THE RULES FOR FIGHTING FORECLOSURES
                                                            HAVE CHANGED


As a result of the recent decision by the Eleventh Circuit Court
of Appeal,  debtors who has filed bankruptcy to stop a foreclosure
of a residential or commercial property  will have limited options if
they decide to surrender their property.The decision of Failla v Citibank,N.A. prevents a debtor in either a chapter 7 or chapter 13 
from filing a defense in a foreclosure case if they indicate in their 
Chapter 7 Statement of Intention  to "surrender"  the property. Similarly,  debtors by indicating in a Chapter 13 plan their intention
to surrender the property will have the same affect.

The Court's rational was that a  debtor's decision is irrevocable once they have received their discharge. In many cases the lender will sell the debtor's  mortgage to another lender either  during or shortly after the entry of a discharge. The "new" lender will then take several months or longer to initiate or complete an existing foreclosure. The debtor will then  contact an attorney to fight the foreclosure.

Under the Failla  decision, the  former debtor  will not be able to fight the foreclosure as the intent to surrender the property in the prior and separate bankruptcy proceeding is binding on the debtor.
The lender in the foreclosure proceeding,in the event one defends the foreclosure, would be able to re-open the debtor's prior bankruptcy and seek sanctions against the debtor which could include the revocation of their discharge in the bankruptcy.

 Thus, if an individual files and then receives a discharge in a Chapter 7 or 13 bankruptcy and has stated his intention to surrender any real property, the discharge terminates a defendant's rights to 
defend the foreclosure. Thus, it is important to consult an attorney
as to all your options prior to filing bankruptcy,as the Failla decision will limit the right of individuals to fight a foreclosure of a property "surrendered" in a prior  bankruptcy.





             

THE DO'S AND DO NOT'S OF ASSET PROTECTION

                           

                  An individual with debt will often make poor decisions in regard to the
                  disposition of their assets. It is important to understand the laws with 
                  respect to protection of your assets.


                                                       "THE DO'S"

                  1. It is important to consult an attorney to have the law explained to
                      you because  often I find that people rely on misplaced advice from family
                     or friends about their assets.   

                2. Do not sell assets like 401K's, IRA'S, and other retirement benefits
                    as they are protected from your creditors under applicable federal and state
                    laws. I have seen too many clients liquidate their IRA'S  and are left only
                    with homes that have negative equity.

               3. If  you are having difficulty paying your creditors and need to sell assets,
                   sell assets that can be seized by creditors such as stocks, bonds, savings
                   accounts and extra cars. Assets like jewelry and fine art are in your house
                   and not easily identifiable by a creditor, unless it is a personal friend or
                   business associate. Nevertheless, you will need to liquidate these assets
                   at fair market value if  forced to file bankruptcy at some point.

             4.  If you are still paying your creditors in a timely manner, but foresee
                  the possibility  of defaulting on your debt in the future,you may want
                  to contact a trusts attorney to determine the feasibility of placing
                  certain assets in a trust.

                                                 
                                       "  THE DO NOTS"**
                  
             1.   You are prohibited from transferring  from  non exempt assets
                   into  spendthrift trusts within 4 years of filing bankruptcy.

            2. You are not allowed to accelerate the payments on your mortgage within
                2 years of filing bankruptcy.

            3. You can not transfer assets to relatives,close friends,or associates within
                4 years of filing bankruptcy in Florida.
           
            4. While you may acquire ownership in real property which you reside in
                prior to bankruptcy,the  issue of homestead may be contested by the 
                bankruptcy trustee. In order to claim the residence as homestead, you will 
                need to have resided in  Florida for a period of 730 days. Also, if you have
                owned the residence for less than 1040 days,then the allowed amount you 
                can claim for homestead is $155,675.00.
            
**The debtor in a bankruptcy may have defenses to the transfers above,and the standard is whether the transfer was done to delay,hinder,or defraud creditors. Also, other factors including whether a large judgment is pending or the extent of  the insolvent state of the debtor will allow a court to determine whether the transfer is fraudulent.

Please contact the law office of JOHN E. MUFSON PA if you have any questions.
 561-272-1003   Mufsonlaw@aol.com





               

SHORT SALE OR STUPID SALE?

You are  seven months behind in your mortage payments to your first and second mortgage
and  in fear of a foreclosure complaint being served upon you.  A company then contacts you
stating they will handle  the short sale of your property,claiming it will be  a smooth process.
The company requires that you leave the property and also deed your residence to them. They
give you a check for $2,000.00 and you feel secure that you will not have any liability for your
two mortgage payments.

Well, the company will simply rent your house to a third party until your house has been
sold at  a foreclosure auction which could take up to two years after  you have left your home.
In addition, the unscrupulous company ,who you believe is there to protect your interests,will
attempt to short sell the property and keep the monies paid by lenders as a short sale incentive.
Often, the short sale will never be accomplished and months or even years later, you will be served
with a foreclosure by the lender for the property,which you thought had taken care of by the company
which had paid you the monies to leave the property.

In May 2012, an owner of a company in South Florida was arrested for scamming  dozens of individuals
who deeded their property to the company with a promise of a "short sale" and no liability on their
mortgages for the property. A short sale is often a poor scenario to resolve the negative equity issues of owners of real property. Please contact the law office of John E. Mufson P.A. at 561-272-1003 to discuss
the ramifications of a short sale.

The Goal of Retaining your Property in Bankruptcy.

Often an individual seeking to file bankruptcy in Florida is often fearful of having some or all of their property seized by the trustee. In most  chapter 7 cases handled by a competent attorney, the debtor will
be able to retain ownership of their real and personal property while discharging their unsecured
debts. With respect to household furnishings and appliances,the items will in many cases fall within the allowed exemption of $1,000.00 for individuals and $2,000.00 for married couples. Only where the residence contains antiques,collectibles or an expensive piano will there be an issue with respect to the allowed exemption.Also,if the debtor is renting or surrendering their home through foreclosure the the "wildcard" exemption is  applied and which is $5,000.00 per individual and $10,000.00 per married couple.

For motor vehicles the allowed exemption is $1,000 unless you are renting,whereby you can then use the  $5,000/$10,000  wildcard exemptions. As the value of used cars has increased significantly since the March 2011 earthquake in  Japan, it has become more difficult for a debtor with equity in their car to file Chapter 7. If a debtor has a car with $5,000 in non exempt equity in a car, in order to keep the car,they will have to either borrow money from a relative or take money out of a 401K/IRA to pay the trustee the non exempt value. 

Sometimes,a debtor is unable to use either of these options and thus does not want to file Chapter 7. The other option would be to file bankruptcy under Chapter 13. Thus, if the debtor has $15,000 in equity in two cars, the debtor would remit ($15,000 divided  by 60 months) for a total of $250.00
per month plus an additional $25.00 to the Chapter 13 trustee who administers the case. In addition,the debtor would have to be able to establish that they have the ability to make the chapter 13 payments.

If you need further information about property exemptions, please contact the law office of John E. Mufson P.A. at mufsonlaw@aol.com

The Strategic Foreclosure

Millions of homeowners in Florida now own a primary residence with negative equity.
Many owners have two mortgages and the combined balances on them are so great,that
it will take as long as 20 years to realize positive equity in the property.Thus, the owner must
explore all options with respect to the debt. Important consideration should be given to situations
where either the owner will need to relocate or retire in  five years. Continued payment of the first and second mortgages for a period of three to five years still will not allow the owner to complete
a conventional sale.

As wages and retirement plans are not growing at anticipated rates,an owner should strongly
consider a strategic foreclosure. Thus ,while the owner can afford the mortgage payments, he or she will have to attempt a "short sale" to sell the property if required to relocate. By choosing not to pay mortgage payments, a owner may be able to save money to relocate and in some cases pay "cash" for another property, thus enjoying substantial costs in the ownership of a home.

Two obvious questions arise, first the issue of liability of the owner on the mortgages and second,
the affect on the owner's credit score.In Florida,most foreclosures of a first mortgage are "in rem",
meaning that the lender will not pursue a monetary judgment against the owner and will proceed
only to take back ownership of the property.

If there is a second mortgage,most likely the lender will accept settlement from the owner at a deep discount form the balance owed, sometimes as highas 90% off the balance.While the owner's credit score will drop, he or she will still have use of all their credit cards, however there may reductions in the credit limits.

A viable option is the filing of either a Chapter 7 or Chapter 13 bankruptcy which will delay
the foreclosure process. In a chapter 13, which usually involves a 60 month payment plan of debt, the owner in some instances may "strip" a second mortgage, whereby at the end of the 60 months, only the first mortgage remains as a lien on owner's  property. In either Bankruptcies,the owner will have to include all credit card and other unsecured debts.

A strategic foreclosure alone or in combination with filing bankruptcy may be a solution.
Please contact the law office of  John E. Mufson at 561-272-1003  for all other questions.