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socrateaser
socrateaser, Attorney
Category: Bankruptcy Law
Satisfied Customers: 33849
Experience:  Attorney and Real Estate Broker -- Retired (mostly)
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My wife and I had a joint chapter 7 discharged in July 2010,

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My wife and I had a joint chapter 7 discharged in July 2010, in Orlando FL. We need to file a chapter 13. We are 4 months behind on our mortgage and 24 months behind on our home owner association. Our mortgage was reecently sold to another lender and the loan that transferred was modifieed about 2 years ago into a 2% fixed for about 5 years with slight adjustments. The balance is about 220,000 and then another 125,000 balloon in 25-30 years. I am 59 and she is 45 with three children. My wife is a teacher and earns about 38,000 a year. I am self-employed and my earnings vary based on straight commission. I am paid on a 1099, with gross commission earnings distributed once or twice a month if earned. Good months, bad months. I am able to deduct a large percentage of my income at tax time. I don't know how they will determine what my trustee payment will be. Since I am more than 3 years out of Chapter 7 discharge does that mean I will have to take all my unsecured debt and divide it by 60 (months) and pay it off entirely? The only secured debt we have is the house. I have not been served any papers yet for foreclosure and don't know how long I have to file a Chapter 13 to protect ourselves from the HO association foreclosing or the 1st mortgage. We have a 2nd mortgage that has been inactive for many years and never tried to collect. It's about another 150,000 or so. It was not stripped out in the Chapter 7 for some reason. The house value was as high as 440,000 and now about 225,000. Our unsecured debt is about evenly divided between consumer credit and medical. About 5,000 each for a total of about 10,000. My gross earnings are about 45,000 a year. What are my options? What kind of trustee payment am I looking at? Will I have to pay the entire amount divided over 60 months? How will the mortgage and HOA arrears be divided over the chapter 13? My wife was laid off during the summer and I earned nothing from June 1st through September 15th so that's how we got behind. How long do I have before the foreclosure proceedings begin? I'd like to be able to put off filing to save some money. Otherwise I will have to make trustee payments almost immediately. On the other hand how can I find out what the banks plan is for foreclosing and their schedule? What if they send me a certified letter and I miss the notice somehow?
Submitted: 11 months ago.
Category: Bankruptcy Law
Expert:  socrateaser replied 11 months ago.
My wife and I had a joint chapter 7 discharged in July 2010, in Orlando FL. We need to file a chapter 13. We are 4 months behind on our mortgage and 24 months behind on our home owner association. Our mortgage was recently sold to another lender and the loan that transferred was modified about 2 years ago into a 2% fixed for about 5 years with slight adjustments. The balance is about 220,000 and then another 125,000 balloon in 25-30 years. I am 59 and she is 45 with three children. My wife is a teacher and earns about 38,000 a year. I am self-employed and my earnings vary based on straight commission. I am paid on a 1099, with gross commission earnings distributed once or twice a month if earned. Good months, bad months. I am able to deduct a large percentage of my income at tax time. I don't know how they will determine what my trustee payment will be.

A: Your plan must devote all of your disposable income to paying unsecured creditors. You must pay your unsecured creditors at least as much as they would receive in a Chapter 7. Based upon your description of your finances, you may be able to propose a 0% plan, and only pay your secured creditors, because you don't appear to have any assets to distribute.

Since I am more than 3 years out of Chapter 7 discharge does that mean I will have to take all my unsecured debt and divide it by 60 (months) and pay it off entirely?

A: No. A Chapter 13 filed after a Chapter 7 discharge does not create any automatic liability for the debtor. The only requirement is that the Chapter 13 discharge cannot occur within four years of the date that the Chapter 7 was filed. That won't be a problem, because the shortest Chapter 13 plan is three years, and it's already been three years since July 2010. So, your Chapter 13 plan can be entirely ordinary in its terms and conditions.

The only secured debt we have is the house. I have not been served any papers yet for foreclosure and don't know how long I have to file a Chapter 13 to protect ourselves from the HO association foreclosing or the 1st mortgage.

A: Whenever you file, all collection efforts must stop. The HOA or lender can request relief from the automatic stay and then foreclose. But, if your plan proposes to catch up on your payments, the court won't lift the stay. If you cannot make the necessary payments, then the court will lift the stay, and you will lose your home -- making the bankruptcy a waste of time, if that's your principal goal.

We have a 2nd mortgage that has been inactive for many years and never tried to collect. It's about another 150,000 or so. It was not stripped out in the Chapter 7 for some reason.

A: There are numerous problems in Florida concerning both lienstripping of a second lien in Chapter 13 after filing Chapter 7, as well as in lienstripping HOA assessments. The law is different in the three different Florida bankruptcy courts, and the 11th Circuit Court of Appeals, that controls all Florida bankruptcy law is getting ready to make an important ruling on the issue. Consequently, I cannot possibly answer this question, ,and you will need to discuss it with local counsel.

The house value was as high as 440,000 and now about 225,000. Our unsecured debt is about evenly divided between consumer credit and medical. About 5,000 each for a total of about 10,000. My gross earnings are about 45,000 a year. What are my options?

A: Explained above.

What kind of trustee payment am I looking at?

A: ≈$200 per month, not including maintaining your current mortgage and HOA payments.

Will I have to pay the entire amount divided over 60 months?

A: No. Explained above.

How will the mortgage and HOA arrears be divided over the chapter 13?

A: You must catch up over the course of the plan, or be able to pay a balloon at the end. Some debtors create a plan with a balloon and hope that the real estate market will recover, or their income will increase to make it possible to satisfy the balloon. In my experience, this almost always fails and the Chapter 13 is dismissed. Sometimes this is okay, because the debtor has finally decided to let their home go. Debtors who are severely underwater in their home are generally better off letting the home go -- but, they can rarely be convinced of this, so they create a bankruptcy plan that will ultimately fail, leaving them in the same boat as they started, five years after they file bankruptcy.

Something to think about.

My wife was laid off during the summer and I earned nothing from June 1st through September 15th so that's how we got behind. How long do I have before the foreclosure proceedings begin?

A: A lender can commence a foreclosure action whenever it finds the borrower in default. There is no "up front" time before the lender can commence the action. The process generally requires 135 days.

I'd like to be able to put off filing to save some money. Otherwise I will have to make trustee payments almost immediately. On the other hand how can I find out what the banks plan is for foreclosing and their schedule? What if they send me a certified letter and I miss the notice somehow?

A: There's no way to predict what the bank will do. If you miss the notice, you may be defaulted. However, practically no one misses the notice, because it is usually served on you by the sheriff personally, or notice is posted on your front door.

Please let me know if I can be of further assistance. And, thank you for using justanswer.com.
socrateaser, Attorney
Category: Bankruptcy Law
Satisfied Customers: 33849
Experience: Attorney and Real Estate Broker -- Retired (mostly)
socrateaser and other Bankruptcy Law Specialists are ready to help you
Customer: replied 11 months ago.

A: Your plan must devote all of your disposable income to paying unsecured creditors. You must pay your unsecured creditors at least as much as they would receive in a Chapter 7. Based upon your description of your finances, you may be able to propose a 0% plan, and only pay your secured creditors, because you don't appear to have any assets to distribute.


Am I able to deduct my business expenses from my disposable income since they decrease my "disposable income" and I can prove it through tax returns or expense ledgers?



A: A lender can commence a foreclosure action whenever it finds the borrower in default. There is no "up front" time before the lender can commence the action. The process generally requires 135 days.


135 days from the day of filing OR from payments missed were June 1, July 1, August 1 and Sept 1? Naturally I would like to be able to accrue some funds before the first trustee payment is due. I hear of people stalling payments for a year or two. How is that possible?



If I receive or file my 2013 taxes and expect a refund, is that money intercepted by the court?



If the home needs any costly repairs such as a roof or AC system can that be presented to the court as a major unaffordable cost and get assistance in some manner from the lender to pay up front and then recover through the Chapter 13?



Can I file the necessary papers with the court myself, or is it absolutely recommended that it be done by an attorney? Is there a guide or is that just foolish to do it yourself? I think the filing fees and online course are about $300.00. Most attorneys want a retainer of $1000-$3000. I just don't have it.



Can you take this case? I like the direct answers that you give.



 

Expert:  socrateaser replied 11 months ago.
Am I able to deduct my business expenses from my disposable income since they decrease my "disposable income" and I can prove it through tax returns or expense ledgers?

 

A: If your income comes from self employment, then your cost of doing business is not income. So, yes, you can deduct "ordinary and necessary" business expenses. Obviously, if you are driving a Ferrari California, and you're not a professional race car driver or a Ferrari dealer, then that's not an ordinary and necessary expense. But, if you're a software consultant, and you have two laptops, three different smart phones and several different computer servers from which you operate your own internet service provider, then those are ordinary and necessary to your trade or business.


135 days from the day of filing OR from payments missed were June 1, July 1, August 1 and Sept 1? Naturally I would like to be able to accrue some funds before the first trustee payment is due. I hear of people stalling payments for a year or two. How is that possible?

 

A: Date of filing. Every case is unique. Every lender is unique. Some lenders cannot produce the original promissory note to back up their foreclosure complaint. Sometimes a mortgage instrument has a defective legal description of the property.

 

The average time, however, according to RealtyTrac, Inc., which is the major foreclosure tracking service in the USA, is 135 days.

 

If I receive or file my 2013 taxes and expect a refund, is that money intercepted by the court?

A: Intercepted -- no. But, it must be provided for, as an asset, in the bankruptcy plan. Tax refunds are part of the Chapter 13 bankruptcy estate. You can't just stuff it in your pocket.


If the home needs any costly repairs such as a roof or AC system can that be presented to the court as a major unaffordable cost and get assistance in some manner from the lender to pay up front and then recover through the Chapter 13?


A: You're painting a picture of a property that ought to be surrendered. You need to rethink your goals, in my opinion. That said, there's no provision for what you are suggesting.


Can I file the necessary papers with the court myself, or is it absolutely recommended that it be done by an attorney? Is there a guide or is that just foolish to do it yourself? I think the filing fees and online course are about $300.00. Most attorneys want a retainer of $1000-$3000. I just don't have it.

 

A: You can try to "do it yourself." if you intend to try to lienstrip the HOA fees and your 2nd loan, then you need a lawyer -- and a damn competent one, because of the reasons I previously discussed.


Can you take this case? I like the direct answers that you give.

A: I'm retired. I "justanswer" questions in this forum. But, I'm flattered by your interest. If you need a link to a lawyer referral service or to a "how to" file Chapter 13 guide, let me know and I will be happy to provide.

Hope this helps.
Customer: replied 11 months ago.

 


 



If the home needs any costly repairs such as a roof or AC system can that be presented to the court as a major unaffordable cost and get assistance in some manner from the lender to pay up front and then recover through the Chapter 13?



A: You're painting a picture of a property that ought to be surrendered. You need to rethink your goals, in my opinion. That said, there's no provision for what you are suggesting.


 


I understand the vision of the "painting" but when your credit is not good and your funds are extremely limited to pack and move, pay rent and a security deposit, we're not left with many choices but to stay. I was just trying to think of the large, not imminent expenses we could face.


 


Thank you for all your insight!


 


I would appreciate the legal referral service contact.



Expert:  socrateaser replied 11 months ago.
I understand the vision of the "painting" but when your credit is not good and your funds are extremely limited to pack and move, pay rent and a security deposit, we're not left with many choices but to stay. I was just trying to think of the large, not imminent expenses we could face.

A: I completely understand. And, if you can lienstrip the 2nd mortgage, then a Chapter 13 may solve all your problems. Otherwise, it seems to me that you're sinking far too much into "renting" your home from your lenders, than it's worth, because the market may never recover sufficiently during your lifetime to pay off the loans. And, even if it does, then you will have had no appreciation from the efforts. So, in fact, you're already a tenant -- and you're rent is probably above fair market.

Thank you for all your insight!

 

A: You're welcome and good luck!

Customer: replied 10 months ago.

A: Your plan must devote all of your disposable income to paying unsecured creditors. You must pay your unsecured creditors at least as much as they would receive in a Chapter 7. Based upon your description of your finances, you may be able to propose a 0% plan, and only pay your secured creditors, because you don't appear to have any assets to distribute.

Since I am more than 3 years out of Chapter 7 discharge does that mean I will have to take all my unsecured debt and divide it by 60 (months) and pay it off entirely?

A: No. A Chapter 13 filed after a Chapter 7 discharge does not create any automatic liability for the debtor. The only requirement is that the Chapter 13 discharge cannot occur within four years of the date that the Chapter 7 was filed. That won't be a problem, because the shortest Chapter 13 plan is three years, and it's already been three years since July 2010. So, your Chapter 13 plan can be entirely ordinary in its terms and conditions.


 


There seems to be a significant difference in this answer and the one by my lawyer. According to him since my Ch 7 was discharged in July, 2010 and if we file a CH 13 in Nov 2013, that means that a 60 month CH 13 won't discharge until Nov 2018. Realistically we could postpone payment on all unsecured debt and file a new chapter 7 in July 2018 or maybe even April 2018 and eliminate all unsecured debt that I would not even be paying on in the ch 13. The best case scenario is to pay only secured debt for the next 60 months, but he seems to feel that even unsecured debt must be paid as well. What is the 0% plan that you mentioned? That seems to be the key to this?

Expert:  socrateaser replied 10 months ago.
Hello again,

I think that the controversy may be based upon a misinterpretation of my previous answer.

A Chapter 13 discharge after a Chapter 7 discharge must be separated by at least four years. Bankr. Code 1328(f).

This doesn't mean that in your unique circumstances, you can obtain a discharge at the instant that you cross the four-year minimum time period. If you file a Chapter 13, then you must either: (1) complete the plan (which dependent upon your income being above or below the state median for your family size, is either 3 or 5 years in length); (2) convert to Chapter 7 and be granted a discharge (which you can't do, because eight years haven't passed, yet); or (3) request a Chapter 13 hardship discharge (which is almost the same as a Chapter 7 conversion, but it doesn't require an eight-year waiting period).

You seemed to indicate that your income was pretty marginal, so I assumed you could create a three-year plan, which would mean a discharge in 2016 (unless you can qualify for a hardship discharge). But, you can't raise that issue right now, because you cannot tell your bankruptcy lawyer that you're thinking about a hardship discharge, before you file Chapter 13 -- if you do, the attorney will have to withdraw from representing you, because he would be assisting you in committing a bankruptcy fraud.

A 0% plan is one in which the debtor has no assets with which to pay unsecured creditors, and disposable income only sufficient to pay minimum allowed expenses. Such a debtor would ordinarily be granted a Chapter 7 discharge, but because of an eligibility requirement, the debtor cannot file Chapter 7.

Assuming that you are such a debtor, you may be able to create a 0% plan (or very low payment plan -- because some judges will refuse to confirm a 0% plan, under any circumstances).

Hope this helps.

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