Fort Lauderdale Bankruptcy Lawyer Blog

From the FHA guidelines:

A borrower whose previous principal residence or other real property was foreclosed or has given a deed-in-lieu of foreclosure within the previous three years is generally not eligible for a new FHA-insured mortgage. However, if the foreclosure was the result of documented extenuating circumstances that were beyond the control of the borrower and the borrower has re-established good credit since the foreclosure, the lender may grant an exception to the three-year requirement. Extenuating circumstances include serious illness or death of a wage earner, but do not include the inability to sell the house because of a job transfer or relocation to another area.

If you have a foreclosure and then file bankruptcy in order to eliminate any potential deficiency judgments from the foreclosure, the longer waiting period would apply (see my blog article about buying a home after bankruptcy). For example, if you file bankruptcy and then your house is sold at foreclosure a year later, you would have to wait three years from the date of the foreclosure sale in order to qualify for an FHA mortgage again - even though it's only a two year waiting period after a bankruptcy.

In a previous blog entry, I answered a common concern that people have when considering whether to file bankruptcy. Can I buy a house again? The answer to that is yes, you can. After two years, you can qualify for an FHA mortgage again if you have qualify. So, how do you qualify?

In order to qualify for an FHA mortgage after a Chapter 7 bankruptcy, you must first wait until two years have passed since you received your discharge. During this two year period, you must have also re-established good credit and achieved a minimum credit score of 620. FHA guidelines currently define that as having at least three (3) credit lines that have been active for at least twelve months and always paid on time.

There is a misperception that once you file bankruptcy, you won't be able to get credit or buy a house for as long as the bankruptcy is on your credit report. This is false. Most of my clients begin to receive credit card offers in the mail again just months after their case is discharged.

Don't let what other people have told you about bankruptcy keep you from finding out the facts from a quaified professional.

A Chapter 7 bankruptcy does not disqualify you from qualifying for an FHA mortgage. In order to qulify, you must wait until two years after you receive your discharge. During those two years, you must re-establish good credit and demonstrate an ability to manage your financial affairs. Your credit score must also be a minimum of 620 by then. Additionally, the lender must document that the borrower's current situation indicates that the events that led to the bankruptcy are not likely to recur.

A Chapter 13 bankruptcy does not disqualify you from obtaining an FHA mortgage. In a Chapter 13, the lender must show that one year of the payout period under the bankruptcy has elapsed and your payment performance has been satisfactory (i.e., all required payments made on time). In addition, you must receive permission from the court to enter into the mortgage transaction.

On my website, I have a section on fiing bankruptcy without an attorney (pro se). The bankruptcy forms appear deceptively simple. They are available online at the bankruptcy courts website. They even have explanations for every section explaining what should go in that section.

On top of that, there are document preparers that will fill out the forms for you and charge you $500 to $600 for doing so. I've had clients that paid preparers to file the forms and still ended up in my office because the forms weren't done correctly, or better yet, they paid the money and were under the impression that the case was filed and nothing was ever done.

But let me tell you what happened at a 341 meeting this week that illustrates why going cheap usually ends up a lot more costly. It's not what you know that will hurt you (how to fill out the forms) - It's what you don't know.

At the 341 meeting, you're in a room with others who are waiting their turn to meet with the trustee. As a result, we all see and hear what happens in other cases. As I was waiting for my case to be called, the case before me was a pro se case (self-represented). The debtor had two cars. One was hers and the other belonged to her granddaughter but was in her name. Her car was a late model vehicle that was paid off. She valued the vehicle at $5000 but in reality, the car was worth $9,500 (the trustee looked up the value right there). Her only two options at that point were to pay the trustee $9,500 to keep the car or turn the car over to the trustee. Not having the money, she made arrangements to drop the car off this week. OUCH!

I hate to see things like that happen because they really don't have to. I know that paying a bankruptcy attorney legal fees is hard when you're already having financial difficulties but in the case I just mentioned, not having an attorney cost her $9,500.

Many Broward bankruptcy attorneys provide a free initial consultation. I'm thinking that this poor woman didn't take one of us up on it and lost her car as a result. Don't let this happen to you! Most people won't try to fix their car themselves or venture into other areas that they know are best left to a professional.

I read with amusement the filed response by Deutsche Bank regarding "Execution of Signed Affidavit" in a foreclosure case (Deutsche's Response to Bogus Affidavit.pdf). It showcases the strategy that banks are going to use in whitewashing the rampant fraud that has taken place in the mortgage industry. Your first clue that there is a problem is the title of the case. The case caption (title) reads: Deutsche Bank National Trust Company, as Trustee for Long Beach Mortgage Loan Trust 2006 -4 v. India Channels. Although the bank suing for foreclosure is Deutsche, the bank filing a response is Chase! The filing states:

"Chase/Washington Mutual Bank, FA has engaged independent outside counsel to review its affidavit preparation and signature process to confirm that it satisfies documentary and
evidentiary standards. Chase/Washington Mutual Bank, FA requests that the court not
enter judgements in pending matters until it completes this review. It is anticipated that this review should be completed in a few weeks."

From all reported accounts, we're talking about hundreds of thousands of affidavits and they're going to review them all for accuracy in a few weeks? Riiiiight. First we had Robo-signors and now they will appropriately be reviewed for accuracy by "Robo-Reviewers."

The Florida Attorney General is on the executive committee of a nation wide task force of AG's looking into this problem. The problem is huge. Everyone should be outraged if criminal charges are not brought for this ongoing and intentional fraud upon homeowners everywhere by the banking industry and law firms they employed. What about you? Are you sure that whoever you're paying your mortgage to has a right to collect the money? This affidavit issue is just the tip of a huge iceberg.

The documents would not have to be backdated, forged, etc if they had been properly endorsed to begin with...but it appears that they weren't. I'll be writing more on this issue - stay tuned!

There are weeks that I seem to get asked the same question repeatedly during the free Chapter 7 bankruptcy consultations that I provide. When that happens, that question usually becomes a blog post! This week's question has actually been coming up for a couple of weeks now so it's overdue for a posting.

The question on most minds lately is: Can my employer take any action against me for filing a bankruptcy? This has come from prospective clients in the banking industry, goverment and also those that are looking for a job. There's no easy answer to that one.

There is federal law that prohibits a government entity (federal, state, local) from discriminating against someone solely because they filed for bankruptcy (11 U.S.C. sec. 525(a)). The prohibited actions include denying someone a job or firing them.

In re Kanouse, 153 B.R. 81 (Bankr. S.D.Fla., 1993), the Court found the language of Section 525(b) to be plain and unambiguous on its face: Section 525(b) provides a remedy to "an individual who is or has been a debtor under this title, a debtor or bankrupt under the Bankruptcy Act, or an individual associated with such debtor or bankrupt ..." 11 U.S.C. Section 525(b) (emphasis added). Section 525(b) bars employment termination or discrimination by a private employer against a debtor or former debtor solely because such debtor: (1) is or has been a debtor under the Bankruptcy Code; (2) has been insolvent before the commencement of a case under the Bankruptcy Code; or (3) has failed to pay a dischargeable or discharged debt. (I emphasize the word "solely")

If you noticed, I emphasized the word "solely" in both of those paragraphs. The reason for that is because an employer cannot use bankruptcy as the sole reason for making a decision, but they can use other reasons such as performance issues as a reason for taking disciplinary action (including dismissal) and the bankruptcy becomes a secondary issue. The law clearly states that a bankruptcy cannot be the only reason that an action is being taken against the employee.

When it comes to hiring, government employers are expressly prohibited from denying someone a job because the person filed for bankruptcy. However, there is no similar "express prohibition" directed at private employers under the bankruptcy code. This has been tested in lawsuits and unfortunately many courts appear to land on the side of private employers on this one and rule that private employers have a right to refuse employment to someone because of a prior bankruptcy.

A recent example of this is found in a Pennsylvania case: Rea v. Federated Investors (W.D. Penn. Jan. 29, 2010). The U.S. District Court in Pennsylvania ruled that Section 525(b) of the bankruptcy code does not prohibit a private employer from refusing to hire a job applicant solely because they had previously filed for bankruptcy seven years earlier.

In reaching its decision, the court seemed to focus on the wording of Section 525 section "a" and section "b." It expressly commented on the fact that while the phrase "deny employment to" was found in Section 525(a) regarding government employers -- it was not present in Section 525(b). By this exclusion, the Court opined that Congress intended to leave it out and not bind private employers to that standard.

Continue reading "Can my Fort Lauderdale Employer Fire Me Because I File a Chapter 7 or Chapter 13 Bankruptcy?" »