By: Jeena Cho

Just in the last 2 weeks, I’ve received at least a dozen or so inquiries from home owners, realtors and others about loan modification. We don’t do loan modification and most San Francisco loan modification attorneys I know has  stopped doing them since new Civil Code Section 2944.7(a)(1) went into effect. In short, the law prohibits receiving money upfront to do loan modification. If anyone requires money upfront to do a loan modification, they are violating this law.

It is unfortunate that the banks seem more willing to take the loss on a foreclosure then to work with the homeowners and work out a loan modification. One solution that has been proposed is to give authority to the bankruptcy judges to modify the mortgage. This legislation has been shot down. It is one of the great ironies that bankruptcy judges can change the terms of the loan for every other types of properties (including rentals, commercial property, etc.) but not primary residence. In my opinion, a loan modification is not meaningful if the principal of the loan is not adjusted to reflect the value of the home. If your property is under water by $100,000 or $200,000, what good is a teaser reduction of interest rate?

In these difficult economical times, homeowners need to face the reality that it may not be possible to keep the home. I meet with clients almost everyday who could not afford their mortgage even if the banks had offered 0% interest. This is frequently the case with people who signed up for Neg Am loans. Once the Neg Am term comes to an end, very few people can afford the principal and interest payment.

Most homeowners I know that has tried to get a loan modification deals with the banks losing the paperwork (at least 2-3 times). Being told a different story by every single representative. And in general, getting the run around. Of those few clients I’ve seen actually get a loan modification, the change is not meaningful enough to make any difference.

One client recently received a letter from Chase offering a three month trial period. What I found to be interesting about the “offer” is that it specifically says the account will not be brought current. Chase specifically reserves the right to terminate the plan and continue with the foreclosure. In another words, we reserve the right to take your money and not give you a loan modification! This homeowner will fork over $10,000 in the three month trial period but there is no assurance that the bank will live up to its end of the deal and offer a loan modification. I could not have thought of a worse deal for the homeowner.

Currently, debtors that file for Chapter 13 can “strip” the second mortgage provided the value of the home is less then the first mortgage value. This may be the only true meaningful change for a homeowner that doesn’t put the homeowner in the bank’s mercy. At least one bankruptcy court in Orlando is contemplating requiring the banks to negotiate a mortgage modification with Chapter 13 debtors. Another benefit of Chapter 13 is that you can cure the arrearages of your first mortgage. For many homeowners, their property has decreased so much in value that stripping the second mortgage won’t make any difference. For others, they can’t afford the mortgage payment on their first mortgage so the lien stripping won’t help. However, if you can afford to make your first mortgage payment without the second mortgage dragging you down, Chapter 13 may be a good alternative.

Disclosure: I do not do loan modification. Please read our disclaimer.

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By: Jeena Cho

Can I get credit after bankruptcy? The simple answer is “Yes.” Most people will get offers for credit cards and cars after bankruptcy. Why? Because you can’t refile for 8 years (in case of Chapter 7 bankruptcy) and the creditors know they’ve got you. You can’t run and hide again. Most of these “deals” you get after bankruptcy are not deals at all. Here’s an example of one I’ve come across recently.

Our FDIC insured bank, has a Visa secured credit card that features:
- NO CREDIT CHECK OR INQUIRY
- Reports to all 3 major credit bureaus
- No annual fee
- 0% APR for 6 months on purchases
- Low $200 minimum deposit

It is perfect for people right out of bankruptcy.

Sounds great, right? No credit check? 0% interest rate? No annual fee? You’re thinking, where do I sign? NOT SO FAST! You must read the fine print before signing any document. So, being a smart consumer, you read the Cardholder Agreement. It’s 11 pages long, with very dense font. It doesn’t take long though to figure out this is not a good deal at all! In the first 3 pages, I find these fees.

• Set-up fee: $79
• Minimum monthly fee: $10 or 2% of total balance, whichever is greater
• Credit limit increase or decrease: $25 per occurrence
• No interest on deposit account

For the privilege of having a credit card, you will pay $199 in the first year. This is assuming you don’t carry a balance at all. Not to mention the fact that you have to front the money in exchange for the credit limit – interest free.

How about taking the money you would have given to the credit card company, and parking it in a savings account? Assuming $500 @ 1.5% interest, you just earned $7.55 in the first year. Instead of giving $199 to the credit card company, you’ve earned $7.55. Total amount you saved = $206.55. Of course, this amount doesn’t take into consideration fees for interest, overdraft, over limit, etc.

We live in a credit driven society. We don’t value savings as much as we should. Instead, we focus on credit, which is just borrowing from the future. How about saving for the future instead of borrowing from it? Don’t let these creditors take advantage of you and lead you into life of debt again. If you can’t pay cash for it, if you don’t have the money sitting in your bank account – you can’t afford it. So, go on, take that money and save it.

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by Brandi Bernazzani

Have you always wanted to be a saver but could never find the extra money?

If that describes you or your family, you are the RULE and not the exception in America.  Most people pay their major bills first and then spend as they need to and want to.  For the most part, unless people are in the habit of saving, they spend what’s in their account and sometimes more, regardless of how much they make.

If the idea of savings makes you cringe you’ve got to put a plan in place that automates the savings and removes the money from “your fingers” before you get a chance to find it a new home.

Here’s the solution in 3 easy steps:

1. Go to the web and find a reputable online savings account that offers these benefits and set up a new account:

a.      No fees to open or maintain an account
b.      No minimum deposit amount or account value to keep from paying fees
c.      Interest on savings of  > 1%
d.      FDIC insured
e.      Easily able to open multiple accounts
f.       A company you’ve heard of or one that is well established
(My favorite is ingdirect.com’s Orange Savings Account)

Once you have opened the account, nickname it “Cushion”. Then commit to not touching it, think of it as money that is untouchable.  This part is really important.

2. Determine a rough estimate of how much you could realistically save per month.
An easy way to do this is to go through at least 2 months worth of past spending.  Make sure to add in items (as if you spent on them monthly) that you pay once or twice a year like property tax or insurance.  Most working families in the bay area can reasonably save $500 to $1k per month but you’ll have to determine what you can do.  Remember, even $10 a month or $100 a month is better than $0 a month.  Start with an amount you know will make you successful.

3. Next, set up an auto transfer (at ingdirect.com) from your checking account (where you receive your direct deposit) to your Cushion Account, for the total that you’ve chosen to save each month.  Make sure the transfer is set up to take place a few days after you are paid each month.  You are also welcome to break up the savings into as many times a month as you are paid. That is up to you.

Once you’ve set up the auto savings, carefully monitor your spending to make sure you spend less than is in your checking account.  The first couple of months you may miss the $ that has been saved, but soon you won’t even notice and you will have adjusted your spending.  It’s likely the amount you see accumulating in your Cushion account won’t be exciting until you have at least $5K or $10K.  However, at some point, you are going to become motivated to add to your savings and before you know it, you might even become a Savings Evangelist. Pass on this article, share the idea with friends, and break the Financial Silence.  Make savings a new habit that is hard to break!

For more information, contact Brandi Bernazzani at (415) 664-5884

San Francisco based Financial Planner with Scalisi & Bernazzani Financial Services, LLC
Building a Roadmap to your Financial Success

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By: Jeena Cho

One of the most compelling reason to file for bankruptcy is if you cannot afford to pay your monthly living expenses and your debt. There comes a point where a person has so much debt that no amount of budgeting or living on beans & rice will make a bit of a difference.

If you are reading this blog, you probably already know about the two different bankruptcy (Chapter 7 and Chapter 13). Many people think they don’t qualify for Chapter 7 bankruptcy because their income is too high. That is true but not always. It’s possible that an above median income earner can pass the Means Test due to payments on secured property, or high medical costs. If majority of your debt is non-consumer (meaning business related) you don’t have to pass the Means Test at all.

If the client does not qualify for Chapter 7, the next step is Chapter 13. Here are three things to consider.

• I will have to pay back all of my debt. Rarely is this the case that the client’s income is so high that he or she will have to pay back 100% of the debt. Even if you do end up in a “100% plan” meaning all of your debts have to be paid back, you generally pay it back with no interest and no penalties.

• I don’t want to be locked in for five years. I get it. The idea of having to write a check every month for five years is not too appealing for most people. However, ask yourself – what are my alternatives? Are you expecting a big raise at your job where you’ll be able to tackle the debt on your own? Are you willing to continue on your current track making the minimum payments? Or deal with creditor harassment?

• Learn to save. Imagine after your Chapter 13 plan being debt free. No more harassing phone calls, threats of law suits or wage garnishment. Just be debt free. By the time you are done with your Chapter 13 plan, you should be used to setting aside certain amount of money every month for the plan. Now, that money is yours to save. Think of what you can do once you are debt free.

Bankruptcy is the beginning. Not the end. Is it scary? Yes. Will you be better off debt free? Are there other alternatives to filing? These are all the questions one should answer before filing. Bankruptcy should be the last resort, but it’s not the end, but a beginning.

Disclaimer: Please read our disclaimer. Unless you have hired JC Law Group as your attorney, there is no attorney-client relationship. This article is not intended to be legal advice. Obviously, you should consult with an attorney about your particular situation.

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By: Jeena Cho

Have you been meaning to call for an appointment but afraid to? You might be wondering, what happens at a meeting with a bankruptcy attorney? Well, for one thing, I promise you, it won’t hurt a bit, and you might even feel better.

• When you call our office, Chris, our receptionist will schedule a time for you to meet with either myself or my partner Jeff Curl. It will usually be about 1-2 weeks out.

• We send you a two-page questionnaire to fill out and send to us before the meeting. It asks for basic information: amount of debt, amount of income, and assets/liabilities. I can’t tell you the number of people that tell me they had no idea he or she had so much debt. Everyone, and I mean everyone should know how much debt he or she has. If you don’t know, make a list of every credit card you have and the balance. Add it all up.

• The meetings generally last from 45 minutes to 1 hour. Either Jeff or I will meet you personally. We don’t believe a paralegal can assess your situation as competently as an attorney can. We do the following at the consultation: Listen, Ask, Listen, Answer, and Analyze.

Listen

Go ahead, tell us your story. What happened that led you to this point? Tell us the obvious, but also tell us about you. What do you do? What do you enjoy? What are you passionate about? I listen to people all day long and I love it.

Ask

As you are telling your story, I’ll ask questions. This is to make sure I get all the information I will need to be able to assess your situation and also make sure I did not miss any important details. And you can ask us questions as well.

Answer

Of course, you’ll have questions for me. I answer questions all day long. This is the reason why I blog. So I can answer questions. I will do my best to answer all of your questions. If I don’t know the answer, I’ll tell you, but I’ll find out the answer. Sometimes, a referral may be in order. I only practice bankruptcy law. I can’t help with tax, real estate, family law, immigration, etc. I have good people I can refer you to. You can ask me any question you like. Some people ask about credit after bankruptcy, others about being able to keep their job after bankruptcy, keeping homes or cars after bankruptcy.

Analyze

The next step is for me to analyze your situation to determine if bankruptcy is an appropriate solution for you. Just as it would be unethical for a doctor to recommend an unnecessary surgery, it would be unethical for me to recommend bankruptcy unless I believed it was in your best interest. We build our practice based on trust, and by exceeding your expectations so that you will refer your friends and family. Obviously, we can’t build trust unless I’m completely honest with you.

What I’m analyzing is how long it will take you to get out of debt without bankruptcy. Do you have assets, and if so, can we protect them in bankruptcy? Do you have any sources of money coming such as life insurance or inheritance? What are costs you will incur by avoiding bankruptcy? Are you willing to give up all of your disposable income for the next 20 years so you can pay back your credit card? There is no “right” solution, only better or worse solutions. It may all feel like rock and hard place.

If bankruptcy is a solution for you (notice, I said “a” solution, not “the” solution), I will quote you a flat fee. Please don’t call and ask how much we charge for bankruptcy. There is no way for me to know the details of your circumstances without having done the above analysis. After that, you go home and think about it. I don’t push you to sign a contract on the spot. I always say go home and think about it.

So, think about this article. Chew it over. Sleep on it. When you’re ready, we’ll talk.

Disclaimer: We are San Francisco bankruptcy attorneys. Unless you have hired JC Law Group as your attorney, there is no attorney-client relationship. This article is not intended to be legal advice. Please consult with a San Francisco bankruptcy attorney about your particular situation.

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By: Jeena Cho

Good people are good because they’ve come to wisdom through failure. William Saroyan (1908 – 1981)

Upon the conclusion of the winter Olympics this year, what really caught my attention were the stories of the athletes. My favorite stories are those athletes that failed before but came back to win. Everyone loves the underdog that comes back to win.

If there was one message I wish I can convey to every person contemplating bankruptcy, it is this: You are NOT a failure simply because you filed for bankruptcy. Just like the athlete that bounced back to win the gold after a severe injury, illness, drug addiction or scandal so can you. We meet on average 16 – 20 clients per week. Assuming 50 weeks, that’s over 800 people per year. This doesn’t count the phone calls and emails we get from people in financial distress. So I know a little something about people who are filing for bankruptcy. The only common denominator among all these people is that 1) they are in financial distress and 2) they are struggling with the decision to file or not to file. That’s where the commonality ends and the uniqueness begins.

Who are these people filing for bankruptcy?

Doctors, lawyers, actors, teachers, waitresses, entrepreneurs, business owners, construction workers, financial advisors, accountants, athletes, students, parents, married, divorced, widowed, elderly, young, home owners, realtors, mortgage brokers, investors, government employees, nurses, restaurant owners, researchers, single parents, unemployed, employed, under-employed, receptionists, stock brokers, photographers, artists, designers, home owners… The lists goes on and on… All of them hit a bump on the road. Ok, maybe a very big bump.

All of them have come to a single conclusion – I cannot live with this debt anymore.

For some, this can take weeks. For others, years. Those who have more resources can delay longer, but the truth is, if you are going to file anyway, save your money and file sooner rather than later. Don’t cash out your 401(K), don’t borrow from your family and friends. The decision is the hard part. Execution is much easier. Just like those athletes that overcame great obstacles to win the gold, so can you. Ask yourself, can I be a better member of society, better father, mother, sister, brother, daughter, son, better employee, better business owner if I didn’t have this debt? Of course.

• Everyone has their story.
• Everyone struggles with the decision.
• It’s painful.
• Many feel a sense of remorse and guilt.
• The hardest part is making the decision.
• Do people regret the decisions that led them this point? Yes.
• Has anyone told me they regret filing? No.

You are not in this alone. You are certainly not the only one with overwhelming debt. Look around. There are cities, counties contemplating or filing for bankruptcy. I certainly don’t need to list the companies that have filed for bankruptcy in recent years. I’m stating the obvious by saying we’re in very tough times.

Many people delay coming to meet with me — a bankruptcy lawyer – in the same way they delay going to see a doctor. It’s easy to ignore the problem and hope that it goes away. You cannot afford to ignore your finances and hope that it will magically get better.

Disclaimer: Please read our disclaimer. Unless you have hired JC Law Group as your attorney, there is no attorney-client relationship. This article is not intended to be legal advice. Obviously, you should consult with an attorney about your particular situation.

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By PETER S. GOODMAN | New York Times
February 20, 2010

BUENA PARK, Calif. — Even as the American economy shows tentative signs of a rebound, the human toll of the recession continues to mount, with millions of Americans remaining out of work, out of savings and nearing the end of their unemployment benefits.

Economists fear that the nascent recovery will leave more people behind than in past recessions, failing to create jobs in sufficient numbers to absorb the record-setting ranks of the long-term unemployed.

Call them the new poor: people long accustomed to the comforts of middle-class life who are now relying on public assistance for the first time in their lives — potentially for years to come.

Yet the social safety net is already showing severe strains. Roughly 2.7 million jobless people will lose their unemployment check before the end of April unless Congress approves the Obama administration’s proposal to extend the payments, according to the Labor Department.

[More]

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by: Jeena Cho

We’ve received several emails and calls regarding Mann Braken’s bankruptcy. Most common question being, “I was sued by Mann Bracken and they have filed for bankruptcy. What happens to my case?” First, it’s important to realize Mann Bracken was the law firm representing the plaintiff in your case. So, it’s not Mann Bracken suing you, but Discover, Chase, Bank of America, etc. Mann Bracken as the law firm has filed for bankruptcy, but the plaintiff in your case still has the claim against you. The law suit won’t be dismissed simply because Mann Bracken cease to exist. Most likely, the plaintiff in your case will get new counsel and the law suit will continue.

If you do have a pending case, it’s important to get legal representation in your case. We suggest you contact a lawyer regarding your particular law suit.

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By: Jeff Curl, San Mateo Bankruptcy Attorney

In my recent experience, these three credit card companies seem to sue more quickly than other creditors.  Counsel for Chase mentioned filing something on the order of 5,000 new cases per month.  With such voluminous filings, it is their hope and desire that your will either pay them, or go into denial, bury your head in the sand and not do anything. 

The reason for hoping that you do nothing is that in California, after your are served with a summons and complaint, you have 30 days to respond to the complaint.  If you fail to do so, the creditor can request a default – at that point, the debtor essentially “wins.”  The default permits the creditor/prevailing party to obtain a judgment for damages.  With the default and judgment in its pocket, a prevailing creditor can seek to garnish wages, levy bank accounts or seek a variety of other methods for enforcing its judgment.

If you are sued by debt collectors such as Zwicker & Associates, Winn Law Group, Mann Bracken, or J.P. Morgan Chase Legal Department that sometimes represent these creditors, do not ignore it.  That only invites invasive collection activities.  Sometimes fighting it reveals that the creditor cannot prove its claim.  Sometimes bankruptcy is inevitable anyways, and filing your bankruptcy petition will stop the state court case in its tracks.

If you are sued, seek legal advice right away.  It is always disappointing when a client comes to us after garnishment and bank account levies because they panicked and did nothing.  It is often the case that we could have filed their bankruptcy petition and prevented this in the first place, or that they may have had a viable defense.

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By: Jeena Cho

Tax season is right around the corner and this is a common question regarding tax refund. If you live in California and can use California exemption, chances are, you can keep your tax refund. The amount of property you can keep through bankruptcy is governed by exemption laws. Some states have its own exemptions (including California). Other states use the Federal exemption.

In California, clients have the option of using either the 703 or 704 exemption. 703 exemptions are great for clients without equity in their home. 703 has what is known as “wild card” of $21,825 that can be applied towards any property of the debtor. This includes potential refund from either the IRS or Franchise Tax Board (FTB). Certain items have its own separate exemptions, hence you do not need to use your Wild Card to protect it.

Let’s take an example. Suppose Jane has $5,000 in her bank account, $3,000 in IRS refund pending, vehicle worth $10,000 and household furnishings worth $5,000.

Starting with the household items, we would apply the $525 exemption towards each item in the home. If any item exceeds $525, the excess amount would get peeled off the Wild Card.

Next, the car. She would first apply the vehicle exemption of $3,300. Next, she would peel off $6,700 from the Wild Card to protect her car. Now she’s down to $18,525. This amount would be sufficient to cover both the money in her bank account as well as the IRS refund.

Assuming she is filing for Chapter 7, this would be a “no asset” case, meaning she loses the debt, and keeps all of her property.

If you have any questions regarding the property you can keep through bankruptcy, you should consult with a bankruptcy attorney. Jeena Cho is a San Francisco and San Mateo bankruptcy lawyer. The information contained in this article is meant to be educational in nature and should not be taken as legal advice. Please consult with an attorney regarding your particular circumstance.

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