This proposal by the National Association of Consumer Bankruptcy Attorneys (NACBA) would allow homeowners who enter a chapter 13 bankruptcy to reduce their interest rate to zero for the term of their plan. This would allow the payments to be applied directly to principal and help the homeowner dig out from a possible negative equity situation. This would encourage many people in a chapter 13 bankruptcy to stay in their homes, instead of letting their home go through short sale or foreclosure. If people are allowed to stay in their homes, it would help the housing market recover by decreasing the number of short sales or foreclosures for sale. It would also reduce foreclosure related costs by the banks holding the notes. If this was coupled with the ability of homeowners to strip off wholly unsecured junior loan, it would encourage many of my clients to keep their homes. Instead many of my clients choose to let homes go, due to no equity for the foreseeable future, or inability to make the mortgage payments.
Americans Paying Off Debt According to the Federal Reserve Bank
A recent article on Yahoo that was based on data from the Federal Reserve Bank shows that American consumers are slowly paying off debt (http://finance.yahoo.com/blogs/daniel-gross/big-dig-fed-data-shows-households-attack-mountain-170636810.html). It also shows that bankruptcy filings are down by around 17% so far in 2011. This seems to indicate that people are either attempting to settle their outstanding debt, or a number of people may not have sufficient assets to protect to benefit from filing for bankruptcy protection.
In some cases you may not need to file for bankruptcy protection if you are “judgement proof”. This means that you do not have any assets that creditors can take after they get a judgement against you. If you are on some sort of government assistance with little or no assets, the creditors can not collect from you, and you would probably not need a bankruptcy filing. This is primarily true if you do not see a future without the government benefits due to a disability. If you are simply out of work but have some job prospects or other assets to protect filing a bankruptcy is one option to consider.
Divorce and Bankruptcy In Minnesota
This is a common situation facing our bankruptcy clients. The client is separated from their spouse and they always wonder should we file bankruptcy together. The answer to this depends upon each situation but in general people getting divorced with a large amount of debt should file a chapter 7 bankruptcy before divorce, and should file a chapter 13 bankruptcy separately, after the terms of the divorce have been finalized. The reason is that if all our clients are fighting about is debt, then filing a chapter 7 bankruptcy wipes out the debt, making the divorce an easier process. If the client does not qualify for a chapter 7 bankruptcy, then they should file a separate chapter 13 bankruptcy, the reason for this is simple, after a divorce you do not ties that bind the couple together. If you file a joint chapter 13 bankruptcy, you will have to rely on another party to continue to make the plan payment for 3-5 years.
Preference Lawsuit in Minnesota
If you have been sued by a Minnesota bankruptcy trustee you are not alone. It is common for trustees to send out demand letters and lawsuits regarding bankruptcy preference actions. These types of actions are fairly common and mean the trustee thinks that you have received money from an insolvent debtor before a bankruptcy was filed. You may have defenses available to you and you should consult with our office before you decide how to proceed. If you have been sued it is important to remember that you have a limited amount of time to answer the complaint. In some cases settling with the bankruptcy trustee may be your best option, but in other cases you may have a valid defense to the preference suit, and may want to defend the action in front of the Minnesota Bankruptcy Court.
Bankruptcy Adversary Proceedings in Minnesota
If you filed for bankruptcy and the creditor does not agree with you getting rid of their debt, they have the option to file an adversary proceeding with the bankruptcy court. This basically starts a lawsuit in bankruptcy court to determine whether the debt is discharged, or stays with the debtor forever until paid off. The most common grounds for this type of proceeding are fraud. The creditor must show that but for the debtors fraudulent activity they would not have entered into an agreement with the debtor. This is a difficult standard to meet in bankruptcy court, since if the creditor wins the adversary proceeding the debt must be paid back and the creditor can get a judgement in state court.
If a creditor has filed an adversary proceeding against you in Minnesota give our office a call. We may be able to help you settle with the creditor or help you with the adversary proceeding in court. It is important to have representation in this type of proceeding since the creditor will probably be represented by an attorney.
Top Reasons for Filing A Chapter 13 Bankruptcy
1. The most common reason for filing a chapter 13 bankruptcy under the law change of 2005 is that the clients income exceeds the median income for where they live. This is in reference to the means test portion of the bankruptcy petition. This determines what type of bankruptcy you will be eligible for. The advantage of this type of bankruptcy is that it allows a repayment schedule with one monthly payment to take care of all of your unsecured debt, and can also include car payments.
2. Chapter 13 bankruptcy allows a person to discharge all of their remaining debt after they repay the debt for three or five years. This means that you make a set payment each month, and unless you are doing a 100% plan you will only pay back a portion of your debt. This amount is determined by your budget, and you are required to put all of your disposable income towards the plan.
3. Chapter 13 bankruptcy can allow an individual to keep their home from going into foreclosure. If you are behind on your house payments in Minnesota a chapter 13 may allow you to catch up on your past due house payments and prevent a sheriffs sale. The catch is that you need to be able to make your full mortgage payment, and pay something to catch up on the past due payments.
4. It may be possible to strip off 2nd mortgages that are totally unsecured. This never used to be the case in Minnesota, but a recent court decision makes this option a possibility for the many Minnesotans who have houses with a 2nd mortgage that they cannot afford. This decision was recent and could still be appealed to the 8th Circuit Court of Appeals.
5. If your car loan is over 910 days old you may be able to cram down the value of the car to what the vehicle is actually worth. This allows you to make a smaller car payment and have the vehicle paid off at the end of your chapter 13 plan. It also allows you to make a larger payments to your unsecured creditors.
6. You can schedule certain debts as priority. If you have certain debts that would not be dischargeable in a chapter 7 bankruptcy, you can make payments on those debts in a chapter 13 bankruptcy. This allows you to set up a fair payment plan and pay your priority debts, and at the end of the three or five your repayment term, also get rid of your unsecured debt. This is a huge advantage if you owned a business in Minnesota and owe sales or use taxes, or other priority government debt.
7. If you are working and can contribute to a 401k you are allowed to do this in a chapter 13 bankruptcy. This means that you are saving for your retirement and paying off your debt at the same time. This is a great option for clients, since they can exit bankruptcy with more money for their long term retirement needs.
8. The above list does not include all the possible benefits of filing a chapter 13 bankruptcy. If you have more questions you can give our office a call at 952-294-0144 and we would be happy to see if chapter 13 bankruptcy in Minnesota is a good option for you.
Initial Default Notices for Home Foreclosure Increase
The national trend is that foreclosure notices to homeowners behind on their mortgage increased by 14% according to a recent article in the Wall Street Journal http://finance.yahoo.com/news/Foreclosures-continue-to-cnnm-1597432038.html?x=0&sec=topStories&pos=2&asset=&ccode=. This trend seems to indicate that banks are getting through the backlog of paperwork and beginning to work on all the foreclosures in the system. What this means for Minnesota residents is that if you are behind on your home, you need to look at your options, to determine how you can keep your home. If you have received a foreclosure or sheriffs sale notice in Minnesota, our office may be able to help you figure a way out of the default. If you are facing this situation you may want to look at a chapter 13 bankruptcy or working with your lenders to negotiate on your first or second mortgage.
The Good, Bad and the Ugly of 2nd Mortgages in Minnesota
If you are one of the thousands of Minnesota homeowners who took out a 2nd mortgage a few years ago during the real estate boom in order to avoid private mortgage insurance, that decision could end up costing you if you lose your home in foreclosure. The issue is that a few years ago lenders in Minnesota seldom pursued homeowners for the deficiency owed on a 2nd mortgage when a home went into foreclosure. That is not the case anymore, lenders are aggressively pursuing individuals and obtaining judgements for most 2nd mortgages in Minnesota. I have seen numerous clients who owe a lot of money for the 2nd mortgage that was taken out to avoid PMI because they did not have a 20% down payment. In some cases these clients owe very little other debt, besides the 2nd mortgage. In the end the homeowner was able to buy a home without paying for PMI with the 2nd mortgage, the bad is that the housing market crashed leaving many homeowners underwater on their homes, and the ugly is that if you get a judgement, your only way out of the debt may be a bankruptcy. If you are being sued on a 2nd mortgage you need to speak with an attorney to advise you regarding your rights.
Minnesota Statue of Limitations for Debt Collection
If you have been contacted regarding credit card debt that is over 6 years from the date of your last payment, that credit card debt is probably past the statute of limitations. In Minnesota creditors have six years to attempt to collect a debt from you from the date of your last payment. If you think the debt may be over six years old and you are contacted by a debt collector, make sure you figure out the applicable statute of limitation before you make a payment on the account. If you make a payment you will start the statute of limitation over, that will give the debt collector another six years to attempt to collect the debt. If you are struggling with this type of debt, give our office a call, we may be able to help you with a bankruptcy or debt settlement options.
Importance of Accuracy in Bankruptcy Schedules
When you are filing for bankruptcy it is important to make sure you review your bankruptcy petition carefully to make sure you have included all of your debts and assets. If you have questions about what should be included on the bankruptcy petition you need to ask the attorney. It is of the utmost importance that you list all your bank accounts, any transfers made to families or friends, any land transfers, any legal entities that you have an ownership interest in, cash on hand, and all other information required on the bankruptcy schedules. If you are filing a Minnesota bankruptcy the burden is on the client to fully disclose all assets. The problem becomes if a client does not disclose all possible assets, the bankruptcy trustee may begin to think that they are intentionally concealing assets from the bankruptcy estate. If this is the case it can lead to a 727 non dischargeability action initiated by the trustee. In most cases by the time a client has reached the 341 meeting they have had a chance to review their bankruptcy petition at least four times. In most cases this is sufficient to ensure an accurate bankruptcy petition. The moral of the story is be honest and list all of your assets. If you are unsure whether an item needs to be listed, you should ask your attorney.
