Steps for Requesting a Reduction in Your Chapter 13 Plan Payments

So you’ve been making your monthly Chapter 13 payment and it hasn’t been easy. There isn’t a lot of wiggle room to begin with but some months have been better than others. Plus, you know you’re on track to save a lot of money by completing the Chapter 13 bankruptcy. Then life happens. It’s the loss of a job, unexpected medical situation or a variety of other reasons why you may not be able to afford your monthly Chapter 13 payment anymore. So what do you do?

Can I File Bankruptcy If I have a Trust Fund?

Female on White BackgroundWhen it comes to bankruptcy, it’s important to know the limitations of a bankruptcy. One area we occasionally have people ask about is whether they can file bankruptcy or not if they have a trust. To answer this question, yes; generally speaking, someone with a trust fund is more than likely able to file a bankruptcy.

There are two different types of trusts. There is a revocable trust and an irrevocable trust. A revocable trust is when the grantor (the person who created the trust and put property into it) of the trust has full access and control over the trust and at any given time can access the property in the trust. This is true only until the passing of the grantor. The beneficiary of the trust (the person that will receive the trust) is not able to control the assets of the trust until the grantor of the trust is deceased. Even then, the beneficiary may not have full control over what happens to the trust. This is due to there being provisions and rules associated with the trust that may limit what the beneficiary can do with the trust and the assets in the trust.

An irrevocable trust means the trust cannot be changed, and the assets in the trust cannot be accessed, without permission from the beneficiaries. This is because the grantor of the trust has given up their rights of ownership of the assets in the trust. The beneficiaries may not be able to access a trust instantly, but because the grantor has removed their ownership rights, the beneficiaries of the trust have some legal rights to those assets.

The main concern with trust funds is whether or not the trust can be protected from creditors. There are many allowances that will let you protect a trust. One of the most common allowances in the legal field is a “spendthrift” clause. A spendthrift clause can limit creditor’s claims to trust assets, regardless of whether the trust is revocable or irrevocable.

If you are a beneficiary or a grantor of a trust fund, and you are considering filing for bankruptcy, it is very important that you make your attorney aware of the trust. You should also have your bankruptcy attorney or trust attorney look over the trust and contract to be sure that it can be protected from creditors.

Am I Personally Responsible for Business Credit Card Debt?

Male on White BackgroundYou are only personally liable for the debt if you sign as a personal guarantor. 

What is that you ask?  It is someone who ?guarantees? (hence the derivative ?guarantor?) to pay for someone else?s debt should they default on their obligation.  It is quite like a co-signer but normally applies to business debt.

As you know, businesses come and go as the days go by.  It is quite easy to open and close a business; and as many credit card and loan companies understand this, they will often have the owner of the company personally sign as a guarantor on the loan.  This protects the creditor should the business close; this way even if the business itself is not open, there is still a live body that obligated to pay them their monies owed.

The good news is that if you have signed as a personal guarantor on a business credit card or loan and the business has closed, should you file a bankruptcy, you can include that business debt as part of your personal debt to relieve your personal liability on the debt owed.  If the business is still open then the creditor has every legal right to go after the business for the debt owed, but not you personally.

What Should I Expect at my Foreclosure Hearing?

Foreclosure on Rental Property | Filing for BankruptcyIn the State of North Carolina, foreclosure hearings are held by the Clerk of Court or Assistant Clerk of Court, as judges rarely hear foreclosures. The Clerk of Court is only to hear cases involving “legal defenses.” Cases involving any other type of defense, such as defense of fraud cases, are to be handled through Superior Court. This is due to North Carolina being a “Power of Sale” state.

There are three possible outcomes of a foreclosure hearing. The first outcome is that the Clerk of Court will deny the right to foreclosure. During a foreclosure hearing, a mortgage holder is required to prove four different components in order for the Clerk of Court to approve a foreclosure sale. Generally, the mortgage holder provides the Clerk of Court with documents supporting each of the four components. The four components considered at a foreclosure hearing are as follows:

1. Reasonable debt occupied by the mortgage holder or party seeking to foreclose.

2. Default on the debt

3. The right for the mortgage holder to foreclose based upon the deed of trust to the home

4. Notice of hearing was sent to the Debtor

If the mortgage holder does not prove the existence of the four components, the Clerk of Court will not approve the sale.

The second outcome of a foreclosure hearing is the Clerk of Court will issue a continuance. Under Section 45-21.16C of the General Statutes, the Clerk of Court may continue a foreclosure hearing up to 60 days. This could be due to the Clerk’s conjecture that the issue can be solved with time. For example, the Clerk may issue a 60 day continuance if the Debtor is in the process of working something out with the mortgage company. If the Clerk issues a continuance at a foreclosure hearing and the Debtor is present at the hearing, the Debtor will receive a written order from the Clerk stating the continuance.

The third outcome of a foreclosure hearing is the Clerk of Court will issue a “sale date”.

More than likely, the Clerk of Court will approve a foreclosure sale if the mortgage holder can prove all four components mentioned above. If a mortgage holder is able to prove all four components, the Debtor will receive a “sale date”, which represents the date at which the Debtor’s home will be sold. The sale date usually follows approximately 20 days after the foreclosure hearing. Once a Debtor receives a “sale date”, the Trustee, whom is listed on the deed of trust, will then post a “notice of sale” flyer at the county courthouse bulletin board in addition to sending notice to the borrower. They may also put the “notice of sale” in the upcoming newspaper.

Once the sale date has arrived, the State of North Carolina issues a ten day upset bid period. The ten day upset bid period allows for the filing of a bankruptcy within that ten day period in order to stop a foreclosure. If a bankruptcy is not filed before the sale date or during the ten day bid period, the Debtor will no longer own the property. If you have a foreclosure hearing or foreclosure sale date pending it is important that you immediately contact an experienced bankruptcy attorney to learn more about how you can save your home.

Can An Undocumented Worker or Illegal Immigrant File for Bankruptcy?

Question Mark ManCan a person who is not a legal resident of the United Stated file for bankruptcy in the US? According to 11 USC §109(a), any person that resides or has domicile, a place of business, or property in the United States or a municipality, can in fact file a bankruptcy. This means that anyone who lives, owns a business or owns property in the United States can file for bankruptcy, whether they are here legally or not. They do, however, have to have some sort of identifying number such as a social security number or a tax payer ID number.

However, if someone is applying to become a legal citizen of the United States, a bankruptcy on their record could negatively impact their application. Immigration officers typically delve into many areas of a person’s life, including their finances. An immigrant must be able to prove that they are of good moral character in order to be granted citizenship in the United States. Although we have never heard that filing a bankruptcy has stopped someone from receiving citizenship, it is something that should be considered. Having a bankruptcy in their record could throw up a red flag to the immigration office about their morality. There is currently no law that states that a bankruptcy can affect your immigration status legally, but the issue of morality could come in to play.

There is also the chance that information divulged in a bankruptcy proceeding could affect ones immigration status. If in the bankruptcy it is revealed that there are taxes owed, jobs that were obtained illegally, refusal to pay child/spousal support etc., this could greatly affect ones chance to stay in the US and be granted citizenship. If you are an immigrant to the United States and are considering bankruptcy make sure to contact an immigration lawyer and /or bankruptcy lawyer in your area soon.

Can I Still Use the Mortgage Deduction On Taxes If My House is Being Paid In A Chapter 13 Bankruptcy?

Laptop KeyboardAfter filing Chapter 13 bankruptcy, you should confirm with your attorney whether the monthly mortgage payment is to be paid by you or the Chapter 13 bankruptcy Trustee.  Often the mortgage payment is included in your monthly Chapter 13 payment and disbursed to the mortgage company by the Chapter 13 Trustee.    Regardless of how the monthly payments are made to the mortgage company, you are eligible to deduct interest paid on your loan if you itemize your deductions on your tax return, and the mortgage interest meets the requirements established by the Internal Revenue Service.   The same holds true if the property insurance and taxes are escrowed in your mortgage payment or whether you pay them directly to your insurance agent and city and county tax collector.  They should be eligible for deduction on your taxes.

The mortgage company should continue to send you the Form 1098 Mortgage Interest Statement which will list the mortgage interest, insurance premiums and real estate taxes paid to them for the tax year.  This will only include taxes and insurance if they were escrowed in your monthly payment.  If you do not receive Form 1098 by early February following the tax year, you should contact the mortgage company and request they send the form to you.  The information on Form 1098 is the same information the mortgage company provides to the Internal Revenue Service regarding your loan.