First, the mortgage lenders now have added the staff to complete the foreclosure process to sale. Meaning that more homes are being sold at auction.

Secondly, this has motivated homeowners who are struggling with their mortgages to sell before they go into foreclosure in an attempt to get the best price for their property.

Home sales are up as is the number of building permits, which clearly indicate a slow recovery. Interest rates are at one of the lowest rates which have helped boost home sales.

The nationwide trend may be a little different, however. The governmental plans to assist home owners have failed miserably. There is no other way to state it. The Federal Government has a complete inability to watch over mortgage lenders to ensure they comply with the regulations and help distressed property owners. Mortgage lenders are unmotivated to make the process timely or efficient. This only leads to a completely frustrating experience.

The trend is called “Strategic Default” and it effects even the most reluctant and proud homeowner. Once they have concluded that the existing mortgage is not going to be adjusted to make the home affordable, they plan the timing of the foreclosure. Often times this planning involves the school year, graduation, work relocation, etc.

The major question becomes “How much longer can I remain in my house until I am forced out?” This is where the engagement of a professional is so critical. Once the move becomes a reality, the timing of the move becomes the focus.

As an article about strategic default practices said, severe negative equity is a massive and corrosive problem across the country. If the value of the home is far less than the balance of the primary mortgage, then there is negative equity. If there is a second mortgage on the home, then the negative equity is far more acute. The problems that are associated with a second mortgage can be even more devastating as the second mortgage holder may, and probably will, pursue the collections of balance of their loan after foreclosure. This could also result in a heavy tax liability in the form of a capital gain for forgiveness of debt.

It is critical to engage the services of a professional San Diego bankruptcy firm early, long before the foreclosure begins and long before the liquidation of any retirement accounts.

Banks have been making millions of dollars from consumers by simply covering small purchases made with an ATM card when there’s not enough money in the account, then charging big fees for doing so. That is why a little $4 latte can cost you $34 on your bank statement. You charged the $4 when your balance was almost zero, and the bank charged you another $30 to cover the balance.

Come this summer one bank, Bank of America, recently announced that it will no longer cover the price of the purchase if the money is not there. They will simply decline the purchase. Now that makes sense. It is too bad that the bank has to save the customer from themselves, but, in today’s economy, it is necessary.

In the future, I expect this to be a mandated practice for all banks. The only way an overdraft fee can be allowed would be at the election of the customer. I also think that the fees associated with the overdraft protection will be more costly to make up for the lost revenues.

The tax break preventing the issuance of a 1099 cancellation of debt is no longer available starting tax year 2009. Previously, for tax year 2007 and 2008, mortgage companies who held second mortgages were not allowed to issue 1099s for cancellation of debt on short sales or foreclosed primary residences. Now they can, do, and will in the future.

As a result, the State of California will be assessing an income tax based on the amount of debt forgiven. A huge tax bill may result, depending on the net loss. Further, the holder of that mortgage can pursue collections of the total amount of outstanding balance. The biggest losers will be homeowners who have lost their residences.

The best way to not only avoid the tax liability but to prevent collections of the deficiency balance is to file a bankruptcy.

In theory, the changes should help San Diego consumers with credit card debt manage their bills better, but it’s not a bed of roses. Sure, credit card companies have to play by more rules now, but they are still going to find ways to make their money.

Here is how the new way of handling credit card debt will affect you.

• Interest Rates:
  Credit card companies can no longer jack up your interest rate on the existing balance, and they must notify you of an increase in the rate on new purchases 45 days before the rate increase. But they will more than make up for this by increasing the interest rate on new purchases and eliminating fixed-rate credit cards. That way they can vary the interest rate on a balance.

• Fees:
  Companies can no longer charge fees when you go over your limit or when you pay your bill over the phone. But rest assured that they’ll probably find new and more costly fees for services that are currently free.

• Statements:
  The new credit card statements are supposed to be more informative, with information on how long it will take you to pay off the balance, etc. This is likely to be more confusing to most consumers, making it harder to understand the cost of credit.

• Due Dates:
  Your statement must arrive 21 days before the due date, and your due date will be the same every month. If the day falls on a weekend or holiday, it is due the next normal business day.

• Minimum Payments:
  Credit Card Companies are now required to apply any amounts over the minimum payment to the balance with the highest interest rate. If you are just making minimum payments, you never reduce the balance by very much.

• What Stays the Same:
  Credit card companies can still lower your available balance and cancel your card for any reason and without notice.
• And the best advice about your credit card doesn’t change either:
  • Never use your credit cards to finance other debt, such as pay taxes or insurance, and, if you do use your credit cards, try to pay them off each month.
  • Do your best not to use your credit cards for normal living expenses, such as food, gas, etc.
  • If you’re starting to get into trouble with your credit card payments, do not hesitate… consult a bankruptcy professional right away before the situation becomes worse. You can put your house, car and other possessions into danger if you find yourself too far behind on payments.

A recent court decision in California has tightened a loophole that might have allowed people to falsely inflate the amount of expenses they incur each month. These expenses, commonly called phantom expenses, involve property or collateral, such as a house or a car, that a person filing bankruptcy actually intends to get rid of. For example, let’s say you are making payments on a car. You want to file Chapter 13 bankruptcy, but you actually plan to surrender the car to the bank. You cannot compute the payments you were making on the car you’re going to get rid of when you put together the Chapter 13 Payment Plan.

Because changes to the laws of bankruptcy in San Diego change so often, it’s important to find a professional to help you evaluate the decision that’s best for you. Make sure your San Diego Bankruptcy Attorney is up to date on the most recent court decisions and regulations that could affect the success of your bankruptcy.

I’m always happy to sit down for a free consultation to explore all your options. Feel free to make an appointment today.

We help our clients debunk these common myths about current consumer bankruptcy law:

• The Myth: You cannot stop a foreclosure even if you file for bankruptcy.
• The Truth: Bankruptcy filings can put an immediate halt to foreclosure proceedings so you have time to think about your options.
• The Myth: These days only corporations can file for bankruptcy.
• The Truth: Consumers can still file Chapter 7 and Chapter 13 bankruptcy petitions to address financial issues such as credit card debt, medical bills, foreclosure and car repossession.
• The Myth: If you didn’t file for bankruptcy before October 17, 2005, it’s too late.
• The Truth: Each day our law offices file bankruptcy petitions on behalf of consumers in need of debt relief and reorganization.
• The Myth: Medical and credit card bills cannot be discharged under the new law.
• The Truth: A bankruptcy filing can help you address debt from medical bills and credit cards.
• The Myth: You will have to relinquish your personal vehicles when filing for bankruptcy.
• The Truth: Your debt relief plan can protect your essential assets such as motor vehicles.