John E. Smith & Associates

05/13/2022

10/20/2020

https://www.npr.org/2020/10/17/924682991/i-m-still-unemployed-millions-in-dire-situation-as-savings-start-to-run-out

Many unemployed Americans have been tapping into their savings to pay bills. But those savings are going fast, and hopes for a new round of pandemic relief before the election are fading.

02/13/2019

Even with a good economy, people are struggling. I am filing more and more cases recently involving vehicles in danger of repossession. You don't have to lose your car. I can help.

https://www.cnbc.com/2019/02/12/a-record-number-of-americans-are-90-days-behind-on-their-car-payments.html

The level of serious delinquencies broke past the heights reached just after the financial crisis.

12/18/2017

Hurricane Harvey and your Mortgage

Due to a damaged house, loss of work, or simply flood restoration expenses, many people have been unable to stay current with their mortgage payments. Most mortgage companies have offered disaster relief in the form of forbearances or mortgage modifications. Unfortunately, this relief often falls short of the real help that is needed. Let’s take a look at it.

This first thing to understand is that any such relief is completely voluntary on the part of the mortgage company. No law forces them to act in any way to resolve the financial burden left by Hurricane Harvey. What each company actually does offer varies by mortgage servicer and the actual holders of the loans.
Many homeowners were offered forbearances on their mortgage payments. A forbearance is where the mortgage company offers to “forbear” or hold up on collections. Ditech Mortgage has offered a October-March forbearance with the missed payments being rolled back into the loan. The homeowner simply has to renew making current payments when the forbearance expires.
On the other hand, Wells Fargo offered three month forbearances to their mortgagors. For that three months, Wells Fargo would not pursue payments or report to credit bureaus. Unfortunately, once the three month period elapsed( at the end of November) all missed payments became due. It is either pay up, get a loan modification, or face foreclosure. Of course, the problem is that the financial effects of Harvey are still being felt. The vast majority of homeowners have no way of making up three missed payments plus current payments. What are the options?
4. Mortgage modification is a situation where a mortgage company voluntarily agrees to change the terms of a mortgage to ease the financial burden on a homeowner. Again, there is no law giving anyone a right to a mortgage modification. Mortgage modifications are information intensive and take 6 months or more. Homeowners are often advised not to make payments during this time as it will change the numbers being considered. The result is that if the modification is denied ( and a high number are denied), the homeowner is desperately further behind.
5. Foreclosure in Texas is typically non-judicial. A mortgage company does not have to go to Court to get permission. The main exception is home equity loans. Those entail a lawsuit. For non-judicial foreclosures two notices are sent. The first is a 21 day Notice of Acceleration. The second is the actual Notice of the Foreclosure Sale at least 20 days after. Foreclosures in Texas occur only on the first Tuesday of the month between 10 AM and 4 PM at the County Courthouse.
6. Is there any help to stop this process? Yes, After review by an experienced attorney, A Chapter 13 bankruptcy can stop foreclosure and arrange for mortgage arrears and other debt to be paid over 5 years. The homeowner remains in the house while the process is worked out.

11/21/2017

http://money.cnn.com/2017/11/10/news/economy/hurricane-foreclosures/index.html

As life slowly returns to normal in hurricane-ravaged parts of Texas, Florida and Puerto Rico, housing experts and consumer advocates worry another crisis is on the horizon: Foreclosures.

09/12/2017

Hurricane Harvey, Debt, and You

Harvey has had a devastating impact in this area. The recovery has begun but his effects are far-reaching. Beyond the property damage, distress, and displacement, there is Income Disruption, Increased/Extra Expenses, and financial stress. Income disruption from missed days at work or shut down businesses. There are extra expenses from repairs and even paying for additional living quarters.Here are some hints and information to hopefully help you navigate the coming months.

Credit Card Bills.
Credit cards are what are called “unsecured” debts. That means there is no collateral that can be repossessed if the debt is not paid. The only means of collecting are incessant calls, letters, and eventually lawsuits.
If you fall behind on credit card payments because of the extra expenses or income disruptions, the first thing to do is contact your credit card company. Many companies will offer forbearance or reduced payments if you are affected byHarvey. The only problem is that such programs will likely be limited to a month or two. The effects of extra expenses or reduced income may not.

Mortgage problems.
Several problems can arise with mortgages. Without the steady stream of income or with the increased expenses of living away while he home is being repaired, or the repairs themselves, you may fall behind on the monthly payments. If that occurs, the first step is to contact your mortgage servicer. Some servicers are allowing those affected by Harvey to put off a payment or two. Other mortgagors will not allow deferment, but are waiving late charges and not reporting late payments the credit bureaus. Both of these programs usually run through November. Unfortunately, the financial issues from Harvey will last much longer.
If you do get behind, it will take months to proceed to foreclosure. Under Texas law, residential foreclosures only occur on the first Tuesday of the month after two notices in the previous two months. Business foreclosures only require one 21 day notice.
In addition, if there is a significant loss to the value of the home and no flood insurance, you could end up in a scenario where you are paying for an uninhabitable house without real value to the family. Again, the debt is still owed but the house has to be replaced or repaired without the insurance funds to do so.

Vehicle issues.
You may be dealing with a damaged or totaled vehicle without enough insurance recovery to repair or replace. Some times there is no recovery at all because the insurance coverage either does not exist or is too little. In that case, you have no vehicle but still owe the unpaid balance to the lender. That debt does not just go away. The lender will eventually seek payment. This simply compounds the already devastating loss.

FEMA/SBA Loans.
If there is no flood insurance, FEMA will likely offer loans for repairs. If the loan is less than $10,000. it may be unsecured.See above. Anything above that amount is likely to be added as another lien to your house. This loan meets the immediate need of repairs but reduces any equity or drives the debt farther above the homes’ value. In addition, the monthly amount to pay for the home is increased, putting further strain on an already stretched budget.

In all of these issues, there may be solutions that can relieve the financial stress. I have 34 years of experience in this area. If you find yourself facing these problems, don’t tackle them alone. Give me a call at 281-996-9393 or visit my website. www.johnesmithlawoffice.com
John E. Smith

Houston/Friendswood Board Certified Bankruptcy Lawyer.John E. Smith has helped thousands of people through bankruptcy to save homes, discharge debt,and resolve tax problems. He has practiced in Friendswood, Pearland and the Houston area since 1981.

12/02/2015

Bankruptcy Timing-When to file

Filing bankruptcy is most often a last resort option to handle financial difficulties. That does not mean that it is to be rushed into at the last second without consideration of timing. Since 1983, I have seen many clients come to me either too early or too late to accomplish the results they are seeking in a bankruptcy. Too early is much better than too late. At least being too early, allows time to plan and get things done at the right time.
Here are some frequent scenarios where timing is extremely important in seeking bankruptcy relief.

File before the foreclosure sale. This seems like a no-brainer. Unfortunately, I have been contacted by many people wanting me to save their home after the foreclosure sale has taken place. Getting the sale reversed is difficult and unlikely. Most of the clients in that situation lose their home. So, why would someone delay until after the sale? Many people wait on the long-promised mortgage modification until it is too late. Others, simply, are hoping to work it out themselves and just wait too long. Foreclosure sales in Texas take place on the first Tuesday of the month between 10 AM and 4 PM. I have received many calls on Foreclosure Tuesday morning. That is a recipe for disaster.
File before your vehicle is repossessed. Unlike the foreclosure scenario, a repossession can be reversed by a bankruptcy filing. The problems caused by a pre-filing repossession are practical. It will take a few days for the vehicle to be returned. In addition, damage or loss of personal items form the vehicle is not uncommon.
File before you use your 401k and IRAs. Money in 401k and IRAs is generally protected in a bankruptcy proceeding. They are funds that can be used to give you a head start in recovering financial stability. Unfortunately, I am seeing many clients who access these funds to pay debts that would be dischargeable in bankruptcy. In many cases, the debts are not completely cleared or only monthly payments are made. When the retirement funds are gone, the clients have still had to file bankruptcy to finish the job of clearing the debts. They gained nothing for the loss of those protected retirement funds.
File before a trial is finished and a Judgment is granted. Before a Judgment is granted, your debt to the suing creditor can be uncertain. In a bankruptcy proceeding, that uncertainty can give you more options in dealing with that debt. For instance, I have had many people come to me with Judgments that had findings indicating fraud as a reason for the debt. Once there is that finding, it is very difficult to fight it in bankruptcy. The Bankruptcy Court defers to the Court that issued the Judgment. Debts obtained by fraud are not dischargeable in a bankruptcy. If the fraud Judgment is in place, there is very little you can do to effectively contest it in Bankruptcy Court.
File before a Federal Tax Lien is placed on your property. A federal Tax Lien is filed in your county of residence. It applies to all assets you own in that county. In bankruptcy, there is a huge difference indexing with a debt with a lien and a debt without a lien. For instance, a tax debt, filed timely, over three years from the date due, and more than 240 days from the last assessment may actually be dischargeable. It can be wiped out. The filing of a tax lien can completely change that scenario and make the tax become secured by assets you own, such as your home. So, filing before the lien discharges the taxes. Filing after the lien very well may not. Even if the tax is not old enough to be discharged, the filing of a lien is important. Without a lien, such a tax must be paid in full as a priority debt, but no interest. If a lien is filed, interest must be paid.
File while your income numbers are favorable. Bankruptcy is now governed by threshold test called the Means Test. It is a formula using your last six months gross income to determine the amount of your disposable income. Too much disposable income and you must file a Chapter 13 reorganization instead of the Chapter 7. Your payment under the reorganization would be greatly determined by those calculations. If you have suffered a recent bout of unemployment, or are currently unemployed, it may be the best time to seek bankruptcy counsel. The formula may fall more in your favor. If you wait until finding new employment, the disposable income calculation may preclude the most total relief.

01/27/2015

Many small businesses can use the Bankruptcy Code to reorganize and continue. The question then becomes, “Which reorganization?” The Bankruptcy Code lists five types of reorganization. They are as follows, with some explanation.
Chapter 9- can be used by municipalities, water districts,and other governmental/quasi-governmental agencies.Detroit is currently in a Chapter 9.

Chapter 11- for individuals and corporations. GMAC filed a Chapter 11.

Chapter 12- For Family Farmers and Fishermen. Rarely used, but very effective type of reorganization. I have filed approximately 30 cases in the last ten years for shrimpers, ranchers, and fish farmers.

Chapter 13- frequently used, simplified reorganization for individuals earning a wage or small businesses. I have filed thousands of Chapter 13 cases, of all sizes and complexity.

Chapter 15- international, cross-border business reorganizations.

10/22/2014

The first thing for the small business owner considering bankruptcy to determine is whether or not the business can continue. Is the income enough not only to sustain but pay down outstanding debts over a reasonable time. If the business can lower expenses or grow income to meet expenses, a reorganization is possible. Reorganizations can eliminate unsecured debt, lower interest rates, lower the amount of secured debt to be paid back, and pay the IRS back over time with low or no interest. Reorganizations include Chapter 9.11,12,13, and 15. The primarily used Reorganizations are chapter 11 and 13. These will be discussed in detail in a later post.
If the business simply cannot sustain itself, then closing it down and filing a Chapter 7 may be the answer. A Chapter 7 is a Liquidation bankruptcy. Debts are discharged and remaining assets sold to pay creditors as much as possible.

10/10/2014

With the depressed economy and tight credit, many small businesses are hurting. At one time, the general thinking was for every small business to have a bank line of credit to smooth out the rough places with sporadic cash flow issues. Unfortunately, in 2008, most major banks began cutting back or cutting off these kinds of loans. That left small businesses either struggling to pay with cash as it came in or seeking less beneficial avenues for credit. Many have used higher interest business and personal credit cards and even "payday" loans to bridge this gap. Worse, but all-too-common, payments due the Internal Revenue Service have been skipped to keep the business from going under. This usually causes major problems at a later date. This has put many small business owners and their businesses in serious budget crunches that are restricting or killing the ability to fund on-going operations or expansion.
The discussion for my next several posts will be options to assist small businesses with their slow cash flow and unsustainable debt.

10/02/2014

The ultimate goal of most bankruptcy cases is the receipt of a Discharge. A discharge is a permanent injunction against the collection of debt. When people say they get their debt "forgiven" in bankruptcy, they are talking about the Discharge. It prevents any further action to collect on discharged debts.The discharge is granted at the end of a Chapter 7 Liquidation(about 4 months) and a Chapter 13 Reorganization (3-5 years).
There are certain behaviors that can keep a discharge from being awarded in a bankruptcy. These are found in 11 USC 523 and 11 USC 727. These behaviors are for a discussion another day. The main issue in these cases is usually dishonesty.

09/29/2014

One thing confusing to many clients are the budgets involved in a bankruptcy filing. There are two, with different purposes. The Means Test budget is historical. It deals with all gross income earned in the last 6 months. That data is used to complete two formulas determining whether or not a Debtor has sufficient income to pay creditors back. This budget is extremely important in determining eligibility to file a Chapter 7 Liquidation or a Chapter 13 Reorganization.
The second budget is a typical monthly "This is what I make and this is what I spend" budget. These are Schedules I and J of the filing. It is projected in nature. It looks forward to what you anticipate your budget will be from this point on. This budget will usually differ from the Means Test budget. Being a projected budget for after a bankruptcy filing, it will not include references to all of your debt payments. These payments will be changed or eliminated in the bankruptcy, so they do not appear as normal in the budget.
The second budget can be very important in a Chapter 13. There is case law that states the projected budget rules over the Means Test budget in a Chapter 13 in determining how much money is paid to creditors.
Both of these budgets are important. Getting them right with sufficient detail can help make a bankruptcy filing a less stressful experience.