Things to Know Before Filing Chapter 7 or Chapter 13 in San Diego: Disclosure & Bankruptcy Fraud
Among many considerations, the first thing to understand is that your petition must be filed in good faith.
Truthful Documented and Thorough Disclosure
Do not hide information: all income, assets, debts need to be disclosed. You will be expected to disclose and document: six month’s worth of income, year to date income, as well as income in prior years by providing previously filed tax returns. Your Bankruptcy attorney will need documentations, which you should provide in an expeditious manner if you wish for your case to proceed quickly.
Incurring Additional or Paying on Debt Just Before Filling
Stop using all credit cards as soon as you know you are in trouble and need to consider bankruptcy. Using credit cards and borrowing money knowing you are incapable of paying it back or not intending to pay it back is fraud. You cannot charge your legal bankruptcy fees on your credit card (I’m asked that very often). Credit cash advances obtained by petitioner within 90 days of filing are presumed to be abusive.
If you have borrowed money from friends, relatives, business partners, unless these loans are collateral loans, do not make payments to these creditors. These creditors are not only unsecured but bankruptcy law considers these creditors to be “insiders” and payments to insiders are scrutinized. Repayments of such debts at the expense of other creditors (like credit cards) is considered preferential treatment of creditors. Remember, grandma and credit cards are equals in bankruptcy.
If you have chosen and are eligible to proceed under Chapter 7, you can continue and are encouraged to make payments on secured debt, like mortgages and cars if it is in your best interest to keep these properties. Most car lenders will attempt to repossess a vehicle once loan payments fall 60-90 days behind. Once repossessed, even if you file for bankruptcy protection just afterwards, you would need to bring the loan current and pay for repossession costs to get back the vehicle provided it had not already been sold at an auction. Post Bankruptcy you are allowed to pay whichever creditor you wish, even discharged debt. This is sometimes the case where a debtor includes some small amount owed for medical services. While these creditors cannot seek repayment after discharge, they also are not obliged to provide future services. After discharge, you may resume paying grandma, your doctor, or any particular credit card for that matter, if you are so inclined. Such payments are voluntary.
Not All Debt is Dischargeable
Certain debts such as: child support and alimony, recent income taxes, personal injury claims incurred while driving under the influence, debt incurred fraudulently, post bankruptcy Home Owner’s Association fees, debts incurred after filing of your bankruptcy petition, student loans (without undue hardship adversary proceeding) are not dischargeable in a Chapter 7 Bankruptcy case. Some of these may be handled through a Chapter 13.
Cross Collaterization Clauses With Credit Unions
Many of my clients hold checking and savings accounts with credit unions. In fact, some credit unions require a person upon obtaining a car loan to open a savings account. Often, the car loan contract will state that the value of the vehicle is not only collateral for the car loan but also against credit cards debt you have with the credit union. This is only a problem if the value of the car exceeds the loan itself, which thankfully is often not the case. I advise all my clients who maintain bank accounts as well as credit cards at the same institution to establish new accounts at a different financial institution where they do not have credit and redirect deposits to the new accounts before filing for bankruptcy. Typically, credit unions close the customer’s account(s) upon discovering you have filed for bankruptcy.
Credit Counseling/Financial Management Course
You must complete two courses. Before filing your case, you must complete a credit counseling course, which can be taken online or over the phone. Talk to your bankruptcy attorney because often they know where to obtain the course at cheapest rates. Typically, these can now be obtained for $25-30. After your petition is filed, you must complete a Financial Management Course. I am familiar with one provider who charges $14.95. If you forget to do this in a timely manner, your case will close without discharge so certificates of completion along with a form called B23 should be filed timely with the Court.
Reaffirming Car Loans
Understand that by signing a contract with your car lender, after filing your bankruptcy case, you are creating a new debt obligation post filing. Be sure that you can afford the payments. If consequently, the vehicle is repossessed for non-payment, your lender can pursue you for deficiencies, even though the original loan was listed in your bankruptcy petition. Same is true for any contracts and leases you assume in your bankruptcy case. If your expenses exceed your income, you may be required to attend a reaffirmation court hearing and would be asked to show not only that you understand the implications of singing a reaffirmation agreement but also how you can afford to make the proposed payments. While some creditors, most notably Ford Motor Financial corporation will require an execution of a reaffirmation agreement and will take steps to repossess a vehicle even if the loan is current post bankruptcy, other creditors maintain different business practices and may allow the debtor to keep the vehicle as long as the loan remains current, even if a reaffirmation agreement is not approved by the Court.
Foreclosure and Repossession
Note that Chapter 7 does not prevent creditors who have a secured interest in property to eventually proceed with repossession or foreclosure if the debtor is unable to bring such loans current. You can either bring these loans current or attempt to negotiate different terms with the creditor, such as loan modifications and reaffirmation agreements with car lenders, however creditors are not required to offer better terms. If you are behind on car and/or mortgage payments and are unwilling to take your chances with negotiations in order to keep the secured property, you may need to look to Chapter 13, which allows borrowers to bring loans current over a period of 3 to 5 years. Obviously, there needs to be enough disposable income in the household’s budget to afford a repayment over that time period. If your home is worth less than the first mortgage on the property, it may be possible to eliminate the second mortgage holder from the Deed of Trust. Sometimes this action, known as a lien strip, can help make the mortgage payments more affordable.
Kathryn U. Tokarska, Esq. is admitted to practice in State of California. Graduate of California Western School of Law in San Diego, California, Ms. Tokarska concentrated her legal studies in area of Bankruptcy, Estate Planning, Taxation, Securities Regulations, and Real Estate Finance. She has over fourteen years of experience working for major financial investment institutions, offering financial planning services, investment products, wealth building and preservation strategies. Ms. Tokarska holds a Financial Paraplanner certificate, was a licensed stockbroker, and is currently enrolled in an LL.M. in Bankruptcy/Finance at Thomas Jefferson School of Law.
For assistance, contact Tokarska Law Center online, by Emailing Us, or by phone (619) 285-1992. We are a FEDERAL DEBT RELIEF AGENCY. We help people file for Bankruptcy Protection under the Federal and State Laws.