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Credit reports show short sales as foreclosures

2013-05-24T03:57:05Z

California homeowners who are struggling to pay their mortgages may resort to several solutions to sell their homes. One of the most common is the "short sale," a method by which the lender and homeowner agree to allow a sale of the home for less than is owed on the mortgage. This may seem an equitable solution to those who are struggling with financial hardship, but many homeowners may not realize that a short sale can appear as a foreclosure on a credit report.

Credit reporting bureaus do not have separate codes to distinguish between a short sale and a foreclosure. The Federal Trade Commission and the Consumer Financial Protection Bureau have been asked to investigate this problem. Many agencies that source mortgage funding make a distinction between borrowers who allow their houses to be foreclosed upon and those that negotiate a short sale. Borrowers who have opted for a short sale may find it easier to get another mortgage later.

]]> However, the lack of distinction between the two on credit reports may lead to rejections by lenders of borrowers who could have successfully obtained and made payments on mortgages. One Florida Senator has asked the federal agencies to investigate this practice and to penalize those responsible if the coding is not altered. According to the Senator, there have been 2.2 million short sales across the country in the past several years. Failing to make a distinction between foreclosures and short sales on credit reports could stifle economic recovery.

A bankruptcy attorney may represent an individual who is struggling to repay debt, including mortgages. Homeowners who are facing financial difficulties may be able, through a bankruptcy filing, to renegotiate their debts into more manageable payments.

Source: Washington Post, "Short sales may be treated like foreclosures by credit-reporting agencies", Kenneth R. Harney, May 16, 2013

Chapter 7 vs Chapter 13 bankruptcy

2013-05-17T22:20:05Z

California residents who are considering filing for bankruptcy can either file for Chapter 7 or Chapter 13 bankruptcy. Though both are popular debt relief options, there are some fairly large differences in the ways that each eliminate debt and who is eligible for them. The main benefit of Chapter 7 is that it discharges most unsecured debt while Chapter 13 bankruptcy is more of a reorganization, but it enables people to keep their assets and may be able to prevent a foreclosure.

Chapter 7 bankruptcy is the most popular: 70 percent of people who file for bankruptcy file for Chapter 7. In this type of bankruptcy, people's assets are sold off to pay creditors, and most remaining unsecured debt is discharged. This process is a fairly quick one, and most individuals are able to complete it within a few months. Once they have completed their filing, the bankruptcy will stay on their credit report for 10 years. However, it is important to note that not everyone qualifies for this type of bankruptcy. If someone fails a means test, the only viable option is filing for Chapter 13.

]]> With Chapter 13, the process takes an average of three to five years. Individuals are able to keep their assets, and they are given more time to pay off debts. A trustee is appointed by the court who sets up a debt payment schedule and also collects these debt payments every month. This type of bankruptcy remains on a person's record for seven years.

For bankruptcy to be beneficial, it needs to be done correctly. An attorney could help people who are interested in filing for bankruptcy initiate the process.

Source: Fox Business, "Chapter 13 Bankruptcy: How it Works", Susan Ladika, May 09, 2013

California brings lawsuit against JPMorgan Bank

2013-05-15T22:20:05Z

A lawsuit was announced by the California Attorney General that alleges that JPMorgan engaged in fraudulent debt-collection practices against California residents.

According to the Attorney General, JPMorgan filed more than 100,000 lawsuits against California consumers between January 2008 and April 2011. The lawsuit claims that JPMorgan used illegal shortcuts to produce such a large number of lawsuits. One such shortcut was robo-signing. Robo-signing is a process in which bank employees sign sworn documents without the normal bank record checks and case reviews. Banks used robo-signing on a massive scale at the height of the foreclosure crisis. It was listed as one of the abuses by regulators in two multi-billion-dollar settlements reached with JPMorgan and other large mortgage servicers.

]]> In addition to the allegations of robo-signing, the lawsuit claims that JPMorgan neglected to notify residents that they were being sued. California law requires such notification. Another allegation against the bank was that consumers' personal information had not been redacted in court filings. This oversight could expose people to potential identity theft. The complaint alleges that JPMorgan certified under penalty of perjury that it did not target consumers on active military duty, when it had not checked.

If a judge finds in favor of California, JPMorgan could be liable for a substantial sum of money. A spokesman for the California Attorney General said that it is likely that there were multiple violations for each of the cases. Each individual violation can carry up to a $2,500 penalty.

Anyone who has questions about fraudulent debt collection, credit card debt or bankruptcy may benefit from a consultation with a bankruptcy lawyer. A lawyer may be able to explain the rights of consumers in regard to credit card and other debt.

Source: CNN Money, "California accuses JPMorgan of fraud in credit-card-debt collection", May 09, 2013

Investment bank files for Chapter 7 bankruptcy

2013-05-11T04:15:01Z

In today's tenuous economy, investment banks in California may face similar financial challenges as Ledgemont Capital Group LLC. Fox Business News reports that the New York based investment bank has filed for Chapter 7 bankruptcy, citing between $1 and $10 million in liabilities. Its assets, estimated to be between $10 and $50 million, are to be liquidated, with proceeds distributed to Ledgemont's creditors.

According to Fox Business News, Ledgemont LLC's debt struggles began several years ago when it served as joint underwriter for FriendFinder Networks' $460 million public offering; Russian investment bank Renaissance Capital served as the second underwriter. However, the venture failed in 2008, and FriendFinder Networks ultimately sought underwriting from Imperial Capital and Landenburg Thalmann & Co. FriendFinder Networks is the current publisher of adult magazine "Penthouse."

]]> It should be noted that filing for Chapter 7 does not guarantee a company's dissolution. Generally, Chapter 7 filings involve the summation and liquidation of assets to effectuate a creditor's claims recovery. The amount creditors receive varies, often depending on how much secured collateral they possess against the debt. In truth, bankruptcy is seldom the disaster it's made out to be. Chapter 7 filings can help protect personal property and offer legal entities a fresh financial start from substantial liability.

Large corporations aren't the sole benefactors of Chapter 7. Individuals and small businesses burdened by overwhelming debt may consider their own filings in order to seek relief from wage garnishment, creditor harassment or other such practices. An attorney's counsel may prove a valuable resource under these conditions.

Source: Fox Business, "Boutique investment bank Ledgemont seeks Chapter 7 bankruptcy", May 06, 2013

Is it better to save or pay off debt first?

2013-05-09T04:15:01Z

California residents with debt may be wondering if it is better to pay all of their debt off before they begin setting money aside for retirement. However, there is no straightforward answer to the question. The types of debts people have and the savings options available to them will determine what the best financial strategies are. Many financial experts suggest that people set a small amount of money aside for emergencies but to make high interest rate debt, such as credit card debt, a priority.

Once someone has gotten this type of debt under control, they should start looking at their options for paying off their mortgage and any car payments they might have. How much they want to pay towards cars and homes should be weighed against how much they stand to benefit from savings accounts. For example, if someone has access to an employer-sponsored 401(k), they should at least save the maximum that their employer will match, even if it reduces the money they have available to pay off their mortgage.

]]> Additionally, people should focus on saving more money rather than paying their house down due to the current housing environment. Since most portfolios provide a better return on investment than the interest rate for a mortgage, money will go further when put into savings.

Another option that individuals in California should consider if they have large amounts of debt, especially if it is unsecured, is to speak with lawyers about filing for bankruptcy. Having enormous debt can hamper people's ability to save for retirement, and lawyers could explain their options.

Source: Forbes, "Pay Down Debt Or Save? The Spock Vs. McCoy Debate", Chris Farrell, April 30, 2013

Chapter 7 relief sought by construction company

2013-05-03T12:17:44Z

Construction companies in the Los Angeles area may be experiencing financial troubles that are similar to those of a relatively young construction company in North Carolina. This company, which was incorporated and launched in 2007, recently announced that it is filing for Chapter 7 bankruptcy, and its assets will be liquidated.

A closer look at the company's financial records provides insight as to the trends that were followed by management. The ratio of assets to liabilities, where liabilities are reported at $1.2 million to total assets of only $240,000, made it virtually impossible for the company to sustain itself and service its debt.

]]> Revenue reported by this company has been trending downward, with $3.2 million in 2011, $3.1 million in 2012, and $2.7 million projected for the current year. Even though the revenue numbers appear to be substantial, it is not enough for the company to maintain solvency.

There are varying types of bankruptcy relief that can be sought by commercial entities. Chapter 7 bankruptcy seeks to liquidate a company's assets and distribute the proceeds among creditors, based upon factors such as the amount of collateralization that creditors may possess as security against the debt. A Chapter 7 filing does not always result in the dissolution of the company, as in those instances where the bankruptcy court appoints a trustee to review the financial records and determine if the company can be salvaged.

Companies, regardless of whether sole proprietorship, partnership, corporation, or otherwise organized, that find themselves struggling with similar financial problems as the one cited above, may prefer to seek the counsel of a reputable attorney who specializes in bankruptcy cases before proceeding further. A bankruptcy attorney may be able to suggest an alternative to Chapter 7 bankruptcy that could serve to be a viable option that better serves the needs of the troubled business.

Source:Triangle Business Journal,"Coastal construction company goes bankrupt," Chris Bagley, April 25, 2013

Homeowners in federal loan modification program still defaulting

2013-05-01T12:27:12Z

A new report found that the federal program that is supposed to help struggling homeowners around the country is failing. Homeowners, including some here in California, were supposed to be able to keep their homes by altering their mortgages through the Treasury Department's 2009 Home Affordable Modification Program, or HAMP. However, homeowners who obtained a loan modification in the third and fourth quarters of 2009 have default rates of 46 percent and 39 percent, respectively.

The report came from the special inspector general for the Troubled Asset Relief Program, or TARP, who said that homeowners who fell out of modification programs were likely to face foreclosure. About 312,000 homeowners have defaulted on HAMP-modified mortgages. Nevertheless, Treasury officials defended HAMP, saying that homeowners in that program were less likely to default than those in private modification programs. Moreover, Treasury officials said that around 6.5 million homeowners nationwide had avoided foreclosure through HAMP. TARP officials dispute that claim, claiming it is only 1 million.

]]> Critics say many homeowners claim that the process of reviewing their loan for modification is too slow and also that no explanation is given if they are denied. Many people who go through a period of financial difficulty find themselves falling behind on their bills, including mortgage payments. Moreover, merely adjusting the interest rate can result in a situation where people are not paying down the principal.

A loan modification lawyer may be able help a struggling homeowner by negotiating with the lender on their behalf. This can be particularly helpful for people who are at risk of bankruptcy. Along with interest rate reduction, a lawyer can also try to negotiate a reduction of principal or a loan recapitalization.

Source: The Washington Post, "Homeowners defaulting in loan modification program, report says," Danielle Douglas, April 23, 2013

Levels of credit card debt declining

2013-04-25T17:10:56Z

Residents of California and the rest of the nation have become increasingly focused on reducing their debt in the last few years. In 2009, 5.01 percent of credit card holders were more than 30 days late on making payments. By the last quarter of 2012, only 2.47 percent of payments were over 30 days late. Additionally, the amount of credit card debt per household has gone down to an average of $7,117 at the end of 2012 compared to $7,768 at the beginning of 2010.

Young adults are also avoiding racking up credit card debt. According to statistics from Fannie Mae, only 39 percent of undergraduates between the ages of 18 and 24 have credit cards, a drop of 10 percent since 2010. Additionally, the median balance owed by households under 35 went from $2,500 in 2001 to $2,100 in 2010.

]]> There are various explanations for the reduction in credit card use, including reduced availability of credit from banks, less collection efforts being made by banks and the personal fear of racking up debt that cannot easily be paid back. Many young adults who feel they lack economic security are less likely to risk accruing credit card debt, especially since the average income for people between 25 and 34 has dropped by 8 percent since 2007.

If people are running into problems keeping up with their credit card payments, they may want to speak with a bankruptcy attorney. An attorney could help someone understand what bankruptcy covers and if it could help them financially.

Source: Policy Mic, "Credit Card Debt At 18-Year Low: Have We Learned Our Lesson?," Charles Wendel, April 14, 2013

Options for getting out of debt

2013-04-22T19:02:45Z

Thanks to uncertain economic times, many residents of California have found themselves deeply in credit card debt. The good news is that they have numerous available options for getting back on track, even if they are having trouble making ends meet. Viable debt management options include doing a financial inventory, working with creditors and non-profit debt consolidation agencies and filing for bankruptcy.

One of the first things people who are in debt should do is to inspect their finances and find out where their money is going. It could be that they need to scale back on their lifestyles or it may be that their credit card payments are beyond what their income can cover. Understanding the underlying causes of overspending can help individuals stop getting further into debt and address their problems.

]]> Those who are in debt also have the option of working with creditors to change interest rates, lower monthly payment amounts and have late fees and overdraft charges waived or reduced. However, it is important for individuals to avoid organizations that offer programs that sound too good to be true because they usually are. While working with lenders and non-profit agencies can reduce debt and make it easier to manage, there is usually no quick and easy fix for a large amount of debt.

If someone simply cannot make ends meet, it may be a good idea for him or her to contact an attorney and consider filing for bankruptcy. Bankruptcy can eliminate most unsecured debt, and an attorney can help someone understand the process and what exactly is covered.

Source: The Bakersfield Californian, "ACTION LINE: Be smart about debt relief options," Joey Fernandez, April 13, 2013

Why fewer college students have credit cards

2013-04-20T15:41:56Z

One of the results of the global economic recession is that college students in California are far more aware of the dangers of debt, and it has led to a decrease in students having and using credit cards. Based on a survey done by Sallie Mae, only 35 percent of college students were still using credit cards in 2012, dropping by a full 5 percent from the previous year. Additionally, students who do have credit card debt only have an average of $755 of debt, and a third say they have a zero balance on their cards.

]]> In addition to the economic downturn, many cite parents discouraging their children from having credit cards and the 2009 Credit Card Responsibility and Disclosure Act for the decline in credit card use. Parents are concerned about the debt many students are accumulating from student loans and are cautioning their children not to add to it, especially since people can no longer depend on being able to get a job after they graduate. Additionally, the new federal guidelines for credit card companies are much stronger and require far more disclosure to users.

The downside of this increased hesitancy to have credit cards is that students are delaying building their credit. Without a credit card, students will have an uphill battle creating a solid credit history and a strong credit rating.

When someone is having trouble making ends meet due to large amounts of debt, they may find it helpful to consult a bankruptcy attorney. An attorney could explain their options and let them know what debt that bankruptcy will cover.

Source: Washington Times, "College students more wary of credit card debt," Joshua Eferighe, April 1, 2013

Advocacy group questions bank integrity in handling bailout money

2013-04-18T15:39:15Z

An advocacy group claims that some banks are not living up to their end of the bargain following the landmark 2012 settlement that dealt with mortgage servicing and foreclosure abuses. The California Reinvestment Coalition is alleging that financial institutions are not granting mortgage modifications but are pursing foreclosures instead of helping borrowers.

The monitor who was appointed as the watchdog of the settlement explained that he thought the CRC's findings were accurate. He has been talking with many professionals in the industry who are confirming those suspicions.

]]> The associate director of the CRC said that regulators need to hold the financial institutions accountable for their misdeeds and support consumers as they work to recover financially. The financial institutions need to be open about what they are doing with the government bailout monies. Some problems identified by the CRC included clients being "bounced" between multiple mortgage contacts, the pursuit of foreclosure while a loan modification was under consideration and extensive delays related to the processing of applications.

Five of the country's largest providers of mortgages made a deal in 2012 to settle the mortgage fiasco. At least two spokesmen in the industry were uncertain about the results of the survey and thought the data might be flawed. One of the men reported that 5 million homeowners have been given bailout assistance monies in the form of loan modifications in the last five years.

The possible misuse of funds in the mortgage bailout means that consumers who needed the money may not have received it. A bankruptcy attorney might be able to help clients obtain a much-needed loan modification.

Source: Los Angeles Times, "Banks are not complying with mortgage settlement, survey finds," E. Scott Reckard, April 3, 2013

Banks moving away from foreclosures and towards modifications

2013-04-12T15:07:15Z

Homeowners in California worried about foreclosure may not have as much to worry about as they think. Foreclosures have fallen to their lowest rates since the financial crisis began in 2008, and one of the reasons for this is that a bank is more likely to give someone a loan modification. Before the housing crisis, if someone could not keep up with their mortgage payments, foreclosure was inevitable and loan modifications were essentially unheard of.

However, following a settlement of $25 billion enforced by the government and the high cost of foreclosure compared to loan modifications, banks are no longer automatically repossessing homes. While banks clearly drug their heels in the matter, one of the reasons that it took banks so long to begin allowing loan modifications is because banks had to create a system where one did not exist.

]]> The banks abruptly had to deal with millions of Americans that could no longer afford to stay current on their home loans. Currently the number of "home retention actions" from banks in the last quarter has dropped by 20 percent compared to the fourth quarter of 2011, meaning that fewer people need loan modifications.

Banks are now far more willing to negotiate loan modifications with borrowers that have fallen behind, but people cannot automatically assume a bank will work with them. If someone is struggling to keep up with mortgage payments, they may find speaking to an attorney helpful. An attorney might be able to help people ensure that banks are following the law and operating in good faith.

Source: Fox Business, "Banks Reworking Loans Means Fewer Foreclosures," Dunstan Prial, March 28, 2013

What to do when deep in debt and behind on a mortgage

2013-04-10T20:24:22Z

Many people living in California are struggling to make ends meet, and it is not uncommon for them to end up with enormous credit card debt along with being behind on a mortgage. The good news is that individuals do have options in these situations, and homeowners may be able to keep their home, even if they are behind on payments. Additionally, there are numerous ways that individuals can manage large amounts of credit card debt.

Since being behind on a mortgage is usually the most immediate concern, individuals should determine how far they actually are behind on their payments. Most mortgages have a 15-day grace period, but the next payment is usually owed by the first of the month. Therefore, someone may actually be two months behind on a payment if they are not careful. Loan modifications are an option for many people, and if someone is not able to afford their home, they may want to sell it this year to take advantage of the Mortgage Forgiveness Debt Relief Act that expires on Dec. 31, 2013.

]]> Individuals can also look into paying off their credit card debt by negotiating with creditors to lower interest rates, reduce monthly payment amounts and even a debt settlement. Those looking to pay back credit card debt can also receive assistance by speaking with a non-profit credit counseling agency.

If someone is too far behind on their finances, it may be best for them to file for bankruptcy. Bankruptcy can eliminate most debts, and speaking with a bankruptcy attorney may help someone better understand what is involved.

Source: Fox Business, "How to Make $40,000 Credit Card Debt Disappear," March 25, 2013

What is the statute of limitations on credit card debt?

2013-04-05T18:59:27Z

If a California resident has large amounts of unpaid credit card debt, he or she may have passed the statute of limitations on that debt, which entails that his or her lender can no longer use the legal system to collect. However, determining if someone is still legally obligated to pay off his or her credit card debt can be tricky because states can determine their own statues of limitation on debt, and the statutes may differ between the borrower's state and the lender's state.

It is beneficial to the borrower for the statue of limitations to be a shorter period of time because after that time passes, a lender can no longer use tactics like wage garnishment to collect. The statute in California is four years, but a judge's interpretation of contract law may be different. Due to the differences in the laws, the statute is sometimes determined on a case-by-case basis.

]]> This may be the primary reason that many lenders have begun to focus on debt that is less than five years old. In addition to the fact that the debt may have expired, it is up to the lender to prove that the borrower owes a debt, and documentation is often missing or incomplete the longer the debt is outstanding.

If someone is taken to court for credit card debt, it may be in his or her best interest to speak with an attorney. The attorney could help them understand state laws regarding credit card debt and represent him or her in court if the case requires it.

Source: Fox Business, "Expiration Dates Fuzzy on old Card Debt," Fred O. Williams, March 25, 2013

Loan modification dispute goes before federal court

2013-04-03T18:57:10Z

According to attorneys who represented a group of homeowners in a class action lawsuit against Wells Fargo March 20 in California's 9th Circuit Court of Appeals, the bank failed to uphold its obligations in offering them loan modifications. Because the bank accepted federal money in the 2008 bailout, it was required to participate in the Home Affordable Mortgage Program, which stipulates that servicers must provide homeowners with loan modifications that include trial periods followed by term agreement plans if they qualify.

In this case, the homeowners claim that the bank failed to let them know that they did not qualify for their loan modifications within the promised 30-day period. They also maintain that the bank let them continue paying the reduced trial period fees before foreclosing on their homes later. A federal judge had already dismissed two similar class actions in 2008, but the homeowners appealed.

]]> Although trial cases haven't come to a uniform conclusion about these types of issues, appellate courts maintain that banks must offer loan modifications when conditions are met. In this case, however, the attorney for Wells Fargo claimed that the bank never gave the homeowner any indication that the conditions had been met and that the homeowners simply failed to provide additional documents upon request.

Although mortgage modification laws were designed to make things easier on homeowners, they also make the lending process more complicated. Homeowners may have to open up escrow accounts, provide additional information or go through involved approval processes that tax their resources. Lender negotiations don't always result in approvals, and ambiguities often lead to confusion among loanees. As a result, many who feel that they were treated unfairly or subjected to terms that they did not fully understand may seek legal assistance in order to hold the banks liable for their possibly deceptive practices.

Source: Courthouse News Service, "Loan modifications fell short, lawyers argue," Chris Marshall, March 20, 2013