Prevention Questions

Q: My neighbor has been out of work and now his house is up for forclosure sale on January 2nd. He got a card in the mail from a company in L.

A: " called, "Goldman, Wilson, Drew & Associates" that claims to be able to "buy him time" from month to month. They said that he needs to go to the courthouse in his city (Houston) and transfer a 5% portion of his deed to a trust that they set up. Then they file bankruptcy in the trust's name and this stops the sale. The fee is $475 per month since they do this each month. He is interested in buying some time rather than filing bankruptcy since he is now employed and can likely get back on track. Foreclosure Prevention Questions : 1) Is this a legitimate company and approach to use? He is afraid that this is a scam and he would be signing over his house to this company. 2) Is it even possible to sign over a percentage of a deed? 3) What would happen if he needed to file bankruptcy later--say in 90 days? 4) Is this something he can do himself without using this company?

A: Bad idea. First of all, a trust cannot file a Chapter 13 bankruptcy, it can only file a Chapter 7, which

cannot be refiled each month. Second, there are fraud and bad faith issues involved; I suspect that the US Trustee would be very interested in what this group is proposing. Third, your friend is giving away some of his property and paying to do so. It may not be easy for him to get it back. Fourth, transferring an interest in his house without the mortgage company's approval is probably a violation of the mortgage and can cause the full balance of the mortgage to become due (what is called a "due on sale" clause). Fifth, and finally, your friend can simply file his own Chapter 13 bankruptcy, get the time he needs to restructure things, and avoid any of this stuff.