An experienced bankruptcy attorney will never tell you to reaffirm a mortgage loan. In fact, such erroneous advice is widely considered to constitute malpractice. This is true even if you intend to keep your house.

First, the only one that receives a benefit from a reaffirmation agreement is the mortgage holder. Signing a reaffirmation agreement makes you responsible for the debt after bankruptcy.  As property values continued to sink after 2007, a large number of people were happy to find that they were able to walk away from their home without any legal or tax consequences.  If a reaffirmation agreement were signed, this would not have been possible.

Second, the bankruptcy code does not require a reaffirmation agreement for mortgage loans. So long as you keep the mortgage payments current, the lender cannot foreclose on the property. This is referred to as “Retain and Pay” and is an option your attorney would have selected in your Chapter 7  Statement of Intent.

Finally, you cannot take legal advice from non-attorney mortgage company “loan processors” who falsely tell you your mortgage should have been reaffirmed. Even though the mortgage may not be reported on your credit report as “included in bankruptcy,” a good mortgage banker knows how to work around this perceived problem. If you are trying to refinance or purchase a new property, the new mortgage lender only needs to contact your current lender to receive oral verification that you have made your mortgage payments on time every month.

Colorado law is unique in making really easy for folks to lose their homes — oftentimes to banks that have no right to foreclose.  It got even easier in 2009 when powerful special interests like attorney Larry Castle convinced state  lawmakers that foreclosures should be approved merely based on the bare approval of a single foreclosure attorney.   Bankruptcy can stop such foreclosures in their tracks and enable most people to keep their homes.  But without bankruptcy protection, a foreclosure lawyer can easily get a public trustee to sign over the title to your home back to a bank — whether or not that bank has the right to take the home.  (For more information about saving your home in bankruptcy, click here.)

The Denver Post reported on this problem after an employee of Mr. Castle’s law firm stepped forward:

“Thousands of Colorado homes were taken in foreclosure in recent years by banks that probably never had the right to do so because no one bothered to challenge the process, said a lawyer who worked for the state’s biggest foreclosure law firm. Lawyers often blindly sign a document attesting that the bank they represent has the right to foreclose — allowable under Colorado law — without ever actually seeing the original loan documents, attorney Keith Gantenbein said. He worked at Castle Stawiarski, where more foreclosure cases originate than any other law firm statewide. Gantenbein said he and other lawyers signed “tens of thousands” of documents known as statements of qualified holder. The papers certify lenders’ right to foreclose, generally with little more than an e-mail from a bank or loan servicer telling the lawyers to file the case.”  http://www.denverpost.com/business/ci_20160083/honor-system-foreclosure-paperwork-has-led-illegal-colorado   Mr. Castle had no comment on the article.

With student loan debt now topping U.S. credit card debt and few or no options available for distressed borrowers (including unwary parents who co-signed loans and now face the loss of nest eggs, retirement homes and other assets), America faces the very real possibility of another major economic threat on a par with the devastating home mortgage crisis, according to a new survey and report published today by the National Association of Consumer Bankruptcy Attorneys (NACBA).

Report on this coming economic disaster by the National Association of Consumer Bankruptcy Attorneys: Click here

One of my favorite clients is the couple I never met who sent this testimonial to me in an email:

“Thank you for all of your help and putting up with my countless questions. We are glad that part of it is over. Tell Bill that we really appreciate him offering this service to us while we are [in Europe]. No other attorney would even return e-mails after they found out we were out of the country.”

The husband was stationed in Germany on active military duty serving our country. Technically, he should have been protected from his creditors while on active duty but that’s an issue for another day. The bottom line is that this family needed bankruptcy relief but no one would bother to try and help them. The assumption was that they would be too difficult to deal with outside the United States.

Unlike most firms, Morris Law doesn’t require an extensive, think, hand-written questionnaire. Our questionnaire can be completed online from anywhere in the world. Using the online questionnaire, and gathering documents via email, we were able to put together a sound bankruptcy petition with schedules for this couple while serving overseas. We emailed the documents to the couple, conducted a telephone consultation to go over the documents in detail, then had the clients sign the bankruptcy documents and return them to us via Federal Express. After filing the case, we obtained the bankruptcy trustee’s consent to hold the bankruptcy hearing via telephone.

The clients received their bankruptcy discharge shortly thereafter and were off to a fresh start rebuilding their financial life.

The timing of your bankruptcy filing is always critically important but sometimes there are things timing can’t fix.  Through litigation, the debtor attorneys in Colorado have established broader exemptions under the current statutory scheme.  For instance, you might be entitled to a $5,000 vehicle allowance but what if that vehicle is used in the operation of your business?  A $20,000 exemption might be available in such circumstances.  Or, for instance, if an exemption for a child tax credit tax refund  is written into the law then why is the US Trustee trying to limit that exemption under a contrived and nonsensical “above the line/below the line” mathematical formula?  The bankruptcy appellate panel has decided that won’t fly and that debtors are entitled to keep their child tax credit income tax refund.

When Congress passed bankruptcy “reform” in 2005, it created a complex method of determining which state laws a debtor can use for claiming property exemptions.  Exemptions are used to protect most property from the trustee when you file a Chapter 7 bankruptcy. Although a reading of the law is somewhat complex, it sets up scheme whereby one can determine whether the debtor can claim exemptions for the state where the debtor now lives — or alternatively whether the debtor must claim the exemptions for the state where he or she used to live.  It was intended to stop people like OJ Simpson from moving to a state like Florida where 100% of the value of the debtor’s home is exempt from creditor claims or claims of the bankruptcy trustee.

In actuality, there are a lot of states out there with exemption laws far more favorable from Colorado.  For instance, if you have a large income tax refund coming to you soon, Colorado provides no protection for that money.  The bankruptcy trustee might take every dime of it (except for EITC or child tax credit) unless you delay your bankruptcy case filing.  Sometimes a long filing delay isn’t feasible; for instance, if your paychecks are being garnished.

However, some other states have “wildcard” exemptions which apply to any property — including tax refunds.  William A. Morris P.C. recently represented a debtor from Virginia who was distressed to learn that Colorado law would not protect her $5,000 tax refund.  After tracing down her legal residence addresses for the past three years, and making the required statutory calculations under the bankruptcy code, it was determined that she could claim Virginia exemptions.  Using the wildcard exemption (CV 34-4 for “real and personal property” of any kind), she filed bankruptcy and her tax refund was safe.

We are always distressed when we see people at their bankruptcy hearings being grilled endlessly by the bankruptcy trustee after having either filed bankruptcy alone or with the help of a “document preparation service.”  Inevitably, the documents are incomplete or error-filled.  And in the end these debtors may lose thousands of dollars when they can least afford it.  It could have been prevented with competent legal help.

About 10 percent or so of bankruptcy cases filed in Colorado are filed without an attorney. Aside from the fact that many of these people will unnecessarily lose property or tax refunds, the court record shows they are putting their financial circumstances in future peril.

On one judge’s calendar this week, there were multiple pro se (without attorney) debtors actually trying to get reaffirmation agreements approved by the judge. Reaffirmation agreements are a promise to repay a debt after bankruptcy. Good legal counsel would have guided these people away from the mistaken impression that a reaffirmation agreement is required to keep their property. Now, on the hook for hundreds of thousands of dollars post-bankruptcy in some instances, these debtors will suffer a catastrophic event if they become disabled or unemployed (worse case) or are paying back debts for used furniture unnecessarily (best case) costing them thousands of dollars.

This is just one of many examples of what happens with self-help legal services. Hiring a licensed legal expert pays for itself many times over.

. . . and the world of bankruptcy law is no exception. The latest example of governmental ineptitude follows.

First, a bit of background. You may already know that you can file Chapter 7 bankruptcy only once every eight years. Perhaps you think that once is enough and for most people it is. However, sometimes families are hit hard with large uninsured medical expenses. Sometimes, these large uninsured medical expenses are compounded by the debtor’s inability to work due to the medical problem at hand. For example, a father of four, with a job that doesn’t offer medical coverage, has a heart attack. Two bypasses and six months of rehabilitation later, he owes the hospital and the doctors over $100,000. However, he filed bankruptcy only six years ago and isn’t eligible for Chapter 7 for another two years. Meantime, the creditor sharks are circling. (And of course, because he had no insurance, the hospital charged the debtor four times what he should have been charged. But that’s a subject for another day.)

Even though he cannot file Chapter 7 bankruptcy because the eight year time frame hasn’t run, he can still file Chapter 13 when he gets back to work. This enables him to prevent wage garnishments while making a very low monthly payment to a bankruptcy trustee.

But what happens if he loses his job, say, two years into the Chapter 13 bankruptcy plan? Now his case is in jeopardy of dismissal because he can’t pay the bankruptcy trustee anymore.

The question becomes: Can the Chapter 13 case be converted to Chapter 7? It has now been eight years since his first Chapter 7, however the Chapter 13 case originally was filed only six years after the Chapter 7.

Now, here’s the exercise in futility courtesy of the geniuses in Congress and in the US Trustee’s Office. This unfortunate debtor CANNOT convert to Chapter 7 which would be the simplest, most cost-effective solution, saving the debtor money and saving judicial resources on the federal level.

Instead, the debtor must simply wait until the Chapter 13 is dismissed, then file a new Chapter 7 case at substantial additional expense. Meantime, the courts are required to use their resources to administer a new case all over again.

Yes, dismiss and re-file the case, instead of simply converting the Chapter 13 bankruptcy to Chapter 7. The federal bureaucracy at its finest.

Harvard Law Professor Elizabeth Warren is running for Senate in Massachusetts. “The pressures on middle class families are worse than ever, but it is the big corporations that get their way in Washington,” said Warren, in a statement obtained by The Huffington Post. “I want to change that. I will work my heart out to earn the trust of the people of Massachusetts.”

Warren, who advocated the creation of a new federal agency intended to protect consumers, was snubbed by Senate Republicans for appointment as the head of the new agency. Warren was an outspoken opponent to the ill-advised bankruptcy “reform” act in 2005 which passed Congress after being bankrolled by the big banks.

Political commentator Warren Graham recently noted that Bankruptcy “Reform” was the failure Elizabeth Warren predicted: “Four out of five would-be bankruptcy filers were forced into dire financial straits by circumstances beyond their control, such as the loss of a job, catastrophic medical expenses or the death of a spouse. It is almost certain that, due to the dramatic increase in administrative expenses and new hurtles to recovery of preferential transfers created in the new legislation, unsecured creditors are likely to be receiving less, not more, in bankruptcy dividends and distributions.”

Elizabeth Warren, in 2005, made substantially similar comments about the proposed new bankruptcy laws, noting that the vast majority of filers faced unemployment, crushing medical bills, medical disability, divorce, or a combination of all of these prior to filing bankruptcy. Despite all the clear evidence against the mean-spirited bankruptcy “reform” proposals, cash from the big banks funneled into the campaigns of Democrats and Republicans alike resulted in passage of yet another senseless piece of federal legislation.

It never ends. Congress for sale? Read more about bankruptcy reform (click here)..

In my law practice, I continue to see clients who believe that Chapter 7 bankruptcies either are not possible at all or are only possible for people with low incomes. This is a myth which has been largely perpetuated by erroneous reports by the news media.

Chapter 7 bankruptcy — usually the preferable way to go — means you are in and out of bankruptcy in only 90 days or so. Generally, you walk away from almost all of your debt and lose no property.

Most of our cases are still filed under Chapter 7. Even if your income is above the Colorado median income for your family size, frequently a Chapter 7 case is still possible by the time all allowable expenses are factored into the equation. Such expenses include, but are not limited to, day care, mortgage expenses, and health insurance.  However, Chapter 13 is still sometimes required — yet that’s not necessarily a bad thing.

In some cases, you might be better off filing Chapter 13 even if you qualify for a Chapter 7. For instance if you have a second mortgage and you want to keep your house, you can often eliminate your second mortgage in a Chapter 13 bankruptcy but not in a Chapter 7. Tax debts may also be a good reason to file Chapter 13 because you can pay the taxes over five years with no penalties and interest.  If the taxes are over three years old, and are not payroll taxes, they can usually be eliminated in Chapter 7 and Chapter 13.

If you receive a summons and complaint, act quickly to avoid a wage garnishment. In Colorado, a creditor can continuously garnish 25% of your wages until the judgment is paid. If you ignore a summons and complaint, a judgment will enter against you without further notice to you.

Unless you have a viable defense to the lawsuit or reach a settlement with the creditor, bankruptcy is one way to prevent entry of a judgment. Bankruptcy isn’t always the answer, depending on the facts and circumstances of your financial situation.  If you don’t wish to file bankruptcy or otherwise are not a good candidate for bankruptcy, we can file an answer to the county court complaint and set up a defense to the complaint on your behalf.

Even if you don’t have a good defense to the complaint, filing an answer and setting up potential defenses will usually enable you to reach a smaller settlement with the creditor. Once the creditor has a judgment and is garnishing your wages, the creditor has no incentive to settle. For help with county court lawsuits, read the information at this site: www.coloradocountycourts.com