Bankruptcy Filings in Utah Bucking National Trend.

According to an article in the Salt Lake Tribune found here the filings for bankruptcy are up in the State of Utah.  This is opposed to the national trend where filings are down nationally. 

The article quotes Jason Kilborn, a visiting scholar at the American Bankruptcy Institute and professor at the John Marshall Law School in Chicago.  He stated that “What you’ll often see is that more people will file for bankruptcy if they think the economy is improving,” Kilborn said, explaining that by eliminating or reducing debt those consumers believe they will be better positioned to take advantage of the turnaround. “And it could be that some consumers in Utah see the economy a little different than elsewhere.”

He also says in the article that Utah's home foreclosure rate could be playing a part in the amount of bankruptcies that are being filed.  He contends that in other states there is an enormous backlog of home foreclosures to be processed, which allows many consumers to stay in their homes, even though they are seriously in arrears on their payments. 

However, it appears from his research that the "foreclosure process in Utah is clipping along" at a more normal rate and may be more quickly affecting consumers there than in other parts of the country.

The article states that RealtyTrac, which tracks foreclosure filings nationally, reported that Utah had among the 10 highest rates of filings for the third quarter of 2011.

Citing to statistics maintained by the bankruptcy court in the State of Utah, of the 14,552 Utah consumers who sought bankruptcy court protection from their creditors through the first nine months of this year, 33 percent filed for Chapter 13, according to the U.S. Bankruptcy Court for Utah. The remaining 67 percent filed for Chapter 7. 

Chapter 13 gives people the opportunity to formulate a plan to repay all or most of the time only a portion of their obligations over time.  Chapter 7 involves a trustee liquidating a debtor’s assets and distributing the proceeds to creditors.

What might be the best course for you can only be determined by an experienced bankruptcy attorney.  Contact Red Rock Legal Services in St. George or Cedar City for a free consultation regarding your options and how to protect yourself through bankruptcy.  

Stripping a Second Mortgage

What follows is a simplistic analysis of stripping of second mortgages in Chapter 13 bankruptcies. Your individual circumstances will definitely play a role in what you ultimately decide to do.
If you are like many homeowners who owe more on their mortgage than the home is worth, you may be able to eliminate, or "strip," a second mortgage through the process of Chapter 13 bankruptcy.The United States Supreme Court has ruled that you cannot “strip” a second mortgage in a Chapter 7 bankruptcy.
However there are some cases, where you can strip your second mortgage so long as and because it is wholly unsecured. This means that the value of your house must be equal to or less than the amount owed on your first mortgage.
For example, if you owe $175,000 on your first mortgage and $75,000 on your second mortgage, but your home is valued at $160,000, there is not enough value in your house to secure the second mortgage.
A value decline such as this is not uncommon in today’s real estate market. The real estate bubble caused many homes purchased during the height of that market to have values that have come crashing down in the past 3 years. Although most home mortgage lenders do not oppose the process when presented with the facts regarding the mortgage balances and home values, this process can be complex.
A second or subsequent lien on your property can only be stripped once you have completed the chapter 13 repayment plan. This means making all of the payments for the entire repayment period, receiving a discharge in your case and staying current on your first mortgage during your Chapter 13 bankruptcy.

Chalk one up for Debtors -- HOA fees ARE dischargable in Chapter 13

In a memorandum decision, Judge William T. Thurman, the Chief Judge for the Bankruptcy Court for the State of Utah held that fees and assessments of a home owners association are dischargable under Chapter 13 if the debtor receives a "full compliance" discharge. Red Rock Legal Services represented the debtors in this case where an HOA in St. George, Utah attempted to have the automatic stay modified or a finding made by the court that the stay did not apply at all to the claim of the HOA. This would have allowed them to attempt to collect on the HOA fees/assessments in state court by seeking a judgment against the debtors.
Red Rock objected to the request on the basis, supported by the court's opinion that the HOA's claim was one that was addressed as a claim in the debtors' plan and that a review of the statute indicated that the exemption to discharge of post-petition HOA fees/assessments found under 11 U.S.C. sec. 523(16) did not apply to a case of a discharge under 11 U.S.C. sec. 1328(a). We will update with a link to the opinion as soon as the court has it uploaded to its site. However, if you would like to get a copy in advance, email me and I would be happy to send you a copy.