What You Need to Know About Bankruptcy

Woman holding document, thinking. The bankruptcy lawyers at OlsenDaines serving Oregon and Washington talk about what you need to know about bankruptcy.

If you’re dealing with serious debt issues, filing for bankruptcy may be an option. It’s like getting a second chance. But it cannot wipe out all of your debt and it comes with some consequences, so keep reading to learn more about bankruptcy as you weigh your options.

What is Bankruptcy?

Bankruptcy is a legal court proceeding when a person is unable to repay their debt. A judge and court trustee will examine the person’s liabilities and assets and determine to discharge the debts. If they find the person cannot repay their debts, the person will have to declare bankruptcy.

Filing for bankruptcy can stop repossessions and foreclosures, and it can temporarily halt evictions.

There are two main types of bankruptcy people file for:

  • Chapter 7 Bankruptcy: this is the most common type of bankruptcy. You must earn less than the median income for family size in your state to qualify for this type of bankruptcy. In Chapter 7 Bankruptcy, the court will sell all of your assets, so you can pay off as much debt as possible.
  • Chapter 13 Bankruptcy: Also called a wage earner’s plan. To qualify, you must have a steady income and unsecured debt (less than $394,725) and secured debt (less than $1,184,200).

How do I know If I Should File for Bankruptcy?

While job loss and medical debt are the most common reasons people file for bankruptcy, here are some other situations which could cause you to consider bankruptcy.

  • Your wages are being garnished
  • You’re getting a divorce
  • You are unable to negotiate your debt
  • You have no assets or they’re worth less than your debt
  • You’re being sued
  • You can only afford to pay for things using a credit card
  • You use one credit card to pay off another credit card

If you’re facing serious debt, contact OlsenDaines for your free consultation because every situation is unique. As experts in bankruptcy law, we’ll address your financial difficulties and help you determine whether bankruptcy is right for you. We also offer a complimentary credit rebuilding program.

Can Filing a Chapter 7 Bankruptcy Stop Foreclosure?

The worst has happened. You’ve fallen behind on your house payments, and the bank has started foreclosure proceedings. First you got the Notice of Default. Now you’ve been served with the Notice of Sale, telling you that the bank has set a date for the sale of your home. What can you do? Should you file a Chapter 7 bankruptcy to stop the foreclosure?

Maybe, but then again, maybe not. Foreclosure laws differ from state to state and they are very complicated. Whether a Chapter 7 filing is right for you depends on your particular circumstances. However, if you are facing foreclosure, it’s important that you understand at least some of the basics, including the difference between a judicial foreclosure and a nonjudicial foreclosure, and:

  • how much time you have to respond to the notices,
  • what your rights are and what laws protect you in foreclosure, and
  • what happens afterwards (for example, whether you’ll be liable for a deficiency judgment).

Filing a Chapter 7 bankruptcy can temporarily stop the sale of your home (because of the “automatic stay”) but that does not mean it will ultimately save your home from foreclosure. Whether a Chapter 7 is the right option for you is something that you should discuss with a bankruptcy attorney. Here at OlsenDaines, our bankruptcy attorneys know the options and care about the outcome. That’s why we offer free consultations, so we can sit down with you and help you decide what is the best approach for you and your family.

While a Chapter 7 will give you the benefit of the automatic stay, bringing the foreclosure to a halt until discharge or the stay is lifted, unlike a Chapter 13 bankruptcy, it will not allow you to catch up on missed mortgage payments. That’s because a Chapter 7 is a liquidation bankruptcy designed to discharge (wipe out) unsecured personal debts (e.g., credit card debt and medical bills).

Chapter 7 Will Erase Personal Liability on the Note, But it Won’t Eliminate the Lien.

When you took your loan from the bank, you signed a Promissory Note (“Note”) agreeing to repay the money. And you secured that promise with a Deed Of Trust (“Deed”), creating a lien on your property. Chapter 7 will wipe out the amount you still owe on the Note, but it won’t wipe out the mortgage lien. That means that if you are behind in your payments on your mortgage, your lender can foreclose on your property. It also means that the lender can continue a foreclosure that was delayed by your bankruptcy once you are discharged or a relief from the automatic stay (“relief from stay”) is granted. The same thing applies to other liens on the property; like homeowner association liens, or condominium liens.

No Deficiency.

On the other hand, the lender cannot get a deficiency judgment against you after a nonjudicial foreclosure. (A deficiency is the difference between the amount you owe on the loan and what the house sells for at the nonjudicial foreclosure sale.) In many states, absent a bankruptcy, the lender can come after the homeowner for this amount. Oregon laws prevent a lender from getting a deficiency judgment after a nonjudicial foreclosure, a judicial foreclosure of a residential trust deed, or a short sale (if certain conditions are met). But Oregon does not have laws about deficiency judgments where a deed is given in lieu of foreclosure (“deed in lieu”). That means you need to be careful if you accept a deed in lieu of foreclosure, because the specific language of the deed in lieu negotiated between the borrower and the bank will govern whether or not the lender can seek a deficiency.

Talk to a Lawyer!

Losing your home to foreclosure is stressful and can be devastating. The foreclosure laws are complex and confusing. If you are facing foreclosure or struggling with debt, take advantage of our free consultation and talk to one of our experienced Oregon or Washington bankruptcy attorneys. We can help you decide what course is best for you and your family. Call us at 1-800-682-9568 today!

Can My Car Get Repossessed During Chapter 7 Bankruptcy?

Catch-22 situations can present themselves when financial difficulties arise. One of them is the matter of transportation to and from work. Let’s say that you fall behind on your car payment because you are having monetary problems, and your vehicle is repossessed. Without a car, you may find it hard to get to work on time or complete a successful job search if you are unemployed. You lost the vehicle due to a lack of resources, but it will be even more difficult to satisfy your creditors without transportation. If you find yourself in this position, a Chapter 7 bankruptcy filing can provide a solution.

As soon as you file for Chapter 7 bankruptcy, you get an automatic stay. This means that your creditors cannot try to collect debts for a prescribed period of time while the bankruptcy process is underway, so your car can not be repossessed. However, the lender who holds the note on the vehicle can file a motion to get permission from the judge to repossess.

If you were behind on the payments when you filed the bankruptcy, you can potentially make arrangements with the lender to bring the payments current. After this is done, you will be able to retain possession of the car after the bankruptcy was finalized. Redeeming a vehicle is another interesting possibility. When you file a Chapter 7, you may be able to redeem the car by paying the lender the fair market value, even if it is far less than the amount that you owe on the car.

Chapter 7 Bankruptcy Can Free Up Resources

You may find it hard to pay your car payment because you have unmanageable credit card debts or medical bills. If you can get out from under these unsecured debts, you will have the money you need to make your car payments on time. If you were to file a Chapter 7 bankruptcy, the unsecured debt will be discharged. However, as long as you are current on your car payment, you will be allowed to keep the car (unless you had a great deal of equity in the vehicle).

We have offices in numerous different cities in Oregon and Washington, including Eugene, Portland, Medford, and Salem. If you will like to discuss a potential Chapter 7 bankruptcy filing with one of our attorneys, we will be more than glad to assist you. You can set up a free consultation right now if you call us toll-free at 1-800-682-9568.

What Happens to Your Unpaid Debt When You Die?

What happens to unpaid debt after death? It has to be handled through the probate process. A person who uses a will to handle his estate will name an executor or personal representative in the document. This individual will be responsible for the estate administration tasks. The process will be supervised by the probate court. Inheritances will not be distributed to the heirs until after the obligations of the estate are satisfied.

During probate, the executor is required to notify creditors to file a claim for payment of unpaid debts. Assets that are part of the estate will be utilized to pay any legitimate debts. What happens if there isn’t enough money in the estate to pay the unpaid debts? Under these circumstances, surviving family members are not held responsible even though the creditors will receive less than 100% of their claims.

There are some types of transfers that will not be subject to the probate process. For example, a person can add a beneficiary when opening a bank account or brokerage account. This is sometimes called a payable on death account or transfer on death account. The beneficiaries that are named on the account will have no access to the account while the holder of the account is still living. At the time of death, the beneficiary will assume ownership of the funds. Creditors can not step in to try to attach any of these assets. The same thing is true when it comes to insurance policy proceeds.

For real estate, Joint tenancy with right of survivorship is another arrangement that can protect assets from creditors. Let’s say you own your home outright, and you want your daughter to inherit the home after you are gone. You can add your daughter to the title or deed of the property. She will become a joint tenant or co-owner. After your death, she will assume ownership of the home in its entirety, and your creditors will have no ability to touch the home. There are other types of deeds that can also accomplish the same purpose.

Clearing up debts before passing away is the best way to ensure your creditors don’t come before your heirs. Our firm can help you clear up your unpaid debts before you pass away so that you can feel good about the legacy that you will be leaving behind to your loved ones. A Chapter 13 bankruptcy can make your debts more manageable, and a Chapter 7 bankruptcy can completely wipe away many different types of debt. We have locations that can be conveniently reached from Eugene, Portland, Medford, and a number of other major cities in Oregon and Washington. If you will like to schedule a free consultation, give us a call at 1-800-682-5568.