Fort Lauderdale Bankruptcy Lawyer Blog

Good news! In a Chapter 7 bankruptcy, Florida law protects the cash surrender value of life insurance policies and the proceeds of annuity contracts. Florida Statute 222.14 exempts (protects) from attachment, garnishment or any other legal process.

The important thing in any bankruptcy filing is to be 100% forthright about your assets and disclose them to the court in your petition. For many Florida residents that are considering a Chapter 7 or Chapter 13 bankrutpcy filing, the only significant assets that they have are retirement accounts, annuity contracts or the cash value of their life insurance policies. All of these assets are fully protected under Florida bankruptcy exemption law.

Continue reading "Pembroke Pines Bankruptcy Question: What Happens To The Cash Surrender Value Of My Life Insurance Policy Or My Annuity?" »

If you're like most people, you think income is only what you earn from a job or through a business venture. For the most part, that's true. In a Chapter 7 bankruptcy, what you earn from an employer or though your business is considered income for the means test, but bankruptcy law also recognizes any other regular contribution to your household as income.

What does that mean? Let's start with a bried look at what "current monthly income" is according to bankruptcy law.

The "current monthly income" received by the debtor means the average monthly income received over the six calendar months before filing the bankruptcy case. Monthly income includes regular contributions to household expenses from non-debtors and includes income from the debtor's spouse if the petition is a joint petition. For the purpose of the means test, social security income or certain payments made because the debtor is the victim of certain crimes [11 U.S.C. § 101(10A)] arenot included as income. But what is included as income that is often overlooked?

Any regular contributions to your household is considered income. This means all those cash deposits to your bank account from family members to help you make ends meet. Unemployment compensation is considered income. If you collect rent from someone, that is considered income (it's offset later in the petition but still considered income). Child support and domestic support is income. A general rule of thumb is to consider any source of money coming to you as income and talk to a Broward County bankrutpcy attorney on whether you need to include it on the means test or elsewhere on your petition.

As a Fort Lauderdale bankruptcy lawyer, many assume that I always recommend bankruptcy to prospective clients. Some of my best referrals come from people who schedule their free consultation and the facts of their case lead me to recommend other solutions.

One of the scenarios where bankruptcy might be avoided is if you have little or no assets that a creditor could take. Most people in this category are retired, have no wages that could be garnished (in Florida, a creditor can garnish your wages if they have a final judgment against you and other exemptions don't apply), and do not own a car or have income other than social security. That segment of the population is what we call "collection proof." They may get a judgment against them, but there is nothing a creditor could do to collect their money. I've had clients in this category choose bankruptcy not because they had to - but to stop the creditor harrassment and gain peace of mind again.

But what if you own some assets and/or have a job? Wages are an asset that a creditor can garnish in Florida with certain restrictions. For example, if you are a head of household, they cannot garnish your wages but you will have to file a Claim of Exemption with the court when you receive your notice of garnishment. If your creditor objects to your claim of exemption, then you will have to go to a hearing to prove that you are a head of household. If you are a non-head of household, Florida Statute 222.11(2)(c) allows creditors to garnish only 25% of your wages.

One asset many people overlook and creditors love to take are cars. For some reason, people are under the impression that a creditor cannot take your only car becasue you need it to go to work. WRONG. Creditors don't care if you can't get to work. They only care about getting their money and your car (whether there is a loan against it or not) is an asset that they can sell and recover something. The good news is that if your car is picked up by a creditor, you can get it back by filing a bankruptcy right away.

If you have a lot of assets such as cars, investment property, money in bank accounts, etc - these can legally be taken and sold to pay off your debt. In cases like these, a Chapter 7 or Chapter 13 bankruptcy is sometimes your best option.

Another point that I'm going to briefly address here. Retirement money, 401Ks, and pensions are off limits to creditors. They cannot touch them. You should not touch them either to pay off unsecured debt -- no matter how much creditors harass you or how attached you are to your credit score. If you have to choose between dipping into your retirement money or filing bankruptcy, the majority of the time you should file bankruptcy. Using your retirement money may buy you a few months of relief from your creditors but you're only buying time and not solving the problem. The saddest cases for me are the ones where people have gone through their entire 401K feeding creditors and THEN come in to file bankruptcy.

I'll repeat it again -- your 401K money is protected against creditors - they can't touch it. You shouldn't touch it either to pay credit debt.

When it comes to bankruptcy, every case is unique. One can always find both reasons to avoid bankruptcy and reasons to file. The internet is a great source of information and it's good to educate yourself on the laws, but the internet is like a blank piece of paper...it will hold whatever anyone puts on it - whether it's true or not - and you have no way of knowing whether what you're reading is correct. Your best option is to consult with a Broward County bankruptcy attorney and then make the best choice fror you.

This past week, the House Judiciary Subcommittee on Commercial and Administrative Law took the first steps in reversing language in the 2005 bankruptcy law related to private student loan debt by approving on a 6-3 party line vote H.R. 5043, the Private Student Loan Bankruptcy Fairness Act.

The proposed legislation will restore fairness in student lending by treating privately issued student loans in bankruptcy the same as other types of private debt. Under the bill, privately issued student loans will once again be dischargeable in bankruptcy.
To view a text of the legislation, click here.

The bill now goes before the full Judiciary Committee. Though time is short in this legislative session, we are hopeful that the bill will see full Committee action before the end of the year. Similar legislation has been introduced in the Senate (S. 3219) by Senators Durbin (D, IL), Whitehouse (D, RI) and Franken (D, MN). Call or write to your congressional representatives today to voice your support for this bill and for a bill to allow bankruptcy judges the right to cram down mortgages on primary residences.

Many people who I meet with to discuss their debt relief options have substantial student loan debt, both private and government-issued. The Judiciary Committee's action was the first step in restoring fairness to the bankruptcy process by eliminating private student loan debt.

If you'd like more information about this proposed change to the bankruptcy law and how it can benefit you, call or email today for a free consultation! Keep checking back for updates on this bill's passage!

A little known foreclosure alternative program by Fannie Mae became available on August 1, 2010. The Home Affordable Foreclosure Alternatices ("HAFA") program provides options to homeowners so they can avoid foreclosure. It also provides incentives to lenders for them to either approve short sales or accept a deed-in-lieu of foreclosure.

Under the program, homeowners will receive $3,000 to help them relocate to another residence. This money is received at the closing if it's a short sale or within 5 days of the lender accepting the deed-in-lieu of foreclosure. Part of the agreement is that the homeowner must vacate the property and leave it in acceptable condition.

To be eligible for HAFA, owners must not qualify for a HAMP loan modification ("Home Affordable Modification Program") or they were approved for a HAMP modification but missed two consecutive payments under HAMP.

There are other alternatives to saving your home also. In a Chapter 13 bankruptcy, you can force the bank to accept any arrearages through the court's payment plan. You can also eliminate a second mortgage through a Fort Lauderdale Chapter 13 bankruptcy filing if you owe less on your first mortgage than what your home is presently worth. Talk to a Broward County bankrutpcy attorney for more information on this option.

Continue reading "Broward County Foreclosure Alternatives: Fannie Mae Announces HAFA Program" »

Since the beginning of the housing crisis, Florida has consistenly held one of the nation's highest foreclosure rates. In response, the Florida Supreme Court Administrative Order requiring mediation for mortgage foreclosures on homestead properties, Fannie Mae recently issued a new servicing guideline regarding pre-foreclosure mediation for mortgage loans in Florida.

Under the new Fannie Mae guidelines, foreclosure attorneys for the bank must hold a mediation session before filing foreclosure on a property.

The new policy will apply to all mortgages held in Fannie Mae's portfolio. This will include loans that are part of a mortgage-backed securities (MBS) pool that have the special servicing option, or a shared-risk MBS pool for which Fannie Mae markets the acquired property.

As tax season gets closer, you need to consider how filing a Chapter 7 bankruptcy petition in the latter part of the year will affect your tax refund for the following year.

The bankruptcy trustee is entitled to claim a pro-rated portion of your tax refund. For example, if you file a case in October, 2010 and then receive a tax refund of $6000 when you file your tax return in 2011, the trustee can claim 10 months of that return. If you divide $6000 by 12 months, you get $500 per month. Multiply that by 10 months, and you would have to turn over $5000 to the trustee whenever you get your refund.

Earned Income Credit ("EIC"), however, is exempt from attachment, garnishment or other liens resulting from a bankruptcy proceeding or other legal process (Florida Statute 222.25). The trustee is not entitled to any portion of the return that is determined to be Earned Income Credit. This protection applies regardless of whether the EIC is received or commingled with your other financial accounts as long as it is traceable. The only exception to this is when a debt is because of child or spousal support obligations.

Under Florida's Constitution, Article 10, Section 4(a)(2), if you are filing a Fort Lauderdale Chapter 7 bankruptcy, you are entitled to exempt (protect) up to $1,000 of your personal property from creditors. The $1,000 can be used to protect anything of value that you have, including cars. You can spread it out over several items or use it all on one item - the choice is yours.

Florida Statute 222.25(4) allows you to claim an additional $4,000 in personal property as exempt if you are not claiming or receiving the benefit of homestead exemption. What that means is that if you own your home and are living in it at the time you file, you may be receiving the benefit of your homestead exemption even if you don't claim the home as exempt in your bankruptcy filing. The issue of whether you are "receiving" the benefit of homestead exemption is a sticky one that is best left in the care of a lawyer if you are going to challenge whether you are receiving the benefit and try for the extra $4,000.

In the simplest of terms, the additional $4,000 is primarily used by those that are renting their residence or otherwise not a homeowner. Some exceptions may apply to mobile home owners. Contact a bankruptcy lawyer for more information.

In the course of my work as a Fort Lauderdale bankruptcy attorney, I am often asked by potential clients what the difference is between debt settlement and bankruptcy. For those who qualify for Chapter 7 (which requires no repayment of debts but the discharge of all unsecured debt), the difference is between making monthly payments to a debt settlement company or discharging all of your debts with no monthly payments. For most people, getting rid of all your debt for the price of the bankruptcy makes the most economic sense - especially when you realize that the impact to your credit score is the same and sometimes even better with a bankrutpcy.

But what about those who don't qualify for Chapter 7? Their only bankruptcy option is to file a Chapter 13, which is very similar to a debt settlement plan but better in the long run.

In a debt settlement arrangement, the credit card companies still hold all the cards. They decide if they will enter into a settlement. They decide how much they will settle for. They decide whether they will stop charging interest and late fees while you're in the plan. And the plain truth is that some of the major banks will not enter into settlement agreements. So if you have 10 credit cards and only 5 settle, you still have to deal with the other 5 companies or possibly get sued by them for the balance. Most of the debt settlement companies forget to mention these things.

In a Chapter 13 repayment plan, the amount you have to repay will almost always be less than what you would pay in a debt settlement plan. Depending on various factors - principally your income and expenses - you can get a discharge of your debts in a Chapter 13 case and only repay anywhere from 0% to 100% of your outstanding debt on the day you file.

Why is it better to repay debt through a Chapter 13 instead of doing debt settlement? First, you set the repayment plan according to your disposable monthly income. Second, all of the credit card companies have to accept what they get paid and the balance is discharged at the end of the payment plan. Third, you do not pay interest or late fees while in the plan - your debt does not increase. It kinda freezes on the day you file. Also, in Chapter 13, your repayment plan will be for either 36 months or 60 months, depending on your Means Test results. This can result in significantly less paid out over time than one would have to pay in a debt settlement arrangement.

So even if you have too much income to qualify for a Chapter 7 case, but are having trouble managing the monthly payments on credit cards, you should consult with a Broward County bankruptcy attorney about the possibility of filing a Chapter 13 case. You may be surprised at how you can pay off your unsecured debts with affordable monthly payments in less than 5 years!

Real estate values have been steadily dropping over the past 4 to 5 years. This economic crisis has resulted in many homes being worth less than what is owed on the mortgages. For some homeowners, this can be an opportunity to eliminate a second mortgage through a Fort Lauderdale Chapter 13 bankruptcy filing. One of the most common questions I am asked as a South Broward bankruptcy attorney is: "How do I get rid of my second mortgage?"

In order to eliminate a second mortgage through a Chapter 13 bankruptcy, you must owe more on your first mortgage than what your house is worth. That is not a difficult feat to accomplish in today's depressed real estate market. If you owe more on your first mortgage than what your house is worth, then you can ask the bankruptcy court to make a judicial determination that your second mortgage is not secured by your home since there is no equity "securing" the second mortgage.

Once that determination is made, then your second mortgage becomes an unsecured debt and moves over to the pile of unsecured creditors hoping to get some money from your monthly payments to the court. When you are done making your plan payments, any unsecured debts that didn't get paid in full are discharged (wiped out) by the court.

Although I've tried to explain the process in a simple matter, it is not something that you should try on your own.

Continue reading "My Hollywood Florida Home Is Under Water! How Can A Chapter 13 Bankruptcy Eliminate My Second Mortgage?" »

Most people are aware that if you are a head of household in Florida and file Chapter 7 bankruptcy, your wages for the past six months are 100% exempt from your creditors under Florida Statute 222.11. But what if you are a single person with no dependents?

Under Florida Statute 222.11(2)(c), non-head-of-household debtors may exempt 75% of wages that were earned in the six months before the bankruptcy filing.

F.S. 222.11 (2)(c) states: Disposable earnings of a person other than a head of family may not be attached or garnished in excess of the amount allowed under the Consumer Credit Protection Act, 15 U.S.C. s. 1673. A further reading of F.S. 222.11(3) shows that these wages deposited into a bank that are received in the six months before filing are protected.

Surprisingly, this section of the law is not as well known and even though it's pretty clearly stated that non-head of household bankruptcy filers can exempt 75% of their wages, this law was challenged by a local trustee. In Re Weinshank, U.S. Bankruptcy Court Case No. 08-25508-PGH was decided by Judge Hyman on May 28, 2009.

The facts were simple enough: Mr. Weinshank was a single man with no dependents who filed for Chapter 7 bankruptcy protection. He had $4,500 in the bank at the time and claimed 75% of that money exempt under F.S. 222.11(2)(c). The trustee disagreed that he was entitled to any Florida exemption for the money because he was not a head of household. The question before the Court was whether Mr. Weinshank could apply F.S. 222.11(2)(c) and (3) to exempt the money in his checking account.

Judge Hyman ruled in favor of Mr. Weinshank, specifically stating:

"Based upon a plain reading of Fla. Stat. § 222.11 and the undisputed facts of this matter, the Court finds that even though the Debtor is not a head of family, he may exempt funds deposited into his Washington Mutual checking account within six months of his bankruptcy filing that can be traced and properly identified as earnings."

If you are thinking about filing Chapter 7 bankruptcy in Broward County, I offer a free consultation to answer your questions and discuss your options. Contact my office today!