The Chapter 13 Wave Is Coming – Choose The Right Lawyer To Save Your Home

I suspect that there are going to be more Chapter 13 bankruptcy filings soon. This posting explains why and what you can do if you are considering Chapter 13 as a way to save your property or resolve debt problems

I get many calls at my Manhattan law office from people in foreclosure or who have missed mortgage payments. I speak to people from the 5 boros of New York City, from Long Island and from Westchester and Rockland often. Many of them have little equity in their property as a result of all of the crazy mortgage underwriting in 2005. Many callers had no equity the day they closed! Now, with the real estate market slow down, values have dropped by 5% or more. If there was no equity at the closing in 2005 or 2006, there is almost certainly no equity in 2008. Many callers were attracted to teaser rates and are now stuck with adjustable rate loans that they cannot afford. Others have just had changes in their circumstances that have left them in dire straights – i.e., divorce, layoff, illness, accident, family death, nonpaying tenant, etc. To make things worse, lenders have restricted their loan to value ratios for foreclosure bailout loans to the point where almost no one in foreclosure, even those with some equity, can actually refinance. It’s been reported that over 200 subprime lenders closed in the past year. Some of my clients have just decided to surrender their property and with the hope of avoiding a deficiency judgment after an auction, they have offered their lender a deed in lieu. The lenders don’t seem interested.

In this harsh environment, Chapter 13 may be a good option for those with regular income. If their budget can carry the regular monthly payment plus something extra each month to pay back mortgage arrears and other debts in a consolidated payment to a trustee, they may be able to save their property. Under Chapter 13, an automatic stay (injunction) freezes all collection litigation, including forclosures. The plan period can last 3 to 5 years. In some cases the unsecured creditors (like credit cards) don’t have to be repaid in full – so the cost of doing the bankruptcy may be more than covered by the money saved (discharged).

Chapter 13 is a difficult process. Calling a lawyer and choosing the right one for your case is the first step. Not all lawyer’s fees are the same, but then again not all will provide the same level of personal attention. Most will work out a flexible payment plan for fees before filing your case and will also defer part of the fees into the payment plan (so part of the fees can be included in the monthly trustee payment you will already be making).

If you are worried about hiring a bankruptcy factory type of firm where you will be handled by inexperienced clerical staff, you should call around. I have seen what happens with bargain basement firms – clients show up in court and are greeted by a disheveled per diem attorney they have never met. This is a lawyer that does not even work for the firm you hired and may not have ever met you or even looked at your file until the two of you are standing in the hallway ready for the first meeting with your trustee when you will testify under oath. Be careful to ask lawyers about this before you hire one. I always feel bad for debtors who made bad decisions about who they retained. They get to court to meet the trustee and don’t even know the lawyer that will be representing and protecting them at the meeting.

Check out the lawyer you want to hire. Visit their website. Read his or her profile. If there isn’t one available beware. You should know about your lawyer’s prior experience and education. This information should be readily available on his website. Your lawyer should belong to the National Association of Consumer Bankruptcy Lawyers (NACBA). NACBA is the national organization in the US for bankruptcy attorneys who represent debtors, including homeowners. NACBA members amusingly call the organization “The Firm” because it has a forum where bankruptcy attorneys from all over the country share their thoughts and views on the Bankrupcy Code. They post questions about difficult cases. It is a great resource for on-going legal education and assistance. When you hire a NACBA lawyer for your Chapter 13 case, you get a lawyer who has resources behind him that may help you.

You should also find out if your lawyer offers unlimited availability to you via email or phone as I do for my clients. You will almost certainly have questions about the process. It is frustrating if you hire someone that won’t respond to an email or call you back. I always try to get back to everyone the same day and if I have a difficult schedule I will ask my paralegal to respond until I can do it personally.

Once you feel comfortable with a lawyer, set up an office consultation. It is helpful if you can gather and bring in certain doscuments such as court papers, your recent paystubs, your last two tax returns, and recent bills.

I offer free telephone consults and can usually determine if someone may benefit from Chapter 13 in the first call. If you think you are a candidate and want to discuss it, please feel free to call me at my midtown office at (212) 764-7250. You can also email me at [email protected] to set up a telephone consult.

If you want to read more about Chapter 13, I have blogged on this topic before – just click on “Chapter 13” under the Categories on the right side of this page.

Best regards,
Scott