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Those Troublesome Timeshares

A vacation timeshare can become like a stone around your neck.  I would say if you are thinking of getting one, don’t.

Vacation Timeshares can be like a stone around your neck.
A vacation timeshare can be like a stone around your neck.

A while back I heard from some people  I had done a Chapter 7 bankruptcy for in 2006.  After hearing nothing for years, out of the blue they were being sued for dues and maintenance fees by a timeshare company. The vacation  timeshare was owned at the time of filing the bankruptcy.  My clients were asking me the obvious questions:  Wasn’t that taken care of when we filed the bankruptcy?  How can they be suing us now?

Timeshares are unusual animals and a bankruptcy discharge might not apply to the maintenance fees and ownership association dues which accumulate AFTER the filing of the bankruptcy.  Any fees owing from before the filing of the bankruptcy would, however, ordinarily be discharged.

When it comes to fees which accumulate after the filing, the reason they might not be dischargeable is a provision among those that Congress added to the bankruptcy code in 2005, Section 523 (a) (16).  If you go here you can see it, just scroll down to (16).  This was written mostly to apply to condo and homeowner association fees, but it also says “in a share of a cooperative corporation … for as long as the debtor or the trustee has a legal, equitable, or possessory ownership interest in such unit, such corporation or such lot …”

Some timeshares involve real estate ownership and are a version of a condominium or townhouse setup.  Others are cooperatives that own the property and the customer gets a membership in the coop.  If you have either of these, you are probably liable for the fees which are accumulated AFTER the bankruptcy filing and continue to accumulate until you are no longer an owner.  This is or can be a terrible spot to be in, because many of these places have quit trying to take back the units when they are not being paid for.  Most of them are worth little or nothing and can’t be sold.  A timeshare owner might be stuck with it indefinitely.

However, if you merely have a contract that gives you a license to use the facilities during a certain time, without any sort of ownership of the property, then liability for the fess would probably not continue after the bankruptcy filing.  The bankruptcy should kill it for good.  So exactly how the timeshare is set up makes a big difference.   I have looked over many stacks of timeshare documents, some of them even in foreign countries.  Those papers tend to be very hard to wade through, very hard to figure out.  I can read and write, and I even went to law school, but sometimes it can be hard to figure which category a certain timeshare setup belongs in.

If you have a timeshare of any kind and are considering bankruptcy, be sure to tell your lawyer all about it. If you can sell it before filing the case, you probably should.  Make your best effort to figure out whether it has a market value and what that is.  Provide your lawyer with all the paperwork you may have about it.  Make sure it is properly listed and properly described in your bankruptcy petition, and make sure that whoever is running the organization gets notice of your bankruptcy filing.

Then cross your fingers, hold your breath, or better yet –  pray a lot.  Hope the darn thing goes away.

As with any other financial matter, if you are considering a bankruptcy, don’t make any serious moves without consulting your attorney first.

This post is for general information purposes only and is not legal advice.  It does not create an attorney-client relationship.  If you need legal advice, please consult the attorney of your choice. 

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Paying Off Student Loans with Credit Cards – Bad Idea

 

Here’s a link to an interesting article from creditcards.com discussing possible consequences of paying off student loans with credit cards.  I’ve never met anybody who tried it, or at least admitted trying it.  The trouble with replacing old debt with new debt is that any debt you run up right before filing a bankruptcy is very likely to be considered fraud.  The creditor gets to object and can prevent the discharge of that particular debt.
Also watch out for paying tax debt with credit cards.  The 2005 law says that if you transfer a tax debt to a credit card, it remains non-dischargeable.

http://www.creditcards.com/credit-card-news/paying-off-student-loans-credit-cards-bad-idea-1282.php

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Moving to New Location Today

Anyone who has spoken with me over the past few months knows that I have been moaning and complaining about how my landlord was selling out to a developer and the building containing my office is scheduled to be torn down.  My beautiful office being destroyed.  It saddens me.

As of this morning, however, the moving truck is on its way and I hope to be unpacking at my new location as of late this afternoon.  The telephone and internet man is not coming until tomorrow morning, however, so that means that communications via my land line may be disrupted for a while.  If you need me the best bet will be to call  my cell – 612-735-3797.

The new location will be 11900 Wayzata Blvd. #116E, Minnetonka, MN 55305.  This is on the frontage road on the north side of 394 between Hopkins Crossroad and Ridgedale Drive.  It’s about a block east of the Staples store.  The office complex is called Marsh Run.

As many of you know, my old office had a patio and a back yard – something that an office would not ordinarily have.  For an office it was wonderful, and I loved it.  I didn’t think I would ever find any kind of an office space even close when it came to an amenity like that.  But I have managed to find something that has some similarity in that regard.  The new office actually has a deck that overlooks a little pond.  As far as the view goes, it is actually better  than the old office.

I’m going to be pretty distracted with moving and getting unpacked for the next few days; but taking  care of my clients and taking care of business has priority.  Everything that needs immediate attention will be taken care of.  As I said, if you need me just call my cell:  612-735-3797.

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Marital Status and Bankruptcy – Best to Plan Ahead

Plan ahead before you sign the marriage license.

Marital status can make a big difference in a bankruptcy case.

There’s a certain amount of rejoicing in these parts over the events at the Minnesota legislature yesterday which appear to make legalization of gay marriage a certainty in this state probably by next week. I assume that we will have a lot of people who are now legally single soon becoming legally married.

I find myself thinking about all the times a married person has come in to see me about a bankruptcy and wanted to file individually and not jointly.  I had to explain that for a married person it is usually best to do it jointly.  When a married person insists on filing individually, I will often just refuse to take the case.  I’ve actually done quite a few individual filings for married people, but I usually don’t want that case unless there is a really compelling reason to not file jointly. The probability of something going wrong in such a case is multiplied by a factor of I’m not sure what – but by a substantial factor. I don’t consider “but my wife has such a good credit score” to be a compelling reason.

For anybody thinking about both marriage and bankruptcy, you might want to consult with a competent lawyer concerning whether it would be best to file the bankruptcy before or after the wedding.

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Failure to complete Credit Counseling can Wreck Your Case

Drawer of Shame

In bankruptcy, either Chapter 7 or 13, there is a counseling requirement – one  course that must be taken before the case is filed and another that must be taken before the case can be discharged.

One of the things that keeps me awake at night is the possibility that one of my clients might miss the deadline for the second course and have their discharge refused as a result.  I ask my clients to please have the second course done by the time of the meeting of creditors, which is about a month after filing.

If the second course is not done by then, I keep track of that fact by moving the file to my “drawer of shame.”  It has a big label on it in red letters.  My goal then is to bug those clients until the second course is done.  It would be a terrible shame to have a case that is otherwise going well fail because of that.  One time it was actually down to the last 24 hours before my client got it done.  That one had me actually calling my client’s mother.

I’ve never had a case where a client has actually missed the deadline.  The lawyers I know who have clients that have missed it tell me that every one of them blames the lawyer, even though the lawyer sent all kinds of reminders.

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Update on Billboard in Blaine

Sign for defunct service which used to offer bankruptcy for $860.

It turns out that this sign belongs to an outfit called “Affordable Law Center” which is operated by a gentleman named Edward Jonak.

I am sitting here now reviewing a court order from Judge Kishel issued March 29th concerning Mr. Jonak.  Looks as if the order completely shuts down the “Affordable Law Center” and charges a number of large fines.  This sign is actually mentioned in the opinion.  It’s 55 pages long – very long because of how elaborate the entire scam was.  Take a look for yourself – here’s a link to the opinion: https://www.mnb.uscourts.gov/sites/mnb/files/opinions/shadley.gfk_.pdf

I wish I could find the phone number of the person who called me and who was going to have these guys do her bankruptcy case.  I am afraid I have already shredded it.

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Payday Loans – NO NO NO NO NO

I see on my Google Plus page that an outfit called “Get Payday Loans” has added me to their circles – or something.  Usually I would add them back, but I just can’t do it.  From where I sit payday loans are about the most evil thing on the planet.  They are very addictive.  Once a person gets started, they are drawn into debt and will have the devil of a time getting out.

I have never done a study or looked at any statistics on this subject.  However, I have dealt with these in numerous bankruptcy cases, so I have some opinions based on what I  myself have seen – at least what it looks like to me.  For one thing, it looks to me as if the rates they charge are very high.  Another thing I seem to be seeing is that some of the banks seem to like these things – I suspect because they charge a fee to set them up on a customer’s checking account so that when the pay check is deposited, the money automatically disappears to the lender.

I believe that anything which is automatic – happening painlessly behind the scenes without drawing full attention to itself – makes it easier to get deeply in debt.

So no, I’m not adding “Get Payday Loans” back.

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What to Bring to the First Meeting at My Offce

For me the starting point for most bankruptcy cases is a call from the prospective client.  If you are reading this that could be you.  Before anything else I like to do a screening over the phone.  This can be done in about fifteen minutes, sometimes maybe a bit longer.  No need to be afraid of me.  I’m easy to talk to.  There’s no fee for the phone conversation.  If the information from the phone conversation indicates that bankruptcy is appropriate, whether that be a Chapter 7 or a Chapter 13, the next thing I want to do is meet face to face in my office for a more serious consultation. For this I will charge a small consultation fee, which I will have quoted in the phone conversation.  I will credit the consultation fee against my fee for the case if we decide to go ahead.  If I suggest that you come in for a consultation, it’s because I’m already fairly certain that it is a case I would accept.

There are four batches of information that I would ask you to bring when you come:

  1. Forms.  There are two forms on my web site, the bankruptcy questionnaire and the monthly expense sheet.   Please print these two forms and fill them out in pen and ink.  Pencil is OK too.  Then bring them with you when you come.  Some of the questions, especially on the first form, are hard to answer.  If you can’t figure out the question, leave it blank and we’ll talk about it when you come in.  Complete the expense sheet to the best of your ability, and we’ll go over those numbers when you come in too.  Remember that things you charged on a credit card count as an expense as well as the things you paid for in cash or by means of your checking account.
  2. Tax returns.  I’d like to see your state and federal tax returns for the past two calendar years, along with your W2s and any similar supporting paperwork.  At the time of writing this post, that would be the returns for 2011 and 2012.  If you filed for a Minnesota property tax refund or Minnesota rent credit, I’d like to see that return for the past two calendar years as well.  If you file separate returns for your corporation or LLC, bring them along as well.
  3. Pay stubs and income information for the past seven months.  I need to see the last seven months of pay stubs from your your job and from the job of your spouse.  If you don’t have them, get them from your employer or from your employer’s web site.  By seven months I mean the six previous months plus the month we are in.  If you don’t have pay stubs because you are self employed, I need a spread sheet showing your gross income and your business-related expenses for that same seven month period.  If you don’t have pay stubs because you are unemployed, I need detailed info on what unemployment benefits you are receiving and what taxes are being withheld from your benefits if any.  If you are receiving child support or spousal maintenance, I would want dates and amounts received during that seven month period.  If you are on  Social Security or Social Security Disability, provide me with details of how much you received gross in the past seven months and what if anything was withheld from that.  If there is any kind of income coming in from anywhere, I need to know about it.
  4. Details about your debts.  I want to see every piece of paper you have describing each and every debt.  Include your credit cards, car loans, mortgages, tax debts, student loans and any fines and penalties you owe.  I usually can’t make the student loans go away, but I still need to know all about them.  You probably intend to keep paying your mortgages and car loans, but we need to list them anyway.  Some of your tax debt may be dischargeable, but even if it isn’t we need to list it all.  Be sure to include nasty letters from lawyers and collection agencies.  Eventually we will be checking your credit report, but for the first meeting the information you have handy about your debt will probably be enough.

As you might have gathered by this point, that consultation in my office is usually quite thorough.  I should be able to give you an opinion concerning your situation that will be worth the trip.  Figure on spending an hour and a half – more if we are planning on running a means test.

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Tax Season is Upon Us

Well, tax season is upon us. I am hearing from quite a few folks who have returns ready to file but don’t have the money that they are required to pay in. What I usually say is that in most circumstances it is better to file the return without paying than it is to delay filing. If you file your return without paying, the taxes you owe might be dischargeable in a bankruptcy three years from now; but if you don’t file the return, chances are that the taxes would never be dischargeable in bankruptcy.

Another reason to file is that tax filings are required to be up to date prior to the filing of a Chapter 13 bankruptcy.  And for Chapter 7 bankruptcy it is best to have them up to date.  It is possible to file a Chapter 7 without having the tax filings all finished, but it is not a good idea.  In any bankruptcy case you are required to list all your assets and all your liabilities.  A tax refund is an asset, and if you owe taxes that certainly is a liability.  Either way, without the taxes done, you don’t know what you have and you can’t  provide the full information that is required in the bankruptcy petition.

Some situations may call for something different, but most of the time it’s best to file on time even if you can’t pay on time.  The IRS and the Minnesota Department of Revenue are usually fairly easy to work with when it comes to setting up payment plans.

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Keeping Your House in a Chapter 7 Bankruptcy

Can the lien of the second mortgage be removed from my house? - Bankruptcy

Of all the questions I get asked, “can I keep my house” could be the most frequent.  I have a long article about it on my site, probably too long.  For one thing, the web page covers both Chapter 7 and Chapter 13.  For another thing, the article covers the topic of letting the house go as well as keeping it.  Here I’d like to just say a few simple words about keeping your house – the house you are living in – when you file a Chapter 7 bankruptcy.

So here I’m assuming that you are filing a Chapter 7 and you want to keep your house.  If you have any equity in the house, that equity will have to be claimed as exempt in order to keep the bankruptcy trustee from taking the house away from you.  In most cases claiming the house as exempt it  easy.  If the equity doesn’t exceed $10,000 for a single person or $20,000 for a married couple, we can claim the house as exempt under the federal exemptions.  If the equity is more than that, it would be best to use the Minnesota state exemptions which allow for up to $390,000 of equity.

Once we are satisfied that your equity is protected as exempt, the next issue is the mortgages.  We have to list those in the bankruptcy petition like any other debt, and that means that your personal obligation to pay them should eventually be discharged.  I say mortgages in the plural, because most of my clients seem to have two – a first and a second.  Some people I talk with seem to think that if their mortgage obligations are discharged, then the house is free and clear.  That is not the case.  The mortgage liens remain on the house even though the debt or debts themselves are discharged.  Ths means that if you want to keep the house long term after filing a Chapter 7 bankruptcy, you need to plan on continuing to pay the mortgages.

This is a bit of a simplication, and for more detail read my keep my house page.  But what it usually comes down to is being able to claim the equity as exempt and being able to keep making the payments.

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