California Bankruptcy Attorney Blog

As Fontana loan modification attorneys, we were interested in a recent announcement that the federal government is changing important rules for its foreclosure prevention program. According to a Jan. 28 article in MarketWatch, participants in the Home Affordable Modification Program will have to provide income-verification documents at the start of the process, beginning in June. In return, lenders will be required to acknowledge receipt of the documents within 10 days and make a yes or no decision within 30 days. The goal is to speed up the process of converting trial modifications into permanent ones.

HAMP has been under fire recently because of repeated reports that most loan modifications have not been made permanent. As the Chicago Tribune reported Jan. 28, the Treasury Department reports that only about 7.3% of HAMP loan modifications have been made permanent. Federal officials say the new rules will hasten the process by eliminating confusion and delay about income documentation. Previously, borrowers were required to provide the documentation during their three-month trial periods. Some had income changes that slowed the process or didn't submit the right documents, while others reported that lenders gave them contradictory requirements or lost their documentation. The up-front documentation rule mimics rules at two of the lenders with the highest conversion rates, GMAC Mortgage and Ocwen Financial Corp.

Our San Juan Capistrano loan modification lawyers wish the new program well, but we're afraid it won't increase conversion rates significantly. A large part of the problem with loan modification conversion lies with the lenders' inability or unwillingness to process applications quickly and explain requirements clearly. We believe lenders behave in these uncharacteristically incompetent ways because they don't truly want to offer loan modifications. The new rules try to stop bureaucratic delays by setting deadlines for responses, but these are easy to get around or ignore, if that suits the lender's needs. To get real action, banks need a clear showing that modifying loans is in their self-interest, through either market forces or government intervention.

Continue reading "Treasury Department Announces Tighter Deadlines and Documentation Rules for HAMP" »

One of the most frustrating realities for our Moreno Valley fair debt collection attorneys is that many people don't understand their rights when dealing with collection agencies. That's why we were impressed by a lengthy article published in the Dallas Observer Jan. 20, about a man who understands his so well that he's actually made money from debt collector harassment. The article features Craig Cunningham, who has sued so many collection agencies that he's on an industry list of troublesome consumers. Cunningham, 29, considers himself a "private attorney general" whose lawsuits help correct illegal behavior by debt collectors.

Cunningham, an Army veteran and reservist, got into debt through ambitious investments that came crashing down when the real estate market crashed. Like many Americans, he began receiving harassing phone calls from debt collectors. But instead of hanging up or getting scared, Cunningham went online and began reading up on ways to handle the debt collectors. He learned about the numerous legal protections offered by the Fair Debt Collection Practices Act, which mandates certain behaviors by collection employees and forbids others. A similar Texas state law was even more friendly to consumers. The next time a debt collector called, he used a voice recorder to capture the employee illegally telling him things that weren't true. He sued that collector and won $1,000, then learned enough to file 15 more lawsuits, collecting a total of more than $20,000.

Another person who's made a career out of suing debt collectors told the newspaper that despite the collection industry's claims, "you can find violation in almost every collection attempt in America." As Westminster debt collection abuse lawyers, we think this is pretty close to the truth. The collection industry claims that debt collectors who use illegal tactics are a "rogue" minority, but clearly, there are enough to allow Cunningham and people like him to win multiple lawsuits. If the industry wants to avoid lawsuits from people who know their rights and use the law to their fullest advantage, all it has to do is avoid breaking the law in the first place.

Continue reading "Newspaper Profiles Consumer Who Repeatedly Sues Debt Collection Companies" »

Our Rancho Cucamonga loan modification attorneys have read scores of articles in the past year about the ineffectiveness of most anti-foreclosure efforts, public and private. A new study by state banking regulators and attorneys general confirmed that problem yet again, according to a Jan. 20 article from Dow Jones Newswires. The State Foreclosure Prevention Working Group reported that despite efforts from homeowners themselves, loan servicers and government agencies, foreclosures are likely to actually increase in 2010. The recommendations from the group, whose members include California Attorney General Jerry Brown, included a call for principal write-downs (or cramdowns) to decrease the chances of another default.

The report (PDF) is based on two years of data from 13 mortgage servicing firms. Most disturbingly, it found that only four in 10, or two-fifths, of borrowers in default were even involved in a "loss mitigation effort." As of the end of October 2009, there were 1.7 million borrowers who were at least two months behind in their payments. Meanwhile, in the year between October 2008 and October 2009, the number of loans in foreclosures jumped by 52%. The study also found that the proportion of prime loans in default increased 21% between 2007 and 2009. And more than 70% of loan modifications that are granted actually increase the principal owed, the report said, while only 9% of loans got a principal reduction reducing the balance by more than 10%.

As Fountain Valley loan modification lawyers, we're disappointed to hear that principal is actually added in so many loan workouts. Several studies, as well as common sense, show that negative equity increases the chances that the loan will go into default. It's quite clear by now that banks do not like principal reductions; lobbyists for the financial services industry fought tooth and nail against a proposal to allow mortgage cramdowns during bankruptcies. However, lenders may actually lose more than 10% in a foreclosure or bankruptcy -- and current policies seem designed to force one of those choices. If lenders and servicers are serious about keeping borrowers in their homes, it's clear that they should seriously reconsider principal cramdowns.

Continue reading "State Group's Report Says More Aggressive Effort Needed Against Foreclosures" »

As Riverside unfair debt collection attorneys, we were interested to read about the fallout from the bankruptcy of one of the largest debt collection law firms in the United States. As the Baltimore Sun reported Jan. 16, Maryland-based Mann Bracken was ordered by state regulators to cease operations earlier that week. The order was not entirely necessary; the law firm was already in financial trouble because an affiliated company that handles debt collection, Axiant, had filed for bankruptcy in November. The arrangement tied Mann Bracken's fortunes to an arbitration company called the National Arbitration Forum. That company was sued for consumer fraud by Minnesota's attorney general in 2009.

In fact, the Sun reported that the law firm's financial trouble may have started with the Minnesota lawsuit. The National Arbitration Forum was accused of conflicts of interest that biased its judgments in favor of the credit card companies that paid it. As part of the settlement, it agreed to stop handling consumer arbitrations. Axiant filed for bankruptcy four months later, and Mann Bracken blamed its financial troubles on that move. The firm was facing separate lawsuits and regulatory action accusing it of violating the Fair Debt Collection Practices Act and similar state laws. The firm's closure may dismiss those lawsuits, but it will also end tends of thousands of lawsuits filed by Mann Bracken against consumers. Experts told the newspaper that this was a victory for consumers, who may otherwise have ended up with legal judgments against them before they realized they had been sued.

Our Costa Mesa unfair debt collection lawyers don't exactly enjoy seeing another law firm fail -- but in this case, it may benefit consumers. As the Sun noted, Mann Bracken was under investigation, the target of multiple lawsuits and had a Better Business Bureau rating of F because of numerous accusations of unfair business practices. Closing the business will give valuable time to people who were being sued by the company. In any lawsuit, the person suing must notify the defendant. But shady debt collectors frequently fail to give notice, or find ways to ensure that notice isn't served quickly, because they will win automatically if the consumer doesn't appear and fight the case. This creates a default judgment that the unscrupulous debt collector may use to garnish wages or take property. Many victims don't realize this happened until it's too late to fight back.

Continue reading "Thousands of Debt Collection Lawsuits Dismissed by Collection Agency Bankruptcy" »

Our Ontario loan modification attorneys are not alone in believing that loan modification programs have not helped most homeowners avoid foreclosure. But we were interested to see a Jan. 19 article in the Wall Street Journal reporting that at least some analysts think it's helped stabilize the housing market anyway. The report from Barclays Capital says the federal Home Affordable Modification Program has helped reduce the number of foreclosed homes offered for sale, which has helped stop housing prices from sinking. This helped home prices bounce back a little in the past year, which has helped increase stability in the market, experts say.

Stabilizing housing prices and encouraging new buyers is not an official goal of HAMP, the article said. The official goal is to help borrowers in trouble keep their homes by reducing their monthly payments. The program is not considered a success, although the Treasury Department announced a small amount of progress Jan. 15. But Barclays Capital's analysis said HAMP has been successful at preventing an even steeper fall in housing prices by "buying time" for the housing market. The report said the market was flooded with foreclosed homes in 2008, which pushed prices down. But thanks to HAMP, foreclosure moratoria (like the one here in California) and other programs, the foreclosure process slowed and nearly 210,000 fewer foreclosed homes hit the market in November 2009, compared to a year earlier. Barclays Capital expects the number of foreclosures to peak again in spring or summer of 2010.

As Cerritos loan modification lawyers, we're glad that HAMP has helped slow down and possibly even reverse the fall of housing prices, which was particularly sharp here in Southern California. This should help keep some people out of foreclosure simply by leaving them equity in their homes, and hopefully start restoring more equity as prices normalize. But as this article notes, that's not the goal of HAMP, and progress toward its actual goal of preventing foreclosures has not been strong. Financial institutions have blamed government rules and borrowers themselves for this lack of progress, but media reports show that lenders and loan servicers behave like they don't really want to make loan modifications. But instead of saying so, they continue to take applications and ignore them, repeatedly lose them or deny them for spurious reasons.

Continue reading "Analysis Says Federal Mortgage Program Has Helped Prop Up Housing Prices" »

As San Bernardino County debt collection abuse lawyers, we were interested to read about the conclusion of a major enforcement action against an abusive collection agency. The Federal Trade Commission announced on Jan. 7 that it had settled with two individual employees of Academy Collection Service, Inc. The company itself and its owner, Keith Dickstein, had already paid $2.25 million to settle their part of an FTC lawsuit accusing them of using lies, threats and harassment to compel payments. The new settlement order is against employees Albert Bastian and Keith Hurt III, who oversaw the company's Las Vegas office.

The FTC lawsuit alleged that Bastian and Hurt participated in, or directed and allowed, debt collection practices that violated the Fair Debt Collection Practices Act and the Federal Trade Commission Act. According to a Jan. 14 column in the Washington Post, they and the other defendants in the case are accused of improperly calling debtors' neighbors, children and co-workers; calling at work after being told the employer wouldn't allow it; and making illegal and unauthorized withdrawals from victims' bank accounts. They also allegedly threatened victims with violence, arrest, legal action and wage garnishment, even though they couldn't legally do those things, or didn't intend to. The judgment fines Bastian $375,000 and Hurt $300,000. They were also barred by the court from engaging in the same illegal practices alleged in the lawsuit.

Our Garden Grove FDCPA attorneys are pleased to see the FTC taking major enforcement action against an abusive debt collector. That's especially important right now, because when the economy is bad, debt collectors get more desperate -- and some are happy to break the law. Unfortunately, far too many consumers don't realize that many of the practices the FTC mentioned are even illegal, so they never complain. In fact, the FDCPA restricts debt collectors from using a variety of unfair and deceptive practices, including calling someone other than the debtor, his or her spouse or attorney; calling constantly; threatening actions they can't legally take or don't intend to take; and using profanity. Collection agencies accused of these and other unfair practices can be sued and fined by the FTC, state regulators or individuals.

Continue reading "FTC Settles End of Largest-Ever Case Against Unfair Debt Collection Business" »

Our Fullerton debt collection abuse attorneys were pleased to see a recent article from debt collection industry publication InsideARM about federal action against debt buyers. The Jan. 11 article says the Federal Trade Commission, the agency responsible for enforcing the Fair Debt Collection Practices Act, has requested purchase and sales records from the nine biggest debt buyers in the U.S. The companies are not accused of wrongdoing. Rather, the FTC says it wants to better understand the debt buying industry, which has grown in recent years and is the subject of many consumer complaints. The debt buyers chosen by the FTC are the biggest in their industry, collectively representing about 75% of all debt purchased in the country.

Debt buyers are companies that purchase written-off debt from the original creditors and try to collect it. They are the focus of numerous complaints about harassment from consumers who say they are victims of mistaken identity; unproven debts; debts too old to collect; and violations of the FDCPA. A Scripps Howard newspaper investigation from 2009 showed that debt buyers frequently get incomplete or bad information, leading to incorrect collection attempts, lawsuits and damage to the consumer's credit score. The FTC said it was seeking to understand the industry better by requesting detailed information on the companies' sales and earnings; number of debt portfolios purchased; ages and types of accounts; and other information. Complying with this request is not optional, and debt buyers have until Feb. 25 to comply. A study may follow.

As Riverside unfair debt collection lawyers, we are extremely pleased to see the FTC shine a spotlight on the practices of debt buyers. As the Scripps investigation said, debt buyers don't always get the full information when they buy a debt. This can lead to mistaken identity, confusion about whether the debt was paid off and other mistakes. To make matters worse, some debt collectors are actively hostile when consumers point these mistakes out, believing they're lying to get out of paying what they owe. And particularly in this bad economy, some debt buyers are so eager to collect the debts that they're willing to break the law by harassing consumers, calling their workplaces, neighbors and family or even resorting to threats.

Continue reading "FTC Requests Information From Debt Buyers to Understand Consumer Complaints" »

Our San Bernardino County loan modification attorneyshave written here before about the problem of major lenders targeting racial minorities for expensive subprime or even predatory mortgage loans. This practice, known as "reverse redlining," is the subject of lawsuits against lender Wells Fargo by several municipalities, which claim it violates federal civil rights laws and destroys city neighborhoods. Now, the New York Times reported Jan. 14, the federal Department of Justice has launched a new campaign against unfair lending practices, to be part of its Civil Rights Division. Led by special counsel Eric Halperin, head litigator for the nonprofit Center for Responsible Lending, the new unit will investigate all types of unfair lending practices and file federal civil rights lawsuits when appropriate.

Reverse redlining is the practice of targeting minority borrowers for expensive "subprime" or even predatory mortgage loans. It is illegal under the federal Fair Housing Act, which bans practices that have a "disparate impact" on minorities. This is the legal theory behind the Baltimore and Memphis lawsuits, both of which accuse Wells Fargo of explicit and intentional reverse redlining, with supporting affidavits from former loan officers. An attorney who helped both cities said he hoped the new Justice unit would consider joining the cases. The Civil Rights Division has itself opened 38 investigations into reports of lending discrimination, and more may be coming. The Justice Department plans to analyze Treasury Department data to look for disparate impacts in loan modification decisions, and is also working with state attorneys general on subprime lending issues.

As Placentia loan modification lawyers, we are extremely pleased to see the federal government paying attention to fair housing laws. In fact, as one attorney in the article puts it, the Justice Department involvement in enforcing federal law may be overdue. Because we followed the subprime lending crisis closely, we know that minority communities have been particularly hard-hit by expensive, "exotic" and adjustable-rate loans. This may be particularly true here in Southern California, where unscrupulous lenders may take advantage of our large population of non-English-proficient immigrants. With this move, the federal government has signaled that it takes this issue seriously. We hope that discourages lenders from exploiting people on the basis of race.

Continue reading "Justice Department Opens New Division to Handle Lending Civil Rights Cases" »

As Chino bankruptcy attorneys, we already knew that foreclosure and bankruptcy tend to go together -- one tends to cause the other. The Wall Street Journal illustrated that correlation neatly in a Jan. 7 article juxtaposing personal bankruptcies in the "sun belt" with high foreclosures in those states. The national average increase in bankruptcies last year was 32%, the article said -- but above 50% in the Western states of Arizona, Nevada, California. Not surprisingly, these were also the states with some of the highest rates of foreclosure. Consumer bankruptcy lawyers told the newspaper that mortgage debt helped push some people into bankruptcy by cutting off home equity loans as a source of credit.

The highest bankruptcy rates don't correlate exactly with the highest foreclosure rates. For example, two of the most bankrupt states identified by the Journal were Utah (57% growth in individual bankruptcies) and Wyoming (58.3% growth), neither of which is consistently in the list of most-foreclosed states. And Florida, a heavily foreclosed state, saw its bankruptcies grow by 44.8%, compared to 79.6% in the national record-holder, Arizona. But in the West, states with the most personal bankruptcies tended to be the states that saw housing prices rise and fall to the greatest extremes -- Arizona, Nevada and California. One consumer bankruptcy attorney told the newspaper that his clients were almost always renters a few years ago. But now that prices and equity are falling, he said, more homeowners are forced to consider bankruptcy.

We're sorry to say that our Redlands bankruptcy lawyers see this trend ourselves. As the article notes, the housing crisis can cause bankruptcies by taking away financial tools like refinancing, selling the home or a home equity line of credit. Some homeowners may also file for bankruptcy as a last-ditch attempt to keep their homes out of foreclosure, after exhausting all of their other financial resources. But the reverse is also true: Financial problems that lead to bankruptcy can cause foreclosure even if those problems have nothing to do with the mortgage loan. This might be the case for homeowners who lose a job and can't find another quickly, or those who rack up high medical bills and exhaust their financial resources to pay them.

Continue reading "Western States With Highest Foreclosure Rates Also Had High Bankruptcy Rates" »

The U.S. Supreme Court heard oral arguments Jan. 13 in a case with important implications for our practice as Ontario fair debt collection lawyers. In Jerman v. Carlisle, the high court is examining whether the bona fide error defense under the Fair Debt Collection Practices Act extends to a mistake of law, rather than a clerical mistake. The FDCPA says debt collectors may not be liable for violations that arise unintentionally, from a bona fide error and despite procedures intended to prevent such mistakes. The federal appeals courts are split on whether a mistake of law is eligible for this defense, with the Second, Eighth and Ninth saying no and the Sixth, Seventh and Tenth saying yes. The Sixth Circuit's decision led to this appeal.

Karen Jerman was a homeowner who received a foreclosure complaint from the defendant law firm, Carlisle, McNellie, Rini, Kramer & Ulrich. Representing Jerman's mortgage company, the Carlisle firm wrote that Jerman's debt would be assumed valid unless she contested it in writing within 30 days, as provided by the FDCPA. This was a misreading of the law, which does not require that disputes be put in writing. In fact, Jerman's mortgage was paid off, and she successfully contested the debt and got the case dismissed. She then sued the Carlisle firm for violating the FDCPA. The firm got the case dismissed by using the bona fide error defense. Jerman appealed to the Sixth Circuit, arguing that the bona fide error defense does not apply to mistakes of law. The Sixth disagreed, finding that Congress never explicitly barred the defense.

The Wisconsin Law Journal reported on the oral arguments in the case Jan. 14. During the arguments, the article said, Justice Stephen Breyer suggested that narrowing the bona fide error defense would create a sticky situation for attorneys. Under this reading, he said, attorneys who have followed the law diligently could still be liable for honest misreadings of the law. This would remove their ability to successfully represent clients. However, Justice Ruth Badger Ginsberg suggested that Congress didn't impliedly include mistakes of law in the bona fide error defense just because it failed to exclude them. Because mistakes of law are rare, she said, Congress would have explicitly included them if that was the intention. A decision is expected later in the current Supreme Court term.

As Brea debt collection abuse attorneys, we look forward to that decision. We believe expanding the bona fide error defense to include mistakes of law would be a serious mistake, because it could allow debt collectors to abuse the law. If collection agencies could avoid liability for breaking the law by claiming that they simply misread it, we do not doubt that some would intentionally do so. Individuals would still be able to challenge gross and obvious law-breaking, but the change could effectively end lawsuits over subtler violations. This would weaken the consumer protections that are the goal of the FDCPA, and discourage the private consumer-rights lawsuits that currently comprise the majority of FDCPA enforcement actions. The Federal Trade Commission, which enforces the FDCPA, has argued that a decision against Jerman would weaken its watchdog role as well.

Continue reading "Supreme Court to Decide Whether Bona Fide Error Defense Applies to Mistakes of Law" »

Our Los Angeles County fair debt collection lawyers wrote back in October about a Buffalo, NY collection agency whose employees were actually arrested for posing as law enforcement officers. A Jan. 5 article from the Associated Press put a spotlight on Buffalo's surprisingly large debt collection industry. The article starts by discussing the owner of the business that sparked the arrests, Tobias Boyland, a former felon who is himself being prosecuted for unlicensed possession of a firearm. But even aside from Boyland's nine companies, the article says, the Buffalo area has become a center for debt collection agencies that break the law with their aggressive collection attempts.

Western New York is a former industrial area whose job-hungry workforce and low cost of living make it attractive for call centers. Grants from the state have helped create 110 collection agencies around the city, employing 5,000 to 6,000 people. But along with the growth of jobs came a growth in complaints from consumers who claim the companies violated state and federal consumer protection laws with aggressive and abusive debt collection tactics. The Better Business Bureau for the region gave 104 of 213 debt collection companies in Western New York an F grade, and a Buffalo company is the subject of one in 10 complaints about debt collectors to the national BBB. And at least 20 individuals in the industry have been arrested or sued for threatening, harassing or otherwise abusing consumers. Among the victims was a woman who was scared into paying a debt she didn't owe by a caller who said she would be arrested and her children put in foster care if she didn't hand over her bank account information.

As Redlands debt collection abuse attorneys, we know very well that debt collectors can't have people arrested. In fact, threatening someone with arrest or another legally impossible action is illegal under the federal Fair Debt Collection Practices Act and numerous state laws. Unfortunately, many consumers don't know their rights -- which is why so many collection agencies get away with abuses like these. Arrest and criminal prosecution for abusive debt collection employees is very unusual, but the law gives consumers another option for dealing with abusive debt collectors: a civil lawsuit. Both state and federal laws allow consumers who are victims of debt collection abuse to sue the perpetrators for financial damages.

Continue reading "Western New York Becomes Center for Sometimes Unethical Debt Collection" »

Our Riverside County loan modification attorneys keep an eye on the health of the housing market, in California and across the U.S. So we were interested in a somewhat grim set of predictions for housing in 2010 published Jan. 4 by BusinessWeek. The article consults industry experts including economists and a professor for the Mortgage Bankers Association for predictions on foreclosures, recovery signs, federal action and more. While the experts seemed hopeful about signs of recovery, both current and future, they didn't mince words about the problems they anticipate. First and foremost, they said foreclosures would increase in 2010, particularly among prime borrowers.

When the housing crisis began, the bulk of foreclosures were among borrowers who took out costly subprime loans. Now, the article said, the problem has shifted mainly to prime borrowers, who qualified for lower interest rates. Experts said the problem is driven by unemployment, which affects people of all economic classes. Despite a small fall-off, unemployment is still at record highs, at 10% nationally and 12.3% in California. Without income, homeowners may simply not be able to pay what they owe, even if the loan terms were reasonable and appropriate. This will slow the housing recovery that began in September, one expert said -- but it won't stop recovery entirely. Sales have risen in the past three months, and new-home inventories are low.

No one can truly predict the future, but these predictions absolutely fit with our experience as Anaheim loan modification lawyers. More and more, our clients are people who are facing foreclosure because of unemployment, not because they were sold bad loans. People subprime loans and victims of predatory lending are absolutely still out there, but most who were facing foreclosure have already resolved their problems. As some in the federal government are now acknowledging, the problem is that people without an income don't have the money to make their mortgage payments, especially if they bought their homes at the height of the market. Because many are also "underwater," owing more than the home is worth, some feel like the best solution is simply to walk away.

Continue reading "Experts Predict More Foreclosures and Trouble for Prime Borrowers in 2010" »

As Rancho Cucamonga loan modification lawyers, we have long supported laws that would allow bankruptcy judges to "cram down," or lower, principal owed on a primary home during a bankruptcy. In a Jan. 5 editorial, the New York Times reiterated its agreement. The editorial said the housing market may be weakening again, after some signs of recovery. It also repeated predictions from many housing experts who see the market worsening or staying flat thanks to predicted interest rate increases, high unemployment and the end of the homebuyer tax credit. Under these circumstances, the editorial said the Obama administration should put new emphasis on mortgage cramdowns, which it said was the best way to modify an underwater loan.

In a cramdown, the principal owed on the loan is simply reduced. This means an immediate loss for the lender, but it also reduces defaults and foreclosures by restoring equity and lowering mortgage payments. Last year, Congress considered allowing bankruptcy judges to cram down principal on a primary home loan as part of a Chapter 13 bankruptcy. Despite the fact that judges may already cram down principal on any other loan, the measure died because of fierce opposition from the financial industry. The Times did not call for more efforts to pass this bill, but suggested that the White House could simply change its policies to encourage voluntary cramdowns through the Home Affordable Modification Program.

Our Whittier loan modification attorneys don't believe this would be enough to make a difference on its own. As the article itself notes, HAMP has been largely unsuccessful, with borrowers complaining about bureaucratic delays, seeming incompetence from lenders and mistake that threaten their homes. We believe this is partly because the program is entirely voluntary, with public shaming the only tool available for the Treasury Department to compel compliance. Lenders who believe they will make more money by foreclosing have no real incentive to grant loan modifications, although they do have an incentive to look like they will. More toothless policies from the federal government, however well-intentioned, are unlikely to change the behavior of lenders who fought hard against bankruptcy cramdown legislation.

Continue reading "New York Times Again Calls for Mortgage Cramdowns in Consumer Bankruptcies" »

Thanks to personal experience and industry reports, our San Bernardino personal bankruptcy lawyers knew that 2009 was likely to offer a flood of new bankruptcies. According to a Jan. 6 article from the Wall Street Journal, individual bankruptcies increased by 32% last year over 2008, which means 1.41 million bankruptcies. This is the highest rate since 2005, when bankruptcies spiked just before changes to the law. The article attributed the rise to the continuing recession, high unemployment rates and the housing crisis, all of which are putting a squeeze on consumers. In fact, the article said, bankruptcy attorneys are seeing an increase in filings from people with six-figure salaries and high levels of education, many of whom were doing well financially just a few years ago.

The increase in individual bankruptcies is particularly noteworthy because it includes a large proportion of Chapter 7, or liquidation, bankruptcies. That's despite the 2005 bankruptcy reform law, which was specifically intended to cut down on Chapter 7 filings by forcing more filers into Chapter 13 reorganization bankruptcies. In Chapter 7, filers pay off some debts and the rest are forgiven, but in Chapter 13, filers must make a repayment plan and repay most or all of their debts. The reform laws included a "means test" provision intended to determine whether the filer could repay the debt -- so the rise in Chapter 7 bankruptcies means more filers are failing that test. A Columbia University law professor quoted in the article said the numbers suggest that the law is ineffective and likely was not well written.

As Orange consumer bankruptcy attorneys, we agree, although we don't enjoy being right about this. The rise in Chapter 7 bankruptcies means more and more people are dealing with debt that's disproportionate to their incomes. In this economy, we suspect that unemployment and failures of small businesses are major factors. Just as the article says, we have seen many bankruptcy clients from middle-class or upper-class backgrounds, who never believed they would end up in our office. The vast majority of these people did not spend too much money or make unwise investments. But like many Americans, their income has dramatically changed over the past 24 months or so, and they sometimes turned to credit cards, home-equity loans or other forms of debt to make it up.

Continue reading "Consumer Bankruptcy Filings Reach Post-Reform Record High in 2009" »

As Riverside County loan modification attorneys, we've spent most of 2009 watching, and being disappointed by, the progress of federal foreclosure prevention efforts. A Dec. 31 article in the Modesto Bee sums up the state of those efforts under the Home Affordable Modification Program, or HAMP. The Obama Administration launched the program at the beginning of the year, hoping to reverse the damage to the U.S. real estate market caused by a flood of foreclosures. But 2009 is ending without much real progress, the article said, with borrowers repeating many of the same complaints about lenders' behavior that they had in March and July.

The situation has changed in some ways, the article said. The focus on foreclosures caused by subprime or predatory loans has shifted to a focus on foreclosures on prime borrowers crippled by job losses. And HAMP has created a lot of trial modification. However, the article said, only 4.3% of those trial modifications had been made permanent as of November. Many of the homeowners who once complained that lenders weren't responding to requests for a loan workout are now complaining that lenders aren't responding to requests to make the trial modification permanent. One borrower told the newspaper that she received foreclosure auction notices for her home twice, even though she's part of a trial modification that's supposed to suspend foreclosure. Another complained that she received a permanent modification offer that raised her mortgage payment well above the 31% limit set by HAMP.

Our Cerritos loan modification attorneys have watched this situation throughout 2009. Thanks to numerous media reports with stories like these, as well as several studies of the economics confronting lenders and loan servicers, we have concluded that they do not really want to make loan modifications at all. If it is more profitable to foreclose, at least in the short run, lenders will most likely choose that option. As a housing counselor in the article says, some borrowers simply walk away after months or a year of consistent seeming incompetence from lenders. However, it's also clear that lenders want to seem as if they are willing to make modifications, which may explain why so many have joined the voluntary HAMP program in the first place.

Continue reading "HAMP Gets a D Grade After 2009 Sees Low Permanent Modification Rates" »

As Fontana debt settlement lawyers, we know that the new year typically brings in a few people who have resolved to get their financial lives under control. Fortunately for those with credit card debt, a Dec. 30 article in the Chicago Tribune suggests that this may be an excellent time to settle that debt. As the economy goes downhill and unemployment rises, many people are having a hard time making their credit card payments. That means credit card companies are seeing more and more defaults -- in fact, the article says defaults are tracking the unemployment rate. And that, in turn, means credit card companies are hurting and eager to negotiate settlements with people who can no longer handle their debt -- even if that means the company gets less than the full amount.

The article suggests several ways to approach settling your credit card debt. The most direct way is simply to call the credit card company, explain your situation and request a reduction in your debt in exchange for paying it off quickly. However, negotiation is not for everyone, and the stress of debt can make some people shy. That's why the article also suggests a nonprofit credit counseling agency. These agencies may charge a fee, but they also do the negotiation for you, help you set up a payment plan and provide education on how to avoid overwhelming debt in the future. A third alternative is a debt settlement company, which the article recommended with reservations because they are for-profit companies that may be dishonest and will likely harm your credit. A debt settlement company uses missed payments as leverage to negotiate a settlement for a reduced amount.

We offer a fourth option: representation from a licensed Orange County debt settlement attorney. Like credit counselors, our law firm negotiates directly with creditors to settle debts, generally for less than the full amount owed. We can do this because credit card companies know that they could get nothing at all if the client is forced to declare individual bankruptcy -- and when bankruptcy lawyers are on the job, they get nervous. Once the debt is settled, we have partners who help follow up to ensure that official records reflect the settlement and that old debt won't come back to haunt you. And unlike some debt settlement firms, we believe it's part of our job to explain the financial implications of the actions we take on clients' behalf, such as taxes owed on forgiven debt.

Continue reading "Bad Economy Means Settling Credit Card Debt May Be Easier Than Ever" »

As Chino loan modification lawyers, we have long been cynical about the behavior of mortgage lenders when their financial interests oppose the common good. So we were not surprised by a Dec. 30 article on BNET about a new study of New York State's relatively recent foreclosure settlement law. Effective in September of 2008 and intended to prevent avoidable foreclosures, the Foreclosure Prevention and Responsible Lending Act of 2008 requires mandatory settlement conferences between lenders and subprime borrowers before a foreclosure lawsuit can proceed. But a study by the Center for New York Neighborhoods (PDF), a network of nonprofits focused on housing issues, found that lenders come to these conferences with inadequate preparation, documentation or authority, making real negotiations impossible and undermining the law's intent.

Under the New York law, lenders and borrowers meet for a settlement conference supervised by a court employee. The law specifies the topics they must discuss, including each party's obligations under the loan documents and negotiations for a "mutually agreeable resolution." However, the CNCYN report found that lenders' attorneys knew the status of the loan just 6% of the time; had a copy of the homeowner's officer just 3% of the time; and had the phone number of someone with settlement authority just 13% of the time. Even worse, the report said, courts rarely take steps to penalize this lack of preparation. Due to inadequate training, little guidance and high caseloads, courts determined how far apart offers were just 5% of the time and asked lenders for a payment history just 8% of the time. To make matters worse, fees for the lender's attorney are charged to the homeowner regardless of preparation.

As the BNET article points out, these are the results in a state with a consumer rights law on the books to deal with foreclosures. Under those circumstances, our Yorba Linda loan modification attorneys aren't surprised that the situation is even worse in states without such a law. Like the New York State law, the federal HAMP program provides virtually no accountability to lenders who fail to make a reasonable effort to modify loans. Both programs also lack well-trained mediators and mandatory pre-negotiation counseling, features of the apparently more successful foreclosure mediation programs. Without accountability and consumer education, these laws are virtually toothless. In fact, since New York's law allows lenders to bill borrowers for the time of unprepared attorneys, it may even do more harm than good.

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