Debt Relief Law Offices of Tampa Bay

Tampa Bankruptcy Attorney 727-849-3328

Strip Your Second Mortgage When Filing for Bankruptcy

Posted on Nov 26, 2014


Host: Welcome to this program. It is the Debt Relief Program. Ziona Kopalovich is here with us this morning. And solving this debt crisis right now! It’s your daughter’s debt crisis.

Ziona: It’s true. She is considering whether or not we can throw it out to the public.

Host: Well you know what, I think that is a good question.

Ziona. Yeah, I mean when you have a flat tire and your insurance company sends the big tow truck to get you back to the dealership. Do you tip that tow truck driver? So we would like to hear what the public thinks.

Host: My proverbial two cents. I think that’s one of those things where it is arguable. Because that’s his job.

Ziona: It’s his job.

Host: You know, it’s like I walk out of here every day and someone says, “Good job here is five dollars.” Which by the way would never happen. And the other part of it is.

Ziona: You mean which part? Wouldn’t happen. The good job or the money?

Host: Either one.

Ziona: Either one? Okay!

Host: No one will ever accuse me of doing a good job.

Ziona: Okay.

Host: And two; The other part is no one is ever going to hand me five dollars for said saying. But you know, I would look at is as if it were the middle of the night or in the middle of nowhere. Or Christmas day or if it’s Thanksgiving day. And you know, okay.

Ziona: That person should be with his or her family.

Host: Yeah, I mean I could kind of almost go with that one but I don’t know. And then you get in that whole thing at the end of the year we’re supposed to do your annual tip for the people who like cut you hair. I tip her every time to get my hair! You know should I have do again just cause?

Ziona: Well, you know what? You could avoid going and having your hair cut in December. Does that then? But if you do that. Do you still have to stop by and tip?

Host: That’s true.

Ziona: Right, so you really don’t solve the problem.

Host: So maybe I should think about this, and it is a nice connection. Is maybe there is debt relief by just staying indoors the entire month of December.

Ziona: Oh my God! Do you think that that is going to happen?

Host: Oh, no. Absolutely not.

Ziona: It’s not going to happen. People do have the tendency to go out and spend because they want to give gifts. They want to give gifts in the spirit of the holiday.

Host: Oh, absolutely!

Ziona: You know, many people feel that have a strong connection to giving in Christmas and they want to do that. And it’s important.

Host: It is it’s important. It’s good for the person receiving the gift and even better for the person giving the gift. However, we have to learn to know how to give. So as not to destroy ourselves. Not to destroy our financial situation. So just be smart about it.

Host: There was a story that I was watching yesterday. And this you know we’re always trying it’s always about doing what we can to help you stay debt, is what this is all about. And one of the points was brought up is everything from lighting, to the music, to the scents that they still pump into that you smell.

Ziona: Yes, in retails and stores.

Host: And they say that guys are much more likely to be guilty of overspending in the holidays. I just look at this as another reason to stay home and not shop! I’m good with that.

Ziona: Well some people are good about shopping online, as well.

Host: True!

Ziona: And you can get into a lot of mischief online as well.

Host: I think what happens is Ziona.

Ziona: You try to avoid it on the one hand and then you fall for the other.

Host: I think your you’re I think there is an argument to be made that you are just as likely, if not more, to put yourself in debt. Then you see something going that’s only $150. “Okay I can do that!”

Ziona: And you are in another $150, then forgot somebody so there’s and $150.

Host: Right.

Ziona: So what I am saying to save for it during the year and commit yourself to whatever you are able to save. When you’re done, you’re done. Go to the store with cash and when you’re done, you’re done.

Host: You really think that discipline is probably the strongest characteristic you can have in helping to even manage or eliminate your debt?

Ziona: It takes a lot of discipline. If discipline was the only measure for us to deal with that the to be almost easy.

Host: Almost?

Ziona: Okay the problem is that life comes in. So for example in the case of my daughter she didn’t anticipate a flat tire.

Host: That’s true!

Ziona: You know, so okay and then just a simple example. You know, there other things that happens. Life happens. And we have to deal with them so hopefully was saved during the year not only to gift shop for our Christmas gifts but also for the unexpected. Now this is the ideal situation. You and I know that and the ideal situation happens ideally. Not always.

Host: Right, I was going to say never not always!

Ziona: In some instances, it does happen and some people our lucky enough to have plenty and Christmas is not a problem. But there’s a large segment of the population where it is a problem so you know. I’m just asking the audience please don’t overspend! Because then you know what happens? You become my client. Right?

Host: Right.

Ziona: Because there is a solution now I’m not you know and you know me I’m not tell you all. “Oh go spend and come to me and I’ll will make it disappear now.” Try not to become my client. If in your life it has happened to you and you did get into financial problems. There’s a way out this and we can get you out either by filing a Chapter 7. Which is liquidation. Basically we don’t really are going to liquidate all your assets. The name is popular in that this liquidation. But you can keep all your assets that by law cannot be liquidated. So for example your retirement funds. If you have like a 401(k) or an IRA. Your creditors cannot liquidate it. Right?

Host: Right.

Ziona: Your homestead cannot be liquidated by creditors. It can be sold or foreclosed on by the mortgage lender. Because that mortgage lender lent you the money to buy the house. So they are the only creditor and taxes.

Host: True.

Ziona: That’s you know, but credit card lender. A creditor cannot sell your house and cannot foreclose on your house. So Chapter 7, usually even though we call it liquidation we don’t really liquidate. We typically file Chapter 7 for people whose property cannot be liquidated. If the property is over the exemptions, over the law affords to you. Then we put you in a Chapter 13 so that you don’t lose your property so that your property does not get liquidated. Okay? So they get a program it’s called a PLAN. Chapter 13 PLAN. where you pay what you are over on your exemptions. You pay back over 3 to 5 year. Period. So that it’s not such a hardship and you don’t necessarily pay all your debt back. You probably will pay just a portion of should debt back. A portion it is equivalent to how much you bar over your exemptions. How much your property needs protection. Okay? So for example if you Chapter 7 let’s say you own a home homestead and you have a card it’s paid off in the car. If you sold it on the open market will that you $10,000, private party is $10,000, paid off that car is only partially protected and partially and re-parsley to the extent of $1,000.

Host: Oh, my God! Seriously?

Ziona: Seriously. So you have $9,000 they are the not protected. Most people don’t have $9000 to just pay the trustee in bankruptcy in order to save that car. So people in that situation we would put them in a Chapter 13 where you pay those $9,000 to the trustee. Over a five year period. So the payments are not that high that a little bit over $100.00 a month. Really low car payments.

Host: Yeah, true.

Ziona: No interest. No penalty. You pay to the trustee. You keep your car. Whatever your debt was assuming the debt that in this particular scenario was $100,000on credit cards, on medical bills, whatever.

Host: Right.

Ziona: You will pay only that $9,000 in order to protect your car.

Host: Seriously?

Ziona: Sure.

Host: Wow. There so much about the things that I think it’s. Well you tell me, you deal with this every day, but it seems to me there are so many guidelines and outlines inside these laws to protect the consumer. But we just naturally assume that if you if you’re going to do Chapter 13, Chapter 7, whatever. Immediately it all benefits the banks it all, benefits the creditors at it, all benefits. But that is not necessarily the case.

Ziona. You know, filing of bankruptcy is really striking learning I mean striking a balance between the rights, balancing the rights of the debtor and the creditor. You have to be fair to both.

Host: True.

Ziona: You can’t just have one party with all the benefits and other party, just a loser.

Host: No, that doesn’t really work out to well.

Ziona: Nah, for society.

Host: No I don’t that think is going to work long but there are I think the when you look at the fact we’ve discussed several occasions that you can eliminate a second mortgage through bankruptcy. It’s two or three very specific stipulation itself, you know. I never knew that.

Ziona: Well that is a gift isn’t it?

Host: Well I’ll say. If you find yourself, I think what’s funny, the worse you are. And for the more for lack of a better term, the more desperate your situation is, is that bankruptcy comes off to be the better off you are.

Ziona: Yes, the better off you are. Right? So you mentioned getting you know getting rid a second mortgage. Let’s review that scenario where that can happen.

Host: Let’s.

Ziona. Let’s, but or so it your house worth let’s say $100,000. Is an easy number $100,000.

Host: Right.

Ziona: But you owe on $150,000. Okay, now several years ago the situation was a little bit different. So the house, you still all you owe $150,000 but the house of that time was worth $200,000.

Host: Those days.

Ziona: You remember. So okay, so you thought I have $200,000 in the house. It’s a value. I owe $150,000. So that leaves me $50,000 to pay my credit cards that I cannot manage to pay. So you get it? You owe $150,000 to Bank A and you go to Bank B and said “Please I have $50,000 equity in my house I’m having trouble paying my credit card debt. So can I borrow $50,000 to the extent of the value of my house?” You’re fully secured because the value is there. So you can now pay off your credit cards. So okay you owe $40,000 that’s good. We’ll give you an extra $10,000 so you could down may be do some extra stuff to the house. Okay so here’s your $50,000. Bank B is happy. They’re fully secured because the value of the house was $200,000. Then the bottom fell out.

Host: Oh, yeah!

Ziona: Now the house is worth $100,000.

Host. Yay!

Ziona: Yay, right? And you owe Bank A $150,000 and another $50,000 to Bank B. That whole proposition isn’t really playing itself well in that situation.

Host: No.

Ziona: Like we’ve said, we can strip Bank B. Because even Bank B does not have enough equity in the house to pay to pay Bank A if the house were sold, right?

Host: Right.

Ziona: Though the first mortgage is partially secured. Partially unsecured. Secured to the extent of $100,000. That’s the value of the house. And unsecured with relation to the remaining $50,000, but there’s nothing we can do about that situation in bankruptcy laws. This is your homestead. We cannot do anything about that. But Bank B is totally unsecured. There is no value in the house, if it were sold Bank B would get zilch, nothing, zero.

Host: Wow.

Ziona: So in bankruptcy we can strip that second mortgage because it is wholly or totally unsecured.

Host: Yeah, it’s a loss.

Ziona: So it’s a loss to the bank. Because it was a bad loan.

Host: Well the bank immediately pretty much writes that off as a bad loan.

Ziona: It’s a bad loan yes.

Host: Do they come back to you later on say or, do or in some form of the IRS, they send them something saying like “We had this bad loan. We’re writing off the loss.” And then the IRS comes to you and say alright right you had a $50,000 loss.

Ziona: That happens if you negotiate a second mortgage with the bank. They can issue you a 1099, yes. But if you do it through bankruptcy the answer is, No. There are no tax consequences. You walk away from this this extra $50,000. It’s a better situation.

Host: You know, it’s very specific and I think you know we are seeing some property values a lot of property values bounce back a little bit. Their certainly not where they were 10 years ago. And they’re not going to be.

Ziona: In some cases we cannot strip those mortgages anymore because the value of the house back high enough so that even if the second mortgage is only partially secured. That’s it. We cannot strip it. So it has to be in a homestead.

Host: So it has to be wholly unsecured.

Ziona: Wholly unsecured.

Host. God it.

Ziona: So there has to be like a good margin because if we’re talking about the thousand dollars being upside down the judge is not gonna cancel fifty thousand dollars market mortgage on someone’s opinion. That is the thousand dollars different. It really has to have a good margin for a judge to declare that mortgage unsecured. But it happens.

Host: I’m sure.

Ziona: It happens a lot, and it is a relief for the debtor. It is a huge relief.

Host: It’s like I said, the deeper the water sometimes the bigger the relief. The bigger the rescue. It seems to work out a lot better.

Ziona: Right.

Host: There was a trend, this this happened many years ago where I was living in California is it became very common practice for people to put themselves in a debt situation. Where it was hopeless and basically just use the bankruptcy just as a is a bailout. They would intentionally be aware and put themselves in extremely impossibly over their head and that is use it as a, “See you, bye!” And it seemed that those weren’t very much, they weren’t prosecuted that much. Do you see that still?

Ziona: Not at all. I mean someone cannot put themselves in a bad situation by themselves.

Host: True.

Ziona: You cannot over-borrow from a bank if the bank is not complicit. And you remember, I mean all the solicitations we used to get.

Host: Oh, yeah.

Ziona: Piles and piles of paper. Dealing with all of those.

Host: Oh, Re-Fi! We will refinance this.

Zoina: Right.

Host: We will refinance this, do this you and we will refinance your car on top of these things I have make sure all mailing goes to my PO Box. Between the PO Box and the front door of the post office for recycling bins and that if I look. It goes,it goes you don’t look at you don’t see people tempted by it. Especially at the beginning of the year when all those credit card bills start coming in.

Ziona: Right. So do I see a lot of it? No, I don’t see that people putting themselves intentionally into debt. What I see are people losing jobs and see people get into accidents. I see people aging and a lot of medical issues, abandonment, you know divorce of the breakdown of family. I see that. I don’t really see a lot of fraud. And if I can smell it.

Host: You stay away from it.

Ziona: You explain to the client you know why you cannot either take the case or condone what happened. Sometimes the advice is just you better wait. You can’t file today you, may have to wait 10 years to file but you know but you’ve got to be careful. Because you don’t want bring the wrath of the Department of Justice.

Host: And that’s just going to blow up in your face.

Ziona: It would.

Host: And that’s ridiculous for you to take that.

Ziona: No I wouldn’t.

Host: And that would you bring up a great point. That you really cannot do this by yourself you have to have help. You can’t get that far into debt without some sort of bank financial institution helping out for some extraordinary on to commit the fraud that is.

Host: Oh I know, if you totally give absolutely wrong information and fraudulent information and you produce document that are fraudulent. You know, because the bank will ask you to or should ask you to bring pay stubs, prove that you  own other properties, supposedly free and clear of this, the bank is supposed to produced document if the bank is doing. So if you’re committing fraud then you that you really cannot get away bankruptcy they may not catch you right away but they’ll catch you.

Host: They’ll get you!

Zion: They will get you and in bankruptcy it is the really the FBI that investigates against fraud cases.

Host: Oh, dandy.

Ziona: We don’t want to get there.

Host: No, no, no, their not necessarily known for their sense of humor sloppy work.

Ziona: No.

Host: Not too terribly big on that. I think when it comes to the situation I mean there are everyone situation certainly is individual, but I think what we’ve learned. Is the fact that there are a lot of common factors that play into it. It’s really in the process of determining if this is something you should do it. It’s really quite simple and in in the consultation period.

Ziona: I mean I go through you know the questionnaire that I have prepared. We go through the questionnaire you put down your problems you put on your financial problems. We once I have a good picture of what happened and what the financial situation is and I can give you your particular solution that is good for you. At times you can there’s a variety of ways of handling situation. And I lay down for you I you know this is what I can do for you, there’s this situation, and then there’s another one. And basically led the client to let the client bank the decision. I cannot make a decision for my client both where they want to go what they wanted to I just down the road that can do for them. And then they let me know what they want to do.

Host: What I think is the bottom line was is there’s really no pressure and it could be, when we talk about 1,000 times is you walk in there with the burden of the world on your shoulders and you walk out feeling relieved you’re standing a little bit straighter now that there is a light.

Ziona: Take a deep breath and not in the world. There is a solution we can do something for you. This is what can do for you.

Host: And the bottom line is that consultation is going to be free.

Ziona: It is. Isn’t that lovely?

Host: It truly is. I think the hardest part for people is is that admitting the okay I I have to go do I think people can admit to it readily. It’s the it’s the saying, Oh God. I just got here. Almost like you’re admitting defeat.

Ziona: I see a lot of guilt feelings for people for some reason thing that their fault though you know when they are to help you and want to get you out of hot water. Put you back on the right road to financial independence and feeling good. Feeling good about yourself. We just love to do that.

Host: That truly can be as simple as just the conversation and getting the ball rolling and the way that the process moves now. Especially with technology! It’s a very rapid process.

Ziona: It is. It really is. We file you know electronically. It’s no longer running to the courthouse huge reams of papers. So you know.

Host: And the good and cool thing was there for me who wants to get it done expedited. In the moment did you determine that I have I have this attorney, and I am working with this attorney, you need to talk to her and immediately those phone calls are gone.

Ziona: Yeah, you tell them that Ziona Kopalovich which is my attorney and I don’t want to talk to you. And they have to call me.

Host: And in speaking of which. You know in the minute that we have left. How do they get a hold of you?

Ziona: Well I’m going to give a few phone numbers.

Host: Okay!

Ziona: So get your pens. The first number is 727-849-3328 or 352-678-2265. And you know I see people who are my clients, people in my office, and to say I’m at New Port Richey. It’s it 5422 Trouble Creek.

Host: We all know where that is.

Ziona: And, for my Spring Hill clients. I see them 4245 Rachel Blvd. in Spring Hill and it’s very close and they’re available.

Host: Well young lady a job, you did a great job! Congratulations and have a great Thanksgiving.

Ziona: And everybody have a happy, healthy, tasty Thanksgiving!