CategoryBankruptcy

Can I remove a 2nd mortgage from my home through bankruptcy?

If you have a second mortgage on your home, filing bankruptcy can help to alleviate some of your financial burden and assist in helping you in trying to reduce your debt.

When you file bankruptcy, such as Chapter 13, your debts will be consolidated into a repayment plan. You can possibly have some debt eliminated. It all depends on what type of debt you owe and which type of bankruptcy you file. Usually, second mortgages are lower in amount than the first mortgage. Therefore, they are most likely not as high of a priority in terms of repayment to a lender.

Usually, most homeowners file Chapter 13 bankruptcy because the terms are typically better and more accommodating. Even if you do file Chapter 13 bankruptcy, it is important to know that you are still responsible for your second mortgage debt. However, since your first mortgage is based on the value of your home and if the bankruptcy court determines that you do not have the equity or assets to pay off your second mortgage; it is possible for it to be declared an unsecured debt. This allows the second mortgage to be regarded as not a high priority in terms of which debt needs to be paid off, and in some cases, it can be removed all together.

Under Chapter 13, a repayment plan will be decided by you, your creditors, and the bankruptcy court that is agreeable and accommodating to your financial situation. The plan typically is set up for three to five years. After this period of time, any unsecured debt, such as a second mortgage, will be eliminated.

Chapter 7 bankruptcy is another option; it typically cancels all secured debt owed due to your home mortgage. Chapter 7 bankruptcy is usually best for homeowners that want to sell their home. It allows for you to spend time in your home while your bankruptcy case is taking place. However, it does not stop foreclosure proceedings on your home or relieve you from a tax lien or liability against your property.

Protecting Your Retirement Plan in Bankruptcy

If you make the choice to file Chapter 7 or Chapter 13 bankruptcy, you might wonder what will happen to your retirement plan. It is important to know what affects bankruptcy will have on your retirement money and more importantly, if you will be able to keep it or lose it.

Keeping your retirement money if you file bankruptcy depends on if it is a qualified plan. A qualified plan is one that is established by your employer than meets the guidelines set up by the IRS. Typically, most retirement plans, including 401Ks, profit-sharing, Keogh, defined-benefit, money marketing, and IRAs, meeting those requirements.

Most states offer some protection to your retirement plan if you file for either Chapter 7 or Chapter 13 bankruptcy. For instance, a 401K is protected under law from being taken by creditors to pay your debts in bankruptcy. In addition, IRAs are usually protected for up to $1 million dollars and annuities are safeguarded under state law. However, laws differ from state to state.

It is important to know that if you owe money for back taxes, the IRS can seize your retirement plan money to satisfy the bill. Also, if you have a traditional and Roth IRA accounts, you are typically allowed to keep only $1,095.00 per person. What this means is if you have more than that in your account, the balance can be taken in bankruptcy court to pay back your creditors.

If you have taken out a retirement plan loan, repayment of that loan depends on if you filed a Chapter 7 or Chapter 13. If you file a Chapter 7, you have to pay back the loan. For a Chapter 13, since you pay back your debts (usually three to five years) as part of your repayment plan, anything owed after that period of time is typically discharged, including retirement plan loans.

If you are considering filing for bankruptcy, your first step should be to consult a qualified bankruptcy attorney in your area. They can advise as which bankruptcy you should file and give you their expert and knowledgeable opinion as to how to handle your retirement plan during this time.

What is a 341 Meeting of Creditors and what happens at it?

If you decide to file for bankruptcy, either Chapter 7 or 13, one of the first things you will be required to have do is have a meeting with the bankruptcy trustee. This is known as a 341 meeting, named after the bankruptcy section it refers to. The 341 Meeting usually is scheduled a few days after you file your bankruptcy petition.

It is not like going to court since a judge will not be present. What the meeting essentially is for everyone (you, your creditors, and the bankruptcy court) to get an understanding of your financial situation, payment intentions, and the facts of your bankruptcy.

You will need to be prepared for this meeting.   You should make plans to arrive early and make sure you take time off from work to do so. It is best also to have your bankruptcy attorney with you as well. If at all possible, try not to be late. Since there are several bankruptcy 341 Meetings taking place for the bankruptcy trustee, they do not have time to wait on you.

Most likely, if this happens, they will have to reschedule and then any of your creditors that planned to attend twill have to reschedule as well. Tardiness will not work in your favor. Even more, if your bankruptcy attorney has to come back to another 341 Meeting for you, it could cost you more money.

During the 341 Meeting, which is recorded, the bankruptcy trustee will ask you some basic questions that you must answer. The questions are not difficult; examples are your name and social security number, the bankruptcy petition number, and the valued property on your bankruptcy. This is why you will need to bring all the required documents and identification listed on the bankruptcy information sheet such as your driver’s license and social security card.

 

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