Posts Tagged ‘bankruptcy’

Trust Numbers to Guide your Financial Decisions

In Uncategorized on August 14, 2012 at 8:36 pm
One of the most important points I try to get my clients to understand is that numbers can be trusted. You may have heard the saying, “Numbers don’t lie.” It’s very true. I’m not talking about corporate earnings and government employment figures. Those numbers can lie through their teeth. I’m talking about the simple budget numbers that I put together with each client to show their financial situation. Those numbers, as long as they’re accurate, will be entirely truthful. And I try to get my clients to let those numbers guide them in their financial decisions.
Here’s an example: I spoke today to a man named Darrell who had racked up a bunch of credit card debt and was considering filing bankruptcy to be rid of it.
We put together Darrell’s budget and found that his truck was costing him $1,000 per month–$450 for the truck payment and another $550 for gas and insurance Meanwhile, the guy’s monthly income was only $2,000. Darrell had been living on credit cards because he didn’t have much money left after paying for his rent and his monster truck. He just didn’t realize it because he never looked at these numbers; he just went along charging everything until he reached the limits on his credit cards. Even if he got rid of the credit card debt through bankruptcy, he still wouldn’t be able to keep up with that truck because there wasn’t enough income. He couldn’t afford it, plain and simple.
“Darrell, half your salary is going to pay for that truck,” I said. “And that’s not including any maintenance for it. Filing bankruptcy isn’t going to let you afford the truck. You need to make another five or six hundred a month at least to afford it. If you don’t make more money, you’re going to keep having problems unless you get rid of it.”
Darrel explained how he really liked the truck, and didn’t want to give it up.
“Well, can you live in it?” I asked him.
He chuckled and replied, no he could not.
“Well, can you move back in with your parents?”
Darrell didn’t want to do that either.
And that’s another thing about numbers. Because they don’t lie, they show you the reality of your situation. Then  it’s up to an individual person to decide if they want to face that reality. But either way, the reality of those numbers will confront the person eventually.
Just ask the guys who were running Enron.

What to Expect from a Lender

In Housing Horror Stories on July 24, 2010 at 1:02 am
Half million dollar house in Salinas, Californ...

Image via Wikipedia


13 payments from paying off their mortgage, this unemployed couple are in danger of losing their home

  Many of my clients think that because they have paid on time in the past, their creditors will be lenient with them. Usually they won’t.
  You could pay on a 30-year mortgage for 29 years, never be a day late with a payment, and if you suddenly stop making that payment, they’ll foreclose to get that last year’s money they’re owed. And they’ll charge you all the normal attornies’ fees, late fees, and penalties in the process. 
  One of my clients actually was in this exact same predicament. His name was Jose, and this man had only 13 payments to make before his home would be paid off. But Jose worked in construction and as you may know, that industry has been at a standstill for almost two years. Jose hadn’t worked in a year and a half, and he’d missed six house payments by the time he called us. Now, the bank was moving to foreclose, and they were moving quickly. The home was scheduled to be sold at auction in the next month.
  Jose’s unemployment benefits had stopped, and his wife didn’t make much at her job. The $6,000 they’d had in savings was long gone. Theirs was a 15-year mortgage, so the monthly payments were rather high–$1,500 per month. They’d moved here from Mexico thirty years ago, and they’d saved a lot of money by the time they bought the house in 1996. Jose made pretty good money doing construction, so they opted for the shorter term mortgage with a big down payment in order to pay off the house more quickly. If it weren’t for all the foreclosure costs and penalty fees, they would only have owed about $20,000 on the house. It was due to paid off in mid-2011. But all the costs associated with the bank’s foreclosure action came to another $5,000. They were so close to owning their house outright, but because Jose couldn’t find another job, they were in real danger of losing their home and their investment.
  The reinstatement amount–legalese meaning the cost to stop foreclosure and bring the loan current–was about $26,000, due in a month. The mortgage company was offering one thing only: they would accept half the reinstatement amount, with the remaining half to be paid off over six months, in addition to the monthly mortgage payments. That meant a combined debt payment of $3,700 per month. It did not help. 
  “There’s nobody else I can borrow money from,” said Jose. “Isn’t there somebody at the bank I could talk to about this?”
   We called his mortgage company–one of the major ones–to find out if they would be reasonable, or if we might actually talk to a decision maker.
  I explained to the customer service rep that there was literally no way they could come up with the $13,000 by the deadline given, that they had no money left, and I asked if it was possible for them to pay some smaller amount each month, perhaps just the interest  until Jose got back to work
  “According to the notes here,” said the person on the other end, “We would need thirteen thousand, two hundred, dollars by June 26 or the house would be sold at public auction…”
  “Wait a second,” I interjected. “Are you guys really going to take his house? He’s only got 13 payments until the loan is paid. He’s never been late on a payment in 14 years. You can’t work with him until he finds a job?”
  “I’m sorry sir, the decision is the decision. There’s nothing I can do.”
  I asked to speak to a manager, and it went straight to voicemail.
  Jose and his wife were forced to declare bankruptcy in order to stop the foreclosure sale. And this was a guy who never was late with a house payment, he never had any excessive debt and had a good credit score. That’s the kind of behavior you should expect from a lender. Don’t expect anything less.