Most people contemplating bankruptcy obviously are in a financial bind. As a result, it is natural that one of the questions they ask of a bankruptcy attorney is the following:
How much does it cost to file bankruptcy?
The desire to keep the cost as low as possible is understandable. However, those considering bankruptcy should be aware that the best long-term option that saves the most money is not necessarily what appears to be the cheapest path.
You Get What You Pay For
First of all, we have seen cases where clients have signed up with inexperienced lawyers who have charged very little for their fee but have failed to protect the assets of their clients. One such client came to us after the damage was done. He had lost $11,000 that could have been protected with proper counsel and planning. Unfortunately, there was nothing we could do to extricate him from this mistake.
Costs Vary Depending on a Wide Variety of Factors
Second, the actual cost of filing for bankruptcy protection necessarily varies depending on other factors as well. For example, one factor is whether one qualifies for a liquidation or must instead enter into a payment plan.
But there may be reasons why someone who would otherwise qualify for a discharge in a few months under Chapter 7 might instead prefer a wage-earner plan under Chapter 13. Typically, a Chapter 13 might be used to catch up on mortgage payments and save the family home. Cases under this chapter most often fall under the Court’s “no-look” rule. Thus, the cost is the same no matter what attorney is employed.
The cost for a Chapter 7 may vary depending on whether a debtor needs to file with little or no money down due to a garnishment or can come up with the entire legal fee up front. Either way, it is best to discuss these choices in depth with competent counsel.
Bankruptcy Court Filing Fees
Third, there are the Bankruptcy Court’s filing fees. These charges support the Court’s operation and are standard across the country. At the time of this publication, the fee for filing personal bankruptcy under Chapter 7 was $335 and was $310 for a Chapter 13. Businesses and high-asset individuals filing under Chapter 11 were obliged to pony up $1,717 to file their cases. There are other chapters that are little used. For example, Chapter 12 cases for family farmers and fishermen amounted to little more than 0.06% of all cases filed during the last 12.
With a Skilled Attorney, You’ll Save Money in the Long Run
Undoubtedly, the fees charged by a lawyer and the Bankruptcy Court appear to be substantial to the average filer. However, the amount of money saved in the long run should make the expenditure well worth the cost. Moreover, the downside of choosing overly busy or inexperienced attorneys can have expensive, and even disastrous, consequences. Attorney fees are the majority of the cost of a case. Thus, it is understandable that a struggling debtor might be tempted to seek out the cheapest possible lawyer. A billboard or park bench may advertise a local law firm provides bankruptcy services “for a mere $555” or other similarly low quotes. Despite these “teaser rates,” one should be wary of the quality of the services that will be provided.
Avoid Costly Mistakes With the Help of an Experienced Lawyer
Bankruptcy is often considered one of the most stressful and daunting times in an individual’s life. Do you really want to go through this stressful time with a discount lawyer who doesn’t really care about your case, and may simply do the bare minimum? This sort of service may lead to not getting the highest quality service. It can lead to paying more in the long run to creditors and the trustee than you would have paid to competent and slightly more expensive legal representation. Competence, loyalty, and knowledge should really be the deciding factors when you are looking for legal representation in bankruptcy, not cheapness. For expert legal help, call Benson Law Firm today.
Although most folks looking for relief from overwhelming debt would prefer the “quick and dirty” Chapter 7 discharge, there are several reasons why filing under Chapter 13 and making payments for 3-5 years might be preferable. Of course, those households with over-the-median income will likely have to file a Wage Earner Plan anyway and may not have a choice. But there are options under Chapter 13 that are not available in Chapter 7. Even those who indeed qualify for a 7 may find they are better served by taking a closer look at the benefits of a 13.
Catching up on a mortgage arrearage
Popular with many families facing foreclosure, especially those with a sheriff sale right around the corner, is the Chapter 13 feature that allows both an immediate halt to the foreclosure case (along with a canceling of any sale) and an opportunity to pay down the accumulated arrearage by spreading proportional payments over the next five years. This can be an important and vital lifeline in cases where someone has suffered a temporary hardship, like a job loss or unexpected medical procedure, and just wants to “get back in the saddle” by catching up payments over time.
Plan payments must be affordable
Many people presume that monthly payments made to the Chapter 13 Trustee will be larger if the level of debt is greater. Nothing could be further from the truth! In our experience, most of the parties involved in the process of agreeing on a Wage Earner Plan would prefer that a debtor be able to make the monthly payments comfortably and not be under so much strain with budget constraints that they eventually give up and pull out of bankruptcy.
Shave off second mortgage
Unlike a liquidation where underwater mortgage interests remain on a residence post discharge, a Chapter 13 case offers an opportunity to sever a second mortgage from the property and discharge that obligation completely. The central issue in such a move is whether the second position is indeed fully unsecured by the house. A valuation must be undertaken by the attorney and then presented to the Bankruptcy Court in order to support the request for this special relief.
Reduce car payments
Most cars and trucks bought on credit carry a running balance that is higher than the value of the vehicle. You know the old saw, “The new car loses $800 in value by just driving it off the lot.” As a result, eventually trading in this vital means of transportation usually involves placing some of that extra debt into the next purchase. But Chapter 13 can resolve this problem.
In a Wage Earner Plan, you may be able to undertake a “cramdown” of the loan and thereby reduce the balance to the value of the vehicle. You can accomplish this in a Chapter 7 through the use of a redemption loan. However, that requires qualification with a lender. In a Chapter 13 bankruptcy, you need not take this route. Your attorney can file a motion to value the collateral and ensure that the remaining balance is cleared to the extent your other unsecured debts are discharged. Pretty nifty.
There is one caveat. The vehicle loan you are adjusting cannot be purchased within the 910 days (about 2 ½ years) prior to the filing of the bankruptcy. This limitation is to prevent folks from gaming the system. Otherwise, you could purchase a new vehicle with a good-faith lender and then turn around. Then you could reduce the balance immediately through bankruptcy.
Manage tax debt
Spending time without a job, losing a business, suffering a major medical event or experiencing family loss can make it difficult to keep up with tax obligations. A Chapter 13 plan can be used to keep the taxing authority at bay (“talk to the hand, Mr. Tax Man”) and allow you to catch up over an extended period of time. The IRS usually gives taxpayers only 12 months to satisfy their tax obligations. Bankruptcy can extend that period to 60 months.
As soon as you file bankruptcy, all collection efforts must cease. It’s the law and it’s automatic. No one is permitted to continue to request payment or seize any assets. And that includes your car, truck or motorcycle. Repossession of any vehicle after a petition is filed is a violation of the automatic stay. It may thus earn the company a big smack-down by the Court.
Not only will the repo stop, but your Chapter 13 will provide for the resolution of any amounts owed in back payments. The arrearage will be paid in increments over the life of the Plan at a measly interest rate of 0 percent!
Student loans are included
We’ve heard a lot about how student debt is out of control and that people are drowning in it. We’ve also heard about threats of default and seizure of assets to satisfy those loans. Like with taxes, you can use a Chapter 13 to keep the collectors at arm’s length. It can also provide some payment through the Plan.
Unfortunately, full discharge of these obligations is very difficult and can be expensive at this time. However, an attorney should undertake an analysis of each case and explore non-bankruptcy solutions or programs. In the meantime, a 13 can provide at least temporary relief from any voracious government collectors and their attorneys.
Co-signors can’t be pursued
A common concern among clients who have had their parents or others co-sign for their loans is that bankruptcy will mean that lenders will immediately pursue the co-signors upon the filing of the petition. A federal statute, 11 U.S. Code § 1301, provides for a stay of any such action against a co-debtor. So as long as you pay into your Chapter 13 plan according to its terms, the law will protect any co-obligor from any unexpected collection activity by the lender.
As a side note, the co-debtor stay applies only to consumer debts. It does not cover any business or other non-consumer obligations.
In a Chapter 7, a debtor receives a discharge. However, in a 13, you get what people often refer to as a “super” discharge. In neither case can a debtor discharge:
Child and parental support
Criminal fines and restitution
Damage awards caused by drunk driving
Liabilities for theft, embezzlement or breach of fiduciary duty
Debts incurred through fraud or false financial statements
Most student loans
Most tax debts
Obligations arising from the willful and malicious injury to other persons
However, debts that are dischargeable in a 13 but not a 7 are:
Civil fines and penalties
Divorce decree debts
Loans to pay non-dischargeable federal taxes
Welfare repayment directives
Obligations arising from the willful and malicious injury to property
So if any debt on the latter list is substantial, your attorney would do well to consider a 13 – even if you qualify for a 7.
Contact Benson Law Firm Today
For more information about the benefits of a Chapter 13 wage earner plan, contact the Benson Law Firm today.
Everyone who walks into my office presumes that their credit score will be irretrievably ruined for years to come as a result of their bankruptcy. I am always happy to tell them, “Stop listening to the doomsayers and panicky prognosticators!” Even though the court filing will stay on your credit report for 10 years, that does NOT mean your score will remain low. It also does not mean no one will allow you access to credit.
Of course, most people filing bankruptcy have low credit scores already. The financial challenges that have damaged their credit are the very reason they are filing in the first place. But decent credit can be right around the corner! And with time and a few good strategies, you can bounce your score significantly within a year or two. To fix credit after bankruptcy, all you need to do is follow the following suggestions.
Review Your Credit Report
It is always a good practice to begin each New Year with a review of your credit report. This is especially true for clients who have filed bankruptcy. The reasons for this essential habit are that you:
keep your finger on the pulse of your credit and review the progress of your efforts to improve, refining your strategy of recovery;
uncover any mistakes in how the creditors are reporting so that their proffered information doesn’t unfairly damage you;
see if any creditors are engaged in unlawful conduct (yes, they do!) for which you might be entitled to compensation; and most importantly,
guard against identity theft.
Ordering your credit reports is actually quite simple. You can visit www.annualcreditreport.com or my.bankrate.com once every year and receive free copies for each of the three reporting agencies: Equifax, TransUnion and Experian. We tell our clients to order the first set of reports approximately 2-3 months following their bankruptcy discharge. This allows us the opportunity to review them with trained eyes. We go through the credit report with the client to check for the accuracy of trade lines. We also check whether the client consented to certain credit reviews, and if any creditor is violating the bankruptcy discharge order.
When you are trying to fix credit after bankruptcy, sometimes it will be necessary to dispute information on your credit report. In order to assure that any incorrect entry is either removed or fixed, you must clearly state exactly what the error is and how it should be remedied. We urge clients to include evidence supporting your contention. Also, be sure to send the notice by certified mail, return receipt requested.
Avoid High Interest Debt
Recently discharged folks often become deluged with offers for immediate credit from car dealers, payday lenders and other sources of high-interest debt. The reason they do this is that they know you will not be able to declare bankruptcy again any time soon. They’re looking to get their feet in your door. We urge our clients to resist these entreaties. Instead, consider other ways to find a little breathing room or work on building up your credit scores.
A good way to avoid high-interest debt and to fix credit after bankruptcy is to:
create a monthly budget and
set aside 5-10% of your income for savings.
That way, you make sure you don’t have to resort to high interest debt just to get by or address a sudden emergency. If setting aside something in a savings account doesn’t seem to fit into your budget, consider reducing nonessential expenses such as fees for cable TV or high-speed internet, dining out at restaurants, or renting new furniture.
Avoid Unscrupulous Credit Repair Companies
According to the Federal Trade Commission, “anything a credit repair clinic can do legally, you can do for yourself at little or no cost.” That includes ordering copies of your credit reports and writing letters to the agencies to challenge inaccurate information. Of course, it does not include filing suit against a creditor or one of the three agencies because they are breaking federal law.
But it is important to be aware that some unscrupulous credit repair companies suggest they can accomplish things to fix credit after bankruptcy that they cannot. The Credit Repair Organizations Act prohibits untrue or misleading statements and compels companies to make certain disclosures. The Act the collection of advance payments, requires all contracts to be in writing, and allows consumers an unfettered right to cancel a contract within three business days. If we discover one of our clients has engaged one of these companies, we urge the client to contact us immediately. We can help to ensure they have actually been well-served and that the company has complied with the law.
Consider a Secured Credit Card
Applying for a secured credit card is probably one of the most popular ways of beginning to rebuild a credit score. In order to receive the credit line, the company will usually charge a start-up fee and require you to deposit a certain amount of money (between $200 and $500 is not uncommon). In our estimation, those funds should accumulate interest as a sign the lender is a reputable company. As you use the card and promptly pay it off every month, the lender may slowly increase the debt limit.
It is important to shop around a bit before alighting on a particular company. Some will charge exorbitant up-front fees, insist on high annual fees and include huge hidden costs. Avoid these predators. Keep in mind that many reliable lenders will require a certain waiting period after you receive your discharge before they agree to issue a secured credit line. This is a good sign that they aren’t trying to take advantage of you.
When you do finally receive a credit card, be sure to keep the balances low. The purpose of have the card is NOT to spend. It is merely to run planned expenses through a mechanism that enhances your credit score.
Finally, be sure the lender reports the credit history to the three bureaus. If they are on the up and up, this should not be an issue.
Consider Applying for a Retail Card
After you have begun building credit with a secured card, consider applying for a retail credit card. Retail companies such Sam’s Club, Amazon, Bed Bath & Beyond, Costco, Kohl’s and WalMart offer credit lines with rewards such as cash back on gas, travel and restaurant purchases. Of course, these incentives can lead to a high debt load due to high interest rates and the constant urging to spend more than you can afford. So these credit lines should also be used judiciously and only for the purpose of boosting your credit score.
Do Not Close Accounts
Every time you close an account, your credit score will go down. Seems counterintuitive? Keep in mind that part of your score is determined by how much you owe as a percentage of your total credit limit. Since your limit goes down whenever you close an account, so does your score.
Don’t Try to Remove Bankruptcy From Credit Report
There may be the occasional ad suggesting you can remove a bankruptcy from your credit reports. Nonsense. The only way to eliminate the reporting of a bankruptcy is by illegal means. Why create additional headaches at this point? The bankruptcy will be a matter of public record. And it is not the end of the world if it remains on your reports for 10 years.
Purchasing a Home or Car
Many of our younger clients want to know when after a bankruptcy they will be eligible to purchase a new home or a new car. Purchasing a new car is easy immediately after an order of discharge is received and the bankruptcy case is closed. However, purchasing a house or condo is a different story. It is not uncommon to have to wait 2-3 years after discharge before a lender will even consider issuing a home loan. Then, interest rates may be higher. They may be as much as 0.5% to 3% above conventional rates, depending on the applicant’s credit score. Requirements vary from lender to lender. Therefore, beginning to shop around immediately following the close of one’s bankruptcy case is a good idea.
If you are a first-time homebuyer or are of low-to-moderate income, the Federal Housing Administration has special opportunities and requirements for people in, or coming out of, bankruptcy. The FHA offers unique consideration for those with serious illnesses or those who have just lost a primary household income provider. As of 2018, FHA requires applicants to put down a mere 3.5% of the value of a home as long as they have a credit score of at least 580.
To Learn More About How to Fix Credit After Bankruptcy, Contact Us Today
With the right strategy and the help of a good bankruptcy lawyer, you can fix credit after bankruptcy. Call our Cleveland Bankruptcy Attorney at the Benson Law Firm today to learn more.
Many clients ask about the differences between the various chapters in bankruptcy and whether they have a choice in determining under which chapter they will file. The answer is, as in many things in life, it depends. Qualifying for a Chapter 7 case (liquidation) will require that either:
the debtor’s household income falls below the median income for the area,
if the income exceeds the median, whether the debtor can pass the “means test,” or
the majority of the debtor’s obligations are business debt.
Let’s just assume that the debtor qualifies for liquidation. Should he or she move forward with a Chapter 7? Let’s take a look at some benefits of Chapter 7 bankrtupcy.
In our office, it usually takes around three months from our filing a case to a debtor receiving their order of discharge that permanently releases his or her debts. This is far less time in bankruptcy than your typical Chapter 13 case. Chapter 13 cases customarily last between three and five years. This brief period makes Chapter 7 an attractive option for most below-median debtors.
Once a case is filed, an automatic stay of all collection efforts means that any efforts to collect on any debt. This includes garnishments or attachments of bank accounts that have been ordered by local judges. As a result, employers are required to cease deducting funds from the paychecks of filing debtors. If any money is collected or transferred after the bankruptcy case has been filed, those amounts must be returned to the debtor.
Ends Creditor Calls
The automatic stay also applies to creditor calls. Any creditor continuing to pester a debtor following the filing of a bankruptcy case may be subject to a contempt motion in bankruptcy court. Moreover, any collector intentionally violating the automatic stay may be subject to claims under the Fair Debt Collections Practices Act and other laws.
Even if a foreclosure judgment has been obtained and a sheriff sale is imminent, a Chapter 7 filing will operate to halt the sale and allow a debtor the time necessary to file a loan modification packet or make other arrangements to keep the property. This is only a temporary measure. However, a discharge of competing unsecured debt can lower monthly bills and expenses. This therefore can free up cash to apply either to a modified loan or a plan payment in a Chapter 13 case. Either way, the benefits of Chapter 7 when it comes to facing foreclosure are clear. Chapter 7 can be vital in retaining a family home.
Exemptions Protect Most Property
In Ohio, exemptions for everything from a house and car to an engagement ring and Dad’s old hunting rifle usually result in debtors retaining all of their property. Common exceptions to this rule are found in older vehicles with more than $5,000 in equity and non-retirement investment accounts. Property is reportedly liquidated in about 4 percent of all cases filed.
Discharge Most Obligations
At the end of a Chapter 7 case, the vast majority of debts should be subject to discharge. This includes most credit card balances, medical bills, divorce lawyer statements, remaining liabilities on repossessed vehicles and lines of credit. Not included in the discharge will be, among other things:
most student loans,
domestic support and property settlement obligations,
most fines and penalties, and
injuries caused intentionally or while intoxicated.
Eliminate Some Tax Debt
While most tax debt cannot be purged through bankruptcy, there are exceptions. Certain income taxes that are more than three years old may be purged under rather arcane rules. Whether or not this is possible is usually a separate analysis requiring some special knowledge and tools.
Student Debt Reduced, But Rarely
Given the staggering amount of student loan indebtedness carried by an increasing number of Americans, it is only natural that we are asked increasingly whether there is any potential for a debtor’s student liabilities to be reduced or completely eliminated. Unfortunately, there are few bankruptcy attorneys out there who are willing to take on student loan discharge cases. They are difficult because, generally speaking, one must prove that paying off the loans would prove an “undue hardship.” This standard is not an easy hurdle to clear. But good counsel and evaluation of prior cases within a particular courtroom may lead to a favorable result.
Wipe Out Mortgage Deficiencies
One trap that has tripped up many good-faith debtors has to do with a lender’s treatment of mortgage deficiencies. When a lender gets a judgment in a foreclosure case and the court subsequently issues an order to the county sheriff to place the property for sale, the property may not sell for enough money to pay off the mortgage. If that happens, the lender has two options:
Get a deficiency judgment and continue to pursue the debtor, or
Write off the balance and take a loss deduction on its next tax return.
The problem for the debtor is that both options have serious downsides. The first is that the debtor is not yet off the hook, despite being out of the house and into new lodgings. The second is that the lender may issue a 1099-C and create taxable income for the debtor. With some deficiency balances, this can mean a huge tax hit!
Bankruptcy allows the debtor to wipe out the mortgage deficiency without the tax obligation. Even if the debtor receives the 1099-C, a tax preparer can submit a Form 982 that makes it clear there was no forgiveness-of-debt income since the debtor had no obligation to forgive. The debt had already been discharged in the bankruptcy case.
Lower Vehicle Payments
A Chapter 7 case provides an opportunity to revisit car and truck loans to see if redemption is an attractive option. Redeeming a vehicle allows you to replace your existing loan with a new loan based on the actual value of the vehicle. For example, a late-model midsized car valued at $12,000, that the debtor purchased for $30,000 two years earlier, may be a good candidate for redemption. The debtor would secure a loan for approximately $12,000 from a redemption lender. Then that lender would send funds to the original lender in exchange for holding title. The debtor then pays a lower monthly amount to the new lender and carries the lower balance forward.
Jettison Business Debt
Many small business owners give personal guarantees in order to secure a loan for the business. If the business either goes south or suffers a serious cash-flow crunch, the owner may be called on to pony up for the obligations of the business. In the event that this happens, a Chapter 7 may be an attractive option for ridding the owner of the debt.
If more than 50 percent of the owner’s total debt is business-related, he or she may qualify automatically for a Chapter 7 and unload the burden. This has been a very popular strategy for small businesses. It sometimes allows owners and their businesses to survive and push forward to profitability.
Avoid Unwanted Leases
Chapter 7 gives debtors the opportunity to look at all leases and other contracts to determine whether proceeding with those arrangements is in their best interest. It may be that a car lease payment is too expensive or a furniture contract was unwise. As a result, the option to terminate can vastly improve a debtor’s monthly bottom line.
Likely Never Face a Judge
While a 10-minute meeting with a Chapter 7 panel trustee is a necessary customary visit to the courthouse, very few debtors have to appear before a judge. To date, none of my clients have had to attend a court hearing or visit a judge’s chambers.
Contact a Bankruptcy to Learn More About the Benefits of Chapter 7
To learn more about the benefits of Chapter 7, contact Benson Law Firm today. We can help you determine which chapter of bankruptcy best suits your needs.
If you make more than the median income for your household size and cannot pass the Means Test, you may be unable to qualify to file bankruptcy under Chapter 7. Most debtors who do not clear these two hurdles will then opt for filing under Chapter 13. They will also perform a Wage Earner Plan for the next five years. However, there are limits on who can file under a 13. Effective through all of 2018, the debt limits for filing chapter 13 bankruptcy under section 109(e) of the Bankruptcy Code are:
Total unsecured debt (credit cards, medical bills, utilities, etc.): $394,725
Total secured debt (house, vehicle and other collateralized obligations): $1,184,200
If you cannot file under either Chapters 7 or 13, you will be left with Chapter 11 as your only other bankruptcy option.
Benefits of Chapter 11 Over Chapter 7 or 13
There Are No Time Limits
In Chapters 7 and 13, there are specified waiting periods one must observe before re-entering bankruptcy. Not so under Chapter 11. If you have recently received a discharge under another chapter, there is no time limit to prevent you from filing under Chapter 11.
You Can Extend the Period Over Which Mortgages May Be Paid
In a Chapter 13 case, the plan must propose to pay the entire mortgage arrearage over five years. A Chapter 7 doesn’t address your past due mortgage payments at all. However, a Chapter 11 plan can stretch your payback period to longer than a mere five years and, in some cases, provide a better cash-flow solution to deal with a foreclosed or soon-to-be-foreclosed home.
If You Have Non-Dischargeable Debts
Occasionally, we come across a situation where non-dischargeable debts must be dealt with in the context of a bankruptcy. For example, unpaid payroll taxes can become a personal obligation that must be addressed immediately to stop additional fees and penalties from piling up on already unmanageable sums. A 5-year plan under Chapter 13 may not be feasible in such circumstances. Therefore, the flexibility offered in Chapter 11 may be the best option.
Cram Down All Vehicles
In Chapter 13, a debtor can cram down the loan balance on car and truck loans to the value of the vehicle. For example, a 2011 Dodge Avenger with 100,000 miles in good condition might have a private party value of $5,000 but is encumbered with a loan for $7,000. In bankruptcy, the loan amount can be crammed down to $5,000 to match the value of the car. This option can save substantial amounts of money. It can also provide a way to own a car or truck outright following a bankruptcy discharge.
But this option only applies to vehicles purchased more than 910 days (approximately 2.5 years) prior to the filing of the case. So if the car was purchased last year, this benefit would not be available. But this time restriction found in Chapter 13 does not apply in Chapter 11. So the cram down benefit could be used if a debtor chooses to file under the latter code provision.
The Flexibility Could Be Worth the Added Cost
Make no mistake that achieving the benefits of filing under Chapter 11 comes at a cost and added complexity. For example, filing costs and lawyer fees will often be more than double that of a typical Chapter 13 case. Creditors are afforded the opportunity to vote on a debtor’s proposed plan, which is unique to Chapter 11. There is a lot more paperwork your lawyer will have to file and many hearings your lawyer will have to attend.
But the flexibility afforded a Chapter 11 debtor can definitely be worth the added cost. You as a debtor have the right to fashion a plan that substantially reduces your obligations to certain classes of debt. All it takes is for one class of impaired claimants to approve the plan. And, as long as certain minimum requirements are met, the bankruptcy court can put its stamp of approval on it.
Speak to a Chapter 11 Bankruptcy Attorney Today
If you are considering filing for bankruptcy, contact Benson Law Firm today. We can answer your questions and advise you as to which chapter best suits your needs and individual circumstances.
If you are facing foreclosure, filing bankruptcy may help. At Benson Law Firm, we can answer your questions and guide you through the bankruptcy process. Below, we explain what you need to know about how bankruptcy may be able to stop foreclosure.
Are You Trying to Save Your Home?
You and your husband have a beautiful home in an inner-ring suburb of Cleveland. You love your life there and everything is going smoothly. Your husband is a contractor and you have a part-time job so you can bring in some money but also spend quality time with the kids.
Then, your world is turned upside down when your husband has an unexpected heart attack. He survives but is laid up for months. Now, the money only comes in when he’s working so this hiatus drains your savings and soon you’re unable to keep up with expenses. You have to put food in your kids’ mouths and pay the light bill so you’re not walking around in the dark. But there just isn’t enough money at the end of the month to pay the mortgage.
But things will improve once your husband returns to work. Unfortunately, he’s taking longer to recover than expected because of his diabetes. Now six months behind, you get a FedEx packet in the mail with a Summons and Complaint in Foreclosure. You panic. The bills are piling up and you’re about to be homeless. Is there anything you can do to save this life you’ve built?
The Automatic Stay, a Powerful Tool
As with a garnishment, bankruptcy carries with it a very powerful tool – the automatic stay. That means that not only must your creditors stop calling, but all civil lawsuits must stop as well. And this includes that dreaded foreclosure. So which kind of bankruptcy do you want? That depends.
Chapter 7 Bankruptcy
If you and your husband have a combined income that is below the median for a family your size, you can file for a liquidation of your debts. Although this will temporarily stop foreclosure, it doesn’t kill it. After you get your discharge, the mortgage lender can restart the lawsuit and you’re back to square one. So should you file under Chapter 7? Again, that depends.
Chapter 13 Bankruptcy
Under Chapter 13, you can catch up on your back mortgage payments over as much as five years. This might be attractive if the dip in income was truly only temporary. However, there are other alternatives that might be even more appealing.
“Chapter 20” Bankruptcy
Some folks decide they want the benefits of a liquidation of their credit card and medical debt, but also want to make sure to save their house and stop foreclosure. In this case, those who qualify can file a Chapter 7 case to eliminate their personal debt and then move on to file under Chapter 13 to address their mortgage obligation. This is a nice option because debtors get both a fresh start and save their homes from the clawing reach of the bank.
Bankruptcy is not the only option when served with a foreclosure Summons and Complaint. But the matter must be dealt with promptly in order to maximize the number of options, preferably, before receiving the FedEx packet. The important thing is to talk to your foreclosure/bankruptcy lawyer asap.
In limited cases, a homeowner can go toe-to-toe with a lender when it’s clear that they have made fatal errors, when ownership isn’t clear or where the servicer has failed to follow proper procedures. In our experience, these kinds of cases are few and far between. Thus, it is usually advisable for an attorney to answer the complaint and then request mediation.
In Cleveland, we have a first-rate mediation department that does an excellent job in resolving foreclosure cases through a highly structured facilitation of modification review. In other cities, mediation departments are not available but the courts do designate magistrates or others to perform the same function. All in all, the mediation results are good and, if there is a solution to be had, we can find it through this process.
A modification can transform a previously unattractive mortgage situation into a performable product, in line with the homeowner’s current income and property value. As you might expect, the borrower must articulate a hardship. But we have not had a client who has been denied a modification on this basis.
This is a very complex area of regulatory law and should not be attempted without expert assistance. One of the common problems we have run up against is something called “dual tracking.” Currently, when a lender receives a modification request at least 37 days prior to a sheriff sale of the property, they are not permitted to continue to pursue the sale without first responding to the modification request.
There are other rules that banks must live by, but we don’t want to put you to sleep right in the middle of reading this post.
Contact a Bankruptcy Lawyer to Learn More About How to Stop Foreclosure
If you are facing foreclosure, you are not alone. At Benson Law Firm, we can help you understand your options and decide whether bankruptcy is right for you. Contact us today for a consultation.
In our office, it usually takes around three months from our filing a case to a debtor receiving their order of discharge that permanently releases his or her debts. This is far less time in bankruptcy than your typical Chapter 13 case, which customarily lasts between three and five years. This brief period makes Chapter 7 an attractive option for most below-median debtors.
Contact me at (216) 241-2510 if you have questions concerning Chapter 7 Bankruptcy.
Cleveland Bankruptcy Attorney discusses 5 Mistakes Bankruptcy Clients Make In Picking A Bankruptcy Attorney
There are many common bankruptcy client mistakes…
Selecting a Cleveland bankruptcy attorney who does not have the appropriate level of familiarity with bankruptcy, debt settlement, mortgage foreclosure, divorce, debilitating injuries and vehicle titling. Although bankruptcy should be the main focus of your lawyer, related areas are not unimportant in deciding what course to take.
Deciding on an attorney because they have rock-bottom prices. It should send up a red flag if an attorney is willing to take your case substantially below the average charge for your matter. It may be an indication of a lack of experience. And a lack of experience could cost you much more in the long run.
Opting for a “bankruptcy mill” that provides only basic, uniform representation for all their many, many clients. Each bankruptcy case is unique and should be handled with the care and attention it deserves.
Choosing an attorney who does not handle cases under all Chapters of the Bankruptcy Code. Some attorneys limit their bankruptcy practice to Chapter 7 liquidations and are not comfortable handling more complex bankruptcy matters.
Going with an attorney merely because he or she is close to home. This is a serious decision in your life and you should consider downtown attorneys with ready access to the courthouses and the Trustee offices.
Cleveland Bankruptcy Attorney discusses Truth About Bankruptcy and Your Credit
Are you curious about the truth about bankruptcy?
Your creditworthiness after bankruptcy is in part a function of your creditworthiness before you filed
Obviously, filing for protection with the bankruptcy court is not a positive for your credit score, but it doesn’t have to be a complete destruction thereof. If you can, it is beneficial to file before you start missing payments. You will start from a better place when you rebuild after filing.
Filing bankruptcy stops all negative reporting from pre-petition accounts.
Reporting from past due and delinquent accounts will not hold you back from rebuilding your credit. Only credit lines opened post-bankruptcy will report monthly. The Truth about Bankruptcy in Cleveland will guide your decisions as you work to determine whether bankruptcy is the path to debt relief.
You will be offered credit immediately after our bankruptcy.
You will be offered credit immediately after your bankruptcy. Many lenders target people receiving discharge from bankruptcy for credit offers. They aren’t great terms…low limits and high interest rates…but, they do provide an opportunity to re-establish good credit. Offers for auto loans and credit cards will come immediately after your bankruptcy. You will be eligible for FHA financing two years after discharge, and conventional mortgage financing will be available after four years.
Our knowledgeable attorney can evaluate your circumstances and then inform you of your options. The more complicated your situation; the more reason to learn the truth about bankruptcy and consider hiring an attorney who specializes in Bankruptcy Law.
If you are like most people considering bankruptcy, you have probably looked into working with a debt negotiator or debt settlement agency. Here are four reasons why a bankruptcy is usually a superior choice.
In bankruptcy, you pay back no more to unsecured creditors than required by law.
In a no asset chapter 7 case, you repay $0 to unsecured creditors. In a chapter 13 case, you may have to pay back a portion to your unsecured creditors, but how much is a function of your income, your assets, and federal bankruptcy law…not the relative skill of your debt negotiator.
Debts discharged through bankruptcy are not taxable income.
When you settle a debt through a debt negotiator or debt settlement agency, the IRS treats the difference between what you owe and what you settle for as taxable income. This could cause you to owe taxes to the IRS. Debts discharged in a bankruptcy are not considered taxable by the IRS and therefore you will not owe money on the discharged debt.
You are protected from lawsuits by the Federal Bankruptcy Court.
Many of our clients come to us due to lawsuits arising because their debt settlement plans are not paying their debts fast enough. Debt negotiators don’t pay your creditors monthly. Instead, they hold your money in escrow until they have enough to settle with one creditor. Creditors don’t care that you paid the debt negotiation firm monthly…they just know they aren’t getting paid and that is all they care about. Federal bankruptcy law affords you a “stay” from collection during your case, then prohibits creditors from suing in state court over uncollected debts after your case discharges.
Debt settlement plans do more damage to your credit score than bankruptcy.
While bankruptcy prohibits creditors from reporting to the bureaus after the case is filed, debt-settlement plans lead to credit score destruction. Every account that goes unpaid while you’re in the plan will report your non-payment to all three bureaus. It can take years to pay off a debt settlement plan and the entire time your credit report continues to show your non-payment. The bankruptcy is a one-time hit, after which you can then begin to rebuild.