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When I was a prosecutor, I was assigned to the Domestic Violence court. One of the most frustrating and difficult part of my job was getting the victims of domestic violence to see that the abuser was abusive. I would have victims with black eyes, broken arms, or bruised lips look me straight in the eyes and say “Oh, but he’s been so good to me. I don’t want to end the relationship.” I’d think to myself what? Are you kidding?

As a bankruptcy attorney, I have a similar reaction when my clients will tell me that he or she really “likes” Bank of America (Chase, Wells Fargo, etc.) and don’t want to end the relationship. “I’ve been with them for years and they’ve been good to me.” Maybe your bank isn’t breaking limbs, but they can certainly be Continue Reading » ]]> Written by San Francisco Bankruptcy Lawyer, Jeena Cho

When I was a prosecutor, I was assigned to the Domestic Violence court. One of the most frustrating and difficult part of my job was getting the victims of domestic violence to see that the abuser was abusive. I would have victims with black eyes, broken arms, or bruised lips look me straight in the eyes and say “Oh, but he’s been so good to me. I don’t want to end the relationship.” I’d think to myself what? Are you kidding?

As a bankruptcy attorney, I have a similar reaction when my clients will tell me that he or she really “likes” Bank of America (Chase, Wells Fargo, etc.) and don’t want to end the relationship. “I’ve been with them for years and they’ve been good to me.” Maybe your bank isn’t breaking limbs, but they can certainly be abusive. They abuse you by charging you 30% interest rate, taking your last dime, and would not hesitate to take the clothing off your back given a chance. Like the abusers in domestic violence court, they will continue to abuse until the Justice System steps in and says “ENOUGH!”

That’s precisely what happened when FTC and USTP recouped $108 million from Countrywide (acquired by Bank of America) for its borrowers.  Among other offensive behavior, Countryside was accused of the following:

“When homeowners fell behind on their mortgage payments, Countrywide ordered property inspections, maintenance, and other services meant to protect the lender’s interest in the property, the FTA asserted. Bur rather than simply hire vendors to perform the services, Countrywide created subsidiaries to hire the vendors. The subsidiaries marked up the price of the services charged by the vendors – often by 100 percent or more – and Countryside then charged the homeowners the marked-up fees… As these troubled homeowners found their way into bankruptcy, Countrywide continued to add on the fees …” Source: Consumer Bankruptcy News, July 1, 2010 issue.

Seriously?

If you have been in an abusive relationship with your bank, maybe it’s time you stand up for yourself and say ENOUGH! Maybe it’s time you stop giving away your hard earned dollars, or your savings over to the abuser. Unfortunately, in this abusive relationship, the abuser can refuse to let you out of the relationship. It can sue you, take your home, put liens on your property, garnish your wages and take your money.

This is why bankruptcy laws exist. It’s a legal way for victims to say to the abuser – Dear Bank, I am breaking up with you.

Recently, I was reading an email exchange on a bankruptcy lawyers’  Listserv. One attorney mentioned the “five stages of grief” and his client’s struggle through the stages. Most of us probably have experienced these five stages sometime in our life. When a traumatic event happens, such as a loss of a job, divorce, loss in stock market, death of a spouse, etc. It’s natural to go through these stages.

Here are the five stages of progression.

Do you remember that scene in Fight Club where Brad Pitt’s character says “You are not your bank account”? If you have not watched the movie, I highly recommend it. To view the clip I’m referring to, click here. So, what does Fight Club have to do with your credit score? Because, to quote from the movie,

“This is your life and it’s ending one minute at a time.”

Consider for a moment, your life and think about your goals. Let’s start with 5 years. Where would you like to be? What accomplishments have you achieved? How about in 10 years? In 20?

I don’t know what’s on your list, but I would probably guess correctly if I said – making monthly minimum payments on my credit card is not on that list. Maybe you would like Continue Reading » ]]> Written by San Francisco Bankruptcy Lawyer, Jeena Cho

Do you remember that scene in Fight Club where Brad Pitt’s character says “You are not your bank account”? If you have not watched the movie, I highly recommend it. To view the clip I’m referring to, click here. So, what does Fight Club have to do with your credit score? Because, to quote from the movie,

“This is your life and it’s ending one minute at a time.”

Consider for a moment, your life and think about your goals. Let’s start with 5 years. Where would you like to be? What accomplishments have you achieved? How about in 10 years? In 20?

I don’t know what’s on your list, but I would probably guess correctly if I said – making monthly minimum payments on my credit card is not on that list. Maybe you would like to buy a home, or a car. Maybe take a vacation to Europe. Pay for your children’s college education. Whatever your financial goals are, you cannot get to the starting line as long as you are enslaved to your debt.

So many of my clients will sit across the table and say “But my credit score is 710!” or “I’ve always had excellent credit.” My answer is, “But what can you get with your 710 credit score?” If you are so in debt that you are on the hamster wheel making the monthly minimum payment every month, what good is having an excellent credit score? Having a good credit score is supposed to be an indicator that you are credit worthy, but nowadays, that score seems to mean less and less. New credit is more difficult to come by than ever and there is little sign that the economy is improving.

You have the choice. You can continue to struggle, draining your assets to try and maintain that “perfect” credit score, or you can face reality and make the decision to fix your financial problem – once and for all.

There is no doubt that filing for bankruptcy will have a negative impact on your credit score. However, the impact is not as severe as most people think. Consider the following. 30% of your credit score is determine by the amount you owe (your revolving  credit.) So, if you are carrying a high balance on your credit cards each month, this can hurt your overall credit score. Another interesting thing to note is that 35% of your credit score is made up of payment history. For this reason, we find that about 1 year after bankruptcy, credit scores tend to re-bounce.  Why? Because your debt-to-income ratio will improve after bankruptcy and you can help repair your credit score by making timely payments on all of your bills.

Source: FHA Lender

My advice is to think long-term and figure out what it is you want. Is it to be debt free and start saving for the future? Or continue to live in the past and pay off your debt for the next 5, 10, 15 or more years? Most credit cards will take over 30 years to pay off assuming you make the monthly minimum payments. If you’ve been stuck in the world of making monthly minimum payments, ask yourself, what’s my exit strategy?

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]]> http://www.jclawgroup.com/blog/you-are-not-your-credit-score/feed/ 1 http://www.jclawgroup.com/blog/bankruptcy-podcast-1/ http://www.jclawgroup.com/blog/bankruptcy-podcast-1/#comments Mon, 16 Aug 2010 15:08:51 +0000 admin http://www.jclawgroup.com/blog/?p=509 In this Podcast, San Francisco bankruptcy attorneys Jeena Cho and Jeff Curl discuss the basics of Chapter 7 and Chapter 13 bankruptcy. Answering commonly asked questions: “Can I keep my home, car, property in bankruptcy?” and “How about my failing business?”

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You may have heard there is a “credit counseling” requirement before you can file for bankruptcy. This mysterious counseling class seems to give many people great anxiety. In fact, it is one of the first questions clients ask about. “What is this CLASS I have to take?” It’s easy to think the the class is a semester long, and you have to pay hundreds of dollars to attend. Nothing can be further from the truth! Credit counseling classes can be completed online, over the phone or in person. It will generally take you less than an hour. Costs vary between $15 to about $50 depending on where you go. One company I like is DECAF.

The credit counseling class was part of the 2005 Bankruptcy Amendment and it’s just another hurtle for people to have to get through before filing your bankruptcy. Continue Reading » ]]> Written by San Francisco Bankruptcy Lawyer, Jeena Cho

You may have heard there is a “credit counseling” requirement before you can file for bankruptcy. This mysterious counseling class seems to give many people great anxiety. In fact, it is one of the first questions clients ask about. “What is this CLASS I have to take?” It’s easy to think the the class is a semester long, and you have to pay hundreds of dollars to attend. Nothing can be further from the truth! Credit counseling classes can be completed online, over the phone or in person. It will generally take you less than an hour. Costs vary between $15 to about $50 depending on where you go. One company I like is DECAF.

The credit counseling class was part of the 2005 Bankruptcy Amendment and it’s just another hurtle for people to have to get through before filing your bankruptcy. There is one class you must take before filing and one after filing. You will be required to provide information about your income and debt (the same information required for the petition).

Aside from not having to go to an actual “class,” the other important thing to know is that there is NO grade, and NO pass/fail for the test. No one can tell you you do not qualify for bankruptcy from the class. You should be aware though that some of these credit counseling class are run by credit card companies and they may try to trick you into thinking you can afford to repay your debt. For this reason, I suggest you do a little background search on any company you select for credit counseling.

Disclaimers: JC Law Group is not affiliated with any credit counseling agencies.

Unfortunately, it is impossible to give legal advice over the internet, no matter how well researched or written. Before relying on any information I give, contact a lawyer to discuss your particular situation. I am a San Francisco bankruptcy attorney. The information given is based on California law.

Written by San Francisco Bankruptcy Lawyer, Jeena Cho

In this economy, when couples are contemplating divorces, they are not fighting over who’s going to get the silverware, but who is going to pay the marital debt. Frequently, there are no assets to distribute in divorce – only debt. Divorces are of course expensive. It’s costly not just in terms of having to pay for two attorneys, but the emotional toll as well. Just this week, I met with a client who had racked up over $30,000 in attorney fees all in an effort to take on as little of the marital debt as possible. Now she is contemplating bankruptcy to get rid of the attorney fees.

So, is it smart to contemplate bankruptcy before the divorce? If you are on amicable terms with your soon-to-be ex spouse and the only issue is how the debt will be divided, it may make a Continue Reading » ]]>

Written by San Francisco Bankruptcy Lawyer, Jeena Cho

In this economy, when couples are contemplating divorces, they are not fighting over who’s going to get the silverware, but who is going to pay the marital debt. Frequently, there are no assets to distribute in divorce – only debt. Divorces are of course expensive. It’s costly not just in terms of having to pay for two attorneys, but the emotional toll as well. Just this week, I met with a client who had racked up over $30,000 in attorney fees all in an effort to take on as little of the marital debt as possible. Now she is contemplating bankruptcy to get rid of the attorney fees.

So, is it smart to contemplate bankruptcy before the divorce? If you are on amicable terms with your soon-to-be ex spouse and the only issue is how the debt will be divided, it may make a lot of sense for both parties to file for bankruptcy. As long as you are still married to your spouse, you can file for joint bankruptcy. This will generally mean less attorney fees as only one petition needs to be prepared and filed. Divorce is painful enough as is and the goal should be to come out on the other side with little damage as possible, both financially and emotionally.

Regardless of whether the bankruptcy is filed before or after the divorce, support obligations, such alimony and child support cannot be discharged in bankruptcy.

Disclaimer: Unfortunately, it is impossible to give legal advice over the internet, no matter how well researched or written. Before relying on any information I give, contact a lawyer to discuss your particular situation. I am a San Francisco bankruptcy attorney. The information given is based on California law.

When you hire a bankruptcy lawyer, you are not just hiring someone to fill out the bankruptcy forms. If you wanted someone to simply fill out the forms, you can hire a document preparer for a couple hundred dollars. What you are paying for is the attorney’s knowledge about the bankruptcy law.

So, what goes into planning for a bankruptcy? Why hire an attorney for your bankruptcy?

Here are few items to consider.

Four real people, Michael, Robert, Robin and Andrew, shared their experiences going through bankruptcy. (Only Robert allowed us to use his real name.)

Living in the Bay Area, I have many clients who are business owners. Oftentimes, these small businesses are heavily in debt and have little or no hope of survival unless it can shed its debts. What most small business owners do not realize is that bankruptcy may actually be a beginning rather then an end.

Let’s take two simple examples.

Example #1. You operate a business as a sole proprietorship. There is $20,000 of business assets and $150,000 of debts related to the business. In addition, the you have $50,000 of personal credit card debt.

Assuming the owner does not have significant amount of personal assets or other non-exempt assets, s/he can qualify for Chapter 7 bankruptcy regardless of his or her income. The business owner would qualify for Chapter 7 as a non-consumer case. The rule is that if more than 51% of your total Continue Reading » ]]> By: Jeena Cho

Living in the Bay Area, I have many clients who are business owners. Oftentimes, these small businesses are heavily in debt and have little or no hope of survival unless it can shed its debts. What most small business owners do not realize is that bankruptcy may actually be a beginning rather then an end.

Let’s take two simple examples.

Example #1. You operate a business as a sole proprietorship. There is $20,000 of business assets and $150,000 of debts related to the business. In addition, the you have $50,000 of personal credit card debt.

Assuming the owner does not have significant amount of personal assets or other non-exempt assets, s/he can qualify for Chapter 7 bankruptcy regardless of his or her income. The business owner would qualify for Chapter 7 as a non-consumer case. The rule is that if more than 51% of your total debt was obtained for a non-consumer purpose (e.g., business purpose), you are not subject to the means test. This is particularly useful for those business owners who either has another high paying job or has a spouse with a high paying job.

As for the business assets, we would exempt those assets, hence being able to continue operation of the business after bankruptcy. Sometimes, it may be advantageous to incorporate the business as well.

Example #2. Let’s assume the same facts as above but that the business has a liquidation value of $60,000. In this situation, Chapter 13 may be an appropriate solution. In a Chapter 13, you would repay some of the debt. One of the common misconception about Chapter 13 is that you would have to repay all of your debt. Not true. The amount of your Chapter 13 is determined by the greater of the “liquidation analysis” or “disposable income.”

Liquidation analysis would be the portion of your assets that we could not exempt. In Example #2, the business owner would have to repay the unexempt portion of his business assets. The Wild Card exemption in California is approximately $23,000. Hence, leaving $37,000 of his business assets unprotected. That’s the amount which would have to be repaid in a Chapter 13 ($37,000/60 = $617/mo). (This is a very simplistic explanation because certain deductions are also made such as hypothetical trustee commission, cost of sale, taxes, etc.)

Disposable income test is a long calculation based on the Means Test where we take your gross income and make certain adjustments (e.g., taxes, medical expenses, health insurance, term life insurance, mortgage payments, etc.) At the end of the equation, whatever amount is left over would be paid to the Trustee for either 3 or 5 years.

In either Chapter 7 or a Chapter 13, at the conclusion of the case most of the debts (including credit card debts, SBA loans, and other business related debts) would be discharged, leaving you and the business free to continue to operate the business.

In the next article, I will address special consideration for businesses that are incorporated.

If you have a struggling small business, please call us for a consultation at (415) 963-4004.

Disclaimer: Unfortunately, it is impossible to give legal advice over the internet, no matter how well researched or written. Before relying on any information I give, contact a lawyer to discuss your particular situation. I am a San Francisco bankruptcy attorney. The information given is based on California law.

Let’s take