Jacksonville Bankruptcy Lawyer Blog

Divorce in Jacksonville, Florida is not a rare thing. According to Daily Beast, the city of Jacksonville has the ninth highest divorce rate of all cities in the United States. Many of these couples are jointly liable on home mortgages when they file for divorce. Since 46% of homes that have mortgages are underwater, many people are "left holding the bag" for mortgage payments they can't make, refinance or otherwise settle with. Often times the only option for these people is bankruptcy. Bankruptcy and Refinancing are often the only options for debtors to have their personal liability removed from un-payable mortgage notes.
When one ex-spouse files for bankruptcy, it almost invariably causes the other to file. Of course this depends on whether or not couple had purchased a home using combined credit scores and on whether or not the non-filing individual can handle the mortgage payment on their own. If the individual is able to make the payment on their own, they may be able to refinance the mortgage, allowing for the other party to be removed from the liability on the note.
If you have questions relating to the interplay of bankruptcy and divorce, contact a Jacksonville Bankruptcy Lawyer or call us at (904) 685-1200 for a free consultation.

Although it's rarer these days, people occasionally come into my office who have equity in their home. This is fortunate because Florida has one of the most generous homestead exemptions in the United States. There are exemptions on a federal level, but if a state chooses to create their own, residents of that state must utilize the state exemptions instead of the federal ones. Some states, like Pennsylvania, have no homestead exemption at all.
The Florida homestead exemption requires that the property be either: one half acre if within a municipality or one hundred and sixty contiguous acres outside a municipality. This is a unique benefit for many folks who live in Fleming island because it is largely unincorporated. What this could mean is that a person could file bankruptcy and retain a home with two million dollars in equity as exempt property and, if it's in an unincorporated area, the property could cover several acres of land.
This exemption is outlined by the Florida Constitution, Article X, § 4. Land located within a municipality that was previously unincorporated can still be "homesteaded" as it so referred, unless the owner of the land consents to inclusion into the municipality.
These rules defining homestead, although referred to here in the bankruptcy arena, also apply to the more well known Florida Homestead Taxable Value Exemptions of $25,000 of home value which is exempt from all taxes and an additional $25,000 which is exempt from all taxes except for those providing for education.
If you have questions about your homestead and whether or not it is incorporated or unincorporated, contact a Fleming Island Bankruptcy Attorney or call us at (904) 685-1200 for a free consultation.

Jacksonville, Florida Chapter 13 bankruptcy cases rarely see claims for deficiencies on real properties. A deficiency occurs when a repossessed home is sold, but the sale price isn't high enough to meet the value of the mortgage. The different between the sale price and the amount owed is the deficiency. In Florida, the borrower owes the deficiency amount to the lender. When the borrower files for Chapter 13 bankruptcy protection, the lender almost invariably writes the debt off as a tax loss, never filing a proof of claim against the debtor.
A proof of claim is just that -evidence that money is owed by the debtor to the creditor. Creditors who wish to make a claim must do so within the proper time constraints and the claim must be valid. If the claim is not valid, the debtor or debtor's counsel can object to the claim and have it disallowed.
A claim may be invalid for a variety of reasons. Recently, a deficiency claim for over $95,000 was filed against one of my clients. Like many people, the debtors had owned a rental property which wasn't worth enough to cover the second mortgage. Their income was too high to qualify for Chapter 7 due to the means test, so they were forced to file a Chapter 13. The claim was unexpected, but came after the case plan had already been confirmed. In every Chapter 13 case a payment plan must be presented to all of the creditors. If the plan has not been objected to by a certain date, it is "confirmed" a term which is similar to a blessing from the court. In my case, the payment plan proposed to return the rental property back to the creditor in full satisfaction of the debt my client's owed. I indicated that the creditor had no valid claim against my clients because the creditor did not object to the proposed plan, that because the creditor didn't object to the confirmation of the plan that proposed to pay them no money, that creditor had lost the right to file a claim.
When a claim is objected to, creditors have thirty days to request a hearing on the objection. If the creditor does not object within the time prescribed, the judge can enter an order sustaining the objection to the claim. In this case, the creditor never responded to our objection and the judge ordered the claim disallowed. The creditor may have some options to re-open this order, but it's an uphill battle and if the case is finished faster than usual by virtue of making all payments to the trustee under a 100% plan, this creditor may never recover a dime.
If you are exploring the possibility of filing bankruptcy, you should seek the advice of an attorney. You can contact a Jacksonville Bankruptcy Lawyer or call us at (904) 685-1200 for a free 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.

When a bank wants to foreclose or repossess property from someone who has filed bankruptcy protection, that bank must obtain permission from the court for relief from the automatic stay provided by 11 USC §362. If the Judge enters an order granting that permission, the lender can then return to the county court and resume collection activities.
Select Portfolio Servicing (SPS) sought to foreclose on a mortgage held in trust by First Franklin Mortgage Loan Trust which encumbered a property possessed by a debtor in Chapter 7. SPS filed a motion for relief from automatic stay and the debtor objected on the grounds that the Mortgage Electronic Registration System (MERS) could not establish that it held an enforceable right against the property as MERS had no valid and enforceable interest in the mortgage.
States have various recording requirements for secured loans. One of the most common terms is "Perfection". A lien must be "Perfected" for it to attach to the subject property. "Perfection" is synonymous with "Recorded with the County (or state)". If a lien is not properly recorded, the lien does not attach to the property and is as unsecured as a credit card, i.e. you don't pay your mortgage and the lender can't take the homestead.
For years banks did the job of recording their liens and any subsequent assignments of their interest. However, by 1995 banks were selling mortgage notes multiple times and a MERS, a publicly traded company, came along and and offered banks a new solution to the assignment recording issue: Record the initial lien properly, then assign the interest to MERS. MERS would then buy and sell the mortgage notes 'in house' without recording those assignments and would nominate servicers to collect on unpaid mortgage notes. This method bypassed the debtor protection requirements set up by states and made things much easier for lenders.
When the New York court considered the issue, it blatantly stated, "This Court does not accept the argument that because MERS may be involved with 50% of all residential mortgages in the country, that is reason enough for this Court to turn a blind eye to the fact that this process does not comply with the law." To give permission to foreclose, the court requires that the entity requesting permission be the holder of the note and mortgage. The court in this case found that MERS, nor U.S. Bank had demonstrated no evidence that it either a valid holder of the note or mortgage nor had they validly recorded transfers with the state or county as required to remain secured. The court finished their opinion stating, "...in all future cases which involve MERS, the moving party must show that it validly holds both the mortgage and the underlying note in order to prove standing before this Court." This means that any MERS loan that attempts to obtain relief from automatic stay in New York will have to show ownership of both note and mortgage to have the right to ask for permission to foreclose.
The implications beyond this single bankruptcy case are huge. If MERS is found to be an invalid method of lien assignment and notes and mortgages have been lost the basis of perfection for hundreds of thousands of loans would be absent and all of those mortgage liens would become unsecured debts. If this were to occur, Florida borrowers could file Chapter 7 bankruptcy, discharge the unsecured mortgages and keep their homes. The impact on the banks would be severe as well as they would lose millions of dollars of home backed loans.
If you have questions about MERS or secured assets in bankruptcy, 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.

Although bankruptcy filing rates are down, the primary cause for most bankruptcies at my office is underwater home mortgages and the inability to pay those mortgages.
When someone applies for a mortgage, the bank (or mortgage broker) uses a variety of tools to determine the amount of money the applicant can borrow -and for how long. Of course, one of the factors that weighs heaviest is the borrower's ability to repay the loan. Although interest rates have varied greatly over the years, the term length of mortgages has generally increased. For instance, mortgages are usually thought to last thirty years, but now I have seen forty year mortgages and have even heard of fifty year mortgages.
Since the average age of a first-time homeowner is 34, a forty year mortgage would leave the buyer at 74 by the time they paid off their house. According to the CIA, the average American lives to be a little more than 78 years. This means that people (often couples) work almost their entire lives to pay off their homes.
Combine these grim facts with the idea that their home is now worth far less than they owe and that they have a decreased income and you have a person who is in dire need of bankruptcy if they are ever going to own a home at all.
If your home is underwater and you are unable to continue your payments, contact a Jacksonville Bankruptcy Attorney or call us at (904) 685-1200 for a free 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 average American isn't the only one facing the effects of a sunken housing market as recent sales show that even very wealthy celebrities have failed to sell their homes for near their asking price. Regis Philbin recently sold his Greenwich, Connecticut home for $3 million dollars. This may not seem like a hardship, but it's a far cry from the original $5.9 million he started at in 2008. Regardless of the price, taking three years to sell and having to drop the price by nearly half is not a good economic sign.
Mel Gibson is having similar problems selling his Greenwich home, but he is also facing a divorce- putting the actor on a tighter time line to sell. Mr. Gibson first listed him home for $38.5 million, but the price has dropped by nearly $10 million since then and it still hasn't sold.
Neither of these celebrity home sale losses are as great in percentage as Beyonce's recent sale of a condo she'd purchased for $465,000 but sold for $110,000.
Unfortunately, most Americans don't have the financial strength to handle this kind of loss. They don't actually own their homes and having to sell for less than owed forces them into bankruptcy. If you're one of the many Americans who is trapped in this situation and aren't mega rich, contact a Jacksonville Bankruptcy Lawyer 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.

As is most legal processes, bankruptcy can be a difficult thing to maneuver. There is a lot of misinformation out there, you need to be careful to get your information from a trusted source. Here are some myths regarding bankruptcy:

Myth 1: If I file for bankruptcy, everyone will know.
Like most legal proceedings, most bankruptcy documents are public record. Since I work at a law firm in the bankruptcy department, I search these records all the time. I even have a special username and password that allows me access online. However, how many times do you think your friends, family, or co-workers search through federal court records? The truth is that while your bankruptcy documents will be public information, it is unlikely that those you know would search to find them.

Myth 2: If I file for bankruptcy, I have to give up all my house.
If you are filing a Chapter 7 or Chapter 13 bankruptcy, you are often able to keep your house. Obviously, you need to be sure that you can pay your mortgage, or it would be useless to try and keep the house. But if you can afford the payments, then you can reaffirm the debt and retain your house. In a Chapter 13, you can even catch up on mortgage arrearages through your Plan, which may be all the help you need to keep your home.

Myth 3: Chapter 13 Plans require you to pay all of your unsecured debts.
A "means test" is the tool used to figure out if you qualify for a Chapter 7 or Chapter 13 bankruptcy. If you must file a Chapter 13, then a similar test tells you what your disposable monthly income is. This amount must be paid to your unsecured creditors. So, depending upon your situation, you could pay all of your unsecured debt, very little of your unsecured debt, or none at all.

Myth 4: Married couples must file bankruptcy together.
This is not true. You can file a joint petition if you want to save on court costs, but you are not required to. A Jacksonville Bankruptcy Attorney can assess your particular situation and tell you whether it is beneficial for one of you or both of you to file, based on how much debt you have, what kind of debt it is, and in whose name the debt is in. Often times it is more beneficial for one spouse to file.

To discuss any questions you have regarding bankruptcy, creditor harassment or consumer law, contact a Jacksonville Bankruptcy Attorney today at 904-685-1200 for a free consultation.

The Federal Housing Finance Agency is reviewing a proposal that would permit Judges of Chapter 13 cases to give 0.00% interest rates on FHFA loans during the duration of the five year cases. Since about 90% of all U.S. Mortgages are FHFA backed, this would allow nearly all mortgages to have zero interest rates for five years. This comes on the heels of the Federal Housing Finance Agency's plan to allow Chapter 13 bankrupt to enter modifications and attempt to reduce their principle balances.

The proposal comes with two caveats: 1. The home must be worth less than it's mortgage (46% of Florida homes are underwater) and 2. whether or not to grant the modified interest rate would be up to the bankruptcy judge.

White House spokeswoman Amy Brundage told the Financial Times that the administration is not considering this particular idea. Fortunately, this bill can become law without approval from the White House. Even if a President were to use their veto power, the bill could still be passed by a 2/3rds majority vote by both houses of Congress.

Since the creation of this bill is only under consideration, it is likely that the 2012 election will have passed by the time it gets to the president, whose policies may be different than our current leader of the executive branch.

Many people who are considering bankruptcy are concerned that they will be unable to find a place to live if they give up their home. Although I have addressed this concern in the past by calling housing complexes around the city to see if they will rent to those who are bankrupt, there are still people who worry. Of course there is always the thought, "Sure, it someone else who filed for bankruptcy found a place to rent, but it what if it won't happen for me?". It's easy to understand this concern as almost nothing is more important than having shelter, especially if you have children.

According to the Consumer Bankruptcy Project of 2007, 70% of those who who surrender their home in bankruptcy rent thereafter. Others chose to live with relatives, purchased a different house, etc. I still keep a list for my clients of properties around Jacksonville who will rent to those who file bankruptcy. If you would like more information regarding bankruptcy or would like to get your complex added to our list, contact a Jacksonville Bankruptcy Attorney or call us at (904) 685-1200 for a free consultation.

Jacksonville residents are facing some of the hardest times ever. With 46% of Florida Homes worth less than their mortgages notes, a lot of folks are considering bankruptcy.

As attorneys, it is our job to counsel our clients on what action is in their best interest. I have worked at a few different law firms and I have found that there are three schools of thought. The first thought is that the debtor should always keep the house, regardless of it's value to debt ratio. This philosophy feels that the American Dream should prevail and that every one of us deserves to own a home. While I don't disagree that we should all have the opportunity to own a home, this philosophy often fails because the debtor's income is simply too low to make the house payments. Attorneys who say that they always try to save the house either make so much money that they don't remember what it's like to struggle or even worse, they're just telling clients what they think the clients want to hear. Be wary of attorneys who only tell you what you want to hear. That's a sign of a good salesman, not of a good counselor.
The next school of thought is that the house should always be surrendered if it's under-water. This purely economical approach makes more sense than the one toting the "American Dream" and it's quite attractive. However I don't think it's enough to consider only the economics of the situation. Bankruptcy attorneys tend to think numbers, because that's what we deal in, but a wise person once said something to the effect of, "A home is more than just a house."
The final school of thought is the one I tend to subscribe to. If a home is under water I consider the individuals complete situation and ask the following questions: Does the debtor have young kids? How long as the debtor lived in the home? To what degree is it underwater? Will the debtor be able to gain the same or better financing on a home later? The list goes on. So, is keeping your home a purely economic decision as the home is just a house? No. Is the ownership of a home an inalienable right guaranteed to every American? No. Whether or not a client is advised to keep an underwater home should depend all the factors involved, be they emotional or economically driven.

If you have an underwater home and aren't sure what direction to take, contact a Jacksonville Bankruptcy Attorney or call us at (904) 685-1200 for a free consultation.

Singer Beyonce Knowles, recently sold her Miami, Florida condo for nearly 25% of what she paid for it. According to TMZ, Beyonce bought the 190 square foot condo in 2002 for $465,000 only to sell it this November for $110,000. This is a $355,000 loss on what TMZ suggests was essentially a private restroom. This is a far greater loss than most mortgage holders face, but this also wasn't Beyonce's homestead, it was a luxury property. With so many homes underwater in Florida, it's no wonder the star lost out on this investment. One things is for certain, with an income like hers, a small property like this won't be irreplaceable.