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According to affidavits signed by former Bank of America employees in a class action lawsuit filed in a Boston federal court, the bank regularly lied to customers seeking home loan modifications to deny their application. The affidavits were filed last week in a multi-state class action lawsuit filed on behalf of homeowners who claim they were wrongfully denied a loan modification under the Home Affordable Modification Program (HAMP). www.MakingHomeAffordable.gov
We were told to lie to customers and claim that Bank of America had not received documents it had requested, and that it had not received trial payments (when in fact it had). We were told that admitting that the Bank received documents would ‘open a can of worms’ since the Bank was required to underwrite the loan modification within 30 days of receiving those documents, and it did not have sufficient underwriting staff to complete the underwriting in that time.” Affidavit of Simon Gordon, Senior Collector of Loss Mitigation for of Bank of America from 2007 to 2012.
According to William Wilson Jr., a former Case Management Team manager for Bank of America, twice a month the bank would deny 600 to 1,500 modification applications at time in a procedure called a “blitz.” Wilson states that Bank of America told its managers to “clean out” the backlog of HAMP applications even though all financial documents were received and Trial Payments had been made by the homeowners. In addition, Wilson claims that homeowners were coerced to accept “in-house” modifications with 5% interest rates instead of the 2% rate provided under HAMP.
I personally reviewed hundreds of files in which the computer system showed that the homeowner had fulfilled a Trial Period Plan and was entitled to a permanent loan modification, but was nevertheless declined for a permanent modification during a blitz. . . . Employees who challenged or questioned the ethics of Bank of America’s practice of declining modifications for false and fraudulent reasons were often fired.” Affidavit of William Wilson Jr.
Theresa Terrelonge, a “collector” for Bank of America, provides more details on how the bank denied applications.
One tactic Bank of America used to delay the modification process involved telling homeowners who applied for a HAMP modification or who were in a Trial Period Plan to resubmit financial information each time they called to inquire about a pending modification. Bank of America then treated any change in financial information as a justification for considering the home owner to have restarted the HAMP process. Even a small change to financial information or correcting an error that Bank of America made will cause Bank of America to restart the application process under the pretext of changed financial information." Affidavit of Theresa Terrelonge.
It gets worse. Terrelonge declares that managers received bonuses based on how many applications they denied.
The production goals of Bank of America placed on its managers were based on how many accounts they could ‘close’—meaning how many homeowners they could reject for the loan modifications rather than how many modifications they could successfully complete. Managers received bonuses if their teams met or exceeded production goals. . . . Employees were awarded incentives such as $25 in cash, or as a restaurant gift card based on the number of accounts they could close in a given day or week—meaning how many applications for modifications they could decline.
It gets even worse than that. Terrelonge states she witnessed employees and managers change, falsify and delete information from Bank of America’s computer system to make it appear that the homeowner was ineligible for a loan modification.
Steven Cupples was employed by Bank America as an underwriter and Team Leader in Bank of America’s HAMP department. He observed that due to poor training, Bank of America employees did not know how to find all the documents submitted to the bank.
Most underwriters did not know that they needed to look for documents in multiple systems and often assumed documents had not been sent. As a result, many borrowers were declined loan modifications that should have been received." Affidavit of Steven Cupples.
The statements made by these Bank of America employees match the complaints I have heard from my clients over the past four years. Banks losing documents. Banks requesting that documents be submitted over and over again. Banks denying the application for no apparent reason.
Studies have shown, however, that loan modifications filed while a bankruptcy case is ongoing have a significantly higher success rate. In states like Florida where the bankruptcy courts have established mediation programs to help homeowners in the modification process, the success rate is nearly 90%.
It is clear that the modification process requires a third party to watch over the banks to ensure that the applications are properly administered. We have helped many of our clients successfully apply for the HAMP program, and I believe bankruptcy court oversight is essential to making this program work.
Bringing you the most up-to-date news, tips and blogs throughout the web. Here’s your Bankruptcy Update for June 18, 2013 Orchard Files for Bankruptcy, but Lowe’s Buying Assets Mexico’s Maxcom negotiates prepackaged bankruptcy Texas Construction Firm Caught in Rare Spider’s Web
Here at Shenwick & Associates, many of our clients have complex bankruptcy cases involving factors that often lead to increased scrutiny by the Chapter 7 Bankruptcy Trustees assigned to the cases, as well as by the United States Trustee Program (USTP), a component of the U.S. Department of Justice that oversees the administration of bankruptcy cases and Bankruptcy Trustees. Some of these factors include:
• High levels of income, expenses and/or assets
• Tax debts
• Business debts
As part of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), the USTP established procedures for independent accounting firms to audit petitions, schedules, and other information in consumer bankruptcy cases.
However, due to the federal budget sequestration that began on March 1, 2013, the USTP has indefinitely suspended its designation of cases subject to audit and notified the independent accounting firms performing the audits. At the conclusion of fiscal year 2013 (Sept. 30th), the USTP will make public information concerning the aggregate results of the debtor audits performed during fiscal year 2013.
To find out how you can minimize the chances of an audit of your bankruptcy case through pre–bankruptcy planning, please contact Jim Shenwick.
Warning – this article is fairly technical. It’s an important issue if you’re thinking about filing for bankruptcy and have student loan debt, so skim it to get some ideas.
At least once a week, a client comes in to me with a lot of credit card debt and student loans they can’t pay.
We crunch the numbers and realize that they can pay down their student loans if only they could get rid of the credit card debts.
For those people who are over median income and fail the means test, this may mean they can’t file for Chapter 7 bankruptcy and get rid of the credit card debt.
In some situations, however, we may be able to look to the student loan debt as a way to qualify you for Chapter 7 bankruptcy.
Means Testing Applies Only To Primarily Consumer Debt
Under the U.S. Bankruptcy Code, you’re required to go through means testing only if your debts are primarily consumer in nature. That means we total all of your debt, then divide it into consumer and non-consumer debt.
If the non-consumer debt comes out to 50% + $1 of your total consumer debt, then you do not need to go through means testing.
What Is A Consumer Debt?
Under the U.S. Bankruptcy Code, a “consumer debt” is defined as “debt incurred by an individual primarily for a personal, family, or household purpose.”
So how do you know if a debt was incurred primarily for a personal, family, or household purpose?
In the 1998 case of In re Kelly, the court determined that if a debt isn’t incurred for business ventures or other profit-seeking activities then it is considered to be consumer debt. The bankruptcy court in Los Angeles went along with this reasoning in a related 1994 case, as have other courts covering California through the years.
In New York, too, the question of a consumer debt has come down to profit motives.
So long as the debt is considered to have been incurred with an eye towards profit, you can consider is as non-consumer in nature.
If you’ve got enough non-consumer debt to tip the scales, you’re in a far better position for Chapter 7 bankruptcy.
Is A Student Loan Considered Non-Consumer Debt?
If student loan debt can be considered non-consumer, then someone with a large amount of student loan debt may be able to file for Chapter 7 bankruptcy without worrying about the means test.
The question of whether student loan debt is consumer or non-consumer is an open question in many bankruptcy courts, with judges looking at a variety of factors to decide on a case-by-case basis.
After all, every student can claim that he or she decided to pursue an education because of a long-term profit motive. But the reality is that some people get an education for reasons other than capitalism.
Some folks go back to school to be smarter than they were before (I’m not saying it’s the end result, just that this is the intent). Others do so because they’re looking to avoid a tough job market.
Student Loan Payments As Means Test Deduction
In Los Angeles bankruptcy cases, we may be able to use student loan payments as a deduction on your means test for Chapter 7 bankruptcy purposes. This can help you qualify for Chapter 7 bankruptcy even if you’re above median income.
In New York bankruptcy cases, we cannot deduct those payments from the means test.
If you live in another place and are thinking about filing for bankruptcy, your lawyer can tell you about your local practice.
The Devil is In The Details
The upshot is that when you’ve got student loan debt, you really want to sit down with a lawyer who will take the time to work through every single angle.
For example, if you went back to school because your employer told you to do so in order to get a promotion then I’d look more closely into getting that student loan debt classified as being non-consumer debt.
If, on the other hand, you took a few classes for personal improvement and pleasure then I’d lean the other way.
There are lots of grey areas but, as you can see, for the right situation there may be a way to make a better outcome.
Image credit: Roberto Trm
Student Loans As Non-Consumer Debt In Chapter 7 Bankruptcy was originally published on Consumer Help Central. If you're seeing this message on another site, it has been stolen and is being used without permission. That's illegal, a violation of copyright, and just plain awful.
Many people may not realize that planning ahead for bankruptcy may help you save money, aside from protecting your assets. Planning ahead includes taking a number of important steps to ensure you complete the process faithfully to the best of your knowledge. Taking time to get advice from informed professionals can help you obtain a [...]
Never got one of these on a report card so I am extremely pleased to report that our law firm has obtained an ‘A+’ rating from the Better Business Bureau for our Bankruptcy and Fair Debt Collection Practices Act work.
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The original post is titled New Better Business Bureau A+ Rating for Our Bankruptcy and FDCPA Law Firm! , and it came from Oregon Bankruptcy Lawyer | Portland, Salem, and Vancouver, Wa .
Credit card debt settlement can leave you owing taxes on the forgiven balance.
If you’re in debt and have only one or two credit cards that you need to clear up, you may want to look into settling your debt.
It’s no secret that lots of debt buyers and collectors will negotiate to reduce the balance due and let you pay it off all at once.
After all, it makes sense for them to settle. Most companies buy past-due debt for a fraction of the face value, so when you settle they still make a profit.
You may think you’re getting away with paying less by engaging in credit card debt settlement. Sometimes you’re right.
But without proper planning and guidance, you may find yourself in a bad situation.
Credit Card Debt Settlement Makes For Taxable Income
When you settle a credit card debt, the lender or debt buyer may be required to file Form 1099-C, Cancellation of Debt. This form must be filed if the creditor has canceled $600 or more of a debt you owe.
Because you no longer have to pay the debt in full, the IRS treats the forgiven amount as income.
You may need to pay taxes on that forgiven amount.
Avoid Paying Taxes On The Forgiven Debt
There are two circumstances under which you may not need to pay taxes on the amount that’s wiped out in a credit card debt settlement.
Under Internal Revenue Code Section 108(a), you do not need to include the forgiven amount of the credit card debt in your gross income if the discharge occurs in a bankruptcy case or the discharge occurs when you are insolvent.
In order to waive the tax liability, you’ll need to file IRS Form 982.
The Insolvency Test
If the settlement occurred while you were insolvent, you won’t need to pay taxes on the amount forgiven.
You are considered insolvent if your liabilities exceeded the fair market value of your assets when the debt was settled.
According to the IRS, liabilities include the following:
- the entire amount of recourse debts;
- the amount of nonrecourse debt that is not in excess of the fair market value of the property that is security for the debt; and
- the amount of nonrecourse debt that in excess of the fair market value of the property subject to the nonrecourse debt to the extent nonrecourse debt in excess of the fair market value of the property subject to the debt is forgiven.
I’m a lawyer who’s been working in this field for well over 15 years, and that makes my head spin a bit every time I read it.
There’s a worksheet in IRS Publication 4681, but it’s a better idea to work with a tax professional who understands debt cancellation issues to make sure you don’t botch the job.
In The Right Hands, This Could Work Out Just Fine
When someone calls me to settle a credit card debt, the first thing I do is run through their financial situation to see how the tax implications stack up. Then we talk about possible credit card debt settlement options – how they’ll pay any tax debt, how to balance the settlement with any amounts due, and the like.
It’s the smartest way to approach the problem, knowing in advance what you’re up against rather than scrambling at the end of the tax year. I recommend that you find a lawyer or tax professional who works this way, or in a similar vein.
Because it’s a real downer to settle a credit card debt only to find out later than you’re not done paying the piper.
Understand The Tax Implications Of Settling Credit Card Debt was originally published on Consumer Help Central. If you're seeing this message on another site, it has been stolen and is being used without permission. That's illegal, a violation of copyright, and just plain awful.
As a Virginia bankruptcy lawyer, people ask me almost every day, do I need to file bankruptcy after foreclosure? When I try to answer that question, we look at the credit reports. Usually, the first mortgage shows “foreclosed” with a zero balance. Does that mean you are safe? Does that mean you don’t owe the [...]The post Do I need to file bankruptcy after foreclosure–update! appeared first on Robert Weed.
In a recent decision, the United States Supreme Court provided guidance relating to the term “defalcation” of the Bankruptcy Code under Section 523(a)(4).1 In a unanimous decision, the Supreme Court held that the term “defalcation” of the Bankruptcy Code includes a “culpable state of mind requirement involving knowledge of, or gross recklessness in respect to, the improper nature of the fiduciary behavior.” Read More ›
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As victims across both Oregon and Washington can tell you, there are many forms of short term predatory lending. The defining characteristic is that in each instance a lender takes unfair advantage of a consumer’s financial situation by charging ridiculous interest rates and other unconscionable fees and charges.
Defenders of short term predatory lenders might say that no one is forcing any of the borrowers to the table which is something less than accurate. When you need money to eat until your next paycheck you don’t have a whole lot of choice. Regardless of whether the borrower has any choice, we know one thing for certain and that is that lender are preying on misery, taking advantage of Washington and Oregon consumers while they are down.
Examples of short term predatory lending include the following:
Tax Refund Anticipation Loans (RALs): These loans are short-term cash advances against a probable income tax refund. But the loans are offered at murderous rates from anywhere between about 39% to over 699% annual percentage rate (APR). Are you kidding me? Also, they speed up the refund process by as little as seven days. When you compare these rip off loans to what consumers can expect by filing online and having their refunds deposited directly into their banking accounts, it’s like throwing money away.
Payday Lending/Cash Advances: This is the practice of using a post-dated check or electronic checking account information as collateral for a short-term loan. For cash strapped consumers this process is all roo familier: For approval, borrowers need only an i.d., a checking account, and an income from a job or government benefits, like Social Security or disability payments. The interest rates cannot be discussed with a straight face.
Auto Title Loans: Like payday loans, car title loans are sold as small emergency loans, but in reality these loans have extremely high annual interest rates that trap borrowers in a cycle of debt. I have never seen a borrower pay one off quickly and honestly I don’t know that I have ever even see a borrower pay one off at all. A typical car title loan is made for far less than the value of the vehicle and has an annual interest rate over one hundred percent, mandating repayment within one month.
If you are contemplating any of the above short term predatory loans or are already stuck with one, it is a sure sign that you have more than a temporary problem that can be resolved with a short term cash infusion, call our firm today, get me on the phone or set up an appointment online for either of our Washington Law offices in both Seattle and Vancouver or either of our Oregon offices in both Portland and Salem. I look forward to hearing from you.
The original post is titled Avoid Short Term Loans , and it came from Oregon Bankruptcy Lawyer | Portland, Salem, and Vancouver, Wa .
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