THE RUSH TO CLAIM A MORTGAGE DEFICIENCY IN FLORIDA BEFORE JULY 1, 2014

A recent new client to our office highlighted a potential wave of new mortgage deficiencies that may be filed over the next few weeks.

This potential client had had a home foreclosed in September of 2009. No action had been taken by the mortgage company in the foreclosure case for nearly five (5) years since the foreclosure sale. Instead, what she brought in was a new suit by a debt buyer which was attempting to obtain a deficiency against her.

A quick research of the Florida Statutes found the reason for the action. When the Florida Legislature changed the mortgage deficiency statute of limitations in 2013, it gave old foreclosure cases up to 5 years from the date of the sale or until July 1, 2014, whichever came first, to collect deficiency judgments. See Florida Statutes, § 95.11 (2013).

If you are being sued by a debt collector for a deficiency related to a long foreclosed home, contact our office for advice on how to handle this situation. You may have valid legal defenses and/or claims related to the collection of such claims.

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 orbkmickler@planlaw.com.

Bryan K. Mickler

CAN I LOSE MY EXEMPTIONS FOR ALLEGED BAD CONDUCT IN BANKRUPTCY?

            When you make the difficult decision to file for a Chapter 7 or Chapter 13 Bankruptcy, there are certain assets that are declared exempt in your case. Typically, the biggest exemption is a person’s home equity. If you own a home that is worth $150,000.00 and you owe $125,000.00 on the home, the $25,000.00 of equity is exempt in Florida due to the unlimited homestead exemption in this State.

            With the recent decline in Chapter 7 filings, it is becoming very evident that Chapter 7 Trustees are seeking to make more from any possible asset in any case, whether it is exempt or not. Normally, a Chapter 7 Trustee will make $60.00 as an administrative fee from a “no asset” Chapter 7 case. The possibility of tapping into exempt equity is very appealing to the Chapter 7 Trustees in rough economic times (fewer assets in each case) combined with lower numbers of filings. Thankfully, such a possibility seems to have been recently ruled out by the Supreme Court.

            In Law v. Siegel, (http://bankruptcy.cooley.com/wp-content/uploads/sites/245/2014/03/Law-v-Siegel-SCOTUS-Opinion.pdf) issued on March 14, 2014, the Supreme Court held that a bankruptcy court cannot surcharge a debtor’s homestead exemption to pay for the Chapter 7 trustee’s administrative expenses, even if those expenses were incurred as a result of the debtor’s fraudulent misrepresentations.

            Why should anyone care about a claim of fraudulent conduct by a Chapter 7 Debtor? While the vast majority of Chapter 7 cases are relatively routine, there are some cases that have considerable litigation involved where a Debtor may fight to maintain assets which a Debtor legitimately feels are not property of the Chapter 7 Trustee. In such a case, the threat of a Chapter 7 Trustee claiming fraudulent conduct and attempting to reach exempt property is a possibility. This type of conduct by a Trustee could have a chilling effect on a legitimate rights of Chapter 7 Debtors to dispute claims by Chapter 7 Trustees. Forced settlements and other bad results would certainly follow.

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 orbkmickler@planlaw.com.

Bryan K. Mickler

IS YOUR BANKRUPTCY ATTORNEY REALLY A FULL-TIME BANKRUPTCY ATTORNEY?

            Is your bankruptcy attorney really a specialist in bankruptcy? Or is that attorney just filing a couple of cases to make some extra income, while really putting most effort into another area of law? Our office sees part-time bankruptcy attorneys on a regular basis while attending court. During the bankruptcy filing boom years of 2009-2012, lots of part-time bankruptcy attorneys jumped into filing Chapter 7 or Chapter 13 cases. Some would even try a Chapter 11 if the retainer were large enough. Since that time, 2013 filings were down 8% from 2012 levels and down 35% from the 2010 peak of over 11,000 cases.

So what is the part-time bankruptcy attorney doing now that there are not as many filings? Have they have gone back to foreclosure defense, divorce and other types of law in order to make income? If so,this could mean that the attorney is not staying up to date on the latest case law related to bankruptcy or any changes in the Trustees’ offices that might affect a Chapter 7 or Chapter 13 filing. When this occurs, exemptions are missed, bankruptcy schedules are not filled out properly and issues arise with the bankruptcy trustee. Ultimately, it is the client who is affected by all of the above.

Would you go to a lawnmower shop to have your car repaired? They are both mechanics, but with very different specialties. Before you hire any bankruptcy attorney, check the website of that attorney and ask them questions about what area of law they specialize in practicing. Do they exclusively practice bankruptcy? Are they involved in State Court cases such as divorce, foreclosure defense or litigation that will require large amounts of time at a separate courthouse? All of these issues could potentially impact your bankruptcy filing in a negative way.

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.

Bryan K. Mickler

1099 FORMS AND FILING FOR BANKRUPTCY

With 2013 behind us, many people are starting to think about filing taxes for the 2013 tax year. In connection with tax season, our office has noticed a great increase in the number of 1099 forms arriving from mortgage lenders. These forms can have no tax effect or can dramatically alter a tax obligation for an individual or family. First, you need to understand the 2 main types of 1099 forms. There is a 1099-A and a 1099-C as explained below.

If you borrow money from a lender to purchase property, the lender may require the loan to be secured by the purchased property. If the property is sold in a foreclosure or you abandon the property, you may be required to treat the transfer or the abandonment as a sale of the property. If the lender forecloses on the property or has reason to know that you abandoned, or permanently discarded from use, the secured property, the lender should send you a Form 1099-A, Acquisition or Abandonment of Secured Property. The filing of a bankruptcy and surrender of the property after a Chapter 7 or Chapter 13 filing will often trigger a 1099-A filing.

The 1099-C is strictly income related. When you borrow money, you are not required to include the loan proceeds in gross income because you have an obligation to repay the lender later. If that obligation is subsequently canceled, you may be required to include the amount of the canceled debt in gross income. A commercial lender canceling a debt will issue a Form 1099-C  Cancellation of Debt, to report the cancellation. Often we see this with mortgages and credit cards after the filing of a Chapter 7 or Chapter 13 case.

On Form 1099-A, the lender reports the amount of the debt owed (principal only) and the fair market value of the secured property. You, the debtor, use these values to determine a gain or loss on the disposition of the property. On Form 1099-C, the lender reports the amount of the canceled debt. If the lender’s acquisition of an interest in the secured property (or the debtor’s abandonment of the property) and the cancellation of the debt occur in the same calendar year, the lender may issue a Form 1099-C only.

Either form can have a large impact on tax obligations. If you receive a 1099-C, the IRS will include the amount reported as imputed income and you are obligated to pay tax on the amount of the income. On the 1099-A, you may have a paper gain that would be a taxable event and cause an increase in taxes owed.

So what is the solution? Filing a Form 982 with the IRS will generally relieve you of the tax obligation. The Form 982 is used by people who have filed for bankruptcy and allows the income reported to the IRS to be a non-taxable event in most instances. It can also be used if you are insolvent (assets worth less than liabilities) and have imputed income reported to you.

If you are interested in filing a Chapter 7 or Chapter 13 to deal with IRS or other issues, please contact our office for a free consultation.

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.

Bryan K. Mickler

EFFECT OF BANKRUPTCY ON JOB SEARCH

            Bankruptcy and foreclosure have long been recognized as severe drags on a person’s credit report score. A typical foreclosure filing against an individual can drag that individual’s credit score down by 250 points for 7 years. A bankruptcy filing will have the same immediate impact. However, in the case of the bankruptcy the score will begin to rise almost immediately upon discharge of the Chapter 7 or over the course of a Chapter 13 repayment Plan based upon timely payments to the secured creditors.

            Our office uses a software program to predict the result of any bankruptcy filing on an individual’s credit score. While not exact, it does provide a good insight into what effect the filing will have on long term credit.

            But what if an individual is applying for a job. Does it matter if the individual has filed for bankruptcy or has damaged credit? As the law is written now, the Fair Credit Reporting Act allows employers to access credit reports of potential job seekers to determine credit worthiness. It is estimated that 50% of employers access the credit reports of potential employees prior to hire.

              The ability of employers to deny job seekers the opportunity for employment based upon credit has had a dramatic effect on a large number of families as a result of the recent financial crisis. Millions of Americans have suffered credit damage as a result of foreclosure, job loss, divorce and other non-merit based reasons. As a result of a general economic slowdown, an individual’s experience, education and work ethic have ceased to be determining factors in whether that individual may qualify for a particular job when employers base employment decisions on credit reporting.

         Recently, however, there may be some encouraging news on this pressing issue. Legislation was recently introduced in the United States Senate to amend the Fair Credit Reporting Act to prohibit potential employers from accessing a potential employee’s credit reports or inquiring about credit status in connection with an application for employment. Sen. Elizabeth Warren recently introduced the “Equal Opportunity for All Act” in order to prohibit employers from making employment decisions based upon negative credit report items. Errors on credit reports, studies showing no correlation between credit and work ethic and past economic problems for the entire economy make this legislation important to even out the competition for jobs according to Senator Warren. See http://www.warren.senate.gov/?p=press_release&id=305

       If you have bankruptcy credit impact questions, our office will be happy to assist you and answer any questions related to the effect of filing a bankruptcy on credit and other aspects of your life.

     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.

Bryan K. Mickler

INHERITED IRA’S TARGETED BY CHAPTER 7 TRUSTEES AND POSSIBLY A GREATER NEED FOR CHAPTER 13

            With the coming wave of Baby Boomer inheritance issues, one situation has suddenly taken on new urgency. Most people who are near retirement age or have already retired were gradually shifted from traditional pension plans into an IRA or 401(k) plan in the past. IRAs and 401(k) funds are two of the most common exemptions that are claimed in Chapter 7 or Chapter 13 cases. This means that the IRAs and 401(k) plans cannot be liquidated in a Chapter 7 filing or counted as liquidation in a Chapter 13 case. The accounts simply pass through the filing of a bankruptcy and will remain available for later income upon retirement.

            Recently, however, a new issue has become a target for Chapter 7 Trustees. What if a Chapter 7 debtor had inherited an exempt IRA and then rolled the funds into an exempt IRA in their own name within the allowed period after inheritance? This is precisely the issue confronting the Supreme Court now. The case is Clark et ux. V. Rameker et al., U.S. Supreme Court, No. 13-299.

            In the Clark case, the Wife inherited a $300,000.00 IRA from her later mother. She immediately rolled that amount into an exempt IRA in her own name. When their pizza business failed, the Clarks filed for Chapter 7 to discharge approximately $700,000.00 in business guarantee and personal debts. They claimed the IRA as exempt in the Chapter 7 filing.

            Prior to that date, the 5^th and 8^th Circuits had ruled such inherited funds to be exempt. Undeterred, the Chapter 7 Trustee filed an exemption to the IRA in the Clark’s Chapter 7 case. Eventually, the 7^th Circuit ended up with the case and ruled that the IRA was not exempt since the funds were inherited and not for the savings or retirement of the Clarks.

            The Supreme Court will most likely rule on the issue in June of 2014. Our office is closely monitoring the case and progress of the current exemption in inherited IRAs. Don’t be surprised if inherited 401(k)s are the next target as they are essentially the same as an IRA for exemption purposes.

            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.

Bryan K. Mickler

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

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