File a Bankruptcy on Your Own....In Five Minutes!

Ever wondered how to file a bankruptcy on your own?  Well wonder no more, here is the quick 5 minute course on how to do it!

1. Fill Out the Required Bankruptcy Forms
1. Link to Official Bankruptcy Forms! 
2. Take your pre-bankruptcy credit counseling course at least one calendar day prior to your filing
1. Link to an Example of Court Approved Credit Counseling Agency 
3. File your bankruptcy by going to the Federal Clerk of Court in your district
1. Link to Information about Where to File 
4. Submit your Chapter 341 Documents within 14 days to the bankruptcy
1. Link to Information on how to submit your 341 documents 
5. Attend your 341 Meeting
6. Wait for your Discharge Order!
7. Need Help - Contact the Bankruptcy Assistance Desk
1. Link to the Help Desk

That's it.  How hard can it be?  Avoid attorney fees and file it on your own.

So what's the catch?  Why do people use attorneys in probably 95% of all cases:

• What do you fill - in the forms?
• How do I reaffirm a debt? - such as to keep my car or home
• How do I fill out the means test? - It's worse than doing my taxes
• What do I say and do at my 341 meeting?
• Should I be using a Chapter 13 bankruptcy for my higher income and/or need to save my home?
• What is a motion for relief from stay?
• Why has the trustee filed a motion to dismiss?

Bottom line - filing on your own is a good option when you have a lot of time on your hands and can go to the bankruptcy assistance desk to help along the way to confirm your filings are done right.  This is great for people who have racked up alot of debt say $60,000 in credit card debt are now unemployed, getting harassed by creditors and will not likely be re-employed for at least one year.  This is true of people in the construction business and other long cycle industries.  Another good application for filing on your own is when you have made alot of money in the past, have lots of debt and then suffer a disability which becomes permanent leaving you with an income that is often only 20% of your former income.  In this case you won't be taking on more debt in the future and you are really in no danger of a lawsuit or garnishment, but you simply want to clean up and get rid of all of the old debt so that you can focus on your new life.  Many times these folks will do best using legal aid associations providing pro-bono - free bankruptcies.  One large organization that is used in Cook County is:  Legal Assistance Foundation of Metropolitan Chicago

For a free 1/2 hour bankruptcy consultation to learn whether you qualify for debt relief under bankruptcy or should even consider filing on your own, please call 877-GO-GO-NLO (877-464-6656) or Click this link and email your request for a consultation.

A new video of David C. Nelson from NLO Nelson Law Office!

Can I Skype or Video Conference My 341 Bankruptcy Meeting?

Can I Skype or Video Conference my 341 Bankruptcy Meeting.  Yes.

I recently had a client who filed for a Chapter 7 Bankruptcy several days before leaving for a year contract work assignment in a foreign country.  The client wished to file bankruptcy before she left to ensure that her creditors were not harrassing her while out of the United States.  However, returning to the United States for the 341 Meeting was cost prohibitive at nearly $4000 round trip cost.  After speaking with the United States Trustee and reviewing the bankruptcy code, I learned that there is no real law that either prohibits the use of video conferencing for this hearing  or supports the use.

In the Northern District of Illinois, it is essentially at the discretion of the U.S. Trustee and Local Chapter 7 Bankruptcy Trustee to allow this meeting if it will meet the requirements of a 341 meeting.  Essentially, the trustee needs to ensure that:  1) The debtor is the one present at the 341 meeting  2)  That the debtor review the petition prior to filing it and that the debtor did sign the declaration and recognizes her name.  3)  Identification can be proven up where the debtor's bankruptcy attorney has seen all identification in his office prior to the meeting and has personally met the debtor and can identify the debtor to the trustee.  The trustee must be able to verify the debtors Identification and the picture of the video conferencing match and that a positive identification has been made.  Then it is really just a regular meeting except that the debtor is not in the flesh to confront the trustee and creditors if present.

My recommendation if that the court consider establishing bankruptcy rules that allow video conferencing under the following circumstances:

1)  It would be an undue hardship for the debtor to attend the meeting in person
2)  The debtor found it important to file the bankruptcy realizing that she could not attend the 341 meeting person.
3)  The court should adopt a formalized script for identifying the debtor
4)  The court should set forth minimum standards of quality

In essence this is an extension of the already commonly used telephone appearance made by out of state attorneys in bankruptcy court where to appear in person would be cost prohibitive and to not appear would against the interests of good justice.

In conclusion, I do not believe that Skype or Video Conferencing should be the norm in our 341 meeting appearances, but do believe in situations where a debtor will have an undue hardship in attending that it be an accepted substitute of in person appearance as a means of furthering good justice.

Why Hasn't My Loan Modification Become Permanent - I've made the trial modification payments and now I haven't heard anything from the bank?

Homeowner is a woman whose house is worth approximately $100,000.  She has a mortgage loan of approximately $180,000 and a new trial modification payment of $1000 per month.  She has made all three trial modification payments of $1000 each on time and in compliance with the lender's demands.  At this time, she has now made a total of 6 payments and the lender has still not offered a permanent loan modification.  After the third payment was made the lender "asked for more information".  She has not been able to get any more updates from the lender.

What should she do?

If she wants to stay in the house for over the next five years regardless of whether the loan modification is made permanent, keep making the trial modification payments until the lender says otherwise.

If she does not want to keep the house unless she get the permanent loan modification, I would recommend walking away from the home.  The homeowner should try a short sale, deed in lieu of foreclosure and ultimately bankruptcy to eliminate this debt.

Rationale:

Most residential primary household loan modification are done under the guidelines of the HAMP (Home Affordable Modification Program).   This "program" is not a law and is not something that a homeowner can enforce against a lender.  Instead, it is a law that provided "incentives" of up to $1000 to a mortgage servicer to  keep a borrower from defaulting on their mortgage.  The incentives HAVE EXPIRED.  Lenders are simply offering modifications under these guidelines to improve their profitability by keeping more borrowers from defaulting.  However, where a borrower really can't afford the home long term, it can be surmised that lenders are simply "stringing along" borrowers for several months...without end at trial loan modification payments amounts to get them to pay more towards the lender until they ultimately either give up, default or go back to making their regular mortgage payments.

Therefore, in this case if the borrower simply stopped paying after 6 months of trial modifications, she would be:

1. In Default
2. Not have a modified mortgage
3. Be in arrears immediately because she had been making a lower payment than what was required by the lender

So why can a lender get away with this?

1. Lenders DO NOT have to give modifications after the trial period is completed
2. Lenders DO NOT have to given modifications even if underwriting says they qualify
3. Lenders CAN tell borrowers that they will accept lower payments and accept them and Still then declare a default at anytime and foreclosure AT THEIR LEISURE AND WILL
4. Borrower CAN BE SCREWED OVER at anytime in these modifications
5. Lenders CAN CHERRY PICK only the best borrowers and use modification processes to hurt borrowers and get the most amount of money from them

So is there any justice?

YES - in foreclosure, if the borrow hires good legal counsel for usually more than $2500 in legal fees, fraud can be alleged and judicial action can be taken against the lenders including rescinding the loan.

Why don't we here more about loans being rescinded?

Usually borrowers are completely out of money and the will to fight any longer by the time the foreclosure begins and simply walk away.  Lenders know this and build their business models to exploit this.

Bottom line - BE AN ACTIVIST!  If you don't get your permanent modification in three months as promised, don't wait - take action.  Call any attorney immediately to figure out your options:

1. Foreclosure Defense
2. Bankruptcy
3. Non-Bankruptcy Surrender Options

For more assistance and to schedule a consultation click this link to email NLO Nelson Law Office today by clicking HERE! or calling 877-464-6656

Illinois Hardest Hit Program - Save Your Home - $25K Grant to Pay Mortgage Arrears

For anyone who hasn't heard, here's the news...there's a new program on the block for saving your home.  And for some people, it's a hit.

Looking for unbiased help in figuring out how to save your home?  Check out the following housing organizations. Click on the Link.  I have worked with all of them for years and know of their honesty and fair dealing:

• Rogers Park Community Housing
• Latin United Community Housing (LUCHA)
• Spanish Coalition for Housing
• Illinois Housing Development Authority

The Illinois Hardest Hit Program essentially gets your home out of foreclosure.  Pays all the arrears, court costs, etc. to reinstate your loan fully and then provides up to 18 months of payment assistance.  The cap on the assistance is $25,000.

To apply for this program, please go to (click link):  Illinois Hardest Hit Program

Pro's:

• No Fees
• Completely Reinstates Your Mortgage 
• Up to 18 months assistance

Con's:

• Increases the mortgage balance on your home by up to $25,000
• Does not reduce the total amount owed on your home
• Does not provide assistance after 18 months which is a problem if a person has not secured employment or their family is only partially employed.

Who are the best candidates for this program:

• Homeowners who are only temporarily out of work and can easily return to work in a stable job within 18 month of starting the program.
• Homeowners whose mortgage has less than $15,000 in arrears or is about 6 months or less behind
• Homeowner who want to stay in their house for 10 years or more and does not care about having the flexibilty to move....for say a new job, changed family circumstances (divorce) or any other matter

Who are the worst candidates for this program:

• Homeowners who haven't made a mortgage payment for over one year
• Homeowners who are in a profession that has been affected by the severe economic downturn such as construction or union jobs and are unlikely to have stable employment for the next five years
• Homeowners who want the ability to be flexible in selling their home in the next 10 years.

Who should consider a short sale of their home instead of this program:

• Homeowners who cannot afford their home even when they are fully employed
• Homeowners who are in an employment industry that will not recover soon and may need to relocate for employment
• Homeowners who have so much debt on their home that they will not have equity for ten years or more (typically someone with two or more mortgages including a home equity line of credit)

Who should consider a Chapter 7 Bankruptcy instead of all of these options?

• Homeowners who have unsecured debt (credit card style debt) that exceeds more than 1/3 of their annual take home pay.
• Homeowners who have not made a mortgage payment in over one year
• Homeowners who have not been able to get a short sale approved by their lender
• Homeowners who want to easily walk away from a home to simply move-on or need to relocate for employment
• Homeowners who are insolvent - that is - no real assets outside of retirement accounts

When is a Chapter 13 Bankruptcy Reorganization a  better than the Illinois Hardest Hit Program?

• When a mortgage debt is more than 6 months in arrears (no payment for at least 6 months or longer
• When the homeowners property has more than one mortgage such as a second mortgage or home equity line of credit
• When the homeowner has equity or something valuable to save in the property but also has a large amount of unsecured debt (credit card style)
• When the total home mortgage debt can be reduced through "stripping off the second and junior mortgages/liens".

Can I file Bankruptcy if I am not a U.S. Citizen and/or not a legal Resident? Yes

Can I file Bankruptcy if I am not a U.S. Citizen?   YES

Can I file Bankruptcy if I am not a Legal Resident of the U.S.?  YES

If I am not a legal resident and I file bankruptcy, should I use the Social Security Number that I Purchased years ago?   NO

If I am not a legal resident, but I have a TIN (Taxpayer Identification Number) should I use the TIN instead of a Social Security Number:  YES

What are the risks of filing bankruptcy if I am not a U.S. Citizen and/or not a legal resident of the U.S.?

1. Deportation
2. Charges of Bankruptcy Fraud because of use of Social Security Number owned by someone else or a deceased person.
3. Charges of Tax Evasion for non-filing of taxes even though income is known to exist.

Discussion:

The bankruptcy code specifically grants to every occupant of United States Soil the opportunity to avail themselves of the bankruptcy just as any visitor to the United States avails themselves of the laws of the United States.  However, filing bankruptcy, means that the Social Security Number, Your Name, Your Address and Taxpayer Identification Number come to surface in a public way.  So, if you are someone that Homeland Security wants to deport for a crime, you probably shouldn't file;  if you are someone who has never filed taxes, you probably shouldn't file;  if you have used a fake social security number for taking out any of the credit listed in your bankruptcy - you probably shouldn't file. 

Who files bankruptcy then.  The typical non-citizen, non-legal resident filer is someone who is either a migrant laborer or full time year round worker who works at a job where taxes are taken out under a TIN and files taxes every year and may even get a tax refund.  This is a person who by law should not be in the country but under our immigration system is "permitted" to remain because they aren't considered much of a problem to our government.  Typically, a filer will not have taken any credit out under a fake social security number and if they have a mortgage and own land have either done it with their TIN or purchased long ago and didn't need to provide this information at the time.

While deportation is extremely rare, any filer with a past felony or criminal record should probably avoid a filing until they because a legal resident at least.

This area of the law is not black and white because the bankruptcy code grants to "anyone who avails themselves of United States Laws the privilege of bankruptcy" but does not go on to protect filers from prosecution for being in the country illegally, not filing taxes or other immigration issues.

Therefore, this gray area of the bankruptcy law will continue to be gray and murky with attorneys giving only guidance but not hard advisement on whether a client SHOULD file, but simply whether they CAN file and also what the risks are.

For more information about bankruptcy, call 877-GO-GO-NLO (877-464-6656) or email the office at INFORMATION NLO CHICAGO

Should I hire an Attorney to Represent me in a Refinance?

Yes and No.

Yes, it is always good to have attorney counseling you on the meaning of any legal document you are signing.  No, it is not always necessary to have an attorney to sign standardized bank documents in a refinance unless you want to fully understand the refinance and make sure that you are getting what you bargained for.

Bottom line - Having an attorney at a refinance closing is a really great way to make sure that the interest rate your thought you were getting is right, that it is either fixed or is adjustable in the way you understood it.  It is also important to understand the rather large fees charged (and buried) in a refinance.  On average, a refinance costs $5000 in bank fees.  Bottom line - $250 for an hour appearance fee is a drop in the bucket compared to these fees and will help you feel comfortable with what you are signing.

Hiring the attorney, the problem is how to hire and attorney who can make these sorts of appearances profitable and desirable to do and also be qualified.  Usually an attorney belonging the Illinois Real Estate Lawyers Association (IRELA) www.irela.org will be competent in Illinois to represent you and usually has flat rates that are reasonable.

If you are hiring an attorney generically, try these tried and true questions and technics:

1)  Find three attorneys that serve the geographical area you need service in
2)  Confirm that the attorneys speak your language
3)  Call each attorney and ask three questions:

1. How long have you been in practice in Illinois
2. How many residential real estate closings have you done on average over the last five years
3. What is your flat rate for representation at a refinance including any trip charge

Based on your discussed with the attorney, you should be looking for the following answers:

1. I have practiced in Illinois for over 5 years
2. I do at least 10 residential real estate closings per year and it is one the core concentration areas of my practice.
3. I charge a flat rate fee of $250 per refinance for up to 1 hour of representation.  Trip charge is maximum of $100.  {This illustrates that the attorney understands how to be profitable and thereby of good service both in the City and Suburbs}  Attorneys who charge too little and are unprofitable are not motivated to provide good and competent service and should be avoided.  Value is the golden rule in purchasing legal services whereas price is simply irrelevant.

For more information about representation in any real estate matter, call David Nelson at 877-464-6656 or email Dave at:  info@nelsonlawoffice.com

For more information about NLO Nelson Law Office, please go to:  http://www.nelsonlawoffice.com/contact.html

To see David Nelson's video on YELP go to:  http://www.yelp.com and then search for NLO Nelson Law Office.

Can I Modify my Home Mortgage in Chapter 13 Bankruptcy?

Yes - you can modify your home mortgage in a Chapter 13 Bankruptcy by Stripping off the second mortgage and other junior liens.
Today, you can modify your home mortgage in two ways:  Get a modification from the lender or file a Chapter 13 bankruptcy and attempt to strip off the second mortgage mortgage on your home.  Oftentimes, this will reduce the balance on your mortgage by 30%.  While this isn't perfect, it is oftentimes, the difference between being able to keep your home or being forced to surrender it in foreclosure.

So how does this work.  First it is important to determine whether you should file bankruptcy.  Second you need to file a Chapter 13 bankruptcy.  Third, your bankruptcy attorney files an adversary procedure with the court to rule that the value of your home is less than the balance on  your first mortgage.  Fourth get the Chapter 13 plan confirmed by the court whereby the second (third, fourth, fifth and any junior mortgages) are wholly unsecured and will be paid as unsecured creditors.  At the end of the plan (60 months), the second mortgage and all other junior mortgages are released by the lender and the debtor/s is left with a home with only one mortgage.

Does this work in real life applications.  In the last year over 40% of our firms Chapter 13's had successful plan confirmations with the second mortgage being stripped.    On average this reduced the principal by 30% on the home indebtedness.

So what is not so great......the first mortgage still has to be paid off in full with all of the arrearages paid back over 60 months along with the costs of collection plus the first mortgage may still have a balance that is more than the home can be sold for.......so why has the court allowed this to occur - the answer is in the intent of the bankruptcy code, the idea was that if home mortgages could be modified in bankruptcy, why would anybody pay their mortgage?  Therefore, to save the ability for consumer to get home mortgages from banks, the bankruptcy code strictly prohibits the modification of a home mortgage this is wholly or even partially secured even if secured by only $1.


Bottom line - Chapter 13 offers a crude type of home mortgage modification by getting rid of unsecured mortgages, however, it does not fix long term problems with a first mortgage.  If your first mortgage is OK by itself then this type of modification is for you.  If your first mortgage is still a problem, then it may be wise to simply surrender the home in the bankruptcy and let the lender take the loss.

What are we seeing now that is unbelieveable - it never used to happen in the past, but it is happening now.  After filing the bankruptcy  and after stripping the second mortgage, the lender on the first mortgage voluntarily modifies the first mortgage to make the plan easier.

So what is this all about?

Well.....here's the best way to describe it.  Typically, the interest rate is reduced to 2% for the first five years and it increases by 1/2% per year after that until it hits the market rate and then becomes fixed at that rate.  The kicker is that the bank will put the arrears on to the balance of the loan.  Doesn't seem like a big deal, but it is!  If your old mortgage payment was $2400 per month and you were 10 months behind at the time of your bankruptcy filing, then you owe $24,000 in arrears.  In a typical 60 month chapter 13 plan, you will pay $24,000/60 per month to pay back these arrears.  This is $400 per month.  In this case, the bank basically put this into the balance.  So basically, you are now paying 2% interest on $24,000 over the next 30 years or so.  Around $50 per month.  The benefit is theoretically that your home if you keep it for 15 years will finally be worth more than the mortgage, you can sell it, pay off the mortgage and have a happy life.  This is all true with one caveat.  What if you have to get out of the house one year after your bankruptcy ends and you are still "underwater"   Good luck - you just entered another bankruptcy or years of garnishments.

In a nutshell - if you want to live in your house a long time and don't have a big need to move soon and don't believe you will be forced to move, then this is the ticket.  Basically, the bank cuts its price on loaning you the money.  But if you need to be more flexible and actually have the debt load be less immediately, then you are out of luck and better surrendering the home in bankruptcy.

Examples:

Ron and Karla bought a home in 2006 for $200,000.  The first mortgage was $160,000 from Wells Fargo.  The Second Mortgage for $40,000 was from Banco Popular.  Ron and Karla were doing great until Karla lost her job in 2008.  The couple missed 8 payments.  The couple was five months into their foreclosure action when they filed a Chapter 13 Bankruptcy.

Ron and Karla hired David Nelson to file their Chapter 13.  David suggested that they keep their home, but attempt to strip off the second mortgage.  Ron and Karla agreed.

Ron and Karla make approximately $70,000 per year together and have two children.  Their budget is tight and the means test says that they need to contribute on 10% of their plan to paying unsecured creditors.

Ron and Karla have no other debts besides the home.  Their mortgage payment was $1400 on the first mortgage, $500 on the second and their tax escrow was $300 per month.

Ron and Karla were $11,200 in arrears on their first mortgage when they filed their bankruptcy.

Here is how their plan payment is figured.

$1400 for payment of the first mortgage regular payment
$300 for tax escrow payment on the first mortgage
$67  (10% of $40,000 divided by 60 months) for payment of the unsecured second mortgage
$187  ($11,200 divided by 60 months)
$1954 Subtotal
$195  Trustee Fee (10% of payment)
$2149 total payment

So how does this work out with their budget

$70,000 Gross Income Per Year
$5833 Per Month Gross
($1458)  Taxes
$4375 Net Income Per Month

$2149 Plan Payment
$250  Gas & Electric
$800  Food
$194  Clothing
$100  Laundry
$250  Medical
$502  Transportation
$130  Auto Insurance
$4375  Subtotal


Square Budget.  Home Saved.  Overall home mortgage modified by overall reduction by 20%

Bottom line - this Chapter 13 accomplishes good things.  With other applications we might have an auto loan, additional credit card debt or other unsecured debt.  For those discussions, please see my other blog postings.

For more information about bankruptcy, mortgage modification or other debt relief options, please call NLO Nelson Law Office at 877-464-6656 or email to: info@nelsonlawoffice.com