When is bankruptcy a good option?

If I file for bankruptcy, will everyone know about it?

What is the first step in determining whether or not bankruptcy is my best option for dealing with debt?

Should I tell my bankruptcy attorney everything that is related to my financial situation or can some things be hidden?

Should I Tell My Bankruptcy Attorney Everything?

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When you hire a bankruptcy attorney, you are hiring a legal professional to protect you and your financial interests.  Your attorney is unable to do his or her job if you aren't completely honest about your financial situation, and you should look at your attorney-client relationship in much the same way as you view your doctor-patient relationship.  Your privacy is protected with client privilege and what you DON’T tell could end up hurting you.    

This is because whatever facts you are attempting to conceal about your finances are likely already known by the bankruptcy trustee or the attorney that has been hired by your creditors.  If the “other side” knows more about your true financial situation than your own attorney does, you are setting up a scenario in which your attorney is going into the fight blind.  In this situation, he or she cannot fight for you without the proper knowledge to do so. 

Your bankruptcy attorney has a fine line to walk.  He or she must keep the bankruptcy trustee happy and present your bankruptcy case to the court without appearing to hide something.  If there is information that the trustee knows but your bankruptcy attorney doesn't  this will look suspicious to the court and keep your attorney from doing the job he or she is trying to do—the job of helping you and your finances. 

So should you always be completely honest with your bankruptcy attorney about your financial situation?  The answer is a resounding yes!  You are paying an attorney to help you get your finances back on track, so you should take advantage of the opportunity to let your attorney know everything that is related to your financial state of affairs.  Then, and only then, will the attorney be able to help you in the best way possible.  In our experience, people get a lot of bad advice about bankruptcy- from their friends, the internet, their “primos en Kendall” and lots of other places.  The best advice regarding bankruptcy you can get is from a bankruptcy attorney.  Most good ones offer a free initial consultation (like us), so give them a call (our number is 305-663-3281) and tell them EVERYTHING.

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.  

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.

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 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.   

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.  

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.  

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

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

How Debts Are Discharged In Bankruptcy

A common misconception is that when debts are discharged during a bankruptcy, the tax payer picks up the burden.  This is simply not true – in the process of a bankruptcy, the creditors are the ones who take a financial hit.  They do this by often getting pennies on the dollar amount of what they originally loaned, so it’s never a pleasant process for them.  

When a court declares your debts discharged, it essentially becomes illegal for creditors to contact you about the debt.  However, not all debts are discharged and this is why it is important for you to contact someone who can advise you regarding bankruptcy law and which part of your debt is most likely to be discharged.  Every bankruptcy is different and bankruptcy laws vary widely, state by state.  A bankruptcy attorney will be able to counsel you regarding the laws that are particular to your state and give you a good indicator if bankruptcy is really your best option. 

Starting fresh is an important part of beginning on a road to financial freedom and recovery.  A court will be able to look at your situation – past, present, and future – and determine your ability to reasonably pay off your debt.  If the court finds that some debts should be discharged, they will focus on the high-interest ones and determine if you will pay them back partially, or not at all.  Since each bankruptcy is different, it is impossible to determine exactly which debts will be cleared by the courts, but a bankruptcy attorney will be able to give you a good estimate of what might happen in your particular situation.  

One of my top ten favorite bankruptcy cases

The last step of the bankruptcy process is when you receive your discharge notice. Both you and your attorney receive this notice and it means that the court has wiped out your debt and you are now able to start over, debt free. I recently received a discharge notice for Miguel C. that caught my eye. His was an especially rewarding case. He had been a law enforcement officer for ten years and had partial ownership in a business. He earned over 80k a year but had over 50k in credit card debt and a growing family that made meeting his monthly obligations impossible. He had been told time and again by other attorneys that he did not qualify for a chapter 7 bankruptcy due to his income and business ownership. NOT TRUE. The “means test” which determines whether a person qualifies for a chapter 7 bankruptcy is based on both income and expenses. It takes a qualified, skilled bankruptcy attorney to determine whether a person qualifies for a chapter 7. Thanks to us, Mike was able to:

• Keep his primary home

• Get out from under an investment property that was dragging him down

• Keep his 2008 Toyota SUV

• Enjoy a better relationship with his family and loved ones

• Concentrate more at work without distracting collection calls or financial pressures.

Every week I cringe when I talk or meet a perspective client who “heard from a friend”, or “read online” about what a bankruptcy can or cannot do, what happens post bankruptcy or how someone should act prior to filing bankruptcy. Shouldn’t you get your information from a qualified bankruptcy attorney expert? To schedule your free initial consultation call us at 305-663-3281or email john@bankruptcylawclinic.net.

The Bankruptcy Law Clinic is now on Google+!

The Bankruptcy Law Clinic wants to stay close with all of you, so we created a page on Google+! We are looking forward to getting to know you better. Add us to your circles and hit the +1 button:

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The Truth About Car Repossessions And Bankruptcy

Are you avoiding the repo man? Are you still receiving harassing phone calls even after you turn the car back in? We can help!

 If you have fallen behind on your car or truck payments, filing bankruptcy can help! One of bankruptcy’s most powerful tools is the fact it can start to work right away. Its “automatic stay” can stop the repo man immediately. Once a bankruptcy has been filed, it is very difficult for the finance company to repossess your car or truck. WE CAN SLOW DOWN THE PROCESS OR EVEN STOP IT ENTIRELY. Bankruptcy may even help you get your car back after it has been recently repossessed, but you must act fast.

In some cases, a good bankruptcy attorney can spread your past due auto payments over 36 or 60 months without further penalties or interest in a Chapter 13 bankruptcy reorganization plan. In other cases, we may be able to reduce the TOTAL amount you owe on the vehicle. THAT MEANS THAT instead of paying THE $15,000.00 you owe on the car, you only have to pay the $9,000.00 that it is currently worth and we can work at putting you into a comfortable payment plan. The sooner you see us, the more options you may have. Before your car gets repossessed is when you have most power over the banks, and we can help you the most.

On the other hand, sometimes it’s not worth keeping a car. MAYBE you can’t afford the payments or the car is just not worth what you owe. In many bankruptcy cases, we simply include the money you owe on your car in with your other debts and wipe it out in the bankruptcy. No more stress for you and no dealing WITH the repo guy!

Some people think that once their car or truck has been repossessed, they no longer owe any money. The bank got the car back and the debt should be gone. WRONG! That is not how it works. Once your car has been repossessed, it will be sold at auction. If it sells for less than what you owe (which it nearly always does) the bank will come after you for the difference. They can start the harassing calls again, file a lawsuit and even garnish your wages. You might be able to avoid all this from happening.

If your car has been repossessed or is in danger of being repossessed call us NOW for a free no obligation consultation at 305-663-3281. The sooner you do, the sooner we can discuss your options, the sooner we could find a solution for your problems and the sooner you will feel relief.

Will I lose my home if I file for bankruptcy?

More Bankruptcy Mistakes

Image via Rookiepastor.com

  

1. Transferring property out of your name


A bankruptcy trustee (the person who reviews bankruptcy cases) can reverse a transfer of property that previously belonged to you if the transfer was made within the last four years with the intent to delay or defraud a creditor. They can even do it even if simply a fair price was not received. Don’t be cute!

2. Line of credit/second mortgage to pay off credit cards

Don’t take a loan against your real estate in an effort to reduce the equity to pay off your debts. You can often file bankruptcy and not lose this valuable asset. If you take out a second mortgage to pay credit card debt, you may be putting your house at risk.

3. Failing to appear in court

You can’t avoid a lawsuit simply because you’ve decided to file bankruptcy. A collection case continues until your bankruptcy case is actually filed, which occurs only after the fees have been paid and you have provided your attorney with ALL the information needed. Retaining an attorney to file bankruptcy is an important first step, but it isn’t the end!