in a Chapter 13 bankruptcy.


Saturday, August 28th, 2010

Debtpidemic [det-pi-dem-ik] – noun a rapid spread or increase in the occurrence of toxic debt, affecting individuals, corporations, as well as local, state and national governments:  Doan Law Firm has officially declared a debtpidemic.

Our collective debt load has reached such a level that we need a new word to describe it.  We propose “debtpidemic”.  The pivotal concept behind this newly coined word is that an epidemic changes the lives of everyone in a society whether they are infected or not.  At this point in our history, national and personal debt is taking a heavy toll on our families, friends and loved ones.

Imagine if the bubonic plague swept our great land.  It would command our instant attention.  Each of us would take the utmost precautions.  We’d be hand-washing, antidote-seeking, near-hysteria fools.  We would implicitly understand the severity of the situation, the stakes are high, it’s life or death.

We’re in the same predicament now, it’s just a different plague.  Our government has emptied its arsenal; stimulus, bailouts and special programs.  At home we have pounded the pavement for work, tightened our belts and then tightened them some more, yet the debtpidemic rages on.

What is the antidote?  The first step is to stop the debtpidemic at home.  Take a good, hard, objective look at your personal financial situation.  Do you wonder how to keep the hamster wheel spinning?  Do you engage in creative accounting to get everyone, or almost everyone, paid?  Most importantly, does your financial situation keep you up at night?

Come talk to us at Doan Law Firm.  We get it and we can help.  We even published a full page of quality content in the Orange County Register to explain this concept. Our team of bankruptcy attorneys have cured over 25,000 people of their own debtpidemic, one family at a time.  We can provide you with the antidote.

PS While we’re at it, here’s another word to add to your vocabulary: Debtpandemic det-pan-dem-ik – noun: a rapid spread or increase in the occurrence of toxic debt across nations, affecting individuals, corporations, as well as local, state, national, and international governments. The debtpidemic is now reported to be a full blown debtpandemic.

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!

Chapter 7 or Bust? Over-Median Debtors

Monday, December 14th, 2009

When a client comes to see me, they are usually struggling with debt. Might be a little or a lot; much of it depends on the eye of the beholder. For some, $20,000 in debt is a drop in the bucket; for others (most), it’s a noose that only seems to tighten with each twitch of the head.

So Mr. Dapper Debtor tells me, “I want to file Chapter 7 to get rid of my debts, approximately $50,000 of old credit cards.”

And I say, “I agree with you. You should eliminate this debt if you can no longer pay it back.” (fraud arguments aside)

Dapper then tells me, “Great, so you will help me?”

I say, “Of course, but first we must determine whether you qualify for Chapter 7 relief under the current standards.”

Dapper asks me, “What are these standards?”

I say, “First you must pass a means test, then show no excess income and finally not have any unexempt assets that the court might liquidate for the benefit of your creditors.” (besides not having filed bankruptcy within a certain period of time)

Dapper says to me, “Well, lawyer, I make $150,000 a year and I’m single. Will I still qualify?”

I sink into my chair, get very cozy and say, “Maybe.”


Does a Judgment for Fraud Issued by a State Court Act as Res Judicata in a Bankruptcy Dischargability Proceeding?

Monday, November 9th, 2009

Simply put, no.

I’ll start by stating that fraud and its appendages as found under section 523 of the bankruptcy code are nondischargeable debts (meaning they survive bankruptcy) .

Now we must define res judicata. In its most basic terms, res judicata prevents a dispute already ruled upon by a previous court to be disputed again in another court.

Being found liable for fraud or absolved of same in a state court proceeding will carry res judicata effect on any subsequent proceeding minus appeal and a very important exception: Bankruptcy.

In Brown v. Felson, 442 U.S. 127, 1979, the U.S. Supreme Court held that “the bankruptcy court is not confined to a review of the judgment and record in the prior state-court proceedings when considering the dischargeability of a debt.”


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