Friday, December 20, 2013

Carrying Debt vs. Bankruptcy.... Would you rather save your behind or save your face?


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.
They found something absolutely new.

Stress makes you stupid

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.

Challenging myths

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.
Confront the myths about bankruptcy.  Many are just that:  myths.  Fanciful tales unconnected to reality.
Recognize that lots of the “avoid bankruptcy at all costs” hype comes from people who profit by your continuing to pay on impossible debt, or people who want to sell you an alternative solution.

Get smart

A first step is to recognize  that your debts may be impairing your thinking.
Get the facts, enlist some help, and consider whether the alternatives to living in debt are viable for you.
Just hunkering down and  paying the minimums, and remaining impaired may be stupid.


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.

Monday, October 14, 2013

NACA's FREE LOAN MODIFICATION ASSISTANCE..... COMES TO LA!!! October 31 - Nov 4 & Nov. 14-18, 2013

Oct 24-28
Oct 31-Nov 4
Nov 7-11
Nov 14-18
The Neighborhood Assistance Corporation of America ("NACA") is a non-profit, community advocacy and homeownership organization. NACA’s primary goal is to build strong, healthy neighborhoods in urban and rural areas nationwide through affordable homeownership. NACA has made the dream of homeownership a reality for thousands of working people by counseling them honestly and effectively, enabling even those with poor credit to purchase a home or refinance a predatory loan with far better terms than those provided even in the prime market. 


Investing in working people
The NACA homeownership program is our answer to the huge subprime and predatory lending industry. NACA has conclusively shown that when working people get the benefit of a prime rate loan, they can resolve their financial problems, make their mortgage payments and become prime borrowers. NACA’s track record of helping people who have credit problems become homeowners or refinance out of a predatory loan debunks the myth that high rates and fees are necessary to compensate for their "credit risk." 

Started in 1988, NACA has a tremendous track record of successful advocacy against predatory and discriminatory lenders as well as providing the best mortgage program in America with $10 billion in funding commitments. NACA is the largest housing services organization in the country and is rapidly expanding by growing its existing 30+ offices, headquartered in Boston, MA, opening many new offices nationwide, and expanding the services it offers its membership. NACA’s confrontational community organizing and unprecedented mortgage program have set the national standard for assisting low- and moderate-income people to achieve the dream of homeownership. 

NACA – America’s Best Mortgage Program
The incredible NACA mortgage allows NACA Members to purchase or refinance homes with:

  • no down payment,
  • no closing costs,
  • no fees,
  • no requirement for perfect credit,
  • and at a below-market interest rate.

Everyone gets the same incredible terms, including the below-market interest rate, regardless of their credit score or other factors. NACA also provides free, comprehensive housing services. NACA counsels Members into the extraordinary NACA mortgage using character-based lending criteria that takes each Member’s circumstances into account to determine whether they are ready for homeownership and what they can afford. This is in contrast to risk-based pricing where people are often given loans they cannot afford while brokers and others make tremendous fees and profits. 

Friday, September 27, 2013

"Liking" something on Facebook and being Fired for it..... NOT SO FAST!

"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.