California Bankruptcy Attorney Blog

Our Fullerton loan modification attorneys were very interested to learn that the federal government is still looking for ways to improve the Home Affordable Modification Program. A Feb. 22 article in the Wall Street Journal says the Treasury Department, which administers HAMP, is considering several changes that would give borrowers more chances to fight an unfair denial by their lenders. Most importantly, the proposed rule would require lenders to give borrowers thirty days after a denial of a HAMP application to respond. The idea is to allow borrowers to appeal the lender's decision without fear that the lender will foreclose.

The proposal is part of internal federal documents and is not final. A spokesperson for the Treasury Department said it was one of many ideas under consideration and that no announcements are scheduled. Other parts of the proposal included:

• Expanding the requirement to make "reasonable solicitation efforts" to let borrowers know they qualify for HAMP. The proposal would specify that lenders must contact any borrower whose payments are late by 60 days or more and who is eligible for HAMP, with at least four phone calls and two letters, one certified.
• A requirement to certify in writing that the borrower is not eligible for HAMP before a foreclosure sale.
• A requirement to suspend foreclosure proceedings while a HAMP application is being considered. This is not currently mandatory, although many lenders say their policy is to suspend foreclosures.

The article says the proposals would slow down the already slow foreclosure process. That may be an implicit criticism, but we're not sure we see anything wrong with slowing it down. These proposals seem designed to address common complaints about lenders' behavior in HAMP, particularly complaints about incorrect denials and foreclosures happening during a loan modification application. Many borrowers have gone to the media with stories about being foreclosed on after a loan modification was granted, suggesting that lenders' left hands don't talk to their right hands often enough. If another month is what it takes to prevent this sort of seeming incompetence, our Colton loan modification lawyers are okay with a delay -- especially since lenders already routinely drag their feet on applications.

Continue reading "Treasury Department Considers Adding Appeal Period to HAMP" »

As Costa Mesa debt settlement attorneys, we have been guardedly optimistic about the CARD Act for some time. This credit-card reform bill was passed last year and some of its provisions took effect in August, but the remainder became active Feb. 22. According to an article by McClatchy Newspapers, the law may help consumers avoid some of the most costly deceptive practices by credit card companies. However, other abusive practices remain unchecked, and credit card companies have already raised their rates to compensate for anticipated losses.

As of last August, credit card companies could not raise interest rates without 45 days' notice, and had to send bills at least 21 days before the payments were due. This week's new provisions add to those protections considerably. Companies may no longer raise customers' interest rates on existing balances until a bill is at least 60 days overdue. If a cardholder pays on time for six months after this happens, the credit card company must drop the interest rate back to its original size. Among other things, this will stop the practice of "universal default," in which a credit card company raises rates on all cards because of a late payment on one card. The article estimated that this alone will save U.S. cardholders $10 billion a year. Other provisions include:

• A requirement to get permission before allowing cardholders to spend over their credit limits.
• A prohibition on a practice called "double-cycle billing," in which the credit card company charges interest on the average daily balance over the past two months to determine the interest charge, rather than using the current month's balance.
• A requirement to put any payment over the minimum payment toward the balance with the highest interest rate. This applies only when there's more than one balance, of course.
• For cards with a high annual fee, a limit on that fee in the first year to no more than 25% of the total credit limit.

When the Act was passed, our Fontana debt settlement attorneys were disappointed that it didn't go further. Nonetheless, we believe this will help many credit-card holders avoid becoming financially entrapped by provisions that they didn't expect and had little way to learn about. Double-cycle billing, for example, was perfectly legal before the CARD Act, but not at all intuitive and arguably deceptive. By reducing that kind of deception in credit card lending, the law will give people fuller information with which to make good decisions about their money. It will also reduce the amount of money companies can charge their customers, which will slow the growth of debts. In the long run, this may actually benefit credit card companies, because it may keep their customers from getting so deep into debt that they're forced to file for personal bankruptcy.

Continue reading "CARD Act Protecting Buyers From Unfair Policies Finally Takes Effect " »

Federal statistics on loan modifications under the Home Affordable Modification Program have not been encouraging. So our Rancho Cucamonga loan modification lawyers were pleased to see a sharp increase in temporary modifications made permanent in the Treasury Department numbers released Feb. 17. According to the Feb. 18 Los Angeles Times, lenders stepped up in January, increasing the number of permanently modified loans from 66,465 at the end of December to 116,297 at the end of January. Another 76,482 modifications were approved and waiting for acceptance by the borrower, the report said.

HAMP was announced about a year ago as the Obama administration's attempt to slow foreclosures and help the housing market recover. However, the program has come under intense fire in the past year as a "failure," because very few modifications have been done compared to the estimated 3.4 million mortgages eligible. The program's slowness has attracted criticism of the participating lenders as well as the government and, to a lesser extent, borrowers who don't follow instructions well. The January numbers say 28% of eligible homeowners have now entered the program through all participating lenders. At Bank of America, the nation's largest loan servicer, that number was 22%, up from 15% in December and 12% in November. And HousingWire reported that California has the most active HAMP loans, trial and permanent, in the U.S.

This is good news for our clients. As Corona loan modification attorneys, however, we'd like to know what role public relations played in the sharp upswing in loan modifications. We wrote in December about a meeting the federal government called with participating lenders, in which it reportedly chastised them for their very low rate of conversions as of November. Treasury officials also planned to require more frequent updates from participating lenders and even fine those that don't respond fast enough. We suspect these actions had a strong effect on January's loan conversion numbers. As with other aspects of HAMP, we believe lenders simply declined to take serious action to prevent foreclosures until the government "shamed" them publicly or added teeth to the program.

Continue reading "New Federal Data Shows Sharp Increase in Permanent Loan Modifications" »

A year after President Obama announced his Making Home Affordable plan to slow foreclosures, the plan has been heavily criticized. From the left, and from Ontario loan modification attorneys like us, the criticism has focused on the plan's lack of teeth -- nothing compels lenders to participate, or complete their side of the deal in a timely manner. A Feb. 14 article in the New York Post makes the same criticism, but of a similar program in New York state. The Bankruptcy Loss Mitigation Program, a project of bankruptcy judges in the Southern District of New York, has produced fewer than 10 permanent loan modifications out of 808 applicants, the newspaper said. And according to many personal bankruptcy attorneys, the problem, as with HAMP, is that the plan doesn't motivate lenders to actually complete the deals.

Under the Bankruptcy Loss Mitigation Program, lenders and borrowers are supposed to meet face to face to negotiate a loan workout whenever the circumstances make one possible. That part of the program is working, says Judge Cecelia G. Morris of Poughkeepsie bankruptcy court. But consumer bankruptcy attorneys say the rate of loans actually modified is miserable. One attorney said he hasn't had a single case in which the lender got the paperwork right the first time. This is also a common complaint from borrowers and attorneys trying to participate in HAMP, who say they've been strung along for months by lenders who repeatedly lose paperwork, ignore it for months or give contradictory instructions. Another attorney suggested that banks would have a stronger incentive to finish loan modifications if bankruptcy judges were allowed to reduce principal on primary homes, as they are currently allowed to do with second homes and vehicles.

That attorney was referring to "cramdowns," a proposal that unfortunately died in Congress last year due to strong lobbying from the financial industry. Our Chino loan modification attorneys agree that cramdowns would incentivize lenders to get the deal done. If lenders know they may lose money by forcing a borrower into bankruptcy, they are much more likely to complete a loan modification deal in which they lose far less money and can better control the terms. As things stand, lenders lose nothing if they force borrowers into bankruptcy by refusing to make a good-faith effort to modify loans. This is the real problem behind the "failure" of HAMP, and we do not believe it will be fixed unless authorities find some way to show lenders that making the modifications is in their best interests.

Continue reading "New York State Loan Modification Program Called Ineffective Because It's Voluntary" »

As San Bernardino County loan modification attorneys, we have been reluctant to write about media coverage of the trend toward homeowners "walking away" from their mortgages. We find that despite the wealth of coverage of this emotionally charged issue, the vast majority of our clients have personal and financial reasons to look for other solutions first. However, a Feb. 16 article from CBS News provides a good overview of the pros and cons of this decision. CBS MoneyWatch.com editor at large Jill Schlesinger said the decision may be right for some people, but it's not one to make lightly.

Walking away from a mortgage means moving out and stopping payments because it makes more financial sense to leave than to stay -- not because you can't afford the mortgage. These "strategic defaults" are done because the borrowers are deep underwater and the numbers show that their finances will recover sooner this way. Not surprisingly, Schlesinger warned readers that any default, including a strategic default, will destroy their credit for seven years. She advised borrowers to weigh this against the prospect of being locked into a mortgage payment two to three times the price of rent. You may want to consider a strategic default if you're more than 20% underwater, she said, but you should always do the math. Interestingly, Schlesinger added that most borrowers are reluctant to consider walking away until they see the numbers convincing them that it's a better long-term financial move.

Our Pomona loan modification lawyers know firsthand that borrowers don't make this decision casually. We have represented candidates for a loan modification from the beginning of the housing crisis. In most cases, our clients have strong emotional reasons for wanting to hold on to their homes, along with practical reasons like wanting to keep the down payment or keep their children in good schools. However, when the math shows that a default or a personal bankruptcy makes more sense than fighting for the home, we don't hesitate to explain that to our clients. As Schlesinger points out, large real estate developers have walked away from soured investments for the exact same reasons, without creating the outcry aimed at individual homeowners making what is ultimately a business decision.

Continue reading "CBS News Financial Expert Discusses Pros and Cons of 'Walking Away'" »

As Riverside County loan modification attorneys, we have been skeptical about reports that the housing market is rebounding. A Feb. 16 article from the Associated Press feeds that skepticism by reporting that the number of people behind on their mortgage payments rose at the end of 2009. This continued the disturbing trend of delinquency rates rising over the last year's for each previous year, and reversed a trend toward smaller gains in delinquencies for the rest of 2009. Credit reporting agency TransUnion, which reported the numbers, said it expects foreclosures to continue rising throughout 2010.

TransUnion counts a mortgage delinquent when the borrower is at least two months overdue with a payment. It collected data using its database of credit information on 27 million people. It said in the fourth quarter of 2009, 6.89% of mortgage payments were at least 60 days overdue. That's up from 6.25% in the third quarter of 2009, and from 4.58% in the last quarter of 2008. A spokesperson for TransUnion said a certain amount of uptick is normal during the holiday season, when some people prioritize holiday spending over paying debts. But the trend may go beyond the seasonal, he said, especially if it continues into 2010. Furthermore, adjustable-rate mortgages written in 2006 and 2007 are likely to reset to higher numbers this year, which will create high mortgage payments and eventually more debt. That means more delinquencies are likely, and foreclosures will follow.

Our Fontana loan modification lawyers would like to declare that the market is improving, but the numbers just aren't there. In addition to the considerations mentioned in the article, we believe the continuing high rate of unemployment is a factor. The article does mention that the average amount of debt in new mortgages has increased slightly, which is a good sign because it shows that home prices may be rising slightly. We agree with the TransUnion spokesperson that increasing and stabilizing home prices will be key to the housing market's recovery. Unfortunately, this won't happen quickly unless lenders take a more active approach to stopping foreclosures -- or the federal government requires them to.

Continue reading "Mortgage Delinquencies Remain High in Last Quarter of 2009" »

The New York Times recently ran a story on an approach to negative equity that intrigued our Redlands loan modification attorneys. According to a Feb. 8 post on the Bucks Blog, a private equity company has begun offering lenders and mortgage servicers a program intended to stop "strategic defaults." That term refers to the practice of homeowners walking away from their mortgages when they owe substantially more than the homes are worth. The Loan Value Group offers lenders a chance to hold on to these borrowers by essentially paying the borrowers to stay put. Specifically, the group offers to pay back some of the negative equity when the mortgage is paid off, as an incentive for homeowners to hold on.

The company works only with homeowners who can afford their mortgages, but who are at risk for strategic default because it makes more financial sense to stop paying. It works with client banks and mortgage servicers to identify at-risk borrowers, using a combination of location, income and negative equity information. Then, targeted borrowers are offered money payable when they fulfill the terms of their loans, whether that means paying off the mortgage, refinancing or a short sale. The payment is calculated to be just enough to keep them in their homes, but not enough to make up all of their negative equity. The Times said this typically works out to 8 to 10 percent of the loan's value, but could be as much as 20 percent in boom-and-bust areas. The lender avoids taking a loss in a foreclosure and the borrower stays in the home.

As Costa Mesa loan modification lawyers, we're interested in anything that seems to offer a solution that keeps homeowners in their homes and doesn't meet strong opposition from banks. We believe bankers' reluctance to lose profit (real or imaginary) is the primary problem with loan modification programs, as well as the reason they opposed mortgage cramdowns in bankruptcy. This program may meet those conditions. However, we'd be interested in knowing more about the Loan Value Group's own business model. All businesses exist to make money, and it's important to evaluate whether a business makes money to your detriment before signing on. And borrowers participating should realize that the offer won't necessarily solve their problems. Before signing on, they should do the math and make sure an eventual reward makes it worthwhile to stay on.

Continue reading "Private Fund Invents Program Paying Underwater Homeowners to Stay Put" »

As Rialto loan modification attorneys, we were very interested to get a glimpse into a complaint against a major bank by one of its own former employees. The blog Consumerist ran a post Feb. 8 about a former Bank of America employee who was laid off last year after 21 years, most recently doing due diligence on loans. Vince K. also had a home loan through Bank of America, and he couldn't pay for it after he lost his job, so he arranged a short sale. Unfortunately, the bank never took the loan off its books after the sale, which led to debt-collection phone calls at 4 a.m. and a bill for insurance on a property he no longer owns. In January, a year after his layoff and five months after the short sale, he finally wrote to Bank of America CEO Brian Moynihan to beg for a sensible resolution.

The letter-writer starts out by acknowledging that he owes money for the deficiency balance -- the mortgage debt left over after the proceeds of his short sale. He said he was aware that he owed the money, but that the bank's way of handling this was to "robocall" him at 4 a.m. After weeks of such calls, he tried to contact someone at the bank directly and eventually ended up talking to someone who put his account into collections. He had to call to straighten that out before he could start making payments on the deficiency -- very small ones out of his unemployment check.

During that time, it became clear that the bank hadn't removed his loan from its books, in part because it was sending Vince K. letters demanding that he buy insurance on the property he sold. The bank eventually "force placed" insurance and billed him for it. Then he began receiving collection phone calls about the mortgage debt again. Despite explaining his situation, then reaching out to contacts in the company, he couldn't stop the calls. Finally, he wrote this letter to the media and to the CEO, explaining his problem in detail and with documentation.

Our Placentia loan modification lawyers have read many horror stories like this, but rarely in so much detail and from someone who understands the company from the inside. If the allegations in the letter are true, it seems clear that Vince K. is a victim of severe incompetence by the bank. Not only has the bank failed to clear his mortgage debt off its books, but it has repeatedly violated the Fair Debt Collection Practices Act by attempting to collect debt that is not validated and by calling outside the legally allowed hours. Furthermore, we think it's significant that all of this happened to a former Bank of America employee who presumably knew which departments and people to speak to about the problems. If someone like that can't get a basic problem solved, the chances must be even lower for someone with no bank experience or connections.

Continue reading "Laid Off Bank Employee Writes CEO to Complain About Banks Mortgage Mistakes" »

A federal appeals court recently made a ruling that pleased us greatly as Riverside County fair debt collection attorneys. InsideARM reported Feb. 3 that the Second U.S. Circuit Court of Appeals, the federal appeals court for New York, Connecticut and Vermont, has ruled in favor of more notice to consumers when debt collectors start lawsuits very quickly. In the case, Ellis v. Solomon & Solomon PC (PDF), a collections law firm started its collection efforts against Janet Ellis with the legally required notice that the debtor may dispute the debt within 30 days. About halfway through that 30-day period, the law firm sued the Ellis. She eventually sued it back for violating the Fair Debt Collection Practices Act.

In her lawsuit, Ellis claimed that Solomon and Solomon and two of its attorneys had violated the FDCPA in several ways. However, the appeal focused on whether the law firm misled her when it sued during the 30-day validation period, without providing notice that the validation period was not over. A trial court in Connecticut agreed and ruled for Ellis on that part of the case. The law firm appealed to the Second Circuit, but it too sided with Ellis. Under the law, the court said, new notices must not overshadow or be inconsistent with the original validation notice. Applying a test that takes into account what the "least sophisticated consumer" would think, the appeals court decided that such a consumer might be misled into thinking a lawsuit supersedes the original notice. Thus, the court agreed that the law firm had violated the FDCPA.

As InsideARM noted, this ruling will probably mean that debt collectors who sue during the 30-day validation period have to make it clear that it's still possible to dispute the debt. Our Ontario debt collection harassment attorneys believe this will be valuable for people hit by debt notices. In our experience, most people who receive a debt collection notice don't understand it well, or understand their rights generally. It's not hard to believe that someone without any special legal experience might be confused by a lawsuit that hits halfway into a thirty-day notice. The second notice the court required is a simple solution to this problem that won't cost collection businesses much extra money. And of course, those wishing to avoid a second notice can always wait out the 30 days before suing.

Continue reading "Court Says Second Notice Required When Debt Collectors Sue During Validation Period" »

Our Fontana debt collection attorneys are not big fans of the practice of buying and selling debt. This is a standard practice in the debt collection industry, in which an original creditor like a cell phone company writes off a debt as bad, then sells it for pennies on the dollar to a dedicated debt collector. That sale can be repeated many times. According to a Feb. 3 article in The Kiplinger Letter, a Government Accountability Office report (PDF) says this practice causes serious problems for consumers. Because information goes missing when debt information is passed from hand to hand, debt collectors can end up collecting debt that's already paid, discharged in bankruptcy or belongs to someone else. The article suggested that this contributed to 2009's sharp upswing in debt collection complaints.

Thanks in part to the GAO report, the article said, the FTC is scrutinizing the debt collection industry more closely than before. Not only is the agency requesting information on how debt buyers do business, but it's enforcing the law more aggressively. That includes requesting bigger legal settlements as well as holding debt collection leaders personally responsible for violating the law. Action by lawmakers may be next, the article said. In fact, the GAO report called on Congress to make several changes to the Fair Debt Collection Practices Act. The law should be updated to require debt collectors to keep information accurate enough to verify debts, the report said. Congress should also update the FDCPA to reflect new technologies and give the FTC rule-making authority.

As Chino Hills unfair debt collection lawyers, we like these recommendations very much. The lack of documentation caused by debt resales can lead to serious problems, because debt collectors generally don't trust debtors. When a debtor says he or she is not the original creditor, or that the debt was paid off, collection agents may assume it's a lie and just keep on calling. In fact, because the information is missing, debt collectors can use lack of proof as a shield against accountability for knowingly calling people who don't truly owe debts. Requiring collection agencies to keep proof of the debt on hand will allow people to exercise their rights under the FDCPA. And giving the FTC rule-making authority will allow it to update the law to deal with innovations like text messaging, more quickly than the political process in Congress generally allows.

Continue reading "Government Report Says Buying and Selling Debt Causes Anti-Consumer Mistakes " »

As Rancho Cucamonga loan modification attorneys, we routinely work with homeowners who are forced by financial circumstances to consider loan workouts, short sales, deeds in lieu of foreclosure and other last-ditch financial moves. So we were interested to see an article on CNN.com Feb. 3 that explains one of the lesser-known repercussions of a foreclosure. As the article explains, a foreclosure or a short sale doesn't always end the homeowner's financial obligations. In many cases, lenders may still pursue the homeowners for the difference between what they owe on their loans and the sales price of the property. This is called a deficiency judgment, and it's achieved by suing the borrower in state court for the difference.

One woman in the article thought she was free of the debt after she was forced to short-sell her house. But about a year and a half after the sale, she received a notice saying the lender was holding her responsible for the $65,000 difference between the sale price and her loan. She couldn't pay, so she had to declare personal bankruptcy. This is not uncommon, the article said, thanks to falling home prices that make it next to impossible to sell homes for what they were worth a few years ago. In fact, lenders in many states can pursue people who let the home go into foreclosure, even if the lender knows the homeowner can't pay. In fact, state laws allow lenders to wait a few years to sue, until borrowers have gotten back on their feet financially. Whether a lender will pursue a deficiency judgment depends on the lender's own policies, the state the home is in and the types of loans involved.

As the article notes, California is a non-recourse state, which means lenders can't go after foreclosed borrowers under certain circumstances. Unfortunately, they're free to pursue deficiency judgments against foreclosed borrowers with refinanced loans and second mortgages, and those who made a short sale or deed in lieu of foreclosure. They're also free to sell those debts to debt collectors who will then go after the borrower. For our Anaheim loan modification lawyers, this means we must carefully analyze the possibility of a deficiency judgment in every case involving loan forgiveness. When necessary, we will aggressively negotiate for a legal document releasing clients from any further financial obligation after the transaction. In some cases, we can also defend clients in court against lawsuits trying to get money the borrower doesn't have and never did have through a deficiency judgment.

Continue reading "Some Mortgage Lenders Pursue Foreclosed Homeowners for Loan Difference" »

Part of our job as Riverside personal bankruptcy attorneys is to explain the ripple effects that our services can provide. At this time of year in particular, that means explaining the tax implications of a bankruptcy, loan modification or other major financial move. As a New York Times blog post set forth Jan. 29, taxes may look substantially different this year for people who underwent major financial changes in 2009. For many of our clients, this includes cashing out investments, having debt forgiven or losing a job.

People who settled debt without bankruptcy, were foreclosed on or had principal forgiven on a loan may be surprised to learn that the forgiven debt is taxable. That's because the IRS counts it as "income," even though a lack of income is likely what led to the debt forgiveness in the first place. There are several exceptions to this rule. Debts discharged in bankruptcy don't count as income. Thanks to a 2007 law, the federal government will also ignore forgiven debt that comes from a foreclosure or forgiven mortgage on your primary home, as long as it doesn't exceed $1 million for individuals and $2 million for married couples. However, this only applies in specific circumstances, so you should talk to a tax professional before making decisions. Finally, you can avoid paying taxes on forgiven debt if you can convince the IRS that you're insolvent, which means your debts exceed your assets.

Unfortunately, many of our clients who get into financial trouble make financial moves that will also complicate their taxes. Cashing out retirement savings, for example, will mean paying income tax on what you took out as well as a 10% penalty. Selling investments can qualify you for a capital gains tax. And unemployment insurance payments are taxable after the first $2,400. The plus side is that if you lost income in 2009, you will drop into a lower tax bracket. And very high medical expenses, which bring too many of our clients into our office, are tax-deductible under certain circumstances.

Our Lakewood consumer bankruptcy attorneys can't overemphasize the importance of understanding these rules before you file your taxes. Innocent mistakes may not be harshly punished, but by failing to take the steps needed to show you're insolvent, for example, you could be locked into higher taxes than you need to pay. Worse, you could end up in a tax debt situation that you'll need professional help to change. To make matters worse, recent debt to the IRS cannot be discharged in bankruptcy. When working with clients, we provide individual counseling about tax implications of bankruptcy and other financial moves. We also counsel clients on related matters, like discharging difficult debts like student loans or unpaid child support.

Continue reading "Financially Distressed and Bankrupt People Should Plan Carefully for Taxes" »

Our San Bernardino County loan modification attorneys have long believed that lenders' policies are primarily responsible for their success or failure in the federal loan-modification program. A Feb. 2 post on AOL's DailyFinance blog adds evidence to that belief by profiling practices at Ocwen Financial. Ocwen has attracted media attention because unlike the larger lenders, it's got a strong record in the Home Affordable Modification Program. Where Bank of America had converted fewer than 2% of its trial modifications to permanent and Chase had converted 4% as of mid-December, Ocwen had converted 40%. Its redefault rate is also about half of those at the larger banks. The DailyFinance blog concluded that policies in place at Ocwen made the difference.

According to the blog, Ocwen got its start by buying distressed loans, working with homeowners to sort them out and selling them once they increased in value. It has since shifted to loan servicing, but a company spokesman attributed its success to that background. Where larger lenders had to scramble to handle surging delinquencies, Ocwen already had resources allocated. Borrowers work with a single consultant, not whoever happens to answer the phone, and that consultant is chosen for specific personality traits. Ocwen also uses behavioral-science tricks to remind homeowners of their documentation responsibilities. For example, consultants are trained to remind borrowers that the federal government will accept only signed tax return documents as income verification. And perhaps most importantly, Ocwen is willing to modify principal in cases where it believes that's necessary -- about 15%.

As Fullerton loan modification lawyers, we suspect all of these are radically different from the way larger banks handle HAMP. While not every lender has the background and experience Ocwen has in loan workouts, it's not hard for any company to follow the policies and hiring practices outlined in the post. In particular, the policy of reminding borrowers what documentation they must submit seems very basic and sensible. Perhaps more difficult for the larger banks would be imitating Ocwen's willingness to cram down mortgage principal. Financial institutions are notoriously reluctant to do this, despite the multiple studies suggesting it's the best way to keep underwater borrowers from defaulting or walking away. Major banks may believe they cannot afford to do this, but Ocwen, a much smaller company than Bank of America or Chase, appears to be surviving it.

Continue reading "A Look at Why One Lender Has Succeeded in HAMP While Others Have Failed" »

As Upland consumer bankruptcy lawyers, we were pleased to see a recent article on the importance of timing a bankruptcy. The Kalamazoo Gazette reported Jan. 16 that experts, including individual bankruptcy attorneys like us, suggest that people headed for bankruptcy consider filing early, before their financial problems are overwhelming. This is how most people handle it, the article said, because most people do everything they can to avoid a bankruptcy in the first place. But if the bankruptcy seems inevitable, personal bankruptcy lawyers say it's better to protect your assets by taking action early.

According to the article, most people drain their savings, cash out their 401ks and IRAs and sell possessions to pay debts after they get into financial trouble. This is understandable, because bankruptcy is a major financial upheaval that stays on the filer's credit report for ten years. During that time, it will be harder for the filer to rent an apartment, get a loan or perform many other basic acts involving credit. Many people try to avoid bankruptcy because they believe it will leave them "nude," one attorney said, meaning without assets. But in reality, experts said bankruptcy can often preserve financial assets while providing a chance to start over. For that reason, attorneys said they wished bankruptcy filers would come to them months earlier, closer to when their financial troubles started.

Our Garden Grove personal bankruptcy attorneys strongly agree. The article doesn't make this explicit, but in many cases, consumers lose their assets needlessly while trying to avoid a bankruptcy. It's better to avoid bankruptcy if possible, of course, but some filers have debts so high that there's no other realistic way to handle the situation. When this is the case, we encourage potential clients not to sell off their assets or liquidate their savings before they speak to us. In a bankruptcy, many of the assets that people typically liquidate are protected, which means they will not be sold to creditors. These include retirement savings, a certain amount of home equity, personal possessions without much value and heirloom jewelry. By declaring bankruptcy early, filers can start over with these assets in place, providing a cushion they'll need as they begin to rebuild their finances.

Continue reading "Experts Say Declaring a Bankruptcy Earlier May Help Debtors Rebound Later" »

Because we are Corona consumer bankruptcy lawyers, we spend a lot of time talking to our clients about the effects of bankruptcy and other major financial decisions on their credit scores. Many of our clients have misconceptions about bankruptcy and credit that can keep them from addressing their financial problems until after a lot of expense and emotional turmoil. That's why we were pleased to spot a Jan. 28 blog post on WalletPop.com interviewing the co-author of a book on living with bad credit. Geoff Williams, who authored Living Well With Bad Credit along with Chris Balish, told his own story about declaring bankruptcy and addressed some of the ways that people end up with bad credit in the first place.

For some people, Williams said, bad credit or a bankruptcy is truly out of their control because it's triggered by a major financial disaster like a serious disease or a job loss. But for many others, he said, one mistake snowballs into several more mistakes made to deal with the first one. For example, he said, buying a car that's too expensive for your budget could lead to higher credit card debt or suspending contributions to a savings account. Signs that your credit is slipping can be difficult to spot, he said, and emotionally difficult to acknowledge. Williams said that while credit matters, bad credit isn't the ruinous, financially crippling situation many people fear. In fact, he said, filing for bankruptcy "was one of the smartest financial decisions I've ever made." Even though it hurt his credit, it helped him get control of his finances and resume saving for things like retirement and his daughters' college tuition.

As San Bernardino individual bankruptcy attorneys, we believe this is true for many individuals who are backed into a financial corner. Some people regard bankruptcy as a failure or a sign that they can't handle their own finances. But in the right situation, bankruptcy can be a smart choice that gives you back the power to control your own future. When you literally cannot pay back all that you owe and that isn't likely to change, trying to pay it off just delays the inevitable. Draining retirement accounts or selling off assets to pay debts are common strategies, but they frequently aren't necessary to declare a bankruptcy, don't solve the problem and leave people in worse financial positions than before. A bankruptcy isn't anyone's first choice, but it can be the first step toward rebuilding savings, credit and a healthy financial life.

Continue reading "Author Discusses Myths About Bankruptcy and Its Effect on Credit" »

Our Redlands debt collection abuse attorneys saw an increase in calls about aggressive debt collection in the second half of 2009. So we were not surprised by a Jan. 21 report in Collections & Credit Risk saying that Fair Debt Collection Practices Act lawsuits increased substantially between 2008 and 2009. The article called it a record high number, saying it more than doubled over 2007's total of 3,813. The statistics come from research firm WebRecon LLC, which provides data about consumer lawsuits to the collections industry.

The trend continued into the first half of January, with 319 FDCPA lawsuits filed between Jan. 1 and Jan. 15. The article offered explanations for the rise from ACA International, a trade group from the collections industry. According to its spokesperson, ACA did not believe the increase in lawsuits corresponds to an increase in actual abuses by the collections industry. It noted that the numbers don't show how many claims were dismissed. The spokesperson attributed the spike in part a rise in consumer debt and increased online advertising by consumer attorneys. However, the article said, other types of consumer lawsuits, such as those under the Fair Credit Reporting Act, have seen little to no growth.

We suspect this flat growth shows that increased advertising is not a factor in the rise in FDCPA claims. Our Placentia unfair debt collection attorneys handle both FDCPA and FCRA lawsuits. Purely from speaking to clients and potential clients, we believe that there are more FDCPA lawsuits because consumers are seeing, and reporting, more violations of that law. As more consumers are having trouble paying their debts in a bad economy, debt collectors are losing money. We suspect that this makes some of them so desperate to collect that they cross the line. The collections industry claims that the majority of its employees are law-abiding, but it's fighting an increasingly large number of media reports of outrageous behavior by debt collectors. If it wishes to eliminate this negative PR, it may have to take a harder stance against law-breaking than it has.

Continue reading "Report Says Individuals Filed Record Numbers of FDCPA Lawsuits in 2009" »