Los Angeles Bankruptcy Lawyers Blog

Minimal research of Chapter 13 Bankruptcies in Pasadena will reveal that the main advantage of this option is to save your home from pending foreclosure. However, with an appraisal of your home, you may be able to strip away your second lien ("lienstripping) as long as the following is true:

Your home value must be below the value of your first lien. In other words, if the home is sold, only the first lien holder would get paid because there is nothing left for the second lien holder.

In this case, one can totally strip away the second and convert it into unsecured status, which gets treated like a credit card. If you can successfully maintain your payment plan in a chapter 13 throughout the payment period (3 to 5 years), then any remaining unsecured debt is wiped away. You can emerge with a fresh start, and a home that no longer has a second mortgage on it.

If you have a job, want to keep your home, but are having trouble making ends meet, give us a call or e-mail and we will guide you through this process and see if a Chapter 13 Bankruptcy can be the right solution for you.

Kirk Laron
Pasadena Bankruptcy Attorney

Most of us will remember the effort the Obama administration made in March and April 2009 to pass legislation permitting Bankruptcy Judges to modify or "cramdown" a mortgage to the present value of the homeowner's real estate. The legislation passed the House but was defeated in the Senate. Now, Congressman Barney Frank wants to give "cramdown legislation" another shot. The legislation would benefit homeowners whose homes are "underwater," i.e., of lesser value than the mortgage on the home, by cramming down the mortgage to the present value.

Another term getting a lot of press and a similar effect is "lienstripping" in bankruptcy. "Lienstripping" is bankruptcy jargon referring to a debtor's ability to reduce an undersecured creditor's claim to the present value of its collateral through claim valuation., Lienstripping has the effect of dividing an undersecured creditor's claim into secured and unsecured portions: The unsecured portion of the lien is "stripped" from the collateral and the deficiency between the total debt owed and the collateral's present value becomes an unsecured claim. The lien on the collateral remains only in the amount of the "secured" claim. Unfortunately, this process is limited to the reorganization cases, i.e., Chapter 11 (debtors whose debt amounts to over $1,010,050) and Chapter 13 cases and cannot be applied to the first mortgage of a debtor's principal residence (cramdown legislation would permit this extension) on the first mortgage. However, lienstripping can apply to a "junior lien" (second or third mortgage) on a principal residence. For example, Creditor 1 has a $200,000 claim on the principal resident and Creditor 2 has a $100,000 claim on the same home for a total of $300,000 and the home is only worth $160,000. By bifurcating the secured and unsecured claims, the Creditor 2's claim becomes unsecured and can be eliminated from the debtor's repayment plan.

Lienstripping applies to real estate, automobiles, boats, airplanes and other items. With exceptions and limitations, this process becomes quite complex and you should have bankruptcy attorneys such as Frazee/Laron handle these procedures for you.

--RoseAnn Frazee--
Los Angeles Bankruptcy Attorney

If you are a Los Angeles resident contemplating Bankruptcy but are having feelings of shame or guilt, rethink those feelings as they are likely misplaced and you are being too hard on yourself. A recent article in USA Today demonstrated just how obvious Bankruptcy filings have directly followed Foreclosures linked to the Housing Crisis. Nevada now has the most filings in the United States, and the fact that the state is home to the highest foreclosure rates is no accident. The days of Bankruptcy being reserved for the irresponsible are officially over. Fortunately, an individual has some choices, and can file a Chapter 7, Chapter 13, and even a Chapter 11 to keep assets and get a new lease on life.

If you are contemplating Bankruptcy because your finances are out of control, it is likely because of a job loss or cut in hours, a serious medical problem or illness that has happened to someone who is no longer employed with health insurance, or a person who was taken by an exotic loan that ballooned out of control when the teaser period ended and can't sell the house for even half of what they bought it for.

Remember, a Bankruptcy can actually save your home if you can file a Chapter 13 Bankruptcy, or you can still keep your home under a Chapter 7 if your equity has fallen dramatically (which includes just about everyone in Los Angeles) as long as you keep up your payments. However, this choice is a serious one that needs professional attention. As a Los Angeles Bankruptcy Attorney, I can evaluate your particular situation and develop the smartest way to handle a difficult financial crisis. Take action, get the help you need, and look forward to a new beginning where you don't have to wallow in the financial misery that has swallowed literally millions of Americans.

Kirk Laron
Los Angeles Bankruptcy Attorney

If you live in Los Angeles and have had financial difficulties, chances are a week does not go by without hearing about great programs that can easily modify your home loan to two percent or ways to have the bank write off some of your debt. Others advertise that they can simply consolidate your loan so that you make one easy payment. Here's another one: play the lottery and you can win millions of dollars! It is so sad that many of these companies not only do not deliver on their promises, they are scamming the very people who are most financially desperate out of what little money they have left just so they can believe the dream of easily getting out of debt just by signing up with these companies who just need you to sign their contract and they'll take care of the rest.

Here's a real Debt Consolidation Program: A Chapter 13 Bankruptcy. This program actually looks at what your disposable income is after all your debts and allows you to take that amount as your monthly payment. It lasts anywhere from 36 to 60 months depending on your income level, the amount never changes, and here's the best part. YOU DON'T PAY ANY INTEREST AND THE FEES COME OUT OF THE MONTHLY PAYMENT FOR THE LIFE OF THE LOAN.
So, what is the biggest concern? My credit is going to be ruined, right? Well, I have yet to meet someone on the verge of Bankruptcy who has excellent credit. What is even more interesting is that right after you declare Bankruptcy, you are a safe bet for creditors because you can't declare Bankruptcy again for another eight years. Within a few months, low and behold, credit card companies are already invading your mailbox once again.

Of course, there is more to it. But, remember, unlike the Consolidation, Modification, Lottery Markets, Bankruptcy is actually governed, regulated, and protected. Before you get scammed again, talk to a reputable Bankruptcy Attorney because the old adage is simply true: If it sounds too good to be true, it probably is.

Kirk Laron
Los Angeles Bankruptcy Attorney

Avoiding Bankruptcy has now become a cottage industry: Loan Modifications, Credit Counseling, Negotiations with Creditors have all become Catchy Slogans for many new business ventures - some reputable and some downright crooks. Most clients are willing to do just about anything to avoid Bankruptcy on their record, but many of these options do not make mathematical sense, especially when there is little chance of a higher income in the near term.

A recent article in the Chicago Tribune gives some signals that suggest a Bankruptcy might be inevitable, but I believe most people have the common sense to know in their gut when the mountain of debt is insurmountable.

Personal bankruptcy filings for July were up 34 percent over last year, according to the American Bankruptcy Institute. This is now the highest monthly total since the infamous 2005 change to bankruptcy laws, making it more difficult for debtors to file. Translation: Average Californians are getting financially devastated by current economic conditions, their State Government is so beholden to Special Interests that it is incapable of responding to the downturn, and a catastrophic correction finally occurred in artificially created Housing Assets that Bankruptcy has become the only realistic option for average folks.

This is what you won't often be told. Historically, the number one reason why a person does not declare Bankruptcy is because they have to protect the Equity in their Home. What used to be an insurmountable obstacle is now just a little bump in the road. No equity translates to a free pass to the world of Bankruptcy Relief. It's not that simple, of course, but it is a big deal, and does much to explain why the tougher Bankruptcy Laws of 2005 have done little to impede Bankruptcy Filings of late. As a Los Angeles Bankruptcy Attorney, I will take a in depth look into your particular situation and determine if Bankruptcy is your best option. Hopefully, I can tell you whether a Chapter 7 Bankruptcy is the right choice BEFORE you spend money on other options that don't work.

- Kirk Laron
Los Angeles Bankruptcy Attorney

Many California residents contemplating Bankruptcy have been frustrated in their attempts to avoid foreclosure. Some of the excuses given are that the lenders cannot convince their investors to sign onto a typical Government Loan Modification Program. Another reason is that lenders may not be motivated by a homeowner who is not far behind in their mortgage payments. This has led to a whole new industry that charges people to pay for the Dream of a Loan Modification and avoid Bankruptcy. Most of the time, they end up not getting the modification, while wasting money on fees.

How about this reason for not getting a loan modification? Delinquent loans bring huge fees to mortgage companies, which are then collected after a home is sold! In other words, homeowners who fall behind are perfect investments for a mortgage company looking to increase their profits. While the Obama administration continues to put pressure on various mortgage companies to process loan modifications and various other foreclosure avoidance programs, it is an uphill battle that fights against the essence of the Capitalist spirit - Increased Profits.

Just think of the various services that benefit from the foreclosure process. Appraisals are needed, more title searches are performed, there is a need for more insurance policies, just to name a few. All of these ancillary services profit from the foreclosure of a home.

The result of all this is a classic example of a conflict of interest that the mortgage companies simply cannot avoid. On the one hand, they have the prospect of collecting exhorbitant fees for a delinquency. On the other hand, they are supposed to look out for the investors who are the true owners of these mortgages to ensure that they are protecting that investment. Just one more of the many reasons why loan modifications are not as easy as people think. In the end, Bankruptcy is often the only realistic option. As a Bankruptcy Attorney, I will not suggest that a client declare Bankruptcy unless it makes sense. Many times, it simply makes sense and actually avoids needless fees and expenses.

Kirk Laron
Law Offices of Frazee/ Laron

The Means Test can really make life difficult for someone who can't make their high rent and other various payments, but who makes a decent wage. The reason is that "rent" expense is controlled by the government, who basically tells you what your rent should be in the area you live, not what you are actually paying. In Los Angeles, rent can be astronomical, but the Bankruptcy Guidelines may not allow you to utilize your full rent expense for purposes of the Means Test. As a result, you may be unable to make ends meet, but cannot declare a Chapter 7 Bankruptcy because your income is over the State Average.

However, a high mortgage can save you in this situation. This is because the Means Test allows you to deduct your actual Mortgage Expense, not what it ought to be in Los Angeles. So, if you have a very high Mortgage, like almost everyone in California these days, your high income may be offset by a high mortgage, which can allow you to declare a Chapter 7 Bankruptcy, whereas a similarly situated renter will not qualify.

One important Caveat to remember, though. If you have too much equity in your home, which is not much of a problem these days for most people in Los Angeles and California in general, the Trustee could sell your home to take the equity for your creditors. As a Los Angeles Bankruptcy attorney, I can investigate your homestead exemption as well as all other relevant exemptions to ensure that this will not happen.

The lesson here is that there is at least one advantage to having a Huge Mortgage Payment. It makes your chances of declaring a Chapter 7 bankruptcy much better, even though you may not initially qualify because your income is over the State Median.

- Kirk Laron
Los Angeles Bankruptcy Attorney

According to a new analysis released by the Center for Public Integrity, the top five subprime lenders in U.S. were based in Los Angeles or Orange counties. Countrywide, Ameriquest Mortgage Co., New Century Financial Corp., First Franklin Corp. and Long Beach Mortgage Co. are the top five lenders who accounted for nearly $998 billion of the $1.4 trillion subprime mortgages made from 2005 to 2007. Countrywide Financial Corp., formerly headquartered at 4500 Park Granada in Calabasas, is a "key mortgage meltdown culprit" as coined by the Daily News. Countrywide topped the center's list of 15 lenders responsible for extending subprime mortgages to homeowners who might not otherwise have qualified for a mortgage.

For instance, the borrower was qualified for the loan at an introductory "teaser rate." The "teaser rate" is only good for a few years, and then the payments increase with the thought that the borrower's income would likewise increase. Regretfully, the borrower's income has often decreased in this economy, especially for salesmen on commissions. The salary decrease, along with the homes prices decrease, have left homeowners "underwater" and unable to continue the roll of refinancing.

John Dunbar, Director of the center's mortgage analysis project, is quoted as saying: "It was just a real lust for high yields and profits. Call it greed if you want." Kirk and I have seen clients in our Pasadena Bankruptcy law offices who were refinanced year after year with their mortgages increased by closing costs such as loan origination fees. Even more sadly, the loan officer would encourage the borrower to increase the loan even more to cause higher origination fees. The loan origination fees are the fees charged by the lender and one of the charges that go directly into the lender's profit pockets leading the borrower into "underwater" coffins.
-RoseAnn Frazee