Sonoma County Bankruptcy Lawyer Blog

I'm about to file suit against a low-income housing complex in Healdsburg, CA on behalf of a tenant who was locked out by the property manager. Granted she was behind in her rent and the landlord had initiated unlawful detainer proceedings, but the law forbids self-help and my client was locked out while she was still in legal possession.

California law -- like most states -- imposes statutory penalties and attorneys fees for illegal landlord self-help, which is why, OwnerSecrets.com has an article detailing some of the troubles landlords have gotten themselves into.

The article points to a few cases from around the country. These examples have relatively low amounts, but the point is well-taken:

[In South Carolina], Hanna Abdulla engaged in self help eviction by changing the locks and removing William Spano's personal property from the premise to the sidewalk. Hanna Abdulla claimed that she thought the tenant had abandoned the premises. The court was not persuaded by her claim and awarded Spano $1,800 for the 3 months of rent expense he incurred to live elsewhere. The court further awarded $1,200 in punitive damages and attorneys fees.

[In Ohio] the landlord changed the locks just before the end of the month upon learning that the tenants had shut off the utilities and removed most of their belongings. The trial court awarded the tenants only $96.77 in actual damages (they had paid rent through the end of the month but were deprived of the use of the apartment, and this was the prorated amount). But the trial court further awarded $1,000.00 in punitive damages and $1,462.00 in attorneys fees.

Nolo.com's Bankruptcy Foreclosure Blog reminds us that California increased its homestead exemption by $25,000.

The California homestead exemption increased by $25,000 as of January 1, 2010. The current amounts are $75,000 for individuals, $100,000 for couples, and $175,000 for seniors (over 65), disabled or over 55 with limited income, effective January 1, 2010, thanks to legislation signed by Governor Schwartzeneger in late last year.

Of course the increases matter little to most debtors in California these days, what with many homes worth less the mortgages. On the other hand, the new law (AB 1046), will help people facing judgments outside of bankruptcy.

One of the things you have to declare in Chapter 7 is any current executory (not fully performed) leases - either as the landlord or the tenant - as well as your other contracts. If these are month-to-month leases, there's no problem. The tenant could move out with 30 days notice. But it's a different story when you've signed tenants, especially commercial tenants, to fixed-term leases.

I know of a case in the Santa Rosa, Calif. Bankruptcy Court where the debtors had signed two commercial tenants to above-market-rate leases with a commitment to three years, total. In that case, the trustee claimed the leases as property of BK estate. Total value of the leases was over $100,000 but the matter will likely settle for substantially less than that.

Often, the trustee won't want residential leases -- they come with liability! But commercial leases are far less risky. Here's a good summary of the issue from the University of Minnesota:

The trustee may assume or reject executory contracts and leases of the debtor. An executory contract is an agreement under which the obligations of both parties to the contract are unperformed. Common examples of such contracts in a farm setting include equipment leases and real property leases. Certain farm program contracts, such as Conservation Reserve Program contracts, are also executory contracts.

If the trustee elects to assume an executory contract, he must either cure any defaults in the contract or provide the other party to the contract with adequate assurances that he will cure the defaults. In a Chapter 7 case, the trustee has 60 days from the filing of the bankruptcy petition to make a determination as to whether such contracts or leases should be assumed. A contract for deed in which the debtor is the buyer has been determined by the courts not to constitute an executory contract under the Bankruptcy Code. Therefore, the trustee need not determine whether to assume such contracts or cure all defaults under such contracts immediately.

Nice means test calculator at Nolo.com. As Nolo explains here, the means test is part of 2005 "reforms" of the bankruptcy law, designed to limit who can file for the Chapter 7 discharge.

The means test compares a debtor's income and expenses with regional standards, which makes it rather difficult to figure out if you qualify. Attorneys use software that figures these things out automatically, but the means test has made things difficult for individuals trying to do their own bankruptcies. Nolo's online calculator is a great tool for figuring out the calculations, but of course it doesn't compete with an attorney's know-how.

In any case, the means test is just one piece of your bankruptcy filing...

SANTA ROSA, CA -- I'm representing a tenant in Sebastopol, who suffered a most disgusting interruption of her tenancy. Raw sewage started flooding her bathroom and bedroom during the winter rains in February. The landlord, Lucien Jamey of Sunmoor Properties, responded by cleaning up the mess and fixing the bathroom linoleum, but utterly failing to do any meaningful testing or to contact professionals who handle remediation.

The result is that the cabin currently has off-the-chart human waste bacteria and elevated levels of a range of molds. The house continues to be very wet and a good environment for mold growth. I'll be filing suit against Mr. Jamey later this month (and I'm posting this information as part of that litigation.)

A question I get a lot is "Will I be able to rent if I declare bankruptcy?" Or "will I ever get credit again?" The answer is, a bankruptcy isn't great for your credit, of course, but it's a hell of a lot better than a never-ending cascade of late and nonpayments.

If you're considering a Chapter 7 or 13, then your credit has no doubt taken a nose dive already. Bankruptcy is a chance to restart with a clean slate. That means restarting your credit, too. With those credit card debts wiped out, can you live within your means? You should be able to obtain some credit, repay it on time and build from there.

When creditors see you've taken advantage of the clean start, you'll be in a good position, much better than you'd be without bankruptcy. But this is only true if you can truly make the most of the fresh start. If you're going to be back in the same boat, bankruptcy is only a Band-Aid-brand plastic bandage.