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Dave Ramsey vs. Bankruptcy »

My colleague, Matt Berkus, a bankruptcy attorney in Denver, has written an excellent article discussing Dave Ramsey’s anti-bankruptcy positions (despite his having filed for, and benefited from, a Chapter 7 case). When my clients ask if they will ever be able to get credit again and buy a home, I often show people a picture of Mr. Ramsey’s current $5,000,000 mansion…

David Ramsey's $5,000,000 home


…noting that this is the current home of someone who previously filed for Chapter 7.


Are You Too Far Behind On Your Mortgage for a Chapter 13? Chapter 11 May Help. »

Mortgage lenders have been delaying foreclosures for years for many people in Maryland and Washington. DC. As a result, the arrearages–the amount you’re behind on your mortgage–can be a lot of money.

When you go to most consumer bankruptcy attorneys to file for a Chapter 13 repayment plan, you’re told that the plan payments will be too high for you to afford, since the full amount of the arrearage must be paid over a maximum of five years. If the arrears are $60,000, for example, this would require at least a $1,000 per month payment on top of resuming the regular monthly payment. Most people just can’t afford it.

This may result in many people thinking that they have no alternative other than losing their home. But there may be another alternative: an individual Chapter 11.

Most people don’t even know that an individual can file for Chapter 11; they think that it’s just for businesses. This is not the case. In fact, my law partner, Dan Press, and I have written a book about individual Chapter 11 cases, Chapter 11 for Individual Debtors, and we teach other attorneys how to handle individual Chapter 11 cases. In a Chapter 11 case, there is no five-year limit on the repayment term for mortgage arrearages. In many of my Chapter 11 cases, I have obtained repayment terms of up to 30 years, without interest. In the example above, instead of a $1,000 per month payment, my client is looking at a monthly payment of $166.67. This is a lot more doable.

Chapter 11 isn’t for everyone. It is much more complex and expensive than a Chapter 13, and there aren’t a lot of consumer bankruptcy attorneys who know how to steer you through an individual Chapter 11.

We do.

The Human Cost of Foreclosure »

An article in the July 26, 2008 Washington Post, “What Gets Left Behind,” talks about one side of the human cost when a house goes to foreclosure. As the owner of a company that cleans out foreclosed homes, Troy Hughes notes:

I remember that kid’s balloon was still inflated, like someone had just had a birthday party. That what kills, me, the things the children had to leave behind. Sometimes, their crayon pictures are on the wall.  A lot of toys are in the closet…It’s traumatic.

It was too traumatic for one woman in Massachusetts. She faxed a note to her mortgage company saying, “By the time you foreclose on my house, I’ll be dead.” As this ABC News story sadly relates, 53-year-old Carlene Balderrama of Taunton, Massachusetts, fatally shot herself with her husband’s rifle shortly before the foreclosure.

Nadine Kaslow, chief psychologist at Grady Memorial Hospital in Atlanta and a professor at Emory University’s School of Medicine, said such financial stresses come attached with significant psychological consequences.

There is no question that the economic downturn in our country is causing havoc with people’s mental health,” she noted. “It is very depressing to lose one’s home. It represents loss of stability, a feeling of failure. … It is scary and overwhelming.

But it’s not the end:

Once you find out that foreclosure is not a sign of personal failure, that it is not anything that is happening to nobody else … there’s hope.

And given the numbers, it’s happening to a lot of people. According to RealtyTrac, the number of U.S. homes receiving a foreclosure notice between April and June of this year shot up 121 percent compared with the same period last year. That means that 739,000 households received a foreclosure notice during this three-month period — which translates into one out of every 171 households in the country.

There is a way out–Chapter 13 gives you the chance to catch up on missed mortgage payments over 5 years. And even if you can’t, a Chapter 7 will delay the foreclosure to give you some time, let you wipe out any arrearages and deficiency and start over with a clean slate.

Bankruptcy Law, Obama and McCain »

Over on the Bankruptcy Law Network, I have been writing a series of blogs on Senators Obama and McCain‘s positions on bankruptcy. The results may surprise you.

The articles may be found by clicking on the links:

Obama vs. McCain on Bankruptcy
Obama and McCain’s Votes on Bankruptcy Amendments
Barack Obama on BAPCPA
Barack Obama on Bankruptcy/Credit Reform

Maryland Foreclosure “Moratorium” to Expire Soon »

When Governor O’Malley signed into law changes to Maryland’s foreclosure laws effective on April 4, 2008, new foreclosure filings stopped. Although the new law’s changes were, in most instances, more cosmetic than substance (see my article on the Mortgage Law Network, “Changes to Maryland Foreclosure Law: Steak or Sizzle?“) they contained provisions that resulted in an effective moratorium, or halt, in foreclosures.

This is primarily because of required new forms that have to be adopted by the State, and without which, the foreclosure cannot comply with the technical requirements of the new law. The forms should be issued in early July, and the floodgates will open. Three months worth of foreclosures will be filed at once, with auctions likely scheduled in early September.

Thousands of new cases are likely to be filed, so if you’ve fallen behind on your mortgage, now is the time to examine your options, before the rush hits.

Whatever Happened to Usury Laws? »

Usury is defined in Webster’s as, “the lending or practice of lending money at an exorbitant interest.” All states, including Maryland, have laws prohibiting usury—in Maryland, the default rate of interest is 6%, and most loans cannot exceed 24%. So how is it that many credit cards have annual rates of 30% or more? How is it that payday loans and tax refund loans have interest rates over 300%?

The answer lies in the federal National Bank Act and a series of Supreme Court decisions.

The National Bank Act, first adopted in 1863, provides for the establishment and regulation of national banks. For more than 100 years, that law was interpreted to require that even national banks can only charge interest at the rate allowed by the state in which its customer is located. In 1978, the Supreme Court changed everything. In Marquette National Bank v. First of Omaha Corp., it ruled that a national bank can charge its customers, no matter where they are located, interest at the rate allowed by the state in which it is located. Even though the customers in Marquette were located in Minnesota, the fact that the bank was centered in Nebraska allowed it to charge its Minnesota customers the higher Nebraska interest rate.

Shortly after Marquette was decided, North Dakota pretty much repealed its usury statutes. National Banks descended like a horde of locusts on that state, establishing their main offices there. CitiBank was the first, and others followed its lead. North Dakota’s interest rate cap—or the lack of an interest rate cap—became the de facto national interest rate on credit cards. Ever wonder why so many of your credit card payments are sent to North Dakota? This is why.

The practical effect of Marquette was to repeal every state’s usury laws insofar as they deal with National Banks. And any lender that wants to charge exorbitant interest and still follow the letter need only form a National Bank, and the sky’s the limit.

US Trustee Audits to Resume May 12, 2008 »

According to an article on the US Trustee website, random debtor audits, which were halted in January 2008 due to budgetary problems, will resume on May 12, 2008. The only change appears to be that instead of randomly auditing one out of each 250 cases filed, the UST will audit one out of each 1,000 cases filed.

Brett Weiss Quoted in the “Salisbury Daily Times” Discussing Foreclosures »

Brett Weiss was quoted in an article in the May 1, 2008 Salisbury Daily Times. The article, “Bankruptcy Reform May Have Exacerbated Foreclosure Crisis,” discussed the impact of the 2005 adoption of major pro-creditor changes to the Bankruptcy Code, called BAPCPA.

Mr. Weiss’ summary of BAPCPA may be found by clicking on this link.

What We Do For You In a Chapter 7 or Chapter 13 Bankruptcy… »

We’re often asked by new clients what we actually do for them. I thought I’d put a short list together:

  • We let you answer your phone without your heart seizing with fear that it’s someone calling to collect a bill.
  • We give you room in your mailbox for birthday cards instead of bills.
  • We let your answering machine be empty when you come home from work.
  • We let you know your kids will be going to the same school next fall, because you’ve saved your home from foreclosure.
  • We let you know you’ll keep your job because you’ve saved your car from being repossessed.
  • We let you sleep at night.

Oh, and we also deal with creditors and the Court, prepare and file pleadings, argue on your behalf, and do all of the other “lawyer work.”

But what our clients remember is the important stuff above. *That* is what we really do.

Brett Weiss Quoted in “Washington Business Journal” on Chapter 11 Business Bankruptcy »

Brett Weiss was quoted in the January 25, 2008 issue of the Washington Business Journal in connection with the recent bankruptcy filing of one of his Chapter 11 developer clients. Weiss was quoted as saying, “We all know that the current housing market is lousy. And this is making things hard for a lot of good folks.”

The full article may be found on the Washington Business Journal website.