Boston Bankruptcy Lawyer Blog

Massachusetts homeowners facing foreclosure should consider reading Arizona Law Professor Brent White's new book Underwater Home: What Should You Do If You Owe More on Your Home than It's Worth? The book makes some excellent points that Massachusetts homeowners facing foreclosure should consider. For example, according to Professor White, it does not make sense to default on your mortgage if you are less than 10% underwater on your home loan. The book contains practical advice such as looking at a default verses the cost of renting, with detailed calculations in the book.

Dr. White notes that "before you any make a final decision about what to do about your underwater mortgage, you should talk to an attorney...[because] [T]his is a big financial decision with long-term consequences, so it's worth spending a few hundred bucks to get it right." He points out that there will be a 100 to 150 point hit on your credit score from a foreclosure, but also points out that "it's possible to have a good--or even great--credit rating again within two years after a foreclosure."

Continue reading "Massachusetts Bankruptcy Lawyer Discusses When to Walk Away From Underwater Homes" »

A Massachusetts bankruptcy lawyer is asked to file a Chapter 7 bankruptcy for his client, but also to provide financial education. In a study undertaken by the financial industry's education arm, the Investor Education Foundation ,a survey in all 50 states revels some interesting facts about Massachusetts consumers verses the rest of the nation. For example, of the five financial literacy questions, Massachusetts's residents answered 3.1 of them correctly; the national average was 3 questions answered correctly.

In the survey, one critical question was: in a year, do you spend more than you earn, not including buying major items such as a car or a house. In Massachusetts, 21% of respondents said they did while the national average was 20%. It was the 18-34 year old age group that skewed this average. Another measurement they used was non-bank borrowing. This includes auto loans, payday loans and tax return advance loans. In Massachusetts, the percentage of folks with such loans is 16%; in the United States the average is significantly higher, at 24%. Rainy day funds protect folks when there is a personal financial crisis. Only 56% of Massachusetts residents have a rainy day fund while the national average is 60%. With respect to comparison-shopping, 62% of Massachusetts's residents' comparison shop, which is equal to the national average.

Continue reading "Massachusetts Consumers' Financial Knowledge" »

Our Massachusetts bankruptcy clients often ask how to get their financial house in order. Many clients have a 401k or other retirement plan. Others may be completing a bankruptcy discharge and are looking for a life after bankruptcy. Whether you are coming off a Massachusetts bankruptcy or simply refocusing on your financial situation, we've put together some initial rules of thumb with some good links to aid our clients and friends.

1. Create a budget: list your expenses, all of them, divide them into fixed (mortgage or rent, car payment, utilities) or variable expenses; analyze where you can cut back on variable expenses short term (and fixed expenses long term)

2. Establish a financial emergency fund - experts differ on how much should be in your fund, with some saying 3-6 months if you have a home equity line of credit you can tap, or longer if you don't or want to be conservative; this money should be kept in ultra short, low interest rate, FDIC insured money market accounts;

3. 401k, IRA, ROTH IRA accounts - while retirement may be far off, at that time you may not be willing or able to get a second job or cut back on expenses. Social Security http://www.ssa.gov/pubs/10035.html may be reduced. Thus, now, think with the end in mind, as Stephen R. Covey says in The 7 Habits of Highly Effective People. First, max out whatever your employer will match in a pension plan; next review your budget seriously consider putting the maximum matching contribution allowed in your 401k and/or your other retirement accounts.

Continue reading "Financial Planning for Massachusetts Consumers for 2011" »

The Massachusetts SJC ruled Friday that banks cannot foreclose on Massachusetts homes without proper paperwork. The banks must show a proper chain of title before being able to complete a foreclosure and eviction in Massachusetts. Massachusetts bankruptcy and consumer lawyers need to properly advise clients in accordance with this ruling.

In the cases at bar the plaintiff banks, Wells Fargo and US Bankcorp, filed foreclosure actions stating that they owned mortgages taken out by Antonio Ibanez, for $103,500 and Mark and Tammy LaRace for $129,000, in 2005. The mortgages for both homes were two of those notorious adjustable rate subprime mortgages. At some point in time they were unable to pay for their mortgages and the foreclosure began in 2007 and the banks bought the homes. In March 2009, The Land Court, however, upon examining the actual documentation, found against the banks, saying that they did not own the mortgages when they filed the foreclosure. Further, the Court said that the banks failed to assign the Note when the finally did assign the Mortgages. The Massachusetts SJC agreed. In a concurring opinion by Justice Cordy, he found that the banks used "utter carelessness" in documenting title to homes.

Continue reading "Massachusetts Supreme Judicial Court Stops Foreclosing Banks" »

Bankruptcy lawyers in Massachusetts often get asked how to rebuild credit after bankruptcy. We have pointed to numerous ways in the past, and on our website there is a section on Life After Massachusetts Bankruptcy. One way to jump start enhancing your score is to find a helpful bank or credit union; one that will give you a credit card. CreditCardConnection.org seems to have attracted a lot of attention. Essentially, they find a local credit union for you. These are not commercial banks, but nonprofit membership organizations.

When I entered our office zip code, it found two "featured" and numerous other credit unions with offices within 5 miles of Six Beacon Street, Boston. With some types of accounts at the credit unions, you give them a deposit of money and they give you a credit card, not a debit card, and allow you to use the credit card up to the limit of the dollars you have deposited. Each month they report to the credit agencies, Experian, Transunion and Equifax, that you are up to date on your payments. This is the opposite of debit cards, where the process is the same; however, the banks do not report your positive credit history to the credit agencies.

Continue reading "Massachusetts Consumers Rebuild FICO Credit Score" »

Consumer bankruptcies were up 9% for 2011 according to the American Bankruptcy Institute. The number, which hit 1,530,078, was 122,290 more than the total for 2009. Over 70% of the personal bankruptcy filings were Chapter 7. The numbers of Massachusetts Chapter 7 bankruptcies was up 13.9%, the 11th highest increase in the US. The Wall Street Journal http://blogs.wsj.com/economics/2011/01/03/personal-bankruptcies-in-2010-by-state/ says that increased bankruptcy numbers is associated with housing busts. According to the ABI, the number of filings nationally has been up each year since the new bankruptcy law became effective, in October 2005. The December bankruptcy filings were up 4% from the previous December. According to the National Bankruptcy Research Center, the number of bankruptcies is approximately 1 out of every 150 people.

Apparently the growth in bankruptcy filings was in every part of the country, with the biggest increase in the Southwest, especially Nevada, and the Southeast, especially Florida. South Florida, for example, had a 40% increase in personal bankruptcies filed last year.

For 2011, it is not clear which way we are headed. A report by Robert Lawless for Credit Slips predicts the number to be about flat for 2011. Mr. Lawless bases his projections on a complex mathematical formula which is interesting to read about.

The New Year has closed some doors for 401k and other retirement account owners. But lots of retirement plan options remain. If you haven't made deposits into a work sponsored 401k plan for 2010, your time is indeed up. (But this could be a wonderful time to get started for 2011!) On the other hand, if you have income in 2010, you have until April 18, 2011 to establish and fund a SEP IRA, for 2010. This will lower your taxable income for 2010 and, moreover, give you a tax-deferred account that can grow until retirement. All of these retirement vehicles would be protected in bankruptcy.

The SEP IRA allows you to contribute up to 20% of your net income (minus half of your self employment tax) up to 49,000 in 2010.

For 2011, also consider a solo 401k which must be set up before the end of the year, but can be funded up until the tax return date in 2012 to fund it.

Bankruptcy consumers are hopeful in the new credit statistics. According to the Federal Reserve, US consumers total credit card debt is shrinking. Revolving credit, also known as credit card debt, was reduced each of the first three quarters, and through October, in 2010. However, this is likely because banks are tightening approval of credit card debt for individuals and small businesses, according to a Federal Reserve study.

Nevertheless, average household credit card debt is $15,700. The credit reporting agencies are reporting that average debt is down for the fifth quarter in a row. Further, they report that fewer credit cards are being issued. It is not clear if this is because of enhanced requirements to get credit cards, or because fewer folks are requesting new credit cards.

Continue reading "Credit Cards Being Paid Off" »