Monthly Archives: November 2011

Are You Behind on Your Mortgage Payments?

By Ryan C. Wood

If you are behind on your mortgage payments bankruptcy can help.  If you can afford to pay back the arrears over time in a chapter 13 plan of reorganization, one of the questions you may have is whether you will have to pay interest on the arrears in your Chapter 13 plan.

Your Chapter 13 plans can last three to five years which spreads your missed mortgage payments out to make them affordable.  The length of the Chapter 13 plan is determined by each individual’s circumstances.  If your household income is below the median for the number of people in your household, you can choose to be in either a three or five year
Chapter 13 bankruptcy plan.  If your household income is above the median for the number of people in your household, you will have to have a five year Chapter 13 bankruptcy plan.  Normally, the longer the length of the plan, the lower your monthly Chapter 13 plan payment will be given that you have a longer period of time to repay the arrears.  All of the pre-petition mortgage arrears will need to be accounted for in your Chapter 13 plan payment to be feasible.  Remember, you will need to pay the arrears in your Chapter 13 bankruptcy case on top of your regular mortgage payments.

Normally, when your mortgage lender files a proof of claim in your Chapter 13 case, they include the pre-petition arrears, interest and penalties for late payments, escrow payments, and attorney fees to review and file a proof of claim.  Some mortgage lenders include property inspections in the pre-petition arrears.  Note that pre-petition interest for the late payments is already included in the arrears.  Almost all deeds of trust securing payment of your mortgage do not include a provision that requires you to pay interest on the mortgage arrears in bankruptcy.  Not having to pay interest on the arrears while paying them back in a chapter 13 bankruptcy will save you thousands of dollars.

Chapter 13 bankruptcies allow you to pay the arrears off at zero percent interest unless the underlying contract or deed of trust indicates that the mortgage lender is allowed to collect interest on the interest payments.

If you you are behind on your mortgage payments let our experienced Fremont bankruptcy attorney or bankruptcy attorneys file your Chapter 13 bankruptcy to help you keep your house.  Please call us at 877-9NEW-LIFE or 877-963-9543 to schedule a free consultation.

I’ve Filed Bankruptcy Previously – When Can I File For Bankruptcy Protection Again?

By Ryan C. Wood

Filing for bankruptcy protection will provide you with the opportunity to get out from under your debts and truly obtain a “fresh start” when all your unsecured debt is discharged.  However nothing is easy and you may filed for bankruptcy again if you issues in the future.  You have to strikeout more than once sometimes to hit a homerun.  The Bankruptcy Code has rules on how long you have to wait before you can file another bankruptcy case again after your discharge whether that be in chapter 7 or chapter 13 bankruptcy.  If we are allowed to discharge out debts at any moment there should be chaos in our financial system.  Only large multi-national conglomerate corporations get bailed out entirely by the government regardless of that they do.  They are too big to fail while us individuals re too small to matter.  We do have bankruptcy though to wipe it all away and start over though.

In a Chapter 7 bankruptcy case, all of your dischargeable unsecured debt (such as credit card debt, medical bills, personal loans, deficiencies from repossessions, etc.) will be discharged.  Assuming there are no issues in your Chapter 7 bankruptcy case, the case is normally held open for approximately three to four months to provide your creditors with the opportunity to object to your bankruptcy case.  If there are no objections, then your debts are discharged and your case is closed.  In a Chapter 7 bankruptcy case, there is no repayment of your unsecured debts.  Thus, since all of your unsecured debts were discharged, you will not be allowed to file for another Chapter 7 bankruptcy case until at least 8 years after your previous Chapter 7 bankruptcy case was filed.  If you are concerned about your future ability to file another case discuss future limitations with your bankruptcy lawyer prior to filing.

In a Chapter 13 bankruptcy case, you will be repaying a certain percentage of your debt back to your creditors.  After repaying your debts for three to five years, whatever unsecured debt left unpaid after the three to five years is discharged.  Since you have been repaying some of the debt back to your creditors, the Bankruptcy Code is more lenient and allows you to file another bankruptcy case sooner.  If you have previously filed a Chapter 13 bankruptcy case, the Bankruptcy Code allows you to file a Chapter 7 bankruptcy case 6 years later.  If you have previously filed a Chapter 7 bankruptcy case, you can file a Chapter 13 bankruptcy case 4 years later.  Finally, if you have previously filed a Chapter 13 bankruptcy case, you can file another Chapter 13 bankruptcy case 2 years later.

The easiest way to remember the rules is that there are 2-year differences between each rule:

1) Chapter 7 to Chapter 7 = 8 years

2) Chapter 13 to Chapter 7 = 6 years

3) Chapter 7 7 to Chapter 13 = 4 years

4) 13 to 13 = 2 years

Be sure to let your bankruptcy attorney know that you filed and received a discharge in a prior case no matter how long ago it was.  It is important that a global view of your circumstances be evaluated including prior bankruptcy filings.

While some will criticize the multiple filings for bankruptcy protection there is usually much more to the story that is not known.  The highly critical people are also the ones that have never tried anything in their life.  They have worked for others and others takes risks and build businesses.  They do not understand or know how challenging it is to build something then sustain it against all odds.  Nothing is easy and there are so many ways for circumstances outside of the business owners control that can destroy the business overnight.  The mortgage meltdown in 2008 and the more recent COVID pandemic response are prime examples.  Even the horrible wildfire season of 2020 is another example of how to get wiped out and have done nothing wrong or made bad choices.  This why we are lucky to have the Bankruptcy Code and the legal ability to discharge our debts and move on.   

 

 

I’m About to Receive a Lump Sum Social Security Payment and Does that Affect My Bankruptcy Case?

By Ryan C. Wood

A number of issues that come up in the real world are not good in once in the bankruptcy world.  Receiving a lump sum social security payment is one of them.  There are many people that are about to file for bankruptcy  or have already filed for bankruptcy and realize that they will be receiving a lump sum payment from the Social Security Administration for payment owed to them for prior months (sometimes years).  At times it is not clear when the funds will be received or if they will be received at all.  Receiving a lump sum payment is normally a cause for celebration since you will now receive what is owed to you by the government.  However, the most prevalent fear out there is that because they are about to file for bankruptcy, or have already filed for bankruptcy, they may lose some or all of those funds.  Well, we are here to help you settle those fears.

Social Security benefits are exempted from the bankruptcy estate.  What is a bankruptcy estate?  A bankruptcy estate is created when you file for bankruptcy protection.  The bankruptcy estate essentially includes all assets that you have in your name, whether it is real or personal property, tangible or intangible goods.  We use exemptions to protect those assets.  Since Social Security benefits are exempted from the bankruptcy estate, it means that these benefits are protected against creditor collection, including levies, garnishment, or any other legal process.

If you received your lump sum social security payment before your bankruptcy case is filed, be sure to place those funds in a separate account that is not commingled with deposits from other sources.  This way, there is no argument that the account consists of only the social security payment, and all the funds in the bank account can be protected.  If the lump sum payments are commingled with monies from other sources, it becomes harder to trace the funds.  If you have your paycheck deposited in the bank account along with the lump sum payment, how do you prove that the $1500 you spent on rent came from the lump sum social security payment and not your paycheck?  The harder it is to prove that the funds came from the social security payment, the harder it is to protect.

If you receive your lump sum social security payments after your bankruptcy case is already filed, you need to make sure the payments are listed in Schedule B of your bankruptcy petition.  If it is not, you can file an Amended Schedule B to list the lump sum payment and exempt the asset on Schedule C of your bankruptcy petition.  As previously indicated, remember to place the lump sum payment in an account that is not commingled with other funds to ensure maximum protection.