You decided you will file bankruptcy, for sure, so when do you stop paying those pesky creditors?

Hey, I am a lawyer, so the answer is:  it depends.

If you are keeping your house, keep paying the mortgage or mortgages.

If you are keeping your vehicle, and are current, keep making the lease payments or payments to purchase the vehicle.

Although depends on the chapter you will be filing.

In the Detroit bankruptcy court, if you are behind on a mortgage or other secured creditor payment like a car, you must make that payment through the Chapter 13 trustee as part of your plan.

So, maybe yes, maybe no, you need to consult with your attorney on the best use of your funds before you file.

Water bills, gas, electric, cable, internet, things that you will keep using, and are current on, you keep paying.

If you have overdue bills for these services, those have to be listed as debts on your bankruptcy schedules.

The utilities know what to do; they get hundreds or thousands of bankruptcy notices every month.

You will get a new bill from the bankruptcy filing date forward, for what you use after the bankruptcy case is filed.

Gas and electric are also governed by state regulatory agencies which restrict what they can do.

Cable and internet, not so much.

You should check on alternatives, see if you can get a better deal somewhere else.

If you are filing bankruptcy, you need to cut corners and save money.

How about credit cards?

Unless it is like American Express used to be, you pay it off every month like the electric bill,

Stop!

Right away!

Now!

You are just throwing that money away.

And if you are filing bankruptcy, you need it!

If I Am Filing Bankruptcy, When Do I Stop Paying Creditors?

Related posts:

1. Stop Paying Credit Cards?
2. Is Filing Bankruptcy A Sin?
3. Filing For Bankruptcy – Video

Negative equity, that is, your home is underwater, worth less than you owe on it.

As I have been blogging for years, the answer is judicial mortgage modification, Congress amending Chapter 13 to allow the bankruptcy court to modify mortgage balances down to the value of the home.

HAMP has failed in its announced goal of avoiding foreclosure and keeping homeowners in their home.

Over half of the HAMP modifications are already in default.

There are several reasons.

One, people are told, you can keep your home if you pay us (mortgage company) X dollars per month.

Wanting to keep their homes, they say yes, but cannot really afford the payments.

Of course, the government program pays the mortgage servicers for doing loan modifications, whether they succeed or fail.

So the incentive on that side of the fence is to write a modification and get the check from the government.

Objections?

Oh, that moral hazard thing.

The one the Federal government keeps violating by saving the “too big to fail” institutions that created this mess.

They made bad loans, hundreds of thousands of them, and the taxpayer bailed them out by taking over Fannie Mae and Freddi Mac, and TARP, and so on.

I do not understand where the moral hazard is.

If I am going to be foreclosed, and the bank takes my house, and sells it for what it is worth, that is fine.

But, if I pay them what it is worth, saving them all the costs of foreclosure, that is a moral hazard.

Using the Chapter 13 process means sworn statements of income and assets, and a trustee reviewing tax returns and pay stubs.

The banks failure to do the same is how they wrote so many bad loans.

And the government wants people to borrow and spend, spending what they do not have to boost the economy.

Well, that, at least is consistent.  Governments have been doing it for years.

Where is the economy going to be with 9 million more foreclosures, that many more taxpayers leaving their community, that many families moving.

Foreclosure Crisis – The Next Phase

Related posts:

1. Did Bankruptcy Reform Worsen Foreclosure Crisis?
2. Michigan Foreclosure Crisis Continuing
3. Government Report on Foreclosure Crisis

“They” being the creditors, of course.

I have filed a third Chapter 7 for at least three individuals, so, you know, people can get credit again.

But, by the time you contact a lawyer, that good credit rating is in the rear view mirror, or about to be.

People don’t email or call me because they can pay their bills.

They may be current, because they just got the layoff notice, or, in the old days, ran out of new credit cards to get cash advances to make the minimum payments.

So, let’s be clear, it is not bankruptcy that wrecks your credit, it is, not paying your bills.

If you do not file bankruptcy, you still will not have the money to pay your bills, and will still have a bad credit score.

A good credit score comes from paying your bills on time.  Period.

Do not pay the scam companies with the magic formulas, the ones who say they can get that bankruptcy off your credit report earlier than the ten year maximum allowed by current law.

But, people say, how do I get a bill to pay off on time to restore my credit after bankruptcy?

Hey, are there utilities still in your name?

Did you keep paying on a mortgage or car or other vehicle?

Even if you did not reaffirm a debt, you have the right to include, to add, information to your credit report.

Maybe you are renting.

That is another debt you are repaying.

Of course, you pay higher interest for credit after filing bankruptcy.

But, again, you would probably not even get a loan if you had not filed bankruptcy.

Creditors are not standing in line to lend to someone who cannot pay the bills she already has.

But, you are a better credit risk after wiping out a bunch of debt than before, and the creditors know you cannot get another Chapter 7 discharge for 8 years.

You can get a high fee, high interest rate secured credit card.

This is where you deposit X dollars at the bank, and the bank gives you a Visa or MasterCard secured by the X dollars in your account, which you usually cannot use.

I am not recommending this, just pointing out, one way to get credit.

So, this is reality, no shortcuts, it takes a while, but it is done all the time.

How Do I Rebuild My Credit After Bankruptcy?

Related posts:

1. Should I File Bankruptcy?
2. Credit Card Debt Defaults Record High
3. Stop Paying Credit Cards?

Asked by who?  Why, the mortgage company, of course.

Here in Michigan, most homes with mortgages are underwater, worth less than what is owed on them.

So, you file Chapter 7 bankruptcy, your house is worth $100,000, and you owe $#120,000 on it.

This is a time you can walk away from the house, you will be discharged in the Chapter 7 bankruptcy from having to pay anything on the mortgage note.  (Unless the mortgage company sues you in the bankruptcy court, by filing an adversary proceeding and proving you committed fraud in obtaining the mortgage)

But, like most of my clients, you want to keep your house.

Of course, you have to be able to make the mortgage payment after your Chapter 7 bankruptcy.

And keep paying the taxes and keep it insured, just like you did before you filed bankruptcy.

Do you have to reaffirm, to sign a binding reaffirmation agreement, that makes you personally liable on that mortgage note as if you had never filed bankruptcy?

No.

I have yet to see a mortgage company in Michigan foreclose on someone who was keeping the taxes and payments made, and had the home insured, just for not signing a reaffirmation.

It borders on malpractice for an attorney to sign off on a client reaffirming a debt that is more than the value of the home.

I look at upside, downside.

I see no downside to not reaffirming.

Now, some of the mortgage companies say they will not tell the credit reporting agencies that you are making the payments on time.

So?  You have the right to include accurate information in your credit report.

You can add that at least once a year, yourself, without them.

They are required to give you at least annual statements.

The downside?

You sign, something else goes wrong, and you cannot make the payments, they foreclose for the $100,000 the home is worth, and sue you for the $20,000 difference.

Unless they are giving you some fantastic modification, DON’T DO IT!

In Chapter 7 Bankruptcy, Reaffirm My Mortgage?

Related posts:

1. Mortgage Modifications: Problems
2. What Happens In A Michigan Foreclosure?
3. Reasons To File Bankruptcy, Musically Presented

get your bankruptcy discharge, your fresh start, and get on with your life

Couple of years later, you try to sell or re-finance your home, and cannot, because creditors still have liens showing on the record.

How did this happen?

Well, you and your attorney should check the record for liens recorded against your property as part of the bankruptcy process.

Then you can force the creditor to remove the lien during the bankruptcy case.

I am talking about judgment liens, or non-consensual liens, which means, you did not agree to pledge your house as collateral for this creditor.

In Michigan, any unsecured creditor with a judgment against you can record that judgment as a lien on your real estate, your home, by filing papers in the county where you live with the register of deeds.

It is a long, expensive process to foreclose on that lien, to take your home, and the creditor would have to pay any prior liens, like your mortgage.

So that rarely happens.

What does happen is, the creditor sues, gets the judgment, puts the lien on the home, and waits for a sale or re-finance, when the liens have to be paid.

Now, it could be that some company bought the debt after you filed bankruptcy, or the original creditor sues you after bankruptcy.

In Detroit, we have trash can service.

Someone drives by your house and drops the papers in the trash, and says you are served.

So you could have a judgment against you without you knowing it.

Until you try to sell your house.

It could be the creditor does not know about the bankruptcy, if they bought the debt and were not told.

A bankruptcy case can be re-opened to grant relief to the debtor, and enforcement of the discharge is a good reason.

There is no filing fee due in this situation.

I always give creditors another chance to do the right thing before filing a motion to hold them in contempt.

I usually send them the motion I am going to file, so they know exactly what is coming and I can show the Judge they had a chance to resolve the issue out of court.

Prevention is better than cure, so check the title records on your home before you file bankruptcy.

After Bankruptcy, Creditor Lien On My Home?

Related posts:

1. Federal Government Home Appraisal Guidelines
2. What Happens If A Creditor Contacts Me After Bankruptcy?
3. Glossary – Definitions

Debt drives people into bankruptcy.

Student debt drives students into insolvency, that is, being broke, but many are not helped by bankruptcy.

Student loans already saddle many college students with big debts on graduation.

Now, more details are emerging on how colleges profit from getting their students into even more debt, with credit cards.
Credit card companies pay the colleges for names and other information, and rights to market to students.

The Huffington Post reports identifying the the following practices:

“# Sell students’ personal information. Many are contractually obligated to share students’ names, phone numbers and addresses with banks.

# Earn royalties: Banks typically pay schools $1 for each student who keeps a credit card open for 90 days. When students carry a balance, some schools can collect up to $3 more per card.

# Cash in each time a student uses plastic: Many schools are entitled to receive 0.4 percent of all retail purchases made with student cards.

# Benefit from marketing incentives: When a university or alumni association agrees to market cards to students itself, the payoff is greater — sometimes up to $60 for each card opened through a school’s own marketing.

# Offer special perks: Banks sometimes gain special access to athletic events. Cornell University must provide Chase Bank with tickets and “priority” parking passes at football, basketball, hockey and lacrosse games.”

Bad enough to do these things, and without any disclosure, until the recent credit card reform legislation.

But few colleges, if any, are posting this information online so that people can make informed decisions.

But to dump this on your students, few of whom have any real income, most of whom are already in debt with student loans, is unconscionable.

The colleges participate, if not direct, the national myth about the value of a college education.

Hey, if you could get the government to subsidize the cost of your product, that would help your business, right?

Young people frequently lack the perspective to understand how long it will take to pay off student loans, how hard it will be to get a job with enough income to do that, and how having to repay the loans restricts their other options.

Like, being able to buy a house.

Colleges Profit From Student Debt and Student Loans

Related posts:

1. Student Loans: The Big Scam
2. Do I Have To Pay My Student Loans?
3. Student Loan Problems, Bankruptcy Rarely Helps

Countrywide, one of my favorite villains, fessed up to cheating homeowners, in foreclosure, and even including those who had successfully completed Chapter 13 bankruptcy cases, out of tens of millions of dollars.

The United States Trustee office, which is part of the Department of Justice, oversees bankruptcy cases throughout the country.

Like most government bureaucracies, not known for their speed.

Even they got on board on this one.

You don’t pay $108 million dollars for doing things the right way.

Countrywide was number one in mortgages in the U.S., when acquired by Bank of America in 2008.

One of the worst acquisitions in history.

The settlement involves some 200,000 homeowners, so, I figure they missed quite a few of those screwed by Countrywide.

As always, it seems, they nail the people already in trouble.

Behind on your payments?

Having job, illness, other problems?

Countrywide (and others) found you the perfect candidate to overcharge.

The famous property inspections.

Someone drives by your house to see if anyone is living there, you get charged, the mortgage company makes money:

When homeowners fell behind on their payments and were in default on their loans, Countrywide ordered property inspections, lawn mowing, and other services meant to protect the lender’s interest in the property, according to the FTC complaint. But rather than simply hire third-party vendors to perform the services, Countrywide created subsidiaries to hire the vendors. The subsidiaries marked up the price of the services charged by the vendors – often by 100% or more – and Countrywide then charged the homeowners the marked-up fees. The complaint alleges that the company’s strategy was to increase profits from default-related service fees in bad economic times. As a result, even as the mortgage market collapsed and more homeowners fell into delinquency, Countrywide earned substantial profits by funneling default-related services through subsidiaries that it created solely to generate revenue.

(from the Home Equity Theft Reporter site, http://homeequitytheft.blogspot.com/)

Pushing you into foreclosure generates more fees for them, and is more profitable, than if you make every payment on time.

Let’s say you file bankruptcy to stop that foreclosure sale.

They still get you.

You make all your payments for your 3, 4, or even 5 year bankruptcy plan, and next thing you know, you get a foreclosure notice.

Because, they accrued a bunch of junk fees on their books while you were in bankruptcy.

They never notified anyone, not you, not your attorney, not your Chapter 13 bankruptcy trustee.

Criminal charges could still come.

Something I have been awaiting for years.

Michigan Bankruptcy and Foreclosure News

Related posts:

1. Michigan Foreclosure Crisis Continuing
2. Foreclosure News
3. What Happens In A Michigan Foreclosure?

If your bankruptcy schedules are filled out wrong, can you blame your lawyer for what is on them when you are charged with bankruptcy fraud?

Technically, the criminal charge will be perjury, but it is for filing fraudulent schedules.

That is, not listing an asset you have, answering one of the questions on the statement of affairs incorrectly, or another significant omission.

It would still be incorrect to list something you do not own as an asset, but that rarely happens, and would rarely have any effect on the bankruptcy case.

Hiding assets damages the creditors who might get some recovery from those assets, and, deceives the court as to your real financial condition.

Misrepresentations on your bankruptcy schedules can also lead to denial of your bankruptcy discharge, meaning you would still owe all of your creditors.

Fraud by creditors, well, that is another issue.

Sure, but you will be the one with the jail sentence.

Bankruptcy cases are filed electronically, so the copy on record with the court is not the one that has the “wet”, or ink, signature of the person filing.

In Detroit bankruptcy court, all debtors are sworn in and asked to authenticate their original signature on the papers they did sign.

Peter Pocklington, owner of the Edmonton Oilers when they were winning Stanley Cups, and still hated there for trading Wayne Gretzky to the L.A. Kings.

Though he plead guilty to perjury for filing  fraudulent bankruptcy schedules, he tells the press, hey, I just signed the papers, my lawyer left out those bank accounts and storage facilities that were not on my bankruptcy schedules.

You would think this guy would read something he was swearing to under penalty of perjury before signing it, but, he says he did not.

Guilty of bankruptcy fraud anyway.

Do not sign anything unless you have read it.

Thoroughly and completely.

Everybody blames his lawyer, oldest trick in the book.

Now, I am not saying lawyers are perfect, but if you have one telling you to sign bankruptcy papers that leave out something you told him, better get a second opinion before you sign.

Bankruptcy Fraud: Blame My Lawyer?

Bankruptcy Fraud: Blame My Lawyer?

Related posts:

1. If I Am Filing Bankruptcy, When Do I Stop Paying Creditors?
2. After Bankruptcy, Creditor Lien On My Home?
3. In Chapter 7 Bankruptcy, Reaffirm My Mortgage?

Bankruptcy laws were significantly changed in 2005, and filings went way down.

A new study suggests bankruptcy reform accelerated the foreclosure crisis.

The theory is simple enough.

People who file bankruptcy and get rid of credit card and other debt, have more money available to pay the mortgage payments, and stay out of foreclosure.

So, if the bankruptcy law changes made it harder to file, which no one disputes, even keeping some people from filing for bankruptcy relief, they could not get rid of that credit card and other debt, and so could not afford their mortgage payments.

The study assumes the bankruptcy law changes kept some people from filing, based on the big decline in bankruptcy cases after the law changed.

The study concludes “bankruptcy reform caused the number of mortgage defaults to increase by around 200,000 per year even before the start of the financial crisis. ” Did Bankruptcy Reform Cause Mortgage Default Rates to Rise?,  by Wenli Li, Michelle J. White, and Ning Zhu.

They did not make the next calculation, how many more foreclosures occurred because of the extra 200,000 defaults per year.

But, that number would be large.

My own view has always been that creditors did not collect a lot more money because the law kept some people from filing.

Most of my clients file because they do not have the money to pay their debts, and keeping them from filing does not put any money into their pockets with which to pay those debts.

They are still broke.

They face foreclosure whether they could file bankruptcy or not.

So, I doubt the conclusion of the study.

The real villains of the foreclosure crisis remain Greenspan, who pumped up the money supply which fueled the mortgage lending boom, the bean counters and regulators who let the banks carry speculative mortgage investments off their books (so-called SIVs, Special Investment Vehicles), FANNIE MAE and FREDDIE MAC for buying all the junk, the ratings agencies who rated the crappy mortgage securities just under U. S. government grade debt, the crooked mortgage brokers who changed the papers to make the deal go through, the appraisers they used who magically found every home to be worth the amount needed to make the mortgage go through.

I may be forgetting someone, that is off the top of my head.

Bankruptcy reform was a bad idea, it did not do what the creditors wanted, it made filing more costly and complicated without any measurable good effect.

But I do not believe it added to the foreclosure crisis.

Did Bankruptcy Reform Worsen Foreclosure Crisis?

Related posts:

1. Foreclosure Crisis – The Next Phase
2. Government Report on Foreclosure Crisis
3. Chapter 13 Bankruptcy Reform – Bankers Oppose

Student loans started with the GI bill in World War II, and has expanded out of control.

Because of:  the colleges.

Tuition costs raced ahead of inflation by over half in the 80s, which looks like a bargain compared to the  four hundred per cent gap in the last ten years.

So, the way to keep attendance up, was, more student loans!

Of course, our friends the bankers were right there, not worried too much about lending standards, as the taxpayer was guaranteeing most of the money lent.

Today’s average college graduate owes over $60,000 in student loans.

The government estimates $605 billion in federal student loans out there, $47 billion already in default.

Private loans estimated at an additional $157 billion of student loans.

Keep tuition increases down to inflation, and that amount would decrease by about 90%.

Over half the amount lent, since 1965, is still out there, unpaid.

Supply and demand, the perceived cost of college is low, because the students are not paying as they go, and have been told how much more money they will make with that college degree.

It more than pays for itself!

No one ever crunches the numbers to check that out.

At some point, that college education is over-priced.

Not if you ask the colleges.

The Zen College Life website suggests, among other things, re-directing the bank bailout money to pay off the outstanding student loan debt.

Well, it would be a better use of the money.

But, once again, people who were frugal and paid their own way, would get screwed.

The government being the one who makes the rules, and the one the student loans are mainly owed to, they are not dischargeable in bankruptcy, unless you sue and prove in the bankruptcy court that it would be an undue hardship for you to have to repay them.

There is a better chance at relief if you were totally scammed, and the college was a sham, or, the program they conned you into was bogus.

For other possible student loan remedies, click on the link.

Student Loans: The Big Scam

Related posts:

1. Colleges Profit From Student Debt and Student Loans
2. Do I Have To Pay My Student Loans?
3. Student Loan Problems, Bankruptcy Rarely Helps