Los Angeles Bankruptcy Lawyers Blog

Some people in Los Angeles are right now wondering if they should declare Bankruptcy due to financial desperation. So, what can Bankruptcy do for you and what's it going to cost you?

1. A Chapter 7 Bankruptcy can eliminate all of your credit card debts. However, if you have assets that go beyond your maximum exemption limits, the Bankruptcy Trustee can force you to sell your assets that go beyond your exemptions in order to pay off your credit cards.

2. A Chapter 13 Bankruptcy can help you avoid losing your home. However, you must be able to afford making plan payments from 3 to 5 years, and keep making your present mortgage payments.

3. A Chapter 11 Bankruptcy can actually be used for individuals that do not even have a business if their debt load goes beyond maximum amounts under a Chapter 13 filing.

4. A Bankruptcy does not allow you to pick and choose which debts and assets you wish to disclose. It is an "all or nothing" proposition.

5. A Chapter 7 Bankruptcy can actually allow you to avoid some of your tax debts, provided they are over three years old and you have a current payment plan with the tax agency.

The downside is that your credit will be affected. However, there is a good chance your credit has already been beaten down as you have fallen into this financial crisis. After your Bankruptcy is discharged, credit companies will be salivating over the opportunity to lend money to a person who cannot declare Bankruptcy again for at least another eight years.

If you think more deeply about these issues, many questions come to mind that are unique to you. As a Pasadena Bankruptcy Lawyer, I can demystify the subtleties of the Bankruptcy Laws so that you can maximize your relief and minimize your stress and anxiety over what is sure to be a difficult decision.

Kirk Laron
Pasadena Bankruptcy Lawyer

Most of us will remember the effort the Obama administration made in March and April 2009 to pass legislation permitting Bankruptcy Judges to modify or "cramdown" a mortgage to the present value of the homeowner's real estate. The legislation passed the House but was defeated in the Senate. Now, Congressman Barney Frank wants to give "cramdown legislation" another shot. The legislation would benefit homeowners whose homes are "underwater," i.e., of lesser value than the mortgage on the home, by cramming down the mortgage to the present value.

Another term getting a lot of press and a similar effect is "lienstripping" in bankruptcy. "Lienstripping" is bankruptcy jargon referring to a debtor's ability to reduce an undersecured creditor's claim to the present value of its collateral through claim valuation., Lienstripping has the effect of dividing an undersecured creditor's claim into secured and unsecured portions: The unsecured portion of the lien is "stripped" from the collateral and the deficiency between the total debt owed and the collateral's present value becomes an unsecured claim. The lien on the collateral remains only in the amount of the "secured" claim. Unfortunately, this process is limited to the reorganization cases, i.e., Chapter 11 (debtors whose debt amounts to over $1,010,050) and Chapter 13 cases and cannot be applied to the first mortgage of a debtor's principal residence (cramdown legislation would permit this extension) on the first mortgage. However, lienstripping can apply to a "junior lien" (second or third mortgage) on a principal residence. For example, Creditor 1 has a $200,000 claim on the principal resident and Creditor 2 has a $100,000 claim on the same home for a total of $300,000 and the home is only worth $160,000. By bifurcating the secured and unsecured claims, the Creditor 2's claim becomes unsecured and can be eliminated from the debtor's repayment plan.

Lienstripping applies to real estate, automobiles, boats, airplanes and other items. With exceptions and limitations, this process becomes quite complex and you should have bankruptcy attorneys such as Frazee/Laron handle these procedures for you.

--RoseAnn Frazee--
Los Angeles Bankruptcy Attorney

If you are a Los Angeles resident contemplating Bankruptcy but are having feelings of shame or guilt, rethink those feelings as they are likely misplaced and you are being too hard on yourself. A recent article in USA Today demonstrated just how obvious Bankruptcy filings have directly followed Foreclosures linked to the Housing Crisis. Nevada now has the most filings in the United States, and the fact that the state is home to the highest foreclosure rates is no accident. The days of Bankruptcy being reserved for the irresponsible are officially over. Fortunately, an individual has some choices, and can file a Chapter 7, Chapter 13, and even a Chapter 11 to keep assets and get a new lease on life.

If you are contemplating Bankruptcy because your finances are out of control, it is likely because of a job loss or cut in hours, a serious medical problem or illness that has happened to someone who is no longer employed with health insurance, or a person who was taken by an exotic loan that ballooned out of control when the teaser period ended and can't sell the house for even half of what they bought it for.

Remember, a Bankruptcy can actually save your home if you can file a Chapter 13 Bankruptcy, or you can still keep your home under a Chapter 7 if your equity has fallen dramatically (which includes just about everyone in Los Angeles) as long as you keep up your payments. However, this choice is a serious one that needs professional attention. As a Los Angeles Bankruptcy Attorney, I can evaluate your particular situation and develop the smartest way to handle a difficult financial crisis. Take action, get the help you need, and look forward to a new beginning where you don't have to wallow in the financial misery that has swallowed literally millions of Americans.

Kirk Laron
Los Angeles Bankruptcy Attorney

We have all read the headlines of murder-suicide by a family head facing financial difficulties in both Southern California and nationally in the past few years. There have been family murder-suicides in Yorba Linda, San Clemente, Porter Ranch, Covina and Wilimington. The Porter Ranch incident involved an unemployed financial analyst who shot his wife, three sons and his mother-in-law before killing himself last October. The recent stabbing deaths of two daughters in North Hollywood again highlights the recessive nature of the California economy and the housing crisis in driving family members to unthinkable crimes.

Fortunately, the US government established the Bankruptcy Code to help alleviate some of these extreme measures of coping with financial crisis. The Bankruptcy Code provides protection for family homes, cars and other items. If facing a financial crisis and have no money, you should still seek assistance from trained professionals. The US Court system provides a fee waiver program, and the Law Offices of Frazee/Laron stands ready to assist you.

-RoseAnn Frazee
Los Angeles Bankruptcy Attorney

Before considering a Chapter 7 Bankruptcy, one of the last assets a person feels forced to liquidate are their Retirement Accounts. Often times, clients will tell me that they figured it was an asset that would be taken anyway, so they might as well use it to either buy more time, or spend a little money as one last splash in the pool of wealth. You would not believe the sadness that overcomes them when they find out virtually all retirement accounts are exempt from Bankruptcy.

These exemptions only really apply to a Chapter 7 Bankruptcy, which is the far more common liquidation scenario whereby a person does not make enough money compared to other Los Angeles residents and wants to wipe their slate clean. If a Chapter 13 Bankruptcy applies, which is often used when one's income is either too high or they have an asset such as a home that would otherwise be liquidated and needs to be protected, the result is that no assets are taken at all as long as you keep up with the mandated payments.

Don't ever liquidate your retirement account to stave off a Bankruptcy. You just might discover after the fact when it is too late that you basically transferred your retirement money to a credit card company, when you could have kept the whole thing and wiped out all of your unsecured debt. There are just too many mistakes the unwary can make and the stakes are high. What is the number one reason for Los Angeles Residents to get a Divorce? - - Money Problems! Talk to a reputable Los Angeles Bankruptcy Lawyer and don't get burned.

Kirk Laron
Los Angeles Bankruptcy Lawyer

As a Pasadena Bankruptcy Attorney, I often have clients who think they can pick and choose the Debts they want to disclose. I often tell them, Bankruptcy is an "all or nothing" proposition. You must list all of your debts and all of your assets, especially if they are listed in public records such as tax records, credit reports, and title searches.

This is just one of the common mistakes that people can make when attempting to do a Bankruptcy on their own. However, just because you have to list all your Debts and Creditors doesn't mean you have to discharge all of them. There is an option known as Affirming your Debt, which means that you can still plan on paying that debt. This usually occurs when your debt is personal - to a friend or family member, for example.

Another concern that often comes up is that people fear not having any credit cards at all after they have declared Bankruptcy. As a Bankruptcy Attorney, here's my advice: Take one credit card that you have your smallest balance on and pay that one down to $0.00. You only have to list the Creditor if you have a Balance Owed. In this way, you can still keep one of your Credit Cards when you declare Bankruptcy.

By the way, don't worry too much about it. Within months after your Bankruptcy is discharged the Credit Card offers will start arriving in the mail once again. After all, you are a safe bet for at least eight years.

Kirk Laron
Los Angeles Bankruptcy Attorney

As a Pasadena Bankruptcy Attorney, I often have clients attempt to transfer property out of their name prior to declaring bankruptcy. The thinking is that they would rather give what little property they have to friends or family rather than have it taken by creditors. This is both dangerous and usually unnecessary.

Bankruptcy Exemptions under a Chapter 7 Bankruptcy are often very generous, and under a Chapter 13 Bankruptcy, you keep all your assets anyway as long as you maintain your monthly payments. In California, there are different systems of exemptions available, and often cater to those who are either homeowners or renters. Often times, the very property that one risks transferring prior to bankruptcy would never have been taken away in the first place. If a trustee discovers such a transfer, you can be prosecuted for Perjury and your Bankruptcy will almost certainly be dismissed. It is simply a foolish risk to take.

The key is to contact a Los Angeles Bankruptcy attorney who can advise you how to maximize your exemptions and avoid following popular myths related to Bankruptcy. Know the facts, knowledge is power, and know that if you feel you are doing something wrong there is a strong possibility it is illegal. Bankruptcy Trustees are usually experienced, smart, and have seen it all before.

Kirk Laron
Pasadena Bankruptcy Attorney