Who Will Know About My Bankruptcy?

Question: I want to file for bankruptcy, but I don't want my family or friends to know. Can they find out about my bankruptcy?

Answer: The documents in your bankruptcy case, like most court documents, are public record. The bankruptcy court will mail notice of the bankruptcy to your creditors, but there are also people who can find out about your bankruptcy through a variety sources.

People who will find out about your bankruptcy:

1. Your creditors, co-debtors and others that you choose to notify of your bankruptcy. Your attorney must list all of your creditors in your bankruptcy papers as well as any co-debtors. Anybody else that you choose to include in the mailing matrix will receive notice of your bankruptcy filing.


2. The major credit bureaus. The bankruptcy will send electronic notices of your bankruptcy to the major credit bureaus as well as Dun & Bradstreet. Even credit card companies that you don't owe money to can see the bankruptcy on your credit report.


3. Vendors and other advertisers. Vendors and advertisers can purchase mailing lists of new bankruptcy filings. Some debtors have reported receiving solicitations for credit counseling services or even credit card offers that appear to be taken from mailing lists purchased from the court.


4. Your ex-spouse. When the bankruptcy laws changed in 2005, a new provision was added that requires the Trustee to send a letter to the person receiving child support, advising of the bankruptcy, case number, filing date, creditor's meeting date and probable discharge date. This letter also gives the name and address of the state agency to contact if the child support does not continue being paid.

How people may find out about your bankruptcy case:

1. Newspapers. Some newspapers publish data on new lawsuits and new bankruptcy filings. Information such as the date you filed bankruptcy could end up in a local news .


2. Search engines. Some bankruptcy court websites publish court calendar information for upcoming cases. Search engines like Google might pick up this information and it could should up if someone ran a search for the debtor's name.


3. Courthouse records. Any member of the public can go to the court to review records for free or pay for electronic access to most bankruptcy court records. Some banks like Wells Fargo actively search these records to see if an account holder has filed for bankruptcy.


4. Your employer. While employers are not typically informed of a bankruptcy, a Chapter 13 trustee could request an earnings withholding order to your employer if you get behind on your Chapter 13 plan payments.

In most cases, friends and family will not find out about your bankruptcy unless you tell them or they happen to stumble across the information online. Nonetheless, the information is publci record and there is no way to prevent someone from discovering that you have filed for bankruptcy.

About the Author: Carl H. Starrett II has been a licensed attorney since 1993 and is a member in good standing with the California State Bar and the San Diego County Bar Association. Mr. Starrett practices in the areas of bankruptcy, business litigation, construction, corporate planning and debt collection.

Changing Banks Prior to Filing Bankruptcy

Debtors who have decided to file for bankruptcy should plan ahead to be ready for the short term consequences that might result. For some debtors, pre-bankruptcy planning may include closing bank accounts and moving their money to a different financial institution.

Reasons to switch to a different bank or credit union include:

• Avoiding having your bank account temporarily frozen. Some banks like Wells Fargo have a policy to place an administrative freeze on any account of a newly-filed Chapter 7 debtor with a balance exceeding $5,000. Other institutions like Union Bank are even more strict on this issue. One colleague told me about a case where Union Bank had frozen a debtor's bank account that contained only $16. In theory, the banks are protecting assets of the bankruptcy estate. In reality, this type of bank policy creates a huge inconvenience to customers and does little to preserve bankruptcy estate assets.

• Ending automatic withdrawals. Many debtors set up automatic withdrawals taken from their bank account to pay credit card bills. Even with the filing of a bankruptcy, there is not guarantee that automatic withdrawals will stop. It is easier to close a bank account than to get money back that a creditor improperly withdrew from your account.

• Avoiding set offs. Sometimes debtors bank with an institution that has also issued credit cards to them or provided other forms of credit. It is not uncommon for a bank to claim money from a debtor's bank account as a set off against other money owed by the debtor. Closing your account or keeping a low balance will minimize the risk of a claim of set off.

Debtors considering bankruptcy should avoid banking with Wells Fargo, Union Bank of California and any financial institution to which the debtor owes money. If a creditor does improperly remove money from your account after your bankruptcy is filed, contact your attorney immediately.

UPDATE:  Wells Fargo completed its purchase of Wachovia in December 2008.  I have heard from colleagues in other parts of the Wachovia is now engaging in this same practice, so debtors filing for bankruptcy should strongly consider moving their money from Wachovia before filing their case.

About the Author: Carl H. Starrett II has been a licensed attorney since 1993 and is a member in good standing with the California State Bar and the San Diego County Bar Association. Mr. Starrett practices in the areas of bankruptcy, business litigation, construction, corporate planning and debt collection.

Conducting a Financial Triage

Nearly every day, we are contacted by debtors desperately seeking help and answers: "Do I qualify for bankruptcy?" "Will I lose my house?" "Will bankruptcy ruin my credit?" "How long does bankruptcy take?"

Analyzing a debtor's bankruptcy options is like a doctor seeing a patient for the first time. Before the doctor can diagnose and treat a patient, the doctor gets a medical history and conducts tests. Once the test results are in, the doctor can recommend a course of treatment for the disease or condition. A bankruptcy attorney reviews the debtor's financial status, a financial "triage', and recommends a course of action to treat the debtor's financial ailments.

Every case is different. A debtor trying to get caught up on their house payments might be better off in a Chapter 13 bankruptcy. A debtor with limited assets and lots of credit card debt might be better off in a Chapter 7 bankruptcy.

In order to assess a debtor's global financial picture, we begin by asking potential clients to complete an online questionnaire that provides a bird's eye view of a debtor's financial situation. We also request the same types of documents that must be submitted to the court and the bankruptcy trustee to document the debtor's eligibility for bankruptcy. And finally, we conduct a detailed interview and consultation to assess the potential client's needs and goals so that we can create an orderly plan to assist the client.

In some cases, the debtor is facing an emergency that requires fast action such as a foreclosure sale, a wage garnishment or an eviction. Careful analysis of the matter is still required, but an experienced bankruptcy attorney can provide emergency assistance in appropriate circumstances. Our firm is nimble enough to take on emergency cases and can file bankruptcy literally 24 hours a day.

If you are in Southern California and would like more information about our bankruptcy services, please contact us.

About the Author: Carl H. Starrett II has been a licensed attorney since 1993 and is a member in good standing with the California State Bar and the San Diego County Bar Association. Mr. Starrett practices in the areas of bankruptcy, business litigation, construction, corporate planning and debt collection.

Payday Loan Pitfalls

Attorney Carl Starrett was recently invited to appear on KUSI television's Good Morning San Diego show to discuss the risks of payday loans:

Payday loans are short-term loans where a borrower writes a postdated check to a lender who provides immediate cash, and the check is deposited on the borrower’s next payday. According to the California Department of Corporations, 1.4 million Californians took out payday loans totaling $2.5 billion. While California law limits the cost of these transactions to 15% of the face value of the check, the short length of these transactions means that the annual percentage rate on these loans often exceeds 400%.

Members of the military are often particularly vulnerable to payday loan predators because they have steady income from the government and often with little to spare. At deployment time, members of the military are often hit with unexpected expenses.

Payday loans and other types of short term loans should be used sparingly, if at all. Before applying for a payday loan, consider more traditional and less expensive lenders such as a credit union or other local financial institution.

If you have been the victim of a predatory payday loan or simply see no way out of your financial struggles, consider contacting a member of the National Association of Consumer Bankruptcy Attorneys for further assistance. If you are in San Diego County, please contact us for a free consultation.

About the Author: Carl H. Starrett II has been a licensed attorney since 1993 and is a member in good standing with the California State Bar and the San Diego County Bar Association. Mr. Starrett practices in the areas of bankruptcy, business litigation, construction, corporate planning and debt collection.

More Harassment of Consumers by Navy Federal Credit Union

In a previous article, I wrote about a client in the military that had suffered from harassment at the hands Navy Federal Credit Union (“NFCU”). Now another client recently retained by my office has been victimized by in-house collection agents for NFCU. After leaving several messages for my client at work, an NFCU employee finally threatened contact the HR department at my client's employer and actually did end up leaving a message for the HR department.

Under California law, contacting the debtor’s employer is only permissible if it is made for the purposes of verifying the debtor's employment, locating the debtor, or effecting garnishment, after judgment, of the debtor's wages, or in the case of a medical debt for the purpose of discovering the existence of medical insurance. NFCU had already verified my client's employment and location as shown by the multiple voicemail messages left for my client. One NFCU collection agent had even expressed the suspicion that she had spoken directly with my client already, believing that my client had lied about her identity during the phone call. Under those circumstances, further contact with the employer was neither necessary nor permitted.

Consumer debtors in California are protected from creditor harassment by the Rosenthal Fair Debt Collection Practices Act. A debtor can sue for statutory damages ranging from $100 to $1,000 for each type of violation. Some acts, such as suing for a time-barred debt, constitute a violation of multiple sections of the Rosenthal Act. A debtor can also sue for actual damages such as out of pocket expenses to see a doctor to alleviate stress or expenses such as medication or legal advice. Debtors can also sue for emotional distress under extreme circumstances.

When my client in this matter files for bankruptcy, we will list the Rosenthal Act claims against NFCU and then be filing a lawsuit in state court at the appropriate time. I will post more details in the coming months as the case progresses.

About the Author: Carl H. Starrett II has been a licensed attorney since 1993 and is a member in good standing with the California State Bar and the San Diego County Bar Association. Mr. Starrett practices in the areas of bankruptcy, business litigation, construction, corporate planning and debt collection.