Does Your HELOC (Home Equity Line of Credit) Have You Locked?

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A few years ago when your home had equity, you obtained a Home Equity Line of Credit or HELOC to consolidate your debt and payoff credit cards, medical bills, personal loans, etc.  It seemed like a great idea because you could eliminate all of your revolving debt and make only two payments each month…your first mortgage and your HELOC payment.  This approach also provided a way to lower your monthly payment, since the interest rate on the HELOC was less than what you were paying on credit cards.  And we all thought at that time your home would appreciate in value!

Family Walking Holding HandsThat was circa 2008 and here you are in today.  You are lucky if your home is worth what you owe on the first mortgage, there’s no way will it will cover the HELOC.  So your HELOC has you locked!  What are your options?

Do absolutely nothing – You can see what is the HELOC creditor is going to do.

The HELOC creditor could foreclose on your home but probably not, since they would receive little if anything from the sale.  However, your credit will be negatively impacted because of late, slow or no payments on the HELOC.  The impact on your credit will make it difficult for you to obtain other credit for another car or other needs.

The HELOC creditor may actually decide to foreclose on the property.  They know they will receive little or nothing from the foreclosure, but they can write-off the bad loan from their books making the company more financially sound.

The HELOC creditor may write-off the debt on the loan and send a 1099C to you and the Internal Revenue Service.  It appears that this voluntary non-payment is excluded from the Mortgage Forgiveness Debt Relief Act of 2007.  At this point you will be responsible for taxes on the forgiven debt.  You should also remember that the creditor writing off the debt does not eliminate the lien by deed of trust on your home.  If you try to sell the house in the future, you must still deal with the HELOC creditor before you can convey the deed to another person.

Sell the home – You would sell the home, but you can’t get enough to pay the first mortgage and the HELOC.

You’ve talked to the HELOC creditor about a short-sale, and they want you to come to the closing table with at least some money to pay them.

Since you don’t have the money at closing, they have agreed to release the lien for you to sell the house, but they want you to sign an unsecured loan on at least a portion of the debt you owe them.  That is an option, but do you really want to pay for a house you do not own?  If you default on this unsecured loan in the future, they can actually sue you for the unpaid debt.

Chapter 13 bankruptcy – You can file a Chapter 13 bankruptcy to resolve the HELOC and any other outstanding debt.

The key is that your first mortgage must be greater than the value of your home.

You will be required to file a lawsuit or adversary proceeding in bankruptcy against the HELOC creditor.

You must complete your bankruptcy and receive a discharge.

This approach will allow you to retain your home and make it a more valuable asset, since you will no longer be saddled with the HELOC.

We you speak with your accountant or a bankruptcy attorney to determine what option is best for you.

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What Steps Do I Take to Obtain a Loan Modification?

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Family in Front of HouseIt is possible to obtain a loan modification even if you have filed bankruptcy.  At this time, most mortgage companies would rather work out a loan modification agreement, if viable, than to foreclose on your home.  The last thing most mortgage companies want is another vacant house!

Steps to Follow:

Step #1: You should contact your mortgage company and express your interest in obtaining a loan modification. If you are in bankruptcy, they may indicate that your bankruptcy attorney must provide a release form before they will agree to speak with you.  If that should occur, contact your bankruptcy attorney to obtain the authorization letter.

Step #2: After receipt of the authorization letter, the mortgage company will send a package of materials for you to complete as well as request that you provide income tax returns, paystubs, and other relevant information.  You should complete the paperwork in its entirety and provide all the information the mortgage company requested.  If you do not thoroughly complete the package or fail to provide additional information they requested, the mortgage company may reject your request for a modification or it may slow down the process.

Step #3: Before you submit the package to the mortgage company, Duncan Law recommends you make a copy of your completed package. This will come in handy if the mortgage company has specific questions or indicates they did not receive a document in your package.

Step #4: We also recommend you send your loan modification package to the mortgage company either overnight mail or certified mail so that you can track your package and be sure it was received by the mortgage company.  Often the mortgage company will provide an overnight envelope for mailing the loan modification package.  Be sure to keep your receipt so you can track the package.

Step #5: Now is the hardest part…waiting for a response.  Each mortgage company is different when it comes to the timeline for responding on the loan modification.  Some mortgage companies indicate they will respond in three to four months, others indicate it can be up to one year.  It does not hurt to be the “squeaky wheel”.  If you haven’t heard from the mortgage company, you may want to follow-up every two weeks.  Do not be surprised if the mortgage company requests additional information.

Step #6: Once you are approved for a loan modification, you may need to contact your bankruptcy attorney.

If you are in an active Chapter 7 bankruptcy, you should contact your bankruptcy attorney to see if it is necessary to obtain the Court’s approval of the modification agreement.

If you were in a Chapter 7 bankruptcy and your case has been completed, a final decree has been issued, it is not necessary to contact your attorney.  You do not need approval to can sign the documents with the mortgage company.  However, you may find it helpful to retain a real estate attorney to review the modification agreement.

If you are in an active Chapter 13, you should contact your bankruptcy attorney.  It will be necessary for the bankruptcy court to approve the loan modification agreement.  Your bankruptcy attorney will need the terms of your modification agreement so they may file a Motion to Incur Debt.  It takes approximately 30 days to obtain approval of the loan modification from the bankruptcy court.   You should work closely with your bankruptcy attorney through this process.

If your Chapter 13 bankruptcy has been dismissed or discharged, it is not necessary to obtain the bankruptcy court’s approval.  You may work directly with the mortgage company, but again, you may want to seek the advice of a real estate attorney.

Again, it is important to be thorough in completing your loan modification paperwork, and persistent in your follow-up and interactions with the mortgage company.  Good luck in your efforts to obtain a loan modification with your mortgage company.

How to Write a Cease and Desist Letter

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If you are currently suffering from some type of creditor harassment or dispute and you believe that if the matter went in front of a judge that you would win the dispute, writing a cease and desist letter may be a good option for you.

A cease and desist letter is a letter that may be written by anyone – not just a lawyer – in an attempt to stop some sort of harmful activity (usually harassment or a dispute by a bill collector). Cease and desist letters are usually used when the matter is not serious enough to spend money taking the other party to court. Although cease and desist letters are usually written by lawyers, they are not required to be and can certainly be written by an individual who is not a lawyer.

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Usually, a cease and desist letter threatens further legal action if the harmful harassment or dispute does not end immediately. For example, if debt collectors are constantly harassing you, you can write a cease and desist letter. The information you include in your letter should be:

The name and address of the person you are contacting

The name and address of the party who is harassing you or against whom you have a dispute

A description of the harmful actions that the other party has taken against you (harassing phone calls, harassing letters, etc. – be as specific as possible, including dates, times, people’s names, etc.)

A specific demand that the actions stop immediately

A statement that if the actions do not stop immediately, further legal action will be taken (you can be as specific here as you would like – lawsuit filed in a certain court, certain damages will be sought, etc.)

It is also a good idea to send the letter via certified mail, return receipt requested, so that someone will have to sign off on receipt of the letter. That way, the other party cannot argue that they never received your letter. If you send the letter via regular mail, the other party may argue that they never received your letter or that it was lost in the mail.

Although some people do hire attorneys to write a cease and desist letter on their behalf, it can definitely be done by an individual who is not an attorney – just be sure to include all necessary information and be stern in your demands. Here is an example of a Sample Cease and Desist Letter.

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How Do I Request Medical Records?

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To review a possible medical malpractice case or nursing home injury or neglect case at Duncan Law we must have the injured person’s medical records reviewed by an expert witness.  These are usually an expert nurse and/or a physician. For a medical expert to give a thorough review of your case it is important they have the opportunity to review the medical records.

To obtain a copy of the medical records you must request the records from the medical care provider. To provide these medical records to you, your health care provider must follow government privacy laws called HIPAA.  HIPAA is the Health Insurance Portability and Accountability Act of 1996.

First, you must qualify to receive the medical records. If you are the patient requesting your medical records, you can sign a HIPAA release and receive your medical records. If you are not the patient, you must have a formal release signed by the patient or have the legal authority to obtain these records.  The legal authority is usually granted by a power of attorney document properly executed by the patient (not just a hand written note signed by the patient). If the patient is incapacitated, you may have to obtain a legal guardianship or a court order to acquire the records. If the patient has died you must be the executor of their will or be appointed administrator of their estate by the clerk of the court or a judge.

Filling Out A Document

Second, after qualifying to receive the medical records you should make a written request to the medical care provider to provide the medical records. The medical provider may have these records stored electronically offsite away from their physical location, so it may take several days to obtain these records. If the records are stored offsite, the medical care provider should provide the records to you within 10 calendar days.

If the records are available at the facility, they should be able to have a copy made for you within 24 hours of your request. Do not expect to walk into the medical facility and they make you copies while you wait.

When you request the records, the staff may ask you why do you want a copy of your medical records? First, you are not required to answer that question. It is your medical records and you do not have to answer that question. However, any time you ask for medical records, especially from a doctor’s office, it raises flags and alerts the doctor to a possible problem. The staff will usually inform the doctor or nursing home administrator of the request and they go into “defensive mode”. In the past, some medical providers have been known to illegally change the medical records to “cover up” a mistake they have made.  Be aware this could happen. If the medical records are on site, you may ask the person in charge of medical records to pull the records so that you may look at the records on site before they are copied.  Once you have reviewed the records, you may then ask for copies.  After receiving the records, review the records and determine if any changes were made. If changes were made, notify your attorney immediately and dispute this with the medical facility.

Many medical providers will “discourage” you from obtaining the medicals by charging you an outrageous price per page to “copy” these medical records. Some providers will attempt to charge you a $1.00 per page.  If you have 600 pages due to an extended hospital or nursing home stay that could become very expensive. Fortunately, in North Carolina, there is a state law that prohibits excessive copy fees.  It is North Carolina General Statute  90?411, which states:

“A health care provider may charge a reasonable fee to cover the costs incurred in searching, handling, copying, and mailing medical records to the patient or the patient’s designated representative. The maximum fee for each request shall be seventy?five cents (75 cents) per page for the first 25 pages, fifty cents (50 cents) per page for pages 26 through 100, and twenty?five cents (25 cents) for each page in excess of 100 pages, provided that the health care provider may impose a minimum fee of up to ten dollars ($10.00), inclusive of copying costs.”

Once you’ve received your medical records contact your medical malpractice attorney or nursing home injury lawyer and provide them with the records so they can be appropriately reviewed.