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26

Apr 2010

If I file bankruptcy, can I still get a mortgage modification?

Posted by / in Weekly Posts / 2 comments

Important new regulations issued by the Obama administration say two very important things for people struggling with their debts and trying to save their homes.

First, filing bankruptcy does not affect your eligibility to apply for a mortgage loan mod.

Second, if you are in a trial modification, bankruptcy does not push you out of the trial and back to the end of the line.

Both of those are very good news.

Since the beginning of the crisis, I’ve told people to try to get their mortgage loan modification before we filed the bankruptcy.   For some people, that’s been a really long time.  (Last week we celebrated that a lady I’ve be working with since the middle of 2008 finally got a mod approved.)

Stalling the other creditors until the modification has been approved hasn’t always been easy.  Sometimes it hasn’t been possible.  So I’m glad we don’t have to do it any more.

I can also tell you that people who filed bankruptcy to fix their credit card problems back in 2008 are now telling me they are getting approved for modifications.  And I have a couple people who filed bankruptcy and moved out at the end of 2009 ask me why Bank of America sending them modification applications at their new address.   (They’d rather get some payment then foreclose.)

So how does it add up?  If you need a loan modification to save your house,  but also need protection from your credit cards or medical bills, it’s safe to file bankruptcy and still apply for the modification.

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08

Apr 2010

Before filing bankruptcy, get your money out of Wachovia

Posted by / in Weekly Posts / 15 comments

I just found out that when you file bankruptcy, Wachovia will freeze your accounts.  That’s even if you don’t owe them any money.

So if you are thinking of filing bankruptcy, get your money out of Wachovia.

This has been the policy of Wells Fargo for several years, but there weren’t any Wells Fargo Banks in Northern Virginia.   Wells Fargo took over Wachovia in the mortgage crisis and now they are freezing people’s accounts when they file bankruptcy in Virginia, too.

I see a lot of people in this part of Virginia who bank with them.  They base this policy on this court decision from Texas.  It doesn’t persuade me, but it persuades them.

So, if you are filing for bankruptcy, get your money out of  that account.  (And turn off the direct deposit if that’s where it’s going.)

PS   Roderick Martin, a bankruptcy lawyer in Georgia, just had one of his clients hit by Wachovia freezing his bank accounts.  He sent copies of the Wachovia letter to other lawyers around the country, as a warning, and looking for ideas on what to do.  Here’s Wachovia’s letter, dated May 2010.

PS  On June 30, 2010 an important court decision–from the 9th circuit bankruptcy appellate panel–told Wells Fargo they have to stop this.  I understand though that they have appealed.

PS  Bruce White, a bankruptcy lawyer in Richmond, shared this August 2011 letter from Wachovia, explaining that they still freeze people’s accounts.  Get your money out of Wachovia.  You can see the letter here.

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28

Jan 2010

After foreclosure, do mortgage companies keep trying to collect?

Posted by / in Weekly Posts / No comments yet

Many people ask me what happens if they walk away from the house and don’t file bankruptcy.  Do the big banks and mortgage companies really keep trying to collect the rest of their money?

Well in some states, about half, they can’t.  For example, they can’t in California and it’s very difficult in Pennsylvania.  But here in Virginia, they can and do.

The Federal Deposit Insurance keeps track of that.  (The FDIC’s job is to be sure the banks have money in the bank when you need your, so they keep track of how much the banks collect on, among other things, charged off loans.)  The FDIC reports the banks collected one billion on charged off mortgages in the first nine months of last year–up from about $750 million the year before.  Another $400 million was collected from charged off home equity loans.  And that’s how much they got–the amount they tried to get from people (who then woke up and filed bankruptcy to stop them) would be much higher.

The FDIC total does not include money collected by debt collectors who bought the foreclosed loans from the banks and then tracked down the former home owners.   What’s the bottom line?  In Virginia you can’t just give back the house and figure they will call it square.  Sooner or later, they will come after you for the rest of their money.

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NORTHERN VIRGINIA BANKRUPTCY LAW OFFICES