Monthly Archives: April 2014

How a Chapter 13 Bankruptcy Will Affect Your Property

One of the provisions in Chapter 13 of the bankruptcy code allows a bankruptcy filer to cure a debt by surrendering property. And right now many filer are more than willing to part with their property due to declining house values, making Chapter 13 only second to Chapter 7 in the number of bankruptcy filings nationwide.

 

If you have filed for a Chapter 13 bankruptcy and decided you no longer want your home, you had better make sure the property transfer or foreclosure happens quickly, otherwise you will run into some problems.

 

Just because you’ve moved out you think your problems are over? Think again.

 

You are still responsible for vacant property – So you have filed for bankruptcy, moved out and notified the mortgage holder you are surrendering your property. Guess what? Until the title is transferred the property is still technically titled in your name.

 

Until then you can still be held responsible for those pesky homeowners or condominium association fees, any fines imposed by the city or town it is located in for failure to maintain the property and even any damage claims as a result of injuries or accidents that occur on the property.

 

If your bank is taking forever on your foreclosure, those pesky fines, fees and damages will just accumulate and put you in debt all over again. While it is true that the lender does have responsibilities for vacant property and some cities and towns have ordinances requiring banks to check up on and maintain foreclosed properties, it is not the same all over the US.

 

Transferring property to the bank through via Chapter 13

 

This is a problem you want to nip in the bud. There are some things you can do to make sure it doesn’t happen.

 

  • You can include the surrender and transfer of ownership in the property to the lender in the terms of your Chapter 13 plan. You have to state that the ownership of the property will become legally effective in the bank at plan confirmation.

 

  • Try to get the court to go along with this and include appropriate transfer language in the confirmation order so that no deed will be necessary.

 

  • Record the court order in the official property records office of the area where the property is; don’t forget to include the legal description of the property and the name of the bank, just to hit it on the head that that is the right house.

 

Admittedly, this is still not a generally accepted method and some courts may allow it while others don’t.

 

Other options for getting rid of your property

 

If even with a Chapter 13 plan the bank still won’t take back the property then there are others things you can do to get rid of it.

 

For one you can negotiate a deed in lieu, short sale, or consent judgment of foreclosure. You can also lease the property and use the rent for maintenance, insurance, and city or homeowner’s fees.

 

You can also transfer the property by quitclaim deed, but remember that deeds should be recorded in the official property records. This must also be prepared and executed in the form required by the state, and most of all, this must be accepted by the new owner.

How to be Ready for a Bankruptcy Meeting

If you have opted to file for a Chapter 7 or a Chapter 13 bankruptcy, a meeting between you and the creditors (also called a 341 meeting) will be scheduled at least 21 days after you file your case but no later than 40 days after you file for bankruptcy.

 

The true purpose of a 341 meeting is to make sure you have fairly and honestly represented your assets, income and debts in your bankruptcy petition. As part of his or her job, the trustee will also try to determine any bankruptcy fraud and make sure your paperwork is accurate.

 

For a bit of trivia the name 341 comes from the section of the bankruptcy code that requires such a meeting. So, yes, it is provided for by law.

 

What you should know about the meeting

 

It doesn’t take place in a courtroom – the meeting is usually arranged in a regular room in the bankruptcy court.

 

There are usually few people in attendance – There will be no judge, by law judges are not allowed to attend 341 meetings, your Chapter 7 trustee will be there since he or she will be the one to conduct the meeting.

 

Your lawyer will be there to represent you, but you also have to be there.

 

Creditors will be formally invited to the meeting, but they usually neither attend nor send representatives. In the rare instances they will, it is usually to inquire about the whereabouts or condition of mortgaged property or anything covered by a secured loan.

 

Again it is important that you not miss this meeting; at best it will be rescheduled, at worst this may result in the dismissal of your case and you will have to re-file and pay the court filing fees again.

 

What to provide before the meeting

 

Prior to the meeting, you are required to send your trustee certain documents like tax returns, paystubs and mortgage statements so he or she can check them against the information in your bankruptcy petition. You might also be asked for a copy of your most recent federal tax return at least seven days prior to your meeting of creditors.

 

As to the meeting itself, you will be asked to present any photo ID and any ID with your Social Security number or any government document with the same for proper identification.

 

What questions will be asked during the meeting?

 

As it is the job of the trustee to make sure everything in your petition is in order, he or she might ask you:

 

  • Why you filed for bankruptcy
  • If you have sold or given away any property in the past few years
  • If your monthly expenses are necessary and reasonable
  • If you have reviewed your petition before it was filed
  • If you have listed all your assets and debts
  • If there has been any improvement in your finances since the filing

 

Meetings are rescheduled for any number of reasons, but usually to provide more information to the trustee, submit more required documents or amend some entries in your petition.

 

In all, the meeting should not last longer than 15 minutes. After that you will have just taken what is considered the first step in order to get your debts discharged.

Ways to Increase Your Credit Score After Bankruptcy

 

Don’t think of bankruptcy as the end of your “financial trustworthiness”. Even if you have filed for protection from your creditors and reached some form of agreement regarding your debts there are still some things you can do to save and even improve your credit rating.

 

Just remember that this is something you have to take seriously. A bankruptcy can remain reflected in your credit report for up to 10 years and your credit score will stay low until you have started building up your credit again.

 

So what should you do?

 

Do not close your accounts

 

Yes, it was your account that led to temptation and spending in the first place, but it would be a bad idea to throw the baby out with the bathwater, if you get the drift. Closing your accounts will only raise red flags with the company and make them think that you are no longer interested in settling your obligations or even that you’re preparing to make a run for it. Closing accounts will also reduce the amount of credit you have available to you.

 

Apply for a secured credit card

 

Get a card that will allow you to put as high a deposit as possible. You might think this is a bad idea, but if you have such a card the disposable balance the credit card will report to the credit bureaus will be equal your deposit and that will do good for your score. Just remember to buy little with that card at first, never get carried away. It also helps to pay off the small balance each month. Paying this will eventually get rid of the initial credit increase.

 

Pay your bills on time

 

Your payment history makes up roughly 35 percent of your credit score so one of the best ways to get your score up again is to make sure you always your bills on time. If it was bad memory that made you always late for payments, take drastic measures to make sure you know when the due date is. Go as far as to mark due dates on your calendar or PDA. You can also set up alerts with any handheld mobile device you always have with you. Many banks and creditors also offer services that allow you to set up your payments electronically, take advantage of this feature.

 

Constantly monitor your credit report

 

You can request yearly copies of your credit report, but better if you go over them every six months. Check the report and make sure all items that have been discharged in the bankruptcy are no longer there. Also keep any eye out for mistakes or inconsistencies.

 

If you see something that has to be disputed you should do this over certified mail as opposed to phone call, email or the company’s online service. Letters have to be encoded manually by a processor and this may help guarantee that your case gets to where it should.

 

Get a loan

 

Try not to do this until after a year or two after the bankruptcy. Whether it’s for a car, a house, education or anything else, also be sure that it is affordable so you can pay it off. Keep a lookout for loans with the lowest interest rates. Remember that once your credit score improves, any loan you get in the future may likely have a lower interest rate.

The Good and Bad of Filing a Chapter 20 bankruptcy

There is actually no Chapter 20 in the bankruptcy code, the Chapter 20 is the term used when someone files for a Chapter 13 bankruptcy just after getting a Chapter 7 discharge. This is done when the person filing bankruptcy, or his lawyer, feels either chapter is inadequate to provide relief to the filer.

 

First let’s see in a nutshell what each chapter provides.

 

Chapter 7 – This provides for a quick discharge of a bankruptcy filer’s debts, but also requires the filer to pay a lump sum to creditors to be able to keep secured property like a home or a vehicle, roughly equivalent to the item’s replacement value or reaffirm the debt and go on making payments as if a bankruptcy never occurred.

 

Dischargeable debts include credit card debt, mortgages, medical bills, vehicle loans, personal loans and even tax debts.

 

Chapter 13 – This allows a filer to pay a non-dischargeable debt or settle a delinquent mortgage or car loan by way of a payment plan that usually lasts several years.

 

Why people file for a Chapter 20

 

A Chapter 20 strategy allows consumers to be eligible for Chapter 13 relief if they cannot file for Chapter 13 directly because they do not fulfill some of the requirements.

 

Pros of a Chapter 20 strategy

 

It buys time. The most common reason for filing Chapter 20 is when people need more time to settle a delinquent mortgage or car loan. If your overall debt exceeds the limits specified under Chapter 13, you can file for Chapter 7 first, so when you subsequently file for Chapter 13, you will get more time to settle the debts or to pay non-dischargeable debts under Chapter 7.

 

A Chapter 20 filing can also protect your home while allowing you to pay off debts, specifically when people have a second or even third mortgage on their home. When a homeowner owes more on the first mortgage than the home is actually worth, Chapter 13 will let the second mortgage be removed to become an unsecured debt.

 

Cons of a Chapter 20 strategy

 

You have to be careful in proceeding with a Chapter 20 bankruptcy. Under law you cannot file for a Chapter 13 discharge four years after you have filed for a Chapter 20.

 

Some jurisdictions and judges also do not favor granting this type of bankruptcy, seeing it as a loophole already overexploited by opportunists; others cite the possible lack of good faith on the part of the debtor when it comes to this move.

 

Another known disadvantage to going for a Chapter 20 is that some states require the petitioner to first pass a Means Test. For example the in Colorado Bankruptcy Court the household size, income and expenses of the family of the filer has for to be examined six months before filing. So this has to have ample preparation. A debtor who does not pass the Means Test will be required to file chapter 13 directly, if eligible.

 

The strategy itself can also be used against a filer if a secured creditor can prove that the multiple filings were intended to hinder, delay or defraud them.

Discharging Debts in Bankruptcy

While filing for bankruptcy can give you a chance at new start by offer some relief from your debts, it will not apply to all of your obligations. With the different types of financing schemes being offered by lending institutions today, there are now a lot of types of “uses” for money, not to mention many more types of debts to be incurred.

 

If your financial situation is that bad and you are eyeing filing for bankruptcy as an option, you have to know what debts can be discharged by pursuing this course. Here are some of the common types of debts that can be discharged through bankruptcy.

1.    Credit card debt

 

Majority of Americans carry that little piece of plastic around with them all the time. It is easy to pull out and use, there is very little fuss except to sign the receipt and any transaction you make is a done deal. It doesn’t matter if you are buying coffee, groceries or even a car. This convenience and ease of use is the reason why credit card debt is the most common type of debt people have today. However, the good news is that bankruptcy usually eliminates all credit card debt so you can get the fresh start you need.

 

2.    Medical bills

 

Another common bill is the medical bill. Who hasn’t gotten sick or hasn’t been taken to the hospital for any medical emergency? Majority of people have been seriously ill at least once in their lives. And with today’s economy doctor’s rates don’t come cheap anymore, not to mention the whole lot of other items that find their way into the bill. Again, the good news is medical bills are also covered under bankruptcy.

 

3.    Mortgage debt

 

When you mortgage a house or any piece of property or land, you are offering that house, property or land as a guarantee so you can borrow money from any lending institution. This is often a risky move as people have lost homes and property taking on debts they thought they could pay but couldn’t. With the bankruptcy option, the outstanding mortgage debt, plus any default fees and other charges on top of your mortgage account, is discharged through bankruptcy once you relinquish the property.

 

4.    Vehicle Loans

 

These days private transport is a must for many individuals, and that’s why many people opt to get car loans. The bad news is not all who get loans can pay them, but the good news is that car loans are also covered for discharge if you file for bankruptcy. However, like the mortgage, the vehicle loan, plus any default fees and other charges, will only be discharged once you surrender the vehicle.

 

5.    Unpaid tax debts

 

Contrary to popular belief, some unpaid tax debts can be discharged under bankruptcy. However, some requirements in the bankruptcy code have to be met for this to happen.

 

6.    Personal Loans

 

Personal loans are those provided based on the signature of the borrower alone. Since this type of loan is unsecured, which means you did not have to put up property as a guarantee to pay it, you risk losing no property to lending institutions.

What Your Bankruptcy Lawyer Should Know First…and Fast

If you have made up your mind about bankruptcy then there is no more turning back. You have to commit to this path wholeheartedly. Success in filing for a bankruptcy means the difference between a fresh start or sinking even deeper into debt through re-filing due to false or obsolete information, even new expenses you have to pay to settle a fraud case.

What are the things your bankruptcy lawyer has to know?

 

Your real reason for filing bankruptcy – We all know the main objective of your filing bankruptcy is to get out of debt and have a fresh new start. But being specific about what you want will help your lawyer decided what type of bankruptcy to file for, not to mention how to go about it.

 

The circumstances leading to bankruptcy differ with each individual, the more your lawyer understands your case the more he or she can be able to help you.

 

All your assets and liabilities – In your list you may be tempted to hold out information about what you have or what you owe. You should trust your lawyer with this information, otherwise why get a lawyer? Better your lawyer find out about what you have and what you owe from you, and not from the bankruptcy trustee.

 

If you have sold or given away any property in the past few years – This is standard question that will be asked during the creditors meeting. It’s better your lawyer hear the answer first.

 

Your monthly expenses and other expenditures – Another standard question that will be asked during the creditors meeting and one that your lawyer should know the answer to first.

 

Changes/improvements in your status – If there is any change or improvement in your finances between the time you met your lawyer and before the creditor’s meeting, he or she has to know. Again, better your lawyer find out from you than only learning about it during the meeting.

 

Any change in your finances might also drastically alter your strategy in filing for a bankruptcy.

 

What to ask your lawyer

 

There are also questions you should ask your lawyer, just to clarify some things.

 

Whether or not you should file for bankruptcy - If you want to get rid of cold feet once and for all then let this be your first question. This goes without saying it helps to apprise your lawyer of your current situation.

 

What the pros and cons of filing for bankruptcy are – This obviously cannot be answered completely here, but your lawyer will be sure to fill you in on both the pros and cons.

 

Remember that filing for bankruptcy will have its consequences and repercussions; if your lawyer is a good one he or she will be able to explain them further for you.

 

What information is needed to get started – Once your mind is truly made up, it’s time to take the plunge, ask your lawyer what you need to get the ball rolling. For sure you will need lots of documents and you will have to spend time getting more documents, attending hearings and other such activities. Remember: Consequences and repercussions.