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Retirement Investing while Paying Off Student Loans

 

Why would I save for retirement when I am paying off my student loan debt?  This doesn’t make any sense!  Oh yes it does!!!!  While you might think it is better to pay off all of your debt before saving for retirement, think again.  Not only do you need to save regularly for retirement but you also need to keep your life moving forward in spite of your student loan debt.  Here’s how it’s done.  Every year, you have the opportunity to invest $5000 into a Roth IRA.  You might think that this is not a lot of money, but add it up over 40 years and you see the magic.  Bottom line, the most important aspect of this type of savings is that it is protected from bankruptcy. If you are self-employed and go bankruptcy 6 times during your life, ALL OF YOUR RETIREMENT SAVINGS ARE PROTECTED.    This means you can take lots of risks during your lifetime and even have good and bad years of income and file bankruptcy and then end up with a nice protected amount of retirement savings.  This is how smart entrepreneurs protect their family while trying to make a go of their business ideas, many of which fail, but if just one is successful even at the end of it all – it’s all worth it and you have retirement savings as well.

When should I convert my chapter 13 bankruptcy to a chapter 7

When should I convert my chapter 13 bankruptcy to a chapter 7?  Loss of employment loss of income plan is no longer feasible. You no longer need save your home or cars.

Section 348 of the bankruptcy code says that the qualification for a chapter 7 discharge is the petition date and not the conversion date. Therefore if you didn’t qualify for a chapter 7 filing on the date your chapter 13 is filed you cannot convert to a 7

However if it has been at least 8 years since you filed your prior chapter 7 you can dismiss your chapter 13 and then filed a brand new chapter 7

Examples

Mindy filed a chapter 7 bankruptcy on August 1 2007.  The case was discharged on February 1 2008 and was closed the same day.  Mindy filed her present chapter 13 case on August 5, 2011.  On August 2 2013 Mindy filed a motion to convert her case to a chapter 7.  The case cannot be converted to a chapter 7 because Mindy did not qualify for a chapter 7 discharge on the date of her chapter 13 filing.  Mindy can however dismiss her chapter 13 on August 2 2013 and filed a new chapter 7 on August 3 2013.

Atari U.S. operation files for bankruptcy

Atari U.S. operation files for bankruptcy.

A former colleague of mine mentioned this article to me today.  It is surprising to see Atari file Chapter 11 when it seemed recently that there had been a resurgence in interest in playing the classic Atari games such as Asteroids.  Recently I saw someone wearing a re-issued Atari t-shirt with the classic early 1980’s logo.   As a kid growing up in Sheboygan, I remember the afternoon after Christmas morning probably around 1983.  There had to be at least 4 thrown out Atari Game System boxes sitting out on the street for the trash.  A lot changes, many of you out there will remember the ill-fated Radio Shack TRS-80 computer system or the Commodore 64 all early competitors to Atari who always kept their focus on games.  They tried a computer system, but quickly learned that consolidation in the industry doomed them to the scrap yard.

Although I am not intimately aware of the details and facts surrounding Atari’s bankruptcy, it is a Chapter 11 filing which is usually filed where a corporation wishes to survive after a “reorganization” which is a friendly way of saying reducing debt balances, interest rates and eliminating some types of debt.  In this case, Atari (of the United States) is trying to separate from its from its French owner to save its “classic” assets which include classic games such as Asteroids.

When considering debt relief, please consider NLO Nelson Law Office, our firm is a full service personal bankruptcy firm concentrating its practice in the areas of Chapter 13 and Chapter 7 Bankruptcies.  At this time, our firm provides referrals for bankruptcy work that requires either a personal or business Chapter 11 bankruptcy.

If you have ever wondered why a person would file a Chapter 11, think of it simply as a large Chapter 13.  Chapter 13 only allows about $340,000 in unsecured (credit card style) debt and about $1,000,000 in secured debt.  Clients with multiple investment properties and large lines of credit often look to a personal Chapter 11 to handle problems too large for Chapter 13.

NACBA Board of Directors Election Debate – Hear David Nelson talk about his candidacy

Today, an unofficial debate was held by three of the four candidates running for seat #4 in the National Association of Consumer Bankruptcy Attorneys Board of Directors.  Hear David Nelson talk about his candidacy and his passion for consumer advocacy and bankruptcy rights.  Covered in this meeting are the topics of outreach, qualifications, the future and legislative trends.  HAMP, Principal DownPayment, Private Student Loans and Marketing are discussed.

To listen to the recorded debate, goto:  NACBA Debate

New Year’s Fresh Start Bankruptcy Timeline

New Year’s Fresh Start Bankruptcy Timeline

Set Up your Free Bankruptcy Consultation Today!  Fill out the form below for an immediate response.

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NLO Nelson Law Office is a Debt Relief Agency offering debt relief through bankruptcy.

2012 New Year's Eve Fireworks Navy Pier Chicago, Illinois

2012 New Year’s Eve Fireworks Navy Pier Chicago, Illinois

1)  Get Through the Holiday, spend wisely and see our post about credit card use during the holidays
2)  File your taxes as soon as possible
3)  See a Bankruptcy Attorney about Debt Relief Options early in January to find out your options
4)  Receive your tax refund in February and file your bankruptcy.

Why is the New Year such a popular time to file bankruptcy?

Tax Refunds are usually received prior to May 31st of the New Year.  Tax Refunds can be used for legal fees and court costs in a bankruptcy.  The tax refund is listed on the bankruptcy petition, but the portion used for legal fees and filing fees is exempt.

Holiday spending often times puts people “over the top” after years of family budget deficits caused by medical bills, illness, loss of job or overspending.

What should I do if I don’t have much of a tax refund?

You can either wait to file your bankruptcy later after you have saved enough money to pay for it, or you can file a Chapter 13 bankruptcy which allows for all of your legal fee to be included in the bankruptcy “plan”.

Need more options?  Have Questions?

Call David Nelson at 877-464-6656 to set up a free bankruptcy consultation.

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Can I Use My Credit Cards for Christmas Gifts and Still File Bankruptcy?

Can I Use My Credit Cards for Christmas Gifts and Still File Bankruptcy?

  • Schedule Your Free Bankruptcy Consultation By Filling Out this Form




Yes, you can use your credit cards for Christmas and still file bankruptcy. However, you must be extremely careful. If you are filing within ninety days of using your credit cards, you must make sure that you have used them only for “necessary” i

Daley Center Christmas Tree

Daley Center Christmas Tree

tems and not for “luxury” items. If you are filing more than 90 days since you last used your credit card, you can essentially charge anything onto the credit cards except it cannot be in bad faith or with a fraudulent intent. Schedule a Bankruptcy Consultation

At this “Christmas” time of year, people spend excessively and often use credit cards. A large portion of Chapter 7 Bankruptcies are filed in the months of February, March and April because tax refunds can be used for paying your bankruptcy attorney fees, filing fees and due diligence costs such as credit reports.

1. Best Solution: Do not use your credit cards – At All. File Bankruptcy with your tax refund as early as January or anytime after you receive your tax refund.

2. Fair Solution: Use your credit card over the holidays and prior to your bankruptcy for “necessary” items such as groceries and clothing from non-luxury retailers. File Bankruptcy with your tax refund as early as January or anytime after you receive your tax refund. Before even considering this solution, you should seek out a qualified bankruptcy attorney.

3. So-So Solution: Use your credit card for non-luxury items that might be objectionable as non-necessary, such as toys, electronics or other items are not basic survival items, such as food and clothing. You could possibly file in January, February or March but best choice is to file April 30th or later.

4. Not so great solution: Use your credit card for all items at all retailers, including luxury retailers. Purchase jewelry, electronics and just about anything you want. File your bankruptcy at least ninety days after the last purchase. Take the chance that you have made such flagrantly offensive purchases that the creditor files an adversary petition to take away your discharge, or, worse yet, fraud. Bottom line: this is risky at best, but if the purchases are small enough, a calculated risk.

5. Terrible solution that will nearly always run into problems: Use your credit card during the holidays on anything and run every card up to the limit. Include luxury items at luxury retailers. File your bankruptcy whenever you want, such as February. Chances are that if the purchase is over $500 at any one creditor, the creditor will file an adversary lawsuit.

One scenario that happens over and over again (often times with bad results) is the “blowout” Christmas Charger who decides to “let it all out” one last time before filing for bankruptcy. This charger may still have up to $1000 left in credit and may often purchase entirely luxury goods, such as an iPad, Wii, Xbox, large screen T.V., an unnecessary computer, a trip to the Caribbean, or a bunch of jewelry. Then the charger stops in to a local attorney’s office and doesn’t mention the charging, the bankruptcy attorney doesn’t check out the charge bills, the bankruptcy is filed in February and then a lawsuit is file by the credit card company to take away the bankruptcy discharge with regard to the credit purchases. Usually, the debtor is forced to hire a second attorney at $2000 or more to represent the debtor in a defense of the discharge action and usually results in the debtor entering into a promise to pay the entire debt to the creditor with interest over a period of time.

What is the lesson of this article? If you are contemplating bankruptcy, stop using your credit cards and keep it simple. If you must use your credit cards, then use them only on food and clothing and at non-luxury retailers. Under all circumstances, try to not use your credit cards at all 90 days prior to the filing of your bankruptcy.

Three true stories:

Client purchases an $8,000 hot tub one week prior to filing on a line a credit issued from a credit card style creditor. Client files bankruptcy. 2 & 1/2 month after filing bankruptcy, debtor is sued by the credit card company. Creditor seeks to take away the debtor’s discharge with regard to the $8000 debt plus attorney fees and interest or about $10,500 total. If the case was not settled, this would have eventually been a garnishment on debtor’s income for about five years at 15% of his gross salary. Due to a settlement, the debtor was able to pay off the debt under a new agreement over 5 years at a reasonable interest rate. What does this teach us? A luxury item purchased within 90 days prior to a bankruptcy filing that is obnoxious and unnecessary and expensive will result in a nasty lawsuit that will cost the debtor another $1000-2000 in legal fees and possibly ruin all of the benefit of the bankruptcy.

Client purchases a tennis bracelet at Nordstrom as a “gift to herself” for filing bankruptcy…Good Luck! Nordstrom filed suit against the debtor, debtor ended up returning the item and paying about $600 in attorney fees to Nordstrom as a settlement instead of a fraud judgment, which would have resulted in the denial of an entire discharge of all debts. Bottom line: no “gifts” for successfully filing bankruptcy. No jewelry purchases on credit cards included in the bankruptcy up to one day before filing.

Client knows he isn’t going to be able to afford a new riding lawn mower for many years after filing bankruptcy, and one week prior to bankruptcy he purchases a new riding lawn mower for $1500.00. Client files bankruptcy one week later. Client does not tell his attorney about this purchase and does not make the bill available to the attorney, and the attorney must rely upon a credit report to file the bankruptcy petition. Debtor is sued in an adversary petition to deny the discharge of this debt. Result: client ends up paying the debt back over 36 months at 10% interest. Not much better result than if he had purchased it one year after the bankruptcy legitimately.

The one resounding rule throughout these cases seems to be that creditors object to the discharge, but this “un-permitted” purchasing in effect gives the debtor access to a tool right away that he may have needed immediately but would not have been able to get after the bankruptcy. Bottom line: even though the behavior above is in violation of the bankruptcy code and even though creditors dislike this behavior, they do end up preferring to extend a loan at a reasonable interest rate.

NLO Nelson Law Office is a debt relief agency offering debt relief through bankruptcy. To schedule a free confirmation click here and write “Bankruptcy Consultation Request” and hit send. Our office will respond with a variety of times and date for your consultation. Or…call our national toll-free number 877-GO-GO-NLO or 877-464-6656.

cram down chapter 13

1973 Lincoln Town Car

1973 Lincoln Town Car

cram down chapter 13

Cramming Down your Auto Loan: How to Lower Your Interest Rate and Increase the Amount of time to Pay Off your Car!

How to lower the interest rate on your auto loan.  How to increase the amount of time to pay off your auto loan. How to lower your payments. It’s all a part of filing a Chapter 13 Bankruptcy and properly modifying your loan in the bankruptcy plan.

Here’s how it works:

If your car was purchased more the 910 days in the past and the current loan was used to purchase it…oftentimes referred to as a “purchase money loan” you are allowed to both reduce the total loan balance to the appraised value of the car on the date of filing your bankruptcy PLUS you can also reduce the Interest rate the Till rate. The Till rate is :

PRIME RATE (Click Here for Today’s Prime Rate) + RISK FACTOR (1-3%)

TILL v. SCS CREDIT CORPORATION, 124 S. Ct. 1951, 158 L. Ed. 2d 787, 541 U.S. 465 (S.Ct., 2004)
To Read More about Till Case, Click the Attached link:
TILL v. SCS CREDIT CORPORATION

 

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Example:

Jeff’s 2002 Mitsubishi Galant is worth $2400.00. Jeff’s automobile loan is with Wells Fargo. The loan balance at the time of filing his Chapter 13 bankruptcy was $5500.00. The interest rate on this his loan was 22%. He had 24 payments left on his loan. Jeff’s attorney modified the loan as follows in his bankruptcy plan:

Balance to pay off: $2400.00 (This is the current appraised value of the auto)
Interest Rate of Loan: 6.25% (Current Prime Rate of 3.25% plus maximum risk factor of 3% from the Till case.)

What is my auto loan is only 30 days old?

No problem, you can still modify the interest rate down to the Till rate of Prime Rate + Risk Factor BUT YOU CANNOT reduce the loan balance amount.

In this example, Jeff’s 2002 Mitsubishi Galant is still worth $2400.00. Jeff’s automobile loan is still with Wells Fargo. But the loan is only 30 days old and the balance is $5500.00. The interest rate is 22%. Jeff still has only 24 payments to go, but the loan is only 30 days old. In this case:

Balance to pay off stays at $5500.00
Interest Rate of the Loan goes to: 6.25% (Current Prime Rate of 3.25% plus maximum risk factor of 3% from the Till case).

Summary:

Chapter 13 Bankruptcy offers the ability to modify an automobile loan by either reducing the interest rate to Prime Rate Plus a Risk Factor or both reducing the interest rate AND reducing the loan payoff amount to the appraised value of the automobile depending on whether the auto loan is 910 days or older. The Till case is a watershed case that has been followed for years in providing for this treatment of the interest rate. However, the Bankruptcy Act of 2005 added the 910 day rule.

For more information about Chapter 13 Bankruptcy in Illinois, please call NLO Nelson Law Office at 877-GO-GO-NLO (877-464-6656) or email NLO Nelson Law Office Information

file bankruptcy on your own

Clear Lake Iowa

Clear Lake Iowa

file bankruptcy on your own

  • Schedule Your Free Bankruptcy Consultation




File your own bankruptcy.  File your Chapter 341 documents, reaffirmation agreements, filing fee and attend your own Chapter 341 meeting.  How Hard Can it Be?  Avoid Attorney fees and file it on your own.  Warning – it will take a lot of time.  Great for disabled, unemployed or low income filers with uncomplicated cases.  Chapter 13 is practically impossible to do properly on your own, but can be done.  Usually people start it on their own and add an attorney later.

Ever wondered how to file a bankruptcy on your own? Well wonder no more, here is the quick 5 minute course on how to do it!

1. Fill Out the Required Bankruptcy Forms – Link to Official Bankruptcy Forms!
2. Take your pre-bankruptcy credit counseling course at least one calendar day prior to your filing – Link to an Example of Court Approved Credit Counseling Agency!
3. File your bankruptcy by going to the Federal Clerk of Court in your district – Link to Information about Where to File!
4. Submit your Chapter 341 Documents within 14 days to the bankruptcy – Link to Information on how to submit your 341 documents!
5. Attend your 341 Meeting
6. Wait for your Discharge Order!
7. Need Help – Contact the Bankruptcy Assistance Desk – Link to the Help Desk!

8.  Link to “Guide for Individuals filing without an Attorney”, by United States Bankruptcy Court for the Northern District of Illinois.

That’s it.  How hard can it be?  Avoid attorney fees and file it on your own.

So what’s the catch? Why do people use attorneys in probably 95% of all cases:

• What do you fill-in the forms?
• How do I reaffirm a debt, such as to keep my car or home?
• How do I fill out the means test?  It’s worse than doing my taxes!
• What do I say and do at my 341 Meeting of the Creditors?
• Should I be using a Chapter 13 bankruptcy for my higher income and/or need to save my home?
• What is a motion for relief from stay?
• Why has the trustee filed a motion to dismiss?

Bottom line – filing on your own is a good option when you have a lot of time on your hands and can go to the bankruptcy assistance desk to help along the way to confirm your filings are done right. This is great for people who have racked up a lot of debt say $60,000 in credit card debt are now unemployed, getting harassed by creditors and will not likely be re-employed for at least one year. This is true of people in the construction business and other long cycle industries. Another good application for filing on your own is when you have made a lot of money in the past, have lots of debt and then suffer a disability which becomes permanent leaving you with an income that is often only 20% of your former income. In this case you won’t be taking on more debt in the future and you are really in no danger of a lawsuit or garnishment, but you simply want to clean up and get rid of all of the old debt so that you can focus on your new life. Many times these folks will do best using legal aid associations providing pro-Bono – free bankruptcies. One large organization that is used in Cook County is: Legal Assistance Foundation of Metropolitan Chicago.

For a free 1/2 hour bankruptcy consultation to learn whether you qualify for debt relief under bankruptcy or should even consider filing on your own, please call 877-GO-GO-NLO (877-464-6656) or email your request for a consultation to us at info@nelsonlawoffice.com.

illinois hardest hit program

illinois hardest hit program

Illinois Hardest Hit Program – Save Your Home – $25K Grant to Pay Mortgage Arrears

For anyone who hasn’t heard, here’s the news…there’s a new program on the block for saving your home.  And for some people, it’s a hit.

Looking for unbiased help in figuring out how to save your home?  Check out the following housing organizations. Click on the Link.  I have worked with all of them for years and know of their honesty and fair dealing:

The Illinois Hardest Hit Program essentially gets your home out of foreclosure.  Pays all the arrears, court costs, etc. to reinstate your loan fully and then provides up to 18 months of payment assistance.  The cap on the assistance is $25,000.

To apply for this program, please go to (click link):  Illinois Hardest Hit Program

Pro’s:

  • No Fees
  • Completely Reinstates Your Mortgage
  • Up to 18 months assistance

Con’s:

  • Increases the mortgage balance on your home by up to $25,000
  • Does not reduce the total amount owed on your home
  • Does not provide assistance after 18 months which is a problem if a person has not secured employment or their family is only partially employed

Who are the best candidates for this program:

  • Homeowners who are only temporarily out of work and can easily return to work in a stable job within 18 month of starting the program
  • Homeowners whose mortgage has less than $15,000 in arrears or is about 6 months or less behind
  • Homeowner who want to stay in their house for 10 years or more and does not care about having the flexibilty to move….for say a new job, changed family circumstances (divorce) or any other matter

Who are the worst candidates for this program:

  • Homeowners who haven’t made a mortgage payment for over one year
  • Homeowners who are in a profession that has been affected by the severe economic downturn such as construction or union jobs and are unlikely to have stable employment for the next five years
  • Homeowners who want the ability to be flexible in selling their home in the next 10 years

Who should consider a short sale of their home instead of this program:

  • Homeowners who cannot afford their home even when they are fully employed
  • Homeowners who are in an employment industry that will not recover soon and may need to relocate for employment
  • Homeowners who have so much debt on their home that they will not have equity for ten years or more (typically someone with two or more mortgages including a home equity line of credit)

Who should consider a Chapter 7 Bankruptcy instead of all of these options?

  • Homeowners who have unsecured debt (credit card style debt) that exceeds more than 1/3 of their annual take home pay
  • Homeowners who have not made a mortgage payment in over one year
  • Homeowners who have not been able to get a short sale approved by their lender
  • Homeowners who want to easily walk away from a home to simply move-on or need to relocate for employment
  • Homeowners who are insolvent – that is – no real assets outside of retirement accounts

When is a Chapter 13 Bankruptcy Reorganization a  better than the Illinois Hardest Hit Program?

  • When a mortgage debt is more than 6 months in arrears (no payment for at least 6 months or longer
  • When the homeowners property has more than one mortgage such as a second mortgage or home equity line of credit
  • When the homeowner has equity or something valuable to save in the property but also has a large amount of unsecured debt (credit card style)
  • When the total home mortgage debt can be reduced through “stripping off the second and junior mortgages/liens”

Can I Modify my Home Mortgage in Chapter 13 Bankruptcy?

Mrs. Free's Studios Davenport, Iowa

Mrs. Free’s Studios Davenport Iowa

Can I Modify my Home Mortgage in Chapter 13 Bankruptcy?

  • Schedule Your Free Chapter 13 Bankruptcy Home Loan Modification Consultation




Yes – you can modify your home mortgage in a Chapter 13 Bankruptcy by Stripping Off The Second Mortgage and other junior liens.

Today, you can modify your home mortgage in two ways:  Get a modification from the lender or file a Chapter 13 bankruptcy and attempt to strip off the second mortgage on your home.  Oftentimes, this will reduce the balance on your mortgage by 30%.  While this isn’t perfect, it is oftentimes, the difference between being able to keep your home or being forced to surrender it in foreclosure.

So how does this work.? First it is important to determine whether you should file bankruptcy.  Second you need to file a Chapter 13 bankruptcy.  Third, your bankruptcy attorney files an adversary procedure with the court to rule that the value of your home is less than the balance on  your first mortgage.  Fourth get the Chapter 13 plan confirmed by the court whereby the second (third, fourth, fifth and any junior mortgages) are wholly unsecured and will be paid as unsecured creditors.  At the end of the plan (60 months), the second mortgage and all other junior mortgages are released by the lender and the debtor/s is left with a home with only one mortgage.

Does this work in real life applications?  In the last year over 40% of our firms Chapter 13’s had successful plan confirmations with the second mortgage being stripped.    On average this reduced the principal by 30% on the home indebtedness.

So what is not so great?  The first mortgage still has to be paid off in full with all of the arrearages paid back over 60 months along with the costs of collection plus the first mortgage may still have a balance that is more than the home can be sold for…so why has the court allowed this to occur – the answer is in the intent of the bankruptcy code, the idea was that if home mortgages could be modified in bankruptcy, why would anybody pay their mortgage?  Therefore, to save the ability for consumer to get home mortgages from banks, the bankruptcy code strictly prohibits the modification of a home mortgage this is wholly or even partially secured even if secured by only $1.

Bottom line – Chapter 13 offers a crude type of home mortgage modification by getting rid of unsecured mortgages, however, it does not fix long term problems with a first mortgage.  If your first mortgage is OK by itself then this type of modification is for you.  If your first mortgage is still a problem, then it may be wise to simply surrender the home in the bankruptcy and let the lender take the loss.

What are we seeing now is unbelieveable – it never used to happen in the past, but it is happening now: After filing the bankruptcy  and after stripping the second mortgage, the lender on the first mortgage voluntarily modifies the first mortgage to make the plan easier.

So what is this all about?

Well…here’s the best way to describe it.  Typically, the interest rate is reduced to 2% for the first five years and it increases by 1/2% per year after that until it hits the market rate and then becomes fixed at that rate.  The kicker is that the bank will put the arrears on to the balance of the loan.  Doesn’t seem like a big deal, but it is!  If your old mortgage payment was $2400 per month and you were 10 months behind at the time of your bankruptcy filing, then you owe $24,000 in arrears.  In a typical 60 month chapter 13 plan, you will pay $24,000/60 per month to pay back these arrears.  This is $400 per month.  In this case, the bank basically put this into the balance.  So basically, you are now paying 2% interest on $24,000 over the next 30 years or so.  Around $50 per month.  The benefit is theoretically that your home if you keep it for 15 years will finally be worth more than the mortgage; you can sell it, pay off the mortgage and have a happy life.  This is all true with one caveat.  What if you have to get out of the house one year after your bankruptcy ends and you are still “underwater”   Good luck – you just entered another bankruptcy or years of garnishments.

In a nutshell – if you want to live in your house a long time and don’t have a big need to move soon and don’t believe you will be forced to move, then this is the ticket.  Basically, the bank cuts its price on loaning you the money.  But if you need to be more flexible and actually have the debt load be less immediately, then you are out of luck and better surrendering the home in bankruptcy.

Examples:

Ron and Karla bought a home in 2006 for $200,000.  The first mortgage was $160,000 from Wells Fargo.  The Second Mortgage for $40,000 was from Banco Popular.  Ron and Karla were doing great until Karla lost her job in 2008.  The couple missed 8 payments.  The couple was five months into their foreclosure action when they filed a Chapter 13 Bankruptcy.

Ron and Karla hired David Nelson to file their Chapter 13.  David suggested that they keep their home, but attempt to strip off the second mortgage.  Ron and Karla agreed.

Ron and Karla make approximately $70,000 per year together and have two children.  Their budget is tight and the means test says that they need to contribute on 10% of their plan to paying unsecured creditors.

Ron and Karla have no other debts besides the home.  Their mortgage payment was $1400 on the first mortgage, $500 on the second and their tax escrow was $300 per month.

Ron and Karla were $11,200 in arrears on their first mortgage when they filed their bankruptcy.

Here is how their plan payment is figured.

$1400 for payment of the first mortgage regular payment
$300 for tax escrow payment on the first mortgage
$67  (10% of $40,000 divided by 60 months) for payment of the unsecured second mortgage
$187  ($11,200 divided by 60 months)
$1954 Subtotal
$195  Trustee Fee (10% of payment)
$2149 total payment

So how does this work out with their budget

$70,000 Gross Income Per Year
$5833 Per Month Gross
($1458)  Taxes
$4375 Net Income Per Month

$2149 Plan Payment
$250  Gas & Electric
$800  Food
$194  Clothing
$100  Laundry
$250  Medical
$502  Transportation
$130  Auto Insurance
$4375  Subtotal

Square Budget.  Home Saved.  Overall home mortgage modified by overall reduction by 20%

Bottom line – this Chapter 13 accomplishes good things.  With other applications we might have an auto loan, additional credit card debt or other unsecured debt.  For those discussions, please see my other blog postings.

For more information about bankruptcy, mortgage modification or other debt relief options, please call NLO Nelson Law Office at 877-464-6656 or email us at info@nelsonlawoffice.com

We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code. CALL 877-GO-GO-NLO (877-464-6656) FOR A FREE BANKRUPTCY CONSULTATION TODAY! SATURDAY APPOINTMENTS ARE AVAILABLE.