Parents – like all of us – get older. Parents – like all of us – are human. And parents – at times – find themselves in a financial mess. Over the years, I have had a chance to represent older debtors, and in many cases, that representation resulted from the urging of their children. If you think your parent or parents might need to file bankruptcy, you might want to think of a few things.
From FoxBusiness: a look at the legislation Congress is mulling over to give bankruptcy judges more authority to modify residential mortgages.
Have you ever heard those radio commercials touting "debt elimination?" It usually has an announcer proclaiming that "my plan does not reduce your debt, it eliminates it!" One commercial in particular on a local station also has a speaker who says "using this system, I will be able to pay my 30 year mortgage in just three years making only the money I am making now." That sure does sound too good to be true. Well, it was a bad week for two scam artists from California who ran such an out. The Mercury News reports that on Tuesday they were sentenced to more than 25 years in prison for mail fraud.
Actually, this bit is yesterday's news, but it's worth mentioning: The New York Times reports that the mortgage crisis is not only affected lower and middle income borrowers. According to the report "affluent consumers with annual incomes of $100,000 or more ... are increasingly being ensnared in the home mortgage crisis."
And finally, here's something we might want to think about this weekend: is the US Dollar on its last leg?
I have written about so-called "debt settlement" companies that tout a benefit of paying off your debt quicker and cheaper. In the long run, consumers are left with less money and still at the door of the bankrutpcy court.
From the March 6 issue of Business Week:
The booming business has caught the attention of prosecutors and regulators, who say such programs can leave consumers in worse financial shape. Fees for the services run high. And when banks don't agree to settle—if the settlement firm contacts them at all—consumers get hit with late charges and penalized with higher interest rates, leaving borrowers with even more debt than when they started.
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And Speaking Of Credit Counseling Predators...
Credit Counseling Predators
The foreclosure crisis sweeping the nation is also sending some mortgage companies into financial ruin, leaving many folks caught in the middle. Last week the Federal Trade Commission issued a new publication giving consumers advice on what to do if their mortgage company files bankruptcy.
The PDF of "How to Manage Your Mortgage If Your Lender Closes or Files for Bankruptcy" can be found here. There is also information how to obtain the publication by mail.
Houston-based LTD Financial Services got slapped with $1.3 million in civil penalties to settle FDCPA violation charges.
Washington Mutual issued a press release in response to the action filed by the NY Attorney General. We reported on that action earlier this week.
An astute observation on the passage of BAPCPA: "Be careful what you wish for."
I received a call today from someone with questions about Chapter 7. I receive many calls a day, but what made this call interesting was that the caller told me that they conferred with another attorney and was told that with the passage of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, only 50% of debt was now dischargeable in a Chapter 7. My response was "nope, not true."
The caller also told me that according this other attorney there was no law that required a bankruptcy filing to appear on the credit report for 10 years. According to what the attorney purportedly stated: “Credit card companies want you to believe there is a federal law out there that requires it, but there is not.” My reponse was "that's not my understanding." Since this issue is not a primary one in my practice, it's not something I can rattle off the tip of my tounge, like I might be able to with regard to discharge exceptions. So I decided to take a quick detour from my petition preparations and research the issue a bit further.
Let me start with the easy one: nothing in BAPCPA declared that only 50% of debt would be discharged in Chapter 7. If anyone is telling you that, they do not bankruptcy law.
The claim that there is no federal law that requires a credit card company to report a bankruptcy filing is also hogwash (I could think of another term, but this is a professional site). Title 15, Section 1681c(a)(1) of the United States Code states that credit reports may not contain information concerning “[c]ases under Title 11 or under the Bankruptcy Act that, from the date of entry of the order for relief or the date of adjudication, as the case may be, antedate the report by more than 10 years.” And there is an exception. Under 1681(b)(2) a credit report may contain information about a bankruptcy that is more than 10 years old if the report is to be used in connection with a “(1) a credit transaction involving, or which may reasonably be expected to involve, a principal amount of $150,000 or more; (2) the underwriting of life insurance involving, or which may reasonably be expected to involve, a face amount of $150,000 or more; or (3) the employment of any individual at an annual salary which equals, or which may reasonably be expected to equal $75,000, or more.”
So the bankruptcy can stay on the credit report for up to 10 years, an din come cases, even longer. If any attorney tells you otherwise, invite them to call me.
When I come across something that I think might help readers answer this question, I be sure and post it here.
Read more at MSNBC.
From today's New York Times:
Borrowers who took out loans in the first six months of 2007 are falling behind on payments faster than homeowners who took out loans last year, according to a report by Friedman, Billings, Ramsey, an investment bank based in Arlington, Va. The data suggested that more Americans could lose their homes and that the housing market’s troubles might persist longer than many analysts have been predicting.
Here’s one for the “believe it or not” list: ostriches do not hide their heads in the sand. I know – you’re thinking “get OUT!” I was as shocked as the next person. Apparently, while they do not bury their head, they will sometimes lie on the ground trying to make themselves look inconspicuous. According to The Phrase Finder:
The story also relies on the supposed stupidity of ostriches, and of birds in general. In fact, there's little to support that either as birds have a significantly larger brain to weight ratio than many other species of animal. The notion is that the supposedly dumb ostrich believes that if it can't see its attacker then the attacker can't see it. This was nicely reformed as a joke on Douglas Adams' 'Hitchhiker's Guide to the Galaxy', in which the 'Ravenous Bugblatter Beast of Traal' was described as 'so mind-bogglingly stupid that it assumes that if you can't see it, then it can't see you.'
Birds are not stupid (at least not all of them), and I find it difficult to believe that a bird that merely lies about hoping not to be avoided (such as one might do at a high school or college reunion) is intellectually deficient. So if ostriches don’t hide their heads in the sand, why do people struggling with high house payments often do just the opposite?
Continue reading "A Message For Those With Their Head in the Sand" »
Anyone facing foreclosure, or considering just "walking away" from their home, must read this important announcement from the IRS.
People explore all of their available options before filing bankruptcy. Bankruptcy is not for everyone struggling with debt. Some may benefit from credit counseling, while others may benefit from loans from family members. However, there is one option that I am pretty sure does not work for most people I meet: “debt settlement” companies. In many cases, I have represented people who unsuccessfully tried this option and only ended up losing their money and adding to their stress. A conversation I had today with a prospective client reminded me that these "debt settlement" companies are still lurking out there, and people struggling with debt need to think about these issues before signing on the dotted line.
Continue reading "Thinking about Debt Settlement? Think about this..." »
Minimum payments on Bank of America credit cards: going up.
The Massachusetts foreclosure rate as measured by April filings: going down.
Gasoline prices: going up.
The cost of electricity as we head into the summer season: going down.
Number of people over the age of 45 seeking bankruptcy protection: going up.
Clients have been kind enough to share with me some of the many letters and solicitations they receive from people and companies who have learned of their looming foreclosure. Actually, to be more accurate, clients tell me they are deluged with these letters. Some of these letters offer assistance and provide truthful and accurate information. Others however, are clearly designed to mislead.
Recently a co-called “US agency” (who for now will remain nameless) sent a letter to a client declaring this:
Bankruptcy stops foreclosure but you will lose your home. (Note: Only 11% of bankruptcies are successful.
People facing foreclosure need to do their research and not rely on what one company, or a group of companies tells them. Unless a bankruptcy attorney who they have met with has told them that in no uncertain terms, bankruptcy is not an option, no one should assume that it is not. And companies who make such broad sweeping generalizations that are simply false should be avoided.
Subscribers to our newsletter might remember our recommendation of iamfacingforeclosure.com as a recommend blog to visit often. Casey Serin is a 24 year old "would be real estate mogul" who is learning some difficult lessons about real estate, investing, mortgages, and foreclosures. On his blog, he shares his thoughts and experiences on his journey through this undeniably difficult process.
I have been told more than once that people follow this site for months before they have the courage to call me seeking advice. Today, Mr. Serin says simply: "Something's Gotta Give." A review of the postings of the last several weeks reveal that the pressures he faces are, on some level, taking a toll. But the fact that he shares them with the public and admittedly wants to "help others in trouble" is something readers of this blog need to know.
By the time many people come to see me, they have already been feeling overwhlemed for some time. The financial pressures can lead to depression and isolation. Here, Mr. Serin is providing an exceptional public service: reminding others similarly situated that they are not alone.
Please visit I am facing foreclosure.com.
From Today's Boston Globe: Boston’s Department of Neighborhood Development (DND) announced that the foreclosure rate in Boston has quadrupled since 2005.
The numbers are still much lower than the 1,700 foreclosures in Boston in 1992, when the technology-based economy ran aground and some property values were cut in half. But Mayor Thomas M. Menino said he is concerned about the current figures, fueled by the rising delinquencies of risky subprime mortgages.‘‘It’s not just a Boston problem. It’s a nationwide problem,’’ he said. ‘‘We need state help. We need federal help.’’
That help may have to come from Washington. In an April 17 decision (Waters v. Wachovia Bank, N.A., et al.) the US Supreme Court held that Wachovia’s mortgage business, whether it was conducted by the bank itself or through the bank’s operating subsidy, is subject to the oversight of the Office of the Comptroller of the Currency pursuant to the National Bank Act (12 USC Section 1, et seq.). It is not subject to the “licensing, reporting and visitorial regimes of the….States.” A bank’s subsidary mortgage company is subject to state regulation only if the parent bank would be if it performed the same function.
Consumer groups have called for Congress to reform the bankruptcy code to save the homes of Americans who are mired in the subprime mortgage foreclosure crisis.
"For most of these families, bankruptcy is the only viable option to save their home," said Henry Sommer, president of [the National Association of Consumer Bankruptcy Attorneys]. "This current exclusion is contrary to sound policy, and operates to disadvantage low-wealth and middle-income borrowers as compared to debtors with the wealth to own more than one home."
You might want to read this from yesterday's New York Times:
...it’s now clear that people who chose renting over buying in the last two years made the right move. In much of the country, including large parts of the Northeast, California, Florida and the Southwest, recent home buyers have faced higher monthly costs than renters and have lost money on their investment in the meantime. It’s almost as if they have thrown money away, an insult once reserved for renters.
On Paula Zahn Now, host Paula Zahn examines whether mortgage brokers are to blame for the mortgage crisis. The series "Debtor Nation" continues tonight at 8:00 pm ET. Transcripts from last nights "Debtor Nation" are available here
I spent last night at the Kendall Square Cinema in Cambridge with a number of local bankruptcy attorneys for a special screening of Maxed Out. The movie tackles an important subject for my clients, for me and for just about everyone else I know: debt.
Director James Scurlock take us on a journey from the living rooms of average Americans to the halls and hearing rooms of Capital Hill. From there you will hear the personal stories (some funny, some not) of average people. You'll hear from bankers and credit card companies. You will hear from folks that you can agree and empathize with. You will also hear from folks that will leave your stomach feeling a little…um, let’s just say a little “off.” If you are remotely curious how the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 sailed through the House of Representatives, you need to see this movie.
Also, if you are wondering…
...how and why people are facing foreclosure;
...how and why people find themselves buried in debt they can not (and may not ever) climb out of; and
...what average people do when they are staring the debt-monster in the eye,
see this movie. No one can afford to miss it.
The screening was sponsored by Americans for Fairness in Lending, a non-profit group based in Boston. Please visit their website where you can learn more about what they do.
Many distress homeowners tell me that they are hoping to refinance their way out of their adjustable rate mortgages. USA Today reported this weekend that lenders are already raising the bar for prospective borrowers. In other words, it is not nearly as easy to refinance as people may need it to be.
To stem their losses, lenders nationwide are notifying mortgage brokers to cancel loan programs. Many of them are:.
•Reducing loans for 100% of the purchase price.
•Reducing the number of "piggyback" loans, whereby a lender makes one loan for 80% of the purchase price and a second loan for the remaining 20% of the price at a higher interest rate.
•Raising the required credit score.
•Requiring more documentation of a borrower's income and scrutinizing the appraisal and comparable-home sales data.
The news on the housing market is not cheery.
The FDIC reports that residential mortgage loan charge offs climbed to almost 200% during the 4th quarter of last year. The FDIC also reports that the number of deliquent loans at banking institutions is also on the rise.
The Japanese are getting concerned over increasing defaults in sub-prime mortgage loans here in the US. They are not the only ones. Freddie Mac today announced "today announced that it will cease buying subprime mortgages that have a high likelihood of excessive payment shock and possible foreclosure."
So there's all that news, and then we have today. Apparently tired of the cold winter weather, the stock market headed south. Marketwatch reports that todays drop (which included a 200 point drop in one minute) is the worst one-day drop since 2001. From Breitbart.com:
The housing market, which the Street had been hoping had bottomed out, also looked far from recovery after a Standard & Poor's index indicated that single-family home prices across the nation were flat in December. A later report from the National Association of Realtors said existing home sales climbed in January by the largest amount in two years, but the data didn't erase housing-related concerns, as median home prices fell for a sixth straight month.
Some argue that the drop is simply a long overdue correction. Others blame the Drudge Report.
All I can say is that these sure are interesting times.
When someone asks you where you reside, the answer is usually easy. But when someone asks you where you are domiciled, the answer might not be the same. A recent Massachusetts bankruptcy court decision determined that a debtor who claimed Massachusetts was only a temporary home could not use the Massachusetts homestead statute to protect property in Michigan where he was domiciled.
The debtor sought to shield from creditors approximately $30,000 in equity in the Michigan property. The Massachusetts homestead statute (subject to certain limitations) protects up to $500,000 in equity in a debtor’s residence. The Chapter 7 Trustee objected to the claimed exemption. He argued that at the creditor’s meeting, the debtor admitted that he had not occupied the Michigan property and had lived in Massachusetts for several years. Because he did not reside in the property, the Chapter 7 Trustee argued that the debtor could not use the exemption.
Debtor claimed that the property had been in the family for generations and is acquired it in 1988. He lived in the property for approximately 10 years until he moved to Massachusetts to take care of his ailing grandmother. He viewed the move to Massachusetts as temporary. While here, he continued to maintain the property and visited it once per year. He did not rent it out. In December, debtor’s grandmother died and he argued that he intended to return to the property.
Debtor argued that he could only use the Massachusetts homestead exemption because he resided in Massachusetts prior to filing. He argued that while the homestead statute does not expressly state whether a home must be located in Massachusetts in order for the statute to apply, he is entitled to use that exemption. He resided in Massachusetts when he recorded his homestead declaration. The Trustee then claimed that based on the debtor’s responses to his objections, the debtor resided in Michigan at the time of the filing, and therefore, the Debtor must choose between the federal or Michigan exemptions, not Massachusetts.
Continue reading "Homestead Update: Domicile v. Residence" »
Many people get tax refunds, and today Reuters reports that a National Retail Federation survey reveals what some will be doing with their refunds:
...According to the survey, which polled 9,027 consumers between February 1 and February 8, only about 10 percent will dedicate a portion of their return to major purchases or a vacation. About 43 percent plan to use it to reduce debt, while about 38 percent see saving it, and more than 25 percent will put the money toward everyday expenses.So, what are you doing with your refund this year?
The Chief Economist for the Real Estate Center at Texas A&M University is warning struggling homeowners about foreclosure 'rescue' scams:
Here is how the scam works. The homebuyer gets behind on mortgage payments. The predatory lender offers a “loan to get caught up” on the delinquent mortgage payments. In exchange for the rescue, the homeowner signs over the title to the predator, who promises that the homebuyer may remain in the home while paying rent. The predator then sells the house to someone else, and the original homeowner gets an eviction notice.
Atlanta bankruptcy attorney and fellow NACBA member Jonathan Ginsburg has a great post today and recommends two websites that I will also pass along:
The first is a blog called Debt Free and more notably, a recent entry called "How the Red Flags of Debt Can Save You."
The second, and definitely more entertaining is StopBuyingCrap.com.
In recent years, the Massachusetts housing market has been – in a word – ridiculous. Prices of modest homes have not been in line with income. In other words, owning a home in Massachusetts has been unaffordable for many. As a way around this, mortgage companies (and brokers) came up with creative mortgages. For example, a borrower could pay interest only for a few years, while paying nothing towards principal. The thought of getting a 100% mortgage did not seem so daunting at the time because homeowners have believed that they could refinance later when the values of their homes increased with the market. Those prospects are looking slim.
Home prices in Massachusetts are falling and 2006 saw the worst one-year drop in prices since 1993. As reported in the Boston Herald:
The median price -- the point where half of homes sell for more and half sell for less -- dropped 5.8 percent, from $345,000 in 2005 to $325,000 last year, according to a report by The Warren Group, a Boston-based publisher of regional real estate data and other financial information.For many (especially first time buyers) who bought in at the latter part of this “wonderful decade”, the medicine could be quite difficult to swallow. And even if you did not buy your home recently, you might be in a regrettable position if you refinanced into one of those creative mortgages and took some cash out.
That price had grown 12 straight years, beginning in 1994.
"You have to realize that that was a wonderful decade," said Timothy Warren, CEO of The Warren Group, referring to the last 10 years of home sales. "I think we have to take our medicine and realize that it can't go up forever."
A realtor told the Standard-Times that the market is not crashing at all. He “likened the market to being at the top of a pyramid, about to roll over into a plateau of moderation and consistency.” This is not a particularly good metaphor since the only pyramids I have ever seen with a “plateau” are those from the Mayan era, and what happened on those “plateaus” was rather heart-wrenching (pardon the pun). Also, I have noticed that the the other side of the “plateau” goes down.
Even though the articles end on an upbeat financially distressed homeowners need to be proactive. Contact a professional. Learn more about your options. Listen carefully and choose wisely. And don't assume that because people are whispering things like "soft landing" and "plateau" that the news will be any better tomorrow.
Medical insurers are toying with a program that would let patients on their plans charge medical expenses that are not covered by insurance, such as co-payments and deductibles, or even medical services that are not covered. If patients cannot pay, the insurer will pay the bill, and then the patient will owe the insurer (with interest). Proponents are touting the program as working like a credit card and designed to “boost collection of unpaid medical bills, a major drag on hospital profit margins.”
Hospitals have been struggling to collect unpaid medical bills as rising numbers of Americans go without health insurance and those with coverage face steeper costs. Unpaid bills, also known as "bad debt," have been rising for several years and are seen worsening in 2007.
Now, patients can get even deeper into debt.
Today I received a phone call from a client who received their Chapter 7 bankruptcy discharge earlier this year. They are applying for a job and as a part of the screening process, the employer is requiring a credit report.
The prospective employer does not have a problem with the bankruptcy, but does have a problem with a $34,000 debt appearing as still being old and delinquent. However, the debt was discharged in the bankruptcy. They do not owe it.
While the prospective employer might be satisfied with documents I provide them, it should not be assumed that other prospective employers will be as accommodating. The reporting of the debt as still being owed is an error. It is either the fault of the credit bureau or the fault of the creditor who is reporting inaccurate information. Certainly, I can point that out, but if a prospective employer wishes to rely on the information in the credit report, they are free to do so - even if it is wrong.
While the client may have remedies to address this incorrect entry on the credit report, as I write this and post it to this blog, the incorrect item is still there. Banks as well as prospective employers and landlords may rely on incorrect information, and may make adverse decisions based on it.
With all of that said, please make it a habit of checking your credit report at least two times per year. If you have filed bankruptcy and a debt you know was discharged is still appearing as being owed, contact an attorney (start with the attorney who handled your bankruptcy). Do not wait until you receive a call that you might not get that credit line, or that job, or that apartment because of an incorrect item on your credit report.
According to a report in the Cape Cod Times, a record number of homeowners on Cape Cod are facing foreclosure. While there are a number of reasons why this is happening, it is also reported that folks facing foreclosure are waiting far too late to take appropriate remedial action. Nancy Davison, vice president of the Housing Assistance Corporation says:
They stay in denial until it reaches a point where it is difficult, if not next to impossible, to come up with a solution to the delinquency.I add that many also do not have a back-up plan, a topic that I have discussed here. If the problems with the mortgage are present, or if they problems are foreseeable, then it’s time to start exploring options and taking action.
In addition to the report from the Cape Cod Times, there is word that foreclosure rates statewide increased nearly 300 percent in November, and the rate could even surpass the 1991 record.
Lately, I’ve been meeting with clients who are facing an imminent collection action (or two). For example, I might get a call on a Tuesday, and a foreclosure auction is on Wednesday, or a client calls to cancel their appointment because they cannot get to the office because their car was repossessed. In others, there is a court date, or an ordered garnishment. In virtually every instance, folks have been trying to deal with the debt issues themselves.
Sometimes, they are dealing directly with the creditor, trying to work out a deal only to have it fall through at the last minute. Others, they are heading from bank to bank, or calling credit card company after credit card company looking for an extra extension of credit to get them through. And still others are hoping that an uncle/brother/parent/grandparent can lend them money. Regardless of what they tried to do, their efforts did not pay off.
Then, they are sitting across from me. While I admit I am not the first person people call when they are struggling with debt (notwithstanding my abilities and off-beat sense of humor), being the last person is not necessarily a good thing especially when if I am forced to say is “you’ve waited far too long and there is nothing I can do.”
Let’s not forget that the Bankruptcy Code now requires credit counseling: the ticket in. And let’s not also forget that while bankruptcy protection is still available, the code now requires that we attorneys get a lot more information and documents than we once had to. If your foreclosure auction is tomorrow, the last thing you want to hear from me is “I can help you – but I need at least six months of pay stubs.” Perhaps the second to the last thing you want to hear is: “I also need your tax returns.” Of course, that might really be a problem…unless you have not filed your tax returns yet….or, have not filed them for quite some time.
Here’s my point: the majority of us do not go to bed at night only to wake up and be more broke than we were the day before. It’s something that grows for a period of time. Sometimes weeks. Sometimes months. Sometimes years. While folks might try borrowing from relatives, getting loans, credit counseling or negotiating directly with creditors, folks need to have a back up plan just in case one – or all of those of those attempts are unsuccessful. Plan accordingly.
Please, plan accordingly.
When you’re deep in debt, going to the mailbox can feel pretty overwhelming. In fact, I’ve had clients tell me that it’s something that have dreaded on a daily basis. Of course, this time of year, in addition to bills and junk mail, there are also greeting cards from friends and family.
I still get holiday greeting cards from people I have not spoken to in almost 20 years (let’s not let Roy, my associate know that as he’ll only remind me how old I am). Of course, I do not get cards like the one that fellow NACBA member and Hawaii Attorney Stuart Ing recently shared.
I am not sure if it’s funny, or just plain wrong. The artwork is pretty. It is apparently designed by Hallmark artist Johne Richardson (I did not misspell the first name).
The greeting card is fairly inoffensive to the eye. Soothing. A means of conveying peaceful wishes to someone struggling...almost like a sympathy card. And then... I get to the requisite FDCPA language on the inside left. You’ll need Adobe, – but you can check it out here.
Years ago, I remember the big push for homeowners to convert from oil or electric heat to natural gas. At that time, it was touted as cheap and clean. While I am no chemist, I have no reason to believe it is no longer clean. However, based on many discussions with clients over the past couple of years, I have no doubt it is no longer cheap, and for some, it's what's pushing them over the financial edge and ultimately in my office.
So I was a little taken aback to learn that the 900 employee strong Marcal Paper company filed for bankruptcy protection today. The Chairman and Chief Executive, as well as the founder's grandson, Nicholas R. Marcalus had this to say:
The price increases in energy have proven to be immensely difficult. Demands by our lenders created liquidity pressures which caused the company to file for the continued restructuring under Chapter 11.We believe that the decision to file, although difficult, was in the best long-term interest of our company, employees, customers, vendors and other valued business partners. We plan to take advantage of the opportunities presented by this restructuring to address both our financial and operational issues in order to position the company for long-term success.
I would vote yes. According to The Warren Group, "Massachusetts home sales fell by double-digit percentages in October, and the median sale price of single-family homes dropped 6.9 percent compared to October 2005..." And there's more: "condominium sales dropped 19.5 percent in October, down to 2,226 units sold from 2,765 during the same month in the previous year. The median condominium sale price dropped 4.8 percent to $261,750 from $275,000."
This does not bode well for homeowners who have been hoping for continued growth in home values, which would in turn, allow them to tap into equity and refinance their way out of adjustable mortgages. It doesn't sound like that can happen any time soon.
In a press release, Timothy Warren, Jr. , the CEO of the Warren Group had this to say:
“While we expect the market to stabilize sometime in 2007, it appears as though the housing sector is undergoing a significant correction.”
I have no idea what why he expects the housing market will stabilize sometime in 2007. If anyone has a clue, I encourage you to comment.
According to a report in today's Boston Globe, there's a "marked increase in the number of troops stripped of their security clearances because they are so deeply in debt."
The number of soldiers who are losing their clearances because of financial problems has nearly doubled over last year.
Interest rates have pushed mortgage payments higher. The softening real estate market has made it difficult for homeowners to sell or refinance. And just in time for the holidays, Boston is increasing its residential tax rates…and for some, the increase is going to hurt even more. From Boston.com:
The annual tax bill for the average single-family house will increase from $2,755 this year to $3,093, starting in January. The estimated bill for the average two-family house will jump from $3,307 to $3,857, while the bill for the average three-family house is expected to increase from $3,725 to $4,309.
Meanwhile, in other news, some argue that the financial crisis facing homeowners is nothing like it was in the early 1990s. The Lowell Sun reports that might not be the case:
Massachusetts homeowners had 4,891 foreclosure actions filed against them during the third quarter of this year, 66 percent higher than the same period in 2005, according to ForeclosuresMass.com, a provider of such data. The most recent data indicates that foreclosure filings are on record pace, higher even than the dark days of 1991.
Statistics have been floating around for months (even on this site) about the foreclosure rates throughout the country. However, an article in the Denver Business Journal raises an interesting question: what’s really behind those numbers?
"What's coming through here is that more people are giving up," [Lakewood, Colorado Realtor Lance] Chayet said.What the numbers don't tell, he added, are whether the sellers who have taken their properties off the market are doing so temporarily until after the holidays or whether sellers are so desperate that they are allowing their homes to go into foreclosure.
Colorado currently leads the country in foreclosure rates. But the article certainly makes me wonder: with Massachusetts foreclosure rates continuing to rise, and the housing market still on a downward slope, could the same thing happen here?
I’ve often commented on the sad tactics debt collectors use to shake down distressed debtors. Fortunately, there’s no prize for the sleaziest tactics. If there were, Alpine Credit Inc. out of Lakewood, Colorado would win a blue ribbon.
A client of my colleague and fellow NACBA member Will Evans received a letter from Alpine that conveyed this delightful message:
“The bench warrant from your arrest will remain in effect until your judgment is satisfied. We are confident, at some point in time you will be pulled over for a traffic violation, will need to renew your drivers license, or will be arrested at your home. You must post a cash bond before you will be released from jail. Your failure to face the seriousness of this matter will only result in further expenses.”
Interestingly, Alpine Credit apparently touts itself as being “professional”, “ethical” and “legal.” For real.
Will tells me that his client was “…in extreme distress because she was afraid to take her kids to school for fear of being pulled over and arrested in front of them.”
At the risk of sounding unprofessional, what kind of desperate little scum-bag bill collector needs to descend to such levels? I can't imagine it's ethical, and I know it's not legal.
Most people would – if they could - pay their bills. The last thing struggling folks need is a letter like this…and the fear and sleepless nights it spawns. A violation of the Fair Debt Collection Practices Act? You bet. But perhaps more importantly: it's just plain wrong.
The American Bankers Association is telling the Arizona Republic that the new bankruptcy laws (which will have it's first anniversary on Tuesday, October 17) is working as it was intended. Fortunately, there is more than one source for news. Delaware Online reports that after one year, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 is not quite doing what bankers had hoped or paid for.
Certainly, bankruptcy attorneys - including yours truly - would agree that there has been a substantial drop in case filings. A Toledo Blade report attributes the drop in filings to higher legal fees and a “difficult” income test. Most bankruptcy attorneys have had to increase their fees since October 17, 2005 due to the increased work on a typical bankruptcy. In many cases, the work has doubled than it was under the old law. However, I am not convinced that the means test is “difficult.” While it’s an extra form, and more paperwork, I cannot say however, it is “difficult.”
What remains difficult is the struggle people face in dealing with debt that's grown out of control. That difficulty is only intensified when debt collectors get ugly. From the Pittsburgh Post-Gazette, this year the Pennsylvania Consumer Protection Bureau has received the highest number of complaints against abusive debt collectors than any other industry, such as telephone companies:
Take the case in which a collection agency telephoned a woman's 5-year-old daughter, ordering her to tell her deadbeat mommy that she'd better pay her credit card bills.
I have to wonder: did the bill collector also tell the 5-year-old that mommy could not file bankruptcy anymore because it was too expensive and there was a difficult income test? I hope not. Debt collectors are not supposed to lie.
The Boston Sunday Globe's Magazine asks this question:
As property values soared, we got hooked on the idea of using our house as a bank, pulling out blocks of equity to pay for renovations, vacations, and more. Now, will the softer real estate market cost some of us our homes, our shirts, even our retirement?
For many Massachusetts homeowners, the short answer is yes.
When my firm is retained to file bankruptcy for clients, our clients refer their creditors and collection calls to our office. When they call, most creditors merely confirm we have been retained, ask us when we can expect to file their bankruptcy petition, and then hang up. But lately, some creditors are asking if our clients would like to “settle” their credit card debts instead of filing bankruptcy. These creditors are not too swift.
Most clients have more than one debt, and many clients have a mortgage (or two). How can settling with one account benefit the client at all?
Perhaps more importantly, such payments might be considered preferential under the bankruptcy code. Payments made to any regular creditors that total $600 or more within the 90 day period prior to filing must be disclosed on the Statement of Financial Affairs. These are considered “preferential” payments.
In bankruptcy, all creditors are treated equally, and if the debtor knew he was in financial distress on the day he filed bankruptcy, chances are he knew it 90 days prior to that. Therefore, any large payment would confirm that the debtor preferred one creditor over another. In those cases, a Chapter 7 Trustee would be entitled to get that payment returned so it can be distributed to the rest of the creditors. So the client is out the money, and the creditor is forced to give turn it over to the Chapter 7 Trustee.
So where’s the motivation for our clients to settle? There is none. Clients get no benefit from settling any debt prior to filing their petition. If anything they are throwing money away that could be used to get them back on the road to financial wellness. The only benefit goes to the rouge credit card company or collection firm that gets the money. And depending on the payment amount, they only have it temporarily.
West Virginia Attorney General Darrell McGraw announced a settlement with Help Ministries Incorporated, d/b/a Debt Free, a credit counseling agency based in Mesa, Arizona. According to a statement released by the AG’s office:
Debt Free’s primary service consisted of arranging monthly payment plans known as “debt management plans” to assist consumers facing dire financial circumstances. West Virginia law caps the allowable fee for administering debt management plans at 7% of the monthly payment amount. However, Debt Free previously charged monthly service fees in excess of 7% as well as a one-time “set-up” fee that was not distributed to creditors. Debt Free also charged several other fees not permitted by West Virginia law, including a monthly fee for funds handling, a fee for “credit education,” and an administrative fee of $20.00 for failed electronic debits.
This is the third settlement with a creditor counseling company/debt agency in 12 months. The WV Attorney General’s office has also entered into settlements with Debt Management Credit Counseling Corp., of Boca Raton, Florida, and Cambridge Counseling Credit Corp. of Agawam, Massachusetts.
A new law will help consumers seeking credit counseling avoid those who claim to be “non-profit” agencies, when in fact, they are profiteers. However, the new law doesn’t take effect until next year. As reported by KOMO News Radio in Seattle, “…for now if you respond to a credit counseling ad, chances are you'll get someone looking to make a profit at your expense.”
This law follows years of abuse by so-called debt counselors and credit counselors who took large fees from consumers and then in some cases, did not pay a dime to creditors until they got paid.
On paper, the law sounds like it could work.
Under the new law, credit counselors wil