Blog - Dickson Law Group, LLC

Recent case shows it is possible to defend foreclosure . . . if you know what you’re doing.

January 22, 2015 By John P. Dickson

foreclosure defense due to mortgage debt

Mortgage debt and foreclosure defense.

Because of the sheer volume of foreclosure cases running through our courts in Illinois, the body of cases related to mortgage foreclosure defense changes every day. I receive a email alert from the Illinois State Bar Association letting me know each day what recent appellate cases have been decided and summarizing how they affect various areas of law. A new case relating to people defending their foreclosure comes down about twice a week–maybe 70 new decisions a year. To put this into perspective, only criminal law cases pop up in the ISBA email more often.

I can’t blog about every foreclosure defense case–there is just way too much to cover. But I do blog about the ones that make major changes to the laws or, in this case, that provide good examples of why you should hire an attorney to defend your foreclosure case. The First District (the appellate court in Chicago) rendered its opinion in Citimortgage v. Bukowski, 2015 IL App (1st) 140780. Read the first numbered paragraph for a little background and then skip down and read paragraphs 15 through 19.

Bukowski is incredible because the homeowners had a legitimate defense to their foreclosure case–the bank failed to mail a notice of acceleration (which is a letter that basically says “Because you missed your payments, we want the entire amount right now”) and therefore was not entitled to file its foreclosure suit. That’s big if true because the bank would have to go back and refile its case against you, potentially buying the homeowners another year or more in their house.

But, the homeowners messed up and failed to plead that defense with sufficient specificity to survive a summary judgment motion. They lost, not because their case lacked merit, but because they did not file the correct sheet of paper. That’s crazy and never should happen. Justice in courts should be based on the truth, not on whether you can fill out the correct forms properly.

This is the value of an attorney. Rather than having their rights vindicated and maybe staying in their home for additional time, the Bukowskis will soon be out on the street. Having a strong case is not enough, you also need a strong lawyer.

Nightmare CPS child custody situation going on in Maryland

January 16, 2015 By John P. Dickson

The Washington Post is reporting that two Maryland parents are under investigation by their local Child Protective Services (what we call DCFS in Illinois) for “neglect after letting kids walk home alone” from a park one mile from their home. Whether or not you agree that a 10-year-old child can safely escort his 6-year-old sister home safely from the neighborhood park, the heavy-handed response to threaten the parents’ custody of their children from CPS is frightening:

The Meitivs say that on Dec. 20, a CPS worker required Alexander to sign a safety plan pledging he would not leave his children unsupervised until the following Monday, when CPS would follow up. At first he refused, saying he needed to talk to a lawyer, his wife said, but changed his mind when he was told his children would be removed if he did not comply.

Don’t get me wrong. DCFS and other child protective advocates do their jobs correctly 99.999% of the time, but it’s the 0.001% of the cases where child custody is botched that send chills down your spine.

What to do if DCFS is seeking a finding that your children are abused or neglected or is seeking termination of your parenting rights?

Image credit: Wikipedia. A photo of a parent and child. You could lose custody of your children if you do nothing when DCFS and CPS investigate.

Speak to a lawyer in person immediately. For low risk matters, I have no problem providing self-help information on this website for the benefit of people who cannot afford a lawyer. Involuntary termination of your parental rights and child custody is not one of those low risk types of cases. These cases are heard on an expedited basis, and you will get steamrolled by DCFS’s attorneys if you do not seek the counsel of an attorney from the beginning. I handle DCFS investigation cases and temporary custody hearings in child abuse and neglect cases in McHenry County, Illinois and surrounding areas.

Missing note defense to foreclosure alive again in Illinois?

December 15, 2014 By John P. Dickson

Before the recent economic downturn, very few attorneys had experience defending foreclosures (or effectively prosecuting them, for that matter). As thousands and thousands of residential foreclosures flooded into our courts, the attorneys that picked up the foreclosure defense cases churned out hundreds of innovative arguments, and most went down in flames spectacularly. The “no note, no foreclosure” defense was among the most popular defenses, and our appellate courts quickly put an end to it. The Seventh Circuit, however, may have resurrected the “no note, no foreclosure” defense in limited circumstances.

How the “no note, no foreclosure” defense used to work.

During the real estate boom of the 90s and early 2000s, when everyone and their dog could qualify for a no-down-payment mortgage loan, many mortgage originators were very sloppy. They were too busy originating new mortgages to be as careful as they should have been, and important documents were occasionally lost. The most important documents for a mortgage loan are the promissory note (which contains the promise to repay in exchange for the money) and the mortgage (which grants the bank the right to foreclose if you fail to repay). The mortgage document itself is never lost because immediately after the loan closes the mortgage document is mailed to the county recorder of deeds and recorded.

The promissory notes, on the other hand, were lost quite frequently. The originators would mail them to the bank, and the bank would stuff the notes into a dusty file cabinet in a basement somewhere, and with the huge volume of loans being made these things were lost all of the time. This problem was compounded by the fact that as the bottom of the economy dropped out, several major mortgage lenders went belly up and their assets (99% of which were these promissory notes) were scattered to the wind to any bank with room on its balance sheet for more loans. In the process of divvying up failed lenders’ assets, some promissory notes were outright lost, others were miss-filed at the new bank, and the end result was that in a fair number of cases, the foreclosing bank’s attorneys were unable to produce the original promissory note to the court.

Attorneys who defended foreclosures salivated at the possibility of the lending having lost the promissory note because promissory notes are (supposed to be) special. They are like checks where the original document has significance in itself and you should not be able to cash (in the case of a check) or negotiate (in the case of a promissory note) a photocopy because what would keep you with making a hundred photocopies and trying to cash them all?

Well, seeing the havoc this would create in our domestic real estate market, our Illinois Appellate Courts have fairly consistently ruled that a promissory note is not like a check in that respect, and the original promissory note is only evidence of the debt obligation. If other evidence of the debt obligation can be produced, the absence of the original promissory note is not fatal to the foreclosing lender’s case.

The Seventh Circuit Court of Appeals resurrects the “no note, no foreclosure” defense somewhat.

Last month the Seventh Circuit handed down its opinion in State Bank of Toulon v. Covey (In re Duckworth), Nos. 14-1561 and 14-1650 (7th Cir. Nov. 21, 2014), which considered a very similar question–what happens if the promissory note is still in existence but the important parts were left blank? In State Bank of Toulon, the debtor, David Duckworth took out a $1.1 million loan from the State Bank of Toulon that was supposed to be secured by an Agricultural Security Agreement on certain farmland and crops. The security agreement, however, did not reference the note specifically by date, and the dollar amount of the security agreement was left blank. The bank tried to prove that it was the $1.1 million promissory note that was secured by the mortgage with parol evidence (a lawyer term for evidence about what a document means that is not contained within the document itself). The Seventh Circuit shot that argument down but carefully limited to apply only to the efforts of bankruptcy trustees to avoid liens.

Fighting your foreclosure in the bankruptcy court is now something you should consider.

Recent developments in bankruptcy court assist foreclosure defense.

The Duckworth case may have resurrected the “no note, no foreclosure” defense for Illinois foreclosure defense

If your lender was as sloppy as the State Bank of Toulon lender was, and if there are major terms left blank in the promissory note for your foreclosure case, taking your foreclosure to the bankruptcy court by filing bankruptcy is not so bad of an option. Federal courts will follow this law, and for once it works to the homeowner’s advantage.

Debt settlement instead of bankruptcy? There are tradeoffs.

December 12, 2014 By John P. Dickson

Most people who come into my office asking about bankruptcy want to get an understanding of the bankruptcy alternatives before pulling the trigger on a bankruptcy filing. Debt settlement is the most common alternative people ask about.

How debt settlement works (in theory).

In theory, debt settlement works like this: your original creditor sells the debt to a debt collector for 10 cents on the dollar (or even less sometimes), and the debt collector starts calling you, writing you, calling you at work, calling your relatives, etc. asking for payment. Because you are aware of the fact that the debt collector did not pay 100% of the face value of the debt to your original creditor, it is possible for you to settle the debt with the debt collector for less than you owe but more than they paid, creating a win-win situation for everyone involved. For example, if the debt collector purchased a $10,000 debt for $1,000 and if you settle that debt with the debt collector for $2,500, you are better off because you only have to pay back 25% of what you owed, and the debt collector is better off too because it just made a 150% return on its investment. This is how it should work.

Then the IRS steps in and complicates the debt settlement process.

Unwary settlers of debt often receive a nasty surprise from the IRS

The IRS will find a way to mess up your debt settlement.

One unforeseen consequence of debt settlement is that after you settle the debt for less than you owed you are supposed to report the discharged debt on your income tax return as income for the year. To further encourage you to report the settled debt on your taxes, the creditor is supposed to issue you an IRS Form 1099-C, which reports the canceled debt to the IRS.

This creates big problems for unwary settlers of debt for a couple of reasons:

Working off of the example above, you thought you were settling $10,000 of debt for $2,500. But, at the end of the year if you have to pay taxes on the canceled $7,500 portion of the debt and if you are a 25% tax bracket payer, the IRS is going to stick you with a bill for $1,875 bill at tax time.
Suppose you don’t have the $1,875 at tax time? Well, now you’re going to pay interest and penalties on the unpaid tax bill.
Even worse, because this is income tax debt, you cannot discharge the tax liability in bankruptcy until 3 years after it came due have elapsed.

Don’t get me wrong. Settling $10,000 of debt for $4,375 is a pretty good deal, but you should understand that you have two entities to pay to settle, not just the owner of the debt.

Also understand that Form 1099-Cs are not issued every single time a creditor writes off debt. You could get lucky and dodge this bullet. However, do not think you are out of the woods just because you settle debt in one year and have not received a 1099-C by the time you file your taxes. 1099-Cs can be issued years after the fact, so you have the unpleasant uncertainty of waiting for this bomb to drop some time in the future.

The beautiful thing about discharging debt in bankruptcy is that you do not have to pay income tax on the written-off portion of the debt. Even if the creditor sends you a 1099-C after bankruptcy, it is a relatively easy process to tell the IRS that you will not be including that written-off debt in your income by attaching a Form 982 to your tax return.

Bankruptcy is a better option for many people.

I usually decline to engage in the settlement of debts on behalf of my clients. I find that in most situations, an attorney would have to charge you too much to engage in the settlement negotiations, and a professional debt settlement negotiator is a better, more economical choice. I can recommend a good debt settlement negotiator in Crystal Lake. Ray of Hope Negotiations does good work, doesn’t rip people off, and I trust them (and, no, I haven’t been bribed by Gary for the recommendation).

What I can help you with, however, is filing bankruptcy. If your debts are too large to negotiate or if you do not want to deal with the uncertainty of being issued a 1099-C, bankruptcy is a great option for many debtors. Contact me to schedule a free consultation to discuss whether bankruptcy is right for you. The initial consultation is free, and I try to make it a low-pressure environment.

John P. Dickson is now Lead Counsel Rated

December 9, 2014 By John P. Dickson

Dickson Law Group, LLC is proud to announce that its principal attorney, John P. Dickson, has been ranked as Lead Counsel Rated by Lead Counsel, a service of Thompson Reuters.

From Lead Counsel’s materials,

The Lead Counsel Rating was established in 1997 as a quality assurance tool consumers and businesses can use to quickly and easily evaluate a prospective attorney’s ability and credibility. When you see the Rating, you can be assured the attorney has met strict qualification standards that include:

Professional Experience

Peer Recommendations

Spotless Disciplinary Record

Furthermore, an annual review is conducted in order to confirm an attorney’s eligibility for the Rating. Should the attorney no longer meet eligibility standards, the Rating is immediately revoked.

Finally, attorneys may earn the right to use the Lead Counsel Rating free of charge. This confirms both Rating objectivity and credibility.

Read more at Lead Counsel’s website. Feel free to review Mr. Dickson’s Lead Counsel profile, and when you have chance take the opportunity to congratulate him for the industry recognition.

17 common divorce causes. Money is not so important.

December 9, 2014 By John P. Dickson

Just about everyone who practices divorce law has had the conventional wisdom pounded into their head that financial and money problems lie at the heart of most divorces. At least we are told that people are capable of working things out if only they could create some financial stability for their household.

A recent study shows that our conventional wisdom regarding divorce is apparently incorrect. Two researchers in the sociology department of Pennsylvania State University, Paul R. Amato and Denise Previti, analyzed questionnaires submitted by divorcing spouses between 1980 and 1997 to try to determine what caused the breakdown of the marriage. Amato and Previti were able to identify 17 unique causes of divorce.

The most common causes of divorce are surprising to no one:

Infidelity (indicated in 21.6% of cases)
Incompatibility (indicated in 19.2% of cases)
Substance abuse (indicated in 10.6% of cases)

However, a surprising take away for me is that none of the top responses involve money. 3 of the 17 identified causes of divorce had a financial component to them:

Not meeting family obligations (which related more to homemaking, but nevertheless had a “bread winning” component was indicated in only 3.4% of cases)
Employment problems (indicated in 3.4% of cases)
Financial problems (indicated in 2.4% of cases)

Here is the full table summarizing the results of Amato and Previti’s study:

The most frequent causes of divorce are listed here in full. Surprisingly, money is less important to a happy marriage than we have been lead to believe.

Love is all you need? Tips for spouses trying to avoid divorce.

Marriages require work. A lot of people are raised to think that being a good earner for the family is enough to create a happy, healthy marriage and family unit. That is apparently wrong. But, the other end of the spectrum–working on love exclusively–is just as wrong. Communication, bonding, creating happiness for your spouse, and being compatible with your spouse are every bit as important as love and providing for your family.

Most people seeking a divorce will first make efforts–either in a formal marriage counseling setting or on their own–to fix the problems they are experiencing with their spouse. If you are reading this post and your marriage is on the rocks, it may be helpful to walk through each of the 17 causes of divorce and figure out what applies to your relationship (and needs work) and what doesn’t.

Can I discharge taxes in bankruptcy?

November 19, 2014 By John P. Dickson

Although we are technically coming out of the recession and bankruptcy filings are on the decline, a significant number of Crystal Lake and McHenry County residents are considering bankruptcy. A major contributing factor to bankruptcy is tax debt and penalties due to the IRS or State of Illinois. This blog post will attempt to explain for the most common types of tax debt whether you can discharge taxes in bankruptcy.

The most common forms of tax debt.

Personal bankruptcy filers and small business filers generally face three types of tax debt or quasi-tax debt when considering bankruptcy:

Individual or family income tax liability. This is relatively straightforward and is what most people think of when wondering whether you can discharge your taxes in a bankruptcy. This is debt owed to the Internal Revenue Service or the Illinois Department of Revenue.
Unpaid payroll tax, unpaid sales taxes, or related trust fund liability. This can be a problem for small business employers that had employees at one point.

Individual income tax liability can be discharged in bankruptcy, usually after 3 years after the return was due.

Regular unpaid income tax debt, owing to either the IRS or the Illinois Department of Revenue, can be discharged if all of the following are true:

It has been at least 3 years since the tax return that caused the income tax liability was due (and this includes any extensions).
The return actually must have been filed more than 2 years ago. This usually only applies if you filed your returns late.
There have been at least 240 days since an IRS adjustment or audit adjustment took place or there was an amended return. If you make an Offer in Compromise, this time frame is extended during the time that the OIC is under consideration plus 30 days. See 11 U.S.C. §507(a)(8)(A)(ii)(I).

Trust fund tax liability generally cannot be discharged in bankruptcy.

Most businesses that fail do not property hold money to pay the IRS. This can create tax liability that cannot be discharged in abnkruptcy.

If your small business may fail and if you have employees, pay special attention to your employees’ payroll tax withholdings. The personal liability you can create for yourself is both expensive and non-dischargable in bankruptcy in most cases.

Federal law requires employers to withhold from the pay of and hold “in trust” for the benefit of its employees the employee’s share of federal income and social security taxes. See 26 U.S.C §3102, 26 U.S.C. §3402. Because of the requirement that these taxes be held in trust for the benefit of the employee and the federal government, they are commonly referred to as “trust fund taxes.” There are similar payroll taxes, sales taxes, and excise taxes to be remitted to the State of Illinois that are considered to be trust fund taxes.

Unpaid trust fund taxes cannot be discharged in the company’s bankruptcy filing. See 11 U.S.C. §523(a)(1)(A); 11 U.S.C. §507(a)(8)(C). This generally is not that big of a concern if the company is liquidating under Chapter 7 of the Bankruptcy Code because the company is essentially dead anyhow. However, this is a big problem for the owners of the company who were responsible for the collection and holding of these trust fund taxes.

The employer, officer, or member of the company who are deemed “responsible” for “willful” failure to collect and remit trust fund taxes will have personal liability for the unpaid trust fund taxes. See 26 U.S.C. §6672 (federal taxes); 35 ILCS 735/3-7(a) (Illinois taxes). Additionally, they will likely face a 100% penalty in addition to the unpaid tax liability.

For the individual owners and employers of the defunct company who are held responsible for the company’s failure to remit trust fund taxes, their personal liability for the taxes and for the penalty imposed for failure to pay the taxes is non-dischargable in bankruptcy. See 11 U.S.C. §523(a)(1)(A); 11 U.S.C. §507(a)(8)(C). This debt must be paid in full.

If you think your small business may fail, speak to your bankruptcy attorney well in advance of the doors closing.

Because of the harsh penalty for failing to pay tax authorities certain taxes, small business owners should consult with a knowledgeable bankruptcy attorney before closing up shop. Winding up the company the right way can save you significant tax liability and penalties.

Should you keep paying association assessments if your Illinois condominium is in foreclosure?

November 15, 2014 By John P. Dickson

Short answer: In 99% of all cases, yes, you have to keep paying your condominium association or homeowners’ association dues. Read on for an explanation of why it is a good idea to keep paying your Illinois condominium association dues even if your unit is in foreclosure.

Is your Illinois condominium in foreclosure? This blog post explains when you should continue paying your condominium assessments and fees and when you can safely stop paying.

[Read more…]

Accepting a new position or leaving your old job? Be careful what you sign.

November 12, 2014 By John P. Dickson

A disturbing trend that has been making news lately is the imposition of noncompete agreements on even low level employees. Jimmy Johns (the freaky-fast sandwich company) came under fire in October when the national media caught wind of the fact that it forces its delivery drivers to sign noncompete agreements as a condition of working there.

Quoting directly from the document:

This is an excerpt of the noncompete agreement Jimmy Johns forces its drivers to sign as a condition of being hired.

To break this down in simpler terms: If you have accepted a job at Jimmy John’s, you are prohibited for 2 full years after quitting from working at any fast food sandwich shop that is within 3 miles of a Jimmy John’s location.

That’s a big problem if you are a fast food employee because there are many locations in Illinois where a 3-mile radius from any Jimmy John’s location covers the entire map:

Jimmy John's locations near Crystal Lake

Here are the 41 results for Jimmy John’s locations when you plug Crystal Lake’s zip code into Jimmy John’s store locator on its website. I haven’t measured, but I would wager that there is nowhere in the southeast corner of the county that is not within 3 miles of a Jimmy John’s location.

Most people work fast food as a job of last resort–it’s not your dream position, but at least it pays the bills. Imagine losing the right to accept a position of last resort merely because you delivered sandwiches. It’s a scary thought.

It’s not just Jimmy John’s. More and more companies are forcing their employees to execute restrictive agreements .

A Seattle franchisee of the national janitorial company, ServiceMaster is starting to come under fire for forcing its employee janitors to execute noncompete agreements. Camp counselors and hairdressers have lost jobs because of similarly restrictive employment provisions. Noncompetes used to be reserved for high level employees and individuals with the ability to take customers with them. Now, if sandwich delivery drivers, janitors, and hairdressers are at risk of having their livelihood taken away from them because they took a job with the wrong company, no one is safe.

An ounce of prevention is worth a pound of cure. Figure out what you’re signing before you sign it.

If your employer is forcing you to sign a document, you can guarantee that your employer’s attorney has drafted this document to be as friendly as possible to your employer. If the other side of the deal is represented by lawyers, you had better have your own representation or your are going to be taken for a ride. Before signing anything related to a new position or before signing anything in connection with a severance package, you would serve yourself well by speaking with a McHenry County employment attorney to ensure your rights are protected. Contract review is a low-cost preventative measure to ensure that you know what you are signing.

How to save money on your McHenry County divorce case

November 7, 2014 By John P. Dickson

Divorce is not a lot of fun. Even less fun is the bill you receive from your attorney for your divorce in McHenry County, Illinois. Here are a few tips that will help keep your bill down.

1. Collect your thoughts before you reach out to me.

I am more than happy to speak with you all day long, but I will bill you for every minute of that time. If you call me nine different times regarding nine different issues, your bill will be much higher than if you call me only once and save those nine questions for that one phone call. Keep a note pad with all of your questions for your divorce attorney. Use that note pad to make fewer, more productive phone calls.

2. Use email, not the phone.

Most attorneys provide better, more complete answers to questions in writing than over the phone. It takes less time to respond to emails than it does to talk on the phone.

3. Understand your attorney’s role in the divorce case.

Divorce clients tend to want their attorney to be a therapist, social worker, police officer, and problem solver in addition to being a lawyer. I have no problem helping you vent about your soon-to-be ex-spouse, but the truth is that you will likely have a more productive therapy session with a therapist. Before reaching out to your lawyer, you should ask yourself “Is this something I hired my lawyer to deal with?” I can promise you that your therapist’s hourly rate is lower than mine.

4. Don’t hide things from me.

Did you take your girlfriend for a weekend in Las Vegas? Do you have a separate apartment? Did you spend a couple thousand dollars on the kids for Christmas? If you did something that you do not want your soon-to-be ex-spouse to know about, you should tell me. I can’t help you unless you let me.