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

Each year I gaze once again into my crystal ball of clarity and make my predictions for the economy and declare my bankruptcy trends for 2012.  Here's last year's trends, to refresh your memory. I continue to debunk the myth that bankruptcy is the last stop to financial freedom because the American people have been brainwashed into thinking bankruptcy is a dirty word. Bankruptcy filings for 2011 dropped 8% to 1,467,221, for the fiscal year ending September 30th, according to U.S. Courts. Here in the Central District of California, year-to-date through October, 2011 total filings were 115,717, down 3.9% from the same time, 2010. I predict these numbers will remain constant through the middle of next year with a spike toward the end of 2012 if the homeowners seeking short sales no longer get the tax waivers.

This year, Kamala D. Harris, California attorney general, broke from the herd of all 50 states because she was not satisfied with the settlement negotiations with the banksters for their participation in the housing bubble burst, foreclosure crisis and near collapse of our entire economy. I applaud her departure from what I would consider a "sweep the problem under the carpet" quick and dirty settlement. 

 Foreclosures have an impact on every aspect of our recovery. Until we solve the housing crisis our economy will continue to sputter.  In fact, I predict we have yet to see the peak of foreclosure season with the increasing so-called "shadow inventory," and variable loans that have yet to adjust.  Then, there is the amusing and confusing and ever-changing foreclosure process that forces me to continually advise my clients that I cannot tell them how long it will take for them to be removed from their home after foreclosure, let alone when the bank may foreclose.

I agree with this Goldman Sachs economic outlook that we will see higher unemployment. Don't get excited about the present decline because those that have gone back to work are not getting paid nearly enough.  Unemployment reports fail to include the underemployed part-time workers, those that have taken pay cuts and those that have simply left the job search to go back to school.

Okay, enough doom and gloom.  The bright point is that 2012 is an election year.  What do you mean you're not excited about an election cycle? Over at the Wall Street Journal, four financial advisers gave their opinions on the Markets for next year. They tell us that we've got political propaganda that will give us anxiety and an aging population that is sure to burden our health care system.  All of this means that bankruptcy filings will continue at the million filings annually mark as the middle class continues to be trampled on and forced into the lower class.  As more baby boomers look to retire, they too will be forced into bankruptcy because they haven't been able to pay off all their debts and probably still have yet to recover their retirement losses from the crash in 2008.

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What happens to the debts of a family member upon their death?  Generally, when you die, your debts will die with you, unless there is a co-signor on the loan.  Or, if there is a lien, such as a mortgage or car loan, the lenders have rights to the property and can take it back unless the surviving family members pay the debt.

The Wall Street Journal published this article recently, which details the unconscionable tactics that death collectors will employ to collect debts from the surviving family members.  Many are surviving widows who will likely pay, though they're not legally obligated to do so, just to make the phone calls stop. The reason we are likely to see an increase in this type of debt collection is,

"One thing isn't in dispute. Dwindling retirement savings, falling home values and high unemployment mean that more Americans are dying while still in debt, says Sally Hurme, an elder-law lawyer with AARP, an advocacy group for people 50 or older."

Don't be fooled into thinking that you're morally or legally obligated to pay the debts left behind when a family member dies.  Ask for the creditor to identify themselves and note the date, time and who called in a collections log.  Save the mailed notices in their envelopes and consult with a Debt Collection Lawyer in your area to determine whether you have a right to sue harassing debt collectors.

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How soon can we buy a home after bankruptcy?  This is a frequently asked question from my clients who are struggling to decide whether to fight to save their underwater mortgaged home, or simply walk away and come back into the market within a couple years.  What we are now seeing is a steady stream of buyers who went through the short sale process nearly two years ago, who have saved their money and now have 3-5% to buy again.

Home Ownership University posted FHA, Fannie and Freddie guidelines in their recent article. It is very important to consider your long term goals when making the financial decision to walk away from your present mortgage and start over.  If you are among those who want to re-enter the marketplace in the future, a short sale and/or bankruptcy is clearly a better option than a foreclosure.  Remember that time is of the essence because the safe harbor tax breaks will likely be ending in 2012.

Your credit score is also a factor here and you are wise to work with a reputable credit repair expert whether you decide to file bankruptcy or not because lenders are looking for a score if 640 or better for potential buyers.  If you have debts besides your mortgage, you should consider bankruptcy as an option.  Otherwise, if all you're dealing with is mortgage debt, then a short sale is right for you.

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So, what's this I am hearing lately about your credit score still being negatively impacted after bankruptcy.  Or, worse, if your spouse filed bankruptcy and your credit score is still showing all the debt that was discharged in bankruptcy.  Either way, a high credit score not only gets you lower interest rates, but shows potential employers that you're "credit worthy" so maybe they'll be more inclined to hire you.  So here's the skinny on the law that protects your FICO score.

The Fair Credit Reporting Act ("FCRA") is the federal law that in California is enforceable through our Unfair Deceptive Practices Act ("UDAP") statutes. Designed to promote accuracy and fairness in the files kept by Equifax, Transunion, and Experian, and other consumer reporting agencies.

YOUR RIGHTS:

1.  You Must Be Told if Information in Your File has Been Used Against You;

2.  You have a Right to Know What is in Your File;

3.  You have a Right to Ask for a Credit Score;

4.  You have the Right to Dispute Incomplete or Inaccurate Information;

5.  Consumer Reporting Agencies Must Correct or Delete Inaccurate, Incomplete, or Unverifiable Information, usually within 30 days;

6. Consumer Reporting Agencies Must Not Report outdated negative information;

7.  You Must Give Your Consent for Reports to be Provided to Employers

It is still possible to improve your credit score even if you've previously filed for bankruptcy. What is important is to manage your finances and stay out of trouble with debt.  If you need to make a major financial purchase, such as a house, you should work hard to be sure information contained in your credit report is accurate.  If not, you have a right to sue!

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     You've heard of the Fair Debt Collection Practices Act ("FDCPA").  Well, California has codified its own version under the Rosenthal Act found in California Civil Code Section 1788 et seq.  The California Fair Debt Collection Practices Act was adopted in 1977. It regulates the conduct of “debt collectors.” The California statute prohibits numerous deceptive, dishonest, unfair and unreasonable debt collection practices by debt collectors, and it also regulates the form and content of communications by collectors to debtors and others.

Your Rights In a Nutshell:

1.  The Debt Collector Must Disclose the Purpose of their Contact the First Time They Communicated with You;

2.  They Must Follow-up in Writing Soon After Their Contact with You; usually within 5 days;

3.  They Must Disclose Their Identity;

4.  You Have a Right To Dispute The Debt;

5.  You Have a Right To Stop the Communications;

6.  A collector cannot provide any information to any third party; nor can they contact you at unusual times or places, such as work;

7.  Debt Collectors cannot threaten criminal actions or physical threats of harm;

8.  They cannot make any misrepresentations as to their identity, the amount of debt or to whom the debt is owed; nor legal misrepresentations as to their limitations and your rights.

YOU HAVE A RIGHT TO SUE HARASSING DEBT COLLECTORS  that cross the line and violate the law. 

Here Are Some Important Steps You Can Take To Help Your Case:

• Save copies of all letters and notices from collection agencies.
• Save all phone messages and voice mails- this is very important!
• Make note of your conversations with these bill collectors.
• Call a consumer rights attorney to help you recover your damages.

     The law says that any debt collector who violates your rights may be made to pay you statutory damages of up to $1,000, actual damages, and attorney's fees and costs, if you win your FDCPA case.  You may be responsible for any other costs in your lawsuit.

     Most attorneys who practice in this area of law known as Consumer Protection Attorneys, will not take any fees up front to take your case and will only collect a fee in the event they are successful in obtaining a settlement on your behalf.  This is known as a contingency fee arrangement.

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