Detroit Bankruptcy Lawyer Kurt O'KeefeChapter 13 Bankruptcy | MIchigan Bankruptcy Blog

S Is For Chapter 13 Step Plan

Kurt O'Keefe — Thu, 16 Feb 2012 06:20:31 +0000

S is for Step Plan

Chapter 13 bankruptcy is difficult enough to understand. The Chapter 13 plan is the point of a Chapter 13 bankruptcy case.

Chapter 13 is a payment plan bankruptcy case, as opposed to Chapter 7 or “straight” or “liquidation” bankruptcy.

Clients always ask: How does the court figure out how much I will pay?

The answer is: it ain’t the court, you do!

You file your Chapter 13 plan, and you really need an experienced attorney to do this.

Any financial analysis starts with: the budget.

How much is coming in, minus how much is going out for living expenses, determines the plan payment.

We will leave plan length and liquidation analysis for a letter “L” post.

So, simple enough, once you take your pay stubs – oh? self-employed, you say? Or on cmmission? Well, Congress says we have to crunch those numbers, make our best guess as to FUTURE income and expenses, and go with that.

Lots of guesswork, I know, but, them’s the rules.

Unless you are paying 100% of your debts before 3 years are up, your Chapter 13 plan must go for at least 36 months.

So, what if your car payment is done after 20 months? Let’s make it simple: you are buying this car, not a lease that has to be replaced.

In the Detroit bankruptcy court, the Trustee will object to confirmation of your plan unless you increase your payment, or, step up the payment, by the amount of the car payment, in month 21.

So, your monthly car payment is $300; your monthly plan payment starts at $400, for months 21 through 36, you pay $700.

The Trustee’s view of bankruptcy law, in this situation, is right, it says here. Regardless of my opinion, the Detroit bankruptcy Judges say she is.

What about your 401(k) loan?

The 6th Circuit Court of Appeals, In Re: Seafort, issued its opinion that when a 401(k) loan is paid off during a Chapter 13 case, the payments must step up by the amount of that loan.

Seems obvious to me, but, the Debtors’ attorney argued that they should be able to take that money, and increase their 401(k) contribution.

The 6th Circuit blew the whistle on that move, and, short of the U. S. Supreme Court, which is usually too busy for bankruptcy cases, they are the FINAL word for those of us in Michigan, Ohio, Kentucky and Indiana.

Detroit Chapter 13 Bankruptcy and Second Mortgages

Kurt O'Keefe — Sun, 28 Mar 2010 22:29:34 +0000

Even though the mortgage and lien were in the name of the husband and wife, a second mortgage lien in the wife’s individual Chapter 13 bankruptcy case has been stripped by a Court.

Judge Rhodes wrote the decision, stripping second mortgage liens on two consolidated cases.

In each case, worth less than the amount owed on the first mortgage; the home was underwater.

Each home also had a second mortgage on it.

Now, in both of these cases, the spouse not in Chapter 13 had previously filed Chapter 7, and discharged any personal liability on each mortgage.

However, the Court said this had no effect in the outcome.

As with more than half of Michigan houses with a mortgage, the homes had no equity.

So, if the house were sold, it would not evern bring enough to pay the first mortgage.

Even in Chapter 13 cases, bankruptcy courts are powerless to modify the terms of a first mortgage securing the debtor’s home, that is, principal residence, it has not been uncommon for debtors to get rid of the second mortgage lien in Chapter 13 cases.

The second mortgage lien is stripped only if the debtor make all the Chapter 13 payments and gets a discharge.

Debtors must first file an adversary proceeding, a separate lawsuit in the bankruptcy case, suing the second mortgage company, and proving that the second mortgage lien is unsecured.

11 USC 506 states that a claim is secured only up the the value of the collateral securing the lien.

So, in these cases, one house was worth 120,000, with a first mortgage of 131,117.98, and a second mortgage of 48,262.48.

The other was worth 100,000, with a first mortgage of 103,990.24 and a second mortgage of 45,598.48.

The second mortgage holders claimed that, because the homes were owned as tenants by the entireties, that is, husband and wife, by the filing debtor and the non-filing spouse, that the second mortgage lien could not be stripped in an adversary proceeding brought by only one of the married couple.

The court held that the bankruptcy estate had no interest in that property after carefully analyzing the precedents and facts, finding that there was no equity in the property in which the bankruptcy estate could have an interest.

Many cases have held that the bankruptcy estate includes whatever entireties property is available to pay off joint debts, that is, claims against both husband and wife.

However, Judge Rhodes held that even though the non-filing husband or wife benefits from the lien strip, both spouses do not have to be in the bankruptcy or adversary case.

It is the same as the non-filing spouse benefiting from a run of the mill chapter 13 bankruptcy case, in which one spouse can file and stop a foreclosure.

The deadline to appeal has not run yet.

Judicial Mortgage Modification Lives! Nope, Voted Down Again

Kurt O'Keefe — Thu, 10 Dec 2009 19:32:38 +0000

The House Rules Committee just minutes ago agreed to allow the bankruptcy modification amendment to be considered on the House floor as an amendment to the broader financial services reform bill AS EARLY AS THIS AFTERNOON!!

1. Phone toll free at: 877.354.4958

2. Put in your zip code

3. When you reach the receptionist:

State your name
Say that you are a constituent
Ask the Representative to vote FOR the Conyers-Turner-Lofgren amendment (#201) to the Financial Services Reform bill.
This amendment will cost taxpayers NOTHING and will save millions of homes from foreclosure

Judicial Mortgage Modification Lives!

Judicial Mortgage Modification At The Brink

Kurt O'Keefe — Thu, 09 Apr 2009 18:50:04 +0000

Senator Dodd is saying it is time to fish or cut bait on the judicial mortgage modification, or cramdown, bill, that is sitting in the Senate.

Click on this link to tell your Senators how you feel on this issue.

http://www.congressweb.com/cweb4/index.cfm?orgcode=nacba&hotissue=1

Judicial Mortgage Modification: Cost

Kurt O'Keefe — Sun, 05 Apr 2009 22:39:58 +0000

Not much! Especially compared to the trillions of our bucks Uncle Sam has thrown to Wall Street.

I think even this $27 per year per family for five year estimate is high.

Judicial Mortgage Modification

Judicial Mortgage Modification Bill Stalled in the Senate

Kurt O'Keefe — Wed, 01 Apr 2009 10:14:22 +0000

Judicial mortgage modification

Chapter 13 Reform Bill

Kurt O'Keefe — Wed, 18 Feb 2009 01:05:30 +0000

I usually call this judicial mortgage modification, same bill.
USA Today did a story featuring quotes from Matt Mason, who led the Michigan NACBA delegation through the halls of Congress last week.

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Foreclosures Increase

Kurt O'Keefe — Fri, 06 Feb 2009 02:39:39 +0000

Center For Responsible Lending has a ticker tracking total foreclosures in the U.S. for 2009, new one every 13 seconds.
Chapter 13 bankruptcy reform is the way to address this crisis NOW. (link is to the proposed legislation)
I will be in Washington DC Tuesday to personally lobby Congress, with about 150 of my fellow NACBA members.

Hope for Homeowners Joins Bankruptcy Reform Effort

Kurt O'Keefe — Thu, 05 Feb 2009 02:04:59 +0000

The Hope for Homeowners Program brought to you by your federal politicians last year has produced zero, yes none, yes, as in not one mortgage modification, just slightly short of the 40,000 predicted, as the fastball described by Bob Uecker in “Major League” was “just a bit outside.”
Never one to let failure affect its programs, this one is being revamped.
Representative Barney Frank of the People’s Republic of Massachusetts predicts that the bill with those revisions will be joined with Chapter 13 bankruptcy reform allowing mortgage cramdowns.

Home Foreclosed? Just Stay There, Says Ohio Congressperson

Kurt O'Keefe — Wed, 04 Feb 2009 01:14:39 +0000

Foreclosures continue, up 158% over last year, modifications are difficult, the Chapter 13 bankruptcy law has yet to be reformed, what to do?
Just stay in your foreclosed home says one of our politicians.
There are foreclosure defenses. In order to foreclose, the mortgage company must prove it owns the mortgage.
With all the buying and selling and transferring, unrecorded assignments, many mortgage companies, nearly half, do not have proof they hold the mortgage.
You are not likely to get a free house, but making the mortgage company prove it actually owns the mortgage gives you leverage in getting a modification.