Tag: exemption

Exemption

An exemption is the way you protect your assets in a bankruptcy. For example, the California homestead exemption is one example of how debtors can protect their home in a Chapter 7 bankruptcy. In California, there’s also an exemption to allow you to protect anything you want, but it has limits.

 

 

sb1099 new california exemptions home lock

SB1099: New 2022 California Bankruptcy Exemptions Increase

SB1099: New California Bankruptcy Exemptions Increase (2022) | 5 Major Wins

SB1099, the new California exemptions increase which gives debtors in bankruptcy more protections, is now law.  The new California exemptions in 2022 help people in bankruptcy keep more of their assets, including their cars, their home, money, support pay, and sick leave. The bill was signed by the governor yesterday, and takes effect 1/1/2023.

Note that SB 1099 and the 2022 California exemptions are different from the 2021 increase in the California homestead exemption which is tied to Los Angeles County median home prices. Last year’s homestead exemption boost strictly involved homes. The 2022 exemption hikes for California improves protection homes, cars, savings, support, and accrued leave and wages.

While the changes in the new California exemptions of SB 1099 are many and wide-ranging, below are some key highlights.

Home equity appreciation now goes to debtor, not the estate

A key provision of the new California exemptions law is that postpetition appreciation in the home equity of debtors cannot be taken to repay debts.  Section 2 of the SB 1099 says:

[I]n a case where the debtor’s equity in a residence is less than or equal to the amount of the debtor’s allowed homestead exemption as of the date the bankruptcy petition is filed, any appreciation in the value of the debtor’s interest in the property during the pendency of the case is exempt.

This addresses the horrible, terrible, no-good decision of In re Jacobson, 676 F.3d 1193 (9th Cir, 2012)  which provided the perverse result that debtors had a contingent homestead exemption. The

New California exemptions provide more protection for home and appreciation
New California exemptions provide more protection for homes and their appreciation

Ninth Circuit there ruled, “That right was contingent on their reinvesting the proceeds in a new homestead within six months of receipt. Cal.Civ.Proc.Code § 704.720(b). The Jacobsons did not abide by that condition and thus forfeited the exemption.” Jacobson at 1199.

Now, with SB1099 becoming law, regardless which way the housing market goes after homeowners file bankruptcy, appreciation in their house is theirs, and not the trustee who previously could take it to pay their debts.

Ridethrough for Cars is Back in California

In 2005, the bankruptcy reform known as BAPCPA required debtors in Chapter 7 bankruptcy to sign reaffirmation agreements if their lender provided one. This meant that the debtor owed the car loan, even if they lost the car to repossession after bankruptcy. With SB 1099, the debtor doesn’t need to sign the reaffirmation agreement, and the car loan can “ride-through” the bankruptcy case. Ridethrough was the norm before BAPCPA, and now in California, it has returned. The ride-through policy protects debtors from being liable for a big debt if they eventually default on the car loan.

The “ride-through” bankruptcy part from the new CA law helps debtors. In short, no longer is the person in bankruptcy gambling that they won’t suffer some future hardship and lose the car, and still be stuck post-bankruptcy with thousands of dollars in a car loan they can’t afford. Ride-through in bankruptcy for cars is back in California.

Car Exemption is Increased to $7,500

The new SB1099 law also increases the car exemption amount to $7500, regardless of which exemption scheme is chosen. The California exemptions have two tracks, in the 703 and 703 sections of the California Code of Civil Procedure. Each section previously has a different amount for protecting equity in a vehicle. Now, regardless which scheme debtors choose, they can protect $7,500 of equity. This is crucially important in this era of record prices for used cars.

Sick leave & family leave time protected up to $7500

Family leave, sick leave, and vacation credits are now exempted up to $7,500, as these terms are defined in Section 200 of the Labor Code.

Alimony and support

Pre-existing law included an alternative exemption for the debtor’s right to receive alimony, support, or separate maintenance, to the extent reasonably necessary for the support of the debtor and any dependent of the debtor. This new California exemption adds a general exemption matching the existing alternative exemption.

And there are more.

New California Exemptions of SB1099 help debtors … a lot.

While the list goes on and on, these are the key provisions. It amends Section 2983.3 of the Civil Code, Sections 703.140, 704.010, 704.050, and 704.113 of, and to add Section 704.111 to, the Code of Civil Procedure, and amends Section 22329 of the Financial Code, which relates to bankruptcy. The bottom line is the newly-enacted SB 1099 California exemptions protect homeowners, car owners, people receiving support, and sick pay. It’s a win for Californians, and those who lose out are the credit card companies. Rejoice, California!

 

fraudulent transfer California

Fraudulent Transfer California: Top Keys

Fraudulent Transfer in California: Top Keys

Fraudulent transfers. Voidable or fraudulent conveyances. They go with these 17 words: “Have you sold, transferred, or given away anything worth more than $3,000 in the last four years?” It’s a 341(a) question bankruptcy attorneys can recite in their sleep, and one that can cause our debtor clients to have nightmares. The reason is the trap known as fraudulent transfers, voidable transfers, fraudulent conveyances, and the like.

Fraudulent transfer in California comes up typically here in Chapter 7 bankruptcy. Also known as a fraudulent conveyance, it can get your friends and family in hot water. It’s one of the top tips recommended to do or avoid before filing bankruptcy. Fraudulent transfer grief can even include the recipient being taken to court in a lawsuit, and forced to give up something they own. It’s terrifying and a nightmare. Worst of all, it can all happen with the purest of intentions.

That’s right: fraudulent conveyance doesn’t even require fraud.  More on that in a bit.

What is a Fraudulent Transfer?

With all this talk about voidable transfers or fraudulent conveyances, we should probably define the terms.  What’s a transfer? The Bankruptcy Code defines a transfer, for our purposes, as “each mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with property, or an interest in property.” 11 USC 101(54D).

voidable transfers
Transfers in bankruptcy are defined as broadly as possible

You can’t get more all-inclusive of a definition than that. Direct or indirect. Definitely or maybe. Voluntary or not. Parting with property, or even just an potential stake in property. It “literally encompasses every mode of parting with an interest in property.” Matter of Besing, 981 F2d 1488 (5th Cir, 1993). Basically, if there’s something you had or could have had (or even had the possibility of maybe one day having), and… now you don’t, that’s a transfer.

So that’s a transfer. Now, what’s a fraudulent transfer?

Fraudulent conveyance or transfer isn’t defined in the Bankruptcy Code. However, case law defines fraudulent transfer in California (and the Ninth Circuit) as a transfer of “some property interest with the object or effect of preventing creditors from reaching that interest to satisfy their claims” or “an act which has the effect of improperly placing assets beyond the reach of creditors.” In re First Alliance Mortgage Company, 471 F3d 977, 1008 (9th Cir, 2006).

A fraudulent transfer as defined by the Ninth Circuit Court of Appeals is some act that stops your debts from getting something that would satisfy their claims. Note that the action can have either the “object or effect.” That means what you did has was to stop the creditors from getting it as the intended goal (object), or even just the unintended impact (effect).  But the appellate court went on. In the alternative, an act of putting something where the creditors can’t get it, and here the 9th Circuit adds the term “improperly.” Again, there’s talk of effect, which means you didn’t even have to do the act on purpose.

Summing that up, a transfer is pretty much anything you had but now don’t. A fraudulent transfer in the 9th Circuit is a transfer which had the goal or even just the unintended effect of making it so your creditors couldn’t get to the thing.  When you step back, this seems super broad and a trap that pretty much anyone can fall into without even meaning to, just because they sold their paid-off pickup truck a few years ago. And it can be, but for some limitations in the state and federal law.

The Law on California Fraudulent Transfer

Fraudulent transfers in California are governed by the Uniform Voidable Transactions Act (UVTA). The UVTA is Calif Civil Code 3439.04.  Notice the name: voidable transactions. This should get your attention, because it implies that someone can void, that is, undo or erase the transaction or conveyance. And that is exactly what can happen.  Let’s look at what the law says.

What California UVTA says about Fraudulent Transfers

The text of the fraudulent conveyance law in California:

(a) A transfer made or obligation incurred by a debtor is voidable as to a creditor, whether the creditor’s claim arose before or after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation as follows:
(1) With actual intent to hinder, delay, or defraud any creditor of the debtor.
(2) Without receiving a reasonably equivalent value in exchange for the transfer or obligation, and the debtor either:
(A) Was engaged or was about to engage in a business or a transaction for which the remaining assets of the debtor were unreasonably small in relation to the business or transaction.
(B) Intended to incur, or believed or reasonably should have believed that the debtor would incur, debts beyond the debtor’s ability to pay as they became due.

There are a couple of things to point out about this.

First, with California voidable transfers, the transfer is voidable.  That is, it can be made as though it never happened, if some conditions are met. Second, actual intent has to be shown the giver tried to hinder or defraud a creditor.  This sounds like a high bar, which can be a good thing for debtors.  Third, the debtor didn’t get equivalent value in return, and either was in a business or transaction and got in return something small in exchange, or intended to get debt or reasonably should have believed he’d have to get debts he’d be unable to repay.

That last sentence, number three, is a mouthful. It combines (2) and (A) or (B) from the UVTA statute. The gist of it is this: no intent needs to be shown, only that the debtor gave away or sold something for less than its value, and couldn’t pay his debts he was about to get.

So, using the California fraudulent transfer law, actual intent to hinder doesn’t have to be shown. The trustee or creditor needs to demonstrate that the debtor believed, or should have believed debtor would be unable to pay the debts.

(Note that the statute used to be called the UFTA or California Uniform Fraudulent Transfer Act. The old UFTA applies to transfers before 12/31/2015. With the new UVTA, the standard of proof became lower, and there’s no need to prove actual intent, as we’re about to see. But look to the date of the transfer; if you’re in California, and it’s before 1/1/2016, debtor may have an easier road utilizing the  old UFTA.)

Let’s now turn to how they prove actual intent. It helps to have a smoking gun letter that states, “I  declare that I actually intend to defraud this creditor.” But that doesn’t come up very much.

California Badges of Fraud under UVTA (Civil Code 3439.04)

Badges of Fraud for California Voidable Transfers

To prove actual intent, the California fraudulent conveyance law says the following

In determining actual intent under paragraph (1) of subdivision (a), consideration may be given, among other factors, to any or all of the following:

(1) Whether the transfer or obligation was to an insider
(2) Whether the debtor retained possession or control of the property transferred after the transfer
(3) Whether the transfer or obligation was disclosed or concealed
(4) Whether before the transfer was made or obligation was incurred, the debtor had been sued or threatened with suit
(5) Whether the transfer was of substantially all the debtor’s assets.
(6) Whether the debtor absconded
(7) Whether the debtor removed or concealed assets
(8) Whether the value of the consideration received by the debtor was reasonably equivalent to the value of the asset transferred or the amount of the obligation incurred
(9) Whether the debtor was insolvent or became insolvent shortly after the transfer was made or the obligation was incurred
(10) Whether the transfer occurred shortly before or shortly after a substantial debt was incurred
(11) Whether the debtor transferred the essential assets of the business to a lienor that transferred the assets to an insider of the debtor

A few thoughts about all those badges of fraud. Some badges of fraud clearly show someone had bad intentions: absconding sounds pretty guilty, as does concealing, or even keeping control after you supposedly give something away.

However, other California badges of fraud some a bit more innocent: being insolvent at the time or even after the transfer, or was sued or even threatened with a lawsuit, and whether the value received was reasonably equivalent.

How many Badges of Fraud are Needed

In 2021, Bankruptcy Judge William Lafferty wrote in In re Fox Ortega Enterprises, 631 B.R. 425 (NDCA, 2021) that “only one or two badges of fraud may suffice to find a transfer was made with actual fraudulent intent.  In re Ezra, 537 B.R. 924, 931 (9th Cir BAP, 2015); Filip v. Bucurenciu, 129 Cal. App. 4th 825, 834 (2005).” The Ninth Circuit BAP earlier found that the “UFTA list of ‘badges of fraud’ provides neither a counting rule, nor a mathematical formula. No minimum number of factors tips the scales toward actual intent. A trier of fact is entitled to find actual intent based on the evidence in the case, even if no ‘badges of fraud’ are present.” In re Beverly, 374 BR 221 (9th Cir BAP, 2007). Depending how these fraud badges are weighed, insolvency pretty much covers everyone in Chapter 7 bankruptcy, and doesn’t really require actual intent.

Proving insolvency under UVTA

Insolvency is proved under the UVTA using the “balance sheet test.”  The balance sheet test is traditionally “whether debts are greater than assets, at a fair evaluation, exclusive of exempted property.”  In re Koubourlis, 869 F. 2d 1319 (9th Cir 1989), citing 11 USC 101 (now subsection 32A). Therefore, a homeowner with equity and maybe $20,000 of credit card debt may pass the balance sheet test.

However, while we’re here discussing the UVTA state law, there’s also a rebuttable presumption against the debtor. See California Civil Code 3439.02: “A debtor that is generally not paying the debtor’s debts as they become due other than as a result of a bona fide dispute is presumed to be insolvent.”  Because of this statutory “cash flow test” on the books, it’s on the debtor to show that he or she was paying their debts at the time of the transfer to get it back to the potentially more favorable balance sheet test.

So all of that is fraudulent transfers in California. Let’s turn to the federal standard.

Federal Fraudulent Transfer Law

The Bankruptcy Code’s fraudulent transfer provisions are in Section 548, which is its own version of the UFTA.  Section 548 is titled “Fraudulent Transfers and Obligations.” The Bankruptcy Code, at Section 544, gives a bankruptcy trustee the power to avoid transfers made with actual intent to defraud and transfers made without reasonably equivalent value.

The key provision is in subsection (a), which is presented here:

The trustee may avoid any transfer (including any transfer to or for the benefit of an insider under an employment contract) of an interest of the debtor in property, or any obligation (including any obligation to or for the benefit of an insider under an employment contract) incurred by the debtor, that was made or incurred on or within 2 years before the date of the filing of the petition, if the debtor voluntarily or involuntarily [either]

  • made such transfer or incurred such obligation with actual intent to hinder, delay, or defraud any entity to which the debtor was or became, on or after the date that such transfer was made or such obligation was incurred, indebted; OR
  • received less than a reasonably equivalent value in exchange for such transfer or obligation; AND [one of the following]
      • was insolvent on the date that such transfer was made or such obligation was incurred, or became insolvent as a result of such transfer or obligation;
      • was engaged in business or a transaction, or was about to engage in business or a transaction, for which any property remaining with the debtor was an unreasonably small capital;
      • intended to incur, or believed that the debtor would incur, debts that would be beyond the debtor’s ability to pay as such debts matured; or
      • made such transfer to or for the benefit of an insider, or incurred such obligation to or for the benefit of an insider, under an employment contract and not in the ordinary course of business.

In short, the trustee has to show either actual intent to hinder, or less than value along with  either insolvency, giving away most of debtor’s stuff, about to incur debts, or helped an insider (family member).

Actual Intent of Section 548 Fraudulent Transfers

We see, then, from the first part of Section 548, that there has to be actual intent to hinder, delay, or defraud.  This is hard to prove, as the 9th Circuit pointed out in Kupetz v Wolf, 845 F2d 842 (9th Cir, 1988).  In that case, the circuit court analyze the leveraged buyout (LBO) of a mannequin company.  It went back on a history trip to the Statute of 13 Elizabeth passed by Parliament in 1571. Then, the appellate court explained how, for four centuries, courts relied on badges of fraud to try to infer intent. It then concluded that absent proof of actual intent, one can “assume fraudulent intent when an insolvent debtor makes a transfer and gets nothing or very little in return.” Kupetz at 846.

Constructive fraud alternative: No proof of actual intent

The other part of Section 548 provides a path for a trustee if actual intent can’t be shown, relying on “constructively fraudulent transfers.” The trustee would have to show debtor got less than value, along with one of four factors. Note that not all four are needed. The typical way to get here in a bankruptcy is where less than full value is received by a debtor who is insolvent. (see discussion on insolvency standards elsewhere on this page).

Some fraudulent conveyance examples

1. Selling a vehicle for value

Let’s say debtor a year ago prepetition was struggling to pay their debts as they came due. To make ends meet, debtor sold a vehicle by placing an ad while insolvent. They haggled and finally sold the vehicle to a stranger.  Voidable transfer? Probably not, because while debtor was insolvent, didn’t receive less than the reasonably equivalent value.

2.  Selling the asset to a family member

Now assume the debtor sold the item prepetition to a family member, and was even insolvent while doing so. Ah, we’re missing information: was there a sweetheart deal or was there reasonably equivalent value?  Let’s go with less than value, because heck, it’s family. Voidable conveyance, because less than value and transferred to an insider. The fact that debtor was insolvent, while not necessary in the 548 UFTA constructive fraud variables, actually hurts his argument. If he was struggling to pay his bills and insolvent, it makes one wonder why he’d settle for less than value and sure looks like a sweetheart deal and fraudulent transfer.

3. Divorce agreement transfers can be troublesome

Husband is debtor and has judgments against him. He structures his divorce’s marriage settlement agreement (MSA) to transfer basically all the assets to his soon-to-be ex-wife.  He can’t later say there was a “good faith for reasonably equivalent value.” Further, moving assets beyond the reach of creditors was explicitly part of the MSA negotiations as an actually fraudulent transfer.  In re Beverly, 374 BR 221 (9th Cir BAP, 2007)

4.  Quitclaiming half of debtor’s home to their adult child for estate planning

Debtor is advanced in age, has a home with some equity, and wants to put her adult child on title as a joint owner. The purpose is innocent: for estate planning, when debtor passes away, the child gets the other half of the real estate without having to create a will or trust. Debtor then quitclaims half of her home to the child, and files bankruptcy a year later. Fraudulent transfer, as it was for the benefit of a family member (insider), without receiving reasonably equivalent value in return.

That last example is interesting. What if the equity could have been exempted before the transfer?  The California homestead exemption is now very generous. Let’s say the entire equity or even the transfer amount was smaller than the broad exemption coverage for the homestead.  In California, the fraudulent transfer can still be avoided even if exempt. Read on for why.

Exemption status irrelevant

But wait, you might say. If debtor still had the asset, it could have been exempted!  That sounds persuasive, and in some states it would be. However, with fraudulent transfers in California in the Ninth Circuit, that’s not the case. In fact, the transfer of property waives the right to exempt it. Further, the recipient can’t claim it exempt for debtor, either. Gladstone v US Bancorp, 811 F3d 1133 (9th Cir, 2016).

Reachback period for fraudulent transfers and voidable conveyances

What’s the reachback period for fraudulent transfers or voidable conveyances in California? Like most things, it depends. For California fraudulent transfers, it helps to understand how far back in time the trustee can go, since when it happened can make all the difference between avoiding the transfer and getting the asset or it being safe.

The fraudulent transfer reachback time period varies, depending on which statute (the Calif UVTA or 548) is being used, when the transfer happened, and the type of asset it was.

  • 1 year: for cases commenced before 4/21/2006 per Section 548
  • 2 years: Section 548, for current cases and California’s UFTA for transfers before 2016
  • 4 years : using California fraudulent transfer statute 3439.09(b) for transfers after 12/31/2015
  • 7 years: using Section 544(b) and California 3439.09(c), but note 546(a) in bankruptcy, so maybe longer than 7 years, as equitable tolling applies In re EPD Inv Co, 523 BR 680, 691 (9th Cir BAP, 2015). Los Angeles Bankruptcy Judge Robert Kwan has an interesting discussion of this in In re Art & Architecture Books, 2:13-bk-14135-RK, Adv 2:15-ap-01679-RK, opinion dated May 5, 2021.
  • 10 years for Self-settled trusts (SST) using Section 548(e)

The 341(a) question asking have you sold, transferred or given away anything of value in the past four years isn’t really the end of the story. Even if it’s been five or six years, there may still be ways for the trustee to avoid the California fraudulent transfer and sell the asset. Is the voidable transfer reachback period clear as mud? You bet.

Burden of Proof for Fraudulent Transfers

After reviewing the reachback periods for fraudulent conveyances, you get a sense that it makes a difference whether the trustee is relying on the federal section 548 or California state 3439.04. Not only do they have different time frames, the burden of proof is different.

A creditor making a claim for relief under 548 subdivision (a) has the burden of proving the elements of the claim for relief by a preponderance of the evidence.  Under California’s UFTA (or UVTA), the burden of proof can be on the debtor if they weren’t paying debts as they became due. Calf CC 3439.02.

In short

A transfer is something you had before and don’t have anymore. If you file Chapter 7 bankruptcy, you will almost certainly be asked about it. This also applies to cash apps Zelle and Venmo with transfers of cash in and out of your bank account.  The Chapter 7 trustee, using one of the above tools, can go after the person or people who received the transfer and force them to give up the thing or money, even subjecting them to a lawsuit to force it to happen.  With fraudulent transfers in California, consider all your options, including Chapter 13 bankruptcy, as Chapter 7 can be a risky bet where assets have gone away.

    bankruptcy dos and don'ts

    12 Crucial Tips Before Filing Bankruptcy

    12 Crucial Tips to Do (and Avoid) Before Filing Bankruptcy

    Los Angeles Bankruptcy lawyer explains what to do and don’t before seeking a fresh start

    If you’re thinking about filing bankruptcy, what you do you beforehand has more of a bearing on the success of your case than how well the papers are completed. As a longtime Los Angeles bankruptcy attorney, I must make the best of the circumstances that are presented to me. Sometimes these situations are, shall we say, less than ideal.

    What follows, in no particular order, are just some of the things I wish the people I meet with had done, or avoided doing, before we met for the consultation.

    Do disclose all your income, asset, and debts

    Just before we meet, in the brief questionnaire I send you, disclose to me all the various income streams you have, all the things you own, and all the people and companies you owe. All means all.  Tell me about that small online business. Share me with me that 1967 classic car in showroom condition. Inform me about that embarrassing gambling debt. This way, I can give you the best advice. This prevents before us both being surprised when the vast investigative power of the government finds it and brings it to our attention. Then it’s too late (ask Boris Becker). Tell me now so I can help you strategize and navigate, honestly and ethically.

    Dos and Don'ts

    Don’t repay loans to your family

    Look, we all get it. You don’t want to hurt your loved ones, and bankruptcy will wipe out that debt to your Aunt Gertrude.  But taking care of family and not repaying your other debts sure seems a lot like playing favorites. Which it is. And the Bankruptcy Code has a fancy word for that: insider. When you repay the debt owed to a relative in the months before you file bankruptcy, it creates a situation where the Chapter 7 trustee can go after the money and spread it out more fairly.

    File all your tax returns

    If you’re going to benefit from bankruptcy, you need to show you’ve been satisfying your obligations to the federal government, including reporting your income. It’s understandable that you’ve been falling behind on filing your tax returns each year. Maybe you’re a year behind.  Maybe you’re four.  It’s easy to get into avoidance, and then you feel guilty, because you know if you submit your 1040s it’ll just say you have even more debt you can’t pay. But file them. All the returns. If you owe, you don’t need to send a check in with the return. But let’s find out what you owe. And this also prevents the very bad situation of the IRS filing a return for you (called a substitute for return or SFR). Just do it, let’s find out what you owe, and craft a strategy.

    No spending sprees

    This one is simple: don’t run up your credit cards. The fact that you still have thousands of dollars left under your credit limit is irrelevant. Just say no. Avoid large purchases. Stop luxury spending. No cash advances. You don’t get a spending spree. In fact, using your credit cards prior to filing bankruptcy is evidence of fraud, particularly if the credit card files a lawsuit in the bankruptcy.  Fraud doesn’t go away with the Chapter 7 bankruptcy discharge; it remains your debt after the case is closed.  So, don’t use your credit cards before you file bankruptcy.

    Read my Ultimate Chapter 7 Bankruptcy Guide.

    Don’t give away, sell, or transfer anything to anyone

    Fraudulent transfer sounds pretty scary — and it is — and it doesn’t even require fraud or bad intent. Because most bankruptcy cases focus on assets, making an asset go away in the months and years prior to filing bankruptcy gets a lot of scrutiny. The trustee has the power to go after the person you gave or sold the thing to and take it away and sell it for your debts. The sad irony is in many cases, the asset could’ve been protected had it stayed in your name. In short, don’t try to game the system: the system has been around for centuries, most trustees for decades, and they have the investigative power of the government behind them. Tell me about the asset, don’t move anything around before filing, and let’s see if I can use a bankruptcy exemption to protect it.

    Stay away from Zelle, Venmo, and cash apps

    Here in the 2020s, cash apps like Venmo and Zelle are common.  They’re convenient, and make it super easy to transfer money to and from your bank accounts. That’s also the downside: all that money flowing in and out and being exchanged with your friends and relatives at the very least looks like extra income & unnecessary expenses, and at worst, like transfers. And what did we just learn about transfers in the last paragraph? That’s right, they’re bad.  You don’t want to explain each and every transfer on your bank statements to your lawyer, and then, to the trustee. You’re better off using your debit card to pay for things, or even a personal check like a primitive cave-dweller.

    Think twice about buying a car before you file bankruptcy

    A car debt is different from the spending spree tip, in a few ways. It’s just one purchase, though it’s a big one. Also, it’s a secured debt attached to a collateral (the vehicle). And, in bankruptcy, you don’t get a free car, or house. If you want to keep the thing, you need to stay current on the payments. However, some courts or trustees may look at a brand new car payment from a contract entered into on the eve of bankruptcy with a suspicious eye. It lowers the amount you have available to repay your debt. The Supreme Court in Milavetz weighed this very issue (examining 526a4). You’re at a bankruptcy website, so you’re clearly thinking about filing. So, before getting a vehicle loan, you probably should meet with a bankruptcy attorney.

    Don’t make the big chunk of money disappear

    Few things can complicate a bankruptcy more than a massive sum of cash you had two years ago being completely spent. It could be that pandemic relief PPP or SBA loan. Maybe you cashed out a home refinance, or a 401k or other retirement account. Or perhaps you sold a house and put the proceeds in the bank. Or got a recovery from a car accident. The issue is that you didn’t use this money to repay debt, but instead, funded a luxurious lifestyle and now you want to wipe out debt you chose not to repay. When asked where the cash sum went, the guaranteed answer: “it’s all gone.” The Office of the United States Trustee (OUST) will be very interested where the all-gone money went, and you should be prepared to provide a line-item analysis showing how every dollar was spent, using bank statements as supporting evidence.

    Documents: get your ducks in a row

    In bankruptcy, you’ll be testifying under oath. However, documents can be used as evidence. So, you should have ready (or be prepared to get ready), a year’s worth of bank statements, a Zillow printout to see if your home is over the median home price, a credit report (they can be obtained for free), at least two years of tax returns, and at least six months of pay stubs for the means test. Sure, we can sit down at your consultation and rip open all your untouched credit card statements you bring to us in a crumpled paper bag in one big cathartic unsealing ceremony. But the more efficient option is to have all these documents downloaded or saved as PDF files.

    Scan documents or use a free phone scanning app

    Speaking of which, your bankruptcy lawyer will love you if you can scan documents in PDF format to email to them as attachments. This is not the same thing as taking a picture of each page of your tax return. This also does not mean a screenshot of your bank balance. And, for the love of all things holy, don’t use the cell phone to take a picture of the computer monitor showing the credit report. Instead, either invest in a scanner, or, more affordably, a free PDF scanning app for your Android or Apple device. With these free PDF scanning programs, you can use the camera to capture pages of a document, and then make it a PDF for your bankruptcy attorney. A little bit of effort here will make you your bankruptcy attorney’s favorite client.

    Don’t bank where you owe, and avoid Wells Fargo

    Don’t have a checking or savings bank account at the same bank where you have a debt. Why? Because you have already or will soon start missing credit card payments to that bank’s credit card.  When that happens, they likely have the right or authorization to take your money from the bank account to pay the debt in a bank setoff. You don’t necessarily need to close the account, but just don’t keep money in there you’d be upset about if they took it.

    Also, do you know what bankruptcy attorneys talk about when we socialize? Our agreed-upon and utter dislike for Wells Fargo Bank. Why do some of us bankruptcy lawyers hate Wells Fargo with the fire of a thousand suns? Because they’re one of the very few banks that will freeze our clients’ money, even if there’s no WF credit card with them. They don’t take it, only freeze it. But that distinction is unimportant when you need to pay rent or buy food and you can’t get at your own money because Wells Fargo has has a policy which amounts to punishing you for filing bankruptcy. Wells Fargo and bankruptcy don’t mix.

    Do meet with an experienced bankruptcy attorney

    Get a consultation from a skilled bankruptcy lawyer. Most will charge a reduced rate to meet with you, and it’s worth every penny given the hazards you face if you don’t. It’s true you can file your own bankruptcy, and do not need to retain counsel. However, given all the risks and dangers you face, the time spent completing a bankruptcy attorney’s intake questionnaire and then answering their questions while they advise you is worth 1,000 times what you give. They’ll tell you if a Chapter 13 bankruptcy is a better option, what you could lose in a 7, or if waiting is best. You’re not under any obligation to hire that lawyer, but when you feel the relief and peace of mind, I’m pretty confident you just might want to.  If you’re in the greater Los Angeles area, give me a call or send me a message; I’ll be happy to help.

      California bankruptcy exemptions can save your house.

      California Homestead Exemption to Save Your Home (2022 update)

      California Homestead Exemption – 2022 update

      The California homestead exemption can help you save your home from creditors. 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 home equity.

      There are two sets of California bankruptcy exemptions. California 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.

      2022 update:  the 2021 homestead exemption amount adjusts each year, and due to inflation, the 2022 California homestead exemption is now higher.  CCP 704.730 (b) says: “The amounts specified in this section shall adjust annually for inflation, beginning on January 1, 2022, based on the change in the annual California Consumer Price Index for All Urban Consumers for the prior fiscal year, published by the Department of Industrial Relations.” In June 2021, the CPI was 297.447, a 4.4% increase from the June the previous year. Applying that factor to the homestead amounts, that would increase both ends of the spectrum to $313,200 and $626,400. As inflation in 2022 is higher yet again, it looks like the 2023 California homestead exemption will be even more than that.

      The California Homestead Exemption 2022

      In 2021, California homestead exemption increased dramatically. What this means to the person contemplating filing bankruptcy is that more of their home equity can be protected. They really do take houses in Chapter 7 bankruptcy. Previously (see below), the amount of home equity which could be protected was inadequate and hardly kept up with the inflated Calif real estate.

      But then in 2020, COVID-19 struck, and people were suddenly unable to pay their rent and mortgages. Partially in response to the pandemic, the state legislature passed and the governor signed a dramatic increase to the California homestead exemption.

      The result is a system which depends upon the location where the house is, and has nothing to do with marital status or age. And this makes sense, as a homeowner in Ventura County probably has a higher home value than someone who owns a home in Lancaster.  So, now homeowners who’ve lived at a home for 4 years or more get a minimum of $300,000 of home equity protection, and a maximum of $600,000 of California homestead exemption.

      Some guidance on the Los Angeles County median home price 2020

       

       

      Spoiler alert on the above link: The trick is no one knows for sure what the data source for county median is. And if you haven’t lived at the property long enough, you don’t get the above protections. So you will want to consult with a qualified bankruptcy attorney before you risk your house.

       

      The Three Homestead Exemptions in California Before 2021

      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 2020, 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 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. If you don’t do this right, you’re literally gambling with your house.

      median home price los angeles

      Los Angeles County Median Home Price (2022)

      Los Angeles County Median Home Price (2022)

      The Los Angeles County median home price in 2022 can be tricky to determine. There are different sources that say different things. It’s not clear which of the many options will be relied upon by courts and trustees for the California homestead exemption.

      Warning: This is provided as information only, and is not legal advice. If you are thinking of filing bankruptcy, do not rely upon any information on this webpage. You are assuming all risk and are literally gambling with your home. You will have only yourself to blame if you use the wrong numbers for the Los Angeles County median home value.

      See a bankruptcy attorney for more updated information before you file.

      Average is not Median

      los angeles county median home value
      The Los Angeles County median home value is not the mean

      Before we can determine what the Los Angeles County median home price is, we’ll need to know what it’s not. A median is not the same as the average. This takes us back to high school math, but a quick couple of definitions:

      • Average (or mean): this is where you add up the data, and then divide by the number of data points
      • Median: this is where you list all the data, and then take the number which is at the midpoint

      So, as you can see, the median is not the same as the L.A. County average home value.

      The Median Changes Over Time

      Because the median is the midpoint of all the data, each time there’s another home sale, the median changes and moves. You may figure with a random distribution of data, there would be an equal likelihood that future sales will be about half above and half below the median, keeping the median the same. But home prices change over time and are not static, and particularly during a virus pandemic like the COVID-19 coronavirus we had in 2020 and 2021.

      For example, you might find some data sources that list the median home prices for last year, but only through December.   Can you assume that houses would sell for the same prices in December around the holidays as they do during the summer when people move a lot and kids are usually out of school?

      Read Our Means Test Guide on Median Income Limits.

       

       

      The Los Angeles County median home price is not the same as that for the L.A. area

      Los Angeles County is one of the largest counties in the United States, with over 4,000 square miles. While you may find data for the metropolitan area, that’s very different than the numbers for Los Angeles County. Why? Because L.A County goes from South Bay all the way up to the Antelope Valley and Lancaster. The Los Angeles County median home price is pulling together data from all these.

      Los Angeles County is home to about 10,000,000 people, while the city of L.A. has “only” 4,000,000. If you use only city data, you’re missing out on home values in remote areas in LA County like Littlerock and Pearblossom on the 138 and on the way to Vegas.

      The Median Home Value is not the same as Median Home Sales Price

      You can find some sites which average the values of the homes in the L.A. area, or even Los Angeles County. The problem with that is this: you’re using their own estimate about the Los Angeles county median home values, even those that didn’t sell, when what you’re really needing is the sales price of homes that actually sold.

      After reviewing all the above, you can see that we’re looking for a very specific thing here, and no one website reports the Los Angeles County median home price, or has information that in 2022 is depended upon reliably as the “go to” source for Los Angeles County median home value information. Over time, maybe one place will emerge, but for now there’s just a few “almost there” entries.

      Some Data Sources Which are Close

      which data source can provide the los angeles county median home price
      Which of the various data sources is the right one?

      With all that being said, you can understand the challenge of finding the Los Angeles County median home price.  Most websites are using averages, some have only the L.A. area, and none of them let you have access to the data of all the home sales so you can calculate the median yourself.

       

      Zillow: this company is famous for using its proprietary “Zestimate” to approximate home values. For example, if you go here, you can find what Zillow calls “the typical home value of homes in Los Angeles.”

      But that number isn’t clear…. What does “typical” mean – average or median? Remember, they’re different.  Home value or home price? There’s no indication this is relying on sales data. And for what time period? Now, at this snapshot in time, last month, this year, or last year?

      The website doesn’t say what the Los Angeles County median home price is. It also doesn’t say if it includes single-family homes, is only single-family homes, or something else.

      Realtor: This website features real estate, but if you dig down deep enough, you can find market data, research, and trends. It provides data by month, not year, and appears to be providing listing prices, not sales prices.

      Redfin: Redfin is another national real estate website, which tracks listings and sales, and helps connect home buyers to realtors. It has market data and trends, but seems to be restricted to only Los Angeles city, not all of Los Angeles county median home price info.

      CAR: The California Association of Realtors also has some market data. But it cautions that the data which it is using comes from over 90 associations and counts “single family detached homes only” and “median price changes may exhibit unusual fluctuation.”

      Trulia: Similarly, Trulia is a real estate website that tracks home sales and house prices. It has a way to filter for L.A. and show market information at the bottom of the page, but doesn’t show Los Angeles county median home price or value info.  It appears to list home values the way Zillow does, but it doesn’t appear to be relying on sales data.

      News reports: You may find news reports from Los Angeles-based newspapers that report data on home sales prices.

      Note: you may find some websites that provide spreadsheets of Los Angeles County median home price data, and lists medians by month. Taking the median of the medians isn’t the same as the median of all the sales data. It’s just creating garbage data. To find the true Los Angeles County median, you’d have to have access to all the sales data. This is something very few people have.

      And that’s the problem:  no one person has the data, and different places which are close report different numbers for the Los Angeles county median home value.

      While some of these are close, none of these seem to provide “the” number. Not one can be relied upon, especially for something which involves risking your home.

      Summing up Los Angeles County median home price

      Is there one bottom line source? No, and honestly, a lot of us are trying to sift through all this information to make sense of it. Maybe in the months ahead, one choice will crystalize as the one we all rely upon.

      This will likely be after litigation and people guess wrong. Sadly, they will lose their homes in some cases because they guessed wrong on home value.  Currently, there is not one number that we can reliably “bet the house” is the median home price in Los Angeles County.

      Be very cautious, use this at your own risk, and best of luck to you in your future.

      Contact us

      If you’re in Los Angeles County, request a case evaluation, which we can set up by Zoom.


        Woman Facing Jail

        Woman Facing Jail for Bankruptcy Fraud

        A woman in Michigan recently pled guilty to bankruptcy fraud. Wait, jail? Bankruptcy is just forms, right? Just before filing bankruptcy, she had received a $12,000 workers’ compensation award. She, then made it disappear. After that, she lied about the whole thing. Now she faces five years in prison, $250,000 fine, or both.

        When you file bankruptcy, you’re signing a stack of papers under oath. You’ll then be asked, under penalty of perjury, whether they list all your assets, income, and about any recent transfers. The wrong answer, a lie, could land you in jail for bankruptcy fraud.

        The sad kicker is this: in California, this likely could’ve been avoided. All she has to do was everything disclosed everything. With a good bankruptcy attorney, it could then properly exempted. She’d be free today, enjoying her discharge and money.

        She only had to tell the truth to her bankruptcy lawyer. Then, she needed to be honest in the bankruptcy papers. a good Los Angeles bankruptcy attorney could have exempted the award, and she’d have it to spend when the bankruptcy is over.

        By trying to save a few bucks on maybe the best bankruptcy lawyer, she’ll not only lose $12,000, but maybe twenty times that, and her freedom.

        Contact me today for a consultation, and let’s guide you to a honest fresh start.