As a result of the foreclosure crisis, cash starved homeowner and condo associations are resorting to using aggressive collection agencies and lawyers to try to recover delinquent fees.

The collectors employed by the associations have turned to the courts in an attempt to force current and former property owners to pay up. Judges have written orders giving the collectors the right to seize the bank accounts and posessions of delinquent owners.

Taking their cue from the banks, more and more HOA’s are seeking deficiency judgments for unpaid association fees. Many homeowners thought their nightmare had ended when they turned over the deed to their lender, not realizing that their unpaid mortgages and association fees could come back to haunt them years later.

Either as the result of a short sale or an outright foreclosure, when a lender sells a home for less than the mortgage amount owed the difference between the amount owed and the amount the bank sold the property for, including legal fees, is usually recorded with the court as a deficiency. In Florida, the lender then has five years to seek a deficiency judgment in order to collect the amount owed. Once the deficiency judgment is granted by the court, the lender has up to twenty years to collect their money. The end result is that twenty years later when you’re back on your feet again and doing well and have forgotten all about it, the lender seizes your assets.

The time allowed for a lender to file for a deficiency judgment varies from state to state.  Some states, known as non-recourse states do not allow deficiency judgments at all, and some require the lender to apply for it at the time of foreclosure, while others require an additional lawsuit. One would be well advised to consult a local attorney to find out how the law applies in their state of residence.

The same is true with unpaid homeowner’s or condo association assessments. The association can ask the court for a deficiency judgment, and more and more of them are exercising their right to do so.

A whole new cadre of lawyers specializing in defending distressed homeowners from judgments has evolved, along with another group who work for the homeowner’s association or lender and specialize in chasing down these former property owners.

Once a deficiency judgment has been obtained it is a relatively simple matter for the association or lender’s attorney to have a judge issue a Writ of Garnishment. With only a few exceptions the judge’s order can be used to seize almost anything of value, including wages or the cash in a checking or savings account. In most states you will be given no notice that a writ has been issued, and the only way you will find out about it is after your money or property has been taken. You will then have a short period which varies from state to state, in which to file your objections with the court.

Most creditors will go after the cash in your accounts because it is easier to get at. They tend to stay away from seizing your possessions simply because it is too expensive to levy on them. However, your lender can show up at your door step unannounced accompanied by the sheriff and a moving van and clean out your home. Each state defines what can, and can’t be seized, so it would be wise to research the laws in your state.

Since Florida law sets limits of 12 months of association payments or 1 percent of the amount of the original mortgage, whichever is less, it’s not likely that the association would resort to something as drastic as a moving van unless you have really managed to annoy them. Banks, however, are generally owed a substantial sum and could resort to such draconian measures.

It’s also worth pointing out that your bank may have sold the deficiency judgment for pennies on the dollar to a scavenger firm that specializes in collecting these debts. Eventually, more and more banks will be selling these judgments to collection firms, and obviously those firms are going to be a lot more aggressive in collecting the money judgments. These firms will go to great lengths to extract payments from debtors, sometimes forcing them into bankruptcy.

The myth that you can simply walk away from your house and mortgage and be done with it is just not true. Years down the line when you least expect it you could find your money and your property taken from you.

If you find yourself facing a deficiency, most attorneys will advise you to try to settle for a lesser amount or work out payment arrangements. Condo associations and homeowner’s associations will probably be amenable to settlement.

If you are contemplating a short sale get an agreement in writing with your lender that they won’t seek a deficiency judgment. Generally speaking, there are tax liabilities involved with a short sale, but the IRS has some new rules under the Obama Mortgage Plan. Talk to your lawyer or accountant before you agree to anything.

Most importantly, talk to a local attorney who specializes in bankruptcy and mortgages before you get in any deeper. There are ways to avoid having a deficiency judgment ruin your future.

There are various solutions available to people with debt problems, each designed to help with different circumstances. If you can’t afford your existing repayments but can still commit to regular (reduced) payments, one option could be a debt management plan.

What is a debt management plan?

A debt management plan works by reducing the amount you pay towards your unsecured debts to a manageable level. Your new payments will be based on what you can afford after you’ve covered your other essential living costs.

Interest and other charges may also be frozen – depending on what your lenders will agree – which can stop your debts from growing, thereby reducing the amount of time the debt management plan takes to complete.

A downside of this is that making smaller payments means your credit rating will be affected. Defaulting on your original repayment agreements will be recorded on your credit history, potentially making borrowing further money more difficult until the records have disappeared (after six years). And if interest and charges aren’t frozen, the longer repayment period could cost you more in the long run.

How to arrange a debt management plan, step by step

Lenders are legally obliged to accept any payments you make towards your debts, but they can still take action if you’re not keeping up with your original arrangements. As such, it’s important to agree everything with your lenders in advance, rather than just making smaller payments without first talking to them.

With that in mind, we’ve put together this step-by-step guide to arranging a debt management plan in a way that can help you ensure the needs of both you and your lenders are met.

Note: this example assumes you are arranging your debt management plan with the help of a professional debt management company.

1. Get expert advice

A debt adviser will talk you through your circumstances and discuss the various options available to you. If they feel a debt management plan is an option, they’ll tell you exactly what’s involved and (if you think it’s the best approach) help get you started.

2. Work out your budget

Working out your budget for repaying your debts is fairly simple. Start by adding up your essential monthly outgoings (not including the cost of your unsecured debts): things like mortgage/rent payments, food and bills. Now subtract the total from your monthly earnings.

What’s left is money available to pay towards your unsecured debts. On a debt management plan, your lenders will expect you to contribute more or less all of this towards your debts every month.

Normally, this will be split between your lenders on a pro rata basis. This means each lender will receive a proportionate amount of your available income, based on how much of your overall debt they are owed. So if 50% of your debt is owed to lender A, 30% is with lender B and 20% is with lender C, you would offer to pay the same percentages of your available income to each lender.

Note: this doesn’t take into account monthly fees charged by some debt management companies, which would also come out of your available income. Your debt adviser will talk you through any associated fees before your debt management plan is agreed.

3. Negotiations with lenders

Once you and your debt adviser have worked out how much you can afford to pay to your lenders each month, they will start negotiating with your lenders. If all your lenders agree, then great – your debt management plan can start.

Of course, it’s not always this simple. Sometimes lenders may feel you can afford higher payments, in which case you would have to see if your finances can stretch any further. There are no guarantees that you’ll be able to come to an agreement, but your debt adviser will do their best to find a compromise that everyone can accept.

4.Your debt management plan begins

If your lenders agree to it, your debt management plan can begin. Normally a debt management plan will last until you can afford to start making your original repayments again (or if that never happens, until the debts have been cleared).

When considering different debt repayment solutions, Chapter 13 bankruptcy often attracts people as a relatively safe solution. But with this type of filing, specific goals must be met. As one of the top reasons to avoid Chapter 13, these conditions often go unnoticed in the investigation stage. Taking a deeper look into Chapter 13 bankruptcy allows us to determine whether it is the right avenue.

When weighing the options that the different types of bankruptcies can offer, understand that debt counselors will recommend Chapter 13 to anyone who owns a leverage asset, such as a home. As well, for a debtor with back taxes or assets that have a lower value that what is owing against them, Chapter 13 will also be the avenue of choice. Typically, Chapter 13 allows the debtor to repay a portion of the debt, rather than the debt in full, provided the debtor can prove sufficiently that he cannot repay the full amount.

Chapter 13 allows debtors to keep an asset that does not come under exemption. You can file chapter 13 every four years. In return, you have to come up with an acceptable debt repayment plan that aims to repay loans through your income. Chapter 13 is in force for a period of three to five years, during which you must make regular payments toward clearing the debt. Creditors must forfeit the remaining amount once chapter 13 payment plan ends. Until chapter 13 is in force, your creditors cannot hike interest rates. Sounds too good to be true? It probably is.

One of the top reasons to avoid Chapter 13 is that debtors must meet certain eligibility requirements. This begins with having a steady income, which excludes people who might really benefit but who are currently unemployed and having trouble making ends meet. Often, people with this type of debt problem had arrived there as a result of the lack of income. The irony is that most debtors with a steady income would have repaid the debt in full. More interesting is that the Chapter 13 means test requires that a debtor’s income exceed certain thresholds in order to be eligible for this option. Go figure.

Another one of the top reasons to avoid chapter 13 is that it can bring your lifestyle under a court mandate. While many people are okay with that kind of regulation over their lives if it helps those clear debts, some debtors feel hopelessly trapped when told where to live, how to travel, what food to eat… Remember, once you file for chapter 13, the court and trustees have the right to look at the minutest details of your income and expenses and order changes that they deem fit.

What often discourages debtors from filing Chapter 13 is that they quickly realize they are practically prohibited from substantially improving their financial condition over the course of their plan. This means that any unexpected gains and even an inheritance could be surrendered to the trustee and funneled to the outstanding debt. More intrusive however is that the debtor’s spouse can often be required to submit evidence of assets, income, and expenses, even when a filing was submitted jointly.

Before considering Chapter 13 bankruptcy, debtors are wise to consider creating their own debt repayment plan, particularly if they have the means to repay their debt. Two of the biggest benefits with of a Chapter 13 bankruptcy include keeping the debtor’s financial circumstances out of the public domain while simultaneously improving credit rather than ruining it.

Bankruptcy can be an easy solution to discharge your judgment, but if you have an alternative to pay off your debts like a debt management program then seize the opportunity. It might blemish your credit report. But you can always repair your credit report once your bankruptcy proceeding gets over. Critically analyze your situation and make the decision if you want to file bankruptcy.

If you are sued by your creditors then filing bankruptcy can help you to discharge your debts.  An “automatic stay” is put into place after filing bankruptcy. This prevents your creditors from engaging in further collection practices. And once you have completed the bankruptcy process you are protected you from your obligation to creditors.

If you have decided to file for bankruptcy but are not aware of the fling process then the following steps can help you to understand the entire procedure:

• Your first and most important task will be to make a list of your valuable assets, your income and your debts. The list should include all of your personal items, all of your credit card debt together with all other debts and medical expenses.

• In order to qualify for bankruptcy procedure you need to undertake a Means Test. A comparative analysis will be drawn between your income and median income of your state of residence. If your income exceeds the median income of your state then you will probably fail to qualify for chapter 7 bankruptcy. In that event you can file for chapter 13. Visit the website of US Bankruptcy Court’s Means Test if you intend to take the test.

• You can decide if you want to hire a bankruptcy attorney once you have decided the chapter you are filing under. You might choose to file without a bankruptcy lawyer but a bankruptcy attorney’s advice can lead you through the process with ease. An attorney will be required if you plan to file under chapter 13 bankruptcy. You also need to go through a credit counseling session that will be presented before the court while filing the petition. A bankruptcy lawyer can give you right advice and show you the proper process when you are filing bankruptcy.

• Try to fill in and submit the bankruptcy form. Read the form carefully so that you can complete the required criteria mentioned in the form and attach all the necessary documents to it. Before you file the bankruptcy petition you need to go through a credit counseling session and the related paper works need to be submitted in the court.

• After the filing of the bankruptcy petition you will attend the court hearing that includes a 341 Creditor’s Meeting held within 20-40 days after filing bankruptcy. If you follow through with the court proceedings then in the final hearing you will receive your discharge from debt. Here an experienced bankruptcy lawyer can handle the routine court proceedings on your behalf; thus converting the whole process into a simplified form for you.

Here are few common types of lawsuits that are discharged in bankruptcy:

• Credit card debt collection lawsuit

• Mortgages and vehicles lawsuit

• Unpaid medical and other bills lawsuit

• Business and individual debts and personal injury lawsuit

These are four basic lawsuits that can not be discharged by filing bankruptcy.

Filing bankruptcy will not discharge the lawsuit in case of a child support, alimony or a compensation for an injured person whom you have hit while driving drunk. Other than the above exceptions, bankruptcy would be a viable option for you if you are submerged in a sea of debt after losing a lawsuit.

A local bankruptcy attorney can help you understand the differences between Chapter 7 bankruptcy and Chapter 13 bankruptcy, so that you can make an educated decision about the best next step for you.

Keep in mind, however, that each bankruptcy case is different. To get more thorough answers to all of your questions, you should speak with a bankruptcy lawyer near you. If you would like a free case review with a local bankruptcy lawyer, fill out the form and we’ll help you connect with an attorney nearby. Fill out the form below for a free bankruptcy case evaluation by a local attorney.

Bankruptcy is a legal process available to consumers or businesses seeking federal protection from creditors when the borrower is unable to repay their debts.  Declaring  bankruptcy is the legal filing with a court of a person’s or company’s inability to repay debts. It is intended to afford the debtor with a legal fresh start by “wiping the slate clean” of debts.

The ability to file for bankruptcy and obtain a fresh start is an important and long-standing part of American law. The right to file for bankruptcy protection is guaranteed under federal law and the U.S. Constitution  (Article I, Section 8, of the United States Constitution).  Prior to 2005 it was a relatively simple process which enabled many people to easily walk away from their debts.

Why were changes made to the bankruptcy law?

In 2005, mostly at the prodding of the credit card industry, Congress made some significant changes to bankruptcy laws . The main purpose of these changes was to make it harder to file for bankruptcy. Nonetheless, the ability to file for bankruptcy and obtain a fresh start is an important and long-standing part of American law and people who need bankruptcy relief can still get it.

The bankruptcy laws have made it more difficult to file Chapter 7 as the government would prefer that everyone meet their financial obligations. The eligibility requirements for Chapter 7 or Chapter 13 are based on your income, living expenses, and debts. A bankruptcy lawyer will help you determine which option is best for you.

What are some of the more important changes to bankruptcy laws?

* Higher income filers must file for Chapter 13
* Filings are more closely investigated and more documentation is required
* Credit counseling and  financial budget counseling is required
* Property must be valued at replacement cost, instead of a “fire sale” cost
* State exemptions are not available to new state residents in order to prevent debtors from moving to a state with more liberal exemptions.
* Residency requirements have been tightened to prevent people from moving to states that allow a person to protect more equity in their personal residences.

What are the types of bankruptcy available to individuals?

There are two basic types of bankruptcies for individuals: Chapter 7 Bankruptcy and Chapter 13  Bankruptcy.

Chapter 7, also known as a liquidation bankruptcy or no asset bankruptcy, is a bankruptcy procedure designed to eliminate your debt. One of the advantages of Chapter 7 is that it immediately stops creditors from collecting or attempting to collect any of your debts the moment you file the bankruptcy petition with the court. This is done by filing a Suggestion of Bankruptcy document with creditors. The other advantage is that at the conclusion of the process you are immediately provided with a discharge of debt without having to pay any of your debt and you have no monthly payment plans. Both individuals and businesses can file for Chapter 7 bankruptcy.

Most individual bankruptcies are Chapter 7. It is relatively fast and simple. Typically, a case is opened and closed within three to six months. Local bankruptcy lawyers in your area are available for Chapter 7 bankruptcies filings and consultations.

There are numerous reasons why people elect a Chapter 7 bankruptcy over a Chapter 13 bankruptcy. Most people who chose Chapter 7 do so because they have large debts that they cannot manage to pay down, such as credit card bills, hospital bills or legal judgments.

A Chapter 13 bankruptcy, also known as a wage earners bankruptcy, is different from Chapter 7 in that it does not completely eliminate your debt. Instead, it gives you the opportunity to pay off some your debts over an extended period of time through a court-approved, court-supervised, and court-enforced payment plan.  Chapter 13 bankruptcy filers are given from three to five years to pay off their debts. You make one monthly payment based on how much you can afford for 3 to five years. Most creditors will not be paid in full, however, and unpaid balances are discharged, subject to some exceptions, at the end of the three to five year period.

Who can file for bankruptcy?

Generally, almost anyone can file for bankruptcy. If you are a person who simply cannot afford to pay your bills, regardless of the reason, you probably can qualify for bankruptcy, either Chapter 7 or Chapter 13. If you have filed a previous bankruptcy, it could limit the options that may be available to you. For instance, if you have previously filed for a Chapter 7 bankruptcy, you cannot file another Chapter 7 for eight years.

You will not, however, be permitted to file for bankruptcy to in order to beat your creditors. If you know you are having financial difficulties, you cannot deliberately max out your credit cards just to beat the system by filing bankruptcy. At the very least you could find your bankruptcy filing dismissed and wind up being stuck with all that debt. You could also find yourself filing your next bankruptcy petition from a prison cell.

There are numerous documentation requirements. You will need to provide an inventory of everything you own. You will need to provide your personal tax returns, proof of income for six months prior to filing along with a list of your spending, and a certificate showing that you took a mandatory credit counseling class.

What is the actual bankruptcy process?

There are eight basic steps in obtaining your bankruptcy. Your bankruptcy attorney will guide you through the entire process which takes about 3 to 6 months on average.

* Attending a credit counseling course at an approved credit counseling agency.
* Meetings with your bankruptcy attorney to draft copies of your paperwork.
* Providing proof of income for the previous six months in order to determine eligibility.
* Determining with your attorney which assets are safe in a bankruptcy.
* Filing the paperwork with the bankruptcy court.
* Attending a short meeting with the bankruptcy trustee.
* Attending an additional personal financial management class.
* Obtaining the final discharge of debts from the bankruptcy court.

Credit counseling

Before you can file for bankruptcy, you must first have a consultation with a nonprofit credit counseling agency that has been approved by the United States Trustee. The purpose of this consultation is to see whether there are any alternatives available to you other than filing for bankruptcy protection.

You must meet with the counseling agency within the 180 day period prior to filing your bankruptcy petition. The agency will probably try to work out a repayment plan with you and your creditors. You do not, however, have to agree to any repayment plan. You will still receive a certificate from the agency stating you have received the counseling. And you need to submit their proposed repayment plan to the court along with the rest of your filing.

After your bankruptcy has been completed, but before your debts are discharged, you will also be required to attend a personal financial management class. A certificate will be given to you after completing your course.  This certificate must be submitted to the court. This is the last step of your bankruptcy.

Can I keep my house and my car?

Bankruptcy courts are aware of the importance of keeping your home and car. There are certain rules that may allow a person to keep their home or car under what is called a “Homestead Exemption” or “Automobile Exemption.”

Homestead exemptions vary by state and marital status. The concept is very simple: if your home has more equity in it than the amount of your state’s homestead exemption you will be forced to sell your home to pay off your other debts. If your homestead exemption is higher than the amount of equity in your home, you may be able to keep your home even after you file for bankruptcy.

For example, if you have $25,000 in equity in your home, and your state’s homestead exemption is $50,000, you may be able to keep your home. If your equity is $150,000, the court will force the sale of your home in a chapter 7 bankruptcy proceeding. However, you could file Chapter 13 bankruptcy and still keep your home.

Automobile exemptions work very similar to homestead exemptions. However, if you are behind on car payments in a Chapter 7, your car may still be repossessed by the creditor in the bankruptcy proceeding if you do not pay your back payments. However, Chapter 13 could provide you an opportunity to prevent the repossession of your car even if you are behind on the payments.

Personal property exemptions and other assets

When you file for bankruptcy, the court will allow you to keep certain personal items of low value. Every state has different laws regarding what you can keep. But in general, you can keep a small amount of jewelry (ranging from $2000 to $7000), health aids, animals, crops, appliances, furnishings, books, musical instruments, and various other inexpensive items of property.

Personal luxury items such as expensive watches, furs, paintings and jewelry must be disclosed and will probably be sold by the trustee.

Pensions are generally exempt from bankruptcy and so are ROTH IRAs and Keoghs. Insurance benefits are also usually exempt, as are tools of your trade.

Do I have to pay my credit card bills if I’m bankrupt?

Credit card debts can be completely forgiven in bankruptcy as long as you did not run up your credit cards just prior to filing for bankruptcy protection.

After you file for bankruptcy, it is against the law for credit card companies to contact you. They must stop calling you, cannot file a lawsuit against you or proceed with a lawsuit they previously filed; they cannot record liens against your property; they cannot report your payments to the credit reporting agencies; and they cannot seize your income, bank accounts, or property.

When you file for bankruptcy, something called an “automatic stay” goes into effect. The automatic stay usually prevents most actions from moving forward against you. No more harassing phone calls or letters, and no more threats from lawyers.  The “automatic stay” will also temporarily stop a foreclosure, but only for the very short term until the bank goes into court and gets the stay lifted.

Will my other debts be eliminated in bankruptcy?

You may have all types of debts that are weighing heavily on you. Most of these debts are dischargeable in bankruptcy, but there are a few exceptions.

The most common dischargeable debts are credit cards, medical bills, obligations under leases and contracts, personal loans and promissory notes.

The most common debts that are not dischargeable are student loans, alimony and child support payments, certain tax debts, and criminal fines and penalties (like parking tickets or moving violations) imposed on you by the courts.

The most common debts that are sometimes dischargeable are student loans, some IRS income taxes, and debts from prior lawsuits. The term “sometimes” is used because it depends on the circumstances of the debt. For instance, while generally non-dischargeable, if your student loans are causing a tremendous burden and you have made a good faith effort to pay them back, they may be discharged. In regards to regular income taxes, if the taxes have been owed for more than three years, and the IRS has not reassessed the amount in the last 240 days, they may be discharged.

Since each individual’s situation is unique, you should discuss with your bankruptcy attorney all of your debts to determine whether or not they can be discharged in bankruptcy.

I am married. Do married couples have to file bankruptcy together?

Many married couples often feel they are legally responsible for each other’s debts. This is simply not so.

While you are responsible for your own debts, these debts may or may not include your spouse’s debts. It depends on whether you have co-signed any debts together. For instance, if you bought a car together, you may both have signed for the loan. Also, if you live in a community property state (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, or Wisconsin), you and your spouse are jointly responsible for each others’ debts incurred during marriage, even if you did not “co-sign” for the loan.

In order to file a joint bankruptcy petition, you must be legally married. Living as co-habitants does not allow you to file joint bankruptcy. Most states do not recognize common law marriages or same-sex committed relationships as valid marriages.

It costs about the same to file a joint bankruptcy as is does to file individually

What are the alternatives to bankruptcy?

Bankruptcy may not always be the best solution for many reasons. You might still have to give up your non-exempt assets. Your debts may be non-exempt and non-dischargeable, or you may not be eligible to file.

You might want to take other steps first. You could try to sell whatever assets you have to pay off your debts. If you own anything valuable, such as jewelry, cars, or watches, you may want to consider selling them first to try to pay off your debts. Another option may be to approach family and see if they are willing to help you. Of course, many people prefer not to involve family, especially if they can qualify for bankruptcy.

Transferring credit card debt to a lower interest credit card will only solve your problems temporarily. Oftentimes, the new credit card companies will fight to collect their money if you file for bankruptcy after transferring large debts to a new card.

Refinancing your home if you have equity is an unattractive alternative, as is a home-equity line of credit. You want to make absolutely certain you can afford the payments because if you can’t, you risk losing your house because you have turned your unsecured and dischargeable credit card debt into a lien on your property. You must be very cautious about trying to pull equity out of a house to pay creditors, especially if bankruptcy could provide a way to preserve your equity and still eliminate your debt.

Do debt consolidation services work?

If you can find a debt consolidation service that isn’t an outright scam you will find a plan that is similar to a Chapter 13 payoff plan. They get the credit card companies to  lower their interest rates and your payments. You make one payment a month to them for years and after they’ve taken their cut they give the rest to your creditors. After you have completed the plan the credit card companies wipe out your remaining balance and consider you paid up. They report it to the credit reporting agencies as a “negotiated settlement” which puts another dent in your credit score and then promptly send a 1099 to the IRS reporting the “forgiven amount”.  The IRS comes looking to you for taxes on the “forgiven amount”.  With few exceptions, whenever you settle a debt with a creditor for less than you owe, you are liable for taxes on the balance you didn’t pay. Simply stated, if you owe the bank $10, 000 and they agree to take $6,000 as a settlement, you now owe taxes on the $4,000 you didn’t have to pay. Depending on your tax rate, you could owe Uncle Sam $1,000 in taxes. And he will want it all right now. If you think the credit card companies were annoying when they didn’t get paid, just wait until the IRS comes after you!

What are the long term consequences of filing for bankruptcy?

Without a doubt bankruptcy will have the worst possible effect on your credit score.  Credit reporting agencies will report information about your bankruptcy for as long as 10 years. If you’re thinking about filing bankruptcy this may be of little consequence since your credit score may already be so low that it would take that long to rebuild your credit anyway. Having a bad credit score doesn’t necessarily mean you can’t get any credit, it just means that you will have to pay a lot for it for years to come.

The credit cards and other accounts that you listed as part of your bankruptcy will definitely be canceled by the issuers if they have not already suffered that fate.  Oddly enough, you might be surprised to find that you can still get new credit cards and other loans, and you will probably start receiving offers in the mail for them soon after you file for bankruptcy.  The offers you will get will be for accounts where the credit line will be small and the interest rates will be much higher than on regular credit accounts. Since after bankruptcy you have no debt and can’t file again for 7 years you’re a actually a better credit risk to the card issuers than before your bankruptcy.

If you had any loans before bankruptcy that had co-signers, your obligation to repay will be wiped out. Instead, your co-signer will get stuck with them.  So if your parents co-signed a car loan for you they will continue to be fully responsible for the loan.

Tapping into your retirement plan is oftentimes ill-advised. The reason is because pension plans are generally safe from bankruptcy. You will be able to keep your pension or retirement money, unless you borrow against it. If you borrow against it, your creditors can attack your pension or retirement money during bankruptcy and you will have to pay income tax penalties on an early distribution.

Conclusion

Deciding to file for bankruptcy is not an easy decision. While you can file bankruptcy without a lawyer, doing so should not be undertaken lightly. There are simply to many pitfalls that need to be avoided. Even if you don’t want to hire a bankruptcy lawyer, at least talk to one before you file. Most will give you a free consultation and many will keep the cost down by letting you do some of the grunt work yourself if you decide to file for bankruptcy.

Establishing a  good credit score is one of the most important tasks every American citizen faces. Your credit is going to be graded with a credit score. Your credit score is a numerical illustration derived from the statistical breakdown of your credit files, to signify your creditworthiness. A credit score is mainly based on information listed in your credit report as reported by the credit bureaus. There are three main credit bureaus: Equifax, Transunion and Experian. Each credit bureau will have different information about you, your debt and your creditors. And therefore, each credit bureau is going to report a different score for you. Credit scores can range from as low as 300 to as high as 850. A credit score of 600 -700 is decent. Anything about 700 is very good. Below 600 is considered poor credit.

Encompassing a good credit score is extremely important. Your credit score, also known as your FICO score, is going to influence many aspects of your life; most importantly your financial well-being but also the rates that you will receive for your auto insurance, your ability to obtain that job you want or even that apartment you are interested in. A potential employer will view your poor handling of debt as a sign that you will not perform while working, while a potential renter may assume that you may not be able to pay your rent timely or in full.

How Do I Get Credit?

As a minor, you won’t have to worry about credit, but as soon as you turn eighteen, you must begin establishing credit for yourself. The first steps for obtaining credit are to open a bank account in your name and also put a few utility bills in your name. This can include your home and/or cell phone as well as the electric, gas and cable to name a few. Pay these bills timely and in full and your credit will begin to become established. The bank account is important because you will need a checking account so that you can write checks or schedule automatic drafts for paying these bills. A bank account will also help build your credit up

After about 3-6 months of positive account history with your new utility bills, apply for a credit card. It is difficult to get a credit card with no credit at all, but now you will have some credit. Since this will be your first credit card, you will likely want to apply for a secured card first. Unlike unsecured credit cards that offer a set spending limit via a credit line, a secured card requires you to deposit money into an account and you only will be able to spend that money. When the deposited funds are used up, you will need to add more money to the account. Credit cards offer great temptation and until you get the hang of this spending power, a secured credit card is definitely better for your needs. While in the beginning stages of credit card use, a good idea would be to visit some credit card information sites and familiarize yourself with what smart credit card use is.

Once you have become a seasoned credit card user for 6 – 12 months and your credit is now in the 600s, the next step for establishing credit is to apply for a small unsecured personal loan. Getting approved for these types of loans would not be possible with no credit or even minimal credit. If you have been paying your utilities and credit card bills timely and in full every month, you should have no problem at all getting approved for a personal loan. It is very important that you utilize a loan provider that is reputable and provides favorable rates and terms. There are many predatory lenders out there that will take advantage of the unsuspecting with loans that seem to be good to be true.and ultimately are. If you are not careful, you can end up with a loan that will end up costing you an unbelievable amount of money by means of inflated interest rates. Equally crucial is that you do not apply for a loan that you are not going to be able to make payments for.and will ultimately default on. If you neglect to make your loan payments, your credit that you worked very hard to establish will be severely adversely affected. But, if you practice positive account activity, your credit will rise to levels of excellence; in the 750-800 range!

In conclusion, getting credit a good score is not difficult. Besides following the steps above, the best thing you can do is to do research and read as much as you can about credit. There are companies like Choice Personal Loans that not only offer unsecured personal loans but also provide consumers with an abundance of information that will help educate them about all things related to getting  a good credit score.

Despite acres of trees and barrels of ink spent to cover the foreclosure crisis, an under-story exists to haunt people. A decade after they threw their keys in the dirt and walked away from their dream houses, future financial pain is in store for many former homeowners.

Foreclosure or a short sale does not end financial vulnerability.

Make no mistake: Southwest Florida is where it all started, and by all measures, this region remains the American poster child of a home ownership system gone rancid.

This is not a normal news story. It is more akin to a briefing from somebody who’s visited a very ugly land and comes back to tell you of the horrors. There are no “quotes,” for example. No sad story of Mr. and Ms. X to personify the pain. Mr. and Ms. X may not know how agonizing it will get after they have turned over the keys.

Like a killer cancer or a red-light-runner, this mortal danger, too, has a name – deficiency judgment. It’s a legal term meaning you still owe the money. Even if you’ve been foreclosed on, or the bank agreed to a short sale, you owe the difference between the sale price and the mortgage – plus all the legal fees.

Banks do not have to seek a deficiency judgment immediately. They have five years from the date of a foreclosure or short sale to do so. The judgment itself is valid for five years, and it can be extended another five years. There appears to be virtually no legal defense against it.

A book in the local law library – “Florida Jurisprudence,” Second Volume, No. 37, Page 480 – lays it out: “The grant of a deficiency judgment is the rule, rather than the exception, unless there are facts and circumstances creating equitable circumstances justifying the court’s denial of the deficiency.” In other words, unless you can prove “equitable circumstances,” the bank wins.

Waiting a few years for property values to rebound doesn’t work, either. The same book says on Page 482: “Existence of the deficiency is determined as of the date of the foreclosure sale.”

A few of the early short sale contracts contained a provision to waive the “deficiency judgment,” because banks were in unknown territory, groping their way through a virtually unheard-of jungle of “loans gone bad.” But today, the waiver of “deficiency judgments” is rare. Banks got smart, as the law has allowed.

“Florida Jurisprudence,” again, says on Page 489: “The mere fact that a deficiency could have been obtained in the original foreclosure proceeding does not preclude a separate action seeking damages for a deficiency after a repossession and sale.”

It gets worse. Should “the bank” seek a deficiency judgment after foreclosure, a judge – not a jury – will decide the outcome. Charles Holcombe’s “Florida Mortgage Foreclosure Practice Guide” (also in the law library) says, “The mortgager does not have the right to a jury trial in a deficiency proceeding.” Also in Chapter Six, Holcombe writes, “A separate suit at law does not usually allow the mortgager equitable defenses. This fact may enhance the plaintiff’s chances for a deficiency judgment.”

Such a tidal wave of foreclosures and short sales has not been seen since the Great Depression of the 1930s. The smart lawyers from those days are all dead, but they left behind a legacy of laws and legal decisions, such as the “deficiency judgment,” that dictate judicial action in 2010,

In other words, thanks to law based in the Great Depression, the deck is stacked. No jury trial, no “equitable defenses.” In Holcombe’s words, “The relief sought is a personal money judgment.”

I spoke with a large number of people in confidence to be able to understand the dimensions of this story. In Washington, D.C., parlance, we were “on deep background.” In other words, I would be the source. Everybody had real issues with being quoted – lawyers with cases before judges; mortgage brokers who had assembled bad loans; Realtors who had pressured appraisers; judges wrestling with these issues on “rocket dockets”; public officials and staffers standing by with their hands up, trying without much success to soften the blows falling on their constituents; and people in foreclosure who never had heard the term “deficiency judgment.”

I must add another codicil to this discussion. When I say “banks,” I do not mean the institutions providing homeowners their loans. The banks sold the loans. They belong to … who knows? Another bank? An investment fund? A foreign government? For our purposes, the owner of the mortgage is called “the bank.” But who really owns your mortgage? It could be the People’s Republic of China that owns the “bale” with your sweet alfalfa stalk inside, surrounded by rotting weeds. “The bank” in this story isn’t the friendly neighborhood institution that gave you a mortgage. That bank ditched it – and you – long ago.

So what is this “personal money judgment?” It means five years after foreclosure, “the bank” can go to court and demand you pay the difference between your mortgage (the money it gave you) and the foreclosure sale price (the money it got eventually) – plus legal fees, of course.

The courts, under these Depression-era laws, have little leeway but to enforce a judgment authorizing the legal seizure of your bank accounts, automobile, personal property, stocks and bonds, even your television and other personal goods inside your new abode, to satisfy the difference. – years and years after your default on the mortgage.

You might have spent 10 years trying to get back on your feet after you threw the keys in the dirt; yet, everything you’ve earned or bought subsequently is forfeit. “The bank” can claim every dime with the force of law.

Tens of thousands of homeowners in Sarasota County are “under water,” owing more on their mortgages than their homes are worth.

One of every eight workers is unemployed. Many are walking away from their mortgages, throwing their house keys in the dirt. Nationwide, a quarter of homeowners are under water. Locally the number is vastly higher.

Most don’t realize Florida law allows “the bank” not only to foreclose on their homes if they stop paying, but – with a legal instrument called a default judgment – chase them for decades to reap the difference between the foreclosure sale price and the amount of the mortgage.

We are in a collision between Great Depression-era law and ultra-modern finance. I need to simplify something complex at this point. Think of a field of alfalfa, each individual plant representing one specific mortgage. Thanks to enormous deregulation and incentives offered by presidents of both political parties, these alfalfa plants could be reaped, baled (i.e., consolidated) and sold in bulk. This created an entirely new financial product for sale. Since the new product was backed by real property, it became a hot commodity.

Unfortunately, these new products were not created in a methodical or regulated manner. As any alfalfa farmer knows, some parts of a field grow superior crops and other parts grow weeds. But the bankers bundled the good and the bad together in “bales” and sold them. One simple change made this possible.

To make the “bale machine” work, bankers needed to eliminate historical paperwork. Florida mortgages for 150 years were registered by local officials. The clerks of court offices did the work, and they charged a fee.

To avoid the registration and processing fees at local courthouses to record sales of mortgages (saving hundreds of dollars per property) and then reselling them to a “bailer,” a private company was created to keep an electronic record of each mortgage in the “bale.” It is called MERS – the Mortgage Electronic Registration System. The effort is so electronically efficient, it employs fewer than 100 people.

Local mortgage originators – real local banks – were delighted with this secondary market. They resold many of their mortgages, especially the shaky ones. Now “the bank” could be anybody. The bank no longer is “the bank.” Instead, it can be an investor, an investment group or even a foreign government.

Some homeowners fighting foreclosure have asked “the bank” for proof of indebtedness. All “the bank” could come up with was a MERS record, not a piece of paper with stamps, seals and signatures. When judges asked for documents attesting to the ownership of mortgages, fraudulent documents began to appear in courtrooms. Some lawyers representing “the banks” produced signatures and notary stamps that – upon further investigation – were revealed as frauds. MERS itself came under attack.

But if the MERS concept is upheld – billions are at stake, so that seems inescapable – the last real systemic block to widespread foreclosures is gone. A congressional oversight panel on Nov. 16 released a report after looking into these “automatic processors.” The report said they “may have concealed much deeper problems in the mortgage industry.”

Reverse triage

Now the bundles are going bad – the weeds turning sour – and the holders of these “bales” possess increasingly smelly products. Today these owners are conducting triage – separating the “dead” from the “injured” from the “walking wounded.” But unlike military surgeons, their priorities are reversed.

First priority is the “dead” – properties involving cases in which people threw the keys in the dirt and walked away. Looters on the Florida West Coast quickly followed, stripping the homes of anything valuable, down to the copper wires in the walls.

In the opposite of military triage, these properties have become the prime focus of the banks. Here foreclosures fly through the legal process in “rocket dockets,” as judges called from retirement spend less than one minute per property to give “the banks” possession.

After gaining possession, “the banks” hold a fire sale, crushing neighborhood property values. Contamination with “death” spreads like a miasma over the community. North Port would have preferred a cholera epidemic to the “rocket docket.” The impact on a community is an incentive for other property owners to throw their keys in the dirt.

However, former owners have no idea they are still on the hook for the difference between the foreclosure sale price and the mortgage amount: the deficiency judgment.

The injured

Some homeowners – still believing in a system with a hint of fairness – have tried to reach an agreement with “the bank.” They proposed selling their properties to willing buyers, but for less than the mortgage values. They made the properties immaculate, put them on the market and hoped buyers would recognize the value. This process is called a “short sale.” But the owner of the mortgage – the bank, holding company, risk investor, foreign government, who knows? – must agree to the price.

The news is full of short-sale failures, in which an offer of even $2,000 less than the remaining mortgage is rejected by the bank/holding company/risk investor/foreign government. Why would the holder of the note refuse to negotiate or even communicate?

The answer is “legal fees.” And the corollary is again “deficiency judgment.” Not only can “banks” demand you make them whole (i.e., pay every dime you owe), but they also can assess you every nickel of legal fees in the process. At $200 or $500 per hour, the nickels add up fast.

And property owners cannot rely on PMI – private mortgage insurance – because the companies handling PMI are running away as fast as they can from the crisis. Those $40 or $100 per month premiums you paid for PMI? You’ll need to hire a lawyer to make the company stand behind its promise. In fact, you’ll not only need to hire your own team of lawyers, you’ll also probably end up paying for the bank’s team of lawyers.

It doesn’t make any difference if the property is foreclosed on or sold in a short sale, because the rule of “deficiency judgment” means the bank will get its legal fees covered and eventually reap the difference in sale price vs. mortgage price when it comes back to court for ask for a “deficiency judgment.”

A huge and personal financial time bomb is hovering over each and every foreclosure or short sale in Sarasota County and Florida.

“The banks” have up to five years from the date of foreclosure or short sale to file for the deficiency judgments. They can wait for the smoke to clear, then seek to make their losses good.

Another category of “the injured” includes people who stopped paying the mortgage but continued to live in their property. For the time being, “the bank” is fine with this arrangement. The bank is taking care of “the dead” first, stopping the looters. But “the injured” are next. Don’t think “the bank” forgot you.

The problem is especially acute for people owning nonproductive rental property. A foreclosure or short sale on one puts all of a person’s holdings at risk of seizure to satisfy the deficiency judgment. Only your personal home, your domicile, is exempt.

This threat to rental property owners spreads the pain across a much wider spectrum. We think of foreclosure in terms of family homes. But the collapse of property values, the out-migration of people from the county and the demise of the local construction industry has led to a plunge in rents.

Many local professionals over the past decades “parked” their investment money in rental housing. Today even mansions are renting for peanuts on the Gulf Coast of Florida. It is not just homeowners sweating “deficiency judgments.” Owners of substantial numbers of rental properties see their “empires” at risk. They are the “walking wounded,” people still paying their multiple mortgages by diving into their savings paying “the banks” for the luxury of losing their savings. Partners in law firms all over Florida are sweating.

New business model

Banks are fond of saying, “We’re in the banking business, not the property business.” Banks don’t want to manage property, find tenants for rental homes, collect rent or fix plumbing. It’s not their game. But debt is something they understand very well. And debt – just like those bales of mortgages – can be sold.

In the next five years, as “the banks” obtain deficiency judgments against defaulted borrowers or short-sellers, a new wave of financial paper will be created. Enter the debt collector. One of the country’s biggest “receivables management firms” is located here in Sarasota.

Just as banks are not in the property business, they are also not in the debt collection business. And just like the original mortgages, these judgments can be bought and sold. The buyers this time will be professionals in “receivables management.”

Once a bank wins a deficiency judgment (and it’s hard to present a defense against it), the bank will try to collect it. But it will tire and sell the debt to a collector for pennies on the dollar.

These debt collectors will skim the cream and sell the rest for fewer pennies on the dollar. And so on down the food chain. In other words, if you throw your keys in the dirt, or hold a successful short sale, you’re still liable.

If you’ve already gone through the process with a lawyer, and the lawyer didn’t advise you about the “deficiency judgment,” you may have grounds for a malpractice suit – one more legal proceeding you get to pay for.

Nobody has a clue about what to do. Congress, the Florida Legislature, the Florida Bar Association, local governments, neighborhood associations, scared individuals: We only know Depression-era law rules.

(Editor’s note: the above article written by staff writer Stan Zimmerman appeared in two parts in the Pelican Press)

The Act amended an earlier credit report law entitled the Fair Credit Reporting Act. FACT amended the Fair Credit Reporting Act to include a provision for an absolutely free credit report. In Title II of FACT, (IMPROVEMENTS IN USE OF AND CONSUMER ACCESS TO CREDIT INFORMATION), under section 211, which is entitled “Free Consumer Reports”, all credit reporting agencies are required to give consumers their credit reports once during a 12 month period “upon the request of the consumer without charge to the consumer”. This law reversed the practice of credit reporting agencies to charge consumers for their own credit report.

FACT goes on in Title II to state that the consumer may get an absolutely free credit report only if the consumer makes that request from a centralized source that a government commission would oversee in its development. At minimum, credit reporting agencies are required to provide a toll free number consumers may call to make their request. It also states that credit reporting agencies have 15 days in which to provide the absolutely free credit report to the consumer after the consumer has made the request.

FACT also states that consumers may also request a reinvestigation of the details of their credit report after they receive it and that credit reporting agencies must complete that investigation within 45 days after a request for reinvestigation. This assures that consumers may use the absolutely free credit report after they receive the results of the reinvestigation.

The three credit reporting agencies in the U.S., Equifacts, Experian, and Transunion, together formed a centralized source that consumers can use to request their credit report as required by FACT. You can call their toll free number, which is 877-322-8228, to make your request. Alternatively, you can mail your request to the Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281. You can also apply for it online and receive it online at the Annual Request Service’s website at www.annualcreditreport.com. Thanks to FACT, an absolutely free credit report is now at hand.

Lawyers find that even when homeowners have made payments towards their homes, they can still find foreclosure documents waiting for them in the mail. What happens is the banks employ attorneys who use what they call robo-signers – employees who will just blindly sign hundreds of blank or fraudulent foreclosure legal documents each day. And then they are free to take back the house and remove the owners from their homes. Courts have taken judicial notice of these robo-signers and the practice appears to be widespread. But there are all kinds of mistakes that the banks make that may not always amount to outright fraud, even if you do always stand on the losing end. And you always need professional foreclosure help from a lawyer to help spot these.

Let’s go over some of them. Sometimes they will go in to foreclose on the home even when they have no regular paperwork done that shows that they hold title to the home. Sometimes they’ll have mortgage notes without the right kinds of endorsements on them. In one more instance of fraud, sometimes they’ll forge papers with dates on them that go earlier than they have a right to. And sometimes, to make a little extra cash, the banks will steal from homeowners by claiming to have spent legal fees that are many times what they actually paid.

There are a few things you can do without seeking professional foreclosure help though. You could check to see if the party claiming payment is the same as the party you signed up with for the mortgage. If the documents you are presented at the time of foreclosure, list the names of companies that you don’t know anything about, that’s your first clue. Things are so bad now, that the banks have finally suspended all foreclosures to put their own houses in order first. And that is something they really need to do get done.

Do not just passively sit back and allow the bank to take your house. Free legal aid may be available from your local bar association.