Let’s look at what the program actually does.  According to Bank of America’s media room, found here this is merely a pilot program.  It may not actually go into affect.  The people that will have an opportunity of using this program have already been selected.

This pilot program will only attempt to help 1000 homeowners.  That’s not very many when you look at the areas the program is to be “tested” in.  These areas are limited to Arizona, Nevada, and New York.  As I am in Arizona, that does offer some assistance for my clients.  But I wonder how many.  I have to assume that New York will receive the most assistance because of the population differences in the states selected.  Even if they apportion it equally, there will only be 333 customers using the program in each of the three states.  However, for states like California and Florida, which were also significantly impacted by the real estate bubble bursting, there appears to be no assistance available.

Here is a list of the requirements that the “preselected customers” had to meet in order to qualify for the program:

• Have loans owned by Bank of America
• Are delinquent for more than 60 days.
• Have exhausted modification solutions or have not responded to alternatives to foreclosure, including short sale or deed in lieu.
• Have high loan balances in relation to their current property value.
• Face considerable risk of ultimate foreclosure.
• Have no junior liens.
• Are still occupying the home.
• Have adequate income to make an affordable rent payment:

Another substantial problem is the requirement that there be no junior liens.  This means that you do not have a second mortgage.  The problem with this is that for most of those that got into trouble with their mortgages, they purchased the home when 80/20 loans were very popular.  The reason they were popular was that an 80/20 loan allowed you to avoid mortgage insurance.  All of these loans would be excluded from this program, apparently, even if the second mortgage is with Bank of America.

Finally, there does not appear to have a reasonable way to determine the amount of rent that you would be paying during the program period.  It claims that rent would be at or less than fair market value, however, here in Phoenix, rent is often higher than a mortgage payment on a similar property.

Bank of America states that they will own the loan originally, implying that they will then let some other investor purchase the property from underneath you.  This is great for Bank of America, because then it can value the property much higher as there is a renter in the house already.  This is to make the house values go up in the neighborhood, but is really of no benefit to the people paying the rent.

The major problems with this program are that you will not be living in your home essentially house payment free while you get back on your feet.  In many of my clients’ cases, my clients have been able to stay in their house for years prior to being evicted or going through the actual foreclosure.  This is even after a bankruptcy has cleaned up their credit, and by the time they are forced to move out they have good credit again.

Also, Bank of America has not indicated how it will affect your credit.  From all outward appearances, it appears that this is what would normally be titled a “Deed in Lieu of Foreclosure.”  What I would expect to happen with this program, would be that your credit rating would drop to that of a deed in lieu and as such, would have the same impact on your credit as a bankruptcy or a foreclosure would.  So, instead of filing bankruptcy and cleaning up their credit, the customer would be paying a monthly payment, instead of none, he or she would still have bad credit, and would not be able to move on with their life.

This program has all the hallmarks of a win-win scenario for the banks, but a bad bargain for the consumers.  Finally, I suspect that the media blitz with the announcement of this program and that the pilot program is so small, possibly means that Bank of America is just doing a publicity stunt.

Thank you for taking the time to read this post by Tempe based Bankruptcy Attorney, Glenn W. Roethler.  This post may not represent the views of all members of Greeves & Roethler, PLC.

As a matter of fact, you deserve to be compensated for many things, including: not being able to sleep due to pain, missing work, the pain itself, not being able to go dancing with your spouse, not being able to participate in your softball league, the pain you’re going to have 30 years from now (my mom still gets occasional neck pain from a T-bone collision when she was a teenager in the 1950s!), and the time you spend visiting doctors.

Too often, people try to settle their own injury claims themselves and are thrilled when the insurance company writes them a quick check for a few thousand dollars.  Well, I’m here to tell you, the insurance company is making out like a bandit when that happens.  Don’t let them sucker you in with quick cash!  The insurance company plays this game numerous times every day!  How often will you do it in a lifetime?  once, maybe twice?  You’re at a HUGE disadvantage: you’ve never done it before, you don’t know what normally happens in cases similar to yours, and you don’t know the rules.  It’s like playing football for the first time, but you’ve never seen a game before and you have one arm tied behind you back – you’ll be crushed!

Anyway, insurance companies love it when you represent yourself – they know they can settle quick and cheap – it’s a numbers game pure and simple.  Hire a lawyer.  Yes, it will take longer (maybe years) to finally get your money, yes the lawyer will be paid 1/3, but you’ll end up with twice the money in your pocket – maybe five times – maybe ten times – maybe 100 times! So, do yourself a huge favor – hire a lawyer to represent you and be patient.  One more thought – if the insurance company rep says “Don’t worry, you don’t need a lawyer for this, we’ll help you” – then, you probably need a lawyer.  You deserve to have someone on your side who’s done this before.

Thank you for taking the time to read this article by Tempe based attorney Scott Greeves.  

For the last 14 years, student loan debt has rocketed.  This increase in student loan debt is tied completely to the increase in tuition.  Many commentators claim that this increase in tuition is due to the increase in costs of tuition, the required tuition expense, the costs of staffing and all of the other expenses that a college incurs.  I fully disagree.  As a matter of fact, here is a link to a Daily Kos article that disagrees with my conclusion, but also indicates that these elements cited above have little to do with the increase in the costs of tuition.  The Daily Kos cites a study by NYU that can be found here.  Unfortunately, this study was completed in 1998, which was prior to the major changes in the bankruptcy code that protected lenders completely.  I believe student loan companies are causing the problems.

I propose that changes from 1979 to 2005 to the bankruptcy code provided motives for easy money lending by student loan companies.  This allowed students to obtain more funds for student loans resulting in schools being able to charge more money as students could now afford the new tuition rates with “easy money.” Of course, universities defend this action with increased “renovation” to campuses and everything else that is “necessary to compete” for students.  This is essentially an arms race at the expense of students.  This “arms race” is the actual cause of the increase in tuition.  This is by no means an original thought.   It has been discussed by many commentators.  See Here and Here.

While this “necessary to compete” claim is probably true, it is because ALL of the universities are benefiting from the income produced by these higher student loans.  This requires universities to spend more money to maintain their position as all of the other universities are spending more money to advance themselves.  This excessive amount of spending is necessary for ALL of the universities to compete with every other universities.

These changes in the bankruptcy code were a slow chiseling away of the protections afforded to students under the bankruptcy code.  Originally, in 1976, when much of the modern bankruptcy code was enacted, student loans were dischargeable five years after they became due, but only if the loans were by the government or a non-profit institution of higher learning.  In 1978, this was expanded to allow for hardship discharge.  That was the peak of bankruptcy protection offered to students.

Then the chiseling began.  In 1979, the loan payment deferment periods were eliminated from counting towards the five year period.  A major change in 1984, excepted private loans from discharge by eliminating the words “higher learning” from the 1976 language.  In the NYU study previously mentioned, 1986 was when tuition started to increase dramatically.  So we see only 2 years after this discharge exception, sophisticated education institutions were already taking advantage of the easier money available to students.

In 1990, the time period exempt from discharge was extended from five years to seven years.  In 1993, hardship discharge was essentially eliminated by the inclusion of the income based repayment plans.  In 1996, social security payments may be offset to repay student loan obligations.  In a huge step, Congress, in its infinite wisdom, decided that in 1998 there was no more ability to discharge student loans at all, but only if there was government backing in some small way for the loans.  In 2005, this was extended to prevent discharge from practically every single student loan available.

For more information and more in-depth analysis of this history,  I refer you to this excellent timeline here.

As most such paths are paved, I don’t believe that this was done with the intention of fleecing a generation of students.  I believe that the federal government was much more altruistic, and had many more good intentions.  Namely, I believe, much of this goes back many years to the United States Federal Government’s desire to have a highly educated work force.

In order to obtain this work force, the government determined that it needed to subsidize students, and make attending a university more affordable.  In this particular instance, I believe the Congresspeople at the time had lenders whispering in their ear, telling them that private lending could accomplish the goal, but only if bankruptcy discharge was watered down.

This should sound, at least, a little familiar.  To me, it sounds just like the creation of the housing bubble. The federal government had an established goal to make housing affordable for all.  Please see this excellent article outlining the history of home ownership.  This is directly comparable to the programs to make education affordable for all.  Both programs were created with the best intentions, but as usual, it is the best intentions that pave the fastest path to hell.

Just as one example of this, in the period between 1985 to 2009, the cost of law school tuition has increased over 900%.  See here.  Between 2001-2009, overall student loan debt has increased over 600%.  See here.   This is, coincidentally, roughly the same period that these important changes in the bankruptcy code were made.  Notice in particular that the period of time from 2001 to 2009, the rapid increase in student loan debt made possible by the changes in 1998 to the bankruptcy code.

It is clear to me, that not allowing bankruptcy to apply to these student loans allowed massive amounts of tuition increases at universities.  This is primarily because student loan companies no longer have any risk in making student loans, as there is no possible way that they will not collect that money from the student.  Therefore, easy lending practices by student loan corporations (at exhorbitant interest rates in the face of nearly certain repayment) have increased student tuition which has, in a circular fashion, increased student lending and student debt.  This cycle has just continued for nearly 30 years and is now spinning out of control.

Thank you for taking the time to read this article by Tempe based Bankruptcy and Financial attorney Glenn W. Roethler.  The views expressed in this article may not represent all of the views at Greeves, Price & Roethler, PLC, but certainly represent some of them.  

Well, as of this week, CNN Money is reporting here that TaxMasters has filed for bankruptcy.  At first I was astonished that a company that could work the miracles described above would have to file bankruptcy.  Then I read the article and found out that TaxMasters was being sued for deceptive practices and making claims that it could not substantiate by the Attorney General.  Then this bankruptcy made sense.

While I am sure TaxMasters did assist many people with settling their tax debts to some degree or another, I think this is an excellent cautionary tale about being careful with services that sound too good to be true.  When you are dealing with services of someone of this kind, you should look into the company in depth and determine if that company is comprised of people that you believe will deal fairly and honestly with you.

I have a couple of issues with this.  The first being that the Federal Government is, AGAIN, figuring out another way to manipulate with the financial markets.  This time it will be manipulating rental incomes and housing prices.  It is like the powers that be have not yet figured out that the market does best when nobody is manipulating it.  The federal government has, apparently, not yet realized that the housing bubble was due to government programs and incentives designed to make Americans purchase homes.  So, now it is messing with it again with the result that rental prices will go down for everyone.  While this may sound like a good thing, for landlords who are making their mortgage payment on properties people are living in, it is terrible news.  This action may drive those landlords that have been successful in recent years into bankruptcy and foreclosures.

The next issue that comes to mind is that if this program goes into effect, it will just be another source of corruption and profit from those that would be in positions of power, such as the investors that they are collecting the opinions from.  It seems like the Federal Government is trying to allow those that have already profited several times through this economic crises, like the banking institutions, to profit again.

Thank you for taking the time to read this article by Phoenix, Arizona bankruptcy attorney, Glenn Roethler.  The views expressed in this article are solely his own and do not represent those of everyone at Greeves, Price & Roethler, PLC.

One thing is for certain though, interest rates are likely to be increasing for every American on everything here.  This is troubling and could possibly lead to further defaults on adjustable rate mortgages as those mortgages are reset with higher interest rates, rather than the lower ones that we have been experiencing lately.  This would further strain the ability of the average American to make their payment obligations.   All in all, this is terrible news.

On a separate note, I do have to respect the courage that Standard and Poor’s demonstrated by downgrading the United States’ debt rating.  I believe that the failure of the ratings agencies such as Standard and Poor’s and Moody’s to properly grade the businesses that led to the overvaluation of many businesses leading up to the economic collapse of 2008.

Thank you for taking the time to read this article by bankruptcy lawyer Glenn Roethler.  The views expressed in this article do not reflect those of all the members of Greeves, Price & Roethler, PLC.

For more information please find the article here.

Thank you for taking the time to read this post by bankruptcy attorney Glenn Roethler.

This certainly coincides with my experience as a bankruptcy attorney.  As a firm we have had clients that have lived in their house waiting to get foreclosed upon for over five years.  You read that right.  Five Years.  Of course, that’s an atypical case with most of our clients living in houses that they are surrendering for approximately a year.  Further, bankruptcy further slows down the process of foreclosure as well.  All of which gives homeowners much needed breathing room in this terrible economy.

As an aside, you may have recently heard that it is now what is termed a “seller’s market” in real estate.  This mans that there is less than 3 months of inventory for sale currently.  While technically true, I believe that this is not taking into account the stealth inventory that the banks have of houses that they are waiting to foreclose upon.  You may ask why they are waiting, the primary reasons are that the banks do not want to own a house, risk the liability of injury, pay the HOA fees, or figure out a way to maintain the property.   Finally, and primarily, I believe that the banks are waiting to foreclose because they know about the phenomenon of a seller’s market, which is supposed to increase house prices.  In essence, they are trying to create a false market for the properties they need to sell, eventually.  Just my 2 cents.

Thank you for taking the time to read this article by Tempe, Arizona Bankruptcy Lawyer Glenn Roethler.  The views expressed in this article do not represent the views of all members of Greeves, Price & Roethler, PLC.

In my experience, this has definitely been true.  Filing bankruptcy is an embarrassing and very difficult decision, even for (and often especially for) business executives.  It implies a failure, either real or imagined, of some sort.  However, the truth is, that bankruptcy is a financial decision.  There should not be any moral judgment attached to it.  Unfortunately, creditors have perpetrated the belief that bankruptcy is a moral decision.  It’s unfortunate, because bankruptcy can help in many difficult situation.

Thank you for taking the time to read this article by Tempe, Arizona bankruptcy attorney Glenn Roethler.  The views reflected by this article are not necessarily held by all members of Greeves, Price & Roethler, PLC.