What should I do w/bank accounts

[theylive]

I've been reading through all of the threads and picked up some mixed answers on the " is it time to put our $$ under the mattress??" thread.

As of yesterday I was officially "late" on my mortgage. My loan is w/CW and I'm located in FL. which is a recourse state so I'm planning on a DJ at about $50k plus, but hopefully not. The loan is in my name and my wife and I have joint accounts through are local bank not affiliated with CW. I pay my mortgage online and used to have the amount automatically withdrawn every month but put a stop to that about 6 months ago.
We have about $20k in savings, and I'm concerned if I should move the cash out of the bank? I know CW had access to my checking which is linked to my savings. If "they" were to come after us for a DJ would they be able to see that we have some liquid cash and try to get it? Should we pull it all out and put it into a safe or would we be red flagged for taking out a lump some? I'm not paranoid and I trust my bank, but I just don't wanna lose what we have. Thanks, and yes I posted a similar response in a different thread, but have had no replies yet and I got my paycheck and trying to figure out if I should just cash it or deposit it?

[Enough Already]

Hi Theylive,
We decided to open new accounts, the lender wouldn't have the account numbers. We also talked with an asset protection attorney and he said they cannot take money from your bank accounts. He also told us that you would know you were being sued for the deficiency long before they could they could sieze your accounts, or do anything to you - giving you time to move it or use it for something else.

The attorney also thought that it would be more likely for the lender to end up selling your 2nd mortgage to a debt collector, who would probably settle with you for 5%-10% of the loan amount.

In our case we own another FL property which we'll be moving into, so if they come after us we'll sink our savings into that property, as it will be protected by FL homestead. Either way, we felt more comfortable closing old accounts, and opening new ones.

I hope this helps. Good luck!

[theylive]

Thanks for the response. Did you open new accounts w/the same bank or go to a different bank? Could the lender somehow find out that we have a chunk of money and be less willing to work with us, or a collection agency on the 2nd?

[Enough Already]

We opened new accounts at the same banks (one is a credit union account the other is an online ING account). We figured if the lender didn't have our account numbers they would not be able to reach in and take money out.

I think the lender can do a search and find out if you have money, but it's expensive to do it, and they don't want to spend the money. For the most part I think they figure most people are broke, so they don't want to waste money on investigations.

If they find out you have the money they would certainly be less willing to settle it for a low price. Honestly, if didn't have another FL property to sink our savings into I would take my money out of the bank and put in a safe, as so many others have done.

As far as the red flag goes, I think transfers or withdraws of $10K or more get flagged somehow, so you might want to take out $9,500 one week, and $9,500 the next to be on the safe side.

Crazy that it comes to this! I don't understand why the home itself doesn't also satisfy the 2nd mortgage. When we bought the house we thought it was also collateral for the 2nd mortgage. What a shock to find out it wasn't. I can't believe any bank would loan us $63K without some kind of collateral. If we had known that I'm sure we would not have taken the loan. Of course the banks knew that if people had to put 20% down home sales would grind to halt, so they kept giving those 80/20 loans (and all the other crazy types of loans), which kept driving the real estate prices up and they made a killing at everyones expense.

[theylive]

Well I don't have another property to sink the cash into, and I never thought about the accounts being, or could be an "issue". As a 26 year old man, I've always tried to make the right decisions and live debt free. This house has really been my demise and I find myself second guessing myself quite a bit lately. I'm scared to death of walking away, and after much counsel and prayer, I think it's our best option. And as far as the accounts go, my gut says to pull the funds out and stash it or get a safety deposit box, I don't know...thanks for the replies "enough already"

[Enough Already]

This whole business of walking away is scary! When we first made the decision to go this route I was losing so much sleep, and literally worrying myself sick. We've always been the types to pay our bills, never late etc. Buying this house was our big financial mistake too.

You are right to try to live debt free, and save up your money. This is a bump in the road. If your gut tells you to take your money out of the bank do it. You'll feel better and sleep better. Then keep saving your money, and when the time comes you'll be ready to settle the debt with the lender/collector and move on with your life.

Have you talked to a foreclosure attorney yet? I'll tell you, talking to a couple of attorneys about our specific case really put our minds at ease. We talked to two of them for free, but they just tried to steer us to do a short sale (they get the commission). The other two we paid for the consulations, and it was money well spent. We now have a plan, and we don't feel so vunerable. I would definitely recommend you contact a foreclosure attorney, and go over your situation with him/her. I think you'll feel a lot better, and a lot more confident if you do.

Please keep me posted.

[Enough Already]

PS: I don't mean to imply that there's anything wrong with a short sale. In fact if it works out I'd love to short sell ours. I just meant that the attorneys who gave free consultations were pushing their own agends. You want to talk to one who isn't going to make a commission if he can convince you to short sell your house.

[theylive]

I spoke w/an attorney and paid him for his time. He suggested walking mostly for the safety aspect, being that neighborhood is filling up w/thugs. He has called me twice to give free advice and to keep me posted on new happenings relevant to our situation. He suggested coming to see him again if they come after me for a DJ and we might have a case...long story...inflated docs, false appraisal, CW caught lying to me via email, ect...

[dealingwithHomeEq]

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.

[The Professor]

dealingwithHomeEq:

Your posting identifies an issue that most people do not realize. Chapter 7 bankruptcies, from a bankruptcy trustee's viewpoint fall into two categories. Most Chapter 7's are identified as "no asset" cases. For these, the trustee is compensated a relatively nominal amount (something like $60). Where there are "assets," a trustee is paid a percentage of the dollars that flow through the trustee's hands. The following provides interesting information relative to the composition of asset and "no asset" cases and related trustee's fees:
BANKRUPTCY BY THE NUMBERS: CHAPTER 7 ASSET CASES: Part II

Why this is important is trustees can be expected to utilize efforts that relate specifically to the potential for compensation and seem to focus more on the "low hanging fruit" than doggedly pursue debtors trying to find those hidden assets.

Daniel

[Enough Already]

As I understand it the Set Off clause generally refers only to a bank account the borrow may have with the mortgage/lending bank. The asset protection attorney I spoke with said they would not be able to take money from an outside bank account (a non-affiliated bank) especially if they do not have the account number, and you have not authorized it. It would also be illegal for the lender to do that.

[dealingwithHomeEq]

Professor:

There are about 1,220 active panel trustees serving nationwide.

It will be interesting to see the quarterly figures for Q1 2009. We are not even back to where we were in Q4 2005 (when BAPCPA was signed into law). These trustees are not going to have time to dig too far into purported no-asset cases.

California Quarterly Filings

2005: 29,593 35,812 43,358 57,946

2006: 6,543 9,704 10,983 12,055

2007: 15,041 17,050 18,778 21,758

2008: 25,727 32,387 37,083 38,011

Enough Already: I believe your attorney gave you correct advice. I was just pointing out for those considering moving ther accounts to another bank that there are more ways to get at your bank account than just a writ of execution. Someone whose home loan is with CW should be careful not to bank at B of A. Likewise, if your loan is with Wachovia, don't bank at Wells Fargo. With all the mega-mergers going on, it's hard to keep track of which banks are affiliated.

[Irish Gal]

[QUOTE= With all the mega-mergers going on, it's hard to keep track of which banks are affiliated.[/QUOTE]


Forget banks. Join a credit union. This whole massive experience really underscores the need to support credit unions and to break the behemoth banks once and for all.

[KT in CA]

We belong to a credit union. No worries.

[azuw67]

One of my loans is WITH a credit union. I think I'm just going to take my money and give it to George Bailey at the Building & Loan in Bedford Falls. I'll do anything to keep old man Potter from getting his greedy hands on it.