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

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.

• Email This
• Print
• Comments
• Trackbacks

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. 

• Email This
• Print
• Comments
• Trackbacks

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.

• Email This
• Print
• Comments
• Trackbacks

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. 

• Email This
• Print
• Comments
• Trackbacks