What Happens in Small Claims Court?

Clients sometimes come to my office regarding a claim they have on a defaulted personal loan or they want to retrieve a security deposit from a landlord or have some other matter where money is due them. In many cases, the amount they claim is too small to warrant being handled in a
civil court of general jurisdiction, nor does it justify hiring a lawyer to represent them. In cases like these, generally the best option is to bring the matter to small claims court.

In small claims court, the person who brings the action is called the “plaintiff,” and the person being sued is the “defendant.” With the occasional exception, (e.g. corporations), neither side is allowed to have a lawyer present at the small claims hearing, though it is often acceptable and well-advised to speak to a lawyer before or after the court proceeding.

What types of cases go to small claims court? Here are some typical examples:

  • Disputes regarding property damage
  • Personal injuries following a motor vehicle accident
  • Landlord/tenant security deposits
  • Property damage allegedly caused by a neighbor
  • Disagreement with a contractor concerning a home repair or improvement project
  • Dispute in a homeowner association
  • Collection of money owed

Generally speaking, the highest dollar amount an individual plaintiff in small claims court can ask for is $10,000. (Small businesses and government entities are usually restricted to no more than $5,000.) Once both sides have made their case, the matter is left to the small claims judge to decide. Actually, most small claims matters are heard by “temporary” or “pro tem judges,” who are attorneys who have practiced law in California for at least ten years and who volunteer to assist the court in certain types of cases.

The person who brings a dispute to small claims court may also be entitled to receive costs from the defendant. “Costs” refers to filing fees, witness fees, the expense involved in notifying the person you’re suing, etc. The plaintiff may request the court to add these costs to the judgment—the amount of money the court determines should be paid to you.

Issues in small claims court are generally resolved in a rapid and inexpensive manner. Unlike a matter in civil court, which can go on for many months, a case in small claims court is typically heard within 20 to 60 days from the date the claim is filed. Keep in mind – the dockets for most small claims courts are extremely full, you must be ready to present your side as quickly as
possible. When I meet with clients who are scheduled to appear in small claims courts, I advise them to be sure they’re thoroughly prepared ahead of time. This means having evidence on hand to back up your claim, such as:

  • Bills
  • Contracts
  • Receipts/cancelled checks
  • Witness testimony—Usually the witness is required to attend the proceeding
  • Photographs
  • Letters
  • Any other relevant and supporting documents

As noted, both plaintiffs and defendants represent themselves in the small claims court setting. I recommend clients should dress respectably, (a sloppy appearance won’t do anything to help your case), be polite, and reasonable in their presentation.

Small claims court serves a useful purpose in settling certain types of disputes. If you feel you have an issue that seems appropriate for this venue, I advise you to contact an attorney experienced in small claims cases beforehand. The knowledge you can gain may prove extremely helpful when you find yourself standing before the small claims judge.

Do you think you may have grounds for a lawsuit but are worried that it may cost too much to bring it to court? The Law Offices of Ian S. Topf offers a free consultation in a variety of issues, ranging from family law, estate planning, bankruptcy, and DUIs and civil matters.

What does “Spousal Support” Mean?

Spousal support, (formerly known as “alimony”), refers to the obligation of one party in a marriage or domestic partnership to provide support to their former spouse or partner. California Family Code Section 4320 lays out numerous factors by which a court is mandated to award spousal support. These factors include:

  • Duration of marriage
  • Available resources (including assets and income) of the person seeking spousal support
  • Ability of the other party to provide resources to the supported spouse
  • The reasonable needs and lifestyle requirements of the supported spouse

Spousal support is usually based on how much the supported spouse believes she needs, (for purposes of this post, I’ll use “he” for supporting spouse and “she” for supported spouse), and how much the supporting spouse believes he can pay. Somewhere between these two figures, a final number is determined.

In general, the issue of spousal support revolves around the style of living established during the marriage or domestic partnership. Let’s use this hypothetical example to explain:

Ron is a cardiologist married to Sheila, a schoolteacher. When they first got married, they agreed Sheila would be a stay-at-home mom. She quit her job, thus depriving herself of an income and moved from a rental apartment to an expensive house in La Jolla. During the course of their marriage, Sheila established a very comfortable lifestyle in their exclusive neighborhood. She
had friends there and the couple sent their two children to a costly, local private school.

At some point, Ron and Sheila decide to separate. Sheila is unable to maintain this lifestyle on her own, nor can she realistically expect to do so even if she gets a job. Thus, under the law, she is reasonably entitled to spousal support that will help her live the same style of life to which she’s become accustomed. The question, of course, is how much and for how long? At this point, Ron will be obligated to either accept the terms of spousal support Sheila requests or to demonstrate (a) that he’s unable to make such payments or (b) that his separated spouse is over-inflating her anticipated expenses and/or understating her expected income and resources. If the parties can’t agree on a figure, the issue goes before a Family Court judge.

There’s a common misconception that you can only get spousal support if you’ve been married or in a domestic partnership for a certain amount of time. The truth is, anyone can assert an entitlement to spousal support, no matter how long the marriage/partnership lasted. Typically, the Court’s reasoning goes as follows:

  • A marriage of 10 years or more: Unless the two parties can agree on a date to terminate
    spousal support, the obligation to pay support will continue until the supporting party can
    convince a court that this obligation should come to an end (if, for instance, his ex-wife
    now earns enough to support herself).
  • A marriage of less than 10 years: The two parties can agree on a date of termination for
    spousal support or the Court has some discretion to order a termination date. While this is
    not absolute, the unwritten practice is that the obligation lasts for roughly half the length
    of the marriage.

In my years of practice in this field of law, I’ve encountered many supporting spouses who feel aggravated by the ongoing obligation to support their ex-spouse. I try to lessen the aggravation somewhat by reminding them that, unlike child support, spousal support can be claimed as a deduction on their income taxes and that the supported party has to report what they receive as
income on their taxes. A silver lining? Maybe just a little.

Wondering what you might face should your spouse or partner file for a dissolution of marriage/partnership or legal separation? The Law Offices of Ian S. Topf offer free consultation in a variety of issues, ranging from bankruptcy, family law and estate planning to traffic violations and landlord/tenant disputes.

To Stash or Not to Stash: Do I Have to Disclose Everything I own in a Divorce Proceeding?

People who come to my office seeking assistance with a divorce often ask one of two questions, and sometimes both:

  • “Do I have to tell my spouse about everything I own or owe?”
  • “What happens if my spouse is hiding an asset?”

These are important issues that need to be addressed, since the process of dividing assets and debts can determine the quality of life for both partners following their divorce. Any attempts to hide property or mislead the other person by failing to disclose can have serious consequences for everyone involved.

In the course of a legal separation or divorce, California law dictates that each spouse must provide complete information about all of his or her assets (such as property, vehicles, financial accounts, business interests, etc.) and debt (loans, credit card payments, etc.). The statements made by each spouse concerning assets and debts are contained in what’s called a Schedule of
Assets and Debts, and may also be disclosed in Community and/or Separate Property Declarations.

During the legal proceedings, each party is required to serve their financial disclosures on the other party and file a declaration confirming such service of disclosures with the court. Any Judgment of divorce or legal separation entered without such disclosures is generally considered void under California law.

In a situation where there’s an unintentional omission of assets, the court (once alerted to this omission) usually readdresses the division of property to make sure there has been a fair and equal division of assets overall. With an intentional omission of assets, (such as the concealment of a party’s stock options or undeclared cash in the bank), the court may award the other party
more than the typical 50 percent of the community property asset — sometimes up to 100 percent! The court may also demand that the offending party pay attorney fees and costs as sanctions for having to litigate this issue.

So how can one party find out if their spouse or partner is deliberately hiding assets?

A lot depends on the complexity of the particular case, but in general, legal professionals can call upon several resources to obtain information about undisclosed assets. During what’s called the “discovery process,” one party’s attorney can formally request production of relevant documents
and other information from the other party or invoke the power of subpoena to third parties to get necessary information and/or documentation handed over. There’s also the option of hiring a private investigator to do an “asset search”—the results of which are regularly admissible in court.

What happens if a hidden asset is discovered after the division of assets has been completed? Unless otherwise ordered, the court maintains jurisdiction to address this issue should it arise, even after judgment has been rendered. An undisclosed asset can be subject to a further court order after the divorce has been finalized, so long as it is promptly thereafter brought to the
court’s attention.

Post-Judgment penalties for concealing or misrepresenting one’s assets or debts may include payment of the other party’s attorney fees and costs, a dismissal of any of his or her own claims, reallocation of asset and debt division (if possible) and, even, incarceration. That’s why the safest rule of thumb in a divorce proceeding is to always disclose your assets and debts.

Any situation where significant assets or debts are concerned may be too complicated for the parties to resolve on their own. Consulting an experienced family law attorney is your best bet to ensure a proper division of assets and debts before the divorce or legal separation proceeding comes to a close.

Are you in need of legal counseling or have any questions about the above topic? The Law Offices of Ian S. Topf offer a free consultation in a variety of issues, ranging from family law/divorce, bankruptcy, and estate planning to criminal/DUI matters and landlord/tenant disputes.

Take Care of Your Legal Needs

It’s more than half way through the year so this is a great time to take care of some essential legal planning responsibilities – and you’ll feel much better when you do.

Estate planning

Many people mistakenly think of an estate plan as something that matters only when they die, but there’s really much more to it than that. With a thorough and carefully prepared plan in place, your loved ones won’t have to experience the additional stress of wondering about your final wishes (health, financial, etc.) should you become physically incapacitated and unable to share those wishes during a highly emotional time.

If you already have an existing estate plan, take the opportunity to review the plan so it reflects any changes that took place prior to now. Such changes might have included:

  • Got divorced or remarried
  • Blessed with the birth or adoption of an additional child in the family
  • Need to remove or replace an agent or beneficiary who passed away
  • New wishes for how you want to have your medical needs addressed

It’s also important to note that, depending on when you first created your estate plan, California law may have changed in ways that invalidate some provisions (or at least affected them so they’re no longer practical). In my legal practice, for example, I’ve come across very old estate plans that haven’t been modified to accommodate requirements under HIPAA (Health Insurance Portability and Accountability Act) and/or the California Probate Code. Without being updated, such plans could run into serious legal problems at a later date; the same problems you have sought to avoid by creating your estate plan in the first place.

Now’s a good time to check with an experienced lawyer to make sure your estate plan is still legally valid and will carry out your wishes, and, if you do not have an estate plan in place, get to it!

Debt relief

Are you one of the many, many Americans who have been accumulating considerable debt lately? Rather than wallow in this predicament, take advantage of free consultation offered by many debt relief attorneys (including myself)!

We can help you design proactive ways to resolve your debt and gain control of your financial situation, so you can actually move forward without this enormous weight on your shoulders. Don’t wait for debt collectors to start coming after you!

Take action

Stop procrastinating! It’s understandable that people put off their legal planning—after all, approaching a lawyer about estate planning or debt relief or any other legal matter seems like a severely negative thing, and most of us naturally drag our feet on these issues, sometimes until it is too late. But think how much better you’ll feel after you address and resolve these matters directly.

For families and individuals who have enrolled in legal insurance plans, such as Hyatt Legal Plans, ARAG, Workplace Options or Legal Access/LegalEASE and Legal Resources, I suggest you take a closer look at what these plans have to offer. Many plans provide full-service benefits for legal matters like estate planning and debt relief. They’re also very helpful for general legal advice on a wide range of legal matters.

Remember—you don’t have to wait until you’re facing a lawsuit (or initiating one) to get in touch with an attorney. We can help you cope with many of life’s challenges and free you up for other important goals in the coming year.

Are you in need of legal counseling or have any questions about the above topics? The Law Offices of Ian S. Topf, APC offer a free consultation in a variety of issues, ranging from family law/divorce, bankruptcy, and estate planning to criminal/DUI matters and landlord/tenant disputes.

A Policy You Didn’t Know You Needed – Legal Insurance Policy

Ever had an unexpected legal matter come up and you didn’t know what to do or who to turn to? Legal services have increased during the pandemic. Coping with a legal issue can be expensive, time-consuming, and emotionally overwhelming. Many employers offer a legal insurance plan as part of their employment benefits but those who sign up tend to forget they have it.

A legal insurance plan is similar to a health insurance plan. (Keep in mind this is not liability insurance either.) By enrolling with an employer’s plan, a small monthly amount is deducted from their paycheck. Employees then can gain access to a nationwide network of high quality legal services, attorneys, and legal resources without the costly legal fees. The legal plan provides a list of approved attorneys for you to choose from. When an attorney accepts your case, they submit a claim to the legal insurance plan provider, usually with little to no further expense to you (beyond minor out-of-pocket costs). Some policies may reimburse you for seeking out-of-network services or offer a discount to their legal services.

Every legal insurance plan provider has its own policies and procedures, but in general they cover a full range of personal legal matters such as the following:

Depending upon which legal insurance plan your employer subscribes to, you may have access to these benefits:

Advice and office consultations. Call an attorney for free advice and/or office consultation. Get guidance on your legal rights in a given situation, as well as access to various online tools and resources. This benefit could lead to preventing a serious legal situation from occurring in the first place.

A resource in times of legal trouble. Should you need a lawyer for any of the cases mentioned above (or others), through your insurance plan, you’ll be in a great position to find the right person for your needs. 

Financial benefits: Review the policy’s coverage for services, rates, discounts that are offered. If you’re unsure what legal benefits your employer provides, I urge you to review the policy with your boss or HR representative. Knowing this ahead of time will have you prepared to know your options.

This employer-provided benefit can reduce the stress of anyone with a legal issue, as well as the time and expense involved. You will feel more in control of the situation and closer to resolving the issue and moving on with your life. Legal insurance coverage is a valuable resource to have access to.

The Law Offices of Ian S. Topf belong to a variety of employer-provided legal insurance plans. Contact us for more information about getting a free consultation .

Tenants’ Rights When a Property is Sold or Goes into Foreclosure

I’m often asked by tenants what they can do if the house they’re renting is about to be sold by the landlord or is headed for foreclosure. Here’s information that should prove helpful to you in these situations:

In California, landlords wishing to sell their rental property are required to notify tenants in writing of their intention to sell. Many landlords ask tenants to vacate the property promptly, since having renters occupying the property generally limit the pool of potential buyers to investors or others willing to maintain the property as a rental.

Generally speaking, a rental lease will provide terms as to how much time a landlord must give the tenant to vacate the property. If such written terms are not included in the lease, the legal time requirement is at least 90 days—and notice must be delivered to the tenant in writing.

When a new owner takes over

If a prospective buyer wishes to purchase the property free and clear of occupants, the buyer can negotiate that the seller ensures the property is vacant by close of escrow. If the seller had not previously provided a Notice to Vacate to the tenant(s), the escrow period may end up being extended, since a Notice to Vacate provides tenants 30 to 60 (or even 90) days to relocate. Furthermore, if the tenant refuses to vacate after given proper notice, then the seller may be required to initiate legal proceedings for eviction.

In the event you face a Notice to Vacate, you’re entitled to all the privileges afforded by the lease until the period expires, (though you still have to pay rent). Whether it’s a foreclosure or sale situation, you can recover all or a portion of your security deposit, subject to any allowable deductions.

If the property is sold or foreclosed upon prior to the completion of a noticed period to vacate, the new owner takes the property subject to the tenant’s lease. I have found that, frequently, new owners offer current tenants “cash for keys”—meaning they will pay tenants to facilitate moving out so there’s no need to resort to legal proceedings (like eviction).

Stay aware of the situation

Tenants generally face a different problem when the property is in foreclosure. In the vast majority of situations, a tenant’s lease will survive the foreclosure process and the new owner takes the property subject to the lease. However, to stay in good standing under a lease, a tenant must make rental payments to the landlord/current owner of the property. How do you know if a piece of property is about to go into foreclosure or seems headed that way? If the landlord isn’t keeping you updated, contact the County Recorder’s office and file a Request to Notice, asking that you be alerted to any foreclosure proceedings. By doing so, you will receive copies of a Notice of Default and Notice of Sale in a timely manner.

Tenants have substantial rights in the event of a property sale or foreclosure, but they must stay on top of the situation in order to maintain those rights. In a foreclosure, for example, chances are good your security deposit will be gone with the original landlord who lost the property—in which case, you can seek return of that security deposit from the new owner. But in order to do
so, you must have documentation confirming that the original security deposit was paid (as noted in the original lease or through a cancelled check). So be sure to keep all documents relating to your rental (i.e. leases, canceled checks, or other proof of payment, etc…). Don’t throw anything away.

If you learn that the rental property you’re living in is about to be sold or go into foreclosure, contact an attorney. They will help make sure you are able to preserve and assert all your rights as a tenant.

Are you in a situation affecting your rights as a tenant? The Law Offices of Ian S. Topf offer free consultation in a variety of issues, ranging from family law, estate planning, bankruptcy, and DUIs and landlord/tenant disputes.

If You Pay into a Legal Insurance Plan, Don’t Waste it!

Coping with a legal issue can be expensive, time-consuming, and emotionally overwhelming. Many employers offer a legal insurance plan for just such situations as part of their employment benefits but in my experience a significant number of people sign up for such a plan and completely forget they have it.

Legal insurance won’t count for much if you don’t take advantage of it.

A legal insurance plan is similar to a health insurance plan. By enrolling with an employer’s plan and having a small monthly amount deducted from their paycheck, employees gain access to a nationwide network of attorneys and legal resources. In many cases, you get high quality legal services without the costly legal fees. The legal plan provides a list of approved attorneys for you to select from, just as you would a doctor. And when an attorney agrees to take your case, he or she submits a claim to the legal insurance plan provider, usually with little to no further expense to you (beyond minor out-of-pocket costs).

Each legal insurance plan provider has its own policies and procedures, but in general they cover a full range of personal legal matters, including:

  • Family law
  • Debt matters
  • Wills and estate planning
  • Defense of civil lawsuits
  • Traffic defense
  • Juvenile court issues
  • Real estate law

Depending upon which legal insurance plan your employer subscribes to, you may enjoy these benefits:

Advice and office consultations. Call an attorney for free advice and/or office consultation. Get guidance on your legal rights in a given situation, as well as access to online tools and resources. This benefit could lead to preventing a serious legal situation from occurring in the first place.

Build a relationship. Through a legal plan, you can develop a relationship with an attorney that might prove very helpful later on. Also, you know that lawyers who work with a legal insurance plan have been vetted for competence and reputability.

A resource in times of legal trouble. Should you need a lawyer for any of the cases mentioned above (or others), through your insurance plan, you’ll be in a great position to find the right person for your needs. It’s far better than simply typing in “I need a lawyer” on a Google search.

This employer-provided benefit can dramatically reduce the anxiety anyone feels with a legal issue, as well as the time and expense involved. You feel more in control of the situation and closer to resolving the issue and getting on with your life.

If you’re unsure what legal benefits your employer provides, I urge you to take a few minutes to talk with your boss or HR representative. Legal insurance coverage is too valuable a resource to overlook.

The Law Offices of Ian S. Topf belong to a variety of employer-provided legal insurance plans. Learn more about getting a free consultation .

Timing is Critical for Divorce/Dissolution of Domestic Partnership andBankruptcy Filings

Debt and other money issues are often at the root of divorce or the dissolution of domestic partnerships. But these problems don’t just go away once a couple separates. When debt is incurred by spouses or domestic partners in their joint names (and, in some cases, in just one party’s name), creditors can go after either party, regardless of a divorce or dissolution of
domestic partnership order.

For this reason, when one or both parties have racked up significant debt and look ahead to life as single individuals, they may see bankruptcy as the best way to address their financial situation.

Filing for divorce and filing for bankruptcy is, of course, two separate legal matters but if both actions are deemed necessary, the timing for each filing is especially critical. Why? Because while there may be benefits to filing jointly for bankruptcy protection, such a move is generally not permitted once a divorce becomes final. As for domestic partners, the Defense of Marriage Act
prohibits joint bankruptcy filings for unmarried partners.

Benefits of joint bankruptcy filing include:

  • Most attorneys charge the same fee whether one person or a married couple file for
    bankruptcy at the same time.
  • Filing for bankruptcy before a divorce should simplify debt and property division issues
    and lower your divorce costs.
  • In some circumstances, a married couple with dependents may find themselves eligible
    for certain types of bankruptcy relief, i.e., Chapter 7 discharge, for which a divorced
    individual with only visitation rights to his/her child(ren) may be deemed ineligible.

I often see clients who come in for both divorce and bankruptcy. If they both intend to file for bankruptcy, it generally does not matter which filing goes first. But if one party files for bankruptcy and the other party does not, things can get messy.

When a bankruptcy action is pending, Family Courts are temporarily deprived of their jurisdiction over property and debt issues but may still make orders with respect to the status of the marriage (or partnership) such issues as child custody and child/spousal support. Once the bankruptcy matter has been settled, parties then can return to Family Court for orders relating to what remains with respect to asset and debt division—if any assets and/or debts are left over after the bankruptcy.

Sometimes it’s beneficial to file for bankruptcy after a divorce, but in general, it makes sense to get rid of the debt together before the divorce is granted. Whatever your situation, please be sure consult with an attorney before moving ahead with either a divorce and/or bankruptcy filing.

Are you in need of legal counseling? The Law Offices of Ian S. Topf offer free consultation in a variety of issues, ranging from family law, bankruptcy/debt collection defense, to DUIs/criminal defense, and landlord/tenant disputes.

Tips on Avoiding Foreclosure Scams

Anyone facing the possibility of foreclosure on their home is in serious financial distress. People in these situations are susceptible to undue influence and can be easily misled into making bad decisions. It’s a sad but true fact—there are many unscrupulous third parties who won’t hesitate to take advantage of someone desperately seeking a way to save their house
or at least some of their finances. If you are facing foreclosure, here are some things to look out for when seeking professional assistance:

Scams come in many forms

Foreclosure scams, also known as “rescue scams,” come in many forms. The most common involve what companies call “mortgage relief services.” They say they’ll help you refinance your mortgage in a timely fashion so that a foreclosure sale doesn’t take place out from under you. For this alleged service, they charge a huge fee, (and sometimes additional fees for “operating
costs”), with the promise that the homeowner will walk away still owning the property and with a refinanced mortgage and all of their missed payments cleared up.

Sound too good to be true?

In the vast majority of cases, it is. What generally happens in these cases is … nothing ever gets done. The company that made such lifesaving promises collects its fee and then basically does nothing, never returns calls, etc. This goes on until the house goes into a foreclosure sale, at which point the former homeowner is simply out of luck. And just try to get a refund . . .

Another common scam involves a title transfer, where the foreclosure relief company requires you to turn over title (ownership) of your house either to them or to some other third party. You’re permitted to stay in the house as a tenant (renter) and, so the promise goes, with the plan to eventually buy back the property once the mortgage issue has been resolved.

The problem is, once you turn over the title, these companies routinely provide nothing in writing that validates this supposed agreement. Generally speaking, the title transfer process ends up with the third party claiming they were unable to save the house or that they now own the property outright, with no recollection of any alleged agreement with you. If they want, they can
sell the house themselves (they’re now the title-holders, after all) or they can open a home equity line-of-credit or other loan against the property, and take out any equity from the property. The end result – you lose any anticipated equity and, if you’ve been staying in the house as tenant, you’ll likely be evicted as well.

How can you avoid falling prey to schemes like these?

The office of the California State Attorney General offers helpful tips , including these:

  • Never transfer title or sell your house to a “foreclosure rescuer.”
  • Do not make mortgage payments to anyone other than your approved lender or loan
    service.
  • Do not sign documents without carefully reading them first. Homeowners believe they’re
    signing a document for a new loan or a loan modification. They learn later that they’ve
    transferred ownership of their home to someone who is now trying to evict them.

This is great advice but I want to add that you should always contact a lawyer before approaching any business promising foreclosure relief or responding to such a solicitation. Believe me—these companies have no accountability. They won’t think twice about taking your money and then disappearing.

If you’ve already become a victim of such a scam, it’s not necessarily too late to take action. A lawyer knowledgeable in this area can still take steps to help remedy the situation.

Are you in need of legal assistance regarding debt relief options or have any questions regarding the above topic? The Law Offices of Ian S. Topf offers a free consultation in a variety of issues, ranging from bankruptcy, debt collection defense, estate planning, family law, as well as DUIs
and civil matters.

Too Poor to File for Bankruptcy?

According to a study by the Federal Reserve Bank of New York, changes originally enacted in 2005 to the Bankruptcy Abuse Prevention and Consumer Protection Act have made it substantially more difficult for “financially struggling people” to file for bankruptcy relief.

While it’s true that changes like these have made it tougher for people to seek bankruptcy protection in general, I don’t believe the additional hurdles put into place present a significantly greater financial hardship than before these changes were made. Remember, as stated in a couple of my prior blogs, there may be several different options to explore if you’re in need of debt relief.

The three common debt relief choices are:

Ignore the debt. Typically under California law, there’s a four-year statute of limitations for debts (except those made with an oral contract, for which the statute of limitations is two years). While I generally do not advise clients to go this route, especially if your debt(s) were incurred recently, you may just simply ignore your debt and hope the statute runs. In my experience, creditors are a pretty unforgiving bunch. Eventually you may get sued, which will lead to having your wages garnished, liens attached to your property, and/or bank accounts/other property seized and forfeited to your
creditor(s). Also, interest, penalties, and other fees for non-payment will keep accruing on your debts, worsening the situation.

Negotiate to settle the debt. In general, creditors are willing to reduce the overall balance owed on a debt, if they know they are going to get paid, especially if (1) you’ve missed at least a few payments and (2) you are willing to pay off the settled amount promptly (either lump-sum or over only a couple of months). The bad news is the government has made it a bit harder to negotiate with creditors. There is now a mandatory requirement that, with certain exceptions, creditors issue a 1099 Form for any balance forgiven in a settlement when the settlement amount equates to a more-than-$600 reduction from the balance you actually owe, You will then have to declare that 1099 amount on your taxes as if it were income (and pay taxes on said amount). Say, for example, you owe $2,000 and you negotiate a lump-sum settlement of $1,200, you will receive a 1099 for $800 to be added to your gross income for the year when tax time comes around.

File for bankruptcy relief. If neither of the first two options work, you will probably find yourself in bankruptcy court. In my opinion, in general, the greatest change that impacts one’s ability to file for bankruptcy relief has been the increase in allowable attorney fees in bankruptcy cases.  For example, here in San Diego, California, bankruptcy attorneys can now initial fees of up to $3,600.00 for a Chapter 13 consumer bankruptcy filing, up from $1,700.00 in 2012.  These fees usually do not include certain administrative costs and other miscellaneous fees for actions that may take place during the course of the bankruptcy case.

Where does this leave people in need of relief?

In general, if push came to shove, most people can come up with the requisite monies needed to hire a bankruptcy attorney to assist them in getting rid of a far more substantial amount of debt. For those who aren’t able to do so, there will always be attorneys (including myself) who usually don’t charge the allowable “standard” attorney’s fee.

There’s also the option of representing yourself in matters of bankruptcy relief, though of course, you’re held to the same standards and requirements as an attorney representing you in such an action. In my experience, those charged with monitoring your bankruptcy case (court websites, court clerks, the U.S. Trustees’ office) can be both understanding and helpful in providing information that may assist you with proceeding on your own.

A word of caution: There are individuals and businesses out there offering bankruptcy preparation services for “reduced fees.” Across the U.S., bankruptcy courts have had issues with such services, since they generally offer document preparation services with minimal instructions on how to file. The end-product is often incomplete and there’s usually no follow-up after the bankruptcy petition is filed. While not all such bankruptcy preparers operate this way, I urge you to carefully explore your options before choosing such a service.

In conclusion, while it is true that desperate times call for desperate measures, there are several non-drastic opportunities out there for debt relief, contrary to what the public is being led to believe by recent studies and news articles.  So if you find yourself in a personal financial crisis, don’t just curl up into a ball and hope your problems will magically disappear; reach out to a skilled debt relief professional and explore your options.

Are you in need of legal counseling for bankruptcy or debt issues or have any questions regarding the above? The Law Offices of Ian S. Topf offer free consultation in a variety of issues, ranging from bankruptcy, family law, and estate planning to traffic violations and landlord/tenant disputes.