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A very hot topic in South is the "short sale". This usually involves a sale to another person with your mortgage company agreeing to satisfy its mortgage with a payment of less than the full amount due. A variation on the short sale is the "short refinance." In a short refinance, a person tries to refinance his mortgage with a new mortgage for less than the full amount owed on his existing mortgage with the existing mortgage company agreeing to take less than a full payoff.
Chapter 13 bankruptcy reorganization may offer some people results similar to a short refinance. If the value of your home has fallen dramatically, like most real estate has in South Florida, you may be able to wipe out or "avoid" your second mortgage. For example, if you owe $400,000 on your first mortgage and $100,000 on your second mortgage and your home has fallen in value to $399,000, you may wipe out or avoid your second mortgage as there it is wholly unsecured. That is, there is no value or equity to "secure" it.
If your foreclosure involves real estate that is not your principal residence, you may be able in Chapter 13 bankruptcy to reduce even your first mortgage down to the value of your home in addition to wiping out your second mortgage. You may also be able to lower your mortgage interest rate.Jordan E. Bublick, Miami and Palm Beach, Florida, Attorney at Law, Practice Limited to Bankruptcy Law, Member of the Florida Bar since 1983
It is not uncommon for a bankruptcy filer to have outstanding state or federal tax debt. As is commonly known, tax debt is not dischargeable through either chapter 7 or chapter 13 bankruptcy. In a chapter 13 case (at least in Utah), the bankruptcy filer will have to pay all of the outstanding tax debt through the 3-5 year plan. Since there is no repayment plan in a chapter 7, filers under this chapter will need to work with the State or the IRS to arrange a payment plan or negotiation either before or after the bankruptcy. Since tax debt is priority debt, if there is money that comes out of the liquidation of the filer's assets, these tax creditors would be the first to get paid. However, since so many chapter 7 cases yield no return to creditors, most filers are faced with ongoing arrangements with the tax agencies in order to pay back these nondischargeable debts.Adam Brown is a bankruptcy attorney for Dexter & Dexter, a debt relief agency helping people file for bankruptcy.
How to Avoid Problems When Filing a Bankruptcy Case Budget from Jonathan Ginsberg on Vimeo.One of the most important tasks you will be asked to complete relates to the budget you file in your bankruptcy case. Your bankruptcy trustee (and creditors) will expect a budget that accurately reflects your income as well as all “reasonable and necessary” expenses. The problem: what is reasonable and necessary and who decides what that means?Furthermore, the budget you file most account for expenses that you are currently incurring as well as likely expenses that you will face in the near future.Experienced bankruptcy lawyers understand that creating a bankruptcy budget can require many judgment calls. In this video, I discuss some of the considerations I bring to the process as well as some suggestions about you can protect yourself from possible challenges.The post How to Create a Trustee Friendly Bankruptcy Budget appeared first on theBKBlog.
Below is a guest post offering a concise description of the four main types of bankruptcy:
Know more about the 4 different types of bankruptcy
Bankruptcy is essentially a legal proceeding which involves either a person or business that isn’t able to repay outstanding debts. It offers an individual or business the opportunity to start afresh with debts being forgiven. It also offers the creditors some chance to obtain a certain measure of repayment based on the available assets. Theoretically speaking, bankruptcy is supposed to benefit the overall economy as well.
The different types of bankruptcy
The bankruptcy filings in the United States essentially falls under 4 categories. Read on to find out more.
1. Chapter 7: This chapter essentially deals with a bankruptcy proceeding wherein a company stops all operations and generally goes completely out of business. There’s a trustee appointed for liquidating or selling off the company’s assets or in the case of an individual, his or her assets, and the money generated from this sale is used to pay off debts. As for the payments, then those investors who’ve taken the least risk are paid off first. This is one such phenomenon which is known as “absolute priority”.
2. Chapter 11: This is a form of bankruptcy that essentially involves reorganizing a debtor’s business affairs plus assets. This particular bankruptcy is generally filed by corporations that mostly require time for reshuffling their debts. This is perhaps the most complex of all bankruptcy cases as well as the most expensive one. Experts are of the opinion that this particular case should only be considered after a lot of careful analysis and exploration of all other possible alternatives.
3. Chapter 12: This particular chapter deals particularly with family farms or fisheries. This US bankruptcy proceeding endows the farm or fishery owner the ability to restructure his or her finances and debts while still being able to keep the farm or fishery. In this proceeding, the farm or fishery owner has to work with a bankruptcy trustee and his or her creditors to formulate a payment plan that’ll meet his or her own financial obligations.
4. Chapter 13: This chapter deals with a US bankruptcy proceeding wherein the debtor takes on a reorganization of his or her finances under the supervision and the approval of the courts. The debtor also needs to submit a plan which he or she must compulsorily follow through. This would essentially involve a pay back plan wherein the debtor has to pay back his or her creditors the outstanding debt within a time span of 3 to 5 years. If required, then this can use cent per cent of the debtor’s income.
If you’re considering filing bankruptcy, then it always helps to gather knowledge about the entire process. This always gives you an easy start which is more than welcome.
As the weather turns colder here in midtown Manhattan, we at Shenwick & Associates wanted to take this time to wish you a happy, safe and warm holiday season and a very happy and healthy 2013. We also wanted to thank you for your friendship, your business, your referrals and your trust in us. Personal bankruptcy, business bankruptcy litigation, short sales, real estate closings and our emerging student loan debt practice continue to keep us busy as 2012 draws to a close! We're here for you now and in the upcoming year, and we look forward to working with you.
Short Sales Will Have Increased Tax Consequences Starting In 2013 An important tax provision that allows underwater homeowners to short sell their home without tax consequences will expire at the end of this month. Earlier this year I wrote about this tax provision. You can review that article here. Briefly stated, any discharge of indebtedness […]The post Underwater Homes Owners Facing the Fiscal Cliff appeared first on National Bankruptcy Forum.
In December, 2007, Congress passed the "Mortgage Forgiveness Debt Relief Act of 2007" to alleviate tax consequence for some homeowners in foreclosure. The new Act excludes from gross income certain cancelled discharged "qualified principal residence indebtedness."
Existing law provides that discharged debt, whether after a foreclosure or short sale, is generally taxable income realized in the year the debt was forgiven, unless an exception applies. Generally only reductions in principal and not forgiveness of interest results in discharge of indebtedness income ("DOI"). Usually a lender is required to issue a Form 1099-C to report the DOI to the IRS. Taxpayers are required to disclose DOI to the IRS whether the lender issues a 1099-C or not. Taxpayers may be able to exclude the DOI from income if an exceptions to DOI applies.
Two existing exceptions to DOI are the insolvency and bankruptcy exceptions. 26 U.S.C. section 108(d). If the borrower is insolvent, DOI is not taxable. If the debt is discharged in bankruptcy, DOI is also not taxable. Another exception is the "purchase price infirmity doctrine". This allows DOI to be excluded from income where the lender agrees to write down the purchase money debt to the true value of the collateral as the purchase price was inflated in the original transaction due to fraud or misrepresentation. Another exception from DOI is when the liability was contested. Pursuant to Zarin v. Comm'r, 916 F.2d 110 (3d Cir.1990), DOI is not income where there is a legitimate basis for the borrower to claim that the debt was never owed or collectible because illegal.
The new Act adds to the existing exceptions from DOI a category of "qualified principal residence indebtedness." Up to $2 million of indebtedness may be excluded if the reason for the discharge is either a decline in the residence's value or the taxpayer's financial condition. It should be noted that debt excluded by the Act reduces the taxpayer's basis and a "short sale" could result in a taxable "gain" which may be taxable as a capital gains.
In order for this new exception to apply, the debt must be "qualified" which includes only acquisition and not home equity indebtedness. Acquisition indebtedness includes funds borrowed to buy, construct, or improve a home. Debt consolidation loans or cash out loans are generally not acquisition indebtedness. The Act only applies to debt discharged between January 1, 2007 and December 31, 2009. Pub.L.No. 110-142 Section 2(d). If acquisition debt is refinance, the refinanced principal amount retains its status as acquisition indebtedness. The excess of the total refinanced loan amount over the refinanced acquisition indebtedness is treated as home equity indebtedness and is not eligible for exclusion from income. Acquisition indebtedness included loans to "substantially improve" the principal residence.
This new exclusion only applies if the debt was discharged due to the borrower's financial condition or a decline in the home's value. A discharged based on the lender's acknowledgment of its wrongdoing or even rescission is not eligible for the qualified principal residence exclusion. Documentationj in any litigation or settlement that one of the required grounds is the basis for the discharge of the debt would be helpful.
The homeowner must apparently elect to take either the qualified principal residental exception or the insolvency exception. The insolvency exception, if elected, is "in lieu of" the qualified principal residence excetion.Jordan E. Bublick, Miami and Palm Beach, Florida, Attorney at Law, Practice Limited to Bankruptcy Law, Member of the Florida Bar since 1983
Payday loans, or paycheck advances, are high interest rate loans designed to help the borrower receive some quick cash to help any financial burdens until they receive their next paycheck. Since these payday loans have such a high interest rate, they become very devastating to borrowers. If borrowers are relying heavily on these loans, their [...]
A common misconception of filing a Chapter 7 bankruptcy and surrendering your house, or “walking away” from it, is that once your case is filed you no longer are responsible for taking care of that property. That simply is not the case. Until the bank actually comes in and forecloses on the property you remain [...]
Zsa Zsa Gabor, a 1950′s movie star known for her 8 marriages, once remarked, “I’m an excellent housekeeper. Every time I get a divorce, I keep the house.” Most people, of course, do not find divorce much of a laughing matter, especially when it comes to financial issues.If you are going through or have gone through a divorce, you know that the divorce process usually causes financial hardship to both husband and wife, and this is especially true if your divorce involves lengthy and expensive litigation.Not surprisingly, one or both parties to a failed marriage often turn to bankruptcy after their divorce in an effort to recover from the financial burdens of divorce. Debts to a former spouse for alimony and support are not dischargeable in a bankruptcy but personal loans and credit card debts owed to third parties are dischargeable to the bankruptcy filer, although discharging these debts may run contrary to the divorce judge’s order about who is to pay what.However, questions about dischargeability of debts may not be the most important issue when you or your ex-spouse files for bankruptcy. Instead, the bankruptcy paperwork a debtor files can yield a great deal of information about that bankruptcy filer.If your ex-spouse files a Chapter 7 or Chapter 13, his bankruptcy schedules will reveal a great deal of information about his income, expenses, assets and debts. Bankruptcy schedules are part of the public record and available to you and your lawyer for review. In theory, your ex’ financial information should have already been revealed to you during the course of divorce discovery but in reality there may be some discrepancies that can require an explanation.Remember that financial disclosures produced by a divorce lawyer are made in the context of an adversarial state court proceeding. Your ex-spouse’s divorce lawyer will attempt to minimize his client’s financial liabilities by arguing that his client’s assets are limited and that his income and income potential are unstable.By contrast, your ex-spouse’s bankruptcy lawyer is not involved in an adversarial proceeding. The Bankruptcy Code requires extensive financial disclosures supported by documentation and the United States trustee and the Chapter 7 or Chapter 13 trustee will insist on full and complete disclosure. Often the bankruptcy attorney will be called upon to show that his client can afford to pay for a house, vehicle or other liabilities.You and your attorney may find that financial disclosures made by your ex-spouse differ from those made in his bankruptcy. Recognizing and understanding these discrepancies can help you and your lawyer advocate for a more favorable outcome in a divorce or in a post-divorce modification. Should you be the one filing bankruptcy, those differences may exist in your case as well. If you will be filing bankruptcy make sure to provide your bankruptcy lawyer with copies of the financial disclosures made in your divorce case and encourage your bankruptcy lawyer to communicate with your divorce lawyer.While Zsa Zsa was able to joke about the financial impact of divorce, you probably do not find much to laugh about during this most stressful time in your life. Divorce paperwork and bankruptcy paperwork read together can clarify what your ex-spouse may want to hide.The post Public Bankruptcy Filings may Help Your Cause in a Divorce Battle appeared first on theBKBlog.
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