V is for “Victory”: FINDING & RESTORING CREDIT AFTER A BANKRUPTCY FILING

 V is for “VICTORY”:   FINDING & RESTORING CREDIT AFTER A BANKRUPTCY FILING

By Christopher C. Carr, Esq. Chester County bankruptcy attorney.

Tel: 610-380-7969 Email: cccarresq@aol.com Web: westchesterbankruptcyattorney.org

Why do so many of us come this way?  Well, virtually all of us who seek a bankruptcy do so in order to get a “fresh start”.  That is precisely what the law says it is there for.  Elsewhere, I argue that without such a safety net there to catch us if we fail, WE COULD NOT AND WOULD NOT HAVE A ROBUST FREE MARKET ECONOMY.  So many of us are maxxed out on our credit cards and have no more purchasing power.  We seek fresh sources of credit for autos, schooling, even our everyday purchases.  So for better or for worse, it becomes critical for us to find our way back to the credit wellspring as soon as possible after, nay even during, our bankruptcy.

A Chapter 7 “liquidation type” bankruptcy filing remains on your credit report for 10 years from the date of filing.   A Chapter 13 “debtor in possession” bankruptcy filing will remain on your credit report for 7 years from the date of filing. It will be automatically removed after the expiration of the applicable period.
Does this mean that your credit will be impaired for 7 to 10 years? Does it mean you will not be able to purchase critical items on credit?    Absolutely not.

Note that the period starts from the date of filing not discharge so, for example, if you are in a Chapter 13 and complete a 3 year plan 3.5 years later, you will only have three and a half to go. And during this time and even before, you will, with persistence, be able to get credit for the things you really need (see below.) But, you can begin to rebuild your credit rating immediately upon the date of your discharge order. (In a Chapter 7 this will be granted 3-4 months after your petition is filed, typically.)   Actually, it will often prove easier to rebuild your credit after a bankruptcy filing because you will no longer have debts that are in excess of your credit limits.

Don’t even think about hiring a “Credit repair” agency. The money you pay to them could actually be used directly to repair your credit.  As any bankruptcy practitioner will tell you, it’s really no secret, the crucial thing you need to do to rebuild your credit quickly and at no added cost is to pay all of your future bills on time. After a bankruptcy filing, your payment history will be crucial.  If you are in a Chapter 13 your plan payments will be reported. It is common to see former clients who have rebuilt their ratings within 2 to 3 years after a bankruptcy. Their secret? They paid their mortgage and car loans ON TIME and didn’t miss a payment. Some ideas: Send the checks EARLY in case the mail is delayed. Set up an emergency fund, perhaps in a short term CD, to give yourself the “float” needed to make the payments in case you are short one month and then replenish it in flush months or with your tax refund. Have the mental discipline not to use it for anything else!

As an example, a recent Chapter 7 client finished his case; obtained his discharge order and exactly 30 months later (2 years and 6 months), purchased a new home and obtained a competitive mortgage rate for a 30 year fixed.

You will be able to get a new credit card after your bankruptcy case has been completed.   It is true that you are likely to be rejected once or twice, but you should be able to obtain approval for a small credit card as long as you are persistent. Your best bet may be to talk to that friendly bank manager you have known for years. And you may need to ask more than once.

There are also ways to surrender that car you are driving now and its high rate loan and purchase a new car even while in bankruptcy, believe it or not.  You will pay a somewhat higher interest rate but rates are at historically low levels now anyway.

You will also be able to apply for student loans, for yourself or for a child.  Specifically, the Bankruptcy Code (11 U.S.C. Section 525) prevents the government from discriminating against individuals on the grounds that they have filed for bankruptcy relief.  I have yet to hear of anyone being denied a student loan on bankruptcy grounds.

Law Offices of Christopher C. Carr, MBA,  P.C., is a quality bankruptcy and debt relief practice, located in  Valley Township, west of Coatesville, Pennsylvania, where Attorney Christopher Carr, a Chester County bankruptcy attorney, who has over 30 years if diversified ;egal experience, concentrates on serving the residents of and businesses located within Western Chester County and Eastern Lancaster County, Pennsylvania, including the communities in and around Atglen, Bird in Hand, Caln, Christiana, Coatesville, Downingtown, Eagle, Exton, Fallowfield Gap, Honeybrook, Lancaster, Lincoln University, Modena, New Holland, Parkesburg, Paradise, Ronks, Sadsbury, Thorndale, Valley Township, Wagontown & West Chester,  Pennsylvania. If you reside or do business in the area and need assistance with a legal issue, please call Mr. Carr at (610)380-7969 or write him at cccarresq@aol.com today!  

I also provide Mortgage Modification Services.

©Christopher C. Carr, Attorney at Law 2009, 2012, All Rights Reserved

“V” Photo by Janet McKnight

“U” IS FOR UNLISTED CREDITORS

By Christopher C. Carr, Esq. Chester County bankruptcy attorney. Tel: 610-380-7969 Email: cccarresq@aol.com Web: westchesterbankruptcyattorney.org

U by StriaricNLISTED CREDITORS IN A “NO ASSET” CHAPTER 7 BANKRUPTCY CASE

You filed your “no asset” chapter 7 bankruptcy and thought you obtained a discharge from all your past debts.  But you unintentionally omitted a trade creditor from your petition and that creditor has been calling daily demanding payment in full and threatening suit, claiming it was never notified of the bankruptcy.  You are wondering now whether you must pay the claim and if not what you can do to stop the calls and demands.

  • DO NOT PAY OR AGREE TO PAY THIS DEBT WITHOUT FIRST CONSULTING WITH LEGAL COUNSEL

Most jurisdictions have adopted a “no harm , no foul” rule , whereby  a debt will be discharged in the bankruptcy case, even if the debt is not listed in the bankruptcy and the creditor is not notified of the bankruptcy, if the following apply:

  1. The Court never set a deadline for creditors to file a proof of claim. This is the case in virtually all no asset cases.   In a no asset case the unlisted creditor is not harmed, because there was no distribution for the creditor to receive.  However, if the court did set a deadline for filing proofs of claim, then the obligation to the creditor is not discharged if the creditor was not listed in the bankruptcy and did not otherwise receive notice of the bankruptcy in time to file a proof of claim.  It is the setting of a deadline for the filing of a proof of claim that is the key.  Ironically, it does not matter whether the creditor would not have received any distribution from the trustee on the claim. Nor does it matter that no distribution was made by the trustee to any creditors. It is also irrelevant that a distribution was made by the trustee, but the omitted creditor would not have been paid anything even if a proof of claim had been timely filed, for example  if the distribution all went towards administrative costs and priority claims. In any of these instances, the debt survives the discharge.
  2. The creditor does not have the type of claim for which the creditor could have filed a lawsuit in the bankruptcy court to have the debt declared not discharged, such as for fraud or intentional injury.
  3. The creditor does not have the type of claim which is never discharged in bankruptcy, such as child support, spousal maintenance, most taxes, etc.
  • DEALING WITH THE OMITTED CREDITOR:

The biggest difficulty is often convincing an omitted creditor that its claim was discharged and that the post-discharge injunction of 11 USC §524 prohibits collection efforts. Typically, this will require the assistance of competent counsel.  At a minimum the creditor should be sent a legal letter advising of the law and the applicable court rulings in your jurisdiction.

The bankruptcy courts will not normally allow a closed case to be reopened for the purpose of listing an omitted creditor, since the matter  is considered moot,  butthe debtor may re-open the bankruptcy and request sanctions against a creditor that refused to stop collection efforts, in violation of 11 USC §524.   In addition, since the creditor is attempting to collect on an invalid debt, the harassment may also constitute one or more violations of the Fair Debt Collection Practices Act and/or applicable state consumer protection, especially if it continues after receipt of the lawyer’s letter.Again however, this is a matter you should bring up with your local counsel.

Law Offices of Christopher C. Carr, MBA,  P.C., is a quality bankruptcy and debt relief practice, located in  Valley Township, west of Coatesville, Pennsylvania, where Attorney Christopher Carr, a Chester County bankruptcy attorney, who has over 30 years if diversified ;egal experience, concentrates on serving the residents of and businesses located within Western Chester County and Eastern Lancaster County, Pennsylvania, including the communities in and around Atglen, Bird in Hand, Caln, Christiana, Coatesville, Downingtown, Eagle, Exton, Fallowfield Gap, Honeybrook, Lancaster, Lincoln University, Modena, New Holland, Parkesburg, Paradise, Ronks, Sadsbury, Thorndale, Valley Township, Wagontown & West Chester,  Pennsylvania. If you reside or do business in the area and need assistance with a legal issue, please call Mr. Carr at (610)380-7969 or write him at cccarresq@aol.com today!  


I also provide Mortgage Modification Services.

Other Attorneys Blogging on the Letter U Include:

U.S. Trustee Omaha and Lincoln, Nebraska Bankruptcy Attorney, Ryan D. Caldwell http://bankruptcyblog.caldwell-lawfirm.com/2011/11/23/bankruptcy-alphabet-u-is-for-u-s-trustee.aspx Unauthorized Practice of Law Cleveland Bankruptcy Attorney Bill Balena http://ohiobankruptcysource.com/?p=2601 Underwater Jay Fleischman, bankruptcy attorney in New York City http://www.consumerhelpcentral.com/bankruptcy-alphabet-underwater/ Underwater Metro Richmond Consumer and Bankruptcy Attorney, Mitchell Goldstein http://www.morethanbankruptcy.com/u-underwater.html United States Trustee Maui Bankruptcy Attorney, Stuart Ing http://www.bankruptcyhi.com/2012/02/u-is-for-the-united-states-trustee/ Unsecured Cathy Moran, Bay Area Bankruptcy Lawyer http://www.bankruptcysoapbox.com/bankruptcy-alphabet-2/ Upside-Down Vehicles Wisconsin Bankruptcy Lawyer, Bret Nason http://nasonlawfirm.com/archives/962 Unlisted Asset Allen Park, Michigan bankruptcy lawyer, Christopher McAvoy http://downriverbankruptcy.com/unlisted-undervalued-assets-bankruptcy/#axzz1uLBcDSOL Unsecured Creditor Livonia Bankruptcy Attorney, Peter Behrmann http://www.livoniamichiganbankruptcy.com/u-is-for-unsecured-creditor-in-bankruptcy/

 

Law Offices of Christopher C. Carr, MBA,  P.C., is a quality Chester County Bankruptcy Practice, located in  Valley Township, west of Coatesville, Pennsylvania, where Attorney Carr, who has over 30 years if diversified experience as an attorney, concentrates his practice on serving the residents of and businesses located within Western Chester County and Eastern Lancaster County, Pennsylvania, including the communities in and around Atglen, Bird in Hand, Caln, Christiana, Coatesville, Downingtown, Eagle, Exton, Fallowfield Gap, Honeybrook, Lancaster, Lincoln University, Modena, New Holland, Parkesburg, Paradise, Ronks, Sadsbury, Thorndale, Valley Township, Wagontown & West Chester,  Pennsylvania. If you reside or do business in the area and need assistance with a legal issue, please call Mr. Carr at (610)380-7969 or write him at cccarresq@aol.com today!


©Christopher C. Carr, Attorney at Law, 2012, All Rights Reserved.  See Disclaimers.

Photo by Striatric

K is for “Knight in Shining Armor”

Knight1 form Pranavian

By Christopher C. Carr, Esq. Chester County bankruptcy attorney. Tel: 610-380-7969 Email: cccarresq@aol.com Web: westchesterbankruptcyattorney.org

  It is simply AMAZING what a good bankruptcy lawyer can accomplish for you. In perhaps no other sector of the law are we attorneys handed a SWORD with which we can in a single blow, release the chains that bind our clients to the downward spiral of debt and a SHIELD with which to protect our clients against their predators (oops, I meant creditors).

Just look at what this mighty power we weild allows competent and compassionate counsel to do for you:

Eliminate Debt:

Credit Cards

Medical Bills

Liens and Judgments

Retain Assets:

Your Home

Retirement Accounts

Your Vehicles

Stop/Prevent:

Foreclosure/Repossession

Wage Garnishments

Creditor Harassment

Utility Shut Offs

Loss of Rental Unit

Reduce/Restructure/Strip Off:

Second & Beyond Mortgages

Late Model Vehicle Loans

& even retain for you or restore to you your very liberty, they even sometimes can keep you out of jail.

But BEWARE: of the novice, unskilled lawyer or the cut rate lawyer who “only does Chapter 7 bankruptcies”.  These types, through ignorance or lack of concern, will simply not be equipped to wield that sword and shield to fashion the relief that you need.  You need an EXPERIENCED FULL SERVICE CONSUMER BANKRUPTCY EXPERT to advise you and most importantly what your OPTIONS are and to help you to plan so that you can optimize your bankruptcy.

And where does this incredible power that we wield come from? Well, our forefathers, many of whom who had seen or even experienced firsthand the evils of the European debtor’s prisons, considered it a fundamental underlayment of the freedoms that we all enjoy that in times of need a “fresh start” could be obtained. So they instituted for all of the people of our great nation within the United States Constitution[1] the rights and protections of the bankruptcy clause!

Law Offices of Christopher C. Carr, MBA,  P.C., is a quality bankruptcy and debt relief practice, located in  Valley Township, west of Coatesville, Pennsylvania, where Attorney Christopher Carr, a Chester County bankruptcy attorney, who has over 30 years if diversified ;egal experience, concentrates on serving the residents of and businesses located within Western Chester County and Eastern Lancaster County, Pennsylvania, including the communities in and around Atglen, Bird in Hand, Caln, Christiana, Coatesville, Downingtown, Eagle, Exton, Fallowfield Gap, Honeybrook, Lancaster, Lincoln University, Modena, New Holland, Parkesburg, Paradise, Ronks, Sadsbury, Thorndale, Valley Township, Wagontown & West Chester,  Pennsylvania. If you reside or do business in the area and need assistance with a legal issue, please call Mr. Carr at (610)380-7969 or write him at cccarresq@aol.com today!  

I also provide Mortgage Modification Services.

Other Attorneys Blogging on the Letter K Include: See Comments Below.

©Christopher C. Carr, Attorney at Law, 2012, All Rights Reserved.  See Disclaimers.


[1] Article 1, Section 8, Clause 4

“R” in Bankruptcy is for Rental vs. Chapter 13 Home Retention: A Tax Benefit Analysis

  r^36 by mag3737 is for Rental vs. Home Retention

By Christopher C. Carr, Esq. Chester County bankruptcy attorney. Tel: 610-380-7969 Email: cccarresq@aol.com Web: westchesterbankruptcyattorney.org

Deciding whether to keep your home or not  is not always a simple “Rent/bankruptcy vs. “Keep/no bankruptcy” decision: if you have regular income  and otherwise are eligible to file a Chapter 13 Bankruptcy you should also consider keeping the property in a 13. In a  13 you still have to pay principal and interest and escrows, if any but the 13 Plan, once confirmed by the Court, will allow you to hang on to this most precious of assets and pay the arrears in the plan over a 3-5 year period instead of selling at a loss and in many cases owing the deficiency to the lender.

The decision is not an easy one and there are almost always emotional ties to a home as well.  But one thing is for certain: you have to pay taxes and anything that saves you a dollar in taxes is like a dollar in your pocket right?

Some lawyers and others will, in “knee jerk” fashion, tell you that since your house is under water you should short sell and “find another place to rent”.  However, any analysis which does not “add back” into the equation the net present value of the tax advantages of home ownership at your marginal tax rate is telling you only half the story.  Renting has little or no tax advantage, mortgage payments do. (Same for state and local taxes that you pay or are escrowed by your lender)  Let’s say your mortgage is $950 a month you are in the 25% bracket for example and your property taxes are $3,600 a year or $300 a month, then the ownership “savings”  is computed as follows:  ($950 + $300) x .25 or $312.50. Another way to say it is that the government is subsidizing 25% of your ownership cost under these assumptions (not quite because as I explain below, we also have to consider insurance in the computation).

The pragmatic way to analyze this as they taught us in MBA School, is to compute  your net after tax cost of home ownership and ask yourself the question: CAN YOU REALLY FIND EQUIVALENT RENTAL HOUSING FOR A PRICE AS GOOD  or BETTER THAN YOU ARE PAYING NOW?  Let’s look again at the example I have been exploring above.  To get the full cost of ownership you have to add in home insurance (which is not tax deductible). Let’s say that is another $75 a month. So your fully loaded cost (assuming you live in a place with no association fees) is (950 + 300 + 75)-312.50 = $1012.50.  Note when you figure in the tax savings in it brings the overall cost of home ownership down to only a few dollars more than the amount of your  mortgage payment.  So ask yourself, using your actual costs and tax bracket instead, can I find adequate rental housing for that net figure (in my example $1012.50 a month)?  If not, you might want to consider a Chapter 13 to allow you to keep your current residence.

Of course, the above analysis while a good starting point, it is just one of the factors to be considered. A couple of examples: if you can strip out your second mortgage in a Chapter 13 because your home is completely under water as to the second (meaning that there is not enough equity coverage for the second and any homestead or other exemptions that are applicable in your jurisdiction), that will further reduce your ownership costs by the amount of the monthly payment you make on the second now. And if you can get rid of your credit card debt to boot, you are that much more ahead (assuming you are still paying on them).  In a 13 keep decision, these things also have to be weighed against the rental advantages. Also consider any costs of sale and the effects of the deficiency judgment (see above) that you might incur!  See my article in this series called: J is for “Judgment” Lien and its Impact upon Homeowners for more information.

One factor that may seem to favor renting is the negative impact that a decision to go bankrupt will have on your credit.  Financial advisers warn that foreclosure will leave a “strong negative” on a credit report for as long as seven years from the date of discharge (which can be longer than 5 years from the date of filing in a Chapter 13), though the impact on a borrower’s rating declines over time. But remember that if you are far behind on you payments and/or your credit cards your credit has already been affected… and, a good bankruptcy lawyer can show you ways to rebuild credit even while in a Chapter 13 bankruptcy plan period (3-5 years).

Whatever your decision may be, I wish you luck.

Law Offices of Christopher C. Carr, MBA,  P.C., is a quality bankruptcy and debt relief practice, located in  Valley Township, west of Coatesville, Pennsylvania, where Attorney Christopher Carr, a Chester County bankruptcy attorney, who has over 30 years if diversified ;egal experience, concentrates on serving the residents of and businesses located within Western Chester County and Eastern Lancaster County, Pennsylvania, including the communities in and around Atglen, Bird in Hand, Caln, Christiana, Coatesville, Downingtown, Eagle, Exton, Fallowfield Gap, Honeybrook, Lancaster, Lincoln University, Modena, New Holland, Parkesburg, Paradise, Ronks, Sadsbury, Thorndale, Valley Township, Wagontown & West Chester,  Pennsylvania. If you reside or do business in the area and need assistance with a legal issue, please call Mr. Carr at (610)380-7969 or write him at cccarresq@aol.com today!  

I also provide Mortgage Modification Services.

Other Attorneys Blogging on the Letter R Include: .

  • New York Bankruptcy Lawyer, Jay S. Fleischman on R is for Redemptions.
  • Omaha and Lincoln, Nebraska Bankruptcy Attorney, Ryan D. Caldwell on R is for Reaffirmation Agreements
  • Bay Area Bankruptcy Lawyer Cathy Moran on Retirement.
  • Colorado Springs Bankruptcy Lawyer Bob Doig on Repossession.
  • Kona Bankruptcy Lawyer, Stuart T. Ing also on Repossession

©Christopher C. Carr, Attorney at Law, 2012, All Rights Reserved.  See Disclaimers.

Photo by mag3737.

P is for Property of the estate: The key to when a lien can be stripped by the bankruptcy court.

p from toofar north

By Christopher C. Carr, Esq. Chester County bankruptcy attorney. Tel: 610-380-7969 Email: cccarresq@aol.com Web: westchesterbankruptcyattorney.org

When you inherited that property from your father who died in Texas, it had a second lien which was completely under water and impairs an exemption but you had no liability for the underlying home equity loan so it can’t be stripped in your Chapter 13 bankruptcy, right?  Wrong. Let’s see why.

To be “strip eligible”, a secured claim has to be an “allowed claim”. Section 506(a)(1) of the US Bankruptcy Code provides:

An allowed claim of a creditor secured by a lien on property in which the estate has an interest … is a secured claim to the extent of the value of such creditor’s interest in the estate’s interest in such property…”,

The relevant inquiry then for lien stripping is not does the “debtor” owe the debt but does the estate have an interest in the property to which the lien attaches?  For that to happen all that is required is that the subject property be in the estate created when the debtor declares bankruptcy. Here are 3 examples to better illustrate the point:

  1. Simple Inheritance Scenario. Suppose the debtor inherited a parcel of real property from her deceased father subject to a lien in favor of his creditors. In the debtor’s bankruptcy case, a lien securing the father’s promise to pay the Bank of Armadillo is just as strip eligible as if the debtor rather than her deceased father were herself the borrower. As long as the property which is collateral for the debt is properly before the court, the lien is subject to stripping.
  2. Co-Beneficiary Scenario. Take the same case but now we have two debtors, each a co tenant and heir with a sibling in the same inherited house (a duplex). Both halves of the house are subject to the BOA lien. If only one debtor files bankruptcy, only that co-tenant’s interest in the house is property of the estate, and the court can only strip the lien from the half of the property because only half is in the bankruptcy estate.
  3. Husband & Wife (certain states only) Scenario. Somewhat the reverse fact pattern is a very common one in Pennsylvania, where I primarily practice law. This can happen for example because the original owner, say the wife, upon marriage deeds the property into husband and wife form, which under Pennsylvania is called “tenancy by the entireties” and serves to protect the marital property from the creditors of the individual marriage partners. The husband is now on title to the property while the wife, the original owner, remains the only one liable on the note. If both spouses file for bankruptcy,, the real estate comes into the bankruptcy estate. Once again, it’s strippable simply because the collateral is property of the estate without reference to the locus of the debt.

Because bankruptcy is essentially “all about the debtor and his or her debts”, it is a common mistake to overlook liens that could have been stripped because the debts do not happen to “belong” to the debtor. This then is another illustration of how competent counsel, by properly identifying and claiming this benefit for you, can save you far more than any legal fee you might have to pay.

Law Offices of Christopher C. Carr, MBA,  P.C., is a quality bankruptcy and debt relief practice, located in  Valley Township, west of Coatesville, Pennsylvania, where Attorney Christopher Carr, a Chester County bankruptcy attorney, who has over 30 years if diversified ;egal experience, concentrates on serving the residents of and businesses located within Western Chester County and Eastern Lancaster County, Pennsylvania, including the communities in and around Atglen, Bird in Hand, Caln, Christiana, Coatesville, Downingtown, Eagle, Exton, Fallowfield Gap, Honeybrook, Lancaster, Lincoln University, Modena, New Holland, Parkesburg, Paradise, Ronks, Sadsbury, Thorndale, Valley Township, Wagontown & West Chester,  Pennsylvania. If you reside or do business in the area and need assistance with a legal issue, please call Mr. Carr at (610)380-7969 or write him at cccarresq@aol.com today!  

I also provide Mortgage Modification Services.

Other Attorneys Blogging on the Letter P Include:

  • Omaha and Lincoln, Nebraska Bankruptcy Attorney, Ryan D. Caldwell: P is for Plan.
  • New York Bankruptcy Lawyer, Jay S. Fleischman: P is for Pay Advice.
  • Colorado Springs Bankruptcy Attorney Bob Doig: P is for Preferences.
  • Maui Bankruptcy Attorney, Stuart Ing: P is for Preference.
  • Southgate, Michigan Bankruptcy Lawyer, Christopher McAvoy: P is for Pride.
  • Cleveland Bankruptcy Attorney, Bill Balena: P is for Phone Call
  • Wisconsin Bankruptcy Lawyer, Bret Nason:  P is for Property of the Estate
  • San Mateo Bankruptcy Lawyer, Jeff Curl:  P is for Priority Debt
  • Metro Richmond Consumer and Bankruptcy Attorney, Mitchell Goldstein:  P is for Privacy
  • Jacksonville Bankruptcy Attorney, J. Dinkins G. Grange:  P is for Payment

©Christopher C. Carr, Attorney at Law, 2012, All Rights Reserved.  See Disclaimers.

Photo by Too Far North

J is for “Judgment” Lien and its Impact upon Homeowners.

By Christopher C. Carr, Esq. Chester County bankruptcy attorney. Tel: 610-380-7969 Email: cccarresq@aol.com Web: christopherccarrlaw.com

1.      What Is a Judgment vs. a Lien and how do they arise in Real Estate?

When you owe money and are unable to pay, the creditor, unless it is the IRS, must take you to court before levying upon your back accounts or garnishing your wages. Typically the creditor will sue you in municipal court or in common pleas court in Pennsylvania if the amount of the claim is larger than $12,000 (up to 15,000 for Philadelphia County real estate matters). When a lawsuit is initiated against you, you will be served with a Complaint. If you do not respond (by answer or other responsive pleading) within a set period of time or appear at the hearing set for your case, a default judgment will be issued against you. This judgment will be recorded by the court.

In Pennsylvania, a judgment is an automatic lien on real property owned by the defendant in the county in which the judgment is located. The lien of a judgment lasts for 5 years, 42 Pa. C.S.A. Sec. 5526, and execution must be issued against personal property within 20 years after entry of the judgment, 42 Pa. C.S.A. Sec. 5529. In addition, via a mechanism called a writ of execution liens can be transferred to other counties in Pennsylvania where the debtor owns property. A lien on real property means that the debtor cannot sell the property until all liens are paid. However, a judgment lien can only be arise in real property. If the debtor does not own real property within the applicable jurisdictional limits, the judgment lien cannot attach to anything and all the creditor has is a recorded judgment. What is the use of this?  Well, the creditor can then use this judgment to pursue garnishment where available or levy upon your Pennsylvania bank accounts. However, wage garnishment is prohibited in Pennsylvania except for certain obligations such as support.  It is critical for homeowners to respond to all lawsuits by bringing them immediately to the attention of their attorney as in this way an ordinary unsecured debt such as a unpaid credit card debt can become a lien against your home. (See final comment below.)

The filing of a bankruptcy will stay a foreclosure and the underlying debt can be discharged in a bankruptcy except for certain obligations such as domestic support obligations (DSO’s) which are non-dischargeable under Section 11 USC. 523(a) (5) of the Bankruptcy Code. (But see my blog on the effects of a Chapter 13 bankruptcy on DSO’s for further valuable information for homeowners facing support issues.) Even if these steps are taken the lien of the prior judgment will typically continue (in some some cases they can however be completely or partially removed as discussed below) and may cause difficulties for homeowners. To avoid the continuing negative financial consequences they can create, the judgment will need to be removed where possible.

2.      REASONS TO HAVE A LIEN/JUDGMENT REMOVED:

When a creditor who has obtained a judgment but the debtor subsequently files a bankruptcy, the debt underlying the judgment is discharged through the bankruptcy. However, the lien of the judgment itself will remain and will be effective against any real property in the county and will interfere with the sale of the property. A lien on real property means that the debtor cannot sell the property until all liens are paid. Understandably, a title company will refuse to clear the title for a home when the property has a judgment lien against it until the title insurer receives proof that the lien has been satisfied or discharged and this can defeat or delay a sale of the property. A lien can of course be satisfied through payment but a typical homeowner files bankruptcy precisely because they can no longer pay their mortgage.

Even if you do not own real estate, while no creditor can collect upon the judgment, it will still continue to exist on the county record. The judgment will be reported to credit bureaus as active, thus continuing to impair your credit for up to 7 years, which is the length of time a judgment can remain on your credit.

3.      WHICH JUDGEMENTS AND LIENS IN REAL ESTATE MAY/MAY NOT BE DISCHARGED BY BANKRUPTCY AND HOW IS THIS DONE?

Certain types of debt cannot be discharged through a bankruptcy. For example, back child support cannot be discharged through a bankruptcy.

The lien of a judgment which was entered before the bankruptcy was filed will appertain against real property of the debtor for at least 5 years after entry of the judgment in the county. (See above).  However, to the extent the lien impairs an exemption the lien will be subject to removal once the debt has been discharged.

The homestead exemption in bankruptcy applies to property used as your residence. As of early 2012, the federal homestead exemption is $21,625 (if both spouses file, this is doubled). State homestead exemptions vary a great deal. In some states, like Florida, there’s no limit, while in other states, like New York, the limit is $50,000 to $150,000, depending on where in the Empire State you reside.  In Pennsylvania, for example, the federal exemption may be elected. So, if you have a house with $50,000 worth of equity you are entitled to a federal exemption with your spouse of $43,250.00. If you only owe $50,000 on the property, you can petition the court and have the judicial lien removed up to the exemption amount.  The lien for the remaining $6,750 will remain on the books. Unfortunately however, few homeowners in this day and age of declining home values have sufficient equity in their homes to claim equity impairment sufficient to remove liens following bankruptcy. (See final comment below.)

This process only works when you have claimed a valid exemption relating to your principal residence in the bankruptcy proceeding and the underlying debt has been discharged. If these conditions are met, the bankruptcy court will, upon motion made by your attorney, remove the lien to the extent it impairs your homestead exemption.

A debt must have however been included in the bankruptcy for it to have been discharged.  If the creditor was not listed and the debt existed before the case was filed, the case may need to be reopened and the creditor added. (This topic will be treated in greater detail in my blog under construction with the working title: “U is for the Unlisted Creditor in the Bankruptcy Alphabet”.)

If you are involved in a Chapter 13 bankruptcy, which is the usual case for homeowners, you cannot receive a discharge until your plan has been completed which can take up to 60 months. A judgment cannot be removed if a discharge has not been issued. You will have to wait until your plan is completed before you will be able to remove any judgments issued against you and begin to clear your credit.

Once the discharge has been obtained, clearing a listed judgment (but not the judicial lien if you have non-exempt real estate in the county: see above) may be as simple as having your lawyer send a notice of discharge in bankruptcy to the clerk of the court of the county in which the judgment was recorded with a copy to the creditor.

Clearing debt off your credit report however can require the additional help of a credit specialist.  Certain lawyers can assist you with credit repair.

4.      CONCLUSION: DO NOT HIDE YOUR HEAD IN THE SAND:

Obviously these rules are very complicated and, while I have illustrated with examples drawn mainly from Pennsylvania where I practice, vary from state to state and even within state boundaries.  There is however one sure fire way to keep a lien from arising on your real property in Pennsylvania and elsewhere.  Never allow a judgment to be entered against you before you have the oportunity to file bankruptcy. Instead, seek the advice of a competent bankruptcy lawyer as soon as you see the first sign of a law suit looming on your horizon and start planning for a bankruptcy filing to preempt the filing of a judgment.

Law Offices of Christopher C. Carr, MBA,  P.C., is a quality bankruptcy and debt relief practice, located in  Valley Township, west of Coatesville, Pennsylvania, where Attorney Christopher Carr, a Chester County bankruptcy attorney, who has over 30 years if diversified ;egal experience, concentrates on serving the residents of and businesses located within Western Chester County and Eastern Lancaster County, Pennsylvania, including the communities in and around Atglen, Bird in Hand, Caln, Christiana, Coatesville, Downingtown, Eagle, Exton, Fallowfield Gap, Honeybrook, Lancaster, Lincoln University, Modena, New Holland, Parkesburg, Paradise, Ronks, Sadsbury, Thorndale, Valley Township, Wagontown & West Chester,  Pennsylvania. If you reside or do business in the area and need assistance with a legal issue, please call Mr. Carr at (610)380-7969 or write him at cccarresq@aol.com today!  

I also provide Mortgage Modification Services.

©Christopher C. Carr, Attorney at Law, 2012, All Rights Reserved. See Disclaimers.

 Other bankruptcy attorneys discussing the Letter “J” include:

The H in the Bankruptcy Alphabet is for “Honesty” and Fraud Avoidance.

190864341_12cca04722_t[1] is for Honesty

By Christopher C. Carr, Esq. Chester County bankruptcy attorney. Tel: 610-380-7969 Email: cccarresq@aol.com Web: christopherccarrlaw.com

Every potential bankruptcy client needs to understand that it is in his/her best interest to be entirely honest in their dealings with their lawyer, the trustee and the courts.  Not only may the debtor harm themself by failing to disclose material information but they may also potentially face severe criminal penalties.[1]  The United States bankruptcy laws require the debtor to disclose all income and assets to the bankruptcy court and the court is empowered under applicable federal statutes to uphold the integrity of the system and the participants in it. The theory and practice of these disclosures, is that if accurate and complete, the bankruptcy trustee and the court are able to determine what, if anything, the debtor can afford to repay to the creditors.

The bankruptcy disclosure form which every debtor is required to sign WARNS as follows:

Bankruptcy Crimes and Availability of Bankruptcy Papers to Law Enforcement Officials

A person who knowingly and fraudulently conceals assets or makes a false oath or statement under penalty of perjury, either orally or in writing, in connection with a bankruptcy case is subject to a fine, imprisonment, or both. All information supplied by a debtor in connection with a bankruptcy case is subject to examination by the Attorney General acting through the Office of the United States Trustee, the Office of the United States Attorney, and other components and employees of the Department of Justice.

WARNING: Section 521(a)(1) of the Bankruptcy Code requires that you promptly file detailed information regarding your creditors, assets, liabilities, income, expenses and general financial condition. Your bankruptcy case may be dismissed if this information is not filed with the court within the time deadlines set by the Bankruptcy Code, the Bankruptcy Rules, and the local rules of the court. [2]

Oftentimes the debtor will unintentionally hurt their case by “shading” the truth based upon an inaccurate understanding of the bankruptcy laws.  For example, a debt may not be listed on the petition because the debtor does not wish to reveal it. However, a debt that is not disclosed cannot be discharged in bankruptcy.

One of the great unfounded fears in all of bankruptcy is that the debtor will “lose all their assets in bankruptcy”.   Thus, a debtor may fail to reveal an asset which might have been partially or completely exempt and thus unnecessarily face the complete loss of the asset (see below).   There are generous exemptions available for many assets especially under the federal statutes and the laws of states like Pennsylvania where I practice law allow debtors to elect these, instead of the far less generous state exemptions. Other states like Florida have homestead exemptions which allow a debtor domiciled in Florida to completely shield their primary residence.

One article provides the following example of this temptation in action  and how the result of yielding to it easily can be detected:

“Because cash is difficult to track down, it may be tempting to pile up as  much cash as you can before bankruptcy and then “forget” to include the cash on  your financial  statement that you file with the bankruptcy court. Be forewarned that the  bankruptcy code imposes significant civil and criminal penalties on debtor’s who  intentionally provide false information to the bankruptcy court. Because the  bankruptcy trustee will have access to all your recent history of earnings, bank  statements and other financial records, there is a strong likelihood that the  trustee will be able to tell if you have attempted to siphon off cash before  filing your bankruptcy petition.”

It is thus essential that the debtor reveal all debts, assets and income sources to the lawyer who can then properly advise the debtor on legal protections and issues. If there is any question for example as to whether an item is an asset, the debtor should disclose it and let the lawyer decide how to properly treat it in the petition. Some writers have indicated that such proactivity can help to show that the debtor did not have the requisite intent to commit bankruptcy fraud.

One consequence of failing to disclose income or assets is that the debtor may be denied a bankruptcy discharge and remain liable for all debts under Section 727 of the Bankruptcy Code. Its provisions permit the court to dismiss the debtor’s case for dishonesty on the bankruptcy schedules, hiding assets, failing to maintain financial records, refusing to turn over records, or refusing to cooperate with the trustee. Not only may the court deny the dishonest or uncooperative debtor a discharge under Section 727 but any assets turned over during the case will still be sold by the bankruptcy trustee so that the debtor loses the property without any concomitant bankruptcy benefits.

As is indicated above, the most serious consequence for the debtor of dubious honesty is the prospect of being charged with criminal bankruptcy fraud.  Most bankruptcy fraud first comes to the attention of the bankruptcy trustee during the course of the bankruptcy or as a result of “whistle blowing” by neighbors, creditors, or ex-spouses. The IRS under the Internal Revenue Service Criminal Investigation’s Bankruptcy Fraud Program and the US Trustee are the most active in investigating fraud.  The Department of Justice Trustee Program encourages individuals to report bankruptcy fraud to the US Department of Justice for further potentially criminal action. The IRS also maintains a whistle blower award program.

The IRS appears to use the Bankruptcy Fraud Program to make examples of egregious miscreants, especially where a case also involves tax fraud or evasion, and consequently has an extremely high conviction rate. For example in 2011, 83% of those who had been charged with bankruptcy fraud are now serving time. In virtually all these cases, the individual was also required to make substantial financial restitution and also were required to serve a period of supervised release.

In addition, just because your bankruptcy is discharged, don’t think that you are off the hook. Individuals who file for relief under Chapter 7
or Chapter 13 of the Bankruptcy Code are subject to audits by the U.S. Trustee.  For further information visit the U.S. Trustee site.

The moral of the story? You are filing bankruptcy to get a fresh start. You have little to fear and everything to gain from the process if you are honest and adopt a policy of full disclosure.

Law Offices of Christopher C. Carr, MBA,  P.C., is a quality Chester County Bankruptcy Practice, located in  Valley Township, west of Coatesville, Pennsylvania, where Attorney Carr, who has over 30 years if diversified experience as an attorney, concentrates his practice on serving the residents of and businesses located within Western Chester County and Eastern Lancaster County, Pennsylvania, including the communities in and around Atglen, Bird in Hand, Caln, Christiana, Coatesville, Downingtown, Eagle, Exton, Fallowfield Gap, Honeybrook, Lancaster, Lincoln University, Modena, New Holland, Parkesburg, Paradise, Ronks, Sadsbury, Thorndale, Valley Township, Wagontown & West Chester,  Pennsylvania. If you reside or do business in the area and need assistance with a legal issue, please call Mr. Carr at (610)380-7969 or write him at cccarresq@aol.com today!

 


[1] The criminal sanctions can include sentence of up to five years in prison and fines up to $250,000.

[2] Source

Law Offices of Christopher C. Carr, MBA,  P.C., is a quality bankruptcy and debt relief practice, located in  Valley Township, west of Coatesville, Pennsylvania, where Attorney Christopher Carr, a Chester County bankruptcy attorney, who has over 30 years if diversified ;egal experience, concentrates on serving the residents of and businesses located within Western Chester County and Eastern Lancaster County, Pennsylvania, including the communities in and around Atglen, Bird in Hand, Caln, Christiana, Coatesville, Downingtown, Eagle, Exton, Fallowfield Gap, Honeybrook, Lancaster, Lincoln University, Modena, New Holland, Parkesburg, Paradise, Ronks, Sadsbury, Thorndale, Valley Township, Wagontown & West Chester,  Pennsylvania. If you reside or do business in the area and need assistance with a legal issue, please call Mr. Carr at (610)380-7969 or write him at cccarresq@aol.com today!  


I also provide Mortgage Modification Services.

For other articles in the nationwide bankruptcy ABC’s series check out these attorneys:

  1. Omaha and Lincoln, Nebraska Bankruptcy Attorney, Ryan D. Caldwell: H is for Hearing.
  2. New York Bankruptcy Lawyer, Jay S. Fleischman: H is for Household.
  3. Northern California Bankruptcy Lawyer, Cathy Moran: H is for House, no not the doctor.
  4. Colorado Springs Bankruptcy Lawyer Bob Doig: H is for Homestead.
  5. Los Angeles Bankruptcy Attorney, Mark J. Markus: H is for House
  6. Hilo Bankruptcy Attorney, Stuart T. Ing: H is for Household Size.
  7. Cleveland and Lorain Count Bankruptcy Attorney, Bill Balena: H is for Honesty

©Christopher C. Carr, Attorney at Law, 2011, 2012, All Rights Reserved

Photo by Arenamountanus