Texas Bankruptcy Blog : Texas Bankruptcy Lawyer & Attorney : Fears Nachawati law Firm : Chapter 7, Chapter 13, Consumer Bankrutpcy : Dallas, Fort Worth, Austin, Houston, San Antonio

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. 

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.

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.