the7thirteen

  In previous blog posts I’ve discussed decisions from the 11th Circuit Court of Appeals (covering Alabama, Georgia and Florida…all the best SEC teams) on the ability to deal with motor vehicle title pawns in bankruptcy.   You can view the prior posts here and here .   Last year, interpreting Alabama law, the 11th Circuit ruled that a vehicle owner who filed bankruptcy before the expiration of the title pawn redemption could use Chapter 13 bankruptcy to modify the pawnholder’s rights and pay the loan back over time.   If you’re new to the concept, a title pawn allows you to obtain cash, in the form of a high-interest loan, by pawning your motor vehicle title.   If you do not repay the loan and interest by the end of the agreed time – usually a 30-day “redemption period” followed by a 30-day “grace period,” – ownership of the vehicle passes to the title pawn company.   For many years, bankruptcy was an option that consumers could use to hang onto their vehicles by repaying title pawn

  Part 1 of this three-part series focused on mistakes a debtor in bankruptcy could make with respect to property transfers.  Today we focus on one of the most common, and serious, creditor mistakes: Violation of the “automatic stay.” An injunction is an order issued by a Judge that directs someone to do or (more often) stop doing something immediately.   The two things most people know about injunctions are: (1) they aren’t easy to get, and (2) they should be taken seriously.   It’s the – just for fun let’s call it the “injunction function” – that allows the bankruptcy system to work.   A main goal of the bankruptcy system is to allow an orderly procedure, and an orderly procedure isn’t possible if creditors engage in a “free for all” as they compete to dismantle a debtor’s assets.   Whenever a bankruptcy case is filed, the Bankruptcy Code provides for a stay of most types of creditor collection activity.   And this stay happens automatically, making it a special sort of injunctio

  Don’t Do That!   (Part 1)   Panic is a normal reaction when a creditor threatens legal action to collect a debt.   If your house or car is paid off, or you have a large amount of cash in your bank account, those assets could be especially vulnerable to creditor collection activity.   The Bankruptcy Code, and every U.S. state, has a series of “exemptions,” a dollar-amount limit on the value of assets that will be protected from creditors.   If the value of your assets exceed the amount of those exemptions, they might be at risk.   (Here’s a quick example: Assume you own a home valued at $150,000, with no mortgage.   Your state allows a $43,000 “exemption” in your homestead.   A creditor or bankruptcy trustee could force the sale of your home, pay you the first $43,000 in proceeds, and use the rest to pay your creditors!)   Bankruptcy can often protect assets when their value exceeds the exemption limit, but that usually requires the ability to use future income to pay the value