About to file 13

[jimbo367]

Biz failed 18 months ago, and closed, but I have two PG's on 50K and 30K from two different banks for corporate loans.

One of them just took an offset as they claim against my personal checking for 4,700 a few days ago.
I asked them to send me copies where they have that right.

This was without notice.

I called a few lawyers one said the bank can do it under NY law if it's in the contract, the other said since it would be within 90 of filing he could recover it upto the cash exemption of $2500.

Not sure who to believe.

The first morgage is just about at market value and I did a modification agreement last summer with a 3% note.
So I'm ok there.

I have a second of $45K witch I know I can strip in a 13.

I have a car with a note of 13K worth about $8,000, I would like to cram that and get a lower interest rate.

The other car is free and clear worth about 12K, there is only a 2400 state exemption.

Your thought

Jim

[BKDefender]

jimbo367:
Most state's laws allow a bank to setoff a debt of a depositor by sweeping money from the depositor's other accounts with them. That's why I tell clients to pull all of their money out of their accounts from banks to whom they owe money before we file their bankruptcy.
When you deposit money with a bank, you become a creditor of that bank - i.e. the bank OWES you money.
When you borrow money from the bank, the bank becomes your creditor - i.e. you OWE the bank money.

The law of setoffs is that when two entities owe each other money, they have the right to 'setoff' the amount owed by canceling their obligations to each other up to the amount owed to the other. If both of the debts (you owe them, they owe you) were created pre-petition then the bankruptcy court won't interfere as a matter of course.

If the setoff can be deemed 'unjust' by the court - i.e. it's against the public policy to setup that much money, then the BK court can interfere and require them to turnover a portion, or all, of what they setoff. Your attorney would have to file a motion for turnover that cited to law that is contrary to the laws of most states which allows setoffs. I'd like to see his legal argument because my arguments against setoff always fall on deaf ears.

I wouldn't get my hopes up.

--William

[lrprn]

I called a few lawyers one said the bank can do it under NY law if it's in the contract, the other said since it would be within 90 of filing he could recover it upto the cash exemption of $2500.

Not sure who to believe.

Since what lenders can do after a default does depend on state and local laws, unless one of our members lives in your area of NY and has/had a similar situation to yours, I don't know if we can shed much light here.

I would suggest setting up at least 2 more free initial consultations with experienced bk lawyers in your area who file a goodly number of Ch 13s after business failures and then review your situation and numbers during the consultation to get more opinions.

The first morgage is just about at market value and I did a modification agreement last summer with a 3% note.
So I'm ok there.

I have a second of $45K witch I know I can strip in a 13.

How did you estimate the current value on your house? Unless that valuation is acceptable in court, you need to make certain that the valuation is accurate before you can assume you can strip your second mortgage in a 13.

I have a car with a note of 13K worth about $8,000, I would like to cram that and get a lower interest rate.

If you purchased the car more than 910 days before you file Ch 13, you can 'cram down' the loan value to the current market value of the car. However, if you purchased the car within 910 days of filing, you cannot cram down the loan.

However, lowering the interest rate can't be done through a bankruptcy filing. You can try to get a loan modification before filing - very low chance of happening but you can try it. You will probably have to miss several months of car payments before the lender takes this seriously which means you also risk losing the car to repossession during this period of negotiation. That's far more likely than getting a loan mod on a car that's already this far underwater.

The other car is free and clear worth about 12K, there is only a 2400 state exemption.

You can't protect this car with your state's auto exemption alone, so you have four options to choose between. (1) Before you file, you can trade the car in on a new/new-to-you car taking out a new loan to get the new car value minus the loan value below the $2,400 exemption (going to be a challenge to do with that much equity already on the table); or (2) You can ask your lawyer to make a deal with the trustee to pay him/her $9,600 over an agreed period of time to keep the car; or (3) You can surrender the car as a part of your bankruptcy and ask the trustee for permission to purchase another car after filing; or (4) Sell the car before filing and spend down the $12K (or whatever fair market value you get) to under the $600 cash exemption that NY allows (likely $1200 for a married couple filing together in NY). Ironically enough, NY does *not* allow doubling the car exemption - http://longislandbankruptcyblog.com/...tions-doubled/

What you do depends on how much you want to keep this particular car after filing. If you do, then option 2 is the only one that will allow you to do that. Options 1, 3, and 4 come with significant disadvantages attached too. Only you can decide which option makes the most sense in the long run. Your lawyer should be able to help you sort this out.

[jimbo367]

jimbo367:
Most state's laws allow a bank to setoff a debt of a depositor by sweeping money from the depositor's other accounts with them. If both of the debts (you owe them, they owe you) were created pre-petition then the bankruptcy court won't interfere as a matter of course.

If the setoff can be deemed 'unjust' by the court - i.e. it's against the public policy to setup that much money, then the BK court can interfere and require them to turnover a portion, or all, of what they setoff. Your attorney would have to file a motion for turnover that cited to law that is contrary to the laws of most states which allows setoffs. I'd like to see his legal argument because my arguments against setoff always fall on deaf ears.

I wouldn't get my hopes up.

--William

From reading online I thought so which leads me to belive the lawyer that said he could do it is incorrect-or looking to tell me what I want to hear to sign me up????

If you purchased the car more than 910 days before you file Ch 13, you can 'cram down' the loan value to the current market value of the car. However, if you purchased the car within 910 days of filing, you cannot cram down the loan.

You can't protect this car with your state's auto exemption alone, so you have four options to choose between. (1) Before you file, you can trade the car in on a new/new-to-you car taking out a new loan to get the new car value minus the loan value below the $2,400 exemption (going to be a challenge to do with that much equity already on the table); or (2) You can ask your lawyer to make a deal with the trustee to pay him/her $9,600 over an agreed period of time to keep the car;

One car with the loan will be 910 days in 3 weeks.

Trading the car in is great idea, never thought of that.

That won't look bad with the trustee?

Also now I'm going to really push it, with my credit not so good now I would likely get a high interest rate on new car loan.

Can I modify that loans interest rate after I file??

I do need both cars.

Jim

[BKDefender]

Jimbo, you could always sell your car for $12k, fund your 2009 Roth IRA for $5k (must do 2009's prior to April 15th/tax day in 2010), fund your 2010 Roth IRA for $5k, and use the $2k as a down payment on another car.
Wait a month after buying the car, make the first car payment, then file bankruptcy and reaffirm the car loan.

You generally cannot modify a car loan after filing unless you bought it more than 910 days before filing, you file a chapter 13 and the car will be completely paid-off during the plan - you could then pay the '<i>Till</i>' rate accepted in your jurisdiction. (google your state name, bankruptcy, and 'till rate' to see what you find.)

--William

[jimbo367]

On second thought if I buy a new car by trading in with 10-12,000 in equity as the down payment I will still show most if not all of that equity after I file.

So that may not work

New car 30K balance on loan 20K leaves the same attachable asset

[BKDefender]

jimbo - but if you sold your car and used part of it as a down payment on a new car, and converted the remaining non-exempt cash into an exempt Roth-IRA account, you wouldn't have that problem.

--William

[jimbo367]

Ok, thanks William