Underwater homes are a local crisis and many Orlando homeowners are feeling the pain. President Obama wants to sell and rent all the homes that have been taken back from families that could not longer afford their mortgage payments in this challenging economy. However, the National Association of Consumer Bankruptcy Attorneys (a professional society that I am proud to be a member of) is proposing a program that will actually help families readjust their mortgages and keep their under water homes. Here is the press release issued last Friday by the President of this group:
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Saving a home and keeping property are key concerns of people who are considering bankruptcy. Most homeowners are relieved to learn that the Florida homestead exemption allows them to keep 100% of their home equity. Without a doubt, a homeowner can keep their home even while discharging their debts. However, many homeowners have misunderstandings about the extent to which they can use their homes to avoid having to surrender property in a bankruptcy. That is because of changes that took place when the Bankruptcy Code was overhauled by Congress in 2005.
Keeping a car in a chapter 7 bankruptcy is often the biggest challenge for my clients, but it can be done and in fact it’s done all the time. Florida’s exemption law permits a debtor to claim only $1,000.00 in value for one motor vehicle in their bankruptcy. That’s what belongs to the debtor – the rest of the value of the vehicle belongs to the trustee, to sell to pay off creditors. Who drives a car that’s worth $1,000.00? This is a really stingy exemption, but there it is!There are several “tricks” for keeping a car in a chapter 7 bankruptcy. A debtor is entitled to use other exemptions that are available under the law to keep a car, such as the $1,000.00 personal property exemption. The debtor may also use the $4,000.00 “wildcard” exemption, but only if the debtor does not claim an exemption for homestead property. However, these exemptions must also be used to keep other personal property such as clothes, household furnishings, and other personal property. (In another post on this blog, I explain how the goal of a chapter 7 bankruptcy is to try to get all of your property “under the umbrella” of allowable exemptions.) If, after using all the exemptions available to a car owner, there is still value in the car that is not covered by exemptions (outside the umbrella), it will be considered “non-exempt” and it is available to pay creditors.At this point, the debtor has two choices: turn the car over to the trustee to be sold for the benefit of creditors. Or, you can make a deal with the trustee. Remember, in a chapter 7 bankruptcy, the trustee’s goal is to raise as much cash as possible to pay creditors. The trustee would rather have cold, hard cash than your property. If the trustee takes possession of your car, she needs to go through the trouble and expense of selling it to raise the cash. She would rather give you the chance to be the first buyer and take your money.Most chapter 7 trustees in Orlando give a debtor up to ten months to pay the value of their car equity in monthly installments. Some debtors get help from a friend or family member to pay off the value of their non-exempt car equity. A good bankruptcy attorney will help you negotiate the lowest dollar amount that represents the true value of your car.It hurts to have to buy your own car, but then, under the law, when you file chapter 7 bankruptcy, it really isn’t your car anymore.This is one of many ways that you can keep a car in a chapter 7 bankruptcy. If you are wondering how you can get debt relief, but still keep your car, contact my office to make an appointment for a free consultation to discuss your situation.
Keeping a car in a chapter 7 bankruptcy can be tricky. If you still owe money on your car loan, the lender has the right to re-possess your car if you stop making payments on the loan. Filing bankruptcy prevents the lender from taking any action repossess your car. However, after the bankruptcy is filed, the lender does have the right to ask the bankruptcy court for special permission to repossess the vehicle.
Chapter 7 bankruptcy is the fastest legal way to discharge unmanageable debt. However, many people who come to me for advice on filing bankruptcy are surprised to learn that they earn too much income to qualify for this form of debt relief. This week, I spoke with a gentleman who was a perfect candidate for a chapter 7 bankruptcy: a recent divorce has left his personal finances in disarray, with a mortgaged house that neither he and his former wife can afford to pay. However, this father of one earns $85,000.00 a year – too much income to qualify for chapter 7 bankruptcy.