I Stopped Paying My Bills… What Can Creditors Do to Me?

Common Question: I can’t pay my bills. What happens if I don’t seek bankruptcy protection and just stop paying?

Answer: It depends on your income and assets. Creditors can file a lawsuit against you. Once they win, they might seek to garnish your wages, seize your bank account, or go after other assets in your name. They can subpoena you for a deposition in which they swear you in and ask you a lot of detailed questions about your work and property. People that fail to comply with court orders may be subject to contempt of court sanctions.

Assuming a debtor qualifies for bankruptcy and does not have assets that are unprotected, then seeking bankruptcy protection may be a way to wipe away past debts forever so people can get a fresh start. Many people are pleasantly surprised at how simple the bankruptcy process can be–especially for those with low income and few assets. Speak with a bankruptcy attorney to determine whether you should file a bankruptcy.

Is it Better to do a Short Sale or Just Allow Bank to Proceed with Foreclosure?

Common Question: My property is in foreclosure, should I seek a short sale or let the bank take the home in foreclosure?

Answer: It all depends on your situation. Foreclosure can take a long time, especially if you fight it and don’t allow the bank to win by default. So if your income is not currently enough for the rental market, it may be a good idea to stay in the property longer. On the other hand, if you have a job lined up somewhere else, leaving the property in your name longer exposes you to some liability, if the house is sitting empty. Of course, if your income is increasing, it may be advantageous to file a bankruptcy while you still qualify.

Many people believe that achieving a short sale will “save” their credit as long as it happens before the end of a foreclosure. There is no literature that supports this view. If a representative of the bank says something of this sort, have them put it in writing. Once a foreclosure is filed against you, it is a public record, regardless of the disposition. A short sale, a foreclosure, a deed in lieu of foreclosure all represent the same thing: a default by the borrower. In other words, one’s credit is typically ruined before the foreclosure lawsuit by the bank even begins.

FL Bankruptcy: Claim Homestead Exemption & Protect Less Personal Property…Or Lose Your Home?

In Florida, when people file a bankruptcy, they can either elect NOT to claim homestead exemption on their home and utilize up to $5000 of wild card exemptions on personal property, OR they can claim homestead exemption, protect their interest in their home, and opt for only $1000 of wild card exemptions on personal property. For the lucky few who have equity in their home, the choice is obvious: protect up to $125,000 of home equity and surrender other personal property that exceeds $1000.00 (speak with a bankruptcy attorney for more details on retirement funds, autos, and other types of personal property that may be protected).

These days, however, many people are in homes that have no equity. They owe more than the homes are worth. Many of these people continue to live in their “underwater” or “upside down” homes, and many are still making payments. Others are not making payments, but continue to reside at their home while seeking a modification or going through foreclosure.

When such people file a bankruptcy, should they elect to utilize the homestead exemption to protect non-existent home equity, or should they opt for $5000 in personal property and not exempt their homestead? For a long time, Floridians with no equity could take the $5000 in personal property exemptions, not exempt the home, but not fear that they would lose the home to the trustee in the bankruptcy. Sadly, those days are over.

When a bankruptcy is filed, the trustee becomes the owner of non-exempt assets of the debtor. Recently, the trustees have found that they are able to sell their interest in a property (sometimes referred to as “bare title”) to investors that rent out the home while lengthy foreclosure proceedings linger in the court systems. Eventually these investors lose the home back to the bank that holds a note against the property–but not before they’ve rented it out for a profit for months. That means that people who are planning to stay in their homes, even if there is no equity, need to claim homestead exemption and protect their right to live in the property–otherwise they may be evicted and their home rented for the benefit of an investor. That means that bankruptcy filers claiming the homestead exemption will only be given up to $1000.00 of  wild card exemption to exempt other personal property, with an additional $1000 that may be used to exempt an auto. Retirement accounts are 100% protected.

Be sure to speak with a bankruptcy attorney prior to filing your case, so that you know what assets may be at risk if you file.

Hoping to Modify Your Home Mortgage? Watch Out for these Predatory Bank Practices…

This month, the Securities Exchange Commission charged top former executives at Mortgage giants Fannie Mae and Freddie Mac with securities fraud for making false statements about the quality their massive loan holdings. Read more about the civil fraud suits here. While many are relieved to see the federal government finally holding people accountable, many wonder when the government will stand up to help Americans keep their homes, or pay for student loans after their livelihoods were destroyed by systematic financial industry fraud, and the resulting destruction of millions of jobs.

The blog Mandelman Matters has reported that an employee of Chase’s mortgage servicing company described his job as, “making borrowers jump through every hoop so that when something fails to get done on time, they can deny it and foreclose.”

The employee, identified only as “Jared,” said that his boss said, “We’re in the foreclosure business, not the modification business.”

According to the Chase mortgage servicing company employee, “Foreclosures are a no lose proposition for the servicers… The servicer gets paid more to service a delinquent loan, and they get to tack on extra charges. If the borrower reinstates, which is rare, then the borrower pays the extra fees. If the borrower loses the house then the investor pays them. Either way, the services gets their money.”

Perhaps this explains why so many borrowers were told that modification would only be available only if they missed several payments. Yet, when people followed the directions they had been given, and applied for the modification, they instead faced foreclosure.

Researcher Matt Stoller with the Franklin and Eleanor Roosevelt Foundation reports on another angle of the corrupt mortgage servicing industry: a payment computer program that improperly applies payments first to mortgage servicing costs instead of to interest and principal. Home loans specify that payments be applied first to interest, then principal, and then to all other fees. Yet the program used by the servicer routinely applies payments first to fees.

In other words the banks have intentionally installed computer programs that apply payments systematically in ways that violate the very contracts they are enforcing via foreclosure, but which lead to greater profit for so called “mortgage servicing.” Read more about this systematic and predatory bank practice here. The practice was identified by Judge Elizabeth Magner in the the Louisiana foreclosure case, Jones v. Wells Fargo.

Has this happened to you or anyone you know?

Occupy Protesters Shut Down a Brooklyn, New York Foreclosure Auction… Could it happen in Florida?

Most people have heard of the protests against bank corruption and corporate greed in New York City, Chicago, Washington, D.C., Denver, Houston, San Diego, and Orlando, Florida.

Believing that banks have corrupted the proper functioning of government, protesters have taken their concerns about the economic crisis directly to banks and banking officials. On October, 13th, 2011, community members in Brooklyn shut down a foreclosure auction to prevent the loss of housing to more American families in their community.

Watch the video here.

Could protesters disrupt auction in Melbourne, FL, Palm Bay, FL or Deland, FL?

Do you have thoughts or comments? Please share them.

If I File a Bankruptcy, Will They Take All of My Property?

One of the most common fears people have about filing a bankruptcy is that all their possessions will be sold in an auction and creditors paid with the proceeds.

The truth is that although bankruptcy is a legal process that occurs in the federal court system, state laws control what types of property and how much is protected when a bankruptcy is filed.

In other words, if you have lived in a state for more than the past two and a half years, the laws of that state will control what property is protected and which assets may be at risk. If you have not lived in your state for at least the past two and a half years, the laws of the state where you previously resided will typically be applied.

Different states have different strategies regarding what should be protected in a bankruptcy.

In Florida, homestead equity is given great protection. Retirement accounts are protected. Other types of personal property are protected to a dollar value of $1000.00 per person, with an additional value of $1000.00 available to protect equity in a car. If a person is not claiming the homestead exemption, an additional $4000.00 is available to protect personal property.

So a couple filing a Florida bankruptcy that has no equity in their home might be able to protect up to $12,000 of auto equity and other personal property, if they are filing jointly, and depending on whether autos are jointly owned.

Thinking of filing a Melbourne, FL bankruptcy? Considering a Deltona, FL bankruptcy? Call (321) 253-6223 or (386) 218-4973 for a free consultation! Visit us in Melbourne, Florida at SpaceCoastBankruptcy.com. Visit us in Orange City, FL and Deltona, FL at VolusiaBankruptcyLaw.com.

Credit Card Company vs. Elderly Lady…Would You Believe Bank Loses Florida Trial?

Recently at a local county court house, perhaps in Melbourne, Viera, New Smyrna, or Deland, a trial occured in which a credit card company sued an elderly lady over roughly $10,000 in allegedly unpaid credit card debt.

The bank attorney called a witness to appear telephonically from one of the bank’s offices in the midwest. The witness wanted to testify as to the amount owed, the charge off date, the date of the last payment, and so forth.

Under evidentiary law, witnesses can only testify regarding events they have personally witnessed. In other words, if a person did not see a traffic accident, they cannot testify about what transpired in the accident from what they read in a report. Such testimony would be hearsay. However, there is an exception relating to business records. In a situation in which a business regularly maintains records, the custodian of such records can testify to the information in the records, because the custodian of the records has personal experience and knowledge about the policies and procedures that ensure the accuracy of such records.

Under cross examination, the bank witness admitted that she did not work in the department where the records were entered into the system. Nor did she manage anyone entering or maintaining the records. She did not work on the computer systems in which the records were stored. She merely was able to access the records that others created and maintained.

For this reason her testimony was deemed to be hearsay, because she was not a custodian of the records in question. Because she was unable to testify, the bank was unable to prove its case, and the elderly woman was not found to be liable for the alleged credit card debt. A win for the little guy!

Man Forecloses on Bank for Failing to Respond to His Queries

According to the Huffington Post, a Philadelphia man took advantage of an old law and sued Wells Fargo for failing to “acknowledge written requests within twenty days.”  When he filed his complaint against the bank, it did not respond and he won a default judgment for $1173.00.  He then initiated foreclosure proceedings at Wells Fargo’s 1341 N. Delaware Ave. offices, to collect on his judgment, placing a sheriff’s levy against the office.

A similar law would be very welcome here in Florida, where homeowners are unable to get banks to respond to their letters, modification requests, and other questions.  Visit www.SpaceCoastBankruptcy.com to learn more about how people deal with banks and other creditors.