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BEWARE of the Traveling Sales Man: Companies Found Selling Mortgage Salvation Could Be End of Your Home Dream

Mortgage Defense I am writing this blog out of concern for the many homeowners that have turned to the internet looking for salvation in saving their home.  I always wondered why a homeowner would be more willing to send money to a company promising the whole world without any backup experience to demonstrate that they can actually do what they say they can rather than pay an attorney that might be 10 or 20 minutes away.  It really does not make any sense and quite frankly inspired me to write the blog.  If I can reach one person, than maybe I can save one home from foreclosure.

I recently was contacted by a fellow bankruptcy attorney about a client that wanted to put his Chapter 13 bankruptcy case on hold because he found this non-profit company online in California that promised to refinance his mortgage.  They represented that they were a federally backed non-profit and had access to federal refinance mortgage programs that almost guarantee a mortgage to the client.  Apparently, the program was free to client but that the client had to send three months of mortgage payments to the company before they could get started on his refinance process.  Additionally, the company noted in its contract these “aka three months of mortgage payments” would be used for fees and costs for attorneys, consultants and etc.  Whatever costs they need to get the job done.

The concern here is several folds.  First, the client delayed the filing of a Chapter 13 case that would by law stopped the impending foreclosure sale coming in 30 days.  Second, the client rather send money to a non-profit in California and not pay his Massachusetts attorney that is 10 minutes from his home who he met and sought real advice.  Three, the client is blind to the fact that he is being charged more than the fees of a Chapter 13 case by this alleged non-profit. Four, the client is so desperate to save his home that he is willing to believe anything but the truth.

The client in this case will ultimately spend more money on someone who he did not even meet and on a program that he thinks exist but does not and lose his home.  There are no non-profit companies set up by the United States Government to provide the consumer mortgages.  It that was the case, the federal government would be in the business of fraud and we know the federal government is a lot of things but not in the business of fraud.  Really think about it—if the program was set up for the consumer and ran by the federal government would you have to pay three months of mortgage payments upfront? And why would the program not be provided a government website and why would you not be able to contact a government agency in DC.

The point of this blog is that the attorney asked me what can be done to help this client from making a huge mistake.  The reality is that if a consumer continues to think Chapter 13 bankruptcy cases are worst alternative to the Traveling Sales Men on the internet, there is nothing an attorney can do.  Bankruptcy is the only federally backed and monitored program to help consumers.  It is the only program designed to ensure a consumer is not being taken advantage of.  Consumers complain about not getting the truth about their circumstance yet when the truth is in front of them, such as a Chapter 13 case, they often run to companies like these non-profits to seek salvation that does not exist.

In short, I said to my fellow attorney you can send your client this blog and hope that he will understand the grave mistake he is making and hope that he wakes up before it is too late.

So, consumers beware of the Traveling Sales Man selling tonics on the internet that will cure all ailments.  There is always a price to pay for the tonics and the ultimate price could be your home and your dream.

What happens if you don’t list all of your debts when filing bankruptcy?

Often times when I talk to a client about filing for bankruptcy they often ask me the question, “do I really need to include everyone?”.  In many situations, Debtors have a friend or family member, who they borrowed money from and want to pay back, while still discharging credit cards and other unsecured creditors.  Other times, they feel a credit card with only $100 on it or less does not need to be disclosed so that they can try to keep one credit card open.

The problem is the bankruptcy is a full disclosure procedure and pursuant to Title XI of the United States Code, you are required to list all creditors.  More importantly, if you intentionally leave a creditor off your schedules and statements, the Trustee or another creditor can claim you have committed fraud and misrepresented the true facts of your situation to the Court.

Some Judges take the situation when you leave a creditor off your schedules so seriously that they will deny your entire bankruptcy discharge of debt.  For example, their was a recent case in the First Circuit where a debtor failed to list five small credit card debts on her schedules because in her own words she did not want to completely destroy all of her credit.  She had listed most of her significant debts however, she refused and failed to list five (“5”) minor debts, in a vein and futile attempt to salvage some of her credit.  The Bankruptcy Court denied the debtor a discharge under 11 U.S.C. § 727(a)(4)(A), which allows for denial of discharge when a debtor knowingly and fraudulently makes a false oath relating to a material fact in her bankruptcy case. In the case of In re Harris, 2008 WL 1732924 (1st Cir.BAP 2008).  The Bankruptcy Appellate Panel affirmed the lower courts decision.  The same in all of this is that even if her misrepresentation did not lead to a total denial of discharge, her credit cards that she did not list would likely have reviewed her credit report every few months in the normal course of business and canceled her cards anyway.

Other times, Debtors think that they don’t want to list a family member, because they want to continue to pay that person.  They not only fail to list the debt, but also on their schedule J (list of monthly expenses) fails to list that the family member is receiving some payment.  This raises yet another problem called a preferential treatment of an insider.  What this fancy legal term means is that a family member is receiving money or has received money that they are not actually entitled to, because other creditors have been unfairly discriminated against.  As a result, the Bankruptcy Trustee will likely contact that family member and demand the funds paid be turned over to the Trustee to pay all creditors in equal amounts.  If the family member does not turn the money over, the Trustee can then file a law suit against them to recover the insider payment.

The bottom line in all of this is that if you simply list all of your debts and who you are paying or have paid over the past few months, you can avoid a whole lot of trouble.