Tag: chapter 13

Difference between Chapter 7 and Chapter 13 Bankruptcy

Posted on by Emil Fleysher

While most people are familiar with bankruptcy, many do not know the differences between the types. The experienced bankruptcy attorneys at The Law Offices of Emil Fleysher, P.A., are here to demonstrate the differences between Chapter 7 and Chapter 13 bankruptcies as well as the options you have when filing.

What Are the Differences Between Chapter 7 And Chapter 13 Bankruptcies?

You will find that as a small business owner, it is essential to understand how each type of bankruptcy will affect your company.

In fact, Chapter 7 bankruptcy is a form of liquidation and can be filed by individuals and business entities. Typically you will see that eligibility restrictions meet specific standards of disposable income being low enough to pass the Chapter 7 bankruptcy means test. It will take anywhere from three to four months to receive a discharge. Additionally, the property under Chapter 7 bankruptcy allows the trustee to sell all non-exempt property to pay creditors.

Chapter 7 bankruptcy does not allow for removing unsecured junior liens from the real property through lien stripping. It does allow for reducing the principal loan balance on secured debts but the tangible personal property only. Furthermore, the benefits of Chapter 7 bankruptcy allow for debtors to discharge qualifying debts. And, they can get a fresh start more quickly. The drawbacks of this type of bankruptcy are the granting of trustees to sell the non-exempt property. Additionally, they have the inability to provide a means of catching up on missed payments to avoid foreclosure or repossession.

Chapter 13

In contrast to Chapter 7, you will learn that Chapter 13 is a reorganization type of bankruptcy. Only individuals, including sole proprietors, can file, and eligibility restrictions must adhere to the following: one cannot have more than $419.27 of unsecured debt or $1,257.85 of secured debt. It will usually take three to five years upon completion of all payment plans to receive a discharge.

In fact, property under Chapter 13 bankruptcy mandates that debtors keep all property. But, they pay unsecured creditors an amount equal to the value of non-exempt assets. Moreover, Chapter 13 bankruptcy allows for removing unsecured junior liens from the real property through lien stripping if specific requirements are satisfied. Again, certain standards must be fulfilled in enabling the reduction of principal loan balances on secured debts.

Furthermore, the benefits of Chapter 13 allow for debtors to keep their property. Also, it allows them to catch up on any missed mortgage, car, and non-dischargeable priority debt payments. While drawbacks include monthly payments to the trustee for three to five years, there is a high likelihood that you may have to pay back a portion of general unsecured debts.

Call the Law Offices of Emil Fleysher, P.A., Today

If you are struggling with filing for bankruptcy, you should enlist help from The Law Offices of Emil Fleysher, P.A., and our team of experienced bankruptcy attorneys. We know you may have some questions or concerns regarding bankruptcy, and we are here for you. Don’t sit in agony while you contemplate your options going forward. Let our professionals handle everything. Call our office at 888-886-0020 to schedule a consultation today.

What is Chapter 13 Bankruptcy?

Posted on by Emil Fleysher

Read the explanation of Chapter 13 Bankruptcy.

If your debts are getting out of your control but your income is still more than the median of the state and you have been living in the same state for the past two years, you can still file for bankruptcy. A Chapter 13 bankruptcy was put in place for those who still have some “disposable” income. Even after paying all their expenses. And/or for those who’d like to keep the property that they would otherwise lose if they filed for Chapter 7. Completion of a form is a must. Its purpose is to determine if the amount of “disposable” income is equal to or less than the median of the state. Then, how much is actually left, and whether a 3-year plan or a 5-year plan will be implemented.

Once a timeline plan has been chosen, a repayment plan is then hatched. To construct a repayment plan, you must show that you can stay on top of your secured debts; such as a mortgage, car note, or domestic support obligation. All the while you are still paying off your unsecured debtors. You are paying the value of the properties that you would have otherwise had lost in a chapter 7 bankruptcy case. You must also be up to date with all of your tax filings. If you are not current with your tax filings, you must first complete that before continuing to file bankruptcy. When the proposed repayment plan has been accepted, a bankruptcy judge will then confirm it. And, it is now up to you to follow through with the plan.

Call Us

If you have questions about Foreclosure, Loan Modification, Bankruptcy, Short Sale, or other alternatives, please feel free to call my office at 888-886-0020. Or, send an e-mail to emil@fleysherlaw.com, or complete the contact form below.

Options for Florida Homeowners with Homes that are “Underwater”

Posted on by Emil Fleysher

What are your Options if your House is Underwater? More and more Floridians are coming to the unsettling realization that their homes are now worth less than they owe on their mortgage(s). This unfortunate scenario is commonly referred to as your house being “underwater.”
One of the most common questions that clients ask is “What are my options if my house is underwater?” Generally, the answer is that you have 6 options and their descriptions are below.

I. Continue Paying

If you can afford the payments and are more comfortable paying an over-priced loan than walking away from it, you may decide to keep paying.

  1. Pros – The pros of continuing to pay on the loan as it stands include
    1. protection of your credit score
    2. predictability of future payments
    3. household stability
  2. Cons – The cons of continuing to pay on the loan as it stands are
    1. substantially inflated housing payments
    2. compromised standard of living due to high cost of housing
    3. little or no chance of building equity in under 20 years

II. Deed in Lieu of Foreclosure

If you want nothing more to do with the property and are ready to “walk away,” then offering the bank a Deed in Lieu of Foreclosure (“Deed in Lieu”) may be the choice for you. A Deed in Lieu describes a situation in which the borrower agrees to vacate the property. And, abandon any claim or rights to the property. Banks like this option because it saves them the expenses and delays associated with judicial foreclosure. In return, most banks are willing to waive any deficiency claims that may result after the subsequent sale.

  1. Pros – The pros of offering the bank a Deed in Lieu include…
    1. An instant solution to the problem, allowing you to move on right away and start rebuilding your credit
    2. Potential waiver of any deficiency judgment
  2. Cons – The cons of offering the bank a Deed in Lieu include…
    1. It will have nearly the same effect on your credit score as a foreclosure. However, you will save your credit score from the damage that having successive late mortgage payments would cause.
    2. There are tax implications when any debt is forgiven. This results in a cancellation of debt that the IRS considers to be taxable income. However, exceptions to this rule include Insolvency (your total secured debts were higher than the Fair Market Value of your assets at the time of foreclosure sale). And, Bankruptcy (filing for Ch. 7 Bankruptcy would discharge this liability).
    3. A Deed in Lieu is only possible if there are no junior liens on the property (i.e., home equity loans or 2nd mortgages)

III. Short Sale

A short sale is a type of pre-sale in which the bank agrees to let you sell the property for less than the full amount owed. And, to accept the proceeds of the sale as full satisfaction of the debt.

  1. Pros – The pros of Short Selling the property include…
    1. Potential waiver of any deficiency judgment
    2. Slightly less negative impact on the your credit score
  2. Cons – The cons of Short Selling the property include …
    1. There are tax implications when any debt is forgiven. This results in a cancellation of debt that the IRS considers to be taxable income. However, exceptions to this rule include Insolvency (your total secured debts were higher than the Fair Market Value of your assets at the time of foreclosure sale); Bankruptcy (filing for Ch. 7 Bankruptcy would discharge this liability); and the Mortgage Debt Relief Forgiveness Act which has been recently extended through December 31, 2013.
    2. While a Short Sale may be slightly better for your credit than a full foreclosure, it still has a substantial negative impact. However, for those unable or unwilling to file for Bankruptcy, a Short Sale may be the best option in avoiding facing a deficiency judgment later on.

IV. Loan Modification

The intent of a modification is to eliminate the arrearage and reduce monthly mortgage payments for homeowners who have recovered from financial distress but whose net income has been reduced to a level lower than it was before the default, such that they can no longer afford the original loan.

  1. Pros – The pros of modifying your loan include…
    1. You can stay in the home at a payment that is affordable based on the income information you provided to the bank to get the modification.
    2. No dramatic negative impact to your credit score
  2. Cons – The cons of modifying your loan include if you:
    1. Suffer a reduction in income you will no longer be able to afford the payments and will have to start the process over.
    2. Are “upside down” on your mortgage after the modification, you will still be paying substantially inflated housing payments
    3. Are “upside down” on your mortgage after the modification, you may still be compromising your standard of living due to high cost of housing
    4. And, if you are “upside down” on your mortgage after the modification, you may still have little or no chance of building equity in less than 20 years.

V. Litigation / Foreclosure Defense

If none of the above choices are acceptable to you, then you may be interested in pursuing a Foreclosure Defense strategy. In short, a foreclosure defense strategy affords you the opportunity to stop making payments on the mortgage, property tax, and property insurance while an attorney defends your legal rights against the foreclosure action.

  1. Pros – The pros of pursuing a foreclosure defense strategy include…
    1. The opportunity to save your monthly housing expenses for an indefinite period of time. This money can be later used for moving expenses, housing, or as a down payment on a subsequent home purchase.
    2. This option gives you the most time to get your affairs in order and to plan for your next step.
  2. Cons – The cons of pursuing a foreclosure defense strategy include…
    1. You will eventually lose the house unless the bank agrees to allow resumption of payments or full payment of the loan is tendered (this is also referred to as “redemption”).
    2. You will have the dramatic negative impact of a foreclosure on your credit score.
    3. The servicer may pursue a deficiency judgment for the difference between the amount of the mortgage loan and the foreclosure sale price.
    4. If the bank waives the deficiency, there may be tax implications. This results in a cancellation of debt that is considered by the IRS to be taxable income. However, exceptions to this rule include Insolvency (your total secured debts were higher than the Fair Market Value of your assets at the time of foreclosure sale) and Bankruptcy (filing for Ch. 7 Bankruptcy would discharge this liability).

VI. Bankruptcy

Filing a Chapter 13 Bankruptcy may enable you to “strip off” any fully unsecured liens on your property. If your home is worth less than what you owe on your first mortgage, then any subsequent mortgages are fully unsecured in that there is no equity in the property above the first mortgage to secure them. In this scenario, a Chapter 13 bankruptcy may enable you to discharge the debts associated with the subsequent mortgages as well as strip off the liens completely. At the end of your successful Chapter 13 payment plan, you keep the house with only the first mortgage.

  1. Pros – The pros of pursuing a Chapter 13 Bankruptcy strategy include…
    1. Discharge and strip of any 2nd mortgages or Home Equity Lines of Credit
    2. Discharge of most unsecured debt (including credit cards, medical bills, etc.)
    3. Once the Chapter 13 plan is confirmed, all creditors must abide by the terms and honor the outcome.
  2. Cons – The cons of pursuing a Chapter 13 Bankruptcy strategy include…
    1. Filing Bankruptcy will negatively impact your credit score
    2. The Chapter 13 plan will last 3 or 5 years and you only get your discharge if and when the plan is completed.
    3. Bankruptcy may not be the best option for everyone at every time and an attorney should always be consulted with prior to making a decision as to whether or not to file.

If you have questions about foreclosure, loan modification, bankruptcy; or other alternatives, please feel free to call my office at 888-886-0020. Or, send an e-mail to emil@fleysherlaw.com, or complete the contact form below.

Can my Homeowner’s Association (HOA) foreclose on my home?

Posted on by Emil Fleysher

Many borrowers that have stopped making their mortgage payments are unsure as to whether or not they should continue making payments to their homeowner’s association; commonly referred to as their HOA. My clients that are facing foreclosure often ask what the consequences are for not paying the HOA. And, they are often surprised with my answer. With very few exceptions, I recommend paying your association in full and on time.

Homeowner’s Association and Florida Law

According to Chapter 720 of the Florida Statutes, a property owner that is at least 90 days late in paying HOA assessments may have his/her rights to common areas and association amenities suspended until the arrearage is paid. In addition, Florida law allows the HOA to charge a fine for each day the account is in default. Once the fines reach $1,000 or more, the HOA can place a lien on your property. Most HOA boards do not do this type of work themselves. So, they hire an attorney to handle liens, collections, and foreclosures. These services can get very expensive and the statute allows the HOA to stick you with the bill. Nonpayment of these amounts can lead to the HOA filing a foreclosure against you and the property.

The HOA can foreclose on your property in much the same way as the bank. Then, the HOA, like the bank, can also obtain a judgment against you for the unpaid assessments, fines, interest, and legal fees. The HOA bylaws set the interest rate. If the bylaws do not provide an interest rate, the statutory default rate is 18%.

Homeowner’s Association and Lien

Before the homeowner’s association can file a lien on your property they must make a formal demand for payment. This demand must meet the following criteria… First, they must provide you with 45 days to pay up on all amounts due (including attorney fees and costs). Second, certified mail and first-class U.S. mail must send the notice.

Reasons for Paying the Association

If a tenant is renting the property while the foreclosure case is pending in court, the HOA has an entitlement to appoint a receiver to collect the rent. And, apply it to the delinquent assessments. Furthermore, the expense of hiring the receiver will be added to the final judgment amount. This is if the HOA eventually prevails in the foreclosure.

If the bank holding the first mortgage gets title to the property through a deed-in-lieu of foreclosure or through a valid foreclosure sale, that bank will be responsible for paying all of the assessments accrued over the preceding 12 months or 1% of the original mortgage amount (whichever is less). This statutory requirement often pits the bank and the HOA against each other in cases where the HOA is desperate to complete a pending bank foreclosure so that they can collect fees. But, the bank is bogged down with problems arising from their paperwork or other legal hurdles to completing the foreclosure. With that in mind, the HOA can apply pressure to the foreclosure case and potentially accelerate the sale.

In addition to the above-mentioned reasons for paying your HOA assessments, it really is the right thing to do. The community or building and the people that live in it rely on the HOA for many important things; such as insurance, maintenance, cleaning, sanitation, repair, landscaping, security, etc. When one or more residents stop paying the assessments, the remainder of residents must bear the burden on a pro-rata basis. That is part of the rationale behind the statutory provisions that bestow so much power to the HOAs in Florida. Of course, it doesn’t hurt that the HOAs have a great lobby here in Florida.

Chapter 13 Bankruptcy May Be an Option for You

If you are too far behind in your HOA payments and the HOA is unwilling to offer you a repayment plan that you can afford, Chapter 13 Bankruptcy may be an attractive option for you. Upon filing a Chapter 13 Bankruptcy, any collections or foreclosure activity on the part of your HOA (or any other creditor) is suspended. This will give you a chance to put together a repayment plan over 3 or 5 years. Or, even strip off the association’s lien completely. Chapter 13 Bankruptcy is a relatively complex process and many factors must be considered prior to filing. However, under the right circumstances, it can be a tremendous tool for homeowners facing an HOA foreclosure.

If you have questions about HOAs, foreclosure, loan modification, bankruptcy, or other alternatives, please feel free to call my office at 888-886-0020. Or, send an e-mail to emil@fleysherlaw.com, or complete the contact form below.