My sister is filing bankruptcy and she went to pay the lawyer monday and goes back to sign the papers tomorrow.Her and her husband have spilt up and were behind on the house payments by about $7000, so what she did was call the loan company and made arrangements for them to add it to her payments over the next two years.Which they agree to and made her sign a repayment agreement.The house is only in her name and he left her with three kids and at the time he left she was five months pregnant. He took all the money they had in the bank and canceled all their credit cards. He basically left her broke. She was too embarrassed to ask for help so she did nothing. In anycase she wants to file bankruptcy but file chapter 7. The lawyer she obtained said she can file this because the mortgage company agreed to payment agreements over a period of time. Is that true? I thought chapter 13 would be what she needed to file to protect her assets.She wants to clear her debts and stop a garnishment she has coming out of her check so she can make extra payments to the mortgage company.I just hate to see her get bad advice and lose her home because she filed wrong.
I believe you can keep your home in either case, depending on the state laws. The difference is that in a Chapter 13 she would have to repay all of her creditors, in a Chapter 7 she is relieved of the debt. Her attorney should know. It sounds like in your state either the house is exempt altogether or she doesn't have enough equity to worry about.
I believe her attorney is correct. In order to save her home in ch 7, she could not be in arrears. Because the mortgage co has already agreed to payments, she doesn't have arrearages. The same rule applies to other secured property like cars, too. These loans must be current before filing chapter 7. So as long as she doesn't have more equity in her home than her state exemptions allow, it's my opinion that her home is safe.
Wrong BK advice again! More wrong information on bankruptcy. Please don't give bankruptcy advice unless you have read Title 11 U.S. Code. It is the law that governs bankruptcy. WHY YOUR SISTER CAN'T FILE BANKRUPTCY The reason your sister cannot file bankruptcy at this time is because she showed a preference to a creditor. This is a big no-no. You cannot make deals with one creditor over another creditor. She should never had made the 2 year deal with the bank without consulting her bk atty. In bankruptcy the creditors are put into a line, so to speak. Some creditors get preference over others. Secured creditors get in front of unsecured creditors. I won't go into all the ways the bk court determines which creditor is first in line and which are at the back of the line. Because of these rules a debtor cannot in anticipation of filing a bankruptcy make a deal with a creditor. That is not permitted. For example if you owe your mother $9,000 and you want to pay her back 89 days before you file a chapter 7...guess what...you have to get the money back and give it to the bk trustee. In your sister's case she will have to wait at the least a year from the date she signed the agreement with her mortgagee. The section in Title 11 U.S. code is 547-Preferences and you can read this section by going to this site: http://caselaw.lp.findlaw.com/casec...s/5/subchapters/iii/sections/section_547.html Hope this helps to explain exactly what her bk atty tried to explain to her, I'm sure. clc
Re: Wrong BK advice again! It was her attorney's opinion that she CAN file chapter 7. And yes, that section of code does explain his position perfectly. MY attorney (a different one, I'm sure) told me that "preferential payment" does not apply to secured loans such as car or home. In fact, he told me that I needed to spend a couple hundred in my savings account before I filed, and that one way I could use it was paying extra towards my house. (I wasn't close to exceeding the exemption limit in my state.) Even if preferential payment did come into play, it wouldn't preclude her from filing bankruptcy as your bold headline seems to suggest! The OP's sister wouldn't be responsible for getting the money back from her mom, the bankruptcy trustee would get it back. Even if this was a PP, the OPs sister would in no way get in trouble for making it.
Re: Wrong BK advice again! The OP's sister signed a "modification of mortgage" agreement in order to cure a $7,000 default. If the mortgage modification was signed 91 days before her bk then the transfer is not considered "preferential." It is different from a case where the mortgagor was NOT in arrears and continued to pay their mortgage and even paid more than was originally agreed upon. Secured creditors are not first in line they are third in line after bk administrative costs and priority claims. A mortgage which is secured by a home has no more standing than a loan secured by an automobile. The "mortgage modification" to cure an arrearage of $7,000 could be subordinate to a car loan with an outstanding loan of $3,000. This scenario would definitely be a case of "preferences" as defined in Title 11 U.S.C. Section 547. clc
Re: Wrong BK advice again! Thanks everyone for their advice, all I know is she signed the chapter 7 papers today. She said the lawyer told her that she could keep her car and house. She was not behind on her car but was on her house when she entered into the agreement.The lawyer told her it could take up to 4 months for the bk. So she said she would send the mortgage company extra money each month to buy the arrears down.I told her about the post I have been reading and told her she might want to make sure her lawyer is right by maybe calling another one.I hate to see her go to court just to lose her house in the end.I thought chapter 13 was the only way to save secured debt or your assest.Her spirits are up about a fresh start.Also he did tell her to keep paying her car and house on time.
Re: Wrong BK advice again! clc after re-reading your post I get the impression her lawyer did give her bad advice but how could the prove she intended to file bk?
Re: Wrong BK advice again! Teesha, Section 547 is so complex that most attys don't understand it completely. Her "mortgage modification" will probably never be spotted unless there is some pis**d off secured creditor who goes to the 341A meeting and hollers foul. I doubt that will happen. If the equity in her house is equal to or less than the exemption in the State where you live then she CAN keep the house in a bk 7. There is also a "wild card" exemption which is like a little lotto winning you can apply it to anything you have that is not exempt. Also if the exemption for the house is over and above the equity then those $$$s can be added to the "wild card" dollars and also apply to any personal property that otherwise is not exempt. I am sure your sis will do just fine. I mainly post on bk issues as most people do not have a clue. There is a lot of misinformation and the laws can be complex. If people knew ahead of time what was involved there is a lot of pre-planning that can be done to take advantage of what a bk can offer. In that spirit I try and educate where it is possible. Enjoy the weekend with your sister and revel in her happiness. Her bk is definitely is a stress reducer given what she has lived through. clc PS I WAS wrong about the "mortgage modification" as it pertains to the timeline...it would fall under the 90 day rule. An "inside" transfer would be the one I described above...paying a close friend or relative in preference to other creditors. The timeline for those transfers is 1 day over a year.
Re: Wrong BK advice again! Hedwig- In a bk 13 a debtor DOES NOT have to pay all their debts. They have to present a plan to the bk court that includes the necessary expenses they need in order to live decently. After subtracting those expenses from their salaries what is left over goes to pay the creditors by standing on a pro-rata basis. The plan has to be confirmed by the court BUT the payments presented in the plan must start immediately. The plan must be at least 36 months of payments but can be extended to 60 if need be. The court could change the payments and/or the months of repayment if they think they are too low but it is never 100% of the debt. Only 35% of the people who file a 13 complete the plan. Most people file a 13 in order to protect large assets like a home that has more equity than is allowed in a bk 7 homestead exemption. Another little tidbit of bk education...if the total debt is over $350,000 then a person could file a chapter 11. This is many times is the case when debtors have jumbo mortgages that exceed the bk 13 debt level allowances. Most people think 11s are only for corporations...not true. If you want to learn about bk then I would be happy to teach you but your insiduous little flame posts are getting annoying. clc (where is Butch when I need him...geesh)
