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A Zombie Deed is a piece of real estate that you thought was gone, foreclosed, lost forever and no longer yours, but to your dismay, you find that you still own the property long after you thought it was gone. For example, you know you have missed mortgage payments and you know that your mortgage lender would not give you the mortgage modification that you thought would help you save your home. Foreclosure has started and you have moved from the home to beat the court marshals from forcibly moving you out. You may have also filed bankruptcy to discharge the obligation of the mortgage debt and avoid the possibility of any deficiency judgment making you responsible for the difference between the value of the home and the debt. But none of this helps you until the title to the house leaves your name and goes to the bank. That means that the foreclosure action has completed and the property has been auctioned or that a Surrender of Real Estate in bankruptcy has been recorded on the land records where the property is located. There have been a number of cases where the bank had changed direction after starting a foreclosure and stopped just short of completion. The homeowners never find out about it because they have left the property in anticipation of the foreclosure. But the bank has decided that it has too many houses in inventory, or that the home isn’t worth the cost of pursuing it, or that there are title problems caused by improper paperwork. With over 5 million foreclosures in the last three years, these things happen. Or in other cases, the homeowners have filed bankruptcy and thought that the bankruptcy discharged somehow. While bankruptcy does discharge the debt, it does not remove the lien from the property or act to transfer title. The consequences of a Zombie Deed means that you remain responsible for the priority taxes and homeowner association charges. You remain responsible for the condition of the property which may cause a nuisance for trash, overgrown vegetation, or vandalism. Worse yet, if someone gets hurt on that property, you could be sued for the injuries; all when you thought it was long gone. In short, do not assume you have taken care of everything by walking away from your home.

I see people make many mistakes when filing for bankruptcy. It could be in their paperwork or it could be failing to plan appropriately. Here are the top two things that people do wrong when filing for bankruptcy protection. Using Your IRA, 401K or other Qualified Retirement Plan. Bankruptcy exemptions protect your IRA, Inherited IRA, 401K, etc. from creditor’s claims. Why then would you use that money to pay unsecured creditors. In a nutshell, these assets are protected from creditor’s claim either inside or outside of bankruptcy. So, if a debt collector tells you that your 401K will be garnished, he is lying. Also, if your kids are hitting you up for a loan, and your only source for the funds are your retirement plan, it may hurt, but you need to tell them no. Preferential Transfers (Paying back friends or relatives before filing) The bankruptcy code was designed to protect both debtors and creditors. In this way, the debtor will be protected from their creditors and creditors can be assured that actions taken by the debtor will be scrutinized to prevent debtors from liquidating all their assets prior to filing. Well, a preferential transfer to a friend or family member prior to filing for bankruptcy protection is a big no-no. It’s not that we don’t want Mom and Dad to be repaid, it’s just that we don’t want them to get paid to the detriment of the other creditors. Here, the bankruptcy can and will sue the friend and family member to get the money back into your bankruptcy estate.

The short answer to this question is “no,” you cannot cancel your bankruptcy filing and somehow undo the process. You may be able to dismiss your case, or your case may be dismissed by the court, but a dismissal is not the same thing as undoing the process. In other words, you cannot annul your bankruptcy filing like you might annul a marriage. When you file your bankruptcy petition, a public record is created about your filing. At a minimum, your name and the last 4 digits of your Social Security number will be associated with a bankruptcy case number. This bankruptcy case filing will be picked up by one or more of the credit bureaus and under federal law, your bankruptcy case number will remain on your credit profile for up to 10 years. If you file bankruptcy and change your mind, it may be possible to dismiss your case or allow your case to be dismissed, but, again, a dismissal does not remove the evidence of your filing from the public record or from your credit report. Your ability to voluntarily dismiss your bankruptcy case will depend on whether you filed a Chapter 7 or 13. As a general rule, the Bankruptcy Code allows you to voluntarily dismiss your Chapter 13, although you should never do so without the benefit of counsel. You cannot voluntarily dismiss Chapter 7 without specific approval of the judge in your case and if you schedule non-exempt assets (or if the trustee suspects you have non-exempt assets), you may be forced to remain in your bankruptcy case even if you want out.

If your income is above the median income for your household size, you must complete a “means test” when you file your bankruptcy petition. To determine whether you are above or below the median income, your gross income for the six month period prior to the month you file bankruptcy is considered. So if you file October 31, the six month period under examination is April through September. If you file, November 1, the six month period excludes April but adds October. If you get the exact same paycheck each payday, this won’t make a difference. But what if you got a lump sum bonus or a retroactive pay raise in one of your October paychecks? In that case, you could be under the median today, but well over it November 1. Some income may not need to be included in determining median income. Social Security income, for example, is excluded. Just because you are over the median income and have to complete the means test, it doesn’t necessarily mean that you can’t file a Chapter 7. Be sure to work with an experienced bankruptcy lawyer to see what your best options are.

After you file a bankruptcy case, you are required to attend a meeting of creditors. This is scheduled for about a month after your petition is filed, and is usually the only appearance you will need to make during the bankruptcy process. Your attorney should prepare your bankruptcy petition and schedules with plenty of attention to detail and accuracy. Before you sign your petition, you should carefully review it and correct any items that are incorrect or incomplete. At the meeting of creditors, the bankruptcy trustee will ask you some questions which you will answer under oath. Tell the truth. Listen to the question. Let the trustee finish before you start speaking. Answer in as few words as possible. The trustee will already know much about your financial affairs. Before your scheduled meeting, your attorney sends the trustee several documents. Prior to the meeting the trustee has reviewed your deed, mortgage, vehicle titles, and your most recent tax returns, in addition to your bankruptcy petition and schedules. So when you meet with the trustee, s/he may not have many question for you other than “When you signed your bankruptcy petition and schedules did you review them? And were they true and accurate? Were there any errors or omissions?” You may be asked if you had sold any property in the last few years, or how much of a tax refund you expect to get. The trustee could ask if you have suffered any injuries that you could sue someone for, or if you expect to receive an inheritance. The trustee will also discuss with you what will happen to any property you own that is not protected by an exemption. The meeting of creditors often takes less than ½ hour.

This is NOT true. In fact, nothing could be further from the truth. The minute you file bankruptcy, the Bankruptcy Court issues an order telling all of your creditors to leave you alone. No more phone calls. No more collection letters. No more lawsuits. No garnishments. No repossessions. No foreclosures. Nothing. No actions whatsoever against you or your assets. This order has a name. It is called the “Automatic Stay,” and it is issued pursuant to Title 11 of the United States Code, Section 362. The Automatic Stay prohibits your creditors from taking any action that could be considered an attempt to collect a debt form you or your assets. Once you file bankruptcy, the creditor is not even allowed to call you or send you letters. In addition, the creditor must stop any collection attempts already started. The Automatic Stay is very powerful, and puts the full weight of the United States Courts to work for you, to make sure your creditors leave you and your assets alone. If a creditor violates the Automatic Stay, you have the right to bring the creditor before the Court for Contempt of Court, and to be compensated accordingly. This is not a hollow right. Bankruptcy Court Judges do not take kindly to creditors who ignore their Order-the Automatic Stay-and these Judges have been known to punish creditors severely. Very simply, once you file for bankruptcy, creditors must leave you alone or suffer the consequences.

There exists something referred to as the “wild card” exemption. This is a very useful exemption and what allows most bankruptcy debtors to keep all their property. Section 522(d) of the Bankruptcy Code states, in relevant part: The following property may be exempted […] (1) The debtor’s aggregate interest, not to exceed $22,975 in value, in real property or personal property that the debtor or a dependent of the debtor uses as a residence, in a cooperative that owns property that the debtor or a dependent of the debtor uses as a residence, or in a burial plot for the debtor or a dependent of the debtor. [….] (5) The debtor’s aggregate interest in any property, not to exceed in value $1,225 plus up to $11,500 of any unused amount of the exemption provided under paragraph (1) of this subsection. Subsection (5) is the wild card exemption. These two subsections work together to allow the debtor who doesn’t use the so-called federal homestead to exempt almost $13,000 in “any property”. This, coupled with the other asset-specific exemptions found elsewhere in Section 522, usually allows a debtor to exempt all his property in bankruptcy.

There are two main federal bankruptcy exemptions for “unmatured” insurance contracts; 11 U.S.C. § 522(d)(7) and (d)(8): (7) Any unmatured life insurance contract owned by the debtor, other than a credit life insurance contract. (8) The debtor’s aggregate interest, not to exceed in value $11,525 less any amount of property of the estate transferred in the manner specified in section 542(d) of this title, in any accrued dividend or interest under, or loan value of, any unmatured life insurance contract owned by the debtor under which the insured is the debtor or an individual of whom the debtor is a dependent. So, what’s the bottom line of these exemptions? First, an unmatured life insurance contract is one in which the insured person hasn’t died yet. These insurance exemptions have at times provoked controversy, but the gist is that subsection 7 protects the basic insurance contract, i.e. the right to receive proceeds on the death of the insured. Consequently, it is a good idea to claim an exemption in any term life policy under this subsection so that if the insured dies within a period which would give the bankruptcy estate an interest in the proceeds-for example, in the 180 days after the filing of the petition-these proceeds would be exempted without need to resort to the alternative exemption for life insurance proceeds under subsection 11 of Section 522 (which includes a reasonableness cap). Similarly, the basic insurance contract of a whole life situation should also be exempted with subsection 7, but since a whole life policy has an additional facet to them, a savings or cash surrender value, this additional value is addressed in subsection 8. Subsection 8 provides an exemption for this cash value but a monetary cap of the amount that can be exempted in bankruptcy. It is important to note that, depending on the other property of the debtor, it may be possible to exempt additional value under the “wildcard” exemption, but the current $12,250 is the only insurance-specific exemption for whole life cash value.