BANKRUPTCY AND YOUR AUTOMOBILE LOAN OBLIGATION

Many debtors contemplating Chapter 7 or 13 Bankruptcy do not want to list their automobile finance company as a creditor out of fear of losing their automobile. This should not be a concern for most people.

The good news is that more often than not, with the help of the law firm of Pitts & Burns, your vehicle will not be affected by any Bankruptcy filing. So long as you are current with your monthly payments, your finance company cannot and will not take your car in the Federal District of Rhode Island.

When you file for Bankruptcy you must list all of your creditors, including your finance company, even if you are current on your payments. You are obligated to name all creditors in your Bankruptcy, but there is a process for effectively removing them so that they are not affected by your Bankruptcy Discharge. This is done by reaffirming that obligation. Whether reaffirming that obligation is in your best interest requires a thorough analysis of your financial situation by Attorney Jack Pitts.

Chapter 7      

If you are seeking Chapter 7 bankruptcy relief, then you will file as part of your petition, a Statement of Intention. In that statement you are alerting your finance company that while they were named in your Bankruptcy that it is your intention to reaffirm that obligation. Therefore, when the financer receives notice of your Bankruptcy they will also know that it is your desire to keep your automobile and remain current on your obligation to their company. Once the reaffirmation agreement is executed and filed with the Court, the finance company will continue to report your timely payments to the credit bureaus.            You can also use that same Statement of Intentions to state that you want to give up your automobile. Debtors might want to do this for several reasons, usually though, because they are behind in their payments and have no practical way of catching up. The other reasons include that a Debtor owes more than the car is worth, or, they want to use the Bankruptcy opportunity to walk away from monthly payments that are too high. The filing of the Bankruptcy is an excellent time to regroup and not only discharge your overwhelming credit card debt, but also to reduce your living expenses that may have gotten out of hand, i.e. $500.00 per month auto payments.

 

Chapter 13

Debtors file for Chapter 13 Bankruptcy relief for many reasons. The most common cause is due to a loss of income, i.e., job termination, layed off, death, loss of a spouse, etc.. Many Debtors even after they regain their past income status, still cannot get out of the hole they found themselves in due to the rigidity of the demanding and obnoxious creditors. Creditors do not want to wait for their money and continue to add high interest and penalties making it impossible to ever get caught up.

A Chapter 13 puts you back in control of your finances. The Bankruptcy Court will allow you to pay creditors what you can reasonably afford (as determined by a number of methods); and for the first time, with a light of hope at the end of the tunnel.  After speaking with an experienced attorney at Pitts & Burns, you will know if Chapter 13 is the correct avenue for you.

Debtors can use a Chapter 13 filing for a number of good reasons as it pertains to their automobile obligations. The most popular reason is that they are threatened with repossession of their automobile due to a default in their regular payments and they cannot afford to lose their mode of transportation nor can they pay the arrearage off in one lump sum.  Chapter 13 will enable Debtors to pay back the arrearage due the finance company over time, usually 3 to 5 years. This way the threat of losing your automobile or getting into further debt is no longer necessary.

If you are current on your automobile, then you can continue paying your finance company outside of the bankruptcy and just concentrate on your other debt. There is no need to reaffirm your automobile finance obligation in a chapter 13.

You can also surrender your vehicle to the finance company in your Chapter 13 if you feel that the obligation is not worth continuing with.

A Chapter 13 also offers other very attractive options for the Debtor with a “bad” automobile loan. A Debtor can restructure their loan obligation so that you only pay the current fair market value of the vehicle and not what your current balance is. This is especially attractive to people who had to roll in their last car’s indebtedness into the purchase of their present car. For example, many people end up with their current car being worth $10,000.00, but owe $25,000.00.  Why pay back more than your car is worth if you do not have to. This option is not available to everyone, so you should discuss that with the law firm of Pitts & Burns who have been practicing law for over thirty years.  If you have owned your automobile for more than 910 days then you should be considering this option. You may also be able to reduce the interest rate you are paying on your current obligation.

Attorney Jack D. Pitts of Pitts & Burns is ready and able to help you.

 

Forgetting to Include A Debt in Your Bankruptcy

While your Bankruptcy is open you may easily add any creditor you forgot to your initial petition for relief. Once your case closes though, you may not be able to add any missing creditors. The circumstances surrounding the omission may determine if the Court will allow you to correct this error/omission.

To add a creditor post-discharge, you will first need to file a Motion to reopen your case. You must demonstrate to the Court that your omission was “for cause”. The Judge has absolute discretion to grant or deny your request to add that missing creditor. Federal statues and case law are very specific on what needs to be demonstrated to the Court in your request. Only experienced attorneys, like those at Pitts & Burns, will know what the requirements are and how to present them. Many times Court’s will deny your request just because the necessary information surrounding the omission was not proffered to the Court; sadly, even when the correct facts existed.

Some of those factors the Court will consider include how much time has elapsed since your case closed, if any creditors will be prejudiced by the reopening of your case, the extent of the benefit to the Debtor, as well as other factors. In the case of In re Johnson, the Court set forth the following four factors to determine the “cause” condition, which are: “(1) a reasonable explanation for the failure to comply with the financial course requirements; (2) a timely request for relief; (3) explanation of counsel’s failure to monitor the debtors’ compliance; and (4) no prejudice to creditors.”

 

 

ARE RETIREMENT FUNDS PROTECTED IN BANKRUPTCY

In the State of Rhode Island, most retirement/pension plans are protected 100%. When filing a Chapter 7 Bankruptcy a Debtor must be very careful that all of his or her assets are protected under some applicable State or Federal Law. When filing for Bankruptcy you must declare all of your assets and what they are currently worth. You want to make sure that you report everything very accurately to your bankruptcy attorney so that you do not find out too late that you are losing your future income that you thought was protected from creditors.

Many people , and attorneys, do not always understand that once you file for Chapter 7 relief that everything you own at the time of filing becomes the property of your “bankruptcy estate”. As such, if the property is not “protected” the Trustee assigned to your case may take it, sell it and distribute unprotected net sale proceeds to your creditors. That is why it is so important to retain competent legal counsel, like Pitts & Burns, who is thoroughly familiar with the ever changing and complex Bankruptcy Laws. Most people have between $40,000.00 and $70,000.00 in unsecured debt when they file for Bankruptcy. Therefore if your Bankruptcy is done correctly you receive an enormous amount of relief. With that said, all lawyers are not created equally, and the selection of the right attorney to represent you should not be based on the cheapest price. The wrong attorney, or thinking you can represent yourself, can cost you far more than what competent counsel would have cost.

Every asset you own most likely has a specific law that protects it, but in many cases not for the full value. Fortunately, so long as your pension/retirement plan is a qualified plan pursuant to the IRS regulations, it will be preserved.

 

 

Chapter 13 Bankruptcy Stops Harassment and Controls Debt

The filing of a Chapter 13 Bankruptcy petition can return financial control to you and your Family’s future. For most individuals the choice of filing a Chapter 7 or 13 Bankruptcy is mandated by your household income and the statutory calculations that must be administered. Chapter 7 Debtors are traditionally those individuals who have little to no incomes to even meet their basic needs. Whereas, a Chapter 13 Debtor is satisfying all of his/her household and living obligations, but does not have enough excess income to pay anything but interest on their ever-growing debt. A Chapter 13 allows you to freeze your current balances and pay your unsecured creditors a pro-rata portion of what is determined to be available after satisfying all of your basic and necessary expenditures. Then after a relatively short time, you will be starting all over again: free of all unsecured debt that once left you immobile. This method is far more palatable then sacrificing your and your family’s needs and really not making any headway.
A Chapter 13 Bankruptcy involves establishing a financial Plan between 36 and 60 months in which you pay a reasonable sum (determined by our own situation) to the Trustee’s office, and in the end whatever dischargeable debt was not paid in full, is discharged forever. There will in fact be a light at the end of the tunnel.
If that seems too good to be true, it is. For most people filing for Chapter 13 relief, there will be a feeling of extreme relief. No more cutting corners, staying up nights, living on the edge or fear of wage assignments, bank levies, Court battles or endless harassment from your creditors…no longer will you be told by creditors what you can afford.
The two most common profiles of Chapter 13 Debtors are as follows. First, there are those who are meeting their financial obligations by paying minimums only, stealing from Peter to pay Paul or living like misers. Then there are those individuals who have finally recovered from a long period of unemployment, illness, or reduced wages. These people now have monies that enable them to stay current, but not enough to pay back the arrearages of past due payments that developed in the manner that the Creditors will demand.
Nobody wants to lose their home or have their pay reduced with wage assignments. And you do not need to. Chapter 13 Bankruptcy with the help of Attorney Jack Pitts with his almost thirty years of experience is your answer
At Pitts & Burns, we will spend the time to look at your income going forward and the expenses you must meet to determine what monies you really have available to distribute to creditors. Thereafter, we will create a plan that utilizes what you do have available to satisfy your creditors under the Bankruptcy laws. Mortgage and real estate tax arrearages will be paid in full and first. Then with the remaining monies, you will pay as much off as you can in your allotted period. Some people will pay off their creditors in full and others maybe 5%. The Court and pertinent Federal Laws just demand that you pay what is determined to be available after satisfying your reasonable living expenses and nothing more.
Don’t lose your home to foreclosure or deal any longer with Creditor harassment. At Pitts & Burns, we can help.

Will Divorce Discharge Debt Obligations?

Divorce creates a common question about debt posed to our office which is whether obligations resulting from a divorce are dischargeable in Bankruptcy. The answer is, “it depends” or “no”, depending on the type of divorce obligation you have and also what Chapter of Bankruptcy relief you are eligible for.

Divorce obligations can be broken into two categories. There are the “Domestic Supportobligations and the “Property Settlement” obligations. There are specific criteria in the Bankruptcy Code used to determine what type of obligation is involved. Noteworthy, the Family Court’s classification of the obligation you are questioning will not necessarily be that of the Bankruptcy Court. Attorney Jack Pitts will be able to decipher what type of domestic obligation you really have and advise you accordingly.

Child support or alimony are the commonly known Domestic Support obligations. The Bankruptcy Code clearly states that regardless of what type of Bankruptcy you file, that these support obligations are never Discharged. Even better news for the ex-spouse that is owed support and not filing, is that your chances of collecting that debt may have increased significantly if a Chapter 13 is filed by the Debtor. This is because the Debtor will need to propose a Chapter 13 Plan to the creditor ex-spouse that pays them in full during the life of the Plan.

Divorce created obligations that are not domestic support obligations in most cases are still not dischargeable in the debtor ex-spouse files for Chapter 7 relief. Examples of “Property Settlement” obligations would be the responsibility for a marital debt, or, obligation to pay a certain sum of money to the other upon the happening of an event like the sale of what once was the marital domicile, to suggest a couple. You can usually find these types of obligations in your property settlement agreement that details the division of marital assets and liabilities.

If though, a debtor files for Chapter 13 relief, they can in fact discharge “Property Settlement” obligations, if the debt is: owed to a spouse, former spouse, or child of the debtor;
is not a the debt found to be a Domestic Support obligation; and must have been created during the Divorce. This is great for the Debtor, since you can now pay that obligation off in a set period of time and in an amount that you can afford. At the end of the Chapter 13 Plan you will be relieved of any further obligation even if you only were able to pay a portion of same.

Consulting with an experienced Rhode Island and Massachusetts’s Bankruptcy law firm, such as Pitts & Burns, can help you determine if you have a domestic obligation that can be discharged in bankruptcy, or, for the creditor ex-spouse, if you have an argument to stop marital obligations from being Discharged.

LOAN MODIFICATIONS FOR AUTOMOBILES

Lots of people ask if they can modify their car loans as they have with their home mortgage. The answer is yes, subject to some restrictions which require you among other things to be in an active Bankruptcy.

First, you cannot get any form of modification if you file for Chapter 7 Relief. You can though in a Chapter 13 if you meet certain specific criteria. This maneuver is known as a “cramdown”. If you are eligible, you may be able to enjoy two types of relief. First, you will only have to pay back that portion of the outstanding loan equal to the vehicle’s current fair market value. Second, your monthly payments can be reduced.
The mandates for a cramdown require you: to be at least 910 days into your loan (about 2 ½ years) and that your vehicle be worth less than you owe on the subject obligation. Even if you have not had your vehicle loan for the requisite 910 days, you may still be able to enjoy the benefit of lowering your current interest rate to reduce your monthly obligation payment. So either way, you can still come out a winner.
Your Chapter 13 Plan will range in life from three to five years. You are allowed to extend your loan through the length of the plan, which will reduce your monthly payments. The principal due on the loan can only be reduced if your car is worth less than what you owe. You will need to prove to the satisfaction of the Court what the automobile’s current value is. The lender on the other hand will try to convince the Court that your assessment is wrong.
In both cases of reducing interest or lowering the principal due, you must complete the Chapter 13 Plan. You cannot convert your case to a Chapter 7 Bankruptcy or have it dismissed without losing these opportunities.
If successful, you have saved yourself thousands of dollars with the help of an experienced bankruptcy law firm, like Pitts & Burns.

Why Isn’t the filing for Bankruptcy To Stop Foreclosure Not Always The Correct Answer?

The filing of a Bankruptcy will without question stop the foreclosure of your home if filed prior to the scheduled sale. In fact, it will stop all creditors and their efforts to acquire any of your property.

Why then would filing for Bankruptcy relief not be the right choice? First, it is the right choice as often as it is the wrong choice. Most everyone wants to stay in their home and while the filing of a Bankruptcy will stop the sale, that decision might not be the correct one for everyone. You need to thoroughly understand your options and the ramifications of same. This country’s economic crisis has caused many people to make decisions that they would not have made ten years ago. The world and the rules have changed and the need for an attorney who understands the legal nuances has never been more important.

You will discover after meeting with a competent seasoned attorney at Pitts & Burns that there are lots of factors to consider before stopping a foreclosure or filing a Bankruptcy.

There should be lots of thought and planning before you file for Bankruptcy relief. First, have you exhausted all other remedies. If so, then you need to decide whether you want to stop the sale. While that seems like a stupid question, it is not. There are lots of reasons to stop the foreclosure and just as many reasons not to.

Too many people file for Bankruptcy to stop a foreclosure sale because either they have not taken a practical and pragmatic look at their financial situation or they are being guided by misconceptions about foreclosure and Bankruptcy. As to the latter, too many people believe that if the sale goes through that they will be out on the streets the same day. This is just not the case. The mortgage bank or the new owner that purchases your home at the foreclosure sale will need to evict you through the District Court in the State of Rhode Island. This takes time and more often than not, you will continue to reside in your home for months after the sale.

The people who maybe should not be stopping the foreclosure sale are those who have not really considered the following questions:

  1. If I file for Bankruptcy before the foreclosure sale, will that correct my default? No, if you file a Chapter 7 and owe arrearage to the bank, they will file for authorization to start the foreclosure right up again. The mortgage companies in a Chapter 7 are secured and therefore have a right to the security backing their loans: your home. Therefore, the filing of a Chapter 7 is merely a temporary delay. Moreover, the Bankruptcy Court is a Federal Court and the filing of a Bankruptcy in bad faith could result in undesirable results. The Court is not there to stop your foreclosure haphazardly. Once you file a Chapter 7 you are in with very little chance of ever dismissing it if you discover that you made a poor choice.

The filing of a Bankruptcy is very complicated and even most attorneys do not understand it.

2.         When is the right time to file a Bankruptcy? You need to decide what your objectives are. If you are ready to leave your home and discharge your debt, then do not file until after the foreclosure sale. You will have sufficient time to relocate after the sale. The filing of your bankruptcy after the foreclosure allows you to name all creditors associated with the ownership of your home. Therefore, you will have drawn a very definite line allowing you to go on with your life with no concerns of loose strings that might haunt you in the future.

When someone files before a foreclosure sale, their bankruptcy only relieves them of the debt that existed prior to the filing. Therefore, that individual will still have ongoing debt for real estate taxes, municipal services, condominium fees, utilities and the list goes on. Even worse than that, you might find after you stopped the foreclosure that the bank decides not to foreclose. This is happening more and more. People are discharging their debts and leaving their homes to find out that they still own them. As an owner of property you continue to be responsible for ongoing municipal debts and for any accidents that might happen on the property in your absence.

If you can afford your mortgage payments though and just fell on hard times for a while and developed a sizable arrearage with your mortgage company, but are on your feet again, then a Chapter 13 filed before the foreclosure sale is the way to go. The Bankruptcy filing will stop the sale and then through a well-designed financial Plan approved by the Bankruptcy Court, you can pay off the arrearage over time. How much time and how much you will need to pay the Bankruptcy Court will depend on numerous facts that require a full analysis by a competent bankruptcy firm like Pitts & Burns, Attorneys At law. Do not trust your assets and family to the advice of just any attorney.

Filing Bankruptcy Stops Creditors in their tracks

As soon as you bankruptcy gets filed an “automatic stay” goes into place. The “Stay” prohibits debt collectors from making any further effort to collect any debt against you (except for debt owed to the IRS, although, that too can be eliminated in many cases). It stops harassing phone calls, threatening letters, lawsuits, Judgments, bank account levies, wage assignments, foreclosures, and repossessions.  

The automatic stay remains in effect during the pendency of your bankruptcy for most creditors. There are exceptions depending on the type of debt and whether you filed previously.  Creditors do have a right to petition the Court to have this Stay removed, especially if it is a creditor like a mortgage company or automotive loan lender and you are in default or the value of the secured property is not adequate to protect their interests

Keep in mind that unless the creditors are part of the Court’s electronic noticing system, that they will not find out about your filing until they receive notice in the mail. The creditors may not receive the Court’s notices for up to a week after you file. Therefore, Pitts & Burns sends notices out ourselves the same day you file cutting down your exposure to further collection efforts tremendously.

If a Creditor knowingly violates the Court’s automatic stay, we can alert the Court which in many cases results in a reversal of their collection efforts, i.e. taking money from your bank account, and the imposition of fines and payment of our fees.

The power of the filing of a Bankruptcy is massive. You will be relieved of your debt and creditor harassment, so that you can get your life back on track. Like so many of our clients you will say, “I should have done this years ago”, especially, if you elect to have the attorneys at Pitts & Burns help you.

 

What assets will be affected by my filing for Bankruptcy?

When you file for bankruptcy relief, all of your assets become property of what is called the “bankruptcy estate”. That does not mean that you will lose your assets though. It does mean that equitable title to those assets transfer to the Court appointed Trustee for a set period of time. The filing of a bankruptcy requires complete disclosure of all your assets and their current fair market value. While I have never had a case where the Trustee came into your home to do a visual inspection of your belongings, you must be reminded that you are signing a Federal bankruptcy petition with very serious sanctions if you are found to be defrauding the Court. Therefore, we always have you list everything from winter clothes to a broken camera. Then as to values, you must be able to support your assessments as any misrepresentations could lead to a loss of property.

We will aid you in making sure you have not forgotten any of your assets by going over an extensive check list. Some of the assets people do not think about, but are subject to the court’s jurisdiction, are stock in a corporation you own; inheritance; your parent’s bank accounts and real estate that they have added your name to for convenience; claims you have against anyone for damages you incurred in an automobile accident, contract or medical malpractice incident; income tax refunds; life estates; property you received as gifts; life insurance; and, pets.

There are assets that are always exempt, such as, alimony, child support, IRA’s, defined pensions and Term Life Insurance policies.

With that said, declaring you assets does not mean losing them. One of the most important jobs we will be performing is making sure that all of your property is protected, and if not, that you know about it before you file. Most every client will in fact retain all of their personal property and home. How can you be sure of that? Well, there are both State and Federal Laws that protect your assets up to certain amounts and most people fit safely within those protected limits. This is another reason why accurate reporting of vales is so crucial and we do not want to tell you that your car is fully exempt, when in fact it is not because you undervalued it and the Trustee learned of its true value.

The only reasons you would lose your house or automobile then would be in the unlikely case that you have too much equity (note, that in Rhode Island and Massachusetts the equity in your home is protected up to $500,000,00), failed to list a known item or you are not current in making your monthly payments on a secured obligation. Mortgages and automobile loans are secured, and therefore, regardless of the exemptions that protect these items, the secured creditor has a right to its security if you are in default (if you are filing for Chapter 7 relief).

When you receive your Bankruptcy discharge the case is closed and you will own your property once again free of the bankruptcy estate. If though, it is found that you purposely omitted listing any property or you acquire substantial monies within 180 days of filing your Bankruptcy, i.e. inheritance, lottery, etc., these items will be still subject to the Court’s jurisdiction.

This is why it is so important to go to a seasoned bankruptcy law firm like Pitts & Burns so that your life is not disrupted any more than it has been. The filing of a Bankruptcy will bring you relief that you never imagined possible.