Sonoma County Bankruptcy Lawyer Blog

SANTA ROSA (Sonoma County), CA -- The big news in landlord-tenant law is that President Obama has extended the Protecting Tenants at Foreclosure Act through 2014, This law gives tenants renting from landlords who are later foreclosed on 90 days (if they have a month to month lease) or the remainder of the lease (if there's a current written lease.)

The problem with the law has been that it talks about leases entered into before "foreclosure.' Well, in California (and probably many other states) there is no specific event called foreclosure. There are two events: there's the notice of default and the actual sale. Banks have argued that "foreclosure" begins at the notice of default, which I personally think is ridiculous, since, although it's required for foreclosure, it's a totally curable notice of a problem.

The new law now makes clear that "foreclosure" means foreclosure (sale), not notice.

Continue reading "Obama extends, clarifies protection for tenants in foreclosed homes" »

How high? Check this out.

Michael R. Mastro, the Seattle real-estate tycoon, filed for Chapter 7 of the U.S. Bankruptcy Code last summer reporting liabilities of $570 million. He then proceeded to take vacations in Italy, Paris, New York and Palm Springs, Calif., as well as ski trips to Switzerland and Jackson Hole, Wyo.

He has enjoyed $2,900 dinners at the plush Seattle restaurant Canlis and continues to roll around in his Rolls-Royce and Bentley, which cost him $8,000 a month. He also still lives in his $15 million waterfront home in Medina.

Yikes.

If you're reading this blog but you're not yet ready to sign up for a consultation, feel free to post a question in the form to the right. I'll do my best to provide a basic understanding of the law. Obviously, I won't give specific legal counsel without having a solid understanding of your situation (that would require a face-to-face meeting in my Santa Rosa, CA offices -- or a phone meeting), but I encourage you to shoot me a question of comment here, and I'll try to provide some help.

Look forward to hearing from you.

Usually when I meet with people in my Sonoma County offices in Santa Rosa, one of the first questions they have is, how bad will filing for Chapter 7 bankruptcy be for my credit? Will I be able to rent again? Will I be able to buy a car?

Of course a bankruptcy stays on your credit report for 10 years, so it ain't great. But if you're sitting in a bankruptcy attorney's office -- the odds of you having stellar credit are pretty bad. In point of fact, you probably have a wave of late payments, nonpayments, credit cards sent to collections, perhaps a foreclosure ... you get the idea.

Putting yourself in a creditor's seat, would you rather work with someone who clearly can't pay their bills, or someone who declared bankruptcy and 6 months later is paying all their bills on time?

This article on the National Bankruptcy Forum points out that a key factor is your debt-to-income ratio.

If you have tens of thousands of debt, that ratio is going to look pretty bad. If you have declared bankruptcy, you have virtually no debt, so your debt-to-income looks great. Once you get a little new credit in place and make regular payments, you're on the way to a clean bill of health.

Santa Rosa, CA -- Back in 2005, Congress passed -- at the behest of credit card companies -- a dramatic overhaul of the bankruptcy laws, under the supposed need to stop debtor "fraud." In fact, the law was intended to protect the monied interests by making it harder to file bankruptcy.

The San Francisco Chronicle took a look at the effect of the law 5 years later. It's clear that the law had an immediate freezing effect on bankruptcy filings, but today in light of the Great Recession, filings have steadily and markedly marched upward.

This either proves, as Scott Talbott, with the Financial Services Roundtable, claims: "The fact that the numbers are up means people still have access to the bankruptcy courts."

Or that there are many people who can't afford bankruptcy who desperately need it.

The Government Accountability Office, the nonpartisan watchdog agency of Congress, told lawmakers in June 2008 that the 2005 law boosted Chapter 7 expenses from about $914 to $1,477, including legal, filing and counseling fees.

What's not clear from this data is how many of these increased filings are Chapter 13s instead of Chapter 7 bankruptcies, which provide a full discharge.

2009 was a record year for bankruptcies, with a record high of 2,264 cases in Sonoma County alone. According to a Santa Rosa Press Democrat report from April, Chapter 13s are a growing part of bankruptcy here, as people look to save their homes.

Key reason: Homeowners can strip the second mortgages on their underwater homes, while entering a payment plan to cure arrears on the first mortgage, while staying current on the first. As a result, many homeowners are able to modify their loans on the first.

The story features a typical Chapter 13 story, Robert and Jennifer Campbell, who were able to strip their second mortgage in a 13 and drive their credit card debt to minimal amounts under their plan. Campbell,a photographer, couldn't do a Chapter 7 because he would lose his 1969 Helio Courier airplane -- the kind of personal property for which there is no exemption.

A Chapter 13 allows Campbell to keep his property, strip the second and save the house -- maybe. The article points out that just the $500,000 first mortgage is plenty to keep Campbell up at night