Kentucky Bankruptcy Law

Counsel with Care

$@&# HAMPens: Home loan modification revisited

I am currently sitting in a continuing legal education training with hundreds of other Kentucky lawyers listening to a foreclosure defense seminar. Of the approximately 10% of the attorneys who have attempted to help make home loan modifications for clients, NONE have had success. This is not a scientific study, but I thought I would offer it as a follow-up to my prior post, Miracles HAMPen.

Other information offered include: though the foreclosure crisis has plateaued  it has not abated; banks only have to decide if the modification will profit THEM more than foreclosure, they have no incentive to get good information to KNOW the answer, so they default to “no, it won’t profit us”; short sale offers are being denied even if reasonable; and nothing has really changed in the court system.

Now, there are many strategies to defend against foreclosure actions, but the real dilemma is that people who have not been able to catch up on their home loans are not likely to be able to afford a lawyer. I explain to people that they can pay me to defend against a foreclosure, but most of the time the bank will likely prevail AND they will likely still have to look at bankruptcy though I will be able to buy some time. Or, they can invest the legal fees into going ahead and doing a Chapter 13 which forces the banks and other creditors onto a level playing field. I just want people to make an informed choice based on the circumstances.

October 31, 2012 Posted by | attorney fees, Bankruptcy, Chapter 13, Foreclosure, Home loan modifications, Planning, Pre-filing planning, Property (exempt, reaffirm or surrender), Security interests | , , , , , , , | Leave a comment

Miracles HAMPen

I met with a new client recently and listened as they described their fifteen month attempt at getting a home loan modification. This time, though, the client had retained a national law firm to negotiated the modification. Did I mention they had been at this for fifteen months with professional assistance? The arrears now extended into the tens of thousands of dollars. They want to save their home!

My heart went out to them and I ended up feeling bad for being so negative about their prospects for finally getting the modification in place. They showed me a correspondence asking for just two more documents. So close….oh, why can I not encourage them on and give them some hope that these last two documents really would be the last two? What if they really are that close and here I am discouraging them? I am sure I mentioned the fifteen months invested so far…Sorry, I really want to be hopeful for them and I just keep being negative.

I want this home loan modification to work, but the best I can muster is this: I absolutely believe that miracles happen every day. Truly I do. I know this may sound like sarcasm and to a certain extent it is because I find it easier to believe the lame walking and the blind seeing than I do a bank modifying a loan voluntarily. But, I do believe in miracles and so I believe that home loan modifications happen. In fact, I have personal knowledge of one. I just ask that folks consider where their hope is springing from. If your hope is based solely in the representations made by the bank, then it is time to get a back up plan and start preparing along other lines. If you have hired an agency or law firm to do a modification, they need to be able to show you if your income, expenses and home loan debt fall within the ranges where you should qualify. Otherwise, take your business elsewhere.

September 25, 2012 Posted by | Bankruptcy, Chapter 13, Debt solution centers, Foreclosure, Home loan modifications, Plan, Pre-filing planning, Property (exempt, Security interests | , , , , , , , , , , | 1 Comment

Saving your home in Chapter 13

Chapter 13 is an extremely effective legal mechanism for saving one’s house if it is being threatened with foreclosure. The trend these days is for home loan lenders to refuse to accept payments while “modifications” are being “reviewed”. This means arrears mount higher and higher. I have known of an extremely few home loan modifications actually coming to fruition. However, I have heard person after person recount to me how the lenders “lost” paperwork submitted for modifications multiple times, countless delays, requests for more information, and ultimately refusal to modify. This whole process can destroy the chances of a Chapter 13 to save your home.

In a Chapter 13, the entire arrears on a house have to be paid in full during the 60 months of the plan duration. The arrears can include certain fees, penalties, and other costs prior to the filing, but gets zero (0%) percent interest in the plan in the Eastern District of Kentucky.  So, if the arrears mount too high prior to filing the Chapter 13, then the plan payment can end up being so high that the plan is not feasible. On top of the plan payments, one has to resume making the ongoing regular monthly payment.

I strongly recommend that you consult a bankruptcy attorney about a Chapter 13 early in the process because modification efforts are usually unsuccessful. I do not know why lenders are taking the approach they are to home owners because it does not seem economically logical, but then we are talking about huge, mindless organizations. But, in a Chapter 13, the lenders HAVE to play by the rules.

Debtors also must play by the rules and they MUST make those monthly payment to the lender and their Chapter 13 plan payments for the whole thing to work. So, their budget must support both payments. This means taking action early.

July 23, 2012 Posted by | Bankruptcy, Chapter 13, Plan, Planning, Pre-filing planning, Property (exempt | , , , , , , , , , , , , | 1 Comment