Beware of Short Sale Scams after Filing Bankruptcy

 

Today I learned of yet another scam being perpetrated on unsuspecting consumers after they file for bankruptcy. When a consumer surrenders their home or rental property in bankruptcy and the mortgage debt is discharged that should be the end of it, right? . . No. . .Unfortunately, until the lender forecloses the owner of the property still faces liability for property taxes, homeowner association dues and possibly for injury to third parties who come on the property for one reason or other. Since the debtor no longer has insurance on the property this can be a sticky issue.

 

To avoid this unwanted liability exposure consumers often try to arrange a short sale so the title will be transferred out of the consumer's name, thereby ending this liability exposure. A short sale is when someone buys the property but the lender accepts less than the full amount due to release its security interest. It sounds good but it is actually a perilous venture for the consumer to participate in.

 

First of all, the property owner isn't likely to get any compensation for his time and effort, so why bother? Sure it's good for closure and could stop further liability exposure, if I works, but rarely will the lender accept substantially less than the full balance owed on the note. Most of the time a short sale will be an exercise in futility.

 

Normally when a consumer surrenders property in bankruptcy it will become an asset of the bankruptcy estate to be administered by the trustee. In most cases the lender will have a security interest in the property so the trustee will abandon his interest in it, but what happens if the property is leased out and the lender doesn't foreclose for two or three years? The consumer is not entitled to the rent since he surrendered the property so it technically belongs to the estate.  But what if the trustee has abandoned the asset?

 

This happens fairly often so some ingenious scam-artists have emerged to take advantage of the situation. What they do is contact the debtor representing that they have someone interested in the property and ask if they can list it. The debtor is desperate to get rid of the property and the mortgage lender has suggested they would consider a short sale, so he agrees. What he doesn't realize is the scam artist doesn't intend to sell the property and pay off the mortgage, but only to exploit it until the mortgage company forecloses. This is done by renting out the property, collecting the rents for months or even years, and pocketing the money until the property is foreclosed.

 

The danger to the debtor/consumer is that by listing the property for sale and authorizing the realtor to rent out the property, the mortgage lender can assert that the debt is no longer discharged because the debtor has revoked his surrender. This becomes particularly important if a debtor tries to enforce his discharge or sue for FCRA violations. Another area of concern is that the Trustee may come back and want the rents collected on the property even though the debtor never got them. Since the debtor signed the listing agreement thereby inadvertently authorizing the property to be rented out, he may be held liable to the mortgage company or the trustee for the rents that were paid.

 

So, it is important for those consumer/debtors who have surrendered real property in bankruptcy to move out of the property promptly and have no further contact with the property or the mortgage company. That way there can never be any claim the debt has been revived or reinstated after the discharge. It's also a good idea to send the lender a certified letter telling it that the debtor does not want to get statements, calls, or other communications from the lender in the future, except what is absolutely required for foreclosure. And if a realtor calls, refer him to the lender.

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Buy Now, Pay Later; A Ticking Time Bomb:

The other day I called a client to advise her that upon reviewing her credit reports I had discovered that one of her former creditors was pulling her credit reports almost every month. I explained that since she had filed bankruptcy and she no longer owed this creditor anything, that they didn't have the right to pull her credit reports. But when I explained that she could sue them for violating the FCRA and for invasion of privacy, she responded that since she had allowed herself to get in a financial mess, that she deserved any fallout that resulted from it.

 

Hearing this I just shook my head in frustration. What my client didn't realize was that she had been targeted and lured into debt by dozens of banks and lenders of every sort who were making obscene profits off her and millions of other Americans every year. And this didn't happen by accident. Every year these banks and lenders spent millions of dollars in advertising making consumers believe they could live in luxury now by paying for it later. The key to the American Dream is good credit, they insisted.

They knew, however, that with so much credit extended to consumers who couldn't afford it, that there would be a significant default rate. So, they set up and funded organizations whose sole purpose was to assist consumers in budgeting and personal finance to enable them to lower their standard of living enough to keep paying their huge debt run up by living high above their means. The later of "buy now, pay later" had come and it had brought with it financial ruin. 

 

These banks and other lenders are very concerned about consumers paying their debts and honoring their commitments, but when it comes to obeying consumer protection laws it's a different story. While they claim to be meticulously following the law, the truth is they are always searching for loopholes or ignoring these laws altogether hoping not to get caught. And I have yet to find a lender who felt the least bit guilty about violating the FCRA or a bankruptcy discharge injunction.

 

I have found, however, that most consumers don't want to file bankruptcy and only do it as a last resort. The buy-now-pay-later mentality that has been ingrained in us all is a ticking time bomb that will eventually go off.  It makes consumers vulnerable to misfortune.  Sickness, unemployment or business failure just happen and consumers rarely have any control over these unfortunate events.

When the time bomb explodes bankruptcy is the only sane option. Unfortunately, many consumers file for divorce, turn to drugs or alcohol or even suicide. They consider their life a failure and give up on the future. So, there is no shame in filing bankruptcy and consumers should never hesitate to file when the bomb goes off. And after the dust settles and they get their fresh start after bankruptcy, they should never let guilt stop them from enforcing their right to privacy and fair credit reporting. Banks and other lenders are not above the law, no matter how rich and powerful they have become by fostering a consumer dependency on credit.

 

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Don't Mess With Texas Consumers!

Tell It Like It Is

 

 

 

 

 

 

 

 

 

 

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Consumers Need to Monitor Their Credit After Bankruptcy

It is a common belief that bankruptcy ruins a consumer's credit, but that's not necessarily true. The fresh start consumers are searching for when they file bankruptcy can apply to their credit too. When a consumer files bankruptcy all of his existing debt should be reported as "discharged in bankruptcy" and "balance -0-." If that actually happens, filing bankruptcy gives the consumer a clean slate. Sure, the bankruptcy is a negative, but its impact on the consumer's credit score will diminish in time. This gives the consumer an opportunity to re-establish their credit fairly quickly--often in six months to a year. Sure, a consumer won't have perfect credit with a bankruptcy on his record but his credit score will often be high enough to get car loan, rent an apartment or even refinance a home at market interest rates.

 

Unfortunately, this won't happen automatically. Creditors often do not report the bankruptcy to the credit bureaus, Experian, Transunion, and Equifax, correctly which will prevent the credit score from recovering the way it should. This is why is imperative for consumers to monitor their credit after bankruptcy. This can be done with a credit monitoring service or simply by going to AnnualCreditReport.com and doing it themselves.

For our clients it is part of our service. We help them get copies of the credit reports and then review them to be sure the reporting is correct. If it turns out to be wrong we get it corrected and do our best to make the offending creditors pay our fees. Either way, our client's never pay us a dime out of pocket.

For information on how to obtain your credit reports follow this link or, if you would like our assistance in getting a fresh start on your credit, visit our Website.

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Plastic Gods

 

PLASTIC

 

They came from everywhere

Over here and over there

The mail, the phone, in the mall

Unsolicited, one and all

 

Get them one, two or ten

Don’t wait—pick up the pen

It’s a simply wonderful game

All you do is sign your name

 

Now jump for joy, and yell, hooray!

Cause baby they’re on their way

Dillards, Penneys to name a few

Visa, Mastercard and Amex Blue

 

Do it now, live the American dream

Stand right up and let out a scream

Whatever you want, no money down

You’ve got credit all over town

 

Sit back, watch your dreams come true

Not a worry now, only pennies due

For Moses it was manna from the Lord

But for us today, plastic is our sword

 

Now its silver, gold and platinum too

Macy’s, Sears to name just two

Cars, clothes, a ten day cruise

Gambling, clubs and lots of booze

 

You’ve got it all and then some more

Until the bills flood in the door

It cannot be, I didn’t spend that much

Just a few odds and ends and such

   

Eighteen, Twenty, Twenty-four

Interest, interest, bills galore!

Oh my God, it’s all a scam

To steal my life, I’m in a jam

 

Collectors call day and night,

Every balance out of sight

I can’t sleep, or even think,

Go to work—I need a drink

   

My lover scorns me, yells and screams

God, what happened to all our dreams?

Letters, calls, demanding blood,

From my lover’s eyes there is a flood

   

Now she’s gone, couldn’t take the heat

I’m here alone, tired and beat

Bankruptcy. Is that all that’s left for me?

I can’t believe it, I just didn’t see

   

But now I do, clear as glass

I fell in love with cold, hard cash

Visa, Mastercard, Amex Blue

Lucifer got his due

 

copyright William Manchee

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What the critics said about Plastic Gods.

"This is easily one of the most exciting fiction novels of the year. . . ."

"Plastic Gods is a suspense packed thrill ride through the worlds of power politics, the legal system, and finance. This is a very well written book that draws the reader into the storyline and doesn't let them go until the very end. I had to read the entire book at one setting to see how Matt would resolve his problems. ... An excellent story, masterfully done, and recommended for those who like a good suspense story. Harold McFarlen * Amazon.com * Top 50 Amazon Reviewers (#39)

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"Non-stop plotting action makes Plastic Gods’ a book you can't put down...."

"As an expert at bankruptcy laws, and having practiced it in his field for a quarter of a century, author William Manchee has penned his second exciting novel featuring lawyer Rich Coleman and his son, Matt. . . . While the subject matter might seem daunting and somewhat uninteresting, such isn’t the case. In fact, credit cards and enormous debt makes for a unique premise, for many of us are caught in that trap already. Well-drawn characters and a nearly perfect balance between narrative and dialog make this ‘financial thriller’ a winner." Denise Clark, Denise's Pieces Book Reviews

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 ". . . Manchee offers the reader a peek into a side of banking and credit most of us never realized might exist."
One of Manchee’s best Plastic Gods is a nail biter. From the opening paragraphs when Rich Coleman reflects over his own life and muses about his son’s surprising decision to become an attorney through the whole action packed tale we follow Matt on his headstrong journey into a life he never expected. Matt’s impulsive determination carry him and those with whom he associates into jeopardy, lethal danger and a crassness the naïve young man never suspected existed Molly Martin, Booklore.co.uk

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 "Action aficionados will not be disappointed, and although the book is a work of fiction, its theme is tantalizing."
". . . a surprising and unpredictable ride that keeps you in constant suspense as what is around the next bend. . . . Action aficionados will not be disappointed, and although the book is a work of fiction, its theme is tantalizing. It is sure to leave many a reader thinking about some of the unsavory banking practices pertaining to credit card marketing and what is looming behind closed doors of these institutions. Robert P. Goldman, The Best Reviews

Creditors Can’t Seem To Stop Illegally Accessing Credit Reports

It is a perplexing phenomenon but some creditors can’t stop illegally pulling consumers’ credit reports even after they are caught doing it. On numerous occasions we have sued a creditor for illegally accessing our client’s credit reports after their debt was discharged in bankruptcy. Once the debt is discharged they have no legitimate reason to be pulling them, yet sometimes before the ink on the settlement agreement is dry, they start pulling the credit reports again. In a few cases we have had to sue them three times before they finally stop. And it’s not because the penalties are small. Damages can run $500 to $1500 per illegal pull, plus actual damages, costs and attorney’s fees. If anybody has an explanation, let me know.

 

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Crime Scene - Creditors Often Intentionally Misreport the Bankruptcy Discharge

 

A common problem for consumers who have surrendered their homes or rental property in bankruptcy is that their lenders or mortgage servicers often ignore the bankruptcy discharge and attempt to collect the mortgage deficiency. This illegal collection activity may take the form of statements, collection letters, notices of forced insurance placement, escrow reconciliations, modification offers, etc. The correspondence will say that it is for informational purposes only and to disregard it if the consumer has been through bankruptcy, but the statements usually demand the payment of money and provide an envelope to remit payment. Of course, these lenders and services hope the consumer will write a check and send it in even though they have no obligation to do so.

  

A worse problem is when the lender or mortgage servicer fails to update a consumer's credit report to show that the debt has been discharged in bankruptcy or report the debt as collectible when it is not. Although it is a crime in Texas to knowingly furnish false information to a credit bureau, the statute is rarely enforced by prosecutors. This results in the consumer not only suffering from the effects of the bankruptcy on his credit but also a delinquent mortgage. When a potential lender pulls the consumer's credit report it will appear that the mortgage has been reaffirmed, is past due, that the full balance is still owed. This could result in a consumer being denied credit in the future or, if credit is granted, having to pay a higher interest rate, and certainly will preclude getting new mortgage financing.

  

For some reason mortgage lenders and servicers have a difficult time shutting down their collection efforts even after they are told by the consumer or their attorneys to cease and desist. If this happens litigation may be necessary to enforce a consumer's rights.

 

Consumers who experience continued collection activity by lenders should keep all correspondence and emails and keep a log of all phone calls as these may be needed as evidence should litigation be necessary. It is also advisable to periodically review their credit reports to be sure the mortgage debt is being correctly reported.

 

It is expensive for lenders to ignore the bankruptcy discharge, the Telephone Consumer Protection Act (TCPA) or the dictates of the Fair Credit Reporting Act (FCRA). I'm sure you have seen the huge settlements these lenders and servicers have been forced to pay by government regulators over the past year and doesn't include the millions in civil damages they must have paid to settle private suits, yet the abuses continue. The only conclusion that can be drawn from this is that these lenders and servicers must be making a lot of money by violating the law.

 

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Bankruptcy: Chill, It's No Big Deal

       Chill, It's No Big Deal!

Get a nasty letter in the mail?
Send us money or we’ll give you hell?
Don’t lose your cool, don’t get upset
Chill, it’s no big deal

Creditor called and wants his bread?
Got to have it now, no more said?
Don’t get upset, don’t be depressed
Chill, it’s no big deal

Constable came knocking at your door?
You’ve been sued, can’t take no more?
Take a deep breath, don’t despair
Chill, it’s no big deal.

Didn’t pay your taxes? Owe a lot?
Accounts been seized, checks are hot?
Take a walk, get some air
Chill, it’s no big deal.

Rent is late? Landlord lookin’ for the cash?
Wants the rent or you’re out on your ass
Take two aspirin and go to bed
Chill, it’s no big deal

‘Cause when your world starts to crumble
Your lawyer will make sure you don’t stumble
He’ll smile as he takes your cash and tell you
Chill, it’s no big deal

Chill, It’s No Big Deal
William Manchee, March 2009

I wrote this poem initially to get across the point that it's advisable to get an attorney immediately when you get in trouble. Better yet, get an attorney when you first smell trouble. Too many people wait until it's too late to take any preventative or defensive measures before they seek legal advice. The consequences of that strategy can be devastating.

But there's another message in the poem that is important in today's economy. When you lose a job or take a pay cut, remember, we're just talking about money. Don't let your temporary financial difficulties destroy the most important things in you life like your marriage, your family and your integrity.

If bill collector's are hounding you, your rent is late, or the repos man is looking for your car, go see your attorney and discuss bankruptcy. Millions of Americans file bankruptcy every year. It's not a disgrace. It's a fact of life in our credit driven economy. And bankruptcy doesn't mean you lose everything. In fact, most people don't lose anything but their debts. Chapter 13 is a great way to catch up on your house payments, cure a default on a car loan, or pay your delinquent taxes.

Remember, it's just money. Chill, it's no big deal!

THE MOD - THE MORTGAGE LENDER'S SCAM

                The Mod

When I was young I often dreamt
Of owning a home one day
A great investment it would be
No money down, thirty years to pay

So my wife and I bought a house
And together we made it a home
A wonderful place to raise our kids
With lots of land for them to roam.

For years we lived there happily
Watching our children grow
Then one day my health went south
Couldn’t work, had to take life slow

My wife was forced to get a job
She worked hard but the pay was low
Unemployment checks weren’t enough
And all our debts began to grow

Missed a payment and then two.
Asked our lender what we should do.
No worry, they said. "We understand."
Just modify, add arrearage to the end.

Okay, sounds good, so what do we do now?
Fill out this form, they say. Send us this and that
No payments due until your loan’s approved
We’ll get this mod done in nothing flat

We do all they ask, they say, "Just relax."
Then a letter comes—YOUR PAYMENT’S LATE!
We wilt in disbelief. But you said don’t pay?
So now it’s ‘PAY UP’ or we’ll accelerate?

We call them, distraught, confused, upset
We don’t understand this turn of events?
After passing us around, a supervisor says
Ignore the letter, it shouldn’t have been sent.
　
　

But weeks go by, yet we’re not approved,
More letters come that make us squirm,
We call, complain, get passed around.
Don’t worry. All is well, they confirm.

Weeks stretch to months, still no word
Then a certified letter arrives in the mail.
I call, upset. They say, "Oh, don’t be concerned."
Oh really? What in the hell is a trustee’s sale?

They say it’s all a computer glitch
Just hang in there, your mod’s a go
But it’s from a law firm? I’m not convinced.
They say, they know, it’s okay, just breath slow.

I call again to find out what’s going on.
It’s your application, we can’t find it anywhere?
I sigh in utter disbelief, such incompetence.
It’s beyond belief, "I’ll kill them all," I swear.

Now the constable’s knocking at our door.
They said they‘d wait, they wouldn’t dare,
Sell our home at a foreclosure sale?
I call, mad as hell, but they don’t seem to care

It’s too late now. Tried to help you out, they contend.
We did our best. Sorry, what can we say?
But don’t despair,'Cash for Keys' is still a go
Move out now, no fuss, and have a nice day

Copyright William Manchee

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How Creditors Collect Discharged Debt

We all know that when a debt is discharged in bankruptcy that’s the end of it, right? Think again. Creditors have a sack full of tricks to get consumers to pay debts that they don’t have any legal obligation to pay. In fact, there is an entire industry of debt buyers out there that most people don’t even know about. I’m not talking about the collection agencies, but companies and trusts that do nothing but buy and sell debt—some of it discharged. Obviously if they are buying the debt they intend to collect it. Below are a few of the ways it’s done.

1) Closing on a house or car. When your bankruptcy is over you will eventually need to finance a new car or buy a home. When you go to apply for a loan your loan officer will pull your credit and may tell you that you don’t qualify—unless you can pull up your credit score a few points. They suggest you contact some of your creditors that are negatively reporting on your credit report and settle the debt. You protest that the debt has been discharged but they just shrug. So, you take their advice, contact the creditors and pay off some of your discharged debt. What you were not told was the negative reporting should not have been on your credit report in the first place.

2) Several months after you bankruptcy discharge comes through you start receiving telephone calls or letters from a company you don’t recognize. You think perhaps you didn’t list them on your bankruptcy and are still liable for the debt or the collector says this debt isn’t discharged by the bankruptcy. It gets ugly from there on and you end up settling with them. What they don’t tell you is that they bought the debt from a creditor who was listed in the bankruptcy or that, in a no asset case which is the norm, an unlisted debt is still usually discharged.

3) After your bankruptcy is over you continue to pay an auto loan or home mortgage, although you don’t formally reaffirm that debt. Later on you get behind on the payments and the car is repossessed or the house foreclosed. Months later a collection agency comes along and tries to collect the deficiency. They tell you or you assume that you still owe the debt since you continued to pay on it after the bankruptcy is over. What they don’t tell you is that the debt is still discharged and usually not collectible. The creditors sole remedy, in most cases, is to take back their collateral and that’s it.

4) After your bankruptcy is filed some of your creditors will quit updating your credit report so they don’t have to report that their debt has been discharged. They hope you will voluntarily pay them later to improve your credit score. What you should know is that this trick called “parking an account” and you can dispute the account and make them update it without paying them a nickel.

 

These are just a few of the ways creditors will try to collect a debt that legally isn't collectible. They are very resourceful and will do just about anything if they think they can get away with it. That's why we decided to practice in this area. We believe everyone who filed bankruptcy to get a fresh start should get what was promised them.

 

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