Frequently, bankruptcy debtors find themselves in the position of spending more than the amount of their earnings. Such situations are not unusual in a Chapter 7 liquidation case and are in fact the reason the debtor must file bankruptcy, because they cannot afford a repayment plan for the amount they owe. However, even in these no-asset cases debtors often purchase property with financing but wish to retain the collateral securing their debt. These debtors would be allowed to file for bankruptcy relief and receive a discharge of unsecured debt while reaffirming the secured loans. Reaffirmation agreements for these debts would usually be allowed by the bankruptcy court but cases of debtors whose expenses exceed their income receive special scrutiny. The court might hold a hearing and wish to hear from the debtor that in fact they are prepared to make continued payments in spite of the “presumption of undue hardship.”
Disclaimer: This does not constitute legal advice. Please contact a bankruptcy attorney in your jurisdiction for question specific to your situation.
February 18th, 2010 by Administrator
Bankruptcy is a viable option for dealing with many types of debt, including the massive amount financed for a home purchase, with a few exceptions, the most prominent being student loan debt. Other debts that are nondischargeable in bankruptcy include taxes and other payments owed to the government and domestic support obligations arising from court order. A recent news article highlights the danger of failing to make a prompt repayment of student loan debt. While this may be an extreme case, students taking out loans to finance their higher education should be aware of the importance of prioritizing such debts above all others for which alternative relief, such as bankruptcy, may be available. After graduation, these individuals may be thinking they only need to eventually, when they have the chance to, pay off the “amount borrowed” for their studies rather than the actual amount owed per the loan terms including forbearance interest and late payment penalties.
Disclaimer: This does not constitute legal advice. Please contact a qualified bankruptcy attorney in your jurisdiction if you have questions about your particular situation.
February 18th, 2010 by Administrator
In the February 8, 2010 issue of Massachusetts Lawyers Weekly, James L. Rogal, who practices at Ablitt Law Offices in Woburn, MA representing mortgage lenders and servicers doing foreclosures, wrote an opinion piece titled “Borrowers bear responsibility in foreclosures.” What may be of interest is his explanation of the foreclosure process in Massachusetts. There is not the swiftness with the foreclosure process that there is for other legal actions such as eviction or wage garnishment. Banks rarely begin foreclosure after the first month of default. Only after the borrower is already several months in default does the mortgage lender or servicer send the borrower a notice of default giving him 30 days to cure the default. The next step is that the borrower is served with a 90-day right-to-cure letter as required by G.L.c. 244, s.35A (Acts of 2007) in the event the default is not cured or the borrower does not enter into some type of workout with the mortgagee. The bank cannot conduct any foreclosure activity during this 90-day period other than collecting principal and interest. Only after the 90-day period if the borrower is still in default can the bank file a complaint to foreclose with either the Land Court or the Superior Court. In about three to four months, the Land Court issues an order of notice with a return day approximately 45 to 60 days later. At that time, the formal notice of foreclosure is served on the borrower. The foreclosure sale by public auction is scheduled after the return of service is filed and after the judgment is issued by the court. The bank serves the borrower with a notice of sale as required by G.L.c.244, s.14. This notice of sale period lasts an additional 25 to 30 days. This whole process from service of the 90-day right-to-cure letter to completion of the foreclosure sale is about 160 to 180 days if the complaint is filed in Land Court and a little less if in Superior Court.
The entire process definitely lasts longer than a typical Chapter 7 bankruptcy case. While these steps are particular to Massachusetts, banks have to go through the procedures of the local state courts in the home’s jurisdiction in order to recover their interest in the property. The process is not easy for banks, but when they are faced with no other choice after a borrower’s default, they need to begin. Borrowers can take from this the lesson that the best way to protect their own liability after the start of foreclosure is to seek a discharge of their debts if they qualify to do so.
Disclaimer: This does not constitute legal advice. Please contact a bankruptcy or foreclosure attorney in your jurisdiction for questions related to your individual situation.
February 17th, 2010 by Administrator
Homeowners filing for bankruptcy but keeping their house may wonder how long they need to wait before they are able to modify the terms of their mortgage. The answer would depend on the bankruptcy case. Mortgage modification is a popular option these days for homeowners wishing to continue staying where they are but needing assistance because of limitations on their means along with drastic reductions in home values. While the automatic stay applies to all accounts held by a bankruptcy debtor, the mortgage company may contact their account holder directly to discuss the terms of continued payments. However, they would be prevented from practically effectuating a change in mortgage terms until after the debtor has received an order of discharge for a Chapter 7 case or until after the approval of a Chapter 13 reorganization plan by the court. In the District of Massachusetts, the deadline for objections is generally set approximately two months after the date of the creditors’ meeting and soon thereafter the court can be expected to grant an order of discharge if there are no objections. However, if the case is prolonged for any reason, this would then prolong the granting of discharge for this period. Debtors should know from their bankruptcy lawyer the estimated period of time for them to receive a Chapter 7 order of discharge based upon the date set for objections to the case.
Disclaimer: This does not constitute legal advice. Please contact a bankruptcy attorney in your jurisdiction for questions related to your individual situation.
February 15th, 2010 by Administrator
Could handing over the deed and thereby avoiding foreclosure be the answer for homeowners considering walking away from their property? Citigroup seems to think so, as today it announced a pilot program called “Foreclosure Alternatives” that would provide their company with the deed to the house without having to go through the legal process of foreclosure and allow the homeowner to remain in their residence for six months. This program will be launched on a limited scale in Texas, Florida, Illinois, Michigan, New Jersey and Ohio for approximately 1,000 homeowners. Traditionally, homeowners owing significantly more on their house than it is worth and not confident about an increase in home values would consider walking away from their property rather than continuing mortgage payments that seemed fruitless. Mortgage companies like Citigroup seem to have recognized this and in order to save themselves additional work to foreclose on properties, have offered an alternative “deed in lieu of foreclosure” for homeowners not qualifying for mortgage modifications or short sales. By avoiding foreclosure, the homeowner also avoids damaging their credit. However, this relief is only helpful if the homeowner intends to pay off any amounts still owing on the mortgage and mortgage companies can explain the programs they offer to their qualified account holders. If not, bankruptcy may offer the ultimate relief for such situations.
Disclaimer: This does not constitute legal advice. Please contact a Bankruptcy attorney in your jurisdiction to discuss your particular situation.
February 11th, 2010 by Administrator
Consumers who have been making at least minimum monthly payments on their credit cards may be curious about how new changes in the law might affect them. Regulations restricting credit card issuers go into effect on February 22, 2010. Credit card companies are constantly monitoring the credit reports of their customers and would increase interest rates based on overall credit scores. While this new law will not completely eliminate increases in interest rates, their ability to increase interest rates on existing balances would be limited. The rates would only increase in cases where a promotional rate ends, the card has a variable rate or the cardholder makes a late payment. Interest rates on new transactions can only increase after the first year. In addition, interest rates on existing balances cannot be increased because of “universal default” on other credit accounts prior to forty-five days of notice.
While interest rates themselves would not be limited, the restrictions on rate increases might cause card issuers to make demands on payment sooner and therefore force their account holders into bankruptcy. Cardholders are also given under the new rules at least twenty-one days to make payment before incurring default. Card would have to enabled to allow for over-limit spending, which would otherwise be prohibited. Card applicants under the age of twenty-one would be required to have an adult co-signer on their account if they lack the income to make regular payments.
Basically, the new law just means that credit could be harder to come by and also incentivizes people to pay off their balances quicker rather than postponing their agony and thereby allowing the interest rate to ride up on their existing balances.
Disclaimer: This does not constitute legal advice. Please consult a qualified bankruptcy practitioner in your jurisdiction on how and if the above law may affect you.
February 4th, 2010 by Administrator
Short sales (selling a home for less than its value) and foreclosures, are more common these days, but are not necessarily the right prescription for homeowners facing decreasing property values, especially when the borrower can continue to afford mortgage payments. A recent article, expresses surprise at homeowners facing responsibility for a loan deficiency. This result is the combination of the poor real estate market and lenders’ need to enforce the terms of their original contract.
Simply put, a short sale with a release of title is not enough. A release of any loans owing on the property needs to be negotiated as well or the short sale is little more than a foreclosure in practice. Former property owners whose homes were foreclosed upon even several years prior would be well-advised to carefully review their credit report in order to determine that they still do not owe for such accounts. A qualified real estate attorney in your area should be able to inform you of your liability to pay a loan after short sale and may refer you to a qualified bankruptcy practitioner who can help you possibly discharge or at least work out this debt.
February 3rd, 2010 by Administrator
