On Monday, New Century Financial filed for Chapter 11 bankruptcy protection in Delaware. New Century, once the nation’s second largest subprime mortgage lender, also announced plans to fire 3,200 employees, about 54 percent of its work force. As part of the restructuring plan, New Century will sell its loan servicing business to Carrington Capital Management for $139 million.

New Century is the latest subprime lender to fall casualty to the dramatic increase in defaults and foreclosures nationwide. Many homeowners have seen their monthly mortgage payments increase as interest rates have risen. Due to the recent popularity of Adjustable Rate Mortgages and interest only loans, many homeowners are facing steep increases in mortgage payments as interest rates rise and fixed introductory payment periods end. Chapter 13 bankruptcy can stop a foreclosure, but you must have sufficient income to continue with the regular mortgage payments in addition to a court ordered payment to catch up on the mortgage arrears and pay off a percentage of any other debts.

The credit industry is responding to the recent collapse of the subprime market with a tightening of qualifications and some have stopped subprime loans altogether. Although it is still relatively easy to obtain a mortgage after a bankruptcy, consumers should expect to find fewer loans available immediately following a bankruptcy discharge.

Risky, or irresponsible, lending extends too many other areas of the credit industry, including pay-day loans, financing offers, credit cards, and auto loans. These industries have not received as much attention as the subprime mortgage industry, but there is clearly an over-extension of credit to consumers that simply cannot afford to carry the amount of credit given to them. These debts typically have high interest rates and unreasonable payment terms that often lead to default. The lender is harmed by the high amount of defaults, and the consumer is often forced to consider bankruptcy or other debt relief options.

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Cleveland has officially joined the growing list of Midwestern cities that have seen a severe increase in foreclosure filings over the last year, and there’s no sign of this dubious trend stopping anytime soon. While subprime mortgage defaults have recently rocked Wall Street and damaged our national economy, the effects of these shady lending practices are being felt by families nationwide, especially so in the Midwest. Michigan and Ohio alone accounted for a combined 15% of the nation’s foreclosures in January, 2007.

Cleveland is in a similar situation to Detroit and other blue-collar working towns in the Midwest experiencing this unfortunate foreclosures spike. Many factors are deemed responsible for the problem - a poor economy, predatory lending tactics, weak consumer protection laws, shady lenders trying to exploit the loosely regulated subprime market for their personal gain, and financially unqualified people obtaining home loans.

The problem however isn’t confined to just the metropolitan areas either, it’s a true statewide problem for Ohio, Michigan and other Midwestern states.

While the SEC (Securities and Exchange Commission) has recently publicly announced that it is investigating a number of companies that operate in the troubled market for subprime mortgage loans, this won’t unfortunately assist or help the families who have fallen or hard times are facing losing their homes in the near future.

Based on household income and an ability to repay, Chapter 13 Bankruptcy is the most effective way to stop foreclosure proceedings. Chapter 13 forces your mortgage company to accept repayment of mortgage arrears over a three to five year period and allows people to stay in their homes. If you or someone you know is involved or will soon be involved in a foreclosure lawsuit, an experienced bankruptcy attorney may be able to help.

See the articles on which I based this blog:

http://www.chicagotribune.com/Cleveland Foreclosures

http://www.chicagotribune.com/SEC Subprime Investigation

--Attorney Andrew Partridge

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www.uscourt.gov recently released bankruptcy filing statistics for the 2006 fiscal year. (October 1, 2005 – September 30, 2006) The total number of bankruptcy filings for the 2006 fiscal year (1,112,542) was the lowest amount since 1996. Chapter 7 bankruptcies accounted for 75 percent of all petitions filed in the 2006 fiscal year.

The numbers for this time period are deceptive, because over 50% of all bankruptcies filed during this period were filed in the first 16 days of the fiscal period. This is a result of a rush to file cases before the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BACPA) that went into effect October 17th, 2005.

The drop-off in filings after the law change was largely expected by the bankruptcy legal community, but many bankruptcy attorneys did not expect the decrease in filings to last for so long. As the public becomes more educated about the new bankruptcy laws, I expect bankruptcy filings to gradually increase, especially with the large amount of homes currently in foreclosure nationwide. Chapter 13 bankruptcies will become increasingly popular as more homeowners need to seek bankruptcy protection to stop a foreclosure on their home.

Attorney Richard Waple

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Last week, a Senate committee summoned top executives from Bank of America, Chase, and Citigroup to review unfair credit practices that can punish people who need the most help.

Wesley Wannemacher of Lima, OH, testified on how his $3,200 of credit card debt grew to $10,700, due to late fees and a 30% interest rate. Wannemacher incurred the original credit card debt in 2001, mostly to pay for his wedding. After making $6,300 in payments since 2001, he still had a remaining balance of $4,400, thanks to $4,900 in interest, $1,100 in late fees, and $1,500 in over-limit fees.

Chase decided to forgive the remaining $4,400 of Wannemacher’s debt, and even offered him an apology. “We simply blew it”, testified Richard J. Strednicki, Chief Executive of Chase’s card services division. Chase also agreed to stop charging over-limit fees at 90 days.

This is great news for Mr. Wannemacher, but what about the rest of Chase’s customers who have also been subject to similar interest rates and fees? Now Chase has admitted that it “blew it” and waived the remaining debt, I would hope that Chase would be willing to waive the debts of the thousands of their customers with similar stories, especially those with excessive over-limit fees.

Chase opened the door for others to contact them to discuss debts incurred through unfair practices, “We look at any situation in which we have made a mistake,” said Paul Hartwick, a spokesman for Chase. “We think that we are pretty fair and responsible in the way we deal with our customers.” If you have a debt with Chase, I encourage you to call them and request for any excessive fees to be waived. Unfortunately, without the high profile of Mr. Wannemacher’s case, I fear that your results might not be as good.

Mr. Wannemacher’s story is very similar to many bankruptcy clients that I have consulted. It seems like the credit card companies money making strategy revolves around pushing consumers into more debt than they can handle, then hitting them with every sort of late and penalty fee they can imagine. Finding the disposable income to climb out of debt can be very difficult, but is often impossible when the interest and fees are so high. At some point, consumers are left with few choices, and filing bankruptcy can be the best alternative.

It’s time for the Government to step in and take some responsibility for stopping the unscrupulous tactics of the credit industry. Relying on the credit card executives to change their own policies will result in nothing more than superficial changes, and a token forgiveness of $4,400 is just a drop in the ocean that isn’t going to help the rest of Chase’s customers who are also victims of unfair credit practices.

Attorney Richard J. Waple

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Can student loans be discharged in a bankruptcy?

Student loans can be discharged in a bankruptcy if you are able to demonstrate an “undue hardship” on you or your dependents. You have to prove to the bankruptcy judge that you are physically unable to work and your situation is unlikely to change for the remainder of the term of the loan.

Unfortunately, the majority of bankruptcy courts have interpreted the “undue hardship” standard very unfavorably towards debtors, and it is rare that student loans are successfully discharged. You must file a separate motion with the bankruptcy court to attempt to have your student loans discharged, and the exact laws can vary depending on the jurisdiction.

Many bankruptcy lawyers are reluctant to take on these cases because they can be complex and difficult to win. In a catch 22, the debtor is often left in a situation where they must prove that they cannot make any meaningful payments towards their student loans, but also have to pay a bankruptcy attorney for assisting them with such a time-consuming matter.

If you are unable to demonstrate an “undue hardship” and discharge your student loans in a Chapter 7 bankruptcy , a Chapter 13 bankruptcy may provide you with short-term relief. A Chapter 13 bankruptcy generally allows you to include your student loans in your monthly trustee payment. You may be eligible to pay back as little as 10% of the student loan over a 3-5 year period, but you will be responsible for the remaining 90% once the bankruptcy is discharged.

Consult with a local bankruptcy attorney to discuss if Chapter 7 bankruptcy or Chapter 13 bankruptcy can assist you with your student loans.

-Attorney Richard J. Waple

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Over the last several years, adjustable rate mortgages have seen a large increase in popularity as many consumers were attracted to the initial low monthly payments offered by these loans. Lenders typically offer lower monthly payments on ARMs, but after a fixed period of time the monthly payment can either increase or decrease depending on the overall market interest rates.

Unfortunately for many, a gradual increase in market interest rates has increased overall monthly mortgage payments, and made it difficult for many to maintain their mortgage payments, contributing to a large increase in foreclosures in 2006. A study by www.realtytrac.com shows that “more than 1.2 million foreclosure filings were reported nationwide during the year, up 42 percent from 2005 and a foreclosure rate of one foreclosure filing for every 92 U.S. households.” The study attributes the increase in foreclosure filings “”¦partly by the impact of monthly mortgage payments increasing dramatically for homeowners who held some of the riskier types of adjustable rate and sub-prime mortgages”¦”

I’ve consulted with many bankruptcy clients who weren’t aware that their monthly payments could increase and made the mistake of only paying attention to what the initial monthly mortgage payment was. Refinancing with a fixed rate mortgage may be the solution, but it can be difficult to refinance, especially if you are already behind on your mortgage payments.

Bankruptcy laws do offer help for individuals facing foreclosure or unmanageable mortgage payments. A Chapter 13 bankruptcy can stop a foreclosure and give you a period of 3-5 years to payback any mortgage arrears, but you will still be required to make the scheduled monthly mortgage payment in addition to the trustee payment. For some, the monthly obligations are just too much, and a Chapter 7 bankruptcy may be the best option to allow you to “surrender” the house and walk away from all outstanding mortgage balances.

-Attorney Richard J. Waple

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In an unprecedented move, the New Jersey Bankruptcy Court is mounting an informational campaign through the news media to educate the residents of New Jersey of the new bankruptcy laws.

Bankruptcy Filings were down by 39 percent in New Jersey and 37.6 percent nationally in 2006. The New Jersey Bankruptcy Court believes that a widespread misperception among its residents about the availability of bankruptcy has contributed to the continued sag in bankruptcy filings happening still today.

Unfortunately, these common misperceptions about bankruptcy aren’t confined to the residents of New Jersey alone. Nationwide, there are many inaccurate rumors flying around about the new bankruptcy laws. Many people even still believe that the bankruptcy law was completely abolished when the law changed and is no longer available to anyone. This of course is the opposite of the truth.

You have an economic right to file a Chapter 7 bankruptcy once every eight years if you can satisfy the new income requirements which are based on your state’s median income and your household size. In the case where your income is too high to file a Chapter 7 bankruptcy, you still have the legal right to stop all creditor harassment and pay back a reduced percentage of your debt through a Chapter 13 bankruptcy. Consulting with an experienced bankruptcy attorney is a fail-proof way to determine which bankruptcy chapter is a better fit for your specific situation.

BankruptcyHQ commends the New Jersey Bankruptcy Court for being proactive in attempting to cure this problem and better inform its public.

Read the article on which I based this blog:
http://www.northjersey.com

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It is much easier for a bankruptcy attorney to help a client that is well prepared and provides all the necessary information in an organized manner. Your bankruptcy attorney will be able to thoroughly evaluate your financial situation if you provide him/her with a clear picture of your finances. This will also reduce the possibility of any oversights or mistakes that can occur when a bankruptcy attorney does not have all the information.

Take these 10 things to your consultation with a bankruptcy attorney:

1. Bills: Copies of the most recent bill you have received from each of your creditors
2. Credit reports from each of the three major credit reporting bureaus. Highlight any debts that you would like to keep (mortgage, car loans, furniture, etc). Obtain free copies of your credit reportÂ
3. Copies of your most recent mortgage, home equity loan, and auto statements.
4. Copies of pay-stubs received in the last 6 months. Â
5. Copies of your 2 most recent Federal Tax Returns.
6. Documentation regarding any lawsuits you have being a party to within the last 3 years
7. Deeds to any real estate or property owned
8. Auto Title(s)
9. Investment, Pension, and Life Insurance Summaries
10. Social Security Card

Attorney Richard J. Waple

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Many Americans have turned to the fast-growing Debt Counseling industry over the last decade to help solve their debt problems. Debt Counseling companies attempt to improve people's financial situations by working-out reduced payments with their individual creditors and/or consolidating their debts into one payment.

On a weekly basis for as long as I have practiced consumer bankruptcy law, I've heard horror stories from my bankruptcy clients of Debt Counseling relationships that have gone bad. Common complaints that I hear include: Creditors included in my client's debt consolidation suing them for collection (even though they had been making timely monthly payments to the Debt Counseling company); mismanagement of the funds paid to these companies; credit report scores plummeting; and even fraud and class-action lawsuits filed against these companies.

Since most people consider the filing of bankruptcy a last resort, a large number of my clients over the years have pursued debt consolidation before coming into my office. In all the time I've been practicing, I've yet to meet anyone who has had a positive opinion of the Debt Counseling company they've used. In fact, I've actually never met or even heard of anyone who debt consolidation has sucessfully worked for.

According to a recent consumeraffairs.com article, the root of the problem is that there is next to no government oversight of Debt Counseling companies. In fact, there's NO federal regulation of debt counseling services whatsoever, and only 17 states have specific regulations to govern debt counseling. Thus, a lack of fear of legal recourse has allowed these companies to act and perform in many instances unethically and without regard for their clients who they are supposed to be helping in a difficult time.

While I obviously personally can't endorse the process, if you're considering consolidation of your debt with a Debt Counseling company, please refer to this list of suggestions to help you avoid the irreputable companies and find the decent ones:
http://www.consumeraffairs.com/debt_counsel/

Additionally, for a list of Debt-Counseling companies that consumers have filed complaints against, please see:
http://www.consumeraffairs.com/debt_counsel/

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ABC’s popular television show 20/20 ran an interesting investigative report exposing the sometimes abusive and illegal practices of debt collection. The report featured recorded abusive debt collection phone calls and exposed the often unethical practices of the debt collection industry. These recordings can be heard at ABC News. Â

It came as no surprise to me to hear some of the abusive language and illegal tactics used by debt collectors. Over the years, I’ve heard countless similar stories from my bankruptcy clients who are often hounded on a daily basis for debts that they simply cannot afford to repay. Often, it is these abusive phone calls that motivate people to file bankruptcy. To be fair, some debt collectors are courteous and act in a professional manner, but clearly something needs to be done to clamp down on the rampant abuse throughout the industry.Â

Consumers do have protections available for violations of the The Fair Debt Collection Practice Act (FDCPA), but the damages are often statutorily limited to as little as a $1000 for violations. To most large collection agencies, the potential fines are so small compared with their profits, that they don’t have the motivation to make fair and ethical practices a priority.Â

In my opinion, Congress needs to impose tougher fines and increase the statutory damages limits. They need to send a message to the debt collection industry that unethical or illegal collection methods will not be tolerated. Only then will consumers receive enough protection to rest assured that they will not be illegally harassed by debt collectors in their time of financial distress. Â

Rich Waple
Attorney, BankruptcyHQ

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