Mitchell & Culp » Bankruptcy Counseling

Threatened With Foreclosure? Bankruptcy May Help You Save Your Home

Heather Culp — Tue, 12 Jul 2011 12:16:07 +0000

We have seen how sloppy and aggressive foreclosure processes have taken a toll on homeowners, neighborhoods and the economy in general. Last week’s news of a House panel examining lapses and gaps in mortgage servicing regulation caught my attention, but I don’t expect a speedy resolution.

State attorneys general and the Justice Department are advanced talks with JPMorgan Chase & Co. (JPM), Bank of America Corp. (BAC) and three other servicers on a $20 billion settlement to resolve state and federal claims over botched foreclosures, faulty paperwork and inadequate staffing by the industry, according to two people briefed on the matter.

The Office of the Comptroller of the Currency, Office of Thrift Supervision, Federal Reserve and Federal Deposit Insurance Corp. reached an accord with the 14 largest servicers in April, requiring them to improve foreclosure, loan- modification and refinancing procedures. The settlement covers firms that handle nearly 70 percent of all mortgages.

A bankruptcy counseling session can help you develop a strategy

With so many people in financial distress and with so many Charlotte homeowners “underwater” people often make decisions based on mis-information. Remember, real estate agents pushing you to list your home at a short-sale price are not lawyers. The customer service representative with your mortgage servicing company is not a lawyer. And Realtors and mortgage companies have their own interests to protect and advance. A lawyer works for YOU and you alone.

A bankruptcy counseling session with a straight-talking attorney can result in:

A strategy for using a court-supervised bankruptcy process to keep you in your home
Asset planning and protection strategies
An analysis of whether you are at risk of re-defaulting after a mortgage modification
A referral to agencies that may be able to help you with your financial difficulties

While everyone holds their collective breath waiting for legislative remedies, people need strategies for dealing with their financial distress. A bankruptcy counseling session is a great way to learn your legal rights.

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How to Decide Whether Bankruptcy is Right for You

Heather Culp — Thu, 17 Feb 2011 03:09:01 +0000

There are financial and emotional reasons to seek bankruptcy protection. Let’s consider both categories.

Financial questions to ask yourself

Are you able to make more than a minimal payment on your debts every month?
How many times in the last year have you been late or skipped a payment on a debt?
What is your total debt relative to your annual income? The higher your debt to annual income, the more difficult it will be to pay off over time.
Can you realistically pay your debt completely over a reasonable amount of time given your current earnings?
What type of debt do you struggle to pay? Credit card and other unsecured debt can be eliminated in bankruptcy, student loans and child support cannot.
Are you using credit cards to pay off other credit cards?
Are you going to payday loans to make it through till next payday?
Are you able to save anything on a monthly basis? Do you have any savings at all?
Are you worried about your credit rating? Bankruptcy hurts your credit record, but if you’re not making payments on time or regularly, it’s already taken a hit.
What are your other options? Seriously…what are they?
Are you current on the house payment? The car payment? Is there a chance one of them will soon be paid so that you can direct those funds to your other debts?
Do you own significant assets? This will be a factor we consider in a bankruptcy counseling session.
Are your income tax refunds being retained to pay taxes from prior years?

Emotional considerations

Are you losing sleep, experiencing heart burn or elevated blood pressure since your financial hardships set in?
Is your relationship with family and significant others suffering?
Has your work performance changed? Has anyone at work said you are more difficult to deal with?
How often to you find yourself obsessing over your financial position?
Are you fielding calls from creditors on a daily basis?

The first step

If these questions make you uncomfortable we suggest it’s time to meet with a bankruptcy attorney for a preliminary bankruptcy counseling session.

These resources might help you deal with a mortgage company.

Between my law partner, Rick Mitchell, and myself, we’ve been helping clients through financial hardship for over 50 years. We’ve seen clients rebuild their lives after getting the fresh start that bankruptcy provides. It is only money.

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If You Want a Refund Anticipation Loan, Consider Bankruptcy Counseling, Too

Heather Culp — Mon, 24 Jan 2011 19:45:29 +0000

As bankruptcy attorneys we understand more than most professionals how tight the average person’s wallet is this year. Today we learned that North Carolina’s unemployment rate increased slightly to 9.9 percent in December from 9.7 percent in November.

That’s why we like to post tips for avoiding moves that can only worsen a tough situation.

One of those is “refund anticipation loans” – loans you’re supposed to pay back with your tax refund. Lots of problems can come up with the refund itself. If it is be reduced or intercepted to pay back other debts, you are still obliged to pay the loan. And the interest rates on these loans are outrageous. More here in the video.

If you are struggling to make your financial obligations don’t try to figure it out on your own. Consult a financial professional and/or call for a free bankruptcy counseling session.

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Who Will Stop Your Foreclosure?

Heather Culp — Mon, 22 Nov 2010 13:11:45 +0000

Increasingly, we hear from new clients that they have paid a substantial sum of money to someone who has promised to “stop a foreclosure.” Generally, these new clients tell us that they found “an agency” or “a law firm” online with an out of state address that advertises such services and requires an up-front, non-refundable fee.

Behind the slick ads and promises

When we ask for details on what these “agencies” and “law firms” promised to do for them, our clients generally can’t say. It seems to us that they’re just desperate for help and gave money to the first person who told them what they’d hoped to hear. As we’ve written before, these promises are usually scams.

Some Realtor firms are using language like “we can help you stop the foreclosure process” and this simply is not true. Realtors are suffering for lack of commissions and this seems to be a way to replace (or supplement) commission income with fee income. They can call your mortgage company and save you the agony of directly speaking to your creditor, if you want to spend your money that way, but if you’re in financial distress this seems to be an unnecessary expense for no more than it offers you.

Stopping a NC foreclosure

The only way to stop a foreclosure in North Carolina, without a written, legally binding agreement between the lender and the borrower, is by the filing of a bankruptcy or an order from a superior court judge. Anyone else who so promises is making a false promise.

A sad case in point. Just this month I talked to a man who told me he paid a Florida law firm $1400 up front “to stop” a foreclosure sale scheduled for December. He also told me that when he followed up with his lender to see if the firm had made contact, the lender informed him they refuse to negotiate or discuss the account with a third party. This leaves him out $1400 and unable to pay for a bankruptcy. Heartbreaking.

Before you give money to a service provider, including a law firm, get a list of what they’ll do in exchange for that money. Our firm offers a free initial consultation, only charging for that time if you hire us to represent you.

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Modification Makes You MORE Vulnerable to Foreclosure?

Heather Culp — Tue, 16 Nov 2010 12:54:13 +0000

We often talk to prospective clients who hope to avoid foreclosure and bankruptcy by applying for a mortgage modification. While we always wish them the best of luck, we consider it our professional duty to inform them of what lies ahead if they apply with the Home Affordability Modification Program (HAMP).

In October, Bloomberg reported on congressional hearings, which include this fact: even borrowers who do win approval and never miss a payment can wind up in foreclosure.

“The dog ate your paperwork”

Ok, mortgage servicers don’t really say that. Here’s what was said at the hearing:

“It’s more common to hear that banks have lost paperwork than to hear that they received it and properly handled it.”

~Joe Ridout, a spokesman for Consumer Action

“Some lenders take as long as nine months to approve modifications, something that should take as little as 45 minutes.”

~Rick Rogers, an attorney in Bannockburn, Illinois

“Lenders are overwhelmed. A lender is duty-bound to hire enough people to be able to service their loans.”

~ Nathalie Martin, a professor at the University of New Mexico School of Law

Snowballing effects

The Office of the Special Inspector General for the Troubled Asset Relief Program, or SIGTARP, said in an Oct. 26 report to Congress, “(Homeowners) may face back payments, penalties and even late fees that suddenly become due on their ‘modified’ mortgages and that they are unable to pay, thus resulting in the very loss of their homes that HAMP is meant to prevent.“

If loans are under a Second Look review, foreclosure sales are suspended, and if reviewers conclude that servicers aren’t following guidelines, they may require applications to be re-evaluated.

Our advice

Begin with a bankruptcy counseling session with a qualified bankruptcy lawyer. Armed with the knowledge of how the courts would view your case, the benefit of an automatic stay, and asset planning & protection strategies, you can still apply for modification and hope for the best. If you do not prevail with your modification you’ll at least have a backup plan.

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Credit Scores After Short Sales, Foreclosures & Bankruptcies

Heather Culp — Wed, 27 Oct 2010 11:39:38 +0000

Clients and prospective clients almost always ask about the effect of their financial difficulties on their credit scores. This information is elusive. Finally, USAA has some guidance on how your score is determined and “hit.”

A myriad of variables combine to create a score:

Your payment track record.
How much you owe.
How long you’ve had established credit.
Whether or not you’re taking on new credit.
The types of credit accounts you have open.

And now the effects of:

1. Bankruptcy: 165 to 365 points, depending on number of delinquent accounts and your score when it’s reported. Scoring models usually give the most weight to payment history, and bankruptcy is included in that category.

2. Foreclosure: 105 to 160 points.

3. Short sale mortgage A lower sales price than outstanding balance was negotiated, but a delinquency was reported: 115-140 points.

4. Settling a credit card debt for less than is owed: 65 to 125 points.

5. 30-days late on a payment: 60 to 110 points.

6. Maxing out a credit card: 10 to 45 points.

If you find yourself unable to pay your debts as they become due, or know that you will be, then no matter what happens, your credit will take a hit. We can help you sort out the least painful option to deal with your financial concerns in a bankruptcy counseling session.

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Good Alternatives to Foreclosure?

Heather Culp — Mon, 25 Oct 2010 11:56:17 +0000

This week a WSJ article quoted the head of the NY Federal Reserve Bank addressed, saying “the Federal Reserve actively encourages efforts to find viable alternatives to foreclosure, like loan modifications, or deeds in lieu.” Let’s take a look at each of these alternatives.

How about a modification?

If you CAN get a modification, and if the modification allows you sufficient room to pay your other bills you’re indeed fortunate. The Washington Post uncovered this statistic: roughly 1.3 million trial modifications have resulted in about 460,000 permanent modifications. This means only 35% of people applying for a modification have been helped.

What’s a deed in lieu?

For the borrower, deeds in lieu are similar to short sales in that a wide variety of facts must be considered in order to make a decision about the legal, tax and credit consequences. Facts to be considered include:

the original documents related to the mortgage and the documents relating to the deed in lieu (typically, both drafted by the lender),
the character of the real estate securing the mortgage (primary residence or investment property),
in what state the property is located, and what exemptions the borrower can claim, and
the borrower’s overall financial circumstances.

It’s not you; it’s the system

Many of our clients are losing sleep and becoming physically ill with the stress of possibly of losing their homes. Here’s some perspective, from a New York Times article related to the graphic to the right.

When borrowers began to default in droves, banks found themselves in a never-ending game of catch-up, unable to devote enough manpower to modify, or ease the terms of, loans to millions of customers on the verge of losing their homes. Now banks are ill-equipped to deal the foreclosure process.

“We waited and waited and waited for wide-scale loan modifications,” said Sheila C. Bair, the chairwoman of the Federal Deposit Insurance Corporation, one of the first government officials to call on the industry to take action. “They never owned up to all the problems leading to the mortgage crisis. They have always downplayed it.”

In recent weeks, revelations that mortgage servicers failed to accurately document the seizure and sale of tens of thousands of homes have caused a public uproar and prompted lenders like Bank of America, JPMorgan Chase and GMAC Mortgage to halt foreclosures in many states.

The role of a bankruptcy counseling session

A bankruptcy counseling session with a straight-talking attorney can result in:

Asset planning and protection strategies
An analysis of whether you are at risk of re-defaulting after a mortgage modification
A referral to agencies that may be able to help you with your financial difficulties

Many people we see in our offices want us to handle negotiations with credit card companies or provide them with credit card counseling. Most often these individuals need bankruptcy protection, not creditor negotiation or credit card counseling.

You may be the exception, so contact our office for an initial consultation.

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Charlotte & Mecklenburg County Foreclosures

Heather Culp — Tue, 19 Oct 2010 12:16:58 +0000

RealtyTrac is chock full of information about foreclosure trends. Here’s a map of Mecklenburg County’s foreclosure hot spots based on September 2011 data. The Charlotte region leads the state in the number of foreclosures.

We wish more Charlotteans at risk of losing their homes educated themselves and this series we wrote on foreclosure is a good place to start.

For answers to your specific situation, schedule a bankruptcy counseling session before surrendering to the foreclosure process.

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Challenge Your Foreclosure?

Richard Mitchell — Thu, 14 Oct 2010 11:55:47 +0000

For struggling homeowners trying to avoid foreclosure, the processing errors admitted to by GMAC and Chase could mean an opportunity to challenge the banks. If you can stomach a bit of crude humor, Jon Stewart sums up the situation rather well.

Mon – Thurs 11p / 10c

Foreclosure Crisis

On a more serious note

After 40 years of helping families and businesses cope with melt downs of one sort or another, the depth and breadth of the real estate crisis is unlike anything I’ve seen. It’s no wonder so many of our clients have whiplash: they’re being foreclosed upon, then they’re not; they think they’ve found a buyer for their property and then they haven’t.

According to the Washington Post the troubles banks are having with foreclosures “also threatens to leave (homeowners) in prolonged limbo, stuck in homes they still cannot afford and waiting for the foreclosure process to begin anew.”

And just last week Reuters reported that Old Republic won’t provide title insurance to homes purchased after they’ve been foreclosed upon by GMAC and Chase. When house foreclosures are done with faulty documentation, new owners could be vulnerable to ownership claims. Title insurers agreed to protect buyers against defects or errors in the title.

How this pertains to bankruptcy

The economy is not turning around any time soon. RealtyTrac Inc. reported this month that homes in the foreclosure process sold at an average 26 percent discount. In Charlotte, default notices, scheduled auctions and bank repossessions are up 50% over 2009.

If you do not have strong financial resources to weather this economic storm, consult with a qualified bankruptcy attorney for proactive bankruptcy counseling.

Hopefully YOU won’t have to file for bankruptcy protection, but a bankruptcy counseling session will walk you through scenarios and help you plan for contingencies, including creditor negotiation.

In this Great Recession, the wisdom and experience of a qualified bankruptcy attorney can help you develop strategies to deal with whatever comes up in the future.

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Financial Coping During Prolonged Unemployment

Heather Culp — Fri, 01 Oct 2010 11:20:24 +0000

We’ve been writing a great deal lately about financial coping through a prolonged period of unemployment. If you feel you’re alone in your financial predicament, here’s a wider view of the national landscape.

Below the chart, watch a video on preventing employment fraud schemes (from the Better Business Bureau).

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