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Words of Wisdom for High School Graduates

By Jonathan on June 6, 2011

Yesterday, my son graduated from high school. His class selected a math/environmental sciences teacher named Nicole Brite to deliver the faculty address to the senior class. Ms. Brite delivered a spectacular address which was meaningful, witty and thoughtful (and she received a well deserved standing ovation from both the students and the audience).

In one part of her speech, Ms. Brite turned to the graduates and said “now I am going to offer you some words of advice that I wish someone had said to me when I was leaving high school.” One of the points she made I think is applicable to everyone, not just high school students. [Read more…] about Words of Wisdom for High School Graduates

Reaffirmation Requires Written and Signed Contract Between You and Your Creditor

By Jonathan on May 30, 2011

I have written before about the pros and cons of entering into a reaffirmation agreement with one or more of your secured creditors. On the plus side, reaffirming a secured debt gives you a degree of certainty – you are once again in a contractual relationship with your creditor. You know how much you are supposed to pay each month and you know the payoff balance, interest rate and terms of the agreement.

Further, you may be able to negotiate a more favorable deal when you reaffirm. Other than cars, secured creditors are often not set up to liquidate used merchandise and since you already have possession of the property (collateral), many lenders are happy to negotiate more favorable terms with you so they can avoid the hassle of recovering and disposing of property. This negotiation option is less true with motor vehicles, because there is an active used car market, but the negotiation option can work well when you are dealing with furniture or electronics. [Read more…] about Reaffirmation Requires Written and Signed Contract Between You and Your Creditor

Reaffirmation of Debt Need Not be Under Same Terms as Original Loan

By Jonathan on May 9, 2011

Most people know that Chapter 7 allows you to wipe out unsecured debt – credit card bills, medical debt and other signature loans. But what about secured debt – loans you are still paying to finance your home, your car, perhaps some jewelry or furniture?

This past March, I discussed redemption of property in Chapter 7. Redemption of property is a viable option but it is far less common than “reaffirmation” of debt.

Why Do You Need to Reaffirm?

Secured loans actually contain two different kinds of obligations. On one hand, you obligate yourself personally to pay a particular debt. This is typically in the form of a promissory note. The second layer of obligation ties the specific item of property to the loan. This is called a security agreement.

When you file a Chapter 7 and a discharge is issued by the judge, your personal liability on your secured debt is extinguished. This is why payments on a non-reaffirmed car loan or home loan will not be reflected on your credit reports. You have no personal obligation to pay. However, a Chapter 7 discharge does not extinguish the lender’s security interest against property. This is why a vehicle lender can repossess or a mortgage company may foreclose to recover property. In such a situation you would not have any personal liability for any deficiency amount.

A reaffirmation serves two main purposes: [Read more…] about Reaffirmation of Debt Need Not be Under Same Terms as Original Loan

How Chapter 13 Can Reduce Your Credit Card Debt Significantly

By Jonathan on May 1, 2011

There are many misconceptions that surround Chapter 13 bankruptcy. Many of the potential clients I meet mistakenly believe that they must pay back 100% of their debt in a Chapter 13, with interest.

While it is true that Chapter 13 cases can be challenging, there is nothing in the Bankruptcy Code that requires a 100% payout to all creditors. Some debts must be paid in full – generally these are secured claims, such as missed mortgage payments, car loans, furniture loans and other debts that are tied to specific property. Most (but not all) tax claims must be paid in full as well.

Unsecured debts – which includes credit card bills, medical debt and signature loans – need not be paid at 100%. In fact, I frequently file Chapter 13 repayment plans that call for 50%, 25%, or even 1% payments to unsecured creditors. This means that if you enter Chapter 13 with $50,000 in credit card debt, you may pay back as little as $500 over a 5 year period and that credit card lender is forever discharged. [Read more…] about How Chapter 13 Can Reduce Your Credit Card Debt Significantly

Bankruptcy Fraud: Don’t Cross that Line!

By Jonathan on April 15, 2011

News reports indicate that former baseball star Lenny “Nails” Dykstra has been charged with bankruptcy fraud by a California based United States Attorney. Dykstra filed for Chapter 7 bankruptcy in 2009, scheduling $31 million in debts and only $50,000 in assets.

In the complaint, prosecutors allege that Dykstra sold or destroyed over $400,000 worth of property. Among the property that Dykstra allegedly sold – presumably to raise case – were sports memorabilia and furnishings from the home he lost in the bankruptcy.

Obviously most of the Chapter 7 cases filed in the Northern District of Georgia, or in most bankruptcy courts do not involve millions of dollars of debts incurred by a high profile debtor. However, there is an important lesson that all bankruptcy filers can learn from the charges levied against Mr. Dykstra. [Read more…] about Bankruptcy Fraud: Don’t Cross that Line!