Impact of New Administration on Bankruptcy Outcomes

Business man cartoon saying, What do I need to know now?

In recent months, bankruptcy attorneys and people considering bankruptcy have wondered how the new presidential administration might influence bankruptcy laws and the outcomes of personal bankruptcy petitions. We did, too. To gain perspective, we took a look at America First: A Budget Blueprint to Make America Great Again—produced by President Donald J. Trump’s Office of Management and Budget.

The Blueprint revealed a proposed budget change for the Department of Justice, which oversees bankruptcy laws. Specifically, the Blueprint would increase “bankruptcy-filing fees to produce an additional $150 million over the 2017 …  level to ensure that those that use the bankruptcy court system pay for its oversight.”

According to the report, the proposed 2018 DOJ budget is projected to save taxpayer dollars overall by consolidating, reducing, streamlining, and making its programs and operations more efficient. The DOJ Budget also manages critical investments to confront terrorism, reduce violent crime, tackle the Nation’s opioid epidemic, and combat illegal immigration.

While there is no reason to believe the Trump administration seeks to revise the substance of bankruptcy laws, other administrations and political agendas have influenced the bankruptcy codes over the years. In 2006, the last major overhaul to the Bankruptcy Code included the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA), which added a “Means Test” for consumer (personal bankruptcy) cases. Before the Means Test, debtors were allowed to pay off at least some of their debt, and it codified a debtor’s choice to pay creditors through an extended repayment plan, which was largely voluntary. According to a report published by the United States Department of Justice Executive Office for United States Attorneys, since BAPCPA was enacted, repayment of consumer debt is done through a three- or five-year payment plan under chapter 13 of the Bankruptcy Code; and a discharge of consumer debt is accomplished by filing for relief under chapter 7.

Under the DOJ, debt discharge and repayment plans are overseen by a bankruptcy trustee; the trustee’s role is to determine the debtor’s ability to repay creditors and oversee the bankruptcy process. For example, a trustee may require a debtor to produce voluminous records to prove his/her financial circumstances and determine repayment capability; the effect could increase overall filing costs. Some believe this scenario is more likely under an administration seeking to reduce government liability for court costs; some believe the new administration could favor creditors over consumers. Time will tell.

Given the proposed changes to the DOJ budget, with anticipated increase in court costs, it may be important for those considering bankruptcy to file before higher court costs take effect.

Consult a bankruptcy attorney if you have questions. Solomita Law is available to help.

Interview on Talk Network Radio

I joined Bold Talk Business Radio talk show host Donna Anselmo for a live stream on  TalkNetworkRadio.com Tuesday, February 15. We discussed issues on the minds of people dealing with debt, especially questions relating to bankruptcy.  The interview will stream again today and Friday in the 1 PM EST time slot on TalkNetworkRadio.com, or you can listen to our discussion right here at SolomitaLawBlog.com.

If you are mired in debt, don’t feel alone. According to a  2015 Pew Research study, only 20 percent of Americans are free from any form of debt. The most common variety is mortgage debt (44 percent), followed by unpaid credit card balances (39 percent), car loans (37 percent), and student loans (21 percent). 

According to a USA Today report (10.12.2016), “Using data from the U.S. Census Bureau and the Federal Reserve, ValuePenguin found that the average credit card debt for households that carry a balance is a shocking $16,048 — a figure that has risen by 10% over the past three years. At the average variable credit card interest rate of 16.1%, this translates to nearly $2,600 in credit card interest alone. And many credit cards have interest rates much higher than the average.”

With “an average interest rate and a minimum payment of 1.5% of the balance, it would take nearly 14 years for the typical indebted household to pay off its existing credit card debt, at a staggering cost of more than $40,200. Keep in mind that this assumes no additional credit card debt is added to the tab along the way,” the report stated.

For more information on debt relief and bankruptcy, feel free to contact me with your questions or concerns: 

Email:  asolomita@solomitalaw.com
Office Phone: 407-545-3625
Address: 12001 Research Pkwy, Ste 236, Orlando, FL, 32826
www.SolomitaLaw.com

Protecting Assets Under Bankruptcy

Protect Your Assets

When filing for bankruptcy on behalf of a client, an attorney must consider how to best protect the client’s assets. During bankruptcy proceedings, the court reviews the petitioner’s assets to determine the debtor’s ability to repay creditors. The court then may require sale of the debtor’s property to reimburse creditors and/or cover court costs. The degree to which property is liquidated depends on the circumstances of each case.

Luckily for debtors, the bankruptcy codes include exemptions that may allow debtors to keep essential items, such as money contributed to retirement and pension plans, primary residences (to a certain value), vehicles (depending on their value),  household goods and home furniture.

If you are considering bankruptcy, a qualified bankruptcy attorney can help you understand your options. While it is not necessary to hire an attorney to file for bankruptcy, an attorney can help ensure that your bankruptcy is properly filed and determine which assets you can protect from liquidation.

When clients first consult me about bankruptcy, most feel worried and concerned about their future. The part I most enjoy about representing people in bankruptcy court is watching the smile emerge on their faces when their debts are discharged, and we’ve been able to protect property and assets important to their future.

Florida’s Homestead Exemption Protects Home Against Creditors

Beautiful Home photo © Colleen Coombe | Dreamstime Stock Photos

PHOTO CREDIT: Beautiful Home | © Colleen Coombe | Dreamstime Stock Photos

In addition to tax savings on a primary residence, Florida’s homestead exemption can offer protection in times of severe financial distress, such as bankruptcy.

Florida homeowners typically apply for a homestead exemption on their primary residence to reduce their tax burden. However, this exemption also can protect one’s home from being forcibly sold by a creditor—unless the creditor is the actual lien holder (e.g., mortgage lender) on the property.

During bankruptcy, Florida’s homestead exemption offers crucial protection. Residents in states not offering this special exemption can lose their homes in bankruptcy if they are unable to pay the additional money required to keep their homes. However, In the State of Florida, any homeowner who has been a resident for at least two consecutive years may claim the homestead exemption to protect their home from becoming part of the bankruptcy estate, and thereby subject to creditor claims.

Protections Under the Homestead Exemption
The homestead exemption not only protects the home from unsecured creditors—such as credit card companies or medical bill collectors—but it also can provide protection from the mortgage company itself (for a limited amount of time, depending on the chapter filed and whether the debtor can catch up on outstanding balances during the time of the bankruptcy filing).

Additionally, the home remains exempt even for debtors who own the house outright or have equity in their home. Other assets with value, such as vehicles or collectible items, are not exempt from creditor claims and would probably end up being auctioned to raise funds to pay creditors.

It is good to be a homeowner in Florida, where the homestead exemption protects your home in the event you encounter tough times. While Florida bankruptcy exemptions may appear stingy on some issues, when it comes to primary home protection, they beat the majority of the exemptions available in other states.

Alec Solomita Informs Listeners on BOLD TALK Business Radio

Alec Solomita on AM 1060 WMEL

ALEC SOLOMITA, ESQ., appears on AM 1060 WMEL. Located in Cocoa, FL, The Talk to Me Station, broadcasts across Central Florida at 50,000 watts, and streams live worldwide.

Attorney Alec Solomita, founder of Solomita Law, appeared in a recent interview with Donna Anselmo, host of BOLD TALK Business Radio, which airs on AM 1060 WMEL, Tuesdays between 1:00 and 2:00 PM EST. The show broadcasts to more than 4 million residents in Central Florida.

Intrigued by Alex’s commitment to  helping individuals who are struggling with debt, Ms. Anselmo offered to facilitate subsequent teleseminars for people who want to learn more about their options for debt relief through Chapter 7 and Chapter 13 bankruptcy filings and other debt management programs.

During the April 7 teleseminar, Alec provided insight to the bankruptcy process by discussing common questions asked by clients who are considering bankruptcy. Wondering what was said? We’ve inserted a link to the recorded teleseminar so you may listen at your convenience. Please do listen, and let us know your thoughts.

To ask us your own questions, feel free to use the form below or follow this link to our website where we have a slightly different form waiting for you. We’ll do our best to answer all questions in an upcoming teleseminar, blog article, return phone call—or all three. We look forward to hearing from you and will respond as quickly as possible.

Solomita Law Offers Free Debt Relief Tele-seminar Thursday, April 7, 7 pm

Solomita Law Teleseminar on iphone screenWe know that it’s not always easy to discuss personal financial matters, particularly when they involve debt. Many people struggling with debt believe there is no way out, so they avoid seeking advice until monetary situations become even more dire. Often, they can’t pay off their debts without outside help. To answer frequently asked questions about debt relief and bankruptcy, Solomita Law will host an informational tele-seminar. Registration is free and easy.
Once registered, participants simply need to telephone our conference call line at 7 pm, Thursday, April 7, 2016.


Debt Relief Strategies and Bankruptcy Options Tele-Seminar
REGISTER NOW  SolomitaLaw.com/register-for-event
Participants may listen in and/or ask questions in the privacy and convenience of their own homes. During this 45-minute tele-briefing, participants will:
  • Get answers to questions about the bankruptcy process and how it works.
  • Find out who is a candidate for a bankruptcy petition.
  • Learn how Chapter 7 and Chapter 13 petitions enable debtors to get a fresh start.
  • Have the opportunity to ask questions.
  • Learn more about how the legal system works.
  • Find out how to set up a free private consultation to discuss their individual concerns.

This tele-session is designed to help people struggling with debt and/or asking questions such as:

  • How can I get out of debt?
  • Will I lose my home in a bankruptcy filing
  • Is there any way to protect my assets?
  • Should I use my retirement funds to pay off my debts?
  • How can I get creditors to stop calling me?
Note: The information presented in this tele-seminar will be provided for educational purposes regarding options available for dealing with debt. This seminar is not intended to provide legal advice related to individual situations. For specific legal advice, please contact a qualified attorney to discuss your individual needs and circumstances.

Frequently Asked Questions by Solomita Law Clients — Part ll

In our prior article, Solomita Law answered three frequently asked questions about bankruptcy. This article addresses other common queries.

Must I include every one of my debts in a bankruptcy filing or may I elect to pay off certain debts without applying for a discharge?
All debts must be included in the bankruptcy petition. Certain debts such as student loans and child support (among others) will not qualify for discharge. Other debts, like mortgage and vehicle loans, can be repaid during the bankruptcy and after the discharge is entered as well.

Can a creditor file a new claim after I have filed a bankruptcy petition? What happens to new claims?
When you file for a bankruptcy judgment, the courts issue an automatic stay that will prevent additional creditor actions during the time of bankruptcy. This can buy you valuable time to stay in your home while exploring your financial options, finding a new place to live, preparing your belongings for a move, conducting your move, and/or applying for a mortgage modification.

An automatic stay also stops creditors from harassing you for payments and/or making claims during that time. However, creditors may elect to pursue you for debts that were not discharged during bankruptcy. During bankruptcy, the judge may discharge non-secure debts in full or in part (depending on circumstances and rules of the bankruptcy chapter under which you qualify). If debt remains, the judge also may establish a plan and order you to continue paying secured debts and non-dischargeable debts. Generally, the plan will be based on what the court determines you can afford to pay based on the total you owe and will establish a three-to-five year payment plan.

Will I lose my home if I file bankruptcy?
The answer depends on your mortgage history, the state in which you reside and the bankruptcy chapter under which you file. If you file under Chapter 13 in the State of Florida where Solomita Law operates, you have a good chance of keeping your home. The bankruptcy court’s Mortgage Modification Mediation Program has proven to be very successful for debtors in the Central Florida area. This program can help make your payments more affordable so you can stay in your home—particularly if you continued to make regular, on-time mortgage payments before filing for bankruptcy.

Will I be allowed to keep my furniture, car or other personal property?
The court provides each debtor with exemptions that they can use to protect their assets. If the exemptions used do not shield the full value of your assets, as the debtor, you will have to repay the unexempt amount to the Court or surrender possession of the unprotected asset. Please contact Solomita Law for further information on this topic.

Can I sell or transfer property before filing bankruptcy?
The courts will look at your financial transactions over the year prior to your bankruptcy to ensure those transactions did not occur with intent to commit fraud. If, for example, you sold a car six months earlier, and used the money to pay attorney fees or to purchase or repair an old car and use the remaining money to continue paying your bills, the court may consider those transactions an appropriate part of your debt management plan.

If you are considering a bankruptcy petition, speak to an attorney who can help you protect your assets and your standing in court. It’s important to make informed decisions before selling or transferring property so you do not jeopardize your opportunity to discharge debts through bankruptcy proceedings.

For more information, contact Solomita Law at 407-545-3625, or send email to Staff@SolomitaLaw.com. We will respond to your questions as soon as possible.

Frequently Asked Questions by Solomita Law Clients — Part l

Many people under financial duress avoid filing for bankruptcy because they don’t understand how bankruptcy works, don’t know where to turn for information, or fear that they will not be able to live a normal life after bankruptcy. In fact, bankruptcy law provides a means for recovering from excessive debt, and many (possibly even most) people who qualify to file bankruptcy wish they hadn’t waited so long.

Below, Solomita Law provides answers to three of the most frequently asked questions from clients considering bankruptcy.

Will I be free and clear of debts if the court approves my bankruptcy filing?

Not all debts are dischargeable through bankruptcy. Typically, in Chapter 7 bankruptcy, qualified debtors may be released from all unsecured debts. Under Chapter 13 bankruptcy filing, a debtor may be relieved of certain debts, depending on individual circumstances,, and in general, most debts managed under Chapter 13 include a repayment plan that allows the borrower more affordable payments each month, until those debts are paid, typically within three to five years.

Recent tax debts, as well as child support, criminal restitution and student loans will not be discharged through bankruptcy court; and, in certain cases, the Court may order a borrower to repay these debts in full during the course of the bankruptcy.

How can I protect my assets under bankruptcy?
Your ability to protect assets under rules of law depends on your individual case and the bankruptcy chapter under which you qualify for relief. For specific advice on the merits of your case, speak with a qualified bankruptcy attorney.

Certain assets, such as Individual Retirement Accounts (IRAs) are protected under 11 U.S.C § 522(d) and cannot be involuntarily used to repay creditors in a bankruptcy. Do not allow a creditor to harass you into using your retirement savings to pay a debt! Creditors are not allowed to demand or place a lien against your retirement savings. Varying levels of home equity and motor vehicles (depending on their monetary value) also may be protected from creditors provided that payments are not in arrears and continue to be made regularly according to your loan agreement.

Is there any way to stop creditors from harassing me through bankruptcy?

Bankruptcy court offers debtors relief from creditor harassment by order of an “automatic stay” that goes into effect when a bankruptcy petition is filed. The automatic stay essentially freezes your estate in time and protects you against further creditor actions while your attorney presents your case and advocates on your behalf with the bankruptcy trustee and judge.

The automatic stay stops a creditor from proceeding against a debtor to recover a claim that arose before the bankruptcy filing. During the stay (usually for the length of the bankruptcy proceeding), creditors are prohibited from any act to obtain possession of property of the debtor’s estate or to exercise control over the property of the estate. Creditors may not create, perfect (complete), or enforce any lien against the property, nor may they act to collect, assess or recover a claim that arose before the case.

After a bankruptcy discharge or plan is entered by the Court, the automatic stay is lifted; at that point, creditors must abide by the terms established by the judge. In some cases, debts may be entirely discharged (eliminated). In other cases, the court will establish a debt repayment plan based on the court’s judgment of your ability to pay.

Watch for answers to other common questions in Part II of this article. Or, if you are considering filing bankruptcy and wish to discuss your needs, feel free to contact Solomita Law at 407-545-3625 or send email to Staff@SolomitaLaw.com. We will respond to your questions as soon as possible.

Understanding Bankruptcy Options

Dreamstime Image 198174

Speak with a qualified attorney to help assess your options under bankruptcy laws.                       Photo courtesy: Dreamstime.com # 198174

Positioning Yourself for a Fresh Start through Bankruptcy

Under Title 11 of the United States Code, bankruptcy laws were established to assist financially distressed individuals and organizations with debt relief. After a bankruptcy has been granted and debts have been discharged, debtors are positioned to gain stronger financial footing, and repay debts, such as mortgage and vehicle loans, on more affordable terms. The bankruptcy positions them to make a fresh start.

Bankruptcy provides for the reduction or discharge (elimination) of various types of debt. Depending on individual circumstances involved, the Court may discharge the entire consumer debt (as in a Chapter 7 filing) or provide a plan for repayment of non-dischargeable debts over time (as in a Chapter 13 filing).

To determine the chapter of bankruptcy for which you qualify, you must fill out a form called the “Means Test” and provide details about your income and expenses, based on your personal records. Some information needed to complete the form comes from the Census Bureau and the Internal Revenue Service (IRS). For questions related to the means test, contact Solomita Law or email the United States Department of Justice at ust.mt.help@usdoj.gov

ABOUT THE BANKRUPTCY CHAPTERS

The bankruptcy chapters address the financial needs of different types of entities and employ different qualification criteria. While Solomita Law focuses our practice on reducing stress and uncertainty associated with Chapter 7 and Chapter 13 bankruptcy filings for our clients, we are happy to share information about other bankruptcy chapters, as well. Below are short summaries of issues and options addressed by each bankruptcy chapter.

Chapter 7 enables full discharge of unsecured debts, such as credit cards and personal loans. Secured debt, such as a real estate loan or vehicle loan, typically remains unaltered, meaning that the property remains in the borrower’s possession as long as timely payments are being made. Primarily, Chapter 7 is available to individuals with business debts as well as corporations when they meet certain income requirements.

Chapter 9 deals with reorganizing of municipalities and government owned entities.

Chapter 11 was designed to help a business entity reorganize debts to maintain business viability and pay creditors over time. This is the most comprehensive chapter of the Bankruptcy Code, with reorganization options such as discharging some debts, repaying others, and restructuring the remainder. Although individuals may file for Chapter 11 relief, the relatively high filing fees and administrative costs lead most individuals to favor Chapter 7 or Chapter 13 bankruptcies,

Chapter 12 facilitates restructuring of debts for family farmers.  Only family farmers are eligible and this chapter functions in a similar way (but not exactly comparable) to Chapter 13.

Chapter 13 is reserved for individual debtors (not businesses). It permits the discharge of some debts, as well as the repayment of others across a three-to-five year time frame.  In some cases, a Chapter 13 filing will restructure principle payments of secured debts, or may enable discharge certain debts in full.  Only individuals who meet income and debt qualifications (according to the Means Test) are permitted to file under this chapter.

Finding Bankruptcy Services in Your Area

For general assistance in filing for bankruptcy relief, the clerk of your local bankruptcy court or your local state Bar Association may have information regarding attorneys and/or organizations offering bankruptcy related services on a reduced fee or pro bono basis. However, we are prohibited from providing specific legal advice before conducting a private consultation about your individual case.

The Official Bankruptcy Forms can be found on the Administrative Office of the U.S. Courts Web site.

For more information, contact Solomita Law at 407-545-3625 or send email to Staff@SolomitaLaw.com. We will respond to your questions as soon as possible.