Archive for 2006

The Sting of the Homestead Cap

Among the delightful changes BAPCPA (the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005)made to the Bankruptcy Code was the “cap” on homestead exemptions. In Massachusetts, a homeowner can keep up to $500,000 in equity in their primary residence from the reach of creditors. BAPCPA capped homesteads to $125,000 if the “interest” in the residence was acquired within 1215 days of the filing of the bankruptcy petition. In two recent cases, Massachusetts homeowners found their homestead exemptions capped. Massachusetts homeowners thinking of filing bankruptcy need to keep reading.


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A Christmas Message…

Many of my clients have told me that they cannot afford Christmas this year. They have either shunned credit cards, or been shunned by the credit card companies. Others have lost their jobs, or are facing a lay-off. Some are living pay check to pay check and do not know how they can pay the mortgage or the rent. For those clients, and for others so similarly situated, I have this Christmas message for you.


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Bankruptcy and the Credit Report

Today I received a phone call from a client who received their Chapter 7 bankruptcy discharge earlier this year. They are applying for a job and as a part of the screening process, the employer is requiring a credit report.

The prospective employer does not have a problem with the bankruptcy, but does have a problem with a $34,000 debt appearing as still being old and delinquent. However, the debt was discharged in the bankruptcy. They do not owe it.

While the prospective employer might be satisfied with documents I provide them, it should not be assumed that other prospective employers will be as accommodating. The reporting of the debt as still being owed is an error. It is either the fault of the credit bureau or the fault of the creditor who is reporting inaccurate information. Certainly, I can point that out, but if a prospective employer wishes to rely on the information in the credit report, they are free to do so – even if it is wrong.

While the client may have remedies to address this incorrect entry on the credit report, as I write this and post it to this blog, the incorrect item is still there. Banks as well as prospective employers and landlords may rely on incorrect information, and may make adverse decisions based on it.

With all of that said, please make it a habit of checking your credit report at least two times per year. If you have filed bankruptcy and a debt you know was discharged is still appearing as being owed, contact an attorney (start with the attorney who handled your bankruptcy). Do not wait until you receive a call that you might not get that credit line, or that job, or that apartment because of an incorrect item on your credit report.

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Mass Foreclosures Spiking

According to a report in the Cape Cod Times, a record number of homeowners on Cape Cod are facing foreclosure. While there are a number of reasons why this is happening, it is also reported that folks facing foreclosure are waiting far too late to take appropriate remedial action. Nancy Davison, vice president of the Housing Assistance Corporation says:

They stay in denial until it reaches a point where it is difficult, if not next to impossible, to come up with a solution to the delinquency.

I add that many also do not have a back-up plan, a topic that I have discussed here. If the problems with the mortgage are present, or if they problems are foreseeable, then it’s time to start exploring options and taking action.

In addition to the report from the Cape Cod Times, there is word that foreclosure rates statewide increased nearly 300 percent in November, and the rate could even surpass the 1991 record.

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Debt: Have a Back Up Plan

Lately, I’ve been meeting with clients who are facing an imminent collection action (or two). For example, I might get a call on a Tuesday, and a foreclosure auction is on Wednesday, or a client calls to cancel their appointment because they cannot get to the office because their car was repossessed. In others, there is a court date, or an ordered garnishment. In virtually every instance, folks have been trying to deal with the debt issues themselves.

Sometimes, they are dealing directly with the creditor, trying to work out a deal only to have it fall through at the last minute. Others, they are heading from bank to bank, or calling credit card company after credit card company looking for an extra extension of credit to get them through. And still others are hoping that an uncle/brother/parent/grandparent can lend them money. Regardless of what they tried to do, their efforts did not pay off.

Then, they are sitting across from me. While I admit I am not the first person people call when they are struggling with debt (notwithstanding my abilities and off-beat sense of humor), being the last person is not necessarily a good thing especially when if I am forced to say is “you’ve waited far too long and there is nothing I can do.”

Let’s not forget that the Bankruptcy Code now requires credit counseling: the ticket in. And let’s not also forget that while bankruptcy protection is still available, the code now requires that we attorneys get a lot more information and documents than we once had to. If your foreclosure auction is tomorrow, the last thing you want to hear from me is “I can help you – but I need at least six months of pay stubs.” Perhaps the second to the last thing you want to hear is: “I also need your tax returns.” Of course, that might really be a problem…unless you have not filed your tax returns yet….or, have not filed them for quite some time.

Here’s my point: the majority of us do not go to bed at night only to wake up and be more broke than we were the day before. It’s something that grows for a period of time. Sometimes weeks. Sometimes months. Sometimes years. While folks might try borrowing from relatives, getting loans, credit counseling or negotiating directly with creditors, folks need to have a back up plan just in case one – or all of those of those attempts are unsuccessful. Plan accordingly.

Please, plan accordingly.

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Greeting Cards (And Cash Back)

When you’re deep in debt, going to the mailbox can feel pretty overwhelming. In fact, I’ve had clients tell me that it’s something that have dreaded on a daily basis. Of course, this time of year, in addition to bills and junk mail, there are also greeting cards from friends and family.

I still get holiday greeting cards from people I have not spoken to in almost 20 years (let’s not let Roy, my associate know that as he’ll only remind me how old I am). Of course, I do not get cards like the one that fellow NACBA member and Hawaii Attorney Stuart Ing recently shared.

I am not sure if it’s funny, or just plain wrong. The artwork is pretty. It is apparently designed by Hallmark artist Johne Richardson (I did not misspell the first name).

The greeting card is fairly inoffensive to the eye. Soothing. A means of conveying peaceful wishes to someone struggling…almost like a sympathy card. And then… I get to the requisite FDCPA language on the inside left. You’ll need Adobe,but you can check it out here.

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Lipstick on a Pig

As it mourns its final days of Republican control, the Senate Judiciary Subcommittee on Administrative Oversight and the Courts is holding hearings today. According to a statement released by the National Association of Consumer Bankruptcy Attorneys, the hearings are intended “to create a phony record of the ‘success’ of what, in fact, are widely viewed as decidedly ineffective and counterproductive bankruptcy law changes” implemented by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.

NACBA President Henry Sommer stated:

No credible person in the field seriously disputes the fact that the bankruptcy law changes have been a spectacular flop. The law is not squeezing out the supposed legions of abusive filers because they were never there in the first place. All these ill-considered law changes are doing is erecting pointless additional hurdles and costs in the way of desperate families who legitimately need the fresh start of bankruptcy.

Among the Committee’s guests of honor was Professor Todd Zywicki, of the George Mason University School of Law. I have mentioned the good professor in this blog. He’s hardly an advocate for the average American struggling with debt.

NACBA believes that these hearings are an attempt to put “Lipstick on a Pig.” Read the release here.

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Marcal Seeks Chapter 11 Protection

Years ago, I remember the big push for homeowners to convert from oil or electric heat to natural gas. At that time, it was touted as cheap and clean. While I am no chemist, I have no reason to believe it is no longer clean. However, based on many discussions with clients over the past couple of years, I have no doubt it is no longer cheap, and for some, it’s what’s pushing them over the financial edge and ultimately in my office.

So I was a little taken aback to learn that the 900 employee strong Marcal Paper company filed for bankruptcy protection today. The Chairman and Chief Executive, as well as the founder’s grandson, Nicholas R. Marcalus had this to say:

The price increases in energy have proven to be immensely difficult. Demands by our lenders created liquidity pressures which caused the company to file for the continued restructuring under Chapter 11.

We believe that the decision to file, although difficult, was in the best long-term interest of our company, employees, customers, vendors and other valued business partners. We plan to take advantage of the opportunities presented by this restructuring to address both our financial and operational issues in order to position the company for long-term success.

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Is Boston’s Housing Bubble Deflating?

I would vote yes. According to The Warren Group, “Massachusetts home sales fell by double-digit percentages in October, and the median sale price of single-family homes dropped 6.9 percent compared to October 2005…” And there’s more: “condominium sales dropped 19.5 percent in October, down to 2,226 units sold from 2,765 during the same month in the previous year. The median condominium sale price dropped 4.8 percent to $261,750 from $275,000.”

This does not bode well for homeowners who have been hoping for continued growth in home values, which would in turn, allow them to tap into equity and refinance their way out of adjustable mortgages. It doesn’t sound like that can happen any time soon.

In a press release, Timothy Warren, Jr. , the CEO of the Warren Group had this to say:

“While we expect the market to stabilize sometime in 2007, it appears as though the housing sector is undergoing a significant correction.”

I have no idea what why he expects the housing market will stabilize sometime in 2007. If anyone has a clue, I encourage you to comment.

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Debt and Insecurity

According to a report in today’s Boston Globe, there’s a “marked increase in the number of troops stripped of their security clearances because they are so deeply in debt.”

The number of soldiers who are losing their clearances because of financial problems has nearly doubled over last year.

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