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Lots of people seeking help from a bankruptcy lawyer to file a Chapte 7 (eliminate unsecured creditors) or a chapter 13, have one or more payday loans. Payday loans are difficult to deal with for both the client and the bankruptcy lawyer. The companies that offer these loans seem to know every trick in the book to continue receiving payments, as well as avoiding having their addresses known so they cannot be notified of a bankruptcy filing. The only way to prevent such a lender from collecting on their loan is to close the bank account upon which the lender collects its funds. Merely having a zeo balance does not seem to work, inasmuch as many people have accounts that have overdraft protection or at the least, will incur a charge for every returned check. Closing their bank accounts presents a few challenges to many clients for reasons such as automatic withdrawals for monthly payments and/or direct deposits of checks. If you are going to stop these folks from collecting, you must promptly close your account and open a new account at a different bank.
Have you ever wondered why doctors and lawyers ‘practice' their profession? I have. Today you have to be lucky to find a doctor that focuses on ‘healing' and an attorney that focuses on ‘selfless problem solving'. It has been my experience that the word ‘practice' gives professionals the freedom to make choices that may not best serve our needs. It's important to sift through the rhetoric and do your homework.
I 'm Sidney Diamond wife and I can often be his worst critic. He leaves his clothes everywhere, almost never closes a cabinet door and is constantly misplacing his keys. He's also brilliant and has more integrity than anyone I know.
Case in Point: I sat in on a free initial consultation with a potential client this week. The gentleman was devastated about his state of affairs and at his wits end. He started his business over 10 years ago, incorporated his business and now due to the economy his industry came to a screeching halt. I was impressed by how prepared he was for this meeting. He wanted to know if he should consider filing a business Chapter 7 or a Small Business Chapter 13. He had corporation papers, his lease, credit card statements, tax information; he knew the answers to all the questions asked and had all the documents that Sidney asked for. He had several years left on his lease (which he did not personally guarantee), credit card debt and bank loans (which he did not guarantee). Basically his business was in debt for almost $100,000 and the business had no assets to protect.
Sidney recommended closing the business and walking away. Bankruptcy was not recommended in his situation. It was amazing to see the relief on his face. His reality is still scary, he worries how he'll continue to feed his family, pay his mortgage and find employment. Lucky for him he found sound legal advice.
There are always people ready to take advantage of other people in desperate situations and the current home foreclosure situation is no different. A whole cottage industry has sprung up made up of predators prepared to charge large fees for helping someone avoid foreclosure through a loan modification.
The vast majority of these people simply take a person's money and perform no service whatsoever. I am sure that there must be a few people who actually attempt to do what they have been hired to accomplish and I am sure that on occasion a loan actually gets modified.
The truth is there is no reason to pay anyone for this type of help. There are non-profit companies all across the country that has qualified people ready to lend a hand for no charge of any kind. In short, there are no fees or other charges for obtaining their help.
The U.S. Department of Housing and Urban Development ("HUD") offers a variety of services and assistance in avoiding foreclosure through a variety of resources, both new and old. Trying to understand these programs by going directly to HUD is difficult and confusing. This agency actually understands the problem and has come up with a solution that really works. On one of their web pages the following statement is made by HUD:
"Foreclosure prevention counseling services are provided free of charge by nonprofit housing counseling agencies working in partnership with the Federal Government. These agencies are funded, in part, by HUD and NeighborWorks® America. There is no need to pay a private company for these services...."
Finding a reliable free agency is now easy; just go to http://www.hud.gov/offices/hsg/sfh/hcc/fc/. Find the pull down menu on the page which allows you to pick your state. That selection then takes you to a web page that allows you to narrow your search by city; with several other choices such as your preferred language.
I am located in El Paso, Texas. I went through the search instructions and came up with four (4) agencies. Much to my delight I was familiar with all four. I have referred clients to each. I can vouch for each agency having highly trained, qualified and very courteous people to address a full range of problems. While they do not always succeed, one can rest assured that they have made a maximum effort to help.
There has been a great deal of publicity about money being infused into banks and financial institutions by the government. A significant portion of that infusion is supposed to be used to modify existing mortgages that are in default or are on the verge of foreclosure. In addition, there has been a great deal made by various government or semi-government agencies about their assistance in loan modifications and/or accelerating the process.
There has been a great deal of hype regarding loan modifications; to enable people to keep their homes, as well as, getting the banking system stable and profitable so that new loans can be made. After a number of months the banks and other financial institutions have announced a return to profitability.Yet according to the media, based upon various statistical data, foreclosures continue to increase. Perhaps what is most important is what is not being said, discussed, published or announced either by the government or the financial institutions. How many loan modifications have been made and/or are in process? What terms and conditions, if any, are being offered to people who are behind in their mortgage payments? It would seem to me that these financial institutions would be making one press release after another (creating goodwill and improved public relations) about how they are helping people out of difficult if not impossible situations. The silence in this area has become deafening.
I am a small bankruptcy lawyer whose practice is practice is primarily in El Paso, Texas and the surrounding area. My only real knowledge is based on: what is happening to my clients who are trying, or have tried to modify their mortgages; what I have observed in the bankruptcy court with other cases; what the discussions have been over coffee and the water cooler with other local bankruptcy lawyers. Sad to say, based upon all of the foregoing there have been very, very few loan modifications actually being accomplished.
The best advice I can give a person seeking a loan modification, in a general sense, since each person's situation is unique, is to avoid the new companies that have sprung up offering to assist with a loan modification for a fee. Go directly to the lender. Insist on their terms be reduced to writing. Give yourself plenty of time to seek an alternative if the proposed modification does not work, and finally the alternative of seeking relief under Chapter 13.
This is not to be taken as legal advice and is given only as information. Only a consultation with your attorney with facts specific to your circumstances can be relied upon as legal advice.
There are a number of things a person should not do when considering bankruptcy or when bankruptcy is a solution but one you wish to avoid. The bill collectors are hounding you with a barrage of telephone calls, in many cases they are breaking the law by calling your relatives, your employer, calling you very early in the morning, after 9pm or when you are at work and/or threatening to do all kinds of awful things if you do not pay up. It is understandable that all you can think about is getting them off of your back, at least for a little while. So what do you do? You promise to make them a payment(s) in the future; knowing there is no way you'll have the money to pay them, short of a miracle. In some cases people go so far as to sign a new agreement with their creditor.
You then seek the protection of the Bankruptcy Court and the creditor screams foul and seeks to have the debt you owe not be forgiven. Why? You made a promise to pay and did not keep your promise and because you made the promise the creditor did not take any action to collect on the debt. If a creditor can show you're promising to pay in the future delayed action to collect the money it was owed, you may well be denied forgiveness of that debt.
Do not make a creditor a promise or enter into an agreement with a creditor if there is any chance that you can not make the payments. The best thing to do is make no promises of any kind. If you are being hounded by creditors use the rights given to you under the Fair Debt Collection Practices Act,( which I have written about before) and write your creditors letters telling them to stop calling you, etc. Remember empty promises can hurt.
Parties in control of Congress change, politicians that control the parties change, but it appears regardless of which party has the upper hand, the one thing that never changes is the people behind the scenes controlling the show. The bankruptcy bill that would give some protection back to the consumer is now stalled in the Senate, on the other hand, provisions that give businesses additional rights in bankruptcy, especially against the average guy trying to hang on to his job and support his family, is quietly moving through Congress and will probably end up being approved. There is also another law that received a great deal of publicity, when it passed Congress, dealing with the abusive tactics used by banks and other companies issuing credit cards. There is now a new proposed law that has been introduced in Congress that would push back the time that the law goes into effect by several years.
After you read this, I hope you are as angry as I am and you contact your representatives.
If you have lived in Texas two (2) years prior to the date you filed your Chapter 7 bankruptcy (or plan on filing) you are entitled to use Texas Law to determine what property you get to keep. That means you may either use the property that is "exempt (free to keep)" from bankruptcy under the Texas State Statute or you may choose to use the Federal Exemption Laws. Which law you use is up to the person(s) filing Chapter 7, which means you get to choose the statute (Texas State or Federal) that gives you the most benefit. For most people this generally means you get to keep everything you have, with few exceptions.
Which law is most advantageous depends on whether or not you own a home and how much equity you have in your home. Equity is determined by the difference between what you owe on the house and how much the house is worth. If your house has a lot of equity one usually finds the Texas Statute gives a person the biggest relief. While Texas Law protects most things it does not protect cash, cash in banks or income tax refunds. Federal Law on the other hand would allow you to apply the "wild card". The "Wild Card" under federal exemptions is exactly the same concept as the wild card used in a poker game - it is any card you want it to be. In a bankruptcy case, it can be used to exempt from the bankruptcy anything that the debtor wants to keep that is not otherwise exempt. The 'Wild Card' is contained in Section 5 of the Federal Statute.
The exemption laws are designed to allow people to keep enough of their property to have a "fresh start", not to strip them of their assets or dignity.
Click on these links to see an outline of the Texas Exemption Code and an outline of the Federal Exemption Code.
The fate of your property not protected by either statute (Texas or Federal) is in the hands of the Chapter 7 Trustee. The Chapter 7 Trustee is only going to take things he can turn into a relatively large amount of cash quickly which he can then use to pay your creditors.
6. What property will I get to keep?
Dealing with the Internal Revenue Service is a scary proposition, especially if you owe them money. The Bankruptcy Court is one of the tools a taxpayer has at his/her disposal in dealing with "the tax man" in a variety of situations.
The Bankruptcy Court can be used to:
-Stop wage garnishments, bank account garnishments, levies, seizures of property and remove income tax liens that are in excess of the value of the property claimed as exempt;
-Income tax and certain other types of taxes become dischargeable after a period of time ranging from two to three years after the date tax returns were filed provided certain other conditions have been met;
-Taxes can be paid in monthly installments over a period of five years, usually without interest or additional penalties accruing in a Chapter 13 case;
-Disputes over how much is owed can be determined quickly and inexpensively by a Bankruptcy Judge;
-Tax liability can be determined by a Bankruptcy Judge in a setting which the Internal Revenue Service is subject to a level playing field.
This is a general outline of the options a taxpayer has in the Bankruptcy Court. As with anything dealing with taxes and the law can have numerous complications and exceptions.
The "Means Test" is part of the bankruptcy code which determines if you qualify for a Chapter 7 or a Chapter 13 Bankruptcy. A Chapter 13 Bankruptcy also determines your disposable income. Disposable Income is the amount of money you have to pay out of your monthly income to the Chapter 13 Trustee which in turn gets distributed to your unsecured creditors.
On Sunday all of the numbers in the Means Test will be revised upward. Because the average median income will rise, it will be easier to qualify for a Chapter 7 bankruptcy (which is the first part of the Means Test). If you do not qualify for Chapter 7 because of your average median income you may still qualify for Chapter 7, depending on the result of the second part of this Test. These figures will also increase on Sunday. Visit our resources page for links to these revised tables.
My general rule of thumb is a person will be able to obtain a credit card on reasonable terms after two (2) years of your bankruptcy discharge. Now you can acquire an FHA loan to buy a house after two (2) years from your bankruptcy discharge. Take time in choosing your new credit card and mortgage because terms and conditions vary from company to company. FICO scores are important to some while others value how long it's been since you were past due on any obligation.
Here are a few simple rules to follow to restore your credit:
- 1. Obtain a copy of your credit report within 90 days after your bankruptcy has been discharged. Make sure that all discharged debts have been removed from your credit report. If you don't want to do the required leg work - contact your bankruptcy attorney.
- 2. Be sure to keep your current debts (obligations) current and paid on time.
- 3. Start a savings program so that you can have a down payment available when you are ready to purchase a house.
- 4. New credit card charges should be paid in full each month.
These simple rules will allow you to improve your FICO score, prove you are responsible in paying your obligations, as well as demonstrate you are fiscally responsible by keeping your obligations low and finally have the ability to make a reasonable down payment on a house.
So, you can have credit cards and qualify for a mortgage to buy a house after discharged from your BANKRUPTCY.
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