Are Mortgage Company's Stealing Your Money?

Just finished drafting a lawsuit today for woman, I'll call her Mary Lou. She's a single woman who lost one of her two jobs she needed to make ends meet and got behind on her mortgage. She contacted her mortgage company and asked if they could do a modification. They said "no problem" we'll just roll the past due payments into the modified loan. So, she filled out the loan applicaton and sent them 27 pages of documents. A few days later she confirmed with them that they'd received the documents. Nothing happened for 45 days so she contacted them again and ended up talking to their India office and was told they couldn't find the application. She faxed it again and confirmed with them the next day that they got it. They told her it would take 30 more days to process. In the meantime she's getting farther behind on her mortgage.

Forty five days later she contacts them and she gets the same story---we can't find your paperwork. So, she faxes them 37 pages again. This time they say it will take 60 days to process. She confirms they got the fax and waits. A month later she contacts them again and can't get through to a person so she leaves several messages. Several weeks later she finally gets a later acknowledging her request for a modification and assuring her that it will be processed expeditiously.

There weeks later she tries to contact them again and they direct her to another agent in India. After many attempts she finally talks to a woman and is told they need more documentation. The client has trouble finding these documents but manages to send them in two weeks later. In the meantime she receives an acelleration letter and notice of foreclosure from a lawfirm. She tries to call the mortgage servicer to see what's up but only gets messages. A few weeks later she breathes a sigh of relief when she gets a letter from the mortgaging servicer assuring her everything is okay and they won't foreclose.

On the first Tuesday of the following month the mortage company forecloses and the home she's lived in for 23 years is sold for $50,000 more than the note. Mary Lou doesn't find out about it until a man walks up with eviction papers---she has 3 days to vacate!

Devastated, Mary Lou moves out to an apartment and has to trash two thirds of her belongings because they won't fit into her small apartment. She's broke, depressed, angry, humilitated and can't focus on anything. Her life has been ruined and she doesn't feel like even getting off the sofa.

What she doesn't realize, in addition to all the horrible injustices that have been inflicted on her, is that she's just been ripped off for $50,000. The lender had a duty to write her a check for the money they received from the foreclosure in excess of the loan principle plus the cost of foreclosure, but instead someone pocketed her money!

I wish this were an uncommon experience, but it happens every day, and it's not always simply gross incompetence, sometimes, if not many times,it's intentional.

Mortgage Companies Circumventing Bankruptcy Laws and Forcing Debtors into Foreclosure

This week we discovered a new and ingenious way that mortgage lenders are circumventing the bankruptcy laws and forcing Chapter 13 debtors into foreclosure. Typically when a consumer gets behind on their mortgage and are faced with foreclosure they can file Chapter 13 bankruptcy. This allows them to cure the default under the mortgage, cure property tax defaults, and pay out what is delinquent over three to five years.

Mortgage companies don't like this obviously because they'd prefer to foreclosure and take the consumers equity in the property, or, if they don't have any equity, to liquidate the collateral and get their money into a performing loan. Additionally, there's a lot of extra bookkeeping, legal expenses involved in monitoring a case in bankruptcy, not to mention the danger of violating the automatic stay and getting sanctioned.

This week we noticed two different mortgage companies use the same trick to force our chapter 13 clients into a default situation. What they did was to pay the delinquent property taxes that were included in the debtor's chapter 13 plan. Then they notified the debtor that there was an escrow shortage in the account so their monthly payments had to be increased. For one of our clients their mortgage payment would have doubled for the next year until the delinquent property taxes were paid.

The chapter 13 trustee involved fell right into the trap set by the mortgage company. When they received a letter from the taxing authority that the taxes had been paid, they quit making the monthly payments provided in the plan. We almost fell for the scam too thinking there was nothing we could do about it, until we realized the mortgage companies had violated the confirmation order by forcing the debtor to pay the property taxes prematurely and causing a post petition default of their deed of trust.

If the debtor can't pay the increased mortgage payment then, of course, the mortgage company will file a motion to lift the automatic stay or notice the debtor for default, if an agreed order is in effect. Eventually the debtor may find his house up for foreclosure again, despite the protections of Chapter 13 and his diligent compliance with the terms of his plan.

Hopefully, when we bring this to the courts' attention the judges will put a stop to this practice.

Don't Throw Away The Evidence

One of the big problems consumer attorneys face when they try to make creditors obey the bankruptcy discharge or properly report a consumer’s credit after bankruptcy, is that much of the evidence has disappeared. Unfortunately, to prevail in a lawsuit you have to produce credible evidence to the court or jury and without it a remedy that should be available is not. This is tragic as creditors often get away with flagrant violations of the law!

Persons who have filed bankruptcy should be aware that creditors are not allowed to contact them once the case is filed. If contact does occur it should documented carefully and reported to your bankruptcy attorney. We often are called upon to file adversary proceedings to stop creditors from violating the automatic stay or the discharge injunction. In order to prevail in these actions we must prove the creditor contacted the debtor in an effort to collect the debt. So, it’s important that letters received are kept, telephone calls recorded or, at least the pertinent information about the call written down. So, often when a client calls about a violation they can’t tell me who they talked to, the date and time of the call, or what exactly was said.

It’s even worse in credit reporting cases. To prove damages here we need specific information about damages such as credit denials, increased interest rates charged, as well as documentation of mental distress suffered on account of the creditor’s illegal behavior. So often we have to settle a case for far less than it’s worth simply because a consumer has thrown away critical evidence or neglected to keep track of all the damages that has been suffered on account of the creditor’s malicious conduct.

Here are some simple things that every consumer who files bankruptcy should do once their case is filed:

1. Keep all correspondence from creditors received after bankruptcy
2. Record all telephone calls from creditors after the case is filed. Simple recording equipment can be purchased at Radio Shack.
3. If creditors call after the case is filed get their name, name of their company, the identity of the creditor they represent, how much they say is due, and the reason for the call. Note the date and time of the call. Don’t argue with them or hang up on them until you have this information. Once you have this information tell them you’ve filed bankruptcy and give them your attorney’s name.
4. If a creditor calls a second time get all this information again so you can testify with confidence if the need arises. Also, note anything they say that is untrue, argumentative, slanderous, threatening, rude, or profane.
5. If you apply for credit and are denied, keep the denial letters that come in the mail. Also, try to get the creditor to tell you specifically what caused them to deny you credit. Often it will be the erroneous information on your credit report. Ask them what would have to be removed from your credit report for them to extend you the credit you requested.
6. If you receive offers of credit upon favorable terms but when you apply they want to charge you more interest or give you less favorable terms, keep the documentation of the original offer so you can prove what you lost when the original deal was lost.
7. Often consumers suffer extreme mental anguish, embarrassment, fear and humiliation when credit is denied. This can result in insomnia, headache, muscle ache, high blood pressure and a wide variety of other ailments. To get mental anguish damages, however, requires proof. Documentary evidence from doctors, medical providers, and pharmacist is needed if the consumer seeks medical attention. Even more critical, however, is a daily diary of all of the emotions, anxieties and physical symptoms suffered each day from the date the creditor's misconduct occurs. If a consumer has this information at his fingertips it will provide him much confidence and add credibility when he tries to explain how he has been damaged by the creditors violation of the law.

Creditors are often angry when they have to write off a debt and often try to take advantage of debtors who may not understand the law. Understand your rights and make your ex-creditors obey the law. If you need help contact us.

The Speech I Never Gave

A young man came up to me at a book signing yesterday and asked me if I was the one who had written Plastic Gods. I acknowledged to him that I was and he told what a great book it was and how much he'd enjoyed it. My signing had been a little slow, so it lifted my spirits to find out my book had meant a lot to this young man. As I stood waiting for the next person to stroll by, I thought about my own high school days decades earlier. Being second in my class at Buena High School I was asked to address my fellow graduates. At the time I was lacking in experience and the wisdom experience brings. I didn't really know what to say, so it turned out mediocre at best. I sighed, wishing I'd of known then what I knew now. Then I started to formulate in my mind what I would have said to my fellow classmates had that been the case.

Fellow seniors, I stand before you today to warn you of a great peril that you will face the moment you step out into the world on your own. It's a danger that will threaten your health, your happiness, your marriage and even your very freedom. The reason this risk is so dangerous is that it is perfectly legal. There are no laws to protect you, no warnings from family and friends, and you won't know that you are a victim until its too late.What I'm warning you about today is the credit trap—the lure to buy now and pay later, to live above your means, to accumulate possessions of every sort that you don't need. It's an unfortunate fact of life that our economy is driven by credit and you will be expected to do your patriotic duty and help drive the economy forward. This pressure will be manifested by a deluge of credit card applications, offers of financing for new fancy cars, a barrage of advertising trying to lure you into buying expensive home, clothes, cosmetics, travel packages, you name it.

You won't feel any pain the first few years after you fall into the credit trap. You'll be enjoying everything you've purchased on credit. Minimum payments on credit cards are low and you can draw on your credit cards or credit line if you come up short. It won't be long though until you'll find yourself in serious trouble. Lets say you have $50,000 of family income. If you did a budget you'd discover that you were probably spending $70,000. That means you're going in debt at the rate of $20,000 per year plus interest.

Interest at first may be reasonable, but the first time you miss a payment it will be jacked up to 28% and every time you go over your limit or make a payment late you'll be charged outrageous fees in above this high interest rate. Soon, in addition to your car and house payment you'll have credit card debt exceeding your car and house payments combined. You'll live with this as long as you can, borrowing from Peter to pay Paul, but eventually it will be too much and the only way out will be bankruptcy.

It's an established fact that financial stress is the leading cause of divorce. After a few years when creditors start to call, your credit goes in the dumpster, and it gets difficult to even pay basic bills, you'll start blaming your spouse, arguments will ensue, and love will turn to bare tolerance. It's very common for bankruptcy to be followed by divorce. Some law firms ofter a combination package, bankruptcy and divorce all for one low fee.

So, you've been warned. Don't fall into the credit trap. If you do, at best you'll lose your financial freedom and at worst you'll end up alone in the bankruptcy courts. Don't live above your means. The only credit you'll ever need is for a house, a car and perhaps your children's education. Pay cash for everything else.

Now here's my final piece of advice. If you follow it you'll never experience the tragedy I've just described. When you get your first job and go out on your own, prepare a budget and follow it no matter what. Change it whenever your income changes, and put in a budget item for savings. Ten percent is the amount you should save each month. Do this without fail and you'll preserve your financial freedom, greatly improve the chances of having a successful marriage and go a long way in insuring your future happiness and well being.

That's the message I wish I'd of given my fellow students back in 1969 or I wish someone would have given me. I fell into the credit trap just like millions of other American's have done over the years and suffered greatly on account of it. It's only been in the past few years that I've managed to escape and become debt free. I wrote Plastic Gods as a way to communicate this message in a manner that would be entertaining but still effective. The young man I met tonight wasn't the first person who's thanked me for Plastic Gods, but it felt good to know someone had benefited from my work.

Beware of Debt Negotiators

With so many Americans out of work and finding it impossible to keep up with their credit card bills, there has been a proliferation of debt negotiators out peddling their services.

Some of these debt negotiators are honest and sincere but many are not. Either way it is highly unlikely that they will be able to formulate a workable plan for many reasons. First if a consumer can't afford the minimum payments on his credit cards they won't have cash for discounted settlements nor will they be able to spare any income for long term payouts. Often debt negotiators will be overly optimistic and lead consumers into a plan that is totally unrealistic and only exacerbates their perilous situation.

The truth is many of these debt negotiators care little about the consumers they claim to be helping. Some are interested only in the nice fat fee they ask for upfront, others are funded by the credit card industry itself, and others have unrealistic expectations from the consumers they represent.

In my experience when you find yourself buried in debt there are only three options. One is to drastically increase your income. This is possible by getting a better job or taking on a second one. This isn't usually a realistic solution. A second option is to quit paying the debt and hiding from creditors. Many consumers take this second option, however, it isn't very satisfactory either as creditors will try to make their lives a living hell. The only sensible option for most is bankruptcy.

Many people delay filing bankruptcy hoping for a miracle. This delay usually only makes matters worse and subjects them to unnecessary stress and anxiety. Long term stress of this type can result in divorce and even suicide.

Bottom line, if a consumer is overhead in debt they should avoid debt negotiators and file bankruptcy without delay before their financial predicament scars them for life.

Collection Agency Enjoined From Collecting In Texas

In one of our cases this the court enjoined an out of state collection agency from engaging in business in the State of Texas until they posted a bond with the secretary of state. In Texas, as is probably the case in many other states, a debt collector must register with the secretary of state and post a bond in order to do business in the state. In this particular instance the debt collector was trying to collect a debt that had been discharged in bankruptcy. This is not uncommon, as delinquent debts are traded in the marketplace like stocks and bonds. Creditors package a large number of debts and then sell them to debt buyers for pennies on the dollar. For instance, in a recent case I was involved in the debt buyers paid approximately $750,000 for 17 million dollars in debt.

The buyers are supposed to scrub the accounts to make sure the debtors haven't filed bankruptcy, but they don't always do it. Typically the debt buyers then hire collection agencies to collect the debt. These collection agencies have a duty to scrub the account for bankruptcies too, but often don't or ignore the result. If the collector doesn't collect the debt within a reasonable time the debtor buyer takes it back and sends it out to another collector.

The problem for consumers is a debt may change hands four or five times without notice such and each one may send it to a different collection agency! That's why they don't recognize the account when the collector starts calling them or sending letters. Frustrated consumers often pay discharged debt just to get relief or to improve their credit score so they can get a car or a house loan.

To make matters worse many of these collection agencies will report the debt on the consumers credit report. When the account is returned to the debt buyer they don't always report the transfer. If the next collection agency reports the debt the result is two blights on the consumers credit for the same debt. This could go on and on. I have seen the same debt reported three or four times on a debt that wasn't even collectible.

This kind of behavior is in violation of the bankruptcy discharge injunction as well as many state consumer statutes like the Texas Finance Code. Offenders can be sued by consumers in the bankruptcy court or under state law and recovery damages. Damages can include mental distress, loss of time, statutory damages as well as punitive damages if the action will willful

Will Filing Bankruptcy Ruin Your Credit?

One of the misconceptions about filing bankruptcy is the belief that it will destroy the filer's credit. The truth is filing bankruptcy often will improve a persons credit and certainly, in the long run, be very beneficial to your credit score. Typically the bankruptcy filer will already have bad credit. Credit cards, medical bills, and installments loans are often behind or the debtor has quit making payments altogether. If nothing is done his credit will not improve for at least 10 years, and often longer since the ten years that adverse credit can remain on a credit report only starts when the customer quits making payments. Bankruptcy, however, often will be the beginning of a healing process. After much of a person's debt has been discharged, the person becomes a much better credit risk and his or her credit score will begin to improve, assuming the person is employed and doesn't run up a bunch of new debt after the bankruptcy.

This improvement in the bankruptcy filer's credit will only happen, however, if the creditors properly report the debtor's credit. Unfortunately, often this isn't the case. It's important to check your credit after bankruptcy to be sure the debt is listed as "discharged in bankruptcy" and a balance of "zero." If this isn't the case not only will the adverse impact of a bankruptcy be on your credit, but also all of your old blemishes that should have been removed. A consumer can dispute adverse credit themselves, but often creditors don't correct the adverse reporting. Your best bet is get professional help in the beginning. This shouldn't cost you any money as the law provides that attorney's fees are recoverable if it becomes necessary to sue a credit to force compliance with the credit laws. Visit our website at http://protectyourfreshstart.com for more information.