From the San Diego Union Tribune February 29,2012
http://www.utsandiego.com/news/2012/feb/27/calif-ag-asks-freddie-fannie-stop-foreclosures/
California Attorney General Kamala Harris has asked the regulator of mortgage giants Fannie Mae and Freddie Mac to stop foreclosure sales in the state until it reviews whether principal reductions could help homeowners with Fannie- and Freddie-backed mortgages.
Harris made the request to Federal Housing Finance Agency Director Edward DeMarco in a Feb. 24 letter, roughly two weeks after Harris announced her involvement in a historic mortgage settlement between 49 attorneys general and the nation's largest lenders.
The settlement, which still needs judge approval, could help an estimated 466,000 borrowers in California. However, loans backed by Fannie Mae and Freddie Mac would not be affected by the attorney generals' mortgage deal.
"You have consistently declined to authorize principal reduction programs by those government-sponsored enterprises," said Harris in the letter to DeMarco.
Harris' office estimates more than 60 percent of home loans in the state are owned or held by Fannie and Freddie, a significant portion of borrowers who could benefit from having their principal balances reduced.
The Federal Housing Finance Agency could not immediately be reached for comment.
DeMarco, during an oversight committee hearing hearing on Nov. 16, said the FHFA has concluded that reducing principal balances is "not going to be the least-cost approach for the taxpayer" when compared to other alternative-foreclosure programs including principal forbearance, which "zeroes out the interest rate charged on the underwater portion of the mortgage."
This blog is updated by the San Diego Bankruptcy Law Firm. The blog is designed to illuminate, update and educate consumers about their bankruptcy rights. Our staff of Bankruptcy Attorneys help consumers file for bankruptcy protection under Chapter 7 and 13 of the Bankruptcy Code. Feel free to contact our Bankruptcy Lawyers for a free consultation at 619-260-1800 or visit us at www.gobksandiego.com
Wednesday, February 29, 2012
Wednesday, January 18, 2012
As home prices fall, more borrowers walk away
Link to article: http://bottomline.msnbc.msn.com/_news/2012/01/09/9614305-as-home-prices-fall-more-borrowers-walk-away
By John W. Schoen, Senior Producer
When David Martin and his wife bought their north Seattle condo five years ago, they figured they had plenty of time to downsize if they needed to before they retired.
Now, with the property worth roughly $60,000 less than the balance of their mortgage, Martin, 68, has been giving serious thought to just walking away, a process lenders call "strategic default."
"Guilt and morality are one side, and objective financial analysis are on the other side," Martin said. "They're coming to two opposite conclusions. I wonder how many other people are struggling with the same question."
Strategic defaults like the one contemplated by Martin are on the rise. A survey last year by two Chicago-area finance professors, Paola Sapienza at Northwestern University and Luigi Zingales at the University of Chicago, found that roughly three out of 10 mortgage defaults in 2010 were by homeowners who could afford to make their payments, up from 22 percent in 2009.
"It's a looming problem that's in the shadows," said Jason Kopcak, a mortgage trader at Cantor Fitzgerald who advises lenders on how to value the loans on their books. "It's very worrisome to mortgage lenders."
Researchers point to a number of forces that are driving borrowers to walk away from their mortgages. At the top of the list is the estimated 12 million homes that are underwater, meaning the owners owe more than they are worth.
Until recently, borrowers like Martin and many industry analysts held out hope that a housing recovery would reverse the rising tide of "negative equity." But after stabilizing this summer, home prices began falling again, dropping 7.5 percent in the third quarter alone and leaving more homeowners underwater.
Even if prices stabilize this year, millions of underwater borrowers face a long wait before they can sell their homes without having to write a big check to their lender to cover the shortfall. Economists at Goldman Sachs recently forecast that after bottoming in 2013 house prices won't recover their 2006 peak until 2023. (No, that's not a typo.)
Many homeowners simply can't wait that long.
In the early stages of the housing bust, the main causes of defaults included unemployment or other financial setbacks and adjustable mortgages that reset to unaffordable levels, according to researchers. Now, five years into the housing recession, strategic defaults are growing as financially healthy borrowers learn of friends or family who have decided to walk away.
A recent study commissioned by the Mortgage Bankers Association likens the rise in the rate of strategic defaults to the spread of a disease. The longer the crisis drags on, the more homeowners will be exposed to someone who has successfully walked away, making the decision easier, the study suggested. "As fundamentally social animals, humans consciously (and subconsciously) look to their peers when forming opinions, habits and behaviors," the report said.
"Most people who own a home know of someone -- a friend, a colleague a family member -- who has defaulted, especially in housing markets that have taken a big hit," said Jon Maddux, CEO and co-founder of youwalkaway.com, a service that advises homeowners on walking away from their mortgage. "They realize these are not bad people. They're not deadbeats. They're just like them."
Researchers say strategic default is also more common among borrowers who feel no personal connection to the party on the other end of the transaction. Gone are the days when you walked into a bank and met with a lender who shepherded your application and congratulated you when the loan was approved, said Michael Seiler, a finance professor at Old Dominion University and a co-author of the MBA study.
"If you defaulted, it was like you were defaulting on your friend," he said. "Your kids might go to the same school. You all might go to the same church. And you're constantly reminded of who you're defaulting on."
That scenario is a far cry from the modern system of mortgage finance, where loans are sold over the phone or online, chopped up into pieces and then sold to multiple, anonymous investors. Many underwater homeowners who try to negotiate with their lender can't even find out who owns their loan.
"We're finding that people are much more willing to walk away when the other party is unknown or what you might call a 'bad bank,'" said Seiler. "Those are the ones that received a lot of bailout funds or were active in the subprime market, giving loans to people who couldn't afford them and they knew that."
The mortgage lending industry's widespread reluctance to modify loan terms has also changed homeowner attitudes about walking away, according to Maddux.
"They feel much better about doing it if they've tried to contact the lender and the lender won't budge," he said. "They feel justified about it because they've tried to do their best to work it out."
Shifting attitudes about the causes of the housing bust are also playing a role, say researchers. In their surveys, Sapienza and Zingales found that 48 percent of Americans said they would be more likely to default if their bank was accused of predatory lending, even if they are morally opposed to strategic default. Some 11 percent said they’d be less likely to pay their mortgage, and more likely to walk away from their loan, if their lender was cited for using false foreclosure documentation.
The government's ineffective response to the housing crisis, even as it went to extraordinary lengths to backstop banks, has also propelled walkaways, say researchers. Since the housing bubble burst in 2006, some $7 trillion in home equity has evaporated, according to Federal Reserve data. Now, as home prices resume their fall, some homeowners believe lenders should bear at least a portion of the losses inflicted by a housing bust the industry helped create.
"The money didn't disappear," said Martin. "We still owe it to the bank, so the bank will end up getting all of its money back on a loan that no longer has its original value. They're taking no part in the loss."
Widespread reports of lenders' bad behavior, from filing defective paperwork to selling investors bad loans, have begun to erode one of the strongest deterrents to walking away: the sense that skipping out on a debt is morally wrong. University of Arizona finance professor Brent White interviewed hundreds of homeowners for his research on strategic default. He found that, in the eyes of many homeowners, mortgage bankers have lost the moral high ground.
"The reality is: for the bank it is simply an economic transaction," he said. "They have no moral qualm about taking your house, and they feel no moral obligation to modify your mortgage even if you're in a difficult financial situation."
Still, there are much more serious consequences to strategic default than pangs of guilt. Any loan default will damage a borrower's credit score. But some strategic defaulters are finding that the impact isn't as long-lasting as widely believed, according to Maddux.
"You don’t destroy your credit, you wound your credit," he said. "Just like a wound, it heals over time."
Maddux said surveys of the roughly 8,000 customers who have signed up for his service in the last four years found that some strategic defaulters are able to restore their credit in as little as a year and a half.
The bigger risk for walkaway borrowers is that their lender will pursue them in court and win a so-called "deficiency judgment," a court-ordered, full repayment of the mortgage balance. That process is governed by state laws; some so-called "non-recourse" states bar lenders from pursuing such judgments.
But the force of that deterrent is also weakening, according to Sapienza.
"(There's an) increasing perception that lenders are not going after borrowers who walk away," he said.
That perception may be dangerously misplaced, as many lenders continue to aggressively pursue judgments against homeowners who strategically default. That's why there's widespread agreement that homeowners considering it need to get solid legal advice from an experienced real estate attorney in their state.
"There's a process to strategic default and a lot of people don't know how to do it," said Kopcak. "They don't really know what their options are. People really need to talk to a lawyer who knows the process."
For now, Martin is electing to stay in his home and continue paying the mortgage.
"We intend to continue as we are on the basis that we gain nothing from acting at this point," he said in a note. "We think that the real estate market in Seattle will rise by 2013 enough to offer better alternatives. There is a small chance that the federal government will act to offer more rational choices. The real possibility is that the debt might be refinanced in 2013 at a level that might offer enough reduction in payments to allow us to hang on long enough to shore up our financial position."
In short, giving up at this point may be worst of all alternatives. Giving up seems to run counter to our value system, no matter how financially wise experts seem to believe it may be."
By John W. Schoen, Senior Producer
When David Martin and his wife bought their north Seattle condo five years ago, they figured they had plenty of time to downsize if they needed to before they retired.
Now, with the property worth roughly $60,000 less than the balance of their mortgage, Martin, 68, has been giving serious thought to just walking away, a process lenders call "strategic default."
"Guilt and morality are one side, and objective financial analysis are on the other side," Martin said. "They're coming to two opposite conclusions. I wonder how many other people are struggling with the same question."
Strategic defaults like the one contemplated by Martin are on the rise. A survey last year by two Chicago-area finance professors, Paola Sapienza at Northwestern University and Luigi Zingales at the University of Chicago, found that roughly three out of 10 mortgage defaults in 2010 were by homeowners who could afford to make their payments, up from 22 percent in 2009.
"It's a looming problem that's in the shadows," said Jason Kopcak, a mortgage trader at Cantor Fitzgerald who advises lenders on how to value the loans on their books. "It's very worrisome to mortgage lenders."
Researchers point to a number of forces that are driving borrowers to walk away from their mortgages. At the top of the list is the estimated 12 million homes that are underwater, meaning the owners owe more than they are worth.
Until recently, borrowers like Martin and many industry analysts held out hope that a housing recovery would reverse the rising tide of "negative equity." But after stabilizing this summer, home prices began falling again, dropping 7.5 percent in the third quarter alone and leaving more homeowners underwater.
Even if prices stabilize this year, millions of underwater borrowers face a long wait before they can sell their homes without having to write a big check to their lender to cover the shortfall. Economists at Goldman Sachs recently forecast that after bottoming in 2013 house prices won't recover their 2006 peak until 2023. (No, that's not a typo.)
Many homeowners simply can't wait that long.
In the early stages of the housing bust, the main causes of defaults included unemployment or other financial setbacks and adjustable mortgages that reset to unaffordable levels, according to researchers. Now, five years into the housing recession, strategic defaults are growing as financially healthy borrowers learn of friends or family who have decided to walk away.
A recent study commissioned by the Mortgage Bankers Association likens the rise in the rate of strategic defaults to the spread of a disease. The longer the crisis drags on, the more homeowners will be exposed to someone who has successfully walked away, making the decision easier, the study suggested. "As fundamentally social animals, humans consciously (and subconsciously) look to their peers when forming opinions, habits and behaviors," the report said.
"Most people who own a home know of someone -- a friend, a colleague a family member -- who has defaulted, especially in housing markets that have taken a big hit," said Jon Maddux, CEO and co-founder of youwalkaway.com, a service that advises homeowners on walking away from their mortgage. "They realize these are not bad people. They're not deadbeats. They're just like them."
Researchers say strategic default is also more common among borrowers who feel no personal connection to the party on the other end of the transaction. Gone are the days when you walked into a bank and met with a lender who shepherded your application and congratulated you when the loan was approved, said Michael Seiler, a finance professor at Old Dominion University and a co-author of the MBA study.
"If you defaulted, it was like you were defaulting on your friend," he said. "Your kids might go to the same school. You all might go to the same church. And you're constantly reminded of who you're defaulting on."
That scenario is a far cry from the modern system of mortgage finance, where loans are sold over the phone or online, chopped up into pieces and then sold to multiple, anonymous investors. Many underwater homeowners who try to negotiate with their lender can't even find out who owns their loan.
"We're finding that people are much more willing to walk away when the other party is unknown or what you might call a 'bad bank,'" said Seiler. "Those are the ones that received a lot of bailout funds or were active in the subprime market, giving loans to people who couldn't afford them and they knew that."
The mortgage lending industry's widespread reluctance to modify loan terms has also changed homeowner attitudes about walking away, according to Maddux.
"They feel much better about doing it if they've tried to contact the lender and the lender won't budge," he said. "They feel justified about it because they've tried to do their best to work it out."
Shifting attitudes about the causes of the housing bust are also playing a role, say researchers. In their surveys, Sapienza and Zingales found that 48 percent of Americans said they would be more likely to default if their bank was accused of predatory lending, even if they are morally opposed to strategic default. Some 11 percent said they’d be less likely to pay their mortgage, and more likely to walk away from their loan, if their lender was cited for using false foreclosure documentation.
The government's ineffective response to the housing crisis, even as it went to extraordinary lengths to backstop banks, has also propelled walkaways, say researchers. Since the housing bubble burst in 2006, some $7 trillion in home equity has evaporated, according to Federal Reserve data. Now, as home prices resume their fall, some homeowners believe lenders should bear at least a portion of the losses inflicted by a housing bust the industry helped create.
"The money didn't disappear," said Martin. "We still owe it to the bank, so the bank will end up getting all of its money back on a loan that no longer has its original value. They're taking no part in the loss."
Widespread reports of lenders' bad behavior, from filing defective paperwork to selling investors bad loans, have begun to erode one of the strongest deterrents to walking away: the sense that skipping out on a debt is morally wrong. University of Arizona finance professor Brent White interviewed hundreds of homeowners for his research on strategic default. He found that, in the eyes of many homeowners, mortgage bankers have lost the moral high ground.
"The reality is: for the bank it is simply an economic transaction," he said. "They have no moral qualm about taking your house, and they feel no moral obligation to modify your mortgage even if you're in a difficult financial situation."
Still, there are much more serious consequences to strategic default than pangs of guilt. Any loan default will damage a borrower's credit score. But some strategic defaulters are finding that the impact isn't as long-lasting as widely believed, according to Maddux.
"You don’t destroy your credit, you wound your credit," he said. "Just like a wound, it heals over time."
Maddux said surveys of the roughly 8,000 customers who have signed up for his service in the last four years found that some strategic defaulters are able to restore their credit in as little as a year and a half.
The bigger risk for walkaway borrowers is that their lender will pursue them in court and win a so-called "deficiency judgment," a court-ordered, full repayment of the mortgage balance. That process is governed by state laws; some so-called "non-recourse" states bar lenders from pursuing such judgments.
But the force of that deterrent is also weakening, according to Sapienza.
"(There's an) increasing perception that lenders are not going after borrowers who walk away," he said.
That perception may be dangerously misplaced, as many lenders continue to aggressively pursue judgments against homeowners who strategically default. That's why there's widespread agreement that homeowners considering it need to get solid legal advice from an experienced real estate attorney in their state.
"There's a process to strategic default and a lot of people don't know how to do it," said Kopcak. "They don't really know what their options are. People really need to talk to a lawyer who knows the process."
For now, Martin is electing to stay in his home and continue paying the mortgage.
"We intend to continue as we are on the basis that we gain nothing from acting at this point," he said in a note. "We think that the real estate market in Seattle will rise by 2013 enough to offer better alternatives. There is a small chance that the federal government will act to offer more rational choices. The real possibility is that the debt might be refinanced in 2013 at a level that might offer enough reduction in payments to allow us to hang on long enough to shore up our financial position."
In short, giving up at this point may be worst of all alternatives. Giving up seems to run counter to our value system, no matter how financially wise experts seem to believe it may be."
Tuesday, December 20, 2011
Preparing For Bankruptcy
by Adrian Lapas, Eastern North Carolina Bankruptcy Attorney
Link to article: http://www.bankruptcylawnetwork.com/preparing-for-bankruptcy/
When you are considering a trip, usually, you make substantial preparations in anticipation of that trip. You make travel arrangements; you make sure you have a place to stay; you make reservations for any activities in which you wish to participate. You will often make significant plans and preparations for any “big” event. Bankruptcy is no different. It is a significant life event that demands some thought and preparation before you embark on it.
In talking with potential bankruptcy clients, it seems that a lot of them wait until the last minute before contacting a bankruptcy lawyer to find out how bankruptcy may help them. While visiting a bankruptcy lawyer most likely does not rank high on most people’s “bucket list,” if you are struggling financially, it most likely makes sense to determine if and how bankruptcy can help you sooner rather than later.
So, how can “preparing” for bankruptcy help? First, you will need to have the fees for the lawyer and for the court available. For now, for a chapter 7 filing, just the filing fee is $306.00. Additionally, before you file, you must complete a consumer credit counseling session and get the certification that must be filed with the court. If you “fail to plan” for your bankruptcy filing by finding out what you need ahead of time, when your car is on the verge of getting repo’d, you may not have the time and/or money to retain a bankruptcy lawyer.
Second, you can carefully go over your income and expenses and see where the trouble lies. Certainly a bankruptcy lawyer can help you identify the problem (with appropriate information) but you also need to know how you got into this financial mess. Some problems are easy to identify–temporary loss of income; extraordinary medical bills; overspending for a bit, etc. Bankruptcy can assist in overcoming those past problems but you need to be aware of the problem so that you can avoid it in the future. Bankruptcy is designed to be a “fresh start.” You can greatly assist in obtaining that “fresh start” by breaking or modifying some of the habits that perhaps got you here in the first place.
Third, make sure you know who you owe and how much. Find out if there is any collateral associated with the debts and gather up loan documents. Your lawyer will need this but, more importantly, you need to know your own financial picture. Credit reports are freely available and can be a big help. Also, if lawsuits or foreclosures have been filed against you, make sure you have that paperwork–all of it! It is important!
Finally, change your mindset. In dealing with individuals facing financial problems, it is often much more difficult instead of dealing with distressed businesses. That is because a business looks at assets and liabilities and can make a rational decision as to whether keeping an asset is worth the corresponding liability. Understandably, people are attached to their “things.” But, after all, they are just “things” and you have to consider carefully whether retaining a “thing” is worth the potential stress and headache. As an example, if you suffered a decrease in income and you have two relatively late model cars. No one wants to give up one or two cars but sometimes it is better to surrender a vehicle or two in order to keep your house (if that is important to you). There will be some emotional attachment to some “things” but it is imperative that you do this. Determining what is important to you is important for your bankruptcy lawyer in setting achievable goals for your bankruptcy filing.
Finally, do some research. There is a lot of information about bankruptcy that is freely available. However, you should exercise extreme caution in considering the information. Not that the information is inaccurate (some info may be outdated or simply inapplicable) but it takes an experienced profession to know what is appropriate and what is not. But, by familiarizing yourself with some basic bankruptcy information, you will be in a better position to appreciate and assist your bankruptcy lawyer in setting realistic and achievable goals.
After all, the real goal of a bankruptcy filing is a “fresh start.”
Link to article: http://www.bankruptcylawnetwork.com/preparing-for-bankruptcy/
When you are considering a trip, usually, you make substantial preparations in anticipation of that trip. You make travel arrangements; you make sure you have a place to stay; you make reservations for any activities in which you wish to participate. You will often make significant plans and preparations for any “big” event. Bankruptcy is no different. It is a significant life event that demands some thought and preparation before you embark on it.
In talking with potential bankruptcy clients, it seems that a lot of them wait until the last minute before contacting a bankruptcy lawyer to find out how bankruptcy may help them. While visiting a bankruptcy lawyer most likely does not rank high on most people’s “bucket list,” if you are struggling financially, it most likely makes sense to determine if and how bankruptcy can help you sooner rather than later.
So, how can “preparing” for bankruptcy help? First, you will need to have the fees for the lawyer and for the court available. For now, for a chapter 7 filing, just the filing fee is $306.00. Additionally, before you file, you must complete a consumer credit counseling session and get the certification that must be filed with the court. If you “fail to plan” for your bankruptcy filing by finding out what you need ahead of time, when your car is on the verge of getting repo’d, you may not have the time and/or money to retain a bankruptcy lawyer.
Second, you can carefully go over your income and expenses and see where the trouble lies. Certainly a bankruptcy lawyer can help you identify the problem (with appropriate information) but you also need to know how you got into this financial mess. Some problems are easy to identify–temporary loss of income; extraordinary medical bills; overspending for a bit, etc. Bankruptcy can assist in overcoming those past problems but you need to be aware of the problem so that you can avoid it in the future. Bankruptcy is designed to be a “fresh start.” You can greatly assist in obtaining that “fresh start” by breaking or modifying some of the habits that perhaps got you here in the first place.
Third, make sure you know who you owe and how much. Find out if there is any collateral associated with the debts and gather up loan documents. Your lawyer will need this but, more importantly, you need to know your own financial picture. Credit reports are freely available and can be a big help. Also, if lawsuits or foreclosures have been filed against you, make sure you have that paperwork–all of it! It is important!
Finally, change your mindset. In dealing with individuals facing financial problems, it is often much more difficult instead of dealing with distressed businesses. That is because a business looks at assets and liabilities and can make a rational decision as to whether keeping an asset is worth the corresponding liability. Understandably, people are attached to their “things.” But, after all, they are just “things” and you have to consider carefully whether retaining a “thing” is worth the potential stress and headache. As an example, if you suffered a decrease in income and you have two relatively late model cars. No one wants to give up one or two cars but sometimes it is better to surrender a vehicle or two in order to keep your house (if that is important to you). There will be some emotional attachment to some “things” but it is imperative that you do this. Determining what is important to you is important for your bankruptcy lawyer in setting achievable goals for your bankruptcy filing.
Finally, do some research. There is a lot of information about bankruptcy that is freely available. However, you should exercise extreme caution in considering the information. Not that the information is inaccurate (some info may be outdated or simply inapplicable) but it takes an experienced profession to know what is appropriate and what is not. But, by familiarizing yourself with some basic bankruptcy information, you will be in a better position to appreciate and assist your bankruptcy lawyer in setting realistic and achievable goals.
After all, the real goal of a bankruptcy filing is a “fresh start.”
Tuesday, December 13, 2011
Unpaid Bills Land Some Debtors Behind Bars
Unpaid Bills Land Some Debtors Behind Bars
by SUSIE AN
Link to article: http://www.npr.org/2011/12/12/143274773/unpaid-bills-land-some-debtors-behind-bars?sc=tw
Although debtors' prisons are illegal across the country, it's becoming increasingly common for people to serve jail time as a result of their debt.
Collection agencies are resorting to some unusually harsh tactics to force people to pay their unpaid debt, some of whom aren't aware that lawsuits have been filed against them by creditors.
Take, for example, what happened to Robin Sanders in Illinois.
She was driving home when an officer pulled her over for having a loud muffler. But instead of sending her off with a warning, the officer arrested Sanders, and she was taken right to jail.
"That's when I found out [that] I had a warrant for failure to appear in Macoupin County. And I didn't know what it was about."
Sanders owed $730 on a medical bill. She says she didn't even know a collection agency had filed a lawsuit against her.
"They say they send out these court notices, and nobody gets them," Sanders says.
She spent four days in jail waiting for her father to raise $500 for her bail. That money was then turned over to the collection agency.
Similar stories have been reported in Indiana, Tennessee and Washington.
Here's how it happens: A company will often sell off its debt to a collection agency, generally called a creditor. That creditor files a lawsuit against the debtor requiring a court appearance. A notice to appear in court is supposed to be given to the debtor. If they fail to show up, a warrant is issued for their arrest.
Beverly Yang, a legal aid attorney with Land of Lincoln Legal Assistance, says most debtors don't know their rights.
In fact, she says, some judges don't even know debtors' rights, which could result in the debtor being intimidated into a pay agreement.
"I've seen this even when I'm standing in the court room as the legal aid attorney," Yang says. "The judge will ask if they can pay, how about $150 a month. How about $75 a month? How come you can't even pay $50 a month? Did you apply for a job last week?"
Leveraging Payments
The Federal Trade Commission received more than 140,000 complaints related to debt collection in 2010. That's nearly 25,000 more than the previous year.
Yang says some creditors are eager to use harsh tactics. "Whatever the creditors or the creditors' attorneys can do to leverage some kind of payment, it will help their profits enormously because they have, literally, millions of these."
Kevin Kelly, president of the Illinois Creditors Bar Association, says members of his organization only issue warrants in extreme situations.
"There's an assumption in what you're saying that we'd rather throw them in jail than work with them," he says. "And I don't find that to be true at all."
Sometimes it's the debtor who's keeping information from the collectors, Kelly says. That prevents important documents from getting to the right place.
He says most collectors want to make reasonable arrangements, but it's difficult when the vast majority don't respond to the notices sent to them.
Illinois Attorney General Lisa Madigan thinks more can be done. It's illegal in Illinois for people to be sent to jail because they're in debt. But Madigan thinks some creditors are abusing the law.
"You wouldn't be in that predicament if you didn't have debt," Madigan says. "But for being in debt, you wouldn't be in prison. And that essentially equates to being thrown in jail, debtors' prison."
She says courts need to be certain they have correct information to serve notices. Madigan also says judges need to be properly educated in these proceedings to prevent a debtor from needlessly going to jail.
The Illinois attorney general also says the state is investigating agencies that it thinks are abusing the law.
As for Sanders, she has a remaining balance of about $160 on her medical bill. But at least she now knows she won't have to go to jail for it.
by SUSIE AN
Link to article: http://www.npr.org/2011/12/12/143274773/unpaid-bills-land-some-debtors-behind-bars?sc=tw
Although debtors' prisons are illegal across the country, it's becoming increasingly common for people to serve jail time as a result of their debt.
Collection agencies are resorting to some unusually harsh tactics to force people to pay their unpaid debt, some of whom aren't aware that lawsuits have been filed against them by creditors.
Take, for example, what happened to Robin Sanders in Illinois.
She was driving home when an officer pulled her over for having a loud muffler. But instead of sending her off with a warning, the officer arrested Sanders, and she was taken right to jail.
"That's when I found out [that] I had a warrant for failure to appear in Macoupin County. And I didn't know what it was about."
Sanders owed $730 on a medical bill. She says she didn't even know a collection agency had filed a lawsuit against her.
"They say they send out these court notices, and nobody gets them," Sanders says.
She spent four days in jail waiting for her father to raise $500 for her bail. That money was then turned over to the collection agency.
Similar stories have been reported in Indiana, Tennessee and Washington.
Here's how it happens: A company will often sell off its debt to a collection agency, generally called a creditor. That creditor files a lawsuit against the debtor requiring a court appearance. A notice to appear in court is supposed to be given to the debtor. If they fail to show up, a warrant is issued for their arrest.
Beverly Yang, a legal aid attorney with Land of Lincoln Legal Assistance, says most debtors don't know their rights.
In fact, she says, some judges don't even know debtors' rights, which could result in the debtor being intimidated into a pay agreement.
"I've seen this even when I'm standing in the court room as the legal aid attorney," Yang says. "The judge will ask if they can pay, how about $150 a month. How about $75 a month? How come you can't even pay $50 a month? Did you apply for a job last week?"
Leveraging Payments
The Federal Trade Commission received more than 140,000 complaints related to debt collection in 2010. That's nearly 25,000 more than the previous year.
Yang says some creditors are eager to use harsh tactics. "Whatever the creditors or the creditors' attorneys can do to leverage some kind of payment, it will help their profits enormously because they have, literally, millions of these."
Kevin Kelly, president of the Illinois Creditors Bar Association, says members of his organization only issue warrants in extreme situations.
"There's an assumption in what you're saying that we'd rather throw them in jail than work with them," he says. "And I don't find that to be true at all."
Sometimes it's the debtor who's keeping information from the collectors, Kelly says. That prevents important documents from getting to the right place.
He says most collectors want to make reasonable arrangements, but it's difficult when the vast majority don't respond to the notices sent to them.
Illinois Attorney General Lisa Madigan thinks more can be done. It's illegal in Illinois for people to be sent to jail because they're in debt. But Madigan thinks some creditors are abusing the law.
"You wouldn't be in that predicament if you didn't have debt," Madigan says. "But for being in debt, you wouldn't be in prison. And that essentially equates to being thrown in jail, debtors' prison."
She says courts need to be certain they have correct information to serve notices. Madigan also says judges need to be properly educated in these proceedings to prevent a debtor from needlessly going to jail.
The Illinois attorney general also says the state is investigating agencies that it thinks are abusing the law.
As for Sanders, she has a remaining balance of about $160 on her medical bill. But at least she now knows she won't have to go to jail for it.
Thursday, December 8, 2011
Bankruptcy is the Best Way to Save Your Home
Bankruptcy is the Best Way to Save Your Home
by Brett Weiss, Maryland Bankruptcy Attorney
Link to article: http://www.bankruptcylawnetwork.com/bankruptcy-is-the-best-way-to-save-your-home/
You want to save your home. Which is the best way to stop a foreclosure, get caught up on your monthly payments, and save your home? Is it loan modification? A workout? Or a bankruptcy?
A recent article, “The Home Ownership Experience of Households in Bankruptcy” by Professor Sarah W. Carroll, of the University of Pennsylvania Law School and Wenli Li, of the Federal Reserve Bank of Philadelphia, provided the first in-depth analysis of the home ownership experience of home owners in Chapter 13. Its conclusions mirror what most bankruptcy attorneys’ personal experience has been: Chapter 13 is one of the most effective ways to let you save your home.
The study followed homeowners who filed for Chapter 13 between 2001 and 2002 in New Castle County, Delaware, from the time of their filing to October 2007. (Since most Chapter 13 plans last five years, this was a fair trial period.) After analyzing the data, it found two important results:
First, the Chapter 13 filing was not always the solution: 27.9 percent of filers lost their houses in foreclosure despite filing for bankruptcy. This is typically a result of poor cashflow. If job loss, or illness continues and there is not enough money coming into the household, the house will be lost regardless of filing bankruptcy or not. Many of the homeowners in this group will end up converting their cases to one under Chapter 7, so that they can wipe out any personal liability for the mortgage(s), as well as most of their other debts.
However, when compared with homeowners who did not file, debtors who filed for bankruptcy were able to stay in their homes for, on average, 27.7 additional months, over two years. This figure includes those who ended up losing their homes.
So, if you’re behind on mortgage payments, consider a Chapter 13–it may let you stay in your home a lot longer than other options.
by Brett Weiss, Maryland Bankruptcy Attorney
Link to article: http://www.bankruptcylawnetwork.com/bankruptcy-is-the-best-way-to-save-your-home/
You want to save your home. Which is the best way to stop a foreclosure, get caught up on your monthly payments, and save your home? Is it loan modification? A workout? Or a bankruptcy?
A recent article, “The Home Ownership Experience of Households in Bankruptcy” by Professor Sarah W. Carroll, of the University of Pennsylvania Law School and Wenli Li, of the Federal Reserve Bank of Philadelphia, provided the first in-depth analysis of the home ownership experience of home owners in Chapter 13. Its conclusions mirror what most bankruptcy attorneys’ personal experience has been: Chapter 13 is one of the most effective ways to let you save your home.
The study followed homeowners who filed for Chapter 13 between 2001 and 2002 in New Castle County, Delaware, from the time of their filing to October 2007. (Since most Chapter 13 plans last five years, this was a fair trial period.) After analyzing the data, it found two important results:
First, the Chapter 13 filing was not always the solution: 27.9 percent of filers lost their houses in foreclosure despite filing for bankruptcy. This is typically a result of poor cashflow. If job loss, or illness continues and there is not enough money coming into the household, the house will be lost regardless of filing bankruptcy or not. Many of the homeowners in this group will end up converting their cases to one under Chapter 7, so that they can wipe out any personal liability for the mortgage(s), as well as most of their other debts.
However, when compared with homeowners who did not file, debtors who filed for bankruptcy were able to stay in their homes for, on average, 27.7 additional months, over two years. This figure includes those who ended up losing their homes.
So, if you’re behind on mortgage payments, consider a Chapter 13–it may let you stay in your home a lot longer than other options.
Tuesday, November 15, 2011
San Diego Bankruptcy Law Firm to Offer Free Bankruptcy Services to San Diego Veterans.
Link: http://news.yahoo.com/san-diego-bankruptcy-law-firm-offer-free-bankruptcy-160845474.html
San Diego Bankruptcy Law Firm to Offer Free Bankruptcy Services to San Diego Veterans.
PRWeb – Wed, Nov 9, 2011...
San Diego Bankruptcy Law Firm is proud to announce that it has agreed to offer free bankruptcy services to San Diego veterans by partnering with Thomas Jefferson School of Law Veterans Legal Assistance Clinic.
San Diego, CA (PRWEB) November 09, 2011
San Diego Bankruptcy Law Firm, located in Mission Valley, is proud to announce that it has agreed to offer bankruptcy services to San Diego Veterans free of charge. San Diego Bankruptcy Law Firm has partnered with Thomas Jefferson School of Law Veterans Legal Assistance Clinic. The Veterans Clinic will pre-screen eligible veterans and refer those who qualify to San Diego Bankruptcy Law Firm.
San Diego Bankruptcy Law Firm was founded by Thomas Jefferson School of Law alumni Todd F. Williams and Scott M. Schlegel and is managed by Maureen A. Enmark. “We were looking for a way to give back to our community and veterans have been particularly affected by the downturn in the economy. This is our way of saying thank you for their service,” says bankruptcy attorney -Todd Williams.
The Veterans Clinic provides limited legal assistance, as well as full service legal representation, to the residents and alumni of Veterans Village of San Diego. Thomas Jefferson School of Law students represent the veterans under supervision of the law school faculty. Veterans Village is a highly successful, residential program that provides housing, substance abuse, mental health, and job training services to formerly homeless veterans.
Bankruptcy can help veterans by stopping foreclosure, eliminating debt and protecting assets. “Sometimes filing bankruptcy is all it takes to provide a little breathing room that will help veterans get back on track,” says bankrupcy lawyer -Scott Schlegel.
The Veterans Clinic will pre-screen potential candidates and refer those who qualify to San Diego Bankruptcy Law Firm. According to Steve Berenson, a professor at Thomas Jefferson School of Law, who runs the Veterans Clinic: “we hit our capacity fairly quickly each semester and have to turn away some cases that we might otherwise be able to handle.”
“This is not the first time San Diego Bankruptcy Law Firm has stepped up to help San Diegans in need,” says Maureen Enmark. When Kerry Steigerwalt’s Pacific Law Center closed its doors, San Diego Bankruptcy Law Firm offered to take over cases and charge the client only the remainder of what they owed to Pacific Law Center.
San Diego Bankruptcy Law Firm is a Better Business Bureau Accredited Business with an A+ rating. They are located in Mission Valley and can be reached at 877-GOBK619 or 619-260-1800. You can also visit their website at http://www.gobksandiego.com
San Diego Bankruptcy Law Firm to Offer Free Bankruptcy Services to San Diego Veterans.
PRWeb – Wed, Nov 9, 2011...
San Diego Bankruptcy Law Firm is proud to announce that it has agreed to offer free bankruptcy services to San Diego veterans by partnering with Thomas Jefferson School of Law Veterans Legal Assistance Clinic.
San Diego, CA (PRWEB) November 09, 2011
San Diego Bankruptcy Law Firm, located in Mission Valley, is proud to announce that it has agreed to offer bankruptcy services to San Diego Veterans free of charge. San Diego Bankruptcy Law Firm has partnered with Thomas Jefferson School of Law Veterans Legal Assistance Clinic. The Veterans Clinic will pre-screen eligible veterans and refer those who qualify to San Diego Bankruptcy Law Firm.
San Diego Bankruptcy Law Firm was founded by Thomas Jefferson School of Law alumni Todd F. Williams and Scott M. Schlegel and is managed by Maureen A. Enmark. “We were looking for a way to give back to our community and veterans have been particularly affected by the downturn in the economy. This is our way of saying thank you for their service,” says bankruptcy attorney -Todd Williams.
The Veterans Clinic provides limited legal assistance, as well as full service legal representation, to the residents and alumni of Veterans Village of San Diego. Thomas Jefferson School of Law students represent the veterans under supervision of the law school faculty. Veterans Village is a highly successful, residential program that provides housing, substance abuse, mental health, and job training services to formerly homeless veterans.
Bankruptcy can help veterans by stopping foreclosure, eliminating debt and protecting assets. “Sometimes filing bankruptcy is all it takes to provide a little breathing room that will help veterans get back on track,” says bankrupcy lawyer -Scott Schlegel.
The Veterans Clinic will pre-screen potential candidates and refer those who qualify to San Diego Bankruptcy Law Firm. According to Steve Berenson, a professor at Thomas Jefferson School of Law, who runs the Veterans Clinic: “we hit our capacity fairly quickly each semester and have to turn away some cases that we might otherwise be able to handle.”
“This is not the first time San Diego Bankruptcy Law Firm has stepped up to help San Diegans in need,” says Maureen Enmark. When Kerry Steigerwalt’s Pacific Law Center closed its doors, San Diego Bankruptcy Law Firm offered to take over cases and charge the client only the remainder of what they owed to Pacific Law Center.
San Diego Bankruptcy Law Firm is a Better Business Bureau Accredited Business with an A+ rating. They are located in Mission Valley and can be reached at 877-GOBK619 or 619-260-1800. You can also visit their website at http://www.gobksandiego.com
Thursday, October 27, 2011
Why Bankruptcy is NOT a Dirty Word
By: Michael Goldstein
Link to article: http://www.jdsupra.com/post/documentViewer.aspx?fid=55bd06ef-ed39-427c-9ca8-747a0e0ea9c4
Unfortunately, in recent years many debt consultation companies, loan modification companies and real estate and mortgage brokers have attempted to mislead the public into thinking that bankruptcy is a dirty word and can end your credit life. These companies are trying to create the propaganda that “bankruptcy” is a word best whispered to yourself in the center of a Middle East war zone. The truth of the matter is that bankruptcy is actually the best course of action when you are struggling with debt and bills you can not handle without some form of assistance.
I am not going to sugar coat bankruptcy because if you are in debt no matter if it is credit card or mortgage issues; it is not a great place to be in. However, bankruptcy law is the Federal sponsored and regulated course of action to help consumers get out of their debt and start their lives again. Unlike bankruptcy, debt consultation companies, loan modification companies and real estate and mortgage brokers are not sponsored or regulated by the Federal Government.
Bankruptcy law is as old as our country. In fact, the concept of bankruptcy was so important to our Founding Fathers that they gave Congress the power to create bankruptcy courts and rules in Article III of the United States Constitution. The drafters did not wait until Article Ten or Twenty but added it as early as Article three in the U.S. Constitution.
If bankruptcy was such a terrible thing to do, the Federal Government would certainly have removed it from the laws and not sponsored it. Congress would certainly not have amended the rules in 1978, or again in 2005 to add more complexities to the Bankruptcy code or Title XI. So, the little dirty word is not
bankruptcy, rather all of the other marketing schemes to get you to spend more money are the dirty parts of the consumer debt business. As a consumer debt attorney, and a founder of a debt relief agency, I would suggest you go right to source to fix your debt with a bankruptcy counsel rather than waste both time and money with companies that are not sponsored by the Federal Government, or that must follow specific rules and regulations to ensure consumers and creditors are treated fairly and equitably.
If you are thinking about entering into a Debt Settlement program you need to be very careful. Based upon what I have seen as a consumer debt advocate over the past ten years, I am personally aware of only a few companies out of the many that advertise debt settlement on the internet that I would trust to try to resolve a debt for my friends and family.
The key to remember in all of this is that if you feel that your debts have spun out of control and you can not catch up with your credit card payments, or mortgage payments, or some other form of debt, your best bet is to set up an appointment and speak with a bankruptcy lawyer today and find out what options are available to you.
Link to article: http://www.jdsupra.com/post/documentViewer.aspx?fid=55bd06ef-ed39-427c-9ca8-747a0e0ea9c4
Unfortunately, in recent years many debt consultation companies, loan modification companies and real estate and mortgage brokers have attempted to mislead the public into thinking that bankruptcy is a dirty word and can end your credit life. These companies are trying to create the propaganda that “bankruptcy” is a word best whispered to yourself in the center of a Middle East war zone. The truth of the matter is that bankruptcy is actually the best course of action when you are struggling with debt and bills you can not handle without some form of assistance.
I am not going to sugar coat bankruptcy because if you are in debt no matter if it is credit card or mortgage issues; it is not a great place to be in. However, bankruptcy law is the Federal sponsored and regulated course of action to help consumers get out of their debt and start their lives again. Unlike bankruptcy, debt consultation companies, loan modification companies and real estate and mortgage brokers are not sponsored or regulated by the Federal Government.
Bankruptcy law is as old as our country. In fact, the concept of bankruptcy was so important to our Founding Fathers that they gave Congress the power to create bankruptcy courts and rules in Article III of the United States Constitution. The drafters did not wait until Article Ten or Twenty but added it as early as Article three in the U.S. Constitution.
If bankruptcy was such a terrible thing to do, the Federal Government would certainly have removed it from the laws and not sponsored it. Congress would certainly not have amended the rules in 1978, or again in 2005 to add more complexities to the Bankruptcy code or Title XI. So, the little dirty word is not
bankruptcy, rather all of the other marketing schemes to get you to spend more money are the dirty parts of the consumer debt business. As a consumer debt attorney, and a founder of a debt relief agency, I would suggest you go right to source to fix your debt with a bankruptcy counsel rather than waste both time and money with companies that are not sponsored by the Federal Government, or that must follow specific rules and regulations to ensure consumers and creditors are treated fairly and equitably.
If you are thinking about entering into a Debt Settlement program you need to be very careful. Based upon what I have seen as a consumer debt advocate over the past ten years, I am personally aware of only a few companies out of the many that advertise debt settlement on the internet that I would trust to try to resolve a debt for my friends and family.
The key to remember in all of this is that if you feel that your debts have spun out of control and you can not catch up with your credit card payments, or mortgage payments, or some other form of debt, your best bet is to set up an appointment and speak with a bankruptcy lawyer today and find out what options are available to you.
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