FAQ’s

Bankruptcy

What is a chapter 7 bankruptcy?

Under the federal bankruptcy statute, a discharge is a release of the debtor from personal liability for certain specified types of debts. In other words, the debtor is no longer required by law to pay any debts that are discharged. The discharge operates as a permanent order directed to the creditors of the debtor that they refrain from taking any form of collection action on discharged debts, including legal action and communications with the debtor, such as telephone calls, letters, and personal contacts. Although a debtor is relieved of personal liability for all debts that are discharged, a valid lien (i.e., a charge upon specific property to secure payment of a debt) that has not been avoided (i.e., made unenforceable) in the bankruptcy case will remain after the bankruptcy case. Therefore, a secured creditor may enforce the lien to recover the property secured by the lien.

Why do people file a chapter 7 bankruptcy?

Generally people file chapter 7 bankruptcy if they have a large amount of unsecured debt such as credit card debt or medical expenses that they are no longer able to pay. Often unemployment, unexpected medical expenses, or divorce prompt the cause the debtor to seek protection from creditors by filing chapter 7 bankruptcy.

What is chapter 13 bankruptcy?

In a chapter 13 case you file a plan showing how you will pay off some of your past-due and current debts over a period of three to five years. The most important thing about a chapter 13 case is that it will allow you to keep valuable property, like your home or car, even if you are behind on payments or you have equity not covered by your exemptions. Your payments on these secured debts will generally be your regular monthly payments plus some extra amount if you need to get caught up because you are behind when you file.

Why do people file a chapter 13 bankruptcy?

Generally, people file chapter 13 if they have valuable property not covered by an exemption, like a home or car, but want to keep this property. If a debtor is behind on secured loan payments a chapter 13 bankruptcy can allow the debtor to make up these payments over time while keeping the home or car.

What property can I keep after I file bankruptcy?

In a chapter 7 case, you can keep all the property which is exempt from the claims of creditors. In determining whether property is exempt, you must keep a few things in mind. The value of property is not the amount you paid for it, but what it is worth now. Generally the trustee is interested in the resale value of your property so for most personal effects this is the garage sale value of your property.

You also only need to look at your equity in property. This means that you count your exemptions against the full value minus any money that you owe on mortgages or liens. For example, if you own a $50,000 house with a $40,000 mortgage, you count your exemptions against the $10,000 equity you have in the home. While your exemptions allow you to keep property even in a chapter 7 case, your exemptions do not make any difference to the right of a mortgage holder or car loan creditor to take the property to cover the debt if you are behind. If you are behind in payments and can afford to make the loan payment and to make the amount you are behind over a period of three to five years you should consider a chapter 13 bankruptcy.

In a chapter 13 case, you can keep all of your property if your plan meets the requirements of the bankruptcy law. In most cases you will have to pay the mortgages or liens as you would if you didn’t file bankruptcy.

Can I keep my home and/or car after I file bankruptcy?

You will not lose your home or car during your bankruptcy case as long as your equity in the property is fully exempt. Even if your property is not fully exempt you may still be able to keep your property by filing a chapter 13 bankruptcy instead of a chapter 7 bankruptcy. In a chapter 13 plan you will be required to pay at least the equivalent of the non-exempt equity you have in your home or car and any amount you are behind on your home or car loan over the course of the three to five plan. You also will be required to continue making the regular monthly payments.

How do I stop harassing creditor calls?

There is a federal law, called the Fair Debt Collection Practices Act, which protects consumers from the more threatening, egregious acts of creditors. For example:

If you tell a creditor that you have an attorney, then he or she must immediately stop contacting you directly and, instead, work through your lawyer.
Phone calls can only be made during normal waking hours; that means it is illegal for the phone call harassment to begin before 8:00 AM and must end at 9:00 PM, with no exceptions.
It is illegal for a creditor to call you repeatedly, such as every half an hour — repeated phone calls in short succession are a violation of the law.
It is also illegal for the debt collector to claim to be something that they are not, such as a lawyer.
Once you notify the harassing debt collector, in writing, that they have to stop calling you, they must immediately cease. They will only be able to call you if there is something new and important about the situation.
Tags: Bankruptcy, Credit Debt, Fair Debt Collection, Harassing Creditors, St

What is the Chapter 11 Bankruptcy Process

In Florida, filing for Chapter 11 customarily begins with the development of a plan for reorganization and repayment of all debts. Once Chapter 11 filing has commenced, all collection activities are brought to a halt, allowing the debtor time to breathe, assess the situation, and determine how to proceed — all with the guidance of their legal adviser.

After the repayment and reorganization plan is developed taking into account the needs of the debtor and the creditors a trustee is customarily appointed. It is the role of the trustee to make sure that all of the assets are properly managed, all of the priority claims are paid on time, and that the reorganization proceeds according to the law. Occasionally the trustee will take control of all of the assets, depending on the abilities of the debtors.

The Chapter 11 bankruptcy process may last for years — as long as it takes for all of the debts to be discharged. During this time, the emphasis is dual: to pay off or pay down debt and ensure that the business again becomes profitable.

Filing for Chapter 11 bankruptcy in Florida is a major undertaking and needs to be done under the guidance and assistance of a knowledgeable attorney. Mr. Compo is such an attorney, having walked many of his clients through the process, and he is ready and available to help you, as well.

Foreclosure

What is a demand or acceleration letter?

A demand or acceleration letter is sent by the lender when a borrower has become in default of the loan agreement. The lender must send this letter in order proceed with a foreclosure action for the entire amount of the loan. If the lender has accepted a payment after sending the acceleration letter, the lender must send another acceleration letter in order to proceed with the foreclosure action. If you have received on these letters call an attorney.

What do I do if I receive a demand or acceleration letter?

Do I have a better chance of keeping my home if I contact an attorney before a foreclosure action is filed?

Yes. Given the state of the economy and the real estate market, lenders are more likely to provide loan modifications and workouts to qualified homeowners before a foreclosure action has been instituted.

How long do I have to answer a foreclosure complaint? What if I am past the time to file an answer? I

In Florida, you have 20 days to answer a foreclosure complaint. If you are past the time permitted to answer a foreclosure complaint you may still have other options. You should contact an attorney right away.

What is a deed in lieu of foreclosure?

Occasionally, the lender will offer a deed in lieu of foreclosure if there are no other liens on the property. Deed-in-lieu is a process in which the borrower failing to satisfy the loan obligation hands over his property to the lender. The lender may then sell the property in order to retrieve a part or whole of the amount borrowed from the sale proceeds. The principle advantage to the borrower is that it immediately releases him from all of the personal indebtedness associated with the defaulted loan. It is important for the borrower to obtain an attorney to proceed with a deed in lieu of foreclosure in order to avoid legal and tax consequences.

What is a deficiency judgment? Is there a way to avoid a deficiency judgment?

A deficiency judgment is a judgment lien against a borrower whose foreclosure sale did not produce sufficient funds to pay the mortgage in full. It is possible for a borrower to avoid a deficiency judgment but it is not guaranteed. It is important for the borrower to obtain an attorney to proceed with a waiver of deficiency judgment in order to avoid legal and tax consequences.

What is the Mortgage Foreclosure Debt Relief Act?

The Mortgage Forgiveness Debt Relief Act of 2007 was enacted on December 20, 2007 in response to the overwhelming increase of foreclosures in the United States. Generally, the Act allows exclusion of income realized as a result of modification of the terms of the mortgage, or foreclosure on your principal residence. What does that mean? Usually, debt that is forgiven or cancelled by a lender must be included as income on your tax return and is taxable. The Mortgage Forgiveness Debt Relief Act of 2007 allows you to exclude certain cancelled debt on your principal residence from income. see News Release IR-2008-17

What is a modification?

A modification is a change to the original mortgage terms. It may include a change to the product (an ARM to a fixed rate mortgage), interest rate, amortization term and maturity date, and/or unpaid principal balance. The changes are made to create

What is a streamline modification?

A streamline modification is a modification that requires less documentation and less processing. In this case, the streamlined modification seeks to create a monthly mortgage payment that is sustainable for troubled borrowers by targeting a benchmark ratio of housing payment to monthly gross household income.

What is a benchmark ratio?

This the first time the lending industry has agreed on an industry standard. The benchmark ratio for calculating the affordable payment is 38 percent of monthly gross household income. Once the affordable payment is determined, there are several steps the lender can take to create that payment. The lender can extend the term, reduce the rate, and forebear interest.

Who is eligible for a modification?

Lenders have different standards, although most lenders follow general guidelines. The highest risk borrower, who has missed three payments or more, owns and occupies the property as a primary residence, and has not filed bankruptcy. To qualify for the streamlined modification, the borrower must certify that he or she experienced a hardship or change in financial circumstances, and did not purposely default to obtain a modification.

What is HOPE NOW?

HOPE NOW has the lending servicers as members. HOPE NOW collaborated with Fannie Mae, Freddie Mac and FHFA on arriving at a standard that is consistent and addresses the capacity challenge for servicers dealing with increased delinquencies. For more information visit www.HOPENOW.com

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FAQ’s

Bankruptcy

Foreclosure

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