One of the most frequently asked questions on the various debt and bankruptcy forums is whether a person is still responsible for debts 
their former spouse agreed to pay (or was ordered to pay) in a divorce settlement or decree. For example, a Court may divide the debts and order the husband to pay the credit card debt even if the credit cards were joint debts. The Court can give possession of the jointly-owned house to one spouse and order that spouse to make payments on the loan until it can be sold or refinanced in only one spouse’s name. Many people, quite understandably, believe that if a divorce Court clearly orders the former spouse to pay a debt, it means they are no longer responsible to pay it. Court ORDER! Makes sense, right? All of us lawyers are always preaching about reading orders to see what they actually say. Unfortunately, this is not the case. Continue Reading
Should I Buy A Car Just Before Filing For Bankruptcy?
This is another question that comes up more frequently that people might think. “I am facing financial problems, so how does it make sense for me to go out and borrow more money or use what little savings I have on an old used car???” Now…I said the question comes up frequently but the answer is what you would expect about 90%+ of the time — no, you should not buy a car! Now let’s talk about the very few people who might consider the question just a little longer.
I am going to make three very important assumptions: One, you have an absolute need for a vehicle, as most of us do for work and daily life unless we live and work where public transportation is available and do not have kids to shuttle around several places every week. Two, you do not own a reliable vehicle, or the expense of maintaining your current vehicle significantly exceeds its value, or the payments for your current vehicle are more than you can pay going forward. In short, there is a realistic possibility that you will not have a running vehicle in the next year or two. If you have basic transportation that gets you where you need to go every day, and probably will for the next few years with regular maintenance and a few repairs, then it is unlikely you need to consider buying another vehicle. This is not a post about trading up to a nicer and newer car before a bankruptcy is filed. The third and final assumption is that you have the financial means (down payment and monthly payments) to purchase a basic, reliable used vehicle that should last you several years with financing terms that are reasonable under the circumstances. That rules out “buy here, pay here” car lots. Continue Reading
Never Buy A Car At “Buy Here/Pay Here” Car Lots!
You see the signs all over the place. “BUY HERE PAY HERE!” “NO CREDIT CHECK!!” “APPROVED!!” “BAD CREDIT OK!!” This is an awesome deal for people with poor credit, such as people just out of a Bankruptcy case, right? These companies provide a good service and help people rebuild their financial lives and give them a way to get to and from work, right? Wrong! At the risk of painting with a broad brush, these dealers “get you” at every stage of the deal, from before you set foot on the lot until they get paid in full or they take the car and sell it to someone else. Lets take a look at the process of most Buy Here/Pay Here car lots. Continue Reading
Can A Trustee Sell A House That is Underwater?
In a previous post we discussed in detail the math that applies when a Chapter 7 Trustee is deciding whether or not to sell a house. In short, unless there is significant equity over and above exemptions, rarely will a Trustee be interested in taking a second look at the house. There is simply no value to the Bankruptcy estate or creditors. Why would a Trustee waste time and resources for their $60 fee in a no-asset case? A recent case in Georgia shows that there are exceptions to the general rule that a Trustee will not sell a property that is underwater (i.e., the house is worth less than the secured debt). Continue Reading
The Expensive Decision To Not Hire A Bankruptcy Lawyer.
There are a few Bankruptcy forums or Q&A sites on the internet that allow people to post general questions about Bankruptcy. Almost on a daily basis people post questions that indicate they are, or intend to, go without a lawyer and do the case themselves. Rarely does this work out well as statistics show that about 5% of Chapter 13 cases even get to confirmed plans without a lawyer and not many more Chapter 7 cases are discharged. That is only half the equation, and it leaves out what is lost by not having a lawyer. A question from today is yet another example of the expensive decision to not have a lawyer. Continue Reading
Can A Judge Deny My Reaffirmation Agreement?
Yes, a Judge can deny a reaffirmation agreement even if it is a voluntary agreement between lender and borrower. We discussed the basics of reaffirmation agreements in this post, and we also have posts about car reaffirmations and house reaffirmations. A reaffirmation agreement is, in theory, a voluntary agreement between you and a lender in which you give up the discharge of that particular debt and the lender agrees to keep taking payments and allow you to keep the collateral. Many people in Bankruptcy, especially those who decide to try it without a lawyer, believe that a reaffirmation is required and that idea usually comes from the lender (and occasionally lawyers who do not know what they are doing). As an added level of protection (beyond good advice from a lawyer), Bankruptcy law generally requires that reaffirmation agreements be approved by the court when the schedules reflect that monthly expenses (including the monthly payment at issue) exceed income or the borrower does not have a lawyer. Continue Reading
Why Do Bankruptcy Lawyers Hate Dave Ramsey?
“Hate” may be a strong word, and it almost always is, so let’s change it to “dislike” or “disagree with” Dave Ramsey. If you do not know who Dave Ramsey is, you might not be interested in this post, but you can read his biography here. In short, he is a “financial planning guru” (my term) who writes books and materials and conducts seminars on how to get out of debt. There is nothing new or novel about his teachings, as it is based on cutting the budget (sometimes drastically) and starting to knock out debts one by one. I could explain it further, but Dave has a podcast and if you listen for 15-20 minutes you will probably get the picture.
Back to the question – why do Bankruptcy lawyers “dislike” Dave Ramsey. Simple – because he is anti-bankruptcy. Very anti-bankruptcy. His favorite term is “rice and bean, beans and rice” and he applies it to groceries as well as houses, vehicles, entertainment and everything else. It means to spend the bare minimum on absolute necessities and using all available funds to pay down debt. That means a 12 year old car that runs well. Selling a house that is more than you need and can afford and renting instead. You get the picture. Here are the usual major objections to Ramsey’s programs in general (as opposed to disagreeing with specific advice): Continue Reading
The Game Is Over For Chapter 7 Lien Stripping In Georgia, Alabama And Florida
For the past couple of years one of the benefits of being in the 11th Circuit states (Georgia, Florida and Alabama) is that you could strip an unsecured junior lien from a house. These states were the only states in which this was available and it was because a higher court approved it. This all came to an abrupt end on June 1, 2015 when the United States Supreme Court overruled the 11th Circuit and said the 11th Circuit was not properly following the law. A detailed analysis of the law is generally beyond the scope of this site, but you can read a more detailed discussion of Bank of America, N.A. v. Caulkett, No. 13-1421 (June 1, 2015) by clicking here.
If you are one of the fortunate people who were able to take advantage of this benefit, how does the recent decision affect you? Most likely, it does not affect your case at all. Supreme Court cases like this are generally affective after the opinion is entered and do not relate back to prior cases. Even if a lien stripping order was entered by the Bankruptcy Court just a few days before the Supreme Court order was entered, as long as the lender did not timely appeal or request reconsideration the lien is stripped. It is important to note that the Supreme Court did not rule that lien stripping was, in any way, unconstitutional. They merely interpreted the law and anytime Congress chooses to allow lien stripping in a Chapter 7 case they can change the law.
Atlanta-Based Debt Collector, Zenith Financial Group, Shuts Down
The Governor’s Office of Consumer Protection recently shut down Zenith Financial Group, a Metro Atlanta-based collection agency. As part of the agreement, Zenith agreed to cease collections on $3.1 in purported debt.
Zenith was accused of violating the Georgia Fair Business Practices Act by threatening consumers with arrest or imprisonment and concealing that its collectors were contacting consumers to collect a debt and any information they obtained could be used for that purpose.
If you receive a call from anyone attempting to collect a debt on behalf of Zenith, make notes of the call and contact the Office of Consumer Affairs. However, if you do have a legitimate debt Zenith was attempting to collect there is likely nothing stopping another collection agency from taking over the account, at least according to the articles and press releases. If you receive calls from another agency that claims to have taken over a debt from Zenith, it is probably still a good idea to contact the OCP.
Buying A House After Bankruptcy – What’s Wrong With Renting?
Houses can be great long term investments, or they can drag you into Bankruptcy. They are usually your biggest investment, and your largest debt burden. Some people have a great emotional attachment to their house, as is the home in which they raised a family. As Bankruptcy lawyers, we are frequently asked by clients or potential clients when they can expect to be able to buy a house after Bankruptcy. Often, it is their house debt that led to the Bankruptcy filing in the first place. The goal of buying a house is almost always a good goal to have, but often I will ask “what is the rush?” Why go through a Bankruptcy to get out of debt, and then try to rush to get back into debt? Although many lawyers advise (often as a sales pitch) that the clients can buy a house in only a couple of years after Bankruptcy, is that the best course of action? Continue Reading