Can I Get Rid of my Second Mortgage if I File for Bankruptcy?

Some debtors may have heard through one source or another that it is possible to get rid of a second mortgage by filing for bankruptcy. While it may sound too good to be true, some individuals are, in fact, able to keep their homes while no longer being responsible for their second mortgages. This process through bankruptcy is called stripping a lien. Lien stripping is an option for people who have filed for Chapter 13 bankruptcy, and it allows people who are upside down (meaning your mortgage balance exceeds the fair market value of your house) on their house to get rid of their smaller liens such as second or third mortgages. This is only an option for people who are filing for Chapter 13 bankruptcy; you cannot strip a mortgage through a chapter 7 bankruptcy. Through a lien strip, the bankruptcy court essentially takes your second mortgage, which is a secured debt, (meaning your house is collateral for the loan, so the lender can foreclose on your property if you miss your payments) and converts it to an unsecured debt (just like a credit card debt). They do this by ordering the lender to remove their lien from the property.

You can only strip your second mortgage or other junior liens if the amount of the senior lien on the property exceeds the home’s fair market value. To break things down, if you have a first and a second mortgage on your house, your first mortgage balance must be more than what your house is worth to be able to qualify to get rid of your second mortgage. If you have three mortgages, then you can strip both your second and third mortgages if the balance of your first mortgage is greater than the value of your house. However, if your house is worth more than your first mortgage alone but not more than the combined balance of your first and second mortgages, then you can only strip your third mortgage.

As an example, let’s say you have a house that is worth $100,000, and you have a first mortgage with a balance of $150,000, and a second mortgage with a balance of $25,000. Because the fair market value of your home is lower than the balance of your first mortgage, you qualify to have your second mortgage stripped through a Chapter 13 bankruptcy case. To give an example showing what would happen if you also had a third mortgage, let’s add another mortgage to the example used above- you have a house worth $100,000 with a first mortgage of $150,000, a second of $25,000, and a third in the amount of $5,000. Because the first mortgage has a balance that is higher than the fair market value of your home, you would also be able to strip your second and third mortgages. However, if the value of your home was $160,000, and you had a first mortgage with a balance of $150,000, you cannot strip your second mortgage of $25,000 because you have equity in your home; the value of the home is higher than the value of the first mortgage. However, since the combined first and second mortgage balances ($175,000) exceed the fair market value of the home, you would be able to strip your third mortgage with the $5,000 balance.

The second mortgage (or other junior lien) you strip through your bankruptcy case is treated as a non-priority unsecured debt when you file your Chapter 13 bankruptcy case. Just like medical or credit card debt in Chapter 13, you do not have to make payments on this debt outside of your bankruptcy. Depending on your case, you may or may not have to pay a portion of this unsecured debt through your Chapter 13 plan. If you complete the plan, any balance that remains from the mortgage you stripped would be discharged, which means that it would be wiped out/you would not be responsible for paying it in the future.

What this means as far as payments go is that as soon as you file your chapter 13 bankruptcy case, you do not have to keep paying your second (or third, etc) mortgage. Your attorney would list in your plan that you are planning to strip those mortgages, and that would notify your trustee and lenders that you intend to no longer pay these. You will just need to make sure you continue to pay your first mortgage and plan payment to the trustee. However, the second mortgage lien technically will not be removed from your house until you complete your plan and receive a discharge. If your case gets dismissed before you complete your bankruptcy plan, your second mortgage lien will not be stripped.

It is important to speak with your attorney about stripping your second/third mortgages prior to filing your chapter 13 case. Because stripping liens is not an option for everyone who files for Chapter 13 bankruptcy, it is likely that you will incur more attorney fees than you would if you were not attempting to strip your liens. This process is considered an adversarial proceeding by the bankruptcy court which means that your attorney will need to attend hearings on your behalf, and put in a lot of work to help you no longer have to pay those debts. However, to many, it is worth spending a small amount to an attorney to get rid of tens of thousands of dollars or more.

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If I File for Bankruptcy, Can I Keep my Home?

The potential to lose your home can be one of the most stressful and emotionally trying aspects of going through a tough financial period in your life.  While some may consider filing for bankruptcy, many people fear that in that process, they will lose the most important asset they own, which is a safe place to live.  There seems to be a misconception that people who file for bankruptcy will lose their homes; however, in many cases, filing for bankruptcy can help home owners save their homes.

One of the most common ways that a bankruptcy can assist you with keeping your home is if you are late on your payments and/or facing a foreclosure.  After trying solutions like loan modifications with mortgage companies, many people are left wondering what other options they might have to save their homes if they are late on payments or facing a foreclosure.  Fortunately, filing for bankruptcy can help you keep your home when you are behind on mortgage payments and/or facing foreclosure.

When you file for chapter 13 bankruptcy, an automatic stay goes into effect immediately.  The automatic stay will stop any foreclosure proceedings and will give you more time in your home.  The chapter 13 bankruptcy will put all of your late payments, or arrears, into the chapter 13 repayment plan; this will give you a chance to catch up on arrears monthly over the length of your Chapter 13 plan. You will still be responsible for your ongoing mortgage payments in addition to the monthly plan payment.

If you are interested in filing a Chapter 7 bankruptcy, there are also ways for you to keep your home.  Generally, if you are current on your home mortgage payments, you will be able to keep your home. This may not apply, however, if you have a large amount of equity in your home.  Should you have an excessive amount of equity in your home, the Trustee may decide that you need to sell your home in order to use the money to pay back some of your creditors.  Fortunately, each state has a certain set of what are called exemptions that apply to your property; there is a dollar amount allotted for different types of property that help debtors keep some of their assets.  For people who own homes, you can “exempt” a certain amount of equity in your home, allowing you to keep your house.  For example, in Missouri, the Homestead Exemption allows home owners to exempt up to $15,000 in equity in their homes.  This is an excellent option for people who have managed to stay current on their mortgage payments, but have been struggling due to other debts.

However, even after using all available exemptions, if you have excess equity in your home still, you may still be able to keep your home, but you may have to proceed with a chapter 13 bankruptcy instead of a chapter 7 bankruptcy.  A Chapter 13 bankruptcy is a good option for individuals who have excess equity in their homes because instead of making you sell the property, you are asked to pay the amount of equity over the course of your plan.  It will increase your monthly payment, but you will be able to keep the property.



Posted in Automatic Stay, Bankruptcy filing, Bankruptcy General, Chapter 13 Bankruptcy, Chapter 7 Bankruptcy, Exemptions, Foreclosure, Homestead exemption, Protected Assets | Comments Off on If I File for Bankruptcy, Can I Keep my Home?

What is the Automatic Stay?

In Bankruptcy, an automatic stay protects a debtor from his or her creditors.  The automatic stay prevents a creditor from collecting on debts incurred by the debtor.  The automatic stay is effective immediately upon the filing of the bankruptcy.  As soon as the bankruptcy is filed and a case number is obtained, creditors may no longer pursue judgments, garnishments, foreclosure proceeding, or repossessions.  Creditors also must cease all phone calls, letters, e-mails, and any other form of communication with the debtor.  It is not legal for them to continue attempts to collect on any debts.

While this automatic stay goes into effect immediately, some of your creditors can ask the court for permission to continue collections. Secured creditors can ask the court for a motion for relief from the automatic stay.  A secured creditor has a claim on a debt that is secured by collateral, such as a mortgage on a home or a loan on a vehicle.  If a debtor is not current on their secured debts, the creditor can file a motion for relief from automatic stay with the bankruptcy court.  You must continue making payments on secured debts while in a bankruptcy if you want to keep the collateral.  If you do not remain current, the creditor will file the Motion for relief with the court.   When a motion for relief is filed, if the debtor does not become current or make arrangements with the secured creditor, the court can grant the motion for relief.  When that is granted, that gives the secured creditor permission to repossess or foreclose on the property.   The debtor is then no longer protected by the automatic stay from those particular creditors.

There are exceptions to the automatic stay.  For example, if a debtor is in a situation where their landlord gets a rent and possession judgment against them for rent before the filing of the bankruptcy, that is not protected by the automatic stay.  The automatic stay has certain limitations.  If a debtor has had more than one bankruptcy case pending in the one year prior to the filing of the current bankruptcy, their automatic stay is limited to 30 days.  The debtor would have to file a motion to extend the automatic stay in order for it to last the entirety of the bankruptcy, and that motion would state why circumstances are different with this bankruptcy and that it was filed in good faith.  If two or more bankruptcies have been pending in the last year, there is no automatic stay.  You can request that the automatic stay be imposed, but the court will have to decide that, and your creditors can object to that being allowed.

Posted in Automatic Stay, Bankruptcy filing, Bankruptcy General, Chapter 13 Bankruptcy, Chapter 7 Bankruptcy, Collection Harassment, Foreclosure, Secured Property | Comments Off on What is the Automatic Stay?

Can I Keep My Tax Refund in a Chapter 7?

Many people who are interested in filing for Chapter 7 Bankruptcy are interested to know if they are able to keep their tax refunds if they decide to file.  The answer to this question depends on when your case is going to be filed in the bankruptcy court.  Starting in the month of September of each year, our attorneys begin to ask prospective filers what they expect to receive as a tax refund for the upcoming year.  If the debtor is expecting to receive a tax refund, the attorney will want to know how much they expect to receive.  This is due to the fact that at about this time of year, the trustee begins to take an interest in tax refunds as an asset that is to be included in the bankruptcy estate.  This means that your trustee will potentially want you to turn over your refund, so he or she can distribute the funds to your creditors.  With that being said, your trustee may not be entitled to your whole tax refund.  In fact, depending on when your case is filed, they may only be entitled to a small percentage of it.

The portion of your tax refund that the trustee is entitled to is dependent on when your case is filed with the court.  If you have a case that is filed between September 1-December 31st of the year prior to when your tax returns are due, the trustee will be entitled to a percentage of the tax refund you are expecting to receive the following year.   The court also gives you certain exemptions to keep property, including money in a bank account or an expected tax refund.  The amount of these exemptions vary case by case depending on what state your case is filed in, whether you are head of your household and/or married, and whether you have dependents under the age of 21.  This is something that you will need to consult your attorney about to determine for your specific case how much could be protected.  Additionally, there were recent changes that also allow Earned Income Credits to be 100% protected as well.  If you receive Earned Income Tax Credits, the entire amount received will be protected in the bankruptcy.

As an example, if a debtor is planning to file for Chapter 7 bankruptcy and expects a $4,000 tax refund, and they want their bankruptcy filed on September 1st (the 244th day of the year), we explain that 244/365 about 67% ($2,673.97) of the tax refund for the next year is part of the bankruptcy estate.  Does this mean the trustee automatically gets over $2600 of this client’s refund? No.  The attorney would then determine what exemptions are available to the client depending on their household size and dependents, and the attorney would help determine if any of the refund is going to be Earned Income Credit.   If the client is not head of household, does not have any dependents, and will not be receiving an Earned Income Credit, the amount that could be protected would be limited to a $600 wildcard exemption in the state of Missouri.  Factoring in the information above, this would mean that the trustee could require the client to turn over $2,000 of their $4,000 refund.  This client may want to wait to file the bankruptcy until after they have received and spent their tax refund. Once it is spent, it no longer needs to be listed as an asset, and the trustee will not be able to require you to turn it over to the bankruptcy estate.

However, if you choose to wait to file for bankruptcy for the purpose of retaining your full tax refund, it is important to be cautious of what you are spending the money on. You cannot make payments to family members or friends that you owe money to, and you do not want to pay certain creditors more than $600.  This is because the trustee can void these transactions and require your family and friends or your regular creditors to pay back the money you gave them to the bankruptcy estate.  Additionally, you should not spend the money on extravagant items or unnecessary expenses.  You can, however, pay normal expenses: rent/mortgage payment, utilities, necessities for yourself or dependents, etc.   If you are not sure whether the bills you plan to pay with your tax refund are acceptable, contact your bankruptcy attorney BEFORE you spend the money so they can help let you know.   It is always best to be cautious with how you spend the money than to wind up in a situation where you need to pay money back, etc.   Additionally, you should keep record of what you spent the money on just in case your trustee requests to see documentation of where the money was spent.

If you have questions about how much of your tax refund you can keep, it is important to discuss your options with a bankruptcy attorney.

Posted in Bankruptcy filing, Bankruptcy General, Chapter 7 Bankruptcy, Exemptions, Protected Assets, Taxes | Comments Off on Can I Keep My Tax Refund in a Chapter 7?

Do I Have to File for Bankruptcy with my Spouse?

Debtors who are married often wonder if they are required to file for bankruptcy with their spouse.  The answer to this question is no; a debtor is not required to file for bankruptcy jointly with their spouse if they are married.  There is nothing in the bankruptcy code that prohibits one spouse from filing by his or her self.  While there are no limitations to being able to file for bankruptcy singly, it is important to discuss your situation with an attorney to determine if it is in your best interest to do so.

If a person files for bankruptcy individually, it will not negatively affect their spouse or their spouse’s credit.  However, it is important to pay attention to if there are any joint debts that you and your spouse share.  If there are joint debts, the filing spouse’s liability for the debt will be eliminated, but the non-filing spouse can still be held liable for the debt and may be pursued by creditors.  In that case, the non-filing spouse’s credit may be affected.  If there are joint debts, it might be beneficial to file a joint bankruptcy so both party’s liability for the debt is eliminated.  Any debt that is in joint names or any debt in each party’s individual names would be discharged through the bankruptcy.

If a person’s spouse only has debt that is not able to be discharged, such as student loans, certain taxes, alimony, child support, etc., or secured debts they are current on and wish to keep, they can continue to make those payments without needing to file for bankruptcy.  They do not need to file jointly just because they are on certain secured debts together.  Secured debts are those that are protected by collateral, such as a house or a car.  For instance, if both spouses’ names are on a car loan or a mortgage and the loan or mortgage is current and the property is going to be retained, both spouses do not need to file just because their name is on the property jointly.  The non-filing spouse would not be affected by the filing.  However, if only one spouse files for bankruptcy, and the loan or mortgage becomes delinquent, or the property is foreclosed or repossessed, the non-filing spouse would then be responsible for any deficiencies.

Some people may think that filing for bankruptcy singly while married is a good way to avoid becoming over-median if one spouse’s income is much higher than the other’s; however, this is not the case.  If a debtor files for bankruptcy without their spouse, their spouse’s assets, property, and debts would not be included in the bankruptcy, but their income would be.  The non-filing spouse’s income is included for purposes of determining median income as long as the married couple is living together.  That is based on the assumption that if a married couple is living in the same house, they are sharing income and expenses.  If you are married and living with your spouse, his or her income will have to be included to determine your eligibility to file a Chapter 7 bankruptcy.

As always, it is important to discuss what your best options would be with a bankruptcy attorney.  They can review your situation and let you know if filing jointly is a good option, or if it might be in your best interest to file by yourself.

Posted in Bankruptcy filing, Bankruptcy General, Chapter 13 Bankruptcy, Chapter 7 Bankruptcy, Means Test, Protected Assets, Secured Property | Comments Off on Do I Have to File for Bankruptcy with my Spouse?

How to Build Credit Post-Filing

As many people know, filing for bankruptcy will effect your credit score.  The question many people want to know is how much will their credit be effected, and how do they rebuild it after filing for bankruptcy.  It is nearly impossible to predict how far your credit score will fall after you file for bankruptcy.  The impact on your credit score is largely based on where your credit score is prior to when you file, and what type of information is on your credit report.   However, it is important to note that the bankruptcy filing is a one-time hit to your credit.  Assuming you receive a discharge in your bankruptcy, you will no longer owe any of the unsecured debts you list on your bankruptcy petition.  That means no more late payments and negative payment histories appearing on your credit report. You will have a fresh slate to work with.

Because you are presented with a fresh slate after filing for bankruptcy, it is important to focus on rebuilding your credit.  Some of the best ways to rebuild your credit after filing for bankruptcy are to obtain a secured credit card, obtain a small, regular credit card, reaffirm car loans and mortgages, and obtain new car loans.

One of the easier ways to begin rebuilding credit is to obtain a secured credit card.  You can receive a secured credit card through many banking institutions, and they will provide you with a solid way to build credit.  Secured credit cards work in the following way: The first step in the process you will make is to place a security deposit down with the bank for a certain amount.  The amount you place down as a security deposit will act as your credit limit.  So, for example, if you place $300 down as your security deposit, your credit limit on your secured credit card will be $300.  You can then use the card as you would with any other credit card to purchase gas for your car or necessary living expenses.  Then, each month, you pay off the full amount on the credit card.  If you do not make your monthly payments, the security deposit you put down will be used to cover your payments; however, all positive and negative payment history is reported to the credit bureaus.  The security deposit is there to protect the bank; it is not there for you to rely on to make your payments.

Another credit card option is to open up a small credit card at a store.  This is not as highly suggested as a secured credit card, but it will have the same effect on your credit. You can use this to purchase necessary living items, and then pay off the full balance each month.  It is important to be aware of interest rates when opening these credit cards.  You do not want to open up credit cards that have too high of interest rates, and get back into a situation where your credit could be negatively affected.

Reaffirming car loans and mortgages post-filing for bankruptcy is also another way to help rebuilding your credit.  By signing a reaffirmation agreement, you are assuming the liability of the loan again, just like you did when you originally signed the contact.  Once the reaffirmation agreement is in place, your positive payment history for your car payment and your mortgage payment will be reported to the credit bureaus.  If you can afford to make the payments on your secured loans, reaffirming is a great option to help you rebuild your credit.

If you do not have an existing car loan to reaffirm post-filing, purchasing a car with a loan post-filing is also a good option to help you rebuild your credit.  While, again, you want to make sure that you can afford to make the payments you are signing up for, if you can afford the car payment, the positive payments you make toward the loan will be reported to credit bureaus and will help improve your credit score.   Just like the credit card, you want to be wary of high interest rates that could cause you to get in over your head.

If you are interested in rebuilding your credit post-filing, it is important to note that anything that can help you build your credit can also cause negative effects on your credit score if payments are not made on time and in the correct amount.  While you should pursue some options for rebuilding your credit, you should not get in over your head.  Starting with something small, like a secured credit card, is perfectly fine. Or, just focusing on something you know you can afford, like your car payment or your mortgage payment, will help you rebuild your credit.  Taking small steps toward building a better credit score will help you in the long run.

If you have questions about how to rebuild your credit post-filing, your St. Louis bankruptcy attorney will be able to assist you with options and ideas.

Posted in Bankruptcy filing, Bankruptcy General, Chapter 13 Bankruptcy, Chapter 7 Bankruptcy, Discharge of Debt, Reaffirmation Agreements | Comments Off on How to Build Credit Post-Filing

Effects of Filing for Bankruptcy

For many people, the thought of filing for bankruptcy brings up many questions that have to do with eliminating debt and concerns about the potential loss of property.  However, for some people, the questions they have go much deeper than debts and assets, and hit at the core of what it means to be a member of our society today.  They wonder what kind of effect the bankruptcy will have on maintaining self-respect, earning a living, raising a family, and keeping freedoms.

Until very recently, filing for bankruptcy was a dignified way to achieve a fresh start in a world filled with economic uncertainty.  The law presumed that individuals filing for bankruptcy were honest citizens seeking a fresh start with regard to their debts.  However, due to changes in the bankruptcy code in 2005, the new bankruptcy code leans more toward assuming each debtor is potentially cheating the system.  While this change in attitude will not prevent you from receiving a discharge in most cases (assuming you are being honest), it can sometimes make you feel bad about yourself.  Although it is sometimes easier said than done, you should not feel bad about yourself for needing to file for bankruptcy.  Bankruptcy is a worthy part of our legal system that is based on forgiveness rather than retribution.  Apart from giving you a fresh start financially, it can help keep families together, improve depression rates, and lower stress levels.  Case in point, don’t let filing for bankruptcy get you down.

Many individuals wonder if their employers will find out about their bankruptcy filing and if it will effect their ability to maintain employment with that particular company.  It is very unlikely your current employer will receive notice of your bankruptcy filing if you file a Chapter 7 bankruptcy case.  If you file a Chapter 13 bankruptcy case, your payroll department may find out about your filing because it may be a requirement from the court to have your Chapter 13 payments deducted from your pay checks.  While you may not like the idea of your employer finding out about your filing, and having your plan payments deducted directly from your paychecks, the bankruptcy court could deny confirming your plan if you do not comply with this.  The automatic deduction from your checks, or wage order, will also make paying your plan payments easier for you by ensuring your payments are made on time.   The first thing to recognize is that no employer, government or private, may fire you because you filed for bankruptcy.  Additionally, they cannot discriminate against you in other ways by reducing your salary, demoting you, or reducing responsibilities due to your bankruptcy filing.  If a debtor is fired shortly after their employer receives notice of their filing, the debtor may have a case for illegal discrimination or wrongful termination.

Some individuals also worry that they will be discriminated against by Government agencies and private entities after filing for bankruptcy.  Federal, State, and local governmental units cannot legally discriminate against you due to a bankruptcy filing.  They may not deny or terminate public benefits, evict you from public housing, or deny you access to a number of other government run programs/opportunities.  Additionally, there have been no reported cases from any state of a parent losing custody or custody privileges because he or she filed for bankruptcy.  Prohibitions against private discrimination, however, are not nearly as broad.  While private entities, such as employers, may not fire you due to your bankruptcy filing, other forms of discrimination, such as denying you rental housing, like an apartment lease, are legal.  The best way to confront these types of discrimination are to work on building your credit post filing.  There are a number of ways to do build your credit post-filing, including obtaining a secured credit card, reaffirming car loans and mortgages, or obtaining new secured debts and making payments on time and in the full amount.

Personal Freedoms are also another area that debtors fear will be effected by filing for bankruptcy.  The only true way that your personal freedoms can be effected by filing for bankruptcy is if you lie about or withhold information on your bankruptcy petition.  When you file for bankruptcy, you swear under penalty of perjury that everything in your bankruptcy petition is true to the best of your knowledge.  If you deliberately commit a dishonest act, such as failing to disclose income or property, you can be criminally prosecuted for fraud.  There are cases where it was proven debtors lied under penalty of perjury, and were sentenced to prison time in Federal penitentiaries.  If you lie, hide, or try to cheat the bankruptcy code, it can come back to haunt you in ways much worse than your current debt crisis ever could.   With this being said, as long as you are completely honest while preparing your bankruptcy petition, you should not face any effects on your personal freedoms.  After you file for bankruptcy, you are free to move to new homes, change jobs, and seek divorce if interested. If you decide on any of these things, it is important to seek legal advice from your attorney before doing so to ensure they are in your best interest.

Filing for bankruptcy does not mean that your life as you know it will be over.  In almost all cases, filing for bankruptcy provides a fresh start to help you re-build and move on to a debt-free life.   If you are interested in more information about how filing for bankruptcy would effect you, contact your St. Louis Bankruptcy attorney today!

Posted in Bankruptcy filing, Bankruptcy General, Chapter 13 Bankruptcy, Chapter 7 Bankruptcy | Comments Off on Effects of Filing for Bankruptcy

Can the Trustee Deny my Bankruptcy Case?

Many individuals who are considering filing for bankruptcy are worried that their bankruptcy case will not be allowed to go through or will be denied by the court.  In fact, we receive the question “Can the Trustee deny my case?” very often.  Filing for bankruptcy is not based on arbitrary things such as how far behind on your bills you are or if the trustee likes or dislikes you.  It is based on your ability to file a specific type of bankruptcy, and if you are within the guidelines of the bankruptcy code.   More often than not, your case will go through with no issues at all.  If you hire an attorney and provide truthful answers to questions asked, you will likely have a case that goes through without a hitch.

While the court will not flat out deny your case, there are some instances where your trustee will file objections with the court regarding your case.  In the large majority of Chapter 7 bankruptcy cases, this will not happen; however, if you are over-median income, your trustee can file something called a 707(b) objection in your case.   A 707(b) objection or inquiry is filed when the trustee assigned to your case has questions about how the means test and/or income and expenses schedules were completed on your bankruptcy petition.   Typically, the first step your trustee will take in this situation is to request documents from your attorney proving the circumstances reflected on your petition.  If a child care or medical expense seems to be higher than the standard, your trustee may request documentation to prove this is an accurate portrayal.  Once proof is provided, your trustee will withdraw their objection, and your case will move forward as planned. However, if you are unable to provide documentation that the trustee is requesting, or you show that you have excess funds monthly, your trustee may request that you convert your chapter 7 bankruptcy case to a chapter 13 case.

In a Chapter 13 case, your trustee will also file objections in your case; however, unlike a Chapter 7 case, an objection that is filed in a Chapter 13 case is much more common to see.  In a Chapter 13, your trustee will file objections to the confirmation of your Chapter 13 plan.  This could be for a number of reasons, including your trustee needing additional documents to review and adjustments needing to be made for how certain items are listed in your chapter 13 plan.

Receiving an objection in your case is not the same thing as your case being denied.  More often than not, it just means that your trustee has additional questions they would like answered.  Once the questions are cleared up, your case can move forward smoothly.

If you have questions about bankruptcy, contact your St. Louis Bankruptcy Attorney today!

Posted in Bankruptcy General, Chapter 13 Bankruptcy, Chapter 7 Bankruptcy | Comments Off on Can the Trustee Deny my Bankruptcy Case?

Social Security Income and Bankruptcy

Many debtors wonder if they can and should file for bankruptcy if they are only receiving Social Security Income.   If you are only collecting Social Security Income, your creditors cannot garnish your wages and cannot levy, or freeze, your bank accounts (if the only source of income going into the bank account is social security). With this being the case, many people wonder why they should even bother with filing for bankruptcy if they cannot be garnished or levied.  In some cases, our attorneys may advise that you do not necessarily need to file since the creditor may have no way to collect the debt from you. With that being said, though, it is important to remember that no two cases are alike, and what may be a good option for one person may not be a good option for another.

While your creditors may not be able to garnish or levy your bank accounts, there is nothing to stop them from continually harassing you through threatening phone calls and numerous letters.  For many people, the phone calls alone drive them to file for bankruptcy so that they can stop living in fear day to day that the next time they answer the phone is yet another bill collector.  Filing for bankruptcy would stop the threatening phone calls and give you a chance to relax once and for all.  You would receive a fresh start, and a break from collection efforts.

Although there are some individuals that our attorneys may advise not to file for bankruptcy while only receiving Social Security Income, there are some individuals that we do in fact suggest to file for bankruptcy. These individuals are typically people who have property in their names such as a house.  Your creditors cannot garnish your social security or levy your bank account if your only income is from Social Security; however, they can put a lien against your real property.  This may be reason enough to file for bankruptcy.  A judgment lien on your home would prevent the sale of your home in the future for you and any of your dependents, family, etc who may inherit your home in the future.  Filing for bankruptcy would prevent your creditor from placing a lien on your property.  If a lien is already on your property, there are ways to include them in your bankruptcy filing, depending on which type of bankruptcy you end up filing.

If you are only receiving Social Security Income, you should contact a St. Louis Bankruptcy attorney to discuss if filing for bankruptcy would be a good option for you

Posted in Bankruptcy filing, Bankruptcy General, Chapter 13 Bankruptcy, Chapter 7 Bankruptcy, Collection Harassment, Protected Assets | Comments Off on Social Security Income and Bankruptcy

What is a “Motion to Dismiss”?

Often, when in a Chapter 13 Bankruptcy case, debtors will receive notice from the court and their attorney that there has been a “motion to dismiss” filed in their case.   A motion to dismiss can be filed by a number of individuals, including your trustee, the Department of Revenue and/or IRS, and various creditors; even individuals can file a motion to dismiss in their own case if they decide they no longer wish to proceed with their bankruptcy case.   When filed by your trustee or a creditor, this motion is basically the individual party asserting that the debtor(s) should not be allowed to continue with the bankruptcy case for some specified reason.

If your trustee files a motion to dismiss your Chapter 13 bankruptcy case, it is most often because you have fallen behind on your monthly plan payments.   While there is no set rule stating how far you can be behind on your payments before the trustee will file a motion to dismiss your case, typically, the further you fall behind the more likely it is that a motion to dismiss will be filed.  Most often, we see these filed when you become two or more months behind on your payments.  If a motion to dismiss is filed for failure to make plan payments, your attorney will receive notice of a date that a response needs to be filed by.  If you intend on remaining in your Chapter 13 bankruptcy case, your attorney will need to file a response, which is a statement to the court, by the specified date.  The response can state a variety of things; however, typically, it will state that you are intending on becoming current with your plan payments.  Once this response is filed with the court, the motion to dismiss your case will be set for hearing, at which time you would have to be 100% current on your plan payments. It is important to remember that because payments must be made by money order in the mail, if you are sending your payment close to the deadline you may need to appear at a hearing in person to make the payment to the trustee, or ensure that your attorney has the payment with enough time to bring with them to the hearing for you.   If you do not become current on your plan payments by the court date, though, your case can be dismissed at the hearing.

If your case is dismissed at the hearing, you do still have the option to reinstate your case.  You will have 14 days after the date of dismissal to become reinstate; however, reinstating your case will mean that you will need to become current with your plan payments and any plan payments that become due during the 14 day window.  You may also incur an attorney fee.   Because of how large of a hassle this can become, the best course of action is to avoid a motion to dismiss whenever possible.  You can do this by making timely monthly payments, or by entering into a wage order.  By entering into a wage order,  your employer will send your monthly plan payment to the trustee.  This can be split in equal parts between however many paycheck you receive monthly, and will ensure that your plan payments will be made on time and in full.

Another party that often files a Motion to Dismiss your case is the Department of Revenue and/or the Internal Revenue Service.  Due to the party that is filing this motion, it is easy to guess that this motion is likely filed in regard to tax issues.  Your State’s Department of Revenue and the IRS typically file motions to dismiss cases due to tax returns from a particular year not being filed.  Due to the way the bankruptcy code is written, it is a requirement that you file your taxes for the four years leading up to when your case is filed.  This is because any taxes owed during this time-span are considered “priority” debts, which means they are entitled to receive payments before your general unsecured debts (credit cards, medical bills, etc).  As an example, if you file for bankruptcy in 2013, you must have filed your taxes for the years 2009, 2010, 2011 and 2012.  If you have not filed taxes for these years, the IRS and/or the Department of Revenue will move to dismiss your case.   Similar to the trustee’s motion to dismiss your case, when there is a motion to dismiss filed regarding taxes, there is a response that your attorney has to file with the court to allow you more time to file your taxes for the specified years.  This would then set the motion for a hearing, at which time you would have to have your taxes filed, or your case can be dismissed.

Overall, it is important to avoid motions to dismiss your Chapter 13 case altogether.  You can do this by listening to your St. Louis Bankruptcy attorney’s advice, making your plan payments on time and in the full amount, and by ensuring your taxes are filed.

Posted in Bankruptcy filing, Chapter 13 Bankruptcy, Taxes | Comments Off on What is a “Motion to Dismiss”?