Sacramento Bankruptcy Lawyer Blog

There is a growing consensus that the federal Home Affordable Modification Program (HAMP) championed by the Obama Administration is a failure. Borrowers blame the banks for not being responsive and banks lay that same accusation at borrowers along with claiming that they are not properly submitting paperwork. Through November 30, only 31,382 permanent loan modifications had been completed under HAMP. With predictions for 1.7 million foreclosures in 2010, HAMP is barely a drop in the bucket.

A major problem is that HAMP requires income, and many borrowers face foreclosure because they have none. Also, the approval process is frustratingly bureaucratic, with confusing paperwork flying back and forth often discouraging borrowers.

There are a number of suggestions on how to improve HAMP. Provide direct loans to unemployed homeowners. Compel banks to write-down mortgage principal on mortgages that exceed home values, which is the case for more than a quarter of homeowners. Force banks to rent foreclosed properties to former homeowners. Apply more government pressure to ensure that loan servicers are properly handling loan modifications. Organize the mortgage industry to provide more help for borrowers to navigate the process. Finally, there are even those that advocate for nothing to be done because those that got themselves into trouble should suffer the consequences, and the economy would recover quickest if foreclosures sank housing prices.

It is true that HAMP has been unsuccessful for most distressed borrowers. Still, HAMP does provide relief to borrowers that patiently work the system. Homeowners may benefit from speaking with an attorney who has successfully negotiated loan modifications to avoid foreclosure.

In November 2009, the Wall Street Journal published an article on the rise of expungement requests from job seekers who want to erase their criminal pasts. California Penal Code Section 11121 allows a person review records of the Department of Justice's Bureau of Criminal Identification and Information. In the civil arena, judgments affect credit scores.

Because background checks do not forgive the past, people fear the stigma attached to bankruptcy. It's not a planned life interruption. People plan on college, a job, a house, a family; but do not plan unemployment, costly medical procedures, or legal troubles. Yet, life is what is left, not what is lost.

Marty Nemko, a career coach and personal coach, gives inspirational speeches on not becoming a victim to circumstances. In a talk to job seekers on November 13, 2004 at CPC Job Connections in Danville, CA, Nemko called failure his friend. Nemko spoke about his father who died at 86. In 1939, when his father was a teenager in Poland, the Nazi knocked. The family left in 24 hours with what can be taken in a bag. Everyone in his father's family was killed except his father who was placed at a concentration camp. Luck came when his father stayed in a tunnel with Christians for a year until being dumped in the New York Bronx without speaking English. In New York, his father found a job sewing shirts in a Harlem factory, and attended high school at night. On weekends, his father asked a factory owner if he could buy shirts for $1 and sell them at a harbor for $1.50. Even though the Nazi took 5 years from his father's life, Nemko said his father only looked forward.

These days, employers expect people to work at wages back 10-20 years ago. In the legal market, there are nonprofit attorney openings for 5+ years experience paying $40K-$50K/year; craigslist.org postings for independent contractor attorneys at $15/hour; and law clerk openings for free trial assistance.

It's like The Girlfriend Experience, a movie about a girl who makes $2K/hour. She thinks nobody does what she does. She's a high-end Manhattan prostitute. In a recession, no one is that special. Everyone does what she does. If "rapist" is hyperbole for user, "prostitute" is hyperbole for someone selling him/herself short. Do not confuse sex to be the way to use someone; money is the medium for human affairs.

No one lives without blemishes. The media exposes people who stray from their plans - married lawmaker on family matters committee boasting about lobbyist mistresses, doctor with $150K/month salary overdosing celebrity client, diligent lab technician murdering a co-worker. It's not education, family upbringing, or affluence that define people. Detach from plans to become comfortable with uncertainty. When every world object falls at death, there is nothing worthy of losing. Not fearing obstacles is what differentiates the survivors.

Continue reading "Expungement Requests" »

The filing of a bankruptcy case automatically creates an injunction for debtors. 11 USC Section 362. Litigators on the verge of obtaining a judgment have been frozen when the defendant seeks bankruptcy. A bankruptcy petition immediately stops foreclosure sales, wage garnishments, and prosecution of lawsuits.

Take for example The Pacific Lumber Company with a case in United States Bankruptcy Court for the Southern District of Texas, Corpus Christi Division, Case No. 07-20028-C-11. The Pacific Lumber Company is known for a September 28, 1996 Agreement with MAXXAM, Inc., the United States of America, and the State of California, where the parties agreed to use best, good faith efforts to achieve expedited development of a Sustained Yield Plan on the harvesting of lumber.

According to Environmental Protection and Information Center, et al., vs. California Department of Forestry and Fire Protection, et. al. (2008) 44 Cal. 4th 459, the California Supreme Court Case held that California Department of Forestry did not properly approve a final Sustained Yield Plan. Though several Forest Practice Rules requirements were not met in the draft Sustained Yield Plan, it may be unlikely for litigation against The Pacific Lumber Company on the matter while it is in bankruptcy.

The bankruptcy filing suspended litigation against The Pacific Lumber Company, but The Pacific Lumber Company could proceed as a plaintiff against others. This is because litigation where The Pacific Lumber Company is a plaintiff is considered an asset, whereas litigation against The Pacific Lumber Company is considered unsecured debt.

The automatic stay applies to debts or claims that arise before a bankruptcy filing. A debtor may still be sued after the commencement of bankruptcy for claims post-petition. Gonzalez v. Parks (9th Cir. 1987) 830 P.2d 1033.

Continue reading "Automatic Stay" »

The following is a fictitious scenario:

Year 2005: Jeff, Controller never thought he would settle in California, but the politics start here, the best athletes are from here, the fashions are ahead of everyone else's. Everyone knows the major cities from rap: Frisco for San Francisco, Sacto for Sacramento, Oaktown for Oakland. People judge based on area code, and if asked where they're from, they give their area code. 2 hour commute from the 831 to the 650, but the commute is an excuse when late. To some, Jeff's life is perfect. The office is walking distance from a pool, East West Bookstore, and ethnic foods (Vietnamese, Greek, Mexican...). Silicon Valley is where the money is. Save on groceries - free snacks, sodas, lunches. Save on water - free showers, gyms. Save on tickets - free parking. In other places, the best you may get is a filtered water cooler with little paper cups.

Year 2009: Jeff was shown the door when after returning from lunch. Jay, his manager, discussed ridding him all day behind closed doors, but pretended there was nothing happening when he asked Receptionist to help on one of his quarterly goals, when he expensed a training course. Jay read from a script and left on the guise that he had to take care of personal business so he would not need to say anything further to Jeff. Before the meeting, Jay instructed IT Manager to take Jeff's computer away so it would be gone by the time he returned to his desk. Facilities Manager wouldn't let him take his personal things, afraid that he would steal confidential information. She would not let him sit at his desk to read the exit paperwork. She treated Jeff like he stole something, and rushed him out the door.

Continue reading "Bankruptcy Discharge" »

Forbes Magazine ranked the Sacramento area 91st out of the country's 100 largest metropolitan areas in its ranking of bang-for-your-buck cities. Sacramento scored mediocre at best in Forbes' eight categories: housing affordability (47), travel time (75), real estate taxes (65), unemployment (85), vacancies (72), job forecast (70), home price forecast (67), and foreclosures (93). At 91st overall, Sacramento was in the middle of a cluster of Northern California cities, with San Francisco (90) ranked just ahead and San Jose (92) ranked just below.

Sacramento has especially suffered from the collapse of its housing market, which has made it a national leader in foreclosures and vacancies. It also scored very low in joblessness, a reflection of the near total absence of construction after the building boom of a few years ago. On the plus side, its relatively solid rank in housing affordability may portend an eventual housing market. Housing prices have dropped 30 percent over the last three years.

The Forbes ranking highlights how the recession has hit California particularly hard. The state's highest-ranked areas are Modesto (48) and Stockton (59). At the top of the list are cities in the middle of the country. The top three, respectively, are Omaha, NE; Little Rock, AR; and Jackson, MS.

The U.S. Bankruptcy Court for the Eastern District in Sacramento will hold an auction of two dozen Sacramento-area commercial properties on January 14. It is anticipated that the properties will fetch as much as $35 million.

The properties were owned by Roseville developer Abe Alizadeh and his development company, Kobra Properties, Inc. Kobra filed for bankruptcy in 2008 with $300 million in debt. Among the 24 properties are two T.G.I. Friday's in Vacaville and in Sacramento, nine area Jack in the Box restaurants, a Woodland Sonic Burger, and vacant lots. All of the lots have minimum bids, the highest being the former Vacaville T.G.I. Friday's, which has a minimum bid of $3.25 million.

A surprising number of potential bidders have come forward to inquiry about the properties despite the still-rough commercial property market. Property Manager Mark Thomann told the Sacramento Bee that his firm has received inquiries from 125 parties. Buying the properties may include approvals from Jack in the Box and T.G.I Friday corporate headquarters to reopen franchises on the sites.

The amount of interest and the willingness of corporate franchisers to work with new ownership bodes well for current Kobra employees and those looking to return to work in the restaurant industry. Kobra employed thousands in the Sacramento area. A successful auction will be a boon for the local job market.

Swift Dodge Sacramento will close permanently after 42 years of operation. The dealership was named after Chuck Swift and continued to run under his son Bob Swift until Bob's death on October 21. At one time, Swift Dodge was the No. 1-ranked Dodge dealer in Northern California.

When the financial crisis hit the Big Three U.S. automakers, much was made of the potential trickle-down effect of their demise. Chrysler and G.M. filed for Chapter 11 bankruptcy and amid their restructuring their relationships with manufacturers and dealers were disrupted.

The trickle-down theory fits what happened to Swift Dodge. Chrysler owned the Dodge brand and filed for Chapter 11 bankruptcy on April 30. Although Bob Swift declared that Swift Dodge was going to stay open, without new inventory that position became untenable. Now, not only has Sacramento lost an iconic business, but Swift Dodge's employees are out of their jobs at a time where finding similar employment at other car dealerships may be the toughest it has ever been. In the last year, more than a dozen Sacramento-area car dealers shut down.

Swift Dodge's lease at 2301 Arden Way expires on December 31 and Colliers International has yet to find a new tenant for the 2.5 acre property. The vacated lot will be one more example of how one company's bankruptcy can change the face of communities thousands of miles away.

Stockton developers are suffering as badly as Sacramento-area builders. Stockton also enjoyed a meteoric rise in land value and development projects during the housing boom, and has suffered just as badly from the bust. Construction has nearly come to a halt and a steady stream of foreclosures prevents a job-creating resumption of building.

During the boom, developers would gobble up land and develop it as quickly as possible. To do so, they overleveraged themselves with cheap credit. When credit dried up and housing prices fell off a cliff, many developers held unbearable levels of debt. With their projects' values suddenly a fraction of what they had initially projected, they had no prospects of repaying the debt and filed for bankruptcy. Nationally, one in five developers filed bankruptcy or closed, and that rate was surely higher in the Stockton and Sacramento areas.

Developers that survived have built at a much slower pace. According to the Stockton Record, KB Home does not build until a home is sold, and the homes that it does build have been smaller. And with one in 85 existing Stockton homes going into foreclosure in November, there is a lackluster market for new homes because of so many cheap recently-built homes coming onto the market.

For development to rekindle and supply more construction jobs, the tide of foreclosures will have to be stemmed. Hopefully, the federal government's Home Affordable Modification Program begins working more effectively. Each home that avoids foreclosure reduces the housing supply and props up everyone's home values.

California housing market may be stabilizing, but Cynthia Kroll, a senior regional economist for the Fisher Center for Real Estate and Urban Economics, at UC Berkeley, reports prices are unlikely to fully recover in 2010. Read her research report titled "California Housing in the Subprime/Credit Crisis -- Overview and a Forward Look at Recovery." This may drive more homes into foreclosure.

The article does a study on median home prices, and provides statistical analysis on California trends as compared to US home prices. The extended recovery will affect everyone with real estate interests (lenders, investors, borrowers) in California.

With commercial property, Brady W. Dunnigan at Dinsmore & Shohl LLP reports in his article "Why is a "financeable lease" crucial to your loan?", that lenders are focusing on financeable leases to ensure consistent cash flow and terms that protect them from liability in the event of property foreclosure.

In analyzing whether a lease is financeable, the lender will review the creditworthiness of the tenant. Security deposits and personal guarantees of the tenant's obligations are important.
The lender may require each tenant to sign a subordination, non-disturbance, and attornment agreement (SNDA), to ensure stable occupancy and rental payments if there is a loan default and subsequent foreclosure of the loan by the lender. In the SNDA the lender and tenant agree that:

• the lease is subordinate to the lender's mortgage;
• as long as the tenant is not in default of the lease, it will not be affected by the owner's loan default and subsequent foreclosure; and
• if the lender or a new owner takes over from the original owner, the tenant will acknowledge the new owner as its landlord under the lease.

Continue reading "Real Estate Recovery Unlikely in 2010" »

In October 2009, the SEC charged billionaire hedge fund manager Raj Rajaratnam and his hedge fund advisory firm Galleon Management LP with insider trading that generated more than $25 million. The SEC also charged senior executives at major companies IBM, Intel and McKinsey & Company, alleging Rajaratnam obtained insider tips and confidential information about corporate earnings or takeover activity, including Google, Hilton, and Sun Microsystems.

How does insider trading hurt everyday consumers? Some argue it may undermine public confidence in the securities markets, or cause everyday investors to lose great amounts of money falling into financial difficulties. Insider traders with private information misappropriate corporate returns at the expense of other shareholders.

This is why a company looking to buy back its own stock when it thinks its market price is undervalued, or to improve return on equity or earnings per share, might comply with Securities and Exchange Commission Rule 10b-18 under the Securities Exchange Act of 1934 to obtain a limited safe harbor from anti-manipulation provisions relating to manner, time, price, and volume conditions.

When people fear that insiders regularly profit at their expense, they may not be willing to invest. Companies prefer that their securities trade in markets with many traders, and frequent opportunities to trade. When a company becomes thinly capitalized because of low volume or inability to meet stock exchange listing requirements, it may result in bankruptcy, leaving employees unemployed. The most common reasons for filing personal bankruptcies are unemployment, overextended credit, and large medical expenses.

Continue reading "Insider Trading and Bankruptcy" »

ReputationDefender, launched in 2006 to defend people's good name on the Internet, discusses on its blog on November 17, 2009 and November 16, 2009, about its attendance at the National Association of REALTORS (NAR) Conference in San Diego, CA. People looking for professional assistance in loan modifications and foreclosures might look online for information on realtors, lenders, and other professionals prior to engaging them. Social media has become the connection between buyers and sellers in this job market.

Many professionals are building web properties with blogs to relate the news, professional networks like LinkedIn to connect with customers, and messaging services like Twitter to share insights. Can a professional who publicizes inappropriate photographs and poor online communications do well in representing someone in something as serious as negotiating a short sale? Do not check just the professional, but any friends and family members linked to the professional on social networks. For instance, can an attorney who purchases alcohol for an under 21 son who posts photos of him and his friends drinking on FaceBook really obey all laws in a representation? Poor judgment on a personal level may lead to poor judgment on a career level.

ReputationDefender suggests that professionals monitor their name online like setting up a Google News Alert or signing up for MyReputation. ReputationDefender advises to separate work and play and be careful of oversharing. Anything published on the web may be considered public even if locked only to approved friends. Friends may become enemies, spouses may get separated, and photos are easily emailed to non-friends and future employers.

It's best to search all avenues of content on someone to get a full picture of the professional. For example, David Thompson is the General Counsel and Chief Privacy Officer at ReputationDefender. Though his bio details deep experience in Internet technology and the law, his LinkedIn profile shows him as graduating from Stanford Law School in 2007. Of course, some people can rise to the top quick. Thompson founded his first Internet business in 1996 before entering college at Yale University. Highlights of his legal experience include clerking for Chief Judge Alex Kozinski of the Ninth Circuit and clerking for Justice Antonin Scalia of the Supreme Court of the United States. His personal web site at www.davidcthompson.com shows him as having prior interests in bankruptcy laws:

• "Note: A Critique of 'Deepening Insolvency,' a New Bankruptcy Tort Theory," 12 Stan. J. L. Bus. & Fin. __ (2007) (describing a bankruptcy theory of liability).
• The Johns-Manville Bankruptcy in Bankruptcy Stories (Foundation Press 2007).

Continue reading "ReputationDefender" »

Under 11 U.S.C. § 547(b)(4)(A), transfers made from the debtor's estate up to 90 days prior to filing of the bankruptcy petition are avoidable by the trustee as preferential transfers. In other words, the bankruptcy trustee can undo any such transfers because they are deemed to improperly favor the recipient over other creditors.

However, under § 547(c)(4), those transfers are not preferential if the creditor made a new loan after the borrower paid off the old loan. This exception is designed to protect revolving credit arrangements. Typically, a credit card provides a borrower with a debt limit that cannot be exceeded. If the borrower pays the full balance one month, then the next month the borrower has the full credit limit at his disposal. If the borrower has not paid the full balance, then the following month he has a correspondingly less amount at his disposal to borrow.

Hence, it is unfair for the lender if payments made prior to a new loan are undone. The lender would not have offered the new loan unless it received those payments.

An illustration: John has a $1000 credit limit. He uses $600 to make purchases in Month 1 and pays off the full balance at the end of the month. In Month 2, he makes total purchases of $800 and pays off the full balance at the end of the month. In Month 3, he makes $1000 in total purchases, but does not pay off the balance and files bankruptcy. Under section 547(c)(4), John's payments at the end of Months 1 and 2 are not preferential transfers, and the lender does not have to return the payments to John's bankruptcy estate.

Bloomberg reports that country-wide foreclosure filings are projected to hit 3.9 million for 2009, the second consecutive record-setting year. In 2008, there were 3.2 million filings. Through November this year, there have been 3.6 million filings. On the positive side, filings fell 15 percent from their July peak and 8 percent from October.

But, the data still does not leave much room for optimism. University of California, Berkeley economics professor John Quigley believes that the housing market will not improve until unemployment does. National unemployment continues to hover around ten percent, and projections do not forecast job growth until well into 2010. And when there is job growth, it will take some time to recover from the 7.2 million jobs that have been lost during the two years since the recession began.

November was the ninth straight month that foreclosure filings topped 300,000. The federal government had hoped that defaults would taper off after it implemented its foreclosure prevention plan, the Home Affordable Modification Program. However, only 31,000 homes have received permanent modifications, and many of the trial modifications have not succeeded as the homeowner has subsequently defaulted.

California led the country with 73,995 November filings. Three of its cities had the top three rates of foreclosure among metropolitan areas of over 200,000 people: Merced, Stockton, and Modesto. It is clear that the national housing figures will not recover in large part until California's housing market improves.

The American Bankruptcy Institute (ABI) reported encouraging numbers for November. Consumer bankruptcy filings dropped 18 percent from October, as there were 112,152 filings as compared to 135,913 the previous month. Chapter 13 filings held steady at 29 percent of all consumer cases.

The November numbers still represented a 12 percent increase from the previous November. Samuel J. Gerdano, ABI's Executive Director, attributes the rise to the persistently high unemployment figures and still beleaguered housing market. National unemployment remains high and many consumers are still struggling with housing debt in excess of their homes' values. Negative equity prevents homeowners from being able to refinance to lower monthly payments and to use any equity to pay down debt.

Many subprime, adjustable-rate mortgages (ARM) have yet to reset. Banks wrote an avalanche of five-year ARMs into 2007 before the credit crisis began. Bankruptcies may remain high as these mortgages switch from their low initial interest rates, and the monthly payments adjust upwards accordingly. Chapter 13 bankruptcies will also remain high, as homeowners are more likely than non-homeowners to have income and assets that preclude them from filing Chapter 7.

If you are a homeowner struggling with an ARM, then you may benefit from consulting with an experienced bankruptcy attorney.

Many Sacramento-area Jack in the Box restaurants remain in limbo as their owner, Kobra Associates remains in bankruptcy. The Sacramento Bee reports that the restaurants are likely to be auctioned off in February.

The 4,000 employees of Alizadeh's Jack in the Box restaurants eagerly await new ownership, which should provide closure after the unstability of working for the bankrupt Alizadeh-controlled Kobra Associates and then a court-appointed bankruptcy trustee. Back in September, just before Kobra filed for Chapter 11 protection because of $1.5 million in back taxes, Alizadeh's Jack in the Box restaurants abruptly closed for a day when the state pulled their operating licenses. Since then, the trustee has operated the restaurants with sales income, which has thus far been sufficient to maintain operations.

Finding a buyer for the Jack in the Box restaurants should not be difficult, as Jack and the Box remains a strong brand. The restaurants have remained profitable despite the turmoil. Alizadeh's financial woes derive from his real estate investments, and he admits to using the revenue from the Jack in the Box restaurants to bolster his investments. It is very likely that a new owner will retain current employees and managers.

Kobra Associates' bankruptcy illustrates the value of the bankruptcy process. Without the shelter of bankruptcy, the restaurants would have likely been forced to close for weeks, leaving thousands of workers without a paycheck. Bankruptcy is necessary to confine the problem and prevent it from spreading. In this manner, one bankruptcy prevents a domino effect.

Many people fall into bankruptcy from not being careful on when they pay debts. For instance, on credit cards, realize when signing up for a credit card account, it is a contract between the credit card issuer and the cardholder. When signing an application, the cardholder agrees to the terms and conditions of the account. Read the finance charges, interest rates, and other terms carefully, and don't get carried away with 10% merchandise discounts or reward point deals. Upon receipt of credit card bills, a cardholder is presumed to agree to the balance when he/she does not object to amounts or makes payments. Not disputing the balance leads to an easy collections judgment. Generally, the credit card issuer files a complaint in state court for approximately $350, does little discovery, and relies on the declaration of the credit card issuer's accounting person who testifies pursuant to Code of Civil Procedure Section 98 on the cardholder's account history from time of account opening, to charges made, and to any objections on amounts due.

Whatever the consequences, from a higher perspective, external forces are not always responsible for changes drawn to life, but people do not need to blame themselves. Everyone owns power, and can transmute energy directed towards past people and events.

Those confronting bankruptcy or foreclosure on their home may lose a sense of life, but remember the perfection in imperfection. On America's Next Top Model, the judges identify beauty with imperfection. They choose girls with big eyes, burns, and gapped teeth. Imperfections set the winner apart.

Filing for bankruptcy is a practical way to eliminate debt and get back on track. Witness the past, but no longer be a part of it. What has happened is not life, not all that will come. Do not be embarrassed by financial difficulties. Show confidence despite weaknesses then the weaknesses will go unnoticed. Bankruptcy laws are specifically provided for by the United States Constitution. Once a bankruptcy case closes, changing payment habits is all that is needed to stay out of debt.

For example, on traffic tickets, realize when given a ticket, a driver signs agreeing to pay the ticket or to dispute it in court. Take care of debts immediately by disputing or paying them. In California, if a driver does nothing, a simple $25 fix-it can turn into a $364 ticket in three months because state law adds a $300 civil assessment when someone does nothing.

These days, people seek counseling for worries. Some unemployed question the reason for existing. Michael Jackson's This Is It exhibited a man of extraordinary talent who sang and danced with applause, but had anxieties in having to direct, choreograph, and put on a great show. Don't give any loss a value out of proportion to its merit. The Dalai Lama said it: If the situation or problem is such that it can be remedied, there is no need to worry. Alternatively if there is no way out, no solution, no possibility of resolution, there is also no point in being worried because you can't do anything about it.

Continue reading "The Perfection in Imperfection" »

The United States Court of Appeals for the Second Circuit held in Ogle v. Fid. & Deposit Co. of Md., __F.3d __, No. 09-0691-bk, 2009 U.S. App. LEXIS 24329 (2d Cir. Nov. 5, 2009). that a creditor was entitled to post-bankruptcy legal fees incurred on a pre-bankruptcy indemnity agreement. Claims enforceable under applicable state law will be allowed in bankruptcy unless they are expressly disallowed.

In Ogle, the contractual entitlement to attorneys' fees arose from pre-petition agreements between Fidelity and Agway. Fidelity provided surety bonds to Agway's insurers in exchange for Agway indemnifying Fidelity for payments made under the bonds and for legal fees incurred enforcing the agreements. After filing its bankruptcy petition, Agway defaulted on obligations to insurers. Fidelity complied with its obligation under the bonds and tendered payment to Agway's insurers. Fidelity's enforced its indemnity rights against Agway in litigation during which Fidelity incurred costs, including attorneys' fees. The bankruptcy trustee agreed Fidelity was entitled to the fees under state contract law, but that the Bankruptcy Code barred Fidelity's recovery.

The issue presented to the Second Circuit was: Under the Bankruptcy Code, is an unsecured creditor entitled to recover post-petition attorneys' fees that were authorized by a pre-petition contract but were contingent on post-petition events? The Second Circuit concluded the underlying contract is valid as a matter of state substantive law; none of the Bankruptcy Code § 502(b)(2)-(9) exceptions apply; and the Bankruptcy Code is silent as to whether the Bankruptcy Code allows unsecured claims for fees incurred while litigating issues of contract law.

The Second Circuit Court noted that the Bankruptcy Code defines "claim" to be a "right to payment," which "usually refer[s] to a right to payment recognized under state law." The Bankruptcy Code's definition of "claim" in § 101(5)(A) includes "contingent" claims. Because contract law gave the creditor a right to payment when the indemnification agreement was signed, the creditor "possessed a contingent right to post-petition attorneys' fees," although "its right arose pre-petition." Nothing in Bankruptcy Code § 502(b) precludes an unsecured creditor's "recovery of post-petition attorneys' fees."

None of the exceptions to claim allowability listed in Bankruptcy Code § 502(b) applied to the claim. Unless applicable state law or one of the exceptions in § 502(b) applies, "courts must 'presume' that the claim 'will be allowed in bankruptcy unless [it is] expressly disallowed.'"

Continue reading "Post-bankruptcy Legal Fees " »

With the recession ongoing, those who have child and spousal support obligations might think of modifying their support orders.

Generally, premarital debts go to the spouse who incurred the debt without offset. Family Code Section 2621. Debts incurred during marriage, but prior to separation are divided equally between spouses, except when there is overall equal distribution of estate, a personal service business, liability that was not for the benefit of the estate (Example: credit card charges for gambling habit by one spouse), educational loans. Family Code Section 2622(a). Debts incurred after separation, but before entry of dissolution or legal separation judgment, go to the spouse who incurred the debt without offset. Family Code Sections 2623(a), 2627, 2641(b)(2) and (c). Post-judgment debts go to the spouse who incurred the debt without offset. Family Code Section 2624.

Transfers of property between spouses are subject to the Uniform Fraudulent Transfer Act. Civil Code Section 3439. A fraudulent transfer occurs when the transfer is made with actual or constructive fraud. Civil Code Section 3439.04. Constructive fraud means a transfer without receiving a reasonable equivalent in exchange and the debtor's remaining assets are unreasonably small in relation to the transaction or the debtor intended to incur debts beyond ability to pay.

Bankruptcy is not a modification of child support or spousal support. Child support orders comes first before paying anything else. Child support arrears are considered debt to be paid after current child support. Child support orders in California are never final unless the child is emancipated, and may be modified downward or upward by a court no matter the agreements between the parents for change of circumstances, such as unemployment, furloughs, military deployment trigger modification. To prove change of circumstances, get a statement of decision according to Family Code Sections 4005 and 4056(b), and show circumstances at the time of support order, and how circumstances changed.

To evaluate income, courts look to see if there is bad faith in stepping away from income in order to avoid support obligations by testing whether there is a willingness to work, opportunity to work (employer willing to hire), and ability to work. A payor's new spouse's income shall not be considered when establishing or modifying child support except when excluding income leads to extreme and severe hardship to a child or including income would be extreme and severe hardship to other children belonging to the payor and the new spouse.

Bankruptcy may change spousal support. If there is a community debt, the other spouse is still liable for the debt if only one spouse files for bankruptcy. If a spouse is discharged of a debt, then that spouse has less support need; if the other spouse becomes responsible for the debt, then that spouse has less ability to pay support orders.

Continue reading "Bankruptcy and Family Law" »

Despite mortgage interest rates lower than they have been in sixty years, many homeowners have been unable to refinance their existing loans. The New York Times reports that six of ten homeowners have mortgages with terms that exceed the 4.8 percent fixed rate currently available on 30-year mortgages. Many of these existing loans have variable interest rates that may skyrocket into the double digits if and when the Federal Reserve raises interest rates.

Nevertheless, credit remains tight and banks are unwilling to approve homeowners' applications for refinancing. With rates so low, refinancing would save many homeowners hundreds of dollars in payments per month. But, banks cite the pressure they are under to lend more cautiously on the heels of their aggressive lending that pushed the country into the recession. Banks were burned by many of the risky subprime mortgages they handed out and are hesitant to approve anything but the safest loans. Thus, homeowners with second mortgages or with negative equity are almost invariably turned down. And these are the homeowners who are in most need of help.

President Obama is trying to put pressure on the banking industry to more freely lend to consumers. If banks refinance more loans, then more homeowners will be able to afford to stay in their homes and avoid foreclosure. Also, those homeowners will have more disposable income to spend, save, or pay down other debts.

Obama must act with some urgency because fixed loan rates likely will remain below five percent only through March, when a Federal Reserve program that drives down interest rates expires. Many experts believe that rates will jump to as high as six percent in the spring.

On Friday, the U.S. House of Representatives passed a number of major overhaul of financial regulations, but failed to pass a provision that would have allowed bankruptcy judges the power to modify mortgages. The so-called "cram-down" provision would have allowed bankruptcy judges to rewrite mortgage terms to lower interest rates and monthly payments, reduce loan balances, and lengthen repayment terms. Currently, bankruptcy judges can rewrite terms on loans secured by cars, vacation homes, and family farms, but not a primary residence.

The bankruptcy provision was proposed as an amendment to the ultimately passed bill, which featured increased regulations of financial transactions. The cram-down provision failed by a vote of 241-188, mostly along party lines with only four Republicans voting for the bill and 71 Democrats voting against it. The House passed an identical cram-down provision in March, but the Senate rejected it. This time, representatives cited projections that the measure would increase bankruptcy filings, the cost of borrowing, and the cost of mortgage insurance premiums. Lobbyists for the banking industry contended that passage would have led to a further destabilization of the housing market.

Proponents of a cram-down provision have been trying to pass a measure for years, and they saw the housing crisis as a prime opportunity. They claimed that such a provision would alleviate the wave of foreclosures. President-elect Obama openly supported the cram-down provision. Upon his election, the intense populist anger against banks and lenders appeared to create the perfect environment to pass the measure. However, whatever window there was has apparently closed. The lending industry, despite its weakened position, still conjured up enough influence to soundly defeat the provision twice this year.

Proponents will have to go back to the drawing board, and homeowners who are underwater in their home loans will have to seek refuge elsewhere besides bankruptcy. Yet again, the banking industry won a battle against consumers.

Two blocks of prime real estate on K street in downtown Sacramento remains undeveloped after four years of efforts by the city. The latest derailment comes after a developer withdrew a proposal for a 25-story hotel. The developer could not secure financing, a common problem with credit still tight from the recent banking and credit crisis, and the plan fizzled. This was not the first time that a would-be development was torpedoed by the economy.

A previous proposed K Street business filed bankruptcy, setting back the whole K Street development. Z Gallerie, an upscale furniture chain, was supposed to be a major component of redevelopment. But, Z Gallerie filed for Chapter 11 protection in April 2009 and closed 21 stores nationwide. Z Gallerie has recently emerged from bankruptcy and plans to move forward with its business. The city hopes that post-bankruptcy Z Gallerie reconsiders moving to K Street. Sacramento hopes to produce a corridor of trendy retail shops and had previously received interest from Urban Outfitters and Sur La Table.

After a tough legal battle that resulted in an $18.6 million dollar settlement with the property owner and the relocation of preexisting K Street businesses, Sacramento owns the two blocks of K Street that it seeks to revitalize. To do so, it will need to corral hundreds of millions of dollars in financing and ensure that the prospective tenants are on financially sound footing.

K Street remains prime territory for gentrification. Sacramento hopes that as the economy rebounds the city will have better luck at meeting its goals.

Sacramento Association for the Retarded (SAR), a non-profit organization, filed for Chapter 11 bankruptcy protection in October. The organization's federally-appointed trustee has begun the difficult task of tracking down assets. The trustee's investigation is revealing serious mismanagement of hundreds of thousands of dollars in funds.

SAR had been around since 1950 and had provided services and support to Sacramento-area children with developmental disabilities. As recently as January 2008, SAR had $1.5 million in assets, but by mid-2008 more than half of those assets were gone. At the time of filing two months ago, SAR only claimed $179,000 in assets.

The trustee has been interviewing current and former board members to try to trace back what happened with the missing funds. He has found that the former board president made a $100,000 transfer without board approval and that a $128,303 grant was made to the sister of the former executive director to invest in a project that benefited another former board presidents. There is no record of any of that money being repaid. There is also an accusation that employees embezzled more than $100,000.

It is becoming clear that there were a litany of serious misdeeds. The bankruptcy process is designed so that the trustee, who is usually an expert in forensic accounting, has full access to records and can compel key figures to answer questions. The trustee will try to trace the destination of any illicitly used funds and attempt to recover the funds for the bankruptcy estate. If the trustee uncovers misdeeds or crimes, then he may refer those matters to the appropriate law enforcement agency. Considering the scale of some of the transactions, the investigation may take quite some time.

The California Court of Appeal, Sixth Appellate District issued a decision in Berg & Berg Enterprises, LLC v. Boyle, 2009 Cal. App. LEXIS 1740 (Oct. 29, 2009) that limits a breach of fiduciary duty action brought by creditors against directors of an insolvent corporation.

Berg arose out of a dispute between Berg & Berg Enterprises, LLC ("Berg") a real estate developer, and Pluris, Inc. ("Pluris"), a business developing advanced network routers. Pluris shut down in 2002 due to downturn in the telecommunications industry. Berg alleged it became Pluris's largest creditor when its predecessor-in-interest MWP agreed to build and then lease two office buildings in San Jose, California to Pluris. Pluris allegedly repudiated the lease agreement and made an assignment of its assets for the benefit of its creditors. Berg attempted to file an involuntary bankruptcy proceeding against Pluris that was dismissed. Berg then litigated in California court against nine of Pluris's directors for breach of fiduciary duty, alleging the Pluris directors breached fiduciary duty to Berg by making the assignment for the benefit of Pluris's creditors before examining other possible courses of action to maximize the value of the company's assets and allowing the assignee to waste Pluris's assets. For example, Berg alleged a bankruptcy filing could have made the preservation of the net operating losses possible with higher payments to creditors.

In California "there is no broad, paramount fiduciary duty of due care or loyalty that directors of an insolvent corporation owe the corporation's creditors solely because of a state of insolvency. . .." The duty owed by corporate directors to an insolvent corporation's creditors arises under the "trust fund doctrine" limited "to the avoidance of actions that divert, dissipate, or unduly risk corporate assets that might otherwise be used to pay creditors claims." When a California corporation is insolvent, directors owe a fiduciary duty to creditors under the trust fund doctrine not to divert, dissipate, or unduly risk corporate assets. The duty arises only when a corporation is insolvent, not in the "zone of insolvency." This may differ from Delaware law, which may recognize derivative actions by creditors when a corporation is in the zone of insolvency.
The court held the business judgment rule would shield Pluris directors from liability if the decision to make the assignment for the benefit of its creditors was made in good faith and without the presence of a conflict of interest.

Continue reading "Director Fiduciary Duties to Creditors at Insolvent Corporations " »

Federal bank regulators issued Policy Statement on Prudent Commercial Real Estate Loan Workouts (October 2009), guidelines that encourage financial institutions to renew or restructure commercial mortgage loans "experiencing diminished operating cash flows, depreciated collateral values, or prolonged sales and rental absorption periods", rather than foreclose on them. Regulators hope the guidelines will decrease commercial real estate foreclosures and reduce bank losses on loans.

The guidelines were issued by several federal agencies including the Federal Deposit Insurance Corporation and the Federal Reserve on October 30, 2009. Policy Statement on Prudent Commercial Real Estate Loan Workouts (October 2009) provides directions on real estate loan workouts to lenders that have issued loans to creditworthy customers.

The guidelines provide risk management practices that address issues on documentation of borrower's financial conditions, identification and tracking of loan performance, financial institution's lending limits, loan collection procedures, and credit reviews. For example, workout arrangements should include loan workout policies and plans, analyses of borrower's aggregate debt, monitoring the borrower's performance, a loan grading system, and allowances for loan lease losses.

Bank management is responsible for creating internal controls and governance with respect to preparing regulatory reports and examiners are responsible for reviewing bank management's processes on accounting and reporting.

These guidelines come at the same time as a recent victory decision for buyers of distressed debt and bankruptcy claims on the secondary loan market. On October 15, 2009, the New York Court of Appeals held in Trust for the Certificate Holders of the Merrill Lynch Mortgage Investors, Inc. Mortgage Pass-Through Certificates v. Love Funding Corp. 2009 WL 3294928, (N.Y. Oct. 15, 2009) N.Y. Slip Op. 07323 that an assignment of claim does not violate New York's champerty statute, which forbids trading in litigation claims, if the purpose of the assignment is to collect damages by means of a lawsuit for losses on a debt instrument in which the assignee holds a pre-existing proprietary interest.

Continue reading "New Guidelines On Restructuring Real Estate Mortgage Loans" »

On November 6, 2009, the New York Times reported Jason Rodriguez opened fired at his former workplace in downtown Orlando, FL. The engineer gave his life away when he randomly shot 6 people, injuring 5 and 1 dying at the scene. The shooting resulted from anger in being terminated in 2007 at an architectural firm. Rodriguez filed for bankruptcy and was working at a Subway shop.

It seemed difficult for his former employer to understand why he would still be angry at the termination, but those who have jobs, are not in debt, or are otherwise productive, may not realize angry thoughts continue to play over and over when someone is stuck at the same place for a long period of time. The unemployed today have taken much longer to find new positions, with some taking possibly over a year to land only a part-time or temporary job. It seems Rodriguez allowed an injury to go beyond its original scope, defining his self-image based on one company, but compassion is what separates a bankruptcy attorney who is an ally from one who advises only on legal proceedings. Bankruptcy is not a sign of imperfection, but an unburdening of the past, and a test in courage to face whatever comes.

Bankruptcy proceedings are governed by federal law - the Bankruptcy Code, found at Title 11 of the United States Code. Title 11 contains numbered chapters that define eligibility to Chapter 7, Chapter 9, Chapter 11, Chapter 12, Chapter 13 and Chapter 15.

Chapter 7 can be used by both businesses and consumers to liquidate assets to pay creditors. A Chapter 7 debtor cannot reorganize, emerging from bankruptcy with restructured debt. In Chapter 7, upon the filing of the proceeding a trustee oversees the liquidation of the debtor's assets. The trustee is chosen randomly from eligible panel trustees in the district where the case is filed. For a business, the trustee takes over control and oversight from an entity's board and leadership team. For a voluntary bankruptcy, there is little chance for payment of creditors.

Chapter 9 provides for reorganization of a municipality like Vallejo, CA and perhaps Pacific Grove, CA.

Chapter 11 refers to the business reorganization chapter of the Bankruptcy Code. Unlike Chapter 7, in a Chapter 11, the company's management and board remain in control of the process. A company continues to operate post-filing. No trustee is appointed in most Chapter 11 proceedings, but bankruptcy court approval is necessary for many operational decisions. Chapter 11 by a business does not necessarily mean that it will reorganize. Many Chapter 11 cases begin with an immediate sale of substantially all of the debtor's assets (a liquidation), commonly known as 363 sales. After substantially all of the assets are sold, Chapter 11 proceedings may end with court approval of a reorganization plan.

A reorganization plan is provides for payment of creditors and interest holders in accordance with the Bankruptcy Code. The plan may involve distributing proceeds to creditors after a liquidation sale, restructuring debts, and continued operations. The plan offers creditors an opportunity to review and take a position as to property distribution and future operations of the debtor.

Chapter 12 is limited to family farmers and fisherman, Chapter 13 is limited to consumers, requiring the consumer debtor to repay some amount to creditors. A business is not eligible for Chapter 13. Chapter 15 deals with cross-border insolvencies.

Continue reading "Bankruptcy Reorganization or Liquidation" »

On Tuesday, the Supreme Court heard two cases that could significantly impact bankruptcy law. Besides hearing arguments about the dischargeability of student loan debt in bankruptcy, the U.S. Supreme Court heard a second case challenging the validity of provisions of the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA). One rule prohibits lawyers from recommending that assisted persons, who are individuals with primarirly non-exempt consumer debts, take on additional debt. Another requires that attorneys who offer bankruptcy advice must advertise as debt relief agencies.

A Minnesota law firm challenged the provisions as violating lawyers' First Amendment rights, ethical duties to provide legal advice, and responsibility to not provide misleading advertising. The firm's stance is that 11 U.S.C. section 526(a)(4) is overbroad and wrongfully prevents attorneys from providing sound legal advice to clients. For instance, the law, which prohibits advising assisted persons to incur more debt, may prevent an attorney from advising a potential bankruptcy filer to sell his overly expensive home and rent an apartment because the lease would be additional debt.

The firm also argued that Congress did not intend for 11 U.S.C. section 528, which requires that debt relief agencies disclose in advertisements that they are debt relief agencies, to apply to bankruptcy attorneys because Congress designed the law to regulate behavior by non-attorney bankruptcy providers. The firm's attorney made the point that If Congress wanted the law to apply to attorneys the law's language would explicitly include attorneys.

The justices appeared to view section 526(a)(4) unfavorably and Justice Scalia even repeatedly referred to it as "a stupid law." On the other hand, a few justices treated the firm's position on section 528 skeptically. The Supreme Court will likely hand down a decision towards the beginning of 2010.

On Tuesday, the Supreme Court heard oral arguments in a case that could provide more clarity to what circumstances qualify as "undue hardship." Finding undue hardship is a requirement to permitting a bankruptcy filer to discharge student loan debt.

Over two decades ago, Francisco Espinosa took out $13,000 in student loans to go to an Arizona trade school to learn computer drafting. After four years, he graduated but could not find a job. He wanted to get married but first wanted to make sure his finances were in order. Without little recourse to pay back the debt, he called a lawyer. The attorney filed a Chapter 13 bankruptcy and drafted a plan that would pay back the original student loan principal but not repay the $4,000 in accrued interest. Although the lender, United Student Aid Funds, Inc., was notified about the bankruptcy, it did not object, and a bankruptcy judge approved the plan.

Espinosa made payments on the Chapter 13 plan, and after five years in 1997 the bankruptcy court declared the debt paid in full. Espinosa thought that was the end of the story, but two years later United started demanding that Espinosa pay the interest. Then, in 2003, eleven years after the bankruptcy court confirmed the original payment plan, United claimed that the original plan was illegal and void because the bankruptcy code only allows discharge of student loan debt if the borrower shows undue hardship.

The Ninth Circuit Court of Appeals in San Francisco ruled against United because of the multiple notifications it received and its failure to object to Espinosa's plan. United appealed and the U.S. Supreme Court took the case.

In front of the Supreme Court, the Justice Department, siding with United, argued that the "undue hardship" requirement ensures that student loan debt is not routinely discharged. This policy helps ensure that lenders continue to offer student loans, even to those with weak credit.

In rendering their decision sometime in the next few months, the justices must rule on Espinosa's fact-specific scenario and also indicate to lower courts how to approach undue hardship arguments. The decision may have significant ramifications for the lending industry and the millions who hold student loan debt.

An Elk Grove megamall remains unfinished as its bankrupt developer remains shackled by billions of dollars of debt.

Elk Grove, a suburb south of Sacramento, underwent substantial development a few years ago. However,development was ongoing when the economic downturn began at the end of 2007. Many projects remain suspended, frozen in time as a reminder of how suddenly the property market crashed after years of remarkable growth.

General Growth Properties, Inc., a national mall developer, hired contractors and began development on Elk Grove Promenade. The mall was designed to be 1.1 million square feet and Macy's and Barnes & Noble were a few of the notable big businesses that had committed to opening stores. However, General Growth halted construction in October 2008 and since February 2009 the mall has remained unimproved and surrounded by a chain link fence ever since. In April, General Growth filed for Chapter 11 bankruptcy reorganization with billions of dollars in debt. It continues to negotiate with lenders, but even if General Growth emerges from Chapter 11 there are no guarantees that the Elk Grove Promenade project moves forward.

While in Chapter 11 bankruptcy, General Growth has tried to sell the mall project, but the market remains weak for retail property, and the Elk Grove Promenade sits in a poor location, miles from the nearest housing. There is no reliable prediction on what will happen with the mall, but it is at the very least 3 to 4 years from completion.

Between stalled business and housing development, Elk Grove will take years to restart its stalled ambitions for growth.

The Center for Responsible Lending is advocating a change to bankruptcy laws that would allow bankruptcy judges the ability to rewrite mortgage terms. The Center's position appears even more necessary in light of loan servicers' inability to permanently modify mortgages under the federal Home Affordable Modification Program.

Rewriting bankruptcy law to provide bankruptcy judges discretion to unilaterally impose revised mortgage terms is not a revolutionary idea. Bankruptcy judges can rewrite debtors' terms on many secured loans, most notably car loans. Due to lenders' powerful lobbying efforts, when Congress enacted the Bankruptcy Code in 1978, an exception was inserted into 11 U.S.C. section 1322(b)(2) that prevented bankruptcy judges from modifying first mortgages. Thus, even if a home is worth significantly less than the mortgage amount, the bankruptcy judge cannot revise the principle to the fair market value. The judge cannot affect the monthly payment either.

Ideally, providing bankruptcy judges the power to revise mortgage principal and montly payments would be unnecessary. The Home Affordable Modification Program was supposed to make it substantially easier for borrowers to work out loan modifications with lenders. However, while the Program has spurred 650,000 trial modifications, few have been converted into new permanent mortgages.

Extending bankruptcy judges' powers would provide borrowers a last, but potentially very effective, resort to stay in their homes if their lenders and servicers are unresponsive. Unless the Home Affordable Modification Program is more successful, Congress should take a look at following the Center for Responsible Lending's recommendation.

As a result of a bankruptcy filing, an automatic stay prohibits creditors from seeking to take certain actions outside the bankruptcy proceedings to collect amounts due to them from the debtor which arose prior to the filing of the bankruptcy petition. Notwithstanding, a creditor may be entitled to take certain legal action to obtain relief from automatic stay.

For example, if a creditor is a supplier who shipped products received by the debtor within forty-five (45) days prior to the bankruptcy filing, a creditor might submit a timely written reclamation demand to recover possession of goods, or at the debtor's option, receive a higher priority administrative claim as to the products when opposing an unsecured claimant, thus increasing payment.

Another example is for a creditor to file a motion with the court to obtain relief from automatic stay by explaining the asset as a depreciating asset that will lose its value if the court does not allow the creditor to take back the asset to resell. The Bankruptcy Code allows the court to grant relief from automatic stay for cause when there is lack of adequate protection of an interest in property, if a debtor does not have any equity in the property, or if the property is not necessary for an effective reorganization of debtor. This usually occurs in the event of assets like cars where a debtor is no longer able to pay loan payments towards the car purchase.

In a recent case decision, Dumont v. Ford Motor Credit Company, 581 F.3d 1104 (9th Cir. (Cal.) Sep. 15, 2009), the Ninth Circuit Court of Appeals confirms the Bankruptcy ode does not protect a debtor's personal property if the debtor fails to commit to redeem, reaffirm or assume the underlying loan. According to Bankruptcy Code Section 362(h)(1)(A), a debtor has to file a Statement of Intention and indicate whether debtor will surrender or retain the property. If the debtor retains, the debtor is required to elect to redeem, reaffirm or assume the underlying loan. Otherwise, the automatic stay is terminated and the vehicle is no longer property of the bankruptcy estate, allowing the creditor to attempt repossession of the vehicle.

When doing business, a company should be wary of customers' credit to prevent becoming a potential creditor of a bankrupt estate. A company should watch out for publications on bankruptcy filings to ensure that it timely files any claims and meets deadlines for relief from automatic stays.

Continue reading "Relief from Automatic Stay" »

On October 21, 2009 Federal Reserve Governor Daniel K. Tarullo spoke before the Exchequer Club in Washington about the financial crisis and need to address the "too big to fail" concern. "Too big to fail" relates to a large financial institution facing failure (whether illiquidity or insolvency) and government authorities intervening to fund or guarantee, to prevent more banks failing or a ruin of the entire financial system.

Government intervention may protect a bank from operation risks, but may lead to negative effects on the economy, including inefficient capital allocation, and a competitive advantage for larger financial institutions. Among Tarullo's recommendations:

1. Mandating higher capital requirements based on the systematic importance of a financial institution;
2. Assessing a special charge to financial institutions;
3. Applying capital regulatory requirements to all financial institutions;
4. Requiring financial institutions to have specific contingent capital

Tarullo's speech follows changes in the California mortgage market to address the loan crisis. Effective October 11, 2009, California prohibits any person, including California-licensed real estate brokers and attorneys, from collecting or requiring an advance fee in connection with providing loan modification and/or mortgage forbearance assistance pertaining to one-to-four family residential real properties located in California. California law also requires certain disclosures specifying it is not needed to compensate a third party to obtain a loan modification.

The California Department of Real Estate is investigating over 1,300 loan modification complaints and, in the past 12 months, has issued around 400 desist and refrain orders and accusations against individual respondents for illegally collecting advance fees. Most of the cases involve someone collecting an advance fee in exchange for a promise that the homeowner will receive a loan modification; but in some cases, once the fee was paid little or nothing was done to get the borrower's loan modified. A list of persons and companies the California Department of Real Estate has taken action against can be found at http://www.dre.ca.gov/cons_drs.asp.

Continue reading "Too Big To Fail" »