New Study Finds Racial Disparity In Bankruptcy Filings

A new study indicates that there is a racial disparity in bankruptcy filings, with blacks being twice as likely to file a Chapter 13 bankruptcy as white debtors with similar financial circumstances.
The report, authored by two law professors and a psychology professor, found some bankruptcy attorneys directed black clients to file Chapter 13 more than they directed white, Asian or Hispanic clients with identical economic situations.

The study found no overt indication that this was done intentionally, but may have been inadvertently caused by multiple factors that the study could not determine with any precision.

Chapter 13 vs. Chapter 7

In a Chapter 13, there is a plan that uses the debtor’s disposable income to pay a portion of their debts over a three or five year period. The advantage of the Chapter 13 is that it allows a debtor the ability to protect secured debt (a home or car) while paying a smaller percentage of unsecured debt (credit card).
Chapter 7, allows a debtor to discharge all of their unsecured debt, and typically, they have no secured assets they intend to keep (90 percent of Chapter 7s are “no asset”). Chapter 7 has a “means test” to determine the eligibility.

The study cautions that it has only found the symptoms, and could not isolate a “cause” of the racial gap. It strongly suggests that all parties involved, clients, attorneys, judges, and trustees should be aware of this situation. You can hire trust lawyers from here!
The racial gap also highlights the need to carefully consider all of the differences when filing bankruptcy. The choice between a Chapter 7 and a Chapter 13 filing is very complex. The number of variables is limited only by the number of clients.

Ask Questions to be Certain You Understand

Clients should ask their bankruptcy attorney to explain the differences, advantages and disadvantages of each chapter. It is important to understand how they are different. For example, Chapter 7 requires the use of a means test while Chapter 13 does not.

Chapter 13’s plans last three or five years, so a debtor must have the discipline and ability to budget their income for the long-term. Chapter 7 bankruptcies are typically completed within six-months, but once receive your discharge, you cannot refile another Chapter 7 for seven years.

In order to choose the chapter that is best for you, you need to evaluate all aspects of your economic condition; your job and it’s stability, if you own a home or rent, if you have a car, the age of the car, the reasons for financial problems (job loss, medical issues, overspending), the need for new credit, and any other factors that affect your financial circumstances.

Source: “Blacks Face Bias in Bankruptcy, Study Suggests”, New York Times, 1/20/12

Experts Predict the Number of Foreclosures to Rise in 2012

In 2011, the country saw a slowing of the foreclosure crisis that had engulfed the country in the previous years. Any hope that the crisis had reached the bottom and the housing market was finally on the road to recovery has been tempered by the expectations of many real estate experts.

Real estate company Zillow believes that the housing market hasn’t even hit bottom yet. The company believes foreclosures will rise in this year and that housing prices will not bottom out until 2013. Mark Seifert, executive director of the counseling group Empowering & Strengthening Ohio’s People, told Reuters that he expects 2012 to be a “bigger year for foreclosures than 2010.”

One of the reasons experts believe foreclosures will increase over 2011 is that many large banks put foreclosures on hold during the recent robo-signing scandal. Now that a settlement has been reached, it is expected that the banks will resume foreclosures.
Reuters notes that the mortgages foreclosed upon in 2012 will differ from those at the beginning of the housing crisis. Early on, many of the foreclosures involved subprime mortgages, but now most of these mortgages are no longer in the market. This means that the expected foreclosures will involve people with “ordinary mortgages” who have been impacted by the down economy.

Whether you are currently in foreclosure or behind on mortgage payments, losing your home does not need to be inevitable. People struggling to make ends meet may have several options for keeping their home such as negotiating with their mortgage company and other alternatives to bankruptcy or filing for Chapter 13 bankruptcy.
Every situation is unique and there is not a “one-size-fits-all” solution that works for everyone. By speaking with an experienced bankruptcy attorney you can learn what solution(s) work best for you and your family.

Source:, “Americans brace for next foreclosure wave”, Nick Carey, April 4, 2012

Chapter 7 and lien stripping your second mortgage

As a general premise, in bankruptcy, a secured creditor is only secured to the extent that their security or collateral has value equal to or greater than the ‘secured’ debt. For many years that very basic bankruptcy premise applied to anything and everything except your primary residence, your homestead.

In May of 2012, in the case of In Re McNeal the 11th Circuit ruled that in a chapter 7 case, a Debtor – Homeowner could value their homestead property and in turn, if the second mortgage lien were fully and totally unsecured (the value of the property is less than the amount of the debt) the second mortgage lien is removed (‘stripped’) from the property and the entire debt or financial obligation discharged.

Up until the McNeal decision, junior mortgage liens could only be stripped in Chapter 13 cases which meant some portion of the second mortgage would be repaid as a general unsecured debt under the Chapter 13 Plan.
This is an incredible benefit to a consumer debtor whose home has declined in value as a result of the Recession or for any other reason. It gives new and significant meaning to the term ‘Fresh Start’ and allows the Debtor(s) to retain their homestead and discharge debt which would certainly strain the budget of a newly discharged Debtor.

The real practical significance for the Debtor – Homeowner is that once they strip the junior lien off the property, it becomes significantly easier to seek and obtain a mortgage loan modification because the income which would be dedicated to paying the second mortgage is now free to make it easier to pay a modified first mortgage.

If you are considering the filing of a Chapter 7 or even a Chapter 13 bankruptcy, you certainly want to make certain that your counsel and you discuss this possibility and investigate homestead property values as it pertains to this issue.

The McIntyre Firm has extensive experience with lien stripping junior mortgage debt as well as all the other nuances and subtleties of filing a consumer bankruptcy in this economic environment. Our Mortgage Modification Department has had tremendous success in modifying payment terms, reducing principal balances and helping homeowners retain their single most valuable asset, their Home.

Chapter 13 Overview

There are several types or ‘Chapters’ of bankruptcy. Each Chapter does something different but ironically, they do it in a similar way. A Chapter 13 is known as a “Wage Earner Repayment Plan’. People file Chapter 13 cases for many different reasons.

Like each of the Chapters, the case is commenced by the filing of a Petition, a set of Schedules which list your income, expenses, assets and liabilities and the Statement of Financial Affairs known as a SOFA. It contains a set of questions about your finances over the last few years and other historical financial information. All of these documents are filed with the Court and are public record, although they are seldom looked at by the public.

Before the case is filed, the Debtor is required to take a Credit Counseling Class and then file the Certificate with the initial Petition and Schedules. Chapter 13 requires the Debtor file a Chapter 13 Plan with the Court. The Plan is your guide to what you want to accomplish in your Chapter 13 case.

Chapter 13 can do many things. It has several methods to save the family home. It offers an opportunity to value the property, discharging and removing mortgages where the balance of the mortgage is more than the home is worth. You can value a car and car loan and restructure the remaining payment obligation to get a longer term, lower balance or a lower interest rate. Chapter 13 gives you a structured method to repay Student Loans and non-dischargeable tax liabilities. During your Chapter 13 consult, your Counsel will look at your particular situation and be able to explore the various opportunities and tools which Chapter 13 provides.

Once your case is filed, one of several local Chapter 13 Trustees will be appointed to your case. Your lawyer will forward various documents to the Trustee so they can look at your financial condition. The Trustee will also conduct a Section 341 meeting where you will appear and answer several minutes worth of questions about your income, expenses, assets and liabilities.

The ultimate goal of your 13 is to get your Chapter 13 Plan confirmed or ‘approved’ by the Court. The Order of Confirmation sets out how each of your debts are being modified or Discharged by the Court as a result of the Chapter 13. A 13 reorganization is a very valuable tool to stop all of the collection activity, identify who your creditors are, decide if you’re keeping or surrendering the house, the car, the electronics and how you treat each one.

Chapter 13 is a very valuable tool. The McIntyre Firm has extensive experience with helping consumers, small businesses and even big businesses to evaluate their debt load, look at their assets and see if a Chapter 13 or some other financial, non-bankruptcy strategy would be beneficial.