In an opinion just issued by the Honorable Karen Jennemann, Orlando Division U.S. Bankruptcy Judge, stripping off second mortgages in Chapter 7 cases is not allowed.

This is unfortunate for people needing Chapter 7 relief who want to keep their home but are reluctant to do so because of a second mortgage in relation to the value of their home.

The case explains the 1992 U.S. Supreme Court case that many believed controlled; however, there has been a split of authority around the country and your truly informed local members of the Bankruptcy Bar about a case that went the other way in New York last fall.

The good news is that stripping off that unsecured (no equity) second mortgage in a Chapter 13 case is still the law of the 11th Circuit (Florida, Georgia and Alabama federal appeals circuit). 

Where the value of your home is less than the amount owed on the first mortgage, we can "strip" the lien, turning that mortgage into an unsecured debt, like a credit card.  In most cases, people will pay pennies on the dollar on this second "stripped off" mortgage and at the end of the case, the mortgage is gone forever!  A huge factor when deciding whether keeping the home is a wise move.  By lien stripping the second mortgage, the property will have more equity when the real estate market finally recovers.  A reason to not give up your home!

By: Consumer Bankruptcy Attorney Rick Baker www.legalquestion.com  

How much do I have to pay unsecured creditors in my Chapter 13?

A less experienced Bankruptcy Lawyer I know recently asked me about his Chapter 13 Bankruptcy client who owned a rental property that actually had some equity in it; very rare these days.

He wanted to know whether it would have to be liquidated (sold) to pay unsecured (usually credit card) debts in the case? 

The real question is not whether it has to be sold, as Chapter 7 is liquidation whereas Chapter 13 is an individual reorganization and no liquidation occurs.  The real question is if he keeps the rental property and it has non-exempt equity, what does that mean?

The answer is that the non-exempt equity in the rental house establishes the “floor” or minimum amount required to be paid pro rata to all allowed unsecured claims but no liquidation occurs.

My less experienced Bankruptcy Attorney friend forgot or did not realize that there are actually two (2) tests to determine how much gets paid to the unsecureds in a Chapter 13 bankruptcy case. 

The above example of non-exempt equity establishing the minimum payout to the unsecureds is called the liquidity test.  The other test is whether there is any excess disposable income left for the unsecureds after payment of priority and secured debts in the Plan.

A new third test may result soon based on the recent U.S. Supreme Court decision of Hamilton v. Lanning; more to come on that one.

This issue points out an advantage to filing Chapter 13 Bankruptcy.  The Debtor remains in control of assets and can keep them.  They may have to repay some portion of their debts but it could be pennies on the dollar relative to what they gain in keeping assets. I call these cases “Liquidity 13s.” 

The rule is that the unsecured creditors have to come out as well in Chapter 13 as they would in a Chapter 7 case where assets are liquidated to pay unsecureds.  The advantage of the 13 is control over the asset is not in the hands of a Chapter 7 Trustee.  By Consumer Bankruptcy Attorney Richard R. Baker at BAKER LAW, PLLC. www. LegalQuestion.com

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Offices in Winter Park, Florida.

The Court System’s Latest Headache: Debt-Collection Suits - Law Blog WSJ:http://bit.ly/bOe1E1 

As Pete Barry said at NACBA in San Francisco in May, Debt Collectors in a recession are like dogs you don't feed...they start chewing on the furniture.  Who's the furniture?  Consumers!  My Clients!  Due to the increased number of debt buyers, the lawsuits are now coming in greater numbers, putting even more pressure on cash strapped consumers trying their best to keep current.

As Dick Rubin states in this article (a longtime expert just like Pete Barry from Minnesota), it is a factory approach to practicing law.  Note the NY firm mentioned files 80,000 lawsuits a year!

So what does this mean?  It means that if you are behind on debts and can't catch up, a debt collector lawsuit is more likely than ever.  With more debt collectors suing first and asking questions later, get PROACTIVE!  Explore your options and speak with an experienced Consumer Bankruptcy Attorney.

At BAKER LAW, I serve, counsel and represent clients in Greater Central Florida, including counties of Orange, Seminole, Osceola, Lake, Brevard, Volusia and Polk.  We serve many cities including, Winter Springs, Winter Park, Maitland, Altamonte Springs, Sanford, Oviedo, Orlando, Fern Park.  

As a federal debt relief agency law firm, we help people solve debt problems so visit us at www.legalquestion.com and read some of my blogs that may help you.  You can also follow me on Twitter at twitter.com/BakerLawFL for the latest information on these issues.

Three Reasons Why Upside Down Homeowners Should Consider Bankruptcy http://bit.ly/9fXgln 

Another good blog that ties in with a recent blog I wrote on this very issue.

Three Personal Finance Mistakes That Lead To Bankruptcy http://bit.ly/9u2fAC  

Please become a Fan if you are interested in useful and interesting information on debt and foreclosure issues.  For up to the minute updates become a fan at

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Central Florida Consumer Bankruptcy Attorney Richard R. Baker www.legalquestion.com

You have options and you have rights so...KNOW your options!

In a recent report issued by the Treasury Department under the Making Home Affordable mortgage modification program, it is clear that too many mortgage modifications fail, are denied or re-default later.  After reviewing the data, I believe that the main reason this happens is because Debt to Income Ratio is too high.

In other words, because most people have other debt issues in addition to their mortgage problem, that "other debt" makes the mortgage modification almost impossible to sustain...unless

You modify you mortgage as part of a Chapter 13 Bankruptcy Case.  

A few of us Orlando Bankruptcy Attorneys are working with the U.S. Bankruptcy Court in Orlando, Florida to refine the Court's new mediation program.  You see, without addressing the other debts too, it is hard to make a HAMP modification work.  But when you can have court supervision, can adjust other debts and take many of those debts out of the equation, you get a clear picture of what income is really available to pay on the mortgage.

Consider this:  if you can lien strip off your second mortgage, adjust car loans, pay very little to unsecured credit card debt, modifying your mortgage as part of a Chapter 13 bankruptcy case will give the overwhelmed homeowner the best chance at keeping their home.  

For more information on how this Bankruptcy Court Mortgage Mediation Program will work in Orlando, contact Consumer Bankruptcy Attorney Richard R. Baker at www.legalquestion.com or call 888-841-3588 or 407-647-8833.

http://ezinearticles.com/?New-Federal-Loan-Modification-Rules-To-Now-Work-With-Chapter-13-Bankruptcy-Laws-&id=4353662

Florida Judges are fed up with foreclosure law firms abusing the Courts

By: Orlando Bankruptcy Attorney Richard R. Baker, Esq.  www.legalquestion.com

In a recent foreclosure case in Miami, Florida, State Circuit Judge Jennifer Bailey cancelled a Note for $207,000 on Orlando Eslava’s Home and Ordered title be transferred back to him as a sanction against his mortgage company (HSBC v. Orlando Eslava, Case No.1-2008-CA-055313, 11^th Circuit Court, Miami-Dade County).  The Bank, HSBC, was Ordered to post a bond and did not comply with the Court’s Order, a business decision on their part.

Their attorneys, Florida Default Law Group, tried to apologize and explain the file was on hold for loss mitigation but refused to stop the foreclosure sale anyway.  It didn’t fly.  Florida Default Law Group were taken to task by a Judge who has had enough of its judicial resources being wasted on conflicting positions about loss mitigation and pushing for the foreclosure sale to go as scheduled and ignoring Court Orders. 

The story on the newswire focused on man getting his home back and his mortgage cancelled; however, I think the real story is what the Judge said to the foreclosure attorneys, Florida Default Law Group.  The Judge apparently has had enough of these foreclosure mills having no idea of what is happening in their own files and wasting the Court’s time on shifting positions on the case. 

We Consumer Attorneys know this to be the truth about foreclosure in Florida and much of the country, yet foreclosure attorneys and mortgage companies think the Courts are required to do whatever they want.  Judge Bailey thinks otherwise and the sentiment is growing.  Is it incompetence?  Is it arrogance?

The following are some excerpts from the certified transcript of that hearing:

This line of questioning by the Judge was to the Foreclosure Attorney from Florida Default Law Group:

THE COURT:  How many files are you responsible for?

ATTY: I don’t have that number. I’m not sure.

THE COURT: How many cases can you tell me where you know anything in detail about the loss mitigation status of the file?

ATTY: Well, the way it’s set up, the bank handles the loss mitigation separately.

THE COURT: So the answer is zero.  You’re filing pleadings everyday in court and you don’t even know what is going on with the case.  And see, the really interesting thing to me as a Judge is that in no other species or kind of law would that be remotely acceptable or, frankly, anything short of malpractice. But somehow in Foreclosure World everybody thinks that that’s just fine, that you all can know absolutely nothing about your files and walk in here and ask Judges for things left and right without even knowing what’s going on.

The Judge went on to lambast the Florida Default Law Group further:

THE COURT: What I’m trying to give is, to lawyers who handle these cases, a wake-up call that this is your life, your career on the hook and you guys better wake up and smell the coffee.

My fellow Floridians, we need more Judges like Judge Bailey.  I agree with her that if the mortgage is in loss mitigation why push the case and clog the Court’s docket, only to shift positions after the Court has expended its resources on needless hearings.  With 60,000 foreclosures in Miami-Dade alone in 2009, I can appreciate the Judge refusing to tolerate these mortgage company and lawyer shenanigans.  For more information or a copy of the transcript, contact Orlando Bankruptcy Attorney Richard R. Baker at www.legalquestion.com