Monday, November 22, 2010

Filing for Bankruptcy: What Can You Protect?

By the end of the year, more than 1.6 million people are expected to have filed for personal bankruptcy, according to the American Bankruptcy Institute. Almost 65% of filers chose “income reduction” as a reason for filing, while 42% listed “job loss” as a reason (debtors can choose more than one).

Filers who have been conscientious borrowers and consumers will often have equity in their homes, possess cars that are partly or fully paid for, and hold savings accounts designed to provide for them in the future. But there’s no credit for being responsible when it comes to bankruptcy court — and the more responsible a consumer has been, the more they have for a trustee to take and sell off to pay creditors. Bankruptcy doesn’t care that they’ve been good Samaritans.
What and how much someone in bankruptcy can keep depends mostly on where they live. Florida millionaire Burt Reynolds was able to keep his 160-acre ranch through his bankruptcy – a feat that would be impossible in, say, neighboring Georgia. And there are a number of exemptions and loopholes in each state that allow consumers to hold onto some assets. Among them is the federal “wild card,” a credit of up to about $12,000 per person, which in 16 states and Washington, D.C. can be used to help a consumer keep items like cars or jewelry. (Some states have their own wild card options, but they’re far less generous.)  Florida's is $4,000.  There are also assets that bankruptcy trustees aren’t interested in taking because they won’t yield profits to pay creditors — like a home or car, if the filer owes more it’s worth.

A home
Holding on to your home depends on the state you live in and the equity in your house. Florida residents can keep up to 160 acres outside of city limits and the home that’s on it, or up to half an acre and a home in cities. Texans can protect up to 200 acres of rural property or up to 10 acres in the city. And in general, if a home is worth less than the mortgage balance – that is, the owner has no equity – the owner can keep it as long as the payments stay current.

For filers who do have equity, most states offer an exemption — money from the trustee’s sale of the home that stays with the homeowner. But over that amount, every penny of a sale is applied to outstanding debts and paying the trustee.

Tax-exempt retirement funds
Most tax-exempt retirement funds, like 401(k)s and individual retirement accounts, are out of reach from creditors. IRAs are protected up to about $1.17 million per person.

But trustees view these accounts skeptically and will flag suspicious actions like dumping cash and investments – which are usually not protected in full in bankruptcy – into retirement plans


Holding on to a car depends on several factors, including what’s covered by state exemption. In general, as with a house, owners who owe more than the value of the car can generally keep it, as long as payments stay current. Free-and-clear car owners can keep a car if it’s worth less than the state exemption, but drivers who have a car loan and some equity in their car can see their vehicle seized and sold, and recoup only their equity up to the exemption.

Life insurance policy

Term insurance policies are safe after bankruptcy, but whole-life insurance policy holders aren’t always so lucky: These policies are considered an investment vehicle.
Depending on the state, there could be exemptions – Florida protects the entire policy, other states only protect a fraction.

College savings

The fate of the balance of a 529 plan depends on several factors. If a 529 plan is less than two years old, protection is limited to $5,000; creditors can take what’s been saved beyond that. The same mostly holds true for a Coverdell account. But after that two-year period, the plan is safe, as long as the person filing for bankruptcy is not the beneficiary; the account is not safe if the beneficiary is not the child or grandchild. If the filer is the beneficiary — for example, a 30-something with leftover college savings earmarked for grad school — trustees could cash out the 529 plan to pay creditors.

Call to schedule your appointment today (727)410-2705


Must Read

Servicers Still Reeling From Missing Assignments

in From The Orb > Required Reading
by John Clapp on Wednesday 17 November 2010

REQUIRED READING: Discrepancies between information contained in county records and information in servicers' files or imaging systems; flimsy placeholders that vaguely indicate a mystery assignee exists; last beneficiaries of record that are no longer in business, let alone easy to locate and persuade to execute a document - these are only a handful of the considerations with which servicers must contend when trying to perfect their collateral files.

Although providing a clear chain of title has seemingly relinquished its position as servicers’ main document-management concern for the moment, remedying missing mortgage assignments remains a tedious aspect of the business. The number of missing assignments is huge, according to vendors that handle documents, and it is the result of rapidly changing loan ownership and lackluster due diligence.

“The loan volume was so big and so strong in ‘07 and ‘08, and everybody was too busy to keep up with the process,” says Tina Lindsey, vice president of sales for Rekon Technologies. “They were maybe keeping track of the fact that documents hadn’t been received yet, but they weren’t actively procuring them to ensure they were received.”

Nowadays, servicers are forced to confront errors caused by shortcuts of the past. Some shops are, whether to raise capital or simply tidy up their portfolio, selling off their distressed assets - transactions in which buying entities are being more demanding about clear title. In other cases, companies that bought loans are using missing assignments to support repurchase requests.

Not least among the reasons for servicers to perfect collateral is the growing judicial requirement for files to be airtight.

“What’s becoming more and more prevalent is, when you go into a courtroom, it’s [the judge’s] courtroom, and they make rules on their interpretation and their personal opinion,” says Mike Wileman, president and CEO of Orion Financial. “We’ve seen it for years in bankruptcy. Anytime they’re holding the lender’s or servicer’s feet to the fire to get their documents in order, I think they’re justified, and there’s not much you can do.”

Increasingly, the note and the recorded deed are being viewed as a single legal instrument, despite the fact they are two separate documents, Wileman says. When failing to match for the judiciary the chain of title on the note with the chain of title on the land record, lenders run the risk of having their liens stripped.

Jeremy Pomerantz, senior vice president of Nationwide Title Clearing (NTC), says that, as pervasive as the mentality has become that the note and deed must be in sync, its basis is impractical.

“The assignment used to be on record, in effect, [to indicate the entities that are] supposed to receive notice if anything happened on the land record with the mortgage,” he says, alluding to items such as tax-default notices. “The owner of the note may want nothing to do with the day-to-day operations and maintenance of that mortgage.”

Thus, servicers are typically the parties listed on assignments.

Perfecting the chain of title can be a tedious process. Vendors tasked with preparing missing assignments often have to turn to lender-tracing, which, as the name suggests, involves finding the last lender on record and getting an officer who has signing authority to execute the document. Because the mortgage and banking industries have seen massive consolidation and a spree of closings in recent years, such officers can be hard to come by. Lost assignment affidavits might suffice in some counties, but the acceptance of such affidavits varies from jurisdiction to jurisdiction. Moreover, their rigor might be put to the test should a loan enter litigation.

As made clear by the ongoing foreclosure affidavit scare, it benefits servicers to ensure their outsource companies and legal counsel execute documents with precision. Wileman notes that Orion Financial has had to kick back to foreclosure attorneys lost assignment affidavit requests where firsthand knowledge of a loan transfer is referenced. Occasionally, attorneys resend the documents but remove language that implies firsthand knowledge. Other times, the request for execution simply goes away.

Complicating matters further, servicers’ own imaging systems can produce a different chain of title than what appears at the county level. If a client of NTC requests that the company prepare an assignment based on the lineage found in the client’s system, NTC protects itself with an indemnification clause, Pomerantz explains.

“They’re not asking us to make up a beneficiary - they have someone on record in their images or in the file,” he says. “We can’t force them to do a $50 or $100 title search on every loan when they believe what they have is correct, so we have review processes and contract language to ensure all the bases are covered."

Assignment work has drawn the ire of at least one state attorney general - Florida’s Bill McCollum. Earlier this year, McCollum’s office launched an investigation into Docx LLC, a now-defunct subsidiary of Lender Processing Services (LPS), for using documents that “appear to be forged, incorrectly and illegally executed, false and misleading.” According to a statement issued by LPS at the time, the documents used terms “Bogus Assignee” and “Bad Bene” in place of actual assignees.

“These placeholders were used to flag the document to prevent further processing,” LPS said. “Unfortunately, on occasion, incomplete documents were inadvertently recorded before the missing information was obtained.”

According to professionals in the doc management world, such placeholders are not altogether uncommon, although controls should not allow such identifiers to be printed and processed. In a statement released in early October, LPS noted that servicers and attorneys provided Docx with the information used to prepare assignments and that Docx was not involved in determining whether the assignments would be used in court proceedings.

In bulk loan deals, buyers and sellers were provided leverage to complete transactions quickly, “but years down the road, your options have all washed away,” says Rekon’s Lindsey.

“That’s why it behooves the industry to make sure they’re carrying the documentation sooner rather than later,” she says. “It’s one of those things where, the older it gets, the messier and uglier and more expensive it gets” to cure.

McCollum’s office additionally chided LPS for preparing assignments that “to even the untrained eye, appear to be forged and/or fabricated, as the signatures of the same individual vary wildly from document to document.” In its statement from October, LPS explained the cause of the varying signature styles, saying the manager of Docx allowed an employee to sign an authorized employee’s name with his or her express written consent.

“LPS was unaware of this practice,” the company said, adding that upon learning of it, “LPS immediately took remedial actions to correct all assignments of mortgage signed in this manner.”

Florida Default Law Group - one of the law firms being targeted by McCollum’s investigations - was described in a notice on the attorney general’s website as a client of Docx. The economic-crimes division of McCollum’s office is investigating Florida Default Law Group for allegedly presenting false documents in foreclosure cases.

As of press time, Florida Default Law Group had not responded to inquiries from SM. McCollum’s office declined to comment on the basis that the investigations are active and ongoing.

Further, law firms have been accused of backdating assignments and committing notary fraud. In some instances, law firms are accused of notarizing documents on dates that occurred before the notary had even obtained its license.

Going forward, best practices require servicers to have a follow-up mechanism that verifies assignments are recorded or, if an assignment is rejected at the county level, verifies that the relevant information is corrected and the document ultimately recorded, says Wileman.

“That chain, that proper ownership, has to be made clear at the county, or else [servicers] are not going to be able to do anything with it down the road,” Wilemen warns.

Thanks Mortgage Orb

Your rights under the Fair Debt Collection Practices Act:

Credit Reports

What’s in Your Report

Credit Inquiries

How Mistakes Are Made

Missing Accounts

Fixing An Error


Fair Credit Reporting Act

Equal Credit Opportunity Act

Fair Credit Billing Act

Fair Debt Collection Practices

Average Credit Statistics

ID Theft

Contacts and Resources

GlossaryDebt & debt collectors – know your rightsYou are responsible for your debts. If you fall behind in paying your creditors or an error is made on your account, you may be contacted by a "debt collector." A debt collector is any person, other than the creditor, who regularly collects debts owed to others. This includes lawyers who collect debts on a regular basis. You have the right to be treated fairly by debt collectors.

The Fair Debt Collection Practices Act (FDCPA) applies to personal, family, and household debts. This includes money owed for the purchase of a car, for medical care, or for charge accounts. The FDCPA prohibits debt collectors from engaging in unfair, deceptive, or abusive practices while collecting these debts.

Your rights under the Fair Debt Collection Practices Act:

Debt collectors may contact you only between 8 a.m. and 9 p.m.

Debt collectors may not contact you at work if they know your employer disapproves.

Debt collectors may not harass, oppress, or abuse you.

Debt collectors may not lie when collecting debts, such as falsely implying that you have committed a crime.

Debt collectors must identify themselves to you on the phone.

Debt collectors must stop contacting you if you ask them to in writing.

FICO Score calculation

Payment History 35%

Account payment information on specific types of accounts (credit cards, retail accounts, installment loans, finance company accounts, mortgage, etc.)

Presence of adverse public records (bankruptcy, judgements, suits, liens, wage attachments, etc.), collection items, and/or delinquency (past due items)

Severity of delinquency (how long past due)

Amount past due on delinquent accounts or collection items

Time since (recency of) past due items (delinquency), adverse public records (if any), or collection items (if any)

Number of past due items on file

Number of accounts paid as agreed

Amounts Owed 30%

Amount owing on accounts

Amount owing on specific types of accounts

Lack of a specific type of balance, in some cases

Number of accounts with balances

Proportion of credit lines used (proportion of balances to total credit limits on certain types of revolving accounts)

Proportion of installment loan amounts still owing (proportion of balance to original loan amount on certain types of installment loans)

Length of Credit History 15%

Time since accounts opened

Time since accounts opened, by specific type of account

Time since account activity

New Credit 10%

Number of recently opened accounts, and proportion of accounts that are recently opened, by type of account

Number of recent credit inquiries

Time since recent account opening(s), by type of account

Time since credit inquiry(s)

Re-establishment of positive credit history following past payment problems

Types of Credit Used 10%

Number of (presence, prevalence, and recent information on) various types of accounts (credit cards, retail accounts, installment loans, mortgage, consumer finance accounts, etc.)

Please note that:

A FICO score takes into consideration all these categories of information, not just one or two.

No one piece of information or factor alone will determine your score.

The importance of any factor depends on the overall information in your credit report.

For some people, a given factor may be more important than for someone else with a different credit history. In addition, as the information in your credit report changes, so does the importance of any factor in determining your FICO score. Thus, it's impossible to say exactly how important any single factor is in determining your score - even the levels of importance shown here are for the general population, and will be different for different credit profiles. What's important is the mix of information, which varies from person to person, and for any one person over time.

Your FICO score only looks at information in your credit report.

However, lenders look at many things when making a credit decision including your income, how long you have worked at your present job and the kind of credit you are requesting.

Your score considers both positive and negative information in your credit report.

Late payments will lower your score, but establishing or re-establishing a good track record of making payments on time will raise your FICO credit score.

Home Ownership Gets Tougher as Lenders Restrict FHA Mortgages

Home ownership may be falling out of reach for more Americans as lenders toughen their standards for Federal Housing Administration-insured loans beyond what the agency itself requires, Bloomberg News reported today. Mortgage lenders including Wells Fargo & Co. and Bank of America Corp., the two largest, have raised the minimum credit score on FHA-insured loans that they will buy to 640 from 620. About 6.3 million people fall within that range, according to FICO, which created the formula for the ratings. The higher hurdles for FHA loans, used in about a fifth of U.S. home purchases, add to challenges for a housing market already struggling with record-low sales and surging foreclosures. The FHA, which previously didn’t have minimums for FICO scores, began in October to require grades of at least 500, and more than 580 for loans with down payments of as little as 3.5 percent. Borrowers with scores between those levels must put 10 percent down. Several lenders moved minimums to about 620 at the start of 2009, the companies said then.

Attorney's Role in Reaffirmation Agreements

Divided Loyalties: The Attorney’s Role in Bankruptcy Reaffirmations

by Gregory M. Duhl

Associate Professor of Law

William Mitchell College of Law


Section 524 of the Bankruptcy Code divides the consumer bankruptcy attorney’s loyalties between the client and the court. On the one hand, the attorney is the gatekeeper for the court in ensuring that whether a debtor enters into a reaffirmation agreement is balanced against one of the primary objectives of the bankruptcy system—to give the debtor a “fresh start.” On the other hand, the attorney has an obligation under the Model Rules of Professional Conduct to pursue the client’s objectives during the bankruptcy representation.

This Article is about the lawyer-client relationship. Ethics scholars have traditionally adopted either a client-autonomy or paternalistic model to analyze the lawyer-client relationship. This Article rejects both and proposes a collaborative model of lawyer-client decision-making. Congress must free bankruptcy lawyers of their ethical conflict, so that lawyers can work in collaboration with their clients to help debtors improve financially post-bankruptcy. Then, the client might be able to be her own gatekeeper, freeing both the courts and attorneys from that responsibility.

HUD November Score Card

Foreclosure Rates

Based on foreclosure inventory, the states with the highest rates were Florida (13.68 percent), Nevada (9.72 percent), and New Jersey (6.73 percent).

Based on foreclosure starts, the three states with the highest rates were Nevada (3.17 percent), Arizona (2.44 percent), and Florida (2.32 percent).

Brown Noising

 Only the very naive think that talent and hard work propel people to the top of the heap. Look around you.

The legal profession, with its obsession with grades and unreadable law review articles, loves spewing that "cream naturally rises to the top" nonsense. Don't believe it.

Yes, sucking up builds careers, especially if you're just passably smart, as most of us are. But the big question is how to do it well.
“Lawyers, politicians, and salespeople routinely take part in flattery and opinion conformity to complete their jobs, similar to those operating in an upper-class social environment,” Stern explains. “Ingratiatory behavior is a form of interpersonal communication that is acceptable and expected in both arenas.”

Stern and Westphal note that acts of flattery are successful in yielding board appointments at other firms only if the influence target does not recognize these acts as a favor-seeking motive.

“To tap into the corporate elite’s inner circle, a person cannot be too obvious,” Westphal says. “Being too overt with one’s intentions can be interpreted as manipulative or political. The more covert the ingratiation, the more sophisticated the approach and effective the outcome.”

1. Pretend you're seeking advice. Example: “How were you able to close that deal so successfully?” Mentoring is very in--so let that incoherent partner think that he can actually teach you something.

2. Argue a bit with the kissee about his opinion or approach. Do not agree immediately. But, needless to say, ultimately agree. Remember, lawyers love a good argument--especially if they think they've won.

3. Tell the kissee's friends or family how much you adore/admire her. Just pray that word ultimately gets back to the kissee--otherwise, you've wasted a lot of time.

4. Flatter the kissee by pretending that you're actually a reluctant flatterer. Example: “I don’t want to embarrass you, but your presentation was really top-notch. Better than most I’ve seen.”

5. Agree with the kissee’s values before agreeing with her opinions. The goal is to convey how you both share the same big picture--that vision thing.

6. Tell people in the kissee’s social network that you really share those values. Again, you are counting on word getting back to the kissee that you are kindred spirits.

7. Finally, hint that you are part of the same circle, such as a religious organization or political party.

Bk Case

In re Castleberry

Failure of a creditor to timely object to the debtor’s Chapter 13 plan constitutes acceptance of its treatment which crammed down a potential “910 car.”

Home Values Continue to Decline

States with the greatest annual depreciation in CoreLogic’s study include: Idaho (-14.04 percent), Alabama (-8.9 percent), Mississippi (-8.3 percent), Florida (-7.68 percent), and New Mexico (-7.47 percent).

FTC Proposes New Guidelines for Collecting Debt from Dead People

The Federal Trade Commission is seeking to revise the protocol surrounding two of life's touchiest subjects: debt and death, the Washington Post reported today. The rise in debt collection has spawned a niche market devoted to recouping money from those who die with unpaid bills. The FTC began investigating the practice several months ago and found confusion among collectors over whom they were allowed to contact and what they could say, said Joel Winston, the agency's associate director of financial practices. The federal Fair Debt Collection Practices Act limits the people that collectors can contact to those with authority to pay the debt - typically a spouse or family member, and possibly a third-party executor of an estate. However, in a proposed policy statement, the FTC said that changes to court procedures have widened the pool of those who may be able to pay to include a host of other legal representatives. Some consumer activists have criticized the FTC proposal as giving too much leeway to debt collectors. In addition, they have questioned details such as use of the word "spouse" vs. "widow" or "widower," arguing that marriages end upon death. The FTC has extended the public comment period 0n the proposal to Dec. 1.