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Bankruptcy can seem so scary or humiliating that lots of folks resolve to just keep paying the minimums on their debts.
You know what it feels like to have more bills than you can pay. You don’t know how bankruptcy will affect you.
It seems easier to stay the course, pay the minimums, and plod along.
It may be sort of comfortable, and knowable, but it may be a life sentence of being in debt.
You won’t get ahead, for sure, but you don’t have to face the uncomfortable fact that you can’t really ever pay off your debts.
On the surface, it seems like a rational choice.
It’s allowed by the terms of the credit card agreement.
It saves you from looking at the big picture of your finances.
You still have plastic in your wallet.
But what’s the real and total cost to you of paying forever?
The non monetary cost
If you decide to live with overwhelming debt you’ll encounter costs that don’t appear on your balance sheet.
Being in debt is stressful.
One of the old surveys measuring stress listed financial problems as a major cause of stress, along with death in the family, divorce, birth of a child, and serious illness. Having a mortgage of more than $150,000 was deemed to be a serious source of stress. These days, I regularly deal with Californians whose mortgage debt is $500,000 to $900,000. By that definition, everyone I see is stressed.
Health professionals have long cataloged the bodily consequences of stress. It is not just something you live with and tough it out. It shortens life as well as detracts from the quality of life. I worry about the life expectancy of some of my clients.
However, new academic studies have expanded our understanding of stress.
And it’s not that it is the stupid who get into debt. It’s not that getting into debt was necessarily stupid.
The stress caused by debt reduces your ability to perform intellectually. You make new, bad decisions because of stress.
The researchers from Harvard tested IQ’s in a controlled setting in a shopping mall in New Jersey and in the field in a farming community in India.
Constant worry about paying bills intrudes on your thinking, and diminishes the mental resources you have to apply to all of life’s decisions.
In the American lab setting, financially worried subjects lost 13 IQ points. In the field, Indian farmers who got paid just once a year improved their IQ by 25% after the harvest when they had money in their pockets and no immediate money troubles.
Wherever it’s found, stress over money makes you less intellectually capable. No matter how you got into debt, being in debt reduces your ability to make good decisions about anything.
So, the challenge for those stressed by debt is to make good decisions about the alternatives to being in debt. That can be a tall order when you aren’t thinking well.
Get good information. There’s lots of it here on this site, from highly experienced bankruptcy lawyers.
Good financial counselors can assess whether you have a realistic chance to become debt-free in a reasonable time outside of bankruptcy.
Cheung v. Wells Fargo Bank, N.A., 2013 Westlaw 6017497 (N.D. Cal.).
Facts: Following a nonjudicial foreclosure, the defaulting borrower brought suit against the foreclosing creditor, claiming that the foreclosure itself had been wrongful because the original lender had improperly transferred the mortgage to a securitization trust after the deadline contained in the securitization agreement itself. As a result, the mortgage was never owned by the party that conducted the foreclosure sale. The creditor moved to dismiss the action on the ground that the borrower had not tendered the balance due.
Reasoning: Citing Fleming vs. Kagan, 189 Cal.App.2d 791, 11 Cal. Rptr. 737 (1961), the court held that tender is not required when the transaction itself is void due to fraud. Therefore, the wrongful foreclosure cause of action was properly brought. For the same reason, the court held that the mortgagor could seek cancellation of the written instruments, since the title documents themselves were void.
Author’s Comment: I think that Fleming is distinguishable. In that case, the underlying debt had already been paid off, and there was evidence of fraudulent behavior. Here, the underlying debt was never paid, and there is no evidence that the borrower in this case was defrauded by anyone.
But the larger issue – the tardy assignment of the mortgage to the trust after the deadline – is terribly troubling because there are thousands of mortgages that fall into the same category. A few other courts have validated the theory that a borrower can challenge a completed foreclosure on the ground that the mortgage securitization trust had no standing to foreclose. See, e.g., Glaski v. Bank of America, N.A., 218 Cal.App.4th 1079, 160 Cal.Rptr.3d 449 (2013). Surprisingly, the court in Cheung did not cite Glaski, a California state court decision, even though the result in Cheung was purportedly governed by California law.
For a complete discussion of Glaski, see 2013-32 Comm. Fin. News. NL 66, Commercial Finance Newsletter Borrower May Sue for Wrongful Foreclosure When Assignment of Mortgage to Securitized Trust Occurs After Trust's Closing Date.
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"Bland et al. v. Roberts, 2013 U.S. App. LEXIS 19268 (4th Circuit, September 18, 2013), Daniel Ray Carter, Jr., was employed as a deputy sheriff in Hampton, Virginia. During the election season when his boss, Sheriff B.J. Roberts, was running for reelection, Carter (and some of his co-workers) expressed support for Robert's political opponent by "liking" his campaign Facebook page. Upon learning of this, Roberts terminated the employees who had "liked" his opponent's page claiming the terminations were based on budget cuts and disruption of office dynamics."
Sheriff Roberts believed that his firing was in retaliation for supporting his boss' rival. Roberts and his co-workers sued stating that they were being fired for expressing their free speech rights under the First Amended. Well the district court did find that "Liking" something on Facebook could be protected speech, but merely liking something didn't make it "protected speech" warranting constitutional protection. Roberts appealed and the 4th Circuit reversed this determination.
The Appellate Court held that on a "most basic level, clicking on the 'Like' button literally causes to be published the statement that the user 'likes' something, which is itself a substantive statement," of approval or support. Because this was a political campaign, the "like" button became like a campaign sign in front of a person's front lawn which is purely political speech. This sort of speech has always been protected by the first amendment.
The importance of this decision is significant because it creates First Amendment protections for employees who use social media and their use of "likes" and "emoticons." This means employers need to be very careful when investigating or taking disciplinary action against employees who exercise their First Amendment rights in this fashion. If you fired an employee for this sort of use of social medium you could find yourself sued.
Good luck out there!
PS: I know this doesn't have as much to do with bankruptcy and loan modification. However, I did find it interesting.