Tax Relief for Mortgage Debt

With all of the “fiscal cliff” talk recently, it’s hard to pinpoint exactly what came of it and if the tax revisions/extensions affect you. One benefit is a one year extension of the tax relief for people whose lenders forgave a portion of their mortgage debt (1). If the bill had not passed, mortgage debts forgiven in short sale, loan modification, or foreclosure would be considered taxable income. That means you could be responsible for paying taxes on an already difficult loss. For someone struggling with income loss and losing a home, the last thing they need is to be slapped with a large tax bill.

According to RealtyTrac.com, 1 in every 1,274 homes in Missouri received a foreclosure filing in November, 2012. In Kansas, that number was 1 in every 1,255 homes for November 2012(2). With numbers that high, it’s easy to see just how many people could have been affected had the bill not passed.

This bill now expires on January 1, 2014. Some government programs encouraging loan modifications and short sales expire on that date as well. Daren Blomquist, vice president of RealtyTrac believes that because there are so many foreclosure listings, there will be a couple of years of short sales to come. He believes that the bill will likely be extended again next year, but there is no guarantee(3).

Recent mortgage settlements have encouraged lenders to work with their customers that are behind. They are being pushed to allow customers to examine alternatives to foreclosure. And, extension of the tax relief bill makes it more appealing to customers as well. However, these options, including loan modification, deed in lieu of foreclosure, and short sale can be complicated, time consuming, and confusing. It’s best to speak to an experienced attorney and real estate agent to figure out which option best suits your situation after speaking to your lender to see what is available.

By
Charice Holtsclaw, Managing Attorney
and
Kelley Snyder, Paralegal



1 “Fiscal Cliff Pact Also Aided Troubled Homeowners” The Sacramento Bee. 5 January 2013. http://www.sacbee.com/2013/01/05/5093513/fiscal-cliff-pact-also-aided-troubled.html

2 “Fiscal cliff bill extends tax relief for struggling homeowners facing foreclosure.” OregonLive. 3 January 2013. http://www.oregonlive.com/front-porch/index.ssf/2013/01/fiscal_cliff_bill_extends_tax.html

3 RealtyTrac. http://www.realtytrac.com/trendcenter/ks-trend.html

Thinking Ahead: Attorney Fees

The beginning of a new year often represents the opportunity to start fresh. For many, this means committing to resolutions such as getting in shape or completing unfinished projects. For others, beginning anew involves other significant changes such as defending the dissolution of a marriage, seeking modification of child custody or support, bankruptcy and paternity actions.

On the tail end of the holiday season, the thought of paying any lump sum towards attorney fees can often seem overwhelming or simply not feasible. But with tax season just around the corner, the next few months provide the perfect opportunity to begin planning and saving. Consider using this year’s tax refund as a payment towards retaining an attorney to help you navigate your legal matters. If you are currently represented and owe outstanding fees, using your tax refund to pay the remaining balance is a simple way to get caught up.

In general the legal process can often be time-consuming and expensive. Once you have hired an attorney to represent you, there are several measures you can take to help minimize your own attorney fees.

• Identify and communicate your goals and expectations. It might be helpful to rank them according to what you feel the most strongly about. Discuss your goals and expectations with your attorney to avoid future misunderstandings. Be reasonable and realistic. Remember that resolving disputes amicably can not only set a positive tone moving forward, it can also spare you from a financially and emotionally draining courtroom battle. Recognize the importance of being agreeable and knowing when to settle. 
• Keep track of your questions and issues that you would like to discuss. Making a list will allow you to ask all of your questions at one time without forgetting anything. Contacting your attorney by email can often be a more cost-effective approach to communication. While you will still be billed for the time spent reviewing and responding to your email, the fees will generally be lower than those for phone calls during which it is easy to become sidetracked. Keep in mind that other members of the attorney’s staff with lower hourly rates, such as law clerks and paralegals, may be able to assist you with certain questions or concerns related to administrative matters such as billing. 
• When you speak to or meet with your attorney, take notes to help you remember what was discussed and any instructions your attorney may have given you. This will help eliminate confusion and unnecessary delay in the form of your attorney re-explaining matters to you or making repeated requests for information. Be prepared. Keep a calendar with important dates and deadlines. 
• Respond promptly and completely to your attorney’s requests. In addition to collecting the requested documents, keep them organized. This will allow your attorney to spend more time working with the information itself and less time trying to dig through an unorganized stack of papers. 
• Remaining calm will also allow you to listen and communicate more effectively. One key to remaining calm is managing your own stress and taking measures to protect your own well-being. Remember that the process can often be very emotional, especially when it comes to family law matters. It is not uncommon to experience anger, frustration, sadness, and depression. While your attorney will assist you through the legal process and protect your interests, he or she is not a licensed psychologist. Finding a therapist or a counselor to help you work through the emotional components will allow you to spend the time you have with your attorney more productively. 
• Finally, remember that your attorney can only estimate costs and fees at the outset of the representation. Recognize that circumstances often change and the budget might need to be readjusted throughout the process. 

Contributed by Kelly Thompson, Law Clerk

Managing Stress During the Holiday Season

While the holidays bring plenty of cheer and laughter, they also tend to bring a great deal of stress. Planning face-time with family, coordinating activities, and managing the financial aspect of the holiday season can often become overwhelming. The following suggestions from the Mayo Clinic aim to reduce holiday-related pressure and anxiety:

Stick to a budget. It might be helpful to decide in advance how much you are going to spend. The trick is to then stick to it. Remember that gifts and presents do not equate to happiness. Do not extend beyond your means. If you have a large family or are traveling, consider other gift-giving arrangements. Some alternatives include donating to a charity in someone’s name or exchanging homemade gifts.

Plan ahead to avoid becoming overwhelmed. Trying to visit all of the family in a single day can be exhausting. Spreading family visits over the course of several days will allow you to make the most of the time you do spend with relatives. If certain relatives drive you crazy, consider activities that minimize the amount of time you spend together, like a cup of coffee or a quick lunch. Establishing some organizational tools can also help minimize unnecessary stress. For example, generating lists can help keep you focused while shopping or planning meals and activities.

Be flexible and realistic. Striving for utter perfection can often lead to disappointment when things do not pan out as hoped. The ability to make adjustments along the way is essential. Do not be afraid to adopt new traditions that better suit your family’s needs. Remember that traditions can grow and change as your family does and not every year has to be exactly like the one before.

Maintain healthy habits. The holidays are full of temptation. Remember to keep everything in moderation. Overindulgence can often lead to feelings of guilt. Try to strike a balance between some indulgence and maintaining your regular habits and routines. Exercise regularly and make sure you get enough sleep. Engaging the family in physical activities together can help make those healthy routines seem a little more fun.

Be aware of your feelings. Holidays may not necessarily be happy and joyous, particularly for those who have lost a loved one. Take the time to acknowledge and work through your emotions. If you are feeling isolated, reach out by volunteering or get involved in community events. When dealing with pushy family members, do not be afraid to say no. At the same time, do not be afraid to ask for help when you are feeling swamped. Openness and honesty can prevent harboring frustration, anger, and resentment. Take some time for yourself and relax as well.

For divorced families, the holidays can often be particularly challenging. The American Psychological Association offers several key pieces of advice for the holiday season, beginning with the importance of setting aside differences and laying down the sword. Put the needs of your children first. Encourage your children to spend time with your former spouse and reassure them that you will be fine when they do. Do not put unnecessary pressure on your children. When visits are not possible, technology like Skype can help facilitate contact between family members during the holiday season.

Sources:

“Stress, depression and the holidays: Tips for coping,” Mayo Clinic, available at http://www.mayoclinic.com/health/stress/MH00030

Dr. Elaine Ducharme, “10 Tips for Managing Family Stress at Holidays,” American Psychological Association, available at http://www.yourmindyourbody.org/family-stress-during-the-holidays/

Contributed by: Kelly Thompson, Law Clerk

If It Sounds Too Good To Be True...

We’ve all seen or heard the commercials offering debt settlement to consumers. They are inundating our radios and televisions constantly. These schemes can be really appealing to someone deep in debt – especially with credit cards. They promise to settle all of your accounts and get you debt free quickly.

This just seems too good to be true, and with reason. According to the National Association of Consumer Bankruptcy Attorneys, government officials estimate that about one in ten debt settlement cases fail. The Better Business Bureau was quoted as saying that debt settlement schemes are an “inherently problematic business.” The New York City Department of Consumer Affairs went on to say that debt settlement is “the single greatest consumer fraud of the year (1).” When a debt settlement case fails, it can leave you even further in debt with additional late charges or over limit fees on top of what you already owed.

If you choose to take the risky debt settlement road, there are a few things to watch for:

• Do they encourage you to fall behind on your payments? 
• Are they a for-profit businesses instead of a non-profit corporation? 
• Do they charge high fees for their services? 
• Are they offering you debt settlement for pennies on the dollar? 
• Have they said that they can remove negative things from your credit report? 
• How is their rating with the Better Business Bureau and your Attorney General’s Office? 

Paying attention to these things can help keep you out of the debt settlement trap. It can help you differentiate a settlement company that is a scheme versus a legitimate company that may be able to help your finances (1).

Getting out of debt, no matter which method you choose, can take a lot of time, effort, and dedication. You can’t expect for a settlement company to get you out of debt quickly and save you tons of money. You need to do some research and consider all of your available options. Research the consumer information on the FTC’s website (ftc.org) (2). Talk to an attorney about Chapter 7 bankruptcy, or consider paying off the debt yourself using Chapter 13 bankruptcy or techniques like the snow ball method or by paying more than the minimum payment each month.

Sources:
“The Debt Settlement Trap: The #1 Threat Facing Deeply Indebted Americans.” National Association of Consumer Bankruptcy Attorneys Consumer Alert. October 2012. 30 October 2012. <http://www.nacba.org/Portals/0/Documents/NACBA%20Docs/NACBA%20debt%20settlement%20trap%20consumer%20alert.pdf>.

Federal Trade Commission. 30 October 2012. <http://www.ftc.gov/bcp/menus/consumer/credit/debt.shtm>.

Contributed by: Kelley Snyder, Paralegal

Appearing in Court: Appropriate Dress and Decorum

Whether you are a party to a case or a witness, appearing in court is a formal and serious matter. Accordingly, the importance of the affair should be reflected in both your attire and behavior while inside the courtroom. The following recommendations establish some general guidelines for how to present and conduct yourself in court.

Appropriate Courtroom Attire

Above all else, make sure you appear in court looking clean and well-groomed. You should be freshly bathed and have clean hair, clean nails, and clean clothing. Remove excessive or gaudy jewelry. Facial piercings and other accessories such as large ear plugs are distracting and should be removed. If you have a tongue piercing, remove it prior to entering the courtroom so that you will be easier to understand while speaking.

When dressing for court, think conservatively. Women should avoid low-cut tops or outfits that fit too snuggly. Appropriate apparel for women includes slacks and a blouse or blazer, a skirt, or a dress. For footwear, choose reasonable heels. Low-heeled, closed-toe shoes are more suitable for court than flashy platform pumps. Do not wear flip flops.

For men, slacks and a collared shirt are appropriate selections for the courtroom. Avoid wearing T-shirts, especially those with graphics, phrases, or statements printed on the front or back. Even in the summer, avoid wearing shorts. Do not wear a hat to your court appearance.

Appropriate Courtroom Conduct 

Be on time. This often means making sure you leave yourself enough time to find parking and navigate the courthouse. Do not bring your cell phone into the courtroom with you. If you do, turn it completely off.

While in court, speak and respond only when asked. When answering a judge’s question, try to limit your reply to ten words or less and avoid lengthy monologues. Be careful not to act too casually, such as leaning on the judge’s bench. Do not try to kid around with the judge or crack jokes, especially those which might be found distasteful. Keep your movements to a minimum and avoid distracting gestures.

Most importantly, be polite and respectful at all times. While tensions often run high, do not raise your voice or use coarse language. When someone else is speaking, listen politely. Do not react by sighing, laughing, snorting, rolling your eyes, or shaking your head. These types of responses are disrespectful to both the person speaking and to the court. Finally, remember to be courteous to everyone you encounter while in the courthouse and courtroom, including judges, attorneys, other parties, clerks, and bailiffs.

Contributions by Jeanne Foster, Attorney and Kelly Thompson, Law Clerk

What happens if I don’t reaffirm my mortgage in a chapter 7 bankruptcy?

A reaffirmation agreement is a document that is executed after your bankruptcy case is filed. It renews your obligation to a secured creditor, who has the right to repossess a vehicle or foreclose on your property if you fall behind on payments post-filing. It also makes you responsible for any deficiency balance after the sale of the property. It basically strips that debt of the bankruptcy protection. However, there are many benefits to reaffirming a debt too, including an easier time refinancing and positive reporting on your credit report.

If you intend to keep a house, vehicle, or piece of property secured by a lien, the creditor may prepare a reaffirmation agreement and forward it to your attorney. It is the Creditor who is responsible for preparing these agreements and they cannot be forced to do to. If you choose to sign a reaffirmation agreement generally your attorney’s office completes the required information, forwards it to you for review and signature, then it gets sent back to the creditor for filing with the bankruptcy court. If your budget (Schedules I and J) shows you can afford the payment and that it is not a hardship, no hearing is necessary (in WDMO and District of Kansas). The creditor files the agreement with the court and you are responsible for that debt regardless of your bankruptcy filing.

Not reaffirming a debt, especially a mortgage can sound like a good idea to you initially. It seems as though you can just pay each month and remain in the property. It is true that state contract law protects you to the extent that if you keep up with payments, the property cannot be taken away. And if something does happen financially in the future, such as illness or loss of income, you can surrender the house or car without having to worry about the deficiency balance. Because if no reaffirmation agreement was filed, it means the debt was discharged. And for the most part, that can be true. But, you need to be sure to speak to your attorney about the best option for you because there can be some consequences to not reaffirming a property in your chapter 7 bankruptcy.

One big problem with not reaffirming is credit reporting. If you don’t reaffirm the mortgage, the creditor will likely stop reporting payments to the credit bureaus even though you are making the payments on time each month. The mortgage debt may appear as being discharged in bankruptcy. So, your credit score may take a hit. This can make getting a new loan difficult. Another major problem can be with refinancing or modification. Many lenders will not refinance or modify a loan if a reaffirmation agreement was never filed. So, you will likely be locked into the original loan terms that you have until you decide to sell the property or let it foreclose. It can leave you with few, if any options if you find that the payments are no longer affordable. At that point your only option may be to surrender the property and walk away. And on that note, there are a few things to keep in mind if you are facing foreclosure. Until the property is transferred out of your name (after the foreclosure sale), you need to keep insurance on the property, keep up with maintenance, winterize and secure the property if vacant, and ensure compliance with city rules and codes. As long as it’s in your name, you are responsible for anything that happens to the property, and those fines and costs imposed by a city code violation, fire, etc. are not dischargeable if they happened after your bankruptcy was filed.

So, overall the best option is to speak to your bankruptcy attorney about your options with reaffirming a debt, especially a mortgage debt. They will be able to give you the best advice for your particular situation.

Contributions by Kelley Snyder, Paralegal

Sources:

http://www.bankruptcylawnetwork.com/refinancing-without-reaffirming-in-bankruptcy/

http://www.bankrate.com/brm/news/bankruptcy/20061121_debts_reaffirmed_a1.asp

http://www.loansafe.org/what-happens-if-you-do-not-reaffirm-your-mortgage-in-bankruptcy

Child Support and Children in College

In Missouri, a parent’s obligation to pay child support generally ends when the child turns eighteen years old. If the child is enrolled in college, however, the child support obligation may continue if certain conditions are met.

Under Mo. Rev. Stat. § 452.340(5), the child support obligation will continue if the child enrolls in an institution of vocational or higher education prior to the October that follows the child’s graduation from high school. An “institution of vocational education” encompasses any postsecondary schooling or training where the child attends classes on a regular basis for a fee or tuition. An “institution of higher education” includes colleges, community colleges, or universities.

For the support obligation to continue, the child must be enrolled in and complete twelve credit hours each semester. Summer semesters are excluded. If the child withdraws from a course, the credit hours for that course will not count as part of the twelve required hours.

By statute, the child must provide a transcript to each parent at the start of each semester. The transcript, or other official document issued by the institution, must indicate the courses the child has enrolled in and completed for each term. The document must also show the grades and the number of credits the child received for each course. In addition, it must reflect the courses and corresponding credit hours the child has enrolled in for the upcoming semester.

In addition to enrolling in the required number of credit hours, the child must also receive grades that allow the child to remain enrolled at the institution. Failing grades in half or more than half of the child’s courses for any given semester may terminate the payment of child support.

The child is also responsible for providing the noncustodial parent, upon request, with a copy of his or her grades. Such documentation must be provided within thirty days of receipt of grades from the institution. Child support payments may terminate if the child fails to produce the documents in the allotted time.

If circumstances prevent the child from enrolling in twelve credit hours a semester, the requirement may be lessened. A minimum of nine credit hours each semester is required if the child remains employed for fifteen or more hours a week during the course of the semester. A child with a diagnosed developmental disability or health problem that impacts the number of credit hours the child can carry will remain eligible for child support as long as he or she meets all of the other requirements.

Provided the above requirements are met, a parent’s child support obligation shall continue until the child completes his or her education or turns twenty-one years old, whichever happens first. During this time, either the obligated parent or the child can petition the court to amend the order and instruct the obligated parent to make the child support payments directly to the child.


Contributions by Kelly Thompson, Law Clerk