A blog about debt, credit and bankruptcy

July 13, 2011 By jenleelaw Leave a Comment

I Can’t Afford a Bankruptcy Attorney

Or, why you can’t afford not to hire a bankruptcy attorney.

I was sitting in on some meetings of creditors today and heard the trustee tell unrepresented married debtors that they would have to surrender their vehicles or buy them back from the trustee. I could tell that the debtors had no idea what the trustee was talking about because they kept saying that they owned the vehicles free and clear. They did not understand that everything they owned when they filed bankruptcy became part of the bankruptcy estate and was subject to sale and distribution to creditors, except for property that was claimed exempt on Schedule C or property where they owed more than it was worth.

The trustee confirmed with the debtors that they used § 704 exemptions, which is not very common these days in California. One of the § 704 exemptions protects equity in a property, which is usually the main reason for choosing this set of exemptions. After the meeting, I went and looked up the schedules that the debtors had filed with the assistance of a non-attorney petition preparer.

The debtors had no equity in their property and had no reason to use the § 704 exemptions to exempt the property. In addition, the exemption for a motor vehicle was used for an RV with no equity instead of the 2 vehicles they use to get to and from work.

At the end of the meeting, the debtors ended up having to buy back their vehicles for $10,000 from the trustee. With proper legal representation, it is likely that they would not have had to pay anything and kept all of their property – and there is also a good chance that the attorney fees would have been a lot less than $10,000.

A bankruptcy attorney’s job is not to simply prepare a bunch of paperwork for you. My job is to help you understand how the bankruptcy process works, explain your options for the property that you own, and help you make a fresh financial start. Please feel free to contact me to schedule an appointment to discuss your options.

This is just a basic overview and is not legal advice specific to your situation. If you are considering bankruptcy or are facing foreclosure, you should speak with an attorney in your area for legal advice. To speak with me regarding your situation, please email me at jen@jenleelaw.com or call 925-586-6738

July 11, 2011 By jenleelaw Leave a Comment

What is the Meeting of Creditors?

After you file your bankruptcy petition, the next step is usually a meeting of creditors that takes place at the US Trustee’s Office about 30 days after your petition is filed. The purpose of the meeting is for the Trustee assigned to your case to make sure that you physically signed the documents, that everything is true and accurate, and to ask you any questions that he or she may have about your petition.

Many people who I talk to get very nervous when they hear they have to go to a meeting of creditors. The mention of such a meeting tends to conjure up images of Chase or Bank of America showing up to interrogate you on your reasons for filing bankruptcy. Relax, it is actually very rare for creditors to show up at your meeting of creditors and if they do, they get about five minutes to ask questions related to your financial situation.

When your name is called, you go up and hand your driver’s license and social security card to the trustee so he or she can verify your identity. Then, you will sit at the table to the left or right of the trustee (depending on the trustee). After being sworn in, the trustee will generally ask a few brief questions regarding the documents you filed and make sure that there is no clarification needed. At the end, he or she will ask if there are any creditors present in your case. If not (and about 99% of the time, there are not any creditors), he or she will usually wish you good luck and you are free to leave.

I try to fully prepare every client for the meeting of creditors so there are not any big surprises and clients tend to feel relieved after it is over. If I can help you with your financial problems, please feel free to contact me to schedule an appointment.

May 16, 2011 By jenleelaw Leave a Comment

Giving Up the House

Many people, especially in California, are facing the difficult possibility of walking away from their houses. I talk to people every day who are trying to make huge mortgage payments that they can no longer afford. So, what goes in to deciding to give up the house?

First, it’s important to recognize that your house does not define you. There is a great article on Money Health Central today about the idea that your home and house are not the same thing. While the topic is usually emotional, looking at the situation from the standpoint that you can create a home wherever you live may help.

Second,developing a realistic budget to figure out whether you can afford to keep paying on the mortgage. Much has been said about loan modifications in the news, but what gets left unsaid is that those mortgages are now being extended to 40 years and/or requiring a balloon payment at the end. If you are 40 years old, do you envision yourself living in the house for the next 40 years and finally having a paid off home at the age of 80?

Third, many are concerned that they will not be able to buy another house ever again. It is possible that not buying a house is a great option. You’ll need to look at the cost of renting versus the cost of a mortgage, taxes, insurance, and home upkeep. In addition, it is possible to buy within a few years of a foreclosure and/or bankruptcy. Saving up a significant downpayment and living within your means are important steps to buying again.

What I hear frequently is that someone wants to keep the house because it is their home and they have sunk so much money into it. However, sometimes it is better to walk away from a bad investment than to continue paying interest-only on a house that is worth far less than you owe on it.

April 9, 2011 By jenleelaw Leave a Comment

Alternatives to Bankruptcy – Part 4: Debt Management Plan

This is the fifth in a series of posts regarding the alternatives to bankruptcy. The series will discuss debt consolidation, debt settlement, mortgage modification, and debt management programs.

What is a Debt Management Plan?

A Debt Management Plan (DMP) is a budget that you set up to pay off your debts in a set number of years. The budget can be put together by a credit counseling agency or you can do your own program, if you have the discipline.

What Kinds of Debts are Included?

A DMP will help you with mostly unsecured debts (credit cards, lines of credit with no collateral backing them up). They generally will not help with secured debts, such as your mortgage or car payment. In addition, a DMP will only help with taxes if you’ve already arranged a payment schedule with the IRS and follow it.

Is there anything a DMP will not help with?

A DMP will not help you keep your house if you are behind, unless part of your DMP is to negotiate a home loan modification and you can get affordable payments set-up. It would be up to you to obtain the home loan modification and adjust your DMP accordingly.

What are the Risks Associated with a DMP?

Similar to debt settlement, the risks associated with a DMP are that you won’t be able to continue making payments for whatever reason and your creditors are not bound to accept any of your arrangements, so they could still sue you and get a judgment against you. If you have so much debt that you could not reasonably make more than the minimum payments each month, a DMP would probably not be in your best interests. If you are just making the minimum payments, it often takes 15-20 years to pay off a credit card and hopefully, a DMP would allow for payoff in 5 years or less.

This is just a basic overview of debt management plans and is not legal advice specific to your situation. If you are considering bankruptcy or alternatives to bankruptcy, you should speak with an attorney in your area for legal advice.

April 7, 2011 By jenleelaw Leave a Comment

Alternatives to Bankruptcy – Part 3: Mortgage Modification

This is the fourth in a series of posts regarding the alternatives to bankruptcy. The series will discuss debt consolidation, debt settlement, mortgage modification, and debt management programs.

What is Mortgage Modification?

Many homeowners in California are in the unfortunate situation where they cannot afford their current monthly mortgage payments. It is hard to catch-up on payments once you get behind and then the foreclosure process starts and it can be overwhelming to figure out your options. A mortgage modification allows you to possibly lower your monthly payment, which can be accomplished through a lower interest rate, extending your loan out longer, or bringing your loan current (reducing the arrears due right now).

The Making Home Affordable Program

The Making Home Affordable program website has a huge amount of information available regarding the Home Affordable Modification Program (HAMP). This program lowers your monthly payment to 31% of your gross income, but there are a number of eligibility factors that you have to meet first. You have to actually use the house as your primary residence, you obtained your mortgage prior to January 1, 2009, you owe up to $729,750 on your home, and other guidelines available to review.

What Should I Expect During the Mortgage Modification Process?

Be prepared when applying for a mortgage modification. You will need to submit tax returns, paystubs, bank statements, and possibly other documents that show your monthly bills. Oftentimes, you will have to submit updated documents each month or submit multiple copies of the documents. It is also important to continuously follow up on the status of your mortgage modification. Give the company a call every week to find out where things are and if they need anything else.

Another thing to keep in mind is that the bank can foreclose on your house, even if you are in the middle of a loan modification. As long as they take the proper steps in providing notice and scheduling the sale, they do not have to delay a foreclosure sale to see how the loan modification works out.

Mortgage modification can also be used in conjunction with a bankruptcy filing. A modification may allow you to bring your loan current and start making payments again while you get a handle on other debts through the bankruptcy process.

This is just a basic overview of mortgage modifications and is not legal advice specific to your situation. If you are considering bankruptcy or alternatives to bankruptcy, you should speak with an attorney in your area for legal advice.

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