That’s the question I get from my clients.  Unfortunately the answer is “almost never.”  The government instituted a sweeping, $50 billion mortgage modification program designed to keep people in their homes and reduce the rate of foreclosures.  New data indicates that this is not happening.

A new report shows that only 9% of all eligible homeowners have received modifications.  Ten banks are not participating at all.  Some of the biggest lenders are well below the national average: Bank of America modified 4% of eligible loans, Wells Fargo modified 6% of eligible loans, and Wachovia (now part of Wells Fargo) only modified 2% of eligible loans.  Associated Press - Mortgage Modifications Moving at Snail’s Pace.

The Reality of Modification

People want to modify instead of filing bankruptcy.  I completely understand that.  But the problem is that banks are not required to modify, and so they refuse to modify.  The federal mortgage bailout programs are all consensual.  That means that a bank has the choice to modify.  If a bank refuses to modify a loan, it does not lose its’ right to foreclose.  This means that the banks hold all the cards in a modification, they can refuse the offer, they can threaten you with foreclosure, and they make ludicrous modification offers.

Here is how the modification process usually works.  The bank will tell you that you need to be behind on your mortgage to get a modification.  When you are behind on your mortgage, the bank is on control.  The bank can start foreclosure proceedings, because you have missed payments.  If the bank starts a foreclosure, it will tell you to either make up your missed payments or accept its offer.  Unless you have the money to make up your missed payments, you are stuck.  Sometimes the bank will call off the foreclosure for a few weeks, so that you can get the modification.  Well by this time you are so far in the hole that the bank can make whatever modification offer it wants.  This is how you get trapped by the modification process.

Bankruptcy Is an Alternative to Modification

When you file a chapter 13, the bank is required to follow federal bankruptcy law.  During a modification a bank can do pretty much whatever it wants.  During a bankruptcy, the bank has to do what it’s told or it can be sanctioned by the federal bankruptcy court.

If the bank has started foreclosure, filing bankruptcy before the sale date stops the foreclosure.  Then you get up to five years to become current on your mortgage.  A bankruptcy cannot modify the terms of your first mortgage, but in many cases you can get rid of the second mortgage.  In many cases, getting rid of the second mortgage saves your more money than a mortgage modification would have.

Chapter 13 is an affordable option for homeowners who want to avoid foreclosure.  Plan payments are setup based on what you can afford and you can pay part of your attorney’s fees through the plan as well, which reduces the upfront cost by spreading it out over the chapter 13 plan.

For more information and a free consultation contact attorney David H. Fuller.

The Law Office of David H. Fuller is designated as a debt relief agency under the United States Bankruptcy Code and helps people file for bankruptcy under the United States Bankruptcy Code.  David H. Fuller is a Seattle bankruptcy lawyer who represents people and businesses in chapter 7 bankruptcy, chapter 13 bankruptcy, and chapter 11 bankruptcy.  David H. Fuller is only licensed to practice law in the State of Washington.  David Fuller represents people from all of King County and Pierce County, including Seattle, Renton, Kent, Tukwila, Auburn, Federal Way, Bellevue, Des Moines, Redmond, the Eastside, Sammamish, Issaquah, Burien, Tacoma, Fife, Puyallup, and Fort Lewis.  Nothing on this website constitutes legal advice or creates an attorney-client relationship.  No attorney-client relationship exists until you have signed a retainer agreement.  If you wish to establish an attorney-client relationship, then contact The Law Office of David H. Fuller.

Debt is not your fault.  Times are tough, unemployment is up, cost of living is up, and wages are down.  Thousands of people file bankruptcy every month.   Bankruptcy is a safe and responsible way out of debt.  David Fuller is a Seattle bankruptcy lawyer who can get you a fresh start.

Chapter 7 Bankruptcy:  Chapter 7 takes care of most debts in about 90 days.  Once you file chapter 7, the creditors stop harassing you and debt payments stop.  You can protect your property in a chapter 7 and you can stop lawsuits and garnishments against you.  Despite the change in the bankruptcy law, most people still qualify for a chapter 7.  An experienced Seattle bankruptcy lawyer can help you get qualified for a chapter 7.  More about Chapter 7.

Chapter 13 Bankruptcy: Chapter 13 provides affordable relief if your home is in foreclosure, you owe back taxes, you have debts that can’t be discharged in a chapter 7, or you have a high income.  Chapter 13 plan payments are affordable.  In most cases you only have to make partial repayment of debt in a chapter 13.  As a Seattle bankruptcy lawyer, David Fuller can help you create an affordable repayment plan to take care of your debts and protect your property.   More about Chapter 13.

Foreclosures and Bankruptcy: Bankruptcy is often the best way to deal with a foreclosure.  You can either keep your house or you can get enough time to find a new home.  In some cases you can reduce your mortgage payments.  A bankruptcy lawyer can help you determine if bankruptcy is the right solution to a foreclosure on your home.  More about Bankruptcy and Foreclosure.

Business Bankruptcy:  Depending on the type of business you own, you can file a chapter 7, a chapter 11, or even a chapter 13.  A business bankruptcy lets you rebuild your future, protect your business investment, and get you and your business back on the right track.  Talk to a Seattle bankruptcy attorney about your business.  More about business bankruptcy.

I am experienced with getting people a fresh start and a better financial future.  Contact David H. Fuller, a Bankruptcy Lawyer for the Seattle -Renton - Tacoma area.

The Law Office of David H. Fuller is designated as a debt relief agency under the United States Bankruptcy Code and helps people file for bankruptcy under the United States Bankruptcy Code.  David H. Fuller is a Seattle bankruptcy lawyer who represents people  in chapter 7 bankruptcy, chapter 13 bankruptcy, as well as assisting businesses in bankruptcy under chapter 11.  David H. Fuller is only licensed to practice in the State of Washington.  David Fuller represents people from all of King County, including: Seattle, Rention, Kent, Tukwila, Auburn, Federal Way, Bellevue, Des Moines, and Issaquah.  Nothing on this website constitutes legal advice and nothing on this website established an attorney-client relationship.  No attorney-client relationship exists until you have signed a retainer agreement.  If you wish to establish an attorney client-relationship contact the Law Office of David H. Fuller

If you have spent your career growing a business or developing your skills, it is often hard to admit that you need a bankruptcy lawyer.  Right now, there are many business people who are realizing that they are at risk of insolvency.  A business bankruptcy lawyer can’t print money for your business, but I can restructure your debts and hopefully save your investment of time, effort, and business capital.  The key to surviving these tough economic times is to get help before it is too late.   If you contact a bankruptcy lawyer while you still have some cash, or at least some cash flow, I can generate a plan to either reorganize your business or liquidate it, discharge the debts, and restart it for you in a new debt free form.

If your business is starting to struggle, the contact a business bankruptcy lawyer.  Many businesses can be saved if the owners contact a lawyer before it is too late.  When you are going into a business bankruptcy, your lawyer needs time to plan and structure your assets and your debts. The sooner the better for contacting a bankruptcy lawyer about your business.  But even if you need to file quickly, I can still help.

If you have reached the crisis point and there is no time left, then you need to contact a business bankruptcy lawyer immediately.  Your business still has a chance to be saved, even at the last minute.

If you own a business and need debt advice, contact David H. Fuller.

David H. Fuller is a Washington State bankruptcy lawyer representing individuals and business in the Seattle and Tacoma area, including Kent, Renton, Tukwila, Federal Way, Auburn, Bellevue, and all parts of King and Pierce County.   I am a debt relief agency.  I help people and businesses file for bankruptcy under the United States Bankruptcy Code.  No part of this website constitutes legal advice or creates an attorney client relationship.  If you wish to establish an attorney client relationship, you can contact my office for a free consultation.

Foreclosures are tough because most people want to stay in their home.   Right now, the key to saving your home is getting in touch with a lawyer as soon as possible.  I always hate to see clients who are so far gone that I can’t save their homes.  In most cases, if people get to me in time, I can work out a chapter 13 bankruptcy plan to save their house.

If you are facing a foreclosure and need help, then contact bankruptcy lawyer David H. Fuller.

David H. Fuller is a Washington State bankruptcy lawyer representing individuals and business in the Seattle and Tacoma area, including Kent, Renton, Tukwila, Federal Way, Auburn, Bellevue, and all parts of King and Pierce County.   I am a debt relief agency.  I help people and businesses file for bankruptcy under the United States Bankruptcy Code.  No part of this website constitutes legal advice or creates an attorney client relationship.  If you wish to establish an attorney client relationship, you can contact my office for a free consultation.

Getting Rid of A House Through Bankruptcy:

When you decide to give up your house through bankruptcy, you get plenty of time to find a new home, and you don’t have to make another mortgage payment.  If foreclosure has not started, then you get as much 150 days, sometimes even longer.

If the foreclosure process has already started, bankruptcy can still buy you extra time to find a new home.

Using bankruptcy to get rid of a house, means that you have time to find a new home, you can save money for the move, and you can get rid of your debts.

Keeping a house:

If your house is in foreclosure, you do not have to get rid of it.  Many people miss a few payments because of a temporary interruption in income like a layoff or an illness.   The problem is that when you get back on you feet financially the bank wants you to pay everything back all at once.  If you can’t meet the bank’s demands, then they start foreclosure proceedings.

In a chapter 13, you can pay back the missed payments over time, in a way that is affordable for you.

Chapter 13 plan payments are affordable.  The chapter 13 payment is based on what is left over after you pay all of your monthly expenses, your mortgage, and a fraction of the missed mortgage payments.  This means that  clients can pay as little as $50-$150 on top of their mortgage payment, depending on the length of their plan and their income.

Reducing Mortgage Payments:

There are two different scenarios in which you can reduce your mortgage payments.

First: If you have more than one mortgage on your primary residence, you can get rid of the additional mortgages.  These are very fact specific cases and you should call to learn about your options.

I will look at your mortgages and determine if any are eligible to be gotten rid of through a process called lien stripping.

Second:  If you own house and rent it out to someone else, then you can reduce the value of the loan to what is called the “present value,” and pay it off over 3-5 years.  This only works if the house is not your primary residence and if you can afford to pay off the remaining principal over 3-5 years.

You may not think that it is possible, but you I can sometimes find ways for you to structure all of your debt payments to pay off the principal on a rental property in 3-5 years.

Also, if the house is a rental property, then you can combine the two scenarios to get rid of junior mortgages and then pay the house off over 3-5 years.

Contact David H. Fuller, attorney at law

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David H. Fuller is a Washington State bankruptcy lawyer representing individuals and business in the Seattle and Tacoma area, including Kent, Renton, Tukwila, Federal Way, Auburn, Bellevue, and all parts of King and Pierce County.   I am a debt relief agency.  I help people and businesses file for bankruptcy under the United States Bankruptcy Code.  No part of this website constitutes legal advice or creates an attorney client relationship.  If you wish to establish an attorney client relationship, you can contact my office for a free consultation.

• Cashing out your 401k could keep you out of chapter 7.  This is because the 401k will be counted as income under the Means Test.  If you’ve taken money out of your 401k in the last six months, you need to let your bankruptcy lawyer know.  Either you need to wait for a few months to file, or your attorney can find enough deductions that that it doesn’t matter.
• If you cash out your 401k early, you have to pay taxes on it.  Early withdrawals from a 401k are taxable income.  That tax won’t be dischargeable in bankruptcy for at least three years.
• The 401k is protected in bankruptcy.  I can exempt the 401k, which means that you get to keep it.  Don’t give up a valuable asset to pay debts that are dischargeable in bankruptcy.
• The 401k is essential to your future.  You’re better off with retirement savings.

Chapter 7 Basics:

Most people file a chapter 7 because it is the fastest and easiest way to get out of debt. As soon as we file your chapter 7 petition, you get the automatic stay. The automatic stay requires that all of your creditors stop calling you stop harassing you and stop trying to collect a debt from you.

You will not lose all of your property in a chapter 7. This is a very common concern, but you should not worry about it. This is because the bankruptcy code is set up to protect your property and to give you a fresh start. In the unlikely event some of your property is subject to turnover, I can either structure your chapter 7 to protect that property or we can discuss putting you into a chapter 13.

You will not lose your house or your car in bankruptcy, if you can afford to keep making the payments. If you cannot afford to keep making the payments and you want to get rid of the house or car, then you can use chapter 7 to get rid of that property and get rid of the debt. If you are behind on house payments are car payments then, depending on the size of the missed payments, you can either come to an agreement with a creditor or we can file a chapter 13. If you’re making payments on something you want to keep it, then bankruptcy can help you do that.

About 30 days after we file your petition, we will attend a 341 meeting. The 341 meeting is in front of the chapter 7 trustee and usually takes 5 to 10 minutes. You will get your bankruptcy discharge approximately 60 to 90 days after the 341 meeting.

The chapter 7 discharge applies to all the debts that you had before you filed your bankruptcy petition. The chapter 7 discharge applies to all the debts were included in your bankruptcy. After you get a chapter 7 discharge, you are freed from all of the debts that you included in the bankruptcy. There are some exceptions to the chapter 7 discharge, most importantly child-support, alimony, and certain back taxes. Most debts they can’t be taken care of a chapter 7 can be taken care of a chapter 13.

It only costs $100 to get your case started. In most cases, people take one to three months to pay the full filing fee. The attorney fee for a regular chapter 7 is $1200-$1500. In addition, you must also pay approximately $400-$600 in court costs and due diligence fees. In most cases, the total of attorney’s fees plus court costs is $1638 to $1663. Fee quotes are all inclusive.

Chapter 13 basics:

Chapter 13 is useful for many of my clients, because it allows them to save their house from foreclosure or get a discharge for debts that the chapter 7 discharge does not cover. In addition, the chapter 13 plan payment is affordable, because it is based on your income and living expenses. Chapter 13 allows you to pay less on your debts than you would if you tried to pay off your debts without doing bankruptcy.

The chapter 13 discharge covers more debts than the chapter 7 discharge. In particular, you can get a discharge for back taxes, and you can use chapter 13 to stop foreclosure on your house. Chapter 7 will do neither of those things for you.

Chapter 13 is less expensive and easier to manage than debt consolidation or trying to pay off your debts on your own. This is because interest rate on many of your debts will be frozen and your creditors must abide by the terms of your chapter 13 plan. This means that if some of your creditors only get pennies on the dollar, then there is nothing they can do about it. You cannot get repayment terms like these outside of bankruptcy.

When you are dealing with your creditors outside of bankruptcy, they don’t care about your living expenses; they want to get paid. It is just the opposite in chapter 13. The chapter 13 plan looks at your income, then deducts your expenses, whatever is left over goes to your creditors. This means that your chapter 13 plan payment is based on what is left over, after you have paid your other expenses.

The chapter 13 plan payment is based on your income minus your expenses. When I draft a chapter 13 plan for you, I will look at your gross income and then subtract all of your expenses such as taxes, rent, mortgage, car payments, insurance payments, and all your other living expenses. Whatever is left over is the amount you are required to pay to the plan. Finally, if your income goes down during the chapter 13 plan, then you can adjust your plan payments to reflect your new income.

Chapter 13 bankruptcy runs for 3 to 5 years, during that time you make regular payments to chapter 13 trustee. The chapter 13 trustee takes each payment and distribute to each of your creditors. You don’t have to worry about which creditor gets paid or how they get paid. Your creditors are required to accept whatever is given to them by the chapter 13 trustee. Your creditors cannot ask for any more than they receive through the chapter 13 plan.

In a chapter 13, most of your attorney’s fees are paid to the chapter 13 plan. The upfront attorney’s fee is $1200, plus the cost of filing the case. It only costs $100 for me to start working on your case. Most chapter 13 cases can be started for $1638. the remainder of the fee is based on the amount of work required me to get confirmation of your chapter 13 plan and as far the fee is paid for your chapter 13 plan.

If your case needs to be filed on short notice, then this fee may be higher to reflect the additional work and the adjustments that I’ll have to make my schedule in order to get your case filed.

If you need a bankruptcy lawyer, then contact David H. Fuller.

David H. Fuller is a Washington State bankruptcy lawyer representing individuals and business in the Seattle and Tacoma area, including Kent, Renton, Tukwila, Federal Way, Auburn, Bellevue, and all parts of King and Pierce County.   I am a debt relief agency.  I help people and businesses file for bankruptcy under the United States Bankruptcy Code.  No part of this website constitutes legal advice or creates an attorney client relationship.  If you wish to establish an attorney client relationship, you can contact my office for a free consultation.

]]> http://bankruptcy.toughtimeslawyer.com/2009/01/chapter-7-and-chapter-13-explained/feed/ http://bankruptcy.toughtimeslawyer.com/2009/01/chapter-7-and-chapter-13-explained/ http://feeds.g2webmedia.net/~r/SeattleBankruptcyAttorneyBlog/~3/Ys0_KdbQa9M/ http://bankruptcy.toughtimeslawyer.com/2009/01/bankruptcy-facts-dont-believe-the-myths/#comments Thu, 01 Jan 2009 19:00:12 +0000 David Fuller http://bankruptcy.toughtimeslawyer.com/?p=99 Bankruptcy rates in Seattle and King County are soaring.  Many people are experiencing financial distress for a variety of reasons, including: job loss, lost wages, health care costs, high cost of living, mortgage adjustments, or just plain bad luck.  Right now you are facing a lot of tough decisions.  Many people hesitate to file bankruptcy because they are afraid of the consequences, they are ashamed, or they don’t understand bankruptcy process.  In this post, you will find some bankruptcy basics and get rid of some common misconceptions about bankruptcy.

• You don’t have to make any more debt payments, unless you want to.
• The phone calls stop.
• Lawsuits and garnishments stop.
• You can get your discharge in a matter of months.
• Your discharge means that you are not required to pay any of your discharged debts.

Most people qualify for a chapter 7:

• Many people think that personal bankruptcy is gone because the law changed.  That’s just not true.  Personal bankruptcy is still available to most people.
• In order to file a chapter 7, you have to pass the Means Test
• If you received a chapter 7 discharge in the last 8 years, you cannot file chapter 7 again.  But, if you received a chapter 7 or chapter 13 discharge more than 4 years ago, you can file a chapter 13.

You won’t lose your property in a chapter 7

• First of all, the Bankruptcy is meant to give you a fresh start.  For that reason, the Bankruptcy Code provides many protections for you and for your property.  The drafters of the Bankruptcy Code realized that if people lost all of their property, then bankruptcy would not do them any good.
• If you are making payments on something - like a car - and you can afford to keep making the payments after bankruptcy, then you can keep the property.
• If you have fallen behind on the payments, then you can ewalk away from the property and have the debt discharged, work out a repayment plan with the lender, or file a chapter 13.
• The bankruptcy code allows you to “exempt” property, so that you can get a fresh start.  Unless you have something that is very valuable - like a 4 carat diamond ring - your property is most likely exempt.  When your property is exempt, it means that you get to keep it during and after the bankruptcy.
• If you have a piece of very valuable property, then you still may be able to exempt it.   I can structure the unused portion of your homestead exemption and use a wild card exemption to protect the property.
• If a piece of property is so valuable that you can’t exempt it, then you can file a chapter 13.  In a chapter 13, you get to keep all of your property, no matter how valuable it is.

Once you file bankruptcy, the creditors stop harassing you.

• You get protectiono from your creditors as soon as you file the bankruptcy petition.  This is called the automatic stay.  The automatic stay means that creditors must stop calling, writing, or doing anything else to try and collect a debt from you.
• If a creditor does not obey the automatic stay, then you can get damages from them.

You are not required to appear before a judge.

• You donj’t have to go to court and appear before a judge, unless your case is unusual.  The only requirement is that you attend the 341 meeting.  The 341 meeting is often held in a courthouse, but it is in front of the trustee not the judge.
• The 341 meeting usually lasts about 5-10 minutes.  You are required to swear under oath that the information in your bankruptcy petition is true and that you have no changes to make.  Most people spend more time waiting for the meeting to start than they actually spend in the meeting.  I will represent you in the meeting and be there with you.
• Of course, if you want to bring a matter before the court, that is your right.

Once you get your chapter 7 discharge you are done.

• The discharge is automatic in most cases.  As long as you disclose everthing on your bankruptcy petition, you have nothing to worry about.
• The discharge relieves you of the obligation to pay old debts.

• The vast majority of debts are dischargeable, but some are not.  The important thing is that even if you can’t get rid of a debt, I can create breathing room so that you can actually make the payments on that debt.
  • You can’t get rid of child support or spousal support obligations in bankruptcy.
  • Certain tax debts can’t be discharged in chapter 7, but they can be taken care of in a chapter 13.  It depends on the type of tax and how old the debt is.  Talk to me and I can help you find a way to take care of your old tax debts.
  • You still have to pay debts for things you want to keep like your house and your car.
    • If you can’t afford to keep something, then you can surrender it and wipe out the debt.
    • If you surrender your house, you don’t have to give it up that day.  The lender still must foreclose on the deed of trust, a process that takes at least 120 days from start to finish.  That gives you plenty of time to find a new place to live.
  • Credit card debts are dischargeable, you if you have used your credit cards recently, then let me know so that I can make sure those recent credit card charges are included in the discharge.
  • Student loans are also tricky, but there are ways to deal with them as well.
  • There are other non-dischargeable debts for things like fraud, criminal penalties, damages caused by driving drunk, and things like that.  These don’t arise very often and can sometimes be dealt with, so that you are included in the discharge.
• Most people get all the relief they need from a chapter 7 discharge, but if you don’t, then we can talk about a chapter 13.

If you need a bankruptcy lawyer, contact David H. Fuller.

David H. Fuller is a Washington State bankruptcy lawyer representing individuals and business in the Seattle and Tacoma area, including Kent, Renton, Tukwila, Federal Way, Auburn, Bellevue, and all parts of King and Pierce County.   I am a debt relief agency.  I help people and businesses file for bankruptcy under the United States Bankruptcy Code.  No part of this website constitutes legal advice or creates an attorney client relationship.  If you wish to establish an attorney client relationship, you can contact my office for a free consultation.