Los Angeles Bankruptcy Law Monitor : Los Angeles Bankruptcy Lawyer & Attorney : Christine Wilton Law Firm : Southern California Chapter 13 & Chapter 7 Bankruptcy, Foreclosure

I'm losing my voice over year, screaming from the mountain top.  I've been calling 'Bull' on the toxic securitized mortgages and explaining to my fellow Californians that we have all been blindsided into thinking that this ocean front real estate of ours will always increase; or bounce back sooner rather than later.  I don't know about you, but I'm sitting on at least $200,000 in negative equity. 

As you all probably know, I read a lot.  I also share with you here, my musings and information.  Here are some more tidbits for you homeowners to chew on.  First, remember when I posted, When Should You Walk Away From Your Mortgage, about the psychology of why people don't/won't strategically default?  It's time to get ruthless with our own personal finances; like the wealthy do.  If it's toxic, it's time to dump it, and deal with it legally.

In this morning's readings, I found Strategic Default's website where homeowners post their own stories.  I found Brad's story from there.  Brad happens to have his own website called You Walk Away and he provides a calculator that is intended to tell you how much savings you'll have by walking away from your underwater mortgage.  It's liberating to say the least.  Now, these sites talk about short sales and loan modifications, but as I've been screaming; if MERS is involved and named on your promissory note, then you're not getting a modification absent litigation.

When will you get off your high moral horse and get real?  I'm clueless on this one.  If your home mortgage is your only financial concern, then you may look to foreclosure or short sale as a solution; even bankruptcy can be a home saving device.  However, if you are dealing with more than just your home mortgage, it's high time you dealt with your debts as legally effective as Chrysler, GM, and AIG.  No, you can't get a bailout; but you can file Bankruptcy.  As my favorite bankruptcy guru, Max Gardner said in his recent post by Mandelman Matters, The Great Unwind and Final Redemption, "Praise the Lord and pass around those bankruptcy petitions.  Like now. Like yesterday."

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Last week, Yves Smith caused a stir with this post, "Fannie and Freddie Continue to Rely on Foreclosure Mills Despite Evidence of Fraud."  The 64 comments are worth a read, if anything to ferret out the boys from the men in terms of skill level in dealing with the legal issues.  Smith gives acknowledgment to O. Max Gardner, who is the nation's go-to bankruptcy litigation attorney and, I am proud to say that, I am a Lieutenant in his army.  So, what's all the scuttle butt about? 

Smith's post referred to another piece published by Mother Jones, "Fannie and Freddie's Foreclosure Barons," which provides a peek inside the shady document fabrication operations to cover up past mistakes in the mortgage industry and post foreclosure clean-up.  What a mess.

Looking at the securitization issues from a California standpoint, we have both federal and state law to contend with.  From a bankruptcy position, here in the Central District we have the In re Foreclosure cases , In re Hwang, In re Walker, and In re Vargas.  Since the mortgage follows the note, we need a complete, and unbroken chain of custody of the note and adherence to the California Commercial Code.  We are arguing the Creditor has no standing and even if they did, there are major computation errors in their claims. The fight goes on for now.  Results may vary in California.  Side effects include general frustration; nausea; possible foreclosure; and guilt for not paying your mortgage. 

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Let's face it, we are in tough financial times throughout our country.  There are many options to dealing with money issues.  Along with tough financial times comes stress, even depression, anxiety and fear.  Our emotions are tied very closely to our relationship with money.  Here are a few tools that just might help you gain some perspective.

Take a look at this WebMD article, The Debt-Stress Connection and notice where you might be in terms of your stress level about your current financial situation.  Your life is much too precious to lose over your debts.  It's important to start right where you are and decide to take action; whatever action is necessary to change the outcome. What is the worst that could happen to you financially?  Most people don't answer the question with any health issues, but that's what you're facing if you remain paralyzed about the situation.

Take action and get help.  I'm a big fan of the Dave Ramsey program for those of you that have the ability to climb out of debt without bankruptcy.  Learn about financial planning and get yourself on a budget today.  Have a reality check with your doctor, your tax professional, financial planner and your bankruptcy lawyer.

Vision your life in five years.  What does your life in the future look like?  Where will you live?  How will you provide for your self?  Your family?  Imagine what that looks like and then decide the path that is right for you to get there.  For some, it's creating a budget and sticking to it.  For others, it means filing for bankruptcy. The sooner you commit to your future, the sooner you'll feel better.

Remember that financial responsibility requires that we make some tough choices in our lives.  Filing bankruptcy is not the end, but a process toward a new beginning.

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Homeowners in California have been fighting an uphill battle to unwind wrongful foreclosures and have been getting mixed results in state courts all over California.  I have always said that it's easier to stop a foreclosure by filing bankruptcy than  it is to try to reverse a wrongful foreclosure in state court once it's been sold or reverts back to the bank. 

Mortgage Electronic Registration Systems, Inc., fondly known as 'MERS,' has been named on more than 80% of all California mortgages, but who are they?  MERS came onto the scene back in the 90's, created by the mortgage banking industry to streamline the mortgage process by using electronic commerce to eliminate paper.  What they really did was cheat many local governments out of recordation fees and failed to properly document the assignments and transfers of the sub-prime mortgages as they were allegedly turned into securitized investments.

Mandelman, over at Mandelman Matters, recently posted this article entitled, California Court Rules:  MERS Cant' Foreclose, Citibank Can't Collect.  The court case he cited, In re Walker, 2:10-21656-E-11 is a Chapter 11 case where MERS, acting solely as 'Nominee' assigned a Deed of Trust to the Creditor.  The Court was not swayed by the assignment and held that the Creditor had not demonstrated any document to support its claim that it has standing to enforce the promissory note and deed of trust.

MERS is not a real party in interest and has no right to enforce, assign, or foreclose on any mortgage note, even though their named on the note as a 'nominee' and 'beneficiary.'  So, if you look at your mortgage note and see MERS listed as a nominee and beneficiary, chances are pretty good that your mortgage has been securitized and any attempt to foreclose by the loan servicer, or any entity for that matter is probably unlawful.  Call your lawyer and take action to stop the foreclosure and save your home.

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I know what you've been told because I have heard it all too.  The government wants you to do your very best to avoid bankruptcy at all cost.  Bankruptcy is bad; or at least, a harsh remedy to dealing with debt, and should be your last resort.  We have all bought into this 'agreement reality' and it couldn't be further from the truth.

I assert, bankruptcy is a powerful tool that should be considered in your overall financial plan that includes eliminating debts.  Adrian Lapas, over at Bankruptcy Law Network explained the pitfalls of debt settlement by warning of 1099 tax bills for canceled debts; and even creditor's unwillingness to negotiate a settlement at all.  Oh, and I'm really tired of discussing your credit  score because it's already been adversely affected by your not making your payments on time. In fact, filing bankruptcy might actually improve your credit score once all that bad debt is cleared from your credit report. 

I've had clients come to me after signing up with these debt settlement companies and spending nearly $10,000 on fees, only to find themselves in lawsuits with their creditors that these companies warned them about and would not help them with.  Remember that if you negotiate your settled debts, you're still paying money toward them and you'd better have some cash saved up to pay it in full if they accept your offer.  Also, you must be prepared for that 1099 tax bill at the end of the year because you'll wind up paying taxes on that can celled debt.

Bankruptcy not only eliminates the debt without any payments from you, it will eliminate your liability entirely and you won't owe taxes on the debts that were discharged in the bankruptcy.  That's where bankruptcy as a tool, is more efficient and not only a powerful tool, but a cost saving device for you as well.

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Recently, Katie Porter, over at Credit Slips, reported that Bank of America (BOA) reached a settlement with the Federal Trade Commission regarding certain mortgage overcharges, including overcharges in bankruptcy once serviced by Countrywide. Henry Sommer joined the conversation, asking if the Bank of America Settlement is a sign of true progress.

After reading the consent judgment and order provided by Katie, followed with Henry's entertaining summary of the requirements set forth in that order that include BOA's agreeing to not lie, cheat, or steal from consumers, I am not getting that warm feeling like we've accomplished much.  Did I miss anything?

Those homeowners that can afford to make a mortgage payment seek Chapter 13 where they are given time to make up the arrears on their mortgage and get their finances back on track.  What has been happening though is that many receive their discharge only to be served a Notice of Foreclosure soon after for charges on their mortgage. I'm even seeing this when the servicer files their proof of claim, declaring that "hey, we're going to do this up front and charge attorneys fees and costs to even file this proof of claim."  They'll also usually include inflated arrears, inspection fees they did not conduct, and other fees and costs that are superfluous to your mortgage. 

It is imperative that debtor's counsel in chapter 13 practice, scrutinize every proof of claim in every case and hold these Creditors to account for their willful failure to follow the law.  If you're a homeowner seeking to stop a foreclosure and you know that you've been overcharged and your loan servicer adding charges incorrectly, don't file under Chapter 13 without a competent attorney that not only practices Chapter 13, but really understands this mortgage mess we're in. 

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Many a Creditor has driven us bankruptcy lawyers and our clients nuts with their antics, but freezing a client's bank account after their case has been filed takes the cake.  The Ninth Circuit BAP just released In re Mwangi Case No. 09-1408 (9th Cir.B.A.P., June 30, 2010), which held that Wells Fargo's national policy of placing administrative holds on accounts of persons filing a bankruptcy petition violates the automatic stay by exercising control over property of the estate.  The issue in Mwangi was their national procedure of running a computerized comparison of all newly filed Chapter 7 bankruptcy cases against Wells Fargo's list of account holders.  If they found a match of one of their account holders who had also filed bankruptcy, then Wells Fargo would immediately 'freeze' that account, preventing the debtor from having access to their money. 

It's no secret that Wells Fargo has been notorious for freezing the accounts of debtors filing bankruptcy under Chatper 7.  We also have it on good word that Wells Fargo will continue to hold funds while they appeal the Mwangi case. 

Keep in mind that your bank account is property of the estate upon filing your bankruptcy case that presumably includes the cash in your bank accounts.  So, don't go on a spending spree just yet.  Any Exempt funds are not exempt until 60 days after the conclusion of your meeting of creditors.  Technically, all of your assets, including cash on hand must be turned over the trustee to administer your estate, but that is just not practical.  This means that the law is not on your side here and while Wells Fargo can put a freeze on your accounts, they also must act prudently by asking for guidance and direction from the Trustee and/or Court as to what to do with your funds.

This reminds me of the term "vicious compliance."  This term seems to crop up in certain union worker circles when they don't like a particular ruling or law, they will strictly comply with it and demonstrate that it doesn't work and then use it against management by knowing it better.  So, if Wells Fargo wanted to 'viciously' comply with the law, they would stop freezing accounts and simply send all the money to the trustee.  No matter how you slice this ruling, Wells Fargo is still a big bully.

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As debtor's counsel, I get the sense that many Americans who need to file for bankruptcy are avoiding it still because of its stigma and the myths fed to them by their government, creditors, family and friends.  In spite of the 'file bankruptcy as a last resort' method to financial reform for American households, filings are soaring in 2010.

Liz Pullium Weston wrote about it in her article, Bankruptcy filings soaring again.  I can't tell when that article was written and that bugs me to some extent, but I can move on from that.  In May, the American Bankruptcy Institute issued their first quarter press release, that revealed that bankruptcy filings are up 17% in the first quarter over 2009; and, consumer filings are up 18.2% in the first quarter.  California is 8th on the list of states with the highest per capita filing rate for the 12-month period ending March 31, 2010, with our Central District experiencing a 57.8% increase. So, what does this mean for the remainder of the year?

I predict that you will see California sink into the ocean of financial despair with the continued housing market depression and the banks attempt to control the housing prices by holding inventory of foreclosed homes.  Foreclosures will continue to rise as the asset-backed securitized mortgages continue to reset over the next 7 to 10 years.  Remember that these teaser rate, sub-prime, fancy loans were sold straight into the housing crash in 2008.

When California decides to make the tough decisions in closing their budget gap, you will see more municipalities filing chapter 9, like Valejo, CA, when the state pulls funds from the communities and cuts services.  You see, states can't file bankruptcy like the local governments can.  The problem here is that the federal government can print money when they need it, and municipalities can file bankruptcy under Chapter 9 of the Bankruptcy Code, but the states have no remedial measure other than to cut services and pull funds from the local governments.

The bottom line here is that financial reform starts with every American taking personal responsibility for their own household and taking stock of their options, including the option to choose to file bankruptcy under Chapter 7, 11, or 13, depending upon your own set of circumstances.  Most bankruptcy attorneys offer free consultations by phone and you should take advantage of their advice.  We help our clients steer clear of scams and help you to take stock of your liabilities, depending upon your current situation and your financial goals.  Yes, you can keep your stuff and lose your debts.  You can save your American Dream of home ownership. 

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Are you one of the many Americans caught up in the viscious grip of payday loans?  It seems, these days, that payday loan shops are replacing Starbucks on every corner.  It's the new business to be in with this depressed economy. Here's what happens when you obtain payday loans in your rup-up to filing for bankruptcy.

If you have presented a post-dated check as 'security' for the loan, when you file for bankruptcy, the payday lender will simply cash the check and hang on to the funds.  The lender can do this under 11 U.S.C. Sectioin 362(b)(11), which provides that the automatic stay does not apply to the presentment of a negotiable instrument and the giving of notice and protesting dishonor of such an instrument.

However, the overconfidence on the part of these payday lenders comes with a price.  One decision, In re Thomas, 311 B.R. 75 (W.D. Mo. 2004) provides that a post-petition transfer of funds out of the account by presentment of post-dated payday loan check could be avoided pursuant to 11 U.S.C. Section 549(a).  This means that you could bring an action to recover the funds as an unauthorized post-petition transfer.  Unfortunately, such actions are more costly than the amount transferred; which is why most debtors decline to bring an action under Section 549.

Ask your bankruptcy lawyer about their experience with repeat offenses by payday lenders because the creditor's willful violation of the automatic stay does give rise to actual damages, costs, and attorney fees; even punitive damages in some cases.  Don't think that these payday lenders have the upper hand just because they have your check in their hands.

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