Rising Car Values And Bankruptcy

The value of your car is an important consideration when filing bankruptcy. This is because your car, like the rest of your property, must be exempted from your creditors.

Exemptions are available under state and federal law. These exemptions exempt, or protect, your personal property and real estate from being liquidated to pay your creditors. Most exemptions are sufficient to protect the property of most people.

This is also true of vehicles. The exemption must only protect your equity in the vehicle. Equity is the value of the vehicle minus what you owe. Most people owe nearly as much, or more, as the vehicle is worth. Normally, as you paid on the vehicle, the value dropped as well.

However, the shortage in car production the past two years has led to a strange situation where car values have gone up, even as the cars have gotten older. Shortages in car production have led to shortages in used cars. So, in some situations there have been problems with filing bankruptcy when individuals have some equity in their cars.

The motor vehicle exemption is $4,000.00 per debtor. The wildcard exemption can be used as well to top-up the amount. For most debtors, this issue with exemptions will only be a problem if they have paid down the car a fairly significant amount since purchasing it . This may be an issue you need to touch on with your bankruptcy attorney. Getting an accurate vehicle value will be important in ensuring that you get to keep it after filing your bankruptcy.

Contact us at 412-414-9366 to set up a free consultation to discuss your situation!

Post-Holiday Debt

The period after the holidays and leading into Spring is normally the busiest time of year for bankruptcy attorneys.

It makes sense in a lot of ways. First of all, not many people want to deal with debt and credit issues during the holidays. Which is entirely understandable. So, it is often put off until the next year sometime after New Year’s.

Another reason it is a busy time of year is because people will make resolutions to clear up their debt and credit issues. A fresh year is a good time for a fresh start. I have many new clients during this time of year who will say as much.

A less obvious reason that this is a busy time of year for bankruptcy filings is that many people are able to use their tax refunds to pay the filing fees and costs. Some clients on payment plans are able to finish them up once they receive their tax refund. You tax refund may be earmarked for repairs, household expenses, or utilities. But, using it to file bankruptcy may make your entire year easier and less stressful.

The most unfortunate reason that bankruptcies pick up in the Spring is that foreclosure actions tend to spike during the Spring. This may be especially true in 2022 as mortgage companies are once again allowed to foreclose on homes after the lengthy COVID moratorium. A Chapter 13 bankruptcy is a great way to stop a foreclosure. It allows you to catch up all arrears and fees spread out over 3 to 5 years. Even more importantly it will stop a foreclosure or even a sheriff sale up until the final moment of the action. Your home need not be in danger.

All of these reasons tend to cause bankruptcies to increase at the beginning of the year. However, it’s no reason to despair. As mentioned earlier, New Year’s is a great time for a fresh start. With the holidays behind us it is often times a good moment to get our affairs in order. If you’ve been considering filing bankruptcy, but put it off because of the holidays, call us at 412-414-9366 to set up a free consultation and see if it’s a viable option for you. The new year is a great time to end the stress related to creditors and collection actions.

Who Are These Collection Companies???

You might be finding yourself asking this question as you receive collection notices in the mail from unfamiliar companies. You know that you have credit card debt, but the companies that are collecting are entirely new. It might be a company like LVNV Funding, Midland Funding, or Portfolio Recovery Associates. Who are these companies?

Most likely, if you don’t recognize the company that is collecting from you, they probably purchased your debt from the original creditor. This is called an assignment. Unfortunately, this is generally legal. Many people who call me have hopes that these collectors can be easily dismissed. Usually they cannot. However, there are effective ways to deal with them, and sometimes you do not even need to pay them.

First of all, who are these companies? They are companies who specialize in purchasing debt, sometimes for pennies on the dollar, who then use various tactics to try and collect from you. These tactics may include calling you, sending threatening letters, or possibly even suing you. They buy the debts so cheaply that they can turn a great profit by simply collecting on a portion of the debts. So, what can you do to combat these companies and their tactics?

If you qualify for bankruptcy, these debts will almost always be dischargeable. “Dischargeable” means that any rights that these companies acquired from purchasing the debts are wiped out, as is the underlying debt. Even if these collection companies have sued you and received a judgment, the underlying debt will likely be discharged.

Bankruptcy will most likely be the most effective way to deal with these old debts. If, however, you are not able to file bankruptcy or you do not qualify, it may be possible to challenge the lawsuits filed by these companies. Oftentimes these companies will purchase the debts on the cheap, but in doing so they will not buy all of the necessary paperwork to prove what they are required to show when filing a lawsuit against you in the magistrate court. I would need to review information related to the lawsuit to see if this is an option.

Finally, in a worst-case scenario where bankruptcy is not an option and you cannot beat these companies in court, it may be necessary to come to some type of settlement agreement to pay the debt. If you have a lump sum of money available it is possible that they will take less than the full amount of money owed in a negotiation. Their willing to negotiate will vary by circumstance.

Your best option can probably be determined by speaking with an experienced bankruptcy attorney like myself. I would be happy to sit down and discuss any third-party collection agency and what we can do about them. I have been filing bankruptcy on these types of collections for almost 15 years. Do not allow these companies to threaten and scare you. They can be dealt with and disposed of. Call me at 412-414-9366 to set up a free consultation so I can help you determine your best path going forward!

Property Taxes and Bankruptcy

Property taxes are a frequent problem I hear from individuals who are considering bankruptcy.

If your property taxes are paid through an escrow account, you will likely be in arrears if you’re behind on your mortgage payment. If you have no mortgage payment, it is likely that you are responsible for paying your property taxes directly. Either way, it is important to make sure you do not fall behind, as this can lead to penalties, fees, or even foreclosure of your home.

Property taxes can be included in a bankruptcy filing, but they normally need to be paid in order for you to receive a discharge at the end. While property taxes are not dischargeable in Chapter 7 bankruptcy, they can be listed and used to reduce the equity you have in your home (search elsewhere in this blog for a discussion of “equity” and how you determine it). This can be useful if you may have too much equity and otherwise would not be able to protect it all in Chapter 7 bankruptcy.

However, if you file Chapter 7 bankruptcy when you owe property taxes, those property taxes will not be discharged or eliminated. In a Chapter 13 bankruptcy, property taxes can be included and paid over the course of the Chapter 13 bankruptcy plan. This means you can spread out the balance owed over a five-year period, if necessary. A good thing about paying property taxes through a bankruptcy is that you can limit any additional fees and penalties, though you will be responsible for paying interest. This may make it much easier to pay your balance, as property taxes may be due in full if you were behind for several years. This can lead to a sheriff sale on your property.

It should be noted that it is important to continue paying your property taxes while you are in Chapter 13 bankruptcy. If you don’t, by the end of the plan you may be caught up with older property taxes, but will owe all of the property taxes that came due over the course of the plan. This may require a second Chapter 13 bankruptcy filing, which you would ideally want to avoid.

If you are in arrears on your property taxes, call us for a free consultation at 412-414-9366. I would be happy to discuss your situation and help you determine the best plan going forward to fix the problem.

Determining Equity In Your Home

Determining the equity in your home is very important in bankruptcy law. Any equity that you have in your home must be exempted in order to protect it from your creditors. So, when you speak with a bankruptcy attorney, they are likely to ask, “how much equity do you have in your home?” What do they mean?

In short, equity is the value of your home minus anything that you owe on it.

The value of your home, at least in the bankruptcy context, is generally the current market value. This can be determined several ways. The most accurate way is to get an appraisal done. This will cost several hundred dollars, but will give the most accurate number. You may also be able to use comparable values listed on real estate websites. If your home was purchased recently and you have not made any major renovations, you may be able to use the purchase price, with a slight increase.

It should be noted that the Bankruptcy Court does not generally except tax assessment values for valuation on homes. This is because tax assessment values are notoriously inaccurate and sometimes are long out-of-date.

Once the value of your home is determined, you must next list all of the mortgages and liens against your home. Your equity is reduced by whatever you owe on the home. Obviously, this would include your first mortgage. It would also include home equity loans and second mortgages. Less obvious, but equally as important, tax liens on your home can also reduce your equity. Judgment liens can reduce it as well. When you deduct all of the mortgages and liens from the value of your home, you will have your current equity.

As an example, imagine that you have received an appraisal of your home that comes back at $200,000. You have a first mortgage of $150,000, a home equity loan of $10,000, and a tax lien of $5,000. In this example, you have a $200,000 home, minus $165,000 in liens. So, you would have $35,000 in equity. This would need to be exempted to protect it from your creditors.

Call us with any questions about bankruptcy or whether or not your home will be fully exempt from your creditors. I would be happy to discuss your situation and and see if I can help.