SIGNING MEMORANDUM
The purpose of this memo is to bring your attention certain matters and information that are of importance to you. If you have questions, be sure to ask us. We are here to help.
Chapter 7 and 13: Any inheritance, property or lottery winnings you acquire during the entire length of your plan becomes part of this bankruptcy estate. You must report this to our office immediately and will more than likely be turned over to the trustee. For ch 7 this ends 180 days after filing.
Failure to notify/report any after acquired funds or property could result in the dismissal of your case, or if you have already received a discharge, the revoking of that discharge. This is extremely important and you agree to comply with this requirement.
DISCHARGED DEBT IS NOT TAXABLE
Any debt discharged through a bankruptcy proceeding is NOT taxable. Many creditors will still send out 1099 forms even though you have discharged their debt in a bankruptcy. You are not required to report this on your tax return.
SPECIAL NOTICE ABOUT UTILITIES
We have started to notice that the utility companies are “zeroing out” accounts upon the filing of a bankruptcy; regardless of whether or not the person(s) were behind on their bill. In other words, if you had your normal bill coming due a week after we file your case, they may just act as if you included in the bankruptcy and put you to a zero balance.
We do not know if this will happen or not until after the case has been filed. Due to this inability to predict if it will happen, we feel it is necessary to notify you that it is a possibility. Should they choose to close your account and begin billing you anew, they are allowed to charge you a set up fee, or a reconnection fee. They are only allowed to bill you from the date of filing going forward. We have typically been seeing this with electric, heat and cable companies. Again, if you have any questions about this, please feel free to ask.
You have listed someone in your bankruptcy petition as a co-debtor or someone who is co-signed on a debt you have. In Chapter 7, you will receive a discharge on this debt unless you reaffirm the debt (agree to be liable on it). The co-signer will not be protected.
If you file Chapter 13, a co-debtor stay automatically goes into effect prohibiting creditors from collecting consumer debt from co-debtors. In order to maintain this protection, your Chapter 13 plan must provide for payment of the entire debt and interest. If you file a chapter 13 that provides for less than 100% payment to the unsecured creditors – most plans do NOT pay 100% to these creditors, then the creditor can obtain relief from the stay and pursue the co-debtor. The co-debtor is not protected. Tax interest will accrue on the non-filing co-debtor and will be owed by that person after your case is over.
We are giving you this memo, and placing a copy of it in your file, to record the fact that you have been advised of the co-debtor issue, what the effect of your filing will be on the co-debtor, and to provide you with yet another opportunity to discuss this matter with your attorney and be sure you understand exactly what the legal effect of your filing may be on the co-debtor.
We don’t represent the creditors, and while we have a great deal of experience and can tell you what creditors will generally do in a particular situation, you must realize that we are not in a position to guarantee what a particular creditor will or will not do in your case.
I acknowledge a copy of this memo and understand that my filing will not protect co-debtors except as indicated above.
You have listed multiple debts that are all owed to one credit union. Sometimes credit unions “bundle” all of your accounts together, in what is called cross-collateralization. This simply means that you cannot discharge one debt in a chapter 7 bankruptcy, and only pay another.
Generally, if you want to keep anything associated with this credit union, than you must agree to keep ALL the debts associated with this credit union. The only way to avoid this from happening is to either file a Chapter 13 which destroys this relationship, or surrender everything associated with this credit union.
(Child Support and Alimony)
In order to receive your discharge, you MUST be current on your Domestic Support Obligation. That means that if you have any arrearage, you must be making your current payment, as well as some type of additional payment that includes this arrearage. If you are not current on this type of an arrangement, YOU WILL NOT RECEIVE A DISCHARGE.
If you owe child support, spousal support (alimony), or if you have been ordered to pay any debts or deliver any property to an ex-spouse, that obligation is NOT discharged in your chapter 7 bankruptcy case.
If you have any questions about the dischargability of any of these obligations, discuss this with the attorney before your case is filed.
By signing below, you acknowledge that you understand the limitations on the discharge of marital debts and obligations, and have had an opportunity to discuss the matter with the attorney and you are electing to proceed with a chapter 7 filing
Garnishments, like other attempts to collect debts, are subject to the Automatic Stay that arises when your case is actually filed with the court. However, if you have a Garnishment that has been started already, it will take some time before the Garnishment will stop.
Our office will contact the attorney for the creditor that is causing your paycheck to be garnished. That attorney’s office must then draft a notice to the court that is issuing the garnishment telling that court to stop the garnishment. Once this notice is drafted by the Creditor’s attorney and transmitted to the court, the court clerk will present the same to the judge. The judge of that court will then sign the order directing your employer to stop the garnishment. The court then transmits this notice to your employer’s payroll department. The Payroll Department is then free to stop taking the money out of your check.
Until your payroll department receives notice from the court to stop taking the money out of your check, your payroll department is under a Court Order to continue to remove the money each and every time you are paid and send the money to the court.
Of course, money taken from you after the case is filed will ultimately be returned to you, or, in some cases, the creditor will insist on sending the money to your bankruptcy trustee. In either event you will receive the money at some point in time. Frequently, this entire process takes up to two weeks.
Please note that all of this activity takes place between the Creditor’s attorney, the court, and your employer. Your bankruptcy attorney’s office is not involved in this activity. We have no ability, after we notify the Creditor, to speed up or become involved in the garnishment process. Although we do everything in our power to make sure that the notice of your bankruptcy filing is promptly communicated to the creditor’s attorney, it sometimes happens that your check will be garnished one or two times the after the filing of your case. If you are garnished more than twice after your case is filed please contact our office immediately. We have no way of knowing that you are being garnished unless you tell us.
If you have any questions with respect to this matter please contact us. Remember, however, that we are unable to stop the garnishment – this must be done by the creditor’s attorney and the court issuing the garnishment to your employer.
Your petition indicates that the value placed on your property exceeds the amount protected by Ohio Exemption Law. This means that the trustee will have the right to exercise an interest in the property, and you have the ability to negotiate with the trustee to deal with this issue, should the trustee elect to pursue the non-exempt equity.
For example, there is a $4450.00 equity interest in one vehicle. If you owned a vehicle worth $4450.00, with nothing owed on it, it is fully protected.
If, on the other hand, the car was worth $5,000.00, with nothing owed on the car, there would be $550.00 non-exempt equity in the car ($5,000 less the $4450 exemption). Thus the trustee would have an interest in the car to the extent of $550.
In the latter example, you could pay the trustee $1775 for the non-exempt equity, or the trustee, could just take the car and sell it, and give you $3225 (your exemption amount) and the other $1775 would be paid to your creditors.
Just because there is non-exempt equity in property does not mean that the trustee has to administer the asset, or go after the property. The trustee will make this decision on a case by case basis.
We don’t know in advance what the trustee will do, but we do know in advance if there appears to be non-exempt equity in the property. This memo, which you are signing, is our record that we discussed this matter with you, and you have elected to pursue a chapter 7 filing and not a chapter 13, despite the possibility that the trustee may go after the property to sell it for the benefit of your creditors. By signing below, you acknowledge that you have been advised of the non-exempt equity issue. You are making an informed decision to file a chapter 7 instead of filing a chapter 13. You further acknowledge that you have had an opportunity to fully discuss this with an attorney from the firm.
If your bankruptcy schedules list an education or student loan.
You are advised that the bankruptcy does not discharge student loans.
While in bankruptcy the creditor is not permitted to attempt to collect the debt, but the debt will not be discharged, and interest will continue to accrue.
If your case is a chapter 7, you may wish to continue to make payments on the debt, although while your bankruptcy is open the creditor cannot request or force you to make payments.
If you are in a chapter 13, you are not permitted to make payments to the creditor directly. The payments must be made through the trustee’s office, as part of your plan. Whatever portion of the debt that is not paid in the chapter 13 will not be discharged and you will be required to pay it after the bankruptcy is over. Fortunately, for most, the discharge of the other debt makes the payment of the non-discharged student loan possible and you should be able to resolve it more easily after all the other debt is paid or discharged.
In chapter 7, most taxes are not discharged. You have listed taxes on your bankruptcy that will not be discharged. The government, Federal, State and Local, may not attempt to collect your taxes while you are in an open bankruptcy, but your case will normally be closed in about 5 months from the time it is filed. After that, you can expect that the tax authorities will try to collect the taxes. You should contact the appropriate office to discuss a payment plan with them.
If, after discharging debt in a bankruptcy, you still cannot pay the taxes you owe, you might seek to be placed in an uncollectible status, file an offer in compromise, or make some other arrangements. These are not part of the representation our office provides to you. You will need to handle the matter yourself or have some other professional attempt to assist you. We don’t offer tax services.
Income taxes that are older than three years (from the due date, including any extensions) may be discharged in a chapter 7 if certain conditions are met. Note that any tax liens that may have been filed will survive the bankruptcy, and remain attached to property even if your personal liability to pay the tax is discharged in the bankruptcy. You have already discussed this with the attorney if you are being given this memo, but do feel free to ask any additional questions that you may have. We do not guarantee that the taxing authorities will automatically take the proper steps to reflect your discharge of the taxes. In the event that you do have taxes that should be discharged in your case and you require additional bankruptcy related assistance with tax issues after your case is over, you will be required to retain us for that matter, subject to a new fee agreement.
LIENT NOTICE FOR SURRENDERING VEHICLE
Your bankruptcy provides for you to surrender a vehicle. After your bankruptcy is filed, the creditor should obtain permission to repossess the car you intend to surrender. This is called Relief from the Automatic Stay. You will get court documents for this. You do not need to respond to these court documents. Occasionally, creditors repossess cars without permission, so we STRONGLY recommend that you remove all personal belongings from the vehicle immediately. Anything that you may want from the vehicle should not be in it after today. Trying to get back into the vehicle once it has been repossessed can be difficult, and usually the cars get “cleaned out” by the repo man. If the creditor is following the proper procedure, they will typically not come to take the vehicle until 2 – 3 weeks after your hearing. Most companies will call to schedule a time to pick it up. In the event that the creditor does not pick up the vehicle, (which can happen for numerous reasons) you may continue to drive it – understand, however, that the vehicle may be repossessed at any time. You sometimes want to junk it, but since you don’t have clear title, this is difficult or impossible to do. Creditors will not generally give you the title unless they are ordered to do so.
If you do need to obtain a title to a car that the creditor refuses to repossess, our office can file a request with the Court to order the creditor to release the lien, or, in the alternative, that the title office provide you with a title to permit you to dispose of the vehicle. Should you need us to do this for you, there is a minimum fee of $350 to get this done (assumes that the creditor does not contest the request, which, if they did not pick up the vehicle, the creditor is unlikely to do).
If you have any questions about this, speak to your attorney.
If you are seeking to discharge condominium fees, you are advised that only those fees arising before you file your petition may be discharged. If you continue to live, or have the right to continue to live, in the condominium, any new fees incurred during that time are your responsibility and are not discharged.
For example, if you are permitting your condo to be surrendered to the bank and allow a foreclosure, then you will be responsible for all condo fees until you no longer have a right to live in the condo. This could be months, as foreclosure sales often do take months. You will continue to be responsible for and can be sued for, fees that arise after your bankruptcy.
The purpose of this memo is to alert you to your responsibility with respect to the house, so that you don’t end up with problems later.
If you have any questions about this, speak to your attorney
SPECIAL NOTICE REGARDING HOMEOWNERS AND CONDO ASSOCIATION FEES NOT DISCHARGED IN BANKRUPTCY
If you surrender Real Estate subject to condo fees or home owner association fees, you are responsible for the fees that apply from date bankruptcy is filed to the date of the Sheriff’s Sale plus 10 days thereafter. If the property is not sold at the Sheriff’s sale, you continue to be responsible for the fees that accrue until the property is sold to someone else and it is no longer in your name.
If you are surrendering Real Estate and this applies to you please ask your attorney if you have any questions regarding this debt that is not discharged in your bankruptcy.
You can be sued for these fees if you don’t pay them because they are not discharged in your bankruptcy case.
What if I’m surrendering property and it doesn’t sell or the bank does not foreclose?
This is a serious problem and bankruptcy does not solve it! You will continue to own the property and be responsible for it.
If this happens, you should discuss the situation with you attorney.
CRAMING DOWN VALUE OF VEHICLE IN YOUR CHAPTER 13
Due to your purchasing of a vehicle(s), your Chapter 13 plan proposes that we pay the creditor only what this vehicle(s) is worth at the time we file your case. Due to the fact that you owe more on the loan than what the vehicle is worth, the term we use in this scenario is that we are “cramming down” the vehicle.
We typically will use the trade-in value from the NADA vehicle valuation guide to determine the value we have placed on your vehicle(s) that we intend to cram down.
After your bankruptcy is filed, the creditor will generally not agree on the value we have placed on this vehicle(s). The creditor has the right to object to the value of the car, which they generally will do in an “Objection to Confirmation of the Plan”. Some creditors may not object right away and will show up at your hearing to request and schedule an appraisal be done of the vehicle: at their cost.
These disagreements are resolved by coming to an agreement with the creditor on the value of the vehicle and generally do not require any further appearances in court.
We provide this notice to make you fully aware of an issue that may arise in your case.
If you have any questions about this, speak to your attorney.
CHANGES DURING CHAPTER 13 PLAN
You must get court permission if any of the following apply to you:
- Incur any new debt more than $1,000.
- Example: want a loan for a vehicle.
- Sell or give away any asset worth more than $1,000.
- Example: want to give a vehicle to your child.
- Retain a bonus from work.
- Example: want to keep a Christmas bonus.
- Retain any insurance proceeds for any reason.
- Example: car repairs, home repairs
- Retain funds from an inheritance.
- Hire a lawyer
- The Court must approve your lawyer.
- Settle a lawsuit
- The Court must approve the terms of the settlement before you agree.
- Want to get a divorce
Please call us if any of these issues every apply to you. Do not spend any money before talking to our office.
You must keep our office updated of the following:
- Income tax refund amounts.
- Changes in your employer
- Large changes in your income.
ADDITIONAL DOCUMENTS MAY BE REQUIRED
Sometimes the trustee assigned to your case requires documents in addition to the ones you have already provided. Different trustees require additional documentation, especially the chapter 7 trustees, but even the chapter 13 trustees may require additional documents. We have no way of knowing in advance whether or not this will be necessary in your case. We want you to understand this so you will not be surprised if we later request additional documents or information.
SURRENDERING YOUR HOME
If you intend to surrender your home, please read this information carefully. Please understand that there is no legal mechanism to simply give your home back to the mortgage company. The mortgage company must foreclose. This document will explain your rights and responsibilities during the foreclosure process.
This document answers 90% of the questions people often have. Please read this prior to calling our office for advice.
Occupancy
You will legally own the home until the property is sold at a sheriff’s auction. You have the right to live in your home, for free, as long as you are still the owner of the home (until the property is sold by the sheriff). Once the property is sold, the deed will be taken out of your name and you will no longer own the home. Therefore, you have no legal right to live in the home at that time. We recommend you move out as soon as you know the property has been sold by the sheriff.
Homeowner’s Insurance
If you are living in your home, we recommend you keep the property fully insured. Most insurance policies are good for 12 months. At some point in the future, it will be time to renew your policy. If your insurance is escrowed by your mortgage company, the insurance company will send a bill to the mortgage company. If there is enough money in your escrow account, the mortgage company will pay the bill to renew the policy.
If there is not enough money in the escrow account, you will be notified that the policy will be cancelled unless you personally pay the money to renew the policy. We recommend you do this if you are living in the home. You may not need another 12 months of coverage, so you may talk to your insurance company about purchasing a shorter term policy. You only need to be covered as long as you are living in the home.
If you do not renew the insurance policy, the policy will lapse. At that time, the mortgage company will likely purchase their own insurance policy called collateral protection insurance (CPI). This policy only protects the structure; it does not protect you or your personal property inside the home.
If your home is vacant, it is not necessary to have the property fully insured. Most people will allow their policy to lapse and let the mortgage company purchase CPI. However, some people may want to consider purchasing a special vacant property liability policy. This policy does not protect the home; rather, it protects you from any possible liability as the landowner. For example, someone might get hurt on your property and try to sue you. The mortgage company’s CPI policy would not protect you. You would need your own liability policy for protection. We recommend this if you have a lot of trees or a swimming pool on your property.
Property Taxes
You will not be responsible for any property taxes. Any unpaid property taxes will be paid by the sheriff once the property is sold.
Housing Ordinance Laws
Most cities and townships have imposed housing ordinance laws. For example, your grass cannot be too tall, or trash cannot pile up on your lawn. You must comply with these laws, even though you are surrendering your home. You must comply with these laws even if your home is vacant. You own your home until it is sold by the sheriff. As the land owner, you are responsible for the property.
If you fail to comply with these laws, the city may come onto your property and rectify the problem. For example, they will mow your grass for you. Then, the city will issue a citation and fine you. Generally, the fine is three to four times the cost of the actual work. It might cost the city $30 to hire someone to mow your lawn, but they might fine you $120 per violation. Further, these fines cannot be discharged in bankruptcy.
Utilities and Winterization
If you leave your home vacant, you should turn off all utilities. However, be advised that most cities will continue to bill you for trash and sewer service, even if the home is vacant. The city cannot “turn off” trash and sewer services. You will be responsible for these bills.
We recommend you have the home winterized as a courtesy to the future owner of the home.
The Foreclosure Process
See the attached handout which explains the process in detail.
If a foreclosure case was already pending when you filed bankruptcy, the bankruptcy temporarily stops the foreclosure. Eventually, the mortgage company will resume the foreclosure process. In some cases, the mortgage company will simply reactivate the existing foreclosure case at pick up where they left off. In other cases, the mortgage company may file an entirely new case and start from the beginning of the process.
You will not have to file a single document or attend a single Court hearing. You will receive copies of Court papers, but you do not have to do anything. All you need to do is keep an eye on the status of the case and make sure you know when the property is scheduled to be sold at sheriff’s auction.
You can monitor the process of your foreclosure case by visiting the website for your County’s Clerk of Courts. You can check the sheriff’s sale schedule by visiting the website for your County’s sheriff. All this information is public and easily accessed online.
Please be advised that we do not represent you in foreclosure. We will not be filing any documents or attending any Court hearings on your behalf related to the foreclosure.
What if the property does not sell at auction?
In rare cases, the mortgage company may not buy the home from the sheriff. This happens if the value of the home has declined to the point where the mortgage company does not believe they would be able to re-sell the home. In that event, you still own the home and have the right to live there for free. If the home is vacant, you would remain responsible for complying with housing ordinances.
Under this scenario, you would not be able to sell the home, even though the mortgage company does not want the property. The mortgage company would still have a lien against the property and that prevents you from selling the home to someone else. There is no legal mechanism to fix this problem; it is a catch-22. Our only advice is to wait a couple years and the County will eventually foreclose on the property for unpaid property taxes.
8 Steps of Foreclosure
Payment Default
You miss one or more mortgage payments.
Lawsuit Complaint
The creditor hires an attorney to foreclose on your home. Their attorney will file a complaint with the Court and send a copy to you certified mail.
Answer Period
You get 28 days to file an answer to the complaint. Most people do not file answers, because there is nothing to dispute. You do not have to appear for any Court hearings.
Default Judgment
After 28 days, the creditor files a motion for default judgment. The Court grants the motion, meaning the creditor automatically wins the lawsuit.
Order for Sale
The Judge instructs the Sheriff to schedule a sale date.
Public Notice
The Sheriff schedules a sale date. The sale date is published in your local newspaper for three weeks.
Sheriff’s Sale
A public auction is held at the Courthouse. Anyone can bid on the property, but it cannot sell for less than 2/3 its appraised value. The mortgage company is typically the winning bidder. You should vacate the residence by this date.
10 days After the Sale
The Court confirms the sale and the mortgage company gets a Sheriff’s deed to the property
By retaining the office, you acknowledge that you have been given a link to this DOCUMENT. You also acknowledge that this information has been explained to you and that you have been provided the opportunity to ask questions ABOUT This information.
