By Prashant Gopal - Feb 7, 2012 Banks, accelerating efforts to movetroubled mortgages off their books, are offering as much as$35,000 or more in cash to delinquent homeowners to sell theirproperties for less than they owe. Lenders have routinely delayed or blocked suchtransactions, known as short sales, in which they accept lessfrom a buyer than the seller’s outstanding loan. Now banks havedecided the deals are faster and less costly than foreclosures,which have slowed in response to regulatory probes of abusivepractices. Banks are nudging potential sellers by pre-approvingdeals, streamlining the closing process, forgoing their right topursue unpaid debt and in some cases providing large cashincentives, said Bill Fricke, senior credit officer for Moody’sInvestors Service in New York. Losses for lenders are about 15 percent lower on the salesthan on foreclosures, which can take years to complete whiletaxes and legal, maintenance and other costs accumulate,according to Moody’s. The deals accounted for 33 percent offinancially distressed transactions in November, up from 24percent a year earlier, said CoreLogic Inc., a Santa Ana,California-based real estate information company. Karen Farley hadn’t made a mortgage payment in a year whenshe got what looked like a form letter from her lender. “You could sell your home, owe nothing more on yourmortgage and get $30,000,” JP Morgan Chase & Co. (JPM) said in theAug. 17 letter obtained by Bloomberg News. $200,000 Short Farley, whose home construction lending business dried upafter the housing crash, said the New York-based bank agreed tolet her sell her San Marcos, California, home for $592,000 --about $200,000 less than what she owes. The $30,000 will covermoving costs and the rental deposit for her next home. Farley,who is also approved for an additional $3,000 through a federalincentive program, is scheduled to close the deal Feb. 10. “I wondered, why would they offer me something, and whywouldn’t they just give me the boot?” Farley, 65, said in atelephone interview. “Instead, I’m getting money.” Tom Kelly, a JP Morgan spokesman, declined to comment on thecompany’s incentives. “When a modification is not possible, a short saleproduces a better and faster result for the homeowner, theinvestor and the community than a foreclosure,” he said in ane-mail. A mountain of pending repossessions is holding back arecovery in the housing market, where prices have fallen for sixstraight years, and damping economic growth. Owners of more than14 million homes are in foreclosure, behind on their mortgagesor owe more than their properties are worth, said RealtyTracInc., a property-data company in Irvine, California. Foreclosure Holdouts Short sales represented 9 percent of all U.S. residentialtransactions in November, the most recent month for which datais available, up from 2 percent in January 2008, according toCorelogic. Bank-owned foreclosures and short sales sold at adiscount of 34 percent to non-distressed properties in the thirdquarter, according to RealtyTrac. As lenders shift their focus to sales, they are findingthat some borrowers would rather risk repossession while theywait for a loan modification, according to Guy Cecala, publisherof Inside Mortgage Finance, a trade journal. In a loanmodification, the monthly payment, and sometimes principal, isreduced to help prevent seizure. Homeowners facing foreclosuremay live rent-free for years before they are forced out. “That’s why the banks have got to pay the big bucks,”Cecala said. “The real question is why is the bribe so big? Isthat what it takes to get somebody out of their home?” Multiple Banks Banks also pay a few thousand dollars to the owners ofsecond liens, whose loans can be wiped out by a short sale, toencourage them not to block the deals. While JP Morgan is giving the largest incentive payments,other banks and mortgage investors are also offering them,according to interviews with 12 real estate agents in Arizona,California, Florida, New York and Washington. Lenders alsoprovide incentives on loans they service and don’t own when themortgage investor, such as a hedge fund, requests it. JP Morgan, the biggest U.S. bank, approves about 5,000 shortsales a month. It generally offers $10,000 to $35,000 in cashpayments at settlement, real estate agents said. Not all of thesales include incentives. Borrowers also can receive payments from the federalgovernment’s Home Affordable Foreclosure Alternatives program,which in 2010 began offering as much as $1,500 to servicers,$2,000 to investors and $3,000 to homeowners who complete shortsales. Quicker Resolution For banks, approving a sale for less than is owed on thehome can cut a year or more off the time it takes to unload aproperty. From listing to sale, the transactions took about 123days on average at the end of last year, according to theCampbell/Inside Mortgage Finance HousingPulse Tracking Survey. Lenders spend an average of 348 days to foreclose in theU.S. and an additional 175 days to sell the property, accordingto RealtyTrac. In New York, a state that requires court approvalfor repossessions, it takes about four years to foreclose on ahome and then resell it, the company said. Lenders can often afford to forgive debt, offer theincentive and still make a profit because they purchased theloan from another bank at a discount, said Trent Chapman, aRealtor who trains brokers and attorneys to negotiate with banksfor short sales. Chapman, who also writes a blog on TheShortSaleGenius.com,said he’s heard about 50 homeowners who have received incentivesfrom lenders including JP Morgan, Wells Fargo & Co., CitigroupInc. and Ally Financial Inc. Wells Fargo “My guess is they want to get rid of bad loans,” Chapmansaid. “If they short sale these types of loans, they have lessof a headache and have some goodwill with the homeowner.” Wells Fargo, based in San Francisco, offers relocationassistance of as much as $20,000 for borrowers who completeshort sales or agree to transfer title through a deed in lieu offoreclosure “in certain states with extended foreclosuretimelines, including Florida,” Veronica Clemons, a spokeswoman,said in an e-mail. Bank of America Corp. sent letters to 20,000 Floridahomeowners as part of a pilot program, offering incentives of asmuch as $20,000, or 5 percent of the unpaid loan balance, Jumana Bauwens, a spokeswoman, said in an e-mail. The program expiredin December and the Charlotte, North Carolina-based bank hasn’tdecided whether to introduce it in other states, she said. About15 percent of the homeowners agreed to participate in theprogram, she said. Citigroup Offers “The bank is pleased with the response,” Bauwens wrote.“The state is experiencing higher foreclosure rates than otherparts of the country and is therefore seen as a viable market togauge incremental short-sale response and completion rates whenpresenting homeowners with relocation assistance at closing.” Citigroup offers $3,000 to most borrowers who qualify forits program, but the “amount may increase based on thecircumstances of each individual case,” Mark Rodgers, aspokesman for the New York-based bank, said in an e-mail.“Investor programs have different guidelines for relocationincentives, which we honor.” Susan Fitzpatrick, a spokeswoman for Detroit-based Ally,didn’t comment specifically on incentives when asked about them. Borrowers typically can’t negotiate the incentives, whicharrive by mail, Chapman, the Realtor, said. Tap on Shoulder “It’s not really easy to identify the guidelines becauseChase doesn’t tell you, they kind of tap you on the shoulder,”he said. “When I first saw it in January 2011, I thought it wasa joke or a typo. I was convinced it must say $3,000, not$30,000.” Offering enough for the homeowner to put down a deposit ona rental apartment is reasonable, said Sean O’Toole, chiefexecutive officer of ForeclosureRadar.com, which tracks sales offoreclosed properties. Giving tens of thousands of dollars todelinquent homeowners sends the wrong message, particularly ifthey got into trouble by running up home-equity loans during thehousing boom, he said. “It may make sense for people to walk away, it doesn’tmake sense for them to get rewarded for doing it,” O’Toolesaid. “It’s not the homeowner’s fault that house prices droppedso dramatically, but they have already received months of freerent, if not cash out.” Cecala of Inside Mortgage Finance said he wonders whetherlenders are making big payments on properties with underlyingtitle problems. Evan Berlin, managing partner of Berlin Patten,a real estate law firm in Sarasota, Florida, saidrepresentatives of a large bank told him the incentives areprimarily given to borrowers when it doesn’t have the properpaperwork needed to win its foreclosure case. He declined toname the bank for publication. Incentive Disconnect State attorneys general across the U.S. began investigatingforeclosure practices in October 2010 following allegations thatthe nation’s top mortgage servicers were using faulty documentsto repossess homes. Berlin said his office negotiated about 400 short sales inthe past year and about a quarter included an incentive, rangingfrom $3,000 to $48,000. In some cases, the payments aren’tincentives at all because they’re offered after the borrower hasalmost completed the short sale, he said. “The idea is that this is relocation assistance,” Berlinsaid. “But when you’re offering $48,000, obviously it doesn’tcost $48,000 to relocate.” Cooperation Sought The size of the payment may have little to do with salesprice. JP Morgan gave one Phoenix homeowner $20,000 after shesold her property in June for $32,000, according to RoyceHauger, the real estate agent who represented the seller andshared a copy of the settlement sheet with Bloomberg News. Thebank also agreed to forgive more than $70,000 in debt, she said. Kelly, the JP Morgan spokesman, declined to comment on thepayment. The homeowners are getting the money in exchange for theircooperation, said Kris Pilles, a Riverhead, New York-based realestate broker who represents banks, servicers and hedge fundsthat own distressed housing debt. Pilles is frequently dispatched to the homes of delinquentborrowers to explain the benefits of avoiding foreclosure, hesaid. His clients have paid as much as $92,500. In return, thelenders expect the seller to clean the house before showings,and trim the grass. “Money talks,” Pilles said. “From the bank side, it’sanything to initiate a conversation with someone who may not belistening to them.” ®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.

If you are considering filing for bankruptcy for a business there area number of options available to you.  First you would need toconsider what type of liability you have.  If you are a soleproprietor or a general partner you are personally responsible for thedebt.  If you are a limited partner, have an interest in acorporation, or you have an interest in a limited liability companyyou are generally not personally responsible for the debt.  However,there can be exceptions to this where an individual has personallyguaranteed the debt of a company or the corporate veil can be pierced. Prior to filing for bankruptcy you will want to consult with theattorney that handled the start up of your business. Filling for a Chapter 7 differs, depending on the type of business youhave.  If you are a sole proprietor you cannot file for bankruptcysolely for the business.  In this case you would need to filepersonally and list the business.   This is because a soleproprietorship is not a separate legal entity and is not consideredseparate from you personally.  If, however, you have a partnership,corporation, or limited liability corporation you may file on behalfof the business and are not required to file for bankruptcypersonally. If you have a sole proprietorship and are required to file personally,both personal debts and business debts will be eliminated throughfilling.  You can use exemptions available in personal bankruptcyfilings to exempt both personal and business property, though the samelimits and rules still apply.  The debt will be discharged and you canstill operate your business.  This is a very good option if you wouldlike to save your business.  Of course, if you do not want to continueyour business you may choose to surrender assets and begin winding upyour business. If you have a partnership, corporation, or limited liability companyand file on behalf of your business filing for bankruptcy willdissolve the business.  Upon filing you would need to begin winding upaffairs.  You could not enter into any new business, but could finishexisting obligations to the extent possible.  Assets would beliquidated to pay off creditors.  The business debt is not dischargedand you cannot apply any exemptions that would be available in anindividual filing.  This would not eliminate any personal obligationon debts incurred by making a personal guarantee of piercing thecorporate veil.  However, if you do have some personal obligation onthe business debts you can also file for a personal bankruptcy toeliminate your obligation.If you have any questions, or would like a free consultation with aSt. Louis Bankruptcy Attorney, contact us today!

Pleading a claim to recover a preferential transfer is one of the most basic bankruptcy causes of action. Merely by establishing the date, amount and recipient of the transfer, the plaintiff can establish that a transfer was made, within 90 days before bankruptcy while the debtor was presumed to be insolvent. Most preference complaints include this basic information and then the conclusions that the payment was made on account of an antecedent debt and that the transferee received more than it would have received in a hypothetical chapter 7. Anyone who has practiced bankruptcy law for any period of time has seen (or drafted) the form complaint with an exhibit A describing the transfer. Preference complaints are sometimes paired with fraudulent conveyance claims making skeletal allegations. After Ashcroft v. Iqbal, 129 S.Ct. 1937 (2009) and Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), the Supreme Court signaled that a higher standard would be required for pleading, one of plausibility. Instead of pleading the bare elements of a cause of action, the pleading must contain sufficient facts to make the claim plausible. How does that apply to common avoidance actions? Judge Craig Gargotta addressed that question in Crescent Resources Litigation Trust v. Nexen Pruet, LLC, Adv. No. 11-1082 (Bankr. W.D. Tex. 1/23/12), which can be found here. In Nexen Pruet, the Litigation Trust filed a complaint which alleged two causes of action: a preference claim and a fraudulent transfer claim. The complaint included the following: *A description of the debtors’ cash management system; *A statement that the debtors’ schedules, statement of financial affairs, disclosure statement and a declaration of the debtors’ CFO (none of which were attached) indicated that the debtors were insolvent at all relevant times; *An exhibit describing the transfers by date, amount, invoice number and date the check cleared; and*A statement of each cause of action. The defendant filed a motion to dismiss for failure to state a cause of action, alleging that the claims were based on “naked assertions devoid of further factual enhancement.” The Court found that both claims should be dismissed without prejudice. The Court relied extensively upon In re Careamerica, Inc., 409 B.R. 737 (Bankr. E.D. N.C. 2009). In the case of the preference claim, the Court found that the plaintiff had failed to allege sufficient facts to show that the transfer was made on account of an antecedent debt: Notwithstanding the Court’s finding that the Trust has sufficiently pleaded the majority of the elements of a preferential transfer action, the Court finds that the Trust has not sufficiently pleaded the existence of an antecedent debt. By contrast to the cases cited above, including those which espouse even the most lenient of pleading standards, the Trust’s Complaint contains no description whatsoever of the Defendant, Nexen Pruet, much less a description of the nature of the relationship between Nexsen Pruet and the Debtors. The Complaint merely contains the conclusory allegation that “[t]he Transfers were made . . . for or on account of an antecedent debt owed by the particular Debtor to the Defendant before such Transfers were made,” with no factual allegations to support this contention (id. at 6). Without more, the Court is unable to infer the existence of an antecedent debt based on the conclusory allegations presented under Count I of the Complaint. Opinion, p. 12. With respect to the fraudulent conveyance claim, the Court found that the pleadings with regard to both insolvency and lack of reasonably equivalent had not been adequately pled, concluding: In this case, like in Caremerica, the Trust’s allegations with respect to the fraudulent transfer claim contained in Count Two of the Complaint do no more than mirror the elements of § 548(a)(1)(B) (see docket no. 1, at 7). The Trust argues that the Complaint, read in its entirety, contains a “detailed pleading of insolvency” and a “clear pleading of reasonably equivalent value.” (Docket no 1 at 9.) Like in Caremerica, however, “other than dates, amounts, and names of transferees included in Exhibit B,” along with general conclusory allegations of insolvency and reasonably equivalent value, the Trust fails to support its allegations with factual assertions. (citation omitted). First, with regard to insolvency, the Trust alleges that the Debtors’ Schedules, Statements of Financial Affairs, and Disclosure Statement, along with the declaration of the Debtors’ chief financial officer, reflect that the Debtors were “deeply insolvent at all times relevant to the complaint.” (Docket no. 1 at 5.) The Trust did not attach any of these documents to its Complaint nor did it refer the Court to any specific facts provided in these documents that would allow the Court to draw a reasonable inference of insolvency. The Trust further alleges that the Debtors were insolvent “under a number of tests” and then proceeds to describe each test, without providing the applicable facts to support a finding of insolvency under any of them (id.). Second, with regard to reasonably equivalent value, the Complaint contains only one sentence, which states, “The Debtor or Debtors identified on Exhibit B received less than the reasonably equivalent value in exchange for the Transfer(s).” (Docket no. 1, at 7.) In light of Iqbal and Twombly, this Court will not accept such “threadbare recitals of a cause of action’s elements, supported by mere conclusory statements.” (citation omitted). Opinion, pp. 14-15. The Nexen Pruet opinion has much different implications for the two causes of actions involved. With regard to preference claims, the opinion imposes only a minor burden. In performing its due diligence before filing suit, the plaintiff should have investigated the relationship between the debtor and the creditor and, in particular, should have reviewed the invoices submitted by the creditor. Thus, pleading facts with regard to an antecedent debt should not impose a significant burden. By the same token, it does not provide that much more information to the defendant, who presumably would know this information as well. The fraudulent conveyance claim is another matter. A preference is a preference primarily because of timing. On the other hand, a fraudulent conveyance could be based on any number of scenarios from a payment made on the debt of another to a payment made to an insider based on made-up invoices. In this regard, the heightened pleading requirements provide useful information to the defendant, as well as requiring the plaintiff to have a theory which would survive scrutiny under Rule 9011. In many cases, a preference claim and a fraudulent conveyance claim will be mutually exclusive. Generally, an antecedent debt implies value. Thus, only an antecedent debt in a transaction for less than reasonably equivalent value could be actionable under both statutes. By requiring a higher standard for pleading fraudulent conveyance claims, the Court protects defendants from having to respond to potentially spurious claims.

Sometimes a legal argument which seems clever in the abstract can look downright silly when placed in context. That was the case with several arguments rejected by the court in Smith v. Citimortgage, Inc., et al, Adv. No. 11-5136 (Bankr. W.D. Tex. 2/21/12), which can be found here. Argument #1: 39. None of the Plaintiffs’ first three (3) claims, which assert that the Defendants are in “breach” or “violation” of the Court’s orders entered in the Plaintiffs’ bankruptcy, come close to meeting the facial plausibility standard. The Plaintiffs have already settled and released these claims through the Court-approved Settlement. Specifically, through the Settlement, they have “release[d]” “Citimortgage . . . and [its] agents and employees . . . from all claims of any kind . . . that [the Plaintiffs’] may have with respect to the . . . [Plaintiffs’] Bankruptcy . . . or any other matters[.]” 40. The Plaintiffs’ allegations that the Defendants are in violation of the Court’s orders are claims with respect to the Plaintiffs’ bankruptcy. Even if the Plaintiffs’ factual allegations are taken as true for the moment, through the Court-approved Settlement, the Plaintiffs’ (sic) traded their rights to enforce the related orders for a contract right to enforce the Settlement pursuant to Texas-state law. They have no right to rescission of the Settlement and cannot now assert claims against any of the Defendants that they affirmatively gave up through the Settlement. Renewed Motion to Dismiss, pp. 14-15, Dkt #17. At first blush, the argument that the Debtors released certain claims and are now attempting to pursue them appears to be quite plausible. However, the Bankruptcy Court’s opinion adds the relevant context. The court declines to read this provision as precluding claims for breach of the settlement agreement itself and violation of the court order approving it. The court also declines to read this provision as precluding claims for violation of the discharge injunction that arise after execution of the settlement agreement. The provision above is best understood as applying to claims that the Smiths had at the time of execution of the settlement agreement. Opinion, p. 9. While the argument appeared plausible on its face, it quickly turned outrageous when it became manifestly clear that the plaintiffs were suing for violation of the settlement agreement and the order approving the settlement agreement, each of which necessarily occurred after execution of the underlying agreement. While the power to compromise claims is broad, an agreement which negates its own enforcement is no agreement at all. To put it another way, a release, no matter how broad, cannot release the right to enforce the agreement in which it is contained. Also, I am not aware of any legal principal which would allow a party to release wrongs yet to occur. What is really insidious about the argument in this case is that it appears that Citimortgage was arguing that because the discharge occurred in the bankruptcy case, that the Debtors released their right to ever enforce the discharge against Citimortgage. That is an audacious claim. Argument #2: 28. The Fifth Circuit has long recognized that in order for a bankruptcy court to have jurisdiction over a matter, “the outcome of that proceeding [must] conceivably have an[] effect on the estate being administered in bankruptcy. (citation omitted). Once administration of a case concludes and a Court closes the case, no bankruptcy case is “being administered”—the bankruptcy court’s jurisdiction over all matters therefore ends at closure of the case. (citations omitted). 29. The Court’s closure of the Plaintiffs’ bankruptcy on September 1, 2011 ended its jurisdiction over any and all related matters. Even if the Adversary were “related to” the Plaintiffs’ bankruptcy for the purposes of 28 U.S.C. Section 157 when filed (which the Defendants deny), the Court’s jurisdiction over the Adversary would have terminated on September 1. Renewed Motion to Dismiss, p. 11. Close, but no cigar as noted by the Bankruptcy Court: None of the cases relied on by Citimortgage involve a debtor’s post-discharge attempt to hold a defendant in contempt for violating court orders. For this reason, Citimortgage’s argument can be easily dispensed with. Bankruptcy courts always retain jurisdiction to interpret and enforce their own orders. (lengthy list of citations omitted). (emphasis added). Opinion, p. 7. Never tell a judge that he lacks authority to enforce his own order. By arguing that the court lacked authority to enforce its own orders, Citimortgage struck at the court’s authority. Orders issued by a court which cannot enforce them are not worth the paper they are written on (or in the case of electronically stored data, the PD Fs into which they are converted). What of Citimortgage’s other arguments? They were on the money. Ten out of eleven statutes relied upon by the Plaintiffs for jurisdiction were either not jurisdictional at all or were inapplicable. The court found that it lacked jurisdiction over the Plaintiffs’ Fair Debt Collection Practices Act claim and its state law claims. The court dismissed the claims brought against two employees of Citimortgage. It could be said that the Plaintiffs’ claims contained several grains of wheat among an excess of chaff. Had the defendants excluded just two arguments from their motion, they would have done a valuable service in helping the court separate the wheat from the chaff. However, by overreaching with grimace-inducing* arguments, they attacked the very integrity of the court from which they sought relief. Better to accept a strong half-victory than to generate an opinion which is equal parts rebuke to both sides.*--Readers, can you come up with a better term? Originally, I was going to use OMG-inducing, but when I looked it up in the Urban Dictionary, it was defined as a term overused by teenage girls in chat rooms who are incapable of spelling out entire words. I tried forehead-slap, as in Homer Simpson saying "Doh!" but that didn't quite work either. I went with grimace-inducing, even though it is a bit staid, because I could not come up with something more powerful.

After I unloaded on the incompetence I saw in the courtroom last week, it’s only fair to ask:  what are you struggling with?  Is there something I can do to help? I’m here to share what I know, with an emphasis on fitting together the pieces of what you can learn from books or traditional CLE courses into a scheme for actual practice of bankruptcy law. I raise the issues I either see around me being mangled or the odd issues that come up in my practice.  Not at all systematic.  It’s a shot in the dark about what would help new practitioners. So, I ask, what’s baffling you?  Where do you see the holes in your skill set?  What would you like to see here? What are your ambitions for your practice?  For taking the next step forward? Image courtesy of jmgardner.

When filing for bankruptcy there are a number of options to consider with regard to property.  A debtor can choose to surrender property, reaffirm debt, or to redeem the collateral.  Each has different advantages and disadvantages.  Here we will focus on redemption of collateral.  Redemption means that a debtor will make a one time lump sum payment to a creditor in the amount of the secured portion of the debt.  The secured portion is determined by evaluating the fair market value, as only that is secured.  When a a loan is worth more than the fair market value of the collateral a creditor is under secured and can only recover for the secured amount.  For example, lets say that a debtor has a vehicle that is worth $10,000 and the loan value is $15,000.  You can determine what the unsecured portion is by subtracting the fair market value from the loan value.  Here there is $5,000 of unsecured debt.  To redeem this property through a bankruptcy a debtor would need to make a payment of $10,000 to the creditor.  The remaining $5,000 balance on the loan would be discharged through a Chapter 7 Bankruptcy proceeding.  As mentioned previously, each of the options has certain advantages and disadvantages.  The advantage to redeeming property is that a debtor can keep then keep the property, will own the property free and clear of encumbrances, and will not have any ongoing payments on the collateral.  Of course, this option does require a debtor to make a lump sum payment, which may not be possible for all debtors.  In the event that you cannot make that payment there are financers that offer redemption loans specifically for this purpose.  Choosing to finance a redemption will mean that a debtor has an ongoing payment even after filing for bankruptcy.  When considering this option, particularly with financing, debtors should make sure that they can truly afford the payment or the debtor may be at risk of repossession at a later date.  In some cases financing a redemption is a good choice because the terms of the loan may be better than the existing loan terms. If you still have questions you can schedule an appointment with a St. Louis Bankruptcy Attorney today to discuss the available options. 

Redemption Redemption will require you to have a certain amount of cash up front that you can put towards the balance.  Redemption applies to cases where the property value has depreciated to lower than the amount of the loan.  When this happens the creditor is considered under secured. Essentially, to redeem a debt, you make a payment of the current secured value of the debt. For example, if a debtor owes 10,000 dollars on a vehicle and the vehicle is now only worth 6,000 dollars, the creditor is under secured by 4,000 dollars.  To redeem this vehicle a debtor would make a payment of 6,000 dollars to the creditor.  Then, through filing for bankruptcy, a debtor can eliminate responsibility for the remaining 4,000 dollars as it is unsecured.  After the bankruptcy the debtor will own the property free and clear.  ReaffirmationAnother option for individuals filing for bankruptcy is a reaffirmation agreement.  Reaffirmation agreements can be used on any type of property regardless of the value.  Reaffirmation agreements do not require a lump sum payment.  Rather, a reaffirmation agreement is an agreement to continue making payments under the original loan agreement despite the bankruptcy proceeding.  After the bankruptcy the debtor is still financially responsible for the property and will be subject to repossession or foreclosure if the debtor is unable to remain current on the obligation.  Surrender When filing for bankruptcy a debtor may also choose to surrender property.  A debtor may surrender property regardless of the value of the property or the current amount of the mortgage or the loan.  This option will require you to turn over the property to the trustee, usually at an arranged time.  Surrender allows you to walk away from the bankruptcy not without any further responsibility or obligation to pay for the property.If you have questions, or would like more information, schedule an appointment with a St. Louis Bankruptcy Attorney now. 

A new bill was introduced which would require mortgage companies to respond faster to inquiries about a possible short sale: The Prompt Notification of Short Sale Act. Bankruptcy attorneys know about this issue: a client would like to avoid foreclosure by selling his house to a third party below the mortgage amount. The mortgage company would lose money through a short sale but might receive more money than through a foreclosure. However, the process takes often a long time. Even though someone from the mortgage company talks with the house owner about the short sale process, someone else at the mortgage company might start the foreclosure process. Every so often, we see that clients have to file bankruptcy to stop a foreclosure and have more time for the short sale process.   The legislation is known as the Prompt Notification of Short Sale Act. It will require a written response from the mortgage company within 75 days after the house owner sends a request to the mortgage company.   If the act becomes law, it will not change anything in my opinion because the bill requires only a response from the mortgage company. The response could be that the mortgage company needs more time to review the house owner's request. However, the mortgage company or better: the servicer of the mortgage company can extent the response deadline only once by 21 days.   If the servicer does not respond within 75 days after receiving the written request, the buyer could receive $1,000 in statutory damages. That means the buyer does not have to proof any real damages. Reasonable attorney fees would need to be paid by the servicer as well.   A short sale is favorable for two reasons, the seller avoids a foreclosure on his credit and a short sale is better for the neighborhood. A short sale does not bring down the value of other properties in the neighborhood as a foreclosure normally does.   A short sale normally takes four to nine month to complete. This is not only too long for a potential buyer but it is sometimes too long for the mortgage company itself which might foreclose on the property before the short sale process is finished.   Will the new bill be successful? A similar bill was introduced last year which required a response deadline of 45 days. The bill did not make it to a debate in the house....

When filing for bankruptcy debtors are faced with a number of important decisions.  Throughout bankruptcy a debtor has the option to surrender property, even property that still has a loan balance.  Through bankruptcy a debtor is able to surrender property without penalty or worrying about deficiencies.  However, some debtors may wish to keep certain types of property, i.e. a vehicle.  If a debtor chooses to keep property it would still need to be disclosed on the bankruptcy petition, however, it would be listed that the debtor is keeping the property.  In some cases lenders will require the debtor to sign a reaffirmation agreement.  A reaffirmation is a voluntary agreement that must be filed within 60 days of the creditors meeting or before the case is closed, which ever is sooner.  The agreement will state that the debtor is continuing the loan and will continue to make payments in accordance with the agreement.  If a debtor chooses to sign a reaffirmation agreement the debtor is responsible for that particular debt as if he/she never filed for bankruptcy.  Even if a debtor chooses to sign a reaffirmation agreement the debtor has sixty days after the agreement is filed with the court or the order of discharge to rescind the agreement. Whether a debtor should sign a reaffirmation agreement is a very important decision and there are a number of factors to consider.  Signing a reaffirmation agreement may allow the debtor to keep certain types of property that may be very sentimentally important to the debtor, like a house.  A reaffirmation agreement may allow a debtor to keep very practical types of property, like a vehicle.  When filing for bankruptcy a debtor may be hesitant to surrender property that he/she is not required to surrender. However, in making this decision, a debtor should consider whether or not he/she can actually afford the payment.  A reaffirmation effectively eliminates some of the "fresh start" offered by a Chapter 7 Bankruptcy.  It would be very unfortunate to reaffirm the debt, not be able to continue payments, and eventually lose the property anyways.  Debtors should also consider, even if he/she can afford the debt, whether it is truly worth signing.  In signing a reaffirmation agreement a debtor will incur attorney's fees, fees from the lender, and still have to pay according with the original contract terms.  While debtors may be concerned about acquiring a new vehicle, there are lenders that specialize in helping people that have filed for bankruptcy. If you still have questions about bankruptcy and reaffirmation agreements you can schedule an appointment with a St. Louis Bankruptcy Attorney.

When considering bankruptcy, the most meaningful difference between unsecured and secured debt is that unsecured debt can be discharged.  Secured debt can be discharged, however, any lien on the asset still remains.  Basically, this removes the contractual obligation to pay for the asset is eliminated, however, you still own the asset subject to a the lien.  There me be other options available for certain types of secured debt, like cram down. A secured debt is a debt where the debtor uses an asset as collateral for the loan.  If you do not make payments on the debt as required the lender can take possession of the collateral and sell the item to recover losses if the item is not reaffirmed within 45 days of the 341 hearing.  Until this time, an automatic stay generally protects the debtor from collection or repossession efforts, unless the creditor sucessfully obtains a motion for relief.  The most common examples of this type of loan are a car or property.  Very often the loan is a purchase money security interest, which simply means that the loan is secured by the item that you are purchasing, meaning, if you purchase a car from a dealership with a loan the car is collateral and can be repossessed if you do not pay in accordance with the loan. When an individual has equity in a house or other property it is often possible to take out loans on that equity.  When taking out a loan on equity that debt is considered secured by the home or property in which you had equity, thus not a purchase money security inserest, regardless of what you spend the proceeds on.  Meaning, if you take out a loan based on equity in a house to purchase new furniture for your home that loan is secured by your house.  In the event that you do not make payments on the loan the creditor could attempt to foreclose upon your house.  It is important to remember that even a second mortgage holder may forclose upon your house.  There are many types of secured debt, including, mortgages and liens.  These types of voluntary secured debts are created by agreement of the debtor and the creditor.  It is also possible to have secured debt that is involuntarily created, like a mechanics lien.  Mechanics liens can attach with the consent of the title holder under limited circumstances where property value has been increased by work or materials that have not been paid for by the debtor.  In some courts, depending on both the court and county in which you reside, judgments create liens that may not be dischargable in bankruptcy. Conversely, unsecured debt is a general debt not attached to specific collateral.  The lender cannot take possession of assets to satisfy the debtor's obligation.  Common examples of unsecured debts include signature loans, personal loans, credit card debt, and pay day loans.  It is possible to discharge unsecured debt through bankruptcy.  Generally most unsecured debts can be discharged through a Chapter 7 bankruptcy, with the notable exception of student loans.  Even in a Chapter 13 bankruptcy proceeding, depending on the individuals disposable monthly income as calculated by the means test, it may still be possible to eliminate some or all of the unsecured debt.If you still have questions, make an appointment to speak with a St. Charles and St. Louis Bankrupty Attorney today!