Deficiency balance allowed as an unsecured claim in Chapter 13 in Northern District of Illinois

Northern District of Illinois - Eastern Division Chicago Bankruptcy Judge Squires recently ruled in the chapter 13 case of Linda J. Blanco, 06B 13223, where debtor tried to surrender a vehicle in full satisfaction of the claim owed. Judge Squires

The Court held that "the Debtor may not surrender the collateral in full satisfaction of the debt to the Creditor. The Creditor is entitled to seek its available state law remedies, including its right to an unsecured deficiency claim after liquidation of its collateral."

Judge Squires follows the minority argument in other jurisdictions, but it is also supported by fellow Chicago Bankruptcy Judge Schmetterer. This argument states that that when the collateral is surrendered, "the bankruptcy estate no longer has an interest in the collateral for purposes of § 506." Wherefore, the “hanging paragraph” does not preclude the creditor from claiming an allowed unsecured deficiency claim under § 502.

Judge Squires continued:
"Judge Schmetterer in the Morales case followed Judge Shefferly’s logic in Particka, and he aptly explained the interplay between § 506(a) and § 1325(a)(5)(C):

if a debtor surrenders the vehicle, the interests of parties in the collateral and the impact of § 506 changes. Section 506(a) applies only to “an allowed claim of a creditor secured by a lien on property in which the estate has an interest. . . .” 11 U.S.C. § 506(a). If a confirmed Chapter 13 plan provides for surrender of a vehicle under § 1325(a)(5)(C), the estate no longer has an interest in the vehicle. . . . When . . . . the debtor surrenders the vehicle and the estate no longer has an interest in the property that secures a claim, there is no reason to use the valuation process provided in § 506 to determine the amount of the allowed secured claim. Rather, once the vehicle is surrendered to the creditor pursuant to § 1325(a)(5)(C), the value of the creditor’s secured claim is determined under state law, Illinois U.C.C., 810 ILCS 5/9-610-624. "

Giveaway of the Day

Although this is a bankruptcy forum, my clients and visitors can all use a 'freebie' now and then. We'll, I have been using this site for a while now...and they offer some cool things! Check it out!
Terry

Giveaway of the Day

Free Credit Reports for bankruptcy filing

The bankruptcy code states that if you do not list a debt in a bankruptcy petition....

1. It is bankruptcy fraud
2. It is not dischargeable.

What are you to do?



Well, if you are filing for Chapter 7 or Chapter 13 it is advisable to provide your attorney a list of all of your debts, including recent copies of your 3 credit reports. Although some attorneys help their clients to obtain them (I do!), often they leave it up to you, the consumer.

Well, a few years ago, the FTC- Federal Trade Commission mandated that consumers are now entitled to one free copy of each of the three credit reports, once per year. Woo Hoo! Free stuff from the government!!



The FTC site at www.ftc.gov goes on to explain the specifics, which I quote below



Your Access to Free Credit Reports

The Fair Credit Reporting Act (FCRA) requires each of the nationwide consumer reporting companies – Equifax, Experian, and TransUnion – to provide you with a free copy of your credit report, at your request, once every 12 months. The FCRA promotes the accuracy and privacy of information in the files of the nation’s consumer reporting companies. The Federal Trade Commission (FTC), the nation’s consumer protection agency, enforces the FCRA with respect to consumer reporting companies.

A credit report includes information on where you live, how you pay your bills, and whether you’ve been sued, arrested, or filed for bankruptcy. Nationwide consumer reporting companies sell the information in your report to creditors, insurers, employers, and other businesses that use it to evaluate your applications for credit, insurance, employment, or renting a home.

Here are the details about your rights under the FCRA and the Fair and Accurate Credit Transactions (FACT) Act, which established the free annual credit report program.

Q: How do I order my free report?

A: The three nationwide consumer reporting companies have set up a central website, a toll-free telephone number, and a mailing address through which you can order your free annual report.

To order, visit annualcreditreport.com, call 1-877-322-8228, or complete the Annual Credit Report Request Form and mail it to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281. The form is on the back of this brochure; or you can print it from ftc.gov/credit. Do not contact the three nationwide consumer reporting companies individually. They are providing free annual credit reports only through annualcreditreport.com, 1-877-322-8228, and Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.

You may order your reports from each of the three nationwide consumer reporting companies at the same time, or you can order your report from each of the companies one at a time. The law allows you to order one free copy of your report from each of the nationwide consumer reporting companies every 12 months.

As always, this blog does not create an attorney client relationship. I am a debt relief agency, and help people file for bankruptcy under the bankruptcy code.

Now that the legal mumbo jumbo is out of the way, if you want any further bankruptcy information about chapter 7 and chapter 13 bankruptcy filings, feel free to contact me at 312-427-7400 or visit my websites at Leederslaw.com or ChicagoBankruptcyNetwork.com

Chapter 13 to Stop home foreclosures

Chapter 13 bankruptcy

Chapter 13 Stop mortgage foreclosure
Keywords: chapter 13, bankruptcy, foreclosure, consolidation, chapter 7, mortgage, mortgage default, credit cards, medical bills, interest rate, ARM, adjustable rate mortgage
Stop Foreclosure
Yes, you can save your home!

Using the chapter 13 can strategically help you cure your mortgage default, protect your equity and eliminate your other debts to help you right the ship.

Several years ago, we saw a boom in mortgage lenders offering low adjustable rate mortgages (ARMS) 100% to 110% mortgage loans, and no money down mortgages.

Today, we have seen these ARMS increase from 5% to 8%, 9% or more depending on the lender. Homeowners are being bombarded with a mortgage payment that is almost double than it had been previously before the interest rates have started to rise.

What is a homeowner to do? With the soft real estate market, homes have not appreciated in value, or not enough to allow homeowners to refinance and use some of their equity to help with the higher rates.

Chapter 13 is an option. In a nutshell, consumers can file chapter 13 which will let them catch up on their mortgage payment, interest free. It can also consolidate their other financed items and often save money on the interest rates. Currently, debtors can pay cars, furniture and jewelry back at prime rate of interest or prime +2, or +3. Bankrate.com shows a current prime rate of interest at 8.25%.

Consumers can also consolidate their credit card debt, medical bills and other consumer debts and pay them back, with little or now interest, and often can pay them as low as 10 cents on each dollar owed!By doing this, consumers can cure any mortgage arrears, pay off their secured debt for vehicles and for big ticket financed items, while eliminating their consumer debt. A Chapter 13 bankruptcy can run from 3 to 5 years. This depends on your monthly household disposable income. There are several recent changes to the Bankruptcy Code that can affect this repayment plan. These changes were part of the BAPCPA reform. Therefore, it is crucial to discuss with an experienced bankruptcy lawyer about the various law requirements and qualifications based on your unique situation.

For instance, let’s say Johnny Consumer owns a home worth $100,000 in Chicago, Illinois. Let’s say he has a $70,000 mortgage with the bank, but has fallen $6,000 behind and the mortgage company has started a foreclosure. Johnny was recently out of work do to an injury on the job. He has just went back to work, and sees no way to catch up $6000 any time soon. He has $10,000 in medical bills. He owes $3000 on his car. For our example, let’s say that Johnny makes $3000 per month and takes home about $2100. His mortgage is $700 a month, his car note is $300 and he has $67 left at the end of the month to use to try to catch up with the medical bills and the mortgage arrears.

At first glance, there is no way he can manage this on his own. Under a chapter 13, Johnny can make a monthly payment of $367 to the court. This will allow him to catch up on the mortgage, pay off his car note, and eliminate the medical bills he has. This will only take 3 years. It will protect all of the equity he has in his home and stop the foreclosure!

Therefore, if you are looking to stop foreclosure, and have steady income, Chapter 13 could be a great tool to use. You can always refinance or sell your home while under Chapter 13 if you wish to pay off the bankruptcy and move on with your life. The Chapter 13 stops the foreclosure immediately. Often, your only other option would be to refinance, or enter into a repayment agreement with your mortgage company. All too often, they want a double payment each month until you can catch up. If you had that kind of disposable income, you probably wouldn’t be in this situation in the first place.

Contact an experienced Chapter 13 bankruptcy attorney today to discuss these options. You don’t need a home to file either. Often consumers just wish to get a better deal on their old car note, consolidate their credit card debt to eliminate the high interest rates…or wish to consolidate their old student loans and parking tickets. There is a way to pay back old IRS debt as well as pennies on the dollar.

Pick up the phone and call me at 312-427-7400 and I’ll be happy to give you a free consultation by phone or schedule an appointment at one of our convenient office locations.
We also have a free online legal evaluation to try as well.

The time to act is now if you want to save your home from foreclosure.