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11

May 2010

One of my bankruptcy clients stopped me in the grocery store

Posted by / in After Bankruptcy / No comments yet

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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03

May 2010

At the bankruptcy attorneys convention, what I learned

Posted by / in Chapter 7 Bankruptcy / 1 comment

Attorney Leigh Faugust and I just got back from the annual convention of the National Association of Consumer Bankruptcy Attorneys.  We met in San Francico, along with twenty four other bankruptcy  attorneys from Virginia and 1600 attorneys from across the country.

We attended 14 hours of classes, had dinner with old and new friends, traded ideas and strategies late into the night.

One thing I learned that surprised me.

We heard it from Mark Redmiles,  Deputy Director of the Office of the United States Trustee.  He’s the top guy nationally in charge of enforcing the “means test”.  That’s the formula Congress put in place in 2005, to block chapter 7 bankruptcy for people who supposedly can afford to pay.

Redmiles reported that one only out of every eight chapter 7 bankruptcies approved nationally was filed by bankruptcy attorneys for people who did not have automatic Chapter 7 eligibility.

People have automatic eligibility if they earned less than the median income for their family size.  In Virginia, those median income numbers are:

Family size        one                two               three              four

Virginia         $48,190    $64,890     $73, 887    $85,633

Only one out of eight bankruptcies approved nationally as Chapter 7 are over the numbers for their state.

Five out of eight of my approved Chapter 7’s are over.  That’s five times the national average!

What is going on?  Northern Virginia is a high income and high cost of living area in a low income state.  The automatic eligibility formula that bankruptcy attorneys use to get most bankruptcies approved, usually doesn’t work here.

But experienced bankruptcy attorneys do get people here approved.  They get approved using the long formula means test–taking every time in your budget, compared to the allowances for that item, and using the ones we can to show the court why you can’t afford to pay.

The 2005 bankruptcy law made details very important.  But, they are more important here in Northern Virginia than almost anywhere else.   And it’s more important here than most places to have experienced bankruptcy attorneys on your side.

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30

Apr 2010

Navy Federal takes money from children

Posted by / in Before Bankruptcy / 18 comments

Last month, Navy Federal emptied out the savings account where 14 year old Tammy (not her real name) saved the money she made baby sitting.

Tammy’s mom had been out of work for nine months.  She was now two months behind on her second mortgage.  (The second mortgage was from Navy Federal.)  She just got a new job paying half of what she had been making, and she was glad to get that.  But she knew she would not be able to pay the second mortgage and still feed her children.

So Tammy’s mom came to see me about filing bankruptcy.  But she mentioned in passing that Navy Fed has helped themselves to her daughter’s savings account.  How could they do it?

First time I heard of Navy Fed doing this, I was shocked too.  But I figured out how they do it.

Most banks set up children’s accounts under the Uniform Transfers to Minor’s Act, where the parent is the custodian of the account, but the child is the owner.

Navy Fed apparently doesn’t do it that way.  Instead they set up a joint account, with the parent and the child.  This gives them right, as they see it, then to take Tammy’s money to make mom’s payment.

I think that stinks.  The child, by definition, is a child, and hasn’t agreed to co-sign for mom.  So I don’t think the credit union can pretend the little girl did.

I’ll see if I can find a judge who agrees with me on this.

The big lesson of this.  If you lose your job, take your money out of Navy Federal.  And that include’s your children’s money, too.

PS Navy Federal did back down on this when we sued them–and the little girls have their money back. May 2011

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26

Apr 2010

Filing Bankruptcy to Save Security Clearance

Posted by / in Weekly Posts / 2 comments

Someone came to me today and we are filing her bankruptcy tomorrow–we hope to save her security clearance and her job.

This lady had talked to me two years ago, when she first got into financial trouble.  But she was persuaded by her friends that filing bankruptcy would cost her job.  She struggled but could not fix her financial problems.

Last Friday she was told that her security clearance had been taken away.  And that she had no job assignment and would soon have no job.  That was the bad news.

But–this is the good news, and the boss really wants to help her–if she files bankruptcy and cleans up her credit, she can reapply for her clearance.   They wanted her to do that this week.  So we are filing her case tomorrow.

What’s the lesson?  This is what I tell everyone who will listen.  Filing bankruptcy causes your clearance to be investigated.  Being behind on your debts causes your clearance to be revoked.   (You cannot be in financial trouble and keep your clearance because you are tempted to sell things that don’t belong to you.)  Nobody likes being investigated, but just being told you are out of a job is a lot worse.

This lady is doing something important for our country–and keeping her job is important for her family–so we went all out to get her forms ready to send to the court tomorrow.  Hope it works.

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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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NORTHERN VIRGINIA BANKRUPTCY LAW OFFICES