Monthly Archives: March 2020

Bored? Check Your Credit Report

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Nobody ever has the time to check their credit reports, go through them carefully, decipher the codes and columns — until they are closing on a new house on Tuesday, and there is a problem.  Then, I get to explain that a credit report dispute takes at least 30 days.

However, when you are sheltering in place or quarantined or social distancing that’s a great time.  You an get a free copy of your credit report from www.annualcreditreport.com  .  You are entitled to one free report from each of the three major Credit Reporting Agencies (CRA’s) every year.  (You can get additional free copies for other reasons, like a denial of credit.)  So, start by downloading your credit report.  Then, go through it carefully.  This is the hard part.  Don’t just check the names of the creditors, like with so many things, the Devil is in the details.  Check the payment history, the outstanding balance, the monthly payment amount, the date of last activity (which should be the last time you used or made a payment on the account, it should not be the time the present owner of the account bought it).   Those things can make huge differences in your access to credit.  Make sure they are all correct.

If you find something that is not correct, dispute it.  You will get information for disputing it online.  If you want to do that for a first dispute, fine; but do a screen shot or otherwise record the terms and time of the dispute just in case.  Remember, the Credit Reporting Agencies don’t work for you.  You are not their customer.  Their customers are the people who pay them, and those people are the creditors who report to the CRA’s.  If the first dispute is not successful.  I suggest doing it again, and doing it in writing and sent by certified mail.  Although, I also suggest talking to a lawyer at that point in time.

Elaine

Mortgage Payments and Coronavirus

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Before you call your mortgage company to find out what they can, or will, do to help you through this current mess we all find ourselves in, there are a couple of things you should know.

First, your mortgage company is going to have lots of options, and the first person you talk to may – or may not – know all of them.

Second, what your mortgage company can do for you will depend in large part on one thing — do they own your mortgage or are they merely the servicer.  You probably have no idea, but it doesn’t hurt to ask when you call.  If you write your mortgage check to Bank of America, they may actually own your loan — which is kind of what you expect.  On the other hand, your loan might be owned by a securitized trust that hires Bank of America to accept and process payments, make sure the taxes and insurance get paid that sort of thing, i.e., service the loan.  If your mortgage company is just the servicer and not actually the owner (or holder) of your note and mortgage, what they can do for you will be determined by their contract with the actual owner (sometimes referred to as the investors, although, that is not technically accurate).

Third, if your mortgage loan is insured by a U.S. Government program, that will also control, at least in part, what options your mortgage lender has.  That means that if you have an FHA insured loan or a VA insured loan or Fannie or Freddie, you can expect there to be regulations from FHA or VA or Fannie or Freddie or USDA Rural housing or whomever that will tell your mortgage company what they can and can’t do and what they should and shouldn’t do.

I know it is confusing, but knowing enough to ask your servicer for specifics can take some of the frustration out of the process.  You may read a news article about things that your mortgage company says it will do for home owners, only to call and be told that what you read in the news doesn’t apply to you.  Ask why it doesn’t apply to you, and then make sure it is right.  Mortgage companies really do make mistakes — often.

The next thing you need to know is to ask follow up questions.  You call your mortgage company, you are out of work until your employer reopens, what can they do for you.   They say they can agree to a 3 month deferment on your mortgage payments.  No payment necessary for three whole months!  Not so fast.  Your next question should be — and then what?  What happens to those three missing mortgage payments?  I can promise you that they won’t just go away.  There are a number of possibilities (including the one that I’m not thinking of, so please don’t assume this is a complete list).

One answer to this that I am already hearing is that after the three month deferment the missing mortgage payments are all due at once — along with the next month’s payment too.  So, the mortgage company won’t expect you to make payments for three months, but it will then expect you to bring those missing payments current at the end of the deferment period.  That is probably not a great option.

Another answer is that the missing payments will be added to the end of your mortgage loan.   That is a better option, but it is also not a great option.  Here is why.  Let’s say that your mortgage payment is $1000 a month on a 30-year-loan (360 months) with interest at 6%, and you are in month 99 (almost through with year 9).  Those three mortgage payments will defer to the end — with interest accruing for the next 21 years.  Now, I was an English major, and someone else should always check my math; but according to my calculations that means when you complete the 30 years of your original mortgage term, you will still owe over $10,000 — all because of those three missed payments.  So, if you are going to do this put yourself on a schedule to pay extra every month.  Then, at least once a year check your payoff against an amortization schedule to make sure you are getting those missing payments paid before the interest gets out of hand.  Oh, also ask how the escrow payments (taxes and insurance) will be handled.  If the lender advances the escrow portion of those payments you could wind up with a significant payment increase in the next year after your next escrow account analysis.

The next option is that you may be eligible for a loan modification at the end of the three months.  If you are, certainly apply for whatever you are eligible for.  Again, I will caution you to read the terms of the proposed modification carefully.  Historically, principal reductions have been rare on mortgage mods.

Probably the best option is for the mortgage company to put you on a schedule after the deferment period to cure the missed payments over a reasonable period of time.  If you can get it done in no more than a year, that is probably your best option.

Ultimately, however, if you and your mortgage lender can’t come to an agreement that you think is in your best interests, you might want to consider what a chapter 13 bankruptcy can do for you.  Chapter 13 is designed to give home owners an affordable means to cure a an arrearage or default on their mortgage.  In a chapter 13 you can take up to 5 years to cure a default, and deal with whatever other debt you have accrued along the way as well.

Elaine

The Bankruptcy Courts Remain Open for Business — Sort Of

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The Bankruptcy Courts — even the Oklahoma Bankruptcy courts remain open for business — sort of — despite the order entered Friday afternoon by the Oklahoma Supreme Court basically closing all Oklahoma State courts until May 15, 2020 except for emergency matters in response to the COVID-19 pandemic.

First of all, the Bankruptcy courts are part of the Federal court system, not the State court system.  So, this order from the Oklahoma Supreme Court does not effect them in the least.  That does not mean that the Federal Court system, including the Bankruptcy courts, are insensitive to the current pandemic and changes in daily life.

What it does mean is that the Federal court system, including the Bankruptcy courts, are much better positioned to respond to current events.  Essentially all Federal courts went to electronic systems years ago.   The Bankruptcy Court for the Western District of Oklahoma has been an all electronic courthouse since 2006.  What that means is that for most purposes the Courthouse doesn’t accept paper.  All filings, including new cases, are done electronically.  Instead of walking into the Court Clerk’s office, standing in line with a bunch of other germy lawyers, then coming face to face with a Deputy Court Clerk to file pleadings, my computer dials up the Court’s computer and they exchange files — quickly, efficiently and antiseptically.  Filing fees are likewise done electronically.

Now, that doesn’t mean that there haven’t had to be some hasty changes at the Bankruptcy Courts.  Traditionally (which means prior to last week) most courts required that all pleadings (like a Bankruptcy Petition) be signed in the lawyer or his staff’s presence, and the lawyer had to retain the original signature on behalf of the court clerk’s office.  More and more Bankruptcy courts around the Country have been changing those rules in the last week or so.  The Western District of Oklahoma, which includes the Oklahoma City metro area and all parts west, entered an order on Thursday March 26, 2020 allowing for the execution of pleadings with electronic signatures.

Traditionally (again that means prior to last week) First Meetings of Creditors (a/k/a 341 hearings) were held in person, at the courthouse in a packed meeting room.  Procedures have come down very recently for those to now be held telephonically.  Hearing dockets are likewise being conducted telephonically.  Now, large contested hearings with witnesses and exhibits and arguments and stuff?  Good luck getting one of those set; but this too shall be accommodated eventually.

Hurricane Katrina really exposed the greater ability of the Federal system to adapt to disaster.  You would think that in the 15 years since then, State courts would have learned a thing or two from their Federal peers.  You would be wrong.

Elaine

Student Loans and the Coronavirus Relief Bills

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More details coming soon — like after I’ve read all this stuff; but if you have federally held student loans (as opposed to federally guaranteed or private loans) the current relief bills just became your new best friend.  Ok, so we can complain all we want to about the HUMONGOUS tax breaks for real estate investors included in the bills, but these bills also give considerable benefits for both loans in good standing and loans in default.  More information coming soon.

Elaine

Keep in Touch with your Lawyer!

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It is even more important than usual during Coronavirus days to keep in touch with your lawyer — even if all businesses in your area are closed.  Sure, it is always important for all kinds of mundane reasons, like a change of address; but now those worries that are keeping you awake at night?  Call or email your lawyer.  You never know what tricks your lawyer may have stuck up a sleeve, and even if all businesses are closed, lawyers are pretty good about keeping an eye on email.  You might also call the office number.  It might be answered, and it might have a recording giving you information on how to get in touch.

First of all, your lawyer should be keeping a close eye on the various Coronavirus relief bills passing through Congress.  Second, your lawyer should have copies of the actual administrative orders from your Mayor or your Governor closing businesses, etc.  Your lawyer can tell you if they apply to you and how they are or can be enforced.  Your lawyer should also have a feel for employment law issues that may be effecting you, whether you are being told to work or not to work.

A bankruptcy lawyer can also help you with deciding which bills to pay and which not to when money gets really tight.

If you are in a bankruptcy, your lawyer can help you with issues like the reach of the automatic stay and the discharge injunction — that includes helping you shut down the phone calls if some creditor decides bankruptcy doesn’t really apply to them.  If you are in a Chapter 13 plan your lawyer can explain to you what remedies are available to you if you can’t make your plan payments or you need to change your plan terms.

Your  lawyer can also explain to you what court activity is ongoing in your area — are Sheriff’s sales still being held, are foreclosure cases being filed and heard, what about garnishments and collection cases?

Do not just sit at home and make yourself sick with worry.  Lawyers are trained problem solvers.  Sure, we can’t solve all of them, but we can try.

Elaine

SBA Loans — Things to Consider

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Oklahoma has just had all 77 Counties approved for low-interest SBA loans, and I thought I would post a few things to consider.  First of all, I get the fact that small businesses hit with an expected cessation of business (that means income, that means cash flow, that means money to buy groceries and pay the electric bill) are desperate.  I understand that most small businesses live very much month to month — if not week to week.  I also understand that if a small business doesn’t have money coming in, the owner doesn’t get paid.  Trust me — I GET IT.

I also get that when you are under sudden, intense, terrifying stress is the worst possible time to make difficult, complex decisions.

If you are applying for an SBA loan (or considering it), read everything carefully.  Most SBA loans over a certain amount require collateral, and that usually means a 2nd mortgage on your home.  This is true despite the fact that I have never represented a small business owner with an SBA loan who really understood that.  Oh, they all signed the mortgages.  I print the mortgage papers off from the County website and show them their signatures, but in the heat (and frequently panic) of the moment, they simply did not process the fact that they were putting their homes at risk.

So, read everything carefully.  If you don’t understand something — ask questions until you do, and that doesn’t mean until you can parrot back what someone has told you.  Ask questions until you understand the words on the pages in front  of you.

Then, ask yourself a few things — 1.  What am I being asked to put on the line for this money?  2.  How profitable was the business before this happened?  3.  How much other debt do I have?  4.  Am I borrowing money so that I can make payments on other debt?  5.  How long will this money tide me over, and what is the likelihood that the state of the pandemic, the state of the economy and the state of my business will be in position to not just be back to paying the regular bills, but also in place to pay this new bill (remember, these are loans, not grants)?  6.  How much is the payment on this loan?  7.  When do repayments start?

The hardest thing is to try not to ask what you will do if you don’t get this money.  Before you let yourself head down that road, call someone who understands your business and who understands not paying bills.  Remember, a lot of the financial experts we trust are people who prioritize paying your bills above all else.  In many cases, they don’t understand that sometimes the credit cards need to just not get paid for a while.  They also don’t always understand which kinds of debt you can go longer without paying than others, and who will work with you and who won’t.

I know these are scary times.  I understand being terrified of having no income and still needing to buy groceries and keep the lights on.  I also know that scary times can lead to great things — or worse things.  The problem is telling the difference.

There are some brand new tools in the Bankruptcy system for small businesses.  There are also some old tools that aren’t well understood.  For many small businesses, bankruptcy isn’t the end, it can be a tool for a new beginning.  On the other hand, waiting too long to file really limits your options.  Bankruptcy helps you deal with debt.  It won’t help you make payroll on Friday.  Good luck, stay safe and don’t be afraid to ask questions.  If you are in the Western half of Oklahoma, my phone number is in the right hand column, and whether I am working from home or at the office, I will return your call.

Elaine

When is the Right Time to File for Bankruptcy

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People contact me, and they tell me they need to file for bankruptcy; and frequently, they tell me that they need to file for bankruptcy NOW.  So, I ask, why?  Why now?  Why not last month or next month — what is it that has you calling me now?

The most common response?  Crickets.

Very few people have a ready answer to that question, and it is an important question.  Bankruptcy eliminates your personal liability for debt you incurred prior to the time that the bankruptcy was filed.  As a general rule, it doesn’t effect debt that you incur after the bankruptcy is filed.  So, ideally you should file when you have reached bottom and are headed back up.  Now, that isn’t always possible.

Regardless, I understand the impulse to want to file NOW when something bad happens — you lose your job, you incur significant health problems, your income drops.  I get that deciding to file for bankruptcy is DOING  something, and it addresses the rising stress and panic levels.  But NOW may not be the right time.

There are lots of reasons why now might not be the right time.  You just lost your job and have no idea when you will find another one, you have just been diagnosed with a major health problem, and you don’t know how you will manage with that and your existing debt.  You can’t make the minimum payments on all your cards this month.  You just missed your mortgage payment, and they are already calling.

A blog post can’t begin to tell you when the right time to file will be, but don’t be afraid to call and ask.  Just don’t be surprised when I ask, why now?

Elaine