Posted by Kevin on August 22, 2011 under Bankruptcy Blog | 
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Bankruptcy has its own language- sometimes quite colorful. We have cram downs and strip offs. Long before we talked about mortgages being underwater, underwater was a term used frequently in bankruptcy to determine whether a claim was secured or not.
Posted by Kevin on July 8, 2011 under Bankruptcy Blog | Be the First to Comment
In a Chapter 13, the debtor is limited to $360,475 of unsecured debt. Unsecured debt is debt where there is no collateral. Like credit card debt.
However, in a Chapter 13, a debtor can strip off otherwise secured debt that is completely underwater. For example, if your house is worth $300,000 and the first mortgage is for $350,000 and the second mortgage is for $100,000, the second mortgage is totally unsecured and could be “stripped off”. When it is stripped off, it becomes unsecured debt and must be added to other unsecured debt.
Posted by Kevin on February 22, 2011 under Bankruptcy Blog | Be the First to Comment
Of course, they are related. People who cannot pay their mortgages are likely to be people who are having trouble paying other debt, like credit cards.
But, I am talking about strategy. Some of the same arguments that are being used by the cutting edge foreclosure defense attorneys were actually used first by bankruptcy attorneys.
Posted by Kevin on September 21, 2009 under Bankruptcy Blog | Be the First to Comment
A Chapter 13 bankruptcy may be filed by individuals with regular income. This includes a sole proprietor who runs a business but does not include a corporation, an LLC or a partnership. In a Chapter 13, the debtor pays all or a part of her debts over a period of 3-5 years under the supervision of the bankruptcy court.
A Chapter 13 bankruptcy is initiated by the filing of a Chapter 13 petition together with a Chapter 13 plan. The plan must provide for a fixed monthly payment to the Chapter 13 trustee. The debtor must begin making payments pursuant to the plan beginning the month after the filing. For example, if the filing is on April 10, then the first payment is due on May 1. Creditors and/or the Chapter 13 trustee may object to the plan. The debtor can either modify the plan to meet the objections or allow the bankruptcy judge to decide if the plan complies with the law and is, therefore, confirmable.
Posted by Kevin on May 8, 0201 under Bankruptcy Blog | Comments are off for this article
Most of the time, you get to keep whatever you own when you file bankruptcy. These 10 truths tell you how it works.
Truth #1. Exemptions can be trickier than they seem to be: There is much more to protecting your assets than just matching assets to exemptions. Although some exemption categories are straightforward, important ones often are not. Some require knowing prior court decisions, and/or how the local trustees and judges are informally interpreting them.
Truth #2. Federal and state exemption schemes: Congress has left it up to each state whether to use a federal set of exemptions in the Bankruptcy Code for bankruptcies filed in that state, or instead a set of exemptions created by the state, OR even to allow each debtor to choose to use either the federal or state set of exemptions. In New Jersey, we generally employ the federal standards. Why? Because most of the NJ exemptions were instituted about 100 years ago and were never adjusted for inflation.
Truth #3. Which exemption scheme you must use can depend on how long you’ve lived in your present state: If you have not been “domiciled” in your current state for two full years before filing bankruptcy, you cannot use the set of exemptions available to residents of your state. You must use the state you were “domiciled” in during the 6-month period immediately before those two years. And if you were “domiciled” in more than one state during that 6-month period, you must use the exemptions available to the residents of the state where you were domiciled the longest during that 6-month period.
Truth #4. If you have assets that exceed the applicable exemptions, you stand a much better chance of protecting them with pre-bankruptcy planning: This is one of the most important reasons to meet with a competent attorney well before you are pushed into filing bankruptcy. What you do with your assets before filing bankruptcy can be scrutinized by the trustee and/or creditors afterwards, so you must get thorough legal advice beforehand. Doing so can make all the difference in protecting what is important to you.
Truth #5. Some trustees are more aggressive than others, and asset values are matters of opinion: Therefore, do not be surprised if a trustee challenges the value that you assign to an asset.
Truth #6. It is crucial to be thorough in listing assets AND exemptions: Failing to be thorough in listing your assets in your bankruptcy documents can jeopardize your entire case, and in extreme cases even lead to criminal charges against you by the U.S. attorney. Also, failing to list an asset which would have been exempt can result in losing the right to claim that exemption later, and then losing that asset.
Truth #7. Just because you have an asset that’s worth more than the exempt amount, doesn’t necessarily mean the trustee will take it: Trustees can decide not to pursue an asset that is either partly or completely not exempt because 1) the asset is not worth enough to justify the trustee’s efforts to collect or liquidate it; 2) the trustee is not willing to bear the costs to collect or liquidate it (such as the attorney fees needed to pursue a claim of the debtor); or 3) the asset’s detriments arguably outweigh its benefits (such as a parcel of land polluted by hazardous waste).
Truth #8. If you have an asset that you want to keep that is not exempt, you can usually “buy it back” from the trustee as long as you have the money to do so within a few months: It may seem like a bad deal to have to pay a Chapter 7 trustee to keep something you already own (such as a vehicle). But if the alternative is doing without a vehicle, or risking getting an unreliable one, or filing a 3-to-5 year Chapter 13 case to save your vehicle, buying it back from the trustee could be by far the best way to go.
Truth #9: You don’t ALWAYS want to avoid having the trustee claim an asset: Sometimes you may actually want the trustee to take a particular non-exempt asset or two. You may not need them—such as the leftover assets of a closed business—and may appreciate handing the liquation hassles over to the trustee. This could especially be true if the trustee will be paying a significant part of the proceeds of sale to a debt you want paid, such as taxes or back child support.
Truth #10. The difference in exemptions under Chapter 7 and 13: Although the set of exemptions used in filing under both chapters is the same, the exemptions are used for a different purpose. In Chapter 7, the exemptions determine whether you have any non-exempt assets for the trustee to take from you, and distribute their proceeds to your creditors. In Chapter 13, the exemptions are applied in the same way but for the purpose of imagining whether there are any non-exempt assets that a hypothetical Chapter 7 trustee would have taken, and if so paying the estimated amount to the creditors over the life of the Chapter 13 plan.
