Sacramento Bankruptcy Attorneys Blog

Sacramento bankruptcy lawyers who file Chapter 7 and Chapter 13 bankruptcies on behalf of individuals will be glad to know that the Center for Responsible Lending has published a study that shows that it makes more sense for lenders to modify a distressed homeowner's loan than to immediately foreclose on the individual's property. The Center released a study on March 22 that researched whether investors who held a defaulting loan could retrieve more money through foreclosure or modification. The study used the net present value test (NPV), which is used by the federal loan modification program in addition to numerous private programs. The answer turned out to be (under most circumstances), whether the loan was securitized or not, that it made more sense to modify because the lender received more money in the long run.

The authors explained that when considering whether to modify a loan, a prudent investor must balance the cost of foreclosing with the costs of reducing a borrower's monthly payment. The NPV test is a ready tool to calculate this ratio and the authors using the instrument were able to evaluate over 1,500 test cases. The authors were also able to include different circumstances such as original size of the loan, different property values, and well as the size of the reduction in monthly payments. According to the study then, if the end result of the test shows a lower re-default rate than the actual re-default rate, the value of modifying the loan is higher than what could be gotten through foreclosure. Therefore, under these conditions the lender should grant a loan modification rather than initiate foreclosure proceedings. The Center's study calculated that most real-world circumstances should lead to a loan workout.

According to the study, a loan modification that discounts the loan by 10% would be profitable more than 86% of the time under existing self-cure numbers. Thus, the Center has concluded that NPV tests should begin to inspire a lender's willingness to implement the loan modification process into its business model.

As a Sacramento Bankruptcy Attorney I am dedicated to ensure that my clients receive the best information available to assist them in determining what course of action works best for his or her financial situation. Whether Chapter 7, Chapter 13, or a Loan Modification rests in an individual's best economic interest is, of course, determined by the special circumstances that are unique to every person. As a local practitioner I incorporate litigation as well as aggressive negotiations to get fair consideration and treatment for my client's loan modification applications as well as equal and fair treatment from the court should they decide to file for bankruptcy.

If you or someone you know has been dealing with these sorts of circumstances recently, you should contact someone who has experience dealing with these issues in order to know what options may be available and therefore can begin to re-take control over the economic conditions that have significantly affected your living situation.

Recent data proves what practitioners in the Sacramento metropolitan area have already noted with regard to the loan Modifications being sought by individuals or corporations filing for Chapter 7 bankruptcy. On February 3, 2011 the Federal Reserve bank of Chicago released a study that shows that bank -held mortgage loans are one fourth to one third percent more likely to be modified than a similar securitized mortgage. The study also shows that individuals who receive the loan modification are almost 10 percent less likely to default on the new loan generated by the bank. Similarly, the Center for Public Integrity notes that homeowners are more likely to get their loan renegotiated if a bank owns their mortgage by a margin of 26% - 36%.

The practice of securitization consists of investment banks or brokers who bundle individual loans into a pool whereby investors are then able to buy a stake in the pool of loans with the lenders continuing to collect the monthly payments. This "securitization" is completely legal, but is widely blamed for contributing to the housing crash since it allowed institutional lenders to make high risk loans and then pass the risk of default onto the investors who purchased the bundled loan pools.

Borrowers have no say as to whether the loan on their residence has become securitized in this fashion. Unfortunately, these borrowers must deal with the consequences of their loan having been securitized if they seek a modification later. The increased chances of receiving a loan modification existing in a bank held loan appear to remain firm regardless of the borrower's credit rating. The reasons for this may be due to coordination problems among investors, legal constraints, as well as a lack of servicers' financial incentives (such that the servicers control the "loans" but do not have an ownership stake since it has been passed along to investors).

I am always interested to see data that sheds light on the current housing and financial situation being experienced by most of us in the nation. While securitization was initially blamed as a contributing factor to the housing crisis attention to the matter has since been shifted to other areas. A lender's willingness to engage in loan modification discussions remains the biggest issue facing a home owner when trying to hold onto his or her residence. However, hopefully these types of studies will provide a framework to future policy makers who can attempt to resolve or avoid similar scenarios in the future.

As a Sacramento Bankruptcy Attorney I have heard from numerous individuals who have tried for months to get a modification on his or her home loan. Regardless, of whether or not a home loan has been securitized the homeowner has a right to be considered for a HAMP modification. If a person qualifies under HAMP their loan is required to be modified and made permanent. Since these questions are often complex and time consuming my offices are available to anyone who has considered exploring the option further.

Economists and legal experts believe that 2011 could see a slowdown in personal bankruptcy filings. As indicators point to an improving economy and consumers borrow less money, "there is less reason for people to take the step of filing for bankruptcy" according to University of Illinois Professor, Robert Lawless.

American consumers filing for Chapter 7 or Chapter 13 topped 1.5 Million in 2010. This number represents an increase of 9% from 2009. The Southwestern and Southeastern States accounted for a majority of the increased filings last year. It appears that conditions in the Southeast have improved to some degree with decreased filings in states like Tennessee, South Carolina, and Alabama. However, communities in the Southwest remain mired in the economic turmoil experienced by numerous households across the country. Both California and Arizona saw an approximate 25% increase in bankruptcies from 2009. The economic crisis has forced individuals to make difficult choices or uncomfortable compromises with regard to managing their monthly budget. Numerous households have been forced to make these decisions with regard to their houses or mortgages.

Here in the Sacramento metropolitan area I have met many people who continue to hold onto mortgages they cannot afford because they are unable to get a loan modification or, until real estate values rebound, refinance their property. The fact remains, however, that personal bankruptcy is available to individuals who have extreme amounts of debt and are unable to pay their financial obligations. Eliminating staggering debt, or creating a plan to repay it, can help individuals use their financial resources more efficiently to meet other financial obligations.

With personal bankruptcy filings reaching such high numbers most individuals will have come into contact with someone they know who has been impacted by the economic downturn and has sought relief through the Bankruptcy process. While some people may experience personal shame or guilt by resorting to this process, they need to understand that the decision to file for bankruptcy is merely an economic decision and not a moral one.

As a Sacramento Bankruptcy Attorney I was disappointed, but not surprised, to see the overall number of filings in 2010 reach a staggering level. Fortunately, as noted in the Wall Street Journal, economists and legal experts predict 2011 will be a better year for individuals. My office represents individuals of all income levels and backgrounds who have considered Bankruptcy as a possible solution to deal with overwhelming debts. The majority of my clients have used Chapter 7 or Chapter 13 as a last resort to manage the unfortunate circumstances they face financially.

If you are a resident of the Sacramento Metropolitan area you may be interested to know that Chapter 7 and Chapter 13 bankruptcy filings have slowed over the last month. Although these numbers may point to a possible sign of economic recovery, the numbers for 2010 as a whole remain at a five year high.

The number of individual households filing for bankruptcy dropped by 13% last month according to the Wall Street Journal. The United States saw 114,587 personal bankruptcy filings in November as whole. While these numbers are down significantly from October, the number of filings still remains 2.2% higher than this time last year. Analysts predict that approximately 1.6 million people will have filed for bankruptcy in 2010. This is the highest number of filings since Congress passed the bankruptcy reform law in 2005. Congress changed the bankruptcy code in 2005 in order to make it more difficult for individuals to qualify for Chapter 7 and eliminate their debts.

Some economists opine that the credit crisis which struck the nation along with the economic downturn pushed bankruptcy filings higher since individuals could no longer use new sources of credit to pay down existing debts and were forced into declaring bankruptcy. Nonetheless, job losses appear remain the driving force behind the flood of bankruptcy filings over the past few years. According to surveys taken by individuals enrolled in mandatory credit counseling classes, required as a prerequisite to filing for bankruptcy, 65% noted a reduction in income was the cause of their financial situation.

Since the economic downturn began in 2008 the Nation has seen a decrease in consumer spending. "When consumers pull back, two things happen, typically," said the executive director of the Bankruptcy Institute. "The economy stalls, but longer term we do see a leveling off of and then perhaps a dip in consumer bankruptcy filings." The reduction in filings is most likely attributed to individuals relying less on credit and ensuring they live within their economic means.

As a Sacramento Bankruptcy Attorney I am delighted to see that there may be early indications of an economic recovery in sight. This means that local families are able to pay their bills and focus their energy on more important matters rather than worrying about ways in which to manage or juggle their burdensome debts. Nonetheless, the decision to file for bankruptcy remains an economic one and should be carefully considered if you or someone you know is having difficulty meeting their financial obligations. Bankruptcy filings are often times a strategic process that should be planned with an individual who is knowledgeable on the law and the long term implications of the process.

Today, the California State Assembly blocked legislation proposed by the State Senate that would protect homeowners against foreclosure while pursuing a loan modification. The legislation was heavily supported by consumer interest groups and opposed by the California banking industry and business interests.

The Assembly rejected SB1275 towards the end of their daily session. If passed by the Assembly and signed by Governor Schwarzenegger, the Bill would have required institutional lenders to consider a loan modification on all distressed homeowners before making the decision to foreclose on the property. SB1275 differs from federal legislation because it creates a cause of action against the lender if they fail to consider a loan modification before the decision to foreclose. At this point federal legislation requires a bank who participates in Obama's Mortgage Protection Plan to refrain from foreclosing against a homeowner who is attempting to negotiate a loan modification. Unfortunately, these rules are voluntary and have no ramifications if the bank decides to foreclose.

Statistical data show that 10% of California homeowners are 60 or more days behind on their mortgage payments. This number is almost 4% higher than the data compiled for the entire country. More than a third of California's mortgage holders owe more on their homes than the market value of the house itself.

The spokesman for the California Mortgage Bankers Association, which opposed the law along with several other powerful business interest groups, was pleased that the bill did not pass. The vote boiled down to traditional party lines, with nine Democrats voting no and 12 Democrats who abstained. Sen. Mark Leno, D-San Francisco, plans to propose similar legislation in next year's legislative session.

The battle between consumer advocates and business interests remains fierce in this troubled economy. Each side has legitimate concerns. Those who support this type of legislation note the unfairness of the scenario where the lender decides to foreclose against the homeowner while he or she is in the process of renegotiating the loan. On the other hand, the banking industry argues against this type of legislation because it overregulates the industry and would allow lawsuits to be brought against lenders for technical violations that would delay the foreclosure process even further against homeowners who are ineligible for a loan modification. These opponents also note the law could potentially conflict with federal regulations that would make the foreclosure process even more complicated.

If you are a Sacramento area resident facing Chapter 7 or Chapter 13 bankruptcy, and have considered a home loan modification as an alternative to losing your home, you must keep these types of issues in mind. Be aware that help and information is available to you from a variety of resources. As a Sacramento bankruptcy attorney I recommend you always consult with someone familiar with these particular topics if you are considering any of these options before making any decision.

As a Sacramento Bankruptcy Attorney I take notice of business practices by debt collection companies that may have an impact on my clients. Today, The Washington Post reported a story that highlights the problem of some debt collectors who report inaccurate information to a person's credit report. This practice has been called "debt tagging" and has been reported by more and more consumers as the economic downturn continues to affect millions of Americans and numerous Sacramento metropolitan area residents alike. Often times "debt tagging" is a result of sloppy research by the debt collector or mistaken identity from people with similar or the same names. Consumers need to take specific measures to protect themselves against inaccuracies on their credit reports these days.

In 2009, the FTC - responsible for enforcing the Fair Debt Collection Practices Act (FDCPA) - received almost 120,000 complaints from consumers about unfair or unethical debt collection practices by in-house or third-party debt collectors. That number exceeded the complaints received in 2008 by approximately 15,000 complaints.

Debt collection companies defend these practices by pointing out the difficulty in tracking a debt back to the original debtor. Often times a creditor will sell their debt onto other companies. Debt collection companies buy the debt for pennies on the dollar with the prospect that they can collect a hefty portion of the debt owed thus making a profit. Unfortunately, the debt collection agencies who buy the debts do not always receive the correct information and this creates the problem especially since the debt may have changed hands many times.

When a consumer finds an inaccuracy in his or her credit file they can dispute them. Credit reporting agencies like Equifax, Experian, and Trans Union have developed specific practices and procedures for dealing with individuals who report inaccuracies on their credit report. When a consumer disputes items found on the credit report it takes the agency approximately 30 days, sometimes less, to correct the mistake. "The original creditor has the burden of proving the debt exists" according to Susan Henson, a spokeswoman for Experian.

In today's economic environment an individual's credit score has become an increasingly valuable commodity. Therefore, it remains extremely important for a consumer to document all contacts with the debt collector, especially the instances where the consumer informs the debt collector that they have made a mistake. If the debt collector still refuses to correct the mistake the consumer needs to contact an attorney.

The Law Offices of Matthew D. Roy assists people who find themselves in this predicament. Our offices serve a clientele who have been victims of harassment, deception, and high pressure tactics performed by debt collectors that are illegal. If you believe you have been a victim of "debt tagging" and the debt collector refuses to correct the inaccuracy you should contact a local attorney who can file a lawsuit against the offending party to stop this inappropriate behavior.

Sacramento Metropolitan Area residents who have considered filing for Chapter 7 or Chapter 13 bankruptcy due to too much debt may be curious to know that U.S. courts have seen an exponential increase in law suits filed by debt collection agencies against individual debtors over recent months. Many people may not be surprised that these types of lawsuits have increased during the current economic situation. However, what any debtor should be aware of is that many of these lawsuits are being filed automatically.

The New York Times published an article today that shows Debt Collection agencies have responded to the growing number of credit defaults by using computerized software that files the legal paperwork electronically and almost without any human involvement. This software generates letters, court documents, and legal pleadings on behalf of the debt collection agency. Debt collectors hope to receive up to 50 cents on the dollar owed by getting a court judgment against the debtor and then garnishing the debtor's wages or property. The leading debt collection firm in New York has been filing approximately 80,000 lawsuits a year in this manner.

Critics of this practice already note the lack of human oversight allows these cases to be filed improperly and/or without the correct debt amounts. Others suggest that these practices are subject to abuse. Often times the collection agencies entire case is based solely on a debtor's address, name, and alleged balance owed. Since debtors often fail to show up in court to defend against the action, the collection agency receives a default judgment and there is little a debtor can do to challenge the amounts awarded by the court after judgment has been entered. "It's the factory approach to practicing law," said Richard Rubin, a New Mexico lawyer who represents consumers against debt collectors.

Unfortunately, the numbers of consumers whose rights have been stepped on by debt collectors is growing. As a Sacramento Bankruptcy Attorney I strongly recommend that you always respond to any legal action personally or preferably by hiring a lawyer to represent you. Although the prospect of showing up in court may be intimidating, it is a small hurdle to overcome rather than having a judgment entered against you by default. If you believe you have been unfairly targeted by collection agencies that have engaged in abusive or illegal tactics you should call a lawyer immediately.

The Sacramento bankruptcy attorneys at the Law Offices of Matthew D. Roy routinely keep track of bankruptcy filing statistics across the United States. The Real Time Economics Blog reported on July 2 that bankruptcy filings in 2010 have surpassed the record number bankruptcy cases filed in 2005. 2005 saw a record number of bankruptcy filings due to the bankruptcy reform laws passed by Congress. Nonetheless, economists and bankruptcy experts alike have steadily projected that filing rates will meet or even surpass the record numbers seen in 2005, when many debtors scrambled to beat the deadline before more stringent guidelines came into effect, and it appears that they are correct.

As we are well aware, however, the United States in currently embattled in the worst economic downturn since the Great Depression. Statistics show there were 770,117 bankruptcy filings in the country for the first 6 months of this year. That is a fourteen percent increase over the numbers provided in the first part of 2009. The American Bankruptcy Institute predicts a total of 1.6 Million filings for the entire year.

While June seems to have experienced a lull in bankruptcy filings from May, which was the third consecutive month that saw a decrease in filings, these filings still remained 8 percent higher than June of last year. Columbia Professor of Law Ronald Mann conducted a study that shows that the highest bankruptcy filing rates in the country were in the southwest and southeast. Nevada alone saw 15,000 filings per million households, more than twice the national average. The National average of bankruptcy filings is 6,800 filings per million households. Washington, D.C., South Carolina, and Alaska experienced the lowest filing rates across the nation. States in the southeast typically see the highest amount of filings across the Nation, however, Tennessee and Alabama appear to have experienced reductions in these rates.

Surprisingly, California was not mentioned in the study, however, as a Sacramento Bankruptcy Attorney, I suspect the exact statistics for Chapter 7 and Chapter 13 remain fairly high since California has some of the largest unemployment numbers in the country, and many regions -- including the Sacramento metropolitan and surrounding areas - have also been severely impacted by the real estate foreclosure crisis. High unemployment rates and increased foreclosures tend to fuel bankruptcy filings. The San Francisco Chronicle reported a study published by the American Bankruptcy Institute that the states with the highest bankruptcy filing rates also have a high correlation with those states hit hardest by the housing crisis.

As a Sacramento Bankruptcy Attorney I help people from many different circumstances and income levels prepare and file Chapter 7 or Chapter 13. Many of my clients seek to file due to unemployment, foreclosure, or excessive credit card debt and/or medical bills. Filing for bankruptcy can be a wise decision under the right set of circumstances. This is why if you or someone you know has considered filing for bankruptcy you should contact someone familiar with these topics immediately.

As a Sacramento Bankruptcy Attorney I often take interest in matters that affect my clients in the Sacramento metropolitan area. According to an article published today in the New York Times, homeowners across the nation are beginning to take advantage of the increasing delay between eviction and the implementation of the foreclosure process by a mortgagor. In the article "Owners Stop Paying Mortgages, and Stop Fretting" by David Streitfeld, the New York Times notes that financial institutions have begun the foreclosure process against 1.7 million households across the country. Even though this number sounds staggering, many homeowners have stayed in their homes far beyond the time typically allotted to the foreclosure process.

The average eviction time has increased from 251 to 438 days from the borrower's original delinquency on the mortgage payments since 2008. While the foreclosure process has always remained a slow one, and in California takes approximately 3 months, the lag between a bank starting the entire process and the ultimate eviction of the homeowner has become an even longer. This increased time between foreclosure and eviction can be attributed to several barriers facing financial institutions in this current economic environment.

First, many borrowers have instituted legal challenges against the mortgagor in an attempt to void the lien entirely or avoid personal liability on the loan for violations that the lender may have committed when providing the loan. For example, The Truth in Lending Act (TILA) requires that lenders include specific language and disclosures in the documents they provide to borrowers upon origination of a loan. If a lender fails to provide these disclosures then the borrower cannot be held personally liable for any default on the property. This means a lender cannot sue a borrower for the difference between the loan amount and the foreclosure sale price. Second, some state and local governments have imposed moratoriums on foreclosure. Third, the federal government has begun to apply pressure to mortgage companies to offer loan modifications to distressed homeowners. Lastly, many of the lenders are severely backlogged with multiple foreclosures and delinquent borrowers that they just cannot get to the process until well after they would be permitted to proceed with eviction according to law.

While one can never determine the rate at which a lender will actually begin the foreclosure process and ultimately evict the homeowner, it appears that more and more homeowners have begun to stay in their homes for longer periods of time essentially "rent-free" until they are forced to move out by the lender. Since the California foreclosure process is not overseen by our state's court system, the increased delay between foreclosure and eviction may not be substantially affected by the aforementioned reasons. If you have been having trouble making your mortgage payments and have considered going into default on your mortgage you should seek advice from a Sacramento Bankruptcy Attorney.

According to the Wall Street Journal, California and Arizona are responsible for between 36%-46% of the year to date increases in consumer bankruptcy filings across the nation. While bankruptcy filings in April have been marginally lower than the filings from March, they still remain 15% above the statistics from April 2009. California, specifically, has seen a 40% jump in personal bankruptcy filings since this time last year.

144,490 people filed for personal bankruptcy in March throughout the entire United States. The Eastern District of California, the jurisdiction that oversees the bankruptcy process in the Sacramento area has seen approximately 32,000 Chapter 7 filings since January 1st alone. Economists predict that individual bankruptcy filings will top 1.5 million in 2010. This number exceeds the 1.4 million consumer bankruptcies filed in 2009, which has been the highest number of filings since Congress changed the bankruptcy laws in 2005. Congress reformed the system five years ago in order to reduce the number of bankruptcy filings by making it more difficult for individuals to qualify under Chapter 7.

If you or someone you know have been affected by the recent economic collapse and have considered filing for bankruptcy, you should take action now and discuss your financial situation with a Sacramento Bankruptcy Attorney.