Thursday, December 6, 2012
Can Filing Bankruptcy get me Fired From my Job?
As financial recovery for this country still seems a long way off, the job market is still very tight. Many people feel very grateful for their jobs and realize that their employment may end at any time. This is not surprising since the unemployment rates have more than doubled since 2000 and poverty levels are set to reach their highest point since the 1960's. More and more people are worried about the possibility of losing their jobs if they file bankruptcy.
They ask the Question: "Can I get fired for filing bankruptcy?" The answer to this question is a reserved, “No.”
First , there is a good chance your employer will never find out about your bankruptcy filing. Unless you owe money to your boss (which makes him/her a creditor), notice of your bankruptcy filing will not be mailed to your employer.
Your employer would have to take certain affirmative steps to find out that you filed bankruptcy. The most common way to do this would be to “pull” a credit report on you. Of course, this would not only disclose a bankruptcy filing, but all other negative history as well.
Second, your employment status is protected by Federal law.
According to Section 525 of the Bankruptcy Code, no governmental unit or private employer may
“…terminate the employment of, or discriminate with respect to employment against, an individual who is or has been a debtor under this title…”
Simply put , you cannot be fired from your job because you filed bankruptcy.
Employment in the Financial Industry
More often than not , the bankruptcy concern arises from employees working in the financial industry. This could include banks, brokerages or other financial institutions that deal with transacting client money. Section 525 still applies to these types of business and you cannot be fired if the sole reason is the bankruptcy filing.
Unfortunately, a bankruptcy filing can be held against you during the hiring process or when being considered for a promotion. Potential employers typically run background checks and a poor credit history could be misinterpreted as irresponsibility.
On the positive note, a government employer cannot refuse to hire someone because of a prior bankruptcy filing. So while there is a stigma attached to bankruptcy, we know that bad things often do happen to good people. Hard working people are sometimes forced to file bankruptcy and there is nothing wrong with that. As bankruptcy promises a fresh financial start to the debtor, there is built in protection to prevent employment discrimination against bankruptcy debtors.
Thursday, November 15, 2012
Wednesday, October 31, 2012
Monday, August 20, 2012
Can’t Afford Your Car Payment? File Bankruptcy.
Many people believe that bankruptcy is a legal process used to deal only with excessive credit card debt. Of course, bankruptcy can be a very good option if you have unreasonable credit card debt, however , this assumption is incorrect.
You can actually owe $0 in credit card debt and still use the bankruptcy process to improve your financial situation .
While certain debts are not dischargeable in bankruptcy (student loans , child support, etc.), car loans are. This can be extremely helpful if you are stuck with a burdensome car loan that you can no longer afford.
If you are thinking "This Car Payment is Killing Me!”, bankruptcy may be your answer.
For example, if you have purchased a car and due to bad credit and other financial constraints, you were given with a high interest rate car loan your payment may be simply unaffordable and too burdensome. In addition if you now owe more on your can than it is worth, the car will no longer have any financial value to you and be solely a burden.
How Bankruptcy can Help
Certain debts are not dischargeable in bankruptcy. A car loan is not one of them. A car loan is dischargeable in bankruptcy.
Assuming the loan was not obtained fraudulently and no other discharge defense is available, a car loan can be wiped out in bankruptcy. Of course, since the bank maintains a lien on the vehicle, the car does have to be “surrendered” as a part of the process . While this can be a temporary inconvenience, with proper planning most people are able to find a replacement vehicle without a problem.
The bankruptcy allows you to get out of the burdensome, high payment car loan and replace it with a less burdensome one, or none at all.
You may ask , “If I can ’t afford my car , why not just stop paying , surrender the vehicle and avoid bankruptcy.” Some are forced to go this route out of sheer necessity, but this could eventually force you into bankruptcy as well .
Once the car is surrendered, the car will be sold and you will most likely owe the difference between the sale price and the balance of the loan . Inevitably, additional fees will be tacked on as well . You now owe a large, lump sum and failure to pay typically results in collection activity or worse, legal action .
Filing bankruptcy on your terms is the cleaner option and prevents intrusive remedies such lawsuits to collect the deficiency and wage garnishment that could result from a repossession or voluntary surrender.
If you are struggling with an unreasonable car loan and a payment that you can ’t afford, do not rule out bankruptcy as an option . Consult with an experienced bankruptcy lawyer and discuss all of your options. Relief from a burdensome car loan could free up disposable income and open the door to financial freedom for you and your family.
Sunday, July 15, 2012
A Chapter 7 Bankruptcy Debtor can strip a second mortgage in a Chapter 7 bankruptcy if they live in a jurisdiction under the 11th Circuit Federal Court of Appeals. Approximately two weeks ago, the 11th Circuit issued an opinion in In Re McNeal, Case No. 11-11352 (11th Cir., May 11, 2012) wherein it held quite simply that a Chapter 7 Debtor could strip a second mortgage during the Chapter 7 case. This is huge because everyone and I mean everyone did not believe this to be the case after the Supreme Court’s decision in the Dewsnup v. Timm case.
The McNeal case is rather surprising for several reasons. First, the 11th Circuit is not noted as being the most Debtor friendly Circuit in the Country; however, that seems to be changing as the Court issued several Debtor friendly decisions this year in FDCPA cases. Second, everyone thought that this issue was dead after the Supreme Court issued the Dewsnup opinion. As a matter of fact, many Bankruptcy Courts within the 11th Circuit issued opinions stating exactly that. Third, the 11th Circuit's opinion was based upon a 1989 case, Matter of Folendore, and the Court explained that the Dewsnup case did not abrogate or overrule their precedent in Matter of Folendore, and therefore, Matter of Folendore was still good law. The Question still remains as to whether this decision survive and spread to other Circuits.
The real issue will be to see where this case goes next. Obviously, this issue is going to continue to heat up. There are several appeals pending right now in New York, Utah and Illinois. It may be five years before the cases get to the Supreme Court, but until then, many Floridians will be busy stripping liens.
The implications are this decision are huge. In a Chapter 13 bankruptcy, a debtor can strip a second mortgage lien, there is no doubt about that. But, in order to truly get the benefits of the bankruptcy, you must wait to get your discharge, and that could take from three to five years. Now in the Middle District of Florida, if a person is eligible, they can file a Chapter 7 bankruptcy and be completely done in 6 months. Many will want to take advantage of this scenario. It may be the deciding factor that makes retaining a families home financially viable. Chapter 7 bankruptcy is cheaper and quicker. A debtor doesn’t have to worry about filing a plan of reorganization that will have them under scrutiny for the next 5 years, etc, etc, etc. The benefits clearly outweigh the negatives on this issue.
Sunday, May 20, 2012
For many years, it has been well settled law that a Debtor who owns real estate with more than one mortgage can file a Motion with the Bankruptcy Court to eliminate, or “strip,” the second mortgage or equity line from that property. More specifically, “[t]o the extent that a lien secures a claim against a debtor that is not an allowed secured claim, such lien is void.” 11 U.S.C. § 506(d). The caveat to this rule, however, it is that the law was just as well settled that only those consumers in a Chapter 13 case could take advantage of 506(d). Up until recently, a Debtor who filed a Chapter 7 bankruptcy case and wanted to discharge all unsecured debt was not allowed to strip a second lien. The reason for this rule was that, in a Chapter 13 case, the Trustee retains an interest in the property for the bankruptcy estate. Conversely, in a Chapter 7 case, presuming the Trustee abandons any exempt asset, there is no interest in the property by the estate and section 506(a) does not apply. As a result, the court cannot bifurcate the debt into secured and unsecured debt, and without this bifurcation there is no unsecured debt to discharge. Additionally, a Chapter 7 discharge does not extend to an in rem claim against property; the discharge is limited to a discharge of personal liability. Dewsnup v. Timm, 502 U.S. 410 (1992).
However, the rule that lien strips cannot take place has changed in the Middle District of Florida. In Re: McNeal, Case: 11-11352, Lorraine McNeal v. GMAC Mtg. held that, at least in the 11th Circuit, even though a Debtor still cannot cramdown the value of an investment property as clearly noted in Dewsnup, a Debtor can strip a junior lien from a primary residence. The Court reasoned that because the United States Supreme Court in Dewsnup disallowed only a “strip down” of a partially secured mortgage lien and did not address a “strip off” of a wholly unsecured lien, it is not “clearly on point” and as such, the issue was not intended to be addressed by that Court.
The court essentially held that, where the Supreme Court only discussed a cramdown in a Chapter 7 case under 506, entirely stripping a junior lien was not addressed. As such, the 11th Circuit Court reasoned, there is no restriction on lien stripping. Under this ruling, a Debtor cannot reduce the principal owed to a Creditor, but that Debtor can completely eliminate it. If this holds up, though, it could be very helpful to many Debtors who meet all of the criteria for a Chapter 7, but find themselves in a Chapter 13 for no other reason then to file a Motion to Avoid a Lien. If you believe you may be a candidate to strip off your second lien and have a significant amount of unsecured debt, you should consult with a local bankruptcy attorney who can advise you of your rights.
Thursday, February 23, 2012
RI: MERS’s Standing to Foreclose Upheld
by Jeffrey H. Gladstone and David J. Pellegrino
Rhode Island is the most recent state in a long line of jurisdictions to rule that Mortgage Electronic Registration Systems, Inc. (MERS) has standing to foreclose. The Rhode Island court further ruled that MERS, as mortgagee, may exercise the statutory power of sale in its own name.
The name of the case is Bucci v. MERS, C.A. No. PC 09-3888, which was filed in the Providence County Superior Court. The facts of the underlying action are typical of many foreclosure scenarios occurring across the country. A loan was originated and the borrower executed a promissory note made payable to the lender. Contemporaneously, as security for the repayment of the promissory note, the borrower granted a mortgage on the residential property to MERS. The mortgage was granted by the borrower/mortgagor to MERS as nominee for the lender; granting all the rights and privileges of a mortgagee to MERS, including the statutory power of sale.
As with many nonjudicial jurisdictions, Rhode Island’s legislature enacted a statutory process allowing a mortgagee to foreclose on its mortgage following a borrower’s default. Rhode Island Gen. Laws § 34-11-22 codifies the statutory power of sale, which many, if not all, MERS-originated mortgages incorporate by reference.
The borrower eventually defaulted on its repayment obligations under the terms of the promissory note. The loan was accelerated and the borrower failed to cure. Then, nonjudicial foreclosure proceedings were commenced whereby, pursuant to Rhode Island’s statutory scheme, a notice of foreclosure was sent to the mortgagor and foreclosure notices were published in the statutorily prescribed form and manner.
In this case, prior to the scheduled foreclosure date, the borrower filed a complaint seeking injunctive relief to enjoin the foreclosure sale. The complaint alleged, among other things, that: the Rhode Island statutory scheme does not allow MERS to exercise the statutory power of sale in the mortgage because Rhode Island does not recognize a “nominee mortgagee,” MERS, because it is not the lender, does not have standing to foreclose; and MERS is precluded from foreclosing because it is not the owner of the promissory note. The court granted the initial request for relief pending a substantive hearing on the issues. Five days later, a preliminary injunction hearing was held and, pursuant to Rule 65(a)(2) of the R.I. Rules of Civil Procedure, the court consolidated the preliminary injunction hearing with the trial on the merits.
Following the full hearing, on August 25, 2009, the court issued its decision denying borrower’s requests for relief. In so ruling, the court “specifically [held] that MERS, in the case at bar, has standing to and may foreclose the mortgage granted to it by the Plaintiffs utilizing the Statutory Power of Sale referenced therein.”
After a brief description of MERS’s functions, the court first considered MERS’s contractual right to foreclose pursuant to the mortgage document. Citing directly to the mortgage, the court noted that the borrower granted “the Statutory Power of Sale to MERS, as nominee for Lender, its successors and assigns.” The court went on to quote the mortgage, which stated that: “if necessary to comply with law or custom, MERS (as nominee for Lender and Lender’s successors and assigns) has the right to exercise any or all of those interests, including, but not limited to, the right to foreclose and sell the Property” (emphasis in decision). In addition, the court, rejecting certain of the borrower’s other contentions, found that the “fact that paragraph twenty-two of the mortgage states that the Lender ‘may invoke the STATUTORY POWER OF SALE’ does not negate the previous language in the Mortgage directly granting MERS, as mortgagee in a nominee capacity, the right to invoke the Statutory Power of Sale.” Accordingly, MERS has the contractual right to exercise the statutory power of sale because it is the named mortgagee and nominee of the lender, and its successors, and assigns; and MERS was acting on behalf of the beneficial owner of the promissory note.
Next, the court tackled the borrower’s assertion that MERS does not have the statutory authority to foreclose. First, the court determined that there is no express statutory prohibition impacting MERS’s ability to foreclose. Next, citing to the statutory power of sale, the court determined that because the “mortgagee or his, her or its executors, administrators, successors or assigns” can exercise the power of sale, so too can MERS as the mortgagee. Simply put, the court found that MERS “is the mortgagee because the mortgage executed by the [borrower] so states.” “The fact that MERS acts in a nominee capacity for the lender ... does not diminish MERS’s role as the mortgagee nor is there created a new legal term ‘nominee mortgagee.’” Therefore, not only is there “[n]othing in the Rhode Island statutes prohibit[ing] MERS, as mortgagee in a nominee capacity, from foreclosing under the Statutory Power of Sale,” MERS “may invoke the Statutory Power of Sale as the mortgagee.”
In the clearest language, the court’s decision addressed the challenges to MERS authority to foreclose under Rhode Island law. As a result, the multitude of pending cases seeking to enjoin Rhode Island foreclosures by attacking MERS standing will most likely be resolved in a perfunctory and consistent manner in favor of MERS.
Wednesday, January 11, 2012
SJC Has New Order In Eaton Case - Should the Lenders be Worried?
The Massachusetts Supreme Judicial Court has made a requires for more information from the parties in the case of Eaton vs. Fannie Mae. The question remains as to whether this is a hint the court may be inclined to rule against Fannie, an outcome which could throw established Massachusetts foreclosure practices into further disarray.
Most would argue that the order itself is indicative of the court's deep concern over whether its ruling [will] have a disastrous impact on foreclosure titles and, if so, whether its ruling should be applied prospectively rather than retroactively.
Lawyers have until Jan. 23 to submit their arguments. A ruling on the Eaton case was widely expected early this year; it is unclear how long this request for more information will delay the issue of the ruling.
The existence of the order does not necessarily determine which way the court will rule. It is still possible for the court to rule in favor of Fannie, and the nuances of its decision will be significant in determining the wider impact of the ruling.
"I don't think that's there's any way of being able to predict from the order itself which was they're leaning," said Pitt. "I would say that the fact that they're asking these questions acknowledges their interest in several issues that are very important to REBA, and REBA will certainly be submitting an amicus brief."
For some background for those still not familiar with the Eaton case, this case involves a defaulted borrower, which a servicer was attempting to evict. Before doing so, the defense argued, the foreclosing entity or its servicer should have to prove it possessed the note, or debt, owed on the property - and not simply that it had been assigned the mortgage. Otherwise, a former homeowner could be placed in double jeopardy if it turned out the foreclosing entity did not own the note, and the true note-holder subsequently attempted to enforce it.
This is inverse of the argument in the now infamous Ibanez case, in which the SJC ruled that under Massachusetts law, a lender or servicer possessing the note must also be assigned the mortgage before commencing a foreclosure.
The "show me the note" foreclosure defense at the heart of the Eaton case has been argued by foreclosure defense lawyers across the country, with varied success.
If the SJC were to rule in Eaton that a lender must have both, it could call into question the chain of title for thousands of loans, as it has been industry practice for more than a decade to separate the note and the mortgage during the process of securitization. This was almost always accomplished by assigning the mortgage to the Mortgage Electronic Registration System, or MERS.
"Since the note is not a matter of record, and has historically not been a matter of record in Massachusetts, there's no way of telling who has the note. Assignments of the note are not put on record. So every title that has a foreclosure in it, indefinitely [far] back, is going to be potentially affected by this," said Chris Pitt, president of the Real Estate Bar Association (REBA). "I don't think that's there's any way of being able to predict from the order itself which was they're leaning," said Pitt. "I would say that the fact that they're asking these questions acknowledges their interest in several issues that are very important to REBA, and REBA will certainly be submitting an amicus brief."
The SJC's recent order issued Jan. 6, shows its concern as it requests that interested parties submit further arguments on the question of whether "requiring a unity of the mortgage and the underlying promissory note, in order for there to be a valid foreclosure, would cloud any title that has a foreclosure in the chain of title, regardless of how long ago the foreclosure occurred.
The SJC asked parties to "Address whether they believe that such a requirement would have such an effect, and if so, what legal or practical measures exist that might limit the consequences of such a requirement."
The court also asked for more arguments on whether "if the court were to hold that unity of the mortgage and note is required under existing law," the court's ruling should be prospective - in other words, that it would apply only going forward, and not to prior foreclosures. In the Ibanez decision, the court declined to make its ruling prospective because it said it was only clarifying and reinforcing existing law.
The items of concern to the court ought to raise grave concerns for Massachusett's real estate attorneys. If the court does what it did in Ibanez, and rules that existing Massachusetts law has long required that the note and the mortgage must be united, the vast majority of foreclosures which have taken place during the foreclosure crisis of recent years could be called into question.