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Utah has its own foreclosure process. A helpful link is Utah Foreclosure Help which contains a lot of helpful information about foreclosure and assistance scams. In summary, it takes about 200 days from the time you make your last house payment until the time your lender can foreclose or sell your property. After 90 days of missed payments, the lender can file a NOD or Notice of Default. This is public record as it is recorded at the County Recorder's office. You then have 90 days after the Notice of Default to "cure" or catch up on all of the arrears. At that point, if still in arrears, the lender can set a date for foreclosure which must be published for 3 weeks in a local newspaper. So 200 days is the minimum, and it is very common for lenders to take longer than that as they attempt to work with you on a loan modification or other loss mitigation alternative.Adam Brown is a bankruptcy attorney for Dexter & Dexter, a debt relief agency helping people file for bankruptcy.
Fannie To Allow Walkaways by On-Time Borrowers: Mortgages – Bloomberg.
Exciting news if you have a Fannie Mae or Freddie Mac insured loan. With the upcoming changes, you may be able to walk away from a home that is underwater without owing a deficiency to the mortgage company and without going into foreclosure.
This change gives the homeowner the option to deed the property back to the creditor to avoid foreclosure and walk away from the property. The “deed in lieu of foreclosure” has always been an option but traditionally the mortgage company would try to collect the remaining balance owed on the home from the homeowner. The change is that now, it appears, they may be writing off the deficiency owed and not trying to collect from the homeowner. Even more good news is that the government has extended tax-free status to the forgiveness of the loan, however, currently, that law is set to expire at the end of 2013.
Fannie To Allow Walkaways by On-Time Borrowers: Mortgages – Bloomberg.
Exciting news if you have a Fannie Mae or Freddie Mac insured loan. With the upcoming changes, you may be able to walk away from a home that is underwater without owing a deficiency to the mortgage company and without going into foreclosure.
This change gives the homeowner the option to deed the property back to the creditor to avoid foreclosure and walk away from the property. The “deed in lieu of foreclosure” has always been an option but traditionally the mortgage company would try to collect the remaining balance owed on the home from the homeowner. The change is that now, it appears, they may be writing off the deficiency owed and not trying to collect from the homeowner. Even more good news is that the government has extended tax-free status to the forgiveness of the loan, however, currently, that law is set to expire at the end of 2013.
If you are only three months behind on the mortgage, you have plenty of time and plenty of opportunity to save your home. You can save your home through non-bankruptcy measures, provided that you can work a payment plan or a repayment plan with your mortgage company for the amount you fell behind.
If your mortgage company is not willing to work with you, then you can save your home through Chapter 13. Chapter 13 will allow you to repay the part that you fell behind over the next 3 to 5 years by reorganizing that debt along with all of your other debt. When a Chapter 13 bankruptcy is filed, you must continue to make your regularly scheduled mortgage payment on time every month going forward.
So more important than the three months you fell behind is are you going to be able to make current payments going forward? If the answer to that question is no, then a Chapter 13 is not going to work for you in the long run. You’re going to stop the foreclosure, you’re going to stop the high interest, you’re going to stop any collection activity but if you can’t make both the current mortgage payment plus the arrearage over time, you’re going to be back in the same situation where the creditor is going to ask for permission to avoid your bankruptcy and proceed against the collateral. That motion is known as a Motion to Modify the Automatic Stay which basically removes the bankruptcy protection and allows the finance company to proceed with collection efforts including foreclosure.
In Illinois, the foreclosure process is very long; approximately 7 months to 11 months start to finish. So if you are only three months behind on your mortgage, you have time to work out an agreement with your mortgage company or as a last resort, file a Chapter 13 and dictate to the mortgage company how they are going to be repaid. So Chapter 13 is a way to save your home if you have fallen three months behind and you don’t have the ability to catch up on your own and you need a time period in which to catch up. Contact your local bankruptcy attorney to find out a Chapter 13 will work for you and your family.
Under Chapter 7 bankruptcy law, you have the ability to eliminate the debt on a vehicle whether or not you still possess it or whether or not it’s been repossessed or sold at an auction as long as you make the indication in your Chapter 7 bankruptcy petition that you no longer wish to retain the vehicle. Under Chapter 7 law, whatever amount is owed under that vehicle will be eliminated. In a typical scenario, the finance company repossessed is the vehicle, puts it on auction and comes after an individual for the deficiency. The deficiency is the amount that owed after the auction proceeds are paid toward the debt.
In a Chapter 7 bankruptcy, there is no amount owed after the case is filed if the debtor is going to be surrendering the vehicle. In a Chapter 13, an auto deficiency can be repaid over a period of months based on whatever dollar amount is available pursuant to the budget. In many cases, that amount is $.10 on the dollar, often $.25 on the dollar, up to approximately $.50 on the dollar in most cases. We see very few cases where we have 100% payment plan on unsecured debt.
The key to the car situation is to determine whether or not you wish to keep it or not. If you wish to keep it, you can reaffirm the debt under Chapter 7 or repay the debt under Chapter 13. If you don’t wish to keep the vehicle, you can eliminate the entire debt 100% under Chapter 7. You don’t have to worry about the attorneys’ fees, the repossession fees or the deficiency. The entire debt under Chapter 7 bankruptcy law will be eliminated on a repossessed vehicle if you no longer wish to retain ownership in the vehicle. Make sure that your attorney knows of your intentions so they can be properly listed on your bankruptcy petition.
In short, you should bring as much information as you have. The more information that you can give your attorney at the first interview; the more complete of a consultation they will be able to give you. Some important things to bring are your bills, especially medical bills and pay day loans because those often won’t appear on a credit report; paycheck stubs because people often don’t understand what they are actually bringing home. And tax returns.
It’s also a good idea to look through a budget. Your attorney will often go through a budget with you during your consultation, but it’s good to get an idea of what you’re spending and where your money is going. That way, your attorney can formulate a good plan for you to file bankruptcy and move forward in a positive direction. You should also consider bringing funds in order to hire your attorney. The sooner you file bankruptcy, the sooner you are going to get out of debt and the sooner you are going to be stress free, debt free and living a happy, stress-free, debt free life.
It is possible to discharge traffic tickets in a chapter 7 bankruptcy. Many lawyers will tell you that you cannot discharge traffic tickets in chapter 7 at all; and, that you have to file a chapter 13. However, that is not true. This is one of the funny technicalities of the Bankruptcy Code that less experienced lawyers overlook.
Section 523(a)(7) of the Bankruptcy Code provides that fines, penalties, or forfeitures are non-dischargeable in bankruptcy. If you stop reading after the first sentence than you might think that you cannot discharge a traffic ticket in a chapter 7 bankruptcy. However, subsection B provides that a fine, penalty, or forfeiture is dischargeable if the transaction or event occur in more than three years before that date of the petition filing.
It is important that your bankruptcy lawyer understand this rule. A chapter 7 is faster and less expensive than a chapter 13. If the traffic tickets that are holding up your driver’s license are more than three years old, then you do not have to file a chapter 13 bankruptcy.
A good bankruptcy lawyer listens and asks questions. In Washington State, it is possible to go to the department of licensing website and find out exactly which tickets are holing up your license. If your bankruptcy lawyer does not ask the right questions or do the right background check before selecting a chapter for you, then you may end up in a chapter 13 case and you could just filed a chapter 7.
One of the major themes of this site, and one of the goals of my bankruptcy practice, is to find the right fit for each client. I bring years of expertise to my practice. So when you are dealing with something that gets into the technicalities of bankruptcy law – like discharging traffic tickets – make sure that your bankruptcy lawyer gets all the facts and knows what to do with them. You may be able to get your driver’s license back using a chapter 7 bankruptcy, which is faster and cheaper than filing chapter 13 bankruptcy.
Sorry for the lack of recent posts. Final exams took considerable time away from me. I'll try to be better in the future.
I thought that I should briefly write about something important in the world of bankruptcy that has recently come to my attention. A new study, discussed on a recent ABI podcast, reveals new data about the dischargeability of student loans. Specifically, when debtors attempt to discharge their student loans, they are successful approximately 40% of the time. This is in sharp contrast to we often hear in the media, that student loans are "nearly impossible," or sometimes even that they absolutely cannot be discharged. It seems as though such media reports have produced a deterrent effect on debtors from even attempting to discharge their student loans. For more details, I highly recommend listening to the podcast: http://news.abi.org/podcasts/125-study-on-student-loan-discharges-and-th...
Your IRA Might Not Be Exempt Beginning with In re Daley, 459 BR 270 (Bkcy. EDTenn., 2011), some recent bankruptcy decisions have created doubt as to whether Individual Retirement Accounts (“IRA’s) created by major brokerage firms such as Merrill Lynch and Charles Schwab are exempt from the liquidation efforts of a Chapter 7 Trustee. For... Read More »
Your IRA Might Not Be Exempt
Beginning with In re Daley, 459 BR 270 (Bkcy. EDTenn., 2011), some recent bankruptcy decisions have created doubt as to whether Individual Retirement Accounts (“IRA’s) created by major brokerage firms such as Merrill Lynch and Charles Schwab are exempt from the liquidation efforts of a Chapter 7 Trustee. For years these brokerage firms have employed boiler plate Client Relationship Agreements (or similarly titled agreements) with their account holders that contain clauses similar to the “cross collateralization” clause made famous by your friendly local credit union, and such an Agreement existed in Daley. These clauses grant liens on all client accounts held at the brokerage firm (which would include an IRA) as security for the payment of any other indebtedness the account holder may have with the brokerage firm. These recent cases reason that it is the granting of a lien on the IRA that makes the account vulnerable to liquidation by a Chapter 7 Trustee.
The Courts that have reached this conclusion rely on IRC Section 408(e)(2), which provides that an IRA loses its tax exemption if the account holder engages in a “prohibited transaction”, which under IRC Section 4975(c)(1) includes “any direct or indirect—(B) lending of money or other extension of credit between a plan and a disqualified person” (emphasis supplied). Section 4975(e)(2)(A) provides that the term “disqualified person” includes a “fiduciary”, which is defined by Section 4975(e)(3)(A) as any person who “exercises any discretionary authority or control respecting management…or disposition of [the plan] assets”. The owners of self-directed IRA’s are held to be “fiduciaries” of an IRA, and as such are “disqualified persons”. Accordingly, the Daley court ruled that (1) once the account holder granted a lien on his or her IRA they had engaged in a “prohibited transaction” that caused the funds in said IRA to lose their “exempt from taxation” status under the Internal Revenue Code, and (2) loss of this tax exempt status meant that the IRA could not be claimed as exempt under Bankruptcy Code Section 522(d)(12), or any corresponding state exemption statute.
The IRA in Daley received a “favorable determination” by the IRS, which entitled it to a rebuttable presumption of exemption under Bankruptcy Code section 522(b)(4)(A). The Trustee in Daley was able to rebut the statutory presumption of exemption and proceed against the IRA. QUERY—Would the debtor have been better off if the IRA had not received a “favorable determination” by the IRS? The Daley court does not reach this question, but the Bankruptcy Code exemption statute suggests that the answer might be “yes”. Bankruptcy Code section 522 (b)(4)(B) provides that if the fund in question has not received an IRS “favorable determination” it nevertheless is exempt if (1) no “unfavorable determination” has ever been made by the IRS or any court, and (2) either the fund is in compliance with IRC regulations, or if the fund is not in compliance, the non-compliance is not the account holder’s fault. It is critical to note that this sub-section ( 522(b)(4)(B)) does not create are buttable presumption of exemption, but rather, states that the fund is exempt. It is curious that a fund receiving a “favorable determination” (such as in Daley) enjoys only a rebuttable presumption of exemption, whereas a non-compliant fund seems to enjoy an unqualified exemption providing the account holder did not cause the non-compliance. How does this make any sense?
The Daley ruling is currently on appeal to the Sixth Circuit, but the underlying holding is troubling on many levels. First, the big brokerage firms have created countless thousands of IRA’s for the general population so its effect could be far-reaching—good news for Chapter 7 Trustees but bad news for unsuspecting, struggling debtors. In addition, the debtor in Daley had no other accounts with Merrill Lynch and owed no money to Merrill, so the “cross collateralization” clause in question had no tangible application to the particular account holder. The Daley court held that it was just the existence of the complained of language in the Client Relationship Agreement that made the IRA fair game for the Chapter 7 Trustee. If the Court’s do not fix this unexpected (and presumably unintended) threat to retirement plans then Congress should adopt a statutory fix.
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