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Foreclosure vs. Bankruptcy

By | Bankruptcy Law, Understanding Bankruptcy | No Comments

While foreclosure and bankruptcy are familiar terms to most, the difference between the two is often difficult to determine, because one can often lead to another within the process of working with the bank. Filing bankruptcy has the option of giving or surrendering the property back to the bank. When the bank takes the home from you, that is forclosure. 

The main difference between bankruptcy and foreclosure is whether or not the person will owe money to the bank after the process is complete. Within the process of filing bankruptcy, forclosure is likely to happen in order for the title to be cleared and for the bank to sell the house. In this case, the homeowner no longer owes the bank anything. If a foreclosure is forced on the homeowner, they can end up owing the difference in the mortgage and the price of the home in a foreclosure sale. 

Uderstanding the differences between bankruptcy and foreclosure and the process of each, what happens when you decide to go with one over the other and what it looks like when bankruptcy leads to foreclosure and temporary and lasting impacts on your financial life and credit score can be beneficial moving forward. 

What does everything mean?

Different states have different laws, but the concept of bankruptcy is similar across the board in the context of a mortgage. A mortgage is a loan from a bank to help in the financing of a home. When you sign a mortgage agreement, you agree to pay off the loan you took out plus interest. The home is called “collateral” within the agreement. You sign a statement saying the bank can take the home from you if you do not meet the terms of the agreement. This where the term collateral is enforced. 

The largest term in a mortgage agreement is making the required monthly payments to the bank. Monthly payments consist of a certain amount and include interest.  If payments are not met, the bank will foreclose on your home and become the new owners of the property. Falling behind on the monthly payments leads to potentially having to declare bankruptcy and makes the bank the new owner of your home

Filing for bankruptcy stops all collectors from collection lawsuits or forced foreclosure on your home. You do have the option to sell your house back to the bank in order to pay off debts.  Turning your home over to the bank voluntarily after filing for bankruptcy is considered “surrendering” your home.

What happens after?

When you file bankruptcy and choose to surrender your home to the bank, foreclosure still takes place. Your things will be sold in an auction in order to cover the loan you took out to cover the collateral. The difference in foreclosure and surrendering is that after you have surrendered the home to the bank, you are done and no longer owe the loan payment. In a foreclosure, the house is sold and if the price it is sold for is deemed acceptable, you do not owe anything else. If the payment is not deemed acceptable, you will be required to pay the difference in can be charged in the form of a lawsuit. 

Bankruptcy can stay on your credit report for 10 years, but bankruptcies don’t have a separate section on the reports. Filing and completing a bankruptcy claim can take your credit score down 130-240 points. Foreclosure can stay on your report for seven years. Lenders take foreclosure records and these reports very seriously. Foreclosure can drop your credit score down 85-160 points. Missed payments can also drop your credit score 75 points.

 

Choosing to fight foreclosure or file bankruptcy is up to you, the individual. Each situation is different and has many moving parts that are up to the person to decide what to do. Whatever you decide, make sure you have a reliable and trusted bankruptcy lawyer that can help you make the most informed decision possible in the circumstance and provide you the best outcome. For more information, check out the National Bankruptcy Forum website.

DISCLAIMER: The above blog post is just advice, and you will be better served to call David S. Clark with your bankruptcy questions. This blog contains helpful tips and advice, but is not professional legal advice, and shouldn’t treated as such.

Facing Foreclosure? Consider Filing Bankruptcy

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Can filing Bankruptcy delay or stop a Foreclosure?

When you’ve fallen behind on your mortgage payments, you could be at risk for foreclosure. Fortunately, there are ways you can possibly delay or avoid foreclosure on your home. One of these ways is filing for bankruptcy. Both chapter 7 and chapter 13 can possibly help you in delaying or avoiding bankruptcy. Consider the following information and consult a legal professional to help you select the best option for you.

DISCLAIMER: The following blog post is just advice, and you will be better served to call David S. Clark with your bankruptcy questions. This blog contains helpful tips and advice, but is not professional legal advice, and shouldn’t treated as such.

Need Bankruptcy Help? Call David S. Clark

Foreclosing Process

The process of foreclosure usually won’t begin until you have missed three or four payments on your mortgage. When it begins, the lender has to follow all of your state’s laws and procedures before he or she can sell your home at auction. The money from this sale is applied by the lender to the remainder of your mortgage balance. The collection of a deficiency balance will depend on the laws in your state. However, you have some time to try some solutions such as loan forbearance, a short sale, or a deed instead of foreclosure before the process begins. If none of these work for you, it may be time to consider filing for bankruptcy. 

Chapter 7 Delays

When you file for either chapter 7 or chapter 13 bankruptcy, the court automatically issues an order of relief. The order of relief activates “automatic stay”– which temporarily prohibits creditors from pursuing their collection immediately.

Once bankruptcy is filed, the court will issue an Order of Relief. The order includes and activates an “automatic stay” that prevents creditors temporarily from trying to collect from you. This is true for either chapter seven or chapter thirteen bankruptcy. If you file for chapter seven after a lender has scheduled a foreclosure sale for your home, the automatic stay will legally postpone the sale for a few months while the bankruptcy is pending. This is not guaranteed to last. If the lender appeals to the court with a motion to lift the automatic stay and it is approved, you will not get the typical three to four months of delay on your foreclosure. 

Chapter 13 Help

The only way to be able to keep your home is if you file chapter 13 bankruptcy. Filing chapter 13 means you will pay off your debt with a financial plan which you propose– usually over a period of five years. You will pay your regular mortgage and arrearage (the late unpaid payments), so you’ll need to make sure you have the income to cover both of those payments.

If you think filing for bankruptcy will help you, contact your local professional bankruptcy lawyer to get the expert assistance you need and the best plan and results for your case

DISCLAIMER: The above blog post is just advice, and you will be better served to call David S. Clark with your bankruptcy questions. This blog contains helpful tips and advice, but is not professional legal advice, and shouldn’t treated as such.

A Guide to Filing Bankruptcy

By | Understanding Bankruptcy | No Comments

A Guide to Filing Bankruptcy

 When you realize that your current financial situation would best be served by declaring bankruptcy, the following response is “How?”.  How do I file for bankruptcy? What is required? Do I need a lawyer? These questions and more will be answered as we explain the filing processes for chapter 7 and chapter 13 bankruptcy and how to get started.

DISCLAIMER: The following blog post is just advice, and you will be better served to call David S. Clark with your bankruptcy questions. This blog contains helpful tips and advice, but is not professional legal advice, and shouldn’t treated as such.

Need Bankruptcy Help? Call David S. Clark

FIRST STEP

Before you can file for bankruptcy, you legally must attend credit counseling with an approved credit counseling agency within 180 days before filing. A counseling session typically costs around fifty dollars, but if you are unable to pay the agency should be able to waive the fee. After completing the course, you will receive a certificate that must be submitted with the other required documents when you file.

WHAT IS CH. 7 AND DO I QUALIFY?

Chapter Seven bankruptcy relieves the debts of individuals, partnerships, or businesses through a process called liquidation. Liquidation is the use of eligible assets to pay off as much of the filers’ outstanding debt as possible and eliminating the remainder. You may lose some property, but there is an exemption form to complete for eligible assets that will not be used in liquidation. Important to know is that complete discharge of qualifying debts is only available to individuals. There are debts such as child support and fraudulently accrued debt that will not be eliminated. 

DOCUMENTS

When filing for bankruptcy, you will complete a petition, statement of affairs, and schedules. The first step will be the petition which officially declares and outlines your case for bankruptcy. Your list of assets and liabilities will be included in the statement of affairs, and the schedules are forms that outline your financial status and includes a form to list permitted property for exemption. There is a lot of information that fills these documents. You’ll need to know:

  1.  The names of all your creditors
  2. The amount and nature of their claims
  3.  The total amount of income you take in, its source, and frequency
  4. A list of all of your property
  5. All your monthly living expenses in detail

After compiling and submitting all of the required information, you will wait on the court to notify you if your petition is approved or denied, and the bankruptcy procedures will continue from there.

DISCLAIMER: The above blog post is just advice, and you will be better served to call David S. Clark with your bankruptcy questions. This blog contains helpful tips and advice, but is not professional legal advice, and shouldn’t treated as such.

What is Bankruptcy?

By | Understanding Bankruptcy | No Comments
Back to Basics

What is Bankruptcy?

Filing for bankruptcy is an opportunity to start new. While it does affect your credit score for several years, you have the chance to begin rebuilding it as soon as your case is approved and closed.  If you are an individual looking to file bankruptcy, contact your local bankruptcy attorney to help you through the process. Attorneys offer expertise in court and negotiations. They can help you get the best deal from your case and assist you through the legal procedures and terminology that you may not understand.

DISCLAIMER: The following blog post is just advice, and you will be better served to call David S. Clark with your bankruptcy questions. This blog contains helpful tips and advice, but is not professional legal advice, and shouldn’t treated as such.

Need Bankruptcy Help? Call David S. Clark

When you acquire more debt than you and your income can handle, it may be time to file for bankruptcy. It may sound frightening or embarrassing, but the reason the program exists is to help you, not to hurt you.  Bankruptcy is a federal court procedure to help reduce, restructure, and/or eradicate debt. However, this does not mean any debt for any one can be forgiven. There are qualifications one must meet before he or she can file for bankruptcy.

Individuals and businesses who have a debt so large, they are not able to repay it all may be eligible to file. There are different qualifications for each type of bankruptcy. The first and most common type of bankruptcy applies mostly to individuals. It is Chapter 7 bankruptcy, and it allows debts to be forgiven and certain assets to be exempt from liquidation. Your not essential/ non exempt assets will be sold/ obtained to repay some of your debt if possible. The remaining balance will be forgiven.

Chapter 13 bankruptcy is sometimes known as “wage-earner’s” bankruptcy. Your debt cannot exceed a certain amount, and you will create a 3-5 year payment plan. If your payment plan is successful, the remainder of your debts will be forgiven. An important note, these bankruptcy reports will stay on your record either 7 (chapter 13) or 10 years (chapter 7). Which makes purchasing a new line of credit or finding a new job much more difficult. 

Although Chapter 7 and Chapter 13 are the most popular forms of bankruptcy, there are a few other forms that aid individuals and businesses in more specific cases. Chapter 9 applies to cities and towns to protect them from creditors as they develop a plan to repay their debts. Chapter 11, also known as “reorganization bankruptcy”, allows businesses to continue serving customers while figuring out a payment plan. Chapter 12 is a lot different than the others. It is specifically applicable to family farmers and fishermen who make no more than $4.07 million for farmers or $1.87 million for fishermen. These filers will have a payment plan that must be completed within five years (with seasonal consideration). Finally, for those with debts and assets in both the United States and another country or countries, there is Chapter 15 bankruptcy. The U.S. court will handle the case regarding the assets and debts in the United States only.

Bankruptcy does not discharge the following types of debt: federal student loans, taxes, alimony and child support, debt acquired after filing for bankruptcy, and some debt if acquired 6 months prior to filing. It also does not eliminate debt from fraudulent loans or personal injury from driving while intoxicated. It also does not release a co-signer from his or her responsibility to pay your loan in full or in part, if you fail to do so. 

DISCLAIMER: The above blog post is just advice, and you will be better served to call David S. Clark with your bankruptcy questions. This blog contains helpful tips and advice, but is not professional legal advice, and shouldn’t treated as such.