California Bankruptcy Attorney Blog

Our Rancho Cucamonga foreclosure defense attorneys wrote earlier this month about a Massachusetts Supreme Judicial Court decision invalidating two foreclosures in which the bank could not prove ownership. So we were interested to see a column from CBS MoneyWatch columnist Jane Bryant Quinn using that case as an example of how homeowners can fight an unfair or outright illegal foreclosure. Homeowners might worry that a lawyer costs too much, Quinn wrote, but there's often little or no upfront cost thanks to the contingency fee structure used by most consumer attorneys. (This is what Howard Law uses in litigation as well.) And legal representation can be a powerful tool to call attention to sloppiness and illegal behavior by banks.

The Massachusetts homeowners in the case, Antonio Ibanez and married couple Mark and Tammy LaRace, purchased their homes in 2005 and defaulted in 2007. In between, the mortgages were securitized -- bundled into groups and sold as investments. The lenders seeking to foreclose were the trustees for those investments, not the owners of the mortgages, who are the only entities with the right to foreclose. In fact, the lenders reportedly couldn't find any ownership paperwork, which led the state high court to dismiss the cases. Quinn writes that this shouldn't be a surprise, because there are and should be high standards when banks seek to take away people's property. If the court hadn't required proof of ownership, she wrote, nobody's home would be safe from incompetent or greedy lenders.

These cases went to court because Massachusetts requires lenders to take their foreclosure requests before a judge. However, as Los Angeles County foreclosure defense lawyers, we'd like to remind Californians that they do not have this type of protection because we're a non-judicial foreclosure state. That means that if you want an unbiased human being to double-check that a foreclosure is valid, your best bet is to sue the lender. As Quinn writes, this is not necessarily a severe financial burden. Attorneys seeking a financial settlement, as they might in a predatory lending case, are paid when and if they win the case. Those who aren't claiming lots of money might arrange a fee based on the client's current means. And if your foreclosure is part of a consumer bankruptcy, as the case involving Ibanez was, the fees can be rolled into your repayment plan.

Howard Law PC helps borrowers explore all of their legal options for fighting a foreclosure and holding on to their homes. In many of our foreclosure defense cases, we have strong evidence that the lender never seriously considered alternatives like a loan modification. In fact, the article mentions that lawyers in the Massachusetts case admitted that loan servicers are graded on how quickly they finish a foreclosure. In cases like that, our Tustin foreclosure defense attorneys help clients stop a foreclosure right away by suing, then prove in a court of law that they have not been treated competently or fairly. When the client's other financial circumstances are right, we can also fight a foreclosure through a personal bankruptcy, which freezes all debt collection attempts immediately. And in cases where the bank broke the law, we can seek justice through a predatory lending lawsuit.

If you've been trying to arrange a loan modification or straighten out a mistake with your bank for months, but you haven't gotten anywhere, you should contact Howard Law for help. To tell us your story and learn more about your rights, send us an email or call toll-free at 1-800-872-5925 today.

As San Bernardino County consumer bankruptcy attorneys, we were interested to see yet another report of a political figure filing for bankruptcy. The Arizona Republic reported Jan. 25 on the personal bankruptcy of Lyn Truitt, the mayor of Surprise, Ariz., which is northwest of Phoenix. Truitt said he's been struggling with the loss of his wife's income since her death, a situation compounded by medical bills and the economic downturn. He wants to keep his home and intends to continue making payments on his $371,000 mortgages even though he's underwater, with the home valued at $153,000. He told the newspaper that he didn't think Surprise voters would hold the bankruptcy against him in the August primary election, since the financial downturn has driven people across the United States to bankruptcy.

Truitt lost his wife, Donna, to pancreatic cancer two years ago. In addition to the personal loss, he said, the loss of her income has left him financially strapped. He also cited high medical debt, though it wasn't clear whether it was from cancer treatments or another ailment. To make matters worse, Truitt's business as a real estate broker took a beating along with the rest of the Arizona real estate market, generating just $14,000 last year. In 2009, that income was nearly $138,000. This is in addition to his $34,000 salary as Surprise's mayor. And Truitt has a total of $77,000 in debt on 10 credit cards. The article noted that Truitt has filed for bankruptcy before, in 1986, when his former furniture delivery business got into financial trouble.

Our Corona personal bankruptcy lawyers hope Truitt is right that voters will see that he's "affected by this economy just like everyone else." With the number of bankruptcies on the rise in the past year or two, and increasingly including people of all personal and financial backgrounds, it would be nice to think the stigma is falling from bankruptcy. The situation has been especially hard on people who work in real estate like Truitt, because the real estate downturn has shrunk their incomes along with the value of their homes. A serious illness in the family is also a very common cause of bankruptcy, and one that's no fault of the patient's or family's own. We think Truitt should be commended for facing his problem -- and discussing it publicly -- rather than ignoring it or digging himself in deeper with credit cards.

Continue reading "Mayor of Arizona City Believes Bankruptcy Won't Harm His Upcoming Reelection Bid" »

Our Riverside personal bankruptcy lawyers were very interested to see reports suggesting bankruptcy cramdowns may make their way back to Congress. Westlaw Journals reported Jan. 26 on a new plan by Sen. Jeff Merkley, D-Oregon, to deal with the ongoing foreclosure crisis. Merkley outlined his six-part plan in a letter to President Obama. The plan addresses what Merkley sees as the weaknesses of the Home Affordable Mortgage Program, which has far fewer participants than the federal government estimated it could help. One part of the new plan is a "lifeline bankruptcy option," a bankruptcy cramdown for people in personal bankruptcy who would be eligible for HAMP.

Bankruptcy judges can "cram down" the principal owed on a loan to current market value for almost any kind of property -- except a primary home. As Merkley pointed out, that includes luxury properties such as second homes and boats. This exception has been in the bankruptcy code since the 1970s, and Democrats have in the last few years attempted to remove it. However, it ultimately failed to pass in 2008 and 2009, thanks in part to fierce opposition from the financial industry. Merkley's proposal (PDF) says this would be "one last lifeline for families about to lose their homes" and could also give banks an incentive to negotiate with borrowers in good faith. His other proposals include requiring a single caseworker for borrowers in foreclosure; ending the practice of foreclosing while negotiating for a loan workout; and a "short refinance" program for borrowers in default who still have a steady income.

As Escondido individual bankruptcy attorneys, we're pleased to see another cramdown proposal on the table, no matter what it's called. We strongly agree with Merkley that cramdowns would give lenders a stronger incentive to negotiate loan modifications than they apparently possess right now. Lenders dislike the idea of cramdowns because a principal reduction means they take a financial loss -- and they cannot control its size or terms. Faced with that prospect, many businesses would prefer to negotiate a loan modification whose terms they can control. Unfortunately, there's very little incentive right now for lenders to seriously negotiate loan workouts. In fact, some market forces reward loan servicers for pushing borrowers into foreclosure faster. The bankruptcy lifeline option Merkeley proposes would reverse that incentive.

Continue reading "Senator Announces Foreclosure Plan With Renewed Call for Bankruptcy Cramdowns" »

Our Rancho Cucamonga personal bankruptcy lawyers were interested to see another article on the possibility of using bankruptcy as a way to stave off foreclosure. The Atlanta Journal-Constitution reported Jan. 18 on the strategy of declaring bankruptcy, which has been adopted by troubled homeowners in Georgia, California and throughout the United States. Experts said bankruptcy is a quick way to stop a foreclosure in Georgia, which has a very short foreclosure process, but may not necessarily save the home. What it can do, they said, is give the filers time to look at whether they're financially able to keep the home. It can also provide court supervision of a foreclosure, which is important because Georgia, like California, is a non-judicial foreclosure state.

Most bankruptcy filers who are trying to avoid foreclosure choose Chapter 13, which usually means a five-year repayment plan that allows them to catch up on missed mortgage payments. A credit counselor quoted in the article said about 20 percent of his clients who file for bankruptcy cite foreclosure as a reason. However, he said, many of his clients choose bankruptcy because they come to him for help too late for any other solution. A consumer bankruptcy attorney told the newspaper that bankruptcy also isn't necessarily the best choice. For one thing, he said, many clients consider it to hold on to homes that aren't financially worthwhile. A client of his added that he decided against bankruptcy because his non-mortgage finances were fine, and his home loan problems would hurt his finances at least as badly as bankruptcy.

As Huntington Beach individual bankruptcy attorneys, we're glad this article stresses the importance of timing and early action in a bankruptcy. Waiting too long to take action, whether it's bankruptcy, credit counseling or a loan modification, can take away opportunities and options in the future. If you do decide to file for bankruptcy, it can also allow you to run through assets that you could have saved instead, giving you a much-needed cushion for the time when you're out of bankruptcy and ready to rebuild your finances. When clients come to us to discuss a bankruptcy to avoid foreclosure, we start by examining their finances to see if, like the man in the article, they are better off with an alternative approach such as a loan modification. If not, we structure the bankruptcy with the client's mortgage and other financial priorities in mind.

Continue reading "Experts Say Bankruptcy Can Stop Foreclosure Quickly But Only Temporarily" »

Our Moreno Valley foreclosure defense lawyers have watched the news for yet more reports of fallout from "robo-signing." On Jan. 18, Maryland became at least the fifth state with large-scale delays in foreclosures caused by concerns about defective paperwork. As the Baltimore Sun reported that day, GMAC Mortgage, the home-loans unit of Ally Bank, asked to dismiss about 250 pending foreclosure cases supported by paperwork that might not meet legal standards. The decision was followed the next day by a similar decision by Wells Fargo's mortgage unit, which said it would dismiss an unspecified number of Maryland cases. Both banks expect to re-file after reviewing their paperwork and records to ensure that "all home preservation options were exhausted."

The decisions came after both banks were sued by a public interest law firm that specializes in housing, Civil Justice. Civil Justice brought class-action lawsuits asking the court to dismiss foreclosures whose paperwork was signed by specific bank employees who had admitted to robo-signing. The claims were likely bolstered by an emergency update to Maryland court rules made in October in response to robo-signing. That update made it clear that courts can throw out foreclosure cases tainted by robo-signing and audit shaky paperwork; a foreclosure defense attorney said he'd noticed an increase in judges asking questions about paperwork under the new rules. The banks' decisions to drop and refile the cases will likely benefit homeowners, the article said, because of new rules requiring banks to show that they considered foreclosure alternatives and allowing homeowners to use court-supervised mediation.

This decision is a victory for Maryland homeowners, some of whom may be incorrectly plunged into foreclosure by shoddy paperwork practices. It's also more evidence that the fallout from robo-signing is going to have measurable and sometimes positive effects on homeowners in foreclosure. Already, as this article notes, banks have slowed the rate at which they take actual physical control of foreclosed homes across the nation. That effect is expected to last several more months. More importantly for our Norwalk foreclosure defense attorneys, robo-signing is giving judges a good reason to scrutinize paperwork provided by lenders, and lenders a reason to make sure their noses are clean. At the least, this will give homeowners more time to deal with foreclosure; at best, it could stop the careless mistakes that have sent some into foreclosure for no good reason.

Continue reading "Robo-Signing Concerns Stop Foreclosures in Maryland From Two Major Lenders" »

One of the most famous and long-running celebrity bankruptcy cases our Chino personal bankruptcy attorneys know about involves Anna Nicole Smith, the late Playboy Playmate who was briefly married to Texas oil magnate J. Howard Marshall. Smith, who was 63 years younger than her husband, was involved in a lengthy court battle over Marshall's will with his son, E. Pierce Marshall. That case was complicated by Smith's filing for bankruptcy in California, which created a dispute over whether the estate should follow the bankruptcy court's ruling or a contradictory ruling from a Texas trial court. The Supreme Court has sent the case back to the Ninth U.S. Circuit Court of Appeals once already, but the case was appealed back up to the court and heard oral arguments Jan. 18, according to an Associated Press story.

Howard Marshall's will left his $1.6 billion fortune to Pierce Marshall, but Smith challenged the will, saying her husband had promised her millions during their one-year marriage. She contested the will in a Houston court that ultimately decided in Marshall's favor. But while that was going on, Smith filed for bankruptcy, which required her to list all assets she might have coming her way. Before the Texas court could rule, the California bankruptcy court awarded her $475 million from the estate, which was reduced on appeal to $89 million. This created a controversy over whether to honor the decision that came first, from California, or ignore it because it came from a bankruptcy court on a matter not "core" to the bankruptcy process. The Supreme Court will decide whether bankruptcy judges, who are not authorized in the same part of the Constitution as other federal judges, have the same authority.

As Carson individual bankruptcy lawyers, we are more interested in the Supreme Court's take on this than in who ultimately receives the money (Smith and the younger Marshall are both dead, so the battle is now between Smith's young daughter and Marshall's widow.) Normally, the ruling that comes first is the one that's respected, in the small number of cases heard in two courts. However, bankruptcy judges may not make final decisions on issues that are not "core" to bankruptcy, and the Ninth Circuit ruled that the bankruptcy court's decision on what Smith was owed was not "core." The Supreme Court is deciding whether it agrees. The clarity provided by such a ruling would likely be welcomed by bankruptcy attorneys. As a rule, we prefer rulings that give bankruptcy judges more flexibility -- but of course, within the boundaries of the law.

Continue reading "Supreme Court Hears Arguments in Anna Nicole Smith Bankruptcy Case a Second Time" »

Our Riverside County personal bankruptcy attorneys were disappointed to read about the bankruptcy of an active player on an NFL playoff team. The Pittsburgh Tribune-Review reported Jan. 15 on the bankruptcy of Charlie Batch, a backup quarterback for the Pittsburgh Steelers. Batch's problems don't come from overspending on personal items, but from his Batch Development Co., a real estate redevelopment company. Batch Development has invested heavily in Batch's hometown of Homestead, a Pittsburgh suburb that has suffered financially from the decline of the steel industry. In all, Batch lists $8.29 million in debts, including multiple mortgage debts and $2.3 million in assets including his $722,376 NFL salary.

Batch Development has 25 properties that recently went into receivership after it was unable to make payments on a bank mortgage. The mortgagor, Dollar Bank, told a court that Batch has been working with the properties, but hasn't been able to charge enough rent to make mortgage payments. Most of the properties are single-family homes, with some multiple-unit housing. The bank said it planned to sell the properties. This group of properties is distinct from the ongoing conversion of the Homestead Bakery Co. building into apartments, office space and retail, which is not in financial trouble and expected to open in the spring. The bankruptcy is also not expected to affect the Batch Foundation, a children's charity. Batch has said he wants to build a real estate development portfolio while also helping revitalize Homestead.

As Orange individual bankruptcy lawyers, we think Batch's financial problems are typical of the problems facing the entire real estate market: rents are falling, while mortgage payments stay the same. The depression of rents may be especially bad in Homestead, which has suffered financially since the closing of its steel mill. It's a shame that his attempts to improve his home town happened to come at a bad time in the real estate market. It's not clear whether Batch filed for bankruptcy in an attempt to hold on to the 25 properties, but the lender may have a good incentive to work with him on an alternative to a foreclosure sale. After all, the properties are unlikely to fetch more in the current market than they did in 2008, when the loan was made. The bankruptcy court may also be able to set up a repayment plan, depending on the kind of bankruptcy he filed.

Continue reading "Steelers Backup Quarterback Files for Bankruptcy After Real Estate Investments Tank" »

Our Riverside County personal bankruptcy attorneys were disappointed to read about the bankruptcy of an active player on an NFL playoff team. The Pittsburgh Tribune-Review reported Jan. 15 on the bankruptcy of Charlie Batch, a backup quarterback for the Pittsburgh Steelers. Batch's problems don't come from overspending on personal items, but from his Batch Development Co., a real estate redevelopment company. Batch Development has invested heavily in Batch's hometown of Homestead, a Pittsburgh suburb that has suffered financially from the decline of the steel industry. In all, Batch lists $8.29 million in debts, including multiple mortgage debts and $2.3 million in assets including his $722,376 NFL salary.

Batch Development has 25 properties that recently went into receivership after it was unable to make payments on a bank mortgage. The mortgagor, Dollar Bank, told a court that Batch has been working with the properties, but hasn't been able to charge enough rent to make mortgage payments. Most of the properties are single-family homes, with some multiple-unit housing. The bank said it planned to sell the properties. This group of properties is distinct from the ongoing conversion of the Homestead Bakery Co. building into apartments, office space and retail, which is not in financial trouble and expected to open in the spring. The bankruptcy is also not expected to affect the Batch Foundation, a children's charity. Batch has said he wants to build a real estate development portfolio while also helping revitalize Homestead.

As Orange individual bankruptcy lawyers, we think Batch's financial problems are typical of the problems facing the entire real estate market: rents are falling, while mortgage payments stay the same. The depression of rents may be especially bad in Homestead, which has suffered financially since the closing of its steel mill. It's a shame that his attempts to improve his home town happened to come at a bad time in the real estate market. It's not clear whether Batch filed for bankruptcy in an attempt to hold on to the 25 properties, but the lender may have a good incentive to work with him on an alternative to a foreclosure sale. After all, the properties are unlikely to fetch more in the current market than they did in 2008, when the loan was made. The bankruptcy court may also be able to set up a repayment plan, depending on the kind of bankruptcy he filed.

Continue reading "Steelers Backup Quarterback Files for Bankruptcy After Real Estate Investments Tank" »

As Moreno Valley foreclosure defense attorneys, we've written in the past about the federal Hardest Hit Fund, which gives states especially hard-hit by the housing crisis money to start anti-foreclosure programs of their own. We're happy to say that the state of California, which was one of the first recipients, has finally launched the first of its programs funded by that money. As the San Francisco Chronicle reported Jan. 9, the program extends money to California homeowners who can't make mortgage payments right now because they're unemployed. The money -- up to $3,000 per month for up to six months -- is structured as an interest-free loan secured by a lien against the home, but will be forgiven in three years unless the borrower defaults, sells or refinances.

The program was expected to begin last fall, but the California Housing Finance Agency ran into a major snag -- it needed loan servicers to sign on, and very few of them did. CalHFA said three servicers are signed up as of Jan. 9, and more were expected by the end of that week. Possibly as a result, the qualifications for the unemployment program are strict. Among other things, participants must be receiving unemployment benefits, but cannot be within 90 days of running out. Their loan balances cannot be higher than $729,750 and must have been made before Jan. 1, 2009. Loans must be delinquent or at risk, but not in foreclosure or more than three months behind. Owners must occupy the home and not own any other property or have a stand-alone second mortgage (such as a HELOC). CalHFA plans to launch three other programs Feb. 7; all four are under the name Keep Your Home California.

Our Rowland Heights foreclosure defense lawyers wish this program, and its participants, the best of luck. For people whose unemployment is temporary, a bit of assistance could be a life-saver, helping them avoid default or the credit hit that comes with falling behind. However, we're concerned that this program will go the way of HAMP -- that is, it will ultimately be ineffective because loan servicers will find ways to ignore or manipulate it. The problem with HAMP is its lack of an enforcement mechanism. When lenders break their promises or mistreat participants, there's no provision to hold them accountable aside from a lawsuit. Keep Your Home California needs built-in penalties for unethical behavior by servicers, or at least a provision explicitly allowing lawsuits, or it may also ultimately fail.

Continue reading "California Launches Program Helping Unemployed Homeowners Pay Their Mortgages" »

Our Highland foreclosure defense lawyers wrote recently about a Massachusetts Supreme Judicial Court decision that required foreclosing banks to produce paperwork proving that they actually own the property in question. Despite the seeming obviousness of this requirement, the court's decision was widely expected to throw a wrench into the Massachusetts real estate market. Among other things, the decision is expected to increase the number of homeowners who fight foreclosure by suing to force the bank to produce its paperwork. And buyers for the roughly 33,000 homes already foreclosed in the state may not technically own those homes. To address those problems, Massachusetts Secretary of State William Galvin called for a special tribunal on foreclosure and title issues, the Boston Globe reported Jan. 11.

The high court ruling said lenders may not foreclose on two mortgages that had been securitized, because they couldn't prove they actually owned the loans -- they did not have assignments of the mortgages and their securitization documents did not name the individual loans at issue. That ruling affects every foreclosure in the state. In the short term, it's likely to slow down foreclosures as lenders scramble to find the paperwork they need to prove ownership. However, Galvin's call for a tribunal reflects concern about a sharp increase in lawsuits against lenders, from both borrowers and buyers. Already pending is one case filed by a buyer of a Haverhill home that was determined to be incorrectly foreclosed. The court ruled that the buyer does not own the home, and should seek compensation from the bank that incorrectly foreclosed and resold it.

This ruling is echoed by decisions in other state courts, including New Jersey, New York and Ohio. California does not yet have such a ruling, but our Santa Ana foreclosure defense attorneys suspect it's only a matter of time. Paperwork problems don't reflect whether the underlying foreclosure is valid, of course -- but they still matter very much, because they raise the risk of an incorrect and illegal foreclosure. This problem is not just in Massachusetts, because lenders' shoddy practices are nationwide and endemic to the mortgage industry, as the robo-signing scandal has made clear. That means Californians will likely be able to extend the foreclosure process, at the least. And for those who are genuinely being foreclosed incorrectly, this scandal will provide a reason for judges and perhaps even lenders to take their claims seriously.

Continue reading "Massachusetts Official Calls for Tribunal to Determine Who Owns Foreclosed Homes" »

Yet another state has taken action stopping foreclosures when lenders cannot prove they actually have the right to foreclose. Yahoo! Finance reported Jan. 7 that the Massachusetts Supreme Judicial Court has upheld rulings invalidating two foreclosures in which the lenders could not prove ownership of the loans at the time of foreclosure. That ruling closely follows judicial decisions in New Jersey, New York and Ohio requiring lenders to produce original paperwork or otherwise prove ownership before allowing foreclosures to go through. The decisions are at least partly a response to the "robo-signing" scandal that our Yucaipa foreclosure defense lawyers have followed since last fall, which exposed shoddy and sometimes illegal paperwork processing by lenders. The decisions are expected to slow foreclosures and may increase foreclosure lawsuits.

The Massachusetts cases involved mortgages that had been bundled into investments and sold. The banks seeking to foreclose were not the original lenders, but were trustees for the securities containing the mortgages. This gave them standing to foreclose, they argued. The Massachusetts courts disagreed. Under state law, they said, any lender seeking to foreclose must have a document assigning the mortgage to it. The lenders in these cases -- Wells Fargo and US Bancorp -- didn't have those documents; they had only documents showing they controlled mortgage-backed securities, which did not specifically name the loans in question. Thus the trial court ruled the foreclosures couldn't take place, and the state's high court agreed Jan. 7.

In a concurrence, Justices Cordy and Botsford wrote, "[W]hat is surprising about these cases is not the statement of principles articulated by the court regarding title law and the law of foreclosure in Massachusetts, but rather the utter carelessness with which the plaintiff banks documented the titles to their assets.... Although there was no apparent actual unfairness here to the mortgagors, that is not the point."

The concurrence makes the court's reasoning extra clear: foreclosing lenders must get their paperwork in order or risk losing their chance to foreclose, even when it's not disputed that the borrower failed to pay. As Brea foreclosure defense attorneys, we're glad the court made this decision, because foreclosure is too financially devastating to be allowed without solid proof that it is legitimate. Even though some borrowers who truly belonged in foreclosure may benefit, the court's action will also protect people who are in foreclosure due to bank errors -- which can and does happen. In a non-judicial foreclosure state like Massachusetts or California, scrutinizing the paperwork is literally the only way to ensure that the foreclosure is legitimate. Lenders are not forbidden from foreclosing -- they are merely required to follow the law, as they always were.

Continue reading "Massachusetts High Court Invalidates Foreclosures When Lender Can't Prove Ownership" »

As Riverside consumer bankruptcy attorneys, we were very interested to see a Supreme Court ruling on bankruptcy law -- specifically, the interpretation of a new rule introduced in the 2005 changes to the bankruptcy laws. As Bloomberg News reported Jan. 11, the case is also the first opinion authored by new Justice Elena Kagan. It is a dispute over whether a Nevada man in Chapter 13 bankruptcy may deduct the cost of owning and maintaining a car from the money available for his Chapter 13 repayment plan. The plain language of the statute directs bankruptcy courts to subtract a set amount of money for ownership ad use of a car. However, the debtor, Jason Ransom, owned his car outright. The Supreme Court ruled 8-1 that the deduction was not available to Ransom and other debtors without a car payment.

Ransom filed for bankruptcy in 2006 with credit card debt, including debt to Bank of America's FIA Card Services. In that bankruptcy case, he claimed the car deduction. That deduction comes from a part of the 2005 bankruptcy law that says debtors' monthly expenses "shall be the debtor's applicable monthly expenses amounts under the 'National Standards and Local Standards.'" That's a set of IRS guidelines intended to help the agency decide when to forgive tax debt due to income, and it includes a deduction for up to $471 for owning a car, without mentioning the possibility that the car could be owned outright. Ransom took the deduction and FIA objected, leading the case to the Ninth Circuit and eventually the Supreme Court. Kagan and seven colleagues agreed that Ransom didn't need the deduction. The dissenter, Justice Scalia, wrote that this was a "strained interpretation" of the law.

Our Norwalk personal bankruptcy lawyers are disappointed with this ruling. Of course, it would be nice to be able to protect more of our clients' assets from bankruptcy, regardless of whether they own a car outright or are making monthly payments. Furthermore, the car deduction can't be applied to any other expenses, so allowing debtors to keep it would not allow them to turn around and spend frivolously. But more importantly, this ruling may actually encourage abuses of the bankruptcy code. If debtors get a deduction for having a car payment but not for holding on to a paid-off car, they have an incentive to buy a new car before filing for bankruptcy. This is not the behavior that bankruptcy law seeks to incentivize in other areas. In fact, debtors can be penalized for running up large debts in anticipation of filing for bankruptcy and wiping them away.

Continue reading "Supreme Court Rules Bankrupt People May Not Deduct Car Costs for Cars They Own" »

One of the frustrating parts of our job as Fontana personal bankruptcy lawyers is the misinformation surrounding bankruptcy. Bankruptcy is a legal issue that can be complicated, and because it's an upsetting decision, many people just don't have the heart to become better informed. That stigma and bad information can cause unnecessary heartache and other problems for people headed toward bankruptcy, as a Chicago Tribune columnist wrote Dec. 26. Life after bankruptcy isn't the financial desert many people fear, the article said, so fear of a future in poverty shouldn't hold back potential filers. In fact, waiting too long to file can drain savings that could have been protected from bankruptcy, or at least prolong aggravation from aggressive creditors.

The bankruptcy experts in the article emphasize that bankruptcy is not free of consequences. There are a social stigma and personal feelings to consider, and a bankruptcy will stay on your credit record for up to 10 years. However, that doesn't mean it will be impossible to get credit during the entire decade. Studies have shown that some formerly bankrupt people are able to get home loans within two years after the bankruptcy is discharged, assuming other parts of their financial lives are in order. Former filers are often offered credit cards within a few years of discharging their debts, though these can have unattractive interest rates.

Meanwhile, the consequences of waiting too long can be ugly, the article says. When you put off filing for bankruptcy past the time when you know you need to, you can run through assets that might be protected, such as retirement savings. Delaying bankruptcy also denies you the protections it offers against foreclosure, eviction, wage garnishment, lawsuits and car repossession. Filing for bankruptcy stops these and other legal actions, allowing you a chance to keep a home or car that might otherwise be taken. Once a creditor has sued you and gotten a legal judgment, you can't discharge it in bankruptcy -- so waiting can take away that opportunity.

As Dana Point individual bankruptcy attorneys, we encourage everyone considering bankruptcy to consider it from this practical, unemotional standpoint. It's tempting to ignore stressful problems that don't directly affect your life, but that can lead to more problems down the road. With new clients and potential clients, we generally review all of their finances to decide whether they can realistically pay off their debts within three years (not counting mortgage debt). If they cannot, it's best to consider bankruptcy. As the article notes, some people are better candidates for alternatives to bankruptcy, like making new payment plans, but that's not always possible when your finances are limited or the creditor isn't flexible. In our opinion and experience, there's nothing wrong or irresponsible about making a rational decision to file for bankruptcy -- in fact, taking charge of your debt is often more responsible than continuing to let it pile up.

Continue reading "Financial and Personal Recovery Possible After Filing for Bankruptcy, Experts Say" »

Our Rancho Cucamonga foreclosure defense attorneys wrote last month about drastic measures taken against "robo-signing" in New Jersey courts and a few others around the nation. In response to the disclosure that some lenders knowingly used fraudulently signed documents, these courts have tightened their standards of proof or required additional proof before allowing foreclosures to continue. They were joined in December by the Cuyahoga County Court of Common Pleas, which handles foreclosures in greater Cleveland, Ohio. That court issued revised rules (PDF) in response to numerous motions to extend cases to "ensure that paperwork is proper" -- likely an oblique reference to robo-signing.

The new rules have two prongs. One addresses cases where the lender acknowledges that the paperwork may not be proper and has asked for a delay or to remove the case from the list of pending cases. In those cases, the rules recommend that judges give lenders 30 days to show why the case shouldn't be dismissed entirely. Unless the lender can come up with the correct paperwork within 30 days, this means it will have to end the foreclosure case and start over when and if it does have the paperwork. The rules also require attorneys for lenders to sign affidavits attesting that the paperwork is true and he or she has reviewed it. Lenders' employees signing affidavits must appear personally in court, and if no one is able to honestly sign an affidavit, a lender employee must personally appear with the original note to the property and testify about having reviewed other documents.

As Placentia foreclosure defense lawyers, we think these rules are great for protecting borrowers from rushed or unfair foreclosures -- but they will disrupt the foreclosure machine in the short term. Mortgage documents, including original notes, were repeatedly transferred throughout the housing bubble years, including to financial firms involved in securitization. However, they were rarely physically transferred, possibly by design. As a result, many lenders seeking foreclosure genuinely don't know where the necessary paperwork is. In such cases, the foreclosure would be halted unless a bank employee could give good reasons for the missing paperwork, under oath. However, lenders would still be free to foreclose when they have the proper, verifiable paperwork -- as it should be. It's only those who are trying to rush foreclosures through, without a serious look at whether the case is valid, who will have problems.

Continue reading "Ohio Court Forbids Lenders From Substituting New Documents for Robo-Signed Docs" »

Our Riverside County personal bankruptcy attorneys were interested to see a recent article on free legal help offered to people considering bankruptcy in Colorado. The Denver Post published an article Dec. 27 about the Colorado Bar Association's free monthly bankruptcy clinics. The clinics, which are held at the bankruptcy court in Denver, are designed for people who are considering representing themselves through the most common types of individual bankruptcy, Chapter 13 and Chapter 7. The clinic is taught by volunteer attorneys, who say the attendance has shot up dramatically in the past few years. Attorneys who volunteer to teach the clinic say students show up feeling guilty and upset and often with misconceptions, such as the incorrect belief that they can be arrested for debt.

The article focuses on one student, Victoria Torok, who got into debt trying to start a personal training business. With the economic downturn, she said potential clients just don't have the money for personal training. And at 62, she says it's tough to find a job, so she's currently working for herself selling nutritional supplements. Another student, Deanna Rasmussen, said her debt came from medical bills she put on a credit card, combined with reduced hours at work. The class is designed for people who intend to represent themselves if they file for bankruptcy, so it focuses on guiding students through the basics. However, it cannot provide direct legal advice or help students fill out forms. A volunteer attorney said he believes filers are actually better off with an attorney, but understands that the attorney fees may scare some people away.

As Chino consumer bankruptcy lawyers, we'd like to address that issue. It's true that hiring an attorney is not free, but many reputable law firms will roll their fees into the bankruptcy itself. As the comments in the article show, people frequently have incorrect ideas about debt, and many are also very upset to even consider bankruptcy. This makes it easy to get confused when dealing with complex laws. Judges tend to forgive minor mistakes from people representing themselves, but get impatient if they feel the filer is wasting everyone's time. A bad mistake, or an unkind judge, can get the entire case dismissed. If you're lucky, you can start over -- but judges may also bar filers from re-filing within a certain time, if the mistake was serious. In very serious cases, filers can even be federally prosecuted for bankruptcy fraud.

Continue reading "Colorado Bar Association Offers Free Advice for People Considering Filing Bankruptcy" »

As San Bernardino consumer bankruptcy lawyers, we were disappointed but not surprised to see the final tally of bankruptcy filing numbers for all of 2010. According to the American Bankruptcy Institute, consumer bankruptcy filings met predictions last year, with a total of 1.53 million filings. That's up nine percent from 2009, and it sets a new record for highest number of filings per year since the 2005 bankruptcy law changes took effect. The past several years have broken that record repeatedly, but one expert told the Wall Street Journal Jan. 4 that this may be the last such year, since borrowing has decreased. This year's numbers were attributed to the same causes as previous years: high unemployment, tight credit and the housing downturn. But surveys suggest that a growing number of filers have middle-class incomes and college degrees.

Western states were among the hardest hit, with California second only to Hawaii in increased number of filings, trailed by Utah, Arizona and Colorado. The article spotlighted a southern California bankruptcy filer, Ed Soapes of Corona. Soapes, 53, lost his job last February as an estimator for a construction company. His household includes three children -- one with disability benefits, one in school and one unemployed -- as well as his mother. All of them depend on the disability benefits and the income Soapes can bring in. He said with so many dependents, it was a "losing battle" to fight off 15 to 18 calls a day from creditors. He listed more than $150,000 in debts in his filing, including a mortgage that he'd like to continue paying. Another filer interviewed for the article said he's had to turn down job offers in other states because he can't refinance or sell his home.

These are stories we hear over and over in our work as Whittier individual bankruptcy attorneys. The economic downturn has forced many people to make uncomfortable choices or compromises, especially involving real estate. Here in southern California, we've met many people who are tied to mortgages they can't afford because they are unable to get a loan modification or, unless the real estate market improves, refinance. We hope the bankruptcy expert quoted in this article is right that bankruptcies will ease as people stop borrowing and the economy improves. In the meantime, however, bankruptcy is one option for people who have more debt than they believe they can realistically pay off, or people who have gotten farther and farther behind on their mortgage payments. Eliminating that debt, or making a plan to repay it, can help such people free up money to meet other obligations and make a new start for the new year.

Continue reading "Bankruptcy Filings Topped $1.5 Million in 2010, Breaking Record Set by Reform Law" »