Our lives have changed in a flash.  The Associated Press warns that Americans must brace for new life of no school and growing dread.  We now spend more time in line at Walmart buying toilet paper than we do lining up for Black Friday sales. Parents worry about their jobs while they wonder who’ll watch their children while they are at work since schools have extended spring break or shut down for weeks.

The world has changed.  We are told to practice “social distancing” and not come within so many feet of our fellow human beings. People are wearing medical masks and gloves when they go out. Some people walk around with Lysol bottles.

Selling one of the vehicles would be considered a pre-bankruptcy transfer of property, and there are several factors that determine whether a person can complete a pre-bankruptcy transfer. Your bankruptcy trustee will look at whether the property in question would have been exempt when you filed your bankruptcy, the price you received for the property, how those proceeds were spent, and the reason for the transfer.

If the property would have been exempt when you filed bankruptcy, then transferring the property prior to filing bankruptcy should not be an issue. However, it could cause a delay in the bankruptcy process as your trustee makes this determination. Your trustee will want to make certain that you received the fair market value of the property and that it was in fact exempt. In Florida, a debtor is allowed $4,000 in personal property and $1,000 in a motor vehicle if they do not claim the homestead exemption. If a debtor claims the homestead exemption, then they are only allowed $1,000 in personal property and $1,000.00 in a motor vehicle.

BUT, if you are planning to file bankruptcy and the property would not be exempt in bankruptcy, then you need to proceed with much caution. It is best to first speak with an attorney before making any pre-bankruptcy transfers. Your trustee most definitely will investigate the transfer and will pay close attention to when the transfer was made and the proceeds received from the transfer. If the fair market value was not received, then the trustee may undo the transfer or make you pay the fair market value of the transfer to your bankruptcy estate. The trustee can also look into certain types of transfers from as far back as ten years ago. However, they most commonly only look back two to five years in Florida.

Another thing your trustee and the court will look into is your intent at the time of the transfer. Your intent can be inferred by looking at who you transferred the property to, did you try to conceal the transfer, what was your financial situation when the transfer occurred, etc.

If you use the proceeds from the transfer of non-exempt property to increase the value of your homestead, such as by paying down the mortgage or making improvements, the court can look back 1,215 days. Without having to look at your intent, the court can then reduce your homestead exemption by that amount. Luckily, however, using such proceeds to make normal mortgage payments or normal maintenance and repairs should not be an issue.

Despite the type of property you are looking to transfer prior to filing bankruptcy, it is best to consult with an experienced attorney. Speak with the Law Office of David M. Goldman, PLLC at 904-685-1200 for a free initial consultation.

Ok, so you filed bankruptcy. Your vehicle is financed and you believe that by filing bankruptcy it will be much easier to continue making your car payments. When you are contacted by the finance company about reaffirming the car loan, you do so without hesitation. However, a month or two into the reaffirmation agreement, you realize that it is still very difficult to make the monthly payments and decide it would be a better decision to surrender the vehicle and purchase a new vehicle with lower monthly payments. Can you change your mind and rescind the Reaffirmation Agreement? The answer is, as usual in the legal field, possibly and it depends.

11 U.S. 524(c)(4) of the United States Bankruptcy Code defines when a Reaffirmation Agreement may be rescinded. A Reaffirmation Agreement may be rescinded by a debtor under two very specific circumstances (which ever occurs later):

1. Within sixty (60) days of filing the Reaffirmation Agreement with the Court; or
2. Any time before receiving your discharge.

If you fall into one of these two categories, you must notify the creditor. It is best to notify the creditor in writing sent via certified mail with a return receipt requested. Once you have received the return receipt, you should file the notification of cancellation letter you sent to the creditor along with the proof of service (the green return receipt slip) with the Court.

Being able to rescind a Reaffirmation Agreement is a vital tool offered by the United States Bankruptcy Code. It allows Debtors, who realize a little too late that reaffirming a debt is really not in their best interests, to still be able to take full advantage of filing bankruptcy and have a true fresh start.

Regardless of being able to rescind a Reaffirmation Agreement after entering into one, signing a Reaffirmation Agreement should not be done lightly. Using 11 U.S. 524(c)(4) should only be used as a last resort and should not be abused.

So that you do not have to invoke the use of 11 U.S. 524(c)(4), it is best to first seek the advice of an experienced Jacksonville Bankruptcy Attorney who can help you decide what the best financial decision is for you. Contact the Law Office of David M. Goldman, PLLC today to speak with an attorney. If you are going to file bankruptcy, we want to help you come out on the other side in the best financial position possible.

The biggest hurdle is figuring out what your assets are and what exemptions are available to you. By definition, an asset is anything that has a value and that which can be sold or liquidated in order to pay your debts or commitments. The most common looked over assets are whole life insurance policies, as well as insurance policies in which you are the named beneficiary, accrued or unused vacation pay, timeshares, season tickets, unpaid insurance claims, security deposits, class action lawsuits, trademarks, liquor licenses, divorce settlements and tax refunds.

I cannot stress to you enough the importance of disclosing all of your assets. One accidental omission could have devastating consequences. Take this situation as an example:

What if my vehicle has equity?

A different set of rules applies however when your vehicle has equity that is above the $1,000.00 exemption that is allowed in Florida. For example, when you owe your vehicle free and clear. In such a situation, you might be able to use a wild card exemption to protect the rest of the equity. However, if you are unable to exempt all of the equity, then you may be forced to surrender the vehicle or pay your Trustee the un-exempt equity amount in order to keep the vehicle. Most of the time, your Trustee will allow you to make monthly payments for the equity.

There are two tests that the Trustee will do in deciding if you should keep your vehicle. The first is to determine whether it is feasible. Meaning, if the monthly payments are reasonable and affordable for you. The second and more significant test when keeping the vehicle is whether it is in the “best interest of your creditors.” United States Bankruptcy Code 11 U.S.C. § 1129(a)(7)(A)(ii) states that in a Chapter 13 Bankruptcy, your creditors must receive, at the very least, the amount they would have received had you filed a Chapter 7 Bankruptcy. As an illustration, if you own a motorcycle and wish to keep it in your Chapter 13 Bankruptcy, then if that motorcycle would have been liquidated in a Chapter 7 Bankruptcy, then you will either have to surrender the motorcycle or pay the value of it through your Chapter 13 Plan.

What if I owe more than my vehicle is worth?

If you owe more than your vehicle is worth, wish to keep it, and are filing a Chapter 13 Bankruptcy in Jacksonville, then you might be eligible for something known as a “Cram-Down.” A “Cram-Down” is when you ask your Chapter 13 Judge to establish the value of your vehicle and then to decrease the secured amount of your loan to the vehicle’s value. The amount of your loan that is over the vehicle’s value then becomes part of your unsecured debts. To explain, say that you owe $20,000.00 on your Maxima, but your Maxima is only worth $12,000.00. The court could then potentially lower your loan amount to $12,000.00 and make the remaining $8,000.00 an unsecured debt. When you complete your Chapter 13 Plan, then the unsecured $8,000.00 will be discharged.

In short, there is most likely a way for you to keep your motor vehicle(s) regardless of filing a Chapter 7 or Chapter 13 Bankruptcy in Jacksonville, Florida. This is specifically true for vehicle’s that are necessary for your daily lives. However, the bigger question is going to be whether it is a good business decision to keep it after taking into account the vehicle’s value, loan amount, and what it is going to cost you to keep it. Speaking with an experienced Jacksonville Bankruptcy Attorney can help you figure out what is best for you and your family. Contact the Law Office of David M. Goldman, PLLC today at (904) 685-1200 for your free consultation.

So how does an asset qualify for a cram down? First, the debt must be a secured loan. A debt is a secured loan when a lender has a security interest in the asset or collateral. This interest grants the lender certain rights to the asset, such as the right of repossession of the item if the debtor defaults on his or her payments. The most common type of security interests are found in cars and houses.

A cram down can occur when a person declares a Chapter 13 Bankruptcy. Unlike a Chapter 7 Bankruptcy, this type of bankruptcy requires that the debtor pays back his or her debts through a repayment program, which lasts 3 to 5 years.   It is important to note that a person’s homestead property does not qualify for this benefit.

Most often cram downs are used on car loans. The best way to explain how this process works is to show through an example. In this situation, the debtor has a vehicle that is worth $9,000 but the loan balance remaining is $16,000. By declaring a Chapter 13 Bankruptcy, the owner of the car can cram down the loan balance to be equal to the car’s value, or in this case $9,000. The difference of the loan value before the cram down and after, in this example, is $7,000, will then be lumped in with the debtor’s other unsecured debts. This means the debtor will only pay a small portion of the crammed down value with the other unsecured debts on his or her repayment plan, and the remainder will be wiped out once the repayment plan is completed.

Other Benefits of a Cram Down

Another great benefit to cramming down debts is that it may allow a debtor to reduce his or her interest rate and to prolong payments over a longer period of time. This means cramming down debts can lower a person’s monthly payments. The interest rate that a debtor pays after he or she declares Chapter 13 Bankruptcy is determined by the bankruptcy court and will often times be lower than the original interest rate. Since the repayment plan lasts 3 to 5 years, the payments may then be lower since if they are being stretched out over a longer period of time.

Restrictions

There are some restrictions on when a cram down can occur. For cars, Congress passed what is commonly referred to as the 910-day rule. This rule states that if a person wants to cram down a car loan, the vehicle must have been acquired by the debtor more than 910 days prior to declaring bankruptcy. 910 days is about 2 ½ years, which for most people isn’t a problem. Cars depreciate value immediately after they are purchased, so this law was enacted to prevent people from abusing the system and immediately trying to cram down car loans right after the purchase. The other big rule to take note of is the one year rule for personal property such as furniture or household goods. This rule states that personal property must be owned for one full year before its loan value may be crammed down.

For more information on how your assets can be crammed down through a Chapter 13 Bankruptcy, call The Law Office of David Goldman, PLLC today to speak with an attorney.

One of the main considerations taken into account when your Trustee decides whether or not you get to keep your vehicle is whether your vehicle has any equity in it. The next consideration is whether or not you have exempted that equity. In Florida, you are only allowed to exempt $1,000.00 of equity in a motor vehicle per debtor. However, there could be other ways to protect more equity. If you are leasing your vehicle or took out a car loan to purchase that vehicle, and you currently owe your lender the full value of the vehicle or owe more than the vehicle is worth, then you can most likely keep the vehicle simply by reaffirming the lease or loan.

But what if your current vehicle is no longer reliable enough to simply get you to and from work so that you can continue making a living? You are probably wondering whether or not you can purchase a new vehicle prior to filing bankruptcy or whether you must wait until after you file for bankruptcy. The short answer is you can probably purchase a new vehicle prior to filing bankruptcy, but it will depend on a few factors. It is important to note that regardless of your reasons for purchasing the vehicle so close to filing for bankruptcy, it will appear as a red flag to your Trustee, so expect your Trustee to ask you detailed questions about the purchase.

The main factors that should be taken into account are the following:

• What is the main reason for the purchase? Is it because your current vehicle is unreliable or are you purchasing the new vehicle to hide assets?
• If filing for a Chapter 7 Bankruptcy, do you qualify for a Chapter 7 without the new car payment or are you taking out a loan to purchase the new vehicle in order to help qualify for the Chapter 7?
• If buying the vehicle with cash, are you able to exempt the full value of the new vehicle?

Regardless of your answers to the above questions, it is always a good idea to first speak with an attorney prior to purchasing a new vehicle if you are planning to file for bankruptcy in the near future. An experienced bankruptcy attorney can go over the pros and cons of purchasing a new vehicle prior to filing bankruptcy, so this way you can make the best decision for you and your family.

If you are considering filing for bankruptcy and need to speak to an attorney experienced in this matter contact the Law Office of David M. Goldman, PLLC today at (904) 685-1200 to receive a free initial consultation.

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.

The key to being able to obtain a new car loan while in a Chapter 13 Bankruptcy is demonstrating to the court and trustee that it is absolutely necessary, that the cost of the new vehicle is reasonable and that the interest rate is fair. For example, you need a reliable car to get back and forth to work in order to make your Chapter 13 Plan Payments, but that luxury vehicle is not an essential. Your trustee understands this and wants to help you successfully complete your Chapter 13 Bankruptcy, but will not allow you to set yourself up for failure by obtaining a car loan you can’t afford. In other words, as long as the new car loan payments do not affect your Chapter 13 Plan Payments, then your trustee will most likely allow you to obtain the new debt.

Sine it can be difficult to obtain a loan from a conventional lender while still in bankruptcy (most do not understand the process of obtaining a loan while in bankruptcy or just do not want to take the risk), you will most likely need to contact a lender who specializes in financing for those who are in bankruptcy. They will need documentation from the court in order to provide you with the needed financing.

Chapter 7 Bankruptcy

When you file a Chapter 7 Bankruptcy with a leased or financed vehicle, you simply need to reaffirm the debt in order to keep it. If you are current on your monthly payments, you simply continue to make your payments and the vehicle lessor or financer will provide you with a Reaffirmation Agreement for you to sign. Once executed, it will be filed with the court. By reaffirming the debt, you are agreeing to remain liable for the full amount you still owe on the vehicle despite filing bankruptcy.