Bankruptcy And Divorce Lawyers

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Still trying to decide whether you should initiate bankruptcy or divorce first? If you need help deciding whether to file for bankruptcy or divorce first, careful planning can help simplify both processes and save you money.

Divorce can be tough emotionally and financially, and the financial aspect often links divorce and bankruptcy.

Some individuals may have experienced financial difficulties early on, which could have affected the marriage. Others may need help to handle the expensive divorce obligations.

Regardless of the circumstances, bankruptcy offers a solution to eliminate burdensome debts, making it easier for both parties to rebuild their lives.

Whether to file for bankruptcy before or after divorce depends on location, the extent of your assets and debts, and the type of bankruptcy you intend to pursue.


Should You File for Bankruptcy or Divorce First?

 

 

Simultaneously filing for divorce and bankruptcy offers numerous advantages, but evaluating these benefits individually is crucial since everyone’s financial situation is unique.


Filing A Joint Bankruptcy

 

Did you know that simultaneously filing for bankruptcy and divorce can expedite the process? In most cases, the bankruptcy case is given priority over the divorce case. However, both parties can file for a bankruptcy case by filing for bankruptcy before or alongside a divorce.

Submitting a Joint Petition Together

 

Imagine a bankruptcy case as a process that begins when someone, like a person, a married couple, or a business, fills out special paperwork and submits it to the court.

When a married couple decides to file for bankruptcy together, they fill out a “joint petition.” This joint petition includes all the essential financial information of both spouses in one set of documents.

Divorcing couples often file for bankruptcy together because it can be more efficient. There are a couple of benefits to doing this:

First, when the bankruptcy is approved, it helps eliminate (or “wipe out”) the debts both spouses have. There will be fewer issues to decide in the divorce court, making things simpler.

Second, legal fees are usually cheaper to file for bankruptcy together as a married couple than to file separately. As a result, they can save money on the overall process.

So, filing for bankruptcy together before getting a divorce can make things easier and less expensive for the couple.

Bankruptcy Before Divorce

 

 

Sometimes, both spouses may find it easier to qualify for bankruptcy after the divorce process. This could be because their combined income has decreased significantly, making them eligible for certain types of bankruptcy.

In such instances, it might be more advantageous for each spouse to file for personal bankruptcy separately after finalizing the divorce.

Bankruptcy After Divorce

 

 

Sometimes, both spouses may find it easier to qualify for bankruptcy after the divorce. This could be because their combined income has decreased significantly, making them eligible for certain types of bankruptcy.

In such instances, it might be more advantageous for each spouse to file for bankruptcy separately after finalizing the divorce. Then, after the divorce, they can file for either Chapter 7 or Chapter 13 bankruptcy.

In Chapter 7 bankruptcy, most or all of the debts can be wiped out, giving them a fresh start after the marriage ends. This means they won’t have to worry about those debts anymore. However, the divorce judgment can require one of the spouses to remain liable on the debt, so the bankruptcy filing will not discharge that obligation owed on behalf of the ex-spouse.

In Chapter 13 bankruptcy, the unsecured debts (like credit card bills) can be eliminated, just like in Chapter 7. But it also helps them catch up on any secured debts they might be behind on, like a house or a car. Again, they can do this over three to five years, making it more manageable.

To make sure they make the right decisions, it’s crucial to have the help of an attorney who understands their specific situation. This attorney can guide them through the process and help them choose what’s best for them in the long run.


Chapter 7 vs. Chapter 13 Bankruptcy and Divorce

 

 

A Chapter 7 or Chapter 13 bankruptcy can offer debt relief and the opportunity for a fresh financial start.

While every situation is different, filing a joint Chapter 7 bankruptcy before initiating divorce proceedings is recommended, as it is a quicker and fairer option. However, it’s important to note that bankruptcy may only sometimes be optimal for reducing or eliminating debt.

Factors such as the nature and amount of the debt, individual financial circumstances, and other legal considerations should be carefully evaluated before deciding on the best course of action.


Discharging Marital Debt In Michigan

 

In Michigan, in a divorce settlement, the division of marital debt follows a principle of equal division. Therefore, any assets, property, medical bills, and debts accumulated during the marriage are typically divided equally between the spouses.

It doesn’t matter if the debt was acquired individually or jointly, as Michigan divorce laws treat all debts incurred during the marriage similarly.

Imagine a married couple who decides to get a divorce. A critical aspect of a divorce is the division of debt. In most cases, the debt is divided evenly between two spouses, meaning each person is responsible for paying approximately half of the total debt. This ensures a fair distribution.

However, there are situations where a judge may determine that an alternative debt division is more appropriate and fair. For example, the judge considers various factors, such as each spouse’s financial situation, earning capacity, and other relevant circumstances. Based on these considerations, the judge may decide to divide the debt in a different manner that is deemed fair to both parties.

It’s important to understand that the ultimate goal is to achieve a fair and equitable distribution of debt, considering the specific circumstances of the couple involved.


Property Division

 

 

 

The goal of the law is to divide a couple’s assets equally in many cases. However, certain factors can lead the court to provide relief to one spouse:

  1. If a spouse has significantly more money than the other, the court may make adjustments to ensure a fair division of assets. This prevents one spouse from being financially disadvantaged after the divorce.
  2. If a spouse is responsible for the divorce, the court may consider this when dividing the assets. The spouse who is not at fault may receive a more favorable distribution to compensate for any negative impact caused by the divorce.
  3. If a spouse receives more property that still requires payments, the court may adjust the division of assets to account for these pending payments. This ensures that both spouses share the financial responsibility for any outstanding obligations.
  4. If a spouse has accumulated significantly higher debt than the other, the court may consider this during asset division. The spouse with more debt may receive a smaller share of the assets to balance the financial burden.

In these situations, the court aims to tailor the division of assets to the specific circumstances and ensure a fair outcome for both parties involved in the divorce.


The Myth That Filing Bankruptcy And Divorce Is A Lot Of Work

 

Contrary to popular belief, the idea that filing for bankruptcy and going through a divorce is an overwhelming and burdensome process is often a misconception. While bankruptcy and divorce involve legal procedures and require careful consideration, they can be managed effectively with the right approach and guidance.

Although each situation is unique, with its complexities and challenges, it’s essential to approach bankruptcy and divorce with a realistic perspective. By seeking the help of experienced professionals such as bankruptcy attorneys and divorce lawyers, individuals can navigate these processes more smoothly.

These legal experts have the knowledge and expertise to guide individuals through the necessary steps, handle paperwork, and ensure compliance with legal requirements. They can simplify complex procedures, provide valuable advice, and advocate for their client’s best interests.

Open communication, cooperation, and understanding between both parties can significantly contribute to streamlining the process. Individuals can find amicable resolutions and minimize unnecessary conflict and stress by working together and maintaining a respectful approach.

It’s important to remember that while filing for bankruptcy and going through a divorce may involve some effort and time, managing both processes efficiently with the proper support and a positive mindset is possible.


How A Bankruptcy Lawyer Can Help With Financial Troubles

 

 

 

Whether you are deciding on a repayment plan for your credit card debt while divorcing or deciding what to do with the assets acquired during your marriage with spousal support for the best interest of both of you, whether you know what debt relief options you have in bankruptcy or thinking about invoking bankruptcy protection and filing a divorce simultaneously, hire an attorney to be by your side and help you navigate through these difficult times.

Call a bankruptcy and divorce lawyer today. At Babi Legal Group, we can offer a free consultation with an expert.

Pros and Cons of Different Bankruptcy Chapters

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If you’re struggling to keep up with your debts, bankruptcy is a legal option that can provide relief. However, it’s essential to consider the pros and cons before deciding whether to file.

On the one hand, bankruptcy can give you a fresh start. But on the other hand, it may hinder your ability to obtain credit in the future.

What Are the Pros and Cons of Filing Bankruptcy?

 

 

 

Being in a financial crisis can be a stressful and overwhelming experience. Struggling to pay debts, working to make mortgage payments, or constantly fearing eviction or repossession can make any person feel stuck. However, filing for bankruptcy can be a way out and generally is the cheapest option to obtain relief.

Advantages of Filing for Bankruptcy

 

 

 

Freedom from Creditors 

One of the most significant advantages of filing for bankruptcy is freedom from creditors. This protection is provided by 11 U.S.C. section 362 of the Automatic Stay protection, which is addressed in more detail later. Here are some of the areas of relief:

  • Automatic Stay Protection: Once the bankruptcy is filed, the Automatic Stay provides an immediate stop to all collection activities by creditors, including but not limited to: creditor calls,such as repossessions, wage garnishments, and foreclosures. This means that creditors must stop attempting to collect from you during the bankruptcy proceedings. 
  • Protection from Foreclosure: Filing for bankruptcy can prevent a foreclosure sale, allowing you to keep your home or catch up on missed payments or even give you enough time to seek a loan modification.
  • Protection from Eviction: If you’re facing eviction, filing for bankruptcy can prevent it from happening, providing you with enough time to catch up on overdue rent payments, however, if you have already received a judgment for possession/eviction then the bankruptcy’s Automatic Stay will not be effective.
  • Protection from Car Repossession: Filing for bankruptcy can prevent car repossession, and even if it’s already been repossessed, the Automatic Stay can help you retrieve it and stop the lender from selling it after the repossession.

Elimination of Debt

 

 

Another significant advantage of filing for bankruptcy is the elimination of debt. Depending on the type of debt, some may be eliminated, and some may be reduced. 

  • Dischargeable Debts: Credit card debt, medical bills, and personal loans are dischargeable debts that can be canceled entirely, providing significant debt relief.
  • Non-Dischargeable Debts: Some debts, such as taxes, student loans, and child support, may not be eliminated. However, Chapter 13 can help you organize those into a manageable repayment plan.

Creditor Harassment

Filing for bankruptcy stops creditors from contacting you constantly, bringing relief from the constant harassment and the stress it can cause.  If the creditor continues to contact you, then they may be liable for damages including punitive damages and attorney’s fees.

 

Wage Garnishment

Bankruptcy can stop wage garnishments and help you catch up on payments without sacrificing income.  In some cases, your attorney may be able to recover some of the garnished funds taken from you.

Automatic Stay Protection

 

 

Automatic Stay is a significant benefit provided when filing for bankruptcy. It can provide immediate relief, allowing you to breathe easier during bankruptcy. 

Automatic Stay provides a legal barrier preventing creditors from continuing, beginning, or revising collection activities without court approval, allowing you to reorganize your finances without worrying about sudden or unexpected collection activities.

The Benefits of Automatic Stay Protection

Here are several significant advantages that come with the Automatic Stay:

  • Ability to Catch Up on Payments: The Automatic Stay stops collection activities, providing a distraction-free environment to catch up on overdue payments.
  • Protection from Foreclosure or Eviction: As mentioned earlier, the Automatic Stay stops foreclosure sales and eviction proceedings, allowing you to keep your home and catch up on past-due payments.
  • Time to Reorganize Finances: The Automatic Stay can give you some breathing space, allowing you to evaluate your finances fully. It gives you the time to recover and plan your financial future.

Disadvantages of Filing for Bankruptcy

 

 

Personal bankruptcy provides a way for people struggling with their finances to recover. But while bankruptcy has its advantages, it also has its disadvantages. Knowing these disadvantages is crucial because it can help you decide whether bankruptcy is the best solution.

Credit Damage and Duration

One of the most significant disadvantages of bankruptcy is the damage it can do to your credit. A bankruptcy filing will show up on your credit report for several years, making it difficult to get credit in the future. 

In addition, you will likely have to pay higher interest rates if you get credit. Bankruptcy can also stay on your record for up to 10 years, making it difficult to get a job or rent an apartment.

Expensive Fees

Bankruptcy can also be expensive. Filing for bankruptcy involves many fees, including filing, credit counseling, and attorney fees. 

These fees can add up quickly, and many people end up paying thousands of dollars to file for bankruptcy.  However, it may still end up being your most affordable option. 

Selling of Luxury Items

In Chapter 7 bankruptcy, you may be required to sell some luxury items to pay off your creditors. This can be a complicated process, as it may involve selling items that have sentimental value. You may be able to keep some of your assets, but you will need to work with your bankruptcy attorney to determine which assets are exempt from sale.

Difficulty in Borrowing

Obtaining a credit card or loan can be challenging after declaring bankruptcy. This can affect your ability to acquire a mortgage loan, and the interest rate may be higher if you do.

It’s also possible that you will have to wait a certain period before being eligible for a mortgage loan after filing for bankruptcy.

Different Kinds of Bankruptcy

 

 

If you opt for bankruptcy, you must choose between filing under Chapter 7, Chapter 11, or Chapter 13.

Both Chapter 7 and Chapter 13 bankruptcy can assist in erasing unsecured debts like credit cards, pausing foreclosures or repossessions, terminating wage garnishments, utility shut-offs, and debt collection attempts.

Both types of bankruptcy require you to cover your court expenses and lawyer fees. Nevertheless, they discharge debts differently.

Chapter 7 Bankruptcy

 

 

When people are thinking about filing for bankruptcy, they usually have Chapter 7 in mind. Chapter 7 bankruptcy is also referred to as “straight bankruptcy.”

For this specific bankruptcy, you must allow a federal appointed trustee to oversee the bankruptcy filing and they have the authority to sell any assets that are not exempted. Exempted assets may include cars, work-related tools, and basic household furnishings.

After selling, the money will be used to pay your exemption amount, pay the trustee’s attorney, pay the trustee and ultimately pay your creditors, and your remaining balance will be cleared when the bankruptcy is discharged. However, Chapter 7 bankruptcy does not cover all types of debts. Debts such as court-ordered alimony, child support, some taxes, and student loans must still be paid.

Filing for Chapter 7 bankruptcy can bring about serious outcomes. For example, you could lose your property, and the bankruptcy details will reflect on your credit report for ten years starting from the filing date. You will also be restricted from filing for bankruptcy under Chapter 7 for the next eight years if you get into debt again.

What are the disadvantages of Chapter 7 bankruptcy?

Chapter 7 bankruptcy has some downsides to consider. These include the fact that not all unsecured debts will be discharged, there is a risk of losing nonexempt property, and there may be a temporary negative impact on your credit score.

Chapter 11 Bankruptcy

 

 

Chapter 11 bankruptcy allows businesses and individuals with significant debts to restructure their finances and keep operating. The debtor-in-possession retains control of the company but is monitored by the bankruptcy court. To be approved, the debtor must present a plan for reorganizing their finances and business operations that both the court and creditors agree to.

Although Chapter 11 offers various advantages, the process can be complex and costly, often necessitating the assistance of a proficient bankruptcy attorney.

What are the disadvantages of Chapter 11 bankruptcy?

Debtors must provide extensive financial information to file for reorganization under Chapter 11 by submitting detailed documents to the bankruptcy court. The nature of the records required may differ based on the type of debtor. However, this process may result in a loss of privacy for the debtor.

To reorganize their debts and obligations under Chapter 11, debtors must demonstrate that their operation is profitable.

Chapter 13 Bankruptcy

 

 

In Chapter 13 bankruptcy, you can repay your debt partially or fully and keep your property.

Your attorney will discuss a repayment plan with the bankruptcy court that will last three to five years. The procedure may require you to repay some or all of your debt within that time. Once you have completed the agreed repayment plan, your debt will be discharged, regardless of the amount you repaid – even if it is only a portion of the original debt.

Although all forms of bankruptcy harm your credit score, choosing Chapter 13 might be better. This is because you can keep some of your assets as you repay some or all of your outstanding debt.

Furthermore, a Chapter 13 bankruptcy will expire from your credit report within seven years, and it is possible to file again within four years and obtain another discharge.

What are the disadvantages of Chapter 13 bankruptcy?

A Chapter 13 bankruptcy remains on your credit report for around seven years, but you can use that time to rebuild your credit.

Some types of debts cannot be eliminated through Chapter 13 bankruptcy. In addition, it typically takes 3-5 years to repay your debts entirely.

What’s the difference between Chapter 7 and Chapter 13?

Even though both forms of bankruptcy may entail selling assets to pay off debts, specific properties may not need to be sold.

State laws specify what assets are exempt, but typically essential tools for work, a personal car, or a share of the primary residence may be protected.

Chapter 7 bankruptcy relieves your responsibility to pay the debt. It does not cancel the debt for anyone else. If you want to protect a co-signer, Chapter 13 bankruptcy works only because you will repay the debt through your repayment plan.

Which bankruptcy chapter is better?

If you are facing foreclosure or repossession of a vehicle, usually filing for Chapter 13 is the best option. However, if you are struggling with credit card debt and medical bills and do not have a car or own a home, filing for Chapter 7 is often the better choice.

If you have a more complex situation involving a combination of these factors, own a business, owe taxes, or have a high income, it may need to be clarified which chapter to file, and you may need to consider individual Chapter 11.

Seeking professional help is the best course of action. It is recommended to schedule a free consultation with a bankruptcy attorney in person to discuss your situation. It is important to note that providing legal advice over the Internet is not reliable and insufficient, so more information will be needed to answer your question accurately.

The Process of Bankruptcy

 

 

During the bankruptcy proceedings, you must go through these steps.

To file for bankruptcy, you must meet with a credit counselor approved by the government. During this meeting, you will discuss your financial situation, bankruptcy options, and personal budget. Your bankruptcy attorney can recommend a counselor. This meeting must take place within six months before filing.

If you require the services of a bankruptcy lawyer in Michigan, you can confidently reach out to Babi Legal Group. Our team is well-versed in all aspects of bankruptcy and can offer you reliable guidance on navigating the process.

The most complex component in this process is the bankruptcy petition, a detailed document that strictly categorizes and describes all your outstanding debts. Typically, a bankruptcy attorney will generate this document for you by examining your financial papers and asking questions about your financial situation.

The bankruptcy timeline begins when your lawyer gathers the necessary information, prepares the documentation, and files the petition with the bankruptcy court.

To file for Chapter 7 bankruptcy, you must undergo a Means Test. This ensures only those who cannot pay their debts can file for bankruptcy. If you fail, your bankruptcy may be dismissed or converted into a Chapter 13 bankruptcy.

You have to meet with the bankruptcy trustee assigned by the court to represent your creditors. They review your bankruptcy application, sell assets in case of Chapter 7 bankruptcy, and distribute the money to your creditors. In the case of Chapter 13 bankruptcy, they will supervise your repayment plan, collect your payments and distribute the funds to the creditors.

After bankruptcy proceedings are finished, the bankruptcy is known as “discharged.” Chapter 7 happens when your assets are sold and used to pay off your creditors. In Chapter 13, it occurs when you’ve finished your repayment plan.

What is a Reaffirmed Account? 

In Chapter 7, bankruptcy, you can keep paying a debt that could be forgiven. This is called “reaffirming the account” and is typically done to maintain ownership of the collateral, like a car, that would otherwise be taken during bankruptcy proceedings.

Types of Debt

When you declare bankruptcy, some debts are discharged and no longer owed. Depending on the type of bankruptcy you file, secured debt may be partially or fully discharged, while unsecured debt may be completely wiped out.

Secured and Unsecured Debts

Secured debt is a type of debt that is guaranteed by tangible property, like a home or a vehicle, which creditors can seize if you are unable to repay the loan.

On the other hand, unsecured debt is a debt with no tangible collateral, like credit card debt.

Non-forgivable Debt

Bankruptcy doesn’t provide complete relief from all debts, as certain types of unforgivable debts can’t be eliminated. These include most student loan debt (although some members of Congress are trying to change this), court-ordered alimony, court-ordered child support, reaffirmed obligation, federal tax liens for taxes owed to the U.S. government, and government or court fines and penalties.

Can the bankruptcy court send you to jail?

 

 

A bankruptcy court is distinct from other courts as it deals with the distribution of assets in liquidation or restructuring following a bankruptcy filing. While it doesn’t address criminal matters, different courts may hold you accountable for financial misconduct related to your bankruptcy, such as misusing investor funds.  In cases of fraudulent bankruptcy filing, the court can bring in the Department of Justice to criminally investigate you to seek federal criminal charges. .

Alternatives to Bankruptcy

If you’re concerned about losing property or how bankruptcy can affect your career and result in high-interest rates and low credit limits, consider these alternatives to filing for bankruptcy.

Settle your debt

An informal debt settlement is an agreement that you can voluntarily negotiate with your creditors regarding the terms of your debt. You should contact each of your creditors directly and discuss the interest rates, payment amounts, and schedules.

Consolidate your debt

 

 

If you’re finding it challenging to keep up with numerous debts with different interest rates, consider getting a loan that consolidates all your debts into one monthly payment. This payment typically has a lower interest rate.

If your credit score is good and you can afford the monthly payment, debt consolidation might be a good option. Just remember you may need a co-signer to guarantee the loan.

 

 

Bankruptcy is not ideal, but it can be an opportunity to start fresh. By understanding the advantages of filing for bankruptcy, individuals can make informed decisions that can bring significant debt relief and ease the stress and burden of financial crises.

We encourage you to seek professional legal assistance to help guide you through the process and evaluate options that best suit your financial situation. Remember that natural relief requires real solutions.

What Is A Notice Of Acceleration?

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If homeowners fail to make their scheduled mortgage payments, they may receive a Notice of Acceleration from the lender. This document is used to inform the borrower that the lender has triggered their acceleration clause, which allows them to demand immediate repayment of all amounts due on the loan.

The loan balance is due immediately instead of the remaining amount over the rest of the term.

The notice of acceleration will demand loan repayment and provide details on how much is owed when it is due, and any other applicable instructions for a refund.

Tip: Read the entire loan document before you sign them!

Including an acceleration clause in a mortgage contract is expected, which permits lenders to take action if borrowers fail to make payments. When purchasing a home, it is crucial to carefully read and comprehend all loan documents, particularly the fine print.

Step One: The Breach Letter

 

 

Acceleration clauses are not typically activated automatically.

Loan acceleration usually happens after the lender sends a breach letter, which is a notice to the borrower warning them about a possible default before the acceleration of the loan.

The courts have different opinions on whether the breach notice activates the acceleration or the end of the cure period stated in the notice if the lender issues the notice before acceleration.

In certain situations, if a borrower misses a payment, the acceleration of the loan may happen automatically. In addition, in some regions, filing a foreclosure complaint can accelerate the loan.

The timing and notice required for acceleration before a foreclosure are subject to state laws or governmental guidelines.

Parts of a Breach Letter

 

 

A breach letter must specify the default and the necessary action to cure the default.

A breach letter needs to include a specific date, typically at least 30 days from when it is given to the borrower, for them to cure the default. It should also indicate that if they fail to do so by the specified date, the debt may be accelerated and the property sold.

The servicer usually sends this letter when the borrower is roughly 90 days behind on payments.

Federal law typically prohibits starting foreclosure proceedings until the borrower is over 120 days delinquent on loan. If the default is not corrected, foreclosure proceedings will be initiated.

The notice often tells the borrower that they can reinstate the loan after it has been accelerated, as well as their right to contest a foreclosure by stating that no default occurred or raising a defense.

Get a Foreclosure Attorney on Your Side

 

 

If you have received a notice of acceleration without the previous breach letter most mortgages must send previously, your lender may have incurred a fault.

Quick action with the help of a real estate lawyer can assist you in navigating through financial hardship while preserving your legal rights.

Conditions That Cause The Acceleration To Occur

 

 

As the mortgage acceleration clause states, lenders may require faster repayment if certain conditions are fulfilled. The following are some of those conditions explained.

Lenders can enforce an acceleration clause if there is an unauthorized property transfer.

For example, if the borrower sells their property without first getting permission from their lender, they violate the loan agreement, and the lender can accelerate the loan.

Canceling homeowners insurance could also trigger the acceleration clause, as it is necessary to have insurance for the entire mortgage duration.

If the borrower fails to make the monthly mortgage payments, you may be subjected to an acceleration notice. Missed loan payments typically trigger this clause, although the specific number of delinquent payments required may differ.

Different acceleration clauses have varying requirements for payment delinquency. For example, some may require immediate payoff if one payment is missed, while others may allow for two or three missed payments before demanding full loan payment.

A bankruptcy filing may trigger the acceleration clause in your mortgage agreement because your lender can take action if your default may be impacted. The primary mortgage lender holds a higher priority position than other creditors in real estate.

Bankruptcy is a complicated process that can limit a lender’s ability to recover their money, so they may accelerate payments to safeguard themselves.

Homeowners pay property taxes to avoid a lien and acceleration of the mortgage. Additionally, it’s their responsibility to maintain their property to prevent creating unlivable conditions, which could lead to acceleration.

What Is An Acceleration Clause?

 

 

An acceleration clause in a contract allows a lender to ask a borrower to pay back all of their outstanding monthly payments if they fail to meet specific requirements.

The acceleration clause will specify why the lender can demand the outstanding loan repayment and the amount due.

What happens after the acceleration clause is called upon?

 

 

Activation of acceleration clauses in mortgages is not automatic. However, once triggered, the lender will issue a mortgage acceleration letter indicating the amount due.

The timeline for issuance of the letter varies among lenders, but usually, the letter is sent 90 days after the initial missed payment.

If you’re behind on your mortgage, you can create a plan to catch up with your lender and restore your mortgage.

What does a Mortgage Acceleration Letter mean?

 

 

You will receive a letter from your mortgage company if they activate the acceleration clause.

The letter will contain details such as the reason for your mortgage acceleration, the lender’s contact information, and the mortgage balance with any outstanding interest you need to pay by a specified due date.

What actions should you take if you receive a notice to accelerate?

 

 

It is advised to work immediately with a foreclosure lawyer to understand your rights and options. Then, if a foreclosure is inevitable, the attorney can help you decide on the best action.

 

 

If you received a notice by mistake, contact your mortgage lender or servicer immediately. Ask for a detailed record of your payments to verify their accuracy.

If you need to catch up on payments but can bring your account up to date, do it as soon as possible.

Request a written statement of the amount needed to reinstate your mortgage so you have proof of the arrangement.

 

FAQ

Are acceleration clauses legal?

Acceleration clauses are enforceable under the law. However, they are only activated when a borrower still needs to fulfill their obligations and comply with the terms outlined in a previously signed agreement.

Are lenders required to inform about the acceleration clause?

Suppose you signed a mortgage contract with an acceleration clause. In that case, the lender may not have to explicitly inform you if they initiate a foreclosure process due to borrower default or if you fail to meet certain conditions. To be aware of the acceleration clause, you need to read the entire contract or have a lawyer help you understand what you are signing.

What steps can you take to prevent triggering an acceleration clause?

To prevent having to make accelerated payments, ensure that you keep up with all your mortgage payments, pay your homeownership expenses such as insurance and taxes on time, and maintain your property in good condition. Then, if there are no borrower defaults or missed mortgage payments to your mortgage servicer, you can avoid mortgage acceleration easily.

What Is An Ocwen Foreclosure?

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In December 2013, a national settlement resulted in mortgage relief for numerous borrowers whose mortgage accounts were serviced by Ocwen. In addition, the settlement granted specific borrowers principal reductions or cash payments.

If you feel that Ocwen is servicing your loan unfairly or illegally, or if they have wrongfully initiated foreclosure proceedings on your property, it is recommended that you consult a foreclosure attorney to explore your options.

If Ocwen has violated any state or federal laws related to mortgage servicing or foreclosure, you may have a defense against foreclosure.

 

History of the Ocwen Settlement

 

 

In 2012, Ocwen, the largest non-bank mortgage servicer in the country, was sued by the Consumer Financial Protection Bureau “CFPB”, in 49 states, and the District of Columbia for multiple violations of federal and state law related to servicing.

Although Ocwen has paid the fines as per the settlement, it still had to adhere to the servicing standards put forth by the settlement.

Ocwen has been found to violate the law when servicing mortgage loans, even after the multibillion-dollar settlement. This implies that some borrowers may have reasons to claim against Ocwen for unlawful practices connected to their mortgages, including illegal foreclosures. If you’ve encountered such problems, consult your state attorney general’s office and an attorney to see if you have a valid legal claim.

 

 

Despite the multibillion-dollar settlement, Ocwen has persisted in breaking the law while servicing mortgage loans. Consequently, some borrowers may still have grounds to file claims against Ocwen for illicit practices associated with their mortgage loans, such as wrongful foreclosures.

Ocwen Loan in Numbers

 

 

Ocwen Financial Corporation settled a lawsuit for mortgage servicing misconduct in 2013. They paid $291 million, and the lawsuit was initially filed in California.

Ocwen was instructed to pay $2.1 billion, out of which $125 million is to be given to borrowers who lost their homes from 2009 to 2012.

Multiple Legal Violations

 

 

The allegations against Ocwen involved breaking laws related to consumer protection and real estate at both federal and state levels, including regulations such as the Consumer Financial Protection Act and state laws on unfair and deceptive business practices.

After a thorough investigation, Owen was found to have committed several violations by state regulators and the Consumer Financial Protection Bureau (CFPB).

 

 

The violations consisted of several things: needing to promptly or accurately apply payments made by borrowers, keeping incorrect account statements, giving accurate and timely information to eligible borrowers seeking loss mitigation services, and charging fees related to default and foreclosure without authorization.

Ocwen provided false or misleading information to customers whose loans were transferred from other loan servicers. They misrepresented loss mitigation programs and relief from foreclosure, wrongly denied loan modification relief to eligible borrowers, and gave false or misleading reasons for the denial. Additionally, they still need to follow through with modifications already in process.

Who Has Benefited From The Ocwen Settlement?

 

 

From 2009-2012, individuals who were customers of Ocwen, Litton, and Homeward and owned homes or had borrowed money were eligible to receive payments.

Those who chose to receive payments did not have to give up any legal claims and could still pursue further relief.

Am I Eligible for Relief Provided by the Settlement?

If you had your home foreclosed on between January 1, 2009, and December 31, 2012, and you are an Ocwen customer, you may be eligible for a portion of the settlement.

Additionally, the property had to be a residential property consisting of 1 to 4 units. Also, the first lien’s outstanding principal balance should not have crossed specific limits based on the property type:

  • $729,750 for one-unit
  • $934,200 for two-unit
  • $1,129,250 for three-unit
  • $1,403,400 for four-unit properties

If it was foreclosed, it means that Ocwen Financial Corporation, Litton Loan Servicing LP, or Homeward was managing your loan. Additionally, you must have made at least three payments toward the loan.

To qualify for the settlement, you must either have lived in the property or have intended to make it your primary residence when the loan was initially taken out. In addition, your claim must also have been deemed valid.

Ocwen Loan Servicing Today

 

 

Although there was a lawsuit and subsequent settlement, Ocwen and its primary successor, PHH Mortgage Corporation, are still providing financing for real estate purchases and servicing mortgages.

This lawsuit remains essential. As part of the settlement, Ocwen has agreed to modify its future mortgage servicing practices, particularly for customers dealing with specific issues.

What Is The Ocwen Newest Settlement?

Although Ocwen reached an $11 million settlement with the State of Florida in October 2020, the company has persisted in mistreating its customers despite the national attention given to the lawsuit and settlement.

The Florida attorney general sued Ocwen, and as a result, they settled. The accusations against Ocwen include not giving customers credit for making on-time mortgage payments, leading to unjust late fees, which were then reported as adverse events to credit bureaus, and failing to apply for payments and calculate loan balances accurately. Additionally, they were accused of intentionally misleading borrowers with false information.

Does Ocwen service my loan?

 

 

The company you pay monthly for your mortgage is called a mortgage servicer.

To know if Ocwen services your mortgage, you can contact them at 800-449-8767.

If you lost your home due to foreclosure between January 1, 2009, and December 31, 2012, you may be eligible for a Notice Letter and Claim Form. The settlement administrator is responsible for mailing these documents to qualified borrowers. If you decide to receive payments, you will not be required to release any claims.

Loan Modifications by Ocwen

Ocwen has initiated the foreclosure process on multiple homes, and the settlement does not require them to halt this process. Nevertheless, you can check if you are eligible for a loan modification.

If you are behind on your payments or in danger of losing your home and owe more than it’s worth, you might qualify for a loan modification from Ocwen Services. The settlement requires Ocwen to offer $2 billion in principal write-down loan modifications to eligible underwater borrowers.

However, it’s important to note that not all consumers will receive this relief, as the settlement does not specify which individuals are eligible. Therefore, a loan modification is not guaranteed under this settlement.

Talk to a foreclosure defense attorney in your area for loan modification options. They can tell you more about the specific requirements of Ocwen’s loan modification program and help you explore other options if necessary.

Struggling Homeowners That Need A Loan Modification

As per the settlement terms, Ocwen was required to offer write-down loan modifications to eligible homeowners at risk of foreclosure. This aimed to provide $2 billion in principal reductions to help borrowers who owed more than their home’s worth.

A write-down loan modification would have lowered the principal balance, thus reducing the monthly payments.

Here is the Ocwen settlement website for more information.

Seeking a Loan Modification?

Suppose you completed the required modifications under this settlement but still need help making your mortgage payments, and Ocwen is your loan servicer. In that case, you may be eligible for a modification under another program.

To see if you qualify for a Flex Modification or an in-house modification option, contact a foreclosure attorney such as Babi Legal Group to find out if Fannie Mae or Freddie Mac owns your loan.

Transferred Ocwen Loans

 

 

If you have moved your mortgage account to Ocwen, there are certain things you should be aware of. First, the company has to offer protections for these transferred loans and review any requests for loss mitigation within 60 days of the transfer.

Ocwen is only allowed to initiate or persist with any foreclosure actions once this review is complete.

Who Enforces the Settlement?

 

 

The settlement has been submitted to the federal court; if approved, the court order will support it. State attorneys general can enforce the settlement in their state courts, and penalties may apply if Ocwen violates the settlement terms. Regulators in each state can also enforce orders within their jurisdiction.

As part of the agreement, an independent monitor with objective standards will supervise Ocwen’s compliance and report to the states and CFPB. This adds another layer of oversight. In addition, a monitoring committee, including state attorneys general and financial regulators, will collaborate with the independent monitor.

 

 

Overall, the Ocwen settlement relieves homeowners struggling with their mortgage payments. It requires that Ocwen offer $2 billion in principal write-down loan modifications and other protections for transferred loans. Through an independent monitor, state attorneys general and financial regulators will also ensure compliance with the settlement terms.

Suppose you are facing foreclosure or having difficulty making your mortgage payments. In that case, it is essential to explore all available options to make informed decisions about how best to protect yourself and your home. Contact us if necessary for more information regarding this settlement and other programs designed to help those in need of assistance when dealing with mortgages owned by Fannie Mae or Freddie Mac.