Cincinnati Bankruptcy Blog: Please Scroll Down For Earlier Entries
8/28/2014: Legally married same-sex couples now afforded equal rights under Federal Bankruptcy Law.
On July 6, 2011, the U.S. Department of Justice stated that it would no longer oppose joint bankruptcy petitions filed by same-sex married couples.
That position has now been reinforced by the U.S. Supreme Court in striking down Section 3 of the Defense of Marriage Act (DOMA) in United States v. Windsor, . That historic decision clears the way for legally married same-sex couples to enjoy the federal benefits conferred upon married couples, including the right to file a joint bankruptcy petition.
8/21/2014: President Obama recently announced a significant expansion in the Federal, Income-Based-Repayment, program for student loans.
This is a big deal for many of my clients, and for many others as well. Read the following for further details.
5/2/2014: Do you think the 2008 recession caused Americans to start saving again? Read this article and think again:
3/20/2014: Watch our Cable TV appearance to learn more about Bankruptcy:
2/08/2014: Watch Out For Home Owner Association Fees:
The Home Owner's Association must have a really good lobbyist because they receive special treatment as a creditor under the Bankruptcy Code. Specifically, the bankruptcy code provision is 11 U.S.C. Section 523(a)(16). Any association fee or assessment arising before the date of your bankruptcy filing dischargeable (i.e. meaning it will be eliminated).
Any fee or assessment that becomes due and payable after the bankruptcy filing date is NOT dischargeable, as long as you continue to have legal, equitable, or possessory ownership interest in the property.
Once you have extinguished your ownership interest (typically done through a foreclosure process) in the property, then you are no longer legally obligated to pay any Home Owner's Association fees or assessments that accrue after that point.
So if you still have a legal/equitable ownership interest in that property, then you can still be liable for those HOA fees and assessments after the date of the bankruptcy filing.
12/16/2013: Decline in Bankruptcy Fillings Continues
According to www.USCourts.gov Bankruptcy filings for the 12-month period ending June 30, 2013, fell 13 percent when compared to bankruptcy filings for the 12-month period ending June 30, 2012, according to the Administrative Office of the U.S. Courts. June 2013 bankruptcy filings totaled 1,137,978, compared to 1,311,602 bankruptcy cases filed in the 12-month period ending June 2012. This is the lowest total for bankruptcy filings in any 12-month period since the one ending Dec. 31, 2008.
Filings by Chapter:For the 12-month period ending June 30, 2012, filings fell for chapters 7, 11, 12, and 13 compared to filings in the 12-month period ending June 30, 2011.
• Chapter 7 filings, which constitute 70 percent of all filings, fell 16 percent to 914,015 from the 1,083,671 Chapter 7 filings in the 12-month period ending June 30, 2011.
• Chapter 13 filings, which account for 29 percent of all filings, fell 11 percent to 385,949 from the 432,333 Chapter 13 bankruptcies filed in the same time period in 2011.
• Chapter 11 filings, which make up less than 1 percent of all filings, fell 14 percent to 10,921 from the 12,714 Chapter 11 filings in the same time period in 2011.
• Chapter 12 filings fell 19 percent to 582 from the 717 Chapter 12 filings in the same time period in 2011.
The rate of decline is slowing. Bob Lawless of www.creditslips.org states: "the rate of change in the rate of change is slowing, albeit barely. Instead of year-over-year declines each month of 14-15% as was happening last year, declines are now around 11-12%. Some predict that filings will increase starting the year 2015.
As Jeff Peltz of www.newyorkbankruptcyattorney.com writes: "I predict that bankruptcy filings will continue to decrease to a low of 900,000 during 2014. However, I also predict that, as the economy heats up and credit once again becomes easier to get in 2014 and 2015, bankruptcy filings once again will climb over one million by 2015."
11/21/2013: Seniors and Bankruptcy
If you are over 55 years of age, there are special legal and practical considerations when it comes to bankruptcy and other potential solutions to your financial challenges. American adults age 55 and over experienced the sharpest increase in bankruptcy filings of any age group since 1991, according to a recent study conducted for AARP's Public Policy Institute.
The Institute for Financial Literacy (IFL), based in Portland, Maine, did an age breakdown of the data for 2009, when 1.4 million people sought bankruptcy protection (analysts are still processing the 2010 figures). The study found that older people are making up an increasing proportion of the nation's bankruptcy filers. The 55-to-64 age group made up 17 percent of filers in 2009, up from 14 percent in 2006. The 65-and-up group, meanwhile, made up 8.3 percent of all filers in 2009, a rise from 7.8 percent in 2006.
RETIREES IN DEBTRelative percentage change in bankruptcy filing rates from 1991-2007, by age category
Age % change:
Total filings -29.2% (Source: 2007 Consumer Bankruptcy Project).
According to a University of Michigan study, 67 percent of people age 65 and older who filed for bankruptcy in 2007 cited credit card interest and fees as a culprit. Credit cards have become many seniors' solution when funds are needed to pay for health care, help children and grandchildren, or even to fulfill a desire live beyond their means.
Filing bankruptcy is a last resort, but it may be the only alternative. A bankruptcy typically stays on a credit record for a decade and makes it very difficult to get credit for at least a few years and may also impair one's ability to get a job or rent an apartment.
If filing does become necessary, there is some benefit and relief for seniors-
The Good News:• If you're concerned about protecting your social security: under bankruptcy law, any benefits you receive under the Social Security Act are not counted as income for means test purposes.
• If you're worried about your tax exempt retirement accounts: under federal bankruptcy law, almost all legitimate tax exempt retirement accounts, including 401(k)s, 403(b)s, profit-sharing, money purchase, and defined-benefit plans, are entirely exempt in bankruptcy.
• If your home and the equity you have in it makes up most of your nest egg: many states, as well as the federal bankruptcy exemptions, offer debtors a homestead exemption to protect a certain amount of equity in their home.
• If medical bills are the primary cause of your need to file: filing for Chapter 7 bankruptcy can wipe out your outstanding medical bills in just a few months.
9/10/2013: Several Good Reasons to File Chapter 13 Bankruptcy:
1. Stop Foreclosure on your Home. —
In bankruptcy, an automatic bankruptcy stay goes into effect, which prohibits any collection action against you, including a foreclosure. Mortgage payment arrearages (i.e., past due payments) will be paid back through the 3 to 5 year Chapter 13 payment Plan. Arrearages will get paid through the Chapter 13 Trustee from monthly payments you make to the Trustee.
2. Strip Wholly Unsecured 2nd Mortgage Liens in Chapter 13 —
If you have a 2nd mortgage or 2nd lien on your home that is completely unsecured then that lien can be stripped off in a Chapter 13 bankruptcy. So if your first mortgage loan amount is $150,000, and the home's fair market value is only $130,000, then the $30,000 2nd mortgage is considered completely unsecured as there is not enough equity to cover even the first mortgage. Therefore, the 2nd mortgage lien could be stripped off the home in the bankruptcy. Keep in mind that a mortgage lien cannot be stripped off in Chapter 7 bankruptcy, only in Chapter 13 bankruptcy. Remember, you have to complete your 3 to 5 year Chapter 13 Plan to make the lien strip off permanent.
3. Make Tax problems or a Child/Spousal Support obligations current over 36 to 60 months —
Non-dischargeable taxes or child/spousal support obligations can be paid through a Chapter 13 plan over 36 to 60 months depending on the plan length for your case.
4. Stretch Out Vehicle or Other Secured Debt payments & Propose a Reduction in the Interest Rate—
In a Chapter 13 bankruptcy you can spread out your secured debt payments (e.g., vehicle, secured furniture, computer, jewelry, etc.) over the life of your 3 to 5 year Chapter 13 payment plan. The interest rate can be reduced to a lower rate if you have a high rate of interest. Any arrearages can be paid through the Chapter 13 plan, which would allow you to get current with your payments.
5. Generally, Keep Non-Exempt Property in Chapter 13 Bankruptcy —
In most Chapter 13 bankruptcy cases, people are able to keep non-exempt assets (those assets not protected by the law) that normally could have been taken if the person had filed a Chapter 7 bankruptcy. There are exceptions to this which are specific to each case.
8/20/2013: Trying to buy a property with a loan after a foreclosure? Remember these general guidelines:
1.For a FHA loan on residential, owner-occupied: 3 years from transfer date from Sheriff's deed as reported on auditors site
2.For non-FHA loan: 4 years from transfer
3.For investment property: No FHA and 20% down
4. Remember: Individual banks may have their own internal policies adding to/changing these thresholds.
8/1/2013: Common Bankruptcy Mistakes:
1. Preference Payments
If you owe on credit cards or medical debt and instead of paying that you pay past-due debt to family within 1 year of filing bankruptcy, that is a preference payment. The Judge can take that money back from your family and give it to your other creditors. For ordinary (non family) creditors it is within 90 days of filing bankruptcy. So don't pay past due debt just before filing. On-time payments in the ordinary course of business are fine.
2. Transferring Property
Don't transfer titles, sign property away etc. before you file bankruptcy. Don't sell property for less than fair market value. The Judge can reverse these transfers.
3. Loading Up
Once you know you can not repay your debt, it is fraudulent to continue to acquire new debt. So don't do any cash advances or balance transfers. It is best to stop using credit cards entirely once you know you are going to have to file bankruptcy. There is a presumption that charges made within 90 days of filing are fraudulent and those may have to be repaid.
4. Tax Refunds
If you are filing after about October 1st and before you get your tax refunds, be sure to discuss how much you can exempt with your attorney NOTE: Huge tax refunds are not good. This is a no-interest loan you are making to Uncle Sam each year. Far better to claim more dependents and get more $ on each paycheck.
5. Unlisted Debt
Please don't leave creditors off your petition! Your attorney will review a draft petition with you again after we go through everything together in the office.
6. Unlisted Assets
We can't exempt assets that are not listed, so very important to list everything you own of significance. Normally we can deal with it in some way.
7. Lawsuits & Claims against Others
Personal Injury and other claims must be listed. Because your cooperation is needed in order to prosecute your Personal Injury claim, an arrangement can often be made so you can keep part of the proceeds & we may be able to exempt them if you need them for basic living expenses.
If you will be receiving an inheritance or life insurance proceeds within 6 months, do not file bankruptcy. If you do receive these funds the Court can take them to satisfy your debt.
9. Waiting too Long:Lawsuits, wage and bank garnishments and liens and all their associated headaches can be avoided.
10. Missed Hearing
If you forget to attend your hearing your case may be dismissed.
11. Reaffirmation Agreements
When you file Chapter 7 you schedule all debt including home and car loans you would like to keep. Some banks request new contracts called Reaffirmation Agreements. Some Judges prefer that you not reaffirm and tell clients to just keep & pay. That way you can not be sued, garnished etc. if you can't pay in the future for some reason. Since banks are inconsistent on credit reporting, you may want to pull your Equifax credit report occasionally and see if they are reporting your payments. if not, you can request a payment history from the lender once a year and forward that to the credit bureaus with a request they update your credit history.
7/26/2013: Just in case you were wondering...some bankruptcy statistics:
1) the average age is 38
2) 44 percent are couples filing jointly
3) 30 percent are women filing alone; 26 percent are men filing alone
4) most are slightly better educated than the general population
5) Two out of three have lost a job
6) Half have experienced a serious health problem
7) The vast majority (91 percent ) have suffered a job loss, medical event or divorce
8) 90 percent have two car payments, a house payment, and an average of $2500 in credit card debt
9) 10 percent were delinquent only five to 29 days before bankruptcy
7/23/2013: Possible Trend in Lien Stripping for Chapter 7 :
Previously, the practice of stripping a lien was only available to bankruptcy clients who filed a Chapter 13 bankruptcy, which can be more expensive and complicated than a Chapter 7 bankruptcy. This is STILL the case in Ohio. However, the Eleventh Circuit appellate court recently stated in In Re: McNeal v GMAC Mortgage case No. - 11352 an opinion, ruling that debtors in a Chapter 7 bankruptcy can "strip off" the lien of a second mortgage if the fair market value of the underlying property is less than the outstanding amount of the first mortgage.
As such, debtors in Chapter 7 cases can be discharged of all the debt and strip off the lien of the second mortgage to the extent that it is wholly unsecured, in other words that the fair market value of the property is less than the amount owing on the first mortgage. With the large number of totally underwater second mortgages, this should provide significant relief to those in the Eleventh Circuit and hopefully, someday soon travel to other jurisdictions.
7/10/2013: Why would the Bankruptcy Court deny my bankruptcy discharge?
Some reasons include Intention to defraud creditors by concealing or withholding property. Fraudulent acts committed such as destruction of records, perjury, or concealing details, or the willfull failure in taking responsibility for loss of assets.
When this happens, a Court order violation has occurred. Any or all debts related to your case could be denied a discharge. Sometimes the case leads to termination or dismissal, depending on actions carried out by the trustee. In other words, if your case continues to press forward the opportunity to discharge your debt may be lost.
Most debtors seeking to have debt eliminated or discharged may have the action granted by the bankruptcy court. Although a discharge can be denied and in many cases it is due to the debtor doing something they should have avoided. It is important to note that when a discharge is denied, it may not necessarily mean the case is dismissed. But, it often depends on the situation of the debtor as to how the case will proceed.
It is important to be honest in reporting information about your case to your trustee or bankruptcy attorney. If you are denied a discharge in a Chapter 7 case, it is possible such debts may not be dischargeable in a future filing. There is the possibility of getting them discharged in a Chapter 13 bankruptcy. You can review this option with an experienced bankruptcy lawyer.
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