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An auction Thursday of 16 medallions at an East Elmhurst, Queens, hotel came to an early end, with just three sales and a top price of $138,000.
https://www.crainsnewyork.com/transportation/taxi-medallion-auction-price-hits-new-low
“What was that? Law and Order?” Today I was at the bankruptcy court asking the Judge to approve two credit card reaffirmations. One for a little more than $500; one for a little less. Both because my clients had a good relationship going back years with their credit union. So they wanted to keep them. […]
The post Reaffirmation: It’s like an episode of Law and Order. by Robert Weed appeared first on Robert Weed - AE.
In bankruptcy, a debtor must relinquish assets to satisfy debts. But there are exceptions to this general rule. Certain assets may be exempted from a debtor’s bankruptcy under federal and state law. Other assets, which are subject to a contractual loan agreement and the security interest of a lender, may be “reaffirmed” by a debtor pursuant to a reaffirmation agreement. The debtor may keep the asset, such as a house or a car, as long as the debtor enters into a new agreement with the lender that reaffirms the debt according to defined contractual terms, which may or may not track the original loan terms. Read More ›
Tags: 6th Circuit Court of Appeals, Billing/Payment, Chapter 7, Collections
Another Taxi Medallion Workout Success Story
Crains New York reported on July 11, 2019 that an auction of 16 medallions at an East Elmhurst, Queens, hotel came to an early end, with just three sales and a top price of $138,000.
Regrettably, this article demonstrates that taxi medallions continue to drop in price.
As many readers of this blog know, Jim Shenwick has developed a niche practice representing “underwater’ taxi medallion owners.
The strategies used by Jim Shenwick in taxi medallion workouts are as follows:
First, he does asset protection planning under New York State law to make sure that if the negotiations are not successful, or the taxi medallion owner needs to file bankruptcy, as few assets or property of the medallion owner would be available to creditors or the bankruptcy trustee.
Second, he commences aggressive negotiations with the bank (that holds the medallion loan), seeking that they “take back” the underwater medallion. This is known as a “walkaway”, or a “surrender”, of the medallion and it is a form of “out of court” workout. There are tax implications regarding the take back of a medallion by a bank under Section 108 of the Internal Revenue code, and those issues have been discussed in prior blog posts by Jim Shenwick.
Third, if the out-of-court negotiations do not work, in appropriate cases Jim advises the medallion owner to file for Chapter 7 bankruptcy (also discussed in prior blog posts).
Fourth, if neither of the options described above work, Jim then seeks a modification of the medallion loan with the bank.
Recently, Jim Shenwick concluded a successful negotiation regarding a medallion loan modification and the facts and strategy are discussed below.
The facts: An individual owned one taxi medallion subject to a loan on the medallion in the amount of $650,000. The individual also owned a house in Nassau County with a fair market value of approximately $600,000 and the house was not subject to a mortgage. The medallion was being leased out by a management company and the cash flow from the lease was not covering the monthly loan payment to the bank (a common problem). For several months, the client had been using money from their savings and checking account (out of pocket) to make up the difference. However, based on the property that the client owned and their age, they would be unable to make those payments indefinitely and they were nervous and stressed about their situation.
The Strategy: Jim Shenwick was retained to begin negotiations with the bank. Based on the value of the house and the amount of equity in the house, the bank indicated that they would not accept a surrender of the medallion. He then agreed to a modification of the medallion loan so that after the modification, the cash flow generated from the leasing of the medallion would equal the monthly medallion loan payments- the loan would be cash flow neutral.
While the result was not as ideal as a surrender of the medallion, under the circumstances at that time, it was the best solution for the client. The modification eliminated the need for litigation and a bankruptcy filing by the client. In the case of bankruptcy, based on the equity in the house, the client would have lost their house.
In a loan modification there are four variables: 1) The amount of the loan 2) The interest rate on the loan 3) The term of the loan 4) The amortization schedule for the loan. Once these four variables are determined, a loan amortization table can be used to determine the monthly loan payments.
Let's now discuss those factors and how they applied to the medallion loan modification. First, Jim asked the bank to write the loan down to the value of the medallion and the they refused (the amount of the loan for purposes of the loan modification was $650,000). Second, the bank agreed to an interest rate of 3.75% for the modification. Third, the bank agreed to a two-year term for the loan. The client requested a three to five-year loan repayment term, but the bank refused. Fourth, the bank advised that the loan be interest only to lower the monthly payments- which the client agreed to.
Based on the above factors, the parties agreed to modify the loan. After the modification, the cash flow generated from leasing out the medallion equaled the monthly loan payments and the medallion owner/ borrower no longer had to “go into their pocket” to cover the monthly payments.
While the solution was not perfect, under the facts and circumstances of this case it was the best result for the client. Effectively, we have “kicked the can” down the road for two years with the hope that medallions will increase in value during that period of time. If medallions do not increase in value, the client can either do another loan modification, seek a surrender of the loan, or file for bankruptcy.
Anyone who is interested in discussing an underwater taxi medallion loan modification or similar strategy is advised to contact Jim Shenwick
I just finished a survey of people who filed bankruptcy with me three years ago. Here’s one big thing I found out: credit scores three years after bankruptcy are almost the national average. Right about half of the people who filed bankruptcy with me three years ago have a score above 670. A 670 score […]
The post Credit scores after bankruptcy are close to national average, in just three years by Robert Weed appeared first on Robert Weed - AE.
Nearly one million Americans file for bankruptcy each year because of medical debt. A sudden illness or accident could put you underwater overnight. And while bankruptcy is not the only option, it remains one of the most powerful tools that debtors have to find financial relief. In this article, we discuss how to get rid of medical debt through bankruptcy, and how a Dallas bankruptcy attorney can help.
Figure Out What Kind of Debt You Have
Under bankruptcy laws, medical debt is treated as an unsecured, nonpriority debt. The good news is that in Chapter 7 bankruptcy, these types of debts can be discharged completely, providing you with much-needed relief.
If you used a credit card to pay for your medical bills, don’t worry. Since credit card debt is also unsecured, nonpriority debt, you can use Chapter 7 to wipe out the debt fairly easily.
Make Sure You Are Eligible for Either Chapter 7 and Chapter 13
A Dallas bankruptcy lawyer can help you determine whether you are eligible for bankruptcy, and whether Chapter 7 or Chapter 13 makes the most sense for your needs. For example, if you don’t pass the means test and therefore don’t qualify for Chapter 7, you may be able to file Chapter 13, which allows you to pay back a portion of your debt. But the eligibility requirements for Chapter 13 are a little different, and the process is a little more complicated. So it’s best to speak to an experienced attorney about your options.
Know Your Options
When it comes to medical debt, there are a few options for people who are struggling to make payments on their home and car loans and monthly expenses. Options may include:
- Negotiating a deal directly with the hospital to repay a portion of the debt or repay the debt interest-free.
- Finding a debt consolidator who is willing to purchase your debt for a lower APR and then repaying all the debt in one lump sum.
- Assessing public options to pay your medical expenses.
- Filing for Chapter 7 or Chapter 13 bankruptcy.
Check Your Insurance Benefits
Verify that the service you paid for is not covered by your health insurance. If the doctor’s office made a billing mistake and the insurance company should have paid the bill, be sure to be proactive in trying to clear up the error. This can save you thousands.
Negotiate With the Hospital
In some cases, you can haggle with the hospital to reduce the amount owed. In other cases, you may be able to negotiate to repay the principal interest-free. If you call the hospital and tell them that you either refuse to pay their exorbitant rates or simply can’t, the hospital may be more receptive to reducing your outstanding balance.
Negotiate a Repayment Plan
Hospitals are generally more than willing to negotiate a repayment plan. But many find themselves out of work directly after a major medical event. If you have savings you can draw on, you may be able to repay the debt incrementally.
Apply for Medicaid
If you’re out of work, you may qualify for Medicaid. If you do, Medicaid can kick in retroactively and pick up the tab on outstanding medical expenses. You will only have a specific window in which to apply.
If you’re paying off medical debt for your child, they may qualify even if you don’t.
Put the Bill on a Credit Card
While this is not a very good solution as most credit cards will have higher interest rates than other options, it can be a way to get creditors off your back, at least temporarily.
Consider Debt Consolidation
Unless you have sterling credit, most debt consolidators will balk at purchasing your debt. It’s a bit of a catch-22. Those who really need a debt consolidator won’t qualify for one. Those who don’t, will. If you have otherwise good credit, it’s worth a shot to see if a debt consolidator is willing to purchase all of your debt and allow you to repay at a lower interest rate. It never hurts to ask, right?
File for Bankruptcy
You can file for either Chapter 7 or Chapter 13 bankruptcy. In Chapter 7, your debt will be wiped clean immediately, but you will have to deal with your credit taking a temporary dive. If your credit is already in shambles, that’s not much of a loss. If it’s not, you can still rebuild your credit after bankruptcy.
During the rebuilding phase, you can take out secured loans or secured credit cards. Over time, this will improve your credit. For those with already bad credit, your credit is likely to be better than it was before the bankruptcy. For those with sterling credit, you may want to exhaust all other options before filing for bankruptcy.
How to Get Rid of Medical Debt That Has Gone Into Collections
If your medical debt is in collections, so long as the statute of limitations hasn’t run out on it, the collections agency can sue to get a judgment against you. Once they’ve done that, they can garnish your wages, levy your bank account, or place a lien on your real estate. In Texas, the statute of limitations is four years.
Once that statute of limitations has elapsed, the debt is no longer collectible. It will be sold to a collections agency for pennies on the dollar, but all that collections agency can do is harass you. They no longer have any legal means to forcibly extract the debt from your savings or property.
A Dallas Bankruptcy Attorney Can Help
If you’re struggling under a mountain of medical debt and you can’t afford to repay it while still putting food on your table and paying other necessary expenses, bankruptcy can help. Talk to Allmand Law Firm, PLLC today to learn more about how to get rid of medical debt and find the financial relief you need.
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