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Why Should I Hire an Attorney for Bankruptcy?

July 10, 2013 Leave a comment

You may be asking yourself, “Why do I need to hire an attorney to file bankruptcy?” You may also think, “I’ve done some research and I’ve seen the forms to fill out. It seems simple enough.”  The answer is: Bankruptcy isn’t as easy as a process as you may think. Time and again, we have people come to us telling us that they tried to file bankruptcy for themselves but their case was dismissed. In truth, the cost of fixing errors that are made in representing yourself can add up and you probably would have been better off having an attorney handle your case in the first place.

Representing yourself in a bankruptcy matter is referred to as filing pro se. Just like a traffic ticket, you are welcome to represent yourself in bankruptcy. However, as many people find out later (when it is too late), it is often necessary to have appropriate representation from an attorney with experience to make sure your interests are protected and you get the most favorable outcome available to you in the matter.

Last week, I saw a number of pro se cases that had problems when the petitioners came to their First Meeting of Creditors. This is a meeting where you are asked questions by the trustee of your bankruptcy to make sure everything in your petition is correct. Frequently, pro se filers make mistakes that require amendments to their petitions and coming back to attend future meetings. While it is not impossible for a mistake to be made in a petition filed by an attorney, the chances of having your bankruptcy go smoothly without any problems is a lot better if you have representation.

An attorney will know where your debts and assets need to be listed to prevent problems. Many times I will hear pro se filers say things like “I didn’t think I needed to list THAT.” Your attorney will be able to tell you what needs to be listed and what does not. Also, your attorney will be able to give you advice on when the best time to file will be. If a petition is filed too soon or too late, there may be debts that would have been discharged but will not be if the petition was filed at the wrong time. Finally, your attorney will know how to properly use the available exemptions to protect your property. This can become an issue if you have moved from one state to another within the last two years prior to filing. Some states provide for more property to be exempted from the bankruptcy estate than others. In some situations, the even more generous Federal exemptions may be available to a petitioner.

If you are considering bankruptcy and would like more information about your options, call our office and make an appointment to see one of our attorneys. We offer free consultations and you can discuss what chapter of bankruptcy will best suit your situation.

Rebuilding Your Credit After Bankruptcy

May 23, 2013 Leave a comment

What will bankruptcy do to my credit? This is probably the question most often asked by our clients and potential clients when they are considering bankruptcy. While each client will have a different experience based on their individual circumstances, the question to the answer remains the same. It is absolutely possible to rebuild your credit after filing for bankruptcy.

Bankruptcy is an option available to consumers and businesses to help them recover. It is not an end of the world scenario or a fork in the road as to whether or not they will ever be able to get credit in the future. Filing for bankruptcy will cause your credit score to drop considerably at the time of filing. However, it is possible and common to be able to rebuild your credit score within two or three years after a bankruptcy. While the bankruptcy remains on your credit report for ten years, it will not prevent you from being able to get credit. In fact, the best way to rebuild your credit is to use credit again.

A large factor in your ability to get credit is your income to debt ratio. After filing for bankruptcy and getting your past debts discharged, your income to debt ratio will probably be at its best level in a very long time. Many clients tell us they get credit card offers within weeks and sometimes days after filing or getting their debt discharge date. The important thing to realize is that the interest rates on these credit cards will be higher than they were before. Bankruptcy petitioners are required to complete a credit counseling course that will explain this and help you to guard against getting into the same situations that led to a bankruptcy. Using credit responsibly by buying based on needs instead of wants will help to keep your balances at levels you can handle. It will make you able to pay more than just the minimum payment, or the entire balance, and prevent the interest from tacking on to what you owe.

Living within your means is perhaps the most important step in rebuilding your credit after filing for bankruptcy. Since the economic recession hit a few years ago, nearly everyone has had to cut back on luxuries and everyday expenses to make ends meet. Nightly news stories and newspaper articles constantly show people who have been able to adjust and budget themselves into success and regained prosperity.

Whether it was a lost job, unforeseen medical expenses, a downturn in business, poor financial planning, or youthful inexperience that led you to needing to consider bankruptcy, the most important thing to remember is that bankruptcy is there to help you get back on your feet and not to ruin your credit for the rest of your life.

Will My Judgment or Settlement be Discharged in Bankruptcy?

May 23, 2013 Leave a comment

A common question that people considering bankruptcy may have is whether or not a judgment that has been entered against them will be discharged through their bankruptcy. The short answer is that in many cases the answer is yes, but there are some circumstances that won’t discharge the debt.

For example, let’s say someone has gone to court and obtained a judgment against you for past due rent. Typically, this judgment can be discharged through a Chapter 7 bankruptcy and that debt will no longer be owed. While the landlord would still be able to follow through with an eviction before filing, the debt could be discharged in bankruptcy.

However, let’s say a municipal utility company gets a judgment against you for a past due utility on your home. In this case, the judgment may remain if the utility company seeks to add a lien on your property with that judgment. The judgment lien would remain on your property if you go through bankruptcy. If you were to sell your home at a later date, the lien would be paid out of the proceeds of the sale of the house.

In another example, let’s say you have entered into a settlement agreement with someone who brought a claim against you. Some settlement agreements contain standard language that doesn’t contemplate the defendant filing for bankruptcy at a later date. If this is the case, the settlement can be discharged through bankruptcy under the right circumstances.

Some settlement agreements will contain language that will protect the plaintiff in case the defendant files bankruptcy. Some examples of this would be requiring a guarantor for the defendant or having a third party make the payments to the plaintiff on behalf of the defendant. If the settlement agreement requires a guarantor then the defendant would be discharged of the debt through bankruptcy, but the plaintiff would still be paid by the guarantor. If the third party is contracted to make the payments, the plaintiff would have protection from the bankruptcy trustee attempting to recover the settlement payments.

However, some settlements or court ordered payments are not dischargeable. The bankruptcy code takes public policy considerations and prevents certain debts from being discharged. Obligations like alimony and child support will not be discharged through bankruptcy. If a settlement is the result of a defendant’s “bad act” it may survive bankruptcy as well. For example, if you have a settlement to pay due to a drunk driving accident, it is very unlikely to be discharged. But, the plaintiff will have to file suit again in bankruptcy to preserve the settlement and prevent discharge. In this situation, if the settlement agreement contains an admission of fault by the defendant then the settlement is nearly guaranteed to survive bankruptcy. If it does not, the issue of fault will need to be determined by the bankruptcy court. Other examples of non-dischargeable settlement obligations would be those involving repayment for property obtained by false pretenses, such as fraud or embezzlement. Again, the language of the settlement agreement would determine if the issue of guilt would need to be litigated again.

To find out your options with bankruptcy and any judgments or settlements you may have, contact our office and talk with one of our attorneys.

Missouri Anti-Mediation Foreclosure Bill Gaining Traction

In an update from a previous post, a bill that would prevent local governments from being able to require lenders to offer mediation to homeowners facing foreclosure is nearing passage in the Missouri Senate. The bill, passed by the Missouri House of Representatives a few weeks ago, would directly oppose ordinances passed in St. Louis and St. Louis County over the past few months. If the Senate passes the bill, it would soon make the St. Louis ordinances null and void.

                A Senate committee approved House Bill 446 last week after a review. The bill now awaits an official vote by the entire Senate. Basically, the bill would prevent local governments in Missouri from adding requirements to agreements between lenders and borrowers in real estate transactions. This preventative measure directly opposes the St. Louis and St. Louis County ordinances that provide for the option of the borrower to elect mediation between themselves and their lender when a foreclosure is imminent.

                The St. Louis area ordinances seek to prevent mistakes, hardships, and economic loss that all occur during the foreclosure process. In a foreclosure, the lenders don’t simply get the property back that they lent the money for the borrower to purchase. The lenders argue that they suffer from the added costs of going through mediation and that the process usually just delays an inevitable foreclosure. However, if mediation is successful and the loan is modified to terms that the borrower can afford to pay, the lender is back on track to collecting the remaining balance on the loan. The process of getting the foreclosure is much more costly. There are court costs, legal fees, and ultimately the loss incurred when the property almost always sells for well below the original purchase price or its current market value. The lenders are not the only party to a foreclosure that faces financial burdens. The homeowners also face moving costs, legal fees, and the loss of the investment they had made in their foreclosed home. The economic loss, however, is sometimes nothing compared to the stress and anguish involved in a family losing the place they called home, moving away from family and friends, and children changing schools.

                Neighbors also lose out when someone in the neighborhood loses their home to a foreclosure. The foreclosed property oftentimes isn’t maintained properly, due to the homeowner not being able to afford it or because the property sits empty with no one to keep an eye on it. Property values in the neighborhood suffer when this happens and are especially hurt when the selling price of the homes is far less than what it should be.

                If you believe you are in danger of facing a foreclosure and would like to know more about your options with bankruptcy, or if you have any other questions about foreclosure and bankruptcy, please contact our offices to see if bankruptcy may be an option for you.

Illinois Supreme Court Adopts Foreclosure Mediation Requirements

        Last week, I gave an update on the status of foreclosure mediation ordinances in St. Louis City and St. Louis County that are currently being challenged in the courts by lenders in Missouri. On the other side of the river in Illinois, the Illinois Supreme Court has adopted new rules allowing its courts to adopt foreclosure mediation programs that would force lenders to offer court-approved mediation to borrowers who are facing foreclosure on their homes.

            The court rules in Illinois, set to kick-in on May 1, allow Illinois circuit courts to adopt foreclosure mediation programs. Similar to the ordinances in St. Louis, the rule will force lenders to notify borrowers of the availability of the mediation program. The borrower can then elect to participate in the mediation or allow the foreclosure to continue in the court. If the borrower decides they want to participate in the mediation, the lender is obligated to participate as well. However, if an agreement cannot be reached during mediation, the lender is still free to proceed with the foreclosure.

            Illinois, like Missouri and all other states, has faced a large increase of foreclosure proceedings over the past few years. Mediation programs offer the lenders and borrowers a chance to keep the foreclosure out of the court system. Mediation can often times allow for a solution or agreement to materialize without the adversarial setting of a courtroom. The goal of the rule and mediation programs is to offer the possibility of another chance that families across the state of Illinois would be allowed to remain in their homes and avoid foreclosure.

            Another court rule about to go into effect in Illinois requires lenders, at minimum, to attempt to inform borrowers of any programs available in their county that may help to avoid expense in the foreclosure process. This includes notifying the borrower of any free or low-cost legal services available to them and requiring the lender to participate in any program chosen by the borrower. However, the rule requires the borrower to file an appearance or answer to the lender’s complaint. Without doing this, the lender is not required to consider any loss-mitigation programs.

            The new Illinois rules were originally set to go into effect on March 1. However, the court delayed implementing the new rules to determine if they should be applied to cases that are already pending in Illinois courts. Either way, the foreclosure process in Illinois is set to become a little more borrower friendly on May 1. The new rules in Illinois should help to curb the effects of the increase in foreclosure proceedings on Illinois courts and offer borrowers a chance to avoid foreclosure and to remain in their homes.

Foreclosure and Mediation Ordinances in St. Louis and St. Louis County

April 17, 2013 Leave a comment

Recently, the Missouri State House of Representatives passed a bill that would supersede the ordinances requiring mediation before a lender forecloses on a home in St. Louis or St. Louis County. The bill is now being sent to the Senate and would likely prevent the city and county from enforcing their ordinances.

 

The ordinances requiring mediation before foreclosure that were passed by the city and county are nearly identical. Each ordinance requires the lender to offer mediation to the borrower before initiating foreclosure on a home. The costs associated with mediation are the responsibility of the lender and the lender risks penalties from the city or county if they fail to offer mediation. The city ordinance would impose a $500 fine if the lender fails to offer mediation and the county would cost the lender $1000 for failure to offer mediation. The main goals of the ordinances are to try to keep people in their homes and to avoid mistakes that sometimes occur that lead to improper foreclosure. Mediation also offers the parties a chance to come to an agreement with the help of the neutral third-party overseeing the talks between the lender and borrower. However, the parties are not required to follow the advice or decision of the mediator and the lender is free to foreclose if mediation does not render an agreement.

 

However, the ordinances are currently being challenged by different lenders in St. Louis area courts. The county ordinance, which was passed and amended late last year, is being appealed in the Eastern District of the Missouri Court of Appeals and that court has ordered the county not to enforce the ordinance while the appeal is pending. The city’s ordinance, passed in February, has been halted by a temporary restraining order from the St. Louis Circuit Court and is expected to remain in place until the Court of Appeals makes a decision on the similar county ordinance. It is common for a lower court to take a “wait and see” approach when a similar law or issue is being decided by a higher court. The decision of the Court of Appeals is expected to be appealed to the Missouri Supreme Court and the final decision on the ordinances will likely not be made for many more months.

 

The state law bill that would nullify the ordinances will likely face adversity in the Missouri Senate. Many senators have already come out against the bill and there is no guarantee the Senate will pass the bill even after an overwhelming vote in favor of the bill in the House of Representatives. St. Louis County Executive Charlie Dooley, a big supporter of the mediation ordinance, has stated he will fight the state bill and may seek legal action if the bill is later passed in the Senate and signed into law.

 

If you believe you are in danger of facing a foreclosure and would like to know more about your options, or if you have any other questions about foreclosure and bankruptcy, please contact our offices to see if bankruptcy may be an option you should consider.

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