Failure to modify mortgages spurs Massachusetts bankruptcies and foreclosures

By doug | Published: September 1, 2010

The foreclosure rate in Massachusetts set another record in July, with 1243 homes lost, an 80% increase over the previous year, according to the Boston Globe.

Reasons for the spike in foreclosures are many, housing specialists and economists say, including the failure of government programs to spur lenders to modify mortgage loans.

“They are foreclosing on people who are willing to and have the resources to address their delinquencies,’’ said one Boston lawyer.

“I’ve done this work for 25 years, and I’ve never seen anything like this. I’ve never seen so many people in a position to work something out who are getting rebuffed.’’

“Many of the [modifications] are going into re-default due mostly to rising unemployment,’’ said Kevin M. Cuff, outgoing executive director of the Massachusetts Mortgage Bankers Association. “All federal programs are much less successful than originally hoped.’’

If you are looking for a light at the end of the tunnel, there may be one in this data: the number of homeowners getting into financial trouble has slowed slightly. Foreclosure petitions, the first step in the process, fell to 2,307 in July, a 20.4 percent drop from the same month in 2009, according to Warren Group. There were 15,645 foreclosure petitions filed during the first seven months of the year, compared with 16,712 during the same time last year.

Also on the plus side, it looks like Boston area home values also increased slightly over the summer, posting a 1.2% increase for the month of June.

 

By Doug Beaton

Posted in Foreclosure | Comments closed

Should you re-affirm a mortgage or simply stay-and-pay?

By doug | Published: August 31, 2010

Many if not most homeowners who have to file for bankruptcy would like to stay in their homes, if possible. Sometimes staying put is even the primary, or only, reason for filing the case in the first place.

If a homeowner is current on their mortgage, keeping the house will not be a problem. One issue that often does arise, however, is whether the homeowner should sign a “reaffirmation agreement” with their lender as part of the process.

Most consumer bankruptcy attorney advise against signing these agreements, because they recreate a personal obligation to pay the debt, which is exactly what the bankruptcy filing just wiped out.

Instead, a better option for most folks is what in legal slang we call a “stay-and-pay” — you stay in the house, you make your payments on time, the lender cashes your checks and doesn’t foreclose. You could think of it like a truce: everyone tacitly agrees to the status quo, and pretends that a bankruptcy just never happened. (Of course, if you start missing payments, the lender has the right to start foreclosure proceedings, just like always, at least after the bankruptcy case is closed.)

Are there any possible downsides to the stay-and-pay arrangement? Well, you probably won’t get much of a boost to your post-bankruptcy credit rating, because the lenders aren’t going to report these payments to credit reporting agencies in either a positive or negative way.

Second, some people just plain prefer the security of having a formal agreement with their mortgage holder, even if it is a disadvantage to them. Since a lender could technically accelerate a loan based on the bankruptcy, some people might not sleep at night worrying about this possibility. It doesn’t happen very often though — as long as you keep making timely payments, most lenders will be quite happy to have your checks coming in, especially in the current economic climate.

In my view, the stay-and-pay advantages (primarily that you are not legally obligated for the entire mortgage balance) vastly outweighs the drawbacks for most homeowners who file a Chapter 7 case.

 

By Doug Beaton

Posted in Real estate, Secured loans | Comments closed

Nolan Ryan snags Texas Rangers at bankruptcy auction

By doug | Published: August 30, 2010

With the baseball pennant races heating up, (and with the Texas Rangers currently in first place in the American League’s West division), it’s time for a final report on the results of the Rangers’ bankruptcy case, which saw the team go on the auction block in early August.

The winning bidders: Hall of Fame pitcher Nolan Ryan and his partner Chuck Greenberg, who ponied up $593 million to control the perennial lone star state also-rans. That beat out a bid by a group led by Mark Cuban, already owner of the Dallas Mavericks NBA basketball team.

The bidding was spirited, to say the least, with attorneys for the rival buyers shouting each other down in the courtroom, arguing various alleged improprieties.

With bankruptcy being all about getting a fresh financial start, this Boston fan wishes Ryan and his Rangers all the best at turning his team around — financially at least!

 

By Doug Beaton

 

Posted in Bankruptcy News, Just for fun | Comments closed

Creditor says to Trustee: Stick ’em up!

By doug | Published: August 30, 2010

In a truly strange result in a bankruptcy case from Orlando, Fla., a sharp-witted quick acting creditor has snatched a debtors funds right from the hands of a Chapter 13 bankruptcy trustee!

Florida attorney Carmen Deluttri analyzed a case where the debtor couldn’t afford his Chapter 13 payments, and the judge in the case therefore signed an order of dismissal.

Typically what happens in this situation is that the trustee goes through his account, and draws a check for any funds that haven’t been paid out yet, and mails it back to the debtor. But in Orlando, before the trustee could mail off the money to the debtor, a savvy creditor’s attorney was able to procure an order from a state court allowing a garnishment.

This probably wouldn’t happen in either Massachusetts or New Hampshire, where state judges aren’t as aggressive in issuing garnishments as the judges in Florida, but I suppose you never know. The moral of the story appears to be don’t count on getting any money back in a Chapter 13 case, until a check is actually in your hands!

 

By Doug Beaton

Posted in Bankruptcy News | Comments closed

A costly mistake: draining your retirement account before bankruptcy

By doug | Published: August 30, 2010

One of the biggest mistakes that average people can make when they are under the stress of financial problems is to start raiding their IRA or 401(k) retirement accounts to pay routine bills.

By the time they think about filing for bankruptcy, little or even nothing may be left of their retirement savings. And then I have to tell them that they could have saved the whole balance of the account.

401(k)’s and their cousins are among the most well-protected of assets, both in bankruptcy court and outside bankruptcy, too. Ordinary creditors (prime example: credit card issuers) can almost never get at them. If you end up having to file a bankruptcy case, they are protected virtually 100% from any attachment (there may be limits on IRA accounts, but they are so high I have never seen them come in to play). Therefore, the only proper strategy is to file the case, erase the debt, and save the account for its original purpose, saving for the future.

If you have been dipping in to an IRA or 401 (k) to stave off creditors, please stop and call me instead. We can almost always come up with a better plan for dealing with the primary problem (might include a bankruptcy, might not). If you live in the Merrimack Valley, on either the New Hampshire or Massachusetts side of the border, I’ll give you a 1/2 hour consultation with no charge or obligation.

 

By Doug Beaton

Posted in Practical tips | Comments closed

What you don’t want if you file for bankruptcy

By doug | Published: August 27, 2010

If you file a bankruptcy case, you probably don’t want it to end up like Joseph DiStasio’s. This debtor was the owner of two tree cutting companies in Quincy, but found his bankruptcy case on the front page of the Boston Globe this week.

Most of you would think that was bad enough — seeing a case publicized in a major newspaper. Relax — it rarely happens. But this debtor is the ally of Charles Baker, the Republican candidate for Massachusetts governor. It seems that DiStatsio blamed the failure of his businesses on red-tape from the administration of Baker’s rival, incumbent Democratic governor Deval Patrick. That gave the Globe a reason to go snooping through DiStatsio’s bankruptcy filings.

What they found was a lot of personal spending on luxury items. American Express has objected to a discharge in the case, because they are owed over $40,000 for luxury items charged to the card within five weeks of the bankruptcy filin in January, according to the Globe.

Under the bankruptcy code, more than $500 in luxury charges any time within 90 days of a bankruptcy can trigger a “presumption” of non-dischargablility.

The Globe says credit card records show the debtor racked up $7,043 in charges at a Best Buy store on Dec. 12 and 13 last year and spent $980 for a two-day stay in late November in San Diego. That included payment for a room at the Se San Diego, a luxury hotel that describes itself as “ultra-chic.’’

Obviously, if you are considering a bankruptcy case, you should avoid making charges like these like the plague. Call me or another experienced bankruptcy attorney, and we will do our best to keep your case form ending up at the top of the news!

 

By Doug Beaton

Posted in Bankruptcy News, Practical tips | Comments closed

Everything people believed about the US economy has been turned upside down

By doug | Published: August 27, 2010

The US economy is on its own as federal stimulus programs start to expire.

The federal tax credit for new home buyers expired in April, and sales of homes have all but collapsed by July — which should be the best season for real estate, at least historically.

According to an article by Robert Gavin in the Boston Globe, there is not much more help coming from Washington.

“As the stimulus fades away, we’re left with whatever momentum we have left from the private sector,’’ said Nigel Gault, chief US economist at IHS Global Insight in Lexington. “And there’s not much of that.’’

“Everything people believed about the American economy — you could always get a job, home prices never went down — has been turned upside down,’’ Connecticut banker Nick Perna said. “The housing market is partly a symptom of the lack of confidence overall.’’

In Massachusetts, for example, the number of small business loans fell by nearly half in June to 109, compared with 193 in May.

A dramatic turn-around is urgently hoped for by many, but no one can tell for certain when it will arrive. The more people who can right their ship and get back in the black the better. That’s where the bankruptcy laws can help, as fresh starts for the greatest number of people is really best for the common good.

Photo: Getty Images

 

By Doug Beaton

Posted in Bankruptcy News | Comments closed

Should considering bankruptcy be your last resort?

By doug | Published: August 26, 2010

Bankruptcy is the last resort for people who can’t pay their bills, right?

Maybe not, or perhaps I should say “not necessarily.”

North Carolina attorney Susanne Robicsek has written a nice article that might make people re-think how long they should go without considering a bankruptcy case.

Robicsek thinks the two worst scenarios for debtors are where someone has paid thousands of dollars into a debt-settlement payment program that was doomed to fail and they still have to declare bankruptcy, or where someone works on mortgage modification so long that either they get so far behind even bankruptcy can’t help them or they find out on the eve of foreclosure (or after it occurred) that the modification isn’t going to happen.

The same thing happens here in the Merrimack Valley all the time. Instead of finding out what bankruptcy can offer, people often needlessly avoid it until it is too late. Even worse, basic bankruptcy information, and usually an initial consultation with a lawyer, is almost always free. It is here in my office — all you have to do is call (978)975 – 2608!

 

By Doug Beaton

Posted in Practical tips | Comments closed

Will Park Seed grow again?

By doug | Published: August 26, 2010

The Park Seed Company, whose ubiquitous catalogs light up our winter evenings with dreams of summer gardens, has been sold at a bankruptcy auction.

According to an article in Greenhouse Grower magazine, the South Carolina mail order seed company was purchased by a venture capital firm in Maryland. The purchase price was $13 million.

In a unique twist, the buyer, Blackstreet Capital, has agreed to keep all of the firm’s workers employed for at least three years.

Several companies under the George W. Park Co. entity were consolidated last month by the bankruptcy court at the request of the trustee in charge of the companies. The trustee requested the consolidation after finding the financials of all the companies so entangled he could not establish which creditors belonged to each company.

The firm is a mainstay of South Carolina agriculture, and dates back to the Reconstruction days of the 1800’s. Since bankruptcy promises debtors a fresh financial start, lets hope the new owners get Park Seed growing again!

 

By Doug Beaton

Posted in Bankruptcy News | Comments closed

You can’t buy groceries with your house anymore

By doug | Published: August 25, 2010

Nationwide, credit card debt has fallen to the lowest level in the past eight years, according to an AP article by Eileen Connolly.

The highest levels of credit card debt are in Alaska, and people in Alabama have been paying off their cards the most. Massachusetts and new Hampshire are about in the middle as far as credit card debt goes. Less than 1% of accounts are now more than three months behind, for the first time since this recession started.

Consumers still have worries, though, from the fear of unemployment to the fact that the collapsed housing market means it’s harder to cash in on home equity when money gets tight. “You can’t buy groceries with your house anymore,’’ Ezra Becker of the Trans Union credit reporting agency said.

In a twist, Becker said the foreclosure crisis could be helping to improve the timeliness of credit card payments and lower balances. When people don’t make mortgage payments, he suggested, they have a short-term cash boost.

“That can provide extra money to pay down credit cards,’’ he said.

If you are struggling with your credit cards, a chapter 7 bankruptcy case can provide immediate relief, and a chance to start over again from scratch. You can call me at (978) 975 – 2608 for free information on filing a Chapter 7 case in either Massachusetts or New Hampshire

 

By Doug Beaton

Posted in Credit cards | Comments closed
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