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David L. Friedman

David Friedman’s Answers

32 total

  • My son is going through a divorce. He will not be able to keep his home. Which is the better option Foreclosure or Short Sale?

    What are the after affects of foreclosure?

    David’s Answer

    The answer to this depends on whether there are one or two mortgages on the property.

    If there's only one mortgage on the property, most of the time lenders in Minnesota cannot pursue a borrower for any remaining debt after a foreclosure. The debt will be wiped out regardless of a foreclosure or sheriff sale. This is not true in a rare type of foreclosure called a foreclosure by action, but these are not typical.

    If there is a second mortgage as well, the second mortgage company will be able to come after your son for any debt left over from the foreclosure sale. This debt called a deficiency. This is why a short sale where the second mortgage lender agrees to wipe out its debt may be a better option than foreclosure. Keep in mind that these short sales are somewhat rare, but if he can get one, it's a great solution.

    Your son may also be concerned about the damage to his credit score. Some people say that a short sale has less of an impact on your credit than a foreclosure, but most of these people work in the real estate industry. Most of the research I've seen suggests that there's little to no difference between a short sale and a foreclosure on a borrower's credit report, meaning that saving one's credit probably isn't a good reason to choose a short sale.

    If there is a leftover second mortgage after a foreclosure, it can usually be addressed by either negotiating a settlement with the lender or filing bankruptcy. A good consumer lawyer can talk him through his options.

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  • Can i spend my bank account money on a laptop before chapter 7 filing?

    I would like to purchase a relatively cheap laptop for perosonal use ( school, work, internet, etc). I am filing for bankrutpcy in a month or so and was just wondering if this purchase is okay. I plan to spend about 300-400 on it with my bank ac...

    David’s Answer

    • Selected as best answer

    You absolutely can. Unless you already have too many other assets to exempt, you should be able to protect the laptop using your bankruptcy exemptions. It'll be worth even less than what you spent on it once it's out of the box, so really you're reducing your assets, not increasing them.

    There's nothing that prevents you from making purchases with your own money before bankruptcy.

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  • EDD (payroll?) included not contested and discharged in bankruptcy.. do i still owe?

    I currently live in MN . . I included $ 57 , 000 the CA EDD says i owe ( payroll ? ? ) from 2006 in my bankruptcy last April . . it was not contested and discharged . Since then i keep receiving statements showing the full amount but sa...

    David’s Answer

    It sounds like the debt is for unpaid payroll taxes. If that's the case, whether the tax is dischargeable in bankruptcy depends on whether this was the employer or employee portion of the tax. If it was the employer portion (the tax YOU were obligated to pay) then it might be dischargeable if it meets other legal tests.

    If this was the portion of the payroll tax you collected from an employee and were supposed to pass on to the taxing agency, then it will likely never be dischargeable. These "trust fund" taxes are generally non-dischargeable.

    Either way, I agree--you should talk to your bankruptcy attorney.

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  • I want to let my house go into foreclosure because I owe way more than its worth and its in a bad neighborhood in North Mils .

    I also want to know how long I need to keep this house insured and how long I have to pay property taxes on it?

    David’s Answer

    In Minnesota, property taxes are wiped out in a foreclosure, and they are not assessed personally against the homeowner. So if the house is going into foreclosure, you may not need to pay the property taxes at all. If you want to "redeem" the mortgage (to basically buy it back from the bank in the six months after the sheriff sale), the unpaid property taxes will be part of the redemption amount.

    As for insurance, it is wise to keep liability insurance on the house (in case someone is injured on your property) and also insurance on the contents of the house (in case your stuff is damaged.) Other than that, if you don't intend to keep the house, there may be no reason to keep any other kinds of insurance active.

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  • I am filing bankruptcy. I am being sued. If I settle with the firm is there any way that they can hold me to the settlement?

    I already avoided summary judgment by showing up at the hearing . The judge ordered a scheduling order because discovery was not completed . Id like to settle with them so that I have time to complete the bankruptcy and get this whole lawsuit of...

    David’s Answer

    Hi, I don't see any risk that your settlement would affect your ability to file bankruptcy. The creditor is trying to get some of your money before you file, and there's nothing wrong with that, if you're willing to pay them to buy time.

    It's very unlikely (if not impossible) that they could write something into the settlement agreement to prevent your debt from being discharged. The concept of "bad faith" in bankruptcy has nothing to do with whether you pay your creditors partial payments to buy time before filing bankruptcy. Having said that, I agree with the previous poster who said that it's better to have a good lawyer look over any settlement agreement you make.

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  • Is there a statute of limitations for collecting on a second mortgage in Minnesota? I was told it was increased to 25 years.

    We were foreclosed on in April, 2011. We were told by a realtor to stop paying ont he second mortgage, that they more often then not don't try to collect. We made a settlement offer at the time we were losing the houseand they accepted, but again,...

    David’s Answer

    I generally agree with Mr. Corbin above, except for a couple of things:

    1) The statute of limitations for suing for a money judgment on a foreclosed second mortgage loan is only six years. The 15-year statute of limitations he cited was for foreclosing on a home. Here, the lender has already foreclosed. You're worried about a money judgment, which has a shorter statute of limitations.

    2) Second, just because you get a 1099 on a mortgage loan doesn't mean you have to pay it. Generally, homeowners do not have to count "cancellation of debt" income as income on their tax forms. The federal Mortgage Forgiveness Debt Relief Act says that you don't have to pay tax on forgiven debt on your primary residence.

    All in all, I agree that you might want to consult with an attorney. Because second mortgages are usually for a lot of money, the stakes are pretty high. Good luck!

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  • Can a debt collector threaten to pull state nursing license due student loan default?

    when explained that couldn't make payment for the month but would continue the following month the collector said he would garnish pay check and pull state LPN license.

    David’s Answer

    There's no way (at least none that I know of) for your student loan default to affect your nursing license. Plus it may be a violation of the Fair Debt Collection Practices Act (a federal law that prevents debt collectors from abusing and harassing you in certain ways) to make false threats to collect a debt.

    If this debt collector violated the FDCPA, you may be able to recover money damages, and it might be a good idea to consult a consumer lawyer.

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  • Is this legal

    i received a letter from collection company looks same as court forms but no suit filed asking for discovery of information an a credit card debt, The account doesn't appear on my credit report or the balance that they are asking for me to pay.

    David’s Answer

    It is a violation of the Fair Debt Collection Practices Act to use "unfair or unconscionable means" to collect a debt.

    It may be a violation to send out collection letters that appear to be court forms because they would confuse and frighten the people who receive them. Try contacting a consumer lawyer who is a member of NACA, the National Association of Consumer Advocates (link below) to see if you can take action against the collection agency.

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  • I recently found out I bounced several checks from 2007. How can I track these checks down and pay for them?

    I wrote several bad checks in 2007, last year an attorney contacted me to retrieve the funds. At the time, I didn't have the money. Now I do have the money and would very much like to clear up the situation. How would I go about tracking down the...

    David’s Answer

    I would pull a copy of your credit report at If the checks have been assigned to debt collection agencies, the collection accounts will show up on your credit report. However, if you're contacting collection agencies, I'd be careful. These debts have probably piled on interest and fees over the years, and debt collectors tend to be very aggressive when they collect.

    Before you start contacting them, I would review the Fair Debt Collection Practices Act, a law that protects you against abusive conduct by debt collectors. Once you're armed with the knowledge of what collectors can and can't do, it may be easier to protect yourself.

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  • I am currently getting my wages garnished and have received financial assistance after the garnishment has started.

    By re-sending an exemption claim form with proof of the energy assistance. Can I stop the garnishment? How long do they have to comply?

    David’s Answer

    • Selected as best answer

    I agree with the other poster that your previous garnishment will not be returned, but I'd say there is a good likelihood that your future wages would be protected.

    Also, I disagree with the other poster that your exemption will be limited to the amount of Energy Assistance you receive. The exemption notice required by law states:

    "Your earnings are completely exempt from garnishment if you are now a recipient of assistance based on need [including Energy Assistance], if you have been a recipient of assistance based on need within the last six months, or if you have been an inmate of a correctional institution in the last six months." Minn. Stat. 571.925

    As to whether you can change your exemption notice after the garnishment has started, it's not 100% clear. The law says "Failure of the debtor to serve a statement does not constitute a waiver of any right the debtor may have to an exemption." Minn. Stat. 571.925. While this doesn't help you outright, I think it makes a strong case that your changed circumstances could stop the garnishment.

    But the best way to find out is to try it. Send the new notice right away and see if the creditor complies. The law doesn't specify a time period in which you have to send a new notice, but I would give them a week to ten days. If the creditor does not cease the garnishment, I would contact a consumer lawyer. Try NACA, the National Association of Consumer Advocates (link below).

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