Debtors are not limited to young people. The number of elderly Americans retiring with student loan debt is on the rise. Reports from Equifax, a credit-reporting agency, show that individuals 50 and older have $135 billion in student loan debt and those 60 and older have $36 billion. This spring, many college seniors graduate with debt. At graduation ceremonies across the country, the number of audience members with their own student loan debt is also on the rise.
]]> The traditional attitude is that education is essential to obtain a good paying job. This belief has led many adults back to school to earn GEDs, bachelor's, and advanced degrees. Job loss has even pushed some in their late 40s and 50s to go back to school. Grandparents are taking out loans to help grandchildren pay for the ever-increasing cost of obtaining an education.With the possibility of interest rates on federal subsidized student loans doubling if lawmakers do not take action, many in the Ann Arbor area are concerned about their ability to repay these loans. Debtors struggling with high debt levels may be able to seek relief in bankruptcy court. Discharging student loan debt is more difficult than discharging consumer debt in bankruptcy, but the process can provide relief from other debts to free up money towards repayment of these loans. A provision in current bankruptcy laws allow student loans to be discharged if the debtor can show that repayment of the loans would be an "undue hardship."
Individuals struggling with high debt levels, including student loans, should seek the advice of an experienced bankruptcy attorney to discuss options for getting their financial affairs in order.
Source: The Washington Post, "Student loans saddle both kinds of seniors: graduates and grandparents," Michelle Singletary, 4/09/12.
]]>The study, authored by economists at Columbia University, the University of Chicago and Washington University, set out to examine the effect of increased bankruptcy costs that accompanied the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA). According to the study, administrative bankruptcy fees increased from $921 to $1,477 after BAPCPA took effect, and the act also required applicants to pay for mandatory credit counseling.
]]> The fact that individuals and couples may be concerned about being able to pay for bankruptcy is not surprising, given that they may already be overwhelmed by debt from credit cards, medical expenses, back taxes or student loans. To determine the effect of "liquidity restraints," the authors looked at the two income tax rebates authorized by the federal government over the past ten years, which provided between $300 and $1,200 to American households.While this cash infusion led to only a two-percent short-term increase in bankruptcy filings in 2001, that figure jumped to seven percent after the 2008 rebate. Notably, the authors found that the increases were not attributable to Chapter 13 bankruptcy increases, but were instead a result of more liquidation bankruptcy petitions.
The study found that the increases meant that applicants used the tax rebates to file more quickly instead of postponing their pursuit of financial relief. An experienced bankruptcy lawyer can explain the full implications of the timing of a consumer bankruptcy application, and the likely timeline for obtaining meaningful debt relief.
Source: The Huffington Post, "Bankruptcy Filings Delayed Until Tax Refund Arrives," Bonnie Kavoussi, 3/23/12.
]]>Changes in the law over the past few years have tried to make things easier for people to make their payments. A number of financial services have also been made available to struggling homeowners to refinance mortgage payments, negotiate payment schedules and help people keep their homes.
Yet, even in light of these programs, some are faced with making a decision that losing their homes is inevitable, and are making the decision to cut their losses, stop making monthly mortgage payments and wait for an eviction from a foreclosure proceeding. This is referred to as a strategic default.
]]> Is a Strategic Default the Solution?A strategic default can be an option for people struggling with their finances to save some money to recover losses from losing their homes, pay off some other debts (including car payments and credit card balances) and try to mitigate their damages as much as possible.
Making the decision to strategically default is not an easy one, for some it may mean giving up the house for which they worked hard. Others may feel like they are giving up or cheating the mortgage company.
However, in a situation where someone cannot afford their home and selling is not an option, often because they owe more than what the house is worth, people have to make hard decisions in order to survive and prevent the financial situation from worsening.
In Michigan, a strategic default may not fully save someone from paying for some of the cost of the house. When a person is evicted in a foreclosure, the house is sold and sometimes mortgage companies can sue the person who defaulted for the difference between what they owe and what the house sold for; this is called a deficiency judgment.
Jumping the gun by defaulting too early may also have consequences. If you are in danger of losing your home and are considering a strategic default, speak to a Michigan attorney knowledgeable in debt relief matters. A lawyer can discuss your situation, explain your options and help you determine the best course of action.
Source: Reuters, "What happens when you walk away from your home?" Chris Taylor, 01/27/2012.
]]>Within the 35 to 49 age bracket, people ages 38 to 41 carried the largest amount of student loan debt. This age group had on average $12,000 in student loan debt. In 2009, the same age group averaged only $9,000 in student loan debt. Recent graduates ages 26 to 29 still have the largest amount of student loan debt, reaching an average of $14,000. However, recent graduates seem better able to cope with the load.
]]> The higher levels of debt for middle-aged Americans is a very new trend. The CEO of a credit report company sought to explain this new trend, he said, "High unemployment, rising tuition costs, artificially low interest rates from the government and increased for profit school advertising... (adds up to) consumers taking on student loan debt at an alarming pace." For-profit schools are more likely to rack up more student loan debt than from non-traditional students than other types of schools.The total value of student loans across the country has reached a higher level than credit card debt. Estimates put student loan debt at $966 billion according to the financial aid website finaid.com. Some experts claim that it may be too easy to get student loans, leading people to amass high amounts of debts when looking for a career change. When considering whether to go back to school, people must ensure that the benefits of the job prospects outweigh the costs of additional education.
If you are struggling with student loan debt that you are not able to pay back, a bankruptcy attorney may be able to help. Attorneys can explain your legal rights and find options to relieve your student loan debts.
Source: Reuters, "Middle-aged borrowers piling on student debt," Mitch Lipka, 12/27/11.
]]>Every holiday season brings a slowdown in foreclosure activity as mortgage lenders such as Fanny Mae catch the Christmas spirit and refuse to evict people until after the New Year. But like a glass of stale champagne on New Year's Day, reality is about to hit in a bitter way.
The nation will see another wave of bank repossessions in 2012 according to RealtyTrac, an online foreclosure sale website. The reason is that about four million delinquent mortgages are about to hit the pipeline as banks resubmit documents and courts begin to hear cases again.
]]> Overall, foreclosures nationwide are down 14 percent from a year ago, but a surge in defaults that occurred back in August is about to make an impact. Nevada has led the nation in foreclosure rates for the past four years; however, a new process that requires more documentation dropped the state to ninth place in RealtyTrac's recent survey conducted in November. That left California in the top spot, with Florida, Michigan, Illinois and Georgia rounding out the top five. Michigan had 13,777 houses in some type of foreclosure activity in that survey mainly due to the state's chronic high unemployment rate.What this means for struggling homeowners is that the value of their homes will continue to drop at least for the short term. It is possible that government agencies may sell foreclosed properties in bulk to investors, but nothing is confirmed yet. Until the backlog of distressed properties is cleared, there is little expectation of an upward trend in the housing market.
Source: CNBC, "A New Foreclosure Wave is Coming," Diana Olick, 12/15/2012.
]]>Foreclosure by advertising is cheaper and takes less time than judicial proceedings.
The statute allowing foreclosure by advertising authorizes the owner of the debt, the owner of an interest in the debt secured by the mortgage or the mortgage servicer to foreclose by advertisement.
]]> The Court of Appeals found that MERS fit none of those descriptions. In a 4-3 decision, divided along party lines, the Supreme Court defined MERS role as "an owner of an interest in the indebtedness" because of contractual obligations to the lender.The Supreme Court's reasoning is somewhat unclear. After conceding that an "owner of an interest in indebtedness" is not the same as an "ownership interest in the note," they say that because MERS is the record-holder of the mortgage, this security lien "contingent" on satisfaction of the indebtedness allows MERS to foreclose by advertisement.
The Supreme Court's ruling will be controlling in Michigan.
Therefore, for now, MERS can use the foreclosure by advertisement process. This may have a significant impact on individuals in danger of foreclosure. If you are a homeowner facing foreclosure and want to learn more about how the Supreme Court's recent decision may impact you or want more information on how to stop foreclosure and save your home, speak with a Michigan bankruptcy attorney. An attorney can assess your situation and describe your options, including how bankruptcy could allow you to remain in your home.
Source: Bloomberg Businessweek, "MERS Wins Appeal of Decision Limiting Michigan Foreclosures," Margaret Cronin Fisk, 11/17/11.
]]>The program, which could help up to 1.6 million homeowners who are currently "underwater" on their mortgage - a situation that occurs when a homeowner owes more on the mortgage than the home is worth - would help more struggling homeowners qualify for the Home Affordable Refinance Program (HARP). To date, HARP has helped less than one-million homeowners.
]]> According to the Fiscal Times, the program will:However, other requirements for qualifying for HARP remain in place. For instance, to qualify, homeowners must be current on their mortgage payments and they cannot have had more than one late mortgage payment in the last year.
Janaki Rao, a mortgage strategist at Morgan Stanley, is quoted in Financial Times as estimating that the new program could stimulate the economy by "unleashing a refinance wave", freeing up (in mortgage payment savings) an estimated $7 billion in cash for homeowners.
However, Celia Chen, an economist at Moody's Analytics, believes the new program will not, as quote in Financial Times, "help the housing market greatly to get out of its doldrums." Specifically, she says that the program does not address two of the biggest factors affecting the housing market: unemployment and consumer confidence and the surplus of inventory that is suppressing housing prices.
Even if a homeowner with an underwater mortgage does not qualify for the new program, they may still have options. Because of the current economic situation and high jobless rate, many Americans are behind on their mortgage payments and could use assistance. Chapter 13 bankruptcy could help free up enough cash, through a debt reorganization, to allow a homeowner in arrears to catch up. Speak with an experienced bankruptcy attorney about your situation and to discuss your options.
]]>The LA Times reports "Nationally, new single-family homes sold at a seasonally adjusted annual rate of 298,000 in July, putting the industry on pace to post the lowest annual sales since the Commerce Department began keeping data in 1963."
With too much inventory, and a substantial portion of foreclosed properties, 2011 could be the worst year on record for new-home sales. This is driving the fifth year of decline for the new home construction industry.
]]> Future Foreclosure ReformsIn remarks to the American Banker Regulatory Symposium, John Walsh, Acting Comptroller of the Currency, summed up the problem, "It's hard to overstate the importance of the foreclosure and servicing issues. They are a major drag on the struggling housing industry, and a well-functioning housing sector is vital to the health of local communities and our national economy."
He further notes that "but it's hard to imagine the housing sector recovering until we work through the mortgage modification process, address the large back-log of foreclosures, and restore a fair and functional foreclosure process in the housing market."
Given the critical importance of this element of economic recovery, it would be helpful if fast and decisive action arrived quickly. Comptroller Walsh is optimistic, but recognizes that speed of the reform may not be as fast as many would hope.
He points of the painstaking nature of the process that is necessary to review the individual claims of borrowers and determine the financial injury they may have suffered. This effort is part of the overall plan to restructure the mortgage industry.
The Comptroller's office has also initiated enforcement actions, independent foreclosure review and establishment of new uniform national mortgage servicing standards. Comptroller Walsh notes further changes in the process are occurring because of State AG actions, private lawsuits and new rulemaking.
What If You Can't Wait?
For borrowers who cannot wait for the bureaucratic intricacies of the process to be reformed, an attorney may be able to help. Because of the complex nature of most individual's financial history and circumstances, there may be multiple options available, ranging from a mortgage modification to bankruptcy.
An attorney can review your situation, explain the details of each option and help you make the best choice for you and your family.
]]>Foreclosure by Advertisement
Foreclosure by advertisement allows mortgage holders to begin the foreclosure process on a mortgagee who is in default by running an advertisement announcing a sheriff's sale on the property. Under the terms of the statute, the lender must publish an advertisement for four consecutive weeks in a newspaper that covers the county in which the property is located. The lender also has to post a notice on the property itself within 15 days of the publication of the first advertisement.
]]> How Does Foreclosure by Advertisement Hurt Homeowners?Foreclosure by advertisement is ripe with possibility for fraud. The Ingham County registrar of deeds discovered hundreds of deeds that had been improperly signed or "robo-signed" in order to begin the foreclosure process, meaning that the foreclosures could have been based on falsified documents.
Additionally, the current law has no requirement that the mortgage holder notify the mortgagee personally in order to begin the foreclosure by advertisement process. There is the potential that the borrower would not even know that the lender began foreclosure proceedings under current law.
Proposed Changes to Foreclosure by Advertisement Law
In an effort to keep more people in their homes and to keep buildings occupied, lawmakers are proposing that the court review any foreclosure action on any property that is owner occupied and four units large or less,. Legislators are hoping that having judicial review of mortgages will allow the court to work out loan modifications and allow people to stay in their homes.
If you are behind in your mortgage payments and facing the possibility of foreclosure, do not hesitate to consult with an experienced attorney who can discuss your situation with you and inform you of all of the options available to help you regain solid financial footing.
Source: Officials to push end of law allowing foreclosure by advertisement
]]>Statistics show that 401(k) borrowing is on the rise. According to research the Employee Benefit Research Institute (EBRI) conducted, of 20 million 401(k) participants across the country, 21 percent had taken out loans from their accounts by the end of 2009 - an increase from 18 percent for the previous three years. This was the highest number the EBRI recorded since it began collecting data on this topic in 1996. The Vanguard Group reported similar numbers among the plans the company administers: 18 percent of participants had loans from their 401(k) accounts at the end of 2010, up from 16 percent for the past three years.
Many who take out such loans do so in the face of crushing bills, having few other options for credit. In the poor economy, banks are less willing to lend money and the declining housing market means that people have less equity in their homes against which they can borrow. People believe that they can repay the loan after they pay off their bills.
]]> However, many do not understand the risk associated with such a move. Often, if an employee loses his or her job, a 401(k) loan becomes due within 60 days or the unpaid balance of the loan counts as a withdrawal from the account - meaning the employee will owe taxes on that amount, as well as a 10 percent penalty for withdrawing money from the account before retirement age. Individuals are then left with needing to cash out the rest of the account in order to pay taxes and penalties - along with more taxes and penalties for cashing out the rest of the account - and no longer have any retirement savings.Even if an employee does pay the loan back in full, he or she still loses financial ground. An employee is not able to contribute any money to the 401(k) while making payments on the loan, meaning that the employee's retirement savings is not growing during that payment period, which can last up to five years.
Financial advisors caution people to think very carefully before taking out a 401(k) loan and to weigh the risks. People should explore all other options for credit before turning to a 401(k) loan. If no credit is available, financial advisors also suggest that filing bankruptcy might be the solution for those under particularly crushing consumer debt loads. For those in such a situation, a loan from a 401(k) would merely stave off filing bankruptcy for a brief time, with the added drawback of depleting retirement savings. Filing bankruptcy has the benefit of protecting the retirement assets that the filer has already amassed at the time of filing.
Many people are struggling as the nation's economy shows few signs of improvement and are looking for ways to help them pay their bills. While taking a 401(k) loan is becoming a more popular option as a solution to the problem of needing credit, the risks associated with such a move should make people cautious about taking such a step.
Source: Workers Increasingly Raid 401(k)s for Short-Term Cash
]]>RealtyTrac's data reveals that, nationally, nearly 215,000 homes received foreclosure notices, representing one in 605 households. But, just five states - California, Florida, Michigan, Arizona and Nevada - account for more than half of the nation's foreclosure filings. Michigan had the third-highest number of foreclosures with 14,614.
]]> Although the number of foreclosure filings has recently decreased, analysts say it is simply a temporary stall in foreclosures held up after problems with lenders' documentation came to light in fall 2010. Many foreclosure filings had to be resubmitted, and in states with judicial foreclosures that must be overseen by a judge, courts have been unable to keep up with the deluge of proceedings.Rick Sharga, a senior vice president at RealtyTrac, said that, even though there has been a decline in foreclosures, "all of those foreclosure auctions we should have seen this year roll into next year." Because most foreclosure proceedings have just been delayed, Sharga reported that it will take much longer for the housing market to recover and that homeowners are still in need of assistance in keeping their homes.
In addition, although notices of default, scheduled home auctions and home repossessions decreased by 2 percent from April to May 2011 and 33 percent from May 2010 to May 2011 nationally, lenders repossessed more homes in May 2011 than April in Michigan as well as in Georgia, New York, Virginia and New Jersey. These statistics show that, for many people, the foreclosure crisis is far from over.
Source: America's Map of Misery?
]]>For lenders, MERS provides a valuable service. MERS takes mortgages held by lenders throughout the mortgage industry and groups them into mortgage-backed security products.
]]> Using its position in the industry, MERS forecloses on homeowners by "foreclosure by advertising." Meaning, after a homeowner becomes 90 days past due on payments, the lender can publish notice of the sale of the home in the paper. Notification does not require that the lender go to court to file a lawsuit or otherwise prove they are the rightful owner of the debt.The ruling by the court of appeals states that Michigan law requires that the foreclosing party actually be the party that holds the mortgage. And, since MERS is not the rightful holder of these mortgages, they do not have the authority to foreclose on these homes. Therefore, the many foreclosure proceedings involving MERS will stop.
The effects of the ruling may go beyond mortgages currently in the foreclosure process and reach homes in Michigan that MERS previously foreclosed upon and have subsequently been sold, as ownership of these properties may now be called into doubt.
If you are facing a foreclosure of have been foreclosed upon in recent years by MERS, speak with an experienced attorney about how this ruling could affect you.
]]>The proposed law - while helping families facing foreclosure by proposing to extend the 90-day negotiating period for another year - proposes to cut the post-foreclosure redemption period in half. Currently, after a home-mortgage is foreclosed upon, the homeowner has six months to try to get another mortgage on the property or otherwise payoff the defaulted mortgage in order to keep the home.
]]> As reported by mlive.com, Gail Madziar, vice president of membership and communications for the Michigan Banks Association, said that three months is enough time for a homeowner to figure things out, and that by that point "they better have done everything they can do to stay in their home." Essentially, nothing will change between the three and six month marks.However, in an economy that appears to be rebounding, shortening the amount of time that an unemployed homeowner has to find work could be detrimental, especially if finding employment is all that stands between a homeowner and keeping the home. State Legislator Rashida Tlaib, (D-Detroit) stated that lawmakers "should be doing all that we can to keep our families in their homes."
One thing is for certain, shortening the redemption period speeds up the process. That means, more foreclosures, more families out of their homes and the taking away of one of the most valuable tools that many homeowners need in order to find a way to stay in their homes - time.
If you are facing foreclosure, speak with an experienced attorney to discuss your situation. Depending on the circumstances of your situation, you may have options for keeping or staying in your home, including bankruptcy or negotiating a deal with the mortgage lender.
]]>When child support, taxes and even credit card debt are overdue for several months, creditors and the government may file a lawsuit against debtors. Once the court rules against a sufficiently employed debtor, it may order that the debtor's wages be garnished. Though Title III of the Consumer Credit Protection Act protects employees from having their wages garnished past a certain point, paychecks may be garnished anywhere from 25-50 percent, depending on the type of debt involved. Title III's protections evaporate if a debtor receives additional garnishment orders for subsequent debts.
Avoiding or Ending Wage Garnishment
When debt is becoming unmanageable, debtors should seek out the advice of an experienced attorney. Attorneys can evaluate the situation and work with creditors or the government to institute a repayment plan in order to get the debt under control and keep the situation out of the courts. If an employee is already facing garnishment, an attorney may persuade the court to lower the amount being garnished or may advise that the employee attempt to end the garnishment through the bankruptcy process. In either situation, there are solutions to the seemingly overwhelming problem of potential or actual wage garnishment.
]]>Bankruptcy Options
Generally, individuals will file one of two types of bankruptcy, Chapter 7 or Chapter 13. There are benefits and drawbacks to each type of bankruptcy, so it is important to seek out assistance in determining which type of bankruptcy is for the best for you based on your situation.
]]>Chapter 7 bankruptcy - otherwise known as liquidation - involves a trustee converting the non-exempt assets of the filer to cash and using the cash to repay the debts owed to creditors. A filer is allowed to keep certain exempt property, which is defined by statute. Commonly, debtors eligible for Chapter 7 bankruptcy only have exempt property, meaning they are able to keep all of their property. After the non-exempt property is liquidated and the creditors are paid, nearly all of the debts owed are discharged.
There are eligibility requirements for Chapter 7 bankruptcy, however, a debtor must pass a means test.
Chapter 13 bankruptcy - otherwise known as repayment - is available for debtors with assets that they would like to keep and debtors not eligible for Chapter 7 bankruptcy, among others. Chapter 13 allows debtors who are behind on mortgage payments to keep their homes and make current any arrears. Under Chapter 13 bankruptcy, debtors establish a repayment plan to pay off as much as the debt owed as possible over three to five years. After the repayment period ends, much of the debtors' debt is discharged.
Under both Chapter 7 and 13 bankruptcy, there are certain debts that cannot be discharged, including child support. Speak with an experienced bankruptcy attorney to discuss what debts are dischargeable and which are not.
If you are facing seemingly insurmountable debt, bankruptcy may be a better option than negotiating with the bank or other creditors or seeking help from a debt consolidation firm.
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