Posts Tagged ‘Chapter 13’

« Older Entries

What does Chapter 13 bankruptcy cost?

Monday, January 14th, 2013
Chapter 13

Photo by Daniel Moyle

In an earlier post, we wrote about how we price our Chapter 7 cases. One of the first things a potential client wants to know during a consultation is how much bankruptcy costs. Obviously, every case is different, but here’s a rough version of how we price cases in Chapter 13.

1. You pay a flat fee out-of-pocket. When you’re in financial trouble, you want predictability. You don’t want your lawyer to run up the bill on you. That’ why we quote you a flat fee at the beginning of the process, and that’s what you pay. No fine print, no hidden fees. We agree on it at the start so you can plan for the expense.

2. You don’t need to pay your whole fee upfront in Chapter 13. Unlike Chapter 7, in a Chapter 13 case we don’t need the whole bankruptcy fee up front. In fact, in many cases Chapter 13 costs less upfront than Chapter 7–some people even opt for Chapter 13 because of our flexible pricing. We generally require a minimum of $1,000 before filing in a Chapter 13, but this  can depend on your case.

3. We can get the rest of our fee out of your creditors’ pockets. In Chapter 13, we can apply to the court for our remaining fee. Because this comes out of the Chapter 13 payments you’re already paying, in most cases it doesn’t cost you an extra dime. In fact, if you’re looking for an extra way to stick it to your creditors, here it is. The money we receive from the Chapter 13 payments would have lined their pockets if we hadn’t applied for it. Our total fee comes out to $2,500 for below-median income cases, $3,000 in above-median cases, or greater if we can prove to the court that it was necessary to charge more.

4. The filing fee. In a Chapter 13 case, there is a court filing fee of $281 and mandatory credit counseling fees (for our clients, credit counseling runs around $68 for a single filer or $87 for joint filers). You pay those fees to us and we forward them as needed.

And remember–you may not want to bargain-hunt on bankruptcy. The best lawyers will quote you a fair price, but the worst ones will probably discount their fees to try to take business from the good ones. You want a lawyer who’s experienced enough to understand a lot of the tricks and traps of bankruptcy. You also want someone who’ll be available to answer your questions, and won’t blow you off because they’re too busy with all their other cases. And you want someone who’s willing to use the bankruptcy law creatively to help you improve your situation. As it happens, we know a couple of guys who fit the bill pretty well.

Tags: ,
Posted in Bankruptcy | No Comments »

What to expect at the bankruptcy meeting of creditors

Monday, December 10th, 2012

This post describes what you can expect at your bankruptcy meeting of creditors in Minnesota.

1. What’s a bankruptcy meeting of creditors? A meeting of creditors, sometimes called the “341 meeting,” is a requirement of bankruptcy. In most bankruptcy cases, you do not have to appear in court. You go to a meeting of creditors instead. In most cases, the meeting is just a formality, but it’s important to prepare either way.

2. When is the meeting? Usually three to five weeks after you file your bankruptcy case.

3. Who shows up at the meeting? The bankruptcy meeting of creditors happens in public, so other bankruptcy filers and attorneys will be there. There is also the bankruptcy trustee, who conducts the meeting. The judge is never at the meeting of creditors.

4. But it’s called the meeting of creditors. Won’t my creditors be there? Creditors show up VERY rarely to these meetings. In the last 100 cases we’ve been involved in, a creditor has shown up only once, and we totally expected it and prepared for it. Credit card companies, car lenders and mortgage companies almost never show up.

5. What do I need to bring? This is important. The meeting will be canceled and rescheduled if you don’t bring proof of ID and social security number. You’ll also need your most recent paystub and all bank statements covering the date of filing. We’ll ask you for all this stuff way before your meeting so we have backup copies in case you forget.

6. How long does the meeting take? The trustee usually schedules five cases every half hour. So your meeting should take more than a few minutes, unless we’ve told you that your case is complicated. But if that’s the case we’ll make sure you’re well prepared.

7. What should I wear? Just dress like you would to a meeting at our office. There’s no need to dress up, just dress neat (and don’t overdo it on the bling–if you come in looking like a zillionaire, people will wonder why you’re filing bankruptcy.)

8. What will the trustee ask me? Here are a few questions the trustee is likely to ask:

  • Is this your signature on the petition and schedules? Did you read the petition and schedules before you signed them? Is the information true and complete?
  • Have you listed all of your assets on the schedules? Are you a co-owner of any property with anyone else? (e.g. family cabins)
  • Do you expect to come into any money, such as an inheritance?
  • Does anyone owe you money?
  • Have you paid any creditors in the last 90 days, other than minimum payments?
  • Are you a party to any lawsuits you haven’t identified in your schedules?
  • Are you owed any domestic support? Do you owe domestic support?
  • Have you transferred any property to anyone in the last year? Is anyone holding property for you?
  • Have you previously filed bankruptcy?

9. How should I answer? Just tell the truth. Don’t feel like you need to tell a whole story–keep your answers short and sweet–but answer truthfully and completely. If you don’t know the answer to a question, ask for clarification–it’s better not to answer right away than to answer incorrectly.

10. Where is the meeting? 

  • Minneapolis Chapter 7 cases: Federal Courthouse, 300 South Fourth Street, 10th Floor
  • St. Paul Chapter 7 cases: Federal Courthouse, 316 North Robert Street, 4th Floor
  • Minneapolis/St. Paul Chapter 13 cases: 12 South Sixth Street, Suite 310

 

Tags: , , , , ,
Posted in Bankruptcy | No Comments »

My Chapter 13 was confirmed. What now?

Wednesday, May 9th, 2012

Chapter 13 confirmedThis post describes what happens after a Chapter 13 bankruptcy is confirmed. Confirmation is the biggest hurdle in Chapter 13, but it’s not the end.

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.

Tags: ,
Posted in Bankruptcy | No Comments »

How do I stop foreclosure?

Tuesday, December 6th, 2011
foreclosed house

Photo by Kevin Dooley

The most common problem people come to see about is foreclosure. Knowing you might lose your home in foreclosure is scary, but there are a lot of ways we can help you get back into good standing on your mortgage so we can keep you in your house. In this post I run down some of the options out there:

1. Try for a loan modification. In our opinion, most of the loan mod programs out there are nearly worthless. HAMP can be a good fix for a homeowner behind on payments, since it reduces monthly payments AND puts your loan back into good standing. But since there’s no way to force lenders to comply with HAMP, most people are left out in the cold (and pushed into foreclosure). It’s been very rare to see a homeowner get a HAMP modification, but that doesn’t mean you shouldn’t try it, hoping to catch the right person on the right day and catch a lucky break.

As for the lenders’ “internal” modification programs, your guess is as good as ours whether you’ll qualify.  Since the criteria and terms of these mod programs are usually secret, you’re at the lender’s mercy. So if you go this route, negotiate and negotiate hard. Even though the customer service rep on the phone might not realize it, the bank is probably going to lose a lot of money if they foreclose on you. Show them why. It might be helpful to order an appraisal–if the lender knew your house was $100,000 underwater, they might not think it’s such a good idea to kick you out of it.

2. Don’t hire loan modification sleazeballs. If foreclosure is the number one problem we see in our office, 1A is people who have paid sleazy loan modification outfits to help them stay out of foreclosure. These programs are expensive, and most of the time they just don’t work. In particular, stay away from: 1) out-of-state companies (it’s harder to get your money back), 2) companies that tell you to stop making your mortgage payments; and 3) for-profits that ask for a large up-front fee without telling you what they can do for you or how they can do it. So many people get caught up in these scams, and it only creates a bigger mess to clean up once the scammer runs away with the money and leaves you right where you started or worse.

3. Consider Chapter 13 reorganization. Chapter 13 is a way to force a lender to accept repayment of your arrears over time. It’s ideal for the person who missed a bunch of payments, but now has the income not only to make the payments, but also to catch up and stop foreclosure. Chapter 13 allows you to pay your mortgage arrears in equal installments over a three- to five-year period. It can be surprising when a lender refuses to let you catch up on your mortgage, even when it knows you have the income for it. This way you can call the shots and force them to accept your money.

4. Strip off your second mortgage. If you didn’t have to pay your second mortgage, could you afford to catch up on your mortgage? As of earlier this year, in a Chapter 13 reorganization we can strip second mortgages (and third mortgages, and fourth…) where the value of the house is less than the balance of the first mortgage. It’s called lien stripping. To do this, we need an appraisal to prove the value of your home. Once we can prove that your second mortgage is fully unsecured, we can strip the lien in Chapter 13.

5. More people have just been moving on. If you can’t afford your mortgage payment, can’t qualify for a modification, and bankruptcy won’t help your situation, it’s time to make some hard choices. If you have an underwater house, meaning you have no equity, what do you really own? And if you have to pay $10,000 just to get back into good standing, is it really worth it? If you decide to abandon a home to foreclosure, you can usually live in the house mortgage-free for at least six months while the foreclosure runs its course. For many of our clients, this is just enough time to save up some money to make the transition to a new place to live comfortably. And if you have a second mortgage that won’t go away in the bankruptcy, well we can usually wipe that out in Chapter 7.

Have questions about what to do with a mortgage about to go into foreclosure? Give us a call for a free consultation.

Tags: , , , , , , ,
Posted in Bankruptcy, Foreclosure | 3 Comments »

Bankruptcy filing fees will increase Nov. 1

Monday, October 17th, 2011

With budget crunches hitting U.S. and state governments, the federal court system seems to have forgotten about your budget crunch. Bankruptcy filing fees will become more expensive starting on November 1, 2011.

The new filing fee for each chapter of bankruptcy will be as follows:

Chapter 7: $306 (was $299)

Chapter 11: $1046 (was $1039)

Chapter 13: $281 (was $274)

So consider this a coupon from us to you. File Chapter 7 between now and October 31 and save $7!

Can’t beat this deal!

Tags: , , , , ,
Posted in Bankruptcy | No Comments »

Car loans in Chapter 13

Monday, September 26th, 2011

Clients often want to know what we can do to help them with their car payments in Chapter 13. Often we can make it a whole lot easier for clients to pay their car loans. Here are some of the ways we can help.

1. Pay off the car in Chapter 13. Your car loan must be paid in full during a Chapter 13 Plan, as long as the last car payment falls within the term of the Plan. So if you have 49 months remaining on your loan and your Plan is 60 months long, your Plan must pay off the full balance. If you have 61 months remaining on your car loan, you can opt to continue making your normal car payments directly throughout your case and avoid the Trustee’s commission.

2. With older cars, “cram down” the loan to the value of the car. If you bought your car on credit more than 910 days (2.5 years) ago, we look to see if the value of your car is less than the amount of the loan. If your car is underwater, we can reduce the amount of the loan to match the value of the car. This is called cramdown, and it’s one of the most powerful remedies you have in bankruptcy..

3. Reduce the interest rate to the Till rate. Regardless of whether you bought your car more than 2.5 years ago, we can generally reduce your interest rate on your car loan to the Till rate (named after a Supreme Court case). The Till rate is generally the prime rate, plus some risk factor. So, the prime rate as of the date of this post is 3.25 percent. Assuming we add a risk factor of one percent, the Till rate is 4.25 percent. Very few borrowers already have interest rates lower than 4.25 percent (and many have them up to the mid-to-high teens), so this is a benefit for almost everyone.

4. Surrender the car. The last option, surrendering the car and wiping out the debt, is attractive if your car is a real beater. If the car isn’t worth the remaining loan balance, you can always give it up in Chapter 13 bankruptcy just like you can in a Chapter 7 case.

If you’re struggling to make payments on your car loan, give us a call. There may be lots we can do to make your car payment more affordable by filing a Chapter 13 case.

Tags: , , , , , , ,
Posted in Bankruptcy | 3 Comments »

Lien stripping–removing a second mortgage in Chapter 13

Wednesday, September 7th, 2011

One of the benefits of Chapter 13 bankruptcy over Chapter 7 is flexibility. There are just lots of ways we can help your financial situation in a Chapter 13 that we just don’t have the power to do in Chapter 7. One of the big ones is lien stripping–wiping out an underwater second mortgage.

1. What is lien stripping? Lien stripping is a way of removing an underwater second mortgage on a house in Chapter 13. If the house has two mortgages, and the second mortgage is fully unsecured, it may be removed. This means that if the value of the house is below the balance of the first mortgage, so that the second mortgage is technically not backed by any equity in the house, we may be able to wipe it out in Chapter 13.

2. How do I know my second mortgage is fully unsecured? You will most likely need to order an appraisal of your house. But the first step is to look at your property tax appraised value. During the housing boom, tax values used to be lower than the true value of the house. But now that housing prices are depressed, property tax appraisals are routinely higher than the appraised value of the house. If you have questions, we’re happy to give you a referral to a licensed real estate appraiser.

3. If I can lien strip, what happens to my second mortgage? Instead of classifying the second mortgage as secured debt, which would need to be paid in full over the life of a Chapter 13 plan, a stripped second mortgage is classified as unsecured debt, meaning that it merely needs to be paid prorated with your other unsecured debt. In most Chapter 13 plans, this money comes out of the same pot that will already be allocated to your other unsecureds, such as credit cards and medical bills, so the second mortgage won’t cost you any extra money over the plan. At the end of your plan, if you’ve made all your payments, the court issues an order that removes the second mortgage lien from your house, and you only have one mortgage to deal with.

4. Does Minnesota law allow lien stripping? Minnesota was the only state that did not allow lien stripping until August 29, 2011. The 8th Circuit Bankruptcy Appellate Panel, an appeals court that oversees Minnesota bankruptcy cases, issued its decision in Fisette v. Keller, allowing lien stripping in Chapter 13 cases filed in Minnesota. This caselaw is persuasive, but not technically binding. An experienced bankruptcy lawyer can advise you whether your second mortgage can be stripped.

If you want to know more about lien stripping, give us a call.

Tags: , , , , , , , , , , ,
Posted in Bankruptcy | 3 Comments »

How much will my Chapter 13 payments be?

Tuesday, August 9th, 2011

For people behind on their mortgage payments and looking to keep their home, or people who make too much money to file Chapter 7, Chapter 13 can be a good solution. As we described in an earlier post, Chapter 13 involves paying your disposable income to creditors over a three or five-year period. Whatever isn’t paid during that period is discharged (wiped out). But to figure out whether this makes sense, the question for many clients is: how much disposable income do I have to pay in my Chapter 13 payments? Here are a few guidelines.

1. Your payment plan is based on your projected disposable income. To figure out your Chapter 13 payment, first we figure out your projected income. Your income over the past six months can a starting point for this calculation, but if you’ve recently taken a pay cut, or you know you won’t be receiving the same amount of overtime, we need to bump your income downward.

2. Next, we subtract all reasonable and necessary expenses. To get from just-plain-income to disposable income, we need to subtract your expenses. Here we look at all the expenses that are necessary to take care of your family’s needs, such as food, rent/mortgage, car payment, utilities, etc. We also look at things that you know you will be spending , such as car repairs, home maintenance or dental work. Then we look at things you should be spending on, but haven’t because you’ve been in financial trouble. This can include health insurance and other medical expenses, 401(k), life insurance, etc. If there’s something that’s not on our list of ordinary expenses, that doesn’t mean we can’t deduct it, as long as it’s reasonable and necessary. Once we count all these expenses, we subtract them from income and we get an idea of your disposable income.

3. Our job is to fight for your way of life. The Trustee evaluates the reasonableness of your expenses, trying to cut them down so that there’s extra money for you to pay to your creditors. Our job is to protect the money that is necessary for you to take care of yourself and your family. So we ask for two things: 1) verification of your expenses, so we can prove that you actually need to spend that money; and 2) information on why your expenses are reasonable and necessary. For example, one client had an $800 monthly bill for auto fuel. This seems exorbitant, until we realized that the client drives a gas guzzler and lives 60 miles from where he works. If we can explain to the court why an expense is reasonable, there is a better chance it will be allowed.

4. The plan must pay off certain required debts. Your Chapter 13 payments must be large enough to make certain required payments. For example, if you are trying to get current on a mortgage, your total plan payments must cover the amount of your mortgage arrears. Plan payments also must cover any secured debt (car loans) that end within the plan period. Also, plan payment must cover any priority debt, such as some tax debt or government penalties within the plan period. If the total plan payments are enough to pay all of these required debts over the plan period, your plan can survive.

 5. The plan must be in the “best interests” of your unsecured creditors. If you have unexempt property that you are looking to protect in a Chapter 13, your Chapter 13 payments must be at least the value of your nonexempt property. In other words, in Chapter 13 your unsecured creditors can’t receive any less in the plan than they would have received in Chapter 7 if your nonexempt property was liquidated.

These rules can be tricky, and Chapter 13 almost definitely cannot be done without the assistance of a bankruptcy specialist. Give us a call if you want to run a scenario by us.

Tags: , , , , , ,
Posted in Bankruptcy | 4 Comments »

Stop foreclosure with Chapter 13

Monday, June 13th, 2011

stop foreclosureOften people come to see us after they’ve done everything they can to stop foreclosure. Many try to get loan modifications from their lenders, but after lots of runaround, most are denied. For some strange reason, the lender just won’t allow the borrower to get out of default and get back to making payments. With a foreclosure sale (often called a sheriff’s sale) on the horizon, many people are looking for a way to stop foreclosure and force their lender to accept payments. Chapter 13 reorganization can be a fix in this situation. Here are some of the advantages:

1. The automatic stay will stop foreclosure. The automatic stay protects you from creditors and prevents foreclosure from taking place, even if the bankruptcy case is filed just minutes before the sheriff’s sale. If the clock is ticking on your foreclosure sale and you’re out of options to stop foreclosure, filing bankruptcy may give you the time you need.

2. You can force a lender to accept overdue payments over time. Chapter 13 involves repaying a portion of your debt over time to stop foreclosure. In a Chapter 13 case, you pay your mortgage arrears back over the life of the plan. To figure out if this is feasible, we do some simple math. We take the overdue amount on the loan (arrears), and divide it over the length of your Chapter 13 plan (three to five years). Let’s say your mortgage payment is $1000/mo and you are overdue $10,000 on your mortgage. In a five-year Chapter 13 plan, we would divide the $1,000 arrears by 60 ($166.67). If you can pay your regular mortgage payment plus an extra $166.67 per month (for a total of $1166.67/mo), the lender will have to accept your repayment plan.

3. In some cases, we can “strip” your second mortgage. We can “strip” a second mortgage that is fully underwater. Here’s how lien stripping works–if you have two mortgages, and the balance of your first mortgage is more than the current value of your house, then your second mortgage is “unsecured” because there’s no equity in the home to back it up. When that’s the case, the lien can be removed and the value of the second mortgage is paid pro rata with the rest of your unsecured creditors (medical bills, credit cards, etc.) Because you only pay the unsecured debt you can afford in a Chapter 13, and the remaining debt is wiped out after the plan has ended, this can save you truckloads of money.

Lien stripping be a huge benefit to borrowers over-stressed by two mortgages. But don’t try this at home. The law in Minnesota on lien stripping is unsettled and you’ll need an attorney to guide you through the process. If you’re facing a sheriff sale and feel like you’re out of options to stop foreclosure, give us a call.

Tags: , , , , ,
Posted in Bankruptcy, Foreclosure | 4 Comments »

The automatic stay in bankruptcy

Friday, June 3rd, 2011

automatic stayOne of the biggest benefits of bankruptcy is that your filing will stop any debt collection against you. This means no more angry phone calls from debt collectors, no more threatening letters, and any lawsuits against you must stop (including pending foreclosure sales). Under the bankruptcy law, this is called the “automatic stay.” There are only a few things you need to know about the automatic stay:

1. The automatic stay begins the moment we file your case. This means that a foreclosure sale at 10:00 doesn’t count if you filed your case at 9:59. It also means that a creditor who calls you minutes after your case has been filed has to stop, even if they haven’t received notice of your filing yet.

2.  The stay is in effect until the end of your case, unless a creditor has a good reason. In a Chapter 7 bankruptcy, the stay often lasts until your case is closed. In a Chapter 13 bankruptcy, your case may last for three to five years. The automatic stay remains in effect the entire time.

A creditor may make a motion with the court to lift the stay. This usually happens with a secured debt you’re not paying–the creditor can ask to have the stay lifted in order to foreclose on a mortgage in default, for example. If a creditor does try to lift your stay, your attorney can advise you on whether it’s a good idea to fight the motion and prevent that creditor from being able to collect until the end of your case.

Even though the stay does expire at the end of a Chapter 7 case, that’s usually not a problem for the debtor, since the stay is replaced by the discharge injunction. The discharge injunction is similar to the stay–once a debt is discharged in bankruptcy, a creditor can’t try to collect it ever again.

3. The automatic stay protects you from all creditors, even ones who will still be able to collect when your bankruptcy is finished. If you have tax debts that are nondischargeable, or unpaid student loans, the automatic stay gives you three to four months of breathing room while you figure out your finances. Even if you’re going to owe the debt once the bankruptcy is finished, they can’t bother you while the stay is in place.

4. You may be able to recover money damages for stay violations. The Bankruptcy Code is dead serious about protecting debtors from being bothered by creditors after a case has been filed. If you are damaged by any “willful” violation of the automatic stay, you may recover actual damages, including costs and attorney’s fees, and, sometimes even punitive damages.

In general, if you’re getting collection calls in bankruptcy, we may give them one free pass–we remind the creditor that you filed a case and warn them not to contact you again. If they’re brave enough (read: stupid enough) to continue giving you hassle, we can sue them for damages. Any damages that you win are not considered part of the bankruptcy estate and don’t need to be turned over to the trustee, meaning they’re your down payment toward your fresh start.

If the agency calling you is a third-party debt collector, they may have also violated the Fair Debt Collection Practices Act (FDCPA), which can result in awards of up to $1,000 statutory damages, actual damages and attorneys fees.

If you’ve filed bankruptcy, notify your attorney any time a creditor contacts you, and be sure to keep a record of what calls you’ve received and from whom.  If you’ve been harassed by a creditor after your bankruptcy has been filed, get in touch to discuss your options.

Tags: , , , , , ,
Posted in Bankruptcy | 3 Comments »

« Older Entries