Archive for the ‘Bankruptcy Laws’ Category

There is much controversy in the Senate right now over a possible change to bankruptcy law in response to the current mortgage crisis. Currently bankruptcy judges can change the terms of certain kinds of debt such as credit cards and car loans in order to reduce the amount of debt owed and lower monthly payments. They can even make changes to mortgages on 2nd homes, vacation properties and investment properties, but they cannot change the terms of a mortgage on a primary residence. With so many people in danger of losing their homes to foreclosure, the Democrats are trying to push through a piece of legislation that would change that law and allow bankruptcy judges to change the terms of mortgages on primary residences as well in an effort to save those people from losing their homes. The supporters of this bill feel that lenders would make more of a voluntary effort to help struggling borrowers modify their loans in order to avoid allowing bankruptcy judges who are not knowledgeable in the mortgage industry to be able to modify the loans which would cost the lenders money.

As would be expected, lenders are opposed to the bill. They believe that if this piece of legislation is passed, there is a great potential for interest rates to rise again. It is also feared by other opposition that the lenders would start charging higher fees to cover the costs of loans that will never be paid in full. Neither of these results would do any good for the troubled economy.

The section of the bill that is causing the most amount of concern for the Republicans is a provision that sets up a $4 billion fund for lenders to buy up abandoned and foreclosed properties. This would help alleviate some of the lender’s losses and help the housing market recover some. It is being seen as a “bail out” though for the lenders and that is not sitting well with the opposition.

If the bill passes, it has been said that President Bush will veto it, but that Democrats would try to push it through the senate with a majority vote.

Some people file for bankruptcy in an effort to save their home from going into foreclosure. But does that work? In some cases it will, but in some cases it won’t. If you are filing for Chapter 13 bankruptcy, there is a good chance that you will be able to keep your home because you will be required to continue making mortgage payments as well as paying back the payments you have missed. But if you are filing for Chapter 7 bankruptcy, filing may not help to save your home. The biggest determining factor is based on how much equity you have in your house and whether that equity amount is within the allowed exemption amount.

The first thing you must do is figure out how much equity you have in your home. Once you find out how much your home is currently worth, subtract the amount you still owe from that amount. That will tell you the amount of equity you have. For example, if your house is worth $200,000 and you have $185,000 worth of mortgage loans still owed, your equity would be $15,000.

The current federal homestead exemption is $18,450. Some states have their own homestead exemption amounts as well. So you will want to know what your states’ exemption is as it may be more or less than the federal exemption. If you have less than $18,450 in equity in your home, you may be able to keep it. But if you owe more than the exemption amount, you may be at risk of losing your home.

You may still be able to keep your home if you can pay the difference between the exemption amount and the equity you have from sources other than your bankruptcy estate (chances are you cannot do that though if you are filing for bankruptcy). If the cost of selling your home would be more than the nonexempt equity amount the trustee of your case may allow you to keep your home as well.

Note that there are some types of dwellings that do not qualify for the homestead exemption in certain states such as mobile homes and coops. And some states base their exemption on the lot size of your property.

Before deciding to file for bankruptcy to try to save your home, become familiar with your states’ exemptions to try and determine if filing for bankruptcy will allow you to save your home.

Once you file for bankruptcy, an automatic stay is immediately put into place. An automatic stay temporarily stops your creditors from being able to take any action against your income or property. It also freezes any lawsuits pending against you.

There are a few different kinds of lawsuits or actions by creditors that an automatic stay will not stop. It will not stop any criminal proceedings or any attempts to collect alimony or maintenance or support from property that you acquired after filing for bankruptcy or exempt property.

If you file for Chapter 7 bankruptcy, friends or relatives who have co-signed for a loan are not protected by the stay. They can still be contacted by the creditors to collect the full amount due. If you file for Chapter 13 bankruptcy, the stay may protect your co-signers if they cannot benefit from the debt proceeds, the debt was not incurred in the ordinary course of business or the debt is a consumer debt.

Your creditors can file for a Motion for Relief from Stay which would exempt them from the stay and make it so they still have the ability to collect the debt. They may do this if they feel that the property securing your debt is at risk or depreciating quickly or if there is a consensual lien against your home and you are unable to pay the mortgage payments to pay off the debt. You are allowed to file an Objection to their application for Relief from Stay.

Note that due to recent changes in bankruptcy laws, landlords are still able to pursue eviction even if a stay is in place.

Although some credit consolidation companies can help you in the long run, it’s best to exhaust every other option before you resort to enlisting their services. They tend to cause more trouble than they’re worth and can even end up getting you deeper into a financial rut than you were before.

If you haven’t tried calling your creditors or writing them a letter to try and get your interest rates lowered and your due date extended, make sure to do so. Most companies would much rather you do this than stop paying your bill altogether. It doesn’t hurt to ask, but it does hurt your credit to not make your payments at all.

If you have decided that using a debt consolidation company is what you want to do, investigate them first. Check out the company with the Better Business Bureau and ask them about all their charges, from an application fee to their interest rates.

Ask the company you choose whether or not they can help your credit score as well. Keep in mind that many creditors will look at the fact that you signed up for credit card consolidation as something negative. But, it’s still a better option for most people than bankruptcy is. The bottom line is this: investigate the company you are interested in and find out what they can truly do for your credit. If it’s going to cost you too much or the benefits aren’t great enough, don’t do it and decide if filing bankruptcy is something you need to do to get back on your feet.

Doesn’t it seem ironic that with the passing of the new bankruptcy law, it’s now even more expensive to file bankruptcy? The fact of the matter is this: you’re broke and your bank account is tapped and now you have to figure out just how you’re going to pay for your bankruptcy fees. Talk about kicking a person when they’re down…

The initial cost of filing has gone up and it’s now mandatory to pay for credit counseling prior to filing as well. Not to mention increased bankruptcy lawyer fees due to the new deadline and additional paperwork. But the good news is that there is hope for those that are so financially strapped that even filing bankruptcy seems out of reach.

First of all, think about borrowing some money from a trusted relative or friend. Granted, no one like to be “that guy,” you know, the one that is always looking for a hand out? But, desperate times call for desperate measures, right? If this is not an option for you, think about cashing in any stocks you have or taking out some of your retirement account to pay the fees. Whatever measures you have to take to file, including getting a second job or using your tax refund, keep in mind that the end result will make it all worth your while.

Before October 17, 2005, countless people made sure that their bankruptcy case was in the courts before the new law took place. Bankruptcy has always been used to absolve people of debt and help them build a new life that offers the possibility of financial stability. But, since the new law went into effect, people have become so wary of filing for bankruptcy that they are writing it off altogether. Unfortunately, this isn’t the smartest thing to do. Trying to dig yourself out of debt on your own might just end up making things worse in the long run. The good news is that you can still file for bankruptcy- it’s just going to take longer than it would have before and there will be more paperwork.

One of the major changes instituted by the new law was the establishment of income. The income limit went up to $54,000 for a family of two, $58,000 for a family of three and $66,000 for a family of four. For larger families, it is $6,300 per additional member.

Basically, if you earn more than $40,000 per year and are thinking about filing for bankruptcy, you are going to be met with tougher requirements than ever before. But, don’t let this deter you. A complete and total discharge of your debt is still possible, you just have to be prepared for the mountains of paperwork and documentation that you’re going to have to provide.

To get started, contact a reputable bankruptcy attorney to determine if filing is the right decision for you. Your attorney will be able to go over the new law in detail with you and answer any questions that you might have.

A bill that would let some people filing bankruptcy keep their wedding rings is on its way to Governor Pawlenty’s desk, after the Senate voted to approve it Monday.

Senate members voted 62-0 to approve HF473. The bill will add wedding rings valued at $1,225 or less to a list of Minnesota exemptions of personal goods a person filing bankruptcy does not have to relinquish.