NEW FEDERAL LOAN MODIFICATION RULES NOW WORK WITH

BANKRUPTCY LAWS & ORLANDO BANKRUPTCY COURT’S CHAPTER 13 MORTGAGE MEDIATION PROGRAM

As of June 1, 2010, new HAMP rule changes now make it possible to seek mortgage modification while in an active bankruptcy case.  Under prior U.S. Treasury rules, mortgage lenders are not required to consider modifications under the federal government’s Making Home Affordable Program (HAMP) while a homeowner is in an active bankruptcy case; however, these rules have now changed and they will prevent lenders from saying no to mortgage modification during bankruptcy cases. 

This will make it much easier for homeowners to seek modification of their mortgages and save their homes while adjusting and discharging other debts in a single proceeding.  The rules also allow use of the schedules filed in the bankruptcy case to be used as the modification application and other streamlined procedures that will make it easier to communicate with lenders and avoid the typical runaround homeowners get when trying to modify their mortgage. It also gives the homeowner the added protection of a Court Order approving loan modifications to prevent future mortgage problems caused by the mortgage company.

In the Orlando Division of the Middle District of Florida, the U.S. Bankruptcy Court has also just launched a Mortgage Mediation Program to bring mortgage lenders to the negotiation table and offers sanctions against mortgage lenders who refuse to participate.  I currently serve on the Subcommittee with the Chapter 13 Trustee to help make this new Mortgage Mediation Program a success in the Orlando Division.  This will make the lender come to the table!

These new Treasury rules and the Orlando Bankruptcy Court’s Mortgage Mediation Program make filing a Chapter 13 Bankruptcy case a much better option to seek mortgage modification and stay other creditors at the same time.  It can also allow for the “stripping off” of second mortgages if the current home value is less than the amount owed on the first mortgage, lowering car loan payments and a minimal if any payment to unsecured credit card debts.  A homeowner who files for Chapter 13 Bankruptcy to reorganize may emerge from the case with a modified first mortgage, a second mortgage that is gone forever and be otherwise debt free upon plan completion and discharge.

Finally a rule change to help the Florida Homeowner save their home. Most homeowners I meet with here in Central Florida need a mortgage modification AND bankruptcy relief and now it is possible to get both types of relief at the same time. I believe this will really give homeowners a better chance to save their homes and resolve other debt problems through Chapter 13.

To learn more about how these new HAMP rules and Bankruptcy Court Mediation in the Orlando Bankruptcy Court may help you, visit my website www.legalquestion.com or call me toll-free at 888-841-3588 for a free consultation.  You can also visit our Facebook fan page and follow me on Twitter at www.Twitter.com/BakerLawFL for up to date information.

I will be speaking at a Continuing Legal Education Seminar September 9, 2010 in Orlando Florida.  The seminar is for Attorneys who want to learn more about Lien Stripping Mortgages in Chapter 13 Bankruptcy.  

It is hosted by www.LawReviewCLE.com so for more information, visit their website.

This is a hot topic in bankruptcy because of the ability to "strip off" second mortgages due to a sharp drop in real estate values.  Many people do not realize that this is available under existing bankruptcy law and may mean the difference between saving your home or letting it go...Visit my website for more information at www.LegalQuestion.com

Principal Reduction on Mortgages.  This Reuters Article/Blog finally discusses principal reduction being on the table for Fannie Mae and Freddie Mac...about time!

http://blogs.reuters.com/james-pethokoukis/2010/08/05/an-august-surprise-from-obama/?cp=5#comment-8818

Look folks...the blame game is pointless.  Stabilizing the US Housing Market is the KEY to ending the recession.  If the cramdown bankruptcy bill would have passed in May 2009, the real estate market would already be stable and more people would have kept their homes...this is just an executive version of that bill.  

Hey, we've already paid Fannie & Freddie the $75billion.  The bankruptcy cramdown would have done the same except not on the backs of taxpayers.  Thank Republicans for the extra TAX! 

Many members of Congress already got their $$$ from the banks so cramdown failed.  Wanna blame somebody, blame the GOP, Big Banks and their stranglehold on Congress for many years before President Obama.

The irony is when we try help THE PEOPLE, it's a handout....when we help the banks, its a bailout!  This is non-sense.  Moral problem if it's a US Citizen but no moral problem when a bank walks away from a bad investment.  The only reason people are walking away from their homes is they are now thinking like bankers...it's a business decision.  This gives them a reason to keep paying and keep their home!  Consumer Bankruptcy Attorney Richard R. Baker, Orlando, Florida www.legalquestion.com

In an opinion just issued by the Honorable Karen Jennemann, Orlando Division U.S. Bankruptcy Judge, stripping off second mortgages in Chapter 7 cases is not allowed.

This is unfortunate for people needing Chapter 7 relief who want to keep their home but are reluctant to do so because of a second mortgage in relation to the value of their home.

The case explains the 1992 U.S. Supreme Court case that many believed controlled; however, there has been a split of authority around the country and your truly informed local members of the Bankruptcy Bar about a case that went the other way in New York last fall.

The good news is that stripping off that unsecured (no equity) second mortgage in a Chapter 13 case is still the law of the 11th Circuit (Florida, Georgia and Alabama federal appeals circuit). 

Where the value of your home is less than the amount owed on the first mortgage, we can "strip" the lien, turning that mortgage into an unsecured debt, like a credit card.  In most cases, people will pay pennies on the dollar on this second "stripped off" mortgage and at the end of the case, the mortgage is gone forever!  A huge factor when deciding whether keeping the home is a wise move.  By lien stripping the second mortgage, the property will have more equity when the real estate market finally recovers.  A reason to not give up your home!

By: Consumer Bankruptcy Attorney Rick Baker www.legalquestion.com  

How much do I have to pay unsecured creditors in my Chapter 13?

A less experienced Bankruptcy Lawyer I know recently asked me about his Chapter 13 Bankruptcy client who owned a rental property that actually had some equity in it; very rare these days.

He wanted to know whether it would have to be liquidated (sold) to pay unsecured (usually credit card) debts in the case? 

The real question is not whether it has to be sold, as Chapter 7 is liquidation whereas Chapter 13 is an individual reorganization and no liquidation occurs.  The real question is if he keeps the rental property and it has non-exempt equity, what does that mean?

The answer is that the non-exempt equity in the rental house establishes the “floor” or minimum amount required to be paid pro rata to all allowed unsecured claims but no liquidation occurs.

My less experienced Bankruptcy Attorney friend forgot or did not realize that there are actually two (2) tests to determine how much gets paid to the unsecureds in a Chapter 13 bankruptcy case. 

The above example of non-exempt equity establishing the minimum payout to the unsecureds is called the liquidity test.  The other test is whether there is any excess disposable income left for the unsecureds after payment of priority and secured debts in the Plan.

A new third test may result soon based on the recent U.S. Supreme Court decision of Hamilton v. Lanning; more to come on that one.

This issue points out an advantage to filing Chapter 13 Bankruptcy.  The Debtor remains in control of assets and can keep them.  They may have to repay some portion of their debts but it could be pennies on the dollar relative to what they gain in keeping assets. I call these cases “Liquidity 13s.” 

The rule is that the unsecured creditors have to come out as well in Chapter 13 as they would in a Chapter 7 case where assets are liquidated to pay unsecureds.  The advantage of the 13 is control over the asset is not in the hands of a Chapter 7 Trustee.  By Consumer Bankruptcy Attorney Richard R. Baker at BAKER LAW, PLLC. www. LegalQuestion.com

 http://www.facebook.com/pages/Winter-Park-FL/BAKER-LAW-PLLC/12498355753631

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Offices in Winter Park, Florida.

The Court System’s Latest Headache: Debt-Collection Suits - Law Blog WSJ:http://bit.ly/bOe1E1 

As Pete Barry said at NACBA in San Francisco in May, Debt Collectors in a recession are like dogs you don't feed...they start chewing on the furniture.  Who's the furniture?  Consumers!  My Clients!  Due to the increased number of debt buyers, the lawsuits are now coming in greater numbers, putting even more pressure on cash strapped consumers trying their best to keep current.

As Dick Rubin states in this article (a longtime expert just like Pete Barry from Minnesota), it is a factory approach to practicing law.  Note the NY firm mentioned files 80,000 lawsuits a year!

So what does this mean?  It means that if you are behind on debts and can't catch up, a debt collector lawsuit is more likely than ever.  With more debt collectors suing first and asking questions later, get PROACTIVE!  Explore your options and speak with an experienced Consumer Bankruptcy Attorney.

At BAKER LAW, I serve, counsel and represent clients in Greater Central Florida, including counties of Orange, Seminole, Osceola, Lake, Brevard, Volusia and Polk.  We serve many cities including, Winter Springs, Winter Park, Maitland, Altamonte Springs, Sanford, Oviedo, Orlando, Fern Park.  

As a federal debt relief agency law firm, we help people solve debt problems so visit us at www.legalquestion.com and read some of my blogs that may help you.  You can also follow me on Twitter at twitter.com/BakerLawFL for the latest information on these issues.

Three Reasons Why Upside Down Homeowners Should Consider Bankruptcy http://bit.ly/9fXgln 

Another good blog that ties in with a recent blog I wrote on this very issue.

Three Personal Finance Mistakes That Lead To Bankruptcy http://bit.ly/9u2fAC  

Great post from Reed Allmand in Texas.  Bankruptcy “Alternatives” Could Cause More Financial Pain http://bit.ly/9xfmlM

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Central Florida Consumer Bankruptcy Attorney Richard R. Baker www.legalquestion.com

You have options and you have rights so...KNOW your options!