Home Equity Plunges
Home Equity Plunges
The Federal Reserve reports home equity plunges from more than 61% at the start of 2001 to 38% in the January-March quarter of 2011. According to the Standard & Poor’s Case-Shriller index of U.S. home prices on May 31, prices fell 33% in 20 cities through March from their 2006 peak. Did someone say “double-dip?”
This writer predicts further declines in home values of 10% to 25% in the next five years. Even if house prices stabilize, they could go down in real terms on an inflation adjusted basis. That means the only REAL SOLUTION to collapsing home prices is that principle reduction must be part of any modification. Simply extending the term of the loan at lower interest rates for the short term (5yr. As in HAMP) only serves to trap consumers in a loan they will unlikely ever pay off, thus achieving nothing more than delaying the inevitable and guaranteeing an impoverished retirement later in life.
Top 3 Reasons Not To Reaffirm a Mortgage in Bankruptcy
Clients constantly ask me if they should reaffirm their mortgages. Reaffirmation of debt in bankruptcy prevents the debt from being discharged. State laws protect a homeowner, fromforeclosure, who continues to make voluntary mortgage payments without reaffirming the mortgage, so long as payments are current or brought current within a reasonable time.
In practice, mortgage companies dangle the prospect of reporting future good payment history to credit bureaus as a way for bankruptcy debtors to improve the credit score. If that is the only reason to sign, then that is actually a compelling reason not to sign.
What lender’s don’t say is that they will report all information, good and bad. And that information, both the good and the bad, can damage a credit score more than it already is. The more accurate part of the reporting argument is that the borrower should not want mortgage payments reported to the lender, because:
- Truth is, if the lender is not going to report to the credit bureau, the debt to income ratio should be minimized by not reaffirming the mortgage.
- Borrower’s struggling through a Chapter 13 have a hard time making mortgage payments on time; thus the likely hood of negative information is high if reaffirmed.
- If not reported, the borrower can make the payment late, miss a payment here or there, catch up payment and pay whatever late fees accrue; all without risking a negative tradeline on a credit report.
Why would lenders be so persistent then in telling Chapter 13 borrowers to reaffirm? Obviously, they want any available funds to go to their own loans, not new credit obligations.
A.B.I. Headlines
450,000 former Countrywide borrowers will get over $100 million in refunds for over charges defaulting loans.
There were two categories of overcharges. The first were tied to inspections, home maintenance, lawn mowing and other services that Countrywide provided to homes of borrowers in default. The second set of overcharges came in the form of false claims and fees to escrow accounts of borrowers who entered into Chapter 13 bankruptcies. “It’s astonishing that a single company could be responsible for overcharging more than 450,000 homeowners”, FTC Chairman Jon Leibowitz said in a prepared statement. “Countrywide’s unconscionable behavior harmed American consumers on a massive scale . . .
Wells Fargo Fined $85 Million for Subprime Loans.
The largest U.S. home lender, agreed to pay a record $85 million fine to settle Federal Reserve claims it steered borrowers into costlier loans and falsified data in mortgage applications. The lender’s consumer-finance unit, pushed customers who may have been eligible for prime interest rates into loans carrying higher rates intended for riskier borrowers. In addition, sales personnel used false documents to make it appear borrowers qualified for loans when their incomes made them ineligible.
Consumer Bankruptcy Filings Down 8 Percent Through the First Half of 2011
ABI reports U.S. consumer bankruptcy filings totaled 709,303 nationwide during the first six months of 2011 (Jan. 1-June 30), an 8 percent decrease from the 770,117 total consumer filings during the same period a year ago, according to the American Bankruptcy Institute (ABI), based on data from the National Bankruptcy Research Center (NBKRC).
Bankruptcy Law: How does the debtor get a discharge? Melbourne, Stuart, Palm City, FL
Unless there is litigation involving objections to the discharge, the debtor will usually automatically receive a discharge. The Federal Rules of Bankruptcy Procedure provide for the clerk of the bankruptcy court to mail a copy of the order of discharge to all creditors, the U.S. trustee, the trustee in the case, and the trustee’s attorney, if any. The debtor and the debtor’s attorney also receive copies of the discharge order. The notice, which is simply a copy of the final order of discharge, is not specific as to those debts determined by the court to be non-dischargeable, i.e., not covered by the discharge. The notice informs creditors generally that the debts owed to them have been discharged and that they should not attempt any further collection. They are cautioned in the notice that continuing collection efforts could subject them to punishment for contempt. Any inadvertent failure on the part of the clerk to send the debtor or any creditor a copy of the discharge order promptly within the time required by the rules does not affect the validity of the order granting the discharge.
Bankruptcy Law: Chapter 13 Individual Debt Adjustment, Melbourne, Stuart, Palm City, FL
Individual Debt Adjustment
The chapter of the Bankruptcy Code providing for adjustment of debts of an individual with regular income. (Chapter 13 allows a debtor to keep property and pay debts over time, usually three to five years.)
A chapter 13 bankruptcy is also called a wage earner’s plan. It enables individuals with regular income to develop a plan to repay all or part of their debts. Under this chapter, debtors propose a repayment plan to make installments to creditors over three to five years. If the debtor’s current monthly income is less than the applicable state median, the plan will be for three years unless the court approves a longer period “for cause.” (1) If the debtor’s current monthly income is greater than the applicable state median, the plan generally must be for five years. In no case may a plan provide for payments over a period longer than five years. 11 U.S.C. §1322(d). During this time the law forbids creditors from starting or continuing collection efforts.
This chapter discusses six aspects of a chapter 13 proceeding: the advantages of choosing chapter 13, the chapter 13 eligibility requirements, how a chapter 13 proceeding works, making the plan work, and the special chapter 13 discharge.
- Chapter 13 Hardship Discharge
- The Chapter 13 Discharge
- Making the Bankruptcy Plan Work
- How Chapter 13 Works
- Can the bankruptcy discharge be revoked?
- Chapter 13 Eligibility
- Advantages of Chapter 13
Bankruptcy Law: Does the debtor have the right to a discharge or can creditors object to the discharge? Melbourne, Stuart, Palm City, FL
In chapter 7 cases, the debtor does not have an absolute right to a discharge. An objection to the debtor’s discharge may be filed by a creditor, by the trustee in the case, or by the U.S. trustee. Creditors receive a notice shortly after the case is filed that sets forth much important information, including the deadline for objecting to the discharge. To object to the debtor’s discharge, a creditor must file a complaint in the bankruptcy court before the deadline set out in the notice. Filing a complaint starts a lawsuit referred to in bankruptcy as an “adversary proceeding.”The court may deny a chapter 7 discharge for any of the reasons described in section 727(a) of the Bankruptcy Code, including failure to provide requested tax documents; failure to complete a course on personal financial management; transfer or concealment of property with intent to hinder, delay, or defraud creditors; destruction or concealment of books or records; perjury and other fraudulent acts; failure to account for the loss of assets; violation of a court order or an earlier discharge in an earlier case commenced within certain time frames (discussed below) before the date the petition was filed. If the issue of the debtor’s right to a discharge goes to trial, the objecting party has the burden of proving all the facts essential to the objection.
In chapter 12 and chapter 13 cases, the debtor is usually entitled to a discharge upon completion of all payments under the plan. As in chapter 7, however, discharge may not occur in chapter 13 if the debtor fails to complete a required course on personal financial management. A debtor is also ineligible for a discharge in chapter 13 if he or she received a prior discharge in another case commenced within time frames discussed the next paragraph. Unlike chapter 7, creditors do not have standing to object to the discharge of a chapter 12 or chapter 13 debtor. Creditors can object to confirmation of the repayment plan, but cannot object to the discharge if the debtor has completed making plan payments.
Bankruptcy Law: Divorce & Bankruptcy: Which one should come first? Melbourne, Stuart, Palm City, FL
In today’s world, couples are under more financial stress than ever before. Unfortunately, a dire financial condition is often the final straw in a troubled marriage. Many couples today are considering not just a divorce, but also the possibility of a personal bankruptcy. While it is difficult for couples at such a stressful time to focus on long term strategy, it is important for them to consider timing of the divorce and the bankruptcy so that the already difficult process is not complicated by additional problems.
With divorce affecting half of all marriages, and bankruptcy losing its stigma, it has become common for couples to contemplate both at the same time. Bankruptcy has become simply a tool of financial survival and an option that makes good business sense in an era of great economic hardship.
Why Filing Bankruptcy Before Divorce Usually Makes the Most Sense
These days I see more and more situations where couples have resorted to using credit card debt to fill the gap during times of unemployment or illness. In many marriages, both husband and wife have credit cards where they are separately responsible and also credit card debt where they are jointly responsible for the payments. Couples discussing divorce sometimes make agreements regarding such debt which does not take into consideration which party originally signed for the debt. Whose credit was used to obtain the card?
While agreements like the one above might be binding on the parties in a divorce, such agreements are not binding on the lenders involved. For example, the husband agrees to pay the wife’s Mastercard bill, but fails to do so. The bank does not care that the husband agreed with the wife to pay the bill, they only care that the wife originally agreed to pay them, and they will come after the wife for payment.
It is important to remind yourself of the following:
•Debts incurred jointly during the marriage are the responsibility of both parties.
•If your ex-spouse fails to pay joint debts that he or she agreed to pay according to the divorce, you will be stuck with them.
•If your ex-spouse files bankruptcy and you do not, you will be liable for the joint debt, no matter who agreed to pay it in the divorce settlement.
• If your ex-spouse agreed to pay one of your debts and does not pay it, the bank will come looking for you, no matter what the divorce settlement says.
Part of the strategy is trying to figure out if the couple can jointly qualify for a Chapter 7 bankruptcy, which is a liquidation. To determine eligibility for Chapter 7, a financial calculation is performed, which is known as the “Means Test.” If the couple is still living together, even if the divorce is imminent, the income of both spouses, will need to be included in the calculation of the Means Test to determine if a Chapter 7 bankruptcy is a viable alternative. Therefore, if the combined income is too high, it might be better to wait until you have separated before filing bankruptcy. You can be living separately, but still married, and should still file prior to the divorce.
To avoid a post-divorce financial mess, it is usually best to file bankruptcy before you file for divorce. There are a number of advantages to this strategy. First, it saves you money and makes your divorce less complicated and more straightforward. Filing jointly is less expensive than each party filing separately. Sometimes the difficult part of doing this is that it requires that you and your spouse cooperate. Dividing marital property after a divorce is a much easier task.
Advantages of Filing Bankruptcy
Figuring out who owes which debt, and negotiating with your soon to be ex-spouse as to who is going to pay those debts, can be a messy, expensive and frustrating process. One of the great advantages of filing bankruptcy before the divorce is to know how your debts will be handled. Another benefit is that the automatic stay connected to all bankruptcies will eliminate dunning calls and letters from bill collectors. There is nothing worse than trying to work through the frustration, pain and agony of a divorce and getting five calls a day from Bank of America asking when you can send that credit card payment. By the fifth call, you want to jump through the phone and rip the lender’s head off. When you file the bankruptcy, all collection efforts must cease, immediately. Banks and other lenders know that if they call you, it violates the automatic stay issued by the federal court, and they can, and will, be held in contempt of court if they continue. Rarely, if ever, do they continue to call, and those that do are very sorry that they were so stupid.
While bankruptcy will make things easier when you divide up the marital property, there are a number of things it will not do, including, but not limited to:
•Keep you from paying alimony;
•Stop you from having to pay child support;
•Eliminate student loans
Kinds of Bankruptcy
For individuals, there are two primary types of bankruptcies, Chapter 7 and Chapter 13 bankruptcies. The major difference between them is in the amount and type of debt that is discharged and what property the debtor is able to keep.
Chapter 7
This is also called a “straight bankruptcy” or “liquidation bankruptcy” since it eliminates all debt, with the exception of items such as alimony and student loans. All property that is not “exempt” is liquidated to pay off the debt. This kind of bankruptcy is available to individuals if they meet certain income levels, and as long as the court doesn’t determine that the filer is trying to abuse the system.
Chapter 13
This type of bankruptcy is a “reorganization”, and for strategic purposes can be entered into voluntarily, or can be required if the debtor’s income exceeds certain levels. Depending upon the circumstances, the reorganization lasts between three and five years.
Other Forms of Bankruptcy
If you have more than $1,081,400 in secured debt or $360,475 in unsecured debt, you cannot file for Chapter 13, but must file for restructuring like a business under Chapter 11. Farmers may file under Chapter 12.
If you are contemplating a divorce, and your financial situation is precarious, you need to check into a bankruptcy filing before the divorce. Too many times we see couples who go forward with a divorce and then contemplate a bankruptcy, when a filing before the divorce would have simplified their situation.
Bankruptcy Law: Chapter 7 & Chapter 13, Melbourne, Stuart, Palm City, FL
Chapter 7 Bankruptcy
How long does a bankruptcy filing remain on my credit report?
A maximum of ten years under provisions of the Fair Credit Reporting Act.
Will I get to discharge (get rid of) all my debts?
No. Certain debts do not get discharged. Obligations that do not get discharged include:
- most student loan obligations (unless can show undue hardship)
- most types of taxes
- alimony and child support
- liability from driving under the influence
- criminal restitution awards
- debts incurred by fraud or false pretenses
- debts incurred by a false statement in writing (false credit card application)
- debts incurred by embezzlement and larceny
- fines and penalties owned to the government
This is not an all-inclusive list. Please contact Jon L. Martin attorney if you have question regarding whether a particular debt will be discharged if you file bankruptcy.
Is it too late to file bankruptcy if I am being sued or if there is already a judgment obtained against me?
No. Assuming the debt is dischargeable, you can still get rid of the debt even if the creditor has obtained a judgment against you. However, if the creditor obtained a judgment lien against your property, while this lien may be avoidable in certain circumstances if the proper steps are taken to avoid this lien, the lien will not automatically “disappear.” It is important to contact an attorney who may be able to take the necessary steps to avoid this lien. Therefore, if you file bankruptcy, while the underlying debt may be discharged, the lien will nonetheless survive, unless a motion is filed. If this judgment lien is not avoided (or avoidable), you will have to pay the creditor prior to selling/transferring your property.
What documents should I bring to my initial consultation with Jon L. Martin?
Although it is not necessary to bring any/all documents to the initial consultation if you are familiar with your assets and debts, clients often find it helpful to have an attorney review their documents during this stressful time. Further, if you do decide to file for bankruptcy, certain documents will be necessary prior to document preparation and you may find it helpful to have the documents already prepared.
This list is not all-inclusive and your attorney may need to see additional documents. However, the following documents, if available, will be helpful in evaluating your case.
- Income tax returns (both Federal and State) for last 3 years.
- Pay stubs for the past 6 months. If you operate a business, your profit and loss statement for the last 6 months or bank statements with business deposits and withdrawals.
- Copy of the most recent mortgage statement (from all the lenders).
- Copy of your foreclosure notice, if any.
- Copy of your most recent timeshare statement.
- Copy of your most recent mobile home statement.
- Copy of the most recent bill from auto lender.
- Copy of your most recent real estate property tax bill.
- Copy of the most recent statement from your retirement plan.
- Copy of any lawsuit complaints against you (pending within the last 12 months).
- Copy of all your credit card bills, student loan statements, credit card bills, delinquent tax notices, etc.
- Copy of any marital dissolution documents.
- Copy of your social security card.
Chapter 13:
How many months do I have pay off the debts?
This depends upon your plan which should be based on your income over the life of the plan, and the size of the debt. You’ll get anywhere from 36 up to 60 months.
Can I pay it off early?
Not really, because if your income would allow for faster payback than 36 months, the Trustee will normally set the plan at 36 months and require a larger percentage of funds go to your unsecured creditors.
Under the plan, how much am I expected to pay on unsecured debts?
Normally it’s 50 percent of the creditors claim spread over the 36 (or up to 60 months) plan. For instance; if you owed $5,000 on a credit card then you would typically pay back $2,500 or about $69 per month.
What if I owe so much that I’ll need more than 60 months to pay off my creditors?
Some creditors may be willing to work with you to come up with creative payment options but if not, then normally your case will be converted to a Chapter 7 Bankruptcy.
Can they still foreclose on my house after I have filed bankruptcy?
Not if you’ve made all mortgage payments on time. Otherwise the court may give them permission to foreclose.
Bankruptcy Law: Are all of the debtor’s debts discharged or only some? Melbourne, Stuart, Palm City, FL
Not all debts are discharged. The debts discharged vary under each chapter of the Bankruptcy Code. Section 523(a) of the Code specifically excepts various categories of debts from the discharge granted to individual debtors. Therefore, the debtor must still repay those debts after bankruptcy. Congress has determined that these types of debts are not dischargeable for public policy reasons (based either on the nature of the debt or the fact that the debts were incurred due to improper behavior of the debtor, such as the debtor’s drunken driving).
There are 19 categories of debt excepted from discharge under chapters 7, 11, and 12. A more limited list of exceptions applies to cases under chapter 13.
Generally speaking, the exceptions to discharge apply automatically if the language prescribed by section 523(a) applies. The most common types of nondischargeable debts are certain types of tax claims, debts not set forth by the debtor on the lists and schedules the debtor must file with the court, debts for spousal or child support or alimony, debts for willful and malicious injuries to person or property, debts to governmental units for fines and penalties, debts for most government funded or guaranteed educational loans or benefit overpayments, debts for personal injury caused by the debtor’s operation of a motor vehicle while intoxicated, debts owed to certain tax-advantaged retirement plans, and debts for certain condominium or cooperative housing fees.
The types of debts described in sections 523(a)(2), (4), and (6) (obligations affected by fraud or maliciousness) are not automatically excepted from discharge. Creditors must ask the court to determine that these debts are excepted from discharge. In the absence of an affirmative request by the creditor and the granting of the request by the court, the types of debts set out in sections 523(a)(2), (4), and (6) will be discharged.
A slightly broader discharge of debts is available to a debtor in a chapter 13 case than in a chapter 7 case. Debts dischargeable in a chapter 13, but not in chapter 7, include debts for willful and malicious injury to property, debts incurred to pay non-dischargeable tax obligations, and debts arising from property settlements in divorce or separation proceedings. Although a chapter 13 debtor generally receives a discharge only after completing all payments required by the court-approved (i.e., “confirmed”) repayment plan, there are some limited circumstances under which the debtor may request the court to grant a “hardship discharge” even though the debtor has failed to complete plan payments. Such a discharge is available only to a debtor whose failure to complete plan payments is due to circumstances beyond the debtor’s control. The scope of a chapter 13 “hardship discharge” is similar to that in a chapter 7 case with regard to the types of debts that are excepted from the discharge. A hardship discharge also is available in chapter 12 if the failure to complete plan payments is due to “circumstances for which the debtor should not justly be held accountable.”
Debts That Are Not Dischargeable in Your Stuart Bankruptcy (Part 2)
Here are some more debts that cannot be discharged by your Stuart bankruptcy under federal statute:
- Government or non-profit student loans (so long as the court determines that you can repay the loans without undue hardship on you or your dependents);
- Debt arising out of a judgment against you for the death or personal injury of another as a result of operating a motor vehicle or aircraft while intoxicated;
- Debt that you owe from a previous bankruptcy proceeding in instances where you either waived discharge or were denied discharge;
- Debt arising out of: (a) a judgment or consent decree from the Federal Deposit Insurance Corporation (FDIC); (b) a settlement of a fraud action in which a bank or credit union was involved;
- Debt from payments or fines under the Mandatory Victims Restitution Act of 1996;
- Debt incurred so you can pay a non-dischargeable tax to a government unit (other than the United States);
- Fines or penalties issued under federal election law;
- Any fees you owe to a membership association to pay your interest in a residence for the period that you own the unit after the issuance of the Order for Relief;
- If you’re a prisoner, any filing fees you owe for filing a complaint, motion, or appeal;
- Debt you owe for a pension or profit-sharing plan pursuant to certain sections of the Internal Revenue Code;
- Debt arising out of any violations you committed of the Federal Securities laws; and
- Debt you owe to a creditor if the bankruptcy court, after a hearing, determines that debt to be non-dischargeable.
If you’re overwhelmed by the crushing burden of debt, bankruptcy may be an option for you. If you live anywhere in the Treasure Coast, including Jensen Beach, Sebastian, or Stuart, bankruptcy lawyer Jon L. Martin can provide the legal advice and help you need. Call (772) 419-0057 today to schedule a free initial consultation.
Treasure Coast Bankruptcy Attorney Jon L. Martin Explains Secured Debts
When you file for bankruptcy, then the bankruptcy court will have jurisdiction over your assets and debts (your “debtor’s estate”). Whether or not you provide your creditors with additional security for the payment of your debts depends upon whether your debts are secured or unsecured. In this article, Treasure Coast bankruptcy attorney Jon L. Martin will give a brief overview of secured debts.
A secured debt is a debt that is backed by collateral, such as a lien. The debtor assures the creditor that the debt will be paid by giving the creditor a resource that the creditor may take possession of in case the debtor fails to pay. The creditor becomes entitled to the lien amount.
If the collateral is worth equal to or less than the lien amount, then the creditor is within its rights to take that property. If the collateral is worth more than the lien amount, the creditor may be paid interest, fees, or other charges, pursuant to any prior agreement between the debtor and creditor. After all fees are paid to the creditor, the trustee may be paid for the fees and costs related to preserving or disposing of your property.
If you’re filing for bankruptcy under Chapter 7 or Chapter 13, your secured personal property will be valued by the amount of the replacement value (not the cost of sale or marketing) at the time of filing. If personal property is involved (that is, it was acquired for personal, household, or family purposes), then the replacement value is the price a retailer would charge for the property in its age and condition. Keep in mind that you and the creditor will probably have vastly different ideas as to the value of your secured property. If you and the creditor cannot reach an agreement as to its value, then the bankruptcy court can step in and determine the value.
As opposed to secured debts, an unsecured debt is one that is not subject to a lien or other encumbrance.
Treasure Coast bankruptcy attorney Jon L. Martin represents clients in Port St. Lucie, Stuart, and surrounding areas. He is admitted to practice in the State of Florida and the Southern and Middle Districts of the Federal Bankruptcy Court in Florida. Call today for a free evaluation of your case.
The Debtor’s Estate: Excluded Assets
If you file for bankruptcy, with or without the help of a Stuart bankruptcy attorney, not all of your assets will be included in the debtor’s estate. Here is a list of excluded assets:
- Any power you may exercise on behalf of or for the benefit of another party;
- Your lessee’s interest arising from a nonresidential real property lease that ended before you filed for bankruptcy;
- If you’re an educational institution, your eligibility, under the Higher Education Act of 1965, to participate in programs or gain accreditation status;
- In certain instances, your interest in hydrocarbons;
- Any funds you placed in an educational or retirement account on behalf of your child or grandchild at least 365 days before you filed for bankruptcy (subject to IRS and other limitations);
- Your contributions to a qualified state tuition program on behalf of your child or grandchild (subject to IRS limitations);
- Funds that your employer withheld from your salary to go into an ERISA-qualified retirement, a deferred compensation plan, a tax-deferred annuity, or a health insurance plan;
- Your interest in property that has been pledged or sold as collateral for a loan or advance from a licensed lender (if the transferee has possession of the property and you are not obligated to repay the money or redeem the pawned property);
- Your proceeds from a money order made 14 days before the filing of your bankruptcy petition (if there’s an agreement that your property will not be commingled); and
- If you are a specific kind of corporation under IRC § 501(3)(c)(1), you may still transfer property to a non-501(3)(c)(1) entity as if you were not a debtor.
With experience representing clients in Palm City, Sebastian, Vero, and Stuart, bankruptcy lawyer Jon L. Martin can help you with your bankruptcy. He has successfully handled bankruptcy claims throughout the Treasure Coast, and will do his best to make sure that you get the fresh new beginning that filing for bankruptcy can bring. To schedule a free initial evaluation, just fill out the form on this page or call (772) 419-0057.
Call Jon L. Martin Bankruptcy Attorney Melbourne: 321- 541-1292 | Palm City: 772-419-0057