Things change fast in the legal world. Every day, state legislatures and judges make hundreds of decisions that impact the way cases are prepared and presented for court. At Walton Legal Services, we know how important it is to stay current with legal issues. We follow the legal stories that will have an impact on the best strategies to use while protecting your rights.
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With more Americans finding themselves in danger of losing their homes to foreclosure, loan modification companies are becoming more popular, as are scammers on the hunt for desperate homeowners.
One out of every nine homeowners in the U.S. is behind on their mortgage payments by more than three months. Families struggling to keep their home can be easily lured by scammers immediately guaranteeing modifications without requesting the necessary information to secure such a change.
Take the time to get to know who your lender is and who actually owns your particular loan. Most mortgages are owned by a single bank or are otherwise turned into a mortgage-backed security and are now owned by a number of different people.
Scammers will sometimes act suspiciously and make odd requests when you are sending them or your bank important, personal information. One red flag is being asked to pay for a percentage of the fees upfront. It is definitely uncommon and even illegal in some states to charge anything upfront for these services.
A homeowner wanting a loan modification can choose to work with their lender themselves or to seek professional help with an attorney or non-profit counseling service. Most experts don’t recommend attempting to secure your own modification unless you have some experience withforeclosure and finances.
Scrutinize documents so that you are absolutely sure of what you are signing before you sign it. Be wary of any strange or forged-looking papers. Be sure to protect yourself and your investment. It is important to know exactly what you are being promised, and what could happen if you are unable to meet your new obligations.
According to data from RealtyTrac, a company that markets foreclosed properties online, 84 percent of the nation’s metro areas saw a decline in home foreclosures during the first half of 2011. The company also reported that the nation-wide foreclosure rate has dropped 29 percent in the past 12 months.
Industry analysts attribute much of the slowdown in foreclosures to the glut of foreclosed properties on which lenders already foreclosed and cannot sell, not to any dramatic turnaround in the country’s housing market. Additionally, lenders are being more cautious in how they proceed in foreclosing on homes after the 2010 “robo-signing” scandal over how lenders were having attorneys process foreclosure documents without actually verifying the contents of the documents was accurate – and essentially committing foreclosure fraud.
While this may signal poor news for the nation’s economy, lenders being less anxious to foreclose property may help homeowners who are struggling to make their mortgage payments and trying to avoid foreclosure. With a backlog of properties already in lenders’ possession, lenders are less likely to institute new foreclosure proceedings on mortgagees who are behind in payments, giving people extra time to try to get back on track financially before they are in serious danger of losing their homes.
Additionally, lenders may be more open to negotiating a loan modification with more favorable terms for the homeowner so that he or she can make the monthly payments. Finally, lenders might approve more short sales in an effort to avoid the whole foreclosure process and ensure that the lender does not have yet another property to try to sell.
While the news that foreclosure rate has dropped only because lenders have already foreclosed on so many other homes may be disappointing for those looking for signs of recovery in the nation’s economy, this may end up being beneficial for some people who are suffering the brunt of the poor economy and are in danger of losing their homes.
Every day it seems to be the same story: the economy is struggling. Homeowners are struggling. Many homeowners face foreclosure. To save their homes and their livelihoods, many homeowners seek help from outside firms and companies. Opportunistic companies take advantage of homeowners and other consumers who are struggling financially by offering empty promises of help – for a price.
Recently, Indiana Attorney General Greg Zoeller filed lawsuits against two credit services and foreclosure consultants who offered financial assistance to struggling homeowners and promised to help them out of debt. The firms advertised on the Internet to woo the homeowners, but what’s worse is that these firms are accused of specifically targeting vulnerable homeowners by researching public records of
foreclosures. With these records, the firms contacted homeowners with what appeared to be a random offer of help. Desperate, some homeowners accepted the help and lost money because of it.
The two firms, Community One Law Center and National Law Partners of Florida and California, allegedly accepted deposits in return for a promise to help the homeowner out of debt. According to the Indiana Attorney General, homeowners paid the firms anywhere from $499 to $2,699 for their assistance. The homeowners did not receive the help they were promised.
Consumer Fraud Complaints on the Rise
In this difficult economy, consumers have become vulnerable to scams promising to help with debt or reducing debt. Other cases of consumer fraud that have been in the news lately include “robo-signing” affidavits and empty promises from debt settlement companies. According to the Indiana Attorney General, complaints of consumer fraud are up 19 percent.
In order to avoid these scams, homeowners and other consumers should be wary of firms which offer financial assistance or debt reduction services that require payment by the homeowner or other consumer.
You don’t have to look far to find allegations of consumer fraud. One thing is clear – consumers need to be on high alert so they do not become victims.
Indianapolis foreclosure rates have taken a turn for the worse and rose recently to 3.58 percent of all mortgages. This increase is up from last year’s figure of 3.19 percent according to mortgage tracking service Corelogic, which tracks national foreclosure data. Indianapolis has remained higher than the national foreclosure rate, which was 3.44 percent in July.
There are a number of indications that homeowners are still in a very tough financial situation. The percentage of mortgages over 90 days delinquent rose to 6.41 in July, up slightly from the June rate of 6.39. This is the first increase in the month-to-month tracking of these statistics since January according to the Corelogic report. One good sign is that the delinquency rate overall is down 6.98 percent this year from July 2010.
Robo-signing is a widespread problem in Indiana and has a direct affect on many of the problems that homeowners are having across the state. “Robo-signing” is the term given to the problem of low-paid workers signing important documents that they haven’t read, are not qualified to read or are not qualified to sign. Many of these documents found in recording offices were not only foreclosure documents but thousands of other homeownership documents unrelated to foreclosures.
The scandal and investigation that followed has revealed more than 8,000 suspect documents in Allen County alone, according to the Journal Gazette. The inability to verify documents due to signing concerns and fraudulent documents can delay home sales, further adding to the already strained housing market.
When asked to imagine a winter holiday scene, it might be fair to say that most people would picture a winter scene with stockings hanging from the mantel of a fire place and presents scattered beneath a decorated tree. A scene like this does not come free of charge, however; it costs money to put presents under the tree. And if families are not cautious, the choices they make during the holiday season could lead to having to file for bankruptcy.
Whether a family of lesser means, of wealth or anywhere in between, the holiday season presents a tempting opportunity to stretch budgets beyond reasonable means, risking putting the family in a difficult financial position as the new year begins.
Consumers have options of how they choose to finance purchasing gifts; all offer benefits, but all also present financial risks if consumers are not careful. A CBS News article highlights three common ways to finance purchases: credit cards, debit cards and cash, and layaway.
Credit cards allow consumers to purchase items under the promise of paying the credit card company at a later date. As CBS News notes, many credit card companies offer special promotions during the holidays, allowing consumers to more quickly accumulate rewards points. If people are able to pay the balance of their credit card bill during the next billing cycle, credit cards may offer a great way to purchase gifts. However, if a person buys more than they can easily afford, the interest that accumulates on a carried credit card balance can quickly create a very difficult financial situation.
Debit cards and cash present a way to purchase gifts without fear of accumulating interest. But, paying for presents in this manner is only available to people who have the cash available to spend. If people are not careful, using a debit card can quickly deplete their checking account.
Layaway plans allows people to put presents on hold at stores after paying a small down-payment. People then save money until they are able to pay the remaining balance. As the CBS News article states, stores do not offer layaway in an effort to be helpful to consumers, but rather as a way to make money and help make sure the store does not lose sales to customers with no credit or with limited financial resources.
If used responsibly, credit cards, debit cards and cash, and layaway plans can help people put gifts under the tree this holiday season. However, if people overextend themselves financially, they may find them in situations that require solutions for regaining control of their financial situations, such as filing for bankruptcy. Bankruptcy may offer people a way out from under a mountain of debt, including credit card debt, to gain a fresh start.
According to HealthNewsDigest.com, 2.8 million Americans are turning 65 years old in 2011 and becoming eligible for Medicare. While the government program is less expensive than many private health-insurance programs, the out-of-pocket expenses can still add up and cause financial strain, especially for people living on fixed incomes.
To avoid significant health-care debt – which is one of the more common reasons why people file for bankruptcy – HealthNewsDigest.com provides the following tips to help keep medical costs as low as possible:
Understand your paperwork: Know the parts of your bill and what an Explanation of Benefits (EOB) is.
- Don’t pay the bill immediately if you are not certain it is correct: It is harder to get money back once you have paid the bill.
- Make sure the bill has accurate basic information: Check that the bill has your name, address, date of service and insurance information listed correctly.
- Verify the bill against the EOB provided by your insurer: The EOB should show the amount charged by the provider, the amount paid by the insurer and the amount to be paid by you. That amount on your EOB should be the same as the amount on your bill.
- Avoid receiving treatment or services from out-of-network providers: Your insurance company has negotiated lower prices with in-network providers, so using out-of-network providers generally will be more expensive.
- Ask the provider for a prompt-payment discount: Many providers offer discounts to people who pay for their treatments in full on the day of service.
- Ask for an interest-free payment plan: If you can’t pay right away, some providers will allow you to set up an interest-free payment plan.
- Don’t ignore bills and let them pile up or go to debt collectors: Don’t wait so long that your bill gets sent to a debt collector or begins to collect interest. If you are in the process of verifying or correcting a bill, let the health-care provider know and ask that the bill not be sent to a collector.
This prolonged recession has hit many families hard. Many people have experienced financial problems for the first time, and are unsure what to do to get back on their feet. When they turn on the TV or go online, they are constantly exposed to ads from groups or organizations that are devoted to reducing debt or helping someone file for bankruptcy.
However, not all of these groups are created equal. Some unfortunately prey on debtors to make a quick dollar, and leave the individual in worse financial shape. Debtors rely on bad advice and have to find additional help to undo the damage that has been done.
Recently, there has been a rise in the number of non-attorney bankruptcy petition preparers offering their services to debtors in need. These individuals “help” a debtor file for bankruptcy. They assist the debtor with all of the necessary steps to file for bankruptcy, offering complete service at a cost comparable to attorneys in the area.
While this may sound like a bargain to someone who has experiencing financial hardship, it is often not the answer to getting out of debt. One of the biggest issues for a person going through the bankruptcy process is what property will he or she be allowed to keep. Attorneys experienced with assisting bankruptcy clients will know how to maximize a client’s exemptions, potentially allowing a debtor to keep their most important property (source: Alex Spiro).
Exemptions are just one small part of the complicated bankruptcy process. Once the bankruptcy plan is put in place, a debtor may be unable to change its terms. Property that is liquidated to pay off debts is gone and this cannot be changed.
Knowing the complexities of the bankruptcy code is just one advantage that experienced attorneys can provide to their bankruptcy clients. By understanding all of the options that are available, debtors can make the decisions that are in their family’s best interests.
Since World War Two, going to college has been seen as the ticket to the American Dream. Statistics show college educated employees earn more than their non-college educated coworkers.
A recent report from the National Association of Consumer Bankruptcy Attorneys (NACBA) indicates there may be growing clouds on that horizon.
They report potential clients with student loan debt have increased significantly in the last three to four years and “about half (48 percent) of bankruptcy attorneys reported significant increases in such potential clients.”
The trouble with student loans for those who cannot repay them, is that unlike many types of debt, they are generally not dischargeable in bankruptcy. There is also no statue of limitations, allowing the creditors to sue years, and even decades, after the debtor left school.
The only way, under the bankruptcy laws, to discharge student loans is known as “Undue Hardship.” The most widely used test came out of a case the Brunner case.
A demanding three-part test is used to determine if one qualifies for an undue hardship discharge, where one has to have virtually no chance of ever improving one’s income.
Co-Sign Any Student Loans Recently?
Another source of concern is the number of parents implicated in this debt. The NCBA report indicates that in 2010, 17 percent of parents had taken out loans for their children and this compares to 5.6 percent in 1992-1993.
If their children default on the loans, the lenders will come looking for them. In the worst cases, parents could lose a lifetime of assets repaying large student loans.
A Drag on the Economy
With all, or a large percent, of their income being directed to paying down student loans, this debt will weigh down on the entire economy, taking money away from other purchases.
Many student loans will require 20 to 30 years to repay, leaving many with no discretionary income for most of their adult lives. The NCBA notes that 2010 was the first year that student loans had surpassed $100 billion.
Some homeowners have been able to negotiate their way out of underwater mortgages and have emerged free and clear, due to short sales, foreclosures and other options that they may have had available for their situation.
Or have they?
If you managed to get out of a bad mortgage, you do need to confirm you don’t run afoul of the IRS by failing to pay any applicable tax on that loan forgiveness.
Cancellation of Debt
When a bank or other lender forgives a debt, some accounting must be considered. A loan does not qualify as income, because you have to repay the lender with interest, so that money “costs” you.
If the loan is forgiven, the amount “cancelled” can be counted as income, as you received money and did not pay it back. This seems particularly unfair in the context of underwater mortgages; given the property is no longer worth the original loan value, but the “gain” is based on the loan value.
The Mortgage Forgiveness Debt Relief Act
Congress recognized that for many people, if you are in a financial circumstance that necessitates a cancellation of debt, receiving a tax bill for the mortgage forgiveness, might not feel appropriate.
The Mortgage Debt Relief Act of 2007 to allows taxpayers to avoid liability for the “income” resulting from the discharge of debt on your principal residence.
To be eligible, the debt forgiveness must have occurred from 2007 through 2012.
The debt must be related to a “decline in the home’s value or the taxpayer’s financial condition.” $2 million may be forgiven ($1 million if married filing separately.)
Equity loan debt qualifies, but only if the proceeds were used for improvements to the home. If you used a $20,000 home equity loan for paying off credit card debt or buying a car, it cannot be excluded from your income tax.
When doing your taxes, you will now if you have potential debt forgiveness income if your received the IRS Form 1099-C, Cancellation of Debt from your lender.