Spotting Loan Modification Scams

In tough economic times, the offer of a quick fix or a miracle cure can often be too much to resist when a desperate homeowner is trying to catch up on past due mortgage payments.  With loan modification scams on the rise, a number of states have passed laws designed to protect consumers from predators offering fraudulent loan modification services.  The following tips can help consumers avoided getting scammed:

1. Avoid any loan modification company that demands advance fees.  With limited exceptions, California has banned any type of advance fee to work with your lender to modify, refinance or reinstate your mortgage.  The obvious risk is that they may pocket your money and do nothing to save your home from foreclosure.
2. Over the top guarantees.  No matter how much experience someone claims to have, nobody can truly guarantee that they can stop foreclosure or modify a loan.  The only thing they can really promise is that they will do their best to help you.
3. The company advises you to stop paying your mortgage.  People who are behind on their mortgages are often having other bill problems and they can be tempted to spend the mortgage payment on other perceived needs.  When the lender wants a good faith payment during negotiations, the money is gone. Do not make your payments to the loan modification provider under an circumstances.
4. The company asks you to sign over your house or sign paperwork that you haven't read.  A legitimate housing counselor would always give you time to review the document and understand it.
5. A company/person you don’t know asks you to release personal financial information online or over the phone. You should only give this type of information to companies that you know and trust, like your mortgage lender or a HUD-approved counseling agency.

If you cannot afford an attorney to assist you with a loan modification, there are a number of free or low cost resources available to you:

• U.S. Government Program to Refinance or Modify Loans:
  To find out if you qualify, and how much your loan might be reduced, Click Here .
• HUD-Approved Foreclosure Counseling Agencies:
  Click Here to find a HUD-approved counselor or call 877-HUD-1515.

We do not offer loan modification services.  However we do help debtors file for Chapter 13 bankruptcy to get caught up on their mortgage payments and use bankruptcy to help remove second mortgages under certain circumstances.  If you live in the San Diego area, are suffering financial difficulties and have exhausted your loan modification options, please call us at (619) 448-2129 to see if bankruptcy can help you.

About the Author: Carl H. Starrett II has been a licensed attorney since 1993 and is a member in good standing with the California State Bar, the San Diego County Bar Association and the National Association of Consumer Bankruptcy Attorneys. Mr. Starrett practices in the areas of bankruptcy, business litigation, construction, corporate planning and debt collection.

Insolvency Is Not Bankruptcy

In a recent blog entry, I discussed the misleading concept that some debtors think of themselves as "judgment proof".  However a recent question from a client about insolvency as an "alternative" to bankruptcy indicated that another article on the topic might be warranted.

There are two types of insolvency:  (1) cash flow insolvency, where you cannot pay your debts as they come due; and (2) balance sheet insolvency, where the debts exceed the value of your assets.  Insolvency might make a bill collector's job more difficult, it is NOT as a legal defense to the nonpayment of debts and cannot protect you from a lawsuit for unpaid bills.

You cannot be "declared" insolvent nor can you "claim" insolvency except perhaps when dealing with debt forgiveness income on your tax return.  If a debtor settles a creditor card debt for less than the full amount owed, they will send out a 1099 to the debtor and the IRS.  If the debtor meets the definition in the Internal Revenue Code for insolvency, the debt forgiveness might not be counted as taxable income.  However, the creditor is free to file a lawsuit and get a judgment to garnish the debtor's wages.

Insolvency by itself is not an alternative to bankruptcy.  It is a bit like trying to hide assets or doing nothing in the hope that creditors won't find anything.  It is also like running and hiding from a bully.  Sometimes  you need to confront the bully.

If you are in Southern California and are tired of running from your creditors and the harassing phone calls, please call me today and (619) 448-2129 for a free consultation.

About the Author: Carl H. Starrett II has been a licensed attorney since 1993 and is a member in good standing with the California State Bar, the San Diego County Bar Association and the National Association of Consumer Bankruptcy Attorneys. Mr. Starrett practices in the areas of bankruptcy, business litigation, construction, corporate planning and debt collection.

Don't Lie to the Bankruptcy Court

Fans of the show "Real Housewives of New Jersey", may know that Teresa Giudice and her husband filed for Chapter 7 bankruptcy.  What they may not know is that the trustee assigned to the case has filed a lawsuit asking the bankruptcy court to prohibit them from getting a discharge.  The lawsuit, called an adversary proceeding, accuses them of hiding assets from the court and the trustee.   The hidden assets are said to include a pizza parlor, laundromat, Teresa’s TG Fabulicious clothing line and the “Skinny Italian” cookbook.

The original bankruptcy petition filed by the Giudices did not even list bank accounts.  Even with at least 2 subsequent amendments, many of the Giudices assets seen on the show were apparently left out.  The trustee seems to have taken notice of these omissions.

Section 727 of the Bankruptcy Code allows the court to deny a discharge if debtors lie under oath or try to conceal assets.  Committing perjury in a bankruptcy case is a federal crime that could bring fines of up to $250,000 and/or a jail sentence up to 5 years.  To add further insult to injury, the debtors will still lose their assets.  The Giudices will soon be losing many of their home furnishings, tools and a boat.

An attorney can only provide proper advice with full disclosure from the client.  Lying to the trustee and the court simply is not worth the risk of losing your discharge or going to jail.  If you are in Southern California and need advice about properly protecting your assets in bankruptcy, please me today at (619) 448-2129 for a free consultation.

About the Author: Carl H. Starrett II has been a licensed attorney since 1993 and is a member in good standing with the California State Bar, the San Diego County Bar Association and the National Association of Consumer Bankruptcy Attorneys. Mr. Starrett practices in the areas of bankruptcy, business litigation, construction, corporate planning and debt collection.

Think You Are Judgment Proof? Think Again.

I sometimes hear from debtors that do not wish to file bankruptcy because they believe that they are “judgment proof”.  Being “judgment proof” generally means that the debtor has no substantial assets that a judgment creditor could use to satisfy a judgment.  However, the lack of ability to pay a judgment is not a legal defense to a lawsuit and a creditor can still sue for any unpaid debts.  This reality makes the term “judgment proof” misleading.

Just because a debtor does not currently have assets does not necessarily mean that getting a judgment is a waste of time.  A creditor could use a wage garnishment to collect as much as 25% of the debtor's take home pay.  The debtor's financial situation could also change in the future.  Judgment creditors will sometimes wait to see if the debtor inherits property, receives a tax refund or even wins the lottery.  Once the judgment is recorded, it will show up automatically on the debtor’s credit report too.
 
Before I decided to focus my practice on representing debtors in bankruptcy, I did a decent amount of commercial debt collection.  There are many ways that a judgment creditor can make a debtor’s life miserable even if they never collect on the judgment: http://blog.chs-law.com/2006/07/collecting-california-judgments.html.

Lawsuits can be scary.  Bankruptcy can stop creditor harassment immediately so you don’t have wonder if the county sheriff will show up at your job to serve your employer with a wage garnishment.  If you are in Southern California and involved in a debt collection lawsuit, call me today at (619) 448-2129 for a free consultation.

About the Author: Carl H. Starrett II has been a licensed attorney since 1993 and is a member in good standing with the California State Bar, the San Diego County Bar Association and the National Association of Consumer Bankruptcy Attorneys. Mr. Starrett practices in the areas of bankruptcy, business litigation, construction, corporate planning and debt collection.

No, You Don't Need a Timeshare

One of the hardest things that my potential bankruptcy clients face from an emotional standpoint is losing property they have acquired over the years. In recent months, I have noticed that some of my clients have an odd attachment to their timeshares.

The reality is that timeshares are a lousy investment.  If you don't believe me, just check the prices of timeshares available on eBay.  A few years ago, I attended a timeshare presentation in Las Vegas for a development that was being heavily promoted in the Southern California  market called Tahiti Village.  The unit that the developer offered me for $55,000 is now available on eBay for $297...and there are no bids at that price at the time I wrote this article.  I have als personally purchased 2 timeshares on eBay...for $1 each.

Timeshares can be a decent vacation value if you don't pay an outrageous price to buy one.  If I pay $800 a year for the week that I own in Kuaui, that is about $115 per night at a very nice resort and that seems be hard to beat for a decent hotel in Hawaii.  However, it is only a value because I own the unit free and clear.  I don't have to worry about a monthly payment to a lender for an overpriced unit.

I have seen clients that owe $12,000 or more on a timeshare.  They are usually better off letter the unit go back to the developer or the HOA and buying a much cheaper timeshare after their bankruptcy or even renting a timeshare from a website such as Redweek.com.

If you are in Southern California and would like a free consultation regarding you debt problems or want information on how to get rid of your timeshare, please call me now at (619) 448-2129.

About the Author: Carl H. Starrett II has been a licensed attorney since 1993 and is a member in good standing with the California State Bar, the San Diego County Bar Association and the National Association of Consumer Bankruptcy Attorneys. Mr. Starrett practices in the areas of bankruptcy, business litigation, construction, corporate planning and debt collection.