dorota trzeciecka bankruptcy blog

Mortgage Modification in Bankruptcy

Dorota Trzeciecka — Sun, 07 Apr 2013 21:02:49 +0000

If you tried to get mortgage modification in foreclosure and you were unsuccessful, now there is a new and more effective way to save or surrender your home. Beginning on April 1, 2013, Bankruptcy Court for the Southern District of Florida, covering Miami-Dade, Broward and Palm Beach counties, adopted its own mediation program called Loss Mitigation Mediation (“LMM”), which offers debtors an opportunity to engage in settlement discussion with lenders regarding modification of mortgages and surrender of real property in consumer cases in Chapters 7, 9, 11, and 13. The LLM works in conjunction with an online web portal called Default Mitigation Management (defaultmitigation.com). That portal facilitates preparation of the debtor’s loan modification package and exchange of information between the borrower and the loan servicer.

The LMM program is a significant improvement on the state’s mandatory foreclosure mediation, which the Florida Supreme Court terminated in December of 2011. Remember the days when you went to a foreclosure mediation, and the mediation invariably ended up in an impasse because the lender did not have all the documents and information necessary to make a decision about your loan modification. Those days are gone. To expedite and improve the exchange of documents and information between the debtors and the lenders, the LMM program mandates the use of a secure online portal for exchange of documents especially designed for the bankruptcy court.

Another major improvement is that, in this program, it is the mediator’s duty to ensure that the lender has all the required documentation prior to mediation. Mediation cannot proceed unless the mediator confirms that the borrower submitted all the required documents to the lender, and the lender received and reviewed them. So, even though the mediator ‘s fee is higher than for the state court mediation ($600 split between the parties), the success of the mediation falls heavily on the mediator to ensure that the lender has all the necessary documents and information to come to a decision at the mediation.

The mediation is broken into two one-hour segments. If you cannot resolve your case in the first hour, you get another hour and another chance at resolving it at a later date, without any additional cost to you.

This LMM program, which piloted in the Middle District of Florida, owes its high success rate to the improved exchange of documents and information between the borrower and the loan servicer through the secure online portal, improved modification packages through the Default Mitigation web portal, and the more prominent role of the mediator, who ensures that the complete exchange of documents.

Are Attorneys’ Fees in Post-dissolution Custody and Support Proceeding Dischargeable in Bankruptcy?

Dorota Trzeciecka — Tue, 17 Jul 2012 16:47:57 +0000

I was sitting in my car waiting for parking, when I got a call from a single mom in distress. She just found out that her ex husband filed bankruptcy, after the family court awarded her attorneys’ fees in a long drawn child custody case. She run up all her credit cards to hire an attorney to fight him, and was afraid that now that he filed bankruptcy, she may not be able to recover her attorneys’ fees. She said that she read in my post that alimony and child support are not dischargeable in bankruptcy, but she wanted to know if her ex husband could discharge the attorneys’ fees that she was awarded. I am hoping to answer her question in this post.

The general rule is that attorneys’ fees arising from post-dissolution custody or alimony proceeding constitute support for the former spouse, where the award is based on respective wages or ability of the parties to pay. More specifically, the courts [in Florida] primarily focus on two criteria in determining whether an attorneys’ fees obligations are non-dischargeable in bankruptcy. In some cases the courts look at the nature of the primary underlying obligation under which the attorneys’ fees arose. For example, if the attorneys’ fees are related to enforcement of obtaining alimony, child support, or maintenance, such fees may be found non-dischargeable. In other cases the courts looked at the basis of state court decisions for awarding fees. If state court awarded the attorneys’ fees to one party based on the disparity in the financial position of the parties, then the bankruptcy court may find that because the award of attorneys’ fees was in the nature of support, it is therefore not dischargeable. But, there is authority that the contrary may also be true. When the court determines that the attorneys’ fees were based not on the on “the respective wages or ability of the parties to pay”, but was based upon and supported, for example, by the bad faith litigation misconduct of one of the parties, the court may find that the attorneys’ fees are dischargeable.

Bankruptcy Alphabet A-Z – J is for Judgment Lien

Dorota Trzeciecka — Thu, 31 May 2012 03:04:14 +0000

In Florida, judgment lien arises when a creditor sues you and obtains a money judgment against you. If you do not pay the judgment, the judgment creditor will then file the recorded judgment with the Florida Department of State, Division of Corporation. By filing, the judgment creditor creates a lien on your real property and, in some cases, on your personal property. The judgment lien is valid for 10 years. It can then be renewed for additional 10 years. What does it mean for you, the debtor? The lien creates a cloud on the title to real or personal property that you owe. The creditor can’t force you to sell the property, but in order to sell the property, you have to first satisfy the lien to give the buyer of the property a clear title.

Such lien can be avoided in bankruptcy in a proceeding called “lien avoidance”. The judgment lien can be avoided if:

it is a judicial lien;
you can claim the property as exempt;
and the lien would deprive you of your full exemption.

You can bring lien avoidance action in Chapter 7 or Chapter 13. If you successfully use lien avoidance to remove the lien in Chapter 7, you get to keep the property free and clear without paying anything to the creditor. If you successfully use lien avoidance to remove the lien in Chapter 13, you will not have to pay it under your plan in Chapter 13. Different rules apply to statutory and tax liens. For example, if the IRS recorded a lien against your property for back taxes, or a contractor has placed a mechanic’s lien on your property for the work that you did not pay for, you cannot discharge them in Chapter 7, or in Chapter 13, unless your chapter 13 plan provides for payment of these liens in full.

Bankruptcy A-Z – I is for Individual Liability

Dorota Trzeciecka — Wed, 16 May 2012 15:44:58 +0000

This is a real question that someone posted on AVVO: I filed for bankruptcy and I was discharged. Why is the bank foreclosing on my home?

Here is why. When you sign loan documents for a purchase of a home, a car, a boat, or a motorcycle, you not only give the creditor a security interest in that property, but you also make yourself individually liable for that debt when you sign the note. What it means is that when you give security interest, you stand to lose the home, the car, the boat, or the motorcycle, if you won’t make the payments. But, at the same time, you make yourself individually liable for the debt, and the creditor can pursue you personally for any difference between what you originally promised to pay, when you signed the note, and what the creditor can recover from the sale of that property at an auction.

It is important that you understand this dual liability concept in the context of bankruptcy. When you file Chapter 7, commonly known as liquidation bankruptcy, only your individual liability is discharged. It means that the creditor cannot pursue you for any deficiency from the sale of collateral. But, the creditor can still foreclose on your house or repossess your car, boat, or a motorcycle, with the proper procedure called lifting of an automatic stay, because, in Chapter 7, you cannot discharge security interest that the creditor has in the property.

Bankruptcy Alphabet A-Z – H is for How to ensure a smooth sailing to discharge in Chapter 7

Dorota Trzeciecka — Wed, 02 May 2012 15:00:56 +0000

Disclose, disclose, disclose.

My yoga teacher always says “when in doubt stick it out”. He means “stick your butt out” to make a yoga pose smooth and easy. The same concept applies to bankruptcy – ”when in doubt, disclose it” - it will make your way to Chapter 7 discharge go much smoother. I am referring here to transfers of property and money that you may have made prior to filing, but you may not think of them as transfers. Let me give yo some examples. Signing a quit claim deed is considered a transfer in bankruptcy. Assigning your interest in a limited liability company to an insider is also considered a transfer. Sometimes, even a judicially ordered sale of your property, over which you had little control, may be considered a transfer, if made within 90 days of filing. And then, there are the more obvious transfers, for example, repaying a loan to your Mom within a year of filing bankruptcy, or making large payments to a single creditor within 90 days of filing. The trustee can sue Mom or the creditor and demand a turnover of these preferential payments, so that the trustee can use the money to pay other unsecured creditors in the case.

Failure to list such transfers on your petition can lead to a delay or even denial of discharge. Any creditor in the case can file an action against a debtor for denial of discharge in a separate adversary proceeding. Such lawsuits can not only prove expensive to defend, but can prompt an investigation by a trustee, and hold up your discharge. So when you are in doubt as to whether a transaction is a transfer, tell your attorney about it, and let him or her decide whether it is a transfer which should be listed on your petition for you.

If you need to learn more about bankruptcy topics beginning with a letter H, click on the links below.

Harassement by Creditors

Hardship Discharge

Hearing

Home is where the Heart is

Homestead

Honest but unfortunate debtor

How much is your home worth

Household median income

Home: Can the Trustee take it

Hope for refinance for underwater borrowers

Dorota Trzeciecka — Tue, 10 Apr 2012 03:30:07 +0000

When I called my mortgage company to request refinancing of my mortgage a couple of years ago, the mortgage representative told me that my house would have to appraise at $645,000 for me to qualify for a refinance. My house might have appraised at that amount during the 2006 housing boom, but clearly would not in today’s or 2009 real estate market. In short, I could not refinance and take advantage of record low interest rates, because my home lacked equity. But now, there may be hope for these homeowners who previously lacked the equity to refinance. The program is not new; it has been in existence since 2009 under the name of HARP, or Home Affordable Refinance Program. Only, it did not catch on — the lenders shunned away from it as too risky and too restrictive. So, last fall, the Obama administration revamped the program to encourage banks to work with underwater homeowners. The program eliminates, for example, the requirement that the loan could be no more than 125% value of the house. Fannie Mae and Freddie Mac, on their part,made the HARP loan application processing easier.

HARP is limited to loans owned or guaranteed by Fannie Mae and Freddie Mac, the big government-run mortgage companies. That includes about 60 percent of all mortgages. So, the chances are good that your loan falls into that category. To determine if you’re eligible, you can check your own mortgages at www.freddiemac.com/mymortgage or www.fanniemae.com/loanlookup.

There are other eligibility requirements for HARP, for example:

The existing mortgage must have been accepted by Fannie or Freddie before June 1, 2009.

The mortgage cannot have been refinanced under HARP previously. Fannie Mae loans refinanced from March to May 2009 are excepted and eligible.

The borrower must be current on the mortgage, with no late payment for six months and no more than one late payment in the past year.

To learn more about HARP, visit the government website at http://www.makinghomeaffordable.gov/programs/lower-rates/Pages/harp.aspx.

To learn more about bankruptcy terms beginning with the letter H, follow these links:

Harassment By Creditors

Harassment by Creditors

Home is Where the Heart Is

Home: Can the Trustee Take It?

Homeowner’s Association Dues

Homestead

Honest but Unfortunate Dept

Honesty

Honesty and Fraud Avoidance

House

Household

Household Median Income

Household Size

How Much Is Your Home Worth?

Save My House from Foreclosure

Holding Property for Another

Bankruptcy A-Z – F is for Filing Requirements

Dorota Trzeciecka — Mon, 19 Mar 2012 14:13:10 +0000

If you’re an individual debtor (as opposed to an entity, like a corporation), you will need the following to file a petition for Chapter 7 bankruptcy :

1. Filing fee of $306 (this fee can be waived if you qualify, or paid in installments)

*2. Voluntary Petition

Additional Requirements for Petitions:

A. If you’re an individual debtor, you must complete credit counseling before filing of the Petition

B. Completed Statement of Compliance with Credit Counseling Requirement accompanied by a certificate of completion of credit counseling within six months of filing of the petition. If you’re filing a joint case with your spouse, you have to file two separate Statements of Compliance.

B. If you’re filing pro-se (without an attorney) you have to provide photocopies of government issued photo identification at the time of filing of your Petition.

3. Completed Schedules A-J and related documents, including Summary of Schedules, Statistical Summary of Certain Liabilities and Related Data, and Unsworn Declaration Concerning Debtor’s Schedules

4. Completed Statement of Financial Affairs and Unsworn Declaration

5. Completed Chapter 7 Individual Debtor’s Statement of Intention, declaring your intention to either keep or surrender real property, personal property, like a car, or any unexpired leases, like a car, or a rental agreement on a place where you live.

*6. List of your Creditors (if your Schedules are not filed with the Petition).

Additional requirements (Filed Separately)

7. Official bankruptcy Form “Statement of Social Security Number”. this document will not be placed in public records.

*8. Creditor Matrix filed in accordance with the “Clerk’s Instructions for Preparing , Submitting and Obtaining Service Matrices.”

9. Local Form “Declaration Regarding Payment Adices” with attached copies of pay stubs or other evidence of payments received within 60 days before the date of filing of the petition. If you do not have copies, file the Declaration and explain the reasons.

10. Official Bankruptcy Form 22(A) – Statement of Current Monthly Income and Means Test Calculations for Use in Chapter 7 Only.

11. After the Petition is filed, you have to complete Personal FinancialManagement course and file the Official bankruptcy From “Debtor’s Certification of Completion of Post petition Instructional Course Concerning Peresonal Financial Management.

The local and the official bankruptcy forms can be obtained from the court’s website.

*minimum initial filing requirements

To learn more about bankruptcy topics beginning with letter F, follows these links.

Failure (and “The Fresh Start in Bankruptcy)

Future Flow Agreement

Free Bankruptcy Consultation

Bankruptcy Attorney Fees

Bankruptcy A-Z – D is for Domicile

Dorota Trzeciecka — Mon, 05 Mar 2012 04:39:50 +0000

Your domicile is where you are living, and intend to live for an indefinite time, even if you’ve been living elsewhere temporarily. Domicile may govern where you file your bankruptcy case, but most importantly, what state’s exemptions you can use in your bankruptcy case.

You can file your case in a bankruptcy court in the district where you “[have] been domiciled, [have] had a residence, principal place of business, or principal assets for 180 days immediately preceding the date of the petition or for a longer part of such 180 days than in any other district”.

Which state exemptions you may use are governed by these domicile rules:

If you have been living in your current state for two years, you must use that state exemptions. Each state has its own set of exemption rules, since Bankruptcy Code gave states the right to limit the use of federal exemptions;
If you have been living in your current state for less than two years, you must use the exemption of the state where you were domiciled for a longer part of 180 days immediately prior to two-year period preceding the filing of your petition. If that state permits only its current residents to use its exemptions, then you can use federal exemptions.
If you have been living in your current state for less than 91 days, than you have to wait until you have lived there for at least 91 days, to even file in that state , and then use the exemption rules in accordance with these domicile rules.
If the state where you are filing allows federal exemptions to be used, you can use these exemptions regardless of how long you’ve been domiciled in that state.
If your situation does not allow you to use any of these domicile rule, then you can use federal exemptions.

Domicile rules courtesy of NOLO Chapter 7 Bankruptcy.

To learn more about bankruptcy terms beginning with D, follow these links:

Bankruptcy A -Z – N is for Non-exempt Property

Dorota Trzeciecka — Sun, 05 Feb 2012 18:35:33 +0000

In bankruptcy, there are two types of property: exempt and non-exempt. Property is everything that you own. Exempt property is the property you’re allowed to keep when you file bankruptcy. The amount of what you can keep is limited by state and federal statutes. If you live in Florida, you have to rely on state exemptions, except as specified by Florida Statute 222.201, which allows you to keep, among others, public assistance benefits, like social security, unemployment, veteran’s, and disability benefits. The remainder of your property is the non-exempt property. Typically, the following property would be considered non-exempt, provided you have equity in it:

expensive musical instruments
expensive jewelry
computers, ipads, cameras, digital recorders
cash in bank accounts, stocks, bonds, and other securities in brokerage accounts
coin, stamp, and other collections
valuable family heirlooms
real estate investment property
boats, planes, motorcycles, antique cars, off road vehicles
vacation homes

You have to either buy it outright from a bankruptcy trustee, if you really want to keep it (the trustee will make you an offer), swap it in exchange for exempt property, or sell it before filing, and, with those funds, buy an asset that is exempt.

Chapter 13 may be another option for you to keep the non-exempt property. Chapter 13 allows you to keep your non-exempt property regardless of its value. But, you will be required to propose a plan that pays your unsecured creditors an amount that is equal to at least the value of your non-exempt property.

If you have a lot of non-exempt property, you should consult a bankruptcy attorney who can help you determine how much of your property is exempt, and plan for the ways you can keep your non-exempt property.

Here are more bankruptcy terms beginning with letter N:

Naked by Jay S. Fleischman

Never by William Balena

No Asset by Mitchell Goldstein

No Asset Report by Stuart T. Ing

Nondischargeable by Cathy Moran

Nondischargeable by Mitchell Goldstein

Nondischargeable Debt by Ryan D. Caldwell

Notice by Bob Doig

Bankruptcy Alphabet – C is for Costs

Dorota Trzeciecka — Sun, 22 Jan 2012 20:32:58 +0000

A question on the mind of most potential bankruptcy clients is “How much will this cost me?”. Whether you’re filing Chapter 7 or Chapter 13, the costs can be broken down into the following categories: attorneys’ fees, credit counseling and financial management fees, and court filing fees. In addition, if an amendment to your bankruptcy forms is necessary after filing of the original petition, amendment filing fees may apply.

Despite of what you may believe, bankruptcy lawyer fees are not fixed. Lawyers decide what to charge, based on the services they will provide and how complicated your case is likely to be. But, the fees do not go unchecked. Bankruptcy attorneys have to file a Disclosure of Compensation of Attorney for Debtor with the court disclosing the fee in each individual case.

There are two important things that you want to remember about attorneys’ fees. If you’re filing Chapter 7, your attorneys’ fees have to be paid in full by the time you file your petition. That is because no lawyer likes to become your creditor in Chapter 7 bankruptcy — they would likely not be paid for their services. It does not mean that you have to come up with the full amount of attorney’s fee for Chapter 7 all at once. Most lawyers will let you pay it in installments, up to the time of filing of the petition.

Chapter 13 fees, on the other hand, can be paid through your Chapter 13 plan, with or without a deposit at the start of the case. Chapter 13 fees are two to three times the amount of what the Chapter 7 fees are. They’re generally capped at a certain amount by the local rules and guidelines. For example in the Southern District of Florida, the standard attorney’s fees for a Chapter 13 bankruptcy are set at $3,500. Additional set fees may be allowed for filing any necessary motions, for example, a Motion to Value Real Property or PersonalProperty, without application to the court. Your retainer agreement should specify those services that are included in the standard fee and those set fees in addition to the standard fee. The court may award other fees by special application to the court only.

Before you can file petition for bankruptcy, you have to complete a mandatory credit counseling, and before your debts can be discharged, you have to complete a financial management course, at the fee ranging from $10-$45 each.

The court filing fees are $306 and $281 for Chapter 7 and Chapter 13, respectively.

Each amendment to your bankruptcy schedules in both Chapters is $30; this is in addition to the fees specified by your attorney for amendments.

Check out more bankruptcy terms beginning with C

Competence and Compassion