Wednesday, September 19, 2012

Lawyers in "Hot Water" over mortgage modifications

A few years ago I looked into offering mortgage modification services to my Bucks County bankruptcy clients.  Frequently, my clients were attempting to modify their mortgages, but either had a poor experience with a company or lawyer who assisted them or they were unable to achieve a modification on their own. 

I knew there were some snake-oil salesmen promising modifications and I thought there could be a better way.  What I learned after exhaustively researching mortgage modifications, was that there is limited benefit a service or lawyer can provide.  Essentially, as one U.S. Trustee mentioned to me when I was representing a Bucks County Chapter 7 client, "It comes down to diligence and persistence."  She was right. 

My determination is that if someone needs their hand held through the process to meet deadlines and submit paperwork, then they should use a company for their modification.  But, they can easily do it themselves if they are diligent and persistent.  What this means is that a person must submit timely documents to the mortgage company (i.e. paystubs, bank statements) and follow-up with their point-of-contact.  Paperwork seems to get lost frequently during modifications, so the follow-up is key. 

This all leads me to the article in today's Wall Street Journal.  "Lawyers Land in Hot Water" highlights the alleged fraud lawyers have been committing in over-promising and fraudulently marketing mortgage modifications.  The article states that there are approximately 11,000 mortgage complaints involving attorneys received from California's bar since early 2009.  And that's in California only! 

The takeaway from all of this is:  Buyer Beware.  Mortgage modification is hot.  Homes are underwater and unemployment is high.  This makes for a perfect storm for people to seek some mortgage relief.  But, remember that it may be best to pursue this avenue on your own, rather than rely on the promises of a company or an attorney. 

Thursday, September 13, 2012

Fees in a Bucks County Bankruptcy - Chapter 7

The credit to this picture comes from a bankruptcy listserv of which I am a member which then attributes the picture to Reader's Digest.  

Attorneys fees should always be discussed with your Bucks County bankruptcy attorney at the first consultation.  The filing fee is $306 for a Chapter 7 bankruptcy in Bucks County, which is set by the U.S. Trustee

After discussing legal fees, a client must understand that those fees must be paid prior to the filing of the Bucks County bankruptcy.  A Bucks County attorney cannot be considered a "creditor" under bankruptcy law.  Therefore, any payment plan arrangements must be satisfied prior to filing the Chapter 7 bankruptcy in Bucks County

Finally, each Bucks County attorney is required to file a statement with the bankruptcy petition outlining the legal fees (not including the filing fee) received from the client.  This is to ensure ethical behavior and transparency in the attorney. 

Sunday, September 9, 2012

Bucks County Bankruptcy and Student Loans

I recently blogged about student loans and bankruptcy.  It appears that the NY Times is becoming the "voice" for individuals burdened with tremendous student debt against the "accounts receivable management" industry, aka ARM.

Specifically, this Sunday's Times tackles the collection efforts (and bounties) companies are seeing through student loan collections.  Here's the most shocking number,

As the number of people taking out government-backed student loans has exploded, so has the number who have fallen at least 12 months behind in making payments — about 5.9 million people nationwide, up about a third in the last five years.
In all, nearly one in every six borrowers with a loanbalance is in default. The amount of defaulted loans — $76 billion — is greater than the yearly tuition bill for all students at public two- and four-year colleges and universities, according to a survey of state education officials.
 The secret gem in the article, highlights a little-known secret for those in default on student loans and for those who a Bucks County bankruptcy is not an option:
Introduced in 2009, income-based repayment was supposed to help change that by allowing borrowers with high levels of debt but modest incomes to make relatively small payments over a long term. But many borrowers were never told about the income-based option, and many others have been frustrated by the onerous requirements. So far, 1.6 million borrowers have applied for income-based repayment; 920,000 are active participants and another 412,000 applications are pending.
 Thus, it makes sense to consider requesting an income-based repayment plan if the creditors are hounding you.  It is not as lucrative for the "sponge-squeezing" collectors, but that's their problem.

Frequently, student loan debt and inability to repay such debt coincides with credit card debt and/or mortgage foreclosure in Bucks County.  If you need Bucks County bankruptcy help, please do not hesitate to contact me for a free consultation.

Monday, June 11, 2012

Will getting a cosigner for a loan help my credit rating after a Bucks County bankruptcy?

Once someone has completed their Chapter 7 or Chapter 13 Bucks County bankruptcy, credit repair is on everyone's mind.

One major way to improve your credit score is to get a cosigner for a loan.  If you get a cosigner and make your loan payments on time it will certainly improve your standing with the credit rating companies.  But the larger problem is asking someone to cosign with you as that person becomes equally responsible for the loan, even if the intent is that you alone will make the payments.  Many a friendship has been lost over cosigning after credit reports start suffering.

Consider what will happen if something unfortunate occurs and you are unable to make the payments.  Your cosigner then needs to step forward, even though  that was never the original intention. His or her credit rating is in jeopardy if he/she doesn’t make the payments in addition to your credit rating.  Think of the long term consequences very hard before deciding on a cosigner. After you finish your bankruptcy with a Newtown, PA bankruptcy lawyer, you should make a list of potential cosigners and determine your debt capacity to make sure everyone is satisfied.

Sunday, May 20, 2012

What is an IRS Form 1099c?

A debt that is forgiven to you on your Bucks County residence is considered as income to you. Your mortgage company reports the forgiveness to the IRS which will then send you a form 1099c with the amount of the forgiveness which is subject to federal tax.  Different states have different standards as to whether or not the forgiveness is considered as state income.  In any event, you may have to pay taxes on this amount unless you qualify under the Mortgage Forgiveness Debt Relief Act passed in 2007.

In addition, if an individual enters into a debt forgiveness or consolidation with a company, they are likely to receive a 1099c at the end of the year if the company reduces their debt.  I have written about my disdain for "debt settlement" companies before, and the 1099c "surprise" many of their users receive is another reason I still detest them.  Rarely do they reveal, or only in fine print, that if the company is able to negotiate a debt (which they rarely do), you get stuck with taxes due at the end of the year.  

Thursday, May 3, 2012

What are credit rating bureaus and what do they mean for Bucks County bankruptcies?

Credit bureaus gather information on Bucks County debtors provided by lenders you deal with and compile it into a report . Frequently, Bucks County bankruptcy clients already have unfavorable credit scores.  I often tout the benefits of a Bucks County bankruptcy and how they normally overshadow a potential "hit" to one's currently low credit score.  

A numerical credit score is assigned to your report which reflects your likelihood of repaying your debts.  The most used credit score is the FICO score;  ratings range from 300 to 850. The higher your score, the better your rating and chance to be approved for the loan or product you are seeking. The FICO score is a proprietary number, and each credit bureau guards the algorithm behind what goes into a credit score.  

There are three major credit bureaus: TransUnion, Experian and Equifax.  You are entitled to receive a free credit report annually from each of these bureaus.  

Here are the phone numbers for you to call but remember that to get your FICO score, there is a fee:
TransUnion: 800-888-4213
Experian: 888-397-3742
Equifax: 800-685-111

Saturday, March 24, 2012

Life After a Bucks County Bankruptcy: What is an Emergency Fund?

After people go through a Bucks County bankruptcy and have their debts discharged, they frequently ask how to get back on solid financial ground and avoid bankruptcy again.

Most financial counselors and Bucks County bankruptcy lawyers recommend that you have a fund set aside for unanticipated expenses or unanticipated events that will prevent you from making your usual salary. This goal is normally called an "Emergency Fund".

Your goal should be to have the equivalent of six months salary set aside to be used only in extreme situations. What would you do if you suddenly lost your job or your child became seriously ill and you find yourself with huge medical bills? Even more simply, what if the hot water heater in your home goes in the middle of winter?

Use some discipline and set aside a few dollars from each paycheck until you have six months worth of salary. You can arrange to have your bank direct deposit the money and you won’t even miss it. I personally use Smarty Pig to create my emergency and savings funds. It provides a nice interface and tracking tools. When asked, I always tell my internet savvy Chapter 7 and Chapter 13 Bucks County clients to set up an account with Smarty Pig.

Here is the key: Don’t even think about using that money unless it is absolutely necessary!

Thursday, March 1, 2012

How Long Does a Bucks County Bankruptcy Take?

The length of time in a Bucks County bankruptcy is contingent upon whether the debtor is filing for Chapter 7 or Chapter 13.

A Chapter 7, once filed, is usually discharged within four to five months while a Chapter 13 can take anywhere from three to five years.

In a Chapter 13 there is an agreed upon repayment plan of debt whereas in a Chapter 7 debts are liquidated. Always consult with a bankruptcy attorney as deciding which type of bankruptcy to file can be confusing. It can also be extremely complicated if you attempt to file by yourself and you will definitely be entering into uncharted waters.

Sunday, February 19, 2012

What Are the Debt Limits in a Chapter 7 and Chapter 13 Filing?

Can you have unlimited debt if you file a Bucks County bankruptcy? It depends on the type of bankruptcy, either Chapter 7 or Chapter 13.

In a bizarre twist, there are no debt limits in a Chapter 7 filing but there are limits for a Chapter 13. The current limits for a Chapter 13 filing are $360,475.00 for unsecured debt and $1,081,400 for secured debt. Under the current bankruptcy code these amounts are adjusted every three years and is based on the consumer price index for all urban consumers. The next scheduled adjustment is April 1, 2013.

Thus, if you are a former millionaire who has millions of dollars in debt and pass the means test, you may qualify for a Chapter 7. If, however, you are that same millionaire and you are slightly above the median income for your household size (which would put you into a Chapter 13), you cannot file due to the debt limit, thus precluding you from the benefits of a bankruptcy in Bucks County.

Of course, whichever chapter of bankruptcy you file for in Bucks County, there are still many debts that cannot be discharged.

Wednesday, February 15, 2012

What is Adequate Assurance in a Chapter 7 and 13 Filing?

One of the biggest concerns of Bucks County debtors is what happens to their utility services if he/she fell behind in payment prior to filing for bankruptcy. Do not be alarmed!

Section 366 of the Federal Bankruptcy Code provides the debtor with continuance of service providing “adequate assurance” for future service is given within twenty days of filing a Bucks County Chapter 7 or a Chapter 13. The assurance can be a cash deposit, letter of credit, certificate of deposit or some other security agreed upon by debtor, utility company and trustee. Generally, the utility company requests a reasonable monetary amount.

In many communities, like in Bucks County, it often happens that there are a limited number of utility providers so it would be difficult for a debtor to find another company to serve his/her needs. The "adequate assurance" provision provides the debtor with some level of security knowing that, going forward, his electric , phone or gas, will not be turned off.

Of course, the the Bucks County debtor must continue to make regular payments in order for the assurance to remain in effect.

Thursday, February 9, 2012

PA Foreclosure Abuse Settlement

After years of struggling with foreclosure abuses in Bucks County, a multi-state settlement of $25 billion has been reached. The settlement affects approximately 750,000 individuals. As ABC News Reports,
Payments of about $2,000 will be made to about three-quarters of a million households that were foreclosed on through abusive practices, distributed over three years.
A foreclosure in Bucks County can be a stressful event, where a Bucks County resident faces losing their home due to unpaid mortgage or taxes. They were faced with a decision on whether they should file for bankruptcy. Many families and individuals, as a result of the abusive practices of the mortgages companies, had to file a Chapter 13 in Bucks County. The settlement will bring $226 million to the Commonwealth of Pennsylvania.

As many know, a Bucks County bankruptcy lawyer can stop a foreclosure and a sheriff sale. Through bankruptcy, the arrears of a mortgage can be paid through a five year plan. It is sometimes the best path available for people to save their home and get a fresh start.

Wednesday, February 8, 2012

What is a "Statement of Financial Affairs" in a Bucks County Bankruptcy?

A Bucks County debtor filing for bankruptcy must submit a Statement of Financial Affairs (affectionately called "SOFA" to bankruptcy lawyers in Bucks County) to the trustee. This is an official form from the bankruptcy court consisting of twenty five questions concerning all aspects of the debtor’s personal and business financial background related for the previous three years. If the Bucks County resident is filing for bankruptcy, whether they are filing Chapter 7 or filing a Chapter 13, the Statement of Financial Affairs must be completed. If the debtor is married and filing a joint petition, only one statement need be filled out which will contain information on both persons.

All sources of income from employment and business must be disclosed. In addition, any other sources of income, including unemployment, disability, lottery winnings, and recoveries from lawsuits. Also, payments to creditors made within ninety days of filing must be listed with the dates of payment, amount paid, and remaining balance. All lawsuits, garnishments, repossessions, and foreclosures within one year must be listed and explained. Charitable contributions over $100 within the prior year of filing must be disclosed. All losses from fire, theft, gambling or other casualty must also be disclosed. Even safe deposit boxes must be listed along with a description of contents.

If an individual owns a business, an explanation of the business must be included on the Statement of Financial Affairs. This will include the type of Bucks County business they have, if there are assets, and the corporate structure.

As you can see, the Statement of Financial Affairs is extremely lengthy and comprehensive. As one of my Bensalem clients told me recently, "I would hire a Bucks County Bankruptcy lawyer just to help me with the Statement of Financial Affairs!" Due to its complexity, you should rely on your bankruptcy attorney before submitting the statement and, of course, consult him/her should you have any doubts as to what should be included. You want your statement to be as honest and accurate as possible.

Thursday, February 2, 2012

Benefits of a Bucks County Bankruptcy

Most people will do anything to avoid filing a Bucks County bankruptcy as they feel the stigma attached to filing is very humiliating. I believe that it is in our American DNA to avoid the stigma at all costs, even if filing for bankruptcy in Bucks County may be the most cost efficient, effective, and legally supported path to handling overwhelming debt. I personally feel that, in most cases, individuals who start to get financial worries should get a free consultation with a Bucks County bankruptcy lawyer early on as it may save them thousands of dollars (i.e. by avoiding paying hundreds of dollars on minimum credit card payments that will never pay off the balance) and sleepless nights.

Once someone in Bucks County files, he /she has a unique opportunity to turn their life around for the better and achieve all the dreams they once held so dear. It won’t happen overnight, but the opportunity will be there! Of course, certain lifestyle changes will be necessary but the positive outcome will more than compensate for doing without things once deemed as necessities. There is an expression that your glass is half empty or half full; it all depends on how you perceive it!

Aside from the above psychological advantages, there are everyday improvements to your life after filing. Chief among these is that creditors are eliminated from bothering you. No more hassles with phone calls or threatening letters. Also, if you play it smart, your credit rating will be restored after a period of time. Your unsecured debts are removed enabling you to breathe more easily when paying your current bills. You have a chance to be human again and sleep worry free.

Frequently, after I attend the Trustee's hearing with my Bucks County client, my clients will review me on my AVVO profile and thank me for giving them a fresh start. It is so satisfying to hear that they can start fresh and begin their life all because of my Bucks County bankruptcy services.

Friday, January 27, 2012

Gambling Losses and Bankruptcy

In Bucks County and elsewhere, there is a definite stigma attached to gambling losses and you may be embarrassed to admit such losses. However, it is imperative that these losses, which are considered unsecured debt, be disclosed when filing. From time to time, I have filed bankruptcies in Bucks County for a Chapter 7 or a Chapter 13 where Donald Trump's casinos have been a creditor.

Whether or not gambling losses can be discharged depends on many factors. For instance, if you
gambled excessively (by taking cash advances on a credit card) one day and lost, then filed for bankruptcy the next day, chances are the trustee will doubt you ever intended to make an attempt to repay the losses especially if the money used was obtained through a credit card cash advance. In such a case, you would most likely be required to pay back the money owed to the credit card company. Also, the credit card company has the right to object to the discharge of such a recent debt (less than 90 days prior to filing). Here is an interesting article by an Indiana Trustee related to gambling losses.

In some cases in a Bucks County bankruptcy, however, gambling losses can be discharged. With the proliferation of casinos in New Jersey and Pennsylvania (especially in Bucks County) it is inevitable that gambling losses and subsequent filing for bankruptcy will increase. Be upfront with your bankruptcy attorney if you fall into this category and rely on him/her to guide you to the proper course of action.

Tuesday, January 24, 2012

How Does Gambling Income Affect a Bankruptcy?

Bucks County is home to Parx Casino, a place where millions are won and lost each year. In addition, Philadelphia Park hosts horse racing, a longtime staple in the area. If you have won at a casino in the last year, your winnings are reportable in your Bucks County bankruptcy (I will address gambling losses in a future post). It will be factored into your "income" per the bankruptcy laws.

If income from gambling was obtained within the year of filing, it must be reported when filing for bankruptcy. However, gambling winnings include not just winnings in casinos but also lotteries and horse racing. Even if you win a 50/50 raffle, bingo game, or any other game of chance, you must report it.

Whether you have filed for a Bucks County Chapter 7 or a Chapter 13, it does not matter. The income must be reported.

What happens if you don't report the income? First, it is against the law to not report the income. Also, the Bucks County trustees are smart. They may find it on your tax returns. They may find it deposited in your bank account from your bank statements.

As a result, the Trustees may object to your discharge. Be smart, consult a Bucks County bankruptcy lawyer to make sure you file the right bankruptcy and report the right facts.

Thursday, January 19, 2012

What happens if you receive an inheritance after filing for bankruptcy in Bucks County?

The first thing to remember is to be truthful! Any debtor who receives an inheritance within 180 days after filing must report the inheritance to the trustee (normally done through your Bucks County Bankruptcy Lawyer). Failure to do so is a violation of federal bankruptcy law with the potential consequence being imprisonment or other sanctions. Here is an example of bankruptcy fraud where an individual was sentenced to 39 months of prison for failing to reveal an inheritance to the U.S. Trustee.

It does not matter what the inheritance is; whether it is cash, stocks, furniture, automobiles it must be reported However, the debtor is entitled to claim the legitimate exemptions allowed by the bankruptcy law.

In a Chapter 13 bankruptcy in Bucks County, any unprotected inheritance will be included in the repayment plan. In a Bucks County Chapter 7, any unprotected inheritance assets are liquidated and distributed to creditors. As with any other aspect of bankruptcy, the advice of an attorney is critical and paramount.