Los Angeles Bankruptcy Law Blog

Last week, we discussed Obama's Home Refinancing Plan, whether states would sign onto the plan, and what it would mean for individuals considering bankruptcy. This week, the federal and state government announced that they have come to a $26 billion foreclosure settlement with five lenders - Ally Financial, Bank of America, Citigroup, JPMorgan Chase and Wells Fargo.

Forty-nine attorneys general signed onto the deal (all except for the Oklahoma AG), as well as the U.S. Department of Housing and Urban Development (HUD) and the Justice Department.

The settlement includes $1.5 million for homeowners who faced home foreclosure between 2008 and 2011. These homeowners will receive $2,000 for improper foreclosure but may still sue their banks to recover damages.

During bankruptcy, the court issues an automatic stay to prevent creditors from foreclosing on or repossessing property. If creditors can establish that they have a right to the property in question, they can file a motion for relief from stay. If successful, this motion lets creditors continue to pursue foreclosure, repossession or other actions to collect on debts.

While this motion is vital to many creditors during bankruptcy, it can also lead to consequences if done incorrectly. For example, creditors can be fined or even lose their collateral if they cannot show that the motion for relief from stay was filed properly.

Hostess is the latest company to make news for filing Chapter 11 bankruptcy in U.S. Bankruptcy Court. The bankruptcy is the second in seven years for Hostess, which also filed for Chapter 11 bankruptcy in 2004 and completed its restructuring process in early 2009.

The company is citing labor agreements, labor costs, debt and the economy as its reasons for seeking Chapter 11 bankruptcy. Hostess faces nearly $860 million in debt with close to 100,000 creditors. It also has substantial expenses.

The possibility of losing some of your possessions during bankruptcy can be very frightening. Many people wonder if they will need to find a new place to live or take public transportation after they declare bankruptcy. Thankfully, state law allows individuals going through bankruptcy to keep some of their most important possessions.

The law that dictates what property is not liquidated during Chapter 7 bankruptcy is called the California Bankruptcy Exemption Statute. There are two options from which individuals going through bankruptcy can choose, depending on their unique circumstances.