Posted by Dave Lima on Fri, Jul 04, 2008 @ 10:26 AM
Last week I met an attorney I had been introduced to for lunch. I knew little about his Massachusetts personal injury practice and wanted to learn more. I hoped he wanted to learn about my diverse law practice. During lunch he noted that the real estate market is rather slow and my Massachusetts real estate law practice must be off. I acknowledged that was true for the real estate practice, but that in these difficult economic times my Massachusetts bankruptcy law and Massachusetts divorce law practices are busy.
Often, domestic discord rises as money pressures increase. This can be an even larger problem if one spouse has lost employment and the other feels they are unfairly carrying the entire burden of supporting the family. Finance issues are often at the heart of a divorce case. The personal injury attorney acknowledged how bad times can lead to an increase in the divorce rate, but then continued on to say that bad times shouldn't necessarily lead to an increase in bankruptcy filings. I was absolutely flabbergasted and asked how he could say that. He explained that people should live frugally as he had growing up. He said his family was careful about money in the fear that someday there might not be any, and that staying in financial control meant there would never be a bankruptcy filing. He then commented that bankruptcy was for those people who were irresponsible in managing their debt by allowing credit cards to support extravagant life styles. I was incredulous.
I explained to my colleague that the bankruptcy clients I had helped came to me down many different paths, and that rarely was that path the irresponsibility of living extravagant lives off of credit cards. I was compelled to tell him about the elderly couple from Orange, MA who were forced into bankruptcy when the gentleman became terminally ill, there was no medical insurance and there were plenty of medical bills. Then, I thought of the hardworking mill worker and realtor who went through a divorce and now had their same respective incomes but two households to support. The debt became overwhelming and they filed Chapter 7 bankruptcy. I also told him of the couple who came to Framingham, MA from Brazil seeking the American Dream. Both husband and wife worked several jobs and they bought a home. They were proud of their accomplishment and that they were living the dream. They had trusted an unscrupulous lender to take care of placing their mortgage. The lender had given them two loans, both interest-only with low initial rates and payments. These loans would adjust in a year in rate and payment, but by then they were told there would be a refinance of the mortgages to a fixed rate loan. When the couple balked, the lender assured them "we do this every day, trust us, it works." With the declining market there was no refinance of the mortgage, only an inability to pay increased mortgage payments, inevitable foreclosure and the need to seek debt relief by filing bankruptcy. Finally, I told him of the newly graduated college student. She had received very little aid for her school tuition and expenses, other than many student loans. Her parents took the view that they paid for their education and she needed to pay for hers. Despite a new, good paying job she found it difficult to pay the large student loan payment and pay her living expenses. She started to supplement her budget by paying for food and essentials with credit cards. Soon it was to late to turn back, and Chapter 7 bankruptcy was her only option.
After I had finished recounting these sad stories, my colleague acknowledged that bankruptcy was there to help good people who had bad things happen to them. I told him that I was glad he could see that. I asked him about his parents, who instilled his value for fiscal responsibility. He told me they lived in Massachusetts and were retired living on social security. I expressed my best wishes for them. I didn't want to tell him about the heartache I foresee for our senior citizens and others on fixed incomes this winter when the fill-up of an oil tank is likely to cost $1,250 and the heating season at least $5,000.
Posted by Dave Lima on Thu, Jul 03, 2008 @ 02:02 PM
Over the past year, I've encountered a good number of clients who had bankruptcy cases that would have had no issues, until they decided to unilaterally take financial action without the advice and consent of a Massachusetts bankruptcy attorney. In taking their unilateral action they often badly damaged or substantially delayed their potential Chapter 7 or Chapter 13 bankruptcy filing. I want to describe some of these cases in this post with the hope that future clients will not make the same mistakes.
When an individual is experiencing debt problems they often transfer assets from their name to a relative. They mistakenly believe they are removing the asset from the reach of creditors. I've had clients who deeded their interests in real estate, or transferred their motor vehicle title to relatives without payment of fair market value being received for the transfers. These transfers must be disclosed on the bankruptcy petition and the trustee can seek return of the property to the bankruptcy estate. Never make these transfers prior to filing a bankruptcy case.
Similarly, many clients have struggled with their budget and have borrowed money from family members. The payments to family members whether for loans or gifts made in the last year must be disclosed in the bankruptcy filing. The Trustee can pursue reimbursement of these monies. Plan accordingly when timing your bankruptcy filing.
Sometimes potential clients have taken money from their 401(k) and other retirement assets to live on, and pay unsecured creditors who would have been discharged. They are postponing a filing. This disbursement usually does not create a problem in filing the case (although it might). Primarily, it is unfortunate that the retirement account money could have been protected and retained by the client if the bankruptcy had been filed prior to the distribution. The funds lost could have been saved.
Never run debt, including credit cards up immediately prior to filing. When you borrow money, even by buying with a credit card, and don't intend to pay it back, that is fraud. That type of debt may not end up being discharged. Certainly, luxury items worth more than $500 purchased 90 days prior to filing and cash advances of $750 or more taken 70 days before filing are presumed not dischargeable.
Some clients have payed off secured debt believing that they are improving their monthly budget. Secured debt may have a positive impact on the Means Test being passed and the client being able to file a Chapter 7 case. Also, by paying off secured debt the client might increase equity in the asset beyond the amount which can be protected. Before paying of secured debt items consult a Massachusetts bankruptcy attorney.
Finally, don't transfer balances from one credit card to another. This may result in a situation where some of the credit card debt is not discharged in bankruptcy
For people experiencing difficulties with debt and who might need to seek debt relief, it's always wise the seek a bankruptcy consultation with an attorney before taking action with your financial affairs on your own.
Posted by Dave Lima on Thu, Jul 03, 2008 @ 08:51 AM
A client visited my office yesterday to discuss filing a MA bankruptcy case. He had no savings and very little money in his checking account. The client had a 401k with over $25,000. He had numerous credit card bills with balances totaling over $40,000 with regular monthly payments over$1,000. He had a wife and child and income of less than $50,000. This client was a perfect example of someone who should file Chapter 7 bankruptcy. His concern was how he could pay me to file the case. I had a few suggestions.
The obvious answer is to stop paying the credit cards entirely and take any saved money to apply to paying the bankruptcy attorney. In my client's case, we looked at his credit card situation and discussed each obligation separately. I was able to advise him he could stop paying all of them immediately without harming his Massachusetts bankruptcy case.
Another option often open to people is their income tax refunds, and now their stimulus checks. If these payments haven't been received they can be targeted for use in paying for the bankruptcy filing.
Never take money from a credit card to pay for the bankruptcy. And no, you can't charge the bankruptcy! If you have supportive family or friends they can be a source of funds.
I rarely advocate taking money from retirement accounts, but it may be appropriate to do so only to file a bankruptcy case, especially where the filing is needed to stop a foreclosure on a home. This source of funds should be a matter of last resort.
In any event, always look at the big picture - what little you are paying to obtain such a huge debt relief.
Posted by Dave Lima on Wed, Jul 02, 2008 @ 10:13 PM
Purchasers of Massachusetts real estate which is improved by a one to four family home they will occupy and which is financed with a purchase money mortgage are entitled to a Certification of the real estate title by the lender's attorney. Massachusetts General Laws, Chapter 93, Section 70 requires the lender's attorney to examine the property title records for a period of fifty years. The Massachusetts real estate attorney must then provide the purchaser with a Certification that the purchaser holds "good and sufficient record title to the mortgaged premises free from all encumbrances" except only those matters which are listed in the Certification. Any such exception must be specifically enumerated. Broad and general exceptions, such as "all easements of record" are not acceptable. The MA real estate lawyer must also make a certification to the lender that its mortgage is a "good and sufficient record first mortgage" to the property.
If you have a real estate title problem which surfaces after you've closed, you may have recourse against the attorney who certified your title. The certifying attorney remains liable to the purchaser in the amount paid for the property as long as they own the property. The attorney remains liable to the mortgage holder in the original amount of the mortgage for the life of the loan. The Certification provides buyers and lenders with a remedy against a negligent attorney.
Of course, attorneys retire, become disabled, die, or if lucky, retire to a tropical island. If that happens, your Certification may not be worth much. Always strongly consider the purchase of an Owner's Title Insurance Policy. The cost is reasonably discounted because the lender is always requiring a Lender's Policy that the buyer is paying for, and insurers will allow for a reduced rate to the buyer. After all, the purchase is likely to be your most major investment, and the insurance premium is a one time charge.
Posted by Dave Lima on Wed, Jul 02, 2008 @ 09:39 PM
Many people often visit their physician annually for a checkup. These visits are preventative and help disclose health issues early when they can often be most easily treated. We do the same for our oral health when we visit the dentist for cleaning and checkups. But our annual reviews don't end with our body. We often take our motor vehicles for quarterly oil changes and periodic tuneups and servicing. And don't forget finances. We often see our bookkeeper or accountant at least annually. Most people also make at least an annual call on their financial planner. But how many of you have made it a point to check on the health of your Massachusetts real estate title?
As a Massachusetts real estate lawyer, I represent many lenders, buyers and sellers in real estate closing transactions. When I represent a buyer and lender, I must review the status of the real estate record title found at the registry of deeds and registry of probate. My job is to determine that the buyer will acquire a piece of real estate that is free from defects of title, and that the lender's mortgage will not be subject to any real estate title problems. When I represent a seller, I might be contacted by the buyer's or lender's attorney in regard to a title problem they have found in their search of the records. As the seller's real estate attorney, I then have to correct the problem. Very often, there is very little time to do this prior to the scheduled closing date. In these circumstances, real estate closings are often delayed or perhaps fall apart.
There are many common issues that I have encountered in representing either side of the transaction. Perhaps the most common is an undischarged mortgage. Somewhere in the chain of owners there is a mortgage which may have been paid off, but which has never been discharged (released) on the record. This is a serious issue if the problem is from prior owners, as the current owner won't have any information about the pay-off. Hopefully, the current owner purchased a Massachusetts Owner's Title Insurance Policy and the title company will take care of the problem. If not, the owner bears the burden and cost to clear the matter. Even if the problem mortgage is with a current owner, the matter may not be easy to clear. If the problem is from an older mortgage the bank may now be out of business. A successor must be located. Sometimes these chains of successor banks will pass through many failures, name changes and mergers.
There are other problems which I have found in titles over the years. Improperly completed probates, interests of a part-owner that never was conveyed to the successor, wrong parties signing the deed, and descriptions of the property which are inaccurate and insufficient. The list goes on and on.
So, if you own real estate and might refinance it or sell it, why not see your Massachusetts real estate lawyer for a checkup today. You can have a current or two owner search completed. If there are issues, they can be remedied now when there is plenty of time to act. A correction that can be made at leisure might also be less expensive to make than the same matter attempted in a rush in short time.