Short Sale and Bankruptcy?

Many clients asks me this very important question and truthfully my answer has always been the same. Short sale is a bad idea but it has good ramification. It can prolong your foreclosure process while you can legally stay free in your home and not obligated (at least legally) to pay your mortgage payments. There are some potential problems with short sales.

First, a Chapter 7 discharges the underlying mortgage debt, as well your personal obligation for your second mortgages, HELOCs, equity lines, etc.) A liquidation bankruptcy would discharge all of your debts including the principal balance as well as HELOC.

Second, if you’re in bankruptcy, you can’t do a short sale without Court approval. This often means that you have to pay your lawyer more money to do something that has no financial benefit for you. Again, a short sale may be rejected by the bankruptcy as a collusive transaction.

Finally, even though you’re in bankruptcy, the lender may still issue a 1099-C. This means that you will need to file a Form 982 to avoid having to pay income taxes on the forgiven debt.
It is a good idea to negotiate that the lender would not come after you and file a deficiency judgement.


How Chapter 13 can be used to stop foreclosure?

How Chapter 13 Can Be Helpful In Stopping Foreclosure?
Foreclosure are on the rise in Nevada, and especially in Las Vegas. Chapter 13 is one of the appropriate remedy. When should Chapter 13 be filed? Benefits of Chapter 13 in stopping foreclosure.
My clients quite often asked me one very important question whether they should continue to seek
mortgage modification, or go ahead and file a Chapter 13 to stop a foreclosure. It is of course a very
pertinent question. There is a very slow pace of lenders’ response to modification applications on one pretext or the other. Let me analyze it with more emphasis this time.
1. First of all, You need to know what kind of modification you are applying for. Again, your modification does not stop the foreclosure process. In fact, both are dealt by two different sections of the same bank and have virtually no liaison with each other. If that is the case, you may have a very limited time in which to deal with a foreclosure if you are turned down for a modification. Other programs, like the HAMP program, require that lenders stop foreclosures while they process modifications. It is important to know whether your lender is proceeding with foreclosure in parallel with a modification application, or suspending foreclosure. If the latter is the case, you will have more time to respond, but you still may have to respond quickly.
2. It is has to be determined right away by your lender and you should know as well whether you are likely to qualify for modification under the application guidelines. For example, the HAMP program requires that you show that you have sufficient income to make the reduced payments in order to get approval. If you just lost your job, and you have no income, you aren’t going to qualify for that particular program. If you can predict with a fair amount of accuracy whether you will be accepted or rejected for modification, you can plan accordingly.
3. Please read this blog quite often as I update this continuously even on holidays and please educate yourself about the foreclosure process where you live, and where your case is in that process. I have a tremendous amount of information which is free of course and I never hide anything from Nevada residents. I like them to be fairly educated and make their own smart decisions in this regard. Please do not wait until the last minute to talk to a knowledgeable foreclosure defense attorney in this regard. Time, is of course, the essence in these matters. There can also be differences in what a lender considers to be “in foreclosure” and what a lawyer would describe as “in foreclosure.” The best way to determine what the process is and where you are in it is to consult with a seasoned attorney who handles such matters in your jurisdiction. Your options are very limited if the home is foreclosed.
4. You may want to consider whether you have defenses to foreclosure. First of all, most modification agreements that I have seen contain some language that says that you are waiving any defenses to the mortgage. Know what you are giving up before you sign such a release. Further, you may also want to consider defending a foreclosure action as a third alternative to modification programs or Chapter 13. Many attorneys who handle such matters report that the most meaningful modifications that they see are those that are the result of settlement negotiations where defenses to foreclosure have been raised.
5. There is nothing wrong with Chapter 13 filing when nothing else works or if your lender has become very stubborn. Deal with him in any way possible and stop the foreclosure on your home. This is your fortress and if it is foreclosed, next home purchase is too far away. Fight back, and don’t procastinate.

Can You Keep Your Car in Bankruptcy?

Can You Keep Car If You File For Bankruptcy?
[Law office of Malik Ahmad can be contacted to get free consultation for bankruptcy]
I have been asked many times about keeping car after declaring bankruptcy. The simple answer is yes, you can keep your car. But also it this is a white elephant, and you are fed up making the huge monthly payments, you can get rid of too. The federal plan for bankruptcy does not like to wipe out everything you have. You still can keep a job, and of course driving from to work and back to home. A car is an indispensable tool, and one cannot live without it. You have to drive to work. So let’s handle this questions once and for all. Debtor who file bankruptcy can keep one car in Nevada up to $15,000. worth of equity. Again, you have to think if you can afford the payment and like to continue the car. The most important questions is that if you can afford the car payments.
By filing bankruptcy, you erase your personal obligation to pay debt. When a debtor reaffirms debt, she is agreeing to continue being obligated for the debt, as opposed to discharging it as part of the bankruptcy. As a condition of keeping the car, your lender will make you reaffirm the obligation to make your car payments. After you have executed the reaffirmation agreement with the help of your attorney, you will continue to make car payments and use your car exactly as you did before bankruptcy. Reaffirmation agreements must be taken seriously because once you sign, you have taken the obligations to make the payments as agreed. The Court will not approve your reaffirmation of your car loan if to do so would constitute an undue burden. Therefore, the consumer must be able to demonstrate that she can continue to make her car payments before the Bankruptcy Court will approve the reaffirmation.
Is Your Car Worth to Keep It?
One of the common misconceptions about bankruptcy is that you will lose all of your property if you file. This is simply not the case. Many people who file bankruptcy retain all of their property through the process through the use of the exemption laws. However, it is important to meet with a knowledgeable bankruptcy attorney to discuss your state’s exemption laws. Additional equity can be protected by using the state wildcard exemption. If you owe more than your car is worth you need not worry about exemptions since you have no equity in your car. The bankruptcy trustee will only seek to liquidate property that has equity which exceeds the amount of your allowed exemption. Keep in mind also that you would likely have the option of paying the Trustee the amount of the non-exempt equity in order to retain your car. To summarize, if you can afford to continue to make your payments and do not have non-exempt equity in your car, you will be able to keep it through the bankruptcy process. If you have fallen behind on car payments and need time to get caught up, chapter 13 bankruptcies may be an option to get you the car back.

Should A Reaffirmation Plan Be Signed?

A reaffirmation agreement revives and consolidates a debt back into life that could have been discharged in a Chapter 7 bankruptcy. Mostly such agreements are often made to protect a house or vehicle. In a Chapter 7 proceedings, a debtor is forfeiting bankruptcy protection in exchange for the creditor promising not to repossess the property.It seems straightforward and simple at this stage. You continue to make payments, if you want to keep using the property. A client gets to keep his property and possibly rework the terms of the new contract to make repayment more affordable. What’s so strange here?

Here is what I recommend my clients about reaffirmation agreements:

The problem is once you sign, you are in a hornets nest. One can no longer free to surrender the property without being personally liable. Anytime, you miss a payments, your creditors would come back and haunt you. Again, why to reaffirm the same terms and conditions. Why not to negotiate the terms and ask the creditors to cut down the principal and cut the monthly income in exchange for reaffirmation. Again, you have to decide if you are a good candidate for repayment and a reaffirmation would help you and not eradicating the benefits of your chapter 7 liquidation bankruptcy. An attorney must be careful that he is not enhancing your financial liabilities and that you would be continuously able to make your payments. The court, however, can still reject the reaffirmation plan, if you reaffirm it. Courts has to see and check it independently.

The rule of caution is that one should never sign the agreement unless debtor have restructured the terms to be decidedly in your favor. In other words, try to cut the principal and interest, or stretch out the payment length. Again, one can also revoke the agreement within 60 days if they change your mind.

You have leverage. Use it to the best advantage. Most creditors do not want your property and do not want to take the legal steps necessary to take it back and sell it. If you really want to keep the property, in most cases, the creditor is satisfied with you voluntarily making the monthly payment according to the terms of the discharged debt, without requiring a reaffirmation agreement.

What is statement of intention: Reaffirmation, Redemption, Surrender, Other?

What is a statement of intention when it comes to secured property in bankruptcy code?

In every exempted property, the debtor likes to keep after bankruptcy, they have to file a statement of intention. Section 521(a) (2) requires the debtor in chapter 7 cases to file a statement of certain intentions with respect to property securing debts and with respect to personal property leases. The debtor need not state his or her plan on this statement. All that is required is a statement:

(i)whether the debtor intends to retain or surrender the collateral,
(ii) whether it is claimed as exempt, and
(iii) whether the debtor intends to reaffirm the debt.

However, the debtor is not required to choose redemption, surrender, or reaffirmation in every case. The debtor may choose other options besides those listed on the form. In practice, the choice of Other is commonly used in Nevada. It has different ramifications which can be discussed only with a qualified bankruptcy attorney. A debtor may also choose to simply continue paying an automobile loan without either redeeming or reaffirming the debt. With respect to leases of personal property, the debtor must state whether the debtor intends to assume the lease.

Duration of Filing: The statement of intention must be filed within thirty days of the filing of a chapter 7 petition or on or before the date of the meeting of the creditors, whichever is earlier. The statement must be served on trustee and all creditors named in the statement on or before the date it is filed. Thereafter he debtor may amend it as of right at any time up to the time when performance is to take place under Code section 521(2(B). Section 521((2) also requires that the debtor “shall perform his intention,” within thirty days after the first date set for the meeting of creditor or such additional time as the court for cause within that period allow. In most cases this is quite simple, if the debtor states intent to retain exempt property that has long since been accomplished. If the debtor’s intention is to surrender the property, there is no requirement to deliver it or to execute a deed to effectuate the surrender, because the Code provisions was not designed to provide a substitute for normal state proceedings to enforce a creditor’s rights to collateral.

Although the chapter 7 trustee is supposed to “ensure that the debtor shall perform” the stated intention, the Code provides no mechanism for the trustee to use. The statement of intention thus seems designed primarily as a way for secured creditors to obtain notice of what the debtor plan to do, and as a guideline to when redemption and reaffirmation should occur. However, because substantive rights are expressly left unaffected, the debtor change his or her mind about what is planned and apparently would not have to file a new statement of that happened.

Is there any sanctions if debtor does not follow his statement of intention?
There are no sanctions provided for failing to carry through on stated intention’s however that conduct would give a secured creditor an additional argument in seeking relief from the automatic stay, or it may result in the termination of the automatic stay with respect to certain personal property.

The debtor has other options in addition to reaffirmation, redemption, or surrender under the Code.

What is the right of redemption in chapter 7?The Code also provides that for certain secured consumer debts the security interest may be eliminated upon payment to the creditor of the value of its collateral. The purpose of this section is to avoid creditors taking an unfair advantage of the debtor’s situation. The redemption provision provides a simple procedure, within the chapter 7 case, for the debtor ro remove a creditor’s lien by paying the creditor the real value of the property. This is available to only individual debtor and only with respect to certain property and certain debts.

Shoud You Walk Away From Your Underwater Home?

I have dwelt on this topic in one of my previous column, but this topic keeps coming back as more and more people calling me and asking me this questions. However, my stand remains the same and again I am addressing this issue one more time. In fact, I had seen some unending debate on this topic, and even NY Times in its latest issues has dwelt on it. Basically, it depends on your standards of morality and accountability.

It is not my place to tell people to just leave their home and rent somewhere. It is akin to telling a soldier to surrender in the face of a tough fight. My suggestion is fight back, and it has always been that way. Why? Because this is your American dream? If you walk away, you are going to leave lots of body bags, and spoils of war for someone else to become rich. This home of yours has the pictures of your family, your loved one, and you had good memories. If you walk away, you are going to leave everything. When would you be able to buy another home? No one knows the answer.

You are sending a wrong message to your family and to your kids. Homeowners has responsibility to their family and to your neighbors as well. We see voluntary defaults and they are a new phenomenon. It was not too long ago, when Americans would do anything to pay their mortgage — forgo a new car or a vacation, even put a younger family member to work. But the housing collapse left 10.7 million families owing more than their homes are worth. It is widespread that most of the homeowners are making a calculated decision to hang on their money and let their homes go. Is this irresponsible?

Our neighborhood are going to be depressed, the for sale sign everywhere mushrooming, and U-Haul truck roaming in our neighborhood. The government has done lackluster job. The new kid on the block, i.e, the much coveted Treasury Secretary is a bogus leader in this economy. He should be let go by Obama. He is an abysmal failure. Let someone better come. The home market is getting depressed everyday. The lenders has still the filthy and flimsy excuses of not doing enough, and their lists of excuses is getting longer and longer. NY Times, as usual my favorite papers has written and dealt extensively on this topic.

What constitute bankruptcy fraud?

When you file bankruptcy, you take an oath (in 341 meeting as well) that all documents filed are filed diligently and not meant to defraud anyone. Also, within the Bankruptcy court, the officials of Trustee and the Department of Justice investigates all of the paperwork filed and can ask questions in a 341 meeting.
The latest reform of 2005 had made bankruptcy simpler and information, it can, however, be easier to forget to file many documents in Bankruptcy courts and make them subject to a formal investigation.Following is a link with the IRS which gives many examples of bankruptcy fraud.,,id=213766,00.html”>,,id=213766,00.html