Rebuttal to Attacks from Bankruptcy Attorneys
Mr. Fleischman makes his own profits by helping people file for bankruptcy, and it is understandable that he believes that bankruptcy is a debtor’s best solution, but this is not always the case in the context of dealing with the mortgage on their house.
I wrote in my original article:
“at best, bankruptcy can forestall a borrower’s loss of their home, and at worst it can provide a false sense of security. Many borrowers will simply not be able to cure their underlying financial difficulties that led them to default on their mortgage payments, especially if they lied about their income on their mortgage application.”
This quote was not included in Mr. Fleischman’s critique of me, yet it speaks to the core of something he ignores. Bankruptcy does not discharge mortgage debts against a home, but many laypeople believe that it does.
What Mr. Fleischman ignores is that many people, even those in Chapter 13 bankruptcy, will not be able to catch up on their missed mortgage payments by agreeing to and sticking to a repayment schedule that includes currently due and past due amounts.
Especially in California many homeowners, up to 90% according to many experts, lied on their mortgage applications about the amount of income they made. Compounding this situation is the confusing nature of the pervasive Adjustable Rate Mortgage loans (ARMs) that often result in dramatically increased mortgage payments for borrowers after a series of very low payments.
Bankruptcy often serves as a Band-Aid for struggling borrowers and ultimately does not prevent them from losing their homes to foreclosure. Many people who retain an attorney to file bankruptcy for them will in fact lose their homes ultimately to foreclosure and will suffer the negative effects of a bankruptcy such as damage to their credit rating and will be responsible for large attorney’s fees to boot.
People say that sometimes the best telephone call a person in danger of losing their home to foreclosure can make is to a real estate investor who can help them avoid foreclosure and/or bankruptcy without the damage to their credit rating. Real estate investors across the country do indeed have a profit motive in purchasing a home from a borrower facing foreclosure and the ethical among us admit this upfront. We believe in full and frank disclosure and hope that bankruptcy attorneys and foreclosure consultants subscribe to this philosophy as well.
California real estate law guru Robert J. Bruss had this to say recently regarding foreclosures at http://www.washingtonpost.com/wp-dyn/content/article/2007/02/09/AR2007020900965.html :
“Do everything you can to avoid a foreclosure sale. Worse yet, filing for bankruptcy would merely delay losing your home by foreclosure if you are unable to make the monthly payments.”
I consider myself to be in good company when such an esteemed expert echoes my comments and I emphatically reject Mr. Fleischman’s insinuations and misrepresentations about my comments.
Patrick McGilvray, J.D.
President – http://www.TheHomeBuyingCenter.com
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