Stripping Off Second Mortgages

With the prospect of the economy slowly starting to turn around, I have heard from a number of realtors that homes are selling fast here in Colorado.  Of course that could be due to lack of inventory or it could just be that the realtors I know are really good at what they do and others are still hurting.

If in fact we are seeing a turnaround, property values may start to rise.  For many with second mortgages hindering sales, this will be relatively good news.  However for many with debt who are hoping to get out from under a second mortgage through the chapter 13 process of stripping off lien that is determined to be wholly unsecured, any increase in property values may ultimately prevent a strip off.

When a debtor in chapter 13 bankruptcy's first mortgage payoff amount is higher than the current fair market value of their home, they can motion the court for a determination that their second mortgage and/or their home equity line of credit (HELOC) is not secured and ultimately have the lien removed and the debt discharged.  For many this has made keeping their home a reality.

With home values slowly creeping up, this option may go away for quite a few debtors.  If eliminating a second mortgage will make it possible to keep your home and you have been considering bankruptcy as a means to eliminate debt from credit cards, medical expenses or even a failed business, now may be the time to move forward. 

Contact Greenwald & Hammond for an in depth, free bankruptcy consultation.

Submitted by:

Mindy Greenwald, Esq.

Still No End in Sight for Student Loan Debt

I am getting more and more phone calls and emails from prospective clients who tell me that they are considering bankruptcy, but the majority of their debt is student loan debt. I hate having to tell people that student loan debt is non-dischargeable, especially when I hear amounts that reach 6 figures.

There are some who are able to get their student loan debt discharged, but it’s a very tough process, and from what I’ve learned it’s impossible unless you are extremely disabled and unable to work again for the rest of your life. The fact that you’re unable to find a job, or a single mom raising a family, does not qualify as the sort of hardship required to obtain a debt discharge. If that were the case, the line to file these cases would be very long.

Ok, so student loans aren’t dischargeable in a bankruptcy, and you’re on the hook for them because you’re not permanently disabled. Now you have to determine what types of loans you have, which will tell you what rules they have to follow. If you’re “lucky” enough to have federal loans, you may be able to pay them back on an income based repayment plan. These plans can be very helpful, allowing you to pay what you can afford, and it may even be possible to have the remaining debt cancelled after 25 years of payments.

If you have private loans, though, all bets are off. Not only do private loans not have to follow the guidelines of income based repayment, but they also tend to have higher interest rates and very few borrower protections. The collection efforts for these loans tend to be very aggressive when there is a default.

If you are one of the many who are struggling with student loan debt, it’s important to consider the big picture. The majority of your debt may be in the form of student loans, but if you have other debt (credit cards, medical bills, deficiency judgment from a foreclosure or repossession) that is getting in the way of making your student loan payments, you may still want to consider talking to a bankruptcy attorney. Close to 2/3 of the bankruptcies I file are for people who have non-dischargeable student loan debt in addition to their unsecured, dischargeable debt. In these cases, filing bankruptcy frees up your disposable income and can allow you to afford to put a dent in student loans.

Contact Greenwald & Hammond if you’d like to set up a free consultation.

Submitted by:
Kerry Hammond, Esq.

Bankruptcy Attorney

Loan Modification Update

If anyone has been following my posts about loan modifications, then they would know that when the big five mortgage servicers and the states attorneys general announced their big settlement, I was optimistic about my client's chance of obtaining a loan modification. 

The summaries of the settlement which are published on a site that I linked to through the United States Trustee, led me to believe that people who had the ability to pay would be able to save their homes through a modification process if their loans were being serviced by any of the banks involved in the settlement.  Unfortunately, it didn't take me long to discover the gaping hole in the settlement, that loans serviced by these banks, but owned by Fannie Mae or Freddie Mac were not affected by the settlement.  Most people do not know who owns their loans.

With all the information that I provided to the bank on behalf of my client, I was quickly informed that my client did not qualify for the relief under the national mortgage settlement because the loan was owned by Fannie Mae, of course the servicing bank reassured me that other relief programs would be considered. 

The terms of the settlement are not really relevant here.  The lawsuit itself raised issues as to the way these five mortgage servicers dealt with real people seeking much needed relief.  The idea that the bank should act in good faith while the homeowner is seeking alternatives to foreclosure resulted in the banks agreeing to halt the foreclosure process while borrowers were being considered for alternative relief options.  Unfortunately, you cannot expect the same treatment if your loan is owned by Fannie Mae or Freddie Mac.

So while I am supplementing the bank with updated and additional client information, the foreclosure action began.  The bank has reassured me that the foreclosure sale isn't until August so there is no need to stop the action.  Phew!  Because who has ever heard of a mortgage lender foreclosing on a home, while a modification agreement was in the works?  Oh wait...I have.  Numerous potential clients have consulted with my office or called my office to complain that their house was sold while they believed they were in the midst of a trial modification.  Wasn't that type of action, at least in part, alleged as bad behavior by the banks in the complaint by the state attorneys general in the first place?

I am not sure what percentage of loans serviced by the big five are owned by Fannie or Freddie but I guess if yours is, you shouldn't expect anything as a result of the settlement.  Ultimately my client opted for chapter 13 bankruptcy protection, the filing of the case stopped the foreclosure sale, the arrears are going to be cured through a five year plan (interest free) rather than being added to the principal of the mortgage, where she would wind up paying interest over the life of the loan.  The hopes of getting the mortgage payment lowered are now fading, but the amount that they would have been lowered was rather insignificant in the scheme of things.

If you have been given the runaround by your mortgage company and really want to keep your home, contact the attorneys at Greenwald & Hammond to set a free bankruptcy consultation.

Submitted by:

Mindy Greenwald, Esq.

More Ways to Save Money

I recently came across an article from U.S. News outlining money saving websites that I, for one, didn’t know existed. As I am always intrigued by ways I can save money, I thought I would pass them on. I’m not sure how effective they are, since I haven’t tried any of them yet, but I do plan to check them out.

Many of my bankruptcy clients have tried numerous ways to make money prior to having to file for bankruptcy. Many of them have resorted to selling things on Ebay and Craigslist. Of course, you don’t need to be nearing bankruptcy to want to sell things you don’t need, so this can really help anyone. When you post something on an online sight, you have to decide how much you want to sell the item for. Priceonomics is a website that helps you decide what your item may be worth, based on the data they have available. This can also help when you’re buying something and aren’t sure what to pay.

If you haven’t heard of groupons, you’ve really been living with your head buried in the sand. There are numerous companies out there offering daily deals for everything from restaurants to spas. Many of these offers, however, are for goods and services that you may “want,” but may not “need.” Well, there is a site called Aisle 50 that offers items that may fall more into the “need” category, such as grocieries, allowing people to spend their money on necessities rather than frivolities.

If you still want to subscribe to the many groupon type sites, but want to narrow down the types of offers you get so that you’re not bombarded with ones that don’t interest you, you can check out Dealupa. Apparently this site allows you to combine all of your deals and it filters them into ones that will interested you based on criteria you give.

Carsabi is a tool to help you research the fair market value of a used car. As far as this one goes, I still think you should check their information to Kelly Blue Book and Nada to see if they coincide, but it might help as an additional resource. You can apparently find cars that are for sale in your area and compare different ones offered by local dealerships.

Lastly, Springcoin is a website that helps you track your budget while you try to pay down your debt. I am a bit skeptical about this one as well, but it can’t hurt to give it a look. It may amortize loans and create a budget based on your income versus expenses, family size, etc. It may be helpful as a guideline or a starting point, especially if you don’t currently have a budget that you work from.

There are a lot of tools out there to help you save money and get the best deals possible. It’s always smart to consider “wants” versus “needs” whenever you’re spending money, and of course, if you find that you’re just notable to make ends meet and are getting deeper into debt because of job loss or medical emergency, consult with a professional. Greenwald & Hammond offers a free consultation, so talking to someone won’t put a further strain on your budget.

Submitted by:

Kerry Hammond, Esq.

Bankruptcy Attorney

Are you Heading into Retirement With Too Much Debt?

Years ago the plan was to enter retirement with no mortgage and no credit card debt. Of course years ago the plan was also to do this at a young enough age where you could enjoy yourself, maybe do a bit of traveling. All bets are off these days and many people are nearing retirement with not only a mortgage payment, but hefty credit card debt, making it impossible to stop working because they can’t live without the paycheck.

A lot of the articles you read about retirement offer tips to soon to be retirees, and many of them have good advice. They suggest that if your mortgage isn’t paid off, you up the payments prior to retirement to try and make it happen. If you owe credit card debt, they suggest you put yourself on a payment plan that will take 3 years or less to pay them off.  

All of the above is very good advice and a great plan, if it’s possible. But what if you can’t pay down your mortgage and your credit card debt because of job loss or decreased income? What if medical bills are piling up? I provide a lot of free consultations to couples at or near retirement who are in just this situation. If even one spouse loses a job or takes a pay cut, it can mean complete derailment. Best laid plans for retirement can be gone in a flash and you really need to have a back-up plan.

Bankruptcy is rarely anyone’s first option, and for most it falls way down to plan C or D. But if you’re nearing retirement and are unsure what to do about the debt you’ve accumulated—for whatever reason—you may want to speak to a professional. Start with your financial planner, if you have one, and get their opinion. Find out what your options are and where you stand, or you may just find yourself at the age of 65 saying “welcome to Walmart.”

Submitted by:
Kerry Hammond, Esq.

Bankruptcy Attorney

Renting is NOT Illegal or Immoral

I have written several blog posts dealing with renting versus buying. I have been a lifelong renter and have never purchased a home in my 41 years (and yes, I am proud of it). I did, however, marry someone who “owned” both a residence and a rental property. I put owned in quotes because he obviously had mortgages on the homes, so really the bank owned them. It managed to be a nightmare for us when home values dropped, we owed more than they were worth, and we wanted to move to Colorado for a better lifestyle. We were financially strapped when we couldn’t get a renter and had to cover both mortgages, and don’t get me started on how much we had to pay to get the house ready for a new renter after a previous one left.

I am constantly drawn to articles that compare renting to buying because my husband and I are currently mortgage free renters and blissfully happy. We get surprised comments from a lot of people when we tell them that we rent. It’s as if being in your 40s and not wanting to buy a home is illegal or immoral in some way. About 2/3 of these people even feel comfortable enough to actually tell us we should buy a home. I’m sorry, but telling me where to spend my money, unless you’re my financial adviser, is a bit personal. We tend to take offense at these remarks and put them right up there with anyone who finds out that we’re childfree and tells us we should have kids.

Personal preference aside, we’ve run the numbers on several occasions and buying does not make good financial sense to us. We’ve calculated the amount a homeowner pays in mortgage payments, interest, maintenance, yard care, insurance, taxes, repairs and replacements, HOA fees, upgrades and remodels, realtor fees if you ever sell, etc. If we pay rent and put all of the additional (non-mortgage payment) money into an investment account, we are further ahead, and not just financially. We have the option of leaving at the end of our lease to live elsewhere. We don’t have to hire a realtor, hope the economy is good, let the home sit on the market for an indefinite period of time, before we can move on with our lives. Trust me, it’s a very intense feeling of freedom to us, and best of all – it’s what suits our needs.

Also, consider what I see as a bankruptcy attorney. Approximately 1 out of every 5 or 6 bankruptcies that I file contains a surrender of a home or a previous foreclosure. This means that either the person let their home go into foreclosure and are filing bankruptcy because the home sold for less than the bank was owed, or the person is behind on their mortgage and realizes that they can’t or don’t want to keep it, so they are surrendering it in the bankruptcy. Seeing this many people who are dragged down by their home purchase is troubling to me, and just reinforces my personal decision.

I think putting thousands of dollars down on a 30-year investment that locks you into not only a general location, but an exact address, is a big deal. Just like I think it’s a big deal to decide to have children (that investment tends to last even more than 30 years). Both are very big and very personal choices. But both are just that, choices. I think that a lot of people don’t realize that they are choosing to be parents and homeowners, and we are simply choosing the opposite. Neither choice is better than the other, it’s personal to the decision maker. So the next time you are about to tell someone that they should buy a home because prices are at an all time low, maybe you should think twice and let them make that very personal, very specific to their situation, decision on their own. And in turn, I promise not to walk around telling all of you that you should be renting.

Submitted by:

Kerry Hammond, Esq.

Bankruptcy Attorney

Chapter 13 Plans Aren’t Always Set in Stone

There are a few reasons why someone might file a chapter 13bankruptcy versus a chapter 7. One of the most common is to catch up on payments for a home that is about to go into foreclosure. A chapter 13 allows you to stop the foreclosure and put those past due payments into a bankruptcy plan, giving you 3 to 5 years to catch up while you move forward paying your regular monthly mortgage payment.

You may also file a chapter 13 bankruptcy if your income is higher than the median income (amounts are calculated based on the district in which you are filing). When your income is above median, it forces you into a chapter 13 and you pay back some or all of your debt. The amount you pay is, when extremely simplified, a function of your income minus your allowable expenses.

If the last 4-5 years tells you anything, it’s that the economy is unstable and jobs aren’t secure. You may enter a chapter 13 plan because you made above median income and could “afford” to pay back some of your debt. But a lot of things can happen in 5 years. What if you lose your job and can no longer make the chapter 13 payments? What if you keep your job but take a pay cut so that the plan payment no longer fits in your budget?

While a chapter 13 plan payment is “set in stone” at the time it’s confirmed by the court, this does not mean that if you take a pay cut or lose your job that nothing can be done. At my bankruptcy firm, we always hope that our chapter 13 clients don’t have to call us 2 or 3 years down the road to tell us that one of the above scenarios have happened, but in reality we do get these phone calls.

This good news, if you can call it that, is that there are things that can be done. Many chapter 13 plans can be modified to lower a plan payment in many instances, allowing you the extra money in your budget to pay your necessary bills. In some circumstances, you can even convert your chapter 13 to a chapter 7, which means that you no longer have a plan payment, and the debts you included in your bankruptcy are still discharged.

If you find yourself with a loss in income, you need to contact your bankruptcy attorney. The first step is to find out what options are available to you in your unique situation. Your chapter 13 bankruptcy attorney should remain available to you throughout your bankruptcy plan and should be there to discuss any change in circumstances. Don’t take this to mean that they won’t require you to pay additional attorney’s fees. Unfortunately, no one is able to work for free, and any new attorney’s fees that they incur will have to be paid.  But in a chapter 13 modification these fees can usually be put into your modified plan and be paid through the court.

Whatever the reason for your change in circumstances, your first step should be to contact your attorney to see if anything can be done to make your plan more manageable. Modifying your plan may be just what you need to make ends meet.

Submitted by:

Kerry Hammond, Esq.

Bankruptcy Attorney