There is legal protection for you when filing for a Chapter 13 bankruptcy, which is also known as a wage earners repayment plan. Statistically, the failure rate of Chapter 13 repayment plans is extremely high and approximately 75% of all Chapter 13 bankruptcy cases fail and the client ends up in a Chapter 7 bankruptcy case. This is unfortunate because as with a voluntary non-bankruptcy repayment plan, the fees in a Chapter 13 are expensive. Usually the chapter 13 bankruptcy attorney fees average around $4,000. Chapter 13 debt consolidation repayment plans generally take three (3) to five (5) years to complete.
Oftentimes a client loses his or her job and can not make the payments, or, more commonly the client simply could not afford to make the Chapter 13 debt consolidation payments to begin with so the case is either converted to a Chapter 7 bankruptcy case or it is dismissed and the client has to pay attorney fees and court costs again.
Unfortunately some law firms do not properly explain to client that in a Chapter 13 debt consolidation repayment plan that the payment is not based on what the client can afford to pay. Rather, just like a voluntary debt consolidation bankruptcy, the client must be able to afford the payment in order to stay in the program. This is not to say that there are not good legal reasons that justify filing a Chapter 13 debt consolidation bankruptcy.
A factor to consider whenever one is thinking about filing a Chapter 13 debt consolidation bankruptcy or whether to attempt a voluntary debt consolidation program is the self-interest of the bankruptcy lawyer or debt consolidation management company. For example, there are some bankruptcy law firms that will steer clients toward a Chapter 13 debt consolidation repayment plan because the law firm makes more money on a Chapter 13 case.
The fees associated with a voluntary debt consolidation program must also be examined closely, especially if the company is requiring that fees be paid to the company prior to the time the debt consolidation program has actually been accepted by all of your creditors.
Sometimes there is no option for a client but to file a Chapter 13 debt consolidation bankruptcy. This typically involves a situation where the client has fallen behind in their mortgage payments and needs more time to catch up the payments. If such a Chapter 13 debt consolidation bankruptcy plan is approved by the court, the client is still obligated make the current mortgage payments as they become due after the case has been filed, if they don’t they could end up in a foreclosure bankruptcy situation.
A voluntary non-bankruptcy debt consolidation plan will not assist a client who has missed their mortgage payments, so the only alternative may be a Chapter 13 debt consolidation plan.
Chapter 7 bankruptcy is not a debt consolidation bankruptcy. Rather, it is a bankruptcy proceeding in which many if not all of the client’s debts are legally wiped out. If a client is behind on a mortgage payment Chapter 7 bankruptcy will stop a foreclosure just as Chapter 13 debt consolidation bankruptcy would, but the creditor will file a motion in bankruptcy court called a Motion For Relief From Automatic Stay so that they can obtain court permission to foreclose on the property.
In more recent times, however, mortgage companies have been more receptive to doing loan modifications for clients who are in a Chapter 7 bankruptcy proceeding even though Chapter 7 bankruptcy is not a debt consolidation bankruptcy. In fact, in years past if a client were behind on their mortgage payments, the client would have to file a Chapter 13 debt consolidation bankruptcy in order to save the home.
Moreover, mortgage companies are unwilling to enter into a loan modification with a homeowner prior to a client filing Chapter 7 bankruptcy, but once the Chapter 7 bankruptcy case has been filed, the tables are turned and many times the mortgage company will then discuss favorable modification terms with the homeowner.
Therefore, based upon the current economic climate and the fact that banks have a significant amount of inventory on their books, strong consideration should be given to filing a Chapter 7 bankruptcy instead of a debt consolidation plan, especially if the consumer is a homeowner. If you need help with possible bankruptcy options, give Roger Ghai and his team of legal experts a call. They’re here to help people Kennesaw and Acworth with any bankruptcy cases they can.
Georgia Chapter 13 Debtor Allowed To Separately Classify Student Loan Debt
Allison N. Pracht filed Chapter 13 bankruptcy in the Middle District Of Georgia Athens Division. In her Chapter 13 Plan, she proposed to pay her non-dischargeable student loan debt a higher dividend than her general unsecured creditors. The Chapter 13 Trustee objected to the proposed plan.
In this case the U.S. Department of Education filed a claim for $115,934.98. Debtor had other unsecured debt in the amount of $102,000.00. Before filing her Chapter 13 case, Debtor had exhausted all of the available deferments and forebearances available to her.
Because Debtor is a special education teacher, she is eligible for the so-called “Public Service Loan Forgiveness” program. Under that program if she makes 120 consecutive monthly payments of a negotiated amount without default, the balance of the debt remaining thereafter (approximately $50,000.00) would be forgiven.
Debtor’s plan proposed to classify her student loan debt at $532.12 monthly and the balance of her projected disposable income to be paid pro-rata to the creditors holding other unsecured claims. Under the proposed plan the unsecured creditors would receive a 15% dividend, but if the student loan was not classified separately they would receive a 20% dividend.
In ruling in favor of the Debtor the Court found that the plan did not violate 11 U.S.C. 1325(b)(1)(B) of the bankruptcy law because the plan proposed to pay all of the Debtor’s disposable income into the Chapter 13 plan. The Court noted that this section of the Bankruptcy Code had been complied with because the student loan was an unsecured claim.
However, the legal issue before the bankruptcy court was whether the plan unfairly discriminated against the other general unsecured claims pursuant to 11 U.S.C. 1322(b)(1). Importantly the court pointed out that “[m]ost courts have concluded that discrimination based solely on nondischargeabilty is unfair.” See In re Kalfayan, 415 B.R. 907, 909 (Bankr. S.D. Fla 2009).
The Court further noted that the minority view of the courts was that long-term debt whch extend past the life of the plan were excepted from the unfair discrimination analysis. However, it noted that the majority of courts require that plans providing for a full payment of student loan obligations undergo an unfair discrimination analysis pursuant to 11 U.S.C. 13229(b)(5) of the Bankruptcy Code.
In its analysis, the bankruptcy court made a distinction between discrimination of unsecured claims based upon a difference between the claims and noted that discrimination itself in a broad sense simply meant to make a distinction. It pointed out that 1322(b)(5) only prohibits unfair discrimination between any class of unsecured claims.
In this case the court had difficulty in making a determination of what was meant by “fair” under the Bankruptcy Code. In the end, the court relied upon the policy of the Code of giving honest but unfortunate debtors a fresh start. In the case Debtor would be allowed to discharge approximately $50,000.00 in student loans which would allow her to get a frest start as envisioned by the Code. Therefore the court approved Debtor’s Chapter 13 plan.
If you have questions about Chapter 13 bankruptcy in Georgia, you should consult with a local Georgia bankruptcy attorney.
For a free legal consultation with a chapter 13 bankruptcy lawyer serving Kennesaw, call (770) 792-1000
What Happens To A Tax Lien If You File Bankruptcy
Depending upon the timing of the filing of your bankruptcy, income taxes maybe be discharged once the case is closed. A discharge of debt simply means that the debts are wiped out. Although the debt is wiped out, a question that clients frequently ask is what about the tax lien itself. The rule is that, if eligible, the taxes may be discharged, but the lien itself will survive the bankruptcy.
What does it mean that the lien will survive the bankruptcy? It means that the taxing authority has a lien on your assets. The question becomes whether the taxing authority has a lien on any assets which you acquire after your bankruptcy case has been filed.
To date, the United States Supreme Court has not made a decision as to whether the lien attaches to assets after the bankruptcy case has been filed. This can be a tricky area of the law. In addition, tax liens usually have a definite life span usually Internal Revenue Service tax liens are valid for ten years unless they are renewed.
Although the tax lien would cover assets you had before your bankruptcy was filed, depending upon the jurisdiction where you reside, the tax lien includes property which you acquired after you filed for bankruptcy. In fact, in the case of Barbara Drake, hereinafter Drake, 20 CBN 1062 (Bankr. D. Mass. 2010) the court decided that the surviving tax lien did not cover assets which the debtor acquired after the bankruptcy case was filed.
It should be noted too that although a tax lien usually is valid for only a specific amount of time, filing a bankruptcy case may actually extend the tax lien’s life, as was the case in Drake. In Drake the court held that because the debtor had been in a Chapter 13 bankruptcy for approximately thirteen months, the court indicated that the time the state taxing authority had to file the lien was extended by the thirteen months the debtor had been in the Chapter 13 bankruptcy case. To determine whether a tax lien has survived the bankruptcy and attaches to assets after you file your case, it is advisable to consult with a bankruptcy attorney in your jurisdiction. If you are in the Atlanta area you can contact bankruptcy attorney Roger Ghai if you have questions about filing bankruptcy and tax liens. You may reach him at www.Chapter7attorneys.com or call (770) 792-1000.
Kennesaw Chapter 13 Bankruptcy Lawyer Near Me (770) 792-1000
Chapter 13 Bankruptcy In Texas And Special Circumstances
Gerald Joseph Davis and Carol Ann Davis filed for Chapter 13 bankuptcy In Fort Worth, Texas on November 29, 2010. Their bankruptcy attorney argued that the should be allowed to deduct certain expenses based upon the special circumstances provision of 11 U.S.C. 707(b)(2)(B)(i).
707(b)(2)(B)(i) provides: “[i]n any proceeding brought under this subsection, the presumption of abuse may only be rebutted by deomonstrating special circumstances, such as a serious medical condition or a call or order to active duty in the Armed Forces, to the extent such special circumstances that justify additonal expenses or adjustments of current monthly income for which there is no reasonable alternative.”
In this bankruptcy case, Debtors sought to deduct from their income pool maintenance, septic tank expenses, trash disposal expenses, a savings account expeanse, well as yard maintenance expenses on the Means Test. This Texas bankruptcy court discussed the fact that some courts strictly interpret 707(b)(2)(i) to restrict it to serious medical conditions or a call to active duty while other courts look at the individual’s circumstances to make a determination as to whether a claimed expense is justified due to special circumstances of the debtor.
In order to claim an expense due to a debtor’s special circumstance, pursuant to 11 U.S.C. 707(b)(2)(B) debtor must provide documentation to the trustee of those expenses and testify to those expenses under oath. In this case, Debtors met the procedural requirements of this Bankruptcy Code section.
In this particular case while disagreeing with the Debtors as to some of the claimed special circumstance expenses the Court agreed with many of the claimed expenses. For example, the Court agreed that the pool related to a special circumstance. Debtors testified that the claimed expense of $50.00 per month was to buy chemicals with which they wold clean the pool themselves. Debtors’ bankruptcy lawyer argued that this was necessary so that the pool would not become a safety and sanitation hazard.
The Court also agreed the savings account expense of $300.00 per month was related to a serious medical condition of Debtor’s wife because she had melanoma and as such the strict statutory requirement of 707(b)(2)(B) had been met. Finally the court also agreed that Debtors expenses for a septic tank, trash disposal, and yard maintenance were all related to special circumstances could be claimed by Debtors.
Chapter 7 bankruptcy cases may also involve special circumstances so if you have questions about whether your expenses may be deducted in bankruptcy based upon special circumstances it is best to seek the opinion of a bankruptcy attorney in your area.
Click to contact our Kennesaw Bankruptcy Lawyers today
Chapter 13 Bankruptcy Debtor Discharges Money Borrowed Three Days Before Filing Bankruptcy
On September 22, 2008 Debtors filed Chapter 13 bankruptcy. Plaintiff, I Need Cash, Inc., filed an adversary proceeding stating that the Chapter 13 plan was not filed in good faith and it also sought to have the debt deemed non-dischargeable pursuant to 11 U.S.C. 523(a)(2)(A) and 523(a)(2)(B) of the Bankruptcy Code.
In particular Plaintiff argued that pursuant to 523(a)(2)(A) debtor made a false representation or actual fraud in obtaining the loan. It also alleged that under 523)(a)(2)(B) that her statement in the loan agreement that she did not intend to file for bankruptcy was a statement made in writing respecting her financial condition.
Debtor testified that she paid Ford Motor Credit with the loan which she had obtained and that she had borrowed money before from Plaintiff and previously caught up her payments with Ford Motor Credit. She also testified she did not meet with the bankruptcy attorney until after she had obtained the loan.
In ruling that Plaintiff did not meet the burden of proof, the Court held that the language indicating in the agreement that Debtor was not intending to file bankruptcy was tantamount to a prepetition waiver of a statutory right to file bankruptcy. The Court noted regardless of whether the statement was true or false, promises not to file bankruptcy were not enforceable and that such prepetition waivers were unenforceable under the bankruptcy code. See In re Cole, 226 B. R. 647 (9th Cir. BAP 1998) and In re Huang 27, 5 F.3d 1173 (9th Cir. 2002). Therefore, Plaintiff could not prevail under 523(a)(2)(A).
As to proving a violation of 11 U.S.C. 523(a)(2)(B), the Court noted that this section required a written statement “respecting a debtor’s …’financial condition’ in order to result in a determination of non-dischargeability. In interpreting this section, the Court noted that this is limited to such statements such as balance sheets, income statements or similar documents from which one’s overall financial picture could be ascertained. In a nutshell, the Court ruled that Debtor’s statement that she was not going to file bankruptcy, did not qualify as a statement respecting her current financial condition.
In sum, Debtor was able to discharge the loan to Plaintiff. If you have questions about Chapter 7 bankruptcy in Illinois, Chapter 13, or Chapter 13 bankruptcy in Illinois, please visit our state pages.
Complete a Free Case Evaluation form now
Getting back on sound financial footing
As a Kennesaw bankruptcy attorney, one question my clients often ask is how they go about rebuilding their credit after filing bankruptcy. There is no doubt that bankruptcy is a big step and one of the challenges is sticking to your budget after bankruptcy, especially if you have filed Chapter 13. There are certain steps you can take to help get yourself back in the black after bankruptcy. Some of them include:
- Sticking to a budget – whether you have filed Chapter 7 or Chapter 13 bankruptcy, a budget can be your best friend. With Chapter 13, you will have to make regular payments to the bankruptcy trustee in addition to your normal expenses. Sticking to a firm budget can help you create a savings cushion as well which can help you avoid difficult situations where money may be tight.
- Making regular payments – one of the most important things to consider after filing bankruptcy is to make any payments you have on time. Car payments, rent or mortgage payments and any credit cards you may have retained should be paid as agreed. This is the best way to increase your credit score.
- Pay cash whenever possible – rather than going into debt again it is important to pay cash whenever possible. As a bankruptcy attorney in Kennesaw I have seen clients who have filed bankruptcy get back into debt soon after their bankruptcy is discharged. This is often an untenable position and can result in serious financial consequences.
- Stay with counseling – one of the requirements of filing bankruptcy is credit counseling and it can be very helpful to stick to this counseling as you are trying to rebuild your credit. Not only can these sessions help you create and stick to a budget they also offer valuable financial advice to participants.
- Consider a prepaid credit card – prepaid credit cards are in effect a card where you create a savings account and the limit on the card is a portion of your savings. These cards typically report to the credit bureau which helps you reestablish credit after bankruptcy. Using this type of vehicle also helps you control your spending since you are limited to your savings.
Chapter 7 attorney in Kennesaw discusses home ownership
One of the many questions that clients have asked after filing bankruptcy is whether or not they can purchase a home with a bankruptcy on their credit record. The simple answer is yes but not immediately. There are many programs that will help you buy a home within two years of filing bankruptcy. A word of warning: Do not over-extend yourself with a home purchase, you can recover from bankruptcy quickly but you do not want to find yourself in a position where you cannot meet your financial obligations.
Getting back on sound financial footing after filing Chapter 7 is not easy but it can be done. Renters should make sure their payments are made on time; if you are considering purchasing a home after bankruptcy regular rent payments can help demonstrate a pattern of responsible payments. Chapter 7 bankruptcy provides a fresh financial start and if you use it wisely, you may be surprised at how quickly you can restore your credit.
New Jersey Bankruptcy Debtor Has No Claim Against Mortgage Company Based On HAMP
Shannon O’Biso filed her Chapter 13 bankruptcy case in New Jersey and her mortgage company, Aurora Loan Services, LLC, filed a proof of claim in her Chapter 13 case. Debtor filed an objection to the proof of claim and contended that in an effort to save her home, she made loan modification trial period plan mortgage payments. She further asserted that she provided all documentation to Aurora.
Aurora, however, denied that they received the payments on time and they denied receiving the required documentation from Debtor. Aurora then proceeded to file for foreclosure agaisnt the property and Debtor subsequently filed her Chapter 13 bankruptcy in which she objected to Aurora’s claim. In her objection, Debtor maintaind that she had fully performed under the trial period and thus was entitled to a permanent modification.
In this Chapter 13 bankruptcy case, the Court ruled that Debtor did not meet her burden of proof because there is no private cause of action under the Home Affordable Mortgage Program. In fact, the Court went on to quote other bankruptcy court decision which have held that there is “nothing express or implied in HAMP which borrowers a private right of action. The Court quoted that case of Stolba v. Wells Fargo and Co 2011 U.S. Dist. LEXIS 87355 (D.N.J. August 8, 2011) in which the judge dismissed the plaintiff’s claim that Wells Fargo breached their Trial Period Agreement by failing to offer a permanent loan modification.
In following the reasoning of Stolba the bankruptcy court held that there was no evidence that Aurora guaranteed a permanent loan modification to Debtor. Thus the court ruled that there was no breach of contract action against Aurora in this case. Furthermore, the Court went on to say that Debtor’s theory of promissory estoppel in this case also must fail because Debtor could not show that there was an express promise by Aurora to offer a permanent modification.
For the foregoing reasons, the Court allowed Aurora to file its proof of claim an allowed. The bottomline is that if you are relying on HAMP to create a private caused of action, most likely you will need specific written agreements from your mortgage company in order to be able to proceed. If you have questions about Chapter 7 bankruptcy law in New Jersey or bankruptcy law generally, you should seek the advice of New Jersey bankruptcy lawyer.
Discharge Granted In New York Granted Despite Cashing Of Annuity
Dennis V. Leone and Susan Leone filed for Chapter 13 bankruptcy in New York. Debtors subsquently came to the conclusion that they no longer could afford their home so they filed a motion to convert the case to Chapter 7 bankruptcy. In the original filing, Debtors indicated that they had refinanced their mortgage and received approximiately $35,000.00.
According to their testimony, Debtors indicated that they had been advised by their bankruptcy attorney that they should purchase an annuity because it would be protected from bankruptcy. Originally, Debtors executed their bankruptcy petition on September 12, 2005, but the case was not actually filed until September 17, 2005. On September 12, 2005 a total of $24,920.00 was deposited into Debtors personal bank account and on the same date Mr. Leone issued a check payable to Northwestern Mutual for $21,000.00. The memo on the check indicated it was for the purpose of opening an annuity.
When the bankruptcy case was originally filed Debtors did not list the annuity as being exempt and did not list the cash as being exempt. The check payable to Northwestern Mutual did not clear Debtors’ bank account until four days after the bankruptcy petition was filed. Debtors filed an amended Schedule B to indicate that they had an annuity and that the actual cash they were holding in their bank account was only $500.00.
Once the Debtors’ Chapter 13 case was converted to a Chapter 7 the Chapter 7 Trustee filed an adversary complaint against Debtors in which he requested that they be denied a bankruptcy discharge. One of the reasons that the Trustee sought to deny Debtors a discharge was because Debtors had withdrawn money from the annuity while their Chapter 13 case was pending although there was provision that they were prohibited from this type of a transaction.
The bankruptcy court indicated that the $21,000.00 used to fund the annuity was property of the estate at the time of filing and that there was no annuity which existed to exempt. In this case, the Court noted that there was no annuity which was was part of the estate because Debtors had exempted the annuity and the Chapter 13 trustee never objected to the claimed objection. In a nutshell, the bankruptcy court ruled against the Chapter 7 trustee because although the Debtors had “invaded and spent most of the annuity, which was, at the time, an exempt asset. Thus, the relief sought by the Trustee is denied as there was not dissipation on non-exempt estate assets.
In ruling for the Debtors and granting them a discharge despite the Trustee’s various allegations, the Court found that the Debtors had not attempted to conceal the annuity and were for the most part able to account for the refinancing proceeds from their home. Thus, the Court granted Debtors a bankruptcy discharge in this Chapter 7 bankruptcy case. If you have questions about bankruptcy law in New York you may wish to consult with a local bankruptcy attorney for specific advice relating to your possible filing.
What Factors Does A Court Look To In Determining Whether A Second Mortgage Can Be Stripped In A Chapter 13 Case
In this case, the first lien was held by Citimortgage for $185,069.93. The second lien was held by The Bank Of New York Trust Company in the amount of $39197.51. The Debtors valued the property at $170,000.00 as of May 28, 2007. In this case Defendant never filed an answer in response to Debtors’ lawsuit.
In its analysis, the court indicated that Debtors in a Chapter 13 bankruptcy may “strip off” or wholly avoid the lien of a junior lienholder where there is no equity securing the security interest in the property. The Court relied on Fisette v. Keller (In re Fisette) 445 B.R. 177 (B.A.P. 8th Cir. 2011). In the case [t]he Sixth Circuit Court of Appeals indicated that 11 U.S.C. 1322(b)(2) prohibited the modification of rights of a holder of a secured claim if the security consists of a lien on the debtor’s principal residence; — Section 1322(b)(2) permits the modification of the rights of an unsecured claimholder…
Whether a lien can be stripped depends upon whether it has any “actual value.” If a claimant’s lien on the debtor’s homestead has a positive value, no matter how small in relation to the total claim, the claimant holds a “secured claim” and the claimant’s contractual rights under the loan documents are not subject to modification in the debtor’s Chapter 13 Plan.
However, if the claimant’s lien on the debtor’s homestead has no value at all, the claimant holds an unsecured claim and the contractual rights may be subject to modification in the plan. In this case, there was no dispute that the lien has no value. Thus, Debtors were allowed to strip the second mortgage lien holder. In sum, the valued of the property was $170,000.00 according to the undisputed evidence and the first mortgage was $185,069.93. Because there was no value to the second mortgage the entire mortgage in the amount of $39,107.51 was stripped by the Court.
If you have questions about Chapter 13 bankruptcy or Chapter 13 generally you may visit our state pages contained in this website. Also, if you have any questions about Chapter 7 bankruptcy you may visit that page as well.
New York Chapter 13 Bankruptcy Case Holds Divorce Attorney Fees Are A Priority Debt
Marek Rogowski filed for Chapter 13 bankruptcy in New York on April 8, 2010. The Debtor divorced his former wife and and pursuant to the divorce judgment, Debtor was to pay approximately $32,000.00 in attorney fees to his former wife’s law firm. When Debtor filed his Chapter 13 bankruptcy he did not dispute owng the $32,000.00 in attorney fees, but indicated that the fees were a nonpriority debt which were properly scheduled on Schedule F of his petition.
The law firm argued that although the attorney fees were awarded in the divorce decree directly to the law firm and not to the former spouse, that the fees were entitled to a priority status “because it qualifies as a domestic support obligation under the circumstances pursuant to 11 U.S.C. Section 101(14)([a]] and 11 U.S.C. 507(a)(1).”
The bankruptcy Court noted that 11 U.S.C. 523(a)(5) creates an exception from discharge for any debt ‘for a domestic suppoort obligation,” and 11 U.S.C. 523(a)(15) creates an exception from discharge for any debt to a former spouse, spouse, or child of the debtor that is ” incurred in the course of a divorce or separation or in connection with a separation agreement, divorce decree or other order of a court of record.”
In this case the Court noted that in New York the Second Circuit had not decided this matter in a Chapter 13 bankruptcy case but that it had decided the matter in the context of a Chapter 7 bankruptcy. In ruling against the Debtor, the Court relied upon In re Golio, 39, 3 B.R.56 (Bankr. E.D.N.Y. 2008) in which Judge Eisenberg rejected the debtor’s argument in that case that a prepetition divorce judgment that included an award of attorney’s fees should not be excepted from discharge simply because the payments were made directly to the non-debtors spouse’s matrimonial attorneys, rather than to the former spouse for later payment to the attorneys.
Moreover, the Court relied on the decison of In re Andrews, 43,4 B.R. 541 (Bankr. W.D. Ark. 2010) in which the Andrews court rejected the argument in a Chapter 13 case that the matrimonial attorney’s fees were dischargeable because they were payable to the attorneys directly rather than to the former spouse.
Therefore, based upon these two ruling the bankruptcy Court in New York ruled that just because the attorney fees relating to the divorce action were made payable directly to the law firm and not the former spouse, the attorney fees nonetheless were entitled to priority status in this New York Chapter 13 bankruptcy case. If you have questions about Chapter 13 bankruptcy and whether divorce attorney fees are dischargeable or not, you may wish to contact a New York bankruptcy attorney.
What Is And Why Is A Domestic Support Obligation Important?
In fact, domestic support obligations are interpreted as priority claims pursuant to 11 U.S.C. 507(a)(1)(A). On the other hand, if it is not considered a domestic support obligation then the debt may be discharged in the bankruptcy.
In the Oregon bankruptcy case of Nelson, the issue in this Chapter 13 bankruptcy case was whether a provision in a divorce decree which required debtor to assume and pay debt secured by a house and to hold his former wife ‘harmless’ from that debt was actually in the nature of support.
Pursuant to 11 U.S.C. 507(a)(1)(A) domestic support obligation is defined as a debt owed to a spouse or former spouse that is in the nature of alimony, maintenance, or support … without regard to whether the debt is expressly designated as such.
One of the factors which courts look at in making this determination is the language of the decree itself and the intent of the parties. Other factors include whether the spouse actually needed the support at the time of the divorce, whether there was an imbalance of income between the parties at time of divorce, whether the obligation terminated upon death or remarriage of the recipient spouse, and whether there were installment payments made directly to the spouse over a long period of time.
Based upon the fact the spouse did not appear to need the support in this case, that the marriage was of short duration, that the obligation was not intended to be in the nature of support by the parties, and the fact that the spouse did not think she was getting support at the time of the divorce, the court ruled that this was not a domestic support obligation. Therefore, the debt could be discharged which was a good result for the husband debtor in this instance.
In sum, in order to determine whether an obligation is in the nature of support or not, each case has to be looked at considering the individual circumstances. If you have questions about whether an obligation is in the nature of support or not, you should consult a local bankruptcy attorney.
South Carolina Bankruptcy Court Allows Loan Servicer To Foreclose In Chapter 13 Bankruptcy
Otis Neals and Melvine Donlee Neals filed for Chapter 13 bankruptcy protection on October 4, 2010. U.S. Bank held the first mortgage on Debtors’ South Carolina residence. U.S. Bank through its loan servicer America’s Servicing Company, hereinafater “ASC,” filed a motion for relief from the automatic stay so that they could foreclose on the property.
In its Motion, ASC claimed Debtors owed $205,757.78 and that Debtors had made not post-petition bankruptcy payments for over a year after they filed their case. Debtors claimed they did not know who to make the payments to, and, more importantly, claimed that ASC was a loan servicer was not the proper party to file this bankruptcy motion. More particularly, Debtors claimed in this Chapter 13 bankruptcy case that ASC was not the holder of the promissory note.
In this case the bankruptcy Court had to decide whether ASC was legally entitled to initiate this motion. In discussing the bankruptcy laws, the Court noted that Debtors’ Chapter 13 Plan had been confirmed and that the confirmation of the plan represented a new contractual agreement between debtors and their creditors. In effect, the Court ruled that Debtors had identifid ASC as the proper party in interest to receive payment on the Note and Mortgage in their schedules, statements, and proposed plan as well as their confirmed Chapter 13 Plan.
Furthermore, the bankruptcy Court stated that the general view was that a loan servicer was a “party in interest” under the Bankruptcy Code and thus had the legal right to bring a motion to foreclose. The Court referred to the bankruptcy decision of In re Woodberry, 383 B.R. at 379 for this proposition along with other bankruptcy case law. As an example, the Court pointed out that in the case of In re Miller, 320 B.R. 203, 206 n.2 (Bankr. N.D. Ala. 2005) the servicer was permitted to litigate a motion for relief from the automatic stay.
The bottomline is that at least in South Carolina it appears that a servicer may initiate foreclosure proceedings in bankruptcy cases. If you have questions about Chapter 7 or 13 bankruptcy in South Carolina, you may wish to speak to a bankruptcy attorney for information relevant to your circumstances.
Are You Liable For Homeowner’s Association Dues After Your Case Is Filed
Debtors filed their Chapter 13 case on April 29, 2010. The indicated they owed HOA dues to Hidden Valley in the approximate amount of $4,072.65 and Hidden Valley filed their proof of claim for $8,013.47 which was current through April 2010. In their Chapter 13 Plan, Debtors surrendered their residence to the mortgagee company and had move out of the property about one year before they filed bankruptcy.
After filing the bankruptcy case, the Debtors failed to pay any postpetition HOA dues. In this case the Court had to decide whether the postpetition HOA dues were provided for in Debtors’ Plan. In this case Debtors had surrendered their property about one year before filing bankruptcy. Additionally, the court granted the mortgage company’s motion to lift the automatic stay which allowed the mortgage company to foreclose if it so chose. Therefore, even though Debtors were listed on the title to the property the Court ruled that they were not receiving a benefit to from the property.
In rendering its decision the Court indicated that in some jurisdictions the covenant to pay HOA dues runs with the land and that the basic rule can be boiled down to if ‘you stay, you pay’. In this case because the Debtors has surrendered the property in the Chapter 13 and because the mortgage company filed for relief from the automatic stay provisions of 11 U.S.C. 362(a), the court ruled that the postpetition HOA fees were dischargeable.
If you have questions about this article or Chapter 13 bankruptcy in Utah, please feel free to visit our state pages.
Call or text (770) 792-1000 or complete a Free Case Evaluation form
