Posts Tagged ‘Chapter 13’
February 13, 2011
How To Strip Your Second Mortgage From Your Home In Bankruptcy – Lien Stripping
The benefit for filing a Chapter 13 is that you may be able to strip your second mortgage. This is called a “lien strip” or “lien avoidance”. This can make a difference between being able to save your home or having it go through foreclosure. Lien Stripping does not necessarily mean your second mortgage is eliminated, but it is converted from a secured debt to an unsecured debt – and, it only occurs in a Chapter 13 bankruptcy. Once your Chapter 13 bankruptcy plan is completed (3 to 5 years), your second mortgage is eliminated much like your credit card debts. By changing its status to unsecured debt, it is treated the same as if it were to be a credit card or medical debt. The unsecured debt (including your second mortgage) will be discharged after your bankruptcy plan is complete, whereas your secured debt must be continued to be paid on (i.e., your first mortgage).
Example for Lien Stripping:
A home in California was purchased for $250,000. The debtor obtained a first mortgage for $200,000 (1st mortgage) secured by a deed of trust, and a 2nd mortgage of $50,000, also secured by a deed of trust. The value of the property has declined because of the economy and it is now only worth $180,000. Because the value of the property is now less then what the 1st mortgage is, the 2nd mortgage has no value, which then becomes unsecured.
In a Chapter 13 Bankruptcy, the owner may now have the second mortgage lien stripped off from the property. This means, it could be treated in the bankruptcy plan as ordinary unsecured debt.
How Lien Stripping Occurs:
During a foreclosure process, the property owner may declare bankruptcy (either a Chapter 7 or Chapter 13). However, in order for a Lien Strip to work, the debtor must file for Chapter 13. Filing bankruptcy freezes a foreclosure (also called an automatic stay). The bankruptcy court than reviews your case. In most Chapter 13 bankruptcies where the second mortgage has no equity, the court may rule the second mortgage as unsecured debt, which is called “lien stripping”.
This is What May Occur:
• The property owner purchases a home by obtaining a first and second mortgage.
• Due to the economy, the property value falls below what the debtor owes on the first mortgage.
• If there is insufficient equity left in the property to cover the second mortgage, the court may strip the second mortgage lien off the property. This means that the debt becomes unsecured debt.
• Filing for bankruptcy may stop a foreclosure from happening.
The process of lien stripping may occur during the bankruptcy process. This not only helps the debtor keep the home, but also eliminates some of the debt owed on the property.
A lien strip is not a typical occurrence in a bankruptcy. It requires extensive research and drafting of court documents. It should be performed by an experienced bankruptcy attorney. Hiring an attorney for this type of case is very important. You may need all the legal advice for this situation to help and ensure the process moves forward efficiently and successfully.
Tags: Assets, Bankruptcy Attorney, bankruptcy lawyers, Chapter 13, Foreclosure, Lein Stripping, mortgage, secured debt
Posted in Chapter 7 Bankruptcy / Chapter 13 Bankruptcy, Los Angeles Bankruptcy Attorney and Bankruptcy Lawyer, Uncategorized | No Comments »
Hiring a Los Angeles Bankruptcy Attorney
Are you are considering filing for bankruptcy and are overwhelmed with financial stress caused by creditors , or, your bills are piling up and making you lose sleep over what your options are? California leads the nation in the amount of bankruptcies filed each year according to the AACER (Automated Access to Court Electronic Records.) Hiring a professional who has the tools to assist you in your rough times with highly trained individuals and compassion for what you are going through is an important step in the recovering process. Our team at the Law Offices of Alon Darvish can help you with making the right choices and steer you back into the path of financial stability. For some, the embarrassment of facing such challenges will result in the decision to go about doing it alone which is a mistake in the long run as such a big decision plays an important part in your future. The chances of making errors during the bankruptcy process can mean you not being awarded the discharge of your debts and can become another hassle in your life. Here are some examples of why hiring a qualified individual can make the process stress free and beneficial.
Knowledge of the Law
California attorneys are knowledgeable about the California Bankruptcy process and will know the laws that need to be applied for each case. New Laws under the Bankruptcy Abuse Prevention & Consumer Prevention Act make it more difficult for individuals to file for bankruptcy by themselves. Bankruptcy laws vary depending on the state they reside in, therefore having a qualified bankruptcy attorney helps the process along. One of the advantages of having an attorney is that they understand your situation and can advise you on what is going on so you are not left in the dark during your troubling times.
Paperwork
The process to file for bankruptcy in Los Angeles is time consuming, as the amount of paperwork that needs to be completed is significant. Making sure the bankruptcy petition has a the correct information is crucial to your bankruptcy as it is the foundation of what needs to be done.
The process can be cumbersome. You may have a mountain of paperwork, which you will need in order to file bankruptcy with the court. Gathering these documents can take time and preparing the petition with incorrect information can cost you more money. A Los Angeles bankruptcy attorney can assist you with gathering all the proper information needed and they will help you file them accordingly.
Representation
Once you have hired a bankruptcy attorney, they will represent you during your case. This includes letters sent out to creditors that you have and they will help eliminate the phone calls and collections of property as they are required to contact the attorney, not you. Your attorney will accompany you to your creditors meeting which is a vital part of the process to file Chapter 7 bankruptcy . This meeting will determine which property can be taken and sold to repay the debts. Usually, bankruptcy trustee’s do not take property from the debtor because they are entitled to keep certain assets. However, in order to determine whether your assets are safe (i.e., your home, car, cash in the bank, etc…), you should speak to a knowledgeable bankruptcy attorney. The trustee will be asking questions which can be intimidating and with an attorney present, they can help you answer them so you avoid costly mistakes in the long run.
Attorneys are legally bound by a code of ethics when representing you and will work diligently on your behalf to either negotiate your debts or advise you whether a bankruptcy is the right choice for your circumstances. Our firm will not make empty promises as to what we can do for you. Rather, we will carefully discuss your best options and purse the objective of getting your debts under control, either through bankruptcy or other debt handling means.
Tags: attorney, Bankruptcy, Bankruptcy Attorney, Bankruptcy Attorney In Los Angeles, bankruptcy attorneys, bankruptcy lawyers, bankruptcy petition, Chapter 13, Chapter 7, Creditors Meeting, discharge, file for bankruptcy, Lein Stripping, los angeles bankruptcy attorney, los angeles bankruptcy lawyer, petition
Posted in California Attorney, Chapter 7 Bankruptcy, Chapter 7 Bankruptcy / Chapter 13 Bankruptcy, Code of Ethics, Law, Los Angeles Bankruptcy Attorney and Bankruptcy Lawyer | No Comments »
Bankruptcy Means Test – Do You Pass?
Here is a good flowchart for the Bankruptcy Means Test. See whether you pass:
Tags: Bankruptcy, Bankruptcy Attorney In Los Angeles, bankruptcy attorneys, bankruptcy laws, Chapter 13, Chapter 7, Creditor, Debt, Debtor, discharge, file for bankruptcy, Income, Los Angeles Bankruptcy Attorneys, Means Test, Presumption, secured debt, unsecured debt
Posted in Chapter 7 Bankruptcy, Chapter 7 Bankruptcy / Chapter 13 Bankruptcy, Law, Los Angeles Bankruptcy Attorney and Bankruptcy Lawyer, Means Test | No Comments »
December 6, 2010
Tips to help you prepare for Bankruptcy
Everyone is overwhelmed with debts and responsibilities, especially in the fast hustle and bustle of Los Angeles. Make it easy with knowing what to expect with your bankruptcy filing. First, make sure you have a well qualified attorney like the Law Offices of Alon Darvish who can better guide you thru this crazy process and help you to fresh start. Here are ways to help you with your bankruptcy filing process:
- Have your taxes filed and in proper order with the IRS. If you do not have prior tax papers you can easily receive them by contacting the IRS at (800)829-1040.
- Organize all your credit card information and bills including any collection notices and if you have any pending lawsuits regarding that debt.
- Have your monthly pay stubs in order for the last six months from your employers.
- Stop using any payday loans, any personal lines of credit or any unnecessary credit card usage.
- If you have a credit card from your bank and are in debt from it, close your checking account with good standings and open another one with a different bank.
- Organize all your monthly expenses including your utilities, mortgages or rent, and car payments.
- If you are involved in any lawsuits, ask for advice from your attorney on what you need to do next.
- Continue to pay for the items that you wish to keep such as your mortgage payments or your car payments.
- Attend Credit Counseling with an agency such as www.PioneerCredit.com.
- Keep track of your credit score throughout the whole process and verify that all your credit information is correct and belongs to you.
Having everything in order by creating a folder will keep you better informed and help with the bankruptcy filing process through your difficult times. Having everything ready for your attorney will only speed things up and get you closer to the finishing line.
Tags: bank, Bankruptcy, Bankruptcy Attorney, Bankruptcy Attorney In Los Angeles, bankruptcy lawyers, car payments, Chapter 13, Chapter 7, Credit, Credit Card, Debtor, Debts, file for bankruptcy, help, petition, secured debt, Taxes
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December 4, 2010
Changes on Bankruptcy Laws – Filing Chapter 7 Bankruptcy or Chapter 13 Bankruptcy
The new changes to the bankruptcy law was enacted in 2005 by Congress and the Senate. The reason they have changed the law is to allow people who can make some payments to creditors not be able to file a Chapter 7 bankruptcy which would eliminate all the debt. It means that those who receive a higher income have to file a Chapter 13 bankruptcy . All debtors now also have some new guidelines to follow regarding the bankruptcy process which is another reason why hiring a Bankruptcy Attorney in Los Angeles is still the best way to go. Changes include a Means Test to verify which chapter they should file, as well as counseling has to be taken before and after filing on budgeting and debt management before the California Bankruptcy Courts will allow their Bankruptcy to be complete.
Means Test
The means test was invented to figure out whether you have enough disposable income allowing to either have to file a Chapter 7 (a complete liquidation) or Chapter 13 (repayment plan) Bankruptcy. It subtracts certain allowed expenses and required debt payments, to see if you can make payments on a Chapter 13 plan. To find out whether you pass the means test, you subtract certain allowed expenses and debt payments from your current monthly income. If the income that’s left over after these calculations is below a certain amount, you can file for Chapter 7 . This test is specific to the State that you live in using the Median Household Income. In California the median is $47,234 for a single person household and increases with the number of dependents and income of the household.
Counseling
Before you can file for bankruptcy under either Chapter 7 or Chapter 13 bankruptcy , you must complete credit counseling with an agency approved by the United States Trustee’s office. This is easily done online and helps the debtor learn about what is going on in the process to help avoid future pitfalls. Local attorneys can assist one with the proper tools to go about the counseling. This step is required to determine as well which type of bankruptcy you have to file. At the end of filing the bankruptcy you are required to take a personal financial management course before the California Bankruptcy Court can discharge your debts.
In order to thoroughly work out your eligibility, meeting with a bankruptcy lawyer from the Law Office of Alon Darvish is essential to beginning financial freedom and have the dedicated viewpoint you will need when confronting your financial circumstances. Our office cares about you and ultimately wants to have your debt situation handled and see you moving forward in life with a better financial outlook.
Tags: Bankruptcy, Bankruptcy Attorney, Bankruptcy Attorney In Los Angeles, bankruptcy attorneys, bankruptcy laws, Chapter 13, Chapter 7, consumer
Posted in Chapter 7 Bankruptcy / Chapter 13 Bankruptcy, Los Angeles Bankruptcy Attorney and Bankruptcy Lawyer, Means Test, Uncategorized | No Comments »
October 24, 2010
When Chapter 7 Bankruptcy Is Not The Right Choice
When A Chapter 7 Bankruptcy Is Not The Right Choice
Chapter 7 bankruptcy is a liquidation proceeding where your unsecured debts are discharged and all but your exempt assets are sold. Bankruptcy helps millions get out from under the grip of creditors but chapter 7 can’t help everyone. With the exception of unsecured debt, chapter 7 will usually not be helpful where there is an excess of income, equity, or secured debts you are thinking of keeping. In addition to these categories, bankruptcy won’t have an effect on certain debts due to concerns of bankruptcy abuse such as certain fines, student loans, and certain judgments. Finally, look at your secured debt versus unsecured and balance the positives and negatives.
It is not ideal to file bankruptcy if you have lots of assets or equity. In the typical Chapter 7 bankruptcy , the majority of the debt will be from credit cards and the debtor will have few assets. With few assets, the general exemption will not be exceeded and there will be no non-exempt assets for the trustee to sell. In bankruptcy, equity is treated like any other asset and if there are assets that are not considered exempt, the bankruptcy trustee has the right to sell them and pay the creditors. Therefore,if you had more nonexempt assets than unsecured debt you would probably be better off not filing. Or, if you have assets that you are determined to keep which exceeds the exemption amount, you are essentially allowing the bankruptcy trustee to sell your assets. You could end up giving the trustee your family heirlooms, cars, houses, stocks and bonds. This also extends to chapter 13 bankruptcies because to have a valid chapter 13 plan the amount paid to unsecured creditors must equal the amount that the same bankruptcy in chapter 7 would yield.
If you have substantial excess income, you may not be eligible for chapter 7. The Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) changed bankruptcy law to prevent abuse. This added requirements like the means test which won’t allow you to file for chapter 7 if your median income is above the median income for your area for the particular family size. With too much excess income you will not be able to qualify for a chapter 7 and the bankruptcy trustee may decide to convert your bankruptcy into a Chapter 13 .
Chapter 7 is not recommended where the majority of your debts are unsecured but are in special categories of bankruptcy law. Bankruptcy is designed to help those who are unfortunate rather than ill willed. If you have debts cause by drunk driving, larceny, embezzlement, or similar crimes, these can’t be discharged. Student loans and support payment are also not dischargeable as it would encourage abuse of bankruptcy.
Finally if your debts are primarily secured debts, chapter 7 might not be the right option. Since Chapter 7 bankruptcy only discharges unsecured debts the secured debts will survive the bankruptcy. If you also have a substantial amount of unsecured debt and relieving that debt would allow you to pay your secured debt, then chapter 7 may be the right solution. It may also improve your ability to get a loan modification because you will have more funds available when your unsecured debts are discharged. These are only broad areas that you may consider and only a Los Angeles Bankruptcy Lawyer can analyze your situation and help you plan the right course of action.
Tags: Assets, Bankruptcy, Bankruptcy Attorney, Bankruptcy Attorney In Los Angeles, bankruptcy petition, Chapter 13, Chapter 7, Equity, file for bankruptcy, Income
Posted in Chapter 7 Bankruptcy, Credit, Los Angeles Bankruptcy Attorney and Bankruptcy Lawyer, Means Test, Uncategorized | No Comments »
July 9, 2010
Chapter 7 Bankruptcy – Case Example
Susan runs a dance studio in Los Angeles but due to the recent economic decline she has had far fewer clients. Susan could no longer afford to pay for her expenses and her credit card bills are piling up. While most of the debt was in the name of her dance studio, which is a corporation, they were personally secured by her. Therefore, if she had the corporation file for bankruptcy she would still be responsible for the debt. Susan has reached her breaking point as there is only 1 week until her house is put up for sale by her lender. Susan found a Bankruptcy attorney in Los Angeles near her studio.
Generally, filing for bankruptcy stops all of your creditors from collecting even before the bankruptcy is granted. Once a bankruptcy petition is filed, any garnishment of wages, levies on bank accounts and lawsuits stop. Even if a bankruptcy is filed 1 minute before the sale of your home and it is sold anyway, the transaction can be reversed and you will continue to own your home. However the best course of action is to avoid this hassle and contact a bankruptcy attorney before this happens.
Creditors take notice once there is a stay and may be more willing to negotiate. This may be helpful on secured debts such as a mortgage but not as much with unsecured debts like credit cards. Negotiating with credit card bills may be a trap for the unprepared, as the reduction in the amount you owe turns into income you must pay taxes on. In addition, you may find that not all of your creditors will be willing to negotiate and you will in the end still file for bankruptcy but only after paying more money to creditors than you would have otherwise.
A chapter 7 bankruptcy allows all of your unsecured debts like credit cards to be discharged. A chapter 13 allows you to keep more of your property (i.e., home in foreclosure, automobile, etc…) and puts the debts on a 3-5 year payment plan based on the amount of excess income after paying expenses, but the amount of unsecured debt cannot exceed 300,000.
Susan’s attorney felt that a chapter 7 bankruptcy was the right choice because although the mortgage on her home in Los Angeles was upside down her unsecured debt was too high for a chapter 13 and her current income did not exceed her expenses. Susan’s attorney helped her through the process of a chapter 7 bankruptcy.
Susan now had a fresh start and was able to keep living in her home and running her dance studio. While many believe bankruptcy eliminates any future ability to get credit Susan was able to get new credit cards shortly after receiving her discharge
Bankruptcy Attorney in Los Angeles | Bankruptcy Attorneys in Los Angeles
Bankruptcy Lawyer in Los Angeles | Bankruptcy Lawyers in Los Angeles
Tags: Bankruptcy, Bankruptcy Attorney, Bankruptcy Attorney In Los Angeles, bankruptcy attorneys, Chapter 13, Chapter 7, Credit Card, Debt, los angeles bankruptcy attorney
Posted in Chapter 7 Bankruptcy / Chapter 13 Bankruptcy, Los Angeles Bankruptcy Attorney and Bankruptcy Lawyer, Uncategorized | No Comments »
July 4, 2010
Chapter 7 Bankruptcy versus Chapter 13 Bankruptcy – Client Example
Rita Geraldo is a single mother with 3 children who lives in a small home in Los Angeles. Rita works as a dental assistant in Beverly Hills but could just make her payments and was nearly drowning in debt. However after a change in the interest rates on her adjustable rate mortgage these payments have doubled and reluctantly she cannot afford to pay her credit card bills. Missed payments have caused the interest rates on her credit cards to skyrocket in only a few months and this is on top of the penalty fees for failing to pay. As her debt grew even larger her credit card companies turned over Rita’s accounts to various debt collection agencies. Before only the fear of debt was keeping her up at night but now the collection agencies are making her phone ring off the hook with threats of lawsuits, garnishments of wages, and levying of bank accounts. Rita knew it was now time to take charge of her debt problems.
Rita had heard of bankruptcy before but was embarrassed and was not sure where to start. Rita found an attorney in Los Angeles near the office where she worked and he walked her through the process of filing for bankruptcy. Most individuals will either file for a Chapter 7 or Chapter 13 bankruptcy. Filing for a chapter 7 would allow her to eliminate all of her unsecured debt such as credit card bills and doctors bills. While filing a chapter 13 puts all of your debt both secured and unsecured on a 3 to 5 year payment plan based on your excess income. In certain circumstances, a Chapter 13 bankruptcy can be used to get rid of a second mortgage entirely. A chapter 7 will only allow you to keep exempt assets which for most will be every asset you own. A Chapter 13 bankruptcywill allow you to keep both exempt and nonexempt property but takes more time and is more complex.
Rita really wanted to keep her home and even if her credit card bills were eliminated she could not afford her 2 mortgages so she decided to file for a Chapter 13 bankruptcy. Filing a Chapter 13 bankruptcycreates the opportunity for a lein strip. A lein strip allows a second mortgage which is generally classified as secured debt to be reclassified as unsecured debt like her credit card bills.
She then told the attorney of all her debts, creditors and collection agencies. After starting the process with the attorney Rita had to take a short Debt Management course online. At the attorney’s Los Angeles office, they took care of the mountains of paperwork involved in the process.
The process still had a few steps left as Rita had to take part in a meeting with the bankruptcy trustee. At the meeting she had to answer questions from the trustee which she answered honestly. The meeting with the trustee includes you, your bankruptcy attorney and your creditors. Most of the time the creditors don’t show up. After it was determined that she was not hiding any assets a payment plan was established using the excess income she had after paying her expenses. This calculation excludes any payments to unsecured debt as expenses (i.e., credit card debt). The payment plan goes to a confirmation where a judge decides if the payment plan is satisfactory. Now as a part of the payment plan she only needs to pay her excess funds over the next 5 years while the rest of her debt is eliminated.
Rita is now living comfortably and can afford to pay her mortgage and all her other bills without living in fear of harassment from debt collection agencies.
To learn more about bankruptcy, feel free to contact Mr. Darvish at (619)324-9529. He is truly an attorney that cares and places great effort in making sure his clients understand the process thoroughly.
Los Angeles Bankruptcy Attorney | Los Angeles Bankruptcy Attorneys
Los Angeles Bankruptcy Lawyer | Los Angeles Bankruptcy Lawyers
Tags: attorney, Bankruptcy, Bankruptcy Attorney, bankruptcy attorneys, Chapter 13, Chapter 7, collection agencies, Credit Card, Creditors, Debt, los angeles bankruptcy lawyer, mortgage, secured debt, unsecured debt
Posted in Chapter 7 Bankruptcy / Chapter 13 Bankruptcy, Creditors, Los Angeles Bankruptcy Attorney and Bankruptcy Lawyer, Secured and Unsecured Debt | No Comments »
March 26, 2010
Discharge Tax Debt In Bankruptcy
Discharge Tax Debt In Bankruptcy
Many have questions as to whether you are able to discharge tax debt in a Chapter 7 or Chapter 13 bankruptcy. The short answer is YES and NO.
Tax debt to the Internal Revenue Service (IRS) and the Franchise Tax Board can be eliminated as long as you meet the relevant factors. The main factor is the age of the tax debt. If you have a tax debt that is a couple years old, you will not be able to discharge the debt. There are three factors one has to meet in order to successfully discharge a tax debt:
1. the debt has to be more than 3 years since the returns were last DUE (including extensions) to be filed
2. the returns were timely filed or it has been at least 2 years since the returns were filed, and
3. there was no fraud involved or attempts to evade the tax, AND
4. the taxes were not assessed within the last 240 days.
If you meet this criteria, the chances of you discharging your debt are extremely great. However, even if you cannot discharge tax debt in a Chapter 7 bankruptcy, you may be able to create a more favorable repayment plan for the taxes in a chapter 13.
Bankruptcy tax debt is extremely tricky and you must correctly determine whether it can be discharged in bankruptcy. To do so you must find an extremely experienced Bankruptcy Attorney with knowledge to analyze your situation. Remember, bankruptcy is an alternative to dealing with your tax debt. This is particularly true if it has been more than 3 years since the tax returns for the years you owe were last due to be filed.
Tags: Bankruptcy, Bankruptcy Attorney, Chapter 13, Chapter 7, discharge, IRS, Tax Debt
Posted in Los Angeles Bankruptcy Attorney and Bankruptcy Lawyer, Tax Debt | No Comments »
March 10, 2010
Debt Settlement – Not Truly An Alternative to Bankruptcy
Many consumers debate on whether they should file for bankruptcy. They seek out other alternatives such as debt settlement. A debt settlement is when a creditor is willing to take less than what the actual amount is owed. For example, you may owe Bank of America $10,000 on a credit card. However, they may be willing to take $3,000 in order to settle this debt.
Before going through this type of deal, always remember that the creditors are not on your side. I cannot stress this point enough. Creditors know that you have options – one option is to file for bankruptcy. This will leave the banks with nothing because the debt will be considered discharged. Therefore, they are willing to settle the debt for a lesser amount.
However, what banks do not tell you are the consequences of doing so. First, banks will not tell you that they will 1099 you at the end of the year for the amount that they have forgiven (the $7,000). This amount will be considered income on your tax returns and you will have to pay taxes on this amount.
The other issue with debt settlement is that one creditor may go forward and settle the debt for a lesser amount. However, you may have 5 other credit cards that are unwilling to negotiate a settlement. Therefore, you have already wasted $3,000 on settling one debt, and now you are back at square one.
Always consider your options before moving forward. However, also consider the consequences of your actions. Majority of Mr. Darvish’s clients are those that have attempted debt settlement or debt consolidation. Debtors like yourselves saw that it was hopeless to work with the creditors and were forced to file for bankruptcy. Although stressful during the process, his clients felt a large burden being lifted off their shoulders.
Mr. Darvish is a Los Angeles Bankruptcy Lawyer and has provided many consumers with Chapter 7 and Chapter 13 Bankruptcy assistances. Contact his office to learn more.
Tags: Bankruptcy, Chapter 13, Chapter 7, debt settlement, los angeles bankruptcy lawyer
Posted in Los Angeles Bankruptcy Attorney and Bankruptcy Lawyer | No Comments »