FORECLOSURE V. BANKRUPTCY

 

REPRINTED FROM msnbc.com

By John W. Schoen Senior producer

Based on our mail, the financial squeeze that’s left millions of Americans falling behind on their mortgage payments doesn’t seem to be letting up. For some, that presents a stark choice: is it better to lose your house to foreclosure or file for bankruptcy protection?

What is better on your credit report – foreclosure or bankruptcy?

— D.F., Address withheld

Neither option is going to be easy. Generally, a foreclosure will remain on your credit report for 7 years, while a bankruptcy remains for 10 years. But that doesn’t mean foreclosure is necessarily the better option, according to Ray Hooper, Education and Housing Director for the Consumer Credit Counseling Service of Greater Dallas, a non-profit agency that tries to help people facing foreclosure keep their homes.

“A foreclosure is very serious to mortgage lenders,” said Hooper. “They’re going look at a foreclosure more seriously than they will a bankruptcy that doesn’t include the house.”

Before you accept that foreclosure is a foregone conclusion, consider trying to avoid it. If you’re having trouble making payments, or even behind by a month or two, contact your lender before the process goes any further. Even if you’ve gotten an official “notice of default,” saying you’re several months behind, you still have time before the formal foreclosure process begins.

The first question you need to decide is whether you want to keep your house or give it up. If you want to keep it, you need to try to work out a plan to get back on track. This involves either making up for the missed payments – which you can do all at once or try to spread out – or coming up with a new plan. One option is to have the loan modified – at a lower interest rate, for example. Or you can ask for “forbearance,” which basically means the lender suspends payments until you can get back on your feet. If you’re in over your head and bought too much house, though, these options probably aren’t going to help.

So you may have to consider moving. Even if you do lose your house, you don’t want a foreclosure on your record when you go looking for a smaller house or a place to rent. One option is to ask the lender to hold off on foreclosing until you sell. If your mortgage is bigger than your house is worth, your looking at what’s called a “short sale” and you’ll owe money to the lender even after the house is sold. In some cases, lenders will let you off the hook for that amount rather than go through the expense of foreclosing. (But you may not be completely off the hook: you may owe taxes on that amount.)

You can also try something called a “deed in lieu of foreclosure” – which basically means you turn over your house to the lender and walk away without owing anything. But you’ll need to work this out with the lender: you can’t just leave the keys in the mailbox.

While it’s possible to work out one of these solutions with your lender on your own, you may have better luck with the help of someone who specializes in the process. A good attorney who knows real estate law can help, but you may not be able to afford that. A credit counselor (from an accredited, non-profit agency, not the slime balls who spam you with bogus promises of making your debts “go away”) is another option. Lenders are more likely to go along if a competent third party is there to help smooth the process.

If all else fails, you may have to consider allowing foreclosure to proceed – or filing for bankruptcy. But like most aspect of personal finance, there’s no “one-size-fits-all” guidelines for which is the least bad alternative. There are different ways to file for bankruptcy, and not all of your debts have to be included (for more, see the next page.) So even if faced with bankruptcy, you’ll need advice from someone – either a good credit counselor or a bankruptcy attorney – who can walk you through the choices you’ll face.

How many years apart can you file bankruptcy in Georgia?
–D.D., Address withheld

While it’s not an easy option, bankruptcy is becoming more common. Some 391,000 individuals turned to the bankruptcy courts for help getting out from under debt during the first half of this year, according to the American Bankruptcy Institute. That’s up nearly 50 percent from the first half of 2006. While that’s down from levels seen before changes in the law in 2005 made it harder to file, the ABI said the number of filings is expected to continue to increase.

“Continued pressure on housing markets, combined with high consumer debt burdens, will lead more households to consider bankruptcy as an option to their financial problems,” the group said in a recent press release.

While the bankruptcy process in the U.S. is governed by federal laws and handled by a system of federal bankruptcy courts, state laws regarding consumer debts and the disposition of property also come into play. There are also different types of bankruptcy filings. No matter which course you take, the filing stays on your credit record for 10 years. That makes it very difficult to get any type of loan during that period; the loan will be more expensive if you can get one.

The two most common forms of personal bankruptcy are called Chapter 7 and Chapter 11. (About 60 percent of those who file for bankruptcy use Chapter 7, most of the rest use Chapter 13.) Under a Chapter 7 filling, you get to keep certain property (this is where state laws vary), but the rest is turned over to a court-appointed trustee who sells your stuff or gives it to lenders to satisfy your debts. Under a Chapter 13 filing, you pay back your debts under a plan worked out by the court. The trustee collects payments, pays off your debts and makes sure you stick to the plan.

If you own a business, you may want to consider a Chapter 11 filing. This let’s you stay in business, as long as the court and the people you owe money to approve of the plan to pay off your debts. If the court decides a trustee needs to be appointed, the trustee takes control of your business and its assets.

Not all debts can be wiped clean – even if you ask for a “discharge.” The list includes alimony and child support, taxes, court fines and most student loans. New debts, taken on after the discharge, aren’t included. And if the judge finds out you’ve lied or committed fraud, your discharge can be denied.

You can also choose which debts you want to have discharged while you keep paying off others. You might want to work out a payment plan so you can keep your car, for example. To do this, you have to sign a “reaffirmation agreement,” which says that you promise to pay off that debt. If you don’t pay it back, the creditor can send it to a collection agency like any other debt.

If you’ve filed a Chapter 7 bankruptcy and gotten a discharge, you’ve got to wait 8 years before you can do it again. There are different limits on filing for Chapter 13, depending on whether you’re trying to get debts discharged.

Whatever you decide to do, you’ll probably want some help. (You can do this alone, but we don’t recommend it. Start with a good credit counselor or bankruptcy attorney. Get references, ask lots of questions, and don’t sign anything until you’re sure you understand fully what it says.

Its time to admit that you did not pick Connecticut v. Kentucky, but does it matter, its all fun

I’ve entered many NCAA college basketball pools in which I picked the teams that I was absolutely sure would go onto the next round.  On each occasion, I had a few wins and a few losses, but never did I pick each and every upset.  How can you?  Every tournament has its surprises.  So, did anyone pick these two teams to play in the finals.  If you did, you are a soothsayer.  No matter who you picked in this tournament, it has been fantastic to watch.  Drama to the maximum.  It just goes to show that even though amateur sports are not truly amateur there is something about the energy of college sports that extends beyond professional sports.  Whoever you pick in the finals its certain to be entertaining and dramatic–good luck to both teams.

Warren Buffet, March Madness and financial responsibility

Today, Warren Buffet can breath easier as his offer to pay a billion dollars to anyone who has a perfect bracket for the college basketball tournament is already moot. That’s right, his pool (reported to be 15,000 deep) of “bracketeers” has no one remaining without at least one loss. Again, proving that this man has great insight and simply knows how to play the odds. That should come as no surprise to anybody that is familiar with his background and skillset. Nonetheless, it demonstrates the absolute futility to playing long odds when hoping for a big financial payoff. Please don’t get me wrong, you need to be “in it, to win it”. But, spitting in the eye of the odds is no way to plan for the future. With that stated, many of us utilize a similar method, but significantly less risky one in planning for our retirement. Investing in 401(k) plans and direct investment in the stock market is a form of gambling, but one for which there is a track record for growth for the most part. Nonetheless, as has occurred, there are occasions when the bottom drops out and significant variations of loss have occurred. The key is to carefully review all of your options and then make a calculated and thoughtful determination. With this in mind, it makes sense to take the $1-20 spent regularly on lotteries and put it into a investment for the future. You will be amazed how quickly this money may grow.

A quick disclaimer to modify my comments above. I am not an investment expert or analyst and these comments contain opinion and not investment recommendation. Always, confer with an expert in the field of investing before committing your hard earned money in the stock market, or other forms of investment. Best of luck.

To file bankruptcy or use alternative options

Bankruptcy is often the right choice for you, but not always.  In some circumstances, you may choose alternatives instead of or before you file.  First, some of your debts may be invalid and you can challenge them.  In that regard, you may have a legitimate basis for the non-payment of your debts.  For example, if you hired a contractor to do work at your home, but he failed to do so as agreed to in the contract, you may challenge your obligation to pay under the contract.  There are many circumstances where your debt obligation may be in question based upon an improper agreement or other issues related to the performance of both parties.  It is best to consult with an attorney if you believe that you may have a basis for challenging your duty to pay any creditor.  Depending upon the size of the debt it likely would be worthwhile to at least meet with an attorney for a free consultation.  Moreover, in many circumstances, the attorney may be able to negotiate a settlement in satisfaction of a portion of the debt.  However, if there are many debts, a Chapter 7 bankruptcy filing may be best. 

Another alternative is to negotiate directly with your creditors to determine whether you can settle for a portion of the entire debt in several payments.  Furthermore, you may negotiate lower monthly payments, a lower interest rate and a discount on the full amount.  However, these negotiations often take time, persistence and a great deal of patience as you will need to speak with the right people who have the authority to make these decision.  The best thing to do is to skip right past the first person who answers the telephone and ask for a supervisor or the department that negotiates repayment.

Another alternative to immediately filing bankruptcy is to work with a debt loan consolidation Company.  They will negotiate for you to reduce your interest rate and your monthly payment.  However, there is a cost associated with this–they will charge you a monthly fee that will continue for the entire time that you are in their program.  It is important to calculate whether the amount you save is significant enough to cover the monthly payment to the debt consolidation Company.

Additionally, you may check with State and City agencies to determine whether there are programs that can assist you with housing, utilities, health and other assistance.

It is important to note that all of these options may be discussed with your attorney in a free initial consultation.  During your consultation, you will be able to determine which direction makes the most sense for you.  Most importantly, your attorney must be looking out for your best interest.

Mark S. Grodberg/MSG Attorney at Law

(646)770-4366, Mark.Grodberg@gmail.com

www.nyaccidentlawyernow.com

 

Filing bankruptcy for a Fresh Start in the New Year

It’s the end of the year and you are feeling the stresses of the Holidays and responsibilities to your friends and family.  What should you do pay a bill and forgo buying gifts.  Of course, your monthly expenses come first.  Are you feeling overwhelmed.  Creditors are calling you everyday.  There just never seems to be enough to cover all your expenses and bills.  You have tried and exhausted all other options for resolving your debt.  You are not the only one in this situation!

You and many others find themselves in this predicament.  Starting from when the economy took a turn for the worse in 2008.  There are many people feeling the stresses of their individual economic pressures.   Some are employed and others are out of work , but looking for employment.  Now, making things worse, it appears that Congress will vote against any further extensions in 2014 for unemployment insurance beyond the 26 week allotment. (Check out the following link for updates—http://jobsearch.about.com/od/unemployment/a/unempextension.htm)  This may change, but until it does it adds further pressure on individuals who are out of work.

NOW.  It is time to do a personal accounting and straighten out your individual situation.  Not to say that filing bankruptcy is right for every person.  It is not–it is important to assess your debt load, your income, and carefully determine what is ideal for you.  Bankruptcy should be carefully considered as your debt option, but you should not and do not have to make these decisions without some expert assistance.  Check out my website at www.nyaccidentlawyernow.com for information regarding the steps of filing a bankruptcy.

Also, you may always contact me directly to discuss your situation and schedule a further free discussion (assessment) in person.  I understand your situation and would like to help you to get a fresh start and stop any harassment coming from your debtors.  Call (646)770-4366 or by email at Mark.Grodberg@gmail.com

What to Expect When Filing Chapter 7 Bankruptcy

Below is a summary of the initial process for starting a Chapter 7 Bankruptcy Petition.  If you are having financial difficulties and would like to discuss your options for bankruptcy or otherwise, please contact me at your convenience to set up a free consultation. (646)770-4366, Mark.Grodberg@gmail.com.  www.nyaccidentlawernow.com

A chapter 7 case begins with the debtor filing a petition with the bankruptcy court serving the area where the individual lives or where the business debtor is organized or has its principal place of business or principal assets. (3) In addition to the petition, the debtor must also file with the court: (1) schedules of assets and liabilities; (2) a schedule of current income and expenditures; (3) a statement of financial affairs; and (4) a schedule of executory contracts and unexpired leases. Fed. R. Bankr. P. 1007(b). Debtors must also provide the assigned case trustee with a copy of the tax return or transcripts for the most recent tax year as well as tax returns filed during the case (including tax returns for prior years that had not been filed when the case began). 11 U.S.C. § 521.

Individual debtors with primarily consumer debts have additional document filing requirements. They must file: a certificate of credit counseling and a copy of any debt repayment plan developed through credit counseling; evidence of payment from employers, if any, received 60 days before filing; a statement of monthly net income and any anticipated increase in income or expenses after filing; and a record of any interest the debtor has in federal or state qualified education or tuition accounts. Id.

A husband and wife may file a joint petition or individual petitions. 11 U.S.C. § 302(a). Even if filing jointly, a husband and wife are subject to all the document filing requirements of individual debtors.

The courts must charge a $245 case filing fee, a $46 miscellaneous administrative fee, and a $15 trustee surcharge. Normally, the fees must be paid to the clerk of the court upon filing. With the court’s permission, however, individual debtors may pay in installments. 28 U.S.C. § 1930(a); Fed. R. Bankr. P. 1006(b); Bankruptcy Court Miscellaneous Fee Schedule, Item 8. The number of installments is limited to four, and the debtor must make the final installment no later than 120 days after filing the petition. Fed. R. Bankr. P. 1006. For cause shown, the court may extend the time of any installment, provided that the last installment is paid not later than 180 days after filing the petition. Id. The debtor may also pay the $46 administrative fee and the $15 trustee surcharge in installments. If a joint petition is filed, only one filing fee, one administrative fee, and one trustee surcharge are charged. Debtors should be aware that failure to pay these fees may result in dismissal of the case. 11 U.S.C. § 707(a).

If the debtor’s income is less than 150% of the poverty level (as defined in the Bankruptcy Code), and the debtor is unable to pay the chapter 7 fees even in installments, the court may waive the requirement that the fees be paid. 28 U.S.C. § 1930(f).

In order to complete the Official Bankruptcy Forms that make up the petition, statement of financial affairs, and schedules, the debtor must provide the following information:

1. A list of all creditors and the amount and nature of their claims;
2. The source, amount, and frequency of the debtor’s income;
3. A list of all of the debtor’s property; and
4. A detailed list of the debtor’s monthly living expenses, i.e., food,      clothing, shelter, utilities, taxes, transportation, medicine, etc.

Married individuals must gather this information for their spouse regardless of whether they are filing a joint petition, separate individual petitions, or even if only one spouse is filing. In a situation where only one spouse files, the income and expenses of the non-filing spouse are required so that the court, the trustee and creditors can evaluate the household’s financial position.

Among the schedules that an individual debtor will file is a schedule of “exempt” property. The Bankruptcy Code allows an individual debtor (4) to protect some property from the claims of creditors because it is exempt under federal bankruptcy law or under the laws of the debtor’s home state. 11 U.S.C. § 522(b). Many states have taken advantage of a provision in the Bankruptcy Code that permits each state to adopt its own exemption law in place of the federal exemptions. In other jurisdictions, the individual debtor has the option of choosing between a federal package of exemptions or the exemptions available under state law. Thus, whether certain property is exempt and may be kept by the debtor is often a question of state law. The debtor should consult an attorney to determine the exemptions available in the state where the debtor lives.

Filing a petition under chapter 7 “automatically stays” (stops) most collection actions against the debtor or the debtor’s property. 11 U.S.C. § 362. But filing the petition does not stay certain types of actions listed under 11 U.S.C. § 362(b), and the stay may be effective only for a short time in some situations. The stay arises by operation of law and requires no judicial action. As long as the stay is in effect, creditors generally may not initiate or continue lawsuits, wage garnishments, or even telephone calls demanding payments. The bankruptcy clerk gives notice of the bankruptcy case to all creditors whose names and addresses are provided by the debtor.

Between 21 and 40 days after the petition is filed, the case trustee (described below) will hold a meeting of creditors. If the U.S. trustee or bankruptcy administrator (5) schedules the meeting at a place that does not have regular U.S. trustee or bankruptcy administrator staffing, the meeting may be held no more than 60 days after the order for relief. Fed. R. Bankr. P. 2003(a). During this meeting, the trustee puts the debtor under oath, and both the trustee and creditors may ask questions. The debtor must attend the meeting and answer questions regarding the debtor’s financial affairs and property. 11 U.S.C. § 343. If a husband and wife have filed a joint petition, they both must attend the creditors’ meeting and answer questions. Within 10 days of the creditors’ meeting, the U.S. trustee will report to the court whether the case should be presumed to be an abuse under the means test described in 11 U.S.C. § 704(b).

It is important for the debtor to cooperate with the trustee and to provide any financial records or documents that the trustee requests. The Bankruptcy Code requires the trustee to ask the debtor questions at the meeting of creditors to ensure that the debtor is aware of the potential consequences of seeking a discharge in bankruptcy such as the effect on credit history, the ability to file a petition under a different chapter, the effect of receiving a discharge, and the effect of reaffirming a debt. Some trustees provide written information on these topics at or before the meeting to ensure that the debtor is aware of this information. In order to preserve their independent judgment, bankruptcy judges are prohibited from attending the meeting of creditors. 11 U.S.C. § 341(c).

In order to accord the debtor complete relief, the Bankruptcy Code allows the debtor to convert a chapter 7 case to a case under chapter 11, 12, or 13 (6) as long as the debtor is eligible to be a debtor under the new chapter. However, a condition of the debtor’s voluntary conversion is that the case has not previously been converted to chapter 7 from another chapter. 11 U.S.C. § 706(a). Thus, the debtor will not be permitted to convert the case repeatedly from one chapter to another.

FOR FURTHER OR MORE SPECIFIC ANSWERS TO ANY QUESTIONS THIS MATERIAL RAISES PLEASE CONTACT ME AT YOUR CONVENIENCE.  (SEE CONTACT INFORMATION ABOVE)