Reform of Complicated Mortgage Forms to Help Potential Homeowners

Posted on February 28, 2013 by Staff Writer

On June 20, 2012 the Consumer Financial Protection Bureau (CFPB) testified before the House Financial Services Subcommittee on Insurance, Housing, and Community Opportunity to highlight CFPB solutions to the problems with the current federal law regarding consumer mortgages. In a presentation, CFPB Deputy Director Raj Date explained that the two forms consumers must agree to under federal law have overlapping information and inconsistent language. “Not surprisingly,” he said, “consumers often find the forms to be confusing. It is also not surprising that lenders and settlement agents find them burdensome to provide and explain.”

The first of these developed under the Truth in Lending Act (TILA), and the other by the Real Estate Settlement Procedures Act. (RESPA) According to Date, these forms did not properly detail how mortgages worked with consumers. “For example,” he said, “many consumers select a loan based on their ability to afford the mortgage payments. But some consumers experienced “payment shock” because they did not understand that they payments could include unaffordable amounts a few years or even months after closing.” The Dodd-Frank Act transferred authority of the TILA and RESPA to the CFPB in 2011.

This ultimately means that the convoluted TILA and RESPA will be replaced by the CFPB with easier-to-understand forms “that will make the mortgage process easier for consumers and industry.”

Research to come up with the new forms include but is not limited to:

Meeting with consumer advocates, other banking agencies, and credit settlement agents to better understand the issues that consumers and the industry face
Launched the “Know Before You Owe” project—an informative drive on the CFPB website to share prototypes of the disclosure funds and a place for consumer feedback.
A Small Business Review Panel to “gather information from representatives of small lenders, mortgage brokers, settlement agents, and not-for-profit organizations about the costs of the proposals under consideration and potentially less burdensome alternatives.”

While these new procedures won’t help the one in 17 Arizona homeowners who foreclosed in 2010—and those who faced subsequent bankruptcy because of it—it is good new for Arizona residents as the state recovers from its particularly bad housing crash. If you or someone you know does, however need bankruptcy assistance, contact a dedicated Arizona bankruptcy attorney today.

Image courtesy of FreeDigitalPhotos.net

Can Anyone File Bankruptcy?

Posted on February 27, 2013 by Staff Writer

In a manner of speaking, yes, anyone can file for bankruptcy. What chapter of bankruptcy you qualify for depends on your specific situation. In October 2005, a massive change took place in the U.S. bankruptcy code. Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) as a response to the belief that too many people were taking advantage of Chapter 7 bankruptcy. The result of this new law is to force people who can afford to repay some of their debt to file for bankruptcy under Chapter 13 instead of Chapter 7.

Chapter 7:

In a sense, anyone—even businesses—can file for Chapter 7 bankruptcy protection. There are no minimum or maximum debt limits to be concerned with. However, before you can file a Chapter 7 bankruptcy you must be able to pass the infamous Means Test. The Means Test is used to determine whether an individual debtor’s chapter 7 filing is presumed to be an abuse of the bankruptcy code. If there is a presumed abuse, the case must either be converted to a Chapter 13 or it will be dismissed. Most people who cannot file a Chapter 7 bankruptcy because their income is too high end up filing for Chapter 13.

Chapter 13:

There are a few key limitations about who can file for Chapter 13 bankruptcy. For one, businesses are not able to file a Chapter 13 bankruptcy. Additionally, neither can people with too much debt. Currently the debt limits are $1,081,400 in secured debt plus $360,475 in unsecured debt (taxes whether dischargeable or non-dischargeable are included in the unsecured debt limit calculation). If you make too much money to pass the means test and have too much debt to file a Chapter 13 there are still some options for you.

Chapter 11:

In rare cases a person must file a Chapter 11 because they cannot file either a Chapter 7 or Chapter 13 bankruptcy. If a person does not pass the means test because they make too much money and they have too much debt to file a Chapter 13 then they must file a Chapter 11. Because a corporation cannot file a Chapter 13 bankruptcy if they are looking to reorganize their debt they must file a Chapter 11.

Contact our law firm to see what chapter of bankruptcy will best help you.

Secured vs. Unsecured Debt

Posted on February 26, 2013 by Staff Writer

Unsecured Debt Unsecured debt is debt that is not guaranteed or “backed” by any collateral. Essentially this means that if you default on an unsecured debt there is nothing that the creditor can take from you to recoup their losses. Interest rates tend to be higher on unsecured debt because there is no collateral for the creditor to seize. Credit cards fall into the category of unsecured debt. Because credit cards are unsecured they cannot seize any of your possessions if you do not pay off the balance. Creditors attempting to collect on a delinquent unsecured debt typically turn the account over to a collection agency. These collection agencies will often use a law firm to sue you in an attempt to collect on the unsecured debt.

Secured Debt Secured debt is debt that is backed by some type of collateral. Mortgages and vehicle loans are two examples of secured debts. With a secured loan if you allow the loan to become delinquent, the lender can foreclose on your home or repossess your vehicle. Because there are assets the lender can use to potentially recoup their loss in the event of a loan default, interest rates are generally lower on secured loans.

What happens to different types of debts in Bankruptcy? Generally speaking all unsecured debts are discharged in bankruptcy. This means you will not be responsible for debts such as; credit cards, medical bills, or an cell phone bill. However, with secured debt you must either continuing paying on the debt or risk losing the collateral. For example, if you have a car that you want to keep and you file for bankruptcy, then you must keep paying on the car or else you will it. However, if you have a vehicle that you don’t want to keep then you can stop making the payments and surrender it to the bank. Once you have filed bankruptcy then the banks only recourse will be to take back their collateral, they may not also pursue you for any losses.

U.S. To Export Bankruptcy Code to Mexico?

Posted on February 25, 2013 by Staff Writer

Arizona, because of proximity, is sometimes more affected by happenings in Mexico than other northern U.S. states. Yet when it comes to bankruptcy of Mexican companies, the effects are felt nationwide. In late June, Mexican glassmaker Vitro SAB, according to Reuters, is “heading to a U.S. appeals court to save its restructuring at home from an assault by U.S. creditors.” This is one of the first times that the U.S. bankruptcy code could be transported beyond the nation’s borders.

Chapter 15 is a clause in the U.S. bankruptcy code that was added by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. According to U.S. Federal Bankruptcy Court, “it is the U.S. domestic adoption of the Model Law on Cross-Border Insolvency” set out by the United Nations. Its purpose it to provide “effective mechanisms for dealing with insolvency cases involving debtors, assets, claimants, and other parties of interest involving more than one country.” It’s meant to promote cooperation and establish legal certainty for trade, among other things.

The issue with Vitro stemmed from a Dallas bankruptcy court ruling that “refused to enforce the company’s Mexican restructuring against U.S. hedge funds.” Reuters analysis purports that the “restructuring plan violated a bedrock rule of U.S. bankruptcy by rewarding shareholders before repaying creditors in full.”

In today’s global market, when a company anywhere in the world files for bankruptcy protection, ripples are felt across the market. The U.S. is, of course, affected when major international importers and exporters go insolvent. And subsequently, U.S. business markets are affected adversely as well.

If you or someone you know has been affected by an international company’s insolvency, or have questions about how the system works, contact a dedicated Arizona bankruptcy lawyer today.

Image courtesy of FreeDigitalPhotos.net

How do I know if I qualify for a Chapter 7 Bankruptcy?

Posted on February 24, 2013 by Staff Writer

Determining whether or not a person can qualify for a Chapter 7 bankruptcy is one of the most complex areas of consumer bankruptcy. The means test is used to determine who can file for Chapter 7 bankruptcy and who must file a Chapter 13. The means test was introduced to the Bankruptcy Code in 2005 and is designed to limit those individuals eligible to file for Chapter 7 bankruptcy.

The Chapter 7 bankruptcy means test compares your current monthly income against the median income for households similar in size to those in your same state. The means test looks at the average household income over the six months prior to filing. If your income is below that of the average household income for your state then you will automatically qualify for a Chapter 7 bankruptcy.

Now if your household income exceeds the median income for households of a similar size in your state you still may be able to qualify for a Chapter 7. This is because certain expenses are deducted from your current monthly income in order to determine your net monthly income. Now not all expenses are qualifying expenses, however, the following kinds of costs can be deducted: child support, alimony, tax withholding costs, health savings account, garnishments, certain utilities and several other types of expenses.

However, if you still do not qualify for a Chapter 7 even after deducting the qualified expenses you can still file bankruptcy. For most people who do not qualify for Chapter 7 bankruptcy because of their high income file Chapter 13 bankruptcy. Chapter 13 bankruptcy is a reorganization of your debts. The bankruptcy last for 3 to 5 years during which time you make payments to your creditors. At the end of the bankruptcy whatever balances are left over will be discharged.

The means test is one of the most complex areas of consumer bankruptcy so please speak with one of our bankruptcy attorneys to look at your individual situation. Don’t subject yourself to a Chapter 13 bankruptcy without first speaking to our experienced attorneys.

House Judiciary leader wants to update Arizona bankruptcy laws

Posted on February 23, 2013 by Staff Writer

According to a recent article published by Verde Independent News, the head of the House Judiciary Committee would like to update Arizona’s dated bankruptcy laws.

Representative Eddie Farnsworth’s proposal does not include anything that would alter the process that allows individuals to seek protection from creditors, as those are set in federal law.

However, the same federal law that ensures protection does allow each state to decide what those declaring bankruptcy can keep. And according to Farnsworth, that list for the state of Arizona is long overdue for a revision. He believes it is far too specific.

Arizona’s current law allows debtors to keep one kitchen table and one dining room table with four chairs each. They can keep additional chairs if there are more than four in the house.

The list of items also includes three living room lamps, one radio alarm clock, one vacuum cleaner, and a choice of one television set, radio, or stereo….just to exemplify the specificity of the Arizona law. The total value of those items cannot exceed $4,000.

Farnsworth’s new bill would keep that $4,000 limit for household items. However, it does destroy the specifics of what can be included to give those in bankruptcy some individual choices; they can decide what’s important to them.

According to Farnsworth, “one person may have a hutch from their great grandmother that they want. Somebody else may have a clock that’s important, or two clocks that are family heirlooms. This just gives them flexibility within the already established cap on exempted property.”

Another part of the existing law gets specific when considering other kinds of items that are considered off-limits to creditors.

Individuals may keep all of their musical instruments- but only up to a market value of $200. Farnsworth’s revision would double that number. The same thing is true for engagement and wedding rings, with the new cap being raised to $2,000.

Farnsworth’s bill wants to modernize Arizona’s current law.

If you or somebody you know is considering declaring bankruptcy, it would be in your best interest to contact an experienced Arizona bankruptcy attorney to talk about your options.

When will my Creditors Stop Calling Me?

Posted on February 22, 2013 by Staff Writer

There are two different events which will stop creditor calls. First, when you hire our law firm you will be able to refer your creditors to us. Once you are represented by a law firm, creditors are no longer to contact you directly but are to communicate to you through your attorney.

We recommend our clients tell their creditors: “I am filing for bankruptcy. I have an attorney and he told me not to talk to you. If you have any questions please call his law office” and then just hang up the phone.

In most instances your creditors really will call our law firm and verify that you are a client. This will stop 99% of the creditor calls. However, pay-day and title loan companies are notorious for continuing the calls until the bankruptcy is actually filed.

Second, once your bankruptcy is filed it becomes illegal for creditors to continue contacting you in an attempt to collect on the debt. Because as soon as a bankruptcy is filed the Automatic Stay of Protection goes into effect. This Automatic Stay of Protection prevents creditors from making any collector efforts. Creditors will be prevented from contacting you in any way, they will not be able to mail, email, or call.

So if you would like to learn how to stop the harassing phone calls, make an appointment to meet with one of our attorneys.

Do I have to tell my fiancé that I am filing for bankruptcy?

Posted on February 21, 2013 by Staff Writer

You do not have a legal responsibility to tell your fiancé of an impending bankruptcy, however, you may feel a moral responsibility to do so. There isn’t a legal responsibility to tell a fiancé of an upcoming bankruptcy because you aren’t married.

In the eyes of the bankruptcy court you’re married or you’re not, there’s nothing in between. So if you’re single on the day you file for bankruptcy then you will go through the entire bankruptcy process as a single person. By filing the bankruptcy as a single person your fiancé does not need to sign any of the paperwork filed with the court nor does he or she need to appear in court at the 341 hearing.

However, if your fiancé co-signed with you on a vehicle or house then they’re going to find out about the bankruptcy whether you want them to or not.

In most cases filing bankruptcy prior to marriage is a good idea. Discharging all of your debts prior to starting your marriage will give you a clean break from your old debts and a fresh start. This way you won’t run the risk of subjecting your new spouse to garnishments, liens, or bank levies.

A large percentage of marriages end because of financial problems and so hiding financial problems from a soon-to-be spouse might add unneeded stress to a new marriage. Filing bankruptcy would remove any need to try and hide debts you may be currently carrying.

What is an Adversary Proceeding?

Posted on February 20, 2013 by Staff Writer

An Adversary proceeding is a lawsuit that takes place within a bankruptcy. The adversary proceeding begins by when a complaint is filed with the bankruptcy court. A “trial” then takes place within the context of the bankruptcy. Typically an adversary proceeding is filed by a creditor; however, your trustee may also file one on behalf of the bankruptcy estate.

When a creditor files an adversary proceeding, it is typically because the creditor believes that a specific debt owed to them should not be discharged in the bankruptcy. The creditor may argue that the debt falls within one of the exceptions to discharge, such as a debt created through fraud, willful or malicious injury, or a personal injury caused by drunk driving.

Additionally, a trustee may file an adversary proceeding if he or she believes that you intentionally tried to hide assets. The trustee would then liquidate any non-exempt assets to collect money back from a creditor who received funds or property from a debtor. A trustee may also file an adversary proceeding to undo a transfer of real property. The U.S. Trustee may file an adversarial proceeding to try and force a debtor to move from Chapter 7 to Chapter 13 if he or she believes that the filing of the bankruptcy petition was done in bad faith.

Adversary proceedings are very rare; they are filed in less than 1% of all bankruptcy filings. So unless you are trying to commit some type of fraud the chances of an adversary proceeding being filed in your case are very small.

Registration Loan vs. Title Loan

Posted on February 19, 2013 by Staff Writer

Prior to June 30, 2010, Arizonians could write a post-dated check to Payday lenders for short-term loans. These Payday lenders charged interest rates of more than 400 percent on an annual basis! However, post June 30, 2010 consumer loans with annual interest rates higher than 36 percent became illegal without exception. Arizona law now caps the annual interest rates of Payday loans at 36 percent. Because Payday loans in Arizona essentially became extinct these creditors developed “Registration loans” as a way of avoiding the new cap on interest rates.

What is a Registration Loan?

A Registration loan is almost identical to a Payday loan; the only different is that you need a vehicle registered in your name in order to qualify. These loans are exempt from the 36 percent A.P.R. and therefore they have rates as high as 204%. The vehicle does not need to be paid off in order to receive a Registration loan.

Default on a Registration Loan:

Registration loans do not put a lien on your car title and therefore the creditor cannot repossess your vehicle upon default. However, I have read some Registration loan contracts which state that they will put a steel “boot” on your car if you default on payments.

Now if you file bankruptcy on a Registration loan the creditor will never be able to contact you again in an attempt to collect on the debt. The Automatic Stay of Bankruptcy will protect you from their collections efforts. However, this is not the case with Title loans.

What is a Title Loan?

Auto-title loans are closer to traditional loans, using the vehicle as collateral, while Registration loans are more similar to a Payday loan. Title loans are very expensive because they are exempt from the 36 percent cap on the annual percentage rate. Therefore, you will pay up to 204% A.P.R. for a Title loan.

In order to obtain a Title loan you must own a vehicle that is free of any liens. Your vehicle must be free of liens so the lender can put a new lien on your vehicle.

Default on a Title Loan:

If you fall behind on a Title loan, the lender can and will repossess the vehicle. Because technically until the Title loan is paid-off the vehicle is there’s and they can take it back in the event there is a breach of contract. So whether it’s before or after bankruptcy if you do not pay on a Title loan the lender is free to come and repossess the vehicle.