By Massachusetts Bankruptcy Attorney, Kara O’Donnell, Esq.

What Are Their Rights?

Last year, Federal legislation (signed in May 2009) gave important rights to tenants whose landlords have lost their properties through foreclosure.

When the landlord defaults on a mortgage, the mortgage holder, often a bank, either becomes the new owner or sells the property at a public sale. (Or BOTH, if the mortgage holder simply buys its own property back at auction.) If the bank becomes the owner, it may pay a servicing company to handle the property. Tenants will then pay rents to the servicing company, but any maintenance needed will probably not be attended to as servicing companies are notorious for being elusive, absentee landlords.

Even before the foreclosure an investment trust can move in and buy the property. These investment trusts specialize in buying the defaulted loan directly from the bank, then foreclosing, evicting, and selling.

Many tenants face a situation where the new owners (after the foreclosure sale) refuse to be landlords, never making repairs or even paying utility bills. Because the banks are stuck with more and more foreclosed properties that they can’t sell, they do not maintain the properties and the tenants will suffer the consequences of lack of maintenance until they are evicted.

***Renters in Foreclosed Properties No Longer Lose Their Leases***
Before May 20, 2009, renters lost their leases upon foreclosure. But on that day President Obama signed the “Protecting Tenants at Foreclosure Act of 2009” which provided that leases would actually survive a foreclosure — meaning the tenant could stay at least until the end of the lease. Month-to-month tenants would be entitled to 90 days’ notice before having to move out.

The exception to this law is that if the property is sold to an actual person who intends to live on the property. Then, the buyer may terminate a lease with 90 days’ notice. The law also provides that any Massachusetts legislation that is more favorable to tenants will not be preempted by the federal law.

Does It Make Sense to Evict Tenants?
While some new owners choose to pay lawyers to start eviction procedures others will pay a fee to a management company to collect rent and manage the property.

“Cash for Keys”
To encourage tenants to leave quickly and save on the court costs associated with an eviction, banks offer tenants (or their landlords) a cash payout in exchange for their rapid departure. Thinking that they have little choice, many tenants take the deal.

With the 2009 federal legislation, most tenants with leases will keep their leases, and month-to-month tenants will have at least 90 days to relocate. Tenants with leases have no legal recourse against their former landlords, because they are in the same position with the new owner as they were with the old – the lease survives and ends as it would had there been no foreclosure.

However, a lease-holding tenant whose rental has been bought by a buyer who want to move in to the property ends up less fortunate as he may lose his lease with 90 days’ notice. Normally, the new owner has to wait until the lease ends.

Kara O’Donnell, Esq.
Quincy, Massachusetts

Posted by Kara O’Donnell


By Kara O’Donnell, Bankruptcy Attorney

(857) 526-1355       Quincy, MA

In a bankruptcy filing, debtors have the right to claim a generous amount of property as exempt.  (Exempt property is NOT allowed to be taken by the Trustee and sold to pay the creditors.) 

While most debtors choose to use the Federal exemptions,  debtors who have a large amount of equity in their home most often prefer to use the Massachusetts property exemptions instead.  Consult with a bankruptcy attorney to determine which plan of action is right for you.

While there is a set dollar amount of property that can be exempted in Federal exemptions, there also exists ADDITIONAL exemptions to protect almost all of your retirement funds in bankruptcy. This is a very broad protection that applies to all types of plans including 401(k) plans and 403(b) plans. IRAs and Roth IRAs are protected but only up to the amount of $1,000,000.  (There are some exceptions as to rollovers – consult with a qualified bankruptcy attorney.)  

And as mutual funds are not retirement funds, they would be subject to the exemptions mentioned at the beginning of this post.

Kara O’Donnell, Esq.
Quincy, Massachusetts

Posted by Kara O’Donnell

By Kara O’Donnell, Bankruptcy Attorney in Quincy, MA

In one of my previous posts, I addressed a widely used banking practice of the “Automatic Overdraft Protection.” View here

The problem was that the banks, without even requiring your approval, would allow you to withdraw funds from the ATM or make charges to your debit card and then HIT YOU WITH AN OVERDRAFT FEE. Remember the old days? When if you didn’t have enough money in your account, the ATM would say DECLINED? Those days are long gone and have been for quite a while.

BUT NOW, there are new Federal regulations coming into play – finally! Score one for the consumer!! It seems new laws now require the banks to decline the ATM withdrawal or debit card transaction UNLESS you opt in. (Note: Do NOT opt-in. You will forget you have done so then regret it later when you see 3 overdraft charges on your account for one day of buying coffee, lunch and dinner.)

Below is a notice I just got on my Sovereign/Santander account.

Important Changes to Your Account.
Under new federal regulations that will take effect this summer, Sovereign will no longer authorize overdrafts* on your checking or money market savings accounts for the following transactions**, unless you authorize us to do so by opting-in to our overdraft program:

ATM withdrawals and transfers
One-time debit card transactions

If you opt-in and one of these transactions overdraws your account, Sovereign may pay the transaction. If we do so, we will follow our standard overdraft policy*. If you do not opt-in to this program, and you try to make transactions when you do not have sufficient funds, we generally will decline the transaction.

Learn more about ATM and Debit Card Overdraft Elections.

To opt-in, call 877-SOV-BANK (877-768-2265) or visit your local branch today.

* An overdraft on your checking or money market savings account occurs when you do not have enough money in your account to cover a transaction, but the transaction is still processed by Sovereign. Under Sovereign Bank’s standard account overdraft practices, a fee of up to $35 will be charged for each overdraft on your account. If your account is overdrawn for 5 or more consecutive business days, an additional $5 per day will be charged. There is a limit of 9 fees per day for overdrawing your account.

** Sovereign will continue to authorize overdrafts for checks and other transactions made using your account number, automatic bill payments, Online Banking payments and transfers, and recurring debit card transactions. Overdrafts are always paid at our discretion, and we do not guarantee we will always authorize and pay any type of transaction. If we do not authorize and pay an overdraft, your transaction will be denied.

Kara O’Donnell, Esq.
Quincy, Massachusetts

Posted by Kara O’Donnell