Foreclosure and Bankruptcy

If you’re facing the foreclosure of your home or a second property, you’re hardly alone. More than 1.2 million real estate properties were the subject of foreclosure filings in the U.S. in 2007 (WHAT ABOUT 2008)— a 75% increase compared to the prior year.  As we enter 2012, many Americans are still in risk of losing their homes, rental properties and commercial real-estate investments to foreclosure. 

Things are not getting better and it now seem that we are likely facing a poor economy for many years to come. If you’re unable to make your monthly mortgage payments, one of the best steps that you can take is to talk with an attorney who is knowledgeable about your options.

Protect Your Interests with a Knowledgeable Attorney

At Legal Objective, a foreclosure, bankruptcy and/or distressed asset attorney will discuss your real-estate situation with you in depth, in order to help you:

* identify your alternatives
* choose the best path
* protect your interests
* implement and carry out your plan

Options When Facing Foreclosure

One option for an individual or family facing a foreclosure, although not the only option, is to file for bankruptcy. At Legal Objective one of our experienced attorneys can assess your situation and advise you regarding whether bankruptcy is right for you.  Bankruptcy can be used to delay a foreclosure, eliminate debt if a foreclosure is unaviodable or has already occured, establish a Court ordered repayment plan to catch you up on any arrearages owed and eliminate 2nd, 3rd and subsequent mortgages on the property.

A different option may be best in your case, such as a loan modification, getting a loan forbearance from your lender, doing a “short sale” of the property, or using a deed in lieu of foreclosure. Whatever your circumstances are, one of our attorneys will explain your options with clarity and courtesy, and help you choose the path that’s right for you.

The following is a basic summary of bankruptcy pros and cons that may get you thinking about the road ahead.

When Bankruptcy is Appropriate & Types of Bankruptcy

For any individual facing significant debt or financial difficulties, there are primarily two bankruptcy options. The options are named after their chapters in the U.S. Bankruptcy Code: Chapter 7 and Chapter 13. Each has its own requirements, advantages, and disadvantages.

Chapter 7

If you simply don’t have enough income to meet your current mortgage payments or don’t have enough extra income to fund a Chapter 13 bankruptcy, a Chapter 7 bankruptcy may be a viable option. Although your home will eventually be foreclosed on, a Chapter 7 bankruptcy will stall the foreclosure process and the sale of your home at auction, often for several months without making any additional mortgage payments, allowing you to remain in the home and save up some money. It has also been our experience that lenders are often more willing to negotiate the terms of a mortgage when faced with a debtor who otherwise will be surrendering their home in the Chapter 7. If the lender will not negotiate, or the debtor simply can’t afford to keep the home, a Chapter 7 bankruptcy will discharge (eliminate) the debt associated with your home (including your mortgage, any second or later mortgages, home equity loans and property taxes).  In addition there are no tax consequences for forgiveness of debt when the debt is discharged in a bankruptcy.

Chapter 13

If you think that your future income will be enough to catch up on the unpaid mortgage payments in smaller installments (in addition to making each current monthly payment), a Chapter 13 bankruptcy may be the way to go. Paying off this “arrearage” over a specified period, say, five years, will allow you to stay out of foreclosure and keep your home. In a Chapter 13 bankruptcy, under the provisions of 11 USC § 1322, we can perform what is known as “lien stripping”.  Lien stripping may allow a distressed homeowner to eliminate or drasticaly reduce the amount owed to a 2nd, 3rd or subsequent mortgage holder. It might be like purchasing your home at the current fair market value. In addition a Chapter 13 can greatly reduce or eliminate any unsecured debt you may have such as credit cards bills, personal loans, meeical bills, etc.

Speak With An Attorney Today

Bankruptcy is one of the most complex fields of law in the U.S., and there are many provisions only an experienced attorney can understand and competently handle. In addition, every property owner’s situation is unique. Before you give up, schedule a FREE in-depth consultation with a skilled and experienced bankruptcy attorney.  Contact an attorney at Legal Objective today.