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HOME FORECLOSURES AND LIEN STRIPPING IN BANKRUPTCY

The filing of a bankruptcy can help avoid a home foreclosure and bring individuals current with their mortgage lenders. The automatic stay prevents creditors from taking collection action, including proceeding with a pending foreclosure or initiating one. A creditor can proceed with the foreclosure only after they obtain an Order from the Court granting relief from the automatic stay. In some instances the filing of the bankruptcy will not only act as a “Band-Aid” for your mortgage issues but can help resolve those issues. A Chapter 13 bankruptcy may be used as a tool to allow debtors to cure their mortgage arrears and bring delinquent mortgages current as long as certain criteria are met. The delinquent payments will be cured via payments made under the Chapter 13 plan and paid back over the life of the Chapter 13 plan. During this time you will also resume paying your monthly mortgage payment to ensure no additional arrears are incurred. At the end of the plan, any arrearages that existed prior to the filing of the Chapter 13 will be cured.

If you happen to have a second mortgage on your principal residence, you may also be eligible to eliminate this lien entirely. A “lien strip” occurs when there is more than one mortgage on a property and the second or even third mortgages are reclassified as unsecured debt.  First a home appraisal is needed to determine the fair market value of your home. You home must lack equity to cover the second mortgage after the first mortgage balance is taken into account. If you are eligible for a lien strip and successfully complete your Chapter 13 plan, then the remaining balance, if any, is discharged as an unsecured debt. The goal of most bankruptcies is to have your debts discharged, or forgiven.  Lien stripping is a complex process and should be discussed in depth with an experienced attorney. Please contact Hindo Law Group, PLLC at (602) 377-9369 to set up a free consultation to learn more about bankruptcy and the impacts on your home.

Disclaimer: The information in this web site is not intended to constitute legal advice or to create an attorney-client relationship. The information, documents or forms provided herein is intended for general information purposes only and must not be regarded as legal advice. Laws change periodically; therefore the information in this site may not be accurate. It is imperative that you seek legal counsel in order to ascertain your rights and obligations under the applicable law and based upon your specific circumstances.

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Bankruptcy: Is it the right option for you?

Bankruptcy: Is it the right option for you?

Financial distress is a difficult issue to cope with; however, there are ways to alleviate the stress it can cause. One option that may help to relieve financial stress is filing a bankruptcy. Deciding whether or not to file bankruptcy is a difficult task. There are several things to consider prior to filing a bankruptcy. Ask yourself the following questions. Are you currently unable to pay your bills? Are you behind on your mortgage? Are you behind on your vehicle payments? Have you been sued by your creditors? Are your wages being garnished or have your bank accounts been levied? If you answered yes to any of these questions then you may want to consider bankruptcy as an option.

Depending on your financial state you may be able to drastically reduce the amount of debt you pay to your creditors or even completely eliminate the amount you are required to pay back. This is decided by determining whether you meet the specifications for a Chapter 7 or a Chapter 13 bankruptcy. A Chapter 7 bankruptcy is a straight liquidation in which a typical debtor pays little or nothing to their creditors. A Chapter 13 is a reorganization of debt where you are responsible for paying at least a percentage of your debts back to your creditors. It is important to evaluate all factors to determine which chapter of bankruptcy, if any, is best suited for your situation.

Please contact our office to set up a free consultation to speak with an experienced attorney to determine whether or not bankruptcy is right for you.
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Tax Refund

Bankruptcy & Your Tax Refunds

 

Tax Refund

When filing a chapter 7 bankruptcy it is important to consider what will happen to your tax refund. The bankruptcy estate is entitled to a prorated portion of your next tax refund and all of your previous tax refund if it was not received prior to filing bankruptcy. The court utilizes a simple formula to determine what portion, if any, of your tax refund must be turned over to the bankruptcy estate.  First, your case will be assigned a Trustee who will oversee your case. The Trustee then has to decide if he or she is interested in the tax refund as an asset of the bankruptcy estate.  In doing so, the Trustee will first determine what the refund consists of. The Trustee will utilize the courts formula and look at what percentage of the year has passed at the point your case was filed with the court and that percentage is the amount of your tax refund which must be turned over to the bankruptcy estate.

There are strategies which can be utilized to ensure you keep your tax refund.  The most important strategy is timing. As long as you play your cards right there is a good chance of keeping your tax refunds. It is important to look at what time of the year you are filing your bankruptcy case and how filing during that time period will impact your tax refunds. You also want to make sure you are not over withholding. Oftentimes, individuals over withhold taxes intentionally so they can receive a large tax refund. When preparing for a bankruptcy it is important to not over withhold as there is a possibility of losing that large tax refund.  You should have your attorney guide you through the process, applying your unique circumstances to the applicable laws. To learn more about bankruptcy and the possible tax consequences please contact our office to speak with an experienced attorney.