Chapter 7

Published on: December 16, 2011

The Underwater Mortgage: a Home or a House

Bankruptcy and Underwater Home Mortgages Jacksonville residents are facing some of the hardest times ever. With 46% of Florida Homes worth less than their mortgages notes, a lot of folks are considering bankruptcy.

As attorneys, it is our job to counsel our clients on what action is in their best interest. I have worked at a few different law firms and I have found that there are three schools of thought. The first thought is that the debtor should always keep the house, regardless of it’s value to debt ratio. This philosophy feels that the American Dream should prevail and that every one of us deserves to own a home. While I don’t disagree that we should all have the opportunity to own a home, this philosophy often fails because the debtor’s income is simply too low to make the house payments. Attorneys who say that they always try to save the house either make so much money that they don’t remember what it’s like to struggle or even worse, they’re just telling clients what they think the clients want to hear. Be wary of attorneys who only tell you what you want to hear. That’s a sign of a good salesman, not of a good counselor.

The next school of thought is that the house should always be surrendered if it’s under-water. This purely economical approach makes more sense than the one toting the “American Dream” and it’s quite attractive. However I don’t think it’s enough to consider only the economics of the situation. Bankruptcy attorneys tend to think numbers, because that’s what we deal in, but a wise person once said something to the effect of, “A home is more than just a house.”

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Published on: December 16, 2011

Two Year Degrees Connected to Bankruptcy

By David M. Goldman

Bankruptcy Education College Associates In the recent publication, “Broke: How Debt Bankrupts the Middle Class” by Kathrine Porter, Miss Porter explains that while most Americans are pushed to attend college as though it were the only path to success, anything less than a four year degree will increase your probability of filing for bankruptcy. She goes on to state that the cause of bankruptcy for these individuals does not appear to be student loan obligations, but she offers no concrete alternative explanation.

A study by The Institute for Financial Literacy reiterates Porter’s surprise at the growing number of educated bankrupt, but still shows that the majority of bankruptcy filers are those who have only high school education or went to college but never finished.

Gant Daily came to similar findings but only showed a little more than 2% growth in higher education filings over the last few years.

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Published on: December 16, 2011

I Just Moved To Florida. Can I File For Bankrtupcy?

By David M. Goldman

Yes, you can still file for bankruptcy. However, a very important part of every bankruptcy case is your exemptions. Exemptions allow you to keep your real and personal property. There are federal exemptions, but most states have adopted their own exemption laws. To use Florida exemptions in your bankruptcy, there are residency requirements. If you have lived in Florida for the 730 days prior to your filing, you can use Florida’s exemptions. If you have not lived here for that long, then your exemptions will be those of the state in which you resided for during the 180 days prior to your filing or the federal exemptions, whichever your prior state’s law indicates.

Florida is often seen as having a liberal homestead exemption, as it allows you to keep your home despite unsecured creditors. However, to use the Florida homestead exemption, you must have owned the home for 1215 days, otherwise you can only protect up to $125,000 in equity. Since nearly half the homes in Florida are underwater on their mortgage, it is a rare circumstance that anyone has more equity that the federal system allows. If you are unclear what exemptions you are allowed to use, contact a Jacksonville Bankruptcy Attorney today to discuss your specific case and what exemptions would be best for you.

Published on: December 15, 2011

National Guard and Reservist Debt Relief Extension Act of 2011

By David M. Goldman

Soldier bypassing means test Recently, the U.S. House of Representatives voted to pass the The National Guard and Reservist Debt Relief Act of 2011 (H.R.2192). This bill is an extension of a 2008 version of the bill with the same name. The currently existing law helps soldiers qualify for Chapter 7 bankruptcy by allowing those on active duty to bypass the means test.

Soldiers would more easily qualify for a Chapter 7, because they can now bypass the means test. The means test requires the court to look at the debtor’s income and compare it to an average income for the same family size. If the debtor’s income is above average, then the filing a Chapter 7 is presumed a fraudulent abuse of the system as the debtor makes too much money to not pay any debts back. The debtor presumed fraudulent can then either file a Chapter 13 bankruptcy or pursue a non-bankruptcy option. The National Guard and Reservist Debt Relief Act of 2008 dictates that those in active duty for at least 90 days do not have to overcome any fraud analysis. They automatically qualify for a Chapter 7 regardless of how high their income is.

The justification behind the bill is that oftentimes these soldiers are called upon on short notice, requiring them to leave higher paying jobs to travel to remote locales to defend America. This may lead to soldiers having to maintain more than one household. Again, to qualify under this bill, reserve members must have been on active duty for 90 days or more since September 11, 2011. You can also qualify during the 540 days following activation.

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Published on: December 14, 2011

Debtors Prisons Abolished, But Some Still Jailed

By David M. Goldman

Debtor's Prison, Bankruptcy, Collection Practices There’s not much that inspires us to act (or not act) than the threat of imprisonment. Collection agencies are using a new angle on collections that can lead to the arrest of unwitting debtors.

The Fourteenth Amendment states that “[n]o state shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any state deprive any person of life, liberty, or property, without due process of law”. Despite the protections of this amendment, collectors are satisfying the requirements of due process by filing suit, unilaterally scheduling hearings, and when the debtors fail to appear for court, they have they ask the judge sign an order for them to appear. If they don’t show up for the second hearing, the judge will issue a warrant for the debtor’s “willful” non-appearance before the court. The next time the debtor is pulled over for a route traffic stop, they can be arrested.

The problem with this satisfaction of the due process requirement is two-fold. First is the fact that most collection agencies have bad or outdated addresses for debtors. People move all the time, especially those with financial troubles. If the address is incorrect, then the debtor never gets notice of the hearing. This makes the “willful non-compliance with a court order” no longer willful. If the debtor didn’t know, how could they willingly not comply?

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Published on: December 13, 2011

Disclose Everything in Bankruptcy

By David M. Goldman

Bankruptcy, Honesty, Oath, Perjury When filing for bankruptcy, it is very important to be very honest and disclose everything. If you do not, you risk having your bankruptcy denied, discharge revoked or even prison time in the worst case scenario. When you sign your bankruptcy documents, you are doing so swearing that they are true under penalty of perjury. If the trustee finds out that something you have in your schedules is incomplete or untrue, this will raise a red flag and the trustee will scrutinize your bankruptcy schedules even more.

A common way that people fail to disclose everything in bankruptcy is trying to hide assets. Debtors might leave off a gold watch or a private bank account. This is a big mistake. When filing for bankruptcy, you must list all of your assets. Even if you think an asset is inconsequential or minute, you should list it. It is better to have overkill than to raise a red flag.

Another thing debtors sometimes fail to list is creditors that happen to be friends or relatives. Or maybe the debtor does not want a specific creditor to know that they have filed for bankruptcy, so they do not want to list that creditor. You should not do this. You need to list all creditors to whom you currently owe any kind of debt on your bankruptcy papers. The trustee wants to make sure that all of your creditors get their fair share of your estate. No matter your intentions, make sure to list every creditor. If you do not and the trustee finds out, this will raise a red flag.

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Published on: December 12, 2011

Concealment of Assets in Bankruptcy

By David M. Goldman

When people are in desperate situations, they often have desperate thoughts. One of those thoughts that often comes to light in my office is the idea of hiding assets from the trustee. Sometimes it’s money, sometimes it’s your great grandfather’s old service revolver. Either way, these items must be listed in your bankruptcy petition as they are your property. Declaring them does not necessarily mean that you have to lose them, as certain amounts of personal property is exempt in bankruptcy.

18 U.S.C. §152 makes it a federal felony to knowingly and fraudulently conceal any property belonging to the estate of the debtor from the United States Trustee or from creditors. The penalty for this crime is a fine up to $250,000, up to five years in federal prison, or both.

The easiest thing to do is not hide assets in the first place. The Federal Bankruptcy Code is there to provide relief to those who need it. It allows for certain amounts of exempt property so that those who need it can attempt to restart their lives and get out of desperate situations. The best way to deal with property you don’t wish to lose in a bankruptcy is to attempt to exempt it properly. If you would like to meet with an attorney who understands how the Florida bankruptcy exemptions work, contact a Jacksonville Bankruptcy Attorney or call us at (904) 685-1200 for a free consultation.

Published on: December 8, 2011

Having a Lawyer Represent You in Bankruptcy

By David M. Goldman

Filing for bankruptcy can be very confusing for those trying to go it alone. As an in-depth legal process, it is greatly beneficial to have a Jacksonville Bankruptcy Attorney to help you navigate your way through a successful bankruptcy. Here are some reasons why:

1. There are many calculations that must be done correctly. To file for bankruptcy, you must first know which Chapter you qualify for, a Chapter 7, 13, 11 or 12. One step to figuring it out is by completing a Means Test. This is complex thing to do. You must know things which deductions you can use for food, clothing, personal care, health care, housing, and many more. You’ll need to how the allowances for vehicles work and what involuntary deductions you can take. You must know how to list future debt payments correctly. And the list goes on and on. Without the proper knowledge and skill, this can be very difficult to do right the first time. If you do not do this correctly, the court could dismiss your case without a discharge, penalize you with fines or in rare cases, even send you to jail. Hiring a Jacksonville Bankruptcy Attorney would be beneficial because someone with knowledge and experience would be handling these issues, taking the stress off of you.

2. Another daunting task is drafting a Chapter 13 Plan. This Plan is very important, as it outlines your responsibilities over a three to five year period. You must know which creditors get paid, how much is required to go to unsecured creditors, and how to allocate the Trustee’s portion. You want to make sure that you get all the benefits you can through your Plan. It is not the job of the Court or Trustee to watch out for your interest, it is there job to be sure that the code is being applied properly.

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Published on: December 7, 2011

Ex-Jacksonville Jaguar, Mark Brunell Chapter 11 Plan Confirmed

By David M. Goldman

Mark Brunell, Bankruptcy, Chapter 11 On 06/25/10, Mark Brunell, ex-quarterback for the Jacksonville Jaguars filed for Chapter 11 bankruptcy protection. In a Chapter 11 bankruptcy a debtor proposes a repayment plan that includes all of their creditors. Those creditors then get to approve of the plan if their rights are infringed. Once all creditors infringed are satisfied with the proposed plan, it can be confirmed. Mr. Brunell’s plan was confirmed yesterday by Jacksonville’s very own Judge Jerry A. Funk.

Consumer debtors who earn more than the median income for their family size cannot file Chapter 7 Bankruptcy. Often, this results in their filing of a Chapter 13, however Chapter 13 has a “debt ceiling”. This “debt ceiling” limits the dollar amount owed by any debtor who wishes to file this chapter. Currently, the debt ceiling is $360,475 for unsecured debts and $1,081,400 for secured. If a debtor makes more than the median income, but owes more than the debt ceiling, their only recourse may be to file Chapter 11, just as in this case.

Creditors in a Chapter 11 must retain their existing rights in the proposed plan, or consent to having those rights modified by the plan or get at least as much in the plan as they would if the debtor was liquidated in a Chapter 7 bankruptcy. Because Mr. Brunell owned $350,000 in assets that would be unexempt (and therefore liquidated) in a Chapter 7, so his plan requires that $350,000 will be paid to his unsecured creditors by June 30, 2012.

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Published on: December 6, 2011

Have a Credit Card Company Complaint?

By David M. Goldman

Is your credit card company driving you crazy? Think they are trying to rip you off or aren’t taking your complaints seriously? The Dodd-Frank Act created the Consumer Financial Protection Bureau (CFPB), an agency to whom you can voice concerns regarding your credit card companies. Since their opening in July 2011, the office has fielded more than 5,000 consumer complaints. Some of the most common complaints dealt with collection practices, debt protection services, account closures, identification theft, fraud, and fees.

After a complaint is filed, the CFPB acts as a go-between in order to resolve the issue between you and your credit card company. So far, approximately three quarters of the complaints have been either partially or fully resolved by the credit card company. The rest are either still under review or there was no relief found.

Consumers can submit their complaints either online with Consumer Finance’s Government Site or by calling 855-411-CFPB (855-411-2372). In the near future, CFPB will be fielding complaints for all kinds of consumer financial products, including mortgages and other loans.

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