Chapter 7

Published on: April 20, 2012

Matrimony With The Bankrupt

“What happens when I marry someone whose filed bankruptcy?” Is a common question. People want to know what affect a spouses’ prior bankruptcy may have on their own credit or borrowing power. The classic attorney answer is, “It depends.”

Generally speaking, the fact that your fiance filed a bankruptcy in the past is irrelevant to your current or future credit score. Marriage does not merge scores or credit histories, what it does do is require you both to sign some kinds of contracts when a lender extends you more credit.

One of the few ways having a spouse who has a bankruptcy in their past can effect you is when it comes to borrowing. You can only borrow as much as your credit allows. Married couples are allowed to borrow as much as their combined credit allows. So, if your spouse has a low credit score, your combined credit score will be lower, thereby limiting your combined borrowing power. There are ways around this. A co-signer with a strong credit score can help you qualify for a larger loan amount. Some banks, such as Bank of England even have programs by which you start a mortgage with a cosigner and then after one year of proper payments they may offer you a refinance to remove that cosigner’s name. Another way to deal with your spouses’ credit problems is to take time and work on increasing their credit score. By taking out a secured credit card, you can help build your spouse’s credit score but you must be sure that the card actually reports your history of good payments to the credit bureaus. Capital One offers a Visa that is supposed to report to the three bureaus. Some of these cards have annual fees, so shop around to find the best rates. After a year of good payment history, you should then have your spouse apply for a unsecured credit card with the same company -this time in only their name. They are more likely to get approved this way and once the card is in their name only, their credit should be able to build faster.

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Published on: April 19, 2012

Bankruptcy Filings Down, But Distressed Sales Make Up 43% Of The Market

By David M. Goldman

Bankruptcies are down nearly 20% in the Middle District of Florida when comparing 2011 to 2010. Many in the industry attribute the decrease in filings to the moratorium on foreclosures caused by the robo-signing scandals and studies show that there is a strong relationship between foreclosures and bankruptcies. The inventory of the real estate market may not be flooded with foreclosures and short sales as we may imagine, but according to Key Property Partners, such “distressed” property sales did make up more than 43% of all closings in March.
What happened to all of the bankruptcies? My first thought was that perhaps everyone who was going to go bankrupt had done so, but only about 3.5% of the population of Jacksonville has filed for bankruptcy since 2007. Since 46% of Florida home mortgages are considered to be “underwater” there still stands to be a large number of bankruptcies for people looking to get rid of negative-equity homes. One must remember that there is not a 1:1 ratio from bankruptcy to foreclosure or vice-verse. Some people filing bankruptcy have no home, one home or multiple homes and some people being foreclosed upon never file bankruptcy at all. Still, the correlation is there. As long as homes are underwater, strategic and involuntary foreclosures will occur and bankruptcies will follow.
If you have questions about a short sale, strategic foreclosure or a bankruptcy, contact a Jacksonville Beach Bankruptcy Lawyer or call us at (904) 685-1200 for a free consultation.

Published on: April 18, 2012

Debt Forgiveness Income

By David M. Goldman

The economic squalor many of us have been enduring over the last year has lead to foreclosures, bankruptcies and a larger than usual amount of debt settlement.

Debt settlement is a useful tool in improving an individuals financial situation, but it is not without pitfalls. When someone has a large unsecured debt, such as a credit card, they can offer their creditor an alternative payment plan. For example: Marc owes $7,000 to a credit card company. Marc has had a severe drop in income and hasn’t been able to make payments to his creditor for several months. Marc wants to pay his debt, but can’t afford the large payment the company requires. He goes to his attorney friend and the attorney negotiates with the creditor on his behalf. Creditors often prefer large initial payments, with a promise to pay small incremental amounts thereafter. If the credit card company agrees, Marc can pay them $1,000 today and make $200 payments each monthly for twenty-four months. They may agree to this because he hasn’t been making payments thus far and it is well known that his attorney friend files bankruptcy cases. If Marc were to file a bankruptcy, this creditor knows they would get little to nothing in payment. When they agree, Marc has struck a deal that has him paying $5,800 to satisfy a $7,000 debt obligation. This is a $1,200 dollar savings which makes Marc happy because it’s more manageable and less than he originally owed. Just before taxes are due, when Marc’s debt is long forgotten, he gets a letter in the mail from the IRS. He nervously opens it to find a Form 1099-C for $1,200 in income, the exact amount he saved in his settlement. This is called “Debt Forgiveness Income”. The IRS’ theory is that because Marc’s overall worth has gone up by a net $1,200, he has in effect earned $1,200 in value and should be taxed on it.

In Marc’s situation he can probably handle the tax liability from an extra $1,200 in income for the year, but as the debt forgiven gets larger, the ability to absorb that liability decreases.

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Published on: April 16, 2012

Being A Cosignor Or Codebtor Can Lead To Bankruptcy

By David M. Goldman

If someone needs automobile financing but lacks the necessary credit, a second person can cosign for them. When someone cosigns on a loan, they are just as liable for the debt as the person their signing for. So, if Jon needs to borrow $5,000 for a car and his friend Charlie cosigns on the debt with him, they are both liable for the payment. This means if for some reason Jon loses his job or can’t pay, Charlie has to pay. This happens most often in the context of a divorce. Even if a family court judge orders a wife to make payments on the mortgage, this doesn’t remove the liability from the husband. This often leads to bankruptcy for both parties since most couples borrow as much as they can, leaving them with a debt that neither can pay individually. This is why cosigners are given special notice when the party they signed for files a bankruptcy.
However, just because a party files bankruptcy, it doesn’t mean that the non-filer can’t finish making the payments. If Jon were quit paying on the loan in the example above, Charlie could make the payments for him to preserve his own credit. This often happens in the context of student loans. I personally know a husband and wife who cosigned on their son’s private student loans. Upon graduating, the loans came due and he’s been unable to find employment that would enable him to make payments for over a year. His parents, now well into their 50’s, are now saddled with tens of thousands of dollars in debt for his apparently unmarketable education.
If you are a codebtor on a loan and the borrower or yourself are filing for bankruptcy, you should consult with an attorney about what your rights and obligations may be, contact a Jacksonville Bankruptcy Lawyer or call us at (904) 685-1200 for a free consultation.

Published on: April 13, 2012

Casey Anthony Would Probably Benefit From A Bankruptcy

By David M. Goldman

Since Anthony was found not-guilty of first degree murder in 2008, she has been barraged by civil law suits. The most recent of these suits is brought by Mr. Roy Kronk. Kronk was a meter man who found the remains of Miss Anthony’s daughter. Kronk is suing Miss Anthony for defamation of character, as her defense team alleged that Kronk himself murdered the child. Later it was alleged by Anthony that her daughter, Caylee had drown in the family pool.

Defamation is a false and defamatory statement about a plaintiff which is heard by a third party by the fault of a defendant. Some kind of damage must result. In this case, defendant Casey Anthony, through her lawyers, said that plaintiff Ray Kronk had murdered a child and this was heard by third parties across several news stations. It’s likely that his reputation was damaged. it’s likely that Kronk will win such a suit, unless Anthony’s can prove by a preponderance of the evidence that Kronk did in fact kill the child. That would mean that she committed perjury in saying that the daughter drowned in the pool, but she’s already had perjury suits in the past.

Even if Anthony is found liable for the damages to Kronk, it is possible that she could file a Chapter 7 bankruptcy and discharge the debt. Unlike debts to the government, debts to private citizens are almost always discharged. One of the few exceptions to discharge-ability falls under 11 U.S.C. § 523(6) which requires that a willful and malicious injury by the debtor occur to the plaintiff. The case of In re George out of Tampa, Florida holds that some defamation judgments are both willful and malicious. This case found that willful merely means that an act was intentional. Malicious, on the other hand, was not defined by this court as the previous court that found the defamation had declared the defamation malicious, instantly proving it as a matter of law for the In re George case. The ultimate question is whether Casey Anthony could benefit from a bankruptcy filing. The answer to this depends on whether Kronk can prove malice on the part of Anthony. Malice is often thought of as actions arising from, “evil intent”. This poses an interesting question of what motivated Casey to accuse Kronk. Did she actually believe Kronk had murdered Caylee? No. She couldn’t have if she knew Caylee had died in the swimming pool. But Casey didn’t know Kronk, why would she want to frame him for a crime that she knew hadn’t been committed?

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Published on: April 12, 2012

Florida Citizens Can Keep Several Cars In Chapter 7 Bankruptcy

By David M. Goldman

Many 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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Published on: April 11, 2012

Property Division Through Divorce, Enforcement, and Bankruptcy

By David M. Goldman

Divorce in Jacksonville, Florida is not a rare thing. According to Daily Beast, the city of Jacksonville has the ninth highest divorce rate of all cities in the United States. Many of these couples are jointly liable on home mortgages when they file for divorce. Since 46% of homes that have mortgages are underwater, many people are “left holding the bag” for mortgage payments they can’t make, refinance or otherwise settle with. Often times the only option for these people is bankruptcy. Bankruptcy and Refinancing are often the only options for debtors to have their personal liability removed from un-payable mortgage notes.
When one ex-spouse files for bankruptcy, it almost invariably causes the other to file. Of course this depends on whether or not couple had purchased a home using combined credit scores and on whether or not the non-filing individual can handle the mortgage payment on their own. If the individual is able to make the payment on their own, they may be able to refinance the mortgage, allowing for the other party to be removed from the liability on the note.
If you have questions relating to the interplay of bankruptcy and divorce, contact a Jacksonville Bankruptcy Lawyer or call us at (904) 685-1200 for a free consultation.

Published on: April 10, 2012

“Use It Or Lose It.” Right To Amend Claim Of Exemptions

By David M. Goldman

When one files for bankruptcy, a petition must be created. That petition is made up of several different sections called, “Schedules”. Each of these sections deals only with one specific issue, for instance, Schedule A deals with real estate, Schedule B with personal property, and so on. It is generally accepted that these schedules can be amended at any time, however a recent case out of the Middle District of Florida has limited this freedom somewhat.

Although every schedule is important, the schedule most debtors are interested in is Schedule C. Schedule C is where the debtor lists which property (s)he wishes to keep a exempt from collection by creditors. The rules allowing for property to be kept are called “exemptions” and are outlined by either state or federal statutes.

In Florida the use of one such exemption may forbid the use of another. As such, debtors can choose only door A or door B, but not both. Since there are so many rules in the bankruptcy code and because those rules are not always clear, it is often the case that people filing bankruptcy without a lawyer (pro se) mistakenly choose incompatible exemptions. This forces the Trustee to file an Objection to Claim of Exemptions, which requires a hearing for the judge to determine whether or not the objection is valid. If the objection is valid and the exemptions are denied, the trustee can then file a motion for turnover. The motion for turnover is the trustee’s way of asking the judge to force the debtor to surrender their rights in the property to the trustee. This is where the turning point is. Up to and until the judge orders turnover, the debtor can amend their Schedule C list of exemptions and change the amount and type of property they wish to keep, but once the judge signs an order requiring the debtor to surrender their rights, the debtor can no longer amend.

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Published on: April 9, 2012

IRS To Revoke Passports Of Tax Delinquent Americans

By David M. Goldman

Senate Bill 1813 will allow for the revocation of passports from anyone who owes more than $50,000 to the Internal Revenue Service. The Bill will Amend Sub-chapter D of Chapter 75 of the Internal Revenue Code of 1986 to read:

“SEC. 7345. REVOCATION OR DENIAL OF PASSPORT IN CASE OF CERTAIN TAX

DELINQUENCIES.

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Published on: April 6, 2012

Some Attorneys Are Biased For Some Chapters

By David M. Goldman

As a counselor for others, attorneys are obliged to be fair and honest in their candor with everyone, including clients. Unfortunately, this idealist principle often falls short when it comes to attorney practice. There is a segment of the population of lawyers who intentionally try to persuade debtors to file Chapter 13 cases when Chapter 7 would serve them better. The reason for this is the fees. Chapter 13 cases pay almost twice that of Chapter 7. Therefore, we as attorneys stand to gain double the fees if we can convince you that a Chapter 13 is better for you. Lawyers are not the only ones whose morals cause clients to fall victim to greed. In 2011 Judge Mark Ciavarella of Pennsylvania was sentenced to 28 years in prison as a result of a “cash for kids” deal with a local private prison. If the judge sent a child to prison, the prison would in turn send the judge a check. After the judge had received nearly a million dollars in so called “finder fees” from the prison, suspicion grew. It is unlikely that we will ever know how many innocent children were sentenced to prison terms or how many guilty children had their prison terms unjustly extended as a result of this ghastly corruption, but when it comes to lawyers helping you choose which chapter of bankruptcy best suits you, you have been warned.

There are four chapters of bankruptcy available for individuals in the United States. These chapters vary in their usefulness in different situations as much as people do. They also often vary greatly in cost. When you consult an attorney for bankruptcy advice, their job is to determine which chapter, if any, best fits your financial situation. As time permits, they should explain to you why that chapter is best for you and equally important, why the other chapters do not work for you.

In Jacksonville and even across the United States, the attorney’s fees for a Chapter 7 is about half that of a Chapter 13. The court filing fees are about the same. The Chapter 11, which is rare but not unheard of has enormous attorney’s fees when compared to the other chapters as it is typically only filed by either businesses or by individuals with a very great amount of money and/or debt. It also has filing fees that are more than three times that of 7 and 13. Chapter 12, which requires the petitioner to be a commercial farmer or fisherman, is so rare that I can’t even approximate the fees as I’ve never known any attorney who filed one. The court’s fees are slightly lower than those of 7 and 13 and because a Chapter 12 is very similar to a Chapter 13, I would imagine the fees for it to be similar.

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