Archive for the ‘Chapter 7 Bankruptcy’ Category
Wednesday, May 25th, 2011
A recent news article from LoanSafe.org tells the story of a woman who broke some important bankruptcy laws and ended up with almost $48,000 in fines to pay, on top of a five-year probation period. If that doesn’t sound like a good deal to you, read on to find out what she did wrong.
According to sources, the woman’s case worked like this:
- In 2005, the woman in question filed for Chapter 7 bankruptcy. Chapter 7 is designed to help filers eliminate certain unsecured debts without making creditor payments through a repayment plan (that only comes into play in Chapter 13 bankruptcy).
- As bankruptcy law requires, the woman testified to the completeness and accuracy of the information in her bankruptcy petitions as part of the Chapter 7 process.
- Before filing her bankruptcy petition, the woman apparently transferred a piece of property (worth more than $47,000) to her son. She did not mention this transfer in her bankruptcy documents.
- After the Chapter 7 case ended, the woman reportedly sold the “transferred” property and used the money to buy a home in a different state without reporting the proceeds of the sale.
Avoiding Bankruptcy Fraud
The woman’s crime was that she improperly transferred property with the intention of shielding it from the bankruptcy court. Had she proceeded lawfully without transferring the property, it would have been considered part of the bankruptcy estate.
Depending on the specifics of the woman’s case, the property might have been sold to raise money to repay her creditors in part; however, lying about the property ended up costing her in the long run.
One reason most insiders recommend that potential bankruptcy filers work with a bankruptcy lawyer is to help them avoid bankruptcy fraud, which includes all of the following.
- Reporting incorrect or incomplete information: While the bankruptcy court may excuse honest mistakes on paperwork, more serious “mistakes” will likely lead to some legal action.
- Attempting to repay a favored creditor before filing: Singling out one creditor (say, a family member or friend who lent you money) to repay before discharging other debts in bankruptcy is not allowed. Those who attempt to do so could face charges of bankruptcy fraud.
- Improperly concealing or transferring property: This could be considered a branch of the “complete and accurate” rule, but it deserves its own section. Attempting to hide or pretending to give away assets to shield them from bankruptcy is not permitted.
- Omitting known future income: Whether you’re expecting a tax refund or a hefty inheritance, it’s important to include it in bankruptcy petitions. Otherwise, you risk being charged with bankruptcy fraud.
As the story above illustrates, bankruptcy fraud is serious business: fines can get as high as $500,000 and those convicted may face jail time. Neither of those options sounds like a good way to get back on your feet financially.
Posted in Chapter 13 Bankruptcy, Chapter 7 Bankruptcy, Legal Info, bankruptcy fraud, homes in bankruptcy | Comments Off
Wednesday, March 23rd, 2011
New reports highlight some interesting information about two topics near and dear to those who have filed or are considering filing for bankruptcy: underwater mortgages and student loan debt. Here’s a look at what kind of picture the latest numbers paint.
Students Don’t Need to Default to Be Behind on Loans
The Institute for Higher Education Policy released a report last week showing that two-fifths of those who borrowed money for educational purposes fell behind on their payments at some point in their first five years of repayment. So what does this mean?
- Widespread repayment difficulties: These numbers may not even reflect the current rates of repayment difficulty, given that graduates in the last few years have faced a much tougher job market than those who graduated five years ago.
- Old measures may be inadequate: Traditionally, studies on student debt have focused on the rate of default rather than delinquency. Looking at delinquent loans offers a clearer picture of how many people are struggling to repay their loans, even if they manage to get back on track at some point.
- Bankruptcy not an option: Student loans are typically not dischargeable in bankruptcy court, which means that those with unmanageable student debt have few options for easing their debt burden. This is scary, considering that some estimates put the country’s total student debt at $896 billion, which is greater than our national credit card debt total.
Reports note that these numbers may affect the current debate in Congress over whether for-profit colleges and universities should be eligible for federally backed financial aid.
More Underwater Homes
Recent numbers released by a company called CoreLogic show that the number of underwater homes in the U.S. (that is, homes with a current value less than the amount of the mortgage on the house) has climbed since last quarter. Here’s a look at the numbers.
- A reported 11.1 million U.S. homes were underwater in 2011’s first quarter, a jump from 10.8 million in the last quarter of 2010.
- Nevada has a 65 percent rate of underwater mortgages, and is apparently the only state in which the average homeowner is underwater.
- Besides the more than 11 million underwater homeowners in the U.S., 2.4 million Americans have less than five percent equity in their houses, according to sources.
- Collectively, we reportedly owe about $751 billion more on mortgages than our homes are worth.
- Analysts predict that home prices could fall by another five to 10 percent in 2011, meaning that those with little equity could soon find themselves underwater.
Unfortunately, mortgage loans for primary residences cannot be modified in bankruptcy court, but in some cases homeowners may find a Chapter 13 or Chapter 7 filing useful for eliminating other debts to help improve their odds of staying on track with their mortgages.
Posted in Bankruptcy and the Economy, Chapter 13 Bankruptcy, Chapter 7 Bankruptcy, Foreclosure, Mortgage Foreclosure, Student Loans | Comments Off
Tuesday, December 28th, 2010
A bill recently signed into law in New York outlines more extensive exemptions for petitioners filing under Chapter 7 of the U.S. Bankruptcy Code. The new law, according to Bloomberg news, has been lauded by consumer advocates and grumbled about by bankers and some city officials.
So what’s the big deal about changing Chapter 7 bankruptcy exemptions? A lot, if you’re interested in keeping your valuables when you enter bankruptcy protection.
How Chapter 7 Exemptions Work
To understand the significance of the New York law, it’s essential to understand how exemptions work in Chapter 7 bankruptcy. Here’s an outline.
- Laws by state: Each state outlines its own exemptions and is responsible for updating those exemptions as values and costs fluctuate.
- Protected property: Exemptions outline property that is protected from the Chapter 7 liquidation sale. Any property that is not protected by an exemption might be sold by a filer’s bankruptcy trustee to raise money to repay the filer’s creditors. However, in most cases there is no sale of any property thanks to the protection of exemptions.
Changes to New York Chapter 7 Exemptions
So what will change about the Empire State’s Chapter 7 exemptions? According to sources, a few things, including the following:
- Increased homestead exemption: It seems that New York’s homestead exemption will increase from $50,000 to up to $150,000, a move, some proponents think, that will allow more filers to keep their homes in Chapter 7 bankruptcy. Other advocates reportedly suggest that the increased dollar amount is more in line with current property values in the state.
- Increased vehicle exemption: Additionally, Chapter 7 filers will apparently be able to hold onto vehicles worth up to $4,000 above an associated loan (an increase from the earlier limit of $2,400 above). This exemption may make it easier to protect your car from repossession or towing if you have have traffic ticket debt.
Some analysts have reportedly suggested that the new changes to Chapter 7 exemptions in New York might make loans harder to come by in the state, as less money will be available for liquidation and creditor repayment in Chapter 7 bankruptcy filings. But for Chapter 7 petitioners in New York, the changes should be welcome.
Wondering about your state’s latest Chapter 7 exemption updates? For more information about the current state of Chapter 7 bankruptcy where you live, you can speak with a bankruptcy lawyer in your area.
Posted in Bankruptcy Laws, Bankruptcy News and Events, Chapter 7 Bankruptcy, Filing Bankruptcy | Comments Off
Tuesday, June 15th, 2010
Personal bankruptcy filings for the month of May have increased compared with a year ago, but dropped slightly compared with a month earlier, the American Bankruptcy Institute reported last week.
Here’s a breakdown of the data.
- Total filings: In May 2010, 136,142 personal bankruptcy cases were filed, a nine percent increase from May 2009, when 124,838 cases were filed.
- Month-to-month change: May’s total marked a six percent drop from April of this year, when 144,490 cases were filed.
- Distribution: Of the cases filed, 26 percent were under Chapter 13 of the U.S. Bankruptcy Code, and most of the remaining 74 percent were under Chapter 7.
- Projected total: Based on figures collected so far this year, most sources estimate that personal bankruptcy filings this year will total about 1.6 million, a 10 percent increase over the 1.44 million filed in 2009.
So what can these numbers tell us about the economic situation in the U.S.? Let’s take a look.
The Effect of Unemployment
While the decrease in filings from last month can be seen as good news, the increase from this time last year could be read in just the opposite way, meaning that these bankruptcy figures provide no clearer picture of the economic situation than any other economic indicator.
- Long-term unemployment: The year-to-year increase we see in bankruptcy filings could be one of the effects that the nearly consistent unemployment rate has had—people who have been out of work for several months may have depleted their cash reserves and be turning to bankruptcy for financial relief.
- Chapter 7 vs. Chapter 13: Another indicator that unemployment is hurting the country is that Chapter 7 cases outnumber Chapter 13 cases nearly two to one, indicating that most people in financial distress cannot afford repayment plans to resolve their outstanding debts and have relatively little income.
- The role of mortgages: In addition to the problem of unemployment, mortgage costs may be pushing more filers toward Chapter 7. Despite the Obama Administration’s Home Affordable Modification Program (HAMP), millions of Americans with unaffordable mortgage loans have not been able to have their loans modified, meaning that they’re stuck with expensive (and, in many cases, too expensive) mortgage payments.
If you’re struggling with unwieldy debt, an unmanageable mortgage or other financial burdens, you may want to consider consulting with a bankruptcy attorney from your area to see whether personal bankruptcy protection is right for you.
Posted in Bankruptcy Statistics, Bankruptcy and the Economy, Chapter 13 Bankruptcy, Chapter 7 Bankruptcy | Comments Off
Tuesday, June 1st, 2010
Chapter 7 bankruptcy is an option for debtors who simply cannot pay off their creditors due to any number of circumstances: divorce, job loss, or high medical bills. The common view of people who file for bankruptcy is that they must be deadbeats or living beyond their means, but it's normal people who file for bankruptcy.
Perhaps you qualify for Chapter 7 bankruptcy. You may be wondering if you’ll lose everything in the process. The good news is that some property is exempt from bankruptcy proceedings. There are two lists of possible exemptions: one state, one federal. Most states allow debtors to utilize only state exemptions, but a few states allow the debtor to choose between federal or state exemptions. An attorney may be able to assist you in determining what property your state exempts.
Homestead Exemption
The first, and most common, exemption is known as the “homestead exemption,” and it applies to your residence. The limitations on value of the homestead vary from state to state. For instance, in Texas there is no limit on the value of the homestead. In contrast, the maximum value that can be claimed in Alabama is $5,000.
Some states require special proceedings for spouses who jointly own property. You may also be required to continue making mortgage payments in order to keep the house. Once again, an attorney may be able to help you decide if those requirements apply in your state.
Vehicle Exemption
The second most common exemption is the vehicle exemption. Most people will not lose their car, provided its value in equity is below the state exemptions requirement. This value is usually around $3,000, but you need to check your state’s requirements.
In order to calculate the equity of your vehicle, find the market value of the vehicle and then subtract any money owed on it. If the vehicle is worth less than the exemption vehicle, you will probably be permitted to exempt your vehicle from the bankruptcy proceedings. If the vehicle is worth more than the exemption value, it is possible to pay the bankruptcy trustee the amount above the exemption value in order to keep the vehicle.
Like the homestead exemption, if you retain your vehicle, you are required to continue paying any loans or leases on the vehicle.
Other Exemptions
Other exempted property includes household property and appliances, clothing, jewelry up to a certain value, life insurance, alimony and child support, public benefits, retirement plans, and tools that are necessary for the debtor’s trade. For example, a professional musician will not lose her harp in bankruptcy proceedings, even if it is a very expensive musical instrument.
Unexempted property may include stamps, coins, and other collections; cash; bank accounts; stocks, bonds, and other investments; a second vehicle; or a second or vacation home. It is possible to keep a second vehicle, however, if it qualifies under another exemption category, for instance "tools of the trade." For example, if the debtor owns a carpet cleaning business, and needs his company’s van in order to continue doing business. This varies between states as well.
When filing for bankruptcy, the debtor will file a schedule, or list, of all exempted property, including its description, market value, and exemption value. This will allow other parties in your proceedings to review your exemptions and object. However, even if a creditor believes an exemption to be improperly claimed, they have the burden of proof—they can't simply demand you hand over assets.
Bankruptcy can provide relief from a wide array of debts, and despite common myths, very few debtors are left with nothing after they file. Most of all, bankruptcy gives you the chance to move on from debts and start anew.
For more information on bankruptcy exemptions, check out the state bankruptcy laws or talk with a local bankruptcy lawyer today.
Posted in Bankruptcy Laws, Chapter 7 Bankruptcy, Exemptions, Setting the Record Straight about Bankruptcy | Comments Off
