Common Mistake Made by Bankruptcy Filers and Their Attorneys #7

7. Assuming property taxes and home owner association assessments will end when real property is surrendered and the debt discharged.

This is one of the most annoying discoveries after a person surrenders their home in bankruptcy. They assume their "Fresh Start" will include the property taxes and homeowners' association dues. The fact is it does up to the date of filing the bankruptcy, but the debtor is still liable for new assessments and taxes that accrue after the bankruptcy. This doesn't seem right to consumers who have lost their home. If they aren't in possession anymore why would they be liable for taxes and HOA assessments?

The problem is that until they mortgage lender forecloses they are still technically the owner of the property. It used to be that foreclosures took place fairly quickly after a property was surrendered, but after the 2008 real estate crash quick foreclosures became the exception rather than the norm. Now foreclosures often drag on for months and even years. So, the homeowner who surrenders his property in bankruptcy now must endure endless harassment from homeowner associations, taxing authorities and municipal code enforcement agencies until the property is finally foreclosed and their liability stops.

There ought to be a law requiring mortgage companies to quickly foreclose, but there is no such law and one is not likely to be ever enacted.  But on the bright side I have seen several times where the mortgage lender completely abandons its security interest in the property leaving the debtor with a free home or a windfall of whatever price he can get for the house. Don't do what one of client's did, however. When he got a notice from his lender that they were releasing the lien on the house and all he had to do was agree to accept it, he was so suspicions he rejected the offer. Needless to say he was very upset when he found out he had thrown away over $50,000!

So, when a consumer decides to surrender his homestead in bankruptcy he should factor in the likelihood that he will have to keep paying the HOA dues after bankruptcy until the property is sold, that he will have to maintain the exterior landscaping to meet local code requirements if the lender doesn't do it, and pay the property taxes until the property is foreclosed. If he is lucky the lender will pay the property taxes and keep up the exterior maintained until foreclosure, but he needs to monitor the situation and make the sure the lender does so.

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Common Mistakes Made By Debtors and Their Attorneys

There are a number of mistakes that debtors and their bankruptcy attorneys make that often cause problems after discharge or after their chapter 13 is confirmed. These mistakes often make it difficult to enforce the discharge or the automatic stay and can cause the debtor to suffer a serious financial loss..

 

2. Failing to monitor returned chapter 13 payments after confirmation.

 

This most often occurs with property taxes. A debtor files bankruptcy and includes the home loan and delinquent property taxes. The plan is confirmed and everything seems fine. But a year or two down the road the mortgage company notices the property taxes are delinquent and elects to pay them. When the chapter 13 trustee sends a payment to the taxing authority it is returned because the mortgage company has already paid it. The following year the debtor gets a notice that his house payment has increased dramatically because there is an escrow shortage. The Chapter 13 Trustee usually sends the attorney a letter advising him that the payment was returned, but these letters are often ignored. If two or three years have gone by it’s a very difficult problem to resolve because the payments that should have gone to pay taxes are diverted to unsecured creditors. If this situation is handled immediately upon receipt of the trustee’s notice it is a problem that can be solved quickly without any permanent damage.

 

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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!

Danger in the Mail

Danger in the Mail

You face a danger every day
Of which you may not be aware
It comes benignly in the mail
But I’m telling you, beware
 
It’s not a toxic powder
A bomb, or poisonous glue
It’s a simple offering
Of easy money, just for you
 
It may be a simple credit card,
A check to deposit, if you please
But no matter what’s its form
It’s works just like a disease
 
It sits there on your dresser
Daring you to resist
The use of all that money
But you must desist
 
The bankers put them in the mail
Applications by the billions
Hoping to lure you into their snare
So they can make their millions.

For it's easy to borrow money
But so very hard to pay it back
And if you let your guard down
You won't survive the next attack
 
copyright 2012
William Manchee

The Speech I Never Gave

A Must Read For Young Adults

A young man came up to me at a book signing a year or two ago and asked me if I was the man who wrote Plastic Gods. I acknowledged to him that I indeed was that man. He smiled and then proceeded to tell me what a great book it was and how much he'd enjoyed it.

My signing had been a little slow, so his kind words lifted my spirits. It was gratifying to find out my book had meant so much to this young man. As I stood waiting for the next person to stroll by I thought about my own youth, decades earlier. Graduating second in my high school class at Buena High School in Ventura, California, I was asked to address my fellow graduates. Being barely 17 at the time and having lived a sheltered life, I wasn't a fountain of wisdom at the time, so I didn't really know what to say. Somehow I stumbled through my speech but it had been mediocre at best. If only I'd of known then what I knew now. I started to formulate in my mind what I would have said to my fellow classmates had that been the case.

Fellow seniors, I stand before you today to warn you of a great peril that you will face the moment you step out into the world on your own. It's a danger that will threaten your health, your happiness, your marriage and even your very freedom. The reason this risk is so dangerous is that it is perfectly legal. There are no laws to protect you, no warnings from family and friends, and you won't know that you are a victim until its too late.

What I'm warning you about today is the credit trap--the lure to buy now and pay later, to live above your means, to accumulate possessions of every sort that you don't need. It's an unfortunate fact of life that our economy is driven by credit and you will be expected to do your patriotic duty and help drive the economy forward. This pressure will be manifested by a deluge of credit card applications, offers of financing for new fancy cars, a barrage of advertising trying to lure you into buying expensive home, clothes, cosmetics, travel packages, you name it.

You won't feel any pain the first few years after you fall into the credit trap. You'll be enjoying everything you've purchased on credit. Minimum payments on credit cards are low and you can draw on your credit cards or credit line if you come up short. It won't be long though until you'll find yourself in serious trouble. Lets say you have $50,000 of family income. If you did a budget you'd discover that you were probably spending $70,000 or more. That means you're going in debt at the rate of $20,000 per year plus interest.

Interest at first may be reasonable, but the first time you miss a payment it will be jacked up to 28% and every time you go over your limit or make a payment late you'll be charged outrageous fees in addition to the high interest rate. Soon, in addition to your car and house payment you'll have credit card debt exceeding your car and house payment combined. You'll live with this as long as you can, borrowing from Peter to pay Paul, but eventually it will be too much and the only way out will be bankruptcy.

It's an established fact that financial stress is the leading cause of divorce. After a few years when creditors start to call, your credit goes in the dumpster, and it gets difficult to even pay basic bills. You'll start blaming your spouse, arguments will ensue, and love will turn to bare tolerance. It's very common for bankruptcy to be followed by divorce. Some law firms offer a combination package, bankruptcy and divorce all for one low fee.

So, you've been warned. Don't fall into the credit trap. If you do, at best you'll lose your financial freedom and at worst you'll end up alone in the bankruptcy courts. Don't live above your means. The only credit you'll ever need is for a house, a car and perhaps your children's education. Pay cash for everything else.

Now here's my final piece of advice. If you follow it you'll never experience the tragedy I've just described. When you get your first job and go out on your own, prepare a budget and follow it no matter what. Change it whenever your income changes, and put in a budget item for savings. Ten percent is the amount you should save each month. Do this without fail and you'll preserve your financial freedom, greatly improve the chances of having a successful marriage and go a long way in insuring your future happiness and well being.

That's the message I wish I'd of given my fellow students back in 1969. I know I would have benefited from it. You see, I fell into the credit trap just like millions of other American's have done over the years and suffered greatly on account of it. It's only been in the past few years that I've managed to escape and become debt free.

I wrote Plastic Gods as a way to communicate this message to readers in a way that would be entertaining but still effective. The young man I met tonight wasn't the first person who's thanked me for Plastic Gods, but it felt good to know yet another person had benefited from reading it.

 

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