Archive for the ‘Bankruptcy News’ Category
Friday, June 25th, 2010
Well, according to a recent ABA Journal article, it appears Fannie Mae is going to pursue deficiency judgments against borrowers who walk away from loan obligations without good reason.
A deficiency judgment is a judgment following a foreclosure sale for the difference between the property’s value at the time of the foreclosure sale and the balance owed on the loan obligation. Once the deficiency judgment is obtained, the creditor may be able to garnish wages, seize assets, and take any other action allowed by law. Apparently Fannie Mae will be instructing its servicers to recommend which homeowners should be pursued for deficiencies.
The first question I had when I read this article is what criteria will be used to determine whether a reason for the walk away was a “good reason.” It appears that the Fannie Mae’s goal is to stop people who have the ability and means to pay their mortgages from walking away merely because the property is no longer an economically appealing investment. But with the management of the loans I have seen by the servicers in my clients’ cases I have little doubt that implementation of this program will affect people not intended.
Some states do not allow deficiency judgments but Florida is not one of those states and pursuit of a deficiency judgment is becoming a more frequent occurrence here. While deficiency judgments may be obtained even if there is a valid hardship, it has largely not been pursued against debtors in the past. However, it seems the tides are changing.
In Florida, a deficiency judgment is an equitable remedy and is discretionary with the trial court judge. Following a foreclosure sale, the creditor has one year from the date of the foreclosure judgment to seek a deficiency in the foreclosure case. If one is not sought or requested in the foreclosure case, the creditor has up to five years to bring a new action for a deficiency. Many debtors believe there is no defense to deficiency judgments but in most instances, this couldn’t be farther from the truth. In defending against a deficiency judgment, debtors can fight creditor’s valuation of the property and raise numerous equitable defenses and legal defenses that an experienced attorney can counsel them on.
As with any legal issue, early consultation with an attorney can many times make the issue much easier and cheaper to deal with. With creditors becoming more aggressive in the collection efforts on the loans by seeking deficiencies, it is more important than ever to seek an attorney’s advice and counsel in handling a foreclosure case from its outset as merely “walking away” may put you in more jeopardy than it may have in the past.
This blog was written by David Fineman, Esq. of The Dellutri Law Group, P.A.. Attorney David Fineman handles Bankruptcy, FDCPA, FCRA, UDAP, FCCPA and civil litigation.
Posted in Bankruptcy News, Consumer Protection, Foreclosure Defense, Mortgage Foreclosures, Sign of the Times, Southwest Florida News | Comments Off
Friday, March 26th, 2010
On Wednesday, March 24, 2010, Carmen Dellutri was asked to sit on a panel put together by the American Bankruptcy Institute with several bankruptcy experts and discuss the Supreme Court's Espinosa opinion. The Espinosa case dealt with the discharge of student loans in bankruptcy.
The panelists were led in a very lively discussion of the opinion written by Justice Thomas.
This post was submitted by Carmen Dellutri, Esq., founder of The Dellutri Law Group, P.A. Currently, the firm has offices in Port Charlotte, Fort Myers, Naples and Sarasota. Mr. Dellutri also sits on the Board of American Board of Certification. Mr. Dellutri is also one of the founders of the Bankruptcy Law Network, Debt Law Network, Credit Law Network, and Mortgage Law Network. Mr. Dellutri also writes for the firm's personal injury litigation blog, www.faircreditreportingactblog.com and www.fairdebtcollectionpracticesactblog.com, and the firm's mortgage modification blog.
Posted in Bankruptcy News, Consumer Protection | Comments Off
Saturday, March 13th, 2010
Practicing Consumer Bankruptcy Law is very interesting work. Usually, I get to tell bankruptcy clients good news. Sometimes, I have to deliver bad news about their bankruptcy cases. In a recent case, a young man purchased his first home several years ago, and naturally, the value of the home has dropped significantly. He tried modification and was turned down flat (The mortgage is held by a securitized trust). That wasn't the bad part.
The bad part, as you can tell from the title is that he had his Grandfather co-sign for the loan. So, during the course of the bankruptcy when this young man couldn't get the lender to modify, he asked me: Can I short sale the property, and if so, what will happen to me, and what will happen to my Grandfather? These are both excellent questions.
Here is my advice: Yes, as an option, you can do a short sale. Of course, since you are in a Chapter 13, we will need the Judge's permission, and I will have to file a motion with the Court to allow same, but that is not a problem. I don't believe that the Judge will require any additional items from you other than a signed contract. With regard to the deficiency and you, the answer is simple, your debt will be included in the bankruptcy and you will ultimately receive your discharge, so, no problem.
The problem is: How will a short sale on your primary residence hurt you or hurt your grandfather? As to your grandfather, we have to look at a whole new set of issues. Since this property is not his primary residence, any deficiency that is still owed to the lender will have to be dealt with. This can come in two forms: First, they can pursue him for a deficiency balance. In other words, they can sue him for the remaining balance owed on the promissory note. As I have explained in the past, it's kind of like having two fish on a hook and one gets away. The lender still has one fish to reel in (Grandpa)
When the lender wins the lawsuit, they could go after his non-exempt assets. Alternatively, the lender could just issue him a 1099C cancellation of debt. If the lender takes the second option, your grandfather would have to deal with the IRS. As such, I would advise him to see a CPA for tax advice on how to combat this issue.
All and all, it is not fun to have to explain this to someone who took a risk on purchasing a first home and then sat back and watched his investment disappear as the Southwest Florida real estate market crumbled to the ground.
Now, I just hope the relationship doesn't crumble as well.
I apologize for the depressing blog, but this is something that you need to know and need to prevent in the future. When you take a risk, you want to do it on your own so that you don't jeopardize anyone else's future. It is never worth that risk.
This post was submitted by Carmen Dellutri, Esq., founder of The Dellutri Law Group, P.A. Currently, the firm has offices in Port Charlotte, Fort Myers, Naples and Sarasota. Mr. Dellutri also sits on the Board of American Board of Certification. Mr. Dellutri is also one of the founders of the Bankruptcy Law Network, Debt Law Network, Credit Law Network, and Mortgage Law Network. Mr. Dellutri also writes for the firm's personal injury litigation blog, www.faircreditreportingactblog.com and www.fairdebtcollectionpracticesactblog.com, and the firm's mortgage modification blog.
Posted in Bankruptcy News, Consumer Protection, Sign of the Times, Southwest Florida News | Comments Off
Wednesday, March 3rd, 2010
The Orlando bankruptcy court is preparing to adopt a rule providing for mandatory mediation between homeowners and their mortgage companies to facilitate mortgage modification. Congress rejected a change in the bankruptcy code that would have empowered Chapter 13 debtors to force reduction in their first mortgage principal to their residence’s current fair market value. This proposed procedural rule will not circumvent the bankruptcy code and will not force reduction of first mortgage principal. What the rule will do is enable Chapter 13 debtors by motion filed with the court to compel a bank representative with full authority to modify mortgages to meet with the debtor and an independent mediator to negotiate in good faith a possible modification of the debtor’s first mortgage terms. The terms and the conditions of the rule are expected to be announced shortly. This bankruptcy rule should be a big help to debtors who want to save their primary residence from foreclosure.
The Florida Supreme Court is requiring mediation in state court foreclosure cases. This state court rule is helpful, but the bankruptcy court rule could be better for homeowners. Before getting to mediate with a bank agent with full authority the homeowner has to be in a foreclosure case. The homeowner first has to stop paying the mortgage for at least three months, wait for the bank to file a lawsuit, hire a civil attorney to answer the lawsuit, proceed for several months in civil litigation, and then at some point, arrange for a court ordered mediation. The result of the mediation is a contractual agreement to modify the mortgage, and the modification usually calls for a few months of trial payments before it is binding.
Chapter 13 mediation should be faster and more definitive. A debtor probably can get an order requiring mediation with their mortgage lender very soon after filing a Chapter 13 bankruptcy petition. The borrower/debtor will not have to miss several mortgage payments and fall farther behind on their mortgage. There will probably be uniform court orders. The bankruptcy rule probably will permit a court order adopting any mediated mortgage modification which order can be recorded in the public real estate records.
Posted in Bankruptcy News | Comments Off
Thursday, February 25th, 2010
Bankruptcy is filled with land-mines. Therefore, if you are thinking about filing for Bankruptcy, you must be careful. We previously listed this a list of Bankruptcy Don'ts. Here is a list of Bankruptcy Do's that we give to our clients.
· Do take the bankruptcy court seriously, and avoid making any financial decisions that may make your creditors suspect you of filing in bad faith.
· Do seek bankruptcy court counsel before you file any papers, and learn your rights and options under the United States bankruptcy code.
· Do maintain timely payments on any collateralized loans that you wish to keep the collateral for. In other words, if you have a mortgage or car payment and you intend to keep the house or car, you must remain current on the payment. (Please alert us if you are not current on a collateralized loan at the time we are preparing your case for filing.)
· Do file your tax returns. Even if you know that you owe the IRS a lot of money, it is still important to file your taxes in a timely fashion. Not filing will only exacerbate the problem.
· Do reduce the amount of future income tax refunds. Refunds are routinely taken in Chapter 7 cases, and may affect plan payments in Chapter 13. If you expect to get an income tax refund , reduce your withholding so that you do not get a refund . If much of the refund id from the Earned Income Tax Credit, apply to get that available at www.irs.gov/pub.irs-fill/fw5.pdf or through your employer. For more information, see the IRS web page. Caution: Do not reduce the withholding for tax so much that you will have a big tax bill to pay.
· Do be honest and forthcoming on your bankruptcy petition. Even if it is embarrassing, it is important that your attorney knows. Any creditors not listed on your petition may not be discharged.
· Do keep our office up to date with your contact information. Mailing address, phone and email.
· Do consider increasing your 401K contribution if you have excess income and you are filing a Chapter 13.
This post was submitted by Carmen Dellutri, Esq., founder of The Dellutri Law Group, P.A. Currently, the firm has offices in Port Charlotte, Fort Myers, Naples and Sarasota. Mr. Dellutri also sits on the Board of American Board of Certification. Mr. Dellutri is also one of the founders of the Bankruptcy Law Network, Debt Law Network, Credit Law Network, and Mortgage Law Network. Mr. Dellutri also writes for the firm's personal injury litigation blog, www.faircreditreportingactblog.com and www.fairdebtcollectionpracticesactblog.com, and the firm's mortgage modification blog.
Posted in Bankruptcy News, Consumer Protection | Comments Off
Thursday, February 25th, 2010
If you are going to file for Bankruptcy or are thinking of filing for bankruptcy, you have to be careful because you don't want to take any action which may come back to bite you in the end. Here is a list of Bankruptcy Don'ts that we give to our clients.
· Don’t pay your relatives or friends in favor of your other creditors, and don’t try to transfer property out of your name and into theirs. If you do, the bankruptcy trustee may sue them on behalf of your creditors to get the money back.
· Don’t transfer any property to a relative within one year of filing your case. The Trustee may even go back five (5) years from filing the case if the transfer was for a fraudulent purpose such as avoiding paying your creditors.
· Don’t take a loan against your real estate in an effort to reduce the equity. You can often file a bankruptcy and not lose this valuable asset. If you take out a second mortgage to pay a credit card debt, you may be putting your house at risk.
· Don’t pay ahead or pay off balances early on secured loans (loans for which there is collateral).
· Don’t pay ahead or pay off balances early on unsecured loans (personal loans, medical bills, credit cards or store cards, etc.).
· Don’t attempt to sell your property for less than what it’s worth. This will not reduce the amount you eventually have to repay – and you or whoever you sold it to may end up stuck with the difference.
· Don’t run up your credit card debt prior to filing a bankruptcy. The court may view this as an attempt to exploit the bankruptcy system, and the judge may treat it accordingly.
· Don’t buy any luxury items prior to filing for bankruptcy. Any luxury items purchased within 70 days of filing for bankruptcy are viewed as non-dischargeable debt.
· Don’t take any major cash advances off of credit cards prior to filing for bankruptcy. The court may suspect that you are acting in bad faith and may refuse to discharge the debt.
· Don’t borrow, withdraw from or cash out your 401K, IRA, or ERISA qualified savings and retirement plans to pay bills. If you do, you may be liable for penalties and taxes that are not protected by the bankruptcy filing. If you don’t use these funds, you are very likely to have them to draw on after bankruptcy.
· Don’t file if you are about to receive a tax refund or inheritance. Discuss the timing with your attorney.
· Don’t transfer money in to your kid’s bank accounts. They have you as a co-signer and are subject to the same review as your bank accounts.
· Don’t get married just before filing if your spouse has high income.
· Don’t misrepresent facts to your attorney we are working to help you.
· Don’t wait until after filing to purchase a vehicle, if you know you will need a more dependable car please take care of that before filing your case. Each case is different if you need to do this please contact the attorney first.
· Don’t assume that the bankruptcy will get rid of all your debts. Some tax liabilities are non-dischargeable (basically, all tax liability accrued in the three tax years prior to filing are non-dischargeable in most circumstances). Student loans are now non-dischargeable except in cases of extreme hardship.
· Don’t tell your attorney that certain items of personal property do not belong to you if they really do belong to you.
· Don’t expect your Attorney to help you defraud the Bankruptcy Court and your creditors, it won’t happen.
· Don’t lie you will be signing the bankruptcy papers under penalty of perjury.
This post was submitted by Carmen Dellutri, Esq., founder of The Dellutri Law Group, P.A. Currently, the firm has offices in Port Charlotte, Fort Myers, Naples and Sarasota. Mr. Dellutri also sits on the Board of American Board of Certification. Mr. Dellutri is also one of the founders of the Bankruptcy Law Network, Debt Law Network, Credit Law Network, and Mortgage Law Network. Mr. Dellutri also writes for the firm's personal injury litigation blog, www.faircreditreportingactblog.com and www.fairdebtcollectionpracticesactblog.com, and the firm's mortgage modification blog.
Posted in Bankruptcy News, Consumer Protection | Comments Off
Sunday, February 21st, 2010
The 2005 bankruptcy law was supposed to encourage, or require, many debtors to file a Chapter 13 repayment bankruptcy instead of a Chapter 7 "wipe out" bankruptcy. People who make too much money relative to expenses usually fail the Chapter 7 means test and are forced into Chapter 13. Not exactly. The problem is that Chapter 13 has debt ceilings. Regardless of how badly you flunk the means test you are ineligible to file Chapter 13 if your secured debts total more than approximately $1,000,000 or if your unsecured debts total more than approximately $350,000.
These debt limits frequently close people out of Chapter 13 even if they are willing to pay what they can afford to creditors. Blame it on the housing bubble. The great housing inflation not only raised prices, but it also increased mortgage amounts. Liberal issuance of second mortgages took peoples total mortgages even higher. Many people now filing bankruptcy became insolvent because of the depreciation of investment real estate- more mortgages. All homestead mortgages and all investment property mortgages count as secured debts to the extent they remain secured by property value. Upside down mortgages are secured debts to extent of current property value and are unsecured debts to the extent of the deficiency. The sum of this mortgage debt is throwing many people out of Chapter 13.
If you don’t qualify for Chapter 7 or Chapter 13 you have two alternatives. One is Chapter 11 bankruptcy, but Chapter 11 is a very complicated procedure and involves legal fees- mostly over $20,000, which few individual debtors can afford. Chapter 11 procedures are appropriate for large corporate bankruptcy. The only other alternative for people who cannot file 7 or 13 is to face creditor lawsuits without any bankruptcy protection.
The Chapter 13 debt limits increase effective April 1, 2010. The increase is only 3%. The debt ceilings will not significantly rise. The April, 2010, increase will not solve the problem.
If a debt is contingent or unliquidated that debt does not count toward Chapter 13 debt limits. A debt is contingent if the debtor will owe them only if something happens in the future. A purchaser’s debt to a seller may be contingent upon the seller delivering the product at a future date. An unliquidated debt is owed now, but the debtor does not know the amount and cannot determine the amount. If a debtor has been sued, and the court found the debtor liable but the damage award is undecided then the debtor is facing an unliquidated claim.
If you think your debts exceed Chapter 13 limits check with an attorney to see if the attorney believes that some of your debts may be either legally contingent or unliquidated.
Posted in Bankruptcy News | Comments Off
Wednesday, February 17th, 2010
As a Consumer Bankruptcy Attorney, I hear and read about what is going on with consumers who are on the front lines of economic issues. The latest twist on the Foreclosure Crisis is that inventory is hurting the real estate market. I don't know about your neck of the woods, but right here in Southwest Florida our real estate market has taken a beating. As a homeowner, I'm not too happy with the drop in prices, but I am more concerned about others who are facing multiple issues. For example, it is estimated that over 7 million homes in the United States are in trouble.
Likewise, it is estimated that we will see another 3.5 to 5.5 million foreclosures. Florida is expected to be one of the hardest hit areas. Why? My answer is that Loan Modifications are not working. Even if a person is able to get a loan modification and stay in their home, it may not be enough to deal with all of their debt problems.
On a daily basis I see people who are maxed out with debt. A loan modification for them would be the equivalent of putting a band aid on a broken arm. These are good people who have lost their jobs or have had their hours cut back, etc, etc. They are good, honest and hardworking people were not able to foresee this economic nightmare. Now, they are having to make very hard choices.
If Congress changed the Bankruptcy Laws to allow people to modify their first mortgages in the Bankruptcy Court, people would have an opportunity to save their homes, cut down their debts, modify their payments schedules and pay their debts in a fair and equitable manner.
Bankruptcy is an option for many people, yet for some reason, the bankruptcy process is still shunned by the many people.
This post was submitted by Carmen Dellutri, Esq., founder of The Dellutri Law Group, P.A. Currently, the firm has offices in Port Charlotte, Fort Myers, Naples and Sarasota. Mr. Dellutri also sits on the Board of American Board of Certification. Mr. Dellutri is also one of the founders of the Bankruptcy Law Network, Debt Law Network, Credit Law Network, and Mortgage Law Network. Mr. Dellutri also writes for the firm's personal injury litigation blog, www.faircreditreportingactblog.com and www.fairdebtcollectionpracticesactblog.com, and the firm's mortgage modification blog.
Posted in Bankruptcy News, Consumer Protection, Life After Bankruptcy, Mortgage Foreclosures | Comments Off
Wednesday, February 17th, 2010
As a Consumer Bankruptcy Attorney, I hear and read about what is going on with consumers who are on the front lines of economic issues. The latest twist on the Foreclosure Crisis is that inventory is hurting the real estate market. I don't know about your neck of the woods, but right here in Southwest Florida our real estate market has taken a beating. As a homeowner, I'm not too happy with the drop in prices, but I am more concerned about others who are facing multiple issues. For example, it is estimated that over 7 million homes in the United States are in trouble.
Likewise, it is estimated that we will see another 3.5 to 5.5 million foreclosures. Florida is expected to be one of the hardest hit areas. Why? My answer is that Loan Modifications are not working. Even if a person is able to get a loan modification and stay in their home, it may not be enough to deal with all of their debt problems.
On a daily basis I see people who are maxed out with debt. A loan modification for them would be the equivalent of putting a band aid on a broken arm. These are good people who have lost their jobs or have had their hours cut back, etc, etc. They are good, honest and hardworking people were not able to foresee this economic nightmare. Now, they are having to make very hard choices.
If Congress changed the Bankruptcy Laws to allow people to modify their first mortgages in the Bankruptcy Court, people would have an opportunity to save their homes, cut down their debts, modify their payments schedules and pay their debts in a fair and equitable manner.
Bankruptcy is an option for many people, yet for some reason, the bankruptcy process is still shunned by the many people.
This post was submitted by Carmen Dellutri, Esq., founder of The Dellutri Law Group, P.A. Currently, the firm has offices in Port Charlotte, Fort Myers, Naples and Sarasota. Mr. Dellutri also sits on the Board of American Board of Certification. Mr. Dellutri is also one of the founders of the Bankruptcy Law Network, Debt Law Network, Credit Law Network, and Mortgage Law Network. Mr. Dellutri also writes for the firm's personal injury litigation blog, www.faircreditreportingactblog.com and www.fairdebtcollectionpracticesactblog.com, and the firm's mortgage modification blog.
Posted in Bankruptcy News, Consumer Protection, Life After Bankruptcy, Mortgage Foreclosures | Comments Off
Tuesday, February 9th, 2010
I was really bothered by something that I heard on the news last night, and this morning I couldn't help but voice my opinion on Bankruptcy Law Network. I know that I shouldn't listen to the news before bed, but I heard the talking head make a comment about why people file for bankruptcy and why businesses file. The joker said that when a business files for bankruptcy, it is done for one reason, and that is because it is in the best interests of the business. When an individual files for bankruptcy protection, it is because they have made bad decisions. Nothing could be further from the truth in my opinion.
So, I wrote a blog this morning titled: Bankruptcy Double Standard ? : Businesses and Individuals
Please take a look at the blog and see if I came close to hitting the issues.
This post was submitted by Carmen Dellutri, Esq., founder of The Dellutri Law Group, P.A. Currently, the firm has offices in Port Charlotte, Fort Myers, Naples and Sarasota. Mr. Dellutri also sits on the Board of American Board of Certification. Mr. Dellutri is also one of the founders of the Bankruptcy Law Network, Debt Law Network, Credit Law Network, and Mortgage Law Network. Mr. Dellutri also writes for the firm's personal injury litigation blog, www.faircreditreportingactblog.com and www.fairdebtcollectionpracticesactblog.com, and the firm's mortgage modification blog.
Posted in Bankruptcy Myths, Bankruptcy News, Consumer Protection, Life After Bankruptcy, Sign of the Times | Comments Off
