Category Archives: San Francisco Attorney

Discharging Student Loans - The Unicorn of the Bankruptcy World

By Jeff Curl, San Mateo Bankruptcy Attorney

A colleague of mine attended a student loan webinar put on by collection companies that chase down student loan borrowers in default. He asked for an estimate of the percentage of student loans facing a discharge in bankruptcy court. In other words, How often do bankruptcy courts grant discharges of student loans?

The presenter’s response was that discharging student loans was the unicorn of the bankruptcy world.

Student loan lenders and the collection companies do not fear borrowers that declare bankruptcy because student loans are not dischargeable unless the borrower can show an “undue hardship.”

Proving an “undue hardship” first requires a debtor in bankruptcy to file an adversary proceeding to discharge student loans. An adversary proceeding is a lawsuit by the debtor/borrower against the lender.

This in itself is a barrier to entry that eliminates most borrowers from pursuing discharging student loans. The expense of pursuing a lawsuit is cost prohibitive. If you filed bankruptcy with large student loan debts in the first place, funding litigation against a bank or collection company is just not in the cards for most people.

Second, the burden on the debtor/borrower to prove that the student loan is an undue hardship is very difficult. There have been some cracks in this high burden, but the courts where we practice still are bound to follow a very strict standard.

This is not to say that there are not appropriate cases where an undue hardship exists. But when collection companies openly declare discharging student loans as the unicorn of the bankruptcy world, expect resistance and be prepared for a fight.

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Clean-Up on Aisles Seven and Thirteen: Choosing the Right San Francisco Bankruptcy Attorney

By Jeff Curl, San Francisco Bankruptcy Attorney

Cleanup on aisles 7 and 13The amount of people filing bankruptcy continues to decline. Bankruptcy filings for the 12-month period ending June 30, 2013, fell 12 percent when compared to bankruptcy filings for the 12-month period ending June 30, 2012, according to statistics released by the Administrative Office of the U.S. Courts. This drop seems to have a commensurate counterpart: an increase in problem cases.

In discussing the state of affairs in the San Francisco bankruptcy lawyer world with some colleagues, there seems to be a consensus that while the number of filings has decreased, the complexity of most Chapter 7 and Chapter 13 cases has increased; at least that’s the sense concerning San Francisco bankruptcies. Unfortunately a noticeable portion of our recent complex cases involve taking over bankruptcies that have gone badly because someone attempted to file without an attorney or because even though the client made the right decision to hire counsel, the attorney made errors.

It is rewarding to help clients out of these difficult situations. Though not all parts of the rescue are enjoyable. Sometimes we can’t repair everything. And sometimes we have to go after the previous attorney and disgorge the fees paid by the client who was victimized by an incompetent attorney.

How does someone who is filing, and already stressed avoid these further stresses? First, do not file without an attorney. Bankruptcy is too complex, and even highly educated attorneys can make errors trying to navigate the ever-changing labyrinth of the bankruptcy world. Yes, attorneys make mistakes so it is no guarantee that everything will be flawless, but your chances of success are far, far greater with competent counsel.

Choosing the Right San Francisco Bankruptcy Attorney

(1) Trust your gut.

If you sense that you may have a difficult time working with the attorney or just don’t like them, follow that instinct. There is no reason to enter into a relationship because you feel pressured or for any other bad reason. You’re already stressed out, so don’t add to it by paying someone you don’t trust.

(2) What areas of law does the attorney practice?

If the attorney list eight areas of practice, and bankruptcy is one of these, it causes me concern. There may be complementary practice areas such as family law or business law that make sense. But when an attorney is trying to be all things to all people, I am concerned about how well he or she has mastered bankruptcy law.

(3) Ask about experience.

It’s okay to ask how long the attorney has practiced or how many cases he or she has handled.

(4) Referral from trusted source.

If someone worked with this attorney and liked the experience, nothing beats a warm body referral. Similarly, a trusted professional that knows the attorney is better than guessing.

You can also read this article posted at Fox Business about choosing an attorney, that includes advice from our own Jeena Cho. If you are contemplating filing bankruptcy, get an attorney, and choose wisely.

Photo courtesy of Kenny Louie.

Austerity Measures in Bankruptcy | San Francisco Bankruptcy Attorney

San Francisco Bankruptcy Attorney

By: Jeena Cho, San Francisco Bankruptcy Attorney

If you’ve been watching the news, you probably saw stories about Greece and its austerity measures. Austerity describes government policies to reduce budget deficits. Oftentimes, austerity measures are necessary in personal bankruptcy as well. We are creatures of habits, so most changes are painful. Budget cuts are a particularly painful type of change.

When I meet with a potential bankruptcy client, a common question I get is “do I have to give up _________.” This can be anything from bad habits like smoking to non-essential spendings like vacations. The answer to whether you can keep any single line item on your budget depends on several factors.

Can You Afford It?

The first obvious rule is that any budget item you want to keep should be affordable. This applies to homes, cars, utilities such as phone, cable and internet, food, transportation, etc. Frequently, people subsidize their income with credit. Without credit, you may find yourself coming up short each month. If this is the case, it’s time to take a hard look at your budget and ask yourself “can I afford this?”

Another helpful analysis may be to ask yourself “is this something I need or something I want?”

Reasonable and Necessary

The basic rule in bankruptcy is that all of your expenses must be “reasonable and necessary.” This is a case-by-case analysis, taking into consideration the client’s individual circumstances.

For example, a $600 per month payment for a BMW may be “reasonable and necessary” for a real estate agent where it’s important to portray a certain image to his or her clients. However, if you’re earning $40,000 or there’s no justification for why you need a BMW, this would not be considered “reasonable and necessary.”

Similarly, if you’re a busy working professional with young children, it may be necessary to pay for full-time child care. Not so much if you’re not working and can care for the kids yourself.

Is it fair?

Bankruptcy is premised on an idea that honest but unfortunate debtors should be afforded an opportunity to get a “fresh start.” Tied to this idea is that you should be required to pay back your fair share of the debt if you can afford it. This doesn’t mean that you’ll be required to eat ramen noodle for five years to repay your creditors. It does mean you probably won’t be able to dine out at every meal.

The information contained in this post is informational only and not substitute for legal advice. Please consult a San Francisco Bankruptcy Attorney about your circumstances.

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Discharging Tax Debt in Chapter 7

Discharging Tax Debt in Chapter 7

By: Jeena Cho, San Francisco Bankruptcy Attorney

This time of year, I get a lot of calls from panicked taxpayers. Despite common myth that taxes cannot discharged in bankruptcy, oftentimes it can be discharged.

Discharging Tax Debt in Chapter 7

In general, income tax debts, both Federal and State can be discharged in Chapter 7 if you meet the following criteria.

1. It has been more than 3 years since the return was due;
2. The return was timely filed or it has been at least 2 years since filing;
3. There was no fraud or attempt to evade taxes; and
4. No taxes were assessed within 240 days.

Even though the rule may sound simple, it’s not. There are many exceptions to the rule such as “tolling events.” For example, if you’ve filed for an Offer in Compromise, or requested a due-process hearing, it may toll (or delay) the running of the above dates.

Assuming you meet all the criteria for dischargeability, you can file for Chapter 7 and discharge the back taxes in full.

Steps for Discharging Tax Debt in Chapter 7

1. Order tax transcript
2. Determine dischargeability of tax debt
3. Gather information related to your income (paystubs, P&L, etc)
4. Review assets to determine exemption
5. Gather information on any other debts (credit card, car loan, mortgage, etc)
6. Complete credit counseling
7. Prepare Chapter 7 bankruptcy petition and sign
8. File Chapter 7 petition with bankruptcy court
9. Attend your 341 hearing (approximately 30 - 45 days after filing)
10. Complete another class - debtor education
11. Receive your discharge after 60 days

Chapter 7 vs. Offer in Compromise

- Chapter 7 takes about 3 - 4 months to complete from date of filing vs. Offer in Compromise that can take years.

- Unlike an Offer in Compromise where the IRS has the discretion to reject your offer, Chapter 7 is automatic. The IRS doesn’t get to decide if it wants to accept or reject your offer.

From this perspective, Chapter 7 is often preferred over an Offer in Compromise because it’s more straightforward and in general, more core cost effective.

If you live in San Francisco Bay Area and are facing overwhelming tax debt, bankruptcy may be the solution. Please call a San Francisco Bankruptcy Lawyer at (415) 963-4004.

Image credit: 401(K) 2013

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