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Dear Bankruptcy Adviser,
My retired mother, living only on Social Security, has taken out a subprime loan against her house and the payments have ballooned
to equal her entire Social Security check. If she files bankruptcy, does she have any hope of saving her home?
-- Cheryl
Dear Cheryl,
I hope that if you find the right assistance,
you can keep your mother from filing bankruptcy.
In fact, bankruptcy might be her worst option,
because it might make it easier for the lender
to take the property out of bankruptcy protection
and sell her home.
Your mother appears to be a victim of a very common, but illegal predatory/elder abuse loan. Obviously, no one -- not
your mother, not any reputable lender -- would approve a loan with a payment that would equal or exceed the borrower's gross income.
Your mother was in need of cash and she believed someone who had a great sales pitch. More likely than not, some shenanigans were
committed by the people who put the loan documents together in order to qualify her for the loan.
Most big cities have nonprofit legal organizations that handle predatory lending cases. Unfortunately, most of these
organizations are underfunded and can handle only so many cases. Although it would be best if your mother can receive free legal
assistance from one of these organizations, she may need to seek paid legal assistance.
While I wish you could resolve this issue without an attorney, you must find someone who knows how to rescind the
loan and keep the lender from foreclosing on the property.
Most states have laws prohibiting unfair and deceptive practices. These state laws were meant to protect elderly and
disabled persons from losing everything to scam artists.
Congress has created numerous laws, such as the Home Ownership and Equity Protection Act, or HOEPA. HOEPA-covered
loans mean that the lender cannot extend credit to individuals without regard to their ability to repay the loan, among numerous other
protections. Violations of HOEPA will give rise to civil liability for actual damages, statutory damages, and attorney fees and costs.
Most HOEPA violations also extend the time for the borrower to rescind the original contract.
You should inform the local district attorney's office in her county. While district attorneys are overworked, underpaid
and have inadequate staffing, the lender or the loan brokers/agents might already be on their radar and your mother's case could be
pooled with other existing cases.
You must act immediately to protect your mother's home. If the lender was involved in the scam, then you can expect the
foreclosure process on the house to start soon after one missed payment. Your mother apparently made one bad decision already. Do not let
her compound that mistake with indecision and failure to act.
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