Fort Lauderdale Bankruptcy Lawyer Blog

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.

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.

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.

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 bankruptcy is mentioned, many automatically assume that the rising number of bankruptcies can be blamed on poor personal money management and over-spending with credit cards. However, statistically and from what I see in real life, the major bankruptcy driver for many tends to be uninsured medical costs for health care or as a result of an unexpected illness or injury.

Another contributing factor that I've experienced first-hand is that medical providers are becoming increasingly inflexible with their co-payments and other accounts receivables. In the past few years, the medical industry has started to use aggressive collection agencies on minor amounts ($100 or less). Once collection fees are added, a minor debt can turn into several hundred dollars and countless phone calls, letters and other forms of abuse. To those facing chronic illness or serious health concerns, it can be debilitating. When you're ill or in poor health, I strongly feel that your first and only priority is to get better.

The good news is that a Chapter 7 bankruptcy can eliminate your medical debt completely. Medical bills are a type of unsecured debt, meaning none of your property was pledged as collateral for it. A Chapter 7 Bankruptcy can have all medical bills: including hospital or doctor charges, dental bills, lab bills, and diagnostic charges wiped out. Consulting with a bankruptcy attorney is your first step in finding out if you can eliminate your medical debt through bankruptcy.

A common reason that most people delay finding out about bankruptcy is a fear that they can't afford the process. You don't have enough money to pay your bills. You're drowning in debt. The mortgage is behind six months or more - how can you afford a bankruptcy?

The better question is: "How can you afford not to?" Although there are some costs associated with filing for bankruptcy, remaining in debt will cost you far more in interest, late fees, stress-related health issues and overall quality-of-life in the end.

If the total cost of filing a Chapter 7 bankruptcy is less than $2,300, what you need to ask yourself is this: If my creditors offered me a deal to wipe out all my credit debt right now for less than $2,300 - would I take it? Most people would jump at it! Filing a Chapter 7 bankruptcy is creating that deal for yourself and forcing the creditors to take the deal -- No more begging them to give you a break. But lets take a look at some of the costs:

Court Costs
There are costs involved with filing for bankruptcy. First there is a fee that must be paid to the court for filing the case. That fee is currently $299 for a Chapter 7 and $274 for a Chapter 13. There are costs associated with preparing the petition such as pulling all three credit reports, mailings, copies, and administrative costs for maintaining your case file. Those costs are $150. These are normally the only costs associated with filing a bankruptcy case and fortunately, they're both pretty manageable. The next cost are attorney fees.

Attorney Costs
The legal fees for hiring an attorney can vary greatly by firm, city or state. The average cost for a Chapter 7 case can range between $1,000 and $2,500. Before you automatically think that you can't afford those fees, think about what you could lose in a bankruptcy if you don't know the law and how it may affect your assets (if any). I was in a 341 meeting and saw a woman who filed her own case lose a $9,000 car (her only transportation) because it was paid off and she had no idea that it would become property of the bankruptcy estate and she would lose it. She lost it. Having the proper legal representation may not have saved the car but at least she would have known it was at risk and made a different decision or she could have made arrangements to keep it.

Hiring An Attorney versus Doing It Yourself
As stated above, you may file for bankruptcy in Coral Springs or Fort Lauderdale and complete the process yourself. You don't have to hire an attorney. But, hiring a bankruptcy attorney can often make the process much smoother and less scary.

An experienced bankruptcy attorney will manage the paperwork, trustee paperwork and court filings, as well as provide you with the resources you need to complete your debtor education courses. A good bankruptcy attorney is your representative and should convey a sense of compassion and flexibility while managing your case.

Your attorney should be able to tell you within a certain amount of probability what property (if any) is at risk and how to prepare for it. It's mush easier to deal with an asset case (a case that has assets which the trustee can liquidate) if you know what they are and how to keep them if you'd like. It's also easier to get a fresh start if you have someone that knows what exemption laws are available to help you keep your assets by protecting them. But how do you pay for it all??

Payment Plans
The most common way that people get out of debt through bankruptcy is to hire an attorney that accepts installment payments. Many people stop paying their credit cards and apply those payments towards the bankruptcy filing costs. A Chapter 7 bankruptcy case must be paid in full prior to filing but a Chapter 13 case can have some of the fees rolled into the payment plan.

At Casas & Mayor, P.A., we want everyone that is in need of a fresh start and sleep to find both. We offer very flexible payment plans that are crafted around your budget and needs. We don't believe that anyone should remain shackled to debt because of the cost of filing. During your free consultation, we will discuss all fees, costs and how to pay for them. You'll be surprised how flexible our payment terms are and pleased to know that you can start all over again! Find out today at either our Coral Springs or Davie location. You have nothing to lose but the debt!

A Chapter 7 bankruptcy does not disqualify you from qualifying for an FHA mortgage. In order to qulify, you must wait until two years after you receive your discharge. During those two years, you must re-establish good credit and demonstrate an ability to manage your financial affairs. Your credit score must also be a minimum of 620 by then. Additionally, the lender must document that the borrower's current situation indicates that the events that led to the bankruptcy are not likely to recur.

A Chapter 13 bankruptcy does not disqualify you from obtaining an FHA mortgage. In a Chapter 13, the lender must show that one year of the payout period under the bankruptcy has elapsed and your payment performance has been satisfactory (i.e., all required payments made on time). In addition, you must receive permission from the court to enter into the mortgage transaction.

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" »

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?" »