Recent Posts in Chapter 11 Category

Bankruptcy can save your home from foreclosure!

The moment a bankruptcy case is filed with the bankruptcy court the automatic stay comes into effect. The automatic stay prevents creditors from taking certain actions against you including foreclosing on your property.

 Bankruptcy will even stop a foreclosure if filed minutes before the foreclosure sale.

Once the case is filed and the foreclosure stopped you may be able to catch-up missed mortgage payments during the course of a chapter 13 plan, eliminate second or third mortgages, or have time to work out a modification with the bank.

Individual debtors filing bankruptcy are required to complete both pre and post discharge counseling courses. Pre-filing counseling or “Credit Counseling” must be completed before the filing of bankruptcy.

After the filing of bankruptcy debtors must again complete a counseling course. The post filing course has several common names; including, “Debtor’s Education,” “Financial Management Course,” and “Pre-Discharge Education.”

The course must be completed in order to get a discharge of debts. If a debtor fails to complete the course then the debtor’s bankruptcy case will be dismissed and no discharge granted debtor. The course must be completed and the certificate filed with the Court no later than 45 days after the first scheduled date of the §341 meeting of creditors. However, it is my recommendation to complete the course before the meeting.

The course can be completed, on-line, over the phone or in person.  There are many agencies that provide pre-discharge education to bankruptcy debtors. These organizations must be non-for-profit corporations AND must be approved by the US Department of Justice; commonly debtors use the same company for both the pre-filing and post-filing course.

I provide all my clients with a referral to an approved counseling course, however, clients are free to use any agency they wish to complete the course.

If you owe the IRS or the Massachusetts Department of Revenue (“DOR”) back taxes then filing bankruptcy may help.

Filing bankruptcy under chapter 13 or 11 will put you into an interest free repayment plan. Yes, you will have to pay the IRS or DOR back, but it will be INTEREST FREE, penalty free, and you will be able to do it over 5 years in chapter 13 and possibly even longer in chapter 11.

It should also be noted that some taxes will get discharged in bankruptcy meaning you never have to pay them back.

For most debtors filing under chapter 7, 11, 12, or 13 you are able to keep your tax return without surrendering it over to the case trustee or the estate.

In bankruptcy you are able to exempt certain asset from your creditors and the bankruptcy estate. Although there is no specific exemption for tax returns, the federal exemptions allow for a “wild card” exemption for up to $11,200 per person or $22,400 for married debtors filing jointly.

Because of the large value of the wild card exemption it is rare that a debtor will lose their tax return in bankruptcy.

Also, individuals filing under chapter 11, 12, or 13 will simply factor their anticipated tax return into their monthly budget as to not lose their tax return over the course of the bankruptcy plan.

If you filed bankruptcy under chapter 7 you will be able to obtain a new credit card very shortly after filing. Most banks will want your business, because (1) you have reduced your debt, (2) cannot get another bankruptcy discharge for 8 years, and (3) the bank will be able to charge you a high interest rate.

Most individuals are able to get unsecured credit cards, however, in some cases the bank my require you to get a secured credit card. A secured credit card is much like the traditional unsecured card, however you will be required to secure the card with a deposit. This is different than a prepaid card. With the secured card you will still need to pay the monthly bill.

If you are in chapter 11 or 13 you are not permitted to get a credit card or other loans until after the case is over.

In either chapter getting a new card and using it responsibly will increase your credit score and rehabilitate your credit score. Using your card responsibly should include paying your bill on time and never charging more than 30% of your credit limit.

 Filing bankruptcy will automatically stay any foreclosure proceeding. So long as your bankruptcy case is filed prior to the actual foreclosure sale.  

If your intention is to permanently save your home from foreclosure then you will need to catch-up your missed mortgage payments in chapter 11, 12, or 13.

In chapter 13 you will have to make a monthly payment for either 3 or 5 years. This payment must be enough to pay back the entire arrears on at least the first mortgage.

In some cases you are able to eliminate the second mortgage and keep your home.