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Can I Stop a Citation to Discover Assets By Filing For Bankruptcy?

Posted by Ryan Blay on May 19th, 2014 in Bankruptcy, Exemptions, Illinois, Legal, Wisconsin

Courts in all states have procedures set to allow creditors to get judgments against the debtors who owe them money.  Then there are steps to allow those creditors to find out what the debtors owe and let the creditors take anything that is not exempted (or protected).

In Wisconsin, creditors mail an Order for Financial Disclosure form to the debtors and insist on getting the form filled out and returned in about two weeks.  If they don’t receive it, they can order the debtor to appear at a hearing in front of a court commissioner.  If the debtor skips the meeting, they can be held in contempt and even jailed for not showing and answering!

In Illinois, the process is called a Citation to Discover Assets.  It involves the same steps – paperwork and sometimes a hearing where a debtor has to testify about what they owe and what they believe is protected.

This process allows creditors to take what they can and it’s hard to stop or delay.  But filing for bankruptcy can put an end to the process.  We’ve helped multiple couples and individuals recently in Illinois and Wisconsin by filing bankruptcies to propose eliminating or repaying the debt that caused the citation or financial disclosures.  By not going to these hearings, our clients can focus on their businesses or jobs and proceeding through bankruptcy to get a discharge instead of taking time off to show up and submit paperwork they’d have to give to us to prepare their bankruptcies.

Bankruptcy allows creditors to be paid or eliminated in an orderly fashion.  Citation hearings and post-judgment paperwork are meant to help judgment creditors cut to the front of the line and take money and property faster than what most people can comfortably pay. Let us talk about using bankruptcy as a way to stop these creditors and put yourself back in control of your debts.  Call Lakelaw at 847-249-9100 or 262-694-7300 in Wisconsin to set up a free consultation for a better financial future.


What is the Rooker-Feldman Doctrine and How Does it Apply to Bankruptcy?

Posted by Ryan Blay on January 11th, 2013 in Bankruptcy, Bankruptcy Information, Illinois, Legal, Wisconsin

Most rulings come from state courts, not from federal courts.  State courts hear all sorts of claims, from criminal claims to civil claims to foreclosures in “equity”.

We don’t always like the outcomes, and occasionally judges do make errors in their rulings or rule based on information that later turns out to be wrong.  So what can we do in Bankruptcy Court about it?

The Rooker-Feldman doctrine, based on two Supreme Court cases, says federal court s (like bankruptcy courts) can’t sit as appellate courts for state court decisions we don’t like.  If a trial court judge in the Circuit Court of Ozaukee County, Wisconsin rules against a client and says a foreclosure is proper, we can’t appeal that decision in Bankruptcy Court.  It’s a final order and would have to be appealed in state court.

This is very important because many people look to not only file for bankruptcy, but also to ask the judge to avoid a mortgage or cancel a judgment that could turn into a non-dischargeable debt.  In many cases, these decisions come when clients, who can’t afford to hire lawyers to investigate and defend them adequately, are held in default or easily lose in summary judgment.

This is why the first level is so important and why, if the client wants to fight their case in Bankruptcy Court, lawyers must make sure there isn’t a final judgment to try and set aside.

The moral of the story:  Fight early or else you might not get to fight at all.


Does the “Show Me the Note” Defense Work to Stop a Foreclosure?

Posted by Ryan Blay on May 9th, 2012 in Foreclosure - Saving Your Home, Legal, Mortgage Foreclosure Defense

Something we have seen a lot lately at Lakelaw is a failure of banks and their attorneys to follow the rules during foreclosure lawsuits. A typical purchase of property requires that you sign a Mortgage instrument and Promissory Note with your bank. The Mortgage is a basic security agreement that says if you don’t pay, the bank can come get your house; it uses the home and possibly other property as collateral. The Note is an agreement to pay until the borrowed money is repaid in full. After the Mortgage and Note are signed, most people keep a copy of each in their records but don’t look at them again until they have problems paying.

The mortgage holders must follow some simple rules to properly “negotiate” or transfer a Note.  The first rule says there must be an “endorsement” to a person or company and delivery of the Note, or an endorsement “in blank” so whoever holds the Note can enforce it. The endorsement can either be on the Note itself or on a page “affixed” to the Note called an Allonge. This might sound complicated, but these are similar rules for paying someone by a personal check - if you write a check payable to Lakelaw, Lakelaw can stamp or sign the back of the check and deposit it or it can endorse it to another party by writing “Pay to the order of [Name of Party]“.

While these rules seem simple, we are seeing some major issues in our Foreclosure Defense practice.  One mistake we see is that the company foreclosing on a homeowner does not have a properly endorsed Note, and the bank or servicer is not the original lender. If the Note was not endorsed, how did the foreclosing bank get the Note? Another strange thing we see is when the foreclosing bank starts with a Note that is not endorsed, endorsements appear on the Note or a page with endorsement later appears. How did these endorsements get there?   It seems unlikely the bank has two copies of a Note, one unendorsed and the other endorsed. It’s a question that may prevent a judge from granting a judgment to the plaintiff if it’s addressed properly and in a timely fashion.

The disturbing trend of banks not following proper procedure when trying to take away people’s homes should cause a pause and hopefully bring about reforms that will cause lenders and servicers to reevaluate how they do business.  It also should encourage anyone with questions about their mortgage documents in a foreclosure lawsuit to speak to a lawyer immediately to see what defenses and claims they might have.

This post was co-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.


Don't borrow money that you can't pay back when thinking about bankruptcy!

Posted by David Leibowitz on March 17th, 2009 in Bankruptcy, Chapter 7, Legal, ,

If you’re thinking about bankruptcy, you probably don’t have very much spare cash.  On the other hand, you may have plenty of credit.  Many of our clients have very high credit scores and have been paying the balances on their credit cards for years.  Credit cards often send these people “convenience checks.”  This allows the card-holder to write a check and borrow money at very high credit card rates. If you do that anytime close to bankruptcy, you can be very sure that the credit card will want you to pay the money back even though you declared bankruptcy.  If you file a bankruptcy case, cash advances made within a few months of the filing will be highly suspect.  In fact, you would have to prove that you actually intended to pay the money back.  The court will assume that you did not.  

That will put you in the very bad position of having to pay back a debt even though you filed a bankruptcy case and thought you would discharge it.  It’s a much different case than using your credit card to buy a week’s worth of groceries or paying a medical bill.  And it’s different than buying a car before bankruptcy while you still have credit and intending to keep the payments up afterwards.

When you first visit your bankruptcy attorney, be sure to find out what you can do and can’t do until you actually file your bankruptcy case.  What you don’t know can hurt you very badly.


New Notices to Homeowners in Illinois Foreclosure Cases

Posted by David Leibowitz on January 4th, 2009 in Consumer Law, Foreclosure - Saving Your Home, Legal, Real Estate, ,

A new Illinois statute, effective January 1, 2009, requires that lenders give homeowners special notices in forclosure cases, both in English and Spanish.  Click here to read the Illinois Mortgage Foreclosure Law.  These notices must inform the defendant that:

  • As lawful occupants, they have the right to live in the home until a judge enters an order of possession
  • The homeowner continues to own the home until the court rules otherwise
  • Homeowners can get professional guidance from a lawyer or certified housing counsellor but should PROCEED WITH CAUTION when dealing with others who say that they are offering help
  • The mortgage company doesn’t really want to foreclose on the house if there is any way to avoid it

In addition, the name of the mortgage lender must be set out in large type.  The lender must provide a pay-off statement at no cost.  If the lender wilfully fails to deliver an accurate statement within 10 days, the lender is liable for actual damages or statutory damages not less than $500.

This statute gives borrowers important rights.  We at Lakelaw are ready, willing and able to help Illinois homeowners protect their rights and save their homes.


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