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Theodore L. Hall Bankruptcy Lawyer
A Fresh Start for People and Families through Bankruptcy Relief in Mobile and Southwest Alabama
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You may have one irritating creditor who is bugging you. That creditor is unreasonable, and is making your life miserable. Otherwise, your finances are in decent order. Should you file bankruptcy just to get that one creditor off your back, or even to “get even” with the creditor? That is almost always a bad idea. In extreme (and I mean extreme) cases, your “Rambo creditor” may be guilty of creditor harassment. But usually, “Rambo” is probably just trying to get paid. Negotiation, possibly with help from a reputable non-profit consumer credit counseling agency, is probably your better option. Have you previously filed bankruptcy? Depending on the type of case you filed (Chapter 7, 11, 12 or 13), the outcome of the case (discharge or dismissal), and the type of relief you are presently seeking (Chapter 7, etc.), the prior bankruptcy may prevent you from getting a discharge in a new case. Or it may keep the Automatic Stay (see below) from protecting you from continuing creditor action against you. The combinations are too varied to explain in full in this Bulletin. You need to talk to a lawyer, and I will be glad to help. What kind of debts do you have? If the vast majority of your debt is made up of child support, student loans, criminal fines or restitution, or recent taxes, then your debt is probably non-dischargeable for the most part. Chapter 7 will probably be of no real benefit, and even Chapter 13 may provide only temporary relief. These are real problem areas. However, you should talk to an experienced bankruptcy lawyer to carefully review the facts, if you want to be sure. I will be glad to help. It’s what I’m here for. But, if the debts which are distressing you the most are primarily credit cards, medical bills, or other unsecured debt, or if you need to stop a foreclosure, garnishment, or repossession, then bankruptcy is likely to give you relief, and a fresh start. |
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In Chapter 7, you are allowed to keep all your exempt assets. You must turn over non-exempt assets to a Court-appointed Trustee, who will administer them with the goal of getting money for your creditors. After a short period of time, usually four to five months, the Court discharges you (that is, releases you from your dischargeable debts), and you’re off to a fresh start. If you exempt a car, house, or other property which you’re still paying for, you can keep the property, if you keep up your payments and reaffirm the debt. Basically, you must be current on your house, car and purchase price payments on other assets when you file bankruptcy in order to reaffirm. What is exempt property? For Alabama residents, it’s primarily your earnings, $5,000 equity in a house or mobile home, and $3,000 in personal assets (less what’s owed on a given item). There are too many other exemption claims available to you to itemize here; I will help you claim all you’re entitled to if you decide to file bankruptcy. In Southwest Alabama, over 90% of Chapter 7 debtors can claim all their property as exempt. The 2005 changes to the Bankruptcy Code add a wrinkle. Basically, to qualify for Chapter 7, a person’s household income must be below the median for their State; and if it’s not, their disposable monthly income must be below a certain figure. The median income changes periodically, but as of November 1, 2010, for Alabama, the median is $38,018 for a household of one; $46,143 for a household of two; $51,613 for a household of three; and $62,983 for a household of four, and so on. There are exclusions for some types of income. If household income is over the median, categories of qualifying expenses may be considered in order to reduce monthly disposable income; otherwise, most household expenses are allocated according to certain IRS tables. I can analyze your income and/or disposable monthly income, and help you find out if you qualify for Chapter 7. In Chapter 13, you don’t turn over non-exempt assets to a Court-appointed Trustee. Instead, you agree to make regular installment payments to a Standing Chapter 13 Trustee and, in some instances, directly to a creditor (usually your home mortgage), under a Court-approved Plan. Payments to the Standing Trustee last for three to five years. If you complete payments, you receive a discharge from the Court. You are allowed to keep all assets (whether exemptible or not) which you need to perform the plan. That could include your home, even if your equity is $100,000! It could include expensive equipment for a self-employed debtor, too. The possibilities are endless. Are you way behind on your house note? Or second or even third mortgage? Is the repo man circling the block, looking for the car you’re four months behind on? In Chapter 13, the mortgage holder or car loan company can be required to let you keep the house or car, and allow you to catch up on your delinquent payments through a Court-approved plan. You can even pay back taxes through a Court-approved plan without worrying about levies and seizures. There are even some debts which can be released in Chapter 13 which cannot be released in Chapter 7. But the 2005 changes to the Bankruptcy Code have severely restricted this advantage for Chapter 13 filers. And you can file Chapter 13, regardless of how much you earn. The median income restriction is for Chapter 7’s only. Finally, you may end up paying less than the full amount of your unsecured debts, such as credit cards, medical bills, and bank and loan company loans without collateral recognized in bankruptcy. Summary of Advantages for Each Chapter Chapter 7 is preferred. It usually works best if: You are current on your house and car/truck/SUV notes (or have none). You are able to keep all your assets as exempt You are below the Alabama median income You want to make your fresh start as soon as possible – usually four to five months Chapter 13 may be needed to address these common contingencies: You are delinquent on your house note and you want to keep your house. Same with vehicles. You have non-exempt assets (such as excessive equity in your home) which you wish to keep You are above the Alabama median income and your disposable monthly income isn’t low enough You are willing stay under the Court’s jurisdiction in a 3 to 5 year repayment plan before getting your fresh start Remember this advantage to Chapter 13 – you may still end up paying less than the full amount of your unsecured debts. |
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What is Better for Me: Chapter 7 or Chapter 13? |
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Will Bankruptcy Release (Discharge) All My Debts? The discharge is the goal of filing bankruptcy. It is a Court order releasing, or discharging, you from all your dischargeable debts. Once it is entered, you can usually begin your fresh start. Typically, both Chapter 7 and Chapter 13 will release you from your general, unsecured debts. Examples of this sort of debt are credit cards, medical bills, and loans from banks and loan companies without collateral recognized in bankruptcy law. It will also include the deficiency remaining if you elect to surrender collateral to a secured creditor. An example of this would be letting a lemon go back to the car loan company. For unsecured creditors, the only payment they will receive will be (in the rare case) a dividend from the Court-appointed Chapter 7 Trustee who liquidates non-exempt assets. Otherwise, you are released from any further personal liability. Or, in the case of a Chapter 13, payments from the Standing Chapter 13 Trustee from money you pay him under a Court-approved plan. Otherwise, the Chapter 13 discharge releases you from any further personal liability (unless your case is dismissed before you finish paying your plan). There are many debts which will not be discharged. Examples include: Debts (including house mortgage payments) reaffirmed in a Chapter 7 Future house mortgage payments in a Chapter 13 where the debtor keeps the house Child support Student loans Criminal fines and restitution Fraud Recent taxes Certain credit card charges made shortly before filing bankruptcy Unlisted debts Some debts, such as taxes and student loans, may or may not be dischargeable, depending on many factors. I can review your individual situation with you and advise you. |
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Frequently Asked Questions About Foreclosure and Chapter 13 How far behind on my house payments can I get before the mortgage company will foreclose? Usually, just one gives the mortgage company grounds to foreclose! It depends on what the mortgage and the promissory note (or loan agreement) say. Customarily though, most mortgage companies do not begin foreclosure until the second or third monthly payment is past due. How does a foreclosure take place? Alabama law allows for foreclosure by newspaper publication. A minimum of three weekly notices must be given in a newspaper of general circulation in the county where the property is situated. Each notice will identify the date, time and place of the foreclosure sale. At the sale, the property is sold at auction. Usually (but not always), the mortgage company bids in the amount owing on the mortgage, which cancels out the debt and results in the mortgage company taking ownership of the property. What legal notice do I get of the foreclosure? Very little – Alabama Law requires only newspaper publication. As a matter of practice, however, the attorney handling the foreclosure will often mail a copy of the notice to the property owner. When is it too late for bankruptcy to stop a foreclosure? It is too late if the foreclosure auction has already been held. That is why you MUST contact my office immediately, if the foreclosure notices have appeared in the newspaper, and you plan to save your house in chapter 13. Do not wait till the last minute – filing a last-minute chapter 13 is risky and may be impossible! What about my other debts? Chapter 13 is comprehensive – you must deal with ALL of your debts in your plan. But read on – this may be to your advantage. Can I reduce my mortgage payments in Chapter 13? The Bankruptcy Court has no authority to lower your monthly mortgage payments. This must be worked out directly with the mortgage company. Mortgage companies will often work with its customers and try to lower house notes. In many cases, the Federal Government requires them to try. Notice I say try. How can I save my house and yet deal with all of my other debts, if I was not able to keep up my house payments to start with? Fortunately, Bankruptcy Law allows you to modify most of your other debts. Usually, this makes the difference. You can often significantly reduce, or even eliminate, unsecured debts such as credit cards, past-due medical bills, and unsecured loans. You can often reduce your regular car notes. Many people find that these modifications free up enough extra money every pay period to resume making house notes and make the single regular plan payment which deals with house arrearage, car note, and unsecured debts. The plan payment also pays your attorney’s fees and a commission to the Standing Trustee, who collects the money from you and disburses it to the creditors according to your Court-approved plan. That reminds me: what about Court costs and attorney’s fees? A filing fee of $274.00 must be paid to the Court when your chapter 13 petition is filed. Sometimes, the Court will allow the filing fee to be paid in short-term installments, but will not approve your plan until it is paid in full. Attorney’s fees are paid as a part of the plan, over time, after the bankruptcy is filed. The Court usually approves an attorney’s fee of $3,000.00, but the amount can vary depending on how complex the case is. Do I qualify for Chapter 13? You must have a regular source of income and enough disposable income to pay your regular future house notes, as well as make plan payments. You must be current on filing tax returns, even if you haven’t paid all your taxes. If you have recently filed bankruptcy, it may limit your relief or even disqualify you. There are other circumstances affecting your eligibility. Call (251) 479-0619 for a confidential, no-cost no-obligation initial consultation at my office to see if you qualify. Is there more? Yes. These are just the basics, insofar as chapter 13 applies to stop a foreclosure. For more, call (251) 479-0619 for a confidential, no-cost no-obligation initial consultation at my office. Or visit my website at www.tlhbl.com. |
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Important notices …
This website contains general information only! It is not intended, nor should it be used, as legal advice for yours or anyone’s specific situation. I cannot be considered as your attorney unless you and I have entered into a signed retainer agreement.
Alabama State Bar requires: “No representation is made that the quality of the legal services to be performed is greater than the quality of legal services performed by other lawyers.”
The Bankruptcy Code requires: “We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.”
Copyright © 2010 by Theodore L. Hall, Bankruptcy Lawyer. All rights reserved. |
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Chapter 13 and Home Foreclosures ... |