The Atlanta Journal and Constitution recently reported that the federal government will unveil yet another new program to help resolve the foreclosure crisis in this country (click here to read the full article).  This new proposal will make changes to the Home Affordable Refinance Program (HARP) which was introduced in 2009.    Just like all of the other programs unveiled to this date, this program will not help all consumers who own a house that is underwater.

The AJC reports that this new program will allow Georgia consumers to “shrink their payments and stay in their homes by reducing barriers to refinancing mortgages held by federally backed lenders Fannie Mae and Freddie Mac.”

What about those consumers who have mortgages that are not backed by the federal government?  I guess they are still out of luck if they want any help reducing their mortgage balances.

The AJC goes on to report that more than 30 percent of Georgia consumers (or 500,000 homeowners) owe more money on their house than it is worth.  The article reports that John Bartholomew, an Atlanta attorney for Legal Aid, states that this revamped HARP program will not help his clients because in order to qualify for HARP, the Georgia consumer must be current on all mortgage payments.

Georgia consumers can refinance their mortgage under HARP if they meet the following criteria:

1.  The consumers mortgage must have been purchased by Fannie Mae or Freddie Mac before May 31st, 2009.

2.  Consumers must be current on their mortgage payments.

3.  They must have a loan to value ratio of greater than 80 percent.

4.  The mortgage must not have been previously refinanced under HARP.

I conclude that these changes to HARP will have a minimal impact on the foreclosure crisis that is gripping all of Georgia.  As a Georgia bankruptcy attorney, the biggest problem I see is homeowners who have mortgage payments that are too high.  Unfortunately, Chapter 13 does not currently allow you to reduce your future mortgage payments.  Loan modification programs have been too complicated for most consumers to complete.  The denial of loan modifications by mortgage companies seem to be arbitrary.

The foreclosure crisis is not getting better.  In fact, it seems to be getting worse.

If you would like to read about a real solution to the national foreclosure crisis, read Why a Mortgage Cram Down Bill Is Still The Best Bet to Save the Economy.

Other Posts:

1.  What is Chapter 13?

2. What is Chapter 7?

3. How much does it cost to file?

4.  Stop Garnishment

5.  Stop Foreclosure

When a house gets foreclosed, many consumers fear that they will still owe money to the lender after the foreclosure of their home.  In Georgia, it is usually only the second mortgage companies that pursue a deficiency after a house is foreclosed.  However, the Wall Street Journal reports that many banks are now pursing deficiency judgments on the first mortgages as well (click here to read the full article).

In the article, the Journal details how mortgage companies are becoming more aggressive in Florida in pursuing these deficiency judgments after foreclosure sales.

I doubt that we will see first mortgage holders start pursuing deficiency judgments in Georgia.  Click here to read a blog post I wrote about confirmation of foreclosure in Georgia.  In my twelve years as a bankruptcy attorney, I’ve seen it happen only one time.  In almost every single case, it is complete waste of time for a mortgage company to chase a consumer who just lost their home in a foreclosure sale.

However, I have seen an increase in cases where a credit union refuses to foreclose on the house.  Instead, they sue the consumer on the note.  When they are successful in their lawsuit, the credit union will then be able to garnish twenty five percent of the consumer’s net income.

When I saw a consumer go through this type of situation, I advised him to continue living in the house while his wages were being garnished.  In his case, getting garnished was much cheaper than the mortgage payment.  Also, the amount he was being garnished for was much cheaper than renting an apartment.  In his case, the credit union was incredibly stupid by choosing to garnish his wages instead of just foreclosing on the house.

If we see first mortgage holders start to pursue deficiency judgments in Georgia after a foreclosure is completed, I doubt it will last long.  In almost every case, the consumer will file for bankruptcy and wipe out the mortgage company.  Legal fees for pursing a deficiency judgment against a consumer are expensive.  Thus, any mortgage company who chooses to pursue a deficiency judgment will most likely be throwing good money after bad.

1. What is Chapter 13?

2. What is Chapter 7?

3. How much does it cost to file?

4.  Stop Garnishment

5.  Stop Foreclosure

The Atlanta Journal Constitution has recently reported that bankruptcy filings have dropped by eight percent this year but that does not mean that the economy is improving (click here to read the full article).  You would think that with the stock market dropping and unemployment on the rise that bankruptcy filings would be climbing  but not in this awful economy.  It is so bad that many people can’t even afford to file bankruptcy.  As a result, filings are dropping.

The article reports that there is currently little pressure from creditors to file bankruptcy.  The article suggests that once the economy turns around, creditors will resume pressuring Georgia consumers for payment and the number of filings will increase.

As a Georgia bankruptcy attorney, I agree that many creditors are holding off on filing lawsuits against some Georgia debtors because they are unemployed.  However, one factor that the article did not mention was that last year, Georgia dramatically increased the filing fee for creditors to file lawsuits.  When the price of something goes up, the demand will usually come down.

I suspect that many creditors are holding off filing collection lawsuits in Georgia until the economy improves.  As a consequence, there will be many Georgia debtors who will wish that they had filed Chapter 7 when they were unemployed.

When someone has been unemployed for the past six months, there is almost zero chance that they will flunk the bankruptcy median income test.  In contrast, once they go back to work and get six months of solid income under their belts, some potential Georgia bankruptcy filers will be disappointed to discover that they now no longer qualify to file Chapter 7 but must instead file a Chapter 13 and pay back their creditors.

I realize that for many people, filing a bankruptcy is something they are desperately trying to avoid.  However, many people need to clear the decks now so that they will be able to get a fresh start once they return to work.   For some people, waiting too long to file might make getting that new start a lot tougher.

Why not take advantage of a free consultation with a Georgia bankruptcy attorney and allow them to review your entire situation?

1. What is Chapter 13?

2. What is Chapter 7?

3. How much does it cost to file?

4.  Stop Garnishment

5.  Stop Foreclosure

As a general rule, Chapter 13 bankruptcy protects you from repossession of your car.  However, what happens if you just bought the car right before filing bankruptcy?  The answer to this question in Northwest Georgia is that it depends on the facts of your case.

For example, let’s say you bought a car six months before filing.  The reason you filed is because you lost your job after you bought the car but now have found a new job.  After your bankruptcy case is filed, your car creditor files a Motion for Relief from the Automatic Stay so that they can get permission from the Bankruptcy Court to get your car back.  I don’t think that under this kind of fact scenario that a bankruptcy judge is going to allow the car creditor to repossess your car as long you have maintained insurance on it and you need the car for a legitimate reason like going back and forth to work.  Furthermore, six months is long time.

Another important question to answer when analyzing car situations is what is the percentage of debt that your unsecured creditors will receive in your Chapter 13 plan?  For example, if you are paying back all of your debts at 100 cents on the dollar, you are going to be able to keep the car.  When you are wiping out all of your unsecured debt in your Chapter 13 plan, your bankruptcy attorney will have to look at your situation carefully to make sure you will be able to keep your car.

In this next example, I want to paint a picture where I think a judge most likely would grant a Motion for Relief so that a car creditor could take the automobile.  Let’s assume you have a person who bought a car two months before filing.  Also, assume that this person has never made a single payment on the car.  Furthermore, assume that nothing in this person’s economic situation has changed since the car was purchased.  With these types of facts, I think a bankruptcy judge will most likely consider it to be abusive to the car creditor to prevent them from repossessing the car.  If a situation smells bad to an average person, it’s going to smell bad to a bankruptcy judge as well.

Every case is fact specific.  There are always exceptions.  For example, in some bankruptcy cases, the cause of filing is a creditor who has filed a lawsuit so that they can garnish their wages.  A person who is now facing garnishment clearly has suffered a change in circumstances since the purchase of the automobile.

If you have recently purchased a vehicle and you are afraid that it will get repossessed if you file bankruptcy, I strongly encourage you to sit down with an experienced bankruptcy attorney who can review your entire situation.

Other Posts:

1. What is Chapter 13?

2. What is Chapter 7?

3. How much does it cost to file?

4.  Stop Garnishment

5.  Stop Foreclosure

Bloomberg News reports that Ray Guy’s three Super Bowl rings will be auctioned off in his bankruptcy case (click here to see to full article).

The article reports that the rings are worth between $70,000.00 and $90,000.00.  I’m no expert in jewelry valuation but it seems like a Super Bowl Ring would be worth a lot more.

Ray Guy, who is from Swainsboro, Georgia, filed for bankruptcy protection in Augusta, Georgia in April 2010.  Bloomberg News reports that the IRS is the first lien holder on the rings.

The Ray Guy Award is given to the best college football punter every year by the Greater Augusta Sports Council.  Can you imagine being so good at a specific position in football that an award for the best player in that position is named after you?

It seems extremely harsh and unfair that this football great will have to sell his Super Bowl rings in his bankruptcy case.  When I was in high school, I won a few trophies when I won some races.  I still have those trophies.  If someone were to ever take them away from me, I would surely cry.  I cannot imagine the pain that Mr. Guy must feel at the thought of losing these symbols of such a tremendous achievement.

Georgia does not have any bankruptcy protection for sports memorabilia.  However, Georgia does have a total wildcard exemption of $5,600 that can be used for anything of value.

However, Mr. Guy has the IRS on his back.  Unfortunately for him, even if Georgia had an exemption in bankruptcy that protected Super Bowl Rings, it would not help Mr. Guy because the IRS lien trumps Georgia bankruptcy exemptions.

If Mr. Guy were able to propose a plan that paid the IRS back the same amount of money that they would receive if the rings were sold at auction, he would be able to keep the rings.

I am praying that somehow he will end up keeping these rings.  I like stories with a happy ending and I’m trusting that somehow things will work out well for Mr. Guy.

Other Posts:

1. What is Chapter 13?

2. What is Chapter 7?

3. How much does it cost to file?

4.  Stop Garnishment

5.  Stop Foreclosure

This economy is so bad that even the Los Angeles Dodgers have filed for bankruptcy (click here to read an article on Yahoo about this bankruptcy filing).  Frank McCourt, owner of the Dodgers, is currently embroiled in a bitter divorce proceeding.  Many speculate that the his divorce is a major factor in causing this bankruptcy filing.  The team has reported that it was on the verge of running out of cash before the bankruptcy filing.  In March of this year, Forbes reported that the Dodgers were the third most valuable team in baseball.

The combined forces of an awful economy and divorce can bring down even some of the most powerful people in our society.

The most common scenario I see where a divorce is the main cause of the bankruptcy are situations where the husband has left the wife for another women.  The wife gets left with the house payment and the children.  For whatever reason, the child support payments are not enough to cover all the household expenses and the credit card payments.  In addition, there is usually some triggering event that pushes the person over the edge.  For example, one of the children has some type of accident that forces the mother take two weeks off work to care for her child.  While medical insurance covers all of the medical bills, nothing makes up for losing two weeks of wages.

In Georgia, divorce is definitely one of the leading causes of bankruptcy.  When you take family who is used to having two incomes supporting the household and split it in half, paying the monthly bills can become impossible.  Fortunately for many Georgia consumers, Chapter 13 bankruptcy is an option.  In a Chapter 13, you can catch up house payments and car payments while eliminating credit card and medical debts.  For those who need to wipe out all of their debts and get a fresh start, Chapter 7 bankruptcy may be an option.

Sometimes, bad things happen that are beyond your control.  The best thing you can do is take control of the situation as best you can and explore all of your options.

Other Posts:

1. What is Chapter 13?

2. What is Chapter 7?

3. How much does it cost to file?

4.  Stop Garnishment

5.  Stop Foreclosure

Some people believe that a Chapter 13 bankruptcy will be a miserable experience.  The truth is that for most people, it’s a huge relief because it ends the pressure from your creditors.  Below, I’ve listed the top seven ways your life will improve after you file Chapter 13 bankruptcy.

1.  The phone calls from creditors will stop.  Any creditor that calls you after your case has been filed is violating the automatic stay   As a consequence, if they keep calling your after your case is filed, they are breaking the law.

2.  The foreclosure stops.  The thought of losing your house is scary.  Without bankruptcy, you are totally at the mercy of your mortgage company when you are behind on your house payments.  After filing Chapter 13 bankruptcy, the foreclosure stops the second your case is filed.  We do not need permission from your mortgage company.

3.   The garnishment stops.  Losing 25 percent of your net income is impossible to bear for most people.  Unfortunately for the citizens of Georgia, a creditor can garnish up to 25 percent of your disposable wages.  With Chapter 13, you don’ t have to worry about this.  Once your case is filed, we need to fax a judicial order to your payroll department to get it stopped.

4.  The lawsuit stops.  Knowing that you have a deadline to respond to a lawsuit can be extremely stressful.  Once you file Chapter 13 bankruptcy, we take care of that for you.  You won’t have to worry about the lawsuit once your case is filed.

5.  The interest rate on credit card debt is lowered to zero percent.  Without bankruptcy, most people pay between 25-30 percent interest on their credit cards.  For many people, its a struggle just make the interest payments.  In contrast, people who file Chapter 13 have the peace of knowing that there is light at the end of the tunnel.

6.  The late fees stop.  Getting nailed by a late fee is so frustrating.  Your money just goes up in smoke.  With Chapter 13, the late fees on your credit cards completely stop.

7.  The interest rate on your car note is lowered.  In  Dalton Georgia, its not uncommon to see an interest rate as high as 30 percent.  I see rates this high in the Rome, Cartersville and Dallas areas as well.   Many people pay back more in interest than the purchase price for the car!  With Chapter 13, we can lower the interest to around six percent in most cases.

There is light at the end of the tunnel.

Other Posts:

1. What is Chapter 13?

2. What is Chapter 7?

3. How much does it cost to file?

4.  How do I Stop a Garnishment in Georgia?

5.  How do I Stop a Foreclosure in Georgia?

6.  What do I need to bring to my first meeting?

The bankruptcy means test can really ruin a person’s day.  Every now and then, I meet with a high income potential Georgia bankruptcy client who ends up with a means test number that just won’t work in reality.

Usually, this person will come into my office who had a friend that recently filed bankruptcy with me (referrals are the largest source of my business).  The friend’s case went perfect and everything ended happily.  In contrast, this high income debtor gets stuck with number at the end of the means that will never work.  I hate it when that happens.

I wish I could tell you that the means test was completely logical.  Its not.  Instead, its a product of politics and we are stuck with it.  As a consequence, you generally cannot get around the bankruptcy means test.

However, there are exceptions.  For example, let’s say you received a one time bonus payment within the last six months.  If this bonus payment significantly increases your average income for the six month period prior to filing, we may be able to argue that since you will most likely never receive this type of bonus again, it should not be taken into consideration.

Another example of an exception is when a debtor received double pay while he worked in Iraq.  I had a client from Rome, Georgia who spent some time driving a truck in Iraq.  The reason his employer paid him double was because of the danger.  When he returned to Rome, Georgia  his income was cut in half.  As a consequence, the trustee allowed this fact to be taken into consideration.

A third example of a possible way to deal with a bad means test number is to consider exceptional medical costs.  In one case, I had a bankruptcy debtor from Dalton, Georgia who suffered from diabetes.  Her monthly cost for insulin and strips were over $400 per month.  When we factored this in at the end of the means, we were able to come up with a Chapter 13 plan that worked for her.

I sometimes meet with clients who come into my office expecting me to give them horrible news because they filled out some online bankruptcy means test.  In almost every case, they forgot to enter child support or daycare expenses into the equation.  My point is that you should not rely on some internet program to tell you whether or not a Chapter 13 plan will work for you.

Instead, you should meet with a bankruptcy attorney.  Allow them to look at your entire financial situation and then you will know whether or not the means test will allow either a Chapter 13 or Chapter 7 bankruptcy to work for you.

Related Posts:

1. The Big Fat Lie About the Bankruptcy Means Test.

2.  The means test cannot be ignored.

3.  What is the Means Test?

4.  Harsh results of the means test by reduced by this Supreme Court decision.

When considering bankruptcy, retirement should definitely be taken in account.

I meet with quite few potential bankruptcy clients in Dalton, Dallas, Cartersville and Rome, Georgia who reluctantly come to my office and resist the idea of bankruptcy even though economic reality demands it.  The tide usually begins to shift when we start talking about retirement.

Sometimes, I ask the question, “How soon do you plan on retiring?”

The potential bankruptcy client usually responds, “To be honest, I haven’t really thought about it.  I get at least 10 nasty creditor calls a day which stresses me out so bad that all I can think about is this debt problem.”

“Why not wipe out the debt problem and start focusing on a retirement plan?”  I will respond.

Many clients become more open to the idea of bankruptcy when they start to contemplate retirement.  When both a husband and wife are working full time, a married couple might be able to squeak by each month and make that minimum credit card payment.  However, once one of them retires, reality hits.  Half the income is gone but the bills are the same.  Actually, with twenty-five percent interest on credit card debts, they can grow rapidly.

I’ve heard many clients say to me, “I wish I had filed this case years ago.  I’m about to retire and I have no savings.”

A most disheartening situation is when a person empties out their 401k account to make payments on credit card debt.  Under Georgia law, your retirement account is 100 percent protected from your creditors.  Why would you ever want to take a protected asset and convert into cash so that you can pay a debt that could have been wiped out in a bankruptcy?

Everyone knows that you can’t retire on social security alone.  You must have some savings to cover medicine and other medical expenses.

Busting your tail to pay twenty five percent interest on your credit card debt instead of funding your 401k retirement account just isn’t smart.  Make funding your 401k a priority and if you there is nothing left for the credit card companies, you need to come see me soon.

Related Posts:

1.  Can I Keep Contributing to My 401k After I File Bankruptcy?

2.  Don’t borrow against your 401k to pay off credit cards or medical debt!

3. What is Chapter 13?

4. What is Chapter 7?

5. How much does it cost to file?

As everyone in Georgia knows, home values have been falling this past year. On the down side, this means that borrowing on the equity of your home is difficult  and if you are trying sell, you may not be able to get the price you need.

People all across Northwest Georgia, from Dalton to Rome, Cartersville, Hiram and Dallas have gasped in agony at the tumble in home values.

From a bankruptcy perspective, falling home values have helped many debtors.  The biggest upside to falling home values is that it gives many Chapter 13 debtors the opportunity to eliminate their second mortgage on their homes. If your house is worth less than what you owe on the first mortgage, you can eliminate the second mortgage in a Chapter 13 bankruptcy case. For a more detailed explanation of how this process works, click here.

Another upside of the falling homes values is that Chapter 7 bankruptcy has become much easier for many debtors.  During the housing boom, there were many debtors who needed to file for bankruptcy but could not do so because they had too much equity in their homes.  For example, married couples with more than $20,000 equity in Georgia should not file Chapter 7   In situations where the equity exceeds what can be protected by Georgia law, a Chapter 7 trustee can put a house up for sale and use excess proceeds to pay creditors.

During the housing boom, it was not uncommon to see a Chapter 7 trustee challenge the value that a debtor listed on their home.  Today, with the tremendous drop in housing values, I not personally seen trustee challenge the home values listed on the bankruptcy petition.

A great place to start when trying the determine the fair market value of your home is your tax assessor.  Take a look at your most recent tax bill.  How much did they list as the estimated fair market value?  In the past, we could not rely on this value but most tax assessors had underestimated the fair market value.  Today, this is no longer the case.

I had a recent bankruptcy case where the county tax assessor had actually overvalued the property by $40,000.00.  In this particular case, the debtor obtained an expert appraisal and overcame a creditor objection.

If you would like to explore your bankruptcy options, please do not hesitate to call me at 706-295-0030.

Related Posts:

1.  How do I wipe out my second mortgage in bankruptcy?

2. What is Chapter 13?

3. What is Chapter 7?

4. How much does it cost to file?