Los Angeles Bankruptcy Lawyers Blog

To make the Means Test simple to understand when considering a Chapter 7 Liquidation or Chapter 13 Payment Plan Bankruptcy, just ask yourself if you have any income left over after expenses at the end of the month. Let's face it, if you had any income to spare, you probably wouldn't be thinking of bankruptcy in the first place. Contrary to popular belief, the Means Test is more than just comparing yourself to the average income in your state, and hoping you fall below that average to qualify for Bankruptcy protection.

Many people in Los Angeles still qualify for a Chapter 7 Bankruptcy, even when their income is higher than most other people. This is because many people are strapped into a bloated Mortgage Payment, which counts as a valid expense for the means test, so it gets subtracted from that higher income. If you don't have more than you pay at the end of the month and your expenses are not extraordinary, other than a high mortgage, you can still pass the Means Test. In other words, just because you have decent income and live in the Los Angeles area does not mean that bankrutpcy protection cannot be there to give you a fresh start.

It is also important to categorize your debt to see if it is secured or unsecured, and how much you really owe on each asset. If you actually have substantial equity in your home, this can work against you as your exemption may not protect that full amount and the Trustee can force the sale of your home to pay creditors. The upside is that if you have little to no equity, your ability to stay in the home is actually greater, and you may be able to utilize generous exemptions in other areas as a California resident.

As a Los Angeles Bankruptcy Attorney, I can guide you through the pitfalls so that you can protect your property through various exemptions. Be wary of professional form preparers and high volume Bankruptcy Mills, as it takes more than a passing glance to see if Bankruptcy is the right option for you.

-Kirk Laron

According to a new analysis released by the Center for Public Integrity, the top five subprime lenders in U.S. were based in Los Angeles or Orange counties. Countrywide, Ameriquest Mortgage Co., New Century Financial Corp., First Franklin Corp. and Long Beach Mortgage Co. are the top five lenders who accounted for nearly $998 billion of the $1.4 trillion subprime mortgages made from 2005 to 2007. Countrywide Financial Corp., formerly headquartered at 4500 Park Granada in Calabasas, is a "key mortgage meltdown culprit" as coined by the Daily News. Countrywide topped the center's list of 15 lenders responsible for extending subprime mortgages to homeowners who might not otherwise have qualified for a mortgage.

For instance, the borrower was qualified for the loan at an introductory "teaser rate." The "teaser rate" is only good for a few years, and then the payments increase with the thought that the borrower's income would likewise increase. Regretfully, the borrower's income has often decreased in this economy, especially for salesmen on commissions. The salary decrease, along with the homes prices decrease, have left homeowners "underwater" and unable to continue the roll of refinancing.

John Dunbar, Director of the center's mortgage analysis project, is quoted as saying: "It was just a real lust for high yields and profits. Call it greed if you want." Kirk and I have seen clients in our Pasadena Bankruptcy law offices who were refinanced year after year with their mortgages increased by closing costs such as loan origination fees. Even more sadly, the loan officer would encourage the borrower to increase the loan even more to cause higher origination fees. The loan origination fees are the fees charged by the lender and one of the charges that go directly into the lender's profit pockets leading the borrower into "underwater" coffins.
-RoseAnn Frazee

Faced with Bankruptcy, many people in Los Angeles wonder about whether they will be forced to lose their homes. The answer is: It depends! If you are filing a Chapter 7, which most consumers will do, you have to look at the equity in your home. As a single person in good health, for example you can exempt up to 75K. This means if your equity is 75K or less the Bankruptcy Courts will allow you to keep all of this amount!

A few years ago, this seemed to be a trifle sum. However, nowadays many either have minimal or negative equity, so the one bright spot of this dismal economy is that you may get to stay in your home after all. Whether you want to walk away or not from the home is another matter. Also, if you have alot of equity and don't want to risk having the Trustee in Bankruptcy Court to sell your home for the excess equity above your exemption, you can file a Chapter 13 Bankruptcy provided your income is high enough to afford a payment plan. The good news is that a payment plan can often allow you to only pay back 10% of the original amount owed on many of your debts, and after 3 to 5 years, the rest of the debts are wiped out.
Bankruptcy is a weighty decision and should not be taken lightly. At www.frazeelaron.com we can walk you through a complete analysis in order to find the best way to stop the bleeding and provide you a solution that won't break the bank, yet provides you real legal advice instead of form fillers who can't step into court to fight for your dignity and economic survival.

Recent legislation last week failed to allow Bankruptcy Judges to order "Cramdowns" - which would have resulted in lower balances owed for home owners drowning in their home loans here in Los Angeles and the country. When it sounds to good to be true then it probably is. Never underestimate the power of a Bank Cartel to lobby for their interests in Washington effectively. To be fair, however, their contractual obligations to investors down the line have been problematic to say the least. Contract law makes it kind of difficult to unilaterally change the terms of an agreement that both sides understood.

So, what is the next Chapter in the Real Estate nightmare for so many? The Senate voted Wednesday to make it easier for homeowners with risky credit to switch to a lower cost mortagage backed by the government, but effectively conceded defeat on the Cramdowns by not including the provision in this latest version. Many people are wondering why they haven't seen the results from all of these Programs in the Headlines. Answer - Because, despite the incentives these programs are VOLUNTARY for the banks, and they still need to get permission from the Investors of these Mortgage Backed Securities to cut a new deal.

The good news is this. The incentives are increasing with each passing legislative announcement, and the reality is setting in that these Investors may not get their money anyway so why not cut a deal while they can still get something. As a Los Angeles area Bankrtupcy Attorney, I am finally starting to sense that your options may be improving, and we can provide you a real plan on how to salvage your Financial Dilemma without creating empty promises and false hopes. Just remember, if it sounds too good to be true, then it probably is.

-Kirk Laron