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Archive for the ‘Foreclosure’ Category

Choosing Between Bankruptcy and Foreclosure

May 10th, 2018 at 9:04 am

foreclosureThe decision between filing for bankruptcy or foreclosing on your home is stressful. Neither is optimal when it comes to the immediate financial impact to your credit score, however, neither are late payments. Bankruptcy stays on your credit report for 10 years, while foreclosure typically rolls off in seven years. But, before you give in to losing your home, there are a few details worth considering.

Saving the Home

First, you must decide if you want to save the home. If you are behind by a month or two, contact your lender. The foreclosure process is expensive for banks. In many cases, your lender will work with you. Options to consider include:

  • Make up the late payments;
  • Restructure the loan; or
  • Request a forbearance.

The Foreclosure Option

First, consider that foreclosure is very serious to future mortgage lenders, more than a bankruptcy that did not include the house. Additionally, foreclosure will drop your credit score by 200 or 300 points. Discuss the option of a short sale instead of foreclosure with your lender. With this option, the house is worth less than the principal balance of the loan, in which case, you may owe the remaining balance. In many situations, banks waive this difference. If a short sale is not an option, some banks accept “deed in lieu of foreclosure,” where you turn the house over to the lender and owe nothing. Explore these opportunities with your lender

How Bankruptcy Can Help

There are many options when filing for bankruptcy, each with unique benefits to suit your needs. Because you own a home and have income, Chapter 13 will probably be your best option. Rather than liquidating everything, Chapter 13 allows you to restructure your debt. As soon as you file, an automatic stay is placed on all accounts, effectively stopping all debt collection attempts. The stay also halts foreclosure proceedings, which may help you catch up on payments. Next, all of the creditor and lenders then convene with an appointed trustee to create a payment plan to repay the debt. This option allows you to keep your assets, including your home, and eventually get caught up on your mortgage.

Ask an Attorney

Mortgage lenders and collection agencies send correspondence that is intimidating and overwhelming. The calls and other communication can stop now. You can begin looking forward to a brighter financial future today. Discover if bankruptcy is the right solution for you by calling a New Braunfels, TX bankruptcy attorney. The Law Offices of Chance M. McGhee will take the time to carefully examine the details of your case and give you honest feedback on which bankruptcy option is best for you. Call 210-342-3400 today to schedule your free, no-obligation consult.

 

Sources:

http://www.nbcnews.com/id/21478416/ns/business-answer_desk/t/which-worse-foreclosure-or-bankruptcy/#.WuvfQDGG_IU

http://www.txs.uscourts.gov/node

Chapter 7 Buys Time and Money to Move from a Foreclosing Home

November 10th, 2017 at 8:00 am

Filing a Chapter 7 case stops foreclosure of your home temporarily, helping you gather funds for your transition to your next housing. 

 

Last week we went through a list of ways Chapter 7 buys you time when dealing with a home foreclosure. Included was that filing a Chapter 7 case “can give you time to surrender your home while saving up for moving expenses.”  This deserves a more thorough explanation.

 Stopping a Foreclosure

The filing of a bankruptcy case, including a Chapter 7 “straight bankruptcy” one, stops a pending home foreclosure sale. This happens through the “automatic stay,” the law which freezes most creditor collection actions the moment you file bankruptcy. In particular, the automatic stay statute says that a bankruptcy filing stops “any act to… enforce any lien” against your property. (See Section 523(a)(4) and (5) of the U.S. Bankruptcy Code.)  A mortgage lender’s foreclosure of your home is an act to enforce a lien. So your bankruptcy filing stops it from happening.

It’s crucial to time your bankruptcy filing strategically. Otherwise you will file it too soon or too late. You want to buy as much time as possible. And you don’t want to mess up and fail to stop the foreclosure. 

You absolutely need to talk with your local bankruptcy lawyer to determine the best timing. This decision requires a thorough understanding of BOTH federal bankruptcy law and state property and foreclosure law.  While bankruptcy law provides the ins and outs of the “automatic stay,” state law lays out crucial considerations like exactly when a foreclosure takes away your rights to your home. For example, filing too late would leave you with no rights to your home that your bankruptcy filing could protect.

After Your Bankruptcy Stops the Foreclosure Sale

What happens after you file the Chapter 7 case? In particular how much time will you have before you have to move away from your home?

A consumer Chapter 7 case usually takes about 3 or 4 months. The automatic stay is in effect that whole length of time, UNLESS the mortgage lender asks for “relief from stay.”

So if your lender does not file a motion asking for that “relief,” filing Chapter 7 can buy you 3 or 4 months. It could be even longer. That’s because there is usually some delay between when the foreclosure process is restarted and the new foreclosure takes place.

If your lender does file a motion for “relief from stay,” your Chapter 7 filing may only buy you an extra month or so. That’s because if you’re surrendering the home you’re presumably not making the mortgage payments. So you don’t have much defense against the lender’s motion, and it would almost certainly be granted.

However, if your mortgage lender does ask for “relief” to resume foreclosure, that often presents an opportunity for negotiation. You have something to offer in the way of surrendering the home peaceably at an appropriate time. The lender may well save attorney fees and foreclosure costs. Under some circumstances it may even pay you some money to move and sign the home to the lender.

Gathering Funds for Your Move

Usually the main benefit to delaying a foreclosure once you’ve decided to give up the home is for time to gather moving costs. By moving costs we mean everything needed for your transition, including rent, security deposit, moving truck rental—everything. Every month you are not paying your mortgage should give you the opportunity to save a chunk of money. In some states money you save for this purpose even before filing your Chapter 7 case can be protected under the homestead or some other exemption. Money saved after filing is virtually never a problem.

Conclusion

Filing Chapter 7 bankruptcy stops a foreclosure, although you have to time it right through the help of your lawyer. The point of buying time is to give you more time to cover your costs in transitioning to new housing. The amount of time you can buy depends in part on the aggressiveness of your mortgage lender. The extra time will usually be between one and four more months. You can often negotiate your leaving to make it less disruptive for you.

 

Mistakes to Avoid–Selling Your Home to Prevent Its Foreclosure

September 14th, 2015 at 7:00 am

Stopping a foreclosure through Chapter 7 or 13 while addressing your whole financial picture can be much better than hurrying a home sale.

 

The last few blog posts in this series has been about how filing bankruptcy can buy you a few more months or even several years, so you don’t have to sell your home when under pressure from your creditors but rather when you’re financially and personally ready. There’s no greater pressure than when you are under threat of foreclosure by your mortgage lender, and especially when the actual date of foreclosure sale is looming.

The Temptation to Sell Quickly

If you have been struggling to keep up on your main mortgage, or your second (or third) mortgage, and/or if every year you struggle to pay the property taxes, it could be perfectly sensible to sell your home to get out from under the debt. That may be especially true if you have no equity and your hopes of your home being a good investment have not worked out. Or if you do have some equity it may be perfectly sensible to get at that equity to pay down some of your other debts.

But decisions like these are not sensible if they are based on assumptions which are not accurate. If you are thinking about selling your home quickly to prevent losing it to foreclosure, consider the following situations:

  • You’re selling fast because you are behind on either your first or second mortgage, or both, and know there’s no way you can afford to pay both. But what if you didn’t have to catch up on or pay most of that second mortgage and could concentrate your financial resources on that first mortgage, while getting relief from all your other debts?
  • You owe a bunch of income taxes, and maybe even have a tax lien against you home, and understand that income taxes can’t be written off in bankruptcy so you see no way that can help. But what if some or all of your unpaid taxes could be written off, and that tax lien could be released from your home’s title without paying anything on it?
  • You wish you could hang onto your home for a few more years before selling because you’re just starting to build equity again, but you are many thousands of dollars behind on your first mortgage and heard that even in bankruptcy you have to catch up on the first mortgage. But what if you were given years to catch up or didn’t even have to catch up until you sold the home 3-4 years later, when it better fit into your family plans and you’d built up some equity?

There are many, many ways that either Chapter 7 “straight bankruptcy” or Chapter 13 “adjustment of debts” can help in ways you likely are not aware of, and may have misassumptions about.

Stopping a Foreclosure through the “Automatic Stay”

You likely know that filing a bankruptcy case stops a foreclosure. The federal law called the “automatic stay” is one of the most powerful parts of bankruptcy law. It trumps state law which allows and governs home foreclosures. So, through bankruptcy you can stop an about-to-happen foreclosure, whether it’s scheduled to happen by “non-judicial” auction or through a “judicial” sale as part of a foreclosure lawsuit by your lender.

The Tools of Bankruptcy

But that’s just the beginning of how filing either a Chapter 7 or Chapter 13 can help you either keep your home or sell it at the time when it’s in your best interest to do so. Bankruptcy law provides a wealth of tools for helping you keep your home, or to buy extra months or even years before needing to sell.

Please review the last several blog posts of this series for explanations of many of these tools. For example, if you have a second or third mortgage, you may be able to avoid paying most of one or the other of them, possibly even both, potentially saving you tens or even hundreds of thousands of dollars and getting you much closer to building equity in your home. If you have a judgment lien, or tax or support lien, if you are behind on property taxes, or many months behind on your mortgage payment, in all these situations bankruptcy may be able to help in ways better than you thought possible. You may be able to take advantage of property values that are finally climbing in most markets, by staying in your home permanently or long enough for it to regain some of its value.

Conclusion

Every homeowner facing a foreclosure has a unique set of circumstances which deserves an individual analysis. Don’t rush to sell before finding out the tools that can be put to work for you and your home. Bankruptcy can often give you a number of many different combinations for solving your own personal home challenges, so you need to find out what combination of tools would best fit your own goals.

 

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