DebtStoppers USA Bankruptcy Blog

When you're falling behind on your mortgage payments, the chance to change the terms on your loan via a mortgage modification can sound almost too good to be true.

Unfortunately, it often is.

Loan modifications have gained notoriety in recent years, as lawmakers have tried to encourage them as a solution for struggling homeowners with programs like the Home Affordable Modification Program (HAMP).

In a best case scenario, a mortgage lender will agree to a loan modification with a trial payment period. If the trial is successful, the homeowner may enjoy permanently lowered payments thanks to their new terms.

For most homeowners, however, loan modifications aren't the dream come true that lawmakers have made them out to be.

Qualifying Is a Challenge

The reality is that lenders have little incentive to offer modifications.

Since they can make more money off late fees as homeowners approach foreclosure, lenders are usually in no rush to process loan modification applications - leaving stressed-out homeowners in limbo for months. Meanwhile, lenders may be moving forward with foreclosure.

It's not uncommon for homeowners to lose their properties to foreclosure after being denied - or before being approved - for a modification.

When you're headed toward foreclosure, time is of the essence. If you don't act quickly you will lose your home and any equity you have paid into it. That's why Chapter 13 bankruptcy is often a better solution for families facing foreclosure in the near future.

Terms Aren't Always Better

Normally when you're seeking a loan, you can shop around for the best terms. But Uncle Sam requires that homeowners receive a loan modification from their own lender or from a preferred counselor.

Often times, these terms aren't significantly better than your current mortgage. Once you factor in the cost of receiving a modification, back interest that may be added back into the loan, and damage to your credit as a result of the modification, you could end up paying more per month than you do now.

Modifications May Not Stop Foreclosure

Even if you qualify for modification - and even if your new terms are an improvement over your old ones - you may still end up in foreclosure. Why? Because mortgage modification fails to address the underlying cause of most folks' financial troubles.

Mortgage payments are rarely the reason for default; other household debts, namely credit card debt, are usually the culprit.

If you're struggling with snowballing credit card debt, slightly lower mortgage payments won't offer relief for long. Until you deal with debt, your home will always be at risk.

Unlike modification, Chapter 13 bankruptcy has the ability to restructure unsecured debt into manageable payments, providing the breathing room necessary for homeowners to prioritize their mortgage.

Additionally, filing for Chapter 13 enacts an automatic stay that legally protects your home from foreclosure and other assets from repossession. And while many worry that bankruptcy will hurt credit, it's usually just the opposite.

Reorganizing debt and creating manageable mortgage payments allows you to get back on track, so you can begin rebuilding credit - and your financial future.

Continue reading "Loan Modification vs. Bankruptcy: Which Is the Best Way to Stop Foreclosure?" »

Could the foreclosure crisis officially be over? Foreclosure filings in the first quarter of 2013 fell to the lowest level since 2007, according to new data from RealtyTrac.

This March, banks took ownership of 44,000 homes. While it may sound like a lot, compare that with September 2010, when banks repossessed more than 100,000 properties.

Foreclosure activity has slowly started to decline in recent years for several reasons.

For instance, more homeowners are turning to foreclosure alternatives such as short sales - or are avoiding the loss of their homes entirely by filing for Chapter 13 bankruptcy, which stops foreclosure proceedings.

The surge of foreclosures that occurred when banks resumed processing paperwork following the robo-signing scandal has mostly subsided.

Even the reasons for foreclosures have changed.

At the height of the housing bust, homeowners were defaulting due to plummeting home prices and outrageous mortgage terms. These days, most folks losing their homes to foreclosure are struggling with non-mortgage financial troubles - say, a job loss, illness or divorce.

Of course, having too much credit card debt is still a leading cause of mortgage default for everyone from low-income families to wealthy households.

But while the foreclosure drop-off is good news for homeowners in most parts of the country, there are still a few states buried under a backlog of foreclosures. Foreclosures in Georgia, Illinois and Florida are higher than in any other state.

Even more bad news: Many foreclosures in these states are being dismissed because banks aren't ready to proceed with their cases. However, this gives homeowners false hope, as dismissed cases can be reopened at any time.

In some cases, homeowners have fallen in and out of foreclosure two or three times, ultimately losing their home - in addition to dollars lost dealing with the process.

If you're at risk for foreclosure, it's never too soon to protect your home. When you file for Chapter 13, a legal action called an automatic stay has the power to stop foreclosure proceedings while you pay off debts over a manageable timeframe.

If lack of income requires you to file for Chapter 7 bankruptcy, it may still be possible to avoid foreclosure. Meanwhile, you can eliminate most crippling unsecured debts, such as credit card debt and medical bills.

The tide of foreclosures is turning, but there are many factors that still put homeowners at risk. With bankruptcy, you can protect against foreclosure while relieving debt and improving your family's finances - a win-win any way you slice it.

Continue reading "Foreclosures Dwindle to Pre-Housing Crisis Levels" »

It's still only February, and already 2013 is shaping up to be a better year for the housing market. Recently released data indicates that we've surpassed the peak of the foreclosure crisis.

According to RealtyTrac, foreclosure activity - which includes default notices, scheduled auctions and repossessions - fell 7 percent since last month and a remarkable 28 percent from January 2012.

New foreclosure filings last month dropped to the lowest level in six years.

However, most of the decline occurred in a single state: California, which has long suffered the highest foreclosure rate in the U.S.

On January 1, a new California regulation - the Homeowner Bill of Rights - went into effect. The law stops foreclosure proceedings once a homeowner has applied for a mortgage modification. As a result, new foreclosure filings in California are now down 65 percent from a year ago.

That's good news for residents of the Golden State, but it doesn't mean much for the rest of the country where foreclosure filings are still double what they were in 2005, before the subprime mortgage fiasco imploded the housing market.

Of course, even California residents who qualify for loan modifications aren't protected from foreclosure permanently. At best, most modifications will only lower a mortgage payment by a few hundred dollars per month - and that doesn't take into account the fees and tax implications that come with modification.

In some cases, loan modifications may actually increase a borrower's monthly payment; if a borrower has been delinquent for a long period of time, the unpaid amount can be spread on top of regular payments.

There's only one surefire way to stop foreclosure, and that's to get - and stay - current on payments. For many of us, this means eliminating overwhelming debts. And when it comes to getting out of debt, no solution is more reliable than bankruptcy.

Bankruptcy provides the ability to reorganize debts into payments determined not by your lender, but by the amount you can afford. Imagine how much more manageable it will be to make your mortgage payment when you're not struggling to also pay credit card bills, medical bills, car payments and more.

If you've fallen far behind on your mortgage, filing for Chapter 13 bankruptcy also has the power to legally stop foreclosure while you work out your new payment plan - whether you're a month behind or are just days from losing your home to the bank.

With bankruptcy, you can put your past behind you so you can move forward - to a more affordable home, fewer debts and a brighter future.

Continue reading "Foreclosure Rate Falls to New Low, But Most of Decline Occurs Only in California" »

Homeowners struggling to stay current on mortgage payments may soon have an unlikely ally: big banks.

Last week, the Consumer Financial Protection Bureau debuted a new set of rules requiring U.S. banks to start evaluating defaulting borrowers for all possible loan assistance options, from programs available via mortgage giants Freddie Mac and Fannie Mae to help from private investors.

Additionally, lenders would be forced to hold off on beginning the foreclosure process until a homeowner has fallen behind on at least four months of payments, giving borrowers much-needed time to seek loan assistance or file for bankruptcy.

If an application for help is submitted at least 37 days before a scheduled repossession, homeowners will be protected from foreclosure while they attempt to receive help.

The only bad news? The new rules don't go into effect for a year. And, of course, there's the reality that loan assistance will not be available - or effective enough - for every homeowner.

In the last five years, American borrowers have defaulted on a staggering $585 million in debt. Today's debts are three times what they were in 1998, just 15 years earlier.

While some of that amount includes mortgages and personal loans, the vast majority is made up of credit card debt.

Options like mortgage modification and refinancing may be able to lower mortgages slightly, but they have their limitations - especially for borrowers who are saddled with large debts.

If you've been drowning in debt, you may not qualify for rates low enough to make a significant change in your mortgage payments, especially not when you factor in the fees associated with refinancing or modifying a mortgage.

In some cases, applying for loan assistance only puts off the inevitable. Many homeowners who apply for help end up in foreclosure in the long run, whether it's because they failed to qualify for assistance or their new mortgage terms didn't address the underlying cause of their late payments - more often than not, overwhelming debt.

There's no doubt that banks should be doing more to help borrowers stay in their homes. But many homeowners don't realize there's already a program that's helped millions of families stop foreclosure and dig their way out of debt: Chapter 13 bankruptcy.

While loan assistance addresses a mortgage, bankruptcy addresses a wide variety of debts - including credit card debt, medical bills and personal loans - that are often the underlying source of mortgage default.

Like the new rules, Chapter 13 bankruptcy puts foreclosure on hold. But bankruptcy goes even further by reorganizing debt into manageable payments and, in some cases, eliminating certain debts altogether.

Why spend time and money to lower your mortgage payment by a fraction, only to have credit card debt continue to get in the way of payments? For many, bankruptcy has the power to solve all debt problems - once and for all.

Continue reading "New Rules Mandate Banks Must Do More to Help Troubled Homeowners Avoid Foreclosure" »

With mortgage rates hovering at record lows, many homeowners are scrambling to lock in savings by refinancing - in some cases, multiple times.

According to new data, nearly 2.2 million homeowners have refinanced a mortgage at least twice since 2009.

Many of these borrowers are being lured in by lenders offering to waive some or all of the closing costs associated with a refinance. Unfortunately, these deals are frequently too good to be true.

Remember, mortgage lenders and banks are in the business of making money, not making consumers' lives easier. They won't do anything if they don't think they'll be able to turn a profit from it.

A lender may claim to waive closing costs or other fees, but what they're not telling you is that those fees are either rolled into the loan itself or paid for via a higher interest rate - or both.

When you refinance, you're essentially taking out a whole new mortgage. That means fees for inspections, document preparation, applications, administration, escrow, title policies, recording, and more. Add yet another refinance down the road, and your costs will double.

In most cases, say our bankruptcy attorneys, homeowners who refinance end up with a bigger loan and longer term. That may be okay for those who have plenty of money and don't mind staying in their home for the next few decades. But if you're like most of us, the benefits just don't add up.

Let's say your new mortgage costs you $3,500 to secure. If you're able to knock off $100 a month due to a better rate, you won't break even for almost three years.

Then there's the issue of credit. Most homeowners seeking to refinance are doing so in hopes of lowering their monthly mortgage payment. But if you've been struggling to stay current on your mortgage, it's unlikely that you'll be able to qualify for a rate that makes a refinance worthwhile.

For financially strained consumers, loan modifications - which modify the terms of an existing mortgage instead of taking out a new one - may seem to make more sense.

Unfortunately, lenders have little incentive to perform modifications, even when pushed by government programs like the Home Affordable Modification Program (HAMP), because lenders know they can charge more fees and late penalties when families are facing foreclosure.

What lenders won't tell you is that even if you refinance or modify your mortgage, you may still lose your home in the end. Refinances and modifications don't work for most people because they don't address the real problem: non-mortgage debt.

Most people have trouble making payments because they're drowning in high-interest credit card debt. Chapter 13 bankruptcy has the power to not only legally stop foreclosure, but to eliminate the most pressing forms of debt - from credit cards to unpaid medical bills. With your credit card debt gone, you may be surprised at how quickly your mortgage payment becomes affordable.

And while lenders may claim bankruptcy will hurt your credit score, in most cases it actually paves the way for you to clean up your score by allowing your family to finally become debt-free.

Chapter 13 lets homeowners reorganize all their debts, not just their home loan. At DebtStoppers, our bankruptcy lawyers have helped thousands of families keep their homes - and their dignity - through bankruptcy.

Continue reading "Homeowners Rushing to Refinance Mortgages Often Overlook Drawbacks" »

For the second time in two years, U.S. banks have agreed to pay a major settlement to homeowners who were improperly foreclosed upon. As to whether it will be more effective than the first agreement, only time will tell.

USA Today reports that 10 of the nation's largest banks claim they will shell out $8.5 billion - some in direct payments and some in the form of loan modifications and other adjustments - to borrowers who were victims of servicing errors.

Federal regulators put foreclosure processing on hold in 2011 to investigate accusations that banks were improperly handling paperwork and ignoring important regulations in order to push a glut of foreclosures through the system as quickly as possible.

As a result, millions of people who may otherwise have been able to save their homes ended up losing the properties to lenders.

It's estimated that 3.8 million borrowers who lost a home between 2009 and 2010 to one of the 10 banks listed in the settlement could qualify for a piece of the pie.

The banks included are Wells Fargo, Citigroup, Bank of America, JPMorgan Chase, U.S. Bank, MetLife Bank, Aurora, PNC, Sovereign, and Sun Trust. Four more banks still negotiating with lawmakers could be added later on.

But as the past has shown, promising to make good with consumers and actually doing it are two different thing entirely.

A much larger $26 billion settlement deal was made with major mortgage lenders in spring of 2012. Ultimately, however, that agreement only ended up helping less than 1 million of the 11 million homeowners with an underwater mortgage, not to mention the millions more who had already lost their homes to foreclosure.

Some consumer advocates have been quick to point out that the new, smaller settlement will likely do even less to help those who need it most.

To even be considered, a borrower's mortgage must have been held by one of the 10 banks. Even if you qualify for a loan modification, you may not see a significant change in your payments. And if you receive a direct payment, it's unlikely to be enough to make staying in your home more affordable.

For most homeowners, the settlement is merely a formality acknowledging that banks were in the wrong. But when it comes to actually stopping foreclosure, it's too little too late.

But just because your bank won't bail you out doesn't mean you can't change your fate. Chapter 13 bankruptcy remains the most powerful tool to stop foreclosure and reorganize debt so it's possible to regain control of your finances.

If you're delinquent on your mortgage and facing foreclosure, you don't have time to wait for a loan modification that may never come - or may not do enough to change your financial situation when it does.

Filing for bankruptcy is a guaranteed method to lower debt once and for all. When you're free of overwhelming debt, your bills will become more manageable, you can bid goodbye to degrading harassment by debt collectors, and you can work on improving your credit and finances.

Bankruptcy is more than a chance to save your home - it's a chance at saving your future.

Continue reading "New Foreclosure Settlement to Distribute $8.5 Billion to Millions of Eligible Borrowers" »

U.S. consumers had more money in their pockets this year. Unfortunately, those fatter wallets may not last long.

The household debt service ratio, which looks at the amount of mortgage and consumer debt in relation to disposable personal income, fell to its lowest level since 1983 - nearly 30 years ago - in the third quarter of 2012, according to the Federal Reserve.

U.S. household debt reached its highest point during 2007, as consumers took on home equity loans and other debts.

Since then, credit card debt has risen as borrowers struggled to pay down unaffordable mortgages on homes that were now underwater.

The news should mean that consumers will have more money to spend, giving the economy a much-needed boost in 2013. Right now, though, the looming fiscal cliff stands in the way.

According to the Tax Policy Center, nearly 90 percent of households would be impacted if a deal isn't reached by Jan. 1. But with just days left until dozens of tax cuts expire and spending cuts take effect, lawmakers are still bickering over what to do.

What happens if they are unable to agree on a deal? Here's a taste.

Payroll taxes would rise by 2 percent as a temporary tax cut expires. Income taxes would go up across the board. Over 2 million out-of-work Americans could lose unemployment benefits.

Most significantly for families facing foreclosure, the Mortgage Forgiveness Debt Relief Act of 2007 - also known as the mortgage tax break - would expire.

As our bankruptcy attorneys have pointed out, that means homeowners will owe income taxes on the amount of their mortgage forgiven by lenders in a foreclosure, principal reduction or short sale. In other words, if you owe $200,000 and your house goes for $150,000 in a short sale or foreclosure auction, you're on the hook for taxes on that $50,000 gap.

Additionally, lower debt levels aren't always a good thing. Some debts - such as mortgages and car loans (when you can afford them, of course) - help improve personal credit and grow the economy through demand for loans.

But right now, many Americans are resistant to or unable to take on new debt, choosing to rent instead of own and to continue driving the same vehicles.

When it comes to debt, it's all about balance. In a perfect world you'd be free of overwhelming and unnecessary debts - such as credit card debt - that hurt your credit score and impact your ability to keep up on your mortgage and pay your tax bill.

However, you'd also be able to qualify for a home loan with decent rates and a credit card for emergencies.

For millions of Americans, bankruptcy can turn that dream of financial freedom into reality.

Whether you're behind on mortgage payments and facing foreclosure, drowning in credit card debt, or buried under a mountain of medical bills, the right bankruptcy plan can grant a clean slate by reducing or eliminating debt.

Whether or not we go over the fiscal cliff is up to lawmakers. But it's up to us to take steps to protect our family finances, regardless of the decision in Washington. If debt has been a thorn in your side for far too long, bankruptcy can be the relief you need.

Continue reading "Household Debt Hits New Low, But Expiring Tax Cuts Could Obliterate Savings" »

As the holidays draw nearer, so does something else: the so-called fiscal cliff.

At midnight on Dec. 31 of this year, spending cuts and new taxes are set to go into effect, while a series of tax breaks are on track to expire, potentially culminating in an economy-crippling financial pickle.

If lawmakers can't agree on taking action, for instance, 2013 will bring the end of current payroll tax cuts, changes to Medicare, and - maybe most disturbingly - the expiration of tax exemptions for homeowners facing foreclosure or a short sale.

As our bankruptcy attorneys discussed earlier this month, delinquent borrowers who give up or lose their properties will be on the hook for paying income taxes on the portion of their mortgages forgiven by lenders.

But while the media is focused on the national economic effect, experts caution consumers to look inward to avoid their own personal fiscal cliffs.

A fiscal cliff is really just a situation in which feared major financial events happen simultaneously, creating an overwhelming economic effect.

In reality, many individuals are driven off their own personal financial precipices every day.

Maybe it's the day too much credit card debt finally interferes with your ability to pay the mortgage. Perhaps it's the point when your massive student loans finally come due - and you can't afford to pay them. It may be sudden unexpected car repairs that eat up your paycheck.

Maybe ordinary everyday expenses have become a problem because you lost your job months ago and are still looking for work.

The good news is that, unlike bureaucratic lawmakers, consumers actually have the ability to quickly do something before they reach the point of no return.

Experts encourage consumers to build up a liquid emergency savings they can fall back on to pay for unexpected financial challengers, such as lost wages, unmanageable medical bills or car repairs.

Of course, that's easier said than done when all your money is going to your debts.
For millions of Americans overwhelmed by credit card debt and mortgage debt, bankruptcy offers a fresh start.

The deeper the hole, the harder it is to dig your way out. Filing for bankruptcy allows consumers to reduce or eliminate debt, freeing up funds for covering other important expenses.

If you're behind on mortgage payments, for instance, Chapter 13 bankruptcy has the ability to stop foreclosure and other collection proceedings while you repay a portion of debts in an installment plan over 3 to 5 years. If you're out of work - and thus funds to pay credit card bills - Chapter 7 bankruptcy can stop creditor action and completely eliminate crippling unsecured debts.

If you can see a fiscal cliff coming, don't wait until you're soaring over the edge toward rock bottom. Take action! Bankruptcy has helped thousands of families get out of debt - and get on with their lives.

Continue reading "Instead of Worrying About Washington, Experts Encourage Consumers to Prepare for Personal Fiscal Cliff " »

A recent report on mortgage delinquencies could be taken as good or bad news, depending on your financial situation.

New information from credit bureau TransUnion shows that, if the number of borrowers who have missed their home loan payment for a year or more were excluded from the data, the U.S. delinquency rate would be only a little higher than normal, according to USA Today.

If those homeowners were ignored, the rate of delinquent borrowers would drop in half, from 5 percent to 2.5 percent of mortgage holders.

Back before the foreclosure crisis, the nation had a 2 percent delinquency rate.

That means the above-average 5 percent rate isn't being caused by new mortgages. Instead, it's being kept afloat by the same group of delinquent homeowners.

In fact, it's estimated that 80 percent of the country's delinquent mortgage holders fell into delinquency before 2008.

One of the effects of the housing bust has been longer foreclosure processing times, which means a homeowner may miss payments for years before the banks takes their home.

That's a semi-good thing for the real estate market, as it indicates delinquencies are not increasing.

The bad news is that homeowners who are delinquent aren't finding relief.

As foreclosures and short sales continue to be processed, delinquency rates should begin to fall. But unless more homeowners find a solution for their mortgage woes, it could take as long as four years until rates get back to normal, according to the USA Today article.

For many homeowners, bankruptcy could offer a solution.

Often times, struggling homeowners avoid filing for bankruptcy because they want to believe there's another way. But loan modifications and short sales have simply not slowed the flood of foreclosures.

Unfortunately, by the time most borrowers realize bankruptcy is their only hope, they're already years behind on payments, in the process of losing their home, and suffering from decimated credit.

Chapter 13 bankruptcy, also known as reorganization bankruptcy, was created especially for individuals who earn a regular income, but who carry large unsecured debts that make it difficult to pay the mortgage.

When you file for Chapter 13, a legal action called the automatic stay immediately stops foreclosure while you catch up on your payments, which are organized into a manageable schedule.

Never knowing when that foreclosure or eviction notice is going to arrive is no way to live. With bankruptcy, you can get back your financial independence - and your life.

Continue reading "Fewer Homeowners Missing Mortgage Payments...But Existing Delinquencies Aren't Improving" »

Perhaps the only thing worse than facing foreclosure is facing foreclosure over the holidays.

In an effort to relieve stress for troubled borrowers, mortgage giants Fannie Mae and Freddie Mac have agreed to refrain from repossessing homes from the third week in December through Jan. 3, according to CNN. Bank of America will also postpone its foreclosure evictions through the holiday season.

But while it may seem like an early Christmas present for delinquent homeowners, it's important to remember this is only a very temporary solution.

Banks will continue to conduct pre- and post-foreclosure activities. So while you might not be kicked out of your home this month, you could still receive a foreclosure notice or have your house scheduled for auction.

Millions of homeowners in the U.S. are either underwater on their mortgage, unable to afford mortgage payments or a combination of both.

As our bankruptcy lawyers reported last week, an expiring tax exemption could make matters worse by creating impossibly high bills for borrowers facing a foreclosure, short sale or loan modification.

If the law does indeed expire on Jan. 1, homeowners would owe income taxes on the portion of a mortgage debt written off by the lender. For instance, if you hold a mortgage for $250,000 and your home were to sell in a short sale for $200,000, the IRS would count the $50,000 difference as taxable income.

If you want to give yourself a present this holiday, make it the gift of real financial relief. Bankruptcy is the single most powerful tool for avoiding foreclosure, getting out of debt and regaining financial control.

If you're falling further and further behind on mortgage payments, filing for Chapter 13 bankruptcy has the ability to stop foreclosure and collection proceedings - not just during the holidays, but for good.

After filing, you'll be able to work out a plan to pay down debts in affordable installments. Meanwhile, unsecured non-mortgage debts like credit card debt or medical bills may be reduced or eliminated entirely.

For those with crippling credit card debt and little income, Chapter 7 bankruptcy may be the best solution.

While often thought of as a last resort, bankruptcy is actually the only guaranteed way to relieve debt and retain valued possessions like your home. Our expert bankruptcy attorneys have helped thousands of families eliminate debt and rebuild their finances for a happier New Year.

Continue reading "Lenders Suspend Foreclosures for Holidays, But Bankruptcy Offers Lasting Solution" »

Usually the first day of a new year means a fresh start. But if a federal tax exemption is allowed to expire, this Jan. 1 could mean disaster for troubled homeowners.

When a portion of debt is canceled or forgiven, that amount is often considered taxable income by the IRS. However, thanks to the Mortgage Debt Relief Act of 2007, mortgage debt is currently forgiven by lenders in a short sale, foreclosure, or loan modification if the home is a primary residence.

In 2011, the law saved borrowers an estimated $1 billion, according to The New York Times.

Unfortunately, it's scheduled to expire Jan. 1, 2013.

What does that mean? Let's say you owe $300,000 on a home you can no longer afford. If the property goes for $200,000 in a short sale, the government will tax you on the remaining $100,000 forgiven by the lender - even though you never saw a dime of the money.

Additionally, any mortgage relief rendered under this spring's $26 billion foreclosure settlement, such as a loan modification, will only make homeowners liable for taxation.

While it's still possible that the exemption could be extended, it's also highly possible that lawmakers will be too busy grappling with current fiscal woes to renew existing laws.

Since short sales and foreclosures typically take several months (or even longer, depending on state laws) to complete, homeowners just entering the process today could already be looking at facing taxes.

So what do you do when you can't afford to keep your house - but you can't afford to lose it, either?

If the exemption expires as planned, filing for bankruptcy may be the only way to avoid a large tax liability.

When you have no choice but to walk away from your home, bankruptcy ensures that the remaining debt - and any associated taxes - can be discharged.

Of course, if there's a chance of saving your home, bankruptcy can also be your best friend.

As they say, an ounce of prevention is worth a pound of cure. Filing for bankruptcy has the power to relieve debt, often making it possible for delinquent homeowners to get current on mortgage payments.

If you're struggling to pay the mortgage, attempting to work out a solution with lenders, or in the foreclosure process, time is of the essence. The right bankruptcy plan can keep you from losing your home - and the shirt off your back.

Best of all, bankruptcy can provide the financial boost needed to get you and your family back on your feet. Laws may come and go, but bankruptcy is one consumer protection that's here to stay.

Continue reading "Losing a Home to Foreclosure Could Mean Big Taxes If Exemption Expires in January" »

The goal of this spring's $26 billion mortgage settlement was to help victims of predatory lending practices. Now, it appears that banks may be using the funds to help themselves.

Back in April, the five biggest banks in the U.S. agreed to refinance mortgages and reduce principals on loans held by homeowners who are facing foreclosure because they are underwater or behind on payments.

Under the plan, the settlement would reduce the mortgage payments of as many as 2 million of America's most embattled borrowers.

But if a consumer advocacy group is correct in its suspicions, a big chunk of those funds are going to wealthy homeowners - not the low- and middle-income homeowners who need them the most.

According to the Maryland Consumer Rights Coalition, there's evidence that loan servicers are concentrating their efforts in affluent neighborhoods.

Wealthier homeowners are more likely to have expensive mortgages, and writing down these large mortgages can allow loan servicers to reach their required goal more quickly.

Furthermore, it appears that banks aren't offering the promised principal reduction modifications in neighborhoods with low and moderate incomes.

Yet borrowers with lower incomes were hit hardest by the careless lending standards that led to the housing bubble, and are therefore most in need.

Unfortunately, until monitors of the settlement start requiring demographic and geographic data, it's difficult to ensure at-risk homeowners will get the relief required to avoid foreclosure.

The good news is that there's still hope for troubled borrowers. Whether you are a victim of a predatory loan or simply of changing financial circumstances, bankruptcy is an often overlooked solution.

For those who qualify, Chapter 13 bankruptcy makes it possible to develop a manageable debt repayment plan without giving up secured debts, like homes and cars. Meanwhile, a legal action known as the automatic stay puts a stop to foreclosure while you make payments.

Many homeowners hold out hope that they'll be able to receive a mortgage modification. The sad truth is that lenders willing to perform modifications are few and far between - and those who do usually reduce interest, not principal, making little difference in monthly payments.

Why wait around for help that may never come - and risk losing your home and dignity?

The right bankruptcy plan has the power to lower the total amount you pay toward your debts each month - making it easier to pay the mortgage, the credit card bills, and all those other expenses in your life.

Make this the season you give thanks for the most important gift you can give yourself: a fresh start.

Continue reading "Are Banks Bypassing Poorer Homeowners When Distributing Mortgage Relief?" »

With the uncertainty of the election over, many Americans are breathing a sigh of relief today. But struggling homeowners now have a new reason to worry.

A tax break that prevents homeowners from having to pay income taxes on the forgiven portion of a foreclosure or short sale is set to expire at the end of the year.

If Congress doesn't extend the Mortgage Forgiveness Debt Relief Act of 2007, tens of thousands of homeowners could be affected. Each month, an estimated 50,000 borrowers go through foreclosure and more than 41,000 homeowners complete a short sale, according to CNN Money.

Let's say one of these homeowners owes $200,000 on a home. If it goes into foreclosure and is sold at auction for $150,000, the remaining $50,000 would be considered taxable income by the IRS.

That means that a person who falls into the 25 percent tax bracket could potentially owe $12,500. Imagine perhaps doubling your tax bill in a year, while also losing the roof over your head - not a fun prospect!

Experts disagree on whether Congress will extend the break. On the one hand, the Senate and House both believe it's a good policy. On the other hand, it's rare for Congress to pass legislation in the months after an election, known as the "lame duck" period.

But regardless of whether the exemption is renewed, there is still hope for homeowners.
Borrowers able to discharge debt through a bankruptcy filing won't have to pay the tax.

Bankruptcy protects borrowers in more ways than one. By filing for Chapter 13 bankruptcy, homeowners gain the power to stop creditor actions - including foreclosure. Chapter 13 then continues to protect the property while homeowners work out a payment plan that fits their financial situation.

Under bankruptcy, your payments will be determined not by what you owe, but by what you can afford.

Whether you've missed a single payment or are days away from having your house sold on the auction block, bankruptcy offers a priceless second chance.

With the right bankruptcy plan, you won't have to wait to see if Uncle Sam bails you out. You have the freedom to put yourself and your family on the path to a better financial future - today.

Continue reading "Struggling Homeowners Brace for Expiration of Foreclosure Tax Break" »

As if it isn't hard enough to face foreclosure, many delinquent homeowners are now at risk for another hardship: foreclosure rescue scams.

With more Americans falling behind on mortgage payments, our bankruptcy lawyers note that a growing number of individuals are attempting to benefit from the misfortune of others.

In Illinois, for instance, foreclosure activity during the third quarter of 2012 increased by 31 percent compared to the previous year. Meanwhile, foreclosure scams are on track to increase by as much as 70 percent in 2012, according to the Treasury Department.

The good news is that some of that rapid rise may be attributable to better awareness, and therefore better reporting, of scams.

The bad news is that many folks are still falling victim to frauds that can not only cost them an arm and a leg, but ultimately their home.

Often times, mortgage brokers or real estate brokers who have suffered business losses due to the real estate crash begin offering "foreclosure rescue services" to homeowners as a side business. These folks may mean well - or they may not - but they are rarely able to do much to stop foreclosure.

Worst of all, homeowners usually don't realize they've been taken advantage of until they've shelled out thousands of dollars for supposed foreclosure help.

By the time most people realize the phone call that their house has been saved is never going to come, they're usually so much farther behind on payments that avoiding foreclosure becomes near impossible.

In some cases, foreclosure rescue specialists encourage homeowners to send payments directly to them rather than to the bank or to lease their home then later attempt to buy it back - tactics which only increase the odds that a homeowner will lose the property.

When you're in danger of losing your home, you may be willing to try anything to avoid foreclosure. But this is exactly when you should be the most wary of folks trying to help.

Look at it this way: Companies wouldn't offer assistance if they didn't believe they could gain financially. Bankruptcy, on the other hand, is different. Bankruptcy is a legal process created by the U.S. government specifically to help Americans down on their financial luck. And for many folks, filing for bankruptcy is the only way to truly avoid foreclosure.

Of course, unlike foreclosure rescue scams, bankruptcy doesn't make guarantees to save your house. But what it does do is provide the legal protection you need to stop the foreclosure process, giving you the opportunity to catch up on payments.

Meanwhile, bankruptcy has the power to consolidate - and in some cases, eliminate - your debts so that making payments becomes easier.

There's only one way to avoid foreclosure, and that's taking back control of your finances. Bankruptcy is often the most effective way to do just that.

Continue reading "More Foreclosures Can Mean More Foreclosure Rescue Scams" »

The good news is that an anticipated flood of foreclosures is shaping up to be more of a trickle.

The bad news is that, rather than lose their homes to foreclosure, some borrowers are simply being pushed into short sales.

According to a recent housing report, the number of foreclosure filings dropped to the lowest level in 5 years last month.

This September saw just over 180,000 foreclosure filings, which include default notices, planned auctions, and bank repos. That's down from 7 percent a month earlier and 16 percent a year ago.

Housing experts had been bracing for a huge wave of foreclosures following April's $25 billion mortgage settlement, which cleared the path for lenders to begin processing foreclosures that had been on hold after the robo-signing scandal.

Now it seems that the flow of foreclosures is more streamlined than expected.
In part, the lower number of homes falling into foreclosure is due to the improving economy and today's low mortgage rates.

Homeowners with good credit standing and cooperative lenders may be able to refinance for a more affordable rate (though our bankruptcy attorneys warn that modifying a mortgage doesn't always mean a lower payment).

However, there's more to the story. Another explanation for the decline in foreclosure filings is the increase in short sales. Many banks today are eager to agree to short sales, in which the lender accepts a price lower than what the borrower owes on his or her mortgage.

Lenders prefer short sales over foreclosures because they're faster, require fewer legal expenses and typically generate more money for the bank.

Unfortunately for homeowners, short sales don't come with the same advantages. They do nearly as much credit damage as foreclosures. Since the IRS considers unforgiven debts to be taxable income, they'll leave you with a big bill. And as with foreclosure, borrowers ultimately lose their home.

Making matters worse, some ruthless lenders have later filed for deficiency judgments demanding that borrowers pay the difference between the short sale payment and the mortgage balance.

For those facing foreclosure or a short sale, filing for bankruptcy can be a better solution. Chapter 13 bankruptcy has the power to stop foreclosure, lower debt payments and protect against creditor harassment. You may be underwater, but you'll only take a loss if you lose your house.

As the economy picks up, fewer people are falling behind on their mortgages. But for the many homeowners still in distress, bankruptcy can be a breath of fresh air.

Continue reading "Foreclosure Rates Hit New Low As Refinancing, Bankruptcy Help Distressed Borrowers Hold onto Homes " »