San Diego Bankruptcy Attorney Blog

Debt collectors must pay for harassment

2012-02-04T15:14:36Z

The federal government is coming to the aid of Americans who have been the target of creditor harassment regarding debts they may not have even owed.

The Federal Trade Commission (FTC) is the federal agency responsible for responding to consumer complaints about fraudulent practices. Though identity theft ranks as the number one complaint investigated by the FTC, debt collectors come in at number two.

Recently, the FTC penalized one of the country's largest debt collectors, Asset Acceptance, for deceiving consumers with respect to collecting on old debts.

]]> Specifically, Asset Acceptance was charged with:

Failing to tell consumers that certain debts were too old to be sued for
Failing to inform consumers that paying even a small portion effectively revives an old debt, and extends the amount of time the collector can legally sue.
Failing to conduct reasonable investigations concerning disputed debts
Failing to verify that debts were valid
Using illegal collection practices
Reporting inaccurate information to credit reporting agencies

Under the terms of the settlement agreement reached with the FTC, Asset Acceptance agreed to settle the claims against it for $2.5 million. It must also tell consumers with old debts that it will not sue and investigate disputed debts so that there is a reasonable basis for pursuing a consumer. Finally, it must also notify consumers if the debt will be placed on their credit report.

This is not the first time that the FTC has pursued debt collectors for such illegal and deceptive practices. In fact, in the past two years, eight debt collection agencies have been pursued by the FTC based upon consumer complaints.

Californians who are being harassed by a debt collector should protect their rights and learn how to guard themselves from illegal debt collection practices.

Source: The New York Times, "F.T.C. Fines a Collector of Debt $2.5 Million," Tara Siegel Bernard, Jan. 30, 2012

Are blacks discriminated against when it comes to bankruptcy?

2012-02-02T15:39:33Z

According to the results of a recent study, it appears the answer to that question may be yes. In fact, the study suggests that in general blacks are almost twice as likely to face more difficult and expensive bankruptcy proceedings than white people are.

The study found that some bankruptcy lawyers may be more likely to suggest filing for Chapter 13 bankruptcy as opposed to filing for Chapter 7 bankruptcy. These statistics were interestingly consistent across the nation, including in California.

]]> Chapter 7 is the most common form of bankruptcy for those who are facing unmanageable debt. In such a scenario, debtors are able to erase their debt and start fresh. This process is relatively quick and can sometimes be less expensive than other alternatives.

One such alternative is to file for bankruptcy under Chapter 13. In this type of bankruptcy, one is expected to pay off some debt under a payment plan during a three to five-year period.

Chapter 13 is more appropriate than Chapter 7 in certain circumstances. For example, Chapter 13 would be the bankruptcy form of choice for homeowners who wish to stay in their homes and avoid foreclosure. Chapter 7 does not necessarily offer this protection. However, the study found that blacks who are not homeowners were still more likely to file for Chapter 13.

It is important to note that the findings specifically did not find any form of overt discrimination, or a conspiracy to simply file for Chapter 13 protection if a client is black.

As this story shows, it is extremely important to have trust in your bankruptcy attorney that he or she will have your best interest in mind, and will offer you the most appropriate vehicle for dealing with your debt depending on your financial situation.

Source: The New York Times, "Blacks Face Bias in Bankruptcy, study suggests," Tara Siegel Bernard, Jan. 20, 2012

Major lenders agree to reduce principal mortgage amounts

2012-01-28T16:51:38Z

Many California homeowners are currently struggling to make ends meet, and as a result may be facing imminent foreclosure if they are unable to reach a loan modification with their lender.

Help may be on the way for at least some struggling homeowners in California and throughout the country if a draft settlement between five major lending institutions and the 50 states is executed.

]]> In the past few years since the nationwide financial crisis, some such homeowners were the victims of deceptive and fraudulent practices by major lenders throughout the country, some of which were potentially illegal.

In an effort to prevent further abuses towards homeowners in the lending industry, the U.S. states' attorneys general have pursued at least five of the major lending institutions during the past year. These include Wells Fargo, JPMorgan Chase, Bank of America, Citibank and Ally Financial. Recently, both sides appear to have agreed to a $25 billion settlement agreement.

Though the victims of these faulty foreclosures may receive little benefit from this settlement agreement -- if at all -- California homeowners who are currently facing foreclosure may at least see some protections in terms of foreclosure guidelines and the possibility of a reduction in their outstanding mortgage amounts. Specifically, under the proposed settlement those homeowners who owe more than their home is worth, and who also have very little chance of refinancing, may be eligible for this reduction in the principal amount of their mortgage. It is estimated that this constitutes approximately 25 percent of homeowners.

Interestingly, California's Attorney General will evaluate this settlement agreement which is expected to be executed in the coming weeks. She is particularly concerned about whether California would still be able to prosecute lenders' wrongdoing outside of the settlement agreement.

Source: Pioneer Press, "Mortgage lenders agree to $25 billion settlement," Derek Kravitz," Jan. 24, 2012

Kodak to restructure with the help of Chapter 11 bankruptcy

2012-01-28T00:47:34Z

In what has been a much anticipated restructuring, the 132-year-old American photo company, Kodak, has finally filed for bankruptcy protection under Chapter 11. Kodak has suffered after the coming of the highly competitive digital age and has faced heavy competition both by foreign companies as well as the digital industry, and most recently with the widespread use of smartphone cameras.

In the past decade, the company has been struggling to see profits and has reduced its workforce by nearly 50,000 employees. Many of its manufacturing plants and processing labs have been closed, and it looks like more will have to go. Inside bankruptcy, Kodak is hoping to streamline its business structure even further so that it can remain operational.

]]> Of its $5.1 billion assets, Kodak still owns many patents -- some of which may still have significant value. However, Kodak is struggling with almost $7 billion in debts. In order to continue operating, Kodak is considering selling off its intellectual property portfolio. In an effort to boost the value of these assets, Kodak has filed several patent infringement lawsuits against its competitors, among them California-based Apple.

Kodak is not expected to exit from bankruptcy until at least 2013. This will be somewhat longer than a normal business bankruptcy because Kodak has many creditors with which it will need to negotiate. Among the major creditors that Kodak will have to work with are Disney Studios, Best Buy and Wal-Mart Stores Inc.

In the meantime, Kodak is hoping that an 18-month, $950 million credit facility will help this struggling company to continue operating through its restructuring.

Source: Los Angeles Times, "Kodak files for long-expected Chapter 11 bankruptcy," Tiffany Hsu, Jan. 20, 2012

Credit scores fell along with credit card debt last year

2012-01-26T21:07:04Z

The economic downturn has left many Americans more aware of their credit and financial situations. Many people are working their way out of credit card debt and learning how to better manage their finances, as not to repeat mistakes that many in the San Diego made in the past. A person's credit score is often influenced by many indicators of overall financial stability.

Sometimes inaccuracies in a person's credit report can cause low credit scores and leave them in need of credit repair services. This might be the case for more people since last year the average credit score in the United States fell. This indicated more Americans could be using more of their available credit, missing payments on their credit cards or exceeding credit limits. All of these things can impact a person's credit score.

]]> If a person has a lower credit score, they often find themselves paying higher interest rates on card and loans, or unable to obtain loans when they need them. If a person's credit score is being negatively impacted by an inaccurate credit report, which includes payment history, they may want to seek help in correcting the report.

Having a correct credit report can help when people are hoping to take out a new loan or applying for a new credit card. If someone in San Diego is in need of credit repair either because of an inaccuracy in their credit report or because they have filed for bankruptcy in the past, they may want to seek the help of a credit repair attorney.

Source: Money Rates, "Credit card debt falls alongside credit scores," Maryalene LaPonsie, Jan. 23, 2012

O.J. Simpson trying to stop foreclosure

2012-01-21T18:24:06Z

Football star O.J. Simpson is well-known not only because of his NFL career, but also because of problems that he has had in his life. These problems include the famous criminal trial in which he was acquitted in the murder of his ex-wife, Nicole Brown Simpson and her boyfriend Ron Goldman, in 1994.

Simpson's name was not completely cleared however, as he was held financially responsible in the wrongful death lawsuit brought by Goldman's family. That judgment was in the amount of $33 million. This judgment against Simpson is one of many factors that led to his bankruptcy and most recently a foreclosure filing.

]]> As a result of dwindling market values, along with a substantial mortgage left on the property, it is no wonder that foreclosure was a risk for the former football star. This is especially true because Simpson is currently behind bars on charges of kidnapping and armed robbery. He also has very little means, besides his fixed income consisting of retirement and pension amounts, to make the monthly mortgage payments on his home. This is why Simpson sought the protections of bankruptcy and hoped to get a fresh start.

Bankruptcy presented new challenges for Simpson however because the Goldman family claimed income that Simpson earned from a book about the 1994 murders should be turned over in payment of the civil judgment. This left only a small amount of Simpson's assets available to pay down the mortgage on his home that he purchased in 2000.

Simpson apparently stopped making mortgage payments in March of 2010 according to his lender, JP Morgan Chase, which has filed papers to foreclose on Simpson's home. According to the foreclosure filing, Simpson owes more than $700,000 on the home, which includes interest, fees and penalties, and is far above what the home is worth.

In the meantime, Simpson's lawyers have appealed not only the civil judgment, but also the foreclosure action.

Source: Forbes, "JP Morgan Chase Trying to Serve Foreclosure Papers on O.J. Simpson - at His House!," Jose Lambiet, Jan. 16, 2012

Real life Jerry Maguire files for Chapter 7 bankruptcy

2012-01-18T16:12:40Z

Leigh Steinberg, who may be better known as the inspiration for the lead character from the movie "Jerry Maguire," recently filed for bankruptcy. Though the famous sports "super agent" has represented some of the biggest names in football and has negotiated record-setting contracts, he has not been without his own personal financial problems.

Californians may be thinking that bankruptcy is only for people who do not know how to manage money. However, managing money and negotiating multi-million dollar contract is exactly what Steinberg did best. According to some, Steinberg is brilliant. Even so, he filed for Chapter 7 bankruptcy because his financial situation got away from him.

]]> So, how does an extremely wealthy individual, who looks like he has everything going for him, end up needing the protections afforded by bankruptcy law?

Apparently, a series of events in his life were such that he now lists only $475,000 in stock as assets, even though he earned a commission on some of the largest football contracts in history. Steinberg's total debt is somewhere between $1 and $5 million, which will more precisely be determined as his bankruptcy case proceeds. Included in that amount is at least $1.4 million in debt that he currently owes to a landlord.

In this case, Steinberg points to serious medical problems with his children, a struggle with alcoholism and an unauthorized business transaction made by one of his employees as the sources of his financial difficulties.

He says that his creditors have been so relentless and aggressive that, even though he has been working very hard to pay off his debts, it appeared that bankruptcy was his best option to protect his family and his life.

Source: ABC News, "Inspiration for 'Jerry Maguire' Files for Bankruptcy," Susanna Kim, Jan. 12, 2012

California realtors warn of foreclosure relief scams

2012-01-12T21:33:36Z

Offers by companies to modify mortgages and create financial relief are often part of fraudulent schemes. Financially troubled borrowers should be leery of falling prey to foreclosure relief scams. A recent announcement by the California Association of Realtors is attempting to increase consumer awareness of these scams at a time when such fraudulent setups are becoming more prevalent.

San Diego foreclosure prevention lawyers note that scammers find consumers to victimize through the public foreclosure notices publishing in newspapers, on the internet and elsewhere. Scammers purport to be able to stop foreclosure proceedings immediately, and many offer money-back guarantees to create the illusion of a no-risk situation.

]]> But these are a serious financial hazard to homeowners and could create far more problems than they promise to solve. Consumers need to understand the rules and regulations governing loans and loan modification in order to protect themselves from this scam and others that use similar tactics.

Only your original mortgage servicer has the authority to make modifications to a loan -- third-party setups claiming to provide these modifications are unable to make any changes. Additionally, charging up-front fees for mortgage modification is illegal in almost all cases -- legitimate companies will never demand this type of payment.

Consumers should also be reluctant to do business with companies or entities that offer loan modification on a mortgage but do not encourage you to communicate with your mortgage servicer regarding the matter.

Source: Mercury News "Realtors warn homeowners to beware of mortgage modification scams" Jan. 2, 2012

New California law restricts right of employers to check credit

2012-01-06T20:12:41Z

Starting Jan. 1, California enacted a law that made it harder for employers to check the credit scores of job applicants. Some San Diego readers might have been surprised at how widespread this practice was before this law went into effect.

Employer say they need to check the credit scores of job applicants because doing so provides an insight into character and judgment of a prospective employee. According to one privacy expert, about 60 percent of employers perform a credit check as a regular part of the background process.

]]> However, there is the fear that this practice will keep those who are in need of credit repair out of the very jobs that would earn them the wages they need to get back in financial good standing. There is also the point that there are life events that are not entirely within a person's control, like a medical emergency or a drawn-out divorce, that can negatively affect someone's credit score. In that case, the credit score would not say very much about the person at all. On top of that, there is always the point that a person's personal spending habits do not say much about how that person will perform on the job, if they say anything at all.

California's law curtails the ability of an employer to look at a job applicant's credit. Generally, that is only allowed when the applicant is applying for a managerial position or for a position that regularly deals with confidential information, such as bank account data or Social Security numbers.

Along with California, five other states have laws restricting credit checks by employers.

Source: WOAI News Channel 4, "Hiring Hurdle: Credit Check," Jan. 3, 2012

Critics want changes to student loan system and bankruptcy

2012-01-03T12:01:53Z

One of the growing issues coming out of the Occupy Wall Street movement and other groups is the increasing burden student loan debt has placed on young professionals and even individuals with families. But some of the more pressing criticism seems to be toward a broken system that rewards lenders for defaulted loans more than the ones that are paid off.

San Diego bankruptcy lawyers note that some observers of the student loan industry consider the lenders' actions to be predatory in nature. Because student loans are exempt from traditional consumer protections like bankruptcy, refinancing and statutes of limitations, lenders benefit from having a power over those in debt to them to a degree unmatched by lenders in other markets.

]]> For example, the guarantors of the student loans, which are intended to police the lenders, make an average of 60 percent of their total revenues from the excess charges applied to defaulted loans. Outside organizations like the Department of Education also earn profits off of defaults of the loans issued through the Federal Family Education Loan Program.

Because of this environment, people who have student loan debt that they are unable to pay can see their suffering compound as fees and late charges pile up on student loan debt they can't get out from underneath. The result is a deepening hole with little to no options but to pay off the debt -- and all its accumulated charges -- regardless of how long the process takes.

Some critics of the current student loan system would like protections put in place that reform current practices to make debt more manageable while providing greater protections to those who take on the debt.

Source: Forbes "Should Student Loans be Dischargeable in Bankruptcy?" Dec. 29, 2011

California foreclosure relief may be hard to get from government

2011-12-30T22:01:04Z

Homeowners holding out hope that foreclosure relief is in the near future had better prepare to be disappointed. Several of Washington's efforts to provide some relief to distressed homeowners have already failed. Although a new program announced last April is designed to offer monetary compensation for homeowners who had been wrongly foreclosed on by banks, new information about the program suggests that the program's benefits may be marginal.

San Diego foreclosure attorneys have noted that the program offers reviews of individual foreclosure cases to homeowners who have potentially been harmed in the foreclosure process. The review process will then determine what reparations, if any, are provided to the homeowners.

]]> But some government representatives are skeptical about the program, saying that the consultants contracted out to conduct the reviews may experience possible conflicts of interest during the review process, since these individuals have been selected for their jobs by the banks, which are also paying them. Because these consultants have a history of working with banks and would like to maintain their relationship with the financial institutions, it is possible they will want to work on the behalf of the banks to minimize reparations.

The review process is the product of improper foreclosure practices used by banks in the wake of the housing crisis several years ago. A review of banking procedures found that many major banking institutions failed to follow legal procedures when processing foreclosures and put consumers at a disadvantage. Consequently, banks are now attempting to compensate for the financial burdens they placed on consumers as a result of their unfair practices.

Source: NYT "Foreclosure Relief? Don't Hold Your Breath" Dec. 24, 2011

Foreclosures jumped 21 percent in third quarter of 2011

2011-12-29T18:09:14Z

Mortgage foreclosures in the United States increased sharply in the third quarter of 2011 after a temporary suspension of foreclosure practices was lifted off of banking institutions. The 21 percent increase from the previous quarter brought national foreclosure levels back to the historically high levels that the mortgage industry has been seeing in the aftermath of the housing crisis.

San Diego foreclosure defense attorneys noted that part of the rapid spike in foreclosures is that banks are working more aggressively to process foreclosures for seriously delinquent loans. Now that the suspension period has been lifted, banks are working to catch up on mortgages entering into foreclosure proceedings.

]]> The foreclosures report, which was produced by the Office of the Comptroller of the Currency, said another reason foreclosures have increased is that many delinquent loans are faced with no alternatives other than foreclosure proceedings. The number of seriously delinquent mortgages also increased as stalled foreclosure processes allowed for past-due mortgages to become even more delinquent.

Despite the grim foreclosure news, there is information to suggest a more optimistic future for the housing industry. Although foreclosures spiked in the third quarter of 2011, it was still 11.8 percent lower than the third quarter of 2010.

But mortgages that are current remained steady from the second quarter in 2011, suggesting that more home loans are stabilizing after the housing crisis. Meanwhile, Bank of America Corp. and other major financial institutions are currently negotiating settlements for their improper foreclosure practices.

Source: Reuters "Home foreclosures jump in third quarter" Dec. 21, 2011

Mortgage lenders make modifications difficult for homeowners

2011-12-20T20:57:07Z

There are some tentative indications that the U.S. housing market may be making steps toward recovering from the ongoing foreclosure crisis. However, continued errors in the loan modification process are making it more difficult for homeowners to dig themselves out of financial holes with their lending institutions.

San Diego foreclosure attorneys note that one particular case in the news concerns a California homeowner who has been attempting to restructure a subprime loan since 2007. Although the homeowner never missed a payment on her mortgage, the adjustable rate acquired in 2004 increased quickly and soon moved beyond what she could afford to pay.

]]> The homeowner has struggled to work out the mortgage issues with her lending bank, which recently denied her application to restructure after failing to provide certain documents crucial to the process.

But there was a hitch: the bank had never requested the specific documents it later claimed were missing.

While that point of contention was being brought through appeals, the application was once again denied over two reasons attributed to calculations that were later found to be incorrect.

Later in the process, the bank notified the homeowner that it was accelerating the foreclosure process despite a perfect payment history and a stated balance that showed the bank owed the homeowner nearly $300.

The homeowner's struggles highlight the problems that are still rampant in the mortgage market. Homeowners must be wary of their banks' procedures and policies. Bank errors and other unforeseen problems can cause significant holdups in the mortgage modification process regardless of a homeowner's history with the lending institution.

Source: Reuters "Modification blunders bedevil U.S. housing recovery" Dec. 19, 2011

Bankruptcy and Foreclosure in California, Part II

2011-12-14T12:01:06Z

In the last post, we began to talk about the tactic of filing for bankruptcy when a homeowner is in foreclosure. As we said there, it may not be of much help to a homeowner in foreclosure to file for Chapter 7 "liquidation" bankruptcy, because the mortgage lender will still be able to repossess the home. A Chapter 7 bankruptcy does not discharge the mortgage lien on a house, so while filing for Chapter 7 will delay a foreclosure action, the filing in and of itself will not stop the foreclosure.

Chapter 13 bankruptcy can be a different story, however. This is a good time to print a reminder that a San Diego bankruptcy attorney should be consulted about how bankruptcy will affect foreclosure. The general information in these blog posts is just that: general. It may or may not apply to a specific homeowner's situation.

]]> Typically, a debtor who files for Chapter 13 bankruptcy keeps their property and makes a plan to pay off creditors. Chapter 13 is sometimes referred to as the "wage-earners bankruptcy" because the debtor needs to have a realistic plan for being able to make regular payments to creditors.

In many cases people who file for Chapter 13 bankruptcy opt to include payments of mortgage arrears in their payment plan. In cases where communication with the lender has been difficult (and a lack of communication is common), Chapter 13 can lead to a court-supervised modification of the mortgage loan.

Again, a bankruptcy attorney should be consulted on how a specific bankruptcy will affect a specific foreclosure.

Source: Forbes "Going Bankrupt in 2012, but Keeping Your Home" Dec. 8, 2011

Bankruptcy and Foreclosure in California, Part I

2011-12-13T17:18:41Z

Even with the minimal positive indicators that have been reported on the economy, it is still estimated that millions of people across the country, including California, will lose their homes to foreclosure in the coming year. When homeowners' financial straits become serious enough that they are in danger of going into foreclosure, then it is time to consider some serious measures. None may be very appealing, so the thing for any individual to do is to determine which path will put them on the best financial footing possible. In many cases the best option available is to file for bankruptcy protection.

Filing for bankruptcy is not something that should be taken lightly. For one thing, it does not solve people's financial problems in one fell swoop. There are different types of bankruptcy, and choosing one over the other can have very different consequences for different people. In addition, even though bankruptcy law is federal law, there are state laws that are important in bankruptcy, most notably laws about what property is exempt from liquidation in bankruptcy; in other words, laws regarding what you get to keep even if you have to sell most of your possessions.

]]> Consult with a San Diego bankruptcy attorney on California's exemptions. The situation can be complicated. For instance, with an exemption for a home, it may make a difference how much equity a homeowner has in the home, the home's value, and the balance on the mortgage.

If a homeowner in foreclosure files for Chapter 7 bankruptcy, they can definitely put off the foreclosure, but they may not be able to put it off very long. Chapter 7 will not discharge the lien on the house, meaning that the bank can still take the house as collateral on the mortgage loan.

The news is a little better regarding Chapter 13 bankruptcy, and we'll discuss that in our next post.

Source: Forbes "Going Bankrupt in 2012, but Keeping Your Home" Dec. 8, 2011