Archive for May, 2016

Bankruptcy and Child Custody

Monday, May 23rd, 2016

Here in Florida, your right to spend time with your child is not related to whether or not you pay your child support. This may seem alarming to some, and certainly is not the way it used to be.

Bankruptcy and divorce are closely intertwined, and filing for Chapter 7 or Chapter 13 can have a significant impact on matters like child custody and domestic support.  If you file for bankruptcy, will you still have to pay off your child support debts?

In bankruptcy, debts are divided into two basic categories: dischargeable debt, which can be eliminated, and nondischargeable debt, which the debtor is stuck with.  Whether you file for Chapter 13 or Chapter 7, most obligations fall into the dischargeable category, including major sources of debt like credit card bills and medical bills.  However, there are still a few debts which retain nondischargeable status — and child support is one of them.

Not only is child support considered nondischargeable in both forms of consumer bankruptcy, it is also considered to be something called a “priority debt.”  As the name suggests, priority debts are the first debts to be repaid to creditors.  In fact, child support often takes precedence even over other priority debts, such as income tax obligations and financial restitution for crimes.  It should also be noted that alimony, sometimes referred to as spousal support, also falls into the nondischargeable category along with child support obligations.

But what about the automatic stay, which normally places a freeze on collection actions?  In Chapter 7 cases, your post-filing earnings are not considered to be part of the bankruptcy estate, which means the stay has no effect on domestic support payments.  In other words, in Chapter 7 you can be sued if you fall behind on your child support obligations.

For Chapter 13 debtors, the stay offers a greater degree of protection.  In Chapter 13, post-filing earnings are considered to be part of the bankruptcy estate, which means that your creditors would need to file a motion to lift the stay before they are permitted to pursue you for child support.  Nonetheless, if you want to keep the benefit of the stay, you need to continue making full and timely payments as provided by your repayment plan.

bankruptcy should not have any bearing on the terms of a child custody arrangement.  When the courts make decisions about custody plans for divorcing parents, their primary concern is finding the arrangement that’s going to provide the best possible quality of life for the child.  That’s why family courts review factors such as the whether either parent has a criminal record, whether the child would be safe from harm, and the personal preference of the child.

That being said, you always need to keep in mind that from the judge’s perspective, the optimal custody arrangement is one in which the child is being nurtured and cared for.  If financial insolvency interferes with your ability to provide for your children — for example, if they are not properly fed, clothed, schooled, or housed because their needs are not affordable — then the judge may determine the other parent would give the child a more stable home environment.

If you already have a custody arrangement and go on to file for bankruptcy in the future, your arrangement will not be undone by the filing in and of itself.  If you or your former spouse wishes to change a custody order, you will need to file a petition to modify the preexisting arrangement with the court that made the original determination.

At the end of the day, altering the terms of a custody plan really has more to do with your child’s quality of life than it does with bankruptcy, and your standing arrangement should not be seriously threatened unless your bankruptcy renders you unable to provide appropriate financial support.  Of course, you should always consult with a family law attorney in addition to an experienced bankruptcy attorney in order to ensure you reap the combined benefit of having both perspectives.

Carolyn Secor P.A. focuses its practice in the areas of Bankruptcy and Foreclosure Defense in Clearwater, Florida.  For more information, go to our web site www.BankruptcyforTampa.com
or call (727) 254-1704.

What Can You Keep

Monday, May 16th, 2016

It varies from state to state. When you file a bankruptcy, you get to keep property that is considered exempt under the laws of your state. Wow! That’s great: get rid of debts and keep the house, car and whatever…

Of course, it’s not quite that easy and the exemptions can vary from state to state. Those differences can be dramatic ranging from a complete exemption for your home no matter what it is worth to an exemption of only a few thousand dollars!

One of the loop-holes that the new bankruptcy law from ten years ago “fixed” was allowing you to move to another state with better exemptions. Now you can still move and file bankruptcy there, but you have to use the exemptions from the state where you used to live (assuming you were there for at least two years). As with all things in bankruptcy, check with a good attorney where you live to understand your state’s exemptions.

In California and the 9th circuit (the western states), you can even change the status of your property right before filing a bankruptcy and get the exemption. For example, if you have money in a savings account and can put it in a 401 or an IRA,  in most cases it will change from being non-exempt (you lose it if you file a bankruptcy) to exempt: you get to keep it.

The Supreme Court seemed to say the same thing  indicating that so long as it is not done in bad faith, the courts don’t have the authority to disallow exemptions. Basically they said, a bankruptcy debtor has the power to choose which exemptions to invoke.

If you have to file bankruptcy it’s worth knowing what property you can keep and how you can maximize that before you file. Find a competent bankruptcy attorney in your state for help.

Carolyn Secor P.A. focuses its practice in the areas of Bankruptcy and Foreclosure Defense in Clearwater, Florida.  For more information, go to our web site www.BankruptcyforTampa.com
or call (727) 254-1704.

Reverse Mortgage Clearwater

Wednesday, May 4th, 2016

There was a story on the Tampa Bay news channel last night (May 3, 2016) about a reverse mortgage situation. A couple owned a reverse mortgage personproperty with a reverse mortgage that was “upside down” and when they died, the bank was attempting to recoup the shortfall from the  couples’ children.

Most people assume that a reverse mortgage is a no risk situation, but when the property values decline, it is anything but no risk. Elderly people may be at risk of losing their homes, either because confusion on their part or intentional misrepresentation on the part of a lender.

What is a Reverse Mortgage?

You’ve all seen the ads.  Happy smiling couples enjoying the good life thanks to there reverse mortgage.

A reverse mortgage is a home equity loan that someone 62 years or older can take out and continue to live in their home.

It’s similar to a home equity line of credit (HELOC) or a second mortgage with one big difference:  with a HELOC or a second mortgage, the borrower must make monthly payments on the loan, which with a reverse mortgage the borrower does not.  The thought was that it would permit a retiree who need money but lacked the income to make monthly payments to borrow money that they could use to support themselves.

Sounds pretty great, doesn’t it?

What is Wrong with Reverse Mortgages?

They are Confusing.

The Consumer Financial Protection Bureau (CFPB) conducted a recent study of homeowners 62 years and older. In the study, the homeowners were shown ads from a number of reverse mortgage lenders.

The results of the Study?

  • Incomplete and inaccurate statements used to describe the loans
  • Important loan requirements often buried in fine print or not mentioned at all
  • Many of the homeowners did not realize the loans needed to be repaid, believing that they were getting interest free loans, and in some cases believing that the reverse mortgage was a government benefit which provided money to the elderly.
  • The homeowners were left with the message that the can still own their homes and live in them forever, while the ads either glossed over or omitted entirely the fact that the homeowner could lose their home if they didn’t pay property taxes or homeowners insurance.

It is the last finding that I see the most.

Most individuals do not pay their property taxes and homeowners insurance directly when they have a mortgage. Instead the lender maintains an escrow account where a monthly amount is collected by the lender and used to pay taxes and insurance on an annual basis.

However, this is not the case with the reverse mortgages I see. In those mortgages the homeowner is now required to pay the taxes and insurance themselves.

Often, when I see an elderly client with a reverse mortgage they may be years behind on property taxes and insurance. When this happens the lender then pays the taxes, and usually the lender acquires what is referred to as forced placed insurance on the property, which is usually at a higher premium than the homeowner could get on the open market.

After paying the taxes and insurance for a period of time the lender will normally begin the foreclosure process which when completed leaves the borrower homeless.

What You Need to Know About a Reverse Mortgage!

  • It’s a is a home loan, not a government benefit.
  • You have to pay your property taxes and homeowners insurance directly. The lender will not escrow those funds.
  • These loans have interest and fees associated with them.
  • It is a loan that will need to be repaid.
  • If you don’t pay the taxes, insurance and fees when they become due, you can lose your home to foreclosure.

Sometimes the only option is to file a Chapter 13 Bankruptcy which permits the homeowner to catch up on the taxes and insurance through monthly payments.

Carolyn Secor P.A. focuses its practice in the areas of Bankruptcy and Foreclosure Defense in Clearwater, Florida.  For more information, go to our web site www.BankruptcyforTampa.com
or call (727) 254-1704.