How Bankruptcy Can Help if You are Behind on Your Mortgage Payments

If you happen to fall behind on your mortgage payments, then filing Bankruptcy may provide an option to help you catch up and get current on your mortgage.  Specifically, a Chapter 13 Bankruptcy will help the debtor reorganize their creditors and provide for the mortgage arrears to be paid out over a period of 36 to 60 months.  In addition, the Bankruptcy filing would prevent or delay an upcoming foreclosure if the case is filed prior to the sale date. 

Once a debtor files for bankruptcy, an automatic stay is immediately put into place.  The automatic stay, as provided under Section 362 of the Bankruptcy Code, prohibits creditors from continuing collection activity against the debtor during their bankruptcy case.  After the bankruptcy case is filed, the debtor, who may be at risk of foreclosure, must make payments to their Chapter 13 Trustee according to the terms of their Chapter 13 Plan.  The Chapter 13 plan will provide for the payment of the mortgage arrears, along with other creditors if applicable depending on a case by case situation.  If the debtor fails to make the payments according to the Chapter 13 Plan, then the bankruptcy court dismiss the case, or the creditor may petition the court to allow foreclosure proceedings to resume.

Chapter 13 allows the debtor to reorganize their debts and pay them off through a three to five year repayment plan.  If the debtor continues to pay each month, then filing for a Chapter 13 bankruptcy will provide an efficient way to prevent foreclosure and catch up on missed payments.  The debtor must be able to pay the Chapter 13 Plan payments and their regular mortgage payments each month, depending on the jurisdiction which their Bankruptcy case is filed. 

Filing a Chapter 13 bankruptcy is extremely beneficial if you are behind on your mortgage payments.  Due to the automatic stay, creditors will be unable to continue collection activities. You can focus on reorganizing your debts and create a payment plan that will satisfy all of your creditors. 

Delay on Foreclosure due to Chapter 13 Bankruptcy

Foreclosure on homes often happens when lenders want to retrieve the remaining balance of a loan from the homeowner who has stopped making payments. Normally, the lenders will not begin the legal process until the homeowner skipped out on 3 or 4 months worth of payments.  Keep in mind, the foreclosure process varies in each state.  In Texas, foreclosures only take place on the first Tuesday of the month.  In addition, the creditor must provide certain notices informing you of the sale prior to any foreclosure date.  Although there are loss mitigation options available through some lenders, Chapter 13 Bankruptcy also provides an option to delay or prevent foreclosure while providing an avenue for you to catch up on the mortgage arrears.

Chapter 13 is often called “Reorganization Bankruptcy” because it allows you to reorganize your debts and prepare a payment plan. If your home is being foreclosed, then you can file for Chapter 13 and extend your repayment length.  Typical Chapter 13 cases range from 36 to 60 months and arrange monthly payments to your priority, secured, and in certain situations, unsecured creditors.  For many, Chapter 13 provides a beneficial option for people to catch up on the arrears by including the arrears in the Plan and spreading the amount out over five years.  While in Chapter 13, all payments must be made on time, including the regular on-going mortgage payments if they are not part of the Bankruptcy Plan. When the debtor completes all plan payments, the arrears on the mortgage will be cured and the debtor will exit the bankruptcy current on their mortgage.  

Statute of Limitations and Foreclosure

Every state has a statute of limitations for filing a foreclosure action. A statute of limitations is a state law that tells the lender that a foreclosure must be filed within a certain time after default on a promissory note. If the foreclosure is not filed by that date, it is not valid and may be stopped or dismissed by a court. A statute of limitations is an “affirmative defense” and must be raised by the homeowner in defense of a foreclosure action. If it is not raised, it is generally considered “waived” and will not be considered in future lawsuits.

The time limit depends on the type of action and the claim that is involved. There are different statutes of limitations for oral contracts, written contracts, personal injury, and fraud. Generally, the statute of limitations for home foreclosures applies to written contracts (i.e. promissory notes). Some states (e.g., New Jersey), have a specific statute of limitations for foreclosure.

Each state has its own statute of limitations, which ranges from three years to 15 years. Most states fall within the three to six year range. The statute of limitations clock for a mortgage foreclosure usually starts when the default occurred, which is generally dated from the last payment.

A foreclosure must be initiated before the expiration of the statute of limitations period. For example, if the expiration of the statute of limitations is March 30, 2015, and the foreclosure is started on March 15, 2015, then the statute of limitations does not apply, even if the foreclosure is not completed before March 30, 2015. However, if the foreclosure action is dismissed or stopped by the lender after March 30, 2015, the time will have expired and the statute of limitations defense is effective against a future foreclosure.

If you have a home that is under threat of foreclosure, consult with an experienced bankruptcy attorney and consider your options.  In some cases, a statute of limitations defense may save your home from foreclosure.

A Second Bankruptcy, the Automatic Star, and a Foreclosure

In 2005, Congress, with help (and influence) from creditor lobbyists, chose to add restrictions to the automatic stay and make it harder for a serial filer to get debt relief. Section 362(c)(3)(A) provides that if an individual debtor files a second bankruptcy case within a year of dismissal, the automatic stay terminates “with respect to the debtor on the 30th day after the filing of the later case[.]” The automatic stay may be continued by the bankruptcy court upon a showing of good faith by the debtor.

In English, Section 362(c)(3)(A) means that if you file a second bankruptcy case within a year after the first is dismissed (either by you or by the court), you must ask the bankruptcy court to continue the automatic stay protection or it will expire after thirty days. However, courts across the country disagree as to the effect of this termination.

The vast majority of courts find that when the stay is terminated under Section 362(c)(3)(A), the debtor and his property is fair game, but property of the bankruptcy estate is still protected. This interpretation was recently confirmed by the First Circuit Bankruptcy Appellate Panel in the case of Witkowski v. Knight (In re Witkowski), No. 14-34, __ B.R. __ (B.A.P. 1st Cir. Nov. 13, 2014).

In the Witkowski case, the debtor filed several bankruptcy cases attempting to forestall foreclosure of a residence. When the debtor filed one bankruptcy case within a year of a previous dismissal, and the lender continued a pending foreclosure sale according to state law. The debtor did not seek to extend the automatic stay, but filed a motion seeking sanctions for continuing the foreclosure action in violation of the stay.

The Witkowski court agreed with the debtor and with the majority of courts that the automatic stay was not terminated as to property of the bankruptcy estate, which included the debtor’s residence.

The court then turned to the question of whether the lender’s action constituted a violation of the bankruptcy stay injunction. The court distinguished between taking new action against the debtor and “maintaining the status quo” by continuing a state law foreclosure. The court found that the lender did not take new steps in the foreclosure process after the bankruptcy case was filed and, therefore, did not violate the automatic stay.

While other courts may derive a different result, there are two important rules to learn from Witkowski: (1) most courts agree that the termination of the stay under Section 362(c)(3)(A) does not affect estate property; and (2) there is a growing trend to allow the “maintenance” of foreclosure sales commenced pre-bankruptcy. These are important issues that merit a close watch in the future.

BANKRUPTCY TIP: Fight Back Against Mortgage Servicers

Mortgage servicer PHH Mortgage Corporation is in the news again, this time on the losing end of a $16 million jury verdict. Like many others in Yuba County, California, homeowner Phillip Linza ran into some financial trouble after purchasing his home in 2006. Linza filed bankruptcy in 2009, then worked with PHH for a home loan modification. According to Linza’s attorney, PHH agreed to a loan modification that reduced Linza’s monthly payments from $2,100 to $1,543, which would take effect in January 2011.

Inexplicably, PHH changed the terms. PHH first told Linza his new payment was $2,350 per month, then demanded an extra $7,056. When Linza complained and threatened litigation, he was told, "We're a multi-billion dollar company. Stand in line because we've got a busload of attorneys that are on retainers."

This is not the first time PHH has been in the news. In January, 2014, the Consumer Financial Protection Bureau initiated an administrative proceeding, alleging PHH harmed consumers through a mortgage insurance kickback scheme that started as early as 1995. The CFPB is seeking a civil fine, a permanent injunction to prevent future violations, and victim restitution.

In December, 2013, the New Jersey Attorney General announced a $6.25 million settlement with PHH to resolve allegations that the company misled financially struggling homeowners who sought loan modifications or other help to avoid mortgage delinquency or foreclosure.

In 2011, PHH was hit with a $20 million jury verdict from a Georgia federal court for improperly reporting U.S. Army sergeant David Brash to credit agencies as "seriously delinquent" despite the fact that all his mortgage payments had been automatically deducted from his paycheck. When he tried to resolve the matter, his letters to PHH went unanswered (violating federal law) and his calls were routed to overseas customer services staff who couldn't answer his questions.

When a mortgage servicer will not play fair, there are few options. Litigation is costly and time-consuming, and also carries some risk since not every consumer lawsuit is successful. For many consumers, the power found in the federal bankruptcy laws is a more certain and permanent option. Most jurisdictions allow a bankruptcy debtor to strip away an unsecured junior lien against a home in a Chapter 13 case. A mortgage arrears may be repaid over three to five years under court supervision, and without threat of an unannounced foreclosure.

A Chapter 7 debtor may discharge a personal obligation on a home loan while retaining the right to modify post-discharge under HAMP. That means that the lender has no recourse against the homeowner for nonpayment, and the property is eligible for loan modification.

If you are experiencing the pains of dealing with an incompetent or dishonest servicing company, consider all of your options, including options found in the federal bankruptcy laws. Bankruptcy is not always the best option, but it is often the most powerful option.

If you are considering filing for bankruptcy please call the experienced attorneys at Fears | Nachawati  Law Firm to set up a free consultation. Call 1.866.705.7584 or send an email to fears@fnlawfirm.com.

CFPB Hunting Zombie Foreclosures

The Consumer Financial Protection Bureau has turned its attention to “zombie” foreclosures, as reported by Reuters. A zombie foreclosure occurs when a bank begins a foreclosure, but then abandons the process without informing the homeowner. In most cases the zombie foreclosure is stopped by the bank after the homeowner has moved out of the home. Homeowners don’t realize that they still own their homes, and are still responsible for the mortgage debt, taxes, homeowner association (HOA) dues, and upkeep.

“The CFPB is beginning to look very closely at abandoned properties and zombie foreclosures,” said Laurie Maggiano, the CFPB's servicing and secondary markets program manager. “There is direct borrower harm if a borrower believes a foreclosure on their property has been conducted and they are no longer responsible, and months or years later find out that they are, that there was never a foreclosure and they have large financial responsibilities that they never knew about.”

Zombie foreclosure often occurs when a bank charges off a low-value property, but does not complete the foreclosure process. By not completing the foreclosure, the bank is not responsible for the property or associated expenses, but still retains a lien which makes it impossible in many cases for the homeowner to sell the property. The property is abandoned and the unwitting homeowner may be civilly or criminally liable for violating local ordinances, failure to pay taxes, etc.

There is no requirement for banks or loan servicers to inform homeowners about lien releases or charge-offs, however the Truth-in-Lending Act requires that servicers send monthly statements to borrowers with delinquent mortgages.

Bankruptcy is little help
Bankruptcy can discharge an individual’s personal obligation to pay a mortgage debt, but a bankruptcy case does not transfer title from the homeowner to the bank. The person still owns the property after bankruptcy, even if he is not obligated to pay the bank.

Courts across the nation have said that the Bankruptcy Code does not require a lender to act upon the surrender of collateral in a bankruptcy. Until the lender is the legal and equitable owner of the property (through a foreclosure, or deed transfer), the debtor may be on the hook for HOA fees, taxes, or property insurance that arise after the bankruptcy filing. These debts are not part of the bankruptcy discharge.

If you are experiencing trouble paying your home mortgage and need to “walk away,” discuss your situation with an experienced bankruptcy attorney at Fears | Nachawati. In many cases, the smart move is to stay in the home (rent free) until the foreclosure is completed. Filing bankruptcy may also buy your family some time to find another home. Contact us today at 1.866.705.7584 or send an email to fears@fnlawfirm.com.

Mortgage Giant Ocwen Agrees to Settlement

Mortgage servicer Ocwen has joined the list of major lenders and servicers who have agreed to slash mortgages for struggling homeowners. Ocwen agreed to reduce $2 billion in principle for struggling homeowners over a three-year period, and to pay $67 million in cash settlements to individuals who were wrongly displaced from their homes during foreclosure.

The deal was reached as a settlement with federal and state authorities over accusations of deceptive mortgage servicing. The complaint against Ocwen alleged that it engaged in improper shortcuts, imposed unauthorized fees, improperly denied loan modifications, and engaged in illegal foreclosure practices with homeowners. The agreement did not admit any admission of wrongdoing on the part of Ocwen, and there were no criminal charges levied against executives. The settlement includes any wrongdoing by two mortgage servicing companies recently acquired by Ocwen: Homeward Residential Holdings (aka American Home Mortage Servicing) and Litton Loan Servicing.

“We believe Ocwen violated federal consumer financial laws at every stage of the mortgage servicing process,” said Richard Cordray, director of the Consumer Financial Protection Bureau (CFPB). “After examining the potential violations, we have concluded that Ocwen made troubled borrowers more vulnerable to foreclosure.”

Individuals who were foreclosed on between January 1, 2009, and December 31, 2012, may be sent a cash payment. Those eligible to receive payment or mortgage relief will receive notification directly from settlement administrators. More information and qualifying conditions is available on the CFPB website, here. You may also contact your Attorney General’s office and add your name to the contact list for your current address. To find your state’s Attoroney General, click here.

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I Received a Motion for Relief from Stay. Now What?

When you file a bankruptcy case there is an automatic stay that goes into effect. This stay protects a debtor from their creditors trying to collect. Most importantly it protects a debtor from a foreclosure or a repossession of their home or car. A creditor can request relief from the stay or request that the stay be lifted. Normally they do this when you have missed payments under the plan or direct payments on your secured debt. If the stay is lifted the creditor can start to collect. This means they can start calling you and foreclose, or repossess the collateral.

You will usually be mailed the motion by the creditor. If you get the motion, contact your attorney to discuss your options. Many times the attorney can work with your creditor to resolve the motion without the stay lifting. Usually the best way to resolve the motion is to get caught up with the payments. Sometimes if you are only behind a few payments this can be done prior to the hearing or you can enter an agreement with the creditor to do it over the next few months. Otherwise you may need to change the terms of your plan to cure the delinquency amount through your chapter 13 plan. It’s important to contact your attorney because they know what options will work best to resolve the motion.

Motions to lift stay are much more common in a chapter 13 however they can also occur in a chapter 7 case as well. The reason they are less common in a chapter 7 case is because the case usually only lasts a few months and then the stay ends so it is not necessary to file a motion. If a creditor does file a motion it is usually to repossess collateral the debtor is surrendering. If you are in chapter 7 and you receive a motion to lift stay you should contact your bankruptcy attorney to know what to do next and to discuss your options.

If you have questions about bankruptcy contact the experienced attorney’s at Fears | Nachawati. Call us at 1.866.705.7584 or send an email to fears@fnlawfirm.com to set up a free consultation.

Stop Foreclosure with Bankruptcy

Filing a personal bankruptcy case will stop a judicial or nonjudicial foreclosure whether or not the foreclosure was begun before the bankruptcy. See 11 USC § 362 (a). The only notable exception to the automatic stay is for foreclosures which are brought by the Secretary of HUD on federally insured mortgages for real estate involving five or more units. See 11 USC § 362 (b)(8).

In order to stop the foreclosure, it must not yet be completed and finalized. In other words, you must still own the property at the time you file bankruptcy. Section 1322(c)(1) states that a debtor may cure and reinstate a home mortgage until the property is sold in a foreclosure sale.

Debtor’s Right of Redemption
After the sheriff’s sale, the debtor has no right to cure a default in a Chapter 13 plan. However, the debtor may have a state statutory right to redeem the property. The debtor’s state right of redemption is separate from an ability to cure a default under §1322. A cure leaves the underlying mortgage intact, allows a debtor to reverse acceleration caused by default, and allows a debtor to repay past due amounts over time while maintaining monthly payments. The right to redeem, on the other hand, does not allow the debtor to reverse acceleration and catch up payments. Rather, the debtor must pay the entire amount the purchaser paid at the foreclosure sale plus interest and costs within a statutory period of time.

Trustee’s Rights in Foreclosed Property
A bankruptcy trustee can undo a foreclosure as a fraudulent transfer if a creditor gets a windfall. See 11 USC § 547 and § 548 (up to 90 days before the bankruptcy filing, or within one year if an “insider” forecloses).

Foreclosure after Bankruptcy
Since the bankruptcy filing immediately triggers the automatic stay, the stay is effective whether or not a creditor is aware of the bankruptcy filing. This means that a foreclosure action must stop, even if the creditor has no knowledge of the court’s injunction! In order to proceed with a foreclosure sale after the bankruptcy case is filed, the creditor needs special permission from the bankruptcy court, called “lifting the stay” or “relief from the automatic stay.” This required notice and an opportunity for a hearing. See Rule 4001 FRBP. For more information on contesting a motion to lift stay.

If you are harmed by a foreclosure intentionally performed after your bankruptcy filing, you can “recover actual damages, including costs and attorneys’ fees, and in appropriate circumstances, [you] may recover punitive damages.” See Section 362(k). Bankruptcy judges are not happy with creditors who purposely violate the law. Fortunately enough of them have been slapped so most creditors know better, but from time to time some venture to get around the law. If you are considering filing for bankruptcy or fear foreclosure please call the experienced attorneys at Fears | Nachawati Law Firm to set up a free consultation. Call 1.866.705.7584 or send an email to fears@fnlawfirm.com.

Mortgage Tax Break Set to Expire

As a general rule, any debt cancelled or forgiven by a creditor must be added to the individual’s income for tax purposes. At the end of the year, a creditor who cancels of forgives a debt must send an IRS Form 1099-c to the Internal Revenue Service and to the taxpayer. Called “cancellation of debt” by the IRS, a cancelled or forgiven debt is no longer borrowed money that will be repaid; it is income that the taxpayer must claim on his or her tax return.

For example, say you borrow $10,000 and default on the loan after paying back $2,000. If the lender is unable to collect the remaining debt from you, there is a cancellation of debt of $8,000, which is generally taxable income to you. Cancelled debts can arise from charged off loans, debt repayment plans, foreclosures, and short sales.

After the housing bubble burst and many Americans lost their homes, Congress enacted the Mortgage Debt Relief Act of 2007. The Act generally allowed taxpayers to exclude income from a cancelled or forgiven debt after they lost their homes. In other words, the Act meant that taxpayers did not have to pay taxes on any loan deficiency if the home was lost to foreclosure or sold in a short sale.

The Act was intended as short-term relief to help taxpayers avoid high tax debt. It was initially set to run until the end of 2009, but was extended for another three years, then extended again to the end of 2013. It will now expire on December 31, 2013. The Washington Post reports that it is unlikely that Congress will extend this relief again.

This is very troubling news to homeowners still struggling to pay or modify underwater homes. Without this relief, many individuals who lose their homes to foreclosure may be charged huge tax bills many months or even years after foreclosure. Since new tax debts are not dischargeable in bankruptcy, individuals will now suffer the injury of tax debt on top of the insult of losing a home. A large non-dischargeable tax debt can make it impossible to financially recover for many years.

Some states avoid this imputed income problem by prohibiting the lender from assessing a deficiency against a foreclosed home. However, most states do not have this provision, and some only protect certain home deficiencies (such as from a primary home mortgage) and not others (such as a deficiency from a home equity line of credit).

If you are facing a foreclosure sale on your property, discuss your options with an experienced bankruptcy attorney. Filing bankruptcy before foreclosure can avoid the nightmare of cancellation of debt income. Your bankruptcy attorney can review your case and offer a legal solution to your financial problems. For more information and a free consultation contact the experienced attorneys at Fears | Nachawati by calling 1.866.705.7584 or sending an email to fears@fnlawfirm.com.

Emergency Bankruptcy Petition

An emergency bankruptcy petition is a three page petition with a “mailing matrix”—a list of creditor names and addresses. The naked petition and creditor list are filed with the bankruptcy court along with the necessary filing fee and evidence of completion of consumer credit counseling. The chief benefit of an emergency bankruptcy filing is that the automatic stay goes into effect immediately and stops all creditor collections. This is especially useful if the debtor arrives at his attorney’s office on the eve of a foreclosure sale.

 

To effectively stop a foreclosure sale, the creditor must have notice of the bankruptcy filing. The best way to do this is to fax a copy to the creditor (and/or foreclosure firm, attorney, foreclosure trustee, etc.) and call to confirm receipt. The reason that notice is so important is the distinction courts draw between actions that are “void” and those that are merely “voidable.” Some courts hold that creditor actions in violation of the automatic stay are void, period. Others find some actions voidable. Those later courts sometimes allow a foreclosure sale to stand in a Chapter 7 case. This may occur when the creditor did not have prior knowledge of the bankruptcy case (and is therefore not culpable for an intentional violation of the stay order) and the debtor intends to surrender the property. Obviously, if the foreclosure takes place, the debtor no longer owns the property and must vacate immediately.

 

 After the emergency bankruptcy petition is filed with the bankruptcy court, the debtor has 14 days to file the completed bankruptcy paperwork, including all schedules. See Bankruptcy Rule 1007(c). If the completed bankruptcy petition is not filed with the bankruptcy court within 14 days after the emergency bankruptcy filing, the bankruptcy case could be dismissed.

 

One common problem with emergency petitions is gathering a complete list of creditors. While the debtor has 14 days after filing to identify assets, income, and expenses, the bankruptcy rules require that the debtor list all creditors (as well as collection agencies, co-debtors, interested parties, etc.) at the time the bankruptcy case is initially filed. Debtors filing emergency petitions are under duress and frequently forget creditors. Some legal commentators, including Judge Alan Jaroslovsky, a California bankruptcy court, have pointed out that the debtor’s bankruptcy papers are filed under oath and must contain the whole truth. In his open letter posted on the website for the US Bankruptcy Court for the Northern District of California, Jaroslovsky writes:

 

Whatever your attitude is toward the schedules, you should know that as far as I am concerned they are the sacred text of any bankruptcy filing. There is no excuse for them not being 100% accurate and complete. Disclosure must be made to a fault. The filing of false schedules is a federal felony, and I do not hesitate to recommend prosecution of anyone who knowingly files a false schedule.

 

Filing an emergency bankruptcy petition can stop creditors in their tracks, but it can also present potential problems for the debtor. If you are considering a bankruptcy filing to protect your property, consult with an experienced attorney at Fears | Nachawati as early in the process as possible. As bankruptcy attorneys we can explain how the federal bankruptcy laws can help your family and identify any areas of concern. For more information and a free consultation, contact us at 1.866.705.7584 or send an email to fears@fnlawfirm.com.

Mortgage Deficiency Collection on Rise

A recent story published in the Washington Post suggests that the collection of foreclosure deficiencies is on the rise. This may signal the start of a new wave of litigation and collection efforts to pursue the debts remaining after the housing collapse. It also means adding insult (a six figure judgment) to injury (a past foreclosure).

A foreclosure deficiency occurs when there is money owed to the lender after a foreclosure. For instance, suppose a borrower “walks away” from an underwater home in 2009 owing $400,000 on a mortgage debt. The bank forecloses on the home in 2010, and then sells it at auction in 2011 for $300,000. The remaining balance owed on the debt is $100,000. The lender (or a subsequent purchaser of the debt) can sue the borrower to obtain a “deficiency judgment.” But that’s not the end of the story. The homeowner may remain on the hook for costs until the bank obtains ownership through foreclosure. Also, there are interest and fees, including attorney fees and court costs, which increase the total debt. In some cases this can be $10,000 or more each year which can turn a $100,000 debt into $200,000 within a mere few years.

The law regarding the collection of foreclosure deficiencies varies from state to state. Presently 40 out of the 50 states permit creditors to pursue a residential mortgage deficiency. In many states collectors are allowed a certain time to sue the debtor after foreclosure, ranging from 30 days to 20 years. Collecting after the judgment can be stretched for more than 20 years with continuing legal fees, costs, and judgment interest.

If the state law allows a mortgage creditor to delay pursuing the borrower for a deficiency judgment, there is little incentive to sue the borrower. A recent government audit found that the recovery rate for foreclosure deficiencies was a mere one-fifth of 1 percent. The lender gains an advantage by waiting for interest and fees to increase, and time for the borrower to “get back on his feet” financially. A lawsuit for a deficiency judgment can be devastating to a person recovering from a foreclosure, and in many cases this lawsuit arrives without warning.

For those sued for a foreclosure deficiency, a six figure judgment is unthinkable. Bankruptcy is one of the few remaining options to escape the pain of forced repayment through garnishments and asset seizures. For most situations, bankruptcy can discharge the mortgage debt for good.

 

Your Creditors are Coming!

In his famous midnight ride, Paul Revere made phase a simple phrase, “The British are coming!” The Boston silversmith didn’t say much on his ride into the history books, but he said what mattered: the nature of the threat and the way the threat would appear – not by land, but by sea.

 

One of the most important reasons why you need a dedicated bankruptcy attorney is to issue the warning you need when you face financial difficulty: the nature of the threat your creditors pose and the way that threat may appear. So, just how might creditors come if you default on your payments?

 

You probably won’t be surprised to learn that you lenders will come after assets you purchased on credit. Your car, your home and consumer products like a television or furniture may all be subject to repossession or foreclosure.

 

What may surprise you is that your creditors may also come after your intangible assets, such as bank accounts or earned wages. These repossession efforts can be highly disruptive and embarrassing and may result in your family, friends, co-workers and supervisors knowing that you’re experiencing money problems.

 

The bottom line is that if you’re facing financial distress and falling behind in your payments, in a matter of days or weeks you could lose your car, your income and your house. You can prevent the harshest effects of this process, but you need to act promptly and deliberately.

 

Calling the experienced attorneys at Fears Nachawati may be the right first step for you and your family. With years of experience, we know how to advise you on your legal rights with respect to your creditors. Contact us today for your free consultation.

Automatic Stay Violations: Void or Voidable?

When a debtor files bankruptcy an automatic statutory injunction takes immediate effect which prohibits the commencement or continuation of collection actions against the debtor or property of the debtor's bankruptcy estate. The automatic stay is very broad in scope and offers the debtor a “breathing spell” to develop a repayment or reorganization plan, or time for the bankruptcy trustee to effect an orderly liquidation of the debtor's assets. The automatic stay also prevents creditors from a chaotic scramble to obtain the debtor’s assets.

Occasionally, a creditor will collect in violation of the automatic stay. Usually this is done from ignorance. For instance, suppose the debtor filed a bankruptcy petition at 11:59 and the debtor’s home was sold at a non-judicial foreclosure at 12:00. While the creditor did not intentionally violate the automatic stay, the act itself is a violation because it was legally prohibited. The question then arises, is the act void or merely voidable. In other words, did the foreclosure sale have any legal effect, and must it be voided by the court?

Bankruptcy courts around the county disagree whether a collection action in violation of the automatic stay is void (has no legal effect), or is merely voidable (the bankruptcy court must declare the act violated the stay). In our example if the foreclosure sale is void ab initio (void from the beginning), the debtor need only notify the creditor of the bankruptcy filing. If the creditor wants to foreclose on the home, it must first petition the bankruptcy court for relief from the automatic stay in order to proceed.

On the other hand, if the foreclosure sale is merely voidable, the debtor must seek an order from the bankruptcy court voiding the foreclosure sale. The court will consider the circumstances and decide whether to grant the creditor relief from the automatic stay retroactively, which validates the foreclosure sale in our example. A majority of the federal circuits hold that an action in violation of the automatic stay is void ab initio, but a few courts still consider these actions voidable.

Professor Mason Coolet once said, “Procrastination makes easy things hard, hard things harder.” Delay in filing bankruptcy often proves Cooley’s point. Filing early can avoid many problems in your bankruptcy case, including actions by creditors.
 

Don't Let a Zombie House Eat You Alive

A few years ago, TV stock analyst Jim Cramer advised people who are more than 20% upside-down on their home mortgages to simply “walk away.” This flippant advice sounds good on the surface, but defaulting on your home loan and “walking away” from the home can have unforeseen consequences. When you walk away from your home before the bank has completed its foreclosure process on the home, you have continuing responsibilities and obligations as the legal owner.

Many home owners are discovering the problems with the “just walk away” advice. Until the bank receives legal title to your home, you continue to own it. That means you are responsible for upkeep, like lawn care and home maintenance, and may be cited for criminal neglect – even if you no longer live in the home! You may also be responsible for damage to the home from looters. You are responsible for home owner or condo association fees, insurance, and taxes.

There is no legal recourse to make a bank foreclose on your home. There is also no way to transfer title without the bank’s consent (including a quit claim deed back to the bank). Many banks see a foreclosed home as a huge burden because once it receives title and legal ownership, the bank is responsible for maintenance, costs and liability until it is sold to a new owner. More and more banks are choosing to not foreclose, and thousands of homes abandoned by their owners are now sitting vacant.

The press has taken to calling these abandoned homes “zombie houses,” that may be “dead,” but are still dangerous. Even bankruptcy does not transfer title to a zombie house that no one wants. Many debtors are surprised to learn that the bankruptcy court has no authority to force a bank to foreclose or accept transfer of title. If you plan to surrender your home during bankruptcy, you still own it until the bank forecloses.

If you have been threatened with foreclosure, don’t listen to advice from TV “financial experts!” Speak with an experienced attorney and discuss your options.
 

Can Bankruptcy Halt Your Foreclosure?

The short answer to this important question is usually, “Yes, but not always.”

 

Many Americans qualify to file bankruptcy under Chapter 13 of the Bankruptcy Code. For these debtors, Chapter 13 provides them with the opportunity to make up past mortgage payments on a court-supervised repayment plan that more closely matches your financial means with your financial obligations.

 

For those debtors who earn too much income for Chapter 13, Chapter 7 bankruptcy can sometimes provide a way to keep your house. First, the provision of the Bankruptcy Code known as the automatic stay will stall the foreclosure proceedings. Second, if a debtor only has unsecured debt or if he or she can find a way during the bankruptcy proceeding to catch up on the secured lender’s claims, then the house may stay in his or her possession.

 

Unfortunately, for debtors who make too much money for Chapter 13 and who have outstanding secured debt against their home, Chapter 7 may only delay, but not ultimately prevent a creditor’s successful foreclosure proceeding. Where this is the case, you should take care to ask if bankruptcy really is right for you and you may also want to explore whether a private workout may better accomplish your financial objectives.

 

Want to know more about the differences between Chapter 7, Chapter 13, and a private workout, as well as which one may be right for you? The dedicated and experienced attorneys at Fears Nachawati know how to answer these important questions and many more. To get started, talk to our team today. Your consultation is free. 

Show Me The Note

In most states, a common defense to a home foreclosure is the “original note” theory which challenges the validity of a non-judicial trustee sale. In essence, the homeowner demands that the note holder, through the trustee conducting the trustee sale, produce the original promissory note that evidences the mortgage debt. When a promissory note was executed years before the trustee's sale, and has been bought and sold multiple times, it becomes very difficult to produce the original note. Without showing the legal standing, the foreclosure sale must stop. This “show me the note” defense has also been used effectively around the country in bankruptcy during lien stripping cases, motions to lift stay, and valuation cases.

Unfortunately, the “show me the note” defense is not universally applied. Some states, notably Arizona, Washington, and Nevada, have rejected this defense altogether. In 2012, the Arizona State Supreme Court flatly rejected a challenge to the trustee's standing during a foreclosure sale. The issue before the court in Hogan v. Washington Mutual Bank, N.A. was whether Arizona law permits a trustee to foreclose on a deed of trust without the beneficiary first having to show ownership of the note that the deed of trust secures.

The Arizona Supreme Court stated that Arizona is not a “show me the note” state and that nothing in Arizona’s non-judicial foreclosure statutes mandates that a beneficiary of the deed of trust must show possession of, or otherwise document its right to enforce, the underlying note prior to the trustee’s exercise of the power of sale. It said that the “only proof of authority the trustee’s sale statutes require is a statement indicating the basis for the trustee’s authority.” The court noted that “[r]equiring the beneficiary to prove ownership of a note to defaulting trustors before instituting non-judicial foreclosure proceedings might again make the mortgage foreclosure process ... time-consuming and expensive, and re-inject litigation, with its attendant cost and delay, into the process.”

If you are facing foreclosure, you need experienced assistance. A foreclosure is not only a disruption to your family life, it has lasting impact on your finances. It may be time to consider bankruptcy. Filing bankruptcy before the foreclosure sale will stop the foreclosure cold and allow you time to find a new residence. The bankruptcy will discharge the mortgage debt and the lender’s subsequent foreclosure cannot further harm your credit report. Call today and learn how bankruptcy can help you.

 

Plan Your Timing, Prepare for Your Needs

The effectiveness of your bankruptcy may turn on your timing and your needs. With this in mind, it’s important to prepare carefully and time your filing accordingly.

 

Sometimes, a consumer debtors needs to act quickly. If you’re facing the possibility of a home foreclosure, apartment eviction, or car repossession, filing immediately will activate the Bankruptcy Code’s powerful automatic stay provision. As a result, pending legal actions – such as foreclosures, evictions, or repossessions – will stop in their tracks.

 

On the other hand, a consumer debtor sometimes needs to act deliberately. In general, there’s only one shot in the bankruptcy gun. You need to hit your target the first time. Additionally, the Bankruptcy Code’s look-back provision may make you unwind certain monetary transfers that took place in the months preceding bankruptcy. In some cases, waiting just a matter of days or weeks can save you thousands of dollars.

 

Finally, it’s important to speak with bankruptcy and financial professionals to understand more clearly what your financial future will look like after bankruptcy. If you undergo a Chapter 13 restructuring, you may have to pay a portion of your monthly earnings to your creditors. Living within this budget can constrain your lifestyle in new ways. You’ll want to prepare for that change before it comes.

 

Ready to speak with the dedicated professionals and skilled attorneys at Fears Nachawati. Our Dallas-area practice is ready to serve your needs and prepare you for your bankruptcy filing. For your free consultation, talk to us today.

Foreclosure After Surrendering Home In Bankruptcy

It is axiomatic that bankruptcy has a serious affect on your credit. But when facing a foreclosure, the federal bankruptcy laws can at least offer some credit assistance. After enduring the pain of foreclosure, you may be faced with a bankruptcy in order to discharge the house debt. You may be forced into bankruptcy when the value of the property is less than the amount you owe the bank. Consequently, you owe the bank the difference, called a “deficiency balance.” After a quick sale of the house, real estate fees, maintenance costs, insurance costs and other related expenses, the deficiency balance can be tens of thousands of dollars. The bank will sue to collect this balance. That can lead to a foreclosure and a bankruptcy on your credit report.

Thankfully, bankruptcy offers a way to minimize the damages. Filing bankruptcy before the foreclosure sale can stop the foreclosure from ever appearing on your credit report. How? Bankruptcy discharges your personal liability for the loan. When a debt is discharged, the bankruptcy court issues an injunction prohibiting the collection of the debt from the debtor. However, this limited injunction applies only to protect the person, not creditor claims against property like a lien against your house.

Lenders must generally foreclose on home in order to obtain a transfer of ownership. Foreclosure is permitted after the debtor discharges his personal obligation in bankruptcy because the foreclosure is against the property, not against the individual. The lender uses foreclosure to gain ownership of the property, but the action is not against you personally.

Any reference to the foreclosure on your credit report after discharge would be inaccurate and a violation of the federal bankruptcy court’s discharge injunction order. It should not appear as a public record, and not as a foreclosure mark on a trade line. The mortgage trade line should read “discharged” with $0 balance, not foreclosure, with no further activity past the filing date.

If you are facing foreclosure and cannot save your house, consider a bankruptcy filing to stop the foreclosure and ensure a controlled and orderly surrender of your real estate back to the bank. A bankruptcy will prevent a foreclosure from appearing on your credit report and discharge the debt once and for all.

 

Remember Your Pre-Bankruptcy Options

If you’re a homeowner struggling to make your debt payments, you should remember several important rules before you engage in a strategic default, submit to foreclosure, or declare bankruptcy.

 

Rule No. 1: Your home loan may be as much a millstone around your bank’s neck as it is around yours. In recent years, thousands of homeowners have surrendered their homes to the bank or defaulted on their residential mortgage. As a result, the balance sheets of many banks remain clogged with an excessive amount of residential real estate and bad debt. Consequently, many banks are willing to negotiate with their debtors in order to keep the loan and the asset in the debtor’s hands – and off theirs.

 

Rule No. 2: A home loan is a contract with a financial institution. And as with any deal, the parties can voluntarily change the terms even after they sign the contract. Whether you and your bank agree to a forbearance, a loan modification, a sale, a short sale, or a deed in lieu of foreclosure, these kinds of ameliorative efforts can give you the breathing space you need to avoid a more drastic and permanent decision.

 

Rule No. 3: An attorney can often help you sort through these and many other challenging financial and legal decisions. Renegotiating your lending agreement carries with it the possibility of altering your legal rights. And many distressed debtors ultimately need a bankruptcy or foreclosure option, despite successfully changing the terms of their loan. As you consider how you should proceed, an attorney can help you understand your choices and help you make the right one.

 

The attorneys at the Dallas law firm of Fears Nachawati have years of experiencing advising distressed debtors. Whether you need a loan modification, a strategic default, or outright bankruptcy, we can guide you through those important decisions. Talk to our professionals today to learn about your next steps.

Strategic Default: A Recourse Worth Considering

More than you might realize, the difference in two little words – “recourse” and “non-recourse” – may be what separates you from thousands of dollars in savings.

 

If you’ve made a financed real estate purchase, such as buying a home on credit, the loan associated with the asset you purchased is either “recourse” or “non-recourse” debt. Determining whether your residential or commercial real estate debt is recourse or non-recourse is pretty easy – your loan agreement should state the nature of the obligation.

 

What does it mean if you have a recourse loan? Unfortunately for the debtor, it means that you have fewer rights and more risk. In the event of default, a recourse note entitles the lender to not only foreclose against the real property that secures the obligation, but in the event that the value of the note exceeds the value of the foreclosed property, the lender may also pursue the debtor personally for the remaining debt. That is, the bank may take recourse against the debtor.

 

On the other hand, a non-recourse loan limits the debtor’s default risk to the underlying property. If the debtor’s real property securitizes a non-recourse obligation, the lender’s only remedy in the event of default is the underlying property. In other words, if the value of the outstanding loan exceeds the value of the property, default will leave the bank out of luck on the remaining debt – and the debtor will be free of making further payments.

 

Enter an important debtor remedy: the strategic default. In the event that a property owner owns real estate that securitizes a non-recourse obligation and the owner is having trouble making payments, a strategic default may be an appropriate approach to consider. Specifically for homeowners whose homes are “underwater” (i.e. the value of the note exceeds the value of the property), a strategic default may make sense.

 

Of course, before you make any life-changing financial decision, you should consider speaking to the lawyers and professionals at Fears Nachawati. With years of experience advising debtors on issues of bankruptcy, restructuring, and debt solutions, we’re prepared to help you understand all of your options. Call us today for a free consultation.

Debt Collection Lawsuits Often Flawed

The recent foreclosure crisis revealed serious abuses by mortgage companies and collection firms. In many cases lenders would produce inaccurate documents without review, a practice called “robo-signing.” In other cases it was not clear if the suing lender was the rightful owner of the mortgage note. These shoddy practices resulted in a huge government attack on the foreclosure process. Earlier this year the federal government and 49 state attorneys general reached a $25 billion settlement with the nation’s five largest mortgage servicers to redress what authorities describe as “loan servicing and foreclosure abuses.”

Now the New York Times is reporting the same type of abuses in the debt collection industry. In many cases consumer debts are not investigated and important documents are not reviewed prior to filing a lawsuit. “I would say that roughly 90 percent of the credit card lawsuits are flawed and can’t prove the person owes the debt,” said Brooklyn civil court judge Noach Dear, according to the New York Times.

Even when the debt is legitimately owed, companies may not be able to prove the account due to poor record-keeping. Collection lawsuits are often accompanied by an affidavit from an individual claiming to be the “custodian of records” who “reviewed the account.” This affidavit is usually not produced in the manner described by state law, nor is it accurate. The New York Times article states that “The Office of the Comptroller of the Currency is investigating JPMorgan Chase after a former employee said that nearly 23,000 delinquent accounts had incorrect balances.”

Unfortunately, defending a collection lawsuit takes time and money. Most consumers cannot successfully navigate the court process and protect their rights, and hiring an attorney is cost prohibitive. Consequently, big banks and the collection firms face very few challenges to their fraudulent filings. The court enters a judgment against the debtor which can lead to wage garnishments and frozen bank accounts.

If you are facing a collection lawsuit, the federal bankruptcy laws can stop a lawsuit and discharge the debt without a judgment against you. Speak with an experienced bankruptcy attorney and review your options. Bankruptcy is not always the best choice, but it is powerful relief for people who need it.
 

Real Estate Taxes Owed For Property Surrendered in Bankruptcy

Perhaps the best feature of a personal bankruptcy is the opportunity to get a fresh start. That means discharging overwhelming debts that are eating up your monthly income, like medical bills and credit cards. It also means freeing yourself from lingering debts like an upside-down vehicle or underwater real estate. Since the housing bubble burst and real estate values have dramatically fallen, "walking away" from underwater property during bankruptcy is often your best option.

Surrendering real estate back to the lender during bankruptcy does not transfer ownership. That is accomplished by deed, either from the debtor to the bank, or by foreclosure. In the meantime, you own the property. Consequently, any real estate tax bill will be sent to you as the owner. Receiving this bill can cause great anxiety since the mail comes in your name.

Fortunately, the real estate tax debt belongs to the property, not to the person - it "runs with the land." You are not personally obligated for the property taxes. This tax debt will be paid by the creditor after the creditor takes ownership. If your lender attempts to pressure you into paying a tax debt by "advancing" money to pay the debt, contact your bankruptcy attorney immediately. You are not obligated to pay real estate taxes for property you surrender in bankruptcy.

Transferring ownership of real estate during bankruptcy often takes time and the assistance of an experienced bankruptcy attorney. Your attorney will explain the process and act as your legal representative during the surrender process. Don’t be pressured into paying debts that are legally discharged! Learn your rights from your attorney and protect yourself with the power of the federal bankruptcy laws.
 

How Chapter 13 Bankruptcy Can Help

Chapter 13 is known by several different names: reorganization plan, wage earner's plan, and repayment plan. Whatever the name, filing a Chapter 13 bankruptcy indicates an intention to repay creditors over three to five years. The debtor makes a monthly payment to a bankruptcy trustee, who in turn pays the creditors.

Save your home
Many debtors file Chapter 13 to stop the home foreclosure process. The moment the bankruptcy is filed a foreclosure action must stop. The debtor is given an opportunity to propose a plan to pay the delinquent mortgage payments over three to five years. During this repayment period the debtor must also pay any mortgage payments due after the bankruptcy is filed (called post-petition payments). Failure to make post-petition payments can result in losing the bankruptcy protection and the bank may resume the foreclosure action.

Cram-down
The Chapter 13 debtor can ask the bankruptcy court to modify and reduce a secured loan to the value of the security. This process, commonly called a “cram-down,” is done when the amount of the secured loan is significantly more than the value of the property. The resulting benefit is a lower monthly payment.

For example, say the debtor owes $20,000 on a car loan, but the car is worth only $10,000. The loan can be “crammed-down” to an allowed secured debt in the amount of $10,000 only. The debtor pays only the $10,000 during the Chapter 13 bankruptcy and the remaining unsecured portion is discharged at the end of the case. Every situation is different, so be sure to discuss your options with your bankruptcy attorney.

Repayment of non-dischargeable obligations
Sometimes a Chapter 13 is used to repay debts that cannot be otherwise discharged. Tax debt and child support debts are two common debts that get paid under the supervision of the bankruptcy courts.

What you expect during a Chapter 13 bankruptcy
Once the debtor files a bankruptcy, the bankruptcy court automatically issues an injunction prohibiting creditors from collecting from the debtor. This “automatic stay” also stops foreclosure, lawsuits, and garnishments. Within 15 days of the filing the debtor must file a proposed repayment plan with the court. The plan is sent to the U.S. trustee and to all creditors for review. The plan must provide for regular fixed payments to the trustee who then distributes the funds to creditors according to the terms of the plan (which may be less than full payment on their claims). It is common for a chapter 13 plan to propose to pay secured creditors in full and nothing to unsecured creditors. This largely depends on whether there is “extra” money at the end of the month after the debtor’s secured creditors and monthly expenses are paid.

If you need assistance from the federal bankruptcy laws, contact an experienced bankruptcy attorney to review your options. The bankruptcy code offers powerful relief to deserving people in bad financial situations.
 

Bankruptcy Can Help Distressed Homeowners

Reuters.com recently published a story predicting an increase in home foreclosures in 2012. Banks slowed their foreclosure processes in 2011 due to the "robo-signing" scandal, but this past February five major banks settled a major lawsuit with 49 U.S. states. Now there are signs that foreclosures are ramping up again. One mortgage servicing provider recently reported "foreclosure starts" had increased 28 percent in January.

The Reuters article quoted RealtyTrac CEO Brandon Moore as saying that the "numbers point to a gradually rising foreclosure tide as some of the barriers that have been holding back foreclosures are removed." This new wave of foreclosures targets middle class homeowners hit hard by tough economic times. "The subprime stuff is long gone," said Michael Redman of 4closurefraud.org. "Now the folks being affected are hardworking, everyday Americans struggling because of the economy."

Current data estimates around 13 million Americans are unemployed and millions more are under-employed making it difficult to pay a monthly mortgage. To make matters worse, many homeowners are struggling with homes that are "underwater" - the market value of the home is worth less than the amount owed.

The federal bankruptcy process can help a homeowner manage a distressed home situation. First, the Bankruptcy Code allows the debtor to strip away junior mortgages that are entirely unsecure. For instance, if your home is worth $200,000, and you owe $200,000 or more on your first mortgage, any junior mortgage or judicial lien can be stripped off during a Chapter 13 bankruptcy. This process is especially useful to homeowners struggling with HELOC loans.

Second, a Chapter 13 bankruptcy can provide the homeowner with time to catch up past-due mortgage payments or property taxes. During a Chapter 13 bankruptcy the debtor is allowed up to five years to pay off mortgage arrears while the bank is prohibited from foreclosing. Finally, if you are unable to keep your home, a Chapter 7 bankruptcy will allow you time to surrender your home back to the lender on your terms.

Bankruptcy is a legal shield that can protect you during tough financial times. If you are facing foreclosure, speak with an experienced bankruptcy attorney and discuss how the federal bankruptcy laws can help you.

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Top 5 Questions About Chapter 13 Bankruptcy

The chief distinguishing characteristic of a Chapter 13 bankruptcy is its repayment plan. Unlike a Chapter 7 bankruptcy case, the Chapter 13 debtor submits a proposal to the court to repay creditors over three to five years. There is no repayment plan in a Chapter 7 bankruptcy case. Because of the repayment plan, Chapter 13 cases are generally more complicated than Chapter 7 bankruptcies, but the debtor’s relief can be more powerful. With this in mind, here are the top five questions clients ask when considering Chapter 13 bankruptcy:

Will I lose any property?
No. The Chapter 13 trustee will not take property from you. The law allows you to keep and “exempt” a certain amount of property during your bankruptcy case. If you have property in excess of the legal exemption amounts, you are required to pay unsecured creditors an amount equal to the non-exempt equity during your repayment period.

How can I keep my car if I owe more than its worth?
If your vehicle loan was made more than 2-1/2 years before your bankruptcy is filed, you can “cram down” your loan to the fair market value of the vehicle. For instance, if you owe $15,000, but your car is only worth $9,000, the bankruptcy court will separate the debt into a secured amount of $9,000, and an unsecured debt in the amount of $6,000. You must pay the secured debt in order to keep your vehicle, but the remaining unsecured debt will be paid at the same rate as other unsecured creditors (like credit cards and medical bills). Usually this payment is nothing or a few cents on the dollar. At the end of the case most unsecured debts are discharged.

My house is in foreclosure. Can I keep it?
If you are behind on mortgage payments, a Chapter 13 bankruptcy will allow you to “catch up” the arrears over three to five years. Additionally, while you are not able to “cram down” a mortgage on your home, if you have a junior (second or third mortgage, or tax or judgment lien) that is entirely unsecured, Chapter 13 may afford a significant benefit. The bankruptcy judge can strip off the lien and the junior debt becomes an unsecured debt, payable at the same rate as other unsecured creditors.

How much is my monthly payment?
Your monthly payment will largely depend on your ability to pay your creditors. The bankruptcy law requires that you pay priority creditors first. Priority creditors include domestic support obligations and most taxes. Any secured property you want to keep is paid next. Finally, any “extra” income (called “disposable” income) must be paid to unsecured creditors.

What if my income changes during the repayment period?
Immediately report any changes in income to your attorney. If there is a substantial increase, your monthly payments will likely increase. Similarly, if your income is reduced, your monthly payment may decrease. If you are unable to complete your plan because of a reduction in income, you may qualify for early discharge, or your plan can be modified.

Chapter 13 is a very flexible legal tool for restructuring personal finances. Your attorney can explain how the federal bankruptcy code can provide relief from overwhelming debt and help you on your way to a bright financial future.

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Transportation During Chapter 7 Bankruptcy

For most people having reliable transportation is a necessity. A vehicle is required to get to work, school, or to an appointment at the doctor. Most of us can't imagine doing without a personal vehicle. Filing bankruptcy doesn't mean you have to give up having a car, truck, or motorcycle.

The first question is whether you have equity in the vehicle you own. Equity is simply the difference between the amount you owe and what your vehicle is worth. If you owe more than your vehicle is worth, you have "negative equity," which is really no equity at all. The bankruptcy laws allow you to keep a reasonable amount of vehicle equity. If this amount is not enough to fully protect the vehicle, you may use other legal exemptions to protect your vehicle equity. Finally, if you have more vehicle equity than you can legally protect, you can purchase the equity from the Chapter 7 trustee.

The second consideration is your lender. There are three options for dealing with vehicle loans in Chapter 7 bankruptcy: reaffirmation, redemption, and surrender (a controversial "fourth option" is available in some states and circumstances. Speak with your attorney to see if your situation qualifies).

If you wish to continue the monthly payment, you can execute a reaffirmation agreement. This is a contract that states that the debt you owe the lender will survive the bankruptcy and the lender agrees to not repossess the vehicle. In some cases you can use a reaffirmation agreement to rewrite the original agreement. This can be useful if you have missed a few payments or need to reduce your interest rate.

If your vehicle is substantially "upside down," you may want to consider a redemption. In a redemption, the debtor pays the lender the fair market value of the vehicle. The payment is made in a lump sum which usually requires another loan at a high interest rate. However, for a car that is worth thousands less than what is owed, the new monthly payment could be hundreds less - even with the high interest rate.

The final option is surrender. Sometimes just walking away from a lemon or a bad deal is the best choice. In a Chapter 7 bankruptcy, you simply turn over the car to the lender and owe nothing. There is no prohibition against buying a different vehicle during or after your bankruptcy case. If you need to purchase a different vehicle, speak with your bankruptcy attorney.

The United States bankruptcy laws contain powerful provisions for protecting property and reducing debt. There are many options available in Chapter 7 or Chapter 13 cases. Consult with an experienced bankruptcy attorney and explore your options under the federal law.
 

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Dismissing Your Bankruptcy Case

The most common goal in bankruptcy is the discharge; however the discharge is not every debtor’s goal. For some, the goal of bankruptcy may be to use the automatic stay to postpone a legal action, like a foreclosure or a lawsuit, while the debtor negotiates a settlement. For others, it may mean buying time to refinance a debt. When the objective is met, these debtors want to dismiss the bankruptcy case. The bankruptcy code contains special provisions for dismissing a bankruptcy case.

A Chapter 7 debtor is not able to dismiss the case without the permission of the bankruptcy judge. If the case does not contain assets (a “no asset case”), approval is easy to obtain. On the other hand, if the case is an asset case and creditors will receive money, the trustee will likely object to the dismissal and request permission to distribute the asset proceeds to your creditors. This is important for a Chapter 7 debtor who receives a large sum of money like an unexpected inheritance. The debtor cannot just say “forget it” and walk away from the bankruptcy case and keep the money.

A Chapter 13 debtor has an absolute right to dismiss the bankruptcy case. The theory behind this is that a debtor should be able to stop the bankruptcy and repay creditors on his or her own terms. The bankruptcy court will still look at whether the debtor is acting in good faith. If the debtor is not acting in good faith, the case may be converted involuntarily to a Chapter 7.

While the discharge remains the crown jewel of the bankruptcy process, it is not the only reason to consider a personal bankruptcy. An experienced bankruptcy attorney can discuss the advantages of the federal bankruptcy code and how it can help you and your situation. Your bankruptcy attorney can work with you to plan your strategy to eliminate debt and reorganize your finances.
 

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Advantages of Chapter 13 Bankruptcy

The most common types of personal bankruptcy are Chapter 7 and Chapter 13 bankruptcy. A Chapter 7 bankruptcy is an “erase-your-debts-and-start-fresh” bankruptcy. The Chapter 7 case typically takes around four to five months and unsecured debts are discharged. On the other hand, Chapter 13 cases last three to five years and all disposable income is paid to unsecured creditors. So why would any reasonable person choose Chapter 13 over Chapter 7? There are several differences between Chapter 13 and Chapter 7 which offer special advantages under the right circumstances.

The most significant advantage, and perhaps the main reason many debtors choose Chapter 13, is the opportunity to save a home from foreclosure. Chapter 13 allows the debtor to cure overdue mortgage payments over the life of the repayment plan (three to five years). During a Chapter 13 bankruptcy, the debtor may also take advantage of any home loan modification program that he or she is otherwise qualified to receive. Finally, a home that has a second or third mortgage that is completely unsecured may qualify for lien stripping in Chapter 13. Once the junior mortgage is stripped off, the debt is paid at the same rate as other unsecured debts and the remaining balance is discharged at the end of the bankruptcy case.

Another advantage is the ability to “cram-down” a motor vehicle loan to the fair market value of the vehicle. The loan principal of the qualifying vehicle loan is reduced and the payment is stretched over the life of the repayment plan. High interest may also be crammed down to the trustee’s interest rate, which could mean a significant savings in monthly payments.

During a Chapter 13 bankruptcy case, any co-debtor or co-signor is protected from creditor collector and harassment. This provision protects a co-debtor from harm while the debt is repaid in bankruptcy.

Chapter 13 also acts like a court ordered consolidation loan. The bankruptcy court judge orders the creditors to accept payments during bankruptcy, whether they like it or not! The debtor has no direct contact with the creditors during the case. If the creditor has an issue with how its debt is treated in bankruptcy, the creditor must take it up with the judge.

Chapter 13 can be a powerful legal tool for some debtors, but it is not for everyone. The federal bankruptcy code contains many provisions that are specifically suited to help individuals recover during financial crisis. The protection is broad and the relief is very real. If you are struggling financially, speak with an experienced bankruptcy attorney and learn how the bankruptcy laws can help you.
 

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How To Walk Away From Your Home

There are many reasons that an individual would consider "walking away" from a home. Before abandoning your home, speak with a qualified bankruptcy attorney about the consequences. Your attorney can discuss alternatives for keeping your home such as loan modification, bankruptcy lien stripping, or Chapter 13 repayment. If surrendering your home is the best option, then a short sale, a deed in lieu of foreclosure, or even renting out your home may be better solutions than walking away. In most cases staying in your home as long as possible is the best choice. Be sure to consult with an attorney and examine all of your options before you make a decision.

If you decide to walk away from your home, be aware that you are still the legal owner. Consequently you should maintain insurance on the property until the property is transferred. Many things can happen to an empty house. Someone may be injured on the property, there may be fire or flooding, the roof may leak, or the pipes may freeze. If the lender takes out insurance on the property (“force-placed” insurance), you are not covered. Force placed insurance only covers damage to the property.

Filing bankruptcy does not mean that you no longer own the property. You may be liable for a claim or an accident that happens on the property after you file bankruptcy and before ownership is transferred. A claim that arises after you file bankruptcy is generally not dischargeable! Additionally, some condominium or homeowners association fees that occur after you file bankruptcy may not be dischargeable, and there is the possibility of tax consequences. Speak to an experienced attorney to determine whether you will be responsible for these fees and taxes.

Aside from insurance, there are other things you can do to protect yourself and the property. First, be sure that all windows and doors are locked. Second, ensure that all mail and newspaper service are forwarded or cancelled. Do not advertise that the house is vacant. Third, turn off lights and unplug appliances. Fourth, turn off air conditioning and turn down heat to a low level. Maintaining a modicum of heat is necessary to prevent walls and pipes from freezing. Fifth, remove any swing sets, trampolines, play gyms, or other items that might attract children into your yard. Finally, arrange for someone to inspect the home periodically and take care of any yard work. Failure to maintain the property may result in fines or citations from local authorities.

Document all of the activities surrounding the home including the date that you move out, and the condition of the house. Note any damage, and take digital pictures of the inside and outside of the house. Do not remove anything that is permanently attached to the property. Toilets, built-in appliances, and other fixtures are a permanent part of the property and removing these items may cause you legal headaches in the future.

Walking away from your home can lead to legal complications. Explore your options with your attorney before making a decision. Your attorney can help you reach the best decision for your family, and help manage any potential legal liability.

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Foreclosure Mill Gets its Due

 Foreclosure is always ugly business, but public complaints from homeowners alleging sloppy research, unethical filings, and outright lies, have made law firms that specialize in foreclosure especially villainous in the public eye. While many foreclosure firms may conduct their work with the honesty and diligence that is expected when practicing law, there are some that are less than, well, “sympathetic” to homeowners experiencing financial difficulty.

Last October the New York Times published photos of a Halloween party at the law office of Steven J. Baum. The Baum law firm handled around 40 percent of the state’s 46,572 mortgage foreclosures in 2010. The photos show an office costume party in 2010 where employees dressed up as homeless people and squatters, and decorated the office to resemble foreclosed properties.

The Baum law firm has been notoriously called a foreclosure mill by the media, and has been the subject of several complaints. Recently the firm agreed to pay a $2 million settlement in response to allegations that it had “filed misleading pleadings, affidavits, and mortgage assignments in the state and federal courts in New York.” In November Fannie Mae and Freddie Mac cut off business with the firm, and this past week it announced that the Baum law firm is closing its offices.

Certainly not every foreclosure firm is heartless. However, when the wheels of the foreclosure machine are set into motion, it is often difficult to find a person who can stop it. If you are experiencing trouble paying your mortgage, there are options:

• Home Affordable Refinance Program (HARP) is a federal program that offers homeowners a chance to refinance with their banks before they default and the home goes into foreclosure.
• Chapter 13 bankruptcy. The bankruptcy court cannot modify your first mortgage, but it can eliminate your second under certain circumstances. Chapter 13 can also provide time to negotiate a modification with your lender, or repay mortgage arrears over three to five years.
• Chapter 7 bankruptcy: If discharging unsecured debt will free up money for your mortgage payment, Chapter 7 may be the answer. You are also able to discharge your home mortgage and walk away from the house.

Don’t be pressured by foreclosure firms! You have rights and options. An experienced bankruptcy attorney can explain your legal options and help you decide on a path that is right for you and your family.

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Report Indicates That Foreclosures May Soon Increase

September foreclosure filings fell 38% from one year ago, according to information released by RealtyTrac.com. This may seem like good news, but there is reason to believe that the foreclosure rate may soon increase.

First, the foreclosure process came under attack during the past year prompting many banks to slow or temporarily stop foreclosure proceedings. Banks and mortgage servicers have taken corrective actions over the past twelve months, and there is no evidence that previous sloppy practices are continuing. On the contrary, there is evidence that banks are being more cautious in dealing with foreclosures. The time the average foreclosure takes has increased to 336 days, up 18 days from the previous quarter.

Second, while the number of foreclosures is down for the year, the number of September foreclosure filings increased 6% from August. “This marginal increase in overall foreclosure activity was fueled by a 14% jump in new default notices, indicating that lenders are cautiously throwing more wood into the foreclosure fireplace after spending months spent trying to clear the chimney of sloppily filed foreclosures,” says RealtyTrac Chief Executive James Saccacio.
“While foreclosure activity in September and the third quarter continued to register well below levels from a year ago, there is evidence that this temporary downward trend is about to change direction, with foreclosure activity slowly beginning to ramp back up," Saccacio said in a statement.
If you find yourself unable to pay your mortgage and facing foreclosure, get professional help. An experienced bankruptcy attorney can provide you with options to catch up payments over three to five years, modify your existing mortgage, strip away an entirely unsecured junior lien, or even walk away from your house and the debt on your own terms.

Once a bankruptcy case is filed, the federal law stops all collection action – even foreclosure! Bankruptcy gives you a “breathing spell” to organize your finances and propose a plan to restructure your debt. In many cases debtors are able to save their homes while discharging thousands of dollars in unsecured debts, including credit cards, personal loans, and medical bills.

Don’t be another statistic! Get the information you need to make a sound financial decision regarding your home. Call an experienced attorney today and learn how the federal bankruptcy laws can help you!
 

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Bankruptcy Can Provide Leverage to Underwater Homeowner

The Washington Post recently reported that the Obama administration is not planning another large federally funded program to relieving the troubled housing market. This news comes despite the President's acknowledgement that the billions of dollars already spent to bolster the weak housing market has not solved the problem.

The Post reports that the housing market is suffering from a glut of inventory. The article cites David Stevens, head of the Mortgage Bankers Association, who says that it would take more than nine months to sell all of the homes on the market at the current sales rate. To add to this grim news, industry statistics suggest that more than four million homeowners are having trouble paying their mortgages.

In direct opposition to promises made to the federal government, many banks have been reluctant to write down the balances of underwater mortgages. In some cases banks have misled homeowners into spending their savings with false promises of modifying their mortgages. So what can a homeowner do to take control?

The federal bankruptcy law can restore balance between the struggling homeowner and the bank. Filing a bankruptcy will immediately stop the foreclosure process, and provides time to consider available repayment options. A Chapter 13 bankruptcy case can force a creditor to accept monthly payments for mortgage arrears over a three to five year period. Additionally, an entirely unsecured junior mortgage can be stripped away and included in a discharge as an unsecured debt.

For those debtors with underwater mortgages, the bankruptcy discharge acts as a hammer during the negotiation process. If the lender refuses to negotiate, the homeowner can walk away through a Chapter 7 or 13 bankruptcy discharge with a fresh financial start. Bankruptcy debtors are also eligible to participate in loan modification programs. Finally, a Chapter 7 case provides an opportunity to negotiate a new contract between the lender and borrower in the form of a reaffirmation agreement.

If you are experiencing trouble with your home mortgage, consult with an experienced Texas  bankruptcy attorney and review your options. The federal bankruptcy law provides a distressed homeowner with options to cure a serious financial problem.
 

Banks Are Not Playing Fair During Home Loan Modification

National banks that took federal bail-out money also agreed to participate in government home modification programs. These banks have created in-house loan negotiators to assist in home-loan modifications, which may reduce loan principle or interest to adjust the loan to an affordable rate. Many American homeowners have applied for these programs, but few have been approved. In many cases the empty promise of home loan modification leaves the homeowner in a worse position than when he started.


It has become clear that these banks are simply not playing fair. Several lawsuits have been filed against national banks alleging fraud. A federal lawsuit was recently filed by the State of Nevada Attorney General against Bank of America, the nation's largest home loan servicer, alleging deceptive practices. Additionally, a class-action lawsuit against Bank of America is pending in Massachusetts federal court. These suits claim that Bank of America deceived consumers into depleting their savings by making mortgage payments based on false hopes they'd be eligible to modify their home mortgages. The lawsuits allege that BOA accepted $25 billion from the U.S. government in 2008 as part of the Troubled Asset Relief Program (TARP), but has failed to participate in programs such as the Home Affordable Modification Program (HAMP) aimed to minimize foreclosures.

 

If you are in need of a home modification, review your options with an experienced bankruptcy attorney. Many bankruptcy debtors are able to strip away a second or third mortgage, or pay past-due payment over three to five years. Bankruptcy debtors can also apply for government programs such as HAMP during the bankruptcy case, while under the protection and supervision of a federal bankruptcy court judge.
 

Homeowners Foreclose On Bank of America

 Call it poetic justice, or even karma. . .

During the past few years Bank of America has been at the subject of harsh criticism for business practices that range from the mean-spirited (such as doubling credit card interest rates without notice, up to 28% for cardholders in good standing), to irresponsible (such as foreclosing on the wrong homes), to even fraudulent (such as the recent robo-signing scandal involving mortgage documents). Bank of America is the nation’s largest servicer of mortgage loans, and the second largest mortgage loan originator. You’d think good record keeping would be important to such a large company, but apparently mistakes abound at Bank of America.

Take for example the case involving Florida couple Warren and Maureen Nyerges. In 2009 the couple moved from chilly Cleveland, Ohio, to warm Naples, Florida. They purchased a foreclosed home from Bank of America and paid $165,000 cash. However, in February 16, 2010, Bank of America filed a Complaint to Foreclose on Mortgage against them, claiming the Nyerges owed almost $141,000 in unpaid mortgage debt.

Warren Nyerges, 46, a former sheriff’s deputy in Ohio, spent months trying to dismiss the suit and clear up Bank of America’s error. In April of 2010, the lawsuit was dropped, and in December the Nyerges were awarded $2,534 in attorney fees. The bank did not respond to the repeated requests to pay the court judgment. Warren called the bank, sent certified letters, called the bank’s attorney, but nothing worked. Then, in January, he hired an attorney to pursue the case. The attorney sent letters and made phone call, and still Bank of America failed to respond or pay the judgment.

On June 3, the attorney for the Nyerges, accompanied by Collier County deputy sheriffs and a moving company, arrived at a local branch of Bank of America and presented the bank manager with a writ of execution to seize assets: either pay up or the movers will start taking things. An hour later checks were cut to satisfy the court judgment.

This may seem to be an extreme example of one case that has fallen through the cracks, but the truth is that banks make errors regularly. In Utah and Nevada courts issued foreclosure injunctions against Bank of America for improper practices. Other banks have also had their share of problem in producing mortgage documents and verifying that the bank is the rightful holder of the mortgage.

If you are facing foreclosure, don’t get steamrolled by the bank! You have legal options to negotiate a lower payment or possibly strip away a junior mortgage. Call today and discover how the federal and state laws can help you save your home and protect your rights.

Homeowners Have Options for Underwater Mortgages

If you are a homeowner who owes more money on your mortgage than your home is worth, there are a several options for saving your home. One of the latest is an $11 billion program through theFederal Housing Administration called "Short Refi." Under this program a non-FHA borrower may be able to obtain a new FHA-insured mortgage. 

To qualify for the Short Refi program, the homeowner must be current on the monthly mortgage payments. The new primary FHA-backed loan cannot exceed 97.75 percent of the value of the property; and the second mortgage cannot exceed 15 percent of the property value. Additionally, the lender must agree to write off at least 10 percent of the loan’s principal balance.

Fannie Mae and Freddie Mac loans do not qualify for the Short Refi program. The New York Times reports that 23 lenders have signed on to the Short Refi program and are offering refinancings. Notable non-participants are Bank of America, Citibank, and JP Morgan Chase.

There are several programs available to save an underwater mortgage, so the homeowner is not stuck with a “one-size-fits-all” refinancing dilemma. One federal refinance program that has seen some recent success is the Home Affordable Refinance Program (HAMP). Refinancing a mortgage under HAMP during bankruptcy is specifically authorized and can save the homeowner significant money when combined with a bankruptcy discharge. Additionally, debtors in Chapter 13 bankruptcy may be able to strip off a second or third mortgage if the loan is entirely unsecured. For instance, if the value of the home is $200,000, and the first mortgage is $200,000 or more, then any additional mortgage or lien on the property would be entirely unsecured and could be stripped off during Chapter 13 bankruptcy.

If your home is underwater and you are struggling with debt, speak with an experience bankruptcy attorney and discuss your options. In many cases you can discharge your unsecured debt through bankruptcy and refinance or modify your underwater home loan to new, affordable terms. Get the facts about rescuing your underwater mortgage today.

Foreclosure, Pets, and Bankruptcy

The economic downturn has had a far-reaching affect. The mortgage crisis created a new victim: the family pet. As more families lost their homes to foreclosure, more pets were abandoned or left at animal shelters. USA Today reports that some pet owners are leaving pets in empty houses and garages with some food and water. Often these abandoned animals aren't found for days or weeks and are dead or dying.

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.

Short Sale Tax Consequences

A short sale is the sale of real estate for less than the balance owed on the property. Short sales are common in today's real estate market, where home prices have fallen and the home owner is no longer able to pay the mortgage loan. A short sale takes cooperation between the home owner and the lender to sell the property at a loss. Both parties must consent to the sale. A short sale can avoid a foreclosure, which can be mutually beneficial to the parties. The lender avoids the expense of a foreclosure and the home owner avoids the negative impact on personal credit.

Short sales were seldom used by homeowners prior to the mortgage crisis because a short sale results in a deficiency balance obligation to the homeowner. The home owner was sometimes sued for the difference between the amount owed on the home and the short sale price, or, more commonly was taxed by the IRS on the amount "forgiven" by the lender. Either way, a short sale created another heavy burden on the home owner.

 

In response to the mortgage crisis, the Mortgage Forgiveness Debt Relief Act was signed into law in 2007 which excludes from income a discharge of debt on a principle residence. Debt forgiven by a lender in connection with a foreclosure, refinance, or short sale in calendar years 2007 through 2012 is eligible for this relief. Up to $2 million is excluded ($1 million if married filing separately). This relief only applies to a principal residence, and does not include a second home, credit cards, or a car loan.

 

A forgiven debt is generally taxed as income to the tax payer, but that is not always the case. The most common exclusions of this tax are: (1) if the tax payer was insolvent immediately before the debt was forgiven; (2) if the debt was discharged in bankruptcy; or (3) if the debt is a qualified principal residence indebtedness until 2012.

 

If you are struggling with a home mortgage and need to walk away, consult with an experienced bankruptcy attorney and learn how the law can work for you. Your attorney can explain your options and together you can make the decisions for a better financial future.

How to Walk Away From a Mortgage

Realizing that you can no longer pay for your home means that you have difficult decisions to make.  While modification and even lien stripping in bankruptcy may be options for some, if you truly cannot afford to keep your home, you must decide on the best way to walk away.

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.

Fears & Nachawati Bankruptcy Law Offices

4925 Greenville Ave Suite 715, Dallas, TX 75206 (214) 890-0711
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The Decision to Surrender Your Home During Bankruptcy

The traditional wisdom for debtors in bankruptcy was to protect your home and discharge unsecured debts.  In some cases, bankruptcy attorneys advised surrendering a vehicle and eliminating the monthly auto payment in order to afford the home mortgage.  Back when real estate prices were appreciating at staggering rates, that wisdom was sound advice.  It was important to protect an asset that was appreciating quickly and could be used to secure a family’s financial future.

 

Unfortunately, times have changed.

 

Over the past few years housing prices have flattened, or even depreciated.  In many areas home prices have dropped significantly.  For a debtor who is upside-down on a home loan, it usually doesn’t make sense to try to dig out of negative equity and continue to pay on a home that is a liability, not an asset.

 

If your mortgage is stressing your family’s budget, it may be wise to walk away.  It is important to consider surrendering your home during bankruptcy and renting rather than continuing to pay a burdensome mortgage payment, taxes, insurance, home repairs, and maintenance.  The question to answer is whether walking away will save you money in the short run and the long run.

 

One tool for this analysis is provided free of charge at Trulia.com.  Trulia maintains a rent vs. buy calculator that compares the cost of buying a home against the costs of renting.  Using the calculator you can determine whether keeping your home is a smart financial decision.  Trulia also publishes a Rent vs. Buy Index, which tracks whether buying a home or renting is less expensive in America's 50 largest cities, based on current market conditions.

 

Deciding whether to walk away from a home is often difficult, but is an important consideration for any home owner facing bankruptcy.  When a debtor surrenders property in bankruptcy there is generally no financial consequence to the debtor, and the debt is discharged by the bankruptcy court.  If you are considering surrendering your home during bankruptcy, speak with an experienced attorney and discuss the advantages and disadvantages of the process.  Your bankruptcy attorney can help you reach a decision that is right for you and your family.

 

Fears & Nachawati Law Offices

4925 Greenville Ave Suite 715, Office 1, Dallas, TX 75206 (214) 890-0711  Google Reviews   |  fnlawfirm.com  |  Directions

 

"Foreclosure-Gate" Causing Chaos In The Mortgage Industry

Recently allegations have been made against several prominent mortgage lenders claiming the use of flawed and in some cases fraudulent documents during the foreclosure process.  In one GMAC Mortgage has been accused of using a “notary-mill” to crank out upwards of 10,000 foreclosure documents each month without reviewing the documents.  Similar accusations have been leveled at Bank of America.  In states that use judicial foreclosure, this activity amounts to a fraud upon the court and is illegal.

 

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.

Fears & Nachawati Law Offices

4925 Greenville Ave Suite 715, Office 1, Dallas, TX 75206 (214) 890-0711  Google Reviews   |  fnlawfirm.com  |  Directions

 

Dallas-Fort Worth area sees decrease in foreclosure filings in February

 

The Dallas News reports that the Dallas-Fort Worth area has seen a decrease in foreclosure filings in February, according to Foreclosure Listing Service.

Home foreclosure postings for the four-county area (Dallas, Tarrant, Collin and Denton) totaled 4,695. That’s a 20% decrease from the nearly 6,000 postings recorded in January.

This month’s number of postings also represents a 4% decrease from February of last year. In fact, it’s the lowest foreclosure total for a February sale in three years in the Dallas-Fort Worth area.

The largest decline in foreclosure filings was seen in Collin County, where postings were down 9% from a year ago. Dallas County has seen a 7% decrease, followed by a 4% decrease in Denton.

Only Tarrant County is up from last year, with a 2% increase compared to the same period in 2009.

CEO of Foreclosure Listing Service George Roddy Sr. says the decline is welcome news but cautions against jumping to any conclusions. “While this decline may be what we have been waiting to see, a change for just one month does not establish a new trend. We will just have to wait to see what happens next month.”

If you are a Texas homeowner facing foreclosure, talk to a bankruptcy attorney today to learn more about your financial options. Bankruptcy may be able to stop the foreclosure and allow you to keep your home.

 

Study finds more Texans filing for bankruptcy to avoid foreclosure

 

The number of Texas homeowners filing for bankruptcy to avoid foreclosure on their homes is on the rise according to a recent study.

An analysis of post-bankruptcy cases of homeowners in 60 Texas counties was done by Foreclosure Listing Service. Included in the study were bankruptcy cases filed in courts in Dallas, Fort Worth, Sherman, San Antonio, Houston and Austin.

In their analysis, Foreclosure Listing Service found that $2.28 billion worth of real estate was affected by a bankruptcy filing in 2009. That’s an increase of 26% over the $1.92 billion figure from 2008.

The overall number of properties affected was higher, too. In 2008, 11,171 properties were affected by bankruptcy. In 2009, the number increased by 9% to 12,170.

The U.S. bankruptcy court in Fort Worth handled 3,154 properties affected by a post-bankruptcy filing in 2009, up 3% from 2008 when the number was 3,064. The dollar volume increased 10% from $420.4 million in 2008 to $464.5 million in 2009.

In Dallas, the number leapt even higher. In 2009, 4,764 properties were affected by a post-bankruptcy filing, 21% higher than the 3,952 properties affected in 2008. The dollar volume saw a significant increase of 38% from $548.4 million in 2008 to $757.9 million in 2009.

For more on this look at bankruptcy and foreclosures in Dallas and Fort Worth, Texas, click here for the article from the Star-Telegram.

 

Happy Holidays from Mortgage Lenders

The Associate Press is reporting that Citigroup Inc. will suspend foreclosures and evictions for 30 days. This moratorium will provide temporary relief for about 4,000 borrowers during the holiday season. Other lenders are expected to follow suit continuing a tradition that began last year for suspending foreclosures during the holiday season.

Thanks a lot.

A report release earlier this month by the U.S. Department of the Treasury indicates that many of the nation’s largest mortgage lenders are not doing enough to lower the numbers of home foreclosures. In one case the report found that after eight months of participating in the Home Affordable Modification Program (HAMP) Bank of America had registered a dismal 15 percent of the more than 1 million delinquent borrowers who are potentially eligible.

The HAMP, introduced in March 2009, provided guidelines for lenders to modify a home mortgage, such as capitalizing arrearages, extending a mortgage to 40 years and reducing the interest rate, until the payments get down to 31 percent of a borrower’s income.

One reason for the low numbers of loan modifications is that it is labor-intensive, according to John Rao, an attorney with the National Consumer Law Center. Mr. Rao testified to Congress earlier this year that lenders are not compensated for the labor-intensive process of a modification, whereas they are compensated for the extra work in foreclosing on a home. In other words, there is no real incentive to help the homeowner. Some lenders have delayed the loan modification process until the homeowner is forced to file bankruptcy and then add thousands of dollars in interest and costs to their home loans.

For homeowners that would benefit from a loan modification and a chapter 7 bankruptcy, lenders are especially reluctant to give permanent loan modifications, often offering interim loan modifications that last only two to three months. If the homeowner files for bankruptcy, the lender will often withdraw any workout plan leaving the homeowners further in debt.

The road to saving your home and easing your monthly debt obligation can be a perilous journey. It is best to use an experienced bankruptcy attorney to guide you through this difficult path. Until Congress decides to offer an effective program that offers real relief, bankruptcy can be a powerful option for saving your family’s home. 

For free legal advice from a Texas bankruptcy lawyer, contact Fears | Nachawati today. Simply email us or phone us toll free at 1.866.705.7584.

Should I Stay Or Should I Go?

In the early 1980s the British punk band The Clash asked a question many homeowners are struggling with today:

Should I stay or should I go now?

If I go there will be trouble

And if I stay it will be double

So you gotta let me know

Should I stay or should I go?

Walking away from a home that is worth less than the mortgage debt is not simply a financial decision, it is a moral dilemma. University of Arizona associate professor of law Brent T. White argues in a paper entitled “Underwater and Not Walking Away: Shame, Fear and the Social Management of the Housing Crisis” that Americans who own homes that have depreciated far below the amount owed would be better off walking away and renting. In this paper recently featured by the Wall Street Journal Online, Mr. White says homeowners are kept in these “upside-down” homes by feelings of fear, shame, and guilt that are encouraged by politicians and bankers.

No one wants to walk away from a family home, but one should consider the financial consequences of staying. White gives the example of homeowners “Sam and Chris” who purchased a home for $585K 2006. Their mortgage payment is $4,300/mo. White explains:

Unfortunately for Sam and Chris, the housing market began to collapse in 2007. Though they still owe about $560,000 on their home, it is now only worth $187,000. A similar house around the corner from Sam and Chris recently listed for $179,000, which, with a modest 5% down, would translate to a total monthly payment of less than $1200 per month – as compared to the $4300 that they currently pay. They could rent a similar house in the neighborhood for about $1000.

Assuming they intend to stay in their home ten years, Sam and Chris would save approximately $340,000 by walking away, including a monthly savings of at least $1700 on rent verses mortgage payments, even after factoring in the mortgage interest tax reduction. The financial gain for Sam and Chris from walking away would be even more substantial if they took their monthly savings and put it into an investment account. If they stay in their home on the other hand, it will take Sam and Chris over 60 years just to recover their equity[.]

Walking away from a financial obligation can be a gut-wrenching decision. If you are struggling with an upside-down home and indecision’s bugging you, speak with an experienced bankruptcy attorney. Only a licensed attorney can explain the legal consequences of walking away from a home.

To receive free legal advice on issues related to foreclosure and bankruptcy, contact Fears | Nachawati today. You can email us at info@fnlawfirm.com or call our toll-free number at 1.866.705.7584.

Chapter 7 Bankruptcy Q&A

Often filing for a Chapter 7 bankruptcy is seen as the final step in a personal financial crisis. While this thought is understandable, it’s more realistic to view a Chapter 7 bankruptcy as the beginning of financial freedom.

Benefits of a Chapter 7 bankruptcy

Briefly, filing for Chapter 7 bankruptcy will place an automatic stay that will help protect you against:

• Liens on your paycheck or bank account
• Foreclosure of your home
• Repossession of your vehicle

The filing fees for a Chapter 7 bankruptcy

The fee to file a Chapter 7 bankruptcy in Texas is approximately $299. For more information go to: www.txnb.uscourts.gov/Clerks-Office/Filing-Fees.

Attorney fees involved in a Chapter 7 bankruptcy

When considering the fees associated with attorney fees, the big picture must be taken into account. Mistakes on a Chapter 7 bankruptcy application can end up costing you money in the long run. Furthermore, representation by a skilled bankruptcy attorney can help you deal with unethical action from overzealous creditors who may harass you or refuse to remove liens on your paycheck or other assets.

Many bankruptcy attorneys are willing to work out a reasonable payment plan so you can file for a Chapter 7 bankruptcy as soon as possible to avoid a lien on your paycheck or repossession of your vehicle.

For a free consultation to discuss your options, contact Fears | Nachawati by calling toll free 1.866.705.7584 or e-mail us at info@fnlawfirm.com
 

Chapter 7 Bankruptcy: Key To Rebuilding Your Credit

At first sight the title above may seem contradictory. How can filing for Chapter 7 bankruptcy be key to rebuilding your credit? After all, this statement is against everything your creditors and collections agencies have been telling you. In order to understand how Chapter 7 can help you it is best to explain the benefits of filing a Chapter 7 bankruptcy.

Benefits

The first benefit in filing for a Chapter 7 is the automatic stay. What this means for you is that the creditors included in your Chapter 7 must stop all collection action immediately.  This means that they will not be allowed to place a lien on your bank account, foreclose on your home or repossess your car. If these actions have already started against you, the creditor will have to reverse or stop the action right away.

The second benefit is that you will no longer be legally held to repay most (if not all) of your debts. You will not be obligated to pay your debts once your Chapter 7 bankruptcy is discharged.

In order to understand what debts are dischargeable it is important to consult with an experienced bankruptcy attorney in your area.  Contact law firm Fears | Nachawati toll free at 1.866.705.7584 or via e-mail at info@fnlawfirm.com to discuss your specific financial situation.
 

What Happens When You Walk Away From A Home Loan

Deciding to walk away from a family home is a gut-wrenching decision. Before walking away the prudent person will investigate all of the options, including returning the property to the lender (i.e. a deed-in-lieu of foreclosure), a short sale, or renting the property. Unfortunately, for some walking away is unavoidable, so it is important to know the repercussions.

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.  Contact Fears | Nachawati for a free consultation to discuss your options by calling toll-free 1.866.705.7584 or by e-mailing info@fnlawfirm.com

 

 

Top Five Reasons People File For Bankruptcy

When you are experiencing a financial crisis you may feel like you are the only one in that situation. The reality is that many people are feeling the current financial crunch for one reason or another. So whether you live in Dallas or any other part of the country, you are not alone!

The following top five reasons seem to be the most common reasons why many people are filing for bankruptcy:

1. Wiping the slate clean. The goal of a discharge is to reduce debt to give you a fresh start.

2. Stop foreclosure or sale of your home.  If your home is in foreclosure a Chapter 13 bankruptcy will stop the foreclosure any time prior to the sale.

3. Prevent repossession of your car or other property. If the bankruptcy is filed quickly enough it can effectively force the creditor to return your car or other personal property.

4. Stop aggressive collection efforts by creditors. Often, creditors will call the home of a debtor at all hours and behave in an abusive manner. Bankruptcy will help stop the harassing phone calls and other aggressive behavior by creditors.

5. Restore or prevent your utilities from being shut off. Filing bankruptcy can prevent the utility company from pulling the plug on you.

 

If you are experiencing a financial crisis, contact bankruptcy law firm, Fears | Nachawati, toll free at 1.866.705.7584 or info@fnlawfirm.com for a free bankruptcy consultation.

 

What I Should Know About Bankruptcy

What bankruptcy can do for you

When filing for a Chapter 7 or Chapter 13 bankruptcy you get immediate protection from creditors against collection efforts against liens on your assets or paycheck. A creditor is considered anyone you owe money to whether it be a credit card debt or a judgment from a civil law suit.

If you file for a Chapter 7 your debts are discharged and you are no longer obligated to pay the debts. In a Chapter 13 case you will have the opportunity to set up a payment plan that can last 3-5 years. Debtors who want to save their home or have IRS debts typically file for a Chapter 13 bankruptcy. This type of bankruptcy will freeze a foreclosure and relieve an individual of liens on their paycheck or bank account.

What bankruptcy can do for you

Unfortunately, even bankruptcy cannot absolve you of the following debts:

  • Child support
  • Spousal support/alimony
  • Fines resulting from criminal cases

Student loans and IRS debts are usually not discharged but can be under specific and limited circumstances.

For a free bankruptcy consultation and to receive information on what bankruptcy can do for you, contact bankruptcy law firm, Fears | Nachawati, by calling our toll free hotline at 1.866.705.7584 or by e-mailing us at info@fnlawfirm.com.

Bankruptcy for Beginners

When you file for bankruptcy you can stop harassment, foreclosures, repossessions and lawsuits and be allowed to keep your home, your car, assets and wages. In order to better understand your bankruptcy options, we will take a look at the two most common bankruptcy options for individuals:

 

Chapter 7

 

In a chapter 7 bankruptcy case the bankruptcy trustee gathers and sells the debtor's nonexempt assets and uses the proceeds to pay creditors. Part of the debtor's property may be subject to liens but will allow the debtor to keep certain "exempt" property.  A trustee may liquidate the debtor's remaining assets therefore when you file for a Chapter 7, you may lose property. Once the debts are discharged, a debtor is no longer obligated to pay them.

 

Chapter 13

 

A chapter 13 bankruptcy is also known as a wage earner's plan because it enables individuals who can provide proof of a regular income to develop a plan to repay all or part of their debts. Under this chapter, debtors propose a repayment plan to make installments to creditors over three to five years that is dependent on the debtor’s income. Payment plans cannot exceed a period longer than five years. During this time the law forbids creditors from any form of collection effort.

 

For more detailed information on your bankruptcy options contact bankruptcy law firm, Fears | Nachawati, toll free at 1.866.705.7584 or by e-mail at info@fnlawfirm.com for a free consultation.

 

How To Apply For A Modification Of My Mortgage

Currently mortgage modification is a very hot topic. It is being seen as an alternative to foreclosure or bankruptcy. Briefly, a loan modification is a process by which the bank modifies the terms of a borrower’s mortgage to lower the monthly payment. The bank can change a person’s interest rate, reduce the principal balance of the overall amount owed and extend the amount of time a person has to pay off the loan (up to 40-50 years). These are some of the ways in which the lender reduces a borrower’s monthly payment to an amount in which they can afford as opposed to foreclosing. Sounds simple enough but as many people find out, dealing with a mortgage servicer takes much time and patience. Most of the time, you will have a hard time reaching them or they will not return your call.

Without legal representation you are basically at the mercy of the mortgage holder. If you are having trouble with your mortgage, an attorney skilled in loan modifications can help:

  • Lower your interest rate to a payment you can afford
  • Stop foreclosure
  • Obtain a principal forbearance
  • Change the terms of an option ARM mortgage

If you are a resident of Fort Worth, Dallas, Arlington, Garland, Rowlett, Mesquite and Plano contact bankruptcy law firm, Fears | Nachawati, toll free at 1.866.705.7584 or info@fnlawfirm.com for more information on home loan modifications.

 

Fort Worth Homeowners: You Can Avoid Foreclosures!

Despite some of the reports on the Internet that foreclosures in the Fort Worth area are declining, the rates are still considerably higher than they were last year. There can be many reasons why there is a lull in foreclosures. It could mean that the mortgage companies are overwhelmed with paperwork and are forced to sit on homes that are in pending foreclosures. This of course does not mean that they will not foreclose, but rather that they will eventually get around to it.

 

If you are facing foreclosure and cannot negotiate a reasonable repayment plan with your mortgage lender, it may be wise to consider filing for a Chapter 13 bankruptcy. When you file for bankruptcy, you will stop the sale of your home and have the opportunity to repay the arrears. Additionally, you may even be able to exclude a second mortgage that in turn can save you thousands in mortgage payments.

 

If you are in danger of losing your home, filing for bankruptcy can be a very powerful solution for many homeowners as it can give you the time and resources to renegotiate your mortgage with your lender while saving your home.

 

For more details on how Chapter 13 can help you save your home contact bankruptcy law firm, Fears | Nachawati, toll free at 1.866.705.7584 or e-mail info@fnlawfirm.com for a free bankruptcy consultation.

 

 

What are my alternatives to Bankruptcy to Stop a Foreclosure?

There are a few effective ways to stop or postpone a foreclosure or sale date on your home.  Your first step should be to contact your Mortgage Company directly as soon as you know you are behind or are about to miss a payment and speak to the Loss Mitigation department. Every mortgage company has Loss Mitigation department and they are there to help you in times of need (not that they always do help).  Let them know your current situation (such as loss of job, decrease in income, medical conditions or emergency situations) and ask them for your options.

The Loss Mitigation department of your Mortgage Company should be able to provide you a forbearance option or a modification option. BEWARE, some Mortgage Companies use their Loss Mitigation department to drag their feet until they sell your house.  Don’t let this happen to you!

If you keep getting the run-around, call our office and let us layout the options for you before it’s too late.  Call toll free at 1-866-705-7584 or e-mail us at info@fnlawfirm.com

Texas Hit Hard By Foreclosures

It’s not a big surprise to people in San Antonio, Texas, (and the rest of the country) that we are in the middle of a foreclosure epidemic. Some states like Texas, California and Florida are suffering much more than others. But regardless of the reasons people are facing foreclosure--loss of income, slow business or mismanagement of finances--there is something homeowners can do to gain control and avoid losing their home. For many the best option is to file for a Chapter 13 bankruptcy. It will give you some control over your home loan and time to restore your finances.

When you file for bankruptcy in San Antonio, the lender cannot foreclose on or sell your home. A Chapter 13 bankruptcy also gives you the opportunity to repay any arrears so you can get caught up. You may even be able to lower your monthly payment by removing a second mortgage. Filing for bankruptcy will also keep any other creditors from taking action against your paycheck or assets. If your goal is to save your home, it is advisable you speak with an attorney experienced in bankruptcy law as soon as possible.

For a free consultation on how Chapter 13 can help you save your home, contact bankruptcy law firm, Fears | Nachawati, by calling toll free 1-866-705-7584 or by e-mailing info@fnlawfirm.com.

Avoid Foreclosure Scams & Save Your Home

Homeowners in Dallas need to be on alert of people and companies with fraudulent foreclosure schemes and scams to deprive them of their home. Some of the schemes include offers to buy your home and let you rent while in order to help you buy back your home. Other similar scams involve an offer to help you financially in exchange to be put on the home’s title. Do not fall for any of these quick fix solutions to your financial problems because you will end up losing your home. In these scenarios, the homeowner is eventually kicked out of their own home! Don’t become one of their victims!

While some of these scammers are in jail, there are plenty still around ready to take their place. The following are some simple steps you can take to protect yourself:

  • Avoid contact with people who make unsolicited calls or visits to your home offering to help you.
  • Do not let precious time go by, as time is not on your side in a foreclosure proceeding.
  • Do not sign anything without speaking to an attorney.

 

If you are feeling the stress of too many bills and not enough money to pay your bills, then bankruptcy may be an option for you.  For a free bankruptcy consultation contact Fears | Nachawati Law Firm, (866) 705-7584.

How Filing Bankruptcy Can Save Your Home

While many homeowners in Arlington and Dallas are feeling the foreclosure noose around their necks, there are a few things they can do to avoid hanging themselves. First, don’t live in denial! The reality is if a homeowner does nothing to protect their home, they will lose it sooner than later. If you have attempted to re-negotiate your mortgage without success, it’s vital that you use whatever rights you have under the law to protect your most valuable asset--your home! Second, use your right to file for bankruptcy.

Bankruptcy laws were created to protect consumers. When you file for bankruptcy, an automatic stay is put in place to freeze all actions by your creditors. This includes the financial institution that gave you your home loan. What this mean for you is that the lender cannot foreclose on your home. It also gives you time to pay any arrears you owe the lender. There are also other advantages to filing for bankruptcy, such as removal of a second mortgage that may greatly reduce future mortgage payments. To learn more about what options you may have, you should discuss your current situation with an attorney that specifically handles bankruptcy cases. This will help ensure you get the expert representation to help you save your home.

 

 

For a free bankruptcy consultation contact Fears | Nachawati Law Firm, (866) 705-7584.

Bill would buy more time for Texans in foreclosure

By Janet Elliott - Houston Chronicle

AUSTIN — Texans would have more time to fix their troubled finances before losing their homes under a bill passed Friday by the Senate.

Current law allows 20 days for homeowners receiving a foreclosure notice to resolve their mortgage default, one of the quickest processes in the nation. The Mortgage Foreclosure Deferment Act extends this notice period to 45 days.

It also would provide at least 14 days for a homeowner and 60 days for a renter to vacate a foreclosed property.

If the bill, which now goes to the House, becomes law, it would only apply to foreclosures initiated after Sept. 1.

One in 10 Texas homeowners is at risk of default and foreclosure, according to a recent report from the Mortgage Bankers Association of America.

“Recent headlines tell the story that more Texans are at risk of losing their homes to foreclosure,” said the bill's author, Sen. Craig Estes, R-Wichita Falls. “This bill will give Texas homeowners more time to work with their lender to try and reach an accommodation to stay in their homes while meeting their financial obligations.”

Sen. Leticia Van de Putte, D-San Antonio, said homeowners could use the extra time to work with nonprofits that help negotiate loan modifications.

Texas Attorney General Greg Abbott, whose office has cracked down on foreclosure rescue scams, recommended that the Legislature allow a debtor more time to cure a loan default before a notice of sale.

The bill requires a notice of rights to be included with the default notice. The lender would have to provide contact information for a person authorized to assist the debtor on the delinquent loan.

Owners who have received a foreclosure notice would have to notify any tenants of a pending foreclosure within five days.

“While most homeowners may never feel the threat of home foreclosure, it is an issue that can impact all of us when it strikes our neighbors, friends and family,” Estes said.

The premier bankruptcy attorney Bryan Fears said " I am very happy to hear that our legislatures are recognizing something must be done to stop this trend. Home owners of our great state need help.  Every day my firm fights for families facing foreclosure."  If you are facing repossession or foreclosure contact my office immediately at (214) 890-0711 or fears@fnlawfirm.com.

Dallas Fort Worth Foreclosure Filings on the Rise

 

According to recent news reports, Dallas/Fort Worth foreclosures are on the rise.  According to the Dallas Morning News, home foreclosure filings in the Dallas-Fort Worth area have risen to a record high, with more than 5,500 properties facing forced sale next month.

Foreclosure Listing Service reports that the number of house facing foreclosure in May rose 25 percent from 2008.

Bankruptcy records indicate that more than 40 percent of the current foreclosure postings Dallas County are repeat foreclosures.  This may be due in part to the fact that some lenders have recently announced that they are lifting the self-imposed moratoriums.

The largest increase in May postings was in Collin County, where the number of homes posted for foreclosure jumped 45 percent, rising to 700 for the first time.  Efforts to restructure home loans and keep owners in their homes have met with limited success at best. The loan modification program supported with government funds is also similarly too new to provide any solid idea of its effectiveness. 

Another dismal figure is reports that more 30,000 jobs were lost in Dallas and Fort Worth at the end of February compared with a year earlier.

The benefits and pitfalls to considering bankruptcy are significant.  Any individual considering bankruptcy should make a decision after consulting with competent legal counsel.  For more information on bankruptcy, contact the Fears | Nachawati Law Firm at 1.866.705.7584.

 

 

 

Homeowners' rallying cry: Produce the note

ZEPHYRHILLS, Fla. (AP) — Kathy Lovelace lost her job and was about to lose her house, too. But then she made a seemingly simple request of the bank: Show me the original mortgage paperwork.

And just like that, the foreclosure proceedings came to a standstill.

Lovelace and other homeowners around the country are managing to stave off foreclosure by employing a strategy that goes to the heart of the whole nationwide mess.

During the real estate frenzy of the past decade, mortgages were sold and resold, bundled into securities and peddled to investors. In many cases, the original note signed by the homeowner was lost, stored away in a distant warehouse or destroyed.

Persuading a judge to compel production of hard-to-find or nonexistent documents can, at the very least, delay foreclosure, buying the homeowner some time and turning up the pressure on the lender to renegotiate the mortgage.

"I'm going to hang on for dear life until they can prove to me it belongs to them," said Lovelace, a 50-year-old divorced mother who owns a $200,000 home in Zephyrhills, near Tampa. "I'll try everything I can because it's all I have left."

In interviews with The Associated Press, lawyers, homeowners and advocates outlined the produce-the-note strategy. Exactly how many homeowners have employed it is unknown. Nor is it clear how successful it has been; some judges are more sympathetic than others.

More than 2.3 million homeowners faced foreclosure proceedings last year and millions more are in danger of losing their homes. On Wednesday, President Obama will unveil a plan to spend at least $50 billion to help homeowners fend off foreclosure.

Chris Hoyer, a Tampa lawyer whose Consumer Warning Network Web site offers the free court documents Lovelace used to file her request, has played a major role in promoting the produce-the-note strategy.

"We knew early on that the only relief that would ever come to people would be to the people who were in their houses," Hoyer said. "Nobody was going to fashion any relief for people who have already lost their houses. So your only hope was to hang on any way you could."

Tom Deutsch, deputy executive director of the American Securitization Forum, a group that represents banks, law firms and investors, dismissed the strategy as merely a stalling tactic, saying homeowners are "making lawyers jump through procedural hoops to delay what's likely to be inevitable."

Deutsch said the original note is almost always electronically retained and can eventually be found.

Judges are often willing to accept electronic documentation. And lenders are sometimes allowed to produce other paperwork to establish they are the holder of a loan. Still, assembling such documents to a judge's satisfaction takes time, which to homeowners is the point.

Lovelace filed her produce-the-note demand last fall after the bank acknowledged that her original mortgage document had been lost or destroyed. Since then, there has been no activity on the foreclosure — no letters from the lender, no court filings.

The law firm handling the foreclosure for the lender refused to comment.

A University of Iowa study last year suggested that companies servicing mortgages are often negligent when it comes to producing the documentation to support foreclosure. In the study of more than 1,700 bankruptcy cases stemming from home foreclosures, the original note was missing more than 40 percent of the time, and other pieces of required documentation also were routinely left out.

The first big success of the produce-the-note movement came in 2007 when a federal judge in Cleveland threw out 14 foreclosures by Deutsche Bank National Trust Co. because the bank failed to produce the original notes.

Michael Silver, a lawyer for two of the families in that case, said at least one eventually lost their home. Still, he considers that a success.

"From the perspective of the person who's in the home, you may have kept them in the house another 10 or 12 months," he said. "If I can get a result with economic benefits to a client, then I think I won."

Democratic Rep. Marcy Kaptur of Ohio endorsed the strategy in a fiery speech on the House floor during debate on the federal bank bailout last month.

"Don't leave your home," she said. "Because you know what? When those companies say they have your mortgage, unless you have a lawyer that can put his or her finger on that mortgage, you don't have that mortgage, and you are going to find they can't find the paper up there on Wall Street."

April Charney, head of foreclosure defense for Jacksonville Area Legal Aid in Florida, said the strategy has been so successful for her that she now travels around the country to train other lawyers in how to use it. She said she has gotten cases delayed for years by demanding that lenders produce paperwork they cannot find.

"This is an army of lawyers getting out there to stop foreclosures so we can get to the serious business of creating solutions," Charney said. "Nothing good is going to happen as long as we continue to bleed homeowners."

If you are feeling the crunch of unemployment and do not seem to have enough money to pay your bills bankruptcy may be an option for you.  For a free bankruptcy consultation contact Fears | Nachawati Law Firm, Phone (866) 705-7584. Immediate Assistance

Citizen Fights Foreclosure

 

BRAD GRAVERSON/DAILY BREEZE
 
Frank Torres talks on the phone as he surrenders outside his Carson, Calif., home after barricading himself inside his foreclosed home for a few hours Tuesday. A report by RealtyTrac said nearly 67,000 properties were repossessed by lenders in January.
 
If you are feeling the crunch of unemployment and do not seem to have enough money to pay your bills bankruptcy may be an option for you.  For a free bankruptcy consultation contact Fears | Nachawati Law Firm, Phone (866) 705-7584. Immediate Assistance

 

U.S. foreclosures down 10% from December

By ALAN ZIBEL - Associated Press

WASHINGTON — The number of Americans on the verge of losing their homes fell in January but was still up from the same month a year ago. The numbers would have been higher if not for efforts to stall the foreclosure process.

Nationwide, more than 274,000 homes received at least one foreclosure-related notice last month. That was down 10 percent from December, but still 18 percent higher than a year ago, according to RealtyTrac Inc., an Irvine, Calif-based foreclosure listing service.

Contributing to the monthly drop was a decision by government-controlled mortgage finance companies Fannie Mae and Freddie Mac to suspend foreclosure sales during the winter holidays. Plus, Florida Gov. Charlie Crist brokered a deal in which lenders in that state agreed to a 45-day halt to new foreclosure petitions.

But those efforts may not have much of an impact in the long run.

“If you don't do anything to get to the core problem, all you're doing is extending the housing downturn,” said Rick Sharga, RealtyTrac's vice president for marketing. “It's only a good idea if there's a corresponding program that dramatically restructures hundreds of thousands of loans.”

More than 2 million American homeowners faced foreclosure proceedings last year, and that number could soar as high as 10 million in the coming years, according to a report last month by Credit Suisse, depending on the severity of the recession.

The RealtyTrac report said nearly 67,000 properties were repossessed by lenders in January as the worst recession in decades, falling home values and stricter lending standards continue to sap the U.S. real estate market. That was up from more than 45,000 repossessed properties in January 2008, but down from 79,000 in December.

In the RealtyTrac report, Nevada, California, Arizona and Florida had the nation's top foreclosure rates. In Nevada, one in every 76 homes received a foreclosure, while the number was one every 173 in California. At No. 5, Oregon, formerly a bastion of housing stability, made its first appearance close to the top of the list of foreclosure hot spots.

Rounding out the top 10 were Illinois, Michigan, Georgia, Idaho and Ohio. Among metro areas, Merced, Calif., was first, with one in every 59 housing units receiving a foreclosure filing. It was followed by Las Vegas and the Cape Coral-Fort Myers area in Florida.

If you are feeling the crunch of unemployment and do not seem to have enough money to pay your bills bankruptcy may be an option for you.  For a free bankruptcy consultation contact Fears | Nachawati Law Firm, Phone (866) 705-7584. Immediate Assistance

Fears | Nachawati Law Firm has offices located throughout Texas in: Dallas / Fort Worth / Houston / San Antonio / and Austin

Fed Adopts Program To Stem Foreclosures - Washington Post

Fed Adopts Program To Stem Foreclosures - Washington Post

With its bailouts of Bear Stearns and American International Group, the Federal Reserve took a vast portfolio of mortgages onto its books. Now, it is trying to use its control of billions of dollars worth of home loans to help prevent foreclosures.

The Fed will seek to renegotiate mortgages it owns that might otherwise enter foreclosure, Chairman Ben S. Bernanke told congressional leaders in a letter yesterday. The decision won praise from congressional Democrats, who took it as a sign that the central bank's leaders are cooperating with efforts to use government power to try to stem the number of foreclosures.

It is unclear how many homeowners stand to benefit. Under the program, the Fed can reduce what a homeowner owes on a mortgage, lower the interest rate, lengthen the term of a loan or take other steps to keep a loan from defaulting, if doing so would offer taxpayers a better long-term payoff than foreclosure. Individual borrowers are unlikely to know whether their mortgages are owned by the Fed, but if they qualify for a renegotiation, they would deal only with their mortgage servicer.

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The Fed is emphasizing reducing the amount of principal owed by people at risk of foreclosure, particularly those with a loan balance that is more than 125 percent of the estimated value of their property. Private lenders have been reluctant to renegotiate loans that way, as some of the institutions that own those loans, in the form of mortgage-backed securities, stand to lose money and therefore object.

Bernanke has previously advocated principal reductions, saying in a speech in March that they could be an "effective means of avoiding delinquency and foreclosure."

If the Fed strategy works and reduces the number of foreclosures while helping the owner of the loans -- the central bank in this case -- it could serve as a model for other owners of mortgage loans. For example, the Federal Deposit Insurance Corp. has tried to use its control of California bank IndyMac, which it seized last summer, to do loan modifications, but has been frustrated by investors in those loans being unwilling to reduce the amount of principal owed.

"It's a step beyond what FDIC is doing with its own portfolio," said Alan White, an assistant professor at Valparaiso University School of Law, who has been studying the foreclosure crisis. "Principal write-downs are still the critical issue" in keeping borrowers in their homes.

It is impossible, based on public information, to know the exact dollar value of the mortgages the Fed holds -- though it is in the tens of billions of dollars. In the near term, the mortgages affected are those held in special limited liability corporations that the central bank created to hold assets after its March rescue of investment bank Bear Stearns and September takeover of insurance company AIG.

The Bear Stearns portfolio is worth $27 billion, of which some portion -- exactly how much the Fed will not disclose -- consists of residential mortgages. The AIG assets include a $20 billion portfolio of mortgage-backed securities and a $27 billion portfolio that includes complex securities that are partly backed by mortgage debt.

Congressional leaders yesterday praised the Fed's action, while urging further steps. "This is an important advance, and I hope to work with the [Fed] to strengthen the program," said Sen. Christopher J. Dodd (D-Conn.), chairman of the Senate Banking Committee. Dodd also urged the Fed "to work with consumer advocates to develop the most effective program possible."

If you are feeling the crunch of unemployment and do not seem to have enough money to pay your bills bankruptcy may be an option for you.  For a free bankruptcy consultation contact Fears | Nachawati Law Firm, Phone (866) 705-7584. Immediate Assistance

Fears | Nachawati Law Firm has offices located throughout Texas in: Dallas / Fort Worth / Houston / San Antonio / and Austin.

AVOID FORECLOSURE

People with financial difficulties who own homes at some point in time may not be able to make their monthly mortgage payments.  This, of course, may occur for any number of reasons including bad financial decisions, loss of employment, and / or unforeseen medical conditions resulting in astronomical bills.  Whatever the reason may be lenders have no alternative but to call in the loan after a certain number of late or missed payments.  The more equity in your home the more beneficial it is to the lender to foreclose.  While foreclosure makes the lender whole, it may be a financial disaster for you.  Your home is gone, your equity is gone, your credit is negatively affected, and you incur the costs of moving.  You should always try to avoid foreclosure even if it means selling your house.

There are ways to avoid foreclosure like contacting your lender as soon as you realize you have a problem.  Lenders may be able to assist you in lowering your payments.  Be sure to prioritize your spending and you may be able to reduce your monthly expenditures – by putting a membership on hold.  If you are behind on your home mortgage filing for bankruptcy may allow you to keep your home.  For more information on bankruptcy please contact Fears | Nachawati Law Firm, Phone (214) 890-0711, 4925 Greenville Avenue, Suite 715, Dallas, Texas 75206.

Dallas - Fort Worth Home Foreclosures

A close look at homes lost to foreclosure here in the first half of the year shows that the pain is being felt in almost every neighborhood.

Dallas-Fort Worth home foreclosures for October up 35%
But analyzing more than 11,000 homes sold at foreclosure during the first half of 2008, it's obvious that some areas have been hit harder by home mortgage defaults.

The Dallas Morning News reports,the largest number of foreclosures in the first six months of the year were in ZIP codes 75115 – which includes most of DeSoto – and 75052, Grand Prairie, according to data supplied by Foreclosure Listing Service.

Broken out by city, the largest number of foreclosed homes in the first half of the year were in Dallas, Fort Worth, Arlington and Garland.

The foreclosed homes in the five-county area on average had $123,668 in debt, a tax value of $148,384 and loans that were four years old.

The average square footage of the foreclosed residences was about 1,941. And the average age of the homes was 24 years.

Compared to the overall housing base in each city, the communities with the largest percentage of foreclosures at midyear were Aubrey and Oak Point in Denton County and Princeton in Collin County.

"If you look at those areas, most of them have subdivisions that have been built in the last few years and that are way out," said George Roddy, chief executive of Addison-based Foreclosure Listing Service. "You have the crummy loans that were made and add in the cost of driving to work to Dallas, and people can't afford it.

"They wanted to get in a new home and get in it cheap and weren't thinking about the cost of commuting."

Most analysts predict that foreclosure rates in Dallas and across the country will remain high through next year.

Many homeowners who financed their houses with adjustable rate mortgages have yet to see their payments increase. And when they do, it will be hard for many to make the higher monthly payments or find cheaper funding.

Foreclosed homes now make up a sizable portion of the total inventory of housing for sale in North Texas.

Currently, there are more than 3,100 foreclosed properties identified in the Realtors' local multiple listing services. But the number is definitely higher since not all sellers of foreclosed houses choose to identify the properties as distressed sales.

"A lot of these properties are going to auction before they are even listed for sale," said agent Connie Zetterlund with Coldwell Banker Real Estate. "They are still selling for pretty good prices."

But with the growing numbers of foreclosed homes and increased financial pressures on lenders, it's likely that lenders will move faster to unload houses they have taken back.

"They are going to see in their pipeline what is coming on, and they are going to have to get rid of more."

 

Foreclosures in Dallas Area

A close look at homes lost to foreclosure here in the first half of the year shows that the pain is being felt in almost every neighborhood.

The Dallas Morning News reports, the largest number of foreclosures in the first six months of the year were in ZIP codes 75115 – which includes most of DeSoto – and 75052, Grand Prairie, according to data supplied by Foreclosure Listing Service.

Broken out by city, the largest number of foreclosed homes in the first half of the year were in Dallas, Fort Worth, Arlington and Garland.

The foreclosed homes in the five-county area on average had $123,668 in debt, a tax value of $148,384 and loans that were four years old.

The average square footage of the foreclosed residences was about 1,941. And the average age of the homes was 24 years.

Compared to the overall housing base in each city, the communities with the largest percentage of foreclosures at midyear were Aubrey and Oak Point in Denton County and Princeton in Collin County.

"If you look at those areas, most of them have subdivisions that have been built in the last few years and that are way out," said George Roddy, chief executive of Addison-based Foreclosure Listing Service. "You have the crummy loans that were made and add in the cost of driving to work to Dallas, and people can't afford it.

"They wanted to get in a new home and get in it cheap and weren't thinking about the cost of commuting."

Most analysts predict that foreclosure rates in Dallas and across the country will remain high through next year.

Many homeowners who financed their houses with adjustable rate mortgages have yet to see their payments increase. And when they do, it will be hard for many to make the higher monthly payments or find cheaper funding.

Foreclosed homes now make up a sizable portion of the total inventory of housing for sale in North Texas.

Currently, there are more than 3,100 foreclosed properties identified in the Realtors' local multiple listing services. But the number is definitely higher since not all sellers of foreclosed houses choose to identify the properties as distressed sales.

"A lot of these properties are going to auction before they are even listed for sale," said agent Connie Zetterlund with Coldwell Banker Real Estate. "They are still selling for pretty good prices."

But with the growing numbers of foreclosed homes and increased financial pressures on lenders, it's likely that lenders will move faster to unload houses they have taken back.

"They are going to see in their pipeline what is coming on, and they are going to have to get rid of more."

 

Feds Taking Control of Mortgage Companies

President Bush said Sunday that the historic federal government takeover of mortgage giants Fannie Mae and Freddie Mac is needed to keep them from failing, a risk he called "unacceptable" for an economy battered by housing and credit crises.

"Allowing the companies to fail or further deteriorate would damage our home mortgage market, and could weaken other credit markets that are unrelated directly to housing," Bush said in a statement released Sunday afternoon. "Americans should be confident that the actions taken today will strengthen our ability to weather the housing correction and are critical to returning the economy to stronger sustained growth."

The Bush administration announced Sunday it was taking control of the two institutions to avert the potential for major financial turmoil.

The Dallas Morning News reported, the companies, which together own or guarantee about $5 trillion in home loans, about half the nation's total, have lost $14 billion in the last year and are likely to pile up billions more in losses until the housing market begins to recover.

Both companies were placed into a government conservatorship that will be run by the Federal Housing Finance Agency, the new agency created by Congress this summer to regulate Fannie and Freddie. The executives and board of directors of both institutions are being replaced.

In a statement, the president called the moves temporary until the appropriate role for the companies can be determined.

He said they must be reformed so that "they not pose similar risks to our economy or the financial system again."

Treasury Secretary Henry Paulson said the actions were being taken because the failure of either of the mortgage companies "would cause great turmoil in our financial markets here at home and around the globe." The huge potential liabilities facing each company could cost taxpayers tens of billions of dollars. But Paulson stressed that the financial impacts if the two companies had been allowed to fail would be far more serious.

Bush said the federal regulator for Fannie Mae and Freddie Mac determined they could no longer operate safely and conduct their public mission.

He said that posed "an unacceptable risk to the broader financial system and our economy."