*Note: For those unfamiliar with the bagel reference, you can find the explanation in this NY Post article along with some additional modern bankruptcy cultural history in this NY Observer article.More on Bankruptcy Bill's Bankruptcy Humor
Filed under Bankruptcy humor by 
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.
Filed under Foreclosure issues, Mortgages by
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.
Filed under Blog by
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
Filed under Recovering from bankruptcy by
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.
Filed under Causes of bankruptcy, Preparing for bankruptcy by
