Phone Numbers Used By Phony Debt Collectors

In recent weeks, I have written about phony debt collectors using illegal and abusive threats to collect on payday loans.  Click here to read my first article and here to read my second article.  My friend Steve Rhode also dug a little deeper and and wrote this article that reveals some very interesting information about how these places operate.

The phony debt collectors often claim to be attorneys and begin by threatening debtors with jail time for nonpayment of payday loans.  The scam artists presumably have some level of success with their scare tactics based on the number of calls that I receive about this scam.  Below is a list of phone numbers known to be used by the scam artists:

• 201-221-3060
  
• 213-221-1002
• 213-286-0210
• 213-286-2016
• 213-550-4189
• 213-995-3046
• 310-362-4305
• 310-362-4319
• 310-362-9386
• 313-332-1091
• 343-729-0397
• 407-506-0424
• 408-317-0831
• 408-355-9951
• 415-223-4108
• 415-880-5599
• 496-900-0000
• 619-342-0094
• 714-333-2945
• 714-333-2951
• 714-400-0563
• 714-409-0208
• 714-409-0250
• 714-845-0766 (FAX)
• 760-300-4000
  
• 718-831-7157
• 818-936-4699
• 904-425-9141
• 941-961-8518
• 949-743-1049
• 951-707-4047
• 973-200-6686

If you are contacted by one of these scam artists, please leave comment below with the phone number they used so I can keep this list up to date. 

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.

Will Congress Resurrect Judicial Loan Modification?

In January 2009, I was in the unusual position of asking my fellow Republicans to support legislation sponsored by the Democrats that would have given bankruptcy judges the capability of modifying mortgages in a Chapter 13 bankruptcy.  Click here to read my original article.  Unfortunately, this legislation failed to pass in the Senate.  I have now received word that the concept of judicial loan modification in Bankruptcy Court could be resurrected.

Congress will soon be considering amendments to H.R. 4173, the Wall Street Reform and Consumer Protection Act, that would give consumers a powerful negotiating tool to use when trying to negotiate loan modifications with intransigent lenders.  I am once again urging my fellow Republicans to set aside outdated perceptions of irresponsible borrowers and support this legislation.
 

President Obama's loan modification program, commonly known as Home Affordable Modification Program or HAMP, has been a dismal failure.  As of September 2009, only about 1700 homeowners had received "permanent" loan modifications under the HAMP program.  As any bankruptcy attorney can tell you, experience has shown that lenders have very little motivation to modify loans.  Consumers have seen their 90-day "trial payment periods"  under HAMP drag on for months with no sign of a permanent loan modification offer in sight.
 

The threat of an involuntary loan modification in bankruptcy court may be the only way to force lenders and loan servicers to take loan modifications seriously and to stop dragging their collective heals in offering reasonable solutions.
 

I am urging all of my readers, colleagues and clients to contact their representatives in Congress by going to http://clerk.house.gov/member_info/mcapdir.html and urging them to support amendments to this bill that would give bankruptcy judges the power to modify residential  mortgage loans.
 

With 3 million new foreclosures expected in 2010, the ongoing foreclosure crisis will continue to cause a rise in bankruptcy filings and undermine any hope of an economic recovery.

Unlike the expensive bailouts provided to the big lenders, this change to the Bankruptcy Code will not cost taxpayers one penny and will help stabilize the economy.  The voluntary loan modification programs simply are not working.

So if the Republican Party wants to stop looking like it is out of touch with reality, supporting this legislation might be a good first step in fixing the public's perception of the party.

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, CashNet Cannot Throw You In Jail for Defaulting on a Loan

After I wrote a recent article about phony debt collectors pretending to be attorneys, I started receiving phone calls from people around the country that a collection agency for CashNetUSA was impersonating me and trying to collect debts.  I am receiving disturbing reports that this collection agency is illegally threatening borrowers with jail time for not repaying loans.

I filed a complaint with the Better Business Bureau and CashNetUSA has not responded to my request for assistance.  I also contacted the El Cajon Police and the San Diego officer of the F.B.I., but they do not feel that any crimes have been committed.

The Federal Fair Debt Collection Practices Act specifically prohibits debt collectors of consumer debts from threatening a debtor with jail time for failing to repay debts.  Debt collectors also may not falsely claim that they are attorneys or government representatives.

If any collection agency for CashNetUSA contacts you and pretends to be an attorney collecting a debt, I recommend taking the following steps:

• Go to www.annualcreditreport.com and get a copy of your credit report.  Dispute any inaccurate information.
• Put a preliminary fraud alert on your credit report.  The collection agency for CashNetUSA seems to have loads of personal information about people and you could be at risk for identity theft.
• Contact your local police.  A debt collector impersonating and attorney might be committing a crime.
• Consult an attorney.  You may have a claim for damages against the collection agency under the Fair Debt Collection Practices Act and you may also have a claim for damages against CashNetUSA under the laws of your state.

If you live in Southern California and a collection agency for CashNetUSA or any other collection agency has been has been harassing you, please call us today for assistance 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.

Beware of Phony Payday Loan Debt Collectors

In August 2009, the Better Business Bureau issued a nationwide alert warning consumers about phony debt collectors threatening to arrest them for not repaying a payday loan.  I decided to investigate a little further after the daughter of a bankruptcy client called after receiving one of these phone calls.

The phony debt collector called my client's daughter from the following phone number:  (323) 332-1091.  The person answering the phone sounded like he was from an overseas call center and claimed to be an attorney named Steve Austin with the "Riverside County Criminal Defense Office".  When I asked for his bar number and street address, "Mr. Austin" stated that his bar number was confidential and the address he gave me was in Los Angeles.  Riverside is in a completely different county than Los Angeles, which was another warning sign that this was a scam.

"Mr. Austin" claims to be any attorney, but he is not admitted to practice law in California.  He does claim, however, to be admitted to practice law in Texas and Florida.  The claims of the caller do not withstand scrutiny.

It is not uncommon for debt collectors and scammers to use false information or make illegal threats in order to collect a debt.  If you are in Southern California and have been a victim of a phony or a harassing debt collector, please call me now at (619) 448-2129 to get information about dealing with these people to help put your mind at ease.

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.

Paychecks for California Employees Shrinking For The Rest of 2009

Paychex, a nationally known payroll service provider, is reporting that California employers must increase withholding for state taxes as a result of the recently passed California state budget.  The new withholding tables become effective on November 1, 2009.

The new withholding tables are designed to accelerate withholding for the remainder of 2009 by requiring employers to increase the amount of state income tax withheld from employee paychecks by 10%.  The new tables will be in effect from November 1 through December 31, 2009 only.

If you have any questions or need additional information, please call us 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.

California Increases Homestead Exemptions Limits for Debtors

Homestead exemption laws protect the amount of equity that a homeowner can shield from judgment creditors or from creditors while in bankruptcy.  Beginning on January 1, 2010, the limits on homestead exemptions in California will increase by as much as 50% for some homeowners.

Under current law, the base homestead exemption to protect home equity from judgment creditors will increase from $50,000 to $75,000.  A $75,000 exemption for certain family units will increase to $100,000.  A $150,000 exemption available to homeowners who are 65 years of age or older, disabled, or 55 years of age or older with a limited income will increase to $175,000.

As a debtor facing bankruptcy, you can choose from the homestead exemptions listed above or from a different set of exemptions only available to Californians in bankruptcy cases.  Often referred to as the "renter's exemptions" because they are used primarily by renters or homeowners with little or no home equity, these "bankruptcy only" exemptions can be used as a "wild card" to protect any type of property in bankruptcy.  The maximum "wild card" exemption in California is presently $21,825.  However, this amount might be increased based on any increase in the California Consumer Price Index since the exemption was last adjusted in 2007.

If you are in Southern California and want to talk to an attorney about your debt problems or how this new law might effect you, please call us now at (619) 448-2129 or contact us through our website for more information.

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.

Staying in Business While Filing For Chapter 7 Bankruptcy – Part II

In Part 1, I discussed bankruptcy options available for self-employed business owners (sole proprietors) in California with debt problems but who may not be good candidates for repayment plans under Chapter 11 or Chapter 13 of the Bankruptcy Code.  In Part 2, I will focus on the how owners of a corporation might be able file personal bankruptcy and form a new corporation in order to stay in business.  This article is intended primarily for debtors and business owners in California because it is based on my experience with California law and the bankruptcy exemptions available to California residents.

One of the most important duties for a bankruptcy attorney is to have an understanding of the value of the debtor’s assets.  When filing for bankruptcy, debtors must list all of their assets and property.  Some assets are “exempt”, meaning that the debtor can keep the assets despite the bankruptcy.  Other assets are “non-exempt”, meaning that the trustee could sell the assets to pay creditors.  Placing a business owner in a Chapter 7 bankruptcy is risky if the value of the business is not fully exempt.

If a business owner with an incorporated business wishes to file for Chapter 7 bankruptcy, I generally recommend obtaining two valuations of the business first.  One valuation would come from a business broker to demonstrate the value of the business if it were to be sold on the open market to a third party.  The other valuation would come from a Chapter 7 liquidation auctioneer to show the value of the business if it were shut down and the assets liquidated.  This provides a range of value that can be used by the attorney to determine if staying in business after file for Chapter 7 is a viable strategy.

If the value of the business exceeds the available exemption money, the debtor may need to negotiate a payment plan or settlement with the trustee to keep the business.  In most cases, however, the debtor’s corporation has its own debts to the point that it would have little or no value to a potential buyer.  In this type of case, the Chapter 7 trustee will typically have no interest in the day-to-day operations of the debtor’s business or selling it.

If the debtor’s existing corporation is totally exempt or the trustee abandon’s the business as an asset of the bankruptcy estate, the debtor will retain ownership of it.  The debtor then forms a new corporation which purchases the assets of the old corporation that it needs to conduct the activities of the business.  I recommend that the new corporation pay the higher of the 2 valuations obtained prior to the bankruptcy.  This will reduce the risk that creditors of the old corporation would attempt to sue the new entity to collect on the preexisting debts.  If all goes well, the debtors will be free of any dischargeable debt and also own a brand new corporation with no debts.

Disclaimer: The information contained in this article is provided for general information purposes only and is not intended to be a legal opinion, legal advice or a complete discussion of the issues related to the area of consumer bankruptcy. Every individual's factual situation is different and you should seek independent legal advice from an attorney familiar with the laws of your state for specific advice. State law generally determines how much property the debtor will be able to keep when filing for bankruptcy.

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.

Harassment of Debtor Allegations Against Patenaude & Felix Revealed

On September 24, 2009, a client reported to me that she was receiving phone calls at work from a gentleman claiming to be an attorney with the San Diego law firm of Patenaude & Felix, APC. She further reported to me that a coworker was receiving calls and messages from the same man made to a cell phone number obtained from their employer’s website. After I called the law firm to confirm that I represented this client, I was assured that no further contact would occur.

Under the California Rosenthal Fair Debt Collection Practices Act, creditors and their attorneys cannot legally contact consumer debtors that are represented by an attorney. The Federal Fair Debt Collection Practices Act similarly protects consumer debtors from collection agency harassment. I thought that the unwanted creditor contact with my client would end, but I was wrong.

On September 30, 2009, my client again reported contact from the law firm by a collection agent falsely claiming to be an attorney. The same collection agent called my office and spoke with a bankruptcy paralegal and the caller again identified himself as an attorney.

The law firm claims that there was simply a “misunderstanding” and that no violation of state or federal laws occurred. I happen to know this bankruptcy paralegal fairly well. Her name is Lisa Starrett and I married her in 1994. She has a paralegal certificate from the University of San Diego and has been working with me as a bankruptcy paralegal for over 3 years now. She knows the importance of precision when it comes to communication in our line of work. Her words carry a lot more weight than a collection agent trying to spin his way out of a lawsuit.

If you are in Southern California and have experienced unfair debt collection practices when dealing with Patenaude & Felix, please call me at (619) 448-2129. You may have grounds for legal action against the law firm and the creditors they represent.

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.

Chapter 7 Bankruptcy Options for Business Owners - Part I

In Part 1 of a 2-part series discussing Chapter 7 bankruptcy options for business owners, I will discuss options available for self-employed business owners in California that need to file for bankruptcy but who may not be good candidates for repayment plans under Chapter 11 or Chapter 13 of the Bankruptcy Code. Part 2 will discuss how owners of an existing corporation might be able file personal bankruptcy and form a new corporation in order to stay in business. This article is intended primarily for debtors and business owners in California because it is based on my experience with California law and the bankruptcy exemptions available to California residents.

As the economy continues to worsen, I am seeing an increasing number of self-employed business owners facing a crushing amount of debt and no place left to turn. In some cases, my clients have owned their businesses for 20 years or more and have no sense of what the job market might hold for them if they were to close the doors of their business. As a result, I find many business owners in a position of owning a business that could generate a reasonable income…except for that little inconvenience called debt.

Where I practice, self-employed debtors are not allowed to use property of the bankruptcy estate to generate income without the express written consent of the trustee or a court order. Shutting down for an indefinite period of time is not an option for business owners because they could quickly lose their customer base and a viable alternative is needed.

With few exceptions, most self-employed debtors I see would be better off incorporating to take advantage of tax deductions not available to sole proprietors. After incorporating the business, the debtor then transfers all of the business assets to the new corporation in exchange for the issuance of the corporate stock. The value of the new corporation is typically very small and the debtor can usually claim the shares of stock as exempt when filing for bankruptcy.

Under the law, a corporation is a separate entity from the debtor and can continue to operate despite the bankruptcy of the owners. Unless the bankruptcy trustee decides to run the corporation to generate income for the creditors or to sell the business, the debtor will remain in control of the business and continue to receive a salary as an employee. The valuation of the new company and the risk of it being sold for the benefit of creditors is something that should be discussed with a qualified bankruptcy attorney prior to filing for bankruptcy. I have employed this strategy successfully for a number of Chapter 7 debtors.

When the bankruptcy is filed, the debtor will list the shares of stock in the new corporation as an asset. The transfer of assets to the corporation will also be disclosed. In most cases, the corporation will be of little value to the trustee. Upon completion of the bankruptcy, entry of a discharge and closure of the case, the corporation will belong to the debtor. The debtor will have their business and a fresh start on a pathway to success.

The information provided in this article is general information only and is not intended as legal advice. DO NOT use this information as a substitute for obtaining qualified legal advice or other professional help. If you are a business owner in Southern California with debt problems, please contact us for a free consultation to see how we might be able to 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.

Getting What You Need From Bankruptcy

The United States Supreme Court once said that the principal purpose of the Bankruptcy Code is to grant a ‘fresh start’ to the ‘honest but unfortunate debtor’. This reminds me of a Rolling Stones song that tells us that “You can't always get what you want. But if you try sometime, you find you get what you need.” This sentiment is often true in bankruptcy and sometimes debtors have unreasonable expectations of what bankruptcy can do for them.

In any type of bankruptcy, I tell potential clients that the 4 most important elements of any possible bankruptcy case are: (1) income; (2) expenses; (3) assets; and (4) debts. This information tells me what type of bankruptcy the debtor may wish to file, what property they might lose in a bankruptcy proceeding and what debts the court will discharge. While the vast majority of my clients keep nearly all of their assets, there are limits to what bankruptcy can do and sometimes debtors must make necessary sacrifices.

I have seen debtors fall behind on their house payments while paying hundreds of dollars per month keep luxury items such as a motor home, a boat or a vacation home. Bankruptcy is a court of equity and clean hands, so debtors cannot expect to walk away from tens of thousands of dollars in credit card debt while shelling out excessive payments to keep luxury items like a yacht or a second home. If a debtor is unwilling to make the necessary lifestyle changes and budgetary adjustments, then qualifying for bankruptcy will be an uphill battle.

If an “honest but unfortunate debtor” files for bankruptcy, chances are they won’t get everything they want. The desert toys and the fancy SUV with the $950 payment may need to go away. But if the debtor follows the rules, they make get what they need: debt relief and a fresh start.

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 and the San Diego County Bar Association. Mr. Starrett practices in the areas of bankruptcy, business litigation, construction, corporate planning and debt collection.

I Can't Open a Bank Account After Bankruptcy...Now What?

From time to time, I encounter bankruptcy clients who have trouble opening bank accounts because they bounced checks due to insufficient funds. Banks and merchants often report bad check writers to database services. These services care consumer credit reporting agencies just like TransUnion, Equifax and Experian. The three largest reporting agencies for bad check writers are the Shared Check Authorization Network (SCAN), Telecheck and Chexsystems. Consumers with negative check information on their credit report will often find it difficult to write a check or even open a bank account.

I first encountered this problem in 2007 when a former client advised me that she was unable to open a bank account because of negative information reported by Chexsystems. I faxed a copy of the bankruptcy discharge order to Chexsystems and received a letter within a week confirming removal of the negative information from my client's credit report. She was then able to open a new bank account.

Companies like Chexsystems are subject to the Fair Credit Reporting Act. If a bad check debt is discharged in bankruptcy, the creditor has 30 days to report the debt as "zero balance, discharged in bankruptcy". My colleague Mike Doan has written an excellent article on the steps necessary to dispute negative information on Chexsystems and other bad check databases.

In my experience, however, an ounce of prevention is worth a pound of cure. For every new consumer bankruptcy case I file, I now include the major check verification services on the mailing list to receive notice of the bankruptcy. Many of my clients are unaware of any negative banking information on their credit reports. My clients often report to me that this approach has resulted in the automatic removal of negative information from their credit reports that they did not even know existed.

If you are in Southern California and are also encountering problems opening a bank account after bankruptcy, please contact us for a complimentary 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 and the San Diego County Bar Association. Mr. Starrett practices in the areas of bankruptcy, business litigation, construction, corporate planning and debt collection.

Preparing For Your Meeting of Creditors

After a consumer debtor files for Chapter 7 bankruptcy, the court's computer will assign a hearing date for a Meeting of Creditors as required under Section 341 of the Bankruptcy Court. The trustee assigned to the debtor's case is responsible for reviewing the debtor's bankruptcy papers and selling off the debtor's non-exempt assets to pay creditors. Although most of these hearing are fairly routine, some of my clients become very anxious over what might happen to them at the hearing.

The Office of the United States Trustee has produced this helpful video that shows how a Meeting of Creditors usually works:

I advise my clients to review their bankruptcy petition again prior to the Meeting of Creditors. I also give my clients the following grounds rules, courtesy of my colleague Frederick Clement:

Be sure you understand the question before answering it. If there is anything about the question you don't understand, ask for clarification, instead of answering. But always be sure you understand the question you are being asked.

Never guess at an answer. You swear an oath to tell the truth and guessing isn't telling the truth. By guessing, you are not helping anybody understand what really happened. There are things witnesses know and things they think they know. "Know" generally means you learn it with one of your five senses. Otherwise you probably don't "know" it in the legal sense. So be sure not to guess.

Never volunteer information. The shortest truthful and complete answer is always the best. Where possible, truthful and complete, "yes" and "no" answers are best. If the clarification is required with a "yes" or "no" answer, make it very short. Volunteering information never helps you, it only hurts you.

Here are some of the common questions a trustee might ask at a Meeting of Creditors:

1. State your Name and Address for the Record
2. Did read your bankruptcy papers before you signed them?
3. Did you read and sign the meeting questionnaire?
4. Did you understand the questionnaire?
5. Did you list all your assets?
6. Did you list all you debts?
7. Did you list all your income?
8. Is there any reason to make any changes to your schedules?
9. Have you transferred any property or money to any family members in the last year?
10. Are there any creditors present?
    

The trustee might ask other specific questions that may be unique to your case. If your meeting is concluded, you will have no other obligations beyond completing the course in debtor education and any other instructions the trustee may give at the meeting.

And there is one final thing to remember: try to relax. The trustee is not a judge and knows that you are nervous just like the other debtors who also have to be there for a meeting of creditors. Your attorney will have the file and be able to assist you if any problems arise.

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 and the San Diego County Bar Association. Mr. Starrett practices in the areas of bankruptcy, business litigation, construction, corporate planning and debt collection.

California’s 90-Day Foreclosure Moratorium Really Isn’t

In February 2009, Governor Arnold Schwarzenegger approved the California Foreclosure Prevention Act. The news media has portrayed the legislation, which takes effect on June 15 2009, as a 90-day moratorium on foreclosures. The reality is much more complicated and could lull home owners into a false sense of security if they in negotiations with a lender for a loan modification.

What the new law really does is expand the time between when a lender can record a Notice of Default to begin the foreclosure process and when the lender may record a Notice of Sale from 90 days to 180 days. The law only protects owner-occupied homes from foreclosure where the first loan was recorded between Jan. 1, 2003 and Jan. 1, 2008. For loans outside of the specified time period, the time before the lender may give a Notice of Sale remains at 90 days.

The law also allows lenders to avoid the 90-day “moratorium” if they have a comprehensive loan modification program based, in part, on criteria set forth by the Federal Deposit Insurance Corporation (“FDIC”). There is no requirement that the lenders negotiate in good faith.

Nearly all residential foreclosures utilize what is commonly referred to as nonjudicial foreclosures, which means that the foreclosure sale can occur without court supervision. If a lender does not comply with California’s foreclosure laws, it will still be up to the homeowner to go to court to prevent or set aside an improper foreclosure. If homeowners wait too long before seeing a qualified attorney, they may be so far behind in their payments that even a Chapter 13 repayment plan in bankruptcy might not be able to save them from foreclosure.

For now, I am advising my clients to act as if they do not have the benefit of an additional 90 days to stop a home foreclosure because there simply is no way to tell when a lender might assert that it has a loan modification program that complies with California law. Once the foreclosure sale takes place, it is very difficult and expensive to go to court to undo the transaction.

If you are in Southern California, please feel free to contact us for a free consultation on your bankruptcy options to possibly help save your home from foreclosure.

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 and the San Diego County Bar Association. Mr. Starrett practices in the areas of bankruptcy, business litigation, construction, corporate planning and debt collection.

A Creditor Objected to My Discharge…Now What?

When a debtor files for Chapter 7 bankruptcy, the court mails the creditors a document entitled "Notice of Chapter 7 Bankruptcy Case, Meeting of Creditors, & Deadlines". One of the deadlines set by the court is when the creditors must take legal action to prevent the debtor from receiving a discharge of some or all of the debts. This objection is accomplished by filing a lawsuit within the bankruptcy case called an adversary proceeding.

Most adversary proceedings that I see are filed by credit card companies alleging that a debtor made purchases or took cash advances without the intention of repaying them. The best way to avoid an adversary proceeding is for the debtor to stop using their credit cards for a minimum of 90 days prior to filing for bankruptcy. Luxury purchases and cash advances in close proximity to the filing date of the bankruptcy might be presumed to be fraudulent, giving the creditor an advantage in the adversary proceeding.

Most credit card companies that regularly threaten to file adversary proceedings are usually looking for "low hanging fruit" (i.e. a quick settlement with the debtor). Perhaps they feel that a debtor will not be able afford more legal fees to defend the new lawsuit or will simply be scared into submission.

In my experience, creditors will often back away very quickly if confronted with a strong defense. In one recent case I handled, Wells Fargo dropped a claim that my client had fraudulently borrowed $10,000 on a credit card less than a month after I had filed an answer to the adversary complaint on behalf of my client. Perhaps it was the fact that the bankruptcy court could have ordered Wells Fargo to pay my client's legal fees if it was found that the lawsuit had been brought without sufficient justification for the fraud allegations.

Don't let a creditor scare you into giving up your rightful discharge. If you are in Southern California and need assistance in defending an adversary proceeding, please feel free to contact us.

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 and the San Diego County Bar Association. Mr. Starrett practices in the areas of bankruptcy, business litigation, construction, corporate planning and debt collection.

Struggling With The Decision to Call a Bankruptcy Attorney

Before joining my husband’s law practice as a bankruptcy paralegal in 2006, I worked at the corporate headquarters for Jack in the Box, Inc. for 11 years in human resources and training, the last year of which was spent as a recruiter for the Quick Stuff division. Interviewing potential job candidates was a very rewarding experience as both the job candidate and I would work through the interview to determine if a job was a good fit for them and for Jack in the Box.

As the senior paralegal in a family-owned bankruptcy law firm now, I am often the client’s first contact in the information gathering process. I view the initial phone call to us as a unique opportunity to show a potential client from the beginning that we care, to talk with them about their situation and to provide general information, in easy to understand terms, of what bankruptcy is and how it works.

Picking up the phone to call a bankruptcy law firm is a big step, especially if someone has been battling stress and depression because of their financial situation, and fear of shame in needing to call. For each person that I talk with and hear this in their voice, my goal is to be a friendly voice that shares information about what bankruptcy is and is not, so that they can begin to explore if bankruptcy is the right solution for their needs.

My experience with client interviews has allowed me to develop my own mental checklist of common client experiences that indicate they have made the right decision by calling us:

• If you are routinely taking cash advances on one credit card to pay the minimum balance on another
• If you can barely afford to pay the minimum balances on your credit cards
• If you are considering using cash advance checks or getting a payday loan to meet basic expenses while trying to pay credit card bills
• If you are looking at credit card offers in the mail, and hoping you can qualify for just a small amount to tide you over
• If you are afraid to pick up the phone or go to the mailbox
• If you lose sleep over not being able to pay your bills
• If financial stress is affecting your health
• If you cannot enjoy daily activities with friends or family because of worry over your finances
• If you find yourself hiding bills from your spouse
• If you live paycheck to paycheck with no available credit and no reserve for any emergency
• If you park your car different places each day to avoid repossession
  

Bankruptcy is not a magic pill that will make all of your troubles go away. However, people who seek us out will hear a friendly voice and an open ear. If you are in Southern California and can identify with the warning signs above, let us help. Please contact us for a free consultation.

About the Author: Lisa F. Starrett has been a bankruptcy paralegal since 2006 and uses her human resources background to connect with clients of the Law Offices of Carl H. Starrett. Mrs. Starrett graduated from the University of San Diego in 1989 with a degree in Political Science and a paralegal certificate from a program approved by the American Bar Association.

5 Signs That It May Be Time to File Bankruptcy

Bankruptcy is intended to help honest debtors get a fresh start, but there is no hard and fast rule on who will benefit the most from filing for bankruptcy. These are some of the warning signs that I look for when advising a potential client that it may time to file for bankruptcy:

1. Struggling to make rent or mortgage payments. When someone is faced with mounting bills, some debtors will play a game I call the Credit Card Shuffle, randomly choosing which minimum payment to make based on how nasty the collection call will be. Some debtors will even pay credit card bills before paying their rent or mortgage rather than face those harassing collection calls. This is simply wrong. Food and shelter should take priority over credit card debt.

2. Stress. Are you losing sleeping or constantly arguing with your spouse because of your debt problems? Money problems are a leading cause of divorce. Bankruptcy is not a cure all, but it can help remove your financial problems as a source of difficulties and stress in your marriage.

3. Health. I have seen far too many clients losing sleep and suffer stress-related health problems because of their financial struggles. A willingness to work multiple jobs or crazy overtime hours may be a sign a good character, but it can lead to burnout, exhaustion and anxiety.

4. Changes in your normal behavior. Are you considering doing something illegal to fix your debt problems or something that could put your health or the health of your family at risk? Have you taken up gambling or drinking? Are you doing things that are “out of character” for you? These may be signs of desperation and it may be time to see an attorney.

5. The Balance Transfer Shuffle. Are you constantly applying for new credit cards to take advantage of low balance transfer rates? This may be a sign that you are in over your head in debt.

If you identify with one of these warning signs, schedule a consultation with a bankruptcy attorney and explore your options. Debtors in Southern California may contact us 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 and the San Diego County Bar Association. Mr. Starrett practices in the areas of bankruptcy, business litigation, construction, corporate planning and debt collection.

Bankruptcy and Professional Licenses

In a recent article, I discussed the limited protections that debtors have against employment related discrimination set forth in the Bankruptcy Code. In this article, I will discuss the impact that the Bankruptcy Code has on professional licenses.

Section 525(b) of the Bankruptcy code protects present and former debtors and their associates against governmental discrimination, such as the revocation of an employment license. However, section 525 protects only against discrimination "solely because" the person is bankrupt or has been bankrupt.

Debtors with professional licenses are protected to a certain extent by the automatic stay that is immediately triggered upon the filing of a bankruptcy petition. An exception to the automatic stay appears in Section 362(b)(4) of the bankruptcy code "the commencement or continuation of an action or proceedings by the governmental unit to enforce such governmental units' police or regulatory powers." This exception is intended to allow governmental units to sue a debtor to prevent or stop violation of fraud, environmental protection, consumer protection, safety, or similar police or regulatory laws, or attempting to fix damages for violation of such a law.

While the general rule is that bankruptcy alone should not impact a professional license, the protection is not absolute. For example, the California Contractors State License Board (“CSLB”) generally could not force a bankrupt contractor to pay money damages to an owner to fix deficient work. However, the CSLB still would have jurisdiction to fine the contractor or take other necessary steps to protect the public.

Bankruptcy is meant to help protect honest debtors in unfortunate circumstances and this same principle applies to any debtor who is a licensed professional such as doctors, attorneys and accountants. Licensed professionals cannot lose their license “solely” due to filing bankruptcy. Nonetheless, incompetent or dishonest professionals may be at risk and will not be protected by the Bankruptcy Code.

If you are in Southern California and want to know how bankruptcy might impact your professional license, please feel free to contact us 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 and the San Diego County Bar Association. Mr. Starrett practices in the areas of bankruptcy, business litigation, construction, corporate planning and debt collection.

Bankruptcy and Employment Discrimination

A common question many debtors ask bankruptcy attorneys is whether an employer can discriminate against an employee or a job applicant due to a bankruptcy on their credit report. At first glance, the Bankruptcy Code seems to provide a broad range of protection against debt-related employment discrimination. Section 525 of the Bankruptcy Code prohibits private employers from terminating employees or discriminating with respect to employment solely because a person: (1) is or has been a debtor in bankruptcy; (2) has been insolvent prior to filing bankruptcy but before receive a grant or denial of a discharge; or (3) has not paid a debt what was dischargeable or was discharged in bankruptcy. However, the courts have limited the effectiveness of this statute.

In 2002, the 9th Circuit Court of Appeal ruled that an employee who threatened to file for bankruptcy was not protected by the Bankruptcy Code. Norbert Majewski became an employee at a hospital where he had incurred a large amount of medical debt from an emergency procedure. After 3 years of being unable to repay his debts, the hospital fired Mr. Majewski when he said he was going to file for bankruptcy. The Court of Appeal ruled that the statute only protected people who had actually filed for bankruptcy.

Other courts have also focused on a literal interpretation of the portion of the statute prohibiting employment discrimination “solely” due to filing bankruptcy. Even the smallest non-bankruptcy related reason for termination could be sufficient grounds for an employer to defeat a discrimination claim brought under Section 525 of the Bankruptcy Code.

In this economy, debtors can expect that employers will be more selective in the hiring process with more extensive background checks. The best thing a debtor can do is to be open and honest if the topic comes up during an interview. There will always be potential employers who say “thanks for being honest” and yet still make you feel like you are being judged. And if you don’t get the job, it probably would not have been a good fit anyway.

If you are in Southern California and want to know how bankruptcy might impact your job, please feel free to contact us 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 and the San Diego County Bar Association. Mr. Starrett practices in the areas of bankruptcy, business litigation, construction, corporate planning and debt collection.

Removing a Second Mortgage Through Bankruptcy

In recent weeks, I have observed attorneys offering bankruptcy services, loan modifications and debt management plans. It is often difficult to decide what is the best option, but not many attorneys are talking about a powerful tool to help debtors: the ability to use bankruptcy to remove a second mortgage.

Under a 1992 decision by the U.S. Supreme Court called Dewsnup v. Timm, lien stripping can only be accomplished in a Chapter 13 bankruptcy. Chapter 13 is designed for people with regular income to pay back a portion of their debts over time.

In the Southern District of California, which covers San Diego County and Imperial County, the process begins by filing a petition for Chapter 13 bankruptcy. The debtors or their attorney also file a plan with the court to repay creditors all or part of the money that is owed to them using future earnings. A repayment plan can be three years or five years, depending on factors such as your income and must be approved before the plan can take effect.

Prior to filing a Chapter 13, the debtors or their attorney should obtain a professional appraisal of their home. In order to remove an unsecured second mortgage, the fair market value of the home must be less than the balance owed on the first mortgage. After filing the Chapter 13 bankruptcy, the attorney will contact the court and obtain a hearing date to request an order removing the lien from the property.

If the court grants the motion, the court will issue an order directing the holder of the second deed of trust to take the necessary steps the remove to the lien from the home. The type of loan does not matter. The bankruptcy court can order the removal of a HELOC, a purchase money loan or any other type of mortgage or other type of lien on the property if it is fully unsecured.

The lien strip only becomes effective once the debtors have completed the payments under their plan. In addition to the removal of the second mortgage, their debts are generally discharged except for domestic support obligations, most student loans, certain taxes, most criminal fines and restitution obligations, certain debts which are not, properly listed in your bankruptcy papers, certain debts for acts that caused death or personal injury and certain long term secured obligations.

If you are in Southern California and would like to see if you qualify for Chapter 13 bankruptcy to remove an unsecured mortgage or other lien from your home, please contact us 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 and the San Diego County Bar Association. Mr. Starrett practices in the areas of bankruptcy, business litigation, construction, corporate planning and debt collection.

Avoiding Loan Modification Scams

A recent story in the San Diego Union Tribune noted an increase in the number of businesses offering loan modification services, a field that was once dominated by nonprofit organizations. A corresponding increase in complaints to the California Department of Real Estate (“DRE”) and the Better Business Bureau has also taken place.

Homeowners that get behind on their payments will often be contacted by companies offering loan modification services because foreclosures are public record. Consumers should be particularly wary of persons or businesses that ask for payment of services in advance.

California Civil Code § 2945 regulates foreclosure consultants. In most cases, anyone who falls under the definition of a “foreclosure consultant” is prohibited from collecting advance fees if a lender has recorded a Notice of Default to begin foreclosure against a consumer’s property. This prohibition against collecting advanced payments also extends to any real estate licensee. If your lender has recorded a Notice of Default, do not pay an advance fee without fully exploring your options.

If you need loan modification assistance, consider using a non-profit agency that can assist you without charging you a fee or a real estate licensee and an attorney who would be willing to work for a fee paid after their work has been completed. The California Department of Real Estate recommends the following websites for information on non-profit housing counseling services:

Federal Housing Administration

Hope Alliance Web site

Licensed California attorneys are allowed to request a retainer in advance of providing loan modification serves. Licensed real estate brokers may also collect advance fees for loan modification services with special permission from the DRE. However, the broker must have you sign an agreement that tells you what services will be performed, when they will be performed and how much you must pay and the agreement must be submitted to the DRE for review and permission granted to use it. Consumers considering using a real estate broker for loan modification services can call the DRE at (916) 227-0770 for more information.

Many persons offering loan modification services claim to have “inside knowledge” of the lending industry and promise to “cut through the red tape” to convince a lender to change the terms of a loan. The reality is much different. One local attorney I spoke with indicated that many times a lender would only modify a loan after being served with a lawsuit. And while using an attorney may sound expensive, only an attorney can represent a homeowner in court against a lender threatening to foreclose on an unaffordable loan.

If you are in Southern California and require assistance with a loan modification or other debt problems, please contact us for a referral.

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 and the San Diego County Bar Association. Mr. Starrett practices in the areas of bankruptcy, business litigation, construction, corporate planning and debt collection.

Avoiding Foreclosure During a Loan Modification

Mark Twain supposedly said once that "A verbal contract isn't worth the paper it's printed on." A client recently learned that the same can be said of a lender's promises during negotiations for a loan modification.

These homeowners had hired another law firm to represent them during the loan modification process. The lender had delayed a foreclosure sale several times while negotiations were ongoing. Without notice to the homeowners, the lender decided to cease negotiations on a Friday and conducted the foreclosure auction the following Monday. The home they had occupied for 15 years was sold to a third party bidder and now there is little they can do to save their home.

My colleagues that do loan modification work tell me that it is often necessary to advise homeowners to stop paying their mortgage before a lender will even discuss changes to a loan. When considering a loan modification, lenders look at several factors including (1) the nature of the hardship causing the mortgage problems; (2) the borrower's ability to pay; (3) the amount owed; (4) the equity in the property; and (5) the borrower's future financial situation. Without a delinquency, the lenders or loan servicers often have little incentive to modify a performing loan.

When a borrower defaults on a loan, the risk is that they will get so far behind that the lender will simply choose to foreclose rather than have a bad loan on the books. It is also possible get so far behind that a Chapter 13 bankruptcy repayment plan might not be able to help a borrower save their home. Before starting the loan modification process, consider the following tips:

• Hire an experienced mortgage attorney to examine your loan documents for potential violations of laws such as the Truth in Lending Act or the Real Estate Settlement Procedures Act. This may give you leverage in the negotiation process.
• Obtain a complete written life of loan history to see if there any inappropriate charges and fees included in their mortgage balance.
• Do not spend the money you would have used to make your house payments. Consider setting the money aside in a separate bank account. The lender might require a "good faith" payment at some point in time during the process and you will want to have those funds available if needed.
• Get all assurances in writing. If the lender does foreclose, written assurances could be used in legal proceedings to set aside the sale.
• Have a bankruptcy attorney on standby. The automatic stay can stop a foreclosure sale before it happens. A debtor can also use a Chapter 13 repayment plan to get caught up on the past due mortgage payments. We offer a free consultation on new bankruptcy matters.
  

In this economy, negotiating a loan modification can be very risky yet very beneficial given the right circumstances. If you need assistance with debt relief or a referral to a loan modification specialist in Southern California, please contact us.

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 and the San Diego County Bar Association. Mr. Starrett practices in the areas of bankruptcy, business litigation, construction, corporate planning and debt collection.

Support Needed for Bankruptcy Loan Modification Bill

I recently wrote an article urging my fellow Republicans to support a bill giving bankruptcy judges the authority to modify home mortgages to prevent foreclosures. The battleground has now shifted to the Senate, which is gearing up to vote on the legislation . The bill is now known as S. 61, the “Helping Families Save Their Homes Act of 2009".

The premise for the bill is very simple. Experience has shown that lenders and loan servicers are only giving lip service to lofty promises to cooperate with struggling homeowners who need loan modifications. Unaffordable adjustable rate mortgages are still a major cause of bankruptcy and foreclosures in the United States. This bill would change that dynamic.

Under current bankruptcy law, a judge can modify almost any type of loan except the first mortgage on a debtor's home. This bill would allow judges to make changes such as extending payment terms, setting a fixed rate of interest or reducing payments. While this bill might cause a short term spike in bankruptcy filings, the long effect will be to force lenders to negotiate loan modifications in good faith. That is not happening right now. Some lenders are even foreclosing in the middle of negotiations without warning the home owner.

Please help by telling your Senators to support this bill. You can start at this link to learn more about the bill and then sign an online petition to show your support. Then you can click on this link to find contact information for your Senators. It does not matter whether you call, write, email or fax them, but make your voice heard very soon. As aptly stated by my colleague O. Max Gardner III, "This legislation is mandatory to make the voluntary modifications work."

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 and the San Diego County Bar Association. Mr. Starrett practices in the areas of bankruptcy, business litigation, construction, corporate planning and debt collection.

7 Facts That The Average Debt Settlement Company Won’t Tell You

In a recent article, I debunked a blog entry by J. Carlton Ford, owner of a website called Debt Warriors. Mr. Ford is a sales associate for Pre-Paid Legal, Inc. and sells “coaching videos” that purport to teach debtors how to reduce their debts. The cottage industry of “quick fixes” to debt problems is a sign of growing desperation by debtors who are confused about their options. Whether purchasing a video from someone like Mr. Ford or considering the use of a “debt settlement company”, consumers should be wary of quick fixes and empty promises of easy solutions.

Debt settlement companies offer to negotiate directly with your creditors, often for fees from ranging from 9%-16% of the consumer’s total unsecured debt. But debt settlement plans can harm debtors in ways they never imagined.

1. Debt Cancellation/Forgiveness is Presumed to be Taxable Income. Generally, if you owe a debt to someone else and they cancel or forgive that debt, you are treated for income tax purposes as having income and may have to pay tax on this income. If you owe a credit card company $10,000 and settle the account for $5000, the credit card company will send you and the IRS a 1009 form showing $5000 of income for the forgiven debt. You may be trading a debt that is completely dischargeable in bankruptcy for a nondischargeable tax debt. Debt forgiveness achieved in bankruptcy is not taxable.

2. Debt Settlement Plans Are Not Binding On All Creditors. Creditors do not have to deal with the debt settlement companies. Some creditors like American Express usually refuse to do so. If a creditor does not agree to the proposal, the creditor can sue you to obtain a judgment and garnish your wages and take your assets. A chapter 13 repayment plan is binding on all of your creditors and the automatic stay created by the filing of a bankruptcy prohibits any of your creditors from suing you.

3. A Debt Settlement Company Cannot Represent You In Court. Unless the debt settlement company is also a law firm, it cannot legally represent you in court. If you do not hire any attorney or do not have sufficient legal skills to represent yourself, then you risk have a judgment entered against you.

4. Debt Settlement Plans Are Often More Harmful to Your Credit Than Bankruptcy. Unless your debt settlement company skillfully crafts a settlement agreement the correct way, your creditors can still continue to report you as delinquent. While filing for bankruptcy will impact your credit, the automatic stay prevents creditors from reporting further negative information. In the case of a Chapter 7 discharge, creditors must start reporting zero balances within 30 days of your discharge and you can quickly distance yourself from any bad payment history. You can actually have bad credit longer under a debt settlement program than when filing for bankruptcy.

5. Debt Settlement Plans Are Often More Expensive Than Attorney Fees For Bankruptcy. In the Southern District of California where I practice, most consumer Chapter 13 cases cost approximately $3300 in legal fees plus expenses such as the $274 filing fee. Chapter 7 fees are often less than half of what an attorney might charge for a Chapter 13 bankruptcy. A person with $30,000 in debt will often pay a debt settlement company more than they would pay an attorney to file for bankruptcy.

6. Bankruptcy Can Accomplish More Than Debt Settlement Plans. Debt settlement plans typically only deal with unsecured debts such as credit cards and medical bills. Debt settlement plans usually do not deal with taxes or secured debts such as a home or car loan. Using bankruptcy, debtors can discharge certain income taxes, modify certain types of loans and many debtors are even using Chapter 13 bankruptcy to remove second mortgages from their homes. Debt settlement plans cannot accomplish any of those things.

7. Most Debt Settlement Companies Use the Carrot On a Stick Approach. Debtors rarely have the money to offer lump sum settlements to creditors. Debt settlement companies will often take installment payments and collect their fees first. Once they have a sufficient pot of money, they will offer a token settlement to one or two creditors. While this is happening, creditors may sue the debtor and the debtor’s credit rating will continue to drop.

While debt management plans may have their place, I have yet to see a satisfied customer come through my doors. If you are in financial difficulty, a consultation with a qualified bankruptcy attorney is always a good choice and often free.

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 and the San Diego County Bar Association. Mr. Starrett practices in the areas of bankruptcy, business litigation, construction, corporate planning and debt collection.

California Adopts Moratorium on Many Foreclosures

On February 25th, Governor Arnold Schwarzenegger signed a bill into law that establishes a 90-day moratorium on many home foreclosures on in California. The bill protects owner-occupied homes from foreclosure where the first loan was recorded between Jan. 1, 2003 and Jan. 1, 2008.

Under existing California law, a lender can initiate a foreclosure by recording a notice of default. After the expiration of 90 days, the lender can record a notice of sale. For first mortgages recorded between January 1, 2003 and January 1, 2008, the lender must now wait 180 days before giving notice of a sale date unless the lender or loan servicer has an approved loan modification program in place. The new legislation expires on January 1, 2011.

In January 2009, lenders commenced more than 2800 foreclosures in San Diego County. Like many other legislative proposals, the intent of this legislation is to force lenders and loan servicers to be more reasonable in offering loan modifications to troubled homeowners. However, it is unclear how many of those 2800 foreclosures will be prevented by this legislation.

With the vast array of options available for struggling homeowners, the most important advice is to seek the assistance of a qualified attorney. For some, the best option might be a Chapter 13 bankruptcy to strip an unsecured second mortgage from their home. For others, the best option might be an experienced attorney who specializes in loan modification services. For now, the California legislature has offered homeowners additional time to negotiate and incentives to lenders to cooperate with reasonable modification requests. Whatever you decide to do, hire a professional and don’t go it alone.

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 and the San Diego County Bar Association. Mr. Starrett practices in the areas of bankruptcy, business litigation, construction, corporate planning and debt collection.

Why Republicans Should Support Judicial Loan Modification

This is an open letter to all of the Republicans that serve in the United States Senate and the House of Representatives:

I am a Republican and a conservative, so it is a bit unusual for me to be asking you to support a piece of legislation introduced by the Democrats. I am specifically asking you to support House Resolution 200, the Helping Families Save Their Homes in Bankruptcy Act of 2009 ("H.R. 200").

Over the last year, I have watched as our government has flailed around from one failed measure to another in a vain attempt to save the economy. Big lenders such as Citibank have received hundreds of billions of dollars of taxpayer money under the theory that the bailout would free up the credit market, but I have yet to see any benefit to the consumers. It is time to stop bailing out Wall Street and pass legislation to help the "little guy".

As a member of the National Association of Consumer Bankruptcy Attorneys, I am in the trenches every day in an attempt to help my clients save their homes. The biggest obstacles that my clients encounter are adjustable rate mortgages and intransigent lenders who refuse to consider even the most reasonable loan modification requests.

H.R. 200 would give bankruptcy judges the authority to modify mortgages while still giving the note holders a reasonable return on their investments. The mortgage industry has already received help from the bailout money. The credit card industry received help when Congress passing the bankruptcy reforms in 2005. Isn’t it about time to help out the people who actually need it?

The lawful ability of a consumer to force a mortgage modification will provide the necessary impetus for many of the loan servicers to voluntarily modify the loans without the need for a bankruptcy filing. Without this legal leverage, there will be no bargaining power for the average consumer.

Credit Suisse estimates that passage of this legislation could reduce home foreclosures by as much as 20%. If you want to save the economy, then keeping people in their homes is a good way to start. This legislation would help homeowners get relief under the Bankruptcy Code and help people get back on their feet again.

The enactment of this law will not dramatically increase the number of new bankruptcy cases. The primary benefit of the law will be to give consumers who are already in bankruptcy the equal opportunity to modify their residential loans. The Congressional Budget Office in a study for Senator Durbin has estimated that the law will only result in approximately 2,000 new bankruptcy filings per year. It is time to help level the playing field and help your constituents in this time of need.

Thank you for your consideration.

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 and the San Diego County Bar Association. Mr. Starrett practices in the areas of bankruptcy, business litigation, construction, corporate planning and debt collection.