Kentucky Bankruptcy Lawyers Blog

As a result of the housing bubble and the poor economy, home foreclosures in Kentucky and Indiana, as well as elsewhere across the country, have become an epidemic. Suffering a foreclosure can have a devastating impact, not only from the obvious hardship of losing one's home, but from the extremely negative impact it can have on one's credit.

Like most negative information, such as repossessions and judgments, foreclosures stay on one's credit report for 7 years. From a credit standpoint, however, a foreclosure is one of the hardest things from which to recover. For someone trying to finance the purchase of another home, a foreclosure is the worst piece of information that can appear on the credit report. In order for someone to qualify for a conventional home mortgage loan who has had a foreclosure on his record, the foreclosure must be more than 7 years old. What makes matters worse is that the 7 years runs from the date the foreclosure sale is complete, that is the date the new purchaser takes title to the property. Because the foreclosure process can drag out for months if not years before a new owner takes title, it can often take much longer than 7 years from the start of a foreclosure before one can obtain a loan.

Filing a Chapter 7 Bankruptcy, on the other hand, actually speeds up the time frame for obtaining new credit. Although the bankruptcy filing itself will stay on one's credit report for up to 7 years, the rules for obtaining a mortgage loan are much more lenient for someone filing Chapter 7 Bankruptcy than they re for someone with a foreclosure on his record. For example, a conventional mortgage loan can be obtained 4 years after a bankruptcy discharge and an FHA or VA loan can be obtained 2 years after the discharge.

Whether or not you are trying to save your home, Bankruptcy may be a better alternative than letting it go into foreclosure.

Consult with a Louisville or Southern Indiana bankruptcy attorney before it is too late to save your credit.

Redemption is a bankruptcy process that is often overlooked and under utilized by many Louisville and Southern Indiana bankruptcy bankruptcy filers. Redemption is the process of paying a lump sum to a creditor in a Chapter 7 Bankruptcy in exchange for a release of its lien on some personal property, such as a car or household items. The money paid to the creditor must equal the fair market value of the property that serves as collateral for the loan.

Here is how the process works. Suppose you own a car with that is worth $2,000 but the loan balance on the car is $6,000. If you Reaffirm the note on the car, you will be paying $6,000 plus interest for a car that is only worth $2,000. Would you buy a $2,000 car for $6,000? I doubt it. But that is in effect what you are doing if you reaffirm. The redemption option, on the other hand, would allow you to pay only what the car is worth. But the kicker is that you have to come up with the money in a lump sum. There are, however, companies that will loan you money to pay off the redemption amount, in effect giving you a new loan with a smaller balance.

The way it works is that the debtor files a motion to redeem the property for 2,000. The creditor then has an opportunity to object. The only basis for objecting would be if the creditor believes that the property is worth more than what the debtor is offering to pay. Most of the time the creditor will not object because it would rather have the money than take the car back and have to sell it. So if the creditor does not object, the court will enter an order allowing the debtor to redeem for 2,000 and the debtor then has 10 days to pay the money. Upon payment of the money, the debtor gets a free and clear title to the car.

This process is also very useful where the debtor has put up items of personal property as collateral with very little re-sale value, but that have value to the debtor. In many instances, the debtor may be able to redeem those items for very nominal amounts because the creditor does not want to have to repossess them.

In order to understand your rights, it is important to consult with an experienced Louisville or Southern Indiana Bankruptcy Attorney.

The Star-Ledger in New Jersey reports that "Real Housewives" star Joe Giudice has withdrawn a bankruptcy petition after taking the Fifth Amendment in consultation with a criminal lawyer. E! Entertainment reports the petition was withdrawn after the filer became uncomfortable answering questions from a bankruptcy trustee.

The media does not say whether Giudice was filing for Chapter 7 or Chapter 13 bankruptcy but a withdrawn petition is not at all uncommon in Chapter 13 filings. Typically, in a Chapter 7, few creditors bother to show up at the hearing or contest the discharge.

In other words, this is most common when assets are at stake. In most Chapter 7 bankruptcies, the petitioner seeks debt forgiveness with few assets. An upside down mortgage or car loan, are not considered assets, after all. And retirement funds are protected.

Questions more often arise in Chapter 13 filings. In Chapter 13, a debtor discloses assets and sources of income and establishes a repayment plan in an attempt to satisfy most debts presented to the court. The plan lasts 3-5 years. In an increasing number of cases -- particularly those involving bad real estate debt -- a Louisville bankruptcy attorney may suggest filing for Chapter 13 to see who shows up with their hand out.

For instance, say a homeowner who lost several properties in foreclosure is being chased for $50,000 on a second mortgage. By filing Chapter 13, you force the banks and collection agencies to stop hounding you, and you see who shows up in court. If you get tagged for the $50,000 and two other banks show up with $500,000 in deficiency judgments, you dismiss the Chapter 13 to avoid establishing the payment plan.

If no one shows up, or if you are prepared to make payments to those who do, you enter into the plan.

Chapter 13 bankruptcy -- bankruptcy protection -- is a court action brought by the consumer. The consumer is not obligated to go through with the filing. There can be many legitimate reasons to dismiss a bankruptcy case. Perhaps the debtor has obtained employment or his or her financial picture has changed substantially. Perhaps he or she received an inheritance.

At the same time, good legal advice is critical. Lying to trustees or misrepresenting assets can result in serious legal trouble -- even when done unintentionally. As the case of former major league baseball player Lenny Dykstra illustrates, not properly disclosing assets can lead to disaster. Dykstra is facing federal charges after being investigated for grand theft. The bankruptcy trustee in his case accused him of improperly hiding and selling assets. He faces 80 years in prison if convicted of charges related to bankruptcy fraud, embezzlement and obstruction of justice.

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