by Mike Wallace | Dec 22, 2014 | Debt
By Mike Wallace, Bankruptcy Attorney, serving clients in all of East Texas, including Lufkin, Nacogdoches, Palestine and Jacksonville
Many clients come to me for bankruptcy services because they have acquired one or more of the predatory “payday loans” that have an annual percentage rate of interest typically in the 400 to 900 percent APR range. So the bottom line is that we have a person who is already in financial distress taking out a loan that has an interest rate that precludes the borrower from making any headway on paying down the principal. In other words, the borrower makes very high monthly or semi-monthly interest payments, and the principal remains the same.
A practice that I am seeing quite frequently now is rogue collectors that are either operating with the consent of the payday lender, or more likely, operating without the consent of the payday lender, who are making contact with former bankruptcy clients and making outrageous statements to them regarding the payday loan. A recent client was told that “payday loans are not dischargeable in bankruptcy; that if she did not pay the loan that she was going to be charged with fraud and he was having papers served on her related to her debt.” These are outrageous lies that are aimed at putting extreme fear in the Debtor and making them believe that they have to pay the debt. Only a rogue collector would make such outrageous lies to a Debtor, because a legitimate collector that we could actually track down would be before the bankruptcy court explaining why they have violated every aspect of the bankruptcy law that is aimed at preventing such outrageous conduct.
Most of the time these rogue collectors will advise the Debtor that they are a lawyer to make them seem more legitimate. They usually cite a bogus section of the bankruptcy code, which they claim makes payday loans non-dischargeable. I do understand that the payday loan lenders are getting desperate, because they have been informred for the most part by county and district attorneys that they will no longer collect on the post-dated checks that the Debtors have generally provided to them.
If you get a call from one of these rogue collectors, then be sure to get their full name, address, telephone number with extension, name of the company they are with, the name of the creditor they are collecting for and the name of their supervisor. If they represent to you that they are an attorney, then ask them what state or states they are licensed in and their bar number(s). They probably will go away once you ask them all these questions, because again, they are illegitimate in every respect. If they are in fact legitimate and are engaging in this type of outrageous conduct, then let us know all of the information if you are a former client, or if not, then let us know if you should have any questions that we might answer.
Any opinions expressed on this website are just that, opinions. So if you have a question regarding bankruptcy or debt relief, then please give me a call to discuss your individual situation. Bankruptcy, as many other areas of the law are very case or fact specific. I pride myself on giving you the answers to your questions that are based on your individual circumstances.
by Mike Wallace | Dec 22, 2014 | Real Estate
By Mike Wallace, Bankruptcy Attorney, serving clients in all of East Texas, including Lufkin, Nacogdoches, Palestine and Jacksonville
I have previously written about reaffirmation agreements on vehicles and the importance thereof, but in that discussion I did not address the issue of reaffirmation agreements on real estate. First, with respect to home equity loans there is absolutely no reason for a Debtor to sign such an areement, beacause such loans are non-recourse in nature in the State of Texas. In other words, Debtors do not have personal liability on such loans and the creditor must look only to the property in the event of a default. Since there is no personal liability to begin with, there is no discharge in the bankruptcy of personal liability to be waived.
With respect to conventional real estate mortgages it is clear under the current state of bankruptcy law that a reaffirmation agreement is not necessary or required by law. This is because Sections 521(a)(6) and 362(h) of Title 11 of the U.S. Bankruptcy only apply to personal property. The signing of such an agreement on a conventional real estate loan can be a trap for the unwary. The reason this is true is because when you sign a reaffirmation agreement you waive the discharge of your personal libility. Therefore, if you later default on the mortgage you will remain personally liable for the deficiency. A deficiency arises if the mortgage company sells the property for an amount that is less than what they are owed. As a rule of thumb, lenders typically sell properties at foreclosure sales for 75% of the outstanding mortgage, unless there is a third party buyer who is bidding on the property. It is my professional opinion that it is never in debtor’s best interest to sign a reaffirmation agreement on real property unless the mortgage company is offering some significant change to the terms of the loan, (i.e. a reduction in principal balance or a reduction in the interest rate).
Unfortunately, some mortgage companies are now holding debtors hostage who received a discharge of their personal liability and then desire to work with the mortgage company on a modification. In other words, the mortgage company is refusing loan modifications for debtors who received a discharge in bankruptcy, and who did not sign a reaffirmation agreement. I believe such a stance by the mortgage company smells of bad faith, and the reality is that the mortgage company uses the lack of a reaffirmation agreement as a pretext to deny loan modifications.
At a minimum, reaffirmation agreements on real estate are a double-edged sword. If you sign one, then you have waived your discharge of personal liability. In the event the property value drops and you later default, then the mortgage company will look to you for the deficiency. The prospect of this happening in the real estate market that we have seen of late is significant. If you don’t sign the reaffirmation agreement, then the mortgage company tells you that they will not report the favorable paying of your mortgage to the credit bureaus. Additionally, they will quite likely refuse any modifications or allow you to make electronic payments on the mortgage.
As always, any opinions expressed on this website are just that, opinions. So if you have a question regarding bankruptcy or debt relief, then please give me a call to discuss your individual situation. Bankruptcy, as many other areas of the law are very case or fact specific. I pride myself on giving you the answers to your questions that are based on your individual circumstances.
by Mike Wallace | Dec 22, 2014 | Chapter 7
By Mike Wallace, Bankruptcy Attorney, serving clients in all of East Texas, including Lufkin, Nacogdoches, Palestine, Jacksonville and other surrounding communities
Chapter 7 bankruptcy, sometimes called liquidation bankruptcy, is generally intended for those persons who have unsecured debt and qualify for relief under the current bankruptcy law.
The term liquidation bankruptcy is for the most part a misnomer, because in the overwhelming majority of chapter 7 cases there is no property to be liquidated.
These types of cases are commonly referred to as “no asset” cases. In the unusual circumstance that a chapter 7 debtor might have property that cannot be exempted under the bankruptcy law, then an appointed trustee will liquidate that property to pay to the debtor’s creditors.
If you are in a situation that has placed you in financial distress, then please give me a call and lets talk about the possibility of a chapter 7 bankruptcy.
If you are burdened by medical bills, finance companies, payday loans, credit cards or any other debt that is keeping you awake at night, I want to talk to you about the possibility of helping with your burden.
Even if you have student loan debt, which is in most case nondischargeable, it might be all the more important to discuss bankruptcy if you have other debt coupled with the student loan debt.
Since you have choices in who you hire to represent you in a bankruptcy, I would ask that you allow me an opportunity to discuss an affordable option for your particular circumstances. I always offer a discount for seniors who are on a limited fixed income.
As always, any opinions expressed on this website are just that, opinions. So if you have a question regarding bankruptcy or debt relief, then please give me a call to discuss your individual situation. Bankruptcy, as many other areas of the law are very case or fact specific. I pride myself on giving you the answers to your questions that are based on your individual circumstances.
by Mike Wallace | Dec 22, 2014 | Debt
PUTTING YOUR FINANCIAL STABILITY AT RISK
Some individuals who have accumulated a significant amount of unsecured debt in relation to their income, are putting their financial stability at risk by paying these unsecured debts to the detriment of their living expenses.
When I talk about unsecured debt, I am talking about the credit card debt, signature loans (typically from high interest finance companies), payday loans and medical bills.
This type of debt is unsecured because there is no collateral pledged as security for payment of the financial obligation.
When I talk about living expenses I am specifically addressing housing (either rent or a mortgage on a home), transportation expenses (could include a car payment), food and utilities.
If you have developed such a pattern of paying unsecured debt to the detriment of your ability to live and it is causing you financial distress, please pick up the phone and give me a call.
You might not be a bankruptcy candidate, but I can certainly give you some financial tips that might keep your situation from getting worse.
I can be reached at my Jacksonville office at 903-683-2018, or at my Nacogdoches office at 936-225-1800.
As always, any opinions expressed on this website are just that, opinions. So if you have a question regarding bankruptcy or debt relief, then please give me a call to discuss your individual situation. Bankruptcy, as many other areas of the law are very case or fact specific. I pride myself on giving you the answers to your questions that are based on your individual circumstances.
by Mike Wallace | Dec 22, 2014 | Chapter 13
By Mike Wallace, Bankruptcy Attorney, serving clients in all of East Texas, including Lufkin, Nacogdoches, Palestine, Jacksonville, Tyler and other surrounding communities
I am asked the question so often: “How does a Chapter 13 bankruptcy work?”, I thought I would attempt to give the basics of a Chapter 13 case.
First, Chapter 13 cases are typically for those persons who have secured debt that needs to be reorganized (e.g. Vehicle payments that are behind, mortgage payments that are behind or taxes owed to the Internal Revenue Service). Individuals with student loan debt, which is always unsecured, can also benefit tremendously in some circumstances from a Chapter 13 bankruptcy.
There are other instances that are suitable for a reorganization of debt, but this is an attempt to simplify.
A Debtor in Chapter 13 must make payments to the Chapter 13 Trustee for a period no less than 36 months and no longer than 60 months. The length of the plan is referred to as the commitment period. The amount of the payment is determined based on a very specific budget that is prepared.
First, a net income is determined by taking the gross pay of a Debtor and deducting all of the normal deductions that are deducted from the Debtor’s pay by the employer.
Then all of the expenses for the Debtor on a monthly basis are deducted from the net income.
The monthly expenses that are generally deducted from the net pay would be as follows: mortgage or rent; utilities; auto insurance; home insurance and taxes (assuming the same are not escrow in your mortgage payment); food expense; health, life and medical insurance that is not already deducted from wages; cable or satellite television; phone expenses (land and/or cell); clothing; out-of-pocket medical and dental expenses, including prescriptions; transportation costs (includes gas, vehicle registration, service and maintenance costs); childcare; charitable contributions and trash pickup.
These expenses are for the purpose of an illustration and you might have some additional expenses that are deductible from your net income.
One thing that has to be taken into consideration when calculating net income is any income tax refund that you might receive.
An income tax refund should be thought of as an over payment of your wages to the internal revenue service. If you are receiving a refund, then this refund must be included back into your net income.
For example, let’s say that you are to receive a tax refund in the amount of $2,400.00 for a given tax year.
This refund will add $200.00 to your monthly net income ($2,400.00/12 months=$200 per month).
Once the monthly net income has been calculated and the monthly expenses are deducted therefrom, the amount that is left over for the sake of this illustration is referred to as disposable income.
As a side note, a Debtor in a Chapter 13 case that is drawing Social Security payments, can include the amount received in their net income in order to make a Chapter 13 plan of reorganization feasible (more on that subject in a moment), but if the income is not needed it does not have to be included.
The disposable income is the amount that is paid to the Chapter 13 Trustee on a monthly basis. For the sake of illustration, let’s say that you are behind on mortgage payments in the amount of $5,000.00 and you owe $10,000.00 on an automobile that needs to be paid off in your plan of reorganization.
That is $15,000.00 that has to be paid to the Trustee during the commitment period.
To simplify this illustration I have not included attorney’s fees or any interest that might have to be paid. To make a plan of reorganization feasible to pay the $15,000.00 during the commitment period, the Debtor must have enough disposable income.
Again, for the sake of illustration let’s say that the commitment period is the maximum sixty (60) months. This means that the Debtor must have $250.00 of disposable income being paid to the Trustee.
If the Debtor only has disposable income of $200.00/month, then a feasible plan cannot be proposed.
On the other hand, if the Debtor in this illustration has disposable income of $400.00/month, then there is up to $150.00/month that is available to pay any unsecured debt (e.g. credit cards, medical bills, payday loans and signature loans).
Currently, in the Eastern District of Texas the Chapter 13 Trustee allows a Debtor to keep up to $100.00 of disposable income that does not have to be dedicated to the Chapter 13 plan of reorganization.
If the Debtor in the above illustration is not required to be in a Chapter 13 for 60 months and they have $400.00 available in disposable income, then the commitment period could be shortened.
The gross income of a Debtor determines whether they are required to be in a sixty (60) month commitment period, or can be in for the shortest period available of thirty-six (36) months.
All of the above information is for illustration purposes to allow a better understanding of Chapter 13 bankruptcies. Every situation is different and there are special rules that come into play in any given Chapter 13 case.
For example, manufactured homes that are not part of a Debtor’s real property can receive special treatment in a Chapter 13, as well as automobiles that were purchased more than 910 days ago.
If you have additional questions about Chapter 13 bankruptcy or any other financial situation that you might find yourself in, then give me a call at (800) 867-1583 and we can discuss your situation at no obligation to you.
As always, any opinions expressed on this website are just that, opinions. So if you have a question regarding bankruptcy or debt relief, then please give me a call to discuss your individual situation. Bankruptcy, as many other areas of the law, can be very case or fact specific. I pride myself on giving you the answers to your questions that are based on your individual circumstances.
