Are people who file for bankruptcy "using the system"?

As a bankruptcy attorney, I was asked by a criminal law attorney whether I thought people were acquiring debt with the intention of discharging it in bankruptcy. I assured this attorney that this was NOT the case. The overwhelming majority of clients we have had and have are devastated by having to file for bankruptcy. There may be a few that “work the system”, but that is the exception.

Furthermore, I can also vouch through my experience that the majority of people who are on unemployment compensation would much rather be working. They are making a minimal amount of money on unemployment which doesn’t even begin to cover the income they received when they were working. Without even the income to pay their living and food expenses, unpaid debt starts accruing and creditors add fees and raise interest rates and the amount owed increases rapidly, making it even more impossible to pay back. It’s a no win situation.

My advice if you are falling behind on paying your debt is that you do not use equity from your homestead or use funds from your retirement accounts as both of these assets are usually exempt in bankruptcy. In essence, if you cannot pay your bills, do not devastate yourself even more financially by using up assets which you may keep if you must file for bankruptcy. I have seen too many clients who have done so and they are destitute. Many of these people should be retired, but they don't have the means to retire.

Beware of Foreclosure Rescue Scams. Help is Free!

There is never a fee to get assistance or information about the Making Home Affordable program from your lender or a HUD-approved housing counselor.

For a HUD-approved counselor, visit: http://www.hud.gov/offices/hsq/sfh/hcc/fc

Beware of any person or organization that asks you to pay a fee in exchange for housing counseling services or modification of a delinquent loan.

Beware of anyone who says they can “save” your home if you sign or transfer over the deed to your house. Do not sign over the deed to your property to any organization or individual unless you are working directly with your mortgage company to forgive your debt.

Never make your mortgage payments to anyone other than your mortgage company without their approval.

Reasons to Delay or Speed Up Your Bankruptcy Filing

There are many factors to consider when deciding when you should file for bankruptcy. Here are a few common reasons for delaying or speeding up a bankruptcy filing.

Reasons to Delay a Bankruptcy Filing

Your income recently decreased. One good reason to delay a filing is if your income over the last six months puts you over the means test limit but a recent decrease in your income would put you under the limit if you waited a month or two to file. Remember, the means test is based on your average gross income received during the six-month period just prior to the month you file. So, if you file in October you would average your income during the months of April through September.

You face foreclosure but the sale is not yet scheduled. An impending foreclosure is another reason to delay you filing (or speed it up, see below). If the foreclosure sale hasn't been scheduled yet, you may want to delay your filing until the sale is both scheduled and close to taking place. This tactic will result in a delay of the sale for at least two months and sometimes longer, which will give you an extra couple of months of payment-free shelter.

Certain credit card use. Still another reason to delay filing is if you used a credit card within the previous 90 days or obtained cash advances within the previous 70 days. If the credit card charges totaled more than $550 on any one card and were for luxuries, or the advances on any one card exceeded $850, the creditor can obtain a court ruling that the charges or advances will not be discharged in your bankruptcy. If you have recent charges or cash advances that might survive your bankruptcy you should consider delaying your filing until the three month or 70-day period has expired.

Other reasons. Other common reasons you might want to delay filing are:

•you made preferential payments to creditors (wait 90 days or one year to file, depending on the type of creditor)
•you transferred property for less than fair value within the past two years and the property is valuable enough that the bankruptcy trustee may go after it (typically over $1,000)
•you had a previous bankruptcy case dismissed within the past year (or in some cases within the previous 180 days)
•you are seeking a mortgage modification (the bankruptcy may bring the modification process to a screeching halt)
•you are seeking to discharge back income taxes (wait until three years have passed since the taxes first became due or until two years have passed since you filed a return), or
•you filed a previous bankruptcy in which you obtained a discharge (wait until you are eligible to file again).
Reasons to Speed Up Your Bankruptcy Filing

Sometimes, you'll want to file for bankruptcy right away. If your income greatly increased during the last few months, but was much lower during the previous three or four months, the sooner you file the better your chance of passing the means test. Also, if your house is in foreclosure and the sale is scheduled and you want to delay the sale, you should file for bankruptcy immediately.

To learn more about choosing the right time to file for bankruptcy, see Nolo's article Should I File Bankruptcy Now or Wait? Or visit, Nolo's Bankruptcy Center for articles, FAQs, Legal Updates, books, and software on bankruptcy.

http://www.bankruptcyforeclosureblog.com/2010/11/timing-your-bankruptcy-filing.html

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States to Unveil Joint Probe Into Foreclosures

If the states have their way, mortgage companies will have to revamp the way they handle foreclosures, pay penalties for violations and expand help to homeowners on the verge of foreclosure.

The top law enforcement officials of states around the country are already weighing the outlines of a potential settlement with the industry, said Iowa Attorney General Tom Miller, who will lead the investigation. The inquiry will be announced Wednesday morning.

http://www.aolnews.com/nation/article/states-to-unveil-joint-probe-into-foreclosures/19672006

http://www.FamilyMaritalLaw.com

Bank of America Halts Foreclosures in 50 States

WASHINGTON – Potential flaws in foreclosure documents are threatening to throw the real estate industry into a full-blown crisis, as Bank of America on Friday became the first bank to stop sales of foreclosed homes in all 50 states.

The move, along with another decision on foreclosures by PNC Financial Services Inc., adds to growing concerns that mortgage lenders have been evicting homeowners using flawed court papers.

See the following link:

http://news.yahoo.com/s/ap/20101008/ap_on_bi_ge/us_foreclosure_mess

http://www.familymaritallaw.com/CM/Bankruptcy/Foreclosure-What-Are-YourRights.asp

Making Home Affordable - FAQs

This site gives information on the Making Home Affordable Program. This is an effort to get the economy and the housing market back on track. Preventing foreclosures benefits all of us.http://www.familymaritallaw.com

Making Home Affordable - FAQs

Rubin on Tax: ENFORCEABILITY OF COHABITATION AGREEMENTS IN FLORIDA [FLORIDA]

Rubin on Tax: ENFORCEABILITY OF COHABITATION AGREEMENTS IN FLORIDA [FLORIDA]

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