Chapter 13 Bankruptcy

Published on: June 22, 2017

Who Determines Household Size for Filing Bankruptcy In Florida?

The word “household” appears in over a dozen sections of the Bankruptcy Code, but it is not defined in the Code. Household income and size are extremely important in bankruptcy and determine whether someone qualifies for a Chapter 7 or the length and amount of a plan payment in a Chapter 13. A debtor’s median income is determined by their family size.

In a Chapter 7, a bankruptcy debtor’s above – or below – median status determines whether the debtor is subject to the means test.

In a Chapter 13, a bankruptcy debtor’s status as above – or below median determines whether the debtor’s maximum plan term is three or five years. It also determines whether the debtor’s expenses, for the purpose of calculating the debtor’s projected disposable income, are based on the means test or Schedule J.

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Published on: June 8, 2017

What Should a Mortgage Company Do During and Following a Bankruptcy?

By Christie D. Arkovich, P.A.

In a perfect world, a mortgage creditor should:

Timely file accurate proofs of claim for prepetition arrearage;
Properly calculate postpetition PITI payment;

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Published on: June 5, 2017

Non-Eligible Foreign Medical School Debt is Discharged in Bankruptcy in Florida!

By Christie D. Arkovich, P.A.

One of our most successful cases this month was the discharge of private student loans for our client who attended a Caribbean medical school. The key was that the foreign medical school was not listed on the Federal Schools Codes List as being eligible for federal funding. That particular fact allowed us to obtain a full discharge of several hundred thousand dollars in private student loans. The loans were not “qualified educational loans” as that term is defined by the Internal Revenue Code and therefore were dischargeable under Section 523(a)(8) in an adversary proceeding.

This case, In re Lysiuk, Case No. 6:16-ap-00124-CCJ is available here. It was decided by Bankruptcy Judge Cynthia Jackson out of Orlando, Florida.

This case was not brought as a typical undue hardship. I felt it would be exceedingly difficult to prove under the existing Bruner Standard that our client met the burden to discharge his loans based upon hardship. While he was only making $10/hour when we filed the case, he was potentially capable of much more (despite being unable to pass the medical boards) and was young and healthy. So instead we chose to go the route of a more technical argument that was gaining ground in the United States but was still an issue of first impression in Florida.

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Published on: June 4, 2017

How Important is it to Complete Bankruptcy Schedules and Statement of Financial Affairs Accurately?

By Christie D. Arkovich, P.A.

It is very important to correctly reflect the assets of your bankruptcy estate and your intentions as well as meet all the other requirements to properly file a bankruptcy. Documents that appear thorough, accurate and complete when filed, tend to receive far less scrutiny. When in doubt, disclose, disclose and disclose. If the bankruptcy trustee believes a debtor, or even worse, debtor’s counsel, has not fully and truthfully disclosed all of the requested information, that trustee will question the debtor endlessly, and will also request documents from the debtor to prove the information in the petition. It’s important to hire competent and experienced bankruptcy counsel who has a good relationship of trust with the Chapter 7 and 13 trustees for this reason. Proper preparation of a bankruptcy petition is one of the most important things a debtor and debtor’s counsel can do:

It ensures a quick and smooth 341 examination;
The more complete the documentation is, the less questions a trustee needs to ask;

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Published on: May 30, 2017

Bankruptcy and Child Support Obligations

By Christie D. Arkovich, P.A.

According to the US Census Bureau, and their latest full year of researched data on child support payments (2007), of the $34 billion dollars in child support that was owed, nearly 62% of it was reported as received by the end of the year. What does that tell us? Well, it means that the United States Family Court system puts an extremely high priority and value on a parent’s child support obligation. This is a good thing, but if you believe that bankruptcy absolves your child support obligations, then this might be a sobering moment for you. Let me explain what happens with child support during bankruptcy.

Domestic Support Obligation

Child support is classified as a Domestic Support Obligation (DSO), and is therefore not protected under the umbrella of bankruptcy; it is referred to as a non-dischargeable debt. This applies to past, present, and future support payments. In addition, the “automatic stay” technique cannot halt or delay the collection efforts of DSOs. Nationally, you will find the same regulations, even though different jurisdictions have their own terminology for it.

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Published on: May 22, 2017

Consumer Bankruptcy and Tax Debt – How to Discharge your Federal Tax Debt

By Christie D. Arkovich, P.A.

Bankruptcy enables you to write off income taxes more than three-years old. However, bankruptcy cannot get rid of all back taxes. There are many qualifications and stipulations regarding what taxes you can and cannot write off under bankruptcy. Our Florida bankruptcy clients are often able to discharge more taxes than they previously thought – see our website or contact us for a free consultation.

Federal and State

Because there are two different types of income tax: state and federal. The specific bankruptcy guidelines between state and the federal government vary as well.

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Published on: May 17, 2017

Do Married Couples Have to File Bankruptcy Together?

By Christie D. Arkovich, P.A.

The bankruptcy laws do not require married couples to file bankruptcy together. This is one of those things that people do because they just assume they have no choice, and you can bet that one, two, or five knowledgeable people (none of them bankruptcy lawyers) told them they absolutely had to file jointly. If you are going to declare bankruptcy, and you are married, then several circumstances dictate the outcome of your filing.

When One Spouse Has Much Better Credit Than the Other

Credit ratings are as unique as fingerprints, so the odds are good that either you or your spouse will have a better credit rating. If the difference is quite a bit, then it might be a good idea to file the bankruptcy under that person’s name only. However, you can only write off debts under that bankruptcy if the debt account is under that person’s name individually or jointly. So, just for example, if your spouse has old medical bills (in their name only, from before you married them) that would be eligible for discharge under a bankruptcy, the only way to write those debts off is for either them to file bankruptcy alone or jointly with you. Therefore, you alone cannot write those debts off, because your name is not connected to them in any way. In most cases that I handle, married couples file together, simply because the majority of their debts are jointly held, and thus they want to fix both of their credit ratings and protect their jointly held assets.

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Published on: May 15, 2017

Dispelling the Myth of Losing Everything by Declaring Bankruptcy

By Christie D. Arkovich, P.A.

Personal Property

Bankruptcy is a way for you to actually keep most of your personal assets and say goodbye to the creditors and debt collectors. The truth is that debt collectors cannot touch MANY of your assets when you declare bankruptcy, most are protected. The magic of this protection is exemption. Yes, some assets are exempt from seizure under the protection of the local bankruptcy laws. Now, the keyword in that last sentence was “local”. The bankruptcy exemption laws differ from jurisdiction to jurisdiction, so that means an asset exempt in Dallas might not be in New York; it all depends on the local laws. Sound complicated? Well, it can be, but that is even more reason to retain a law firm that specializes in your local bankruptcy laws. In Florida, the state law exemptions can be found in Florida Statutes Section 222. However, if you have moved to Florida within the past two years, you may instead be governed by the State you moved from or the federal exemptions. It is important to use the correct exemptions or you could waive your right to keep your personal property, vehicles or even your home. To understand the exemption process, it helps to know what type of debt you have. In bankruptcy, there are two types of debt: secured and unsecured.

Secured Debt

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Published on: March 16, 2017

How to Keep Your Home When Your Loan Mod is Denied: File Chapter 13 Bankruptcy.

By Christie D. Arkovich, P.A.

With the property market continuing to improve in Florida, we are seeing more lenders delay and place obstacles in front of borrowers trying to modify their home mortgage in an effort to keep their homes. There are certain court rules and CFPB rules regarding modification that an attorney may be able to help ensure that the lender properly reviews a loan mod package. When that fails, an appeal or online complaint to the CFPB may help. When that fails, a very good way to make a lender accept your mortgage payments, is to file a Chapter 13.

First there is a modification process available in many bankruptcy courts, including the Middle District Tampa Division that works pretty well. There is a good faith requirement that does not exist in state court. So some mods that may be denied outside of court, or in the state court, may actually be approved in a Chapter 13.

A relatively foolproof way to keep a home is also to use a Chapter 13 plan to catch up on the missed payments. This may be really good for a borrower who had a prior loan modification (with principal reduction) that they fell behind. A Chapter 13 should be able to revive the terms of the favorable loan mod. The catch is that the total arrearage (missed payments, and any foreclosure fees/costs) must be paid within no more than five years, while at the same time the regular monthly payment is also made. A mortgage company cannot object to a plan like this that provides “adequate protection” to the lender. Many people cannot afford this, but an easy way to see if you can is to check your last mortgage statement for the balance due (not the principal amount). If it says $20,000, then divide $20,000 by 60 months which is $333. So if your mortgage payment is $1,500, you would add $333 to catch up and another 10% for the trustee’s fee for a monthly total of $1,983. If you can afford this, then your mortgage company must accept it — even though they may really want to foreclose.

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Published on: October 6, 2016

Florida as a Bankruptcy Debtors’ Haven? Not Always… What it Means to Surrender a Home in Bankruptcy.

By Christie D. Arkovich, P.A.

Florida has a history of being unusually lenient when it comes to debtor protections in bankruptcy. For one, we’ve opted out of the federal exemptions and have our own. The homestead protections are some of the best in the country. In some ways Florida’s exemptions are good, in others they are outdated. For instance if a debtor owns a home they are allowed only $1,000 in personal property exemptions (plus other retirement account and homestead exemptions etc). A middle class family filing bankruptcy when they are overwhelmed with bills, have personal belongings that total more than $1,000 particularly when they own a home. This amount is outdated and not reflective of the times.

A recent switcharoo regarding a debtor’s homestead has caught many debtors unaware. For the past several years, many debtors’ attorneys advised their clients to waive their homestead rights and instead select an option on their Statement of Financial Affairs (“SOFA”) to “surrender” their home even though they continued to live there. Some of those clients wanted to defend a pending foreclosure or obtain a loan modification. Some ran into trouble years later and then wanted to defend a foreclosure. Perhaps a client ran into a mortgage loan servicer with poor recording skills that failed to correctly apply their payments and had to defend a foreclosure that should never have taken place. Selecting “surrender” on the SOFA can have long reaching consequences because it can forever bar a client from challenging a foreclosure even years after the fact due to a new interpretation of what the term “surrender” should mean.

On October 4, 2016, the Eleventh Circuit Court of Appeals ruled that chapter 7 debtors who file a statement of intention to surrender real property in bankruptcy cannot later contest a foreclosure action, and bankruptcy courts have broad power and authority to sanction violations. Failla v. CitiBank, N.A., case no. 15-15626 (11th Cir. October 4, 2016). While Failla is a Chapter 7 case, there is a strong probability it will be argued in a Chapter 13 as well.

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