Chapter 128

At the Law Office of Gregory A. Holbus, L.L.C., we are always looking for ways to better serve our clients and meet their needs. We’ve had a number of clients inquire about alternative ways to pay legal fees, and in a few days, we will be offering ACH/EFT as a new method to do so. We’re in active negotiations with a title company to re-introduce real estate deeds, mortgages, and tax bills to the list of things our Document Retrieval System can obtain for you.
We are now offering services to file debt amortization plans under Wis. Stat. § 128.21. What is it? In a lot of ways, it is similar to a Chapter 13 Bankruptcy debt consolidation and repayment plan. Unlike Chapter 13, “Chapter 128s” are cheaper, have less restrictive qualification requirements, and require far less paperwork/disclosures to sign and file. Both Chapter 13 and Chapter 128 pay unsecured creditors at 0% interest and can prevent wage garnishments and utility shut-offs. Chapter 128s do not show up on your credit report as a bankruptcy, there are no counseling courses to take, no hearings to attend, and you have the freedom to selectively include and exclude debts.
But, as I always say: you get what you pay for. Chapter 128 may be Chapter 13’s cheaper, faster, and easier cousin, but there is a trade off. You are not eligible for a discharge in Chapter 128 – all of your debts must be paid in full. You can’t do a 5 year plan like you can in Chapter 13 – a Chapter 128 may go no longer than 3 years. Chapter 128s do not prevent repossession or foreclosure. Though both Chapter 13 and Chapter 128 are a matter of public record, it is much easier for your friends to learn about your Chapter 128 via Wisconsin’s free and publicly-accessible Circuit Court Access (CCAP) web-site. Finally, Chapter 128 is limited to Wisconsin residents.
As your attorney, it is my job to make sure that you make a decision that is in your best financial interests. I do not recommend Chapter 128 for people who have a personal aversion or distaste for bankruptcy. I do, however, recommend Chapter 128 for people in unique circumstances. For example, if your debt is so low that the cost-to-benefit ratio of filing bankruptcy would be negligible, then a Chapter 128 might make more sense. If you are ineligible for a discharge under Chapter 13 because you filed bankruptcy too recently, then a Chapter 128 might make sense. If you are facing a utility shut-off, and cannot afford a bankruptcy (or can’t afford it in the time window you have before the shut-off), then Chapter 128 might be a good temporary solution to your problem.

Are Mortgage Modifications a Scam?

There is more than one way to skin a cat, or so they say. When facing foreclosure, you have several options. Your simplest defense is that the mortgage company’s allegation that you defaulted on your loan payments is false, but of course, that defense only works if it’s true. You might also have a defense under a Truth-In-Lending (TILA) violation, consumer protection laws, or some other state contract law. But when the truth is that you’re simply behind on your mortgage payments, there are really only three ways to save your home, aside from paying the reinstatement amount.
The first option is the one I advocate – Chapter 13 Bankruptcy. The bankruptcy creates an automatic stay which stops foreclosure proceedings, and the Chapter 13 offers a mechanism to cure the mortgage arrears over a 3-5 year repayment plan.
A second option is to refinance your mortgage, which basically means that a new mortgage lender buys out the mortgage from the original lender, effectively refreshing the mortgage and bringing the homeowner current. The catch with this option is trying to find a lender who will give you the new mortgage after your mortgage defaults have ruined your credit rating.
The third option is loan modification, and in response to the foreclosure crisis in America, there has been a tremendous amount of pressure on lenders to explore these options. I’ve even seen court orders to that effect.
IN THEORY, these things are designed to bring you current on your mortgage and stop foreclosure proceedings by extending the term of the loan and putting the mortgage arrears at the back of the loan. All of this happens only if the homeowner jumps through hoops for about 4-6 months, by way of making several mortgage payments (typically at an escalated amount), tons of paperwork, and other procedures.
Now, I confess, I am not an expert as to what these procedures are, the conditions that the lenders are operating these programs under, nor the criteria for qualification. I doubt there are any experts in this area. However, I have had an alarming number of cases present themselves to my office – horror stories of homeowners who have, evidently, followed the terms of the loan modification agreement to the letter, only to be denied the modification – seemingly by no greater cause than the mortgage lender’s whims. I’m not sure what mechanisms, if any, are in place to force the mortgage companies to honor these agreements.
Tragically, many homeowners are over-extending themselves trying to qualify for these modifications, putting themselves in a worse financial situation, and getting nothing out of the ordeal. Worst of all, the foreclosure process is still running in the background, and by the time the homeowner realizes that the loan modification is not going to go through – bam! – they’re facing a sheriff’s auction of their home in a couple of weeks, with virtually no time to prepare to file a bankruptcy case.
Am I saying that you should never explore loan modification? Of course not. But I am issuing this warning. If you are intent on saving your home, have a back-up plan and don’t wait until the last minute to get it lined up and ready to go.
It’s seems more evident by the day that mortgage lenders might be exploiting mortgage modification options as a way to waste precious time in the foreclosure process and to distract you from other, more reliable options to save your home.
I may be biased, but I believe that Chapter 13 is the safest and most reliable way to stop foreclosure. It’s true, on a case-by-case basis, there are some homeowners whose financial circumstances preclude a Chapter 13 Bankruptcy from being a viable option. However, as an attorney who specializes in Chapter 13 and preventing foreclosure, I can give you a fairly good estimate of how a Chapter 13 Bankruptcy will play out in your case, even before you pay a dime of legal fees. The biggest advantage with bankruptcy is that you are not at the mercy of the mortgage company. So long as you comply with and abide by the bankruptcy laws and rules, you are in control of your future.