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06

Sep 2010

After my bankruptcy hearing: Pay the car. Pay the HOA.

Posted by / in After Bankruptcy / 2 comments

After your hearing with the bankruptcy trustee–called the “meeting of creditors”–here are two things you need to know.  Pay the car payment, if you want to keep the car.  Pay the HOA–even if you aren’t keeping the house.

First, make sure you are making the car payment, if you want to keep the car.  They will not bill you.  Because of the bankruptcy, sending you a bill is trying to collect the debt.   And they are not allowed to try to collect the debt.  They will however repossess the car if you don’t pay.  So make sure you are current and stay current.

(If you were set up on an automatic payment, that has probably been turned off.  Check and be sure.)  If they are not receiving the payment, they will not call and yell at you.  They will repossess your car.

After the 2005 change in the law, they can repossess your car even if you are current.   The people who actually do that are Ford Credit, Chrysler Credit, and SunTrust.  (Mazda is part of Ford.)

(Most states have state laws that block them from repossessing if you are current; but this is Virginia.  Virginia has the worst consumer protection laws of any of the fifty states.  Seriously.)

Talk to me about reaffirmation if you have Ford, Chrysler or SunTrust.

Second, make sure you are paying the homeowners or condo association.  Your bankruptcy means they cannot go after you for what you owed before your case was filed.  But your next month’s association fee is an after bankruptcy debt.  So is the one after that and the one after that.   The bankruptcy court is not paying those.  You need to.  (If you have not paid between your filing date and the date of your hearing, you are probably already one payment behind.)

You owe the condo and HOA fees for as long as you own the house.  That’s usually three or four months after the bankruptcy is filed and sometimes it’s six or eight.   Especially when the condo fees are high, and there are already bank-owned condos in your development, the mortgage company is in no hurry to foreclose.   See my blog on “how long after bankruptcy can I keep my house?”

(The mortgage company doesn’t want to be paying the condo fees on an empty place–they’d rather you do it.  If you know there are a lot of empty units in your condo, think about renting yours, if you’ve already moved out.  Rent it on a month-to-month, obviously.)

When are you able to stop paying?  When there’s a foreclosure sale.  You’ll get notice by certified mail.  (They don’t send those to me, once the bankruptcy is over, I’m not involved.  They send them to you.)  Here’s what one looks like.

It would be a good idea to send notice of the sale to your association, so they do not continue to bill you once there is a foreclosure.

The situation with HOA’s and condo associations is so bad, I have one person in my office assigned to it.  It’s Laura Jones, at (703) 962-1043.  I gave her this job in part because she is a Realtor, on the side.

Problems constantly crop up.   Sometimes the associations apply your payments to pre-bankruptcy debts.  They can’t legally do that.   Sometimes they keep billing after the foreclosure finally goes through.  They can’t do that either.

But often, people aren’t making the association payments.   People say, I gave my house to the bankruptcy court.  Why do I still have to pay?  Answer, the bankruptcy court didn’t want it–they gave it back to you.

So, if you had stopped paying the HOA before the bankruptcy, you need to start paying once the bankruptcy is filed.  I know that seems strange, but there it is.  Pay the HOA.

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08

Aug 2010

Year after bankruptcy, Beth Ann still in house

Posted by / in After Bankruptcy / 1 comment

Beth Ann (not her real name) asked me to be her Virginia bankruptcy lawyer in December, 2008.   She was self employed, a single mom, with not much income.  She was in one of those two year teaser rate loans, and when the real rate hit, there was no way she could afford the house payment.

In February, 2009, she came back and asked if bankruptcy could help her keep the house.  Her brother had lost his house to foreclosure, and his family was now living there, too.

Still not enough income to afford that house payment, but I had hope.  Barrack Obama had just been inaugurated two weeks before, and changes in bankruptcy law had been part of his platform.  Obama had promised to change the law so the bankruptcy judge could adjust the balance on a home mortgage to what the house was now worth.  (Bankruptcy judges can do that on an apartment, an office building, or one of Donald Trump’s casinos.   But homeowners can’t use bankruptcy the way businesses can.)

The bank set a foreclosure sale on February 28, 2010, so we filed a bankruptcy for Beth Ann the day before.  We hoped to save her house with the change in the bankruptcy law that President Obama promised but hadn’t been voted on yet.

On March 5, that change in the bankruptcy law passed the House of Representatives.  It looked like Beth Ann and Obama were on a roll.   We filed our bankruptcy reorganization plan two weeks after her bankruptcy was started.  And the change in the law we needed was half way there.

That’s as far as it got.  On April 30, the bill failed in the U.S. Senate.  Commentators blamed Obama for going silent when he needed to speak up.

On July 13, 2009, her mortgage company got permission from the bankruptcy judge to foreclose her house.  (Called “relief from the automatic stay.”)

On September 30, my office got a copy of the notice sent to her of the upcoming foreclosure sale.  Beth Ann’s luck had run out.

Or had it.  Beth Ann came to see me last week about a problem in her credit report.  (I’m one of a handful of bankruptcy lawyers in the country who sues the credit bureaus to fix people’s after-bankruptcy credit reports.)

She mentioned that she is still in the house.  A year after the mortgage company got permission from the bankruptcy judge–seventeen months after the first sale date was blocked by her bankruptcy–there was no foreclosure.

As a bankruptcy lawyer, I file a lot of bankruptcies for people on the eve of foreclosure.  I tell them it gets you at least three more months to live in the house, sometimes more.

Beth Ann’s experience is on the long end of the sometimes more.

Here’s the lesson.  If you want to keep your house and they’ve set a foreclosure sale, file bankruptcy.  (That’s if you have eligibility–you certainly want to talk to an experienced bankruptcy lawyer, first.) At the least, you’ll get several more months to live for free.

And landing your file on a different person’s desk might work in your favor.  That new person might offer you a deal you didn’t get offered before.  Or, they might not know what to do with you, and you just sit there.  That seems to be what happened to Beth Ann.

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25

Jun 2010

After bankruptcy, how soon can I get approved for a new mortgage?

Posted by / in After Bankruptcy / 3 comments

Yesterday the mortgage giant Fannie Mae, now owned the the federal taxpayers, announced a new policy on qualifying for a new mortage, after you lose your house in bankruptcy, foreclosure, or short sale.

They say they want to discourage people who “just walk away” from their mortgages, particularly in states, like California, where the mortgage company cannot come after you for the money.  (Under Virginia law, they can.)

So Fannie Mae now won’t back a mortgage for someone who gave up a house in foreclosure until seven years have passed from the foreclosure date.   They call this a “Seven-Year Lockout Policy for Strategic Defaulters”

Now, there is an exception that I’m calling the loan mod/extenuating circumstances exception.  The seven year lockout does not apply to people who can show the foreclosure was caused by “extenuating circumstances.”  That’s not defined, but I think it would certainly include unemployment, divorce, and probably reduced hours or loss of bonus or commission during the recession.  If you are giving up your house, and want to buy again soon, keeping proof of that would be important.

The seven year lock out also does not apply  to people who tried to get a loan mod.   “We’re taking these steps to highlight the importance of working with your servicer,” said Terence Edwards, executive vice president.

Only a three year waiting period applies to people who tried to get a loan mod and to people who had extenuating circumstances.  (I’m not totally clear whether that means you have to do both, or if either one is enough.)

If you shortsale the house, or do a deed in lieu, the waiting period is only two years.  (This is one of the very few benefits I see in doing a shortsale. September 7, 2012 Washington Post had a good article on the big damage a shortsale does to your credit score.  You can read that here.)

Lots of people think bankruptcy is the worst thing you can do–those people are wrong.  Fannie Mae regulations require only a two year waiting period after the bankruptcy–again if the bankruptcy was caused by extenuating circumstances.   (Again, it’s important to keep a file documenting loss of income or whatever caused the problem.)

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