Jacksonville Bankruptcy Lawyer Blog

St. Johns County, Florida residents never suspected that one of their own, Lydia Cladek, was the head of a $100 million dollar Ponzi scheme, one of the largest to hit the south eastern United States. Cladek is in her sixties and is a little over five feet tall and yet this little old woman has brought many of her investors to their knees. In late January she was convicted of fourteen counts of different kinds of fraud.
Investigators found she was holding $4 million in car notes despite owing $90 million in outstanding loans. She had been living a lavish lifestyle with several houses in the Florida area.
A Ponzi Scheme is one where a person takes money from investors and pretends that those investments are increasing in value. The money never increases in value, but the Ponzi Schemer is able to pay out more than the investors paid in by taking on new investors. The new investors pay the dividends on the old investor's money. As long as the Schemer pays a higher than average rate, they can convince more people to invest. This effect snowballs until there is simply too much money going out vs. coming in and the scheme collapses.
When the scheme fails, those who had made investments and had not yet been paid are without much recourse. They can force the liquidation of the Schemer, but usually those assets aren't near enough to pay them back their investment. Another way of getting funds back for investors is by avoiding transfers.
A transfer is avoidable in bankruptcy law under a variety of circumstances. In the Cladek case, the court is seeking to recover funds transferred years before her filing. These funds may not be owed to the estate, but if the defendants don't file a timely response, they may owe hundreds of thousands of dollars to the court.
Once monies are returned to the bankruptcy estate, they can then be redistributed evenly across all of the investors so that each can get a portion.
Some of those forced to repay may not have the funds to repay and since some of the complaints in the Cladek bankruptcy case allege fraud on behalf of the investors, their debt to the bankruptcy estate may be deemed non-dischargable.
If you have received a complaint from the estate of Lydia Cladek, Inc., and have been asked to return funds, please contact a Jacksonville Bankruptcy Attorney or call us at (904) 685-1200 for a free consultation.

Jacksonville, Florida debt collectors may be more aggressively pursuing deficiencies for vehicle repossessions, new and old. People are getting behind on their payments for everything; their home, credit cards and cars. Unfortunately, cars and trucks often get picked up quickly after non-payment and aren't always sold at their commercially reasonable value.
One the positive side, the Florida legislature has included provisions in their Uniform Commercial Code that allow a debtor to counter-sue their creditor if that creditor seeks to sue for a deficiency and cannot show that their sale of the secured property was done in a commercially reasonable manner. An obvious claim for relief would arise from a scenario where a car dealer repossesses a car, sells it to his brother for half of what it's worth and then sues the debtor for the deficiency. That would be a fairly clear action for statutory damages.
Unfortunately, many people are unaware this protection exists. They feel that because they were unable to make their payments, that perhaps they deserve to be "steamrolled" by the system. We at Apple Law Firm disagree. If you've had a secured asset repossessed and think it was sold for less than it's value, you may have a cause of action to sue your creditor. Contact a Jacksonville Repossession Defense Attorney at (904) 685-1200 for a free initial consultation.

With about half of Jacksonville, Florida homes under water combined with the decrease in overall income for people across the country, it comes as no surprise that people are getting behind on their mortgage payments. Many of those people, especially those in homes that are seriously underwater, would probably benefit most from a mortgage modification or the surrender of the property altogether. However, there is a segment of the population whose home is still worth near if not more than their mortgage(s). Some of these people think that the only way to catch up on their home mortgage is to convince a bank to grant them a modification -often the kind where there are lots of penalties and fees and where the arrearages are tacked on the end of the loan as a balloon payment. These mortgages are not always available and can take so much time to achieve that the penalties become unmanageable.
In many cases, filing a traditional Chapter 13 bankruptcy will help these people catch up on the arrearage on their home. This is especially helpful if there has been a recent increase in income. In a Chapter 13 we submit a plan for repayment which includes the regular monthly mortgage payment, but also amortizes the arrearage to a sixty month period to make payment more manageable. This way, if the debtor can afford it, they can catch up on their mortgage without the arduous frustration of trying to negotiate with the lender.
Filing a bankruptcy stalls any collection attempts so a case filed the morning of a foreclosure sale will cancel the sale or, if the sale occurs, will require the Judge to vacate the sale upon motion by the debtor's counsel. As long as the debtor intends to catch up on their home mortgage and indicates the ability to do so in their bankruptcy plan, the foreclosure will end there.
There are options when it comes to mortgage issues, such as mortgage modification, foreclosure defense or bankruptcy. You can learn the options for free if you contact a Jacksonville Bankruptcy Attorney or call us at (904) 685-1200 and ask for a free initial 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 someone files for bankruptcy an automatic stay is put into place. The stay prevents creditors from making any collection attempts (calling, repossessing, selling) prior to obtaining court permission or, prior to the dismissal of the bankruptcy case.
A Co-Debtor Stay created by 11 USC §1301 occurs when the person filing bankruptcy owed a debt jointly with a non-filing person, typically a spouse. By virtue of being a co-debtor, creditors may no longer make collection attempts against the non-filing person as well. This becomes particularly useful when the creditor has a security interest, such as in a home. For example, if a couple was behind on a jointly owned homestead but one spouse individually owed a large amount of credit card debt, that one spouse could file a Chapter 13 bankruptcy, catch up on the mortgage arrears and simultaneously discharge their unsecured debts. While that spouse was in bankruptcy, the bank could not foreclose on the home as to the non-filing spouse because of the automatic stay protection.
Unfortunately, the Co-Debtor stay does not go into effect as to business assets or function in Chapters 7 or 11, so a conversion from a Chapter 13 to a Chapter 7 would cause problems.
If you have questions about how the co-debtor stay may be used to protect you or your loved ones, contact a Jacksonville Bankruptcy Attorney or call us at (904) 685-1200 for a free consultation.

The Mortgage Debt Relief Act of 2007 was enacted as a response to the growing foreclosure problem. More specifically, it addresses the issue of "Debt Forgiveness Income." Debt Forgiveness Income is an IRS theory that if a debt you owe is forgiven, you have gained in monetary value because you no longer are required to pay that debt. That gain in value is taxable as income despite the fact that you didn't actually earn any money. For example: Stephen owes $5,000 in old medical bills. He can't pay the bills, so the hospital forgives the debt and writes it off on their taxes. Come tax time, he will receive a Form 1099 for $5,000 of additional, previously untaxed, income for that year. Now, $5,000 may not be too much of a problem, even in the highest tax bracket this would only increase his taxes by $1,750, the trouble starts when the amount forgiven is higher, as it is with a house.

If Stephen's home is foreclosed upon and the bank forgives a $50,000 debt, he will owe taxes for his actual annual income, plus this $50,000. You could've argued that $5,000 wouldn't effect what bracket he was in before, but $50,000 is almost certain to increase his tax bracket and will leave him with a minimum of $12,500 in additional tax debt. As a result, Stephen may be in debt for a long time. If he didn't have the money to pay his mortgage, it doesn't make sense that he'd have enough money to pay the taxes.

It was because of Stephen's scenario that the Mortgage Debt Relief Act of 2007 was passed. The act allows a person whose homestead has been foreclosed on to have his debt forgiveness income waived so long as it is less than a million dollars per year.

This waiver is set to expire by January 1, 2013, which has some economists worrying. Personally, I think these economist's concerns are without merit. The original act of 2007 was set to expire in 2009. When 2009 rolled around, Congress could see that there was still a problem and passed the Emergency Economic Stabilization Act of 2008, which extended the tax waiver until 2013. So, as gloomy as our housing economy is, I cannot fathom that Congress will not pass another act extending the homestead foreclosure tax waiver, but if they do, the debtors can always file bankruptcy and discharge the debt before it becomes a tax liability.

If your home is in foreclosure and you have questions about your future or the tax implications forthcoming, contact a Jacksonville Bankruptcy Attorney or call us at (904) 685-1200 for a free consultation.

To say that the state court run Residential Mortgage Foreclosure Mediation program has been a failure is an understatement. This program was created by the Florida Supreme Court in an attempt to help Florida citizens modify their home loans so that they'd not be foreclosed upon for being unable to pay. With only a 3.6 success rate, the Supreme Court of Florida is now considering termination of the program.

On the heels of this debate comes an attractive Federal Court alternative: forcing modification in a Chapter 13 bankruptcy and using the threat of giving the home to the bank as a means of lowering principle and interest payments. This method started last year in Orlando, it appears to be working, and it makes total sense.

For a long time banks have been foreclosing on the homes of good people who can't make their payments only to be unable to sell the property for anywhere near the debt owed. The banks can write-off this difference as a tax loss, but they can only claim so much tax loss each year. Jacksonville judges are now allowing debtors to file motions to force the lenders into mediation where we can show them what they'll get if the debtor gives the house up in the bankruptcy vs. what they'll get if they willingly drop principle and interest on the loan.

This is all fine and dandy in theory, but what about real life?
One law firm stated a 90% success rate for mortgage modifications with 20% of those receiving a reduction of the principle amount owed. One case in particular reduced their principle by $160,000 on a $618,000 loan.

If you are unable to make your mortgage payments and would like to attempt forcing your bank into a mediation, contact a Jacksonville Bankruptcy Attorney or call us at (904) 685-1200 for a free consultation.

Jacksonville Bankruptcy judges are following Orlando judge's lead in granting bankruptcy debtors motions for court ordered mediation. These motions not only require banks to attend mediation in good faith, but they also require the debtor and banks to come prepared -with all the information and documentation that is required to do a modification. Taking things further, the court will require the bank to send an agent who has actual authority to perform the modification.

Many people fail to get loan modifications because the bank either, "lost the paperwork" or the documents became outdated when the bank had time to reviewed them. A lot of these people are eventually foreclosed on and are forced to bankrupt themselves to remove the liability.

Yes, for this to work the debtor will need to file bankruptcy, but it may be just what some debtors need to force banks to modify loans and keep their homes. If you've been trying to modify a loan and found the banks unresponsive and/or impossible to deal with, contact a Jacksonville Bankruptcy Lawyer or call us at (904) 685-1200 for a free consultation and we'll explore your options.

Your Jacksonville home has a sale date. You've been holding off on filing bankruptcy because you thought a mortgage modification might be possible and now you have 24 hours before your home is going to be sold. If you think that nothing can be done to stop it, you're wrong.

If you file bankruptcy in the morning and your home was going to be sold in the afternoon, that sale will be stopped by the automatic stay. In simple terms, the automatic stay tells creditors to, "Stay away" until either the bankruptcy has completed or until they are granted court permission to collect again (a process which takes weeks).

The problem most people have is that filing a bankruptcy case requires a LOT of paperwork, and because this paperwork has to be accurate and is signed under penalty of perjury, it has to be accurate and complete. Fortunately, there is a way to gain the benefits of the automatic stay without having to complete all the paperwork up front: The Bare Bones Filing.

A Bare Bones Bankruptcy or Skeleton Bankruptcy is the creation of technicalities in the law. The title 11 bankruptcy code requires only that Form B1 (three pages) be completed on the day of filing. Four or five more pages are due within two days of that, but the remainder of the paperwork (upwards of 50 or so pages) isn't due for two whole weeks.

Now, I'm not advocating waiting until the last minute, but it's important to know that there is still hope if you are in that situation. If you would like to schedule an emergency filing, please contact a Jacksonville Bankruptcy Lawyer or call us at (904) 685-1200 for a free consultation.

When a home is foreclosed on and sold for less than the amount owed, the bank has two options:

1. Sue the ex-homeowner for the deficiency (an amount the bank knows they're not going to get) or
2. Write the loss off on their corporate taxes.

When a bank writes a loss off on corporate taxes, the amount of the write off becomes Debt Forgiveness Income to the ex-homeowner. The IRS says that when someone's debt has been forgiven, their total worth has gone up, therefore this counts as income. When this happens, the ex-homeowner will actually get a 1099-C for the difference and will owe income taxes on the new amount.

For example, a debtor who makes $50,000 a year with a balance of $200,000 lets their home go into foreclosure. The house is sold on the courthouse steps for $150,000. The bank can either sue him for the $50,000, which they know they're unlikely to obtain, or they can write the $50,000 off as a loss which causes the debtor's $50,000 of taxable income to increase to $100,000 for that year. Can you imagine having to pay taxes based on double your income without having actually earned the income?

There are situations when you may be exempt from a forgiveness of debt and the related taxes.

This is an unfortunate but real possibility for people who go into foreclosure without knowing what can happen to them. If you have questions about how to avoid these issues or don't want to go through them without legal counsel, please contact us at (904) 685-1200 for a free initial consultation or contact a Jacksonville Foreclosure Attorney or a Jacksonville Bankruptcy Attorney.

Recently, a small debate has been brewing in the legal world about whether a person facing foreclosure should file bankruptcy before or after their foreclosure comes to a close. First of all, bankruptcy is not always the best option for someone facing foreclosure.

If filing bankruptcy is right for you, some attorneys recommend filing after your home has been foreclosed on. This should allow you to discharge the debt and will help you move on with your life. But this may also limit your options.

It has been suggested that filing bankruptcy before foreclosure may give you the option to fight the foreclosure post bankruptcy. You would "Surrender" your interest in the property to the Trustee, which gives him the option to liquidate the property subject to the mortgage. However, because the mortgage is often higher than the house is worth, the Trustee disclaims any interest. It is then up to the bank to continue the foreclosure process either during or after the bankruptcy. While the bankruptcy goes on you may still be able to remain in your home (this may effect your exemptions). Theoretically, you will remain there essentially rent-free, as you will not be making your mortgage payments during this time. This could mean saving thousands of dollars in unpaid mortgage payments, depending on how long the bankruptcy takes. At the end of the bankruptcy you should have no unsecured debt and would have savings to use in negotiations with the bank. What's even more interesting is that you would no longer be personally liability for the mortgage, so if negotiations failed, you could just walk away.

If you think you'd like to file bankruptcy and stay in your home, you should speak with a Jacksonville Bankruptcy Attorney or a Florida Foreclosure Defense Attorney to set up a free initial consultation.

Most debts are dischargeable in bankruptcy. However, there are a few debts that are not:

1. Debts arising from fraudulent conduct
2. Government-backed student loans (unless severe hardship can be shown)
3. Debts stemming from death or personal injuries related to your operation of a motor vehicle while intoxicated
4. Certain taxes and fines
5. Some debts not listed on your bankruptcy
6. Domestic support obligations (alimony, child support, etc.)
7. Debts arising from willful and malicious injury by the debtor to another person or property.

To see if your debts qualify for discharge, contact a Jacksonville Bankruptcy Attorney today to schedule a free consultation.

A short sale is when you sell your property for less than you owe on the mortgage, creating a deficiency amount that you still owe on the loan. If you are planning to file for bankruptcy, a short sale is usually not in your best interest. Here are some reasons why:

1. A short sale will damage your credit. You will be defaulting on a contract, and so the mortgage company will report on your credit that you settled for less than the actual amount owed. This can oftentimes have the same negative effect as a foreclosure. If you are going to file for bankruptcy, then you do not need an additional negative report on your credit.

2. The short sale will not alleviate any liability issues. If you are filing for bankruptcy and surrendering the property, then you probably will not be liable for the deficiency amount anyways. In a bankruptcy, you almost always surrender the property in full satisfaction of the debt, so a short sale does not get you away from any problems that the bankruptcy itself does not handle.

3, You are wasting your time and money. If the bankruptcy is taking care of the liability issue, then a short sale is benefiting nobody except the realtor and the lender.

4. You will be losing time that you could spend in your property. When you short sale the house, you must leave immediately. When you file for bankruptcy and surrender the property, you have longer to stay in the property before you must vacate.

5. There is usually tax liability that comes with a short sale. If you are filing for bankruptcy, however, you will not face these tax issues and so do not want to incur them if not absolutely necessary.

These are just a few reasons why a short sale might not be in your best interest if you are planning on filing for bankruptcy. Speak with a Jacksonville Bankruptcy Attorney today to discuss your specific situation.

A reaffirmation agreement is an agreement between you and the creditor that holds a secured lien on collateral that you have previously purchased. This reaffirms the debt that you owe the creditor. So if you own a car and you file Chapter 7 bankruptcy, you can either surrender the collateral (give it back to the creditor), redeem the collateral (refinance through another company), or you can reaffirm the collateral by signing a reaffirmation agreement with the creditor and filing it with the court. This reaffirmation agreement basically says that you will be responsible for the debt just as you were before you filed the bankruptcy. If you do not do one of the above options, the creditor can repossess your vehicle.

As for your home, In re: Linderman dictates that you must also do one of the above options for your real property. So if you file a Chapter 7 bankruptcy and want to keep your home, you must sign a reaffirmation agreement with your mortgage company.

If you need help with your bankruptcy or want to know how to file a reaffirmation agreement, contact a Jacksonville Bankruptcy Attorney today.

Filing for bankruptcy will stop the future sale date of your home, even if there has been a final order foreclosing the property. This is due to an automatic stay that is immediately put into place upon filing for bankruptcy. Under the automatic stay, a creditor cannot take any action against you to try and collect a debt. So your foreclosure suit will halt immediately and your sale date will be cancelled; no more action will be taken in the case until the automatic stay is no longer in place.

The automatic stay will be effective until the conclusion of your bankruptcy. In a Chapter 7, this will probably be a short amount of time, around 4-6 months. But this extra time may give you the opportunity to catch up on your mortgage, achieve a modification, or sell your property. However, in a Chapter 13 bankruptcy, your case will not be concluded until after your Plan payments are finished. This will be anywhere from 3-5 years. Within those years, your Plan will allow you the opportunity to catch up on arrearages and so cure your deficiency with your mortgage company.

There are many ways in which a bankruptcy might be in your financial best interest. Help with mortgages that are in default is just one way a Jacksonville Bankruptcy Attorney can help you. Call us today at 904-685-1200 to schedule a free consultation.