What Your Lender & Counselors Don't Want You to Know
	General Rule. Since most counselors, including credit counselors, are bill collectors in disguise, there are several important rights and legal strategies which they do not want you to know. Ask them who pays them. If you are not paying them, then they are getting paid from lenders and credit card companies. Check out whether they are giving you proper advice, as I have listed here.

Most credit “counselors” who advertise that they successfully stop foreclosures or reduce credit card bills are being paid by lenders. Their loyalty is to the lenders who pay them. They are wolves who advertise themselves as sheep.

I suggest that you ask them how they get paid. Ask them if they get any money from lenders or credit card companies. Essentially all of them do. Some of them will tell you that they are nonprofit companies and they get their money from contributions. That is generally false.

They don’t want you to know that they are hired by lenders and credit card companies.

As a result, they are usually bill collectors in disguise. If they cannot steer you toward a successful refinance or loan workout or liquidation of exempt assets, then they have little or nothing more to offer. They attempt to collect what they can.

They will do whatever they can to avoid a foreclosure, a bankruptcy, or any other result where a lender could lose money. Such as recommend a short sale or deed in lieu of foreclosure. Anything to avoid a foreclosure or bankruptcy.

No matter what the cost to you is.

Your major issues which they don’t properly address include:

1. Your other debts, such as credit cards, medical bills, tax bills, car loans;

2. The loss mitigation requirements of the mortgage insurers or the actual lenders and investors. For example, FHA requires a face-face interview be conducted between the loan servicer and the homeowner before you are 3 months behind in the payments. The real lender wants to find a way for you to keep your home. See Chapter 4 for more information.

3. The strip-down or strip-off of liens on your home or cars.

4. The income tax problems you get when you do a short sale or give a deed in lieu of foreclosure;

5. The “fresh start” opportunities you can get in bankruptcy.

6. Your exemptions from the reach of creditors for $60,000 of your home equity, $5,000 exemption for vehicles, all of your IRA, 401(k), and other retirement assets;

7. The laws which protect you from predatory lending, mortgage servicing abuse, and abuse from bill collectors.

As to the 7 issues listed above, here are some things that the lender or “counselor” does not want you to know:

1. In many cases (but not all), your lender wants to work out a deal so that you can keep your home. For example, FHA requires a face-face interview with the homeowner before you are 3 months behind in your mortgage payments. To see what can be done to help you. See Chapter 4 for more information.

2. In most cases, you can eliminate all of your other bills such as credit card bills and car loans in a Chapter 7 bankruptcy filing. Then all of your income can be used to save your home. Or, you can use a Chapter 13 plan to catch up on your mortgage over a 3 to 5 year period. And you pay your credit card bills and most other bills based on your ability to pay. Then at the end of your plan, the remaining bills on your credit card bills and other unsecured debt is eliminated and you have your “fresh start” as well as you have saved your home.

3. In some cases, your 2nd and 3rd mortgages and judgment liens on your home may be reduced or stripped-off of your home. The same for your car loans. Pursuant to a bankruptcy filing.

4. When you do a short sale or give your home to your lender with a deed in lieu of foreclosure, then you will be given an IRS 1099-C for any amount of your debt which you do not pay. The 1099-C reports the amount of forgiven debt to the IRS as taxable income. You must pay income tax to the IRS and state of Colorado as though you made that amount of money. The only way to can avoid such income is through a bankruptcy filing or proof to the IRS that you were insolvent at the time of the forgiveness of debt. In almost all cases, you will not be insolvent if you have kept exempt assets such as IRA, 401(k), and retirement accounts.

5. For most people who are behind on their mortgage, car loans, credit card bills, tax bills, student loans, have child support arrears, and creditor judgments, a bankruptcy filing is the only way to get back on track with a fresh start. That is the very purpose of this federal law. To help you become productive and responsible again, instead of floundering for years. The banks and credit card companies don’t like it, because they make big money with the ARM 12% mortgage oans and 33% credit card bill interest rates. For most people, a refinance is not a solution, since you often end up only delaying a solution, but you also then spend exempt assets and delay getting back on track.

6. Only in rare cases should you spend or give up your exempt money (retirement assets) and property exemptions in an effort to save your home. Our laws allow you to shelter certain assets which are exempt from the reach of creditors. Don’t hand over those exempt assets. “Counselors” often suggest that you cash in your retirement assets in order to catch up on your home mortgage or other bills. This is almost always a big mistake. Their job is to take as much of your money as they can get. That is how you got into trouble in the first place.

7. Many home owners faced with foreclosure have legal defenses to foreclosure. Especially if the present mortgage loan is a result of a refinance. A Truth in Lending violation can result in the removal of the lien on your home. This will stop the foreclosure, since there is no more lien to foreclose on. This is particularly true of high interest rate and high closing cost loans. Colorado now also has strict laws which regulate mortgage brokers and real estate brokers (Realtor) as to how loans are originated and the required disclosures and agreements with you. Failure to follow the laws can result in a Deceptive Trade Practice lawsuit, where you may get 3 times your damages plus attorney fees. Also, if the loan servicer does not follow the loss mitigation requirements of the lender, the foreclosure may be stopped. If you are able to rescind, you must repay the lender the amount of the loan, but no interest. You will get credit as principal for the payments which you already made. Therefore the amount that you will have to pay back will be less than the amount which you borrowed.

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