Posts Tagged ‘Minneapolis bankruptcy attorney’

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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.

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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

 

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Why did a debt collector send me a 1099-C?

Wednesday, February 22nd, 2012

1099-CRe-posted for the upcoming tax season! This post describes how tax reporting of forgiven debt works. It also gives some solutions if you’ve been hit with a 1099-C for debt forgiveness.

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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Our most popular blog posts of 2011

Monday, December 12th, 2011

As consumer lawyers we like to know what kinds of issues are on our clients’ minds. So we took a look at our blog to see which posts got the most action. Below we run down the top five of 2011.

Can a second mortgage company sue after foreclosure? This was (by far) our most visited post of 2011. In the post we describe how second mortgage companies often wait a couple of years after foreclosure before they go after the homeowner for a deficiency judgment. They probably figure that there’s no point in trying to collect money from people who are in such dire straits. So it was no surprise, since the foreclosure crisis peaked around 2008-2009, that people were dealing with second mortgage companies two years later.

Can I run up my credit cards before filing bankruptcy? This was a popular question on the blog and in the office. And I know people don’t really mean that they want to go on spending sprees and then wipe the debt out in bankruptcy. The questions were more from people who had been living off their credit cards before coming to see us, and wanted to know whether they’d be cut off from credit right away. We advised clients to wean themselves off plastic, and to definitely avoid buying luxury goods and services before filing bankruptcy.

A debt collector is taking my paycheck–what do I do? Garnishment was a killer in 2011. You wanted to know how to get your money back from debt collectors who had taken money out of your paycheck or bank account. We told you about the garnishment exemptions. We told you about the new rule that protects federal benefits. And then we reminded you that if you file bankruptcy, any funds taken from you within the 90 days before filing had to be returned.

How much will my Chapter 13 payments be? One of our biggest trends in 2011 was a big uptick in Chapter 13 filers. A lot were people wh0 had used up every other option, and wanted to use Chapter 13 to catch up on mortgage payments. Others had heard about the magic of lien stripping and wanted to know if we could wipe out their second mortgage (for the most part, we could). But a big part of deciding whether to file Chapter 13 is to know whether the payments would be affordable. We spoke. You clicked.

The payday loan scam Finally, we told you about debt collectors who use nasty practices to collect payday loans that you probably don’t owe. We reminded you never to pay a debt collector without having the deal in writing. We also reminded you that debt collectors (even the ones collecting fake debts) need to follow the Fair Debt Collection Practices Act, and gave you some tips for stopping debt harassment.

The best part was when clients told us that they used our blog to figure out how to get out of a jam. What other topics should we be writing about in 2012? Leave your ideas in the comments.

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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.

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Can I be sued for my spouse’s debt after divorce?

Tuesday, November 8th, 2011

People going through divorce often wonder what’s going to happen to their and their ex’s debt. If they haven’t resolved it before the divorce, people going through divorce will need to deal with their debt after divorce. In many divorce decrees, debt can be allocated–for example, the husband agrees to take responsibility for the Capital One card, while the wife agrees pay the B of A Visa. Life is good.

But here’s something that people often forget to tell you. If you were jointly liable on the Capital One card before the divorce, the divorce decree doesn’t get you off the hook. Even though a judge ruled that you don’t have to pay Capital One, the divorce decree doesn’t change your legal obligation to CapOne. If your ex stops paying his monthly payments, the credit card company can still sue you. In addition, they can come after the full amount of the debt, not just half the balance, or just the purchases you made.

This doesn’t mean you can’t enforce your divorce decree and go after your ex for the money, but if your ex had the money to pay the card, wouldn’t he have paid it to Capital One?

If you were wondering why divorce is one of the three biggest causes of bankruptcy (the other two are medical emergency and job loss) this might be a clue. If you’re dealing with debt after divorce, going through divorce, or you’re being sued for an ex-spouse’s debt, give us a call.

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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!

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Means test income figures changing Nov. 1

Monday, October 17th, 2011

That wacky Department of Justice is at it again. Starting November 1, the means test household median income numbers will be changing. These changes will make it slightly easier for some debtors to file for Chapter 7 after November 1 (and slightly harder for others).

The median income for a single filer with no dependents is increasing from $45,760 to $46,161, meaning that singles making between $45,760 and $46,161 will no longer be subject to the long-form means test calculation. The median income for families of two and four will decrease slightly. What’s a little odd, is that the median income for a family of three has taken a dive from $74,082 to $71,784. Your guess why is as good as mine.

Want to know more about what these changes will mean for your situation? Give us a call.

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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.

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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.

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