Modification of Mortgages through Chapter 13 in Jacksonville, FL

In the Jacksonville Division of the Bankruptcy Court, the mortgage modification experiment is about to celebrate its one year anniversary. So how are things going for clients who have attempted to modify loans in Chapter 13 on their principal residences?

The results so far have been mostly positive if you compare the current system to the old “cure” plans that were required under the Bankruptcy Code. Under Chapter 13 (Section 1323(b)(2)), the Chapter 13 Plan may not modify the rights of lien holders secured by real estate that is the principal residence of the debtor. The same prohibition exists in Chapter 11 in § 1123(b)(5). These sections have been interpreted to mean that principal residence mortgages may not be “stripped down” to current value, may not have legitimate interest charges as allowed by the note and mortgage deleted from the account and also may not prohibit attorney’s fees and other charges if allowed by the note and mortgage.

The end result was that many people were unable to save their home from foreclosure due to a variety of factors. Take, for instance, a hypothetical example of a couple who went to a foreclosure defense firm prior to the mediation program. The foreclosure defense firm may have been able to stall the foreclosure process due to the backlog in the court system. Eventually, however, the home will be severely delinquent and a summary judgment hearing will be looming. At this point, many foreclosure defense firms would have simply told the couple to plan on moving out shortly. Or that firm may have recommended to the couple to file Chapter 13. However, due to the delay in the filing of the Chapter 13 case, the arrearages under the old “cure” Chapter 13 would have been too large to cure while trying to maintain the regular mortgage payments each month. Not only did the foreclosure defense serve only to delay the inevitable, it also made a cure plan impossible.

HAMP Program now in use by the Jacksonville Bankruptcy Courts

In December of 2011, the Jacksonville Bankruptcy Courts began a HAMP modification program in Chapter 13 cases. The program is a voluntary mediation program that was modeled after successful programs in Orlando and Tampa Bankruptcy Courts.  The program cannot force the mortgage company to modify a loan. But, it does provide a process to obtain a HAMP modification through a mediation session with a federally appointed mediator. The great benefit of the program is that it is run through the Federal Bankruptcy Court and is subject to the Mediation Order issued by the Bankruptcy Judge. If the mortgage company fails to cooperate or does not offer a HAMP modification to an otherwise qualified candidate, that mortgage company may be subject to sanctions. In fact, statistically, our office has seen great success in obtaining modifications, either through HAMP or an “in house” program offered by the servicer. Each financial situation is different, so a full evaluation of your particular eligibility for the modification program must be performed prior to any recommendation to attempt to obtain a modification through Chapter 13.

HAMP Eligibility

To be eligible for HAMP, a homeowner must owe less than $729,750 on a one-unit property, have established the mortgage prior to January 1, 2009, and have a monthly mortgage payment greater than 31 percent of his monthly gross income. Also, a homeowner must be able to provide documentation indicating that he is facing a serious financial hardship as a result of his mortgage.

Our office has a full-time person devoted to making sure that your paperwork is organized and prepared properly prior to submission to the mortgage servicer. Based on our experience, the paperwork component of the modification process is the step that most denials have been based upon outside of Chapter 13. Without the experience of a dedicated staff member and multiple past modifications, it is simply too difficult to put together a complete modification package which will satisfy a mortgage underwriter.

Once our office has obtained your package, the mediation session is set up to provide a decision on the modification request. Typically, the mediation session is held about 45 days after the modification package has been presented. The mediation session is held at our office with the mortgage company on the phone and generally lasts about 20 minutes. The mediator is present during the mediation session and will guide the parties through the process in order to ensure that each side has a chance to present whatever documentation and testimony is needed.

A modification is usually offered at the mediation session or at a follow up phone conference to be held within two weeks of the mediation session. There are also instances where the modification is denied at the mediation session. Normal reasons for denial are that the mortgage payment is currently low enough to be below the 31% of gross income, the borrower does not currently have income to support the modified payment amount needed or that the Net Present Value of the home is greater through foreclosure.

The Net present value Trap

If the loan otherwise meets HAMP requirements, the decision of whether a homeowner must be approved for HAMP rests on the results of the NPV test.  Based on Treasury data as of March 2012, approximately 5% of 3.2 million homeowners denied for HAMP were denied based on the NPV test.  This represents 160,870 homeowners who did not get help from HAMP.

The NPV test estimates whether it is in the best interests of the investor to modify a mortgage under HAMP.  Servicers enter data into the NPV test. The NPV test compares the expected cash flow from a modified loan with the expected cash flow from the same loan with no modification to determine which option is likely to be more valuable to the investor.  If the NPV test estimates that modifying a mortgage will result in more revenue for the investor than not modifying the mortgage (described as a positive NPV result), the servicer must offer a HAMP mortgage modification to the homeowner.  If the NPV test produces a negative result, a servicer has the option of modifying the mortgage under HAMP if the investor consents.

Prior to attending your mediation session, our office will run an NPV test to determine if the loan modification may be denied. While the investor may still consent, a NPV failure may doom any modification attempt under HAMP. This would leave only an “in house” modification program as an option for the borrower.

Conclusion

The mortgage modification process has been extremely beneficial to those people who qualify for HAMP treatment on their principal residence. With the benefit of judicial oversight and attorney involvement by both the borrower and lender,  a large number modifications have been obtained through the Chapter 13 loan modification program. While no modification can be guaranteed, you can at least have your modification application reviewed by mortgage company and expect to receive a written approval or denial instead never receiving any response. HAMP is currently scheduled to expire on December 31, 2013. Your package must be in the mail by that date in order to qualify for a modification under that federal program.

If you feel that you may benefit from a loan modification or any type of mortgage relief, contact our office at 904.725.0822  or bkmickler@planlaw.com for a free consultation.

Bryan Mickler

Why isn’t my mortgage current after bankruptcy?

One of the biggest injustices that people face after filing for bankruptcy in Jacksonville, FL is having a mortgage company ignore the terms of the confirmed Plan and discharge order. Think about it – you go through the tough decision to file bankruptcy to save a home, struggle to complete the payments and then the mortgage company ignores all your hard work and sacrifice. The same threats and fears all come back just like you had never filed for bankruptcy.

At Mickler & Mickler we see the effects of mortgage companies ignoring Chapter 13 and Chapter 11 Plans all the time. We initially try to assure the client that they did nothing wrong in the bankruptcy. Assuming that the Plan payments have been made as required (and in most cases – they have been), then it is not the client’s fault, it is not the attorney’s fault, it is not the fault of the Court – it is a mortgage company mistake that has led to the mortgage being declared delinquent even after a discharge from bankruptcy.

This situation is not limited to people who file for bankruptcy in Jacksonville, FL. It is a nationwide problem. Currently, Bank of America – f/k/a Countrywide Mortgage – is facing a class action suit by former Chapter 13 Debtors who claim that they were charged fees and other expenses during their Chapter 13 cases which were not disclosed or authorized by the Bankruptcy Court. Rodriguez, et al. v. Countrywide Home Loans, Inc., 5^th Cir.2012 (Class Action status allowed for former chapter 13 debtors with mortgages serviced by Countrywide which claimed, among other things, that the fees Countrywide charged while plaintiffs’ bankruptcy cases were still pending were unreasonable, unapproved, and undisclosed under Federal Rule of Bankruptcy Procedure 2016(a)). In one Bankruptcy Case, a study of discharged Chapter 13 cases found that 70% of discharged Chapter 13 cases had fees assessed against the property and debtor which were not authorized by the Court. See Wilborn v. Wells Fargo Bank, N.A., 404 B.R. 841, 851 (Bankr.S.D.Tex.2009) (vacated on other grounds).

Obviously, this is a nationwide problem on a grand scale. Millions of dollars of overcharges are potentially assessed each month against properties in Chapter 13. Most of these charges have never been approved by the Court and are unknown to the property owner struggling to save the home through Chapter 13. When the unsuspecting owner emerges from Chapter 13, the bank begins to demand payment of the fees and charges. If the property owner does nothing, then they risk foreclosure.

At Mickler & Mickler we fight to enforce your rights under the Chapter 13 discharge. Maybe the only consumer friendly provision in the 2005 Bankruptcy Code amendments was the addition of 11 U.S.C. sec. 524(i). That new section allows individuals to enforce the discharge provisions against mortgage companies who have violated the provisions of a confirmed plan. Our office has the experience to put this provision to work for you to protect your home from illegal mortgage charges during a Chapter 13 case.

If the bank has assessed illegal charges against your home, we will review your mortgage transaction history to determine whether a discharge violation has occurred. If so, we will file suit to enforce your rights. If your Chapter 13 attorney won’t back you up – come see us to get the protection you deserve. We have successfully defended homeowners against mortgage abuses for over 15 years. We have the resources and experience to back you up against the bank. We routinely hire forensic accountants to recreate your loan history and determine where the illegal charges were made to the loan. Don’t risk losing your home due to illegal bankruptcy charges. Let us review your case and fight to enforce your discharge against mortgage abuse.

Call Mickler & Mickler at 904.725.0822 or email bkmickler@planlaw.com

Can I get my license back if I file Bankruptcy?

As Jacksonville Bankruptcy Attorneys, we see numerous clients with driver’s licenses suspended when they come in to our office. One collection firm in town is notorious for suspending driver’s licenses after obtaining a judgment. This can create a great personal hardship due to the inability to drive to work, for family or any other reasons. Additionally, criminal problems may result if you are pulled over while driving with a suspended license.

The first question people usually have when they come to see us is, “How can they do that?”. The answer is that Florida law allows the creditor to suspend your driver’s license. Florida Statute 324.121 provides that a creditor may apply for a license suspension as follows:

Florida Statute 324.121 Suspension of license and registration.—

(1) The department, upon the receipt of a certified copy of a judgment, as provided in s. 324.111, shall forthwith suspend the license and registration and any nonresident’s operating privilege of any person against whom such judgment was rendered, except as hereinafter otherwise provided in this section, and in s. 324.141.

Our office routinely provides the ability to recover your driver’s license by the filing of a Chapter 7 or Chapter 13 bankruptcy. Upon the filing of your case, the creditor is bound to release the suspension by the operation of the “automatic stay”. This stay goes into effect upon the filing of the case and is the main protection from creditor harassment until your case has been completed and a discharge entered. If the creditor fails to release the suspension, you may have the right to sanction the creditor for violating the automatic stay. In such a case, you would be entitled to recover actual damages (such as taxi costs and lost wages), attorney’s fees and costs. You may also be entitled to punitive damages if the actions of the creditor were sufficient for the Judge to award such damages.

At Mickler & Mickler, we routinely stand up for client’s rights against creditor abuses. Whether its getting your license back after you have filed for bankruptcy or any other right that you are entitled to – our job is to make sure that you are given the full protection of the Bankruptcy Code. Our office has years of experience in handling abusive creditors and making sure that our client’s rights are protected.

Please contact us at 904.725.0822 or bkmickler@planlaw.com to schedule a free appointment to discuss

Divorce and Bankruptcy are like summer and ice cream – they just seem to go together.

The typical scenario is that divorce is followed by a bankruptcy filing for one or both spouses as a result of trying to support two households on the same income. If your ex owes you money as a result of the divorce, you may be wondering what will happen if they file for bankruptcy.

Depending on the type of obligation that your ex owes you, the result of a bankruptcy filing by an ex-spouse could end up in several different ways.

If the obligation is for child support or alimony (called a “domestic support obligation” in the Bankruptcy Code), then the obligation is not dischargeable in any type of bankruptcy filing. Chapter 7, Chapter 11 and Chapter 13 all exclude domestic support obligations from the discharge provisions of the Bankruptcy Code. See 11 U.S.C. §§ 523(a)(5); 1141(d)(2) and 1328(a)(2). Domestic support obligations also include past due amounts for child support or alimony, interest that has accrued on the past due amounts and any attorney’s fees and costs necessary to obtain or enforce the child support or alimony against the ex-spouse in State Court.   See In re Diaz, 647 F.3d. 1073 (11^th Cir.2011). A bankruptcy filing by an ex-spouse will also not serve to stop the Family Law Court from ordering child support or alimony to be paid if the bankruptcy was filed prior to or during a divorce. See 11 U.S.C. § 523(b)(2).

The tricky issues in bankruptcy and divorce come in situations where the obligation is not child support or alimony, or the ex-spouse may claim that the obligation is not covered by the domestic support obligation exception to the discharge. Typical situations include property settlement agreements where an ex-spouse is obligated to pay a lump sum or to pay a joint debt that was owed prior to the divorce. In these situations, a bankruptcy attorney is needed to determine whether legal action is needed to protect your rights to the future payments.

Chapter 7 and 11 and property settlement agreements

Any non-child support or non-alimony obligation incurred in connection with a divorce in Chapter 7 is covered by 11 U.S.C. § 523(a)(15). In both Chapter 7 and Chapter 11, the obligation is non-dischargeable. Such obligations take the form of “hold harmless” provisions for joint debts, obligations to pay joint debts, obligations to pay a lump sum in the future and obligations to sell property and split proceeds. It is generally a good idea to have the Bankruptcy Court issue a Judgment that such a debt has not been discharged by the Chapter 7 or Chapter 11. This requires the filing of an Adversary Proceeding with the Bankruptcy Court. Generally, no trial is required as the Court will issue summary judgment as long as the obligation was as a result of a divorce or separation. The Judgment will prevent any problems in the future with the ex-spouse attempting to claim that such obligation was discharged.

Chapter 13 and property settlement agreements

Chapter 13 is the one bankruptcy filing that may create an issue if you are owed a property settlement agreement obligation as described above. Remember, this is not a child support or alimony obligation. If you feel that you have an alimony or child support obligation that your ex-spouse is attempting to treat as a property settlement agreement, you can have the State Court or the Bankruptcy Court determine the nature of the agreement. If it is determined that such obligation is a property settlement agreement and not child support or alimony, Chapter 13 provides that such obligation may be discharged as an unsecured debt. See 11 U.S.C. § 1328(a)(2). If the Plan meets all requirements of Section 1325, the Chapter 13 may propose a Plan that contributes a minimal amount to unsecured debts over the life of the Plan and discharge any remaining obligation upon discharge in the case.

Conclusion

It is critical to have the correct determination of the type of obligation when assessing whether the debt may be discharged in any type of bankruptcy filing. Please contact our office at 904.725.0822 or bkmickler@planlaw.com for further information regarding any obligations from a divorce as they relate to a bankruptcy filing.