Joseph M. Bochicchio, PLLC

On October 14^th, 2008, the Troubled Asset Relief Program, TARP, Federal Program was launched to purchase assets and equity from financial institutions to strengthen the US financial sector and address the subprime mortgage crisis. The first $350 billion was released that month and the second $350 billion was released in March of 2009.  

One key objective for TARP spending was the “Making Homes Affordable” plan, which was implemented on March 4, 2009, to mitigate the skyrocketing foreclosure rates. The “Hope for Homeowners” initiative followed shortly after. By fall of 2009, almost $75 billion in taxpayer money had been allocated for foreclosure relief for 3 to 4 million American homeowners in financial crisis. So where is all of this much publicized foreclosure relief?

I recently had a couple in my office that has been seeking for homeowner relief with no avail. Their request to refinance to a lower rate/ longer term was denied by their current financial institution even though their combined income had dropped over 60% and they were struggling to pay the monthly mortgage. They then went to another financial institution, thinking that since his bank did not receive TARP funds, that was the root of the problem. The second financial institution, which was a recipient of TARP funds, also denied their request. Ironically, 45 days after their initial request was denied, they received a letter saying their request was under review.     

According to recent releases, fewer than 12% of eligible loans are actually being re-modified. Why?  Many financial institutions were unprepared for the high volume response levels from homeowners in crisis; not only is there a shortage of properly trained employees to handle the loan modification requests, the volume of applications have created massive traffic jams in the processing and approval systems. Human error, system failure, paperwork backups all create many black holes for homeowners in financial hardship to get lost in.

 One individual I spoke with said his attempt to refinance was dragged out over 8 months, before ultimately being denied. In the interim, he emptied his savings trying to stay current on his monthly mortgage. Obtaining legal, debt counseling instead of listening to the “news” could have significantly changed his current situation. He would have been informed that as a self employed individual, he would have to provide 2 years of tax returns to prove sufficient income to qualify for the modified loan. His tax returns did not demonstrate the required level of income hence loan modification would not be a viable option to reduce his financial hardship.

Homeowners in financial crisis should not gamble that they will be lucky and the TARP fairy will bless their request for loan modification to be handled by a qualified counselor, sent to through the proper channels and submitted in a timely fashion. In addition to applying for loan modification, homeowners in financial crisis should seek out legal advice from a licensed debt counseling law firm or non-profit organization so they can be best informed about the options available to them.

In the current economic environment, many people have fallen into debt. As the debts continue to multiply, the ability to pay them becomes virtually impossible. As the reasons and causes of the debt vary from each individual, so do the solutions. It is important to understand that Bankruptcy is NOT a one size fits all solution.

Contrary to popular belief, not everyone is eligible to declare bankruptcy. In October of 2008, the means test established by the 2005 Federal Bankruptcy Reform act was adjusted. This means test compares your income with the median average monthly income in your state to determine whether you are eligible to have your debts discharged in bankruptcy or whether you must participate in a repayment plan and/or file Chapter 13 bankruptcy instead of Chapter 7 bankruptcy. Median income figures were adjusted by the Department of Justice on October 1, 2008, altering the numbers at which you would be considered eligible for discharge of debt. If you have questions about these laws or the impact on your case, consult with an experienced bankruptcy attorney in your state who can provide you with relevant local information and rules.

While bankruptcy should be considered as an option, it should not be recommended immediately as the ONLY option. Without a detailed, personal financial analysis and application of the Federal Bankruptcy Means Test, it is impossible to truly know if the individual even qualifies to file bankruptcy. If a service provider instantly pushes for bankruptcy as the only solution- this should be a red flag to individuals that they may need to get a second opinion.

About the Author: Joseph M. Bochicchio, PLLC. is a licensed Charlotte, NC Bankruptcy Lawyer with nearly 2 decades of experience in finance and law. His Charlotte Debt Settlement Law Firm is committed to providing legal and ethical guidance for North Carolinians facing financial hardship.

Many people find themselves buried in debt; mortgages, credit cards and medical bills that appear to be endless. There are debt solutions to stop the landslide. Common reasons for spiraling debt include job loss, unforeseen emergencies, divorce and overspending. There are three primary options for an individual facing financial hardship and bad debt: debt management, debt settlement and bankruptcy.

Getting back on the right track can appear to be almost impossible, and individuals need to be aware that there are many scams and unethical advertisements for services that actually worsen their situation. To solve your debt problems, you need to understand your options and then seek out legitimate providers of debt settlement or bankruptcy services. In North Carolina, it is illegal for anyone other than a North Carolina licensed attorney or a non-profit organization to offer debt settlement services.

Harassing collection calls and billing notices can create high levels of fear and anxiety, and individuals will impulsively sign on with a pseudo-debt service without any research. High fees and fine print, which states that the fees must be accumulated first before paying $1.00 towards your debt, can make a bad financial situation even worse. Be wary of these illegal service providers- do your homework, ask for references, check that they are licensed to practice law in the State of North Carolina.

Currently, the North Carolina Attorney General is actively prosecuting fraudulent debt service providers and individuals illegally engaged in debt settlement practice.

About the Author: Joseph M. Bochicchio, PLLC. is a licensed Charlotte, NC Bankruptcy Lawyer with nearly 2 decades of experience in finance and law. His Charlotte Debt Settlement Law Firm is committed to providing legal and ethical guidance for North Carolinians facing financial hardship.

Ignore what you see on television ads, hear on the radio or advice from your next door neighbor.  The aim of this article is to clear up some common misconceptions regarding bankruptcy alternatives.  First, there is Debt Management.  Debt Management programs are a form of consolidation of your existing unsecured obligations into one payment, usually at a lower rate, for an extended term.   You send one monthly payment, for a pre-negotiated amount to a not-for-profit, North Carolina LICENSED debt management company, who then distributes payments each month to your creditors in the program until your debts are paid off.

Debt Settlement is the process which in North Carolina, only a NC licensed lawyer or not for profit consumer credit counseling company licensed in this state may perform.  Debt Settlement involves contacting each of your creditors and negotiating reduced payoff balances, either in a lump sum payment or in a series of payments to settle your account in full.  Dont confuse this with debt management… Debt settlement will, in fact, negatively impact your credit, and is a final effort to prevent bankruptcy as an alternative solution.

It is important that you contact a qualified, North Carolina licensed attorney familiar with bankruptcy to advise you as to whether management, settlement, or bankruptcy is the best option in your particular circumstance. Financial hardship can get worse if you fall victim to one of the many unscrupulous and illegal scams out there.

About the Author: Joseph M. Bochicchio, PLLC., is a licensed Charlotte, NC Bankruptcy Lawyer with nearly 2 decades of experience in finance and law. His Charlotte Debt Settlement Law Firm is committed to providing legal and ethical guidance for North Carolinians facing financial hardship.