That’s the question being asked by the folks over at Calculated Risk in light of a report issued today by the Office of the Comptroller of the Currency and the Office of Thrift Supervision.
More here:
Office of the Comptroller of the Currency and the Office of Thrift Supervision
I’ve written about it here before, and it’s worth repeating: the economy and the looming foreclosure crisis is affecting not only families. Pets are also feeling the effects.
The first wave of foreclosure-related pet surrenders arrived on [Boston's Animal Rescue League's] South End doorstep early last year, but soon after owners began just kicking pets out of the house, or driving away from foreclosed homes and leaving them behind.
If you’re facing financial difficulty, I implore you: please do not abandon your pet to fend for itself. They will not be better off if left behind. They will not be better off if dropped off at the side of the road. Call a local shelter and get help with adoption.
And please, if you can help the Animal Rescue League, please do.
When people are in foreclosure, they can fall victim to a host of scammers and scams. Unfortunately, by the time many of these folks are scammed, they are worse-off than they were before they stumbled into foreclosure. So when I come across a scammer who preys on people who need real help, you’ll read about here. Here’s the story behind David Coleman and his bogus outfit: Mortgage Finders of New England.
In April 2008, a Virginia couple contacted Coleman’s firm about an upcoming foreclosure on investment property in Newbury, MA. Coleman told the couple he could help them by filing a bankruptcy petition on their behalf. He also told the couple that he was experienced in filing bankruptcy cases, although at no time did he mention that he wasn’t a lawyer and that by law, he could not give legal advice. Only after the case was filed did the couple learn for the first time that Coleman wasn’t a lawyer at all.
Coleman waited for the debtor (the wife only) in the lobby of the Tip O’Neill building where he collected a $1,000 cash “fee” and had her sign a skeletal bankruptcy petition he prepared. But he did not properly complete the portion of the petition acknowledging that he was a petition preparer. In fact, in an effort to presumably fly below the radar and to keep his scam going, he left it blank. The case was dismissed on May 5, 2008 because no other documents were filed.
On May 21, 2008, a New Bedford woman was contacted by Coleman after he obtained information about a looming foreclosure from a local paper. Coleman told the woman that he could stop the foreclosure and it would cost $1,000 cash to retain his services. The next day, he met the woman in the lobby of the Tip O’Neill building where he collected his $1,000 cash fee, filed a chapter 13 petition, but did nothing more. When the clerk asked Coleman if he was representing the woman, he said he was only assisting her. It was at that time that the woman learned that Coleman wasn’t a lawyer. The woman’s friend demanded that he return the money, but Coleman refused.
On May 6, 2008, a Roxbury man filed a chapter 13 case after being contacted by Coleman, who learned of a foreclosure in the local paper. Again, he met the man for the first time in the lobby of the Tip O’Neill building in Boston and collected the $1,000 case. Again, the filing was deficient. And in this case was dismissed because required documents were not filed. Again, the forms were not completed correctly. Again, the people were not properly advised.
There are many more cases. There are many more violations. There are many more victims.
Who is he?
David Coleman is a predator. He operated Mortgage Finders of New England at 70 Worcester Street in Methuen. He’s not a lawyer. He has no formal education. He has no training with regard to the bankruptcy process or how to properly and fully prepare bankruptcy documents. Yet despite this, he contacts distressed homeowners, convinces them that he can help them, takes their money (and I’m willing to bet, money they cannot afford to lose), files a bare bones petition and does nothing more. Since April 2008, when he started this operation, he has collected money and prepared bankruptcy documents for over thirty people.
He advertises in the Verizon Yellow Pages and by distributing cards and flyers. He makes calls to people, using “411″ to get a homeowner’s name after getting personal information from a foreclosure notice or other public record. He tells his victims to meet him in at the Bankruptcy Court in Worcester or Boston. He downloads forms on line, completes them in his own handwriting, and files them. He doesn’t tell his victims that he is not an attorney and that he may not give legal advice. He does not disclose to the court that he is a petition preparer. He does not even give copies of the documents he files to his victims. And then he does nothing more – ultimately letting their cases fail because other necessary documents are never filed.
He holds himself out as a bankruptcy expert. Folks, David Coleman is no expert.
And it gets worse.
In July 2008, US Bankruptcy Judge Hillman issued an injunction requiring that Coleman comply with the Code and properly disclose on cases that he is a petition preparer as defined by Section 110 and his fees. Even with this order, Coleman continued this unlawful and illegal scam. He continued to file documents without disclosing who he was and what he was doing. He continued to rip people off. He continued to hurt people.
In an order dated February 18, 2009, the US Bankruptcy Court issued an order finding that Coleman had violated Section 110(b)(1) of the Code. He was fined a total of $34,500 for violation of the code, and among other things was ordered to disgorge (return) the fees he unlawfully received.
It was also found that he was engaging in the illegal practice of law, and therefore, he has been barred as “(1) acting as a bankruptcy petitioner; (2) soliciting, assisting, advising, providing legal guidance, advice, assistant or consultation of any king to any person in connection with the filing or prosecution of any bankruptcy case or any document in any bankruptcy case, whether for a fee or for free” in Massachusetts. The order includes not only Coleman but also includes “any person or entity acting in concert with him.”
When it comes to helping people keep their homes out of foreclosure, Coleman serves no legitimate purpose. He preys on people who are probably feeling as if they are at the lowest point in their lives. What people facing foreclosure need is sound counsel given by people who are trained in and who study the law and know what they are doing. That’s not Coleman, and it never was. He’s only taking money and selling false hope. He’s the lowest of the low.
If you’re facing foreclosure, talk to an attorney. Don’t be scammed by Coleman, or anyone else.
Read the Court decision here: US v. Coleman, 08-04132 (2/18/2009).
I came across an interesting story (and video) over at CNBC.com: Fraud at your Front Door which discusses foreclosure rescue scam artists who are knocking at the front door of homeowners facing foreclosure. I have met clients who have told me they have been approached by individuals how have been at their doors offering assistance. But there’s no rescue. They’s only a rip-off.
Not only do the homeowners lose money, they lose time to productively work with their lender. I heard a lender attorney recently say that homeowners have told them that “…we paid this person to help us.” But the person is not helping them, and as this CNBC story points out, in many cases, the “helper” doesn’t even contact the lender. In addition to losing valuable time and money, the homeowner may also lose credibility with the lender.
The story recommends that if your lender is unwilling to relax the payments to help you, seek a qualified real estate attorney or non-profit credit counselor. But there are also local mortgage counselors who will help you with a modification request (click here for ESAC located in Boston). And I also think you should not rule out speaking to a bankruptcy attorney so you can discuss your options. Or, I encourage you to contact us if your lender is unwilling to work with you.
May a debtor propose a chapter 13 plan that provides for the payment of mortgage arrears with regular monthly payments followed by a balloon payment at the end of the plan?
So far, the answer is still no (although the issue is still working its way through the courts).
In the recent case of In re Carman out of the Massachusetts Bankruptcy Court in Worcester, the court found that a debtor could not propose a plan that paid the mortgagee interest only payments throughout the plan period, followed by a final balloon payment. “Such a modification is impermissible in that ‘once periodic payments to that creditor commence, a subsequent balloon payment would be unequal to those that preceded it.’”
Until we get word from the appeals courts, this issue will remain a potential road block for debtors who hope to fund their plan with a sale or refinancing (or other source of funds that they do not have access to now). When I say “road block”, I mean “road block to getting a chapter 13 plan confirmed.” And until this issue is resolved by the appeals courts, it should also be read to mean “a potential road block to keeping your house.”
In re Carman, 07-44271, US Bankruptcy Court, District of Massachusetts at Worcester, July 25, 2008
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With the limited exception of realizing while in court that I have worn two different colored socks and I am convinced that everyone can tell, there’s nothing that drives me more nuts than exaggerated and half-baked claims about bankruptcy. A recent article on TheStreet.com proves my point. Lauren Tara LaCapra writes in “Bankruptcy Can Hurt For Decades”:
Rules enacted in 2005 made it harder and more costly for Americans to file for Chapter 7, in which assets are liquidated and given to creditors, or Chapter 13, which structures a repayment plan for certain debts over a term up to five years. (Debts outside of the plan would not have to be repaid.)
Harder, no. Costlier, yes. It’s hard to really chide the writer for this lack of understanding because I know many people have it. But, there is also this: “Debtors outside of the plan would not have to be repaid.”
Um….No. If debts are not in the plan, they need to be paid. A best example I can give is with a car loan. If the debtor wants to keep the car, the loan needs to be paid. That loan is paid outside the plan. If it doesn’t get paid, the car gets repossessed. I could (and perhaps will at some point) get into some long analysis as to whether a deficiency must be paid through the plan and why. I could (and perhaps will at some point) blog about what happens when debtors attempt to pay only certain creditors through a plan, while paying others on the side. Suffice it to say, the claim that debts not included in the plan need not be repaid is flat out wrong. (I could reasonably infer that the term “Debts” might really mean “Regular monthly expenses” such as the electric bill and the phone bill. Those do get paid outside the plan…but they are not debts. They are expenses.)
Then, the article refers to an Ohio State University study:
…it can take over 20 years for bankruptcy filers to reach the same financial status as those with similar social and economic backgrounds who did not file for bankruptcy. It took more than a decade for a bankruptcy filer to catch up to peers in terms of savings, income and home ownership, according to the study. It took more than a quarter of a century to reach the same level of net worth.
Translated: people who file bankruptcy will not be in the same financial station in life as their peers who do not file bankruptcy. I imagine that most people facing bankruptcy know this…I also imagine that if they are in so much debt that they probably already know this. I also imagine that some of “their peers” are also quietly suffering with a boat-load of debt while all the while trying to put a good face forward to as not to lead anyone to suspect otherwise.
Jay Zagorsky, co-author of the study and a research scientist at Ohio State, notes that high prices for gas, food and housing, combined with crushing debt, can make bankruptcy seem like an easy way out with a clean slate.
“But,” he adds, “to experience what people may heard of as a ‘fresh start,’ that may take longer than they expect or would like.”
True. But it’s going to be easier to pay the higher costs for food, gas and home heating oil if the other debt is dealt with in bankruptcy. As far as getting credit again, it can happen. I have had clients who have been in bankruptcy (chapter 13) and gotten credit cards (without my knowledge and without court permission…which is actually not a smart thing to do at all). I have had clients who have received their chapter 7 discharge and within weeks were receiving credit card offers (and in some cases, receiving cards). Of course, in those days, if you had a pulse, an address you could get a credit card.
Today, it’s not so easy. We are in a credit crunch. Underwriting standards are changing, and some merchants are rethinking whether they will accept credit cards. Just this week, I received a letter from Filene’s Basement telling me that they were discontinuing their credit card after September 1. They were also kind enough to send me a coupon for 15% off of one-item. But I digress…
Gas and food costs are going to make it difficult for people. Actually, it is making things difficult for people…which includes people like me. Then, the article offers this not-particularly-sage advice:
Those grappling with high costs and excessive debt should seek out other options first — whether restructuring or consolidating debt, negotiating a payment plan or lower interest rates with creditors, selling off assets or simply cutting back on costs — before putting a 20-year “scarlet letter” on their credit scores.
You cannot restructure your mortgage if your lender will not return your calls. You cannot consolidate your debt if you cannot qualify for a consolidation loan. You shouldn’t consider repaying debt with credit counseling without exploring whether chapter 13 is actually a better and more cost effective route. Selling assets: sure. So long as it’s not a house you need to sell anytime soon, and so long as you’re not selling something to a buddy because you’re concerned about losing it in a later bankruptcy filing. And as for cutting back on costs, some cannot cut back anymore.
Finally, the bankruptcy filing does not stay on the credit report for 20 years. It’s on the credit report for 10. It’s also not a Scarlett Letter…harkening back to that Nathaniel Hawthorne novel about an adulterous Demi Moore who is forced to wear an “A” so as to let the world know how sinful she is.
For the overwhelming number of people who walk through my office door, that bankruptcy filing is exactly what they need to move on. The bankruptcy is exactly what it will take to get things back on track and to help them face the new economic challenges that face us all. While I encourage debate with others with different points of view, I urge anyone who is “knee-deep in debt” to get the facts. It’s a shame that this article is short on them.
From CNBC: Those $600 “economic stimulus”/”loan on next year’s tax refund” checks: they are going to keep us out of a recession. For now (but what do you do if your bills are more than $600?).
From Bloomberg: Foreclosures up 48% in may and repossessions have doubled. Those $600 checks are arriving just in time!
I recently wrote about some predators in our midst: people who prey on others facing foreclosure, but are only ultimately out for their own benefit. From the Baltimore Sun: a 47-page indictment charges 8 people with a scheme to rip people off. I have yet to read about any indictments in Massachusetts (am I not paying attention?).
And I know this really doesn’t have anything to do with bankruptcy, but I have to change my shower liner this weekend, and I happened upon this article from the LA Times: apparently that smell of the new liner is toxic.
But I guess I am not the only one with some concerns this weekend. Reuters reports that an Ex-Capital One employee has filed a whistleblower suit, claiming she was fired for refusing to approve bad loans. What’s in your wallet?
There seem to be debtors everywhere who think they can file bankruptcy without an attorney. Of course, in many, many cases, debtors only end up causing themselves greater problems. A case out of the Eastern District of Pennsylvania proves my point.
The debtor in that case got his case dismissed because he did not received the requisite credit counseling. The case was filed on Valentines Day of this year, and along with his petition, the debtor filed a statement of “Exigent Circumstances” to excuse his failure to comply with the credit counseling requirement. The debtor represented that he was facing a foreclosure sale.
On February 20, the court ordered him to file by the 29th a Supplement to the Certification to enable the court to determine whether the requirements of Section 109(h)(3) had been satisfied. Debtor didn’t. Instead, the debtor filed his Certificate of Credit Counseling on the 28th. The case was dismissed. Debtor filed a motion for reconsideration.
Bankruptcy Code Section 109(h)(3) has at least requirements for establishing that there are Exigent Circumstances justifying a failure to obtain prepetition credit counseling. First, there must be some emergency compelling the filing before the counseling was obtained. Second, the debtor has to have tried to obtain credit counseling before filing the case but was unable to get it within the 5 day period prior to filing. The pro se debtor did not provide any information on this second requirement.
The case got dismissed. Hopefully, when the debtor again files bankruptcy (since he was facing foreclosure, I am assuming he did or will), he will have a lawyer. One of the first things he’ll have to do is seek an extension of the automatic stay because he will then be a repeat filer.
In re Kaufman, No. 08-11087 (Bankr.E.D.Pa.)
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Notwithstanding the fact that some bankruptcy attorneys (including me) think that the bankruptcy credit counseling requirement is a joke (and I’ll explain why on another day), it’s still a necessary prerequisite to get an entry ticket into the bankruptcy court.
You can read more about the “mixed reviews” that bankruptcy credit counseling is getting here
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For Everything, There is a Time
One of the most common client complaints I have heard throughout my career is how long the legal process can take. I can appreciate that. At the same time, what’s worth doing right, is worth doing well. Sometimes, it takes time to do something well. And lately, time is something that has been a luxury with some of the clients I see. Today, I was reminded how important time can be.
I received a call from some homeowners. They are in one of my least favorite mortgage products: 2/28, interest only. Translated: the first two years of their mortgage payments are “interest only.” Then, in 2 months, the principal will be added to their already high interest-only mortgage payment.
Fortunately, they are not behind. Yet. But they will be if time continues to march forward without some intervention. And even more fortunately, they are calling me early enough that we can take our time and explore all reasonable options available. There is no rushing to the Bankruptcy Court to stop an auction. We can take our time, explore the options, and move in the best direction for them.
Not everyone has that option, but the fact is, the only reason why they do not have the option is because they do not, or cannot look at the handwriting on the wall. Privately, colleagues have expressed their view that I tend to have a negative view of the economy. At the risk of continuing to sound like a ‘Negative Nancy’, today the stock market decided to deal with the summer heat by slipping into the deep end of the pool. Is the end nigh? No. But one cannot ignore that come October $50 billion worth of mortgages will be adjusted to reflect higher interest rates. For real. The handing writing is on the wall for more than the folks who were brave enough to pick up the phone today.
If you see the handwriting on the wall – and perhaps most importantly, if you can muster up the strength to look at what might not be so pleasant to look at on that yonder wall, call someone. Call someone now. It’s only July. There’s two full calendar months before October to plan, prioritize and strategize. That is time. And time is a precious commodity when it comes to saving your home.
October is a time for pumpkins, leaf raking and the World Series. If you are looking to October with a sense of dread, it’s time to do something about it. You can. There is time.
Tags: Bankruptcy, Chapter 13, Commentary - Legal, debt, debt relief, Economy, foreclosure, mortgage, Mortgage and Foreclosure, Mortgages and Foreclosures
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