Wednesday, May 12, 2010

Bankruptcy Petition Preparation Company Problems

Many people who think about filing for bankruptcy often want to avoid legal costs and either look to do their case themselves or pay a petition preparation company that charge anywhere from $200 to $500 to prepare the forms. The problem with not at least consulting with a qualified bankruptcy attorney is that you are going into a very complex federal court system. It is not just a matter of a few simple forms.

If your forms and schedules are not done properly with the most up to date forms or they are not filed in compliance with the federal and local rules of procedure, your case can be dismissed within a matter of weeks of filing. Not only will you have to possibly pay the filing fee again to re-file, the court often imposes a ban on re-filing for 6 months. The court can also prohibit re-filing for an even longer time if they think your filing was an abuse of the system.

I have clients come in and end up spending even more money in the long run for me to fix the problems and properly advise them than if they would have just come to me in the first place. Petition preparation companies often give legal advice, even though they are not supposed to. They tell people that they can remove 2nd mortgage or qualify for chapter 7 filing status, only to have the client later learn that they were not properly advised.

Most bankruptcy lawyers will offer free consultations, so even if you don't hire them, you should at least get some advice before moving forward to be sure you are properly represented.

Chris Barsness, Bankruptcy Lawyer

Saturday, May 1, 2010

Short sale pitfalls

These days many homeowners are realizing that loan modifications are extremely difficult to obtain, so they try to do a short sale of their home. A short sale is when you sell you home for less than what you owe the bank. The bank has to approve the sale which requires the homeowner to show a financial hardship. People assume that their real estate agent will protect them in the transaction. That is far from the truth. There are different legal issues that arise in the transaction for a short sale.

1) Future personal liability- most bank approval forms say they are agreeing to accept less than what they are owed to approve the sale, but many do not include any representation that they will not sue the homeowner down the road to get the difference between what they received and what they were owed. This means a year or two down the road, the homeowner could be served with a lawsuit when the bank thinks the homeowner may be back on their feet to collect.

2) Fraud- most bank are requiring the homeowner and the buyer to sign contracts stating that they are not engaging in some kind of side transaction. Many homeowners are approached by investors stating that they will rent the home back, sell the home back to the homeowner later, or pay the homeowner to do the short sale. If the homeowner signs this and they do something they stated they were not doing, the homeowner, investor, and real estate agents could face charges of fraud against the bank. The bank would argue that they would not have agreed to the sale if they knew there was a side deal.

Bottom line- check with a local real estate or bankruptcy attorney because a bankruptcy filing may be a better choice to walk away and eliminate personal liability or possible fraud claims.

Los Angeles Bankruptcy Attorney Chris Barsness, Esq.

Wednesday, April 14, 2010



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Obama foreclosure plan makes little impact

In a report released today, a congressional oversight committee concluded that the attempts to keep people in their homes is having little effect. The report from the Congressional Oversight Panel, created by Congress to monitor bailout spending, came as the Treasury prepared to release Wednesday its latest monthly report on the $50 billion Home Affordable Modification Program, or HAMP. That report will show that so far more than 230,000 households had been given permanent reductions in loan payments by the end of March, a Treasury spokeswoman said. That is up from 168,703 a month earlier.

By comparison, nearly eight million households are behind on mortgage payments or already in the foreclosure process.

HAMP loan modifications typically leave borrowers still heavily burdened by debts from second mortgages, car loans and credit cards, the panel noted. The typical household with a HAMP modification still must devote 59% of total income to debt service. "Most borrowers who proceed through HAMP will face a precarious future," the report said, adding that "many borrowers will eventually redefault and face foreclosure."

Even if you can get a modification, that doesn't mean that other options are not a better alternatives, such as bankruptcy, short sale, or a deed in lieu of foreclosure.

For a link to the full report of the panel, click here:

Congressional Oversight Panel: Evaluating Progress of TARP Foreclosure Mitigation Programs

Wednesday, April 7, 2010

Credit Repair After Bankruptcy - Steps To Take

Even after one files bankruptcy, there are still steps that need to be taken to improve your credit score.

1) Be sure to check with credit agencies after filing. Many people are scared to look at their credit report after filing, but you should several months after filing or discharge to be sure everything is accurate. You want to be sure the bankruptcy is listed and any discharged debt doesn't show as anything more than a bankruptcy filing.

More can be found at this article below:

RT @NYDailyNews: There is life after bankruptcy

2) Make attempts to obtain credit after discharge. You can get secured credit cards by applying for that specific type of card. You simply give collateral, such as equity in a car or cash, to show the creditor they have something of value to collect if you don't pay.

3) Any debts not discharged or incurred after filing must be paid on time. Don't think that "oh well, my credit is shot anyway." If you make all your payments on time after filing, you can be on the road to financial recovery.

Chris Barsness

Wednesday, March 31, 2010

Loan Modification Changes - Will They Help?

I am sure many of you may have heard about the recent changes and expansions announced last week to the guidelines for loan modifications. I have attached a link to the overview below:

Essentially, the government has heard the problems in the process and are trying to push lenders to start doing things right with more formal procedures and time frames. In addition, they want to expand modifications to homeowners in bankruptcy, provide assistance to those temporarily unemployed, provide cash payments to those who short sell or walk away, and provide more protection from unexpected foreclosure occurring during a modification review.

I must emphasize that these are only guidelines for non-GSE servicers to follow (those other than Fannie Mae and Freddie Mac) on HAM modifications only. There is no real enforcement procedure, it is more of a way to tell lenders that they must comply if they want to get the federal incentives. It took the lenders almost a year to implement the original guidelines announced last February 2009, so it is unknown what effect this will have and how long it will take.

The announcement by Bank of America that they will reduce principal on certain loans sounded like a positive thing; however, it was only done to settle certain cases brought by the Attorneys General of several states and will likely only apply to up to 45,000 borrowers who had certain Countrywide predatory loans.

To say on top of these issues, please follow our blog or visit our website to link to us on Facebook and Twitter.

Bankruptcy Attorney Chris Barsness

Saturday, March 27, 2010

Treasury's New Attempts To Help Foreclosure & Loan Modification Problems

The Treasury announced more attempts to help borrowers in foreclosure or close to foreclosure including payments toward relocation and short sales, as well as additional help for unemployed borrowers.

It remains to be seen whether these changes will help fix the foreclosure and loan modification problems, including problems facing borrowers going through bankruptcy.

For an overview of these changes, you can read more below:

Saturday, March 20, 2010

California Bankruptcy Attorney Uses Chapter 11 to Stop Foreclosure

A bankruptcy filing has the effect of placing a court order stopping foreclosure and eviction. It gives homeowners time to try to work out a solution to their financial problems. Loan modifications are few and far between these days and do not guarantee the bank won't sell the home during the process.

Many people do not realize that Chapter 7 and 13 are not the only alternatives when it comes to filing for bankruptcy. Chapter 11 is a reorganization like chapter 13, but can be used for individuals to accomplish foreclosure relief, debt reorganization, and lien stripping that essentially results in principal mortgage reduction. A homeowner's primary residence 2nd mortgage can only be lien stripped if the home's value is less than what is owed on the 1st mortgage. Rental or investment properties 1st and 2nd mortgages can be lien stripped in certain circumstances in Chapter 11.

Even in Chapter 13, a homeowner can benefit by removing the 2nd mortgage, resulting in more available income.

Consult with a bankruptcy attorney to review your options. Many, including our firm, provide free consultations to see if bankruptcy may be the right option for you.

Watch my Twitter page for updates:

Wednesday, March 17, 2010

How to file bankruptcy - consult a bankruptcy attorney

Record numbers of bankruptcy cases are dismissed by the court as they are not being filed properly. Both local and federal rules of bankruptcy procedure require compliance with filing deadlines and format of forms, schedules, and other documents. People want to avoid the costs of hiring an attorney, but they end up wasting the $300 filing fee and time involved by filing improperly only to have the court dismiss the case 14 to 30 days after filing.

If you are trying to rearrange your finances and get back on your feet, an experiences bankruptcy attorney can help you make sure you handle your case properly. Realize that you are eliminating debts and monthly payments, so an investment in your financial future is worth the cost. Most bankruptcy lawyers are willing to work with you to figure out how to pay the costs involved for their advice and representation.

In addition, a bankruptcy lawyer can explain advantages that you may be able to take advantage of, such as eliminating second mortgages on your home, saving your home from foreclosure, and other pieces of advice and counseling.

Tuesday, March 16, 2010

Banks Intentionally Delay Modifications

How can it be that of the millions of homeowners, loan modification companies, and attorneys applying, less than 200,000 homeowners nationwide have gotten loan modifications? The banks report to Obama that people fall through the cracks because of missing documents or failure to follow up; however, anyone who works in this industry or has tried on their own to get a modification knows that can't be the truth. No matter how many times you submit, resubmit, call, or mail things to follow up, you will no doubt be told everything is fine one day, then that you were supposed to send new paystubs the next day and because you didn't, your file is closed and your home will be sold.

It is quite apparent that the banks have no intention to finalize anything more than a small number of modifications to show the president they are trying. If you are an investor holding loans serviced by these banks, I would be outraged by their either intentional dismissal of help or complete and utter disorganization. Some have theorized that the banks want to take over a large number of homes and only slowly release them for sale to artificially boost the home buying market and prices. This potentially rises to the level of anti-trade violations if there is collusion by several banks to do this by artificially fixing markets and prices. When will the justice department get involved to investigate? Probably never because the banks will just keep blaming everything on homeowners not working with them when we all know that isn't the case.

The only thing that makes sense based upon these facts is an intentionally willingness to not modify loans or stop foreclosures. Not only are large banks possibly doing this, but they then refuse to lend any money to small business or new home buyers. I suggest closing any bank accounts with large banks and opening new accounts with small banks or local credit unions and keep your money out of the hands of the greedy corporations.

I once again call on Congress and the Obama administration to push realistic financial reform and pass legislation to allow primary residence 1st mortgages to be reduced to market value in bankruptcy.

Sunday, March 14, 2010

Banks Sue Homeowners Years After Foreclosure

Other states see the same issues regarding lenders coming after foreclosed homeowners years down the road. See the below article for this happening in Nevada.

Bankruptcy may be the best option to avoid worrying about the banks suing a homeowner after a short sale or foreclosure and no one should assume everything is fine when they walk away from a home.

Friday, March 12, 2010

Beware Of Personal Liability After Foreclosure Or Walk Away

Many people do not realize that they may face personal liability for certain debts if they walk away from their home or let it go to foreclosure. In California, if the 1st lender forecloses with a trustee sale, any other lienholders, such as a 2nd or 3rd mortgage or line of credit may be able to come after the borrower personally.

In fact, reports are that servicing companies are increasing their efforts to come after people who have been foreclosed upon for these personal obligations. Homeowners need to take steps to avoid going through more financial distress after a foreclosure. Often a Chapter 7 bankruptcy liquidation makes sense after a foreclosure to get rid of all other debts and personal liability.

See the report out today on CNBC:

Chris Barsness

Wednesday, March 10, 2010

Bankruptcy & Short Sales Better Option Than Modification

The recent announcement by President Obama of incentives to homeowners of $1,500 for selling their home in a short sale is just further evidence that lenders are unwilling or unable to complete realistic loan modifications. The President is realizing that lenders would rather take a short sale loss and move on than deal with modifications.

Many homeowners get emotionally attached to their homes, but they need to be realistic. If you are in a position where you cannot afford the existing payment and are severely behind in payments, it is unlikely a loan modification is going to help. With only 66,000 modifications in 2009 under the Obama HAM program nationwide, it seems unlikely that anything is going to get better.

Once homeowners realize that they may not be able to save their home and realistically think about moving on, they can properly evaluate all possible options. Many homeowners end up losing their homes during a modification review and end up with personal liability on 2nd or 3rd mortgages. Bankruptcy can be a useful tool to resolve some of these issues. It can be used to remove 2nd liens and bring a homeowner current on back owed payments.

The other options are short sales or deeds in lieu of foreclosure. Homeowners should consult with a local real estate or bankruptcy lawyer to be sure they are protecting their finances moving forward.

Chris Barsness

Friday, February 19, 2010

Loan modifications - Have Realistic Expectations

Many homeowners have very emotional connections to their home and it can often cloud their judgment when it comes to trying to save their home. If the homeowner doesn't have steady income, the bank is very unlikely to do anything to keep you in your home. The banks only look to financial performance, reward, and risk, and if you don't have current income, you are extremely risky. The banks see this over and over where they provide some form of assistance only to have the homeowner default down the road because they think they will start doing better financially, only to realize that the economy is not picking up in 2010 as many expected.

If you are living off withdrawals from retirement accounts, credit cards, or loans from family and friends, a mere change in the terms of your home mortgage is probably not going to be enough to save your home. The banks see this other debt and often take it into account when deciding whether to provide you a loan workout. If you think of a modification as a refinance, you will have more realistic expectations. In a refi, if you don't have verifiable income, reliable income, low other debt, and decent FICO scores, it is too risky for the bank and they will say no. Often clients try to argue that it makes financial sense to keep the person in their home versus foreclosing. The banks have their own internal numbers and they are more than willing to take substantial losses to be done with that loan since it is often not a valuable loan for them to service or sell.

Homeowners should think about what if a loan modification is denied, have they thought about turning the house over with a deed in lieu of foreclosure to avoid personal liability for the loan. Have they thought about a short sale to also avoid personal liability for the loan? Do they realize that once the home is in foreclosure, it is very difficult to get back out and foreclosure and evictions on your record are equal to or worse than bankruptcy. A person in bankruptcy can get a rental apartment because they are in a better financial position now that certain debts are gone; however, someone who had to be evicted tells a landlord that if they have to remove that person, it is going to cost time and money because that person is not willing to move out voluntarily.

For more information on bankruptcy, foreclosure, and loan modifications, visit our website or give us a call 888-881-6591.

Chris Barsness, Esq.

Tuesday, February 2, 2010

Eliminate 2nd and 3rd mortgage, reduce principal

Many homeowners are pounding their heads against a wall trying to get lenders to work to get them current or give them some form of loan modification. Many of these homeowners have been taking out of credit cards, personal loans, or other sources just to survive. However, many lenders look at large amounts of other debt negatively when considering your total debt to income ratio in a modification. These homeowners don't realize that a loan modification is not going to suddenly save them from the brink.

Often times a bankruptcy filing is a better option. It can eliminate the other credit card debts, personal loans, 2nd mortgages, and 3rd mortgages. It all depends upon the type of filing under what chapter of the Bankruptcy Code, but it is even possible to force principal reduction in some cases. Although there have been attempts at federal legislation over the last year to allow bankruptcy judges to force modification of terms of mortgages on principal residences, they are always defeated. There are ways to eliminate 2nd mortgages even on principal residences in some cases.

Homeowners needs to look at all their options and not delaying because your lender will move a foreclosure forward no matter how seemingly nice them seem on the phone.

For more information, contact us or view our website.

Thursday, January 28, 2010

Forensic Loan Audit - scam or useful modification service?

Even before the passage of SB94, real estate agents, consultants, and lawyers were offering to perform a forensic loan audit. Since SB94 went into effect, there are many companies and law firms doing this service to avoid the advance fee provisions of this new law. It seems to me that the majority of these are people who are desperate since they can't charge large up front fees to do loan modifications. It is hard to determine based upon the way they structure these services whether they violate SB 94, but there are things a consumer needs to know before paying any up front fees.

Forensic loan audits are where someone reviews the documents that were used to originate your loan(s). Under state and federal lending, banking, credit, and consumer protection laws, there are required disclosures that have to be provided and certain limits on fees and other things that happen during the loan process.

Someone who does a loan audit will often tell the consumer that if they find Truth In Lending Act (TILA) violations or Real Estate Settlement Procedures Act (RESPA) violations, that your lender will suddenly just change their tune and give you a loan modification. That is far from the case. While these violations can technically be legal claims, your lender will usually not even pay attention to them until a lawsuit is filed in court. Even then, it does not mean that they will just try to settle by giving you a modification.

There is a time and place for a review of the loan docs, but just finding violations is not a real service. Anyone who is not a licensed attorney may not realize that there are complex issues involved with lender litigation. Many banks are protected under federal laws such as the national banking act and the only claims that can be brought against them are with a regulatory agency, not a basic lawsuit. Lawsuits are often dismissed on this basis. Also, there are time limits within which you must bring your claims against the lender, many of which are within one year of the original loan date. Even the right of rescission's 3 year time limit is complicated as you often have to give back the property and loan proceeds in order to move forward with that remedy.

All in all, the majority of loan audits will not help you get a loan modification and are just another way people are trying to take your money. Only if you have very serious claims will it potentially make a difference and usually you have to go after the bank for monetary damages which doesn't guarantee you will keep the home or get a modification.

If someone claims all kinds of success in getting modifications or that their loan audit will push your mod through, take a look at this link with the minimal amount of permanent modifications in 2009 nationwide under the Making Homes Affordable Plan (66,000). Clearly, no one has a magic bullet that will guarantee modifications.

Friday, January 22, 2010

Loan Modification = Frustration & Delay

The numbers announced last week by the administration show that some progress is being made on mortgage loan modifications. Approximately 66,000 final modifications nationwide were completed in 2009 under the Obama Making Homes Affordable Plan. That is a very small number since the number of eligible homeowners is somewhere in the millions. However, only 33,000 had been completed through the end of November, so the lenders completed an additional 33,000 in the month of December alone. This tends to show that lenders might finally have the infrastructure and processes in place to get modifications done.

There is also the thought that the servicing companies doing the modifications don't really care if they get them done or not. In fact, servicing companies can often make more off fees to foreclose than just servicing a loan or getting it current. The holder of the note/investor may not even be the one making the decision that can have drastic impacts on them. It seems that banks have already taken the accounting hits for dropping homes to fair value, so they don't have a problem letting them go to auction or selling at a short sale for current market price.

In any event, we will soon see how much can get done in 2010.

Chris Barsness, Esq. MBA

Thursday, January 14, 2010

Bankruptcy- do it yourself or hire an attorney?

Many people question whether they should save money by filing their own bankruptcy case or hiring a petition preparer or other online source that puts the forms together. Bankruptcy is a federal court case that can have long term implications on a person's credit, finances, and their life in general. People pay for health insurance and pay to see a doctor when anything might affect their health long term, yet they fail to seek expert advice when it comes to their financial health.

Many of our cases come from people who did their case on their own and now have to pay significant fees for us to correct what was done improperly in the first place. The bankruptcy code is a complex set of laws and procedural rules, many that vary by court location with local rules. Many petition preparers do not have access to the local forms that need to be filed. Petition preparers or doing it yourself does not give you the proper guidance and legal review of which bankruptcy case is best for you, how to prepare for bankruptcy, how to list assets and debts, how to go through the process, which exemptions to claim, how to save your home or other assets, and how to minimize the long term impacts. If you fail to properly file the required forms, including required local forms, the court can dismiss your case. At that point, you would have to pay the filing fee again to refile and have lost weeks or months that your case could have been moving forward.

If you fail to list a debt, you can still have liability for it after the case. Our firm runs checks to be sure we are aware of all debt that may be out there, even some that you may have forgotten about or didn't even know was there.

Bottom line, be sure to investigate all the possible consequences before deciding to do your own bankruptcy. It may sound better to save the money and not get expert advice, but realize that you are eliminating all kinds of debt, so paying a little up front to be sure you are protected and getting rid of hundreds or thousands of dollars a month in payments can be worth the investment.

For more information, go to our website or call for a free consultation 888-881-6591.