Higher education costs are vast and growing. In 2010 alone, the average price of a public university rose to $7,020; a 6.5 percent increase from the last year. With prices expected to rise at an average of 5-8 percent each year, parents are taking a closer look at how to provide their kids with the funds necessary to earn a degree. For those filing for bankruptcy, the threat of losing a hard-earned college fund to bankruptcy trustees is devastating. Luckily, there are ways to ensure your son or daughter’s future without sacrificing bankruptcy protection.

National Legislation

In response to this glaring bankruptcy issue, the Uniform Gifts to Minors Act (UGMA) was enacted as a way to help parents. Adopted by the majority of U.S. states, this legislation provides parents with a way to protect their children while filing for bankruptcy. It allows assets to be held in the parents’ name on behalf of their child until the age of 18 or 21. Once the child reaches the appropriate age, they gain control over the account and may withdraw funds at their discretion. The UGMA allows college funds to act similarly to trust funds without the need for an attorney to officially appoint a trustee.

Savings Plans

While the UGMA offers protection for most states, reciting rights not enough for those filing for bankruptcy. To guarantee protection, many utilize their rights to transfer mutual fund and IRA money into an education-specific 529 College Savings Plan. Offered by states and universities alike, 529 Savings Plans are tax-sheltered accounts that focus on educational savings only. Parents have the option of contributing to these interest-bearing accounts during bankruptcy proceedings without the fear of fund confiscation. Why? Because 529 withdrawals may only be used for educational purposes. Of course, there are a few downsides to investing in a 529 plan, including:

• Penalties for withdrawing the funds before a child reaches 18 or 21 (depending on the state laws)
• Investing a surplus amount with no way to use the funds for other purposes (without facing a 10 percent penalty, plus additional taxes and fees)
• Less freedom to invest compared to a mutual fund
• Funds could affect financial aid eligibility

Despite the potential drawbacks, ensuring the safety of your college funds far outweighs the negatives.

Saving for college is a major investment in your child’s future. While your present financial troubles threaten the stability of everyday life, it should never threaten your kid’s ability to learn. Take proactive steps to protect your hard-earned college savings. Your kid’s future depends on it.

The Basics

Filing for bankruptcy begins with some simple information. Gather the following:

• The name, address, and contact information of every creditor you owe
• Applicable account numbers
• Billing statements, dating back to the first month of your missed payment
• The debt owner (e.g., is the debt owned by your spouse as well?)
• The total outstanding balance of each account
• Monthly payment amounts
• The date and year your delinquent debt began

Employment and Income

Once you have outlined your debt, you must illustrate your inability to repay. Disclose the following:

• The name, address, and contact information of your current employer. If you are unemployed, list how long you have been without work.
• Copies of pay stubs, unemployment checks, worker’s compensation, child support, Social Security benefits, etc.
• Copies of tax returns, including:
• State and federal income
• Property tax documents
• Business tax documents (if you own an LLC, S Corporation, or sole-proprietorship)

Living Expenses

Living expenses can account for more than half of a household budget. When costs are overwhelming you, it is important to cite your difficulties when filing for bankruptcy. Be sure to include:

• The mortgages and deeds of any owned properties, or rental agreements and contracts
• Titles of your car and recreational vehicles (e.g., motorcycle, RV, boat, etc.)
• The cost of utilities, phone, and other expenses
• The cost of your dependents

Proceedings and Notices

Filing for bankruptcy is about finding relief from overwhelming debts and impending lenders action. Make sure to include copies of actions already in motion, such as:

• Foreclosure proceedings
• Repossession notices
• Legal proceedings
• Collections

Expert Intervention

With information in-hand, filing for bankruptcy is the next step. This process requires the help of an attorney or other legal advocate. When you file your petition, you must also file other court documents, including:

• Voluntary Petition
• Summary of Schedules
• actual Schedules
• Statement of Intention
• Creditor’s Matrix
• Miscellaneous forms

The accuracy of these documents is crucial to your case, so make sure to consult an expert with a successful track record.

Filing for bankruptcy is a stressful process, but a little organization can help your efforts in a big way. Begin your future by assembling the details of your past in the best way possible. The results will help you achieve a smoother path to bankruptcy protection.

1. Ballooning debt. When credit cards and interest rates spin out of control, motivation to file for bankruptcy can take a life of its own. Chapter 13 works to help qualify people restructure their payments for a period of three to five years. When you cannot afford to keep up with a restructured plan, Chapter 7 bankruptcy works to discharge debt altogether.
2. Halt foreclosure proceedings. Regardless of the bankruptcy type you choose, the simple act of filing will halt home foreclosure proceedings. Although Chapter 7 bankruptcy will not protect you from eviction, it will delay the inevitable until your case is decided. On the other hand, Chapter 13 can stop proceeding completely if you stick to a reduced payment schedule. Both outcomes depend on a judge’s ruling, so be prepared to prove your case.
3. Prevent car repossession. Filing for Chapter 13 bankruptcy can protect your transportation options. Consolidating your missed auto payments into a bankruptcy judgment means you get to keep your car.
4. Relief from medical bills. Unforeseen medical expenses are a common cause of bankruptcy. Those living without insurance are at risk of owing hundreds or even thousands of dollars. While some expenses are exempt, Chapter 7 bankruptcy can drastically reduce or obliterate a large portion of medical debt.
5. Unemployment. Since 2008, the U.S. unemployment rate has skyrocketed to a dismal 11 percent. Since then, it has struggled to improve beyond the 9 percent mark. Families affected by the recession have been forced to sacrifice their lifestyles, and in many cases, their basic financial stability. With no employment and loss of insurance, the path to bankruptcy is a short one. Chapter 13 is deemed the “wage-earner’s” bankruptcy, requiring proof that you can adhere to a repayment plan. However, In the case of prolonged unemployment, Chapter 7 may be the best solution.
6. Keep the lights on. In addition to foreclosure, bankruptcy protection can stop other proceedings in their tracks. If you are unable to pay for utilities, filing for Chapter 7 or 13 can force the utility company to keep your electricity running while your case is decided. The same is true for gas and water suppliers. When circumstances are dire, don’t risk your safety by delaying the inevitable.
7. Reduce the burden of student loans. Education costs are climbing every year, and many students cannot afford to attend school without some sort of student loan. While federal loans offer a fixed interest rate, the danger of variable interest private loans can be as problematic as ballooning medical bills. Chapter 13 will not eliminate your educational debt, but it will consolidate it into payments proportional to your income.

• Arkansas
• Connecticut
• Hawaii
• Massachusetts
• Michigan
• Minnesota
• New Jersey
• New Mexico
• Pennsylvania
• Rhode Island
• South Carolina
• Texas
• Vermont
• Washington
• Wisconsin

If you choose to go the federal route, the following benefits and items are protected:

• Homestead value: Property worth up to $17,450. If no property exists, $8725 may be applied to other personal items.
• Insurance
• Disability
• Illness
• Unemployment benefits
• Funds to pay for life insurance (in cases where the debtor has dependents who will rely on the policy)
• Life insurance including dividends and interest, up to $9,300
• Pension: Funds protected under the Employee Retirement Income Security Act (ERISA)
• Crime victim benefits
• Public benefits
• Social Security
• Unemployment compensation
• Veterans’ compensation
• Funds to pay alimony or child support
• Funds accepted as alimony or child support
• Personal injury benefits valued up to $17,425
• Wrongful death benefits
• Personal property valued up to $9,300. Items may include:
• Animals
• Clothing
• Books
• Furniture
• Household items
• Musical instruments (valued up to $425)
• Jewelry (valued up to $1,150)
• Cars (valued up to $2,775)
• Employment supplies such as tools and books valued up to $1,750 (i.e., “tools of the trade”)
• Miscellaneous property
• $925 allowance for any items
• Use of the remaining $8725 homestead exemption

Even if your state does not allow federal exemptions when filing for bankruptcy, state exemptions often include the majority of the components listed above. The bottom line: although bankruptcy is difficult, you won’t lose the shirt off your back. Take a closer look at your state’s laws to discover the options available to you. Education can help streamline the bankruptcy process, offering small comforts along the way.

The U.S. bailout rescued Fannie Mae and Freddie Mac in 2008, thanks to government funds that continue to support their infrastructures, including repossessed homes. In fact, half of the nation’s mortgages are owned by one of the companies. In the wake of debt ceiling negotiations, the question of how to handle the 248,000 foreclosures among them. With a deadline of September 15, federal regulators are continuing to weigh the benefits of renting foreclosure properties to lessen the national debt.

In addition to reducing the burden of failed mortgages, the new rental plan could have a significant impact on the housing market’s stability. It is no secret that foreclosure properties can bring down the value of a neighborhood. Empty homes and uncut lawns make it difficult for real estate agents to sell an area in addition to a property. Under the rental proposal, foreclosure properties would avoid abandonment with the help of the Federal Housing Agency (FHA), which would offer them to applicants at a discounted rate. This strategy could have a number of positive effects, including:

• Reducing credit losses and federal debt
• Stabilization of neighborhoods and surrounding home values
• Addressing the growing demand for rentals. Nearly 3 million households have switched to renting since 2008, and another 3 million are expected to follow suit by 2015.

While it is not yet clear whether new legislation will help homeowners in dire straits, those looking for a new home can hope for FHA rental options in addition to buying. Keep your eyes open in the coming months; big market changes could mean big savings for consumers.

1. Ask for a continuance. You need more time, so ask for it. Once foreclosure proceedings have begun, you have the right to ask the court for a 60-day grace period before going to court. Submit your request in writing as soon as you receive legal notice from your lender. The court may not give in, but you lose nothing by trying.
2. Challenge the appraisal. If your case has been reviewed in court and foreclosure is looming, a last-minute delay exists in the appraisal process. In the final weeks of home foreclosure, your county sheriff will arrive to appraise the property in order to decide the auction value. If you believe the price is too low, voice your concerns and ask for a second opinion. Not only could a reappraisal help you make cover the remainder of your mortgage, it will buy you more time.
3. Find a consumer advocate. Non-profit organizations and consumer advocacy groups are skilled at handling home foreclosure issues. Find a reputable organization in your area and ask for help. They may be able to appeal to the court to give you more time, especially if you have children. While they cannot save your home, they could help you borrow a few extra weeks.
4. Challenge lender jurisdiction. Attorneys across the country have helped clients delay home foreclosure on the basis of jurisdiction. If you lender’s headquarters is located in another state, your attorney could argue for a federal court filing in lieu of a state bankruptcy case. While this strategy is not 100 percent effective, it could force your lender to withdraw their foreclosure petition and re-file in federal court.
5. Challenge lender language. Mortgage documents encompass large and complicated amounts of information, some of which may be erroneous. If you are desperate, ask your attorney to audit the language carefully and look for errors that could benefit your case. Although it will not save your home, finding fault with even a small portion could reduce your mortgage price and delay the foreclosure date.
6. File for Chapter 7 bankruptcy. Although bankruptcy should be considered a last resort, its protections can offer much-needed relief to struggling households. Chapter 7 will not save your home, but it will halt foreclosure proceedings for up to three months (or until your case is reviewed by a judge). If you cannot pay your mortgage and your other assets are limited, Chapter 7 may be the best solution.

Eviction is a grueling and emotional time for homeowners. While you may feel helpless, participating in the process can help you take control of when it will occur. Be proactive and look for ways to lengthen the time you have left as an owner; it could make a world of difference.

Credit Review

At the threshold of home ownership is your credit status. In all likelihood, bankruptcy did a number on your credit score; a harsh fact that may take years to overcome. Before jumping into the housing market, order a free annual copy of your credit report and review it carefully. Make note of any inaccurate or false information along the way, especially items that should be included in your bankruptcy ruling. If you filed for Chapter 7, verify that your accounts have been discharged and get a sign affidavit from the court. Once you know where you stand, you can begin to rebuild financial strength.

Credit Repair

One thing is certain: after bankruptcy, the damage to your credit score is done. While there is little you can do to repair the past, establishing solid credit in the future is the path to a higher score. Pay your bills on time and in full. If possible, take out a small installment loan or open a department store credit card. Raising your score is about implementing positive habits, and you have to start somewhere. FHA home loans require a minimum credit score of 620; although regular loans are less restrictive, you won’t find a competitive rate with a score below 700. It may be a tall order, but credit repair is the key to home ownership.

Start Saving

With financial ruin on your plate, the need for a safety net is more important than ever. Lenders will look more favorably on your loan application if it comes with a hefty down payment. This will help your chances of securing a better interest rate and eliminating Private Mortgage Insurance (PMI) costs. Regardless of your credit score, saving for a down payment is a wise decision.

Watch and Wait

Despite your credit repair efforts, finding a home loan after bankruptcy isn’t always cut-and-dry. Most lenders require at least a two year window since your filing date. For example, the FHA accepts loan application from borrowers if:

• A minimum of two years has passed since the bankruptcy discharge
• Judgments and taxes have been paid
• Repayment plans have been established

You are likely to find similar regulations with the average lender. Not only do they want to see improved credit, they want to see it over an extended period of time.

Finding a home after bankruptcy may be difficult, but it is possible for those who strive. Buckle down and commit to a better future in your own home; you’ll be glad you made the effort.

1. Contact your trustee. If you feel Chapter 7 bankruptcy is your only option, contact your trustee and personal attorney to discuss the new situation. They will offer state-specific information and requirements related to conversion. If they agree with your opinion, the process of filing for Chapter 7 bankruptcy can begin.
2. Establish eligibility. Once you have decided on Chapter 7 bankruptcy, you must meet your state’s eligibility requirements. These will usually include:
   • No previous conversion of your existing bankruptcy
   • A change in your financial situation
   • Passing a Means Test, which measures your qualification based on income, debts, and expenses
3. File the conversion petition. Once the Chapter 7 qualifications are met, your attorney will file a petition to convert Chapter 13 to Chapter 7. The conversion order will be filed within a few days. Note: some states charge a minimal fee to file a conversion petition. Ask your trustee or attorney about your state’s requirements.
4. Meet with attorneys and creditors. A Meeting of the Creditors must be completed before your Chapter 7 bankruptcy conversion. This allows all creditors involved in your Chapter 13 ruling to appear and raise any objections to your conversion. If none are founded, the conversion can go forward with a judge’s approval. You may also be entitled to a refund of any payments not yet received by the creditors (e.g., a check sent after the conversion petition filing date). Under Chapter 7, you may also add other creditors excluded from your Chapter 13 proceedings. The trustee will outline any applicable changes.
5. Plan for the future. While Chapter 7 bankruptcy is never ideal, it may be your only way out. In the days approaching your conversion, make a plan for the future. Chapter 7 often means the repossession of property such as your home and car, and any other items not yet paid in full. Determine where you will live and how you plan to commute and find future employment. While Chapter 7 may feel like the end of the road, it is a new beginning for those who see the positive side to starting fresh. Be proactive when it counts the most; you’ll be glad you did.
]]> http://www.bankruptcyrights.com/blog/bankruptcy/converting-chapter-to-chapter-7-bankruptcy-the-basic-steps/feed/ 0 http://www.bankruptcyrights.com/blog/bankruptcy/home-foreclosure-myths/ http://www.bankruptcyrights.com/blog/bankruptcy/home-foreclosure-myths/#comments Thu, 11 Aug 2011 21:00:16 +0000 Staff http://www.bankruptcyrights.com/blog/?p=210 READ MORE]]> Navigating the road of home foreclosure is a rocky endeavor. Unless you have experienced home foreclosure in the past, standard procedures and practices may prove difficult to decipher. Before losing your way, consider the myths below. They can help shed light on your situation.




Myth #1: The bank wants my home more than my mortgage payment.

While your lender will take your home if your mortgage payments stop, they will also avoid it if possible. The last thing a lender wants to do is shuffle through the process of foreclosing, listing, and reselling your home. In a shaky real estate market, they aren’t likely to recover 100 percent of the mortgage cost. If you are struggling with payments, call your lender and ask about their reduced payment periods or forbearance options. Many are sympathetic and will work with you to avoid foreclosure.




Myth #2: Filing for bankruptcy will always halt home foreclosure.

Bankruptcy protection can be a welcome relief for those in financial ruin. However, it is not a guaranteed way to save your home. Only some who qualify for Chapter 13 bankruptcy have the option of avoiding home foreclosure, and stipulations are included, such as:

• Proving your income
• Your ability to repay bills under a restructured plan
• A time limit on restructured payments, allowing you to catch up

Unless you qualify for Chapter 13, eluding foreclosure through bankruptcy is not an option.




Myth #3: Foreclosure is a fast-moving train; once it starts, nothing can stop it.

Home foreclosure doesn’t occur overnight; in fact, it may take several months for the process to be complete. You may also be able to halt proceedings all together if you gather the funds to repay your entire mortgage, penalties, and late fees. A bankruptcy lawyer can help you assess your options during the process.




Myth #4: When my home is foreclosed, all of my possessions are at risk as well.

Home foreclosure does not apply to your personal possessions, so don’t worry about losing your clothing, furniture, car, etc. However, any property attached to the home belongs to your lender after foreclosure. This means that all fixtures, floor coverings, and appliances must stay.




Myth #5: I am only responsible for my mortgage cost during the home foreclosure process.

Unfortunately, your mortgage agreement may hold you responsible for more than your home payments. A judge could order you to pay your lender’s legal fees and other penalties related to the home foreclosure process. Review your mortgage documentation for more information about your specific situation.




Myth #6: All ties are severed after my home is repossessed.

While some people may never hear from their lender again, others are faced with additional trouble after foreclosure. If the resale of your home fails to cover the remaining cost of the mortgage, your lender will hold you responsible for the “deficiency.” For example, Al’s home foreclosed with $124,000 remaining on his mortgage. The bank was able to sell his home for only $100,000, leaving Al with a $24,000 bill. To avoid this stipulation, many homeowners negotiate a “deed in lieu of foreclosure” agreement with their lender. Ask your lawyer to help you choose the best option.

]]> http://www.bankruptcyrights.com/blog/bankruptcy/home-foreclosure-myths/feed/ 0 http://www.bankruptcyrights.com/blog/bankruptcy/buying-foreclosure-property-things-to-consider/ http://www.bankruptcyrights.com/blog/bankruptcy/buying-foreclosure-property-things-to-consider/#comments Thu, 11 Aug 2011 15:00:38 +0000 Staff http://www.bankruptcyrights.com/blog/?p=207 READ MORE]]> Foreclosure property represents a large piece of the real estate pie. In a world of sub-prime lending and variable mortgages, the list of lost homes is rising. While you may be tempted to purchase a bargain property, consider the following components before making a move.




• Inheriting debt. Despite the skinny sticker price, many foreclosure properties conceal a much larger bill. When a home is foreclosed by the bank, repossession only wipes out the private debt of the previous owner; public debt is another matter. Before purchasing a foreclosure property, conduct a title search to make sure there are no outstanding debts related to real estate or income tax. A little research could save you from an excess of trouble.
• A faulty deal. While it’s easy to be seduced by slashed sticker prices, buying a foreclosure property isn’t always the best deal. When foreclosures are repossessed and sold by the bank, it is usually to recoup mortgage losses incurred by the previous owner. For example, the Martins’ home foreclosed with $215,000 left on their $400,000 mortgage. While you may be thinking 215K is a steal, think again. Property values may have decreased since the Martins initially purchased their home. Before buying into the bargain hype, conduct a real estate search for similar properties in the area. Their sale values should help you gain a fair cost comparison.
• Unreliable inspection. Speaking of faulty, many foreclosure properties fall victim to sub-prime inspections sanctioned by the bank. When it comes to finding a solid deal, don’t rely on someone else’s inspector. Find a reliable home inspector to assess the property independently. If your new home is a condo or other unit-based entity, make sure the inspector signs off on the safety of the roof, common areas, plumbing, and overall structure of the building. A seasoned professional will cover all the bases.
• Unforeseen repairs. Foreclosure properties can be a welcome investment for rehabbers and contractors; for all others, beware of the fixer-upper. When a family cannot pay their mortgage, chances are they cannot pay for home repairs either. This leads many properties down the path of dangerous and damaged. What’s worse, most foreclosure homes are sold as-is, meaning that no repairs are made before the new owners take possession of the property. While the price of the home may be cheap, the cost of repairs could make up the difference in no time. Before investing in a money pit, ask your inspector to estimate the time and extent of repairs needed. Get a cost estimate as well, and remember that your mortgage will not cover home repair.
• Health dangers. Long-neglected properties may house more than a few cobwebs. Leaking basements and roofs can develop toxic mold and other bacteria, threatening your family’s safety. If the home was built before the age of EPA regulations, ask you inspector to test for the presence of lead-based paint and radon. Sacrificing your health isn’t worth even the most exciting real estate opportunity.




The right foreclosure property is hard to find; but several deals are waiting for the right investor. Take your time in the buying process and be thorough in your research. Not every bargain is as good as it seems.

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