Jonathan Alper, writing in the Florida Bankruptcy Law blog, reports that Democratic congressmen have introduced House Bill 7307 which would empower bankruptcy judges to reduce the balances of “upside down” mortgages to the value of the property and to reduce mortgage interest rates in some cases.
So called “cram down” authority currently allows bankruptcy judges to cram down car loans, furniture debt and other secured loans. The BAPCPA changes to the bankruptcy law put limits on cram downs of car loans; it will be interesting to see if Congress expands cram downs to mortgage loans will they also change the rule that apply to automobile debt.
Opponents to this expansion of cram down authority contend that by giving bankruptcy judges the power to change mortgage loan terms, the mortgage security market will be destablilized and that the cost and availability of mortgages – especially to credit challenged homeowners – will tighten because of the uncertainty that such potential modifications will bring to the market.More on Congress Considers Bill that Would Allow Homeowners to Modify Mortgage Terms in Chapter 13
Filed under General consumer bankruptcy info by 
Nine times out of ten, when I meet with a potential bankruptcy client, that individual will have credit card debts. In some cases, credit card debt can be startlingly large – I have seen many cases that include over $100,000 of credit card debt.
As you may suspect, the bankruptcy law provides that credit card lenders can challenge your discharge in certain circumstances. You cannot, for example, go to an electronics superstore, buy a flat panel television and a $10,000 stereo system using your credit card, then file a bankruptcy the next week to wipe out the debt.
The Bankruptcy Code speaks to two situations in which credit card debt to a specific credit card lender can be declared non-dischargeable:More on When are Credit Card Debts at Risk for a Bankruptcy Challenge
Filed under Creditor discharge actions, Recent credit card use by
This past Sunday, the AJC published a fascinating article entitled “Foreclosures Reach Renters.” The article reports on several very sad cases in which a hardworking rental home tenant finds himself literally out on the street following the foreclosure of his rental home and an eviction filed by the new owner (usually a mortgage lender eager to put the foreclosure property back on the market).
Georgia, as you may know is a “non-judicial foreclosure” state, meaning that in the event of a default in payments, a lender does not have to go to court to retake his property. Instead, the lender need only give notice of the pending foreclosure to the homeowner, then advertise for four consecutive weeks the foreclosure sale in the official newspaper of the county where the property is located. Then the lender’s attorney can sell the property at open auction on the first Tuesday of the following month. In a worst case scenario, a foreclosure in Georgia can be completed in as little as 45 days.
Eviction, too, is not forgiving. Georgia law offers no safe haven or notice period for a tenant who discovers too late that his rental payments were ending up in the pocket of his landlord, rather than as payments to a mortgage company.
Filed under Automatic stay issues, Consumer protection, Foreclosure issues by
Today’s Atlanta Journal-Constitution contains a very interesting article entitled “Consumer Profiling? – His card’s limit was cut over where he shopped.” The story describes the plight of a 29 year old businessman named Kevin Johnson who received notification from American Express that his credit limit was being reduced. Why? According to Amex “other customers who have used their card at establishments where you recently shopped have a poor repayment history.”
Mr. Johnson notes that he has a perfect payment history with American Express, a solid credit score and that he does not exceed 30% of his credit limit. He also reports that American Express will not offer any explanation as to which particular charges triggered the action from the credit card issuer.
Mr. Johnson’s personal credit profile does not seem to matter to the credit card issuer. Instead, Amex’ model makes assumptions about Mr. Johnson based on the stores where he shops. American Express has refused to offer any explanation as to how their model works, which is kind of baffling as it is not too difficult to imagine that some enterprising lawyer will find a client and file a lawsuit accusing the credit card lender of a form of redlining.
It will be interesting to see what kind of fallout this revelation about American Express’ credit policies will generate. My wholly unscientific guesses as to the type of activity that may trigger a credit reduction include:
- use of credit cards to pay groceries
- use of credit cards to pay tax debt
- using credit cards to pay restaurant tabs when you are running a high balance
- a pattern of use that shows an increasing frequency of credit card use at bars or clubs
What do you think about this form of credit profiling? Will you now change how you manage your credit card use?
Filed under Consumer protection by
As a member of the Bankruptcy Law Network, I am part of a small group of knowledgeable and prolific bankruptcy lawyers from all over the country. If you have not yet checked out the Bankruptcy Law Network blog, and its sister blogs
I encourage you to do so.
In addition to writing for the BLN family of blogs, most of my colleagues in this endeavor publish their own websites and blogs that address more local concerns. Just as this blog focuses on bankruptcy issues relevant to the Northern District of Georgia, frequently the BLN member blogs will have a local focus as well. However, there are some bankruptcy and consumer protection issues that have a national focus. I subscribe (using RSS and my iGoogle page) to a variety of bankruptcy and consumer bankruptcy blogs from around the country for the purpose of picking up trends and learning about case strategies that may very well work for me in my local practice. If you are a bankruptcy lawyer or individual interested in keeping track of what is going on in the bankruptcy world, I invite you to subscribe not just to this blog, but to several of the bankruptcy related blogs listed on my blogroll.
BLN member (and founder) Jay Fleischman recently posted a blog article that has relevance in any bankruptcy jurisdisction. His post entitled “Chase Home Finance, Caught Manufacturing Defaults in Bankruptcy Court, Nears Deal with U.S. Trustee” discusses a problem that I believe has existed for years with many mortgage lenders who file claims in bankruptcy court.More on Chase Home Finance Accused of Adding Improper Charges to Bankruptcy Claims
Filed under Automatic stay issues by
When I meet with a potential client, one of the first calculations I run is a “median income test” evaluation. The median income test adds up your gross income from all sources during the six months preceding the month of filing, then divides by six to arrive at a monthly average. If that monthly average exceeds the median income for a similarly sized family in Georgia (or other applicable State), then you “fail” the median income test and a “presumption of abuse” arises. As a practical matter, above-median debtors often find themselves in a Chapter 13 repayment plan rather than a Chapter 7 liquidation.
How should the median income calculation deal with Christmas bonsues? If we read the Bankruptcy Code literally, a Christmas bonus will distort your median income calculation if you file your case in January, February, March, April, May or June. A June filing, for example, would look at gross income during December through May to generate a monthly average. A July filing, by contrast, would look at gross income for January through June, and not count any Christmas bonuses.More on How are Year End Bonuses Treated in a Median Income Test Calculation?
Filed under Median income test issues by
