Month: April 2018

California bankruptcy exemptions can save your house.

California Homestead Exemption

California Homestead Exemption

Chapter 7 bankruptcy is liquidation; the bankruptcy trustee can take your stuff. They don’t take the shirt off your back, but at some point they draw the line regarding what you can keep. These are the bankruptcy exemptions, and each state has its own. The California exemptions include a way to protect some home equity. This is the California homestead exemption.

There are two sets of California bankruptcy exemptions. Bankruptcy attorneys call these the 703s and 704s. The California homestead exemption is found in the 704s, at California Code of Civil Procedure 704.730. There isn’t just one homestead exemption in California, but three.

The Three Homestead Exemptions in California

The California homestead exemption can save your house.
Don’t risk losing your house in Chapter 7. Talk to a experienced bankruptcy attorney about the bankruptcy exemptions and homestead exemption in California.

Firstly, there’s the bankruptcy exemption that a single homeowner gets. This is in subsection (a)(1). In 2018, a single person who lives in a house gets to protect $75,000 of home equity under the California exemptions.

Secondly, there’s a higher California homestead exemption for a married person’s residence. This is in (a)(2). The California homestead exemption for a married person is $100,000.

Finally, if you can tick one of three boxes, you get the superduper $175,000 homestead exemption in California’s bankruptcy exemptions. To level-up and qualify for this, you have to either be:

  • 65 years old;
  • have a disability that prevents gainful employment; or,
  • 55 years old, and make below a certain income level that changes from time to time

This may seem simple, but what is “disabled?” What is “as a result of?” What is the income level, and which time period is measured? You’ll want to speak to a qualified bankruptcy attorney in your area. But in the right circumstances, someone filing consumer bankruptcy can protect a lot more house equity under this third option.

Spouses Sometimes Count

A final note: a good thing about, in particular, the $175,000 California homestead exemption is that it extends to the spouse of the person filing Chapter 7. So if the debtor is, say, 63 years old, but their husband is 67 but really doesn’t want to file bankruptcy, the 63 year old who does file Chapter 7 bankruptcy gets the $175,000 homestead exemption in California anyway.

Be careful in Chapter 7 bankruptcy.  It’s not always the best type of bankruptcies.

Learn the differences between Chapter 7 bankruptcy vs 11 vs 13.

 

 

You really should talk to a qualified Los Angeles bankruptcy lawyer, as you get what you pay for, and it’s not worth risking your home.

Joey Lawrence bankruptcy

Joey Lawrence Bankruptcy Ends

Joey Lawrence Bankruptcy Ends

Some actors from the 1990s show “Blossom” have gone on to fame and fortune. Mayim Bialik has struck gold on “Big Bang Theory.” Others like Joey Lawrence, not so much. Despite earning over $500,000 in 2015, he took home just $60,000 the next year. Joey didn’t cut back enough on spending, couldn’t keep up. In 2017 a Joey Lawrence bankruptcy was filed, claiming over $355,000 in debts.

Joey Lawrence bankruptcy
Joey Lawrence from Blossom

With all that half-million-dollars income in 2015, Joey Lawrence still qualified for Chapter 7 bankruptcy. How can that be, you ask? Apparently he could barely cover his 2017 overhead, and passed the bankruptcy means test for Chapter 7. Now, in 2018, the Joey Lawrence bankruptcy has ended.

The Chapter 7 trustee was able to liquidate over $75,000 in assets for the benefit of Joey Lawrence’s creditors. Often, taxes are priority debts and get paid first, before the other, nonpriority unsecured debts. In the Joey Lawrence bankruptcy, the IRS didn’t even get half its debt. The same goes for the Franchise Tax Board.

Chapter 7 Can Be Tough

Chapter 7 involves losing stuff, and while Joey apparently didn’t have income to repay his debts, he had things the Chapter 7 trustee could take. So that’s what happened, and after almost a year, his case is now over and he can move on with his life.

People think that Chapter 7 is always better, and sometimes it is. But each situation is different and there are times someone is better off in another of the types of bankruptcies.

Finally, we’re often shocked when a famous celebrity we assume is rolling in cash falls on hard times. But acting is a profession just like being an engineer, sheriff deputy, or registered nurse. It’s human nature to spend what we earn. However, when the overtime is gone or next acting gig doesn’t come, not everyone adjusts their spending. The Joey Lawrence bankruptcy is a example that could be any one of us.

2018 median income limits bankruptcy means test

2018 Median Income Limits Changed for Bankruptcy Means Test

2018 Median Income Limits Change for Bankruptcy Means Test

The means test decides eligibility for Chapter 7 bankruptcy. The Chapter 7 means test lets people file bankruptcy without having to repay their debts if they earn less than the California median income limits, or those in their own state. So, 2018 median income changes impact who qualifies, since it sets the bar for who can get into Chapter 7 bankruptcy.

Means Test: 2018 Median Income Adjustments

As the economy changes, from time to time, the government updates the median income limits used. As a result, on April 1, 2018, the DOJ started utilizing new 2018 median income numbers for the Chapter 7 means test.

The California median income numbers have increased for bankruptcy means-test takers. Consequently, many Californians should now have an easier time qualifying to file Chapter 7 bankruptcy.

California household size and California median income for Bankruptcy

  • 1 – $54,787
  • 2 – $73,162
  • 3 – $79,061
  • 4 – $91,349
  • add $8,400 each add’l person

Read Our Means Test Guide.


Just because a household earns more than the median income, it’s still not barred from Chapter 7 bankruptcy. The bankruptcy means test would just need to be filled out completely. It’s still possible to qualify. However, even if someone isn’t eligible, there is still a way out in Chapter 13.

Finally, we don’t know the next time changes to the median income limits will happen again. So, be sure to check before relying on this 2018 median income limits in the future.

 

credit after bankruptcy

Credit After Bankruptcy Discharge Doable – study from LendingTree

Credit After Bankruptcy Discharge Doable – study

Last week, LendingTree, the largest online lender, released study results about credit after bankruptcy discharge. It followed people after their case was completed. This is consistent with my article asserting that there is indeed credit after bankruptcy discharge.

credit after bankruptcy
Yes, Virginia, there is credit after bankruptcy.

The researchers learned that a credit score of 640 or more was achievable after bankruptcy:

  • one year after bankruptcy for 43 percent of borrowers
  • two years after bankruptcy for 65 percent of borrowers

In fact, the researchers concluded:

 

People recovering from a bankruptcy are in a similar position to anyone who needs to repair their credit standings. The study finds no indication that people in the aftermath of a bankruptcy will have a harder time accessing credit than their peers who did not file for bankruptcy (except for potential mortgage loan embargos caused by the Fannie Mae policy discussed above).  Some people may even find themselves in a much better position to recover, thanks to a reset of their debt-to-income ratios.

See also LendingTree’s pointers for how to rebuild credit after bankruptcy discharge. This validates everything we’ve been teaching people, and shows that even if you feel trapped by bad credit, a bankruptcy can provide the fresh start you need.