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 25, 2015 in Bankruptcy Options

Sometimes it's obvious which of the two consumer bankruptcy solutions is right for you. But not always. You might be surprised.

7 vs. 13

The two main kinds of consumer bankruptcy are extremely different.

Chapter 7 “straight bankruptcy” usually lasts no more than 3 or 4 months. Chapter 13 “adjustment of debts” is seldom completed in less than 3 years and can last as long as 5 years.

Chapter 7 focuses on the discharge of debts while Chapter 13 on the payment of (special) debts.

Both have trustees involved but in Chapter 7 he or she is a liquidating agent (although usually with nothing to liquidate), while in Chapter 13 he or she is mostly a payment disbursing agent.

Most Chapter 7s don’t have court hearings, nor do they directly involve the assigned bankruptcy judge except behind the scenes and for very specific functions. Chapter 13s generally have at least one court hearing for approval of the payment plan, and sometimes have multiple hearings over the course of a case, although most of the time you don’t need to attend them.

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 Posted on September 23, 2015 in Income Taxes

Falling behind on property taxes can have serious consequences, but does not necessarily mean you should hurry to sell your home.

Property Tax—the Superior Lien

Your local property tax agency usually holds the first lien on your home. That lien comes ahead even of your mortgage. And it’s way ahead of other debts on your home’s title, like creditor judgment liens and IRS and state income tax liens.

Your property tax agency can foreclose on and seize your property if you don’t pay the property taxes. And because of its superior position on the title, the property tax agency can not only take the home away from you but at least theoretically also from your mortgage lender. So if you fall behind on property taxes, at some point the mortgage lender will usually pay the back property taxes to preserve its own rights to your property.

If your mortgage lender does pay some of your property taxes you can bet it will add the amount to your mortgage debt. Most conventional mortgage documents specifically give the mortgage lender the right to pay the property tax, then add that amount to the arrearage that you must pay to the mortgage lender to get current. Indeed your mortgage lender very likely has the right to begin its own foreclosure against your home simply for you being behind on your property taxes.

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 Posted on September 21, 2015 in Selling Your Home

If you owe a bunch of income taxes, and have a tax lien on your home, it’s tempting to try to fix everything by selling your home.

This series of blog posts is about how to make better decisions about selling your home when under pressure from your creditors. Some of the biggest pressure can come from the IRS and the state taxing authorities. There are some persistent misconceptions are about how bankruptcy can and can’t help with income taxes and income tax liens.

If You Have Income Tax Debt

If you owe back income taxes, especially if you owe for a number of tax years or owe a large amount, or both, you may feel like you’re in a vicious cycle. You keep hoping that you’ll get on top of the problem but it seems to get worse. Maybe you’ve put off filing tax returns, hoping to fly under the radar of the IRS and state. Or you’ve entered into a monthly payment plan for a prior year or two of taxes but know you’ll owe more with your next tax return and that will break your payment plan. You may have already had a tax lien recorded against your home or are afraid that will happen any day. And the interest and tax penalties keep on piling on.

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 Posted on September 18, 2015 in Selling Your Home

Could you afford your home if you didn’t have to pay your other creditors or didn’t have to pay second mortgage payments?

This series of blog posts is about how to make better decisions about whether to sell your home and when, if you are under pressure from your creditors.

If You Really Shouldn’t Be in this House

You may in fact need to sell your home if it’s more house than you need, or its cost is way beyond your present financial abilities. Buying this house may have been a mistake that needs to be corrected. Or your circumstances may have changed so that now its way more of an obligation than your budget can handle. You may be looking forward to less financial pressure every month and know in your heart you need to sell and sell quickly.

Acting from Fear vs. Wisdom

There’s a lot of emotion involving a person’s home. That’s true if you are single living alone, and is amplified if you are living with a spouse or significant other, and especially if you have children living with you. Issues of responsibility, success, and success are tied into the “American Dream” of owning a home. There are also all kinds of practical issues like the neighborhood you live in, how far it is from your job, and where your kids go to school.

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 Posted on September 16, 2015 in Bankruptcy And Divorce

Before deciding that you have to sell your home to pay your ex-spouse, find out your legal options. You may be pleasantly surprised.

The Need to Pay off Your Ex-Spouse

Divorce is so often so traumatic. All kinds of emotions can cloud your judgment at the time, and can cloud your memory afterwards. This is true even in a comparatively friendly divorce, and that much more so in a contentious one. So it’s no surprise that after the divorce is over you’re not really clear what legal obligations you have arising from the divorce and what you can do about them.

So, for example, you may believe you have no legal or practical choice but to sell your home now in order to take care of your divorce obligations. But that may well not be true. You may be able to sell later when it’s better for you. Or you may not need to sell at all. You may need to pay much less to your ex-spouse than you had thought.

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 Posted on September 14, 2015 in Foreclosure

Stopping a foreclosure through Chapter 7 or 13 while addressing your whole financial picture can be much better than hurrying a home sale.

The last few blog posts in this series has been about how filing bankruptcy can buy you a few more months or even several years, so you don’t have to sell your home when under pressure from your creditors but rather when you’re financially and personally ready. There’s no greater pressure than when you are under threat of foreclosure by your mortgage lender, and especially when the actual date of foreclosure sale is looming.

The Temptation to Sell Quickly

If you have been struggling to keep up on your main mortgage, or your second (or third) mortgage, and/or if every year you struggle to pay the property taxes, it could be perfectly sensible to sell your home to get out from under the debt. That may be especially true if you have no equity and your hopes of your home being a good investment have not worked out. Or if you do have some equity it may be perfectly sensible to get at that equity to pay down some of your other debts.

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 Posted on September 11, 2015 in Selling Your Home

Bankruptcy can buy you a few more months or even several years, so you can sell your home when you’re financially and personally ready.

Selling under Pressure

If you are being pushed to sell your home quickly because of serious financial pressures, please know that there’s a good chance that there’s a way to get rid of that pressure and sell the home on your own schedule.

Selling on somebody else’s schedule is no good. Whether it’s because of an upcoming foreclosure or the threat of one, or because of overall creditor problems, it’s understandable that you want to try to cut your losses by getting out from under your biggest debt. But selling hurriedly means that your home is probably not getting the market exposure to sell for its highest price. There are lots of important financial and personal considerations that should govern your decision, not creditor demands.

Waiting to Sell for Financial Reasons

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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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