Rats! I need a new car and I’m stuck in Chapter 13

Posted by Robert Weed / in Blog, Chapter 13, Chapter 13 Bankruptcy, Weekly Posts /

Do You Need to Finance a Car in Chapter 13?

The last thing you want to do is get further into debt while you are in Chapter 13.  (The goal of Chapter 13 is to get out of debt.)  But sometimes you need to–most often if you need to replace a junker car.

There are two things you need to know about financing a car while you are in Chapter 13?

First, car dealers are surprisingly eager to finance a car for people in Chapter 13.  That’s because they figure people in Chapter 13 are trying to get their lives together; but also people in Chapter 13 are stuck paying high interest rates, so those loans can be very profitable.

Second, you do need court approval to finance that car.  (The finance guys at the car dealerships usually know that and will tell you to get a letter from the court.)

Approval from the judge takes about four weeks

You need to get approval from the judge–that takes about four weeks–if nobody objects.

Here’s the info we’ll need from you, so we can put it in front of the Chapter 13 Trustee and the judge.

 

Five things we’ll need to explain to the judge and the trustee and yourself

1.  Why do you need a new car. If you had a car when your bankruptcy started, what happened to that one?
2.  What kind of a car do you want.  What’s the year, make and model.  (This court will never approve a luxury brand. And they won’t approve a souped-up economy brand either. )  What are you going to pay; where did you get the down payment, what’s the interest rate and monthly payments.  The dealership will need to give you that info. We’ll need it on their letterhead.
3. Now in three weeks that car will be gone, so don’t get attached to it.  But you’ll have court permission to get a similar car.
4. How can you afford this car? This court will never let you lower your bankruptcy payments no matter how much you need a car.  They will also turn you down no matter how much you need a car if they think you can’t afford it. So this needs a lot of explanation.
5. Is getting a car loan at a terrible interest rate really something you need to do.  Is there a way to keep your old car running a little longer?  Do you have some cheaper way to get around until your bankruptcy case is over? Are you really being smart here?

 

 

Inflation Adjustment for Family of Two Goes the Wrong Way

Posted by Robert Weed / in Weekly Posts /

Bankruptcy Means Test Inflation Adjustment for Family of Two Goes the Wrong Way

Budgeting food and clothes in the bankruptcy court for a family of two just got harder.

According to the Justice Department (who gets them from the IRS, who gets them from the Bureau of Labor Statistics), the average cost of food, clothing and miscellaneous is lower for a family of two than it was a year ago.  And, that makes no sense at all, but there it is.  

Here’s the Means Test National Standards

National Standards cover five necessary expenses: food, housekeeping supplies, apparel and services, personal care products and services, and miscellaneous.                 

                  Family Size      May 2023      May 2022    Change  

                  Family of 1        $841               $785          $+56         

                  Family of 2       $1389             $1410         $-21

                  Family of 3       $1700             $1610         $+90

                  Family of 4       $1993             $1900         $+93

 

Date of these adjustments

These adjustments for the bankruptcy means test are posted usually April 1 and then reposted May 15.  But, it was today, May 15, 2023 that I first noticed the adjustment for a family of two went the wrong way.

Bankruptcy Trustee Hearings Will Soon Be on Zoom

Posted by Robert Weed / in Blog, Virginia Bankruptcy, Weekly Posts /

Bankruptcy Court Trustee Hearings Will Soon Be On Zoom

Bankruptcy Trustee hearings are now telephonic. That started for the pandemic, effective April 9, 2020. They are moving to Zoom, soon.

Associate Attorney General Vanita Gupta made that announcement Friday at the annual convention of the National Association of Consumer Bankruptcy Attorneys.  Colorado, Wyoming, and Utah switched at the first of this year.  Ohio, Michigan and Hawaii are next.  We hope Virginia will be in the next expansion.  

Zoom Hearings Should Work Better for Everyone

Before the pandemic, people in bankruptcy often lost a day from work for their three-or-four minute bankruptcy trustee hearings. In some parts of the country people had to travel hundreds of miles to the nearest Federal Court House. Here, you could spend hours in traffic trying to get to Old Town Alexandria during the morning rush.

Doing the hearings by telephone conference call avoided that travel time; but phone hearings could often be noisy and hard to follow who was talking. Zoom should work a lot better.

Why Do We Have These Hearings?

By law, people who file bankruptcy“appear” in front of the bankruptcy trustee to answer questions.  (For most people, the questions are, “Did you go over these papers when you signed them, and is everything you put there true?”) Those hearings are called “Meeting of Creditors” although creditors rarely show up. By law are between four and six weeks after we send your papers to the court. The Alexandria bankruptcy court schedules forteen an hour. So that’s four minutes or so per case.  

Paying Your Mortgage with Money Order is a Bad Idea

Posted by Robert Weed / in After Bankruptcy, Blog, Chapter 13, Weekly Posts /

Paying Your Mortgage with Money Orders is a Bad Idea

Handing somebody a money order to buy a car or something–that’s sometimes safer than cash.  But mailing a money order to pay your mortgage–that’s almost always a bad idea.

Let me tell you about Norman.  Norman filed Chapter 13 bankruptcy with different lawyer.  He later came to see me in a panic. Selene, his mortgage company, has started to foreclose. “So have you paid on time for the fifteen month since the bankruptcy was over?” I asked.  “Absolutely,” he replied.  That was Friday.  Sunday afternoon, he sent proof.  Eleven cancelled checks and four sets of Western Union money orders.

We need to move quickly to stop that foreclosure but I don’t really have proof he made the payments. The cancelled checks–they show Selene got them.  But the money orders; who knows where they actually went.

Getting Proof from Western Union

We are sure glad Norman kept his receipts.  Western Union money orders have form on the back he can mail in–with $15.00–to track if the money orders were cashed.  And by whom.  That will be a total of $240 to track sixteen money orders.  (Western Union money orders are limited to $500; so Norman needed four money orders for each mortgage payment.)

If they haven’t been cashed, he can get his money back. If Selene cashed them, we can prove the mortgage is current. Meanwhile, the clock is ticking toward foreclosure.  Because Virginia foreclosure law was changed a few years ago, we do have enough time to work with. But no time to spare. 

Selene Violates Regulation Z and Makes This Problem Worse

When Norman filed for Chapter 13 bankruptcy, Selene stopped sending monthly to him. As far as I can tell, that’s their national policy. (I’m suing Selene because of that.) Regulation Z requires mortgage companies to send periodic statements. And expressly says that bankruptcy is NOT an excuse to stop sending statements.

If Selene had sent monthly statements, Norman could have seen right away if the money orders weren’t being properly credited.  When the case was over and Selene started sending statements, Norman couldn’t figure out what was going on.  We went to the Selene website to download the past monthly statements.  But they would only give us six months of past statements.

 

 

 

Inflation Adjustment on income–But not on Expenses

Posted by Robert Weed / in Weekly Posts /

Bankruptcy income eligibility got easier April 1, 2023

Income eligibility to file Chapter 7 bankruptcy in Virginia got easier April 1, 2023.  The median income–that’s the cutoff for automatic eligibility based on income–shot up six to ten thousand dollars.

The median income for a family of four increased from $124,304 to $134,252.  For a family of three, from $102,791 to $111,017.  For a one person household from $69,791 to $75,376.

Budget Eligibility Did NOT Change

Bankruptcy budget eligibility for people with higher incomes (incomes over the median) did NOT change. Families, and individuals, making more than those median incomes can often get approved for Chapter 7 bankruptcy. But only if they can show budget eligibility on a “means test.” Some parts of the means test use actual expenses, but some are based on fixed allowances.  Those fixated allowances have not changed.  (The food and clothing allowance for a family of five is unchanged at $1651 per month.) 

Usually, the budget allowances increase on either May 1 or May 15.  If your eligibility is border line, not filing until May might get your Chapter 7 case approved.  (Or get you a lower payment in Chapter 13.)

Consumers Do Have a Friendly Person in Charge

These bankruptcy eligibility numbers are published by the Office of the United States Trustee.  In February 2023, the Biden administration appointed Tara Twomey to be in charge there.  Tara was previously Executive Director of the National Consumer Bankruptcy Rights Center and Of Counsel to the National Consumer Law Center.  Over the last ten years she did as much as any lawyer in the country to help consumers get favorable decisions pm close questions of law.  

Her office needs information from the Internal Revenue Service to publish the budget numbers. But I know Tara will pressure them in every way possible to get those numbers published on time.  

 

 

 

 

Ten Years Out of School and Still Struggling with Student Loans?

Posted by Robert Weed / in Blog, Student Loans and Bankruptcy, Weekly Posts /

Are You Ten Years Out of School and Still Struggling with Student Loans?

Recent student loan policy changes by the Biden Administration can help people still struggling with student loans. These are new rules making it possible to discharge your student loans in bankruptcy.  In bankruptcy, you can clear your federal student loans if you can clear these three hurdles.

1. You Have to Be Bankrupt

This new policy allows you to get rid of your student loans by filing bankruptcy.  In most cases to file bankruptcy, you have to be below the median income: that means, making less money that half the people in Virginia (or your state, where you are.) 

Before this new policy, you had to be almost starving.  Certainty of hopelessness was the rule.  Now, you have to be worse off than most people. Worse off than most people–that’s something you can show.  Under the old certainty-of-hopelessness rule, there was no chance.  “That door is nailed shut,” That’s what the bankruptcy chief judge here said under the old rule.

2. You Have to Be Ten Years Out of School

The standard repayment plan for federal student loans is ten years.  At the end of ten years, if you’d been able to stay on the standard plan, you’d be paid off.  This new policy agrees that ten years of struggling with student  loans is long enough.

3. You Have to Have Tried to Pay

This new policy gives you a lot of ways to show you tried to pay. Making payments is of course the best way to show you tried.  But there are others. Applying for a lower payment shows you tried. Applying for a payment deferment–surprise–shows you tried! Signing up with a scammer who promised to help–even that shows you tried!

Did you just blow off the student loans? Then this new student loan bankruptcy policy won’t help you. You have to have tried something.

This New Plan is NOT Automatic

Student loans are still not just another debt in bankruptcy.  (Before the Education Amendments of 1976, student loans could be discharged in bankruptcy just like any other debt.)  It’s a separate legal step and it requires its own court case–an adversary proceeding–and its own attestation form. It’s not automatic. The government and the judge have to agree. But if you can clear these three hurdles, you shoulds be able to clear your student loans.

Do I have to Be Ten Years Out of School to Be Eligible Under Biden’s New Policy?

There are other factors that can also work.  Never got your degree is one. Or a medical disability. Being over sixty-five. Or chronic unemployment.  If any of those factors apply to be, you may be able to clear your debts under the Biden Administration new policy.

Are Student Loans a Good Enough Reason to File Bankruptcy?

I’ve talked to over a thousand people who were struggling with student loans.  All of them had other financial problems too.  If student loans are part of a financial burden that you can’t carry any more, it’s time to talk to a bankruptcy lawyer.  

Want to Find Out More?

Getting your NSLDS is the first step to finding out if bankruptcy can clear your student loans.  The NSLDS is the National Student Loan Data System. Your NSLDS file will give you most of the info we need on your loan.  I have instructions on how to download your NSLDS file here. 

I Just Renewed My Membership in Consumer Advocates

Posted by Robert Weed / in Weekly Posts /

Why I’m a Member of the National Association of Consumer Advocates

I’m a bankruptcy lawyer.  When I first started I said “All I do is Bankruptcy.”  What I found out is that people in financial trouble are magnates for illegal stuff being done to them.  A lot of that is fair credit reporting violations and fair debt collection violations.  

I wanted to know more about those things, so I joined the National Association of Consumer Advocates.  

I learned more about FCRA–fair credit reporting law.  And creditor harassment law–the FDCPA.   I’m NOT and expert on either of those, but I can spots violations and can sue on behalf of my bankruptcy clients.  Years ago, I posted on my website that “suing debt collectors is my hobby.”

I see a lot fewer violations than I used to.  I’m guessing that’s because enough lawyers got good at FCRA and FDCPA law that the credit bureaus and debt collectors had to get into compliance with the law.  But I’m still on the lookout for violations when I talk to my clients–and I warn them on after bankruptcy violations to look out for themselves.  

NACA is a Leader in the Fight Against Compulsory Arbitration

Compulsory arbitration is a personal hot button of mine.  The Seventh Amendment to the Constitution guarantees the right to trial by jury in civil cases.  The Federal Arbitration Act, at least as it’s been enforced, overrides that constitutional right.  NACA is a leader in the fight to change that.  

Unlike fair credit reporting and fair debt collection, compulsory arbitration is NOT something that comes up much with my bankruptcy clients.  But it’s an important consumer right.

 So I just renewed my NACA membership for another year.

Chapter 13 and Tax Relief for Seniors Save Marian’s House

Posted by Robert Weed / in Chapter 13, Chapter 13 Bankruptcy, Weekly Posts /

Marian Saves Her House from Reverse Mortgage Foreclosure: She Filed Chapter 13 and Got Fairfax Senior Citizen Tax Relief

Before her husband died, Marian had taken out a reverse mortgage on her home. That way, they hoped, she wouldn’t have a house payment and she’d never have to worry about having a place to live.

But after a couple years, Marian got a reverse mortgage foreclosure notice.

In a Reverse Mortgage, You Don’t Have a Mortgage Payment But You Still Have the Tax Payment

Having a reverse mortgage does NOT mean you have a free place to live. You don’t have to pay the bank, but you still have to pay real estate taxes and insurance. Marion’s monthly tax was $390.00–lots cheaper than rent but not free.  

The reverse mortgage company paid the real estate taxes–but Marian was required to pay reverse mortgage company back. She didn’t understand (and didn’t have much money) and so she didn’t do it. For three years. That gave the reserve mortgage company the reason to foreclose her.

Chapter 13 in the Nick of Time

Marion’s house was scheduled to be sold out from under her on July 28. We filed Chapter 13 on July 27.  That stopped the foreclosure and the Chapter 13 plan gave her five years to pay the mortgage company back for those taxes.  Wew!

But Marion now has to make the chapter 13 payment. It’s $280 a month.

                                                  

Tax Relief for Seniors Saves the Day

On top of that $280 a month Chapter 13 payment, how can Marion pay next year’s real estate taxes?  Good news. Fairfax County–like most of the counties in Northern Virginia–has tax relief for low income seniors. (Here’s the info for Loudoun. And Prince William.) She applied and got approved. No more real estate taxes. Her budget is very tight, but she will save her house.  

PS  For More Info on Danger of Reverse Mortgage Foreclosure

What happened to Marian happens a lot. And not everybody moves fast enough to stop it. The Naples Daily News had this great article in 2019 about senior citizens in reverse mortgages who end up losing their homes in foreclosure.    

 

Settling Her Debts through Americor, Sheriff Brings a Warrant

Posted by Robert Weed / in Weekly Posts /

Trying to Settle Her Debts through Americor, Liz gets a Warrant in Debt

Liz was shocked when the sheriff brought a warrant in debt for her $2680 Victoria’s Secret account.

Liz Tried to Settle Her Debts

Liz tried to settle her debts. She worked through Americor and gave them $664 per month. Victoria’s Secret was her biggest credit card, how come they hadn’t been taken care of.

She then looked at her credit report and saw only one account–CareCredit for $712–was reporting to the credit bureaus as “Settled for Less Than Full Balance.” Everybody else was just reporting “past due–charge off.” Her credit score was terrible.

Liz had been paying $664 a month to settle her debts. What had she gotten? Credit score in the low 500’s and the sheriff bringing warrant in debt papers to her door.

Bankruptcy Stops the Warrant in Debt

Frustrated and angry, Liz called me. I had done a bankruptcy for her once before back in 2011 and she remembered my name. With her new bankruptcy, the warrant in debt was blocked, and in four months, she was clear of credit card debts totalling $25,237. (Americor had told her it would take two years, and of course it didn’t work.)

Americor Reviews

PS Americor claims to be “The Nation’s Leading Provider of Consumer Credit & Debt Relief Solutions.” Mixed in with their really good Google reviews, are one-star reviews from people who had the same experience as Liz.

We knock out Dyck-O’Neal, Save Lonnie’s Clearance and his Family Home Place

Posted by Robert Weed / in Blog, Chapter 13, Chapter 13 Bankruptcy, Weekly Posts /

We knock out Dyck-O’Neal, Save Lonnie’s Clearance and his Family Home Place

Lonnie was about to lose his federal job. His clearance review showed he owed Dyck-O’Neal $127,153 from a foreclosure deficiency. He needed to take care of that. Or he’ll lose his clearance and his job.

Obviously he didn’t have $127,153.  And when we looked at it, he couldn’t file Chapter 7 bankruptcy either.  When his parents died, Lonnie had inherited a share of their home place. The parents’ home place was paid for. A Chapter 7 bankruptcy trustee would take and sell it.

Chapter 13 Bankruptcy Payment Plan–How Can He Afford it?

He needed to do a Chapter 13 bankruptcy.  To protect his clearance by paying his debts.  And protect the family home place–by paying his debts.  But, in a Chapter 13 payment plan, how much would Lonnie has to pay?

The Chapter 13 trustee demanded a payment Lonnie couldn’t afford. The trustee didn’t want the whole $127,153.  But he wanted most of that to be paid.

We solved that problem by knocking out the Dyck-O’Neal $127,153 claim. We knocked them out under the statute of limitations.

What’s the Statute of Limitations

The statute of limitations is a law that says if a creditor leaves you alone too long, they are too late. More than five years after the mortgage company accelerated the loan (starting the foreclosure process) was too late.  (That’s five years under Virginia law. Each state sets their own rules on this.)

Based on the records we had, it looked like the five years was up. Dyke-O’Neal had more complete records than us–at least they should have. But they didn’t fight.  So, we won.

Now all Lonnie has to pay are the smaller debts he was paying anyway.

 

Don’t put it off

Foreclosure or repossession? Talk to a bankruptcy lawyer right away. You probably have eligibility now–you need to find out of course.  And in three or four years when they come after you, you might not.  (Lonnie could have filed Chapter 7 when the house foreclosed; after his parents died, then he couldn’t.) Usually relying on good luck doesn’t work real well.