Huh?

Don’t people value their home more than a credit card?

That was the conventional wisdom, which a friend of mine points out is usually neither conventional or wise.

The CNBC story linked to above wrongly states that mortgages are non-recourse loans.

This is true in some states.

It is a matter of state law, California and other states, not Michigan, allow mortgage companies to foreclose and get title to the home, but prohibit them from suing the homeowner if the value of the home does not cover the debt.

It is true that it takes a long time, usually a year or more in Michigan, to foreclose.

So you can skip those mortgage payments for many months before actually having to move.

Free living I understand, buy why pay credit cards with that money?

Why not save for another place to live, which you will surely need more than a credit card.

Yra Harris, quoted in the CNBC story, blames the bankruptcy law changes of 2005.

I am not buying that.

Some Americans have learned, debt is bad.

They are getting out of it by: paying it off!

We have the raw statistics on credit card defaults and mortgage defaults, but it is sheer speculation to say that people without enough dollars to pay both are paying the credit cards.

I am sure many are, but not enough to explain the statistics.

When your home is underwater, worth say $100,000 and you owe $200,000, you see the government taking your tax money to bail out the mortgage companies, your income goes down, why pay that mortgage?

Especially if you live in one of the states where they can’t come after you for the money.

Credit card companies can sue in every state.

Now, if your mortgage payment is $2,000, and you have $1,000 per month in credit cards, you can keep paying them, and save $1,000 per month for your next place to live.

If these are issues for you, check with a qualified attorney in your state; make sure you know what law applies to you before making decisions.

Pay Credit Card Or Mortgage?

Pay Credit Card Or Mortgage?

Related posts:

1. Credit Card Debt Defaults Record High
2. How Does My Credit Card Company Find Out So Much About Me?
3. How Do I Rebuild My Credit After Bankruptcy?

“Is there any way to stop the debt collectors before I file bankruptcy?

I can’t stand the creditor harassment!”

I get this question all the time.

People report creditor abuse like, they told me the sheriff would come and arrest me if I did not tell them where my brother’s car was.

Creditor harassment like threatening to garnish my next check if I did not authorize my bank to make a payment by Friday.

Debt collectors getting bonuses for making the most people cry in a day?

You gotta love debt collectors like the guy and gal in the CNN stories linked to above.

Talks about how he lied to people:

“I’m sick of all the agony I put people through.”

Yeah, right.

What a conscience.

He has one week left, after 20 years.

But, hey, turns out, he is a family man!

“The money was great, and I’ve been able to support my two daughters because of

how much money I bring in.”

What a prince!

Heaping out creditor harassment on unsuspecting debtors.

I guess it would only be bad if he did something bad with the money he made off their backs.

Makes your eyes well up with tears.

I guess all the child pornography jobs in his area were full, so he had to do something

less offensive.

Oh, a woman debt collector would not be that bad, you might think.

Not.

“From making calls day and night to elderly people hard of hearing to faxing a person’s workplace about the money they owed, we had to do whatever it took. If the person we were looking for didn’t answer our calls, we were told to ask neighbors to pin notices on the person’s front door, saying to call us immediately.”

Hey, but she only stayed ten years, so I guess she is only half as bad as the male debt collector?

Well, you can see how I feel about it.

This is the answer Tony Soprana would give.

“Its all for the family.”

So what?

The ends justifies the means.

That is this debt collector’s moral philosophy, which means he has no ethics.

Filing any chapter of bankruptcy stops debt collector harassment and creditor abuse, and eforcement of the FDCPA stops some of it, whether you file bankruptcy or not.

Stopping Debt Collector Harassment And Abuse

Related posts:

1. DEBT COLLECTION HARASSMENT
2. Debt Collectors Harassment Continues After Death
3. Colleges Profit From Student Debt and Student Loans

Bankruptcy clients ask me all the time:

“My husband/wife does not want to file, what if I do, does he/she have to ?”

Nope.

The bankruptcy code does provide for involuntary bankruptcy, but that is a complicated process in which creditors get together to throw a person or corporation into bankruptcy court so they can get supervision over the assets of the person or corporation.

Any one person filing does not obligate or require another person to file.

You can file chapter 7 bankruptcy and leave your husband out of it.

Might be a bad idea, but, as we lawyers like to say, depends on the specific facts.

Your discharge only discharges your liability.

So, if you and your hubby both signed for the VISA, and you file, he still owes.

Nothing changed for him, his liability to VISA did not go up, it did not go down.

When you get your discharge, it is just like taking your name off joint debts.

His name stays on.

He is not more responsible for the debt, he was 100% liable before, and still is.

Now, in chapter 7 or chapter 13 bankruptcy, some of his information has to be disclosed.

He does not sign the papers, but the court looks at household income, so his income and expenses normally need to be on the budget forms, schedules I and J.

How much is disclosed where depends on some factors beyond the scope of this post, so , as always, check with experienced counsel.

So, you need to file Chapter 13 to save a house that is in both your names.

Do you both have to file Chapter 13 bankruptcy?

Nope.

Either one can file, and that will stop a foreclosure sale on the home.

Now, you will not get away with putting down only your income, and deducting all the household expenses from that in calculating your chapter 13 plan payment, without accounting for his income.

Let me back up the truck.

Your chapter 13 plan payment will basically be determined by deducting your living expenses from your take home income.

It is only fair, that if you both have income, and are living in the same house, that some of his income be allotted to the shared mortgage and other household expenses.

So, spouses do not have to file  joint bankruptcy petitions, but, the income and expenses of the non-filing spouse will likely have to be disclosed to the court.

Does My Spouse Have To File Bankruptcy If I File?

Related posts:

1. Should I File Bankruptcy?
2. Reasons To File Bankruptcy, Musically Presented
3. File Bankruptcy, Am I A Failure?

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. How Do I Rebuild My Credit After Bankruptcy?

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. How Will Bankruptcy Affect My Credit?
2. Should I File Bankruptcy?
3. Pay Credit Card Or Mortgage?

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. Chapter 13 Bankruptcy Not Possible, File Chapter 11?
2. Bankruptcy Filings Will Go Up
3. Pay Credit Card Or Mortgage?

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. Glossary – Definitions
3. What Happens If A Creditor Contacts Me After Bankruptcy?

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?