This is just too good not to share. Creative, funny and not too technical, it’s a good way to gain a better understanding of why we are where we are. Hat tip to David Liebowitz for this one.
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This is just too good not to share. Creative, funny and not too technical, it’s a good way to gain a better understanding of why we are where we are. Hat tip to David Liebowitz for this one.
The U.S. House of Representatives has postponed a vote on the Help for Homeowners Act, apparently because of fears there weren’t enough votes to pass. Clearly, mortgage industry lobbyists are having an effect. My colleague David Liebowitz expressed the frustration of many proponents of the legislation:
I am extremely disappointed with the Democratic House leadership. They did not lead [on foreclosure relief] and they allowed their members to be led by special interests. I don’t think that any banks voted any of these representatives into office.
Check out David’s explanation of the proposed changes to the law on Fox Business News. As he points out, the legislation provides an efficient way of recognizing the realities of the market without costing homeowners their homes. It has a natural sunset, since it affects only existing loans. Best of all, it won’t cost taxpayers–it’s not another bailout. Supporters of the legislation include AARP, realtors, and of course, consumer advocates. Even Citi Group supports the legislation.
Who is your Congressman listening to? You might want to ask.
Today President Obama announced a sweeping proposal designed to stem the tide of mortgage foreclosures which have contributed to, if not caused, the broader problems in the economy today. Among the proposed steps is a revision to the bankruptcy code which would allow bankruptcy judges to modify home mortgages, which they cannot do under current law.
Despite the knee-jerk opposition by the folks that got us into this mess, the reasons to support the cram-down notion are numerous. Probably first on that list is the fact that it won’t cost taxpayers a dime. It uses a system which is already in place (bankruptcy courts and trustees) and does not require government guarantees, government funding of new loans, or government purchase of bad loans. It does not reward speculation or overspending. The cram-down provision allows courts to restructure loans, but if the fact is that you bought more house than you can afford, that restructuring avails nothing. It also has a built-in feasibility study. Chapter 13 doctrine has long required courts to examine feasibility of debt repayment plans, and empowers courts to turn away debtors who cannot demonstrate the ability to fund those plans. I could go on and on, but smarter people have done a better job than I of analyzing those issues. One of the best of those is Professor Levitin’s article in the Harvard Journal of Law and Politics, which not only presents the arguments for the mortgage cram-down legislation, but provides one of the best and most understandable analyses of the underlying cause of the mortgage meltdown I’ve read anywhere. (I know, in the Harvard JLP–whooda thunk?) Read the entire article if you are so minded.
More here later on the progress of the legislation, and if I can figure out how to do it, a way to contact your elected representatives to express your opinion.
It has been difficult lately to find anything positive in South Carolina’s economic picture, and the financial meltdown means more pressure on more families. Given the current climate, I wanted to frankly address a question that comes up in virtually every client meeting, and is among the most popular online searches: If I need to file bankruptcy, how do I pay for it? Here are some thoughts.
One of the easiest ways to pay for bankruptcy is with your tax refund. For most people, it’s a good time of year to take stock and deal with financial problems, too. This is especially true if you are accustomed to using your tax refund to catch up on all the bills that have gotten behind over the past year. If you are in that kind of pattern, you probably need to consider bankruptcy in any case. Talk to a bankruptcy lawyer about your situation. You may find that you can use your tax refund and the advice of an experienced bankruptcy lawyer to build a solid financial foundation, and next year’s tax refund can be used for a vacation, flat-screen TV, or better yet, saved for a rainy day.
Many folks who worry about paying for bankruptcy and think they’ll never be able to afford it miss the obvious–if you are going to resolve your debts by filing bankruptcy, you may be able to stop making payments on some (or even all) of your current debt. That will free income which can then be used to pay bankruptcy fees. Every situation is different, so you need the advice of an experienced lawyer to determine which creditors you can stop paying, and when. If fact, I believe most of my clients pay for bankruptcy in just such a fashion.
I am generally not a fan of taking money out of retirement accounts (whether IRAs or 401ks) without a really good reason, but it may be appropriate to do so to file bankruptcy, especially if you are facing a foreclosure action on your home. Most employers have hardship provisions which allow you to borrow against a 401k plan in an emergency, and a foreclosure qualifies. If you don’t have enough money in your 401k plan to cure the delinquent mortgage payments, you may have enough to get a bankruptcy filed and stop a foreclosure.
Although I certainly don’t think you should borrow from a credit card or any other institutional lender to pay for bankruptcy (there is a reason I don’t take credit cards), it may be appropriate to take a small loan from family members to pay for bankruptcy, as long as you are honest about why you need the money. Only you can determine whether your relationship is up to the strain, but if you have sympathetic family members, you are truly blessed.
Because of the current mortgage crisis, it appears that more churches and charitable organizations are willing to fund all or part of the cost of filing a Chapter 13 to stop a foreclosure. You may wish to inquire about whether such help is available, and on what terms. Most such programs are need based, and may not cover all of the costs, but some help may be available if you qualify. Similarly, the South Carolina Bar’s Pro Bono program provides a volunteer attorney for those who qualify on an income basis for legal services, but whose cases are not sufficiently urgent to fit within legal services’ priorities.
I also want to take the time to offer a couple of final tips on the issue of fees. First, you get what you pay for. Trying to make do without legal advice or relying on non-attorney services may end up costing you more in the long run than a good bankruptcy attorney would cost. Second, don’t expect a “one-size-fits-all” fee. Virtually every reputable bankruptcy attorney I know sets fees on a case-by-case basis and will need some information about your situation to set a fee. That’s what you want them to do, even though it would be nice to know the fee before you spend your time with them. Go see an attorney and discuss bankruptcy before you do anything else, even if you don’t think you’ll need to file. It will give you a basis to compare other options. Those who have been victimized by a foreclosure or debt settlement scam often say they got involved with the scam because they thought they couldn’t afford bankruptcy, when the reality is that they paid the scammers far more than a legitimate solution like bankruptcy would cost.