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There are certain situations where cars cannot be kept during a bankruptcy. However, in the overwhelming majority of Chapter 7 bankruptcy cases, individual debtors keep the car that they have either by continuing to make financial obligation payments or continue to lease the vehicle. In other cases, if the vehicle is paid in full, if it doesn’t have significant value, then the property is exempt and free and clear from the long arm of the trustee. In a Chapter 13 case, the debtor has the option of either keeping the vehicle and paying for it through the Chapter 13 or surrendering the vehicle and eliminating the debt or at least the secured portion of the debt.
Either chapter of bankruptcy, whether it be Chapter 7 or Chapter 13 provide for the ability to keep a vehicle if the debtor continues to pay for either directly or through the Chapter 13. Either chapter will also allow for the surrender of the vehicle if the debtor decides that it’s not in his or her best interest to be obligated for future car payments.
When you meet with your attorney, you want to go through the budget. The budget will determine whether or not you have the ability to reaffirm and auto debt under Chapter 7. If you feel you have the ability to repay, then your attorney will request that the creditors send a Reaffirmation Agreement. The Reaffirmation Agreement has to be signed by the debtor and the attorney and then sent to the creditor for counter signatures. Once the agreement is filed, the court has the ability to see whether or not there is a presumption of undue hardship which would prevent you from being able to make your payments on that vehicle. If the court has a question on it, the court can set a hearing whereby you as the debtor will have to appear before the court and explain to the court how you are going to be able to make those payments without any undue hardship. In the overwhelming majority of Chapter 7 and Chapter 13 bankruptcy cases, individual debtors keep their vehicles.
Many individuals are unaware that when a creditor forgives a debt that the individual owes, the forgiven debt is considered income for purposes of their tax returns. The IRS and the State of Michigan both tax the forgiven debt, often creating large liabilities on the part of the tax payer.
It is important to note that there are exceptions to this general rule. Individuals who receive a discharge of their debts under the Federal Bankruptcy Code are not subject to tax liability on the forgiven debt. Additionally, individuals who are considered insolvent are not liable for taxation. Finally, debt related to an individual’s mortgage on their primary residence is not taxable upon forgiveness.
These exceptions are located in Section 108(a)(1) of the Internal Revenue Code. In the event an individual finds themselves in receipt of a 1099(c) from a creditor they need to be sure and have their tax preparer file Form 982 along with their Federal Income Tax Return. If your preparer is unaware of the rules regarding these exceptions, it may be best for the individual to seek the help of a more qualified professional.
The Scooter Store, known for helping seniors regain mobility through products such as the power wheelchair and scooter, has filed for Chapter 11 bankruptcy protection due to Medicare and Medicaid fraud allegations. Earlier this year, the company headquarters was raided by federal officials. Just weeks after the raid, a large number of employees were told not to [...]
How Fast Can You File Bankruptcy?
As little as 20 minutes. It is called a barebones filing. You file just enough documents to get a case number and put the automatic stay into effect. Since an attorney can file a case electronically, you file the case and get a case any day, any time. However, you should only do a barebones filing if it is a true emergency, and you need to stop a creditor’s collection action immediately.
The advantage of a barebones filing is pretty clear. If it is Thursday afternoon and foreclosure is schedule for the next morning, then you don’t have a lot of time. If you are being garnished, you don’t have a lot of time. You need bankruptcy fast, and you can literally file bankruptcy in about 20 minutes with the help of a Seattle bankruptcy attorney.
There are also disadvantages to a barebones filing. First and foremost, bankruptcy is a serious step. You should not file bankruptcy if you do not intend to complete the bankruptcy process or if you do not intend to comply with the bankruptcy process.
Second, your options are limited by a barebones filing. Your attorney will not have time to properly evaluate your case and determine whether all of your property is covered by an exemption. You cannot voluntarily dismiss a chapter 7, and so most attorneys will strongly advise that you file a chapter 13. This is because a chapter 13 case can be voluntarily dismissed. Finally, you have to be able to pay your bankruptcy attorney their upfront fees and costs before they will file the case.
A fully developed bankruptcy filing requires about a week’s worth of preparation. It is possible to do a bankruptcy on the fly, but I only suggest a barebones filing if it is a true emergency. If you do a barebones filing, you have to be prepared to work with your bankruptcy attorney after the case is filed. The court will set a deadline for you to turn your barebones filing into a complete filing. If you miss that deadline the case can be automatically dismissed.
So the bottom line is that yes, you can file a bankruptcy very quickly. However, you must be prepared to work with your bankruptcy attorney to make sure that everything goes smoothly after the filing. In addition, you must be prepared to accept the risk of filing a bankruptcy before your attorney has had a chance to completely evaluate your financial situation.
While there are many and varied reasons that people file a bankruptcy case or settle a debt, certainly an improved credit score is a desired result. Unfortunately, post bankruptcy and post debt settlement credit reporting is often not accurate. A Creditor May Continue to Report a Debt The most common way in which credit reporting [...]The post File Bankruptcy or Settle a Debt? Check your Credit Report. appeared first on National Bankruptcy Forum.
Bringing you the most up-to-date news, tips and blogs throughout the web. Here’s your Bankruptcy Update for May 02, 2013 Electric Car Maker Files for Bankruptcy Protection A Tobin Tax, Bankruptcy Style Gay Couple’s Bankruptcy Filing Challenges DOMA
A Tamaroa, Illinois man was recently sentenced to three years’ probation for concealing assets when he filed bankruptcy in 2009. David E. Woodside, 37, pled guilty to the charge after he waived an indictment by a federal jury back in December 2012. The United States Attorney who worked on the case, Stephen R. Wigginton, says [...]
Keep Property Without Signing Reaffirmation Agreement
When you file a chapter 7 bankruptcy, you will have the option of reaffirming your secured debts. The most common reaffirmation is done on a car loan. Many of my clients have questions about reaffirmation agreements; and whether it is in their best interests to sign a reaffirmation agreement.
What Is A Reaffirmation Agreement?
A reaffirmation agreement takes the debt out of the bankruptcy. When you reaffirm a debt you are saying that even though the debt is discharged, you agree to treat the debt like it was never part of your bankruptcy. This can have some serious consequences for you, but it also has some pretty good benefits.
You can only reaffirm secured debts. This is because secured debts are treated differently in bankruptcy. When a debt is secured, there are actually two parts to the claim that goes into the bankruptcy: 1) your personal liability on the contract, and 2) the creditor’s security interest in the collateral. A security interest in collateral is the right to repossess or seize property in the event of default, i.e. repossession or foreclosure.
This means that if you want to keep property that is covered by a security interest, you have to keep paying the secured claim. The secured creditor is only allowed to get the value of their interest, which is equivalent to the balance due on the contract. So basically, when you have a secured debt in bankruptcy and you want to keep the property, you have to keep paying even though the actual “debt” was discharged in bankruptcy.
You don’t have to sign a reaffirmation agreement to keep secured property. For example, you can keep your car if you don’t sign a reaffirmation agreement. However, there are reasons you might want to sign a reaffirmation agreement.
If Your Reaffirm A Debt
If you reaffirm a debt and then default on that debt, the creditor can repossess the collateral, sell it at auction, and hold you liable for any deficiency. A deficiency is the difference between the amount you owe and the amount they get at auction. For example, if you owe $14,000 and the collateral sells at auction for $6,000, then you are personally liable for an $8,000 deficiency.
If you reaffirm a debt, then the creditor will usually start reporting your payment history to the credit bureaus. If you are able to stay current on the payments, then this will help you rebuild your credit. Of course, if you miss payments it will hurt your credit.
If you reaffirm a debt, the creditor may only repossess the collateral if you default on the loan.
If You Do Not Reaffirm A Debt
If you do not reaffirm a debt and the creditor repossesses the collateral, they cannot hold you liable for the deficiency. This is because the debt was discharged in bankruptcy and was never reaffirmed.
If you do not sign a reaffirmation agreement, making on time payments will not help your credit score. However, late payments will not hurt your credit score. This is because the lenders will not report payment history on accounts, unless there is a signed reaffirmation agreement.
There is some risk if you decide not to file a reaffirmation agreement on a personal property loan, most commonly a car. The Bankruptcy Code says that if the debtor does not sign a reaffirmation agreement on personal property, the secured creditor may repossess their collateral at any time, regardless of payment history.
So in theory, you could make all of your car payments on time and they could repossess your car right before it was paid off. In practice, I have never actually heard of this happening. If you do not sign a reaffirmation agreement and you remain current on your payments, it is unlikely that you will have to worry about your car being repossessed. Even though the law allows it, it is unlikely. This is because car lenders don’t want cars, they want car payments.
You do not have to sign a reaffirmation agreement on mortgages or home equity lines of credit. This is because Washington State foreclosure law prevents a lender from foreclosing on a loan that is not in default. Additionally, it is – in my opinion – a bad idea to reaffirm a mortgage because you are increasing the risk that you will be held personally liable for a very large debt. As long as you do not default on your mortgage, you can keep your house.
Conclusion
If you have a car loan, or other personal property loan, that needs to be reaffirmed, then you should carefully weigh the pros and cons of signing the reaffirmation agreement. You can keep your car if you do not sign a reaffirmation agreement. You can also decide to sign a reaffirmation agreement. There is risk both ways. I can help you evaluate that risk and help you decide whether a reaffirmation agreement is right for you.
Last week, I gave an update on the status of foreclosure mediation ordinances in St. Louis City and St. Louis County that are currently being challenged in the courts by lenders in Missouri. On the other side of the river in Illinois, the Illinois Supreme Court has adopted new rules allowing its courts to [...]
A borrower who is establishing credit or has less than perfect credit may have a cosigner help them obtain a loan. A cosigner agrees to pay outstanding debt when the borrower is unable to make payments. It is common to have a cosigner present when applying for a loan on a vehicle, student loan, or [...]
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