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I meet lots of people who desperately need to file bankruptcy, but they lack the money to file. A typical Chapter 7 case costs $1,300, and paying the fee is probably the biggest stumbling block to filing a case.
A company called BK Billing provides an answer: borrow the money. Under the BK Billing model, bankruptcy attorneys divide the Chapter 7 case into two parts: Services rendered before the bankruptcy petition is filed with the court, and services provided after the petition is filed. In bankruptcy lingo we refer to this as pre-petition and post-petition services.
Attorneys using the BK Billing system charge clients a small amount for pre-petition services, typically from zero to $500, to get a case filed. They limit pre-petition services to filing an “emergency petition” that reports nothing more than a list of the creditors. Then, after the case is filed with the court, the client must enter into a new fee agreement to complete the post-petition services, including the filing of asset and liability schedules, income and expense schedules, attendance of the court hearing before a Chapter 7 Trustee, etc. BK Billing then buys the account from the attorney at 70% of face value for the the post-petition services. Since the post-petition fee agreement is signed after the case is filed it is not discharged.
In theory, the BK Billing system makes it easier to file Chapter 7. Instead of having to come up with $1,300 or more to file a case, they just have to pay a small initial deposit. Bankruptcy attorneys win too since they can file more cases and increase profits. What could go wrong?
The Ashcroft Firm of Murrieta, California recently found out how much can go wrong. They advertised “$0 Down Same-Day Filing” bankruptcy services using the BK Billing business model and increased their monthly filings by more than five-fold. But the US Trustee’s office recently sued the law firm for multiple counts of misrepresentation and violations of the bankruptcy code.
There are multiple problems and complications presented with the bifurcation business model for Chapter 7 services.
First, the vast majority of chapter 7 work MUST be performed before the case can be filed. An ethical and competent chapter 7 attorney cannot just file a skeletal petition consisting of nothing more than a list of the creditors. To file a case in such a manner is to commit gross professional malpractice. BEFORE a case can be filed the attorney MUST review ALL of a debtor’s assets to determine if any are unprotected. Whether these asset and exemption schedules are filed with the petition is immaterial. The fact is, to competently represent a debtor the attorney must prepare the asset and exemption schedules. The attorney must also prepare income and expense schedules to see if a debtor even qualifies for chapter 7 since debtors with too much disposable income cannot receive a chapter 7 discharge. The attorney must also prepare a Means Test review prior to filing a case to see if the income received by a debtor in the preceding 6 months is too high to qualify for chapter 7. Property transfers must also be scrutinized to see if fraudulent conveyances have occurred. Bankruptcy attorneys have an ethical and legal duty to perform a “due diligence” investigation before any case is filed, and that means that the majority of legal work must necessarily be performed prior to filing a case. The BK Billing business model suggests that most of the work can be performed after the case is filed, and that assumption is simply false.
Second, even though there are many services that must be performed after the bankruptcy petition is filed, it is clear that such services are so essential and fundamental to the bankruptcy case that they cannot be severed or unbundled. For example, attendance of the Trustee Meeting occurring 30 days after a case is filed is fundamental to the bankruptcy process, and attorneys cannot ethically sever their duty to attend such a hearing with a post-petition contract. The Idaho legal ethics committee has recently issued an opinion on this topic underscoring the inherent danger of attempting to unbundle legal services in bankruptcy cases.
Another recent opinion involving BK Billing was issued by the Idaho bankruptcy court, In re Grimmett. In that case the Idaho court ordered the debtor’s attorney to disgorge all fees paid under that agreement.
The concept of bifurcating chapter 7 attorney services into pre-petition and post-petition categories is inherently flawed. Too much of the attorney services are essential and fundamental to the bankruptcy process to be severed. It is difficult to show that debtors give an informed consent to such a division of services. A better option is to file the case as a Chapter 13 proceeding and then to convert the case to Chapter 7 after the required attorneys fees have been paid pursuant to a court-approved plan.
Image courtesy of Flickr and Iqbal Osman
Provided below is sales data from the sale of 14 taxi medallions as reported by the TLC for November 2017. The foreclosure sales prices for the two medallion sales at $750,000 are the result of foreclosure sales and those prices may be inflated because the banks “credit bid” at those foreclosure sales (they bid up to the amount of their loan balances); therefore, they may not accurately reflect the fair market value of a taxi medallion. Similarly, the estate sale at $150,000 may be too low a value because these sales reflect a sale by the estate of a taxi medallion owner who died, and those may “desperate sellers.” Medallion owners with “underwater” medallions (where the loan balance exceeds the value of the medallion) should contact Jim Shenwick to discuss their options under the law.
Price Type of Sale Number of Medallions $750,000 Foreclosure 2 $750,000 Foreclosure 2 $400,000
1 $350,000
2 $350,000
2 $250,000
1 $190,874.15 Partnership Split 1 $150,000 Estate 1 $150,000
1 $0 Estate 1
Here at Shenwick & Associates, many of our clients have concerns regarding tax issues. In some cases, tax debts can be discharged in bankruptcy (as we wrote about most recently here). However, in many cases, the IRS has already filed a Notice of Federal Tax Lien (putting other creditors on notice of the government’s legal claim against your property), has issued a Final Notice of Intent to Levy (which means that the government is considering taking a portion of your salary, your bank accounts, your other property and/or your real estate) or may have begun levying property. Based on the Employee Retirement Security Act (ERISA) and other federal law, ordinary creditors can’t access Social Security payments and retirement accounts and income to satisfy debts, but government agencies (like the IRS) can. For an excellent review of the IRS’ abilities to levy on these assets, we recommend this post on pension plans and IRAs and this post on Social Security payments.
All of us at Shenwick & Associates wish you a safe and happy holiday season, and we’ll be here for you in 2018.
By Liz McCormick
U.S. student loan debt now equals the size of the $1.3 trillion U.S. high-yield corporate bond market, presenting investors with a whole different range of risks.
“Delinquency rates on student loans are much higher than those on auto loans or mortgages, due to loose student loan underwriting standards, the unsecured nature of student debt, and the inability to charge off non-performing student loans in bankruptcy,” Goldman Sachs Group Inc. analysts Marty Young and Lotfi Karoui wrote in a note Tuesday. “The substantial majority of student loan default risk is borne by the U.S. Treasury.”
While the trend of rising defaults on student loans doesn’t pose “systemic financial risks,” it does impact household behavior as the debt load itself hurts home ownership rates, Young and Karoui said.
The share of student loan debt that is securitized, meaning it’s backed by assets and known as asset-backed securities, is about $190 billion, according to Goldman Sachs. Of that, about $150 billion is linked to loans where the repayment of the principal is guaranteed by the U.S. government.
“Most of the remaining student loan debt not in ABS format is provided to students by the U.S. government through its Federal Direct lending program,” wrote Young and Karoui.
Copyright 2017 Bloomberg L.P. All rights reserved.
Numerous changes to the Federal Rules of Bankruptcy Procedure (the “Rules”) take effect on December 1, 2017. The changes significantly impact the administration of consumer bankruptcy cases, and Chapter 13 cases in particular. Read More ›
Tags: Chapter 13, Chapter 7
In law, the “statute of limitations” is the deadline for bringing a claim or case. If a creditor wishes to sue a debtor in order to collect a debt, such as a medical bill resulting from a surgery or hospital visit, the creditor must sue before the statute of limitations runs out of time. If the creditor misses the deadline and the statute of limitations expires, the claim will be time-barred, which means the creditor will be unable to file a lawsuit. However, waiting for the statute of limitations to expire is seldom an efficient or practical strategy for dealing with medical debt. It may be more useful to consult a Sacramento bankruptcy lawyer, who can help you reduce or eliminate medical debt by filing for Chapter 7, Chapter 13, or in rare cases, Chapter 11.
How Long Can Debt Collectors Come After You for Medical Bills?
The answer to this question depends on where you live, as each state has a different set of statutes of limitations. Generally speaking, they range anywhere from approximately one to six years, depending on the nature of the claim and the state in which it is being filed.
With respect to the collection of medical debt, the applicable statute of limitations is the statute of limitations for breach (violation) of written contract. In California, the statute of limitations for breach of written contract is typically four years. The clock starts counting down from either the most recent payment date, or the date on which the breach occurred – whichever happened later.
If a hospital, clinic, dental office, or other type of treatment center determines that you have breached your contract by failing to pay your bill, the facility may employ various debt collection tactics, such as contacting you over the phone. If initial attempts to collect the debt prove unsuccessful, the facility may turn to a debt collection attorney to file a lawsuit against you. However, the claim would be time-barred if the statute of limitations has expired.
It’s also important to note that state law affords some additional protection to patients in California. Under state law, hospitals must allow a 150-day negotiation period, which is roughly equivalent to five months, for the determination of a payment plan. The hospital that treated you may not send your medical bills to a debt collection agency until the 150-day period has elapsed.
CA Debt Collection Laws
There are strict consumer protection laws defining legal and illegal debt collection tactics. The most prominent example is the Fair Debt Collection Practices Act (FDCPA), a federal law passed during the late 1970s to protect consumers from abusive or deceptive debt collection practices.
The FDCPA, which broadly applies to many types of consumer debts, prohibits numerous consumer debt collection strategies. To provide a few examples, the FDCPA makes it illegal for debt collectors to:
- Call repeatedly for the purpose of causing annoyance or distress.
- Make threats of any kind.
- Pretend to be lawyers, credit reporting company representatives, or government representatives.
- Use abusive or obscene language.
At the state level, California has enacted its own laws to strengthen the FDCPA. The California Fair Debt Collection Practices Act (CFDCPA), which is also called the Rosenthal Fair Debt Collection Practices Act, contains provisions similar to those contained in the federal version of the law.
Unfortunately, it is common for debt collectors to ignore state and federal debt collection laws. If you believe that you have been a victim of creditor harassment, you should consult with an attorney right away. If a creditor violated the FDCPA or other debt collection laws, you may be entitled to “damages” (compensation).
Sacramento Bankruptcy Lawyers Can Help You Erase Medical Debt
It is a valid defense to argue that the statute of limitations has expired. However, this is seldom a practical strategy for debtors. Depending on when the debt was incurred, it could take months or even years before the statute of limitations runs out. In the meantime, the debt will continue to negatively affect your credit score, which will simply worsen any financial difficulties you are currently experiencing.
If you are worried about medical debts that you cannot afford to repay, it may be the right time to consider filing for bankruptcy, which can give you the opportunity to reduce or wipe out your medical debts. In addition, filing bankruptcy will also give you the protection of the “automatic stay.” The automatic stay, which takes immediate effect, is a court order that, with some exceptions, prohibits your creditors from initiating collection actions while your bankruptcy case is in progress.
If you think you may be ready to explore bankruptcy as a strategy for debt relief, turn to The Bankruptcy Group for experience-driven, detail-oriented guidance you can trust. Our knowledgeable legal team includes California Chapter 7 lawyers, Chapter 13 bankruptcy attorneys, and Chapter 11 bankruptcy attorneys serving the Sacramento area. For a free bankruptcy consultation, contact our law offices at (800) 920-5351.
The post What is the Statute of Limitations on Medical Debt in California? appeared first on The Bankruptcy Group, P.C..
The United States Bankruptcy Court for the Western District of Michigan recently issued an opinion in a bankruptcy case involving a husband and wife who filed for Chapter 7 bankruptcy protection. Read More ›
Tags: Chapter 7, Collections
Citibank Deceives Borrowers
Citibank Deceived Borrowers About Tax Benefits, Incorrectly Charged Late Fees and Interest, Sent Misleading Monthly Bills and Incomplete Notices
11/22/17 – The Consumer Financial Protection Bureau (CFPB) took action against Citibank, N.A. for student loan servicing failures that harmed borrowers.
. Specifically, the Bureau found that Citibank:
- Citibank misled borrowers into believing that they were not eligible for a valuable tax deduction on interest paid on certain student loans.
- The company also incorrectly charged late fees and added interest to the student loan balances of borrowers who were still in school and eligible to defer their loan payments.
- Citibank also misled consumers about how much they had to pay in their monthly bills.
- Citibank failed to disclose required information after denying borrowers’ requests to release loan cosigners.
The Bureau is ordering Citibank to end these illegal servicing practices, and to pay $3.75 million in redress to consumers and a $2.75 million civil money penalty.
“Citibank’s servicing failures made it more costly and confusing for borrowers trying to pay back their student loans,” said CFPB Director Richard Cordray. “We are ordering Citibank to fix its servicing problems and provide redress to borrowers who were harmed.”
Enforcement Action
The CFPB’s order requires Citibank to:
- Refund $3.75 million to harmed consumers
- Make changes to their servicing practices
- Pay a $2.75 million fine
- For copy of the Citibank consent order.
- Copy of the Borrower’s Consumer Advisory “Bad Information about your college enrollment status can cost you“
With the announcement that Richard Cordray is stepping down from the Consumer Financial Protection Bureau “CFPB” the Trump administration will amp its attempt to water down the power of the organization. CFPB is the only organization that actively protects the consumers and hold run away businesses (Wells Fargo, Citibank to name one of many). If Trump has his way any changes in the CFPB will lead to either reversing prior orders or reduce, if not eliminate, future attempts to control and/or punish illegal and immoral acts by businesses.
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About the Author:
Diane L. Drain is a well known and respected Arizona bankruptcy attorney. She is an expert in both consumer bankruptcy and Arizona foreclosure. Since 1985 she has been a dedicated advocate for her clients and spokesperson for Arizona citizens. As a teacher and retired law professor, Diane believes in offering everyone, not just her clients, advice about the Arizona bankruptcy and foreclosure laws. She is also a mentor to hundreds of Arizona attorneys. 
I would be flattered if you connected with me on GOOGLE+
*Important Note from Diane: Everything on this web site is available for educational purposes only, is not intended to provide legal advice nor create an attorney client relationship between you, me, or the author of any article. Any information in this web site should not be used as a substitute for competent legal advice from an attorney familiar with your personal circumstances and licensed to practice law in your state.*
The post CItiBank Deceives Student Loan Borrowers appeared first on Diane L. Drain - Phoenix Bankruptcy & Foreclosure Attorney.
Medical debt – number one cause for seniors filing bankruptcy
According to an article in Forbes, the 65+ demographic now makes up a higher percentage of bankruptcy filers than it did a decade ago.
Filing for bankruptcy is seen by many seniors as a social stigma. Some live in a nightmare where they are forced to choose between paying a credit card or buying food; paying a medical bill or paying rent. The truth is that bankruptcy can bring a light into their lives by eliminating medical and credit card debts. Many seniors are under the false impression they will lose items necessary to their daily lives: social security, furniture, retirement accounts, vehicles or even pets (see exempt property).
Bankruptcy is a good way to protect heirs.
In many states when a family member passes their creditors have first ‘bite’ at the estate (the deceased’s property). If the deceased filed bankruptcy most, if not all, of their unsecured debts, such as medical debts, credit cards and personal guarantees, would have been discharged (wiped out). Resulting in their heirs receiving their entire estate and not battling with creditors.
Peace of mind – bankruptcy stops the calls and harassment
When creditors are owed money they are not shy to call repeatedly throughout the day demanding payment. Many will lie about their ‘rights’ (saying they have the right to take everything the senior owns). There are laws governing creditors and collection companies but few know about those laws and fewer know their rights.
Most Arizona consumer bankruptcy attorneys offer a FREE consultation
Many, especially seniors, assume that hiring an attorney to help is too expensive – that depends on the situation and the attorney. For most their initial consultation is FREE so take advantage of that option. Always talk to several attorneys before choosing one. Don’t assume the attorney is being honest about their experience and capabilities. Check them out with the various ranking sources: such as Google, LinkedIn, AVVO, and Better Business Bureau, to name a few.
AVOID Used Car Sales Tactics
Beware of firms advertising on TV or the Internet (“pay per click” – if there is an “Ad” icon on the left side of the name this is a paid ad). Those ads are paid by the client in the form of higher fees. NEVER pay an attorney if you feel pressured – this is what I call a “used car sales firm”. They are in the business to get your money, not offer you advice customized to your unique situation.
Talk to the attorney you will be working with, not a staff person. When interviewing the attorney ask how long they have practiced bankruptcy law. Ask what percentage of their practice is focused on consumer work. Ask whether they are experienced in both chapter 7 and chapter 13 cases. Ask the attorney for references. Ask about their policy of returning phone calls. They should be committed to answering specific questions about your situation and help you understand your options.
If, after talking with the attorney you are still confused about the issues you raised, find another attorney. An attorney is should be your guide in understanding your options, including bankruptcy. They should educate you, be there to assist you in avoiding pitfalls and help you plan for your future after bankruptcy. 
Do your homework before hiring anyone.
There are hundreds of “bankruptcy” attorneys in Arizona. Of those just a few will fit the criteria set forth above. Bankruptcy is a very complicated process and you want to use an attorney who will be there when you need them.
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About the Author:
Diane L. Drain is a well known and respected Arizona bankruptcy attorney. She is an expert in both consumer bankruptcy and Arizona foreclosure. Since 1985 she has been a dedicated advocate for her clients and spokesperson for Arizona citizens. As a teacher and retired law professor, Diane believes in offering everyone, not just her clients, advice about the Arizona bankruptcy and foreclosure laws. She is also a mentor to hundreds of Arizona attorneys.
I would be flattered if you connected with me on GOOGLE+
*Important Note from Diane: Everything on this web site is available for educational purposes only, is not intended to provide legal advice nor create an attorney client relationship between you, me, or the author of any article. Any information in this web site should not be used as a substitute for competent legal advice from an attorney familiar with your personal circumstances and licensed to practice law in your state.*
The post Bankruptcy of Seniors Increasing – A Good Option for Many appeared first on Diane L. Drain - Phoenix Bankruptcy & Foreclosure Attorney.
According to court records, in 2016 more than 6,300 Chapter 7 bankruptcy cases were filed in the U.S. Bankruptcy Court for the Eastern District of California, Sacramento Division. The same year, just under 2,150 Chapter 13 cases were filed, bringing the total above 8,000 cases. Some of these bankruptcy petitions were filed by individuals, while others were filed jointly by married couples, similar to the way spouses may choose to file a joint income tax return. But what about couples who are not married? Is it possible to file joint bankruptcy with your boyfriend or girlfriend if you are unmarried? And how are same-sex marriages and domestic partnerships impacted? Sacramento bankruptcy lawyers explain the answers to these important questions for Californians seeking debt relief.
Can I File Bankruptcy Jointly with My Boyfriend or Girlfriend?
Unfortunately for unmarried couples, the answer to this question is no. Even if you have lived with your boyfriend or girlfriend for many years, and you share numerous jointly-held debts together, you will still be prohibited from filing with your partner. Under federal bankruptcy laws, only married couples have the legal option to file bankruptcy jointly.
Though your household income will be assessed when you take the “means test,” which determines whether you should file Chapter 7 or Chapter 13, you cannot treat your boyfriend or girlfriend as a spouse on your bankruptcy forms. Keep in mind that lying on your bankruptcy paperwork could cause your case to be dismissed, which means you will not get the debt relief you are seeking through the bankruptcy.
Can Married Same-Sex Couples or Domestic Partners File Joint Bankruptcy?
In 2015, the United States Supreme Court legalized same-sex marriage with the landmark ruling Obergefell v. Hodges, in which the Court held that state-level bans on same-sex marriage were unconstitutional. According to the results of a Gallup poll published earlier this year, more than 10% of the country’s LGBT adults are now married: a figure that equates to well over 100,000 Americans.
Before Obergefell legalized same-sex marriage in other parts of the country, California extended this right to its residents in 2008. Though the passage of Proposition 8 halted same-sex marriage in California from November 2008 through June 2013, the right was later restored through Hollingsworth v. Perry, which overturned Proposition 8.
As a result of the Hollingsworth and Obergefell rulings, same-sex couples are entitled to the same legal rights as other married couples – including the right to file jointly for bankruptcy. If you and your husband or wife are thinking about filing bankruptcy together, we invite you to contact our Sacramento Chapter 7 lawyers or Sacramento Chapter 13 attorneys for legal guidance. Before you file for bankruptcy in California, it is crucial to determine whether a joint filing would benefit you and your spouse. In many cases, it is more logical and cost-effective for only one person to file. For more information on this subject, see our article on whether married couples are required to file jointly, or simply call us at (800) 920-5351 for a free legal consultation about bankruptcy in California.
Bankruptcy laws no longer draw distinctions between lesbian couples, gay couples, and straight couples. They do, however, continue to draw distinctions between married couples and unmarried couples. If you and your partner are in a domestic partnership, you may be disallowed from filing together. In 2015 in In re Villaverde, the Bankruptcy Court for the Central District of California ruled against allowing two registered domestic partners to file a joint Chapter 13 petition, citing 11 U.S.C. § 302(a), which provides the following:
“A joint case under a chapter of this title is commenced by the filing with the bankruptcy court of a single petition under such chapter by an individual that may be a debtor under such chapter and such individual’s spouse.”
The emphasis here is on the word “spouse.” Though domestic partnerships are similar to marriages in many respects, only marital relationships qualify couples for joint bankruptcy petitions.
The bottom line is that you must file individually if you are unmarried. If you are married, you will have the option of filing jointly, but are certainly not required to do so. Filing individually may make better financial sense, depending on the nature of your debts, assets, and income.
In either case, you will file using the Voluntary Petition for Individuals Filing for Bankruptcy (Form B 101). If you are filing jointly, you will be required to supply information for both spouses. Per the instructions given to debtors, “[I]n joint cases, [bankruptcy] forms… ask for information from both debtors. For example, if a form asks, ‘Do you own a car,’ the answer would be yes if either debtor owns a car. When information is needed about the spouses separately, the form uses Debtor 1 and Debtor 2 to distinguish between them.”
CA Bankruptcy Lawyers Serving Sacramento and Roseville
If you and your husband or wife are thinking about filing for bankruptcy together, make sure that filing a joint petition is the best course of action before you begin the process. Depending on your circumstances, you may be better off filing individually and excluding your spouse from the bankruptcy proceedings.
Regardless of whether you file jointly or individually, it is critical that you have step-by-step guidance throughout the process. Bankruptcy laws are extremely technical, and it is easy to overlook valuable opportunities or make costly errors unless you have assistance from an experienced Folsom bankruptcy attorney. For a free consultation, contact The Bankruptcy Group at (800) 920-5351 today.
The post Can Unmarried Couples File Joint Bankruptcy in California? appeared first on The Bankruptcy Group, P.C..
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Learn more about how Bankruptcy works and what you need to know.