The Benefits and Disadvantages of Filing for Bankruptcy

Posted on August 22, 2013 by Staff Writer

The choice to file for bankruptcy is not an easy one. The benefits need to outweigh the negative results of bankruptcy. It is necessary to have a full understanding of the consequences of bankruptcy in order to make the best decision possible.

The following are possible outcomes of bankruptcy:

1. Weakened Credit Score

Filing for bankruptcy has a negative effect on your credit score. A bankruptcy shows up on your personal report for 7 to 10 years depending on the type of bankruptcy for which you file. Yet, bankruptcy allows for a financial fresh start. You can rebuild your credit over time and there is an opportunity for it to be better than before your bankruptcy.

2. Difficulty Getting Loans

One of the results of having a bad credit score post-bankruptcy is that it will be more difficult to get a loan. You will also have a difficult time being approved for credit cards and financing the purchase of a home. Yet, if you are considering filing for bankruptcy, it might not be the best idea to have new bills to pay.

3. Issues with Finding Employment

Potential employers occasionally review your credit report before offering you a job. Certain states have outlawed or limited such a practice because of the negative cycle it perpetuates. People who can’t pay their bills on time are not able to get jobs that would allow them to pay their bills on time. Arizona is not one of the states that currently regulates such activity.

The benefits of bankruptcy can far outweigh the negative aspects because it will allow you to start fresh. It is important to discuss your situation with an Arizona bankruptcy lawyer. Bankruptcy will eliminate either some or all of your debts depending on what chapter is selected. Filing will also stop harassment from creditors, foreclosure, wage garnishment, or repossession because filing creates an injunction called an automatic stay. In the long run, a bankruptcy will allow you to build your credit back up to a respectable level and allow you to regain your life. Contact a dedicated bankruptcy attorney in Casa Grande who can assist you in deciding if filing is the right step for you.

Declaring Bankruptcy to Save Your Home—Can It Work?

Posted on June 23, 2013 by Staff Writer

Arizona is still ahead of the national average when it comes to the foreclosure rate, even several years after the brunt of the housing crisis is behind us. In 2013, according to Realty Trac statistics, the percentage of units nationwide that were in foreclosure was .11, while in Arizona the percentage of unites that were in foreclosure was .13. The good news is that both figures are finally at less than 1 percent, after several years of remaining higher. The good news continues for Arizona residents with the fact that houses in auction in the state are down nearly 64 percent from last year, and those that are bank owned are down 52 percent from the previous year, according to Realty Trace. Yet that doesn’t mean that all Arizona homeowners are out of the dark, and many may still be considering filing for bankruptcy in an effort to avoid losing their home. Is this a possibility?

According to Fox Business News, it’s not. “This will not stop the foreclosure, only delay it,” states Fox. “In some cases, only for a month or two.” That’s bad news for any family really desperate to keep its home. Filing for Chapter 7 does in fact stop the foreclosure procedure, according to Fox. But “the lender can make a request to the court to remove the house from bankruptcy protection, also known as a ‘relief from stay.’ Getting this relief means the lender can continue with the foreclosure process,” according to Fox. And lenders, as one may imagine, are “usually very efficient in requesting that relief.”

The one recourse a person has, according to Fox, is to attempt to modify the loan with your lender so your mortgage is more manageable. The trick is that for any loan modification to be approved, a person must have sufficient income—which is often the catch 22 for families approaching bankruptcy.

If you or someone you know is considering bankruptcy, the most important first step is to talk with a qualified professional to determine if it’s right for you. Don’t go through it alone. Contact a dedicated Arizona bankruptcy attorney today.

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Reform of Complicated Mortgage Forms to Help Potential Homeowners

Posted on February 28, 2013 by Staff Writer

On June 20, 2012 the Consumer Financial Protection Bureau (CFPB) testified before the House Financial Services Subcommittee on Insurance, Housing, and Community Opportunity to highlight CFPB solutions to the problems with the current federal law regarding consumer mortgages. In a presentation, CFPB Deputy Director Raj Date explained that the two forms consumers must agree to under federal law have overlapping information and inconsistent language. “Not surprisingly,” he said, “consumers often find the forms to be confusing. It is also not surprising that lenders and settlement agents find them burdensome to provide and explain.”

The first of these developed under the Truth in Lending Act (TILA), and the other by the Real Estate Settlement Procedures Act. (RESPA) According to Date, these forms did not properly detail how mortgages worked with consumers. “For example,” he said, “many consumers select a loan based on their ability to afford the mortgage payments. But some consumers experienced “payment shock” because they did not understand that they payments could include unaffordable amounts a few years or even months after closing.” The Dodd-Frank Act transferred authority of the TILA and RESPA to the CFPB in 2011.

This ultimately means that the convoluted TILA and RESPA will be replaced by the CFPB with easier-to-understand forms “that will make the mortgage process easier for consumers and industry.”

Research to come up with the new forms include but is not limited to:

Meeting with consumer advocates, other banking agencies, and credit settlement agents to better understand the issues that consumers and the industry face
Launched the “Know Before You Owe” project—an informative drive on the CFPB website to share prototypes of the disclosure funds and a place for consumer feedback.
A Small Business Review Panel to “gather information from representatives of small lenders, mortgage brokers, settlement agents, and not-for-profit organizations about the costs of the proposals under consideration and potentially less burdensome alternatives.”

While these new procedures won’t help the one in 17 Arizona homeowners who foreclosed in 2010—and those who faced subsequent bankruptcy because of it—it is good new for Arizona residents as the state recovers from its particularly bad housing crash. If you or someone you know does, however need bankruptcy assistance, contact a dedicated Arizona bankruptcy attorney today.

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Which is worse: foreclosure or bankruptcy?

Posted on February 8, 2013 by Staff Writer

Many people facing foreclosure are worried about whether a foreclosure or bankruptcy is worse for their credit. To state the obvious, neither a foreclosure or bankruptcy are good for your credit. They both have long lasting negative impacts. One difference between a foreclosure and bankruptcy is that a foreclosure stays on your credit report for 7 years and a bankruptcy for 10 years. I wouldn’t recommend basing your decision solely on how it will impact your credit.

If you are behind on your mortgage payments, then a bankruptcy may be a good option. A Chapter 13 bankruptcy allows you to pay back any arrearages through the bankruptcy plan. Plus, by filing bankruptcy, an Automatic Stay of Protection is created. This Automatic Stay prevents the bank from foreclosing on your property. So you can literally file bankruptcy the day before it is to be foreclosed and the sale will be cancelled.

If you no longer want your home and know that you don’t need to file bankruptcy then you may consider a short sale or deed in lieu of foreclosure. A short sale is when you sell your home for less than is owed and the bank forgives any differences. A deed in lieu of foreclosure is basically surrendering the property back to the bank. Or you want to consider a mortgage modification. If you are granted a modification you may be able to reduce your payments and make the future payments more manageable.

If you are behind on your mortgage payments don’t wait until it is too late! Speak with one of our attorneys now so you can get all the facts.

How long do I have to get out of my house after foreclosure?

Posted on February 7, 2013 by Staff Writer

How long you have to vacate your house after it has been foreclosed depends on two main variables: 1) the state you live in; and 2) on whether you are the owner or just renting. For this article let’s assume that you are living in Arizona. First, let’s look at how long a home owner has before they must vacate after their home has been foreclosed.

In Arizona ownership interest passes to the new buyer at the foreclosure auction! Technically this means that as soon as the house is sold, you are trespassing. At that point the new buyer might start the eviction process and very soon you might have the sheriff knocking on your door to remove you and all your property from the premises. My advice is not to risk it, and try to vacate by the auction date. That is one of the reasons why, by law, the owner receives a 90 day notice of trustee’s sale. Anything on the property after the auction becomes the property of the new owner and you may have no rights to remove them. You may be able to work out some kind of a deal to stay after the foreclosure date but the new owner isn’t required to do it.

Secondly, let’s take a look at what happens to a renter in a home that is foreclosed. If you are renting a home that is foreclosed on, then you’re given special protection under the Protecting Tenants at Foreclosure Act (PTFA). The PTFA, which went into effect May 20, 2009, and does not expire until December 31, 2014, substantially alters the treatment of tenants after foreclosure of a residence. The scope of the Act is broad, applying to any residential real property and any person who acquires the property, whether a lender who acquires it via a credit bid or a third party investor at a foreclosure sale.

The PTFA guarantees the following:

Renters who have valid month-to-month leases may remain in their rented homes for 90 days from the date the property changes ownership—specifically, from the date when the title to the property is transferred to a new owner.

Renters who have valid leases that terminate after the date when a foreclosed property’s title transfers to a new owner may remain in their rented homes until the end of the lease term. For example, if a renter has a lease that ends September 30, 2012, and a new owner takes possession of the property May 1, 2012, the renter may remain in the home until September 30, 2012. The exception to this provision is when the new owner intends to move into the property. In that case, the renter may live in his or her rented home for 90 days from the date the property changes ownership. In the above example, that would be July 30, 2012.

The PTFA does not protect tenants when renters are not current on rental payments at the time their rented property is auctioned at a sheriff sale, when renters have fraudulent leases, and when renters enter into lease agreements after the sheriff sale.

If you’re facing foreclosure come and talk to one of our bankruptcy attorneys to see what can be done for you.

Federal Tax Exemption for Mortgage Debt Forgiveness Extended Through 2013

Posted on January 26, 2013 by Staff Writer

According to an azcentral.com article, recent news coverage of worries over the “fiscal cliff” have included concerns about the Mortgage Forgiveness Debt Relief Act of 2007, which was set to expire on January 7, 2013. This law originally was passed in 2007 to provide relief to homeowners experiencing financial distress in mortgage foreclosure proceedings through the end of 2009. Under the Debt Relief Act, homeowners were exempt from federal income taxes on mortgage debt forgiven by lenders through foreclosures, short sales, or mortgage loan modifications. In 2008, the Debt Relief Act was extended to provide relief to homeowners for a six year-period rather than the original two-year period.

With the last-minute passage by Congress of the American Taxpayer Relief Act of 2012, which President Obama is expected to sign this week, relief in the form of this federal tax exemption is extended through the end of 2013. Fortunately for Arizona homeowners, however, they are already protected by the state’s “non-recourse” law. In Arizona, mortgage loans generally are designated non-recourse loans, which means that homeowners cannot be sued for remaining mortgage debt that is owed after a foreclosure action. Under federal tax law, the forgiveness of non-recourse loans results in no tax liability to homeowners. Nonetheless, it is debatable whether Arizona law extends similar protections to homeowners who sell their homes in short sales, so the American Taxpayer Relief Act of 2012 will provide protection for those homeowners, at least through the end of 2013.

Mortgage foreclosures, short sales, and loan modifications are all events that may occur when a homeowner can no longer afford to pay his or her mortgage payments. Depending on the income of the homeowner, the desire of the homeowner to remain in the home, and other facts and circumstances surrounding the particular situation, bankruptcy also may be a legitimate and useful option for dealing with an impending foreclosure. Whether the goal is to simply delay or ultimately prevent the loss of one’s home to foreclosure, Chapter 13 bankruptcy proceedings may be a way to cure any past-due mortgage payments and remain in the home. Contact your Arizona and Las Vegas bankruptcy attorneys today for additional information about how a Chapter 13 bankruptcy might benefit you and your family.

Rental Properties During Bankruptcy

Posted on January 11, 2013 by Staff Writer

While bankruptcy is a good last option for many Americans battling financial insolvency, there are several reasons to seek professional assistance when considering filing for either Chapter 7 or Chapter 13. Knowing how to hold on to what you can after bankruptcy is one such reason. Many people believe that filing for bankruptcy automatically means that any rental or secondary property must be sold. While this is sometimes the case, whether or not the property has to be sold depends on what type of bankruptcy you’re filing, the outstanding loan on the property, and how much income is generated if the property is being rented out.

When filing a Chapter 13—a debt reorganization—bankruptcy, it generally allows for property to be kept and debts to be paid over time, usually three to five years, according to the Federal Bankruptcy Court. Foreclosure proceedings can be stopped during a Chapter 13, but individuals are still expected to pay all mortgage payments on both the primary and secondary residencies. After the 2008 housing crash, which hit Arizona especially hard, many rental property mortgages were underwater, meaning that people owed more on the mortgage than the property was worth. This can be adjusted by a bankruptcy judge during a Chapter 13.

You’re more likely to have to sell a rental property under a Chapter 7—liquidation—bankruptcy. Anyone filing a Chapter 7 bankruptcy gets an exemption for the equity in the primary residence. In Arizona, according to the Arizona bankruptcy code, the homestead exemption is $150,000. This will most likely only be able to be applied to the primary residence, and would not apply to a secondary or rental property. Whether you’re able to keep secondary property also depends on whether it’s in you or your spouse’s name.

Determining what you’re able to hold to after bankruptcy is only one step of the complicated bankruptcy process. If you or someone you know is considering bankruptcy, don’t go through it alone. Contact a dedicated Arizona bankruptcy attorney today.

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Short sales on the rise

Posted on January 5, 2013 by Staff Writer

According to a story in azcentral.com, sales of homes facing foreclosure are on the rise. These sales are growing fast because of lenders who are trying to avoid foreclosure on their homes after their mortgages have been left unpaid.

Foreclosure tracker RealtyTrac Inc. has said that there was a 22 percent rise in the sales of homes that are already in foreclosure compared to the previous year. The previous quarter was also slower than this one, according to the story.

Short sale is when a lender sells their home for less than they still own on their mortgage, and these sales were the majority in the sales of homes heading for a foreclosure with a 65 percent portion of the sales.

The time-consuming and expensive nature of foreclosures can mean bigger losses, so banks are becoming more tolerant of short sales as an alternative for foreclosures. Daren Blomquist from RealtyTrac said that banks are noticing that they will lose less by approving a short sale than by dealing with the long foreclosure process.

Some banks have given borrowers financial incentives to achieve a short sale, and many others are trying to speed up the process, which can easily take six months or more.

When you have legal needs related to bankruptcy or foreclosure, find a knowledgeable attorney in your are to help you. Our Phoenix, Arizona bankruptcy attorneys can help you figure what the best course of action is in your case. Contact our offices today.

Arizona Mortgage Laws Boosting Recovery of Housing Market

Posted on December 17, 2012 by Staff Writer

Outdated mortgage laws are to blame for the sluggish housing rebound, according to experts. A recent study by an assistant real state professor Andra Ghent found out that in so-called “judicial states”, where foreclosures must be done through a long and complicated civil court process, the housing market is recovering disappointingly slowly. Outdated mortgage laws combined with the current housing crisis should be a good enough reason to change the laws to a different kind of system, for example, such as the one in Arizona, Ghent said.

Arizona is a “nonjudicial state” where lenders do not have to go through a complex court proceeding so as to foreclose on properties, which is faster and not as expensive. This has allowed the housing market in Arizona to recover better than the markets of judicial states. For example, median home prices have increased considerably within a year: in the metro Phoenix area the year-over-year increase was 27 %.

Defenders of the judicial foreclosure process, however, are of the opinion that such laws give borrowers more time to talk with the lender and prevent other problems, for example, lenders not signing mortgage documents properly. But in many of these cases, the borrowers would have lost their homes anyway, and often less paperwork means fewer problems with the documents.

According to Ghent, the mortgage laws should be streamlined all across the country. “Can you imagine how much money, time and resources we could save, if we didn’t have 50 different sets of laws, paperwork and legal-expertise requirements?” she said.

If you are falling behind on your mortgage payments and realize that you may be faced with a foreclosure, you should get assistance from legal professionals who know what do in these situations. Contact a capable bankruptcy attorney in Arizona today.

Owning a Home After Bankruptcy

Posted on September 18, 2012 by Staff Writer

Arizona was hit notoriously hard by the housing market crash of 2008, making several top ten lists for foreclosures and drops in new home sales. The state is on its way to a full recovery, however. In August 2012, according to RealtyTrac, the state was down to 57,438 homes currently in foreclosure, as opposed to the 3.2 million that were foreclosed in 2008. According to a 2009 article published in the Phoenix Biz Journal, the foreclosure rate rose 225 percent from 2006 to 2008 in the state.

Bankruptcy and foreclosure often go hand in hand, and one can result in the other. As foreclosure rates drop across the state, so are the rates of personal bankruptcies. In May of 2012, the USA Today reported that late home payments are decreasing faster in Arizona than in the nation as a whole, reflecting the positive trends in the state. As former homeowners pull out of bankruptcy, they will look again to owning a home. This is another example of how the housing market recovery and bankruptcies are related.

It may seem impossible to immediately take on a new mortgage after bankruptcy, especially if foreclosure is what led to financial insolvency. Yet counterintuitive as it sounds, taking on credit—and using it responsibly—is the only way to recovery after bankruptcy. New mortgage restrictions that have been passed and made into law over the past few years, which include mandates of insured clarity of the borrower. Taking on a new, easy mortgage could be the best way to recover from bankruptcy.

Interest rates will be higher, of course, but these will lessen as time passes, providing that you never make a delinquent payment. Understanding the ins and outs of bankruptcy is a complicated process, and shouldn’t be gone through alone. Contact a dedicated Arizona bankruptcy lawyer today.

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