Some people with minimal credit card debt file Chapter 13 bankruptcy primarily to strip a second mortgage. You may be able to accomplish the same result without filing bankruptcy now that banks are becoming somewhat more flexible to work out mortgage solutions on upside down property. I’ve heard of cases where a second mortgage company will substantially reduce a second mortgage balance and permit the debtor to pay off the settlement amount in installments. Here is one real example.
A couple had a first mortgage equal to or a little less than their house’s fair market value. They had a second mortgage of approximately $120,000. They were willing to let the house go if they had to pay both mortgages, but they wanted to keep the house if they could “strip” the second. They had about $15,000 of joint credit card debt. They wanted to avoid any bankruptcy if possible.
The couple stopped paying the second mortgage. They hired an attorney to defend any foreclosures and to negotiate with the second mortgage company. The attorney was able to reach a settlement with the second mortgage lender whereby the lender agreed to accept $15,000 as payment in full of the second mortgage. Furthermore, the second mortgage lender agreed to let the debtors pay the $15,000 settlement over three years in monthly installments. After payments were completed the second mortgage would be satisfied in full.
The couple “stripped” their second mortgage without having to go through Chapter 13 bankruptcy. I think their result was much better than filing bankruptcy. The couple will have less credit damage and they avoided paying 10% trustee fees on top of the mortgage payment. In Chapter 13 the debtors would have to pay all of their disposable income to the trustee for five years, and as a result, they may have had to pay much more money to the second mortgage lender during the five year plan in order to release the mortgage. The settlement strips the second mortgage in only three years rather than the five years required for a discharge and strip in Chapter 13 bankruptcy.
If you are thinking about Chapter 13 bankruptcy to strip a second mortgage, or stripping first mortgages on investment properties, consider hiring a good real estate attorney in order to achieve a better result through negotiation with your lenders.
Well, probably not.
Here’s that would radically cut the use of oil from countries that hate us and want us dead.
It looks funny, because it’s designed to eliminate drag.
Now, you’d think that a government that wanted to cut the use of foreign oil and encourage recycling of materials would embrace this car and make its way smooth.
And I’d love to see the United States become the leader in fuel efficient cars that are fun and safe to drive; and there’s no rational reason we couldn’t produce these simple vehicles right here in the USA, creating value, and jobs for U.S. Citizens.
And will I hold my breath?
Uh, no.
And why would I want to see jobs created in the United States? Well, I’m a bankruptcy lawyer; and I’d like to see fewer folks forced to file bankruptcy because of unemployment!
p.s. innovation and production capacity made our County great; if we can reduce the barriers that permit small companies to innovate, we can generate jobs, and that will be a good thing!
Question: does it cost money (is there a fee for example) to go bankrupt in Ontario?
Answer: Yes, there is a cost to file bankruptcy in Ontario.
You will be required to make a monthly contribution while bankrupt (for at least nine months), which depending on the trustee could be in the range of $200 to $250 per month. This covers the trustee’s cost to administer your estate.
You will also be required to make surplus income payments if your income exceeds the limit set by the government. Finally, you will also lose your tax refund and your HST credits while bankrupt.
You can read a detailed explanation in our article on How Much Does it Cost to File Bankruptcy in Ontario?
Many people who wanted to file Chapter 13 found that they were ineligible because their debts exceeded the Chapter 13 debt limits of approximately $1 million of secured debt or approximately $360,000 of unsecured debt. The debt limits have affected more people in the past few years because inflated real estate values during the boom resulted in many debtors having large mortgages which exceeded the secured debt ceiling. I have had several clients who could not qualify for Chapter 7 and who were willing to pay their creditors what they could afford in Chapter 13, but who were excluded from Chapter 13 by the debt ceilings. These people either had to file an expensive Chapter 11 case or forgo bankruptcy protection completely.
One unresolved question about Chapter 13 debt ceiling is whether joint married debtors could stack their ceilings. For example, if stacking were permitted, joint married debtors could have up to $2 million joint debt in a Chapter 13. Joint Chapter 7 debtors can stack their exemptions.
This past week one of the Orlando bankruptcy judges issued an opinion which hold that joint married debtors may in some cases stack the debt ceilings of Chapter 13 eligibility. The opinion explained that a joint bankruptcy is actually the combination of separate bankruptcy estates. In a joint Chapter 13 filing each of the joint debtors must individually meet Chapter 13 debt requirements.
The opinion’s effect on Chapter 13 depends upon whether joint bankruptcy debtors have separate debts or joint and several liability. For example, if the husband was individually liable for a $1.5 million mortgage and the wife individually liable for a $500,000 mortgage the couple could not file a joint Chapter 13 bankruptcy because the husband, individually, exceeded the applicable secured debt ceiling. If the husband is individually liable for a $900,000 mortgage and the wife is individually liable for a $900,000 mortgage they could file a joint Chapter 13 case even though their combined secured debts exceeded the secured debt ceiling.
It is unclear based on this opinion what happens if a husband and wife are jointly liable for a $1.8 million mortgage. If each spouse is allocated half of the $1.8 million mortgage then they could file a joint Chapter 13 case. If both spouses are accountable for the full $1.8 mortgage then neither spouse is eligible for Chapter 13 bankruptcy, and therefore, the joint petition fails.
Consider that in Chapter 7 bankruptcy married debtors as assumed each to own a 50% interest in personal property, and they can apply their full individual exemptions to their 50% property interest. Debtors who jointly own $2,000 of property each can exempt their $1,000 half ownership using their separate $1,000 personal property exemption. In re Scholz, 6:10-08446.
A woman called me to ask whether she and her husband could file bankruptcy while her husband was in prison. The woman is concerned about her husband’s inability to attend the trustee meeting. She said her husband could not initiate phone calls, and that the state will not transport him to a bankruptcy meeting or hearing. This woman said another bankruptcy attorney previously told her that she and her husband could not file bankruptcy until her husband was released permanently or on parole. I disagree.
Bankruptcy courts have been making it more difficult for debtors to avoid appearing at trustee meetings. For instance, medical excuses must be documented, and it is insufficient for one debtor spouse to simply show up with a power of attorney from the non-appearing spouse.
A debtor in prison legally prohibited from attendance at the trustee meetings, but he is not otherwise prohibited from filing bankruptcy. I think there will be some arrangement made for this incarcerated debtor to file bankruptcy in a joint petition. For example, the debtor could receive a phone call at the meeting time and testify in the presence of a court reporter, or the trustee may simply permit the attending spouse to appear with the husband’s power of attorney. J
In my opinion even if the debtors need to file a motion and get an order from a bankruptcy court, something will be done to resolve the logistical problem.
I’m a member of a Credit Union and have several accounts with them. I’ve heard of this mysterious ‘cross-collateralization’ CLAUSE and thought I would do some investigation so we can all sleep better. Arizona Bankruptcy Attorney John Skiba wrote, Bankruptcy, Credit Unions & Cross Collateralization Agreements, over at JDSupra, which provides a very brief and technically incorrect overview of Credit Union’s dirty little tricks to get you to pay all your debts owed to them. What we all need to know is, Can they get away with it?
The term cross-collateralization is not an agreement on its own, but rather it is a clause contained in other agreements that you might enter into with your credit union. A contract clause is a term or condition that is written into the agreement that becomes part of the contract. The trouble with these nasty little clauses is that credit unions are the only entities that think they’re a good idea and these clauses are not disclosed to the consumer and buried in the fine print or what we call ‘boilerplate’ language. I liken this baby clause as happy when you’re paying your debts and an incessant whiner when you stop.
Whenever you borrow money to buy say an automobile, or home, you list that property as collateral. The promissory note you sign has certain Truth in Lending Act (“TILA”) Disclosures that are required. The problem comes in when you obtain unsecured credit lines with the credit union that contain this cross-collateralization clause that says that they can attach other debts to any collateralized loans obtained from this credit union. This clause is buried in the credit agreements that are usually discarded by debtors without so much as a glance and do not contain any TILA disclosures. At their most fundamental level, these clauses violate Truth in Lending.
What also jumps out to me is Unfair and Deceptive Trade Practices in the Credit Union’s use and enforcement of these junk clauses. It is patently offensive and unconscionable to include this cross-collateralization clause buried in a consumer loan agreement that is not disclosed to the consumer prior to entering into that agreement. Then, when a consumer defaults on the loan or credit, then the Credit Union violates Fair Debt Collection Practices in their attempts to enforce this clause.
What happens in bankruptcy is that we must look at whether the agreements are enforceable. If they are enforceable, then the debts owed are secured. If the agreements are unenforceable, we will treat them as unsecured debts.
For a nation consumed by bankruptcy, this information will not be as shocking as it would have been for previous generations. Isn’t that fact, itself, reason to be worried? From the state with a 19% increase in bankruptcy filings (especially chapter 13 bankruptcy), to the surprising dip in credit card debt, learn all you want to know about the financial state of the U.S. in 2011 in this graphic.
Bankruptcy in 2011
Chapter 13 bankruptcy cases have claim deadlines by which date the debtor’s creditors are supposed to file claims in order to be included in the roster of creditors entitled to distributions of money out of the Chapter 13 plan. I represent a debtor who prior to filing owed money to a law firm which represented him in a pre-bankruptcy legal matter. Three months after the Chapter 13 claim deadline the law firm filed an unsecured claim.
The first question is whether or not the debtor cares if an unsecured creditor files a late claim. If a debtor is paying all of their disposable income into a plan, but the plan will not pay 100% of unsecured claim, then a late claim does not change the amount of the debtor’s monthly plan payment or total payments under the plan. No harm no foul. If the debtor’s plan must be a 100% plan for any number of reasons (such as the debtor’s desire to reaffirm an investment property) then a late filed claim is important to the debtor because the claim would increase plan payments.
In this case, my client is required to pay 100% of unsecured claims, and therefore, opposed the late claim. The creditor argued that they had actually signed a claim form before the deadline, but that it was incorrectly addressed and that the error was not discovered until recently. The court denied the creditor’s claim. The court said that late claims can be filed if there is an “excusable neglect” but that the attorney’s clerical error of not properly filing or mailing a claim form is not one of the excuses accepted by bankruptcy courts.