Client receives notice of default on house, tries Chapter 13 relief
CLIENT is 60 & wife is 58. He issued his check to pay rent of $1200 but the check was dishonored for insufficient funds. Landlord called him to tell him that his rent check bounced. Client was surprised that his check bounced because he had at least $5K in the checking account. He went to the bank and asked why his check bounced when he still had $5K in the account. Teller informed him that there was no money in his account because bank received a notice of levy from his judgment creditor for $11K and so the sheriff took all the money in his bank account.
Client explains that he had consolidated his credit card loans of about $30K through a business providing that service and he had been paying on monthly installments and was surprised to find out that his account was levied and all his money taken. He said he only owed creditor $3K so how come the judgment is $11K? Well, if you add interest and attorney fees and some time, it $3K of debt can become $11K of judgment. It’s not unusual.
Can he get his $5K that was levied back? Yes he can, how? By filing a claim for exemption in the court that issued the judgment and levy, on the ground that the funds taken are necessary for his basic necessities. He must also attach a declaration and financial statement showing his gross and net income for the household vs. monthly living expenses and conclude that the funds taken are required for his basic necessities. He must file the claim in with the supporting documents, get a hearing date and time form the clerk of court, then serve the claim of exemption on the creditor and file in the proof of service to creditor. Creditor is given the opportunity to object to the claim of exemption and appear at the hearing. The hearing will be set at least 30 days after the claim of exemption is filed but the claim of exemption and all supporting documents must be filed within 10 days of the levy date.
If the judge agrees with client, judge will issue an order to have the $5K returned to client. Client has also decided to file for Chapter 7 relief as he and wife still owe about $25K of credit card debt and he wants all of those discharged once and for all to avoid another levy or wage garnishment situation. If the judge denies the claim of exemption, then client has lost the $5K for good. He doesn’t feel good losing the $5K because he only owed $3K and says it is unjust that he now owes $11K for a $3K debt.
Can he keep the $5K in Chapter 7 if the judge orders the refund? Yes. He can keep the $5K because in his case, he can exempt the entire 5K under 703.140(b)(5) of the California Code of Civil Procedure. So, with Chapter 7, he and his wife get a fresh start in life without the burden of any debt while keeping all their assets, all their retirement accounts, all their cards, and all their cash. No worries any more and they don’t have to keep paying installments on a consolidation through a business service that probably keeps the money in their pocket. That’s why client’s bank account was levied despite the consolidation because who knows where the installment payments are going. It’s not like a Chapter 13 where the court appointed trustee distributes the plan payments to all creditors and there is a court order that prohibits further collection efforts against the debtor while the Chapter 13 is still in effect.
Next client is 52. He doesn’t work. His wife makes about $88K a year as a registered nurse. They own a house but the mortgage has not been paid for 8 months. Mortgage is $2500 a month so he owes about $20K in arrears. He received by certified a notice of default with a recording date of June 27, 2017, informing him that the bank has decided to commence foreclosure proceedings and that he has 90 days to pay the arrears in full plus all legal fees and penalties otherwise a foreclosure sale date will be set approximately 21 days after the 90 days expires. So client is worried that he may lose the house to foreclosure after September 27, 2017. Well, I think he should worry more about his wife asking him to explain why the mortgage is 8 months past due when she has been giving him her net income of $6K a month? That’s a perfectly valid and legitimate question to ask don’t you think so?
At any rate, client now needs to file for Chapter 13 to save his house from foreclosure. Chapter 13 will freeze the default at $20K and allow client to pay that off in 60 months, that’s about $340 a month. In addition, he has to resume the current mortgage payment a month after the case is filed. The foreclosure process stops immediately upon filing of the Chapter 13 case. I told him that it may help if he actually got a job to help with the additional expense of the plan payment for the arrears because wife’s income is good at net $6K but the mortgage has not been paid for 8 months, so something else must be going on that is draining the funds, right? I mean, we weren’t born yesterday, money doesn’t just disappear, its going off somewhere where its not supposed to. The math doesn’t add up.
If you need debt relief, set an appointment to see me. I will analyze your case personally.
“GLORY IN HIS HOLY NAME; LET THE HEARTS OF THOSE WHO SEEK THE LORD REJOICE!” PSALM 105:3 n
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Lawrence Bautista Yang specializes in bankruptcy, business, real estate and civil litigation and has successfully represented more than five thousand clients in California. Please call Angie, Barbara or Jess at (626) 284-1142 for an appointment at 1000 S. Fremont Ave, Mailstop 58, Building A-1 Suite 1125, Alhambra, CA 91803.