August 30, 2010
Do You Need To Save Your Home?
If you are behind on your mortgage payments, and cannot get current, Chapter 13 bankruptcy may be a good way to save your home. In Chapter 13 bankruptcy, you pay all or a portion of your debts over time through a repayment plan. Chapter 13 bankruptcy lets you pay off a mortgage "arrearage" (late, unpaid payments) over the length of the repayment plan -- usually three or five years, depending on your income and the time it will take you to meet all the plan's requirements.
In order for this option to work, you'll need enough income to at least meet your current mortgage payment and your other basic expenses at the same time you're paying off the mortgage arrearage. Assuming you make all the required payments up to the end of the repayment plan, you'll avoid foreclosure and keep your home. Give me a call if you want to discuss your situation.
August 23, 2010
Bankruptcy, Defaults And foreclosures Continue To Rise
The Federal Reserve Bank issued a report that paints a mixed picture about consumer debt. People are no longer spending like they used to. Overall debt is dropping. That's the good news. But people are having a difficult time getting rid of the debt they have. In the U.S, the average debt per person is $49,000. Foreclosures and delinquent payments are on the rise. Many people had to file bankruptcy to deal with their debts. Consumer bankruptcies jumped in the last quarter by 34%.
Added to high unemployment and a slowing recovery, the outlook for consumers is not encouraging. Expect expect to see even more bankruptcies for the remainder of the year.
August 13, 2010
Home Equity Loans
The default rate on home equity loans is higher than all other types of consumer loans, according to the American Bankers Association. Home equity delinqencies exceed the defaults on auto loans, personal loans and credit cards. Lenders wrote off $30 billion in home equity loans in 2009.
Some people think they don't have to worry about the banks collecting on these loans. I think that is a big mistake. Its true that the banks seldom foreclose on home equity loans. But the banks can still obtain a judgement and garnish wages and bank accounts. Or they can sell the account to one of many companies that buy bad debts and try to collect them.
A bankruptcy is the best way to protect yourself on these debts. In some cases, people can get rid of the home equity loans by filing a chapter 13.
August 6, 2010
Clean Up Your Credit Report
Once you complete your bankruptcy, you need to check your credit report. The report should state that debts were "discharged in bankruptcy." Sometimes debts discharged in bankruptcy continue to appear as unpaid on the report. What should you do if the debt does not show it was discharged? You need to send a letter to to the credit reporting agency. The letter should dispute the accuracy of the debt. If you don't, the inaccurate information can lower your credit score. That makes it harder to rebuild your credit standing following bankruptcy.
July 31, 2010
Old Credit Card Debts Never Die?
Did you know you can be sued on old credit card debt for 15 years? Even worse, every time you make a payment the 15 year time frame is extended. Some companies specialize in collecting old debts. They try to get people to make payments on debts that are more than 15 years old. The Federal Trade Commission recently issued a report recommending changes to the law. But for now, collectors will still try to collect on the debts. Even if the debts are so old th law will not allow them to sue you.
July 22, 2010
Report Confirms Failure Of Federal Mortgage Modification Program
Only 340,000 homeowners received a permanent modification of their mortgages under the federal program in the last 15 months. This falls far short of the expected three to four million people the program should have helped. Why has the program failed to assist more homeowers? Two reasons were cited in a recent report to Congress. The Treasury Department, the agency that oversees the program, failed to provide clear goals. The program pays mortgage service providers for loans that get modified. But in many cases, the service providers may more money if the family goes through foreclosure.
So for many people, getting rid of credit card, medical and other debt through bankruptcy is the only way to afford house payments.
July 7, 2010
Debt Settlement Often Makes Things Worse
Have you considered using a debt settlement company to deal with your debts? Be careful. The New York Times reported settlement companies typically have fees of 15 to 20 percent of credit card balances. Even worse, they tend to collect fees upfront, regardless of whether a customer's debt is actually reduced.
Since 2004, 21 states have broght 128 enforement actions against debt relief agencies. Consumer complaints received by states attorney generals more than doubled between 2007 and 2009.
Typically, customers make monthly deposits into special accounts while skipping credit card payments. Once the money in the account reaches a sufficient size, the settlement company negotiates a lump sum payment with the creditor.
What they don't tell you is that once you stop making payments, the creditor get angry. Collection calls and lawsuits quickly follow. After getting a law suit, one customer called her settlement company, Financial Freedom. She was told, "we don't have any control over that, and you don't have enough money in your account for us to settle with them." Her account held only $1,470 even though she paid $3,700 into it. The rest went to the settlement company as fees.
June 28, 2010
Walking Away From Home Mortgage Is A Bad Idea
At least if you plan to buy another house. Fannie Mae, the big mortgage finance company said that homeowners who intentionally default because they owe more thn the house was worth would be ineligible for new Fannie Mae-backed loan for seven years.
If you owe more than your house is worth, bankruptcy could allow you to get rid of a second mortgage in some cases. Call me to discuss the details.
June 8, 2010
Documents, Documents, Documents
Many documents are needed for preparing a bankruptcy petition. My clients provide some of the documents and I obtain others. My clients normally provide me with
- six months of paystubs
- three years of tax returns
- six months of bank statements
- vehicle title copies
- retirement statement
The items I usually obtain for clients include
- Deeds and mortgages for Hamilton County real estate
- real estate appraisals for Ohio chapter 13 cases
- credit reports
- counseling services
There are other documents needed in some cases. When you meet with me I provide you with a list of documents that pertain to your case.
May 27, 2010
What Can Bankruptcy Do For Me?
Bankruptcy is very good at
- getting rid of credit card and other unsecured debt
- stopping creditor harassment and lawsuits
- eliminating judgment liens on real estate
- cleaning up your credit history
Some things bankruptcy can't do
- letting you keep real estate and vehicles that you don't want to pay for
- wiping out student loans
- eliminating alimony and child support
- getting rid of recent tax debts
Chapter 13 can help you
- catch up house and vehicle payments
- pay debts based on your monthly income and expenses
May 20, 2010
School Transcripts Protected By Bankruptcy Code
The Bankruptcy Code contains an anti-discrimination provision. It protects your right to a school transcript if you file a bankruptcy case. The school cannot withhold your transcript from you even if you list them as a creditor in your case. Bankruptcy gives you to discharge tuition debts but not student loans.
May 11, 2010
Mortgages: Walking Away
I watched an interesting story on 60 Minutes about people giving up homes. Its understandable if they owe more on the mortgage than the home value. But its not without serious consequences. These include deficiency debt following foreclosure and additional income tax. And a 200-300 point credit score drop. A bankruptcy can shield you from some of these problems.
You can view the video by clicking on the link below.
http://www.cbsnews.com/video/watch/?id=6470184n&tag=api
May 5, 2010
Get Rid Of Second Mortgage In Chapter 13
Chapter 13 allows some people to get eliminate second mortgages. For example, let's say you have a first mortgage of $100,000 and a second mortgage of $25,000. If the appraised value of of your house is $95,000, the $25,000 second mortgage can be eliminated. Chapter 13 bankruptcy permits "stripping" the second mortgage in this case. The reason is that the amount of the first mortgage, $100,000, is greater than the value of the home, $95,000. In this situation, bankruptcy law allows for treating the second mortgage as an unsecured debt.
April 30, 2010
Don't Ignore Citations From City of Cincinnati
I know many property owners who intend to surrender their real estate and file for bankruptcy. But even if you file a bankruptcy case, don't igore a citation from the City of Cincinnati. The City has the power to issue fines that cannot be discharged in bankruptcy. The City issues fines for such things as failing to maintain the premises. In some circumstances, they condemn and tear down the structure, generating expenses that you as the property owner are responsible for. So if you receive a citation, follow the instructions and attend the hearing. The City will consider economic hardship, including bankruptcy. And of course, if you can prove you transferred ownership prior to the issuance of the citation, the City will let you off the hook.
If you are stuck with the fines, chapter 13 bankruptcy allows you to pay them. The bankruptcy court allows monthly payments based upon your ability to pay
April 23, 2010
Short sale vs Foreclosure
Think a short sale is better than a foreclosure on your credit report? It's like the difference between being hit by a train or a bus, according to mortgage broker, Catherine Coy. Either will lead to a drop of 200 to 300 points on your credit report.
The one advantage of short sale over foreclosure is the shorter waiting period before buying another home. Short sale will allow you to get FHA financing withing two years. You will end up waiting from two-to-five years for the same loan following a foreclosure.
You can read more about this at
http://homebuying.about.com/od/4closureshortsales/qt/060907SScredit.htm
April 15, 2010
Foreclosure Rise So Home Values Fall
In a recent interview on CNN, bank analyst Meredith Whitney stated that home foreclosures will continue to rise. As a result, home values will continue to suffer. Meanwhile the Congressional Budget Office issued a report critical of the administration's foreclosure rescue program. The report states that for every home loan modified under the program, ten homes fall into foreclosure. How can we have a real economic recovery while this problem continues to grow?
Here's the link to the CNN story:
http://money.cnn.com/2010/04/14/real_estate/COP_foreclosure_mitigation_report/index.htm
April 5, 2010
More People Choose To Walk Away From Their Homes
The latest bankruptcy statistics show new cases filed in March were at the highest level since the bankruptcy law changed in 2005. More people are choosing chapter 7 over chapter 13. That's because fewer people are choosing to save their homes. That's unfortunate because these abandoned homes add to the already depressed real estate values.
Why are people giving up their homes? I see two factors at work: lower income and declining home equity. Many people struggle to keep up with basic expenses as their employers eliminate jobs, benefits and overtime. As foreclosure rates climb, housing values fall and equity is reduced. So more home owners are walking away from their homes rather than trying to save them.
March 23, 2010
Can I still file for bankruptcy?
Most people have heard about the change to bankruptcy law that went into effect in 2005. Did the law change eliminate bankruptcy? No, it didn't. The law changed the process for filing for bankruptcy. For most of my clients the law requires they produce more documents before they file. Documents like tax returns and pay stubs. They must complete two hour-long classes on line or by telephone. If they have higher than average income, they must show living expenses that prevent them from paying their bills.
The law still allows them to protect assets up to a certain amount. In fact, changes in the law allows people to keep more assets than ever before.
So if you hear than you that the law changed and you can no longer file for bankruptcy, don't believe it.
March 18, 2010
Stop Lawsuits Now!
Can you stop a law suit by filing for bankruptcy? You sure can. Filing a bankruptcy case stops all collection law suits and foreclosures. It protects you from your creditors obtaining garnishments and liens. And it does even more. Your creditors cannot contact you and they cannot collect from you. Filing a bankruptcy case is a powerful tool to protect yourself and your assets.
March 3, 2010
Recovering From The Recession
29 million people currently unemployed or underemployed. 11 million people with home worth less than their mortgages. 5 million people with mortgage debt exceeds their home value by 25% or more. Analysts believe the only thing keeping housing prices from declining further is government incentives that end in the spring.
Its going to take a long time to recover from this recession.
February 22,2010
Foreclosure News Is Not Looking Good
A recent New York Times editorial paints a grim picture of increasing foreclosures. You can see it at http://www.nytimes.com/2010/02/15/opinion/15mon2.html
The points made by the article include
- the value of homes continued to decline in 2009
- foreclosure filings increased by 15% in January compared to a year ago
- 88,000 people had their homes foreclosed in January, a 31% increase from a year ago
- the Obama administration's foreclosure program is not helping
I don't think the foreclosure problem will be solved as long as home values are less than the amounts owed on the mortgages. The banks don't want to write down the value of the mortgages to the current home value. Their balance sheets take a hit and makes them look undercapitalized.
Bankruptcy legislation that allowed judges to reduce a mortgage loan to the value of the home was defeated last year. That is too bad because I believe it would have reversed the trend and forced the lending industry to bite the bullet.
February 16, 2010
Do you have a lot of Medical Debt?
If you do, you are not alone. A study reported in The American Journal of Medicine in 2009 found that 62 percent of American bankruptcies are linked to medical bills. These medical bankruptcies had increased nearly 50 percent in just six years. Astonishingly, 78 percent of these people actually had health insurance, but the gaps and inadequacies left them unprotected when they were hit by devastating bills.
February 11, 2010
Older Americans Bankruptcy Filings Increase Dramatically
According to a recent study, the rate of bankruptcy filings for people 65 and older doubled since 1991. The reason? Increasing financial pressure from health related problems. And the increase in bankruptcy filings is expected to continue. Economic turmoil, instability in the stock market, cuts in social services and increasing health care costs hit seniors hard. You can view the study at www.hlpronline.com/Vol3.1/Thorne-Warren-Sullivan_HLPR3-1.pdf
February 5, 2010
Should I stay or should I go?
The old song by the Clash expresses something felt by a lot of homeowners. New research suggest that when a home's value falls below 75 percent of the amount of the mortgage, the owner starts to think about walking away, even if they can afford the payments. By June, the numbers are exepcted to increase to 5 million homeowners or 10 percent of all homes nationwide.
Though you might be tempted to leave, their are good reasons to stay in your home. Property values will eventually rise over the next several years. Your credit score will suffer if you default on your loan. You will likely be liable to the mortgage company for additional money following a foreclosure.
Chapter 13 can help you catch up missed mortgage payments. The court gives you up to five years to make up the payments while you are protected from your creditors. If you simply can no longer afford your mortgage, chapter 7 can discharge your liability to the mortgage company so that can never collect money from you.
January 27, 2010
Would you pay back your debts if you didn't have to?
Chapter 13 protects you from your creditors while you pay down your debts. And it can reduce your overall payments. Chapter 13 allows you to
- reduce interest payments on vehicle loans to about 5%
- reduce the pay off on vehicle loans over 2.5 years old
- pay off recent tax debts over three-to-five years
- catch up past due mortgage payments
- stop student loan payments for up to five years
Chapter 13 can protect you from your creditors even if you filed another bankruptcy recently. Call me to learn more and see if it can help you.
January 19, 2010
Debt Collection: Frequently Asked Questions
Federal law can protect you from debt collection. The Fair Debt Collection Practice Act prohibits debt collectors from using abusive, unfair, or deceptive practices. A debt collector is someone who regularly collects debts owed to others. The law covers personal, but not business debt.
- A debt collector may not call you at incovenient times, such as before 8:00 AM or after 9:00 PM. They may not call you at work if you tell them you are not allowed to get calls there.
- You can tell the collector to stop contacting you. Send them a letter by certified mail and keep a copy for yourself.
- If an attorney represents you, the debt collector must contact the attorney and not you. If you don't have an attorney, the collector may contact other people but only to learn your address, phone number and place of employment.
January 13, 2010
December Bankruptcy Filings Increase 33%
Consumer bankruptcies increased by 33% in December 2009 over the prior year. A total of 113, 274 cases were filed during the month. Of these cases, 28% were filed under chapter 13 and 72% under chapter 7. The December filings were the highest since the bankruptcy law changes that took effect in 2005.
January 4, 2010
Yes, you can still file a Chapter 7 bankruptcy
I can't tell you how many times people say to me that chapter 7 is no longer available. That the bankruptcy laws changed and eliminated chapter 7. Not true! The changes referred to happened in 2005. Congress passed legislation pushed by the credit industry to "reform" bankruptcy. The legislation made it more time-consuming to prepare a case for filing. It did not eliminate chapter 7. More people file a chapter 7 case than ever before. Over a milliion banruptcy cases were filed in 2009, an increase of 35% over the previous year. So if you feel that you are in over your head with way out, chapter 7 may help you.
December 17,2009
Most Temporary Mortgage Loan Modifications Never Become Permanent
A lot of people hope to get a temporary mortgage loan modification. Lenders are willing to grant them if you tell them your house payment takes about 31% of your income. And lenders don't ask for written proof of income when considering a three month temporary modification. But they do require proof of income in order to make the payment change permanent. Only one in four people can prove their income meets the 31% test. And so most temporary loan changes never become permanent.
December 9, 2009
How To Prepare For Bankruptcy
Here are some simple steps that you can take to avoid common problems.
- Don't use credit. No more credit card purchases, no more loans.
- Don't borrow from your retirement account to pay bills. Many people use up their retirement savings and then file for bankruptcy.
- Don't transfer real estate, savings, vehicles or other assets.
- Get together these documents:
- six months pay stubs
- three years of tax returns
- vehicle titles
- six months of bank statements
- retirement statement
- Don't repay loans to family members or friends.
- Stop paying credit cards and other unsecured debts.Make the payment on vehicles you intend to keep to avoid repossessions.
November 30, 2009
Persistent Unemployment
Employment data continues to look bleak. Job seekers outnumber job openings by six to one. Workers who lose their jobs spend an average of six months unemployed. The rate of unemployment across the country now stands at 10%. Experts expect high unemployment to continue until 2012. All of which leads to more people having to file for bankruptcy protection. Expect the number of bankruptcies to continue to rise.
November 24, 2009
Mortgage Defaults At Record High
Mortgage defaults are at their highest level since 1972. One out of ten homeowners are behind on their mortgage payments. If you add mortgages in foreclosure, the number climbs to 14% of home loans in default. That means one out of every seven homeowners are in default. And these are not just subprime mortgages. Prime fixed-rate mortgages are defaulting at record numbers. This unfortunate trend is predicted to continue until 2011.
August 19, 2009
Is debt consolidation better than chapter 13?
What advantage is there to chapter 13 over debt consolidation? There are several. Chapter 13
- protects all your assets from all your creditors by court order. Debt consolidation cannot protect your from lawsuits, garnishments and judgment liens;
- allow you stop foreclosure and catch up house payments. Debt consolidation does not do this;
- reduces payments on vehicle loans and lower interest to about 5%. You won't get this benefit with debt consolidation;
- consolidate all debts like credit cards, loans and medical bills. Debt consolidation often only covers part of your debts;
- end interest and penalty charges on unsecured debts. Debt consolidation may reduce interest but seldom eliminates it completely.
Payments in most chapter 13 cases are based on your ability to pay. That means the court looks at both your income and monthly living expenses in determining your monthly payment on your debts.
You make payments to the court from three to five years. Then the court wipes out the unpaid portion of debts except for student loans.
So while debt consolidation may seem like the way to go, chapter 13 is much better at protecting you and getting you out of debt.
August 13, 2009
Why don't banks modify more loans?
Lenders modified less than nine per cent of loans of eligible mortgages between March and July. Why is that? The federal government has put up $75 billion in incentive money for banks who rewrite loans. There are a couple of reasons why the federal program is not stopping more foreclosures. Some lenders prefer foreclosure because it delays reporting to investors a loss on the loan. Modifying loans also takes more time and effort than foreclosing. Another reason is that fees and costs generated by delinquencies outweigh the incentive payment the government offers banks. The result is that the number of foreclosures is at an all time high with no end in sight.
So what can be done? Change the bankruptcy laws to allow judges to modify mortgage loans. It would force lenders to get serious about modifying loans. And it would not cost tax payers anything.
July 10, 2009
Fewer mortgage loan modifications
You may recall back in April the federal govenment started the "Making Homes Affordable" program. It offered an incentive payment for each mortgage a lender agreed to refinance. Unfortunately, the number of mortgage modifications has declined each month since the start of the refinancing program.
Its not surprising that lenders don't modify loans because it reduces their income. The baffling part is that lenders are not better off choosing to foreclose rather than refinancing their loans. The average loss on a foreclosed property is 64% of the original loan balance, according to a recent study. So lenders are losing huge sums by foreclosing. But they continue to favor foreclosing over refinancing.
If your bank offers to refinance, don't be surprised if they start foreclosure proceedings. And to me that means the lender is not seriously considering refinancing your mortgage.
July 6, 2009
Inadequate medical insurance
Three out of four people who file bankruptcy because of medical expenses had insurance at the time they got sick. The number of uninsured people has increased as more have fallen victim to deceptive marketing practices and bought what essentially is fake insurance.
The New York Times article describes a man whose $150,000 insurance policy covered his mainly his room and board at the hospital. The insurance provided only limited coverage for his operations, drugs and testing. As a result he had to file a bankruptcy to get rid of everything not covered by his policy.
July 1, 2009
Medical bankrupty study
A recent study published in the American Journal of Medicine had some eye-opening findings. These included
- 62% of all bankruptcies have a medical cause.
- Most medical debtors were well-educated and middle class; three-quarters had health insurance.
- The share of bankruptcies attributable to medical problems rose by 50% between 2001-2007.
- In 1981, only 8% of families filing for bankruptcy did so after serious medical problems. By 2007, that number grew to 50%.
If you are considering filing a bankruptcy due to unpaid medical bills, you are not alone.
June 11, 2009
Feds Investigate Foreclosure Scams
The Federal Trade Commission is seeking the assistance of Ohio homeowners in identifying companies engaged in foreclosure rescue scams for possible law enforcement actions. You can send the agency copies of advertisements, flyers, or other promotional materials from companies promising to stop foreclosures, modify loans, or otherwise save homeowners in financial straits.
Victims of foreclosure rescue or other scams should call the FTC's toll-free hotline, 1-877-FTC-HELP (1-877-382-4357) or file a complaint on-line at www.ftc.gov. By law, the FTC cannot represent individuals in disputes with companies. Consumer complaints, though, help the agency identify businesses whose practices warrant further inquiry.
June 2, 2009
Debt Settlement Companies Sued
People in debt are people who are stressed. Maybe thats why they turn to debt settlement companies for relief with their bills. I have seen scores of people who had a bad experience with these companies. Now the New York attorney general sued two large debt settlement companies. Both were accused of fraud, deceptive business practices and false advertising. Credit Solutions of America enrolled 18,000 people but settled the debts of less than 2,000 of them. Nationwide Asset signed up 2,000 people but only 64 completed the program. Credit Solutions charges a 15% fee of a person's total debt before any money is distributed to creditors.
May 31, 2009
Mortgage defaults on the rise
12% of all mortgages in the country are in default according to the Mortgage Bankers Association. Experts expect the numbers to continue to rise driven in part by an increased number of people who are unemployed. But the numbers suggest that the problem is spreading to include previously stable borrowers. The foreclosure rate on prime fixed-rate mortgages doubled in the last year. You can expect this trend to continue for some time.
May 13, 2009
Foreclosure swindlers
Beware of foreclosure rescue companies. They charge upfront fees to modify loans without doing anything to stop foreclosures. The upfront costs typically run $3,000. The industry is unregulated and there is no way for you to tell if the company is legitimate. Local prosecutors and the Federal Trade Commission have sued dozens of these companies.
You can obtain better results through bankruptcy. Chapt\r 13 stops foreclosure and protects you from your creditors.
May 7, 2009
Worried about credit rating?
Many of my clients worry about rebuilding their credit following bankruptcy. Think of rebuilding credit as a two-step process. The first step is the elimination of past-due debt. That is what bankruptcy does. It cleans up your credit history. The second step is staying current on debts that survive bankruptcy. These debts include debts you agree to repay, like mortgages and vehicle loans. It also includes debts such as student loans that bankruptcy does not eliminate. Staying current on these debts following bankruptcy is the quickest way to rebuild your credit score.
May 5, 2009
Sometimes bankruptcy just makes sense.
Don't wait too long to file a bankruptcy. According to Jane Bryant Quinn, personal finance columnist and author, people wait too long to file for relief. Many people use their retirement or college savings in an effort to keep from filing bankruptcy. It makes sense for them to file a bankrutpcy before they use up all their assets.
People think that bankruptcy ruins their credit scores. Quinn believes the chances are their credit scores are terrible already. The bigger issue is planning a debt-free future that won't lead back to bankruptcy.
May 4, 2009
Bankruptcy legislation dies in the Senate
A law designed to allow bankruptcy judges to modify home mortgage loans failed to pass in the Senate. The legislation could have helped homeowners to reduce their mortgage debt to the value of their homes. As a result of the defeat, continued uncertainty in the value of real estate is likely to prolong the economic recession.
May 4, 2009
Who owns your mortgage?
MERS holds 60 million mortgages but most people have never heard of it. It is a computer registry system created by mortgage companies to help them save money. Unfortunately, for homeowners who need to resolve a problem with theeir mortgage company, MERS can hide who actually owns the mortgage. That means the homeowner may not know how to contact the company when a dispute arises.
April 27, 2009
BANKRUPTCY REFORM STALLED
Bankruptcy legislation designed to help the foreclosure crisis is stalled in the Senate. Republicans oppose giving bankruptcy judges the power to change home mortgages. Under the proposed law, judges could change mortgage principal, interest and payments on home loans. Passing the law would increase the pressure on mortgage lenders to negotiate with home owners outside bankruptcy. Let's hope the legislation passes. It offers a promising way to end the foreclosure mess that is dragging down the economy.
