Tag: Bankruptcy

What is a Homestead and What Does It Have To Do With Bankruptcy in Oakland?

Thinking of filing for bankruptcy in Oakland or nearby, but worried about what will happen to your house? When you hear the word “homestead” do you start thinking about the Ponderosa, the Cartwrights and six-shooters? Speaking of “Bonanza,” didn’t it always bother you that the same parents who produced Adam and Little Joe could also give life to Hoss–and what kind of a name is Hoss, anyway?

It turns out that the term homestead still has meaning in our modern day. Homestead is actually a legal term for property that a property owner is claiming as his residence. Under California law, residents are allowed to protect their homesteads from demands of creditors up to certain values depending on their age and the size and makeup of their family.

As of 2012, a single person can protect up to $75,000 of equity in his homestead. If we’re talking about a married couple or someone living with his minor children, they can protect $100,000 of equity in their homestead. If the homeowner is over the age of 65, he can protect up to $175,000 of equity whether he’s married or not.

There are a bunch of other rules for homesteads besides these common ones.

So if you file for bankruptcy with an Oakland bankruptcy attorney, that bankruptcy attorney will take a look at how much you owe on your house and how much your house is worth. As long as you are able to exempt (protect) all the equity in your house with one of the homestead bankruptcy exemptions, you should be fine when you file your bankruptcy case to wipe out your credit cards, some taxes, medical bills and other stuff in collections.

Since homesteads in bankruptcy can be kind of complicated, you really should talk to a bankruptcy lawyer in Oakland or nearby. There are a number of good ones, including the one who wrote this article. SmileGood luck to you with your bankruptcy plans.

Which Bankruptcy Exemptions Can You Use If You Just Moved to California?

Be careful about bankruptcy exemptions if you’ve just moved to Oakland from anywhere outside California. As I’ve explained in another post, you are allowed to protect and keep certain property. In California, the California legislature has decided on two lists that you can choose from. These lists apply whether you’re filing in Oakland, San Francisco, San Jose, Sacramento or anywhere else in the State of California. For most people who file for bankruptcy in California one or the other of these lists will allow them to protect pretty much everything that they own.

If you’ve moved from out of state in the past few years, however, you need to be careful. Under the current bankruptcy laws, we have to look at where you’ve been living for the past two to three years in order to determine if you’re entitled to use California’s exemption laws or if you have to use the laws of some other state.

Basically, the rules that determine which state’s exemptions you get to use are as follows:

1. The 730-Day Rule: Have you resided uninterrupted in the same state for the past 730 days? By the way, that’s two years (365 x 2 = 730). If the answer is yes, you use that state’s exemptions. If the answer is no, you go to the next rule, the 730 + 180-Day Rule.

2. The 730 + 180-Day Rule: Where did you reside for the greatest number of days in the 180 days preceding the 730 days prior to filing your case? How’s that for confusing? What it really means is that you look at where you lived the most between 2 and 2.5 years ago. Wherever that is, you get to use the exemptions of that state.

3. If it turns out that neither 1. nor 2. applies to your situation (i.e., you were living outside the country), you’re supposed to use the federal exemptions instead of the exemptions of a particular state. At this point, you definitely should talk to a lawyer who has a lot of bankruptcy experience so you can make sure you protect the maximum amount of property you can.

Does all of this really matter? Absolutely! The exemption lists vary a lot from state to state. California has one of the more debtor-friendly lists out there. You definitely wouldn’t want to file in California only to discover that you were not entitled to all the exemptions that would normally be available to a California resident. Again, this is why you should speak with an experienced bankruptcy lawyer.

What is a Bankruptcy Trustee and What Does He Do in a Chapter 7 Case?

Bankruptcy trustees are the folks responsible for reviewing each bankruptcy case filed and finding out whether there are going to be any assets with which to pay creditors.

We file most of our cases in the bankruptcy courts in Oakland, San Francisco, and San Jose. Each of these courts has a list of about eight “panel trustees.” These trustees are usually attorneys or accountants although that is not a requirement. When we file your case, a computer randomly assigns your case to one of these trustees.

The trustee receives an electronic copy of all the documents we file in the case and his job is to look it over to determine whether you have assets that can be used to pay creditors. Now before you panic about this, keep in mind that most cases are what we call “no-asset chapter 7 cases.” A no-asset chapter 7 case is one where the trustee looks it over and concludes that there are no assets there that can be collected and used to pay creditors. If the trustee makes this determination, his job is pretty much done.

One the most important events in your bankruptcy is what is called the meeting of creditors or the 341 meeting. This is a reference to section 341 of the Bankruptcy Code. That’s the section that requires all debtors to show up at the local federal building with their attorneys on particular day and answer a short list of questions asked by the trustee. The trustee asks these questions in order to decide whether there are assets to go after. He’s already reviewed your paperwork. Now he just wants to tie up any loose ends.

This meeting with the trustee usually lasts about three to five minutes. Following the meeting, the trustee will usually file a “Report of No Assets” which means that he’s done his research and rummaging and has determined that there are no assets for him to get a hold of. At this point, the trustee usually does nothing further in your case.

So what if the trustee happens to locate an asset in your case that can be used to pay creditors? Again, this is very rare. I have been filing cases for clients for over a decade and I can probably count on one hand the number of “asset” chapter 7 cases. In all but one of those cases, we knew going in that there were assets for the trustee to liquidate. In the one case that came as a surprise, it was when the client decided not to tell me about huge tax refund he was getting. The trustee questioned him about the refund and then went after it. The lesson? Always be up front and honest with your attorney.

OK. So if there are assets, the trustee has powers from the Bankruptcy Code and the federal government that allow him to take property from debtors, sell it and use the proceeds to pay creditors. The trustee gets to keep a percentage of the proceeds and that’s how he makes his living. If the trustee gets enough to pay creditors only a small percentage of what they’re owed, then that’s all they get. If the trustee manages to rustle up enough assets to pay off all the creditors, then he does so and returns any remaining proceeds to the debtor at the end of the case.

Generally speaking, I like pretty much all the trustee’s in the San Francisco Bay Area area. They are polite, friendly and respectful of the debtors. They know you’re nervous and under a lot of stress. They try hard not to do or say anything that will hurt debtors feelings or add to their stress level. Still, keep in mind that the trustee has a job and that’s to collect assets that can go to pay creditors. If the trustee feels like you’re not being honest or forthcoming in response to his questions, you’ll see him get nasty pretty quickly. Although they’re good guys, they have a job to do and they do it efficiently. Our job as debtor and debtor’s attorney is to help him understand your financial situation. If we do that, we’ll get along with him just fine.