Articles Posted in Bankruptcy Basic Questions

Published on:

by

Your bankruptcy is over and now you want to start rebuilding your credit. What to do.

One of the implications of getting a discharge in bankruptcy is that all of your unsecured debt is gone. Therefore, your debt to income ratio is dramatically reduced. In the eyes of a potential lender, you may actually be a better risk than you were before the bankruptcy.

After filing a chapter 7 bankruptcy and getting a discharge, potential creditors know three things about you.

Published on:

by

In February 2015, a healthy and able bodied debtor was able to discharge approximately $119,000.00 in student loans in Nebraska. The Court looked at the totality of the circumstances in the case and specifically at the fact that the only repayment option offered by the lenders was the suggestion that the debtor “find more money”. Typically,

discharging student loans in bankruptcy is next to impossible and normally requires the debtor to be in extremely poor health with no prospect to earn an income. The lenders were particularly outrageous in this case stating in its defense that the debtor could simply relocate and find a better paying job. The Court quickly dismissed the lenders argument and found that the debtor made a “good faith effort to maximize her income.

images.jpg President Barack Obama recently signed a “student aid bill of rights” to make it easier for people with student loans to pay back their debt. This so-called bill of rights will require that businesses that service student loans provide clear information about how much a borrower owes, what options exist for repayment and if a borrower falls behind,

by
Posted in:
Published on:
Updated:
Published on:

by

Thousands of consumers have been deceived through telemarketing schemes designed to sell phony mortgage assistance and debt relief programs to already cash-strapped citizens. In 2012, the FTC filed complaints against several telemarketing companies alleging that they pitched programs that would supposedly help consumers in financial distress pay, reduce or restructure their mortgage and other debts. Among other things, the reported schemes violated the FTC Act, the Commission’s Telemarketing Sales Rule and the Mortgage Assistance Relief Services Rule (MARS Rule) which prohibits mortgage foreclosure rescue and loan modification services from collecting fees until homeowners have a written offer from their lender or servicer that they deem acceptable.

According to the FTC, the FTC’s complaints alleged that in addition to misrepresenting the likelihood that consumers would obtain a mortgage modification, the defendants falsely represented that consumers who did not receive a modification would receive full refunds, falsely represented that they were affiliated with the U.S. government, and falsely claimed to provide legal representation to consumers. Also, in violation of the MARS Rule, the telemarketers allegedly told consumers to stop communicating with their lenders, and failed to make Rule-mandated disclosures intended to ensure that consumers understand transactions with mortgage-assistance relief service providers and their rights under the Rule.

If you are experiencing financial difficulty, you may be tempted to use a debt relief company to help take care of your bills. Often times, settling with your creditors is a good alternative to filing bankruptcy. However, before you hire a company to help with your debts, you should first understand the differences in services that debt relief companies claim to offer, as well as the potential risks involved.

by
Published on:
Updated:
Published on:

by

One issue which comes up periodically when contemplating the filing of a bankruptcy is whether to purchase a new car prior to filing the case. Most chapter 7 debtors say that they need to purchase a car before the filing of the bankruptcy because they feel their credit will not allow them to purchase a car after the discharge. Most chapter 13 debtors say that they need a new car now, so they can survive the five year chapter 13. Generally, our experience has been that chapter 11 debtors rarely express these concerns. In each case the debtor intends to pay for the vehicle and retain it.

There is an Arizona statute, A.R.S. § 28-2133 which provides for the procedures relating to the recordation of a lien on a vehicle title. Essentially, what the statute means is that a creditor must perfect its security interest within 30 days of a new buyer taking possession of a vehicle, or the security interest may be set aside. The full text of the statute is as follows:

28-2133. Index and filing of liens, encumbrances or instruments; constructive notice

by
Published on:
Updated:
Published on:

by

Private student loans are currently nearly impossible to discharge in bankruptcy. Legislation proposed by Sen. Tom Harkin (D-Iowa) as part of a larger higher education package would allow private student loans to be discharged in bankruptcy. Reform to the current student loan bankruptcy laws has to be addressed due to the size and scope of the debt amounts current student loan holders have.

Student%20Loan.png

The original motivation for reigning in dischargeability of student loan debt centered around preserving government loans, with proponents of reform painting bleak scenarios about federal educational aid drying up if the discharge status quo carried the day. The first student loan reforms took place in 1976 as an amendment to the Higher Education Act and required that debtors wait five years from the beginning of their repayment period, or demonstrate undue hardship, before their student loans were eligible for discharge in bankruptcy. The five year bar was later extended to seven years and in 1998, the laws were changed so that governmental student loans could never be discharged absent a showing of undue hardship. In 2005, the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) made all educational loans, public and private, nondischargeable absent a showing of undue hardship (an impossible standard to meet as interpreted by courts across the country).

With one-in-three students loans considered delinquent and often affecting a student’s ability to make purchases in the future, the bill could offer much-needed reprieve for college students left with mountains of both federal and private student loans. However, the likelihood of the bill moving forward this session is slim, the WSJ reports.

by
Posted in:
Published on:
Updated:
Published on:

by

One issue which comes up when contemplating the filing of a bankruptcy is the homestead exemption. Normally the issue is fairly straight forward. Arizona’s Homestead Exemption, ARS. 33-1101provides: Homestead exemptions; persons entitled to hold homesteads

A. Any person the age of eighteen or over, married or single, who resides within the state may hold as a homestead exempt from attachment, execution and forced sale, not exceeding one hundred fifty thousand dollars in value, any one of the following:

1. The person’s interest in real property in one compact body upon which exists a dwelling house in which the person resides.

by
Published on:
Updated:
Published on:

by

During our initial bankruptcy consultation we go out of our way to advise potential clients that they will likely be required to turnover income tax refunds to their bankruptcy trustee. Many potential clients choose to delay the filing of their bankruptcy until they have filed tax returns, and received and spent tax refunds. Clients who retain our firm are again reminded of the requirement to turnover tax refunds to the Trustee.

However, sometimes the case is filed and the client collects and spends the tax refunds without consulting counsel. The usual explanation is “I am bankrupt, I needed the money for… insert a compelling, important reason.” When the requirement is again brought to the client’s attention we sometimes hear “So what? What can the trustee do about it?” This is an important question, and the answer is of critical importance.

untitled.png CHAPTER 7 TRUSTEE:

by
Published on:
Updated:
Published on:

by

One item that is often overlooked by persons considering filing bankruptcy is that handy trust that someone said you had to have years ago. Remember, the “My Family” living trust that you created a few years ago? You might have placed a car, a house, or even a bank account in the trust. Then when you look to file bankruptcy, you have forgotten all about it. Often, this is not caught by the bankruptcy attorney until you begin providing things like bank statements and car titles. It is, however, an important matter for discussion before you chose to file bankruptcy, and then before you chose which chapter to file.

Question 10b. of the Statement of Financial Affairs (among the initial bankruptcy documents filed in any bankruptcy case), requires the debtor to respond to the following: “b. List all property transferred by the debtor within 10 years immediately preceding the commencement of this case to a self-settled trust or similar device of which the debtor is a beneficiary.”

Question 14. of the Statement of Financial Affairs requires the debtor to respond to the following: “Property Held for Another Person. List all property owned by another person that the debtor holds or controls.”

by
Published on:
Updated:
Published on:

by

When the real estate market crashed, starting in 2007, we had many homeowners stuck in a situation where their homes plummeted in value so much that there was no equity at all. Thousands of homeowners walked from their homes, allowing the properties to be foreclosed upon.

A lien strip is where the lien of a lienholder, other than the first mortgage, is stripped and ultimately changes the status of the obligation owed to the lienholder from “secured” to “unsecured”.

The legal authority for lien stripping in Chapter 13 is 11 U.S.C. § 1322(b)(2). and 11 U.S.C. § 1328(a). § 1322(b)(2) allows a wholly unsecured lien on a debtor’s principal residence to be modified. § 1328(a) allows any unpaid portion of the claim to be discharged as an unsecured debt.

Published on:

by

For the first time since 2001, Arizona has increased the exemptions that a Debtor may claim when he files a bankruptcy. When debtors file a Chapter 7 bankruptcy, they receive a discharge of their debts (with some limited exceptions). In exchange for this discharge, a trustee is appointed who takes and sells some of the debtor’s property to be used to pay his creditors. However, pursuant to the Arizona exemptions, there are some items the trustee cannot take. The debtor gets to keep these items to help with her fresh start. Beginning September 15, 2013, the new exemption law allows exemptions in more items of property and for increased values. Some of the highlight are as follows: [NOTE: Regarding a debtor’s home-This was unchanged. A debtor can still exempt equity of $150,000].

530305_cacti.jpg 1. All wearing apparel not in excess of a fair market value of five hundred dollars ($500).

2. All musical instruments provided for the debtor’s individual or family use not in excess of an aggregate fair market value of four hundred dollars ($400).