The rise was due in large part to the drop in the number of foreclosure sales in the first quarter of the year. But the lull in foreclosures isn't likely to last. According to market analyst, RealtyTrac, Minnesotans may soon be facing another downpour of home foreclosures.
]]> The forecast is based on statistics showing an 11 percent increase in the number of people who are headed for foreclosure. RealtyTrac reported that currently one in every 312 homeowners in the state has either received notice of a sheriff's sale or a warning indicating a sale is coming.Experts believe the rise in foreclosures is left over in large part from the robo-signing scandal, which caused most banks to suspend foreclosure processes last year while they regrouped. There is no indication of how this latest swell of foreclosures will affect the local economy as a whole
For individuals looking to save their homes, there may still be hope. Now, the timing may be right to investigate bankruptcy solutions. Changes in bankruptcy law in Minnesota have created opportunities for homeowners that previously did not exist. People now have the option of stripping off their second mortgages using Chapter 13 bankruptcy in addition to catching up on arrears. They key, however is to get legal help as soon as possible.
Source: www.startribune.com, "More Home Foreclosures on Horizon in Minnesota," Jim Buchta, 12 April 2012
]]>If the full amount off your tax refund will not be covered by your exemptions, you may want to consider spending down your tax refund before you file for bankruptcy. For a lot of individuals, whether they spend their tax refunds has less to do with choice than with necessity. Many people are not concerned about holding onto their tax refund. Some people depend on that money to pay for property taxes or other necessary living expenses.
]]> Although it is permissible to spend your tax refund on necessary living expenses, there are a few rules that every filer should live by. The following are a list of expenses generally considered reasonable and necessary:The list is not exhaustive, but more of a guide. You should always speak with your Chapter 7 bankruptcy attorney before spending any of your tax returns to make sure they are reasonable. You will also want to keep receipts and documentation for how you spent your tax refunds so you will have them available if the trustee requests proof for how you spent your refund.
There are also things that you should never do with your tax return money. The most important is to make sure you do not pay back any friends or relatives. Friends or relatives may be anxious to be repaid the money that they are owed, but it is absolutely critical that you do not pay them back.
Paying back friends or family members is considered a preferential transfer and it is prohibited by the bankruptcy code. If you do, the trustee could pursue them to recover the money so it can be distributed to your creditors.
Source: www.ehow.com, "Can You Keep Your Refund After a Chapter 7 Bankruptcy?" Pamela Parker
]]>When you file bankruptcy, a bankruptcy trustee is assigned to your case to look for any assets that are not protected by bankruptcy exemptions. In a Chapter 7 bankruptcy, part of this review will include a though examination of your tax return to see if there is any tax refund money that would not be exempt that could be used pay back creditors.
Exemptions are the laws that apply to some of your possessions that keep them from being subject to liquidation in a bankruptcy. Around this time of year, many people are concerned about making sure their tax refund will be protected when they file bankruptcy.
Whether your tax refund will be protected in bankruptcy will depend on two things: the system of exemptions you select and the amount of exemption you have available to protect your tax refund.
]]> In Minnesota, we are fortunate to have our choice of using either a federal or a state system of exemptions. There are advantages two both sets. To determine the best exemptions for you, you should speak with an experienced Minneapolis Chapter 7 bankruptcy attorney.People using federal exemptions have the benefit of a "wild card" exemption that can apply to miscellaneous assets, including your tax return. Whether there is any wild card exemption available to cover your tax refund will depend on the other personal property that you own.
Tax refunds are not protected for people using Minnesota exemptions. This is often the trade off that people make when they have a home with significant equity in it. Even when this is the case, you may still spend some of your tax refund, provided you do so before you file for bankruptcy and as long as you are spending the refund on reasonable and necessary living expenses.
Source: www.ehow.com, "Can You Keep Your Refund After a Chapter 7 Bankruptcy?" Pamela Parker
]]>You are required to file bankruptcy by law. What many do not know is that the IRS can actually assess civil penalties for failing to file your taxes as well as failing to pay the taxes that were due.
What is worse, waiting will not make them go away. The IRS' three-year statute of limitations on assessing taxes and penalties does not begin to run until after you have filed your taxes. Similarly, the 10-year statute of limitations on the IRS collecting tax liabilities will not run until you file your taxes.
]]> People struggling to keep their heads above water frequently claim a higher number of exemptions on their paystubs in order to have more money to pay bills that they owe. Inevitably, this puts most of those people in a bad position when it comes to tax time and they end up owing money.Bankruptcy and Taxes
People looking to bankruptcy to help them with their tax debt will be happy to know there are options; however they will probably need the help of a bankruptcy attorney to understand their options. There are specific rules about discharging taxes in bankruptcy.
In general, back taxes are not dischargeable unless the following has happened:
If you are dealing with other debts, waiting may not be an option. Chapter 13 bankruptcy offers people the opportunity to pay back delinquent tax debts through a repayment plan.
Source: www.forbes.com, "File Those Tax Returns," Stephen J. Dunn, 4 January 2012
]]>Cars and other vehicles are typically financed by taking out a loan. The loan is often secured by the vehicle itself. In the loan contract, there is language in it giving the lender the right to "repossess" or take back their collateral if the borrower fails to make the scheduled payment on them. The contract itself will generally state how far behind or "in default" a borrower must be before the creditor has the right to repossess the vehicle.
Lenders do not have to tell individuals when they are coming to repossess a vehicle. They can repossess a car at any time.
]]> Before their cars are taken from them, many individuals in the Twin Cities are putting a stop to repossession by filing bankruptcy. Bankruptcy works in a couple of ways to prevent repossession.First, the moment a bankruptcy is filed, the automatic stay comes into effect. What is the automatic stay? The automatic stay is an operation of law that prevents creditors from continuing to collect on debts that are owed to them. This means that lenders may not continue with efforts to repossess a vehicle while the automatic stay is in effect.
Second, a Chapter 13 bankruptcy can be used to get current on car payments. One of the advantages of Chapter 13 bankruptcy is the ability to reorganize debts to make them more affordable. In some instances, this kind of bankruptcy may help a person afford their car by making the car payment more affordable.
After a car has been repossessed, a lender has a right to sell it, after they have given the borrower notice that they intend to do so. The timeline for selling a vehicle is not long. The car may still be recovered through bankruptcy as long as it hasn't been disposed of by being sold. Because timing is critical, anyone in this unhappy predicament will want to call an experienced Minneapolis bankruptcy attorney right away to discuss their options.
Source: www.ftc.gov, "Vehicle Repossession: Understanding the Rules of the Road," FTC
]]>The mortgage fallout has left many homeowners underwater on their mortgages. The stagnant housing market has left many homeowners feeling trapped in a house they can't afford to keep and can't afford to sell.
National newspapers have made headlines with articles highlighting the benefits of stripping off second mortgages in a Chapter 13 bankruptcy. While this process appealed to many Minnesotans, it was not approved by our courts. Minneapolis bankruptcy attorneys typically tackled these problems by negotiating a settlement with a reduced payout to the second mortgage companies.
Now, a recent case may simplify the process, allowing homeowners to remove their second and third mortgages through a lien strip, eliminating the need for negotiation with mortgage lenders.
]]> The Basics of Lien StrippingWhen an individual files Chapter 13 bankruptcy they set up a plan to repay creditors over a period of three to five years. There are two kinds of creditors that are paid, secured creditors - who must be paid - and unsecured creditors. In a typical Chapter 13 bankruptcy, secured creditors are paid off with unsecured creditors receiving only a portion of what they are owed. The balance owing to unsecured creditors at the end of the bankruptcy is discharged upon the conclusion of the plan.
When a home's equity is insufficient to cover any part of the second or third mortgages, those mortgages may be subject to being stripped. The process of lien stripping in a Chapter 13 will convert the second and third mortgages from secured debts to unsecured debts.
It is important to note that lien stripping will not change the terms of the first mortgage. The first mortgage must be paid. However, the elimination of the second mortgage debt may mean the difference between being able to stay in a home and losing it.
New Case Challenges Court Ban on Stripping Off Second Mortgages
A recent Chapter 13 bankruptcy case challenged the court's long-held position regarding lien stripping. When local bankruptcy judge, Dennis O'Brien, refused to confirm a Minnesota man's Chapter 13 plan to strip off his second mortgage, he appealed. An appellate panel agreed with the man and approved his plan.
The appellate panel decision is being appealed to the 8th Circuit Court of Appeals. Although the outcome is not certain, attorneys believe the appellate panel decision will be affirmed to follow other jurisdictions. In the meantime, the appellate panel's position remains the law.
Source: www.twincities.com, "Bankruptcy Made Easier: Appeals Court Decision Allows Stripping of Second Mortgages" 13 November 2011, John Welbes
]]>Monsters on the Net
Taking out an online payday loan seems to be an easy transaction. But for many people who have turned to them in a moment of crisis, the decision to use them has come back to haunt them.
]]> The Consumer Federation of America recently took a survey of twenty different online payday loan websites. What they uncovered would be enough to put a scare into anyone. Here's what the loan companies keep buried in the fine print:
The trouble with payday loans do not stop there. Although some states, such as Illinois, have rate caps on the annual percentage rates, many loan companies claim state laws do not apply to them because of tribal immunity. According to CBS News, approximately 30% of all online loans are owned by American Indian tribes. The rate cap in Illinois is 404%.
Scary Reality for Borrowers in Minnesota
Most borrows have payday loans have troubles paying them back. According to the CFA, 75 percent of all payday loans are taken out to pay off prior loans that the debtor could no longer afford.
With interest rates that are so high, stringing borrowers along is hard to resist. Lenders actually make it difficult to pay the loan off. Borrowers either have to provide notice well in advance of the loan's due date or they have to scour the lender's website to locate the repayment terms.
Perhaps the most frightening aspect of online payday loans is that it is difficult to stop them once you get started. Online lenders typically require a borrower to authorize the lender to create a demand draft for the balance of the loan or they issue a single payment loan. Both of these methods make it impossible for the borrower to revoke their authorization under the Federal Electronic Funds Transfer Act.
Source: www.consumerfed.org, "CFA Survey of Online Payday Loan Websites," August 2011
]]>When families find themselves struggling to make ends meet, they frequently investigate debt settlement because they are afraid of how bankruptcy will affect them. What many do not realize is that debt settlement has pitfalls of its own. Before you agree to settle with a creditor, here are a few things you should know.
]]> While this blog will highlight a few of the advantages of bankruptcy, you should speak with a Minneapolis bankruptcy lawyer to fully understand the long-term effects of bankruptcy.The Downside of Debt Settlement
Debt settlement advertisements have become a frequent fixture on television over the past three years as the economy has suffered. The dark side of settlement companies is that they do not begin paying off your debts when you start paying them.
They typically collect the first three to six months worth of payments as part of their fee. During this time, your credit score could drop by as much as 200 points because of late payments. The actual hit to your credit will depend on your credit history.
The settlement agency will not begin their negotiations with your creditors until they have been paid. Agencies will generally offer to pay the creditor 30 to 50 percent of what you owe.
Even if a settlement is reached, there may be trouble ahead. The first problem is completing the agreement. Most people do not fulfill their settlement agreement. Even if you do, you could be taxed on the amount of debt that is forgiven according to SmartMoney.com. Finally, the third problem is that your credit score will still suffer. Your credit report will show the debt as being "paid" rather than "paid as agreed".
The worst part of a debt settlement is that it will not protect you from a lawsuit. Until your settlement has been paid in full, a creditor can sue you at any time.
The Advantage of Bankruptcy
When people face the threat of having their bank accounts levied or their paychecks garnished, they should explore bankruptcy, because it has a clear advantage. Once your bankruptcy has been filed with the U.S. Bankruptcy Court you are protected by law from your creditors. Creditors are prohibited from trying to collect from you either directly or through a lawsuit.
While bankruptcy will be a negative mark on your credit, this does not mean that you will never be able to get credit again. There are lenders out there that will extend credit to you to help you re-establish your credit after bankruptcy. In fact, many people are frequently surprised by offers for credit cards they receive after filing for bankruptcy.
Perhaps the greatest benefit of bankruptcy is the ability to have a fresh start. The pressure of debt and creditor collection can be stressful to anybody. Managing this strain over a prolonged period can be damaging mentally and emotionally. Bankruptcy can help you get back on the road to financial wellbeing sooner rather than later.
Source: www.sanfranciscochronicle.com, "Debt Settlement Arrangements and Your Credit Score" 8 September 2011, Angie Mohr
]]>Soon, we plan to begin posting on a variety of bankruptcy-themed topics, such as Chapter 7 bankruptcy, Chapter 13 bankruptcy, foreclosure, secured debt issues and changes in bankruptcy laws. Please check back periodically for updates or add our blog to your RSS feed for the latest news and information on bankruptcy in Minnesota. We also encourage you to comment on our posts if you wish to contribute to the conversation, as one of our goals with this blog is to incite discussion around bankruptcy law.
If you do happen to have bankruptcy questions of a personal nature, please don't hesitate to contact our New Brighton, Minnesota office directly or fill out the contact form on this site. We are ready to discuss your situation in detail.
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