About: Kathleen Michon

Recent Posts by Kathleen Michon

We’ve Moved!

New posts from our bankruptcy, debt, and foreclosure experts are now located on Nolo’s blog at blog.nolo.com. Choose either “Bankruptcy & Debt” or “Foreclosure” from the right side of the page to see the latest posts in those areas.

Nolo Author Leon Bayer to Be Featured on KALW’s Your Legal Rights

Your lawyer won’t call you back?  Missed a deadline? Failed to appear in court?  Doesn’t seem to have the expertise to handle your case? Or maybe you just don’t agree with your lawyer’s advice?

Find out your options if you are having trouble with your lawyer.  On November 26, 2014 you can hear Leon Bayer live on KALW’s “Your Legal Rights” radio show. Leon will be talking about what to do if you have issues with your lawyer and will answer calls from you!

Here are the details:

Live Radio Show:  Got Lawyer Trouble?

When to Listen: November 26th, 7 PM to 8 PM.

How to Listen:  The program airs live on KALW 91.7 FM Radio, San Francisco, California. The program also streams live on the Internet at http://kalw.org/listen-live.

Can’t Tune In on the 26th?:  You can listen to the recording later.

About Leon Bayer

Leon Bayer is a Los Angeles, California bankruptcy attorney, practicing since 1979. He is coauthor of Nolo’s The New Bankruptcy: Will It Work for You? and the author of “Ask Leon” — a regular feature of this blog.

Official Bankruptcy Forms Will Change on December 1, 2014

Bankruptcy_Petition_iStock_000008359066XSmallThe Judicial Conference Committee on Rules of Practice and Procedure (how’s that for a mouthful) is responsible for revising and updating the official bankruptcy forms – those are the forms that you must use when you file for bankruptcy. In the past few years, the Judicial Conference has embarked on a project (the Forms Modernization Project) to make the forms easier to understand and fill out, especially for those people who are filing without an attorney.  (Learn more about completing the bankruptcy forms.)

The Committee has already revised a few of the official bankruptcy forms, and recently approved changes to another batch of forms.  As of December 1, 2014, bankruptcy filers must use new versions of the following forms:

Application to Pay Filing Fee in Installments. The new form removes the reference to the filing fee amounts.

Application to Have the Chapter 7 Filing Fee Waived. In the new form, the actual filing fee figure is no longer included on the blank order form.

Chapter 7 Means Test Forms. Currently, there is only one Chapter 7 means test form (Official Form 22A). Starting December 1, 2014, there will be three separate forms related to the Chapter 7 means test. (Learn more about the Chapter 7 bankruptcy means test.)

  • Form 22A-1. Chapter 7 Statement of Your Current Monthly Income. Everyone filing for Chapter 7 bankruptcy must complete this form. It calculates your current monthly income (which is actually based on your income from the previous six months) and compares it to the median income in your state for the same family size. If your income is above the state median, and you don’t fit into one of the categories in Form 22A-1-Supp, then you must also complete Form 22A-2. If your income is below the state median, then you don’t have to complete Form 22A-2.
  • Form 22A-1-Supp. Statement of Exemption from Presumption of Abuse Under §707(b)2). There are several instances when you do not have to pass the Chapter 7 means test in order to be eligible for Chapter 7 bankruptcy. If any of these apply to you, you must complete Form 22A-1-Supp.
  • Form 22A-2. Chapter 7 Means Test Calculation. If your income is above the median income in your state, you must complete Form 22A-2. This form goes through a series of steps that look at your income and expenses and determine if you can afford to repay a certain amount to creditors. If you “pass” this part of the test, you can file for Chapter 7 (assuming you meet other eligibility criteria). If you don’t pass, you cannot file for Chapter 7.

Chapter 13 Disposable Income and Plan Period Calculation Forms. Currently, there is one form (Official Form 22C) you complete in order to determine how long your Chapter 13 plan will last and the amount of your disposable income (which plays a large role in how much you must pay into your plan each month).  (Learn more about disposable income and the Chapter 13 plan.) Starting December 1, 2014, there will be two forms related to this inquiry:

  • Form 22C-1. Chapter 13 Statement of Your Current Monthly Income and Calculation of Commitment Period. Everyone filing for Chapter 13 bankruptcy must complete this form. It calculates your current monthly income and compares it to the median income in your state for a same size family. If your income is below the state median, your plan will most likely last three years, and you can use your actual expenses when calculating your disposable income. In this case, you don’t have to complete Form 22C-2. If your income is above the state median you must also complete Form 22C-2.
  • Form 22C-2. Chapter 13 Calculation of Your Disposable Income. If your income is above the state median, you must complete this form which calculates your disposable income using preset expense figures.

The forms also have a few other changes throughout. For example, one revision makes clear where to list Internet expenses and another accommodates a U.S. Supreme Court decision regarding future income changes in Chapter 13 bankruptcy.

On December 1, 2014 you’ll find the new forms, along with all of the other official forms, on the U.S. Court’s website, here.  You’ll also find an explanation of each of the new forms in Nolo’s Bankruptcy Forms area (articles on the new forms won’t be posted until December 1).

Ocwen Caught Backdating Mortgage Letters

trap,  catchAccording to a recent review of Ocwen Financial Corporation, a major mortgage servicer, by the New York Department of Financial Services (DFS), Ocwen may have backdated thousands of letters it sent to borrowers who were trying to save their homes from foreclosure.

What Types of Letters Did Ocwen Backdate?

The DFS review into Ocwen’s servicing practices revealed that the company sent letters to borrowers denying their loan modification requests and giving them 30 days to appeal; however, in many cases, those letters were backdated by more than 30 days. This means the deadline to appeal had passed by the time the homeowners received the letters. (Learn more about government loan modification programs.)

In other cases, Ocwen sent letters to borrowers who were behind in payments giving them a deadline to cure the default and avoid foreclosure — but the deadline was months before the borrower actually received the letter.

How Many Borrowers Received Backdated Letters?

The DFS indicates that the backdating issue goes back to 2012, though the New York Post has reported that the problem may have started as early as 2010. As of now, there’s really no way to know how many backdated letters Ocwen has sent (or continues to send). Ocwen is the largest non-bank mortgage servicer in the country and currently services over two million mortgage loans, so it’s quite possible that thousands of improperly backdated letters have gone out. 

Ocwen’s Track Record of Servicing Errors and Abuses

This isn’t the first time that Ocwen’s mortgage servicing procedures have hurt borrowers. A previous investigation into Ocwen’s servicing activities revealed extensive misconduct, including robosigning and charging improper fees, among other errors and abuses in their mortgage servicing processes.

As a result, in December 2013, Ocwen reached a settlement with 49 state attorneys general, the District of Columbia, and the Consumer Financial Protection Bureau that, among other things, required Ocwen to comply with certain standards for servicing loans and to provide $125 million to eligible borrowers. (Learn more in Nolo’s article Foreclosure Relief for Homeowners With Ocwen Mortgages.)

What the Backdating Scandal Means for Harmed Borrowers

It looks very likely that Ocwen will subject to yet another settlement and have to pay millions of additional dollars in restitution payments to borrowers who were harmed by backdated letters.

Also, if you have a mortgage loan that Ocwen services and you applied for a loan modification, but were denied, review your denial letter closely. If the dates don’t make sense, you might want to consult with an attorney who can help you enforce your appeal rights.

You should also speak to an attorney if you’ve received a letter from Ocwen giving you a deadline to cure a mortgage default and avoid a foreclosure, but that deadline had already passed. If that letter (the “breach” letter) is invalid, any subsequent foreclosure steps may also be invalid.

Posted by guest blogger Amy Loftsgordon

Tips for Getting a Great Reaffirmation Agreement in Bankruptcy

Would you like to negotiate a reaffirmation agreement in Chapter 7 bankruptcy so you can keep secured personal property for less? Below are my tips for getting a great deal when reaffirming car loans and debts for jewelry, furniture, major appliances, and electronics.

What Is a Reaffirmation Agreement in Bankruptcy?

Most folks who file Chapter 7 bankruptcy have secured personal property debts they want to reaffirm. (Personal property is anything that is not real estate.) Secured debts are those for which you pledge an item of property to guarantee payment of the debt. If you don’t make the loan payments, the creditor can repossess the property. Common examples include car loans, and loans money you owe for the purchase of furniture, large appliances, expensive electronics, and jewelry. (Here’s a more detailed definition of what secured debts are and how they work.)

In bankruptcy, if you have a debt that is secured by personal property you must either give up the property, redeem the property (pay market value for it), or reaffirm the debt (that is, agree to be responsible for the debt even after you get the bankruptcy discharge).  (Learn more about options for dealing with secured debts in bankruptcy.)

Reaffirming a debt is not to be taken lightly, so be sure you understand what it is and why you might want to do it.  You can learn about the pros, cons, procedures, and reasons for making a reaffirmation agreement here.

If you decide you do want to reaffirm a debt in Chapter 7 bankruptcy, you may be able to get a better deal by negotiating with the creditor. Here’s how.

Negotiating the Reaffirmation of a Car Loan

When you reaffirm a car loan in order to keep your car, you might be able to get loan terms than the ones you currently have. First, you need to know what kind of loan you have. Money you owe on a motor vehicle will fall into one of two categories: “purchase money” loan or “non-purchase money loan.” If you have a purchase money loan, you have a slim chance to get only a slightly better deal than you already have. If you have a non-purchase money loan, your chances of saving a bucket of money are quite good.

Purchase Money Car Loans

With a purchase money car loan, the debt is the original financing you obtained when you first bought the vehicle (you used the loan money to buy the car). Typical purchase money lenders include Ford Motor Credit, GMAC, Toyota Motor Credit, etc. It doesn’t matter if you bought your vehicle new or used – the loan is a purchase money loan if the vehicle was new to you, and the same, original financing is still in place.

Lenders holding a purchase money loan rarely offer you better terms in a reaffirmation agreement.

  • Loans offered by vehicle manufacturers. If the lender is connected to a vehicle manufacturer like GM or Ford, I find they will not budge. You can ask, but it will probably tell you to keep the original contract terms or else surrender the vehicle.
  • Major bank loans. Major banks rarely drop the amount you owe, but sometimes will agree to cut the interest rate which will, in turn, reduce your payment amount. According to recent experiences, if you have a vehicle loan with Wells Fargo Bank you stand a great chance of getting a decent reduction in the rate of interest. Other major banks may give you little or no relief.
  • Loans by small banks. The smaller the bank, the better your chances are to save money (the exception being Wells Fargo).

Keep in mind with all of these lenders: It costs nothing to ask.

Non-Purchase Money Vehicle Loans

Any other vehicle loan is a non-purchase money loan.  A person might take out a non-purchase money loan if he or she owns the vehicle “free and clear” (meaning the person doesn’t have a car loan). If you need fast money, you can take a loan out against your car. Typical non-purchase money lenders include companies that offer “title loans,” credit unions, small finance companies, and loan sharks.

Lenders with a non-purchase money agreement are likely to give you a good deal. This is because such loans are usually on older vehicles. The older the car and the higher the mileage, the better will be your chance to save a lot of money. It just makes sense. The lenders know they can’t sell an old car for very much money.

What to Ask For

When making an offer on a reaffirmation agreement, ask the lender to reduce the loan balance and the interest rate. Remember, this is a negotiation. You can expect the lender to come back with a counter offer. So, make your starting offer lower than the amount you are really willing to pay.

Tips for Getting What You Want

Now, here’s the inside super tip you have been waiting for. The non-purchase money lender does not want to repo your car unless you leave it with no other reasonable choice. When I negotiate, I like to tell the lender that the car is an awful mess. I say I am doing the lender a big favor by advising my client to pay something for it instead of giving it up. If my client has young kids, I tell the lender there are Cheerios jammed into all the seats, the kids have vomited or urinated on the upholstery, and that the interior does not smell “fresh as a daisy.” I remind the lender that my client will get a ton of new car offers from every new car dealer in the county as soon as the discharge is granted. And, to persuade my client to reaffirm the loan, I have to bring to my client a very good offer. I think you get the idea.

⇒⇒⇒ TIP: One more big tip: The more willing you are to surrender the item, the better deal you’ll get. This is true for cars, jewelry, and any other kind of personal property. It is especially effective on electronics and furniture, which have virtually no used resale value in the hands of a lender.)

Negotiating a Good Deal When Reaffirming Jewelry Debts

You can get great reaffirmation deals on jewelry. Did you buy your jewelry from a store in big shopping mall? If so, the $4,000 diamond you bought will probably only fetch around $500 at a pawn shop. (Don’t believe me? Take your jewelry to a pawn shop or two, and see what they offer. This will give you a starting point for negotiating with the lender.) Armed with knowledge of the street value of your jewelry, you should have no trouble getting a reaffirmation agreement for about half the amount you still owe on it.

Negotiating Reaffirmation Agreements on Furniture

To get a great reaffirmation deal on furniture, use the same negotiating tactics described above for non-purchase money car loans. The older the furniture, the cheaper you can get it for.

Would you like to keep your furniture for free? Here’s how. Tell the lender you are willing to surrender it because it’s not in good condition. (If you have kids who have beaten up your furniture, don’t be shy about revealing the details.) If you can tolerate the risk of actually losing the stuff, you will probably get to keep it. It has been decades since I have seen a lender repossess household furniture. It has no street value to the lender, and it actually will cost the lender money to haul it away. What if the lender schedules a time to pick the stuff up? Don’t panic – it doesn’t mean it actually will show up. More likely, the lender is just trying to scare you into paying for it.

Negotiating Reaffirmation Agreements on Major Appliances

Major appliances do have some street value, unlike furniture. You should expect to get your stuff for about half the amount you still owe. The older your items are, the more you will save. If you have an appliance that is more than three years old, there is a good likelihood the lender won’t ever pick it up, even if it schedules a pick-up date.

Negotiating Reaffirmation Agreements on Electronics

You can often get good reaffirmation agreements on electronics. Old computer equipment is worth nothing. However, if your items are less than one year old, the lender probably does want them.

As with other types of items though, you can take a chance and tell the lender to come pick the stuff up. The lender will tell you (or order you) to bring the electronics back to the store. Nope. Tell them “no.” Bankruptcy requires you to offer to surrender the secured item to the lender if you don’t work out a reaffirmation agreement.  But it does not require you to bring the items to the lender. If the lender wants it, it has to come get it. And, like anything else, it costs the lender money to come to your home and haul the item away. Chances are, the lender won’t show up — unless you recently bought the items.

by Leon Bayer

Leon Bayer is a Los Angeles bankruptcy attorney.  He is a partner at Bayer, Wishman & Leotta, a California law firm specializing in bankruptcy.  The opinions and advice in this blog post are from Mr. Bayer alone, and should not be attributed to Nolo.  By answering a question on this blog, Mr. Bayer does not become your lawyer.

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