A Qualified Written Request allows borrowers to obtain servicer information without filing a lawsuit.
You want to save your house and a foreclosure is looming but you’re pretty certain that the lender is claiming you owe more than you actually do. While not part of the bankruptcy code, 12 U.S.C. 2605 is a tool that may assist a debtor to keep their home with or without a bankruptcy filing.
It is common for a lender or mortgage servicer to claim that you owe more money than you think you do. Sometimes these accounting errors even cause you to default on your loan. Some of the common errors are:
- Compounding interest when not allowed;
- Failure to make timely tax payments thus incurring late charges;
- Failure to properly apply payments made to your account;
- Improperly crediting payments you make;
- Charging impermissible late fees;
- Refusing to accept your payments because there is a difference in balance due and sum paid;
- Forcing insurance on you when you already have shown proof you carry it.
Send a Qualified Written Request
The Real Estate Settlement Procedures Act (RESPA) provides for the Qualified Written Request (QWR). As Max Gardner says, “a reasonable QWR can provide the attorney for the Chapter 13 debtor with some of the very best discovery outside of a contested case or Adversary Proceeding. ”The servicer must acknowledge your request within 20 work days of receipt and respond to your inquiries within 60 work days. You must include enough information in your request so that the servicer can identify your mortgage account. Usually an account number along with your name and the property address will work. You should also include any errors you believe occurred and clear requests for information.
Ask for a complete transaction history of the loan including all payments and charges. Also ask for the transaction codes and definitions so you can understand the history. You’ll also want any Pooling agreements; the name and contact information of a person to speak with about your account; the name of the current holder of the note; and copies of all correspondence, communication and collection documents related to your account. With this information you will be able to find out what is happening to your account and who owns your mortgage.
What If My Lender Won’t Respond?
There is also a provision in 12 U.S.C. 2605(f) that allows for reasonable attorney fees and costs if the lender or servicer fails to comply with your request.
Other Q articles:
- Qualifying by Colorado Springs Bankruptcy Lawyer
- Quick by Jacksonville, Florida Bankruptcy Attorney, J. Dinkins G. Grange
- Quicksand by Los Angeles Lawyer, Mark J. Markus
- Quiet by New York Bankruptcy Lawyer, Jay S. Fleischman
- Quit Living on Credit by Wisconsin Bankruptcy Lawyer, Bret Nason
Image courtesy of takomabibelot.
A chapter 13 bankruptcy is often called a “reorganization.”
In a reorganization you are allowed to catch up on mortgages or automobile loans over a period of time.
When a bank or other creditor is uncooperative you can force them to work with you by filing a chapter 13 bankruptcy case. As long as you can catch up under the plan you can force the creditor to let you keep the property while you make up the back payments. Depending on your situation you may be able to strip off an unsecured second or third mortgage. There must be no property value securing the loan and you must successfully complete your plan payments.
Chapter 13 cases also allow you to keep non-exempt property. In a chapter 7 you are allowed to keep only exempt property and non-exempt property would be sold for the benefit of the creditors. In the chapter 13, you can keep the non-exempt property if you pay for it over the life of the plan, usually a three to five-year period.
Chapter 13 Eligibility
In order to qualify to file a chapter 13 you must be an individual with regular income and be within certain debt limits. As of the time of this writing, you may not have over $1,184,200 in secured debt (mainly consist of mortgages and car loans) and no more than $394,725 in unsecured debts (generally credit cards, medical bills, student loans, and income taxes). A corporation or partnership may not file a chapter 13.
You may not file a chapter 13 or any other chapter unless you have taken an approved credit counseling course within the preceding 180 days.There are very few emergency exceptions allowed.
You may not file under any chapter if within the preceding 180 days you had a prior bankruptcy petition dismissed due to your willful failure to appear before the court or comply with court orders, or was voluntarily dismissed after creditors sought relief from the bankruptcy court to recover property on which they hold liens. 11 U.S.C. section 109(g), 362(d) and (e).
Chapter 13 Plan
The plan is your description of when creditors will be paid, how much they will be paid and how they will be paid. After you pay your living expenses, the balance of your income goes into plan payments. Creditors can object if not all your disposable income goes into the plan or if they think they are being treated unfairly under the plan terms. The trustee will review your plan and make sure that it meets the legal requirements and that you have enough regular income to fund the plan. The trustee must approve your plan.
Many people make the mistake of waiting for trustee approval to begin making their plan payments. You must begin making these payments within 30 days of filing your bankruptcy case. The trustee will hold your payments until the plan is approved and then begin to pay them out to creditors. If you do not make your plan payments, your case will likely be dismissed.
Your plan can be modified if you lose your job or there are other changes. There is also a provision for a hardship discharge and you may convert your chapter 13 to a chapter 7 at any time.
- Reaffirm, Redeem, or Retain & Pay? by Wisconsin Bankruptcy Lawyer, Bret Nason
- Redemption by New York Bankruptcy Lawyer, Jay S. Fleischman
- Rental vs. Continued Home Ownership by Philadelphia Suburban Lawyer, Chris Carr
- Renting After Bankruptcy by Los Angeles Bankruptcy Attorney, Mark J. Markus
- Repossession by Colorado Springs Bankruptcy Lawyer Bob Doig
Image courtesy of Leo Reynolds.
What does a SOFA have to do with bankruptcy?
Part of the required paperwork is called the
Statement of Financial Affairs or SOFA.
The SOFA is a complex series of questions that must be answered. This is where everything that has not already been provided in the petition and schedules is listed.
What the SOFA includes.
The first page of the SOFA gives specific instructions. The first few questions deal with income. Unlike the means test which looks back six months, or Schedule I which is for current monthly income, the SOFA asks for your year to date income and your income for the past two years. It asks for wages and money from business as well as all other income.
All other income includes:
Then there are questions about your debt payments. If the bankruptcy consists of mainly consumer debts, then any payments made in the 90 days prior to filing that equal or exceed $600 must be disclosed here. That is a total of $600 or more to any one creditor and not an individual payment of $600. These are considered preference payments and the Trustee can seek return of the payments to divide among the other creditors. All payments to insiders, like your family members, made within the past year must be listed. If you are married and filing a sole petition you must also account for any payments made by your spouse. If significant payments have been made to family members and none to other creditors, then it is wise to wait until one year has passed to file a bankruptcy. Otherwise there is a very real risk that your relative will be sued by the Trustee for return of the payments.
Other things listed in the Statement of Affairs are:
- Repossessions, foreclosures and returns;
- Assignments, receiverships, transfers and set-offs;
- If anyone has sued you, there is a place to put the case information including case caption, case number and court;
- Garnishments and repossessions;
- Individual gifts and charitable contributions made in the past year;
- All losses from fire, theft and gambling in the last year;
- Payments to your attorney and for the credit counseling course;
- Contents of any safe deposit box;
- Anything you are using that belongs to another person like that DVR or cable modem that is rented or on loan;
- If you live in California, or any other community property state, your spouse even if they are not filing with you;
- If you have been divorced less than nine years, the name of your former spouse.
If you have a business there are a number of questions that must be answered. The more complex the business the more questions that must be answered.
Full disclosure is required.
The SOFA is a lengthy and complicated series of questions that must be answered completely and correctly or your bankruptcy case could have problems. If the answers are not complete or don’t match with your tax returns and other materials that the trustee will review you will be challenged and may lose your discharge. The bargain you make when filing for a bankruptcy is full disclosure of your entire financial picture in exchange for discharge of all dischargeable debts. Make use of a trusted and knowledgeable legal adviser to make certain that your case is well prepared.
- Scared by Jacksonville Attorney, J. Dinkins G. Grange
- Security Interest by Jay S. Fleischman
- Small Claims by Wisconsin Bankruptcy Lawyer, Bret Nason
- Step Plan by Kurt O’Keefe Michigan lawyer
- Strip by Bay Area bankruptcy lawyer Cathy Moran
- Stripping in Bankruptcy Court by Los Angeles Attorney, Mark J. Markus
- Student Loans by Colorado Springs Lawyer Bob Doig
Image by Leo Reynolds.
It is a myth that taxes are never discharged in bankruptcy.
Unsecured income taxes first due over three years before a bankruptcy is filed can be discharged in full in any chapter of bankruptcy if a timely and non-fraudulent tax return was filed.
Priority taxes are taxes first due within three years of the bankruptcy filing and taxes assessed within 240 days of the bankruptcy, or which are unassessed but assessable when the case is filed. These taxes are priority claims which are not subject to discharge. Priority taxes will survive a Chapter 7 discharge to the extent that the trustee does not have money in the estate to pay them.
In Chapter 13, such taxes must be paid in full through the plan; penalties associated with those taxes, however, can be treated as a non-priority claim and paid a fraction along with other unsecured claims. In a Chapter 13, if the plan is completed, the tax does not continue to incur interest during the case and no post filing interest is due.
Taxes for which no income tax return has been filed are not dischargeable in bankruptcy
If a return was filed late, for a year outside of the priority tax period, the return must have been on file for two years for the tax to be discharged in bankruptcy.
Some tax debts are not dischargeable
Tax debts that arise from unfiled tax returns are not dischargeable. The IRS routinely assesses tax on unfiled returns. These tax liabilities cannot be discharged unless the taxpayer files a tax return for the year in question.
Five Rules to Discharge Tax Debts
If the income tax debt meets all five of these rules, then the tax debt is dischargeable in Chapter 7 and Chapter 13 bankruptcy petitions.
1. The due date for filing a tax return is at least three years ago. The tax debt must be related to a tax return that was due at least three years before the taxpayer files for bankruptcy. The due date includes any extensions. (It should be noted that all dates are subject to tolling events. This means that different circumstances may impact the time. For example, if you live outside the United States for six months or more you need to add this period to the time. It is best to speak with a knowledgeable local lawyer regarding your specific circumstances.)
2. The tax return was filed at least two years ago. The tax debt must be related to a tax return that was filed at least two years before the taxpayer files for bankruptcy. The time is measured from the date the taxpayer actually filed the return.
3. The tax assessment is at least 240 days old. The IRS must assess the tax at least 240 days before the taxpayer files for bankruptcy. The IRS assessment may arise from a self-reported balance due, an IRS final determination in an audit, or an IRS proposed assessment which has become final.
4. The tax return was not fraudulent. The tax return cannot be fraudulent or frivolous.
5. The taxpayer is not guilty of tax evasion. The taxpayer cannot be guilty of any intentional act of evading the tax laws.
Other Tax Issues in Bankruptcy
Before a Chapter 13 bankruptcy can be granted, the bankruptcy petitioner is required to prove that the four previous tax returns have been filed with the IRS. The four previous tax returns must be filed no later than the date of the first creditors’ meeting in a bankruptcy case.
Additionally, bankruptcy petitioners are required to provide a copy of their most recent tax return to the bankruptcy court. Creditors can also request a copy of the tax return, and petitioners must provide a copy to them.
If you are expecting a tax refund and want to keep it must be listed as an asset and exempted. Otherwise the Trustee will take the refund for the benefit of your creditors. List it or lose it.
Other T articles:
- Tax Refunds by Philadelphia Suburban Lawyer, Chris Carr
- Tension by San Mateo County Lawyer Cathy Moran
- Thankful for Bankruptcy Laws by Los Angeles Lawyer, Mark Markus
- Timeshares by Wisconsin Bankruptcy Lawyer, Bret Nason
- Tools of the Trade by Colorado Springs Lawyer Bob Doig
- Trustee by Bankruptcy Lawyer Jay S. Fleischman
Image by 401kcalculator.org
What is unsecured debt and why does it matter?
There are two main types of debt – secured and unsecured. Secured debt means that there is a lien on some property that guarantees the debt. For example, a loan on a house has a mortgage that is recorded against the property. A mortgage is a secured debt with a lien against the house. It must be recorded with the local county recorded.
Likewise an automobile loan is secured by the automobile and the lien is recorded with the Department of Motor Vehicles. If you borrowed money but the lender isn’t on the title then the loan isn’t perfected and there is no lien.
Most credit card debt is unsecured. Once in a while there is a security interest as in a Sears’s account or other store where you make a major purchase. They may have you sign a document that states they have a security interest in the property until it is paid for. The majority of credit card debt is not secured by the purchases that are made.
Medical debts are also usually unsecured. Once in a while a practitioner may ask for a security document but it is very unlikely. The normal procedure is to submit the bill to your insurance company and then bill you for the unpaid portion. If you have any major medical issues it can quickly add up.
Sometimes unsecured debt can become secured debt
If there is a judgment taken for a past due credit card debt it can become a lien against property which will change the nature of the debt. Never ignore court paperwork as the time lines run quickly and a creditor can obtain a default judgment. That means you never even went into court but they got a judgment and can enforce it in many ways. One way a creditor tries to collect is to record a lien in the county where you live.
It matters because secured and unsecured debts are treated differently under the law and must be designated properly for each case that is filed.
If you have two or more of these signs, you’re in over your head.
- You use credit cards to make ends meet. You can’t make it through the month without charging on your credit cards. You tell yourself that you’ll pay off the credit but you never quite make it. You repeatedly use the cards for food, gas, medical bills and car repairs. Because you spend your money to make the credit card payments, you don’t have the funds to buy the necessities like food.
- You have no savings and no cash cushion. You don’t even try to put money away each month because it seems impossible. When the unexpected happens, you start charging on those credit cards. (Over withholding does not count as putting money away. If you rely on the IRS to save money for you, chances are you spend it as soon as you receive it). You deserve to save some money and have a rainy-day reserve.
- You bounce checks because you have no reserve. You are so close to the wire that even a small error with your bank balance causes you to have insufficient funds. While the bank may cover the balance for you, you’ll be incurring bank charges that you can’t afford. You may even end up without a bank account.
- You live on payday loans. It starts with just one that you may have even paid off. Then the second one it takes longer and costs more. These can cost you hundreds of dollars and this type of creditor gets very aggressive if you miss a payment. In fact most are automatically withdrawn from your bank account and can cause bank problems when there isn’t sufficient funds to cover the payment and your expenses.
- Creditors are calling you with threats to take legal action. You get frequent creditor calls at home or at work so you pay that creditor some money. Then you get behind on another bill until they call you.
- You feel stressed about money and frequently worry about it. It is always on your mind and you worry about how to pay the rent and other regular bills.
- You always carry a balance on your credit cards and never pay them down to zero. Even if you sometimes pay them down, you immediately charge them up again.
If you have two or more of these signs, you’re in over your head. A knowledgeable professional can help you sort things through and come up with a plan for your financial freedom.
Contact Cate today, using the contact form on the right or
call 415-504-2006 and schedule an appointment today.
“Where can I bank?” “I like having my credit card, auto loan
and savings all at the same institution.”
Don’t keep your money where you owe money. This includes your car loan and your credit card. “Can’t I just have a credit card linked to my bank account?” No. For your piece of mind, no.
It’s like the facts are covered in clouds, all hazy and buried from view. The banks offer incentives for tying together different account types because they want easy access to your money if something goes wrong with the loan, credit card, line of credit or mortgage you may have with them. Your finances may look great today but its best to prevent potential problems in the future. If you look, there is a clause in the fine print that allows the bank to take your account funds if you fall behind with any of your payments to them.
The PROBLEM is – if you are financially on the edge and just making your monthly payments when something happens to cause you to fall behind, that helpful institution may just help themselves. In most cases they have a right to offset your debt with your cash. Even if they make a mistake and you eventually get it corrected, you will be without those funds for at least 30 days.
What kind of problems could happen?
The only certain way to protect yourself from this happening is to keep your cash (checking and savings) accounts in a different institution from the bank that has your auto loan, credit card, credit equity line, and any other obligations you’ve incurred. Banks don’t care about you. They aren’t people, they are institutions. For additional bank tips see this article.
[See also the article warning of Wells Fargo and Wachovia’s account freezing practices.]
Bankruptcy is often confusing, filled with deadlines and documentation. It takes a toll emotionally as well as financially. If you think bankruptcy is on the horizon, check out the Bankruptcy Alphabet, which covers different areas of Chapter 7 and Chapter 13.
Learn more about filing for bankruptcy in California, from making a list of “Assets” and “Northern” California Bankruptcy Court to “Unsecured Debt”. Contact me if you have questions or if you’re ready to move forward with the rest of your life.
A – E
A is for Assets
B is for Beware of Credit Card Offers
C is for Chapter 7
D is for Disclose Everything
E is for Equity
F – J
F is for Fresh Start
G is for Gumshoe (Start Investigating)
H is for Homeowners Association
I is for Income
J is for Joint Filing
K – O
K is for 401(k)
L is for Lift the Bankruptcy Stay
M is for Means Test
N is for Northern California Bankruptcy Court
O is for Organize
P – T
P is for Preference
Q is for Qualified Written Request
R is for Reorganization
S is SOFA (Statement of Financial Affairs)
T is Tax Dischargability
U – Z
U is for Unsecured Debt
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