WILL OBAMACARE CURE MEDICAL BANKRUPTCIES?

            During the next year, the Affordable Care Act will begin to be fully implemented. This massive piece of legislation will change healthcare in this Country dramatically in many ways. One of the biggest questions that remains unanswered is whether this change in healthcare law will reduce the instance of the “medical bankruptcy”.

            Medical bankruptcy is a broad term which is not limited to bankruptcies caused by an accumulation of medical bills which cannot be immediately paid. Many credit card bills and personal loans that are included in bankruptcy filings are really the result of attempts to pay medical bills prior to filing the bankruptcy. The end result is that it is estimated that three out of five, or 60%, of the bankruptcy filings each year are the result of medical issues.

            And the issues of health care costs causing bankruptcy is not limited to the uninsured. Nearly 10 million Americans with full time health insurance will accumulate medical bills that cannot be paid. (Source – Nerdwallet Health). Almost two million of that number will file for bankruptcy protection due to medical and other bills. Additionally, millions of Americans will take on credit card debt, skip prescriptions and be unable to afford basic necessities due to medical costs not covered by insurance.

            So what will happen when 2014 comes and everyone has health insurance (or is required to have health insurance)? Health care costs on the working class will certainly rise. The Plans offered will most likely offer less coverage or higher deductibles, as well. With the increased costs of health insurance, the high deductible plans that are currently available and a lack of wage increases, it seems that medical bankruptcy is here to stay.

CONCLUSION

            2014 should be a very interesting year with respect to medical costs and bankruptcy. Only time will tell if the increased insurance coverage promised by ObamaCare will result in fewer or more bankruptcy filings. Either way, be sure to seek legal advice from an experienced bankruptcy attorney if you are experiencing any medical related financial issues. At Mickler & Mickler, we attend Court on a regular basis. We have the experience and knowledge to ensure that you receive the correct advice when confronted with difficult financial decisions related to filing bankruptcy. Contact us at 904.725.0822 or bkmickler@planlaw.com.

Judgments and Bankruptcy

 Did you know that a judgment against you could result in loss of vehicles, a lien on your homestead, levy on your bank accounts and even garnishment of your wages? All of these things can happen if you have a judgment against you and take no action.

 Often, potential clients will come to us after a judgment has been entered and collection efforts have begun. In some cases, garnishments have been taking money from their paycheck for months. One of the best benefits of filing any type of bankruptcy is that it stops the collection of a judgment and allows you to get your finances back under control. Let’s look at a few ways that judgments affect people financially and how the filing of a bankruptcy can stop the collection.

 LOSS OF VEHICLES

 A judgment becomes a lien upon all of your personal property upon proper recordation with the Secretary of State or the County records. If you have a vehicle with a clear title, or even a vehicle with some amount of equity, the judgment creditor can seize the vehicle and auction it off to recover some or all of the judgment amount.

 Prior to seizure of a vehicle, a Chapter 7 will void the lien of the judgment creditor on a vehicle and it cannot be seized after filing. The filing of a Chapter 13 is necessary if the vehicle has been seized by a judgment creditor. The Chapter 13 will allow you to recover the vehicle and pay some money towards the judgment amount based upon the equity in the vehicle.

 LIEN ON HOMESTEAD

 The homestead exemption protects your home from sale by a judgment creditor. But a properly recorded judgment lien will become a cloud upon your title. When you try to sell the home or refinance, the title company will most likely require that the judgment be paid off prior to any sale or refinancing.

 The filing of a Chapter 7 or 13 bankruptcy will allow the judgment to be avoided as a lien on the homestead. There are additional steps which must be taken in your filing to make sure the lien is avoided. Don’t trust your home equity to an inexperienced filer or a paralegal.

 BANK ACCOUNTS

 Bank accounts are a favorite target of judgment creditors. The creditor simply files a notice of garnishment at the institution where you bank and your account is frozen. While joint accounts of husband and wife are exempt from garnishment for a single spouse’s debt, the process of exempting the account is complicated and timely. Your money may be tied up for months or gone by the time the exemption hearing happens in State Court.

The filing of a Chapter 7 or 13 case will release the garnishment from your account immediately. As long as the creditor has not transferred the funds from the account, then the money will remain yours after the filing of the bankruptcy, subject to the review of your Trustee.

GARNISHMENT

 By far the most common method of collection is the garnishment of wages. Federal law allows up to 25% of your wages to be deducted to pay a judgment. How can you live and pay your regular bills with a 25% pay cut?

 The filing of any bankruptcy will immediately put an end to the garnishment and allow you to retain control of you wages to pay your bills.

 CONCLUSION

 Judgments can be a financial catastrophe. Don’t risk losing your car, wages, bank account, etc. due to a past mistake. Take action quickly to resolve the situation through filing for bankruptcy to allow for an orderly way to maintain control of your finances.

 CONTACT US

 At Mickler & Mickler, we attend Court and see the bankruptcy trustees and judges in action several times a week. We have the experience to guide you to the right decision about whether to file a case, and if so, what Chapter to file.

 Please contact Mickler & Mickler at 904.725.0822 or bkmickler@planlaw.com. We will be happy to set you up a free appointment to discuss your situation and potential solutions.

Bryan Mickler

SHOULD I DISMISS MY BANKRUPTCY?

            Chapter 13 cases are typically a 5 year commitment. 5 years of committing all income to living expenses as budgeted and the plan payments. That means that almost everything has to go perfectly in your life for 5 years in order to make the plan a success.

But what happens when there are increased expenses or a loss of income and the Chapter 13 Plan is in jeopardy? Should you just ask the Court to dismiss the case and re-file a new 13 to start over? Unfortunately, that is not as simple as it sounds.

One of the quirks of the Bankruptcy Code is that you really need to have the case dismissed by the Trustee for failure to make your payments, instead of just speeding up the process and requesting to dismiss the case on your own. But, why should there be a difference? The answer lies in section 109 of the Bankruptcy Code.

11 U.S.C. § 109(g)(2) provides as follows:

(g) Notwithstanding any other provision of this section, no individual or family farmer may be a debtor under this title who has been a debtor in a case pending under this title at any time in the preceding 180 days if–
(2) the debtor requested and obtained the voluntary dismissal of the case following the filing of a request for relief from the automatic stay provided by section 362 of this title [11 USCS § 362].

11 U.S.C. 109(g)(2)(2013).

Some courts have interpreted this section to mean that if any creditor, at any time in the previous Chapter 13, filed a Motion for Relief, then the second case must be dismissed if the first case was voluntarily dismissed. This is true even if the Motion for Relief was denied, withdrawn or ended up being just an adequate protection order.

            However, the above provision has also been interpreted to require “causation” as a result of the filing of the Motion for Relief. The filing of the Motion for Relief does not, in and of itself, give rise to the automatic dismissal provisions of sec. 109(g)(2). See, In re Milton, 82 BR 637 (Bankr.S.D Ga 1988). (“Debtor’s subsequent dismissal and refiling of Chapter 13 case does not violate provisions of 11 USCS § 109(g) because as of date of refiling there was, legally speaking, no pending motion for relief from stay that was unresolved in previously filed and dismissed Chapter 13 case.”); In re Copman, 161 B.R. 821, 824 (Bankr. E.D. Mo. 1993) (finding “no connection” between the debtor’s voluntary dismissal of the case and the creditor’s request for relief from stay).

            The causation approach is that § 109(g)(2) was enacted “for the sole purpose of curbing abusive repetitive bankruptcy filings by debtors seeking to overcome the grant of relief to a creditor from a stay in a prior case” and the statutory language is a direct response to that concern. In re Beal, 347 B.R. 87, 92 (Bankr. E.D. Wis. 2006) (citing S.Rep. No. 65, 98th Cong. 1st Sess. 74 (1983)); See also, In re Durham, 461 B.R. 139, 142 (Bankr.D.Mass. 2011) (following causation approach and dismissing case where relief from stay was granted to mortgage lender prior to initial case being dismissed).

CONCLUSION

            Be careful when requesting a dismissal of any type of bankruptcy filing. You really have to know how the judges interpret this section and be aware of any pending motions for relief when you consider a voluntary dismissal.

            At Mickler & Mickler, we attend Court on a regular basis. We have the experience and knowledge to ensure that you receive the correct advice when confronted with difficult financial decisions related to filing bankruptcy. Contact us at 904.725.0822 or bkmickler@planlaw.com.

Rising Home Prices and Bankruptcy

With the recent news that home prices were rising, the issues facing the average homeowner when they consider filing for bankruptcy are becoming even more complicated. The median home price was up 15.7 percent to $135,025, while closed sales and pending sales also saw double digit increases — up 11.5 percent and 36.9 percent respectively as of February of 2013 final figures. (Source: North East Florida Association of Realtors).

EFFECTS OF RISING HOME PRICES OUTSIDE OF BANKRUPTCY

The most obvious effect of rising home prices is that people purchasing homes now are paying more monthly for mortgage payments, taxes and insurance than previous purchasers. This means less money available for necessities such as food, electric, transportation, etc.

When the last run up in home prices occurred during the years 2000-2006, home equity loans and credit cards were used as additional sources of income by homeowners attempting to keep up with rising home costs and living expenses. The results were disastrous. When home prices fell, the ability to refinance and pay off debt evaporated. Then the credit card debt became too much to sustain and the financial crisis was underway. Bankruptcy filings rose rapidly and millions of families lost their homes.

EFFECTS OF RISING HOME PRICES IN BANKRUPTCY

The most obvious example of rising home prices potentially affecting a person who is looking to file bankruptcy is the potential impact on the ability to strip off a second mortgage. I have previously written about stripping off of second mortgages in Jacksonville, FL bankruptcy:

https://www.planlaw.com/stripping-second-mortgages-in-jacksonville-chapter-7/

In order to qualify for this relief, you must file Chapter 7 or 13 case, have a home with a first mortgage (even homestead property is eligible) and the value of the home must be below the payoff of the first mortgage. Often, a tax value is appropriate to use to determine your home’s value or an appraisal may be ordered to determine valuation.

With rising home prices, this ability to strip a second mortgage may not be available. The value of the home may actually rise over the amount owed on the first mortgage. Until recently, that was almost unheard of in real estate.

The rising home values may also affect the ability to obtain a modification of the first mortgage. When a modification of the first mortgage is attempted, the mortgage company does what is called a “net present value” calculation. If the mortgage company feels that there is more value in foreclosing the mortgage and liquidating the home on the open market, then there may be no incentive to modify the loan and wait to be paid off by homeowner through the modification. The result could be a denial of the modification and foreclosure of the mortgage.

CONTACT US

At Mickler & Mickler, we attend Court and see the bankruptcy trustees and judges in action several times a week. We have the experience to guide you to the right decision about whether to file a case, and if so, what Chapter to file.

Please contact Mickler & Mickler at 904.725.0822 or bkmickler@planlaw.com. We will be happy to set you up a free appointment to discuss your situation and potential solutions.

Bryan Mickler

HOA Liens and Bankruptcy

I have previously written about stripping off of second mortgages in Jacksonville, FL bankruptcy:

https://www.planlaw.com/stripping-second-mortgages-in-jacksonville-chapter-7/

But what about condo and other HOA liens when you file a Chapter 7 or Chapter 13 case? Do the HOA liens get treated the same as a regular second mortgage? Can the lien be stripped in a Chapter 7 like a second mortgage?

HOA Liens in General

 HOA liens such as condo liens and homeowner’s assessments are junior mortgages which are secondary to a purchase money mortgage on a residence or investment property. See In re: OLGA P. BUSTAMANTE; Case No. 6:12-bk-12877-KSJ; http://pacer.flmb.uscourts.gov/pdf-new/63788532.pdf. Any first mortgage recorded after 1990 is a superior lien to any recorded HOA declarations. Fla. Stat. § 718.116(5)(a).

This means that the lien is subject to being stripped off in a Chapter 7 case pursuant to the McNeal decision in the 11^th Circuit discussed in the above blog and in Chapter 13 cases. See In re Plummer, 484 B.R. 882 (Bankr.M.D.Fla.2013).

In order to qualify for this relief, you must file Chapter 7 or 13 case, have a home with a first mortgage (even homestead property is eligible) and the value of the home must be below the payoff of the first mortgage. Often, a tax value is appropriate to use to determine your home’s value or an appraisal may be ordered to determine valuation.

Pre-petition assessments v.  Post-petition assessments

The stripping off of the HOA lien is only valid against pre-bankruptcy assessments. Any assessments that come due after the filing of a Chapter 7 or Chapter 13 case would be excluded from discharge and being stripped by 11 U.S.C. § 523(a)(16), which provides that any post-petition assessments remain the responsibility of the owner as long as the title to the property is in the name of the owner.

 Problems with HOAs after bankruptcy

Imagine this nightmare scenario: A Couple filed Chapter 7 in 2008 and gave up their home in a community where there was an HOA. The first mortgage was delinquent and the house was underwater due to the recent real estate slump. They moved out and lived peacefully for several years. However, the mortgage company was slow in foreclosing on the home due to title issues.

Now it is 2013 and the home is still legally in the name of the Chapter 7 couple and the HOA is suing them for a money judgment for the post bankruptcy assessments that have come due since 2008. Sound far fetched?? It’s not and has happened several times to people who filed Chapter 7 or Chapter 13 in Jacksonville. Don’t let this happen to you!! Learn about your rights and the appropriate steps to take to protect yourself from this type of situation.

CONTACT US

At Mickler & Mickler, we attend Court and see the bankruptcy trustees and judges in action several times a week. We have the experience to guide you to the right decision about whether to file a case, and if so, what Chapter to file.

Please contact Mickler & Mickler at 904.725.0822 or bkmickler@planlaw.com. We will be happy to set you up a free appointment to discuss your situation and potential solutions.

Bryan Mickler

Tax Refunds and filing bankruptcy

It’s tax season again. That means that Chapter 7 Trustees and the Chapter 13 Trustee are looking for tax refunds from anyone who has filed for bankruptcy. Generally, a tax refund is earned over the course of the prior year and is a pre-bankruptcy asset that must be turned over to a bankruptcy trustee.

However, that tax refund is important to many families as a source of funds to use for long put off repairs, new clothes for the kids or any other unusual expense. When this time of the year comes around, one of the first questions that we ask potential clients is “Have you filed your tax return yet?”. If the answer is yes and a refund is coming, how can the refund be preserved when a bankruptcy filing is needed?

CHAPTER 7 AND TAX REFUNDS

As stated above, your pre-bankruptcy tax refund will generally belong to a Chapter 7 Trustee. Unless some collection activity is about to take place which will result in the garnishment of a paycheck, loss of vehicle or the foreclosure of a home, the filing of a Chapter 7  may not be immediately necessary. The delay in filing of the Chapter 7 can allow a family to utilize the tax refund for normal living expenses or to pay for long overdue repairs to a home or vehicle. You should keep a record of all expenditures which were paid for with the tax refund and be prepared to show that the refund was completely spent on the living expenses or repairs.

If you must file the bankruptcy and have not received your refund, be sure to attempt to exempt some or all of the refund. Earned Income Credit (EIC) refunds are exempt. Check your tax refund to see if some or all of the refund is EIC and exempt. Chapter 7 debtors are also entitled to personal property exemptions which may be used to cover some portion of the refund. In Florida, a married couple who does not claim a homestead can claim up to $10,000.00 in personal property exemptions which may be used to cover a refund that has not been received. At Mickler & Mickler, we can help to prepare your Chapter 7 case to maximize your exemptions as allowed by law.

CHAPTER 13 AND TAX REFUNDS

Chapter 13 is not a liquidating type of filing. That means that the Chapter 13 Trustee generally won’t be entitled to seize a pre-bankruptcy refund as a Chapter 7 Trustee would. However, the refund may be considered “disposable income” that may be subject to turnover to the Trustee. This disposable income requirement will cover all years that a Chapter 13 case is pending and tax refund may be received. Disposable income is generally defined as monthly income minus necessary living expenses. It is a flexible standard that can be tailored to fit many different lifestyles. What will normally end up happening in a Chapter 13 case is that the necessary repairs or other expenses will have to be submitted to the Chapter 13 Trustee or the Judge in a case to determine if the refund should be used to pay such expenses or will have to be paid to the unsecured creditors in a case.  Again, such determinations are made on a case by case basis and may change from year to year depending on the financial condition of the debtor. Our office routinely submits request for a debtor to be allowed to keep a refund in order to pay for necessary expenses. We are familiar with the requirements for such a request and can advise if such a request should be filed.

At Mickler & Mickler, we attend Court and see the bankruptcy trustees and judges in action several times a week. We have the experience to guide you to the right decision about whether to file a case, and if so, what Chapter to file.   When you contact our office, we can help you in your case with sound legal advice.

Please contact Mickler & Mickler at 904.725.0822 or bkmickler@planlaw.com. We will be happy to set you up a free appointment to discuss your situation and potential solutions.

Bryan Mickler

Stripping Second Mortgages in Jacksonville Bankruptcy

I have previously written about modification of Mortgages through Chapter 13 in Jacksonville, FL bankruptcy:

https://www.planlaw.com/modification-of-mortgages-in-chapter-13-in-jacksonville-fl/

But some people are not interested in modifying their first mortgage or may have already received a modification and would not be eligible for a further reduction in payments. In such a case, many people seek relief under Chapter 7 of the Bankruptcy Code. Chapter 7 is the basic liquidation Chapter which will relieve people from unsecured debts such as credit cards, medical bills, etc.

So what does Chapter 7 have to do with mortgage stripping? As of mid-2012, the Bankruptcy Courts in Florida, Georgia and Alabama have been able to strip second mortgages in Chapter 7 if the value of the home is less than the amount owed on the first mortgage. In  McNeal v. GMAC Mortgage LLC (In re McNeal), 2012 WL 1649853 (11th Cir. May 11, 2012), the Eleventh Circuit determined that lien-stripping of a wholly unsecured lien or second mortgage is allowed in chapter 7. GMAC Mortgage, currently in chapter 11 itself, has requested a rehearing, but the review of ruling has been held up by the GMAC Chapter 11 filing.

In order to qualify for this relief, you must file Chapter 7, have a home with a first and second mortgage (even homestead property is eligible) and the value of the home must be below the payoff of the first mortgage. Often, a tax value is appropriate to use to determine your home’s value or an appraisal may be ordered to determine valuation.

Whichever method you use to determine the valuation of the home, time is limited. The ruling is subject to reversal at any time due the pending rehearing motion. If your motion to strip has not been granted (and any applicable appeal/rehearing time has run) when the ruling is overturned, you will lose the ability to strip the second mortgage from your home. In such a case, a Chapter 13 may be the only avenue to obtain relief from the second mortgage.

If you feel that you may benefit from a loan modification or any type of mortgage relief, contact our office at 904.725.0822 for a free consultation.

Bryan Mickler

Guarantor Issues in Chapter 11 Cases

            Everything was going so well – you have filed the Chapter 11 case for the corporate debtor and are progressing nicely in the case. Then the main shareholder calls your office in a panic – “I’ve been sued!!!” You immediately start dreaming of huge sanction awards against a malevolent creditor that ignored your corporate Chapter 11. But, alas, the creditor has sued the principal as a guarantor on the corporate debt.

This situation is all too common and can cause substantial harm to the corporate case. Judgments against shareholders can result in garnishment of funds needed to cover corporate shortfalls, result in execution on the corporate stock or cause the shareholder to abandon the corporate case.

If your shareholder cannot or will not consider an individual bankruptcy filing, there are still options available to protect the shareholder (and your corporate case) through the corporate Chapter 11. Our office will, depending on the type of Plan being proposed or the particular situation, file an adversary proceeding in order to extend the provisions of the stay to the non-debtor.

The Chapter 11 Court has the equitable powers under Section 105(a) to enjoin the continuation of collection activities against the non-debtor, which would significantly impact the Debtor’s ability to successfully reorganize. See Carway v. Progressive County Mut. Ins. Co., 183 B.R. 769, 775 (S.D. Tex 1995).

As a general rule, the automatic stay will normally apply to non-debtors only “when a claim against the non-debtor will have an immediate adverse economic consequence for the debtor’s estate.” Queenie, Ltd. v. Nygaard, Int., 321 F.3d 282, 287 (2d.Cir.2003). As cited by the Queenie Court, examples are a claim to establish an obligation of which the debtor is a guarantor, McCartney v. Integra National Bank North, 106 F.3d 506, 510-11 (3d Cir. 1997), a claim against the debtor’s insurer,   Johns-Manville Corp. v. Asbestos Litigation Group (In re Johns-Manville Corp.), 26 B.R. 420, 435-36 (Bankr. S.D.N.Y. 1983) (on rehearing), and actions where “there is such identity between the debtor and the third-party defendant that the debtor may be said to be the real party defendant . . .,” A.H. Robins Co. v. Piccinin, 788 F.2d 994, 999 (4th Cir. 1986). Capital contributions from the shareholder are also a good reason to extend the provisions of the stay to the non-debtor. The fact that the co-debtor’s capital contributions are available to fund Debtor’s Plan warrants extension of the stay to the necessary co-debtor. See In re Hamlin’s Landing Joint Venture, 81 B.R. 651, 653 (Bankr. M.D. Fla. 1987).

If you are considering Chapter 11 for a corporation and have a personal guarantee issue, consider the above when deciding on which attorney’s office to utilize. Ask how the attorney will handle a situation where a personal guarantee action has been filed. Our office has the experience to recommend the appropriate course of action in such a situation, whether it requires filing a separate bankruptcy petition or attempting to stay the suit through an extension of the automatic stay.

Contact our office at 904.725.0822 or bkmickler@planlaw.com for a free consultation regarding filing bankruptcy.