Do Nothing

If you do not pay your mortgage payment, the lien holder will foreclose on your property.  Although not paying your mortgage payment and the resulting foreclosure will significantly harm your credit rating, the home finance industry is presently in such turmoil that it may be months to more than a year before the lien holder forecloses on your property.  During this time you live rent free and can save for the future.  Note that if you do not maintain insurance and do not pay real estate taxes, the foreclosure timeline will likely accelerate.  Also note that under the Mortgage Forgiveness Debt Relief Act, which extends through 2012, income normally attributable by the IRS in connection with a foreclosure is not taxable, although you may be liable for a deficiency balance when the home is sold for less than you owe.  A foreclosure is listed as a public record on your credit report and the late payments are also reported. 

Deed in Lieu of Foreclosure

Some financial “experts” have advised distressed homeowners to “just walk away.”  Walking away from a home is easier said than done, since you still own the home and are legally responsible for the property in a variety of ways.  One way to legally “walk away” is to transfer title of the property via a Deed in Lieu of Foreclosure.  Now the lien holder owns the property, which may sound pretty good until the property is sold for less than you owe, triggering a deficiency balance.  You may also end up owing taxes on the difference.  

Short Sale

A Short Sale is a sale for less than what is owed by the seller.  A lender will sometimes agree to allow the property to be sold for less than you owe if it is clear that you are unable to continue paying for the property and the home is upside-down.  In many cases the Short Sale deficiency is forgiven by the lien holder, but that will depend on the lender and on state law.  A Short Sale is identified as a settlement on your credit report and will hurt your score, although not as much as foreclosure or bankruptcy. 

Bankruptcy

A bankruptcy is a legal discharge of your debt.  It is the cleanest and most powerful option to “walk away” from the home with no contract or tax obligation.  A bankruptcy uses the power of federal law to stop further negative credit reporting and collection attempts.  In the end your credit report identifies the loan as “Discharged in Bankruptcy” with a “Zero Balance.”  The bankruptcy record will stay on your credit report for up to ten years, but by surrendering the property you will avoid a foreclosure on your record. 

If you need to walk away from your home and are weighing your options, consult with an experienced bankruptcy attorney and learn how the federal bankruptcy laws can help.  Bankruptcy can provide you time to move without foreclosure and without owing money in connection with the home.

Unveiling the calculator at CheckMyNPV.com is the latest move to streamline the HAMP process. It comes on the heels of an announcement by the Treasury Department to require that servicers designate a single point-of-contact through the entire default resolution process. 

If you are behind on your mortgage payments, or can’t afford your current mortgage payment, you have options! In addition to the federal bankruptcy laws, HAMP is one of several government programs that are available to homeowners in distress. In some cases, bankruptcy can provide time for the homeowner to negotiate lower payments with the lender, repay mortgage arrears, or even strip away a second or third mortgage loan. 

The housing bubble has burst, but that doesn’t mean the fallout must rain down all over you and your family. Protect your home by taking advantage of the legal processes in place to refinance, modify, or discharge your home debt. Speak with an experienced bankruptcy attorney and discuss your legal options.

A paper published by the National Bureau of Economic Research states that the 2005 changes “raised the cost of filing and reduced the amount of debt that is discharged” thereby making it more difficult for debtors “to shift funds from paying other debts to paying their mortgages[.]“  In other words, before the 2005 changes, many debtors struggling with a mortgage arrears and credit card debt could file bankruptcy, discharge the credit card debt, and free-up money to pay the mortgage.  The new bankruptcy provisions make this process more difficult.  As a result, fewer debtors are able to afford to save their homes through the bankruptcy process. 

Jay Westbrook, a professor of business law at the University of Texas Law School in Austin and a former adviser to the International Monetary Fund and the World Bank said, “Be careful what you wish for.  [The banks] wanted to make sure that people kept paying their credit cards, and what they’re getting is more foreclosures.” 

If you are facing overwhelming debt and want to keep your home, there are many alternatives available to you.  An experienced bankruptcy attorney can review your finances and explain your legal options for discharging or repaying your debts.  Bankruptcy is not the only option for saving a home from foreclosure, and many cases are successfully resolved using a combination of bankruptcy and non-bankruptcy methods.  Get the facts today and solve your debt dilemma!

Some economists are predicting that the real estate market will bottom out soon and then begin a slow recovery process.  Sadly, foreclosures may rise again in 2011 and reverse the negative equity statistic as people with underwater mortgages lose their homes.  Nationally, about one home in every 1,000 was foreclosed on during December, 2010. 

Foreclosure is a very stressful process.  It is a public record and is often published in the newspaper.  A foreclosure can happen rapidly and often forces the homeowner to move before ready.  This can be a major disruption to family and children.  Of course it impacts your credit score for years. 

By filing bankruptcy, the foreclosure process can be avoided.  In some cases, a Chapter 13 bankruptcy can provide the debtor time to cure an arrearage over three to five years in small payments and stop foreclosure completely.  In other cases bankruptcy can strip away an entirely unsecured second mortgage, thereby freeing up money to pay the first mortgage.  Lenders are also able to modify your home mortgage during bankruptcy through the federal Making Home Affordable Program. 

If you are underwater and struggling to pay your home mortgage, speak with an experienced attorney and learn how the federal bankruptcy laws can help you.  Whether you need to pay past-due mortgage payments, strip away a junior lien, or surrender the property and “walk away,” your bankruptcy attorney can explain the costs and benefits of each option.  Call today and get the advice that can help you build a better financial future.

Some analysts have speculated that the homebuyer’s tax credit artificially supported the housing market, and now that this credit has ended, the impact of foreclosures and a glut of homes for sale will depress prices in many areas. However, an improving economy could offset that trend and increase demand for homes as the job market improves. 

In many cases the federal bankruptcy laws can help a family deal with a home that is losing value.  During a Chapter 13 bankruptcy a debtor is able to strip away an entirely unsecured second and/or third home lien.  A junior lien is unsecured when the senior lien is more than the value of the home.  An unsecured junior lien can be stripped and the debt discharged during a Chapter 13 bankruptcy. 

A Chapter 13 bankruptcy also provides an opportunity to negotiate with the lender for a modification of the debt.  In some cases the lender may reduce principle or interest and modify the existing note, making staying and paying on the home a more attractive option. 

During Chapter 7 or Chapter 13, a debtor is able to walk away from a house and discharge the debt.  In this way bankruptcy can be used as a financial tool to relieve the burden of a declining investment. 

If you are struggling with debt and overwhelmed by a home that is depreciating in value, speak with an experienced bankruptcy attorney and discuss your options.  Your bankruptcy attorney can help you devise a plan to eliminate your debt and improve your financial situation, both short term and long term.

Before you decide to walk away from a home and turn your back on a family pet, consider how the federal bankruptcy laws can help your financial situation. First, there are options to keep your home during bankruptcy by paying arrearages over time, stripping away an unsecured second or third mortgage, or buying needed time to qualify under a home loan modification program.

Contrary to widespread misinformation, you do not have to give up your pet when you file bankruptcy. The judicial trend is to recognize pets as more than property. In a recent case from the U.S. Bankruptcy Court for the District of Maryland, a Chapter 13 debtor was allowed to claim pet care expense in his bankruptcy plan over a trustee’s objection. The judge in that case found that a family pet should not become “a helpless casualty of a family’s financial crisis,” and “as long as the Debtor is ready and willing to provide the pet with a loving home, the Debtor should not be prevented by the bankruptcy process from continuing to do so.” 

Family pets, or “companion animals,” are not limited to dogs or cats. In the case of In re Gallegos, a U.S. Bankruptcy Court in Idaho held that a pet horse, although residing outdoors, could qualify as a “household pet.” In Gallegos the judge held that “[i]t is more the fact that an animal is held primarily for the enjoyment and companionship of its owners, and not for some other reason, that makes the pet a member of a debtor’s household.” 

Like any other monthly expense, pet care expenses must be reasonable. One bankruptcy court found that spending $100 for the care of two dogs was reasonable, while another court found that $750 per month for pet care expense was not reasonable. 

If you are struggling with debt and need help with your finances, consult with an experienced bankruptcy attorney before making any important and long-lasting decision. You owe it to your loved ones to consider all the available options before deciding on a course of action.

Nationwide, 1 out of 150 people filed bankruptcy in 2010.  Nevada, with its unemployment rate at 14%, has the highest per capital filing rate averaging 1 bankruptcy filer out of every 67 residents.  After Nevada, Georgia and Tennessee have the highest filing rates per capita, about 50% more than the national average.  Alaska, South Carolina, Texas, North Dakota, South Dakota, and Vermont have the lowest filing rates. 

A few states saw sharp increases in the number of personal bankruptcy filings.  Hawaii experienced 29% more filings in 2010 over the previous year.  California, Utah, and Arizona each had increases of 24%.  The net increase in those states (about 62,000) was greater than the net increase in all other 46 states and the District of Columbia combined (around 60,000).  The data indicates that while the southeastern states are filing bankruptcy cases at a slower pace, the southwest is experiencing further economic distress evidenced by its increased bankruptcy filing rates. 

The raw bankruptcy data also shows a strong preference for Chapter 7 bankruptcy cases.  Consumers filed Chapter 13 cases only 28% of the time during 2010.  Information provided by the National Bankruptcy Research Center suggests that a higher percentage of Chapter 13 filings appears closely tied to high rates of auto loan delinquencies.  Southeastern states have the highest percentage of auto loan delinquencies and corresponding high percentages of Chapter 13 filings. 

If you are in financial trouble and need bankruptcy relief, you are not alone!  The federal bankruptcy laws can help protect your income, assets, and retirement accounts, while stopping lawsuits, garnishments and repossessions.  Speak with an experienced bankruptcy attorney and begin your path to a Fresh Start today!

JPMorgan Chase, Ally Bank’s GMAC Mortgage and PNC Financial have all suspended foreclosures in states that require a judge’s order.  Bank of America has suspended all foreclosures in all 50 states.  State attorney generals across the nation have joined an investigation into these foreclosure practices.  In Congress, Nancy Pelosi and Christopher Dodd, have called for a federal investigation, and U.S. Attorney General Eric Holder said he is looking into the matter.  

Potentially millions of foreclosures across the United States are subject to challenge.  In some cases courts are denying the lender’s foreclosure suit because it cannot produce clear title.  A recent lawsuit in federal court in Louisville alleges that banks participating in MERS (a mortgage document clearing house) conspired to produce false promissory notes, affidavits, and mortgage assignments to be used in mortgage foreclosures.  Similar class actions have been filed against MERS in Florida and New York. 

As a result of this mortgage document fiasco, one title insurance company, Old Republic National Title Insurance, has announced that it will no longer write new insurance policies for homes that have been foreclosed on by JPMorgan Chase and GMAC Mortgage.  Homeowners who have purchased foreclosed homes may not have clear title and may face difficulty in selling their homes in the future. 

If you are facing foreclosure, consult with an experienced bankruptcy attorney and discuss your options.  There are many options for homeowners who are unable to make their mortgage payments.  Your bankruptcy attorney can discuss your options and protect your legal rights.

The first concern is safeguarding the property.  Maintaining insurance and basic utility service is important until possession (and in some cases ownership) of the house is transferred.  Should you fail to safeguard the property, you may be liable to the lender for damages. 

Next, once transfer of title is accomplished (usually through a foreclosure proceeding), the bank may sue you for breach of contract and damages.  Sometimes the bank will wait until after it fully realizes all of its damages upon sale of the house, then it will sue for the difference between the amount it recovers and the amount you owed.  This is called a deficiency balance and it is recoverable by the lender in most states. 

The bank may also forgive the debt difference and issue you an IRS Form 1099C.  When this happens the bank is telling the IRS that it has given you a “gift” in the amount of its loss (because you don’t have to pay it back) and you owe income tax on the “gift” amount.  You have two options to avoid paying the tax debt: bankruptcy, or the insolvency exclusion in the tax code.  The insolvency exclusion requires that you prove that your liabilities exceeded the value of your assets.  By filing bankruptcy this type of tax debt will be discharged. 

Congress has granted a reprieve from tax debts stemming from the sale of your primary residence.  The Mortgage Forgiveness Debt Relief Act of 2007 (H.R. 3648) provides that taxpayers do not owe taxes on mortgage debt that was forgiven by the lender.  The law only applies to deficiencies during the 2007, 2008, and 2009 tax years. 

Finally, walking away from your home will have negative consequences to your credit report.  The possible negative items include 120 day late entries, foreclosure, and debt write-off.  All of these items have a devastating impact on your credit report and, consequently, your credit score. 

If you are contemplating walking away from your home, get the facts!  Investigate your options from a qualified bankruptcy attorney.  Only a bankruptcy attorney will be able to explain your options including those available under the bankruptcy laws.

                If you are in a foreclosure, consult an attorney.  Bankruptcy, loan modifications and refinancing are some of the ways to avoid losing your home.  You need legal counsel experienced in these areas to review your situation with you.  Also, avoid making your situation worse by following these precautions: 

                Avoid lenders who seek you out and make promises that sound too good to be true.  Often the loans made by these lenders will contain harsh provisions that no borrower would ever sign if they were thinking clearly.  Ridiculously high interest rates and stiff pre-payment penalties may be buried in the fine print.  Also, the interest rates for such loans may not be “fixed” which means that the borrower’s monthly payments may soon sky-rocket and the consumer may find themselves back in foreclosure.  

                Do not deed your property over to someone who proposes to then “rent” the property back to you after they “catch up” the original mortgage loan.  Once the property is deeded out of your name, the lender has the legal right to do with the property as it pleases.  This may include selling or mortgaging the property.  Since you are now merely a tenant of the property, your rights will be severely reduced and any of the profit made from the property’s sale will end up in someone else’s pocket.  

                 Do not pay someone to work out a mortgage resolution for you. If you are eligible for a loan modification, you can apply for a refinance or modification program for free by contacting your lender.  If you believe that you need help with this process, many non-profit reputable agencies exist who will assist you without you having to pay a large fee for their services.  Most of my clients who have hired a for-profit “mortgage resolution” firm have told me that after receiving their large initial payment that the company never did anything to assist in the loan modification process. 

                Never make your mortgage loan payments to any party other than your mortgage company.  Prior clients have advised that they were contacted by companies promising lower interest rates and much smaller monthly payments.  The scammer insisted that the clients make payments only to the mortgage resolution company rather than to their lender. Ultimately it was discovered that the new company had never turned the payments over to the mortgage company but had instead kept them to apply against phony “fees” that they were charging the client.  The result…foreclosure actions filed by the mortgage companies.  

                If you are facing foreclosure, consult an experienced bankruptcy attorney for legitimate advice.