Penny Wise, Pound Foolish - Filing Bankruptcy without a Bankruptcy Attorney

When a person is experiencing financial problems and knows a Bankruptcy must be filed, it is very tempting to consider filing without an attorney.   However, before you start down the road of filing on your own and opening up a GOLD MINE for the bankruptcy trustee and your creditors, consider the following:

1.  If you miss even one exemption for which you are entitled or the timing of bankruptcy filing is not correct, all the savings you made by filing on your own are GONE.  If you do not properly exempt assets, the bankruptcy trustee WILL take your assets and sell them for the benefit of creditors.  The Trustee is not there to help or educate you!  Their job is to maximize the recovery for creditors AFTER paying themselves.  Let me tell you that this is happening every day.  I can’t even begin to tell you the number of times I have seen trustees take money from bank accounts, tax refunds, jewelry and vehicles because the Debtors did not have representation.  

2.  If you omit property either intentionally or inadvertently, the trustee can take the omitted property and sell it for the benefit of creditors or can move for a denial of discharge.

3.  If you miss or don’t include debts, either intentionally or inadvertently, the debt may be deemed nondischargeable or the court may move for dismissal.

4.  If you don’t understand the Means Test, you may not qualify for bankruptcy or may end up filing the wrong type of bankruptcy case.

5.  If you have a business and your bankruptcy case is not filed properly, you may end up losing the business or assets of the business.

6.  If you are on title to bank accounts, personal property or real property with relatives, the trustee or creditors may attempt to take the property even if you claim to have only bare legal title versus an equitable interest in the property.  Do you understand the effect of inheritance after a bankruptcy filing?

7.  If you don’t understand real property law, you may end up filing an unnecessary bankruptcy or alternatively may increase your personal and/or tax liability by completing a short sale or foreclosure prior to the bankruptcy filing.

8.  If you don’t understand tax law and own real property or have significant amounts of debt, don’t even think about filing bankruptcy on your own especially if you have assets such pensions, IRA, 401k or other assets such as annuities.  You don’t want to trade bank and credit card collectors for the IRS or State Franchise Board.  The fact that you currently do not have equity in the property is irrelevant.

In conclusion, filing bankruptcy on your own is almost always a very bad idea and ends up costing more in the long run because of assets lost or other problems with the bankruptcy case.   The above is just a few of the issues which must be addressed prior the bankruptcy filing.  Bankruptcy is very complicated area of the law and is a mine field for the unwary.   Even attorney who are general practitioners will not generally file bankruptcy cases because of the complexities involved in the filings.  If you don’t have the money to file bankruptcy at this time, you should still seek legal counsel and discuss your options.  Most bankruptcy attorneys allow payment of fees over time.  Don’t be a Penny Wise and Pound Foolish.  I see people every day for FREE 30 minute consultations at my offices located in Walnut Creek, Antioch and Brentwood.

Can't Afford Your Real Property Taxes?

As the mortgage crisis enters its third year and unemployment rises above 10% in many areas of California, more and more people are unable to pay their property taxes.  If you are in default on your property taxes or considering a default, here is the law you should know.

First, property taxes are a secured claim against the real property.  They are not a personal debt and there is no criminal penalty if you cannot pay your property taxes.   If your home forecloses and there are delinquent property taxes at the time of the sale, it will not follow you.  Therefore, if you do not have the money to pay the taxes, do not borrow the money from a credit card or 401k account/ 401k loan to make the payment.  In the event the home is lost in a foreclosure and you borrowed the money, you will still be required to repay the credit card debt (even potentially in bankruptcy because taxes paid with a credit card may benon-dischargeable) or through the 401k loan. 

Second, if you cannot pay your property taxes when due, the County cannot immediately foreclose on your property.  In fact, it is very rare for a county to foreclose on real property for non-payment.  In most places in California, real property must  remains in tax defaulted status for five or more years before it will become subject to the Tax Collector’s power of sale.

Third, if you cannot afford to pay your property taxes, you have several options.  A good option is to enter into an Installment Plan of Redemption which is a 5 year plan that allows a taxpayer to pay defaulted taxes in five installments.  However, prior to applying for an Installment Plan you should contact your mortgage lender to make sure they will allow the payment plan to pay taxes in default.  Sometimes, mortgage lender will automatically advance for the past due taxes and establish an impound account for past due taxes and as well as establishing an impound account for future taxes and insurance.  The negative consequence of a lender paying the taxes is that they usually require the past due taxes to be repaid over 1 year versus the 5 years allowed by the County.  However, the positive consequence is that the accrual of interest by the County is stopped and if you qualify for a loan modification, the past due taxes are in most instances paid through the modification.  Another option is to see if you qualify for tax payer assistance.  The common form of assistance is through the Property Tax Postponement for Senior, blind and disabled persons which allows qualified homeowners to postpone payment of all or a portion of the property tax due on their home.

Fourth, make sure your property is being taxed at the it’s current fair market value.  If you feel that your current assessed value is not the current market value, you may request a review by the County.  This process is commonly referred to as a Proposition 8 review.

In conclusion, there is no free lunch if you are late on your property taxes.  However, there are options available to you.   This is a complicated area of the law.  You are in the deep end of the pool.  Do not swim alone.  The buddy system is essential.  Seek a buddy in legal counsel prior to taking any action.  I see people every day for a FREE 30 minute consultation in my offices located in Walnut Creek, Antioch and Brentwood.

WE ARE A DEBT RELIEF AGENCY.  WE HELP PEOPLE FILE FOR BANKRUPTCY.  THIS INFORMATION IS NOT PROVIDED AS LEGAL ADVICE AND SHOULD NOT BE RELIED UPON IN   MAKING ANY DECISION REGARDING A VOLUNTARY DEFAULT, SHORT SALE, FORECLOSURE OR BANKRUPTCY.  THIS INFORMATION IS NOT A SUBSTITUTE FOR OBTAINING TAX & LEGAL ADVICE REGARDING AN INDIVIDUAL SITUATION.