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Recent Blog Posts
Resolve Mortgage Accounting Disagreements
Chapter 13 gives you valuable power to force your mortgage lender to be up front about how much you owe, and to efficiently dispute the amount.
Catching Up on Your Mortgage over Time
A Chapter 13 case gives you the power to catch up on your home mortgage(s) over an extended period. This “adjustment of debts” type of bankruptcy can give you up to 5 years to catch up.
This power is found in the U.S. Bankruptcy Code language allowing you to cure “any default within a reasonable time.” Section 1322(b)(5). That amount of time is interpreted to mean, in most circumstances, the length of your Chapter 13 payment plan. Most payment plans are between 3 and 5 years long. If you need more than 3 years, usually you can extend your plan longer, up to 5 years.
The Mortgage Accounting Challenge
If you fall behind on your mortgage it can be ridiculously difficult to get accurate information from your lender about the amount you owe. If you don’t have accurate information, you can’t fulfill your desire and responsibility to cure the arrearage.
What Are the Laws for Filing Multiple Bankruptcies?
Most Americans have some sort of debt, with one of the most common forms of debt being credit card debt. Most of the time, debt is manageable if you are able to budget your money, but sometimes life happens and debt can become overwhelming. In cases such as those, bankruptcy is often your best option. Filing for bankruptcy can allow you to manage your debt in affordable payments or even discharge your debt, allowing you to wipe your slate clean.
Unfortunately, sometimes your first bankruptcy is not your last bankruptcy. If you find yourself drowning in unmanageable debt again, you may wonder if it is possible to file for bankruptcy again. Technically, the answer is yes, but there are a few stipulations you should know about.
Filing for Bankruptcy More Than Once
You can file for bankruptcy as many times as you want to file. There are no rules about how many times you can file for bankruptcy, but there are rules as to how often you can receive a discharge of your debs. The time between discharges is based on the type of bankruptcy you filed before, whether or not you received a discharge in that bankruptcy and the type of bankruptcy you are trying to file. The waiting periods between bankruptcy discharges are as follows:
Chapter 13 Really Helps Delay Your Home Sale
Chapter 13 gives you much more power over your mortgage and other home-related debts so that you can sell your home when it’s best for you.
Our last blog post was about using Chapter 7 “straight bankruptcy” to buy time to sell your home. The advantages of Chapter 7 are that it’s usually quite quick and costs less that Chapter 13. It also importantly focuses on your present income and on the present value of your home. If you expect either your income or your property’s value to increase substantially, Chapter 7 could be your better option.
Chapter 7 Disadvantages—Buys Limited Amount of Time
However, Chapter 7’s quickness can often turn into a disadvantage. If you’re behind on your mortgage, or another home-related debt, the protection Chapter 7 provides against them doesn’t last long. The “automatic stay” protection lasts—at most—only 3-4 months, because that’s how quickly most cases finish. If within that time you don’t work out payment arrangements with them, they can start or resume collections and/or foreclosure.
Bankruptcy Helps Delay Your Home Sale
When you need a rather quick solution, Chapter 7 can deal with your creditors and buy you time to sell your home, in the right circumstances.
Our last several blog posts have been about using bankruptcy to either prevent various kinds of liens hitting your home or deal with those liens if they happen. For example, in the last few weeks we’ve addressed, in reverse order:
- Protecting your home from homeowners’ association dues and assessment liens
- Addressing child and spousal support liens
- Preventing income tax liens through Chapter 7 and Chapter 13
- Dealing with already-recorded income tax liens
- Preventing judgment liens, and removing them if they’ve already attached to your home
So clearly bankruptcy gives you a multitude of tools to help you preserve your home and its equity.
Protection from Your Homeowners' Association
Bankruptcy gives you protection from your homeowners’ association. Chapter 7 may be enough, but Chapter 13 buys much more time.
Filing bankruptcy gives you limited, but potentially very useful protection from your homeowners’ association liens and debts. A Chapter 13 “adjustment of debts” filing could especially help.
Your Homeowners’ Association Is a Particularly Dangerous Creditor
Once you fall behind on homeowners’ dues and or assessments, your association gains tremendous power over you and your home.
Unpaid obligations to your homeowner’s association (HOA) immediately create a lien against your home for the amount of the debt. As soon as the debt increases—every month, usually—the lien increases. This is true whether or not you are in bankruptcy. Assuming you want to keep the home, you will have to pay the debt one way or the other.
Also, about 20 states’ laws give HOA liens “super-priority” status over other liens that are attached to the property. This would include priority over even your first mortgage, which could create huge problems for you. As just one example, if your HOA forecloses on its lien that would eliminate the first mortgage lien. At least potentially, none of the value of the home would go towards paying down the mortgage debt. You could owe the full balance of that mortgage debt in spite of no longer owing the property!
Avoid a Support Lien through Bankruptcy
Chapter 7 is very limited in helping avoid a support lien. Chapter 13 is much more powerful, as long as you precisely meet some conditions.
Child and Spousal Support Liens
If you fall behind on child or spousal support payments, your ex-spouse can put a lien on your home. (Most likely a lien can be imposed on your other property, but we’re focusing here on your real estate). The procedures vary state to state, but generally the lien is filed wherever property is recorded. Most often that’s at the local county recorder’s office.
The lien gives legal notice about the support claim against you. The lien goes onto the title to your house. It gives your ex-spouse power to make you pay when you sell or refinance the house. Sometimes the lien can force the sale of the house in order to pay the support debt. So you want to avoid a support lien whenever possible. Or at least stop its enforcement after it’s been recorded.
What Does a Bankruptcy Trustee Do?
The most common types of bankruptcies that are filed in the United States are Chapter 7 and Chapter 13 bankruptcies. There are many differences between a Chapter 7 bankruptcy and a Chapter 13 bankruptcy, mainly in the way that the debts are handled. While these two types of bankruptcies differ greatly in many aspects, they do have one thing in common -- they both utilize a bankruptcy trustee.
If you have thought about getting a bankruptcy or you have done research about getting one, you have probably come across the term -- but do you know what a bankruptcy trustee is? It is important to understand the role of the trustee if you are getting a bankruptcy or considering one.
What Is a Bankruptcy Trustee?
A bankruptcy trustee is a person who works on a bankruptcy case to act as the middleman between the debtor and the creditors. The trustee is not an employee of the bankruptcy court, but rather an independent contractor who is hired to prevent the court itself from having to collect and/or distribute property. Trustees are also responsible for reviewing all financial information that is submitted by the debtor to ensure it is accurate and true.
Avoid Income Tax Liens with Chapter 13
Chapter 13 can prevent income tax liens on dischargeable taxes. But the discharge takes years, and you may have to pay part of that tax.
Two weeks ago we showed how the filing of a bankruptcy case stops the recording of an income tax lien. A bankruptcy filing imposes the “automatic stay.” That law makes it illegal for the IRS or state tax agency to record a tax lien. (See Section 362(a)(4) and (5) of the U.S. Bankruptcy Code forbidding the creating or enforcing of a lien.) That’s true whether your lawyer files a “straight bankruptcy” Chapter 7 case or an “adjustment of debts” Chapter 13 one.
Then last week we showed how this works specifically in a Chapter 7 case. IF the tax meets all of the conditions for discharge (legal write-off), then your Chapter 7 filing would prevent a tax lien, discharge the tax debt, and forever avoid a tax lien on that tax.
Avoid Income Tax Liens with Chapter 7
Chapter 7 can prevent future income tax lien recordings against your home, if the tax is truly dischargeable and you have a no-asset case.
Last week’s blog post was about filing bankruptcy to prevent the IRS/state from recording income tax liens on your home. The “automatic stay”—bankruptcy’s broad freeze of creditor collection actions—stops tax lien recordings immediately when you file your case. To repeat what we said last week:
Federal law is crystal clear that filing bankruptcy stops and prevents “any act to create, perfect, or enforce any lien” against your property. Section 362(a)(4 and 5) of the U.S. Bankruptcy Code. The IRS and the state tax agencies do not dispute this. They cannot record a tax lien against your home or anything you own once you file bankruptcy.
But how this works is quite different under Chapter 7 “straight bankruptcy” and under Chapter 13 “adjustment of debts.” Today we talk about filing Chapter 7 to stop tax liens, next week about Chapter 13.
Prevent Future Income Tax Liens
Bankruptcy can prevent future income tax lien recordings against your home. The result: paying nothing on the tax vs. paying it in full.
Income Tax Liens Are Dangerous
Our last two blog posts were about judgment liens. First was about how filing bankruptcy can sometimes remove, or “avoid,” a judgment lien from your home. Second was about preventing a judgment lien from hitting your home’s title in the first place.
Income tax liens have some similarities to judgment liens and some differences. An important difference is that there is no mechanism for removing a tax lien once it hits your home’s title. This is especially bad and impactful if the income tax debt at issue was one that bankruptcy could otherwise have written off (“discharged”) for you. The recording of the tax lien turns a debt that you could have written off and paid nothing on into a debt you usually have to pay in full.
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