In most bankruptcy cases you will pay back nothing to your creditors. In other cases you will pay back what you can afford.

Debt negotiation typically works by you making a payment to a company and then those companies asking your creditor to accept a payment of less than you own them.  Debt negotiators typically charge high fees for their services and often times the monthly payment is SO high that you cannot afford more than a few months of payments.

Most bankruptcy cases do not require any payments to creditors and typical legal fees and expenses are usually about the same as 3 or 4 months worth of payments to the debt negotiator instead of 3 or 5 years.

Some people will need to file a chapter 13 bankruptcy and pay back a small percentage of what they owe. In this case you only pay what you can afford and not what the credit card company wants.

I encourage you to take advantage of the free bankruptcy consolation and learn more about bankruptcy and debt negation.

Take care,

Robert

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.

Chapter 13 bankruptcy is a payment plan. In chapter 13 the debtor makes a reasonable monthly payment based on his or her income and expenses. Whatever does not get paid back to creditors through the plan is discharged and you never have to repay again.

In order to determine the amount of the monthly payment we first look to the debtor’s income and then take off deductions for living expenses. Such as utilities, rent, mortgage, car loan payments, food, gas, retirement contributions, and life insurance to name a few.

With some careful planning we can reduce the amount of the chapter 13 plan payment. The simplest way to reduce the payment is to increase the amount of you contribute to your employee retirement plan. For every dollar you contribute you have to pay one less dollar to your creditors. However, your contribution cannot exceed 15% of your annual salary.

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.

In order to protect an asset a person thinking about filing bankruptcy may transfer an asset out of her name and into the name of another. This can include a home, vacation home, car, boat, plan, motorcycle, or even cash in the bank.

This is a huge bankruptcy mistake.

This would be an attempt to defraud your creditors. It could result in, a denial of the bankruptcy discharge, loss of the asset, or even criminal actions.

The good news. The asset, would be bankruptcy debtors are trying to hide can typically be exempted in a chapter 7 bankruptcy or protected in chapter 13 filing. In short if you try to hide something from the Court you are risking a lot with no possible reward.

Before taking any action with your assets talk to a qualified attorney.

Chapter 13 bankruptcy is often called a payment plan. In chapter 13 bankruptcy the debtor will make a monthly payment for either 3 or 5 years. The amount of the payment is reasonable based on the debtor’s income and expenses and not on how much debt the debtor has.

The debtor is required to have income. Unemployment income is enough to file. Of course unemployment does not last forever so the debtor filing with unemployment alone will need another source of income by the time unemployment runs out.

If you file bankruptcy you will keep your home; unless you want to surrender it to the bank.

In order to keep your home you will need to at a minimum be able to make the current monthly payment on the first mortgage.

If you are filing chapter 7 bankruptcy, you will need to be current with all mortgages on the home when you file and continue to be current after the case is over. This is just like it would be without the bankruptcy filing. As long as you are current with the mortgage payments the bank will not foreclose.

If you are behind on your mortgage, or have a second mortgage, worry not, you will still be able to keep your home. In chapter 13 you are given up to 5 years to catch-up the missed mortgage payments under a court approved plan. Your bank will legally be barred from foreclosing during your bankrutpcy.

Additionally, in chapter 13 you may be able to eliminate your second mortgage and keep your home. In order to eliminate the second mortgage you will have to prove to the Court that the value of your home is less than the value of your first mortgage.

Leave it there.

An individual filing a chapter 7 bankruptcy case you may be able to exempt up to $11,200 ($22,400 for a married couple) of cash and bank deposits.

If the money is exempt it will not be touched by the bankruptcy court, trustee, or your creditors. Simply put you can keep.

If you are filing a chapter 13 case there is no liquidation of your assets, unless you want there to be, so here again you can keep the money in your bank.

If you have cash and bank deposits that exceed the exemptions, fear not, you may be able to protect some of the non-exempt money by placing it into an IRA or putting a new roof on your home. I strongly encourage you to meet with a lawyer prior to planning any exemption.

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.

Yes, you can but you will need permission of the Court.

While you are in chapter 13 bankruptcy you are prohibited from incurring new debt without permission of the Court. This means no new credit cards, home loans, car loans, or other sorts of debt until your case is over.

However, the Court will grant you permission to incur certain types of debt. The Court will understand that a car is a necessity for you to get to work and run your daily life. Therefore the Court will grant permission for you to incur a new car loan that is reasonable. Luxury cars are not likely necessary nor are trucks or SUVs, unless you need the truck for work, or have an exceptionally large family.

 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.  

If you are unable to afford your car loan you may chose to voluntarily surrender the car to the bank.  After the bank has the car they will sell the car at an auction. They will apply the proceeds of the sale to the outstanding balance you have on the loan. If the bank collects more than you owe on the loan they will send you a check. However, if they do not collect enough at the auction to pay off the entire loan the bank will send you a bill for the deficiency.

If you owe a deficiency, you have a few opinions. Of course you could pay the bill, work out a payment plan with the bank.

Bankruptcy may also be an option. Bankruptcy will discharge your legal obligation to pay the deficiency.

Also, you may be able to save the car and reduce your car payments in bankruptcy by redeeming in chapter 7 or cramming down in chapter 13.

Very often the value of your car is much lower than the amount of your outstanding loan. (Check the value of your car at Kelly Blue Book, www.KBB.com  ). If this is your case bankruptcy may be able to help you reduce the amount of your loan and/or reduce your payments.

Debtors filing chapter 7 have the ability to redeem their car. Redemption is a process during your bankruptcy case where you pay to the bank the current value of the car. The amount of the loan that exceeds the value of the car is discharged.

Most debtors do not have enough cash to pay the current value of their car. However, there are banks that have loan programs for redeeming (checkout www.722redemption.com ). Your new loan payment will be less than your current payments because the principle of the new loan will be much less.

Debtors filing chapter 13 are unable to redeem their car, however they are able to cram down. Cram down is much like redemption without having to get a new loan. Chapter 13 is a court ordered payment plan, which is reasonable based upon the debtor’s income.

Through the plan you can repay your bank the current value of the car and then be discharged from the remainder of the loan. In order to cram down in chapter 13 the car loan must have been incurred more than 910 days prior to filing bankruptcy. At the conclusion of the chapter 13 plan you will own the car free of the lien.

Despite a recent stabilization in home prices, CNN Money is reporting that home values will continue to decline in 2010 (http://money.cnn.com/2009/12/31/real_estate/home_price_drop/index.htm) .

If the housing market continues to decline more people, and perhaps you, will be able to eliminate your second mortgage and retain your home in chapter 13 bankruptcy.

If the value of your home is equal to or less than the value of your home then you will be able to eliminate your second mortgage in chapter 13. Since the housing market is continuing to decline you may be able to eliminate your second mortgage in 2010 even if you were unable to in years past.

In chapter 13 you make a reasonable monthly payment on your debts, based on your income and expenses and not on how much money you owe creditors, for either 3 or 5 years. After making all the payments whatever has not been paid through the bankruptcy is discharged.

In an article from the Worcester Telegram and Gazette (http://www.telegram.com/article/20091230/NEWS/912309982/1002) it is reported that foreclosure petitions in Massachusetts remain high.

The good news is that the actual number of foreclosures that have been completed for 2009 has been less than 2008. However, the number of foreclosures started with the filing of a Petition to Foreclose has increased in 2009 from 2008.

Bankruptcy has several options that may help if you have facing foreclosure, in chapter 13 you may be able to eliminate your second mortgage forever, and catch up the missed payments with the first mortgage.

Additionally, you may be able to eliminate all your unsecured debt in either chapter 7 or 13 thus freeing up money to pay towards the mortgage.

If you are facing foreclosure, please give me a call and we can find a solution to the problem. Bankruptcy can stop the foreclosure and save your home BUT ONLY if you file before the foreclosure sale.

With the snow that fell this weekend I cannot help but think now may be a good time to mention what happens if a debtor cannot make their assigned time and date for their §341 meeting.

The §341 meeting is often the only meeting a debtor has to attend; they are not a formal Court process and are not held before a judge or even at the Court House. The §341 meeting gives the Case Trustee and others a chance to ask questions about the debtor’s financial affairs.

It is uncommon for anyone other than case trustee and the debtor’s lawyer to be present during the §341 meeting in consumer cases. The meetings are typically short lasting only 5 – 10 minutes for chapter 7 cases and about 15 minutes for chapter 13 cases.

When your bankruptcy case is filed, the Court will automatically assign your case a Case Trustee (who represents the creditors) and a time for the meeting.

If for some reason you are unable to make the scheduled meeting time then you can request that your case trustee reschedule the meeting. The case trustee will give you a new time and date. The debtor, typically through her lawyer, will have to send notice (a letter) to all the creditors stating the new time and date of the meeting. Of course the more notice you can give the case trustee about your need to reschedule the better, however, in the case of an emergency or inclement weather you may not be able to give the case trustee much notice at all.

Warm wishes.

Robert

Debtors filing chapter 13 bankruptcies may be able to eliminate their obligation to repay their second mortgage and still retain their home.

In order for to eliminate the mortgage and keep your home the value of your home must be equal to or less than the value of the first mortgage.

In chapter 13 bankruptcy the debtor makes a reasonable monthly payment, based on the debtors’ income and expenses, for either 3 or 5 years. After making all the required payments the debtor will receive a discharge of her personal obligation to repay all most all of her debts and the judge will also order the lien, the mortgage, removed at the registry of deeds.  

With home prices continuing to decline many home owners are now able to get rid of their second mortgage forever. Couple this with the discharge of unsecured debt, such as credit card debt, many people are able to get a needed fresh start and save their homes.