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When Texas and Florida, along with several other states along the eastern seaboard of the United States, were hit by Hurricane Harvey and Hurricane Irma, many mortgage companies offered their borrowers who had been affected by these storms participation in a forbearance program. A forbearance program is where your mortgage company agrees to suspend your mortgage payments for a set period of time. Forbearance programs are usually good for borrowers who are going through a short-term financial situation. The forbearance of mortgage payments is meant to allow the borrower the time they need to get back on their feet and then recommence their regular mortgage payments. The idea behind the forbearance programs after the hurricanes was to allow homeowners time to repair or rebuild their homes that had been damaged by the storms.

Unfortunately, not all forbearance programs have reached their goal. What I have come to learn through the last several months as forbearance programs are coming to an end, is that some of these programs require the borrower to bring their mortgages current at the end of their forbearance period. This means that borrowers must make all missed mortgage payments at one time when their program ends. The issue that many borrowers who have chosen to take advantage of one of these programs is that they were not aware that they would have to make all of the payments at the end of the designated time period. By the time they learned they would be expected to pay their mortgage company all of the payments that were deferred through the forbearance program, it is far too late for them to prepare for such a large payment at one time. This has put many borrowers between a rock and hard place, because they are unable to bring their mortgages current.

The worst part is that many of their homes are still not completely repaired, or even repaired at all. Many borrowers did not have enough insurance to cover all necessary repairs and have been unable to get financial assistance to make up the difference. Many homeowners are now facing the very difficult decision of what they can do in order to keep their homes. Many fear that new foreclosures are on our horizon as homeowners have no choice but to walk away from their beloved homes, because they are unable to make their mortgage payments and/or make the repairs they need in the aftermath of Hurricane Harvey and Hurricane Irma.

Luckily, there still may by a few options available that will at least assist you in making your mortgage payments. One option is a loan modification. If you are approved for a loan modification, all the forbearance payments would be rolled into the new principle balance. Another option may be a Chapter 13 Bankruptcy. A Chapter 13 Bankruptcy would allow you to start making your regular monthly mortgage payments and then spread the forbearance payments out over 5 years, which might help make the payments a much more affordable option. Additionally, a Chapter 13 Bankruptcy might also assist you with other debts you may have.

An attorney experienced in bankruptcy, loan modification, and foreclosure can help you determine which is the best course of action for you. Contact the Law Office of David M. Goldman, PLLC today (904) 685-1200 to speak with an experienced attorney.

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What is an ESOP?

Employee Stock Ownership Plan, better known as an “ESOP,” is a way for employees to have ownership in the company they work for. They are used by several large successful companies because of the various tax benefits they can offer to the company as well as to the employee. Most commonly, employees obtain ownership of the company’s stocks as an award to help motivate and reward the employee. They are also a great way for employees to plan for retirement.

Because of how an ESOP works as a trust fund, employees generally do not have much control or access to their shares until they reach retirement age, or when their shares vest. Because of this lack of access, most ESOPs are treated just like a 401K, or any other retirement plan that is qualified under ERISA, when they file bankruptcy; therefore, ESOPs are treated as an exempt asset.

How does an ESOP work?

Just like a trust fund or spendthrift trust, all shares are retained in an ESOP trust until retirement age or termination of employment. Basically, when a company decides to set up an ESOP, they create a trust that the company makes yearly contributions to. The company then creates a formula that controls how employees receive stock in the company. Before an employee can have access to their stocks, their stocks must first vest.

My ESOP and bankruptcy.

As mentioned above, ESOPs are generally treated just like any other retirement plan in bankruptcy and are therefore an exempt asset, but your ESOP must first pass a two-step test.

First, you must figure out whether or not the ESOP is actually even a part of your bankruptcy estate. As long as there is an anti-alienation clause written in your ESOP documents that restricts your ability to access or transfer your stock, then it should be excluded from your bankruptcy estate. This anti-alienation clause also qualifies the ESOP under ERISA.

In Florida, courts have compared ESOPs to spendthrift trusts. One of the most important things about a spendthrift trust that makes it safe in bankruptcy is that they are set up by someone other than the beneficiary for the beneficiary’s benefit. Therefore, whether your ESOP is safe in bankruptcy really boils down to your access to the stock.

Florida courts have determined that ESOPs are safe where the debtor is unable to reach the stock after leaving employment until they reach retirement age and where they are unable to borrow money from the plan.

On the other hand, if a debtor’s interest in the stock vests and they can reach the stock upon termination or withdrawal proceeds prior to retirement age, then the debtor’s access or control over the stocks disqualifies the ESOP from the exemption and the ESOP will be subject to your bankruptcy estate.

Making sure that your ESOP is safe when you file bankruptcy is very important as they are most often an individual’s biggest asset. This is why it is so paramount to consult with an experienced bankruptcy attorney before filing bankruptcy. Contact the Law Office of David M. Goldman, PLLC.

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Having been unemployed for some time, you have accumulated a lot of debt and are now behind on paying those debts. You are considering filing bankruptcy, but happen to have two vehicles that are paid off and want to sell one of them. Can you sell one of those vehicles and then file a Chapter 7 Bankruptcy? The short answer is it depends, and this is why.

Selling one of the vehicles would be considered a pre-bankruptcy transfer of property, and there are several factors that determine whether a person can complete a pre-bankruptcy transfer. Your bankruptcy trustee will look at whether the property in question would have been exempt when you filed your bankruptcy, the price you received for the property, how those proceeds were spent, and the reason for the transfer.

If the property would have been exempt when you filed bankruptcy, then transferring the property prior to filing bankruptcy should not be an issue. However, it could cause a delay in the bankruptcy process as your trustee makes this determination. Your trustee will want to make certain that you received the fair market value of the property and that it was in fact exempt. In Florida, a debtor is allowed $4,000 in personal property and $1,000 in a motor vehicle if they do not claim the homestead exemption. If a debtor claims the homestead exemption, then they are only allowed $1,000 in personal property and $1,000.00 in a motor vehicle.

BUT, if you are planning to file bankruptcy and the property would not be exempt in bankruptcy, then you need to proceed with much caution. It is best to first speak with an attorney before making any pre-bankruptcy transfers. Your trustee most definitely will investigate the transfer and will pay close attention to when the transfer was made and the proceeds received from the transfer. If the fair market value was not received, then the trustee may undo the transfer or make you pay the fair market value of the transfer to your bankruptcy estate. The trustee can also look into certain types of transfers from as far back as ten years ago. However, they most commonly only look back two to five years in Florida.

Another thing your trustee and the court will look into is your intent at the time of the transfer. Your intent can be inferred by looking at who you transferred the property to, did you try to conceal the transfer, what was your financial situation when the transfer occurred, etc.

If you use the proceeds from the transfer of non-exempt property to increase the value of your homestead, such as by paying down the mortgage or making improvements, the court can look back 1,215 days. Without having to look at your intent, the court can then reduce your homestead exemption by that amount. Luckily, however, using such proceeds to make normal mortgage payments or normal maintenance and repairs should not be an issue.

Despite the type of property you are looking to transfer prior to filing bankruptcy, it is best to consult with an experienced attorney. Speak with the Law Office of David M. Goldman, PLLC at 904-685-1200 for a free initial consultation.

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If you wish to file a Chapter 7 Bankruptcy, you will have to first pass something called the MEANS Test. The MEANS Test is the determination of whether or not you are eligible to file a Chapter 7 Bankruptcy based upon your household size and income.

For a Chapter 7, your income must be below the median income level for your household size in your state. In order to figure out what your income is, the court looks at an average of your monthly income for the previous six months prior to filing. In Florida, as of April 1, 2017, the median income numbers are around the following and increase as your household size increases:

Household of 1: $44,576.00

Household of 2: $55,344.00

Household of 3: $60,636.00

If your median income is below these numbers for your household size, you only have to complete the “short-form means test.” This is because it is easy to determine that you qualify for a Chapter 7, because your income is clearly under the median.

If your median income is above these numbers, you will have to complete the second part of the MEANS Test. The second part of the MEANS Test, the “long form,” does a further determination/analysis of whether your income and expenses allow you to qualify for a Chapter 7. Things such as a mortgage or car payment can help you to lower your monthly income in hopes that it’s just enough to help you qualify for a Chapter 7 Bankruptcy.

What types of income are included in the MEANS Test? 

Now that you know how it is determined if you can file a Chapter 7 Bankruptcy, you probably would like to know what income is included in the MEANS Test. While ALL types of income must be listed on your Schedule I, which lists your monthly income in the future, NOT ALL types of income are included on your MEANS Test, but unfortunately, most are.

Income from regular employment, running a business, pension, retirement, etc. all must be included in your MEANS Test, even child support and alimony payments are included in your MEANS Test. The only income that is not included in your MEANS Test is disability income, such as Veteran Affairs Disability and Social Security Disability.

What this means is that even if your income is too high to qualify for a Chapter 7 Bankruptcy due to your social security or VA benefit, you might not have to include that income in your MEANS Test, because, without it, you might be able to qualify for a Chapter 7 Bankruptcy.

One of the first steps to filing bankruptcy is determining whether or not you pass the MEANS Test and qualify for a Chapter 7 Bankruptcy.

Contact the Law Office of David M. Goldman, PLLC today to evaluate whether or not you will pass the MEANS Test. Other factors such as any assets you might have also need to be taken into account when deciding whether bankruptcy is the best option for you.

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When someone thinks of bankruptcy, one of the very first things that come to their mind is that they do not want to lose the property and assets they currently have. If you own property such as a home, vehicle, or any other property of value, you might automatically assume that bankruptcy is not an option for you because you will have to surrender your assets to your bankruptcy estate.

However, you will be happy and surprised to learn that a Chapter 13 Bankruptcy might present some very unique opportunities for you that you were not previously aware of. For those of you facing financial difficulties while owning an investment property you do not want to lose, a Chapter 13 Bankruptcy might be the perfect solution for you.

You will be happy to know that under Title 11 of the United States Bankruptcy Code, Section 1322(b)(1), you can cram down a mortgage on an investment property. Cram down essentially means that if your mortgage is more than the fair market value of your investment property, then you can lower the principle balance of your mortgage to match the fair market value or secured value of the property. Basically, you can modify the mortgage’s contract by changing the principal balance, interest rate, and term. AND… the creditor cannot object to it.

For example, if the principle balance on your investment property mortgage is $200,000, but the fair market value of the property is only $100,000, you can “cram down” the principle balance of the mortgage to $100,000.

BUT…this option is not available for a mortgage on a principle residence or homestead property. Section 1322(b)(1) of the Bankruptcy Code specifically states that “may modify the right of holders of secured claims, other than a claim secured only by a security interest in real property that is the debtor’s principal residence…” The apparent reasoning by the legislators is that special protections should be given to Lenders who provide mortgages for a principle residence because they are providing an essential service.

There is nevertheless one other major limitation to being able to cram down a mortgage on an investment property. Many courts require that the mortgage is paid off by the time you complete your Chapter 13 Plan, which is within either three or five years. This translates into very high Chapter 13 Plan payments that can be very difficult to afford and keep up with.

Being able to cram down a mortgage on an investment property is not the only type of cram down offered through a Chapter 13 Bankruptcy. You can cram down most debts that are secured by property such as an auto loan.

If you have an investment property and wondering if a Chapter 13 Bankruptcy might help you save it, or have another secured debt that you would like to cram down through a Chapter 13 Bankruptcy, contact the Law Office of David M. Goldman, PLLC today for more information. Set up a consultation today so that an attorney can help you determine what your best option might be.

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The Bankruptcy Abuse Prevention Act of 2005 made student loan debts non-dischargeable through bankruptcy. Why do you ask?

The federal student loan program was initially created with the goal of making a college education affordable for all children. Originally student loans were only meant to help fill the bridge between grant money and the cost of tuition, books, and housing. In other words, student loans were only supposed to supplement education costs. Student loans were never meant to completely cover the full costs of receiving a higher education.

Instead of being based on your creditworthiness like most other types of debts, student loans are only based on your need. Due to this need v. creditworthiness approach, Congress did not feel that student loans should be dischargeable through bankruptcy except under very extreme circumstances that are completely out of your control. Specifically, Congress did not want to put the burden of unpaid student loans onto the taxpayers.

Nonetheless, there were put into place a couple of programs for those facing a partial financial hardship. The first program was the William Ford Foundation, which provided an income contingent repayment plan. This program is available for those who choose to take lower paying jobs such as in public service. There is also the Income Based Repayment Program. With this program, your payments are based on your income. After 20 years, the amount still owed is discharged; however, there are still huge limitations on how you can qualify to remain in this program.

Of course, things did not go the way Congress had intended. Federal government spending on higher education could not and cannot keep up with the ever-increasing costs of earning a college degree. Federal grant programs failed to cover the entire costs and, as a result, students began looking to borrow money from other sources (privately funded student loans) once they had exhausted the federal government-insured student loans. This left college graduates with very high student loans to pay back.

In the Middle District of Florida where I practice, and encompasses the Jacksonville and Orlando divisions, an all or nothing approach has been taken towards the dischargeability of student loans. You either qualify 100% for your student loans to be discharged because of an extreme circumstance, which has a very high level of proof, or you do not. There is no middle ground.

However, Representative John Delaney introduced bipartisan legislation last Friday that would make student loan debt dischargeable through bankruptcy. So everything might be changing in 2017! The bill has been named the Discharge Student Loans in Bankruptcy Act (H.R. 2366).

In 2016, according to the Federal Reserve Bank of New York, the amount of student loan debt reached an all-time high of $1.3 trillion dollars.

At the Law Office of David M. Goldman, PLLC, we are always looking at creative methods to help our clients deal with their overwhelming debt burden. Contact our office today for a free initial consultation at (904) 685-1200. There are a lot of options available. The trick is finding the one that best fits you and your life. We are here to help you put your financial health back on track.

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Abby Lee Miller of the famous reality television show “Dance Moms” recently plead guilty to bankruptcy fraud and was sentenced to 1 year and 1 month in a federal prison to be followed by supervised release for another 2 years. Fraud is not something taken lightly by the federal court system and can have devastating and life changing consequences.

Fraud in bankruptcy can take a couple of different forms.

  1. When a debtor, the person who is filing for bankruptcy, tries to hide their assets in order to prevent losing them. When filing bankruptcy, you are provided certain exemptions that allow you to protect a portion of your assets. Any asset that is not protected by one of these exemptions can be taken from you by the trustee and then distributed to your creditors.
  2. When a debtor tries to bribe the bankruptcy trustee.
  3. When a debtor deliberately files falsified or incomplete bankruptcy forms in order to protect their assets from being seized by the trustee.
  4. When a debtor files for bankruptcy multiple times this can be viewed as an abuse of the right to file bankruptcy and enjoyment of the protections that bankruptcy affords. As soon as someone files for bankruptcy, an automatic stay is put into place that prevents any of their creditors from continuing to collect the debt that is owed to them. This is often seen when someone is facing foreclosure. The debtor files for bankruptcy on the eve of a foreclosure sale date with no intention of completing the bankruptcy. The intentions are to have more time in the home. The bankruptcy is later dismissed by the court because the forms are incomplete or because the debtor does not comply with the bankruptcy court, or the debtor dismisses the case themselves. Once the bankruptcy case has been dismissed and a foreclosure sale date has been reset, the debtor again files bankruptcy on the eve of the sale date with the same intentions as the prior bankruptcy. Some debtors do this over and over again, and this is an abuse of the bankruptcy system.

It is important to note that while bankruptcy fraud not only involves one of the above-mentioned forms, but it is usually coupled with some criminal activity such as money laundering, mortgage fraud, or corruption.

The overwhelmingly most common type of bankruptcy fraud committed is when debtors try to hide some of their assets from the bankruptcy court. And this is exactly what Abby Lee Miller has pleaded guilty of doing. Apparently, she tried to hide $775,000 of the income she received from her multiple Lifetime series by holding the money in various secret bank accounts. In addition to hiding almost $800,000, she was also accused of smuggling another $120,000 of Australian currency into the country.

Bankruptcy fraud can not only be committed intentionally; it can be committed on complete accident as well. Take for example the instance in which you give an older vehicle to your child so that they can get to and from college. A couple of years later, you fall on hard times and are forced to file bankruptcy. The vehicle you gave to your child a couple of years ago does not even cross your mind. You were financially sound at the time and wanted to help your child. There were no alternative motives involved, but you still unknowingly could be committing bankruptcy fraud by failing to list the vehicle in your petition. This is because giving away an asset such as a vehicle within 5 years of filing bankruptcy can be seen as trying to hide it so that it is not lost when bankruptcy is filed. This is why it is so important to seek the advice of an experienced bankruptcy attorney when facing bankruptcy. Hopefully, errors such as these will be caught before filing bankruptcy. But at the very least, when the error is found after bankruptcy has been filed, your attorney will be able to work with you and your trustee to reach a resolution.

For a free initial bankruptcy consultation, call the Law Office of David M. Goldman, PLLC at (904) 685-1200.

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Florida’s Bankruptcy Laws offer a very generous Homestead Exemption for those filing bankruptcy here in the Sunshine State. As long as you have owned your homestead property for 1,215 days or more prior to filing bankruptcy, the Florida Homestead Exemption is unlimited! How awesome? Right?

However, don’t get too worried just yet if you have not owned your homestead for 1,215 days. You can still take advantage of the Florida Homestead Exemption and protect up to $125,000 of the equity in your home per Debtor. That means that a couple can still protect up to $250,000 of the equity in their home when filing bankruptcy together, which is still pretty awesome!

But what happens when you file a Chapter 7 Bankruptcy with other real property that is not your homestead? Can that property be protected? How the property is treated will completely depend on whether or not the property is mortgaged and/or if there is any equity in the property. If the property is encumbered by a mortgage and there is no equity in the property, then you should be able to simply continue making those normal monthly mortgage payments, and the bankruptcy should not have any effect on the property whatsoever. However, if there is any equity in the property, then the Trustee will most likely take possession of the property and sell it in order to reach the available equity. Unfortunately, there is no exemption available to protect real property that is not your homestead.

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When you file bankruptcy all, if not most, of your debts are discharged, which means you are no longer responsible for them. A Reaffirmation Agreement is a brand new agreement or contract between you and your creditor in which you voluntarily choose to remain liable for the debt after you receive your bankruptcy discharge. The terms of the Reaffirmation Agreement are generally exactly the same as the terms of your original contract. There are two major types of debts that you most likely will have to sign a Reaffirmation Agreement for if you wish to keep the property secured by the debt. These two types of debts are car loans and mortgages.

Ok, so you filed bankruptcy. Your vehicle is financed and you believe that by filing bankruptcy it will be much easier to continue making your car payments. When you are contacted by the finance company about reaffirming the car loan, you do so without hesitation. However, a month or two into the reaffirmation agreement, you realize that it is still very difficult to make the monthly payments and decide it would be a better decision to surrender the vehicle and purchase a new vehicle with lower monthly payments. Can you change your mind and rescind the Reaffirmation Agreement? The answer is, as usual in the legal field, possibly and it depends.

11 U.S. 524(c)(4) of the United States Bankruptcy Code defines when a Reaffirmation Agreement may be rescinded. A Reaffirmation Agreement may be rescinded by a debtor under two very specific circumstances (which ever occurs later):

  1. Within sixty (60) days of filing the Reaffirmation Agreement with the Court; or
  2. Any time before receiving your discharge.

If you fall into one of these two categories, you must notify the creditor. It is best to notify the creditor in writing sent via certified mail with a return receipt requested. Once you have received the return receipt, you should file the notification of cancellation letter you sent to the creditor along with the proof of service (the green return receipt slip) with the Court.

Being able to rescind a Reaffirmation Agreement is a vital tool offered by the United States Bankruptcy Code. It allows Debtors, who realize a little too late that reaffirming a debt is really not in their best interests, to still be able to take full advantage of filing bankruptcy and have a true fresh start.

Regardless of being able to rescind a Reaffirmation Agreement after entering into one, signing a Reaffirmation Agreement should not be done lightly. Using 11 U.S. 524(c)(4) should only be used as a last resort and should not be abused.

So that you do not have to invoke the use of 11 U.S. 524(c)(4), it is best to first seek the advice of an experienced Jacksonville Bankruptcy Attorney who can help you decide what the best financial decision is for you. Contact the Law Office of David M. Goldman, PLLC today to speak with an attorney. If you are going to file bankruptcy, we want to help you come out on the other side in the best financial position possible.

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One thought that many people think about when getting married, is what their future spouse’s credit history is and their ability to obtain new debt. A correlating question is how will their future spouse’s credit history affect their own ability to obtain new debt. Why? Because they most likely, one day in the future, would like to know they have the option to purchase a new home, motor vehicle, or simply just obtain new debt. It can become much more concerning if your future spouse has filed bankruptcy within the last few years. How will their bankruptcy affect your ability to obtain new debt? Unfortunately, there are a lot of factors that can affect the answer to this question. So, regrettably, the answer is that it will depend.

Most importantly, it is crucial to make note that the fact alone that your future spouse filed bankruptcy, regardless of when, is absolutely immaterial to your individual credit report. Your credit report will not merge with your future spouse’s credit report simply because you got married. You both will maintain separate and apart credit reports. In other words, your individual credit report will remain the same as it was before getting married. However, by being married, your spouse may have to sign certain types of contracts.

The main way your future spouse’s bankruptcy will affect you is when you want to borrow money, but only because you can only borrow as much as your credit profile will allow. When you are married, your borrowing ability is equal to your combined credit limits. In other words, your individual borrowing power will remain the same, but your combined borrowing power may be lower because your spouse’s bankruptcy may have lowered his or her credit score. Luckily, this is not necessarily the bottom line as there are some ways to get around this. One such way is to use a co-signer if you need to obtain new debt right away. Some banks might even have a program that will allow you to obtain a mortgage with a co-signer and then to refinance it without the co-signer a year later as long as you have made all of your payments during the first year.

Regardless of when you are planning to obtain new debt, the most important way to handle your future spouse’s credit history is to begin working towards improving his or her credit score. You can begin with them obtaining a new credit card in their name alone, using it, and paying it off monthly. Look at it as being 18 years old again. How did you build your credit? You most likely got a credit card, used it, made your monthly payments on time and slowly were able to obtain additional credit cards or other loans, which you also paid on time. However, be sure to shop around for the best interest rates and for credit cards that do not have annual fees.

If you or your spouse are considering filing bankruptcy, it is always best to be prepared. By meeting with an experienced bankruptcy attorney, they can help you further understand the consequences a bankruptcy might have on your credit as well as your spouse’s credit. Contact the Law Office of David M. Goldman, PLLC today for a free initial consultation.

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