CONSUMER MATTERS

By Atty. James G. Beirne

DESPITE the fact that two million Americans filed for bankruptcy in 2005 and close to two million have already sought its benefits this year, many people still rely on rumors and myths that abound regarding bankruptcy. Many people are aware that bankruptcy can help “eliminate debts” and give filers a “fresh start,” but beyond these terms, very few people really know much about bankruptcy, leading to several misconceptions.

In this article, I will point out 10 of these misconceptions and why they are untrue, and sometimes unfair.

1. Bankruptcy relief is no longer available. This is entirely false. With the passage of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) in 2005, it has become a common misconception that people can no longer file for bankruptcy, or if ever, it would be extremely difficult to obtain a discharge. The benefits of bankruptcy filing before 2005 remain the same, except that obtaining them has become a little more complicated. What has become difficult is finding a good attorney who knows the new rules, but an experienced attorney can help you eliminate your debts and give you the much-desired fresh start.

2. I have to be broke to file for bankruptcy. This is not true. Even if you are still able to pay your bills, but are anxious about not being able to pay them in the near future because of income loss, mounting medical bills or other problems, you can consult with a bankruptcy attorney now and avoid the stress and anxiety of lawsuits, collectors calling you every day, or possible wage garnishments. You don’t have to wait until you are in default or until collectors are virtually knocking at your doors.

3. My credit will be ruined if I file for bankruptcy. Absolutely untrue. The mere fact that you are considering filing for bankruptcy indicates that you probably are already having difficulty paying your bills. If your credit score has not gone down yet, it will soon plummet when you start missing out on payments. On the other hand, after the discharge of your debts, financing companies would definitely take a more positive outlook on you considering that you now have a clean financial slate with little or no remaining unsecured debt, you have completed two types of courses to help you manage your finances – one on debt counseling and another on financial management, you have just come up with a household budget that you used to eliminate the unaffordable debt from your household expenses, you realize by now that poor credit management can bring you nowhere, and you can’t file for Chapter 7 bankruptcy for a 8 years.

4. Filing for bankruptcy is an indication of failure. There are many reasons for bankruptcy that is beyond our control. These reasons include loss of income because of layoff or forced furloughs, huge medical expenses, divorce or separation, and increased interest rates on credit cards. It is precisely to prevent honest debtors faced with these hardships from being harassed by creditors. Availing of the benefits of a legitimate law should not be construed as a negative reflection of one’s character.

5. Everybody will know that I filed for bankruptcy. False. This year alone, close to two million debtors have filed for bankruptcy, and while bankruptcy filing is a public record, there is no single list of persons who have filed for bankruptcy this year or in the past. Your bankruptcy attorney is bound by confidentiality laws and will not divulge information about your case.

6. I will lose everything I own once I file for bankruptcy. This is not true. This is one of the main reasons people are discouraged from filing for bankruptcy. They fear losing their home, car, laptop, etc. The truth is bankruptcy laws protect certain assets from being seized by creditors, and in most cases, these include your house, your car, household items, clothes, and money in retirement plans.

7. I won’t be hired and I won’t be able to rent an apartment if I file for bankruptcy. Again, this is not true. Employers would always prefer persons who do not have financial burdens because then they would be able to concentrate on their job. In the same manner, landlords would rather sign up tenants whose money has been freed to pay for rent, instead of debtors.

8. I will not be considered for citizenship if I file for bankruptcy. Not true. Bankruptcy filing is not a crime and will not affect your green card or your citizenship application.

9. I will file for bankruptcy anyway, so I might as well max out my credit cards. This is an absolute no-no. Remember that purchases of more than $550 for luxury goods bought within 90 days of filing and cash advances of $825 within 70 days of filing will not be discharged. In addition, such action constitutes fraud and could make you liable for criminal charges, aside from the fact that it could result in denial of your bankruptcy application.

10.  Creditors can still harass me even if I file for bankruptcy. Absolutely untrue. Once you file for bankruptcy, the court will order an “automatic stay” which means that a hold is put on the outstanding debts listed in your application, and any attempt by creditors to collect these debts can cost them punitive damages and lawsuits.

Call us today and schedule a free consultation. We have three convenient offices to serve you: Glendale (818) 552-4500; Cerritos (562) 865-4480; and West Covina (626) 262-4446.

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Atty. James G. Beirne, a member of the highly respected National Association of Consumer Bankruptcy Attorneys and an active member of the State Bar of California, has been handling bankruptcy cases for over a decade. His offices are located at 520 E. Wilson Ave., Suite 110, Glendale, CA 91206, and 17215 Studebaker Rd., Suite 380, Cerritos, CA 90703, with telephone numbers (818) 552-4500; (562) 865-4480; and (866) 903-4522. He also has offices at 2640 E. Garvey Ave., Suite 104, West Covina 91791, with tel. no. (626) 262-4446.

This article is for information purposes only, and does not necessary reflect the company’s opinions and views on general issues. We make no warranty, prediction nor representation, nor do we assume any legal liability for the completeness of any information and its effect on any case. Each case is different and results depend on the facts of each case. Consult with and retain counsel of your own choice if you need legal advice. ■

BY ATTY. JAMES BEIRNE

MANY homeowners who are in foreclosure and seeking a loan modification from their lenders are reluctant to file for bankruptcy although they can no longer sleep at night because of their insurmountable debts. They are afraid that if they filed for bankruptcy, the lenders would automatically reject their loan modification application.

Similarly, those who have filed for bankruptcy and those whose debts have been discharged under Chapter or those whose repayment plan under Chapter 13 have been approved think that they would no longer qualify for loan modification.

These fears are generally true. But those who have applied for loan modification under Home Affordable Mortgage Program (HAMP) of the Obama administration need not worry about filing for bankruptcy even if their loan modification applications are still pending. Under the guidelines released by the Treasury Department that took effect on July 1, 2010, bankruptcy filers who would otherwise qualify for HAMP loan modification are given additional protection.

If the homeowner who has already been approved for trial loan modification and decides to file for bankruptcy under either Chapter 7 or Chapter 13, the lender cannot deny the homeowner permanent modification just because he or she has filed for bankruptcy.

In addition, the HAMP guidelines effectively prohibits lenders from enforcing foreclosure proceedings until after the lender or loan servicer has determined that the borrower does not qualify for HAMP loan modification.

As a background, the Home Affordable Modification Program (HAMP) is part of the three-pronged comprehensive strategy by the Obama administration to help distressed homeowners who are struggling to keep their loans current or who are already behind on their mortgage payments. Unlike the Home Affordable Refinancing Program (HARP) that is available only to those whose home loans are owned or guaranteed by Fannie Mae or Freddie Mac, HAMP is available to all homeowners in financial trouble. It provides mortgage loan servicers with financial incentives to modify existing first lien mortgages.

To apply for a loan modification under HAMP, the homeowner must:

• Be the owner-occupant of a one- to four-unit home.

• Have an unpaid principal balance that is equal to or less than: $729,750 for one unit; $934,200 for two units; $1,129,250 for three units; and $1,403,400 for four units.

• Have a first lien mortgage that was originated on or before January 1, 2009.

• Have a monthly mortgage payment (including taxes, insurance, and home owners association dues) greater than 31% of your monthly gross (pre-tax) income.

• Have a mortgage payment that is not affordable due to a financial hardship that can be documented.

Here are some key highlights of the new HAMP guidelines with regards foreclosure:

• The servicer must evaluate the borrower’s eligibility under HAMP and determine ineligibility before referring the borrower to foreclosure.

• If foreclosure activity has already been initiated, the foreclosure sale cannot occur until after the servicer determines if the borrower is ineligible under HAMP.

• The servicer must give the borrower 30 days to respond to HAMP “Non-Approval Notices” in certain circumstances before conducting the foreclosure sale.

• The servicer must provide, in writing, to the foreclosure attorney certification that the borrower is ineligible for HAMP before conducting the foreclosure sale.

With regards homeowners who are in bankruptcy or are planning to file for bankruptcy, here are the guidelines issued by the Treasury Department:

• A borrower in active Chapter 7 or Chapter 13 bankruptcy or the borrower’s attorney or bankruptcy trustee can request the servicer to consider the borrower under HAMP.  The servicer can no longer decline the borrower as a “proper exercise of discretion.”• If the borrower has been approved on a trial loan modification and files a Chapter 7 or Chapter 13, the servicer may not deny the borrower a permanent modification simply for filing bankruptcy.

• If a delinquent borrower has a discharged Chapter 7 and chooses not to reaffirm, the first lien mortgage debt is still eligible under HAMP with the following provision added to the permanent modification agreement: “I was discharged in a Chapter 7 bankruptcy proceeding subsequent to the execution of the loan documents. Based on this representation, the lender agrees that I will not have personal liability on the debt pursuant to this Agreement.”

A reaffirmation is a new contract between the lender and the debtor wherein the debtor agrees to reinstate personal liability on a debt otherwise discharged by the bankruptcy court.

Remember that if you think you qualify for loan modification under HAMP, you may still file for bankruptcy without surrendering your HAMP eligibility. At the same time, even if you are already in bankruptcy and think you may qualify for a HAMP loan modification, you can go ahead and apply.

It is always advisable for homeowners having difficulty negotiating with lenders to seek the services of an experienced attorney. My office can help you package your HAMP loan modification application and, at the same time, fight for your rights under the HAMP guidelines.

Call us today and schedule a free consultation. We have three convenient offices to serve you: Glendale (818) 552-4500; Cerritos (562) 865-4480; and West Covina (626) 262-4446.

Atty. James G. Beirne, a member of the highly respected National Association of Consumer Bankruptcy Attorneys and an active member of the State Bare of California, has been handling bankruptcy cases for over a decade. His offices are located at 520 E. Wilson Ave., Suite 110, Glendale, CA 91206, and 17215 Studebaker Rd., Suite 380, Cerritos, CA 90703, with telephone numbers (818) 552-4500; (562) 865-4480; and (866) 903-4522. He also has offices at 2640 E. Garvey Ave., Suite 104, West Covina 91791, with tel. no. (626) 262-4446.

(This article is for information purposes only, and does not necessary reflect the company’s opinions and views on general issues. We make no warranty, prediction nor representation, nor do we assume any legal liability for the completeness of any information and its effect on any case. Each case is different and results depend on the facts of each case. Consult with and retain counsel of your own choice if you need legal advice.)■