Jacksonville Bankruptcy Lawyer Blog

When you file bankruptcy you're required to provide a list of everyone to whom you owe money. Those people and businesses are your creditors. There are separate sections in your bankruptcy petition for creditors that are secured and unsecured.
A secured debt is one that is backed by collateral. This means that if you don't pay the debt, the creditor can repossess something, typically a car or house, to help pay what is owed. If the collateral is sold for less than what is owed, the debtor must pay the difference. This is called a deficiency.
Unsecured debt doesn't have collateral like secured debt. It's security is the creditor's ability to damage the debtor's credit. This includes items like, medical bills, signature loans and most credit cards. Occasionally, a credit card will attempt to collateralize the item purchased using the card, such as furniture or jewelry.
Unsecured creditors are typically discharged with no payment in a Chapter 7. The only time an unsecured creditor will get paid out in a Chapter 7 is when the filing debtor had some kind of non-exempt property to surrender to the trustee for liquidation. Secured creditors can be made unsecured in Chapter 7 by surrendering the collateral back to the creditor. If payments are current, a debtor may choose to keep paying on a secured debt by reaffirming it.
Chapter 13 cases allow a debtor to catch up on late payments on secured debts. Unsecured creditors get paid a portion of what they're owed, depending on the financial situation of the debtor. There are also situations where secured debts can be "bifurcated" or divided into two debts, a secured and unsecured portion. This can be hugely advantageous if the debtor is paying very little toward unsecured creditors.
Finding out what debts will remain paid or unpaid is vital to creating a successful bankruptcy plan. contact a Jacksonville Bankruptcy Lawyer or call us at (904) 685-1200 for a free consultation.

Car payments seem to be unavoidable. Unless you're one of the rare people who have the luxury of being able to ride a bicycle to work, you must have a car. Everyone knows that the value of a car drops as soon as you drive it off the lot and as a result, many people who drive financed vehicles owe more to the lender than the asset is worth. Wouldn't you love to be able to pay what you vehicle is worth right now, rather than what you owe on it? You can, and here's how:
11 USC 722 allows a bankruptcy debtor to pay the secured portion of the debt owed on the car to satisfy the lien. "Security" for a loan the physical asset which can be exchanged to satisfy a lien. A typical security is a house or car. If you stop paying on the lien, the lender can take the house or car to satisfy the lien amount. Any value in the house or car above and beyond what is required to satisfy the lien (and associated fees) is returned to the borrower. A "Deficiency" occurs when the house or car sell for less than the lien amount. Deficiencies are unsecured debts for which a lender may sue. Deficiencies are very typical in the housing market these days.
When a debtor elects to use 11 USC 722, the court bifurcates the lender's single claim into two claims, one secured which is equal to the fair market value of the car and one unsecured which represents the reaminer. This way the borrower can discharge the unsecured portion, pay the secured portion and keep the vehicle. This is relatively easy in a Chapter 13 because the debtor can re-amortize the secured debt to be paid over the length of the Chapter 13 repayment plan, typically over five years. However, in Chapter 7 the payoff must occur immediately which is often impossible for people who're already bankrupt.
Those in Chapter 7 generally have three options when it comes to redemption: they can use their exemptions to hold onto a sufficient amount of cash to pay off the redemption, they can have a relative or friend pay off the balance or lastly, they can find third party financing. One might thing that third party financing for someone in a bankruptcy is difficult to find, but there are actually several businesses who specialize in financing 11 USC 722 payoffs. Yes, the interest rates for these transactions are high at around 28% but since the debtor no longer has to pay the unsecured portion of the debt they can still make economic sense.
I look at various third party finance companies to see if taking a third party loan and electing to use 11 USC 722 makes sense. If you're considering bankruptcy and want to make sure you put yourself into the best possible economic situation once the case is over, contact a Jacksonville Bankruptcy Attorney or call us at (904) 685-1200 for a free consultation.

Nearly half of Florida homes that have mortgages are worth less than the mortgage debt on the home. This, combined with the nation-wide decrease in incomes has lead to one of the greatest recessions our country has seen.
A home mortgage is essentially a contract. You promise to make payments according to the contract's terms, and the lender promises to transfer the home's title to you when you finish making your payments. The government regulates these contracts by creating laws that set out procedures for things like foreclosures. Of course, there is still an element of free contract which allows lenders and borrowers to negotiate the terms of their agreement at any time. The government is limited in how much they are allowed to interfere with contracts so instead of trying to force banks to offer mortgage modifications, they make programs like HAMP, which offers lenders tax deductions or other benefits to make deals with borrowers. Personally, I think that the government isn't offering the lenders enough in benefits because banks aren't particularly helpful in getting borrowers into the program. HAMP mods are done in-house by the banks and "can" lower a borrowers mortgage payments to 31% of their gross income if you qualify. But what if you don't qualify, and what if your payments are already below 31% of your gross income?
This is where lenders will begin the foreclosure process. They may offer you a so called, "in house modification", but offer or no, the foreclosure process will continue until either you are somehow successful in obtaining an in-house modification or your home is sold on the courthouse steps. This is because the judiciary can't force a bank to modify your loan. Honestly negotiated terms that were created in accordance with the laws can't usually be modified by the government due to our rights to free contract as citizens. That being said, a recent program out of Orlando creates an opportunity for people facing Jacksonville bankruptcies and foreclosures.
As previously stated, our government can't force lenders to modify contracts, but our Judges can order those lenders to attend mediation with the client. The primary excuses used by banks to justify to forbearance of a mortgage modifications are that the paperwork was not received, that it was outdated or that no one with modification decision making authority was available to review it. Now the judges in the Middle District Bankruptcy Court of Florida's Jacksonville Division are accepting motions on behalf of those who are bankrupt in Chapter 13 cases to order that lenders with decision making authority attend mediation with borrowers, and require that all up to date papers required to effectuate a modification be provided to both parties prior to the mediation. This method, although new, is reported to have greatly increased the success rate of borrowers obtaining modifications. This more direct approach should give borrowers a more direct approach when dealing with lenders by having a judge order them to mediation and gives lenders a bargaining chip they don't always have- if the bank refuses to propose a good modification, the borrower can simply surrender the property in the bankruptcy. Since banks have more houses right now than they know what to do with, this proposition should make them far more likely to want to strike a deal.
If you have questions about how to get a mortgage modification in the bankruptcy arena, contact a Jacksonville Bankruptcy Lawyer or call us at (904) 685-1200 for a free initial consultation.

When you finance a car, it's accompanied by a note and there's a monthly payment. The note gives the seller security, as they now have recourse if you don't pay -they can repossess the vehicle. This system is good for the seller because their money is backed by an asset instead of backed by your credit score. You can damage a credit score, but you can't repossess a credit score and sell it to someone else.
Ideally, the payment on the vehicle is based on the predicted future value of the car. If the car costs $10,000 today and will only be worth $2,000 in eight years, your payments over the eight years need to add up to $8,000 to keep the value balanced to the payments (I left interest out to make it less complicated). However, in some instances where the buyer's credit is good the seller can offer the vehicle at a lower monthly payment despite knowing that the vehicle will be worth less than is owed on it. This is called negative equity. Eventually, that vehicle dies and the buyer is forced to purchase another car, still owing on the first. Instead of having a buyer who is unable to make two car payments, the new financing company offers to pay off the first car and roll the debt from it over into the new car's note. Over time this vehicle gets more and more underwater and eventually the debtor is forced to file bankruptcy.
A "Cram-Down" occurs when a debtor asks the court to determine the value of their vehicle and to make this value the secured amount of the debt. i.e. if the debtor owes $10,000 on a vehicle, but it is now only worth $2,000, the court can lower the secured amount owed to $2,000. The remaining $8,000 becomes unsecured. This can be done in both a Chapter 7 or a Chapter 13 bankruptcy. However in a Chapter 7 the $2,000 has to be paid immediately, so it is less practical than in Chapter 13 where the debtor has several years over which to make payment.
In Americredit Financial v. Penrod, the Ninth Circuit Court of Appeals found that the security interest in a vehicle does not include the amount paid off to a previous finance company to settle a prior vehicle's debt. In Penrod, the debtor owed $13,000 on a Ford Explorer and received $6,000 in credit for the vehicle. The $7,000 in negative equity was rolled into the note on her new Ford Taurus. This brought the Taurus' balance of $25,600 up to $31,700 at 20% interest. When she filed a Chapter 13 bankruptcy a year and a half later, she sought to have the court evaluate the security interest in the car to the car's market value (currently about $7,000 in the best shape). The creditor objected to this, but the Bankruptcy Court ruled in her favor. The creditor then appealed the decision to the Bankruptcy Appellate Panel, who also ruled in her favor. The creditor then appealed the decision to the Ninth Circuit Court of Appeals, who also ruled in her favor. The only court left for Americredit to appeal to is the United States Supreme Court and it may be worth their while to try it as in most cases there will be thousands of dollars at stake but I have to say: I believe they'll lose.
If you have a seriously undervalued vehicle and think bankruptcy may help you, contact a Jacksonville Beach Bankruptcy Attorney or call us at (904) 685-1200 for a free consultation.

AMR, the parent company of American Airlines, announced November 29, 2011 that they filed for Chapter 11 bankruptcy in the Southern District of New York. The company said that in the first nine months of 2011, they lost $868 million and project that they will lose around $1.1 billion by years end. AMR, a Fort-Worth based company, listed $24.7 billion in assets and $29.6 billion in debt in their bankruptcy Schedules.

An article in the Financial Times says "the move brings to end a nearly decade-long effort to avoid Chapter 11. In 2003, American chose to avoid bankruptcy, while its rivals used the process to shed their pension plans and reduce structural costs, leaving it at a substantial disadvantage."

The company's CEO, Gerard Arpey, was not in favor of the company filing for bankruptcy. In fact, he had spoken out several times saying that he did not want AMR to file for bankruptcy. So he retired. Tom Horton, previously the company's president, will now step in as the new CEO.

For now, American Airlines says that they will continue normal business operations. Flights will go on as scheduled, and tickets will be honored as usual. Employees, their paychecks and benefits will also not be affected, at least not right away.

Contact a Jacksonville Bankruptcy Attorney if you have any questions about bankruptcy at (904) 685-1200 for a free consultation.

Jacksonville residents have several options when it comes to dealing with secured assets when filing bankruptcy. They can redeem the property by paying the creditor it's fair market value, reaffirm the debt by offering the creditor the same loan terms or surrender the item by giving it back to the creditor.

Redemption is an attractive choice for debtors because it allows them to pay what a secured asset is worth instead of what they owe on it. There can be a significant savings here as vehicles plummet in value as soon as they roll of the car lot. However, there are two conditions precedent that often get in the way.

First, if the car is being used for personal consumer use, the date of purchase (or refinance), must be longer than 910 days before filing the bankruptcy to redeem. If the car was purchased for business use, there is no waiting period. The second, and more difficult issue, is that the money to pay for the vehicle's value must be paid for at the time of redemption. This is a problem because the debtors are bankrupt and rarely have enough cash to meet the payoff amount.

The unique possibility here comes into play when the case involves a married couple and only one spouse is filing. If the vehicle is financed in the name of the spouse who is filing bankruptcy, the filing spouse may still opt to redeem the vehicle and keep it paying only the fair market value by having the non-filing spouse finance the redemption. Even if the non-filing spouse doesn't have cash in the bank, they could still attempt to get a signature loan and use those funds to finance the redemption. In effect, this is a chance to refinance a vehicle and reduce the principle at the same time. I also want to note that it doesn't have to be a spouse who helps refinance the vehicle -it can be anyone whose willing to put up the cash on behalf of the bankrupt person, so parents and friends can work too.

If you have questions about bankruptcy and would like to set up a free initial consultation, contact a Jacksonville Bankruptcy Attorney or call us at (904) 685-1200 for a free consultation.

Florida was hit harder than most states when the recession of 2007 hit. The so named, "Middle District" being the third highest rate in the nation from mid-2010 to mid-2011.

As a result, it's no surprise that Trailer Bridge, a local trucking and shipping company, filed for Chapter 11 bankruptcy reorganization yesterday. Truckers have been hit hard by the economic downturn and several of them are seeking loan modifications on their trucks. In a Chapter 13 reorganization, the secured amount owed on a truck can be reduced to what it's fair market value is on the date of filing rather than what the driver actually owes in the contract. This method is called, "Redemption". The loan new amount is also re-amortized to five years so that the driver leaves the bankruptcy owning the vehicle free and clear.

If you would like to learn more about "Redeeming" a vehicle, contact a Jacksonville Bankruptcy Attorney or call us at (904) 685-1200 to schedule a free initial consultation.

There are many reasons that it would be advantageous to file for bankruptcy, but here are some of the most common reasons:

1. The first reason to file for bankruptcy is to stop a foreclosure sale. Filing for bankruptcy immediately stops a halts a foreclosure suit against you. This can give you time to reorganize your finances, try to sell your home, negotiate a modification, or find another place to live. Your chapter 13 Plan can let you catch up on your arrearages over a 5-year time span and so cure your default. If your home has been foreclosed upon, bankruptcy might be a good option for you.

2. Filing for bankruptcy not only stops a foreclosure suit, it halts almost all legal actions taken against you, such as a garnishment or auto repossession. If your auto is in danger of being repossessed, filing for bankruptcy will keep the creditor from doing so. You can value your auto in the bankruptcy and pay only fair market value to the creditor. This means that if you owe $20,000 on your auto and it is only worth $10,000. you can pay the $10,000 to the creditor through your bankruptcy and own the vehicle outright after your Plan is completed.

3. If debt collectors are hounding you too much, filing for bankruptcy can help. Immediately upon filing, creditors must stop from trying to collect the debt. This means the harassing phone calls and letters will stop. For most, this is a big relief.

4. If you are simply behind in your bills and need a chance to catch up or for the debts to be discharged altogether, bankruptcy probably is a great option for you. Some people are just too in debt and need a fresh start. Bankruptcy can provide this to you.

5. If you would like to surrender your property to the creditor and not be liable for any deficiency amount, bankruptcy will allow you to do this. If you surrender the property back to the creditor outside of bankruptcy, the creditor can almost always sue you for the deficiency amount (the difference in what you owe on the property and what they can sell the property for). If you do the surrender through the bankruptcy, the creditor cannot come after you for this money.

These are just some of the reasons that filing bankruptcy might be in your best interest. There are many more, and every case is different. To schedule a free consultation with a Jacksonville Bankruptcy Attorney, call 904-685-1200 today.