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22

Nov 2010

Your after bankruptcy credit report: HSBC won’t show bankruptcy

Posted by / in After Bankruptcy / 14 comments

The Supreme Court said in 1934 that a person who files bankruptcy gets a “a new opportunity in life and a clear field for future effort.”

You won’t get that clear field for the future if your after bankruptcy credit report isn’t right.  If one of your debts is HSBC, your credit report won’t be right.

(To be fair to HSBC, we see this same problem now and then with other lenders.  But with HSBC, it’s ALWAYS a problem.)

HSBC does not update its credit reporting to show that your debts to them are discharged.  That means future lenders–or security clearance investigators–will wonder why HSBC is not discharged.

After Bankruptcy, HSBC won't update.

After Bankruptcy, HSBC won’t update.

Credit cards should always be discharged in your bankruptcy–unless some kind of false statement or fraud is involved.   So if a credit card still still shows as due and owing, it carries the implication that you did something wrong.   That’s serious.

When they get your discharge notice, HSBC does not update your credit report to show “discharged through bankruptcy.”  Instead they sell your account and they put “transfered, closed” and “purchased by another lender.”

That new lender, whoever it is, is not somebody who shows up on the credit reports I see.  Because that new lender is not on your credit report, you have two problems:  You can’t notify the new lender about the bankruptcy–they can always come back later and say they didn’t know.   And you have no way on your credit report to show that the debt was taken care of.

That’s why I get all my clients to sign dispute letters to the three credit bureaus.   We mail those dispute letters about four months after your trustee hearing–about two months after your discharge.   (The Judge in the class action case White v Experian gave the credit bureaus two months after your discharge to get your credit report right.)

Those dispute letters include the list of companies that got the discharge notice of your case from the court.  We ask the credit bureaus to make sure all those debts are showing as discharged in your credit report.

Those letters work sometimes, but often they don’t.  The credit bureaus reply to you and we count on you to send them on to us.

If it’s not fixed, then we sue.  When we sue, we get back a lot of technicalities from the credit bureaus.   They argue that you aren’t hurt, that it doesn’t matter, that HSBC is right.

(When they argue with us, the credit bureaus ignore the fact that the law requires them to be “complete” and “accurate.”  It may be accurate for HSBC to say they sold the debt.  But to be complete, they have to show you discharged it in your bankruptcy.)

Then, usually, we get it fixed–and a small check comes in the mail.   The check from the bureau covers the trouble you had to go through–and the work we had to go through–to get them to get it right.

I spoke on these credit report problems at the May 2005 Convention of NACBA–the National Association of Consumer Bankruptcy Attorneys.  A couple dozen lawyers around the country got involved and fought hard to get the bankruptcy courts involved in this problem.  It seems like they should, since it’s an interference with your new opportunity in life that the Supreme Court said you were supposed to get.

None of us had much luck with that.  That’s why we have to fight this under credit report law.

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14

Nov 2010

After bankruptcy success: Rangers in World Series

Posted by / in After Bankruptcy / No comments yet

Hall of Fame pitcher Nolan Ryan

Hall of Fame Pitcher Nolan Ryan buys Rangers in bankruptcy sale

This would have been a better after bankruptcy success story if they had won.   Instead, the Texas Rangers, who filed a Chapter 11 bankruptcy this summer, were American League champions, but lost the World Series four games to one.

Still, for people who worry that bankruptcy is the end of everything, look at the example of the Texas Rangers.   They were the second best team in baseball the same year they filed bankruptcy.

This is a reminder:  The purpose of bankruptcy is to help you.  Help you get a “new opportunity in life and the clear field for future effort.”   (That’s what the Supreme Court said.)

Your World Series ring may still be ahead.

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28

Oct 2010

After bankruptcy: They won't send bill and won't talk to me

Posted by / in After Bankruptcy / No comments yet

Here are two forms that you might need after your bankruptcy.     One to ask your bank to keep billing you for your car loan and one for your mortgage company, to talk to you if you are applying for a loan mod.

Why do you need these forms?

After bankruptcy, the people you used to owe money to are not allowed to try to collect.  They can’t call, can’t sue or garnish, and they are not supposed to bill you, either.  That rule applies to all the debts (except for things like taxes or child support.)  That includes your car or your mortgage–people you might want keep paying (if you want to keep the house or car.)

Usually (not always) your bank will start billing again on the car loan if you send them my form letter.  And nearly always, the mortgage company will keep discussing a loan mod with you if you send them my form letter.

That’s what these two forms are for.  I’ve already signed them–just type in your information and print them out.  They should help.

PS  Sometimes when you talk to them after bankruptcy, the bank or mortgage company will ask if you want to “reaffirm” the debt.   Reaffirming means you can’t change your mind later and include the debt in the bankruptcy.  “No” is nearly always the right answer to that question.     (Unless you have your car with Ford Credit, Chrysler, or SunTrust.)

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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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17

Jun 2010

After bankruptcy mortgage loan modification saves house

Posted by / in After Bankruptcy / 6 comments

Got an email this morning from Bill and Brenda (not their real names) letting me know they had gotten approved for their mortgage loan modification.

They first came to talk to me about filing bankruptcy in Virginia in November 2008. They really wanted to keep their house, but at that point their income was really low.  Bill was paid by commission, and it had gotten really slow during the worst of the panic.

They couldn’t get approved for a loan modification, because the mortgage company thought couldn’t afford any house payment at all.

So, the mortgage company set a foreclosure sale date on May 15.   Bill filed bankruptcy on May 14–to take care of his credit cards and stop the foreclosure.

They applied again for a loan mod, but got no where.

A new foreclosure sale was set for October 2, after the mortgage company got permission to foreclose from his bankruptcy judge. We filed Brenda’s bankruptcy on October 1, just in time to stop them again.  (The bankruptcy also took care of her credit cards at that point, too.)

By the time the mortgage company got permission again to foreclose, Bill’s income had improved.   This time the mortgage company would consider a loan mod.

And yesterday the loan mod was approved. That was twice bankruptcies were filed within two days of scheduled foreclosures, and now they have saved the house.  Bill and Brenda’s hard work staying in touch with the mortgage company was one reason this worked.  Good timing on the bankruptcies made it possible.   Commissions getting back to normal on Bill’s job helped a lot, too.

It doesn’t always work out that well, but when it does, I’m really happy.  Bill and Brenda really are, too.

I’ve seen several clients get mortgage loan modification offers after bankruptcy when they couldn’t get one before.   This is the one I’m happiest about today.

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13

May 2010

Abusive Debt Collectors: The Lies They Tell

Posted by / in After Bankruptcy, Before Bankruptcy / No comments yet

For most people facing the prospect of filing for bankruptcy, it seems that nothing is more stressful than getting behind on your debts. Knowing that you have obligations that you simply cannot meet, bills that you cannot pay—it’s enough to make the average person feel anxious, frustrated, and even helpless. Now imagine a collector calls about one of those debts and threatens you with arrest and imprisonment if you don’t pay. That’s what happened to one of our clients just this past year.

Our client, let’s call her Mary, had gotten behind on a debt with a department store. That debt was later either assigned or sold to a debt collector called Creditors Interchange Receivable Management, LLC.  Creditors Interchange began calling Mary at home. They left several messages on her answering machine telling her that a lawsuit was being “finalized” against her for the department store debt.  In their final message, an employee of Creditors Interchange told Mary “the authorities” were coming to her home and the only thing she would get out of ignoring their messages was a trip to jail.

After weeks of sleepless nights, crying, depression, and fear, Mary’s son convinced her to call our office. She truly believed that Creditors Interchange could have sent her to jail for failing to pay a personal debt. Once we assured her that that was not possible, we started the work of getting her justice under the law.

The law we used to fight on her behalf was the Fair Debt Collection Practices Act (or FDCPA). The FDCPA is the law passed by Congress to protect consumers from abusive debt collectors such as Creditors Interchange Receivable Management, LLC. The FDCPA says generally that a debt collector cannot harass or abuse you, make false, misleading, or deceptive statements to you, or use unfair practices to collect from you.  These protections for consumers apply whether or not you owe the debt about which the debt collector is calling.

In this case, we were able to get Mary an out of court settlement she was more than happy with, and begin the process of making her whole.

No one should have to go through what Mary went through, but if you have, you do have a remedy.

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11

May 2010

One of my bankruptcy clients stopped me in the grocery store

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One of my bankruptcy clients from 2007  stopped me in the grocery store just now, as a I was out buying lunch.

He just wanted to tell me that he had bought a house in February, after he had built back to good credit.

So many people believe that filing bankruptcy means ten years of bad credit.  When in fact, once your credit is messed up, it’s often the fastest way to rebuild.

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09

Mar 2010

After bankruptcy, what's this from Weltman, Weinberg & Reis? Or Bass and Associates

Posted by / in After Bankruptcy / 1 comment

If you buy furniture, appliances or jewelry on store credit, they have a right to get it back after your bankruptcy is over.  (Unless you keep paying, of course.)

In Virginia, and most states, that right is found in the Uniform Commercial Code. http://www.law.cornell.edu/ucc/9/overview.html.  That law–lawyers call it the UCC–also gives the bank the right to repossess your car if you stop making car payments.  http://www.law.cornell.edu/ucc/9/9-503.html.

The fact is, they are more likely to come after your car, if you stop paying, than to come after your big screen TV.  Two reasons for that.

First, the car is parked out on the street, where they can get to it.  Second, the market for used cars is a lot better than the market for used TV’s.

Still, if they want to, after bankruptcy they can file a legal paper, called a detinue in Virginia law, and ask you to turn over the TV, jewelry or whatever.   I’ve done twelve thousand bankruptcies, and I haven’t seen two dozen detinue.  I’ve seen two or three for jewelry worth more than five thousand dollars.  And the rest were filed mainly by USA Discounters, a furniture and appliance outfit located mainly near military bases.

OK, so who are Weltman, Weinberg & Reis?  This is a law firm that after bankruptcy, will write to you about something you bought at Best Buy or Kay Jewelry and a few other places.   They say they want you to call 800-837-6008 to arrange to turn back in their “collateral.”

You’ll notice they don’t even tell you what the “collateral”–the stuff–is.  That tells you the “collateral” isn’t really what they want.  They want you to call and offer them a payment.

Don’t do it.

My rule is this.  If they contact my clients with a list of what you bought and when you bought it, send that to me.  (Assuming I’m your bankruptcy lawyer.)  I’ll contact them and work something out.  That hardly ever happens.

As for their typical letter.  “We want our stuff back”–without telling you what it is.  Just toss those out.

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NORTHERN VIRGINIA BANKRUPTCY LAW OFFICES