Fort Lauderdale Bankruptcy Lawyer Blog

Creditors love it when people file bankruptcy without an attorney. I was in court the other day and the Judge was holding hearings on "reaffirmation agreements." Reaffirmation agreements are post-filing agreements where you basically incur the debt again that you just protected yourself against in the bankruptcy. They are necessary under the law for personal property such as cars. They are not required in order to keep your home. That is very important.

That means that if you want to keep your car - you must sign one. No problem. But if you want to keep your home, you do not have to sign one. You just keep paying your mortgage and you keep your home. If you default on your mortgage later for some reason, the bank cannot come after you because you have the protection of the bankruptcy discharge. If you sign a reaffirmation agreement, however, you lose that protection and the bank can sue you later and garnish your wages for the judgment.

So, back to court. A nice gentleman who did his own bankruptcy was about $100,000 upside down on his home between his first and second mortgage. The Judge questioned him extensively as to whether he was sure he wanted to sign the reaffirmations given that he was so upside down. (The Judge cannot give legal advice)

The gentleman said he wanted to keep his home and that he wanted to sign them (banks also lie to people and tell them that they have to sign them) so the judge approved them. That man lost the biggest benefit of his bankruptcy discharge on his biggest debt. All because he didn't know the law and how it applies to him. That is the type of creditor that will probably sue him later if he can't make his payments.

He also didn't know one important thing -- he could have gotten rid of the second mortgage entirely! Gone! But instead, he signed up for it again. I hate to see creditors take advantage of people who are not represented by sending them reaffirmation agreements on loans they know do not have to be reaffirmed.

Don't let this happen to you. Filling out the forms is one thing but knowing the law and how it applies to you is the important part.

Attorneys have payment plans and make it easy to be represented through your bankruptcy. Creditors love it when you are penny-wise but pound foolish. Call our office today for a free consultation.

FHA home loans were designed to help Americans fulfill their dream of home ownership and are therefore the easiest type of real estate mortgage loan to qualify for. They require a minimum down payment (3%) and is the most flexible type of home mortgage loan available. A bankruptcy does not keep you from qualifying - on the contrary, it will probably get you into a home faster than waiting 7 years for bad credit to drop off.

THE ESSENTIALS FOR QUALIFYING
• Steady employment history, at least two years with the same employer.
• Consistent or increasing income over the past two years.
• Credit report should be in good standing with less than two thirty day late payments in the past two years.
• Any bankruptcy on record must be at least two years old with good credit for the two consecutive years. (At least 3 credit lines and NEVER late on a payment)
• Any foreclosure must be at least three years old with good credit for the past three years.
• Mortgage payment qualified for must be approximately 30 percent of your total monthly gross income.
• If you can answer YES to these statements you should have no problem qualifying for an FHA home mortgage loan.

Your Chapter 13 bankruptcy plan is what tells the court and your creditors how you intend to repay your debts. The plan must be confirmed (approved) by the judge. To propose a plan that the Judge will approve, you must show that after deducting for living expenses (and other allowed expenses), you will have sufficient income to pay your creditors over the life of your plan. Some debts may be paid outside the plan but other debts must be paid within the plan to the trustee who will then disburse the money to the appropriate parties. The trustee gets 10% included in your plan as payment for administering the case.

What has to be paid through the plan and what can be paid outside the plan is a subject that can't be tackled fully through a blog posting. Finding out what would be included in a Chapter 13 plan for you is best discussed with a bankruptcy attorney during a free consultation such as the one we offer in our Davie or Coral Springs office.

U.S. Rep. Hansen Clarke has recently introduced a bill to Congress asking them to cut student loans, forgive other student loans and to allow the discharge of student loans through bankruptcy.

As stated in an interview to Arron Foley:
"The legislation I'm working on right now, it would allow student loan debt to be discharged in bankruptcy, but it would be much more than that. We're also going to be looking at a way for the federal government to use savings to transfer much of the student loan financing to a grant-based way of funding education. We're also working on a package of bills that would provide comprehensive relief for people struggling to pay their debt right now and those who have fallen behind."

Although the current bankruptcy code states that student loans are dischargeable, the discharge can only be obtained if there is extreme hardship. The courts have defined extreme hardship in the most extreme manner available and to qualify you must practically be comatose, intubated and on life support.

This bill is a call for all of us to write our congressional representatives and tell them that we want them to support this bill. Student loan debt is one of the biggest issues that I see in bankruptcy. Graduates today cannot buy homes, start businesses or take public service jobs because they are carrying a student loan payment the size of a mortgage payment. Yes, there are income contingent payment plans that offer loan forgiveness but that's after 20-25 years. We need relief now and college tuition just keeps rising - not lowering.

I wholeheartedly support this bill and urge everyone reading this to contact their representative and tell Congress and this administration that action is needed now. Bring back the meaningful option of making student loans dischargeable in bankruptcy, or at least define what "undue hardship" is in specific and less stringent terms than what we currently have.

Through the Federal Housing Authority (FHA), President Obama recently announced changes to the Home Affordable Refinance Program (H.A.R.P). This is a program that was meant to help Broward County homeowners refinance their existing adjustable rate mortgages to a fixed rate mortgage. Great? Not.

The Home Affordable Refinance Program was set up to help homeowners who cannot qualify for loans from private companies. The government-owned companies Fannie Mae and Freddie Mac agreed to offer loans at lower rates to borrowers with mortgage debts up to 125 percent of the value of their homes. It was just not realistic in today's market where most homes are valued at 125% under their loan balance.

The most significant change to HARP is the elimination of the 125% loan-to-value requirement for refinances. This allows all homeowners to refinance if they meet the other eligibility criteria - no matter how far their home value has fallen

Here are the changes announced by FHA:
• Eliminating certain risk-based fees for borrowers who refinance into shorter-term mortgages and lowering fees for other borrowers;
• Removing the current 125 percent loan-to-value ceiling for fixed-rate mortgages backed by Fannie Mae and Freddie Mac;
• Waiving certain representations and warranties that lenders commit to in making loans owned or guaranteed by Fannie Mae and Freddie Mac;
• Eliminating the need for a new property appraisal where there is a reliable AVM (automated valuation model) estimate provided by the Enterprises; and
• Extending the end date for HARP until Dec. 31, 2013 for loans originally sold to the Enterprises on or before May 31, 2009.

Here is the new HARP criteria:
• The mortgage must be owned or guaranteed by Freddie Mac or Fannie Mae.
• The mortgage must have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009.
• The mortgage cannot have been refinanced under HARP previously unless it is a Fannie Mae loan that was refinanced under HARP from March-May, 2009.
• The current loan-to-value (LTV) ratio must be greater than 80%.
• The borrower must be current on the mortgage at the time of the refinance, with no late payment in the past six months and no more than one late payment in the past 12 month

That last one is a tough one to meet for most people. If you're behind on your mortgage and want to keep your home, you may have some options in a Chapter 13 bankruptcy. Call today and schedule a free appointment to discuss your case and review your options.

As part of your Chapter 13 plan, you will submit to the court a proposed amount that you will pay towards your unsecured debt (usually credit cards) on a monthly basis. Payments of the unsecured debts will be based on how "allowed claims" that are filed by the creditors. All creditors with allowed claims will be paid a share of the money that you are paying into the plan for unsecured creditors. Establishing an allowed claim is the only way a creditor can get paid any money in a Chapter 13 plan.

When you file a bankruptcy case, your creditors will receive notice of the filing. Unsecured creditors that want a share of the payments must file a "Proof of Claim." Once the creditor files the Proof of Claim, you or the trustee can object to the claim if you have a legal basis for doing so. For example, you can argue that you don't really owe the claim or that you owe less than what they are claiming. The bankruptcy code gives each claim a preliminary assumption of validity unless you object. You must have a valid reason for objecting under the bankruptcy code. If you object, the court will then decide which claims are allowed.

Last week, Federal regulators announced that 4 million borrowers who have faced foreclosure since 2009 are eligible for a review of their foreclosure. Regulators are looking for potential wrongdoing, errors and abuses by financial firms in the process of foreclosure.

Examples of financial injury might include unnecessary or miscalculated fees, a foreclosure that happened while in bankruptcy, or a foreclosure sale that happened while you were waiting for an approval or disapproval of a loan modification.

What is unknown right now is what compensation may be available and what rights do you have to sign away in exchange for that compensation.

This review is at no cost to you! Mortgage servicers are required to pay for the review which will be done by independent outside consultants.

Letters are being mailed out to eligible borrowers which will tell you how to request a review of your case. There is a deadline for requesting a review (April 30, 2012) so don't put off requesting a review if you are eligible to receive one.

To qualify, your mortgage loan would need to meet the initial eligibility criteria:
•Your mortgage loan was serviced by one of the participating mortgage servicers.
•Your mortgage loan was active in the foreclosure process between January 1, 2009 and December 31, 2010.
•The property was your primary residence.

Eligible customers will be mailed a letter by December 31, 2011 that explains the Independent Foreclosure Review process and a Request for Review Form that identifies some examples of situations that may have led to financial injury. The form must be completed and postmarked not later than April 30, 2012.

If you've decided that you need to file bankruptcy then there are definitely some things that you should and should not do. The first thing you should do is schedule an appointment with a bankruptcy attorney to discuss your case specifically, but the following list of items are also of paramount importance.

1. Don't borrow more money from anyone.
2. If you have personal loans from friends and family -- Do not make payments to cover these loans. One creditor (yes, your family and friends will be considered creditors) cannot be preferred over the others prior to filing.
3. Do not get married or divorced right before filing.
4. Don't transfer money or give away your assets in an attempt to hide it. We must report all transfers of property and most likely the bankruptcy trustee will take it back from whoever you gave it to.
5. Don't tell your creditors that you're thinking about filing bankruptcy, they may get the jump on you and escalate collection activities.
6. Do not transfer money to your IRA that isn't consistent with your regular contributions.
7. Do not take money out of your IRA accounts. As long as this money is in your IRA, it is "safe" money and cannot be used to pay creditors. If you take it out of the safety of an IRA account - then the creditors can take it.
8. Don't spend frivolously and rack up more credit card debt, you'll only have to repay that debt in the end.
9. Do not use your credit cards! If you know you are filing bankruptcy, do not use your cards to purchase anything.
10. Don't continue to make payments on your unsecured credit or debt. Credit card debt will usually be discharged so payments toward them is really just money you are throwing away.

At it's essence, a Chapter 13 bankruptcy is the equivalent of a credit consolidation plan but better. In a Chapter 13, all the creditors have to participate and you pay what you have disposable at the end of the month into the plan instead of what a credit counselor says you have to pay. Something that credit counseling agencies forget to tell you is that not all creditors will participate in the plan. People usually find out after they've been paying into a plan for months and then they get sued by American Express, Bank of America or Chase.

You are not required to pay the full amount of your debts or a certain percentage of your debt into a Fort Lauderdale Chapter 13 bankruptcy plan. You are required to pay your disposable monthly income into the plan. In a credit counseling repayment plan, you may be able to convince your creditors to reduce the amount you owe but it's unlikely that you'll convince them to drop it as much as the bankruptcy will. Another benefit is that in a Chapter 13, interest and late fees stop. Under a consolidated credit plan, a creditor may reduce the interest but you are still paying it. But the overall theme is that the creditors have to agree to give you help. And you will get 1099's to report on your tax return for the difference of what you paid them and what they say you originally owed. Ouch.

If it sounds like you're at the mercy of the creditors in a non-bankruptcy repayment plan -- you're right. With a Chapter 13 repayment plan, the creditor and you both fall under the jurisdiction of the bankruptcy trustee in a Chapter 13 case.

Two Benefits of a Chapter 13 That A Non-Bankruptcy Plan Can't Offer
A Chapter 13 bankruptcy considers your child support and alimony payments when looking at your disposable monthly income. Non-bankruptcy repayment plans often don't care about other obligations that you have.

Also, if you have a tax debt that can't be discharged through the bankruptcy itself, a Chapter 13 bankruptcy will allow you to pay it off without interest and penalties in most cases. Without the court's help, this type of relief is just about impossible to come by.

In a nutshell, Chapter 13 is a chapter of the bankruptcy code that allows you to restructure your debt and keep assets that you might lose in a Chapter 7. If you have assets that are unprotected in a Chapter 7, the trustee has the right to liquidate those assets and distribute the proceeds among your creditors. Chapter 13 is designed to allow you to keep all or most of your property and allows you to pay their value to the creditors over the life of the payment plan (typically 3 to 5 years). Example: If you had a car worth $5,000 that was unprotected, the Chapter 7 trustee could take the car, sell it and distribute the $5,000 among your creditors. In a Chapter 13, you would pay $5,000 into the plan over 3 to 5 years but you would keep your car.

Some people have an issue with what they perceive to be "paying for their car again." To those I usually ask: "If your creditors had approached you a year ago and offered to settle all of your debt with no tax consequences for $5,000 - what would you have done?" Everyone would have jumped on the offer. Then they realize that it's no different here. The settlement amount is being determined by your asset - nothing more.

Sometimes the Chapter 13 payment amount is not determined by assets but by the disposable monthly income that is shown on the means test. Whatever amount is higher is what gets paid into the plan.

A simplified way of looking at a Chapter 13 is that it's a Chapter 7 with a payment plan and you usually don't lose any property. For some people, losing a car would cause them to lose their job and it's better to have a plan and get rid of your debt then to lose your car in a Chapter 7.

Call today to find out if either chapter of the bankruptcy code can help you get out of debt and live stress-free again. We have free consultations in our Davie and Coral Springs office.

Most people that come for a bankruptcy consultation had excellent credit up until a job loss, or an illness, injury or a divorce. Unplanned life events force them to dip into their savings account or they start selling off assets to continue paying that minimum payment and "maintain" their credit scores. They are usually depressed and down on themselves when they come in for a free consultation at our Davie or Coral Springs office. In most cases, their credit is already shot because they have missed payments or are behind in their mortgage. In some cases, their bills are current but they know they cannot afford to make one more payment and proactively come in seeking advice.

A Chapter 7 bankruptcy will remain on your credit report for 10 years. A Chapter 13 will be on there for 7 years. But that doesn't mean that you won't have credit again for 7 to 10 years. To the contrary, most clients discover that they actually get a credit card within weeks or months of closing out their bankruptcy case. Without bankruptcy, there was no opportunity to get credit because of their credit scores.

Bad credit entries stay on the credit reports for 7 years from the date of last activity. If you are paying your cards through a debt consolidation plan, then it's 7 years from the date of last activity - which is usually when you settle a card. That could take months or years to do because you have to pay into the plan long enough to have a settlement offer available. You are not getting credit while you are making these payments.

Further, current FHA guidelines allow you to qualify for an FHA loan just two years after your Chapter 7 case closes if other conditions are also met. Try getting approved for a home loan while you're consolidating your debts or shortly thereafter!

Find out all the facts about bankruptcy and how it can actually help improve your credit score. Don't listen to friends, neighbors or the credit card companies. Get the facts! Call today for a free consultation. It could be the fresh start you are waiting for.

Although many well-intentioned people borrow against their retirement accounts in order to pay off credit card debt, it's actually one of the worse things you can do in the long run. Yes, it's very tempting. Some pension plans have a hardship withdrawal provision. The money is just sitting there and the creditors are bugging you non-stop. You really meant to pay the money back anyway...you just lost a job or had an illness and plans changed. But think about it carefully as there are tax consequences, retirement consequences and bankruptcy consequences.

Tax consequneces: Retirement investments are given favored tax-treatment by the IRS while you are saving the money. Normally, you don't pay taxes on money that you put in an IRA account or a company sponsored plan. If you cash out before you reach 59, you incur early withdrawal penalties and a tax penalty at the end of the year. You get back a lot less than what you put in and risk running up your tax bill.

Retirement consequences: I will never agree that it's a good idea to wipe out your future income in order to pay creditors today. There will come a time when you cannot work. Social security is not so secure and doesn't provide a lot of income anyway. You may not absolutely need that money today because you are working or still able to work - but there will come a time when you need it to survive. There are other things you can do to eliminate credit card debt other than eliminating your future income.

Bankruptcy consequences: Any withdrawal that you make from a 401(k) plan within the six months prior to filing a bankruptcy case is treated as income on the means test. In some cases, that is not a problem and you will still qualify for a Chapter 7 bankruptcy. In other cases, a withdrawal has put my client out of a Chapter 7 and into a Chapter 13 because they exceeded the median family income when I added in the withdrawal. Then the withdrawal gets counted as income for the purposes of determining your monthly payment to the court. Not a good idea.

If you are thinking of withdrawing money from a 401(k) to pay off credit card debt, pause first and schedule a free consultation in our Coral Springs or Davie office. Find out first if doing so will cause you unwanted consequences. Informed decisions are better decisions!

The treatment of alimony or child support in a Chapter 7 or Chapter 13 bankruptcy really turns on whether you are the person receiving the money or paying it. Neither one of these two domestic support obligations can be wiped out in either bankruptcy if you are the one paying it (and wanting to file bankruptcy). If you are paying it, you can deduct either one (or both) on the means test. If you are receiving it, you must report both as income on the means test. If your divorce settlement agreement lists any payment as a "domestic support obligation" then it cannot be wiped out in a bankruptcy by your ex-spouse trying to get rid of it.

If you are filing a Chapter 13 and owe either child support or alimony, being current on those payments (and staying current) is part of the requirement in formulating your plan payment. For example, if you are $2,000 behind on child support payments, your Chapter 13 plan must include the regular monthly payment AND it must also pay the $2,000 you are behind. By the end of the plan, you must be current on both obligations.

The short version of everything is this: If your ex-spouse files for bankruptcy protection, they cannot eliminate or discharge any domestic support obligation through a bankruptcy. If they are behind on their payments and filing Chapter 13, they are required to bring everything current while they are in bankruptcy court.

If you owe child support or alimony, a bankruptcy filing under either chapter will not eliminate these financial obligations.

The Number One question that most people have when inquiring about a Chapter 7 or a Chapter 13 bankruptcy is whether they will lose their home because of the bankruptcy. The short answer is no. You will not lose your home because of a bankruptcy filing. The house you live in is protected by Florida's constitution under Homestead Exemption. You can only lose your home if you are not making the payments on it.

Filing a Chapter 7 bankruptcy will not help you keep your home but it won't hasten the loss of it either. On the contrary, filing a Chapter 7 bankruptcy will slow down the foreclosure process and let you stay in your home a little longer.

Filing a Chapter 13 bankruptcy may help you keep your home because it offers an opportunity to catch up on your arrears (the amount of money you are behind) and a Chapter 13 also offers options in dealing with second mortgages and homeowner associations.

When your phone stops ringing off the hook, that is a huge relief! What does it mean though? The truthful answer is "I don't know." It's impossible to know why creditors stop calling with any degree of accuracy. Sometimes they go on to other debts and start calling those people - a fresh list so to speak. Sometimes, they stop calling because they are ready to file a lawsuit and the case has been sent to their attorney. Suing you is not an abusive tactic although it might feel like one. Creditors have the right to go to court to try and collect money that is owed to them.

You shouldn't be terrified of a lawsuit. A lawsuit is nothing more than a legal process by which the creditor has to prove you owe them money and that they are entitled to collect it. You have rights in this legal process also. You have to the right to defend yourself if you don't think you owe the money. Often I see lawsuits filed that don't comply with the local evidence rules for filing lawsuits. Creditors often choose lawsuits as a last resort because of the expenses involved. Defending a lawsuit is expensive also. If you try to do it yourself, you almost always get into trouble because the credit company has a lawyer and they know the rules of the court better than you may. When more than one credit card company sues you, the option of defending lawsuits gets expensive and there's no guarantee that you will win. Ignoring a lawsuit is NEVER a good option. That always results in a final judgment against you that the creditor can enforce in other ways.

A better option is usually (but not always) to file for bankruptcy protection under Chapter 7 or Chapter 13 and start over again. We can help you look through all your options and decide on what's best for you in your particular situation.