If you believe that "debt settlement companies" and "debt negotiation companies" are interested in helping you out and are looking out for your best interests, then perhaps you've considered investing in unicorn farms as well. Know who may be your best friend in paying your debts? Your bankruptcy attorney.
The fact is that debt settlement companies have bills to pay too. Some are not-for-profit and some are. But one way or the other, they have employees to pay. So how do they make their money? If a company is not-for-profit, then they are getting their funding from credit card companies. If they don't charge you a fee, then they have to be receiving their funding from somewhere. If they're funded by credit card companies, do you think they're going to do what's in YOUR best interest?
Other companies will charge you a fee for their services. If you use them, you'll find yourself in a situation where you're not only trying to pay your debts (with interest), but you're paying exorbitant fees to this debt settlement company too. And the fact is that many of them do not properly account for the money they receive from their "clients". They may pay your creditors slowly or not at all. And when the creditors don't get paid, who do you think they're going to start coming after? (Hint: the answer is "YOU"). Other companies have a system whereby they hold onto your money until there is enough on hand to pay off one creditor. Does this make sense to anyone? I can tell you that the other creditors will not sit by and patiently wait in line to get paid. Not to mention that many of these companies are just plain shady. Ever hear of Ameridebt? The were one of the largest companies out there "helping" consumers. That is until the Federal Trade Commission shut them down. Guess they weren't so helpful after all.
Almost weekly I have clients come in who are getting sued while working in one of these programs. This is usually the tipping point when they decide that, despite their best efforts, it's time to go in another direction. Unfortunately, some of them have wasted thousands of dollars trying to make arrangements that eventually fail. It's understandable that people want to pay their bills. But you have to understand that you ABSOLUTELY WILL NOT get honest information from these companies. No matter what your situation, they will try to sell you on a plan that is "doable". Chances are, however, that the only thing it will do it fatten their wallets at your expense.
So what to do? If you're thinking about dealing with one of these companies, talk to a bankruptcy attorney FIRST! Sound backwards? Actually, it's the smartest thing you can do. Any good bankruptcy attorney will present you with all of your options and honestly evaluate your situation. Many times, I've advised potential clients who wish to pay back their debts that they should not file for bankruptcy. And for those who want to, but who cannot realistically do it on their own, we explore the option of a Chapter 13 bankruptcy. And bankruptcy attorneys are required to provide you with a written contract that outlines their services and all of the costs. And most good bankruptcy attorneys will give you a free consultation where you can learn about Chapter 7 or Chapter 13 bankruptcy.
I'm an experienced Canton bankruptcy attorney who's filed or managed over 1,000 cases. For more information on Chapter 7 and Chapter 13, call me at 330-605-3508 or visit my website at http://www.ohiobankruptcyrelief.com/.
Sunday, November 14, 2010
Monday, October 18, 2010
Thinking of Filing for Bankruptcy? - You're Definitely Not Alone
In 2005, Congress changed the Bankruptcy Code with Orwellian-sounding Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA). Despite the impressive sounding name, BAPCPA has done little to prevent bankruptcy abuse and has done nothing to protect consumers. It's real purpose was to reduce the number of people filing for bankruptcy by making it more difficult, more costly and by forcing more people into Chapter 13 repayment plans as opposed to Chapter 7. It appeared as if the credit card and banking industries had gotten more than their money's worth from President Bush and the Republican Congress.
Yesterday we "celebrated" the 5-year anniversary of the effective date of BAPCPA. What better way to memorialize the day than to take a look back and see just what effect BAPCPA has had on the number of bankruptcy filings 5 years later.
Every year, an administrative agency known as the Administrative Office of U.S. Courts (AOUSC) is required to issue a report about certain bankruptcy statistics. The statistics for 2009 are available and the numbers are hardly surprising. They reveal the following:
But hasn't BAPCPA reduced the number of people filing for Chapter 7 and pushed them into Chapter 13 plans? After all, that was one of its goals. A closer look at the numbers shows that in 2004, the percentage of consumer bankruptcy cases that were filed under Chapter 7 amounted to (drum roll please) . . . 71%! Exactly the same percentage as in 2009. So five years down the road, BAPCPA has neither reduced the number of people filing for bankruptcy, nor has it changed the percentage filing for Chapter 13.
Is there a lesson to be learned? Essentially, we find ourselves in the same position that we were in before the law changed. Of course, now there are additional burdens, cost and expense for debtors, their attorneys, trustees, creditors and the courts. To what end? A Congress and President who knew little if anything about bankruptcy pushed through a measure that has made the process a hassle for everybody, including the very banks and credit card companies that paid them for it. Based on the results five years later, maybe they should ask for a refund.
Filing bankruptcy can be complicated and confusing. For more information on Chapter 7 and Chapter 13, or for a free consultation, call me at 330-605-3508 or visit my website at http://www.ohiobankruptcyrelief.com/.
Yesterday we "celebrated" the 5-year anniversary of the effective date of BAPCPA. What better way to memorialize the day than to take a look back and see just what effect BAPCPA has had on the number of bankruptcy filings 5 years later.
Every year, an administrative agency known as the Administrative Office of U.S. Courts (AOUSC) is required to issue a report about certain bankruptcy statistics. The statistics for 2009 are available and the numbers are hardly surprising. They reveal the following:
- In 2009, there were 1.4 million consumer bankruptcy cases filed, an increase of 32% over 2008!
- Approximately 71 percent were Chapter 7 cases, and 29 percent were Chapter 13 cases (down from 34% in 2008).
- In 28% of Chapter 13 cases, debtors indicated that they had filed for bankruptcy in the previous eight years
- In 2004 there were 1,597,000 cases filed
- In 2005 there were 2,039,000 cases filed
- In 2006 there were 597,000 cases filed
- In 2007 there were 819,000 cases filed
- In 2008 there were 1,086,000 cases filed
- In 2009 there were 1,400,000 cases filed
But hasn't BAPCPA reduced the number of people filing for Chapter 7 and pushed them into Chapter 13 plans? After all, that was one of its goals. A closer look at the numbers shows that in 2004, the percentage of consumer bankruptcy cases that were filed under Chapter 7 amounted to (drum roll please) . . . 71%! Exactly the same percentage as in 2009. So five years down the road, BAPCPA has neither reduced the number of people filing for bankruptcy, nor has it changed the percentage filing for Chapter 13.
Is there a lesson to be learned? Essentially, we find ourselves in the same position that we were in before the law changed. Of course, now there are additional burdens, cost and expense for debtors, their attorneys, trustees, creditors and the courts. To what end? A Congress and President who knew little if anything about bankruptcy pushed through a measure that has made the process a hassle for everybody, including the very banks and credit card companies that paid them for it. Based on the results five years later, maybe they should ask for a refund.
Filing bankruptcy can be complicated and confusing. For more information on Chapter 7 and Chapter 13, or for a free consultation, call me at 330-605-3508 or visit my website at http://www.ohiobankruptcyrelief.com/.
Friday, September 24, 2010
Getting a Tax Refund? - Speak To Your Attorney Before You File For Bankruptcy
The next few months will bring us into tax season. Don't think so? Then you're not thinking about the ramifications of your tax refund on your bankruptcy. The fact is that for cases filed from about November 1 through April, the issue of tax refunds has to be considered. Here are a few of the basics about whether or not you'll get to keep that tax refund.
As an initial matter, your bankruptcy trustee has an interest in your tax refund. The trustee's job is to find any property that is not exempt, seize it, liquidate it and use the proceeds to pay back your creditors. Although some trustees are more aggressive than others in pursuing property, they all look at tax refunds as a way to bring some money into the bankruptcy estate.
Here are some of the important things to know. First off, if your case is filed before the end of the year, then the trustee will only be entitled to a prorated portion of the refund. For example, if you filed on December 1, 2010, the trustee would only be entitled to pursue roughly 91% of your 2010 refund (11/12th). Got it? And every day that passes, he or she will be entitled to pursue a greater percentage. If you file after the first of the year (e.g. January 1, 2011), then the starting point for the trustee is the entire refund.
There is, however, good news. A debtor's best friend in bankruptcy (beside their attorney) is the exemption. Let's look at some of the specific exemptions that we use in Ohio to keep some, or all, or the tax refund out of the hands of your bankruptcy trustee.
EXEMPTIONS
An exemption is a legal right for the debtor to place certain property beyond the reach of creditors or the bankruptcy trustee. There are exemptions listed in the Bankruptcy Code for certain property ("Federal exemptions") and exemptions for individual states as well. For the most part, in Ohio we use the exemptions provided for by the Ohio Revised Code, most of which are contained in Section 2329.66. The practical effect of these exemptions is that the debtor gets to retain certain property he or she would otherwise have to surrender. The good news is that oftentimes debtors in Ohio may not have to surrender any of their tax refund to the bankruptcy trustee. Some of the relevant exemptions are as follows:
TIMING
There are actually instances in which it may benefit a debtor to wait to file for bankruptcy. If a debtor has filed their tax return, but not received their refund, their attorney should analyze their refund to see how much is exempt. If the debtors stand to lose a significant portion of their refund to the trustee, I often advise them to wait until they receive their refund to file. If they receive their refund after they've filed, then the trustee will seize the entire non-exempt portion. If they get their refund first, then they will have a chance to spend it down before filing their case. If this is the case, I always advise debtors to keep track of what they've spent their refund on, as the trustee will want to know. And, of course, one great way to spend your refund . . . pay your bankruptcy attorney. However, there are often legitimate expenses that debtors can spend their refund on pre-petition. These may include groceries, utilities, insurance, clothing, car repairs or any necessities. It is NOT, however, a good idea to spend your refund on a big-ticket item or to re-pay friends or family members right before filing for bankruptcy.
Although the trustee is always seeking ways to get a portion of your tax refund, most debtors and their attorneys, using the proper exemptions and timing, can avoid having to turn over their tax refund and put it to use giving themselves a fresh start.
I'm an experienced Canton bankruptcy attorney who's filed or managed over 1,000 cases. For more information on Chapter 7 and Chapter 13, call me at 330-605-3508 or visit my website at http://www.ohiobankruptcyrelief.com/.
As an initial matter, your bankruptcy trustee has an interest in your tax refund. The trustee's job is to find any property that is not exempt, seize it, liquidate it and use the proceeds to pay back your creditors. Although some trustees are more aggressive than others in pursuing property, they all look at tax refunds as a way to bring some money into the bankruptcy estate.
Here are some of the important things to know. First off, if your case is filed before the end of the year, then the trustee will only be entitled to a prorated portion of the refund. For example, if you filed on December 1, 2010, the trustee would only be entitled to pursue roughly 91% of your 2010 refund (11/12th). Got it? And every day that passes, he or she will be entitled to pursue a greater percentage. If you file after the first of the year (e.g. January 1, 2011), then the starting point for the trustee is the entire refund.
There is, however, good news. A debtor's best friend in bankruptcy (beside their attorney) is the exemption. Let's look at some of the specific exemptions that we use in Ohio to keep some, or all, or the tax refund out of the hands of your bankruptcy trustee.
EXEMPTIONS
An exemption is a legal right for the debtor to place certain property beyond the reach of creditors or the bankruptcy trustee. There are exemptions listed in the Bankruptcy Code for certain property ("Federal exemptions") and exemptions for individual states as well. For the most part, in Ohio we use the exemptions provided for by the Ohio Revised Code, most of which are contained in Section 2329.66. The practical effect of these exemptions is that the debtor gets to retain certain property he or she would otherwise have to surrender. The good news is that oftentimes debtors in Ohio may not have to surrender any of their tax refund to the bankruptcy trustee. Some of the relevant exemptions are as follows:
- Cash on Hand (ORC 2329.66(A)(3)) - Allows a total $400 exemption for cash on hand or tax refunds
- Wildcard (ORC 2329.66(A)(18)) - Allows the debtor an exemption of $1,150 in any property
- EIC and Child Tax Credit (ORC 2329.66(A)(9)(g)) - Allows an unlimited exemption for amounts attributable to Earned Income Credit or Child Tax Credit
TIMING
There are actually instances in which it may benefit a debtor to wait to file for bankruptcy. If a debtor has filed their tax return, but not received their refund, their attorney should analyze their refund to see how much is exempt. If the debtors stand to lose a significant portion of their refund to the trustee, I often advise them to wait until they receive their refund to file. If they receive their refund after they've filed, then the trustee will seize the entire non-exempt portion. If they get their refund first, then they will have a chance to spend it down before filing their case. If this is the case, I always advise debtors to keep track of what they've spent their refund on, as the trustee will want to know. And, of course, one great way to spend your refund . . . pay your bankruptcy attorney. However, there are often legitimate expenses that debtors can spend their refund on pre-petition. These may include groceries, utilities, insurance, clothing, car repairs or any necessities. It is NOT, however, a good idea to spend your refund on a big-ticket item or to re-pay friends or family members right before filing for bankruptcy.
Although the trustee is always seeking ways to get a portion of your tax refund, most debtors and their attorneys, using the proper exemptions and timing, can avoid having to turn over their tax refund and put it to use giving themselves a fresh start.
I'm an experienced Canton bankruptcy attorney who's filed or managed over 1,000 cases. For more information on Chapter 7 and Chapter 13, call me at 330-605-3508 or visit my website at http://www.ohiobankruptcyrelief.com/.
Friday, August 20, 2010
Clients FAQs - Lost Your Driver's License? How Bankruptcy May Be Able To Help You Get It Back
It never ceases to surprise me how many people drive without insurance. A common situation I see involves people who have gotten into an accident without having insurance. When there are damages, typically the other party's insurance company pays their insured customer and seeks reimbursement from the driver at fault. If the person is unable to pay, the uninsured driver can lose his license until the amount is satisfied. This is where bankruptcy comes in.
First off, coverage can be expensive, but it's required. If a person purchases automobile insurance, the State of Ohio requires the person to purchase Bodily Injury Liability Coverage as well as Property Damage Liability. In Ohio the required minimum for Bodily Injury Liability Coverage is $12,500 per person injured in any one accident and $25,000 for all persons injured in any one accident. The required minimum for Property Damage Liability Coverage is $7,500 for injury to or destruction of property of others in any one accident.
So what is the penalty for driving without the proper amount of insurance? Failure to provide proof of financial responsibility, when required, will result in the following civil penalties imposed by the Registrar of Motor Vehicles:
■Lose driving privileges for a minimum of ninety (90) days and up to two (2) years;
■License plates and vehicle registration suspension;
■License plate reinstatement fees for first violation, second violation, and third or subsequent violation (There is an additional non-voluntary surrender fee for failing to surrender the license, plates or vehicle registration to the BMV);
■Require filing with the BMV (SR-22 or bond) to continuously maintain proof of financial responsibility for a minimum of three (3), up to five (5) years from the date of the suspension of operating privileges;
■Vehicle immobilization and confiscation of plates for 30 to 60 days for violating FR suspension. Third and subsequent offenses could result in vehicle forfeiture and a five (5) year suspension of vehicle registrations.
Driving and registration privileges cannot be restored until all requirements of the suspension have been met. If you think this is bad, consider what can happen if you get in an accident. If you are involved in an auto accident without insurance or other proof of financial responsibility, additional penalties may apply. You may have a security suspension for two years or more and a judgment suspension for an indefinite period until the judgment is settled. These suspensions can involves several thousand dollars and people can often lose their license for years. This is where bankruptcy can come in.
Assuming there are no other holds on your license, filing for bankruptcy will allow you to get your license back immediately. As long as there were no drugs or alcohol involved, the amounts owed to the insurance company can be discharged through bankruptcy. In fact, the Ohio Revised Code even provides that your reinstatement fee can be discharged in bankruptcy (ORC 4510.10(G)). As soon as your case is filed, you can take your paperwork to the Bureau of Motor Vehicles to get your license reinstated. An experienced bankruptcy attorney will provide you with the appropriate paperwork and guide you through the process.
I'm an experienced Ohio bankruptcy attorney who has managed or filed over 1,000 cases throughout Northern Ohio. For more information on Chapter 7 and Chapter 13, call me at 330-605-3508 or visit my website at http://www.ohiobankruptcyrelief.com/.
First off, coverage can be expensive, but it's required. If a person purchases automobile insurance, the State of Ohio requires the person to purchase Bodily Injury Liability Coverage as well as Property Damage Liability. In Ohio the required minimum for Bodily Injury Liability Coverage is $12,500 per person injured in any one accident and $25,000 for all persons injured in any one accident. The required minimum for Property Damage Liability Coverage is $7,500 for injury to or destruction of property of others in any one accident.
So what is the penalty for driving without the proper amount of insurance? Failure to provide proof of financial responsibility, when required, will result in the following civil penalties imposed by the Registrar of Motor Vehicles:
■Lose driving privileges for a minimum of ninety (90) days and up to two (2) years;
■License plates and vehicle registration suspension;
■License plate reinstatement fees for first violation, second violation, and third or subsequent violation (There is an additional non-voluntary surrender fee for failing to surrender the license, plates or vehicle registration to the BMV);
■Require filing with the BMV (SR-22 or bond) to continuously maintain proof of financial responsibility for a minimum of three (3), up to five (5) years from the date of the suspension of operating privileges;
■Vehicle immobilization and confiscation of plates for 30 to 60 days for violating FR suspension. Third and subsequent offenses could result in vehicle forfeiture and a five (5) year suspension of vehicle registrations.
Driving and registration privileges cannot be restored until all requirements of the suspension have been met. If you think this is bad, consider what can happen if you get in an accident. If you are involved in an auto accident without insurance or other proof of financial responsibility, additional penalties may apply. You may have a security suspension for two years or more and a judgment suspension for an indefinite period until the judgment is settled. These suspensions can involves several thousand dollars and people can often lose their license for years. This is where bankruptcy can come in.
Assuming there are no other holds on your license, filing for bankruptcy will allow you to get your license back immediately. As long as there were no drugs or alcohol involved, the amounts owed to the insurance company can be discharged through bankruptcy. In fact, the Ohio Revised Code even provides that your reinstatement fee can be discharged in bankruptcy (ORC 4510.10(G)). As soon as your case is filed, you can take your paperwork to the Bureau of Motor Vehicles to get your license reinstated. An experienced bankruptcy attorney will provide you with the appropriate paperwork and guide you through the process.
I'm an experienced Ohio bankruptcy attorney who has managed or filed over 1,000 cases throughout Northern Ohio. For more information on Chapter 7 and Chapter 13, call me at 330-605-3508 or visit my website at http://www.ohiobankruptcyrelief.com/.
Saturday, August 7, 2010
Client FAQs - How Does Filing For Bankruptcy Affect Co-Signors?
A common situation that arises when people come into my office involves co-signors. Many people I talk to have either co-signed or had co-signers on loans. Typically these loans are for vehicles and clients wonder what will happen to co-signers if they file for bankruptcy.
This is a common questions with a pretty simple answer (most of the time). In general, the filing of a bankruptcy by one co-signor does NOT relieve the other co-signor of liability for the loan. So, for instance, if you have co-signed a loan for someone else and that person files for bankruptcy, you are still responsible for the entire amount of the loan. It often happens, of course, that the person filing for bankruptcy will choose to keep a car or other secured property. If they continue to pay on the property, then the filing of the bankruptcy will not affect the co-signor.
As with most bankruptcy situations, however, there is a caveat. When a bankruptcy is filed, there is a mechanism put in place called the automatic stay. It takes effect immediately upon the filing of the bankruptcy and protects the debtor from any sort of collection activities including phone calls or letters, lawsuits, wage garnishments or bank attachments. The automatic stay does not apply to any co-debtors or co-signors with the bankruptcy debtor. Or does it? There is a situation in which a co-debtor is also protected by the bankruptcy filing.
The bankruptcy code provides for a "co-debtor stay" in a Chapter 13 bankruptcy (11 U.S.C. 1301). The co-debtor stay will stay in effect for the duration of the Chapter 13 plan. However, a creditor can seek to get relief from the co-debtor stay unless the debt is a "consumer debt" and the debtor is re-paying the debt in full through their plan. If the creditor can show "irreparable harm" due to the co-debtor stay, the court may also grant them relief from the stay. If relief from stay is granted, the creditor can then pursue the co-debtor.
You should talk to an experience bankruptcy attorney for more answers on the scope and effect of co-signing. To speak with an experienced Ohio bankruptcy attorney, or for more information on Chapter 7 and Chapter 13, call me at 330-605-3508 or visit my website at http://www.ohiobankruptcyrelief.com/.
This is a common questions with a pretty simple answer (most of the time). In general, the filing of a bankruptcy by one co-signor does NOT relieve the other co-signor of liability for the loan. So, for instance, if you have co-signed a loan for someone else and that person files for bankruptcy, you are still responsible for the entire amount of the loan. It often happens, of course, that the person filing for bankruptcy will choose to keep a car or other secured property. If they continue to pay on the property, then the filing of the bankruptcy will not affect the co-signor.
As with most bankruptcy situations, however, there is a caveat. When a bankruptcy is filed, there is a mechanism put in place called the automatic stay. It takes effect immediately upon the filing of the bankruptcy and protects the debtor from any sort of collection activities including phone calls or letters, lawsuits, wage garnishments or bank attachments. The automatic stay does not apply to any co-debtors or co-signors with the bankruptcy debtor. Or does it? There is a situation in which a co-debtor is also protected by the bankruptcy filing.
The bankruptcy code provides for a "co-debtor stay" in a Chapter 13 bankruptcy (11 U.S.C. 1301). The co-debtor stay will stay in effect for the duration of the Chapter 13 plan. However, a creditor can seek to get relief from the co-debtor stay unless the debt is a "consumer debt" and the debtor is re-paying the debt in full through their plan. If the creditor can show "irreparable harm" due to the co-debtor stay, the court may also grant them relief from the stay. If relief from stay is granted, the creditor can then pursue the co-debtor.
You should talk to an experience bankruptcy attorney for more answers on the scope and effect of co-signing. To speak with an experienced Ohio bankruptcy attorney, or for more information on Chapter 7 and Chapter 13, call me at 330-605-3508 or visit my website at http://www.ohiobankruptcyrelief.com/.
Tuesday, July 20, 2010
Client FAQs - Is It Too Soon To File Again?
Many people who come in to my office seeking bankruptcy protection have already filed before. This begs the question, how soon is too soon to re-file? Unlike most things in bankruptcy the rules for filing a second (or third) bankruptcy are clear cut.
There are different waiting periods for different chapters. The important date is the date of filing of your previous case. It is also important to know that you are only prohibited by these dates if you received a discharge in your previous case. If, for instance, you had a Chapter 13 case that was dismissed, you do not have to wait to re-file (unless the court has prohibited you from doing so).
So here are the different scenarios:
One scenario that can occur, however, is when a client needs to file a Chapter 13 bankruptcy to stop a foreclosure, but it is too soon to re-file. That person can still file a Chapter 13, but they cannot receive a discharge. However, the filing of the Chapter 13 can stop the foreclosure and allow them to pay off the arrearages over the course of their plan.
For more information on Chapter 7 and Chapter 13, visit my website at http://www.ohiobankruptcyrelief.com/.
There are different waiting periods for different chapters. The important date is the date of filing of your previous case. It is also important to know that you are only prohibited by these dates if you received a discharge in your previous case. If, for instance, you had a Chapter 13 case that was dismissed, you do not have to wait to re-file (unless the court has prohibited you from doing so).
So here are the different scenarios:
- If you filed a Chapter 7 bankruptcy and received a discharge, you must wait 8 years from the date of filing to file another Chapter 7.
- If you filed a Chapter 7 bankruptcy and received a discharge, you must wait 4 years from the date of filing to file a Chapter 13 bankruptcy.
- If you filed a Chapter 13 bankruptcy and received a discharge, you must wait 6 years from the date of filing to file a Chapter 7 bankruptcy.
- If you filed a Chapter 13 bankruptcy and received a discharge, you must wait 2 years to file another Chapter 13.
One scenario that can occur, however, is when a client needs to file a Chapter 13 bankruptcy to stop a foreclosure, but it is too soon to re-file. That person can still file a Chapter 13, but they cannot receive a discharge. However, the filing of the Chapter 13 can stop the foreclosure and allow them to pay off the arrearages over the course of their plan.
For more information on Chapter 7 and Chapter 13, visit my website at http://www.ohiobankruptcyrelief.com/.
Wednesday, July 14, 2010
What Is A "Bankruptcy Petition Preparer"? - Someone You Should Avoid At All Costs!
Want to overpay for a simple service you could do yourself? Want to throw hundreds of dollars away? Then I've got just the thing for you. It's called a "bankruptcy petition preparer".
So what is a bankruptcy petition preparer? This is the best definition I found. This is taken directly form Nolo.com. A link to this page is here.
"A bankruptcy petition preparer is any person or business, other than a lawyer or someone who works for a lawyer, that charges a fee to prepare bankruptcy documents. Under your direction and control, the bankruptcy petition preparer generates bankruptcy forms for you to file either by typing them or inputting information into a bankruptcy software program.
Because bankruptcy petition preparers are not attorneys, they cannot provide legal advice or represent you in bankruptcy court. This means that the bankruptcy petition preparer cannot:
tell you which type of bankruptcy to file
tell you not to list certain debts
tell you not to list certain assets, or
tell you what property to exempt.
In essence, you must understand what debts your bankruptcy will discharge, what will happen to your property in the bankruptcy, and what laws should be used to exempt your property from being taken for the benefit of your creditors.
In addition, you must file the bankruptcy papers yourself and represent yourself in court. In other words, you are responsible for your case. You act as your own attorney and use the bankruptcy petition preparer as a typing service that transposes the information you give them onto the official forms."
A typing service. That's all they are supposed to be. Understand this point, first and foremost: A BANKRUPTCY PETITION PREPARER IS NOT A LAWYER! Did I say that loud enough? How about this too: A BANKRUPTCY PETITION PREPARER CANNOT GIVE YOU LEGAL ADVICE. Here goes another: A BANKRUPTCY PETITION PREPARER CANNOT REPRESENT YOU IN COURT OR AT YOUR HEARINGS! Let's see, what else? OK: THERE IS NO FORMAL TRAINING OR CERTIFICATION REQUIRED TO BE A BANKRUPTCY PETITION PREPARER. A bankruptcy lawyer has a bachelor's degree plus a degree from an accredited law school. They have also passed the bar exam and are licensed to practice law in a federal court. A bankruptcy petition preparer is not required to have any education or certification at all.
If you choose to use a bankruptcy petition preparer instead of a bankruptcy attorney, you are still completely on your own. And the cost for an attorney (who will represent you, give you legal advice and attend hearings with you) is often not much more than you'd pay the bankruptcy petition preparer. Filing for bankruptcy can be full of pitfalls, and the bankruptcy petition preparer is neither permitted nor qualified to give you any advice about whether you should file under Chapter 7 or Chapter 13 or what the consequences might be. They cannot tell you which property is exempt and which property you may lose. In short, they cannot tell you anything.
Bankruptcy petition preparers are often attractive to people because of the low cost involved. If you decide to file for bankruptcy, it can be an expensive option. Most good attorneys, however, will have flexible fees and payment arrangements that can help you get your case filed in a timely manner. But if you decide to take the risk and do it yourself, throwing hundreds of dollars at a typist could be your biggest mistake of all.
For more information on Chapter 7 and Chapter 13, visit my website at http://www.ohiobankruptcyrelief.com/.
So what is a bankruptcy petition preparer? This is the best definition I found. This is taken directly form Nolo.com. A link to this page is here.
"A bankruptcy petition preparer is any person or business, other than a lawyer or someone who works for a lawyer, that charges a fee to prepare bankruptcy documents. Under your direction and control, the bankruptcy petition preparer generates bankruptcy forms for you to file either by typing them or inputting information into a bankruptcy software program.
Because bankruptcy petition preparers are not attorneys, they cannot provide legal advice or represent you in bankruptcy court. This means that the bankruptcy petition preparer cannot:
tell you which type of bankruptcy to file
tell you not to list certain debts
tell you not to list certain assets, or
tell you what property to exempt.
In essence, you must understand what debts your bankruptcy will discharge, what will happen to your property in the bankruptcy, and what laws should be used to exempt your property from being taken for the benefit of your creditors.
In addition, you must file the bankruptcy papers yourself and represent yourself in court. In other words, you are responsible for your case. You act as your own attorney and use the bankruptcy petition preparer as a typing service that transposes the information you give them onto the official forms."
A typing service. That's all they are supposed to be. Understand this point, first and foremost: A BANKRUPTCY PETITION PREPARER IS NOT A LAWYER! Did I say that loud enough? How about this too: A BANKRUPTCY PETITION PREPARER CANNOT GIVE YOU LEGAL ADVICE. Here goes another: A BANKRUPTCY PETITION PREPARER CANNOT REPRESENT YOU IN COURT OR AT YOUR HEARINGS! Let's see, what else? OK: THERE IS NO FORMAL TRAINING OR CERTIFICATION REQUIRED TO BE A BANKRUPTCY PETITION PREPARER. A bankruptcy lawyer has a bachelor's degree plus a degree from an accredited law school. They have also passed the bar exam and are licensed to practice law in a federal court. A bankruptcy petition preparer is not required to have any education or certification at all.
If you choose to use a bankruptcy petition preparer instead of a bankruptcy attorney, you are still completely on your own. And the cost for an attorney (who will represent you, give you legal advice and attend hearings with you) is often not much more than you'd pay the bankruptcy petition preparer. Filing for bankruptcy can be full of pitfalls, and the bankruptcy petition preparer is neither permitted nor qualified to give you any advice about whether you should file under Chapter 7 or Chapter 13 or what the consequences might be. They cannot tell you which property is exempt and which property you may lose. In short, they cannot tell you anything.
Bankruptcy petition preparers are often attractive to people because of the low cost involved. If you decide to file for bankruptcy, it can be an expensive option. Most good attorneys, however, will have flexible fees and payment arrangements that can help you get your case filed in a timely manner. But if you decide to take the risk and do it yourself, throwing hundreds of dollars at a typist could be your biggest mistake of all.
For more information on Chapter 7 and Chapter 13, visit my website at http://www.ohiobankruptcyrelief.com/.
Monday, July 12, 2010
Bankruptcy Fraud - Just How Much Trouble Can You Get In By Lying?
The following is a common situation that needs to be addressed. Often, people will come into my office to talk about bankruptcy and discuss their options. During the course of our conversation, we talk about their assets. Sometimes, I unfortunately have to tell people that they may lose property if they file a Chapter 7 bankruptcy, or pay money to the trustee. Although many people understand this, others get upset. They may talk about transferring property or just not disclosing it on their petition. Of course, I have to advise them that I will not file their petition if I know that we have not disclosed all of their assets or transfers. I often wonder how many of those people then go to visit another attorney and do not tell them about their assets. If you're thinking about hiding assets during your bankruptcy, you need to think twice.
First things first. BANKRUPTCY FRAUD IS A CRIME. According to some sources, nearly 70% of all bankruptcy fraud involves the concealment of assets. You need to know that when you sign your bankruptcy petition, you are signing it under penalty of perjury.
Under federal law "A person who - (3) knowingly and fraudulently makes a false declaration, certificate, verification, or statement under penalty of perjury as permitted under section 1746 of title 28, in or in relation to any case under title 11 (The Bankruptcy Code) shall be fined under this title, imprisoned not more than 5 years, or both." 18 USC 152. The maximum fine is $250,000. This should impress upon you the consequences of intentionally lying on your bankruptcy petition or attempting to conceal assets.
Furthermore, when you sign your petition, it states that "I declare under penalty of perjury that the information provided in this petition is true and correct". Also, when you attend the Meeting of Creditors, your bankruptcy trustee will swear you in. The point is that this is serious stuff people.
Other consequences of lying during your bankruptcy could include: having your discharge denied or revoked. You may also be forced to surrender property to your bankruptcy trustee.
Finally, you need to know that going back and fixing your schedules or disclosing assets does not relieve you of liability for lying in the first place.
If you're concerned about losing property through a bankruptcy, talk to an experienced bankruptcy attorney about the possibility of filing a Chapter 13 bankruptcy. In a Chapter 13, you can keep all of your property, although you will pay the value of your non-exempt property through your Chapter 13 case.
For more information on Chapter 7 and Chapter 13, visit my website at http://www.ohiobankruptcyrelief.com/.
First things first. BANKRUPTCY FRAUD IS A CRIME. According to some sources, nearly 70% of all bankruptcy fraud involves the concealment of assets. You need to know that when you sign your bankruptcy petition, you are signing it under penalty of perjury.
Under federal law "A person who - (3) knowingly and fraudulently makes a false declaration, certificate, verification, or statement under penalty of perjury as permitted under section 1746 of title 28, in or in relation to any case under title 11 (The Bankruptcy Code) shall be fined under this title, imprisoned not more than 5 years, or both." 18 USC 152. The maximum fine is $250,000. This should impress upon you the consequences of intentionally lying on your bankruptcy petition or attempting to conceal assets.
Furthermore, when you sign your petition, it states that "I declare under penalty of perjury that the information provided in this petition is true and correct". Also, when you attend the Meeting of Creditors, your bankruptcy trustee will swear you in. The point is that this is serious stuff people.
Other consequences of lying during your bankruptcy could include: having your discharge denied or revoked. You may also be forced to surrender property to your bankruptcy trustee.
Finally, you need to know that going back and fixing your schedules or disclosing assets does not relieve you of liability for lying in the first place.
If you're concerned about losing property through a bankruptcy, talk to an experienced bankruptcy attorney about the possibility of filing a Chapter 13 bankruptcy. In a Chapter 13, you can keep all of your property, although you will pay the value of your non-exempt property through your Chapter 13 case.
For more information on Chapter 7 and Chapter 13, visit my website at http://www.ohiobankruptcyrelief.com/.
Thursday, July 8, 2010
Client FAQs - Do I Have To List ALL of My Debts?
Many times clients will come into my office saying that they "don't want to file on" a certain debt. Perhaps it's a credit card they want to keep, a doctor they have a relationship with, or a family member. Rarely do we have black and white answers to bankruptcy questions, but the answer to this is simple: YES, you have to list EVERYBODY you owe money to in your bankrupcy petition. Even if you THINK you may owe someone money, list them. Even if you don't think you owe someone, but they think you do, list them (as "disputed").
What are the consequences of not listing someone on your petition? It is possible that the particular debt may not be discharged. If you are in a Chapter 7 bankruptcy and the trustee discovers assets to administer, leaving someone off of your bankruptcy petition may mean that the debt is not discharged. The same situation can arise in regard to a Chapter 13 bankruptcy. If you discover that you've left someone off your petition, you should alert your bankruptcy lawyer immediately. He or she can file amended bankruptcy schedules, although the court can charge a fee to do this.
Unfortunately, there is no one resource where you can find out all of your debts. I encourage my clients to go to http://www.annualcreditreport.com/. You are entitled to receive a free copy of your credit report once a year from each of the credit bureaus (Equifax, TransUnion, Experian). At this site you can get them with no cost and no need to sign up for phony credit monitoring.
For more information on Chapter 7 and Chapter 13, visit my website at http://www.ohiobankruptcyrelief.com/.
What are the consequences of not listing someone on your petition? It is possible that the particular debt may not be discharged. If you are in a Chapter 7 bankruptcy and the trustee discovers assets to administer, leaving someone off of your bankruptcy petition may mean that the debt is not discharged. The same situation can arise in regard to a Chapter 13 bankruptcy. If you discover that you've left someone off your petition, you should alert your bankruptcy lawyer immediately. He or she can file amended bankruptcy schedules, although the court can charge a fee to do this.
Unfortunately, there is no one resource where you can find out all of your debts. I encourage my clients to go to http://www.annualcreditreport.com/. You are entitled to receive a free copy of your credit report once a year from each of the credit bureaus (Equifax, TransUnion, Experian). At this site you can get them with no cost and no need to sign up for phony credit monitoring.
For more information on Chapter 7 and Chapter 13, visit my website at http://www.ohiobankruptcyrelief.com/.
Tuesday, July 6, 2010
Being Sued? - You Can't Ignore It, And Here's Why
If you're sued in Ohio, you need to act. Sitting back and burying your head in the sand is the WORST thing you can do. So how does your standard lawsuit proceed and what time frames are you looking at? And how does bankruptcy fit in the equation? Here's a primer on how they work and what can happen.
When you're sued, whether in municipal court or common pleas court, you have to be "served" with the lawsuit. Most people have the idea that process servers hunt people down and find unusual and amusing ways to hand them lawsuits and "serve" them. We can thank movies and television for this perception. The fact is that personal service is unusual in Ohio, except in the case of foreclosures. Most service is done through the mail. Ohio rules dictate that you have to first be served by certified mail. If certified mail service is unsuccessful, it is usually tried a second time. If it is unsuccessful again, service is usually by ordinary mail. If the mail is returned or service is otherwise unsuccessful, then you can be served by "publication". Basically, notice of the lawsuit is put in a newspaper and you are considered "served" after a certain amount of time. I won't go into the details, but the point to take away is that you can only delay being served with a lawsuit, but you cannot completely avoid it.
OK, so you've been served. You then have 28 days (not including the date of service) to "answer" the lawsuit. Answering it means filing an answer with the court and serving a copy of your answer on the plaintiff or their attorney, if they have one. If you've answered it, this will delay the lawsuit and the court will put it on a case management track that includes deadlines and hearing dates. If you don't answer it, the plaintiff will likely get a default judgment against you for not answering it. Either way, if it is a legitimate claim, you will likely have a judgment against you eventually.
So what are the consequences of having a judgment against you? This is where we need to pay close attention. If a creditor has a judgment against you, they can then start garnishing your wages, attaching bank accounts and putting liens on your property.
So how does bankruptcy fit in? A Chapter 7 or Chapter 13 bankruptcy will STOP any lawsuits, whatever stage they're at. Whether you've just been served or you're already having your wages garnished, a bankruptcy will stop it. But, as always, there is a caveat. If a creditor has a lien against your home, you may or may not be able to get rid of it through a bankruptcy. If the lien is completely unsecured (you owe more on superior liens than the house is worth), then you can get rid of it in a Chapter 7 or Chapter 13 bankruptcy. If, however, the lien is even partially secured, then the debt may be wiped away, but the lien will continue to stay on the property. If this is the case, then it will have to be dealt with whenever the house is sold or refinanced. An experienced bankruptcy attorney should be able to help you through the process of getting rid of liens in bankruptcy.
For more information on Chapter 7 and Chapter 13, visit my website at http://www.ohiobankruptcyrelief.com/.
When you're sued, whether in municipal court or common pleas court, you have to be "served" with the lawsuit. Most people have the idea that process servers hunt people down and find unusual and amusing ways to hand them lawsuits and "serve" them. We can thank movies and television for this perception. The fact is that personal service is unusual in Ohio, except in the case of foreclosures. Most service is done through the mail. Ohio rules dictate that you have to first be served by certified mail. If certified mail service is unsuccessful, it is usually tried a second time. If it is unsuccessful again, service is usually by ordinary mail. If the mail is returned or service is otherwise unsuccessful, then you can be served by "publication". Basically, notice of the lawsuit is put in a newspaper and you are considered "served" after a certain amount of time. I won't go into the details, but the point to take away is that you can only delay being served with a lawsuit, but you cannot completely avoid it.
OK, so you've been served. You then have 28 days (not including the date of service) to "answer" the lawsuit. Answering it means filing an answer with the court and serving a copy of your answer on the plaintiff or their attorney, if they have one. If you've answered it, this will delay the lawsuit and the court will put it on a case management track that includes deadlines and hearing dates. If you don't answer it, the plaintiff will likely get a default judgment against you for not answering it. Either way, if it is a legitimate claim, you will likely have a judgment against you eventually.
So what are the consequences of having a judgment against you? This is where we need to pay close attention. If a creditor has a judgment against you, they can then start garnishing your wages, attaching bank accounts and putting liens on your property.
So how does bankruptcy fit in? A Chapter 7 or Chapter 13 bankruptcy will STOP any lawsuits, whatever stage they're at. Whether you've just been served or you're already having your wages garnished, a bankruptcy will stop it. But, as always, there is a caveat. If a creditor has a lien against your home, you may or may not be able to get rid of it through a bankruptcy. If the lien is completely unsecured (you owe more on superior liens than the house is worth), then you can get rid of it in a Chapter 7 or Chapter 13 bankruptcy. If, however, the lien is even partially secured, then the debt may be wiped away, but the lien will continue to stay on the property. If this is the case, then it will have to be dealt with whenever the house is sold or refinanced. An experienced bankruptcy attorney should be able to help you through the process of getting rid of liens in bankruptcy.
For more information on Chapter 7 and Chapter 13, visit my website at http://www.ohiobankruptcyrelief.com/.
Thursday, July 1, 2010
Client FAQs - Will Filing for Bankruptcy Affect My Spouse?
There are really two sides to this question. In bankruptcy, we're mainly concerned about two things: your debts and your property.
DEBTS
In Ohio, when one spouse files it does not affect credit of the non-filing spouse. As long as the non-filing spouse has not co-signed or otherwise used the credit of the filing spouse, they will not be held liable for the debts of the filing spouse.
One thing to keep in mind, however, is the situation in which both spouses have co-signed for a loan or are jointly liable for a debt. In that circumstance, one spouse's bankruptcy filing does not relieve the other of liability for the debt. The non-filing spouse is fully liable. One caveat to this is if the debtor is filing a Chapter 13 bankruptcy and is re-paying a consumer debt in full through their plan. In this circumstance, the bankruptcy code has a "co-debtor stay" in effect that protects the co-debtor from the creditor (11 U.S.C. 1301).
PROPERTY
As a general rule, any property that is solely in the name of the non-filing spouse cannot be touched by the bankruptcy trustee. One thing to keep in mind, however, is the concept of fraudulent transfers. In Ohio, the trustee can look back up to four years at any property the debtor has transferred out of his or her name. If the debtor transferred property out of his or her name to the non-filing spouse, the trustee may be able to reclaim that property from the spouse.
Also, joint property can be an issue if there is equity in it. For example, if a couple owns a home worth $100,000 that has no lien on it, the trustee may end up selling the house. The debtor owns a 50% interest ($50,000), but Ohio bankruptcy exemptions only cover $21,625 worth of equity. The trustee could then sell the house, give the non-filing spouse the value of their interest, give the debtor the value of their exemption, and give the rest to creditors. This is the sort of situation that can result in the loss of a home, a car or any other jointly titled property. An experienced bankruptcy attorney should be able to point out these potential pifalls before you file your case.
For more information on Chapter 7 and Chapter 13, visit my website at http://www.ohiobankruptcyrelief.com/.
DEBTS
In Ohio, when one spouse files it does not affect credit of the non-filing spouse. As long as the non-filing spouse has not co-signed or otherwise used the credit of the filing spouse, they will not be held liable for the debts of the filing spouse.
One thing to keep in mind, however, is the situation in which both spouses have co-signed for a loan or are jointly liable for a debt. In that circumstance, one spouse's bankruptcy filing does not relieve the other of liability for the debt. The non-filing spouse is fully liable. One caveat to this is if the debtor is filing a Chapter 13 bankruptcy and is re-paying a consumer debt in full through their plan. In this circumstance, the bankruptcy code has a "co-debtor stay" in effect that protects the co-debtor from the creditor (11 U.S.C. 1301).
PROPERTY
As a general rule, any property that is solely in the name of the non-filing spouse cannot be touched by the bankruptcy trustee. One thing to keep in mind, however, is the concept of fraudulent transfers. In Ohio, the trustee can look back up to four years at any property the debtor has transferred out of his or her name. If the debtor transferred property out of his or her name to the non-filing spouse, the trustee may be able to reclaim that property from the spouse.
Also, joint property can be an issue if there is equity in it. For example, if a couple owns a home worth $100,000 that has no lien on it, the trustee may end up selling the house. The debtor owns a 50% interest ($50,000), but Ohio bankruptcy exemptions only cover $21,625 worth of equity. The trustee could then sell the house, give the non-filing spouse the value of their interest, give the debtor the value of their exemption, and give the rest to creditors. This is the sort of situation that can result in the loss of a home, a car or any other jointly titled property. An experienced bankruptcy attorney should be able to point out these potential pifalls before you file your case.
For more information on Chapter 7 and Chapter 13, visit my website at http://www.ohiobankruptcyrelief.com/.
Tuesday, June 29, 2010
Red Alert! Want to Do A Bankruptcy Yourself? Find Out What SOME Trustees Are Doing That Could Make You Lose Your Home
Here's a quick hitter about the perils of doing a bankruptcy yourself, or hiring an attorney who isn't an expert in the field. Imagine this situation: You own a home, it has a mortgage, the payments are current and there is little or no equity. You want to keep the house. If you read my previous post, you'd think that there would be nothing in the way of you keeping your house. Well, there's something that SOME Chapter 7 Trustees are doing that could cause you to lose your house, even in this situation.
In Ohio, a mortgage is required to be signed by the borrower and be attested to by two witnesses and a notary public. If it's not, then it can be invalidated. If you think this is good news for your bankruptcy, then you're wrong. In theory, if the witnesses or the notary were not present when the mortgage was signed, then it is not valid and the property is not secured. What this means for your bankruptcy is that the property would be all equity. If it is worth more than you can exempt, the trustee can sell the property. The practical effect is that the debtor/borrower and the lender (both of whom entered into their agreement in good faith) both get screwed in favor of unsecured creditors like credit card companies and collection agencies. As a note, it is my opinion that this kind of action by any trustee is immoral and unconscionable. However, my opinion aside, it sometimes happens.
To be fair, most trustees DO NOT pursue this avenue, but there are some that do. And if you run into one, you'd better be prepared to answer his or her questions about it. When I know I'm going to have a hearing with one of these trustees, I prepare my clients. To be fair, most clients can't remember who was there and who wasn't. In this case, there is really nothing the trustee can do to invalidate the mortgage. But it's just another pitfall and another reason you should hire a qualified professional to handle your case.
For more information on Chapter 7 and Chapter 13, visit my website at www.OhioBankruptcyRelief.com. If you're in Northeast Ohio, call me at 330-605-3508 for a free bankruptcy consultation.
In Ohio, a mortgage is required to be signed by the borrower and be attested to by two witnesses and a notary public. If it's not, then it can be invalidated. If you think this is good news for your bankruptcy, then you're wrong. In theory, if the witnesses or the notary were not present when the mortgage was signed, then it is not valid and the property is not secured. What this means for your bankruptcy is that the property would be all equity. If it is worth more than you can exempt, the trustee can sell the property. The practical effect is that the debtor/borrower and the lender (both of whom entered into their agreement in good faith) both get screwed in favor of unsecured creditors like credit card companies and collection agencies. As a note, it is my opinion that this kind of action by any trustee is immoral and unconscionable. However, my opinion aside, it sometimes happens.
To be fair, most trustees DO NOT pursue this avenue, but there are some that do. And if you run into one, you'd better be prepared to answer his or her questions about it. When I know I'm going to have a hearing with one of these trustees, I prepare my clients. To be fair, most clients can't remember who was there and who wasn't. In this case, there is really nothing the trustee can do to invalidate the mortgage. But it's just another pitfall and another reason you should hire a qualified professional to handle your case.
For more information on Chapter 7 and Chapter 13, visit my website at www.OhioBankruptcyRelief.com. If you're in Northeast Ohio, call me at 330-605-3508 for a free bankruptcy consultation.
Sunday, June 27, 2010
Second Mortgage Weighing You Down? You May Be Able To Get Rid of It!
Have a second mortgage on a house that is severely "underwater"? Then read on. You may find that there is an option you'd never thought about that can help you get rid of that second mortgage, sometimes without paying a penny on it.
First off, we have to talk about what a "secured debt" is. Secured debts are obligations that are secured by a particular piece of property, such as a house or a car. If you don't pay, they can take that property, whether through foreclosure or repossession. Having said that, we should all be able to see that mortgages on houses are secured debts, right? Of course, the answer is . . . maybe. What about a situation in which someone owes more on a house than it's worth? Is the mortgage fully secured, or is it secured just to the extent of the value of the property? And what about a second mortgage where the house is worth less than the FIRST mortgage. For example, what if a house is worth $80,000 with a first mortgage of $90,000 and a second mortgage of $20,000? Is the second mortgage really secured? If the second mortgage holder forecloses, how much money do you think they'd get? (Hint: the answer is A BIG FAT ZERO).
One of the problems is the initial appraisal used to get the second mortgage. Appraisals commissioned by mortgage lenders are notoriously untrustworthy. In all instances, they over-inflate the true value of the home, sometimes by ridiculous amounts. The reason for this? Because the mortgage lender has to make the loan "work". The loan cannot be underwritten if it doesn't have any equity and the loan-to-value ratio is too small. So how to fix this? Get an appraisal that shows that the house is worth more. When that happens, the the lender can give the second mortgage, brokers can get their commissions and the borrower can walk away with some cash in their pocket. So everyone wins, right? WRONG! Because it's all an illusion. There is no way the house can actually sell for the appraised value. If the borrower continues to pay on the second mortgage, then there is no harm. When they can't afford to, then the real problems start.
So how can you get rid of a second mortgage without paying for it? The answer is simple: Chapter 13 bankruptcy. If there is no equity attached to the second mortgage (the borrower owes more on the FIRST mortgage than the house is actually worth), then you can get rid of, or "strip", the second mortgage. In our example above, the borrower would be able to strip the second mortgage. And the amount of the second mortgage is immaterial. The only numbers that matter are the value of the property and how much is owed on the FIRST mortgage. Most courts are very particular in how you have to go about doing this and what appraisals are acceptable, so you should consult an experienced Chapter 13 attorney to do this for you. So what happens to the second mortgage? It is treated as unsecured and paid at whatever percentage the rest of your unsecured creditors are paid at. It is important to know, however, that stripping the second mortgage is contingent upon completing your Chapter 13 case and receiving your discharge. If your case is dismissed or converted to a Chapter 7 bankruptcy, the second mortgage stays secured. Also, if there is even ONE PENNY of equity in the second mortgage, the whole darn thing stays secured.
For more information on Chapter 7 and Chapter 13, visit my website at www.OhioBankruptcyRelief.com.
First off, we have to talk about what a "secured debt" is. Secured debts are obligations that are secured by a particular piece of property, such as a house or a car. If you don't pay, they can take that property, whether through foreclosure or repossession. Having said that, we should all be able to see that mortgages on houses are secured debts, right? Of course, the answer is . . . maybe. What about a situation in which someone owes more on a house than it's worth? Is the mortgage fully secured, or is it secured just to the extent of the value of the property? And what about a second mortgage where the house is worth less than the FIRST mortgage. For example, what if a house is worth $80,000 with a first mortgage of $90,000 and a second mortgage of $20,000? Is the second mortgage really secured? If the second mortgage holder forecloses, how much money do you think they'd get? (Hint: the answer is A BIG FAT ZERO).
One of the problems is the initial appraisal used to get the second mortgage. Appraisals commissioned by mortgage lenders are notoriously untrustworthy. In all instances, they over-inflate the true value of the home, sometimes by ridiculous amounts. The reason for this? Because the mortgage lender has to make the loan "work". The loan cannot be underwritten if it doesn't have any equity and the loan-to-value ratio is too small. So how to fix this? Get an appraisal that shows that the house is worth more. When that happens, the the lender can give the second mortgage, brokers can get their commissions and the borrower can walk away with some cash in their pocket. So everyone wins, right? WRONG! Because it's all an illusion. There is no way the house can actually sell for the appraised value. If the borrower continues to pay on the second mortgage, then there is no harm. When they can't afford to, then the real problems start.
So how can you get rid of a second mortgage without paying for it? The answer is simple: Chapter 13 bankruptcy. If there is no equity attached to the second mortgage (the borrower owes more on the FIRST mortgage than the house is actually worth), then you can get rid of, or "strip", the second mortgage. In our example above, the borrower would be able to strip the second mortgage. And the amount of the second mortgage is immaterial. The only numbers that matter are the value of the property and how much is owed on the FIRST mortgage. Most courts are very particular in how you have to go about doing this and what appraisals are acceptable, so you should consult an experienced Chapter 13 attorney to do this for you. So what happens to the second mortgage? It is treated as unsecured and paid at whatever percentage the rest of your unsecured creditors are paid at. It is important to know, however, that stripping the second mortgage is contingent upon completing your Chapter 13 case and receiving your discharge. If your case is dismissed or converted to a Chapter 7 bankruptcy, the second mortgage stays secured. Also, if there is even ONE PENNY of equity in the second mortgage, the whole darn thing stays secured.
For more information on Chapter 7 and Chapter 13, visit my website at www.OhioBankruptcyRelief.com.
Friday, June 25, 2010
Client FAQs: Will I lose my home in bankruptcy?
With any question, of course, the answer depends on the circumstances. Clients should realize that with any property they have, their bankruptcy trustee is concerned with one thing, equity. The trustee's job is to find any property that is not exempt, liquidate it, and use the money to pay off creditors. In most Chapter 7 cases, there is nothing for the trustee to sell. These are called "no-asset" cases. Simply put, if there is no equity in your home (a common situation these days), then your bankruptcy trustee will not have any interest in it. But even if you do have equity, you may still be safe. The Ohio bankruptcy exemptions for homes (the "homestead exemption") allows any person to exempt $21,625 of equity in their primary residence. Double this for joint owners ($43,250). Even if you have more than this, your trustee may not pursue your property if they will not realize any money when taking into account the costs of sale.
If you have too much equity in your home, there is one of two ways this is resolved. Either the trustee will sell your property (and pay you the value of your exemption), or you can pay the trustee money to keep the property (in an amount agreed upon between the trustee and your attorney). If neither of these is an option, you should consider a Chapter 13 bankruptcy.
In a Chapter 13 bankruptcy, you do not lose the property, although the nonexempt portion of your equity is taken into account for purposes of your plan payment.
Finally, you should make sure that your mortgage payments are current, or that you have arrangements with your mortgage company, if you want to keep the home. If it is behind, you may want to consider a Chapter 13 bankruptcy to get it caught up or stop a foreclosure. Also, you can sometimes get rid of, or "strip", a second mortgage if you complete your Chapter 13 Plan and get a discharge.
For more information on Chapter 7 and Chapter 13, visit my website at http://www.ohiobankruptcyrelief.com/.
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