- Documents requiring your signature. If I send you a document that needs to be signed, I need to have the original “wet” signature returned to me. That means either mailing it back or dropping it off in person. Unless you’re digitally signing a document using e-sign equipment in my office, all ink-signed documents should be returned to my office in actual paper and ink form. Note – most documents do not require your signature. I can take pay-stubs, tax returns, vehicle titles, real estate documents – all of this stuff electronically. But any special forms, affidavits – anything that needs to be filed directly with the bankruptcy court and requiring your signature – those items I need to get the originals back on.
- Photographs of Documents. Admittedly, this one isn’t so much a rule as it is an annoyance. The image quality of most cell phone pictures of documents I receive is not very good, and the image is distorted if the document is folded at all. Converting image files to PDFs that retain enough image quality to be readable by the Trustee is sometimes not possible. And even when it is, it’s enough of a hassle as to not be worth it. If you don’t have a scanner – that’s fine. Bring the document in to my office and let me scan it. There’s no charge for it, and I’ll have a clean, high quality image to send to the Trustee.
In recent days, I’ve had a few clients who have had to shell out a considerable amount of money to pay for copies of documents that they needed for their bankruptcy case. These are documents that they had already received in the past for free, but instead of holding on to those documents, they chose to throw them in the garbage instead. Replacing those documents came at quite a bit of cost – and it was all perfectly avoidable.
As a general rule, it is a good idea to keep copies of important documents – some permanently, and others for at least six years. Even if you don’t intend to file for bankruptcy, this is a good habit to get into, because it’s not just bankruptcy attorneys who request these types of documents.
Here are some common documents you should always keep copies of in a safe location.
- Vital documents, including birth certificates, marriage certificates, divorce decrees, bankruptcy discharge orders, death certificates, and social security cards – keep these forever.
- Ownership records, including deeds, titles, and confirmations of ownership – keep these for as long as you own the property they reference.
- Tax Returns (IRS 1040 and the corresponding state forms, plus any schedules and worksheets) – keep these for at least six years.
- Insurance Policy Papers – keep these for as long as the policy is active.
- Paystubs, Bank Statements, Receipts, and other Financial Documents – keep these for at least six years.
- Federal or state tax transcripts. You’ll need these if you do not keep copies of your tax returns and cannot obtain a copy from your tax preparer. Both the Internal Revenue Service and the Wisconsin Department of Revenue process transcript requests in about 3 weeks, on average, but some requests take much longer, particularly if there is an issue with the request.
- Vehicle titles / confirmation of ownership. If you have neither your original vehicle title nor the original confirmation of ownership, you have a few options. Do NOT request a replacement from the DMV. The fastest way is to get a document referred to as “confirmation of security interest” from your creditor. If they don’t have that, then you need to submit a special form to the DMV called a certified vehicle record. Again, the turnaround time for these is usually 3 weeks.
- Reinstatement quotes. If you’re filing Chapter 13 to save your home from foreclosure, a reinstatement quote is a crucial number to have. In many cases, it is the single largest debt that has to be paid back, and therefore has the potential to have a large impact on your plan payment. Ideally, you do not want to file Chapter 13 without a reasonable degree of confidence in what your plan payment will be. Because of late fees, penalties, and attorney fees, the reinstatement quote can be very difficult to estimate, and the margin of error on such an estimate may be high. Furthermore, you are likely to be bounced back and forth between the mortgage company and their attorney. Unfortunately, reinstatement quotes are only good for a limited time. So it is highly advisable that you request a quote very early in the process to determine how long it takes your mortgage company to process such a request, then use that information to time your final request prior to filing your bankruptcy case.
- Lien stripping a junior mortgage is only possible in Chapter 13 Bankruptcy.
- You must be eligible for a Chapter 13 discharge. The “Chapter 20” option (which is a Chapter 7 to wipe out debt followed immediately by a Chapter 13 to strip the lien and affirmed by Judge Pepper in In re Fair, 450 B.R. 853 (E.D. Wis. 2011)) has since been rejected at the district court level in Lindskog v. M&I Bank, 480 B.R. 916 (E.D. Wis. 2012).
- If successful, a certified copy of the court order must be recorded with the Register of Deeds in the county where your property is located. Many also believe that, once obtained, a certified copy of the discharge order should also be recorded.
- A title abstract for the property.
- Copies of all recorded mortgages, assignments of mortgages, and subordination agreements attached to your property – obtained from the Register of Deeds’ office.
- Evidence supporting valuation of the property. I strongly recommend all three of the following: (1) copy of your most recent property tax bill, (2) a comparative market analysis not more than 6 months old, and (3) a real estate appraisal not more than 6 months old. If your property was in foreclosure, check the court papers (complaint and judgment) for any assertions of value.
- Proof of the current balance on the senior mortgage(s) – either a recent billing statement or the proof of claim filed with the bankruptcy court.
- The equation depends on the value of the home and the balances owed on each mortgage. The latter is rather simple to obtain. A recent billing statement from the mortgage company will do. Otherwise, the proof of claim that the mortgage company files in your bankruptcy case can be relied on (though that may not come for several weeks or months after your case is filed, and holding off on filing the adversary could delay confirmation of the plan.
- Evidence of the value of the home is much more difficult, since value is subjective. As my mom was fond of telling me when I grew up – “something is worth only what someone else is willing to pay for”. I like to get three pieces of evidence – the most recent property tax assessment, a recent appraisal (from an independent third party, no more than 6 months old), and a recent CMA (comparative market analysis). If all three numbers are less than the balance of the first mortgage, then my client is in good shape. If the house is in foreclosure and both mortgages are held by the same company, it is likely that the foreclosure complaint alleges a value. Since the plaintiff in the foreclosure is the defendant in the lien strip, you can use their own number against them.
- Nothing prevents the mortgage company from disputing the value with their own appraisals. If a contest develops, the judge will have to make a determination as to value.
- You will need to get copies of each mortgage from the Register of Deeds’ office, plus all assignments of the mortgage. If the mortgage has been transferred from one lender to another, it is important in the adversary proceeding to serve the summons and complaint to the correct creditor. Rule 7004 of the Federal Rules of Bankruptcy Procedure applies for serving the summons and complaint.
- Just because you get a bill from Bank of America doesn’t mean that they hold your mortgage. There are several roles involved with a mortgage. There is the holder of the note – the note is what entitles the holder to payment on the debt. There is the holder of the mortgage – the mortgage is what entitles the holder to foreclose a property in event of default under the note. Then there is the mortgage servicer, who merely accepts and processes payments. The servicer is the entity that most homeowners are familiar with because the servicer is who they interact with. However, the servicer is not the proper entity to serve the summons and complaint to (though they are the proper recipients of a qualified written request under RESPA to find out certain information, including the note and mortgage holder). Under the UCC, the note and the mortgage are supposed to be held by the same entity, and most of the time, that is what you will find. However, in the heydey of MERS (Mortgage Electronic Registration Systems) the mortgage and note were often separated.
- Obtaining all of the mortgages also helps to establish rank and priority. The first mortgage holder is usually the one first recorded. A first mortgage that is refinanced after a second mortgage has been recorded could lose its priority status if it does not have a valid Subordination Agreement. Why does this matter? Take my original example. If the property is worth $120k, and instead has a first mortgage of $50k and a second mortgage of $150k, then there is $70k equity for the second mortgage to attach to, and it cannot be stripped.
- If you are successful in stripping your lien, the judgement must be filed and recorded with the Register of Deeds’ office. The judgement should also reference the legal description of the property.
- Debtors may wish to employ the services of a title company to ensure that the judgment is properly recorded.
- There had been a split in judicial opinion about whether a debtor had to be entitled to a discharge in order to strip a lien (the so-called Chapter 20 scenario, in which someone files a Chapter 7, gets a discharge, then files a no-discharge Chapter 13 to strip a lien). The case law was veering in the direction of saying ‘yes’ you did have to have a discharge. The Ryan opinion pretty much settles that question as a firm ‘yes’ – at least in the 7th Circuit.
- A copy of the discharge should be served upon the mortgage company or their attorney upon successful completion of a Chapter 13 Plan. It may also be advisable to attach a copy of the discharge with the judgment that will be filed and recorded with the Register of Deeds’ office.
It is worth noting that there is a form modernization project in the works (also referred to as the form lengthening project). Although there appears to be no set date yet, I expect the new forms to go into effect December 2013, roughly coinciding with the eight year anniversary of BAPCPA.