Author Archives: Ryan C. Wood

About Ryan C. Wood

Ryan C. Wood is a California attorney practicing primarily in the areas of Bankruptcy Law, Business Law and generally seeking justice for under represented clients in the Bay Area.

Is A Car Loan Company Violating The Automatic Stay If They Disable My Car While I Am In Bankruptcy?

By Ryan C. Wood

Do you know anyone that has a disabling device in his or her car or do you yourself have a disabling device in your car? These devices are showing up in more and more states. The disabling device is installed in your car when you purchase a car, most likely at dealerships that act as the finance company as well. The dealerships normally install these devices on buyers who have low credit scores to protect the dealership/lender’s investment. These disabling devices act as an anti-theft device but also have GPS capabilities. What normally happens is that the consumers who purchase the car will have to pay on time each month to get a code from the lender. This code will allow the buyers to keep the car running another month. If the buyer misses a payment the lender will disable the device and the buyer will not be able to start the car and the GPS will provide the lender with the location of where to pick up the car to repossess it. This sounds incredibly dangerous. What if you were driving in the middle of the freeway and your car is disabled? If you have one of these devices on your car you need to know what your rights are after you file for bankruptcy.

In the case of In re Hampton (Hampton v. Yam’s Choice Plus Autos, Inc.), 319 B.R. 163 (Bankr. E. D. Ark. 2005), Toni Hampton purchased a car from Yam’s Choice Plus Autos, Inc. (“Yam’s”). There was a PayTeck device installed on the car. Ms. Hampton thought that it was only an anti-theft device and only learned that she would need a new code to start the car each month after she made her first payment. She made her payments on time and had no issues with her car. She filed for Chapter 13 bankruptcy protection on October 8, 2002. Ms. Hampton’s Chapter 13 plan included payments to the lender for her car. Her plan was confirmed and she made her Chapter 13 payments on time. After she filed for bankruptcy Ms. Hampton indicated she was barely able to get her car working for more than 2 weeks at a time. In the beginning, her bankruptcy lawyer’s employee tried to call Yam’s to get the correct codes. Yam’s indicated Ms. Hampton would need to call in to get the code. Ms. Hampton called in every month to get the code but most of the codes were incorrect and her car was shut off. It made her constantly late for work and there were times when she had to get rides from co-workers and friends and family because her car just would not start. Yam’s was aware of the issues but did nothing to help Ms. Hampton. The bankruptcy court in this case concluded that Yam’s violated the automatic stay. Under 11 U.S.C. §362(a)(3) filing bankruptcy acts as a stay of “any act… to exercise control over property of the estate…” Installing a device in a car which prevents the bankruptcy filer from starting the car is an exercise of control over the estate property which violates the automatic stay. The court awarded Ms. Hampton damages she incurred during this period but did not award punitive damages. The court clarified that while Yam’s violated the automatic stay in this situation, the existence of the disabling device would not in itself violate the automatic stay if Yam had taken proper precautions and provided Ms. Hampton with the correct codes every month. If there were issues with the device itself, Yam’s should have fixed it.

In a similar case, In re Crawford (Crawford v. Credit Acceptance Corporation), 2008 WL5427713 (Bankr. S.D. Ill. December 2008), Ms. Crawford’s finance company repossessed her car. She filed for Chapter 13 bankruptcy and the car was returned to her but she started having problems with her car immediately after because of the malfunction of the disabling device on her car. She sued the finance company for violation of the automatic stay for not repairing the disabling device and the courts agreed with her. The court held that the finance company violated the automatic stay because they failed to ensure the car “operated free from any interference from the disabling device.”

So the bottom line is this: you have the right to drive your car free from worry that it will stop at any time and to also drive your car without having to worry that your car will not start so long as you continue making your payments on time either on your own or through your Chapter 13 plan. If your lender deliberately provides you with the wrong start codes or does not help you if there is a malfunction of the disabling device they are violating the automatic stay and your bankruptcy lawyer will be able to file a motion or adversary proceeding for violating the automatic stay.

Damages for the Willful Violation of Automatic Stay

By Ryan C. Wood

The general rule is that once you file for bankruptcy protection you are free from creditor harassment and collection activity. This is because once you file bankruptcy there is the automatic stay. This automatic stay stops all collection activity including creditor calls, letters, wage garnishments, levies, and/or continuation or start of any lawsuit in an attempt to collect a debt. There are some exceptions to the automatic stay as listed in Section 362 of the Bankruptcy Code. So before threatening a creditor with sanctions make sure one of the exceptions does not apply. The automatic stay is one of the most powerful tools in the bankruptcy arsenal. But what happens if creditors ignore the automatic stay and continue to try to harass you and attempt to collect a debt from you anyway? What rights do you have?

This is what happened in In The Matter of Rupanjali Snowden (No. 13-35291, 9th Circuit Court of Appeals, September 2014). In this case, Ms. Snowden, the bankruptcy filer, took out a payday loan from Check Into Cash of Washington (“CIC”) in the amount of $575. She was unable to make the payment and advised CIC that she was thinking of filing for bankruptcy and provided her bankruptcy attorney’s contact information to them. Despite having this information, CIC would constantly contact Ms. Snowden at work (she is employed as a nurse at a hospital). Every time she heard her name over the intercom she thought she was being called regarding an emergency with her daughter and she became very stressed out. CIC is the original creditor and may contact someone at work, but they cannot harass her. If CIC was a collection agency Ms. Snowden may have a claim under the Fair Debt Collections Practices Act.

Ms. Snowden filed for bankruptcy protection shortly after with a Chapter 7 bankruptcy lawyer. CIC was listed as a general unsecured creditor in the bankruptcy petition. A little over a month after her bankruptcy filing, CIC cashed her post-dated check causing Ms. Snowden’s bank account to become overdrawn and charged additional bank fees as well. Ms. Snowden became panicked and was crying and feeling miserable. Her good bankruptcy lawyer filed a motion for sanctions against CIC for violation of the automatic stay, seeking return of the funds, overdraft fees, emotional distress, punitive damages and attorney fees. CIC disputed the fact that they violated the automatic stay. Ms. Snowden offered to settle the case for $25,000 which CIC rejected. CIC proposed to pay her $1,445, which Ms. Snowden rejected. The bankruptcy court found that CIC willfully violated the automatic stay and awarded Ms. Snowden $12,000 for emotional distress, $12,000 in punitive damages, $575 for the loan amount, $370 in bank fees, and $2,538.55 in attorney fees, totaling $27,483.55. CIC appealed the case to the district court. The district court remanded the case back to the bankruptcy court to determine emotional distress damages and reevaluate punitive damages based on change in the emotional distress damages. The bankruptcy court did not change its judgment after reconsideration. CIC appealed the case again and Ms. Snowden cross-appealed.

The Ninth Circuit upheld Ms. Snowden’s emotional distress award and punitive damages. The court also rejected CIC’s argument that the attorney fees stopped accruing once CIC offered to settle the case with Ms. Snowden for $1,445. The court indicated that CIC never admitted to the violation of the automatic stay and therefore the stay was not cured. The court determined the proper date the violation of the automatic stay ended on December 10, 2009 when the bankruptcy court determined that the automatic stay was violated. Of course, Ms. Snowden would not receive all of the attorney fees up to that date. She would only receive the fees that are related to curing the stay violation itself. Since some of the attorney fees were related to recovering damages, those attorneys’ fees would be disallowed.

This case provides a guideline of what damages can be obtained when there is a willful violation of the automatic stay. As with each case, however, the rulings are heavily dependent on the specific circumstances of each case. You have to provide facts to prove you are eligible for actual damages, emotion distress damages, punitive damages, attorney fees and other damages.

What Happens if I Make Payments to a Creditor After Receiving a Discharge in Bankruptcy?

By Ryan C. Wood

You just received your discharge order from the bankruptcy court indicating your debts are now discharged and your case is closed. Congratulations! You now have a fresh start free from burdensome debts. What do you do now? Some people want to pay back some of their creditors due to a sense of obligation (for example, some people want to pay back their dentist who they have been going to for years and who has never hounded them for payment, or their friends or family members who have loaned them money to get by throughout the years). Whatever the reason, there is no law against voluntarily repaying a debt from post-petition funds (meaning money you obtained from whatever source after you filed your bankruptcy case). Does repaying that debt mean you re-obligated yourself to that debt, essentially reaffirming the debt? The short answer is no. In order to reaffirm a debt you have to follow the strict guidelines outlined in 11 U.S.C. §524(c). See In re Charles Lopez 345 F.3d 701 (2003).

When your experienced bankruptcy attorney files your bankruptcy case and you receive a discharge of your debts your personal obligation to repay that debt is discharged. This applies to even secured debts such as your car or home mortgage. Don’t get me wrong, this does not mean you do not have to repay your car loan or home mortgage to keep the car or home. Since the car loan is a secured debt, if you do not repay the debt your car loan lender can repossess your car. However, given your personal obligation was discharged in the bankruptcy case the car loan lender cannot go after you for any deficiency balance if there are any. If you sign a reaffirmation agreement as part of your bankruptcy, this is essentially a new contract in which you are re-obligating yourself to that debt. If you sign the reaffirmation agreement and then you cannot make payments on that debt the car loan lender can repossess your car and go after you for any deficiency balance.

You filed bankruptcy to get rid of your personal liability to repay your debts. Why would anyone sign any reaffirmation agreement? Unfortunately, in the Ninth Circuit, In re Dumont (581 F. 3d 1104, 9th Cir, 2009) holds that a car loan creditor can repossess your car if you did not sign a reaffirmation agreement. It does not matter even if you are current on the loan – your creditor can still repossess your car. You have essentially 3 different options after you file your bankruptcy case regarding secured debts: 1) surrender the car; 2) redeem the car for the fair market value (meaning you pay your lender a lump sum payment of what the car is worth rather than pay what you owe on the car – this is only good if your car is heavily upside down); and 3) reaffirm the debt. The good bankruptcy lawyer unspoken 4th option to keep the car and continue making payments on it (sometimes called a “ride through”) is no longer available to consumers based on In re Dumont. However, it is still advisable to speak with your car loan lender to see if they are wiling to offer you that option. Most lenders still can offer it. Some lenders, like Ford, will require you sign a reaffirmation agreement in order to keep the car. Keep in mind, you should not and you do not have to reaffirm huge debts like mortgages on your house because you do not know what the future holds. You do not want to be in a situation where you cannot pay your mortgage and your mortgage holder comes after you for the debt in the future.

Once you have finally made a decision to reaffirm the debt, your lender has to follow the strict guidelines of §524(c) to reaffirm the debt. Essentially they have to provide you with full disclosure of what the terms are and the reaffirmation agreement has to be signed completely voluntarily and cannot be an undue hardship for you. Once you sign the reaffirmation agreement the creditor files it with the court. If you sign the reaffirmation agreement without the representation of a bankruptcy lawyer, there is a hearing in front of the judge. This hearing is to protect you and to make sure the creditors are not taking advantage of you. If the judge thinks it is an undue hardship for you to reaffirm the debt he or she can reject the reaffirmation agreement. The judge can also sign off on the reaffirmation agreement if he or she believes it is in your best interest. The reaffirmation agreement has to be filed with the court before the case is closed. Once the case is closed no further reaffirmation agreements can be entered into. Therefore, you do not have to “accidentally” enter into a reaffirmation agreement because it has to follow these guidelines.

How Can I Pay Bankruptcy Attorneys Fees to File a Chapter 7 Bankruptcy Case?

By Ryan C. Wood

It is inevitable that my clients ask me the question of whether I can file their bankruptcy case for them with $0 money down or at least a partial payment with the rest to be paid after their case is filed. I understand the need some of my clients have when they are asking this question. Obviously if they have to file for bankruptcy they may not have the funds to hire an attorney but they may still need to urgently file, either because they have a looming wage garnishment or their car was repossessed and they need to file their bankruptcy case before their car is auctioned off. They are stuck in a catch 22: if they do not file for bankruptcy, their wages get garnished or their car is auctioned off and they will have even less money. It is a never-ending vicious cycle. Filing for bankruptcy immediately and then paying the bankruptcy attorney back after the case is filed may seem to be a solution. Unfortunately that solution is not a viable option in Chapter 7 bankruptcy cases for several reasons:

Violation of Automatic Stay

The automatic stay prevents all collection activity against you after your bankruptcy case is filed. That means no creditor can call you, harass you, go after you for any debt, file or continue a lawsuit against you, continue any wage garnishments, repossess your car, or any other activity that is considered trying to collect a debt from you. Whomever you owe money to is considered a creditor. That includes your bankruptcy lawyer if you still owe him or her money after your bankruptcy case is filed. Your legal obligation to repay the dischargeable unsecured debt in your bankruptcy case is gone. You are therefore not legally obligated to pay your bankruptcy attorney and they will be essentially working for free in your case. If they try to collect from you they are violation the automatic stay. This is not to say that they cannot charge you for any post-petition work that comes up in your case that was not bargained for in your initial contract (such as representing you in an adversary proceeding in your bankruptcy case). The attorneys just cannot charge you for the work they did prior to the filing of your bankruptcy case.

Conflict of Interest

Another reason why attorneys cannot accept no money down or partial payment option is the fact that it is a conflict of interest for them to do so. How is it a conflict of interest? As indicated previously if you owe money to your bankruptcy attorney they are considered a creditor in your case. Well, you cannot be both an attorney and a creditor in the Chapter 7 case because there is potential for conflict to arise. How will you know whether the attorney is acting in your best interest (to discharge all your dischargeable unsecured debts) or in their best interest as a creditor (to collect what is owed to them)? It is an ethical violation for them to represent you in your bankruptcy case if there is a conflict of interest.

Attorney Fees Can Be Paid By a Third Party

If you need to file for bankruptcy under Chapter 7 and do not have the money to pay attorney fees you can have a third party pay the fees and costs. A friend or family member may help you and pay your attorney fees and costs. It has to be disclosed that a third party paid the fees and the third party cannot have any control of the bankruptcy case. Sometimes when a party pays the fees and costs they think they have a right to be involved and influence the bankruptcy filers decisions. Just because someone pays the fees and costs of another does not mean they are a client. The third party payor is not the client. It is a good idea to have the third party payor and client sign a disclosure regarding the payment of the attorney fees and costs.

File A Chapter 13 Case Instead

Payment of attorneys’ fees and costs is different in a Chapter 13 reorganization case. In a Chapter 13 case attorneys’ fees can be paid through the Chapter 13 plan. If the attorneys’ fees are $4,000 and the Chapter 13 plan is 60 months, then about $67 of your Chapter 13 plan payment will go to your attorney to pay their fees once the Chapter 13 plan is approved by the bankruptcy court. Most bankruptcy lawyers will ask for a portion of the attorneys’ fees upfront ($1,000 before filing the case for example) and then rest of and the majority of the attorneys’ fees in the Chapter 13 plan (Remaining $3,000 in Chapter 13 plan). So, you may be able to find an attorney that is willing to do a lot of work for a very little amount of money, then be paid the rest of the attorneys’ fees through the Chapter 13 plan.

If you cannot pay your bills on time each month do not wait to speak with a bankruptcy attorney

If you cannot pay your bills on time each month do not wait to speak with a bankruptcy attorney

Do Not Wait Until The Last Minute to Seek Counsel

So how can you avoid this impossible situation of needing to file bankruptcy immediately but not having enough money for a bankruptcy attorney? The best way to go about filing for bankruptcy is to plan it in advance. Do not wait until the last minute to file for bankruptcy. At the first sign that you are having financial difficulties and may not be able to repay your obligations you should consult with a bankruptcy lawyer. Many law firms provide payment options so you can pay them in installments. They can file your bankruptcy case after all the fees are paid. It may take several months, but you can file for bankruptcy afterwards and obtain that coveted fresh start. If you wait until you receive the wage garnishment orders it will be too late. While there are plenty of lawyers that accept installment payments, there are also plenty of law firms that do not. You should ask the firm before scheduling an appointment with them whether they accept installment payments or not.

Can I Go On Vacation Before Filing Bankruptcy?

By Ryan C. Wood

How do you have money to on vacation but no money to pay your debts? In case you did not know this previously I am going to let you in on a not so secret rule in bankruptcy: it is generally not a good idea to go on vacation right before filing for bankruptcy. Doing so may look like and be an abuse of the bankruptcy process and your case may be dismissed or the discharge of your debts denied.

Pursuant to 11 U.S.C. §707(b)(1) the court may dismiss a case “if it finds that the granting of relief would be an abuse of the provisions of this chapter.” Whether the court finds abuse depends on the circumstances of each case. If the circumstances are the fact that you really needed to have a vacation (with no other explanation) then it probably does not bode well for your bankruptcy case. Essentially you are taking a vacation at the expense of your creditors that you are alleging you cannot afford to pay anymore. Rather than paying for your vacation you could have used those funds to pay some of your creditors. If you are going out of town for a legitimate reason, such as work related reasons (for example, you have to pay all the expenses yourself but your employer will reimburse you in the future) or if there are family emergencies (for example, a loved one is very sick, or you are going to a funeral) then you can explain those reasons to the judge to dispute the motion to dismiss or claim of abuse. If a motion to dismiss is filed in your case pursuant to §707(b), it is highly advisable that you seek the services of a bankruptcy lawyer to help you oppose the motion.

It is generally not a good idea to go on vacation before filing bankruptcy.

It is generally not a good idea to go on vacation before filing bankruptcy.

If you used your credit cards during the vacation right before filing your case the problem may gave just become worse. Creditors could file an adversary proceeding against you to have that debt or all of your debts be deemed nondischargeable pursuant to 11 U.S.C. §523(a)(2) due to fraud or 11 U.S.C. §727. An example of fraud is if you rack up your credit card debt for luxury goods within 90 days prior to filing for bankruptcy. What are considered luxury goods? Luxury goods are anything that is not reasonably necessary for the support or maintenance of you or your dependents. Going on vacation, big screen TVs, electronics, nice purses, jewelry or shoes may be examples of luxury goods.

You may be asking yourself: “How does the United States Trustee or a party in interest find out you went on vacation or spent money on luxury goods?” There are a variety of different ways they may find out. Most Chapter 7 trustees require that your Bay Area or San Jose bankruptcy attorney submit bank statements as part of the documents to be sent to the Chapter 7 trustee after your bankruptcy case is filed and before your meeting of creditors. Even if you paid for your vacation with cash or by debit card from your checking account, the Chapter 7 trustee will see the transactions at the location you are withdrawing the money (for example, if you withdrew cash out of the ATM in Hawaii, it will show cash withdrawal in Hawaii). Or if you withdraw a huge chunk of cash prior to going on vacation the Chapter 7 trustee may question what the huge chunk of cash may be used for. Of course, if you are using your credit cards, it will show up on your credit card statement. If the Chapter 7 trustee finds something suspicious from the documents provided he or she may inform the United States Trustee. The United States Trustee is normally the one who will file motions to dismiss your case for abuse of the bankruptcy process under 11 U.S.C.§ 707. Other parties in interest (i.e. your creditors) may also have the right to file an objection based on abuse of process under 11 U.S.C.§ 707.

Why would buying luxury goods on your credit card before filing bankruptcy be considered fraud? It is presumed to be fraud because it looks like you are taking advantage of your creditors. If you know you are going to file for bankruptcy and you max out your credit card balances it is considered fraud because you “borrowed” the money without ever having any intention of paying the money back. Of course, buying luxury items within the 90 day window is only presumed to be fraud, but you can always dispute the presumption by providing proof that at the time you used the credit cards you had every intention of paying the money back. You can show this in several ways: providing evidence that you have been making your payments every month, providing evidence that you had funds to pay back the credit at the time you made the purchases, or anything else that proves you had the intention of paying back the debt. If something happens afterwards that changes your financial situation such as a decrease in pay or loss of job that makes filing for bankruptcy a necessity you can explain that situation to the judge to dispute the presumption that you committed fraud. You should consult with a bankruptcy attorney to help you if you have an adversary proceeding filed against you for nondischargeability of a debt due to fraud.