Grossbart on Bankruptcy Law

ATTORNEY GENERAL FORECLOSURE SETTLEMENT

Federal and State officials announced a settlement of more than $25 billion with five of the nation’s banks today concerning the banks’ defective and fraudulent foreclosure practices.  The settlement attempts, albeit in a limited manner, to help negatively affected borrowers by reducing the amount they owe on their mortgages, and/or lowering interest rates, and/or paying money to homeowners whose homes have already been lost to foreclosure.  Will this settlement help the troubled housing market in Maryland?  Maybe.  Given the failure of past government programs to help solve homeowners’ problems, most notably the Home Affordable Modification Program (HAMP) coupled with the banks’ past reliance on workers with minimal qualifications or work experience we will just have to wait and see just how effective or ineffective the results will be.  If you have a mortgage with one of the five banks currently signed on to the settlement you may call one of the following toll-free numbers:  Ally/GMAC 800-766-4622; Bank of America 877-488-7814; Citi 866-272-4749; JPMorgan Chase 866-372-6901; Wells Fargo: 800-2883212.Visit a new government website at http://www.nationalmortgagesettlement.com/. Maryland Attorney General Gansler is setting up a call center staffed by 10 people who can be reached at 888-743-0023.  Let’s hope that all 40,000 homeowners that Mr. Gansler estimates are eligible for the program do not call at the same time.  More about this settlement later in another blog as the program’s success and/or failure evolves.

 

Is President Obama's Making Home Affordable mortgage plan program working?

John Ciresi, vice president and portfolio manager for Bank of America in Towson, Md anticipates a rise in the foreclosure rate in 2010 because 60 percent of loan modifications have failed and went into foreclosure. He indicates this is due to a combination of property devaluation and people losing their jobs. He further asserts that Bank of America is getting 40,000 new offers a month on short sales. I believe the famous line from the movie Jaws is appropriate for our rising housing problem, "I think we are going to need a bigger boat". Hold onto your hats!

Death during bankruptcy

The possibility of death during a bankruptcy always exists. What happens if a debtor dies during their chapter 7 case? Basically the deceased debtor can receive a discharge of debt, provided the debtor would qualify for a discharge during the administration of their case. The significance and inpact will be felt by the deceased debtors beneficiaries. They will not have to contend with the dischargable creditors for estate purposes.

In a chapter 13 the plan or even an amended plan can survive the debtors death and therein allow the debtor to obtain a discharge. To accomplaish this two elements must be satisfied: there must exist the  possibility of further administration and must be in the best interests of the parties. 

If I file for bankruptcy will I lose my house?

 

 

This question requires more questions. First whose name(s)is/are on the deed? If it's just one person then the question becomes how much equity is there?  In Maryland you are allowed $11,000 in exemptions that can be applied to a home. If the property is owned husband and wife (called tenancy by the entireties) the question is "are there any joint unsecured creditors that both spouses owe"? If the answer is no, the amount of equity does not matter and the property is safe. If the answer is yes, then you must ask how much joint unsecured debt there is while simultaneously considering how much equity there is to see if the property is safe. 

Bankruptcy and the "underwater home"

Many individuals find themselves with a residence that has gone down in value. These same people might have obtained what is referred to as a  80/20 mortgage. The first mortgage is usually a low initial interest rate adjustable mortgage and the second mortgage a high interest fixed  rate. What does a chapter 13 allow the homeowner to do? If the debtor files a chapter 13 bankruptcy and their residence is worth less than the first mortgage, they can strip off the second mortgage? How does that work? Here are typical facts:

Fair market value (FMV)of residence $250,000

1st mortgage balance                              260,000

2nd mortgage (home equity) balance    50,000

The debtor must file the appropriate motion that has a valid appraisal attached to strip off the mortgage. The debtor continues to pay the first mortgage and the second mortgage becomes an unsecured debt. The  second mortgage is typically paid a percentage of its balance by the chapter 13 Trustee.