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Recent Blog Posts
A Fresh Start at Protecting Your Co-Signer
Bankruptcy may give a fresh start not just to you, but also to your relationship with your co-signer.
Bankruptcy Can Be the Best Way to Help Your Co-Signer
Even if you think that filing bankruptcy would give you the financial relief you need, you may not want to do it because you don’t want to hurt a co-signer. If so, we commend you.
And if don’t want to hurt your co-signer (or anyone otherwise obligated with you on a debt), you will be happy to hear that by filing bankruptcy you can often get both financial relief for yourself and the best practical protection for your co-signer.
Before showing you how, let’s look more closely at the two distinct ways that you might want to protect your co-signer. Then we’ll show how you filing a Chapter 7 “straight bankruptcy” case could provide that protection. And then in our next blog post we’ll show how a Chapter 13 “adjustment of debts” case could deal protect your co-signer in different situations.
A Fresh Start for Your Home Partly Encumbered by a Tax Lien
Chapter 13 handles a tax lien on a home especially well when the home has enough equity to cover some but not all of the tax lien amount.
In our last two blog posts we dug into tax liens, and we do so one more time today. Two blog posts ago it was about tax liens that have no equity at all to attach to. Then the last blog post was about tax liens that have enough equity in the home to cover the entire amount of the tax lien.
Today we get into the in-between situation—where there’s enough equity in the home to cover part of the tax lien but not all of it. How can you get a fresh start on you home in this situation?
A Quick Summary about Tax Liens
A recorded tax lien on your home turns an income tax debt that you could have completely discharged (legally written off) in a Chapter 7 “straight bankruptcy”case into one that you may have to pay in full. If that income tax debt meets the conditions for discharge (mostly by being old enough), whether and how much you have to pay that tax depends mostly on whether there is equity in the home to cover this tax debt.
A Fresh Start for Your Home Equity Encumbered by a Tax Lien
A tax lien encumbering the equity in your home is dangerous. Chapter 13 takes away the danger.
If the IRS or your state tax collector records an income tax lien against your home, and you want to keep the home, sometimes through bankruptcy you don’t have to pay the tax. If there’s no equity at all in the home to cover the tax lien, and if the tax meets the conditions for being “discharged” –written off, mostly by being old enough—you may not have to pay most of that tax. You might even not have to pay any of it. And that’s in spite of the recorded tax lien, which would be removed from your home’s title. See our last blog post about how this can happen.
But it’s a different story if there’s equity in your home to cover the tax lien.
You Have to Pay the Tax
If your home is worth enough so that it has equity to cover the entire amount of the tax lien, you’re going to have to pay the tax. Even in bankruptcy. That’s as long as you want to keep the home.
A Fresh Start with an Income Tax Lien on Your Home
You owe income taxes, and now the IRS or state has recorded a tax lien on your home. Chapter 13 may get rid of both the tax and the lien.
Income Taxes that Can Be “Discharged” (Legally Written Off)
If you owe an income tax debt, it can be discharged like most other debts. The tax debt just needs to meet certain conditions for that to happen. Essentially, two conditions have to be met:
- 3 years must have passed since the tax return for the tax was due, and
- 2 years must have passed since that tax return was actually submitted to the IRS or state.
There are a couple other possible conditions but they very seldom come into play. So most of the time you can get rid of income tax debts simply by waiting until both of those two periods of time have passed.
If you owe a bunch of income taxes, having that legal obligation lifted off you would sure help you get a fresh start.
But What If a Tax Lien is Recorded against Your Home in the Meantime?
A Fresh Start with the Child or Spousal Support Lien on Your Home
The good news is that if you are behind on child or spousal support, with a resulting lien on your home, you can safely protect that home.
If you are behind on your support payments, your ex-spouse and support enforcement agencies have tremendous tools to use against you to try to force you to catch up. And if you own a home, those tools include the support lien that is very likely imposed on your home’s title. Chapter 13 “adjustment of debts” gives you a powerful tool with which to fight back.
Child/Spousal Support and Bankruptcy
Bankruptcy is admittedly limited in its ability to help deal with child and spousal support debts. But the way it can help sometimes makes all the difference.
Chapter 7 “straight bankruptcy” is not able to directly help other than to free up money so that you can better afford to pay any ongoing monthly support, and to catch up on any previously unpaid support. Any lien that you might have on your home remains throughout that time. And you have no protection from collections under that lien.
A Fresh Start with Unpaid Property Taxes on Your Home
Falling behind on property taxes is dangerous, and scares your mortgage lender. Bankruptcy can help you deal with both.
Is Chapter 7 “Straight Bankruptcy” Enough Help?
It possibly can give you enough of a fresh start with your other debts so that you can catch up on your property taxes. But doing so while keeping your mortgage lender also satisfied is difficult to pull off.
If you’ve fallen behind on your property taxes, sometimes just writing off your other debts would give you enough financial breathing space so that you could catch up on your property taxes. Tax foreclosures usually don’t happen until you’re years behind, so you may have a fair amount of time to get current.
So find out from your attorney how much time you would have to catch up. Some tax creditors will set up a monthly payment plan with you. Find out if that would be available to you and if you could afford the payments once you discharged (wrote off) your other debts.
The Judgment Liens that Can Be "Avoided" from Your Home's Title
Bankruptcy can’t get rid of most creditor liens on what you own. But judgment liens on your home are an exception.
Our last blog post was about judgment liens, why they are so dangerous, and how both Chapter 7 and 13 types of bankruptcy can deal with them. Today’s blog post explains what determines whether a particular judgment lien can be removed, or “avoided,” and how that’s done.
The Rules for “Avoiding” Judgment Liens
If a creditor has sued you and gotten a judgment, and your name is on the title of any real estate, including your home, most likely that creditor now has a judgment lien against that real estate.
If you file bankruptcy, the debt that was the basis for that judgment would in most cases be legally discharged (written off forever). But the judgment lien is legally separate from that debt. The lien could survive the bankruptcy discharge, unless you qualify for judgment lien “avoidance.”
A Fresh Start by "Avoiding" a Judgment Lien on Your Home
Bankruptcy doesn’t just give you a fresh start by writing off debts. It frees up your home by often getting rid of its judgment liens.
Writing off debts is good. But if a creditor got a judgment against you, and you own a home, most likely that debt has also turned into a judgment lien on the title of your home. You’re not going to get much of a fresh start on your home if it continues to be saddled by a judgment lien or two.
Bankruptcy is relatively good at writing off (“discharging”) debts. But getting rid of liens can be trickier. However, both Chapter 7 “straight bankruptcy” and Chapter 13 “adjustment of debts” do provide a way to get rid of, or “avoid,” judgment liens.
Today’s blog post is about judgment liens, why they are so dangerous, and how both “Chapters” of consumer bankruptcy can be very helpful in dealing with judgment liens. (Then the next blog post will be about whether a particular judgment lien can be “avoided,” and how that’s done.
Consumer Warning: A Scam Targeting Bankruptcy Filers
Watch out for phone calls seemingly from somebody you think you should trust with reliable sounding information, requesting fast money. You Wouldn’t Be Fooled by This If you get an email written in imperfect English from somebody saying she needs your help to move a huge amount of money out of her African country, and that you’ll get a healthy percentage of that amount if you just provide your bank account information, you probably know better than to respond to that email. Here’s a part of an email which is an example of these advance-fee scams, in which you’re invited to send money to a stranger on the promise of some fast money for you:Dear Beloved Friend,
I know this message will come to you as surprised but permit me of my desire to go into a business relationship with you.
... my late father came to Cotonou Benin republic with the sum of US$4.2M which he deposited in a Bank her in Cotonou Benin Republic West Africa for safe keeping.
A Fresh Start by "Stripping" Your Second Mortgage
Stripping your second mortgage could give your home the very best fresh start by saving you a tremendous amount of money.
If You Can’t Afford the Monthly Payments on Your Home
Last week we compared three ways to save a home in which you’re behind on your mortgage payments: mortgage modification, a forbearance agreement, and Chapter 13.
Mortgage modification is the only one of these three which lowers the monthly payment on your first mortgage. A forbearance agreement just gives you a number of months to catch up on missed mortgage payments, during the same time that you are also required to make the usual monthly mortgage payments. Chapter 13 is similar except giving you much longer to catch up, up to 5 years. Stretching out the catch-up time greatly reduces the amount you have to pay per month compared to a forbearance agreement.
The problem is that mortgage modification is difficult to qualify for. Whether using a governmental program or one provided directly by your mortgage lender, there is a quite narrow window that your income must fit into in order to qualify. So what do you do if you don’t qualify for mortgage modification but still can’t afford what you have to pay each month towards your home?
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