Dubiln Packard

Bankruptcy as an Option

Find out if bankruptcy is an option for you.

Thousands of people have been through it.
It's just another form of financial transaction designed to give people a second chance for a fresh start. Don't let financial problems haunt you forever.

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How to pay bankruptcy filing fees in installments

Bankruptcy Filing Fees Can Be Paid In Advance.

Not everyone is aware that the chapter 7 and chapter 13 filing fee can be paid for in installments.  At time of filing the bankruptcy petition, an application is made which is almost always granted which allows the filing fee to be paid in 4 equal installments.

Filing Fees (as of the date of this article)

Chapter 7: $335/4 $83.75

Chapter 13: $310/4 $77.50

How to pay the filing fees once your application is approved:

Once your application to pay the filing fee in installments has been approved, you must make your monthly payments on time or the Clerk of the Court will dismiss your case without warning.

  • We forwarded the first of four payments on your behalf to the Clerk at the time of filing your application.
  • Your remaining three (3) payments are due 30 days, 60 days and 90 days after the date of filing your case.
  • Payments are in the amount of $83.75
  • Payments must be in the form of a Money Order
  • Mail payment to the address below where your case was filed.

NOTE: to be safe, mail your payment 10 days prior to the due date to ensure it arrives on time.

Include your case number on the money order along with your name and address.

 

Address to mail your Bankruptcy Filing Fees installment payment:

For Newark Cases

Mailing Address: 

US Bankruptcy Court
District of New Jersey
PO Box 1352
Newark, NJ 07101-1352
Phone (973) 645-4764

 

For Trenton Cases:                                                               

Mailing Address:                                                                   

Clarkson S. Fisher US Courthouse
402 East State Street
Trenton, NJ 08608
Phone (609) 858-9333

 

For Camden Cases:

Mailing Address: 

US Bankruptcy Court
District of New Jersey
PO Box 2067
Camden NJ 08101
Phone (856) 361-2300

 

 

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Payment Options For Chapter 7 Bankruptcy

 

We have the best payment options in the business.  We know payment is an important consideration in choosing bankruptcy as an option and in choosing the best bankruptcy lawyer.  Big banks and credit card companies have had laws passed that makes it difficult or impossible for many people to file bankruptcy and to get out of debt.  We believe having payment options is an important part of helping our clients get out of debt with bankruptcy.

Click the button below to find out of you qualify for one of our convenient payment plans.

 

 

We’re here to help so find out now if you qualify for our payment plan right now.

 

 

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New Rules on Payday Loans – Lenders Must Determine Borrower Ability To Repay

cfpb time for changeLenders Must Determine If Consumers Have the Ability to Repay Payday Loans That Require All or Most of the Debt to be Paid Back at Once

“The CFPB’s new rule puts a stop to the payday loans debt traps that have plagued communities across the country,” said CFPB Director Richard Cordray. “Too often, borrowers who need quick cash end up trapped in loans they can’t afford. The rule’s common sense ability-to-repay protections prevent lenders from succeeding by setting up borrowers to fail.”

Payday loans are typically for small-dollar amounts and are due in full by the borrower’s next paycheck, usually two or four weeks. They are expensive, with annual percentage rates of over 300 percent or even higher. As a condition of the loan, the borrower writes a post-dated check for the full balance, including fees, or allows the lender to electronically debit funds from their checking account. Single-payment auto title loans also have expensive charges and short terms usually of 30 days or less. But for these loans, borrowers are required to put up their car or truck title for collateral. Some lenders also offer longer-term loans of more than 45 days where the borrower makes a series of smaller payments before the remaining balance comes due. These longer-term loans – often referred to as balloon-payment loans – often require access to the borrower’s bank account or auto title.

These loans are heavily marketed to financially vulnerable consumers who often cannot afford to pay back the full balance when it is due. Faced with unaffordable payments, cash-strapped consumers must choose between defaulting, re-borrowing, or skipping other financial obligations like rent or basic living expenses such as buying food or obtaining medical care. Many borrowers end up repeatedly rolling over or refinancing their loans, each time racking up expensive new charges. More than four out of five payday loans are re-borrowed within a month, usually right when the loan is due or shortly thereafter. And nearly one-in-four initial payday loans are re-borrowed nine times or more, with the borrower paying far more in fees than they received in credit. As with payday loans, the CFPB found that the vast majority of auto title loans are re-borrowed on their due date or shortly thereafter.

The cycle of taking on new debt to pay back old debt can turn a single, unaffordable loan into a long-term debt trap. The consequences of a debt trap can be severe. Even when the loan is repeatedly re-borrowed, many borrowers wind up in default and getting chased by a debt collector or having their car or truck seized by their lender. Lenders’ repeated attempts to debit payments can add significant penalties, as overdue borrowers get hit with insufficient funds fees and may even have their bank account closed.

Rule to Stop Debt Traps

The CFPB rule aims to stop debt traps by putting in place strong ability-to-repay protections. These protections apply to loans that require consumers to repay all or most of the debt at once. Under the new rule, lenders must conduct a “full-payment test” to determine upfront that borrowers can afford to repay their loans without re-borrowing. For certain short-term loans, lenders can skip the full-payment test if they offer a “principal-payoff option” that allows borrowers to pay off the debt more gradually. The rule requires lenders to use credit reporting systems registered by the Bureau to report and obtain information on certain loans covered by the proposal. The rule allows less risky loan options, including certain loans typically offered by community banks and credit unions, to forgo the full-payment test. The new rule also includes a “debit attempt cutoff” for any short-term loan, balloon-payment loan, or longer-term loan with an annual percentage rate higher than 36 percent that includes authorization for the lender to access the borrower’s checking or prepaid account. The specific protections under the rule include:

  • Full-payment test: Lenders are required to determine whether the borrower can afford the loan payments and still meet basic living expenses and major financial obligations. For payday and auto title loans that are due in one lump sum, full payment means being able to afford to pay the total loan amount, plus fees and finance charges within two weeks or a month. For longer-term loans with a balloon payment, full payment means being able to afford the payments in the month with the highest total payments on the loan. The rule also caps the number of loans that can be made in quick succession at three.
  • Principal-payoff option for certain short-term loans: Consumers may take out a short-term loan of up to $500 without the full-payment test if it is structured to allow the borrower to get out of debt more gradually. Under this option, consumers may take out one loan that meets the restrictions and pay it off in full. For those needing more time to repay, lenders may offer up to two extensions, but only if the borrower pays off at least one-third of the original principal each time. To prevent debt traps, these loans cannot be offered to borrowers with recent or outstanding short-term or balloon-payment loans. Further, lenders cannot make more than three such loans in quick succession, and they cannot make loans under this option if the consumer has already had more than six short-term loans or been in debt on short-term loans for more than 90 days over a rolling 12-month period. The principal-payoff option is not available for loans for which the lender takes an auto title as collateral.
  • Less risky loan options: Loans that pose less risk to consumers do not require the full-payment test or the principal-payoff option. This includes loans made by a lender who makes 2,500 or fewer covered short-term or balloon-payment loans per year and derives no more than 10 percent of its revenue from such loans. These are usually small personal loans made by community banks or credit unions to existing customers or members. In addition, the rule does not cover loans that generally meet the parameters of “payday alternative loans” authorized by the National Credit Union Administration. These are low-cost loans which cannot have a balloon payment with strict limitations on the number of loans that can be made over six months. The rule also excludes from coverage certain no-cost advances and advances of earned wages made under wage-advance programs offered by employers or their business partners.
  • Debit attempt cutoff: The rule also includes a debit attempt cutoff that applies to short-term loans, balloon-payment loans, and longer-term loans with an annual percentage rate over 36 percent that includes authorization for the lender to access the borrower’s checking or prepaid account. After two straight unsuccessful attempts, the lender cannot debit the account again unless the lender gets a new authorization from the borrower. The lender must give consumers written notice before making a debit attempt at an irregular interval or amount. These protections will give consumers a chance to dispute any unauthorized or erroneous debit attempts, and to arrange to cover unanticipated payments that are due. This should mean fewer consumers being debited for payments they did not authorize or anticipate, or charged multiplying fees for returned payments and insufficient funds.

The CFPB developed the payday rule over five years of research, outreach, and a review of more than one million comments on the proposed rule from payday borrowers, consumer advocates, faith leaders,  payday and auto title lenders, tribal leaders, state regulators and attorneys general, and others. The final rule does not apply ability-to-repay protections to all of the longer-term loans that would have been covered under the proposal. The CFPB is conducting further study to consider how the market for longer-term loans is evolving and the best ways to address concerns about existing and potential practices. The CFPB also made other changes in the rule in response to the comments received. These changes include adding the new provisions for the less risky options. The Bureau also streamlined components of the full-payment test and refined the approach to the principal-payoff option.

The rule takes effect 21 months after it is published in the Federal Register, although the provisions that allow for registration of information systems take effect earlier. All lenders who regularly extend credit are subject to the CFPB’s requirements for any loan they make that is covered by the rule. This includes banks, credit unions, nonbanks, and their service providers. Lenders are required to comply regardless of whether they operate online or out of storefronts and regardless of the types of state licenses they may hold. These protections are in addition to existing requirements under state or tribal law.

For more info on Payday loans see: https://toddmurphylaw.com/payday-loans-the-most-despicable-loans/

 

A factsheet summarizing the CFPB rule on payday loans is available at: http://files.consumerfinance.gov/f/documents/201710_cfpb_fact-sheet_payday-loans.pdf

 

Text of the CFPB rule on payday loans is available at:  http://files.consumerfinance.gov/f/documents/201710_cfpb_final-rule_payday-loans-rule.pdf

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Trump Was Smart to File Bankruptcy

bankruptcy
Raise Your Hand If You’ve Filed For Bankruptcy

Bankruptcy Will Reshape Your Idea of Success

If I posed you the question, “Who do you imagine when you think of people who have filed for bankruptcy?,” do you picture a failed business owner, someone who is overall terrible at money management? Or, would our future president run through your head? It may come as a shock, but the latter has filed bankruptcy a whopping six times! Trump was smart to file bankruptcy and has utilized it as a financial tool to become successful.

It has been engrained in our way of thinking from very early on in our lives that bankruptcy is bad. Certain archetypal ideas never fade. These ideas have shaped the way in which we’ve lived our lives up until this point. But, some of those notions may not be entirely correct.

Bankruptcy Is A Financial Tool

Bankruptcy has gotten a bad rap over the years. It has become synonymous with failure and giving up. When, in fact, it lends the exact opposite effect; it acts as a solution to your problem and allows you to start with a fresh slate.

Admitting your loses and then finding a path to recovery is necessary for moving on. A path to recovery is exactly what bankruptcy provides. Contrary to the stigma attached to bankruptcy, it can be the best financial tool that the law provides.

Donald Trump Has Filed For Bankruptcy Six Times And Counting

“I have used the laws of this country … the [bankruptcy] chapter laws, to do a great job for my company, for myself, for my employees, for my family,” Donald Trump stated August 6th, 2016 at the first Republican presidential debate. Our very own president-elect has taken advantage of bankruptcy six times and counting; Trump realizes its power and has employed it as a business tool. Trump was smart to file bankruptcy.

Our new president’s bankruptcies allowed his companies to stay afloat while eradicating debts to banks, employees and suppliers. Personal bankruptcy allows you to do the same thing: stay afloat and get back on your feet while getting rid of debts.

Here is a quick look at each of our president-elect’s bankruptcy filings over the past few decades.

1.  Trump Taj Mahal, 1991

This business’ creation was funded by $1 billion in junk bonds. Later, it could not afford the high interest (just like if you took out a 2 year ARM in 2006 that reset to 11% in 2008 or 2009, your payments would become unaffordable, yet you would be stuck because you can’t refinance without having equity). The business was failing, and had $3 billion in debt. Additionally, Trump had over $900 million in personal debt. He filed for a Chapter 11 bankruptcy in 1991. His business continued to do well, even after filing for bankruptcy. It stayed in business for 25 more years after filing for bankruptcy, then closed down in October 2016, in the midst of the financial mogul for president.

2. Trump Castle (1992)

This casino opened in 1985 and performed very well in its infancy. It became the home of the game shows, Trump Card, and Yahtzee. However, business took a downturn in the 1990s and it could not pay out  $338 million in bonds owed. In March 1992, the business filed for bankruptcy. Over the following years, business was on the upswing. It underwent a few changes, although mainly just in name (it was known as Trump Marina from 1997-2011),  until it was finally sold to Landry’s in 2011.

3. Trump Plaza and Casino (1992)

The plaza and casino opened in 1984. By 1992, business was on the decline. It faced an 80% drop in revenue and acquired over $250 million in debt (comparable to what happened during the Great Recession, when many families’ incomes were slashed due to job loss, and then these families racked up credit card debt to pay for household bills). In 1992, Trump Plaza and Casino filed bankruptcy at the same time as Trump Castle.

4. Trump Plaza Hotel (1992)

Trump purchased the Plaza Hotel in Manhattan in 1988. In 1992, the business accumulated over $550 million in debt. It filed for bankruptcy that year.

5. Trump Hotel And Casino Resorts (2004)

In 1995, the Trump Taj Mahal, Trump Castle, and Trump Plaza were combined with other properties under one entity. In 2004, this conglomerate had over $1.8 billion in debt and consequently filed for bankruptcy to eliminate these debts.

6. Trump Entertainment Resorts (2009)

After the above-mentioned bankruptcy of Trump Hotel and Casino Resorts, the corporation was renamed Trump Entertainment Resorts. It took a blow when the economy failed in 2008. In December 2008 it skipped a $53.1 million bond interest payment. The business filed for bankruptcy in 2009 after it accrued over $1.2 billion in debt.

Bankruptcy Makes You Smart

As seen in these telling examples from our very own president-elect, bankruptcy does not equate to failure. Filing for bankruptcy has not affected him negatively at all in the long term.

It is a law for a reason. It is there to protect you when things don’t go according to plan.

Filing for bankruptcy does not make you a loser; on the contrary, it makes you financially smart.

 

Find out more about how bankruptcy works and how you can stop your debt collectors from taking your money, click here to read, What Is Bankruptcy?

 

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Save My Home From Foreclosure

Navigating The Foreclosure Process: Where Should I Start?

If you’re saying to yourself, “I want to save my home from foreclosure but don’t know where to start,” then you’ve come to the right place. Here is what you should do.

lawyer Foreclosure New Jersey Process save my home from foreclosure1. Educate

First and foremost in navigating the foreclosure process and deciding where to start, begin to educate yourself about the process. We have a plethora of free resources on our website: blog articles about foreclosure, loan modification, bankruptcy, the sheriff sale, and many more topics; we also have educational videos, case stories and helpful webinars which mimic a conversation that you would have with a real foreclosure lawyer if you were to call one– it will go over all of your options.

2. Avoid Scams

Secondly, avoid falling into traps; scams are a dime a dozen. It is highly likely that you will run into some while in the process of trying to save your home, so use your due diligence and keep an eye out for them. Many companies tout too good to be true deals. Most will take your money but don’t actually do anything to help.

3. Remain Strong

The road may get tough, but don’t give up; while the solution you find may have the wonderful end result of saving your home, sometimes the strategies can be hard to navigate, especially things like loan modification and bankruptcy. It can be a long and confusing process to get a loan modification or bankruptcy, but don’t fret, we are here to help you.

4. Decide On A Strategy

If you have just received a foreclosure complaint, you have 35 days to file an answer. To begin, decide whether or not you should file a contesting answer. From there, research what options you have to save your home. Taking all things into consideration, decide if saving your home really is the most realistic choice and the best solution. Then, put your strategy into place.

 

I’m Beginning To Fall Behind On My Mortgage Payments, What Should I Do?

falling behind on mortgage payments new jersey lawyer foreclosureMany people struggle to make their mortgage payments, you are not alone. If you’re saying to yourself, “I’m beginning to fall behind on my mortgage payments, what should I do now?” Here are some quick and powerful tips that will help you:

To answer the question “I’m beginning to fall behind on my mortgage payments, what should I do now?,” you should begin by calling your loan servicer to see what advice they have if you are just beginning to struggle with making your mortgage payments. Your loan servicer is the company responsible for mortgage payment collection. The number to reach them is located directly on your mortgage bill.

Your lender will allow you to miss 3 mortgage payments before declaring your loan in default, and then they won’t accept any more mortgage payments.

Practice good bookkeeping, this will be important in any solution you may employ down the road if you are faced with needing to apply for a loan modification or file for bankruptcy.

It is especially important to have good record-keeping skills if you are self-employed, because it is harder to be approved for a loan modification if you are self-employed, particularly if your finances are not in order or easy for the bank to understand.

Keep all of your documents related to your home in the same place, this will make it much easier if you need to call a foreclosure lawyer in the future.

The lawyer will need information from you, including home value, mortgage payment, the number of missed mortgage payments, interest rate, expenses, et cetera, so it is helpful if it is all in one place and easy to find.

Try your best to keep up with mortgage payments, but don’t be unreasonable. Do not, I repeat, do NOT, begin using your retirement savings or 401K to make your mortgage payments or to pay household bills. This money is nearly impossible to ever replace, and the temporary relief that it provides in paying your bills is not worth the strife that depleting it causes down the road. Further, if you end up filing a bankruptcy to save your home, your retirement money is protected.

Research all of your options for saving your home and decide on a solution that works best for your specific situation. Don’t get yourself into a solution that is unrealistic. Usually the best solution for those who have started falling behind on mortgage payments is obtaining a loan modification.

Be sure that you will be able to afford the option you settle on. No matter how hard it may be, sometimes moving is the best option if you cannot afford a home-saving strategy, because entering into one that you cannot pay for will only cause more trouble.

One of the most important things you can do when you start to struggle making mortgage payments is to learn as much as you can about all of the options that are available.

 

10 Things To Do If You Just Received Foreclosure Papers

Were you just served with foreclosure papers? Here is a quick list of what you should do once you are served with a Summons and Complaint.foreclosure papers new jersey lawyer loan modification bankruptcy

  1. The summons you may have just recieved requires a response within 35 days, commit to taking action within that time period (See below for more information)
  2. Find a qualified New Jersey Foreclosure Lawyer to help you through the process
  3. Complete the application for mediation which is included in the foreclosure complaint
  4. Communicate with your lender- see what options they suggest and request a loan modification application
  5. Apply for a loan modification as soon as possible
  6. Research all of your options and self educate
  7. Keep good records: save all of your mortgage payments (these will come in handy down the road)
  8. Put all of your court deadlines on your calendar, it is important not to miss any
  9. Make a list of all of your expenses
  10. If you don’t think you qualify for a loan modification, look into bankruptcy as an option

Our Opinion On Filing An Answer

From our many years of experience in handling foreclosure cases, we have a strong opinion that it is not in the homeowner’s best interest to file an answer * 99% of the time. We do not recommend a litigation strategy of filing an answer and further motions, because it doesn’t lead to saving your home. It only serves to extend the foreclosure process, but ultimately it will end in a sheriff sale. The strategy that we see the most consistent results with is obtaining a loan modification, or, if you can’t qualify for a loan modification then filing for a chapter 13 bankruptcy.

* Some lawyers’ opinions do not completely align with ours, if you are interested in the litigation strategy, consult with other lawyers for this route of action.

 

“I’m Falling Behind On Mortgage Payments, Are There Ways To Fix The Problem?”

mortgage new jersey lawyer loan modification

First – You’re Not Alone, AND Yes, There Are Ways To Fix The Problem

Thousands of people struggle to make their mortgage payments, especially after significant life changes, like loss of employment, death in the family, changes in income, and other factors that are out of our control. But, if you have just begun falling behind on your mortgage payments, you can still take control, and you have a number of options and strategies available to remedy the problem.

Before Considering Any Of These Options, You Need Income

If you are just beginning to look into ways to fix your mortgage problems, first and foremost – before you can put a strategy into place – you must have a form of income, or you need to find one.

These Are The Options That Can Help You

Home Loan Modification

Home loan modification is usually the best option for those who need a reduction in their monthly mortgage payments; it is the most popular solution. In a loan modification, we look at the principal balance of the loan, and the total of the missed payments. These numbers are added together to establish a new principal balance for the loan. Then, using a new interest rate of around 4%, and a new term of 30-40 years, a new monthly payment is calculated. If you have enough income to support that monthly payment, your problem is solved.

Refinance

Refinancing could be a good option for you if you have a difference in the amount owed on the home and the value of your home, also termed equity. Refinancing could allow you to get a new mortgage and reduce your interest rate. However, this is usually only an option if you have not missed payments yet, only if you are just beginning to realize that your mortgage payments are too high to manage, but you’re still current on payments.

Temporary Interest Rate Reduction

A temporary interest rate reduction could be appropriate for you if your income has recently been reduced, but there is a foreseeable increase again in the near future; it will reduce your monthly mortgage payments for a short period of time. For example, it could be appropriate if you have taken a temporary leave of absence from work, or your hours have recently been cut, but they will return to normal soon. A temporary interest rate reduction is only a short term fix to the problem, and the issue must be addressed at a larger scale if your decrease in income is not short term.

Forbearance

Forbearance results in a temporary reduction or suspension of mortgage payments. It could be the answer to your mortgage payment problems if the problem is temporary and has an end in sight. For example, forbearance could be an appropriate solution if you had to take a medical leave of absence from work, you have experienced a death in the family of someone who contributed to the household, natural disaster has affected your living arrangements – like a flood or hurricane, or another issue that has affected your home short-term. Before entering into a forbearance agreement, it is crucial that you’re assured you will have income in the near future, enough to repay the payments you had missed during the forbearance period.

Temporary Indulgence

This could be a viable option if reduction in income will be solved within the period of one month. Temporary indulgence grants the borrower a 30-day grace period during which they don’t have to pay their mortgage. There must be a concrete date under which you will be able to resume making your mortgage payments.

Repayment Plan

A repayment plan is only granted when your financial hardship has worked itself out, and you have recovered financially. You should only look into a repayment plan if you are able to prove to your lender that you can resume making your normal monthly payments again; while also paying back your missed payments. Under a repayment plan, you usually have to pay back all of your missed payments within a 1 to 2 year period.

Reinstatement

You must pay back your lender in one lump sum the total of missed mortgage payments. This is usually only a good option if your financial troubles have resolved and you have access to or have saved a large sum of money.

Partial Reinstatement

You must pay back 50% of what you owe, or more, in a lump sum. You also must negotiate a plan to repay the remaining amount due in missed payments within a specific timeframe.

Don’t Wait To Find A Solution That Works For You

We know it can be confusing to know what option will work best for you, but we are here to help. Our site has a number of resources for you to research all of your possible solutions. But don’t wait. The problem will only get worse if you do not employ a strategy early on. And as time goes on and you miss more and more mortgage payments, it becomes more difficult to find a solution you are eligible for, and if your home goes into foreclosure, the chances of being able to save it decrease drastically if you don’t take action early on.

If you don’t think that any of the aforementioned options will work for you, bankruptcy may be an option.

 

How Bankruptcy Can Keep You In Your Home

how can bankruptcy save my home new jersey lawyerBankruptcy Can Allow You To Catch Up On Missed Mortgage Payments And Save Your Home From Foreclosure

If you’re struggling to make your mortgage payments and have determined that the solutions listed in: I’m Falling Behind On My Mortgage Payments, Are There Ways To Fix The Problem?, don’t work for you, then a bankruptcy may be the best strategy to keep you and your family in your home.

Chapter 13 Bankruptcy Can Keep You In Your Home

A chapter 13 bankruptcy can allow you to put a repayment plan into place. This option requires that you have a form of income in order for you to make the new monthly payments to pay back your missed mortgage payments. Your total missed payments are added to the principal balance of your loan, with this new amount, a new interest rate is calculated and a new term is given. This can be a great option for those looking to save their home from foreclosure.

A chapter 13 bankruptcy can even stop a sheriff sale the night before it’s scheduled to happen, and can keep you and your family in your home.

But don’t wait until the last minute, it becomes harder to make a chapter 13 bankruptcy work with the more missed payments you have, because it makes the overall monthly payments higher.

 

If You Can’t Save Your Home From Foreclosure: Prepare For A Bright Future Using A Chapter 7 Bankruptcy.

chapter 7 bankruptcy foreclosure lawyer new jersey

You may have entered the foreclosure process with the mindset of wanting to save your home, but you discovered that you can’t save your home from foreclosure. Try this strategy – benefit from the lengthy process of foreclosure: prepare for a bright future.

Sometimes saving your home from foreclosure is just not the most realistic path to take, we know how hard it can be. Loan modifications are difficult. Not everyone qualifies for them, and many struggle working with their bank to get approved for one. Often times, you get denied time after time.

And, a chapter 13 bankruptcy is often used to save homes from foreclosure, but they are very hard to manage and require you to make huge monthly payments for 60 months to try and pay back missed mortgage payments. Depending on your situation, it can be a leap to try and make one work for you.

So, as hard as it may be to overcome, you’ve determined that saving your home is not a good strategy for you. You’ve come very far and made a huge decision. Now that you know you will be moving in the near future, you are wondering how you will get back on your feet again after the sheriff sale.

A Chapter 7 Bankruptcy Can Help You Get Back On Your Feet Again

There are two points in time when a Chapter 7 Bankruptcy can be helpful to you if you’ve determined that you can’t, or don’t want to save your home from foreclosure.

Scenario 1: There is no impending sheriff sale, and you are fairly early on in the foreclosure process.

You are going through the foreclosure process and have done a lot of your research, or maybe spoke to a foreclosure lawyer about your options for saving your home, but decided that saving your home is not in your cards.

Filing a chapter 7 eliminates all of your personal obligations to pay any and all debts. This then allows you to start rebuilding your credit right away since you do not have any debts.

At the same time, since the foreclosure process is just getting started, you can live rent-free for months before a sheriff sale can be scheduled which means you can save money that you would otherwise use to pay your mortgage or rent.

It is even possible to rebuild your credit from what may be 580 or 590, to 680 or 690 within 12 months. This score is good enough to buy a car at the best rate. After 24 months, you can be as high as 750. If you put the $2000 a month you might be paying rent with in the bank for 12 months you would have $24,000 and after 24 months, $48,000 and coupled with a 750 credit score, you could be in pretty good shape after 12 or 24 months.

Using the very lengthy amount of time that it takes to foreclose on a home to your advantage, you can eliminate all of your debts now, live rent-free during that time, rebuild your credit, and even save some money for the future.

Scenario 2: You have an upcoming sheriff sale.

If it is just inevitable for whatever reason that your house will be sold at a sheriff sale, you can delay the sale by up to 120 days by getting a 30 day adjournment from the sheriff’s office and then filing for a chapter 7 bankruptcy. With his additional time, you can better prepare for moving and also enjoy the other benefits of chapter 7 bankruptcy.

Assuming you postponed the sale by 30 days with a 30 day adjournment, (Read More About That Here), filing a chapter 7 will delay the sale by another 90 days and will discharge all of your debts.

Further, it can also help you avoid enormous tax liabilities. Here’s how:

If you don’t file for a chapter 7 bankruptcy, the bank has the right to seek to recover the difference between what the house is sold for and the amount that is owed, this is known as a deficiency amount. However, what is more common is the deficiency amount is forgiven by the lender and it is then required to be reported to the IRS as income in a 1099 statement and you may have to pay tax on that amount. A chapter 7 bankruptcy protects you against both of these very negative possibilities.

For example, if there is a deficiency amount of $100,000, you could owe up to $50,000 in income tax and you didn’t even get the money! Chapter 7 bankruptcy avoids this issue, provided it is filed BEFORE the sheriff sale. And of course, you get the added benefit of up to another 90 days in the house since the chapter 7 delays the sale by up to 90 days.

A chapter 7 bankruptcy before the sheriff sale will eliminate your debts and buy you extra time in your home so you are well-positioned for the future.

 

Is A Short Sale Or Deed In Lieu Of Foreclosure Better For My Credit Than A Sheriff Sale?

home foreclosure alternatives: short sale and deed in lieu of foreclosureMany people ask, “Isn’t a short sale or deed in lieu of foreclosure better than a sheriff sale on my credit?”

To answer this bluntly, no. Unfortunately, if your home is in foreclosure, your credit was already ruined once your loan went into default after missing 3 consecutive mortgage payments.

There is a lot of misinformation on the internet regarding the potential benefits of s short sale or a deed in lieu of foreclosure. I don’t recommend either of these two strategies, unless your lender is offering you a significant sum.

Both a short sale and a deed in lieu of foreclosure assume you either didn’t qualify for a loan modification, or have chosen not to apply for a loan modification because you want to move out of the home. Sometimes, a homeowner is trying to end the lengthy foreclosure process sooner through either of these two solutions, and that may be another reason to consider either of them.

One factor that make either a short sale or deed in lieu of foreclosure nearly impossible is if there is a second mortgage on the property, which requires you to negotiate with both lenders simultaneously and usually requires the first lender to share some of the proceeds with the second mortgage holder, when at a sheriff sale the second mortgage holder wouldn’t receive any funds.

Short Sale

Often times, the only one who benefits from a short sale is the realtor who collects his/her commission once the home is sold. A short sale involves an agreement with your lender, or bank, that when/if the home is old for less than what is owed, the lender will not come after you for any amount owed on the home after the sale.

A short sale also requires the right type of buyer; the buyer must be willing to patient, often for months, while the lender determines whether or not they will prove the short sale. An investor with cash would be the most desirable potential purchaser. A good realtor will carefully screen the buyer prior to making an offer to be sure he/she has the staying power to see the deal through to a closing. Numerous transactions have fallen apart after months of negotiating because the potential buyer was unable to continue the wait.

The most significant reason not to do a short sale is: you may still owe income taxes on the difference between he sale price and the amount owed, which would’ve been forgiven by the lender. The reason for this is that once the bank forgives your debt amount, the IRS then treats that amount as “income.”

However, a chapter 7 bankruptcy could save you from owing a devastating amount to the IRS.

If you do choose to do a short sale, it is crucial that you get an agreement with your bank in writing, insulating you from them taking any further action in trying to collect deficits after the sale.

One possible advantage of this option is that you may be able to negotiate with your bank for them to allot you money for moving. This could help you get back on your feet again after having gone through the foreclosure process, but, this possibility is extremely unlikely with a short sale.

Deed In Lieu of Foreclosure

A deed in lieu of foreclosure essentially requires that you hand over the keys of your home to your bank for nothing in return. The bank will cancel your debts for the deed of your home.

With a deed in lieu of foreclosure, you run into the same aforementioned tax issues that you would if you did a short sale. Once you hand over the deed of your home to the bank and they forgive the amount that you owed, the IRS treats that amount as income that must be taxed.

Instead of a deed in lieu of foreclosure, if you did a chapter 7 bankruptcy, you would not owe any money in taxes because the amount owed on your home would not be forgiven, but it would be discharged, and the IRS could not tax you.

Are Either Of These Options Right For Me?

Unless, your lender is offering you a hefty bonus for doing a short sale or you are trying to shorten the process so that you can move out of the home sooner, then neither of these options offer any real benefits to the homeowner.

Applying for a short sale or deed in lieu of foreclosure is no different than applying for a loan modification; in both situations you must submit a hardship letter and a significant amount of supporting financial documentation. Often, if you qualify for a short sale, you would’ve qualified for a loan modification.

Consider these factors very carefully before you decide to go through with either of these options.