Category: BK – Related


I hope that your new year is off to a good start. Today’s blog post is about the importance of the timing when filing your for bankruptcy protection, especially when it comes to your taxes.

If your petition is filed before you receive and spend your 2010 tax refund, the trustee will use 100% of the refund to pay your creditors, as there is no law protecting the tax refund. Since, this is typically not the preferred outcome, the better way to time your filing is to wait with the filing of your bankruptcy petition until after you have filed your tax return, received your tax refund, and spent the tax refund on exempt items, then file the petition. Furthermore, since a lot of our clients are worried about how to come up with the fees and costs to even afford the filing, being smart and protecting your tax refund by receiving it first, usually helps alleviate this worry as well.

When filing in 2011, your 2010 is not the only tax year you need to worry about. This is because regardless of when you file, your creditors – through the trustee – are entitled to the pre-filing portion of your 2011 tax return. For example, if you file on August 31, 2011, the creditors will receive approximately 8/12ths of your 2011 tax refund, even though you won’t even receive that until 2012. For a $1,200 refund, that would mean $800 goes to your creditors. Therefore, filing early in the year allows you to protect most – and sometimes even all of your 2011 tax refund.

Therefore, typically the best time to file for protection under the bankruptcy laws is immediately after receiving your tax refund, as early as possible in the new year. We encourage you to contact us as soon as possible and set a timeline for filing in the next couple of months, so that hopefully next year, you won’t even have to worry about it anymore.

CALL OR EMAIL TODAY! Steve and I are ready to assist you in getting your fresh start, and putting a permanent end to harassing creditor calls!

In a staggering amount of cases that come across my desk, the bank issues a Notice of Trustee’s Sale that tells the homeowner the exact date and time their house is to be sold at auction – only to then postpone the sale.  Whether the reason for the postponement is a bankruptcy that was filed, a loan modification that is furiously trying to be worked out, or a short sale offer that peaked the bank’s interest, the result is inevitably the same:  Confusion, stress and worry on the part of the homeowner plagued with the most pressing questions of them all “When do I have to be out of my house?”

Of course, the best – least stressing solution – for the homeowner and his or her family is usually to find a new home well before the sale date that was originally scheduled.  Then you don’t have to worry about what happens if the sale doesn’t take place, and how long do I have to get out.  In reality, this doesn’t always work out that way, and in some cases, where the bank just simply is dragging its feet, it is almost better for the homeowner to stay in their home – rent free – while they can, and save up the often much needed funds for the move.

The unfortunate fact is, once the Notice of Trustee’s Sale has been posted, and assuming it wasn’t cancelled (and typically the banks do NOT cancel their notice of sale in a scenario as this one), the bank does NOT have to give you any additional notice of the sale.  This is true even if the original sale date has passed and the homeowner is in a kind of limbo.  The bank has the right to foreclose on your house – read: sell it at auction – pretty much whenever they please, after the original notice period has passed.

The implications of this are plentiful.  The first, and most important one is to remember that the ‘foreclosure department’ of your bank probably doesn’t even know the ‘short sale/loan modification department’ exists, nevermind ever communicates with them.  The result of this red tape nightmare is, of course:  You may me plugging along and looking hopeful for your loan modification to go through, and next thing you know you get served with an eviction notice because your house was sold to an investor last week. 

In a bankruptcy scenario, once the automatic stay has been lifted, and assuming the bank has issued their Notice of Trustee’s Sale prior to filing, the bank can move forward with their sale at their leisure.  The most frustrating part for me, as a bankruptcy attorney, is that there is no way for me to give my clients peace of mind by giving them any kind of definite answer with respect to the sale date.  All I can do is to advise them to keep calling the bank’s attorneys to find out what date the sale has been set for. 

It is hard, when there are no guarantees and no definite answers, but the best thing you as a homeowner can do is to keep on top of all of the information.  Don’t rely on what your realtor tells you (and I say this with the greatest deference to the realtors out there – the ones I work with are wonderful professionals who know what they are doing, but the bottom line remains – they do not control the bank’s foreclosure department), don’t even rely on what the bank is telling you, unless it is the bank’s foreclosure department, and certainly don’t believe what your neighbor/coworker/acquaintance/hairdresser tells you.  Every case is unique and what happened in your neighbors case will most likely not happen the same way in yours.  Probably not even remotely close to it.

Are thoughts like this going through your head?  What about “Which bills should I pay this month…?” or “Why won’t they stop calling me?”  If you find yourself in a financial situation that is worse than what you had hoped for in this stage of your life, and for whatever reason you find that your debts are eating you alive, bankruptcy just may be the answer to your questions. 

Here is a little step-by-step guide to follow after you have asked yourself the above question:

  1. Take a deep breath… there are options out there – and one will be right for you. Remember – sticking you head in the sand, and ignoring the problems around you never works.
  2. Start doing some research.   (If you are reading this, you are on the right track).
  3. Take another deep breath.  Come to the realization that there is A LOT of information out there – not all of it from particularly good sources, not all of it correct, and most likely none of it fitting your particular situation.
  4. Begin researching bankruptcy attorneys in your state. 

Yes, attorneys.  I realize there is a whole variety of options out there, from document preparers, to debt relief organizations, but the bottom line NEVER CHANGES: Only an attorney can give you legal advice – only an attorney can help you realize the full picture.  Also, on a side note, the guys with the sign on the side of the highway advertising $200 bankruptcies – they are, typically, document preparers.  You know what a document preparer does?  He fills out your forms, based on the information you give him.  He cannot give you legal advice, he is not qualified to give you legal advice, and guess what else?  Once he is done filling out the forms, he’ll most likely hand them back to you and send you on your merry way to figure out not only how to maneuver the bankruptcy system, all on your own. 

So, back to researching your attorneys.  Even though this rarely is the reality of things, but the price should be your least important factor in determining whether to hire an attorney.  Arizona bankruptcy attorneys all know what the other charges, in a round about way, we all have our own ways of figuring out what is fair for you, and keeps our bills paid.  The most important factor is ‘are you comfortable with the person that proposes to represent you?’.  Don’t get me wrong, you’re not going to go steady with your attorney, but you will have to work closely with him or her in preparing and planning your way to a fresh start.  Your attorney is your advocate, counselor and legal representative, and if you just don’t see eye to eye with him or her, it might not be the right fit for either one of you.

If you think you are comfortable going from an intake clerk to a paralegal – kind of passing the attorney in the hallway somewhere in between there, and having the paralegal be your main point of contact – by all means, go with one of the big guys.  Their attorneys are highly competent, and on the couple of occasions you get to talk to one of them, you’ll probably like him or her.  If, on the other hand you would prefer to have your actual attorney walk you through the process, with her support staff doing exactly that – supporting her in the data gathering and logistics, then you may be better of with a smaller firm. 

Aside from that, working style also matters greatly.  Take me for example: If you do not have email, or you only check it about once a month to see what the grandkids are up to – then I’m probably not the right fit for you.  On the other hand, if you value getting your questions answered quickly, both in writing, and if needed over the phone, then I might just be your gal.

To sum up, there are a multitude of options out there.  Even though it may feel like it right now – the world is not in fact collapsing around you.  Always remember, knowledge is power, and getting this knowledge from a licensed attorney will empower you to take your life back, and get your fresh start.

The word ‘short sale’ has become a bit of a buzz-word in the last year or two.   Everyone seems to be talking about it, doing it, or at the very least knowing someone who is going through a short sale.  But, in all of that talk, not everyone understands what a short sale really is (it is NOT a way to save your home, for example), how it works, and how it can affect you.

A short sale is a vehicle that allows you to sell your home in a market where your home is worth less than what you owe on it.  By it’s very definition, a short sale is the sale of real property for less than what you owe on it.  Because the bank(s) holding the mortgage(s) does not get all that they are owed, it has to approve the short sale before it can be finalized. 

A short sale can be the way to go for you, if your home loan is your only source of concern.  It will allow you to get out from under the big mortgage without having to worry about the potential consequences of a foreclosure. 

Most of the legwork in a short sale is done by you, the homeowner, and your realtor. A good realtor is probably the best asset to have in your short sale, and if you are looking for one, Marco | Wimmer PLLC can provide you with several names and numbers of some experienced realtors that may be right for you. 

The realtor will work with you in listing the property and completing the bank’s requirements for a short sale.  Remember, the short sale is a contract between you and the bank, and as such you want to make sure that the contract works for you.  The key component of the contract is whether the bank will consider your debt fully satisfied.  If not, they may try to come after you for the difference between the sales price and the amount owed at a later time.  Based on your individual situation, you may have more leverage in the negotiations than you think.  Finally, keep in mind that in a short sale, the bank typically forgives you a portion of the debt, so they will issue you a 1099(c) for the debt forgiven.  Be sure to talk to an accountant about how that can affect you. 

In conclusion, if your home is the only source of concern for you, and for whatever reason you wish to sell it without waiting for its value to increase, a short sale may be the way to go.  On the other hand, if you are struggling with other bills and cannot make ends meet even without taking into account your mortgage payment, bankruptcy may be the better approach.  Homeownership may affect your eligibility to qualify for one chapter over another, so be sure to talk to an attorney before starting on the path of a short sale.

If you live in Arizona, and you have done any kind of research about what happens if you just ‘let your house go to foreclosure’ you have probably come across the Arizona Anti-Deficiency Statutes (ADS), and you have probably walked away confused.   The Arizona legislature, back in the late 70s/early 80s enacted a couple of laws that protect consumers – people like you and me.  Unfortunately, as is the case with most laws, it is a bit complicated to understand, and depends heavily on facts.  Here is a quick overview of how it works:

Question:  Can the Bank come after me for the difference between the mortgage balance and the amount the house was sold for at auction?

Answer:

  1. If your house is a single or dual family residence; and
  2. it is on 2.5 acres or less; and
  3. you, or someone, has actually lived in the residence; then…

…the bank that holds the Trustee’s Sale (usually the first mortgage) CANNOT come after you.  (Be sure to re-read the previous blog post entitled “Foreclosure in Arizona – The Basics” to find out why I did not simply say “the bank that is foreclosing” here).   They will likely issue you a 1099(C) (which is a tax form), and there may be some tax-consequences, but they CANNOT bring a law suit against you for the difference.  In some cases, you may be able to avoid tax-consequences as well, but as I am not a tax attorney, nor an accountant, the best I can do on that is refer you to an accountant on how that works.

Pretty nice, right?  Now, the next question has to be “What about the second mortgage?”  A different statute applies to the bank that is not holding the Trustee’s Sale, and here is how it works:

  1. If your house is a single or dual family residence; and
  2. it is on 2.5 acres or less; and
  3. you, or someon0ne, has actually lived in the residence; and
  4. 100% of the debt owed to the bank was used to purchase the property, then…

…even the second mortgage CANNOT come after you for any monies owed, but the same tax rules still apply. 

The main problem I see in my practice, and the reason why short sales are often the better way to go when bankruptcy is not an option, is that the second mortgage was NOT in fact used to purchase the house.  Unfortunately, and in the bluntest terms possible (I hope you will forgive my bluntness), if you pulled any cash out of your house, chances are the ADS will not protect you.

Now, if ADS does not protect you, and your situation is such that a short sale alone will not solve your financial troubles, bankruptcy may be the answer.  If you surrender your house in the bankruptcy, then the discharge will include the difference between the sales price and what you still owe, AND as an added plus, having the debt discharged in bankruptcy is one of the exceptions to the general rule of taxation.

This is about it, in a nutshell.  Sounds pretty easy, right?  Well, chances are, your particular situation is a little more complicated, and in the spirit of ‘knowledge is power’ please do not hesitate to call or email us to talk specifics.  You can find all of our contact information on www.marcowimmerlaw.com.

Unfortunately, these are times when many people are faced with a potential foreclosure of their home. The way the system is set up, the banks essentially do everything and you, as the homeowner, don’t really have to do anything. However, it will help your peace of mind to know how it all works and what it means to you.

The Basics:

Whenever a borrower fails to pay their mortgage, the bank has the right to repossess the collateral (i.e. foreclose on the property). In Arizona, there are two ways to “foreclose”:

1. Judicial Foreclosure: In order to do a judicial foreclosure the bank has to file a law suit. Because there is an alternative available for banks in this state, almost no residential foreclosures are done this way.

2. Trustee’s Sale: Virtually all home foreclosures in Arizona are done by way of Trustee’s Sale. For a trustee’s sale, all the bank has to do is give the homeowner 90 days notice. This is accomplished by sending a a Notice of Trustee’s Sale to the homeowner and recording it with the County Recorder’s Office. On this Notice, you will find the exact time and date that has been set for the auction – approximately 90 days in the future. The only way to stop the Trustee’s Sale from taking place (assuming the bank is not willing to work with you in any way) is to pay the full amount owed before 5:00 PM the last business day BEFORE the sale.

 Why you should talk to an attorney on how this can affect you?

 This is likely a very stressful and emotional time for you and you likely have questions about what happens after the foreclosure. There are a couple of statutes in Arizona that determine whether the bank can pursue you for a deficiency (the difference between the amount owed on the mortgage, and the amount the property was sold for at auction). The determination is very fact-driven and to understand how it can affect you, you should speak to an attorney about your specific circumstances.