New rules effective January 10, 2014 require that if mortgage lenders provided monthly statements before a case, they must continue providing statements during the bankruptcy case.  These rules were promulgated by the Consumer Financial Protection Bureau (CFPB) pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act.  There are some exceptions to this rule such as for reverse mortgages or home equity lines of credit (HELOCs).  In addition to monthly mortgage statements, lenders must also provide at least two months advance notice of changes in the monthly payment amount due to a rate adjustment.

The CFPB regulations also address the use of “force placed” insurance by mortgage lenders.  Typically, if a borrower’s home insurance lapses, lenders are allowed to obtain their own “force placed” insurance which only covers the lender up to the balance of the mortgage if something happens to the property.  The lender then assesses the costs for this “force placed” coverage, often several times higher than the borrower’s private home insurance, to the borrower’s account.  “Force placed” coverage was sometimes even put in place when a borrower paid their home insurance premiums as part of their mortgage payment, so-called “escrow,” if the borrower fell behind on their mortgage payments.  Assessing borrowers the more expensive premiums for the force placed coverage would compound the amount of the mortgage arrears catapulting borrowers into foreclosure.

The new regulations require that if a borrower escrowed their home insurance premiums as part of their mortgage payment, lenders now have to continue paying these premiums, even when the borrower falls behind on their mortgage payments.  Mortgage lenders will no longer be able to swap in the more expensive “force placed” coverage.

For more detailed information on the new CFPB regulations, see the very informative article by Attorney John Rao of the National Consumer Law Center titled “New Servicing Regulations Adopt Sensible Approach” published in the May 2013 ABI Journal at page 16 and available at this link: https://journal.abi.org/content/new-servicing-regulations-adopt-sensible-approach

Jeff, a Chapter 7

The survey is very short and should only take a couple minutes to complete. If you have filed bankruptcy, please consider clicking on the link below to complete this voluntary survey.  Thank you.

https://docs.google.com/forms/d/1KL4nJyo0d9DnQY7os324gepVApr_EgMH_0FOeXhERvQ/edit

Once you have registered with TFSBillPay.com, you can safely make plan payments from your bank account directly to the Chapter 13 Trustee.  No more worrying if your payment was lost in the mail or credited to the wrong case because you can track your payments at the TFSBillPay.com site.  You can also schedule future payments.  All for the same cost (or less) than a money order or bank check.

Yes, I am very excited because I believe this will help my clients stay current on their plan payments and avoid the hassle and expense of Trustee Motions to Dismiss for failure to pay plan payments.  I would so much rather spend my time helping clients put their lives back together, than to nag about why plan payments weren’t made.  So, to all of my Chapter 13 clients, if you haven’t signed up for TFSBillPay.com yet, please do it today.  Thank you!

The training will cover the basics of representing a Chapter 7 debtor on a pro bono basis, including pre-filing considerations and counseling, preparation of the petition, maximizing exemptions, the role of the Chapter 7 trustee, and the 341 meeting of creditors.  The training will be held at the BBA at 16 Beacon Street in Boston from 3:30PM to 6:00PM, and will be followed by a reception from 6:00PM to 7:00PM.

Lawyers of all experience levels are encouraged to attend the training and reception to facilitate networking with newer members of the bankruptcy bar.  There is no fee for the training, but attendees are strongly encouraged to put their learning to use by taking on a pro bono case through the Volunteer Lawyers Project.

Joshua, a Chapter 7

It’s true, it is not an easy thing to discharge income taxes in bankruptcy.  There are many factors which influence whether a tax can be extinguished.  For example, it has to be a tax that was due at least three years ago (technically speaking, a tax for a year for which the return was due at last three years prior to the date the bankruptcy petition is filed).

And the return has to have been filed at least two year before the bankruptcy case is filed.  The return could even be filed late as long those two years have passed.  And there’s your first reason to file the tax return as soon as possible — to get that two-year clock running.  Yep, you may never need to file bankruptcy, but you’ll be so glad those returns were filed at least two years ago if you ever do.  But that’s not the most important reason to file your tax returns on time.

There’s a bigger, more insidious reason.  If you don’t file your tax return when it’s due and the IRS sees income on your w-2s and 1099s, the IRS can estimate the amount of tax they think you owe by preparing as Substitute For Return.  Once the IRS estimates the tax they think you owe on their Substitute For Return, they will let you know by sending you a bill.  And, yes, you can then file a real tax return to show the IRS you think you owe less than they estimated.

But, for bankruptcy purposes the IRS’s Substitute For Return does not qualify as a return for that two year rule.  Worse yet, bankruptcy courts have been deciding in recent cases, that any return filed by the taxpayer after the IRS has prepared a Substitute For Return does not qualify as a return for bankruptcy purposes.  That means that once the IRS prepares a Substitute For Return for a specific tax year, you are never going to be able to discharge that tax.  Ever.

So, yeah, you may never file bankruptcy, but you should file those tax returns . . . . just in case you do.