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According to a publication of National Association of Student Loan Administrators “NASFAA” the options for students and guarantors of student loans to discharge those loans are slowing expanding.  Only time will tell how this will play out for students and guarantors.
GEN-15-13: Undue Hardship Discharge of Title IV Loans in Bankruptcy Adversary Proceedings  Publication Date: July 7, 2015

DCL ID:
GEN-15-13

Subject: Undue Hardship Discharge of Title IV Loans in Bankruptcy Adversary Proceedings
Summary: This letter provides guidance to guarantors and educational institutions participating in the Federal Family Education Loan Program (FFELP) and Federal Perkins Loan Program (Perkins), hereinafter “holder[s],” as they continue to implement U.S. Department of Education (Department or Education) regulations (at 34 C.F.R. § 682.402(i)(1)(ii) & (iii)) (FFELP) and 34 C.F.R. § 674.49(c)(Perkins)), which govern their actions in defending bankruptcy adversary proceedings seeking discharge of student loans authorized by Title IV of the Higher Education Act of 1965, as amended (hereinafter Title IV), on the basis that excepting the loans from discharge would impose undue hardship upon the borrowers.
For more information, please see the attached PDF file for Dear Colleague Letter GEN-15-13.
Attachments/Enclosures:
GEN-15-13: Undue Hardship Discharge of Title IV Loans in Bankruptcy Adversary Proceedings in PDF Format, 2MB, 23 Pages

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The Consumer Financial Protection Bureau (CFPB) took action against Residential Credit Solutions, Inc. for blocking consumers’ attempts to save their homes from foreclosure. The mortgage servicer failed to honor modifications for loans transferred from other servicers, treated consumers as if they were in default when they weren’t, sent consumers escrow statements falsely claiming they were due a refund, and forced consumers to waive their rights in order to get a repayment plan. Residential Credit Solutions has agreed to pay $1.5 million in restitution to victims and a $100,000 civil money penalty for its illegal actions.
“By failing to honor loan modifications already in place, Residential Credit Solutions put consumers through more headaches but in some cases cost consumers their homes,” said CFPB Director Richard Cordray. “Residential Credit Solutions must now compensate its victims $1.5 million as a result of our action.”

• Failed to honor in-process modifications
• Provided incorrect information
• Misrepresented to consumers that they had extra money in escrow and were due a refund
• Forced consumers to waive certain rights to get a payment plan

Read more….

The post CFPB Takes Action Against Residential Credit Solutions, Inc. For Bad Acts Against Homeowners appeared first on Diane L. Drain - Phoenix Bankruptcy & Foreclosure Attorney.

Can I keep my home if I file bankruptcy?  Do I have to list the mortgage company?  What if I’m behind on the payment?  Can I still pay the mortgage payment online?  Will they send me monthly statements?  How do I know that the past due amounts were paid current?  I want to file bankruptcy but I don’t want to lose my home.  I don’t want to list that debt.
Homeowners have a lot of anxiety about filing bankruptcy, and for good reason.  They worry that by filing bankruptcy they will lose the home.  To be sure, there are risks to filing bankruptcy, but the whole idea of filing a case is to protect property and there is no reason a home should be lost or compromised if you observe the following:

1. Nebraska exemption laws protect the first $60,000 of equity in your homestead.  If your home could not be sold for $60,000 more than what you owe on the mortgage the home is safe when filing Chapter 7.  If the home has more than $60,000 of equity do not file  Chapter 7. Rather, consider filing the alternative type of bankruptcy–Chapter 13–where the trustee does not have the power to liquidate assets.
2. All debts must be listed in bankruptcy.  You cannot exclude any debt, including mortgage or vehicle loans.
3. Reaffirmation Agreements.  In Chapter 7 cases the homeowner can sign an agreement to reaffirm the mortgage debt.  Such agreements basically pull the mortgage loan out of bankruptcy.  The only real benefit to these agreements is that the mortgage company will continue to report to the major credit bureaus whether the loan is being paid on time, and continued credit reporting is critical if you will refinance the mortgage loan in the future.  Reaffirmation Agreements are not used in Chapter 13 cases.
4. Banks Do No Automatically Reaffirm Mortgage Loans.  The number one frustration homeowners experience after filing Chapter 7 is that the mortgage company stops reporting loan payments to the credit bureaus if a Reaffirmation Agreement is not filed with the bankruptcy court.  Banks no longer offer reaffirmation agreements on mortgage loans in most cases unless the homeowner specifically requests one. That means you must call the mortgage company to demand a reaffirmation agreement.  You probably will have to call multiple times, perhaps weekly, to get the agreement.   Why do you have to pester them?  Banks do not view Reaffirmation Agreements as being necessary.  Although bankruptcy wipes out the debt, it does  not terminate their mortgage lien.  So, if a homeowner stops paying the mortgage, the bank still has the right to start a foreclosure whether the loan is reaffirmed or not.  For this reason, banks stopped hiring people to process reaffirmation agreements.  The bank is fine, but you are not. Without a reaffirmation agreement you will find it nearly impossible to refinance a mortgage loan, even if all payments are made on time.  Without the reaffirmation agreement there is no credit bureau reporting, and without that you cannot find a bank that will refinance the loan.
5. Keep Track of your Mortgage Payments.  It is very common that I handle cases where the mortgage company says they did not get payments due after the case was filed.  Most of the time the bank is right, but not always.  Sometimes banks apply payments to the wrong account.  Sometimes they don’t know where to apply a payment and put the money in a “Suspense Account.”  Sometimes homeowners are unaware that the payment has increased and they pay the wrong amount.  If the bank says you did not pay you need to have proof of payment, i.e., canceled checks, bank statements, money order receipts, Western Union wire receipts.
6. Pay the Mortgage Through Your Bank Account, Not Money Orders.  I hate it when clients pay the mortgage with money orders.  Why?  Because a money order receipt only proves that you bought a money order, it is not proof the bank received the payment.  To prove payment you must purchase a “trace report” from the money order company showing the bank actually deposited the money order.  Unless you buy a money order trace you have no idea if the bank accepted the payment.  Banks lose a lot of checks.
7. What if the bank won’t accept my payment over the phone?  It is common for banks to cease online mortgage payment access when a bankruptcy is filed until a Reaffirmation Agreement is filed or until a Chapter 13 case is completed.  Some banks will not take payments over the phone until the case is over.  If they will not accept an online or telephone payment just send them a regular check in the mail.
8. What if the bank returns my payment?  Banks return payments for three general reasons:  (1) They are not aware the bankruptcy was filed; or (2) you are paying the wrong amount; or (3) the amount you are paying does not bring the loan current and they want to make it 100% clear to you that they will not accept partial payment.  When payments are returned bring the returned payment and the accompanying letter from the bank to your bankruptcy attorney.  We are generally able to get the bank to accept the payment if we route it to the correct department or to the bank’s attorney.
9. Keep a chart of your mortgage payments.  When banks say that the mortgage payment is behind I have no clue if they are wrong or right until I see a list of every payment made, the date each payment was sent, the date the payment cleared the bank account, the amount of each payment, the check number for each payment, and the bank statement showing each payment made.  Keep a chart or a table listing this information while the bankruptcy case is open, especially in those 3 to 5 year Chapter 13 payment plans.
10. Homeowners have the burden of proving payment.  If the bank says a payment was not made that is assumed by the court to be correct unless the homeowner has evidence to the contrary.  For this reason it is very important to keep your bank statements and to highlight each mortgage payment that cleared the bank.  Save those bank statements while you are in bankruptcy.  Keep a list of all payments made.  If you are crazy enough to pay the bank with money orders, keep an organized file of each and every payment made.

Image courtesy of Flickr and Andrey 77 dron.

As a Walworth County bankruptcy attorney who represents creditors, you can only imagine how many questions I get asked during initial consultations. I am more than happy to answer all of your questions. Creditors in bankruptcy have every right to be concerned about their owed debt. Depending on the type of bankruptcy the debtor has filed, and a few other details, your options as a creditor can vary. Below you will find answers to some of the most commonly asked questions by creditors in a Walworth County bankruptcy.
Question 1. I have a judgment against the debtor. The debtor has now filed bankruptcy. Can I still collect on the judgment?
Answer: The answer is no. You cannot collect on your judgment any longer now that the debtor has filed bankruptcy. You may have other options to pursue depending on the type of bankruptcy filed by the debtor. Consult your Walworth County creditor bankruptcy attorney for your options and advice.
Question 2. I have a lien against the debtor’s property. Will my lien be removed when the debtor files bankruptcy?
Answer: The truth is that this answer is complicated. It varies depending on various circumstances, such as: Is the property the debtor’s principal residence? What chapter of bankruptcy did the debtor file? What is the value of the property? Are there any other liens on the property? What is the underlying type of debt which caused the lien? If you are faced with the possibility of your lien being removed due to a debtor’s bankruptcy, please contact your Walworth County creditor bankruptcy attorney. Your attorney will need to discuss the minute details with you in order to provide an accurate answer, as well as your options.
Question 3. I am an unsecured creditor (provided services with no collateral). How do I know if the debtor revealed all assets?
Answer: You can obtain a copy of the bankruptcy filing from the clerk of the court. You have every right to review the paperwork. You also have the right to depose the debtor to obtain more details about the debtor’s assets.
Question 4. I am owed money by a debtor who recently filed a Chapter 7 bankruptcy. What types of debt can be discharged?
Answer: See the below list. Remember, there are special circumstances for almost each of the items listed.
-credit card charges and fees
-medical bills
-utility bills
-department store cards
-past due rent or any other money owed under a lease agreement
-payday loans
-civil court judgments
-auto accident claims
-attorney fees
-personal loans from family and friends
-amounts owed to bank from “insufficient funds” checks
-repossession balances
Question 5. I am owed money by a debtor who recently filed a Chapter 13 bankruptcy. What does this mean?
Answer: Chapter 13 is a proceeding under which a debtor proposes to his or her creditors and the court, a plan that enables the debtor to repay as much debt as is feasible given the debtor’s financial circumstances. To be confirmed by the court, a plan must provide that the debtor’s future income be subject to court administration. After determining a reasonable budget, the debtor’s remaining income is paid (generally monthly) by the debtor’s employer to the trustee who, after taking a commission, pays the creditors according to the plan provisions. A plan generally lasts three years, but may last up to five years if the court approves the longer period, or if a debtor is required to propose a five-year plan due to their income level. At the end of the plan, the debtor is entitled to receive a discharge of any remaining debt (some exceptions apply).
Question 6. I am currently suing a debtor. The debtor has now filed bankruptcy. What happens with my lawsuit?
Answer: You must now obtain permission from the bankruptcy court to proceed with the lawsuit.
Question 7. A debtor who owes me money has filed Chapter 7 bankruptcy. I would like them to reaffirm the debt. How can this come about?
Answer: The truth is that it probably won’t happen. Debtors get to choose which debts to reaffirm (promise to repay as originally agreed and not discharge through bankruptcy). Although reaffirmation of your debt would be advantageous for you as a creditor, it is not advantageous or recommended for a debtor. Reaffirmation commits the debtor to payments they may not be able to afford after bankruptcy. The debtor could quickly become overwhelmed and back into the same position they are in now.
Question 8. The debtor owes me money but didn’t list me as a creditor. Can my debt still be discharged by the bankruptcy court?
Answer: The odds are against you. Normally, a proof of claim must be made with the bankruptcy court before a debt can be discharged. There is a deadline to file the proof of claim. However, if no assets were distributed during the bankruptcy, some courts will discharge debts not listed in the bankruptcy petition. You can possibly get the time period for filing a proof of claim extended. Consult with your Walworth County creditor bankruptcy attorney for details.
Question 9. I received notice of a debtor’s bankruptcy. Should I attend the 341a Meeting of Creditors?
Answer: Yes, if you would like to question the debtor under oath regarding any of their assets or the paperwork filed with the court.
 
Contact Our Walworth County Creditor Bankruptcy Attorney
Representing creditors in bankruptcy requires a high level of diligence and skill. If you need legal advice or representation as a creditor in a Walworth County bankruptcy, feel free to contact Wynn at Law, LLC. Our Walworth County creditor bankruptcy attorney represents clients in complex bankruptcy litigation. You can reach us by phone at 262-725-0175 or by email via our website’s contact page. Wynn at Law has offices conveniently located in Lake Geneva, Delavan, Salem, and Muskego.
 

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*The content and material on this web page is for informational purposes only and does not constitute legal advice.