Very Honored with My New Award - Client's Choice Award

Lawyer Paul Lang | Lawyer Bankruptcy

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. 

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. 

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.

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.

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.  

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