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Archive for Bankruptcy
Jan
02
Is Bankruptcy A Better Option Than Foreclosure For Me?
Posted by: | CommentsA Lis Pendens has been filed on the house (NY). An investor ’s short sale proposal was rejected. The lender is taking forever to get back to me to set up a meeting where we can talk about DIL. It doesn’t look as if I can raise enough privately to avoid foreclosure although I am still working on this as an option.
I heard that Chapter 13 bankruptcy was a common way to delay the foreclosure sale. I will try for pro bono legal advice locally but just for preliminary considerations, anyone got any thoughts (keep it simple please) on which is worse? .
Dec
12
Foreclosure: What Homeowners Can Do to Help Avoid Foreclosure
Posted by: | CommentsThese days, especially in areas such as California, many individuals are beginning to feel the after-effects of the recent housing bubble while running into a few financial problems along the way. Lenders have been laying off employees, several sub-prime lenders have gone under and it seems there is no escaping the realities of this current housing situation. There are many things a person can do in order to avoid a bank foreclosure. First, the bank does now want to own the property that they may eventually have to foreclose on and the home owner obviously does want to keep their home. So what sort of things can a homeowner do in order to help their situation? The first thing to do would be to see where exactly they can save money on monthly expenses. Are there any ways to cut back costs on entertainment, such as eating out? Are cable TV and the best cell phone plans really worth the cost? How much gas does a household use? This can be a real cost cruncher as I have found that during winter months, the natural gas expenses can get astronomical at times. I would simply suggest to turn the thermostat down a bit to temperatures that are not so hot, but keep the place warm. Just enough that you may want to wear a sweatshirt to keep a little warmer can really make a big difference in the gas bill. Where are the other expenses? If the car payments are quite high, possibly consider one car. And as for insurance payments, there may be room to increase a deductible amount in order to lower monthly payments as well. When finding ways to save money are maxed out, where does a person go to? The only way would be towards finding a way to bring in more income. Maybe a second job would not be such a bad idea. Also, finding items such as jewelry and expensive golf clubs and such may be able to make enough money to keep the bills paid for a while. One thing that should be left alone in most cases would be the retirement savings. Pulling money from these accounts will only cost a person as well through items such as early withdrawal penalties and the like. Trying to get back up on top can be a painful process, but if it means saving the house a person lives in then maybe it’s not such a bad idea. The lender would absolutely agree. The lender ultimately wants you to keep a person’s home. Foreclosing on a home is an expensive process for the bank and they may not even get back as much as they need for the home. Many times there will be a better solution than foreclosure. The good thing is that the lenders are required by their insurers to work with individuals facing foreclosure. If a person speaks with the lender, they may be pleasantly surprised to find out that the lender can do lots of things to help a person out temporarily, such as suspending payments, paying less than the entire monthly amount (but making up for the rest later on), lowering the interest rate through a change in terms, or they may replace an adjustable rate with a fixed rate. Many times, the lender has been willing to take the missed payments and place them back into the balance and even lowering the monthly payments altogether, provided that the homeowner is willing to add more years on to the mortgage. After all other options have been exhausted and the homeowner simply will not be able to hang on to the home, there are more options in regards to getting through the tough times and avoiding foreclosure. Some other solutions could even be to find a buyer who is willing to take over payments if there is really nothing else that can be done and the person wants to get out of the situation. Or, if the market is really bad, the lender might agree to accept an amount that is less than what is owed on the home. If this is an option given to the owner, then it would be a much easier way to sell the home and avoid the damaging foreclosure process. If nothing else seems to work out, there is yet another option where the lender could possibly just accept the property through a deed in-lieu of foreclosure and the homeowners are cleared of the debt. Foreclosure is something that is extremely damaging to one’s financial record and should be avoided if at all possible. There are many different things a homeowner can do in a situation such as facing foreclosure and it would be advised to set up a meeting with the lender and discuss some of these options and possibly even more.
Dec
10
Will Filling Bankruptcy Avoid Me Paying Taxes For A Foreclosure In Ca?
Posted by: | Commentsi heard they send you a 1099 form for your taxes after a foreclosure is done, this means i would owe the IRS a lot of money. So would filling bankruptcy help me to not owe anything?
Dec
03
Avoiding Foreclosure – What Are the Alternatives
Posted by: | CommentsIn these economic times the percentage of foreclosures in America is on the rise. The homeowner who is facing foreclosure of their primary residence has several options in an attempt to avoid foreclosure. They can negotiate with the lender in an attempt to refinance the loan, get a short sale approved or deed the residence back to the lender in lieu of foreclosure. If the lender is unwilling to negotiate with the homeowner or their representative then there are options of filing a Chapter 13 bankruptcy or a reverse mortgage if the property in jeopardy is an investment property. Even with all of these options at the disposal of the homeowner there still must be a determination by the homeowner of if they indeed wish to save the home from foreclosure or to just allow it to be foreclosed on.Once foreclosure becomes evident, first and foremost the homeowner must make the determination if they in fact want to try to keep the home, if they are financially able to save the home or if it would be more feasible to allow the home to go into foreclosure. Most homeowners attempt to avoid foreclosure due to the misconception that they will save their credit rating if their home is not foreclosed on. Unfortunately this is not correct. Once the homeowner has missed four continuance payments on the mortgage their credit report will already reflect in a negative manner equal to a foreclosure. If the homeowner’s only reasoning for saving the home is to save their credit rating they are already hindered. Most homeowners want to save their home because they need a place to live and need assistance to get out of a situation which millions of American have gotten themselves into.
If the homeowner wants to avoid foreclosure and it is not too late in the process, the auctioneer is not at the front door, then the homeowner can open a line of negotiations with the lender in an attempt to refinance the existing loan. The lender will look at the homeowner’s credit rating at the time of the negotiations – are there any other bills outstanding, are they in any other financial distress – and if there is equity in the home (approximately 25-30%). In addition the lender will look to the amount of time the homeowner has gone without making a mortgage payment. Sometimes the refinancing will be as simple as moving from an ARM loan to a fixed mortgage rate or if there is a FHA loan involved the homeowner could qualify for a partial claim. A partial claim is when the loan is brought current and a lien is placed on the property for the outstanding amount owed until the property is sold or refinanced. Normally, with most negotiations a forbearance agreement is used by the lender in which the homeowner is allowed to delay or reduce payments for a short period of time with the understanding that another option will be used at the close of the time to bring your account to a current status. It is a temporary cease of any and all legal action against the homeowner until a plan of action is determined. This step of refinancing to avoid foreclosure must be used early on in the process. The homeowner must move quickly once a Notice of Default is initiated.
If the homeowner has made the determination that they will not be able to keep the property there are a couple of options that they can attempt to negotiation with the lender. The first is a short sale. A short sale is when the homeowner’s property has been de-valued below the mortgage leaving a shortage between what the current market value of the property and the present mortgage on the property held by the lender. With the lenders agreement the homeowner can sell the property for the fair market value and the deficiency in the mortgage is then considered unsecured. At this junction, the lender can either go after the homeowner for the rest of the unsecured debt through either filing suit themselves or selling the note to another to collect the debt for them. The lender could also forgive the debt altogether. When the debt is forgiven the homeowner is taxed on the amount forgiven as the amount is considered income to the homeowner. The recently passed 2007 Mortgage Forgiveness Debt Relief Act provides non-recognition of the income, which would otherwise be includable. Of course the forgiveness of the shortage of the mortgage is up to the lender. If the lender refuses to forgive the shortage the homeowner has the option to have the short sale of the home and then file a Chapter 7 bankruptcy which would discharge all outstanding debt that the homeowner has including the shortage on the mortgage which had become an unsecured debt upon the short sale.
Another option for the homeowner if they are not going to keep the home is a deed in lieu of foreclosure. The lender again must approve this process and in which the homeowner basically deeds the home over to the lender in satisfaction for the loan in full. In this situation the homeowner will not have the shortage as described in the short sale however the lender will now own the property. This is sometimes a more difficult negotiation for the homeowner to the lender. The key to this in the negotiation is to relate to the lender the expense they are saving from going through the foreclosure against the fact that the property could be sold in the near future. Unfortunately a deed in lieu of a foreclosure can only be perfected when there is no second or junior lien holder on the property.
Unfortunately, in most circumstances the homeowner has waited too long and the time for negotiation is long past when they walk through the attorney’s door for help. In most cases the homeowner has already received the Notice of Default, several demanding letters and the letter that foreclosure is eminent. In this situation the homeowner who wants to keep their property or at least get some breathing room in order to decide what to do has the option of filing a Chapter 13 bankruptcy in order to avoid foreclosure. The Chapter 13 gives immediate protection in the form of an automatic stay. An automatic stay stops all foreclosure processing immediately upon the filing of the Chapter 13. The homeowner will then have an opportunity to make a repayment plan with the lender in which the lender would receive 100% of the missed payments over 36-60 months. Of course the debtor must stay current with all mortgage obligations at the same time as paying back the default. In addition the Chapter 13 will allow the debtor to look at their entire financial situation and any unsecured debt that they have such as credit cards, medical bills, judgments or personal loans can be repaid at a small percentage of the total amount owed within that same 36-60 month pay back period. This would allow the debtor to have more disposable income. Depending on the type of property being foreclosed on and the debtor’s situation, a Chapter 13 bankruptcy could also make available such actions like a “cram down” of the mortgage if the market value of the property is far below the present mortgage. These should be discussed with your attorney, as each situation is different.
These economic times have left many Americans in dire situations in which they must make decision they never thought they would have to, like whether to keep their home or not. When someone finds himself or herself in such a situation the key to survival is not to ignore it. All of the letters and notices from the lender should be red flags to the homeowner to find help. The best help that they could find is a professional early on in the process to guide them and help with the best possible avenue for them to avoid foreclosure.
The forgoing article on avoiding foreclosure was drafted by the Law Office of Goldstein and Clegg a Massachusetts law firm concentrating in Bankruptcy practice.
Nov
16
Take Steps to Avoid Foreclosure (Part 1)
Posted by: | CommentsI was driving through a neighborhood on the southeast side of Chicago this past Saturday and I was amazed at how the area had gone down. The area itself was never the best area to live in, but it was a place where people had a sense of pride. As I drove down one particular block, I slowed my car to witness five houses and multi-units in row that were abandoned. I looked towards the opposite side of the street and noticed numerous other vacant structures. As I continued, I again saw countless pieces of real estate that were without occupants. I immediately started writing this article to try to help people during this current economic downturn. The perils that our country faces today on the economic front have taken away the concept of the American Dream. What was once places where people could call home were now dilapidated and rodent-infested nightmares. I hope that after people read this article, they will begin to take control of their lives so that we can build this country back up, one house and one homeowner at a time. All of these dwellings that I saw were once occupied. They are all now the waste and carnage of foreclosure. They are all now owned by the mortgage companies hoped to help people realize the American Dream (and make some money in the process). So, what is foreclosure? Foreclosure is a court action initiated by a lender or a lien holder for the purpose of having the court order the debtor’s real estate sold to pay the loan or other lien (mechanic’s lien or judgment). It is a legal process. There are specific steps the lender or lien holder must take to force the sell of the property. These steps are governed by various state and Federal laws. Please keep in mind, the lenders do not want to foreclose on the real estate. They are in the lending business not the real estate management business. The worse thing that can happen to them is that they foreclose on the property. With the way the economy is now, it is very likely that they will receive the property back instead of receiving their money. Let’s not get things mixed up here. The lender WILL foreclose on a person’s home if they feel that this is the only way the situation can get resolved. This is also their last choice. They prefer to work with home-owners to help get them back on track. Here are the steps you must take to avoid foreclosure: 1. If you are unable to meet your obligation, call the lender immediately. 2. Do not ignore letters from the lender. Your failure to respond will make the situation worse not better. 3. Assess your current financial state to find out where you can cut expenses and raise money to pay back your delinquency. 4. Talk to friends and family to help you cope with the added stress. 5. Take the time to relax. Do something you enjoy. 6. Contact a professional to solicit their input. If you’re behind on your mortgage payments or facing foreclosure, receive a hassle-free offer on your property. There are options you may have when you talk to the lender: 1. Forebearance – The lender may postpone any foreclosure action against you if you can repay the delinquent amount you owe within a short period of time. 2. Forgive the payment – If you can convince the lender you experienced a temporary setback and you will not miss a payment again, you may be able to have the delinquency forgiven. They may waive the amount. 3. Spread the payment over a longer time frame – Sometimes the lender will allow you to repay the delinquent amount over a longer period of time. The prefer to have the money sooner than later, but they also do not want to foreclose. For example, you may have a normal mortgage payment of $1500 per month. You may be four months behind. The lender may allow you to pay back the $6,000 plus interest over say five years by adding approximately $100 per month to your payment. You will now pay $1600 per month for five years and then $1500 per month after fives until the mortgage is paid. 4. Loan modification – If the you have an adjustable rate mortgage, the lender may agree to freeze the interest rate or change the interest rate to an amount that is mutually beneficial. They may also increase the term of the loan to lower the payments. 5. Move the amount owed to the end of the loan – If you have some equity in your property, the lender may move the amount owed to the back of the loan. There may be a balloon payment at the end or larger payments for a few months. 6. Make an additional loan to you – Some loans that are backed by the government contain provisions to help home-owners who are in trouble. Check different government web sites such as those for the Department of Housing and Urban Development (HUD) or the Department of Veteran Affairs (VA) for more information. As stated, the lender does not want to foreclose. Foreclosures cost the lender BIG money and hurts their ability to borrow money. This article covered some of the things you can do to avoid foreclosure. But what if the lender has already filed a notice of default against you? Be sure to read Part 2 of this article for answers to your questions. Legal Disclaimer Every effort has been made to comply with federal, state and local laws regarding the material presented. We make no representations or guarantees that the material will work for your particular needs, and we disclaim any warranties, express, implied or for any particular purpose you may need. You understand that all material is provided for example only and that it is strongly advise that you seek legal counsel for advice to make certain it is applicable to your situation. It is also advised that you review the potential financial and tax implications of any actions with a qualified professional before proceeding.
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