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17

Oct 2010

Before bankruptcy: Why I like experian.com/reportaccess

Posted by / in Before Bankruptcy / No comments yet

Before bankruptcy, I like to meet with you and go over your credit report.    The credit report I like best is at experian.com/reportaccess.

One reason I like that report is big print.  (I’m 62 and I’ve worn glasses since I was 8.)  But the other reason is that Experian report shows the balance history of your credit cards.

We don’t get that balance history on credit reports from freecreditreport.com.  Even though freecreditreport.com is owned by Experian, the report you get there doesn’t have that detail.  And the print is a lot smaller.

(I hate them for another reason, too.  I don’t think something is “free” if you have to sign up for an annual subscription to get it.)

Knowing your balance history is important in the timing of your bankruptcy.

The bankruptcy code, at 11 USC 523(a), provides that the bank can object to discharging their debt if you made a “false representation.”

The “false representation” they like to bring up is the small print when you sign a charge slip.  The small print that says something like  “I will pay according to my credit card agreement.”

If you haven’t made six payments since your last big charge, there’s a good chance the bank will object to your bankruptcy.  They say your claimed you would pay when you know you couldn’t.  That’s the “false representation.”

If they file objections, we can fight back and win.  Especially if there was a change in your situation–you lost your job, you got sick, your husband split.  If you have something like that, the judge will probably side with you.

But unless there’s something specific you can point to, it’s a good idea to make six payments after your last big charge, before filing bankruptcy.   A credit report with your balance history helps me see when the last big charge was.   That helps us plan a bankruptcy that gets approved without objections.

PS.  In the bankruptcy court here, I see more objections filed by Chase Bank credit cards, than any of the others.

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17

Oct 2010

Loan mod papers lost for the third time? Don't take it personally.

Posted by / in Weekly Posts / 1 comment

As a Virginia bankruptcy lawyer, I’ve talked to three hundred people who’ve gotten loan modifications.    (Most before they filed bankruptcy, but more and more after.)

Only one of them had his loan mod approved the first time he sent it in.  I met that person yesterday!

Why?  There’s a clue in this article I saw in Wednesday’s New York Times.  It says the people in Chase loan servicing department are known by the rest of the bank as the “Burger King kids.”  The joke is that everybody doing loan mods now was working a year ago at Burger King.

So if it seems like the loan mod people don’t know what they are doing, you’ve got that right.

This is the fault of the banks, not the people.

The banks never expected to need to do this many mods.

Before about February 2008, the banks pretty much never modified mortgages at all.  Even when it would make sense for them, they didn’t.  They didn’t want anyone to to think they would ever modify a mortgage.  “Pay us what we want or we take your house.”  That was their rule.

It was February 2008 that I started to see smaller Virginia banks reaching out to people in bankruptcy, offering to work with them to keep their homes.

Newspapers had been reporting the foreclosure flood since the summer of 2007.  But took until mid 2008 for the light to dawn on the bigger banks.  They finally began to realize that they already had too many foreclosed houses and not enough people making payments.  Over the last two years, that problem has only gotten worse.

(Government sponsored programs like HAMP give incentives to banks to make loan mods.  But the real reason they do it is they’d rather reduce your payment a little than take over another house they can’t sell for half what you owe them.)

The banks hired people into loan modification too slowly to handle the flood.  Even when everyone else saw it coming, the banks didn’t.

The other problem is that loan servicing–working on existing loans and collecting payments–is not how banks made money.

The banks spent “billions of dollars in the good times to build vast mortgage machines that made new loans, bundled them into securities and sold those investments worldwide.”  They never gave much thought to how they were going to handle those loans, because they had already made their money.

It’s a lot more work to figure out how to handle a loan that’s gone bad, than it was to make the loan in the first place.  And there’s a lot less money to be made out of it.  So that’s not where the ambitious people in the bank have gone.

My bankruptcy clients report another problem when they try to get loan modifications.   They get conflicting stories from the loan mod and pre-foreclosure departments at the same bank.   The loan mod people say, be patient, we’ll get to you soon.  But the bank is also saying, your house is three weeks from foreclosure.

(There’s rampant confusion in the foreclosure department, too–staffed, according to today’s Washington Post, by “hair stylists, Wal-Mart clerks, assembly-line workers . . . without formal training.”)

So, if you are taking my advice–before or after bankruptcy–of trying to get a loan modification, expect delays, confusion, and lost paperwork.

All my bankruptcy clients tell the same story.  (Except for this one guy I talked to yesterday, who said for him it worked the first try.)

Don’t take it personally and–if you want to keep your house–don’t give up.

PS  That guy, the one who got a loan mod on the first try, is filing bankruptcy anyway.   The second mortgage wouldn’t work with him.  And the small business he started in 2006 is near collapse.    He decided to rent for a few years, and save money, while he builds up a new business.

PPS  In my first paragraph, I quoted the New York Times dumping on Chase.  I don’t think they are worse than other banks.  In fact, they may be better.  Chase has opened up Home Ownership Centers around the country to help people with the loan mod process.  They have two convenient to Northern Virginia.  One in Loudoun County Virginia and one in DC.   No other bank I know of has any.

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14

Oct 2010

Filing bankruptcy in Virginia gets harder November 1

Posted by / in Weekly Posts / 1 comment

You can thank the bank lobbyists who wrote the 2005 bankruptcy law for this cute trick.   When times get tough, filing bankruptcy gets harder and more expensive.

How’s that?  Eligibility to file bankruptcy is much harder for people who are over the median (average) income in each state.  When times get tough, the average income falls.   That makes eligiblity harder.

Check out these numbers, just released today.  Right now, a family of two in Virginia making less than $64,890 has automatic income eligibility to file Chapter 7 bankruptcy.   November 1, that drops to $62,686.    It’s the same for a family of three.  Right now a three person family making less than $73,887 has income eligibility.  On November 1, that drops to $72,078.

The unfairness to people with big families gets worse.  Right now a family of four is allowed to make $37,443 more than a single person with no kids.  Starting November 1, that drops to $36,102.  The law thinks taking care of kids should get cheaper in a recession.

When I look at that, I get mad all over again at the supposedly pro-family values political party that gave us this law in 2005.

While incomes are falling for average families across Virginia, the banks are doing great.  Earlier this week, JP Morgan Chase announced third quarter profits jumped 23%.

Here’s the complete chart, from the Office of the United States Trustee.  This chart shows how incomes are falling in Virginia for families of two, three, and four people.  Making it harder for people to get their bankruptcies approved.

Family size    Now      Nov 1

1            $48,190  $49,484

2            $64,890  $62,686

3            $73,887  $72,078

4            $85,633  $85,586


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11

Oct 2010

Don't file bankruptcy until March if you get a big refund.

Posted by / in Virginia Bankruptcy / 11 comments

This time of year, you need to be very careful about filing bankruptcy in Virginia if you get big tax refunds.  Why?

Virginia law has a lifetime $5000.00 limit on how much cash you can have when you file bankruptcy, and your refund counts against that.  If you file bankruptcy in October, November, or December, the bankruptcy trustee is going to look at last year’s tax return and see how much money you got back.  Hummm.  If it’s any where near $5000.00, he’ll hold your case open and ask to see the 2010 return.

If that refund puts you over the cash limit, he’ll grab it.  Another reason this is a big problem is because Virginia only allows you equity in your car up to $2000.00.  That’s right, the Virginia General Assembly thinks the bankruptcy court should take your paid for car if its worth $2000.00.    (When I graduated from high school a brand new Volkswagen cost $1995.  But that was a LONG time ago.)

You can use your cash limit to protect a car that’s worth a little more, but that leaves the tax refund hanging out.

Darden Hutson and Mitch Goldstein, two excellent bankruptcy lawyers in Richmond, Virginia, are spearheading an effort to raise these limits.   But for now, they are what they are.

Now, there are two reason people get big tax refunds.  Some people get a big refund, because they pay big taxes–they over withhold.  If you are one of those people and you want to go ahead with your bankruptcy now, you should contact your payroll office and increase your exemptions to twelve.   Right, like you have twelve children.  (Both state and federal.)

That will cut to almost nothing the taxes you pay for the rest of the year–and we hope it sopps up enough of the refund that you stay under the cash limits.

Other people get a big refund because of the earned income credit.   The earned income credit is basically a boost that the federal government gives to families with children where the parents are working but not making much.   This was originally put in by Richard Nixon and increased several times over the years, including by Ronald Reagan.

Increasing your depedents to 12 won’t help people who get a big refund because of the earned income credit.  That’s because the refund is based on the number of children and the income–its not really based on what taxes were actually paid.

Unless there’s some real emergency, people who get an earned income credit should not file bankruptcy in Virginia after August.  Otherwise the money the federal government is giving to help your children will end up in the hands of the bankruptcy trustee.

Why am I saying file bankruptcy in March?  File your taxes as soon as you can in February and get that money in and spend it.  Don’t just throw it away–and you can’t bury it in your backyard or give it to your brother–but spend it on things the kids have been needing, probably since last year.

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30

Sep 2010

Leslie beats a warrant in debt

Posted by / in Before Bankruptcy, warrant in debt / 46 comments

How Leslie Beat a Warrant In Debt

Leslie, not her real name, came to see me two months ago about filing for bankruptcy.

It was clear, after we looked at her forms and talked it over, bankruptcy would work for her.  It would take a couple months, though, to gather up everything we needed for her bankruptcy to go right through.

But, she had a warrant in debt scheduled for the following week.   If she just ignored it, she was likely to get garnished.   (We didn’t want that.)  So, I told her to go to court, and follow the instructions at my warrant in debt blog.

Leslie went to the courthouse (in the picture) on the “return date” and asked the judge for a trial.  In Virginia, the trial is usually set six or eight weeks later–depending on the county and the judge.

Warrant in debt in Prince William Courthouse

Leslie’s warrant in debt hearing was in the Prince William County Courthouse.

 

She knew to ask for a bill of particulars, and the creditor asked for her grounds of defense.  The bill of particulars under Virginia law is how the creditor plans show the amount of the debt and why there is a debt.

Leslie was in luck–because her creditor was Asset Acceptance, a debt buyer.  Debt buyers often cannot prove what the debt is about or what the amount of the debt really is.   Asset Acceptance proof must have been really weak in Leslie’s case, because they filed nothing at all as their bill of particulars.

So, for her grounds of defense, Leslie wrote to the court and to Asset Acceptance, that they never filed their bill of particulars.  Also, for good measure, she also listed statute of limitations in her grounds of defense.

(The statute of limitations sets a deadline to sue you after you’ve stopped paying debt.  Wait too long, and the creditor is out of luck.)

We expected that would mean Leslie would win at the trial, but she won sooner.

Asset Acceptance wrote to the judge and said they were dropping the warrant in debt case.  Under Virginia law, that’s called a non suit.

Is Leslie home free?  Not quite.  In Virginia law–not like most states–after a non suit, the creditor could come back and try again.  But, we’ll have the bankruptcy filed before that.   (This debt with Asset Acceptance was only a small part of her problem.)

Because of her good work, she now has plenty of time to get ready to file for bankruptcy, without having to worry about getting garnished.

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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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NORTHERN VIRGINIA BANKRUPTCY LAW OFFICES