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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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04

Apr 2010

Warrant In Debt – What You Need To Know

Posted by / in Before Bankruptcy, warrant in debt / 277 comments

Warrant In Debt

A warrant in debt is what they call it in Virginia when a creditor is suing you in General District Court.  Warrant makes it sound a little worse than it is, but it is bad enough.  It is not a criminal law problem—you can’t go to jail; but they are trying to make you pay.

A creditor wants to make you pay—and if nothing else works, they want to make you pay with a garnishment.  (A garnishment is a court order to your bank or your payroll office to send part of your money to the court instead.)

warrant in debt judge

When the judge asks, do you owe this money, say “Your honor, I want a trial”

In order to get a garnishment, a creditor first has to take you to court and win. Taking you to court starts with sending you court papers. Those papers are the “warrant in debt.”

(They have to sue you in Virginia if you live in Virginia.  Or where you first signed for the debt.  That’s in the FDCPA, a Federal law.  You should keep that in mind when you get threat letters from lawyers. A lawyer in Atlanta GA probably doesn’t come to Virginia to take people to court. A lawyer in Rockville MD probably does. A lawyer in Richmond VA does almost for sure.)

The way you get a warrant in debt is for the sheriff to come around and tape it to your door. The creditor will sometimes also mail you a copy. The warrant in debt will have a return date which is your first court date.  You can find that return date in the upper right hand corner.  (Where it says Hearing Date and Time.)

YOUR FIRST WARRANT IN DEBT COURT DATE

If you admit you owe the money or don’t show up on your first court date, they get a judgment. Ten days after the judgment, then they can get the garnishment.

(You have ten days to note your appeal; but to appeal you have to pay into court the amount of the judgment—that’s probably impossible for you to do.)

Around here, most people don’t show up, so they automatically plead guilty to owing the debt. Ignoring court papers is usually not a good idea.  Especially not in Virginia, where the judges don’t lose sleep over whether you understood what was happening.

(A lot of people call the lawyer for the creditor and ask, do I have to come to court.  And usually the answer to that is no—you don’t have to come to court.  And it’s true—you don’t have to come to court. It’s just if you don’t come to court you plead guilty and they can start garnishing you in ten days.)

Most people who do show up, just plead guilty.

The judge says, “do you owe this money?”

“Yes, but I can’t pay it right now.” Judge, “OK, you can discuss it with that lawyer after court.”

Do that, and you just pled guilty! The ONLY judge who cares about whether you can pay is a bankruptcy judge. Bankruptcy judges worry full time about whether you can pay, so the other judges don’t have to worry about it at all. And they don’t.

If you go on a warrant in debt, you should tell the judge you are not admitting you owe the money and you need time to talk about it with a lawyer. Some judges will really crowd you to just plead guilty, but if you stand your ground they can’t make you. “Your honor, I want a trial.”

“YOUR HONOR, I WANT A TRIAL. AND I WANT A BILL OF PARTICULARS.”

When the judge calls your name, you need to step up behind one of the podiums (the one the collection lawyer isn’t using) and claim your rights under Virginia law (and also the Constitution.) “Your Honor, I want and trial.  And I want a Bill of Particulars.” Your right to a trial is right there, on the Warrant in Debt form. See where it says,  To dispute this claim, you must appear on the return date for the judge to set another date for trial. That’s what you are doing. You are disputing the claim and asking the judge to set another date for trial.

Right under that is place on the form for the Judge to order a Bill of Particulars. The Bill of Particulars is their proof that you owe the money, you owe it to them, and how much you owe. Sometimes they include a lot of that with the warrant in debt. Sometimes they don’t. But either way, it’s worth asking again.

YOUR WARRANT IN DEBT TRIAL

If you show up for your first court date, don’t plead guilty and do ask for a trial, you’ll get a trial date a month or two later. At the trial you need to stop the creditor from proving that you owe the money.  So you should use that month or two to talk to a lawyer, get ready to fight them yourself, or maybe try to work out a payment schedule.

(If you want to work out a payment schedule, you want to show up for court and ask for a trial.  That gives the lawyer for the creditor the idea that you know a little about your rights—and so the lawyer has some reason to be fair to you.)

If you plan to fight them at the trial—with or without a lawyer—you need to first file your grounds of defense.  Your grounds of defense are the reasons you think you don’t owe the money.  At your first court date, the judge will give you a date for your grounds of defense.  Miss that, and, you just pled guilty.

(Virginia’s system makes it easy to plead guilty to owing the money.  Ignoring the first court date—you just pled guilty.  Showing up and admitting you owe the money—you just pled guilty.  Missing your grounds of defense deadline—oops, you just pled guilty.)

So, if you send in your grounds of defense, then you have the right to show up for trial and defend yourself.

The creditor’s lawyer probably appears in that court on hundreds or thousands of cases each year. You’re there for the first time. That gives you an idea your chances of winning without a lawyer are not all that good.

Still you have a better chance if you are being sued by a debt collector—somebody you never heard of like Asset Acceptance, NCO, CG Services, Cavalry Portfolio—rather than being sued by the company you dealt with, like Ford Motor Credit, Bank of America or Fairfax Hospital.  If you know how to object to their evidence and make them prove that they really own the debt, you have a chance of winning.  (Here’s my blog on how Leslie beat a warrant in debt.)

If this debt has bounced around from debt collector to debt collector, you might also win on the statute of limitations.  The statute of limitations means if they left you alone for too long, they are too late.  But they are only too late if you say so.  Statute of limitations is an affirmative defense—meaning you have to show up and argue it; the judge won’t raise it for you.  (And you’d have to put it in your grounds of defense.)

How long is the statute of limitations?  It depends.  The original creditor, especially a credit card company, probably will produce a notice they claim they sent you where you agree that the law of some state you’ve never been to controls the statute of limitations; and they picked that state because it has a long one.

A debt collector, however, may not have any kind of notice, so then you are protected by Virginia’s statute of limitations.  How long is that?  Maybe three years, maybe five.  (Sorry I can’t be more specific than that.)  It depends.

GETTING SUED IN THE WRONG COUNTY

One way to get some leverage on your creditor is if they sue you in the wrong county.  A debt collector—those guys like Asset Acceptance, NCO, CG Services, Cavalry Portfolio—they are required to sue you in the judicial district where you live.  (Or where you signed the contract; meaning where you financed the car, for example.)  In Northern Virginia, each county and Alexandria City is a judicial district.  (Except Loudoun and Fauquier share a district.)

An original creditor who uses a lawyer is bound by the same rules.  The have to sue you in your home county.

If you get sued in the wrong county, that’s a violation of the Federal Fair Debt Collection Practices Act. And you can sue them for violating your rights!

GETTING SUED BY CAPITAL ONE IN RICHMOND

Capital One sues nearly everybody in Richmond.  (Or sometimes Henrico.) They can get away with that, because they don’t use a lawyer.  However, you don’t have to just give up.  And you don’t have to leave Northern Virginia at 5:00 AM driving down I-95 to get to Richmond at 8:30, either.  On the back of the warrant in debt, lower left, it explains that you have the right to object to venue.  If you follow those instructions and say you can’t get to Richmond and ask the judge to please move it to your home county, the judge will nearly always do it.

Then they will show up several weeks later in your home county, with a lawyer.  And so you start from there.

WHAT TO DO WHEN YOU GET A WARRANT IN DEBT

You have some tough decisions.  If the debt is something that you owe—and that you can afford to pay—you should pay it off.  (No, they do not have to accept payment arrangements; by warrant-in-debt time you are way too late for that.)

If you don’t owe it—or are not sure—you should go to court, ask for a trial, and try to find a lawyer who will help with that kind of thing.  (If you Google “Virginia debt defense lawyer,” one Manassas law firm comes up.  Many lawyers who do this kind of work are members of the National Association of Consumer Advocates, and you can check their website here.)

When you go on your first court day, and you tell the judge you want a trial, you should also ask for a “bill of particulars.”  The bill of particulars is their writing proving that you do owe the money.  That will give you some idea about how strong or weak their evidence is.  If you then get a lawyer to help you, he will really want to study their bill of particulars.

If you owe the money but can’t pay, then it’s probably time to talk to a bankruptcy lawyer.  You can find out more about bankruptcy law in Virginia at this website.  I’m Virginia bankruptcy lawyer Robert Weed.

IF I LOSE IN COURT CAN I STILL FILE BANKRUPTCY?

You can still file bankruptcy on most debts even after your trial on the warrant in debt.  (You can’t file bankruptcy and discharge a debt for fraud–for example if they say proved you lied on your credit report, or stole the money.)

There are a couple reasons why its better to file the bankruptcy before.   One is, after bankruptcy your credit report will still show that you had a judgment against you.   That will make it a little harder to get back to good credit.

Second, the judgment may become a lien on your real estate.   (Less likely if you own the real estate as husband and wife.)  The bankruptcy may not be able to get the judgment off.  It depends.

Third, if you wait until after your warrant in debt court date and you get garnished, you may not be able to get that money back.  You sometimes can if you see a bankruptcy lawyer and file your bankruptcy fast enough.

So, if you are thinking about bankruptcy when you get a warrant in debt, its better to talk to a lawyer quickly.

Hope this is helpful.  Good luck.

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25

Mar 2010

After bankruptcy what if I don’t pay my second mortgage?

Posted by / in Chapter 7 Bankruptcy / 610 comments

After chapter 7 bankruptcy, I often advise my clients, just don’t pay the second mortgage.

Now, if you don’t file bankruptcy and stop paying the second mortgage, two things would happen.  They will call you day and night; and eventually they would sue you and garnish you.  Bankruptcy keeps them from doing either of those.

Will they foreclose you?  That’s the big question.    The second mortgage can sell your house to a new homeowner only if they pay off the first mortgage.  If the value of your house has dropped below what you owe on the first, that’s just a way for them to lose more money.  They are not going to do that.

Virginia Bankruptcy Lawyer Robert Weed

I often advise my clients, just don’t pay the second mortgage. This is a strategy that takes nerves of steel.

To put it another way, the second mortgage won’t kick you out of your house just to be mean.  They will only do it to make money.  If they can’t make money, they won’t do it.

So, what are they going to do?  They will wait patiently for you to keep paying the first, and hope the value comes back up (and the balance on the first drops) that at some point you have equity that they can grab.

So, if you follow this just-don’t-pay-the-second strategy, you know you will never have any equity in your house.  If you go to sell five years or twenty years down the road, the second will still be sitting there.   (With five or twenty years of interest and late fees.)

So when does this just-don’t-pay make sense?  Suppose you have five more years before your youngest is out of high school.  Once that’s done, you might want to move to a smaller place anyway.  Then you can stop paying the first mortgage too, and move out.  The bankruptcy still protects you from both of the mortgages.  (You’d have to keep paying the HOA until the first mortgage forecloses.)

Does this strategy hurt your credit?  It does and it doesn’t.  It doesn’t hurt your credit score, because that second mortgage will  just show bankruptcy and can’t show any late payments after that.  (For my clients, we check to be sure.)  But it does hurt your being able to buy again.

For loans like car loans–or interest rates on your credit cards–your credit score pretty much controls, so you’ll be able to get a care loan at a good rate.  Your score will be good, if you’ve built up new, good credit.

But to get a mortgage, a different rule applies.  The March 2, 2010 manual released by Fannie Mae, (link here https://www.efanniemae.com/sf/guides/ssg/sgpdf.jsp) says what you have to do to get an insured mortgage. You have to be two years after the bankruptcy (with extenuating circumstances), but you have to be three years after a foreclosure.   Even though there will not be a foreclosure on your credit report, there will be one on the land records, and a mortgage lender will check there, too.

So if you follow this just-don’t-pay-the-second strategy, you keep the house for three or five or seven years; then you have to plan to rent for three years or so.  Then you’d be able to buy again.

If real estate goes up a lot over the next ten years, you’d be better financially to move out of the house right after the bankruptcy, rent for three years right away, and then buy again.  (If real estate stays flat, then not being able to buy for ten years doesn’t lose you anything.)

But if you want to keep your children in the same school and the same house, just-don’t-pay-the-second is a good plan.

What if you want to keep this house long term?  One way to do that would be with a second mortgage relief Chapter 13.  See my website on that.  http://virginiasecondmortgagerelief.com/

Or, you can not pay the second for a couple years, save some money, and then offer them a cash settlement.  Say you owe $75,000 on the second mortgage, file chapter 7 bankruptcy, and pay them nothing for three years.   If the value of your house is still less than you owe on the first, and you offer them $7000 to call it even, they might agree.   If you move out, they get nothing.

That strategy takes nerves of steel.  And it works best if you go for several years of not paying them–you want them to get used to getting nothing, so your offer of 10 cents on the dollar looks good.  I’ve seen it work.

Here’s an example where Chase, after getting nothing for four years, offers to settle at $20,000 second mortgage for $2000.  And here’s an example of HSBC offering to settle as $126,000 second mortgage for $12,600.

Here’s an offer to settle at $28,500 for $4250.  My client filed bankruptcy in 2010–this offer came in 2014.

 

PS  In January 2015, Bank of America forgives the whole amount.

Ahmad filed bankruptcy with me in 2011.  He got the best possible deal–Bank of America offered to forgive the whole amount of his seocnd mortgage.

 We had a BOA home equity line of credit for around $33K that was included in our BK back in 2011. I received a letter today from BOA that they have agreed to forgive this amount and we don’t owe them a penny on that. I had a question will that show up in our credit and will it hurt our credit in any way? It took us few years to build our credit and get back up and we don’t want this to damage our credit but we are grateful that is being forgiven…..

Don’t worry, Ahmad, this will nto hit your credit.  and not have any tax consequences either.  And I’ll straighten it out if it does.

This nerves of steel strategy does not always work; but it works a lot.

 

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