Tag Archives: bankruptcy

Bankruptcy Filing Fees are Increasing June 1, 2014 in the Northern and Eastern District Bankruptcy Courts

By Ryan C. Wood

If you are thinking about filing for bankruptcy protection from your creditors you should be aware that the bankruptcy filing fees are increasing effective June 1, 2014. Here is a list of increased fees that may affect you:

Chapter 7 bankruptcy filing fee will increase from $306 to $335     NOW $338
Chapter 9 bankruptcy filing fee will increase from $1,213 to $1,717  NOW $1738
Chapter 11 bankruptcy filing fee will increase from $1,213 to $1,717  NOW $1738
Chapter 11 bankruptcy filing fee will increase from $1,046 to $1,550
Chapter 12 bankruptcy filing fee will increase from $246 to $275
Chapter 13 bankruptcy filing fee will increase from $281 to $310     NOW $313
Chapter 15 bankruptcy filing fee will increase from $1,213 to $1,717    NOW $1738
Adversary Proceeding filing fee will increase from $293 to $350.

If you want to bifurcate your bankruptcy case (meaning if you filed the petition with another person and you now want to split up the case) the fees have increased as well. The filing fees are essentially the same as above. For example, to bifurcate or split a Chapter 7 case the filing fee will be $335. To bifurcate or split a Chapter 13 case the fee will be $310. You will be essentially paying double to split a case (once when the case was filed and once when you bifurcate or split the case).

This may not be an exhaustive list of all the increased fees. There may be other increased fees that may affect you. You should contact your bankruptcy attorney or check the court’s website if you want to see what other fees have changed. The fee schedule is applicable to the Northern and Eastern Districts of California. Other jurisdictions may change their bankruptcy filing fees as well. You should check your jurisdiction’s website to verify if the fees have changed.

The last time the court increased the bankruptcy filing fees was back in December 2013. The fees have increased again after 18 months. If you retained the services of a bankruptcy lawyer previously, but your bankruptcy case is not filed yet, you should ensure your case is filed by the end of May to avoid the increased bankruptcy filing fees in the Northern and Eastern District Bankruptcy Courts.

If you can not file until after June 1, 2014, do not be surprised that you now have to pay more to file your bankruptcy case. If your retained a lawyer but have not filed your case by the end of this May your bankruptcy lawyer may be asking you for additional fees to cover the increased bankruptcy cost. They are not arbitrarily asking you for more money but since your bankruptcy attorney will not have to pay more to file your bankruptcy case they may need to recoup the funds from you. If you want to avoid the fees then make sure your case is ready to file and provide the attorneys with all your paperwork, complete the credit counseling course, and review and sign your petition prior to the end of May. This way you will know for sure that you will not be responsible for additional bankruptcy court filing fees unless you want to bifurcate or split your bankruptcy case in the future.

If you already retained an attorney but have not completed all the steps necessary to have your bankruptcy case filed yet now is the time to finalize everything to get your case filed before the fee increase. You need to be sure you made all the payments to your attorney, take the credit counseling course and obtain a certificate of completion, review and sign your petition to ensure it is filed before June 1, 2014 to avoid paying the increased filing fee amount. If you are filing your bankruptcy case without an attorney you should be sure to file your bankruptcy case by May 30, 2014 to avoid paying the increased filing fee amount as well.

Improper Estate Planning Leads to Sale of Properties in Bankruptcy

By Ryan C. Wood

If you have properties you are trying protect either for estate planning purposes or for purposes of filing bankruptcy the most important lesson is to plan properly. It is always best to obtain the advice of an experienced professional like an estate planning attorney or a bankruptcy attorney to ensure you do not lose the very property you are trying to protect.

One family learned this lesson the hard way. In Oklahoma, Mr. and Mrs. Gragg transferred title to their three properties to themselves and their two daughters (Angela Harrison and Melody Lavender) via quitclaim deeds so that each of them had a 25% interest in the properties as joint tenants with the right to survivorship. They did this for estate planning purposes. Only two of the properties were at issue in this case. Both of the properties were paid in full. Neither of their daughters had made any payments towards to the house and the Graggs received all the rent and paid the corresponding taxes and used the deductions on their tax returns. Ms. Harrison filed for Chapter 7 bankruptcy protection. (In re Angela Michelle Edmound Harrison, Case No. 11-13580). Ms. Harrison listed her 25% interest in the properties in the petition schedules with footnotes indicating that her and her sister were added to the title of the properties for their parent’s estate planning purposes only. Harrison claimed she did not have any ownership or control over the properties. The total market value for both of the properties in question is approximately $170,000 to $180,000. The total creditor claims filed in the case was approximately $35,000. The Chapter 7 trustee in the case moved the court to sell the two properties for the benefit of Ms. Harrison’s creditors even though there were three other people on title to the properties that did not file bankruptcy. The trustee proposed to sell the both properties because the properties could not be properly partitioned and sold. The trustee is proposing to sell both properties, give the Graggs and Ms. Lavendar their 75% of the proceeds and pay Ms. Harrison’s creditors in the bankruptcy case with Ms. Harrison’s 25% of the proceeds. The Graggs objected to this sale and argued that Ms. Harrison did not have any recognizable interest in the property and the trustee did not have the right to sell the properties.

The judge in this case concluded that Oklahoma law controls and under Oklahoma law, a quitclaim deed is sufficient to provide notice of the claim to title in the property. If the deed itself does not convey what the original parties intended to convey, the law allows the parties to show what the original intent was. Whether that intent should be binding on an innocent third party buyer is the big question in this case. Once a bankruptcy petition is filed the trustee steps into the shoes of a bona fide purchaser of the property. Based upon the deeds themselves, nothing provides notice to the bona fide purchaser that the deed was only for estate planning purposes. The deeds only show that each party receives 25% interest in the properties as joint tenants with the right of survivorship. Nothing puts the bona fide purchaser on notice that the actual circumstances are different than what is listed on the deed. The Graggs also argued that since they paid for all expenses and taxes related to the property their daughters only hold bare legal title and that Ms. Hamilton’s interest is subject to a resulting trust in favor of the Graggs. The trustee does not dispute this. The court indicated that even if there was a resulting trust Oklahoma law mandated that express or implied trusts do not defeat the title of a bona fide purchaser of real property.

The Graggs lost their properties in bankruptcy even though they did not file bankruptcy themselves. One issue not discussed in the case is that the Graggs could have purchased the bankruptcy estate’s interest in the two properties instead of both properties being sold. As long as the bankruptcy estate receives the same value as if the properties were sold. It is unclear whether Harrison’s bankruptcy attorneys attempted this or if it was even financially possible for the Graggs to do. Even though the Graggs received the full value of their interest in the properties minus Ms. Harrison’s 25% share the Graggs no longer have the rental properties and lost a chunk of their income stream. This is all because they used the wrong estate planning tool. If they had an attorney draw up a revocable living trust naming their daughters as beneficiaries and including a spendthrift provision in their trust the scenario could have played out differently.

Can I Treat My Unsecured Creditors Differently in My Chapter 13 Plan?

By Ryan C. Wood

When you file a Chapter 13 bankruptcy case it is expected that all your general unsecured creditors will be treated equally. You have to treat your secured creditors and priority unsecured creditors differently but your general unsecured creditors will all be paid the same percentage in your Chapter 13 plan, right? The answer is: it depends.

Pursuant to 11 U.S.C. §1322(b)(1), the Chapter 13 plan may designate different classes of unsecured claims so long as the plan does not unfairly discriminate against the different classes. 11 U.S. C. §1122(a) provides: Except as provided in subsection (b) of this section, a plany may place a claim or an interest in a particular class only if such claim or interest is substantially similar to t he other claims or interests of such class.  However, the Chapter 13 plan may treat a claim for a consumer debt differently than other unsecured creditors if there is another person who is also liable for the debt along with the person filing for bankruptcy. The interpretation of this statute varies amongst the different jurisdictions so it is best to consult with a bankruptcy attorney about how your jurisdiction treats this statute.

In the case of In re: Renteria, 470 B.R. 838 (9th Cir. BAP 2012), Ms. Renteria filed for Chapter 13 bankruptcy. In her Chapter 13 plan she proposed to pay her former attorney (whom she owed about $20,000) 100% of the this claim or debt plus 10% interest because her mother personally guaranteed the debt for Ms. Renteria. Her former attorney filed suit against both Ms. Renteria and her mother in state court to recover the funds owed to him and there was currently a default judgment entered against her mother prior to the filing of Ms. Renteria’s bankruptcy case. The Trustee objected to the Chapter 13 plan because he contended the plan unfairly discriminated against the other unsecured creditors since the unsecured creditors will receive 0% repayment in the Chapter 13 plan while the former attorney will receive 100% plus 10% interest despite Section 1322(b)(1) providing the different treatment of co-signed debts.  Ms. Renteria filed a declaration to provide more information about the circumstances of the treatment of her former attorney’s debt. She retained her former attorney to help her with a domestic violence and paternity lawsuit. She would not have been able to retain the services of her former attorney without her mother personally guaranteeing the attorney fees and expenses. Ms. Renteria also indicated that since she had no non-exempt assets her other unsecured creditors would not have been in a worse position if she filed a Chapter 7 bankruptcy case. The bankruptcy court overruled the Trustee’s objections and confirmed the case and the Trustee appealed.  The Ninth Circuit Bankruptcy Appellate Panel affirmed the lower court’s overrule of the objection to confirmation and confirmed/approved the chapter 13 plan.

Courts are split on the interpretation of the “however” clause in §1322(b)(1). A majority of the courts hold that debts that are co-signed (or co-obligated) by another person still need to clear the unfair discrimination hurdle. A minority of the courts believe that the “however” clause is plain and unambiguous and indicates that co-signor or (co-obligors) claims are exempted from the unfair discrimination rule. The Renteria court examined the construction and placement of the “however” clause. The one thing the courts have concluded is that different courts will disagree on the meaning of the “however” clause.  Basic statutory interpretation though requires the word however not be ignored and arguably holding that co-signed debts or claims cannot be treated differently would make the however clause meaningless.  The wrong approach to statutory interpretation.  The Renteria court then looked at legislative history. The Renteria court examined the cases listed in the legislative history (In re Utter, 3 B.R. 369 (Bk.W.D.N.Y. 1980) and In re Montano, 4 B.R. 535 (Bk.D.D.C. 1980)), and found that Congress was trying to address these two cases in the §1322 statute. In the Utter case, Utter separated out one claim to pay 100% and all other unsecured claims received little to nothing. The 100% claim was due to the fact that Utter’s sister was obligated to the same debt. The court in Utter denied confirmation because the preferential treatment discriminates unfairly against the other unsecured creditors that do not have co-signed debts. In the Montano case, the claims guaranteed by co-signors received 100% payment and all other unsecured creditors received 1% payment. The court listed the same reasoning as the Utter court: that the other general unsecured claims were being unfairly discriminated against.

The Renteria court concluded that Congress wants to permit a person filing a Chapter 13 case to separately classify the debts where a third party is co-obligated to the debt and to prefer the co-obligated debt when facts are similar to In re Utter and In re Montano.  This case and many others leave open the rest of Section 1322(b)(1) and when other types of general unsecured debts can be separately classified and treated differently.  There is no clear rule or analysis to draw from about what is unfair discrimination.  Discrimination is clearly allowed but when does it become unfair is the question to be answered.  So far it seems like the unfair part of the discrimination analysis has been rendered meaningless.  Most courts deny confirmation of plans any time there is any type of different treatment and have a blanket rule that all discrimination is unfair.  This cannot be of course.  There has to be some form of discrimination between general unsecured claims that is allowed and held to not unfair discrimination. 

If you are thinking of filing a Chapter 13 bankruptcy case that has co-signed debt it is best to consult with Chapter 13 bankruptcy attorneys to help you through the process.

If There Is A Lien On Your Property There May Be A Way To Remove The Lien When Filing Bankruptcy

By Ryan C. Wood

If there is a lien on your property there may be a way for you to avoid (remove) the lien when you file for bankruptcy protection. It has to meet certain criteria of course. Only certain liens can be avoided: 1) judicial liens (except for judicial liens that secure domestic support obligations) and 2) non-possessory, non-purchase-money security interest liens. See 11 U.S.C. §522(f)(1).

What is a judicial lien? After a creditor sues you for money owed, you can get a judgment filed against you in several ways: you lose the court case because you really do owe the money or you did not defend the lawsuit (or chose to ignore it) and the creditor wins by default and obtains a default judgment against you. The creditor can then place a judgment lien on your property by recording an abstract of judgment with the county recorder’s office of your county. If there is a lien placed on your property due to a judgment, that lien could be avoided.

What about the non-possessory, non-purchase-money security interest lien? Those are basically any non-consensual liens. If you are not sure about what type of lien was recorded against your property consult a local bankruptcy lawyer in your area. Liens you did not voluntarily place on your property. Examples of a possessory or purchase-money security lien are things like your mortgage and car loans: you voluntarily use your house or your car as collateral to obtain a loan.

Now that you know what types of liens can be avoided on your property your next step is to determine if your bankruptcy attorney can help you avoid the lien. Remember, if there is a lien on your property there may be a way to remove the lien by filing bankruptcy. When filing for bankruptcy protection the lien can be avoided if it impairs an exemption that you are entitled to. 11 U.S.C. §522(f). How do you determine if the lien impairs an exemption? According to 11 U.S.C. §522(f)(2)(A), the lien will impair an exemption to the extent that the sum of the lien, all other liens on the property and the amount of the exemption that you could claim if there were no liens on your property exceed the value of your interest in the property in the absence of any liens.

So what does that even mean? §522(f)(2)(A) is essentially saying that if you add up all your liens plus your exemptions and if it exceeds the fair market value of your property then it impairs an exemption. The best way to explain is to provide you with an example. Let’s say you have a house that is worth $400,000. You have a mortgage on the property for $380,000. You have a $25,000 exemption available for your house. You have a judgment lien on your house for $10,000. Can you avoid this $10,000 lien? Let’s work out the math. If we add up all the liens on the house plus exemptions, we get $415,000 ($380,000 + $10,000 + $25,000). Since the house is worth $400,000, and the mortgage of $380,000 (non-avoidable lien) plus the exemption of $25,000 = $405,000, the entire $10,000 lien would impair your exemptions. In another scenario, if you only have a $370,000 mortgage on your property plus the $25,000 exemption, it totals $395,000. If your house is worth $400,000, then the $10,000 lien would impair an exemption only up to $5,000. This means that you can avoid lien up to $5,000. Depending upon the circumstances, if there is a lien on your property there may be a way to remove the lien when filing bankruptcy.

Can Just One Spouse File Bankruptcy In California?

By Ryan C. Wood

A common law marriage is when a couple holds themselves out to be married but the spouses did not actually have a marriage ceremony or go through any of the formalities of a marriage. You need to obtain a marriage certificate. California does not recognize common law marriages. There are other states that do recognize some form of common law marriage, but California is not one of those states. The types of marriages that are currently recognized in California are 1) traditional marriage, 2) domestic partnership, and 3) same sex marriage.

California is a community property state, which means that all assets accumulated during marriage (whether it is a traditional marriage, domestic partnership or same sex marriage) are considered property jointly owned by both spouses even if only one spouse purchased or earned that asset (unless that asset was obtained by gift, inheritance or devise or a prenuptial was executed). The separate property of either spouse is not liable for the debts incurred by the community.

So what does this mean if you are filing bankruptcy? When you file for bankruptcy you need to list all assets owned personally by you and also all community property assets if you are filing bankruptcy without your spouse. A lot of our clients think that just because they are filing bankruptcy by themselves they only need to list their own assets and their own income on their bankruptcy petition. This is not true and that can get you in trouble if you do not tell your bankruptcy attorney about all of the assets that are owned by both you and your spouse. Your spouse’s assets can be subject to liquidation if you file a Chapter 7 bankruptcy case unless your bankruptcy lawyer protects those assets by properly exempting them in your bankruptcy schedules. Since California is a community property state that means you need to list joint assets and household income and expenses. The theory behind this is that when you are married everything is joined together and owned fifty-fifty. Even if one party makes $1,000 a month and the other party makes $10,000 a month both parties join their incomes together to pay household expenses and for the benefit of the community.

On the flip side if you are not married but are living together with your significant other you do not need to list any of your significant other’s assets in your bankruptcy petition since it is not considered community property. Your assets are only considered community property if there was a legal marriage and California does not recognize common law marriages. This also means that your creditors will not be able to go after your significant other’s assets even if you have lived together for 10 plus years. There are always exceptions to the general rule of course but if your case is more complicated I recommend that you seek the services of an experienced bankruptcy attorney to discuss your case.