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Forclosure Defenses

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My house is being foreclosed, what can I do?

If you have not paid on your house and are in foreclosure, there may be hope.

The banks generally don’t want your home; they want your money.

The problem is that they are not sure that you are going to pay. You might want to pay but circumstances are beyond your ability to pay.

There are a few options, first of which is HAMP or the Modification Program. These programs seem to be designed to help consumers if the consumers can make it through all of the delays, the claims of missing paperwork, claims of out-of-date paperwork and claims that you have to re-file because some arbitrary deadline was passed.

It is an unpleasant process but nearly all of my clients who were in foreclosure since these programs began were able to keep their homes for the time-being.

While there are claims that the mortgage companies cannot foreclose because some papers got lost or a “robo-signer” signed their affidavit, most of these defenses are merely stalling tactics which the creditor generally fixes with enough time.

The idea is to stall long enough until you are able to make a settlement with the creditor to keep the house.

Medical Bill Lawsuits

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Help I can’t pay my medical bills and now I’m being sued.

There are some defenses to these lawsuits as well, though not as many as in the other matters.

The most important one that I have found is for the providers to justify the amount of the bill and for the amount not to be completely outrageous. For example, there are situations where you are being charged for the surgical gown, even though it can be re-used. Perhaps, you are being charge $5 for an aspirin whereas the insured folks only pay $.05. If nothing else, sometimes medical providers would prefer just to let a debt go rather than go to Court to explain why the $5,000 procedure only costs $300 to Medicare patients or $350 to insureds or why you got charged extra for the ICU room when you were already being charged for the ICU in the first place.

Note, however, that some of the public hospitals now consider themselves parts of the state government. So, rather than deal with attorneys, some institutions merely send the bill into the Kentucky Department of Revenue, who then sends you a collection letter. If you do not respond appropriately, then the Department of Revenue treats it like a tax debt and garnishes your bank account, for example. You find out when your checks bounce or the bank calls you up.

Is that legal for them to simply take your money without more notice? I don’t think so. The problem, however, is suing the Department of Revenue over $320 that should not have been garnished may cost more than you are entitled to receive. So, it is, unfortunately, a question of cost/benefit analysis. Given that the bills are usually owed, most potential clients just shake their heads and complain. Also, I don’t think one can collect attorney fees for suing them, so that would all fall on the client for their legal tactics.

So, when you get one of those notices, do not ignore them. I have managed to help a few clients avoid those debts in those situations with some fancy footwork.

As a side-note, under the Affordable Care Act (“Obamacare”), insurers have to justify why they will not pay for your bill. In the old days, what you could do about that was limited. Now, however, there is a set of actions you can do with the insurance company to see if you can get them to pay.

Credit Card Resolutions

Like many folks, perhaps you do not want to wait until you get sued and bankruptcy is not something you really want to avoid. In these cases, it may be helpful to negotiate with the credit card companies. By setting up a convincing reason and showing some hardship, you may be able to get a discount off of what you owe. I have generally been pretty successful in negotiating a discount with the credit card company of anywhere from 40% – 90% discount. Of course, every client is different, every creditor is different, and every credit score is different.

One thing is for certain, the credit card companies make it extremely unpleasant for you to negotiate. The wait times may be long, you may be disconnected right when you are close to a deal, you may be transferred to a half dozen people apologizing profusely that you received the wrong department, you may be requested to send a document in which is promptly lost, or the creditor can simply say that it changed its mind and is not offering anything much today. The idea is persistence and patience and a little legal know-how. Consider it mental elbow grease.

Remember, however, that if you do get a discount, it will be reported on your credit report negatively.

Also, the creditor may send a form to the IRS stating that you borrowed $10,000 and only paid $4000. The IRS may consider the $6000 difference as income and you could be taxed accordingly. So, it is very important that you talk to your accountant, CPA or tax preparer to make sure that you respond to the IRS accordingly. Do not ignore the IRS; they are not going anywhere.

Bankruptcy

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Of course, there is always the “nuclear option” of bankruptcy.

The law changed October 1, 2005 making petitioning (filing) for bankruptcy more complex and difficult. For example, not only do you have to show only a minimal amount of excess income each month over your expenses, your income may not be above a certain amount under certain circumstances.

Now, attorneys may be liable for mis-statements made by the client if the attorney did not have good-faith in investigating. So, attorneys may request documentary proof of everything you say, such as the amount of your bills, expenses, income, copies of title papers, etc.

Additionally, the Bankruptcy Court really wants you to be sure that you have to petition. So, now, you have to take a class before and after petitioning for bankruptcy and an attorney is required to go over with you other options, such as paying creditors back through Chapter 13 or making smaller payments.

Interest:

You might ask yourself about the usury laws, which talks about the most that you can be charged.

Well, the US government has a statute roughly called “Parity.”

“Parity” roughly means that Kentucky has to recognize any high interest rate from another state if that state allows for that interstate loan. This is why the credit card companies tend to use states that allow high interest and why your credit card is issued from that state.

However, whether the interest is properly disclosed to you, properly changed with notice to you and properly calculated is another issue.

For example, if you had a cash advance, was the interest started when you got the money, when the 0% APR teaser program was over? These are points to consider.

Deficiency Lawsuits (car repossession lawsuits)

So, you bought a car and did not pay. You called up the creditor and said “come get it” or maybe you left the grocery and your car was gone because you failed to make the payments.

Eventually, you may get sued for “deficiency.” This is the difference between what you owe and for how much the car was sold. For example, you owed $10,000 when the car was repossessed. The car was sold for $4000 and there were about $1200 in additional charges for repossession, inspection, clerk title fees, etc. At that point, you may be sued for $7200 ($10,000 + $1200 – $4000). This is called a deficiency lawsuit.

A few main defenses in these kinds of cases, include:

1. Did you get a Notice of Redemption Letter

This tells you that you can buy the car back.

Unfortunately, a lot of times you don’t think you got the letter, but it was sent anyway. Also, just because you did not get it does not mean that you don’t owe the bill;

2. What kind of shape was the car in when sold?

A lot of clients keep their cars like their children and when they discover that their “baby” was dented, dinged, chipped, or made funny noises, they have pictures of their beautiful cars to show that it got damaged after it was repossessed.

If that is the case, then maybe you don’t owe the entire deficiency.

3. Consumer Defenses

Sometimes, where you bought the car was less than honest or forthright when they dealt with you (Gadzooks). Maybe they overcharged you on the taxes, maybe they sold you a warranty that you did not know about, maybe they charged you fictional government fees that never existed, maybe they sold you items that have no value like “membership” in the car dealer’s “fan club” (yes, they exist).

While these are not the fault of the creditor who loaned you the money to buy the car, if you can show that the creditor should have known, then that throws off all of the calculations on the Truth-in-Lending disclosures (the big boxes on the top of the car contract) and that could be a viable defense. While the creditor will say that they did not cheat you, they may be profiting by the extra charges. So, that could be helpful to your defense.