Troubling Legal Consultation

[brokehmowner]

I did a free consultation with a bk attorney yesterday the last of the 3 I wanted to get. Thanks to the wealth of information on this forum, I knew what questions to ask. However, a few things that the atty said were troubling:

1. Regarding median income values -- he had a print-out and stated to us that we fell a little short of passing median, but could probably pass means test. When he laid the print out down I saw that he was using the 2011 figures. Am I missing something here? Are the 2012 figures not in effect? We are under the 2012 median by over $2,000.00.

2. His fee was already about $200.00 more than the other 2 attorneys. Then he said that for a 13, the lien strip is a separate case, and he charges and extra $2k for that. 2K??? Has anyone heard of attorneys charging additional for that? He says he has to sue (or was it serve?) the mortgage company, the president of the mortgage company, etc etc which is why it is additional. Sounds crazy

3. Not that this was troubling, but it was the first time I've heard this -- in a 13, even if you pass the 7 means test, you still have to payback at least 10 percent of unsecured debt? Because of such little non-discretionary after expenses, for us that would mostly likely mean 5 years instead of 3, even though we are under the median income for a 7. All 3 attorneys have stated that we could probably do a 3-year in a 13.


Any thoughts on these above would really be appreciated.

[TheBajan]

My atty charged a $500 fee for the lien strip. It is a separate petition but he said it was not a big deal and pretty standard. I've NEVER heard of any ruling that requires a certain percent to be paid back .We are in a 3 year and have zero percent going to unsecured creditors. It sounds like you are not at all comfortable with this atty and for good reason. Go to a few more free consults. There's no reason to limit it to just 3 if you haven't found someone you are completely comfortable with. Regarding the 2011 vs the 2012 figures, I don't know if they go into effect in the current tax year or the following. Perhaps someone else can answer that. You do have to go with a 13 if you intend to do a lien strip. That's a major reason we did the 13 instead of the 7.

Best regards,
The Bajan

[brokehmowner]

Thanks, Bajan. I hope someone can chime in on 2011 vs 2012 figures. I don't think I can last until January and I REALLY want to be able to do 3 years as opposed to 5. I know that's not a guarantee in any case, but it would apparently increase our chances of getting 3 years if we're under median. Wish I had the guts to do a 7 and risk that 2nd won't foreclose (over a year in arrears). We will most likely be under water for quite a few years but we surely don't want to risk a foreclosure before the kids are finished school.

[keepsmiling]

Here we are, at the virtual end of 2012.
Not for one second do I believe you can't use those newer figures, which are for cases filed on or after May 1, 2012.
I suspect this lawyer is using old info.
However- I seem to recall some states went DOWN this past year thanks to the sluggish economy. Double check to be sure.

[brokehmowner]

Thanks, Keepsmiling. I checked ours. We went up. I can't believe that we (Maryland) are higher than New York AND California! I should google if we are highest. Perhaps we need to relocate -- we're both in public service for a pittance rather than a salary but still balled and chained to our blackberries 24/7. No life and no money. LOL! But it sure beats unemployment!

[keepsmiling]

Bet you serious cash that my state will beat yours
Now if we were actually AT median we'd be in much better shape .

[TheBajan]

KeepSmiling,
Thanks for clarifying the annual figures and when they go into effect.

Broke... if you file a 7 with a year in arrears on the second, it will discharge the loan but they can still foreclose. It won't strip it away. For some people it's a couple of years and for at least one person here it's been over four years with no foreclosure. It's a gamble one way or the other. Now, since it's a second and your first is the primary lien holder, I don't know how much a foreclosure from them matters. Perhaps someone else can chime in on this. I'm pretty sure it can be a mess for you years down the road as you try to sell the house b/c they (the second) could have a judgement against it.

Just something to keep in mind as you make your decision. If you plan to stay in the house for several more years, you probably don't want to have this hanging over your head the whole time.

[LadyInTheRed]

1. Everyone makes mistakes, but the attorney using median income figures that are 5 months old is not a good sign. Here's a link to the current figures: http://www.justice.gov/ust/eo/bapcpa...come_table.htm

2. Most attorneys do charge an additional fee for a lien strip petition. I paid either $1,500 or $2,000. I can't remember which. It was whatever the maximum "no look" fee is under my district's local court rules. I think TheBajan got a bargain at $500.

3. The 10% minimum to unsecured creditors is a second strike against this attorney. The Bankruptcy Code does not require a certain percentage to unsecured creditors. I am paying less than 1%. Many BKforum members have reported having 0% plans. There are trustees who will look more closely for something to object to if unsecured creditors are paid less than a certain percentage. But, I would stay away from any attorney whose routine practice is to cave to the trustee on this issue.

I'd either go with one of the first 2 attorneys or meet with more until you find one you like.

TheBajan does make a point you should consider if you have not already. If the lender on the 2nd mortgage is different than the first mortgage, the 2nd is unlikely to foreclose while it is underwater. Many are successful in getting a 2nd to settle after the debt is discharged in a Chap 7. We have heard of settlements as low as 10%. In fact, I think one person settled for 5%. It is a risk. You would need to come up with the cash to settle. Even if you do come up with the cash, there is no guaranty the lender will settle. They may prefer to wait until the 2nd is no longer underwater and pounce with a foreclosure at that time. If you can't reach an agreement to bring the loan current at that time, with all the accrued interest and penalties, you'll loose the house. But, if after a Chap 7 you decide you can't afford the house for some reason, you can walk away at any time. Your personal liability for your first mortgage will not be discharged in a Chap 13. So, if you finish your Chap 13 and later can't afford the first mortgage, you will still be liable for a deficiency if allowed in your state.

[walkthaplank]

Sounds like that third attorney is not the one for you, move on. If you are able to get in to a CH7 and you don't have a reason to be in a CH13, go with the 7. We filed CH13 in order to do a lien strip on our second. For what it cost us being in a CH13 and being under the trustees thumb, we could have bought out the 2nd and been done with it years ago. The only plus side is that after we converted to a CH7, our 2nd has decided to forgive the loan so we won't have to pay extra to get rid of it. If you are in arrears on your 2nd, technically they can foreclose after the discharge, but if it is underwater, they won't, they'll bid their time until it isn't under water or they may negotiate with you to buy out the lien. If yours is one of the large nationwide banks that are settling with the USDOJ because of mortgage and foreclosure "irregularities", you might even get that lien forgiven.

So, if you have no REASON to be in a CH13 (protect assets), don't be. Go back to one of the other attorneys if you felt good about one of them, or keep looking, but this guy you saw now isn't the one for you.

[pamkev]

I agree with others stay away from the 3rd doesn't sounds like he is up to date on things