IS THE AMERICAN DREAM DEAD IN JACKSONVILLE, FLORIDA?

           Interesting news out of Jacksonville, FL and the foreclosure/bankruptcy area. Recently, a local real estate survey showed that Jacksonville, FL had one of the highest rates of institutional investors purchasing properties in the Nation. Markets with the highest percentage of institutional investor purchases included Memphis (25.4 percent), Atlanta (23.0 percent), Jacksonville, Fla., (22.2 percent), Charlotte (14.5 percent), and Milwaukee (12.0 percent). (Source Realty Trac, November 2013).

            Institutional investors is a fancy word for hedge fund operators backed by big banks, pension funds and private investors. These big money investors find a market that is considered underpriced and has been hit hard by the foreclosure crisis in the last few years. Jacksonville meets both of those criteria. Both short sales and foreclosures are still exceptionally high despite the real estate gains that have been in the news recently. States with the highest percentage of short sales in October included Nevada (14.2 percent), Florida (13.6 percent), Maryland (8.2 percent), Michigan (6.7 percent), and Illinois (6.2 percent). Markets with the highest percentage of foreclosure auction sales included Orlando (8.6 percent), Jacksonville, Fla., (8.6 percent), Columbia, S.C. (8.1 percent), Las Vegas (6.6 percent), Charlotte (6.1 percent), Miami (6.0 percent), and Tampa (5.7 percent). (Source Realty Trac, November, 2013).

            The end result of the rush of money into any area is price inflation. Markets with biggest increase in median home price included Detroit (up 38 percent), San Francisco (up 32 percent), Sacramento (up 30 percent), Atlanta (up 30 percent), and Jacksonville, Fla. (up 29 percent).

           The increase in prices dramatically, and in a short period of time has combined with the recent foreclosure crisis to deny the ability to a large number of working middle class families to purchase a home. Not only has credit been damaged by the recent increase in foreclosures, job losses and delinquencies on credit reports, but wages have remained essentially flat for the middle class for over 20 years when adjusted for inflation. Institutional investors have used the increased purchasing of homes in middle class neighborhoods to rent the homes back to working middle class families that would have normally purchased a home in same neighborhood. While it may appear that there is no substantial difference in the end result, that is not the case.

           First, all of the tax benefits of interest payments flow to the hedge funds, not the middle class family. The end result is higher taxes and less disposable income for the family. Second, the homes are never upgraded in a way that many families would normally upgrade. Kitchens are not updated, bathrooms are just maintained instead of remodeled and other major repairs that would normally be performed by local companies are never performed by the renters or the out of state hedge fund which is only interested in maintaining a steady stream of income with large expenses.

            It will be interesting to see how the increased rental communities perform over the next few years as the houses age and are in need of upgrades. Will the new hedge fund owners perform the same repairs and upgrades to maintain a neighborhood value as local owners?

           If you have a home now that is delinquent or subject to foreclosure, contact our office to discuss saving the home through Chapter 13 Bankruptcy. The 13 offers a modification program and a cure program for previously modified homes in order to cure arrears and stop foreclosure.

            At Mickler & Mickler, we attend Court on a regular basis. We have the experience and knowledge to ensure that you receive the correct advice when confronted with difficult financial decisions related to filing bankruptcy. Contact us at 904.725.0822 or bkmickler@planlaw.com.

CAN ONE BAD DECISION LEAD TO FILING BANKRUPTCY?

            Lately, our office has noticed a new trend: Bankruptcy filings for people with only one bad debt. How is this possible? Doesn’t the normal bankruptcy filing result from years of financial problems finally becoming too large to deal with any longer? Not necessarily.

With the financial crisis over the past five years many people significantly reduced their debt burden each month. Cars were paid off and not replaced every 2-3 years, houses were repaired instead of sold and replaced with larger more expensive versions and even credit cards were paid off and kept at a $0.00 balance each month. The overriding issue for people became to keep what they had and not to constantly upgrade and incur new debt.

The financial downturn also lead to a decrease in collection activity. As weird as it sounds, the fact that finances were so dire meant that judgments and collection activity became worthless if there was no ability to pay on the part of the Debtor. Now that the financial markets appear to have recovered somewhat, collection activity is starting to pick up again.

So what about the one mistake that people can make which can lead to bankruptcy? With the accumulation of “paid for” assets such as bank accounts, cars, non-homestead property, equipment or inventory, people and/or companies become vulnerable to a judgment creditor attempting to collect on a new or old judgment. We’ve seen several instances recently of exactly this type of situation, where paying down property has led to the need to file a bankruptcy. Not necessarily to deal with the debt itself, but to protect the paid off property that is subject to a judgment. Even one judgment is usually enough to cause tremendous financial pain to people or companies since the amount of the judgment is more than can be paid off immediately.

Chapter 13 and Chapter 11 bankruptcies offer the opportunity to preserve assets that have been paid off, while offering the ability to work out a partial or complete repayment plan to the judgment creditor. The amount of repayment in any plan is based upon the value of the paid for assets (non-exempt only) and the left over income each month after living expenses have been paid.

CONCLUSION

            Asset protection is a valid reason for seeking bankruptcy protection. Don’t let one mistake ruin years of financial good behavior. Learn how to keep your assets and manage your financial issues by contacting our office.

At Mickler & Mickler, we attend Court on a regular basis. We have the experience and knowledge to ensure that you receive the correct advice when confronted with difficult financial decisions related to filing bankruptcy. Contact us at 904.725.0822 or bkmickler@planlaw.com.

WILL OBAMACARE CURE MEDICAL BANKRUPTCIES?

            During the next year, the Affordable Care Act will begin to be fully implemented. This massive piece of legislation will change healthcare in this Country dramatically in many ways. One of the biggest questions that remains unanswered is whether this change in healthcare law will reduce the instance of the “medical bankruptcy”.

            Medical bankruptcy is a broad term which is not limited to bankruptcies caused by an accumulation of medical bills which cannot be immediately paid. Many credit card bills and personal loans that are included in bankruptcy filings are really the result of attempts to pay medical bills prior to filing the bankruptcy. The end result is that it is estimated that three out of five, or 60%, of the bankruptcy filings each year are the result of medical issues.

            And the issues of health care costs causing bankruptcy is not limited to the uninsured. Nearly 10 million Americans with full time health insurance will accumulate medical bills that cannot be paid. (Source – Nerdwallet Health). Almost two million of that number will file for bankruptcy protection due to medical and other bills. Additionally, millions of Americans will take on credit card debt, skip prescriptions and be unable to afford basic necessities due to medical costs not covered by insurance.

            So what will happen when 2014 comes and everyone has health insurance (or is required to have health insurance)? Health care costs on the working class will certainly rise. The Plans offered will most likely offer less coverage or higher deductibles, as well. With the increased costs of health insurance, the high deductible plans that are currently available and a lack of wage increases, it seems that medical bankruptcy is here to stay.

CONCLUSION

            2014 should be a very interesting year with respect to medical costs and bankruptcy. Only time will tell if the increased insurance coverage promised by ObamaCare will result in fewer or more bankruptcy filings. Either way, be sure to seek legal advice from an experienced bankruptcy attorney if you are experiencing any medical related financial issues. At Mickler & Mickler, we attend Court on a regular basis. We have the experience and knowledge to ensure that you receive the correct advice when confronted with difficult financial decisions related to filing bankruptcy. Contact us at 904.725.0822 or bkmickler@planlaw.com.

Judgments and Bankruptcy

 Did you know that a judgment against you could result in loss of vehicles, a lien on your homestead, levy on your bank accounts and even garnishment of your wages? All of these things can happen if you have a judgment against you and take no action.

 Often, potential clients will come to us after a judgment has been entered and collection efforts have begun. In some cases, garnishments have been taking money from their paycheck for months. One of the best benefits of filing any type of bankruptcy is that it stops the collection of a judgment and allows you to get your finances back under control. Let’s look at a few ways that judgments affect people financially and how the filing of a bankruptcy can stop the collection.

 LOSS OF VEHICLES

 A judgment becomes a lien upon all of your personal property upon proper recordation with the Secretary of State or the County records. If you have a vehicle with a clear title, or even a vehicle with some amount of equity, the judgment creditor can seize the vehicle and auction it off to recover some or all of the judgment amount.

 Prior to seizure of a vehicle, a Chapter 7 will void the lien of the judgment creditor on a vehicle and it cannot be seized after filing. The filing of a Chapter 13 is necessary if the vehicle has been seized by a judgment creditor. The Chapter 13 will allow you to recover the vehicle and pay some money towards the judgment amount based upon the equity in the vehicle.

 LIEN ON HOMESTEAD

 The homestead exemption protects your home from sale by a judgment creditor. But a properly recorded judgment lien will become a cloud upon your title. When you try to sell the home or refinance, the title company will most likely require that the judgment be paid off prior to any sale or refinancing.

 The filing of a Chapter 7 or 13 bankruptcy will allow the judgment to be avoided as a lien on the homestead. There are additional steps which must be taken in your filing to make sure the lien is avoided. Don’t trust your home equity to an inexperienced filer or a paralegal.

 BANK ACCOUNTS

 Bank accounts are a favorite target of judgment creditors. The creditor simply files a notice of garnishment at the institution where you bank and your account is frozen. While joint accounts of husband and wife are exempt from garnishment for a single spouse’s debt, the process of exempting the account is complicated and timely. Your money may be tied up for months or gone by the time the exemption hearing happens in State Court.

The filing of a Chapter 7 or 13 case will release the garnishment from your account immediately. As long as the creditor has not transferred the funds from the account, then the money will remain yours after the filing of the bankruptcy, subject to the review of your Trustee.

GARNISHMENT

 By far the most common method of collection is the garnishment of wages. Federal law allows up to 25% of your wages to be deducted to pay a judgment. How can you live and pay your regular bills with a 25% pay cut?

 The filing of any bankruptcy will immediately put an end to the garnishment and allow you to retain control of you wages to pay your bills.

 CONCLUSION

 Judgments can be a financial catastrophe. Don’t risk losing your car, wages, bank account, etc. due to a past mistake. Take action quickly to resolve the situation through filing for bankruptcy to allow for an orderly way to maintain control of your finances.

 CONTACT US

 At Mickler & Mickler, we attend Court and see the bankruptcy trustees and judges in action several times a week. We have the experience to guide you to the right decision about whether to file a case, and if so, what Chapter to file.

 Please contact Mickler & Mickler at 904.725.0822 or bkmickler@planlaw.com. We will be happy to set you up a free appointment to discuss your situation and potential solutions.

Bryan Mickler

SHOULD I DISMISS MY BANKRUPTCY?

            Chapter 13 cases are typically a 5 year commitment. 5 years of committing all income to living expenses as budgeted and the plan payments. That means that almost everything has to go perfectly in your life for 5 years in order to make the plan a success.

But what happens when there are increased expenses or a loss of income and the Chapter 13 Plan is in jeopardy? Should you just ask the Court to dismiss the case and re-file a new 13 to start over? Unfortunately, that is not as simple as it sounds.

One of the quirks of the Bankruptcy Code is that you really need to have the case dismissed by the Trustee for failure to make your payments, instead of just speeding up the process and requesting to dismiss the case on your own. But, why should there be a difference? The answer lies in section 109 of the Bankruptcy Code.

11 U.S.C. § 109(g)(2) provides as follows:

(g) Notwithstanding any other provision of this section, no individual or family farmer may be a debtor under this title who has been a debtor in a case pending under this title at any time in the preceding 180 days if–
(2) the debtor requested and obtained the voluntary dismissal of the case following the filing of a request for relief from the automatic stay provided by section 362 of this title [11 USCS § 362].

11 U.S.C. 109(g)(2)(2013).

Some courts have interpreted this section to mean that if any creditor, at any time in the previous Chapter 13, filed a Motion for Relief, then the second case must be dismissed if the first case was voluntarily dismissed. This is true even if the Motion for Relief was denied, withdrawn or ended up being just an adequate protection order.

            However, the above provision has also been interpreted to require “causation” as a result of the filing of the Motion for Relief. The filing of the Motion for Relief does not, in and of itself, give rise to the automatic dismissal provisions of sec. 109(g)(2). See, In re Milton, 82 BR 637 (Bankr.S.D Ga 1988). (“Debtor’s subsequent dismissal and refiling of Chapter 13 case does not violate provisions of 11 USCS § 109(g) because as of date of refiling there was, legally speaking, no pending motion for relief from stay that was unresolved in previously filed and dismissed Chapter 13 case.”); In re Copman, 161 B.R. 821, 824 (Bankr. E.D. Mo. 1993) (finding “no connection” between the debtor’s voluntary dismissal of the case and the creditor’s request for relief from stay).

            The causation approach is that § 109(g)(2) was enacted “for the sole purpose of curbing abusive repetitive bankruptcy filings by debtors seeking to overcome the grant of relief to a creditor from a stay in a prior case” and the statutory language is a direct response to that concern. In re Beal, 347 B.R. 87, 92 (Bankr. E.D. Wis. 2006) (citing S.Rep. No. 65, 98th Cong. 1st Sess. 74 (1983)); See also, In re Durham, 461 B.R. 139, 142 (Bankr.D.Mass. 2011) (following causation approach and dismissing case where relief from stay was granted to mortgage lender prior to initial case being dismissed).

CONCLUSION

            Be careful when requesting a dismissal of any type of bankruptcy filing. You really have to know how the judges interpret this section and be aware of any pending motions for relief when you consider a voluntary dismissal.

            At Mickler & Mickler, we attend Court on a regular basis. We have the experience and knowledge to ensure that you receive the correct advice when confronted with difficult financial decisions related to filing bankruptcy. Contact us at 904.725.0822 or bkmickler@planlaw.com.

Rising Home Prices and Bankruptcy

With the recent news that home prices were rising, the issues facing the average homeowner when they consider filing for bankruptcy are becoming even more complicated. The median home price was up 15.7 percent to $135,025, while closed sales and pending sales also saw double digit increases — up 11.5 percent and 36.9 percent respectively as of February of 2013 final figures. (Source: North East Florida Association of Realtors).

EFFECTS OF RISING HOME PRICES OUTSIDE OF BANKRUPTCY

The most obvious effect of rising home prices is that people purchasing homes now are paying more monthly for mortgage payments, taxes and insurance than previous purchasers. This means less money available for necessities such as food, electric, transportation, etc.

When the last run up in home prices occurred during the years 2000-2006, home equity loans and credit cards were used as additional sources of income by homeowners attempting to keep up with rising home costs and living expenses. The results were disastrous. When home prices fell, the ability to refinance and pay off debt evaporated. Then the credit card debt became too much to sustain and the financial crisis was underway. Bankruptcy filings rose rapidly and millions of families lost their homes.

EFFECTS OF RISING HOME PRICES IN BANKRUPTCY

The most obvious example of rising home prices potentially affecting a person who is looking to file bankruptcy is the potential impact on the ability to strip off a second mortgage. I have previously written about stripping off of second mortgages in Jacksonville, FL bankruptcy:

https://www.planlaw.com/stripping-second-mortgages-in-jacksonville-chapter-7/

In order to qualify for this relief, you must file Chapter 7 or 13 case, have a home with a first mortgage (even homestead property is eligible) and the value of the home must be below the payoff of the first mortgage. Often, a tax value is appropriate to use to determine your home’s value or an appraisal may be ordered to determine valuation.

With rising home prices, this ability to strip a second mortgage may not be available. The value of the home may actually rise over the amount owed on the first mortgage. Until recently, that was almost unheard of in real estate.

The rising home values may also affect the ability to obtain a modification of the first mortgage. When a modification of the first mortgage is attempted, the mortgage company does what is called a “net present value” calculation. If the mortgage company feels that there is more value in foreclosing the mortgage and liquidating the home on the open market, then there may be no incentive to modify the loan and wait to be paid off by homeowner through the modification. The result could be a denial of the modification and foreclosure of the mortgage.

CONTACT US

At Mickler & Mickler, we attend Court and see the bankruptcy trustees and judges in action several times a week. We have the experience to guide you to the right decision about whether to file a case, and if so, what Chapter to file.

Please contact Mickler & Mickler at 904.725.0822 or bkmickler@planlaw.com. We will be happy to set you up a free appointment to discuss your situation and potential solutions.

Bryan Mickler

HOA Liens and Bankruptcy

I have previously written about stripping off of second mortgages in Jacksonville, FL bankruptcy:

https://www.planlaw.com/stripping-second-mortgages-in-jacksonville-chapter-7/

But what about condo and other HOA liens when you file a Chapter 7 or Chapter 13 case? Do the HOA liens get treated the same as a regular second mortgage? Can the lien be stripped in a Chapter 7 like a second mortgage?

HOA Liens in General

 HOA liens such as condo liens and homeowner’s assessments are junior mortgages which are secondary to a purchase money mortgage on a residence or investment property. See In re: OLGA P. BUSTAMANTE; Case No. 6:12-bk-12877-KSJ; http://pacer.flmb.uscourts.gov/pdf-new/63788532.pdf. Any first mortgage recorded after 1990 is a superior lien to any recorded HOA declarations. Fla. Stat. § 718.116(5)(a).

This means that the lien is subject to being stripped off in a Chapter 7 case pursuant to the McNeal decision in the 11^th Circuit discussed in the above blog and in Chapter 13 cases. See In re Plummer, 484 B.R. 882 (Bankr.M.D.Fla.2013).

In order to qualify for this relief, you must file Chapter 7 or 13 case, have a home with a first mortgage (even homestead property is eligible) and the value of the home must be below the payoff of the first mortgage. Often, a tax value is appropriate to use to determine your home’s value or an appraisal may be ordered to determine valuation.

Pre-petition assessments v.  Post-petition assessments

The stripping off of the HOA lien is only valid against pre-bankruptcy assessments. Any assessments that come due after the filing of a Chapter 7 or Chapter 13 case would be excluded from discharge and being stripped by 11 U.S.C. § 523(a)(16), which provides that any post-petition assessments remain the responsibility of the owner as long as the title to the property is in the name of the owner.

 Problems with HOAs after bankruptcy

Imagine this nightmare scenario: A Couple filed Chapter 7 in 2008 and gave up their home in a community where there was an HOA. The first mortgage was delinquent and the house was underwater due to the recent real estate slump. They moved out and lived peacefully for several years. However, the mortgage company was slow in foreclosing on the home due to title issues.

Now it is 2013 and the home is still legally in the name of the Chapter 7 couple and the HOA is suing them for a money judgment for the post bankruptcy assessments that have come due since 2008. Sound far fetched?? It’s not and has happened several times to people who filed Chapter 7 or Chapter 13 in Jacksonville. Don’t let this happen to you!! Learn about your rights and the appropriate steps to take to protect yourself from this type of situation.

CONTACT US

At Mickler & Mickler, we attend Court and see the bankruptcy trustees and judges in action several times a week. We have the experience to guide you to the right decision about whether to file a case, and if so, what Chapter to file.

Please contact Mickler & Mickler at 904.725.0822 or bkmickler@planlaw.com. We will be happy to set you up a free appointment to discuss your situation and potential solutions.

Bryan Mickler

Tax Refunds and filing bankruptcy

It’s tax season again. That means that Chapter 7 Trustees and the Chapter 13 Trustee are looking for tax refunds from anyone who has filed for bankruptcy. Generally, a tax refund is earned over the course of the prior year and is a pre-bankruptcy asset that must be turned over to a bankruptcy trustee.

However, that tax refund is important to many families as a source of funds to use for long put off repairs, new clothes for the kids or any other unusual expense. When this time of the year comes around, one of the first questions that we ask potential clients is “Have you filed your tax return yet?”. If the answer is yes and a refund is coming, how can the refund be preserved when a bankruptcy filing is needed?

CHAPTER 7 AND TAX REFUNDS

As stated above, your pre-bankruptcy tax refund will generally belong to a Chapter 7 Trustee. Unless some collection activity is about to take place which will result in the garnishment of a paycheck, loss of vehicle or the foreclosure of a home, the filing of a Chapter 7  may not be immediately necessary. The delay in filing of the Chapter 7 can allow a family to utilize the tax refund for normal living expenses or to pay for long overdue repairs to a home or vehicle. You should keep a record of all expenditures which were paid for with the tax refund and be prepared to show that the refund was completely spent on the living expenses or repairs.

If you must file the bankruptcy and have not received your refund, be sure to attempt to exempt some or all of the refund. Earned Income Credit (EIC) refunds are exempt. Check your tax refund to see if some or all of the refund is EIC and exempt. Chapter 7 debtors are also entitled to personal property exemptions which may be used to cover some portion of the refund. In Florida, a married couple who does not claim a homestead can claim up to $10,000.00 in personal property exemptions which may be used to cover a refund that has not been received. At Mickler & Mickler, we can help to prepare your Chapter 7 case to maximize your exemptions as allowed by law.

CHAPTER 13 AND TAX REFUNDS

Chapter 13 is not a liquidating type of filing. That means that the Chapter 13 Trustee generally won’t be entitled to seize a pre-bankruptcy refund as a Chapter 7 Trustee would. However, the refund may be considered “disposable income” that may be subject to turnover to the Trustee. This disposable income requirement will cover all years that a Chapter 13 case is pending and tax refund may be received. Disposable income is generally defined as monthly income minus necessary living expenses. It is a flexible standard that can be tailored to fit many different lifestyles. What will normally end up happening in a Chapter 13 case is that the necessary repairs or other expenses will have to be submitted to the Chapter 13 Trustee or the Judge in a case to determine if the refund should be used to pay such expenses or will have to be paid to the unsecured creditors in a case.  Again, such determinations are made on a case by case basis and may change from year to year depending on the financial condition of the debtor. Our office routinely submits request for a debtor to be allowed to keep a refund in order to pay for necessary expenses. We are familiar with the requirements for such a request and can advise if such a request should be filed.

At Mickler & Mickler, we attend Court and see the bankruptcy trustees and judges in action several times a week. We have the experience to guide you to the right decision about whether to file a case, and if so, what Chapter to file.   When you contact our office, we can help you in your case with sound legal advice.

Please contact Mickler & Mickler at 904.725.0822 or bkmickler@planlaw.com. We will be happy to set you up a free appointment to discuss your situation and potential solutions.

Bryan Mickler

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