In case you have not heard, the Bankruptcy laws have greatly
changed. But not all changes are bad for consumers. Here are some
changes that actually are good:
1. It is easier to obtain relief in a Chapter 13 case than before.
2. If your debts are primarily
business related, your debts may still dischargeable in a Chapter 7 even if you
have the "means" to pay them off.
3. If your house is in foreclosure,
you now have up to five years to pay back what your owe in order to cure your
4. A debtor can often strip and
discharge (completely remove) all junior liens and encumbrances from his home,
including loans used to purchase the home.
And although the new laws require you to pay back your debts
if you have the "means" to do so, many people will fail the means test
and thus be able to discharge their debts without having to pay anything back.
REMOVING SECONDS AND LIENS FROM A FAMILY RESIDENCE
Believe it or not, it is now possible to
remove second loans and liens from a family residence through Bankruptcy.
With so many properties being upside down these days, junior (second) liens and
encumbrances are often if not usually unsecured, meaning there is not enough
equity in the property to secure these loans. The law allows these
unsecured junior liens and encumbrances to be completely stripped (removed) from
the property through a Chapter 13 Bankruptcy*, while allowing the debtor to keep
his home. Considering that the average Chapter 13 often costs somewhere
between $3,000 and $4,000, and the average second is owed somewhere between
$75,000 and $150,000, the return on investment to the debtor is phenomenal.
No wonder so many banks are in a financial crisis!
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*This is only true for jurisdictions that follow the holding
in the case, "In Re Lam". These jurisdictions include San Bernardino,
Riverside, Orange and LA Counties. To see if In Re Lam applies in your
county, contact an attorney in that county.