The North Carolina Bankruptcy Information Blog

Jobs in the private sector may be on the way up—a complete change of pace from the post-Recessionary years—but optimism about the mortgage industry is still way down in the wake of massive foreclosure abuses at major mortgage lenders.

In fact, The New York Times recently published a shocking article detailing the struggles of homeowners facing foreclosure framed by mortgage servicing horror stories piling up all across the nation.

According to the Times, dubious mortgage practices— widespread document execution fraud, misrepresenting fees, forgeries on signatures for your key mortgage documents, and making deceptive statements about efforts to correct paperwork—have become the norm, not the exception, for many a major mortgage lender from the West Coast to the East Coast.…

Many of our clients automatically assume they will lose their rental property if they file for bankruptcy. Isn’t that the whole idea of bankruptcy? That you give up everything you have, with a few exceptions, in exchange for getting the debt collectors off your back?

Well, no. Many factors come in to play in determining whether or not you will be forced to sell your rental property, including whether you file chapter 7 or chapter 13, how much money you owe on the property and how much income you receive from it.

Let’s start with chapter 7. If you file chapter 7, you get an exemption for the equity in your primary residence – how much depends on the state you live in – but rental property doesn’t qualify for the standard residence exemption.…

Is Mortgage Cramdown Back on the Table?

Last week, amidst the hectic flurry of the election in Massachusetts and Obama’s announcement of new regulations on banks, another announcement didn’t get quite as much attention: the Obama administration will revamp the Home Affordable Modification Program (HAMP). The program will be streamlined, making it easier to file the necessary documents; for example, borrowers will be able to use pay stubs as proof of income rather than having to provide tax forms.

One of the most egregious policies is already in the process of changing – right now, the fine print of most mortgage modification contracts allows the lender to deny your application and resume foreclosing proceedings, without even informing you of the decision.…

The latest chapter in the Obama administration’s attempts to make lenders modify mortgages is to send SWAT teams – no, I’m not kidding, really, SWAT teams – into the call centers of major lenders to try to ensure that they follow the proper procedures and actually modify loans. Seriously, wouldn’t it be a whole lot easier just to pass cramdown and allow bankruptcy judges to modify mortgages than to try to sweet talk, bribe or otherwise convince bankers to do it on their own?

Because they’re not. Making Homes Affordable, the program implemented by the government last May, is designed to encourage banks to modify the loans of homeowners who are having trouble making mortgage payments.…

Is there any way to lower your car payments in bankruptcy? The answer, which may surprise you, is maybe. While Congress recently rejected attempts to pass a law that would allow bankruptcy judges to ‘cramdown’ mortgages, there do exist some limited possibilities for revising auto loans.

Basically, debtors who owe more than their car is worth – and who doesn’t, especially if you bought it new? – may be eligible to eliminate the portion of the debt that exceeds the value. In a Chapter 13 bankruptcy, the debt would be divided into ‘secured’ debt (the value of the car) and ‘unsecured’ debt (the excess money on the loan), and the car loan would be revised to repay only the secured portion.…

Last Friday, the House of Representatives passed a wide-reaching swath of financial reforms, designed to reign in the worse excesses of the banking industry. Democratic lawmakers are hailing the bill as a huge victory for consumers. However, one important provision failed to pass: cramdown.

‘Cramdown’ would allow bankruptcy judges to reduce the principle balance of the mortgage on a primary residence in a Chapter 13 bankruptcy, resulting in lower monthly payments for the filer. It’s important to note that bankruptcy judges are already allowed to practice cramdown for a variety of debt, including boats, cars, vacation homes and family farms. In fact, prior to changes in the bankruptcy laws in 1978, they were able to cramdown residential mortgages as well.…

On the eve of success for a very valuable piece of legislation that will instill a new set of guidelines for credit card companies’ communication of interest rate hikes, fees and other monetary stipulations to consumers, a banking bill provision aimed to do similar justice for Americans struggling with mortgage debt and bankruptcy was shot down in the Senate on the last day of April.

The provision was part of a larger and much hyped bankruptcy and housing industry reform bill, the Helping Families Save Their Homes Act, that recently passed the House and was considered another major component of the Obama administration’s effort to help alleviate America’s collective debtload.…