Florida has a statute that keeps this income safe from creditors who seek judgment against you.  This means that most creditors cannot garnish your disability wages-but there is an exception....

According to IRS regulations, when debt is canceled or forgiven by a lender, the amount that has been canceled is considered income for the debtor during tax time and must be reported as income.  In light of the recent housing and foreclosure crisis, this regulation would be especially frightening for the thousands of Americans who are going through loan restructuring and modification processes, or having their mortgages canceled due to foreclosure. 

However, when the economy took a turn for the worst, and right before the housing bubble burst, Congress passed the Mortgage Forgiveness Debt Relief Act of 2007, which allowed homeowners who were already having financial trouble to avoid having to pay taxes on their forgiven or foreclosed mortgages.  In fact, according to that Act, if part or all of your mortgage debt is forgiven in any tax year from 2007 to 2012, you might be able to exclude a substantial amount of that forgiven debt from your taxable income when tax time rolls around. 

The debt that qualifies for this must have been incurred for your principle place of residence (not a vacation home), and can include debt that has been canceled through foreclosure or debt from mortgages that were reduced through restructuring or modifying the loan.

From the IRS website, here are a few additional facts about Mortgage Debt Forgiveness.

   1.  The limit is $1 million for a married person filing a separate return.

   2.  To qualify, the debt must have been used to buy, build or substantially improve your principal residence and be secured by that residence.

   3.  Refinanced debt proceeds used for the purpose of substantially improving your principal residence also qualify for the exclusion.

   4.  Proceeds of refinanced debt used for other purposes – for example, to pay off credit card debt – do not qualify for the exclusion.

What's better for me in the long run- filing bankruptcy or taking a 401k loan to pay off my debts? In Florida, more times than not, a bankruptcy is the better option. Here's why.....

Sometimes a picture is worth a thousand words, but how about a picture of a thank you letter? 

 I recently received a discharge notice for Miguel C. that caught my eye.  His was an especially rewarding case.  He had been a law enforcement officer for ten years and had partial ownership in a business.  He earned over 80k a year but had over 50k in credit card debt and a growing family, that made meeting his monthly obligations impossible.

South Florida is ground zero for the worldwide housing crisis.  By some estimates, 20% of homes in Dade county are in foreclosure.  In the past two years, there have been over 350,000 foreclosure filings in Dade county alone. 

In addition, thousands of South Floridians are trying to get loan modifications, but relatively few are getting any meaningful reductions in the principal of their loans.  Did you buy a house a few years ago and owe $350k? Is it now worth only $150k?  Too bad, maybe the bank will temporarily reduce your  payments and stick the difference on the end of your loan.  Maybe they’ll change the loan from a 30 year to 40 year loan (and make even more money off of you), but actually reduce the principal of the loan?  Forget about it!

So, what to do?  Well for those who have second mortgages, bankruptcy may be the ultimate loan modification through a process called lien stripping. 

Lien stripping is a very powerful and helpful tool within Chapter 13 Bankruptcy Law for homeowners in or near foreclosure.  Second mortgages and Home Equity Lines of Credit can be completely eliminated in chapter 13 bankruptcies as long as the value of your home is less than the amount you owe on your first mortgage.

Chapter 13 is a debt repayment plan that gives you up to five  years to get caught up on back mortgage payments and other debts by repaying creditors what you can afford. After you have successfully finished your Chapter 13 bankruptcy, the mortgage company must remove the junior mortgage(s) from your property and the arrears on the mortgage(s) do not have to be paid back. This can be enormously helpful with keeping your home!

The reason behind this is that the lien stripped loan will be converted from a secured debt that is required to be paid in full to an unsecured debt through the bankruptcy. Unsecured debts are not required to be paid in full in a Chapter 13. In fact, most of the time, the unsecured debts are paid next to nothing. This is completely legal and is done with Court approval. This can be a great benefit for you as the second or third mortgages can be removed and NOT paid according to your Chapter 13 Plan.

There are many ways a bankruptcy can help people with only one mortgage or who cannot afford to make any payments.  Please call us at 305-663-3281 24 hours a day for a free consultation to learn how.

(From the Bankruptcy Law Network) The most common questions we are asked are “How will bankruptcy hurt my credit?”  or “When can I get credit again?”  There is a good reason to worry about this — and a not so good one.  You need credit to make large purchases, particularly long-term assets like houses and cars.    And you may need credit for business in various ways, borrowing money to make more.   Those are fair concerns — and it’s usually possible to re-establish credit for these purposes.

For most people who complete bankruptcy successfully, they have an opportunity to start over.  Bringing the same mind set to this new life that got you into trouble in the first place is a good way to throw away your chance at financial freedom.  One of the greatest things about bankruptcy is the freedom it gives you to live your life for yourself and your family — and to stop working every day for your creditors.  So if someone offers you the opportunity to get credit to “enhance” your lifestyle, they are trying to steal your future. Just say no. (Read full article)

RELAX! Most of our clients are broke.  We let most clients pay for their bankruptcy on a schedule that THEY decide.  Most times they are surprised by how quickly they can pay the whole thing off and get their cases finished.

Get the credit card company to pay for it!

As noted North Carolina bankruptcy attorney John Orcutt says-you can use your credit card company’s money to pay.  If you are doing a chapter 7 bankruptcy (the most common), your unsecured debts (credit cards, medical bills, etc.) will be wiped out in the bankruptcy. So why not take the money that you have been using to try and make minimum payments and use some of it to pay for your bankruptcy.  If your minimum payments are $500 a month you could stop paying the credit cards and pay us $350 toward your bankruptcy, while using the remaining $150 on ordinary expenses, to breathe a little.

CALL US TODAY AT 305-663-3281

Sell something!

Today, in the land of craigslist and eBay, someone’s junk is surely someone else’s treasure.  As Orlando bankruptcy attorney Ryan Hogan says putting on a yard sale or selling an asset on eBay, is a great way to come up with some quick cash to pay for the bankruptcy.  Remember, in a chapter 7 bankruptcy you get to keep a limited amount of assets before the trustee can take them away, so why not sell them in order to pay off your bankruptcy quicker.  I just sold my old cell phone for $173 on eBay (and got a brand new free one from T-Mobile- THANKS) and a bicycle frame for $275.  What’s in your closet?

Tax Returns!

Tax returns may be at risk in a chapter 7 bankruptcy so you should always spend down your refund on legitimate ordinary expenses before filing.  Paying your attorney fees with your tax returns is a great way to solve two problems.  Already spent it?  Why not …

Borrow the money (from family or friends)!

Perhaps you’ve been silently struggling with your debts, too ashamed to let anyone know of your situation. However, filing bankruptcy is an investment in your future, a fresh start.  If you haven’t asked for help yet- now is the time.  Many of our clients have friends and family that can give them a boost and help them pay their fees. These friends and family may use their own credit cards to help pay your fees and get you filed quickly.  Just be careful, as much as you may want to, you cannot pay anybody back (even Mom and Dad) untill after your bankruptcy is complete and your debts have been discharged.  Pay anybody back earlier, and you risk losing your bankruptcy.

CALL US TODAY AT 305-663-3281

Use Retirement Funds (401k)-
LAST RESORT ONLY

OK, first off, tapping your 401k retirement funds to pay off your debts is a bad, bad, idea.  In addition to the interest and tax penalties you will be responsible for, in many cases the 401k money isn’t enough to satisfy the creditors.  Remember thatyour 401k money is protected in bankruptcy. You won’t lose it unless give it to your creditors voluntarily!  However, in very rare situations, it may make sense to use your retirement money to pay for your bankruptcy when there is simply no other way to pay for your bankruptcy and you are facing:

• An immediate foreclosure on your home
• Garnishment of your paycheck due to a lawsuit
• Losing security clearance due to financial situation

Remember, once your bankruptcy is complete, you will have more cash available so you will be able to replenish your retirement account.

Two more things to remember about us:

Nearly 85% of our clients are on some sort of payment plan. While most clients are paid off in four months, we have others who take much longer.  You tell us how many months you need to pay for your bankruptcy and we’ll calculate what the payments will be.  No interest, no penalties, no hidden charges, no stress.  Remember, bankruptcy solves financial problems, not create them. When faced with overwhelming financial pressure, it’s not an easy thing to pay for a bankruptcy, however our typical client  is able to wipe out tens of thousands of dollars in debt and get a fresh start.  Wiping out 30k of debt for less than 10%?  Don’t you wish all your decisions were that easy?

CALL US TODAY AT 305-663-3281