31 Aug Are You Facing Foreclosure? Tips That Work To Stop Foreclosure.
Are you facing foreclosure? Do you want to keep your home? Are you trying to stop foreclosure? If you are one of the thousands of Americans who find themselves behind on their mortgage, there is help for many of you.
However if you follow the advice of “money experts” you may be left unprepared since time after time they leave out one important protection that homeowners have to stop foreclosure: Bankruptcy. Bankruptcy addresses a person’s complete financial situation, and isn’t just aimed to put a bandage on one problem. Many people are behind on their mortgage because they have other bills to pay such as credit cards and loans. Bankruptcy can help stop a foreclosure, and deal with the other debt problems that may be contributing to your financial problems.
Most of the money advisers that you see on TV or find on the internet give “tips” that depend on the voluntary co-operation of your mortgage company, but it isn’t as easy to get as they may imply. The protection offered in the United States Bankruptcy Court does not depend on the agreement of the mortgage company. If you meet the requirements of the bankruptcy laws, you will get help. An experienced bankruptcy attorney can often tell you at your first consultation if you qualify for bankruptcy and what is required to get help. If the attorney sees that any other options apply, they will tell you that too, but you should not put off seeking legal advice by following “tips” given by TV advisers.
I found a new article with tips on MSN.COM: Facing foreclosure? Don’t be caught unprepared By Jean Chatzky TODAYShow.com contributor. Her article gives 5 tips if you are facing foreclosure, but read on and I will tell you some information missing for each of those tips.
1. Speak up
You can try to speak up but many creditors won’t listen until you are actually behind. Once you are, things go bad quickly. Your credit rating drops, you rack up fees and interest, and things spiral out of control. I work with client after client who has been ‘working with’ the mortgage company for months, and nothing happens. By the time they get to me, things are so much worse and so much harder to fix, even with bankruptcy. With all the publicity about programs where the mortgage companies will help, I still get call after call from those who are turned away, or who started with a program that didn’t work.
2. Know your options
The article makes it seem like most mortgage companies will work with you. That just isn’t true for many homeowners. Many of the servicing companies that collect the money for your mortgage don’t own the mortgage and have no authority to settle or rework the loan. Even if they do, postponing the payments by adding them to the end of the loan can be disastrous unless adjustments to payments and/or interest are made.
It isn’t as simple as “we’ll just move this one payment to the end of your loan and extend the loan term by one month.” You may find the payoff or your mortgage delayed by months or even years as the interest is recalculated with the missed payments added to the loan balance so less of your payment is going to pay down the principal balance. Payments are insufficient to cover the interest with the readjusted loan, you could find yourself in a situation of negative amortization ,where your balance will increase even though you are making payments.
3. Seek outside help
Not once in the article is a person guided to a lawyer. If bankruptcy is the best option for you, you won’t learn about it until you speak to a lawyer. Chapter 13 bankruptcy can stop a foreclosure and give you up to five years to catch up the missed payments, and it can also reduce or eliminate other debts like personal loans and credit cards, leaving you with enough income to pay your mortgage payments. If you seek help of a mortgage assistance company, you won’t be dealing with your other debts – only the mortgage. In many cases, that just isn’t enough.
Debt management programs (credit counseling) concentrate on paying off unsecured debts and usually don’t address mortgage problems. Debt management programs may actually contribute to someone falling behind on mortgage payments. While there are some very good credit counselors, there are some very bad ones. If you seek help from a credit counselor, make sure that they are looking at your entire situation and that they are giving you a plan that you can comply with. Too many companies are available via the internet that focus more on debts than the reality of an individual’s life and his/her continuing financial obligations.
4. Consider a short sale
Many people do not realize that a short sale may not pay off the full balance of loans secured by the property. You have to have the agreement by all loans, liens and judgment creditors to be able to complete a short sale – not just your first mortgage holder.
Often short sales allow a property to be sold, but if it isn’t enough to pay off the full balances on any mortgage or home equity line, the deficiency balance(s) may still be owed. I had a client recently who didn’t know until she was signing the sale papers that she still owed a balance from the first mortgage, and the entire second mortgage of over $60,000.00. While a short sale may be better for someone’s credit rating than a foreclosure, the missed payments on the balance negated most of the benefits to the credit score.
Even if the full balance is written off, you may have severe tax consequences from a short sale – in other words you may owe taxes on the forgiven debt. Before you attempt a short sale, make sure you consult a tax expert and are aware of all your tax consequences.
5. Learn your lesson
This is not a tip. It offers no help for a homeowner who in trouble now. While it is a very good idea to save money for an emergency and to budget so that you don’t get into trouble again, if you find yourself in a position where the money coming in this month isn’t covering all your obligations, you don’t need to be told to learn any lessons. It is going to take a lot of work to balance your budget and being told that you should have done something different isn’t going to offer that help.
by Susanne Robicsek, Bankruptcy Lawyer Charlotte NC
Hummingbird Credit Counseling Financial Learning Center
What Is A Short Sale by Karen Oakes, Oregon Bankruptcy Lawyer Jan 5, 2008 Mortgage Law Network
Why Donâ€™t More â€œMoney Expertsâ€ Suggest Chapter 13 To Save Your Home From Foreclosure? by Peter Orville, NY Bankruptcy Lawyer Jan 30, 2008 Bankruptcy Law Network
Bankruptcy In Florida: Short Sales Are A Joke by Carmen Dellutri, FL Bankruptcy Lawyer
Home Loan Foreclosure No Longer A Tax Trap? by Kent Anderson, Oregon Tax and Bankruptcy Attorney Dec 26, 2007 Bankruptcy Law Network
What Is Cancelation of Debt? by Doug Jacobs, CA Bankruptcy Lawyer Sept 24 2007 Bankruptcy Law Network
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