The Atlanta Journal Constitution ran a front page story on Sunday, April 14 entitled More than 40% of Georgia Homes Underwater. The AJC reporter notes that “there’s not another metro area in the United States with as many concentrated pockets of mortgage holders who are underwater in their homes. No place else comes close.”
Your house is considered underwater if it is worth substantially less than what you owe. From the mid-1990′s through the mid-2000′s, home values in metro Atlanta rose and mortgage lenders offered outrageous deals to encourage residential purchases. It was common to see interest only loans or 100% financing which required nothing down from the purchaser.
As long as home prices kept rising, you could refinance over and over, and even take cash out. Rising prices minimized the risk to lenders so loan underwriting standards were lax. I regularly spoke to potential bankruptcy clients who earned $50,000 to $70,000 annually but were living in $350,000 to $400,000 homes. They were meeting with me to deal with excess credit card debt – in many cases, these folks kept their expensive homes even while filing bankruptcy.
When the real estate market crashed in 2008, your home value may have plummeted, but the mortgage obligation remains. Thus, as the AJC points out, there are many areas in metro Atlanta where homeowners are making mortgage payments on homes that may never increase in value to the balance on the loan – the mortgage is kind of a permanent rental. [click to continue…]
Georgia foreclosure law allows lenders to start and complete the mortgage foreclosure process in as little as 37 days. This means that just over a month from the start date of the foreclosure, you may lose all title interest in your home.
With very limited exception, lenders in Georgia do not have to go to court to foreclose on your home. Georgia law permits non-judicial foreclosure, which means that if you go into default, the mortgage company or bank needs only to send you a written notice of intent to foreclosure, then advertise the pending sale for four (4) weeks in the legal newspaper for the county where the property is located.
By contrast, other states like Florida, Illinois and Ohio use a judicial foreclosure procedure where the lender must file a lawsuit against you, win a judgment allowing for a foreclosure then conduct the sale. In these other states, a title transfer might not happen for 8 months to a year.
Foreclosure sales in Georgia are conducted on the courthouse steps of the county where the property is located. These sales occur only on the first Tuesday of each calendar month and consist of live auctions conducted by mortgage company lawyers. [click to continue…]
One of the more frustrating parts of bankruptcy practice occurs when I have to tell a prospective client that he cannot file because he recently transferred property out of his name in an attempt to protect that property from creditors. Most of the time, the transfers are made by someone who owes money to a creditor that he cannot pay and he wants to protect assets from that creditors.
Recently, for example I spoke to a man who has well over $100,000 of equity in his home and over $150,000 in credit card debt. Recognizing the risk to his house, this gentleman executed a quit claim deed to his wife, transferring all of his interest in the house to her. Five months after the transfer he called me to say that he was ready to file bankruptcy. Unfortunately, I had to advise him not to file now because Section 727 of the Bankruptcy Code says that a transfer of property for no purpose other than to frustrate the intent of creditors within a year prior to filing is considered a fraudulent transfer and would prevent such a filer from receiving a discharge.
Another type of troublesome transfer can arise when an elderly parent attempts to transfer assets to an adult child in an effort to qualify for Medicaid. Usually the problem arises not for the transferor but for the transferee. [click to continue…]
Mortgage companies and banks often put you on a “no communication” list after you file bankruptcy. Your on-line access log-in may stop working, you will no longer receive loan statements, and when you call customer service you may be told that because you are in bankruptcy, the lender cannot talk to you anymore.
Lenders are not giving you the silent treatment because they are angry at you for filing bankruptcy, nor are they trying to be rude. They are not talking to you because the automatic stay protection of the Bankruptcy Code says that once you file, it is a violation of the stay to make any effort to collect a debt.
Arguably, a loan statement could be construed as attempting to collect a debt and customer service reps not knowledgeable about bankruptcy may say something inproper. Basically your bank or mortgage company does not want to find itself facing a claim for damages arising from violating the stay so many of these companies simply cut off all communication.
The problem for you, of course, is that you may have a need to speak with a representative. Perhaps you need to confirm receipt of a mortgage payment that was paid directly after filing. You may need to make an electronic payment directly from your checking account. You may need a copy of your payment history.
How do you get past the wall of silence? [click to continue…]
Chapter 13 bankruptcy cases filed in the Northern District of Georgia cannot be confirmed by the bankruptcy court judge if the IRS or State of Georgia files documentation reporting unfiled tax returns. The reason? If you have unfiled tax returns, your potential tax liability is unknown. Since Chapter 13 consists of a payment plan that must fit within five years, an unknown liability means that there is no way to calculate whether your proposed plan payment will work.
Further, prior to your Section341 hearing your Chapter 13 trustee will want to see a copy of last year’s tax return to (a) confirm that you have filed it, and (b) to cross check the annual income figure reported on Schedule B of your petition with the income figures shown on your tax return.
As you can see, therefore, your Chapter 13 cannot get past the trustee or the judge if you have unfiled returns. Currently the IRS reports unfiled tax returns over the past 10+ years, so you should not assume that if your unfiled returns date back many years, you are in the clear. In fact, the statute of limitations to determine when tax debt may be discharged in bankruptcy as stale does not begin to run until your returns have been filed.
What can you do, however, if you need to file Chapter 13 to stop a foreclosure, repossession or other emergency, and you have unfiled tax returns? [click to continue…]
Earlier this week, the 11th Circuit Court of Appeals issued a ruling in the bankruptcy fraud case of United States v. Turner. Here are the relevant facts:
Mr. Turner owned a parcel of rental property that was destroyed by fire. His insurance carrier issued a check to him for $40,000. Two days after receiving this check, Mr. Turner filed Chapter 13. Three days after filing, Turner deposited the check, used $11,500 to pay off the mortgage on the destroyed property and kept the rest of the money.
Several weeks after these financial transactions, Mr. Turner filed his bankruptcy schedules. He did not list receipt of the $40,000 check. He also claimed that the balance on the rental property mortgage was $50,000, rather than $11,500.
The bankruptcy trustee discovered these inaccuracies and moved to convert Mr. Turner’s case to Chapter 7, which the court approved. Three years later the United States attorney filed an action against Turner for bankruptcy fraud for making false statements and he was convicted. The 11th Circuit agreed to consider Turner’s appeal. [click to continue…]