Bankruptcy

Complex Issues Often Arise in Personal Bankruptcy

By Chris Kramer

Bankruptcies come in all shapes and sizes. Some are relatively simple, while others pose particularly troublesome issues. While legal counsel can be beneficial for any type of bankruptcy, many people find experienced attorneys especially helpful during complex filings.

In response to a growing trend of bankruptcy in the Phoenix metropolitan area, which is on pace for around 30,000 filings this year, The Arizona Republic recently listed a few of the most vexing bankruptcy issues:

Divorces

During divorce proceedings, spouses will sometimes agree to shield each other from certain debts, which often include debts incurred during marriage. However, if one spouse later files for bankruptcy, creditors could go after the other spouse for payments on specific debts, despite the previous agreement between the divorced couple.

So, by shielding a spouse from debts during a divorce proceeding, an individual could prevent that debt from being dischargeable during bankruptcy. As a result, couples going through a divorce should tread carefully if one party expects to file for bankruptcy afterward. There may be options to protect both parties and discharge the debt, but these are sometimes best determined by experienced attorneys.

Homeowners Association Fees

Some filers for bankruptcy have recently learned that homeowners associations can still collect unpaid fees, even after those filers have given up their homes. While this scenario may sound implausible, The Arizona Republic offered a fairly common example.

If a homeowner buys a home using a mortgage and fails to make payments on time, that individual may simply leave the home while the lender begins foreclosure proceedings. During this lag, a homeowners association may continue to charge the former homeowner membership fees.

These fees may continue to be charged until the bank completes a foreclosure, which may take several months. If you are facing a foreclosure or a bankruptcy and fear a similar problem, you may wish to contact a bankruptcy attorney.

Faulty Deeds that Leave Loopholes for Trustees

Another complex issue can arise when a homeowner files for bankruptcy. Even if the homeowner makes his or her mortgage payments on time, court-appointed trustees may look for flaws in the mortgage paperwork in order to push their claim in front of a creditor?s.

While this scenario may seem far-fetched, it has occurred, and title companies that complete mortgage paperwork do make mistakes. If such a mistake occurs, and the mortgage lender can?t prove its claim, the trustee could simply sell the home. Again, this is not a terribly common problem, but seeking legal counsel can help avoid such a financial nightmare.

Additional Resources

To read in-depth analysis of further complex issues posed by personal bankruptcy, check out these materials provided by the American Bar Association.

Full post as published by The Bankruptcy Blog on June 20, 2010 (boomark / email).