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Thursday, February 17, 2011

Old blog posts:


July 1, 2009

Modifying Mortgage Loans?

Months ago, there was hope that Washington would provide a change in bankruptcy law to allow the modification of some mortgages in bankruptcy to make mortgages more affordable.  That didn't happen.  But is it possible to ever modify a mortgage loan?

For many clients, I recommend visiting the website for up-to-date information about negotiating with mortgage lenders.  But if they can't help, then sometimes it is possible to modify a mortgage in a Chapter 13 bankruptcy.  Chapter 13 is a bankruptcy in which the debtor makes payments through a bankruptcy trustee for three to five years.  If you owe more on your mortgages than your house is worth, you may be able to reduce the total mortgage debt down to the amount of the current value of your home.  Each case is different, so talk to your bankruptcy lawyer to see if this is possible for you.

May 25, 2008

How Attorneys Decide What to Charge

Attorneys make assumptions about what potential clients want. Some attorneys assume that clients are mostly motivated by price. While that certainly is an important issue for people already having financial troubles, what clients most want, and need, is good representation. That means personal attention from the lawyer and the lawyer's experienced, helpful staff.

Attorneys who engage in discount pricing are usually doing no favor for their clients or themselves. They assume that all potential clients will decide who to hire based on price alone. Because of this belief, these attorneys decide to do one of two things: either make bankruptcy a small (and less profitable) part of their larger practices, or build a volume bankruptcy practice. No client should want to hire an attorney who does few bankruptcies and who sees that aspect of the practice as less profitable. Volume practices, meanwhile, are only viable in large metropolitan areas, and it is a fact that a low fee necessarily means a brief amount of "face time" with the attorney.

Higher priced attorneys, on the other hand, should not be assumed to be better. Someone considering hiring an attorney should, if possible, choose a lawyer based on reputation. Family, friends, and trusted attorneys are good sources of information. And there is nothing wrong with meeting with more than one attorney for free consultations. Meeting more than one attorney will allow the client to pick an attorney who they trust to give the best representation possible.

I think bankruptcy representation is very reasonably priced compared to other services. Divorce and other family law matters, criminal representation, and other common services usually cost considerably more than a bankruptcy, and with much less predictable results.

May 25, 2008

Zombie Debt

Zombie debt is debt that is discharged in bankruptcy, or otherwise unenforceable, but refuses to die. This has become an increasingly common problem. The constant buying and selling of debts on a volume basis means that debt buyers (debt collectors) don't check or don't care that the debt isn't enforceable. Several years ago I had someone visit me with a problem. There was a credit card he last paid on about fifteen years before. Now he was being called by a collector from Florida. I called the collector, explained that Iowa has a 10 year statute of limitations on contractual debts, and he told me "surely, counselor, you're not telling me that just because your client isn't legally responsible to pay this debt, that he isn't morally responsible to pay it." I laughed. People don't come to lawyers for lessons on morals, and debt collectors are in no position to lecture on personal ethics.

Sometimes, zombie debt can be truly and permanently killed by a simple call or letter from a lawyer. Sometimes, however, it takes lawsuits or repeated disputes to the major credit bureaus to protect your credit. This is a sad fact of life -- illegal conduct by creditors and debt collectors is common, and there is no easy way to combat it.


May 25, 2008

Real Estate Title Problem After Bankruptcy

Here's one of the more annoying problems for people who successfully completed their bankruptcy cases and the lawyers who represented them. Here's how it usually starts for me. "Hi, I'm Bob Smith, and you probably don't remember me but you did a bankruptcy case for me about 4 years ago, and I'm being told that there was something not done in the bankruptcy and now I can't sell/refinance my home." I look up Bob's information, and tell him what someone should have told him instead of saying I didn't do a good job. The issue is complicated, however, and takes time to explain.

When someone files for bankruptcy, he or she is discharging his or her personal obligation to pay the debt. There is no effect on liens, like mortgages and auto loan security interests. Sometimes, people have been sued and had court judgments entered against them before the bankruptcy is filed. In that case, under Iowa law there is a judgment lien against any real estate the debtor owns or has any partial interest in (such as being the spouse of someone who owns real estate) in the county where the judgment is filed. Bankruptcy doesn't get rid of a judgment lien unless a motion to avoid the judgment lien is filed in the bankruptcy case.

If there are judgment liens, then we routinely file motions to avoid those liens. The problem arises when the debtor did not own any real estate when the bankruptcy was filed, but later buys real estate or gets married to someone who owns real estate. During the bankruptcy, we can't file a motion because there is no lien to avoid since there is no real estate. The first time the debtor or the spouse tries to sell or refinance, the title examiner discovers there is a court judgment, and it appears to be a lien against the real estate. The title examiner does not know there was a bankruptcy case which discharged the debt. Iowa law clearly states that the judgment is not a lien against property acquired after the judgment debt was discharged in bankruptcy.

This is inconvenient for clients, since the issue usually is first raised at a real estate closing or immediately before. It is embarrassing, and I can understand how someone feels when this arises, such as when a new spouse is told the client's bankruptcy is messing up the spouse's real estate transaction. Unfortunately, there appears to be no way around this problem, other than for me to write to various persons explaining the issue and citing the law.  We just have to deal with it when it arises. This may be a problem only in Iowa, since Iowa is the only state which actually requires real title examinations to make sure that there are no title problems with real estate. But that is another issue I don't intend to get into.

April 20, 2008

Negotiating with Mortgage Lenders

Consumer bankruptcy attorneys have known for some time that negotiating with mortgage lenders, their servicing agents, and their attorneys is hard and has been getting harder. Getting payoff balances, cure balances, or any kind of numbers is frustrating, to say the least.  For a discussion of the problems in negotiating with mortgage lenders, go here:

This should be a wake-up call for anyone hoping that they can work it out on their own with their lender. Certainly, homeowners should be burning up the phones until they get what they want, but frequently, I see people who put all their hopes in getting a deal on the phone, and wait too long and let the mortgage foreclosure go too far to recover in bankruptcy.

10:42 am cst 

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