Renting beats owning a home in California and many other markets

rent 2Even though owning a home is still cheaper than renting nationally there are many markets where it is still cheaper to rent than own.  One of those markets is all of California!  This is rentaccording to a Deutsch Bank housing survey cited in an article posted on-line in SmartMoney.  With housing price declines and record low-interest rates it should be cheaper to own real estate but in California and the northeast and elsewhere it is still in fact cheaper to be a tenant.

According to the same article homeownership is slipping.  It is down from a high of 69% in 2004 to a low of 65% and it appears to be still falling.  More and more people seem to have caught wind of this fact and they are becoming tenants.  Apparently one-third of all rentals are single family homes as the number of single family homes for rent grew by 2 million from 2006 to 2010.  There are currently a total of 13 cities where it is cheaper to rent than own now.

So don’t despair if you don’t have a piece of the American dream.  Don’t worry if you have been foreclosed on and you now must rent.  If it is cheaper to rent then maybe renting is a good idea for a while.  It is doubtful that their will be any meaningful appreciation in housing anytime soon so why buy?  When you add in the costs of maintenance, insurance, mortgage, and taxes it is very expensive owning a home.  Let the landlord worry about that stuff and be happy renting!

Now may also be a good time to clean up those debts yo have accumulated over the years too.  Paying rent is always easier without paying for all those credit cards, personal loans, auto deficiency balances, and medical bills.  Try bankruptcy to eliminate those old debts and get a fresh start.

I am a San Diego bankruptcy attorney.  For further questions please visit my websites at www.farquharlaw.com or www.freshstartsandiego.com.  Or call my office for a free consultation or for any other advice about bankruptcy or debt at (619) 702-5015. Call now for free credit report and analysis!

For a free e-book on “13 things to do to prepare for your bankruptcy filing” please e-mail me at farquharesq@yahoo.com.

 

For rent photo courtesy of Billy Alexander.  Houses for rent photo courtesy of cdsessoms.

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Are gambling debts a problem in bankruptcy?

gambling 3The short answer is that they can be.  In general the bankruptcy trustees who oversee your case seem have the opinion that gambling 4gambling debts are somehow frivolous, shady, or just not respectable and thus possibly not eligible for a bankruptcy discharge.  The same trustees don’t blink an eye at credit card debts as long as they are aged (more than one year old) but they do seem to have something against gambling debts.

I believe that it is a belief that somehow gambling is not the type of debt that the bankruptcy system was designed to discharge.  You are somehow acting irresponsibly in the eyes of a bankruptcy trustee if you engage in gambling and you borrow money to do so.

But wait a minute that is not the end of the story!  The judges don’t always agree with them.  Bankruptcy was designed to give debtors a fresh start and a relief from debts the cannot pay.  Those debts come in many types and gambling is just another type of debt.  They too should be dischargeable in bankruptcy.

I had a case years ago where a client had gambling debts and the trustees raised an objection to their discharge so I looked up what the judges at that time had ruled.  To my surprise they seemed far more understanding than the trustees.  The judges pointed out in a series of cases that gambling is a legal activity.  Not just in Las Vegas but in casinos around the country.  Here in San Diego we have many Native American casinos that are fully legal.  Millions go each year to these casinos and legally gamble.  There simply is no illegality about it.

If a debtor engages in an entirely legal undertaking then we can’t deny a debtor’s right to engage in it as well as borrow money to finance it like he would a car or clothes that he was buying.  So if the debtor accumulates debt related to the gambling then that really is no different from him running up his credit cards for some other item.  This is what I understood from reading a number of cases on gambling a few years ago.

There were a few caveats though.  The debtor with gambling debts could not have run up his credit cards in anticipation of filing bankruptcy.  One judge referred to this as a credit card “bust out” scheme.  If this was the case then that could be seen as credit card fraud.

Credit card fraud occurs when a person borrows (charges) on a credit card with no intention to repay.  That is why if you run up credit cards and then immediately file bankruptcy you probably will have a credit card fraud problem.

When you sign your card you signed that you will borrow money on the card but you have an intention to pay it back.  That intention can change later though and you can find yourself in a position where you cannot pay.  At that point you stop paying and possibly file bankruptcy.

The gambler then is just like the guy who charges consumer goods on his card except he gambles.  As long as he believes he will eventually win and then pay the car back then there is no fraud because fraud is subjective.  We may look form the outside and say that he will never win at gambling.  His chances are great that he will lose.  But if the gambler believes honestly (but unreasonably) that he will win then there is no subjective fraud.

So it is best to wait for some time after a debtor borrows money on a credit card to gamble.  It will then look less like the debtor had any fraudulent intent.  Any questions about gambling debts and bankruptcy should be directed to a knowledgable attorney.

Don’t forget that there is the gambling addiction problem too.  It is possible that a debtor has an addiction to gambling.  If the debtor is in treatment for this addiction and has ceased all gambling there is a possible argument there to counter any fraud charges.  A good bankruptcy attorney can help you with these arguments.

I am a San Diego bankruptcy attorney.  For further questions please visit my websites at www.farquharlaw.com or www.freshstartsandiego.com.  Or call my office for a free consultation or for any other advice about bankruptcy or debt at (619) 702-5015.  Call now for free credit report and analysis!

For a free e-book on “13 things to do to prepare for your bankruptcy filing” please e-mail me at farquharesq@yahoo.com.

 

Risk Free photo courtesy of Sean MacEntee.  Roulette wheel photo courtesy of Zdenko Zivkovic.

What is a chapter 20 bankruptcy?

twentyIt is really just one bankruptcy followed by another.  It is a chapter 7 followed by a chapter 13 which added together equals 20 so it is called a “chapter 20”.  Most people have heard of bankruptcy chapters 7, 11, and 13 but a chapter 20 is really just a combination of a 7 and a 13 and there is no official chapter 20 that you can file.

In a chapter 20 bankruptcy someone will first file a chapter 7 and get a discharge.  They then decide some time later to file a chapter 13 bankruptcy.  A chapter 20 is sometimes referred to as a “no discharge chapter 20” because the debtor is not entitled to a discharge in the chapter 13 if he filed it within 4 years of his chapter 7 according to section 1328(f) of the bankruptcy code.

One reason why people file a chapter 20 is because of the debt limits of a chapter 13.  Some want to file a chapter 7 to discharge the unsecured debt they owe to bring that debt within the limits of chapter 13.  Chapter 13s have specific debt limits and if you exceed them you could be forced into a chapter 11 which is far more complicated.  One strategy to avoid a chapter 11 is to file a chapter 7 to lessen the debt through the chapter 7 discharge and then do a chapter 13.  This would be an example of a “good faith” reason to file a chapter 20.

Another common reason why they would want to file a chapter 20 is because of the chapter 13 lien strip capability not offered in a chapter 7.  In a chapter 13 homeowners can strip (eliminate) second mortgages if they are completely unsecured.  Second mortgages are completely unsecured if you owe more on your first mortgage than the entire home is worth.  This leaves nothing (no equity in the home) to secure the second mortgage so it is in effect an unsecured debt.

But of course it is a lien that exists and will continue to exist on your house if you do nothing or even if you file a chapter 7 bankruptcy.  The lien will remain on you home virtually forever and the only way to get rid of an unsecured second mortgage it is to strip it off in a chapter 13 bankruptcy.

So some people try to get rid of their credit cards in a chapter 7 bankruptcy and then file a chapter 13 to strip the second mortgage.  If they just filed a chapter 13 without the prior chapter 7 they would have to pay some of the credit cards back in the chapter 13.  So it seems that filing a chapter 7 followed by filing an immediate 13 makes sense right?  After all you save all of those credit card payments you would have to make for 5 years in a chapter 13 right?

Wrong!  You cannot be seen to be manipulating the system just to get rid of your credit cards and then strip a mortgage.  This would be an example of a “bad faith” bankruptcy filing and this would be challenged by the bankruptcy trustees in an adversary proceeding.  If you file one chapter and then another to create a benefit for yourself that would not exist in either chapter then that could be considered bad faith.  So you must not attempt to merely get a credit card discharge and then apply for a lien strip.

This tactic would be considered bad faith because if you filed a chapter 7 you would not be allowed the lien strip.  If you filed just a chapter 13 you would have to make payments to the credit cards for the length of the chapter 13 plan.  The courts will want you to pick one or the other but no both chapter in succession merely to seek maximum benefits.

One way to avoid a possible bad faith challenge to your chapter 20 is to show that there has been a subsequent change in your situation since the filing of the chapter 7.  If for instance you intended to surrender your house at the time of filing the chapter 7 but your situation substantially changes after your chapter 7 discharge then you may have a valid new reason to keep your home.  You could get a divorce or suffer a lessening of income for instance.  Then you could possibly do a chapter 13 to strip the second mortgage and this could prevent a bad faith challenge.  Courts examine chapter 20s carefully though so you should be aware of this increased scrutiny over your case when you attempt one.

It is also possible that housing values change and your second mortgage might become unsecured sometime after your chapter 7 discharges.  If you are in a period where housing values are declining then the value of your house may drop below the value of your first mortgage sometime after your chapter 7 is complete.  Now you can strip the lien in a chapter 13 whereas before you filed the chapter 7 you could not.  This would be a valid circumstance that could defeat a bad faith claim.   There are many other possible good faith circumstances in addition to these mentioned above.

Chapter 20s used to be more common.  Doing a chapter 20 became a problem after the 2005 bankruptcy law was passed.  This law can be interpreted to not allow a chapter 13 discharge unless 4 years have passed since the filing of a chapter 7.  (A second chapter 7 cannot be filed until 8 years have passed since a first chapter 7).  This prohibition is contained in section 1328(f) of the bankruptcy code which relates to discharge.

With this code section in mind the question then becomes how can you receive a discharge from your second mortgage after the chapter 13 plan is completed if section 1328 disallows such a discharge?  This can create problems for you as you proceed with the chapter 20 bankruptcy.

Most courts have maneuvered around this by turning to other sections of the code and they have allowed you to do a chapter 20 anyway.  Remember though that the possibility is still there that you will get a challenge if you attempt to do a chapter 20.  It appears that at this time the law is not completely settled and the courts are not in complete agreement on this issue of allowing a chapter 13 within four years of filing a chapter 7.

It also appears to help if new debt exists.  If some sort of new debt has been acquired post chapter 7 judges apparently like that.  It seems as if there needs to be something to make payments on in the chapter 13 and not just a lien to strip.

Bt I still believe that the safest thing to do though is to not run afoul of section 1328(f) at all.  Just wait the required 4 years after your chapter 7 to file a chapter 13 and strip your lien.  You then won’t be in violation of 1328 and there should be no argument to stop you from filing.  Nobody wants to buy a court challenge or court case when filing bankruptcy.

The additional advantage of waiting the full four years to comply with section 1328 is that it is a longer period in which to argue changed circumstances.  It is harder for anyone to argue bad faith if you waited a full four years after your chapter 7 to file a chapter 13.  This is because people don’t generally plan that long in advance and circumstances do naturally do change considerably in four years.

I am a San Diego bankruptcy attorney.  For further questions please visit my websites at www.farquharlaw.com or www.freshstartsandiego.com.  Or call my office for a free consultation or for any other advice about bankruptcy or debt at (619) 702-5015.  Call now for free credit report and analysis!  For a free e-book on “13 things to do to prepare for your bankruptcy filing” please e-mail me at farquharesq@yahoo.com.

 

Twenty photo courtesy of takomabibelot.

Stockton California gets close to filing chapter 9 bankruptcy. Largest city to do so yet!

Stockton California edged closer to filing for chapter 9 bankruptcy protection on June 6, 2012.  The city council authorized the Stockton city manager to file bankruptcy by a 6 to 1 vote after an intense 4 and one half hour public meeting according to an online article in the Los Angeles Times.  The city manager will file for bankruptcy protection for the city if the current attempt at mediation fails.

Stockton had apparently stopped making payments to creditors back on March 27th 2012.  At that time they entered into these mediation discussions that have since failed to resolve their problems.

And it is unlikely that these mediations will work.  The city has released a public statement calling their situation “dire” and that there will be a 26 million deficit by July 21, 2012.

According to the article Stockton is a river port city with 290,000 in habitants east of San Francisco that has the second highest foreclosure rate in the nation as well as a very high crime rate.  An article posted online by USA Today describes Stockton as a “crop abundant” central valley city with high foreclosure, crime rates and unemployment rates.  But it also says that Stockton was named America’s “most miserable city” in a national magazine- twice.

But then the article got to the real reason for the Stockton bankruptcy.  In one sentence they said it all.  Stockton is embroiled in an ongoing dispute with police and city worker unions over pensions.  Here go those public pensions again backed by public unions.

There are many cities with this same problem across the nation right now.  I have blogged about Harrisburg Penn. and Detroit Mich.  Harrisburg filed for chapter 9 bankruptcy and I believe that Detroit may have to eventually along with many other U.S. cities.

These cities have had disputes with public unions over pensions.  These pensions (and other benefits) were promised to city workers in good economic times.  And they were promised by politicians who have since retired.  And these unions often promise the politicians votes if the politicians agree to these pensions.  The politicians do grant the unions what they want because it is someone else’s money that they are giving away.

It is the taxpayers money that is promised to these unions by politicians who want votes.  The politicians don’t have to pay, they just want to get elected.  We see this time and time again.  Here in San Diego the unions were promised contracts that tripled their benefits.  San Diego could not afford it any more than could these other cities and as soon as the economy collapsed San Diego faced bankruptcy like hundreds of other cities could.

This is why FDR himself did not like the concept of collective bargaining for public worker unions.  If city worker unions can collectively bargain and demand benefits from politicians it sets up a whole conflict of interest.

The politician who agrees to give public unions their benefits is not like a president of a public company.  The politician will just award the benefits that the public unions demand if the unions agree to reelect him which they do.  That does not happen in a private company.  Private workers don’t vote for a company president who will give them more stuff.  Even if they did it would not come out of taxpayer pockets so no one would care.

No doubt the city worker unions of Stockton are saying raise taxes on the people and businesses of Stockton to pay for their union benefits.  This is what we hear from other public unions in other cities.  The people of Stockton are getting foreclosed on and they are probably facing unemployment so they can’t afford more taxes.  The same would go for businesses who would relocate if their taxes were raised.

I wrote in my other blogs about the unfairness and absurdity and unworkability of this kind of taxation.  In many cases taxpayers and businesses would be asked to pay larger taxes to pay the benefits of city workers when the taxpayers cannot afford anything like those benefits themselves.  Remember that in San Diego they tripled city worker benefits before the city went broke.  Who else could demand a tripling of their benefits?  Not me.

I also wrote about how I believe that a city exists or should exist to benefit its residents.  A city is not there to benefit its workers over its residents.  I agree with FDR that public unions should not be able to collectively bargain with a city and demand more benefits.  It is a definite conflict of interest where the taxpayer gets screwed and the city ends up in bankruptcy.

I am a San Diego bankruptcy attorney.  For further questions please visit my websites at www.farquharlaw.com or www.freshstartsandiego.com.  Or call my office for a free consultation or for any other advice about bankruptcy or debt at (619) 702-5015.   Call now for free credit report and analysis!  For a free e-book on “13 things to do to prepare for your bankruptcy filing” please e-mail me at farquharesq@yahoo.com.

Can I still go to debtor’s prison if I owe money? Look out Charles Dickens, in some states unfortunately it appears that it is happening now!

(My most recent debtors prison blog is found here: http://bit.ly/I2qMO2 .

There are numerous articles posted online that describe cases where people appear to have been put in jail in some states for merely owing  monetary debts.  This can happen to debtors who either owe money to the court or to private parties.  And this has happened in spite of the fact that debtor’s prisons were outlawed federally in 1833.  Most of the states followed suit after 1833 and included clauses in their constitutions prohibiting imprisonment for owing money to someone.

In spite of these prohibitions debtor’s prisons seem to be making a comeback.  There are states where it’s possible to put someone in jail for failure to pay a debt.  I am surprised that lawyers in these states have not put together constitutional challenges to someone who was thrown in jail for such a monetary debt.

According to blog I found online people are languishing in Illinois jails, in Champagne and other counties, for owing unpaid traffic tickets.  A law professor from Notre Dame Law School quoted in the article says that we do have “de-facto” debtor’s prisons because of this practice of jailing debtor’s for merely owing money in spite of constitutional prohibitions even if the money is owed to the state.   According to this law professor this creates a situation where debtors are scrambling to come up with money by any means just to stay out of jail.

An article in the Saint Petersburg Times points out that it costs the jails $53 per day (in Florida) to incarcerate these people who often don’t owe much money.  So the taxpayers pay for the jailing, the judge, and the whole judicial system that wastes time and money trying to collect from these destitute people.  In Florida they have an ominous sounding “Collections Court” that handles these cases and about a third of Florida counties have these courts.  Even in the counties without these courts people are still being jailed for owing money.

According to the Times article it costs the system $62,085 to bring in $80,450 in debt.  Those languishing in jail for these unpaid tickets are certainly poor and often minority but anyone without means can get caught up in this travesty of justice.  How is it still a possibility that you could go to jail for owing money?  Were debtors prisons not outlawed in the 1800s?  Didn’t Charles Dickens inform us 200 years ago about the foolishness of this practice?

The Times article points out that you can be jailed for violating a court order or for failing to make court ordered payments.  So technically they are not being jailed for owing money but it amounts to the same thing.  Jail time is usually given to people who owe spousal and child support but legal experts argue that it is all illegal.

Now there is more and more disturbing chatter on the internet about debtors being jailed for owing a purely private company money.  There are horror stories emerging about arrests made and persons jailed for owing money to private parties.  On such woman was arrested one day, handcuffed, put in a very cold police car, brought to jail and no one told her why for some time while the contents of her purse were unceremoniously dumped in a plastic bag.  She spent a cold night in jail keeping her hands under her armpits for warmth until 16 hours later when she was informed that she missed a court hearing concerning some private debt.

In that case she had missed a court hearing but in Indiana a man faced jail for just failing to pay a purely private debt.  His incarceration had nothing to do with violating a court order.   According to an online article in the Minnesota StarTibune a lawyer challenged the constitutionality of a debtor being threatened with jail for owing a debt.  The appellate judges agreed with the lawyer and he won the case because debtor’s prisons were made illegal in Indiana in the 1850s.

The article in the Star Tribune points out that there is an inconsistency with who is locked up when, and for how much debt, and that all of these things vary from state to state and county to county.  It also makes mention that no one knows how often this happens as no statistics are kept of these incidents.  One man in Illinois was locked up by a judge “indefinitely” for owing $300 to a lumber yard.

Now it seems that the collection agents are influencing the legal system more and more to be more creditor friendly.   Some would say that the collectors are subverting the legal system and using the threat of jail and jail time extract money from people who cannot afford to pay anything towards these privately held debts.

The good news is though that bankruptcy can remove most debts from your balance sheet.  After a bankruptcy discharge you legally no longer owe the debts anymore so no creditor can try to collect on them or try to get you put in jail if you don’t.  Your legal obligation to pay these debts is eliminated.  With debt collectors gaining in power and money and influence this is a very good thing.

In California I know that the courts can threaten jail if you do not attend the court ordered “debtor’s exam”.  This is where a creditor can ask you all sorts of personal questions about your assets and your financial situation.  The courts cannot jail you if you do not pay the creditor in California but they threaten to jail you if you don’t show up for the court ordered exam.

I filed a case for a client the day before his debtor’s exam and he brought his bankruptcy case number to the debtor’s exam.  The other attorney did not know what to do but the judge threw the whole case out right there and told her to go to bankruptcy court for any money.  My client had nothing and the creditor had no reason to declare his debts non-dischargeable so that is the last we ever saw of the creditor.  My client got his discharge without a problem.  Bankruptcy is indeed a powerful mechanism to defeat over-zealous creditors.

You almost always don’t have to argue whether you owe a debt after bankruptcy and you don’t have to argue whether any punishment is constitutional.  I wrote another blog about debtor’s prisons here: http://bit.ly/JmsMFt .

I am a bankruptcy lawyer practicing bankruptcy law in San Diego California.   For more information related to debt, bankruptcy, or debtor’s prison please visit my websites at www.farquharlaw.com and www.freshstartsandiego.com.  Or call me directly for a free consultation at (619) 702-5015.  Call now for free credit report and analysis!  For a free e-book: “13 THINGS YOU SHOULD DO TO PREPARE FOR YOUR BANKRUPTCY FILING” please send a request by e-mail to: farquharesq@yahoo.com.

What is a fraudulent transfer? Did I do something wrong?

I know that fraud sounds bad and fraudulent transfer sounds even worse.  But his term is often used in and out of bankruptcy.  (Sometimes it is referred to as a fraudulent conveyance).  In your bankruptcy you may have gotten a notice that you are being accused of a fraudulent transfer by the bankruptcy trustee.  Fraudulent transfer rules come from section 548 of the bankruptcy code.  But don’t worry, this can be addressed in the bankruptcy and it does not mean that you are guilty of any crime or even that you are a bad person.

This is because they are not (usually) talking about you committing an actual, intentional fraud where you decided to de-fraud someone of their money or property.  They are instead talking about a “constructive fraud” which is one where there is a law against doing these trnasfers but intent to do fraud is not there.  Fraudulent intent is inferred from your actions.

The fraudulent transfer label is used most often when an asset/property has been transferred to someone else under circumstances that look suspicious. This could be real estate or personal property like a car or a piece of jewelry. In the bankruptcy context it occurs when you transfer an asset to someone else, you receive little or nothing in return, and you are insolvent at the time.

You may have had no bad intent at the time you transferred the asset so don’t worry.  You may not even have thought that it was wrong.  I have had clients transfer all kinds of things for many different reasons.  You will need to disclose the transfer to your bankruptcy attorney and describe the circumstances surrounding the transfer any time you have transferred property before a bankruptcy.

And the look back period varies in different states but in California it is four years.  So any property transferred to someone else in the last 4 years for less than its full value needs to be reported in the bankruptcy.  Especially if that transfer leaves you insolvent which means that your liabilities are greater than your assets.  This would not include a property sale to an outside buyer, especially to a buyer who pays full value.  There is a much shorter “look back” period for these transfers and they are usually not questioned by the trustee.

The purpose of the fraudulent transfer rules in bankruptcy is to prevent people from moving assets out of their estate and then going bankrupt on the debts.  Everyone would give their property to family members if they could and then get rid of their debts.  After the case was concluded then they could take the assets back.  This would not be fair to creditors and is not allowed so report these transfers to your attorney in a bankruptcy.

If you received a notification of a fraudulent transfer in a bankruptcy then the trustee could file or possibly has already filed what is called an adversary proceeding.  An adversary proceeding is a complaint filed within a bankruptcy case that is objecting to some aspect of the case.  A trustee will file one if there is a suspected fraudulent transfer of an asset.  He will want to bring this asset back into the estate to sell it for the benefit of the creditors.  (See here for more on adversary proceedings).

The problem here is that the trustee will seek to recover the asset from the person who received it.  If the transferred asset has gone to your relative or friend then they would be drawn into the case so that the trustee could take the asset from that person.  This person, the recipient of the asset, is not going to be too thrilled about this so this is a fairly serious problem.

As with all adversary proceedings this complaint must be answered.  Even if no adversary has been filed you still need to contact an attorney to deal with this issue.  Sometimes a settlement can be worked out but often the proper procedures must be followed timely or a judgment can occur for the entire asset.  If this is a piece of real estate or and expensive piece of jewelry then this can mean a great loss of money if a settlement could have been worked out.

I am bankruptcy attorney in San Diego who handles adversary proceedings for both settlement and trial.  Please visit my websites at www.farquharlaw.com or www.freshstartsandiego.com for more info. about any of these topics.  Or call my office for a free consultation at (619) 702-5015.  Call now for free credit report and analysis!

For a free e-book: “13 THINGS YOU SHOULD DO TO PREPARE FOR YOUR BANKRUPTCY FILING” please send a request by e-mail to: farquharesq@yahoo.com.

What the heck is an bankruptcy adversary proceeding? Why would someone bring one against me?

Adversary proceedings happen sometimes in bankruptcy cases.  I write about this because a debtor will sometimes file for bankruptcy and then get a notice of an adversary proceeding that has been filed in the case.  This can cause tremendous worry to the client.  But don’t despair, a good attorney will be prepared to handle one of these cases and protect your rights.

An adversary proceeding is literally a lawsuit within a bankruptcy case.  A case within a case.  It means that someone objecting to or fighting about something in the bankruptcy case.  Somebody is letting you know that they have a problem with some aspect of your bankruptcy and they are going intervene in your case to get their problem/objection dealt with.

An adversary proceeding can be brought by just about anyone.   A debtor, a creditor, or even the bankruptcy trustee who is tasked with looking for things like fraud in a bankruptcy case. Almost anyone can file one if they have a legal claim against the debtor or his property.

An adversary proceeding most often happens when someone is intervening in the bankruptcy case to say that some debt is not dischargeable.  Allegations of fraud are the most common reason to file one of these.  Creditors or the trustee himself can file an adversary to challenge the dischargeability of some debt if fraud is suspected.  These are the cases filed under the “exceptions to discharge” under 11 USC § 523(a)(2) of the bankruptcy code.  In addition to fraud, but less often, misrepresentation, false pretenses or other allegations can be pleaded in these cases.

The fraud cases usually come down when a credit card company files an adversary challenging a large charge made on one of your credit cards prior to filing.  These same companies can also object to a large cash advance taken out on a card especially if the cash advance is taken out at a gambling casino.  (I have had a number of these cases over the years as this is more common than one might suspect).

There can be other larger allegations of fraud that can allege fraud over some asset like real estate.  These cases can reach into the millions.  If you find that an adversary was filed against you for very large debt then it is even more important to contact an attorney right away to protect your rights.  With all of these cases is the other side wins then the debt they are challenging will be deemed not discharged in bankruptcy and you will still owe it when the bankruptcy case is finished.  This tends to defeat the whole point of bankruptcy and therefore these cases must be dealt with quickly and correctly.

If it is the trustee who is trying to recover property for the bankruptcy estate (property that was transferred out of the estate prior to filing) then he would file an adversary action alleging fraudulent transfer.  In that case he would go after the recipient of the property which could be a problem if it is a relative or friend of the debtor.  (See here for more on fraudulent transfer).

Other reasons for adversary proceedings would be when a creditor believes a bankruptcy was filed in bad faith.  A debtor can also file an adversary proceeding against a creditor for violations of the bankruptcy automatic stay when a creditor attempts to collect a debt which he cannot because of the bankruptcy.  There are adversary proceedings filed by the debtor’s attorney to strip off second mortgages.

There are numerous reasons for adversary but contact a bankruptcy attorney right away if you get one filed against you.  There are distinct timelines to respond to one of these and definite procedures for doing so.

I am bankruptcy attorney in San Diego who handles adversary proceedings for both settlement and trial.  Please visit my websites at www.farquharlaw.com or www.freshstartsandiego.com for more info. about any of these topics.  Or call my office for a free consultation at (619) 702-5015.  Call now for free credit report and analysis!

For a free e-book: “13 THINGS YOU SHOULD DO TO PREPARE FOR YOUR BANKRUPTCY FILING” please send a request by e-mail to: farquharesq@yahoo.com.

Bankruptcy and the Bible. Yes, debt forgiveness is in there!

bible 3You may have heard it quoted.  It is written in the bible in the Old Testament.  I quote it here:  Deuteronomy 15:1-2, “At the end ofDeuteronomy 3 every seven years you shall grant a release.  And this is the manner of the release:  Every creditor shall release what he has lent to his neighbor.  He shall not exact it of his neighbor, his brother, because the Lord’s release has been proclaimed”.  Yes it is in the bible.  A “release” from your debts shall be granted every seven years by your creditors.

This verse therefore commands creditors to release people from the debts owed by debtors every seven years.  You could argue that the bankruptcy just enforces this biblical passage through the use of law.  You could easily argue that bankruptcy is indeed the very debt forgiveness talked about in this biblical passage.  (And I doubt the creditors will follow this biblical principle without bankruptcy law but you can try).

You could ask why is debt forgiveness in the bible.  Most of us in the debt relief business believe that it is in the bible because people knew in ancient times what we should all know now.  Debt is damaging to people, damaging, to society and damaging to the future of mankind.  It can’t be carried by people forever and it can’t be allowed to follow them and put them in debtor’s prison forever.

Debt slavery is extremely undesirable and indeed intolerable.  Debt must be released and people must be freed from it.  Ancient peoples knew that then and most of us who have lived with debt know that now.  And some would say that God commanded a seven-year debt forgiveness through this verse in case people forgot.  But it is clear that the bible sanctions debt release/forgiveness and it appears that it must be done on a regular seven-year basis.  It is hard to argue that this verse could mean anything else but that.

I believe that it is true that this forgiveness is necessary because people who are burdened with debt can’t spend, save, invest in homes or retirement and therefore can’t truly be productive members of society.  Sadly many of them check out and some even commit suicide because of debt.  Many of my clients have told me that they have considered suicide with all their debt prior to their consideration of bankruptcy.  Debt burdens are potentially the ruin of individuals and nations.  (see here for my article on my website on why you should file bankruptcy)

Bankruptcy is not the bad thing that many people believe it to be.  Many believe that it is irresponsible, somehow sleazy, underhanded, and in effect cheating.  Many believe that they must pay back their debts no matter how large they are and no matter how long it takes.

But then what is the purpose of your life?  To be a slave to your debt?  To spend you entire days on earth paying something to someone else that enriches them and impoverishes you?  With interest?  They knew better thousands of years ago.  I often believe that in modern times we make silly mistakes and have ridiculous beliefs that our ancestors would laugh at.

Bankruptcy is a liberator of people.  It frees them from debt and gives them a fresh start.

For all of our modern science and technology we still sometimes forget lessons they learned long ago,  One of them is that debt is bad.  It must have a limit in years.  It must be forgiven periodically.  This is good for everyone so let’s get on with it.

The next time someone disparages your thoughts of bankruptcy mention to them that it has been recommended for a very long time by some very trusted sources.  Enjoy your freedom and God bless!  Check out my blog about bankruptcy and Christianity here.

I am bankruptcy attorney in San Diego.  Please visit my websites at www.farquharlaw.com or www.freshstartsandiego.com for more info. about any of these topics.  Or call my office for a free consultation at (619) 702-5015.  Call now for free credit report and analysis!  For a free e-book: “13 THINGS YOU SHOULD DO TO PREPARE FOR YOUR BANKRUPTCY FILING” please send a request by e-mail to: farquharesq@yahoo.com.

Holy bible photo courtesy of Jemimus.  Deuteronomy photo courtesy of Billy Alexander.

Are people leaving the labor force? Is unemployment really rising? The labor force participation rate says yes!

There have been many articles and warnings lately that people are leaving the labor force.  These articles claim there are fewer people working or looking for work each year and that the labor force of employed or employable individuals is shrinking.  This is occurring while the population is still rising.  There is therefore apparently not a lessening of the population but a lessening of people in it that are eager to work.

That begs the question of why this is happening.  Is the population just aging?  Are people retiring earlier or are kids staying at home longer?  Or is it that more and more people just giving up and forgetting about working or looking for work?

And if these people are just leaving the workforce out of disillusionment with the current state of the economy then how are they surviving?  Is government (you and me) paying for them?  Are they living off friends and relatives?  Are they living off the land?  What are these people doing and why and will it continue?

According to a recent online article posted on ZeroHedge the labor force has declined in the month of April by 522,000 people.  That means that there are currently 88,419,000 people who are not in the labor force but who are of an age where you would expect that they would be (over the age of 16).  This represents a new low.

I found a definition of the “labor force participation rate” in the Winston-Salem Journal.  It is a term used by the Department of Labor and it simply means the number of people over the age of 16 working or actively looking for work.  According to this article the labor force participation rate for April 2012 is 70% for men which is the lowest since the government started keeping statistics on this in 1948.  For all Americans it has reached the lowest level since 1981.

Some say that high paid jobs are being replaced by low wage manufacturing and construction jobs.  This could account for the lowest level ever of men working.  Many of my clients have looked for higher wage jobs for years and can’t find anything.  Many of these people have given up trying to find a job out of disillusionment.  They simply won’t take a very low paid job at their age and skill level.

As far as 16 year olds are concerned most don’t currently work even if many of us adults think they should.  Indeed the current “failure to launch syndrome” tells us that 70% of children under the age of 30 still live with their parents.  Women make up more than 60% of college grads and they are entering the workforce in numbers which may contribute to lack of job availability for men.  The overall labor force participation rate peaked in 2000 when women really began “flooding” the workforce according to this article.

But still  it seems in general that more people are continuing to leave the workforce.  Some groups have a higher rate but every group seems to have fewer people working as the numbers for the whole labor force participation is at its lowest rate since 1981.

The problem is that the government only counts unemployed people if they are in the labor force. If they have exited for any reason then they are not counted.  So when you are told that the unemployment rate is declining then remember these figures.  Ask yourself if unemployment really is declining because it seems to me that it is still rising.  It also seems like there is an ongoing mass exodus currently from the labor force.  A mass exodus that is not showing up in unemployment statistics.

You might come to the same conclusion that we are being lied to.  That unemployment is rising, more people are out of work and these people appear to be so disillusioned that they have given up on work altogether.  All the while we are being told that the economy is improving and unemployment is falling.  I say don’t believe it.

I am bankruptcy attorney in San Diego.  Please visit my websites at www.farquharlaw.com or www.freshstartsandiego.com for more info. about any of these topics.  Or call my office for a free consultation at (619) 702-5015.  Call now for free credit report and analysis! 

 For a free e-book: “13 THINGS YOU SHOULD DO TO PREPARE FOR YOUR BANKRUPTCY FILING” please send a request by e-mail to: farquharesq@yahoo.com.

How to kick out a squatter from your home or condo in California. If police won’t remove them then you must evict.

I have written several blogs about the squatter phenomenon in America and around the world today.  There is a whole squatter movement that preaches that squatters have the right to occupy vacant homes.  As I wrote in a previous blog………..many groups are pushing the “housing as a human right” philosophy and encouraging people to take over homes that are unoccupied.  They seem to feel entitled to these homes because they believe the banks were responsible for the financial meltdown.  Whatever the justification the squatter movement is leading to a situation where vacant homes are being occupied.

It is common now that a bank will foreclose on and take back a home only to have it remain empty for a period.  During this period the squatter moves in.  A hapless individual buyer may then purchase the home in the foreclosure sale or from a middle man.  The homeowner would then be presented with the squatter problem.  He may not have been told by the bank and the bank may not have known themselves about the squatter’s existence.  Some squatters don’t make their occupation obvious.

Now the problem is that of the current owner.  These squatters can be angry, violent and have been known to attack owners or property managers inspecting property.  The people inspecting may have no idea that the squatter was there.  I reported on this in a previous blog: http://bit.ly/Iyo3g4 .

The squatters rights movement is made all the more possible and widespread by the foreclosure crisis in America which left this large number of homes vacant.  The reality is that someone does own these homes.  They are either owned by the bank or by some business or individual.  Eventually someone, either as owner or renter, will legally attempt to occupy it.  If there is a squatter in there then this could be a problem.  At that point it does not matter if the squatter is just a lone criminal or someone spurred on by a political movement.  He is now the homeowner’s problem.

Many squatters present phony, fraudulent rental agreements to anyone attempting to challenge their occupation of the premises.  This present a problem because there is an appearance of legitimacy created by the phony document.  This is enough to ward off the police who view this as a legal dispute which needs to be heard in court.  In California the police will therefore probably refuse to get involved when called and tell you to get an attorney and evict the squatter.

This is what I recommend too.  A client of mine just told me he has a squatter in his condo and I told him the same thing.  He needs to evict the squatter immediately.  The squatter should be given a 3 day notice to pay rent or quit (or a 3 day notice to vacate the premises because there is not rental agreement or agreed upon rent amount).  The notice must be delivered properly and done in the proper format in case the squatter gets a tenants rights lawyer.  In California tenants have many rights and as landlord you must be sure to do everything correctly.

Once the 3 day notice is created, signed and delivered personally or by what is called “post and mail” then the 3 days must elapse before you file and eviction.  Post and mail means you post a copy and mail a copy to the resident/squatter.  You may not know the squatter’s name so that creates another problem too.  Now you file the eviction and serve it with a process-server on the squatter.

The next step is defaulting the squatter if he does not answer but if he does then you have to set the case for trial.  If he does not show at trial then you get a default judgement and if he does then you must show that you own the property or you are an agent of the owner.  If you own the subject property then you can go in at that point and say to the judge that this is a squatter with no legal rights/lease/rental agreement.  Let the squatter show his phony lease to the judge.  It is unlikely to hold up in court.  If it does then you can object and at least demand rent be paid.  Be sure to be ready to testify to how long you believe the squatter has occupied the premises so you can demand rent for that whole period.

Chances are the whole thing will break down before this point and you will win.  I do recommend a good tenant’s attorney though because these are complicated procedures that need to be done correctly.  Remember that “self-help” is not allowed in California and this is the proper legal process if the police will not remove the squatter in the first place.

I am a San Diego bankruptcy attorney.  Please visit my websites at www.farquharlaw.com or www.freshstartsandiego.com for more info. about any of these topics.  Or call my office for a free consultation at (619) 702-5015.  Call now for free credit report and analysis!

For a free e-book: “13 THINGS YOU SHOULD DO TO PREPARE FOR YOUR BANKRUPTCY FILING” please send a request by e-mail to: farquharesq@yahoo.com.