How can I make it go away?
August 10, 2009 3:06 PM   Subscribe

Is bankruptcy the only way to put this foreclosure mess behind me?

I bought a house near Las Vegas in February of 2005. At the time I was working as a contracted consulting engineer and I could afford the house. It sounds so stupid now, but I really did not understand the housing market bubble, I just wanted a place to live. In July 2005 I was essentially laid off - several clients canceled projects and my contract disappeared.

I was able to find another job but not in Nevada. I moved back to LA and rented the house, but for far less than the note ($1150 of $2400), so I kept paying the rest. After working 9 months in LA, I was laid off again (June 2006). I got married in October 2006. After collecting unemployment and searching for a job in my field, I finally had to give up and take a job at a grocery store. I still continued to pay the mortgage all this time, but in February 2008 I had a baby and have not worked since.

Starting in April 2008 I tried working through a company to negotiate a short sale on the house. I put together tons of financial information demonstrating how my circumstances had changed. The bank never approved any of the short sale offers and finally foreclosed in March 2009. I was not contacted by the bank at all during the process. Now today I get a letter from attorneys retained by the insurance company that offered the PMI on the loan (it was a 30-year fixed 95% down) demanding payment in the amount of $65K.

I am unable to get a job in my field in the LA area. To be honest my field of expertise was kind of narrow and I have made some professional mistakes. I suspect word has gotten around. My 10 year background looks "too exotic" or "overqualified" for a lot of other jobs. I cannot even get a menial job that will break even once childcare and expenses are factored in. I have not contributed to the bottom line of my household since I moved back to LA. I also have $11K in credit card debt (the account has been closed and I have been paying it down as much as possible). I used to make $75-85K a year, I guess I might have been overextended but really it wasn't that crazy when I was working.

But what do I do now? There is no way I can pay this. I don't think my husband should be responsible, since all this happened before we were married. But is he? How long are they going to come ofter me? Would bankruptcy work? If I need a lawyer, how do I get one? What kind do I need? How much does it cost? We have no money.

How do I know if I'm even getting good advice anymore? I feel as though I am loosing my whole life over a few bad decisions and some circumstances that were truly beyond my control. I don't know how to get another chance.

Thank you so much for any information or suggestions you are able to provide.
posted by anony-me to Work & Money (20 answers total) 4 users marked this as a favorite
Yeah, this sounds like exactly the kind of situation for which bankruptcy exists. You need to get in touch with an LA bankruptcy attorney.

Don't know how to find one? Open a phone book. There'll be hundreds. Better yet, check Martindale-Hubbell. Sure, you'll have to pay them--this'll likely cost you a few hundred bucks, maybe as much as $1000--but that's a far sight less than you currently owe, no?

Yeah, this is going to be a black mark on your credit for the next seven-odd years. But let's face it: with your income prospects, you aren't going to be in a position to be responsibly borrowing much anyways.

The good news is that not only can you get your mortgage discharged, but your credit card debt as well.

Assemble as much financial information as you possibly can before you get in touch with a lawyer. That'll save you both time and money in the long run. But any competent bankruptcy attorney will be able to get this done for you.
posted by valkyryn at 3:16 PM on August 10, 2009

You don't spend any time talking about your current household finances, only your personal past and present. How much does your husband make? Generally, your spouse does not assume liability for debts incurred before the marriage, but if you can work this out together without bankruptcy (probably still with the help of a lawyer), then it's a valid option to consider. However, if you think that you will spend more than 5 years getting out of the hole, bankruptcy can be the right choice both objectively and subjectively. Don't view it as an escape from responsibility, but instead as a way to relieve the burden of debt and become a productive member of society once again. After all, that's the practical reason why we don't have debtor's prisons: we'd rather have people creating wealth instead.

The bright side of the mess our economy is in is that you're not alone, and the bankruptcy won't be quite the scarlet letter on your financial reputation that it was in the past. You will come out stronger on the other side. Make the most of it.
posted by Chris4d at 5:18 PM on August 10, 2009

Oh, and as far as "working it out" goes, what I meant to say was, all debts are open to renegotiation. Most lenders would prefer to negotiate something that you can live with, rather than potentially have the entire debt discharged in a bankruptcy. The $65k is still a back-breaker, and you certainly want a lawyer for that if nothing else. The lawyer will have more specific advice than anyone on the internet can offer. good luck.
posted by Chris4d at 5:23 PM on August 10, 2009

You really should consult a bankruptcy lawyer. Nevada is a recourse state which means that the lender can sue for a deficiency, but Nevada is also what is called a single action state. This means they can pursue only a single action, either non-judicial foreclosure or a deficiency judgment, but not both. However, you have a third party involved, the PMI company. PMI only protects the lender, not the borrower, so the PMI company is motivated to recover the money they paid to the lender for the deficiency. Whether they can do this in your state considering the single-action rule can only be answered by a real estate or bankruptcy lawyer. You may have options other than bankruptcy.
posted by JackFlash at 5:28 PM on August 10, 2009

The other thing to keep in mind is that demand for payment is only the start of a very long process. The PMI company is only doing this as pro-forma requirement to preserve their right to sue sometime in the future. They may or may not be serious about it. Considering you are in Las Vegas, they may be backed up a year or two in the courts. A deficiency judgment requires a full court hearing that is much more complicated and expensive for the PMI company to pursue than a simple non-judicial foreclosure. Once they learn that they are unlikely to collect much from you, they may drop the case. More reason to see a lawyer familiar with procedures in Las Vegas.
posted by JackFlash at 5:53 PM on August 10, 2009

I am not your lawyer. You are not my client. This is not legal advice.

"There is no way I can pay this. I don't think my husband should be responsible, since all this happened before we were married. But is he? How long are they going to come ofter me?"

Generally speaking, he won't be. It's your name on the debt; they can only come after you.

And if they do, so what? It sounds like you've got no income; if you're careful and understand what kind of assets a judgement creditor could take from you in your state, and make sure to structure your financial life accordingly, they will eventually realize that it's not worth their time coming after you. That's when you might be able to negotiate a much better deal for yourself - paying some fraction of what they demand, especially if there's a legitimate dispute as to what you might owe.

"Would bankruptcy work?"

To do what, exactly? Wipe out the debt? Probably. Drop an atom bomb on your credit rating? Absolutely. Be a permanent black mark on your record whenever you apply for a job, a security clearance, a loan? Very likely. What do you have that you're afraid they'll take? Wages? Assets of some kind? Sounds to me like they're not likely to waste their time pursuing you once they know you're not likely to be the source of any recovery.

Good luck!
posted by mikewas at 6:36 PM on August 10, 2009 [1 favorite]

Response by poster: Regarding our current finances - my husband is also an engineer and makes a similar amount ($75K range). However, between his current mortgage (the house we live in) and health insurance, etc. there is nothing left over (anything extra we have paid on the credit card). We do not even have car payments, both our cars are old and owned outright.

I feel just awful about all this. Never did I imagine it could turn out this way.
posted by anony-me at 7:06 PM on August 10, 2009

Response by poster: I should also add that we currently don't have any real savings or assets, maybe $2K or so.
posted by anony-me at 7:16 PM on August 10, 2009

OP, as much as you sound like you don't want to file bankruptcy, you should. Really. As Valkyryn said above, this is the sort of situation for which bankruptcy was created.

From what I know of California law, it's a common property state - the assets and liabilities in a couple's lives are 'owned' jointly. It may be that by marrying you, your husband took on responsibility for half your debt.

One thing that trips me up in your statement is that you said you didn't hear from the lender at all during the foreclosure proceedings. Did you really not receive *any* notices from the lender or court regarding the foreclosure? If that's so, then there's a chance you could have that foreclosure rescinded/revoked/I'm missing the word I want here. Of course, since you can't afford to catch up or make those payments, there's really no point to it (particularly since the house has possibly been sold to a third party at this point). Although it might help with the PMI issue...

Talk to a California attorney who is also licensed in Arizona, if you can find one.
posted by LOLAttorney2009 at 7:42 PM on August 10, 2009

Response by poster: Did you really not receive *any* notices from the lender or court regarding the foreclosure?

No. Nothing in the mail, nothing certified, nothing at all. The lender did have my current address. I thought I would at least receive some type of communication or have an opportunity to involve a representative/attorney. I wasn't totally proactive there but I certainly wasn't hiding. I actually learned of the foreclosure when I looked up the house on Zillow and saw it had a last sale recorded in March 2009.
posted by anony-me at 8:16 PM on August 10, 2009

Best answer: One of our best friends is a BK attorney in L.A. (Northwest Valley.) If you want, I can send you his info.
posted by GaelFC at 10:32 PM on August 10, 2009

This is somewhat of a detour from other answers, but some of the numbers here are making me curious. If you were carrying a monthly mortgage payment of $2400 on the house in Las Vegas, and you bought in 2005, you're talking about a house valued somewhere around $400K. That's a crazy amount of house for someone making $75K. I'm not judging, I'm just wondering if you bought the same kind of house when you moved west, and if you're currently living in a place with your husband that is creating a similarly large debt-to-income ratio. If so, that might be your first step--can you sell the place you're in now, move somewhere with a cheaper monthly payment (or even rent for a while until you're back on your feet), and use the proceeds from the sale price to pay off the PMI company? (Probably not the whole amount, but they might be willing to negotiate with you if you explain that your only other option is bankruptcy) That would also give you some extra monthly capital to help pay down the credit card debt.

I'm certainly not an attorney, and your first move should probably be to contact one, but if there's a way for you scrape through this without filing for bankruptcy, it will make the next seven years of your life a lot less unpleasant.
posted by Mayor West at 4:51 AM on August 11, 2009

Response by poster: The house was $315K. The loan was for $295K. It was a modest 1400sf 2-bedroom detached townhome. Maybe it was crazy, but the only other times I had bought and sold a house was in the Southeast. People kept telling me "that's just the way it is" out here. I thought I was making a reasonable purchase. I did not think they would loan me more money than I could afford. And I had no problem with the $2400 payment when I was working. I made nearly $90K in 2005.

There is no equity where we are living now, it is probably underwater. My husband bought it before we were married (I am not on the mortgage). I didn't want him to buy it because by that time I could already see that the market had turned, but it was his decision. I really don't think we could rent any cheaper than what we are paying now as we are partially subsidized by a tennant.

What would be really helpful is if I could find some way to rescue my career.
posted by anony-me at 7:10 AM on August 11, 2009

How bad were the mistakes you made in your career? Are we talking 'designed a bridge that collapsed with a busload of school children on it' bad? If your husband is in the same field can you tap into his network to make contacts and try to pick up some contracting work? Be honest about mistakes you've made in the past, especially if prospective clients probably already know about them. That way you can control the message and explain what you've learned from them and the safeguards you've put in place in your process to make sure they don't happen again.
posted by IanMorr at 8:19 AM on August 11, 2009

Response by poster: No, no, nothing like that! And my husband is in a completely different area.

Overall the various mistakes have resulted in a poor perception of my work ethics in a small field (air quality). I also look very flaky on my resume. My last two jobs were now less than a year apiece. When I lost my job in Nevada and couldn't find another, I freaked out. I was working with a headhunter who I really think oversold me, and was also very pushy on my end. I ended up failing pretty spectacularly at the new job (more of a leadership role than I'd had before) and getting depressed on top of that. Then I was laid off.

If I explain that I was laid off, that really doesn't help. It means you weren't doing things bad enough to get fired, but not good enough to stay on. Glossing over it doesn't seem to work either. And it is very easy in that line of work for someone to ask a colleague "hey what do you know about anony-me?" and they will get an answer that is not bad, but doesn't make anyone want to hire me. Some of my knowledge is way out of date by now. I sure have learned from my mistakes though. And how.
posted by anony-me at 9:13 AM on August 11, 2009

Being laid off is not a big deal, lots of people with that on their resumes these days. Lets of people with short term roles too. You need to own it, don't blame the headhunter, you took the job. Nothing wrong with saying 'it was more of a management role than I was ready for and I didn't do very well at it. It wasn't surprising that when they looked to cut costs I was at the top of the list. I learned a lot about [my mistakes] and that will definitely help me be a better engineer. I've also learned that for now I want to focus on the engineering'.

If your skills are out of date is there a cheap way to update them? Books, online training, industry seminars, etc?
posted by IanMorr at 10:20 AM on August 11, 2009

Response by poster: I don't blame the headhunter, I was only hoping to explain that I made a poor decision in something of a high-pressure situation. The job could have turned out fine - it was several months before I realized how over my head I was. It was my fault, I didn't interview enough to find the best fit, I jumped at the first offer. I like your take on the explanation.

I have been taking a few classes as time/money allows. I had hoped I would be able to network some there but nothing has panned out so far. I plan to keep working this angle.

Do you have any suggestions for a lack of good professional references? Or what to do when people solicit a reference from industry colleagues that WEREN'T your specified references? Or should I just be really frank about what's happened and tell people I'm looking to prove myself again?

Thanks very much for your time, by the way.
posted by anony-me at 11:06 AM on August 11, 2009

One of my references is someone I haven't worked with in 4 years, they don't have to be current, and this would be understandable if you took a few years out from your career to raise a family.

I don't know that there's much you can do about them soliciting other opinions. Can you reach out to these people they may be contacting informally? Talking to them may help you understand what negative info they are spreading, again this will allow you to get out ahead of it. It may also be possible that they don't think as poorly of you as you imagine they do.
posted by IanMorr at 2:10 PM on August 11, 2009

Response by poster: I am adding some follow-up info in case someone with a similar issue finds this thread.

Lawyers have been little to no help at all (excepting GaelFC's recommendation). I spoke with several bankruptcy attorneys - unfortunately most bankruptcy attorneys that advertise themselves as such have no interest in helping you determine if a debt is valid, or whether or not bankruptcy is really in your best interest, or even telling you what all the consequences of bankruptcy will be (i.e. what assets you can keep, etc.). A lackey plugs your numbers into a the criteria for bankruptcy and then a lawyer will call you back later and tell you "yes I could get you through a bankruptcy filing. It will cost $2500 (on average)." And then they pretty much won't help you unless you decide to file through them. Oh, and pay in full first.

I was repeatedly told I would need to contact a real estate or foreclosure attorney to determine if the debt was valid. Everyone I called in California said I needed someone in Nevada. Everyone I called from Nevada did not return my calls. I even got a referral through the Nevada Bar Assn. and still got blown off when they finally called back.

I had much better results thoroughly researching these issues online. I googled all the bankruptcy criteria and forms myself, filled them out, and did my own analysis. I realized that filing bankruptcy would unneccessarily drag my husband's finances into the mix. There are also a lot of rules about what you can keep - we do not have fancy cars at all but they are certainly over the $2K allowance that bankruptcy provides for your car. There are certain purchases you can't have made prior to filing or after filing for a period of time, things like this. I'm glad those provisions are there... bankruptcy should remain a last resort.

As to whether or not the debt is valid... google the term "debt validation" and you'll see what I mean... I can't believe I thought an lawyer was necessary for this (or that so many blew me off when I would have so easily paid to learn of this simple process). I sent a letter to the attorney asking them to validate the debt (I used this one pretty much verbatim, but there are plenty of examples out there). I didn't hear from that attorney again.

About a month after receiving the first collection letter, I received another, from a different attorney that said the same thing. These two different collections letters for the same debt made me think that maybe they are getting their information from publicly available court records of the foreclosure, or something like that, trying to scare me and see if I'll bite (apparently this is a common tactic of collection agencies/attorneys). Again I sent my letter requesting "debt validation"... and I got back a letter that claims to validate my debt, and has attached a copy of my signed note from the title company.

But... I do not think this is over necessarily. This document may not have been that difficult to obtain and there is information missing (like an accounting of how the $65K figure was reached). So I am not convinced this constitutes validation. I am still researching this as well as going through the terms of the note in detail to see if/how the PMI company is part of it, what the language says, etc. Here again the debt validation sites have been pretty useful, but if you are working on such a project for yourself I would suggest that no one site be used exclusively for information. I have looked at about 20, and formulated my plans from something of a consensus among the sites.

Either way I'm writing another letter that says this does not meet the criteria for debt validation and not to contact me again. If it's not valid, this should make them go away once and for all. If it really *is* valid, then my strategy will be to structure my financial life such that I am not worth suing until the statute of limitations has passed (7 years I think but still looking). I don't plan to hire a lawyer at this point. If I do I will use a personal recommendation from someone and not the internet - but my goal is for no more money to go into this situation at all. I'm still optimistic that it's not valid due to the multiple agencies and Nevada's single action status. If this thread is still open I will update again when I know more.

Also my real username is FuzzyVerde and if I can help you in any way with a similar problem you can MeMail me using that username. And yes I am marking this "best answer".
posted by anony-me at 5:55 PM on October 31, 2009

Response by poster: Oh dear, mine was not the "Best Answer" at all. Not once I got served with a lawsuit for that $65K. I then tried again to find a contract or real estate attorney, in the end I consulted with two different local attorneys trying to determine if the lawsuit was valid. I got conflicting answers and probably bad advice. The attorney who said the lawsuit was valid said I should file bankruptcy if I could.

The trouble with a lawsuit is that the clock is ticking for how to address it (in CA you have 30 days from getting served to answer). Thinking it was probably valid, I decided to file for bankruptcy. It's possible that it was never valid, but once I didn't answer the lawsuit, bankruptcy really was the only way to go. Even if I had answered the lawsuit, the legal fees for dealing with it would have certainly exceeded those for a bankruptcy filing in short order, and there was no guarantee that I could even win.

I then hired a bankruptcy attorney (with an office near my house) that turned out to be a bankruptcy mill. Trust me they looked great on paper and in their meetings. Then they repeatedly stalled and delayed my case and blamed it on me. After getting the runaround numerous times, I called GaelFC's attorney friend to see if this was normal, was there anything I could do? He immediately advised me of my sorry treatment and completed my paperwork that very weekend. He also showed me that my lawsuit had gone to a judgment while the other attorneys were jerking me around (NOT GOOD). He even helped me with a couple of strongly-worded letters that led to me getting most of my money back from the bankruptcy mill. So that was definitely the Best Answer. I only wish I had called him first (even though he was clear across LA from me).

In summary, finding the right attorney is key. Keep trying until you find one! If you get sued, act immediately! If I can help in any way, please MeMail me at username FuzzyVerde. I am afraid more and more people will be finding themselves with these kinds of problems in the years to come. Bankruptcy has not been anything like the nightmare I'd imagined, and it has been such a relief to be able to put this all behind me knowing I had an attorney who had my best interests at heart. Thanks, Gael! I really owe you one!

(oh, and on the side item regarding my career, I've found some great ways to take my engineering background in a whole new direction via sustainable/green tech, so really things are looking up all over!)
posted by anony-me at 11:12 AM on May 3, 2010

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