Did You Co-Sign A Loan?

Having a co-signer is a good way to get more credit.  However, there is a dark side – especially when it comes to filing bankruptcy. There are several ways to address these types of debts, but careful planning is required before embarking on a bankruptcy.

Becoming a co-signer is easy and at one time often meant that the borrower(s) received better loan terms - after all, the bank received another target to go after if the loan was not paid.  Nowadays, a co-borrower often does little to enhance the ability to obtain credit and in fact can hinder the process.

Co-signed obligations receive special treatment in bankruptcies.  For instance, there are several unique disclosure requirements that must be satisfied.  From the standpoint of the law, your co-obligor has a right to know that you filed bankruptcy.  Why? Because s/he is now a creditor of yours.

Seem strange? The reason your family member or friend is now your creditor is due to the fact that s/he is still obligated on a loan for which you were equally liable.  So, to the extent the co-signer pays more than “her share” she would have a claim against your bankruptcy estate. Put differently, while your bankruptcy may result in a discharge for you, the co-signer’s obligation will survive and s/he would still be liable for the obligation.  

There is good news. In the context of a Chapter 13 bankruptcy, a recent appellate court decision held that a debtor may be permitted to pay the full amount of co-signed obligation through the Chapter 13 plan, while not paying the full amount of other unsecured obligations.  This is a rare exception to the rule that a debtor may not discriminate as between unsecured creditors.  Moreover, a Chapter 13 provides a special co-debtor stay — similar to the automatic stay — which protects your co-signer like you from collection efforts while the plan is going forward.

Another critical issue is how that co-signed debt was being paid prior to bankruptcy. If the court considers your co-signer an “insider” then a bankruptcy trustee might be empowered to get the money paid on that obligation back on the theory that the creditor received preferential treatment. That’s correct - the trustee could take back payments made to the bank within 90-days prior to the bankruptcy filing.  The trustee could also go after you co-signer for a year’s worth of payments — because you “preferred” your co-obligor by paying this obligation rather than paying other creditors.

There are important pre-bankruptcy steps we will generally take to help ensure that the client’s former payment on a co-signed debt does not raise the interest of the trustee.  As well, we will explore various scenarios of discharging a co-signed obligation and how those options may impact the other responsible obligors. Working intelligently, we find the best solutions for our clients. 

Bankruptcy laws are very powerful, but these laws can also be complicated – especially for the unwary.  Hiring skilled counsel is the first step to securing the life changing benefits that a well-managed bankruptcy offers.  

Call us today for a free confidential consultation with Attorney David Speckman.

619-696-5151

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An Overview of Liens in Bankruptcy

Liens come in many different forms. Some common examples of liens include purchase money security interests, pledges, mortgages, deeds of trusts, and judicial liens - which is a type of non-consensual that arises when a creditor sues and gets a judgment.  An execution lien prevents one from passing clean title on the effected property without first satisfying the lien. It can also lead to a forced “sheriff’s sale” of your property, including one’s house in some circumstances.  It is important to identify such liens before filing a bankruptcy so that a property analysis can be completed.  For instance, Section 522(f) of the Bankruptcy Code allows you to eliminate a judicial lien if it impairs a valid bankruptcy exemption. The lien may also be eliminated in many instances by filing a Chapter 13 bankruptcy, even if the property has no equity.  It is important that you work with counsel who understands the complexities of lien avoidance. 

 At Speckman Law Firm, we have eliminated millions of dollars in unwanted liens. 

We can help you eliminate yours as well.

For More Information or to schedule a free consultation with David L. Speckman, visit our website below!

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HOW TO CHOOSE A BANKRUPTCY ATTORNEY

Most people must at some point interview for a job.  As the interviewee, you come prepared to answer questions and make a case why you are the right person for the job.

Naturally, the pressure is on the interviewee to make the right impression and convey important facts into the conversation as well as to project competence and confidence.

Now, turn the table.  How would you like to be the one conducting the interview?  That is the case when you are considering which attorney to hire to represent you in a bankruptcy, or any case.  The decision to hire is yours.

The challenge of course is that you may not know the details of the bankruptcy process or about the legal field.  Chances are that much of what you have been told or read on the internet is wrong or does not fit with your unique situation.  This is, after all, your situation, not your neighbor’s or that of the hypothetical client.  You need someone who can customize the representation to fit your particular needs.

To be sure, lawyers are not interchangeable.  One lawyer is not necessarily as good as another.  Price is almost always the poorest basis on which to choose an attorney.  Any single error in the process can have lasting consequences, impacting your financial wellbeing for years to come. 

A well-managed bankruptcy begins long before any forms are completed or schedules are filed with the court.  The process begins with understanding the client’s situation, goals and challenges and then taking the appropriate steps to ensure the best outcome possible for the client.  To be successful, one must have an attorney working for his/her benefit - someone who takes the time to listen to the client, develop a winning strategy and explain that strategy to the client.

Here is a checklist one might consider when evaluating a prospective bankruptcy lawyer.

1.       Is the lawyer’s practice focused on representing consumer’s in bankruptcy?

2.      Did the lawyer ask about your goals in filing?

3.      Did you have an opportunity to speak with the attorney – and did he listen to you?

4.      Dis the attorney explain your choices and the legal process in plain English?

5.      Were you comfortable asking questions and disclosing the difficult and messy situations in your financial life?

6.      Did you get real and unrushed face time with the lawyer?

The hiring of an attorney is a big decision.  You may well have a professional relationship with the individual for many years.  Be sure that you hire the best person you can and someone whom you believe will always be there for you. 

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Is Pride Preventing You From Speaking With A Bankruptcy Attorney?

For many, bankruptcy is not a pleasant option to consider.  Neither is simply ignoring the financial problem one faces. Oddly many are more likely to simply struggle with their debt rather than take the proactive role consulting with a bankruptcy lawyer.

The irony is that the bankruptcy option may be easier, and certainly less problematic than simply ignoring the problem.

·  The first misconception to overcome: Bankruptcy is about failure. Bankruptcy is about renewal. Business ventures fail and are liquidated in bankruptcy. But people go into it for a fresh start. They may have fallen upon hard times and are unable to pay debts back. That’s the cause but the point of the process is to get one back on his/her feet.

· The second misconception: Bankruptcy is a punishment. Even though they have done nothing wrong, some expect that their creditors, the trustee, or the judge will ridicule or torment them. In actuality, bankruptcy is more like closing a loan, where someone simply verifies the information provide.  Truly, if you do your part, the system will do its part to get you through safe and sound.

· The third misconception: You’re the only one. Let’s do some basic math. In almost every year going back about 20 years, more than one million cases have been filed – and many of those involved a husband & wife.  To be sure, you already know someone who has filed bankruptcy – and I sure that they are glad they did.

Today, right now, thousands — possibly millions — of folks just like you are doing something foolish to avoid calling someone just like me, a bankruptcy lawyer. They might be about to cash out their 401(k) or IRA account, even though I can save it for you. They might be hiring a debt settlement company to negotiate ridiculously unlikely deals with creditors who will sue before the end-game is played. They might even be considering taking cash out of their home by way of a new mortgage.

And today, right now, millions of Americans believe that they are doing just fine financially, mostly because they’re keeping up on the minimum payment on all their debt.  The reality is that every day that goes by their chances of getting out of debt grow slimmer and slimmer.

It takes courage to talk to speak with a bankruptcy attorney – just as is takes courage to speak with a surgeon about a health problem. But deep down you know it really is not going to get better, right? If your debts are now keeping you from important things — like your kids’ education, replacing your car, or being able to retire — or even critical things — like your health care — then why haven’t you already called a bankruptcy lawyer? And if your answer is that you’re afraid or you’re too proud to “ever do that” then think again. Fear and pride are hard to eat sometimes. It might just be time to find out what you don’t know. 

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