Collateral is when your property can be taken if you do not pay on a debt. It’s also commonly known as secured debt. The most common example of this is a house or a car. For example, if you don’t make your car payment the lender can repossess your vehicle.
If you do not make your mortgage payment, the lender can foreclose and take possession of your house. The most common example of “cross-collateralization” that we see in bankruptcy cases is most commonly employed by credit unions. People have a car loan and an unsecured credit card or personal loan with the credit union – the credit union will make you pay off the credit card or personal loan in order to obtain the title to your vehicle. Its usually up to the amount of equity in the car. For example, your car loan is for $15,000.
The value of your car is $20,000. You have a signature loan with the same creditor for $10,000. The creditor can make you pay $20,000 to obtain title to your vehicle. You always have the option to surrender your vehicle if you don’t want to pay the extra amount added onto the loan by your credit union. The good news is if you surrender your vehicle in the bankruptcy you owe nothing to the car company.
We always recommend having your checking and savings account and/or vehicle at a banking institution where you don’t have any credit lines. If you have any questions or need to make a decision about whether its better to keep your vehicle or pay the creditor we can assist in letting your know the pros and cons.
All of your creditors get listed in the bankruptcy petition so as soon as the bankruptcy petition is filed, the court will mail your creditors the 341 meeting of creditor’s notice. The notice has your case number is located on the notice so they can log on and review all pleadings that get filed in the case.
If you have an active state court case where a lawsuit is pending against a creditor we file what is called a Suggestion of Bankruptcy in the underlying case. That alerts the Judge and all the parties in the State Court case that there is an automatic stay in effect, the litigation must stop because of the active bankruptcy. If you have any co-debtors they also receive a notice from the court.
People often ask if their employer gets notified of the bankruptcy. Your employer will not get notice of your bankruptcy filing. Similarly, people also ask if their landlord on a residential lease gets notified. You do have to list any leases/contracts so they do ordinarily receive notice.
This usually does not present an issue as long as, you are making your rent payments on time to your landlord. If you are involved in a domestic violence type of situation, we can get the court to seal the address from your file for your protection.
Your bankruptcy will typically not show up in a general google search so don’t be deterred from filing for bankruptcy because you think you people will find out. The case is filed in Federal Court and requires Pacer access to view case information.
The question often comes up as to whether it is more beneficial to file for bankruptcy before or after a divorce. It really depends on your situation and what assets are being divided up in the divorce. You can file for bankruptcy if you are separated from your spouse. That can really simplify the divorce process and eliminate all the debt instead of litigating on who is going to pay for what debts. The divorce process can also be very costly relative to filing for bankruptcy.
There are situations where one spouse earns significantly more income than the other. This can make the difference between qualifying for a Chapter 7 or having to file a Chapter 13. If you are married, your spouse’s income is required to be included, whether or not they are filing for bankruptcy with you. If you are separated and residing in different households, you still have the option to file for bankruptcy together or file alone without your spouse and not include their income. There is a way to include both people’s incomes and both people’s expenses on separate budgets in the bankruptcy petition if both spouses want to file for bankruptcy. Many times, this enables both people to file for a Chapter 7 because you are evaluating the income as if they are each individual households rather than counting all the income towards one household.
There are people who “separate” and are in the process of divorce even though they are residing in the same house. There are factors to look at in terms of whether you are still splitting expenses? Are you still on joint accounts paying bills together? Is one person paying the bills? Are you still living in the marital home? Generally is better to be living separately or you would have to show that economically you are not still operating fiscally as one household. If you do have any questions about timing of the filing and how to proceed with it, it is best to consult with an attorney.
If you are currently in a loan modification, it would not be affected by your bankruptcy proceeding. If you are behind on your mortgage payments, its best to have a plan of action when your case is filed, with the direction you want to take.
One option is to try work something out directly with the lender to see if they will allow you time to get your payments caught up, modify the loan, defer payment temporarily, or put what you owe on the back end of the loan. I will usually caution people to set a deadline because with each passing month of you not paying your mortgage, the amount of late fees, potentially attorney’s fees, and arrears continues to grow.
Unfortunately, the lenders do not always timely respond and if you want too long for a result then you might find yourself unable to keep your home. If the lender isn’t working with you, some other options would be to sell the home if it has equity or surrender the home if it has no equity. With inflation being so high currently, most people living in the Tampa area do have equity in their homes.
If you want to stay in your house, a Chapter 13 will afford you two options. You can pay back the arrears over a 60-month period. This is helpful because instead of coming up with say $15,000 within 3 months, you would have 60 months to get the payment current and spread it over a longer period of time. You also have a guarantee that the lender cannot foreclose on you while you are in an active bankruptcy. Another option would be to attempt a loan modification in a Chapter 13 case.
It is often more helpful to do so within the jurisdiction of the bankruptcy court because the lenders have time deadlines to respond so it ensures a result. We would need to look at your debt to income ratio and if you have done a loan modification the past to determine if you are a good candidate.
There are certain income requirements to file a Chapter 7. That amount typically adjusts for inflation twice per year. That amount varies based on your household size and by state.
In the State of Florida the amounts are as follows:
One person household: $60,429
Two-person household: $74,131
Three-person household: $83,396
Four-person household: $100,476
Five-person household: $110,376
Six-person household: $120,276
Dependents in your household include children under the age of 18. If custody is split, we usually factor in how much time the child spends at your residence and how many children there are. If custody is split 50/50 and there are two children, we would list a two-person household. Children under the age of 24 that are in school full-time can also be considered dependents or any disabled children. If there are elderly parents living in the household, they can be considered in the household size or any other relatives. However, if any person is included in the household size, we need to include their income and expenses as well. Social security does not count towards the income amount.
If you are still over that amount, there is still a potential you could qualify for a chapter 7 if you “pass” the long form of the means test. The means test is required for all those debtors who are over the “median”. The test determines your eligibility for a Chapter 7 or the amount of your plan payment in a Chapter 13. It uses some of your actual expenses and some expenses are determined by the IRS guidelines based on your household size and county where you reside. It can get a bit complicated, so it is good to consult with a bankruptcy attorney to guide you through the process.