Bankruptcy and Foreclosure Attorney Blog

If you have borrowed from your retirement account to fund a college education or purchase a home and are now facing bankruptcy, you may be wondering if that loan will be discharge in bankruptcy like many of your other debts.

And the answer is: it depends.

If you file Chapter 7 bankruptcy, a loan from a retirement plan is not subject to discharge. That means you will still have to pay it back. The reason for this is, Chapter 7 bankruptcy discharges debts you owe to others – not to debts you owe to yourself.

If you file Chapter 13 bankruptcy, a retirement plan loan becomes part of your repayment plan for the next three to five years, along with your other debts. You may only be required to pay back a portion, however, and the balance will be discharged at the end of your Chapter 13 bankruptcy.

You should also be aware that if you took out a loan from your retirement plan and are currently having payments automatically deducted from your paycheck, those payments will still continue to be withheld. Although the “automatic stay” that comes with a bankruptcy filing immediately stops collection efforts from creditors, it does not stop your collecting from yourself.

If you are nearing the age of retirement – or have significant assets stashed away in retirement accounts for when that day finally arrives -- how would filing a Chapter 7 or Chapter 13 bankruptcy affect your plans for retirement?

The good news is, if you have money in an ERISA-qualified pension plan like a 401(k), 403(b), Roth IRA, SEP IRA, SIMPLE IRA, Keogh, profit-sharing plan, money purchase plan or defined benefit plan, all of your money is exempt from creditors. That means you get to keep it, even if you file for Chapter 7 or Chapter 13 bankruptcy.

The only exceptions to this rule are for traditional and Roth IRAs: the exemption is limited to $1,095,000 per person, so if you have more than that in a traditional or Roth IRA, anything over that amount can be used to pay off creditors.

You should also know that while the funds in your account are exempt, any income you receive from retirement benefits is not. If you file Chapter 7 bankruptcy and are currently receiving income from retirement benefits, you can keep what is necessary for your own support and the rest will go to pay off debt. If you file Chapter 13 bankruptcy, your paid benefits will be figured into your income when determining your repayment plan.

The news is full of stories about divorce attorneys who use Facebook, MySpace and other social networking sites to get information about their clients’ soon-to-be exes to use in court. I’ve even blogged about it myself.

However, what is reported on less often is that debt collectors also use these sites to try and collect on delinquent debts. And while the law provides rules on how debt collectors can obtain information about a debtor’s location, it is frustratingly vague on the use of social networking sites.

To protect yourself, you should:

• Never post your personal information – address, phone number, email address, etc.
• Never post your employment information
• Never accept a “friend request” from someone you do not know
• Always use your privacy settings to allow only people you know to view your page

According to an NPR story, one debt collection agency says it regularly joins debtors’ social networks to talk to their friends and find out what they are doing. Going out on a new sailboat? That tells the collector you have an asset they can take.

In addition, if you have filed for bankruptcy, you should never post photos of yourself enjoying a lavish vacation or showing off a new car online.

The U.S. Treasury Department has added $2 billion to double the size of its Hardest Hit Fund in an effort to help unemployed homeowners avoid foreclosure.

According to a story in the New York Times, the Department of Housing and Urban Development will be drawing on $1 billion provided to it by the new financial overhaul legislation to work with local aid groups to provide interest-free bridge loans to distressed borrowers.

The Obama administration, acknowledging that the foreclosure crisis is far from over, said the new funds are needed to supplement existing programs that are already helping homeowners avoid foreclosure.

Government officials noted that while the housing market usually helps lead the U.S. out of a recession, it is holding the recovery back this time. While interest rates are at historic lows, unemployment remains high and unemployed homeowners are being squeezed out of their homes by falling values and an inability to keep up with mortgage debt.

Florida will receive an additional $235 million in federal aid and was one of the first states to benefit from the Hardest Hit Fund when it distributed over $1.5 billion to the five states hit hardest by the foreclosure crisis.

A recent feature story in the Florida Times-Union details how the jump in distressed home sales has adversely impacted the Jacksonville housing market, dragging down property values while also helping some homeowners avoid foreclosure.

According to the Northeast Florida Association of Realtors, distressed home sales are more than 40 percent of all closings. Historically, distressed sales have accounted for less than 10 percent of the market.

Distressed sales include short sales, foreclosures and bank-owned, or REO, sales.

This leap has dragged down median selling prices for the entire First Coast area, which includes Clay, Duval Putnam, Nassau and St. Johns counties, where the distressed sale median price dropped by almost 30 percent in the last two years.

One local housing expert says that until home values recover, the market will not return to normal. Even though sales are up in the past few months, those sales are largely to investors who are taking advantage of a depressed market to buy cheap real estate.

If you are a First Coast resident who is facing foreclosure, there are options available to you. To learn more about foreclosure defenses, contact our Jacksonville foreclosure law firm.

The July Foreclosure Report from RealtyTrac is out, and Florida still has the third highest foreclosure rate in the nation, with one of ever 171 Florida homes receiving a foreclosure filing notice in July 2010.

Foreclosure filings include default notices, scheduled auctions and bank repossessions. Nationwide, these rose four percent over the previous month but declined ten percent from one year ago.

Florida accounted for 16 percent of the nation’s foreclosure filing total, with 51,557 properties listed. The top 10 Florida counties and their foreclosure filing totals for July are:

1. Miami-Dade – 7,107
2. Broward – 6,471
3. Lee – 3,958
4. Palm Beach – 3,759
5. Orange – 3,628
6. Hillsborough – 2,804
7. Duval – 1,839
8. Polk – 1,687
9. Pinellas – 1,670
10. Brevard – 1,512

In addition, the Cape Coral-Fort Myers metro area suffered one of the largest monthly increases in Florida foreclosure filings, which were up 21 percent there from the previous month.

July also marked the 17th consecutive month that foreclosures in the U.S. exceeded 300,000. New default notices declined for the sixth straight month, but were offset by a near-record level of bank repossessions during the month.

If you are a Florida homeowner facing possible foreclosure, contact our Jacksonville, Florida foreclosure law firm.

A CNNMoney.com report says that a number of U.S. condo markets, including Florida, are experiencing units priced “lower than a Toyota Corolla”, selling at or even below $25,000.

And while median home prices have fallen over 20 percent nationwide in the past four years, condo prices have fallen even more. According to the National Association of Realtors (NAR), condominium prices have declined almost 25 percent since 2007.

NAR reports that in Miami, condo prices have plummeted by 65% from where they stood in 2007. And, the article notes, prices for individual units are down even lower, like for a Deerfield Beach, Florida, unit that was recently listed for $25,000, a drop of almost 80 percent from its purchase price five years ago of $115,000.

Investors are beginning to snap up these bargains, and many of them are coming from outside the United States.

A recent Jacksonville Business Journal article noted a new flurry of purchase activity in Northeast Florida by international buyers, attracted by coastal property that is selling for sometimes as much as half of that in South Florida.

NAR says that buyers from Canada, Mexico, the United Kingdom, Hong Kong and China are the most active groups buying residential real estate in the U.S. According to their latest statistics, foreign investment in U.S. residential real estate the last year was around $907 billion.

If you are a Florida resident who is facing foreclosure, there are options available to you. To learn more about foreclosure defense, contact our Jacksonville foreclosure law firm.

Analysts for Capital Economics and Moody’s Investors Service say that both home sales and prices are still falling, and the U.S. housing market has not seen the bottom yet for both.

In its U.S. Housing Market Monthly Report, Capital Economics said that the number of pending home sales is down 32 percent following the expiration of the tax credit and that existing sales will follow this trend as soon as mortgage agreements are finalized on those tax credit home sales.

Moody’s has said that the odds are now one in four that a double-dip recession will occur, and if it does, housing prices may fall another 20 percent before stabilizing in 2012.

The Capital Economics report says that the housing market is currently experiencing excess housing inventory, and recorded a record high 11 percent homeowner and vacancy rate in the second quarter of 2010. It said that new home starts are also contributing to the excess housing supply.

Moody’s predicts that home sales and residential construction will be up slightly by the end of the year, while housing prices will depreciate “a bit more.”

If you are a Florida homeowner facing possible foreclosure, contact our Jacksonville, Florida foreclosure law firm.

There was a significant slowdown in business bankruptcy filings in the first six months of 2010, but consumer bankruptcy filings rose 15 percent from the same period one year ago, according to statistics from the Administrative Office of the U.S. Courts.

The national rate of Chapter 11 bankruptcy filings fell by 17 percent in the first half of this year, compared with the same period one year ago. Experts believe that better credit availability allowed troubled businesses to restructure their debt without having to file Chapter 11 bankruptcy.

The number of Chapter 7 business liquidation filings in the U.S. for the first half of 2010 was essentially flat.

However, consumers faced with a still-weak economy and soft job market are having to turn to bankruptcy as a solution for their debt woes in increasing numbers. Consumer bankruptcy filings for 2010 are still on track to exceed annual highs since the bankruptcy laws changed in 2005. There were over 781,000 consumer bankruptcy filings for the first six months of 2010, which was 15 percent higher than one year ago.

Florida was 15th on the national list of consumer bankruptcy filings on a per capita basis, with nearly six in every 1,000 residents filing for Chapter 7 or Chapter 13 bankruptcy in the first half of the year.

If you have a large amount of consumer debt and need help in making a good decision about your financial future, contact our Jacksonville, Florida bankruptcy law firm.

A survey by Sallie Mae and Gallup says that American families are borrowing more and spending more savings to cover college costs, which rose 17 percent on average in the 2009-10 school year.

The survey of over 1,600 college students and parents conducted last spring revealed that while more families were implementing cost-cutting measures, like students living at home and eliminating college choices based on cost.

Other findings included:

Parents pay over 37 percent of a student’s college expenses by tapping into savings, using current income or taking out a loan. The second biggest contributor is grants and scholarships, which covered 23 percent of college expenses.

The number of parents who said they borrowed money to pay for college rose to 46 percent, from 42 percent one year earlier. Parents paying from income and savings rose 26 percent.

Students borrowing to pay college expenses jumped from 16 percent to 25 percent in the past year.

For families with annual household incomes of $100,000 to $150,000, the average cost of college increased as much as 30 percent. For those with annual household incomes of under $100,000, costs rose almost 20 percent.

Most financial experts agree that parents who take money from savings and current income or borrow heavily face a greater risk for financial problems of their own in the future. If spending for college has had a negative impact on your personal finances and you are considering filing bankruptcy to recover, contact our Jacksonville, Florida bankruptcy law firm.

If you set up your business as a sole proprietorship or general partnership, that means you are personally liable for all of the debts of your business. That also means you can get them discharged in Chapter 7 personal bankruptcy.

If your business is a corporation or limited liability company (LLC) and you personally guaranteed some business debts, these are also dischargeable in Chapter 7 bankruptcy.
Using Chapter 7 personal bankruptcy, you can also wipe out the following business debts:

• Credit card debt
• Judgments awarded against the business via a lawsuit
• Medical debt
• Unsecured business debts (bills for professional services, supplier invoices, etc.)
• Lease and contract obligations
• Personal loans and/or promissory notes

If you have secured business debts, the lender can seize the property securing the loan for nonpayment. If you owe more on a secured debt than the collateral is worth, the difference can be discharged in bankruptcy.

As part of the bankruptcy process, the court may decide to close your business, either temporarily or permanently. However, chances are that if you can discharge your business debt through Chapter 7 bankruptcy, you can start a similar business if you wish when the bankruptcy process ends.

Abuses of the Florida foreclosure process by so-called “foreclosure mill” law firms has led the Florida Attorney General’s Economic Crimes Division to expand its inquiry into the actions of several more law firms in Fort Lauderdale, Tampa and Plantation.

An article in the Sarasota Herald-Tribune recently outlined several examples of how the flood of foreclosure filings in Florida has led to abuses throughout the system, with many properties being unjustly taken:

A Pasco County homeowner’s attorney discovered that a court document giving possession of the mortgage to Wells Fargo had apparently been backdated, leading the judge to throw out the case and ruling that the law firm involved engaged in “an intentional effort to mislead the defendant and the court.”

Two law firms representing two different banks filed for foreclosure on the same property in Palm Beach County using the same mortgage note.

Attorneys for homeowners in Palm Beach County found numerous instances where two of the law firms being investigated by the Attorney General’s office had signed mortgage assignments that pre-dated the start of the notary’s commission, making them clearly fraudulent.

Many Florida foreclosure defense attorneys have similar stories, which is why it is important for homeowners facing foreclosure to go to court to protect their rights. For more information, contact our Jacksonville Florida foreclosure defense law firm.