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 Bankruptcy Filers and Their Attorneys - #6

6. Assuming all of a consumer’s debts are on their credit report.
  

Many consumers have no idea who they owe money to. Debtors and their attorney’s routinely rely on credit reports to provide the information for Schedules D, E & F. A lot of time this is okay but not always. Some medical providers, friends, relatives, ex-spouses, business associates, landlords, and many others don’t always report to the credit bureaus. In a no asset chapter 7 the debt may still be discharged but if one of these unlisted creditors years later suddenly sues on the debt it may be difficult to stop them. Few attorneys will take such a case on a contingency so debtors facing this situation may have to spend thousands of dollars defending themselves.
  
So, it is important for consumers filing bankruptcy to think back to anyone in the past who wasn’t paid or anyone who had a claim, whether the claim had merit or not. And they can't assume if a debt was written-off that they don’t have to worry about it. Writing off a debt is only an accounting entry and doesn’t prevent the creditor from trying to collect the debt. Nor does the statute of limitations make it unnecessary to list an old debt. Statute of limitations statutes are complicated. They can be tolled during bankruptcy or extended by the discovery rule or other statue. It doesn’t cost anything to list another debt, so it's not smart to hold back.

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Common Bankruptcy Mistakes 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..

3. Failing to monitor proofs of claims and file them for creditors included in the chapter 13 plan who neglect or refuse to file them.

This can catastrophic. Just the other day a client told me her horror story. She filed chapter 13 and her plan was confirmed, but her auto lender failed to file a proof of claim so her car wasn’t paid through the plan as expected. When her plan paid out she discovered she still owed the full balance of her auto loan. It is true the debt is discharged but  the lien against the vehicle was still good. Her attorney should have reviewed the proofs of claim before the claim’s deadline and contacted any important creditors who hadn’t filed a proof of claim. If the creditor still didn’t file the proof of claim, the Debtor has the right to file it for them.

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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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Common Mistakes by Debtors and Their Attorneys

 

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

1. Failing to Send Notice to Late Added Creditors



One of the mistakes attorney's often make is failing to send the bankruptcy notice to creditors who are added after the initial filing. This can make it difficult to enforce the discharge injunction. We find this all the time. A new creditor is added and since the bankruptcy notice has already gone out the creditor doesn’t get notice of the bankruptcy. Although the creditor may get other notices or a copy of the discharge, the creditor has been deprived of its opportunity to attend the 341 meeting or file a proof of claim. Although the debt will probably still be discharged it will be hard to successfully prosecute a contempt action if the creditor continues to try to collect the debt. Invariably, the creditor will claim they didn’t get notice of the bankruptcy and we won’t be able to prove otherwise. The solution would be for the attorney to send the bankruptcy notice to late added creditors by certified mail, return receipt requested, so there will be  proof they got proper notice of the bankruptcy filing.

 

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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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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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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!

Creditors Sometimes Assign Discharged Debt to Collection Agencies

Recently I worked on a petition against a Colorado collection agency that called our client six times afrer receiving the account from the orignal creditor who was listed in their chapter 13 bankruptcy.  This is a blatant violation of the automatic stay and/or discharge injjunction. In this instance the case was later converted to chapter 7 so it was a discharge violation. Then, to make matters worse, the collection agency assigns the case to an attorney for collection, yet another violation.

 

How does something like this happen? Is it intentional or simply negligence? The excuse we almost always get from collection agencies is that they had no knowledge of the bankruptcy because the creditor who sold or assigned the account didn't tell them about it. Unfortunately for the collection agencies, ignorance of the bankruptcy is no excuse. When they try to collect a debt that is no longer collectable they violate the Texas Unfair Debt Collection Act and if they report it to a credit bureau they can be guilty of liable as well.. It is irrelevant whether they knew about the bankruptcy or not.

 

What is fairly clear is that when the original creditor gets the conversion and discharge notices it will not pass on those notices to the current holder of the debt. I think this is a matter of logistics. The original creditors simply have too many accounts that have been assigned for collection or sold and have no mechanism in place to forward notices from the bankruptcy court.

 

So, the consumer loses and has to suffer through the mental anguish that always results from taking nasty phone calls and/or receiving collection letters from attorneys long after the debt is discharged.  Lucky there is a remedy to the consumer.

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Millions of Americans Will Seek A Fresh Start, But Will They Get It?

With lingering unemployment and the inevitable casualties of our credit driven economy, millions of Americans will be forced into bankruptcy over the next few years. They will be looking for a discharge of their credit card debts, medical bills, and mortgage deficiencies and the fresh start the bankruptcy code promises.

 

Unfortunately, even if they successfully complete their bankruptcy filing and their debts have been discharged doesn't mean the fight against predatory lenders is over. Many creditors intentionally misreport people's credit after filing bankruptcy and some will even continue trying to collect the discharged debt. You would think there would be someone in the government making sure creditors obeyed the bankruptcy discharge and the Fair Credit Reporting Act, but that's not generally the case. That task is largely left to the debtors themselves, which means most often nothing is done and the predatory creditor is allowed to continue to ruin the lives of innocent Americans.

 

We have all witnessed lender greed and corporate excess during the current economic meltdown and it's time we put an end to them. Fortunately there are a myriad of laws available to stop this type of abuse by the credit industry. The first is a contempt action in the bankruptcy court, the second are federal actions under Fair Credit Reporting Act (FCRA) and/or the Fair Debt Collection Practices Act (FDCPA), and the third are state court actions for defamation, unreasonable collection or violation of local fair collection laws.

 

Unfortunately, these laws are not utilized often enough to stop this type of abuse. Two of the reasons for this are ignorance on the part of consumers and residual guilt from the bankruptcy filing. They don't know what their rights are after bankruptcy and because they feel a little guilty over not paying their debts, they are not inclined to take action against the lender whose debt has just been discharged. What they don't know is that their creditors haven't necessarily given up getting paid and sometimes won't quit until forced to do so.

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Mortgage Lenders and Servicers Out of Control?

Mortgage Contracts Allow Creditors to Monitor Credit

Today I reviewed a husband and wife’s credit reports and was shocked to see what their mortgage servicer was doing to them. Over five years ago disaster struck this middle-aged couple, an illness and loss of employment forced them to file bankruptcy. They couldn’t afford their house payments so they surrendered their home in the bankruptcy, moved out, the debt was discharged, so they waited patiently for the lender to foreclose. The property was soon posted for foreclosure but for some unknown reason the foreclosure didn’t go through and hasn’t to this day.

     

Once the debt was discharged the lender no longer had a right to monitor or review the consumer's credit reports since there was no longer a debtor-creditor relationship. About a year later the mortgage servicer contacted the couple several times trying to get them to apply for a modification, do a short sale or give them a deed in lieu of foreclosure. The couple cooperated at first but when a short sale was offered to them it was rejected. The lender knew the couple was not qualified for a modification since they had vacated the property and the debt had been discharged. After the rejection the couple notified the lender in writing that they were fed up and would no longer participate in a short sale or deed in lieu of foreclosure and told them not to contact them in any manner in the future. The letter worked for a couple years and then suddenly the letters, statements, and phone calls began again.

  

When the couple came to us to see what could be done to stop the harassment we pulled their credit reports and were aghast to find out that in 2012 and 2013 the mortgage servicer had pulled their credit reports over 39 times without their consent and without a permissible purpose! It’s hard to believe that some of our leading financial institutions would be a party to such blatant invasions of privacy, but we see it far too often, not only with this servicer but with many others as well. Since the debt had been discharged and was uncollectible, the only conclusions we can draw are that the mortgage servicer doesn’t have the ability to control its automatic collection programs, it has no respect for their customer’s right to privacy, or both. Fortunately, there is a remedy for this flagrant violation of the law, the Fair Credit Reporting Act (FCRA).

 

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