Posts Tagged ‘Bankruptcy’

Question:  In Florida. Lots of stuff going on and now the MI says today they need a take it or leave it answer with no negotiation by close of business Friday. Son no longer lives in house that has mortgage insurance on it that the lender has accepted a short sale contract on and forwarded to the MI. He has purchased another house and just stopped making payments on the other in September. The MI says that they want 42000 over ten years 0% interest starting 2/12 or they will foreclose. (Doesn’t the lender do that?) He has some cash but has a baby due at Christmas that requires 20000 out of pocket at least, assuming no emegencies, because of crappy insurance. He made less this year than last but more last year than in 2009. The short sale contract and the appraisal are 89000 and the mortgage is in the high 150s give or take a few thousand. Not sure what the least expensive thing is to do but 42k is a lot more than he will have in the bank after the baby comes and no one wants to pay an extra $350 a month for 10 years to compensate them for a mutually bad investment. I am thinking ask the lender to do a deed in lieu so there is no deficiency and then file a 982 I think it’s called to get around that. If they don’t take the deed in lieu, then file for bankruptcy to get out of the deficiency but since I have little experience with this I need some advice that may help resolve this better than my solutions.

Answer:  - The least expensive thing to do is file bankruptcy. It will cost him $1500 and he can start over from scratch. A lot of lenders, when you tell them you are going to file, will work with you to find a solution. A better option might be to get an attorney or good real estate agent / short sale negotiator to help you push the short sale through with a full satisfaction meaning they can’t ask for any money to be paid back. The loan would be paid in full. Your son would receive a 1099 which would be negated with form 982 as mentioned. Don’t let the bank push you around… unfortunately they deal with homeowners a lot differently than an attorney or 3rd party negotiator because they automatically assume the homeowner doesn’t know what they are doing.

Question: Looking at short-sale, foreclosure, or bankruptcy… only is Social Security Disability, VA Disability (100%), and disability insurance monthly payment… what should I do? can they come after any of my income in a deficiency judgement? will they even come after me? how will bankruptcy affect me… I currently have NO assets at all except for about 15,000 dollars in savings. thanks Tom from FLORIDA

Answer: -Tom, I have to make the assumption that you’re planning on or you’ve already stopped making payments on your home or you wouldn’t be asking these questions.  A short sale in my opinion is by far the best option if you can’t sell your home for what’s owed, rent it out or can’t work out something with the bank like a forbearance or loan modification.  A short sale will affect your credit but will eliminate a foreclosure on it.  If done properly will also eliminate the possibility of a  deficiency judgment.  If a short sale is not accepted an ultimately your home ends up at the foreclosure auction, then you will either receive a 1099 or they will file a deficiency judgment against you.  If they file a deficiency judgment and you can’t pay, they can garnish wages.  Depending on the amount of the judgment, this forces most people to file bankruptcy to eliminate the judgment.

Question: I am confused if I will lose my house in Chapter 7 Bankruptcy as I am not understanding the Equity Exemption rule. My house is worth $230,000. I owe $105,000 on the first & $60,000 on a HELOC. I am unemployed and my unsecured debt is $60,000. If I file bankruptcy can the mortgage holders force me into foreclosure if I am up do date with payments? I am getting conflicting advice from attorneys.

Answer: -Unfortunately we are not bankruptcy attorneys so maybe someone else can shed some light on this topic.  I do know that a Chapter 7 is a wipe out and therefore you would liquidate all your assets to pay off all your creditors.  An attorney is hired to help “protect” those assets, like personal belongings. The trustee or attorney who represents the court and the creditors will look at all the assets (house, car, furniture, equipment) anything of value and decide what must be liquidated to pay some of the debt that was wiped out.  So depending on whether or not your home has any value, it would be in your best interest to find a good attorney or maybe even investigate different Chapters of bankruptcy’s to make sure Chapter 7 is the way to go.

Question: If I declare bankruptcy now with regard to my other debts, will it prevent the short sale from going through?

Answer: -No.  Bankruptcy only postpones an auction or short sale which buys you more time.  In fact, many short sale investors will use bankruptcy as an option if they need to buy more time so it doesn’t go to auction, as long as it’s in the best interest of the homeowner.

Question: Hello:

Please help. My father’s home recently foreclosed (last week) and our incompetent bankruptcy lawyer did not know it was important to file the bankruptcy prior to the foreclosure which would have cleared any tax consequences or deficiency judgment against him. Since my father has filed bankruptcy AFTER the foreclosure, I understand the lender will either forgive the debt and issue a 1099 to the IRS or seek a deficiency judgment. My question is, if the lender decides to seek a deficiency judgment, will the deficiency amount be discharged in the bankruptcy – although he filed the bankruptcy after the foreclosure? Please advise. Thanks!

Answer: -More than likely you won’t even have to worry about the deficiency judgment because most lenders don’t file a deficiency judgment against homeowners.  It is much more common for them to issue a 1099.  But yes, if by chance they did file a judgment against him, filing bankruptcy after foreclosure shouldn’t matter.  In fact, most homeowners will file bankruptcy after they are hit with the deficiency judgment so it will be wiped out.