TEXAS BANKRUPTCY LAWYER: DOWNWARD TREND IN FORECLOSURES ?

Posted on | January 16, 2012 | No Comments

TEXAS BANKRUPTCY LAWYER: DOWNWARD TREND IN FORECLOSURES NOT NECESSARILY A SIGN OF ECONOMIC RECOVERY

I recently read an article in the San Antonio Business Journal by Tricia Lynn Silva regarding the downward trend in foreclosures. Her article says in part:

“As of Nov. 30 2011, a total of 10,124 foreclosure notices had been filed in the state of Texas for the month of November – marking a 208 percent increase from October filings, according to the latest report by RealtyTrac Inc. Over the past 12 months, however, foreclosure filings were actually down 24.3 percent in Texas.”

I suspect that something else besides recovery in the housing market is responsible for the reduced number of foreclosures. During the last year I have had several cases where a bankrupt client surrendered their home in their bankruptcy case. As a result, the debtor discharges the debt and is no longer personally liable for paying the mortgage. However, ownership of the home doesn’t transfer until the mortgage company forecloses on the property or the homeowner deeds the property back to the creditor.

There are several reasons why in this type of situation, a mortgage lender should want to obtain ownership of the home as soon as possible. First, abandoned properties tend to lose value, because the property is not being maintained and because of theft and vandalism. Second, property taxes continue to accrue, which are superior to the lien held by the mortgage company. As a result, every year the house stays vacant, the value of the mortgage company’s lien is diminished by the additional property taxes.

Based on these considerations you would think that a mortgage lender would move to foreclose as soon as possible, but that simply doesn’t appear to be happening. During the last year, in my experience mortgage lenders are taking longer to foreclose and in some instances refuse to foreclose or accept a deed in lieu of foreclosure when offered. I asked another attorney who represents creditors why this is the case and she responded that the mortgage companies simply have too many properties to process at this time so they are not moving as quickly to foreclose on properties as the law allows.

I suspect that the recent downward trend in foreclosures is simply a lull while mortgage companies get caught up on their backlog of defaulted mortgages. At some point they will likely create systems and procedures to increase their capacity for the foreclosure process and the numbers will begin to rise.

The Wright Firm, L.L.P. is a law firm representing clients in North Texas in bankruptcy, family law, immigration, criminal law, probate, and in tax matters. For more information on our firm, please contact The Wright Firm, L.L.P., at 972-353-4600 or visit our websites at www.thewrightlawyers.com or www.northtexas-bankruptcy.com.

(Source: bizjournals.com)

Category: Bankruptcy, Chapter 13 Bankruptcy, Chapter 13 Title 11 United States Code, Chapter 7 Bankruptcy, Chapter 7 Title 11 United States Code, Dallas Bankruptcy Attorney, Dallas Bankruptcy laws, Dallas Bankruptcy Lawyer, Foreclosure, Frisco Bankruptcy Attorney, Frisco Bankruptcy Lawyer, Lewisville Bankruptcy Attorney, Lewisville Bankruptcy Lawyer, Lewisville Bankruptcy Lawyer, Nathan Graham, Plano Bankruptcy Attorney, Plano Bankruptcy Lawyer, Texas Bankruptcy, The Wright Firm
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MORTGAGE DEBT: STRATEGIC DEFAULT VERSUS BANKRUPTCY

Posted on | January 3, 2012 | No Comments

A strategic default is a property owner’s decision to stop making payments to a mortgage lender and to allow property to be foreclosed. Whether a strategic default is a good idea depends on the property owner’s specific situation and the state in which the property is located. Each state has its own set of rules that govern foreclosure and the mortgage lender’s ability to collect a deficiency after foreclosure. A deficiency is the amount owed to a mortgage lender after a property is foreclosed. For example, if a house is foreclosed and sold at auction for $200,000 but the amount owed to the lender is $250,000, then the lender may be owed a mortgage deficiency in the amount of $50,000.

For the purposes of this article, I will be discussing how Texas law affects a strategic default. Texas is a recourse state, meaning that mortgage lenders can collect mortgage deficiencies. However, mortgage lenders are limited in their ability to collect a deficiency to the difference between the fair market value of the property at the time of sale and the balance of the loan in default. This is a significant limitation because properties sold at auction rarely are sold for the full fair market value of the property. For example, a property worth $200,000 may be sold for $150,000 at auction. The amount owed to the lender is $250,000. The lender will only be able to obtain a judgment for $50,000, which is the difference between the value of the property and the amount owed.

In practice, determining a mortgage deficiency is seldom this simple. Mortgage lenders will present evidence that the property is worth much less than what the homeowner thinks their property is worth. As a result, a home worth $200,000 may be found to have a much lower fair market value which in turn increases the mortgage deficiency. In order to contest the valuation of the property it may be necessary to hire an attorney and to have the property appraised, but there is no guarantee that the homeowner will be successful in proving the valuation of the home is higher, and this process can be expensive.

For some homeowners Chapter 7 bankruptcy is a good alternative to a strategic default. Chapter 7 bankruptcy is relatively inexpensive, it will completely eliminate a homeowner’s liability for a mortgage deficiency and it will address other debts as well, such as credit cards and medical bills. Before deciding to strategically default on a mortgage loan or to file Chapter 7 bankruptcy, homeowners should seek advice from an attorney with experience in these types of legal issues. The attorneys at The Wright Firm offer free initial consultations to clients in need of help with their financial situation. Call The Wright Firm, at 469-635-6000 or visit the firm’s website at www.thewrightlawyers.com for more information.

NORTH TEXAS BANKRUPTCY: TEMPORARY WAIVER OF CREDIT COUNSELING REQUIREMENT

Posted on | November 11, 2011 | No Comments

Before a debtor can file bankruptcy they must complete a prebankruptcy credit counseling course. This course must have been completed within the 180-day period prior to the filing of the bankruptcy petition. Failure to comply with the credit counseling requirement can result in an order striking the petition, which results in no bankruptcy case being filed, or the court may even dismiss the bankruptcy case adversely affecting the debtor’s credit rating.

Sometimes a debtor is unable to complete credit counseling but is forced to file a bankruptcy petition to stop imminent collection activity. The Bankruptcy Code has set forth a rule allowing debtors with exigent circumstances to receive temporary waiver of the credit counseling requirement. Section 109(h)(3) of the Code states: “… (1) [counseling requirements] shall not apply with respect to a debtor who submits to the court a certification that – (i) describes exigent circumstances that merit a waiver of the requirements of paragraph (1); (ii) states that the debtor requested credit counseling services from an approved nonprofit budget and credit counseling agency, but was unable to obtain the services referred to in paragraph (1) during the 5-day period beginning on the date on which the debtor made the request; and (iii) is satisfactory to the court.”

What constitutes exigent circumstances that merit a waiver depends on where you have filed bankruptcy. Most courts have acknowledged that a pending foreclosure, wage garnishment, and repossession qualify as exigent circumstances that merit a waiver. However, some courts have taken into account how much notice of the collection activity the debtor had before filing bankruptcy, and punished procrastinators who had ample advance notice of a foreclosure, but waited until the 11^th hour, by denying their request for waiver and dismissing the bankruptcy case.

In north Texas credit counseling agencies are available on the telephone and internet, and some agencies are available 24 hours a day. Because of the availability of credit counseling in this district it is very difficult to make a successful argument to a bankruptcy judge that a debtor made a good faith effort to obtain credit counseling prior to filing a petition but none was available. There is risk in involved in seeking temporary waiver of credit counseling. It is best to avoid having to file certification of exigent circumstances if at all possible by ensuring that the credit counseling requirement is satisfied prior to filing bankruptcy. For a referral to an authorized credit counseling agency, contact The Wright Firm, L.L.P. at 972-353-4600 or visit our websites at www.thewrightlawyers.com or www.northtexas-bankruptcy.com.

“I’M IN CHAPTER 13 BANKRUPTCY. WHAT HAPPENS TO MY TAX REFUND?”

Posted on | November 10, 2011 | No Comments

“I’M IN CHAPTER 13 BANKRUPTCY. WHAT HAPPENS TO MY TAX REFUND?”

The rules affecting what happens to Chapter 13 debtor’s tax refunds while they are in bankruptcy differ depending on where the case is filed. These rules are generally set out in the local rules of the court or a general order.

In the Eastern District of Texas, the Chapter 13 Trustee will allow a debtor to keep a tax refund if it is for $2,000 or less. If the refund is more than $2,000 then the Trustee will take the entire refund and pay it to the general unsecured creditors in the bankruptcy case. In the Northern District of Texas, the Chapter 13 Trustee will allow the debtor to keep the first $2,000 they receive from their tax refund. Any additional amounts received will be paid to the general unsecured creditors. However, in both districts, if the debtor owes back taxes the IRS may elect to offset a pre-petition refund, meaning they may keep it and apply it to any back taxes the debtor owes to the Internal Revenue Service.

The rules affecting tax refunds are just one example of how bankruptcy cases affect debtors differently depending on where they live. Before you file bankruptcy, it is important that you speak with a local bankruptcy attorney with experience filing cases in the same district in which you will file. For information on filing bankruptcy in Dallas, Denton, Collin, Tarrant, and Rockwall counties, contact The Wright Firm, L.L.P., at 972-353-4600 or visit our websites at www.thewrightlawyers.com or www.northtexas-bankruptcy.com.

BANKRUPTCY: VICARIOUS LIABILITY DOES NOT APPLY TO § 523(a)(9

Posted on | November 8, 2011 | No Comments

As a bankruptcy attorney I have focused my practice on a specific type of legal practice. I don’t know much about drafting a will, litigating a lawsuit, or defending a criminal action, but I know a lot about consumer bankruptcy. Similarly, in my experience I have found that attorneys practicing other types of law know very little about bankruptcy. Invariably, when I meet another type of attorney and they find out that I practice bankruptcy law they have questions for me.

Recently I ran into an attorney in my building who asked me an interesting question involving two legal concepts: vicarious liability and exceptions to bankruptcy discharge. Vicarious liability is a form of strict liability that arises under the common law doctrine of agency. Basically, the idea is that a superior may be responsible for the acts of a subordinate that result in liability to a third party. For example, an employer may be liable for the torts of an employee.

The question asked me was, “can an employer discharge liability in bankruptcy that resulted from a lawsuit in which an employee was driving drunk and was involved in an accident causing personal injury to a third party?” The Bankruptcy Code specifically states that “A discharge under section 727, 1141, 1228(a), 1228(b), or 1328(b) of this title does not discharge an individual debtor from any debt for death or personal injury caused by the debtor’s operation of a motor vehicle, vessel, or aircraft if such operation was unlawful because the debtor was intoxicated from using alcohol, a drug, or another substance. 11 U.S.C. § 523(a)(9).

At first glance it appears that by combining the concept of vicarious liability with the exception to discharge, an employer should not be able to discharge this type of liability in bankruptcy. However, most courts that have considered this issue have held that the employer is not denied discharge from liability resulting from the employee’s bad behavior. Employers can discharge their liability even though the debt would be nondischargable if the employee were to file bankruptcy.

The Wright Firm, L.L.P. is a law firm located in North Texas representing clients with many different types of legal issues, including bankruptcy, criminal law, family law, probate, immigration and tax. Our primary offices are located in Dallas, Lewisville, and Denton. We can be contacted at (469) 635-6900 and invite you to become more familiar with our law firm by visiting our websites at www.northtexas-bankruptcy.com and www.thewrightlawyers.com.

BANKRUPTCY: EXEMPTION FROM THE CREDIT COUNSELING REQUIREMENT

Posted on | October 28, 2011 | No Comments

Debtors wishing to file bankruptcy are required to successfully complete a credit counseling course during the 180 days prior to filing bankruptcy. However, debtors that can show that they are incapacitated due to mental or physical disability may be exempt from this requirement. Under Sec. 109(h)(4) of the Bankruptcy Code, a debtor may be excused from the credit counseling requirement if he has an incapacity or a disability. Incapacity means that the debtor “is impaired by reason of mental illness or mental deficiency so that he is incapable of realizing and making rational decisions with respect to his financial responsibilities.” Disability means that “the debtor is so physically impaired as to be unable, after reasonable effort, to participate in an in person, telephone, or Internet briefing.” Debtors wishing to claim exemption from the credit counseling must get an order signed by a bankruptcy judge excusing them from this requirement. But before a debtor asks the court for an exemption from credit counseling, they need to be sure they can prove incapacity or a disability. Debtors are required to have completed credit counseling before their bankruptcy case is filed but the motion seeking exemption from this requirement cannot be filed until after the bankruptcy case commences. If the motion requesting exemption from credit counseling is denied then the debtor may find his case dismissed for failure to comply with the credit counseling requirement prior to filing bankruptcy.

For more information about filing a bankruptcy in north Texas, contact The Wright Firm, L.L.P. at 972-353-4600 or visit our websites at www.thewrightlawyers.com or www.northtexas-bankruptcy.com.

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Texas Bankruptcy Attorney: WHAT IS TRCC?

Posted on | October 24, 2011 | No Comments

Texas Bankruptcy Attorney: TRCC is an acronym for Trustee’s Recommendation Concerning Claims. TRCC is the point in a Chapter 13 case when the trustee reviews the claims filed by creditors, decides if objections to claims should be filed, and determines if the confirmed plan is sufficient to pay all allowed claims. To understand TRCC it is helpful to understand the events leading up to it.

When a Chapter 13 case is filed the debtor files schedules that list his creditors, as well as a plan to repay these creditors. In the plan the debtor estimates what he believes he owes to his creditors. The trustee and the creditors review the plan and based upon what they find they may or may not file an objection to confirmation of the plan. Confirmation is when a judge signs an order stating that all creditors in the plan are bound by its terms. Since this affects their ability to get paid, creditors and the trustee sometimes object to the plan in a document called an Objection to Confirmation. Once all of the objections are resolved, either by agreement or by a hearing in front of the judge, assuming all other requirements for confirmation have been met, the plan is confirmed.

Creditors don’t get paid simply because they are listed in the plan. They are required to file a proof of claim. A proof of claim is a document establishing what they are owed and why. The deadline to file a proof of claim is 90 days after the first setting of the 341 meeting of creditors for secured and unsecured creditors and 180 days after the bankruptcy filing date for governmental units. The deadline to file a proof of claim is called the claim bar date. A Chapter 13 plan is usually confirmed before the claim bar date has passed. This can create a problem because the debtor estimates how much he owes his creditors in the original plan and sometimes he estimates too low.

During TRCC the trustee reconciles the actual claims filed by the creditors and the amount provided in the Chapter 13 Plan. If the amount provided in the plan is not enough to pay the allowed claims, then the debtor may be required to modify his plan to increase the amount paid during the remaining months. If the claims come in lower the debtor may be able to modify his plan to lower the plan payment or reduce the number of months he is in bankruptcy.

DALLAS CHAPTER 7 BANKRUPTCY: WHEN IS A DEBT REAFFIRMED?

Posted on | October 14, 2011 | No Comments

A reaffirmation agreement is an agreement between a debtor and a creditor in a Chapter 7 bankruptcy case which allows a specific secured debt to survive the bankruptcy discharge. The reason a debtor may want to enter into this type of agreement is because they wish to keep collateral that is securing the debt. In Chapter 7 bankruptcy, debtors can discharge debt, but this may not remove the lien from their property. In cases in which a debt is secured by an asset that the debtor wishes to keep, they may reaffirm the debt, which will allow the contractual obligation to survive discharge, and as long as they continue to make payments to the creditor, they will get to retain the property.

Just because a debtor states in their bankruptcy petition that they wish to reaffirm a debt, doesn’t mean that it is reaffirmed. Reaffirmation isn’t a process that a debtor can implement unilaterally. The bankruptcy petition will state what the debtor’s intent is as to the property, but it is up to the debtor to request a reaffirmation agreement from the creditor, sign the completed document, and make sure that it gets filed with the Court. A debt is not reaffirmed until the Court has reviewed the agreement and has chosen not to oppose reaffirmation. Courts sometimes object to reaffirmation of a debt when the debtor clearly cannot afford to continue making payments based upon the schedules filed in the case that show the debtor’s income and budget. If the Court denies reaffirmation, the debt will be discharged and will not survive the bankruptcy. If this happens, the debtor can try to retain the property by continuing to make payments or they may simply surrender the property to the creditor.

Failing to file a reaffirmation agreement may be a good idea when the debt is a mortgage. Even though a reaffirmation agreement has not been signed, a mortgage lender will not be able to foreclose on a home if the homeowner continues to make payments. Not filing a reaffirmation for a mortgage gives the debtor the benefit of being able to walk away from the debt without paying a mortgage deficiency if they later find they cannot afford to pay their mortgage payments. In the case of auto loans and lenders, failing to file a reaffirmation agreement may result in the car being repossessed even though the debtor continues to make payments.

For more information about filing a bankruptcy in north Texas, contact The Wright Firm, L.L.P. at 972-353-4600 or visit our websites at www.thewrightlawyers.com or www.northtexas-bankruptcy.com.

AUTOMATIC STAY APPLIES TO DALLAS BANKRUPTCY ATTORNEYS TOO

Posted on | October 10, 2011 | No Comments

When I meet with a client, usually one of the first topics they want to discuss is how much is bankruptcy going to cost them and how are they going to pay their attorney’s fees. Understandably this is a concern, because if money wasn’t tight they wouldn’t be seeking the help of a bankruptcy attorney. Unfortunately, bankruptcy attorneys have to collect all of their attorney’s fees and the costs of the case before a Chapter 7 case is filed. There is a simple reason for requiring these costs to be paid up front. The same laws that protect someone in bankruptcy from collection by their creditors also prevent bankruptcy attorneys from collecting their attorney’s fees after the case is filed. When an attorney agrees to accept payment of their attorney’s fees for the filing of a Chapter 7 case after the case is filed, they put themselves and their clients in a difficult situation. Not only is the attorney violating the law by attempting to collect a pre-petition debt in violation of the automatic stay but they are also creating a conflict of interest between themselves and their clients. Smart attorneys avoid this problem and get paid up front so that once the case is filed they can focus on the needs of their clients instead of collecting their attorney’s fees.

The attorneys at The Wright Firm offer free initial consultations to clients in need of help with their financial situation. Call The Wright Firm at 469-635-6000 or visit the firm’s website at www.thewrightlawyers.com for more information and to speak to one of our Dallas Bankruptcy Attorneys.

TEXAS BANKRUPTCY ATTORNEY: BANKRUPTCY MYTHS

Posted on | October 5, 2011 | No Comments

TEXAS BANKRUPTCY ATTORNEY: BANKRUPTCY MYTHS:

There is a lot of content on the internet about bankruptcy. From my regular internet searches on the subject, I estimate that ten percent of bankruptcy content is posted by bankruptcy attorneys who usually know what they are talking about. The rest of the information on the internet is confusing, misleading, and incorrect. I imagine most people that need financial help become very confused at the amount of misinformation they find online. Here I’ll try to address some of the common myths about bankruptcy.

Myth no. 1: You will lose everything! Most of my clients lose nothing, except maybe a sense of hopelessness and an inability to sleep at night. Your assets are protected from creditors in bankruptcy by laws called exemptions. Exemptions allow bankruptcy filers to get relief from their debt without giving up their things. In Texas, we have great exemptions. Most of my clients lose nothing when they file bankruptcy.

Myth no. 2: It’s difficult to file bankruptcy. Yes, this is true. Hopefully you will have an experienced bankruptcy attorney to guide you through the process. If you do you will probably find that your part of the process is fairly easy, and your bankruptcy attorney takes care of the difficult parts for you.

Myth no. 3: Filing bankruptcy means you are a bad person. Nonsense. I have represented thousands of clients in bankruptcy cases and I have yet to represent a bad person. Most of my clients have been unlucky (job loss, sickness, income affected by poor economy) or taken advantage of by predatory lending (adjustable rate mortgage, credit cards with small print and high fees). If those things make you a bad person, then there are no good people, because at some point in each of our lives we all face these types of challenges.

Myth no. 4: You will never be able to borrow money again. Lenders make the decision to loan money largely based upon the applicant’s credit score and report. Luckily for those of us with poor credit ratings, credit reports have a way of improving over time, if you don’t make bad financial decisions in the future. Filing bankruptcy helps to remove a lot of the negative marks on a credit report. After discharge, if you pay your bills on time and keep your balances low, your credit rating will improve. Even bankruptcies come off of a credit report eventually. After discharge you should be better off financially than you were before filing, and soon after your ability to obtain credit should improve as well.

Myth no. 5: Everyone will know you filed for bankruptcy. It is true that a bankruptcy filing is a matter of public record. However, the number of filings each year is in the millions, and most people do not have access to the type of databases needed to determine if you filed bankruptcy. In most cases the only people that will know you filed bankruptcy are the people you choose to tell.

I’ll leave you with one last piece of advice. If you are interested in filing bankruptcy, speak with an experienced bankruptcy attorney. Most bankruptcy attorneys do not charge their clients for the initial consultation, so getting advice about your situation from an attorney is usually free.

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