Short Sales Revisited

For several months I have had a video posted at YouTube entitled “The Trouble with Short Sales.” Of all the videos I have posted, this is the one I get the most flack about – mostly from Realtors who are in the short sale business. My experience of this past week emphasizes how right I am about short sales in Minnesota usually being a really bad deal. If anything, my video understates the case.

A client of mine came to me for help with making a short sale work. I advised that it was likely to be a serious problem, but she wanted to try it anyway. For better mental health and possibly better credit among other reasons, she wanted this house out of her life. A buyer was found, and after a few months the mortgage company indicated – in a rather vague letter of intent – that they were ready to complete the short sale. Getting a real person on the phone from the mortgage company was nearly impossible; and when it was possible to get a real person, it was never anybody who could answer a question or make a decision.

I finally was able to speak with the closer who was going to handle the paperwork for the transaction. She indicated that most of the lenders she dealt with were very clear that they intended to reserve the right to come after the seller for the remaining balance owing on the mortgage, even though the house was being sold. The paperwork for the transaction involving my client did not explicitly say that the lender would be suing my client later, but it didn’t say the lender would not be either. The only release that my client could expect to get would be one that released the house only. There would be no release of personal liability.

This was a situation involving only one mortgage. In those situations in the State of Minnesota, the most common method of foreclosure is “foreclosure by advertisement.” When advertisement is the method, the lender gets the house, but that’s all the lender gets. The home owner is off the hook. That means that my client was presented with the following choice:

  1. Either do a short sale and expect to get sued for the remaining unpaid balance of the mortgage; or
  2. Wait for the lender to foreclose and lose the house without getting sued for anything.

The second choice is obviously better than the first. In both choices the house is lost, but with the second choice at least they don’t come after you for more money afterwards. It would have made a lot of sense for the mortgage lender to provide a personal release of liability so that my client could have completed the short sale. Now it will take the mortgage company another year of so and considerable expense to conduct the foreclosure. The house will probably go down in value during that time too. But in letters and calls to the mortgage company, I never seemed to be able to get any body’s attention with this information.

This aspect of Minnesota foreclosure law is unusual. There are only seven other states as far as I know that have similar laws. The mortgage company does business in all 50 states, and follows a one size fits all policy line for everything. Their policy might make sense in most states, but not in Minnesota. They hurt themselves by being that way, but nobody seems to care.

For a short time this week I was excited because I thought I was seeing some signs that I might be able to make the short sale idea work. What it was going to take, of course, was a release of personal liability. By Thursday afternoon, however, it was quite clear that was not going to happen. It was time to back out of the deal, cancel the purchase agreement, and wait for a “foreclosure by advertisement.”

Underdahl II – End of the Source Code Issue?

I’ve mentioned here once or twice in the past, that there has been a small tempest brewing over the source code of the Intoxilyzer 5000 breath test machine. That’s the one that’s been in use all over Minnesota since the early 1990s. I’ve heard it said that the computer processor that is the guts of the gizmo has about as much computing power as one of those old pong games from the 1980s, although I doubt that’s true. It is true, however, that until recently a small minority of judges have been questioning the validity of the test results because the manufacturer of the machine has keep the source code of the software that dives the device a trade secret. No defense lawyer can get an expert opinion on the validity of the source code, because nobody can get the source code, not even the State of Minnesota.

My understanding is that earlier this year the Attorney General’s office in St. Paul filed a suit against the manufacturer demanding that they cough up the code. So far as I know, that is still pending.

Meanwhile our Court of Appeals seems to have either back tracked or flip-flopped on the issue of the Intoxilyzer’s source code, depending on how narrowly one reads the opinion. In 2007 in a civil implied consent case known as “Underdahl I,” they said that the question of the machine’s reliability is subject to challenge and that the Commissioner of Public Safety would not be granted an order which would prevent the district court from enforcing an order requiring that the Commissioner produce the source code. In May of 2008, however, after the State has continued to be unable to produce the code even after suing the manufacturer, the Court of Appeals in a criminal DWI case decision known as “Underdahl II” has said that the defendants failed to make an adequate showing that the source code is relevant to a plausible challenge to the reliability of the Intoxilyzer.

In short in Underdahl I they seemed to open the door to a source code challenge and in Underdahl II they seemed to close it. I must say that after sitting here for a while looking over these two decisions, my head is spinning a bit. I’m not sure if the dust has really settled on this issue or not, and whether there may be further appeals. I still am noticing that some police departments seem to be using a lot more blood and urine testing in an apparent move to side step any possible problem with this.

Shredding Day

I just got back to the office from my “storage facility,” where it took a truck from Shred-N-Go about 15 minutes to chew up 1,204 pounds of old files. Most of that was from the 1990s, although I did throw in a few things from as recent as 2002. OK, maybe even a few things from 2003 that I was sure were not worth saving. About a fourth of it was my own old financial and billing records.

I am feeling some emotions about seeing that stuff go. At the time that I generated those files, they were top priority in my life. I practically sweat blood over some of them. They represented skill, art, valuable lessons; important help provided to many people, whose lives were improved as a result. I believe I practically walked on water in a few of those cases, and perhaps performed a few near miracles. Or so it seemed at the time. And of course in a few of the cases, notwithstanding my best efforts, everything seemed to turn to crap.

I feel a certain sadness about it I suppose. Also relief.

The paper files are not nearly as important as they used to be. The fact is that I still have electronic copies of most of the paper I shredded on a disk or portable hard drive. All bankruptcy documents are available on line going back at least ten years. A summary of what’s in the state court files is available on line too.

Last time I did this was five years ago. That would mean that on average I generate about 240.8 pounds of paperwork per year. I wonder what the cost of the printer ink for all this is. No wonder my office supply cost is so high. In the next life will I meet the angry ghosts of all the trees I am responsible for killing?

Out of the office until May 21st.

I’m am on my way to Hollywood. That’s where the National Association of Consumer Bankruptcy Attorneys is having a big three day seminar. I’ll be gone between May 15th and May 20th. I’ll be back in the office on the morning of Wednesday May 21st.

I wish I could say I was going to be on American Idol, but that’s not it. There are things I can learn at this seminar that would be hard to find anywhere else. What it comes down to is that I can’t afford to not go. The law of bankruptcy has been in a hard to track state of flux since the new legislation became effective in late 2005. It seems that every few days a judicial decision turns up that changes the landscape. I need all the help I can get in keeping up with this stuff.

Of course, I am planning on seeing a few sights as well. I’m allowing one day in the trip just for that. Right now I would say that the beach could be a priority.

So email me or leave me a message. I will probably be checking my email. I no longer travel without my laptop. The wireless Internet for the hotel where I’ll be did get a poor review, but I expect I’ll figure it out. I’ll be returning my calls on Wednesday, May 21st.

Fraudulent Federal Subpoena Email

This morning I received an email which purported to come from the federal court in San Diego. It appeared to be a subpoena requiring that I appear in federal court May 9th in San Diego before a grand jury.

It also contained a link which I assume would have downloaded a virus onto my computer.

I called the court in San Diego and they confirmed that it’s a hoax. I have also spoken with a lawyer a the law office that is mentioned on the false document. He tells me all they have done there all morning is sit on the phone answering questions about the email. I lost a little time on it, but it’s really messing them up. So in case you get it, now you know.

Goose Poop on the Trail at Westwood Hills

I’m inspired. I just finished my first walk of the year around the Westwood Hills Nature Center. It has been a gorgeously beautiful day. This nature center is maybe a half mile east of my office; at least that’s how far it is if I go to a back door I’ve found. It might be more like a mile and a half if I drive all the way to the main gate. Weather and time permitting, I try to make a point of walking there every day. Obviously, weather and time don’t always permit – such as during the unusually long winter we just finished. I suppose I could have gone in there during the past winter with my cross country skis, but I never did.

A couple of eagles were circling over the lake this afternoon. At first I thought maybe they were hawks; but then I saw some hawks – they were there too – and concluded that the eagles were really eagles. Hawks look quite a bit different. The ice is still on the lake, except for a little bit of open water around the edges. I watched a poor mallard try to come in for a landing on a small patch of open water, only to find that it was only about two inches deep. He made a bit of a splash, and then seemed surprised to be standing on his feet after coming to an to an abrupt stop. I could swear that he looked at me with an embarrassed expression, but that had to be my imagination.

The City of St. Louis Park does an excellent job of maintaining the hiking trails. Today there were some patches of snow and some muddy spots. There were spots where streams of water from the melting snow were flowing across the trail. And yes even this early in the year, there were parts of the trail where one had to be very careful to not step in what the geese had left behind.

CREDIT CARD CASH ADVANCES TO PAY FOR BANKRUPTCY

I just got off the phone with a gentleman who is in extreme debt, lives with his parents, and is essentially unemployed. He works part time odd jobs from time to time. His credit is apparently still good, since he is borrowing from one card to pay for another, even though his debt exceeds $50,000. I told him that he certainly qualifies for a Chapter 7 Bankruptcy, and probably needs one; but with no income and no assets, what was his plan to pay for the bankruptcy?

“I have been told that I can do that with cash advances,” said he without hesitation. I questioned him more trying to determine exactly who had said that or where he got that idea. He side-stepped and never really answered my questions. I explained that if a lawyer had told him that, it was a violation of every code of ethics I ever heard of. It would also be fraud if not theft, and if it preceded the actual filing of a bankruptcy, it would also be bankruptcy fraud. Bankruptcy fraud, I explained, is a federal felony. It is investigated by the FBI. I would like to stay as far away from that sort of thing as possible.

I would not have thought much of this call, and would not find it worthy of mentioning, except that this was the second such discussion I have had in the last ten days or so. Since it has now come up twice, I am wondering if someone on a web site, blog or other media source has been either promoting or at least discussing the idea.

Let me see if I can spell something out. If a creditor can show that a debt was incurred at a time that the debtor intends to not pay it, but intends instead to run it through a bankruptcy, that is bankruptcy fraud. The person who does that will at least be subject to an objection to the discharge brought by the creditor, and at worst possibly be subject to criminal charges. If the debt is more than $600 or so, and it is incurred within 90 days before filing, it will be presumed to be for luxury goods – which also makes the debt nondischargeable if the creditor objects. Even if all the specific rules for the bankruptcy filing are satisfied, there is still a possibility that the case won’t pass the “totality of the circumstances” test. Essentially it’s a smell test. If it doesn’t smell right, the court can dismiss it.

The Cost of a DWI

About Thursday of last week I received a call from a reporter for a weekly newspaper out of New Brighton, MN. I didn’t make a note of the name of the newspaper; and now when I run a Google to find it, I find that there seem to be two of them. The reporter said she was working on an article that they were going to publish in their St. Patrick’s Day edition on the subject of the cost of having a DWI. The topic was coming up because the local police in that area were letting it be known that they would be out in full force over St. Patrick’s Day (Monday, March 17th) and the weekend leading up to it.

The reporter wanted me to run through with her a list of the expenses that a drunk driver can expect to pay as a result of being arrested. What that would come to depends on quite a variety of factors. I said the easiest place to start would be with the case of a first time offender who we presume has a relatively low breath test reading. The reporter indicated that she thought she would limit her article to the first offense, and not even get into what might happen on subsequent offenses.

I indicated that the arrested party could expect, among other things, expenses for the following:

  • getting the car out of impound,
  • reinstating the driver’s license,
  • an alcohol assessment interview,
  • a class,
  • a meeting of Mother’s Against Drunk Driving,
  • a fine with surcharge,
  • perhaps a probation fee,
  • and of course an attorney’s fee.

When added up, using about the lowest and most optimistic numbers possible, the total came to about $3,000. That number does not include all sorts of additional items one might run in to, such as increased automobile insurance cost. I told the reporter that in my experience, a surprisingly large number of my first time offender clients report to me that their insurance did not go up. The reason for that is apparently that the insurance company never noticed it; or by the time they noticed it, the DWI was really old news.

I usually recommend that my client try to go at least three years without doing a thing that might attract the attention of his or her automobile insurance company. That can be difficult or impossible for many people. I say don’t sell or buy a car, don’t be late on paying the premiums, don’t have an accident or any claims, and don’t change insurance companies. Besides that, it would be good to not move and not add or subtract any drivers.

The most obvious problem with just putting a number, any number, on the cost of a DWI is that this is an item that will be on the person’s record for the rest of their life. How does one put a value on that? So looking back on that phone conversation I wish I had been more careful and said something like: The benefit of not having this on your record is really priceless, and the exact cost is impossible to calculate.

Getting a Pardon from the Queen of England for a Minnesota DWI

Well, maybe not exactly the Queen; but at least the government of Canada.

I’m no expert in international law, and my license to practice law only extends to the borders of Minnesota. However, I keep hearing stories about people who have received DWIs in Minnesota and who then have trouble getting across the Canadian border. It seems to be especially difficult if one wants to bring a gun and go hunting.

Apparently a DWI which we classify as a misdemeanor is considered to be a felony in Canada. Canadian law will keep a person from being able to enter that country for at least five years from the date of the conviction. After the five years expires, a Minnesotan can apply for “criminal rehabilitation” through a detailed and difficult process that looks to me to be a lot like applying for a pardon. One basically has to prove that probation is over, all fines are paid, all sentences served, and there’s a good reason to believe it won’t ever happen again. Hiring a Canadian lawyer for help with this would probably be a good idea. I understand there are law offices in Winnipeg that do quite a business in this sort of thing.

For a $200 fee the folks at the border station can issue a temporary pass even though the DWI is on the record, but this is up to the border officer’s discretion. There’s no way to know until you get there whether or not you will be allowed to cross the border. Again, I have heard stories about the border agent saying that entering the country was OK, but not with a gun; and don’t plan on hunting or carrying a weapon while on the Canadian side of the border. This can be really bad news for someone who pays big bucks for a fancy hunting trip deep into the Canadian wilderness.

The fact that this problem is out there is yet another reason why nobody in this state should go anywhere near a courthouse without a lawyer. If there is a DWI charge, but it is reduced to Careless Driving, crossing the border isn’t a problem. It’s only if it’s a straight DWI and not reduced to a lesser charge that this problem might arise. So if you should happen to get a DWI in Minnesota, and you are a person who regularly travels to Canada for work or recreation, make sure your lawyer knows about that part of your life – and of course make sure you have a lawyer.

A Home Equity Line of Credit is a Mortgage

When the same thing keeps happening over and over again, I feel I should say something. Yesterday I met with a well-dressed, obviously educated and intelligent man. We talked about filing bankruptcy. He brought in and deposited on my desk a stack of documents that I usually request for such meetings. As I looked them over I said something that referred to him as having two mortgages. He seemed surprised and stated that he had only one mortgage.

At this point I had to take a breath and explain that a home equity line of credit is a mortgage, usually a second mortgage – but a mortgage. When you use a line of credit like that, it is like withdrawing money from a bank account – only it’s not money in a bank account, it’s the equity in your home. It always disturbs me to see people doing this because:

  1. Most don’t seem to realize that a home equity line of credit creates a lien on their home and therefore eats away at their home equity.
  2. Under Minnesota law the equity in our homes is one of the few things that most creditors cannot take away, except of course for a creditor holding a mortgage.
  3. Unlike a credit card debt or a medical bill, amounts owing on home equity lines must be paid, even in the event of a bankruptcy filing, unless the debtor is willing to let the home be foreclosed upon.

It seems to me that the loan officers do their best to make sure that consumers don’t understand the true nature of these credit lines. Not only don’t they explain it, but they can be downright deceptive about it. They talk as if it is free money, and encourage that kind of unhealthy thinking. Then they give the consumer an incomprehensible stack of papers that nobody understands, and say “sign here.”

I strongly suggest that if you need to go into debt for any reason, be sure you are doing it in a way that does not diminish the equity in your home. Beware of paperwork that puts a mortgage on your home in exchange for a favorable interest rate. That deal is not as good as it looks.