Why Is It Taking Mortgage Companies So Long to Foreclose on Houses?

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This is a question that many people are asking these days, why is it taking the mortgage companies so long to foreclose?  As bankruptcy lawyers we deal a lot with people who are trying to save their homes as they enter the foreclosure process. So knowing how long it takes until a home enters into the foreclosure process is important for many of our clients. There are several reasons for the delay in foreclosures.

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Needless to say, the slow-down in the economy has resulted in the loss of numerous jobs throughout the country.  For those lucky enough to keep their job, deep pay cuts have often occurred.  Add predatory lending practices from a few years ago and it all spells disaster for countless Americans and the lending institutions or mortgage companies.

Unfortunately, many Americans found they could no longer afford the American dream of a home.  With no way to make their mortgage payments, many people began defaulting on their mortgage loans and lending institutions began the process of foreclosing on many homes.  As the economy has continued to suffer, the sheer number of foreclosures has increased to a point that mortgage companies are simply overwhelmed by the volume.

As you may have read or heard in the media, mortgage companies have been heavily scrutinized regarding their foreclosure practices over the past few years.  The practice referred to as “robo signings”, where mortgage company officials signed off on foreclosure proceedings without fully investigating the accuracy of the documents they signed, has been investigated by federal regulators as well as state attorney general’s from all 50 states.  In several cases, bank officials admitted to signing foreclosure documents without reviewing them or verifying their accuracy.  Although this practice is not condoned, most of us understand how this may have happened.  The officials signing the documents may have believed their signature was merely a formality, and that the documents had already been verified for accuracy before reaching their desk.  So with a pen in hand, and a huge stack of foreclosures on their desk, the robo-signing began.

The investigation into robo-signing foreclosures disclosed many disturbing scenarios.  There were cases where homeowners were actually not behind on their mortgage payments but were facing foreclosure due to errors in paperwork.  In other cases, the homeowners were in the process of or had recently completed loan modifications with the mortgage companies while on a parallel path to foreclosure.  Needless to say these practices outranged many people.  The outcry resulted in the government’s investigation into the foreclosure process and then a self-imposed moratorium by many mortgage companies.

If you are like most homeowners, your mortgage company has changed at least once since you obtained your loan.  In many cases, the loan has changed hands two, three and even four times.  As a result, paperwork has often been misplaced or simply lost during the process.  These issues may delay the foreclosure process, since the legal documents needed to complete the foreclosure cannot be located.

As a result of these issues and others, most mortgage companies and lending institutions are completely overwhelmed with the sheer volume of foreclosure files.  As a result, it is taking some mortgage companies a year or more to foreclose on a home.  Obviously the timeframe varies, so there is no guarantee it will take the mortgage company that long to foreclose on your home!

Can A Creditor Freeze My Bank Accounts If I File Bankruptcy?

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Family Riding Bicycles TogetherOnce you default on a payment to a creditor, they then have their legal rights to pursue means of collection from you.  When you have something secured, such as a house or a car, if you ignore their repeated attempts of collection, the creditor can simply come and take back what was theirs in the first place; but what if it’s for a credit card or other unsecured debt?  Many people have the misconception that the credit card companies cannot do anything to them personally and are just “out” on the money that is owed to them.  Wrong!

Once you default on a credit card, the credit card company will send you to a collection agency who will attempt to collect the debt.   When they cannot collect the debt after several attempts they will “charge off” the debt and send your account to an attorney (if they choose to, not all defaulted credit cards are sent to attorneys).   The law firm may make several attempts to collect the debt as well and, after not being able to collect on the debt, they will file a civil complaint with the court for a judgment on the debt; meaning that it is court ordered that you pay that debt back.

Once the judgment is against you, the attorneys for the credit card company will send you something called a Notice of Right to Have Exemptions Designated.  At this time you will list your personal property and attempt to protect it from the creditors whom are suing you.  Your personal property in this matter would consist of homes, vehicles, bank accounts and such.  Most people will either fail to fill out the paperwork or do so improperly. If not completed correctly or if all of your property is not protected, you will receive something called a Writ of Execution which allows the sheriff will come to seize any unprotected assets.  So what does this have to do with your bank account? If you did not properly exempt your bank accounts the sheriff will contact your banking institution(s) and have your account(s) frozen.

Filing bankruptcy will take care of the debt of the judgment but does not automatically take care of any repercussions of the judgment.  In the example of a frozen bank account, your bank account would not be unfrozen simply from filing a bankruptcy; the sheriff who ordered the account to be frozen must take additional steps. The sheriff must receive proof of your bankruptcy filing and contact the banking institution and order the account to be unfrozen. That could take several days which means you could go days without access to money within your bank account.

Although a creditor must take several steps to freeze a bank account – they are able to freeze a bank account after they obtain a judgment if the proper steps are not taken to ensure your property is protected.

 

Can I Still Tithe or Give to the Church If I File Bankruptcy?

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There is no doubt about it, bankruptcy will (at least for the short term) have an effect on your everyday life where finances are concerned – from your living situation, the way your bills are paid, how you can get credit and so on and so forth; but does it also effect being able to tithe or make donations to your church?

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Typically the answer is ?no, you should still be able to tithe and contribute to your church?. In your monthly budget there is a specific place for you to list the amount that you plan on giving to the church in the future. There is also an area in the petition to list all gifts/donations made to the church within one year before filing bankruptcy and that average will also be used in your means test for qualifying for the bankruptcy.

Keep in mind though, the bankruptcy Trustee will allow the tithing or charitable contributions if there is a history of giving.  Let me explain why. The bankruptcy courts are worried about people who have too much disposable income each month (which could determine wither they file a Chapter 7 bankruptcy or Chapter 13 bankruptcy) all of a sudden “finding Jesus” as a way to dispose or get rid of that disposable income problem. If you have a history of giving to the church then you usually will have no problem with the bankruptcy Trustee. However, if you decide to start giving large amounts of charitable contributions to the church, for the first time, at the same time you decide to file bankruptcy the courts could have an issue with your newfound religious yearning.

If you have been tithing to the church the bankruptcy Trustee or bankruptcy courts may require a written letter from your church (or any charitable group for that matter) showing you have been giving the amounts stated in your bankruptcy petition. The bankruptcy courts also look at what percentage of your income you are giving to your church each month. Your contributions have to be within reason.

If you are someone who tithes or donates to your church on a regular basis you will need to make sure that these donations/gifts are listed in your monthly budget. Also, you may want to go ahead and gather copies of any payments you made to your church within the last year just in case they are needed or requested at a later time.

What is a Clincher Agreement in a Workers’ Compensation Case?

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In a North Carolina workers’ compensation case a “clincher agreement” is a compromised agreement or settlement between an injured employee or worker and an employer or their insurance company. When the worker and the employer’s insurance company agree on a settled amount the insurance company’s attorney will draft a clincher, or agreement, stating that the parties have reached a final resolution of the case.

Writing on White Paper with PenThe clincher agreement usually states the employee will receive a lump sum cash settlement in return for releasing all future liability against an employer. In order for a clincher to be allowed, it must be approved by the North Carolina Industrial Commission. A clincher must meet the requirements of Rule 502 of the North Carolina Industrial Commission and, if it does, the Industrial Commission will typically approve the clincher agreement. The main purpose of this approval by the Commission to make sure the employee is treated fairly.

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How are Medicare and Medicaid Liens Treated in an Injury Case?

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Doctor Looking at an X-Ray of a PatientThere are two types of financial medical payment assistance provided by the federal and state governments.  One is Medicare, which was enacted in 1965. Medicare is a federal agency that pays medical care for elderly (usually over the age of 65), the disabled and other limited classes of medical recipients.

In contrast, Medicaid is usually a state run, but federally sponsored, program that provides financial medical assistance to low income families or individuals.

Medicare and Medicaid usually pays for medical care in the event the injured person is eligible for Medicare or Medicaid assistance and is unable to pay their medical expenses.  Medicaid and Medicare are secondary payers and will pay only after private insurance has been exhausted.

In a medical malpractice case, both Medicare and Medicaid have a statutory lien on any recovery from a jury award or a settlement with the defendant in which Medicare or Medicaid has provided payment for the injured person’s medical care.

In other words, Medicare and Medicaid will be paid back any money they have spent to provide medical care to the injured person from the injured person. They will demand under federal and state law this money to be paid back from the settlement or jury award in the medical malpractice case.

Usually the attorney representing the injured person has the legal obligation to reimburse Medicare and Medicaid for any monies they have paid for the care of the injured person. If the attorney does not pay this amount from the settlement or jury award, the attorney is personally liable for the lien.

In conclusion, the law states Medicare and Medicaid must be reimbursed for any money they have provided for the care of an injured person in a medical malpractice case.

Can You Wipe Out A Small Business Administration (SBA) Loan in Bankruptcy?

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The short answer is, yes, a Small Business Administration (SBA) loan is considered a dischargeable debt.

New entrepreneurs or small business owners who are looking to revamp their business sometimes need an additional guarantor on a loan, due to certain factors, such as not having enough collateral.  A guarantor takes responsibility for the debt and promises that the loan will be paid back in full.  The Small Business Administration (SBA) is a government funded entity that was created to encourage and support the success of small businesses.  The SBA can guarantee up to 85% of the loan, leaving 15-20% to the small business owner to provide evidence of collateral, in addition to proving there will be sufficient cash flow from the proposed business to make the necessary monthly payments.  The more risk involved with the success of the business, the smaller the percentage the SBA loan will be cover.  This is of course necessary just in case the loan goes into default.

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An SBA loan has 5 different headings that owners may apply under: 7(a) loan, the 504 economic Development loan, microfinance loan, disaster recovery loan, and the special purpose loan.  A small business owner or a new entrepreneur may apply for a loan at a lending institution of their choosing.  From there, the lending institution may require the business to apply for one of the SBA loans in order to guarantee the loan.

When filing for bankruptcy, depending upon the type of bankruptcy you file, you may be required to include all of your debts (and you should probably list down all of your debts either way).  If you file a Chapter 13 bankruptcy you must list down the SBA loan as a personal debt, if you personally guaranteed the debt, which you almost always do. In a Chapter 7 bankruptcy you can choose to list the SBA loan and discharge the debt so they cannot collect from you personally if the business defaults on the loan. However, if you discharge the debt personally and the businesses defaults on the loan you probably will not be able to get a new SBA loan in the future if you try to restart your business.

Again, a loan from the Small Business Administration may be discharged in a personal bankruptcy. They may, however, still come after the business to try to collect on the debt if the business defauls on the loan and has assets.

Is the Information on My Bankruptcy Petition Private?

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For many, filing bankruptcy can be a very stressful, emotional and embarrassing time in your life.  Ask any bankruptcy attorney, and they will tell you this is a question they are asked quite often. Most people would prefer to not tell the world of their financial problems and keep the information in their bankruptcy private. However, bankruptcy is a public filing and is a matter of public record.

So what does public record mean?

Public record usually refers to any information that is filed and/or maintained by a government agency, such as a court house. When you file for bankruptcy, your case is assigned to a district of the United State Bankruptcy Court. Your bankruptcy then becomes Public Record and the information in your bankruptcy is made available to the public. However, certain information in your bankruptcy, such as social security numbers, loan numbers and other identifiers are kept private and cannot be accessed by the public. Federal Bankruptcy law requires that notice of your bankruptcy case must be sent to all your creditors. This includes every individual and business owed, as well as any co-signor(s) of loans.

The chances of your family, co-workers, friends and neighbors finding out you?ve filed bankruptcy are unlikely, unless you owe them money, they co-signed on a loan for you, or they specifically go looking for it. We are also asked all the time whether or not bankruptcy will appear in the local newspaper. The answer is, it depends where you live. Some local papers will run a list of people who have filed bankruptcy. However, if a paper is running a list of people who filed bankruptcy then the chances are the paper doesn’t have a high readership anyways.

It?s important to remember you are not alone facing financial hardships. You?re filing bankruptcy to take control of your financial situation!

Why Does the Means Test Look at My Gross Income Instead of Net Income?

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This is a question frequently asked by clients.  You do not have access to your gross income, since a great deal of it goes to pay federal and state taxes, health insurance, life insurance, long and short-term disability, 401(k), etc.  The net income or your take-home pay is what you have available to pay your house payment, utilities, food, clothing, gas, car payments, etc., so shouldn’t this be used to see if you qualify for bankruptcy?

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Unfortunately, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) decided to establish a process for determining whether a person qualified for bankruptcy, specifically a Chapter 7 bankruptcy.  BAPCPA decided it was prudent to conduct a “Means Test” for each potential bankruptcy filer.   As part of the Means Test, it was determined that gross income would be the fairest starting point for all bankruptcy filers.  Although two people may have the same gross income, their net income may vary considerably due to different payroll deductions.  In addition, median household income for each state is based on gross income, so this provided a consistent base for comparison.

So, why is your gross rather than net income considered in the means test used in bankruptcy?  BAPCPA requires it!

Can I Purchase a House While in a Chapter 13 Bankruptcy?

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While in a Chapter 13 bankruptcy, you must get permission from the bankruptcy Trustee to incur any new debt. This includes a mortgage if you want to purchase a new house. When you are serious about buying a new home within a Chapter 13 bankruptcy, you should let your bankruptcy lawyer know. They will get in contact with the Trustee for you and let him or her know that you would like permission to incur debt. They will file a motion with the court for this. Once the trustee makes a decision, the attorney will let you know.

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