Posts Tagged ‘Assets’
February 13, 2011
How To Strip Your Second Mortgage From Your Home In Bankruptcy – Lien Stripping
The benefit for filing a Chapter 13 is that you may be able to strip your second mortgage. This is called a “lien strip” or “lien avoidance”. This can make a difference between being able to save your home or having it go through foreclosure. Lien Stripping does not necessarily mean your second mortgage is eliminated, but it is converted from a secured debt to an unsecured debt – and, it only occurs in a Chapter 13 bankruptcy. Once your Chapter 13 bankruptcy plan is completed (3 to 5 years), your second mortgage is eliminated much like your credit card debts. By changing its status to unsecured debt, it is treated the same as if it were to be a credit card or medical debt. The unsecured debt (including your second mortgage) will be discharged after your bankruptcy plan is complete, whereas your secured debt must be continued to be paid on (i.e., your first mortgage).
Example for Lien Stripping:
A home in California was purchased for $250,000. The debtor obtained a first mortgage for $200,000 (1st mortgage) secured by a deed of trust, and a 2nd mortgage of $50,000, also secured by a deed of trust. The value of the property has declined because of the economy and it is now only worth $180,000. Because the value of the property is now less then what the 1st mortgage is, the 2nd mortgage has no value, which then becomes unsecured.
In a Chapter 13 Bankruptcy, the owner may now have the second mortgage lien stripped off from the property. This means, it could be treated in the bankruptcy plan as ordinary unsecured debt.
How Lien Stripping Occurs:
During a foreclosure process, the property owner may declare bankruptcy (either a Chapter 7 or Chapter 13). However, in order for a Lien Strip to work, the debtor must file for Chapter 13. Filing bankruptcy freezes a foreclosure (also called an automatic stay). The bankruptcy court than reviews your case. In most Chapter 13 bankruptcies where the second mortgage has no equity, the court may rule the second mortgage as unsecured debt, which is called “lien stripping”.
This is What May Occur:
• The property owner purchases a home by obtaining a first and second mortgage.
• Due to the economy, the property value falls below what the debtor owes on the first mortgage.
• If there is insufficient equity left in the property to cover the second mortgage, the court may strip the second mortgage lien off the property. This means that the debt becomes unsecured debt.
• Filing for bankruptcy may stop a foreclosure from happening.
The process of lien stripping may occur during the bankruptcy process. This not only helps the debtor keep the home, but also eliminates some of the debt owed on the property.
A lien strip is not a typical occurrence in a bankruptcy. It requires extensive research and drafting of court documents. It should be performed by an experienced bankruptcy attorney. Hiring an attorney for this type of case is very important. You may need all the legal advice for this situation to help and ensure the process moves forward efficiently and successfully.
Tags: Assets, Bankruptcy Attorney, bankruptcy lawyers, Chapter 13, Foreclosure, Lein Stripping, mortgage, secured debt
Posted in Chapter 7 Bankruptcy / Chapter 13 Bankruptcy, Los Angeles Bankruptcy Attorney and Bankruptcy Lawyer, Uncategorized | No Comments »
February 1, 2011
Bankruptcy Discharge!
A bankruptcy is defined as the legal process in which a person or firm declares inability to pay debts. Any available assets are liquidated and the proceeds are distributed to creditors. Upon a court declaration of bankruptcy, a person surrenders assets to a court-appointed trustee, and is relieved from the payment of previous debts. A bankruptcy discharge is an order given by the bankruptcy judge, at the conclusion of all legal steps in processing a bankrupt person’s assets and debts, which forgives those remaining debts which cannot be paid, with certain exceptions. Debts for fraudulent or illegal actions, alimony and child support and taxes are not dischargeable and remain owed.
The fair treatment of creditors and public policy both work to limit the extent of the discharge for debtors. The bankruptcy code was not designed so that debtors can take advantage of creditors for their own profit, and so various provisions of the bankruptcy code limit the debts that are discharged if they were incurred dishonestly or by fraud. This includes debts that were incurred on credit cards where the debtor entered false information on the credit application and also includes major debts for luxury goods that were incurred shortly before filing for bankruptcy. However, a creditor must challenge the discharge of these debts, and the court must notify the debtor and conduct a hearing; otherwise, the debts will be discharged.
There are debts that are discharged and others that are not allowed to be discharged. Most unsecured debts acquired by the debtor in good faith and if they cannot pay them off are allowed to be discharged under a regular Chapter 7 bankruptcy . Debts that are never discharged in a bankruptcy can include:
- Recent taxes
- Trust fund taxes
- Child or family support
- Criminal fine or restitution
- Accident claims involving intoxication
- Debts not scheduled
- Penalties payable to the government other than tax penalties
- Student loans
- Debts listed in prior bankruptcy where debtor was denied a discharge
- Taxes for years where return unfiled or filed for less than 2 years
Some of the listed debt may be discharged if the debtor can prove hardship to pay them back within a reasonable time frame.
Secured debt that is discharged is a little more difficult as the debtor might want to keep that asset such as a car, or home. The individual debtor can surrender the secured property, pay for it in a lump sum, or sign a Reaffirmation Agreement to keep it. In most cases, only prepetition debts are discharged. In an involuntary Chapter 7 case that is brought by a creditor rather than the debtor, discharged debts also includes debts incurred between when the case was filed and when the actual bankruptcy case commences, if the Chapter 7 bankruptcy is approved by the court.
An automatic stay is put once a bankruptcy process begins, this prohibits the collection of debts by the creditors. If the debtor receives the discharge of the debts, then the injunction succeeds the automatic stay and enjoins any further actions to collect the debts from the debtor. If a creditor violates the injunction and tries to collect the debts, then the courts may issue a civil contempt order. Generally, waivers of certain discharged debts are not enforceable except in specific circumstances. Waivers must be in writing and approved by the court. A reaffirmation agreement, for instance, must satisfy these and other requirements to be enforceable. A debtor may volunteer to pay a debt, but the creditor cannot harass or intimidate the debtor into doing so.
A Chapter 7 discharge is granted to an individual debtor if there have been no challenges, which is usually the case. Creditors have 60 days after the creditors meeting to challenge the discharge of its debt. If there are no challenges and if the debtor did not sign an reaffirmation agreement, then after about 3 months after the creditors meeting, the court sends the debtor the notice of the discharge. If the debtor signed a Reaffirmation Agreement and is not represented by an attorney, then the court requires the debtor to appear before it so that it can ascertain whether the debtor understands the Reaffirmation Agreement and that the debt will continue beyond bankruptcy. The debtor can either accept the agreement or cancel the agreement. Regardless, the discharge is granted at this hearing.
A Chapter 7 discharge relieves the debtor of the liability of most prepetition debts and some post petition debts, such as the claims resulting from the rejection of executory contracts or the avoidance of a transfer.
Tags: Assets, attorney, automatic stay, Bankruptcy, Bankruptcy Attorney, Bankruptcy Attorney In Los Angeles, bankruptcy laws, bankruptcy petition, Chapter 7, Child Support, Debt, Debts, discharge, Fines, IRS, Los Angeles Bankruptcy Attorneys, Student Loans, Taxes, unsecured debt
Posted in California Attorney, Chapter 7 Bankruptcy, Chapter 7 Bankruptcy / Chapter 13 Bankruptcy, Creditors, Creditors Meeting, Los Angeles Bankruptcy Attorney and Bankruptcy Lawyer, Secured and Unsecured Debt | No Comments »
October 24, 2010
When Chapter 7 Bankruptcy Is Not The Right Choice
When A Chapter 7 Bankruptcy Is Not The Right Choice
Chapter 7 bankruptcy is a liquidation proceeding where your unsecured debts are discharged and all but your exempt assets are sold. Bankruptcy helps millions get out from under the grip of creditors but chapter 7 can’t help everyone. With the exception of unsecured debt, chapter 7 will usually not be helpful where there is an excess of income, equity, or secured debts you are thinking of keeping. In addition to these categories, bankruptcy won’t have an effect on certain debts due to concerns of bankruptcy abuse such as certain fines, student loans, and certain judgments. Finally, look at your secured debt versus unsecured and balance the positives and negatives.
It is not ideal to file bankruptcy if you have lots of assets or equity. In the typical Chapter 7 bankruptcy , the majority of the debt will be from credit cards and the debtor will have few assets. With few assets, the general exemption will not be exceeded and there will be no non-exempt assets for the trustee to sell. In bankruptcy, equity is treated like any other asset and if there are assets that are not considered exempt, the bankruptcy trustee has the right to sell them and pay the creditors. Therefore,if you had more nonexempt assets than unsecured debt you would probably be better off not filing. Or, if you have assets that you are determined to keep which exceeds the exemption amount, you are essentially allowing the bankruptcy trustee to sell your assets. You could end up giving the trustee your family heirlooms, cars, houses, stocks and bonds. This also extends to chapter 13 bankruptcies because to have a valid chapter 13 plan the amount paid to unsecured creditors must equal the amount that the same bankruptcy in chapter 7 would yield.
If you have substantial excess income, you may not be eligible for chapter 7. The Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) changed bankruptcy law to prevent abuse. This added requirements like the means test which won’t allow you to file for chapter 7 if your median income is above the median income for your area for the particular family size. With too much excess income you will not be able to qualify for a chapter 7 and the bankruptcy trustee may decide to convert your bankruptcy into a Chapter 13 .
Chapter 7 is not recommended where the majority of your debts are unsecured but are in special categories of bankruptcy law. Bankruptcy is designed to help those who are unfortunate rather than ill willed. If you have debts cause by drunk driving, larceny, embezzlement, or similar crimes, these can’t be discharged. Student loans and support payment are also not dischargeable as it would encourage abuse of bankruptcy.
Finally if your debts are primarily secured debts, chapter 7 might not be the right option. Since Chapter 7 bankruptcy only discharges unsecured debts the secured debts will survive the bankruptcy. If you also have a substantial amount of unsecured debt and relieving that debt would allow you to pay your secured debt, then chapter 7 may be the right solution. It may also improve your ability to get a loan modification because you will have more funds available when your unsecured debts are discharged. These are only broad areas that you may consider and only a Los Angeles Bankruptcy Lawyer can analyze your situation and help you plan the right course of action.
Tags: Assets, Bankruptcy, Bankruptcy Attorney, Bankruptcy Attorney In Los Angeles, bankruptcy petition, Chapter 13, Chapter 7, Equity, file for bankruptcy, Income
Posted in Chapter 7 Bankruptcy, Credit, Los Angeles Bankruptcy Attorney and Bankruptcy Lawyer, Means Test, Uncategorized | No Comments »
August 20, 2010
Bankruptcy Stops All Collection Attempts
Julio owned a house in Woodland Hills that was about to be foreclosed on. As the sole owner of repossession company he could just barely make ends meet, and he was behind on not just his three mortgages and credit card bills, but also his auto loan. Julio had no insurance and after a serious heart attack he could no longer afford to make any further payments and his bank moved to foreclose on his home and repossess his truck. To prevent his truck from being repossessed he hid it in the garage of his home but since the home is also up for sale the truck will likely be taken right after the sale of the home. He is now in position to lose both his house and truck at the same time. This truck was not just for transportation but a tow truck he used to make his living. He found a bankruptcy attorney in Los Angeles who told him how bankruptcy could get him relief.
Filing for bankruptcy triggers an automatic stay which stops most creditors from collecting funds or property in any way. This stops foreclosure sales and if the sale is concluded after the bankruptcy filing, that transaction is reversed. In addition to foreclosures, it stops cutoffs in utilities, repossessions, wage garnishments, civil lawsuits, and bank levies. While this applies to utility bills it is not advised to
file for bankruptcy solely for an amount as small as unpaid utility bills as the bankruptcy court may see the filing as abusive. A final caveat is that a creditor can be relieved from an automatic stay if secured property is subject to unacceptable risk or the debtors appears to be unable to make future mortgage payments or pay arrearages.
Julio was used to changing homes and was not concerned about losing his home but without the truck for repossessing vehicles, or another source of income, he could not afford to have it repossessed. Bankruptcy allows a certain dollar amount of exempt items which creditors cannot take and there are special categories for items such as equipment used for work that are not counted as a part of the general exemption. Since the truck was had no equity it did not use any of his exemptions. Therefore Julio can keep things like clothing, jewelry, and some electronics, in addition to the tow truck. As his current income over the last 6 months was below the median income to qualify for a
Chapter 7 bankruptcy and his expenses were close to his income he was eligible for filing a Chapter 7 bankruptcy and could continue to keep his truck and operate his business.
Before you proceed withfiling for bankruptcy, please make sure to speak to a qualified bankruptcy attorney.
Tags: and bank levies, Assets, Bankruptcy, Bankruptcy Attorney, Bankruptcy Attorney In Los Angeles, bankruptcy laws, Chapter 7, civil lawsuits, collection, collection agencies, Creditors, Debt, file for bankruptcy, foreclosures, it stops cutoffs in utilities, Los Angeles Bankruptcy Lawyers, repossession, repossessions, unsecured debt, wage garnishments
Posted in California Attorney, Chapter 7 Bankruptcy, Foreclosure, Uncategorized | No Comments »
Bank Levy – You Can Get Your Money Back By Filing For Bankruptcy
Bank Levy – You Can Get Your Money Back By Filing For Bankruptcy
Santos is a student in Los Angeles who has been out of work for nearly a year. Last year both of his cars were repossessed in addition to a boat. The cars that were repossessed were financed and Santos thought he no longer had to worry about that debt. Just recently he has learned that the finance company he used to buy the cars now has a levy on his bank account. Since Santos is out of work, his wife Rose is the only one with any income. As they were already struggling with bills, the bank levy has resulted in thousands in overdraft fees.
Santos first considered debt consolidation. After searching online he found a debt consolidation company in Los Angeles that guaranteed he would be debt free in no time. Debt consolidation is not for everyone, since the amount owed is reduced and payments are made by a 3rd party, this negatively impacts your credit score sometimes to the point where it is seen by creditors as the same as bankruptcy. Therefore you get all of the burden of bankruptcy without the benefit of no longer paying the unsecured debt. In addition, you should be aware that there are many debt consolidation companies that are illegitimate and want to scam you. Unlike bankruptcy attorneys, to become a debt consolidation company there is no requirement for certification or training, which puts few barriers to crooks setting up a debt consolidation company. Even if the debt consolidation went smoothly there may be unforeseen future events that may force you to eventually declare bankruptcy anyway, but only after you’ve spent thousands paying the debt consolidation service fees and unsecured debts that could have been discharged earlier. To compound the problem, any debt that is forgiven by the lender will be considered income on your tax return that you will have to pay taxes on, while in bankruptcy debts discharged are not treated as income.
He then came to his senses and found a bankruptcy attorney in Los Angeles. Their expenses were already exceeding their income so they were eligible for a chapter 7 bankruptcy. Filing for bankruptcy allows you to recover any funds taken from you through bank levies or wage garnishments up to 10 days before filing. Therefore in these situations it is in your best interest to file quickly. Since Santos and Rose filed quickly, they were not only able to discharge there credit card debts and overdraft penalties they could also recover the funds that were taken from their account through the bank levy.
Tags: Assets, bank, bank levy, Bankruptcy, Bankruptcy Attorney, Bankruptcy Attorney In Los Angeles, bankruptcy laws, collection agencies, debt consolidation, debt settlement, discharge, file for bankruptcy, Los Angeles, los angeles bankruptcy attorney, repossessions, unsecured debt, wage garnishments
Posted in California Attorney, Chapter 7 Bankruptcy, Chapter 7 Bankruptcy / Chapter 13 Bankruptcy, Creditors, Law, Los Angeles Bankruptcy Attorney and Bankruptcy Lawyer, Uncategorized | No Comments »
