Articles Posted in Creditor – Secured

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As the nation enters Phase 2 of the Coronavirus Lockdown, millions of Americans are still behind on their monthly bills. Many lenders have implemented programs to help people manage debt payments during this economic uncertainty.  However, while people with student loans, mortgages and automobile loans were offered helpful alternatives to survive the Corona-induced downturn, people with credit card debts often were not. Debtors with medical debt have not fared well either.

A recent article in the California Law Review Online declared that, “The coronavirus pandemic is set to metastasize into a debt collection pandemic. This is because while evictions, foreclosures and student loan payments have been stayed by various government  orders and federal regulations, there is no blanket moratorium or order stopping debt collection lawsuits. Many debt collection law firms have ramped up credit card collections lawsuits since they have not been able to bring or finish foreclosure lawsuits. Many credit card collection lawsuits end up with the consumer getting a default judgment entered against them, since they believe there is nothing that they can do to stop these lawsuits. Debt collection law firms nationwide kept filing new cases during the shutdown, consumers be damned. For example, in Maryland, two major debt collectors alone filed over 2,000 suits in April.  These law firms must keep their gravy train rolling, even if many Americans have lost their jobs or part of their income, through no fault of their own.

After a homeowner gets a judgment against him or her, the law firm will usually attempt to get paid–voluntarily at first, and then by using court process to take the homeowner’s income and assets. There are several ways in Florida that a judgment creditor can collect on a judgment.

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mediation-150x150When someone thinks of bankruptcy, one of the very first things that come to their mind is that they do not want to lose the property and assets they currently have. If you own property such as a home, vehicle, or any other property of value, you might automatically assume that bankruptcy is not an option for you because you will have to surrender your assets to your bankruptcy estate.

However, you will be happy and surprised to learn that a Chapter 13 Bankruptcy might present some very unique opportunities for you that you were not previously aware of. For those of you facing financial difficulties while owning an investment property you do not want to lose, a Chapter 13 Bankruptcy might be the perfect solution for you.

You will be happy to know that under Title 11 of the United States Bankruptcy Code, Section 1322(b)(1), you can cram down a mortgage on an investment property. Cram down essentially means that if your mortgage is more than the fair market value of your investment property, then you can lower the principle balance of your mortgage to match the fair market value or secured value of the property. Basically, you can modify the mortgage’s contract by changing the principal balance, interest rate, and term. AND… the creditor cannot object to it. Continue reading →

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repoIf your vehicle has recently been repossessed, a Chapter 13 Bankruptcy might help you get your vehicle back! Chapter 13 Bankruptcy is a reorganization of your debts, which requires a monthly payment plan for up to 5 years. If you file bankruptcy soon enough after the repossession of your vehicle and the vehicle has not yet been resold or auctioned off, the automatic stay that goes into place as soon as a bankruptcy is filed will prevent the creditor who repossessed your vehicle from taking any further actions to collect the debt, which includes preventing them from being able to sell your vehicle.

If you are able to file a Chapter 13 before your vehicle is sold, your next step is to file a Chapter 13 Plan that shows that you are not only able to begin making your monthly car payments again, but that you will bring your car payments current through the Plan. If this is the case, your vehicle should be released back to you. You must also be able to show the bankruptcy court that the vehicle is a necessity and that you can afford your monthly payments by providing documentation of your income.

In a lot of instances once your vehicle’s lender receives notice of the bankruptcy as well as the Chapter 13 Plan (which shows that they will be adequately protected), the lender should willingly release your vehicle back to you. However, this is not always the case. If your lender refuses to return your vehicle to you, you will then need to ask the court for help. If you have proven that your vehicle is a necessity, that your Chapter 13 Plan gives the lender adequate protection, and that the vehicle is insured, the court should order your lender to return your vehicle to you.

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You filed a Chapter 7 Bankruptcy and have received your discharge. Among the debts included in your Chapter 7 Petition was your first and second mortgage. You reaffirmed your first mortgage (you elected to remain financially liable for your first mortgage) because you wanted to keep your home, but did not reaffirm your second mortgage. Therefore, you are no longer financially liable for your second mortgage. This seems like fantastic news! You get to keep your home, but no longer have to pay your second mortgage. Right? Unfortunately, this is not the case.

Although you no longer have to pay your second mortgage because you are no longer financially liable for the debt, your second mortgage still has a lien on your home. When you received your first and second mortgage, they each placed a lien on your home in order to secure their interest in your home. These liens allow each mortgage to foreclose on the home in the event you default on your payments. Unfortunately, the bankruptcy only removed your financial liability for your second mortgage. It did not remove the lien the second mortgage placed on your home. Consequently, your second mortgage maintains the right to foreclose on your home if you default on your payments.

So what do you do? You must payoff or settle your second mortgage before your second mortgage forecloses on your home or before you sell your home, whichever comes first. However, when you need to settle your second mortgage largely depends on how much your home is currently worth and how much you owe on your first mortgage. If your second mortgage chooses to foreclose on your home, then your second mortgage must payoff your first mortgage in order to hold the home free and clear. In other words, if your home is only worth $200,000, but you owe $250,000 on your first mortgage, then your second mortgage is not likely to foreclose at the current time because they would have to pay your first mortgage $50,000 more than what the house could be sold for. If you are currently in this situation you have the luxury of not having to try settling your second mortgage immediately. You can take time to save as much money as possible in order to try to settle your second mortgage for a lower amount in one lump some. You also have the option of simply continuing to make your normal monthly payments if you are current on your payments. Regardless of what you decide to do today, it is important to know that if and/or when you decide to sell your home, your second mortgage will have to be settled in order to complete the transaction.

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Recently, I have been receiving inquiries from clients regarding filing bankruptcy after having already filed a Chapter 7 Bankruptcy and receiving a discharge. If you have already received a Chapter 7 Discharge, you can most definitely file bankruptcy again. BUT, you must obey some very specific time limits.

If you filed a Chapter 7 Bankruptcy and received a discharge, you:

  • CANNOT file another Chapter 7 for eight (8) years from the date of your Chapter 7 filing.
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bankruptcy-photo-thumb-250x219-6996Filing for Bankruptcy can be both a scary and exciting prospect that allows a person deep in debt to make a fresh financial start. However, bankruptcy isn’t always the right answer. Here are a few factors to consider when deciding if declaring bankruptcy is right for you.

What type of bankruptcy should I file?

When a person decides to file for bankruptcy, he or she may be able to file two different types of bankruptcy: Chapter 7 or Chapter 13.

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Debtor's Prison, Bankruptcy, Collection PracticesWe all believed that debtor’s prisons were things of the past but in light of the recent arrest of an Illinois state citizen over a medical bill for $280 dollars, it’s apparent that debtor prisons have not yet resigned themselves to the history books.

Lisa Lindsay, like many women in the United States contracted breast cancer. After surviving the ordeal she was sent a bill for $280. Lindsay was told she didn’t have to pay the bill as it was sent in error, yet the hospital sold the debt to a collection agency. State troopers then took her from her home in handcuffs by which time she ended up having to pay $600 to settle the charges. I have written on this subject before, but the instances of arrest have increased as debt collectors have gotten more aggressive.

The law in most states allows for the arrest of people for contempt of court. Contempt of court is what gives the court the ability to arrest those who don’t pay their child support. What happens in these cases is the collector getting an order for the debtor to perform some action (typically provide payroll records). When the debtor doesn’t provide them, they are found in contempt of court and a warrant is issued for their arrest. The problem is that in the cases where people are being arrested the vast majority of the debtor’s addresses for notice are incorrect. This leads to people being arrested for not providing documents they didn’t know they were ordered to provide. Some states, such as Illinois, are amending their procedures to require that these debtors be served with papers before an order of contempt can be issued. This should minimize arrests for those states, however most of them, including Florida, remain without these protections.

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Car Financing Legal Limits FloridaFlorida residents often roll off car lots without knowing if the high interest rate financing they received is even legal. There are protections from high interest rates for people in the Florida Statutes, but you need to know the protections are there and have a lawyer whose prepared to bring an action on your behalf.

Florida Statutes Title 34 §520.08 states that:

“(1) Notwithstanding the provisions of any other law, the finance charge, exclusive of insurance, shall not exceed the following rates:

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Florida Citizen Keep Multiple Cars In BankruptcyMany Floridians contemplating bankruptcy believe that they can only keep one car when they file. This is because the Florida statutes only have one, “motor vehicle” exemption up to $1,000. Florida also has a $1,000 wildcard exemption as well as either a house or an additional $4,000 wildcard exemption. These wildcard exemptions can be used to keep a vehicle as well if the debtor decides. If a debtor had several vehicles worth less than $4,000, they could keep those vehicles. Note that the exemption amounts are only to be used on vehicle equity. If a car is worth $4,000 but has a $5,000 balance on the note, the vehicle has no equity and can be kept in the bankruptcy without using any exemptions.

There are two ways to keep a vehicle that has too much equity in a Chapter 7 bankruptcy. The first way is to go to a bank and to take a loan out with the vehicle as security. The funds from that loan can be used to pay for reasonable and necessary living expenses, which can include attorney fees. So, if a vehicle was worth $6,000, a debtor could take out a note for $5,000 on the car and then spend that money on groceries, gasoline, electricity and the attorney who files their case. They could then reaffirm the debt on the car and keep it in the bankruptcy.

The second way to keep a vehicle that has too much equity is to enter into a “buy back” agreement with the Trustee. Since the Trustee would be auctioning off your vehicle if you couldn’t exempt it, they are often willing to sell you the car for a price slightly less than the vehicle’s value. This makes sense for the Trustee because by selling the car to you they no longer have to pay any auction or repossession fees. The Trustees will also accept these payments over a reasonably long period of time, occasionally as much as a year.

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Whose Credit does my bankruptcy effect?People contemplating bankruptcy often fear the effect it will have on their loved ones. Debtors often think that their credit is somehow merged with their spouse or that their children will be liable for their debts if they’re still outstanding at time of death. I would like to dispel these rumors because they at worst are untrue and at best are misleading.

First and foremost, from a credit perspective married couples might as well be strangers on the street. One spouse may have a stellar credit score while the other may not. Sometimes all the unsecured debts are all in the name of one spouse, while the home mortgage liability is in the name of the other and so on. Oftentimes, home mortgage liabilities are so great that they require the commitment of income from both spouses to justify the bank’s risk in permitting the loan. This is likely the reason people mistakenly believe that marriage results in the “merge” of credit. If there is any truth to this, it is like so: Once two spouses sign a mortgage note on a house, they are now in the same boat as to that debt. If that boat sinks, whose fault it is ceases to matter and they will both drown equally. This is why so many people file for bankruptcy soon after their divorce is completed.

The idea of inheriting debt is archaic. It’s true that there are account of our own Thomas Jefferson having inherited debt from his late father-in-law, but any such law transferring liability on debts by inheritance is a thing of the past. Still, there are some ways in which a son or daughter may ‘feel’ they have inherited a debt. For instance, when someone dies and leaves an estate, the personal representative of the estate must make an accounting of the decedent’s (dead person’s) property and pay their creditors off before allowing the property to be distributed to the heirs. This may make those who inherit feel as though they’re being forced to pay the decedent’s debts. The distinction here being that it is the decedent’s funds that are used to pay the debts and not those of the living heir.

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