Category Archives: Loan Modification

Registration Loan vs. Title Loan

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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.

Federal Tax Exemption for Mortgage Debt Forgiveness Extended Through 2013

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According to an azcentral.com article, recent news coverage of worries over the “fiscal cliff” have included concerns about the Mortgage Forgiveness Debt Relief Act of 2007, which was set to expire on January 7, 2013. This law originally was passed in 2007 to provide relief to homeowners experiencing financial distress in mortgage foreclosure proceedings through the end of 2009. Under the Debt Relief Act, homeowners were exempt from federal income taxes on mortgage debt forgiven by lenders through foreclosures, short sales, or mortgage loan modifications. In 2008, the Debt Relief Act was extended to provide relief to homeowners for a six year-period rather than the original two-year period.

With the last-minute passage by Congress of the American Taxpayer Relief Act of 2012, which President Obama is expected to sign this week, relief in the form of this federal tax exemption is extended through the end of 2013. Fortunately for Arizona homeowners, however, they are already protected by the state’s “non-recourse” law. In Arizona, mortgage loans generally are designated non-recourse loans, which means that homeowners cannot be sued for remaining mortgage debt that is owed after a foreclosure action. Under federal tax law, the forgiveness of non-recourse loans results in no tax liability to homeowners. Nonetheless, it is debatable whether Arizona law extends similar protections to homeowners who sell their homes in short sales, so the American Taxpayer Relief Act of 2012 will provide protection for those homeowners, at least through the end of 2013.

Mortgage foreclosures, short sales, and loan modifications are all events that may occur when a homeowner can no longer afford to pay his or her mortgage payments. Depending on the income of the homeowner, the desire of the homeowner to remain in the home, and other facts and circumstances surrounding the particular situation, bankruptcy also may be a legitimate and useful option for dealing with an impending foreclosure. Whether the goal is to simply delay or ultimately prevent the loss of one’s home to foreclosure, Chapter 13 bankruptcy proceedings may be a way to cure any past-due mortgage payments and remain in the home. Contact your Arizona and Las Vegas bankruptcy attorneys today for additional information about how a Chapter 13 bankruptcy might benefit you and your family.