Talk About Bankruptcy

When you are about to lose your home, you don’t care about anything else. It consumes your every thought. The only way you will be able to relax is to get the foreclosure called off so you can go back to enjoying your home and your life. Well, as a last ditch effort there is a method available to stop foreclosure on your home.

Filing for bankruptcy is bad for your credit, but sometimes it can save a home from foreclosure. Under chapter thirteen of the US bankruptcy code, debtors are allowed to submit a plan for repaying their debts. The foreclosure process is halted as soon as you file for chapter thirteen. However, your repayment plan is subject to review by creditors and must be approved by the bankruptcy court.

Before you file for bankruptcy, you will be required to attend a credit counseling session. This can help you determine whether you really need to file for bankruptcy or if your debts can be repaid in some other way. If the credit counseling agency prepares a debt repayment plan for you, it must be submitted to the court along with your bankruptcy filing.

Within fourteen days after you file for chapter thirteen, you must file your repayment plan. This is usually done at the same time as the original filing, but it can be done later if you are not quite ready yet, as long as it is on file with the court within fourteen days.

You will be required to attend a creditor’s meeting, and all of the companies and people you owe money will have a chance to ask you questions. The purpose of this meeting is to give your creditors a chance to object if they do not feel you will be paying as much as you possibly could under the proposed plan.

After the creditor’s meeting has been completed, your repayment plan will be reviewed by the court to make sure that it meets the requirements set forth in the bankruptcy code. It can take up to 45 days for approval, but you have to start making payments according to the terms of the agreement within 30 days.

The downside to using bankruptcy to avoid foreclosure is that sometimes it only postpones it, and then you end up with both a foreclosure and a bankruptcy on your credit. It is often difficult to stick to the repayment plan, and if you fail, you can still lose your home. But before you file chapter thirteen bankruptcy explore all possible options, talk to an experienced loan modification attorney first.

Call janian and associates for a free consultation with a loan modification attorney.

A deficiency judgment is something that looms over the head of everyone who has to take a loss on their house, whether by foreclosure or by short sale. This isn’t the law in every state, but in many areas the mortgage lender is allowed to sue for the unpaid debt after the sale of the home – and when they can, they usually will.

When you have to sell your home through foreclosure or short sale, is there any way to prevent a deficiency judgment from being awarded? What happens in those situations?

Most of the time, the only way you can avoid a deficiency judgment is by negotiating with the lender during the pre-foreclosure process. They know how expensive it is to maintain their REO properties. The lender may consent to waive their right to collect the rest of the debt if they see that it will cost them less money in the long run to allow a short sale and simply let the debt go.

When that isn’t possible, depending on state law, the homeowner may have a deficiency judgment on their hands, whether the short sale was approved or the foreclosure went through. At that point, the debt only goes away through payoff or bankruptcy.

How is a deficiency judgment figured? First, the judge will look at the proceeds from the sale of the home. If there was a short sale, the amount of the deficiency judgment is the mortgage debt less the sale proceeds. If the home went to auction, in most states, the judge will take the greater of the appraised value of that home or the highest bid from the auction and subtract that amount from the mortgage debt.

So, the former homeowner now has a court order which says he has to pay the rest of that mortgage debt to the bank. If there were two or more mortgages or liens, that homeowner may even have two or more deficiency judgments against him.

Immediately after the judge signs the order, the deficiency judgment begins earning interest. If the lender adds its REO expenses to the balance, the interest just keeps climbing higher. There is an interest rate of 11 percent per year on deficiency judgments in Florida. What’s the rate in your state?

Next, the lender usually sells these types of debt to collection companies for 5 to 10 percent of the amount due. Since they know their chances of collecting the debt from a financially drained homeowner are slim to none, lenders would rather get the debt off their books and get what they can out of it.

Besides the deficiency judgment, the former homeowner also has a wounded credit report and a lower FICO score. Having a foreclosure on record is one thing, but a deficiency judgment or a low FICO score could influence a critical decision by others on whether to give that person a job, a loan, or a rental home.

The foreclosure scenario is changing. There are more property foreclosures than ever right now, and that means deficiency judgments could be increasing as well. The government is taking the lead in re-evaluating how foreclosures are handled. We may see some changes in the way deficiency judgments are handled in the near future, and we may not.

For now, your best strategy is to try and get the lender to see the wisdom of forgiving the debt and reporting the mortgage as “paid in full as agreed” on your credit report. Negotiating that deficiency judgment away is the key to survival here, because it can hang over your head for a long time.

Need to learn more about foreclosures? Visit the Strategic Real Estate Coach website. You’ll gain access to weekly updates on current events in the mortgage industry and more!

A first time bankrupt will usually be discharged about a year after the date of the bankruptcy order. Often it is a very positive option for anyone facing insurmountable debt, despite the social stigma which has often been attached to it. A similar alternative is an IVA (Indididual voluntary arrangement).  This should also be considered when looking at the possibility of bankruptcy.

Bankruptcy is an option which can free you of debts you are unable to pay and share out your assets among your creditors.

The implications of going bankrupt

• You will lose control of all your assets
• You will find it more difficult to obtain credit and must declare your bankruptcy to lenders
• You will have certain employment restrictions, e.g you cannot become a company director, a member of parliament, or a Chartered Accountant or Lawyer.
• You will be publicly examined in court and your bankruptcy will be publicly announced.
• Your credit will be affected for many years to come and you may have problems applying for a mortgage.

On the positive side bankruptcy offers a solution to overwhelming debts which cannot be paid. You can be discharged within a year, sometimes sooner. It gives you the opportunity for a fresh start in life. For your creditors it allows them to have a full investigation into your monetary affairs and to see your situation fully.

How do you become bankrupt?

A person can choose to become bankrupt themselves (voluntary bankruptcy), their creditor can petition a bankruptcy order against the individual (involuntary bankruptcy) or someone can be made bankrupt by a person who is bound by an individual voluntary arrangement (IVA).

If a  bankruptcy petition  is made against you, you should cooperate fully as a bankruptcy order can still be made against you even if you dispute the petition. If you dispute the claim you should arrange a settlement before the petition is due to be heard in court. Otherwise it is difficult and expensive to organise a settlement after the bankruptcy order is finalised.

In the majority of cases, bankruptcy is filed by the debtor (voluntary bankruptcy). Often people considering bankruptcy opt for an IVA instead.

IVA’s

An IVA or individual voluntary arrangement is a legally binding agreement between you and your creditors which provides both parties with legal protections while you sort out your debts. To be eligible for a IVA you must:

• Have 3 or more creditors and over £15000 worth of unsecured debt
• Be having difficulty making payments
• Be able to show proof of employment
• Be a UK citizen (specific IVA England and Wales)

When your considering your debt relief options you may have looked into several ways to cut down debt and boost up your savings.  You may have considered everything from a do it yourself option to debt counseling.

However in this article I’m going to discuss another option to help you get debt free.  In this article I’m going cover three reasons why using an attorney based debt settlement firm might be the way for you to go.

Cutting Principle And Interest Payments

The first thing that a typical debt negotiation company like freedom debt management can do for you is work to cut principle and interest payments.  They do this by working with your creditors and negotiating a lump sum payoff.

The cost do something like this will usually run around a $100 a month plus a monthly fee to handle the monthly transactions.

Credit Negotiations

The next thing a debt settlement attorney can help you do is improve your credit.  They will be able to get a copy of your credit report and look for mistakes that could be fixed to help you improve your score.

However things that are on your report like bankruptcy and foreclosures that have come from mistakes that you have made cannot be erased or changed, only mistakes can be fixed here.

Bankruptcy

Finally, a debt settlement attorney can walk you through the process of bankruptcy such as a chapter 13 or chapter 7.  However bankruptcy should not be looked as a one step fix all plan.  It is something that should be considered very carefully.

The cost of a bankruptcy will usually run around $2000 plus filing fees, and credit counseling fees.  However this is just a rough estimate and fees can depend on a persons situation.

Final Thoughts…

Of the options I have given you take the time to research each and everyone before you make a decision. Making a bad financial choice could take you a second to destroy everything you’ve worked for and a lifetime to rebuild.