Written by: Dania S. Fernandez, Esq., Attorney at Law Of The Law Offices of Fernandez & Associates, P.A.

When facing foreclosure there are many options available to avoid foreclosure and maintain your sanity all together. These options include: Loan Modification/Loan Workout with your lender, Refinance, Obama’s Plan “Making Home Affordable” (go to website http://makinghomeaffordable.com) and Bankruptcy Chapter 13. How can Bankruptcy save my home from foreclosure? When should I file for Bankruptcy? Which Chapter should I file, Chapter 7 or Chapter 13? These are three of the most frequently asked questions in my office. First, in very simple terms here are the definitions of both Chapter 7 and 13:

Chapter 7: liquidation, wipes out most of your debts and in return, you may have to give up some of your property.

Chapter 13: reorganization, enables you to pay off all or a portion of your debts during a three to five year period, yet does not require you to give up any of your assets to pay creditors that you owe. As long as you keep making payments creditors will not bother you for payment or continue the foreclosure against your property.
If you are considering a Chapter 7 Bankruptcy and you are behind in your mortgage, then make certain that you first reach a loan modification/ loan workout or Refinance with your lender and then file Chapter 7. In the Chapter 7 Bankruptcy there will not be a loan modification option of your existing mortgage and therefore if you stop paying your mortgage you could loose you home. Your homestead is exempt, however if you do not pay, it can be foreclosed on. In the Chapter 13 Bankruptcy you can save your house. However, this should be your final option and by that I mean you have tried reaching a modification, you have been represented by a Real Estate Attorney to defend your foreclosure and time is ticking towards the auction date of your house. Bankruptcy is a perfectly legitimate way to stop foreclosures and repossessions, put an end to lawsuits, protect paychecks from garnishments and regain control of your life once again.

The following are gains when filing for Bankruptcy:

Bankruptcy can:
• Halt almost every type of lawsuit.
• Stop Foreclosure.
• Prevent you driver’s license from being yanked for unpaid fines or judgments. (This does not include judgments for child support.)
• Stop IRS Seizures.
• Prevent garnishment of any wages you earn after filing.
• Avert repossession.
Bankruptcy generally won’t prevent:
• Criminal prosecutions.
• Proceedings against someone who cosigned your loan, unless you file a Chapter 13 repayment and propose paying the loan in full.
• Contempt of court hearings.
• Actions to collect child support or alimony.
• Governmental regulatory proceedings

If bankruptcy is an option for you it is important to know what is or will be required of you. Bankruptcy is regulated by Federal law and may be affected by Florida state law. Even though you are not required by law to work with an attorney to file for bankruptcy, it is highly recommended. When filing for bankruptcy, it must be filed correctly in order to have the chance for it be successful.

It is important to consult a bankruptcy attorney or debt relief lawyer in your area in order to ensure that you fully understand your options regarding bankruptcy and whether this is the best decision for your financial future.

The following is a list of facts you should know about filing Bankruptcy:
• Bankruptcy is a matter of public record.
• You can suffer some discrimination.
• You will need to take a credit counseling course and financial management course before you can file for bankruptcy.
• When you initially file for bankruptcy, the court will mail a notice to all the creditors listed in your bankruptcy schedule. Creditors will then be prohibited from contacting you concerning you debt.
• Florida law will exempt certain assets. A lawyer can help determine what is exempt and can help protect particular property.
• In a Chapter 13 bankruptcy, you and your lawyer will need to work out a payment plan wherein you will pay creditors over a period of up to 5 years.
• Your income, bills, assets and property will all need to be evaluated in order to determine what is subject to liquidation, what debts can be discharged, the amount and duration of your payment plan (if any) and much more.
• A stigma may still be attached to filing bankruptcy.
• A record of filing for bankruptcy may remain on your credit profile for up to 10 years, depending upon the particular circumstances.
• While a bankruptcy filing does appear on your credit report, most people fail to realize that the damage has already been done to their credit due to missed payments or late payments. By eliminating your debt in chapter 7, or making payments in a chapter 13, you will immediately improve your credit score.

Written by: Dania S. Fernandez, Esq. Attorney at Law
Of The Law Offices of Fernandez & Associates, P.A.
Located at 6705 SW 57 AVE, Coral Gables, FL 33143
Telephone: 305-254-4492
E-mail: Dania@fap-law.com
Website: www.daniafernandez.com

For more information on Foreclosure, Loan Modifications & Bankruptcy go to www.daniafernandez.com Or, call The Law Offices of Fernandez & Associations and schedule a free consultation with one of our attorneys at 305-254-4492.

A loan modification is an option you may have in order to avoid foreclosure. We have assisted many clients in working out loan modifications with Lenders as well as defending against a foreclosure filed against their properties. Many times our law offices are defending against a client’s foreclosure which simultaneously working out a loan modification with their particular lender. Each of our clients have a unique set of circumstances, financially, physically and emotionally. We treat each case with the upmost priority. We are faced daily with situations that are both emotionally challenging and gratifying.

A loan modification is a permanent change of one or more of the terms of your original mortgage. A short sale or bankruptcy does not have to be the only answer to avoiding foreclosure. If you have had some kind of financial hardship which was the cause of or will result in the failure to make your monthly payments a loan modification may be your option. A loan modification will provide for a lower monthly payment allowing you to maintain financial stability and save your home from foreclosure.

Why Do I need an Attorney?

An attorney can review your current financial situation and discuss all your legal options when forming your decision. A loan modification and a foreclosure defense of your mortgage involves many laws that only an attorney can advise you and defend you on. In addition, I have many cases where the client was served with foreclosure paperwork during the loan modification process. It is highly recommended that an attorney handle the modification process and the defense simultaneously.

The Home Affordable Modification program will help up to 3 to 4 million at-risk homeowners avoid foreclosure by reducing monthly mortgage payments. Working with the banking and credit union regulators, the FHA, the VA, the USDA and the Federal Housing Finance Agency, the Treasury Department today announced program guidelines that are expected to become standard industry practice in pursuing affordable and sustainable mortgage modifications. This program will work in tandem with an expanded and improved Hope for Homeowners program.

With the information now available, servicers can begin immediately to modify eligible mortgages under the modification program so that at-risk borrowers can better afford their payments. The detailed guidelines (separate document) provide information on the following:

Eligibility and Verification

• Loans must have been originated on or before January 1, 2009 
• First-lien loans (first mortgage) on owner-occupied properties (a home you live in) with an unpaid principal balance up to $729,750. Higher limits allowed for owner-occupied properties with 2-4 units. 
• All borrowers must fully document income, including signed IRS 4506-T, two most recent pay stubs, and most recent tax return, and must sign an affidavit of financial hardship 
• Property owner occupancy status will be verified through a borrower credit report and other documentation; no investor-owned, vacant, or condemned properties 
• Incentives will be made to lenders and servicers to modify at risk borrowers who have not yet missed payments when the servicer determines that the borrower is at imminent risk of default 
• Modifications can start from now until December 31, 2012; loans can be modified only once under the program (no repeat offenders)

Loan Modification Terms and Procedures

• Participating servicers are required to service all eligible loans under the rules of the program unless explicitly prohibited by contract; servicers are required to use reasonable efforts to obtain waivers of limits on participation. 
• Participating loan servicers will be required to use a net present value (NPV) test on each loan that is at risk of imminent default or at least 60 days delinquent. The NPV test will compare the net present value of cash flows with modification and without modification. If the test is positive, meaning that the net present value of expected cash flow is greater in the modification scenario – the servicer must modify, absent fraud or a contract prohibition (ask your lender for more specifics) 
• Parameters of the NPV test are spelled out in the guidelines, including acceptable discount rates, property valuation methodologies, home price appreciation assumptions, foreclosure costs and timelines, and borrower cure and re-default rate assumptions. 
• Servicers will follow a specified sequence of steps in order to reduce the monthly payment to no more than 31% of gross monthly income (down from 38%!) 
• The modification sequence requires first reducing the interest rate (subject to a rate floor of 2%), then if necessary extending the term or amortization of the loan up to a maximum of 40 years, and then if necessary forbearing principal. Principal forgiveness or a Hope for Homeowners refinancing are acceptable alternatives 
• The monthly payment includes principal, interest, taxes, insurance, flood insurance, homeowner’s association and/or condominium fees. Monthly income includes wages, salary, overtime, fees, commissions, tips, social security, pensions, and all other income. 
• Servicers must enter into the program agreements with Treasury’s financial agent on or before December 31, 2009.

Payments to Servicers, Lenders, and Responsible Borrowers

• The program will share with the lender/investor the cost of reductions in monthly payments from 38% DTI to 31% DTI 
• Servicers that modify loans according to the guidelines will receive an up-front fee of $1,000 for each modification, plus “pay for success” fees on still-performing loans of $1,000 per year 
• Homeowners who make their payments on time are eligible for up to $1,000 of principal reduction payments each year for up to five years (WOW!) 
• The program will provide one-time bonus incentive payments of $1,500 to lender/investors and $500 to servicers for modifications made while a borrower is still current on mortgage payments (This is huge!). 
• The program will include incentives for extinguishing second liens on loans modified under this program. 
• No payments will be made under the program to the lender/investor, servicer, or borrower unless and until the servicer has first entered into the program agreements with Treasury’s financial agent. 
• Similar incentives will be paid for Hope for Homeowner refinances.

Full Article

For more information please visit: http://www.floridalawattorney.com

Whether or not to reaffirm a secured debt, under §521(2)(A) of the Bankruptcy Code, used to be a no-brainer. Because the act of reaffirmation did far more for the creditor than it did for the debtor, the advice most commonly – and properly – given by bankruptcy attorneys to their clients was as follows: If you want to keep the property securing the debt (most commonly the debtor’s house or car), select the option known as ‘retain and pay’. The creditors’ urgings for reaffirmation could generally be ignored without serious consequences.

But all that changed under the BAPCPA, effective October, 2005. As of this writing, the majority of districts having ruled on the issue do not, under the new bankruptcy law, recognize the ‘retain-and-pay’ option. That is, if a debtor attempts to proceed under that option, there is a very good chance that the creditor may file an adversarial action challenging the debtor’s option.

Upon filing a Chapter 7 bankruptcy petition, a debtor must, within 30 days of that initial filing date, file a ‘statement of intention’ with respect to any debts secured by assets of the bankruptcy estate. The debtor then has, under §521(2)(B), 30 days from the first date set for the §341 creditors’ meeting to “perform his intention” (e.g. file a reaffirmation agreement) with respect to the secured property. With respect to that statement of intention, the options are as follows:

Surrender

The easiest option for the debtor is simply to surrender the asset to the secured creditor. For example, the debtor’s vehicle may be worth less than the amount owed to the lender. If the debtor is finding the monthly payment to be onerous, it may make sense for him to simply allow the creditor to retake possession of the vehicle. After the creditor sells the car at auction there is typically a deficiency, which debt is simply discharged along with the rest of the debtor’s unsecured debts.

Redemption

An option rarely exercised by debtors is to redeem the asset from the creditor by purchasing the asset for the fair market value, with the balance of the debt balance to be discharged. Because the debtor is required to pay the redemption amount in a lump sum payment, this option is rarely used in the case of vehicles, and is generally used only in connection with consumer goods, such as household appliances purchased using a purchase money security interest (PMSI).

Reaffirmation

The option most commonly used with regard to the debt (i.e. mortgage) secured by a debtor’s home. Because reaffirmation requires the debtor to forgo the discharge to which they otherwise would have been entitled, reaffirmations were rightly disfavored prior to the 2005 passage of the BAPCPA. That is, if the debtor later (i.e. after the bankruptcy case is closed) defaults the creditor is entitled to exercise any and all rights available under state law as if the bankruptcy had not taken place. In other words, the debtor would be liable for any deficiency after Sheriff’s sale.

Retain and Pay

In situations where the debtor desired to keep the property, but did not want to risk being “on the hook”, as with reaffirmation, in the event things would turn south for him after the bankruptcy, this is the option that made the most sense. But as explained above, this option has been lost in most districts as of October, 2005. Careful discussion with an experienced bankruptcy attorney is therefore vital to determine if this option is still available in the debtor’s district, and if not, which of the other three options is best under the debtor’s particular circumstances. The option selected by the debtor has critically important consequences for him.

Full Article

For more information please visit: http://www.floridalawattorney.com

What are the different types of bankruptcy that apply to individuals? There are two, Chapter 7 and Chapter 13. You may have heard of Chapter 11 but that is for businesses not individuals.

Effective October 2005, Congress made sweeping changes to the bankruptcy laws that gave consumers more incentive to seek bankruptcy relief under Chapter 13 rather than Chapter 7. Chapter 13 allows people with a steady income to keep property, like a mortgaged house or a car, that they might otherwise lose through the Chapter 7 bankruptcy process. 
Basically in Chapter 13, the court can approve a payment plan that can run up to five years. This process lets you pay off today’s debts with future earnings. Obviously you have to have a steady source of income to qualify for this filing.

Chapter 7 is known as straight bankruptcy, and involves liquidation of all assets that are not exempt. Exempt property may include automobiles, work-related tools, and basic household furnishings. Other property could be sold by a court appointed trustee or given directly to a creditor as payment of your debt. There is also a limitation of how much you can earn during this process. It is not designed for you to profit by not having to pay your debts.

Another difference between the two is the amount of time that must pass before you can refile. With Chapter 7 the waiting period is 8 years. With 13 it is two years.

Both types of bankruptcy can get rid of unsecured debts and stop foreclosures, repossessions, garnishments and debt collection activities. Both can provide exemptions that allow people to keep certain assets, although exemption amounts will vary by state. Obligations that cannot be satisfied by either form of bankruptcy include child support, alimony, fines, certain taxes and student loan obligations both government and privately funded.

Unless you have an acceptable plan to satisfy your debt under Chapter 13, the court usually will not allow you to keep property when the creditor has security lien on it. This could include your home as well as well as boats, vacation homes, recreational vehicles etc.

As part of the new law, persons seeking to file under either chapter have to have attended a government approved credit counseling course within six months of filing. The idea here is to try and solve the credit problem without taking legal action. The second major change just involves Chapter 7. Today you have to satisfy a “means test” to confirm your income does not exceed a certain amount. This amount will vary by state. You can find those limits here.

Bankruptcy is an emotional time but a necessary step for those who absolutely need the relief.

Source

For more information please visit: http://www.floridalawattorney.com

The foreclosure bailout is designed to help certain people. This plan set forth by Obama targets two groups of people. These people include lenders and current homeowners.

Is it the though that counts when someone is trying to help another or was there really any thought put into the foreclosure bailout? There are almost 5 million people who are losing their homes to foreclosure. There are over 20 million people who have already lost their homes. Many people who did lose their homes already and are in serious financial help actually had some hope that Obama would help them with their financial difficulties. Unfortunately, the bailout was to help people who haven’t lost their homes yet. Maybe because this number of people is smaller or maybe because Obama really wasn’t sure how to address the problem.

The banks are chastised in the foreclosure plan for giving home loans to people at rates that they really couldn’t pay for their homes. The lenders are also in the red because they own so many homes now because the homes have foreclosed so they are sitting on the banks books. No bank wants to own a home but because of the abundance of homes they cannot give out any more home loans until they unload what they currently have. Lenders are being affected by the Obama plan in the way that they will have to follow stricter guidelines about how they give out home loans.

Current homeowners are affected the most buy the foreclosure plan because they are finding help in many ways to keep their home. First, people who obtained first time buyer loans through FHA or Fannie Mae or Freddie Mac get the benefit of refinancing at rates that they can afford to pay monthly. This is the biggest benefit. People who financed a home through a band can get a lower monthly rate after they file bankruptcy and have a judge change the terms of their home mortgage. Filing bankruptcy must be done early enough before you lose the home in an auction because the process takes time.

There are only a few people that the foreclosure bailout is really helping. There are billions of dollars going out to buy the homes from the banks which will put the banks in a better position to give new home loans for people with good credit. The plan primarily helps the banks to get the homes off of their books, the people who obtained FHA loans to buy their homes, and people who are willing to ruin their credit and file bankruptcy.

Source

For more information please visit: http://www.floridalawattorney.com

Credit card debt can occur for a variety of reasons and can be dealt with in many different ways. However, there is a lot of misinformation out there, some of it from well-meaning individuals and some of it from the credit card companies themselves. With that in mind, let’s try to clarify some misconceptions.

Profit Oriented 
Credit card companies would like to make as much money as possible from you, so you can not go to them to expect help in paying off you credit card debt. They make you think that is true, but it is not. In general the deeper in debt you are to them the better it is for them to make a profit from you. When you have a large debt the likelihood of paying it off is less because it is so big. So many people will pay a small amount each month. Just make sure this amount is much larger than the suggested monthly minimum.

Monthly Minimum Payment 
Probably the number one money maker for credit card companies is strictly following the common misconception that you can pay off your debt through simply paying your minimum monthly payments. Many insist that by paying your minimum you can keep everything under control, but what they do not mention (outside of the fine print) is that your monthly minimums are really just going to pay down the interest you’ve accrued – your debt remains the same. Only rarely does the money you pay each month actually go into paying down your debt.

How the minimum monthly payments are derived is unique to each credit company. It is a mystery that you yourself have to solve, if you really want to know. Sometimes the formula is buried in the fine print for the brochure that they send you when you first get the card. And sometimes you have to call to find out how they actually do compute it. It is generally considered that the minimum monthly payment covers the interest and maybe a few dollars are left over to pay on the principal. In any case if you only make a minimum payment you will not make any appreciable change in the amount owed and it will be (many) years before you pay off the bill if you don’t continue to charge on the card.

Drive You to Bankruptcy? 
Finally, there’s a great many people who believe that the end goal of a credit company is to drive you to credit card bankruptcy. This is both ridiculous and wrong. The truth is they would want you to find a way of prevention from bankruptcy. What credit card companies truly desire is to keep you in debt, not in a financial state where you can’t make payments or they have to accept less than the total you owe them as would occur after filing bankruptcy. That is why they are quite happy to give you a helping hand in regards to paying down your debt. Notice that the statement was ‘paying down’ and not ‘paying off’. As mentioned above, credit card companies want you in debt and paying regularly. It is how the industry makes its biggest profit through your continuous payments.

One proof of the above is that the quicker you pay down your debt, the more likely the credit card company is to increase your spending limit in order to encourage you to use your card more often and thus to ensure that your debt never entirely goes away. There is nothing a credit card company hates more than a person who never uses their card – they want you to continue charging.

The truth is, that credit, if used wisely, is a useful tool in a largely (and increasingly) cashless society. However, if you are not careful, it can result in adding unnecessary debt to your financial responsibilities, something which can result in permanent harm to your financial stability in this uncertain time.

For more information please visit: http://www.floridalawattorney.com

Do you know how the details of Obama’s Loan Modification law could affect you? If you read this article you will have a great start on understanding the Obama’s Loan Modification Bill and how it can benefit you.

Trial Period Requirement: 
No payments will be made to the lender/investor, servicer or debtor until after the Trial modification Period is successfully completed and the entry of agreements to the plan between the servicer and the Treasury’s financial agent.

Modification will be in effect the first calendar month after the trial period is completed successfully. Successful completion is defined as being current as per MBA calculation at the End of the Trial Period.

Debtors in foreclosure restart states will fail the Trial Period if they are not current when the Foreclosure sale is scheduled to being.

The lender/investor, debtor, or servicer will not be paid during the Trial Period, if the Trial Period is completed unsuccessfully, or if the servicer has not entered into the agreements of the plan.

Trial Period Duration: 
The Trial Period will last for the duration of 90 days (meaning 3 modified term payments) or longer if it is necessary in order to comply with the contractual obligations of the investor. In order to receive a Domestic Economical Modification, the debtor must be current upon the end of the Trial Period.

Escrows: 
Servicers must escrow for debtor’s mortgage-related insurance payments and real estate taxes if they can process these payments or are using a third party for this already. If they can not, they must be able to do so within 6 months of agreeing to the Plan.

Requirements for Counseling: 
The servicer must inform debtors with a Back-End DTI of 55% or higher about the advantages and affordability of counseling. In addition, they must give the debtor a letter informing said debtor of their requirement of counseling and provide the debtor with a list of HUD-approved counselors. In order to start the counseling, this letter may be a requirement. The modification will not be in effect until the debtor affirms in writing that he/she will get counseling.

Assumable: 
In the event that the modified loan was assumable before modification, the Domestic Economical Modification will void this.

Debtor Modification Fees: 
The debtor will not be charged modification fees.

Modification Fees the Investor can Reimburse: 
The investor can reimburse modification fees and charges, including notary fees, property valuation, and other fees. This will take place through the normal procedure between the investor and servicer.

Unpaid Late Fees Waived: 
Late fees that are not paid shall be waived for the debtor, including late fees before and during the Trial Period.

Credit Report: 
Credit report cost will be covered by the investor.

For more information please visit: http://www.floridalawattorney.com

Determining your debt ratio is a key factor to your loan modification approval. Simply put, your debt ratio compares your income to your expenses. If that ratio is too high, your chances for approval by your lender diminish. Each lender must abide by strict approval guidelines and you can be sure they will look at this ratio very closely. The good news is that you can calculate your own debt ratio in just a few easy steps.

Each lender determines a ratio that they deem an acceptable level, and this can vary from lender to lender. Generally speaking, it’s a good idea to keep your ratio under 40%. In other words, your homeowner expenses should not exceed 40% of your gross monthly income. Be sure to include insurance and taxes in your expense calculations. The goal of Obama’s new loan modification plan is to allow lower payments and lower the ratio to 31%. The Federal government will share any costs incurred to reach that low level.

Once you have your debt ratio calculated, you can determine your new monthly payment and ascertain what you’ll need to do to arrive at that figure. Here’s an example: you may arrive at an acceptable ratio by lowering your interest rate to 4.5% and extending your amortization to 35 years. By reflecting those figures on your loan modification forms, your chances for approval will increase. Just make sure that you find your target payment and it is within your budget. You should also make sure that you follow your lenders guidelines. It is not a difficult process, as long you follow it step-by-step.

Your lender will be checking your loan modification forms to determine whether or not you can meet the debt ratio guidelines. You can do this by completing your forms, itemizing your expenses and demonstrating that you have a new target payment that meets the lender’s requirements. It’s important to have all your income and expenses clearly made out. Don’t give your lender a reason to question your numbers and your application will get approved much quicker. If you can complete this critical but simple step, you will have an edge over other applicants.

For more information please visit: http://www.floridalawattorney.com

Our economy is built upon consuming goods and services. We are often encouraged to purchase with credit that for which we cannot afford to pay for with cash. If, because of sickness, a job layoff, or just poor economic and estate planning, you no longer can afford to pay off your consumer debt, you might consider hiring an attorney in order to file for Chapter 7 Bankruptcy in order to obtain a fresh start for your personal finances. In a time when billion-dollar financial bailouts are being extended to prominent banking institutions, giant insurance carriers and well established automobile makers, you deserve to obtain your own personal financial relief.

In order to qualify for a Chapter 7 Bankruptcy, a debtor must meet certain eligibility requirements. First, a debtor may file for Chapter 7 Bankruptcy only once every eight years. Second, the debtor must pass the “Means Test” prior to qualifying for a Chapter 7 filing. As a general rule, the debtor’s average monthly income during the six months period preceding the filing should not be higher than California’s median income. If the debtor’s average income is more than the median, he may not be able to file for Chapter 7 Bankruptcy if his disposable income would allow him to pay off his creditors a certain sum of money over a fixed period of time.

Chapter 7 Bankruptcy takes about three months to complete. Prior to petitioning for Bankruptcy, many candidates will consult an attorney and most filers will be required to consult a nonprofit credit counseling agency. The reasoning behind credit counseling is to figure out whether you can utilize other options for debt management. Once credit counseling is complete, your attorney will file the Voluntary Petition with the court requesting a discharge of debts. After this Petition is filed with the court, the court enters an Order for Relief, commonly known as, the Automatic Stay, which obligates all creditors and collection agencies to stop all collection efforts. This means that most creditors must immediately stop any forms of harassment, terminate their demands for repayment of debt, and halt their threats of pursuing legal action against the debtor.

Filing for chapter 7 bankruptcy also means that the debtor is placing all his debts and assets, including those assets held in living trust, in the hands of the bankruptcy estate. The bankruptcy court controls these debts and assets by assigning a trustee to manage each chapter 7 bankruptcy case. The trustee’s role is to obtain money from the debtor’s Bankruptcy estate for the benefit of unsecured creditors. However, in most cases, the trustee cannot touch the property which is considered exempt. Exempt property is the property a debtor can retain during and subsequent to Bankruptcy. Your attorney will be able to determine in advance what assets are likely to be exempt.

California has created its own individual exemption system. There are two different sets of state exemptions which California uses in the Bankruptcy process. These are the standard California exemptions and the alternative California exemptions. The later, with a few important deviations, are quite similar to the federal exemptions, which for the most part are not available for use in California. A debtor filing for Bankruptcy in California must satisfy the two year residency requirement in order to use California’s exemption system. Generally speaking, a debtor can exempt both real and personal property owned by him, although most exemptions have a cap amount which is continuously updated by the California Judicial Council. One of the most important exemptions offered is the homestead exemption which allows a debtor to retain the equity he amassed in his home. Preparation of a California homestead exemption by a qualified estate planning attorney allows a debtor to retain between $50,000.00 and $150,000.00 worth of equity in his primary residence when declaring a chapter 7 Bankruptcy. In today’s California real estate market, property values are fast declining. This means that many debtors who were effectively precluded from filing for Chapter 7 Bankruptcy during the housing bubble, due to significant equity in their homes, are now free to discharge their debts in Chapter 7 Bankruptcy, and retain their homes.

When filing for Chapter 7 Bankruptcy, a debtor must choose either the standard or the alternative set of the California’s State exemptions, and cannot pick and choose between exemptions contained in both systems. Your bankruptcy attorney will point out that in many cases even if the debtor has property that is worth more than the exemption amount allows, the bankruptcy trustee may still not want to deal with that property, if the trustee sees that little money can be recovered from taking the asset. In such a case, the trustee is likely to abandon the property, and the debtor will be able to retain it. For the most part, such abandoned nonexempt property can be retained by the debtor through redemption, which simply means offering the creditor a lump sum payment equal to the property’s current replacement value. Redemption eliminates all liens on the property. Another alternative available to the debtor is to reaffirm the debt and keep paying for the property. When a debtor reaffirms a debt, both the creditor’s lien on the property and the debtor’s personal liability under the reaffirmation agreement survive Bankruptcy.

Finally, it is important to note that in some instances a debtor may be able to eliminate or reduce certain liens attached to his exempt property. This procedure is known as lien avoidance. How much of a lien can be eliminated depends on the value of the property and the amount of the available exemption. However, not all liens can be wiped out. For instance, the remedy of lien avoidance cannot be used for home equity loans or second mortgages if a debtor files for Chapter 7 Bankruptcy, but might be available if he files for Chapter 13 Bankruptcy, and strips off his second mortgage, treating it as an unsecured debt in the Chapter 13 plan. It is always best to consult with an experienced Bankruptcy attorney prior to filing for Bankruptcy, so that you can get a better understanding of your legal rights and options.

For more information please visit: http://www.floridalawattorney.com