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15

Mar 2020

Virus update–March trustee hearings cancelled

Posted by / in Blog, Weekly Posts /

Virus update–March trustee hearings cancelled.

No rescheduling plan has been announced yet. (Will there be a call-in plan instead??)

The Judges here in the Alexandria VA bankruptcy court have invited the lawyers to a conference call on Wednesday. We may know more after that.

Bankruptcy trustee hearings are at 1376 Duke Street

This is a picture of 1376 Duke St. Trustee hearings, which are held here, are suspended through March.

This announcement applies only to the trustee hearings.  Those are the ones that take place at 1725 Duke Street.  The court hearings, at 200 S Washington Street–those are still on.

 

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12

Mar 2020

After Bankruptcy, OneMain Offers Car Reaffirmation Negotiation

Posted by / in After Bankruptcy, Blog /

In the last few months, OneMain has been contacting me about reaffirmation negotiation on car loans.

That took me by surprise.

With the exception of Ford Credit, I’ve been strongly opposed to reaffirming cars.  Usually you can keep the car without reaffirming. and then give it back when your credit improves. I explain more about that, here. 

Car reaffirmation take it or leave it

Most car reaffirmations come to me on original terms, full balance, take it or leave it. OneMain is NOT doing that.

OneMain figured out that they don’t want you to give them the car back when your credit improves, so they are offering you a better deal now. Up ’til now, I had never seen a car finance company really offer car reaffirmation negotiation. They wanted people to reaffirm the entire balance at the current interest rate on a take it or leave it basis. 

But OneMain has come through with real balance and interest reductions. Taking a terrible loan and making it pretty good. If that’s on a car that you have been taking good care of–and been lucky to avoid problems with–then that makes sense.

Basically, here’s how this works. Get an accurate value on your car. Kelly Blue Book is one place. (Carmax used to offer to appraise any car, but apparently they stopped.) We need to email OneMain, at this email cbp@omf.com, with the Blue Book value and say we’re willing to reaffirm based on that value at 6.0%.  

OneMain then will send back a reaffirmation on that basis. At least a lot of the time. (Sometimes I’ve seen them add a little.)

PS  I need to apologize to one of my clients last year, Kandy. Kandy believed OneMain’s offer when I thought it was just more smoke and mirrors. She was right and I was wrong. OneMain does seem to genuinely be willing to work out a new deal for you to keep the car.  This is my apology, Kandy.

 

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31

Jan 2020

Bankruptcy Solves Rod’s Security Clearance Problem

Posted by / in Blog, Weekly Posts /

Two weeks after filing bankruptcy, Rod got his security clearance.

Rod contacted me from a military base in the Midwest. The military wanted to give him a new assignment, in the DC area, with more responsibility. His wife and children had already rented a place and moved, while he was awaiting orders.

 

At the last minute, he couldn’t go.

 

Rod’s credit had gotten messed up with a repossession and he couldn’t get cleared to take his new assignment. So, he called me.

 

File bankruptcy to clear car repossession and get security clearance.

Rod’s credit had gotten messed up with a car repossession. So he could get his security clearance.

His chain of command told him he needed to file bankruptcy right away.

 

We got the papers signed and sent into the court within a week.

 

Five weeks later we met at his bankruptcy hearing. Rod told me he had been cleared to take the new job three days after his bankruptcy was filed. He was on the job in two weeks. Life was great.

 

Have you heard filing bankruptcy is bad for your security clearance?

 

Many people still believe that filing bankruptcy will damage your security clearance. (I talked to one just last week.)

 

Rod’s experience shows the opposite.

 

Now for sure, the best thing is to never get into financial trouble. But if you do, the military wants you to clear it up. NOT cover it up.

 

The chain of command really wanted Rod in that job. But they couldn’t get him cleared until he cleaned up his credit. Bankruptcy cleaned up his credit.

 

(Careful readers may have three questions. First, was Rod eligible to file in Virginia? Rod had signed a lease three months before, and had moved his family. I said Rod became a resident when he signed the lease. And nobody had any reason to question it. Second, did I have Rod sign the papers without ever meeting him in person? Yes I did. That’s strongly discouraged, but since he was away on military assignment, I decided in this case it would be OK. And I was careful to get enough ID I was sure I knew who I was talking to. Third, is this typical? No. I’ve NEVER heard of a security clearance problem being fixed in three days. Obviously the chain of command really wanted Rod available for this job.)

 

 

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30

Jan 2020

Right After Bankruptcy, Carla Signed on a Car Loan

Posted by / in After Bankruptcy, Weekly Posts /

Right After Bankruptcy, Carla Signed on a Car Loan and She’s Probably Gonna Lose Her House

I tell people please please please, do not get a car loan until at least two years after your Chapter 7 bankruptcy.

 

Two years after bankruptcy, I’m seeing people get car loans in the 6%-8% range. Three years in the 2%-4% range.

 

So please please please do NOT tie yourself to a 24% car loan right after filing bankruptcy. Here’s a true story that tell you why not.

 

after bankruptcy car loan

Please please please do not tie yourself to a 24% car loan right after bankruptcy.

Carla filed bankruptcy with me in 2014. Six months later, she co-signed on a car loan for her sister. The loan was financed by Credit Acceptance, at 24% interest. 

 

After a year, the sister stopped paying. Carla paid for a while, but when she stopped, or course that car got repossessed January 2017.

 

Fast forward to 2019. Credit Acceptance gets a judgment for $8600, attaches that Judgment to Carla’s house, and puts a garnishment on her pay check.

 

Carla is stuck. She can’t afford the house payment while being garnished. It’s too soon to file Chapter 7 bankruptcy, again. And if she could, the equity she’s built up since 2014 means the bankruptcy court would take and sell her house. And while she’s eligible for a Chapter 13 bankruptcy payment plan, she can’t afford that payment, either. (Under Virginia law, with terrible equity protection for single people, her Chapter 13 would have to pay all her debts in full.)

 

Two mistakes. First co-signing for someone whose credit was worse that hers!! Second, letting the dealer arrange financing at a terrible rate.

 

If you have to finance a car shortly after bankruptcy, shop for the car loan, before you shop for the car.

While it’s especially important right after bankruptcy, that’s always good advice. Shop for the car loan, before you shop for the car. (Unless the factory is having trouble selling their cars, dealer financing will always be more expensive than the best loan you can get for yourself.)

 

Sometimes, some people have no choice. They have to finance a car just a few months after bankruptcy. If you really have to, here are some of the places you can look.

 

722 Redemption Funding. These people are in the business of car loans immediately after bankruptcy is filed. they will put you in a bad loan; but probably a much better loan than the horrible loan a car dealer would recommend.

Bankruptcydrive.com is a new company that contacted me recently. I don’t know much about them.

Tower Federal Credit Union. Tower is the largest credit union in Maryland, and they make car loans to people in Virginia. I’ve seen them make loans to people right after bankruptcy that were better than I expected.

 

I’m not recommending any of these three. What I recommend is getting at least two years after your bankruptcy discharge before you finance a car. But if for some reason you can’t wait, shop for the loan before you shop for the car. And shop at least three places: try to get the best bad deal you can get.  

 

 

 

 

 

 

 

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19

Jan 2020

How Chapter 7 Real Estate Sales Benefit Insiders

Posted by / in Virginia Chapter 7 Bankruptcy, Weekly Posts /

How Chapter 7 Real Estate Sales Benefit Insiders

Randa filed Chapter 13 bankruptcy in March 2019. She was hoping to be able to save the family home, by catching up the mortgage over five years. Her husband was recovering from a long illness and was able to work full time again, making the catch up payment possible.

As it turned out, the husband did not recover from his illness; he died. So, Randa moved out, to live with her adult son. And the bankruptcy  case was converted to Chapter 7.

The Chapter 7 trustee told creditors and the court that this would be an “asset case.” He hoped to be able to sell the property and use the equity to at least pay off part of the tax debt of Randa and her husband.

In this case, there will be no money to pay anyone—except the “professionals.”

In March 2019, when the bankruptcy was started, Randa valued the house at $476,000. That was what the house next door had sold for. The Chapter 7 trustee listed it for sale at $484,900. But the best offer was $450,000.

(Real estate in bankruptcy will often sell for less than the going market. The family has NOT fixed it up for sale, and likely has put off maintenance during the financial, or medical, distress.)

Chapter 7 real estate sales

The trustee’s real estate agent received a $13,500 commission.

The mortgage on the house was $403,500. (Randa has estimated $400,000; not far off.) At the real estate closing, each real estate agent, for buyer and seller, collected 3% commissions: $13,500 each. There were miscellaneous costs of around $1000.

That left $18,000 for the bankruptcy trustee. Does that money go to pay the IRS taxes? Well, no.

Why No Money goes to pay the taxes

The Chapter 7 Trustee is entitled to commissions totaling $24,750. (The trustee fee is $5750 on the first $50,000 of the sale and 5% after that. For cases where there are no assets sold, the trustee gets $60.00. So it’s easy to see why trustees want and need these real estate sale cases.)

In addition, the trustee hired himself (actually his own law firm) to handle legal matters—at $580.00 an hour. That bill will be about $5800.00.

No money is left for anyone else.

The trustee’s real estate agent, who originally listed the property at $484,900, makes $13,500. The trustee and his law firm will take a “haircut.” They will get only get $18,000 out of their $30,550 bills.

There’s no money to pay the taxes, or anybody else.

In this case, insiders are winners, but there are no losers. Randa had moved out and didn’t care about the house. The IRS got nothing, but lost nothing.

Does the Chapter 7 trustee sell the house that people want to keep?

Here’s what sometimes happens instead.

The trustee’s agent projects a high listing price: high enough that the creditors would get paid a little something. (If this house had sold for the original listing price, there would have been around $20,000 to pay the taxes.)

The Chapter 7 trustee uses that high estimate to invite the bankruptcy debtors to “buy back” the equity in the house, by making a cash payment to the trustee of say $10,000.00. (This assumes the debtor is able to round up $10,000.)

Chapter 7 real estate sales

One of the Chapter 7 trustees in Alexandria can be very aggressive in demanding cash buy-backs from debtors. Even in cases where the creditors would actually get nothing in a sale.

One of the Chapter 7 trustees in Alexandria can be very aggressive in demanding buy-backs from debtors. Even in cases where the creditors would get nothing in a sale. And the Chapter 13 trustee can use high estimates of real estate values, to demand higher payments into Chapter 13 plans. That gets debtors into Chapter 13 payments they can’t afford, and they end up losing their homes in Chapter 13.

The trustee who sold Randa’s house, almost never sells property where there’s no actual equity. (I’m confident he genuinely believed there would be money to pay the taxes. But there wasn’t.)

It is tough for a Chapter 7 debtor to resist a trustee demand for a buy-back. They can ask the judge to compel an abandonment of the property. But it’s easy for the judge to just say, “let’s see what it sells for.” Once the house is listed for sale, it’s hard to stop. So, the pressure to agree to a buy-back can be unbearable.

Where there’s a buy-back demanded and paid, the Judge signs off on the compromise, without having to consider whether the agreement is extortionate, rather than voluntary.

There were 4,453 bankruptcies filed in the Alexandria division in 2019. That’s down from a high of 10,953 in 2010. On that reduced volume, Chapter 7 trustees can’t survive on the $60.00 fees they get for each case. So each year the pressure on the trustees to generate big fees from real estate cases gets higher and higher.

Can anything be done?

Debtors in Chapter 7 bankruptcy cases in Virginia are able to protect up to $5,000 in real estate equity. That’s the lowest of the 50 states and the District of Columbia. The Virginia General Assembly is considering legislation to raise that $25,000—which would still be among the lowest in the nation. That would help in many cases prevent transactions where the creditors get little or nothing, while debtor families either pay the buy-back or lose their homes.

The bankruptcy case number is 19-10800-KHK.

       

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14

Dec 2019

Credit Card Offers Come Faster Than You Expect

Posted by / in Weekly Posts /

After bankruptcy credit card offers come faster than you think

Have you heard the lie? The lie that filing filing bankruptcy means seven years with bad credit. You after bankruptcy credit will be better than most people expect.

After bankruptcy credit card

                                                 Here’s the after bankruptcy credit card offer “Eddie” got two months after his bankruptcy was approved.

 

The truth about after bankruptcy credit

The truth is the opposite of that bad credit lie.  Two months after bankruptcy, you start getting pre-approved credit card offers. (I know that’s true,because a lot of the offers, by mistake, come to my address.)  After thee years, most people have the best credit of their lives.

Are you putting off filing bankruptcy in order to “protect your credit?”  Then we need to talk.

Eddie, not his real name, got his pre-approved $700 credit card offer, ten weeks after his bankruptcy was over.  I tell people, the best way to rebuild is to have three or four credit cards, use and pay them, stay way below your credit limits.

Better Credit is one of the 5 Ways Bankruptcy gives you a fresh start.

A study by the New York Federal Reserve Bank show that people enjoy a sharp boost in their credit score after bankruptcy. The Philadelphia Federal Reserve found that people with a 540 credit score before bankruptcy usually were are 620 right after. For most people, bankruptcy works.

 

 

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NORTHERN VIRGINIA BANKRUPTCY LAW OFFICES