HUGE Problem!

[AngelinaCat]

If you have not done so, go online to nolopress.com and order their guidebook for Chapter 7 Bankruptcy. It will be well worth your time and money. There is an entire chapter devoted to secured debts such as mortgages and car loans. The price is around $25.00 now. And you can download it directly to your hard drive.

Here is a small introduction I copied from my 2007 edition:

Are Secured Debts Dischargeable?

Some types of secured debts are contractually linked to specific items of property, called collateral. If you don’t pay the debt, the creditor can take the collateral. The most common secured debts include loans for cars and homes. If you have a debt secured by collateral, bankruptcy eliminates your personal liability for the underlying debt—that is, the creditor can’t sue you to collect the debt itself. But bankruptcy doesn’t eliminate the creditor’s hold, or “lien,” on the property that served as collateral under the contract. Other types of secured debts arise involuntarily, often as a result of a lawsuit judgment or an enforcement action by the IRS on taxes that are old enough to be discharged (covered below). In these cases, too, bankruptcy gets rid of the underlying debt, but may not eliminate a lien placed on your property by the IRS or a judgment creditor.

Chapter 7 bankruptcy offers several options for dealing with secured debts, ranging from buying the property from the creditor for its replacement value, reaffirming the contract, or surrendering the property. Secured debts and options for dealing with them are discussed in Chapter 5.

Chapter 5 in my edition is more than 30 pages long.

I hope this helps.

[Exployer1234]

I filed Chapter 7 and the car loan that I had was wiped away. I had a judgement against me for the auto loan and since I filed Chapter 7 it was included in BK. I filed a motion to dismiss the judgement, but besides that everything was taking care of in my BK. I did surrender my car prior to Chapter 7.

I think you need to find someone else to give you the correct answers.

[despritfreya]

OH DEAR LORD!!!!

What can I say? I have not read ANY of the responses but I can guess that the members of this forum had a field day with this one. WOW.

Go back to this "attorney" and have him put each of the statements in writing. Then take it to the State Bar because, certainly one who is so off base should not be "practicing" law. WOW.

1. "He said, emphatically, that secured debt cannot be discharged in a Chapter 7 bankruptcy."

WRONG. No reaffirmation agreement, no debt. The lien survives and if you don't service the lien, lender gets its property back. End of story.

2. "I asked him is this was specific to my state or my appeals circuit, he said no it's a federal law that is well established."

Ask him WHAT FEDERAL LAW - CITATION PLEASE.

3. "He said he always counsels his clients to wait until after the house is taken and sold before filing for Chapter 7. That way the deficiency is an unsecured debt and can be discharged."

Then he counsels them incorrectly and is the most incompetent idiot I have ever heard about.

Need I go on?

This is where I, as a "practicing" attorney really get ticked off. It is idiots like this one that give us all a bad name. You go back to this idiot with a copy of my response and ask him to put everything he said in writing, signed and dated. I will then gladly report him to whatever authority I can find in your State (as well as the UST since he clearly is not competent and the UST monitors such things) and attempt to get him disbarred.

Geeeeeze.

Now I am going to calmly relax and enjoy reading all of the responses. I think I will need a glass of wine for this one.

Des.

Very disappointed. Only saw one comment that gave me a good chuckle. . . Peeps, loved the "attorney on crack" analogy.

[AngelinaCat]

This morning I met with an attorney at the local Debtor Assistance Project (DAP) that is run out of the federal courthouse.

DAE, there is a very real possibility that the room(s) you met this *attorney* in had been rented out for other businesses, even ones that may be scams. Just because the building says 'Federal' on the front, does not mean that everything that goes on inside of it is truly 'Federally sanctioned'.

Is there any type of documentation provided anywhere to says that this DAP agency is 'Federally Approved'? If so, get several copies of that, and along with Des's suggestion, get what this guy said in writing, and submit to your state's Bar and PM it to Des.

Good luck!

[AngelinaCatHub]

I guess I'm getting tired, but someone said "Personally I think he's nuts" and I wanted to second that thought. He is nutz. I like "attorney on crack" remark too.

Once you bk in 7 and give up the asset, the asset is turned back to the lender. If you do this outside of bk, then you are responsible for the deficiency. The deal is, you have given up claim unless you reaffirm. That means it is now become a non secured item as you surrender this in fact and intent. What they do with it after you have filed is their business. They have the option of allowing a ride through and that is their gamble for payments. If you choose not to ride through the asset is/was surrendered in intent and if they chose to burn it down it is not your business. If they sell it for less than you owed, you gave it up and the deficiency is not collateralize and is now non secured. It is automatically in discharge mode as non secured debt. That guy is nutz and if he was truly right, what purpose would a 7 be for "new start"? I think he needs a good stiff Jack Daniels from Frogger to get his head cleared. He is not bk material giving out bad advice. 'Hub

[DAE]

Des and Angelina...thanks so much for the comments. The attorneys at the Debt Assistance Project are practicing attorneys in the state of Maryland. I am not certain what, if any, process they go through for selection to the program, but I would think at a minimum they are barred and in good standing. (http://www.mdb.uscourts.gov/PS_dap.aspx)

Prior to entering into the 30 minute consult you sign a letter of understanding that outlines that they only "represent" you during the 30 minute interview, etc., etc. The attorney I met with practices in Rockville, MD and has been practicing for decades...which is why the information he provided was so shocking to me. I cannot believe this is his first rodeo, so to speak, so the information had a sense of weight to it.

Added to this was the nature of his demeanor. He was emphatic that deficiencies that are created by the sale of secured debts post-petition are not part of the bankruptcy. He was just absolutely sure of it. And he said the same of auto loans.

Since I started this thread, I called another 5 attorneys in the area. Surprisingly, two of those also believed that the deficiency would survive the BK since it was created post-petition. So on a scorecard, the DAP attorney and two others believe the deficiency is a liability and the other 12 attorneys that I called said the deficiency is not a liability.

Ugh!

If you have not done so, go online to nolopress.com and order their guidebook for Chapter 7 Bankruptcy.

Angelina, you mentioned the NOLO book. I have that text. What failed to give me comfort vis-a-vis that book, is that the DAP attorney was suggesting that the mortgage was discharged in the bankruptcy (just like NOLO says), but not the deficiency that was created by the sale of an underwater house...when the sale occurs post-petition. The NOLO book doesn't appear to come out and actually say "the deficiency created by a foreclosed house is discharged as long as the underlying mortgages were part of the filing." I searched high and low for such language and didn't find it.

[free2breathe]

I knew this post would lead des to need a drink ;)

[AngelinaCat]

I knew this post would lead des to need a drink ;)

LOL. I think some others of us are also.....

[DAE]

If you choose not to ride through the asset is/was surrendered in intent and if they chose to burn it down it is not your business.

Hub, hahahaha...thanks! As you will note from my original post, I asked the DAP attorney about reaffirmations and ride-throughs to kind of smoke him out on the issue of deficiencies. He told me, point blank, that reaffirmations are simply a way for the lender to remind you that your liable for the debt, but that in reality that liability exists whether you reaffirm or not. I was shocked!

[helpmeout]

debee, the DAP attorney's would agree with what you said. But he would add that a deficiency created by the sale of the house (post-petition) would be a new debt created post-petition and therefore not discharged.

Thoughts?

He's wrong. My entire mortgage was discharged in my Chapter 7. What didn't get discharged was the lien on the house. The bank is now in the process of actively foreclosing on the house. If they went after me personally for any deficiency, they would be violating the permanent injunction and I would be able to go after them for sanctions. What my bank will do is add all types of legal fees to my mortgage so that I won't get any of the equity in the house (at the time I filed, I had positive equity) when they eventually sell it. But they can't come after me directly.

[justbroke]

Des and others... I had a field day too. I stopped reading the DAP practitioner's "junk" after I read non-dischargeable deficiency! Thanks for jumping in Des!

[DAE]

You go back to this idiot with a copy of my response and ask him to put everything he said in writing, signed and dated. I will then gladly report him to whatever authority I can find in your State (as well as the UST since he clearly is not competent and the UST monitors such things) and attempt to get him disbarred.

I certainly will, at a minimum, call the Debtor Assistance Project about this (and perhaps the UST once my case is closed). I cannot imagine the pain he's caused to unsuspecting clients in those 30 minute meetings. I'm relatively well educated and at least know that I don't know this stuff...so I know to ask questions. But what does a mother of 3, who speaks English as a second language, do? She doesn't have the time to make all the calls I did...she's doesn't have the language proficiency to know whether this guy might simply not know what he's talking about. It breaks my heart to think of how many people allowed themselves to go homeless in an effort to follow his advice and let the house be sold so they could then file for protection...or how many faced garnishment judgements from other creditors while waiting for the house to be sold. In today's market, the sale could take years!

[AngelinaCat]

I certainly will, at a minimum, call the Debtor Assistance Project about this (and perhaps the UST once my case is closed). I cannot imagine the pain he's caused to unsuspecting clients in those 30 minute meetings. I'm relatively well educated and at least know that I don't know this stuff...so I know to ask questions. But what does a mother of 3, who speaks English as a second language, do? She doesn't have the time to make all the calls I did...she's doesn't have the language proficiency to know whether this guy might simply not know what he's talking about. It breaks my heart to think of how many people allowed themselves to go homeless in an effort to follow his advice and let the house be sold so they could then file for protection...or how many faced garnishment judgements from other creditors while waiting for the house to be sold. In today's market, the sale could take years!

Your comments here are EXACTLY why you will pursue this cretin. Remember, there are people still out there in the world, dealing with these issues, that for whatever reason do NOT have a computer, or access to one. I still know people my age, 58, that refuse to touch one and will not have it in the house.

[DAE]

Hey...just to be sure...does any of the information I've been given here change if the lender providing the three mortgages is a credit union? I know that credit unions have better treatment under the law for purposes of reaffirmation (i.e. no court hearing).

[AngelinaCat]

Hey...just to be sure...does any of the information I've been given here change if the lender providing the three mortgages is a credit union? I know that credit unions have better treatment under the law for purposes of reaffirmation (i.e. no court hearing).

I can answer that quickly: NO. A CU is more likely to insist that you do a reaffirmation with them than a regular bank would, though.

We reaffirmed the loan on our car, a VW Jetta. We could not use the generic reaffirmation papers that our attorney had, we had to fill out the specific paperwork the CU sent us, and send that.

We are in Florida, the CU is in Dayton OH. We ended up very fine.