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Personal Bankruptcy

Bankruptcy Could Offer You A Way Out

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There is no question that the U.S. has a financial problem. The statistics are indisputable.  Americans carry an average personal debt of over $90,000. Many times, it’s through no real fault of their own. There are so many factors to consider. The cost of living continues to rise, and as it does so it is becoming easier for people to get credit when they may not have the means to cover their bills.

Additionally, with the unemployment rate skyrocketing due to the COVID-19 pandemic, times are difficult for many people, and that includes the struggle with finances. We’ve all seen the headlines about looming eviction rates and bankruptcy surges, but what those headlines won’t tell you is that for many, these issues are not on the horizon, but rather on their doorstep.

While some people tend to shy away from bankruptcy or think it is a negative thing, that isn’t the case at all – when it’s processed the correct way.

What is Personal Bankruptcy?

Personal bankruptcy is a legal process in which a debtor files with their local court system. As a result, the debtor’s personal assets are evaluated, and some may be sold in order to offer creditors a portion of what they are owed.

The process of filing for bankruptcy also creates something called an “automatic stay,” which means creditors are blocked from collecting your debts until the court proceedings are over. This can give you a bit of breathing room while your case is being reviewed.

Bankruptcy works differently depending on an individual’s financial situation and how the court sees it. In some cases, a financial plan may be worked out that better fits with your income and needs, so you can pay back your creditors at a different rate. Other times, your debt will be completely eliminated.

In the case of Chapter 13 bankruptcy, the debtor will develop a plan based on their personal finances to repay their creditors over a fixed period of time.

Chapter 7 or Chapter 13?

Consumers generally file either a Chapter 7 or a Chapter 13 bankruptcy. Some people believe that a Chapter 7 bankruptcy is the best way to go, but that is not always the case. Everyone has their own unique situation which should be analyzed by a professional to determine whether a Chapter 7 or a Chapter 13 bankruptcy is more appropriate. For example, if you do not have a lot of unsecured debt such as credit card debt or medical bills, but you have a home worth $200,000, a first mortgage of $210,000 and $75,000 on your second mortgage, and you want to keep your house, filing a Chapter 13 bankruptcy may be appropriate for you because you may be able to “lien strip” the second mortgage.

On the other hand, if you have a lot of unsecured debt such as medical bills and/or credit card debt, then Chapter 7 may be more appropriate for you. However, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 made changes to the Bankruptcy Code, which makes filing a Chapter 7 bankruptcy more complicated. To be eligible for a Chapter 7 bankruptcy there is a 2-part test. First, there is the “means test”. This subjects debtors to an income-based test. But if the debtor’s income is below the state’s median income, then the debtor is not subject to the means test. Additionally, debtors with primarily (more than 51%) business debts (including investment properties used as rental properties) may file a Chapter 7 bankruptcy regardless.

However, even if you pass the means test, you still have to pass a second test known as the “abusive test”. The United States Trustee or any creditor can move to have your case dismissed. The bankruptcy Court could dismiss your case if the Court finds that you have the ability to pay back a significant portion of your unsecured debts.

If you are eligible to file a Chapter 7 you are looking to liquidate your debt. You are able to keep some property and may have to let other property go. You can keep exempt property.

A Chapter 13 bankruptcy is a form of reorganization. The debtor proposes a plan to pay his creditors over a 3 to 5-year period. Generally, the debtor keeps property and the creditors get less money than they are owed. However, the unsecured creditors must receive at least as much through the Chapter 13 plan as they would have received in a Chapter 7 liquidation.

The Benefits of Filing for Bankruptcy

One of the biggest benefits to working with a bankruptcy lawyer well before filing is the knowledge about the process that professional counsel can share. Because there are time restrictions on how often you can file for bankruptcy, you’ll want to make sure you are in a position to get rid of the maximum amount of debt.

Also, it is essential to consider what might happen if your financial position changes between now and filing for bankruptcy. If your situation improves, should you back out of filing? If it worsens, should you file more quickly?

Working with an experienced attorney will help clarify the answers to those questions and give you peace of mind as you move forward.

Is Bankruptcy Right for You?

Unfortunately, bankruptcy has been stereotyped in a negative light over the last several years. While it certainly is something that should be used as a last resort to get out of debt, it doesn’t mean your credit will be ruined forever, and it isn’t something you should be embarrassed about. Bankruptcy exists for a reason – to help you get back on your feet.

If you are buried in debt, no matter the reason, and you’re not sure what else to do, bankruptcy could be your best option to get a fresh start with your finances.

Feel free to contact the Orlando Law Group for more information on our bankruptcy services and how we can go to work for you to start the process. Our years of expertise with bankruptcy law will make the entire experience as easy on you as possible, so you can focus on eliminating the debt from your life and starting over with your finances in a healthy and responsible way.

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extensions to the cares act

How Extensions in the CARES Act can Help Hurting Homeowners

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COVID-19 has changed our lives as well as our livelihoods. Income sources have taken a massive hit, and with that, rules are having to change, deadlines are having to be extended, and significant changes are being implemented to help families survive during this stressful time.

Although a phased approach is being taken to open the economy back up, it will be a long road back to normalcy and the financial status many maintained before the coronavirus pandemic. 

Specific extensions in the CARES Act are designed to help. 

The article below details some points about the CARES Act that are important for homeowners.  

Section 4022 – Moratorium on Residential Foreclosures 

On March 27, 2020, Congress enacted the Coronavirus Aid, Relief and Economic Security Act of 2020, also known as The CARES Act, which provides for financial relief due to the COVID-19 Virus Pandemic. This Act is put into place to do precisely what the name implies. The CARES Act provides care for this who are struggling because of the stress of a halted economy. 

Section 4022 focuses on homeowners and provides a moratorium on residential foreclosures for borrowers with federally backed 1-4 family mortgage loans. It addresses the right of a homeowner to request forbearance from payment on these loans.  

Understanding the Requirements – Extensions in the CARES Act Regarding the Foreclosure Process 

The requirements only apply to federally backed mortgages, which are loans insured or guaranteed by FHA, VA, USDA, or loans that are owned or securitized by Fannie Mae or Freddie Mac. The moratorium does not apply to vacant or abandoned property or private bank loans. Under the Act, no mortgage servicer of any federally backed 1-4 family mortgage loan is permitted to do the following beginning March 18, 2020, and ending May 17, 2020; and now further extended until June 30, 2020: 

  1. Initiate any judicial or non-judicial foreclosure process; 
  2. File a motion for foreclosure judgment or order of sale; or 
  3. Execute a foreclosure-related eviction or foreclosure sale. 

Related: View our COVID-19 Legal Information and Recommendations

Utilizing the Extensions – Requesting a Forbearance 

Section 4022 also allows a borrower on a federally backed 1-4 family mortgage loan to request forbearance from payment up to 180 days with the right to request an additional 180-day extension. Section 4023 allows a borrower on certain federally backed multi-family mortgages to request forbearance for up to 30 days with two 30-day extensions. During the term of forbearance, a tenant cannot be evicted or charged late fees. Section 4024 establishes a temporary moratorium on eviction filings for particular single and multi-family housing. During the above referenced period beginning on March 27, 2020, a lessor cannot initiate an eviction for nonpayment of rent. After the moratorium period, the landlord may not evict a tenant unless a 30-day notice is provided to the tenant. 

Governor DeSantis also issued Executive Orders 20-94 and 20-121, consistent with the CARES Act, extending the foreclosure moratorium to all foreclosures and tolling residential evictions until June 2, 2020, but did not waive the obligation to make scheduled payments. Many Florida judicial circuits have also entered administrative orders which limit or prohibit foreclosure and eviction actions. These are meant to stave off the process and help families who are struggling to make ends meet.  

What About Title Derived Through Foreclosure? 

As a result of the federal and state law foreclosure moratoriums, until further notice, you are required to obtain approval from Underwriting to insure the title or issue a policy based on a foreclosure action where the certificate of title or writ of possession was issued after March 18, 2020, but before the expiration of the CARES Act and Executive Orders 20-94 and 20-121, now on June 30, 2020.  

Additionally, title to any property derived through a foreclosure initiated during the effective period of the CARES Act and/or Executive Orders 20-94 and 20-121, will not be insurable. 

As deadlines get pushed, and laws get stretched to allow for more financial breathing-room, it is essential to keep in mind how these rules apply to your specific situation. We have many questions that come into our office, and we are always honored to take the time and help someone gain clarity. Sometimes, legal rulesets can become cumbersome. That is why our lawyers are professionals at translating the legal jargon into a crystal-clear understanding of the law.  

We are here to help you understand how these rules can apply to you. If you have questions, do not hesitate to reach out to us. We can, and we will help you through it. 

Critical Advice: Selling Your Home During COVID-19

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What to do now if there’s a chance of future bankruptcy

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Filing for bankruptcy is on the minds of many people right now. For some, it’s clear that the only solution available to free them from financial hardship is bankruptcy. For others, it might not be a consideration, but should it be?

If you have recently lost your job or the current economic conditions are making it difficult or impossible to pay your debt, it might be advantageous to file for bankruptcy.

In either case, whether you know that bankruptcy is your only option or it is just entering your thinking, it is time to planning strategically. You might need to forget about conventional advice on money management and begin thinking differently. 

We’ll explain.

It should be no surprise that we are having this discussion as a result of the coronavirus pandemic. The virus and COVID-19 have caused staggering numbers of people to lose their jobs, businesses to shutter operations, and economies around the world to topple. 

Some suggest that it could be a year before we see signs of recovery. Maybe longer by some estimations.

So what does this mean for you or your business? If you or your business are struggling to stay afloat, is a bankruptcy on your list of options?

If bankruptcy is in your plan, and it probably should be, here are the things you should be doing right now.

Talk to a bankruptcy lawyer as soon as possible

If you currently cannot pay your debts or you believe that you will soon face insurmountable financial hardship, now is the time to seek out a bankruptcy attorney. A reputable and ethical bankruptcy attorney will offer a free consultation. You will need to understand the types of bankruptcy available to you, the attorney can help with that.

The move that most people make when money gets tight is to get the advice of a financial planning expert. But if bankruptcy is a real possibility, your best move is to speak with a bankruptcy lawyer as soon as possible. 

The people who do best after bankruptcy are typically those who worked with a legal expert well in advance of filing. 

The strategies you need to employ before filing for bankruptcy are unique to your situation. With the help of a bankruptcy attorney, you’ll be more prepared for what will happen before, during, and after the bankruptcy.

Need to speak to a bankruptcy lawyer? Start here.

Clearly evaluate your situation and don’t rush to file bankruptcy

One of the biggest benefits to working with a bankruptcy lawyer well before filing is the knowledge about the process that professional counsel can share. 

Because there are time restrictions on how often you can file for bankruptcy, you’ll want to make sure you are in a position to get rid of the maximum amount of debt. 

Also, it is essential to consider what might happen if your financial position changes between now and filing for bankruptcy. If your situation improves, should you back out of filing? If it worsens, should you file more quickly? 

Working with an experienced attorney will help clarify the answers to those questions and give you peace of mind as you move forward.

If you have a large amount of cash, it’s time to protect it from creditors

Many people do not realize that if you have stockpiled cash in a checking or savings account, that money can be seized to pay your financial obligations to creditors.

Protecting the money you have is critical.

A bankruptcy attorney might advise that you move that money into something like an individual retirement account. In broad terms, if you were to put the money into a Roth IRA, you could still get access to the money if needed and it would be protected from creditors.

Resist the temptation to sell things to pay your debt

If there is even a chance that you are going to be declaring bankruptcy, selling unused or underused possessions to pay credit card or other debt should be taken off your to-do list. 

Why? When you complete a bankruptcy, you will have erased your debt. Paying that debt before filing might feel like you are doing the right thing. But the money you could get from selling things might be better used after the bankruptcy.

Leave your retirement plan alone

It might be tempting to consider taking money out of your retirement accounts to pay debts, student loans, or other secured and unsecured debts. But this is generally something you want to avoid.

Even before coronavirus, bankruptcy lawyers would advise leaving your retirement funds intact because they are generally protected from creditors.

Also, there are new retirement fund coronavirus hardships withdrawals which let people acquire up to $100,000 from their 401(k)s or IRAs without penalty. And while these withdrawals are taxable, if they are paid back within three years there are provisions to reverse that tax.

The problem is, if you are facing bankruptcy, it’s likely that you will not be able to pay back the withdrawal. So, using that money to pay down debt could create further financial hardship in the future. It’s a good idea to avoid that.

Tirelessly explore your forbearance options

If your financial future is cloudy and you are unsure if you will quickly get a job or be re-hired by your employer, exploring forbearance options is important.

In forbearance, a lender will allow you to skip some payments on your loan. Skip does not mean that those payments are erased, but instead means that those payments will need to be made in the future. 

If you are a consumer filing Chapter 7 bankruptcy, your unsecured debt like credit card debt will be eliminated. Secured debt like your car loan or mortgage generally will not be erased. Forbearance on secured loans like these can offer a bit of financial breathing room and allow you to use the money you have to pay for the absolute necessities like food and utilities. You might also need the money to pay your bankruptcy lawyer’s fees and filing fees. 

A bankruptcy lawyer can explaing your forbearance options? Start here.

Do this right now

It should be clear that if bankruptcy is even a remote possibility for you, there are many steps you need to take. Being strategic and moving away from the advice you might get in credit counseling will often make things better for you during your bankruptcy proceedings. 

Debt relief is on the minds of just about everyone right now. If this is you, talking with a bankruptcy lawyer is something you should do right now.

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The Paycheck Protection Program Has Run Out of Money. What now?

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It seemed extremely promising. The Paycheck Protection Program was the cornerstone of the federal government’s stimulus package designed to assist small businesses and their employees during this unprecedented shutdown and quarantine.

What is the Paycheck Protection Program?

The Paycheck Protection Program (PPP) is a federal government loan created to give an immediate incentive for small businesses to retain their workers by keeping them on the company’s payroll.

The U.S. Small Business Administration (SBA) had planned to forgive the loans if the company was able to keep all employees on the payroll for eight weeks. The money from the loan was intended to be used for payroll, rent, mortgage interest, or utilities.

What happened to the Paycheck Protection Program?

The short answer is that the PPP has run out of money. Thousands of businesses who qualified as potential borrowers are now unable to access funds through the now cash-empty program.

On April 16, 2020, The SBA announced that the Paycheck Protection Program would no longer be accepting applications from businesses seeking aid.

The shuttering of the $349 billion program leaves legions of businesses out in the cold. Many of these business owners were attracted to the program. It was designed to assist financially during the coronavirus-induced economic slowdown.

According to the SBA, the agency has approved more than 1.6 million PPP loan applications. The total of the requested funds amasses to a wallet-thinning $340 billion. That money is slated to be distributed by close to 5000 lending organizations.

Most borrowers are currently in a wait-and-see mode as they check their bank accounts for the loan deposit.

While it is impressive that the oft-criticized SBA was able to organize and implement this program in such short order, that’s no consolation to the business owners who were counting on the funds to keep the lights on, quite literally.

I applied but never got approved, or I never got to apply for the PPP. What do I do now?

The hard message is that the further away you are from loan approval, the less likely it is that you will see even a thin dime from the PPP.

While the SBA made their announcement on April 16, it’s likely that that 1.6 million applications were submitted and earmarked days ago. Unfortunately, there is no definitive answer aside from “ask your banker” about the status and likelihood of your loan.

So, if you are in the group that will not be funded, it’s time to start exploring other options. If you are driven to keep your business going through this economic slump, you are going to need to find a way to acquire funds.   The Florida Bridge loan is also out of money but may receive additional funding.  This was limited at $50,000; however.  There are also additional SBA loan products which are traditional non-forgivable loans which still appear to be available at least for now.

Refinancing existing debt and/or liquidating unused assets is another approach.  However, if neither of these options will help, bankruptcy might be an option. At a minimum, the protection the bankruptcy can offer you might give you the foothold you need to reorganize and come out of this above water.

We are offering a free 15-minute strategy session for businesses that are facing difficult choices because of financial or legal hardships. Give us a call at (407) 512-4394 and ask to speak to one of our business lawyers. This no-obligation session is designed to help you see your options more clearly.

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Is Your Income Affected by Coronavirus? Here’s Where to Start.

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With the Coronavirus, there has come a massive influx of change into our daily lives. Our health is, as always, our top priority. Although the Center for Disease Control is recommending that we take massive precautions, we also must take care of our jobs, routines, and responsibilities without being able to be physically present. Public health officials are recommending that those who are sick stay home. Preventing this virus from spreading has caused so many jobs to be put on pause or to come to a halt. It’s important to know that during this stressful time, we are here to help. It’s important that during this time, we take precautions for those who are at a higher risk.

   Even if it’s simply for someone to talk to in case your income gets effected, we believe that conversations with us imbue confidence about the future, which always contains a bit of uncertainty. Consultations are free, and our attorneys go out of their way to consistently be insightful and incredibly helpful. Small businesses have individuals working there that cannot afford sick days, and the businesses themselves can’t afford paid sick leave. The Coronavirus Pandemic is going to have long-term effects on products and services at both the state and local level. The government is doing what they can to brainstorm ways to combat higher rates of job loss and make the federal reserve work to help those who have had a loss of income, but of course, health care costs remain a struggle for those who have lost income due to social distancing and not being able to go to work.

   Here in the United States, bankruptcy is not a situation where someone has failed, but rather a situation where someone is beginning to take control. It’s most important to be prepared during uncertain times, and the more ready we are when life happens, the more we can cope with the change. Coronavirus has certainly brought a lot of fear, change, and damage to an economy that benefits from being able to be present at work. Some workplaces can survive using teleconferences and meetings via computer, but others simply cannot. If you have struggled financially because of this virus or have any questions about the future and any, “What if” scenarios, we are always here to help. We care about you and the well-being of the community, and we want to help you stay safe, comfortable, and confident through this difficult time.

   Many of our clients have come to us after they’ve gotten behind on payments, and that’s why we want to let you know that it’s never too early to sit down and have a conversation, especially given the fact that you might be out of work and missing some paychecks. Absolutely talk to us before you talk to a debt consolidation company. Many Debt Consolidation Companies will take advantage of the client, placing them in even more debt than they were before. We have seen this happen before.

   How has this virus effected your life? We want to know because if there’s an opportunity to help you cope with the change, we will make it happen. The stories that are coming from those we care about are harrowing, and we are committed to our community and to our clients. Even if it’s just to stay connected, do not hesitate to reach out. The ultimate point we want to leave you with is this: don’t let fear or panic stop you from acting. The best knowledge is to be informed by your options. A lot of people, when this happens, start to put their heads in the sand and ignore paperwork and phone calls. It’s best to get on the phone with us as quickly as possible, and together we can help you get to a stable point.      

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How to Postpone or Reduce Student Loan Payments

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By Attorney Sophia Dean

The Student Debt Crisis in Numbers

Photo of Sophia Dean - Attorney at The Orlando Law GroupThere are various reasons which prevent people from being able to make their student loan payments. As of 2019, Americans collectively owe over $1.56 Trillion in student loan debt. This is spread out by nearly 45 million individuals who are paying back their student loans. 

Out of this increasingly large group, there are, of course, individuals who will find themselves in circumstances which will prevent them from making their payments. These people are not alone. In fact, there are roughly 3.7 million student loans in deferment and 2.6 million in forbearance. The good news is that there are deferment and forbearance options which can alleviate some of this stress and allow you to get back on stable ground. 

What to Know About Deferments and Forbearances

While there are several options for individuals who are experiencing difficulty paying back their student loans, like income-based repayment, we commonly see deferments and forbearances. On the surface, these options may seem similar, but they actually have several differences which can make them more or less suitable for certain situations. Both allow you to temporarily stop making federal student loan payments or temporarily reduce the amount you pay. 

A key reason to look into these options is to help to avoid defaulting on your loans, which can cause significant consequences. 

Based on the type of loan you took out, your interest may accrue during this time. Because this will add to the total cost of the loan, it is important to be clear about these details. It is also important to make sure that you have completed the steps necessary to attain an active deferment or forbearance so you don’t miss payments and negatively affect your credit score. 

The important question is, Which choice is right for you?

What are the Differences Between Deferments and Forbearances?  

The most important thing to know about deferments and forbearances is that they are not one and the same. 

A Deferment can be an excellent solution for people experiencing certain circumstances. On particular loans, you may not be responsible for paying the interest that accrues during this period. 

Your lender or loan servicer may offer different deferment options based on your particular situation. For example, federal loans have the following deferment options:

●     Economic Hardship Deferment

●     Graduate Fellowship Deferment

●     In-School Deferment

●     Military Service and Post-Active Duty Student Deferment

●     Parent PLUS Borrower Deferment

●     Rehabilitation Training Deferment

●     Temporary Total Disability Deferment

●     Unemployment Deferment

A Forbearance is a period during which your monthly loan payments are temporarily suspended or reduced. If your particular situation includes financial hardship that prevents you from making loan payments even though you are willing, your lender may grant you a forbearance. During this period of time, the principal payments are postponed. The one caveat is that interest continues to accrue. 

You could potentially qualify for a forbearance if you are temporarily unable to make scheduled monthly payments for the reasons listed below:

●     Financial difficulties

●     Medical expenses

●     Change in employment

●     Other reasons acceptable to your loan servicer

Because the loans continue to accrue interest during the forbearance term, it is smart to continue paying at least the monthly interest. This method is helpful as it resolves any delinquency on the account. 

There are also two different kinds of forbearance—General and Mandatory.

Also known as a “discretionary forbearance”, a general forbearance can be requested due to financial difficulties, medical expenses, change in employment, and/or other reasons acceptable to your loan servicer. It is at the discretion of the loan servicer whether to honor this request or not, hence the name. These can be granted for periods of no longer than 12 months but can be requested again when this time expires. 

Mandatory forbearances MUST be honored by loan servicers as long as the individual meets the eligibility criteria. There are more options for eligibility for mandatory forbearances and each one has more specific qualifications and stipulations attached, but the major requirements are;

●     If you are serving in a medical or dental internship or residency program

●     If you are participating in a teaching service which would qualify you for teacher loan forgiveness

●     If the amount owed on your student loan is equal to or greater than 20% of your total monthly income 

●     If you qualify for partial repayment of your loans under the Department of Defense Student Loan Forgiveness program

●     If you are a recently activated member of the national guard but are not eligible for military deferment

As with discretionary forbearances, a mandatory forbearance is granted for a maximum of 12 months. However, this may be extended as long as you continue to meet the eligibility requirements. 

Postpone or Reduce Student Loan Payments Next Steps–How to Seek Out a Deferment or Forbearance

Both deferments and forbearances are excellent options for people struggling to pay their student loans due to temporary financial hardships. However, if your financial woes are likely to continue for an extended period of time, it may be a better option to change to an income-driven repayment plan. These are based on your discretionary income, size of your family and multiple other factors. If your loan is not repaid after 20-25 years, you may also qualify for student loan forgiveness as well. 

If your circumstances are likely to improve within a reasonable amount of time, it would be a good idea to consider a deferment or forbearance. It is important to remember that your loan servicer does not work for you. The best course of action is to use an outside source such as a well-versed attorney with expertise the variety of student loan options. They will assist you in deciding if a deferment or forbearance is the most applicable in your individual case. Having someone to trust can drastically help reduce the stress and worry associated with dealing with student loan debt. 

For the past ten years, The Orlando Law Group has earned a reputation as the Orlando-area law firm that cares about its clients and the communities it serves. Offices located in Waterford Lakes, Altamonte, Lake Nona, and Winter Garden. For more information, visit www.TheOrlandoLawGroup.com.

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student loans in Chapter 13

What happens to student loans in Chapter 13 bankruptcy?

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The phrase “student loans” strikes fear in the hearts of most people nowadays. Many are facing high payments coupled with employment that doesn’t pay as expected or as the student had hoped it would. Now what? Chapter 13 bankruptcy may be an option. 

Why student loans in Chapter 13 bankruptcy could provide relief.

It’s a well-known fact that except in rare circumstances, student loans cannot be discharged in bankruptcy. However, if you are struggling to make your student loan payments, filing for Chapter 13 bankruptcy will allow you to reduce your monthly obligation by combining all of your unsecured debt into one category. Your payments to your unsecured debt are then based off what you can afford to pay, given your other living expenses and assets. 

Keeping student loan companies from garnishing your wages.

This can be extremely beneficial for someone who is being harassed or having their wages garnished by their student loan companies. When you file Chapter 13, a hold goes on all creditors while you are in the bankruptcy which provides a 3-5-year repayment plan. You can still pay back some of your student loans in Chapter 13 bankruptcy, but it is only based on what you can afford. If you cannot afford your regular student loan payments, lowering your obligations by paying a smaller amount through your Chapter 13 plan, may be the way to go. This allows you time to increase your income, deal with your other unsecured debt, such as credit cards and medical debts so that your payments to the student loans are more affordable after your bankruptcy. (Keep in mind the interest continues to accrue while you are in the bankruptcy). 

Increasing debt limits could help Graduate or Doctorate level degrees with student loans in Chapter 13 bankruptcy.

It is not uncommon for Graduate or Doctorate level degree to come with $250k worth of student loan debt which only increases when payments are put into income-based payments which barely pay the interest. Debtors may find themselves nearing the debt limits for a Chapter 13 bankruptcy between student debt and long overdue credit card debts or Judgments. The good news is that beginning April 1, 2019, the debt limits in a Chapter 13 Bankruptcy will increase to $419,275 for a debtor’s noncontingent, liquidated unsecured debt. This opens the door for more people to qualify for such a beneficial option when dealing with unmanageable debt. If you think Chapter 13 might be an option to help you deal with mounting student loan debt, contact me for a free consultation.

About Sophia Dean

Sophia Dean is an experienced attorney who focuses on bankruptcy and foreclosure defense. She has represented debtors in all stages of debt collection. She is also the co-chair of the Orange County Bar Association’s Bankruptcy Committee. She can be reached by phone at (407) 512-4394, 

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bankruptcy attorney Orlando

Bankruptcy Might Not Be as Difficult as You Think

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How Bankruptcies Work

By definition, bankruptcies are legal and financial arrangements designed to provide a person or business with temporary relief from their debt. The bankruptcy gives the individual or company (referred to as the debtor) time and flexibility to better organize their ability to pay their debt and other financial obligations. Part of the process typically includes the creation of a plan to fulfill certain financial obligations. There are also specific situations where debts are entirely eliminated. 

Clearly, bankruptcies should be considered as an option after other opportunities to relieve the debt have been explored. For example, it is usually advisable to attempt to negotiate with creditors before considering bankruptcy. 

While bankruptcies are incredibly complex, there are things that individuals and businesses can do to make the process less complicated. It’s critical that those considering bankruptcies go through a detailed planning process. Also, a recommended first step is enlisting the professional help of an attorney and a financial advisor.

What is bankruptcy protection?

In the US Legal System and in bankruptcy court there is an essential difference between bankruptcies and bankruptcy protection. Put simply; bankruptcy is the process a person or business follows when they can no longer satisfy their debts. Bankruptcy protection refers to the condition where. During and after the bankruptcy, a company or individual has financial protection from their creditors. 

What steps should I take before filing for bankruptcy?

When preparing to file, the more organized you are, the easier things can be for you and your attorney. Here are the efforts we recommend doing, and in some cases, not doing, as you prepare. 

Do: Determine the type of bankruptcy you should file. Bankruptcies come in several types, including Chapter 7, where most of your debts are forgiven and Chapter 13 which involves restructuring your debt into a manageable payment plan. Your lawyer is the best source of advice on determining which makes sense for your situation. Your lawyer may have you take a Bankruptcy Means Test to assess your ability to pay your debts. The results of this test could eliminate your qualification for filing Chapter 7 bankruptcy.

Do: Enroll in a credit counseling course. You may be required to take a credit counseling course either in person or online. Work with your attorney to determine which is best for your unique circumstances.

Do Not: Go on a spending spree. Many people inaccurately believe that all debt will be forgiven when you file for bankruptcy. The reality is that all of your debt will be examined and an appropriate course of action will be determined. When your debt is reviewed, the bankruptcy court will become aware of any significant spending you might have done before filing. A large amount of what could be seen as unnecessary spending might not work to your advantage. 

Do Not: Conceal the truth. Ultimately, the only way to get out of an impossible financial situation is to be truthful and honest about how you got there. When you work with an attorney, the more they know about your situation, the better they will be able to help you. 

Can bankruptcies be avoided?

It is entirely possible for many people to avoid bankruptcy and bankruptcy court. The most significant benefit to avoiding bankruptcy court is that you will preserve a higher credit rating. One of the ways you can avoid bankruptcies includes working directly with your creditors to organize a plan to satisfy your debt. Another strategy might be to sell non-essential items that you own and use the money to pay off debt. There are other tactics that should be explored, working with an attorney can help uncover all options that might exist for you.

Do I need a lawyer to file?

Facing overwhelming debt can be a frightening experience and could be a source of embarrassment for many people. You might not want to share details with family and friends, and that’s ok. But you don’t have to deal with the situation alone. Because bankruptcies can be quite complex, it can be to your benefit to hire an attorney early on. The attorney can help guide you through the process, work with you on deadlines and paperwork, negotiate with your creditors, and help make the process easier than going at it alone.

Ready to speak with an attorney about your options? You can contact us to schedule a consultation.

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How Does Bankruptcy Affect Child Support Payments?

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The BAPCPA recognizes child support payments as financial support that is intended to maintain human life. Therefore, such monetary arrangements are highly prioritized and protected by the court system.

If your ex-spouse files for bankruptcy it is not a reason to worry. Bankruptcy will not eliminate child support payments, nor can it change the monthly amount you’re owed. What it will do is eliminate certain low-priority debt which will make it easier for your ex to make domestic support payments, including child support.

The attorneys of The Orlando Law Group are experts in both Chapter 7 and Chapter 13 bankruptcy, as well as Family Law. We stand at the ready to assist you through these processes and answer any and all questions you might have. Schedule a consultation today by calling 407.512.4394.

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What is Cram Down in Chapter 13 Bankruptcy

What is Cram Down in Chapter 13 Bankruptcy?

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A Cram Down in a Chapter 13 bankruptcy allows you to reduce the principal balance of a debt to the value of the property it is secured by. You may be able to save your car, investment real estate, or certain other properties, by taking advantage of a Chapter 13 Cram Down.

You are allowed to cram down certain secured debts. A debt is considered secured when your lender has a security interest in your property and can repossess it if you fail to make your loan payments. The most common examples of a secured debt are your mortgage and car loan. In a Chapter 13 bankruptcy, you can cram down your car loan, investment property mortgages, or other personal property (besides real estate) loans such as household goods and furnishings. You can’t cram down a mortgage on your principal place of residence.

Cramming down your loans through a Chapter 13 bankruptcy may also allow you to reduce your interest rate and stretch your payments out over a longer term in order to lower your monthly obligations. The interest rate paid to secured creditors through your plan is determined by the bankruptcy court and will usually be lower than your note rate. In addition, since Chapter 13 plans last three to five years, you may be able to stretch out the payment period for the crammed down loan, resulting in lower monthly payments than if you were paying the loan outside the bankruptcy.

Congress has placed certain restrictions on when you can use a cram down to prevent people from cramming down their recent purchases. These restrictions depend on what kind of property is securing the debt you wish to cram down.

910-Day Rule – If you want to cram down your car loan, you must have purchased the car at least 910 days prior to the bankruptcy, that’s about 2 and a half years. This prevents people from buying a new car and cramming down the loan right soon after driving it off the lot.

One-Year Rule – This rule is similar to the 910-day rule for cars but it applies to all other personal property. It is usually relevant if you are trying to cram down loans on your household goods and requires that the goods be purchased at least one year prior to the bankruptcy before a cram down is allowed.

Investment Property Mortgages – Most courts require that loans that are crammed down be paid off within the three to five year length of your Chapter 13 plan. This creates a practical problem for most people who want to cram down their investment property mortgages because they do not have the means to pay off a mortgage (even a crammed down one) in this short of a time period.

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How Can You Tell When and If its TIme to Declare Bankruptcy

How Can You Tell When and If it’s Time to Declare Bankruptcy?

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How can you tell when and if it’s time to declare bankruptcy?

Some signs that that may be something you need to think about are:

  • You are only able to make the minimum payments on your credit cards
  • Bill collectors are constantly calling you.
  • You are using credit cards to pay for necessities, like groceries and gas.
  • You have thought about debt consolidation.
  • You are unsure how much you actually owe to creditors.

If any of these apply to you, you may need to look into your financial situation a little more. Bankruptcy is when you owe more than you can afford to pay. To determine where you are financially, inventory all of your liquid assets. You’ll want to include retirement funds, stocks, bonds, real estate, vehicles, college savings accounts, and other non-bank account funds. It doesn’t have to be exact, down to the penny, a rough estimate is fine.

After you know how much you have, get together and add up all your bills and credit statements. If the value of your assets is less than the amount of debt you owe, declaring bankruptcy may be one way out of a tough financial situation. However, bankruptcy shouldn’t be approached casually. It’s definitely not a simple, easy cure-all for out-of-control debt.

If you do decide that filing bankruptcy is the way you should go, you can go about it in one of two main ways. The more common route is to voluntarily file for bankruptcy. The second way is for creditors to ask the court to order a person bankrupt. There are several ways to file bankruptcy, each with pros and cons. You may want to consult a lawyer before proceeding so you can figure out the best fit for your circumstances.

Some common reasons for filing for bankruptcy are unemployment, a lot of medical expenses, seriously overextended credit, and marital problems. A Chapter 7 bankruptcy liquidates your assets to pay off as much of your debt as possible. The money from your assets is given to creditors like banks and credit card companies. The record of your bankruptcy will stay on your credit report for ten years.

But Chapter 7 bankruptcies aren’t right for everyone. Almost all assets are taken and sold to repay creditors. If you own a company, a family home, or any other personal assets that you want to keep, Chapter 7 may not be the best option.

For people who have property they want to keep, filing a Chapter 13 bankruptcy may be the better choice. That allows you to pay off your debts over a period of three to five years. If you have consistent, predictable annual income, Chapter 13 offers a grace period. Any debts remaining at the end of the grace period are discharged.

Once the bankruptcy is approved by the court, your creditors have to stop contacting you. It can be hard to admit you need help getting out of debt. But that’s why our country has bankruptcy laws to protect not only the creditors, but you as well. If you have a high debt-load, it may be time to face financial facts. You could be doing yourself a disservice by not filing for bankruptcy. With a good lawyer and the right information, filing bankruptcy could give you the financial footing you need to get a fresh start.

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Chapter 13 Bankruptcy and Mortgage Modification

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What are your options if you cannot afford your current mortgage payment and you are a Chapter 13 debtor? Well, you can surrender your home or you can try to modify your mortgage payment. The option to modify your mortgage payment may be available to you in a chapter 13 bankruptcy before your case is confirmed if you cannot afford your current payment, want to keep your home, and you can afford to pay 31% of your net income to a modified mortgage payment.

What is mediation? Mediation is an informal meeting conducted to resolve disputes and reach an agreement. Mediation is conducted by a neutral intermediary. The mediator is selected by you and your lender. You would pay for the cost of the mediator. The mediator would help you and your lender reach a mutually satisfactory agreement. The mediator cannot force a lender to modify your mortgage. The mediator must be completely impartial.

If you are interested in a mortgage modification while in Chapter 13 bankruptcy you would need to request mediation to participate in the Mortgage Modification mediation program. If you qualify for the mediation program you or your attorney would need to complete and file a Motion for Referral to Mortgage Modification Mediation. The Bankruptcy Court will then enter an order requiring you and the lender to mediate within 60 days. You will have to pay $306.00 to your Chapter 13 Trustee before the mediation for the mediator’s fees. You and the lender will need to agree upon an approved mediator. If you cannot agree upon the mediator the Court will choose one for you. At least 10 days before mediation you will have to provide certain financial information to the lender.

Additionally, the lenders attorney is allowed $300.00 for fees to attend the mediation, which will be paid either through your Chapter 13 Plan or through the mortgage modification. If an agreement is reached at mediation, the Bankruptcy Court will still have to approve the agreement before it is enforceable.

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Do Married Couples Have to File Bankruptcy Jointly?

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No. Just because you are married doesn’t mean you have to file a joint bankruptcy. If one spouse has the majority of debt in his/her name, just that spouse can file bankruptcy. Many married couples have the debt in only one of the spouse’s names just in case something happens in the future; such as loss of employment or health issues. This allows only one spouse to file bankruptcy and the other spouse can maintain good credit.

However, when filing either a Chapter 7 or Chapter 13 bankruptcy, both spouses income is considered. For example, to be eligible for a Chapter 7 bankruptcy there is a 2 part test. First, there is the “means test”. This subjects debtors to an income based test. Both spouses income is considered. If the household income (both husband and wife) is below the state’s median income, then the debtor is not subject to the means test. Even if the debtor passes the means test, the debtor still has to pass a second test known as the “abusive test”. The United States Trustee or any creditor can move to have the case dismissed. The bankruptcy Court could dismiss the case if the Court finds that the debtor has the ability to pay back a significant portion of the unsecured debts. This is determined by looking at what the monthly income will be after filing bankruptcy and what the household expenses are. Both spouse’s income and expenses are considered.

In a Chapter 13, the debtor must list all income, debt, personal property, and monthly expenditures. The amount of the plan payment is based upon the debtor’s disposable income. For example, after the debtor lists all household income and household monthly expenditures (utility bill, water bill, food, clothing expenses, rent/mortgage, phone bill, etc.) whatever is left over is the debtor’s disposable income. As with Chapter 7, both spouse’s income and expenses are considered to determine the plan payment.

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What to Avoid Before Filing for Bankruptcy

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If you are considering filing bankruptcy, there are a few transactions you should avoid so you do not have any complications with receiving your discharge.

Credit cards and cash advances:
You should stop using credit cards if you know you are not going to pay them off. When you decide to file for bankruptcy, do not continue to use credit cards and do not take any cash advances. For example, if you decide that you are going to file for bankruptcy and within 90 days before filing you use your credit cards and take cash advances, those credit card companies could claim that you used the cards with fraudulent intent. They would argue that at the time you used the credit cards or took the cash advances you were never planning on paying them off, and therefore, you had fraudulent intent. When you decide to file for bankruptcy, stop using your cards and do not take any cash advances.

New loans prior to filing for bankruptcy:
If you apply for a loan just prior to filing for bankruptcy you may have to keep the loan. For example, if you receive a loan for a car within 90 days of filing bankruptcy you will most likely have to keep paying the loan. So if you know you’re going to file for bankruptcy, do not take on a loan unless you want to keep that loan.

Fraudulent transfers:
Do not transfer any real property or personal property into another person’s name. When you file for bankruptcy you must list all your personal property and real property. If there is equity in the property the Trustee will want to take the property. Therefore, many people wrongly believe that if they transfer the title to someone else they do not need to list the property. But that is not the case. You will have to list all transfers of property, in some cases you will have to list property transferred 2 years prior to filing, and other cases 10 years prior to filing for bankruptcy. For example, I have had many clients tell me that they own a car that is paid off and titled in their name but they consider the car to be their child’s car. When filing for bankruptcy, it doesn’t matter who drives the car, it only matters whose name is on the title. In that situation, the car would have to be listed in the bankruptcy because the title is in the parent’s name. Even if the parent transferred the title into the child’s name, that transfer would have to be listed in the bankruptcy.

Not disclosing real property and personal property:

As I explained above, when you file for bankruptcy you will have to list all your property, both real and personal. Do not hide property. You must disclose everything.

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What is a Meeting of Creditors?

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After the debtor files either a Chapter 13 or Chapter 7 bankruptcy, the debtor will receive notice of when the first meeting of creditors is scheduled. The first meeting of creditors is held approximately 45 days after filing the bankruptcy petition and schedules. The meeting of creditors is also referred to as a 341 meeting after section 341 of the Bankruptcy Code.

The purpose of the meeting is to examine the debtor regarding the petition and schedules that was filed, and to allow creditors the right to question the debtor. The 341 meeting is fairly informal but the debtor is sworn in and required to tell the truth. Attendance by the debtor at the 341 meeting is required. Bankruptcy Judges are not allowed to be present at the 341 meetings. The trustee assigned to the debtor’s case will administer the oath to the debtor and ask for the debtor’s picture identification and social security card. The trustee will question the debtor about certain assets, whether anyone owes the debtor money, whether the debtor expects an inheritance, whether the debtor listed all assets and debts, etc.

Additionally, if the debtor filed a Chapter 13 bankruptcy, the debtor will be required to read and complete forms and the Trustee will review the proposed plan to ensure the debtor understands the plan. Typically, the 341 meeting last about 5 to 15 minutes. Most of the time creditors do not come to the 341 meeting because they do not need to be present at the meeting to file an objection.

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Chapter 13 Bankruptcy

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Chapter 13 bankruptcy is essentially a reorganization. Chapter 13 enables individuals to develop a payment plan to pay back either all or some of their debt to creditors over a 3 or 5 year period. The time period is based upon the debtor’s current monthly income. If the debtor’s income is less than the states median income, then the plan will be for 3 years. If the debtor’s income is above the states median income, then the plan will be for 5 years.

To qualify for chapter 13 bankruptcy, the debtor must have income to fund the plan. Additionally, the debt limits for a chapter 13 recently increased to $360,475 for unsecured debt and $1,081,400 for secured debt. This means that if your debt is greater than these limits, you will have to file either a Chapter 7 or a Chapter 11 bankruptcy.

If the debtor decides to keep secured property, the debtor will continue to make payments to those secured creditors. However, if the debtor does not want to keep secured property, such as a house or car, the debtor can surrender the property and the creditor will take the property back and the remainder amount owed is treated as unsecured debt. Unsecured creditors (credit cards for example) must receive at least as much as they would have received if the debtor filed a Chapter 7 bankruptcy. For example, if unsecured creditors would have received $5,000 if the debtor filed a Chapter 7 bankruptcy, then the unsecured creditors must receive at least $5,000 over the course of 3 to 5 years during the chapter 13 bankruptcy.

When preparing the chapter 13 schedules to file with the petition, the debtor must list all income, debt, personal property, and monthly expenditures. The amount of the plan payment is based upon the debtor’s disposable income. For example, after the debtor lists all income and monthly expenditures (utility bill, water bill, food, clothing expenses, rent/mortgage, phone bill, etc.) whatever is left over is the debtor’s disposable income. The debtor does not list payments to secured or unsecured creditors that are paid within the plan. For example, if the debtor has $150 left over after paying all necessary expenses, then the debtor would make a payment of approximately $150 per month to the Trustee for either 3 or 5 years, depending upon the plan.

Chapter 13 bankruptcy requires a commitment from the debtor to pay monthly payments to the Trustee. The debtor has a choice of either directly paying the Trustee or having his/her employer pay the Trustee directly. The debtor has a much greater chance of completing the plan successfully if the debtor allows his/her employer to pay the Trustee. However, it’s the debtor’s responsibility to ensure his/her employer is making the payments timely. If the debtor misses a payment, the debtor must make up that payment within 21 days and pay the next months payment. If the debtor fails to make up the payment, the debtor’s case is dismissed, and the debtor does not receive a discharge. The debtor would then be liable for the entire debt.

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How Does Bankruptcy Affect My Credit Score?

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Many people worry that if they file bankruptcy they will ruin their credit. It is true that a bankruptcy will remain on your credit for up to 10 years. However, the truth is, if you are considering bankruptcy your credit is most likely not very good. A lot of money owed to many creditors can bring down your credit score because you are considered a high credit risk. Additionally, paying creditors late or not at all will also lead to a low credit score and possibly lawsuits from your creditors.

You can rebuild your credit score after filing bankruptcy. The first step is to ensure that all accounts included in your bankruptcy show that they were included in the bankruptcy. This should be on your credit report about six months after your bankruptcy discharge. Remember, any errors on your credit report can affect your credit score. The second step to rebuilding your credit score after a bankruptcy is to start using credit wisely. You should start with secured cards, which gives you a limit equal to the amount in your account. Try not to charge more than 30% of your credit limit. Pay off your credit card at the end of the month. Installment loans also help rebuild your credit, such as car loans, student loans, and mortgages. Just make sure you can afford the car payment and mortgage payment. Don’t be surprised at the higher interest rate you will receive at first due to your bankruptcy filing. In time though, after rebuilding your credit, you will begin to receive lower interest rates.

So if you are considering filing bankruptcy and you are paying bills late or not at all, chances are your credit is not good. After filing bankruptcy most people are a better credit risk because they no longer owe debt to many creditors. Of course the creditors want you to think otherwise. Don’t be fooled, in most cases bankruptcy provides a fresh start.

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Should I File a Chapter 7 or Chapter 13 Bankruptcy Petition?

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Consumers generally file either a Chapter 7 or a Chapter 13 bankruptcy. Some people wrongly believe that a Chapter 7 bankruptcy is the best way to go, but that is not always the case. Everyone has their own unique situation which should be analyzed by a professional to determine whether a Chapter 7 or a Chapter 13 bankruptcy is more appropriate for you. For example, if you do not have a lot of unsecured debt such as credit card debt or medical bills, but you have a home worth $200,000, a first mortgage of $210,000 and $75,000 on your second mortgage, and you want to keep your house, filing a Chapter 13 bankruptcy may be appropriate for you because you may be able to “lien strip” the second mortgage.

On the other hand, if you have a lot of unsecured debt such as medical bills and/or credit card debt, than Chapter 7 may be more appropriate for you. However, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 made changes to the Bankruptcy Code, which makes filing a Chapter 7 bankruptcy more complicated. To be eligible for a Chapter 7 bankruptcy there is a 2 part test. First, there is the “means test”. This subjects debtors to an income based test. But if the debtors income is below the state’s median income, than the debtor is not subject to the means test. Additionally, debtors with primarily (more than 51%) business debts (including investment properties used as rental properties) may file a Chapter 7 bankruptcy regardless.

However, even if you pass the means test, you still have to pass a second test known as the “abusive test”. The United States Trustee or any creditor can move to have your case dismissed. The bankruptcy Court could dismiss your case if the Court finds that you have the ability to pay back a significant portion of your unsecured debts.

If you are eligible to file a Chapter 7 you are looking to liquidate your debt. You are able to keep some property and may have to let other property go. You can keep exempt property.

A Chapter 13 bankruptcy is a form of reorganization. The debtor proposes a plan to pay his creditors over a 3 to 5 year period. Generally, the debtor keeps property and the creditors get less money than they are owed. However, the unsecured creditors must receive at least as much through the Chapter 13 plan as they would have received in a Chapter 7 liquidation.

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Your Inherited IRAs Are Not Protected From Creditors

Your Inherited IRA’s are Not Protected from Creditors

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In a major decision, the Supreme Court ruled in June 2014 that inherited IRAs are not considered protected retirement funds—and are thus subject to creditors’ claims if the beneficiary files for bankruptcy.

In the case of Clark v. Rameker, Heidi Heffron-Clark argued that a $300,000 IRA she inherited from her mother in 2001 qualified as a protected retirement account. As such, she contended, the account was exempt from the claims of creditors after Heffron-Clark and her husband filed for bankruptcy in 2010.
However, under U.S. tax code regarding inherited IRAs, Heffron-Clark was required to withdraw a minimum amount of money from the account each year, even though she is not yet retirement age. Given this, the court decided the account was not a protected retirement fund because the beneficiary wasn’t using it as one.

Why does that matter?
The Clark v. Rameker decision means that, in the case of bankrupt estates, inherited IRAs will now be considered assets—fully available to satisfy creditors’ claims. If you pass a retirement fund down to a child or grandchild, that inherited money will no longer be protected if your beneficiary must file for bankruptcy.

What should I do?
Careful estate planning can ensure that inherited IRAs remain safe from your beneficiary’s creditors. In most cases, establishing a Standalone Retirement Trust will protect your assets without restricting your beneficiary’s access to them.

How does it work?
Upon the retirement plan participant’s passing, his or her funds will flow into the third-party trust instead of passing directly to the beneficiary. Because the beneficiary does not establish the trust, doesn’t fund the trust with his or her own money, and cannot modify the trust, the trust will—in most jurisdictions—enjoy substantial protection from the claims of the beneficiary’s creditors. An independent trustee—who isn’t the beneficiary—can also be appointed to oversee the trust’s distributions in order to ensure further protection from creditors’ claims.

What do I need to do?
Make an appointment with an estate planner in your area to discuss your options. Standalone Retirement Trusts must be drafted carefully in order to ensure that the trust qualifies as a “Designated Beneficiary.” This guarantees that the trust will be able to take out the minimum required distributions according to the beneficiary’s life expectancy, not the plan participant’s. If the trust is not set up properly, the entire inherited IRA will need to be withdrawn within five years of the plan participant’s death. Work with a reputable planner to make sure your trust is structured correctly and that your beneficiary—and not his or her creditors—will receive the funds you pass down.

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