Bankruptcy

The Law Office of Resnick & Associates understands that the decision to file bankruptcy is often the most difficult financial decision they will make in their lifetime. Many people who experience serious financial difficulty struggle to make mortgage and credit cards payments even though their liabilities do not decrease and often only continue to grow due to outrageously high interest rates. People deny themselves basic pleasures of life and work only to pay off their debts with no end in sight.

Attorneys at Law Office of Resnick & Associates can evaluate your overall financial situation to determine if bankruptcy can help you. Bankruptcy laws provide people in financial distress strong protection against creditors and collectors. Did you know that as soon as you inform a collection agency that you retained an attorney regarding bankruptcy, all collection calls must immediately stop?

Some people have misconceptions about bankruptcies. They think that bankruptcies are only for poor people and if you file a bankruptcy you can be viewed as a misfortunate looser. This cannot be further from the truth. Bankruptcies are for educated people who are smart enough to take advantage of existing laws and protections. Bankruptcies have been filed by billionaires who may have fallen in difficult times and did not want to be dragged behind by their debts. Bankruptcy allowed some of the wealthiest people whose names we frequently hear in the news and see on TV as being synonymous with wealth and prosperity. People from all walks of life and even businesses from small companies to multi-billion dollar corporations file bankruptcies to obtain protection from their creditors and to get a fresh start to move to better financial future.

Bankruptcy is based on federal laws that allow you to discharge certain debts while allowing you to keep certain assets. What is usually different from state to state is what you are allowed to keep while your debts and liabilities are discharged, also known as exemptions to bankruptcy. For example, in Florida you are allowed to keep your homestead property (your primary residence) without any monetary limit even if you file a Chapter 7 bankruptcy. Chapter 13 is widely used by distressed homeowners who missed many mortgage payments and did not modify their mortgage, facing a foreclosure. Chapter 13 stops a foreclosure and you can leave your home, subject to certain financial conditions, while the amounts of your missed payments will be spread over several years at a reduced rate. Moreover, certain second mortgages on your home can be dismissed in bankruptcy if the value of your home exceeds the amount of your first mortgage.

We understand that not only the decision to file for bankruptcy is very difficult but it is also frequently made at times otherwise extremely stressful to our clients. Whether your financial difficulty is caused by a loss of job, business failure, divorce or illness, we will treat your dignity and respect you deserve for having the strength to pull yourself together and making a fresh start. Call our attorneys at Law Office of Resnick & Associates for your FREE consultation to determine whether bankruptcy is right for you.

Chapter 7 Bankruptcy

Chapter 7 bankruptcy is sometimes called "liquidation" bankruptcy -- it cancels your debts, but you might have to let the bankruptcy court liquidate (sell) some of your property for the benefit of your creditors.

Who Can File Chapter 7

You will not be able to use Chapter 7 bankruptcy if you already received a bankruptcy discharge in the last six to eight years (depending which type of bankruptcy you filed) or if, based on your income, expenses, and debt burden, you could feasibly complete a Chapter 13 repayment plan.

Another very important consideration in making a decision about filing Chapter 7 is what your state law allows you to keep when you file Chapter 7 bankruptcy. Consult bankruptcy attorneys at Law Office of Resnick & Associates to learn what you can keep while discharging your debts.

Chapter 13 Bankruptcy

Chapter 13 bankruptcy, sometimes called reorganization bankruptcy, is quite different from Chapter 7 bankruptcy. In a Chapter 7 bankruptcy, most of your debts are wiped out; in exchange, you must relinquish any property that isn't exempt from seizure by your creditors. In a Chapter 13 bankruptcy, you don't have to hand over any property, but you must use your income to pay some or all of what you owe to your creditors over time -- from three to five years, depending on the size of your debts and income.

Who can File Chapter 13

Chapter 13 bankruptcy isn't for everyone. Because Chapter 13 requires you to use your income to repay some or all of your debt, you'll have to prove to the court that you can afford to meet your payment obligations. If your income is irregular or too low, the court might not allow you to file for Chapter 13.

If your total debt burden is too high, you are also ineligible. Your secured debts cannot exceed $1,010,650, and your unsecured debts cannot be more than $336,900. A "secured debt" is one that gives a creditor the right to take a specific item of property (such as your house or car) if you don't pay the debt. Examples of a “secured debt” are most mortgages, car loans and PMSI (Purchase Money Security Interest, which some people confuse with retailer loans. When you apply for a store credit with some retailers, such as Brandsmart, Mattress Giant, Wells Fargo furniture store loans (such as El Dorado, Robb & Stucky, etc), and many others, you get a PMSI rather than a credit card. If you fail to repay it, the holder of this note has a right to take the items you purchased back. Will Mattress Giant take your used mattress? Most likely not. But they have a right to do so.). An "unsecured debt" (such as a credit card or medical bill) doesn't give the creditor a right to take your property.

How Bankruptcy Stops Your Creditors: The Automatic Stay

Filing for bankruptcy puts into effect an "Order for Relief" -- known informally as the "automatic stay." The automatic stay immediately stops most creditors from trying to collect what you owe them. So, at least temporarily, creditors cannot legally garnish your wages, empty your bank account, go after your car, house, or other property, or cut off your utility service or welfare benefits. If you are a defendant in a law suit, your attorney will file a Suggestion of Bankruptcy in the court where you are being sued. Unless the person who is suing you persuades the bankruptcy court to allow the state proceedings to continue, all law suits against you will be stopped while you are in bankruptcy. Most law suits based on breach of contract, negligence or other non-intentional torts will be permanently dismissed in bankruptcy.

When you file for bankruptcy, something called the automatic stay immediately stops any lawsuit filed against you and most actions against your property by a creditor, collection agency, or government entity. Especially if you are at risk of being evicted, being foreclosed on, being found in contempt for failure to pay child support, or losing such basic resources as utility services, welfare, unemployment benefits, or your job (because of a raft of wage garnishments), the automatic stay may provide a powerful reason to file for bankruptcy.

What the Automatic Stay Can Prevent

Here is how the automatic stay affects some common emergencies:

• Wage garnishments. Filing for bankruptcy stops garnishment of your wages so you take home your full salary.
• Foreclosure. If your home mortgage is being foreclosed on, the automatic stay temporarily stops the proceedings, but the creditor will often be able to proceed with the foreclosure sooner or later. If you are facing foreclosure, Chapter 13 bankruptcy is usually a better remedy than Chapter 7 bankruptcy, if you want to keep your house. Click here to learn how bankruptcy can stop the foreclosure and save your home.
• Eviction. If you are being evicted from your home, the automatic stay may provide some help -- but the new bankruptcy law makes it easier for landlords to proceed with evictions. If your landlord already has a judgment of possession against you when you file, the automatic stay won't affect these eviction proceedings; the landlord can lift the automatic stay and continue with the eviction process. If the landlord has not yet obtained a judgment allowing to evict you, because of the automatic stay the landlord will have to file a motion with the bankruptcy court to lift the stay to evict you. Although the judge is most likely grant this motion, it can buy you usually several weeks during which time you can remain in your home.
• Collection of overpayments of public benefits. If you receive public benefits and were overpaid, the government agency has a right to collect the overpayment by taking it out from your future checks. The automatic stay prevents this collection.
• Utility disconnections. If you're behind on a utility bill and the company is threatening to disconnect your water, electric, gas, or telephone service, the automatic stay will prevent the disconnection for at least 20 days. Although the amount of a utility bill itself rarely justifies a bankruptcy filing, preventing electrical service cutoff in January in New England might be justification enough.

How Bankruptcy Can Help With Foreclosure

If you are facing foreclosure and cannot modify your loan or find a buyer for a short sale, bankruptcy may help.

The foreclosure does not happen as soon as you stop paying your mortgage. The foreclosure usually does not start until you are several months behind on your payments. This gives you time to try some alternate measures, such as loan modification, a short sale, or a deed in lieu of foreclosure.)

If you are only considering bankruptcy because you cannot make your mortgage payments, we usually advise our clients to try other alternatives before filing for bankruptcy. However, if you also have thousands of dollars in credit card debt, medical expenses or other judgments, bankruptcy may be the first option to consider. Not only will it stop or stall a foreclosure but it will also stop all creditors from calling you, garnishing your wages or in most cases suing you in court.

The Automatic Stay: Delaying Foreclosure

Both Chapter 13 and Chapter 7 bankruptcy filings immediately place an automatic stay on all collection activities and legal actions against you, including a foreclosure. If your home is scheduled for a foreclosure sale, the sale will be postponed while the bankruptcy is pending—typically for three to four months. However, there are two exceptions to this general rule:

Motion to lift the stay. If the lender obtains the bankruptcy court’s permission to proceed with the sale by filing a Motion to Lift the Stay, you may not get the full three to four months. But even then, the bankruptcy will typically postpone the sale by at least two months, or even more if the lender is slow in pursuing the motion to lift the automatic stay, which is very frequently the case in these days when the courts are overwhelmed with the number of filed foreclosures and bankruptcies.

Foreclosure notice already filed. Unfortunately, bankruptcy’s automatic stay will not stop the clock on the advance notice that most states require before a foreclosure sale can be held (or a motion to lift the stay can be filed). For example, before selling a home in California , a lender has to give the owner at least three months’ notice. If you receive a three-month notice of default, and then file for bankruptcy after two months have passed, the three-month period would elapse after you’d been in bankruptcy for only one month. At that time the lender could file a motion to lift the stay and ask the court for permission to schedule the foreclosure sale.

How Chapter 13 Bankruptcy Can Help

Many people will do whatever they can to stay in their home for the indefinite future. If that describes you, and you’re behind on your mortgage payments with no feasible way to get current, the only way to keep your home is to file a Chapter 13 bankruptcy.

How Chapter 13 works. Chapter 13 bankruptcy lets you pay off the “arrearage” (late, unpaid payments) over the length of a repayment plan – usually three to five years. It is important to consider that this plan will work for you if you have enough income to make both your current mortgage payments and the additional payments on the arrearage.

2nd and 3rd mortgage payments. Chapter 13 may also help you eliminate the payments on your second or third mortgage. Your first mortgage is secured by the value of your home. If your home has dropped in value, you may no longer have any equity with which to secure the later mortgages. That allows the bankruptcy court to “strip off” the second and third mortgages and recategorize them as unsecured debt – which, under both Chapters 7 and 13, take last priority and often does not have to be paid back at all.

How Chapter 7 Bankruptcy Can Help

It may be that you’ll have to give up your home no matter what. In that case, filing for Chapter 7 bankruptcy will at least stall the sale and give you two or three more months to work things out with your lender. It will also help you save up some money during the process and cancel debt secured by your home. In some instances discharging your other debts, such as credit cards or judgments, stopping legal proceedings against you with associated legal fees and canceling wage garnishments allows you to have enough money to make your mortgage payments.

• Saving money. During a Chapter 7 bankruptcy, you can live in your home for free during at least some of the months while your bankruptcy is pending -- and perhaps several more after your case is closed. You can then use that money to help secure new shelter.
• Canceling debt. Chapter 7 bankruptcy will also cancel all the debt that is secured by your home, including the mortgage, as well as any second mortgages and home equity loans. If you loose your home to a foreclosure, the lender can still go after you for the losses, including the lender’s cost of foreclosure and the amount lost if the home was sold for less that the outstanding amount of the mortgage. Bankruptcy discharges your obligation to repay this amount.