If there is one thing I could suggest to any potential bankruptcy client, or anyone for that matter, it is to avoid credit unions at all costs. Well, at the very least, avoid getting an auto loan and a credit card with your local credit union. This is because most credit unions (and some other financial institutions) cross collateralize their loans.
If you take a look at your account numbers one will be XXXX-XXXX-01 and the other will be XXXX-XXXX-02. That "-01" and "-02" signifies that those are actually two parts of one account. If you fall behind on the credit card part of that account, the credit union has the right to call in the entire account, including your vehicle loan. This means that even if you have made every single one of your car payments, but can't keep up on your credit card, the credit union can repossess your vehicle to satisfy the account.
It also means that I am in a tough spot when you come to me to file Chapter 7 bankruptcy and want to include your credit union credit card but keep your vehicle. If this is the case, the credit union will say that you either have to pay all accounts or surrender the vehicle. I know it's unfair. That's why I am warning you now. We have a few options in bankruptcy, but none of them are full-proof:
1. Option 1 is to redeem the vehicle at its current market value. Essentially getting a new loan for the current market value of your vehicle and paying off all of the cross-collateralized loans. However, the credit union has to agree on the current market value. There are companies that will assist in redemption.
2. Option 2 is to settle with the credit union on all loans and get the lien released on the vehicle. Kind of like redemption, but without getting another loan.
3. Option 3 is to pay off the credit card debt before you file. I am not sure that this is really advantageous because you still have to pay on the vehicle, but at least it avoids repossession.
4. Option 4 is to avoid Chapter 7 all together and file Chapter 13 to pay-off the total amount of the loans over a 3 to 5 year period.
5. Option 5 is to avoid the headache by just surrendering the vehicle and purchasing something newer and better.
I hope that this article will reach many of you in time so that you can choose Option 6 - do not get multiple loans with your credit union! Whatever you decide to do, please remember to mention if you have loans with a credit union when you see a bankruptcy attorney for a consultation. It will save them future headaches as well.
This blog is for informational purposes only and is not to be construed as legal advice.
More information about Perez Law Group can be found on our website, www.perezlawgroup.com.
Monday, January 31, 2011
Monday, January 24, 2011
To Trial We Go
Well ... to the Aiken Schenk mock trial competition we go. This Saturday my colleague, Cristina Perez, and I had the opportunity to judge a national mock trial competition for teams from several universities. I think we can both say that the experience was both interesting and rewarding.
Although, it diverted us from our usual bankruptcy practice, I believe the process of judging this competition will make us better lawyers. The case we presided over was a products liability case involving a fictitious toy and the death of a child. In bankruptcy, we have few opportunities to actually get inside a courtroom and litigate, and even when we do get the chance, it is a very different experience from litigating in state court. Jury trials are rare in bankruptcy. Most of the litigating is done at a podium before a bankruptcy judge. So, Saturday was a refreshing change of pace for us and a great opportunity to reconnect with all those civil and evidentiary concepts we may have forgotten since law school. Both Cristina and I felt our interest in other areas of law reignited, and we both made it a priority to go to more continuing legal education classes that focus on areas of law besides bankruptcy.
I would also like to give a virtual round of applause to the wonderful students we saw and judged. Our team was from Arizona State University and were very impressive. They were all knowledgeable, composed, and articulate. I think we saw some great future lawyers in this group.
Now it's back to bankruptcy we go...
This blog is for informational purposes only and is not to be construed as legal advice.
More information about Perez Law Group can be found on our website, www.perezlawgroup.com.
Although, it diverted us from our usual bankruptcy practice, I believe the process of judging this competition will make us better lawyers. The case we presided over was a products liability case involving a fictitious toy and the death of a child. In bankruptcy, we have few opportunities to actually get inside a courtroom and litigate, and even when we do get the chance, it is a very different experience from litigating in state court. Jury trials are rare in bankruptcy. Most of the litigating is done at a podium before a bankruptcy judge. So, Saturday was a refreshing change of pace for us and a great opportunity to reconnect with all those civil and evidentiary concepts we may have forgotten since law school. Both Cristina and I felt our interest in other areas of law reignited, and we both made it a priority to go to more continuing legal education classes that focus on areas of law besides bankruptcy.
I would also like to give a virtual round of applause to the wonderful students we saw and judged. Our team was from Arizona State University and were very impressive. They were all knowledgeable, composed, and articulate. I think we saw some great future lawyers in this group.
Now it's back to bankruptcy we go...
This blog is for informational purposes only and is not to be construed as legal advice.
More information about Perez Law Group can be found on our website, www.perezlawgroup.com.
Thursday, January 20, 2011
I have to pay HOW MUCH to my creditors if I file Chapter 13 bankruptcy?
When our clients are faced with filing a Chapter 13 bankruptcy, their first concern, inevitably, is that magic number that represents what they will have to pay each month to the bankruptcy court as repayment of their debts. Chapter 13 is kindly referred to as the "wage earner's" bankruptcy. This means people who have higher incomes, but still need bankruptcy assistance, will generally have to file under Chapter 13 and make a repayment of their consolidated debts. While Chapter 13 can be a useful tool for many bankruptcy filers, it often strikes fear in our clients' hearts as it creates a monthly payment, which many people are afraid they will not be able to maintain.
Well, the Supreme Court of the United States has just given us a tool to lessen this fear and has made filing Chapter 13 a bit easier. In March of last year, the Supreme Court heard and ruled on a case titled, Hamilton v. Laning. This case determined that a Chapter 13 monthly payment should be based on the income and expenses a debtor is reasonably expected to have in the future. Before this decision, the bankruptcy court, in some states, would base the monthly payment on the average of income received within the six months prior to the bankruptcy filing. To top it off, the Court would then require expense deductions based on standards and not actual payments made by the debtors. So, if you filed bankruptcy in February after you received a permanent reduction in overtime, the court was able to look at your income for August - January and use that to determine your disposable income and monthly payment. Now, that is scary!
Obviously, this standard approach to calculating a monthly payment for debtors who have had an unexpected or non-reoccurring change in income can lead to unrealistic results. But now we have the ultimate legal authority telling us that we have the go ahead to take into consideration our clients' change in circumstances going forward and to develop a realistic and manageable Chapter 13 payment.
What does all of this mean for our clients? It means that Chapter 13 isn't as scary as it once was. Clients don't have to fear payments that are too high and do not have to avoid a Chapter 13 bankruptcy and all of the benefits it has to offer.
This blog is for informational purposes only and is not to be construed as legal advice.
More information about Perez Law Group can be found on our website, www.perezlawgroup.com.
Well, the Supreme Court of the United States has just given us a tool to lessen this fear and has made filing Chapter 13 a bit easier. In March of last year, the Supreme Court heard and ruled on a case titled, Hamilton v. Laning. This case determined that a Chapter 13 monthly payment should be based on the income and expenses a debtor is reasonably expected to have in the future. Before this decision, the bankruptcy court, in some states, would base the monthly payment on the average of income received within the six months prior to the bankruptcy filing. To top it off, the Court would then require expense deductions based on standards and not actual payments made by the debtors. So, if you filed bankruptcy in February after you received a permanent reduction in overtime, the court was able to look at your income for August - January and use that to determine your disposable income and monthly payment. Now, that is scary!
Obviously, this standard approach to calculating a monthly payment for debtors who have had an unexpected or non-reoccurring change in income can lead to unrealistic results. But now we have the ultimate legal authority telling us that we have the go ahead to take into consideration our clients' change in circumstances going forward and to develop a realistic and manageable Chapter 13 payment.
What does all of this mean for our clients? It means that Chapter 13 isn't as scary as it once was. Clients don't have to fear payments that are too high and do not have to avoid a Chapter 13 bankruptcy and all of the benefits it has to offer.
This blog is for informational purposes only and is not to be construed as legal advice.
More information about Perez Law Group can be found on our website, www.perezlawgroup.com.
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