Our San Francisco Bankruptcy Attorney Discusses Benefits of Chapter 13 Bankruptcy

Bankruptcy can be a hard decision to make due to the complexity of each individuals situation.  Many people tend to shy away from the Chapter 13 bankruptcy because they do not know all the benefits that it can offer, which are many.  A Chapter 13 bankruptcy is a repayment plan over 5 years based on disposable income.  Therefore the amount of unsecured debt that you pay back could be pennies on the dollar.  To make it easier, I have outlined some of the benefits of a Chapter 13 bankruptcy below.

1.  Paying Back Pennies On the Dollar: The amount of credit card or unsecured debt that a debtor would be paying back in a Chapter 13 plan could be pennies on the dollar.  This is because the amount paid back is determined by the % of disposable income the debtor has after expenses have been deducted.  After such expenses as income taxes, mortgage, car payments, health insurance and retirement contributions, most debtors have very little left over to pay the creditor.  Therefore, the amount put into the Ch. 13 plan could be very small and at no interest.  This beats a consolidation company or debt settlement agency taking $500/mo to negotiate debt down since you would most likely be paying more to the settlement than the Ch. 13.

2.  Stripping a Second Mortgage Off the Property: Homes are becoming increasingly hard to maintain.  Nowadays it is not uncommon for a homeowner to have two or even three mortgages tied to their properties.  In a Chapter 13 bankruptcy, if your house is underwater (you owe the lender more than what it is worth out on the market), you can do what’s called a “lien strip”.  Essentially, a lien strip is just removing the second mortgage off the property leaving only the first mortgage to be paid.  With this option in a chapter 13 bankruptcy, you could be losing hundreds of thousands of dollars, never to repaid again.

3.  Stopping Foreclosures: A Chapter 13 bankruptcy can also help you to stop foreclosures on any homes with such notices.  This bankruptcy also allows the debtor to catch up on the arrears that are owed in the Chapter 13 plan instead of coming up with the thousands of dollars in one day to save their homes.

4.  Lowering Monthly Payments: You can also lower your monthly payments on student loans or car loans when you enter into a Chapter 13 bankruptcy.  Any outstanding loans that you may have can be put into the chapter 13 plan to be paid off in five years regardless of what you have agreed with the lender.  The interest is nominal and it spreads the payments out to make them more manageable.  Your car payments can even be cut in half to give you the breathing room that you need to keep up with your daily expenses.

A Chapter 13 bankruptcy can help many debtors out there, so don’t be afraid to call an attorney to discuss these options.  If you wish to discuss your situation, please do not hesitate to contact any one of our offices.  We look forward to speaking with you soon!

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Loan Modification

Our San Francisco Bankruptcy Attorney Talks About New Loan Modification Law

If you are a person that has been struggling with getting a loan modification in San Francisco or San Jose, do not feel beaten, because as of June 1, 2010 the new HAMP laws came into effect helping many homeowners with modifying their loans.  Typically, when negotiating with a loan service provider, many debtors feel bullied and helpless.  This is because the loan providers hold all the cards when it comes to your modification.  You are at their mercy because they can say yes or no to the modification, it seems, at their whim.  As of June 1, 2010 however, many debtors will apply for a loan modification and find that they will be granted a loan modification and will be given a 90 day window to make the proposed modification payments.  This is due to the new HAMP modifications that was passed earlier in the year.  The law allows for a debtor who applies for a loan modification be given a chance at paying the proposed modification for 90 days, after which the lender can consider keeping the modification permanent.  Another benefit of the new HAMP modification is that debtors who are currently in Chapter 7 or 13 bankruptcies will not be denied consideration for HAMP if the debtor’s bankruptcy attorney or bankruptcy trustee submits a request to the servicer.  Therefore, even debtors who are in bankruptcy will not need to worry that they will not be able to participate in starting a loan modification due to the bankruptcy automatic stay.

If you want more information about our firm, please do not hesitate to contact us.  Our bankruptcy attorneys can provide you with information and get you on the road to a fresh start.  We have offices in San Jose and San Francisco.  We look forward to meeting with you soon!

Tips for selecting the right bankruptcy attorney

The decision to file for bankruptcy can be a difficult choice, so don’t make it more difficult by hiring the wrong bankruptcy attorney. Here are some tips to consider when selecting an attorney.
1. Do not wait until the last minute! If you have a foreclosure, wage garnishment or an emergency deadline you will want to hire an attorney as soon as possible.
2. If you know someone who has filed for bankruptcy, ask them about their experience with their attorney. At the very least you may be able to find out which attorneys not to hire.
3. Ask for referrals from professionals that you know such as your accountant or another attorney. Our firm receives referrals from family law attorneys, CPA’s, bankruptcy Trustees and bankruptcy attorneys.
4. Attend your local 341 meetings and see how attorneys interact with the Trustee and their clients. Take note if the cases are concluded or resolved.

The Time to Save is Now

Let’s face it; we are not getting any younger and that means we have less time to save for the future. If your working career is consumed with repaying your debts, how will you save for your retirement or your children’s college fund? It is time to face the music, get out of debt and start saving. A chapter 7 bankruptcy discharges or wipes away most unsecured debts such as credit cards and medical bills and provides for a financial fresh start. Begin your New Year by seeking advice from a bankruptcy lawyer and become financially independent.

Three Ways to avoid getting your Chapter 13 case dismissed

Sometimes our clients feel so much relief from the bankruptcy filing that they neglect to follow the court ordered rules in a chapter 13 case.
1. Debtors must make their monthly plan payments to the Trustee in a timely manner.
2. If the Debtor has not filed their tax returns by the date of filing, they have 45 days to file the return(s) and submit proof to the Trustee.
3. If the Trustee’s objections are not resolved after continued pre-hearing conferences and the Trustee’s objections are well taken, the case will most likely be dismissed.
The dismissal of a case does not negate the bankruptcy filing on the Debtor’s credit report and does not provide for a discharge of debts.

California Homestead Exemptions increase in 2010

Effective January 1, 2010 the California homestead exemption will increase and it is about time. A single person will be allowed $75,000; a married couple $100,000 and elderly or disabled persons $175,000. Although this is a welcome adjustment, some of our clients still have equity in excess of the exemption and depending on the amount of non-exempt equity, the Trustee may not determine there to be enough equity to liquidate and distribute to creditors. The Trustee is entitled to a percentage of the money recovered and if no funds are left for the benefit of creditors thereafter the trustee will abandon the asset to the creditor.

Mortgage Modifications: Beware

I had a client express their frustration with their mortgage lender with a theme all too familiar to me. They requested a mortgage modification to reduce their interest rate and monthly payments but the lender advised them that they would need to be at least three months in default for their application to be considered. The lender would not accept monthly payments thereafter unless the default amount was paid in full and along came the Notice of Default. 90 days went by and here they are filing a chapter 13 bankruptcy to stop the foreclosure sale.

Chapter 13 109(e) Debt limits

The 109(e) limits for a consumer chapter 13 case are $336,900 for unsecured debts and $1,010,650 for secured debts. These debt limits are reasonable if a Debtor has one or two properties but with the California home prices as high as they are, a chapter 13 case may be out of the question for certain consumer debtors. The determination of what constitutes as secured debt is an ongoing contested matter as some Trustees take the stance that the debt is only secured as to the market value of the property. For instance, if the market value of the home is $1,000,000 but the lien is $1,200,000 one could argue that the extent of the security is only as to the market value, therefore making the $200,000 unsecured. If there are two liens attached to the property and the first exceeds the market value of the home, the second lien can be avoided through the bankruptcy but if the lien is considered secured until the lien is avoided, the Debtor would not qualify for a chapter 13 bankruptcy at the time of filing as the total secured amount exceeds the debt limit.

Reaffirm or not to Reaffirm?

While in the active bankruptcy, Debtors are given the opportunity to enter into a reaffirmation agreement for property with secured liens (most common for vehicle liens). The agreement is a new financial agreement and if granted by the Judge, would no longer be a dischargeable debt. There are several factors for evaluation.
1. Does the vehicle have equity or is it under water?
2. Does the car payment impose an undue hardship upon the debtor now or could it in the foreseeable future?
3. Is the debtor current on payments?
4. Will the Judge grant the reaffirmation agreement?
Ford is one of the most aggressive creditors to insist upon the filing of the reaffirmation and has been known to repossess vehicles if there is non-compliance. Many reaffirmation agreements are neither granted nor denied by the court and as long as the Debtor remains current the creditor cannot repossess the vehicle.

Bankruptcy may not be fun, but our firm makes it easy

Although bankruptcy may not be fun, we make it easy. The most difficult step in filing for chapter 7 bankruptcy is making the decision to contact an Attorney. Many of our clients did not realize that they could keep their personal belongings and in most cases their home and vehicle. A chapter 7 bankruptcy discharges the Debtor’s personal liability for most unsecured debts and gives the Debtor an opportunity to surrender secured property that is under water.
The means test determines whether a Debtor will qualify for a chapter 7 bankruptcy. The test consists of a formula accounting the Debtor’s 6 month average income and the Debtor’s ongoing qualified expenses. Debtors who make more than the median income for their household size can still qualify for a chapter 7 case if they have enough qualified deductions to offset their income. The current median incomes for California are as follows:
• 1 person = $47,969
• 2 person = $64,647
• 3 person = $70,638
• 4 person = $79,194
• 5 person = $86,094
• 6 person = $92,994
• 7 person = $99,894
• 8 person = $106,794

Qualified deductions include mortgage payments, car payments, taxes, spousal support, child care, charitable contributions, health insurance and union dues. A Debtor cannot deduct expenses that are associated with secured property that is being surrendered.
A chapter 7 is considered the easiest bankruptcy chapter as the case timeline is approximately 90 days from the date of filing.