Podcast #9: Harassment, Mortgage, HOA, Chapter 7 Or Chapter 13

Disclaimer

While the information given in this podcast is instructional, it is not intended to be taken as legal advice for your particular legal or financial situation. The recommendations that we give to one person may not be appropriate to your particular situation. The information contained in these podcasts is also not intended to replace the advice that you would receive from an actual consultation with a competent legal professional practicing in the area of consumer bankruptcy law.

Welcome

Welcome to Morsebankruptcy.com, the podcasts, I’m Todd Morse, the owner of Morse Law and on these podcast we generally answer about various questions about bankruptcy issues and they come from a variety of sources. The source of this particular podcast are visitors to our website, we have a contact form there and they tend to ask us questions and these are usually the first questions that people are asking when they are looking to see if a bankruptcy is the solution to their situation but this visitor in particular asks or says.

Viewer Question

I’m being harassed by creditors, payday loans, and am two months past due on my mortgage, and several months of HOA dues. I have a good job and I’ve been here for a lot of years. We can’t get caught up so we got are in trouble with those loans. I would like to speak with you regarding chapter 13 possibly or could file a chapter 7 in March of 2013 then it will be eight years from the last filing of chapter 7. I just don’t know what to do, because I know chapter 13 is expensive. And then they give us the information to contact them and try to help them.

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Now, this one brings up more issues than I think we’ve had probably in probably all the podcasts you see on this page but one of the first thing she mentions is the harassment by the creditors and that’s probably one of the things that drives people to look at the bankruptcy faster than anything else.

Now the harassment from creditors there’s lots of ways can be handled you can just retain a firm usually for about a $100 and then the firm will allow you to give the creditors their name and number and that should cut down on it significantly. Or once a bankruptcy is filed that harassment becomes illegal in fact you can actually hold the creditors accountable for calling you after the bankruptcy ‘s been filed. It’s what we call a stay violation. It’s a violation of the automatic stay order.

She also mentions that they are two month past due on the mortgage and that’s enough to startle anyone because traditionally three months down is where foreclosure would began not that the traditional methods have meant much in the last few years since the banks have been so behind but we’re starting to get the point now where banks aren’t waiting 6 and 12 months to start a foreclosure process. It’s getting a lot closer to the old tradition rules where three months of missed payments actually mean that something is about to get started and they also owes some HOA dues.

Now, for those types of arrears if this person intends to keep their home regardless of whether they file chapter 7 in the past or not, they would have to file chapter 13. 13 is the only chapter of bankruptcy for consumers where you could restructure missed payments on your home. So instead of taking those two months of missed payments and trying to pay them all at once to the bank which is what they are going to require you take those two or so missed payments and spread that about the life over the chapter 13 plan which is going to me anywhere from 3 to 5 years long. It kind of like financing a car, you can’t buy it all one time, you spread out those payment over time, everything becomes much more manageable than what the bank would require.

Now, HOA is kind of interesting in that we have different rules governing them because they have a certain community interests involved with their dues. So, if we were talking about a chapter 7 for example, and these people were decidedly going to leave, let their house go – they just wanted to walk away from it. You could actually discharge the HOA dues that were due and not paid up until the time you filed your bankruptcy. But now those HOA dues that come due after the bankruptcy has been filed and up until the time the house comes out of your name like say, through a foreclosure option or whatnot these are examples of how that can happen, but the ones between the bankruptcy filing date until the house comes out of your name – those are still your responsibility. You can’t discharge those so a lot of times if you are dealing with a HOA dues and a foreclosure situation, you have to be very careful in terms of how you time out you filing, when the house is going to come out of the person’s name, and when those HOA dues are going to be incurred.

Now she does go on to mention that they did file a chapter 7 before and correctly states the rule. You have to put 8 years in between chapter 7 filings. There is no way to get around that sometime we well intentionally delay a bankruptcy filing just to make sure that we get those 8 years in between and really the only way to calculate what’s in the best interest for somebody is to try to do a little bit of soothsaying. You have to look and say well where are you at in this collection process, what are the odds that law suits are going to happen, garnishment going to happen or even if the garnishment is placed how many month we really have to wait. Are you going to file today and then end up paying astronomically more money over the life of 13 plan that if you just waited in waited out garnishment for a month may be two and then quickly filed the chapter 7 then eliminated all of it and it’s very case by case. But seeing as how this person like right now we are recording it in November of 2012 so this person would have to end up waiting almost another 5 or so months before they’d be allowed to file a 7.

If the intention here was really to save the home then we wouldn’t be talking about a 7 to begin with. We’d be talking about a chapter 13 from the beginning so we can make up the arrears on the home and with the HOA as well and then it really wouldn’t matter whether the chapter 7 was filed 6 years ago, 7 years ago or 5 years ago. It simply wouldn’t be an option in this case.

Now this individual is looking just to walk away from the home. They’ve had enough of trying to pay for it. Realizes not going to be a workable part of their family’s budget going forward, then they could do that as well. We could just delay the filing until we had our 8 years and between chapter 7 have expired and then can file a chapter 7 try to work out some type of a deed in lieu so that we can get the house out of the client’s name as quickly as possible to keep those HOA dues that we can’t get rid of after the case is been filed from accruing. So the idea there would be to file the case let the HOA dues that have accrued up to that point discharge and try to get the house out of the client’s name as soon as possible after the chapter 7 bankruptcy had been filed.

This is one of those interesting questions where it’s going to just depend a great deal on what the client is really hoping to accomplish at the end of the day. If the goal just to wipe out unsecured debts but to save the house and they need some help with that, then we are clearly a chapter 13. If they just decided they don’t want to keep the home, then we are going to have to look into somehow strategizing our way into a chapter 7. But in either event this whole thing is going to hinge on what it is the client is hoping to accomplish by filing the bankruptcy and essentially you can find that out by asking where they want to be next year. In any event, it’s unfortunate that this has happened but is a very good question very instructive and all around worth looking into.

Prerequisites

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