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.

Can My Debts Related To A Car Accident Be Discharged In Bankruptcy?

By Ryan C. Wood

The impact of a car accident may be emotionally and physically devastating. It is even more devastating when it has been determined the car accident was entirely or even partially your fault. What happens when you are underinsured or not insured at the time of the accident? The impact of such an event may cause your finances to spin out of control.

If you are financially responsible for a car accident you need to take a look into all the options that are available for you. One of the options is that you may be able to file for bankruptcy to discharge those debts depending on your circumstances. Normally your debts related to a car accident are dischargeable. This is true whether the debts are related to personal injury or property damage. There are two exceptions where the debts arising from a car accident are not dischargeable in bankruptcy. Many bankruptcy lawyers mistakenly believe that any debt incurred resulting from a car accident, whether insured or not, is not dischargeable when filing bankruptcy.

The first exception is if the accident was the result of you driving under the influence and you caused a death or personal injury to the other party or parties. Your financial obligations to pay any criminal fines, court fees, restitution, and bodily injury to the other party are not dischargeable if it is the result of a DUI. That means you would need to pay for the debts yourself. The only portion of your debts that would be dischargeable is property damage related to the DUI.

The other exception is if the accident was the result of a willful or malicious injury caused by you to another entity or to the property of another entity. An example of this could be if you deliberately ran your car into your neighbor’s fence because you hated the sight of the fence. Under this exception, both personal injury and property damage are not dischargeable in bankruptcy.

So what happens if you are financially responsible for the debts caused by a DUI or your willful or malicious injury to another person and you do not have the funds to repay the debt? Although the debts are not dischargeable in a Chapter 7 bankruptcy you can file a Chapter 13 to repay the debts in installments of up to five (5) years. If the debts cannot be repaid within the 5 years due to your financial circumstances you may always file another Chapter 13 bankruptcy to pay the remaining balance.

If you owe a debt related to a DUI or willful or malicious injury it is best to seek the advice of experienced bankruptcy attorneys. They will be able to draft a Chapter 13 plan that will help you repay the debts and hopefully you can move on with your life.

Can Debt Settlement Companies Help Me With My Debts?

By Ryan C. Wood

Many consumers today are struggling to make ends meet. They live from paycheck to paycheck and have creditors hounding them to pay for debts with money they do not have. It does not help that they are bombarded with radio ads and television commercials promising to help them settle their debt for pennies on the dollar. The consumers see or hear these ads and think they have found the solution to their problems. But do these debt settlement companies really live up to their promises and actually help consumers? According to the U.S. Government Accountability Office, their investigations have found that a lot of these debt settlement companies use fraudulent and deceptive practices and poses a significant risk to consumers. As a bankruptcy lawyer I have heard many horror stories and I want to highlight some of the dangers of these debt settlement companies. Hopefully you will be able to make an informed decision on how you can manage your debt.

Settle for Pennies on the Dollar

The claim that these debt settlement companies can settle your debt for pennies on the dollar is the main draw for most consumers when they hear this. They think that they are getting the deal of a lifetime. They are willing to pay some company to help them settle their debts and pay a monthly sum to do so. The problem with these claims is that in order to settle the debt these debt settlement companies advise you that you have to stop making your monthly payments first. If you were paying these companies on time and you suddenly stop, your interest rates will increase and you will soon have penalty and late fees tacked on to your balance. Additionally, not all creditors are willing to participate in these debt settlement programs, so you will have to deal with the nonparticipating creditors on your own. For the creditors that are willing to settle the debt with the debt settlement companies, the next issue is how much are they willing to settle for. Contrary to the debt settlement company’s claims, not all creditors are willing to settle for pennies on the dollar. It depends on the amount of debt you owe and how desperate the companies are to settle. In most circumstances you could have settled the debt on your own for the same amount without having to pay a debt settlement company to do it for you.

Be Debt Free in “X” Months

Debt settlement companies promise that if you pay a certain dollar amount to them every month for who knows how many months you will be completely debt free. The number of months can vary depending on the amount of debt. The most common debt settlement program takes the money you pay them and puts it in a separate account. Every time there is enough money in the account they can then try to settle one of your debts. In the meantime the credit cards that are not getting paid continue to increase the balanced owed with interest and late fees. Eventually one the credit card companies will sue you. I had a client that came into my office crying because she was promised that she would be debt free if she paid $1,000 a month for 36 months on her $60,000 debt. She did not receive a statement from the debt settlement company during the 30 months she paid the $1,000. Later she requested the debt settlement company provide a statement to her so she could see how much debt she still owed. She thought she was almost done with the program since she only had 6 more months to go. To her surprise, the balance she owed on her credit cards was HIGHER than when she first started the program. This was after she had already paid $30,000 into the program. Where did her money go? She was out $30,000 and her debt situation did not improve. In fact, her situation had gotten worse. She should have spoken to a bankruptcy attorney and save herself $28,000.

Avoid Bankruptcy

The debt settlement companies make filing for bankruptcy look like the worst possible solution to a consumer’s debt situation. They do not tell you that their debt settlement program will ruin your credit because you are paying less than what you owe on a debt. The really horrible part is that some debt settlement companies also file bankruptcy cases for their clients. So first they tell potential clients that bankruptcy is bad and you would try our debt settlement program. Then when the debt settlement program does not work after collecting months of fees, the debt settlement company markets the client to use them to file bankruptcy and make all the debt go away forever. These debt settlement companies are just bleeding clients dry from all sides. Additionally, if you settle a debt for less than what you owe you can receive a 1099-C and be required to pay taxes on the money that was forgiven or cancelled. That diminishes much, if not all, of the savings you gained by settling the debt. When you file for bankruptcy you will not have to pay taxes on the amount discharged..

Nonprofit Agency

A lot of debt settlement companies claim they are nonprofit agencies, but you need to verify they are actually nonprofit. Just because they say they are nonprofit doesn’t actually mean they are.

So what are some alternatives to debt settlement programs? If you only owe a couple of creditors the best thing you can do for yourself is to try to negotiate with the creditors by yourself. You can save yourself a lot of headaches and money by doing it yourself. Yes, it does take a little bit more of your time, but at least you don’t have to pay any money for it. If you owe a lot of creditors or if the creditors are not willing to settle for an amount that you can repay comfortably, bankruptcy is another option. Bankruptcy discharges all of your eligible debts forever by federal court order and gives you a fresh start. You can consult with a credit counseling agency approved by the U.S. Trustee for more ways to manage your debt.

What Happens When I Receive a 1099-C After I File Bankruptcy?

By Ryan C. Wood

Most of you have received or will be receiving all the important tax documents like your W-2s and 1099s in the mail at this time so that you can start preparing your tax returns. What happens if you receive a 1099-C in the mail and you have already filed bankruptcy? There is no need to panic. This article will provide you with information on whether or not you need to include your cancelled debt as “income” for your tax returns.

Companies send out 1099-Cs to report cancelled debt to the Internal Revenue Service (“IRS”) if the amount of debt cancelled is over $600. The IRS will count the cancelled debt as income that you need to report on your tax return. Why do you have to include cancelled debt as income? The theory behind this is that since you did not have to pay the debt that was cancelled or forgiven that is considered income to you. For example, if you owed $20,000 on your credit card but could not repay it and the credit card company forgives or cancels the debt, you essentially received the benefit of the $20,000 without having to repay it and nonpayment of the debt is therefore considered income to you.

There are several exceptions to counting cancelled debt as income. One of the exceptions is if your underlying debt has been discharged in bankruptcy then the debt that has been discharged is not considered income and therefore not taxable. Therefore you do not have to worry about having to repay the debt that was wiped out in your bankruptcy case. Your creditors should receive notice of the discharge of your debt and not send you a 1099, but some creditors may still send out a 1099 anyway. If that is the case you do not need to worry. You should complete IRS Form 982 and attach it to your tax return to provide notice to the IRS that the debt was discharged in bankruptcy and the discharged amount will not be included as income. Most bankruptcy lawyers may not know about IRS Form 982, so it is a good idea to discuss tax consequences with a CPA.

What happens if you receive a 1099-C before you file for bankruptcy? Does that mean your debt was cancelled before you filed for bankruptcy and therefore not discharged in bankruptcy? The answer depends on which state you live in. Some states believe that the mere filing of the 1099-C does not cancel a debt. The 1099-C only serves to provide information to the IRS and an accounting measure for their internal books but it does not mean the creditor cannot still sue or otherwise collect on this debt. See In re Zilka, 407 B.R. 684. If you retain a bankruptcy attorney and file for bankruptcy after receiving the 1099-C the underlying debt is still considered to have been discharged in your bankruptcy case and therefore not considered “income.” If the 1099-C is considered a true cancellation of debt and it was issued prior to the filing of your bankruptcy case you may still be able to have the income excluded from your tax returns if you were insolvent at the time the debt was cancelled. This means that your debts exceeded your assets at the time the debt was cancelled or forgiven. Taxes are a complex topic. You should consult with a CPA or bankruptcy attorney if you have questions regarding this issue.

What Do I Need To Do To File Bankruptcy in California?

By Ryan C. Wood

When Congress enacted the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (more commonly known as “BAPCPA”), one of the new eligibility requirements to file for bankruptcy was to complete a credit counseling class from a nonprofit organization approved by the United States Trustee within 180 days prior to filing your bankruptcy case. See 11 U.S.C. §109(h). Your bankruptcy attorney will file the certificate completion with the court along with the rest of your bankruptcy paperwork. So what is this credit counseling class and why is it so important?

A lot of people hear the word “class” and shudder. They do not like to take classes and they are afraid they will be tested on information they know nothing about. A credit counseling class is very different. You should know the answers in this class because this class asks information about YOU and your income, expenses and debts. This class is offered in several different mediums: you can take the class in person, by telephone, or even online. Normally people opt for the online version because it is more convenient for them. They can take the class in their pajamas in bed at 1:00 a.m. if they wanted to. The purpose of this class is for you to understand and explore the different options that are available to you besides filing for bankruptcy. There are times when bankruptcy may be the only choice for you due to your financial circumstances but you still need to take the class.

If you took the class and received a certificate of completion, but you are unable to print the certificate and file it along with the rest of your bankruptcy paperwork the court will allow you fourteen days to file the certificate. If you have requested the credit counseling course from an approved credit counseling agency but were unable to complete the class during the seven days from the time you made the request because of an exigent circumstance, you need to provide a certification regarding what the exigent circumstances are. If the court finds that this certification merits a temporary waiver you still need to take the class, but you have 30 days from the date you filed your bankruptcy petition to file the credit counseling certificate with the court. The court may extend an extension of an additional 15 days maximum (making this a total of 45 days from the date you filed your bankruptcy petition).

So what is considered an exigent circumstance? It is something that occurs that is beyond your control that prevents you from taking the course prior to the filing of your bankruptcy petition. The court has the discretion to determine whether your circumstances are considered exigent in nature. A lot of courts have determined that filing your bankruptcy case due to a pending foreclosure sale is not considered an exigent circumstance because you had ample notice that the house was going to be auctioned at a trustee sale. Therefore any exigent circumstances were of your own making. So speak with a bankruptcy lawyer in your area sooner than later. See Dixon v. LaBarge, 338 B.R. 383 (8th Cir. BAP 2006). If the court does find that your circumstances are considered exigent in nature, remember that it is only a temporary waiver and you still need to take the class and file the certificate with the court.

Under 11 U.S.C. §109(h)(4), you can have the credit counseling requirement waived (meaning you do not have to take the course) if: (1) you have a mental illness or mental deficiency that would make you incapable of making rational financial decisions; (2) if you are physically impaired (disabled) and you cannot take the class after a reasonable effort to do so in person, by telephone or on the internet; or (3) you are on active military duty in a military combat zone. If you do not fall in any of these categories you will need to take the credit counseling course. Failure to do so will result in your ineligibility to be a debtor in a bankruptcy case which means that the court will dismiss your case.

What to Look Out for When Hiring a Bankruptcy Petition Preparer

By Ryan C. Wood

When you are looking for help in filing for bankruptcy one important factor is cost. Obviously, if you need to file for bankruptcy you do not have a lot of extra money lying around. A lot of people opt to go with a bankruptcy petition preparer to help them file their bankruptcy case because they believe they are getting a “better deal” than if they were to retain the services of a bankruptcy attorney. A bankruptcy petition preparer is essentially anyone that prepares your paperwork to file bankruptcy that is not listed as your attorney on the petition. Here are some things you need to look out for when determining if your bankruptcy petition preparer is right for you:

Legal Advice

A bankruptcy petition preparer is forbidden from providing you with legal advice. Under 11 U.S.C. §110, bankruptcy petition preparers cannot tell you whether you need to file for bankruptcy or what chapter of bankruptcy to file under. They cannot tell you whether what debts are dischargeable, whether you can keep your car or home or what the tax consequences may be. The bankruptcy petition preparer’s job is to help you prepare your documents based on the information you provide them. When you hire the services of a bankruptcy petition preparer you will be filing the bankruptcy petition “pro se” which means you are representing yourself in the case. If there are any issues based on the information contained in your paperwork you are on your own. That is why it is advisable to retain a bankruptcy lawyer.

Required Notice

Your bankruptcy petition preparer must provide you with notice that they are not attorneys and that they are not authorized to practice law or give you any legal advice. They have to sign and provide their name and address in a document to be filed along with the rest of your bankruptcy paperwork. If your bankruptcy petition preparer does not sign or is unwilling to sign your paperwork, that should be a huge red flag to you. If they are abiding by the laws they have no reason to hide their work from the courts.

Cost

In the Northern District of California bankruptcy petition preparers cannot charge more than $150 for their work. Other jurisdictions may have a different maximum amount the bankruptcy petition preparers may charge. It is a good idea to look up what that maximum limit is before you schedule an appointment to see a bankruptcy petition preparer. This fee covers all costs including but not limited to photocopying, messenger costs, postage, and phone calls. They cannot charge you for the filing fee because you need to pay the filing fee directly with the court, not the bankruptcy petition preparer. I was shocked to hear some of my clients paid $2,000 to $3,000 to a bankruptcy petition preparer to do their paperwork. That is more than what most attorneys would charge for a case! I have heard some of my clients say that they were prepared by an attorney rather than a paralegal and that is why the costs were so high. One critical thing to remember – if they did not file your case as your attorney, they are not considered your attorneys for your particular bankruptcy case and should not charge as such.

It is understandable that you would look for a lower cost alternative to attorneys to file your bankruptcy case. However, keep in mind that if you have significant assets that you need to protect a bankruptcy petition preparer may cost you more than it saves. If your documents are prepared incorrectly, you may be at risk for losing your home, car, or other valuable assets. Additionally, when you turn to an attorney after your case goes downhill it may end up costing you more in the end because it takes more time and money to correct something than it does to file the documents correctly in the first place.