Monthly Archives: November 2017

I am still on a car loan with my ex-wife (ex-husband). What happens when I file bankruptcy?

It depends on what you want to happen.

Most likely, we will take you off of the car loan and discharge that debt.  Your ex-spouse is still on the hook for the full loan, and they will need to keep paying it or face repossession.  

Chapter 7

When we file a chapter 7 bankruptcy, we check a box that states whether we want to surrender a secured loan (like a car loan) or reaffirm and keep it.  With you own car, it is normal to check the box to reaffirm the debt and keep making payments on it.  With an ex-spouse, it is a bad idea to reaffirm that debt.  You should simply wipe out your liability on it and move on.  If they want to keep the vehicle, they’ll have to keep paying on it.

Now there are always exceptions.  Let’s say that as part of the divorce decree, you were ordered to keep up payments on her minivan, then maybe you should reaffirm it.  Or maybe you’re the only name on the loan, you still have a good relationship with her, and she is good at making the payments.  You can still reaffirm and keep it (although most attorneys don’t like you to reaffirm on anything).  But generally, we list it and wipe it out.

Chapter 13

In a chapter 13, it’s just about the same.  If you want to surrender your liability on the loan, you can do so.  If she wants to keep it, she’ll need to keep paying for it.  If you want to keep the loan yourself and keep paying on it, it may be a little more tricky.  The chapter 13 trustee will want a very good reason for you to keep this secured debt for something you don’t even drive.

Ex-Spouse Assumes Car Loan

Now I often get asked if you can list the loan in your bankruptcy and have your ex-spouse assume the loan with the bank.  This is a matter between them and the bank.  I have never actually seen it work, since divorce wrecks your finances and credit (and hers too).  It is possible, but very unlikely.

 

My mortgage company just filed a motion for relief from the automatic stay in my bankruptcy case. What do I do?

It depends on whether you want to keep the home or give it up.

Short Answer:

Fight it if you want to try to save the home.

Ignore it if you’re surrendering the home anyways.

Long Answer:

So when you file bankruptcy, the Bankruptcy Court imposes something called the automatic stay that stays (stops) creditor actions like garnishment, foreclosure, and repossession.  If the creditor wants to remove that protection, they file a Motion for Relief from Stay (“MFRS”), asking the court to remove the stay so that they can foreclose (or repossess).  

If you were planning on surrendering the home anyways, then you can ignore it.  They’ll lift the automatic stay, eventually foreclose on the home, and you will no longer have it in your possession.  But since you filed bk first, they CANNOT come after you for the deficiency in most cases, and they CANNOT report it on your credit as a foreclosure.  If you do nothing, the home and creditor will go away, and you will suffer no further negative credit or collection repercussions.

Now if you want to keep the home, that’s different story.  You can object to the motion, but you usually need to throw money at them to make it go away.  If you are three months behind on mortgage payments since filing your bk, then you’ll either need to catch up in one lump sum and start making regular mortgage payments again, or you’ll need to get on a repayment plan plus start making regular mortgage payments again.  If you cannot, then they will win the motion, and you’ll lose the home.

You could object and say that you are trying for a loan modification, but unless you have the loan mod in place, this really isn’t a valid objection.

You can also object and say that they are wrong on their calculations, but I’ve only seen a handful of cases where the debtor was correct and the mortgage company was grossly off.

It all comes down to money.  If you can throw enough money at them, they will go away.

Here is what a normal Motion for Relief from Stay looks like (I actually received this one last night):

IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF UTAH
CENTRAL DIVISION
In re:
XXX
Debtors.
Bankruptcy Case No. XXX
Chapter 13
MOTION TO TERMINATE AUTOMATIC
STAY AS TO LAKEVIEW LOAN
SERVICING, LLC
[Filed Electronically]
Lakeview Loan Servicing, LLC, hereinafter referred to as (“Secured Creditor”), hereby
moves the Court pursuant to 11 U.S.C., Section 362(d), Bankruptcy Rules 4001 and 9014 and
Local Rules 4001-1 and 9013-1, for an order terminating the automatic stay with respect to the
following described real property (the “property”) located in Tooele County, State of Utah:
XXX, according to the
Official Plat thereof recorded in the office of the Tooele County
Recorder.
Together with a nonexclusive right and easement of use and
enjoyment in and to the Common Areas described, and as provided
for, in said Plat and said Declaration and Covenants, Conditions,
and Restrictions, which include the rights of ingress and egress
over and across the private streets located within said project;
Commonly known XXXXX
so that it may proceed to pursue its rights and remedies under applicable law. This motion is
based on the following.
1. That on or about January 28, 2016, Debtors executed their Note and Trust Deed,
which Note and Trust Deed are in default. Secured Creditor is the current beneficiary of the
Trust Deed. Copies of the Note, Trust Deed, and Assignment of Trust Deed are attached hereto.
2. That Debtors have not made their post-petition monthly payments as required by
their plan and as of November 8, 2017, are in arrears three (3) post-petition payments being from
September 1, 2017 to November 1, 2017.
3. That Debtors have failed to provide Secured Creditor with adequate protection of
its interest in the property.
4. That Debtors have no realizable equity in the property.
5. That the above allegations constitute sufficient cause pursuant to 11 U.S.C.,
Section 362(d) entitling Secured Creditor to an order terminating the automatic stay so that
Secured Creditor may proceed to pursue its rights and remedies under applicable law.
6. That Secured Creditor is entitled to its reasonable attorney’s fees, costs and
expenses for bringing this motion in accordance with its note and trust deed.
7. With respect to Rule 4001(a)(3), the Court should allow immediate enforcement
of any order for relief granted herein.
8. Secured Creditor services the loan on the Property referenced in this Motion. In
the event the automatic stay in this case is modified, this case dismissed, and/or the Debtors
obtain a discharge and a foreclosure action is commenced on the mortgage property, the
foreclosure will be conducted in the name of the Secured Creditor. Secured Creditor directly or
through an agent, has possession of the Note. The Note is either made payable to Secured
Creditor or has been duly endorsed.
WHEREFORE, Secured Creditor moves the Court for the following relief:
1. That the evidentiary hearing to be held within thirty (30) days of the date of this
motion, in accordance with 11 U.S.C., Section 362, be the final evidentiary hearing on this
matter;
2. That the automatic stay pursuant to 11 U.S.C., Section 362, be modified and
terminated to permit Secured Creditor to immediately exercise its rights and remedies under
applicable state and federal law. In the alternative, the Debtors should be ordered to provide
Secured Creditor with adequate protection of its interest in the property;
3. For attorney’s fees, costs and expenses and such further or other relief as the Court
deems appropriate;
4. Any order based on stipulation governing the continuation and termination of the
automatic stay or any order granting relief from the automatic stay should not be amended or
altered or superseded by the confirmation order entered in this case but should be considered a
part of and integrated into the confirmation order. Further, if the automatic stay is terminated
prior to confirmation, the automatic stay should not be reimposed by the entry of the
confirmation order;
5. Secured Creditor seeks relief in order to, at its option, offer, provide and enter into
any potential forbearance agreement, loan modification, refinance agreement or other loan
workout/loss mitigation agreement. Any such agreement shall be non-recourse unless included
in a reaffirmation agreement. Secured Creditor further requests that it be allowed to contact the
debtors via telephone or written correspondence to offer such an agreement.

 

What do I need to bring to my initial consultation with a bankruptcy attorney?

Honestly, nothing.  Most of my clients don’t bring any documents to their first consultation, but it wouldn’t hurt to be a little prepared.

Here’s what you don’t need:  money.  I hate taking money at the first meeting, because I want you to go home and really, really think about it.  Yes, I know that you’ve been thinking about it for at least 6 months or more before you call me, but one more night won’t hurt.  You also don’t need money to pay for the initial consultation.  It’s free.

 

Here’s what you could bring to speed things along:

  1.  paystubs — Sometimes, the main factor determining whether you can file a Chapter 7 or a Chapter 13 is your income.  If you make too much, you might be looking at a repayment plan.  If you bring your paystubs, we can calculate your 6 month averages to see where you fall.
  2.  collection notices — This will give the attorney a good idea of where you are in the collection process.  If you’re still getting nasty letters saying that they will send you to their legal department, there is not a real rush for time.  If you have garnishment paperwork from your employer, then we need to file this case by Wednesday so that I can notify payroll to stop that Friday garnishment.  If you have a foreclosure notice for next Tuesday, then we’d better do something by Monday to save the home.
  3. credit report — Maybe.  If you have set up an account at www.creditkarma.com, you do NOT need to print it out, but make sure to log in to your account at the office so that the attorney can save a .pdf copy of your report.
  4. taxes — not really necessary, but I’d love to see how large your tax refund was last year. You’ll eventually need them before you file, but they don’t make a huge difference for the first consultation.
  5. online class (Credit Counseling) — no.  You don’t need to do this before you meet with your attorney.
  6.  secured loan documents — Yes please.  Mortgage statements and car loan balances will make a huge difference on determining the value of your assets.

So if you want to be extra-prepared, then bring paystubs, collection notices, your creditkarma login info, and secured loan documents, and you’re good to go.

 

What happens to my bitcoins when I file bankruptcy?

You lose them.

In bankruptcy, we list all of your assets and then exempt (protect) them.  Most assets, like $3,000 of equity in your car, or 100% of your 401k, or all of your clothing on your back are protected under state or federal bankruptcy exemptions. However, some assets are not protected.  

For example, here in Utah, you can protect 3 firearms.  So if your have 4 shotguns, then one of them is not protected, and there is a chance that the bankruptcy trustee will want to liquidate it (sell it) and use the proceeds to pay your creditors.

Bitcoins are a kind of investment, but not one protected under our exemptions.  So let’s say that you bought 3 bitcoins a couple of years back for $1,000.  Now they’re just sitting in your bitcoin wallet somewhere in the internet ether.  When we list your assets prior to filing bankruptcy, we will have to list those at their current fair market value.  As of today, it looks like bitcoins are selling for about $7,000 u.s.d.  (See https://www.coindesk.com/price/ ).  In other words, your internet bitcoins could sell today for 3 x 7,000 = $21,000.

When we file bankruptcy, the bk trustee will most likely ask you to liquidate those, give him the proceeds, and he’ll use them to pay off your creditors.  Now that’s in a chapter 7.  If you file a chapter 13, the bk trustee won’t make you sell them, but he’ll demand that you pay at least $21,000 back to your unsecured creditors over a 5 year chapter 13 plan.

Either way, you lost the value of those bitcoins to your creditors.

You might think that there is no way for the bk trustee to track your bitcoin ownership, and you may be right.  However, the truth has a funny way of coming out.   Angry exes will always pop up at the wrong time.  The bk trustee may be looking at your bank statements and ask you what that $100 transaction was at www.coinbase.com last month when you decided to dabble in ethereum and litecoins.  There is always an electronic or paper trail.  Besides, you really should be honest because it’s just not worth the fraud charges and denial of your bk discharge.

So in essence, if your bitcoins have any value on the date of filing your bankruptcy, then you will probably lose them.