Posted on October 23, 2015 in Child And Spousal Support

One of the most important distinctions between these consumer bankruptcy options are how they help or don’t help with support arrearage debt.

Support Liens

If you are behind on your child or spousal support payments and you own a home, most likely there is a lien on that home for that unpaid support debt. This means that your ex-spouse (or the support enforcement agency in his or her name) may be able to foreclose on your home through that lien. In any event, the lien is a cloud on your title, very likely hurting your credit and potentially jeopardizing your ability to refinance or sell the home.

The support lien came about one of two ways (or possibly both).

First, your divorce decree is usually in the form of a court judgment, and so creates a continuous judgment lien for whatever amounts is then outstanding on the court-ordered support obligation. Each month that you fall further behind on support payments increases the amount of the debt that is secured by the judgment lien.

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 Posted on October 21, 2015 in Mortgage

Stripping a mortgage from the title to your home could save you a tremendous amount of money.

Two blog posts ago our topic was getting rid of judgment liens, which can be done under either Chapter 7 “straight bankruptcy” or 13 “adjustment of debts.” So if you have a judgment lien (or two) on your home’s title, that will not push you towards one Chapter or the other.

But stripping a second mortgage can only be done through Chapter 13. Because stripping a mortgage from your home’s title can save you so much money, it is often the major reason to file under Chapter 13 instead of Chapter 7.

The Benefit of Stripping Your Second and/or Third Mortgage

If you qualify to remove, or strip, a mortgage from your home’s title, you would not have to pay that mortgage’s monthly payments, would likely pay only a fraction of that mortgage, and get much closer to building equity in your home. Under the right conditions, you can get rid of the debt you owe on a second or other junior mortgage, and get rid of the lien on your home’s title securing that debt.

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 Posted on October 19, 2015 in Income Taxes

Bankruptcy helps with your property taxes either by writing off your other debts or by buying you more time to catch up.

Discharge Your Other Debts with Chapter 7 So You Can Pay Your Property Taxes

If you’ve fallen behind on your property taxes, presumably your income has not been enough to meet your expenses plus payments on your other debts. Sometimes just writing off your other debts would give you enough financial breathing space so that you can catch up on your property taxes.

Find out from your attorney how much time you would have to catch up on your property taxes. You often have quite a long time. But the rules can be very strict about property tax foreclosures, so be absolutely clear about what the true deadlines are.

Some tax agencies will set up a monthly payment plan with you. Find out if that would be available to you and if you could afford the payments once you discharged your other debts.

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 Posted on October 16, 2015 in Bankruptcy Procedure

An underappreciated benefit of filing bankruptcy is that you can usually remove judgment liens from your home’s title.

In so many ways Chapter 7 “straight bankruptcy” and Chapter 13 “adjustment of debts” are very different, particularly in the tools they each use to help with your home mortgage(s) and other debts related to the home. But the removal, or “avoidance,” of judgment liens is one tool that can be used in either bankruptcy procedure.

What is a Judgment Lien?

First, a lien is a creditor’s legally enforceable interest in your property. Second, a judgment lien is an involuntary lien which usually attaches to your home after a judgment is entered against you in a lawsuit. It is a lien on your home’s title, in effect making the home collateral on the debt.

Judgment liens can arise in unexpected ways. Usually you know you’ve been sued and at some point find out that the lawsuit resulted in a judgment against you and a judgment lien on your home. But a judgment lien can attach even if you settle with the suing creditor, and sometimes even if you enter into a settlement without even being sued. You might even have a judgment lien on your home without you knowing that you were sued.

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 Posted on October 14, 2015 in Mortgage

If you are leaving your mortgage(s) behind, what are the advantages and disadvantages of doing so within the two main bankruptcy options?

Do You Need a Bankruptcy to Surrender the Home?

If you’re thinking about surrendering your home to your mortgage holder, most likely you are struggling to pay other debts besides the mortgage. You may have other voluntary obligations that are on the title of your home, such as a home equity line of creditor or some other kind of second mortgage. Or the home’s title may be burdened by debts which had resulted in involuntary liens such as income tax or construction liens. And you probably have debts that are unrelated to your home and do not attach to the home’s title.

However, you may have no debts, or at least no unmanageable ones, other than the home mortgage. Then you likely don’t need to file bankruptcy. Under many state’s laws you would not owe anything to the mortgage holder after surrendering the home, regardless of the amount of the mortgage debt compared to the value of the home. But that may depend on seemingly obscure factors such as what procedure the mortgage lender is using to foreclose (say, judicially or non-judicially—with a lawsuit or without). So it’s critical that you check with a local attorney whether you’ll owe anything on the mortgage.

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 Posted on October 12, 2015 in Bankruptcy Options

How do these two consumer options help with your home mortgage(s)?

Chapter 7 “Straight Bankruptcy”

A Chapter 7 case usually lasts about 3-4 months. It doesn’t reduce your monthly mortgage payment, and doesn’t directly help you deal with your mortgage lender if you’re behind.

Instead through Chapter 7 most or all of your other debts are gotten rid of so that you are better able to catch up if you’re behind, and can better afford your mortgage and other home-related debts and expenses overall.

Chapter 13 “Adjustment of Debts”

A Chapter 13 case usually takes 3 to 5 years. That’s because it involves putting together and then executing on a court-approved monthly payment plan through which you usually pay a portion of your debts, and often only a small portion.

Although your first mortgage payment can’t be reduced, in some circumstances you would not need to pay a second (or third) mortgage payment. If behind on the mortgage you’d have the 3 to 5-year length of the payment plan to catch up.

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 Posted on October 09, 2015 in Secured Debts

After covering Chapter 7 last time, now how does Chapter 13 help you keep (or surrender) collateral on a debt?

Last time we explained the crucial difference between secured and unsecured debts, and focused particularly on “purchase money” secured debts. That led to laying out the advantages Chapter 7 “straight bankruptcy” gives you when dealing with something you bought that is now collateral on the debt you owe.

Today we show the often even greater advantages that come under Chapter 13 “adjustment of debts” with this kind of collateral.

Creditor Leverage under Chapter 7

We showed last time how under Chapter 7 a secured creditor can require you to pay the debt if you want to keep the collateral. Even though you can “discharge” (legally write off) the debt, the creditor retains the right to repossess the collateral after your bankruptcy is over.

You can always just surrender the collateral—let’s say it’s a couch—and you would usually not owe anything on the debt once the Chapter 7 case was completed. But if you really want to keep the couch you may well have to pay much more than it’s worth, assuming you owe more than that.

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 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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