Can Chapter 13 Save My House?

November 19, 2007 - 18:09 by cerza

Many people are concerned about the mortgage crisis so widely reported in the news today. Foreclosures are nationally at a record-high. Unfortunately refinancing is not an option for most because they do not have enough equity in their home, so a good alternative can be filing a Chapter 13 bankruptcy.  Filing chapter 13 bankruptcy can be used to stop an imminent foreclosure and keep a roof over one's head. Filing a Chapter 13 bankruptcy places an automatic stay on all collection proceedings, including stopping all pending or upcoming foreclosure proceedings and/or foreclosure sales.
    

Filing Chapter 13 bankruptcy, however, does not mean a foreclosure sale goes forever by the wayside. You are responsible to make your current monthly mortgage payments after the filing of the Chapter 13 bankruptcy.  If these post-filing payments aren't made, your mortgage company can reinstitute foreclosure proceedings if they obtain approval from the bankruptcy court.   Chapter 13 works best for a homeowner who has a source of income, can make their mortgage payments under the repayment plan, and has not exceeded statutory limits on debt allowed under Chapter 13 (your attorney will explain this all). 
    

Again, filing Chapter 13 is not a fool-proof end to a possible foreclosure.  Miss payments now and your lender is free to begin foreclosure proceedings again.  But, provided you make on-time payments under your repayment plan, you have a good chance of getting back in your lender’s good graces and, more importantly, keeping your house.  

Click here to contact an experienced Chapter 13 bankruptcy attorney for help.

Attorney Adam Cerza
BankruptcyHQ.com

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Am I going Bankrupt? - Sure Fire Signs You’re Headed For Chapter 7

It should be pretty obvious if your financial health is sick enough to warrant filing bankruptcy, but sometimes a multitude of factors just end up occurring at the same time which can easily cloud what should be a clear situation. Here’s a quick list of red flags which signal a path towards bankruptcy:

1. Creditors are calling your consistently - If you are a chronic late payer or non-payer, you will probably receive calls from your creditors, or their hired hands, wanting to know what the deal is with your debt. These calls can range from professional to intimidating. Depending on the amount you owe and the lateness of the payment, the creditor might be willing to strike a deal with you regarding a plan to pay. Be wary and consult an attorney before agreeing to any deal.

2. You have rising credit card debt – If you find your credit card statement and bill growing each month, despite your sincere effort to pay it down, you’re headed for trouble. Making minimum payments and realistically expecting to payoff your credit card balances is silly. The way interest is calculated these days and the associated fees with late or missing payments virtually eliminate any value to making minimum payments on this debt. Also, if you’re using your credit cards on purchases for everyday items in place of cash, be careful. Balances can add up very quickly and if not managed proactively, they can become unmanageable before you know it.

3. You do not have much of a nest-egg in the bank – If you are living week to week or month to month, chances are you have not had the opportunity or luxury of socking away a few bucks every time you get paid. Many folks live entire lives like this, always vulnerable to happenstance when things might go wrong. One such negative happenstance can mean financial disaster. If you find yourself in this position, you could be on the road to bankruptcy. Talking to an attorney might be a good way to make a move forward.

If your financial health has been consistently challenged despite your best efforts to find a cure, you might be on the road to bankruptcy. Be aware of your situation, don’t ignore it. Speaking to an attorney can be the first step towards solving the problem.

-D Pearlman

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More Oklahomans are filing Chapter 7 bankruptcy and Chapter 13 bankruptcy again. Total statewide Oklahoma bankruptcy filings are up a total of 11.5 percent so far for 2007 compared to 2006. In fact, many Oklahoman bankruptcy court officials and bankruptcy attorneys believe that bankruptcy filings will eventually return to the pre-2005 bankruptcy law change numbers. (In October, 2005, Congress passed the Bankruptcy Abuse and Consumer Protection Act making Chapter 7 bankruptcy income-dependent and more difficult to file for individuals and married couples).

These Oklahoman bankruptcy attorneys and officials believe Chapter 7 & Chapter 13 bankruptcy filings will continue to rise for several reasons. First, the economy continues to remain sluggish, with no real end of the downturn in sight. Secondly, many people are able to obtain much more credit than they can repay, often at outrageous interest rates. Lastly, due to the sub-prime mortgage industry fallout, foreclosures are at a record high. While people have the ability to save their homes from foreclosure by filing Chapter 13 bankruptcy, many individuals and married couple have come to the realize that they can not afford their monthly mortgage payments on a going-forward basis and have decided to turn in or “surrender” their property by filing Chapter 7 bankruptcy.

Other states have also seen notable increases as well, most notably Michigan and Georgia.

Click here for a free evaluation with a qualified bankruptcy attorney and see if Chapter 7 or Chapter 13 bankruptcy is right for you, or visit Directory Free for additional legal information.

Attorney Andrew Partridge
BankruptcyHQ.com

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Those of us who are or have been in debt know the drill. Money gets a little tight so we rely on the credit card. Maybe we even splurge on a couple nights out to feel like a normal person. Then the minimum payments get a little out of reach but, what’s this? I can get another card at 8%? Great, I’ll transfer the balance and buy some time. Now we have two balances and the minimums aren’t getting any easier to pay. Suddenly a cash advance looks really attractive. Well, needless to say these stopgap measures are exactly that. Soon the dam breaks, we miss a payment or two and the credit card companies take advantage immediately. Our APR’s skyrocket and the late fees add up, making next months payments impossible. Our credit cards have us over a barrel, but before we debate this modern-day usury, here are a couple tips to manage the insanity.

  1. Be Assertive! I know this might sound like a waste of time, but if you know you’re going to miss a payment date, call your credit card company and ask for an extension. There’s a good chance you’ll get it. At least you buy some time and hopefully avoid another late fee. And while you’re at it, take a stab at negotiating a lower APR. Credit card companies make money off you. If you can take your business elsewhere, they might make concessions here and there to keep you.
  2. DO NOT, no matter how tempting, no matter how much it makes sense at the time, no matter what your friends say, DO NOT open new lines of credit or take cash advances to pay higher interest cards. If you’re struggling to pay one card, don’t double the stress of adding another bill each month. Worse yet, cash advances carry ridiculous interest rates. Chances are if you’re taking an advance, you won’t be able to pay it back right away, so in the long run you’ll end up paying five times the amount you take in advance.

Certainly not a long-term solution, but a couple things to consider shy of filing for Chapter 7 bankruptcy or Chapter 13 bankruptcy.

 

Attorney Adam Cerza
BankruptcyHQ.com

 

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I Just Filed Bankruptcy. Can My Employer Fire Me?

November 12, 2007 - 16:11 by rwaple

Employers can dismiss employees for many reasons. A bankruptcy filing cannot be one of them. If you’re worried about taking the next steps to filing bankruptcy because you are worried you might lose your job if your employer finds out, don’t fret. You cannot be let go because you file bankruptcy. It is considered discrimination, not different than racial or religious discrimination, and it’s against the law for any employer, private or governmental, to fire you only because you file for bankruptcy. Also, an employer cannot take any other negative action against you, such as demoting you, or reducing your pay, just because you file for bankruptcy. Such actions are discriminatory and you have legal remedies available to you if you find yourself in that position. Conversely, if you’re fired due to general incompetence, corruption, or you like to take long 3 martini lunches, filing bankruptcy will not spare you. It cannot be used as a shield against legitimate disciplinary action including termination.

Employers typically will not find out about your bankruptcy filing unless your wages have been garnished or you enter into a Chapter 13 repayment plan that is paid directly out of your paycheck. If you file bankruptcy, the wage garnishment will stop, so your employer, or at least the payroll department, will know of the filing. They’ll find out, but that is not a reason not to take the first step to restoring your financial viability.

If you’re looking for a job and you’re thinking about filing bankruptcy, the affect of the filing depends on if you are looking for a government job, or a job in private industry. No federal, state or local government agency can take your bankruptcy into account when making a hiring decision about you. However, that same protection does not exist in the private corporate world because private employers will often require a credit check prior to offering to you a new job. If you refuse to consent to the credit check, employers do not have to offer you a position. It’s certainly not the end all of any potential job, so if you’ve filed for bankruptcy, it’s best to be honest with the people you speak to in the interview process about how your financial problems are behind you now, and you’re excited to move forward with a new opportunity.

Don’t be scared to take the steps required to restore your financial health. If you’ve got a good job that you like, and you’ve developed strong relationships, and you’ve run into some hard times, most likely your employer will embrace helping you out. Not look to throw you out on the street. Filing bankruptcy shouldn’t mean giving up your career, and you have the law behind you to ensure your protection. Consult an attorney if you think you’re a victim of bankruptcy discrimination and protect that job of your dreams.

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What the FICO? A Quick Look Inside Your Credit Score...

November 9, 2007 - 17:52 by apartridge

While most everyone knows they have a credit score that creditors use as the end-all and be-all of a consumer’s financial responsibility, I would bet just as many don’t know who – and especially how – their magical three number credit score is determined. 
 
Well, we can all thank Fair Isaac & Co.  for coming up the FICO score (or credit rating) that roughly 90% of U.S. banks use to judge our worthiness.  And if one wasn’t enough, we have three scores, one from each of the major credit reporting agencies.  Our scores come from information the credit bureaus keep on file about us and change over time.  While this score isn’t an exclusive indicator of whether or not we’ll be approved for a loan or get a credit card, it’s as close as you’ll get.

So how do they do it?  Each credit bureau has their own formula and lenders are not required to use any specific calculation, but here are the basics of how our score is determined:

        1. Payment History – About 35% of your score comes from payment information on your accounts, whether paid in full dutifully every month or 6 months delinquent. 
        2. Amounts Owed – About 30% comes from amounts owed on your accounts, what kind of accounts they are and how many carry balances.
        3. Length of Credit History – About 15% comes from how long an account has been open and when it was last used.
        4. New Credit – About 10% comes from the number of new accounts opened and the number of new inquiries into your credit report.
        5. Types of Credit Used – Finally, another 10% looks at the types of accounts you have (credit card, retail account, mortgage etc.) and the prevalence of information on each.

Hopefully this brief look will help the next time you’re wondering why three numbers can be your best friend or worst enemy.

For help in obtaining a free copy of your credit report, click here

--Attorney Adam Cerza
--BankruptcyHQ.com

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Can a College Student File Bankruptcy?

November 2, 2007 - 22:59 by jhall

Many people think that if you’re currently enrolled in college or a school program, you’re not allowed to file for bankruptcy. Nothing could be further from the truth! Bankruptcy laws only require that you be 18 years old, a resident of the state where you are filing from for the last two years, and be capable of making the choice to file bankruptcy voluntarily. So don’t let the fact that you’re still a student stop you from filing for bankruptcy if that’s the relief you need.

In fact, college can be the best time to file a bankruptcy. Your student loans are still in deferment, so you won’t even have to worry about them in the filing itself. Also, you won’t have that high paying salary that might actually keep you from being able to file an easy Chapter 7 liquidation until after you graduate. Why hold on to those debts until you have to pay them back for at least a three year time period? File now and save yourself the trouble.

Also, don’t worry that by filing for bankruptcy you’ll never be able to get another credit card. Most people who file for Chapter 7 bankruptcy see a flood of credit card offers after they file. The credit card companies know that you wont be eligible to file another Chapter 7 for eight more years, so to them, you are a safe bet. The trick is to read the fine print on those offers. Of ten times, they’ll start off with a twenty to thirty percent interest rate. Be selective and choose one with a ten to fifteen percent rate. Use it like a debit card and pay the balance back to zero at the end of each month. In no time at all, you’ll find your credit score steadily improving.

Once your credit has improved, you can think about financing a car, or maybe even purchasing a home, and you’ll be in good shape to do so. It’s all because you filed for bankruptcy while you were in college and then practiced responsible credit behavior after you graduated. When all’s said and done, people wont need to see your diploma to know how good you are at making the right decision.

Just remember, always consult an attorney who specializes in bankruptcy law. They know all the ins and outs to get you back on your feet and on your way to a great future. Until then, keep your eyes on the prize. And if you are looking for some additional information, check out the helpful directory Ldmstudio Directory to kill some time, too.

-JH, Attorney

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Why Can’t I Get Rid of This Debt?

October 25, 2007 - 05:47 by jhall

It’s no secret that people have a lot of trouble paying down their credit cards. Take me for example. I got a credit card in my early twenties (I won’t say which one, but it starts with an ‘A’, and ends with a ‘merican Express’.) That zero percent interest rate sounded great, and for the first few months everything was just fine. I made my payments on time, and was on my way to establishing good credit. Then, I somehow missed a payment. Perhaps my finances were tight that month, or I just misplaced the bill. The reason didn’t matter to my credit card company though. They started charging me thirty (that’s 30) percent interest and soon, what had been a measly $500.00 debt was over $3600.00.

Now, I’ll accept the blame for missing the payment, and when I went back and checked the contract, sure enough, miss a payment and get the interest rate jacked up. As a young man who was still trying to find his way in life, I tried to make the minimum payments, but I soon found that by making those minimum payments I would never actually pay down the debt to zero, or at least I wouldn’t before I was fifty years old.

About this time I started practicing as a bankruptcy attorney, and I discovered something. I was not the only one in this sort of situation. All my clients were too! All across the spectrum, from police officers to construction workers to office managers to salespeople, everyone was being crushed by the interest rates on their credit cards. I was one of the lucky ones with only one card to worry about, but imagine that same problem with three, four or five credit cards, all with thirty percent interest! It’s outrageous! And then, there were the people who thought at the very least they could reduce the number of credit cards and make their debt more manageable. They paid off one card with another, and their installments were still too high to make more than the minimum monthly payment.

The madness has to end sometime though. People are smart, and we will all eventually realize when we’re in over our heads. That’s when it’s time to seek help. And please, whatever you do, don’t seek help from a ‘Debt Consolidation Agency.’ First of all, there is nothing anywhere that says that all your creditors have to go along with the repayment plan. They can opt out, and still be waiting for you in the end, with all the interest that you’ve accrued. Second, Debt Consolidation Agencies can take up to Forty percent of what you pay them every month as service and administrative fees. That means that for every $100.00 you pay them, only $60 is actually going to pay back your debt. Not a good deal at all.

So, talk to a professional. If your debt is more than you can manage, perhaps it’s time to give yourself a fresh start, or at least work out a repayment plan with the full power of the law behind it. Contact an specialized attorney and find out if bankruptcy is right for you.

Until then, keep your eyes on the prize.

-JH, Attorney

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What to Expect in Bankruptcy Court

October 11, 2007 - 18:57 by rwaple

Many of my bankruptcy clients would be very anxious about having to “go to court” during their bankruptcy proceeding. Most of these fears were based on misconceptions and horror stories that simply aren’t true.

In a typical bankruptcy case, you don’t ever actually see the bankruptcy judge or “go to court”, you simply meet with a court appointed trustee at a “341 Meeting of the Creditors”, named after section 341 of the bankruptcy code. The trustee’s job it is to oversee the bankruptcy process and represent your unsecured creditors.

Your Meeting of the Creditors will typically take place 30-45 days after the bankruptcy is filed. In the majority of bankruptcies, these meetings are relatively simple and painless for the debtor and most meetings in a Chapter 7 bankruptcy last as little as 5-10 minutes. In a Chapter 13 bankruptcy , the trustee also has to go over your budget to ensure that the proposed payment plan is feasible, so they can take a little longer to complete, but usually aren’t more than 20 minutes.

The trustee will swear you in under oath, ask some questions to make sure that you are eligible to file bankruptcy, verify your social security number, and examine your bankruptcy schedules for any irregularities. If you hired an experienced bankruptcy attorney to prepare your paperwork and fully disclosed all relevant information, then there shouldn’t be any surprises. Each State has exemptions that allow you to protect all or a portion of your assets and the majority of bankruptcy cases end in a finding of “No-Assets”, meaning that all of your property is protected from your creditors.

Although it is referred to as the “Meeting of the Creditors”, it is unlikely that any of your creditors will actually attend the Meeting. Sometimes your secured creditors will attend the Meeting to offer a Reaffirmation Agreement on your secured debts. By signing a reaffirmation agreement, you are able to keep any property that you pledged as collateral for the loan by agreeing to repay the debt even though you’ve filed bankruptcy. You’re under no obligation to reaffirm any debts, and you should consult with your bankruptcy attorney before signing any reaffirmation agreements.

Many clients ask “Was that it?” after the completion of their Meeting and can’t believe how dignified and simple “going to bankruptcy court” was.

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A common scenario that we as bankruptcy attorneys often see in personal Chapter 7 bankruptcies is when our clients have equity in their real estate in excess of the Illinois homestead exemption. In Illinois, a Chapter 7 bankruptcy filer is allowed to protect, keep and exempt up to $15,000 of equity in their homestead property, and the exemption doubles to $30,000 for married joint filers.  To qualify for this Illinois “homestead” exemption, you generally must be able to show that you lived in the property in question at the time of the Chapter 7 bankruptcy filing.

Real estate equity is determined by taking the real estate’s fair market value and then subtracting a reasonable cost of sale percentage in addition to any liens that exist on the property.  The Northern, Central and Southern Districts of the Illinois Bankruptcy Courts all generally accept a 7% cost of sale reduction to account for any broker fees, real estate taxes, etc. at the time of sale.   So in an example where an unmarried person owns a homestead property worth $200,000 that has a $120,000 mortgage on it (and no other liens), the formula would look like this: $200,000 – 7% cost of sale = $186,000 - $120,000 mortgage = $66,000 - $15,000 homestead exemption = $51,000 of exposed equity.

Many options exist for bankruptcy clients who have equity in their home in excess of the Illinois homestead exemption:

1) Consider Filing a Chapter 13 Bankruptcy
Typically the most advisable and best option given by bankruptcy attorneys to clients who need the relief of the bankruptcy code but at the same time want to keep their home is to file a Chapter 13 bankruptcy.  In a Chapter 13 bankruptcy, the filer is allowed to repay the equivalent amount of excess equity that’s unprotected by the homestead exemption and therefore keep their home.  Chapter 13 bankruptcies are consolidation repayment plans that are based on a filer’s household disposable income and will range anywhere from 3 years at a minimum to 5 years at a maximum.   To be able to qualify for a Chapter 13 bankruptcy, a filer must demonstrate that they have the sufficient, steady monthly income to support a feasible repayment plan based on their subjective circumstances.

2) Selling the Real Estate Prior to Filing
The Illinois homestead proceeds of sale exemption allows a Chapter 7 filer to keep up to $15,000 in proceeds of sale of a homestead that has been sold within one calendar year prior to the filing of the Chapter 7 bankruptcy.  This exemption also doubles to $30,000 for joint filers.   While it makes most sense for those who are willing to part with their home, this option can be extremely beneficial in that allows qualified Chapter 7 bankruptcy filers to receive a discharge on their unsecured debt, and at the same time retain the cash equity from the sale of their former home in a Chapter 7 bankruptcy filing.  Note: It’s important to remember to not commingle any of the sale proceeds with your general funds in this scenario.

3) Surrendering the Real Estate to the Bankruptcy Court
Another option is to file a Chapter 7 bankruptcy knowing that excess equity in the homestead exists, and allow the Chapter 7 Trustee to sell and liquidate the real estate.  In this scenario, the Chapter 7 Trustee will pay the individual filer their $15,000 proceeds of sale exemption ($30,000 for married filers) out of the equity from the sale.  Any funds gained from the sale of the property in excess of the exemption will be used by the Chapter 7 Trustee to repay the Chapter 7 filer’s creditors. 

4) Chapter 7 Trustee Buyout
This option allows a Chapter 7 bankruptcy filer to keep their property, but at a literal cost.  A Chapter 7 filer must produce matching cash funds to cover the equivalent monies that a Chapter 7 Trustee would receive if they sold and liquidated their homestead in a Chapter 7 bankruptcy.   This large cash amount is usually obtained by Chapter 7 filers refinancing the equity out of the property and turning the proceeds over to the Chapter 7 Trustee.  However, this option can be risky and is not usually advisable in that it can often be difficult to qualify for real estate refinancing after the filing of a Chapter 7.

Andrew Partridge, Esq.
BankruptcyHQ.com

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