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.

Mortgage Principal Reductions and Bank of America

By Ryan C. Wood

Bank of America has indicated they will be mailing out letters to their borrowers that would offer a principal reduction of up to $150,000 for 200,000 borrowers.  This is part of the $25 billion settlement agreement reached between Bank of America and the state and federal agencies for robo-signed documents during the foreclosure process.  Many lenders had processed the foreclosures without verifying documents.

As part of a settlement agreement Bank of America will be sending out these letters to their borrowers, but the borrowers still have to prove they qualify for the principal reduction.  In order to qualify you first have to respond to Bank of America’s letter.  A lot of borrowers have grown tired of questionable businesses sending them letters indicating they can help them modify their loans or reduce their principal balances.  Borrowers may think that this is another scam, so they either ignore the letters or throw them away.  However, if you do not open Bank of America’s letter or respond to it you will not receive the principal reduction.  Bank of America is sending these letters to borrowers by certified mail with the words “IMPORTANT” in red letter on the envelopes, so be on the lookout for these letters.  Be sure the letter is actually from Bank of America and not another third party company.  You may respond to the letter by providing Bank of America documentation of your income.  Your current monthly mortgage payment must be 25% higher than your current gross monthly income, which you cannot afford to pay.  If you can afford to pay, why would Bank of America give you a modification?

Once you have received the letter, you have to meet other qualifications to have your principal balance reduced.   Your mortgage has to be more than 60 days late, your mortgage must be owned by Bank of America or serviced by Bank of America and owned by an investor that is agreeing to have the loan modified, and you have to owe more on the mortgage than what your home is worth.

After it is determined that you do qualify for this program your monthly mortgage payment will be reduced to 25% of your gross income.

Now, keep in mind, this program is for about 200,000 of Bank of America’s borrowers. You may still need to find other options in keeping your home if you are not one of the 200,000 borrowers Bank of America has sent the letters to.  The letters will be staggered so that Bank of America can handle the responses, so don’t despair if you don’t receive the letter immediately.  The letters will be sent throughout the next several weeks and into the summer.  I am sure many bankruptcy attorneys will field phone calls regarding these letter.

If you have a second mortgage on your home this program will not help with it.  However, you may be eligible to have your junior mortgages stripped/removed in a Chapter 13 reorganization.  If you are not one of the 200,000 people who receive this letter from Bank of America you can still contact a bankruptcy lawyer to see what your other options are to keep your home.

Is it a Bad Idea to Use my Retirement Funds to Pay Off Debts Prior to Filing Bankruptcy?

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No one wants to be in a situation where they are living paycheck to paycheck.  Sadly, in today’s economy, it happens all too frequently.  Especially now due to COVID-19.  More often than not your paycheck may not cover all of your living expenses, so what do you do?  With the wide availability of credit cards and other sources of credit these days you may turn to credit as the solution to their problems.  Credit, however, is only a temporary band-aid for your problems.  What happens when the credit has reached the maximum limit and you can no longer borrow more funds?  You can also turn to your retirement account to pay off debts too.  This article will explain why that could be a bad idea.

You are planning and saving for your future when you invest in a retirement plan.  Ideally, these funds are to be used when you are retired.  ERISA (Employee Retirement Income Security Act) qualified pension and retirement plans such as 401(k)s, 403(b)s, profit-sharing plans, and Keoghs are exempted from the bankruptcy estate if you file for bankruptcy. The exemption is almost unlimited so it does not matter how much money you have in the retirement plan – you will not have to give up any of the funds if you file for bankruptcy.  If you have an IRA (traditional or ROTH), the limit is approximately $1 million.  That is still a pretty hefty amount that is safe from creditors.

When you make an early withdrawal from your retirement account you are hit with a tax penalty.  When you “borrow” funds from your retirement account you are creating a loan that normally accrues interest.  To make matters worse if you do not settle or pay off all of your debts what happens with the unpaid debts?  Unfortunately we meet with potential clients that have paid of one credit card only to have another sue them.  Paying off one card with retirement money in this situation is a complete waste of money.  If you only take out one of the eight lions chasing you what will save you from the other seven lions?  You will just have less retirement money and have achieved nothing unfortunately.  It is entirely understandable for everyone to want and try to stay out of bankruptcy.  There is no shame in that.  It would just be better to emerge from bankruptcy with as much money in a retirement account as legally possible.

When you file for bankruptcy protection all dischargeable unsecured debts will be wiped out upon completion of your bankruptcy case.    So why would it be a good idea to use exempt funds to pay off debts that would have been discharged in your bankruptcy case?  The answer – it isn’t.  However, most people use bankruptcy as a last resort, when all other solutions have failed.  By this time, your retirement funds are depleted, you have creditors hounding you for the unpaid balances and you still have no relief.

When you realize that you are unable to repay your debts it is a good idea to speak with an experienced bankruptcy attorney first to see what your options are.  Most bankruptcy lawyers like us will be able to quickly and accurately let you know what your options are.  It may be that bankruptcy is not right for you, but it should be ruled out first rather than borrowing from a retirement account. Bankruptcy may help you get a fresh start and debt relief AND help you keep your retirement funds for when you really need it – when you are retired and have no other source of income.

How Does Filing Bankruptcy in the U.S. Affect My Foreign Debt?

By Ryan C. Wood

In today’s world traveling and living in different countries is not very difficult.  It is no surprise that people may owe debts in different countries as well since credit can be obtained easily.  What do you do when you owe debts in different countries and you need to file bankruptcy with our bankruptcy lawyers in Union City?

First of all, if you live in the United States, it would be difficult for a foreign creditor to enforce their debts against you.  Different states have different rules about whether or not a foreign creditor can collect or enforce a judgment of a foreign debt.  In order for a debt to be recognized and enforceable, the foreign creditor would need to “domesticate” their debts.  Different states have different rules regarding domestication of debt.  In some states a foreign creditor can enforce their debts against you if they meet the requirements of the Uniform Foreign Money Judgments Recognition Act (“UFMJRA”).  In addition to meeting the requirements of UFMJRA the foreign creditor must have had personal jurisdiction over you or subject matter jurisdiction over the matter.  The in most states courts have a lot of discretion over whether to allow enforcement of these debts even if the foreign creditor met all the requirements.  Therefore, a lot of foreign creditors may not go through all these steps to try to enforce their judgment against you unless it is was worth their effort to do so.

Regardless of whether or not a foreign creditor domesticates their debt, all creditors are subject to the automatic stay that is in place when you file for bankruptcy in the United States with a bankruptcy attorneys in Fremont.  It does not matter if the debt is from the United States or from another country.  This means that if the foreign creditors try to collect from you or file a lawsuit against you after you have filed for bankruptcy protection they are subject to sanctions as applicable under the Bankruptcy Code.

This does not mean you are home free however.  Filing for bankruptcy protection in the U.S. only protects you from the collection of the debt while you are in the U.S.  As soon as you return to the foreign country the foreign creditors may still pursue the collection of the debt.  For example, if you lived in Canada and moved to the U.S. and filed for bankruptcy protection in the U.S., the Canadian creditor cannot collect from you in the U.S., but if you return to Canada, the Canadian creditor can still pursue you for the Canadian debt unless you file for bankruptcy protection in Canada.

Do I Need to Disclose Property Owned in a Foreign Country in my Bankruptcy Case?

By Ryan C. Wood

When you file for bankruptcy protection in the United States you must to list all your real and personal property.   These assets include both foreign and domestic owned property like houses, bank accounts and investment accounts.

Many people may exclude their foreign owned assets under the mistaken assumption that the bankruptcy trustee may not know or be able to trace the foreign owned assets to them, thereby making those foreign owned assets safe.  The bankruptcy trustee may have multiple ways of learning about these foreign owned assets.   Some of these methods include looking at your tax returns, bank records, official documents, or someone you know may notify the bankruptcy trustee about your assets.

The failure to disclose foreign owned assets may be due to a misconception that since you are filing for bankruptcy in the United States you only need to disclose the assets that you own in the United States.  This is completely false.  You need to disclose ALL assets owned whether these assets are located in the United States or another country.

If you purposefully exclude these foreign owned assets in your bankruptcy petition you will be committing perjury that may subject you to criminal prosecution.  You could potentially be fined up to $250,000 and/or five years in prison.  The bankruptcy judge may also dismiss your bankruptcy case.  The trustee may liquidate your excluded asset in a Chapter 7 bankruptcy case.  None of these outcomes are good for you or your financial situation.  Obviously these results are counter-productive of what you had originally intended, a fresh start free of financial burdens.  An honest debtor receives the fresh start that he or she needs, but a dishonest debtor may end up in a worse situation than what he or she intended.  The moral of the story – be the honest debtor so you receive the outcome that you want.

Just because you have assets in a foreign country does not mean that you would need to give up those assets when you file for bankruptcy.  You still receive exemptions that protect the assets you have.  Whether or not all of these assets are exempted depends on your particular circumstances.  It is best to discuss your situation with an experienced bankruptcy attorney to ensure that all or most of your assets are protected.  Even if not all your assets are protected, the attorney may go over what your options are. You may contact our experienced Fremont bankruptcy attorneys or Oakland bankruptcy attorney today at 877-9NEW-LIFE or 877-963-9543 for a free consultation.

Who is Defined as an “Insider” in My Bankruptcy Case and Why Do I Care?

By Ryan C. Wood

The question of whether a creditor is a considered an “insider” in a bankruptcy case is an important distinction. When you repay one creditor and not others, it is considered a “preference” because you are providing special treatment to a single creditor.  All creditors of the same priority need to be treated equally under bankruptcy law.  Therefore, when you pay one person or one entity and not others, the bankruptcy trustee has the right to avoid that transaction and bring the money back into your bankruptcy estate so that all your creditors will be paid a percentage. If a creditor is an “insider” and you paid them all or a portion of the debt within one year prior to filing for bankruptcy, the bankruptcy trustee may avoid the transaction as a preference under 11 U.S.C. §547(b).  The preference period for a normal creditor (like credit card companies) is 90 days versus one year for an insider, because insiders are more closely scrutinized.

If you have repaid a creditor a significant amount of money before your bankruptcy case is filed it is important to find out if they are considered insiders and talk to your bankruptcy lawyer about the payment in detail.  11 U.S.C. §101(30) defines an “insider” to include a relative of the debtor or a general partner of the debtor.  11 U.S.C. §101(45) defines “relative” to mean an individual related by affinity or consanguinity within the third degree as determined by the common law, or individual in a step or adoptive relationship within such third degree.  This means that if you borrowed money from your sister, she is considered to be one of your creditors.  If you repaid your sister $10,000 six months before you file for bankruptcy, the trustee could avoid that transfer and sue your sister to bring the $10,000 back into the bankruptcy estate.

What if the relationship is a little unclear?  What if you borrowed money from your “Aunt” Margaret who is a close family friend (but not relative) and has known you your entire life and would do anything to help you in your current situation?  In addition to looking at the family ties, courts have also looked at whether there is a close enough relationship between you and the creditor (“Aunt” Margaret in this scenario) that your conduct should be scrutinized at more than regular arms length transactions.  The courts look at whether the creditor would have any influence over you or exert any control over the situation.  If the creditor does have control over you it is not considered to be an arms length transaction and the creditor would be defined as an “insider.”  Some other factors that may be looked at to determine whether the creditor is an “insider” includes whether there was a written contract, whether any interest is being included in the debt and whether the creditor has any advantages based on the relationship.  All these factors point to whether the transaction was made at arm’s length.  If the transaction was made at arm’s length then the creditor is subjected to the regular 90 day preference period.  If it was not at arm’s length then the creditor is treated as an insider who is subjected to the one year preference period.

If you have any questions regarding potential preferential payments, contact an experienced Fremont bankruptcy attorney or Oakland bankruptcy attorney today at 877-9NEW-LIFE or 877-963-9543.  You may also go to www.Fremont-Bankruptcy-Attorney.com for more information.