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Monthly Archives: April 2012

If I declare Chapter 7 bankruptcy, how long will it take me to get my finances back in order?

Posted by Ryan Blay on April 27th, 2012 in Bankruptcy, Bankruptcy Information, Chapter 7, Illinois, Life After Bankruptcy, Uncategorized, Wisconsin

 

While each situation is different, it is possible for you to get back on your feet very quickly after a bankruptcy – maybe even as fast as a few months.  There are certain steps you should take while also being careful not to get yourself right back into financial trouble.

The first way to build your credit back up is by reaffirming debts within the bankruptcy. A reaffirmation is simply an agreement to keep paying a debt even though you declared bankruptcy. You shouldn’t take this idea lightly and should discuss all of the pros and cons with your attorney. But if you do reaffirm a debt, your credit report will reflect the positive payments you make on the debt.  This is why we say it’s possible to file bankruptcy and still keep a car or home.

Another way to improve credit is to take out a credit card and pay off the balance every month. This way you will show potential creditors that you borrow money but are a good risk because you always pay it back. These payments will show up on your credit report and make a positive impression. However, this is something that should be done with caution. You will not be able to declare bankruptcy again for several years so it is important to pay off the balance every month. This is another important discussion to have with your bankruptcy attorney.

Finally, a good way to rebuild your credit is to take out a small secured debt. A secured debt is a debt where you and the creditor agree that if you don’t pay the creditor can have the property back (like a car loan). While it might be hard to take out a large loan for a car you can probably take out a small loan for a television, washer or dryer or have a debt tied to a bank account or credit union account so long as you show the creditor that you have some money in the bank.

Taking on debt after a bankruptcy is a big decision.  Many people are afraid to borrow again because they are afraid they will be back in the bankruptcy court again. Other people need to take on debt or want to take on debt to establish credit and possibly make a big ticket purchase in the future, for instance a home. Any decision to take on debt after bankruptcy should be made after consulting with your bankruptcy attorney.  The only way to earn credit is to borrow and successfully pay off debts, whether the debts are for utilities, gas credit cards, or car loans.

This post was authored by Lakelaw associate Nicholas D. Strom.


Why is My Bankruptcy Lawyer Asking Me So Many Questions?

Posted by Ryan Blay on April 25th, 2012 in Bankruptcy, Bankruptcy Information, Bankruptcy procedures, BAPCPA, Illinois, Legal, Wisconsin

 

When we meet prospective clients for the first time, we try to make them feel welcome as guests of the firm.  After all, a lawyer-client relationship is built on trust and comfort.  The first meeting, which we offer free of charge, is meant to help our clients evaluate us and for us to evaluate the nature of our clients’ cases and what we can do to help.

Like most firms, we usually ask questions at the initial meeting.  Other firms have lengthy questionnaires, whereas we prefer to ask direct questions to find out what we need to know.  Some of these questions probably seem strange, especially since most folks come in with minimal money and assets and hefty debts.  So why do we ask these questions?

Well, first off, bankruptcy is a complicated process.  Try reading the 2005 “reform” of the bankruptcy laws passed by Congress.  If you understood that, you’d be the first to do so.  The point is that the bankruptcy laws don’t always mesh with common sense.  When people do sensible things to avoid bankruptcy like sell off assets, borrow from relatives and pay them back or settle debts, it can cause problems in bankruptcy.  So we need to know this before we prepare paperwork so that we’re not surprised and our clients aren’t either when the courts and trustees ask these questions.

They are routine questions to us, we’ve heard them hundreds of times.  “Has anyone died leaving you money?  Did you pay a relative a large sum of money for a loan or debt in the last year?  Did you sell any big asset like a car or house for less than full value in the last 2 years?   Did you pay any one of your creditors over $1000 in the last 3 months?  Did you use a credit card or take out a loan in the last 90 days?”

As experienced attorneys, we know what the most common questions are going to be as we help people through the bankruptcy process.  We’re not trying to judge or trick you, but trying to identify these issues and explain them.  Sometimes that means waiting for a few weeks or months to file.  Other times it means nothing is wrong and we can move ahead as we planned.  Having experienced attorneys who know what questions to ask mean less “surprises”, and nobody likes those in the courtroom or bankruptcy hearings.


Can I go to Jail for Not Paying a Debt?

Posted by Ryan Blay on April 16th, 2012 in Consumer Law, Debt Settlement, Illinois, Legal, Wisconsin

Debtors' Prison

 

Yes…well, sort of.  But you should never go to jail for a debt.

When you don’t pay a debt for too long, it goes into “default”. In almost all contracts, once a default happens, the creditor has certain rights to collect on the debt. One of these options is going to court and getting a judgment for the amount of the debt plus attorney’s fees and costs.

That part is simple.  You aren’t going to debtor’s prison for failing to pay your credit card bill.  The United States eliminated those a long long time ago.  Unless you intentionally took out a large sum of money and knew you couldn’t pay it, or lied to get it, you aren’t going to be charged with a crime like fraud simply because you tried your best and couldn’t pay.

But after getting a judgment, a creditor has the right to try a wage garnishment or take some unprotected property to pay the judgment down.  Which assets?  How much?  Well, that depends on where you work, where you live, and what you own.  These are questions the creditor has the right to insist you answer in writing.  This form is usually called a Financial Disclosure Form or Citation to Discover Assets.

If you ignore the writing, or if your writing is confusing, or you don’t back it up with paystubs, bank statements, tax documents, and so forth, you might get a letter in the mail informing you of a “supplemental examination” in front of a “court commissioner”.  When the creditor uses the power of the court to insist you appear, you must show up – it’s a big deal.  And if you can’t make it for any reason, call the creditor’s lawyer and the court commissioner.  The court doesn’t care much about the debt but it cares a lot about you not showing up, even if you don’t have money to pay the debt.

This problem is easy to avoid. When you are called to court Just Show Up! You can explain to the creditor why you can’t pay the debt. Maybe you have only social security or unemployment income.  It may seem like a waste of your time to go to a commissioner’s office for 10 to 15 minutes, but it’s not.  By failng to show up, the court can hold you “in contempt” and fine or even jail you for insulting the court and ignoring their rules.

If you have any questions about the possibility of going to jail for a debt, or any other questions related to your financial life give the professionals at Lakelaw a call. We take pride in our work and strive to always treat clients with Care, Kindness, Courtesy, Respect, Professionalism and Dedication.

This post was co-authored by Lakelaw Associate Nicholas D. Strom


Why is my mortgage lender suing itself for foreclosure?

Posted by Ryan Blay on April 11th, 2012 in Foreclosure - Saving Your Home, Illinois, Legal, Mortgage Foreclosure Defense, Mortgage Modifications, Wisconsin

It’s hard enough communicating with one mortgage servicer.  Anyone who has ever tried to get a loan modification, get approval for a short sale, or even deed the property back in exchange for avoiding foreclosure.

Can you imagine having two mortgages, with the same lender, and not being able to get the departments to agree on how to proceed?

Unfortunately, many homeowners across the country face that exact ridiculous situation right now.  And it comes to its absurd conclusion in foreclosure filings.  You see, when a lender forecloses, they need to obtain a clear right to take the property that trumps anybody else imaginable.  So very often you see a case caption that reads:

Huge National Bank v. Joe Homeowner, unknown spouse of Joe Homeowner, a/k/a Jane Homeowner, unknown tenants, XYZ Condo Association, Credit Card Judgment Company, and Huge National Bank

What does that all mean?  Well, Huge National Bank has a first mortgage on this property, let’s say for $200,000.  They have to sue Joe Homeowner, since he’s on title to the property, he’s the owner on the deed recorded with his county.  They may have to sue his wife, if he has one, because some states give spouses a 1/2 interest in their spouse’s property.  They would have to sue a Condo or Homeowner’s Association that has an interest in the property.  They need to notify any creditor that obtained a judgment for a debt (a credit card judgment, a judgment for an unpaid medical bill, a personal injury).  And of course, the holder of any junior mortgage.

So why is Huge National Bank suing itself?  Because it probably has a second mortgage for $50,000 that was either taken out at the same time as the first mortgage (usually referred to as an “80-20 loan” – 80% of the purchase was for the first mortgage, 20% for the second) or it bought the mortgage later from another lender.

The problem is that each department has different interests.  The first lender wants to foreclose if you can’t pay, because that way they can get clear title and move forward with another buyer.  They want to recover as much as possible on the loan.  The second lender wants to do the same thing.  They may have a higher rate of interest on the mortgage since second mortgages bear much more risk.  They might even hire their own law firm to defend themselves against….themselves.

It sounds like a headache and a special case of the law turning common sense into logic games.  You may be correct.  But knowing this can help you determine how you want to proceed with both mortgages.  If you have two mortgages fighting between themselves and refusing to help you, please contact us to discuss your options.


Can I Sue My Mortgage Lender or Servicer For Not Offering Me a Permanent Modification?

Posted by Ryan Blay on April 5th, 2012 in Foreclosure - Saving Your Home, Illinois, Legal, Mortgage Foreclosure Defense, Mortgage Modifications, Wisconsin

Well, to start, anyone can sue anyone.  That doesn’t mean you’ll win or collect.  But a new case from the 7th Circuit Court of Appeals (covering Wisconsin, Indiana and Illiinois) suggests that you may be able to.

In this case, coming from the Northern District of Illinois, Ms. Wigod was working with her servicer, Wells Fargo Home Mortgage, and had entered into a Trial Period under the government’s Home Affordable Modification Program.

As anyone who has entered one of these trial periods knows, the process is frustrating and often offers false hope.

Sometimes, homeowners fail to make payments during the trial period.  Other times they fail to get the signed documents back by a set time.  In other cases, homeowners make the payments AND send in the documents, but the servicers make math errors, miss or misprocess payments, or extend the trial payments at the end of the 3 months.

In Ms. Wigod’s case, Wells Fargo submitted a letter to her after her trial period was done informing her that regretfully they could not offer her a permanent modification due to investor guidelines.  This appeared to contradict what the HAMP trial offer letter stated, so she sued Wells Fargo. She sued in District Court to try to create a big class action lawsuit against everyone who faced similar problems with Wells Fargo or Wachovia.

Two years after her suit, the Seventh Circuit Court of Appeals allowed part of her case to continue.  So she’ll be back in trial court to try to establish her own individual lawsuit, but also the class action.  Based on this, we predict more people will try to raise identical claims in both state and federal courts in Wisconsin, Illinois and Wisconsin.

While she hasn’t been awarded anything yet, Ms. Wigod was able to confirm from the court what most of us knew deep down to be true already:  As part of these programs, the servicers and lenders made promises to homeowners.  If they fail to live up to those promises, the homeowners can sue and seek their damages.  If you feel you were in a similar situation and want to speak with an attorney from our offices in Illinois or Wisconsin, please contact us today.


Robosigning by Big Mortgage Servicers? Stop the Presses!

Posted by Ryan Blay on April 4th, 2012 in Foreclosure - Saving Your Home, Illinois, Mortgage Foreclosure Defense, Mortgage Modifications, Wisconsin

In what has come to be a weekly rite of passage, another big mortgage servicer is being investigated for its faulty servicing practices and “robo-signing”.  You probably heard about the Bank of America/Chase/Citigroup/Wells Fargo/GMAC (Ally) settlement from the attorneys general of 49 states.  You may have heard the less publicized news of a settlement with Litton Loan Servicing last year (they were a subsidiary of Goldman Sachs, a huge Wall Street firm – Ocwen services most of these loans now).

Now we have news of another suit by the Federal Reserve, this time against Saxon Mortgage Services, a company under the Morgan Stanley umbrella (yes, another major Wall Street Firm).  The same practices that all the other major services are being accused of emerges once again, with only the name of the servicer changed.

It’s worth noting that for all of the poor homeowners here unfortunate to have Ocwen Financial servicing their loans:  you’re in the same boat as a lot of people.  Ocwen is not only servicing the lousy loans of Litton, but Saxon as well.  Good luck trying to work with them and get a straight answer on a loan modification or other request.

If you were in a foreclosure from 2009 through 2010 and Saxon was the servicer, chances are you may be getting correspondence soon from somebody – either a government official or a representative of Ocwen.  If you have any concerns about such a loan or any paperwork you have received from these parties, please call us at Lakelaw to discuss further.


What is the Means Test?

Posted by Ryan Blay on April 3rd, 2012 in Bankruptcy, BAPCPA, Chapter 13, Chapter 7, Illinois, Wisconsin

Many people come in to our office fearing the dreaded means test. They want to file bankruptcy but are worried that this means test will not let them file a Chapter 7 bankruptcy, or that they will have to pay a ridiculously high Chapter 13 plan payment. They worry that if they do not pass the means test they cannot file a bankruptcy. This is simply not the case. This article hopes to give a basic understanding of what the means test is and clear up some of the misconceptions about the use of the means test in bankruptcy.

There are two main types of bankruptcy for most folks – Chapter 7 and Chapter 13. Chapter 7 is a chance to shed debt and move forward debt free, while a Chapter 13 is a repayment plan ranging from 3 to 5 years with debt forgiven after the plan completes. The purpose of the means test is to push filers away from a Chapter 7 when they can afford to make payments in a Chapter 13.

The first way to pass the means test is to be what is known as a “below median debtor.” While this sounds complicated, it is a very clear standard. To be below median you have to earn less than the median income for your state and household size for the previous six months. The median income levels, which can be found here is the 50% line for gross income in your home state for each household size. For instance, if you are a single individual in Illinois, and you make less than $45,545 per year based on those last 6 months of income, you are considered “below median”. But even if you do not qualify for below median status you still may pass the means test and be able to file a Chapter 7 bankruptcy.

The next step in the means test is to take account of your expenses. The expenses which can be taken are based off IRS standards, with a few exceptions for bankruptcy specific deductions. The expenses must be reasonable and the best thing to do is speak with an attorney about any deductions you might be entitled to. The deductions take into account car and mortgage payments, child care, child support, union dues, taxes, and many other expenses. Even if you do not pass this step you will still likely be able to file a bankruptcy, but it will have to be a Chapter 13. The outcome of the means test will determine what your unsecured creditors (loans, credit cards, utilities, medical bills, and so forth) must be paid back over the plan, so it can influence what your plan payment will be.

Hopefully, this article cleared up some of the basic misconceptions about the means test. The means test does not prevent filing a bankruptcy, but helps determine what type of bankruptcy a person can file – and, for some people, how much must be paid back through bankruptcy. As you can see, bankruptcy isn’t a simple question of “how much can I give” anymore. That is why a meeting with a licensed attorney who concentrates in bankruptcy filings can give you a clearer answer of your financial options. If you have further questions about the means test, bankruptcy or financial distress in general please contact the professionals at Lakelaw. Our team focuses on representing clients who face financial difficulty while treating our clients with Care, Kindness, Courtesy, Respect, Professionalism and Dedication.

This article was drafted by Lakelaw Associate Nicholas D. Strom


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