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Georgia industry appointments update - 8/1/2007

Jul 31, 2007

Assisting bankruptcy ownersJoe CornoHow bankruptcy affects a mortgage People file bankruptcy to slow the pace of the inevitable. They are heading toward financial ruin and they feel the world closing in on them. They file bankruptcy to breathe for a few months, and most do not understand the bankruptcy laws and consequences. Most people do not comprehend that they will retain the same monthly mortgage payment and a lump-sum monthly payment that consolidates all consumer debt, late fees, penalties and attorney costs, in addition to the mortgage payment. Seventy percent of people—or seven out of every 10—who file for bankruptcy fall out of bankruptcy within a few months after filing. This causes the bankruptcy administrator to petition the court to release them from the bankruptcy protection. In essence, they are worse off than before filing. They have a bankruptcy recorded against them and their chance of obtaining favorable financing is gone. Another consequence is that the bankruptcy structure does not allow for life emergencies and experiences. All income, down to the penny, is allocated towards the lump-sum payment—sickness, accident, unexpected traffic violation, etc. has no allocation for funds. If someone, due to illness or accident, files a bankruptcy, future co-pay and personal costs for care, after insurance, are not allowed in the bankruptcy process. There is no money left to cover life emergencies and experiences. With existing bankruptcy laws, it may be better if the individual does nothing in protecting himself against further suits and judgments. Most consumer creditors do not want the expense of seeking restitution and will wait to proceed. This is simply an opinion, but if there is no property involved, a bankruptcy for any consumer debt causes worse restitution than volunteer repossession or continued credit damage. Once an individual is able to re-pay consumer debt, they can restore credit within a couple of years. A bankruptcy takes four to seven years for credit restoration. You may want to take poetic license and re-type the first four paragraphs of this letter to send to those falling out of bankruptcy. It will let them know that they are not alone and the majority of filings fail. The gem of this training is to give you the source for locating people falling out of bankruptcy. These are people that you cannot save from the federal court system because they are already in the federal court system. They have filed and they now are not able to abide by the bankruptcy re-payment structure. Thus, the court will release them from the bankruptcy protection and the creditors swoop in for the kill. One creditor, the mortgage lien holder, will initiate foreclosure proceedings with the court the day after release from the bankruptcy protection. The owners/borrowers probably have not been able to keep up their mortgage payments and the foreclosure process is now petitioned to be expedited through the court. A few years back, the federal courts required all bankruptcy proceedings to be filed and logged onto a public access federal court Web site referred to as Public Access to Court Electronic Recordings (PACER). The Web site is You will see a "Choose the court you want to locate" and "Search by" matrix in the middle of your screen. Above that is a short paragraph that reads: "Federal Courts across the country maintain Web sites that offer valuable information such as court location contact information, local rules and access through PACER to case docket information." This is the gem of public access. PACER is a court Web site of all federal actions and processes, including bankruptcies. This Web site is unknown to most of the public. It lists every bankruptcy filing since the Federal courts required bankruptcy actions to be filed and logged electronically. You need to register and obtain a password. Once this is done, go into the bankruptcy list in PACER. There are two lists to pay attention to. The first is filed but not paying per bankruptcy rules, which are people three months away from foreclosure proceedings—once again. The other is those who have been rejected from filing a bankruptcy and are three months from their foreclosure. The data bank allows you to search by location, zip code, specific addresses, etc. The names and contact information of the people filing are available to you as well. The key phrase to look at is any petition requesting the court to remove them from the bankruptcy filing. This means that they are falling out of bankruptcy and need your services. They have gone through deep despair, they are worried about basic needs and the process is not money oriented. They become paralyzed with fear and they may make last-minute decisions. Use terms like "make a fresh start," "when you decide to break away, you feel better" and "saving you from the house burden" when you approach them. Their individual circumstances will determine your marketing approach and resolve to their problem. You can bring current their mortgage and take the property subject to existing liens and conditions. You can become their administrator via a land trust, and/or directly negotiate with their lien holders. They are emotionally drained on doing this function themselves. You can seek after a short sale with the lien holders. You can purchase with an assignable lease option. Now remember, some of these people are under bankruptcy protection; thus, any proceeds that they net will go directly to paying creditors. You can create a separate personal agreement, completely non-related to any purchase agreement, to purchase personal property, or offer a "leave early" enhancement that pays them if they vacate earlier than what is contracted. These are ways of getting needed money to the sellers. Sometimes it is just impossible to get anything to the sellers. The property is so upside down that it is a lose-lose-lose scenario. In PACER, search for the bankruptcy filings that indicate a property lien (mortgage loan) in the filing. There are charges to print and some filings have many pages. When you discover that there is more owned than what is there, negotiate. The negotiation is between you and the lien holder, and you deal with their loss mitigation officer. Show the lender what it will cost them to take the property back than to discount and sell you their note. You offer no more than 18 percent—meaning $18,000 on a $100,000 note. If the lender is going to appraise the property, meet the appraiser/Broker Price Opinion to show problems, negative issues and comparables in the area. By taking the note over at a discount, you have $100,000 lien for an expense between $10,000 and $18,000, and you take control of the foreclosure. Obtaining property out of bankruptcy is how to acquire property. By purchasing the note that was in foreclosure, the people can dismiss the bankruptcy and take responsibility back of their other payments as they deed over ownership to you in lieu of foreclosure. At this stage of their lives, people just want relief from their circumstances. Increase their opportunity to do so by discount purchasing the note so that you can release them from the property and associated liens. Of course, you are not discounting your purchased lien to the owners, unless you wish to. You created equity to make money by getting them out from under their burden. It takes time for people to relocate. Work with people's needs and emotions. Respond and react in a way that the owners want you to. In the PACER system, once logged in, you can navigate to find hyperlinks that will take you directly to a specific case. I recommend that you do not pay to print until you have made contact with the owner/seller to investigate further. Go by personally, meet and talk to the owner/seller. Take notes down on what they want and then have them sign your notes. Through PACER, you can also check on cases that have already been dismissed after reports by searching by date. Consistency in mailing and calling works much better than blast mailing. There is no need to send a large quantity of letters. Six letters every week to 10 people brings more business than one letter to 60 people. The level of service you provide is up to you. No paid system replaces moral service to people in need. Of course, there is gain to profit while being of service. Joe Corno is president of Utah-based We Be Consulting and Seminars. He may be reached at (801) 836-2077 or e-mail [email protected].
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