Posted on October 07, 2015 in Secured Debts

How does bankruptcy treat something you bought—furniture, an appliance, or some electronics—when that thing is collateral on a debt?

In our last couple blog posts we compared how Chapter 7 “straight bankruptcy” and Chapter 13 “adjustment of debts” each deal with vehicles that are collateral on vehicle loans. Today let’s look at other personal property that you buy on credit where the creditor has the right to repossess the stuff if you don’t pay the debt.

Secured and Unsecured Debts

We first need to determine whether the creditor really has a right to repossess if you don’t pay.

That’s not always clear. For example, usually Visa and MasterCard purchases create unsecured debt. If you buy a $900 couch on a Visa card, you owe the $900 but Visa or your bank does not have a legal right to repossess the couch. It’s an unsecured debt.

But if you buy that couch on the store’s own credit card or through an old fashioned contract purchase often the fine print of your agreement will state that you are giving the store or financing company a “security interest” in the couch or anything else you buy. This gives that creditor a right to repossess whatever you buy until you pay off either the whole debt or else that part of the debt used to make that purchase. That’s a secured debt.

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 Posted on October 05, 2015 in Vehicle Loans

The second scenario, the Chapter 13 solution for keeping a vehicle if you're behind on payments.

In our last blog posts we showed how Chapter 7 “straight bankruptcy” can make it possible to keep your vehicle even if you were behind on your payments. We showed how this can work in practice through an example.

But hanging onto a car through Chapter 7 when you’re behind only works in limited circumstances.

In a Chapter 7 case you would very likely need to get current on the loan quite quickly—within about 30 to 60 days—or there’s a good chance your lender wouldn’t let you keep the vehicle. Also, you would very likely have to “reaffirm” the debt—continue being legally liable on it. That means that the vehicle loan would be excluded from the “discharge”—the legal write-off—of your debts. So if your vehicle was worth less than the debt amount, you could be left owing a large debt after you case was over if you would be unable to make loan payments and the vehicle was repossessed.

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 Posted on October 02, 2015 in Vehicle Loans

Two similar scenarios, two very different solutions for keeping a vehicle if you’re behind on payments.

Two blog posts ago the topic was about how Chapter 7 and 13 can help you keep collateral—including a vehicle on a vehicle loan. Now, after giving a quick summary, we’ll show how the law works through two scenarios, one today under Chapter 7 and another in the next blog post under Chapter 13. Through these two scenarios you’ll see in a practical way how you might choose between these two bankruptcy options if you’re behind on a vehicle loan.

A Quick Summary

If you are not current on your vehicle loan and want to keep it, both a Chapter 7 and Chapter 13 filing would immediately stop any pending repossession. After that:

• With a Chapter 7 “straight bankruptcy” you would very likely need to get current on the loan quite quickly—within about 30 to 60 days—or there’s a good chance your lender won’t let you keep the vehicle. You will very likely also need to “reaffirm” the debt—continue to be legally liable on it, excluding it from the “discharge”—the legal write-off—of all or most of your other debts. That’s true even if the vehicle is worth less than the debt amount, leaving you exposed to a potentially large debt if you are not able to pay the loan in the future. There are some exceptions to these tendencies, particularly with some local vehicle lenders, but in most situations you would have to catch up quickly and be willing to accept the conditions just stated.

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 Posted on September 30, 2015 in Bankruptcy Options

Most of the time everything you own is exempt, meaning it’s protected in a Chapter 7 bankruptcy. If not, Chapter 13 can usually protect it.

Our last blog post was about keeping or surrendering assets which are security on a secured debt—such as a vehicle on a vehicle loan, a home with a home mortgage, or a household appliance on a secured store credit card or contract.

Today we discuss protecting assets that are not encumbered by any debt. So these assets cannot be repossessed by any secured creditor. However, your creditors would have a right to even these unencumbered assets if an asset is not “exempt.”

Here’s what property exemptions are and how they protect you under a Chapter 7 “straight bankruptcy” and under a Chapter 13 “adjustment of debts.”

The Simple Principle

Choosing between Chapter 7 and 13 on the specific issue of protecting your possessions is based on a very straightforward principle. If everything you own and want to keep fits within the property exemptions that are available to you, you can file a Chapter 7 case and keep everything; otherwise you need the extra help of a Chapter 13 case.

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 Posted on September 28, 2015 in Secured Debts

Some of the assets you may want to protect in a bankruptcy case are those that are security for debts.

Collateral and Other Security on Secured Debts

Everything you own is either legally encumbered by a debt or is yours free and clear of any debt.

Possessions which are encumbered by a debt can be encumbered voluntarily, such as when you buy on credit. You buy a vehicle and give the vehicle loan creditor a lien on the title. You buy a home and the mortgage lender gets a mortgage on the home. You buy an appliance and give back a security interest in what you bought to the store or finance company.

Or you can already own something and you borrow money on it, like a second mortgage, or when you take out a personal loan and provide collateral for it.

Possessions can also be encumbered involuntarily. An income tax lien on everything you own and a judgment lien on the title of your home are examples.

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 Posted on September 09, 2015 in Mortgage

Selling Your Home without First Stripping the Second Mortgage

One way that bankruptcy—Chapter 13 in particular—could save you a tremendous amount of money is with a second (or third) mortgage strip.

If you have serious financial pressures inducing you to sell your home, is it partly because of your second (or third) mortgage? Would you it help if you did not have to make that payment anymore? Would you be able to keep your home, maybe even permanently, if you could stop paying that second or third mortgage (or both) and also get relief on your other debts?

If your home is worth no more than what you owe on your first mortgage, that is what the Chapter 13 “adjustment of debts” version of bankruptcy could accomplish for you. That and get you much closer to building equity in your home again.

Secured vs. Unsecured Debts

Debts are either secured by something you own or they are unsecured. Secured debt includes your vehicle loan, contract purchases of furniture and appliances, sometimes secured credit cards, as well as various kinds of debts secured by your home. Debts secured by your home can include not only first, second and third mortgages, but also any property taxes you owe (almost always the first debt against your home’s title, even ahead of your mortgage), sometimes debts to a homeowner’s association, income tax and child/spousal support liens, sometimes judgment and utility liens, and possibly construction liens for any home renovation or repairs.

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 Posted on August 31, 2015 in Bankruptcy Law

Doing what you believe is the right thing can backfire, if you pay a special creditor before you file bankruptcy.

“Preference” Payments

Bankruptcy law focuses for most purposes on what you own and who you owe at the moment your bankruptcy case is filed. But there are some limited yet potentially dangerous ways that the law can look into the past. “Preference” payments are one example.

Here’s what the law says. If during the one year before you file a bankruptcy case, you pay one creditor more than you are paying at that time to your other creditors, then after you file bankruptcy that favored creditor could be required to pay back the money you’d paid, not back to you but rather to your bankruptcy trustee, for distribution to all of your creditors.

For example, if you received an income tax refund and used $1,500 of it to pay off a debt to your brother, and then six months later you filed a bankruptcy case, your brother could be required to pay that $1,500 to the trustee. The trustee would then divvy up the $1,500 among your creditors as prescribed by law. Your brother would likely get just a tiny portion of that money, based on his pro rata share of all your debts.

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 Posted on July 17, 2015 in Debt Collection

Credit can be a helpful tool when a person faces unexpected financial hardship, but it is also a major contributor to many Americans’ debts. The convenience of credit and bonus offers from credit card companies motivate many consumers to spend out of their budget.

By understanding how to manage credit cards responsibly, it is possible to avoid the stress and uncertainty that come with insurmountable debt. Read on to learn three strategies to avoid credit card debt.

Keep Diligent Records of What You Spend

Online shopping has made it particularly easy to overindulge with credit cards. People can spend thousands with the click of a few buttons.

According to the Federal Trade Commission, one of the best ways to avoid serious debt from online spending with credit is to keep a record of purchases. This will help you understand how much credit spending is affecting your finances.

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 Posted on May 08, 2015 in Chapter 7

Provided that you qualify for bankruptcy, it is likely that you will only apply once in your life. If everything pans out well, the process should set you on a more financially healthy course. However, whether due to a serious injury, loss of income, or another financial hardship, some people may find themselves considering bankruptcy a second time.

Is There a Limit to the Number of Times You Can File for Bankruptcy?

For the most part, you may file for bankruptcy as many times as you wish — although this does not imply that you should. Applying for bankruptcy too soon after the first may void your ability to discharge your debts, according to the Federal Trade Commission. This is critical because, in many cases, the purpose of bankruptcy is to discharge debt to make your finances more manageable.

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 Posted on January 28, 2015 in Bankruptcy

Most Americans have some form of debt, and many struggle to make payments. Some are fortunate enough to get by with responsible budgeting, consolidation, and other financial strategies. However, unexpected circumstances, such as a suffering an injury or losing a job, can cause a debtor to fall behind. In some cases, creditors will garnish a debtor’s income to pay debt.

Although wage garnishment can severely limit a person's financial freedoms, certain requirements must be met in order for wage garnishments to be legal. This article will briefly discuss how wage garnishment laws work in Texas.

Texas Laws Regarding Garnished Wages

For citizens of Texas, creditors cannot garnish wages to pay consumer debt, according to NPR. However, debts involving taxes, student loans, alimony, and child support may lead to wage garnishment.

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