Topic 7: Collections and Foreclosures

Which is worse, delinquency or default?

A client comes to your office after receiving a notice to pay or get out on their front door of their apartment, days later they received an eviction action. They are 4 months behind in rent and can’t afford to pay, they ask you if they should attend the hearing or not. What would you suggest?

During the rental eviction process, a tenant receives a final judgment notice stating how many days the tenant has to get out; why should the tenant make every effort to move within the given time period?

Repossessions can occur when a borrower is in default and a lender takes back the collateral that secures the loan; if you client is 3 months behind on their car payments, what are some things they should consider before it is too late and the vehicle is repossessed?

A creditor has the right to repossess collateral if the borrower is in default, there are many ways that default can occur other than paying late, name two.

One option when faced with a probable repossession is to try to get back on track, some states offer this as a right, others do not – but often a creditor will allow a borrower to pay back what is past due and start making payments again, what is this term?

What is the difference between a self-help repo and a voluntary repossession?

Give an example of how a repo agent may breach the peace.

Following repossession, a creditor will likely get a deficiency judgment against the borrower. How is the deficiency determined, and is this judgment a secured or unsecured debt?

There are few options after repossession; what is the difference between reinstatement and redemption?

If a repossessed vehicle is sold at public auction and the delinquent borrower is able to buy the car himself at a very good price, what happens to the deficiency balance?

How can filing bankruptcy help a delinquent borrower get his repossessed car back?

Describe a bank set off.

Unsecured creditors only have 3 options as far as collection efforts are concerned, what are they?

There are a few circumstances in which a creditor is less likely to sue, name two.

A client comes to you frustrated over harassing phone calls from a creditor; a family member gave them advice to send a cease letter. Although a cease letter will like stop the harassing phone calls, what will likely happen?

The Fair Debt Collections Practices Act protects consumers against abusive collection practices; a consumer can even sue a debt collector for illegal conduct – up to what dollar amount?

List a couple of the protections that are provided through the Fair Debt Collection Practices Act (FDCPA).

The FDCPA limits contact with consumers to convenient times or places. What is considered convenient?

The FDCPA limits who a collector or lawyer can contact in their collection efforts, who can they contact?

Your client lives with their grandmother, a collector calls and talks to grandma asking where they might find your client, is this behavior allowed, per the FDCPA?

Once a creditor decides to sue and the delinquent borrower has been served a summons, the borrower is often humiliated and chooses not to respond at all, not responding to the request for admissions or appearing for court. How can this hurt their situation?

A client comes to see you as they received a summons for a collection judgment for a credit card bill that is very old, a possible affirmation defense might be what?

If a defendant appears in court and argues his case, but the judge finds in favor of the plaintiff, what kind of judgment is it? (Default or Summary?)

Once a collector has received a collection judgment, they can perform a debtors’ examination, what are they looking for?

Once a collector has a collection judgment against your client, they can get their money in a few ways, list 2.

A client loses a collection judgment, the judge issued a money judgment describing the amount of money the she owes the creditor. She does not understand why a credit card with a maximum available balance of $1,500 could end up being $3,150 owed. What is likely the difference?

A contractor does some remodel work for a couple who writes him a bad check for $1,200. He takes them to court and is able to put a security interest on their property, what kind of a lien is this?

What does it mean to be collection proof?

What is the difference between exempt and non-exempt property, give an example of each

What is the difference between a promissory note and a deed of trust?

Escrow accounts are utilized to collect a prorated amount from a borrower monthly; this amount is held in an account to apply to annual insurance premiums and property taxes. Can lenders require that any and all borrowers have an escrow account?

Escrow accounts are utilized to pay necessary homeowners insurance and taxes how does the servicer handle over or under payments?

What is the difference between forced place insurance and private mortgage insurance?

If you find a client has credit life/credit disability insurance attached to their home loan, it may be financially beneficial for them to consider term life insurance instead, why is this?

What is the difference between a mortgage lender and a mortgage servicer?

The most common type of foreclosure is by mortgage lender – due to loan default; however a homeowner could face foreclosure under other circumstances as well, name one.

Homeowners may choose to seek a mortgage work-out plan to avoid foreclosure, what is one possible mortgage work out plan?

A client seeks your advice about beginning the process of requesting a mortgage work-out plan, who should they contact with their request?

A home owner who seeks a mortgage work-out plan will write a short letter describing to the lender why they fell behind on payments. What is this letter called?

Through one common mortgage workout plan, a lender will agree to put the past due amount on the end of the note, if the borrower agrees to keep making monthly payments, what is this called?

There are a handful of special mortgage protections, name one.

What is the difference between a short sale and a deed in lieu of foreclosure?

Anytime that a portion of debt is cancelled or written off there is a likelihood that there will be tax consequences as the IRS may see this as income. Name one circumstance that may lead to tax consequences.

22 states use judicial foreclosure as their main type of foreclosure, what does this mean?

During the foreclosure process, your client receives a notice of a Right to Redeem, a required notice in all states. They are excited thinking that they may be able to keep their home after all. What does this mean, and what is the likelihood of redeeming?

Can filing bankruptcy stop a home foreclosure?

A client is thrilled to have completed a 3 year debt management plan with your credit counseling agency. He would love to buy a home, but says that he will never be eligible to buy another home because seven years ago, he had a home foreclosed. Is this true?