My Chapter 13 was confirmed. What now?

by David Friedman on May 9, 2012

Congratulations, your Chapter 13 plan has been confirmed! (If our congratulations are early, don’t worry–your turn will come too). Since you’ll be in Chapter 13 for three to five years, you probably have a bunch of questions about what to expect. We’ll tackle a few of these below. If you have other questions, please leave them in the comments below.

1. When do I make my first payment to the trustee? Your first Chapter 13 plan payment is due within 30 days of filing your case. The payment must be by money order to the P.O. Box specified on your welcome letter form the trustee’s office. Future payments can be made by automatic debit from your bank account, if we arrange that ahead of time with the trustee’s office.

2. Which of my bills should I pay while I’m in Chapter 13? You’ll need to pay your new, ongoing bills on time. This always includes utilities, generally includes your mortgage, and sometimes includes your car loan and student loans. Every once in a while, it’ll include a credit card if you have a cosigner. But your bankruptcy lawyer should have the final word on what bills to pay. If you’re not sure, ask.

3. I’m still getting calls from creditors. What do I do? Your creditors are breaking the law if they contact you after you file Chapter 13. On the first call, you can tell the creditor you filed bankruptcy and give them your case number. If you keep getting calls, you should let your bankruptcy lawyer know right away.

4. I need to buy a new car. Can I take out a loan while I’m in Chapter 13? You’ll need permission from the court to take out any new loan while you’re in Chapter 13. If you absolutely need financing, call us first so we can take you through the steps of the process.

5. What do I do if I’m going to miss a payment? If you’re in danger of missing a Chapter 13 payment, or if you already missed one, call your bankruptcy lawyer. In some cases, we can work with the Chapter 13 trustee’s office to help you get caught up on your payments. Otherwise, we might be able to modify your plan. If you don’t get in touch before missing a payment, the trustee can move to dismiss your case. The most important thing is that you let us know in advance so we can prevent this from happening.

You’re probably starting to pick up on a trend here. If you have a question, call your bankruptcy lawyer. Most of the problems that come up with confirmed Chapter 13 plans can be avoided as long as we know about them in advance. But let us know in the comments below if you have other questions.

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How to prepare for your free bankruptcy consultation

by David Friedman on May 8, 2012

1. What to expect. The first time you meet with us, we’ll give you at least an hour of our time for a free consultation. See the pictures on the front page of our site? The guy on the right is Blake, and the guy on the left is Dave. If you don’t see either of us, you’re probably in the wrong place. You might also see Bess. She’s our bankruptcy case manager and she sits in on a lot of our meetings.

And just so you know, this isn’t like a visit to the doctor, where you spend most of your time with a nurse or intern until the doc breezes through at the very end. When you come in to see us, you will always meet with an attorney (or sometimes two of us, depending on how busy we are that day).

2. Bring documents. We ask you to bring documents to your initial meeting that help us understand the issues you’re facing. We send prospective clients a copy of our new client form, bankruptcy document checklist and income and expenses worksheet by email before your free consultation (don’t worry–it shouldn’t take too long to fill out all three). The most important things we need from you are your last six months of paystubs (or other proof of income if you don’t receive paychecks) and a list of your household income and expenses. We need these things to figure out whether Chapter 7 or Chapter 13 will be a better fit for you.

Do your best to get these documents. If you can’t find everything, don’t worry about it, but if you bring everything we ask for, we can get more accomplished during the free consultation.

3. Brush up on bankruptcy. We’re happy to explain the ins and outs of bankruptcy to you. We do this stuff all day, and we like to share what we know with you. But if you study up a little bit and understand the basics, we might be able to delve into deeper issues on the first meeting, meaning we can get more accomplished in the free consultation. If you’re the type who likes to do your own research, our blog is a good first resource. We also recommend the Bankruptcy Law Network’s posts, but remember that they’re focused nationally, and because the law is different from state to state, not all the information will apply to you.

4. After the free consultation. Sometimes we can sort out all the major issues in a first consultation and decide on a course of action.If there are more complex issues, it may take a week or two of collecting information after the first meeting to figure out how best to help you. Bess will usually help you gather all the information we need. Once we decide what we can do in your case, we can talk about price, timing of your filing, etc. Throughout this process, feel free to ask any questions that come to mind.

Still have other questions before you’re ready to make that first appointment? Let us know.

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Friedman Iverson profiled in Twin Cities Business

by David Friedman on May 7, 2012

Twin Cities Business really seems to get what we do. We were profiled by senior editor Gene Rebeck in the May issue. There’s no digital copy on their web site, but you can view images of the magazine’s pages here. We’re on pages 30-31.

Buy a copy, and when you’re done with it maybe you can send it to us so we can tack it up on our “brag wall.”

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Friedman Iverson featured in Pollen!

by David Friedman on April 15, 2012

Blake and Dave talk about helping creative business in the latest issue of Pollen, the newsletter that connects creative and civic-minded professionals in the Twin Cities. Writer Regan Smith nails our approach to law for creatives:

The plaid-wearing duo display local band posters in their conference room, frequently dole out legal advice free of charge, and would rather hold meetings over a beer at the CC Club than across a desk at the office. Despite this unconventional approach to law—or, more appropriately, because of it—Friedman Iverson is quickly becoming a household name throughout the Twin Cities creative community.

Read the whole article.

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Introducing new attorney Graham Ojala-Barbour

by David Friedman on March 9, 2012

We have a new attorney at Friedman Iverson. Graham Ojala-Barbour will be working with us as a bankruptcy attorney, primarily serving our Spanish-speaking clients, and practicing immigration law.

Graham was born in Minneapolis and grew up in Northfield, Minnesota. He studied Spanish and Religion at Pacific Lutheran University in Tacoma, Washington, where he earned his B.A. He went to law school at the University of Minnesota and graduated with honors in 2011 with a concentration in human rights law. During law school he received a fellowship to work with the Immigrant Law Center of Minnesota, and also worked for one of Minnesota’s largest private immigration law firms as a law clerk.

After passing the Minnesota Bar Exam he appeared regularly at the beautiful Ramsey County courthouse as a fellowship attorney with the Ramsey County Public Defender’s Office. On the weekends he walks around lakes and reads some of the many books that he checks out from the public library.

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Why did a debt collector send me a 1099?

by David Friedman on February 22, 2012

Re-posted for the upcoming tax season!

It’s time to face the tax man again, and some consumers are surprised to receive a 1099 from a lender or debt collector they dealt with in the last year, counting income to the consumer for debt forgiveness. The amount on Form 1099-C states the income “derived” from the forgiveness or settlement (for less than the full value) of a debt. Because the lender wrote off a debt (or a portion of a debt) it believed it was owed, it has the right (but not necessarily the obligation) to charge the income to you. Here are some exceptions.

1. A lender can’t send a 1099-C for debt discharged in bankruptcy. If a debt was discharged in bankruptcy, the lender can’t issue a 1099-C for debt forgiveness. However, let’s say a debt was settled in January of 2010, and then you filed bankruptcy in February–then the debt forgiveness would be income.

2. Discharge of debt on principal residence. The federal Mortgage Forgiveness Debt Relief Act allows taxpayers to exclude debt forgiveness income from the discharge of debt on their principal residence up to $1 million. So debt reduced in a mortgage modification, as well as debt forgiven as part of the foreclosure process, will not generally count as income.

3. You were “insolvent” when the debt was forgiven. The insolvency exception is a powerful tool for many people. If, on the day before the debt was settled or forgiven, all your assets (including your retirement accounts) were less than your total debts (including your mortgage)–then you don’t have to count a 1099-C as income. File IRS Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness

4. The debt is disputed and the lender can’t prove you owed it. If you don’t owe the debt and the lender can’t prove it’s legit. you may be able to contest a 1099-C. Contact a tax attorney for help.

We aren’t tax attorneys. If you need help with a tax issue, please consult a specialist. But if you’ve received a 1099-C and you think you fall under one of these exceptions, get in touch.

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Can I wipe out tax debt in bankruptcy?

by David Friedman on February 8, 2012

Tax debt is one of the hardest kinds of debt to shake. First of all, the IRS knows where you are. Also, they have special enforcement powers to collect their debt. They can put a lien on your house or your property without suing you. They can take money in your bank account without a judgment. They can seize tax refunds. They can take you social security. And they can also garnish your wages, often for a lot of money. But contrary to popular belief, tax debt can be wiped out in bankruptcy , especially if it’s old. Here’s how it works.

1. The rules: For income tax debt to be wiped out in bankruptcy, the following three rules must apply:

Rule 1: The income tax return must have been due more than three years ago. The first question we ask to figure out income tax dischargeability is whether the tax return was due more than three years before the date of bankruptcy filing. 2008 income taxes were due on April 15, 2009. Today is February 8, 2012. These taxes are not dischargeable today, but they pass this test if we wait until April 16 to file. But there’s one wrinkle. If you filed for a six-month extension that year, your tax return wasn’t due until October 15, 2009. So if you’re looking to discharge income taxes, we can’t file your bankruptcy case until October 16, 2012.

Rule 2: The income tax return must have been filed more than two years ago. This one seems easy. If the return was filed more than two years before today, this test is satisfied. In some cases, the taxpayer never actually files a return, and so the tax agency files one for them (sometimes called a “substitute return.”). When that happens, the two-year clock never starts running, and until the taxpayer actually files his/her own return, this test can never be met.

Rule 3: The tax must have been assessed more than 240 days ago. This means that the tax agency’s determination that you owe a debt must have been made more than 240 days ago. The “determination” can be a few different things–wither you filed your return and acknowledged you owe a balance. That’s an assessment. Or the IRS changed your return to say that you owed a balance. That’s an assessment too. Finally, if you were audited, and the IRS added a balance based on the results of the audit, that’s an assessment too. This part of the test is the most confusing, and you might want to see a tax professional (tax accountant or attorney) to figure out the assessment date.

2. Other factors add time to the clock. If you’ve filed bankruptcy before, the amount of time your case was open, plus six months, are added to all the time limits above. Also, filing an Offer in Compromise with the tax agency can stop the clock.

3. Some kinds of taxes are never dischargeable. Income taxes can be discharged if they meet all the above tests. There are other kinds of debts, such as sales taxes or payroll taxes collected on behalf of an employee, that will never be dischargeable. See a tax attorney if you’re facing these types of debts.

4. If a tax debt can’t be discharged, you still amy be able to stop collection by filing Chapter 13. Chapter 13 bankruptcy stops all collection efforts by a tax agency, and allows you to spread the tax debt over a three to five-year period. This can be a big relief when the tax agency is looking to put liens on your property or garnish your wages, sometimes up to 90 percent of your income.

If you’re struggling with tax debt, give us a call for a free consultation. Often, there’s lots we can do to help.

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We’re looking for a legal assistant for our bankruptcy cases

by David Friedman on February 2, 2012

We’re looking for a legal assistant. A two-attorney boutique law firm working primarily in consumer protection and bankruptcy law is looking for a legal assistant for its uptown office. Come work for a firm dedicated to providing high-quality legal services in an accessible and unintimidating setting. The position is 3/4 time with the potential to add hours.

Skills:

  1. Extremely detail-oriented with strong organizational skills
  2. Some understanding of personal finances
  3. Proficient in Spanish a plus

Professional experience:

  1. Experience with preparation of legal documents preferred
  2. Experience as an office manager will be useful
  3. Understanding of bankruptcy law would be a big bonus

Please apply with cover letter and resume by email to info@friedmaniverson.com.

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Is a short sale better than foreclosure?

by David Friedman on February 1, 2012

The short sale industry has been a huge windfall for real estate agents. Some of them scare people into short sales on their home, even though a short sale usually has no advantages over letting your house go into foreclosure. Why do they do this? Simple, it’s the fees. Realtors stand to make up to 6 percent from the short sale of your home. On a $200,000 house, that’s a tidy $12,000 for the realtors ($6,000 for the seller’s agent, $6,000 for the buyer’s agent) . Turns out, that’s just about enough incentive to pressure you into a short sale, even when there’s no benefit to you.

1. Most short sales are no better for your credit score than foreclosure. Both short sales and foreclosures are major credit events that can have a big impact on your score. But there’s no support for the myth that a short sale is easier on your credit than a foreclosure. In fact, FICO, the leading credit-scoring company, says the opposite. If you compare a borrower who goes into foreclosure with a borrower who does a short sale where there is a deficiency balance, the credit impact is the same. If the second mortgage company will agree to wipe out your balance, then yes, the credit hit from a short sale may be softer. But this isn’t what usually happens.

2. Your realtor probably can’t wipe out your second mortgage, despite what he/she tells you. For people who have second mortgages, short sales can be tricky. Remember, in Minnesota, a second mortgage company can sue you after foreclosure for any remaining balance left on their loan. A lot of times, the second lender will release their lien if they can get a few thousand bucks from the closing of the sale, but won’t release your liability on the loan. This benefits the buyer, because they can buy the house without the lien, but it doesn’t do anything for you, since the second mortgage company can still ask you for the remaining balance. So there’s no benefit for you–you’re on the hook for practically the same amount of money as if you had gone into foreclosure.

3. Foreclosure may suck, but it has its advantages, too. Short sale has a big disadvantage over foreclosure that your realtor will probably forget to tell you. If you sell your house, you’ll probably have to leave within a month or two. If you just let your house go into foreclosure, you may have between six months and a year to live in your house mortgage-free and rent-free, while the foreclosure runs its course. That’s a lot of time to save up some money for whatever comes next–such as a security deposit and moving expenses. If you short sell your home, you’ll be giving up this right.

4. Don’t get caught by the details. I know, I know. Most realtors are honest. But when it comes to short sales, there are a lot of sleazy operators out there who’ll tell you anything to get you to sell. We’ve heard lots of cases of realtors telling the client one thing, and when they get to closing, the deal is totally different than they were led to believe. If you’re thinking of a short sale, you probably need an advocate who’s working for you, not for the commission. We represent homeowners in trouble with their mortgages. We also review short sale documents to make sure you’re getting the deal you think you are. Give us a call to talk about your situation.

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Supreme Court rules robocall cases can be brought in federal court

by David Friedman on January 19, 2012

Lately, it’s not often that the U.S. Supreme Court rules in favor of consumers. But yesterday, SCOTUS ruled 9-0 that cases under the Telephone Consumer Protection Act, known as the TCPA, can be filed in federal court, not just in state court. The case, Mims v. Arrow Financial Services, involves annoying auto-dialed phone calls made by a debt collector to a consumer without his consent.

We’ve written about the TCPA on this blog before. The TCPA prevents harassing phone practices such as calling a cell phone with an automatic dialer and calling a home phone line to leave a prerecorded message. The law awards up to $1,500 in damages for each offending call.

If you are receiving robo-calls to your cell phone, or prerecorded messages to your home phone, get in touch.

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