Chapter 13

Published on: February 29, 2012

Personal Property in a Jacksonville Bankruptcy

When you file for bankruptcy in Jacksonville, Florida, a certain amount of your personal property is exempt from collection by creditors. Generally, you are allowed to keep $1,000 in personal property, $1,000 in vehicle equity and then either a qualified homestead or $4,000 dollars in additional personal property.

To be a qualified homestead the property must be under 1/2 acre if within a municipality or up to 160 acres if in an unincorporated area. Abutting lots can qualify as long as the land maximums aren’t exceeded.

The value you assign to your property should be the approximate auction value of the property. That is to say, how much do you think you could get for that property at a bankruptcy auction? My bedroom set may have cost $1,200 ten years ago, but it is certainly not worth that today, especially at an auction. Evaluating your property is difficult and can sometimes require professional assistance. What is more important is that you are thorough in creating a complete list of what you own. Omitting valuable property interests by accident can look like an attempt to commit fraud. There are cases in which an appraiser will be sent to your house to evaluate your property. It is rare, but it does happen. You can, of course, pick and choose which property you keep based on it’s value. If you don’t care for an old, but valuable, wedding present you never use, you can list that property but not elect to exempt it, exempting something else instead.

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Published on: February 28, 2012

Jacksonville Bankruptcy Has No Debt Requirement to File

By David M. Goldman

Jacksonville, Florida debtors often ask me how much debt they must have to qualify for bankruptcy. In truth, there is no threshold requirement of debt to qualify for a Chapter 7 or Chapter 13 bankruptcy case although Chapter 13 does have an upper limit (over a million dollars).

One of the first questions I ask when meeting with someone for the first time is why do they think they need a bankruptcy -what brought them through my door. I then ask them general questions about their income, assets, liabilities and expenses and analyze their financial situation. Sometimes bankruptcy is not the best option for people I meet with. If that’s the case, I tell them what I think and let them decide whether or not they want to file or explore another option. I think too many people (attorneys included), think that attorneys are supposed to make decisions for the client. In reality, we are only supposed to give advice. We tell you what we think and let you make the decisions.

Whether a person owes one hundred thousand or just a hundred, they can file bankruptcy. The question isn’t whether they qualify, it’s whether they should file at all. This is not a decision to be made lightly. Bankruptcy can be embarrassing and stressful. No one really wants to go bankrupt. Unfortunately, there are times when bankruptcy is the only option. For instance, Abraham Lincoln went bankrupt when his grocery store failed. I’m sure he’d have preferred some other option, but bankruptcy was the one that worked best for his situation at the time. He then went on to be one of the most recognized presidents of the United States.

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Published on: February 24, 2012

MERS Under Fire by New York Bankruptcy Court

By David M. Goldman

When a bank wants to foreclose or repossess property from someone who has filed bankruptcy protection, that bank must obtain permission from the court for relief from the automatic stay provided by 11 USC §362. If the Judge enters an order granting that permission, the lender can then return to the county court and resume collection activities.

Select Portfolio Servicing (SPS) sought to foreclose on a mortgage held in trust by First Franklin Mortgage Loan Trust which encumbered a property possessed by a debtor in Chapter 7. SPS filed a motion for relief from automatic stay and the debtor objected on the grounds that the Mortgage Electronic Registration System (MERS) could not establish that it held an enforceable right against the property as MERS had no valid and enforceable interest in the mortgage.

States have various recording requirements for secured loans. One of the most common terms is “Perfection”. A lien must be “Perfected” for it to attach to the subject property. “Perfection” is synonymous with “Recorded with the County (or state)”. If a lien is not properly recorded, the lien does not attach to the property and is as unsecured as a credit card, i.e. you don’t pay your mortgage and the lender can’t take the homestead.

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Published on: February 23, 2012

Mortgage Modifications through Mediation and Bankruptcy

By David M. Goldman

Nearly half of Florida homes that have mortgages are worth less than the mortgage debt on the home. This, combined with the nation-wide decrease in incomes has lead to one of the greatest recessions our country has seen.

A home mortgage is essentially a contract. You promise to make payments according to the contract’s terms, and the lender promises to transfer the home’s title to you when you finish making your payments. The government regulates these contracts by creating laws that set out procedures for things like foreclosures. Of course, there is still an element of free contract which allows lenders and borrowers to negotiate the terms of their agreement at any time. The government is limited in how much they are allowed to interfere with contracts so instead of trying to force banks to offer mortgage modifications, they make programs like HAMP, which offers lenders tax deductions or other benefits to make deals with borrowers. Personally, I think that the government isn’t offering the lenders enough in benefits because banks aren’t particularly helpful in getting borrowers into the program. HAMP mods are done in-house by the banks and “can” lower a borrowers mortgage payments to 31% of their gross income if you qualify. But what if you don’t qualify, and what if your payments are already below 31% of your gross income?

This is where lenders will begin the foreclosure process. They may offer you a so called, “in house modification”, but offer or no, the foreclosure process will continue until either you are somehow successful in obtaining an in-house modification or your home is sold on the courthouse steps. This is because the judiciary can’t force a bank to modify your loan. Honestly negotiated terms that were created in accordance with the laws can’t usually be modified by the government due to our rights to free contract as citizens. That being said, a recent program out of Orlando creates an opportunity for people facing Jacksonville bankruptcies and foreclosures.

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Published on: February 22, 2012

Jacksonville Attorney’s Advice on Taking Control of Your Financial Situation

By David M. Goldman

Jacksonville bankruptcy attorneys, and attorneys everywhere have faced record numbers of new clients with debt problems. The last five years have been devastating, with home values plunging and politicians screaming across the country that they have new solutions to help us from drowning in debt. There is no doubt that the economy will be the largest issue of the upcoming Presidential Election.

Statistics are a staggering example of our economic squalor. There were 1.4 million bankruptcies across America in 2011, up about a million cases from 2007. A million extra cases per year in only four years is a motivating factor, but what can we do about it?

Most people aren’t sure what to do. Their jobs have lowered their pay or laid them off altogether, many of them are coasting by on savings and hoping for the economy to pick up. Many are depending on loan modifications that may never be granted. Even the government’s Home Affordability Modification Program (HAMP) has been called a Scam.

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Published on: February 19, 2012

Bankruptcies, Co-Signers and Authorized Users

By David M. Goldman

Oftentimes when people prepare to file for bankruptcy we find that there are other people who appear to owe debts jointly with them. The rights and obligations of these people vary depending on whether they are Co-Debtors or Authorized Users.

A Co-Debtor is any person who has signed into a debt with someone else. A Co-Signer is a Co-Debtor. All bankruptcy petitions have a section dedicated to Co-Debtors.

While bankruptcy can remove your personal liability from a debt, anyone who is joint on that debt remains liable. Because of this, Co-Debtors are given notice when a case is filed and will be obligated to pay of the person filing bankruptcy doesn’t.

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Published on: February 18, 2012

Co-Debtor Stay in Chapter 13 Bankruptcy

By David M. Goldman

When someone files for bankruptcy an automatic stay is put into place. The stay prevents creditors from making any collection attempts (calling, repossessing, selling) prior to obtaining court permission or, prior to the dismissal of the bankruptcy case.

A Co-Debtor Stay created by 11 USC §1301 occurs when the person filing bankruptcy owed a debt jointly with a non-filing person, typically a spouse. By virtue of being a co-debtor, creditors may no longer make collection attempts against the non-filing person as well. This becomes particularly useful when the creditor has a security interest, such as in a home. For example, if a couple was behind on a jointly owned homestead but one spouse individually owed a large amount of credit card debt, that one spouse could file a Chapter 13 bankruptcy, catch up on the mortgage arrears and simultaneously discharge their unsecured debts. While that spouse was in bankruptcy, the bank could not foreclose on the home as to the non-filing spouse because of the automatic stay protection.

Unfortunately, the Co-Debtor stay does not go into effect as to business assets or function in Chapters 7 or 11, so a conversion from a Chapter 13 to a Chapter 7 would cause problems.

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Published on: February 13, 2012

Bankruptcy Conversion

By David M. Goldman

Bankruptcy is complicated. If you’re represented by counsel, your attorney will ask you questions and based on your answers, will advise you on which of the four chapters of bankruptcy available to individuals you may want to file. Sometimes choosing the chapter that will put the client in the best position hinges on a single fact or two -and sometimes facts change.
Fortunately, the legislature realized the possibility of changing facts in bankruptcy cases and created a solution, 11 U.S.C. §706. This provision allows a debtor to convert their case to another chapter. Of course, the debtor still must pass the qualifications for the chapter to be converted to, such as passing the “Means Test” for a Chapter 7 or being under the debt limits of Chapter 13.
If you would like to meet with an attorney to discuss the possibility of Bankruptcy, contact a Jacksonville Bankruptcy Attorney or call us at (904) 685-1200 for a free consultation.

Published on: February 11, 2012

The Role of Tax Refunds in Bankruptcy

By David M. Goldman

A commonly overlooked issue when it comes to bankruptcy is what happens to the debtor’s tax refund. Income tax refunds are treated like any other asset owned by the debtor except that it is still being held by the government. The Trustee has an interest in a pro-rata share of the refund based on the month you file because the refund has been earned up to that point. If you file at the end of April, the trustee could have an interest in 4/12ths of your next year’s tax return. When someone files for bankruptcy protection, they are only allowed to keep a limited amount of assets, called exempt property. These exemptions are limited and are declared at the time of filing the petition. If the trustee has any objections to these exemptions, he or she must formally announce those objections within thirty days of the filing of the bankruptcy.

There are a few different strategies on how to deal with refunds. Some attorneys suggest that the debtor wait until they get their refund, spend the refund on reasonable and necessary living expenses such as gasoline, groceries, healthcare etc. and then file for bankruptcy. Others suggest that the debtor adjust their deductions (if there’s enough time to do so) so that the return will be smaller or non-existent. If possible, I prefer to use the debtor’s remaining exemption amounts to cover the trustee’s interest in the return. If the trustee would get $400 and the client is eligible to keep $400 due to their exemptions, I can use the exemption to let the client keep the money.

Although it’s not often an attractive option, the debtor can also simply give up the whole tax return if they feel their exemptions are better used elsewhere.

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Published on: February 10, 2012

Tenancy by the Entireties

By David M. Goldman

Tenancy by the Entireties, only permitted in a few states, is a term unknown even to many attorneys. The lack of knowledge of it’s existence helps to illustrate the stupidity of it’s application: Spouses must intend to hold property as “Tenants by the Entireties” to be afforded it’s protection, yet nearly no one knows that this system (or any system) of ownership exists.
There are several ways people can hold property. Tenants in Common is fairly frequent. Another is Joint Tenants with Rights of Survivorship. Each of these open a different can of worms in different areas of law. What Tenancy by the Entireties (TBE) can do, is allow a bankruptcy filer to keep their property provided that the property is held by a non-filing spouse provided that the property is held by TBE and that the property is not under-secured. Fortunate for Florida debtors, the inherit flaw of requiring the owners to intend TBE is overcome by the courts now presuming that TBE is intended if the couple is married and the property is acquired pursuant to the requirements of TBE. TBE requires that property be acquired at the same time for both spouses, they must have the same title, same interest in the property, have the same right to possession and, of course, be married.
If you have questions about TBE, contact a Jacksonville Bankruptcy Attorney or call us at (904) 685-1200 for a free consultation.