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Friday, October 30th, 2009

Stalemate in Real Estate Sector has Increased Bankruptcy Filings

Guest Author: Peter Gomes

The real estate sector received a jolt when the sub-prime mortgage crisis eroded the US economy. The mortgage market was in doldrums and the upheaval so great that the government had to intervene with its series of mortgage bailout programs.

Consumers bankruptcy filings increased, and so did the number of foreclosures. Many Americans considering bankruptcy filing received more information on bankruptcy by connencting with a bankruptcy attorney.

The Obama Administration introduced a series of mortgage bailout programs to assist homeowners facing foreclosure. The program, known as the Making Home Affordable Plan, was expected to help as many as 7 million to 9 million homeowners. However, due to few limitations, the program has yet to help as many homeowners as anticipated.

There is a vicious cycle of debt that has led to the recession, which has affected consumer spending as well as investor sentiment.

In the easy-credit boom, people started using their credit cards even for making payments for grocery shopping and for utility bills. As employers went on a cost cutting and job cutting spree, it became difficult for consumers to make ends meet.

For consumers considering filing bankruptcy, it can be Chapter 7 bankruptcy or Chapter 13 bankruptcy. In Chapter 7 bankruptcy, a court-appointed trustee will liquidate your non-exempt assets so that the proceeds can help in paying off creditors. As per the new federal bankruptcy laws, certain changes have been introduced. The prominent ones are Means test and credit counseling.

If you are planning to file Chapter 7 bankruptcy, you have to find out if you qualify for the same by taking the Means test. Consumers also must take a credit counseling session prior to filing bankruptcy.

In case of Chapter 13 bankruptcy, you are given a repayment schedule according to which you are expected to make payments to your creditors.

In either bankruptcy chapter, there is one advantage of filing: an Automatic Stay or Order for Relief that prevents creditors from coming after you for their dues.

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Posted in Bankruptcy and the Economy | 9 Comments »

Tuesday, September 29th, 2009

5 Reasons to File Chapter 13

This guest blog entry was written by David Chang of Chang & Carlin, LLP. Chang & Carlin offer bankruptcy and real estate legal services for Chicago and its suburbs. Read David Chang's blog at http://changandcarlin.blogspot.com/

Many debtors view Chapter 7 bankruptcy as the "better" type of bankruptcy to file, and that Chapter 13 is forced upon them by the courts. However, filing bankruptcy under Chapter 13 has many benefits.

Here are 5 major reasons why people may choose file for Chapter 13 bankruptcy:

  1. Chapter 13 has protections designed to stop a foreclosure or repossession.
  2. Chapter 13 bankruptcy can protect an asset that would otherwise not be protected in Chapter 7, and would be sold to pay creditors.
  3. The debtor makes too much money to file for Chapter 7, and would not be able to file otherwise.
  4. The debtor has recently had debts discharged in a Chapter 7 case and is not eligible to file again.
  5. Chapter 13 can consolidate debts that would not be dischargeable in a typical Chapter 7 bankruptcy case.

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Posted in Setting the Record Straight about Bankruptcy | 1 Comment »

Monday, July 6th, 2009

Foreclosures Spreading to Prime Mortgages ~ When Will It End?

In what many consider an inevitable shift in the foreclosure crisis, prime, fixed-rate mortgages made up the largest portion of new foreclosures, according to a report issued by the Mortgage Bankers Association.

This was the first time for such numbers since the subprime lending boom began.

The Best-Laid Plans

Sources suggest that two major factors are contributing to the upswing in prime foreclosures:

  • Rising Unemployment: Though the unemployment rate for those with some type of college degree is 4.4 percent (compared with an 8.9 percent rate overall), this number represents a significant jump from a year ago, when unemployment among the college-educated was just 2 percent. This means that some families who counted on sustained income to keep their houses are now struggling to make payments – or finding they cannot.
  • A Glut of Unsold Homes: Because so many houses are currently on the market, selling a house has become a serious challenge, especially for those with bigger mortgages. This means that many of those struggling to pay off debts because of job loss cannot even raise money by selling their houses – the demand for real estate is currently very low.

Time to Buy, Not Sell

As you may already know, it’s a great time to buy a first home.

The sheer quantity of homes on the market means you’ll have a lot to choose from, and the current interest rates favor the purchasers rather than the vendors.

But if you’re looking to sell a larger (rather than a “starter”) home, you may not be so lucky.

Those who may be pushed by tantalizing interest rates to buy a home sooner than they would have otherwise likely won’t be interested in large, elaborate homes – especially in light of the cautionary tales told over and over by those suffering from the current foreclosure crisis.

When Will It All End?

Experts have predicted a variety of timetables for the prime foreclosure crisis.

The least optimistic among these put the crest two years for now, with steady foreclosure action well into 2012.

And Making Home Affordable, the foreclosure-prevention plan introduced by the Obama administration has reportedly only helped about 17,000 homeowners to date – far fewer than the seven to nine million who could benefit from the program, according to its Web site.

If you’re concerned about losing your home to foreclosure, it may be time to speak with one of our sponsoring bankruptcy lawyers about filing bankruptcy.

Chapter 13 bankruptcy designed to stop foreclosure. Talk to a bankruptcy attorney about filing bankruptcy.

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Posted in Mortgage Foreclosure | No Comments »

Wednesday, May 13th, 2009

Foreclosures Rise Again in April

According to the latest report from RealtyTrac, foreclosures jumped again in April.

CNNMoney.com reports that 342,000 U.S. homes received default or auction notices or were in the process of bank repossession last month.

This translates to one in every 324 U.S. homes involved in some part of the foreclosure process, a number which represents a one percent increase from March and a whopping 32 percent increase from the same time last year.

Here are some hard numbers that paint a picture of how serious this news is for American homeowners:

  • April numbers are the highest ever recorded by RealtyTrac in more than four years of monitoring such figures.
  • Since the start of the real estate bust cycle in August of ’07, more than 1.3 million homes have been foreclosed upon.
  • RealtyTrac’s original forecast of 3.4 million foreclosure filings for 2009 will likely be revised upward after April’s statistics.
  • Though foreclosures are a problem nationwide, 10 states were home to 75 percent of all filings (California, Florida, Nevada, Arizona, Illinois, Ohio, Michigan, Georgia, Texas and Virginia).

Dipping Home Prices Compound the Problem

Some experts are concerned about the effect falling home values will have on future foreclosure rates.

As housing prices keep decreasing, more and more borrowers find themselves “under water” on their mortgages (they owe more than their homes are worth).

This has reportedly led to an increase in people simply walking away from their homes and handing their keys over to the bank, and will likely mean missed payments and defaults for those who choose to stay.

Bank Repossessions Down – For Now

April’s bank repossession numbers actually decreased 11 percent from March, according to sources.

But this isn’t a trend that’s likely to continue: bank repossession is the last stop on the foreclosure train, and as more and more houses enter foreclosure proceedings, more and more will have to complete them in the future.

Chapter 13 Bankruptcy & Foreclosure

If you are one of the many Americans facing the threat of foreclosure, filing for Chapter 13 bankruptcy may provide you some of the relief you need.

Thanks to the protection of the automatic stay, all creditor collection actions (including garnishment, repossession and foreclosure) are typically halted for the duration of your case.

Many filers find that Chapter 13’s three- to five-year repayment plan offers them the time and breathing room they need to get current on their mortgages or at least make alternate living arrangements.

More filing bankruptcy information.

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Posted in Mortgage Foreclosure | No Comments »

Monday, May 4th, 2009

What Happens When Bankruptcy & Divorce Intersect?

Sometimes, one traumatic life event causes another – as when a serious illness, injury or divorce pushes you to file for bankruptcy.

Bankruptcy after divorce can be tricky to understand, largely because both involve complex legal systems. Here are the basics of what happens in a bankruptcy after a divorce:

No Joint Filing Bankruptcy Petitions after Divorce

Once you and your spouse are legally divorced, you no longer have the option of filing a joint bankruptcy petition. But, depending on which chapter of bankruptcy you choose, one spouse’s filing could still affect the other.

Filing Divorce: The Division of Debts and Assets

As you probably know, divorces usually involve a division of marital property and debts between the divorcing parties. Depending on the laws in your state, you and your spouse will take responsibility for various debts and possession of various belongings.

The Chapter 7 Debt Discharge

The bankruptcy court does not always recognize the designations of the divorce court, though.

If one spouse files for Chapter 7 bankruptcy and receives a discharge for a debt that was jointly held during the marriage, creditors may have legal recourse to collect that debt from the other spouse.

The Chapter 13 Repayment Plan

The Chapter 13 repayment plan often allows bankruptcy filers to protect cosigners (and co-debtors) who have not filed a bankruptcy petition. Because many debts are eventually repaid in Chapter 13 bankruptcy, the likelihood that the other spouse would have to take on responsibility for a debt is typically lower in Chapter 13.

But Keep in Mind...

Although bankruptcy offers financial relief for many types of debt, some debt cannot be discharged by the bankruptcy court, such as:

• Alimony/spousal maintenance
• Child support
• Most student loans
• Most tax debt
• DUI & other criminal penalties and fines

If you’re worried about being able to afford child support and/or alimony payments (for example, because of a recent reduction in your income), you may be better off consulting with your divorce attorney about modifying the terms of your divorce than filing for bankruptcy.

However, bankruptcy can offer you relief by excusing you from other, less essential debts and thus freeing up more of your money to put toward the maintenance of your children and former spouse.

As always, consider seeking legal counsel before proceeding with bankruptcy, either before or after a divorce case.

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Posted in Setting the Record Straight about Bankruptcy | No Comments »

Tuesday, April 7th, 2009

When Businesses Are Filing Bankruptcy

As the economic tumult continues, news stories about businesses considering filing bankruptcy continue.

So what does it mean when a major company seeks the protection of the bankruptcy court?

Like personal bankruptcy, it depends what chapter the business files under.

Chapter 11 Bankruptcy

Chapter 11 is almost exclusively used by businesses in financial difficulty.

Like Chapter 13 bankruptcy for individuals, Chapter 11 allows businesses to reorganize their debts.

As with individual filings, the automatic stay protects companies during the process.

Notable differences between Chapter 11 and Chapter 13 bankruptcy include:

  • If a company is worth less than it owes - that is, its debts exceed its assets - ownership of the company reverts to the creditors after bankruptcy reorganization. This means that the company’s “owners” exit bankruptcy owning no part of their company.
  • A company can be in Chapter 11 for as little as a few months or as long as several years – it depends on the complexity of the plan agreed upon by interested parties.
  • Stocks for a company are generally delisted after a Chapter 11 bankruptcy filing. This means that shareholders are left with valueless stocks.

When a company is filing bankruptcy under Chapter 11, it can usually still conduct business, and, as a consumer, you may not notice too many differences in day-to-day operations.

Chapter 7 Bankruptcy

As with personal filings, Chapter 7 bankruptcies for companies take the form of liquidations. This means that the court-appointed bankruptcy trustee sells off a company’s assets to raise money to pay off creditors.

Unless the company’s trustee opts to continue daily operations, many companies shutter their doors after filing under Chapter 7.

Notable differences between Chapter 7 for individuals and Chapter 7 for businesses include:

  • Businesses do not receive a Chapter 7 discharge. Once the bankruptcy case is over, the businesses still owe any debts not satisfied by liquidation (until statutes of limitations expire).
  • After completing a Chapter 7 case, businesses are dissolved, meaning that they no longer exist as they did before filing.

Chapter 7 bankruptcy is typically used for companies with serious debt, but a company’s filing doesn’t necessarily mean that the company’s employees will all lose their jobs – in some cases, entire units of operation are sold as part of the liquidation sale.

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Posted in Bankruptcy and the Economy | No Comments »

Monday, March 30th, 2009

Chapter 13 Bankruptcy: The Process

Curious about Chapter 13 bankruptcy? Talk to a bankruptcy lawyer about whether it could help you.

Chapter 13 has helped many resolve their debts and save their homes from foreclosure. Here’s a bit more on the process and what you may expect:

Credit counseling briefing: This is a pre-filing requirement for all filers, and it’s designed to make sure your financial situation demands the protection of bankruptcy (and not, say, debt negotiation). Once your lawyer files your certificate of completion with the court, your case can officially begin.

Automatic stay: As soon as your case is filed, the automatic stay takes effect and prevents your creditors from making any collection actions. This means that foreclosure, garnishment, lawsuits and repossession are all halted. As long as you adhere to the terms of your bankruptcy case, the stay should last for the duration of your case.

The next three to five years: One of the papers your lawyer will file with the court will be a repayment plan. This plan provides a repayment schedule that you’ll stick with to catch up on your past-due balances while staying current with other payments.

Your bankruptcy trustee: This is a federal employee who will be assigned to your case to oversee your paperwork and distribute your money to your creditors every month.

The first payment: You must make your first payment (as part of the repayment plan) within 30 days of filing your petition – otherwise, the court may decide to dismiss your case.

Meeting of the Creditors: Within six weeks of filing your petition, you’ll have to testify to the completeness and accuracy of all information in your petition. While all your creditors are invited, most probably will not attend.

Financial management course: Before you’re eligible for your bankruptcy discharge, you must complete a financial management (debtor education) course. The course is designed to help you learn strategies for handling money, working with credit and generally making your fresh financial start a success.

Five years after filing: You’re required to make your final payment within five years of filing your petition. After doing so, you’ll receive your bankruptcy discharge and officially be out of bankruptcy.

The Next Four Years: You are not eligible for Chapter 13 bankruptcy protection if you’ve filed for bankruptcy in the past four years, so make sure you fill your bankruptcy lawyer in on your financial past when discussing your case.

Learn more about filing bankruptcy.

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Posted in Bankruptcy Filing Requirements, Setting the Record Straight about Bankruptcy | 2 Comments »

Monday, February 23rd, 2009

Filing Bankruptcy 101: Your Car in Bankruptcy

We rely on our cars for work, commuting, shopping and transporting our families.

Understandably, if you’re considering filing bankruptcy, you probably want to know what may happen to your car in bankruptcy.

Chapter 7 Bankruptcy & Car Loans

When filing Chapter 7 bankruptcy, you have three options for handling a car loan:

  • Reaffirmation: You enter an agreement with your lender stating that you will continue to make regular payments on your car. In exchange, your lender will likely not repossess the vehicle – as long as you keep paying the bills. If you fall behind, though, your lender can sue you for what you owe. Note that reaffirmed debts are typically not discharged in bankruptcy and are strictly voluntary.
  • Redemption: You agree to make one lump payment to your lender of the car’s fair market value – regardless of what you owe on the loan. Any amount you owe in excess of the car’s current value could be discharged as part of your bankruptcy.
  • Surrender: If both making regular payments and forking over a lump sum are beyond your means, you can surrender your automobile to your creditor. Any debt you have on the car may be discharged by the court.

Chapter 13 Bankruptcy & Car Loans

Chapter 13 bankruptcy can effectively halt car repossession (similar to how it can stop mortgage foreclosure).

In Chapter 13 bankruptcy, the amount you’ll pay usually depends on how long ago you purchased your car.

  • 910 Claim: If you purchased your car in the last 910 days (30 months), you must usually pay the full amount you owe, regardless of the car’s current value. The good news: the interest rate you pay may be significantly reduced by the court.
  • Cram Down: If you bought your car more than 30 months ago, you’ll likely only have to pay the company the car’s present value over the course of your repayment plan.

Bankruptcy & Car Leases

Whether you file for Chapter 7 or Chapter 13 bankruptcy, you may continue making payments on a lease or surrender (reject) your lease and vehicle.

A bankruptcy lawyer can offer more details about how each chapter handles leases.

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Posted in Setting the Record Straight about Bankruptcy | No Comments »

Friday, February 13th, 2009

Filing Bankruptcy FAQs: Get Your Bankruptcy Questions Answered

If you’re considering filing bankruptcy, you probably have many questions on your mind.

Take a look at these frequently asked questions about bankruptcy to learn the answers you may need to move forward.

  • Do I need a bankruptcy lawyer? Since the introduction of the new bankruptcy law in 2005 (BAPCPA, or the Bankruptcy Abuse Prevention and Consumer Protection Act), filing for bankruptcy has been much more difficult. Because you need to fill out vast amounts of paperwork, meet strict deadlines and file reams of paperwork with the court, you should consider working with a bankruptcy lawyer.
  • What is the automatic stay? The automatic stay is one of the most powerful protections bankruptcy offers. It works by preventing your creditors from taking any collection action against you and lasts throughout the duration of your bankruptcy case, as long as you adhere to the rules set up by the court.
  • Can bankruptcy prevent foreclosure? Foreclosure is considered a form of collection, so when you file for bankruptcy, foreclosure can be prevented by the automatic stay. Because Chapter 13 bankruptcy cases last for three to five years, you may be able to prevent the foreclosure of your home long enough to make other plans or catch up on your mortgage payments.
  • How do I know if bankruptcy is right for me? A bankruptcy lawyer can help you make this important decision, but you can help yourself by doing some research on your own. You can find lots of useful information on both Chapter 7 bankruptcy and Chapter 13 bankruptcy on Total Bankruptcy’s web site.
  • What are the bankruptcy laws in my state? Technically, bankruptcy is ruled at the federal level, so laws are the same across the country. Each state, though, has different Chapter 7 exemptions, which determine what property you can hang on to if you decide to file under Chapter 7 of the U.S. Bankruptcy Code. Check out your state bankruptcy laws.

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Posted in Setting the Record Straight about Bankruptcy | 3 Comments »

Wednesday, February 11th, 2009

How Can Filing for Bankruptcy Stop Foreclosure?

If you’re one of the millions of Americans in danger of losing your home, you’re likely at your wits’ end trying to hang on to the place you live.

We don’t have to tell you that saving your house is worth the time and effort. When examining options for saving your home, you may find that Chapter 13 bankruptcy may be the first step in protecting your biggest asset.

The Power of the Automatic Stay

When you file bankruptcy, something called the “automatic stay” goes into effect.

This stay prevents your creditors from taking any collection action against you. Foreclosure is considered a kind of collection, so foreclosures are halted when you file for bankruptcy.

This stay continues working throughout the duration of your bankruptcy case, as long as you adhere to the guidelines set by the court.

Protecting Your Home

Filing bankruptcy can be just the first step in stopping foreclosure. Be sure to take these measures when dealing with foreclosure and bankruptcy.

Talk to a bankruptcy lawyer.

Your bankruptcy lawyer can not only help you figure out whether bankruptcy makes sense in your case, but also keep you updated on the latest foreclosure defenses around the country.

Take action.

You may feel intimidated to contact your lender – or even your lawyer – but you shouldn’t! Remember, your home is at stake here, and staying quiet when you have questions or concerns will get nothing done. Speak up early and often to learn as much as you can about the future of your home.

Read up.

TotalBankruptcy.com offers a wealth of bankruptcy information . Learning as much as possible about what to expect from both will help you prepare for the road ahead.

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Posted in Mortgage Foreclosure | No Comments »

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