BANKRUPTCY & FORECLOSURE LAW – KM Jackson Law Firm, P.A. – Bankruptcy, Chapter 13, Chapter 7, Foreclosure, Forbearance, Short Sale, Deed in Lieu of, means testing.

BANKRUPTCY / FORECLOSURE

Bankruptcy and potential foreclosure of your home are traumatic enough as it is, what with facing financial ruin and dealing with a roller coaster of emotions. It is generally perpetuated by unemployment, illness or injury, divorce or separation, business failure or, simply, poor planning.

Although going bankrupt or losing your home should not be high on anyone's to-do list, it is important to remember that filing bankruptcy is a respectable option when all other efforts to survive financially. Bankruptcy is a constitutionally sanctioned path to a fresh start, not a shameful disgrace.

BANKRUPTCY

Chapter 7 - In Chapter 7 bankruptcy, you ask the bankruptcy court to discharge most of the debts you owe. In exchange for this discharge, the bankruptcy trustee can take any property you own that is not exempt from collection (see below), sell it, and distribute the proceeds to your creditors. You select property you are eligible to keep from a list of state exemptions such as your home.

Chapter 13 - In Chapter 13 bankruptcy, you file a repayment plan with the bankruptcy court to pay back all or a portion of your debts over time. The amount you'll have to repay depends on how much you earn, the amount and types of debt you owe, and how much property you own. You lose no property in Chapter 13, because you fund your repayment plan through your income.
Bankruptcy Means Test - Every debtor must complete a bankruptcy means test before filing bankruptcy. A debtor cannot simply choose which type of bankruptcy they wish to choose. The bankruptcy means test is a mathematical calculation to determine what type of bankruptcy a debtor must file. The goal is to reserve Chapter 7 bankruptcy for those who really have no means to pay, and to push those who have available income into Chapter 13 bankruptcy plans, so that their creditors will receive at least partial payment.

FORECLOSURE - While there are steps you should take before simply accepting foreclosure, you must

First analyze the circumstances that have placed you in such an uncompromising position.
Next you should seek professional advice to explore available options.
Then, you should attempt to mitigate or negotiate with your lender to avoid foreclosure rather than simply waiting for the inevitable. While it may cost a few dollars for professional advice or continued payments to your lender until payment alternatives may be reached with the lender, to keeping your home should be the first priority. Some of these options are:

Forebearance - is a prevention tool that is offered to borrowers that permits an extension of time. During the extension, the lender will not report any new negative information to the credit bureaus, late fees are not incurred, and no payment(s) will be due during this period of time. Many lenders will do some type of loan modification after the forbearance period is up so that you can get your mortgage back on track.
Short Sale - The property sells to a third party; the creditor accepts this price as full settlement of the debt if it is negotiated that way. Beware of the bank attempting to take a short sale and ask for a deficiency too.
Deed In Lieu of Foreclosure - Here the debtor gives the property back to the creditor usually in exchange for their forgiveness of potential deficiencies. Do not think this happens without some negotiation by you or a foreclosure professional. Even if you give the house back or the bank takes it at a foreclosure auction you may still owe the deficiency. This amount will be the difference between what the house sold for at the foreclosure sale and what you owe including the legal fees. While the deficiency can be settled without paying any of it, this must be agreed to and certainly does not happen automatically.
Modify The Existing Mortgage - In simple terms, the creditor, usually a bank, agrees to change the terms of the loan. Most often the changes are temporary. Reducing the interest rate, principal portions of payments, or extending the amortization in an effort to reduce overall payment obligations, remain the changes most acceptable to creditors.

In the event you are potentially facing foreclosure, contact our firm form and set up a consultation with one of the firm’s attorneys to learn more about these financial procedures and evaluate your options.