Financial problems are like the ripples that radiate outward from a rock being thrown into water; rarely are there one; and in general, such ripples disturb all aspects of life. Numerous studies have shown that in 2019, more people are living paycheck to paycheck, and more people are likely to suffer a disruption from unknown financial stresses, whether it is the loss of a job; government shutdowns; medical emergencies; or something else that is unforeseen. When financial problems occur, they rarely are confined to an individual – or couple’s economic status, and generally affect their mental health in a number of ways.
While there is not a one size fits all solution for everyone’s financial problems, and in many cases, financial problems are exacerbated by other factors, there are legal remedies, including that of Title 11 of the United States Code, otherwise known as the Bankruptcy Abuse and Consumer Protection Act (“BAPCPA”), or just the “Bankruptcy Code”. While no one ever sets out to file for bankruptcy protection, the law is designed to allow people a fresh start, and to make much needed changes in their lives without constant financial pressure. And, while not perfect, the law when applied correctly can and does make positive changes in many people’s lives.
Bankruptcy is not a monolithic creature either, with differences arising under Chapters 7, 11, 13, and other subcomponents. Generally, most of the questions involving bankruptcy revolve around Chapter 7 cases, especially after the law was modified in 2005. After the new law was enacted, the main misconception that has arisen is that one can only make “so much” money, and otherwise cannot file for bankruptcy protection. Like many myths, there is a grain of truth herein, in that the new law instituted in many cases what is known as the “means test”, which is a six month look-back of income earned.
This test also utilizes numbers from another portion of the government called the “national standards”, which set forth income amounts for household size based on geographic location. If this sounds somewhat complicated, its because it is somewhat obscure. Having said that, the myth in this regard is that not all Chapter 7 filers must complete the means test. For parties for which a majority of their debt is “non-consumer”, the means test does not apply; a common example of non-consumer debt is tax debt. Finally, for those individuals and couples that do have to complete the means test, there are areas where the means test allows for deductions – for mortgages, cars, and other secured debts, and various other expenses. Rarely is the means test a straightforward application of the national standard to income, which means that in reality, there is no “permanent” number for many potential filers.
The second myth is one that could easily be the first myth, because it pre-dates the new law, in that people think they can pick and choose which debts to list in the bankruptcy petition. Under the law, any potential debtor must accurately list all of their assets – and most importantly, all of their debts, so that the Trustee, and the Court has a complete financial picture of their situation. While it may be tempting to think that one can retain a credit card, for example, in the end, that credit card must be listed along with every other debt one owes. Finally, the last myth is that one cannot retain essential items during a bankruptcy, such as furniture, electronics, or more importantly, vehicles. In reality, personal assets are protected by a complex legal series of statutes (exemptions) to certain limits. Separately, loans and leases and vehicles can be “re-affirmed”, meaning that as long as the Court approves the contract, and the potential Debtor stays current on the payments – the debt passes through the bankruptcy as if it did not exist, allowing the party to keep the vehicle.
Like the complexity of financial issues leading to bankruptcy, the bankruptcy code has many permutations itself. If you’re considering a bankruptcy, don’t just trust what advice you receive from family and friends, or the internet, but contact an attorney who can guide you between what is real – and what is a dead end. Contact our office today with any bankruptcy questions you may have.
With two months of 2019 in the books, the start of March, and spring are great times for people to take stock of the resolutions they made some sixty days ago or longer. With the divorce rate continuing to hover around fifty percent, many times resolutions revolve around a fresh start in relationships and life. In California, a marriage can be ended legally by three ways – dissolution (divorce), legal separation, or annulment. For most people, annulment is not an option, unless they had a weekend that was like something seen in the series of Hangover movies. Similarly, while legal separation is an option, it is generally not something that most people find palatable, as it contains all the trappings of divorce – without the status termination.
In California, there are many truths – and rumors about the dissolution process. The first, and most persistent rumor is that any sort of infidelity factors into how the divorce proceeds. While there may be circumstances where infidelity affects things, say, with regard to child custody, the truth is that California is a “no-fault” state. What this means is that irrespective of whether there was cheating on one or both sides, both sides are entitled to a divorce. In fact, the right to have one’s marriage terminated through legal proceedings is something that is available to every resident within the state.
Perhaps the second most popular rumor is that in California, a divorce can be done within six months. While the state does offer a procedure called “Summary Dissolution”, there are specific legal requirements parties must meet. In short, to qualify for summary dissolution, a couple must have been married for five years or less, have had no children, and be willing to waive requests for spousal support, among other things. While this is a great option for the specific subset of Californians who meet these requirements, most people do not fit into this category, and do not qualify for a six month dissolution. In reality, most contested dissolutions last at least two years, and in certain cases can last a lot longer. Of course, in any dissolution, the parties can reach an agreement at any time, which can be memorialized in a writing to end their case, but generally, such agreements are rare at the beginning of the dissolution process.
The third most popular rumor is that after a dissolution is filed – one or both of the parties can do “anything they want” with “their” property. While California does recognize separate property claims to items, in the absence of a pre-marital agreement, or meeting specific legal conditions, all property acquired during marriage is considered community property. Again, what this means is that both parties own what one person perceives as “their” property. It is also important to note that upon filing of a dissolution action, Family Code Section 2040 applies (the ATROS), which among other things, restrains both parties from taking action as to community property items. While certain actions are permissible, others, such as selling a non-filing spouse’s car without their consent, are not.
From here, the rumors and truths about dissolution only branch out further. Venturing into the forest without sound legal advice is always a risky proposition. If you’re considering a dissolution, don’t just trust what advice you receive from family and friends, or the internet, but contact an attorney who can guide you between what is real – and what is a dead end. Contact our office today with any dissolution questions you may have.
Christopher Sunnen, Esq. is a San Diego, CA based attorney specializing in family law and bankruptcy law.