Lien Stripping an Auto Loan in Chapter 13

Chapter 13 of the Bankruptcy Code contains many useful provisions that are not available to Chapter 7 debtors. One of the most useful is the ability to cram-down an over-secured auto loan to the actual market value of the vehicle, and pay the auto loan over the duration of the Chapter 13 bankruptcy plan.

The Bankruptcy Code recognizes that a lien is only secured to the extent of the value of the property. If the amount of the lien is more than the value of the property, the debt is separated into two parts: secured and unsecured. During a Chapter 13, the amount of the loan that exceeds the value of the vehicle can be stripped away.

For instance, if your vehicle is worth $10,000, but the secured auto loan balance is $13,000, the bankruptcy will separate the auto loan into a secured debt of $10,000 and an unsecured debt of $3,000. The secured portion must be paid in full during the Chapter 13 case, and the unsecured $3,000 amount will be paid along with other unsecured creditors (usually pennies on the dollar, if anything).

Another potential benefit to the Chapter 13 debtor is that the contract terms can be modified during the Chapter 13 repayment period. In some cases the repayment period can be lengthened or contract interest rate can be lowered by the bankruptcy court. Changing the contractual terms can make a significant difference in the ability of the debtor to repay the debt.

If you are struggling with debts you cannot pay and own a vehicle that is worth less than you owe, you may be eligible to reduce your principle and your monthly payment on your vehicle loan. Speak with an experienced bankruptcy attorney and discuss how a Chapter 13 bankruptcy can help you reduce your debt and make your finances work for you and your family.

Discharging Payday Loans in Bankruptcy

In these tough economic times, many Americans are desperate to make ends meet. Some are becoming trapped in a destructive cycle of payday loans. A payday loan is a short term, high interest loan that is secured by a post-dated check. The company loans the borrower a few hundred dollars that is repaid on the borrower’s next payday. What is meant to be a small, convenient, and short term loan to pay an immediate expense (an overdue electric bill, for instance), often results in multiple loans and an endless cycle of debt. Unfortunately, many payday loan borrowers are unable to free themselves from this cycle and are forced to seek bankruptcy protection.

Individuals often worry that the payday loan company may file a criminal “bad check” charge if the payday loan is included in the bankruptcy. The payday loan company wants you to believe this, and many have their customers sign a certification that the borrower is not contemplating bankruptcy.

While there are a few exceptions, generally being unable to pay a post-dated check is not a crime. When you wrote the check both you and the payday loan company knew there were not sufficient funds in your bank account to pay the check. Because there was no present intent to pay, the post-dated check is not a “bad check,” only a future promise to repay the loan.

Even after your bankruptcy is filed, a post-dated check may be presented for payment. In some cases (notably in the 6th and 8th Circuit Court of Appeals) courts have stated that the presentment of the post-dated check does not violate the automatic stay provisions of the bankruptcy code. However, some courts have said that the funds collected by the payday loan company is an “avoidable transfer” meaning the bankruptcy court could order the company to return the money.

If you have payday loans, consult with an experienced bankruptcy attorney. It is important to identify any outstanding payday loan before filing bankruptcy. Most payday loans are discharged without issue; however, payday loan companies are becoming increasingly more knowledgeable and aggressive towards debtors in bankruptcy. Discuss the matter with your attorney and protect your legal rights.

Can One Spouse File Bankruptcy Alone?

While it is common for a husband and wife to file a joint bankruptcy, in some cases it may be beneficial for only one spouse to file. When one spouse files for bankruptcy protection, the other spouse is not automatically joined into the case. The husband and wife are treated separately and individually, although there are some consequences to the non-filing spouse, both positive and negative.

Filing separately can have several advantages to a husband and wife who have separate property and debts. It is especially appropriate when there is a large debt that only one spouse is liable to pay, and the parties are able to either protect their marital property through exemptions or by virtue of the non-filing spouse holding the property as non-joint property. Property in which the debtor has no ownership interest is generally not property of the debtor’s bankruptcy estate and beyond the reach of the bankruptcy court.

While the bankruptcy automatic stay will stop collection action against the debtor, this protection does not apply to protect a non-debtor. In a Chapter 7 case, a creditor may still collect on a joint debt from the non-filing spouse. In a Chapter 13 case, the bankruptcy code imposes a co-debtor stay that generally prohibits collection on joint debts during the bankruptcy.

Likewise, the discharge order at the end of the case will only apply to bankruptcy debtor. The discharge does not prevent collection on any joint debt from the non-filing spouse. Most joint debts are the result of a contract or the agreement of the husband and wife to pay a debt, however in some limited cases a statute or other circumstances may make both parties liable for a debt. If you have any questions concerning whether you or your spouse is liable for a debt, consult with your attorney.

Property may be protected during the property through state or federal law exemptions, or the property may be excluded from the bankruptcy estate when the bankruptcy debtor has no ownership interest. Property that is held jointly and cannot be protected by exemption laws may be at risk for turn-over to pay creditors in a Chapter 7 case.

The decision to file bankruptcy for one or both spouses can require a complex analysis of the separate and joint property and debts of each spouse. Every case is different and while some cases gain a benefit from filing jointly, other cases receive a greater benefit from a separate bankruptcy. If you are in a situation where a separate bankruptcy filing may benefit your family, consult with an experienced bankruptcy attorney and discuss your options. The federal bankruptcy laws offer many choices for individuals needing debt relief and your attorney can help you decide the best financial decision for your family.

Can One Spouse File Bankruptcy Alone?

While it is common for a husband and wife to file a joint bankruptcy, in some cases it may be beneficial for only one spouse to file. When one spouse files for bankruptcy protection, the other spouse is not automatically joined into the case. The husband and wife are treated separately and individually, although there are some consequences to the non-filing spouse, both positive and negative.

Filing separately can have several advantages to a husband and wife who have separate property and debts. It is especially appropriate when there is a large debt that only one spouse is liable to pay, and the parties are able to either protect their marital property through exemptions or by virtue of the non-filing spouse holding the property as non-joint property. Property in which the debtor has no ownership interest is generally not property of the debtor’s bankruptcy estate and beyond the reach of the bankruptcy court.

While the bankruptcy automatic stay will stop collection action against the debtor, this protection does not apply to protect a non-debtor. In a Chapter 7 case, a creditor may still collect on a joint debt from the non-filing spouse. In a Chapter 13 case, the bankruptcy code imposes a co-debtor stay that generally prohibits collection on joint debts during the bankruptcy.

Likewise, the discharge order at the end of the case will only apply to bankruptcy debtor. The discharge does not prevent collection on any joint debt from the non-filing spouse. Most joint debts are the result of a contract or the agreement of the husband and wife to pay a debt, however in some limited cases a statute or other circumstances may make both parties liable for a debt. If you have any questions concerning whether you or your spouse is liable for a debt, consult with your attorney.

Property may be protected during the property through state or federal law exemptions, or the property may be excluded from the bankruptcy estate when the bankruptcy debtor has no ownership interest. Property that is held jointly and cannot be protected by exemption laws may be at risk for turn-over to pay creditors in a Chapter 7 case.

The decision to file bankruptcy for one or both spouses can require a complex analysis of the separate and joint property and debts of each spouse. Every case is different and while some cases gain a benefit from filing jointly, other cases receive a greater benefit from a separate bankruptcy. If you are in a situation where a separate bankruptcy filing may benefit your family, consult with an experienced bankruptcy attorney and discuss your options. The federal bankruptcy laws offer many choices for individuals needing debt relief and your attorney can help you decide the best financial decision for your family.

Discoveries While Completing Expense Statement

The Bankruptcy Code requires the individual debtor to file a petition and a series of financial reports with the bankruptcy court. Among these reports is a statement of income identified as “Schedule J.” For many debtors, it may be the first time, or a first time in a long time, that the families’ monthly expenses have been written down and examined. Usually there are surprising discoveries while completing this schedule.

Several monthly expense items are easily determined. Fixed monthly expenses like your mortgage or rent, auto loan payments, day care, insurance premiums, and cell phone bills are easy to identify. Fixed monthly expenses are predictable and do not generally fluctuate from month to month.

Unlike fixed expenses, variable expenses change from month to month. A good example of a variable expense is an electric bill or transportation expense which may be higher during certain times of the year. It is a good idea to average variable expenses over six months or a year to obtain a more accurate estimate of this monthly expense.

Annual expenses are often overlooked. Some annual expenses are quickly ascertained, like home owner’s association dues or personal property taxes. Other expenses are much harder to estimate like out of pocket medical expenses. Again, a yearly average is recommended to find this expense.

Discretionary spending may be the most difficult category to determine. This category includes expenses like food, entertainment expenses and clothing purchases. Bankruptcy debtors often underestimate discretionary spending and the debtor should either take a critical examination of their lifestyle and spending, or keep receipts for a month to accurately estimate this category.

It is very important to accurately identify your monthly expenses on Schedule J. In a Chapter 7 the bankruptcy court may use schedules I (monthly income) and J (monthly expenses) when considering whether you have sufficient income to afford the monthly payment proposed in a reaffirmation agreement. In a Chapter 13, the debtor must show on Schedules I and J that there is sufficient income to pay creditors or the plan will not be confirmed.

Completing your bankruptcy schedules is not a mindless check-the-box process. The federal bankruptcy laws require you to accurately and completely disclose financial information to the court. Not only must you make your best effort to provide truthful information, but it is in your best interest to use these forms to paint a picture of your financial situation that will help you get the relief that you need. Carelessness and inaccuracies will cause delays and problems in your case.

If are buried in debt, consult with an experienced bankruptcy attorney and discuss how the federal bankruptcy laws can help. Your attorney will work with you to complete the bankruptcy petition and schedules carefully and accurately to get you the relief you need.

Honesty in Bankruptcy is Best Policy

Several courts have stated that the bankruptcy laws are meant to give an honest debtor a fresh start, but not a head start. It is important to understand that the bankruptcy laws in this country are very forgiving, but these laws require the debtor to make reasonable efforts to repay creditors. The debtor is obligated to disclose all income and assets to the bankruptcy court. From these disclosures the bankruptcy trustee, creditors, and the court are able to determine what, if anything, the debtor can afford to repay.

The debtor has a great responsibility to truthfully disclose income and assets to the best of his or her ability. The federal bankruptcy laws will relieve the honest debtor from the stress of overwhelming debt. However, the dishonest debtor can face serious consequences.

One consequence of failing to disclose income or assets is that the debtor may be denied a discharge. Section 727 of the Bankruptcy Code is designed to protect the integrity of the process and permits the court to dismiss the debtor’s case for dishonest acts like lying on the bankruptcy schedules, hiding assets, failing to maintain financial records, refusing to turn over records, and refusing to cooperate with the trustee. The court may deny the dishonest or uncooperative debtor a discharge under Section 727 and the debtor will remain liable for all debts. To make matters worse, any assets turned over during the case will still be administered by the bankruptcy trustee and the debtor may lose non-exempt property to creditors.

Another more serious consequence for the dishonest debtor is the prospect of being charged with bankruptcy fraud. The Federal Bureau of Investigation ordinarily investigates allegations of bankruptcy fraud, but other federal agencies may become involved including the Internal Revenue Service Criminal Investigation’s Bankruptcy Fraud Program. Most bankruptcy fraud is first discovered by the bankruptcy trustee, and is often the result of whistle blowing from neighbors, creditors, or ex-souses. The Department of Justice Trustee Program encourages individuals to report bankruptcy fraud.

In bankruptcy, honesty is the best policy. For an individual who needs relief from overwhelming debt, bankruptcy is a tremendous tool that gives real results. The promise of bankruptcy is a fresh start, but not a head start. Debtors who are dishonest during the bankruptcy process can lose the benefits of a bankruptcy discharge, and may be criminally charged with one or more federal crimes. If you need help with your debt problem, speak honestly and frankly with an experienced attorney and learn how the powerful federal bankruptcy laws can help you.

Can Bankruptcy Stop a Rental Eviction?

A person’s financial situation is often desperate by the time a bankruptcy is filed. In some circumstances the rent is past due and the debtor is facing eviction. Fortunately, the bankruptcy laws can help many debtors stay in their homes, at least temporarily.

Generally, when you file a bankruptcy petition all collection actions are automatically stayed. The purpose of this stay is to give you some breathing room and time to sort out your financial difficulties. If you are behind on rent payments, the bankruptcy automatic stays the commencement or continuation of an eviction action. The automatic stay prohibits your landlord from any attempt to collect rents that accrued prior to the bankruptcy filing date. Your landlord may not write or call you in an effort to collect these rents, and may not start or continue a lawsuit to evict you.

The bankruptcy automatic stay will not relieve you from your obligation to pay rent after the bankruptcy filing date. If you fall behind on your rent payments after the bankruptcy is filed, your landlord may evict you regardless of the bankruptcy, but cannot seek payment of past rents. If you are not behind on rents at the time the bankruptcy case is filed, your landlord is not a creditor and will not receive notice of your bankruptcy filing. However, you must account for any rent deposit on your bankruptcy schedules.

In some circumstances a landlord may complain to the bankruptcy court that the tenant is endangering the property or using controlled substances illegally on the property. The landlord must file a certification to the bankruptcy court and the tenant has 15 days to respond. The court must hold a hearing within 10 days. If the landlord is successful in this complaint, the court will lift the automatic stay and allow the eviction process to continue.

If your landlord has obtained a judgment for possession and order of eviction before you file bankruptcy, the legal process is more complex. You must deposit one month of rent to the bankruptcy court immediately upon filing the bankruptcy petition along with a certification stating that your landlord’s judgment permits you to stay in the premises upon satisfaction of the entire judgment amount. This filing stays the eviction process for thirty days. If you wish to remain longer, the amount stated in the judgment for possession must be paid within the thirty day period.

Bankruptcy can stop an eviction and give you time to move or make arrangements to stay. If you are facing eviction from your rental home and contemplating bankruptcy, discuss your situation with an experienced bankruptcy attorney.

Making Your First Chapter 13 Payment

In a Chapter 13 bankruptcy case the debtor proposes a plan to pay back creditors. That plan is composed of monthly payments to satisfy all or part of the creditors' claims over three to five years. Monthly payments are made to the Chapter 13 Trustee, who then pays your creditors.

There is often confusion over when the first plan payment due. Section 1326 of the Bankruptcy Code directs that the first payment must be made within 30 days after filing the bankruptcy case, even if the debtor’s bankruptcy plan has not yet been approved by the court. Often the first meeting with the Trustee (also known as the "341 meeting" or "meeting of creditors") is scheduled more than 30 days after the filing date, so the Trustee expects your first payment before that meeting. The Trustee will hold all payments until the plan is approved by the Bankruptcy Court (called "confirmation"), and then make distributions to creditors.

It is critical that you make this initial payment within thirty days after filing. It is especially important to monitor the status of this first payment when you have instructed your employer to pay the Trustee from your wages. It is your responsibility to ensure that this first payment is made, and neither the Trustee nor the Bankruptcy Court gives much latitude to a debtor who misses the first deadline in the case.

Making a timely first Chapter 13 payment allows your plan to proceed to confirmation and will expedite the bankruptcy process. Failure to commence making payments can result in delays, additional expenses, or even dismissal. Consult with your bankruptcy attorney regarding payment details, and make that first payment on-time!