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rsz_underwaterhouse-150x150When Texas and Florida, along with several other states along the eastern seaboard of the United States, were hit by Hurricane Harvey and Hurricane Irma, many mortgage companies offered their borrowers who had been affected by these storms participation in a forbearance program. A forbearance program is where your mortgage company agrees to suspend your mortgage payments for a set period of time. Forbearance programs are usually good for borrowers who are going through a short-term financial situation. The forbearance of mortgage payments is meant to allow the borrower the time they need to get back on their feet and then recommence their regular mortgage payments. The idea behind the forbearance programs after the hurricanes was to allow homeowners time to repair or rebuild their homes that had been damaged by the storms.

Unfortunately, not all forbearance programs have reached their goal. What I have come to learn through the last several months as forbearance programs are coming to an end, is that some of these programs require the borrower to bring their mortgages current at the end of their forbearance period. This means that borrowers must make all missed mortgage payments at one time when their program ends. The issue that many borrowers who have chosen to take advantage of one of these programs is that they were not aware that they would have to make all of the payments at the end of the designated time period. By the time they learned they would be expected to pay their mortgage company all of the payments that were deferred through the forbearance program, it is far too late for them to prepare for such a large payment at one time. This has put many borrowers between a rock and hard place, because they are unable to bring their mortgages current. Continue reading →

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Assets-3-150x150What is an ESOP?

Employee Stock Ownership Plan, better known as an “ESOP,” is a way for employees to have ownership in the company they work for. They are used by several large successful companies because of the various tax benefits they can offer to the company as well as to the employee. Most commonly, employees obtain ownership of the company’s stocks as an award to help motivate and reward the employee. They are also a great way for employees to plan for retirement.

Because of how an ESOP works as a trust fund, employees generally do not have much control or access to their shares until they reach retirement age, or when their shares vest. Because of this lack of access, most ESOPs are treated just like a 401K, or any other retirement plan that is qualified under ERISA, when they file bankruptcy; therefore, ESOPs are treated as an exempt asset.

How does an ESOP work?

Just like a trust fund or spendthrift trust, all shares are retained in an ESOP trust until retirement age or termination of employment. Basically, when a company decides to set up an ESOP, they create a trust that the company makes yearly contributions to. The company then creates a formula that controls how employees receive stock in the company. Before an employee can have access to their stocks, their stocks must first vest. Continue reading →

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payday-150x150Having been unemployed for some time, you have accumulated a lot of debt and are now behind on paying those debts. You are considering filing bankruptcy, but happen to have two vehicles that are paid off and want to sell one of them. Can you sell one of those vehicles and then file a Chapter 7 Bankruptcy? The short answer is it depends, and this is why.

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. Continue reading →

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If you wish to file a Chapter 7 Bankruptcy, you will have to first pass something called the MEANS Test. The MEANS Test is the determination of whether or not you are eligible to file a Chapter 7 Bankruptcy based upon your household size and income.

For a Chapter 7, your income must be below the median income level for your household size in your state. In order to figure out what your income is, the court looks at an average of your monthly income for the previous six months prior to filing. In Florida, as of April 1, 2017, the median income numbers are around the following and increase as your household size increases:

Household of 1: $44,576.00

Household of 2: $55,344.00

Household of 3: $60,636.00

If your median income is below these numbers for your household size, you only have to complete the “short-form means test.” This is because it is easy to determine that you qualify for a Chapter 7, because your income is clearly under the median.

If your median income is above these numbers, you will have to complete the second part of the MEANS Test. The second part of the MEANS Test, the “long form,” does a further determination/analysis of whether your income and expenses allow you to qualify for a Chapter 7. Things such as a mortgage or car payment can help you to lower your monthly income in hopes that it’s just enough to help you qualify for a Chapter 7 Bankruptcy.

What types of income are included in the MEANS Test?  Continue reading →

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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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Student-Loans-150x150The Bankruptcy Abuse Prevention Act of 2005 made student loan debts non-dischargeable through bankruptcy. Why do you ask?

The federal student loan program was initially created with the goal of making a college education affordable for all children. Originally student loans were only meant to help fill the bridge between grant money and the cost of tuition, books, and housing. In other words, student loans were only supposed to supplement education costs. Student loans were never meant to completely cover the full costs of receiving a higher education.

Instead of being based on your creditworthiness like most other types of debts, student loans are only based on your need. Due to this need v. creditworthiness approach, Congress did not feel that student loans should be dischargeable through bankruptcy except under very extreme circumstances that are completely out of your control. Specifically, Congress did not want to put the burden of unpaid student loans onto the taxpayers. Continue reading →

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Abby Lee Miller of the famous reality television show “Dance Moms” recently plead guilty to bankruptcy fraud and was sentenced to 1 year and 1 month in a federal prison to be followed by supervised release for another 2 years. Fraud is not something taken lightly by the federal court system and can have devastating and life changing consequences.

Fraud in bankruptcy can take a couple of different forms.

  1. When a debtor, the person who is filing for bankruptcy, tries to hide their assets in order to prevent losing them. When filing bankruptcy, you are provided certain exemptions that allow you to protect a portion of your assets. Any asset that is not protected by one of these exemptions can be taken from you by the trustee and then distributed to your creditors.
  2. When a debtor tries to bribe the bankruptcy trustee.
  3. When a debtor deliberately files falsified or incomplete bankruptcy forms in order to protect their assets from being seized by the trustee.
  4. When a debtor files for bankruptcy multiple times this can be viewed as an abuse of the right to file bankruptcy and enjoyment of the protections that bankruptcy affords. As soon as someone files for bankruptcy, an automatic stay is put into place that prevents any of their creditors from continuing to collect the debt that is owed to them. This is often seen when someone is facing foreclosure. The debtor files for bankruptcy on the eve of a foreclosure sale date with no intention of completing the bankruptcy. The intentions are to have more time in the home. The bankruptcy is later dismissed by the court because the forms are incomplete or because the debtor does not comply with the bankruptcy court, or the debtor dismisses the case themselves. Once the bankruptcy case has been dismissed and a foreclosure sale date has been reset, the debtor again files bankruptcy on the eve of the sale date with the same intentions as the prior bankruptcy. Some debtors do this over and over again, and this is an abuse of the bankruptcy system.

Continue reading →

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house-150x150Florida’s Bankruptcy Laws offer a very generous Homestead Exemption for those filing bankruptcy here in the Sunshine State. As long as you have owned your homestead property for 1,215 days or more prior to filing bankruptcy, the Florida Homestead Exemption is unlimited! How awesome? Right?

However, don’t get too worried just yet if you have not owned your homestead for 1,215 days. You can still take advantage of the Florida Homestead Exemption and protect up to $125,000 of the equity in your home per Debtor. That means that a couple can still protect up to $250,000 of the equity in their home when filing bankruptcy together, which is still pretty awesome!

But what happens when you file a Chapter 7 Bankruptcy with other real property that is not your homestead? Can that property be protected? How the property is treated will completely depend on whether or not the property is mortgaged and/or if there is any equity in the property. If the property is encumbered by a mortgage and there is no equity in the property, then you should be able to simply continue making those normal monthly mortgage payments, and the bankruptcy should not have any effect on the property whatsoever. However, if there is any equity in the property, then the Trustee will most likely take possession of the property and sell it in order to reach the available equity. Unfortunately, there is no exemption available to protect real property that is not your homestead.

Continue reading →
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When you file bankruptcy all, if not most, of your debts are discharged, which means you are no longer responsible for them. A Reaffirmation Agreement is a brand new agreement or contract between you and your creditor in which you voluntarily choose to remain liable for the debt after you receive your bankruptcy discharge. The terms of the Reaffirmation Agreement are generally exactly the same as the terms of your original contract. There are two major types of debts that you most likely will have to sign a Reaffirmation Agreement for if you wish to keep the property secured by the debt. These two types of debts are car loans and mortgages.

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. Continue reading →

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marriage-150x150One thought that many people think about when getting married, is what their future spouse’s credit history is and their ability to obtain new debt. A correlating question is how will their future spouse’s credit history affect their own ability to obtain new debt. Why? Because they most likely, one day in the future, would like to know they have the option to purchase a new home, motor vehicle, or simply just obtain new debt. It can become much more concerning if your future spouse has filed bankruptcy within the last few years. How will their bankruptcy affect your ability to obtain new debt? Unfortunately, there are a lot of factors that can affect the answer to this question. So, regrettably, the answer is that it will depend.

Most importantly, it is crucial to make note that the fact alone that your future spouse filed bankruptcy, regardless of when, is absolutely immaterial to your individual credit report. Your credit report will not merge with your future spouse’s credit report simply because you got married. You both will maintain separate and apart credit reports. In other words, your individual credit report will remain the same as it was before getting married. However, by being married, your spouse may have to sign certain types of contracts. Continue reading →

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