Do you have a Mobile home or Manufactured Home Loan?

Is the Value of the Mobile home less than Balance on the Loan?

Valuing Liens in Chapter 13

One of the advantages of a Chapter 13 bankruptcy is ability to strip a lien on a mobile home or manufactured home loan down to the current fair market value and pay the fair market value through a Chapter 13 Plan.  Here is a common example:  Your Mobile Home has current fair market value of $30,000 and the balance on the loan is $55,000.  Because the balance is greater than the fair market value, the value of the lien can be reduced or “stripped” in a Chapter 13 with you only paying the fair market value of the mobilehome through the Chapter 13 Plan over 3-5 years instead of the contract term which may be up to 30 years. 

When does a Chapter 13 lien stripping case make sense?  First, you need to make sure the fair market value is below the balance due and owing on the loan.  This can easily be done by talking to a realtor in your area or looking at mobile homes in your park that have recently been sold.  Second, you don’t want to file a Chapter 13 to strip a lien unless you really, really want to stay in this mobile home.  A Chapter 13 is a commitment of between 3-5 years.  Third, the amount to be reduced on the balance of the mobile home loan combined with other debt needs to make a Chapter 13 advantageous i.e. you don’t want to file Chapter 13 to reduce the balance on your mobile home by $5,000.00.   

If a Chapter 13 is sounding like something that might work for you, there are several other things to consider.  First, we must make sure all of the owners of the mobile home and all of the people who signed on the loan are filing bankruptcy.  For example, if the property is owned by both you and your parents, we cannot strip off the lien on the mobile home unless both you and your parents are filing bankruptcy. If the property is owned by you and your spouse, only one of you would need to file bankruptcy to strip the lien because all community property is included in the bankruptcy case.  Second, in order to strip off the lien, we have to prove that your mobile home is not worth more than the payoff balance.    Therefore, it is very important to understand the current value of  your mobile home. The value does not include the location or park where the mobile home is located.  Rather, it is current the current value of the mobile home without any attachments or value added for location.

In conclusion, there has never been a better time for Chapter 13 lien stripping cases on mobile homes.  Mobile home values are still very low in relation to amount paid for most of the mobile home in this area.  This is truly the lemonade out lemons recipe if you meet the requirements for a Chapter 13.  Before you keep paying on a mobile home that may be worth one half of your current loan balance, it may be a good idea to consider a Chapter 13 and see what it can do for you.      I see people for a free 30 minute consultation at my offices in Walnut Creek and Brentwood.

WE ARE A DEBT RELIEF AGENCY. WE HELP PEOPLE FILE BANKRUPTCY RELIEF UNDER THE BANKRUPTCY CODE. THIS INFORMATION IS NOT PROVIDED AS LEGAL ADVICE AND SHOULD NOT BE RELIED UPON IN MAKING ANY DECISION REGARDING A SHORT SALE OR FORECLOSURE. THIS INFORMATION IS NOT A SUBSTITUTE FOR OBTAINING TAX & LEGAL ADVICE REGARDING AN INDIVIDUAL SITUATION.  GRIMESBKLAW.COM (925) 939-1680

© 2013 Joan Grimes

Make over $100,000 a year and still Drowning in Debt?

Bankruptcy for High Income Earners

One of the most overlooked financial tools available to individuals with high income is Chapter 13 of the Bankruptcy Code.  Unlike a Chapter 7 which can require liquidation of assets and has very strict eligibility requirements, a Chapter 13 has greater flexibility in eligibility and allows individuals to retain their assets while paying back something to their creditors from future income.  Some of the powers of a Chapter 13 Bankruptcy include:

1. Availability of Bankruptcy to High Income Debtors - A Chapter 13 allows individuals who would otherwise not be eligible for Chapter 7 bankruptcy to repay debts to the extent of their ability through a 3-5 year plan.  In most cases, Debtors repay between 5-10% of their unsecured debts.
2. Continuing Business Operation - Unlike a Chapter 7 where a trustee can close down a Debtor’s business, a Chapter 13 Debtor has the right to continue operation of the business and has the exclusive right to sell, lease or otherwise use the business assets, in the normal course of operation.
3. Chapter 13 Plan May Modify Secured Creditor Rights - One of the great advantages of a Chapter 13 bankruptcy at this time is ability to strip a lien on your principal residence that does not attach to any equity.  Here is a common example:  Principal residence has current fair market value of $300,000.  The first mortgage has a balance of $400,000 and the second mortgage has a balance of $100,000.  Because the second mortgage does not attach to any equity in the property, the lien can be avoided or “stripped” in a Chapter 13 thereby removing the balance of $100,000 at the completion of the Chapter 13 case.  In addition, if you have other real property which is not your personal residence, you may reduce the secured claims to the current fair market value if you can pay the fair market value of the real property with the contract rate of interest over the terms of the Chapter 13 Plan which cannot exceed 5 years.  Where this makes most sense is on the small rental property.  On cars, the Debtor can reduce a loan balance to the fair market value except that a reduction is not allowed on cars used by the Debtor for his personal use if it was purchased within 910 days of the bankruptcy filing i.e. you need to have had the car loan for 910 days prior to bankruptcy filing. 
4. Curing a Default -  A Chapter 13 Plan can cure a default on a loan with no interest being paid in most cases.
5. Discharge greater than Chapter 7 - A Chapter 13 discharge can encompass many other types of debts which cannot be discharge in a Chapter 7 including criminal matters and taxes.  However, the most frequently used provision is to eliminate debts to a spouse, former spouse or child incurred by the Debtor in the course of marriage dissolution or separation except to the extent those debts constitute “domestic support obligation.”  What this means is that “hold harmless” provisions on real estate obligations and community property settlements obligations can be discharged.     

The above are just some of the advantages of a Chapter 13 bankruptcy case.   If you are a high income earner, a Chapter 13 may be the answer for you.  While it does have some limitations in the amount debt which may be included, there may be flexibility in classification depending on your particular situation.   If you struggling with debt even though you are making a good income, I urge you to seek legal counsel as soon as possible to fully understand the consequences of the decision and the options available.  I see people for a free 30 minute consultation at my offices located in Walnut Creek and Brentwood.

WE ARE DEBT RELIEF AGENCY AND HELP PEOPLE FILE FOR BANKRUPTCY. THIS INFORMATION IS NOT PROVIDED AS LEGAL ADVICE AND SHOULD NOT BE RELIED UP IN MAKING ANY DECISION REGARDING A VOLUNTARY DEFAULT, SHORT SALE, FORECLOSURE OR BANKRUPTCY.  THIS INFORMATION IS NOT A SUBSTITUTE FOR OBTAINING TAX & LEGAL ADVICE REGARDING AN INDIVIDUAL SITUATION.  

GRIMESBKLAW.COM  PHONE 925-323-7772   © 2012 Joan Grimes 

A Fresh Start - Chapter 7 Bankruptcy

If you are drowning in debt, can’t sleep because you are so worried about your bills or can’t answer your phone because it is always bill collectors, a Chapter 7 bankruptcy may be the fresh start you need.

Most bankruptcy cases filed in the United States are Chapter 7 cases.  The purpose of a Chapter 7 is to provide the Debtor with a “fresh start” through a discharge of his or her debts and equitable distributing any available assets among credits.  In most cases there are no non exempt assets to be sold and thus most Debtors retain all of their assets and discharge their debts without any payments to creditors.  If you are having problems paying your debts as they become due and owing, here is what you need to know about Chapter 7.

1. Who is Eligible - A Chapter 7 bankruptcy may be filed by any person or entity who resides in or has a place of business or property in the United States, other than a railroad and certain financial institutions and insurance companies. 
2. No Debt Limit - Unlike a Chapter 13 case, there is no debt limits in a Chapter 7.
3. Exemptions - The Bankruptcy Code and California law allows Debtors to retain many assets in a bankruptcy including retirement accounts, personal injury and workers compensation awards and additional assets in the form of “wild card” exemptions.  For most individuals, all of their assets will be protected and none will be able to creditors.
4. Means Test - If the person filing a Chapter 7 is an individual consumer with a majority of his debts being consumer debt i.e. debts incurred by an individual primarily for personal, family or household purposes, the individual must disclose financial information using a “means test.”   The purpose of the test is to determine potential ability to pay creditors.  If the result of the means test demonstrates the debtor has the potential ability to pay a minimal amount, a presumption arises that the debtor’s bankruptcy filing is an “abuse” and the case is subject to dismissal or conversion to Chapter 11 or 13. 
5. Secured Debt - Secured debt payments such as a home loan or car loan can be used on the means test if the Debtors are making the payments.  However, there are recent bankruptcy cases in which the court has held that when a debtor is no longer paying on secured debts, they may not include said payments for purposes of calculating the means test. 

If you do not have sufficient income to pay your bills as they come due and owing, you should seek legal counsel before withdrawing any monies from a retirement account, savings account or defaulting on a home or car loan.  These are difficult times, but do not miss the help and protection provided by the Bankruptcy Code and California law by waiting too long.    

WE ARE A DEBT RELIEF AGENCY.  WE HELP PEOPLE FILE BANKRUPTCY.  THIS INFORMATION IS NOT PROVIDED AS LEGAL ADVICE AND SHOULD NOT BE RELIED UPON IN MAKING ANY DECISION REGARDING A VOLUNTARY DEFAULT, SHORT SALE, FORECLOSURE OR BANKRUPTCY.  THIS INFORMATION IS NOT A SUBSTITUTE FOR OBTAINING TAX & LEGAL ADVICE REGARDING AN INDIVIDUAL SITUATION.    © 2012 Joan Grimes

The Power of Chapter 13

       One of the most overlooked financial tools available to individuals including small business owners today is Chapter 13 of the Bankruptcy Code.  Unlike a Chapter 7 which can require liquidation of assets and has very strict eligibility requirements, a Chapter 13 has greater flexibility in eligibility and allows individuals to retain their assets while paying back something to their creditors from future income.  Some of the powers of a Chapter 13 Bankruptcy include:

1. Availability of Bankruptcy to High Income Debtors - A Chapter 13 allows individuals who would otherwise not be eligible for Chapter 7 bankruptcy to repay debts to the extent of their ability through a 3-5 year plan.  In most cases, Debtors repay between 5-10% of their unsecured debts.
2. Continuing Business Operation- Unlike a Chapter 7 where a trustee can close down a Debtor’s business, a Chapter 13 Debtor has the right to continue operation of the business and has the exclusive right to sell, lease or otherwise use the business assets, in the normal course of operation.
3. Chapter 13 Plan May Modify Secured Creditor Rights -  One of the great advantages of a Chapter 13 bankruptcy at this time is ability to strip a lien on your principal residence that does not attach to any equity.  Here is a common example:  Principal residence has current fair market value of $300,000.  The first mortgage has a balance of $400,000 and the second mortgage has a balance of $100,000.  Because the second mortgage does not attach to any equity in the property, the lien can be avoided or “stripped” in a Chapter 13 thereby removing the balance of $100,000 at the completion of the Chapter 13 case.  In addition, if you have other real property which is not your personal residence, you may reduce the secured claims to the current fair market value if you can pay the fair market value of the real property with the contract rate of interest over the terms of the Chapter 13 Plan which cannot exceed 5 years.  Where this makes most sense is on the small rental property.  On cars, the Debtor can reduce a loan balance to the fair market value except that a reduction is not allowed on cars used by the Debtor for his personal use if it was obtained within 910 days of the bankruptcy filing i.e. you need to have had the car loan for 910 days prior to bankruptcy filing. 
4. Curing a Default -  A Chapter 13 Plan can cure a default on a loan with no interest being paid in most cases.
5. Discharge greater than Chapter 7 -  A Chapter 13 discharge can encompass many other types of debts which cannot be discharge in a Chapter 7 including criminal matters and taxes.  However, the most frequently used provision is to eliminate debts to a spouse, former spouse or child incurred by the Debtor in the course of marriage dissolution or separation except to the extent those debts constitute “domestic support.”  What this means is that “hold harmless” provisions on real estate obligations and community property settlements obligations can be discharged.     

          The above are just some of the advantages of a Chapter 13 bankruptcy case.   While it may not be as quick and easy as a Chapter 7, it may provide the debt relief which cannot be obtained with a debt consolidation or repayment plan.  If you are considering a default on your home or other debts, I urge you to seek legal counsel as soon as possible to fully understand the consequences of the decision and the options available.  I see people for a free 30 minute consultation at  my offices located in Walnut Creek, Antioch and Brentwood.

WE ARE DEBT RELIEF AGENCY AND HELP PEOPLE FILE FOR BANKRUPTCY. THIS INFORMATION IS NOT PROVIDED AS LEGAL ADVICE AND SHOULD NOT BE RELIED UP IN MAKING ANY DECISION REGARDING A VOLUNTARY DEFAULT, SHORT SALE, FORECLOSURE OR BANKRUPTCY.  THIS INFORMATION IS NOT A SUBSTITUTE FOR OBTAINING TAX & LEGAL ADVICE REGARDING AN INDIVIDUAL SITUATION. 

GRIMESBKLAW.COM  PHONE 925-323-7772   © 2011 Joan Grimes

Should You File for Bankruptcy?

A common question people ask me is whether they should file for bankruptcy. They don’t want to file, but they also know that they cannot continue with the status quo. Here is what I ask them:

1. Can you pay your bills as they come due and owing?

2. Can you pay off your credit card bills in full in the next 12 months?

3. If you own a house, do you have a fixed rate mortgage that you can payoff by the time you retire? Is your house worth what you owe against it?

If you have answered “no” to any of these questions, you should be considering whether a fresh start through bankruptcy maybe the right decision for you.

A fresh start has been provided to the Banks, the Investment Companies, and the Insurance Companies and a fresh start is available to consumers. Most home loan made between 2001-2007 could not be paid off on a person income. More than anyone, the banks knew that a person can only pay off in home loan debt of 2-21/2 times their gross household income in this lifetime and save for retirement and raise a child or two.

A fresh start for a consumer is usually a Chapter 7 bankruptcy. A Chapter 7 is a straight bankruptcy also known as a liquidation case. In a Chapter 7 case, all assets and liabilities are included and the Chapter 7 Trustee will have the right to liquidate non-exempt assets for the benefit of creditors. In exchange for including all assets and liabilities, an individual’s promise to pay on most debts are forgiven through a discharge.

In most cases, there are no assets available to creditors because all of the assets are exempt or encumbered by liens to the full extent of their value. Exempt assets that the Chapter 7 Trustee cannot reach include 401k, IRA, Annuity, retirement plan, equity in a car up to $3,525, most household goods and furnishing, life insurance, most personal injury actions, and then $23,250 in other assets such as motorcycles, boats, RV or additional equity in cars or other items.

Most people who are having problems paying their bills qualify for Chapter 7 Bankruptcy either because their income is low or because their mortgage payments and other secured loans such as car loans are too high in relation to their income. However, a person should not delay in seeking legal advice. The loss of a home prior to a bankruptcy filing either through a short sale or foreclosure may make an individual’s income too high for a Chapter 7 and the only option will be Chapter 13 repayment plan which will last between 3-5 years. In addition, there may be personal liability and tax consequences which could have been eliminated in a bankruptcy.

In conclusion, if you are having financial problems, seek legal counsel. You did not make this real estate and credit card meltdown. There are serious personal liability and tax consequence of a short sale and foreclosure. Make sure you understand your legal rights prior to undertaking either a short sale or allowing your property to be foreclosed. Do not lose sleep and your sanity worrying about financial problems. Help is available to you just like it was to the Bank, Investment Companies and the Insurance Companies.

WE ARE A DEBT RELIEF AGENCY. WE HELP PEOPLE FILE BANKRUPTCY RELIEF UNDER THE BANKRUPTCY CODE. THIS INFORMATION IS NOT PROVIDED AS LEGAL ADVICE AND SHOULD NOT BE RELIED UPON IN MAKING ANY DECISION REGARDING A VOLUNTARY DEFAULT, SHORT SALE, FORECLOSURE OR BANKRUPTCY. THIS INFORMATION IS NOT A SUBSTITUTE FOR OBTAINING TAX & LEGAL ADVICE REGARDING AN INDIVIDUAL SITUATION. © 2010

Joan M. Grimes. Grimesbklaw.com

411 on Bankruptcy

When people come in for an initial consultation, they want to know three things. First, is bankruptcy appropriate for their financial problems? Second, what options are available under Bankruptcy Code? And third, how will bankruptcy affect their lives after the bankruptcy is done.

Bankruptcy may be the appropriate remedy if a person is having difficulty paying their bills as they come due and owing, have credit card debt they have been unable to pay off or have long term debt such as home loans which they are having difficulty paying.

The most common form of bankruptcy is a Chapter 7. A Chapter 7 is a straight bankruptcy also known as a liquidation case. In a Chapter 7 case, all assets and liabilities are included and the Chapter 7 Trustee will have the right to liquidate non-exempt assets for the benefit of creditors. In exchange for including all assets and liabilities, an individual’s promise to pay on most debts are forgiven through a discharge.

In most cases, there are no assets available to creditors because all of the assets are exempt or encumbered by liens to the full extent of their value. Exempt assets include IRA or retirement plans, equity in a car up to $3,525, most household goods and furnishing, life insurance and then $23,250 in other assets such as balances in bank accounts or additional equity in cars or other items.

A Chapter 13 is a Consumer Reorganization which is usually used when a borrower needs one of the special “bells and whistles” provided by the Code. The most common bells and whistles are that the Debtor has non-exempt assets that they want to keep or they have a junior lien on a primary residence that does not attach to any equity which could be avoided in a Chapter 13 or maybe they have a car loan which is older than 910 days which they can reduce to the current fair market value.

The Chapter 7 process usually takes approximately 4 months from the date of filing to closing of the case. While a bankruptcy can stay on a person’s credit for a maximum of 10 years, Fannie Mae’s guidelines provide that a person will be eligible to purchase with a FHA loan product in as little as 2 years after the closing of the bankruptcy. New credit is usually granted within 1 year, but at lower limits and higher interest rates. The Chapter 13 process takes between 3-5 years, but provides greater relief in many situations.

Most people who are having problems paying their bills qualify for Chapter 7 Bankruptcy either because their income is low or because their mortgage payments and other secured loans such as car loans are too high in relation to their income. However, a person should not delay in seeking legal advice. The loss of a home prior to a bankruptcy filing either through a short sale or foreclosure may make an individual’s income too high for a Chapter 7 and the only option will be Chapter 13 repayment plan which will last between 3-5 years. In addition, there may be personal liability and tax consequences which could have been eliminated in a bankruptcy.

In conclusion, if you are having financial problems, seek legal counsel. You did not make this real estate and credit card meltdown. Do not lose sleep and your sanity worrying about financial problems.

WE ARE A DEBT RELIEF AGENCY. WE HELP PEOPLE FILE BANKRUPTCY RELIEF UNDER THE BANKRUPTCY CODE. THIS INFORMATION IS NOT PROVIDED AS LEGAL ADVICE AND SHOULD NOT BE RELIED UPON IN MAKING A DECISION REGARDING A VOLUNTARY DEFAULT, SHORT SALE, FORECLOSURE OR BANKRUPTCY. THIS INFORMATION IS NOT A SUBSTITUTE FOR OBTAINING TAX & LEGAL ADVICE REGARDING AN INDIVIDUAL SITUATION.  

© 2010 Joan Grimes

Do you have a Junior Mortgage on Your House?

Lien Stripping in Chapter 13

One of the great advantages of a Chapter 13 bankruptcy at this time is ability to strip a lien on your principal residence that does not attach to any equity. Here is a common example: Principal residence has current fair market value of $300,000. The first mortgage has a balance of $400,000 and the second mortgage has a balance of $100,000. Because the second mortgage does not attach to any equity in the property, the lien can be avoided or “stripped” in a Chapter 13 thereby removing the balance of $100,000 at the completion of the Chapter 13 case.

When does a Chapter 13 lien stripping case make sense? First, the principal residence must be your principal residence i.e. where you sleep at night. Second, you don’t want to file a Chapter 13 to strip a lien unless you really, really want to stay in this house. Third, the balance on the junior lien needs to be large enough combined with other debt to make a Chapter 13 advantageous i.e. you don’t want to file Chapter 13 to avoid a lien of $10,000. 

If a Chapter 13 is sounding like something that might work for you, there are several other things to consider. First, we must make sure all of the owners of the property and all of the people who signed on the mortgage note at we need to strip are filing bankruptcy. For example, if the property is owned by both you and your spouse, we cannot strip off the mortgage unless both of you are filing bankruptcy. Second, in order to strip off the mortgage, we have to prove that your real property is not worth more than the payoff balances on the other senior mortgages. That is, we need to prove that there is no value, not even one dollar, left in your real property to “secure” the mortgage we are trying to strip in the Chapter 13. Third, you need to have a “real” senior mortgage or at least a reasonable “hope” of you through a modification. The best senior mortgages for lien stripping cases are 30 year fixed that you can really afford or a mortgage that has been modified into a loan you can afford. If the senior mortgage is going to reset into a payment you cannot afford in 1,2,3 or 4 years, there is no reason to spend the money to strip a junior lien and then lose the house to a foreclosure by the senior lender later.

In conclusion, there has never been a better time for Chapter 13 lien stripping cases. Home values are low and the number of junior liens that do not attach to any equity are at an all time high. This is truly the lemonade out lemons recipe if you are intending on staying in your current residence and meet the requirements for a Chapter 13. Prior to simply walking away for your current residence, it may be a good idea to consider a Chapter 13 and see what it can do for you.

WE ARE A DEBT RELIEF AGENCY. WE HELP PEOPLE FILE BANKRUPTCY RELIEF UNDER THE BANKRUPTCY CODE. THIS INFORMATION IS NOT PROVIDED AS LEGAL ADVICE AND SHOULD NOT BE RELIED UPON IN MAKING ANY DECISION REGARDING A SHORT SALE OR FORECLOSURE. THIS INFORMATION IS NOT A SUBSTITUTE FOR OBTAINING TAX & LEGAL ADVICE REGARDING AN INDIVIDUAL SITUATION.

© 2010 Joan Grimes