Bankruptcy Law

Today, first-time buyers are exposed to countless “free credit score” offers online which have allowed them to be knowledgeable about their credit histories and take steps to improve their scores by the time they are ready to buy a home. However, improving credit and tackling debt are two very different things. For many buyers, especially young adults with student loan debt, high debt levels can stop them from getting financed. Mounting debt may be more harmful than lower credits scores are helpful.

Lenders depend upon three major factors in order to approve a loan application: DTI, which is the ratio of debt to income; credit as measured by FICO scores; and the loan-to-value ratio, which is discovered once a home is appraised.  The credit score and loan-to-value ratio may cause the Lender to increase interest rates or limit the amount they will lend out, contingent on the appraisal.

Existing debt is important because it tells the lender about the applicant’s ability to pay back a loan. If an applicant’s DTI is too high, it greatly impacts their chances of getting financed, even if the borrower has a good credit score or job with excellent earning potential. The qualified mortgage (QM) rule regulates the cutoff for a DTI, only allowing up to 43%. This means that applicants’ monthly debt payments must be less than 43% of their monthly gross income. FHA has their own version of this rule, allowing for 41%.

Reducing your debt is the fastest and easiest solution for lowering your DTI. Below are five ways to reduce debt:

1. Become debt-aware.

Monitoring your finances and keeping track of your debt on a daily basis will help you to become more debt-aware. Utilize your bank’s online banking, money management or virtual wallet programs to help you better track your spending. By pacing yourself and staying committed, you can gain peace of mind in remaining debt-aware.

2. Pay off smaller balances.

Smaller balanced add up and can increase your monthly debt amount. By tackling these smaller amounts in one payment, you will significantly reduce your monthly payment obligations. Instead of paying the monthly minimum, pay off small balances first, then work on the larger debts in increments. If there is a line of credit that you don’t need, close the account or reduce the credit amount.

3. Consolidate monthly payments and reduce interest.

The more you owe the higher your interest rates will be on credit cards and installment plans. Bad payment history also makes those rates increase. First tackle your higher interest cards for consolidation. You can lower monthly payments by consolidating and refinancing debt. This includes car loans and student debt.

4. Stop buying with credit.

Commit to one week without buying anything with credit and see how much you save. Implementing a cash-only plan will help you to become more aware of everything you spend. By exercising restraint you can save a lot of money by making smarter spending decisions. On a daily basis, log your savings and place that amount in a savings account. This will help you pay of current debt without racking up more debt.

5. Begin with FHA.

FHA finances for applications that have lower credit scores and higher DTIs. If your DTI is over 30%, you have a better chance with FHA, than with a conventional loan. You may have a down payment, but the recent reduction in annual mortgage insurance premiums makes FHA more appealing to borrowers.

If you are in a financial crisis and are considering filing bankruptcy, contact an experienced Miami bankruptcy attorney who can advise you of all of your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade & Garcia, P.A. has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade & Garcia website at www.miamibankruptcy.com.

Source: https://www.inman.com/2015/05/18/5-steps-to-beating-debt-and-getting-mortgage-approved/

For some Senior Citizens, bankruptcy may provide greatly needed debt relief after growing medical expenses or years of supporting their children. Bankruptcy experts say that filing for bankruptcy can be a useful tool for retirees seeking to protect their retirement assets, after negotiating with creditors. Unfortunately, fear of shame brought on by financial troubles, often deters many older Americans from seeking bankruptcy help earlier.

Deborah Thorne, an associate professor of sociology at Ohio University said, “People usually postpone bankruptcy for several years before filing. When finances head south, they should file right away.” Thorne who has studied bankruptcy and older Americans explained that retirees face a greater risk of financial ruin than younger individuals do. She proposed that the best strategy is to always protect assets.

401(k)’s, pensions, social security payments, qualified profit-sharing plans, and individual retirement accounts worth up to $1.245 million are all exempt from creditors during bankruptcy. This means that retirement income and savings are out of reach and protected under federal law. Protecting equity, which is the value of a property, minus the amount owed, is important for seniors. Using a homestead exemption, designed to protect the equity of a main residence in a bankruptcy, will usually keep retirees from losing their homes. Florida homeowners can take advantage of the fact that Florida does not have a limit on the equity that is exempt.

When work began to dwindle for one 66 year old retired Central Florida senior, he wanted to get his financial stability back. He quickly saw his debt situation growing larger while his income grew smaller. As a result, he declared Chapter 7 bankruptcy, allowing him to liquidate some of his assets in order to repay creditors.

“I wanted to leave money, not debt, to my grandchildren, and begin rebuilding my life,” the Orlando resident said. Overcoming the harsh stigma of bankruptcy was the most difficult part for the senior, but filing bankruptcy was the chance he needed to start over financially.

Certain debts such as child support, alimony, federal tax bills less than three years old and student loans are usually not discharged with a bankruptcy.

A means test can assist with deciding which type of bankruptcy best fits a particular situation. According to specialists, those with higher income fair best with Chapter 13 bankruptcy, which allows for a repayment plan. John Pottow, a professor at the University of Michigan Law School and a bankruptcy specialist said, “It lasts for a minimum of five years, and it’s a budget that’s created to pay back creditors.” For those with lower income or assets, Chapter 7 works best.

It is recommended for people to negotiate with the creditors before filing for bankruptcy. Consumers should try contacting the credit card companies and asking for reduced interest on outstanding balances. Medical debt can also be negotiated. In some cases, hospitals have even reduced balances by half.

Another strategy is so refuse to pay the outstanding debt. If a retiree has little else outside their retirement fund, the creditors will likely not collect anything, even if it went to court, which can be called “judgment-proof.” Credit scores will be affected by filing for bankruptcy and a bankruptcy can stay on a credit report for up to 10 years, but credit can be restored. Those who declare bankruptcy are required to take credit and debtor counseling classes, which will help with rebuilding their finances.

After declaring bankruptcy, the Central Florida senior’s credit score dropped 200 points. Since then, he has begun rebuilding his credit by leasing a car. “Now it’s slowly coming back,” he said.

If you are in a financial crisis and are considering filing bankruptcy, contact an experienced Miami bankruptcy attorney who can advise you of all of your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade & Garcia, P.A. has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade & Garcia website at www.miamibankruptcy.com.

Source: http://www.nytimes.com/2015/05/14/business/retirementspecial/bankruptcy-can-help-seniors-protect-assets.html?_r=0

According to the New York Times, JPMorgan Chase and Bank of America will remove all Chapter 7 bankruptcy discharged credit card debts from consumer credit reports in the next 3 months. In a written statement coming close to finalization, Citigroup will be doing the same. The nation’s largest banks are ready to put an end to zombie debts.

Pending litigation accuses these banks of attempting to receive payment by leaving these discharged debts on credit reports. Synchrony Financial has also been accused of this as well. Financial institutions are required by federal law to cease reporting defaulted credit card accounts, once a bankruptcy has discharged them.

Ira Rheingold, executive director of the National Association of Consumer Advocates, said, “The bankruptcy then indicates that (it was) taken care of. The notion that it should stay on your credit report is inaccurate and it does damage to consumers.” If a bankruptcy and the eliminated credit card debt appear together on a consumer’s credit report, the consumer is penalized twice, making it harder to gain future financing. It can also harm potential future job opportunities as well, since certain employers will not consider prospects with delinquent accounts.

JPMorgan Chase would not report, comment or confirm to the Times why these discharged debts might have been reported. Synchrony Financial would not respond either, but they did agree to offer similar relief for consumers. According to an email statement, Bank of America feels that their reporting on sold credit card accounts is accurate. Spokeswoman Betty Riess said, “However, given the issues raised by the court, we have made the decision to delete credit reporting for the sold credit card accounts.”

According to the Times, if these agreements follow through, more than a million Americans will be helped by the banks’ decisions.

If in the event a discharged bankruptcy debt still shows up on your credit report, it is advised that you do not pay it since you no longer owe the debt. It is suggested that you file a dispute with the credit bureaus (Experian, Equifax and TransUnion) instead. By asking to have it removed from your reports, an inquiry will be launched. It is also helpful to provide the credit bureaus with as much information as possible to prove that the debt is gone—indeed dead.  Also attach your bankruptcy discharge notice, which lists the debt on it. According to Rheingold, “If the bureaus don’t fix it, you have them on a fair credit reporting violation.”

If you are in a financial crisis and are considering filing bankruptcy, contact an experienced Miami bankruptcy attorney who can advise you of all of your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade & Garcia, P.A. has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade & Garcia website at www.miamibankruptcy.com.

Source: http://www.bankrate.com/financing/credit-cards/death-to-zombie-debts/

The record setting $16.7 billion settlement between Bank of America and the Justice Department, was a big deal last August. Bank of America agreed to the settlement regarding questionable mortgage practices. The bank was required to provide $7 billion for consumer relief, including loan modifications.

Since the settlement, there have been questions as to whether the money will go to those deserving it, or if Bank of America will be allowed to claim credit for the relief well beyond the actual value. The bank has made a $3.4 billion profit, a vast improvement from the $276 million loss, one year before.

According to the settlement, the bank was expected to reduce or forgive first and second mortgage amounts owed, as well as make loans more affordable for borrowers. In return, the bank was to receive a specified dollar amount of credit for these reductions. Several borrowers were told that the bank intended to “forgive” certain loans discharged in their bankruptcies, but those debts were already forgiven.

Florida borrower, Patti Coleman received correspondence from Bank of America earlier this year, stating that Ms. Coleman had been approved for a “full principal forgiveness” of $54,732 for a home equity line of credit, and that she would “no longer owe” the amount. However, Ms. Coleman’s 2010 bankruptcy had already discharged this debt. In an interview, she stated, “In my Chapter 7 filing, the debt was extinguished. They can’t come back to me and try to collect.”

It did state in the letter that Ms. Coleman’s debt was discharged under bankruptcy law, and that she is not personally liable for it, but such a large amount may automatically counted unless she contacted Bank of America to opt out. This suggests that under the Justice Department deal, the bank will still claim credit for these loan forgiveness actions.

A Bank of America spokesman, Richard Simon, argued that Ms. Coleman’s offer from the bank was an opportunity for her to eliminate the lien the banks still holds and clear title to the property. “The vast majority of customers benefit when their second lien is extinguished,” he stated. Mr. Simon was unable to comment when questioned if Bank of America would be submitting the $54,732 that Ms. Coleman no longer owes on her home equity loan.

Under the settlement, Bank of America receives additional credit, over $1 for every dollar of forgiven loans, if it provides certain types of relief by Aug. 31.

According to Jacksonville, Fla. Attorney Chip Parker of Parker & DuFresne, over 100 attorneys said they had clients who have received these letters. “Releasing a debt that has already been discharged is not in the spirit of the settlement. My concern is that the bank will use these cases to avoid having to give true principal reductions to people who need it. ” Mr. Parker said.

Retired Boston University law professor, Eric D. Green, is overseeing Bank of America’s performance under the settlement. As an independent monitor, he validates the bank’s claims for credit under the consumer assistance portion of the agreement. He stated that the bank had not yet submitted claims for credit under the settlement.

“We are working out the definitions and methodology of checking the credits the bank seeks.” said Mr. Green. He also said that bankruptcy discharged loans will not be acceptable for credit. Regarding Ms. Coleman’s case, Mr. Green concluded it to be an honest mistake. Periodic reports on the bank’s progress will be filed by Mr. Green’s office. His office has already completed a report for February and another is expected at the end of July.

If you are in a financial crisis and are considering filing bankruptcy, contact an experienced Miami bankruptcy attorney who can advise you of all of your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade & Garcia, P.A. has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade & Garcia website at www.miamibankruptcy.com.

Source: http://www.nytimes.com/2015/05/10/business/bank-of-americas-relief-for-mortgage-borrowers-is-questioned.html?_r=0

Consumer debt previously eliminated during bankruptcy proceedings are finally being wiped clean from credit reports by America’s two largest banks: Bank of America and JPMorgan Chase. This movement finally puts these two banks in line with the federal law.

According to The New York Times, over the course of the next three months, the banks will update borrowers’ credit reports, to the great relief of millions of consumers. The bank is required to update a consumer’s credit reports, showing that the debt is no longer owed, once a debt has been erased by bankruptcy, under federal law. Because this rule was disregarded by America’s largest banks, consumers had to deal with unfair red marks and inaccurate credit reports.

Several lawsuits have shed light on how many larger banks are ignoring the discharges from bankruptcy, in an effort to sell off the debt and still collect money from debt collectors, the Times explains.

Neither Bank of America nor JPMorgan are admitting to any misconduct, but they do agree to correct credit reports. JPMorgan said they would correctly record all discharged debts from Chapter 7 bankruptcy by this upcoming August. Also, Bank of America will be making changes on how they report cleared debts that have been sold to financial firms. Credit card debt that has been sold since May 2007 is expected to be removed from consumers’ credit reports.

In addition to Bank of America and JPMorgan, Synchrony Financial and Citigroup have also allegedly deliberately ignored bankruptcy charges, and they face lawsuits as well. Like JPMorgan and Bank of America, Synchrony will be providing similar relief.

The Times reports that although the banks have tried to have these lawsuits thrown out, all attempts have failed. In response to the judge’s criticism in Citigroup’s case, Citigroup stated that they have made a proposal to plaintiffs much similar to what other banks have done.

If you are in a financial crisis and are considering filing bankruptcy, contact an experienced Miami bankruptcy attorney who can advise you of all of your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade & Garcia, P.A. has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade & Garcia website at www.miamibankruptcy.com.

Source: http://consumerist.com/2015/05/08/jpmorgan-chase-bank-of-america-agree-to-wipe-debt-cleared-by-bankruptcy-from-credit-reports/