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Bankruptcy – Page 9

Jen|Lee|Law

Main Office Phone: 925-586-6738
Offices in San Ramon, San Francisco, and Tracy, CA

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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.

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.

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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.

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

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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.

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Alternatives to Bankruptcy – Part 2: Debt Settlement

This is the third 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 Debt Settlement?

Debt settlement involves negotiating with your creditors to accept a lump-sum payment that is less than the total you owe. For example, if you owe a credit card company $8,000 and are not making payments, the company may agree to accept 50% of what you owe in order to recover some of the owed money. Debt settlement can only be used on unsecured debts like credit cards or medical bills.

There are a few different approaches to debt settlement. First, you (as the consumer) could take the time to come up with a budget and call each creditor as you have money to pay to see if you can come to an agreement regarding settlement. Second, there are attorneys that you can hire to assist in making those calls and negotiating with the creditors. Finally, there are debt settlement companies who create a plan for you and negotiate with creditors on your behalf.

Who Should Consider Debt Settlement?

Debt settlement may be an option if you have some cash available, but not enough to pay off everything you owe. Bankruptcy may not be able to protect all of your assets in this situation, so negotiating with your unsecured creditors may result in paying a smaller percentage than the bankruptcy court would require in a Chapter 13 repayment plan.

Because debt settlement usually requires a lump sum payment, it is often not a good option for those with little or no cash available. There are some debt settlement companies who will assist you in establishing an account to accumulate money towards lump sum payments, however be very careful to find out how much the service is going to cost you and what happens if the debt is not settled.

This is just a basic overview of debt settlement 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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Alternatives to Bankruptcy – Part 1B: Debt Consolidation Pitfalls

This is the second 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 are the Pitfalls of Debt Consolidation?

There are several pitfalls to watch out for when considering debt consolidation. The interest rate on the new loan, the length of the new loan, hidden fees associated with the new loan, and potentially turning unsecured debt into secured debt.

One of the biggest key indicators to look at is the interest rate on the new loan. If your credit card is charging you 20% interest and your consolidation loan is 10% interest, it might help with lowering your payments and reducing the amount of overall interest you pay. You also want to keep the interest rate in mind with federal student loans. In the past, rates have fluctuated depending on when the loans were taken out and the federal consolidation loan is based on an average of those rates. If you have a high balance at a low rate, you need to look and see what your new interest rate is going to be before you consolidate.

However, the next thing to look at is the length of the loan. If you have a lower interest rate, but are spreading the payments out over 20 years (or longer), you may end up paying a lot more in interest, even with a lower interest rate. So, looking at the interest rate and the length of the loan together are important steps to understand the total amount you will owe.

Also, watch out for hidden fees in your new loan and make sure you consider the overall cost. For example, if you use a home equity line of credit, there may be an appraisal required or an origination fee. Just be aware of the fees and look for anything that could cost you more money.

Finally, turning unsecured debt into secured debt can be a big problem for some people that use their homes to obtain the consolidation loan. When you have unsecured debt (credit cards, personal loans, etc.), the creditor just has your word that you’ll pay and there is no collateral involved. Once your house is used to secure your consolidation loan, the creditor could potentially foreclose on your house in order to recover the loan payments if you default on the loan.

This is just a basic overview of the pitfalls of debt consolidation 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.

Disclaimer and Additional Information

LEGAL ADVERTISEMENT. The information included on this website is not intended as legal advice. You should consult with a lawyer before acting on any information contained in this website.

Jen Lee Law, Inc. is a federally designated Debt Relief Agency. Jen Lee helps clients file for bankruptcy protection under the laws of the United States.

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