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?" »

Home prices are rising, foreclosures are falling and consumers are snatching up properties: It looks like the housing market is on the mend. But all is not as it seems, say bankruptcy attorneys.

Recently, real estate experts have been speculating that the real estate recovery won't last.

According to CNN Money, there are three main reasons the market comeback could be in jeopardy.

Investors

Homes are selling, but it's not homeowners who are doing the buying.

The majority of properties are being purchased by investors taking advantage of low mortgage rates and home prices. As a result of this surge in demand, home values and interest rates are being driven up.

Meanwhile, low- and middle-income consumers looking to buy a primary residence will be unable to afford a mortgage. Sound familiar? It's similar to what caused the original housing bubble.

As prices rise, investors will likely pull back, reducing - and maybe even reversing - any gains.

Economy

It used to be that housing threatened the economy; these days, the economy seems to be threatening housing.

After making gains, the job market is slowing down. Recently it was announced that half a million workers withdrew from the job market, either because they gave up on finding work or opted to retire and thus stopped collecting unemployment.

Student debt is on the rise and, while the number of families with credit card debt has decreased, those with debt have more than ever.

With smaller paychecks and more expenses, it's becoming increasingly difficult for first-time homebuyers to finance a purchase. Those with homes are unlikely to upgrade because, often times, they're struggling to keep up with their current mortgage payments.

The good news is that, while bankruptcy can't help the economy, it can help consumers.

Filing for bankruptcy can eliminate debts and help potential homeowners improve credit and the possibility of qualifying for a loan. And if you're struggling to hold onto a home you already own, Chapter 13 bankruptcy can stop foreclosure.

Cuts

As if the situation isn't bad enough, the $85 billion in spending cuts from the sequestration will peak this summer.

On top of additional job losses, these cuts include the expiration of payroll tax cuts and unpaid days off for more than one million government employees.

It may be enough to bust the already-tight budgets of the many U.S. homeowners struggling to make mortgage payments - leading to more foreclosures, falling prices and the same cycle all over again.

Just when we think things are getting better, the economy throws a curve ball. The reality is that the market will always be up and down. It's up to us as individuals to improve our personal financial situations.

Taking action by filing for bankruptcy has the ability to relieve debt and make payments more manageable, resulting in improved credit, reduced risk of foreclosure and better loan terms. So no matter what happens to housing, your family is protected.

Continue reading "Experts Caution Real Estate Recovery May Not Have Strength to Last" »

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" »

For thousands of deeply indebted Americans, Chapter 7 bankruptcy has been a saving grace. But thousands more consumers are missing out on the opportunity for a fresh start because they mistakenly believe they can't file for Chapter 7 due to their status as homeowners.

It's a common myth that homeowners must file Chapter 13 bankruptcy while non-homeowners are free to take advantage of Chapter 7, explains a recent Bankrate.com article.

Chapter 13 does have its benefits. Known as reorganization bankruptcy, Chapter 13 bankruptcy provides protection against foreclosure while allowing a borrower to get caught up on mortgage payments or other debts over a period of three to five years.

For those with significant equity in a home, Chapter 13 offers a way to reduce debt - it just takes a while.

But when you're drowning in unsecured debts such as credit card debt, you may not have time to wait years to lower your bills.

Chapter 7, on the other hand, provides much more immediate help.

Credit card debt, medical bills, payday loans, utility bills and other debt not tied to any property can often be discharged in a matter of months. That means in mere weeks you could be free of all obligations to creditors.

Since people who file for Chapter 7 bankruptcy don't have to pay back debt out of pocket, their assets can sometimes be sold to pay off creditors. That's why Chapter 7 is known as liquidation bankruptcy, and why in the past homeowners have been steered toward Chapter 13 bankruptcy instead.

These days, though, many homeowners have little equity in their homes thanks to the recent mortgage crisis. Without much money tied up in a property, there's little reason for it to be repossessed.

In fact, Chapter 7 has earned another nickname in recent years: fresh-start bankruptcy. For homeowners with little equity and loads of unsecured debt, filing Chapter 7 can be the ticket to financial freedom.

Look at Chapter 7 as an upside to being upside-down in your mortgage.

Everyone's financial situation is a little bit different. If you're in over your head in debt, discussing your options with a bankruptcy lawyer can help you discover the most advantageous solution to your financial struggles.

Regardless of whether you qualify for Chapter 7 or Chapter 13, you can look forward to the same end result: With the right bankruptcy plan, you and your family will be well on your way to a debt-free future.

Continue reading "Despite Common Belief, Many Debt Plagued Homeowners Can File for Chapter 7 Bankruptcy" »

Fewer young adults are in debt today than 10 years ago. But as it turns out, that may not be a good thing.

It's not that people in their 20s and 30s have become more financially responsible overnight. Rather, it's that their fiscal behavior over the past decade has finally made it impossible for them to qualify for loans.

While debt increased 63 percent for Americans over 35 between 2001 and 2010, it actually dropped 14 percent for the under-35 crowd, according to a recent survey by the Pew Research Center.

Older consumers already have mortgages, home equity loans and car loans and, as our bankruptcy lawyers discussed in a recent post, their debt load has only increased as they've tacked on new credit card debt. As a result, many baby boomers are facing the possibility of delaying - or eliminating - retirement because they simply can't afford to stop working.

At the other end of the spectrum, young Americans are beginning to suffer the consequences of too little debt.

Younger consumers have credit card debt and, increasingly, student loan debt. What they don't have is so-called "good" debt that can increase in value, like a mortgage or business loan. But when you combine a lot of unsecured debt (i.e. credit card debt) with a weak job market, it's no wonder younger generations are struggling to get loans.

Instead of continuing to add credit card debt, many are choosing to pull back on plastic. Between 2008 and 2012, borrowers between 25 and 34 decreased their credit card debt by half.

While carrying a more manageable debt load can help improve one's credit score, it's only part of the picture. Creditors also want to see that a borrower can make consistent timely payments on a mortgage, car loan or other obligation. Yet only 66 percent of young consumers own at least one car, and just 34 percent own their own home - down from 40 percent in 2007.

For most people, it's better to use plastic responsibly than to not use it at all. Putting a reasonable number of purchases on credit and paying off your balance each month can be a wise way to build credit - so that when you do apply for a loan, you don't get skewered by impossibly high rates.

If limited income combined with too much credit card debt is your problem, however, bankruptcy may be able to help.

In many cases, the reason young consumers are avoiding new debt is that they're already overwhelmed by previous debts. Although bankruptcy can't lower student loans, it can eliminate credit card debt and other expenses that may be interfering with student debt payments.

Chapter 7 bankruptcy is ideal for those with overwhelming bills and expenses, but no major assets like a home to protect. Unlike Chapter 13 bankruptcy, which reorganizes debt into more manageable payments, Chapter 7 has the power to discharge unsecured debt entirely - sometimes in as little as a few months.

Whether you have too little debt or too much debt, making the right moves today can help you achieve financial independence in the future. At DebtStoppers, we can help make your dream of financial freedom a reality.

Continue reading "Without Good Debts, More Young Consumers Unable to Get Loans" »

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" »

Home prices are low, mortgage rates have hit rock bottom - and yet owning a home is more out of reach than ever for a growing number of Americans.

Why? Chalk it up to all that debt we carry.

Last year, the average credit card debt for a U.S. household was $7,194. However, if you only look at households that actually have debt, the number rises to more than $15,000, according to NerdWallet.

And of course, that doesn't take into account mortgage debt, student loan debt, car loans or medical bills. In all, Americans were $11.31 trillion in debt in 2012 - up 4.6 percent from 2011.

The more debt a person has, the more likely he or she will struggle to pay it, which could mean missed payments, exceeded credit card limits and debt defaults.

Not surprisingly, that kind of behavior has a negative impact on your credit score. When considering a loan, lenders evaluate a potential borrower's FICO credit score to assess risk.

Being deemed a high-risk borrower means higher interest rates and less favorable terms - if you can qualify for a loan at all, that is.

After the housing bust, lenders are understandably hesitant to make loans to anyone with a history of unpaid bills or subprime credit. Dealing with debt before you hunt for a home loan reassures banks that you're trustworthy.

Not only can cleaning up your finances before applying for a mortgage help with getting the loan, it will also help you pay that loan. Qualifying for a mortgage is only half the battle. If you want to keep your house, you might as well make sure you can actually afford to pay the bills.

If you have overwhelming debts that are interfering with your dreams of owning a home, bankruptcy can be the most effectual way to lower or eliminate them.

While many worry that bankruptcy will leave a black mark on their credit report, chances are their credit is already marred by their debts - for instance, negative credit card information stays on a credit report for seven years. But that doesn't mean you have to wait seven years to improve your financial life.

Once you reduce debt and start making timely payments, you'll be surprised at how quickly your credit - and good fortune - will rebound. Many of our bankruptcy clients are able to qualify for loans shortly after filing. And because filing for bankruptcy relieves the pressure of debt, it will be much easier to make payments on those loans.

You don't have to let debt drag you down. If your debts are letting opportunity pass you by - whether it's buying a home, getting a better job or taking your dream vacation - bankruptcy can help you take control of your finances and your future.

Continue reading "Large Debts and Bad Credit Preventing More Americans from Buying Homes" »

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" »

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" »