California Bankruptcy Attorney Blog

As fair debt collection attorneys in Riverside County, we have long believed that the Fair Debt Collection Practices Act is overdue for updates. The federal law, which provides consumer protections from unfair, abusive or harassing debt collectors, was written in 1977, before the advent of the Internet or cell phones and without adjustments for inflation. That's why we were pleased to see a Government Accountability Office report released Oct. 21 calling for major changes to the law that would modernize it and help boost enforcement efforts, which it said have fallen very short. As financial columnist Michelle Singletary wrote Oct. 28, the report echoes a similar call from the FTC itself earlier this year to improve the FDCPA.

The GAO found major problems with the FDCPA for nearly everyone involved in debt collection, including debt collectors themselves, consumers, the FTC and the state court systems. The FTC gets more complaints about the debt collection industry than about any other industry, the report said -- but over the past decade, it has taken formal enforcement action just 32 times. Meanwhile, abusive practices that blatantly break the law have proliferated, and the resulting debt collection cases are now a majority of all civil cases in many state courts, creating a burden on the civil justice system. And of course, the 32-year-old FDCPA does not acknowledge new communications techniques or new practices in the debt collection industry. Among the recommendations the GAO made:

• Congress should allow the FTC to have rule-making power, freeing Congress from the burden of updating the law regularly.
• The FDCPA should be changed to clarify what counts as proof of what is owed.
• Debt collectors should be required to tell debtors who the original creditor was.
• Debt collectors should be required to explain which parts of the debt are principal, which are interest and which are fees.
• Debt collectors should be required to notify consumers of their rights under the FDCPA.

Our Paramount FDCPA attorneys are delighted that the federal government is giving this issue some long-overdue attention. After more than 30 years, attorneys like us and the courts have had ample chances to examine the law and figure out where it falls short. As the GAO found, one of the biggest problems with the FDCPA is enforcement -- or lack thereof. Due to lack of resources or lack of enthusiasm, the FTC has taken action on only a tiny fraction of abuses, leaving private attorneys and state consumer protection agencies to pick up the slack. As a result, collection agencies have learned that they are free to blatantly break the law, knowing that they face no serious penalties unless a large number of victims happen to know their rights. We strongly support giving the FTC rule-making power so it can make adjustments to the law to clarify it, reflect new technologies and keep penalties up with inflation.

Continue reading "GAO Report Joins FTC in Calling for Overhaul of Fair Debt Collection Practices Act" »

As Anaheim loan modification attorneys active in foreclosure issues throughout the housing downturn, we have come to believe that mortgage servicers don't truly want to modify loans. So we were pleased to see that belief backed up in a recent report from the National Consumer Law Center, a nonprofit legal services organization focused on consumer protection. HousingWire.com reported Oct. 20 that the NCLC believes lenders see a bigger financial advantage in allowing foreclosure than they do in modifying loans. This flies in the face of the conventional wisdom, repeated throughout the media and business world, that foreclosure is an expensive burden that lenders would rather avoid.

In reality, the report says, servicers have a better financial incentive to allow foreclosures to go through. According to the article, the NCLC found that a loan modification costs servicers money for fixed overhead (such as hiring people to process applications), property valuations and other administrative costs. By contrast, a foreclosure may cost money to the mortgage holder -- which is frequently not the servicer -- but it also offers potential profit for loan servicers that can sell the property later on. And servicers face no legal or financial penalty for foreclosing, even when they could have worked with the borrower to avoid the foreclosure. In fact, the article said, financial incentives may even discourage servicers from allowing short sales, since foreclosures are sometimes faster and more profitable.

Diane Thompson, an attorney and author of the report, said the NCLC came to its conclusions by examining how and when mortgage servicers get paid during all steps of the foreclosure process. That is, she said, "...the way that a servicer gets paid entirely pushes the servicer to proceed with a foreclosure and not to do a loan modification." As Redlands loan modification lawyers, we are not at all surprised that profit motivates servicers' decisions on loan workouts. As we wrote on this blog earlier this year, the Boston Fed came to the exact same conclusion in its own study of loan modifications. Neither study explicitly connected this lack of a financial incentive with the terrible customer service for borrowers seeking a loan workout, but the connection seems clear to us. Under pressure from the federal government, mortgage servicers have paid lip service to loan modifications while erecting massive bureaucratic barriers ensuring that few borrowers will actually get one.

Continue reading "New Report Says Mortgage Servicers Find Foreclosure Cheaper Than Loan Modifications" »

Our Rancho Cucamonga debt collection abuse attorneys have little sympathy for collection agencies that admit they violated the Fair Debt Collection Practices Act. So we were pleased to see an Oct. 19 article on Law.com reporting that a federal appeals court was also not impressed. According to the article, the Eleventh U.S. Circuit Court of Appeals ruled that a debt collector could not defend itself from a FDCPA lawsuit by claiming it broke one part of the law in order to comply with another. The court's written opinion compared this logic to the famous, though possibly false, Vietnam War quote from a military officer who said he would burn a village in order to save it.

The case sprang from a debt collection effort against Brenda Edwards. Over four months, Niagara left more than a dozen messages on Edwards' answering machine, at least two of which did not state who was calling or why. This put Niagara in violation of the FDCPA, which requires debt collectors to clearly state to debtors that their messages are from a debt collector. Niagara deliberately did not comply with this provision because it was concerned that doing so on an answering machine would violate another FDCPA provision requiring them not to disclose debts to anyone but the debtors and any spouses or attorneys they may have. After Edwards sued, Niagara argued that its intentional choice not to identify itself was a bona fide error. The Eleventh Circuit rejected that argument on legal grounds, adding that it was not reasonable to violate a law in order to comply with it.

As Pico Rivera collection agency abuse lawyers, we applaud this ruling. The FDCPA exists to protect consumers from overreaching and abuse by debt collectors. Allowing these companies to use one part of the FDCPA as an excuse to flout another part undermines both the letter and the spirit of the law. Furthermore, the Eleventh Circuit wrote, there is no guarantee that leaving a message would violate privacy provisions -- and if there were, collection agencies would still have the option of not leaving messages. As Judge Edward E. Carnes wrote, the FDCPA does not guarantee the right to leave messages, even though this may require changes to the way debt collectors do business. The U.S. Supreme Court may soon decide a similar case, and we very much hope this case will help guide its decision.

Continue reading "Ruling Says Debt Collectors May Not Break One Part of Law to Comply With Another" »

As Placentia loan modification attorneys, we are fully aware of the problems homeowners have encountered when they try to take advantage of the Home Affordable Modification Program. Lenders participating in the program, which is part of the Obama Administration's efforts to fight foreclosure, have been criticized repeatedly for their low participation and numerous incorrect denials to borrowers applying under the program. An Oct. 15 article by the Associated Press offers one explanation for these problems: HAMP gives lenders very little oversight, few obligations to borrowers and establishes no appeals process for borrowers who were incorrectly turned down. In fact, the article said, lenders did not even have to explain their reasons for rejecting applications until recently.

The article illustrated this problem with the story of Maryland homeowner Towana Gooch. After losing her job, she was pleased to enroll in HAMP, which her bank, Wells Fargo, said would cut her mortgage payment in half. But after her first payment, which was withdrawn automatically from her bank account, Wells Fargo kicked her out of the program, saying her payment was seven cents short. It later reversed that, saying her income was the real problem. In any case, she couldn't make the larger mortgage payments once she was kicked out of HAMP. Wells Fargo was scheduled to foreclose on Gooch's townhouse Oct. 16, but held off after a call from the Associated Press.

The Treasury Department, which administers HAMP, doesn't have firm numbers on how many homeowners have been wrongly rejected from programs because of clerical errors like this. However, the department acknowledges that it is a problem, and in fact has asked mortgage buyer Freddie Mac to audit banks' decisions, so it can work with lenders to correct problems. The government has also set up complaint hotlines and asked lenders to set up internal appeals processes. And, starting in December, all participating lenders will be required to make public reports explaining why certain homeowners were not accepted into the program. The Obama administration asked Freddie Mac to investigate rules that would penalize lenders for wrongful denials.

We're pleased to see the federal government taking action against lenders whose mistakes have devastating consequences for the families behind these mortgages. But as Riverside County loan modification lawyers, we believe this neatly illustrates the problems that come from failing to put significant oversight in place when dealing with lenders. The housing crash that led to this foreclosure crisis had many causes, but poor (and sometimes predatory) lending decisions by banks was one of them. HAMP itself was started in part because lenders were not willing or able to make enough loan modifications on their own. And numerous borrowers have come to the media with horror stories like Gooch's, involving mixed messages, bureaucracy and mistakes that led them into foreclosure. After all that, we think it's clear that lenders are either too reluctant or too incompetent to be trusted when borrowers' homes and futures are at stake.

Continue reading "HAMP Foreclosure Prevention Slowed Because Lenders Lack Accountability" »

As Long Beach consumer bankruptcy attorneys, we have seen problems with the 2005 bankruptcy reform bill since before it passed. That's why we were pleased to see an article from the Providence Journal Oct. 20 about a proposed federal bill that would reverse some of its most damaging effects for people who are driven bankrupt by medical debt. Sen. Sheldon Whitehouse, D-RI, has proposed a Medical Bankruptcy Fairness Act that would allow debtors to keep at least $250,000 worth of equity in their homes; waive credit counseling and the "means test" that limits who may file for Chapter 7; and allow debtors to delay paying attorney fees until after they complete the bankruptcy. Studies have found that medical debt is primarily responsible for 60% of all individual bankruptcies in the United States.

In support of the bill, a subcommittee of the Senate Judiciary Committee heard testimony from a Rhode Island couple who went bankrupt after their son was hospitalized for 13 months and underwent three surgeries for his cystic fibrosis. Kerry and Patrick Burns had health insurance, but it didn't cover all the needs of their son, Finnegan, who died this year at the age of 4 1/2. They also lost income when they took leave from their jobs to be with him; Kerry Burns eventually lost her job as a social worker. They drained their retirement accounts, sold belongings and eventually fell into default on their mortgage, enduring up to 60 calls a day from creditors. Kerry Burns told the senators that she found the required credit counseling portion of the bankruptcy process "demeaning and demoralizing," and that she had to borrow the money to file for bankruptcy.

Our San Bernardino individual bankruptcy lawyers support this effort to make bankruptcy a little easier on people who are driven there by medical problems beyond their control. Ideally, we would prefer a bill easing these requirements for all filers, particularly since research shows that the widespread abuses the reforms were meant to curb never existed in the first place. But as Elizabeth Edwards, another witness at the hearing, said, patronizing questions about managing money better are especially inappropriate for families driven into bankruptcy by a serious illness. Nobody chooses to get sick, lose their job because of illness or have essential health care coverage denied by a health insurance company.

Continue reading "Senate Considers Bill to Change Bankruptcy Process for People With Medical Debt" »

As Riverside County loan modification attorneys, we keep a close eye on how mortgage-industry regulations -- or the lack of them -- affect ordinary people like our clients. That's why we were pleased to see an Oct. 13 article in the Los Angeles Times saying the governor has signed seven different bills intended to protect consumers when they buy, refinance, sell or pay off their homes. The bills came all at once because the legislative session is ending, prompting lawmakers to send multiple bills to the governor for approval. Among the laws, all of which were sponsored by Democrats, are:

• A bill increasing the penalty for lying on a mortgage application from a misdemeanor to a felony.
• A law requiring more and clearer information for people interested in reverse mortgages, a product allowing homeowners to draw out their equity.
• A law allowing buyers of foreclosed homes to choose their own escrow officers.
• A new registration program for appraisal firms.
• Licensing requirements for organizations that originate residential loans.
• A law requiring lenders to provide mortgage loan documents in the same language they used for verbal negotiations.

The centerpiece of the article, however, was AB 260, authored by Democrat Ted Lieu of Torrance. An important provision of the law is intended to end the practice among mortgage brokers of steering borrowers toward expensive subprime loans even though they qualify for prime loans. This is important because many brokers are actually paid a bonus for directing borrowers into more expensive loans than the cheapest they qualify for. AB 260 also bans negative amortization loans, which are loans with such low minimum payments that the loan balance can actually grow; limits prepayment penalties; and authorizes state officials to enforce federal lending laws. Gov. Schwarzenegger rejected a similar bill from Lieu last year, but changed his mind this year despite strong opposition from mortgage industry groups.

Our Placentia loan modification lawyers are particularly pleased to see the provision relating to mortgage brokers, despite the predictable outcry from the mortgage industry. Consumers without any special knowledge of the mortgage industry may believe that mortgage brokers are working in their best interests. But when brokers' compensation is tied to "upselling" more expensive loans, they are actually encouraged to work against the borrowers' interests -- which would be a conflict in any field. Worse, the upselling encourages brokers to create more subprime and exotic loans, the same loans that are widely believed responsible for the housing crash, particularly in Southern California. We are also very pleased to see the law requiring that mortgage documents' language match the language of the mortgage negotiations, an overdue measure that's nothing but common sense in a state as diverse as California.

Continue reading "Governor Signs Laws Intended to Curb Fraudulent and Unfair Practices in Mortgage Lending" »

As the economy has worsened and more consumers have had trouble paying off debt, our Fullerton fair debt collection attorneys have received increasingly large numbers of calls from clients who say they were targets of abusive and harassing debt collection efforts. According to an Oct. 14 article from the Associated Press, state governments are also receiving these calls -- and making laws in response. The governments of Arkansas, Colorado, Idaho, New York and North Carolina have all recently passed laws restricting how debt collectors may interact with debtors, and several other states have similar legislation pending. In many cases, the AP said, the laws focus on companies that buy bad debt and then use

North Carolina's law was intended to help people like Eleanor Chittum, 63, of Winston-Salem. According to records, she owed $1,439 on a credit card, but paid the debt off by transferring it to another card. She was therefore surprised to hear from a collection agency that demanded she pay $1,800 to settle the same debt. Nonetheless, the debt collector filed a lawsuit against her; it claims in court filings that it does not have to prove she owes the debt. In response to cases like these, North Carolina passed a law requiring collection agencies to produce documents proving the debt in any lawsuit they file. Other laws focus on preventing foul language, threats of deportation or arrest, or cases of mistaken identity. A New York City ordinance passed this year requires debt collectors to state the amount of the debt, the name of the original creditor and the name of the company they represent.

As Rialto debt collector harassment attorneys, we have known for years that collection agencies routinely use illegal and underhanded tactics. Now that the economy is worse and the number of victims has increased, complaints are up. Every American consumer is protected by the federal Fair Debt Collection Practices Act, which forbids debt collectors from using abusive language, threats, harassment and other unethical tactics -- but as Chittum discovered, the Act has loopholes. Some states have already stepped up to close those loopholes, and we are delighted to see many others following suit as state attorneys general are flooded with complaints. We agree that people should pay what they owe, but nobody should be frightened or harassed into paying debts they do not owe by illegal and unethical behavior.

Continue reading "Many States Responding to Aggressive Debt Collectors With Consumer Protection Laws" »

As Fountain Valley loan modification lawyers, we have followed with great interest the reports from the Congressional Oversight Panel responsible for tracking the results of last year's $700 billion federal "bailout." That panel gave its report to Congress Oct. 9, and while the bulk of the news was not as encouraging as hoped, one piece of data stuck out. According to an analysis of the data by the Huffington Post Oct. 13, one mortgage servicer, Ocwen Financial, is responsible for about 45% of the loan modifications that have been converted from temporary to permanent under the federal Home Affordable Modification Program.

The finding is a bright spot for mortgage servicers, who have been roundly criticized by government and the media for their seeming reluctance to make modifications. HAMP was announced in the spring, but as of August, most loan servicers had modified fewer than 20% of their loans that were eligible for modifications. According to the analysis, Ocwen had 1,058 borrowers enter trial modifications through HAMP; more than 72% of those trials became permanent. By contrast, the average conversion rate for all servicers was 1.26%. It also has a re-default rate -- which measures how many modified loans go back into default -- of nearly half the rate for the industry as a whole. Regulators said the amount of data they have on permanent modifications is small, but they were still concerned about the industry's very low conversion rate.

One fact in the article stuck out for our Chino loan modification attorneys: Ocwen believes that making loan modifications under HAMP is a way for the firm to make money. There are other reasons cited in the article for Ocwen's much greater success, but we believe this positive attitude goes a long way toward explaining it. As we have written here several times before, we believe servicers' actions show that they don't really want to make loan modifications. How else to explain how so many major corporations could continually lose paperwork, route customers from phone to phone and incorrectly deny modifications? At least one study from the Boston Fed backs up this belief. Ocwen's data shows that, despite excuses from other servicers, mortgage companies are fully capable of modifying loans if they're willing to put some effort and resources into it.

Continue reading "Report Finds One Mortgage Servicer Responsible for Half of HAMP Permanent Loan Modifications" »

As Whittier loan modification attorneys, we were disappointed to see a recent article exposing mortgage lender Wachovia as unwilling to even participate in the federal Making Home Affordable Program. According to an Oct. 7 article from Dow Jones, Wachovia has told at least one San Diego homeowner that it's not taking applications for the government program, which provides incentives to both borrowers and lenders to modify the loan and keep the borrower out of foreclosure. A representative told homeowner Richard Bell that Wachovia's computer systems are not yet set up to handle applications for Home Affordable Modification Program, which was announced in March and slightly changed later that spring.

Through August, the article said, Wachovia has modified 2%, or about 1,800, of loans held by eligible borrowers. By contrast, Morgan Stanley's Saxon Mortgage Servicing has modified 39% of eligible loans through HAMP, and even Wells Fargo, which owns Wachovia, has modified 11% of its eligible loans through the program. Wachovia's slow start is a serious problem for borrowers like Bell, who has an option ARM mortgage (called Pick-A-Pay by the lender) on his San Diego County home. Bell expects the interest on his mortgage payments to increase dramatically in early 2009 and knows he won't be able to pay, so he has called Wachovia every week since June for help -- and been rebuffed every time. A spokesman said Wachovia will begin accepting HAMP applications in the next couple of weeks.

The article says option ARM mortgages like Bell's are particularly difficult to adjust because they can actually add principal to the loan balance. They were also typically sold to borrowers in areas like Southern California that once had inflated real estate values and have since crashed hard, meaning that the homeowners are often far underwater even without the negative amortization. For that reason, Wachovia said it prefers its own in-house loan modification program, which relies on interest-only loans rather than lowering interest rates, over HAMP. A Wachovia representative told Bell that program started in September; a spokesman told the newspaper that it started in January.

As Corona loan modification attorneys, we're not sure what we like the least about this story: Wachovia's lack of clear communication or its reluctance to participate in HAMP. As noted above, the in-house program Wachovia prefers uses interest-only loans to cover the loan payments on an option ARM loan for 10 to 15 years; the homeowner would then start paying down principal. This helps protect Wachovia's profits and may help the homeowner ride out a bad real estate market, but it puts the borrower even deeper into debt and completely fails to address the underlying problems of the option ARM loan. By contrast, HAMP relies on lower interest rates; borrowers like Bell may also want to try restructuring their loans to avoid the uncertainty and high interest of an option ARM. From here, it looks like Wachovia is willing to give lip service to helping homeowners, but when it believes profits are threatened, it won't step up.

Continue reading "Wachovia Mortgage Borrowers Locked Out of Participation in Federal Loan Modification Program" »

Our Fullerton fair debt collection lawyers wrote recently about a lawsuit by the state of Maryland against San Diego-based Encore Capital and its subsidiaries, including Midland Credit Management, for illegal debt collection practices. We were therefore not surprised to see an Oct. 4 article in the Toledo Blade about a lawsuit against the companies out of Ohio, alleging a different kind of legal violation. Andrea Schwartzentraub of Sandusky, Ohio sued Midland Credit Management and Midland Funding LLC for sending her a false affidavit that formed the basis of its attempt to collect $4,100 from her. As part of the case, the judge issued an injunction forbidding the companies from issuing the injunctions, a move that affects debtors and lawsuits across the U.S.

According to the article, the judge found that employees of Encore had routinely signed affidavits in support of lawsuits against debtors affirming that they had "personal knowledge" of the debts in question -- when they did not. Rather, the judge said, who signed the affidavits was "an entirely random act" based on when the documents came out of the printer. This makes all of the affidavits from these companies false, the article said, so the collection attempts were invalid and illegal. The decision could throw many other collection lawsuits from around the country into question, if they are based on the same false affidavits. Schwartzentraub's attorney said that millions already paid by debtors sued with the false documents may have to be paid back.

As Fontana debt collection abuse attorneys, we are pleased to see more consumers standing up for their rights in the face of abusive practices by debt collectors. Collection agencies have always had a cavalier attitude about following the law, and the current economic downturn is making it harder to collect, which has led to even more abuses. Debt collectors use these affidavits to start collection lawsuits, frequently inflating the amount and relying on consumers' ignorance of their rights or shame to keep them from objecting to the added amount. If the target does not object, the court can declare the debt valid without any further testimony or information. But as with all affidavits, the person signing must be telling the truth or the document is false and useless -- and consumers can fight and win their cases.

Continue reading "Ohio Judge Grants Injunction Stopping Allegedly False Affidavits From Debt Collection Giant" »

As Ontario bankruptcy attorneys, we are following with great interest proposed new legislation that would change the way student loans are treated in a personal bankruptcy. As Inside Higher Ed noted Sept. 24, a House subcommittee recently heard testimony on the issue of student loan forgiveness during bankruptcy. Under current law, no student loans can be discharged in bankruptcy, including loans from private lenders as well as government-backed loans. Rep. Steve Cohen, D-Tenn. and the chair of the subcommittee, said he will propose legislation that would revoke that privilege for private lenders, making their debt dischargeable just like credit cards, car loans and most other forms of loan debt.

Federal student loans have not been dischargeable in bankruptcy since 1978, but private student loans were dischargeable until 2005, when a provision giving them special treatment was part of that year's bankruptcy reform bill. (Bankruptcy courts may make an exception in cases of "undue hardship.") Critics of the change say this is unfair to consumers because private loans come with none of the consumer-friendly features of federal loans, such as low, fixed interest rates and flexible repayment. It also gives lenders who deal in student loans special treatment that their colleagues who make other types of loans don't get. According to the article, the rising cost of tuition and the $12,500 limit on government loans drove 14% of students to take out private loans in the 2007-2008 school year, up from just 4% in 2003-2004.

As Temple City bankruptcy lawyers, we would like to add that the bad economy is likely to worsen this problem. With fewer jobs available and experienced workers competing for entry-level jobs, many graduates with large amounts of debt have already had trouble paying their loans, or expect to have trouble soon. In fact, surveys have shown that heavy debt loans actually discourage younger adults from buying homes and having children. It's bad enough that these market forces could drive young people into bankruptcy -- and it's worse that the bankruptcy courts can't help them solve the problem by forgiving debt they truly cannot pay. We strongly support legislation to take away the unfair advantage that student lenders currently have in consumer bankruptcies.

Continue reading "Congress Considers Bankruptcy Law Change to Allow Forgiveness of Private Student Loans" »

As fair debt collection attorneys in Santa Ana, we were pleased to see justice done in one of the most egregious cases of debt collection abuse we've read about. According to a Sept. 29 article in the Buffalo News, 11 employees of a debt collection agency in that city have been arrested for using threats and intimidation to collect debts that in many cases were not actually owed. A twelfth person remains at large, and New York Attorney General Andrew Cuomo said additional charges may be filed after the announcement of the case prompted more than 1,000 additional complaints.

The arrested people all worked for one or more collection agencies owned by Tobias Boyland, a convicted felon who had already been arrested on firearms charges. According to the article, Boyland's employees and companies are accused of impersonating law enforcement officers in order to convince consumers to wire them money, give them credit card numbers or authorize withdrawals from checking accounts. Often, the complaint said, the debts were inflated, had already been discharged in bankruptcy, were too old to collect or had never existed in the first place. To collect the debts, they lied to consumers, threatening to arrest them at work or have their children taken away -- which are legally impossible for any debt. They are also accused of falsely claiming debtors were already being sued and disguising their location to make their claims more believable.

The article says the employees are charged with multiple counts of grand larceny for extracting tens of thousands of dollars from "terrified" consumers. In the experience of our Ontario debt collection abuse lawyers, it's rare for prosecutors to bring criminal charges against collection agencies or their employees, which may show the magnitude of their fraud. However, because all of these practices violate the federal and New York state Fair Debt Collection Practices Acts, state prosecutors and ordinary citizens can also take action against them through a FDCPA lawsuit. In fact, the article notes that Cuomo has sued debt collectors before to enforce consumers' legal rights, and had already sued Boyland and his companies to shut them down.

Continue reading "Debt Collection Firm Employees Arrested in New York for Posing as Law Enforcement" »

As longtime Orange County bankruptcy attorneys, we have seen a sharp increase in clients who are considering bankruptcy during this bad economy. That's why we were pleased to see an article in Smart Money magazine Sept. 30, addressing some lesser-known facts abut bankruptcy -- "ten things bankruptcy courts won't tell you." With bankruptcy filings higher than ever and more Americans hit by the double whammy of joblessness and falling home prices, we welcome more nuanced information on the bankruptcy process. While not every item is complete, or terribly surprising, others could be useful to people considering bankruptcy as a legal protection.

The article starts with a fact that surprises many of our clients: They are not likely to be left homeless and destitute by a bankruptcy. In fact, homeowners often choose Chapter 13 bankruptcy because they'd like to protect their homes, and laws in every state specifically protect home equity. Even people who file for Chapter 7 bankruptcy, which liquefies all of their assets, can often hold on to their homes if they don't have enough equity to make repossession worth their creditors' while.

Another overlooked fact in the article is that timing your bankruptcy filing correctly is important. Clients who feel harassed by creditors may want to file right away, but if they know they'll have to take on new debt in the near future -- say, because of a major medical problem -- it may be better to wait until after that debt is incurred, so it can be included in the bankruptcy. On the other hand, waiting too long to address outstanding debt may damage the client's credit more severely than the bankruptcy itself. That's one reason experts suggest that potential filers talk to a bankruptcy attorney as early as possible in the process.

In fact, our Chino bankruptcy lawyers routinely help clients get the most help from their bankruptcies by advising them on issues like these. In addition to timing, we advise our clients on ensuring that all relevant debt is disclosed; which creditors they should continue paying and which they can safely ignore; tax and credit consequences; and alternatives to bankruptcy. Many of these are pitfalls that, if not addressed, can get filers into legal trouble or leave them in debt despite having a bankruptcy on their records.

Continue reading "Article Addresses Myths About Personal Bankruptcy Filing for Consumers" »

Our San Bernardino loan modification attorneys were encouraged to see that federally backed mortgage company Freddie Mac is planning a more active step to help homeowners qualify for loan modifications. According to a Sept. 29 post on the L.A. Land blog from the Los Angeles Times, Freddie Mac has hired a private company to send people to the doorsteps of Freddie Mac mortgage holders who may need help applying. The company is touting the government's Home Affordable Modification Program, which allows qualifying borrowers to change the terms their loans to address a new financial situation that makes the old terms too onerous.

The door-to-door representatives will visit Freddie Mac mortgage holders who are at least 31 days late paying their mortgages but have not completed paperwork to apply for HAMP or filed for bankruptcy. According to a spokeswoman for Freddie Mac, the goal is to give homeowners the same kind of personal help they had when they first applied for their loans, helping with paperwork and to overcome procedural blocks. To avoid imitators trying to commit loan modification fraud, no representative will accept money from borrowers, but they will carry copies of letters the homeowners should have received from Freddie Mac. It's unclear how many people in Southern California could benefit from the program, but the Times said 3.14% of Freddie Mac's loans nationwide are at least 90 days behind.

As Westminster loan modification lawyers, we hope Freddie Mac's intervention will improve the success of the federal loan modification program. HAMP has gotten off to an extremely slow start, with an August report showing that just 12% of eligible borrowers had started modifications that month. After reading extensively about the problems, we believe the problem is driven by lenders' own reluctance to lose money in the short term, rather than the personnel shortages and disorganization they tend to cite. Even though foreclosing is likely to be more expensive in the long run, not least because of the bad housing market, one study showed banks would rather disguise those losses on their balance sheets or sit on foreclosed properties than help homeowners. If active intervention by Freddie Mac helps some of these homeowners cut through red tape, excuses and incorrect denials, we wish them the best of luck.

Continue reading "Freddie Mac to Visit Homeowners in Person to Help Them Apply for Federal Loan Modification Program" »