Keep Your Assets, File Bankruptcy

Of all of the questions I am asked from potential clients, the most common question is whether the debtor can keep their car and their home.  Fortunately in most cases the answer is yes.  For most people the thought of bankruptcy invokes fear.  Fear of losing everything, like on Wheel of Fortune.  In a typical case, most debtors can keep their assets and receive a discharge.

When a car or home has little or no equity, and the payments to the lender are current, a debtor can opt to continue paying for the car and the house, and keep the assets.  In some instances a debtor may be asked to sign a re-affirmation agreement with the lender in order to keep a vehicle (this is a topic for a different discussion), but the option to keep the asset is always available.

When a car or home has some equity, there are exemptions available, to protect the equity for the debtor.  In Colorado a debtor can claim up to $60,000 of equity in their home as exempt ($90,000 if the debtor is over 60 or disabled).  A debtor in Colorado can claim up to $5,000 of equity in their vehicles as exempt ($10,000 for a married couple filing jointly, and $10,000 each for debtors over 60 or disabled). 

When a car or home has equity in excess of the exemptions available the situation gets a little more complicated, however, it is not always impossible to protect such assets in such situations.  In cases where the assets have more substantial equity than the exemptions allow, a debtor should definitely discuss the matter with a knowledgeable attorney and determine the best route for protecting assets.  Some options that I suggest for clients include 1) filing a chapter 13 bankruptcy instead of a chapter 7 bankruptcy; 2) being prepared to "buy back" from the chapter 7 trustee most or all of the non-exempt asset; or 3) liquidating the asset and using the proceeds for necessary living expenses prior to filing of the case.

A chapter 13 bankruptcy allows debtors to keep their non-exempt assets as long as their unsecured creditors receive at least the equivalent of what they would have received if those assets were liquidated in a chapter 7.  For example a debtor who owns, free and clear, a home with a fair market value of $100,000 has $40,000 of non-exempt equity in their home.  Generally if a chapter 7 was filed, the trustee would liquidate the property, incur cost of sale, realtor's fees, and his own administrative costs.  Assuming the Realtors fees and cost of sale are roughly 10% of the sale price ($10,000), the trustee would have about $30,000 to for creditors, the administrative fees the trustee is entitled to can then also be subtracted, leaving about $26,000 for the creditors.  The debtor would have to pay at least that amount for unsecured creditors, into a chapter 13 plan, but would have up to five years to pay.  (Please note that this is a simplification of the process because there can be other things that could affect the amount that unsecured creditors may receive in a chapter 13, like back taxes or child support arrears).

In many cases, where an asset exceeds the exemption allowed, but by a lesser amount, the asset, or its non-exempt portion, can be "bought back" from the trustee in a chapter 7.  For example a debtor who owns a free and clear vehicle with a fair market value of $7,000.00 has $2,000 worth of non-exempt equity.  The trustee may declare "I'm going to sell your car" but if your attorney is sitting beside you, and you are aware of your rights, your attorney may indicate that you wish to settle with the trustee.  The trustee may agree to take slightly less than the $2,000 to avoid all the formalities and costs of selling the vehicle, however the trustee may also agree to a short payment plan and for that he/she may not be willing to negotiate too far from the actual stated value.  In such cases, a debtor should be prepared to pay the values or turnover other, less significant, non-exempt assets, such as guns, recreation equipment, and cash on hand and in the bank at the time of filing, because the case is now considered an asset case and the trustee will be administering the case.  (Many trustees will not administer a case for one small non-exempt asset such as a $50 gun, but when there is $2000 from a car, or money from a tax refund, the trustees will typically add in all other non-exempt assets).

Liquidating the asset for ones own benefit is also an option.  Of course if this is what you decide to do, you will need to do this prior to filing your bankruptcy.  When a debtor believes that they really need a car but cannot fathom paying even a cent, perhaps because they are out of work, or they are barely scraping by, selling a vehicle and using the proceeds to purchase a different vehicle, making sure that the equity in the new vehicle is equal to or less than the allowed exemption.  A debtor can then use the remaining proceeds to help with other day to day expenses, pay for necessary repairs to their home or vehicles, and/or pay the filing fee or attorney's fees for their bankruptcy.  In some cases, a debtor may wish to use a portion of the proceeds toward a newer, more reliable car and may choose to finance (when available, and often is) the remaining costs of the newer vehicle.  Again it is important to ensure that the equity is equal or less than the allowed exemption. 

It is also important to remember that selling an asset for less than fair market value or simply changing title to any asset, by transferring to a friend or family member is not valid and will not protect the asset.  The transfer of an asset for less than fair market value in the two years (can be up to four years) prior to filing bankruptcy can be avoided by the trustee in the bankruptcy.  Not only will you lose the asset entirely, you will not be able to claim your exemption on the asset either.

If you have been considering bankruptcy, and just want some answers to the questions floating around your head, we offer a free consultation with one of the two very knowledgeable attorneys at Greenwald & Hammond.  Please call (303) 832-2550 today to set an appointment.

Submitted by,

Mindy Greenwald, Esq.
Bankruptcy Attorney

More Ways to Save Money

When I saw the title of the latest article in Money Magazine  “Trick Yourself into Saving More,” I didn’t even question whether or not I would read it.  They had me at trick. I’m always trying to come up with new ways to save money, and the idea of tricking myself makes me think it will help me save more without realizing I’m doing it.  Again, I’m in.

I read through the article and has some great ideas, a few of them are already in place at my house.  One of them is putting a label on my savings.  When I save for something, I usually have a specific goal in mind.  Many times, my savings are travel related, so the fund is named the city or place I want to travel. For example “San Francisco Fund.”  If I want to buy something, like a new Scooter, it’s the “Scooter Fund.” It helps me visualize my goal and reach it faster. In addition to this, I will cut out a picture of a scooter, or the Golden Gate Bridge, and put in on my memo board so that I can walk by and see what I want to buy/do.  Keeping your goal fresh in your mind can curb spending.

One of the other suggestions that hit home for me was related to who you hang out with.  My sister is a big spender, but she works hard to make a good living, so she can afford to buy what she wants.  I, on the other hand, can’t afford to be as much of an impulse buyer.  However, when I am with her, I find that I spend more money. It’s contagious and you come up with ways to rationalize the purchase; how can you not buy those shoes when they look so good on you and they’re on sale?  When I hang out with people who are thrifty like me, I tend to spend less. I’m not saying you need to ditch your wealthy friends, but maybe offset the time you spend in buying situations with them, or go in with a dollar amount in your head that you will spend on that shopping trip or at that restaurant. 

My favorite suggestion from the article was to picture your dream retirement scenario.  Do you want to play golf, garden, travel? What will it cost you to live this sort of lifestyle, and are you on track to achieve that goal? It may be too late for some of us to readjust our retirement savings so that we end up with a multi-million dollar 401k, but every little bit counts.

I really recommend reading the entire article, there are some really good ideas for people who are trying to save money.

Submitted by:
Kerry Hammond, Esq.

Bankruptcy Attorney

Bankruptcy Can Help When Your Modification Doesn’t Work

Loan modifications have been the topic of conversation for awhile now. They were first in the news because the banks weren’t taking them seriously. Many homeowners were submitting loan modification documents to their mortgage companies and then waiting 6 months to a year before they heard back. If they checked in, they were told that their documents had expired (no surprise when it takes them so long to review them). It was a vicious cycle of submitting paperwork, letting it get out of date, submitting updated paperwork, etc.

One of the big problems with the above scenario is that while all this is going on, the homeowner isn’t paying the mortgage (as advised by the bank because no modification would be considered unless the payments were three months behind or more).  If the modification is eventually approved, sometimes the back payments can be rolled into the end of the loan and everything will work out fine. Too often, though, homeowners are told their modification is not approved, and by the way, you need to catch up on 9 months of payments in the next 30 days or we’re going to start a foreclosure.

More recently you may have heard that some of the big banks settled with the courts and now have strict guidelines they must follow in regard to the loan modification process.  Namely, that an application needs to be reviewed within 30 days of receipt. This was a big win for homeowners, and I have heard that more modification are being approved and it’s all happening much more quickly.

But what happens after the modification is approved? It’s always the last we hear about the process. But does everyone really live happily ever after? According to a recent article in The New York Times, no. Apparently more than half of the homeowners who get loan modifications are back to being delinquent only 18 months later.  A year and a half is not a long time, and to be right back where you started might say more than you want it to.

If you’ve completed a loan modification and are back to being behind on your mortgage, you may really want to analyze whether or not you can afford your home. Just because you want to stay in your home, doesn’t mean you should. Sometimes you need to make a financial, rather than emotional decision. In many cases, what you owe on the property exceeds the value, and this is another big red flag. When you file bankruptcy, it enables you to surrender your home back to the bank and discharge any liability for deficiency that might occur when the bank forecloses. Very often things happen that are beyond our control, and in these cases we need to take stock and do what’s best for ourselves and our families moving forward.

To set up a free consultation with an attorney, you can contact Greenwald and Hammond through our website, or call us at 303.832.2550.

Submitted by:
Kerry Hammond, Esq.

Bankruptcy Attorney

Impulse Spending - There's an App for that!

With smart phones always just a few inches from their owners, impulse purchases can run rampant.  In addition to the ability to purchase new apps at a moments notice, while shopping in the app store, countless free apps are set up to get you to buy from within the app.

Amazon, Groupon, Living Social and countless others allow you to "buy now" with just one click (or maybe with a confirming click).  Many free gaming apps offer game upgrades to allow you to play more often or for longer periods of time, with just a click as well.  In most cases, a credit card is held on the individual account and need not be entered at the time of purchase, a person need only enter the app select what they want and click to purchase.

I agree that these apps offer an incredible amount of convenience and when a busy person needs to purchase gifts, personal items, baby needs and other necessities to be able to do so at the touch of a button on their phone is an amazing advancement in shopping.  I definitely use such apps and greatly appreciate the time saving qualities of such apps.

The problem arises when people are impulsive.  I was recently told by a friend that in the middle of the night she had this strong idea about something that she thought would be useful for her new baby and in the wee hours of the night she ordered something on her amazon app from her smart phone.  By the time morning came she realized that the item was not necessary and in fact the purchase was impulsive and unnecessary.  From time to time, I have been tempted by apps like Groupon and Living Social to purchase "great deals" as well.

It is important to be fully conscious of what you are willing and able to spend on apps, games, music and other items, and purchase within that budget.  It is easy to lose track when you can just buy at the tap of your finger, or when multiple family members have access to the app store and are not responsible for the bill at the end of the month.

The companies that put out these apps are well aware of the tendency for people to just say to themselves, "well its only $1.99" or "at least now I don't have to go out of my way to go get this."  It is important to remember that these purchases can add up pretty fast.  Remember to think about how much you are spending and think a bit before you buy.

For people having financial difficulties, a free bankruptcy consultation is available, contact Greenwald and Hammond PC.

Submitted by,

Mindy Greenwald, Esq.    

The New Trend in Home Building – Rentals

I love to write blogs that deal with home renting versus buying. Of course I’m biased on the side of the renter, but since so many others are adamantly on the opposite side, I feel like I balance things out a bit.

It’s not surprising that the need for rentals has increased in the last few years. With so many foreclosures and all of the hits taken on credit reports, more and more people are turning into renters, some by choice and some by necessity.

It appears that there is also an increase in the amount of builders who are building single family homes that are to be used as rentals. In the past, that mostly happened in lower income areas, sometimes offering government subsidized housing. But today these homes are being built in all neighborhoods and renters aren’t just living in apartments, they’re living in very nice single family homes with granite countertops and stainless appliances.

These new builds will be mixed in with rental properties that were previously homes purchased at foreclosure sale. In the current economy, these homes can be very nice, very new properties. They’re not what you would have pictured 10 years ago when someone said they bought a home in a foreclosure sale.

Of course the downside for a renter like me is that there are more people out there looking for rental properties and this drives up the rents. I’ve personally noticed that the amount I’ve paid for a home has increased by about 20% in the last 5 years. And it isn’t just harder to find another rental when our lease term is up, it’s hard to snag them too. Once you find a property, it can rent within days, putting you back to where you started if you can’t act quickly enough.

If you find that you are nearing foreclosure because you can’t afford your mortgage, you may be forced to become a renter. Bankruptcy can be a way to free yourself from a mortgage you can’t afford, allowing you the freedom you need to get back on your feet and start over. Call Greenwald & Hammondfor a free consultation.

Submitted by:
Kerry Hammond, Esq.

Bankruptcy Attorney

More Ideas for Saving Money

While enjoying my recent vacation, I mentioned to my husband that we need to budget for an annual vacation similar to the one we just went on.  Since we met, our vacations are more sporadic than I would like, and it is refreshing to get away.  With my student loans looming out there, saving is something that I have not been able to do.  I mentioned that if we each cut out something from our regular spending, we could probably save about $200 per month.

The first thing I suggested is that my husband pack a lunch for work.  Every day he spends roughly $7.00 on lunch.  He eats pretty much the same thing every day...a deli sandwich or salad.  Making the same sandwich at home would cost under $3.00 per day.  So cutting out the deli would result in roughly $86.00 per month saved (more than $1000 per year).  If you are like me and spend even more when you have lunch out, then the savings can be even more.  I am pickier about what I eat so my lunches out tend to run between $9.00 and $15.00 three days a week (that's roughly $156 per month, almost $1900 per year).  If I can reduce my lunch expense by taking lunch from home or having lunch at home, I could probably also save about $117 per month.  The reward of a relaxing beach vacation might be incentive enough to prepare lunches more often.

Another common expense is that trip to the coffee shop.  My preferred drink, the grande non-fat latte, runs about $3.45.  For those adding flavoring and going for the larger sizes, or more than one per day, that really adds up.  I have already cut this expense out for the most part.  My $3.45 latte (on average about 4 times per week) was running me about $59.00 per week.  I still purchase an occasional coffee but have reduced it from four times per week to less than one time each week.

Going out for dinner and drinks is so tempting after work and happens several times each month for me.  When I do, I spend about $15 on my entree and at least $8 - $16 on drinks, toss a 20% tip on top of that bill and I have spent at least $30.  Having drinks or dinner at home, or at a friend's house, instead of going out, just one night a month can save me roughly $30 each month.

By taking my lunch to work, skipping Starbucks, and going out to dinner one night less each month, I can save roughly $245 each month, that's almost $3000 per year.  Wow...tropical vacation, I will see you in a year!

When saving is not possible because payments on your debt and your basic living expenses exceed your income, bankruptcy may be the way to reverse that situation.  For a free bankruptcy consultation, contact Greenwald & Hammond.

Submitted by:

Mindy Greenwald, Esq.
Bankruptcy Attorney 

Still an Increase in Foreclosures

According to an article in CNNMoney, the number of foreclosures in May of this year was up by 9%. Just when we think that we’ve hit rock bottom, it seems like we still have further to go.

Like any statistic, though, there’s room for analysis. This number includes foreclosure filings, default notices and actual foreclosure sales. Because of this, the number may be a bit inflated, since when most people think of foreclosures they think of actual sales where ownership is transferred.

Some of the borrowers who have received default notices will catch up on their payments. Others who are close to sale may file for Chapter13 bankruptcy in order to put the arrears into a bankruptcy plan, stop the foreclosure, and move on paying their monthly mortgage payment.  Some borrowers will also complete  a short sale, where they may find a buyer and get the bank to accept less than they owe in satisfaction of their note.  

However, even if the number is inflated, it still reminds us that foreclosures will continue, even as the economy hopefully bounces back. If you are facing foreclosure and don’t know where to turn, consider discussing your situation with a bankruptcy attorney. My firm meets with a lot of people who are threatened with foreclosure and there are options available to you.

Submitted by:

Kerry Hammond, Esq.

Bankruptcy Attorney