California Bankruptcy Attorney Blog

As Rialto personal bankruptcy attorneys, we tell our clients that bankruptcy will protect them from illegal or unethical behavior by creditors. That may still be correct, but a recent article from AOL's DailyFinance suggested that sometimes, bankruptcy filers have to go back to court to enforce their rights. The Nov. 23 article told the story of a North Carolina couple, Michael and Dolores Kirkbride, who filed for bankruptcy in January of 2008, after the declining real estate market hurt their business as landlords. As part of their bankruptcy, Countrywide Financial negotiated to foreclose on two of the Kirkbrides' properties, which was formalized by an October 2008 court order. However, according to a court order in a lawsuit the couple filed this year, Countrywide and its successor, Bank of America, continued to demand that the Kirkbrides pay their "debt" and declined to go through with the foreclosure.

As the article explains, the debt was settled by court order as part of this couple's bankruptcy. However, the Kirkbrides started receiving collection calls from Bank of America just three days after the court order to foreclose. The couple alleges they answered 100 of the approximately 400 calls the bank made, staying on the phone for 30 to 40 minutes each time in an attempt to explain the mistake. Meanwhile, because the Kirkbrides technically still owned the homes, they continued incurring tax and homeowners' association bills. And because the bank did not report the debt as settled, their credit was damaged further. In January of 2010, the couple got the bank to acknowledge receiving a letter about the court order, but it took no action until their bankruptcy lawyer asked the court to sanction the bank. After they filed for sanctions against the bank, the bankruptcy court ordered Bank of America to pay $126,000 in damages and provide proof that it has corrected the credit reports, within two weeks of the Nov. 19 decision.

Half of that $126,000 is punitive damages, which means payments intended specifically to punish the bank for what the judge called "flagrantly disregard[ing] the court's order." As Placentia consumer bankruptcy lawyers, we're pleased that the court recognized this problem. However, we're less pleased that the problem fits into a clear pattern of behavior from banks -- blatant disregard for the rights of their borrowers. As the robo-signing scandal shows, this sometimes translates into disregard for the rule of law. We've written here many times that we believe banks' "mistakes" with loan modifications are actually intentional attempts to extract as much money as possible out of homeowners before foreclosure. This case seems like a genuine mistake, but it also shows that Bank of America's procedures for correcting mistakes are broken -- perhaps intentionally. The Kirkbrides had to hire a bankruptcy attorney before they could enforce the rights given to them by an undisputed court order.

Continue reading "Couple Wins Legal Judgment Forcing Bank to Comply With Bankruptcy Court's Order" »

One of the most common parts of our work as Rancho Cucamonga individual bankruptcy lawyers is counseling clients on whether bankruptcy is the best idea in the first place. Many clients are anxious to avoid bankruptcy if they can, so they want a professional to help them decide or confirm what they already know. In other cases, they have specific needs that they want to be sure will be met before they take the plunge. This post is an attempt to address this question, looking at some common questions about whether to file and reasons to file. But because no blog post is a substitute for a detailed review of your finances, you are also invited to contact us to set up a free consultation on your specific situation and needs.

The first thing to consider, of course, is whether you have enough debt for bankruptcy at all. As our partner and Norco consumer bankruptcy attorney Vincent Howard has written, you can estimate this informally by comparing your household expenses to your debt. Write down your expenses for basics like food and housing, including only debts for your home and car payments -- not debts from credit cards, medical bills or other expenses. Then, calculate how much of your income is left over. Using that leftover disposable income, can you pay your debts back within three years? If not, you should consider bankruptcy.

However, it's important to realize that bankruptcy is not a solution to every type of debt. Certain debts cannot be erased in bankruptcy court. These include debts for child support or spousal support (alimony); tax debts; criminal penalties or fines; and most student loans. Filing for bankruptcy can still help you deal with those debts, by eliminating debts elsewhere in your life and freeing up money. But you will still be required to pay them in full.

If you're considering bankruptcy to deal with an unsustainable mortgage loans, you should know that mortgages get slightly different treatment from other debts. In a Chapter 13 bankruptcy, in which you make a plan to repay your debts more slowly, the court is permitted to reduce your debt on most loans secured with physical property. That is, if you are repaying a car loan and the value of the car has gone down, the court may reduce the debt to the current value of the car. That's also true for second homes, boats and any other secured property except your primary home. Homeowners may still find bankruptcy helpful, because it frees up money to make mortgage payments, but it cannot change the repayment terms of your mortgage.

Continue reading "Deciding Whether Bankruptcy Is Your Best Choice Requires Thought and Expertise" »

Our Banning foreclosure attorneys have been writing a lot lately about robo-signing -- the practice among lenders of having employees sign massive amounts of foreclosure documents without reading them or verifying their truth. This is a type of fraud that has stopped a few foreclosures, but lenders insist that most or all of the underlying foreclosures are proper. Before that scandal has even passed, another paperwork-related mortgage problem may be emerging, posing even more serious problems for one lender. As New Jersey Newsroom reported Nov. 24, testimony in a bankruptcy case suggests that Countrywide Financial made a policy of not sending mortgage documents to buyers when it securitized mortgages. This violates state laws and throws actual ownership of the mortgage into doubt, raising the possibility that foreclosures may be invalid on thousands o mortgages owned by Bank of America.

When a mortgage is sold, state laws in New Jersey and many other states, as well as a loan servicing agreement, require that the physical mortgage document and a helper document called an allonge be transferred to the new owner. The issue arose in testimony from a Camden, N.J. bankruptcy. Bank of America attempted to foreclose on a home involved in the bankruptcy, whose loan had originally been issued by Countrywide but was supposedly sold to the Bank of New York. Countrywide submitted a document claiming the original documents were lost, but also said it still had the note. When the court investigated, a Bank of America employee testified that Countrywide routinely kept these documents.

The bank has since backpedaled, but if the original testimony is true, it could throw ownership into doubt on as all of the Countrywide loans that were securitized -- many as 96 percent of all of its loans. In the New Jersey case, the bankruptcy judge ultimately denied the foreclosure because the documentation was not in order. Observers believe this could be repeated across the nation, as foreclosure attorneys demand to see notes that owners cannot produce. Furthermore, all of the mortgage-backed securities those loans formed could be improper, which would allow investors to demand that Bank of America buy back those securities. The lender's losses could number in the billions.

Our Rowland Heights foreclosure lawyers have heard this story before -- it's not dissimilar from stories dating back a year or more about foreclosure attorneys demanding to see the note. However, this time, those demands are supported by sworn testimony that a major lender failed to follow the law, as a matter of policy. Thus, it's not just speculation -- it's evidence of not only illegal behavior, but a policy of illegal behavior. Some judges may still allow the foreclosure to go through if the homeowner truly hasn't paid -- but others may penalize Bank of America for Countrywide's blatant violations, or put foreclosures on hold due to genuine confusion over who has the right to foreclose. Furthermore, all homeowners with Countrywide-issued loans now have a very good reason to challenge foreclosures. Under the circumstances, we hope judges give those challenges serious consideration.

Continue reading "Testimony Casts Doubt on Whether Countrywide Mortgages Are Eligible for Foreclosure" »

One of the most common questions we get, as Ontario consumer bankruptcy lawyers, is "Which of the things I own are protected during a bankruptcy?" The Wall Street Journal's Smart Money magazine gave a partial answer to that question Nov. 17 with an article outlining the basics of bankruptcy exemptions and how they might affect people in different states. As the article discusses, bankruptcy exemptions depend in large part on what state you live in, because each state has a different list of exemptions that can vary widely across the country. But by choosing the right kind of bankruptcy, and enlisting the help of an experienced personal bankruptcy attorney, filers can make the most of the exemptions given to them by the law.

The article takes a close look at some of the high-cost properties that could be protected during an individual or married couple's bankruptcy. These include homes, cars, retirement accounts, life insurance policies and college savings accounts. With homes and cars, people with no equity at all are actually in a good position in bankruptcy. When you have no equity, creditors have nothing to claim, which means a bankruptcy trustee will not sell the home or car to pay your debts. If you can continue making payments (which often means a loan modification through Chapter 13 bankruptcy), you can hold on to the property. That's also true if the equity you have in the property is less than or equal to the exemption in your state. Retirement plans and term life insurance policies are generally safe, the article said, although whole-life insurance policies are not because they are considered investments. College savings plans held for someone else are exempted entirely if they are more than two years old; if they are not, up to $5,000 is exempted.

As you can see, bankruptcy exemptions are complicated and depend a lot on the specifics of each individual case. But our Redondo Beach personal bankruptcy attorneys want clients to take away two important lessons. One is that bankruptcy will not leave them in poverty. It is not an easy decision and it will likely mean losing some assets, but it is designed to leave filers with enough assets to support themselves. Even more importantly, we want potential clients to realize that in some situations, it makes more sense to file for bankruptcy than to spend money from assets that would be protected in a bankruptcy. If you know or suspect that filing for bankruptcy is inevitable, you are better off keeping your retirement account and your kids' college savings than you are spending them in a futile attempt to stave it off. This is a hard thing to acknowledge, but it's necessary if you want to give your family the best possible foundation when your debts are discharged and it's time to start over.

Continue reading "Article Outlines Some of the Best Opportunities to Protect Your Assets in Bankruptcy" »

As Corona personal bankruptcy lawyers, we were interested to see a recent report on bankruptcy filings in Orange County for the month of October. According to a Nov. 16 article in the Orange County Register, the U.S. Bankruptcy Court for the Central District of California reports fewer new bankruptcy filings last month than in any other month since February. This may be seen as good news for the struggling Southern California economy, as it represents a decrease in the rate of new filings. However, the article noted, October's 1,568 combined consumer and business filings were still 7.4 percent higher than the number of filings in October of 2009. It's also the largest number of bankruptcy filings on record in the five years since the 2005 bankruptcy law change.

The article suggests that the increase in monthly bankruptcy filings is slowing down from 2008, which saw the biggest gains in the five years since the 2005 law change. That change spiked bankruptcies as filers rushed to file under the old rules. Filings saw a dramatic drop after the new rules took effect, but have risen every year since then, in defiance of predictions made by supporters of the law. They have risen especially sharply since 2008, when the housing crisis took effect. A Foothill Ranch bankruptcy attorney told the Register he sees more middle-class and upper-class bankruptcy filers these days, especially people who own small businesses that folded in the recession. He said he thinks bankruptcy activity will go back down soon, as mortgage lenders start to work seriously with borrowers to prevent foreclosures.

Our Costa Mesa individual bankruptcy attorneys would like to agree, but that has not been the case in our experience. Rather, we've found that mortgage lenders are much more interested in drawing out foreclosures so they can profit off late fees, before ultimately taking the home anyway. In any case, the mortgage crisis is just part of the reason for the large increase in bankruptcy filings. As the article notes, the recession has affected people throughout the financial spectrum, including people whose financial problems stem from a job loss or loss of customers as well as people whose problems are largely mortgage-related. We do agree, however, that the face of bankruptcy is increasingly diverse. These days, bankruptcy filers aren't just people living paycheck to paycheck -- they're people who once had a steady middle-class income, but fell victim to unemployment, slowing business or a major financial catastrophe.

Continue reading "Orange County October Bankruptcy Filings Drop to Lowest Number Since February" »

Our Colton foreclosure attorneys work every day with mortgage borrowers who have been mistreated by banks, so we've been following the ongoing coverage of the robo-signing scandal. That's why we were very interested in a Nov. 17 Washington Post article that broke the news that leading lenders may set up a compensation fund for homeowners who lost their homes improperly. The idea comes out of negotiations between the 50 state attorneys general and the nation's top mortgage lenders. Those talks continue, but the Post reported that both sides agree that some sort of compensation would help avoid a flood of lawsuits from homeowners. Also on the table, the newspaper said, would be a requirement to put more resources into loan modifications; a rule forbidding foreclosures while loan modifications are negotiated; and possibly, a "cram down" provision for underwater homeowners.

Iowa Attorney General Tom Miller, who is leading the negotiations, said he hopes to address the mortgage industry's underlying problems as well as the issues presented by the robo-signing scandal itself. Banks acknowledge that robo-signing is technically fraud, but insist that the underlying facts are correct and the foreclosures are valid in the vast majority of cases. The Senate banking committee was not so sure. Echoing arguments from consumer advocates, senators on the committee expressed concern that incorrect foreclosures are more common than banks suggest, and that the problem stems from inadequate resources being allocated to foreclosures by major lenders. The proposals to emphasize loan modifications and forbid foreclosures while a loan workout is being considered are attempts to address those underlying problems. The fund itself would likely address only the problems of people who can show they lost their homes improperly.

Our Chino Hills loan modification lawyers are cautiously optimistic about the proposed foreclosure fund. For borrowers who have already lost their homes to incorrect foreclosures, fair financial compensation is basically the only remedy left. To make sure that all qualified borrowers actually get access to the money, Miller must insist on clear rules for who may claim compensation, and allow victims to enforce their rights in court if necessary. However, the proposed fund is not the best option for borrowers who are in foreclosure or expecting to be there soon. These borrowers still have a chance to save their homes. To do so, they should speak to an experienced foreclosure lawyer right away, who can help them find and challenge improper behavior. For example, if the lender has started foreclosure proceedings while a loan workout application is under review, the borrowers can and usually should sue for failure to meaningfully consider the loan modification.

As for the other measures Miller is proposing, we cannot emphasize enough that the agreement must include meaningful penalties for lenders who break the rules. We believe the lack of enforcement options is the primary reason that the federal loan modification program, HAMP, has not succeeded. In fact, HAMP has a version of the rule against "dual-track foreclosures," but no consequences for violating the rule -- and the foreclosures continue to happen. Failure to include teeth in this agreement would make it pointless, allowing lenders to continue perpetuating the problem this settlement is intended to solve.

Continue reading "Attorneys General Considering Financial Compensation for Victims of 'Robo-Signing'" »

An article about an Illinois bankruptcy caught the attention of our Moreno Valley personal bankruptcy attorneys. According to a Nov. 12 article from the Chicago Sun-Times, Cook County commissioner Elizabeth Doody Gorman filed for bankruptcy in early November, just after winning re-election to the commission, which administers the Illinois county that includes Chicago. Gorman told the newspaper that the timing of her filing had nothing to do with the election. Rather, she said, she filed after learning that her husband needed had serious heart problems requiring surgery. With her husband already in bankruptcy, she said, she would likely be stuck with her husband's debt in the event of his death. That would wipe out their family of five financially, she said, making it important to file for bankruptcy before he went into surgery.

The Gormans formerly owned two car dealerships together, but the dealerships have folded and the family has hit financial problems. DaimlerChrysler's financial services arm successfully sued them for $4.2 million over a financing issue, and has also accused them of loaning the business's money to Elizabeth Gorman's campaign instead of paying the judgment. Their home is in foreclosure with two different banks that say they are owed $4 million. One of the banks made a business loan with the home as collateral. Elizabeth Gorman makes $85,000 a year as a Cook County commissioner, but her bankruptcy filing says this is inadequate to pay the $13,000 a month her family has in household expenses. In all, the filing says, she has assets of $1.15 million, but debts of $13.5 million.

As Yucaipa individual bankruptcy lawyers, we'd like to discuss the strategy of filing for bankruptcy in advance of risky medical procedures. The article said the Gormans owned their dealerships together, and presumably they also bought their home together. That means either spouse would owe those debts even if the other one died. Gerald Gorman was apparently trying to discharge the debts without involving his wife's credit by filing for bankruptcy on his own. This bankruptcy would protect any joint property like their home -- but it would also be canceled if he were to suffer an unexpected death while the bankruptcy was pending. Then, Elizabeth Gorman would inherit the debts -- and if her filing is accurate, she doesn't have the resources to pay them. That's why it was smart of her to file for bankruptcy, even though it probably wasn't much fun.

Continue reading "Chicago Politician Files for Bankruptcy After Discovering Husband's Health Problems" »

People who declare bankruptcy do it because they're deep in debt -- usually so deep that they can't make a realistic plan to pay it back. In the experience of our Sun City personal bankruptcy attorneys, this kind of debt is almost always accompanied by nonstop phone calls and letters from creditors. Especially these days, with the bad economy bringing down how much they can recover, creditors often use harassment, threats or lies to pressure people into paying. Many of these tactics are illegal, and people very deep in debt might add that they are also a waste of time. If you're not indebted enough to consider a bankruptcy, we can help you pursue a Fair Debt Collection Practices Act lawsuit against an illegal debt collector. But if you are considering bankruptcy, you should know that legally, creditors are required to stop all contact as soon as you file.

When you file for bankruptcy -- for most individuals and couples, either Chapter 7 or Chapter 13 bankruptcy -- it triggers something called an "automatic stay." This is a court order forbidding creditors from contacting you, repossessing or foreclosing on property, garnishing your wages or suing you. It applies to every debt you owe, as long as the property in question is part of the bankruptcy estate. For most people, it stays in effect as long as the bankruptcy is active, although creditors can petition to have the stay released. If a creditor gets notification of the bankruptcy and continues to bother you, you may sue that creditor for all actual financial damages the harassment causes, as well as punitive damages when appropriate. In addition, any lawsuit or other legal action creditors take against you during the stay is legally void.

The automatic stay is a welcome relief for many of our clients. After months of nonstop phone calls from unpleasant people, the silence alone is nice. In addition, the automatic stay gives clients relief from the stress of immediate repossessions or utility turn-offs, as well as allowing them to help us put together the bankruptcy filing. And of course, the automatic stay gives our Aliso Viejo consumer bankruptcy lawyers a chance to sue any creditor that violates it, sometimes recovering much-needed money for the clients. However, potential bankruptcy filers should realize that they cannot walk into an attorney's office in the morning and have an automatic stay by the end of the day. The 2005 changes to the bankruptcy law require all consumer bankruptcy filers to show they completed a 60- to 90-minute credit counseling session before they file. And creditors can't be sued for violations that take place before they know about the bankruptcy, which is why we take it upon ourselves to notify our clients' creditors right away.

Continue reading "How Filing for Bankruptcy Can Stop Harassing Phone Calls From Creditors" »

Occasionally, our Upland foreclosure defense lawyers win a victory we'd like to brag about, because it's unusual or because we managed to score a major victory for a client. In late October, we won a ruling that did both. We were fighting a foreclosure by one of the nation's top three biggest mortgage lenders on behalf of a client we can't name for privacy reasons. Just like more and more of our foreclosure cases these days, we ended up suing the lender because of its failure to give fair consideration to a loan modification. In most of these cases, we can stop the foreclosure for the short term, but have to fight in court to keep it stopped after a relatively short time. But with this client, the court ordered the foreclosure stopped throughout the foreclosure lawsuit, giving our client a year or more without worries about foreclosure.

Right after filing a foreclosure lawsuit, we ask the court for a temporary restraining order (TRO). That's a court order stopping the other side from doing something -- in this case, from proceeding with a foreclosure. Typically, we get the TRO by showing the court that the lender didn't give the borrower's request for a loan modification any serious consideration. However, TROs are often set to expire after the court decides whether to grant a preliminary injunction, which is a more long-term version of the same thing. Most of the time, the lender claims it reviewed our client in the time between the two hearings, and he or she does not qualify. Then the court typically won't grant the preliminary injunction. But in our case from late October, the court did grant it, scoring a rare victory for borrowers. Our client must still make appropriate monthly payments, but while the case is being heard, the lender can't take the home away.

Unfortunately, we can't go into details about the case out of respect for the client's privacy and our own obligations as Costa Mesa foreclosure defense attorneys. But we wouldn't be at all surprised if the ruling was in part a reaction to the "robo-signing" scandal, the ongoing revelations that major lenders are using sloppy, incorrect or even fraudulent paperwork to pursue foreclosures. That matters because it shows that lenders aren't properly verifying the information they use to foreclose on homes -- and that makes it possible that the home is being foreclosed incorrectly. That's a very serious possibility that should be reviewed by a judge whenever feasible. In addition, submitting false paperwork is a form of perjury, and many judges perceive this as disrespectful to them or the justice system. And regardless of what's in the news, any alert judge would stop a foreclosure if he or she finds clear evidence of a problem.

Continue reading "Howard Law Wins Preliminary Injunction Stopping Foreclosure on Client" »

Our Redlands foreclosure defense lawyers have been writing here for months, if not longer, that we believe lenders don't actually want to do loan modifications. The evidence for that belief mostly comes from our day-to-day work helping Californians win loan modifications, but a few studies have validated it by explaining and documenting the financial incentives to lenders. Two more such studies were the basis of a Nov. 9 blog post to the Washington Post's Ezra Klein blog. Guest blogger Mike Konczal argues that conflicts of interests are "baked right into the cake" by the way mortgage servicers and their fees are structured. To do that, he uses a paper -- "Why Servicers Foreclose When They Should Modify and Other Puzzles of Servicer Behavior" (PDF) from the National Consumer Law Center, and its accompanying chart.

The National Consumer Law Center's paper examines the relationship between foreclosure and income earned by the loan servicer. The blog post included a chart from that paper that laid out the different fees, expenses and other factors that incentivize servicers to foreclose or not, and influence the speed of foreclosure. That chart shows two factors that incentivize loan modifications, but nine that favor foreclosures instead. Konczal explains that fees built into the structure of a servicing agreement give servicers a financial incentive to keep borrowers in default. Not only do late fees pile up while a borrower is in a trial modification, but the monthly servicing fee is calculated as a percentage of the loan's principal. Or, as Konczal says, "This structure gives servicers a huge incentive to do make-work modifications, ineffectual interest-rate adjustments and principal forebearance." All of this encourages what he calls "lose-lose-lose foreclosures" rather than "win-win modifications" that are ultimately better for the lender as well as the borrower.

This data echoes what we see regularly, working with clients to help them fight unfair foreclosures. Our Paramount foreclosure defense attorneys have seen many cases in which the lender has granted a trial loan modification and allowed it to go on for months without deciding to make it permanent. When they do make a decision, they often revoke trial modifications due to paperwork problems, changes in income or other real or imagined issues. When they deny a permanent modification, banks can then require borrowers to pay back all of the balance of the "missed" payments plus late fees and anything else the lender tacks on. This behavior would make no sense if the goal were to grant loan modifications -- but it's not. We believe the goal is to make the most money possible by offering false promises to borrowers just long enough to squeeze out the last of their savings. This is unethical as well as bad for borrowers, but Konczal argues that it's also ultimately bad for lenders.

Continue reading "Blog Post Details Financial Incentives for Lenders to Draw Out and Deny Loan Mods" »

Our Rancho Cucamonga foreclosure attorneys have followed the robo-signer scandal with interest to see how it affects mortgage borrowers in real life. Many observers have predicted that the scandal won't stop many foreclosures, because most people in foreclosure really are in default on their mortgages, even if the supporting documentation is fraudulent. A Nov. 9 article from the Washington Post suggests otherwise -- at least in New York. In that state, which is a judicial foreclosure state, certain judges have become notorious for their harsh penalties on sloppy or fraudulent mortgage companies. As a result, 20 to 50 percent of New York City foreclosures are being dismissed, the article says, and a few borrowers even have their debts canceled.

As the article notes, judges across the U.S. have the discretion to react to robo-signing and other fraud however they see fit. As a result, it's impossible to predict how these flawed foreclosures are likely to be resolved, and different results are likely in different states. But in New York, judges are gaining a reputation for ruling on the side of the borrower. One judge told the Post he thought it was because his colleagues work routinely with the financial industry and see it produce a lot of inaccurate filings. New York's chief judge recently required lenders' attorneys to personally vouch for their paperwork in order to cut down on fraud, and at least one mortgage lender requires special care for documents filed in certain parts of New York.

The article also cited several recent cases where New York judges delayed or denied foreclosures because of faulty paperwork. In one case, the same employee signed several documents as the vice president of different companies. In another, title records show the lender filed for foreclosure two days before taking ownership of the property. And in a case that could have wider ramifications for the mortgage industry, a judge erased one family's mortgage debt entirely, giving them the home for free if the ruling stands. The judge called OneWest bank disgraceful and condescending in its dealings with the family, which included an offer of forbearance that came after the deadline to respond had already passed. The family also received contradictory sets of paperwork showing different total amounts due.

That case is on appeal, and as South Gate foreclosure defense lawyers, we will be interested to see how it comes out. As a rule, Californians are not likely to see this kind of flood of denials because we are not a judicial foreclosure state. That means California foreclosures aren't getting scrutinized by judges or any other human beings, as we wrote last week. However, Californians trying to fight a foreclosure can still have access to the courts in one of two main ways. One is to file for bankruptcy, which allows a judge to review all of your debts. Of course, this is not an appropriate option unless you're already in a financial bind. A better way for some homeowners to get help from the courts is to file a foreclosure lawsuit challenging the legality of the loan, the foreclosure or the lender's actions. Thanks to the robo-signing scandal, unfortunately, many mortgage borrowers are in a position to sue.

Continue reading "Judges in Foreclosure Cases Increasingly Penalizing Lenders for Paperwork Fraud" »

The October data for bankruptcy filings have arrived, and the results confirm predictions made by Riverside consumer bankruptcy lawyers like us. According to a Nov. 2 post on the Wall Street Journal's Real Time Economics blog, individuals' and couples' bankruptcy filings rose 1.4 percent between October and November. This continues a trend observers have seen throughout the year, of bankruptcy filings rising steadily. In all, Americans have filed 1.3 million Chapter 7 and Chapter 13 bankruptcy cases this year, and experts say they expect total filings for 2010 to reach 1.6 million. This would be the largest number since the new 2005 bankruptcy law pushed that year's filings above 2 million. However, the rise in bankruptcies in October was actually half of the rise of October of 2009, suggesting that growth is at least slowing.

Experts typically put the blame for a rise in bankruptcies on the bad economy and the housing crisis. Unemployment is at 9.2 percent, according to the federal Bureau of Labor Statistics, and homes across America are worth less than their buyers owe. Both of these have a major influence on whether a homeowner files for bankruptcy -- after all, you can't pay the mortgage when you've been laid off and have no income. And even if a home isn't in foreclosure, homeowners can't pull out equity or even refinance if they are "underwater." The Journal noted that high unemployment may be responsible for the fact that most bankruptcies are Chapter 7 rather than Chapter 13. Chapter 13 requires a repayment plan, making it a difficult option for people with no income. As a result, Chapter 13 filings were less than 30 percent of all filings, even though the 2005 law was intended to push more people toward that option.

That trend has actually been a mixed blessing for our Los Angeles County personal bankruptcy attorneys. Because Chapter 13 filers make a payment plan, that's generally the best option for people who are trying to keep their homes out of foreclosure. But under the 2005 changes to the law, fewer people were able to choose between the two types -- a complicated income test pushed people with more robust incomes into Chapter 13. These days, many clients are coming to us after losing significant income or gaining significant debt, both of which help restore a choice between Chapter 13 and Chapter 7. We would prefer that this choice be available under all circumstances, but at least this situation gives us the flexibility to choose the best type of bankruptcy for each client. And while Chapter 7 is not as good for saving homes, it can help clients discharge their debts more quickly, which can free up money for mortgage payments in some households.

Continue reading "October Bankruptcy Filings Rise Again to Keep Year on Track for 1.6 Million Filings" »

As Fontana individual bankruptcy attorneys, we were very interested to see a news report about a bankruptcy judge who stopped a foreclosure in New York. Bloomberg News reported Oct. 28 on the case of Tandala Mims, who avoided foreclosure on her Bronx home after a judge rejected paperwork provided by Wells Fargo to show that it owned her mortgage. This was especially interesting because Wells Fargo is the only major lender that has not imposed a foreclosure moratorium in the 23 states that require judicial foreclosures. Until Oct. 27, the bank insisted that its paperwork was in order. But on that day, Wells Fargo announced that it would submit new paperwork in 55,000 cases because some affidavits -- the documents implicated in the robo-signing scandal -- had been prepared incorrectly.

According to Bloomberg, Mims, 49, filed for bankruptcy after losing her job made it impossible to keep up with her mortgage payments. She retrained and got a new job, but makes less money. Wells Fargo had the right to pursue foreclosure later in the bankruptcy process, and submitted documents intended to show that it had the right to foreclose on Mims. Those documents did not hold up, in part because Wells Fargo had acquired interest in her loan a week before attempting to foreclose. Mims had originally taken out the mortgage from Lend America, a defunct company that has been implicated in defrauding the FHA.

From there, the loan was owned by Washington Mutual, which was purchased by JP Morgan Chase. The ownership was transferred through MERS, a company that runs an electronic title registration database and is owned by the nation's biggest mortgage lenders. The bankruptcy judge in Mims's case was concerned that Wells Fargo did not have the physical title to the property, especially since it had more supporting paperwork than it should have for a property it had acquired a week earlier. The judge also noted that a signature on the foreclosure affidavit appeared to be improperly notarized, and that Wells Fargo representatives couldn't answer questions about it. As a result, he declined the foreclosure.

This article provides one answer to questions about how judges might respond to the robo-signing scandal. Each case and each judge is different, but in our experience as Placentia personal bankruptcy lawyers, judges respond poorly to fraud, even if it is a result of laziness rather than intent to deceive. However, one thing that does make this case unusual is the fact that it took place in bankruptcy court. In bankruptcy court, homeowners facing foreclosure might have a better chance of having their documents carefully reviewed, because bankruptcy judges' job is to consider whether claims on a bankrupt person's estate have any merit. In a judicial foreclosure, verifying paperwork is routine -- and in non-judicial foreclosure states like California, there's no judge approving any paperwork. That means we sometimes have to file lawsuits to trigger a careful review of whether the foreclosing company has done its job right.

Continue reading "Bankruptcy Judge Rejects Foreclosure Due to 'Robo-Signed' Wells Fargo Documents" »

Our San Bernardino personal bankruptcy attorneys have written here before about the requirement that bankruptcy filers take a financial education course. This is a standard part of the bankruptcy process and without it, the filer's debts can't be discharged and the case ended. However, it was added only in the last five years, with the Bankruptcy Abuse Prevention and Consumer Protection Act that changed the bankruptcy process. And it has come under fire from observers who believe it's ineffective, patronizing or adds unnecessary expense to the process. That's why we were interested to see a Nov. 3 press release from the University of Iowa, where law professor Katherine Porter just released a survey on how filers felt about the financial education course.

The survey took opinions from 2,000 bankruptcy filers from February and March of 2007 who participated voluntarily. Of those people, 72 percent said they found the program useful, but only one-third said it would have helped them avoid bankruptcy. Porter said this could be because the two-hour course assumes bad decisions were behind the bankruptcies of all those attending. In fact, she said, one respondent told the survey that no amount of financial education would have helped her avoid the heart attack that left her with heavy medical expenses. Porter also said those who found the course most useful tended to be unfamiliar with finances and have lower levels of education; most were under age 25 or over age 65. There was also a split according to race and level of education, with more people of color and more who hadn't finished college agreeing that the course had helped.

Unfortunately, these results don't surprise us at all. As Orange County individual bankruptcy lawyers, we felt this provision was a mistake from the start. While more financial education is generally a good thing, this course is a one-size-fits-all approach to the very individual problem of bankruptcy. In 2007, when the survey was taken, some filers were undoubtedly people who had overspent, but they could just as easily have been people whose businesses failed or who had catastrophic medical problems without adequate insurance coverage. These days, many filers end up in bankruptcy because of mortgage problems, or even go into bankruptcy specifically to avoid foreclosure. Financial education for people in some of those circumstances is a waste at best and at worst, an insult to someone who is already feeling down.

Continue reading "Survey of Bankruptcy Filers Finds Mandatory Financial Course Useful but Not Preventive" »

As Ontario foreclosure lawyers, we have followed the unfolding robo-signing scandal with interest. In essence, this scandal comes from the revelation that mortgage lenders have been submitting legal documents without verifying them, causing the testimony in those documents to be false and putting homeowners at risk of an incorrect foreclosure. However, unlike much of the housing crisis, this scandal has not been centered on California because we are not one of the 23 states that requires a court case to foreclose. On Oct. 30, AOL's Daily Finance ran an article suggesting that while non-judicial states like California may not be directly involved, the underlying problems with robo-signing could be much harder to correct in those states.

Judicial foreclosure is often done in a perfunctory way, but it does require review by a human judge. By contrast, lenders can foreclose without any judicial review in California and other non-judicial states. Here in California, the article explains, a lender that's decided to foreclose simply files a notice of default and a record of its attempts to stop the foreclosure, with the local land use office. No one has to verify that the lender has actually made a good-faith effort to work it out with the borrower. After a three-month cure period that gives the homeowner another chance to pay up, the house goes to a foreclosure auction. At this point, the article explains, lenders typically realize that due to securitization, they do not have a physical record of owning the deed to the home. So the lender enters a new record showing ownership within a few weeks of the foreclosure auction. It may also add a trustee that's a subsidiary of the lender so it can recoup any extra fees.

These documents can be fraudulent, the article says -- with names of robo-signers, names of defunct companies, incorrect dates and no one verifying that ownership was transferred correctly. And -- importantly -- in a non-judicial foreclosure, none of this is ever likely to be checked for correctness by a judge or a lawyer, much less the borrower. That means there's no one guaranteeing that these documents are correct unless the borrower has an attorney for another reason. In some cases, that reason is bankruptcy. More rarely, the borrower can hire a foreclosure attorney to scrutinize the records.

Our Norwalk foreclosure attorneys have only scratched the surface of the potential problems with mortgage documentation. Because we've represented clients fighting foreclosure since the beginning of the mortgage crisis, we are confident that this article is right to be cynical about the quality of banks' documentation. Over and over, we hear about lenders losing documents repeatedly, giving contradictory instructions and foreclosing on people who were in the middle of a loan modification, often without notice. That this sloppiness extends to the paperwork side of foreclosure is not at all surprising. However, it is surprising that they would go so far as to submit incorrect documents to courts in judicial foreclosure states, because those documents are perjury. Judges do not appreciate being defrauded, and some lenders are already finding out that they're willing to punish lenders who perpetuate fraud out of sloppiness or eagerness to make a buck.

Continue reading "Robo-Signing Scandal Could Have Worse Effects in Non-Judicial States Like California" »

Our Rubidoux personal bankruptcy lawyers wrote recently about an increase in the number of older people who are filing for bankruptcy, many citing credit card issues. So we were interested to see a related story from USA Today about how workers 55 and older are being forced to put off retirement by the recession, debt and bankruptcy. Like all Americans, many of these older people are losing jobs and having trouble finding more, putting them in a position to rack up credit card debt or vulnerable to disaster following any unexpected expenses. But unlike younger workers, the older workers have less time to recover financially, and are more liable to problems from supporting younger relatives or high medical bills. They may also run through their retirement savings in an attempt to stave off bankruptcy, robbing them of the savings they'll need later.

The article gives several reasons why older workers go into bankruptcy and debt. Many can be traced to the recession. The unemployment rate for workers 55 and older is 7.2 percent, below the average but far higher than it was a few years ago. Finding a job is difficult right now, and people who were at the same job for decades may have special difficulty because they're out of practice. Those who are working tend to make less than they were. Older people are also more likely to experience expensive medical problems. The housing downturn means older people with lots of home equity may still not be able to get a home equity loan. All of this drives some workers to rack up unsustainable credit card debt, eventually leading to bankruptcy. Other older people may make bad loans to their children or grandchildren. And like many bankruptcy filers, older workers feel such a strong shame about bankruptcy that they run through their retirement savings to stay out of it.

In fact, retirement savings are often protected in bankruptcy, so it's especially sad to see people spend them in a fruitless attempt to delay a bankruptcy filing. Spending money that could otherwise be protected is one of the most common mistakes we see as Carson individual bankruptcy attorneys. In older people, it's a particularly big problem because older workers don't have the time to pay back those savings and retire on time. Instead of enjoying those years, they may have to work or rely on relatives for help. To avoid this, we tell clients and potential clients to face the possibility of bankruptcy head-on, using cool mathematics rather than emotions to decide whether bankruptcy is right for them. Bankruptcy is a hard decision at any age, but careful planning can help you land on your feet and make a new start.

Continue reading "Bankruptcy and Debt Forcing More Older Americans to Delay Retirement" »

As Norco consumer bankruptcy attorneys, we were interested to see an article suggesting that bankruptcy filers are increasingly coming from the ranks of small business owners and the self-employed. That was reported Oct. 25 by the Milwaukee Journal-Sentinel, in the context of an article about an increase in bankruptcy filings in Wisconsin. That state, like the country as a whole, has seen a steady rise in bankruptcy filings since 2006, the first year after the bankruptcy laws were changed. But according to bankruptcy lawyers interviewed by the newspaper, more and more bankruptcy filers are people whose small businesses were hurt by the economic downturn. With demand for their needs falling, many of these people aren't able to generate enough income.

One attorney told the newspaper that she sees tradespeople in their 30s and 40s who have families and mortgages to support, but whose work has dropped off. In particular, the article cited people in fields related to construction, which has seen a large drop since the housing downturn. With both residential and commercial construction stymied, demand has fallen for skills like landscaping and flooring installation. Businesses not directly related to construction, such as restaurants, have also been affected. When these small businesses run into trouble, attorneys said, their owners often turn to credit cards to keep things afloat temporarily. But if those temporary conditions become permanent, they can't pay back the loan and the interest keeps rising. In addition, one attorney said, these business owners don't always have good health insurance or healthy savings.

This article is about Wisconsin, but our Rowland Heights personal bankruptcy lawyers believe it could apply just as well to southern California. In fact, with our high unemployment rate and suffering construction industry, California may be even more vulnerable to the same forces. Self-employed people and small business owners often pour their hearts and hopes into their businesses, so they're not ready to close things down just because the economy has taken a downturn. But sometimes, this can lead to decisions, like dependence on credit cards or draining savings, that would get anyone into financial trouble. Some people in this position compound the problem by ignoring signs that bankruptcy is their best option, prolonging their suffering and sometimes allowing them to spend retirement savings that they would be able to protect in bankruptcy.

Continue reading "Attorneys Say Bankruptcy Filers Are Increasingly Self-Employed and Business Owners" »