Articles Posted in Chapter 7 Bankruptcy

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house shopping cart.jpgIt will take less time than you think to qualify to buy a home after bankruptcy. I generally advise my Florida clients that they will likely qualify within 2-5 years.

Where do these numbers come from exactly? FHA and HUD regulations are readily available online.

If you have filed a Chapter 7 bankruptcy, HUD Guideline 4155.1 : 4.C.2.g provides: A Chapter 7 bankruptcy does not disqualify a borrower from obtaining an FHA-insured mortgage if at least two years have elapsed since the date of the discharge of the bankruptcy.

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car title.jpg This debtor in South Florida recently lost his free and clear car in bankruptcy (actually the debtor was allowed to pay for the one-half interest in a Chapter 13 so it wasn’t quite as bad as it initially appears). Joint ownership is getting murkier and legal advise is definitely needed to preserve vehicles, money in bank accounts and even real property. Other bankruptcy cases in South Florida have recently attacked the “bare legal title” concept. These situations often arise when debtors share bank accounts, vehicles or even real property with parents, children or other relatives. Generally, we can show that the debtor held bare legal title only for probate or other purposes and the property is not subject to turnover by the bankruptcy court. However, the law in this area is getting rather murky. The facts in this case were as follows: a vehicle purchased by a debtor’s mother, but titled in the name of the debtor and his mother, and the debtor paid the insurance and maintenance. In re Fletcher, 2012 WL 2062394 (Bankr. S.D. Fla., March 6, 2012).

Under Florida law, when a person’s name appears on title to property, a rebuttable presumption arises in bankruptcy that the person has a beneficial interest in the property, although that interest may be an equal interest or a factional share. The burden then shifts to the debtor to prove by competent, clear, and compelling evidence she does not hold a beneficial interest in the property. In re Kirk, 381 B.R. 800 (Bankr. M.D. Fla. 2007).

Thus, here, although the debtor’s mother supplied the funds to purchase a motor vehicle, the debtor held a beneficial interest in the vehicle, and the vehicle was subject to turnover to the Chapter 7 trustee, where the vehicle was titled in the name of the debtor and the debtor’s mother, and the debtor paid for the insurance on, and the maintenance of, the vehicle.

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Many people think it is advantageous to only list certain creditors in their bankruptcy. This is not permissible in a bankruptcy because all creditors must be listed. You cannot favor one creditor over another. However, you can always voluntarily pay a creditor back after a bankruptcy if you wish.

Besides the creditors have their own subscription system with a third party that monitors PACER filings where they will generally learn of a client’s bankruptcy filing even if not listed. Moreover, if the bankruptcy is an asset case, by not listing the creditor, you’ve actually cheated them of monies they would have received in the bankruptcy.

You only become legally obligated to repay a creditor after filing a Chapter 7 bankruptcy if you sign and file a Reaffirmation Agreement with that creditor. A Reaffirmation Agreement reaffirms the debt and sometimes can be advantageous to the debtor if he wants to retain an asset but can’t pay for it outright and in full.

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ch 7.jpgMany more bankrupt debtors will be able to keep their house in a Chapter 7 now!

In a surprising decision by a court of appeals not noted for its sympathy for debtors’ positions, the Eleventh Circuit Court of Appeals, held in a unanimous decision that a Chapter 7 debtor may strip off a second mortgage. Prior to this O’Neal decision on May 11, 2012, debtors could only do this in a Chapter 13 case. The Eleventh Circuit is the federal appellate court for the Middle District of Florida which includes the Tampabay area.

Twenty-three years earlier, the Court of Appeals had reached this conclusion in Matter of Folendore, 862 F.2d 1537 (11th Cir. 1989), and the present court reasoned that the decision in Folendore survived the Supreme Court’s decision in Dewsnup v. Timm, 502 U.S. 410, 112 S.Ct. 773, 116 L.Ed.2d 903 (1992), which held that a Chapter 7 debtor may not cram down an undersecured claim to the value of the collateral. Here, the Court of Appeals reasoned, the creditor’s junior mortgage lien was both allowed under Code § 502 and wholly unsecured under § 506(a), and the lien was therefore voidable under the plain language of § 506(d). In re McNeal, Case No. 11-11352 (11th Cir., May 11, 2012).

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mousetrap.jpgOur Tampa, Florida bankruptcy law firm is small enough that we are able to help time our clients’ bankruptcy case for maximum results. Without proper timing, a bankruptcy can feel more like a trap than a remedy for financial ills. We are often able to save our clients several hundred dollars a month by simply correctly timing their case. A high volume mill firm won’t do this, their business model is based upon touching their clients’ files a minimum number of times and getting it filed asap.

However, the timing can be critical. Both in terms of assets that our clients can keep and the type of case or relief they qualify for. Most of our clients have something to lose. Our goal is to help ensure they come out ahead when their bankruptcy is filed.

Simple things to keep in mind. It is not wise to file a bankruptcy if you anticipate large expenses in the future, such as an upcoming surgery where there could be uninsured medical costs. It will be another 8 years before you can file Chapter 7 again so choose your timing wisely.

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chained to house.jpgMany bankruptcy debtors in Florida are understandably confused when they surrender their home in the bankruptcy, but are still receiving various dunning letters.

First, it is important to understand that the Bankruptcy Code does not have a mechanism in place to provide for the actual transfer of the real estate to the mortgage company, at least not in a lien theory state like Florida. So in order for the home ownership to transfer legally to the mortgage company, one of three things must occur; 1) a foreclosure sale; 2) a short sale; 3) a deed in lieu is signed by the debtor and accepted by the mortgage company; or 4) a quit claim to another party which is recorded.

So a homeowner may still receive letters and remain liable for certain things even after a bankruptcy is filed:

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1099c.jpgCreditors are busily sending out more 1099C’s then ever before according to a story by Jeremy Campbell of Channel 13 in Tampa, Florida this week. The news story “How the IRS taxes debt” explains that debt settlements while good, come with a penalty. Consumers are taxed on the forgiven debt sometimes months or years after the settlement. More than 6 million consumers are expected to receive 1099C’s this year, double last year.

One important point that the story did not address. Cancelled debt is not taxed in a bankruptcy. Just saying.

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pros_cons.gifI often sit with my clients in Tampa, Florida and perform a simple test: I make two columns on a piece of paper and list the pros and cons of filing bankruptcy versus trying to settle their debt.

More often than not, the bankruptcy column has many more pros, while the debt settlement column has more cons. For instance, in a Chapter 13, the monthly payment is usually much less. In a Chapter 7, the monthly payment is zero if there is no disposable income.

Debt settlement on the other hand usually requires the client have lump sum amounts available to offer to get any kind of substantial reduction. So they have to save up. The client has to reach satisfactory agreements with each creditor, or they still have leftover debt. Finally, in debt settlements the cancelled debt is taxable by the IRS. Not so in bankruptcy.

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price v value.jpgQuotation of the Day:

“The fundamental issue is that law schools are producing people who are not capable of being counselors. They are lawyers in the sense that they have law degrees, but they aren’t ready to be a provider of services.” Jeffrey W. Carr, General Counsel.

At my Tampa, Florida law firm we pride ourselves in our abilities to counsel clients as to their options and help make decisions that may impact the rest of their lives. We don’t take that responsibility lightly. We don’t just file bankruptcy for everyone who contacts us. It is not one size fits all. We don’t mandate that our bankruptcy clients file according to our schedule when simple timing and planning achieves a much better result. We don’t suggest every client defend their foreclosure or maintain a scorched earth policy. We are able to advise our clients regarding both bankruptcy and foreclosure or civil defense. I have 20 years legal experience in areas of bankruptcy and civil litigation (including foreclosure defense).

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If you are like most Florida consumers overloaded with debt, by not considering bankruptcy, you are continuing to just throw money away on debt servicing. Once you get behind, it can be nearly impossible to catch up especially now with the costs of living rising higher than wage increases. You have options rather than see your money continue to go down the drain: speak with a bankruptcy attorney. Quit delaying. Make a decision now. Bankruptcy may or may not be the answer. But you owe it to your family and yourself to find out if it is.

debt whirlpool.jpgNationwide bankruptcies by consumers declined approximately 10% last year. Is this a sign the economy is improving? In part perhaps. But mostly, it may be from indecision, and the inability to pay up to $2,000 to file bankruptcy. The debt is still there and getting bigger in most cases.

The general need for bankruptcy is still present, but the financial ability of clients to pay the fees has decreased. The availability for credit is diminished. In the past, as long as you were breathing, you were able to secure a car loan and probably even a home loan. Not anymore. Costs of food and other essentials have skyrocketed leaving less disposable income. The availability of funds to pay one-time fees for a bankruptcy attorney or other unexpected expenses is non-existent for some clients.

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