How To Avoid or Prevent the Necessity of Filing for Bankruptcy?


One of the most common remarks we here from clients is, “I never thought I would file for bankruptcy protection.” Our response is usually, “No one ever does.” They probably never thought the bad thing that happened to them or, their family, that led to having to file for bankruptcy protection would happen either. Bad things happen every day that are not in our control. So unfortunately for some there is no avoiding the necessity of filing for bankruptcy. For example: being laid off from a job, medical debts, debts resulting from car accidents or a natural disaster. While these circumstances are not traditionally in our control there are plenty of other pieces of the financial puzzle that are within our control.

Credit Cards/Payday Loans/Cash Advances/Vehicle or Title Loans

These four types of debts are primarily the types of debts that can have incredibly high interest rates. If you have never heard of usury laws you are not alone. Each state has or had usury laws to limit the amount of interest a lender could charge a borrower. The laws are designed to protect all of us from unfair or unconscionable interest rates. These laws have been weakened over and over again in the name of greed and corporate profits. For more detailed information please read “How Can Credit Card Companies Charge Such High Interest Rates?” So the law now allows for the ridiculous and unconscionable interest rate as high as 29% on some credit cards. If you do not pay off the credit card each month that has a high interest rate the underlying debt will balloon quickly. Spread that problem around four or five different credit cards are you are heading in the direction of a bankruptcy lawyers office unfortunately. So do your best to limit the use of creditor cards and especially the use of your highest interest rate credit cards. Payday loans and cash advances are even worse. The highest interest rate I have ever seen on an actual loan documents was over 1,000%. Somehow this is legal. Standard vehicle loans can have generous interest rates. Title loans are when your vehicle is paid in full, but you take loan and use the vehicle as collateral. The loan company will take your pick slip/title until the loan is paid in full. Title loans are traditionally horrible for the borrower. Again, very high interest rates and title loan companies rarely keep very accurate records regarding payments and accrued interest.

Home Mortgages

Do not buy too much house. Other than banks handing out questionable loans and fraudulent appraisals artificially increasing the value of homes, the next largest factor as to why so many people lost their homes in my opinion was because they bought too much house. That means they purchased a house that was too large and too expensive given their income and expenses. The cause of this was mostly interest only mortgages and adjustable rate mortgages. So do not buy too much house. If you income is reduced 20% will you still be able to afford your mortgage payment each month? How long can you pay your mortgage if you are laid off? We all hope that these unfortunate events do not happen to us, but they happen to everyone without discrimination.


The thing with taxes is you have to pay them, period. So just let the government have the money upfront so you do not have an issue when it comes time to file your taxes each year. In California the Franchise Tax Board is does aggressively collect unpaid taxes. The FTB will garnish your wages and attached a tax lien to your home if you own real property. If you have changed your deductions on your paycheck to artificially increase your net income each month you are creating a tax debt each paycheck. Will you have the money to pay the taxes at the end of the year? No, you will not because you changed your deductions to increase your net income because you are currently having trouble paying your bills. Do not change your deductions to artificially increase your net income. It is a recipe for disaster. If you take an early distribution from a retirement account pay the penalty/taxes at the time you have the money taken out. Do not defer the penalty/taxes to when you have to file your return. Again, this is a recipe for disaster. Every bankruptcy attorney will tell you that ERISA and other qualified retirement accounts (Tax Deferred) are 100% protectable when filing bankruptcy under almost all circumstances. So another reason to not raid a retirement accounts because you can keep the retirement money and still discharge your debts.

If you are having difficulty paying your bills each month bankruptcy might be the best option to get back on track financially.

Can I Be Evicted after Foreclosure of My Home If I File Bankruptcy?

By Kitty J. Lin

We have all heard this story many times: a homeowner gets behind on their mortgage payment and cannot catch up. The house is foreclosed on and the new homeowners then file an unlawful detainer action against the old homeowner to have the sheriff evict the old homeowner. But what happens if the old homeowner files for bankruptcy protection after getting an unlawful detainer judgment entered against them, but before getting evicted? Does a subsequent eviction violate the automatic stay? The Ninth Circuit Bankruptcy Appellate Panel recently decided that the eviction does actually violate the automatic stay.

That is exactly what happened in the case of In re Perl, No. 13-1328 (B.A.P. 9th Cir. May 30, 2014). The homeowner Sholem Perl and another joint tenant (“the Perls”) fell behind on their mortgage payments and the property was sold to Eden Place in a foreclosure sale. The trustee’s deed was recorded in a timely manner. Eden Place then filed an unlawful detainer action against the Perls when they refused to leave the premises. The Perls filed a lawsuit against Eden Place and several others for wrongful foreclosure, violation of the Homeowner Bill of Rights, unfair business practices and breach of contract. Eden Place counter-sued. The judge entered a judgment against the Perls for the unlawful detainer action and the sheriff posted a lockout notice. Mr. Perl filed a skeleton petition on June 20, 2013 seeking bankruptcy protection under Chapter 13 of the Bankruptcy Code. Eden Place filed a Motion for Relief from Stay on June 24, 2013, but the sheriff proceeded with a lockout on June 27, 2013, before the motion was heard by the court. The Perls were now officially evicted from the property.

Mr. Perl’s bankruptcy attorney filed an Emergency Motion to Enforce the Automatic Stay and the court heard the Emergency Motion and Eden Place’s Motion for Relief from Stay on June 28, 2013. The bankruptcy court indicated that it seemed Eden Place violated the automatic stay by evicting the Perls prior to receiving relief from the automatic stay. Eden Place argued that Mr. Perl did not have any legal or equitable interest in the property since the property was foreclosed on and the trustee’s deed was recorded. Eden Place argued that Mr. Perl was merely a squatter on the property with no possessory rights. The court disagreed. The court indicated that the automatic stay applies even when there is bare possessory interest coupled with causes of action or claims for the right to possession. The automatic stay is very broad. “The automatic stay applies even to the more limited bundle of rights that still exists. It may not even be a bundle. It might just be the opportunity to seek some relief.” In re Perl, No. 13-26126 (Bankr. C.D. Cal. 2013). The bankruptcy court held that the eviction was a violation of the automatic stay and was therefore void.

The Bankruptcy Appellate Panel agreed with the bankruptcy court. In order to determine if Eden Place violated the automatic stay they needed to see if Mr. Perl had any interest in the property. The court held that Mr. Perl’s physical occupation of the property gave him a possessory interest in California law and he was therefore protected by the automatic stay. The court further went on to say that there was a willful violation of the automatic stay because Eden Place knew about the bankruptcy filing and still continued with the eviction. Even though there was no bad faith because Eden Place thought Mr. Perl did not have any legal or equitable interest in the property, it was still a willful violation. The eviction was therefore void. Eden Place appealed this decision to the Ninth Circuit Court of Appeals. In all fairness to Eden Place they legally foreclosed on the property, then legally filed and obtained a judgment in an unlawful detainer action to evict the former homeowner. This is not a quick or cheap process. At the very end the Perls file an emergency skeleton petition to stop their eviction from a house they stopped paying for and no longer own. What is not discussed is whether the Perls’ even have a feasible reorganization case to begin with. It will be interesting to find out how the Ninth Circuit Court of Appeals holds on this issue and how they get there. If the prior homeowner does in fact have actionable claims regarding the purchase, loans or foreclosure of the property and they possess the property still there is a reasonable argument that the automatic stay should apply seems reasonable.

Can I File Bankruptcy If I Have a Payday Loan or Advance?


Can I file bankruptcy if I have a payday loan or advance? Yes you can. Payday loans are unsecured debts just like a credit card or medical debt. Payday advances are dischargeable. There are some issues though given the nature of the debt. Payday loans are usually to be repaid within a relatively short period of time. Given that payday loans are usually recently incurred when filing for bankruptcy protection there are a few issues for bankruptcy lawyers to discuss before filing for bankruptcy protection. The reality is few payday loan companies pursue nondischargeability claims At the same time, past results are not necessarily indicative of future results.

1. Payday Loans Are Horrible

Before discussing the pitfalls of filing for bankruptcy when you owe payday loans let us examine payday loans in general and how the work. Payday loans are supposed to be short term loans until the borrower gets paid next. The percentage rates are usually disgustingly high and should be illegal. We have documentation of a percentage rate of 1000%. To obtain a payday loan or advance it usually requires some sort of regular income of some significance. If make $200 a week you will most likely not qualify for an amount larger than that. Once you are approved for an amount to borrow, you will be asked to write a post-dated check for the amount borrowed to be cashed when you get paid. The original loan will have some sort of fee ranging from $40 to $100 for the loan. If you are unable to pay the loan back when you get paid some companies will allow the loan to be renewed for another high fee ranging from $40 – $100. What about that post-dated check you wrote? If the check bounces your bank will charge you fees too. Not paying the payday advance or loan on time will start a vicious cycle of increased fees. Borrowers commonly have to continue to obtain a new payday advance or loan to keep their bills paid while continuing to incur more and more fees.

2. Recently Incurred Debts May Not Be Discharged

Debts incurred or obtained close in time to filing for bankruptcy raises a number of issues. The problem is that the payday loan company may have an argument that you never intended to pay back the loan given you filed for bankruptcy so close in time to obtaining the loan. Bankruptcy Code Section 11 U.S.C. 523(a)(2)(C) provide for a 90 day look back for cash advances and payday loans. The payday loan company would have to file an adversary lawsuit against the bankruptcy filer alleging the payday loan should not be discharged given it was incurred within 90 days of filing the bankruptcy case. Bankruptcy Code Section 11 U.S.C. Section 523(a)(2)(A) governs debts incurred from fraud. If the case is filed within the 90 days of incurring the loan the payday loan could argue with circumstantial evidence you never intended to pay back the payday loan.

3. Payday Loans With Post-Dated Checks Are A Problem

Another problem is the post-dated check that was provided to the payday advance company. Section 326 of the Bankruptcy Code governs the automatic stay that becomes effective as soon as your bankruptcy attorney files your bankruptcy case. The automatic stay stops any and all collection activity. The problem is that Section 362 does not stop the presentment of a negotiable instrument, or a post-dated check. You need to research your circuit cases regarding this issue to determine if trying to deposit the post-dated check is a violation of the automatic stay or not.

While it is rare for a payday loan company to sue a bankruptcy filer for an unpaid payday advance or loan it is important to be fully advised of the potential ramifications or filing for bankruptcy protection with a recent payday loan or advance. It is more of a cost benefit analysis. If the payday loan is only $500 it does not make much sense to spend thousands of dollars to prove the loan should not be discharged. It does happen though.

What Events Can Toll or Stop The Clock for Reach Back Periods When Discharging Taxes in Bankruptcy?


There are a number of requirements to discharge taxes when filing for bankruptcy protection. Timing is everything. Taxes can be discharged if they taxes are three years old, filed on time or 2 years before the bankruptcy case was filed, assessed 240 days prior to the bankruptcy case, non-fraudulent return and no willful tax evasion. This article will not address the numerous issues that can arise regarding each of the requirements listed. This article focuses on what events can stop the clock or start the tolling of the different time periods. Your bankruptcy lawyer in your jurisdiction will be able to discuss how your state taxes are dealt with in bankruptcy.

Tuition Credits are not Student Loans

Tuition Credits are not Student Loans

For example, the due date for 2009 taxes is April 15, 2010. In theory taxes owed for 2009 therefore will be dischargeable after April 15, 2013, when filing for bankruptcy protection. So stops the clock on the three year period though? Or what stops the clock for the filed on time or return filed at least two years before filing for bankruptcy?

Bankruptcy Code Section 507(a)(8)(G) provides in part . . . . “applicable time period specified in this paragraph shall be suspended for any period during which a governmental unit is prohibited under applicable nonbankruptcy law from collecting a tax as a result of a request by the debtor for a hearing and an appeal of any collection action taken or proposed against the debtor, plus 90 days; plus any time during which the stay of proceedings was in effect in a prior case under this title or during which collection was precluded by the existence of 1 or more confirmed plans under this title, plus 90 days.

Events that Toll or Stop the Clock From Running

1. Filing Bankruptcy: The first event is the filing of a prior bankruptcy case. As soon as the bankruptcy case is filed the automatic stay is in effect stopping any and all collection activity, including collection of taxes. The time period of three years and 240 days is not stopped since the governmental agency is prevented from attempting to collect the taxes. However long the automatic stay was in effect should be subtracted from the total days. Bankruptcy Code Section 507(a)(8)(G) also adds 90 days to the time period.

2. Request for a Hearing: Once you receive a letter in the mail from the IRS or FTB that you allegedly have unpaid taxes you may request a hearing to object or challenge the taxing authorities findings. Once you make this request the time period for looking back to determine if the taxes are dischargeable is tolled or stops. In addition once the event is over the time starts to run again 90 days must be added to the time period.

3. Appeal of Any Collection Action: This is more or less the same as making a request for a hearing. If the IRS or FTB levied on your bank accounts or informs you of a proposed assessment and you appeal the collection action or assessment the time period looking back is again stopped or tolled.

4. Offers In Compromise: If you make an offer in compromise it will stop the 240 day period while the offer is pending or in effect, plus 30 days. See Bankruptcy Code Section 507(a)(8)(A)(ii)(I). The trap here is if you had an offer-in-compromise in effect previously but no longer. The time the OIC was in effect must be calculated and added to the 240 day time period. Also, it only tolls the 240 day period with the taxing authority the offer was made to.

5. Extension to File Return: The Internal Revenue Service requires a form be filled out to obtain an extension of the deadline to file a tax return. Some states, like California, will automatically extend the deadline to file a return if not filed on time. This is an issue that needs to be looked at closely. Do not assume the federal tax time periods and deadlines are the same for whatever state taxes are owed as well.

The good news is that entering into an installment agreement with the Internal Revenue Service or Franchise Tax Board does not toll or stop the time periods. This is our recommendation also. If all else fails then enter into an installment agreement as soon as possible. Ignoring the taxing authority will only make matters worse. You do not want the government levying on your bank accounts, garnishing your wages or issuing tax liens on your real and personal property.

Hayward California Bankruptcy Attorneys and Lawyers


It is 2014 and things a looking better for the economy and housing market in the Bay Area. That does not mean everyone has recovered from the mortgage meltdown and sluggish economy. Our Hayward California bankruptcy attorneys and lawyers are ready to discuss your circumstances during a free consultation right now. We have offices in Oakland, California and Fremont, California for your convenience. We will also conduct free phone consultations to determine if bankruptcy is right for you. We have helped many clients from Hayward California area become debt free and live happier, healthier lives. Please give us a call at 1-877-9NEW-LIFE to schedule a free consultation.

Chapter 7 Bankruptcy Case

Many people call this a straight bankruptcy and liquidation bankruptcy case. I honestly do not know why people call Chapter 7 bankruptcy straight bankruptcy. Are other chapters bent? Now calling this type of bankruptcy a liquidation case makes more sense. In a Chapter 7 bankruptcy case exemptions protect your stuff or assets. If what you own is worth more than can be protected then the Chapter 7 trustee assigned to your case can take that stuff and sell/liquidate it for the benefit of those that you own money, your creditors. If there is a bankruptcy estate with assets those assets are liquidated. During your free consultation our Hayward California bankruptcy attorneys and lawyers will discuss your assets with you and what exemptions are available to protect the stuff you own. Most Chapter 7 cases are cases without any assets to turnover. California’s exemptions are generous and usually will protect all of your assets, so the only thing that happens if your debts and discharged. Whether you qualify to file a Chapter 7 case and discharge all of your debts depends upon your assets, expenses and income. A typical Chapter 7 case from the date of filing the petition to the court signing the order of discharge will take around 100 days approximately. The only appearance you need to make, and our Hayward California bankruptcy attorneys and lawyers will be appearing with you, is at the Section 341 of the Bankruptcy Code meeting of the creditors. The Chapter 7 trustee randomly assigned to your case from the standing panel will ask a series of questions to verify information in the bankruptcy petition and investigate your financial circumstances. The 341 meeting of the creditors usually only takes about 5 to 10 minutes. You must have a valid unexpired identification card and proof of your social security number for the meeting of the creditors.

Chapter 13 Bankruptcy Case

Chapter 13 is the chapter of the Bankruptcy Code that allows individual and small business owners to reorganize their debts in a Chapter 13 Plan of reorganization. During your free consultation our Hayward California bankruptcy attorneys and lawyers will explain the reorganization process. Filing a Chapter 13 case is usually more expensive given there is more work involved. A typical Chapter 13 plan will last between three to five years depending upon your circumstances. There are many reasons why filing a Chapter 13 case may benefit you financially. Chapter 13 will allow you to catch up on missed mortgage payments, missed car loan payments, pay back taxes without interest or penalties, discharge taxes, discharge unsecured debts, get rid of underwater mortgages or home equity lines of credit and much more. Even if your income is high and you can afford to pay back your debts Chapter 13 can help. Unsecured debts like credit cards are paid back in a Chapter 13 plan without paying any interest. This is a huge savings and will allow you to pay back your debts in 5 years instead of the 20 years it will take when adding in interest each month. Our Hayward California bankruptcy attorneys and lawyers have filed hundreds of Chapter 13 bankruptcy cases in the Bay Area. We have free consultations available to discuss your finances today. Do not wait until you are sued or wages are garnished to act. Find out how bankruptcy can help now to help you make better decisions going forward.

How Do I Stop a Credit Card Lawsuit?


There are a number of ways to stop a credit card lawsuit and filing for bankruptcy is one of them. Unfortunately credit card interest rates have been allowed to become out of control. Every state has usury laws limiting the amount of interest a lender can charge. Many years ago the Supreme Court of the United States of America ruled that a company doing business in one state can charge all other citizens of other states according to the usury laws of the state they are doing business in. This resulted in a few states getting rid of their usury laws and the result is 29% interest rates on credit cards and the rest is history.

Please continue to read this article for possible ways other than filing bankruptcy to stop a credit card lawsuit. Filing for bankruptcy protection initiates the entering of the automatic stay. The automatic stay stops any and all credit card lawsuits. It is possible for a credit card company to ask the bankruptcy court for permission to continue the lawsuit in state court. It is very rare for a credit card company to have the right grounds for the court to allow the lawsuit to continue in state court. When you file for bankruptcy protection before the credit card company obtains a judgment the underlying debt is still an unsecured debt that should be eligible for discharge. Whether you qualify to file a Chapter 7 bankruptcy case and discharge all of your debts depends upon your income, expenses, assets and sometimes the amount of your debts. During your free consultation will discuss your circumstances to determine how bankruptcy can help you. Just because you have the one lawsuit does not necessarily mean you have to file for bankruptcy protection though. If the lawsuit is only for $2,000 then filing for bankruptcy protection would not be cost effective. If you have other credit card debts, unpaid taxes, persona loans, repossession, foreclosure or wage garnishment then filing for bankruptcy will most likely be cost effective. If you do qualify to file a Chapter 7 case the actual case once filed should take 100 to 120 days. The only appearance you should have to make is the 341 meeting of the creditors. Bankruptcy is federal, so the court you appear at is the federal court for the district you live in, not the county state court. You will receive notice from us as soon as your case is filed and you will receive notice of the date and time of the meeting of the creditors directly from the bankruptcy court seven to ten days after the case is filed. We do our best to make the process as smooth as possible by providing you with updates throughout the process and providing checklists of the documents we need to draft a complete and accurate petition for bankruptcy protection.
There are other ways regarding how you stop a credit card lawsuit and it depends upon your circumstances. Of course the simplest but probably most difficult way to stop the lawsuit is to pay off the debt. Given the credit card company has filed a lawsuit means paying off the debt is not an option. Entering into an installment or payment agreement can stop the lawsuit under certain circumstances too. Again, this requires a payment to be made that is probably not possible. The credit card company will most likely want their attorney fees and costs paid for given they incurred this expense when filing the lawsuit. This will make it more difficult to make the payment each month. So this remedy is probably not possible.

Another issue is whether you were served with the summons and complaint properly. The credit card company must file a proof of service declaring under penalty of perjury how, where and when you were served with the summons and complaint. If the service was not proper then you could have the lawsuit stopped and make the credit card company serve your properly. The problem with this scenario is the credit card company will most likely be able to turn around and serve you properly and now you are right back where you started from. A lawsuit is pending against you.

Another issue is whether the underlying debt is even legally enforceable? In California a law now exists to make credit card companies or collection agencies verify they have a right to enforce the debt and that the statute of limitations has not run out making the debt legally unenforceable. If the debt is not legally enforceable then the lawsuit should be dismissed. There are a number of ways regarding how to stop a credit card company lawsuit. It all depends upon your circumstances.

What Does Bankruptcy Mean?


What does bankruptcy mean is probably different to different people. It is possible to be bankrupt and not have filed for bankruptcy protection? Yes. Is bankruptcy the process of discharging debts or reorganizing debts? Yes. Can one be morally bankrupt and financially bankrupt? Yes and yes. So what does bankruptcy mean? The most common explanation is a business or a person has debts that are greater than their assets. Or a business or person cannot pay their bills as they come due each month. Insolvent is a another term that is used to describe being bankrupt. The most common use is to describe someone that has actually filed a petition for bankruptcy under Chapter 7, 9, 11, 12 or 13 of Title 11 to discharge or reorganize their debts. What does bankruptcy mean can best be answered by describing the process of filing for bankruptcy protection.

The first part of the process is finding the right bankruptcy attorney to help you. Do not use a bankruptcy petition preparer. Petition preparers cannot give you any legal advice and you cannot easily voluntarily dismiss a Chapter 7 case once everything goes bad after the case is filed. Once the Chapter 7 petition is filed you will most likely be stuck, so it is very important that all issues are discussed and you know what to expect before the petition is filed. You will pay more, but the extra expense of hiring an experienced attorney is priceless in the long run. Once you have retained counsel you will need to pay the fees and costs in full and then provide the necessary documents to draft and file an accurate and complete petition for bankruptcy protection.

Once of the most common questions other than what does bankruptcy mean is what are bankruptcy exemptions. Bankruptcy exemptions protect your assets when filing for bankruptcy protection. There are federal exemptions and states can opt out of the federal bankruptcy exemptions and create their own. Why are bankruptcy exemptions necessary? As soon as a petition for bankruptcy is filed a bankruptcy estate is created. Pursuant to section 541 of the Bankruptcy Code, property of the estate, includes basically all of your assets at the time the case is filed. There are exemptions for equity in homes, to protect vehicles, household goods, retirement account funds, clothing, jewelry and tools of trade. What does bankruptcy mean does not mean leaving someone with nothing after filing for bankruptcy. You will still have what you need to live life and recover. California in particular has generous bankruptcy exemptions.

What does bankruptcy mean also includes life after bankruptcy. For the most part your life will not change that much other than not having to struggle to pay your debts each month and being able pay your bills like rent and food easily each month. Bankruptcy means obtaining a fresh start at is core. It is not a head start or a jump start, but a fresh start financially. It will take time to rebuild your credit score, but your credit score was probably not so great before filing for bankruptcy protection anyway. The damage is usually done far before actually filing for bankruptcy. What does bankruptcy mean does not mean destroying your credit score. It means giving you the ability to make payment each month on your cell phone bill, rent and utilities so that you can rebuild your credit score.

Retaining the right bankruptcy attorney and actually filing for bankruptcy protection is never easy. What is right for you can only be determined by you. There are never easy answers to many questions. What does bankruptcy mean is many things and most importantly obtaining a fresh start and doing better financially.

San Jose Bankruptcy Lawyer


If you are searching for a San Jose bankruptcy lawyer please give us a call toll free at 1-877-963-9543 to schedule a free consultation. All of our consultations are with experienced attorneys that have filed hundreds of Chapter 7 and Chapter 13 bankruptcy cases. Our San Jose office is conveniently located at 111 N. Market Street, Ste. 300 San Jose, California 95113. After we schedule the free consultation we will email you our Client Information Form to fill out prior to the consultation. For the consultation we ask that you provide a few recent payments or proof of income, the completed Client Information Form and any other documents you believe will be helpful.

Affordable Required Courses

One the many benefits to retaining us as your San Jose bankruptcy lawyer is the low cost of the required courses. We have negotiated the lowest prices we know of for both courses. The first course, credit counseling, is $5.00 (each, and the second course, financial management, is $7.95 (for a single person or couple). We have heard of some San Jose bankruptcy lawyer charging their clients as much as $100 or more of these courses.

Personal Service

There are many reasons why you should choose us as your San Jose bankruptcy lawyer, but the most important is that we provide you with superior service. We return all phones calls within 24 hours and respond to emails each day. The number one complaint about attorneys is the lack of communication or timely returning of calls. The opposite is true of us. We are constantly following up with our clients to obtain information and remind them of deadlines to ensure the process is smooth and everything is completed in a timely manner.

Retain our San Jose bankruptcy lawyer today.

Retain our San Jose bankruptcy lawyer today.

We Put Your Interests First

A concern you should have is whether your San Jose bankruptcy lawyer will put your interests first or their own pocket book. Whether you qualify for a Chapter 7 bankruptcy and if so possibly why filing a Chapter 13 case is in your best interest is a big deal. If the San Jose bankruptcy lawyer you speak with does not regularly file Chapter 7 cases they may not be too familiar with the intricacies of the means test. At the same time, even if you qualify to file a Chapter 7 and discharge of your debts filing a Chapter 13 still might be in your best interest. If you are self-employed or own property that has equity even though you qualify to file a Chapter 7 your might not want to deal with the possible results. Most Chapter 7 trustee’s will make your shut down your business while the case is pending and a Chapter 7 trustee may allege your house is worth more than you think it is. In either situation if you had filed Chapter 13 you would not be dealing with the headaches to resolve these issues. Choosing the right San Jose bankruptcy lawyer is essential to obtaining relief from your debts and moving on with life.

If you are struggling with your house payment, taxes, car payment or credit card debts please give us a call at 1-877-963-9543 to schedule a free consultation. You will find our open and honest approach to filing bankruptcy stress free and refreshing. We also recommend that you speak with another San Jose bankruptcy lawyer.

Can My Workers Compensation Award or Lump Sum Payment be Protected When Filing Bankruptcy in California?


The short answer is yes, but how much of the workers compensation award or lump sum payment that can be protected depends upon the bankruptcy filer’s other assets as well. California has two different set of exemptions to protect assets from being liquidated in a Chapter 7 bankruptcy case. In a Chapter 13 case assets are not liquidated, but the equivalent value of the unprotected or unexempt asset are paid to creditors in the Chapter 13 plan as if the assets were liquidated. There are two different ways a California workers compensation award or lump sum payment can be protected under California exemptions.

1. California Civil Procedure Section 703.14(b)(11)(D) Exemption (703 Exemptions)

Pursuant to C.C.P. Section 703.14(b)(11(D) $25,575 of a personal injury award or claim can be protected due to personal injury, including being injured on the job. Even if you already received the award or lump sum payment the funds in your bank account can still be protected if you can trace the source of the funds back to the personal injury award. Be sure to discuss this issue with your bankruptcy attorneys as soon as possible upon being injured at work. California bankruptcy exemptions under C.C.P §703 are most notable for the generous wildcard exemption totaling $26,925.00. This exemption can be applied to equity in a home or any other assets like bank accounts or if someone owns multiple vehicles. The negative of using the 703 exemptions is the limitation on protecting equity in a home. What exemptions are applied really depends upon the individuals assets and potential claims they may have. So in theory, under the 703 exemptions a workers compensation claim, award or lump sum payment could be protected under the 703 exemptions totaling approximately $52,500. This is the combined personal injury exemption plus the wildcard exemption. For this to be true though none of the wildcard exemption could be used to protect money in bank accounts or any other assets, which is unlikely.

2. California Civil Procedure Section 704.160 Exemption (704 Exemptions)

Under C.C.P. Section 704.160 all benefits and claims are exempted or protected and there is not stated limit. So unlike the 703 set of exemptions mentioned above the 704’s provide for in theory protection of an unlimited amount received from worker’s compensation. The catch with using the 704’s is there is no generous wildcard exemption to use on any type of asset. The most common reason bankruptcy attorneys use the 704 exemptions is to take advantage of the generous homestead exemption amounts to protect equity in a primary resident. This set of exemptions allows the following homestead exemptions: Single and no dependents: $75,000; Married or Single with Dependents $100,000; Either Spouse is 65 or older, mentally or physically disabled, $175,000. Now that home values are increasing again which set of exemptions to apply to assets is becoming more and more important.

If you have already received a lump sum payment you need to be able to trace or prove that the funds in your bank account are from the workers compensation award. It would be wise to open a new account for this specific purpose so there is no question where the money came from. Once you comingle the award with normal monthly income and other funds it opens up the argument that the workers compensation award should not be exempt using the exemptions listed above.