For the last 28 years, I’ve been drawing pictures and timelines to explain to my Chapter 7 bankruptcy clients how the process works. I finally decided to make a video and hope you find it helpful.
Obama’s mortgage modification program: on its way out?
Could the Obama Administration’s program to help American homeowners stay afloat be nearing the end of its usefulness? A committee of Washington Republicans assigned to oversee White House programs says this could be the case.
Soon after it became obvious that a major national financial crisis was looming on the horizon, the Obama Administration launched its Home Affordable Modification Program (HAMP), offering mortgage lenders financial incentive to restructure their customers’ payment plans. Although optimists predicted this program would stem the tide of sub-prime mortgage failures, it only ended up being temporarily effective: confusing paperwork, uninformed staffs, and poorly organized processes hopelessly confounded a large number of participants, many of whom ultimately failed to acquire long-term mortgage modification.
Newly elected Republican officials are expected to study and scrutinize many of the President’s recession-protection strategies, and thanks to its less-than-stellar performance, HAMP will probably make an easy target. “This program seems to have outlived its usefulness,” stated Darell Issa of the House Oversight and Government Reform Committee. In Issa’s opinion, the incentive program is yet another example of superfluous government intervention.
This allegation is not entirely without basis in reality. Although hopes ran high for HAMP, in truth the entire program was rushed and poorly planned from the beginning. Of the 500,000 homeowners granted temporary mortgage modifications under HAMP, only a miniscule fraction was approved for permanent modifications. In the long run, this left many further behind on their mortgage than they began.
Additionally, recent unemployment rates have been less than conducive for HAMP’s success. In recent years it has become impossible for much of the country to attain income levels capable of handling modified mortgages, let alone unadjusted ones.
The fact that HAMP has been associated with the robo-signing controversy only compounds problems. Republicans now blame Democratic regulators for not paying close enough attention to the foreclosure industry. Representative Robert Goodlatte is quoted in a recent hearing on Capitol Hill as demanding Democrats to “explain how the OCC [the agency in charge of overseeing the activity of America’s largest banks] …failed to detect that there were foreclosure documentation issues well before this turned into a crisis.”
Julie Williams, Chief counsel for the OCC, had little to say in response: “In hindsight, if we think about the volume of transactions that were going through the process, we could have been more suspicious.”
Your Duties to Disclose During Bankruptcy
A successful Chapter 7 bankruptcy requires honesty in order to work. When filing for bankruptcy in Rhode Island (or any state for that matter), honesty is not just necessary: it is mandatory. Anyone filing for bankruptcy should know that they are expected—required, rather—to act in good faith and be completely transparent with their RI bankruptcy attorney and Chapter 7 bankruptcy trustee.
There are three areas in particular where this “duty to disclose” comes into play for those filing for bankruptcy.
(1) Duty to Disclose Pre-Bankruptcy Asset Transfers
Imagine you own a number of expensive assets (real estate, valuable jewelry, multiple cars, perhaps a boat) but have created considerable debt in acquiring them. Scared that you may lose something, you secretly transfer these items to a close relative before filing for bankruptcy, with the intent of taking them back after your debt has been eliminated. This would be considered fraud under bankruptcy law and could be grounds for the denial of your debt discharge. For this reason, you are required to alert your attorney of any and all transfers of interest in the period before you filed for bankruptcy.
(2) Duty to Disclose Payments Made Before Your Bankruptcy
You may or may not have been advised to avoid repaying loans to family and friends prior to filing for bankruptcy. This is partially because of your “duty to disclose” pre-bankruptcy payments, since repaying loans from family and friends in this context can also be considered as fraudulent. In repaying old debts, you have chosen a lesser priority “creditor” over another higher-priority creditor, an action that can have serious repercussions in bankruptcy court. For this reason, any pre-bankruptcy payments beyond what bankruptcy court considers “essential” must be disclosed to one’s bankruptcy attorney.
(3) Duty to Disclose Any Lawsuits
Your “duty to disclose” extends to payments you expect to receive as well. If you are currently involved in a lawsuit from which you expect to receive some form of financial settlement or compensation, you have an obligation to alert your bankruptcy attorney of your situation.
Bankruptcy is a complicated business, so consulting a qualified bankruptcy attorney is an intelligent move for any person struggling with excessive debt. A good bankruptcy attorney can help you make sense of bankruptcy law’s complex procedures and make the most of a difficult financial situation. The Law Offices of Mark Buckley offer free debt consultation and are a good place to start when looking for financial direction.
A common emotion for most Chapter 7 bankruptcy filers is REGRET. Not regret for filing bankruptcy, but regret for not seeking legal help earlier for their financial struggles.
This may sound self-serving coming from someone who has helped more than 3,000 clients in Rhode Island file for bankruptcy relief, but ask anyone who has filed a Chapter 7 bankruptcy. Most debtors waste time and money on weak attempts to solve an unfixable mess.
Recently, I spoke to married client who hadn’t saved much for retirement. He sold his house a few years ago and put the $ 120,000 profit in the bank, hoping it would supplement the $ 40,000 kept in a 401k plan.
Over the years, he spent $ 80,000 of his precious savings and all of his 401k in order to pay substantial credit card debt. He still owes $ 37,000 and asked me if he could NOW file a Chapter 7 bankruptcy to discharge the remaining debt.
Under federal bankruptcy protection laws, he would have difficulty protecting his remaining $ 40,000 in the bank. Because the account is joint, he may be able to protect half, but the rest is fair game for the bankruptcy trustee to go after. Now in his 70’s, there is no way this retired man could afford to lose $ 20,000.
What went wrong? What should he have done?
If he had called me years ago, I would have explained how under Rhode Island law, he could have exempted all the equity in his modest home and still file bankruptcy to discharge his considerable credit card debt. I would have also explained how it almost never makes sense to liquidate qualified retirement assets to pay credit card obligations. Instead of taking a 10% penalty on the early withdrawal, paying income tax on the gain, and forfeiting the future growth of the account, he should have known that bankruptcy exemption laws are quite generous in protecting retirement assets.
In other words, he could have kept his house and retirement account and discharged all his credit card debt . . . with ease!
It is unfortunate that he spent most of his life savings on debt that could have been eliminated with a simple Chapter 7 bankruptcy filing.
Here is my point. You may never want to, or need to, file for bankruptcy relief. But you should talk with a skilled bankruptcy lawyer who can explain all of your debt options.
So, when do you know its time to seek help? Do you have more than $10,000 in unsecured debt, are you robbing Peter to pay Paul, are debt collectors calling you at home or at work? If so, something is seriously wrong.
Bottom line: You would be surprised what you could learn from sitting with a qualified bankruptcy attorney. A good bankruptcy lawyer can offer a free consultation and patiently explain all of your debt-relief options.
Bad college credit?
In all but a few isolated cases, student loans are not dischargeable in bankruptcy. However, this is not the case for student credit cards, which can be cleared of debt under Chapter 7 bankruptcy.
Banks and credit card companies are all too eager to cash in on the spending habits of American college students. College students tend to use credit cards indiscriminately, creating a profitable market as far as credit card companies are concerned. Meanwhile, banks use the college years to establish financial relationships with young adults.
The CARD Act, a recently passed motion to limit the marketing reach of lenders to students, established a minimum age at which a person can obtain a credit card. Unfortunately, this did not prevent credit card companies from discovering some very large loopholes in this new law.
For example, the CARD Act specified that people under 18 years old need cosigners in order to acquire cards. While this was intended to refer to parental permission and oversight, college teens twisted the word of the law in some serious ways, having older classmates or fraternity brothers function as cosigners. And all along, this activity was encouraged by those who made their livings selling plastic cards. While the CARD acts was intended to prevent credit card companies from selling their goods on campus, sellers managed to skirt that issue as well.
The evidence is telling: last year, Bank of America spent $62 million for the right to market their credit cards to kids on campus alumni associations. Meanwhile, at the University of Southern California alone, it invested $1.5 million in attracting almost 700 new accounts. Ultimately the total amount invested for all banks to get on college campuses in the past year alone amounted to over $82 million, creating 53,000 new accounts.
If you are a student struggling with credit card debt, bankruptcy can offer you a fresh start. Contact the Law Offices of Mark Buckley to schedule a free initial debt consultation.