Bankruptcy & Foreclosures

Let’s cut right to the chase. Imagine you’ve let your mortgage payments slip and now you are threatened by foreclosure. The first question that comes to mind is what do I do now? The answer, of course, begins with the reassurance not to panic. You have options regardless of how bleak things may initially appear. In today’s post, we’ll take a look at some of these options.

Just last week a coalition of the nation’s six largest lenders met up with the goal of giving delinquent homeowners an additional month’s breathing room before proceeding with foreclosure. This comes after the interest-rate freeze for homeowners with subprime adjustable rate mortgages.

Customers who don’t fit the criteria for these programs still have options. In fact, the truth of the matter is that individuals who don’t qualify for the lender’s direct efforts to help may actually have more options to choose from. The best advice is to either contact your lender directly or (and we strongly recommend this option): contact a housing counselor.
Lenders have the ability to make decisions based on homeowners’ unique financial situation, even if you’ve already fallen behind.

Your lender is likely willing to collaborate with counseling agencies to make sure they are properly equipped with the information needed to develop a plan of repayment unique to you. Bank of America, JPMorgan Chase, and Citigroup all admit that they commonly work with such agencies to gain such client knowledge. Citigroup, in fact, set up a special team within its Office of Homeownership Preservation just to work with counselors.
You may be surprised to hear that lenders prefer when delinquent borrowers come to them through counseling agencies on account of the fact that these agencies come equipped with necessary information from the borrower (you).

Keep in mind that a housing counselor knows the process and has an established relationship with the lenders. They can aid you in working out a repayment plan specific to your needs. Analysts claim that these days are some of the most lenient as far as foreclosures are concerned. If you’ve fallen behind, don’t be afraid to put this reality to work for you.

Credit Counseling is big business in the Unites States and has been increasing in popularity each year over the past decade. Further prodding this statistic along is the fact that a recent federal law aiming to crack down on bankruptcy filing has pushed countless others into the counseling direction.

These new rules not only require extra steps before filing, but the consumer must first undergo credit counseling before seeking bankruptcy-court protection!

Naturally, finding out that bankruptcy is not an option without first attempting to get help sends many into a panic. The important thing to keep in mind is that the counseling may actually help get things in order and hence avoid the bankruptcy process entirely.

I’ve been spending a lot of time on the Federal Trade Commission’s fantastic site of late and fount some of their advice in selecting a credit counselor that’s right for you to be priceless.

Important Questions to Ask When Choosing a Credit Counselor

What services do you offer?
Look for an organization that offers a range of services, including budget counseling, savings and debt management classes, and counselors who are trained and certified in consumer credit, money and debt management, and budgeting. Counselors should discuss your entire financial situation with you, and help you develop a personalized plan to solve your money problems now and avoid others in the future. An initial counseling session typically lasts an hour, with an offer of follow-up sessions. Avoid organizations that push a debt management plan as your only option before they spend a significant amount of time analyzing your financial situation. Debt Management Plans (DMP’s) are not for everyone. You should sign up for a DMP only after a certified credit counselor has spent time thoroughly reviewing your financial situation, and has offered you customized advice on managing your money.

If you were on a DMP with an organization that closed down, ask any credit counselor that you are considering what they can do to help you retain the benefits of your DMP.

Are you licensed to offer your services in my state?
Many states require that an organization register or obtain a license before offering credit counseling, debt management plans, and similar services. Do not hire an organization that has not fulfilled the requirements for your state.

Do you offer free information?
Avoid organizations that charge for information about the nature of their services.

Will I have a formal written agreement or contract with you?
Don’t commit to participate in a Debt Management Plan over the telephone. Get all verbal promises in writing. Read all documents carefully before you sign them. If you are told you need to act immediately, consider finding another organization.

What are the qualifications of your counselors? Are they accredited or certified by an outside organization? If so, which one? If not, how are they trained?
Try to use an organization whose counselors are trained by an outside organization that is not affiliated with creditors.

Have other consumers been satisfied with the service that they received?
Once you’ve identified credit counseling organizations that suit your needs, check them out with your state Attorney General, local consumer protection agency, and Better Business Bureau. These organizations can tell you if consumers have filed complaints about them. The absence of complaints doesn’t guarantee legitimacy, but complaints from other consumers may alert you to problems.

What are your fees?
Are there set-up and/or monthly fees?
Get a detailed price quote in writing, and specifically ask whether all the fees are covered in the quote. If you’re concerned that you cannot afford to pay your fees, ask if the organization waives or reduces fees when providing counseling to consumers in your circumstances. If an organization won’t help you because you can’t afford to pay, look elsewhere for help.

How are your employees paid?
Are the employees or the organization paid more if I sign up for certain services, pay a fee, or make a contribution to your organization?
Employees who are counseling you to purchase certain services may receive a commission if you choose to sign up for those services. Many credit counseling organizations receive additional compensation from creditors if you enroll in a DMP. If the organization will not disclose what compensation it receives from creditors, or how employees are compensated, go elsewhere for help.

What do you do to keep personal information about your clients (for example, name, address, phone number, and financial information) confidential and secure?
Credit counseling organizations handle your most sensitive financial information. The organization should have safeguards in place to protect the privacy of this information and prevent misuse.

Asking the right questions can make all the difference in a situation as sensitive as mandatory counseling can be. Like always, I advise heading to the FTC’s site here.

In the confusion of attempting to make sense of financial chaos, it can be difficult to find a place to turn for honest help. The Federal Trade Commission of the United States government exists to protect American consumers despite the fact that they are most likely not the first choice of many who find themselves in financial trouble. The fact is their vast online resource is a great place to begin digging around if you have debt management questions that nobody seems capable of answering.

Take for example the following situation. What if your credit counselor has gone out of business?

What happens to your debt management plan (or DMP) if the credit counseling company that managed your debts shuts down? A counseling agency that is going out of business may send you a notice telling you that your DMP is being transferred to another company. Or it may tell you that you need to take some action to keep your financial recovery on track. If a government agency has filed an action against your credit counseling company, you may get a notice from a third party. If you discover that the organization handling your DMP is going out of business you need to:

Contact your bank to stop payment if you are making your DMP payments through automatic withdrawal.

Start paying your bills directly to your creditors.

Notify your creditors that the organization handling your DMP is going out of business. Consider working out a payment plan with your creditors yourself. Ask if they will give you a reduction on your interest rate without a DMP.

Order a copy of your credit report. Check for late payments — or missed DMP payments — that may result from the company going out of business. If you see “late” notations you don’t expect, call the creditor immediately and ask that the notation be removed.
Understand that they have no obligation to do it.

If payments are late because the organization handling your DMP has failed to make scheduled payments, the consequences can be just as devastating as if you failed to make payments to the DMP. If you do not act quickly to make arrangements with your creditors, you could incur late charges that increase your debt, lose the lower interest rates associated with the DMP, and have “late” marks on your credit report.

This and loads of useful information are available at the Federal Trade Commission’s site (http://www.ftc.gov) or directly by clicking here.