Bankruptcy FAQ - Frequently Asked Questions

The Six Options for Cars and Other Secured Collateral in Chapter 7 – Is your car worth giving up part of your bankruptcy discharge?

admin — Mon, 15 Feb 2010 05:34:12 +0000

Here are the six options available for handling secured collateral in Chapter 7:

1. Surrener – This option is nice if you just want to walk away and owe nothing, but obviously could be a problem for those that want to keep it. Most lenders will repossess the car after discharge if you are not current, but if you are lucky they will never formally demand it or try to pick it up.
My experience is that lenders never formally demand possession they just send out crooked repo men to pick it up. You do not have to give your vehicle to a stranger. Only in smaller counties including Brazoria have I seen them get a court order for possession and sent out the Sheriff or Constable, but in the rare event that they do you do have to surrender the car to a law enforcement officer. How do you know that the tow truck driver is not an impostor with a tow truck? Many of them have felony convictions. Adding insult to injury these people often pretend to be law enforcement using titles like Seregeant or Investigator. They will claim they are investigating a “theft” “civil theft.”. This is a scam on their part. Ask to have the name and telephone number of their supervisor.
They cannot take the car if there is a passenger in it and in Texas they cannot cause a breach of the peace so they cannot break into your garage but they may pick it up from your driveway.
If this does not appeal to you then read the other options!

2. Redeem – Is a great option if you are upside down on a secured personal property. You pay a lump sum equal to the value of the collateral from yourself or anybody or get a loan from Redemption Funding Inc in Sweetwater, Tennessee (423) 337-7572. This works best for upside down loans. The interest rate will be higher, but it’s worth it if you save enough money. The application is on my website at www.sabkr.com/redemption.htm

3. Reaffirm – This choice is bittersweet because you are giving up the discharge of that particular debt in your bankruptcy. Lenders will try to coerce you into this option. They say they require reaffirmations but most do not enforce it. The bankruptcy code does say that if you fail to redeem or reaffirm within a certain time then the automatic stay lifts and they are free to pursue a bankruptcy default clause.

4. Reaffirm and Rescind – You have the right to rescind a reaffirmation agreement anytime before discharge or within 60 days whichever is later. Although the courts have not authoritatively stated whether you are protected if you rescind a reaffirmation it is likely.

5. Reaffirm and Argue to the Judge to not approve the reaffirmation – Is this option ethical? If you do it right I think it is but you need to discuss this carefully with your attorney. If your attorney believes that the reaffirmation poses an undue hardship on you it has to go in front of the judge. Even if you want to reaffirm your attorney is duty bound to not sign off and tell the judge that he or she believes you cannot afford it if that is the case.
If the judge fails to approve it then you are probably protected and can just keep making the payments and ride thru!

6. “Ride Thru” or Keep and pay and not reaffirm – If the lender does not object this is the best option if you are not seriously upside down. You keep up the payments but cannot be sued if you default or the car is totalled. You can walk away from it at any time and all they can do is repossess it. Ford Credit and GMAC/Nuvell and some greedy credit unions will actually repossess your car if you try this. I argue that if the lender accepts payments after the bankruptcy filing they have waived the default caused by your bankruptcy. We will see if I have to ever litigate this issue.

Whichever option you chose you need to discuss this carefully with your attorney. There are a lot of considerations to take into account.

More foreclosures in 2010 and more drops in home prices

admin — Sat, 06 Feb 2010 16:37:23 +0000

Mark Zandi, Chief Economist at Moody’s Economy.com and former advsier to presidential candidate John McCain said today that the foreclosure prevention intiatives have been ineffective and that we will see more foreclosures in 2010, on C-SPAN at a forum by the Urban Institute. He also said that this will cause a drop in home prices.

Additionally Zandi also said the overalll outlook for the econony is not good. My opinion is that Zandi is right. The press and the politicians have been trying to convince us that things are getting better while we all see that things are getting worse. Zandi is courageous to tell the truth that things are not getting better and that these so called mortgaqe modification programs are not accomplishing anything. It is time that Congress give bankruptcy judges the power to modify home mortgages of debtors’ primary residences.

Do make charitable donations before and during your bankruptcy

admin — Wed, 20 Jan 2010 14:43:42 +0000

Many of us tithe to our churches and give money to the Red Cross such as for Haiti earthquake relief. The good news is that the Bankruptcy Code protects these donations as long as they are 15 percent of your annual income or less.

As long as your donation is to a religious or charitable non-profit organization it is protected in several ways. In Chapter 7 it does not count against you on the means test, it will be deducted from your “disposable income” as long as you intend to continue the donations every month.

A Chapter 7 trustee also cannot void charitable gifts with the 15 percent limitation. In Chapter 13 you can continue to give up to 15 percent each year during the case and it cannot be held against you. It should be listed in your budget. In short continue exercising your faith and enjoy the pleasure of giving. It is better to give than to receive!

I will be on CNN Radio this Saturday – Bankruptcy and Credit Scoring www.cnn650.com

admin — Sat, 26 Sep 2009 16:44:00 +0000

I will be on CNN Radio, 9 am CT, this Saturday, on Bankruptcy and Credit Scoring. Tune in at www.cnn650.com or 650 AM in Houston.

Chapter 11 is sometimes the solution

admin — Sat, 26 Sep 2009 01:53:21 +0000

Most consumer bankruptcy attorneys do not understand Chapter 11. Most of our cases are Chapter 7 or 13, but there are sometimes that Chapter 11 is the best choice.

The most common use of Chapter 11 for indvidual debtors whose debts exceed the approximately $1 million secured and $336K unsecured Chapter 13 debt limits. Those above these amounts who have a business or other non-exempt property cannot do Chapter 7 or they will lose it to the Trustee.

While Chapter 11 is expensive if done right it can provide you with some incredible benefits. One of the best advantages is that you can take more than five years to pay off your creditors. Another is that you can cram down vehicles even if you have not had them for 910 days.

Finding the right attorney is hard. I represent Chapter 11 clients and I will consider taking your case even if you live outside of my area. Feel free to call (888) 305-1919 to make an appointment.

More numbers false signs of a recovery

admin — Thu, 10 Sep 2009 00:47:04 +0000

The Mortgage Bankers Association reported that loan applications rose 17 from the week before says the Hosuton Business Journal, perhaps in an attempt to grab headlines that the economy is improving. Asie from the fact that is just one week, it is just another example of how the media is part of the problem by portraying a recovery that is not happening.

Bankruptcy filings also increased in August, especially Chapter 13 which is usually used to save a home from foreclosure. This is a better barometer of the economy. I think it will be two years before we are out of the economic crisis because we have not seen the full fallout of the mortgage crisis. Chapter 13 remains the best option for homeowners who want to save their home from foreclosure as mortgage companies still refuse to modify most distressed borrowers loans.

Redeem your car in Chapter 7

admin — Sat, 01 Aug 2009 17:40:38 +0000

In Chapter 7 you have the option of redeeming your car by paying or getting a loan only for what it is worth even if that is a lot less than what you owe on it. For more information click here to find out more about your options for redemption.

The economy is going to stay bad for several years and bankruptcy filings continue to rise

admin — Sat, 25 Jul 2009 17:13:44 +0000

Recent hotel industry association figures released the other day indicate a 17.5 percent drop in revenue per available room. It is very hard to believe the reports of a rebound when you see such numbers. Frankly there are no credible signs of a rebound.

Until Congress comes up with a real fix for the mortgage crisis and passes the mortgaga nodification bill, things will just get worse. Right now all they seem to do is to throw money at failed businesses.

Since there is no immediate relief in sight for the economy, bankruptcy filings will continue to rise. Those who still have jobs but are susceptible to layoffs may want to make plans for what they would do if they lose their jobs.

Chapter 13 has an undeserved bad rap, it is actually a very good option

admin — Sat, 18 Jul 2009 16:17:21 +0000

It seems that often Chapter 13 gets a bad rap. I disagree I think it is a good chapter. Here are some good reasons to file Chapter 13, other than stopping foreclosures and repossessions:

-You keep all your property even if it is non-exempt.
-You can get another Chapter 13 discharge in two years!
-You can get another Chapter 7 discharge in six years or less sometimes!
-You have an absolute to dismissal if you want out.
-It can sometimes be less than 3 years, e.g. 6 months!
-Get divorce decree debt discharged.
-Get civil fines and penalties, including motor vehicle surcharges and toll fines discharged.
-Get divorce decree debts discharged.

These are many good reasons to file Chapter 13. Also, if you fail the means test filing 13 is not necessarily so bad, because sometimes claims of creditors can be struck and you can finish in 6 to 9 months. If you are current on your mortgage and car loans there are a lot of things you can do in Chapter 13.

One of the best things is that if you run into new financial problems you can file again and get a discharge of your new debts only two years after the first Chapter 13 filing. Even better if you had a Chapter 13 that lasted less than 3 years because most of the claims were struck, then you can file Chapter 7 and get a discharge right away!

The benefits of Chapter 13 are a little complicated to explain in general because it varies a lot depending on your circumstances, but they are many. You should definitely consider Chapter 13 if any of the above reasons appeal to you.

You must file bankruptcy before the foreclosure sale date to stop a foreclosure

admin — Sat, 04 Jul 2009 22:18:41 +0000

In Chapter 13 you have the right to cure defaults in a mortgage up to the foreclosure sale. On some states you may be able to use Chapter 13 to redeem if there is a redemption period after the sale, but most of the time prior to the sale is the last chance.

If you file before the sale and you qualify for an automatic stay then that will stop the sale. In some cases there may also be a codetor stay if the other signer does not file. You can then cure over a five year period out of your future earnings.