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Bankruptcy

FILING BANKRUPTCY TO PROTECT FROM DEFICIENCY JUDGMENT

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Question: CAN FILING BANKRUPTCY PROTECT YOU FROM A DEFICIENCY JUDGMENT?

Answer: -YES…  for most people who go through a hardship like foreclosure, the main reason they file bankruptcy is because a judgment was filed against them. And since they are not in a position to pay off their mortgage amounts, bankruptcy was their only option unless they wanted their wages garnished. Bankruptcy can protect you from a deficiency judgment and that deficient mortgage amount would be included in the bankruptcy.

On a side note, most people do wait to file bankruptcy until after foreclosure because lenders don’t necessarily have to file a judgment against the homeowner. They can issue a 1099 which means the mortgage amount they forgave is considered as taxable income and they give up their rights to come after you for the deficient amount. I would recommend you seek counsel from a professional bankruptcy attorney so you know all your options. Good Luck

Chapter 7 Bankruptcy and Equity Exemption rule.

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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.

My home is awaiting bank approval of a short sale.

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

Answer: -Yes, for only a short period of time.  Eventually it will foreclose. 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.

My father’s home recently foreclosed and our bankruptcy lawyer did not file the bankruptcy prior to the foreclosure.

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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.

A condominium has gone into foreclosure the lending company has it back.

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Question: A condominium has gone into foreclosure the lending company has it back. The condominium has a lien on
it the lien was filed against the original owner.
The owner is about to file bankruptcy. Does the lien
stay with the condominium? Can the association still
collect when the property is sold?

Answer: – The foreclosure auction will wipe out any junior liens that are attached to the property if they don’t protect their position. If a judgment or lien was filed against the homeowner, then it will stay with him unless he files bankruptcy, in which in most cases, liens and judgments are wiped out. So no, the association wouldn’t be able to collect. The only liens that don’t get wiped out are the property taxes and IRS tax liens. Those get paid first when the property is taken back by the bank.

Can your home be foreclosed on if your in bankruptcy ?

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Question: can your home be foreclosed on if your in bankruptcy ?

Answer: – No, not while in bankruptcy. Bankruptcy only postpones the auction though for 6 to 8 weeks until your bankruptcy is released, unless you file chapter 13 which is a workout option. If you fail to meet what’s agreed upon, then the foreclosure begins where it left off. We wrote a small article about Bankruptcy you can read more about.