Surrendering your home in a Chapter 13

Why would you want to surrender your home in a Chapter 13 bankruptcy?

A lot of people file a Chapter 13 to prevent their home from being foreclosed on, but that doesn’t mean that you can’t surrender your home in a Chapter 13 bankruptcy just as you could in a Chapter 7 bankruptcy.  If your income is such that you are not eligible to file for a Chapter 7 bankruptcy, but you can’t afford your plan payment with the mortgage included you may decide to surrender your home so that your payment plan is feasible.

What happens to the amount owed on the mortgage when you surrender your home in a Chapter 13 bankruptcy?

When you surrender your home in a Chapter 13 bankruptcy there is no longer any collateral on the loan and therefore the unpaid balance on the mortgage would be paid back at the same percentage as your other unsecured creditors.  This will greatly lower your plan payment and allow you to be debt free in 3-5 years.

If you have questions about whether or not you should surrender your home if you qualify for a Chapter 13 bankruptcy,  contact Dailey Law Offices to speak with one of our experienced Columbus Bankruptcy Lawyers today.

 

Tax Implications of Debt Settlement

How Debt Settlement Works

A debt settlement company acts as a middleman to help you negotiate your debt.  The first thing that a debt settlement company will likely instruct you to do is to stop paying your credit cards.  The debt settlement company will then contact the creditor and negotiate a settlement for your outstanding balance.  Many will try to tell you they can settle for half of your outstanding balances or sometimes even less.  The debt settlement company will make an offer of settlement to your creditor/s directly.

The Problem with Debt Settlement

The problem with debt settlement is that creditors do not have to accept a debt settlement company’s offer of settlement.  If they don’t accept it they can then move forward with further legal action to collect on the debt.  Perhaps the bigger issue for the debtor is that if they do accept the offer of settlement there are tax implications.  The creditor will send the debtor a 1099 and in essence the amount by which the balance was reduced will be treated as income-and taxed as such.

Contact Dailey Law Offices today for a free consult with an experienced bankrupty lawyer to discuss the pros and cons of settling your debt versus filing for bankruptcy.

Are You Eligible for a Mortgage Modification?

HAMP Calculator

The HAMP, Home Affordable Modification Program, calculator was designed to determine a homeowner’s eligibility for a loan modification.   HAMP sets forth the process for borrowers who are in default, at risk of immediate default, or in foreclosure to modify their mortgage payment targeted at about 31 percent of their gross monthly income.   The HAMP calculator can be found at checkmynpv.com.  The HAMP calculator works by calculating the net present value of your mortgage. 

In addition to a Chapter 13 bankruptcy, HAMP is another option to assist homeowners in default or teetering on the edge of default.  If you are unable to make your mortgage payments contact an experienced Columbus Bankruptcy Lawyer at Dailey Law Offices today for a consultation to discuss all of your options including a loan modification.

Telling Your Creditors You are Filing for Bankruptcy

Should you or Shouldn’t you tell?

In general telling your creditors you are filing for bankruptcy should help you.  Once you have retained an attorney you can tell your creditors that you have done so and that they need to contact your attorney regarding any debt you may own.  The Fair Debt Collections Practices Act FDCPA prohibits third party collectors from contacting you regarding any debt once you have retained an attorney.  This can relieve a lot of stress and hassle if you are drowning in debt and being harassed continuously by creditors.

When wouldn’t I tell?

Until you actually file for bankruptcy a creditor can legally continue to collect on the debt that you owe.  This means a creditor, upon learning of your intention to file bankruptcy, could file a complaint for damages for failure to pay your debt or could initiate a replevin action to repossess a vehicle or a foreclosure action to take your home.  It is best to ask your bankruptcy lawyer when and if you should tell creditor’s of your intent to file for bankruptcy.

Identity Theft and your Credit

How to protect your identity from being stolen

The easiest way to protect your identity from being stolen is to continuously monitor your credit and protect important information such as account numbers, creditor information, and your social security number.  Many credit monitoring companies offer low monthly fees to pull your credit at any time and most of those companies email alerts to you when you have a new inquiry on your credit or a new account has been opened or attempted to be opened.  If you don’t want to pay a monthly fee to pull your credit report monthly or more frequently, pay $20-$30 per quarter to pull your credit report.  $80-$100 per year to monitor your credit will potentially save you thousands of dollars should your identity be stolen.

Also, don’t forget to do the obvious-protect your personal information.  Yes, there are individuals that still dig through your trash and find sensitive information.  Shred your bank statements and credit card statements.  And only order products or services online from secured sites. 

What should you do if your identity is stolen?

If your identity is stolen-and ideally you are made aware of it relatively quickly because of frequent monitoring of your credit-you should immediately file a police report with your local police department, call all three credit bureau’s and place a minimum 90 day alert on your credit, and finally if you are really ambitious, which you should be-call every potential creditor you can think of to inquire as to whether someone has opened or attempted to open an account and if so tell them it is fraudulent and request it to be closed.  At a minimum call the creditors that you are aware someone has opened fraudulent accounts with and request that those accounts be  closed and flagged as fraudulent.

What are some consequences of your identity being stolen?

The most serious consequence of your identity being stolen is that you will have thousands of dollars of debt in your name to repay that you can’t afford to pay and you will need to file either Chapter 7 or Chapter 13 bankruptcy.  Should you have to file bankruptcy, you probably haven’t been diligent enough to mark your debt has fraudulent and have it removed.  Even if you have the fraudulent accounts removed as fraud if you do not move quickly enough to have those accounts removed your credit score could take a hit.

If you find yourself in a position that you need to file Chapter 7 or Chapter 13 bankruptcy due to identity theft, contact Columbus bankruptcy lawyers, Dailey Law Offices today for a free consultation to discuss your options.

Stripping liens secured by a second mortgage

When can a debtor strip a second mortgage?

A debtor can strip (or remove) a second mortgage when the property’s current value doesn’t cover any amount of the second mortgage.

How to strip a second mortgage

First the debtor must have the property appraised and provide the appraisal to the court to show proof of the value of the home.  Preferably the appraisal should be recent and the individual who performed the appraisal should be willing to testify in court.

Are you still liable for a spouse’s debt after your spouse files for bankruptcy?

Community Property Rules vs. Common Law Rules

Whether or not you are liable for your spouse’s debt depends on whether or not you reside in a “community property state.”  In states that follow community property rules, debt that is incurred by one spouse during the marriage is owed by both spouses.  Likewise, the income of one spouse accumulated during a marriage is considered the income of both spouses in a community property state.  In a community property state a creditor can go after the assets of both spouses to pay for the debt that one spouse incurred.  In a state that follows common law rules a creditor can only go after joint assets to pay a debt that one spouse incurred if that debt was incurred for a family necessity.  The following states follow community property rules:  Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin.

Filing Bankruptcy in a Community Property State

In a community property state if only one spouse files for bankruptcy all of the community debt of the spouses will be discharged.  In a common law state only the debt incurred in the name of the spouse alone that is filing for bankruptcy will be discharged.  For example, if one spouse files a Chapter 7 bankruptcy and both spouse’s name are on the mortgage to their home, the non-filing spouse is still liable on the mortgage even if the filing spouse’s Chapter 7 bankruptcy is discharged.  So if payments fall behind once the bankruptcy is discharged the bank can foreclose on the house and hold the non-filing spouse liable on the debt.

If you are married and considering filing a bankruptcy singly rather than jointly with your spouse, contact Dailey Law Offices to discuss the pros and cons of filing bankruptcy singly vs. filing with your spouse.

 

The Means Test

What is the Means Test?

The means test is a six months average of the Debtor’s and spouse’s income, if applicable, divided by six and then multiplied by twelve to compute a hypothetical income over a year.  That income will be used to determine whether there is a presumption of abuse when filing a Chapter 7.  The means test was enacted in the 2005 bankruptcy code with the intention that is would stop abuse of the bankruptcy process.

Can a Debtor still file a Chapter 7 if their median household income is exceeds the threshold for their state?

Potentially.  If the debtor’s income exceeds the threshold for their state then they must complete the second part of the means test to determine whether or not they may file a Chapter 7.   To pass the second part of the Chapter 7 means test, the debtor must- after deducting standard expenses and eligible expenses- have little or no disposable income.  However, if the Debtor has income greater than 25% of their non-priority unsecured claims in the case, or $6000 whichever is greater or $10000 they have to file a Chapter 13 bankruptcy.

The means test is not the end all be all method to determine whether or not you may file a Chapter 7 bankruptcy.  Contact Dailey Law Offices today for a free consultation to determine your filing eligibility.

 

Reaffirmation Agreements-A necessary evil

What is a reaffirmation agreement?

A reaffirmation agreement is an agreement whereby a debtor filing Chapter 7 bankruptcy makes a new promise to pay a pre-petition debt.  Since all of a petitioner’s unsecured debt is discharged in a Chapter 7 and a petitioner may surrender secured debt in a Chapter 7 bankruptcy the only way to keep secured debt in a Chapter 7 bankruptcy is to sign a reaffirmation agreement.  If the petitioner fails to pay the debt after signing the reaffirmation agreement the petitioner remains personally liable on the secured debt despite the Chapter 7 bankruptcy discharge.

Why do creditors require petitioners to sign reaffirmation agreements?

Creditors require petitoners to sign reaffirmation agreements so that the debt will be paid in full despite the bankruptcy discharge.  Absent such an agreement, a debtor could simply stop making payments on the debt and leave the creditor helpless.

What sort of debt requires a reaffirmation agreement?

Reaffirmation agreements are most commonly required on vehicles and sometimes other secured personal property like appliances or computers purchased on credit.

Why don’t creditors require a reaffirmation agreement be signed in a Chapter 13 bankruptcy?

Petitioners are not required to sign a reaffirmation agreement in a Chapter 13 bankruptcy because the whole point of a Chapter 13 is to pay back 100% of secured debt-with some exceptions, and some percentage of unsecured debt.

Do you really need an attorney to file your bankruptcy?

The short simple answer to this question is yes, yes, yes.   The specific reasons are set forth below.

Why do you need an attorney to file your bankruptcy petition?

Bankruptcy is a complex area of the law.  Bankruptcy law is comprised of a convoluted mix of federal and state laws, case law and local rule.  Each federal district court varies in its flexibility and willingness to accommodate those filing pro se.  I find that about 30% of the clients I represent attempted at some point to file their own bankruptcy petition and their case was dismissed due to insufficient information, not meeting deadlines, or failing to file appropriate accompanying paperwork, etc.  Most attorneys charge a flat rate fee and it is a competitive market, driving the fees to low rates so save yourself the time and hassle and the additional filing fee for having to refile the petition correctly and call a bankruptcy attorney.

Why a bankruptcy attorney and not a general practitioner attorney?

Again, bankruptcy law is a complicated area of the law.  An attorney who devotes a large portion of their time to bankruptcy law can quickly review your case and identify any issues or potential problems.  They will be able to address equity concerns and should know immediately which chapter of bankruptcy you qualify for based on your income and family size.   They are also familiar with the local court, its trustees, and what sort of information they demand.

Bankruptcy is an emotionally draining process.  Let an experienced bankruptcy lawyer help you through the process, correctly, the first time.