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Chapter 13 bankruptcy cases filed in the Northern District of Georgia cannot be confirmed by the bankruptcy court judge if the IRS or State of Georgia files documentation reporting unfiled tax returns. The reason? If you have unfiled tax returns, your potential tax liability is unknown. Since Chapter 13 consists of a payment plan that must fit within five years, an unknown liability means that there is no way to calculate whether your proposed plan payment will work.Further, prior to your Section341 hearing your Chapter 13 trustee will want to see a copy of last year’s tax return to (a) confirm that you have filed it, and (b) to cross check the annual income figure reported on Schedule B of your petition with the income figures shown on your tax return.As you can see, therefore, your Chapter 13 cannot get past the trustee or the judge if you have unfiled returns. Currently the IRS reports unfiled tax returns over the past 10+ years, so you should not assume that if your unfiled returns date back many years, you are in the clear. In fact, the statute of limitations to determine when tax debt may be discharged in bankruptcy as stale does not begin to run until your returns have been filed.What can you do, however, if you need to file Chapter 13 to stop a foreclosure, repossession or other emergency, and you have unfiled tax returns?You can still file Chapter 13, but you need to move quickly to get those returns filed as soon as possible. Tax return preparers can download the forms from previous years and if you do not have your 1099′s or W-2s you can get copies of these documents from the IRS directly.I know several very capable tax preparers who can produce returns for past years. You will have to pay a bit more than you would for an on-time return for this service, but if you plan to make your Chapter 13 work you have no choice.Often I find that the past due tax return preparer may need several weeks to gather and process the tax return. If I see that the return preparation is in progress, I can file an objection to the IRS or Georgia proof of claim and use that objection as the basis to request a reset of the confirmation hearing. This will keep your case alive.However, the Chapter 13 trustees in our district expect that you will make a diligent and timely effort to get your overdue tax returns filed. If you do owe money, we may have to recalculate your plan payment. If you are due a refund, that money may go in whole or in part to the trustee.If you did not earn enough money to require the filing of a return, you can execute an affidavit to that effect or file a return showing your limited income. Either way, move quickly.Finally, recognize that the IRS gets automatic notification of every Chapter 13 bankruptcy case filing, so if you have been flying under the radar, your bankruptcy filing will put your case file on an IRS staffer’s desk.The post Unfiled Tax Returns and Chapter 13 appeared first on theBKBlog.
Government-sponsored enterprise Fannie Mae, which owns or guarantees a substantial proportion of U.S. home loans, lists and explains the Fannie Mae loss mitigation options available to borrowers experiencing financial hardship. The 20-page table can be found online here, but I provided brief rundowns of the options are below. Fannie Mae suggests considering the options in the order they appear but notes that some options may better fit particular situations. See the table for more detailed descriptions, eligibility criteria, terms and conditions, reporting requirements, and costs.
Retention Options
The first several options are home retention:
Forbearance
Forbearance temporarily reduces or suspends payments on a mortgage loan for a specified period. Forbearance is considered when the default results from particular financial hardships related to things like natural disasters or a temporary loss of income.
Repayment Plan
A repayment plan is an agreement where a borrower will repay outstanding arrears while still making regularly scheduled payments. Repayment terms may include monthly payments that are multiples of regular installments, a regular payment one month and multiple payments the next, more frequent payments, or other terms.
HAMP
HAMP is the Fannie Mae Home Affordable Modification Program. This program uses a uniform loan modification process to provide eligible borrowers with affordable monthly payments. This is done to bring the borrower’s monthly payments down to 31% of the borrower’s gross monthly income. The eligibility criteria are extensive and include the ability to document a valid long-term or permanent hardship. HAMP will close to new borrowers at the end of the year.
2MP
2MP is the Fannie Mae Second Lien Modification Program. It is designed to work with HAMP to help borrowers by lowering payments on first lien and second lien mortgage loans. Among the eligibility criteria, a loan must be a second lien with corresponding first lien modified under HAMP, originating on or before January 1, 2009, and have an unpaid principal balance of more than $5,000.
Standard Modification
Standard modification is designed to help borrowers who are ineligible for HAMP or who defaulted on a HAMP modification (and, sometimes, another Fannie Mae modification). While the standard modification eligibility criteria are detailed in the table, Fannie Mae will consider exceptions to those criteria when there are extenuating circumstances. The modification changes some terms of a mortgage loan to make it more affordable.
Liquidation Options
The following options are liquidation options:
Standard Short Sale
A short sale is when a borrower sells her home for less than the balance remaining on the mortgage, the proceeds pay off what is possible on the mortgage, and the lien against the property is then released. It can be initiated for eligible borrowers who are delinquent or facing imminent default, can no longer afford the mortgage or do not qualify for retention workout options, and want to avoid foreclosure.
Mortgage Release
A Mortgage Release occurs when a borrower transfers title to and possession of her property to Fannie Mae to satisfy the mortgage loan debt and avoid foreclosure. A Mortgage Release may be appropriate for borrowers who do not qualify for a home retention solution and for whom a short sale is not a viable foreclosure prevention alternative.
HAFA Cases in Progress
The HAFA program expired on December 31, 2012. For HAFA agreements executed prior to that date, the transaction must be closed or settled on or before September 30, 2013.
In addition to these Fannie Mae options, homeowners who can afford their regular monthly mortagage payment, but just need a chance to get caught up with past due amounts, may benefit from a Chapter 13 bankruptcy plan to stop foreclosure and work out the past due amounts.
See Related Blog Posts:
What is a Qualified Mortgage?
Good News for Distressed Property Owners
The post Fannie Mae Loss Mitigation Options appeared first on AKB.
Bankruptcy gets you out of debts you don’t want, but not stuff you don’t want.
It doesn’t force the finance company to tow your car. Or the timeshare people to foreclose the timeshare. And it doesn’t make the bankruptcy court take anything.
Sue got a bad car loan and a bad car from a “buy here, pay here” car dealer. The car is a 1999 Oldsmobile and it doesn’t run. Sue still owes $6590. Before, the dealer called Sue day and night, demanding payment, and threatening to garnish her and repossess the car.
Filing bankruptcy does not force the finance company to tow that junk car that won't run. Bankruptcy gets you out of debts. It does not get rid of stuff nobody wants.
Sue WANTED him to repo the car–because she can’t afford to fix it. But he never does. He knew it wasn’t worth much when he sold it and he now knows it’s not worth towing away.
Now, the dealer can’t call Sue. He can’t garnish her pay. BUT he still won’t pick up the car. She still can’t afford to fix it–and now its drawing tickets because the inspection has expired.
Sorry, Sue, you still have that problem. Bankruptcy got rid of the debt, but it does not get rid of stuff nobody wants.
Mike owns a campground timeshare. Made sense when he bought it–but hasn’t used it in years and it’s not worth the $550 annual maintenance fee.
When Mike filed bankruptcy, he was two years behind–and they were calling and threatening to garnish him. Now that he’s filed, they’ve stopped calling, and they can’t sue. But on January 1, they sent him a bill for another years annual maintenance.
Sorry, Mike, you still have that problem. Bankruptcy got rid of the debt you didn’t want. But it does NOT get rid of the stuff nobody wants.
Is there any help for Sue and Mike?
Usually, people like Sue can find a junk yard or small repair shop which will take the car off her hands–if she pays them a small fee. But she can’t force anybody.
In the same way, the timeshare people will usually accept a deed in lieu –so they can turn around and sell that campground to someone else. But Mike can’t force them. If you own stuff that you want to get rid of, there’s no bankruptcy junkyard where you can just “surrender property.” You need to talk your way–or buy your way–out of the problem.
Good luck!
Today’s post isn’t really about bankruptcy per se, but as a bankruptcy attorney in California, as you might imagine, I have had an up front and personal perspective on the mortgage crisis over the last several years. I was listening to the California Report on my San Francisco Bay Area NPR affiliate, KQED, last week when I heard something that struck me as so preposterous, so deceitful in its specious logic, that it stuck with me for days. The reporter, Rachael Myrow, was interviewing one Ed Gerding, the “Senior Fraud & Risk Consultant for CoreLogic,” which, according to its website, supplies “data, analytics and services” to “financial services and real estate professionals.” The piece was about mortgage fraud in California. Again, as a bankruptcy lawyer, my ears pricked up. I’ve had occasion to witness more than a few “option ARM,” “neg am” and other teaser mortgage loans in recent years as well as the inevitable foreclosures and short sales that resulted from them. And I’ve had the unique perspective of getting to know all the details of the financial lives of hundreds of homeowners stuck with these albatrosses.
I think any of us who learned anything about what led to the Great Recession will recall that the root cause was Wall Street’s invention of mortgage-backed securities, and how lenders like Countrywide, World Savings, et al., encouraged mortgage brokers (literally telling them: “Docs? We don’t want docs anymore”) across the country to peddle absurdly dubious teaser loans to unsophisticated borrowers so they could immediately package them into these exotic derivative securities and sell them to pension funds, etc. That was mortgage fraud to be sure.
But the intro to the story promised that “while you might be inclined to pin Big Blame on Big Banks, plenty of individuals are scamming the system, too.” From that little teaser, the listener was encouraged to immediately assume that we should spread the blame around equally. Individuals—you know, with all their outsized market influence, bargaining power and insight—must have been just as much to blame, right? And what is chief among Mr. Gerding’s examples of such insidious mortgage fraud supposedly so widespread that is today being perpetrated by individuals?
Short sales. That’s right, short sales.
As I said, I’m a consumer bankruptcy attorney. I work for individual debtors. I have now seen hundreds of clients who could not afford the mortgage loan they were sold in the 2000s. The one they were told at the time not to worry about because before the payment readjusted the property would have appreciated so much it would be easy to later refinance at a low fixed rate. I think I have some perspective on short sales and foreclosures in California. According to the story, a short sale is “a boon to a hard up homeowner – or someone pretending to be hard up who wants to stop paying for a house he’s underwater on.” Right there. That’s my problem. That statement is so asinine I don’t even know where to start. But I’ll take a deep breath and try.
What, pray tell exactly, is wrong, immoral, unethical or any other negative adjective implying dishonesty, with someone who wants to stop paying for a house he’s underwater on? Let’s back up here and think about some basic legal principles in contract law and economics. First of all it is a firmly established principle in contract law that where continuing to perform on a contract will lead to economic waste—like paying on a loan that grossly exceeds the value of the collateral secured by it—that to breach the contract is often the most economically efficient thing to do. Corporations quite intentionally breach contracts all the time precisely because for whatever reason—a changed economic climate, for example—it makes more economic sense for the contract to be broken than to carry on performing it. Generally, the agreement itself may contain the consequences for such a breach—by specifying liquidated damages, for example. Or, a statute may impose a different or additional penalty for breaching the contract. The point is that after calculating such economic consequences, it still makes more economic sense to breach the contract than to be enslaved to it. Conservative economists, who generally cling to the quasi-religious notion that all economic actors act with rationality all the time, cheer the idea that in capitalism, efficient use of capital often requires the breaching of contracts. The point here is that simply breaching an economic contract has nothing to do with morality.
But I digress. Back to the context of a short sale. The alternative to a short sale is a foreclosure. In California, a foreclosure is almost always carried out through a nonjudicial process, and the lender exercising their rights to foreclose under a deed of trust has no recourse beyond that process to later sue the borrower for any deficiency for any balance owed on the original note. California is, in other words, a “non-recourse” state at least with respect to first mortgages and nonjudicial foreclosures. Junior non-purchase money loans such as home equity lines are another matter, and I’ve covered these elsewhere.
Given that the alternative to a short sale is a foreclosure, which will invariably cost the lender much more than agreeing to a short sale at the current fair market value of the home, I have long felt that a short sale is nothing short of an enormous favor to the bank. Likewise, it’s a huge favor to the lender of any junior loan where they might not receive anything at all after a foreclosure. By requesting approval of a short sale, the homeowner is, in effect, finding that bank a ready, wiling and able buyer, wrapping them up in wrapping paper with a big bow on top and delivering them on a silver platter to the bank. The fact that banks will sometimes refuse to approve such a gift is beyond flabbergasting. It’s stupid. In the years between 2008-2012, I witnessed dozens of clients who had attempted to get approval of a short sale, have it refused by a hold-out lender, only later to then inevitably let the home foreclose. The foreclosure may then have taken 18 to 24 months to complete simply because the bank didn’t want the property.
While the California Report and Mr. Gerding of CoreLogic implied some widespread fraud on the part of homeowners in California trying to short sell a property they likewise implied that somehow homeowners who cannot or do not want to pay for a grossly underwater property see no negative consequences as a result of a short sale. Wrong again. Remember that to the extent that the lender does not receive the full payoff balance of the original loan, such “canceled” debt is later taxable as income to the homeowner—with just a few exceptions. For example, where the property is not the borrower’s primary residence, and unless a bankruptcy or the IRS-defined “insolvency” exception applies, the borrower will have to pay taxes on the difference between what they owed on the loan and what the bank received from the short sale. The bank gets a nice write off and the borrower may owe income taxes on debt cancellation. Hardly a windfall to the borrower. And we haven’t even touched upon the damage to the borrower’s credit that results from a short sale.
Not to be disingenuous, I am perfectly aware that Mr. Gerding, in his elaboration of what constitutes “mortgage fraud” in the context of California short sales, was talking about situations in which the homeowner is someone “pretending to be hard up” presumably in order to qualify for a lender’s capricious hardship requirements for approval of a short sale.
My point is that a homeowner’s ability to continue to pay on a mortgage that is 30% or 50% or 100% greater than the current fair market value of the property should have nothing to do with whether the bank can approve or disapprove of the short sale. A short sale should not require, and often does not require, depending on the lender, any showing of economic hardship on the part of the borrower. If there is any such “fraud” out there, then it is a fraud manufactured by the mortgage lender to the extent that it has created a barrier to a short sale that shouldn’t exist. I am certainly not advocating lying to a lender in order to get their approval. Remember, if the bank won’t approve a short sale, then the borrower can always just let them foreclose. And they don’t have to provide any proof of financial hardship for that.
The fact is now the property is worth much less than when the bank made the original loan. Either that bank or its predecessor lender they bought that loan from made a decision to lend some inflated amount that today in hindsight looks foolish. They contributed to the property value bubble in the first place in their rush to lend and then sell mortgage backed securities. Lending is a risky business. They know that. It’s not the borrower’s fault that now the house is worth far less. And it is absurd to paint homeowners as fraudsters when they make what is sometimes the most economically rational decision to let such a property go.
Last year, the United States saw ecommerce spending jump to $194.3 billion, up 16.1% from $167.3 billion in 2010. The majority of these purchases were likely made on credit cards, and credit card debt is often cited as a reason why people file Chapter 7 and Chapter 13 bankruptcy.
Americans in general are definitely online shoppers, but which type of online shopper are you?
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The Seeker
- They’re on the lookout for specific items.
- Know exactly what they want, and are ready to buy.
- They’ll shop multiple stores until they find what they seek.
The Frugal Finder
- They’re always on the lookout for the best deal.
- They look for online coupon codes, sales, and free shipping promotions.
- They’ll comparison shop among multiple online stores to get the most bang for their buck.
The Researcher
- They have a goal in mind, but haven’t settled on a particular product or brand. Researchers browse with the intention of finding information until they decide on a product.
- They take their time, reading product descriptions and reviews to gather as much information as possible before making a purchase.
The Window Shopper
- The online equivalent to people who walk by a retail store without stopping.
- They don’t really have a product or purpose in mind.
- They could be looking to entertain themselves, or browsing to gather research for a future purchase.
The Mobiler
- They love shopping online, but rarely find themselves sitting in front of their computer. Instead, they use smartphones or tablets to take care of all their online shopping needs.
- They know what they want and where to get it. They make purchases with the app of their choice in just a few clicks.
The Hermit
- They avoid traditional brick-and-mortar stores as often as possible.
- They sign up for all the deals, newsletters and alerts to make sure they’re shopping at the right time and using the Internet to their fullest advantage.
- Serious Hermits sign up for auto-refill programs to make sure they always have stock on hand.
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Filing Chapter 13 bankruptcy will soon be an option for people with larger debts. On April 1, 2013 the law will adjust to allow people with unsecured debts of up to $383,175 and secured debts of up to $1,149,525 to file Chapter 13.
Chapter 13 Not For Everyone
Chapter 13 is not for everyone. By design, not everyone meets the rules for filing a chapter 13 bankruptcy. Chapter 13 bankruptcy law is designed to be limited to simpler, 
straightforward debt reorganization. For that reason only people and married couples may file Chapter 13. Your corporation or limited liability company are not allowed to file Chapter 13. The Chapter 13 debt limits are another method of excluding more complex cases from Chapter 13.
Option for More People
Many more people who want to take advantage of the benefits of a chapter 13 bankruptcy and get caught up on back house payments, get rid of second mortgages, or protect property that would be lost in Chapter 7 will soon meet the rules and be allowed to file Chapter 13.
Debt Limits Increase April 1, 2013
Every three years the debt limits for chapter 13 change. These revisions are based on changes in the consumer price index. Effective 04/01/2013 the new limits for unsecured debt are $383,175 and the limit for secured debt is $1,149,525.
Debt Limits Subject to Dispute
Anyone who has more than than these limits may not file a chapter 13 bankruptcy. However, as with anything in the law, it’s not always clear whether a particular debt should be counted toward these limits.
The bankruptcy code provides that a debt be non-contingent and liquidated to count toward the unsecured debt limit. Plenty of legal battles have been fought over whether a particular debt meets this rule. Before making a hasty judgment that you do not qualify for chapter 13 be sure to talk to an experienced Arizona bankruptcy lawyer.
Original article: Chapter 13 Bankruptcy Debt Limits Change in 2013©2013 Arizona Bankruptcy Lawyer. All Rights Reserved.The post Chapter 13 Bankruptcy Debt Limits Change in 2013 appeared first on Arizona Bankruptcy Lawyer.
Yes
Pension money that is in a tax qualified pension plan such a Roth or IRA may be kept in a chapter 7 personal bankruptcy, provided that it does not exceed $1,171,650. Pension money is a 401(k), 403(b), SEP or a defined benefit plan, in any amount, is exempt in bankruptcy and may not be taken or seized by a bankuptcy trustee.
In New York a debtor can file bankruptcy and keep 1 car that has no more than $4,000 of equity. If the car or automobile is new or has a loan, equity is calculated by taking the difference between the value of the car and the outstanding loan against the car. To determine the value of a car, a debtor can get a letter from an automobile dealer appraising the car or use the Kelly Blue book values
The homestead exemption in Kings, Queens, New York, the Bronx, Richmond, Nassau, Suffolk, Rockland, Westchester and Putnam counties is $150,000 per debtor. If a married couple files for bankruptcy and they both own real estate the exemption is $300,000.
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