Category: Bankruptcy

Secured debt is the troublesome part during bankruptcy. There is a fear of foreclosure, lien and various other threats when it comes to secured loans. Whether opting for bankruptcy under Chapter 7 or under Chapter 13, there is a good percentage of risk with respect to the secured assets. To begin with, let’s understand secured debt. A secured debt is any debt that is backed up with collateral or an asset, which acts security for the lender. To know the meaning of more such technical terms and to understand them better, log on to https://bankruptcy.staging.recoverylawgroup.com/. Home mortgage and car loans can be the best examples of secured debts.

What do you mean by voluntary liens?

Voluntary liens are something that has been created by choice instead of an order or request. While availing a home mortgage, you might get into an agreement, offering the lender rights to auction, use or dispose of your home in case you default or are unable to make regular pre-defined payments. This is referred to as voluntary lien. The same can be true for any other personal asset also apart from home and automobile. This lien is exercisable only to real property assets and is usually not used for intangible assets. The voluntary lien is usually specified in the mortgage deed or loan agreement.

What do you mean by involuntary liens?

Involuntary liens are liens which are created out of a judgment or a particular scenario. These are usually not mentioned in the deed or any agreement. As the owner or possessor of the asset, you might not be fully willing to opt for a lien and hence, this has been named as ‘involuntary lien’. Some of the examples for the same can be listed as follows-

• Real estate/income tax liens by the state / federal or county jurisdictions
• Mechanic’s lien
• Judgment liens
• In a few states, there is something called landlord liens

Lien Perfection by the creditor

In case of default or missed payments, one of the common things a creditor or lender might consider would be lien correction. The process of lien correction is to notify all interested parties, including the debtor, other lenders, courts, etc., about the lien on the asset. This is usually done through notice. The process varies based on the type of asset. Perfection can be essential when more than one lender grants loans on the same secured asset. The following list will help analyze the process based on the type of secured asset-

• In case of a real property, the agreement or trust deed has to be registered in the local jurisdiction country or state where the real property is situated.
• When the collateral or secured asset is a vehicle, a notification or change in title certificate has to be filed with the motor vehicle department of the state or country in order to perfect the lien
• In case of other tangible assets like stocks, furniture, equipment, tools, etc., a financing statement has to be filed with state secretary.

Actions the lender or creditor can pursue

A lender can consider different options once the debtor has defaulted or missed several payments. Repossession of a secured asset is one of the options, however, it can be eligible only with respect to an automobile or similar class of assets. Breach of peace and privacy might not allow direct repossession of homes or houses. The lender might have to approach the court and get the judgment in favor to evict the debtor or repossess such an asset.

For homes and similar assets, there is an option of foreclosure. Majority of states do not require a judgment for foreclosing on an asset due to payment delays or defaults. However, you might want to check some of the states who require judgment for foreclosure especially a home mortgage. To get more assistance on this aspect and bankruptcy in general, reach out to some of the best lawyers in Dallas at 888-297-6203.

When faced with huge financial problems, people often resort to filing for bankruptcy. Undoubtedly, it offers great respite for people, especially when it comes to harassing collection actions from the creditors. However, bankruptcy can negatively affect your credit report. According to Dallas based bankruptcy law firm Recovery Law Group, there a number of other viable options are also available for people struggling with debt. To know more about them you can call 888-297-6023 and speak with expert bankruptcy lawyers.

The alternate options depend largely on what your primary objective for filing bankruptcy is. If you wish to get respite from the harassing collection actions of creditors, you could opt for state and federal debt collection laws. Alternately, if you have some assets which you are willing to part with, you can negotiate with your creditors. Paying them some money from selling dispensable assets can buy you some time and goodwill from the creditors. You might even be able to settle your debts at less than what you owe. If, however, you are not so great with negotiations, you could seek help from non-profit debt or credit counseling agencies. You can find a state-wise list of the approved credit counseling agencies which are United States Trustee approved as completion of the course is mandatory for debtors prior to a bankruptcy filing.

Debt counseling

The credit counseling agency has a debt management program which is like the repayment plan in Chapter 13 bankruptcy Dallas. The advantage of choosing it over bankruptcy is that no record of debt management appears on the credit record. Having a bankruptcy on your credit record can affect your chances of getting a loan, credit cards, and even job prospects. However, opting for the program has some demerits too:

• The automatic stay in bankruptcy protects collection actions, even if you miss a payment. There is no such provision in the debt management program.
• You are required to pay your debts in full in case of debt management while you can pay a fraction of your unsecured debts during Chapter 13 and the remaining debts get discharged at the end of your repayment plan.
• Many debt management and settlement companies are in the business of collecting fees for their services and may cause you more harm than benefit.
• There have been instances of scams reported, where such companies receive funds from creditors and there might exist a conflict of interest in such cases.

If you are “judgment proof” i.e. have little income and property, you can continue to remain in debt without filing for bankruptcy or seeking any other recourse. Since you have limited property and meager income, any creditor trying to collect from you will be able to get nothing. Unless you draw attention to yourself by refusing to pay government taxes, or spousal or child support, you cannot be thrown in prison for your inability to pay your debts. Moreover, essentials like clothing, personal effects, household furnishings, food or social security, public assistance or unemployment benefits cannot be taken by the creditor.

When you file for bankruptcy, certain assets are protected under exemptions. Apart from the equity in the home, a vehicle, and household necessities, your pension and retirement funds are included in such exemptions. However, there are limitations attached to them too, inform experienced bankruptcy lawyers of Dallas based firm Recovery Law Group . It is important to know the rules prior to a bankruptcy filing.

After overhauling of bankruptcy laws by the Congress in 2005, nearly all ERISA-qualified retirement accounts and pension plan funds are protected from collection action of creditors, with some exceptions. In the case of Chapter 7 bankruptcy, liquidation of non-exempt property takes place. However, retirement funds are protected by Congress and state exemptions; while in Chapter 13, balance in your retirement account does not affect your monthly repayment plan to pay back creditors over a 3 to 5-year period.

In the case of ERISA-qualified pension plans, the exemption amount is unlimited. This includes 401(k), 403(b), IRAs (Roth, SEP, and SIMPLE), profit-sharing plans, Keoghs, money purchase plans, and defined-benefit plans. However, it is important to note that since most general savings accounts, stock options and investment accounts are not ERISA-qualified, they are not protected. Some states do offer exemptions to protect bank and investment accounts, but the limit is capped ($300 in some cases). any unprotected or non-exempt property is used to pay creditors in both Chapter 7 and Chapter 13 bankruptcy cases.

IRA limitations

In the case of both traditional and Roth IRAs, the amount exempted is $1,362,800 per person. In case the collective balance of all your retirement accounts exceeds the said amount, the excess is used to pay off creditors when you file for bankruptcy. This amount is adjusted every three years to factor rising cost of living. Since the latest adjustment occurred on April 1, 2019, the next is scheduled in the year 2022.

It is also important to know that any retirement benefits you get are not exempted during bankruptcy. In the case of Chapter 7 bankruptcy Dallas, you need to qualify the means test. Any monthly payment from your pension or retirement account will be considered as income and might play an important role in your (dis)qualifying the means test. Though the retirement benefits cannot be touched by the bankruptcy court, it could, however, take any amount which is above that required for monthly expenses and pay it to your creditors. In the case of Chapter 13 bankruptcy, your retirement income determines the portion of unsecured debts you get to repay during your repayment plan.

It is important to know what happens to the retirement funds when you file for bankruptcy. People who are living off their retirement funds are judgment proof and don’t need to file for bankruptcy. For more details about how bankruptcy works, call 888-297-6023 and speak with experienced bankruptcy attorneys.