M is for Matrimonial Property Obligations and the Discharge in Bankruptcy

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

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

    M by BigBlue Meanie                    There are two main types of domestic support obligations (‘DSO”) defined in the bankruptcy code. The first kind of DSO encompasses things such as child support payments and alimony. (To simplify, let’s just call this type: “support“). The second type of DSO comes from the distribution of property in divorce; in Pennsylvania the statutes refer to this as “equitable distribution“, which is the terminology I will use here. The latter usually consists of the spouse’s equitable share of the equity — as adjudicated by the courts or agreed to in a property settlement agreement, which also must be court approved in Pennsylvania — in the marital residence but can also include joint bank accounts and other valuable items.

In the general definitions within the Bankruptcy code 11 USC Sect.. 101(14 a-c), both support and equitable distribution appear as DSO’s, misleading one to think that perhaps the two will be treated identically in bankruptcy. However, while this is true of a Chapter 7, it is otherwise for a Chapter 13. The difference in treatment as between the two different kinds of domestic support obligations only become apparent when one looks at how they are treated those portions of the Bankruptcy Code dealing specifically with the discharge of these specific categories of debt.

At first glance in 11 USC Sect. 523(a)(5) and 11 USC Sect. 523(a)(15), the sections of the Code dealing with equitable distribution, it appears that these two subsets of domestic support obligations are treated the same. That is to say, neither support nor equitable distribution obligations appear to be discharged in bankruptcy, meaning specifically that in both a Chapter 7 bankruptcy these debts survive the bankruptcy and remain obligations of the debtor and alternately in a Chapter 13, they both must be paid in the plan and/or any amount left over so survives.

However, 11 USC Sect. 1328(a)(2) changes the picture radically, at least insofar as discharge after completion of a Chapter 13 Plan is concerned. (Note that virtually anyone who has a regular income can elect a Chapter 13 filing as versus a Chapter 7.) This provision essentially states that once all the plan payments are made and the debtor complies with its other requirements, the DSO types not listed in the statute will be discharged: one of the provisions so listed is 11 USC Sect. 523(a)(5), which again deals with with support debts. However, whether by design or inadvertence, Congress conspicuously excluded from that list 11 USC Sect. 523(a)(15), which again pertains to equitable distribution obligations.

Thus, unlike support, which cannot be discharged either in a Chapter 7 or a Chapter 13, the proceeds of an equitable distribution can be discharged to the extent that the ex-spouse still owes same once the Chapter 13 plan payments have been otherwise completed. A clever bankruptcy lawyer, knowing this, will to the extent possible, draft a plan which, perhaps by favoring secured and other priority unsecured debt in order and amount of payment, provides for less than all of the equitable debt to be discharged, which has the effect of excusing the debtor spouse from his or her remaining equitable obligations, even though ironically these were awarded to the creditor spouse by a court of law. The (alas little appreciated) lesson for the family lawyer representing the creditor spouse is to require all equitable debt to be paid up before the property settlement agreement is authorized, so as to avoid eventual loss of some or all of their equity in a potential Chapter 13 bankruptcy.

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

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.

Others blogging on M include:

  • Bill Balena,      CLevand Bankruptcy lawyer tells us that M      is for Mistakes .
  • Omaha and Lincoln,      Nebraska Bankruptcy Attorney, Ryan D. Caldwell says M is for Means Test.
  • Marin County      Bankruptcy Lawyer, Cate Eranthe blogs M is for Means Test, a popular topic.
  • New York Bankruptcy      Lawyer, Jay S. Fleischman agrees M is for Means Test too.
  • Colorado Springs bankruptcy      Attorney Bob Doig says M is for Meeting of Creditors.
  • Northern California      Bankruptcy Lawyer, Cathy Moran believes M is for Modify & also for Monthly Income.
  • Hawaii Bankruptcy      Lawyer, Stuart T. Ing says M is for Mortgage Arrears.

Picture credit: Bigbluemeanie

N is for Negative Impact of Bankruptcy on Credit and How to Overcome it.

N by procsilas in Bankruptcy is for the Negative Impact of Bankruptcy on Credit and How to Overcome it.

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

Most people are aware that filing bankruptcy can hurt their credit and it is well known that this can take its toll for up to ten years. But then why is it that the credit card apps start arriving again just a few weeks after a discharge in bankruptcy? Is it really true that a bankrupt is doomed to being deemed uncreditworthy for ten years? We will explore these questions below but first a bit of background.

The information contained within your credit report is generally governed by the Fair Credit Reporting Act. This federal law specifies how long a bankruptcy can appear on your credit report. This in turn varies based on type of bankruptcy as well as disposition of the case. Chapter 7 and 11 bankruptcies will appear on the report for up to 10 years from the filing date. Non-discharged or dismissed Chapter 13 and 12 bankruptcies also appear on a credit report for up to 10 years. Discharged Chapter 12 and 13 bankruptcies can remain on the report for up to seven years.

Does this mean that your credit will be impaired for 7 or 10 years? Does it mean you will not be able to purchase critical items on credit?    Certainly not, at least for the debtor who learns from past errors.

Note that the period starts running from the date of filing not discharge so, for example, if you filed a a Chapter 13 bankruptcy petition 4 years ago and completed a 3 year plan 6 months ago, you only have three years to go. And during this time, you will, with persistence, be able to get credit for the things you really need (see below.)

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.   If you are in a Chapter 13 your plan payments will be reported even while still in bankruptcy.

Don’t even think about hiring a “Credit repair” agency. The money you might pay them can actually be used directly to repair your credit in the one way the experts agree really works.  The crucial thing you can do to rebuild your credit quickly and at no added cost is to pay all your bills on time. No exceptions.  It is not uncommon 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, say with your tax refund to give yourself the “float” needed to make the payments in case you are short one month and then replenish it in flush months. Have the mental discipline to reserve it just for this purpose! If worse comes to worse, borrow against your IRA, 401K at work, life insurance policy  or pension.

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 mortgage.

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 obtain student loans, for yourself or for a child, the Bankruptcy Code (11 U.S.C. Section 525) specifically 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.

There are in addition certain “tricks of the trade” that a competent and compassionate bankruptcy attorney can impart to you once you have retained him or her which will speed up the process of restoring your credit even further.   Be sure to ask!

In conclusion, your payment history will be crucial after (and in a Chapter 13 even during) a bankruptcy discharge, because prospective lenders really will  be looking  to see that you have paid attention to the mandatory debtor counseling sessions and have well and truly learned the lesson of how to use credit responsibly. It often will be easier to rebuild credit after a bankruptcy discharge because you will no longer have debts that hopelessly exceed your credit limits.  In this way and in general (certainly, not in every individual case) over the long haul, the consumer bankruptcy laws prove their worth. This writ large then is why the “fresh start” offered to debtors by our system of bankruptcy is a necessity to a healthy capitalistic system.

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!


I also provide Mortgage Modification Services.

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

Other Bankruptcy Lawyers writing on the letter N include:

California Northern Bankruptcy Court  Marin County Bankrupttcy Lawyer, Cate Eranthe http://marin-bankruptcy-law.com/803/bankruptcy-a-to-z-n-is-for-california-northern-bankruptcy-court/ NACBA Wisconsin Bankruptcy Lawyer, Bret Nason http://nasonlawfirm.com/archives/813 Naked New York Bankruptcy Lawyer, Jay S. Fleischman http://www.consumerhelpcentral.com/bankruptcy-alphabet-naked/ Negative Notice Jacksonville Bankruptcy Attorney J. Dinkins G. Grange http://jacksonville-bankruptcy-grange.blogspot.com/2012/02/n-is-for-negative-notice-local-rule.html Never Cleveland Bankruptcy Attorney William Balena http://ohiobankruptcysource.com/?p=2418 No Asset Metro Richmond Consumer and Bankruptcy Attorney, Mitchell Goldstein http://www.morethanbankruptcy.com/bankruptcy-a-z-n-is-for-no-asset-case.html No Asset Report Honolulu Bankruptcy Lawyer, Stuart T. Ing http://www.bankruptcyhi.com/2012/01/n-is-for-no-asset-report/ Non-exempt Property Miami Bankruptcy Attorney, Dorota Trzeciecka http://dorotatrzeciecka.com/2012/02/05/bankruptcy-a-z-n-is-for-non-exempt-property/ Nondischargeable Metro Richmond Consumer and Bankruptcy Attorney, Mitchell Goldstein http://www.morethanbankruptcy.com/bankruptcy-a-z-n-is-for-nondischargeable.html Nondischargeable Northern California Bankruptcy Lawyer, Cathy Moran http://www.bankruptcysoapbox.com/bankruptcy-alphabet-n-for-nondischargeable/ Nondischargeable Debt Omaha and Lincoln, Nebraska Bankruptcy Attorney, Ryan D. Caldwell http://bankruptcyblog.caldwell-lawfirm.com/2011/11/16/bankruptcy-alphabet-n-is-for-nondischargeable-debt.aspx Notice Colorado Springs Bankruptcy Attorney Bob Doig http://springsbankruptcylaw.com/?p=1227 Notice San Francisco Bankruptcy Attorney, Jeff Curl http://www.jclawgroup.com/blog/bankruptcy-alphabet-n-is-for-notice/ Notice Taylor, Michigan Bankruptcy Attorney, Chris McAvoy http://downriverbankruptcy.com/n-for-notice-creditors/#axzz1mtGwtQjh Notice of Rights to Claim Exemptions Charlotte Bankruptcy Attorneys, Collum & Perry http://www.collumperry.com/firm-news/notice-of-rights-to-claim-exemptions Numbers and New Bankruptcy Laws Los Angeles Bankruptcy Attorney, Mark J. Markus http://www.bklaw.com/bankruptcy-blog/2012/03/numbers-and-new-bankruptcy-laws/ Non-Attorney Bankruptcy Livonia Michigan Bankruptcy Attorney, Peter Behrmann http://www.livoniamichiganbankruptcy.com/n-is-for-non-attorney-bankruptcy-livonia-michigan/

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