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COVID-19 – HELP FOR HOMEOWNERS AND RENTERS
CORONAVIRUS ASSISTANCE INFORMATION
July 11, 2019 – the following is information from the Federal Housing Finance Agency. FHFA is closely monitoring the coronavirus national emergency’s effect on the housing finance market and continues to update policies and guidance to ensure its regulated entities – Fannie Mae, Freddie Mac (the Enterprises), and the Federal Home Loan Banks (FHLBanks) – are fulfilling their mission of providing market liquidity during this difficult time.
I will post new information as I find more resources to assist homeowners and renters adversely impacted by COVID-19.
Help for Homeowners:
If your ability to pay your mortgage is impacted, and your loan is owned by Fannie Mae or Freddie Mac (use the “loan lookup” tools: https://www.knowyouroptions.com/loanlookup for Fannie Mae or https://ww3.freddiemac.com/loanlookup/ for Freddie Mac to find out), you may be eligible to delay making your monthly mortgage payments for a temporary period, during which:
- You won’t incur late fees.
- Foreclosure and other legal proceedings will be suspended.
Help For Renters
If you are a renter and live in a rental unit financed by Fannie Mae or Freddie Mac, you have access to their respective Disaster Response Networks. These networks offer support from HUD-approved housing counselors, such as a personalized recovery assessment and action plan, financial coaching and budgeting, and ongoing check-ins. Contact your property manager to see if you are eligible. Fannie Mae’s renter hotline number is 1-877-542-9723 and Freddie Mac’s renter hotline number is 1-800-404-3097.
Additional resources: Consumers can also visit consumerfinance.gov/coronavirus for up-to-date information and resources to protect and manage their finances.
Beware of Scams
During times of crisis, there is an increased risk of scams and fraud. Protect yourself by asking questions, reading the materials provided to you, and avoiding any solicitations requiring up-front cash payments. If you think you may have been a victim of a scam and your concerns with Fannie Mae, Freddie Mac, or a Federal Home Loan Bank involve fraud, please contact the FHFA Office of Inspector General (FHFA OIG) at 800-793-7724 or visit the FHFA OIG’s website
MUSINGS FROM DIANE:
This is a very scary time for everyone, especially those who live paycheck to paycheck. One hiccup and they are behind on their rent or mortgage and facing eviction. Throw in COVID-19 and the nightmare begins. Afraid to go to work (assuming you can)? You are not alone. The government is trying to find ways to help everyone who needs it, but they are not equipped to deal with the millions who need assistance. Existing programs are overwhelmed and at the point of breaking. New programs are in the works, but it will take months (or years) before they are ready to offer the assistance that is really needed now (remember the mortgage workout programs that were developed years after the mortgage crisis). There is no easy answer to this nightmare. Everyone has to do their best and use their common sense. Don’t fall for scams (there are and will be thousands. of not hundreds of thousands). Don’t be afraid to ask for help. Don’t take advice from those who have a reason to lie to you (like a politician who offers medical advice – he only wants to be reelected). Be smart.
The post COVID-19 – Help for Homeowners and Renters appeared first on Diane L. Drain - Phoenix Arizona Bankruptcy & Foreclosure Attorney.
April 29, 2020
From: JD Supra
By: Kathleen Muthig; Haynsworth Sinkler Boyd, P.A.
As the COVID-19 pandemic marches on, more homeowners than ever are seeking assistance from their lenders.
The American Bankruptcy Institute reported on April 24, 2020 that over 3.4 million homeowners have entered into COVID-19 related mortgage forbearance plans. This is a significant increase since April 3, 2020, when just over one million homeowners were utilizing COVID-19 related mortgage forbearance plans. Undoubtedly, COVID-19 and the resulting Coronavirus Aid, Relief and Economic Security (CARES) Act have changed the landscape of consumer bankruptcy cases, especially with regard to the treatment of mortgage debt. Below are 10 changes that Creditors should be aware of in Chapter 13 and Chapter 7 cases.
1. COVID-19 relief payments are excluded from definition of “income.”
Payments made under federal law related to COVID-19 are excluded from the disposable income requirement of confirmation in the Bankruptcy Code and the income calculation for eligibility under Chapter 7.
2. Chapter 13 plans may exceed five years.
If the Debtor is experiencing hardship due to COVID-19, then a Chapter 13 Plan confirmed before March 27, 2020, may be modified to extend the repayment period up to seven years after the first payment was due under the Chapter 13 Plan after confirmation. Under the Bankruptcy Code, Chapter 13 Plans are limited to a length of five years. If a plan is modified from five years to seven years, and a Creditor’s arrearage is paid over those seven years, the Creditor will receive less monthly arrearage payments in the modified plan than under the original confirmed plan.
3. Second Moratoriums.
Some Chapter 13 Trustees have agreed to consent to second moratoriums and longer time periods in order to bring cases current, even without the existence of a qualifying hardship under the CARES Act provisions.
4. Practical changes to Bankruptcy Court procedures.
U.S. Bankruptcy Court for the District of South Carolina Judges Duncan and Waites entered an Operating Order 20-08 setting forth procedures in light of COVID-19. The Order includes a requirement for Debtors to make all mortgage payments to the Trustee on claims secured by a first priority security interest in the Debtor’s principal residence. Chapter 13 Plans in which mortgage payments are paid to the Trustee, instead of directly to the Debtor, are called “Conduit Plans.”
5. Payment deferments due to COVID-19 in conduit plans.
Chapter 13 Creditors will need to work with the Chapter 13 Trustees and the Debtors to agree upon and seek Court approval for modifications to the Plan due to COVID-19. Creditors should be mindful to file a timely Notice of Payment Change if the loan payments due are modified under Bankruptcy Rule 3002.1.
6. Payment deferments due to COVID-19 in plans where Debtor is paying mortgage payments directly to the Creditor.
Chapter 13 Creditors will need to work directly with Debtors to agree upon a loan modification, forbearance, or deferment. Again, Creditors must file a timely Notice of Payment Change pursuant to Rule 3002.1.
7. CARES Act foreclosure relief for federally-backed loans.
A servicer of a federally-backed loan may not initiate any foreclosure process, move for a foreclosure judgment, order a sale, or execute a foreclosure-related eviction or foreclosure sale for sixty days from March 18, 2020. Note that this stay is separate from any state-mandated stay of foreclosures, like the one currently in place that prohibits foreclosures until May 1, 2020, in South Carolina.
8. CARES Act forbearances.
Borrowers with federally-backed mortgage loans can request a forbearance from mortgage payments for up to 180 days if they have been affected by COVID-19. The Act also provides for separate forbearance rights for owners of multi-family property (five or more units) and provides protection for tenants from eviction if the owner applies for a forbearance.
9. CARES Act eviction relief.
A Landlord of a “covered dwelling” may not file an action for eviction or charge additional fees for nonpayment of rent during a 120-day period beginning on March 27, 2020. A covered dwelling is one where the building is secured by a federally-backed mortgage loan or one that participates in certain federal housing programs. Note that this stay is separate from any state-mandated stay of evictions, like the one currently in place that prohibits evictions until May 1, 2020, in South Carolina.
10. CARES Act student loan relief.
For covered student loans, the CARES Act suspends payments and waives interest from March 13, 2020, through September 30, 2020. Many Chapter 13 Plans provide for the Debtor making student loan payments outside the Plan, so the CARES Act relief is vital to Chapter 13 Debtors, because a moratorium or deferment in the Plan would not affect those payments owed outside of the Plan.
When Does a Small Business File for Bankruptcy? And 8 More Questions
The coronavirus is expected to permanently shut millions of small businesses in the next several months. Here are issues for owners to consider.
Jerry Stetina, chief operating officer of A to Z Total Heating and Cooling outside Detroit. The firm filed for bankruptcy protection under a new law for small businesses.
Jerry Stetina, chief operating officer of A to Z Total Heating and Cooling outside Detroit. The firm filed for bankruptcy protection under a new law for small businesses.Credit...Sylvia Jarrus for
The New York Times
By Amy Haimerl
May 1, 2020, 5:00 a.m. ET
All the forecasts point in the same direction: A wave of small-business bankruptcies is coming.
More than 40 percent of the nation’s 30 million small businesses could close permanently in the next six months because of the coronavirus pandemic, according to a poll by the U.S. Chamber of Commerce.
“It’s a crisis that will impact our economy for generations,” said Amanda Ballantyne, executive director of Main Street Alliance, an advocacy group for small business. “We’re going to lose so much of the small-business sector.”
Commercial bankruptcies in the first quarter of 2020 ticked up 4 percent from a year earlier, according to data from the American Bankruptcy Institute. But many of those filings were made before the pandemic, when the economy was healthy. Right now, some owners are waiting to find out if they will receive federal stimulus aid before deciding whether to file for bankruptcy protection.
Many of them may just disappear. But for others, a bankruptcy law that took effect in February, the Small Business Restructuring Act, could help them survive the pandemic.
Before that law, if a struggling small business wanted to restructure its debt, its only option was Chapter 11, which is the commercial bankruptcy code. It allows a company to negotiate with creditors for better terms — a process known as debt restructuring — and in some cases dismiss debt. The goal is for the company to get a fresh start.
But the Chapter 11 process is long and expensive, and a recent report by the Brookings Institution found that it is better suited to large firms. The new rules, known as Subchapter 5 because they are part of Chapter 11, give firms with less than $2.73 million in debt the power of reorganization with a few key simplifications. Two main changes: A judge can enforce a restructuring plan even if creditors don’t like it, and the owner can continue running the business.
Congress recognized that this tool could be a lifeline to small businesses trying to get through an economic shutdown. So as part of the federal stimulus program, it expanded eligibility to firms with up to $7.5 million in debt. That change means Subchapter 5 could help up to 70 percent of all businesses that might file for bankruptcy, Brookings estimated.
“A number of small businesses who are prone to just giving up could be saved,” said Bob Keach, who leads the bankruptcy practice at Bernstein, Shur, Sawyer & Nelson, a law firm in Maine.
A to Z Total Heating and Cooling in suburban Detroit was one of the first companies in the country to file for bankruptcy protection under the new rules. The family-owned firm has been operating for nearly four decades, but business really took off in the past few years. The company struggled to manage the growth.
Its primary problem? Labor. The company’s two dozen employees weren’t enough to keep up with demand, and Jerry Stetina, A to Z’s chief operating officer, said it couldn’t find additional workers. That meant the firm got bogged down paying overtime on top of the typical $35 hourly wage — and tapped out cash reserves.
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“I know it sounds really crazy, but the process of growing put us in the situation we’re in,” he said.
Then a mild winter hit Michigan this year, and fewer customers called for new furnaces or repairs. What little work the employees did have was shut down by the coronavirus. But they didn’t want to give up: Mr. Stetina could see a strong summer season; A to Z just needed a bridge to get there.
“People will live without heat, but they won’t live without air-conditioning,” he said. “Our phones are ringing now with questions about A.C. start-ups to get ready for summer.” When A to Z exits bankruptcy, the company plans to hire a controller to better handle its finances.
ImageA to Z said it had needed a bridge to get to what it expected to be a busy summer season.
A to Z said it had needed a bridge to get to what it expected to be a busy summer season.Credit...Sylvia Jarrus for The New York Times
Here are some of the main questions to consider if you are thinking about a bankruptcy filing for your small business.
How do I know when to call it quits?
Business owners must search their hearts and assess their balance sheets.
“The first question to ask is: ‘Do the owners want to keep this going?’” said Kimberly Ross Clayson, whose firm, Clayson, Schneider & Miller in Detroit, advises small-business clients.
If your heart isn’t in it, call a lawyer to help you wind down operations. But if you still think your business can become viable, a Chapter 11 bankruptcy might be the right call.
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Initially, Mr. Stetina of A to Z was scared to call a lawyer. He knew the stigma around bankruptcy and was worried what clients might think even though A to Z planned to restructure, not discharge, debt. Once he did call, he said, he wished he had done it earlier.
“A lot of big businesses have been doing it for years, and it’s some of the reason that they are in business still,” Mr. Stetina said.
How do I know if restructuring would help?
Write a business plan for a post-pandemic business world. How will your business operate? Where will revenue come from? What new expenses — for marketing, infrastructure and more — will you incur to help your business pivot? If you can write a business plan that shows a positive balance sheet after bankruptcy, restructuring might work.
“Chapter 11 bankruptcy is designed to fix people’s balance sheets,” Mr. Keach, the Maine lawyer, said. “It allows you to restructure some debt, eliminate other debt. It doesn’t generate revenue for you.”
Should I take out a loan or file for bankruptcy?
Every business owner’s situation is different. But a general rule is: If you can’t identify enough future revenue to pay off the debt, borrowing may make matters worse. Some business owners no longer have any personal resources to draw on and may not receive federal stimulus funding.
“Don’t borrow blindly and say, ‘It will all work out,’” said Ms. Clayson, who is a federal trustee for Subchapter 5 claims. “If you are thinking a credit card is how you will open your doors and bridge yourself to the next stage, then you really need to be thinking about how viable your business is.”
If you find yourself considering nonbank lenders with high interest rates, it’s time to call a lawyer, she said.
Do I have to file for bankruptcy to close my business?
No. If you can pay off your creditors or negotiate a deal with them, you don’t need to file for bankruptcy protection. But you will want a lawyer to draft agreements.
Also: Don’t forget about withholding taxes. When times are tight, many small-business owners who manage their own payroll dip into that pot of money they set aside at each pay period and use it for other expenses.
“If you have unpaid withholding taxes, the business owner becomes personally liable,” Ms. Clayson said.
Should I file for Chapter 7 or Chapter 11?
Think of Chapter 7 as a funeral and Chapter 11 as a do-over.
Chapter 7 is used for both individual and business bankruptcies when the goal is to wipe out debt. The debt can go away, but you may also lose your assets.
If you wanted to restructure your business debt, you would consider a Chapter 11 bankruptcy and, more specifically, Subchapter 5 for small businesses. But you can always try to negotiate with creditors outside of a formal bankruptcy.
“The only reason you need to use Chapter 11 at all is to deal with recalcitrant creditors,” Mr. Keach said. “If creditors won’t negotiate with you, bankruptcy allows you to cram down a plan of restructuring.”
There are other forms of bankruptcy filing: One, Chapter 13, is used for personal reorganizations, when you want to try to keep your assets and renegotiate the terms of your debt. Another, Chapter 12, oversees businesses in farming and fishing.
Will I lose everything in bankruptcy?
It depends on what personal guarantees you made. Most small-business owners put up their home or some other asset as collateral for start-up loans. In fact, the Small Business Administration requires that as part of its non-Covid-related lending.
If you used your house as collateral, it’s possible you would be forced to sell it as part of a Chapter 7 settlement. Under Chapter 11, you may have more luck.
Must I file both personal bankruptcy and business bankruptcy?
Possibly, but not necessarily. It depends on whether you are closing the business or trying to restructure, and what liabilities you have.
If you are trying to restructure, the goal is for your lawyer to negotiate with your creditors and create a plan that lets you avoid a personal bankruptcy. But if the creditors don’t like the deal, they could come after you for any debts you personally guaranteed. In that case, you might be forced to file for personal bankruptcy.
How does the new Subchapter 5 work?
Here is the main thing to know: Like all bankruptcies, it has a magic power called the “automatic stay.” Filing for bankruptcy stops creditors from collecting from you.
“It buys you time,” Mr. Keach said.
And time is everything. For example, take a restaurant that was having its best year before the pandemic, but then its revenue disappeared. A Subchapter 5 bankruptcy could help the company by halting creditor collections and allowing owners to renegotiate terms.
“What it might allow is, with a couple of exceptions, a built-in moratorium on rent,” Mr. Keach said. “You could propose a plan where you could literally not pay anything toward old debt for four to six months as long as your projections show that you have positive projected income after that.”
In exchange, business owners will need to use their net operating income — what’s left after the usual expenses like rent, payroll, cost of goods — to pay creditors for the next three to five years.
Can I ever open another business?
Yes. Securing funding may be more challenging, but it’s not impossible.
“My favorite clients have always been those who are already on to their next idea,” Ms. Clayson said. “This is the American way. You can start over. This isn’t a black mark.”
Published: April 28, 2020
From: Overton County News
The Trump Administration has put a timely halt on the ability of the government to garnish Social Security benefits to pay for defaulted student loans for an indefinite period during the COVID crisis, reports Association of Mature American Citizens [AMAC].
Seniors are the fastest growing segment of the population with outstanding student loan debt. Research conducted by Consumer Financial Protection Bureau [CFPB] shows that, “In 2018, Americans over the age of 50 owed more than $260 billion in student debt, up from $36 billion in 2004, according to the Federal Reserve. Nearly 40% of borrowers aged 65 and older are in default.”
Bob Carlstrom, president of AMAC Action initiative, said, “Forty-five percent of unmarried Social Security recipients and 21% of married couples rely on their benefits for at least 90% of their income. Garnishing that fixed income for student loan debt can have a particularly devastating impact on their lives.”
In a statement issued Wednesday, March 25, Carlstrom expressed AMAC’s appreciation for the decision to suspend the garnishment of Social Security benefits.
“We commend the administration and the Secretary of Education for suspending the ability of the federal government to garnish the Social Security income of beneficiaries for payment of student debt during this challenging time,” Carlstrom stated. “The Secretary has indeed responded to the concerns and pleas of many members – and non-members – of AMAC. This action is a good first step on this issue.”
Social Security benefits are off limits to nearly all creditors, but not the federal government, which can garnish Social Security benefits for certain debts, including federal student loan debt cosigned by retirees.
According to the Federal Reserve, Americans over 50 hold $260 billion in student loan debt. Benefits can be garnished for court-ordered child support or alimony, or for debts owed to the government. For many seniors, however, their monthly Social Security check is both a critical part of, and indeed the safety net, of their income and financial situation.
“We believe Social Security benefits should be protected permanently from student loan default garnishment by any party, including the federal government,” Carlstrom said.
Are you under financial distress and considering declaring bankruptcy? Bankruptcies have long been the answer to debtors looking to have their debts discharged, so find out what your options are in getting the best possible results when you file for bankruptcy.
There are different types of bankruptcy in the bankruptcy code. For personal bankruptcy, it’s generally a choice between Chapter 7 (liquidation) and Chapter 13 (reorganization). If you want the bankruptcy process that will allow you to hold on to as many of your assets as possible, the bankruptcy chapter for you is 13.
If you’re filing for bankruptcy under Chapter 13, understand that you have to propose a repayment plan. To continue with bankruptcy proceedings, this reorganization plan has to be approved by the bankruptcy court. For the payment plan to meet with the court’s approval, it must manifest your best effort to pay your debts. This means that you’ll be using all of your disposable income to pay your non-priority unsecured creditors.
Disposable income pertains to your leftover funds after you’ve covered all your basic living expenses and made your monthly payments on more important debts. These necessary installments include priority debts (e.g. taxes and child support) payments and secured debts (e.g. car loan and mortgage) payments. A secured debt is one that has an asset attached to it. In contrast, non-priority unsecured debts usually pertain to such obligations as credit card debt and medical bills.
Non-Priority Unsecured Debt Payments
How do you calculate your monthly payment on these debts? The main determination falls on whether your income is below or above your state’s median income. Essentially, it involves averaging your monthly income for the six months prior to your Chapter 13 bankruptcy filing and then comparing it with the established state median for households the same size as yours.
If your income doesn’t meet the state median, your best effort probably wouldn’t cover much of the non-priority unsecured debts. This could result in you completing your repayment plan and getting your bankruptcy discharge in just three years instead of the maximum five years. The plan will be based on your household budget and not on your monthly disposable income.
If your income surpasses the state median, you will have to figure out what your disposable income is by subtracting your living expenses as well as your priority and secured debt payments from your regular income. Living expenses can be calculated based on your specific expenses, if not on local or national standards. After you’ve made the deductions, what’s left is your disposable income. With it, you can spend the next five years paying off unsecured creditors in the manner that the bankruptcy court decides.
Debtors with Substantial Assets
There are bankrupt debtors who might not have much of an income but do own valuable assets. It’s possible that bankruptcy isn’t the right debt relief solution for them. In this case, they should look into alternative ways to get out of debt. If you have substantial assets, a bankruptcy judge may express concern that each creditor would receive less from your Chapter 13 payment plan than they would if you liquidate your assets in Chapter 7 since a filer can keep non-exempt assets in a Chapter 13 bankruptcy case, but not in a Chapter 7 filing.
This is why the court will study the value of your non-exempt property along with your disposable income and the total amount of your priority debt. You’ll have to pay the greater amount to your creditors to ensure that you don’t end up with a windfall by filing bankruptcy under Chapter 13 rather than filing Chapter 7.
Considering Filing Chapter 13 Bankruptcy? Contact a Washington Bankruptcy Attorney Today!
If you plan to pay your creditors to hold on to your assets, make sure that you come up with an acceptable reorganization plan by consulting a bankruptcy lawyer. Bankruptcy lawyers can help their clients in Chapter 13 bankruptcy cases create payment plans that will meet with the approval of bankruptcy courts.
It’s best to hire the services of a lawyer specializing in bankruptcy law in order to craft a suitable plan to make payments to debt collectors. You can definitely use the legal advice and assistance throughout the entire experience, from filling out bankruptcy forms to achieving your bankruptcy discharge.
If you need legal help in a bankruptcy case, call us at Northwest Debt Relief Law firm and arrange a free legal consultation with one of our experienced Washington bankruptcy attorneys.
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The post Chapter 13 Bankruptcy Best Effort Requirement appeared first on Vancouver Bankruptcy Attorney | Northwest Debt Relief Law Firm.
How Filing for Bankruptcy Changed My Life
lawyer, retired law professor, educator, wife, mother
I could tell you how bankruptcy may change your life, but why would you listen to me?
After all, I am the attorney who charges money to help her clients. What makes more sense is that I share my clients’ reports about their lives prior to calling me, the challenges of filing a bankruptcy and how their lives changed after bankruptcy. All of these reports are directly from my clients (as a professional, you will never find a fake review on my website or social media, like so many of other bankruptcy attorneys do). The truth is, I don’t need to lie.
SOME THOUGHTS MY CLIENTS WANT TO SHARE WITH YOU:
- I was scared to the point of panic attacks
- Now, we have hope for the future, more discipline with our finances and eternally thankful for Diane’s guidance through the process.
- My whole life seemed a day to day mix of anxiety and fear.
- That was the hardest time in our life and it was rough on our marriage and mental state.
- We were in serious financial trouble, which created an incredible amount of stress that was beginning to affect my health.
- I was desperate and she made me feel that I could sleep through the nite
I was scared to the point of panic attacks
One and a half years ago, after a series of physical problems, I finally admitted to myself that I could no longer handle my debt load. I was going under, and knew I would have to consider bankruptcy. I had a high credit score and had always been responsible about paying my debts, so the decision was very hard to make. I was scared to the point of panic attacks and had no idea how to find a lawyer. I went on yelp and read through many reviews. When I saw a picture of Diane, I knew she was the person I wanted to work with. What a great decision that turned out to be! From our first phone conversation, her calmness, empathy, and careful, thorough explanations helped me gain confidence in walking through this complicated process. Her and Jay treated with me with such kindness, patiently answering my many questions and quieting my fears with precise, professional knowledge. This is a difficult experience emotionally, but the process is a series of steps, each one of which you will be guided through. Diane and Jay always answered my calls and e-mails in a timely manner. I am so glad I found Diane. Her warmth and caring and wealth of experience greatly eased the stress of going through this difficult and emotional process. I highly recommend using her services. j.R.
Now, we have hope for the future, more discipline with our finances and eternally thankful for Diane’s guidance through the process.
Bankruptcy is not in anyone’s long term plans and was something my wife and I never really considered for years as we slowly drowned in debt. Despite the social stigma of bankruptcy, my wife and I started to educate ourselves about it and realized it was a great option for us. We live in Payson, AZ and talked with the first bankruptcy lawyer we could find in Payson. He made it clear that it was the option for us but we felt demeaned and uncomfortable with some of his suggestions. Still, we felt like it was our only options so we started to move forward with him.
Soon after we retained him, we started doing our research on him and found that he had a number of red flags. Our uncomfortableness was founded. We started searching for a highly rated lawyer and found Diane. Even though she wasn’t 100% sure that representing us was our best option (due to location), she confidently and patiently answered numerous questions for us. She even gave us some other options for lawyers that she highly respected. We truly felt as though she had our best interests in mind.
In the end, Diane was able to represent us and her communication, leadership and clarity throughout the process was night and day different than our first lawyer. I can’t stress to you enough how important it was for us to have made the switch. While we were hurting financially, it was %1000 times worth it to lose the money on the retainer to our previous lawyer.
Bankruptcy is something you have to take ownership of. There was a lot of work for us to do and our case’s quality depended on us taking ownership. However, Diane was a great coach in letting us know each upcoming step and what was needed. She simplified it so that we weren’t ever overwhelmed.
When our family met in court we were at peace and confident in our preparation. Furthermore, there was a high level of respect our trustee had with Diane. This made us feel good about our representation and further confirmed our confidence in her.
It has been a year since my wife and I started to consider bankruptcy and my wife and I find ourselves pondering our last year. This time last year we felt hopeless with our debt and struggling to find any solutions. Now, we have hope for the future, more discipline with our finances and eternally thankful for Diane’s guidance through the process. We out 5 months after discharge (with a credit score of 688 which we didn’t think was possible for us) and happy to be moving into a new year with this behind us.
From beginning to end, Diane was consistent, calm, encouraging, thorough and helped us feel hope again. We can’t say enough great things about Diane!
Bankruptcy was the avenue to financial freedom for our family and it might be for yours too. Our only suggestions are to:
1. Make it a lifestyle change so you can get free and stay free
2.Take ownership of your own situation and your own bankruptcy
3. Hire Diane and trust her to help you! B.K.
That was the hardest time in our life and it was rough on our marriage and mental state.
Diane I just wanted to give you an update on us. We filed bk with you representing us about 7 years ago now. Just wanted you to know we are doing very well. We did listen to you and have no credit card debt to this day. We purchased a home 3 years ago but stayed way under our budget. We bought vehicles but both vehicles are a lot cheaper than what we could have purchased and the one is almost paid off and we have owned it a year. Vehicles are our weakness. We would like to get better in that area.
We have only paid interest on our vehicles and home since we filed. We try to follow Dave Ramsey as much as possible. So paying off everything is our goal. I am doing amazing in real estate now and my husband is still at UPS and doing well.
That was the hardest time in our life and it was rough on our marriage and mental state. We ended up needing counseling 2 years ago for our marriage and our counselor said our problems started 5 years ago and wanted to know what happen then. Well that’s when we filed. I don’t know how people file every 10 years. Thank you for bringing us out of the mess we got ourselves in. We plan on never being in that situation ever again we look at money and credit very differently now. Just wanted to share our story so you can share with others that come in. It is not an easy road to just file bk. Take care and thank you.
Followup from client : please tell people that the first year is hard but after doing a lot of research on how to build our credit by reading bk forums we were able to get back to doing very well. Now we have credit scores in the 740-750 range. So, yes it isn’t the end all, but it isn’t easy either you have to buckle down and not blame each other as well. It happens to more people that the public realizes. K.T.
My whole life seemed a day to day mix of anxiety and fear.
I first met Diane in 2009. I was losing control of my finances and therefore my whole life seemed a day to day mix of anxiety and fear. I landed on her website and returned numerous times to understand the process. I found it one of the best and most informative sites on the subject and just decided that whoever was behind all that information was the person I needed. I remember my first visit, I cried thinking my life was over and she quickly alleviated all my fears. There were no demons or dragons. It my constitutional right to be free of debt. For the first time, I felt empowered and had faith that she would get me past this chapter of my life. Indeed she did. Ten years later, after a major backpacking injury, disability and subsequent loss of employment ( I had been basically debt for all those years in between) I needed her again and returned. Her sound advice, again, helped me get my life back, as I knew she would. I’ll be forever grateful. Diane and Jay are a class act. No one does it better. V.M.
We were in serious financial trouble, which created an incredible amount of stress that was beginning to affect my health.
I cannot adequately describe how much we appreciate the help Diane and Jay provided us. We were in serious financial trouble, which created an incredible amount of stress that was beginning to affect my health. After contacting Diane and starting the process I was able to get the first decent night’s sleep I’d had in months. Diane and Jay were always available to answer EVERY question I had, no matter how ridiculous it sounded. Unlike some attorney’s specializing in bankruptcy, Diane takes a hands-on approach from start to finish providing a complete outline of the process as well as the expected timeline. It was quite apparent how lucky we were to have her during our 341 meeting with the trustee. At that meeting there were several individuals assigned to the same time slot and unfortunately most were represented by people they had never met. Diane told us what to expect during the meeting and remained by our side through the entire process. We are coming to the end of this journey and my husband I will be forever grateful to Diane and Jay for giving us our life back! P.E.
I was desperate and she made me feel that I could sleep through the nite
I cannot tell you how grateful I am that Diane Drain took my call. I was desperate and she made me feel that I could sleep through the nite. She explained all my options to deal with my financial situation and did not push me to hire her. Instead, she was more interested in my welfare than in her charging a fee. I really wish more lawyers were as professional and courteous as Diane Drain. L.B.
ADDITIONAL REVIEWS – TALKING ABOUT CHOICES & THE PROCESS
- Education is the key
- A simple mistake could cost you in many ways
- Diane has developed an extensive array of handouts and email templates that addressed every component of the process that a client is experiencing.
- Like many people, I was very apprehensive about filing bankruptcy. At 65 years old, I always thought- That would never be me!
- Mrs. Drain made a very stressful time in my life easier to manage by providing detailed direction through my bankruptcy process.
- Quite frankly I was scared about having to deal with a big credit card company in court.
- At a time when you are most vulnerable and fearful
- Diane helped me straighten out my case, after an attorney from a different law firm, made serious mistakes in my filing that could have been extremely detrimental.
- Remember, this is your bankruptcy, and you get out of it what you put in. It is hard work. It is not easy.
- We got different or incomplete answers from other lawyers.
- We found ourselves in a financial tsunami 2 yrs ago.
- She explains everything that needs to be done. If you do your part and put in the work to make sure everything is accurate, then she will do hers and you will have great results.
- Diane held me accountable for working with her on completing the necessary paperwork so I was involved in every step of the process.
Education is the key
Feeling the questionable unease of financial hardship can be one of life’s most serious challenges; not knowing where to turn for information, who to trust, and how to proceed once you have the information can be overwhelming. I was feeling lost and out-of-control not knowing what to do next and so I contacted the offices of Diane Drain. What I found was a person capable of compassion, empathy, and in my case, a person capable of giving enough information to steer me in a direction of meaning. At this point in time I have not gone down the road of bankruptcy; however, I now have a much clearer understanding of my choices and that has made the financial challenges much easier to deal with. I am indebted to Diane not only for providing her vast knowledge of Bankruptcy law, but the generosity of time she gave me when we went beyond the 30 minute free referral. I highly recommend getting in touch with her if you’re having any financial challenges! T.P.
A simple mistake could cost you in many ways
After choosing to file bankruptcy, I selected another attorney at first, which was a huge mistake. He offered payment plans which seemed to be a good choice at the time. However, his lack of communication and errors in my documents filed with the court were going to cost me in the long run! I fired him and chose to work with Diane and Jay instead, which turned out to be the right decision. Her professional guidance and continuous communication helped me get back on track with filing my case correctly. You cannot afford to make mistakes when filing bankruptcy, or it will cost you. Diane will guide you in the right direction at all times. She was firm and held me accountable for providing the required documents, and even though she was very busy, always made me feel important and welcome, too. She understands that a simple mistake could cost you in many ways, and works very hard to avoid this. Bankruptcy is a delicate situation and one that can be overwhelming. Diane will guide you through it, with very clear and detailed instructions, and excellent communication. Her knowledge of the law and her expertise are second to none, and I highly recommend her! J.D.
Diane has developed an extensive array of handouts and email templates that addressed every component of the process that a client is experiencing.
Diane Drain and Jay provided professional, comprehensive services and support through every step of the bankruptcy process, were always available to answer questions. Diane has developed an extensive array of handouts and email templates that addressed every component of the process that a client is experiencing. These handouts and templates address every aspect of the process and serve as excellent guides and reference materials as you are struggling through what can be a very painstaking ordeal. Diane and Jay were both, very knowledgeable, and very supportive during the entire process, and also assisted in identifying and helping me successfully navigate any pitfalls that I otherwise would not have been aware of. I highly recommend Diane Drain’s Law Office because I received one on one personal advice and guidance from her as needed, compared with the larger law firms where you seldom get to speak with, or receive guidance from the attorney, and instead are serviced by paralegals and other assistants. Diane and Jay made me feel confident through what otherwise would have been a harrowing experience. I recommend them 100%! Thank you Diane and Jay! R.G.
Like many people, I was very apprehensive about filing bankruptcy. At 65 years old, I always thought- That would never be me!
Like many people, I was very apprehensive about filing bankruptcy. At 65 years old, I always thought- That would never be me! But after paying all my bills for 49 years and barely treading water, I was laid off and found myself with nothing. 
I talked to 5 other attorneys before I found Diane, and they were not a good fit. In fact, most gave me inappropriate advice or simply wrong facts. I found Diane from the BBB website and I knew from our first conversation she was the attorney for me. Diane is so knowledgeable, thorough, timely and efficient! She is also compassionate and caring. And Jay (in the office) was wonderful too! I would recommend Diane to anyone who might have to go through the difficult process of bankruptcy. D.W.
Mrs. Drain made a very stressful time in my life easier to manage by providing detailed direction through my bankruptcy process.
Mrs. Drain made a very stressful time in my life easier to manage by providing detailed direction through my bankruptcy process. From day one I felt comfortable with Dian and Jay in addition to feeling confident with my decision to file. She is always quick to respond to my questions and was patient in providing clear direction and advice. I would highly recommend Mrs. Drain to anyone in need of her law services.
The Best A.T.
Diane held me accountable for working with her on completing the necessary paperwork so I was involved in every step of the process.
Diane Drain and her assistant Jay are beyond professional. From the moment I called them to inquire about their services, to every phone call and each in person meeting we had, they remained calm, and helped to guide me during a very challenging process. Diane is very thorough and has a wealth of experience. She does not do the work for you and there is a significant amount of paperwork that needs to be completed. Having said that, she walked me through this every step of the way, but Diane held me accountable for working with her on completing the necessary paperwork so I was involved in every step of the process. Diane and Jay were always very positive and consistently receptive in answering and returning phone calls and emails in a timely manner. In summary, they are a class act and able to take a very challenging and difficult process and make it as humane and positive as anyone could. I high recommend using their services. T.J
Quite frankly I was scared about having to deal with a big credit card company in court.
I approached Diane with a large debt problem. Although I was working with a company to pay down the debt, one of the credit card companies decided to sue me. This would have destroyed all my pay-back efforts. Quite frankly I was scared about having to deal with a big credit card company in court. I think they were about to roll me. I sought help from Diane with some degree of trepidation. But Diane was able to explain everything to me even though I was under a lot of personally imposed stress. Diane understood all the emotions that were flowing through me and kept me relaxed enough to get through the entire process. She was part Lawyer, part Psychologist, and part Mother Hen. It was exactly what I needed. I really can’t say that going through Chapter 7 was fun, but Diane made the process acceptable and kept me focused when I needed to be focused. I absolutely recommend Diane to anyone considering walking down this path. Thank you Diane. This has made a huge difference in my life. D.S.
At a time when you are most vulnerable and fearful
If you are considering bankruptcy, make sure you consult with Diane Drain, and learn as much as you can from her website prior to your free consultation. Why? Diane will clearly and patiently explain to you the most critical information you need to be able to decide for yourself if filling bankruptcy is your best course of action to resolve your debts. I can attest from dealing with her that Diane (at a time when you are most vulnerable and fearful) will not lead you to a solution that absolutely is not to the best of your interest even if it means you are not hiring her as in my case. From the information you provide her prior to consultation, I believe she already know if bankruptcy is the right solution for you; accordingly, she already know if she is going get business from you or not. In my case, despite her knowing that bankruptcy for now is not the best solution for me (therefore no business for her) and without giving a hint prior to consultation, she still proceeded with my free consultation and spent way more than twice the 30 minutes allotted. That consultation was most critical because it cleared up my mind to pursue a specific course of action, and gives me all the energy I need to pursue it. Priceless. J.M.
Diane helped me straighten out my case, after an attorney from a different law firm, made serious mistakes in my filing that could have been extremely detrimental.
Diane helped me straighten out my case, after an attorney from a different law firm, made serious mistakes in my filing that could have been extremely detrimental. If not for her very professional guidance, constant communication and follow-up, while being firm and holding me accountable for producing the required documents, I don’t know what I would have done. This was a very tough time for me, and Diane’s extensive knowledge, professionalism, and guidance got me through it. Thank you so much, Diane! You are so very much appreciated. J.D.
Remember, this is your bankruptcy, and you get out of it what you put in. It is hard work. It is not easy.
Diane Drain, and her amazing teammate, Jay were two of the most helpful, caring individuals I have met in a long, long time. The process of bankruptcy is daunting, having a guiding hand and experienced consul are an extremely important aspect. Remember, this is your bankruptcy, and you get out of it what you put in. It is hard work. It is not easy. If you follow Diane’s outline and are proactive, it will go on track and follow its course. If you do not, you will face challenges. Be prepared, trust in Diane, trust in Jay, and her team, you will climb the mountain and be successful. K.B.
We got different or incomplete answers from other lawyers
I had filed for Chapter 7 with Diane and it was the easiest most stress free process. My wife and I were considering for months on just what to do since this was my first time filing and we got different or incomplete answers from the lawyers we talked with which did not help and lead me to put off filing. My wife found Diane and when we consulted with her I immediately felt more at ease as she answered every question no matter how ridiculous I felt to ask and gave me sound advice. More important was that my wife felt we can trust her with how patient and well informed she was which helped with her anxiety and meant the world to me. Diane and her husband Jay are cool, salt of the earth people who REALLY want to help! Hands down the “scary” experience of bankruptcy was not scary at all and we retained her immediately. She was kind, knew what she was talking about and kept me very well informed with each step as we went along. I HIGHLY RECOMMEND her services and I cannot be more grateful to her for all she did in helping me get through my bankruptcy. Good woman and AMAZING lawyer! K.
We found ourselves in a financial tsunami 2 yrs ago.
We found ourselves in a financial tsunami 2 yrs ago. No matter how we did things the financial outlook was getting worse and worse. We finally decided we needed to investigate options. Once we found Diane Drain’s website and started to learn what the process of bankruptcy entailed we felt there could be an answer for us. We made an appoint to speak with Diane and decided this was the path we needed to take. While we were getting our documents in order and other paperwork completed, we became bogged down once again thinking maybe we can try something else, something different. So after delaying almost a year longer in April of 2017 we finally jumped onboard @ 100%. Diane and Jay were great guiding us and making sure we had all the items needed completed. They filed, kept us informed, went to the Trustee’s meeting with us, and kept us inform during the entire process. They made the whole process less painful and manageable. We owe a debt of gratitude for Diane having the wisdom to use her website to promote the education of the bankruptcy process available to everyone. If it had not been for her well thought out website and the detailed information we would have had to take our chances with the process. If you find yourself totally stressed and unsure of how you can repair your financial health, you can rest assured that Diane and Jay will do what is needed to get you through the process. They’ll give you peace of mind once again.
Additional note: 0ne of the things I forgot to put in there was the personal service especially the day of the trustee’s meeting. There were a minimum of 4 people that were meeting their lawyers for the first time. One lawyer asked us twice what our name was. She waited another five minutes and then asked again and I quote ” are you SURE your not the Thomas’s?” I’m pretty sure we know who we are and that is not us.” We thought at the time how odd that was that so many people would not have taken the time to actually meet before hand. Very odd. T.W.
She explains everything that needs to be done. If you do your part and put in the work to make sure everything is accurate, then she will do hers and you will have great results.
Diane is a great attorney that made our BK experience as smooth as possible. Before seeing Diane, we went to another attorney who told us that he couldn’t get us a Ch.7 and our only option was a 13 and that is when we found Diane Drain. The entire process starting with the free phone consultation to a couple meetings in the office got us the Ch. 7 we needed. Diane communicates well through the entire process by phone and detailed emails. She explains everything that needs to be done. If you do your part and put in the work to make sure everything is accurate, then she will do hers and you will have great results. Thank you Diane and Jay for everything. We appreciate it. C.P.
Diane held me accountable for working with her on completing the necessary paperwork so I was involved in every step of the process.
Diane Drain and her assistant Jay are beyond professional. From the moment I called them to inquire about their services, to every phone call and each in person meeting we had, they remained calm, and helped to guide me during a very challenging process. Diane is very thorough and has a wealth of experience. She and does not do the work for you and their is a significant amount of paperwork that needs to be completed. Having said that, she walked me through this every step of the way, but Diane held me accountable for working with her on completing the necessary paperwork so I was involved in every step of the process. Diane and Jay were always very positive and consistently receptive in answering and returning phone calls and emails in a timely manner. In summary, they are a class act and able to take a very challenging and difficult process and make it as humane and positive as anyone could. I high recommend using their services. T.J.
MUSINGS FROM DIANE:
Your parents, or grandparents, told you that life was not easy. Some told you that you have to work for what you want and be willing to pay the dues. If you get something too easy – there is a catch. Other parents had a history of making very poor choices, so their advice was very different. These life lessons direct the path we will take. At the time you were sure they didn’t know what they were talking about. After all, you were going find your own path. Years later you look back to see that they were very wise. Good or bad, their choices lead directly to where or who they are today. The truth is – life is a series of choices, both good and bad. We live our choices. Financial decisions are challenging for us all. Do we buy that fancy (you fill in the blank) or save the money for emergencies? Some choices will open a path to comfort and peace, which other choices will open the door to homelessness. Be careful and remember that the choices you make today directly affect your future.
How Can I Help You?
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How to Manage Your Bills During COVID-19
April, 2020 – The Federal Trade Commission released suggestions on managing your bills during this very difficult time (COVID-19 quarantine).
COVID-19 has disrupted life for everyone on the planet. Each of us is asked to sacrifice for the health of the entire nation and world. Unfortunately, that sacrifice comes at a cost for many. They are unemployed or their income has been reduced, but the bills for their regular living expenses (rent, food, utilities, car payment, and insurance) continue to come, month after month. Yes, there are a few programs that might assist, but most of the programs only delay the inevitable – THEY MUST BE PAID. You don’t get a free place to live. Even if there are mortgages and rental programs, they don’t forgive the debt. Instead, the payments are just postponed to a future date (which may only be 3 months in the future).
Seniors are hit extra hard: not only they are one of the most vulnerable population to COVID-19, but most are on a fixed income, so do not have additional resources if they have unexpected expenses (medical, etc.).
In summary here is what the FTC suggested:
- Know what you owe and will owe for the next year. Make a list of your monthly bills: rent/mortgage, car payment, utilities, student loans, medical bills, and anything else. Look at your bank statements and credit card bills to find occasional expenses (such as annual insurance payment or insurance paid every quarter) and those expenses that only happen occasionally, but are very expensive (such as medical, home and car repairs). By putting this in writing you have something to compare your current spending.
- Don’t be afraid to ask for help, 90 percent of us are in the same situation: Pride can kill you!! If you are not taking care of yourself, then you are more susceptible to the virus. Many companies have special programs to help people right now. Contact the companies you owe money to and try to work out a new payment plan with lower payments or delayed due dates. Make sure to get any changes in writing.
- Find out if your state or local government offers programs that will allow you to hold off on paying some bills right now.
- Trouble paying your mortgage? Here’s some advice on how to manage that. If you have a government-backed mortgage, you may be able to delay the payment by contacting your servicer.
- Need additional help? Check out ftc.gov/creditcounselor for tips on how to choose a counselor who really helps you out.
- Prioritize your expenses: If you still can’t pay everything on time, look at what would happen if you couldn’t pay each bill and decide which to pay first. Is a place to live and food to eat more important than paying credit cards? I would think so. Do not worry about your credit report at this stage – it is, what it is. There is nothing you can do about it today. Instead, focus on having the basic necessities.
- Educate yourself about your options and the legal obligations of the creditors. Don’t assume what a creditor says is accurate (they are in the business to get paid and will lie). Rules govern what a creditor or collection company can do. Some of these rules are brand new (it takes new law at least five years to be interrupted by the courts). Know your rights: what is protected from creditors? Can creditors take my stimulus money? How does bankruptcy work? Check out the FTC’s advice on how to cope with debt in the short term, and how to get out of debt when you are able.
Watch out for scams: In stressful times, scammers are everyone and focus on our seniors, but you too may be vulnerable. Beware of any company that guarantees that creditors will forgive your debts, or makes you pay up front for help. If you are looking for debt relief, make sure to find help you can trust.
MUSINGS FROM DIANE:
This is a very scary time for everyone, but please remember ‘you are not in this alone’. But you are the only person who can take care of you (even if you are in a busy household). Today, even more than in the past, it is important to know your needs (financial and emotional). Eventually we will return to a new ‘norm’, but it may not be the norm we had last year. Please don’t ignore the current situation. Instead, every day take a few minutes to lay out a survival game plan. Of course, no one know how long this situation will continue, so be flexible in your plan. Focus on what you need to survive – food, a place to live. NEVER be bullied by a debt collector to send money that you should use on life necessaries.
NOT SMART: Buying a fancy gift for your young child is not going to help them, if there is no food in the house. It is amazing how resilient children are in emergency situations. Don’t hide the truth from them, but make sure they are involved in some household decisions.
How Can I Help You?
The post How to Manage Your Bills During COVID-19 appeared first on Diane L. Drain - Phoenix Arizona Bankruptcy & Foreclosure Attorney.
Updated October 24, 2019
From: creditkarma.com
By: Kim Porter
https://www.creditkarma.com/advice/i/what-happens-when-you-file-for-bankruptcy/
The University of Phoenix, Inc. accused of fraud, to pay $50 million and stop collection on $141 million in loans.
In a large victory for consumers, The University of Phoenix agreed to pay $50 million in cash and cancel $141 million in debt owed to the school by students harmed by their deceptive ads. Phoenix’s ads touted job opportunities and relationships with top tech companies.
Federal Trade Commission, Plaintiff, v. The University of Phoenix, Inc., an Arizona corporation; and Apollo Education Group, Inc., an Arizona corporation; Defendants.
To cease collection on $141 million in student loans
This judgment consists of:
1. Payment of Fifty Million Dollars ($50,000,000) to the Commission.
a) Defendants are ordered to pay to the Commission Fifty Million Dollars ($50,000,000).
b) Such payment must be made within 7 days of entry of this Order by electronic fund transfer in accordance with instructions previously provided by a representative of the Commission.
2. Ceased collection of a minimum of One Hundred Forty Million Nine Hundred Sixty-Six Thousand Eight-Hundred and Six Dollars ($140,966,806) in Covered Consumer Debt as follows:
a) Defendants, Defendants’ officers, agents, employees, and attorneys, and all other Persons in active concert or participation with any of them, who receive actual notice of this Order, whether acting directly or indirectly, are permanently enjoined from attempting to collect, collecting, or assigning any right to collect any Covered Consumer Debt. Defendants shall not refer, sell, assign, or otherwise transfer any Covered Consumer Debt.
b) Within 10 business days after entry of this Order, Defendants shall cease collecting on all Covered Consumer Debt and notify any collection agency or other third party collecting Covered Consumer Debt to cease such collection efforts. Within 60 business days after entry of this Order, Defendants shall:
(1) recall, purchase, or otherwise obtain any Covered Consumer Debt that Defendants have referred, sold, assigned, or otherwise transferred to any collection agency or other third party, and
(2) clear all Covered Consumer Debt from Defendants’ financial systems.
c) For any Covered Consumer Debt that has been reported to a Consumer Reporting Agency (“CRA”), Defendants shall, within 10 business days of clearing all Covered Consumer Debt as required by subsection A.2.b request that each CRA delete the Covered Consumer Debt from the consumer’s credit reporting file.
d) To the extent Defendants receive any payments for Covered Consumer Debt after September 30, 2019, Defendants shall, within 30 days of receipt or entry of this Order, refund any such payments.
e) Defendants shall, within 10 business days after entry of this Order, provide a signed declaration to the FTC attesting that they have ceased collection of Covered Consumer Debt as required by this Section III.A.2.
Stipulated Order for Permanent Injunction and Monetary Judgment
MUSINGS FROM DIANE:
Those who are willing to commit the time and effort to get an education need to be applauded, not ripped off. I did not start my upper education until I was married and had a wonderful daughter. That meant sacrificing to pay tuition and costs, plus it meant my job options were limited (needed time to take care of family and study). My beautiful and very smart daughter spent her early grade school years studying with me at the same table. I was lucky enough not to need loans in order to pay for under-grad, because I was working two jobs. Law school was another story. Working outside school was not permitted and I now know why (no time if you are going to graduate). Therefore, student loans were the only option. Had my law school been one that failed to live up to its promises (like the University of Phoenix) , I would have been stuck the significant student loans and no degree to show for my time and effort. The next two decades would have been spent paying off a debt for something I never received. This is what The University of Phoenix, and many other “for profit” schools, knowingly do to their students. Shame on them!!
The post University of Phoenix to Pay $50 M and Stop Collection on $141 M in Student Loans appeared first on Diane L. Drain - Phoenix Arizona Bankruptcy & Foreclosure Attorney.
COVID-19 FORBEARANCE IN ARIZONA CHAPTER 13 BANKRUPTCIES
The following is a guest post – by Gary R. Stickell, a great Arizona bankruptcy attorney and my friend and mentor for more than 20 years.
COVID-19 and CHAPTER 13 BANKRUPTCIES
Most, if not all, mortgage servicers are offering programs of forbearance to homeowners affected by income loss due to the COVID-19 Pandemic. These seem to be for 90 days or three calendar months, possibly extendable to 180 days. (“COVID-19 Hold”). However, these COVID-19 Holds raise several issues for Debtors in Chapter 13 Bankruptcies. These include the process of notifying the Chapter 13 Trustee of these holds and how to treat the unpaid mortgage payments within the Chapter 13 case. I am concerned that Chapter 13 Debtors are not well served by seeking COVID-19 Holds and might endanger both their Chapter 13 cases and/or loan modifications.
Forbearance versus Deferment
In usual times, a forbearance means that the mortgage servicer will not seek enforcement of missed mortgage payment for some given period. At the end of the forbearance period, the missed payments will need to be repaid by an agreement between the mortgage servicer and the borrower.
In usual times, a deferment means that the missed mortgage payments will be deferred to the end of the loan by extending out the maturity date and/or adding a balloon payment.
These are not usual times
According to mortgage modification lawyer Ellen Lawson, the mortgage servers are not sure how they will treat COVID-19 Holds at the end of the hold period. They may choose to treat them as deferments or require some time of repayment. The crisis is too new for the lenders to formulate uniform treatments so lenders are agreeing to a COVID-19 Hold, but are not explaining right now when or how the missed payments will need to be repaid.
Chapter 13 Bankruptcy
In pending Chapter 13 Bankruptcies, there are three general circumstances as to mortgages. They are cases with conduit payments, cases without conduit payments and cases with loan modifications in process or completed.
Conduit and non-conduit mortgage payments
A conduit payment in an Arizona case requires that the Chapter 13 Plan payment include payment of ongoing mortgage payments as well as payments for mortgage arrears and other debts. If a mortgage server grants a COVID-19 Hold during a conduit plan, the Trustee will need to stop making the ongoing payments to the mortgage lender. The Arizona Chapter 13 Trustees advise that an Amended Plan or Modified Plan must be filed to stop the ongoing payments to the mortgage lender reducing the Plan payment. When the COVID-19 Hold period is over, then whatever arrangement is made as to the missed mortgage payments must be set out in a subsequent Amended Plan or Modified Plan.
In a case without a conduit payment, there appears to be no need to file an Amended Plan or Modified Plan at the outset of the COVID-19 Hold. However, at the end of the hold period, whatever arrangement is made as to the missed mortgage payments will need to be included in an Amended Plan or Modified Plan.
Failure to comply with Chapter 13 plan provisions
Failure to make ongoing mortgage payments may result in the dismissal of a Chapter 13 case without a discharge if arrangements are not made with the mortgage lender. If the mortgage servicer reports a delinquency to the Chapter 13 Trustee, the Trustee will move for dismissal of the case. This not only endangers any provision regarding the mortgage but the other debts, car loans, tax debts and unsecured debts.
Loan Modification in Chapter 13
For those borrowers seeking a loan modification through the Bankruptcy Court’s program or otherwise, the COVID-19 Hold puts everything on hold including any pending loan modification application. This means an active loan modification review under the Bankruptcy Court’s Mortgage Modification Mediation (“MMM”) Program will be put on hold for ninety days and will not proceed forward. All of the documents previously provided to the mortgage servicer will become outdated and a new financial package will need to be uploaded in 90 days. When the loan modification review starts 90 days later, after the COVID-19 Hold expires, the Debtor will be three months more delinquent on their loan making a loan modification review more difficult. If the Debtor has been approved for a trial plan or is in the middle of an active trial plan, and then requests a COVID-19 Hold, the COVID-19 Hold will most likely cause the trial plan to be forever broken.
If a Debtor has been so impacted economically by COVID-19 that they cannot make their Chapter 13 Plan payment, then the COVID-19 Hold is a possible option to consider, but the COVID-19 Hold should only be used by Chapter 13 Debtors as a last resort if they are pursuing loan modification.
As to loan modifications already in place, the COVID-19 Hold could nullify incentives dependent upon the borrower making timely payments under the modification agreement. An example of one such incentive that could be lost is partial forgiveness of the loan balance for timely payments for X number of years after the effective date of a permanent modification.
I thank my friend and mortgage modification guru, Ellen Lawson, Arizona attorney, for much of the information concerning how mortgage servicers are handling forbearances. https://ellenlawsonlaw.com.
MUSINGS FROM DIANE:
This article should help you understand why it is very important to hire an attorney who knows what they are doing (my guess is that you did not understand some of the article above, but certainly you did not understand the implications). Any attorney who writes articles to help educate others is focused on the welfare of the client, not how much money they could get from the client. Education is the basis for a well planned bankruptcy. Today I saw nine new cases filed by an Arizona firm that does not fall into the category that Gary and several other good bankruptcy attorneys fit. Months from now several of those nine will face serious problems because no one educated them BEFORE the bankruptcy was filed. They will lose tax refunds, their family is sued and/or they lose their discharge (which is the entire reason they filed the bankruptcy to start with.
Consumer bankruptcy is complicated and takes work. Any law firm who makes it look simple is misleading their clients. Unfortunately, their clients will not know there is a problem until the ceiling falls in on them. Then it is too late to get out of the bankruptcy.
Be careful and use your common sense. Lastly, remember that you have a right to be treated with respect. IF ANY ATTORNEY TREATS YOU RUDELY – FIRE THEM because it is never going to get better. (Yes, I am thinking about specific attorneys when writing that last sentence.)
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