Posted on August 28, 2017 in Bankruptcy Options

When deciding between Chapter 7 and 13, if you choose a Chapter 13 payment plan realize that converting later to Chapter 7 is an option.

Chapter 13—Powerful But Comes with Risks

Chapter 13 is a powerful tool. If you have certain special kinds of debts it can help you with those debts in amazing ways. It can enable you to save your home or vehicle, sometimes by reducing how much you need to pay monthly. In some circumstances it reduces what you need to pay on these debts altogether. Chapter 13 gives you power over income tax debts, child and spousal support arrearage, student loans, other obligations against your home, other secured debts, and certain other kinds of debts.

But Chapter 13 also requires a long-term commitment. The payment plan that you and your attorney propose requires looking into the future. It requires predicting your income and expenses for the following 3 to 5 years. It’s more challenging if your income and expenses don’t stay somewhat steady during that time. Life often doesn’t go as expected or hoped.

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 Posted on August 25, 2017 in Bankruptcy Procedure

The Bankruptcy Code explicitly says that, at the request of the person in a Chapter 13 case, the bankruptcy “court shall dismiss” the case.

The last three blog posts have been about amending, or “modifying,” your Chapter 13 payment plan. But what if you don’t want to be in the Chapter 13 case at all? Can you just end it altogether?

Yes, almost always you can end a Chapter 13 case, by getting it “dismissed.”.

A Clearly Stated, Special Right

You can dismiss a Chapter 13 case easily because the Bankruptcy Code says you can, and says so very clearly:

On request of the debtor at any time... the [bankruptcy] court shall dismiss a case under this chapter [13].

(Section 1307(b) of the Bankruptcy Code.)

Two parts of this deserve to be highlighted:

1. You can ask for a dismissal “at any time”—at any point in the life of a Chapter 13 case. So you can dismiss it soon after filing, if you realize you’ve made a mistake and change your mind. And you can dismiss your case after your payment plan has been approved by the court, for example, if your circumstances change and you don’t want to be in it any more.

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 Posted on August 23, 2017 in Chapter 13

It’s good to know that your Chapter 13 payment plan can be changed during the 3 to 5 years the case lasts to address changing circumstances.

Last time we discussed making adjustments in your Chapter 13 plan during the first couple months of the case. That’s when you and your lawyer may adjust your plan to get court approval, or “confirmation.” Today we get into changes you may make to your payment plan AFTER confirmation.

Why Modify Your Plan After Confirmation?

A lot can happen during your Chapter 13 case, which will likely last 3 to 5 years.

• Financial changes: Your income could go up or down; your expenses could do the same. If the changes are modest, that may not require a change in the terms of your plan. If they are more significant you may either benefit from changing your plan or you may be required to.
• Goal changes: One or more of the goals of your case may have changed, resulting in changes to the plan. For example, you no longer want to keep your home because you got a job in a different state.

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 Posted on August 21, 2017 in Chapter 13

Sometime you and your lawyer don’t know everything you need to know to put together a perfect Chapter 13 plan. So then you can modify it.

Last time we got into how important it is to know that your Chapter 13 payment plan can be adjusted later. It’s important because when you enter into a 3-to-5-year Chapter 13 case you need to know that it’s flexible.

But you also need to know that flexibility has some limits.

It’s not easy to summarize how flexible a Chapter 13 plan will be. It’s hard to say how much you can adjust your Chapter 13 plan because plans can be SO different. Some plans have tremendous flexibility; some have very little. We’ll give some examples to help make sense of this.

Plan Modification BEFORE Court Approval

In a Chapter 13 case everything revolves around your formal payment plan. So, during the first couple months of your case most of the focus is on getting that plan approved by the bankruptcy court. A lot is up in the air until that point when the court or “confirms” your plan. Then once the court confirms the plan, you’re on your way. Everybody knows the rules you and the creditors are operating under in your Chapter 13 case.

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 Posted on August 18, 2017 in Chapter 13

Before committing to a Chapter 13 “adjustment of debts” it’s good to know that its plan can likely be "modified” if your situation changes.

The Chapter 13 Plan

Chapter 13 is all about the payment plan. The point of Chapter 13 usually is to radically reduce most debts so you can afford to pay special debts. The Chapter 13 payment plan describes the details of how this is to happen.

For example, in your Chapter 13 plan you’ll pay a bunch of recent income taxes that can’t be discharged (written off) in a Chapter 7 case, while paying very little to the rest of your debts.

The most important practical aspect of such a plan is how much you will be paying each month—your plan payment. That payment generally covers all of your debts, although sometimes you’ll continue paying a mortgage or other secured debt directly.

The other main part of the plan describes which debts get paid, how much, and maybe when. Some debts are referred to by name in your plan, others just by category of debt. For example, the plan specifically lays out payment amounts going to a “priority” debt like the income taxes. But “general unsecured” debts are not named individually; the plan just states the anticipated percent-of-debt this category will be paid.

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 Posted on August 16, 2017 in Child And Spousal Support

If you’re behind on support payments, filing under Chapter 13 can legally stop your ex-spouse and support enforcement from pursuing you.

Your filing of a Chapter 13 case can stop your ex-spouse and support enforcement agency from very aggressively pursuing you. It can give you a reasonable time to cure your unpaid support payments. But you have to strictly follow the rules to get this advantage.

Here’s how it works.

The “Automatic Stay” As It Applies to Child and Spousal Support

Filing either a Chapter 7 or Chapter 13 bankruptcy case stops most creditor collection actions. This happens through the power of the “automatic stay.” See Section 362(a) of the U.S. Bankruptcy Code.

But child and spousal support debts are an exception to the automatic stay. The Bankruptcy Code makes clear that the “automatic stay does not apply to “the collection of a domestic support obligation.” Section 362(b)(2)(B). “Domestic support obligation” includes both child and spousal support. Section 101(A14). And it includes support that becomes owing “before, on, or after the date” of filing the bankruptcy case.

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 Posted on August 14, 2017 in Income Taxes

If behind on property taxes on property that isn’t your home, either Chapter 7 or Chapter 13 may buy you the time to save this property.

For most people who are behind on property taxes on their real estate, that real estate is their home. And they have a mortgage on that real estate. See our last blog post about catching up on your property taxes on your mortgaged home.

But you may own real estate that isn’t your home, on which you are behind on property taxes. This comes up in a number of scenarios. Today we’ll look at mortgaged investment property on which you’ve fallen behind on property taxes.

First Problem—The Unhappy Mortgage Lender

Again, see our last blog post about why mortgage lenders get very concerned when borrowers fall behind on property taxes. What we said there about mortgaged homes applies as well to investment and other types of real estate.

Briefly, being behind on property taxes is virtually always a breach of your agreement with the mortgage lender. That’s because the property tax is “senior” to the mortgage, meaning a property tax foreclosure would wipe out the mortgage lender’s lien on the property. That’s very dangerous for the lender, so it acts aggressively to get you current on the taxes. This may include the lender paying the tax and then coming after you to pay it back. And if you don’t the lender can start its own foreclosure, even if you’re current on the mortgage itself.

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 Posted on August 11, 2017 in Mortgage

If behind on property taxes on property with a mortgage, that likely puts you in default on the mortgage itself. Chapter 13 can fix this.

The Problem

Let’s say you’re current on your mortgage, though barely hanging in there. But the bad news is that you’ve fallen behind on property taxes. With just about all mortgage contracts, simply being behind on property taxes puts you in default on the mortgage itself.

That’s because for you to fall behind on property taxes is very dangerous for the lender. The property tax creditor usually has a legal right to foreclose the property out from under your mortgage lender! That would leave the lender without any collateral at all.

So your lender will itself likely pay your property taxes to avoid that from happening. The mortgage contract allows them to do this. Then if you don’t pay back those taxes to the lender it can foreclose, even if you are otherwise current.

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 Posted on August 09, 2017 in Mortgage

If you’ve fallen behind on your mortgage, it’s very hard to catch up. It may even seem impossible. Chapter 13 makes it possible.

The Problem

Let’s say you can’t pay your monthly mortgage because of a job loss or some other major financial hit. The missed payments can pile up fast. The amount you’re behind gets huge fast. It usually takes quite a few months before your home would be foreclosed. That gives time for the missed monthly payments to pile up. For example, if your mortgage payment is $1,700, six missed payments put you $10,200 behind. And that doesn’t count late fees and other likely charges assessed to your account.

If you then find a new job or otherwise fix your financial situation, you’ve got a mountain of mortgage payments to catch up on.

You may qualify for a mortgage modification or refinancing, restructuring that piled up debt, not having to catch up. Or mortgage forbearance may work, in which you must catch up over a relatively short period of time, usually within a year.

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 Posted on August 07, 2017 in Bankruptcy

If you can’t or won’t pay a co-signed debt, or pay a co-signer, you need to protect yourself from that debt and from your co-signer.

What if you owe a co-signed debt and need bankruptcy relief from all your debts?

In the last two blog posts we explained how bankruptcy helps you pay a co-signed debt and protect your co-signer. A Chapter 7 “straight bankruptcy” may free up enough cash flow so you can afford to pay the co-signed debt. Or the special “co-debtor stay” may protect your co-signer as you catch up on and pay off the co-signed debt over a longer span of time.

But what if—even with the help of bankruptcy:

• you can’t afford to pay the co-signed debt now or at any time in the foreseeable future?
• you no longer want to pay your co-signer because your relationship has changed?
• your co-signer got the money or other benefit of the debt and so should pay it back?

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