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Shortly after you file for bankruptcy, the Court sends you a notice to appear at a meeting of creditors, also called a “341 meeting”. This meeting will take place roughly about a month after your case is filed. The notice will contain the date, address, time and the name of the trustee that will be [...]
I want to challenge the conventional wisdom that filing bankruptcy should be considered a last resort. Does that sound self serving coming from a bankruptcy lawyer? Maybe. But consider this table: Balance monthly payment time to payoff interest rate total interest total payoff $10,000 $300 44 months 15% $3,043 $13,043 $50,000 $1,500 44 months 15% $15,217 $65,217 As you can see, under the best of circumstances, it will take you 4 ½ years and $13,043 to pay off that $10,000 credit card debt, assuming that: you are no longer using your credit card for future purchases you have not been late, thereby keeping your interest rate from jumping to a penalty rate you make only the minimum payment of $300 per month Under this best case scenario, $50,000 of credit card debt will require $1,500 per month and you will end up paying interest charges totaling $15,217 for payoff of $65,217. What happens if you miss a payment? In addition to the late fees, your interest rate rises from 15% to a penalty rate, which is typically 29%. With a 29% interest rate, and a $300 per month minimum payment, your interest charge on that $10,000 balance will total $10,959 (totaling $20,959) and almost 6 years to pay off the debt. A $50,000 balance, payable at $1,500 per month, will produce interest charges of $54,793 for a total of $104,793 over that 70 month period. Balance monthly payment time to payoff interest rate total interest total payoff $10,000 $300 70 months 29% $10,959 $20,959 $50,000 $1,500 70 months 29% $54,793 $104,793 You can run your own numbers at: http://www.cardhub.com/credit-card-calculator/ Remember, these calculations assume no on-going use of your credit cards and minimum payments only. The point here is this: if you have $50,000 or more of credit card debt, you are in a very deep hole that will require a great deal of austerity and discipline to escape. More importantly, your capacity to pay off this debt will require stability in both your income and expenses. Late or missed payments at any point during the payoff term can have catastrophic implications in terms of the interest rates you pay. Why Bankruptcy?
The bankruptcy option can offer a huge benefit economically. There are certainly non-economic factors to consider, such as:
- impact on your credit reports
- moral or religious aversion to filing bankruptcy
but speaking solely in terms of economics, the bankruptcy option is worth considering. If you can qualify for Chapter 7, you would be looking at a cost in the neighborhood of $1,500 to $2,000 to totally wipe out the $50,000 credit card debt. Basically for one monthly payment on your balance, your debt can simply go away. If you do not qualify for Chapter 7 and have to go to Chapter 13, you may end up paying back some percentage of your unsecured debt. However, there is no accrual of interest in Chapter 13 – you pay only the balance due at the time of filing. So if your plan called for a 100% payout to unsecured creditors, you would pay $50,000 (not $65,000 and certainly not $104,000) to your credit card lender over 5 (not 6) years. If your plan calls for a 50% dividend to unsecureds, then the $50,000 would turn into $25,000. Obviously other factors will go into your decision to file for bankruptcy, but I wanted to use the credit card example to demonstrate in very clear dollars and cents terms just how powerful bankruptcy relief can be.The post When Bankruptcy Makes More Sense than Struggling to Pay Off Debt appeared first on theBKBlog.
The short answer is no…you do not have to surrender your home if you file for bankruptcy. If you are having financial trouble and problems making your ongoing mortgage payment, I would first recommend contacting your lender and trying to modify your mortgage. Some lenders will work with you, but if they are not willing [...]
Vowing to make the billionaires pay their “fair share”, the country has a true consumer advocate in Massachusetts now. Elizabeth Warren, a law professor who moonlights as a true champion of the middle class consumer, beat incumbent pretty-boy Scott Brown for the Massachusetts Senate seat vacated by Ted Kennedy. Warren created the Consumer Protection Bureau although Wall Street interests had her ousted from her position as director when they saw her headlights in their rear view mirrors. If there is anyone who can give the middle class hope, it is her. Congrats Senator Warren!
Vowing to make the billionaires pay their “fair share”, the country has a true consumer advocate in Massachusetts now. Elizabeth Warren, a law professor who moonlights as a true champion of the middle class consumer, beat incumbent pretty-boy Scott Brown for the Massachusetts Senate seat vacated by Ted Kennedy. Warren created the Consumer Protection Bureau although Wall Street interests had her ousted from her position as director when they saw her headlights in their rear view mirrors. If there is anyone who can give the middle class hope, it is her. Congrats Senator Warren!
New mortgage modification rules make it easier to combine a HAMP or "Obama Plan" mortgage modification with a Chapter 13 Bankruptcy. Combining a HAMP mortgage modification may be beneficial to many homeowners.
The filing of a chapter 13 bankruptcy generally stays all foreclosure and collection actions by mortgage companies and other creditors. This allows a person to formulate a chapter 13 plan to reorganize their financial situation.
A typical homeowner who owes more on their home than it is valued at will propose a chapter 13 plan to avoid their second mortgage lien and categorize it with other unsecured claims, such as credit cards. The homeowner will also file a HAMP mortgage modification request if they haven't already file it. The chapter 13 plan will provide for payment of the estimated and anticipated HAMP modified mortgage payment. The chapter 13 plan provides also provides for a percentage dividend to unsecured creditors.
Filing for a HAMP modification together with a chapter 13 bankruptcy may increase the likelihood of obtaining a HAMP modification for various reasons, including the increased feasibility of making the new payment for the first mortgage, as the second mortgage is avoided and categorized as an unsecured creditor. Also, as the HAMP is being filed in the context of the chapter 13 case, it may receive more prompt review by the mortgage company.
A typical HAMP modified mortgage payment is calculated as 31% of the homeowner's gross income. The 31% amount would cover principal, interest, taxes, insurance and associations.Jordan E. Bublick, Miami and Palm Beach, Florida, Attorney at Law, Practice Limited to Bankruptcy Law, Member of the Florida Bar since 1983
Tens of thousands of people in California file Chapter 13 Bankruptcy every year. Filing a Chapter 13 case and getting that case confirmed by your bankruptcy judge, however, are two very different things. The process of getting a Chapter 13 Plan confirmed can be a bit daunting, but like everything else in filing a personal bankruptcy, having an experienced bankruptcy lawyer along with a bit of good humor will make the process smoother. There are many moving parts in getting a Chapter 13 bankruptcy case confirmed, from filing a proper Chapter 13 Plan, to disclosing all of your financial information, to making sure you make your plan payments on time, and all of this can make the confirmation process somewhat dizzying. Because knowledge is power, this post is aimed at arming you with some knowledge about overcoming a Chapter 13 trustee’s objections to confirmation of your Chapter 13 bankruptcy plan.
If you file a Chapter 13 bankruptcy case in the San Jose Division of the Northern District of California, where we primarily practice, then you should know that the trustee assigned to your case, along with her staff of case analysts and staff attorneys, are efficient, fair-minded professionals who work with us to help get your Chapter 13 Plan confirmed. Yes, you may very well receive something called a “Trustee’s Objection To Confirmation” in the early weeks after your Chapter 13 bankruptcy case is filed, and you might be tempted to think that the Chapter 13 Trustee has it out for you and does not want your case to be confirmed. But this is not the case. Yes, the Chapter 13 Trustee does represent the interests of your creditors. But it is also true, that the trustee and her staff generally want your plan to work, as long as it is filed in good faith.
It is helpful to bear in mind that proposing a Chapter 13 payment plan involves a bit more art than science. The debtor’s bankruptcy attorney is advocating for the debtor’s plan payments to be as manageable as possible while meeting various requirements. At the same time, the trustee is duty bound to make sure that the debtor’s creditors are receiving as much as the debtor can reasonably afford to pay. Hence, there is necessarily some back-and-forth between the debtor’s attorney and the Chapter 13 bankruptcy trustee. It is not at all uncommon for a debtor to receive an Objection to Confirmation from the trustee. This simply means that you and your bankruptcy attorney still have some work to do. But the reality is that Objections can often be remedied in fairly short order.
In the San Jose Division, every bankruptcy case is reviewed by the Chapter 13 Trustee’s office prior to the 341 Meeting of the Creditors. If the Trustee’s office needs more clarification on certain portions of your bankruptcy petition, or needs to review additional documents like paystubs, profit and loss statements for a small business, tax returns, or trust documents, they will file an Objection on your bankruptcy case so that they can review these documents prior to moving your case forward for confirmation. This doesn’t mean your case will not ultimately be confirmed. It simply means that the trustee’s office is doing their own due diligence.
How long do you have to take care of the points of the Objection? Do you need to get the Objection points taken care of by your Confirmation Hearing date? While it would be ideal to get the Objection taken of by your Confirmation Hearing date, it is not absolutely necessary. The Trustee’s office won’t dismiss your case just because you haven’t addressed all issues in the Objection by that time. What will happen if the Objection is not withdrawn by the time the Confirmation Hearing occurs? In the San Jose Division, all that happens is that your case gets taken off of the Confirmation Hearing calendar and is put on something known as the “Trustee’s Pending List,” where your case will stay until all objections have been taken care of. Once all Objections are resolved the Trustee will automatically take your case off of the Trustee’s Pending List and put it back onto the next Confirmation Hearing calendar date.
While it is true that if the objections aren’t resolved after some time has passed your case can be dismissed, this is not the primary aim of the Trustee’s office. The Trustee’s office wants to work with bankruptcy debtors to make sure that their cases and plans conform to the applicable bankruptcy laws in a timely manner, and are willing to work with debtors and their attorneys to make that happen. In fact, the staff of the San Jose Division Chapter 13 Trustee’s office are exemplary in their willingness to candidly discuss with bankruptcy attorneys how to resolve Objections.
If the Trustee’s office reviews your case further after the original Objection has been filed and has found certain objections to have been satisfied, but others have not, they can then file an “amended” Objection to address the issues that are still pending at that time.
Having an experienced bankruptcy attorney help you navigate through the complexities of getting a Chapter 13 case confirmed can mean the difference between a successful Chapter 13 Bankruptcy and a dismissed one. Call us to schedule a free consultation today.
In a recent opinion, the Sixth Circuit has provided clarification of Stern v. Marshall's1 holding by analyzing Article III “judicial power,” the pubic rights doctrine, and the bankruptcy court's authority.
In Waldman, the Western District of Kentucky Bankruptcy Court entered a judgment against the principal creditor after finding that the creditor had defrauded the debtor and had acquired nearly all of the debtor’s assets by means of fraud. The Bankruptcy Court entered a judgment discharging the debts the debtor owed the creditor and awarded the debtor a judgment of more than $3 million in compensatory and punitive damages. The creditor appealed the Bankruptcy Court’s entry of a final judgment based upon three challenges: (1) the debtor’s state law fraud claims are beyond the jurisdiction of the federal court; (2) the judgment entered was beyond the statutory authority of the bankruptcy court; and (3) the judgment was beyond the bankruptcy court’s power pursuant to Article III of the Constitution. Read More ›
Tags: 6th Circuit Court of Appeals, U.S. Supreme Court
Auday v. Wet Seal Retail, Inc., Case No. 12-5057 (6th Cir., Oct. 25, 2012) (recommended for full-text publication).
As most bankruptcy practitioners know, a debtor’s pre-petition cause of action – whether for personal injury, breach of contract, or other claim – is property of the bankruptcy estate. Now, the Sixth Circuit has clarified that only the trustee can file suit in connection with a Chapter 7 debtor’s pre-petition cause of action, unless the action is abandoned. Read More ›
Tags: 6th Circuit Court of Appeals, Chapter 7
On August 17, 2012, the new Making Home Affordable handbook 4.0 for non-GSE mortgages was released.
Jordan E. Bublick, Miami and Palm Beach, Florida, Attorney at Law, Practice Limited to Bankruptcy Law, Member of the Florida Bar since 1983
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