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Chapter 13 Bankruptcy 

The filing of a chapter 13 bankruptcy case puts a stop to most creditor actions, including most foreclosure cases. Under chapter 13, a property owner is given the opportunity to reorganize his affairs while under the protection of the Bankruptcy Court.

The following three main features available under chapter 13 are described below.

1. Mortgage modification
2. Chapter 13 Plan to reinstate mortgage
3. Avoiding of junior mortgages

Mortgage Modification - Mediation 

Within the chapter 13 case, a property owners may make use of the Bankruptcy Court's new "Loss Mitigation Mediation" (LMM).

This program is innovative in certain respects. Under this program, a Bankruptcy Court appoints a meditor to help the parties reach an agreement to modify the mortgage. A mediator is able to help the homeowner and mortgage company communicate and reach an agreement for modification.

This program also involves the use of an internet "portal" which allows the homeowner to upload all the documents needed for the mortgage company to consider for a modification. Through this portal the homeowner and mortgage company are also able to communicate.

Reinstate Mortgage 

If a homeowner does not want to modify his mortgage, he may propose a chapter 13 plan to provide for the reinstatement of his mortgage by catching up the mortgage arrearage over a period of 3 to 5 years, while maintaining current payments.

Avoiding of Under Water Mortgages and Association Liens

If a second mortgage is "under water," the involved lien may be avoidable. To be avoidable as to residential property, there must not be any equity in the property to support the mortgage lien. That is, more is owed on the first mortgage than the value of the property. Association liens, including condominium association liens, may also be avoidable in whole or in part, to the extent that they are "under water."

(305) 891-4055 - Jordan E. Bublick is a Miami Bankruptcy Lawyer with over 25 years of experience in filing Chapter 13 and Chapter 7 Bankrkuptcy Cases.

Bringing you the most up-to-date news, tips and blogs throughout the web. Here’s your Bankruptcy Update for March 6th, 2014 Man Who Avoided Child Support By Faking Bankruptcy Gets 17 Years Over 1,500 stockbrokers fail to report bankruptcy, criminal records Mt. Gox’s Bankruptcy Case Will Be Unlike Any Other

It is a central tenet of bankruptcy law that “the honest but unfortunate debtor has a right to a ‘fresh start.’” This fundamental principle does not, however, apply to the debtor who cannot pay his or her student loans. Rather, the bankruptcy code provides that unless excepting such extreme circumstances, a debtor is not entitled to a discharge of his or her student-loan debt.

Currently there is an overwhelming amount of student loan debt – over $1.1 trillion in the United States! Many people file for bankruptcy, eliminate all of their credit card debt, medical bills and the like but still emerge from bankruptcy with tens of thousands of dollars in student loan debt.  So the question of many of my clients is what, if anything, can be done to help with the student loans.

As with most legal questions the answer depends on several factors.  The first that needs to determined is whether your loans are federal or private.  Federal loans have several programs that can reduce your monthly payment or even eliminate the loan.  Most do not do not involve filing bankruptcy.  Here are several options:

1. Disability: Borrowers may be eligible to have their federal student loan debt discharged because of a total and permanent disability.
2. Loan Rehabilitation: Federal regulations allow borrowers who default on repayment of their loan a one-time opportunity to bring their loans out of a default status and repair the negative credit information reported to credit bureaus. Payment amounts are set at a reasonable rate and borrowers must make nine consecutive on-time payments over a 10-month period. Completing rehabilitation restores a borrower’s loans to good standing and helps to repair credit. Entering a loan rehabilitation agreement has immediate effect on a borrower’s defaulted loans: it stops all collections activity and legal proceedings, prevents wage garnishment, and it may protect a borrower’s state and federal tax refunds from IRS offsets. 
3. Closed School Discharge: Borrowers whose school closed before they could complete the program of study may be eligible for discharge.  
4. Bad School: A borrower’s student loans can be discharged if a school falsely certified the student’s eligibility for a federal student loan on the basis of ability to benefit from the education, signed the borrower’s name without authorization by the borrower
5. Death Discharge: If an individual borrower dies, or the student for whom a parent received a PLUS loan dies, the obligation of the borrower and any endorser to make any further payments on the loan is discharged. 
6. Teacher Loan Forgiveness Program: Teachers in low-income areas and those who teach math or science are eligible for forgiveness of up to $17,500. 
7. Public Service Loan Forgiveness: Borrowers who make 120 qualifying payments under the IBR, ICR, or 10-year fixed payment schedule while employed in the public sector are eligible to have any balance remaining on their student loan debt forgiven. Public service includes employment with most local, state, federal, tribunal nation, or § 501(c)(3) corporations. (Direct Loan Program loans only). 
8. September 11 Survivors Discharge: Survivors of or eligible victims of the September 11 attacks may request discharge of their student loan debt. (Direct Loan Program loans only).

Unfortunately, there are far fewer options when it comes to dealing with private student loans.

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In the year 2007, the Florida Supreme Court issued its opinion in Chames v. DeMayo, 2007 WL 4190796 (Florida December 20, 2007) upholding the 3rd District Court of Appeals' decision (on rehearing) that the waiver of the Florida homestead exemption in an unsecured agreement is unenforceable. The court applied the doctrine of stare decisis and refused to recede from precedent of over a hundred years that the homestead exemption cannot be waived in an unsecured agreement. See Carter's Adm'rs v. Carter, 20 Fla. 558 (1884), Sherbill v. Miller Mfg. Co., 89 So.2d 28, 31 (Fla.1956).

In this case, an attorney who held an unsecured claim for legal fees based on a retainer agreement asked the court to recede from its precedent based on three arguments. First, based on a certain amendment to article X, section 4 of the Florida Constitution. Second, based on a purported national trend approving such waivers. Third, based on other Florida Supreme Court holdings that constitutional rights may be waived. The court rejected each of these arguments in turn.

The creditor first argument was that the 1985 amendment to article X, section 4 of the Florida Constitution, which replaced the phrase "the head of a family" with "a natural person" changed the purpose of the homestead exemption from that of one protecting the family into a personal right that may be waived. The court found no intent on the part of Florida voters to change the fundamental purpose of the Florida homestead when they expanded the homestead protection by no longer requiring one to be the head of a family to claim a homestead. The court stated that the creditor's argument overlooked the State's interest in protecting the home so that homeowners are not reduced to destitution and public charge. Havoco of Am., Ltd. v. Hill, 790 So.2d 1018, 1020 (Fla. 2001).

The creditor next argued that there has been a shift in the position of other states on the issue of homestead exemption waiver. The court noted that if this were true, it would furnish a reason to reconsider its precedent and that it has been willing to recede from precedent when it conflicted with the law in a majority of states. See, e.g., Fridovich v. Fridovich, 598 So.2d 65, 69 (Fla. 1992). The court stated that due to differing constitutional and statutory provisions, any such trend is difficult to discern and "to the extent it can be discerned, the trend appears to go in the opposite direction." The court found that the "majority of jurisdictions that have addressed the issue (whether by constitution, statute, or judicial opinion) do not permit a general waiver of homestead or personal property exemptions in an executory contract."

The court did note some cases from other states that found a waiver of homestead exemption in other manners but concluded that they did "not inform our analysis" as they were in different contexts. In Shuler v. Wallace, 61 Haw. 590, 607 P.2d 411, 414 (Haw. 1980) the court found that the failure to assert the right to claim an exemptions results in a waiver. In Cameron v. McDonald, 216 N.C. 712, 6 S.E.2d 497, 499 (N.C.1940), the court found that the party was estopped from relitigating his right to a homestead when he failed to assert his right.

Lastly, the creditor argued that the waiver of the homestead exemption should be permitted because the court has permitted the waiver of other constitutional rights. The court held that although most personal constitutional rights may be waived, an individual cannot waive a right designed to protect both the individual and the public. The court reiterated that "the homestead exemption protects not only the debtor, but also the debtor's family and the State." See Havaco, 790 S.2d at 1020.

The court recognized the trend in permitting the waiver of personal constitutional rights, especially rights given to criminal defendants. But the court noted that the waiver must be made knowingly, voluntarily and intelligently. Indeed, the court noted that it recently allowed a civil plaintiff to make a certain waiver with regard to a civil attorney fees but imposed safeguards such that the attorney must inform the client about his constitutional right, the possible consequences of waiver, and the initialing of six separate paragraphs. See R. Regulating Fla. Bar 4-1.5(f)(4)(B). In contrast, in this case, the court noted that the waiver was contained on page four of a six page single-spaced contract and at the end of a 118-word sentence.

The court went on point out that the Florida Constitution and case law do permit the waiver of the Florida homestead if accomplished in a certain manner. The court noted Carter and Sherbill do not absolutely prohibit the waiver of the homestead exemption, but they require that a waiver be accomplished in the manner that the article X, section 4 of the Florida Constitution prescribes: by "mortgage, sale, or gift." What is prohibited is a "general waiver of the homestead exemption in an otherwise unsecured instrument." The court stated that "[r]equiring that a waiver of the homestead exemption be made in the context of a mortgage assures that the waiver is made knowingly, intelligently, and voluntarily."(305) 891-4055 - Jordan E. Bublick is a Miami Bankruptcy Lawyer with over 25 years of experience in filing Chapter 13 and Chapter 7 Bankrkuptcy Cases.