California Bankruptcy Attorney Blog

Our Moreno Valley loan modification attorneys wrote last month about foreclosure mediation efforts in Philadelphia and Nevada. These programs, in effect in about 14 states, have shown early promise at helping prevent foreclosures that could be avoided by taking a close look at the homeowner's finances. The state of Florida has been testing the foreclosure mediation process in two of its 20 judicial circuits, and on Monday, the Florida Supreme Court announced plans to make it universal. Citing a glut of foreclosures clogging the courts, Florida Chief Justice Peggy Quince ordered all state courts to shift foreclosure cases into mandatory mediation. In doing so, Quince followed a recommendation made in August by a state task force asked to study the problem, the Miami Herald reported Dec. 28.

Another Dec. 28 report, by the St. Petersburg Times, detailed how Florida's mediation program is expected to work. Mediators are trained third parties from nonprofit organizations, who help the lender and borrower try to reach an agreement. Only borrowers with homesteaded properties are eligible. The mediations will be conducted in single sessions of about three hours and cost $750. Lenders will pay the fee, but can claim it back if the mediation fails and the home goes into foreclosure. Happily, however, preliminary results show that mediation is successful more often than not, with 65% of participating borrowers ending up with a loan modification. Homeowners start the process by attending a mandatory counseling session that explains the process. A mediation session is then scheduled for 60 to 120 days after a foreclosure case is filed.

As San Bernardino loan modification lawyers, we will be very interested to see how this program works out. Florida resembles California in several ways, not least because both are hard-hit by the real estate downturn and facing a high rate of foreclosures. If this program helps stop foreclosures in Florida, it may be useful in our state as well. It is clear from lenders' actions in the past year or two that voluntary loan modification programs are not enough to stop foreclosures. Lenders say they're willing to make loan modifications, but continually lose paperwork, ignore phone calls and letters and otherwise delay real action. Making it mandatory to try to strike a deal can at least require lenders to show up for negotiations. And if the 65% figure is an indication, just showing up substantially improves results for borrowers who might otherwise lose their homes.

Continue reading "Florida Supreme Court Requires Mediation and Counseling for Residential Foreclosures" »

As San Bernardino unfair debt collection lawyers, we have already observed an increase in the number of consumers who come to us with complaints about abusive collection tactics. A Dec. 13 article from the Evansville (Indiana) Courier & Press reports that an investigation showed a similar rise in complaints nationwide. Scripps Howard, the newspaper's owner, conducted an investigation of legal complaints about unfair debt collection, using interviews and Freedom of Information Act document requests. The results showed that as of May, the last month for which it had records, complaints to federal authorities were on track to be up by 6% over 2008. A related poll found that Americans said they were contacted more often as well.

The most common complaints investigators found against debt collectors were complaints about conduct prohibited by the federal Fair Debt Collection Practices Act. This included allegations that callers misrepresented the debt; fail to send a required written notice; and called repeatedly. Thirty percent of those responding in the Scripps Howard poll said they had been called before 8 a.m. or after 9 p.m., which is outside the legally allowed period. Consumer advocates told the newspaper that calls and harassment are going up in part because of the bad economy and the resulting increase in defaults on bills. However, they also said enforcement of the FDCPA is weak, which means collection agencies aren't likely to face consequences when they break the law.

We're sorry to say that this has also been the experience of our San Juan Capistrano abusive debt collection attorneys. The FDCPA is enforced by the Federal Trade Commission, which is responsible for a wide variety of trade regulations. Despite the fact that the majority of its complaints are about debt collection companies, the FTC takes action on only a fraction of those complaints. State agencies sometimes also file enforcement lawsuits, but these are also a small amount of cases compared to the complaints they receive. Consumers may act on their own, usually with help from an attorney, under state and federal laws, but far too many people don't do this because they don't even realize they have rights. As a result, complaints simply fall off the radar and blatantly abusive collection agencies go unpunished.

Howard Law LLP helps clients strike back against debt collectors that break the law. Under federal and California law, debt collectors may not misrepresent the debt they are trying to collect; call continuously or repeatedly; deny a written request for validation of the debt; threaten arrest or any other legal action they can't carry out; report false information on a credit report; and more. If they do break the law, the FDCPA allows consumers to sue for up to $1,000 in damages, plus the entire cost of bringing the claim, including attorney fees. They can also claim any actual damages caused by the illegal behavior, such as the loss of a job due to repeated illegal calls at work from a debt collector. Our Cypress fair debt collection enforcement lawyers work with both individuals and large groups who were all victimized by the same illegal behavior.

If you've had enough from debt collectors who think they're exempt from the law and common courtesy, Howard Law can help. To learn more about your rights and your options, contact us online or call 1-800-872-5925 today for a free, confidential consultation.

As Corona bankruptcy attorneys, we see clients every day whose financial problems are caused or exacerbated by problems making mortgage payments on time. The two issues are closely intertwined, as this Dec. 16 article from business publication Finance & Commerce shows. The article says bankruptcy lawyers like us have become frustrated by the federal Home Affordable Modification Program, but not just because mortgage servicers and lenders have dragged their feet on helping our clients. Attorneys in the article were also disappointed in HAMP because its rules allow bankruptcies to complicate loan modifications, and vice versa, causing painful delays for clients.

Under HAMP, mortgage lenders may not deny modifications to borrowers who have already completed a bankruptcy. However, it says nothing about how lenders may treat borrowers who are already in bankruptcy, or file for one during the loan modification process. That means some lenders are asking borrowers to sign a waiver of their right to file for bankruptcy, the article says, as a condition of requesting a loan modification. This can create sticky situations for borrowers, bankruptcy attorneys said. If a borrower has aggressive creditors other than the mortgage lender, it's impractical to wait. Yet mortgage lenders routinely ask borrowers to wait months and months for an answer or a permanent loan workout, lawyers complained. As a result, the two actions must be timed carefully. Some attorneys are also asking bankruptcy judges to make loan modifications as part of Chapter 13 bankruptcy plans.

Our La Habra bankruptcy lawyers like this strategy -- but it depends on the agreement of not only the judge, but also the mortgage lender. And as our loan modification clients' experience shows, lenders have little incentive to agree to a modification right now. People considering both a modification and a bankruptcy filing should absolutely talk with an attorney before taking any action. Those who qualify for Chapter 7 bankruptcies may be able to complete them in a few months and then pursue a modification, but this is a minority of bankruptcy filers. The majority may simply have to fight their lenders for a reasonably quick loan modification decision. In some cases, we have been able to force the lender's hand by filing a lawsuit -- or simply by joining the case, which puts the lender on notice that a lawsuit could follow.

Continue reading "Attorneys Say Loan Modification Rules and Bankruptcy Complicate One Another" »

As Anaheim fair debt collection attorneys, we generally find ourselves supporting any financial legislation that the collections industry opposes. That's why we were pleased, in a way, to see an article about the debt collection industry's vigorous opposition to new consumer protection legislation. Industry publication InsideARM reported Dec. 16 that ACA International, "the Association of Credit and Collection Professionals," strongly opposes a bill passed in the House of Representatives last week. The Wall Street Reform and Consumer Protection Act includes multiple provisions that the association believes will burden its industry, most significantly the creation of a Consumer Financial Protection Agency. Because the House vote is over, however, ACA International said it planned to take the fight to the Senate, which is expected to address the issue next year.

The CFPA, a project proposed by President Obama as part of comprehensive financial reform, would collect most federal consumer-protection duties under one agency that has serious power. Among the provisions ACA International didn't like is a proposal to assess fees from regulated companies to pay for enforcement without tapping into the federal treasury. The article said the association prefers funding from the treasury, funded by tax dollars. Similarly, ACA International opposed the proposed agency's power to charge fines against companies found to have violated the law -- up to $5,000 a day in most cases and up to $1 million a day in cases of willful and intentional violation. Non-financial provisions the association didn't like included a proposal for the CFPA to enforce laws on behalf of the FTC; its ability to set restrictions on how employees are compensated; and a three-year deadline for taking action after a violation becomes known.

Not surprisingly, our Riverside County debt collection abuse lawyers are in favor of these provisions. In fact, we believe you don't need to be involved in the consumer credit industry to see the virtues of many proposals. Funding regulation by assessing fees on the regulated, rather than using taxpayer dollars, is an almost surefire winner with voters. Fines assessed for wrongdoing can also add to the agency's budget without cost to taxpayers. ACA International claims these fines are too high, but the low fines assessed for companies violating the Fair Debt Collection Practices Act, and its routine violations, show that higher fines are an important deterrent. A three-year deadline for enforcement lawsuits is actually a standard in many states, where statutes of limitations generally run from one to five years. And giving the CFPA the power to control employee compensation structures -- not dollar amounts -- allows it to stop practices that encourage abuse.

Continue reading "Debt Collection Industry Readies Fight Over Consumer Financial Protection Agency" »

Our Rancho Cucamonga loan modification attorneys understand all too well the relationship between unemployment, financial insecurity and problems paying the mortgage. But a New York Times/CBS News poll released Dec. 14 made the connection explicit. According to a Dec. 15 article from United Press International, 13% of the unemployed respondents reported losing their homes because they could no longer make their mortgage or rent payments. Twice as many, 26%, said they had lived with the threat of eviction or foreclosure because of their financial problems. Extrapolating from the estimate that 15.4 million Americans are currently unemployed, the article said this would translate to 2 million nationwide losing their homes to unemployment.

The poll surveyed 708 unemployed adults from all parts of the United States, reached by land-line telephone between Dec. and Dec. 10. Not surprisingly, it found that the threat of losing a home was especially great for people who had been unemployed for six months or more. Of all respondents, 46% said unemployment had plunged them into a "major life crisis." For those who had passed the six-month mark, that number was 57%. Fewer than half said they believe jobs will come back to their communities once the recession ends. Slightly more than 40% of respondents said they had moved, or were considering moving, to someplace with more jobs available. Another 44% said they had tried job retraining or education, and more than two-thirds were considering a career change.

As Yorba Linda loan modification lawyers, we're not surprised to see this grim correlation. Many people consider unemployment one of the most reliable predictors of foreclosure. In fact, one of the major criticisms leveled against the federal Home Affordable Modification Program is its inability to help people with no income at all due to unemployment. Without a steady income, homeowners are forced to make hard choices, including choices between paying the mortgage and other major necessities like food and heating. This doesn't mean unemployed homeowners will inevitably lose their homes, but it does mean that they should act quickly to explore options for saving them. Those options include a temporary forbearance that stops their payments, as well as a short sale, refinance or other more radical moves.

Continue reading "Major Poll Finds 2 Million Americans Lost Homes Because of Unemployment" »

As Ontario predatory lending attorneys, we were pleased to see a Dec. 4 article in the New York Times announcing that the federal government is increasing the help provided to homeowners considering reverse mortgages. According to the article, the Federal Housing Administration, which insures reverse mortgages, has increased its standards for required reverse-mortgage counseling since an investigation found numerous counselors omitting important information. In fact, the Government Accountability Office found that none of the 15 counselors its agents visited covered all of the topics required, and that seven failed to discuss alternatives to reverse mortgages. In response, the FHA has required new testing, training and protocols.

In reverse mortgages, borrowers ages 62 and older put a lien on their homes to receive monthly or lump-sum payments out of existing equity. The lender is repaid after the borrower dies, sells the home or permanently moves out. This can provide important income to seniors, but it also raises predatory lending concerns. The FHA's stricter counseling rules require counselors to pass a test used by the AARP to qualify its own counselors, and attend new training sessions every two years. Counselors will also be required to follow a set procedure to determine whether a reverse mortgage would actually help the prospective borrower. If not, they may suggest alternatives such as social service programs, the Times said. And if they cannot determine with confidence that the client fully understands the information, they are required to deny the counseling certificate required for taking out a loan.

Our Fountain Valley predatory lending lawyers applaud the FHA for tightening its standards in this way. Senior citizens are an attractive target for financial fraud because they tend to have high savings and lots of home equity, but may be losing their rationality. Reverse mortgages are also used by seniors who genuinely need the money -- but they are more expensive than traditional mortgages and home equity loans, which raises exploitation concerns. The requirement to speak with an independent counselor before proceeding with a loan is intended to address these concerns, but as the article noted, counselors don't always do the job expected of them. This leaves borrowers unprotected from making a serious, sometimes irreversible financial mistake that can take away their financial security or even their homes.

Continue reading "Federal Housing Administration Sets Stricter Rules for Reverse Mortgage Counselors" »

Our West Covina loan modification attorneys have long believed that the federal government's Home Affordable Modification Program needs radical changes to be effective. So we were pleased to see a Dec. 6 Fair Game column in the New York Times outlining specific changes that author Gretchen Morgenson recommends. Morgenson pointed out that even the Treasury Department, which administers HAMP, acknowledges that "banks are not doing a good enough job," and that foreclosures have not abated. To fix that, she argued, the government should address at least two major problems with the existing program, all of which were outlined in research by Laurie Goodman, head of mortgage strategy at Amherst Securities Group.

Goodman's research concluded that negative equity -- owing more on a mortgage than the home is worth -- is the driving force in mortgage defaults. This contradicts the conventional wisdom that unemployment is the most important factor. HAMP currently fails to take this into account. Another problem Goodman's research cited is the way HAMP calculates the payments that borrowers can afford, because it takes into account only payments, interest and taxes on the first mortgage. Other credit obligations, such as a car payment or credit card debt, don't count, which means the resulting payments may be too high or too low for the borrower's means.

Furthermore, holders of the first mortgages (the lenders, or in a securitized loan, the investors) may have their investments substantially reduced, while the values of second mortgages aren't touched. Because second liens tend to have higher interest rates, this means consumers with second liens aren't getting the help they need. Furthermore, the situation creates a conflict of interests for banks that hold the second liens but not the first, giving them an incentive to write down loans other people own. This is an especially serious problem because Goodman found that loan workouts with principal write-downs are far more likely to succeed than those that only adjust the interest. Her research also showed greater numbers of cramdowns when banks owned all the loans, suggesting that they do see the merit of cramdowns.

As Orange loan modification lawyers, we would be delighted to see Congress impose these rules. When we work with clients in financial distress, we always ask for the most complete financial picture possible, including all outstanding debt from any source. Omitting other debts makes no sense if the goal is to calculate what the borrower can afford. This may be even more true when dealing with second liens on the home, because second mortgages and home equity lines of credit directly affect the borrower's mortgage payments. Lenders with an interest in the second mortgage should not be in a position to make decisions that protect them from harm while hurting homeowners and investors. And if principal cramdowns offer the greatest chance of success -- as several studies have now shown -- perhaps the government should consider making them mandatory in cases that meet certain criteria -- or available during bankruptcy, as an incentive to consider them earlier.

Continue reading "Columnist Calls for Government to Radically Change Foreclosure Prevention Program" »

As San Berdardino fair debt collection attorneys, we have watched with interest as the Federal Trade Commission, the federal agency responsible for regulating debt collectors, has considered how to reform the Fair Debt Collection Practices Act. After a February report recommending that the FDCPA be modernized, the FTC held three roundtable discussions to discuss reforming the law, bringing together courts, consumer advocates and players in the debt collection industry. The last of these panels was held Dec. 4 in Washington, D.C., InsideARM reported Dec. 7, and focused on debt collection litigation issues. Among the subjects of discussion the article noted were proposed changes to the statutes of limitations for debt collection, and reforms in how consumers are notified of debt collection lawsuits against them.

The discussion on serving claims started with an agreement by all parties that most consumers don't participate in debt collection lawsuits. This makes default judgments -- in which a court allows one side to win because the other never showed up -- very common. Consumer advocates said some of this is because of debt collectors who intentionally misdirect the summons; other failures to respond may stem from problems understanding the documents and transportation issues. A representative for the collections industry added that some consumers blow off lawsuits because they know they owe the money and don't want to face a court hearing. Another panelist suggested that summonses be sent through traceable means like private carriers, so there's a way to track whether documents got to the right place.

Another area of disagreement was statutes of limitations, which are the deadlines by which debt collectors must sue. If the debt is older than the statute of limitations for the consumer's state, the consumer no longer has to pay it -- but if consumers do pay, the payment automatically restarts the "clock" ticking down the deadline. Consumer advocates and judges said collection agencies frequently tried to collect on out-of-statute debt; the debt collection industry disagreed. Consumer groups suggested that the clock should only restart if the consumer explicitly agrees, but an FTC representative dismissed that suggestion, pointing out that no consumer would agree.

As Santa Ana debt collection abuse attorneys, we agree that no sensible consumer would agree to restart the clock -- if they knew that was what they were doing by paying. Unfortunately, even well-educated people don't always understand their rights. The debt collection industry takes advantage of this every day by requesting payments they have no right to receive, and more than a few consumers pay up. That's why we agree with the consumer advocates quoted in the article who want to ban collections on out-of-statute debt entirely, or at least provide notification that the clock will be restarted an explicit part of the process. We also like the implication that the FTC is considering more aggressive means to stop the practice of intentionally providing inadequate notice of a debt collection lawsuit. In many cases, the first consumers hear about these claims is after the lawsuit is over and their money is being taken away.

Continue reading "FTC Holds Panel Discussion on Reforming Lawsuit Portions of the FDCPA" »

As Garden Grove loan modification attorneys, we already knew that the federal mortgage aid program continues to fall short despite repeated government tweaks and stern lectures to lenders. That's why we were pleased to see an article in the Washington Post Dec. 9 reporting that many Congresspeople also seem frustrated by the program's failures. The House Financial Services Committee heard testimony Dec. 8 from officials at the Treasury Department, which manages the Home Affordable Modification Program, as well as from the mortgage industry. That testimony confirmed the poor record that HAMP has had throughout its seven months, with just 680,000 borrowers out of an eligible four million participating.

The testimony focused on converting trial loan modifications to permanent ones -- a growing issue in recent months. Banks told Congress that conversions are slow because about 70% of borrowers have failed to provide paperwork necessary for the conversion; have provided contradictory information; or haven't made their payments. However, consumers and their advocates said banks continue to lose paperwork and give them a runaround, shifting them from one representative to another throughout the process. Banks themselves acknowledged that "ineffective communications with customers [and] shortcomings in document maintenance" were contributing to the problem, along with customer confusion and in some cases, financial stress. Committee member Rep. Al Green, D-Texas, threatened "drastic action" if banks don't do more to stop the continuing foreclosure crisis.

As Chino loan modification lawyers, we have substantial experience with the obstacles homeowners face when they try to get loan modifications, or make those modifications permanent. In both cases, we have heard similar stories from homeowners about repeatedly lost paperwork, contradictory instructions and poor communications between branches of the same lender. We don't doubt that some borrowers have genuinely failed to follow instructions -- but we suspect that in many other cases, lenders are finding ways to delay or derail the process because foreclosing is more profitable. Media reports are not clear on what action the representatives are threatening to take, and what standards lenders must meet to avoid it, but we hope they pass legislation with penalties for lenders that are clearly not trying. It has become clear that carrots are not working with lenders; Congress should consider a few sticks.

Continue reading "Congress Critical of HAMP During Testimony By Treasury and Mortgage Lenders" »

As Placentia loan modification attorneys, we were disappointed but not surprised to see that problems with loan modifications don't end after customers manage to get one. The New York Times reported Nov. 29 that the Obama administration's Home Affordable Modification Program, which seeks to improve the housing market by stopping preventable foreclosures, is seeing problems when borrowers try to finalize their temporary modifications into permanent ones. The article focused on Queens homeowner Yolanda Thomas, 35, who won a temporary modification after she was laid off an forced to take a lower-paying job. But due to another job change and a series of conflicting communications from her lender, Thomas is now being asked to start another trial modification.

Thomas originally had a forbearance arrangement with Chase, which bought her mortgage holder, Washington Mutual. After she found a job at roughly half of her previous pay, she also won a trial modification that cut her mortgage payments by more than half. That deal, struck in June, was supposed to become permanent if she made all her payments on time and submitted the right paperwork. The trouble started in July, when Thomas began receiving threatening phone calls from Chase collection agents, who said she was still on the hook for the original, higher mortgage payment. Despite the loan modification, Chase reported her to credit agencies as delinquent. One letter she received from the bank apologized for the mistake, but a spokesman for the bank said that letter was itself a mistake -- that Chase does consider her delinquent.

When the trial modification ended in October, Thomas hadn't heard from Chase, so she sent in a fourth payment at the same rate. Later that month, the bank told her that she had been denied a permanent modification based on her income -- from the same job that formed the basis of the trial modification. Two days later, she received a letter saying she was still being considered, but needed to submit a tax document. A phone call following that said she needed to start over entirely by applying for a new trial modification. In the meantime, Thomas has managed to get a higher-paying job -- but she is no longer sure that this will help her hold on to her home. The Chase spokesman told the Times that Thomas is a loan modification success story because she's better off than she would otherwise have been.

Our Diamond Bar loan modification lawyers agree that Thomas is probably better off because of her participation in the trial modification program. However, we strongly disagree that the lesser of two evils rates as a success story. If the facts reported here are true, Chase has, at the least, a failure to communicate between its own branches, as well as with this customer. Given what we have written here about the financial incentives for banks to make loan modifications, this behavior could also be intended to delay a loan modification as long as possible, to drive Thomas into a more-profitable foreclosure. This is a senseless policy when faced with a client like Thomas, who is willing and able to pay her mortgage. At least part of these actions -- the false report to credit agencies about delinquent mortgage payments -- is also illegal.

Continue reading "Borrowers Find Obstacles to Converting Trial Loan Modifications to Permanent " »

Our San Bernardino bankruptcy attorneys were delighted when the U.S. Supreme Court took up a case seeking to end restrictions on certain advice bankruptcy lawyers may give to their clients. Now, the New York Times reported Dec. 2, the court has heard oral arguments in the case. Milavetz, Gallop & Milavetz v. United States, No. 08-1119, pits a Minnesota law firm against multiple provisions of the federal bankruptcy reform laws of 2005. Chief among the firm's complaints was the new prohibition for lawyers against advising clients to take on more debt just before filing for bankruptcy. This is a violation of the First Amendment's free-speech guarantee, the Milavetz firm argued, and can contradict state laws requiring lawyers to give the best advice possible. The firm also objected to a provision requiring bankruptcy law firms to advertise with a statement that "we are a debt relief agency."

However, the focus of the article was clearly on the restriction on lawyers' advice. Justice Antonin Scalia said that it was a "stupid law," but said the Constitution does not prohibit stupid laws. By contrast, several other justices seemed open to the law firm's argument that the provision violated bankruptcy lawyers' free speech rights. The government's attorney, Assistant Solicitor General William M. Jay, argued that the prohibition applied only to situations where a lawyer advises a client to abuse the bankruptcy system or defraud creditors, both of which are of course illegal. Chief Justice John Roberts told Jay that the language of the law left this ambiguous, forcing attorneys to stop and consider whether they could be prosecuted even for legal, ethical and correct advice. Justice Ruth Bader Ginsberg suggested that the restriction would stop an attorney from suggesting more debt even when it makes sense, such as when the client has just been diagnosed with an expensive-to-treat medical problem like cancer.

This hypothetical by Ginsberg is just one reason why our Fullerton personal bankruptcy lawyers would like the court to overturn this provision. In addition to impermissibly interfering with the attorney-client relationship, the law actually restricts us from giving clients the best possible advice. For a client like the one Ginsberg suggested, it makes much more sense to delay bankruptcy filing until after treatment, because individuals and married couples may file for bankruptcy only once every seven years. We may also advise our clients to take on more debt for practical reasons, such as to refinance a mortgage for a better interest rate, or borrow to pay for required credit counseling. All of this advice is perfectly legal under state law, ethical and sensible -- but under the bankruptcy reform law, it is illegal. And because state ethics laws already forbid attorneys from advising clients to break the law, we believe the reform law, as interpreted by the government, is not even necessary.

Continue reading "High Court Hears Challenge to Restrictions on Bankruptcy Lawyers' Advice to Clients" »

The U.S. Supreme Court recently took up a question that's directly relevant to our practice as Irvine personal bankruptcy attorneys: How easy should it be to have student loan debt forgiven in bankruptcy? According to a Dec. 1 article from USA Today, the high court started hearing arguments that day in a dispute between a lender and a former student who had part of his debt wiped out in bankruptcy. Francisco Espinosa worked out a plan in 1992 to repay the principal on his student loans as part of a Chapter 13 bankruptcy. A federal bankruptcy judge agreed to the plan and forgave the remaining $4,000 in interest. But his lender, United Student Aid, later objected, arguing that the plan as illegal without a showing of "undue hardship" to Espinosa.

Under current laws, student loans cannot be forgiven in bankruptcy unless repayment would be an undue hardship to the debtor. Proving undue hardship usually requires a special hearing. However, bankruptcy courts are free to restructure debt to make it easier to pay. Espinosa's repayment plan took a middle ground by repaying principal but not interest. United was notified of that plan in 1992, when Espinosa's attorney designed it, and again six months later when the bankruptcy court approved it. Espinosa successfully completed the plan; the debt was declared paid in full in 1997. However, in 1999, United began demanding interest. In 2003, it filed a claim alleging that Espinosa's plan was void because he had never proven undue hardship. A federal appeals court disagreed, and the Supreme Court case followed.

The newspaper said the justices seemed inclined to find a balance between discharging all loans and requiring hearings even when the creditor does not object. As Riverside individual bankruptcy lawyers, we hope the justices find that balance in a way that eases the burden of student loan debt on ordinary Americans. A college education is almost mandatory for people who want to be able to earn a good living -- but the price has gone up faster than inflation. As a result, millions of young people are graduating with an average of around $20,000 in debt, and older workers are delaying homeownership and even marriage because of their debt. Particularly now that the economy is bad, it's difficult for people with less experience, or skills not in demand, to make the kind of money necessary to keep up with that debt. If one or two more negative financial events tip these students into bankruptcy, judges should have the discretion to reduce burdensome loans without endless hearings.

Continue reading "Supreme Court Considers Easing Rules on When Bankruptcy Can Erase Student Loans " »

Our Rancho Cucamonga loan modification attorneys were pleased to see that the Obama administration has learned to put at least some teeth into its Home Affordable Modification Program. The Los Angeles Times reported Dec. 1 that the administration plans to increase accountability of lenders participating in the program, through both closer scrutiny and fines for noncompliance. A meeting between federal officials and the biggest mortgage lenders is planned for the week of Dec. 7, and Treasury Department officials will travel to the lenders this week to help troubleshoot problems and work with borrowers. The goal, the Times said, is to identify mortgage servicers that have failed to convert temporary modifications to permanent ones and publicly "shame" them into doing better.

HAMP got off to a bad start when very few loan servicers allowed trial modifications during its first few months. Pressure from the federal government helped increase the number of trial modifications to 650,000 as of Oct. 30, but borrowers are now complaining about similar bureaucratic runarounds when it's time to make those workouts permanent. The Treasury Department said the number of conversions is low, but that 37% of eligible homeowners have submitted the necessary documents. In addition to calling the meetings, the government plans to require participating lenders to submit updates about each individual mortgage, as much as twice a day, and fine those who don't meet standards. Consumer advocates criticized the plan, saying that shaming companies isn't fast enough to stop foreclosures and that the government can't do more than kick non-compliant servicers out of HAMP. They said they would prefer to see Congress pass bankruptcy cramdown legislation instead.

As Westminster loan modification lawyers, we agree that bankruptcy cramdowns, which would allow bankruptcy judges to reduce principal owed on a primary-home mortgage, would provide lenders a powerful incentive to consider loan modifications instead. But cramdowns are not looking likely at the moment, and we absolutely support the Treasury Department's efforts to pressure lenders. Over the course of this year, it has become clear that the administration's focus on voluntary compliance was too optimistic. Loan servicers have shown that appearing compliant was important to them -- but actually granting loan modifications is not the same as merely appearing to do so. Putting any backbone into the program is an improvement, even if it's not the ideal solution for consumer advocates.

Continue reading "Government Threatens Fines for Lenders Who Delay Making Loan Mods Permanent" »

As Orange consumer bankruptcy attorneys, we were pleased to see that the press has taken note of the growing diversity of our personal bankruptcy clients. USA Today reported Nov. 24 that individual bankruptcies are now largely filed by middle-class people -- and have been since before the current economic downturn. In support, the article cited a new study by scholars at Ohio University and Harvard Law School, entitled "The Vulnerable Middle Class: Bankruptcy and Class Status," which will be released as a book in 2010. That study found that more than 100,000 middle-class families filed for bankruptcy every month as of 2007, and that those filers were in worse shape than bankruptcy filers in 2001.

The study disputed the widely held notion that a college education and homeownership are enough to guarantee financial security. From 1991 to 2007, the proportion of bankruptcy filers with at least some college increased from 46.5% to 58.9%. Meanwhile, home equity, considered a fallback resource, simply increased mortgage payments for homeowners who tried to use lines of credit to pay off medical, credit card or other debts. Rising unemployment and unwise spending habits have also contributed to bankruptcies, the article noted. The result can be emotionally devastating for people who thought middle-class status was enough to keep them out of bankruptcy.

That was true for Staci Schubert, 40, of Costa Mesa. Schubert has been a graphic designer, sales executive and, since 2003, the owner of her own handbag and accessory design business. Much of her savings went to launch the business, which was a problem when sales slowed in 2007. Schubert, a single mom of a two-year-old son, racked up $65,000 in credit card debt and began looking for a job, but only found freelance design work. In early 2008, she filed for a California Chapter 7 bankruptcy -- something she never thought she'd do when she was making six figures annually.

Our San Bernardino County bankruptcy lawyers have seen more and more people like Schubert in the past few years. As the article notes, bankruptcy filing can be emotionally difficult for them, in part because they thought they were doing everything "right." In fact, some of our clients have done a good job of managing their money, but were wiped out by medical bills or other unsecured debts that quickly spiraled out of control. When they come to see us, some of these clients feel ashamed or guilty -- even though filing for bankruptcy can actually improve their financial situations. As individual bankruptcy attorneys, we hope that articles like this one can help remove the stigma on filing for bankruptcy and help guide people toward the financial moves that can help them get back on their feet.

Continue reading "Report Shows That Most Personal Bankruptcy Filers Are Now Middle-Class" »