For some reason, a lot of mortgage companies nowadays seem to be forgetting to send their customers statements telling them just how much money they owe.  Knowing just how much you owe the bank on your home is a very important part of making a complete plan to get rid of your family's debt forever.  So if the mortgage company won't send you one, what do you do?

There are a few federal laws that address situations where a borrower alleges improper accounting of mortgage payments - a Qualified Written Requesut sent to the bank under Section 6 of RESPA can help you with that.  But what if you don't want a long loan history?  What if you just want an accurate payoff statement? 

Well, in Alabama, we have a special statute that requires a mortgage company to send you a complete payoff figure within 14 days of a written demand that contains the following information:

Section 35-10-91

Payoff statement; notice.

(a) A person liable for payment or performance of the obligation secured by the real property described in a security instrument who makes proper notice pursuant to this section shall be entitled to receive a payoff statement.

(b) Proper notice must contain all of the following:

(1) The entitled person's name.

(2) If given by a person other than an entitled person, the name of the person giving the notification and a statement, if required by the secured party evidence, that the person is an authorized agent of the entitled person.

(3) The address to which the creditor must send the statement.

(4) The account number assigned by the secured creditor or other sufficient information to enable the creditor to identify the secured obligation and the real property encumbered by the security interest.

(5) If the secured obligation is an equity line, a statement that the entitled person requests the secured creditor to close the equity line upon receipt of full payment of the equity line on the payoff date specified in the notification and authorizes the secured creditor, at the secured creditor's sole discretion and upon notification to the entitled person or to the entitled person’s authorized agent, to suspend the extension of any additional amounts under the equity line for a period of time prior to the payoff date as designated by the secured creditor. Any payoff statement on an equity line may qualify the payoff amount as being subject to change.

So for a traditional mortgage, all you need to do is send the bank your name, address, account number, and they have 14 days to send you a response.  It need not be anything fancy - just a normal typed letter with the basic information.  If they don't respond, make sure you have the right address and try again.  If they keep giving you the cold shoulder, it's time to contact an attorney.  Hope this helps!

Statistics provided by the US Census Bureau recently show that today, there are less Americans in debt than there were in 2000: 69% of Americans were debt free in 2011, compared to 74% in 2000.  But things have gotten worse in some ways as well: the median debt load of the average American today is $70,000, compared to only $51,000 in 2000.  Most alarming is the fact that among our senior citizens, the average debt load has risen from $12,100 in 2000 to $26,000 in 2011.  Those of us who are most vulnerable to financial problems - the elderly - are the very ones experiencing the most negative changes.  

But are the statistics as straightforward as they seem?  The Recession led to record numbers of personal bankruptcy filings in Alabama between 2008 and 2011, and this trend was uniform across the nation.  Since the purpose of bankruptcy is to allow a debtor to shed debt and unneeded assets and emerge debt-free, the wave of bankruptcies could have very much to do with the increase in the number of debt-free Americans.  And most who go through bankruptcy are leery of getting back into debt, having learned the first time around the danger of easy credit and high interest rates.  It could be that those of us who have filed bankruptcy have learned our lesson and are living more modestly than before.  Furthermore, the consumer price index increased between 2000 and 2011, so a portion of the debt load increase is simply due to inflation.

USA Today published an article about it here: http://www.usatoday.com/story/money/personalfinance/2013/03/21/census-household-debt-report/2007195/

One of the things we always tell our clients is that if you have money in a bank account and you owe money on a loan to that bank, then you need to move that money elsewhere before you file bankruptcy.  Why?  Because if you don't, then the bank will take all the money you have in that account, even though you have filed bankruptcy!

But how can they do that?  Doesn't the bankruptcy stay automatically stop all collection attempts?  For the most part, yes.  But there is a small loophole for creditors that hold your checking and savings accounts.  We have grown accustomed to thinking of our money in a bank account as solid, safe.  As safe as, say "money in the bank."  But 'your' money in your checking account is not really money.  It is not cash sitting in a vault somewhere.  It is a debt owed to you by the bank.  You give them money when you make a deposit, and they promise to give you that money whenever you ask for it.  So if you have money in the bank, it is not your money, but the bank's money and the bank just owes you a debt.  Now normally, this situation is fine, even if you are in bankruptcy.  But if you owe a debt to the same bank, then you have a situation where you owe a debt to someone who owes a debt to you.  

This is called a "setoff."  And a setoff is a lot like what is sounds like: if A owes money to B and B owes money to A, then they each have the right to set off their debts against each other.  EVEN IN BANKRUPTCY!  So if you owe Regions Bank $2500 on a loan, and you have $1000 in your checking account when you file bankruptcy, Regions can freeze that money - keeping you from withdrawing it or even honoring checks against that account.  Your checking account will be sapped down to $0.00, and your debt to them will only be $1,500.  It is only fair, if you think about it, but it still can be very painful to deal with when you were counting on that $1,000 to feed your kids.

Read more: Setoffs? Offsets? Account Freezes? What to do with Bank Accounts If you are Filing Bankruptcy

People don't file Chapter 13 for fun.  They do it because they aren't making enough money to pay everyone they owe and they need a break.  Unfortunately, the confirmation of a Chapter 13 plan does not always end the financial problems that forced debtors into bankrutpcy in the first place.  What do you do when you have filed and confirmed a Chapter 13 bankruptcy plan but experience reduced income or other financial problems you did not expect?  Can you reduce your Chapter 13 payments?  

Yes, but only in certain circumstances.  The most common way to reduce your Chapter 13 bankruptcy monthly payment amount is to give an automobile or house back to the creditor that owns it.  Secured debts in bankruptcy must be paid in full, so getting rid of a secured debt will reduce your monthly payment.  If you cannot afford your Chapter 13 payment and have a car in the bankruptcy that you don't absolutely need, then you should contact your attorney to file a motion to amend your plan to surrender the vehicle.  If the plan has not yet been confirmed, then you can surrender a vehicle without penalty.  If the case has been confirmed, then the creditor may object and demand that their deficiency claim (the amount they are owed after they sell the vehicle) be paid in full.

Read more: Can I reduce my Bankruptcy Payment by giving back a House or Car?

As many of our clients have learned the hard way, the HAMP and HARP loan modification and refinance programs created by the Obama administration during the early years of the recession required a lot of paperwork.  A LOT of paperwork: proof of income, hardship documentation, tax returns, and other documents.  The programs have helped millions of Americans afford to stay in their homes, but the fact was that the banks simply did not have enough employees to competently handle all of the paperwork.  I cannot tell you how many times I have sat with struggling homeowners at our office in Mobile, Alabama and heard that despite their best efforts at providing all of the documentation, the mortgage companies would repeatedly ask for the same paperwork several times, and finally deny the modification because they were "missing documentation" that the clients had sent to them 3 times. 

The administration seems to finally be catching wind of this and has decided to set up a new program that will hopefully solve the problem by not requiring such stringent documentation.  If your loan is backed by Fannie Mae or Freddie Mac, then you can qualify for a modification if your loan is between 3 and 24 months delinquent.  Your mortgage servicer should send you a letter in July 2013 offering you the chance to apply for a modification.  This will require you to make three timely trial payments, and if you do, then you can qualify for a permanent modification.  The new loan would have an interest rate at or below the market rate (which is the lowest in history now, and won't change any time soon).  If your home is underwater, then you will not have to pay interest on a portion of your balance until you have had some time to build up equity in your home.

So check back with us in July for an update on this new program.  Hopefully thousands of our clients in Mobile and Baldwin County, Alabama will get some help staying in their homes.

 http://www.usatoday.com/story/money/business/2013/03/27/homeowners-modify-loans/2023191/

One of the best reasons people file Chapter 13 bankruptcy is to save their home.  A bankruptcy stops a foreclosure sale, even if it is only an hour away from happening.  You then have 5 years to pay back the amount you were behind, during which time you must also make the monthly mortgage payment as it comes due.  So if you missed three mortgage payments of $1,000 each, you are $3,000 in arrears on your mortgage.  In Chapter 13, you can prevent the foreclosure and even though you cannot come up with the $3,000 to catch the mortgage up immediately, you can do so over the next 3 to 5 years.  But very often, when a person files a Chapter 13 bankruptcy, the bank will file a claim not only for the $3,000 owed, but for attorneys' fees as well.  On the one hand, nobody requires a bank to hire an attorney just because you file bankruptcy, so it isn't fair that you be made to pay them.  On the other hand, your loan contract probably says that they have the right to do just that.  Is this allowed?

Only in certain circumstances.  For mortgage attorneys' fees to be allowed against you in bankruptcy, the bank must prove three things.  First, that the contract gives them the right to collect attorneys' fees from you - it probably does.  Second, that the amount of the fee is reasonable.  And third, that you have equity in the property.  Due to the current condition of the housing market, it is usually unlikely that all three criteria are met.  If your mortgage balance is $150,000 and your home is only worth $149,000, then the bank cannot charge you their attorneys' fees.  

And even if you do have equity in the home, the bank must show that the fees are reasonable.  Most bankruptcy courts have a certain amount that they routinely accept as reasonable.  There typically is not much attorney work required to simply file a claim in a Chapter 13 case, so any fees over $300 should raise an eyebrow.  If your bank is claiming over $500 in attorneys fees simply because you filed a bankruptcy, you need to talk to your bankruptcy lawyer and ask him to check it out.  He may be able to argue to the court that it should be reduced to a more reasonable amount.  Every penny counts when you're in Chapter thirteen!

Most Americans who own a car have some sort of lien on the vehicle - either you bought it on credit or you got a title loan against it at some point.  If you have filed a Chapter 13 bankruptcy, your bankruptcy plan deals with these vehicle loans.  Your plan dictates how these debts are treated in bankruptcy, and after the court confirrms the plan, that is the law between you and the bank that has title to the vehicle.  Once you have completed your bankruptcy payments, you have paid off your vehicle, whether or not the payment terms were the same as those originally offered by the bank.  

When your discharge is entered by the court, the bank is SUPPOSED to send you your title.  But sometimes they don't.  So what do you do?

The first thing you do is send them a written Title Request.  It need not be complicated.  Here is an example:

"To Whom it May Concern:

I write to request the title to my vehicle. I successfully completed my Chapter 13 plan (S.D. Ala. Case No. 06-12000), and on March 26, 2012, his debts were discharged –including all of his debts to you.

Read more: How to Request Your Vehicle Title in Alabama After you have Paid Off the Lien

If you are self-employed and facing bankruptcy, do you need to file a bankrutpcy for your business?  This is a common question for many self-employed people facing insurmountable debt problems.  Especially if you have a corporation, many of your debts are probably enforceable against both the corporation and the owner.  If there are multiple owners, one or all of them could be liable for the business' debts.  The question of who is liable for the business debts depends on what documents govern the debts - in other words, what does the contract say and who signed it?  Most small businesses, even if they exist as corporations, are not the sole entities liable for their debts.  Usually, creditors require that the owner co-sign for the business debts, making him or her personally liable.

A personal bankruptcy will handle all of your personal debts, including any debts you incurred as a co-signor for your business.  So what happens to your business debts? Do you need to file a separate bankruptcy for your business?  

Usually, the answer is "no."  I have heard an old lawyer describe a bankruptcy for a closed business is like a funeral for a ghost: there is no body, no casket, no grave, and no widow, so who cares?  The fact is that by the time you are facing personal bankruptcy, your business has probably already lost all of its assets and is going to have to shut down anyway.  If that is the case, then there is no need for a separate bankruptcy for your business, because it has nothing its creditors can take.  And if you file a personal bankruptcy, then they cannot come after you, so as the old lawyer said, who cares?

The only time when you should file a bankruptcy for your business is if the business has value as a going concern and you want to keep it running.  In that case, a Chapter 11 bankruptcy can help you re-organize your business debts while still operating the business.  Chapter 11 cases can be complex and expensive, however, so it is only a good option if your business has a lot of value or assets in its own right.

Living in the South means that you were more likely to file bankruptcy in 2012.  Statistics lately compiled by the folks at BestCase Bankruptcy found that three of the top five states with the most bankruptcy filings per capita were in the South.  Tennessee had the most bankrputcies per capita, followed by Nevada, Georgia, Alabama, and Utah.  So Alabama has a higher rate of consumer bankruptcy filings than 46 states in the country.  

Overall, the number of personal bankruptcies fell by 14% from 2011 to 2012, and as the economy slowly recovers, bankruptcies in 2013 are projected to decline nationally by 7%.

Yes.  Many people ask us this question.  After all, a lot can happen in the 5 years while a Chapter 13 case is active.  Cars break down, get wrecked, and sometimes you need a replacement.  There are two aspects of the process: finding the car you can afford (and the credit to buy it) and getting court approval.

The easiest way to get a car in Chapter 13 is to simply  pay cash for it.  If you scrimp along on ramen noodles and ham sandwiches for a year to save money to buy yourself a paid-for clunker, then you have done the smart thing.  You don't need credit or court approval.  Congratulations on being in the top 1% of the financial intelligence spectrum.

But for most people, the car you want costs more than what cash you have on hand.  So what do you do?

1.  Find a Deal.  Go car shopping.  Find a car you can afford.  Make the biggest down payment you can (this reduces the finance charges you'll ultimately pay by thousands).  Once you have the terms of the deal nailed down (price, amount financed, interest rate, make & Model, etc.) take that information to your attorney so he can file the motion to obtain court approval.

2.  Obtaining Bankruptcy Court Approval for the Loan.   You cannot borrow money without bankruptcy court approval.  Judges don't like it when debtors come to them seeking even more debt, but they realize that you need transportation, so if your request is reasonable, they'll likely approve it if you meet a few basic criteria:

a) You actually need the vehicle.  You cannot buy a brand new sports car or a BMW unless you're already paying all of your creditors 100% of what they are owed.  So don't even try.

b)  You can afford it.  You must be able to show the court that you can afford the payments on the vehicle.  This means that you must be current on your bankruptcy payments, and that you make enough money to cover the additional expense.  If you are constantly late with your bankruptcy payments or have missed some recently, you will get denied.  You may need to submit an amended Schedules I and J (income and expense sheets) to the court as proof of your ability.  The Trustee may object.

c) It is not a total ripoff.  25% APR is a ripoff, and a horrible idea.  Judges are sometimes wiser than you, and they will sometimes refuse to approve your horrible financial decision, no matter how badly you want to waste your money.  If you cannot find an interest rate under 20%, shop smaller, save cash for a down payment, or find a co-signor.