This is the case of Carla Salerno from Chicago, Illinois who is interested in filing for bankruptcy.  Ms. Salerno does not own any real estate.  She is currently renting from a landlord at the same address as her but on the second floor.  It is a month-to-month lease.  She does not own a vehicle.  She+ Read MoreThe post Chapter 13 Is Possible With Extra Income appeared first on David M. Siegel.

This is the case of José Manuel Verones who comes to me with Wauconda, Illinois seeking debt relief.  Mr. Verones is not a homeowner and he currently lives with his parents so he doesn’t have a formal lease.  He’s got a 2000 Chevy Malibu which is worth $2000 and it is paid for. He has+ Read MoreThe post Bankruptcy Case Study For Jose Manual Verones appeared first on David M. Siegel.

The simple answer is yes, the condo associations can be put in a Chapter 13 bankruptcy and be repaid over a 3 to 5 year period.  Much like a mortgage that you fell behind on, the condo association is a secured debt, secured by your property that you need to pay in order to keep+ Read MoreThe post I am behind on my condo association fees. Can I put those in a bankruptcy? appeared first on David M. Siegel.

    One of the hot topics in Florida now is the stripping of subordinate liens of homeowners associations and condominium associations on homesteads.   The associations had been initially alleging that the liens were covenants running with the land, and not subject to motions to strip or value.   It appears all the decisions are rejecting this argument.  The most extensive analysis of this argument was in Judge Williams very recent  decision in In re Plummer. 2013 WL 163479 (Bankr. M.D. Fla. 2013).  While the Bankruptcy Code does not separately discuss association liens, it defines liens broadly as either a judicial lien, a security interest, or a statuory lien.  Assessment liens could be either described as a security agreement pursuant to the acceptance of a deed with constructive notice of the lien provision in the covenant; or a statutory lien under §718.116 of the Florida Statutes.   In either case the assessment lien falls within the Code's definition of liens which are subject to the application of §506.  Congress has given special rights to landlords under §365 and utilities under §366, and given priority status to various creditors under §507, yet has declined to give special status to prepetition association liens.  While association liens are given special status under §523, this status is limited to assessments that become due and payable after the bankruptcy filing.  The next argument of the associations is based on provisions of the Florida Statutes.  §718.116(5)(a) provides:   (5)(a) The association has a lien on each condominium parcel to secure the payment of assessments. Except as otherwise provided in subsection (1) and as set forth below, the lien is effective from and shall relate back to the recording of the original declaration of condominium, or, in the case of lien on a parcel located in a phase condominium, the last to occur of the recording of the original declaration or amendment thereto creating the parcel. However, as to first mortgages of record, the lien is effective from and after recording of a claim of lien in the public records of the county in which the condominium parcel is located. Nothing in this subsection shall be construed to bestow upon any lien, mortgage, or certified judgment of record on April 1, 1992, including the lien for unpaid assessments created herein, a priority which, by law, the lien, mortgage, or judgment did not have before that date.Fla. Stat. Ann. § 718.116 (West)     Since this section limits its applicability to first mortgages that are recorded prior to the lien, it cannot be applied to give priority of the assessment lien over that of the mortgage.  This is in accordance with the notice provisions under Florida real estate law.   Where the declaration of covenants, recorded prior to the mortgage, does not contain a provision that the lien relates back to the date of the filing of the declaration, the mortgage cannot be charged with constructive notice of the association's lien.  In re Holly Lake Ass'n v. Fed. Nat'l Mortgage Ass'n, 660 So.266, 267 (Fla. 1995).  As many declarations contain a specific provision subordinating the liens to the first mortgage on the property (thereby making it easier for potential owners to finance the purchase of the property) it would seldom allow the associations priority over the first mortgage.Another provision of §718.116 is also cited by the condominium associations as giving them a lien that takes priority over first mortgages.  §718.116(b)(1) providesb) 1. The liability of a first mortgagee or its successor or assignees who acquire title to a unit by foreclosure or by deed in lieu of foreclosure for the unpaid assessments that became due before the mortgagee's acquisition of title is limited to the lesser of:a. The unit's unpaid common expenses and regular periodic assessments which accrued or came due during the 12 months immediately preceding the acquisition of title and for which payment in full has not been received by the association; orb. One percent of the original mortgage debt. The provisions of this paragraph apply only if the first mortgagee joined the association as a defendant in the foreclosure action. Joinder of the association is not required if, on the date the complaint is filed, the association was dissolved or did not maintain an office or agent for service of process at a location which was known to or reasonably discoverable by the mortgagee.Fla. Stat. Ann. § 718.116 (West)  Judge Williamson rejected this argument except where the claim of lien is filed prior to the date the mortgage is recorded.  This simply gives the  association to counterclaim against the mortgage holder under this statute upon entry of a foreclosure by the mortgage.  The same conclusion was reached by Judge Cristol in In re Gonzales, 2010 WL 1571172, 22 Fla. L. Weekly Fed B423 (Bankr. S.D. Fla. 2010) in referencing  §718.116(b)(1).   Section 718.116(b)(1) gives associations the right to be paid the lesser of six months unpaid assessments or 1% of the original mortgage even if the first mortgagee becomes the owner of the property and even if there is no equity in the property.  But this does not create an additional lien against the owner, but rather is part of the secured claim of the first mortgagee, to be paid for by the first mortgagee or whoever obtains title to the property at a foreclosure sale. Homeowners associations have another statute they argue gives them a superior lien status to the first mortgage.  §720.3085 provides(1) When authorized by the governing documents, the association has a lien on each parcel to secure the payment of assessments and other amounts provided for by this section. Except as otherwise set forth in this section, the lien is effective from and shall relate back to the date on which the original declaration of the community was recorded. However, as to first mortgages of record, the lien is effective from and after recording of a claim of lien in the public records of the county in which the parcel is located. This subsection does not bestow upon any lien, mortgage, or certified judgment of record on July 1, 2008, including the lien for unpaid assessments created in this section, a priority that, by law, the lien, mortgage, or judgment did not have before July 1, 2008.Fla. Stat. Ann. § 720.3085 (West)The courts reject this argument on similar grounds as §718.116(5)(a).  The section cannot apply retroacatively to improve a lien's priority to a position it did not have prior to July 1 2008.  Evoventure WGV, Ltd. v. Saint Johns Northwest Residential Ass'n, Inc., 56 So.3d 126 (Fla. 5th DCA, 2011).  Thus Judge Jennemann has allowed the stripping of a homeowners association lien where the prior mortgage was owed more than the value of the property in In re Jimenez, 427 B.R. 106 (Bankr. M.D. Fla. 2012).  Debtor's counsel should pull the declaration of condominium and dates of recording of the mortgages.  Where the value of the property is more than the first mortgage, but less than the second, it may not be possible to strip the 2nd mortgage depending on the terms of the association covenants.  If any mortgage is recorded after the date of the assessment, or if the covenant shows liens relate back to the date of the recording of the covenant, with no subordination provision, the association may not be subject to stripping.

When you file for bankruptcy, which type of bankruptcy you can qualify for and how much you can keep are all dependent on the amount of income you are deemed to have under the eyes of federal bankruptcy law. Many people depend on Social Security to survive from month to month, and still others use [...]

The reasons not to file a Chapter 7 for a failing corporation crowded my last post. My point was that just because the person in your office thinks his corporation should file bankruptcy, it may not be so. Today: the situations where it might be worth the downside risks to file a 7 for a client’s corporation. Because, like most issues in advising real people, corporate and corporeal, it depends. My list of  possible benefits: To preserve assets that could pay tax or guaranteed debts from other creditors.  The first creditor to sue seldom is the first creditor the shareholders would choose to pay.  They may have personal exposure for payroll taxes or premises leases.  Those are the debts they want paid first.  The automatic stay may allow that to happen. To obtain a trustee from whom insiders could buy corporate assets.  Transactions between a failing corporation and its shareholders by which former management acquires the valuable assets are suspect.  If, however, the seller in the transaction is a court appointed trustee, after notice to creditors, who can complain? To permit insiders to open new business free of duties to creditors of corporation  Management of an insolvent corporation owes duties of loyalty to the corporation.  Those duties seldom include going into competition with the corporation.  File bankruptcy and you have a clear and verifiable statement that the corporation had no future.  Management is free to move on, including starting afresh in the same marketplace. To discourage collection suits that might reflexively name the shareholders as defendants.  Wasn’t the first thing we were taught in civil procedure to fill all the chairs with defendants?  Collection attorneys went to law school, too.  Asked to collect from a corporate account, they are inclined to name management or  shareholders in their suit, regardless of any evidence that the individuals are liable.  I have found the instances of a stand alone suit against shareholders, after a corporate bankruptcy, to be few. Your mission, then, is to weigh the pros and cons of filing a corporate 7 with the real folks who sit across the desk from you.  Walk them through the issues. Consider putting the alternatives on paper in a letter, so you can cut off the protest, “you never told me”, when something uncomfortable or complicating happens. Welcome to the exciting world of business bankruptcy. Image courtesy of Shardayyy

A Chapter 13 plan is a very complicated mathematical computation which is why you should always have an attorney when filing Chapter 13.  A Chapter 13 plan is determined by three factors, your income, your expenses and your assets.  The court only will approve a Chapter 13 bankruptcy if you can afford it which is+ Read MoreThe post How does a Chapter 13 plan actually work? appeared first on David M. Siegel.

This is the case of Dante Shorr who comes to me from North Chicago, Illinois seeking information on bankruptcy.  Mr. Shorr has never filed for bankruptcy before.  He is not a homeowner and he has currently living with family.  He has a paid off vehicle which is a 1985 Lincoln Town Car which is worth+ Read MoreThe post Bankruptcy Case Study For Dante Shorr appeared first on David M. Siegel.

Taxes can be eliminated in certain circumstances and in certain circumstances your attorney will be able to advise you.  For example, if you have tax debt that is more than three years old and if you filed a return for those years and if you did not commit any type of fraud, then the debt+ Read MoreThe post Can my tax debt be eliminated in bankruptcy? appeared first on David M. Siegel.

Should I Get a Debt Consolidation Loan to Pay Off My Credit Cards? Alan Henry Dear Lifehacker, I've racked up a good bit of credit card debt, and while I'm slowly paying it down, it's a pain wrangling multiple bills with different interest rates. My credit union is offering debt consolidation loans with a lower rate than any of my cards—should I take that, use it to pay off all of my cards, and only have one, low-interest bill to pay every month? Sincerely, Trying to Dig Out Dear Trying to Dig Out, It's tempting, isn't it? Getting rid of all of your credit card bills, no more annoying multiple payment to multiple creditors, just one, automatic loan payment every month that comes out of your account automatically and you're back on the road to being debt free, right? Well sure—but it comes with a couple of pretty big caveats that might sour the milk for you. Let's explain, and then you can decide whether it's a good idea in your case. When Debt Consolidation Loans Don't Make SenseFull sizeIn more cases than not, debt consolidation loans don't make sense. They're certainly attractive: the lure of being able to pay off all of your credit cards is a strong one, especially in exchange for a single monthly payment to your bank or credit union at a lower interest rate. It's definitely a tantalizing opportunity, but it's not perfect. Remember, debt consolidation loans are financial products, which means financial institutions wouldn't offer them to you if they didn't make money from them. Here are a few tips to make sure you're not falling into a trap: Do the math on your credit cards and their interest rates, and figure out how long it would take you to pay them all off at your current payment rate. Compare that to the length of the consolidation loan you're looking at taking out. Your average 5 year (60 mo) debt consolidation loan, even at a lower interest rate than your credit card, may cost more over the long haul than if you just paid your cards down faster. Photo by 401(k) 2012.Check what your monthly payment on a debt consolidation loan would be. Are you at least paying that much towards your credit cards now? If the loan payment is more than you pay towards your debts (and it fits into your budget), it might be time to up the ante and just put more money to your credit cards. If the loan payment is less than you pay to your cards, you'll likely wind up paying way more interest over time, since your loan term will probably be long.Once your cards and debts are paid off, will you cancel the credit cards? Sure, you get credit cards with zero balances and no bills out of the loan, but one of the biggest problems with debt consolidation loans is that they do nothing to change the behaviors that got you into debt in the first place. Instead, they add another creditor to your pile, and fan the flames of going into debt to pay off more debt. If you even think you might be tempted to use those cards again after paying them off, or if you're using debt consolidation as an easy out or way to avoid really looking at your budget, it's not right for you. The last thing you want is to take out a loan, pay off your cards, and then charge up your cards again—now you've done nothing but dig your hole twice as deep.When Debt Consolidation Loans Make SenseFull sizeIf you're hopelessly drowning in debt, know that you can't negotiate any lower interest rates with your credit card companies or creditors, or if the math works out, a debt consolidation loan may be a good decision for you. Similarly, if you're in serious trouble with high interest rates, high monthly payments (that you're having trouble with already), and too many bills, a debt consolidation loan might help. Combined with a debt repayment plan or credit counseling, it can be used to pay off all of your debt at a fraction of their original cost. If it may be a good time to strike, pay it all off, and walk away debt-free. Photo by erules123. Of course, those situations aren't the norm, and most of us with credit card bills looking to get rid of them aren't in that position. That's not to say there aren't situations where debt consolidation loans can offer people who really need them the breathing room to get out of debt and organize their finances. ReadyForZero has a great post on this topic, and showcases some examples of when debt consolidation can be a good choice—and even save you money on interest while getting you out of debt faster. It All Comes Down to Mathematics and BehaviorFull sizeIt may seem attractive to just take out a nice big loan, pay everyone off, and only deal with that one monthly loan payment—one you can even have automatically taken from your checking account every month—but all you're really doing is paying a financial institution to do something for you that you can do on your own. It feels great not to get a bunch of bills in the mail or fret over who you pay when and how much, but you can do the same thing on your own: Start by creating a realistic budget.Then decide whether you want to pay highest interest cards first or lowest balance cards first.Set up auto-pay so you're paying more than the minimum payments every month, paperless billing so you don't get the bills in the mail (although you should still review them every month), and let your money manage itself.Still, even if the math of a debt consolidation loan works out in your favor, your behavior may be the real problem. Paying off all of your credit cards and debts with a loan only shuffles the deck chairs around—you still owe money you have to pay, and if you go charging up those freshly paid-off credit cards again, those deck chairs may as well be on the Titanic. Make no mistake: if you want help with your debt, you should get it. Don't let social stigma or ego get in the way—there are plenty of ways to get on the right track that go further than blog posts and stop short of putting you back in debt to someone else. Debt repayment and credit counseling programs can negotiate lower interest rates on your behalf, or help you do it yourself. They can help you with your budget, and help you plan a route out of debt that turns your credit into a tool you control, as opposed to a monster than controls you. If you need the help, get it—and definitely do that before you take out a loan. Photo by Media Bakery13 (Shutterstock). Good luck, LifehackerCopyright 2013 Gawker Media.  All rights reserved.