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West Palm Beach Law Blog

Understanding cramdowns on vehicle loans

After months of trying to keep on top of a difficult financial situation, things only seem to be getting worse. You are being harassed on the phone by creditors, and now you are receiving notices that your lender will soon repossess your car. However, you need your car to get to work. Without a vehicle, you would have a harder time paying your bills. This is not an uncommon scenario for Florida residents, unfortunately.

Is there anything you can do to keep lenders from taking back your car? If you have a steady job and income, you might consider filing for Chapter 13 bankruptcy and cramming down your auto loan. Loan cramdowns, as FindLaw explains, involve reducing the principal balance of your debt to the value your car is worth, which the lender secures. The following points can help clarify how cramming down a loan works:

  • If your car is worth $8,000 but you owe $15,000, the remaining $7,000 may be lumped into the rest of your unsecured debts during a Chapter 13 bankruptcy.
  • After you complete your Chapter 13 plan, you have wiped clean your remaining unsecured balances, including the exceeding amount you crammed down.
  • By making regular payments to the bankruptcy trustee during Chapter 13, you may avoid having your vehicle repossessed while getting your monthly debt payments set to a manageable amount.
  • After you cram down your loan and successfully complete your Chapter 13 bankruptcy, you own your car free and clear.

Beware of scammers promising to help you prevent foreclosure

Perhaps you have been faced with mounting debt or an emergency financial situation that has caused you to skip one or more mortgage payments. Now you are worried about losing your home.

You may become the target of scam artists who say they can help you resolve this problem, and some of them may sound quite legitimate. Here are three common scams you should know about:

When to hire a bankruptcy attorney

Debt is something that a large majority of households carry in differing amounts. Everyone handles their debt differently and finds various ways to manage their debt loads. However, sometimes debt becomes overwhelming and difficult to pay back. This can happen for a variety of reasons and often results from an unexpected or sudden change in financial circumstances, such as the loss of a job.

Unfortunately, crippling debt in society often carries with it the weight of shame and taboo. This often leads people to ignore their debt issues and avoid facing the problem head-on. When this happens, the problem can become more difficult to resolve the longer a person avoids it. Sometimes, the best way to move forward in facing debt problems is by taking the case to a qualified bankruptcy attorney. Here are some examples of when hiring a bankruptcy attorney can be a positive step in the right direction to debt-free living.

How can I protect myself from foreclosure?

The threat of foreclosure, or losing your home, is among one of the top stresses for debt-stricken homeowners. Shelter is a basic and primary need, and the idea that you may lose your home can cause crippling anxiety in addition to the anxiety you already have over your debts.

Luckily, there are ways for Florida homeowners to defend against foreclosure in West Palm Beach. The threat of the bank foreclosing on your home is not a foregone conclusion, so you should not immediately despair. One of the best ways to approach a looming foreclosure is to speak with a qualified attorney who works with foreclosure defense cases.

What happens if I inherit money during my bankruptcy?

Like many Florida residents, your financial troubles have led you to the difficult decision of filing for bankruptcy. Discharging most of your debt in a Chapter 7 bankruptcy can take a great weight off your shoulders, but what if you receive an unexpected amount of money during your bankruptcy? Will your inheritance be protected from your creditors?

FindLaw explains the dilemma of bankruptcy and inheritance in further detail. If you have inherited money just prior to filing for bankruptcy or you receive an inheritance within 180 days of your petition, the court will likely liquidate it to repay your creditors. The reason for the six-month window for creditors to have a claim on your inheritance is to prevent people from discharging their debts while knowing they will soon receive a large sum of money.

How will I stay afloat in retirement?

You are struggling under the weight of debts and considering bankruptcy as one way to start anew. However, the prospect of starting from scratch scares you because, while it seems to solve your debt problem in the short term, what about the long-term picture? For example, how well can you stay afloat in retirement if you have to use your retirement funds to pay off creditors in a bankruptcy?

The answer is good news. Your retirement accounts should be safe. The bankruptcy generally does not touch these.

Will Chapter 7 bankruptcy discharge recent credit card debt?

If you are a Floridian whose credit card and other debt has gotten out of hand to the point where you cannot afford to pay your bills, you may have heard that you can discharge your credit card debts by means of filing a Chapter 7 bankruptcy. While this is true in virtually all cases, you should be aware that under Section 523(a)(2)(C)(I) of the Bankruptcy Code, there is a presumption against discharging recent credit card debts. These are the debts you incur from a single creditor 90 or fewer days before filing your bankruptcy petition and with which you purchase over $675 worth of consumer goods.

The Bankruptcy Court for the Northern District of West Virginia recently looked at this issue. The Chapter 7 debtor in that case took out an $8,000 cash advance on one of her credit cards and proceeded to make several purchases with the funds a mere two months before filing bankruptcy. Understandably, the bank whose credit card it was objected to the discharge of this debt, citing the Bankruptcy Code presumption as its major arguing point.

Chapter 7 versus Chapter 13: Which is better for me?

If you are like many Florida residents, your debt situation may be getting out of hand. Between your mortgage payments, your credit card payments, your car payment and all the other monthly bills you must pay, you may not earn enough to cover everything. Consequently, you may be wondering if bankruptcy is the answer to your debt crisis, and if so, which type, Chapter 7 or Chapter 13, you should file.

While Chapter 7 accounts for approximately 71 percent of all bankruptcies filed in the U.S., both types of bankruptcy have their advantages and disadvantages. Which type is best for you depends on what you want to accomplish.

How do I know if it is the right time to file for bankruptcy?

You have felt overwhelmed by your debt for a while, but so far have barely kept your head above water. Even so, you know that this is no way to live. Whether you are suffering from insurmountable credit card debt, medical bills, a second mortgage or a combination of different types of debt, you might wonder when to seek help. If so, you are not alone. Many Florida residents are unsure when they should consider filing for bankruptcy.

You might decide to put off a personal bankruptcy until you fear you will lose your home. However, there are other signs that may let you know well in advance of a foreclosure that bankruptcy might be a good option for you. They can include the following:

  • It has become difficult or impossible to make ends meet. If you are having trouble paying your bills each month, you can certainly consider options that may lighten your load.
  • Collection agencies are threatening to sue you or have already taken legal action to collect what you owe them. Understandably, this can be extremely stressful.
  • You are facing wage garnishment. Almost nothing can be worse during financial problems than having a portion of your paycheck taken out to satisfy creditors when you are trying to support your family.

Will my family have to pay my debts after I die?

You have worked hard all your life to be able to pay your bills, but like most Americans, you have some debt. You might even have significant debt that you are certain you will not pay off before you die. What happens to your debt after your death, though? Is Floridians' debt wiped clean after they pass away?

Not necessarily, according to NerdWallet. During the probate process your estate will be used to repay your creditors before your beneficiaries receive a penny. What remains after paying off your debts will be distributed to your loved ones, according to the wishes you left in your will. The executor you named in your will is the one who will be responsible for paying your debts - if necessary, liquidating some assets, such as your home, to satisfy creditors.

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