How to Get Rid of Your Unwanted Debt: A Litigation Attorney Representing Homeowners, Credit Card Holders & Others

Copyright © by Carl E. Person 2010, 2011, 2014 – Rev. 5/5/11, 9/10/12, 5/4/14

ISBN: 9781483548258

Table of Contents

A. INTRODUCTION

How to use this booklet to eliminate or reduce your unwanted debt

B. HOME MORTGAGES

Update as of May, 2014

Foreclosure Defense Strategy

What you can do when you can’t afford your mortgage payments -- in Judicial Foreclosure States where the bank has to file a foreclosure action

How you may be able to block a mortgage foreclosure action for up to years or more

How you can stop a foreclosure when the lender forecloses without a court action

Where non-judicial foreclosure has been started

Securitization and MERS

New York 10/20/10 Administrative Order

Duty to Negotiate in Good Faith; and Claimed Breach of Implied Warranty of Good Faith and Fair Dealing

Violation of Federal and State Antitrust Laws

Bankruptcy is not the way to go for most homeowners - The reasons why

Stay out of Federal Court including Bankruptcy Court

List of ways in which a home mortgage can be eliminated

A list of my 100 YouTube videos on foreclosures

C. CREDIT CARD DEBT

How to Get Rid of Credit Card Debt and Usurious Interest Payments – Preliminary Discussion

Debt Validation Letter

Form of Debt Validation Letter

Full discussion of why many credit-card holders should stop making their monthly payments

The Consequences

A Typical Case – Immediate Result

A Note about Your Credit Rating

What the Credit-Card Company Will Do

So, in Summary

Breach of Agreement by Credit-Card Company

D. STUDENT LOANS

How to Get Rid of Your Student Loans without Slave Labor or Bankruptcy – Preliminary Discussion

Additional Discussion

My Proposed Community Solution - Local Condemnation of Underwater Student Loan Notes

E. IRS LIENS

How to get rid of your IRS tax liens for as little as 3 cents on the dollar

F. OTHER FINANCIAL MATTERS

How you can use jury service to help take back our country

The truth about education in the U.S. and how you can profit from this knowledge

The only practical solution for municipalities with excessive payroll & pension costs

How you and I can create prosperity for the residents of your town or village

APPENDICES

Appendices

A. Other useful websites

B. Types of Debtors

[Please Note: Reference is to electronically-assigned File Pages at this point, starting with page 96, instead of the page number within the form]

C. Forms for Defending Collection Lawsuit by Credit-Card Company or Its Assignee

Form 1 – Answer with Affirmative Defenses and Counterclaims

Form 2 – Request for Document Production

Form 3 – Requests to Admit

D. Forms – Borrower’s Lawsuit against College, Student-Loan Lender and Guarantor

Form 1 – Pro Se Verified Complaint by Borrower against College and/or Student-Loan Lender and Guarantor

Form 2 - Request to Admit

Form 3 - Request for Document Production

Form 4 - Notice of Motion to Compel Discovery

Form 5 - Affidavit in Support of Motion to Compel Discovery

E. Forms Concerning IRS Offer in Compromise

Form 1 – IRS Form 656 – Offer in Compromise (March 2011)

Form 2 – IRS website: What is an Offer in Compromise?

Form 3 – IRS website: What You Must Know Before You File an OIC

Form 4 – IRS website: Do You Qualify for an Offer in Compromise?

Form 5 – IRS website: How to File an Offer in Compromise

F. Forms of Complaint by Homeowner against Bank to Quiet Title; and Homeowner’s Answer with Affirmative Defenses and Counterclaims To Bank’s Foreclosure Action against Homeowner

Form 1 – Complaint by Homeowner-Mortgagor against Bank-Mortgagee to Quiet Title

Form 2 -- Homeowner’s Answer with Affirmative Defenses and Counterclaims to Bank’s Foreclosure Action against Homeowner

G.

[Last Page in Booklet]

A. INTRODUCTION

How to use this booklet to eliminate or reduce your unwanted debt

There are many types of debt, but I have chosen to deal in this booklet with the four main types of debt that are generally the largest of all, and designed to leave millions of Americans in poverty. These four types of debt are home mortgages, credit cards, student loans and IRS liens for unpaid income and payroll taxes.

What makes these four types of debt particularly odious is the common feature of compulsion, usury, and extraordinary remedies available for collection of the debt.

Student loans are the worst because of (i) the inability to cancel the loan through bankruptcy proceedings, and the sometimes extraordinary remedies available for collection of the debt, including the ability of the lender to attach or garnish wages, tax refunds, other governmental benefits; and (ii) typical failure of the college or university to provide an education worth what the unknowing student and his/her parents are required to repay.

Another adverse feature for student loans has been revealed recently. An appellate court in New York held, on April 8, 2010, that the 20-year statute of limitations in New York for student loans no longer applies. The court held that the New York statute of limitations has been preempted by federal law and that, as a result, there is no statute of limitations for student loans - a student or his/her parent guarantors can be sued 60 years from now for unpaid loans, for example. The case is New York State Higher Education Services Corporation v Fabrizio, 73 A.D.3d 158, 900 N.Y.S.2d 159 (3rd Dept. 2010).

The preempting federal statute is 20 USC section 1091(a), which states that no statute of limitations applies to student loans, regardless of what any other statute might say. In 1991, Congress explained that this statute was designed to allow recovery on a broad range of student loan debts by eliminating all limitations defenses.

One aspect of the compulsion for payment of the four types of debt is the credit rating of the borrower (including persons who borrowed from the IRS by not making full payment of taxes, when they became due). Credit ratings are similar to the chains used to prevent slaves from escaping. Now that many millions of homeowners (1 out of 7 home mortgages) are behind in paying their mortgages or are in foreclosure, the need to retain one’s good credit rating is something that most people cannot afford. If you are behind $20,000 in paying your mortgage, would you really pay $20,000 to preserve your credit rating? Most people would not, because they can’t afford to do so.

Once you come to the realization that your financial situation and credit rating are no longer good, you are in a position to act upon my suggestions. If you see that your financial condition is going to deteriorate by your being unable to pay your mortgage payments starting 6 months from now, forget about making the payments. Save the money by not giving it to the bank. You’ve given the bank more than enough already.

B. HOME MORTGAGES

Let’s start now with mortgages, to see what you can do to reduce or eliminate your mortgage indebtedness. I want to start off by saying that elimination of the mortgage is not commonplace, but I will provide at the end of this section with a list of ways in which this could occur.

Update as of May, 2014

I have been defending against judicial foreclosures almost full time since 2008, and have some thoughts to share with you about foreclosure defense in the 50 states:

1. Due to court-sponsored mediation in some states, there is some degree of relief for homeowners-mortgagors, which now tips the scale in such states that are judicial-foreclosure states to wait until you are sued in foreclosure instead of filing a so-called quiet title action. The mediation session is truly an advantage in most states that use them and should not be overlooked, disregarded or not used. To assist you in determining what mediation is available in your state, you should go to http://www.nclc.org/issues/foreclosure-mediation-programs-by-state.html - a website of the National Consumer Law Center, providing foreclosure mediation information for the following states: California, Connecticut, District of Columbia, Delaware, Florida, Hawaii, Idaho, Illinois, Indiana, Kentucky, Maine, Maryland, Massachusetts, Michigan, Nevada, New Hampshire, New Jersey, New York, New Mexico, Ohio, Oregon, Pennsylvania, Rhode Island, Vermont, Washington, Wisconsin, and miscellaneous state and local mediation programs in New Hampshire, Milwaukee and Cook County (Chicago).

2. Non-judicial foreclosures are a national scam and the law in 28 non-judicial foreclosure states should be changed to judicial foreclosures. In these 28 states (with some opportunities for pre-foreclosure mediation being added by state lawmakers in states such as Nevada, Maryland, Washington) the owner of the note is permitted to sell the mortgaged property without having to prove its entitlement to do so in a court.

3. In non-judicial foreclosure states the courts are reluctant to grant any relief to homeowner-mortgagors when applying for a stay of a threatened foreclosure sale; the courts (if willing at all to grant a stay) generally require proof of some type of breach of contract by the note owner before granting a stay, and the banks have been careful not to promise any loan modification agreement when taking the homeowner-mortgagor’s money for a 3-month trial modification; thus, even though the homeowner pays the bank for 3 months on a timely basis, the bank has promised nothing;

4. Quiet title actions (actually, declaratory judgment actions trying to get the court to declare that the bank or servicer can’t prove ownership of the note and has not right to attempt to enforce the note) are frowned upon by judges and courts, but in many cases do enable the homeowner-mortgagor to get an affordable loan modification agreement. The homeowner gets to remain in his/her property, and the bank gets a release from all defenses up to that point so that if the homeowner fails to make payment on the modified loan the bank will be able to commence a new foreclosure action without the battery of affirmative defenses and counterclaims;

5. The New York courts have held that they don’t want any quiet titles brought in the New York courts concerning mortgaged real property located in other states, even though the allegations state that the action is on the promissory note last transferred in New York and subject to the New York Uniform Commercial Code; other states would take the lead from New York and hold similarly, so that any quiet title action at this time should be commenced in the county in which the mortgaged real property is located;

6. The banks in judicial foreclosure states are hiring attorneys who are more careful about compliance with the numerous requirements for obtaining a judgment of foreclosure and sale, which means that it is more demanding to defend a foreclosure action than in the past, when the bank’s foreclosure papers were usually deficient in various ways;

7. The cost of foreclosures is increasing for banks. Previously, the nation’s largest banks were paying about $1,000 per completed foreclosure, which caused the bank’s law firms to cut corners in the foreclosure process. $1,000 does not buy enough legal time to do all the work required by the bank’s lawyers, which left a lot of defenses for foreclosure defense counsel. This is changing.

8. A homeowner-mortgagor who fails to respond to a foreclosure summons and complaint does himself/herself and family a tremendous disservice. If an attorney is retained right away and files the appropriate answer with affirmative defenses and counterclaims and possibly some offsets, the homeowner-mortgagor will often be able to remain in possession for several years. I know of one instance where the homeowners-mortgagors have not paid their mortgage for about 11 years and are still in possession.

9. It pays for a homeowner-mortgagor to stop paying his/her mortgage if this enables him/her to hire an attorney to defend the foreclosure action that will result from the non-payment.

10. The homeowner-mortgagor should not put his/her head in the sand when it comes to a foreclosure action. Instead, he/she should retain a competent foreclosure defense attorney (and not defend on a pro se basis) to prepare, serve and file a timely answer (with affirmative defenses, counterclaims and possible offsets). This will encourage the bank to offer an affordable loan modification agreement at or near the outset of the litigation and enable the homeowner-mortgagor to keep possession and occupancy of the mortgaged property.

11. Homeowners-mortgagors should be aware that it may not be in their best economic interest to accept a loan modification agreement that is based on a principal amount significantly higher than the present value of the mortgaged property. When this occurs, the homeowner-mortgagor can be paying the mortgage for years before he/she sees any equity in the property. In such cases, it is probably better for the homeowner-mortgagor to make plans to leave the property, and perhaps the bank would be willing to pay something like $5,000 to encourage this result.

12. It is exceedingly difficult for most homeowner-mortgagors in the U.S. to find a competent foreclosure defenses attorney for a variety of reasons, especially in the 28 states that are considered non-judicial foreclosure states. The reasons are numerous and complex, and not because attorneys couldn’t learn what to do. Many of them don’t want to take on foreclosure defense because it could conflict with existing clients or financial institutions that the firm hopes to attract as clients. Then, there is the problem of getting paid legal fees from persons who are unable to pay their mortgage.

13. Defenses based on RESPA (Real Estate Settlement Procedures Act) and TILA (Truth in Lending Act) are generally less successful than standing issues (i.e., whether the plaintiff has the right to enforce the note). RESPA and TILA often provide monetary claims (if damages can be proven at all) but not a defense to the foreclosure action. Standing issues could provide a defense to foreclosure.

14. Bankruptcy is not a cure for most homeowners-mortgagors, as will be explained near the end of this section.

15. The various settlement agreement between the major banks and loan servicers and the federal and state attorneys general do not give any right to homeowners to enforce their provisions; this has been decided repeatedly by the courts; unless you can point to a specific provision in any such agreement giving homeowners the right to sue to enforce the agreement, you probably will be wasting your time trying to get the court interested in the settlement agreements.

16. There is somewhat of a movement by legislatures or the courts to require banks and servicers to comply with certain foreclosure rules. New York started this movement, but the movement seems to be very slow, resulting in more mediation opportunities than rules regulating foreclosures. See section below entitled New York 10/20/10 Administrative Order.

17. There are numerous other things that could be said at this point, but I’m going to jump to the main topics right now.

Foreclosure Defense Strategy -

Here are your choices in the 22 judicial foreclosure states (and you are urged to discuss these suggestions with a local attorney of your own choosing):

To commence a quiet title action, file for bankruptcy, or wait for a foreclosure action and file an answer with affirmative defenses and counterclaims.

For reasons set forth above, I now believe homeowners-mortgagors seeking to remain in their property should wait to be sued by the alleged owner of the note or its servicer, for the following reasons:

1. Bankruptcy has too many pitfalls;

2. Quiet title actions are not being treated as well as defenses to foreclosure action.

3. An adverse decision as to claimed defenses or claims in a quiet title action could be binding in a later foreclosure action brought by the bank or its servicer.

4. The homeowners-mortgagors would not have the mandatory mediation afforded in many states in which the bank or servicer (as well as the homeowner-mortgagor) are required by law to negotiate in good faith, with a defense to the foreclosure action if the bank treats the homeowners-mortgagors as badly during mediation (called conferencing in New York) as it treated them during their numerous loan modification applications made prior to the foreclosure action.

5. The loan modification application during mediation will be given directly to the bank’s or servicer’s attorney who will then forward it to the bank’s loss mitigation department and failure to do so promptly could be bad-faith negotiations and a defense to the foreclosure action.

If you believe that the bank or servicer does not have possession or ownership of the note, and you want to establish that fact without going into default, you might consider a quiet title action. Here are some of my observations about that:

1. You will probably not be able to get a declaratory judgment eliminating the bank and its servicer as having no standing. I don’t see court decisions of that type. I see settlement through loan modifications but I don’t see judgments that the homeowner-mortgagor keeps the property free and clear of any claims by the alleged note owner or its servicer.

2. If you can show that there are two banks claiming ownership of your note, you could sue both banks in a quiet title action and probably get a decision that one or the other owns the note.

3. You should consider not paying the mortgage and the adverse credit reports that failure to pay would generate, and then assert the standing defenses and counterclaims, to give you a chance to use discovery to prove or disprove your belief. You might wind up with a reduction in your mortgage.

In non-judicial foreclosure states, the homeowner-mortgagor has fewer choices, assuming that there is no mediation option or that the mediation did not help out. He/she could wait until the foreclosure sale has occurred and then sue for wrongful foreclosure, or could bring a quiet title action with a request for a stay (and temporary restraining order) until the action has been decided (i.e., until the court has decided whether the bank and its servicer has the right to enforce your note). As said previously, these quiet title actions are not in favor with the courts, unless you can show some type of breach of contract by the bank or servicer.

As to homeowners actually engaged in a foreclosure lawsuit brought by the bank, the homeowners should consider amending their pleadings to reflect some or all of the counterclaims and affirmative defenses set forth in the Form of Answer with Counterclaims set forth in Appendix K below.

Evidence has been revealed during the past few years showing that the major banks in their foreclosure actions are using falsified affidavits, robo-signing of affidavits, non-review of documents relevant to foreclosure, willful destruction of original (wet-ink notes) by MERS; failure to own or possess the original note when foreclosing; lack of authority to foreclose when done by servicing agent; failure to have proper assignment of note and mortgage; illegal backdating of assignment; lack of authority of person to execute assignment, adding language to promissory note to make it saleable through securitization, which invalidates the note; creating missing documents and pretending they are the originals, and so on. There is good reason to believe that most foreclosure actions in the U.S. since 2008 have defects enabling the homeowner to have a cause of action for