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Georgia Homeowners Should Not Assume that Mortgage Lenders will Negotiate in Good Faith

By Jonathan on December 3, 2012

The Atlanta newspaper ran a story this weekend about a Mableton woman who found herself facing an eviction notice following a foreclosure even though her mortgage loan account had been accepted into Georgia’s HomeSafe program.

The HomeSafe program is a federally funded and state run arrangement whereby unemployed or underemployed borrowers can get a 0% interest bridge loan. The bridge loan funds are then paid to the mortgage lender to stop the pending foreclosure.

In the Mableton woman’s case, her lender, Citibank, should not have foreclosed because it agreed to participate in the HomeSafe program. In this case, after inquiries by the newspaper, Citibank has agreed to cancel the eviction and presumably reverse the foreclosure. However, Citibank insists that it did nothing wrong because it was acting on behalf of the loan’s actual owner, Freddie Mac.

The AJC notes that the Mableton woman’s case is another example of something called dual tracking, in which a lender prepares to foreclose while at the same time engages in negotiating with the homeowner for a loan modification or forbearance. The homeowner often believes that a modification is imminent and that the foreclosure will be canceled, only to find out two or three days before the foreclosure that there is no deal.

Social Security Disability Payees Now Eligible for Discharge of Student Loans

By Jonathan on November 20, 2012

In an about face from former policy the U.S. Department of Education has released new regulations, effective on July 1, 2013, which state that a student loan borrower’s repayment obligations may be discharged if that borrower has been found totally and permanently disabled by the Social Security Administration. In an absorbing 61 page restatement of Sections 674, 682 and 685 of Title 34 of the Code of Federal Regulations, the U.S. Department of Education has announced its new, streamlined procedures.

This new policy changes the procedure used by a student loan borrower can petition the Department of Education for loan forgiveness based on the borrower’s total and permanent disability. Under current procedure borrowers with student loans issued under the Perkins loan program, the FFEL loan program or the Ford Federal Direct Loan program could apply for forgiveness on the grounds of disability but the forgiveness rules did not recognize a Social Security Disability Award as proof of total and permanent disability.

In an effort to streamline the total and permanent disability process, the Department of Education will now use a common disability forgiveness procedure for all of its student loan programs rather than a different procedure for each. More importantly, a disabled borrower can now include a copy of his Notice of Award from Social Security as proof of disability. Under current rules, the Department of Education would make its own, independent decision about a borrower’s medical or mental health disability.

When Bankruptcy Makes More Sense than Struggling to Pay Off Debt

By Jonathan on November 13, 2012

I want to challenge the conventional wisdom that filing bankruptcy should be considered a last resort. Does that sound self serving coming from a bankruptcy lawyer? Maybe. But consider this table:

Balance	monthly payment	time to payoff	interest rate	total interest	total payoff
$10,000	$300	44 months	15%	$3,043	$13,043
$50,000	$1,500	44 months	15%	$15,217	$65,217

As you can see, under the best of circumstances, it will take you 4 ½ years and $13,043 to pay off that $10,000 credit card debt, assuming that: you are no longer using your credit card for future purchases you have not been late, thereby keeping your interest rate from jumping to a penalty rate you make only the minimum payment of $300 per month Under this best case scenario, $50,000 of credit card debt will require $1,500 per month and you will end up paying interest charges totaling $15,217 for payoff of $65,217.

What happens if you miss a payment? In addition to the late fees, your interest rate rises from 15% to a penalty rate, which is typically 29%. With a 29% interest rate, and a $300 per month minimum payment, your interest charge on that $10,000 balance will total $10,959 (totaling $20,959) and almost 6 years to pay off the debt. A $50,000 balance, payable at $1,500 per month, will produce interest charges of $54,793 for a total of $104,793 over that 70 month period.

Balance	monthly payment	time to payoff	interest rate	total interest	total payoff
$10,000	$300	70 months	29%	$10,959	$20,959
$50,000	$1,500	70 months	29%	$54,793	$104,793

You can run your own numbers at: https://www.cardhub.com/credit-card-calculator/

Achieving Emotional Stability in the Practice of Bankruptcy Law

By Jonathan on November 9, 2012

Next month, I will be speaking about consumer bankruptcy issues at a continuing legal education program in the Atlanta area. While most of my presentation will focus on the nuts and bolts of the Chapter 7 and Chapter 13 process, I do intend to discuss the practical elements of work as a bankruptcy lawyer.

Most bankruptcy lawyers I know find their work to be rewarding and satisfying. Very few areas of the law offer an attorney the opportunity to literally change a client’s life overnight. Bankruptcy is one of those areas. Clients walk into appointments on the edge of dispair, facing wage garnishment, judgments, foreclosures, repossessions and other unpleasant prospects.

Chapter 7 or Chapter 13 can often offer those clients a way out of what seems to be an impossible situation. While I make it clear that bankruptcy is not a free lunch and should be considered as a last resort, it does serve as the most powerful tool available to solve many financial problems and put a bankruptcy filer on the road to financial recovery and emotional peace of mind.

As rewarding as bankruptcy practice can be, it can also be draining. Every day, bankruptcy lawyers meet with people in crisis and it can be difficult to not take a personal interest and concern in our clients’ problems.

Just like our clients who find themselves on an emotional roller coaster when trying to decide what to do about all that debt, bankruptcy lawyers also need to prepare for the highs and lows that are part of the bankruptcy process.

Debts that Arise from Personal Disputes are Often Trouble in Bankruptcy Court

By Jonathan on November 1, 2012

When I meet with a new client, I am always on alert for certain types of debts that I know will be trouble. Sometime the trouble factor is so great that I advise my client not to file.

One area that almost always results in expensive, drawn out bankruptcy litigation are cases where a potential bankruptcy debtor has been sued by another person over a debt and the underlying issues are personal and not just about money.

Broken business partnerships where one or both parties feel betrayed and use the courts to beat up on one another are always trouble. I remember one such case in which I represented the party who had run out of money after several years of litigation and had turned to bankruptcy in what turned out to be a futile attempt to make the entire situation go away. The former partner, who was objecting to just about everything in my client’s case turned to me at one point and said “I don’t care how much this costs, I just want to see your client and his family homeless.”

Not a good situation if you are the party in bankruptcy who will be writing checks to a bankruptcy lawyer to litigate endlessly in bankruptcy court.

I saw a writeup of another such case on the Clerk of Court’s website. This case involved a dispute between two neighbors who did not like each other much. After engaging in a verbal dispute one neighbor went to the police and accused the other neighbor of a variety of crimes. The police arrested neighbor #2 based on these accusations and neighbor #2 spent 2 weeks in jail before her case was eventually dismissed for lack of probable cause.

Can I Remove a Judgment Record from my Credit Report if the Judgment Creditor is Bankrupt and Now Out of Business

By Jonathan on October 29, 2012

This afternoon, I received an interesting email from Gerri Detweiler, the host of Talk Credit Radio. Gerri is the personal finance expert at Credit.com and, not surprisingly, she gets dozens of questions from readers and listeners every day and she asked for my thoughts on an interesting question.

Here is my response to Gerri’s listener: there are several issues you will face in trying to remove the judgment from your credit. First, you need to remember that credit reporting and judgment records are two separate systems. Credit reporting agencies are private companies that maintain records for subscribers.

Credit repair and restoration tactics involve writing a credit bureau to challenge the derogatory entry. Your challenge will trigger a re-investigation and if the entry is not verified by the creditor, it should come off.

Public records like judgments, however, are more difficult to get removed because a judgment posted on a court docket are self-verifying – in other words, a judgment represents a finding by a judge that you owe money and as a matter of law, you owe this money.

The judgment will expire at some point, however, at which point the record of the judgment will fall off the court dockets. Once the judgment goes stale, it is no longer enforceable and will come off your credit report as well.

So, while you can challenge the presence of the judgment on your credit report, it is unlikely that the credit bureau will remove it unless and until the judgment expires or is otherwise canceled.