Loan Modification Forum - LoanSafe.org - View Single Post

dealingwithHomeEq · 03-17-2009, 02:12 AM

Check your mortgage note for a setoff agreement. I found the article below on a Florida BK blog. I would pull my money out in cash and hide it somewhere. If you ultimately end up going bankrupt, it is much easier to tell the trustee six months from now that you pulled all the cash out of the bank at once because you were afraid that the bank or other creditors would setoff the account funds to cover your late mortgage payments or credit card payments.

Once it's in cash, there is no paper trail and no pragmatic way for the trustee to really prove that you didn't spend all the money. I once heard the following conversation take place at a 341 meeting:

TRUSTEE: I see that you refinanced your house last year and took some equity out--about $60,000. The bank statements show that you withdrew the funds in cash. Why did you withdraw the funds?

DEBTOR: With all the collection activity going on against us, we were afraid that a creditor would somehow take it and wipe us out--leave us with nothing to survive on.

TRUSTEE: What did you do with the money?

DEBTOR: We used it to buy food and gas and other things we needed to live with. It seemed to go pretty fast. We also used some of it to pay bills by converting the cash into Western Union money orders at the ATM machine.

TRUSTEE: Do you have copies of the money orders.

DEBTOR: No.

TRUSTEE: Do you have any of the money left?

DEBTOR: No. We spent it all.

TRUSTEE: Good answer (end of inquiry).

_____________________________________

Don't Allow A Mortgage Lender To Invade Your Bank Accounts To Pay Past-Due Payments

People often are driven to file bankruptcy after a creditor has successfully seized their money. Many banks want the borrower to maintain bank accounts as a condition of getting a home mortgage Often prospective bankruptcy clients tell me they have to file bankruptcy because their bank has taken money out of the debtor’s bank account when the debtor missed one or two mortgage payments owed to the same bank.. People usually complain that the mortgage bank has "garnished" their bank accounts.

Technically, the mortgage bank does not "garnish" an account when it invades the borrower’s checking accounts to force a mortgage payments. Garnishment is a legal tool to collect money owed under a civil judgment; in these examples, the bank does not have a judgment against the borrowed. What the bank is doing in these cases is using a "setoff" remedy. A bank can setoff money its holding for the customer in the customer’s checking accounts to pay a mortgage debt the same customer owes to the same bank. The bank can setoff a checking account only if the customer has consented in writing to a setoff remedy.

The bank’s setoff rights are usually expressed in the promissory note signed in conjunction with the mortgage loan. As an example, one of my bankruptcy clients gave me a copy of their mortgage note with SunTrust. The note included the following language:

"RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a right of setoff in all my accounts with Lender(whether checking, savings, or some other account. ) This includes all accounts I hold jointly with someone else and all accounts I may open in the future....I authorize Lender... to charge or setoff all sums owing on the indebtedness against any and all such accounts, or at al Lender’s option, to administratively freeze all such accounts to allow Lender to protect Lender’s charge and setoff rights provided in this paragraph. "

Note that this provisions applies to all joint accounts. Therefore, if a married couple has a joint account at a mortgage bank and one spouse is indebted under this type of note then the bank can setoff money from a joint account which otherwise is protected from the judgment creditors of either spouse as a tenants by entireties account.

Check your lending agreements to see if your lender has inserted setoff rights. In most cases, do not keep significant checking account balances at the same banks to whom you owe money for mortgage loans, credit cards, or other personal loans.

03-17-2009, 02:12 AM	#9 (permalink)
dealingwithHomeEq Fighting Homeowner Join Date: Dec 2007 Posts: 148 Nominated 0 Times in 0 Posts TOTW/F/M Award(s): 0	Re: What should I do w/bank accounts Check your mortgage note for a setoff agreement. I found the article below on a Florida BK blog. I would pull my money out in cash and hide it somewhere. If you ultimately end up going bankrupt, it is much easier to tell the trustee six months from now that you pulled all the cash out of the bank at once because you were afraid that the bank or other creditors would setoff the account funds to cover your late mortgage payments or credit card payments. Once it's in cash, there is no paper trail and no pragmatic way for the trustee to really prove that you didn't spend all the money. I once heard the following conversation take place at a 341 meeting: TRUSTEE: I see that you refinanced your house last year and took some equity out--about $60,000. The bank statements show that you withdrew the funds in cash. Why did you withdraw the funds? DEBTOR: With all the collection activity going on against us, we were afraid that a creditor would somehow take it and wipe us out--leave us with nothing to survive on. TRUSTEE: What did you do with the money? DEBTOR: We used it to buy food and gas and other things we needed to live with. It seemed to go pretty fast. We also used some of it to pay bills by converting the cash into Western Union money orders at the ATM machine. TRUSTEE: Do you have copies of the money orders. DEBTOR: No. TRUSTEE: Do you have any of the money left? DEBTOR: No. We spent it all. TRUSTEE: Good answer (end of inquiry). _____________________________________ Don't Allow A Mortgage Lender To Invade Your Bank Accounts To Pay Past-Due Payments People often are driven to file bankruptcy after a creditor has successfully seized their money. Many banks want the borrower to maintain bank accounts as a condition of getting a home mortgage Often prospective bankruptcy clients tell me they have to file bankruptcy because their bank has taken money out of the debtor’s bank account when the debtor missed one or two mortgage payments owed to the same bank.. People usually complain that the mortgage bank has "garnished" their bank accounts. Technically, the mortgage bank does not "garnish" an account when it invades the borrower’s checking accounts to force a mortgage payments. Garnishment is a legal tool to collect money owed under a civil judgment; in these examples, the bank does not have a judgment against the borrowed. What the bank is doing in these cases is using a "setoff" remedy. A bank can setoff money its holding for the customer in the customer’s checking accounts to pay a mortgage debt the same customer owes to the same bank. The bank can setoff a checking account only if the customer has consented in writing to a setoff remedy. The bank’s setoff rights are usually expressed in the promissory note signed in conjunction with the mortgage loan. As an example, one of my bankruptcy clients gave me a copy of their mortgage note with SunTrust. The note included the following language: "RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a right of setoff in all my accounts with Lender(whether checking, savings, or some other account. ) This includes all accounts I hold jointly with someone else and all accounts I may open in the future....I authorize Lender... to charge or setoff all sums owing on the indebtedness against any and all such accounts, or at al Lender’s option, to administratively freeze all such accounts to allow Lender to protect Lender’s charge and setoff rights provided in this paragraph. " Note that this provisions applies to all joint accounts. Therefore, if a married couple has a joint account at a mortgage bank and one spouse is indebted under this type of note then the bank can setoff money from a joint account which otherwise is protected from the judgment creditors of either spouse as a tenants by entireties account. Check your lending agreements to see if your lender has inserted setoff rights. In most cases, do not keep significant checking account balances at the same banks to whom you owe money for mortgage loans, credit cards, or other personal loans.