The Associated Press reports that the Federal Reserve Bank will be offering a "relief plan" to qualified homeowners whose loans were guaranteed by Freddie Mac and Fannie Mae.  Under the Fed's new foreclosure prevention effort, homeowners may get a reduced interest rate, longer loan term or a lower total mortgage amount.  The Federal Reserve policy statement is set out in general terms at the Federal Reserve web site.

It is unclear exactly how the Fed's policy will be implemented, or when regulations and procedures will be published.    Further, according to the AP story, the amount of mortgage securities in question, valued at up to $74 billion, pales in comparison to the $1.75 trillion in outstanding risky loans, according to trade publication Inside Mortgage Finance.

It will be interesting to see if the Federal Reserve policy has any signfiicant impact on the foreclosure or bankruptcy rate.

As much as it would be nice to believe that everything about bankruptcy is predictable, in fact, there are many gray areas where your treatment depends as much on the parties involved as the situation itself.

One such situation arises if you file Chapter 7 but do not enter into a formal written reaffirmation with your mortgage company.  Reaffirmation, as you may know, is the process by which you renew your contractual obligations with your lender.  In the case of mortgage debt, if you do not reaffirm, in theory you will no longer have any personal liability with your mortgage lender.

Section 521(a)(2) of the Bankruptcy Code requires all Chapter 7 debtors to submit a statement of intention in which they assert their agreement to reaffirm or surrender secured property.  In theory, if you do not reaffirm your mortgage, Section 521(a)(6) provides that the automatic stay shall be lifted and that the creditor can foreclose on the property.

In reality, however, some debtors submit a statement of intention providing for surrender, but they continue to make payments and remain in the property.  In other cases, debtor submit a statement of intention providing for reaffirmation but they never execute the documents.  Often, there is no equity in the property and the mortgage lender would rather have the monthly payment than to foreclosure and add yet another home to their inventory of houses.  In yet another scenario, your budget may not support a reaffirmation because it does not show enough cash available to pay the mortgage and your attorney may advise you not to submit reaffirmation paperwork.

If you do not reaffirm your mortgage, you will have no personal liability to pay the debt, but the lender retains a lien interest on the property.  Because there is no personal liability, most lenders will not report timely payments as a positive on your credit reports.  Should you fall behind at some point in the future, or if property values were to rise unexpectedly, the mortgage lender would arguably be within its rights to initiate foreclosure proceedings months or years from the end of your bankruptcy.

The point here is that if you choose not to reaffirm your mortgage obligation, you need to discuss with your lawyer what such a decision means, both in the near term and in the long term.  Do not assume that "things will work out" because that does not always happen.  Proceed with a plan and understanding of your situation.

Although most people who end up filing for Chapter 7 or Chapter 13 need to do so because of an immediate crisis like a foreclosure, wage garnishment or even harassing phone calls, our attorneys and paralegals usually do get questions about how long a bankruptcy will remain on the debtor's credit reports.

Credit reporting agencies are private companies and each of the three major agencies has its own policies.  The Fair Credit Reporting Act provides that a bankruptcy can remain on your credit report for as long as 10 years.  We usually find that the credit reporting agencies report Chapter 13 for seven years and Chapter 7 for the full ten years.

Cleveland bankruptcy lawyer Justin Smith recently published an informative post on his Cleveland Bankruptcy Law blog entitled "Ohio Credit Concerns: How Long Will a Bankruptcy Filing Stay on my Credit Report?"   In his blog post, Justin explains in some detail about bankruptcy and credit reporting and why your credit will look better the further in time you go from your filing date.

Thanks to Justin for providing the following addresses and phone numbers:

To get your free credit report you can write or call:

Annual Credit Report Request Service
PO Box 105281
Atlanta, GA 30348-5281
1(877) 322-8228

You can also contact any of the credit bureaus directly by clicking on the links below or calling the number listed:

Visit Equifax or call 1(800) 685-1111
Visit Experian or call 1(888) 397-3742
Visit TransUnion or call 1(800) 916-8800

Reuters is reporting that a leading credit card industry analyst believes that major credit card lenders plan to reduce lines of credit by over $2 trillion over the next 18 months.  Consumer liquidity will decline by approximately 45% says Meredith Whitney a banking analyst for Oppenheimer & Company.

Leading credit card lenders like Bank of America, Citigroup and Chase have incurred larger than normal losses due to increasing consumer defaults.

What does this mean to you?  If you are like many struggling Tennesseans, credit card lines of credit serve as a key source of consumer liquidity.  If your credit line is cut from $20,000 to $10,000 your emergency safety line will be that much smaller.   Do not be surprised to see your credit line reduced to a level below your current balance, meaning that you will being seeing overlimit fees not because you exceeded your limit, but because the credit card lender reduced that limit.

Consumer advocates recommend that you should avoid accessing more than 30 to 40% of your available credit line.  If you find yourself servicing larger balances than this, now is the time to start chipping away at those balances.

We also expect to see more bankruptcy filers who are forced into Chapter 7 or Chapter 13 because their credit card lenders will be taking an extremely hard line on overlimit fees and penalty interest rates.   Although we are a bankruptcy firm, we encourage all of neighbors not to let these hardline credit card industry policies drive you into bankruptcy.

A question we get frequently at our offices in Tampa and in Orlando has to do with the potential impact of a bankruptcy petition on a debtor's immigration status.  Miami based immigration lawyer Michael Shane answers this question in a concise and well written article entitled "Effect of Bankruptcy on Naturalization Eligibility," which is published on the Lawyers.com web site.

Michael notes specifically that there is no immigration law, statute, or regulation that specifically forbids individuals who have filed for bankruptcy from applying for Naturalization. Additionally, there is no specific question on Form N-400, Application for Naturalization, inquiring into bankruptc.

However, he also notes that your immigration status can be affected if you have not filed required tax returns or if you owe money to the IRS.  Further, he notes that the INS could view bankruptcy as evidence of "poor moral character" which could be grounds to deny naturalization.

Mr. Shane suggests, and we agree, that if you are facing any type of immigration issue, that you reveal that fact to your Clark and Washington lawyer prior to actually filing and that you discuss your potential bankruptcy with your immigration counsel.

The Tampa Bay Business Journal reports that Florida Attorney General's Economic Crimes Division has launched an investigation or filed charges against 10 companies offering Floridians credit counseling, credit repair, credit card rate reduction services, and other debt relief services.  This action by the Attorney General arose from more than 1400 complaints regarding debt relief companies who promised services that were not delivered.

Clark and Washington regularly advises our clients and prospective clients to be extremely wary about any company that purports to have a "secret process" to reduce debt or cut interest rates.  Credit card companies, banks and other lenders are in business to make money and there are no secret back door channels to reduce debts.

Any reduction that you might see will be a reflection of whatever risk that the lender sees.  For example, consider the following:

Borrower 1: Bob lives in a single family home with a mortgage and a home equity line of credit.  He is current with his mortgage.  Bob and his wife earn $75,000 annually and he owes $5,000 to Creditor A, $5,000 to Creditor B and $7,500 to Creditor C.  He is current with all of his credit card debt but because of some other expenses, the minimum credit card payments leave him with little left over at the end of the month.

Borrower 2: Sally is a single mom with 3 kids who lives in an apartment.  She has lived in 3 different places over the past year and has broken 2 previous leases.  Sally used to work for a trucking company and earned $65,000 annually, but she lost her job 6 months ago and has been working temp jobs ever since.  Sally owes $5,000 to Creditor A, $5,000 to Creditor B and $7,500 to Creditor C.   Sally paid the minimum payments on credit cards for a few months, but she failed to pay anything in June and July and only paid August and September because of near constant harassment from bill collectors working for the credit card companies.

Bob and Sally have both retained the services of credit counseling services.  If you were a credit manager for Creditor C, how would you respond to a request for a reduction in balance and interest rate from the credit counselor?

Clearly, Sally represents a much higher risk.  She owns no real estate that can be encumbered by a lien and because of her erratic employment situation, it will be difficult to garnish her wages.  Sally also represents a risk that other creditors may sue her first, and therefore end up with superior rights to pursue assets.  Sally also appears to qualify for Chapter 7, which could wipe out all debt owed to Creditor C.

Bob, by contrast, represents a much lower risk.  He has a home, which could be encumbered by a judgment lien.  He has a stable job, which means that his wages could be garnished and because he is current with all payments he appears to have the capability of continuing to pay.

Creditor C's credit manager is likely to offer very little to Bob's representative.  There is very little risk that Bob will default, and it is possible that a call from a credit counselor will trigger Creditor C to increase the interest rate, reduce Bob's credit limit and shorten the grace period for payments.

Unsecured creditors have very little leverage and they generally take the position that the "squeaky wheel gets the grease."  Creditor C will do everything in its power to encourage Bob to direct his resources into paying Creditor C by increasing the pain factor (interest rates, shorter grace period).  The problem, of course, is that once Creditor C puts Bob in a higher risk category, his other creditors will spot this action on his credit reports and they will do the same, possibly leaving Bob with an unmanageable situation.

Now, what about Sally?  Creditor C's credit manager is likely to see Sally as a significant risk for total default or bankruptcy.  The credit manager is likely to offer Sally's credit counselor a deal to avoid that default, or worse, bankruptcy.  Sally's best deal would come if she can come up with a lump sum of $2,500 to $3,000.  Creditor C would be happy to "take the money and run."  Otherwise, the credit manager wants to do everything in his power to encourage Sally to devote her limited resources to paying Creditor C as soon as possible.  Terms might include a reduction in the total balance, lower minimum payments and a reduction in interest for a few months.

It is also possible that the credit manager will refuse to do anything.  If statistics complied internally by Creditor C document which type of negotiation is likely to result in higher rates of payments.  Perhaps a reduction in interest rates results in a higher payment rate for a person in Sally's position, or perhaps a 2 month moratorium on interest.

If Sally's account has been sold to a private debt buyer, that debt buyer may have its own business model for negotiating with delinquent account holders.

The point of walking you through this analysis about Bob and Sally is to demonstrate that any deal that Sally or Bob might get is the result of where these individuals fall within the business models used by Creditor C or a debt buyer who bought the account.  At best a private credit counselor may have some knowledge about the circumstances in which a creditor will negotiate but the terms of any "deal" will be set by the creditor.

In addition these "deals" are likely to be moving targets as creditors and debt buyers are constantly coming in and out of the market, and they are constantly adjusting their business models.

When you consider the number of complaints that the Florida Attorney General has received about private credit counselors, it would appear that many Floridians are not too happy with the results they are seeing.  If you are in a debt crisis, or if you see a crisis on the horizon, Clark and Washington encourages you to call our office for a no-obligation consultation.  We also recognize that bankruptcy is only one answer to debt issues, but it is not the only answer.  As attorneys we have a professional and ethical responsibility to offer advice that addresses your needs and not our profit.  Take advantage of this free consultation and debt evaluation by calling our office at 813-345-5954.

Are you required to include all debts when you file for bankruptcy?  Our office recently received the following question by email:
I would like to know if I can file a Chapter 13 on my home loan. I am overdue 2 months. I do not want to include credit card debt.

Here is our answer: the bankruptcy laws are very specific that you must include all of your debts when you file for bankruptcy.  You cannot include some bills and leave others out.  Realize that notice of your bankruptcy will shortly be included in your credit files so it is almost certain that all of your creditors will find out about your filing anyway.

We strongly urge you to provide your bankruptcy lawyer with a copy of your credit report and to advise your lawyer about all of your debts.  Full disclosure will result in your best bankruptcy results.

Clark and Washington announces the opening of two new offices in the Tampa/St. Pete area.  The New Port Richey office is located at 6014 U.S. Hwy. 19, New Port Richey, FL in the Bank of America Building.  Another new office was recently opened in Lakeland at 5302 S. Florida Avenue, Suite 209 in Lakeland, just south of Lake Miriam Dr.

With the opening of these two offices, Clark and Washington now has seven (7) convenient offices in the Tampa area.  As always, telephone and office consultations are offered at no charge and most cases can be filed for the filing fee only.

Call us at 813-345-5954 for an appointment or for more information.

With the economy in a recession, job layoffs common and prices for necessities rising, it is no surprise that bankruptcy filings across the country are at an all time high.  Not surprisingly, our firm frequently receives calls from prospective clients who need to file bankruptcy but who are flat broke.

If you are extremely cash strapped, you might be tempted to look for a "cheaper" way to file for bankruptcy - either by trying to fill out the bankruptcy petition paperwork yourself or by hiring a non-attorney "petition preparer" to assist you.

At Clarkand Washington, we would strongly urge you to reconsider any decision to proceed with bankruptcy without the help of a licensed Florida attorney.

Bankruptcy paperwork is complicated and mistakes in preparing and filing your petition and subsequent pleadings can haunt you for years to come.  More importantly, you may not receive all of the benefits that bankruptcy can and should provide you.

Here are just a few of the complicated issues that arise in every bankruptcy case:

• means test analysis - the Bankruptcy Code requires every debtor to prepare and submit an detailed analysis of his/her family income during the six month period prior to filing.   The purpose of this analysis is to determine whether you have enough "disposable income" to pay creditors back in a Chapter 13, or if you qualify for Chapter 7.  The means test analysis requires you to use IRS tables of approved monthly expenses and median income tables for various family sizes that is prepared by the United States Trustee's office
• amendments to petition - frequently you will face objections or requests for additional information in your Chapter 7 or Chapter 13 case.  These requests will come in the form of official looking pleadings that will be served on you.  If you are proceeding without counsel, you may not know how to respond to these pleadings or where to submit your response.
• bankruptcy procedure requirements - in addition to the official pleadings, every individual bankruptcy debtor must submit additional paperwork, including credit counseling certificates, financial management course certificates, pay stubs (with Social Security numbers blacked out) and tax returns.  Would you know where and how to submit these documents if you are proceeding without counsel?

It is unfortunate that preparing and filing a bankruptcy has become so complicated.   However, Clark and Washington has a standing policy whereby we will not turn away any deserving debtor because of a lack of cash on hand.  In most cases, we will be able to file your Chapter 7 or Chapter 13 case with only the filing fee paid (the filing fee for Chapter 7 is $299 and the filing fee for Chapter 13 is $274).  Thus, for less than $300 to start, you gain the benefit of an experienced Tampa bankruptcy law firm.

So, if you are tempted to file bankruptcy on your own or with a non-attorney, please take a minute and call our office first.