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Bankruptcy Law Blog

Southern states have highest rates of bankruptcy

Florida is not one of the top 10 states for bankruptcy filings, but several nearby states are. According to an analysis by NerdWallet, states in the south have some of the highest bankruptcy rates in the country. They have remained high in some southern states even as nationwide bankruptcy rates have fallen to their pre-recession levels.

The median bankruptcy rate for all 50 states and the District of Columbia is 226 bankruptcy filings for every 100,000 residents. The highest bankruptcy rate in the country can be found in Tennessee, where there are 553 bankruptcy filings for every 100,000 residents. Alabama is second with 529 bankruptcy filings per 100,000 residents, and Georgia is third with 483 bankruptcy filings per 100,000 residents.

Being proactive may prevent bankruptcy

While bankruptcy may quickly eliminate or reduce an individual's debt load, it is not an easy way out for Florida residents who are struggling to pay their bills. Those who file for Chapter 7 bankruptcy will see it remain on their credit report for an entire decade. However, it may be possible to avoid filing for Chapter 7 or Chapter 13 bankruptcy by being proactive when it comes to financial issues.

Individuals should refrain from credit card spending whenever possible. Consumers should consider themselves unable to afford a credit card purchase if there isn't enough money coming in to pay it off by the end of the billing cycle. The best reasons to use a credit card are to accrue perks or because it is easier to charge a purchase than pay cash when conducting the transaction.

Good faith and Chapter 13

A judge in Kansas confirmed a Chapter 13 bankruptcy plan that would allow debtors to pay attorney's fees and a dividend to creditors over a 36-month period. The judge ruled that the couple, who are in their 70s, were not abusing the system when siding with them over the objections of the bankruptcy trustee. Previously, the U.S. Courts of Appeals for the 1st and 5th Circuits have ruled on such cases and found that they did not violate any provisions in the Bankruptcy Code. The U.S. Court of Appeals for the 11th Circuit, which covers Florida, has issued similar rulings as well.

When the case was filed, the couple had $2,100 in cash in the bank and received $3,461 per month in Social Security income. While the debtors said that they had $2,728 in expenses per month including a $93,000 mortgage and over $50,000 in credit card debt, the judge said that the debtors had underestimated their expenses. Furthermore, the Social Security payments were exempt from disposable income calculations.

Debt management vs. bankruptcy

When people living in Florida find themselves faced with a mountain of debt, they may look into ways of managing it. One option is a debt management program, sometimes known as credit counseling. In these programs, a credit counselor reviews a person's debts, income and assets, and works out a repayment plan that can last for several years.

While many people benefit from debt management programs, they also have problems. For one thing, there are situations in which it is simply impossible for a debtor to pay off all that he or she owes. This is particularly true of the debtor or a family member is ill, disabled or if he or she simply does not make enough to cover plan payments while also meeting ongoing expenses. In addition, the plan may not provide significant protection against aggressive collection tactics, nor will it stop foreclosure or other legal actions from creditors who do not agree to participate in the plan.

What debts remain after a Chapter 13 bankruptcy?

While Chapter 13 bankruptcy may eliminate some debts, others will remain after the repayment period ends. For instance, Florida parents who still owe child support will have to make those payments even after obtaining a discharge. Student loans, liabilities stemming from a drunk driving incident and other fines or restitution may also remain after a discharge. Mortgages may also remain if their term is longer than the repayment period.

If an individual who files for Chapter 13 bankruptcy owes child support, a stay may granted against further collection efforts. However, that may only be true if the repayment plan makes provisions for child support payments to be made. If the plan does not account for these payments, a judge may remove the stay against such collection efforts. Additionally, an individual would still be responsible for child support that would have been due after he or she receives a discharge.

The importance of having a qualified bankruptcy attorney handling your foreclosure case.

Seven people were recently indicted in Texas for abusing federal bankruptcy protection laws as a way to stop foreclosure actions on their homes. They filed bankruptcy without any intention of attempting to repay their debts. The filings were only intended to suspend the foreclosure process.

While the actions by these individuals were deliberate acts of bankruptcy fraud, they serve as an important reminder for people who may be facing foreclosure and are considering personal bankruptcy as a potential solution. It is important that you fully understand the bankruptcy process and what it can do for you with regard to relieving debt and helping you save your home.

Recent ruling could impact bankruptcy estates in Florida

A judge from the U.S. Bankruptcy Court for the Western District of Louisiana ruled on Aug. 5 that proceeds from an auto accident settlement can be considered part of a bankruptcy estate. The case involved a man who was in an accident three years after his plan had been confirmed, and the court took the estate-replenishment approach when making its ruling. The driver had updated his schedules based on the possible cause of action after the crash.

The trustee then proposed a plan modification that would increase payments to unsecured creditors and use a portion of the settlement to pay down the plan balance. An attorney for the debtor negotiated a settlement of $196,845 of which $74,067 was left after fees and other expenses. Total allowed claims in the case were $11,359, which were to come from the man's settlement earnings before he is allowed to claim anything.

What happens when creditors return payments to the trustee

When Florida residents decide to file for bankruptcy, they will often choose between Chapter 7 and Chapter 13. Unlike a Chapter 7 bankruptcy, Chapter 13 cases involve the debtor repaying his or her debts pursuant to a payment plan that lasts from three to five years. Debtors submit their payments to the bankruptcy trustee, who then disburses them to the creditors.

The court's decision in two cases provides guidance about what happens when a creditor returns money the trustee sends to it. In the first case, a man entered into a repayment plan through Chapter 13 bankruptcy. One of his debts was a tax debt of $7,333 he paid over the life of the repayment plan. After he successfully completed all of his payments, the court granted him a discharge of his remaining unsecured debt balances. The IRS then returned a payment in the amount of $1,565 to the trustee.

The bank says I'm not eligible for a loan modification. Now what?

In the previous post in this series, we discussed your right under Florida law to attempt to modify your loan as a way to avoid foreclosure and save your home. There have been numerous cases, however, where lenders will attempt to keep the terms of the current loan by telling you that you are not eligible for a loan modification.

It is important for you to understand that there is almost no situation where a person who is facing foreclosure would not be eligible for a loan modification. If your lender is attempting to avoid reworking your loan, do not accept the denial as the final word in the matter. You have the right to fight back and protect your legal right to save your home.

Deficiency lawsuits and how to make them go away

After Florida consumers see their homes foreclosed or their cars repossessed, they are often shocked when their creditors still come after them for the deficiency amounts that they owe. If you are being harassed by creditors for deficiencies owed on repossessed or foreclosed property, you might not know what to do about the situation.

Under the law, creditors are allowed to go after you until they receive everything that you owe to them even after they have seized their collateral. They might file deficiency lawsuits against you in court in order to collect. While there are debt modification programs and companies, many are not reliable, and none are protected by the government. If you try debt modification, you run the risk of the company taking your debt payments and disappearing.

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