Dos and Don’ts of Home Loan Modifications

Home Loan Modifications

If you are struggling to make your monthly mortgage payment, you may be considering pursuing a home loan modification. Here are some things you want to be certain to do, as well as some pitfalls to avoid.

Dos

The most important thing to do when investigating the possibility of a home loan modification is to be realistic. Your lender has no legal obligation to change the terms of your loan. They will only give serious thought to doing so if it’s in their best interests, so you’ll have to put yourself in their shoes and try to determine why you should be allowed to modify the loan.

You’ll also want to put together an honest budget before you take any further steps. Look at how much income you have, as well as your other expenses, and be realistic about what you can afford per month. Don’t try to negotiate a modification if you won’t be able to stay current.

Do consider filing a Chapter 13 bankruptcy petition. It may be the best form of home loan modification available. You’ll have the added bonus of the automatic stay in bankruptcy, so that creditors can’t bombard you with calls and letters.

Don’ts

Don’t assume that your modification is permanent—verify it. If your lender agrees to a modification, be careful to clarify that it’s not just a trial modification. A lender will often allow you to amend the terms on an informal basis, but retains the legal right to reinstate the original terms. Keep thorough records of every correspondence between you and the lender, so that you have evidence that the modification is permanent.

Contact Neuner & Ventura, LLP

At Neuner & Ventura, LLP, we provide a free initial consultation to every client. To set up a meeting, call Neuner & Ventura at 856-596-2828 or send us an e-mail. We do, however, reserve the right to charge a fee to review any work done by another attorney. Evening and weekend appointments are available upon request.

Representing Clients across South Jersey

Challenges to the Discharge of Luxury Purchases and Cash Advances

One of the advantages of a Chapter 7 bankruptcy is that it allows you to permanently discharge certain debts, meaning that you will no longer have personal liability for them. As a general rule, credit card debt can be discharged, but there are limits.

Under the bankruptcy laws, any debts arising from the purchase of luxury goods  within 90 days of your petition for bankruptcy  made from a single creditor will be presumed to be fraudulent and non-dischargeable, if the purchases total more than  $650. This result is not automatic. The creditor has to file a Complaint in the bankruptcy seeking non-dischargeability. If it does so, the burden is on the debtor to prove that the purchases or resulting debt were not made with intent to defraud the creditor. Stated another way, a creditor will not be required to prove that you did not intend to pay or that you intended to discharge the debt in bankruptcy. Instead, you will have to  introduce evidence to demonstrate that the purchase was not a luxury, but necessary for the support or maintenance of the debtor or a dependent or spouse, or that the purchase was not made for a fraudulent or improper purpose.

For purposes of the bankruptcy law, a luxury item is considered to be any goods or services not reasonably required by the debtor for his or her own support or for the support of any legal dependent. While the determination of whether an item is a luxury item depends on circumstances, items like food, gas, clothing and furniture are more likely to be considered non-luxury than jewelry, home appliances, books, or a computer.

The same presumption applicable to luxury purchases also applies to cash advances on a credit card or other open end credit plan made within 70 days of filing, to the extent that these total more than $925. This does not apply where the cash advance is for a business purpose.

We generally recommend that our clients stay away from these kinds of purchases or use of credit. Like any unusual or suspect financial dealings, these will commonly result in suspicion and greater scrutiny across the board. When anticipating a bankruptcy, it is generally best to play it straight and stay within the bounds applicable to the “honest but unfortunate debtor”.

That said, a certain amount of legitimate planning going into a bankruptcy is permitted. The wisest course of action is to consult with and follow the advice of an experienced and ethical bankruptcy lawyer.

Contact Neuner & Ventura, LLP

At Neuner & Ventura, LLP, we provide a free initial consultation to every client. To set up a meeting, call Neuner & Ventura at 856-596-2828 or send us an e-mail. We do, however, reserve the right to charge a fee to review any work done by another attorney. Evening and weekend appointments are available upon request.

Representing Clients across South Jersey

Lessons from the Dark, Lucrative World of Debt Collection

Over the years, we have seen our clients’ individual unpaid debts being collected by one collection agency after another sometimes involving abusive tactics. Many but not all debt collectors are legitimate and law-abiding. But from time to time our clients run into debt collectors who are really abusive. When we have confronted these bad actors on behalf of our clients, they have not hesitated to extend their abuse, including foul language, to us. When he have worked with clients outside of bankruptcy to settle debts or have raised questions about a debt’s legitimacy, we have seen the debt getting handed off to collection agency after agency, each apparently ignorant of the past history or of the questions we have raised about the debt. When we have demanded documentation to support a challenged debt, the response is often to ignore these requests.

A recent expose in the New York Times Magazine entitled “The Dark, Lucrative World of Debt Collection” details the sometimes sordid behind-the-scenes reality of such debt collections. It is eye-opening. Here is a link to it: http://www.nytimes.com/interactive/2014/08/15/magazine/bad-paper-debt-collector.html?a=1&m=en-us&_r=0 As this expose shows, bad debts are a lucrative business. Debt buyers pay pennies on the dollar for bundles of bad debt, that they then try to collect, making large profits. And at some point they will sell the debts off again. What is being handed around is just a list of names, Social Security numbers, contact information, account numbers and supposed balances due. This may or may not be accurate.

These debts can include some that are so old that the right to sue on the debt has expired. In other words, the debt is uncollectible. Although not mentioned in the article, it logically follows from the minimal and often old account information that is sold, the debt may have been settled or discharged in bankruptcy.

The upshot for those facing collections is “debtor beware”.

Based on our experience and what this article reveals, here is some advice to follow if faced with unpaid debts in collection:

1. Don’t assume that the debt collector owns the debt or is authorized to settle it. You should receive a written demand on the debt stating who owns the debt. The demand should state that you are entitled to dispute the debt and if so they will supply proof that you owe it. This is a matter of federal law. If this has not happened, be very suspicious. As the article points out, some supposed debt collectors are thieves trying to collect someone else’s debt.

2. If you settle, make sure you have something in writing from the debt collector making a firm offer. This must have all the account information and must clearly state what payment terms will be accepted as “payment in full” or similar language. When you send in payment, make sure the check has a notation of the debt, the account number and “payment in full” or “payment under settlement letter dated [DATE]” or something similar.

3. Do not respond to threats to send you to jail. These are illegal and bogus.

4. Any time you are dealing with suspected abuse, you should keep a detailed log of who called, the date and time, what was said, and the contact number. The number given may be a bogus one. Always ask for a telephone number “in case we get disconnected”. You might then consider hanging up then calling back claiming you got disconnected.

5. Recording these calls is legal, so long as you tell them you are recording. Knowing they are being recorded will give pause to any legitimate collector. If it does not, then be extremely suspicious.

6. It may make sense to get an attorney involved. If you already have an attorney, then your conversation should be limited to telling the collector that, demanding that he/she “correct your records”, and contact your attorney. If you have hired an attorney to file bankruptcy, most legitimate collectors will then contact the attorney to verify this, then put your debt at the bottom of their stack. This only works if you have really hired an attorney.

7. If you are having these types of troubles, it is probably a good idea to meet with a qualified and experienced bankruptcy attorney to understand that option. You should prepare a household budget showing all your basic living expenses. Whether or not you proceed with a bankruptcy, don’t ignore this option. Bankruptcy under Chapter 13 can allow you to pay your debts to the best of your ability, in a controlled and court-supervised process.

 

How creditors in bankruptcy can lose out by “sleeping on their rights”

At recent bankruptcy conference I attended, we reviewed a lot of recent cases. These all reinforce something I have told many people over the years: when faced with a bankruptcy of someone who owes you money, delay and inaction can be a costly mistake.

Some examples: A mortgage creditor who failed to object to a modified Chapter 13 bankruptcy plan that gave the homeowners two years to sell their home and a similar period to sell their business equipment (also part of the bank’s collateral) lost the right to later seek permission to foreclose on the home through a motion for stay relief. It made no difference that before the modified plan was confirmed by the bankruptcy court, the debtors had agreed that the bank could have stay relief if they failed to meet certain payment obligations. The later approval of the modified plan controlled.

In another case, the bank had an Assignment of Rents on the debtor’s rental property that gave it the right, if the bank served notice of default, to collect the rents directly from the tenants. Although the debtors defaulted, the bank did nothing, and the debtors continued to collect the rent (while not paying the bank). The bankruptcy trustee stepped in to try to get the rents back. The court said no because the rents belonged to the bank IF they asked for them.

I had another case recently where a landlord who was owed rent by a tenant in Chapter 13 did nothing for the first few months when the tenant seemed to be resuming payment (but not paying the past due amounts which were supposed to be paid bakc under the Chapter 13 Plan). The deadline for the landlord to file a proof of claim passed without the landlord filing a claim. The debtor stopped paying rents. The landlord has probably forfeited its right to get paid anything on its back rents owed when the bankruptcy was filed.

There are many other examples I could provide. The takeaway for creditors is to start acting as soon as you learn of a bankruptcy filing, especially in Chapter 11 and Chapter 13 cases. When in doubt file a proof of claim and stay on top of what is happening. Pay attention to all notices and deadlines in them. Most importantly, creditors need to find out what the bankruptcy means for them and  develop a plan of action.

With over 30 years of experience representing creditors, trustees and debtors, we are able to help with timely and cost effective advice.

 

Recognized Quality & Experience