2008 was the year of the financial meltdown, the likes of which had not been seen since the great depression of 1929. Pundits of all sorts who predicted that the worse consequences of the financial meltdown had come and gone were all proven wrong when the sub-prime mortgage crisis started toppling the titans of the financial world, national retailers, and even the BIG 3 car-makers of Detroit. A steady parade of financial behemoths becoming bankrupt made the headlines in the last quarter of last year. Countrywide, Washington Mutual, Wachovia, Indy Mac, Bear Stearns, & Lehman Brothers all went bankrupt. All felled because of too much debt. The CEO’s of Chrysler, Ford and General Motors, went to Washington last month with tin cups in hand asking for bail out funds to save them from bankruptcy. All 3 were shoved into the brink of bankruptcy by too much debt.
The ordinary consumer and homeowner no doubt has also been saddled with too much debt. Many individuals have purchased houses and rentals with zero down that have lost all of their equities. Many have borrowed from credit cards to make improvements on these properties and to keep these properties afloat hoping that their values will start going up. Some have used up their retirement accounts to cover mortgage payments on these properties. As a last step, many homeowners have contacted creditors to ask for ‘loan modifications’ to reduce mortgage payments, only to be turned down, time and again. It is apparent that bail out funds given to banks to be used for ‘loan modification’, are being used for something else or are just being hoarded by the banks. One beneficiary bank of bail out funds used the funds to buy a large bank in China. No wonder, ‘loan modification’ that actually benefits the borrowers is nowhere to be found despite all the media hype about it. Certainly, some borrowers have managed to wrangle out some kind of ‘loan modification’ that makes sense for them, but these cases are far and few in between. Most applicants have just been rejected outright.
Back to reality, if a property is foreclosed but has more than one trust deed against it, the non-foreclosing trust deeds remain outstanding valid unsecured debts against the homeowner; unfortunate, but true. For instance, your house is worth $400,000, is foreclosed by the first trust deed holder with a balance owed of $450,000, the second trust deed of $120,000 is not wiped out by the foreclosure. There is no deficiency owed on the first trust deed even though the first got less than what it was owed, but the entire amount of the second trust deed of $120,000 is still owed. It becomes an unsecured debt. Thus property owners with foreclosures are being hounded for payment of their second trust deeds despite losing their properties.
If you have too much debt arising from foreclosures, credit cards, lawsuits or other obligations, seriously consider getting rid of all your debts with a chapter 7 petition this year so you can start fresh without debt and be productive again. After all, if the titans of business and industry cannot survive with too much debt, neither can you. So, take a long and hard look at your finances and debt situation, and make an objective decision to get your family back on solid financial footing. Ignoring the problem is not the solution. Making minimum payments on your credit cards to keep them current is not the solution. Just like the BIG 3, if you have too much debt, you need bail out funds from a rich uncle, or you will have to get rid of your debt with a bankruptcy. In a chapter 7 bankruptcy, you will be able to keep most if not all of your assets while getting rid of all of your debts, giving you a fresh start in life without debt. You can keep your house, cars, retirement accounts, and income, while freeing yourself of all unwanted debt.
If you need debt relief, contact my office. I will analyze your case personally.
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Lawrence Bautista Yang specializes in bankruptcy, business, real estate and civil litigation and has successfully represented more than five thousand clients in California. Please call Angie, Barbara or Jess at (626) 284-1142 for an appointment at 1000 S. Fremont Ave., Bldg. A-1 Suite 1125 Unit 58, Alhambra, CA 91803.
( Published on January 10, 2009 in Asian Journal Los Angeles p. C4 )
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