Filing Bankruptcy Can Stop Your Wage Garnishments

Garnished wages are something no one wants to deal with, especially when a too-tight budget makes living paycheck to paycheck a common occurrence.  However, if you find yourself in this situation, it is important to know that filing bankruptcy stops all garnishments except domestic support obligations such as child support and alimony.

When a bankruptcy is filed, an automatic stay is created. An automatic stay is a term that is used in bankruptcy to denote an automatic stop to all garnishments and collection efforts when the bankruptcy is filed.  A creditor can petition the court to allow them to resume collection efforts after an automatic stay has been placed, but must have a valid reason for submitting this request.  In most cases, the court will not allow collection efforts to resume.  Exceptions to this, however, are domestic support obligations such as child support and alimony.

The automatic stay is officially over when the bankruptcy is discharged or dismissed.  In a discharge, the creditor to whom you owed the money will likely be included in the discharge, so the garnishment will not continue.

If your wages were garnished prior to filing bankruptcy, there are ways that you and ensure the garnishment stops as quickly as possible.  First, you should give a written notice of the bankruptcy filing to the payroll department of the company for which you work.  If the wage garnishment was handled by the local sheriff’s office, you should notify that office, as well.

 

In some cases, you might qualify for a return of the garnished wages.  To qualify for this, the garnished wages must have been over $600 and you must have had enough exemptions applied in your bankruptcy to cover the amount.  This must occur within 90 days of your bankruptcy filing.  As tough as your current situation may be, imagine if you suddenly received 25% less!  That’s what a garnishment can do and the most effective way to stop it is to file a bankruptcy.

Will I Be Able to Rent a House or Apartment if I File for Bankruptcy?

In today’s current economic climate, many people are forced to rent due to losing their homes in foreclosure and not having the credit or means to buy another house.  This means that rental property is really the only option for many households and landlords understand that.  People with perfect credit are more likely to be taking advantage of the great deals in the housing market right now due to short sells and bank-owned properties, so that leaves people with less-than-perfect credit to apply for most of the rental property available.  Landlords know this, so the good news is that bankruptcy will likely help your chances of renting more than hurt your chances.

As long as your bankruptcy has been completely discharged, your landlord will likely concentrate on the credit you’ve used after filing.  Your landlord will also recognize the fact that now that your debts have been discharged, you will likely have more cash flow to pay your rent and other living expenses.  This is a plus for him or her in assuring that money will be paid on time. 

One thing to keep in mind—whether you have filed bankruptcy or not—is that you should not attempt to rent if the amount is more than 30% of your gross income.  Keeping your search to one that is in the range of housing you can afford will be crucial to getting approved as a renter.  Another thing to keep in mind is that honesty regarding your financial past, including the details relating to your bankruptcy, will be important in your agreement with a landlord.  If you honestly explain the situation that led to your bankruptcy and are able to show how well you have handled your financial affairs post-bankruptcy, many landlords will work with you to make sure you have a home to live in. 

What will happen to my car loan if I file Chapter 7 bankruptcy?

I’m Retired and in Debt: Does Bankruptcy Make Sense?

A comfortable and peaceful retirement is part of the “American Dream,” but an increasing number of seniors in the U.S. are finding themselves burdened with too much debt, whether from medical bills or simply several years of unwise financial decisions.  This is leading to the question: does bankruptcy in retirement make sense? 

There are some important issues to look at if you are at a retirement age and considering bankruptcy—issues that are unique to you due to your retirement plans and age.  First of all, it is important to know that your Social Security wages cannot be garnished, whether you file for bankruptcy or not.  However, many creditors will garnish a bank account, which means that if you keep your Social Security wages in your bank account, along with any other money earned, a creditor isn’t likely to know how much of that account’s balance is from Social Security wages.  Therefore, keeping your Social Security wages in a separate account is crucial to maintaining this protection. 

However, if you have a large pension, you will be unlikely to qualify for Chapter 7 bankruptcy.  This means that you will be stuck with filing Chapter 13, which requires you to pay back a certain amount each month.  Since many seniors are on a very set income and often lack the extra money each month to pay such payments, Chapter 13 might not be the best option if it will make it difficult for them to take care of their basic, day-to-day living expenses AND make these payments on a set income. 

If you have an IRA with a significant amount of money, it is important to check with a bankruptcy attorney to see how that account would be affected after filing for bankruptcy.  Since bankruptcy laws and exemptions vary within each state, you might be advised that you are better off not filing or risk losing a large portion of your IRA.  In Florida, most cases allow you to keep 100% of your IRA or 401k regardless of the amount.

I've lost my home in a foreclosure and can't qualify for another mortgage. Will I be able to rent a house or apartment if I file for bankruptcy?

What Happens to My Car Loans in a Bankruptcy?

Anyone who is considering bankruptcy will likely be concerned about its effect it will have on car loans, since such loans are considered secured loans, with the vehicle as collateral.  Most states have bankruptcy exemptions that allow you to keep your vehicle, but the amounts vary from state to state.  So how do you know what will happen to your car before you make the choice to file?

Regardless of whether you file Chapter 7 bankruptcy or Chapter 13 bankruptcy, there will be an “automatic stay” that applies and prevents debt collection attempts, lawsuits, foreclosures, wage garnishments and repossessions until the court determines the outcome of your bankruptcy filing.  How the courts will handle your car loan depends on the type of bankruptcy you file. 

If you file Chapter 7 bankruptcy, your car loan will be considered secured debt and you essentially have two options.  You can reaffirm it, which means you will continue making payments as normal.  Same interest rate, same payments, same time. Or, you can surrender it, which means you give the car back and have the remainder of the amount owed on the car (after the car is sold through auction) discharged through the bankruptcy filing.  

If you file Chapter 13 bankruptcy and your car is a newer car (meaning you bought it within 910 days of the date in which you filed bankruptcy), you are required to pay the amount of the loan, although it might be possible to get your interest rate reduced.  If your car is an older car (meaning you purchased it more than 910 days before filing for bankruptcy), you will only be required to pay the car’s current market value.  This is a useful tool for people who had bad credit and consequently have been paying for years at an obscene interest rate.

How Much Do I Have to Owe in Order to Qualify for Bankruptcy

At least twice a week I get a phone call that asks the question “How much do I have to owe to qualify for bankruptcy”.  It’s a fair question, but not the right one.  The real question is about your ability to pay.  If you are unemployed, even a minimal payment can lead to ruin.  Sometimes, even if you can make the minimum credit card payment, you may be better off filing bankruptcy.

One of our clients left a big impression.  He had an average, middle management man with a house, a wife and an 8-year old son, when in the space of a little more than a year, he lost his job and his wife divorced him.  He found a new job that paid about 31k a year, but was now forced to rent an apartment and he was unable to do anything except about $300 in minimal payments to the $8,000 he owed in credit cards.  He decided to do a chapter 7 bankruptcy with us, because those $300 were the difference between a tiny studio apartment and just staring at TV with his son and a one bedroom apartment and being able to occasionally take his son out to a Marlins game or the Miami Zoo. 

Each person or family is different in their financial circumstances.  For some, the loss of a job or loss of a 2-person household income has left them stranded in dire financial straits, forcing them to overextend their credit just to keep their head about water. 

Bankruptcy, while certainly not an easy process, if often the best option for individuals and families who face job loss, divorce or other significant, game-changing circumstances.  It provides relief from creditors and can help get your family back on its feet a lot faster than other options.  To be sure which choice is right for you, consult a qualified bankruptcyattorney. 

Foreclosure and a Home’s Sale Date—Can Bankruptcy Stop It?

If a lender has placed a home in foreclosure and has already set a sale date for the property, all hope is not lost—it is still possible to save the home by filing for Chapter 13 bankruptcy.  Filing Chapter 13 bankruptcy immediately stops the foreclosure process and allows the homeowner some time to catch up on payments that have gotten behind. 

This means that even if you have already received a notice of foreclosure and a sale date for your home, you still have time and available legal resources to stop the process.  In Chapter 13, your lender is prohibited by the bankruptcy court from continuing any collection efforts and an automatic stay is placed on your assets, including your home.  This automatic stay is not permanent but it will at least give you some time to figure out if you want to fight to keep your home and catch up on payments through the Chapter 13 repayment plan.  

However, just because you can stall the foreclosure process through Chapter 13 bankruptcy doesn't mean this is a wise financial decision.  Since filing bankruptcy doesn't lower your mortgage premiums or the amount you owe for your home, there is still the consideration of “can I afford this home?”  If your home costs more than you can afford, and the mortgage is greater than 30% of your monthly net income, then you should consider the fact that the home might be more than you can reasonably afford—with or without a bankruptcy. 

Filing for bankruptcy has allowed many homeowners to stay in their homes, despite the fact that the lender has already begun the foreclosure process and initiated a sale date for the home.  You can discuss your options with our bankruptcy attorneys and we will be able to help you determine the best course of action.  

Common Bankruptcy Myths You Should Know Before Filing

There is a lot of misinformation about bankruptcy floating around, and debunking these myths can help clear the air and make your decision one that is based on the facts rather than fallacies. 

Myth #1: The process of filing bankruptcy is as simple as filling out a few forms.

There is nothing about the bankruptcy process that is simple.  It is a complicated, expensive and often long legal process.  While bankruptcy is certainly a process that can help consumers who have too much debt, it is also a very serious legal endeavor that has potential for future litigation.  All bankruptcy forms are filed in Federal court and are looked over carefully by a trustee whose job is to liquidate your assets and pay your creditors, if possible.  Even if you claim exemptions, your bankruptcy trustee has the power to object to the assets you use for these exemptions. 

Myth #2: I will lose all of my property if I file for bankruptcy.

If you file a chapter 7 bankruptcy, your non-exempt property will be subject to being sold and liquidated to pay your creditors.   However, your exempted property is yours to keep and cannot be liquidated in the bankruptcy process.  When you file bankruptcy, your bankruptcy trustee will oversee your estate and make a decision regarding the property that is non-exempt.  In many cases, the cost of liquidating non-exempt assets is more than their worth, so it might be the case that you get to keep everything you currently own.  Many people who have filed for bankruptcy haven’t lost a single piece of property or asset in doing so.   The amount and type of exemptions vary depending on whether you own your own home, are married and other factors.  Consult a qualified bankruptcy attorney for your specific exemptions, but ninety percent of our clients get their fresh start while keeping their home and maintaining their vehicle.

Myth #3: I can never qualify for credit again.

It is often the case that as soon as a bankruptcy is filed, debtors are swamped with credit offers.  This is surprising to some but reveals a truth about the myth that once you file bankruptcy, you can’t qualify for credit again—it’s simply a false statement.  While a bankruptcy can stay on your credit for 10 years if you file a Chapter 7, the ability to borrow money is largely based on your debt-to-income ratio.  If a bankruptcy reduces or eliminates your debt, then it’s even possible that your FICO score can be higher after a bankruptcy than it was before it.  

My home is in foreclosure and the lender has informed me of the sale date. Can I file bankruptcy to stop it from happening?

Will a bankruptcy require me to sell or get rid of my car and home?

What Happens to Your Property in a Bankruptcy?

Bankruptcy is an opportunity to get a financial fresh start but it doesn’t necessarily mean that you have to start completely from scratch with no possessions if you file.  If you file for bankruptcy, you can rest assured that regardless of how much you might owe, you will be able to keep some of your property after filing.  This is done through a process called “exemptions,” and although states vary on their rules regarding exemptions, all states have a certain amount of property that you can keep after filing bankruptcy. 

There are actually two different sets of exemptions—one is the national bankruptcy code exemptions (as stated in Section 522 of the Bankruptcy Code) and the other is the list of state exemptions that are specific to your state.  Some states allow debtors filing bankruptcy to choose between the state exemptions and the Federal ones, while other states completed opted out of the Federal exemptions and solely offer their own state exemptions. 

Your bankruptcy attorney will be able to assist you with determining the amount of exemptions that are allowed by your state, and these exemptions are usually expressed in dollar amounts.  When determining the amount of money an object or property is worth, the equity is used.  For example, if a state offers $10,000 in exemptions for a debtor who is filing bankruptcy, that debtor’s assets would receive a value that is based on their equity or what would that asset would sell for if it were listed on the open market in its current condition.  (Translation:  That $2,000 TV you bought two years ago?  Now you can only get $300 on craigslist?  For bankruptcy exemption purposes, it’s worth $300.

It’s also frequently the case that a debtor will get to retain property that is valued at more than the exemption that is allowed, simply because the cost that would be involved in the trustee taking possession of the asset, selling it and distributing it to creditors would be more than the asset is worth.  The amount and type of exemptions vary depending on whether you own your own home, are married and other factors.  Consult a qualified bankruptcy attorney for your specific exemptions, but ninety percent of our clients get their fresh start while keeping their home and maintaining their vehicle.

Can I Transfer My Car Title To My Spouse Before Filing For Bankruptcy?

In the State of Florida, there is a $5,000 wildcard exemption that is most often used to keep a vehicle during filing for bankruptcy.  However, to use this exemption, the car needs to be titled in the name of the person filing for bankruptcy.  The $4,000 applies to the equity on the car (this is usually determined based on its bluebook value if there are no payments being made), not how much the car was purchased for at the time of purchase. 

The general rule in filing for a bankruptcy is that you shouldn’t make any transfer of property—be it a car or any other property of worth—to a third party, relative or spouse prior to filing.  According to the bankruptcy court, this is a fraudulent conveyance, and can end up costing you much more than you bargained for if the bankruptcy trustee finds out—and they will!  Any title transfer can be discovered through a simple public record search and will immediately raise red flags to the court overseeing your bankruptcy. 

If a trustee determines that property has been fraudulently conveyed prior to your bankruptcy filing, he or she could seize that property and you could lose the exemption that would have allowed you to potentially keep the property in the first place.  In addition, you might lose the right to file bankruptcy if the court determines that you were attempting to file under fraudulent circumstances.

We at Bankruptcy Law Clinic advise that you consult with one of our Florida bankruptcy attorneys before making any decision about your property before filing.  We are familiar with all the red flags that could cause your bankruptcy case to be denied and will be able to instruct you on the best way to make sure you can keep a vehicle or piece of property you want to keep that doesn’t involve fraudulent conveyance.  

I Got My Discharge In Chapter 13 And Now I Have New Debts…What Do I Do?

Chapter 13 bankruptcy is a wonderful way for people who have dealt with a large financial blow to get back on track.  Following a divorce, loss of a job, or loss of a business enterprise, Chapter 13 bankruptcy has helped millions of people get their lives and finances back together after enormous losses.  However, let’s say you received a Chapter 13 bankruptcy and spent the past 3-5 years paying off your debts—only to be hit at the end of it with another bad blow, sending you straight back in to financial ruin.  What now? 

Don’t worry, there is still hope.  After the 2005 amendments in the U.S. Bankruptcy code, the timeline restrictions for filing another bankruptcy were given more flexibility for situations exactly like yours.  If you filed a Chapter 13 bankruptcy and six years have passed since your filing, there are certain circumstances in which you file again.  The laws are very particular on this but if you filed a Chapter 13 originally and were unable to pay at least 70% of it, you can file a Chapter 7.  Or, you could potentially file another Chapter 13 if only two years have passed since you filed the first. 

Even if you have previously filed bankruptcy, there may be factors within your specific circumstances now that will allow you to file again.  Since the U.S. bankruptcy court looks at each case individually, we at the Bankruptcy Law Clinic can provide you with a qualified and experienced Florida bankruptcy attorney who can look at your situation and help you determine the best course of action to protect your family and assets from financial distress. 

Even if bankruptcy is not an option, we will be able to direct on how to get back on track financially, regardless of your current financial circumstances.  Don’t try to face the situation alone—professional help can be just the ticket to get you back on your feet without the stress you are currently facing.  

I am a member of the US Armed Forces. Will I lose my security clearance if I file for bankruptcy?

Will I Lose My Security Clearance if I File for Bankruptcy?

This question is common among members of the Armed Forces or Federal employees and can often cause hesitation when making the decision of whether or not to file bankruptcy.  While each situation is different, the answer in most cases is no.  The reason for this is simple:  when someone is in a difficult financial situation, they are more likely to make a poor decision or accept a bribe in order to remedy the situation.

However, the United States Air Force Academy Legal Office has this to say about bankruptcy:

“The status of your security clearance can be affected, but it is not automatic.  The outcome depends on the circumstances that led up to the bankruptcy and a number of other factors, such as your job performance and relationship with your chain of command.  The security section will weigh whether the bankruptcy was caused primarily by an unexpected event, such as medical bills following a serious accident, or by financial irresponsibility.  The security section may also consider the recommendations and comments of your chain of command and co-workers.  This is an issue that can be argued both ways, so as a practical matter your security clearance probably should not be a significant factor in making your decision about whether to file bankruptcy.  The amount of your unpaid debts, by itself, may jeopardize your clearance, even if you don’t file bankruptcy.  In that sense, not filing for bankruptcy may make you more of a security risk due to the size of your outstanding debts.  By the same token, using a government approved means of dealing with your debts may actually be viewed as an indication of financial responsibility.  Eliminating your debts through bankruptcy may make you less of a security risk.  There is no hard and fast answer there, with one exception: It never hurts to have a good reputation with your co-workers and your chain of command.”

In our Doral office, we have had several clients from the Metro Dade Police Department and the US Southern Military Command (SOUTHCOM).  Often, it was a letter about a five- year security review that finally kicked them into action.  Their bankruptcies helped them maintain their security clearance.

Can creditors file a judgment and have my disability wages garnished?

How Disability Income Can Affect your Bankruptcy Filing

If you are receiving disability income, regardless of whether the income is from private insurance or social security, Florida has a statute that keeps this income safe from creditors.  This means that most creditors cannot garnish your disability wages because there IS an exception—the IRS.  If you owe back taxes, the IRS can indeed garnish your disability wages, within reason.  However, other than the IRS, creditors cannot garnish your disability wages attempting to recoup money you owe them.

Because of this statute, many people think that their disability income will not be a factor when filing for bankruptcy.  After all, if the wages can’t be touched by creditors, the bankruptcy court must ignore them, right?

Unfortunately, it’s a little more complicated than that.  If you receive disability income and you decide to file for bankruptcy, that disability income will be considered when your bankruptcy attorney conducts a means test analysis.  If your disability income is significant because of private disability insurance, your attorney might suggest that you avoid filing bankruptcy and pay back your debts with the disability income you receive. 

“But wait, I thought disability proceeds were exempt!”

This is where many people become confused regarding the bankruptcy code in Florida.  Yes, disability proceeds are exempt from judgments against you but the court will still consider disability proceeds for the purposes of the means test analysis.  For example, if you were a highly-paid executive who receives $25,000 per month in disability insurance from a private disability policy, the court will likely look at this as significant income to repay your debts rather than granting you discharge of them in bankruptcy. 

Is it true that my credit takes a bigger hit if I file for bankruptcy than if I have to undergo a foreclosure?

Common Myths Related to Bankruptcy, Modification, and Foreclosure

The processes surrounding bankruptcy, loan modification and foreclosure in Miami are often complicated, resulting in several misunderstandings about how these processes work and which one you should pursue if you are facing distressing financial situations.  These common myths make it difficult to make the right decision for your financial future, so dispelling them and learning the truth about which process would work in your favor if you are considering bankruptcy in Florida is an important step to getting back on track with your life and financial goals.

Myth #1 – Loan modification is encouraged by the federal government and therefore anyone can easily get it to reduce the principal amount that’s owed on their home.

Wrong.

Less than 30% of the homeowners who apply for loan modifications are granted them.  Additionally, it’s not an easy process and can take many months to complete and there is no guarantee that the lender will reduce the principal amount on the mortgage.  You may have gone through the whole process merely to have your loan extended to 40 years and the interest rate temporarily reduced, not getting you any closer to paying off your home.

Myth #2 – If I apply for a modification, my house won’t go into foreclosure and my missed payments will be waived.

Wrong.

If the foreclosure process has already been started on your home, or is close to being started, applying for a loan modification will not stop this process.  At best, it might slow it down or postpone the sale date slightly, but there’s no guarantee.  Also, a loan modification will not waive your missed payments.  Most lenders simply add these missed payments on to the end of your loan terms. 

Myth #3 – My credit takes a bigger hit if I file for bankruptcy than if I have to undergo a foreclosure. 

Wrong.

Many people find that their credit score actually improves after bankruptcy, especially if they’ve been missing payments for a while on multiple accounts.  If you have a foreclosure on your credit, it will take a serious hit—often one that is more serious than bankruptcy causes. A Miami bankruptcy attorney will be able to look at your specific circumstances and help you determine if a bankruptcy will help you achieve better credit in the short-term and long-term.   

Should I be worried about the Mortgage Debt Relief Act expiring at the end of this year (2012)?

Expiration of the Mortgage Debt Relief Act – Should I be Worried?

The Mortgage Debt Relief Act of 2007 is set to expire at the end of 2012 and many Florida homeowners facing foreclosure are concerned about the effects this will have on their situation.  However, before you stress too much, there are several points you should know about this Act and how it can affect you.

First, you need to know a little about how foreclosures and deficiencies related to them work.  Let’s say you’re one of the many Florida homeowners who owe more on your home than the current value of the home.  If your mortgage is for $250,000 but your home is currently valued at $150,000, the $100,000 difference is the deficiency that would still be owed to your lender—even if your home goes into foreclosure.  For many people, this deficiency is money that the lender would still be able to collect on.  Not only would you lose your home, but the lender would also be able to collect on the $100,000 deficiency, even after foreclosing on your home and forcing you to seek for another place to live. 

However, many lenders are offering forgiveness of the debt that would otherwise be considered the deficiency on your mortgage, especially if it means getting you out of the home so they can attempt to resell it.  The problem with this is according to federal tax code, that forgiven debt is considered to be income for you and is taxed as such.  This means that even if the lender forgives the deficiency you would otherwise owe on the mortgage after the foreclosure, you could still be taxed for the entire amount.  For some people, this is a very high amount! 

The Mortgage Debt Relief Act of 2007 provides relief to people who were granted forgiveness of deficiencies by their lender, stating that they are no longer responsible paying taxes on them, so it’s a very real concern for many people facing foreclosure as to whether or not this Act will be extended past 2012.  However, since it has already been extended and this is an election year, it is highly likely that it will be extended again.  Even if it’s not, one way of avoiding that potentially huge tax liability is to just file bankruptcy. Either way, talk to a qualified foreclosure or bankruptcy attorney to review your options.

The Cash-For-Keys Option in Foreclosure

Foreclosure isn’t an easy process for anyone involved, including the lender.  There is a mountain of paperwork involved and extensive legal fees—two things that are never very attractive prospects.  This is why some banks have developed protocol for making the process as painless as possible, and have implemented solutions like “Cash for keys” to get homeowners out of the house.

 

Cash for keys is exactly what is sounds like: homeowners will be given the offer of cash in exchange for agreement to vacate the home after a certain period of time.  Usually, these agreements include waivers that the homeowners will not vandalize the home or strip it for items to sell, and will leave the home in good, clean condition when they vacate.

 

The reason banks are not hesitant to offer cash for keys is because the foreclosure process is a time-consuming, costly enterprise.  If they can vacate the homeowner with his/her consent through a cash incentive, they will often jump at the chance.

 

Some of the expenses considered when a bank negotiates their cash for keys terms are:

• A security deposit and first / last month's rent for a new home
• The cost of hiring movers or securing a rental truck
• Utility deposits
• Temporary living quarters such as a motel

If you have been offered a cash-for-key option in the Miami area and are not sure if the offer is reasonable, you need the expertise of a debt relief attorney.  There may be other options available to you such as Chapter 7 or Chapter 13 bankruptcy that will allow you to keep your home and not put your family through the difficult process of changing residences.   

What are the Effects of Foreclosure on a Community?

The foreclosures that swept the country during the latest recession have had a devastating impact on many families.  However, the negative effects of this crisis didn’t stop there—communities were also greatly impacted by foreclosure rates.  Although surprisingly few studies have been completed on the topic, there is evidence supporting the fact that foreclosures have a deep and lasting negative impact on communities, as well.   Here is what the research found:

• An increase in theft—when homes are abandoned and banks fail to resell them in a timely fashion, it creates the perfect situation for thieves to take advantage.  Everything from the copper wiring to the appliances within a home (such as air conditioners, water heaters, refrigerators, stoves, and toilets) becomes up for grabs when there isn’t a watchful eye on the property.
• An increase in vandalism and vagrancy—foreclosed homes are primary targets for vandals and vagrants, resulting in additional costs needed to restore or repair the home for potential homeowners.
• Local governments suffer—when there are multiple homes in a particular ward that are foreclosures, property values lower and there is a smaller tax base to support the local government. According to the Center for Responsible Lending, “Over 44 million homes in the United States will experience property devaluation as a result of foreclosures in their neighborhoods. Forty-two counties in the United States can expect to see their property tax base erode by more than $1 billion.”
• Youth experience stress—according to the Center for Responsible Lending, “it is estimated that over 1.95 million youth are affected by foreclosure.”  Not only do foreclosures directly affect the stress level and stability of the children who lose their home, they also directly affect the children left in the neighborhood who experience their neighborhood’s value decreasing.  A smaller tax base affects everything from neighborhood school budgets to playground maintenance and safety.  

Using the FDCPA in Foreclosure Defense

If your home is under the threat of foreclosure, you are likely overwhelmed.  In addition to the harassing phone calls, homeowners facing foreclosure also have to try to “keep their head on straight” and make important decisions that affect their family’s lives—something that is almost impossible to do when a creditor is calling you multiple times every day.  This situation can certainly wreak havoc on anyone’s level of ability to handle stress, which makes fixing the problem even more difficult.  However, there is good news.  According to Section 805(a)(2) of the Fair Debt Collection Practices Act, your lender is prohibited from calling you about your home’s foreclosure if they know that you are represented by a lawyer.

 

That’s why if you live in the Miami, Florida area and are facing the threat of foreclosure, it is extremely important that you reach out to a qualified bankruptcy attorney who can help you find ways of debt relief such as Chapter 7 or Chapter 13 bankruptcy.  This kind of relief provides a legal means in which you can not only potentially save your home from foreclosure—you can also stop the harassing phone calls and stress related to them.   This “breathing room” will give you time to think clearly and do everything within your power to save your house and save your family the turmoil and emotional trauma of having to move out of the place they know as “home”.

If your lender harasses you after seeking counsel in a foreclosure, they will be in violation of both the Federal and Florida versions of the Fair Debt Collection Act.  Once you have told them the name and phone number of your attorney and that you don’t want them to contact you anymore (and sorry just shouting “Speak to my attorney” doesn’t work), any further phone calls from them could result in $4,000 fines for them and the opportunity for a lawsuit from you.  In our office, we deal with hundreds of collection calls each week so that our clients can have peace of mind when their phones ring.  It’s only been on rare occasions that we’ve had to remind the collection agencies about the law.

The Importance of Showing up in Foreclosure Lawsuits

Woody Allen—the famous writer, actor and director—once said, “Eighty percent of success is showing up.” This statement is especially true when it relates to foreclosure defense and showing up in court.

 

When you get your first foreclosure notice, it may seem like the end of the world.  Visions of shame, horror, embarrassment and living on the streets may fill your mind.  Take a deep breath.  (Note- if you get a notice that says your property is going to be sold on a specific date, stop reading the rest of this article and speak to a bankruptcy/foreclosure defense attorney now.)

While your first reaction might be to ignore the situation and hope that it works itself out, not showing up to court is the worst thing you can do. You run the risk of having your foreclosure go through much more quickly than if you had taken a few simple steps to slow the process down.  So, when you get the foreclosure notice go speak to a qualified bankruptcy and/or foreclosure defense attorney, but no matter what, don’t miss that court date.

A bankruptcy attorney will be able to assist you in preparing foreclosure defense and can potentially help save your home through Chapter 13 or Chapter 7 bankruptcy.   

They’re Taking My Home: Understanding the Foreclosure Process

When you receive a foreclosure notice for your home due to unforeseen financial circumstances or lost wages, it’s natural to immediately give up hope and think that it’s over—there’s nothing you can do to save your home.  This is simply untrue.  The foreclosure process is a long, paperwork-heavy procedure that can take several weeks (or even months) to progress.  It begins with the foreclosure notice but this notice doesn’t mean that you’ve run out of options.

 

The best way to not give up hope when you receive your foreclosure notice is to understand the foreclosure process so you’ll have more incentive to make the right choices to save your home during this critical time.  With this understanding, along with the right help from a qualified professional, your foreclosure can be stalled until you have time to get back on your feet.  It can even be completely avoided!

1. When you receive missed-payment notices

Many banks have a grace period for which they allow homeowners to be slightly late on payments.  For some, this grace period is 5 days, for others it is 10 days, and for others it might be 15 days or more.  When you miss your payment, the first thing you should expect to receive is a missed-payment notice.  As long as you send in your payment by the date given to you on this notice, your mortgage will be in good standing.  Many mortgage companies require a late payment, however, if the payment is made within the grace period.

 

2. When you receive a notice of default

Homeowners typically receive a notice of default (NOD) when they are 30 days or more late on their mortgage payment.  This notice gives you a certain number of days to make the mortgage current or run the risk of foreclosure.

 

3. When you get the foreclosure notice

This notice will generally give you the total amounts due, including interest owed, and the contact information for the mortgage company’s attorney.  After you receive this notice, it could be anywhere from 15 days to 15 months before the home goes up for auction on the foreclosure auction block.  The amount of time will depend largely on your lienholder’s regulations and the amount of foreclosure “backlog” they have to work on.  It will also largely vary depending on your location and how many foreclosures are happening within your area or municipality.  

When does the foreclosure process start and how does it work?

What options do I have if I'm in foreclosure?

Foreclosure Rescue Scams - Don’t be a Victim!

“Stop foreclosure now!”  Ever seen a handmade sign bearing these words on the side of the road?  Or perhaps you’ve received an email from someone who promises to work with your bank and keep foreclosure from happening?  Foreclosure defense and “avoid foreclosure now” promises are everywhere, especially in a market that is still struggling.

    

While it is certainly important to seek help when you are facing a foreclosure on your home, knowing who to trust for the right kind of help is crucial.  The wrong kind of help can put you deeper in the financial hole than you were when you started.  Sure, there are a lot of people who say they can help you stop your foreclosure.  But are they legitimate?  Here are scams to watch for:

The "Forensic Audit"

Forensic auditors will attempt to collect an up-front fee from you in order to “look over” and “assess” your mortgage and foreclosure documents.  They will then use their “expertise” to review your mortgage documents and create a report how you can avoid foreclosure.  The funny part is that this process of reviewing the paperwork is just the first step that qualified foreclosure defense attorney will make and it’s an important one, but not enough.  That’s why the “forensic audit” promise is a scam if that’s all they’re offering. 

Rent-to-Buy Schemes

In this scam, a con artist will say that if you give them the title to your house, you can stay there as a renter and buy it back from them later.  They will tell you that when the title is surrendered to them, they can refinance it with their good credit to prevent losing your home.  What they won’t tell you, however, is that these scams often involve impossibly difficult “buy back” arrangements, allowing these new owners to walk away with your house AND your money. They might also raise the “rent” they agreed upon at the beginning and forcing eviction if you can’t pay the higher amount.  

Should I Try a Short Sale if Threatened with Foreclosure?

Should I Try a Short Sale if Threatened With Foreclosure?

If you have been unable to keep up with your monthly payments and are under the threat of losing your home in foreclosure, it might seem like you don’t have a lot of options and are financially cornered.  However, this feeling is normal when we experience stress and life-changing situations, although incorrect in this case.  You have several options if you are faced with a foreclosure and there are professionals who can guide you through them.

If you are being threatened with foreclosure in Miami, Florida, think of it this way: foreclosure is your worst case scenario. Not only will your lender take your house—they will charge you attorney and court fees related to filing the mortgage.  That’s why anything is better than a foreclosure, so it’s important to stop for a moment, take a breath, and find out your options.

One such option is a short sale of your home.  While most lenders aren’t particularly agreeable to the option, it involves you taking the initiative to sell your home for less than the amount of the mortgage.  The lenders will then weigh their options and either take the short sale offer or not.  Talk to anyone who has gone through a short sale in South Florida, and you might hear a different story.  Tales of multiple offers falling through at the last minute, endless “tire-kickers” traipsing through your home.  Sometimes there are better ways of resolving your problem.

A short sale will likely affect your credit somewhat—possibly as much as lowering your score by 200 points.  However, it is important to realize that this is not NEARLY the beating your credit report will take if your home is foreclosed on.  200 points can be fixed with a year or two of responsible credit use, but the after effects of a foreclosure will take longer.  

Still—a short sale will be a better option for you than a foreclosure.  A qualified bankruptcyattorney could lead you through the process and help you connect with a real estate agent who specializes in short sales.  Professionals on your side in situations like these are always an asset—the more, the better.  

Should I just ignore my foreclosure summons and turn my home over to the bank if I can't afford a lawyer?

Ignoring a Foreclosure: Why You Shouldn’t Make it Easy For Them To Take Your Home

Believe it or not, there are worse things the bank can do to you than foreclose on your home.  First, they can convince you to make it easy for them.  Then, they can charge you enormous court and attorney fees for the process they had to go through to take it. 

In fact, they get by with this tactic all the time. A recent study showed that 95% of the foreclosures in this country were foreclosures in which the homeowners didn’t do anything and simply handed over their home without a fight.  They fell for the bank’s bait of “don’t give us any hassle” and walked away from the home and stability they had worked so hard for—it’s such a sad waste.  

Banks are telling homeowners it is okay not to respond because they know that many people can’t afford an attorney, or feel overwhelmed with their financial situation and want to avoid any conflict.  Here’s the truth.  A foreclosure is a lawsuit.  A lawsuit is an adversarial process, it’s you versus them.  Of course they don’t want you to fight back.

A knowledgeable attorney will have an array of tools (including bankruptcy) to help you meet your goals.  There are several bankruptcy attorneys who will provide assistance with your foreclosure pro bono or who will offer payment plans to fit your budget.  You should never let worries of what’s affordable convince you to make it easy for Wall Street to take your home without a fight.  Take our word for it—you need someone to fight in your corner.  

Has Your Lender Initiated a Foreclosure? Here’s What to Do

There are no specific rules for how to handle things if your home is already in foreclosure.  Lenders vary in how they handle things, and beyond this, the laws vary from state to state.  In some states, the foreclosure process may take months; in others, everything could happen within a matter of days.  This is why it is crucial to speak with a foreclosure defense attorney immediately if your lender has already placed your home in foreclosure. 

The best thing you can do is fight back.  The more you fight, the longer the foreclosure process will take—this will allow you more time to get in a better financial situation and work to keep your home. Even if the foreclosure goes through, you should continue to fight because of the redemption period.  This is a period of time in which former homeowners can buy back their property if they decide to do so.  This redemption period varies from state to state: it is 30 days in Alabama and up to 10 months in Delaware. 

The thing to keep in mind is that the foreclosure process isn’t a simple one.  There is a lot of paperwork that has to cross a lot of desks, and anything you can do to stall that paperwork between desks will help you find more time (and money!) to get your home out of foreclosure.  Speaking with an attorney early in the process will be your best bet to help you stay in your home.

What other services does Bankruptcy Law Clinic offer?

Help! I’m Falling Behind on My Mortgage… What Do I Do Now?

If you are falling behind on your mortgage, particularly in Miami, Florida, you’re in a lot of like company.  In fact, over five million homeowners across the country are in the same boat.  But the territory can certainly be frightening for many people, and you may find yourself wondering how long of a grace period you have and what is Plan A and Plan B (maybe even Plan C).

First of all—take a breath.  Many lenders provide grace periods, which is usually around 10 to 15 days after the day you were supposed to make the payment.  If you need to know the exact grace period, it should be printed somewhere on your paperwork.  If you mail your payment within this period, you likely won’t even be charged a late fee.     

30 Days

Once you reach the 30-day mark, your lender will not only have charged a late charge—they will likely be trying to call you or contact you by mail.  Don’t ignore this attempt at communication because your lender will probably offer you ways to catch up and avoid further late fees.  Also, any payment that is 30 days or more late will likely be reflected on your credit report and have an effect on your credit score.  If you don’t want the ding to happen on your good credit, you should do everything possible to make sure your payments are never more than 29 days late. 

90 days

Once you reach the 90-day late mark, your mortgage is at a high risk of foreclosure.  If you are nearing this, it might be best to seek the advice of bankruptcy attorneys who can work with you to help you keep your home.  

Working But Not Making Ends Meet? The Home Affordable Modification Program (HAMP) Might Be For You

If you are one of the thousands of Americans who has a job but is still unable to make ends meet, there may be a way to lower your monthly mortgage payments to 31% of your pre-tax gross monthly income.  For many borrowers—particularly those who find themselves in different financial circumstances than they were in when they initially applied for the mortgage—this results in a significant savings.  This program is being used right now by many distressed homeowners in  both Dade and Broward county as a way to avoid foreclosure and potential bankruptcy.  

The program is the Home Affordable Modification Program (HAMP), and is one of the many programs the government is using to attempt to help borrowers who are in over their head with high mortgages.  In fact, the program has been so successful that the government has plans to expand it in June 2012.  The current program has been available to homeowners since February of 2012. 

To be eligible for HAMP, you must:

•     Occupy the house as your primary residence

•     Have obtained your mortgage on or before January 1, 2009

•     Have a mortgage payment that is more than 31 percent of your monthly gross (pre-tax) income

•     Owe up to $729,750 on your home

•     Have a financial hardship and are either delinquent or in danger of falling behind

•     Have sufficient, documented income to support the modified payment

•     Not have been convicted within the last 10 years of felony larceny, theft, fraud or forgery, money laundering or tax evasion, in connection with a mortgage or real estate transaction

Currently, only about 30% of these loan modifications include an actual principle reduction (you used to owe 250k, the bank forgives 30k, now you only owe 220k).  The rest offer some type of temporary reduction in interest rates and/or an extension of the loan.  Why this may be attractive if you have a temporary financial hardship (your spouse is out of work for 3 months), it may not be the best long term solution.  If you have a second mortgage or a line of equity, you may have other better options.  You may want to consult with a bankruptcy attorney about your own specific situation.  Bankruptcies may enable you to reduce your monthly payments, eliminate your second mortgage and enable you to keep your home.

What are common mistakes people make when they consider filing for bankruptcy?

Divorce and Bankruptcy: Should I File For Both at the Same Time?

It’s no secret that money problems are one of the leading causes of divorce.  In fact, financial woes are often what couples state as the reason their differences became irreconcilable.  Therefore, the situation often arises that divorce and bankruptcy are considered simultaneously.  While it’s possible to file for both at the same time, it’s important to keep in mind that divorce and bankruptcy are two completely separate legal processes, and each must be handled separately. 

In fact, if you file for a bankruptcy while you are in the middle of the filing process for divorce, the divorce proceedings can actually slow down your bankruptcy.  And while the court handling the divorce will be able to make decisions regarding custody, child support, and alimony while the bankruptcy process is happening, it will have no jurisdiction over the couple’s mutual property – only the federal bankruptcy court will have control over that. 

Also, bankruptcy and divorce can be tricky when it comes to jointly owned debt.  If you are required to pay off certain debts as part of your divorce decree and your bankruptcy discharges these debts, your creditors could still go after your spouse if his or her name was on the debt.  Your spouse can then take you back to divorce court to recover the debt, which will likely be granted since it was in the original divorce decree.  Chapter 7 and Chapter 13 bankruptcy also does not discharge child support or alimony that is owed to your spouse as part of the divorce decree. 

The best thing to do is to wait until the divorce is finalized before you begin your bankruptcy process.  When you do it this way, the bankruptcy court will look at your required alimony and child support expenses, and consider these when determining your required monthly expenses.   

Can I file for divorce and bankruptcy at the same time?

The Mortgage Forgiveness Debt Relief Act and Debt Cancellation

According to IRS regulations, when debt is canceled or forgiven by a lender, the amount that has been canceled is considered income for the debtor during tax time and must be reported as income.  In light of the recent housing and foreclosure crisis, this regulation would be especially frightening for the thousands of Americans who are going through loan restructuring and modification processes, or having their mortgages canceled due to foreclosure. 

However, when the economy took a turn for the worst, and right before the housing bubble burst, Congress passed the Mortgage ForgivenessDebt Relief Act of 2007, which allowed homeowners who were already having financial trouble to avoid having to pay taxes on their forgiven or foreclosed mortgages.  In fact, according to that Act, if part or all of your mortgage debt is forgiven in any tax year from 2007 to 2012, you might be able to exclude a substantial amount of that forgiven debt from your taxable income when tax time rolls around. 

The debt that qualifies for this must have been incurred for your principle place of residence (not a vacation home), and can include debt that has been canceled through foreclosure or debt from mortgages that were reduced through restructuring or modifying the loan.

From the IRS website, here are a few additional facts about Mortgage Debt Forgiveness.

   1.  The limit is $1 million for a married person filing a separate return.

   2.  To qualify, the debt must have been used to buy, build or substantially improve your principal residence and be secured by that residence.

   3.  Refinanced debt proceeds used for the purpose of substantially improving your principal residence also qualify for the exclusion.

   4.  Proceeds of refinanced debt used for other purposes – for example, to pay off credit card debt – do not qualify for the exclusion.

Should I take out a loan against my 401k to avoid bankruptcy?

Should 401k Loans Be Used to Avoid Bankruptcy?

People will do just about anything to avoid bankruptcy.  However, taking out a loan against your 401k is not advisable, for multiple reasons.  First, in most chapter 7 bankruptcies that we do, our clients have their debts discharged while keeping their 401k intact.  Avoiding this legal and popular form of protection against your creditors will, in many cases, only push you further into the hole of debt. Add to that putting your retirement at risk, and you’ve compounded the problem exponentially.

Let’s say you use the 401k loan to pay off your creditors.  While you’ve managed to get the collections agencies and threats of wage garnishment off of your back, you’re still responsible for paying yourself back and restoring the funds in your 401k.  While it can certainly be argued that the interest rates of 401k loans is significantly lower than the rates on most credit cards, you should keep in mind that 401k loans must be paid back within a shorter amount of time than many other types of loans or lines of credit.  This means that your monthly payment to your 401k will likely be high. 

If for some reason you are unable to make this monthly payment, the money will be treated as income and you will likely have to pay a 10% early withdrawal penalty since it would be considered a distribution from a tax-deferred plan.  What this means is that in addition to the penalty, you’ll have to pay income taxes on the money you took out as a loan.  Also, if you are unable to continue working or change employers, you will be required to pay back the loan in full, immediately. 

Now weigh all of that against this fact: if a debtor files bankruptcy, most states’ exemptions will keep your 401k protected. This means that you’ll have some of your debt discharged while keeping your retirement money intact.  The benefits of doing this definitely outweigh the benefits of taking out a loan on your 401k to avoid bankruptcy.  

Florida Foreclosures – What Happened and How Can I Protect My Home in Florida?

Let’s get one thing straight: the reason that you need professional legal assistance when you are facing the potential foreclosure of your Florida home is because the bank or mortgage company who owns your mortgage will not look out for your best interest.  The global financial crisis that resulted, in part, from fraudulent business practices on Wall Street created a situation in which your home mortgage – and the rights to it – has likely been sold as bonds to multiple stakeholders.  What this means is that there is no one at your bank or mortgage company who will lend a sympathetic ear to your financial hardships, regardless of how devastating they might be, because there are multiple corporate interests involved. 

In fact, many of these companies have moved your mortgage around between themselves that they are unable to provide original documents proving that they, indeed, hold the loan.  This has created a situation in which companies are using falsified documents to take your home from you—and these documents are passing through the courts unnoticed because of the wave of foreclosures that are happening around the state.  The same companies who participated in throwing Floridians in a tailspin with sub-prime mortgages and unethical business practices are now welding their power to take residents’ homes away from them. 

This is why a foreclosure defense attorney is a valuable asset to have on your side if you are facing the threat of foreclosure of your Florida home.  With the right defense in place, you will have a much greater chance of delaying, or even winning, the foreclosure claim that has been placed against you.  Foreclosure defense attorneys know what to look for to make sure that your bank or mortgage company is playing by the rules (because so many of them don’t!) and know all of the legal processes to keep you in your home for as long as possible, even if you have missed a payment on your mortgage.  

How long does the process take to file for bankruptcy?

What happens when I finally make a decision to retain a bankruptcy attorney?

Florida Foreclosure Defense Basics

Foreclosure Defense is a one-two-three punch of legal defense within the court system, financial planning, and debt solutions that are determined outside of the courts. Beyond providing a legal defense for you when you and your family are faced with a foreclosure, a foreclosure defense attorney will conduct a thorough financial analysis of your debts and assets, and help you find the best possible route out of your financial trouble so that you have a better chance of keeping your home.  Foreclosure defense attorneys also conduct negotiations with your creditors, particularly your bank or mortgage company who is foreclosing on your loan. 

Make no mistake – a foreclosure process is indeed a legal process that can happen quickly and you will need the assistance of a legal professional to put up a fight for your home. Foreclosure defense attorneys will help you delay a foreclosure or, in many cases, avoid a foreclosure altogether, by providing you with the legal defense you need to stop the mortgage company from taking your home and taking advantage of corporate loopholes in the process.  They will have lawyers on their side; you should do the same if you want your legal rights protected. 

When you are given a foreclosure summons, you will have 20 days from the date you receive your summons to respond in writing or lose the right to do so.  In Florida, the foreclosure process can take several months or it can go quickly, depending on the particular circumstances around your foreclosure and whether the courts in your particular jurisdiction are backlogged with foreclosures.  Particularly if you have missed a payment on your mortgage, you should contact a foreclosure defense attorney who islicensed in Florida and can give you an estimate of the timeline of foreclosures in your area of the state.    

Will everyone know that I actually filed bankruptcy?

Why You Shouldn’t Trust Your Mortgage Company If You Are In Foreclosure

When you are in a foreclosure, it’s anyone’s bet what you’ll hear from your lenders.  When their money is on the line, rest assured that lenders will do anything and everything they can do to protect it.  Consequently, there is one simple reality that will rear its ugly head in almost every circumstance: when it comes to keeping their financial interests protected, your lenders will not always tell you the truth. 

Many people facing foreclosure make the mistake of trusting their lenders on a host of lies that end up being detrimental to homeowners when everything is said and done.  These lies cost homeowners valuable opportunities to fight the foreclosure or buy some extra time to catch up on payments.  Some common lies that homeowners hear are “we can only help you if you’re 90 days late” or “if you are in a loan re-modification plan, we won’t foreclose.”  Others might hear, “we don’t want your home and want to keep you in it.” 

The fact is that although you should stay in contact with your mortgage company, you shouldn’t believe anything they tell you unless it is in writing first.  And while you should be as up front as possible with your lenders concerning your situation, know that anything you say or do could be used by them to facilitate the process of taking your home.  This is why it is important to speak with a foreclosure defense attorney when you are facing the threat of foreclosure.  It might be the best defense you have in a situation when big corporations and lenders are only looking out for their best interests and bottom lines.   

Three Mistakes To Avoid if you are Facing Foreclosure

The foreclosure process can be a frightening one.  When a family is faced with potentially losing their home and having their lives uprooted, it is often a devastating time.  During foreclosure – more than any other time – it is crucial to keep a level head and realize that “this, too, shall pass.”  But while the process is happening, there are at least three mistakes you should avoid to increase your chances of coming out on the other side of the chaos with your health and wellbeing (and your home!). 

1. Handling it alone

The laws relating to foreclosure are complex and constantly changing.  If you try to handle the process on your own, you will certainly be at a disadvantage—unless you are a foreclosure defense attorney.  If you aren’t, then you should hire one.  Foreclosure defense attorneys know the process, can easily navigate it, and will be your most powerful asset when facing foreclosure. 

2. Moving out

You will find that in a foreclosure, a bank or mortgage company will tell you anything and everything to make sure that they come out on top in the situation—and this includes lies.  People falsely assume that just because a bank tells them that a sale date is scheduled, that that’s it—there’s nothing to do but move out.  This is far from the truth.  If you move out, you may give up your right to apply for a loan modification or short sell, or one of the many other options available to you.

3. Ignoring your summons

When banks and lenders sue for foreclosure, the homeowner usually only has 20 calendar days in which to respond.  Ignoring the summons doesn’t make the problem go away; it just means that you will lose your available recourses to save your home.