The Florida Bankruptcy Law Blog

Its Becoming Harder To Get Car Loan After Chapter 7 Bankruptcy

Its more difficult for anyone to get credit today, and its particularly becoming more difficult to get credit after filing bankruptcy. I had a conversation yesterday with a man who manages a large car dealership. He has been in the car business for over 20 years. He said that before the banking crisis banks would give car loans to people within two years after they had filed Chapter 7 bankruptcy if they had average or better credit scores. Now, lenders are not considering car loans until at least three years after bankruptcy. Good credit scores are insufficient. Car lenders are also examining debt/income ratios, and they are denying car loans to people if it looks like they have again, after bankruptcy, taken on more debt than they should or could afford.

Good News For Used Car Dealers May Not Be Good For Chapter 7 Debtors

I buy all my cars from a guy named "Mo" in Longwood, Florida, at his business called Auto Gallery. I’ve purchased several used cars from Mo during the past 15 years. Last week I asked Mo how his used car business was doing, expecting to hear the type of complaint currently expressed by most businessmen that business is way down and that  they are struggling to survive. Instead, Mo told me, with a big smile, that his used car business is booming! He said it has never been easier to sell his cars and that large dealers are willing to pay extremely high prices for his cars; Mo can’t keep cars on the lot. I thought Mo might be doing something illegal if he was making so much money in today’s economy, but his joy about his used car sales was later confirmed by a USA Today article that said used car prices are soaring because people are buying used cars instead of new cars. This is good news for Mo, but its not good news for people who file Chapter 7 bankruptcy.

Homestead Protection For Commercial Building With Upstairs Apartment

The issue is whether you can exempt as homestead a commercial building with an second floor apartment used as your primary residence. A south Florida debtor owned a commercial building in Miami. He operated a adult entertainment club on the first floor. He claimed that he lived in an apartment on the second floor. During the day, when the club was closed, the debtor used the kitchen and the employee showers for personal use. He filed bankruptcy and sought to protect the entire property as homestead. The bankruptcy trustee objected to the exemption. The bankruptcy court overruled the debtor’s exemption of the entire building as homestead and ordered that the trustee sell the property for the benefit of the bankruptcy estate, reserving to the debtor a percentage of the sale proceeds for his extent of personal use.

Bankruptcy Does Not Exempt Cars Because You Need Car To Get To Work

Bankruptcy law is supposed to give the honest debtor a fresh start in life. A good job is the basis of a fresh start for most bankruptcy debtors, and most good jobs in Florida require that the employee commute by car to work as most Florida jobs are not located in a concentrated population centers served effectively by public transportation. So, common sense leads many potential bankruptcy debtors to expect that Florida bankruptcy law would protect a debtor’s vehicle required to get the debtor to his job after his bankruptcy discharge to assist the debtor’s fresh start. No so. Florida law permits debtors to exempt only $1,000 of equity in a vehicle, although debtors who do not live in an exempt homestead may get additional exemption. The dollar exemptions applied to vehicles are not waived because the debtor needs his car to get to work. There are no car exemptions based on necessity. That most debtors have difficulty financing replacement vehicles after filing bankruptcy does not increase the limited car exemptions. If your car is owned free and clear, and the car is worth more than the applicable exemption, you may lose your car in a Chapter 7 bankruptcy regardless of how much you rely on your car to earn a living.

Consequences Of Debtor Not Signing Reaffirmation Agreements For Car Loans and Leases

Chapter 7 bankruptcy debtors are required to reaffirm car loans in order to keep their car and their car loan through a bankruptcy. The bankruptcy code says that if a debtor does not reaffirm a car loan (or other secured personal property loan) the automatic stay is lifted as to that loan and the creditor can repo the car. In practice, there are varying consequences for a debtor’s inability or unwillingness to sign a car reaffirmation agreement. According to one prominent creditor attorney, if a debtor refuses a reaffirmation Ford Credit will repossess the vehicle even if the loan is current. GMAC will not repossess the car but will reserve its right to do so in the future at its discretion. If a debtor submits a reaffirmation agreement, but the bankruptcy denies the reaffirmation because the judge believes its not in the debtor’s interest, most lenders will not repossess the vehicle if the loan is current.

Financing Car Purchase During Chapter 7 Bankruptcy

Many Chapter 7 bankruptcy clients would like to surrender a car and escape an upside-down car loan, but they are afraid they will not be able to buy a replacement car. Many people have destroyed their credit by the time they consider bankruptcy and believe no one will loan them money to buy a car after there a bankruptcy filing appears on their credit report. I recently attended an attorneys luncheon in Orlando, Florida where one of the attorneys said many of her bankruptcy clients obtained car financing after surrendering an upside-down car in a Chapter 7 bankruptcy.

Is Repayment To Friend Prior To Bankruptcy An Impermissible Preference?

Bankruptcy is designed to treat all creditors equally. If a debtor favors particular creditors by paying the preferred creditor just before filing bankruptcy the bankruptcy trustee can force the preferred creditor to give back the money for equal distribution to all the creditors. The look-back period for preferential payments is 90 days for general creditors and one year for creditors who are "insiders." Most often, the preference issue comes up when a debtor repays a family member or business partner within the one year preference period because the debtor feels a moral obligation to pay the family member or partner ahead of unrelated creditors. This past week a client described a repayment of a loan from a good friend. Debtor and the friend had known each other for over 20 years and had in the past several business dealings, although they were not currently business partners in any venture. The issue presented is whether repaying a loan to a good friend within one year of filing bankruptcy is subject to reversal and recoupment as an improper preference.

Mortgage Modification Program Enacted By Federal Government

I receive several emails and calls daily from people with problem home mortgages. This week several people have asked me whether they qualify for help under the government’s new mortgage assistance program. I read an article in the Wall Street Journal that described the two mortgage assistance programs implemented this past week. The Journal article included a chart that helped explain the program benefits and qualifications. I have reproduced the Wall Street Journal chart to assist Blog readers.  WHO WOULD QUALIFY

Trustee Takes Debtor's Interest In Real Property Wholly Paid For By Parent Co-owner.

A few weeks ago I wrote a post about a debtor who removed his name from a financial account owned jointly with his parent prior to filing bankruptcy and reported that a court held the debtor’s action was not a fraudulent conveyance. The court reasoned that because the money in the account was deposited solely by the parent the debtor/child had no equitable interest in the money which could be subject to the bankruptcy estate, and therefor, removal of the debtor’s name did not deprive the bankruptcy estate. Subsequently, attorney Mark Bonacqisti of Sunrise, Florida, sent me a different bankruptcy case which, although not dealing with the issue of fraudulent conveyance, presented a different analysis of a debtor’s interest in property owned jointly with a parent under similar facts. The case is In re Corzo 08-1431-BKC-PGH-A, 2008 WL 4826082.