Category Archives: Filing Bankruptcy in Scottsdale

Learn about secured debts and how to recover them from creditors.

A “secured debt” is a loan you owe that is backed by property that your creditors could get back in the event of a default. (“Default” refers to noncompliance with the terms of the contract, such as failure to make the required payments.)

Liens are used to produce secured debt. Liens may be willingly or unwillingly taken. Car loans and home mortgages are two instances of secured obligations that you actively take on. Contrarily, real property tax liens are unintentional liens.

A Voluntary Lien: What Is It?

You typically consent voluntarily to granting a creditor a security interest in your possessions. For instance, a lender may need you to sign a mortgage (or, in some states, a deed of trust) before approving a house loan. An agreement that gives a lender a security interest, or lien, on real property is known as a mortgage or deed of trust. If the homeowner falls behind on the monthly payment, the lien enables a foreclosure auction.

In addition, you can give a lender a lien against any personal property you own or have a stake in that isn’t real estate (real property). Vehicles, furnishings, tools, inventories, stock shares, other forms of investment interests, and even cash are considered to be personal property.

A security agreement is typically used to grant a lien against personal property. For instance, a lender can ask you to sign a security agreement giving it a lien on the automobile you’re buying before extending a new car loan. If you don’t make the agreed-upon payments, the lender may reclaim your car thanks to the voluntary lien.

An Involuntary Lien: What Is It?

Involuntary liens are security interests put on your property through a court order, a state or federal statute, or another legal process. There is no agreement in play. Among involuntary liens are:

Liens on real estate or income taxes
Engineer’s liens
judgment liens as well as landlord liens (in some areas).
How an Obligor “Perfects” a Lien
Perfecting a lien is one of the procedures a secured creditor must take to safeguard its ability to collect. The legal word “perfection” describes the procedure necessary to notify other creditors and other interested parties of a lien or security interest. Depending on the type of property and the relevant state law, a certain step is necessary to perfect a lien. For instance:

Real Estate

Most states require that the lender record all mortgages and trust deeds in the county where the property is situated in order to perfect its lien.

Vehicles Usually, a file with the state motor vehicle department and a notation on the certificate of title are sufficient for lenders to perfect liens against automobiles, motorbikes, and trucks.

Personal Tangible Property

Financing statements are filed in order to perfect security interests in the majority of tangible personal property, such as furniture, tools, items, and supplies. For a secured debt, the borrower, lender, and collateral are all listed in a financing statement.

Financing statements, unlike security agreements, do not require signatures to be in force. As long as you have acknowledged signing the security agreement for the collateral it is intended to protect, the creditor may file a financing statement. Financing statements are often submitted to the secretary of state.

For any creditor, perfecting a lien is a crucial step. Sometimes, borrowers give many creditors liens against the same asset, such as your home. Consider a home equity line of credit, which is often subordinate to the mortgage you obtained to purchase your property. In the event that the owner of the first mortgage is unable to perfect their claim, a junior lien, such as a home equity line of credit, may in fact advance in precedence.

The repercussions of a lender failing to perfect a lien might be significantly more severe in bankruptcy. If you file for bankruptcy, the court has the authority to invalidate any unperfected liens. The lender becomes an unsecured creditor when a lien is put aside because it is handled as if it never existed.

Find out how long Chapter 7 and Chapter 13 bankruptcy will be reported on your credit record.

Most people commence a bankruptcy case when they need to start over and get their finances under control. Improved credit scores are frequently a part of that fresh start, and filers can take proactive measures by making on-time payments and maintaining modest credit balances. Nevertheless, depending on the bankruptcy chapter you file, it may take up to ten years for the bankruptcy to disappear from your credit report.

What is included in your credit report?

The quantity of personal information in your report may surprise you. You’ll notice three different types of information in particular:

identifiable information, such as your name, address history (including accounts marked paid as agreed or charged off), employer information, credit card information, payment history, and public records like court decisions, tax liens, and bankruptcies.

Reporting of Bankruptcy on a Credit Report

After seven years, the majority of bad entries, such as late payments and charge-offs, will be removed from your report. For bankruptcy filings, it operates somewhat differently and is dependent on the specific chapter.

Chapter 7 insolvency. Your Chapter 7 bankruptcy filing will be noted on your credit report for a maximum of ten years. The credit bureaus should stop recording the bankruptcy after ten years.
Chapter 13 insolvency. The filer contributes to a repayment plan in this chapter for a period of three to five years. Only two years longer than the longest repayment plan, seven years from the filing date, the Chapter 13 bankruptcy filing is visible on a credit record. This benefit encourages filers to select the repayment option and to gradually pay back creditors.
Whether you have a high or low initial score will determine the immediate impact of bankruptcy on your credit score, and in most circumstances, a higher initial score will suffer more damage. Because scoring businesses keep the formulae used to generate scores relatively hidden, it is difficult to predict the exact outcome. But if you work hard, it’s not impossible for you to raise your credit score to the extremely high 700s in as little as two or three years after filing for Chapter 7.

Checking the Accuracy of a Credit Report

Even if you aren’t thinking about declaring bankruptcy, it’s a good idea to periodically evaluate your credit report. One way to verify is to use the free copy you’re entitled to once a year from each of the three major credit bureaus—Experian, TransUnion, and Equifax. Visit www.annualcreditreport.com to purchase your credit reports.

Because not all creditors submit reports to all three agencies, it is crucial to carefully analyze all three. Each of your creditors should note that the account was included in bankruptcy a few months after you filed for bankruptcy. If not, it would be wise to have that fixed since any line item that shows as open but unpaid could give the impression that you are still liable for that obligation to a potential lender.

The status of your Chapter 7 bankruptcy case—whether it was dismissed or your qualifying debts were erased—should also be noted on your credit report. An effective bankruptcy that results in a discharge affects a prospective lender’s choice to extend credit differently than if the bankruptcy had been unsuccessful, leaving your account liability unaffected.

It’s a good idea to fix any mistakes you see as quickly as you can. You can do this by immediately mailing a letter to the credit bureau or by disputing the item on the credit bureau’s website.

Many people apply for bankruptcy after receiving legal notice of a lawsuit, and for good cause. A bankruptcy will effectively halt numerous legal actions. However, filing for bankruptcy won’t stop all of the actions you might encounter.

You should move swiftly if you are facing eviction. Start by reading more on bankruptcy’s automatic stay and evictions.

How Can Bankruptcy Prevent a Civil Case?

An order known as the automatic stay prohibits creditors from continuing any collection activity after a “debtor,” or the individual owing money, files a bankruptcy case. This prohibition extends to attempts to obtain a monetary judgment in a civil litigation.

The stay prevents creditors from receiving a disproportionate amount of the debtor’s available funds. The court has time to organize the available assets and fairly distribute them among all creditors by stopping the collection process.

Which Claims Are Not Stopped by Bankruptcy Filing?

People cannot completely dodge legal action by declaring bankruptcy. The following issues will persist even if a bankruptcy case is filed:

Felony cases, divorce and dissolution proceedings, child custody and support disputes, and the majority of evictions following a state court’s possession order (see below for an exception).
Most other lawsuits will be halted by the automatic stay.

Which Civil Lawsuits Will Bankruptcy Prevent?

Your debts and assets are impacted by bankruptcy. Therefore, any matter in which it is claimed that you owe money due to either your failure to make a payment on a debt or the injury you caused to someone else, the bankruptcy court will have jurisdiction over (the power to determine).

Several instances include the following:

a credit card balance, money sought for a contract breach, a financial disagreement between business partners, compensation for a negligence-related (accidental) personal injury case, like a car accident, a home foreclosure, the collection of a deficiency balance (the amount still owing after a property auction), or an eviction, if the state court has not yet issued the order for possession (see below for an explanation of the unique rules that govern eviction)

In nearly every one of these circumstances, the bankruptcy “discharge” decision that discharges qualified debt also discharges the underlying obligation, ending the legal dispute. Although not always. The creditor may occasionally pursue an action with the court’s approval.

Obtaining Approval to Continue the Lawsuit

In any case, the creditor has the right to request that the bankruptcy judge lift the automatic stay so that the state lawsuit can go forward. Such motions are frequently granted by bankruptcy courts in the following circumstances:

the lawsuit will decide a matter that must be resolved in the bankruptcy case (for example, it would be necessary to resolve an allegation of fraud to determine whether a debt will be wiped out, or “discharged,” in the bankruptcy), and it will be expensive to ask the court to make a decision. the outcome won’t affect the bankruptcy case, and the creditor faces financial harm (for example, a home lender stands to lose more money the longer it must wait to foreclose on a home that
In some circumstances, the party who filed the lawsuit may be entitled to continue it, but they must first obtain the court’s approval. An example would be a government agency pursuing an enforcement action, such as the cleanup of a toxic site, delaying the case and, out of an abundance of caution, filing an application to lift the automatic stay before proceeding with the prosecution.

After losing a lawsuit, declaring bankruptcy

It is always preferable to file for bankruptcy prior to the conclusion of the lawsuit. For instance, you might desire to do it for the reasons listed below:

to avoid the creditor placing a judgment lien on your property or obtaining a fraud judgment against you, which would make it extremely difficult to discharge the debt in a bankruptcy proceeding.
However, you are still permitted to file for bankruptcy even if you lose the lawsuit. Most attempts by creditors to recover money judgements will be halted by the automatic stay. This is accurate even if your wages or bank account are being garnished.

Additionally, filing for bankruptcy will momentarily halt a creditor’s attempt to liquidate your belongings in order to pay off a debt. To stop the judgment lien from being collected after the bankruptcy case, you must address it in bankruptcy.

Additionally, declaring bankruptcy will prevent the government from trying to suspend your occupational or driver’s license as a result of unpaid fines or traffic tickets. See Lawsuits You Can’t Stop By Filing for Bankruptcy for more information.

When Can an Eviction Be Stopped by Bankruptcy?

Landlords typically find it simple to move forward with eviction once a tenant filed for bankruptcy. However, landlords must still follow by laws that protect the rights of tenants.

If you’re in this scenario as a landlord or tenant, it’s essential to speak with an experienced attorney because the windows for action are limited and the regulations are difficult to apply.

Before the eviction court renders a judgment of removal

The automatic stay kicks in to stop the eviction if you file for bankruptcy before the eviction court rules in the landlord’s favor by issuing an order for possession or eviction judgment. However, if you have bankruptcy cases outstanding in the previous year, you might need to ask the court to impose the automatic stay.

If you are accused of threatening the property or using illicit narcotics, however, the automatic stay will expire quickly. In that situation, the landlord may proceed with the eviction by submitting a certification to the court. You can contest the certification, but you’ll need to appear in court and persuade the bankruptcy judge that the landlord is mistaken in order to do so.

After the eviction court renders a judgment of eviction

If the landlord has already received a possession order or eviction judgment from the state court, declaring bankruptcy won’t prevent an eviction. Nevertheless, after the eviction court issues the order for possession, several states permit you to make up lost rent or “reinstate” it.

But you need to move rapidly. The rent that is due in 30 days must be deposited with the bankruptcy court. You’ll have 30 days to prove to the landlord that you paid the overdue rent. Learn more about bankruptcy-related evictions and how the automatic stay might facilitate or complicate them.

When Is a Bankruptcy Claim Contingent, Unliquidated, or Disputed? (SEO Title, Title, URL)

Learn what it means for a bankruptcy claim to be contingent, unliquidated, or disputed.

Identifying your debts or “claims” as contingent, unliquidated, or disputed is essential to the bankruptcy process. When filling out numerous bankruptcy forms, you’ll need to understand these terms to list and categorize your debts properly

You Must List All Debts or “Claims” in Bankruptcy

On your bankruptcy forms, you explain your financial situation to the court, trustee, and creditors. Your disclosures will include how much you earn, the debts or “claims” you owe, your real estate and personal property, your monthly budget, and recent property transactions.

You’ll disclose each creditor’s name, address, and amount owed in your paperwork when listing claims. Learn about completing bankruptcy forms.

Not All Bankruptcy Debts Are Contingent, Unliquidated, or Disputed

Most debts won’t need a contingent, unliquidated, or disputed label because the label is only required if it isn’t clear that you owe the debt. In most cases, there will be no question that you owe the money. When you don’t have an issue to raise to get out of paying the debt, you won’t need to label the claim contingent, unliquidated, or disputed.

For instance, suppose you’re behind on your car loan. In that case, the claim would be for the outstanding balance. The same would apply to other everyday obligations, such as credit card debt.

When You’ll Have a Contingent, Unliquidated, or Disputed Debt

Sometimes the amount you owe to a creditor isn’t easy to figure out. Each label—contingent, unliquidated, and disputed—identifies a particular issue that needs resolving before paying the claim.

Perhaps the amount you owe could depend on what someone else does or might not be determined. Or, you and the creditor might disagree on how much you owe.

If a problem exists, you’ll indicate it when listing that claim on your bankruptcy papers under the appropriate label of contingent, unliquidated, or disputed claim (the form has checkboxes).

What Is a Contingent Claim?

Payment of the claim depends on some event that hasn’t yet occurred and might never occur. For instance, if you cosigned a secured loan (such as a car loan or mortgage), you aren’t responsible for paying it unless the other person on the loan doesn’t pay (defaults). Your liability as cosigner is contingent on the default.

What Is an Unliquidated Debt?

Sometimes you owe money, but you don’t know how much yet. The debt might exist, but the exact amount hasn’t been determined. For instance, say you’ve sued someone for injuries you suffered in an auto accident, but the case isn’t over. Your lawyer has taken the case under a contingency fee agreement—the lawyer will get a third of the recovery if you win and nothing if you lose. The debt to the lawyer is unliquidated. You won’t know how much you’ll owe the lawyer until the case settles or gets resolved at trial.

What Is a Disputed Debt?

If you and the creditor don’t agree about the amount you owe, or if you owe anything, you’ll check this box. For instance, suppose the IRS says you owe $10,000 and has put an involuntary tax lien on your property. By contrast, you believe you owe only $500. You’ll list the total amount of the lien, not the amount you think you owe, and indicate that the claim is in dispute (you can explain how much you think you owe in the notes).

You Must List All Claims in Bankruptcy

It’s common for someone to want to omit a claim from the bankruptcy paperwork for one reason or another. You can’t do it. You must list all claims—the claims you think you owe and those others believe you owe.

It’s in your best interest to do so. If you fail to list a claim, the claim might not be erased or “discharged” in your case, even if it would ordinarily qualify as a dischargeable debt.

Paying Claims in Bankruptcy

If money is available to pay creditors, here’s what will happen next:

The bankruptcy trustee appointed to the case will notify creditors that the case is an “asset case.”

A creditor will file a proof of claim form by a particular date to share in the available proceeds.

The trustee will review the claims and pay them according to the priority payment system in bankruptcy law.

Keep in mind, however, that each situation is unique. If you aren’t clear about what will happen to claims in your bankruptcy case, meet with a knowledgeable bankruptcy lawyer.

Source

https://www.nolo.com/legal-encyclopedia/when-is-bankruptcy-claim-contingent-unliquidated-disputed.html

Making sure your tax returns are current is a smart idea if you’re considering filing for bankruptcy.

Waiting to file your income tax return until after you file for bankruptcy won’t give you any meaningful advantages. You should be current when filing your Chapter 7 or Chapter 13 matter, nevertheless, for a variety of reasons.

Bankruptcy under Chapter 7 and Tax Returns

The trustee in charge of your case will request your most recent tax return when you apply for Chapter 7 bankruptcy. The trustee will need an explanation if that isn’t the most recent return, even if it doesn’t have to be for the most recent tax year.

The trustee will contrast the amount stated in your bankruptcy petition with the income you show on your tax return. The trustee will also want to make sure you have the right to protect (exempt) the refund if you can demonstrate that you are entitled to one and that you have claimed the correct exemption amount. If not, you would have to give the trustee your refund so they could give it to your creditors.

Before filing for the case, many people arrange their bankruptcy so they can use the return for essentials like living expenses. It’s a good idea to maintain track of your expenses if you adopt this strategy.

Bankruptcy under Chapter 13 and tax returns

Before filing a Chapter 13 case, you generally need to have all of your tax returns current, but there are several exceptions to the requirements. Before the 341 meeting of creditors (the hearing that all filers are required to attend), you must give copies of your returns for the four tax years prior to that to the Chapter 13 trustee.

Your trustee may request a letter, an affidavit, or a certification explaining why you are exempt from filing a return if you are. There are situations when district-specific local courts set additional guidelines for papers.

Things could go wrong in your case if you owe the IRS a return but fail to pay it in a timely manner (before to your 341 meeting of creditors).

a movement. You will have only a very short time to submit your returns when the trustee files a motion. If the time passes without being met, the court may automatically dismiss your case, denying you the opportunity to present your case before the judge.
a replacement return. Based on your prior income, the IRS may be required to submit a claim with its best guess as to how much you owe. The issue? IRS projections are typically larger than the amount you would ultimately owe after filing a correct return.

Utilizing Chapter 13 Bankruptcy to Manage Taxes

Once you recognize that filing for Chapter 13 bankruptcy to handle your tax obligation can be a wise choice, filing your tax return might not be as difficult. This is why:

Depending on how much disposable income you have left over after deducting your reasonable and necessary costs from your salary, dischargeable taxes (usually those older than three tax years) may be forgiven without any payment at all.

While you are in Chapter 13 bankruptcy, you won’t be subject to any further interest or penalties on past-due dischargeable taxes (you will, however, be required to pay interest on non-dischargeable taxes).

The Chapter 13 plan can be used to discharge an IRS tax lien.

As long as you include all owed income taxes, file your tax returns on time, and maintain your post-petition tax responsibilities current throughout your Chapter 13 plan, the IRS must abide by the plan.

Keep in mind that any non-dischargeable taxes (usually those incurred during the last three tax years) that cannot be discharged in bankruptcy must be paid in full throughout the three to five-year Chapter 13 plan. You will have paid off the majority or all of your other debts by the time it is finished, along with your taxes.

Source https://www.nolo.com/legal-encyclopedia/should-i-file-for-bankruptcy-before-or-after-taxes.html

If you have a car loan and want to keep the car after filing bankruptcy, you’ll have to pay for it.

Many people are under the mistaken belief that filing bankruptcy allows you to wipe out an auto loan and keep the vehicle free and clear of any payments. It just isn’t true. Bankruptcy will unwind your obligation to pay back the loan. But if you don’t make the payment, you won’t be driving the car for long. So the short answer is no—you won’t get a free car in bankruptcy.

Even so, it isn’t a given that you’ll lose a car with a car loan, either. In this article, you’ll learn:

• what happens to car loans in bankruptcy
• how to keep a financed car in Chapters 7 and 13, and
• “surrendering” a car you want to return to the lender.

We have many more helpful articles that explain what happens to cars in bankruptcy. Look for links to additional resources at the end of this article.

Bankruptcy Erases Car Loans But Not Car Liens

Bankruptcy works by breaking the contract requiring you to repay the lender for the car loan. You can file for bankruptcy, give the car back to the lender, and not pay anything further on the car loan.

However, if you want to keep a car with a car loan, there’s a catch. Filing for bankruptcy doesn’t eliminate the lien giving the bank the right to take back your car if you don’t pay as agreed. The bank can use the lien to repossess the car once the bankruptcy case is over—or sooner with the court’s permission—even though you erased the debt. So if you want to keep the car, you must pay for it.

How you pay your car loan—and whether you can keep a car if you’re behind on the car loan—will depend on whether you file for Chapter 7 or 13.

Understanding Car Loans and Car Liens Before Bankruptcy

Buying a car is costly, and most people can’t afford to pay for one outright. Instead, borrowers finance the purchase by signing a “promissory note” agreeing to pay back the debt with interest in monthly installments.

Because most car loans involve thousands of dollars, banks minimize risk by requiring the buyer to agree to put up the vehicle as collateral. The additional requirement creates a lien on the car that lets the lender repossess the car if the borrower “defaults” by failing to pay.

In bankruptcy, the lien makes the car loan a “secured debt,” unlike a Visa or Mastercard balance, which would be an “unsecured debt.”

What’s the difference? If you don’t pay an unsecured debt, you don’t have to return the property you purchased, such as the tiki torches and inflatables you charged for your annual luau.

Watch out, though—charging furniture, jewelry, mattresses, electronics, and appliances usually creates a secured debt. Check the contract or receipt to find out.

How to Keep a Car in Bankruptcy Chapters 7 and 13

What you’ll need to do to keep a vehicle with a car loan will depend on the bankruptcy chapter you file.

Keeping a Car After Filing Chapter 7 Bankruptcy on a Car Loan

In Chapter 7 bankruptcy, you have two people to please before you can keep your car—the Chapter 7 bankruptcy trustee assigned to your case and the car lender. You’ll need to do different things to satisfy each of them.

The bankruptcy trustee won’t take your car if you can protect all vehicle equity with a bankruptcy exemption. So your first step would be figuring out whether you can protect your car’s equity with a motor vehicle exemption. If the motor vehicle exemption isn’t enough to cover your equity, check for a wildcard exemption—many states let bankruptcy filers use both.

If you can protect all of the equity, you can keep the car in Chapter 7 bankruptcy—at least as far as the Chapter 7 bankruptcy trustee is concerned. The car lender and the lien associated with the car loan is another matter.

To steer clear of your car lender in Chapter 7 bankruptcy, you must be current on your car loan when you file and remain current after your Chapter 7 case ends. Otherwise, the lender will use the lien rights to repossess the vehicle.

But there are other things you can do to keep a car in Chapter 7 bankruptcy when you have a car loan, such as “redeeming” the car or paying the lender its actual value. Learn about all of your car options in Chapter 7 Bankruptcy.

Keeping a Car After Filing Chapter 13 Bankruptcy on a Car Loan

If you’re behind on your payments, consider filing for Chapter 13 bankruptcy. You can pay off the vehicle balance over three to five years in a Chapter 13 repayment plan and keep the car.

But if you don’t make the payments, including catching up on any arrearages on the car loan, the lender can repossess your car in Chapter 13 bankruptcy. Learn more about your car in Chapter 13 bankruptcy.

Returning the Vehicle Bankruptcy to Get Out of a Car Loan

Sometimes the best option is returning a vehicle with a car loan to the lender. Then you’ll be out from under the car loan entirely. Many bankruptcy filers will return a fianced car to the lender when they:

• paid too much for the vehicle
• can’t afford the monthly payment, or
• don’t want the vehicle or the car loan associated with it.

If you’re in this situation, you’ll check the box that states that you plan to “surrender the property” when you’re filling out the Statement of Intention for Individuals Filing Under Chapter 7 form. You can also surrender a car with a car loan in Chapter 13 bankruptcy.