A Chapter 13 You Can Afford?

Low Down Payment

I can go as low as required by the case plus filing fee.

I set the down payment on a case by case basis. If you’re under the gun and have to get filed and if you’re serious about debt reorganization, then the down payment is negotiable. However in most cases I won’t go lower than $500.

That can give you a powerful leverage that does the opposite of having to start with a huge pool of cash like when you are trying a debt settlement program.

Chapter 13 Attorney’s Fees

Attorney’s fees for Chapter 13 cases range from $3500 to $5000.  It’s what the US Trustee’s Office allows which in the Southern and Central Districts of California. I consider the final total for your Chapter 13 Attorney’s Fees as a fixed cost, therefore I charge what the US Trustee’s Office allows.

Because think about it, if I reduce my fees by $500 that only reduces your monthly payment by $6.67 per month.

If You Need to Stop Foreclosure for a Short Time

If you’re planning on filing a bankruptcy for the sole purpose of delaying a foreclosure so you can do a loan modification or short sale, then maybe you should do a Chapter 7. Chapter 7 straight bankruptcy gives you the benefit of delaying the foreclosure while discharging your debts at the same time and costing significantly less.

My Bankruptcy Law Office is located in Old Town Murrieta, convenient to Temecula, Menifee, Lake Elsinore, Canyon Lake, Winchester, French Valley, Moreno Valley, Riverside and Palm Desert.

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Why You Should Use Chapter 13 to Consolidate Your Debts When You Have a Higher Income?

What if you make a lot of money but have a lot of debt?

Has a process server shown up at your door yet with a summons and complaint? When you have a higher income, this is a serious problem. If your wages get garnished and you make $9000 per month, then 25% of your check after taxes is a couple of car payments. So now the cars are about to be repossessed. How are you going to get to work? You risk losing that job if you let it move forward.

Have you ever thought that if you could just pay your credit cards what you owe them, you’d be able to handle the payments?  If they just didn’t have 12, 15, or 29% interest rates, you’d be able to eventually pay them off in a reasonable time, right?

Debt Consolidation

For many this would be true. Debt consolidation starts to sound like a great idea at that point. They promise to reduce interest rates for each of your credit cards and accounts, and cut your payments in half and when you get there the numbers just don’t work out.

Once the numbers are all added up, they tell you that you’re going to pay only about 25% to 33% less than you’re currently paying. If honest, they’ll also tell you that some of your creditors won’t play along and will just go ahead and sue you and garnish your wages instead. Some creditors will reduce interest rates to 5% but some will reduce interest rates by 5%.  There’s a huge difference.

Of course if they tell you that, then you won’t sign up and won’t pay them any money and then they won’t make any money on your case.  Clearly that’s why I’m writing this post to you, because I’d prefer you signed up and paid me instead to be perfectly honest.

Chapter 13 Bankruptcy

So, here’s what I can tell you about a chapter 13: Once the chapter 13 payment plan is approved by the Court which is called a confirmation order, none of your creditors are going to opt out and sue you and garnish your wages instead. They can’t.  Basically, you’ve already sued all of them yourself. It’s a pre-emptive strike sort of like suing all of your creditors as a class action lawsuit before they can sue you individually.  So, no lawsuits against you and no wage garnishments or bank levy.

Truly Reorganize Your Debt With Bankruptcy

Additionally, what I usually find is that if you are paying 100% of your credit cards and medical bills and the like, and you’re paying them at 0% interest for only 5 years, then in most cases you cut your payments in half, give or take a few percent. It’s what the debt consolidators promised to reduce your payments to, but couldn’t. The reason it works out though is that the bankruptcy court forces the creditors to take it.  The other reason it works out is that your attorney and your bankruptcy trustee are charging you far less than the interest you would have to pay if you went to a debt consolidation.  Plus the debt consolidators charge you on top of that.

For example

If you owe $60,000 in credit cards and you pay them the regular monthly payments, by the time you’re done you’ll have paid them something like $194,000. That’s a payment of at least $1800 to 2100/mo depending on how many different accounts, who they are with, varying interest rates and so on. Worse it would take 538 months or 44 years to pay it off. I checked the minimum payments at Bankrate.com.

Debt consolidation on the same debts will probably yield a payment plan of $1400 to $1600/mo for about 5 to 6 years and probably at least one lawsuit.

Your chapter 13 bankruptcy plan would pay back about $70,000.  You do that for 5 years only, and your payment is about $1167.

Call for a Free Consultation 951-200-3613

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8 Chapter 13 Bankruptcy Pitfalls You Can Avoid

Chapter 13 is a Great Tool, Unless . . . 


There are pitfalls to avoid. Getting your case dismissed when you thought it was your last hope to save your house is a disaster.  Yet, it happens much more often than not.

Pitfall 1: Losing Your Job

Such a no-brainer, yet it may sound like something you cannot avoid. However, we all know that sometimes it is.  If you don’t get along with your boss, take a deep breath.  Take an anger management course.  Take a Tylenol. Take a break. Take a nap. Because it could be a case of lose your job, lose your house. If you’re in a chapter 13 bankruptcy to catch up the arrears on your house, then you must keep up your mortgage payments current and you must keep up your plan payments.  Quit paying either one and your chapter 13 will be dismissed.  Once it gets dismissed, and you no longer have bankruptcy protection, you go back into foreclosure.

Pitfall 2: Don’t Get a Divorce

Again, while it may sound like something that probably can’t be avoided, often it can be. Be the best spouse that you can be. Bring flowers. Bring chocolates. Bring movie tickets. Read, How Full Is Your Bucket?  On my wedding day, the officiant gave me 5 little magic words for when you come home and find the baby in the highchair, his food is everywhere, the dishes aren’t done, and the other kids have homework, and you’re just back from work and the 5 little magic words are: “What Can I DO To Help?”

Pitfall 3: Re-evaluate Your House Situation Carefully Before You File

Before you file the case, you should reevaluate the house situation carefully. Chapter 13s are designed to put you on a seriously Draconian budget. So, unless you’re making great money, a budget that is too tight will ruin your marriage or your relationship to your significant other in a big fat hurry.  Don’t lose your spouse over a house.

If you DO qualify for a Chapter 7 but want to file a Chapter 13 to try to save the house, then your budget will be under a huge strain, there won’t be any money for fun, recreation or vacations and I’ve seen that lead to divorces and split ups over and over again and then neither of you will end up with the house.

Pitfall 3: Make Your Chapter 13 Plan Payment On Time Every Time

Get behind, you’re toast.  Nuff said.

Pitfall 4: Get Health Insurance If You Don’t Have It Yet

If you’re not properly insured, with health, life, auto and disability, you’re an accident waiting to happen. If you get sick or injured, you’re outta there.  If you cannot pay the plan, then you will lose that house. 

Pitfall 5: Not Filing a Chapter 13 When You Should

If you make great money, and if you could just get all of your credit cards to agree to zero interest (0%), then you’d be able to pay everyone no problem, then do it.  That’s exactly what a Chapter 13 can do for you.  If you pay the regular payments it will take forever and you’ll pay almost 3 times what you owe before you’re through.  If you go to a Debt Consolidation, they’ll be able to reduce your interest rates, but not to zero percent (0%).  Paying at zero percent interest (0%) for 5 years usually will cut your payments by a little under half.  Take the deal.

Pitfall 6: Including Your Car 

If you can file a Chapter 13 without having to include your car, then avoid putting it in the Chapter 13 payment plan like the plague. If your bankruptcy gets dismissed, you’ll find that you’re now perhaps months or years behind on your payments on your car.  You’ll also find that you’ve got mega late fees now attached to the car note.  Also the repo guys will be on their way soon after your Chapter 13 gets dismissed for non-payment. I had clients who wanted save a house, but to do that they had to lower the car payment by including it in the 13.  I suggested that they move out from the beginning.  When the case finally got dismissed the balance on the car was approximately twice what it was before filing.

Pitfall 7: Technical Tricks and Traps

Most of these are things your attorney is going to have to be familiar with and help you avoid them.  However, my favorite is one that you can help avoid: In the Central District of California, in Riverside, you are required to pay your plan payments directly to the Chapter 13 Trustee at the hearings until the judge approves your payment plan. This approval is called a Confirmation Order. Your Chapter 13 plan payments are due 30 days after your case is filed and then ever month on the anniversary of your filing date. However, your hearing date will be approximately 45 days after you file.  If for some reason your judge continues your confirmation hearing, it will most likely be for another 45 days.  When you show up to that hearing, you must bring two (2) payments with you to the 2nd hearing, not just 1.  Because 45 + 45 = 90, your plan requires that you pay 3 plan payments by that 2nd hearing date, not 2.  If you don’t bring the 3rd with you, your case will be dismissed.

Pitfall 8:  Mal-Adjusting Your Tax Withholdings on Your Pay Checks

Whenever you pay less than 100% of your credit cards and medical bills and so on through your Chapter 13 payment plan, the bankruptcy trustee will want to intercept your tax refunds as you get them from the IRS every year until your case is over. Phew!

Many people try to adjust the withholdings so that they end up zeroing out their tax refunds. However, if you reduce it too much, you end up creating a new creditor for yourself, and it’s the biggest most powerful collection agency in the world, the IRS. But at least it’s not the meanest, that distinction goes to the Franchise Tax Board of the State of California.

What pitfalls did you encounter?  Pin, Tweet, Plus and Share This Article.


Call to set an Appointment, 951-200-3613

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10 Things You Must Know About Chapter 13 If You Do Not Qualify for Chapter 7

So, Attorney Gandalf has told you that “You Shall NOT Pass!”

That’s what Gandalf in the Lord of the Rings told the Demon-Balrog as it attempted to cross a narrow bridge deep in the Mines of Moria. So now you’ve been told by another attorney that you don’t qualify for a Chapter 7 bankruptcy. You’ve failed the Means Test. Perhaps based on your own research you think your income might be too high. But it’s not like you’re wealthy and or made of money. You’re struggling just like everyone else, just at a higher level of income. At the end of the month, you have the same amount left over as everyone else; nothing.

What now?

Get a 2nd Opinion About the Means Test

I’ve seen cases where a client’s initial consultation with another attorney missed a couple of key items that made all the difference. When you come in for your free consultation, we’ll go over them together. Attorneys are not supermen, we’re fallible.

Okay, I’m not but some are. Some of the lawyers who are newer in the field of bankruptcy might not know all the ins and outs yet. I’ve filed several Chapter 7 cases where the first attorney thought that the clients didn’t pass the Chapter 7 Qualification Test called the Means Test.

Let me have a look at it if you’re in California, maybe I can help you. I’ve been a bankruptcy attorney since 1994 and I’m located in Murrieta conveniently close to Temecula, Riverside, Wildomar, Menifee, Lake Elsinore, Canyon Lake, Santa Ana and San Diego.

Sometimes Your Only Bankruptcy Option is Chapter 13

There are worse things, just ask Gandalf, more importantly ask the Balrog.  But if you have to file a Chapter 13, there are things you must know.  Here are the first 10 that come to mind off the top of my head.
First: It’s not the end of the world.  The sky will not fall. The police will not show up and arrest you (there is no debtor’s prison). Your friends will not laugh at you. In fact more of them have filed or are about to than you might imagine. You won’t walk around with a watermark of a B on your forehead. Frankly, if you make too much money to file a chapter 7 then that’s a good problem to have. You’re going to get to do what you promised to do in the first place; pay your debts.

Second: A Chapter 13 bankruptcy is a bankruptcy with a payment plan attached. If you don’t qualify for a chapter 7, your payment plan must be 60 months unless you’re able to pay it off earlier. You might even be able to strip your 2nd mortgage lien off of your house.

Third: If you don’t qualify for a chapter 7, your chapter 13 bankruptcy has a version of the Means Test too and it is used to determine, at least in part, how much of your unsecured non-priority debts you must pay back through your chapter 13 payment plan.

The definition of unsecured is any debt that is not attached to something that can be repossessed if you don’t make the payments. Priority debts, roughly speaking, are debts that either you owe directly to the government or that the government must pay if you don’t. So for instance, credit cards and medical bills are unsecured. So are student loans. Recent taxes are priority debts, which you do owe directly to the government. Child support is a priority debt too because if you don’t pay, then the custodial parent may be forced to go on welfare. But student loans on the other hand are not priority debts because if they were a lot of people would never qualify for Chapter 13. But that’s a whole nuther ball o’ wax!

Fourth: You may not have to pay all your credit cards, medical bills, student loans, old taxes (under the right circumstances and conditions of which there are many) and so on in full. Depending on your circumstances, you may be able pay off lates on your mortgage, back child support and recent taxes in full while paying only what you can afford to on your credit cards, medical bills, student loans, and old taxes.  Of course, you will still owe any unpaid student loans after your chapter 13 payment plan is over.

So, “it puts a book mark in the student loan.”  ~Anna.

Fifth: The other thing that determines how much of your unsecured non-priority debt is how much stuff you own. If you have accumulated a lot of stuff or a lot of unprotected savings, you may have to buy it back again. So, never ever have unprotected savings. Basically if you could protect only $50,000 worth of stuff but you have $75,000 then you must pay at least $25,000 into your chapter 13 bankruptcy. So, whichever requires you to pay more is the one that you go with.

Sixth:  Even if you have to pay everything in full, 100% of the principal on your unsecured non-priority debts, but if you can do it with 0% interest, then you will most likely have a lower payment than if you go to a debt consolidation program outside of a bankruptcy.

Seventh:  If you pay less than 100% of the principal they will take your tax refunds away from you every year you are in your chapter 13 bankruptcy so sometimes it’s better to bite the bullet do a 100% payment plan.

Eighth: If you owe more than $1,149,525 to secured debts such as your houses and cars, you can’t file a chapter 13.  Or if your credit cards and medical bills and other unsecured non-priority debts come to more than $383,175 then you cannot file a chapter 13. In those circumstances your options are consolidate your debts outside of bankruptcy, settle some of the debt and then file the 13 or try a 7 anyway and hope they don’t try to force you into a chapter 11 where you will have to pay more than $20K in attorney’s fees (and that’s just the beginning).

Ninth: If you’ve been behind on your payments to your houses and cars then in some jurisdictions your bankruptcy judge will require that you pay your regular monthly payment on your mortgage to your bankruptcy trustee rather than directly to your mortgage bank.  In the Central District of California in the Riverside Division, there is one judge that does require this.  Called a conduit payment, it helps to insure that you don’t get into any further trouble with your mortgage payments.  However, if you haven’t been behind in your house payments, then you are still allowed to pay directly even in that Judge’s Court.

Tenth:  A Chapter 13 bankruptcy has a qualification test too, it’s called the feasibility test, which means what it basically sounds like.  You have to be able to pay the payment plan.  If you can’t, then they dismiss your case or suggest that you convert to a chapter 7 bankruptcy.  So, if at a later date you lose a job, or your spouse loses their job or that second job, then maybe you can request that the judge assigned to your chapter 13 reduce your plan payment based on the new lower income or even request a conversion to chapter 7.

I’ll be expanding the list, so if there’s something you think should be on the MUST KNOW List, please put it in a comment below.  I look forward to your thoughts.

Cash for Keys

If you lose your home to Foreclosure . . .

If you cannot afford to pay for your home, if you cannot eventually get a loan modification, if a Chapter 13 just won’t work for you, then you will lose your home.  Even if you do a chapter 7 and avoid a foreclosure for a little while, if none of those other options will eventually work for you, then you will lose your home.

Keep in mind that a fantastic option is available but only if you start early enough.  Short Sale can help you immensely by avoiding a foreclosure which means a much smaller hit on your credit than a foreclosure.  Your realtor who is probably a relative or close friend will get a commission, the bank will get paid better than it would have if you’d gotten foreclosed and it’s a win win win situation.  If your Realtor is a close relative or family friend, then think of what it means to keep the business in the family.  Because if you’re going to lose the property anyway, why wouldn’t you help your siblings and friends pay their bills too.

At that point, once the home has foreclosed and/or been repossessed by the bank, within a few days, usually only 2 or 3, a Realtor working for the bank will show up and ask you to move.  When they do, they’ll often offer you some moving money.  Usually it’s about $3000.  I believe there’s an Obama stimulus plan which reimburses the bank up to $3000.  A client of mine told me that his offer went like this: $3000 if they were out in 2 weeks, $2000 if out in 3 weeks and No thousand dollars if longer than 3 weeks. Behind the money is the hope on the part of the bank that if you expect to get paid, you’ll have to leave the property in a livable condition, not scrubbed but clean, carpets not shampooed but the house broomed out.  Above all, they want the sinks, faucets, toilets and carpets to still be in the place once you’re gone.

Most of you in this situation have probably already started looking and maybe even found a place to go.  I recommend you keep enough furniture in the house to make it look like you still live there, if you have moved, they won’t offer you anything.

Broom cleaning is usually all that’s required and sometimes they’ll ask you to leave the major appliances behind.  If they are yours and you cannot afford to replace them, let the realtor know that you have take them with you.  Usually you can work something out and these are much less critical than are the sinks, faucets, doors, door knobs, carpets and toilets.

The agreement between you and the real estate agent for the bank will state that you must have the place empty on the last day, and that the real estate agent will inspect the property before turning over the check.  If you haven’t cleaned all the trash out of the garage, you’re not getting the check.  If you have packed up the sinks, faucets, carpet and toilets, you might as well not both showing up to ask for the check.  Besides you don’t want to walk out with fixtures because there’s a good chance the bank will sue you.

Your Landlord has a Foreclosure

If your landlord has a foreclosure on the property that you’re living in, you have a unique situation.  Now the bank must be really nice to you.  The law requires that they give you the cash for keys and that they give you more time to move.

My personal favorite part is this: the landlord can no longer do an inspection and determine how much of your deposit he has to pay you back.  If you are paid current on the rents, he still must send you a settlement letter within 3 weeks and pay back your deposit.  However, you and I both know he doesn’t have it.  If he doesn’t send the settlement letter and payment on time, you can sue him for 3 times the balance due to you.  If your deposit with $1500 you sue him for $4500 in small claims.

If he files a bankruptcy on it, and tries to say that the deposit is discharged in bankruptcy, you tell him that it was money held in trust and therefore not dischargeable.  You will want a bankruptcy attorney who does creditor’s work to help you and you will have to do it during the bankruptcy or you may lose your rights.

Bankruptcy Means Test Basics

Bankruptcy Means Test Basics

_____________

Bankruptcy Means Test is the Chapter 7 Qualification Test. However, if you do not qualify for a 7, it is also used to determine the amount of your chapter 13 plan payment. Additionally, it determines the duration of you chapter 13 plan.

If your income is above the median income your chapter 13 payment plan must last for 5 years.  If below then only 3 years.

You can always file a chapter 13 which is often a much better idea than a debt consolidation. A chapter 13 is a type of debt consolidation however, you as the consumer have the upper hand.  You have the power.

Attorney David Nelson, Bankruptcy Attorney, temecula bankruptcy attorney, murrieta bankruptcy attorney, Menifee bankruptcy attorney, Lake Elsinore bankruptcy attorney, Lake Elsinore Bankruptcy, Canyon Lake bankruptcy attorney, bankruptcy, canyon lake, canyon lake bankruptcy, chapter 7, chapter 13, corona bankruptcy, corona bankruptcy attorney, lake elsinore, menifee, menifee bankruptcy, menifee bankruptcy attorney, murrieta bankruptcy, murrieta bankruptcy attorney, perris bankruptcy attorney, riverside bankruptcy attorney, wildomar bankruptcy, San Diego Bankruptcy Attorney, San Diego bankruptcy

Chapter 13 2nd Mortgage Lien Stripping

Chapter 13 2nd Mortgage Lien Stripping

You may be able to strip your 2nd mortgage or home equity line of credit, Heloc, off of your home in a Chapter 13.  Not only can you discharge the loan, or promissory note that you signed when you executed the loan docs, but you may also be able to remove the lien from your home as well.  If the Bankruptcy Judge assigned to your case agrees, then once your chapter 13 case is over, the creditor must release the lien.

You may also be able to remove the 2nd mortgage from a rental property and in addition, you may also be able to reduce the 1st mortgage as well.  Rental property properties have different rules than residences do.  An important distinction, you must remember that if you live in the house, you have fewer options than if you have moved out and rented the place.

IT WORKS PRETTY MUCH LIKE THIS:

A 2nd mortgage, or home equity line of credit, has two things over you:

*****
a) the have the note that you signed promising to pay
b) they have a deed of trust or trust deed on the house which is a lien on the house
*****

Chapter 7 Bankruptcy discharges the Note or the Loan, but you still have the Lien or Trust Deed on your house.  Even after your bankruptcy, your 2nd mortgage lender can foreclose the lien, but in order to do so, it must first pay off the 1st mortgage and any unpaid property taxes.

This is a big difference between the two chapters of  Consumer Bankruptcy.  After a chapter 7 is over and completed, the 2nd mortgage could still foreclose on the house later.  Over time, the value of the property will go up. The house will appreciate.  After it’s value increases to a point where the value of the house is greater than the balance on the first mortgage, the 2nd mortgage would be in a position to foreclose the property.

So, what you do is:

1.  Get an appraisal.  We must be able to credibly state that the value of the home is significantly lower than the balance on the 1st mortgage.   If your value is lower but close, you run the risk of expensive litigation in order to strip your 2nd mortgage or home equity line of credit.  Of course, if the balance on the 2nd is large compared to the cost of the litigation, then it’s worth the effort.  As long as you know that the attorney’s fees could be significant as you’re going into the deal, then it’s fine if you want to spend the money.  Nevertheless, those attorney’s fees would be on a three to five year payment plan so it should be manageable.

2.  If the value of the home is lower than the balance on the first and it is significantly lower, then the mortgage lender on the 2nd mortgage or Heloc, Home Equity Line of Credit, won’t fight it, and you’ll win by default.

3.  If the value of the home is greater than the balance on the first, even just a little bit, then you lose and you’re stuck with the whole 2nd mortgage.   Remember however, there is a difference between your primary residence and your rental properties.  Respecting your primary residence, you can only remove your 2nd mortgage, or not.  Rental properties however, can have 2nd mortgages removed, 1st mortgages reduced, or if the value of the home is above the balance on the 1st mortgage, the 2nd mortgage (or heloc) could be reduced so that the total balances on all mortgages are equal to the value of the property.

Caution

Chapter 7s are risky. We don’t know how long it will take the values of our real estate to increase.  If you do a chapter 7, you will discharge the loan, or promissory note.  Nevertheless, you will still have the deed of trust still attached to the house.  So at some point you must settle that 2nd mortgage with that bank.

Chapter 13s are risky too.  They can allow you to strip the 2nd mortgage off the house completely.  Risky because chapter 13 (on your primary residence) requires that you immediately go back to paying your regularly scheduled monthly mortgage payments on your 1st.  If the 1st mortgage has not yet been modified on the date of filing the bankruptcy, then you’d be stuck with the unmodified mortgage payments.

All chapter 13s must be approved by the judge assigned to your case.  Called a confirmation order, many cases end up falling short because people who want to remove the 2nd mortgage often propose payment plans that are unrealistic.  In other words the budgets they propose for themselves are just too tight.  Your attorney will refer to such a budget as unfeasible.  Feasibility just means that you really can afford to make the monthly payment to the bankruptcy trustee on your case.  To be confirmed, a case must be feasible, and you must convince your judge and your bankruptcy trustee that you can afford to to make the chapter 13 plan payments.

Additionally, most chapter 13s never get completed once they are confirmed.  More than 70% don’t get a chapter 13 discharge because something happens that derails the payment plan such as a work stoppage or an illness, or even just a busted transmission.  Either your earning capacity has been reduced or your ability to pay has been eclipsed by a more pressing expense.

Stripping the 2nd mortgage off in a chapter 13 requires that you complete the payment plan.  If your hypothetical plan payment is $350/mo and you pay it for 2 1/2 years that’s a total of $350 x 30 months = $10,500.  What if you cannot pay it anymore because of a work stoppage, you get fired or laid off, you break your leg, your transmission goes bad? You’re not going to complete your chapter 13 payment plan.  Guess what, you just tossed $10,500 out the window.

So, to strip a 2nd mortgage off of your primary residence,

  1. the value of the property must be lower than the balance on your first mortgage
  2. you must be able to pay the 1st mortgage payment,
  3. you must get the judge to agree that you are able to afford the plan payment,
  4. and you must complete the plan which will be 3 to 5 years long.

How Much Will My Chapter 13 Plan Payment Be?

Plan payments depend on a couple things

  1. how much excess income you have at the end of the month
  2. how much the means test says you must pay
  3. how much you owe on unpaid mortgage payments from previously unpaid months called arrears
  4. back taxes and child support
  5. the balance owing on your car
  6. how much of your attorney’s fees were paid in advance
  7. how much you usually get as tax refunds
  8. and several other possible issues

You will have to call for a consultation on the issue in order to get an estimate.

Call 800 FILE AWAY or 800 345 3292, call right now for a consultation.

David L Nelson
Temecula Bankruptcy Attorney
Temecula bankruptcy attorney, Murrieta bankruptcy attorney, Lake Elsinore bankruptcy attorney, Canyon Lake bankruptcy attorney, Menifee bankruptcy attorney, Perris bankruptcy attorney, Riverside bankruptcy attorney, Corona bankruptcy attorney, San Diego bankruptcy attorney, Los Angeles bankruptcy attorney, LA, and Orange County bankruptcy attorney

Debt Freedom and Retirement

Debt Freedom is Required for Retirement

If you’re like most of us, you’re planning to retire on your 401k or other similar Retirement plan. And you’re wondering if Walmart and McDonalds will have too many “senior” team members when you get there.  Because you’re going end up with a lower income than the one that you presently cannot live on, you wonder what will you do then?  Do you really think social security will be available?  Even if it is, how much buying power will it have?  My mom used to get the equivalent of groceries and utilities, and that was it.

I will teach you how a 2nd Mortgage can be treated as though Stripped Off your home even in a Chapter 7, and how you can in fact strip a 2nd Mortgage off your home with a Chapter 13.

Because your retirement income will most likely be lower, than your current income: If you’re still in debt at retirement time, you’re going to file Bankruptcy.  Why not file right now?  Put those credit card payments into your retirement accounts instead.  I realize that for most of you, if you didn’t have to pay consumer debts, you would not likely be able to just switch portions of your budget over to retirement planning.  You’re eating white bread from Albertsons with non-fat milk and telling yourself that it’s because the non-fat is healthier.  Just to pay the gas expense, you’re wearing sweaters at night and walking to the not as good park because you can’t afford to drive to the nice one with the lake.  Telling yourself and your kids that walking is good for you even though the slides are broken isn’t making you feel any better. I get it.  However, what if you could have a more normal budget and maybe put at least some into savings?

RETIREMENT AND KEEPING YOUR HOME:

YOU MUST GET OUT OF DEBT. When it comes to Retirement, or Wealth Building, getting out of debt is not the FINAL step but the FIRST. Mortgages must be part of the formula. How can you Retire when you’re in debt?

Here’s what I see everyday: Your Mortgage payment is $1500/mo and your 2nd is $500/mo.  In Credit Cards you have $25,000 with payments of another $500/mo.  Both Mortgages have 30 year terms.  At year 10 you start up a 401k plan and a personal IRA.  But how much can you put into either?  You’ve got $1000 in debt service going out of your budget every month.  Each month before you eat, you have to pay $1000 to cyberspace or “The Man”.

Assuming you have an income of $6500/mo and take home $5300 after taxes and insurances, and that you’re married and you have 2 children living at home.  First, I’d recommend, one of you must get a better job or another job as soon as possible.

$5300 Net Pay Less
$2000 Mortgages
$500 Debts and Credit Cards
$2,800 Left after that. (the rest of the budget must be calculated.)
$700 Two Car Payments
$500 Gas and Travel for the two cars
$100 Car Insurance
$40 Medical Expenses out of pocket
$800 Groceries (and everything that comes from the store) and Fast Food on the way to and from work, school and at work and school.
$400 Day Care
$400 All Utilities including Internet $30, Cell Phones $150, Home Heating & Cooking $100,  TV $50, Water $70
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You can see that this family’s budget is already negative.  Add clothing & shoes $150 (for four), life insurance $80, hair cuts & beauty shop $40, tithing/charitable giving $40, laundry/dry cleaning $35 and home maintenance $20 and you’re toast.

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Bankrupt already, and you just didn’t know it.

Filing bankruptcy for this family would be a fantastic idea.  Just think about it.  Even if they were stuck with the 2nd mortgage when it was over, how much better off would they be if they could just get out of under the credit cards payments.

In a Chapter 7 Bankruptcy they must Qualify.  Called the Means Test, the qualification test starts with your gross income and asks first are you above it or below it?  If above, then there is an 8 page questionnaire that you must go through to see if you qualify or not, and in my experience, 97% of my clients have qualified by the time we are done with the 8 page questionnaire.  In our current test case, the family makes $6,500/mo which is $78,000/yr.  The Median Income for a family of 4 this year is $78,869.00 and they get to skip the 8 page test.  Part three of the Qualification Test, we go their budget to see if they have any money left over when it is all said and done.  Even adding that $500 from the credit cards back in leaves them negative $5.00/mo so they have qualified for a Chapter 7 Bankruptcy.

In Chapter 13 you must also Qualify, but the test is basically this, can you afford to make a payment?  Why would you want to do a Chapter 13?  If the value of the home is lower than the balance on the 1st mortgage, then this family could do a chapter 13 bankruptcy and strip that 2nd mortgage off of the house.  In this case, they would divert the $500/mo that they are paying to their 2nd mortgage, or perhaps even a bit less depending on circumstances, and at the end of three short years, (in this hypothetical case) the 2nd mortgage is gone, the lien is released, and that $500/mo payment is gone forever starting 17 years earlier than planned.

I cannot stress this enough, what happens in month 37?

Okay, probably after a short vacation so probably in Month 40 or 45, they can now put that $500/mo that had been going into the 2nd mortgage into their retirement planning.  If it goes into an IRA, Life Insurance, 401k, or whatever, at least it is now going into their future rather than huge bonuses to Citibank and Chase Mastercard’s CEOs.

I would pay the 1st Mortgage off at this point. 17 years x 12 months is 204 months x $500/mo is $102,000.  Any mortgage with a $1500 payment could probably be paid off before the 17 years is over when you combine the 2nd mortgage payment with the first and pay down the first with $2000/mo instead of only $1500.

If you put the $102,000 into an IRA or a 401k how much would you have at the end of 17 more years, it’s hard to say, it could easily be only the $102,000 or it could be $250,000.  What will the monthly payments be from a pot of $250,000 when you retire?  I’m not a retirement planner but I’m sure it would be less than $1500/mo.

So with a chapter 7 our hypothetical family might have some breathing room.

With a chapter 13 they might be able to pay off their 1st mortgage and save for retirement. HERE’S A CREDIBLE PLAN TO RETIRE EARLY THAT CAN ACTUALLY WORK WITHOUT SELLING STUFF TO YOUR FAMILY AND FRIENDS.  (Not that there’s anything wrong with that.)

It depends on the value of the house.

DO NOT WAIT, FILE NOW.  YOUR HOME’S VALUE WILL START HEADING BACK UP SOON IF IT HAS NOT ALREADY.  YOU MUST FILE NOW TO TAKE ADVANTAGE OF THIS.

Temecula bankruptcy attorney, Murrieta bankruptcy attorney, Lake Elsinore bankruptcy attorney, Canyon Lake bankruptcy attorney, Menifee bankruptcy attorney, Perris bankruptcy attorney, Riverside bankruptcy attorney, Corona bankruptcy attorney, San Diego bankruptcy attorney, Los Angeles bankruptcy attorney, LA, and Orange County bankruptcy attorney

YOUR HOA MAY SUE YOU EVEN AFTER YOUR BANKRUPTCY

YOUR HOA MAY SUE YOU EVEN AFTER YOUR BANKRUPTCY:

THE BANKRUPTCY CODE SPECIFICALLY ALLOWS IT!  The Rule is that you can eliminate your personal liability to pay your Home Owner’s Association up to the date that you file your case.  But what happens AFTER?

YOUR HOME OWNER’S ASSOCIATION CAN SUE YOU IF:

FILING BANKRUPTCY STOPS FORECLOSURE, BUT YOU MUST STILL EITHER WORK OUT A LOAN MODIFICATION OR SETUP A CHAPTER 13 PAYMENT PLAN IN ORDER TO STRIP OFF THE 2ND AND CATCH UP YOUR FIRST. IF ALL GOES WELL YOU WON’T THINK ABOUT YOUR HOA, YOU JUST CONTINUE TO PAY IT.

IF THE ABOVE DOESN’T WORK OUT, YOUR AIM MUST BE FOR A SHORT SALE to avoid a Foreclosure after Bankruptcy.  Doing a Short Sale will take the Home Owner’s Association into account as part of the final deal and that will be that.

But if you end up with a Foreclosure after Bankruptcy . . .

FORECLOSURE AFTER BANKRUPTCY:

If you know that you can’t pay a Chapter 13 payment (YOU MUST CONSULT A BANKRUPTCY ATTORNEY TO BE SURE, NEVER ASSUME ONE WAY OR THE OTHER WITHOUT A CONSULTATION FIRST), & if you cannot pay your 1st, you are going to lose your property.  So, File a Chapter 7 Bankruptcy: Your 2nd or HELOC will no longer be able to sue once your Chapter 7 has discharged.  You can stay in the property a bit longer while saving up to move. You could get a couple or even several extra months Rent-Free! But if you don’t do a short sale, you will eventually have a foreclosure.

Your HOA will be able to sue you from the date that you filed your Bankruptcy until the day your property is foreclosed.  I have seen this more than once, a couple assumes that a short sale is on track, and then it doesn’t go through.  Meanwhile they have not been paying the Home Owner’s Association fees.  Probably they haven’t paid for a year prior to filing the bankruptcy so they are out of the habit of paying it.  Once the bankruptcy took place, they still didn’t pay because they couldn’t afford to, or they assumed that the short sale would take care of it.

But if you don’t pay, and there’s a foreclosure, you’re going to owe all HOA fees and assessments from the day that you filed until the day that you no longer owned the property. Because they banks don’t want to pay the HOA fees either, I have seen them take a couple years to actually repossess a house, especially if the family has already moved out.  $150/mo in HOA fees plus special assessments, attorney’s fees and costs adds up pretty quickly.

SO CONTINUE TO PAY THE HOME OWNERS ASSOCIATION FEES UNTIL THE PROPERTY IS SOLD OR FORECLOSED.  If you don’t want to pay the HOA Fees to the HOA because you expect a short sale to take care of it, put the HOA Fees into a savings account just in case the short sale doesn’t go through.  If it doesn’t go through you just pay them.  If it does go through, you have a small savings account to use as moving money, or maybe replacing your appliances.

Bankruptcy Attorney David Nelson

Temecula bankruptcy attorney, Murrieta bankruptcy attorney, Lake Elsinore bankruptcy attorney, Canyon Lake bankruptcy attorney, Menifee bankruptcy attorney, Perris bankruptcy attorney, Riverside bankruptcy attorney, Corona bankruptcy attorney, San Diego bankruptcy attorney, Los Angeles bankruptcy attorney, LA, and Orange County bankruptcy attorney

Why File Bankruptcy?

Ever considered it?

You may either make too much money or have too much equity in your assets, in which case, why bother?  You may have no job and nothing to take away from you, in which case, why not bother?

However, if you are like most families and people, you have an average income, average sized family and not enough income.  An average income would have been fine some years ago, but now, you’re making less and spending more, even if you have the same job.

As the price of gas, or milk, or health insurance, or baby-formula, or crunchy tacos goes up, while that might be good for the country if it forces us off of gas, milk, or crunchy tacos, it also means that your discretionary spending is shrinking faster than we can re-budget the little that’s left over.  

What are you going to do?

If you’re thinking that it’s immoral, stop it.  Two things, first look up the Jubile (Jubilee in Modern English) in your bible dictionary.  Second, think of the parable that ends with the statement that you cannot serve two masters, you cannot serve God and Mammon. You will want to Google the meaning of Mammon but it translates as ill-gotten gains, (some translations say filthy-lucre, and one just says wealth).  In other words, you cannot serve God and sin.  Kind of a no duh moment. 

But watch what the servant did. In that parable the servant was told by the Lord of the House that he was going to be fired because he hadn’t collected on the accounts.  As the accounts manager of the House, (think of House the way the English use it to mean business) he was a bad servant because he hadn’t collected.

So, upon learning that he was about to be fired, he settled many of the accounts.  Inquired of several of the Lord’s debtors, he would ask how much do you owe? Whatever answer he received, he would settle the account for less. Accounts of 100 measures of oil, or 50 bushels of wheat, or 100 buckets of barley, he settled for between 50% to 80% of the balance.

But what happened to him?  From the Lord who had threatened to fire him, and had called him a bad servant, that servant received a commendation. Think about that. Almost a promotion and he gets an Attaboy from his boss.  The business owner actually thanks him for getting .

Serving Mammon

Serving mammon is to try to get the last penny out of your debtors when in a tough economy no one can afford to pay. Wise action is when the accounts manager has enough sense to settle the accounts and at least get some money back into the business in order to continue operations. In doing so, he made his boss happy to get at least something instead of nothing which is what he was getting when the accounts manager was holding out for full price. In doing so, he also made friends outside the business just in case he did in fact get fired and had to leave.

What are your Creditors doing to you?  They’re trying to get the last penny out of you when in a tough economy no one can afford to pay. If they won’t be the wise servant and settle the accounts with you, then you be the wise servant and settle the accounts with them. If you can afford to pay a little, you do a chapter 13 and pay a payment plan. If you cannot afford to pay, then this is your JUBILEE year, and you do a chapter 7.

If you need help to settle your debts, your best bet for the best advice ever on how to do that is Right Here

If you decide you would like to file bankruptcy, Call 800-345-3292, 800 FILE AWAY 

Temecula, San Diego, Los Angeles or LA, Orange, Temecula, Murrieta, Riverside, Corona, Menifee, Perris, Wildomar, Lake Elsinore in Riverside County, San Diego County, Los Angeles County