Being behind on your mortgage is a frightening prospect. If you haven't already been served notice of foreclosure, it could be coming soon.
For Michigan residents who find themselves with a lot of debt, the option of bankruptcy may be something worth considering. Maybe some unexpected healthcare expenses have suddenly given people more debt than they bargained for. Or, maybe that great business idea you had just didn't pan out. In these cases, a Chapter 13 bankruptcy might be something to consider.
Personal bankruptcy can be an effective way for people dealing with financial challenges to get rid of paralyzing debt. Many people have compared it to a reset button for people looking for relief from overwhelming debt. Still, the decision to file for bankruptcy is a major life decision for Wayne County residents, and it is a good idea to consider a number of factors before taking the plunge.
When facing financial challenges, people have a variety of debt relief options. Some of these options might be a "quick fix" while other may require some significant work. When people are considering Chapter 13 bankruptcy, in particular, they are often looking to solve significant financial issues. They may want to keep their home, car or other expensive good, while relieving some debt.
It's not unusual for people in Wayne County to face various financial issues that make it necessary for them to consider options to get a fresh financial start. One such option is Chapter 13 bankruptcy. Filing for Chapter 13 must be fully understood before moving forward with it. Chapter 13 is useful for people who have a job and earn a living. The process lets eligible people come up with a plan to pay what they owe. A repayment plan will be proposed and paid in installments so the debt is cleared in three to five years.
The tax season is upon us when most Americans can expect a personal income tax refund. If you are presently in a chapter 13 bankruptcy, you may not be rejoicing at the expectation of receiving an income tax refund because your chapter 13 plan requires that you pay the income tax refund to your chapter 13 Trustee for payment to your creditors. If you are represented by the law firm of Charles J. Schneider, P.C., you would have been advised that the payment of the income tax refund would not necessarily reduce the length of your chapter 13 plan. Most chapter 13 plans propose to pay less than a 100% dividend to unsecured creditors, therefore, the payment would only increase the dividend to your unsecured creditors and not reduce the length of your plan. You are committed to pay both the sum confirmed as well as the sum paid for the length of the plan "whichever is greater". If you are a client of the law firm of Charles J. Schneider, P.C. you almost certainly were advised that a chapter 13 plan is modifiable. The payment of the income tax refund is one of the terms which may be and is quite often modified for extraordinary purposes.
Many Michigan residents likely have some idea of what bankruptcy entails. Most understand that bankruptcy is an option for those who need escape from a desperate financial situation. However, that is often where a person's understanding of bankruptcy ends. Sometimes, the many details involved in filing for bankruptcy can prove to be a mystery. One facet of bankruptcy that some Michigan residents may not be aware of is the difference between Chapter 7 and Chapter 13 bankruptcy.
In our December 8, 2014 Newsletter, we discussed the possibility that the U.S. Supreme Court would come to the aid of Wayne County Homeowners and permit the "strip off" of a second mortgage. What is not widely known is that the Bankruptcy Court for the Eastern District of Michigan has taken the lead in helping homeowners to obtain loan modifications. The loan modification process currently takes place only when the homeowner files a chapter 13 bankruptcy. The loan modification process is not dependent on whether the homeowner is behind in payments on the mortgage. It does not matter whether there has been a prior request for modification. It does not matter if there was a prior rejection to a request or whether there is an ongoing request already in process.
This is a very uncertain financial time for many Michigan residents. As the economy continues to recover from the recent recession, many people are learning to live with less. However, many people are stuck in a cycle of borrowing to pay what they owe and struggling to make minimum payments. For many people this has led to creditor harassment and the threat of foreclosure.
The U.S. Supreme Court has recently agreed to hear two Florida chapter 7 bankruptcy cases where the 11th U.S. Circuit Court of Appeals has ruled that a bankrupt homeowner with two mortgages on their home may "strip off" or "strip away" the second mortgage. The "strip off", according to the 11th Circuit, can occur where the first mortgage balance on the home exceeds the value of the home. There would be no remaining value left in the home to support the lien of the second mortgage. A "strip off' of a mortgage should be distinguished from a "strip down" or "cram down" of a mortgage. What the latter two words mean is that the mortgage's principal balance is reduced to the current market value of the property which only partially supports the second mortgage. The Supreme Court has ruled in the past that a "strip down" or "cram down" cannot occur in a chapter 7 bankruptcy. It has not yet ruled in a chapter 7 bankruptcy that a second mortgage can be "stripped off" where it is wholly unsecured.