Bankruptcy Article of the Week
Impact of Mortgage Bankruptcy Bills Could be Significant
We all know that bankruptcy law is broken, and the major overhaul it needs doesn't seem to be in the works. It seems, however, that the mortgage foreclosure crisis has spurred our Senators and Representatives to take a closer look at the impact of the bankruptcy code on homeowners faced with foreclosure, and to propose amendments that might, at least, alleviate obvious problems for that group of bankruptcy petitioners.
While the proposed mortgage foreclosure amendments are a minor piece of the overhaul current bankruptcy law requires in order to effectively serve the original purpose of the U.S. Bankruptcy Code, they also represent the first viable chance for positive substantive change to the Code since the 2005 amendments, and the impact could be significant. Just yesterday, Moody's Chief Economist Mark Zandi testified before the House Judiciary Committee that carefully drawn legislation allowing bankruptcy courts to modify the terms of principal residence mortgage loans could potentially prevent as many as 500,000 foreclosures over the next year and a half without significant impact on the cost of mortgage lending or consumer rates.
We've previously reported on Senator Durbin's proposed legislation and on the effort to waive the pre-filing credit counseling requirement when foreclosure proceedings have already begun. However, unless you're following very closely, the details of all of the pending and proposed legislation to amend the bankruptcy code in response to the mortgage foreclosure crisis have undoubtedly started to blur.
Pepperdine Law Professor Mark S. Scarberry has imposed some order on the bills for us, in a table of current bankruptcy bills relating to home mortgage modification. Scarberry compares S. 2136, S. 2133, H.R. 3778 and H.R. 3609 in a concise, point-by-point format that quickly untangles all of the recent news reports about various similar-but-different bankruptcy bills—and also reveals the gray areas in some of the pending legislation.
A few of the highlights:
- All of the bills make some provision for waiver of the pre-filing credit counseling requirement in foreclosure cases;
- All of the bills make some provision for eliminating or qualifying the prohibition on modification of mortgage loans on the debtor's primary residence;
- All of the bills make some provision for or appear to allow avoidance of prepayment penalties in Chapter 13;
- Senator Durbin's bill, S. 2136, is the only one that makes special provisions for consumer protection issues like disallowing mortgage claims based on TILA or other statutory protections and avoidance of arbitration agreements.
The full breakdown is well worth a look for anyone concerned about the specifics of bankruptcy law change. Although the broad strokes are similar in many areas, the specifics vary greatly—and details that might seem insignificant in mainstream news reporting, such as whether the credit counseling waiver applies to all consumer cases or only to Chapter 13 cases and what kind of limitations the bill places on the bankruptcy court's authority to modify mortgage terms, matter.
For more detailed information, the full text of the bills is available at:
Home Owners' Mortgage and Equity Savings Act (S. 2133)
Helping Families Save Their Homes in Bankruptcy Act of 2007 (S. 2136)
Emergency Home Ownership and Mortgage Equity Protection Act of 2007 (H.R. 3609)
Home Owners Mortgage and Equity Savings Act (H.R. 3778)
Meet Your SFT Team
While working as Director of Operations in our Florida offices, Leigh Bienkowski oversees and manages various day-to-day operations at SFT, including our customer service and education, government compliance and credit counseling agency relationships.
A native of New Jersey, Bienkowski joined the SFT team in August 2005 and previously worked as a Community Outreach and Personal Finance Education Manager in the credit counseling industry.
Bienkowski says that she gets great satisfaction in being able to help people with financial problems attain a fresh start; thus making her an outstanding fit with the overall mission of Start Fresh Today.
"It is rewarding to work with an organization that combines technology and bankruptcy services that provide clients and attorneys with the most beneficial and efficient experience during a challenging and stressful time," Bienkowski says.
"The bankruptcy process is complicated, and SFT simplifies it. Our education sets industry standards, and I am confident that consumers are getting the best credit counseling and education experience as required with the bankruptcy law."
The Numbers Game
A recent report from the American Bankruptcy Institute (ABI) revealed that bankruptcy filings for the first nine months of this year were up 45 percent as compared to the same period last year.
The report also detailed how the number of people opting for Chapter 13 bankruptcy as a means to save their homes in midst of the foreclosure crisis has increased this year.
Here are just a few examples of states where the increases in Chapter 13 bankruptcy filings have especially been seen:
- Massachusetts witnessed a 70 percent increase in Chapter 13 bankruptcies during the second quarter of 2007.
- Chapter 13 bankruptcies in Illinois were up 40 percent during the second quarter.
- California saw Chapter 13 bankruptcy filings double in the second quarter.
The ABI indicated that more Chapter 13 bankruptcy filings are becoming common in areas like the ones above where the housing slump is really prevalent.
Ultimately, these statistics once again reveal what bankruptcy attorneys have been saying for a long time: filing Chapter 13 bankruptcy can be a very viable solution to save homes in danger of foreclosure.
Need More Client Inserts?
We've made ordering more credit counseling and debtor education inserts for your client intake folders even easier with our new request form.
Simply click on the 'Order Client Inserts' graphic in the SFT Newsletter email and fill out our very short form to request more client inserts. That's all you have to do!
Once again, we will ship your new order of client inserts free of charge. All we ask in return is that you include your new inserts in your client intake folders.
Feel free to call (800) 435-9138 or email us at info@startfreshtoday.com with any questions you may have about ordering inserts.
Kevin's Corner
Practice Management Tip of the Week:
Your relationship with your bankruptcy clients doesn't begin and end with the case.
Last week we talked about how a long-term relationship with your client can help build future business through repeat business in other practice areas and word-of-mouth referrals. But how do you maintain a relationship with a client whose bankruptcy case is over?
The process starts early, perhaps before you've even met that client. If your firm has a website, make sure that website is more than just an expanded directory listing—use it to provide valuable information and articles for prospective and past clients alike. This will:
- Keep prospective and past clients coming back to your website, thus keeping your name in front of them;
- Build your expertise in the eyes of past and future clients;
- Help clients see you as a long-term source of information and resources, not just a short-term representative.
Your clients are counting on you to guide them through the bankruptcy process, and additional information you provide along the way can go a long way toward building you up in your client's estimation. By making information and resources part of your marketing plan, you can provide that information and that sense of being well looked after without a substantial increase in time commitment. For instance:
- Provide brochures or information on your website explaining why your clients have to complete credit counseling and debtor education requirements;
- Provide articles, podcasts or videos explaining particular aspects of the bankruptcy process like the automatic stay;
- Send out a newsletter or email campaign containing information your clients will need after bankruptcy.
If you think in terms of the challenges consumers face after bankruptcy and the needs and interests shared by all—or nearly all—of your clients post-bankruptcy, the possibilities are nearly endless. And, of course, don't overlook the elementary: make sure to ask your client during your final meeting or telephone conversation to keep you in mind if friends need bankruptcy services in the future and, if you have a newsletter or email campaign, to let him know that you'll be continuing to provide information and support that way.
- Kevin Chern
President, Start Fresh Today
Last Weekend at NACBA
Thanks to all of you attorneys who dropped by the SFT booth at last weekend's NACBA workshop in Las Vegas and attended our fundraiser for the Clark County Pro Bono Project on Saturday night. A great time was had for a great cause.
Overall, it was fantastic to meet with our clients and be able to put names to faces. Thanks again.
Did You Know.
that if your firm has multiple attorneys, it can choose a default attorney to be automatically assigned to consumer profiles?
That's right! Simply have your Admin attorney log in to your firm's Administrator SFT Account, click on the 'Account' button and then select 'Settings.'
Taking these actions will allow the Admin attorney to 'Change the Default Assigned Attorney' from a drop-down menu. Simply select the attorney whom your firm wants to serve as the default attorney and save the changes.
The selected attorney will automatically appear as the default attorney in the 'Clients Profile' page.
Please remember that this default can always be modified, but that the Admin attorney will have to do so.
Got questions? Simply call (800) 435-9138 or feel free to take the time to send us an email at info@startfreshtoday.com. We're more than glad to help out in any way possible.
Happy Halloween from the SFT Team!
