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.

Deficiency Judgement and Foreclosure

Posted on August 14, 2013 by Staff Writer

According to CoreLogic, there have been over 3 million homes foreclosed on since 2008. Many of those former homeowners are still struggling today, trying to recover from the financial disasters they faced. The majority were forced to leave homes that were then usually auctioned off by the mortgage holders.

Now, what could be a new financial disaster, many of these lenders are filing lawsuits against former homeowners for the balances of the mortgages. As the Washington Post reported, many people thought their home was the security for the mortgage. What they don’t realize is the lender can pursue legal action for a “deficiency judgment”.

For example, a property that with a $300,000 mortgage may have only been worth $100,000 during the housing crisis and the price the bank received during a foreclosure sale. However, the remaining $200,000 that is still owed on the original mortgage is referred to as a “deficiency balance” and that’s the amount that lenders are suing homeowners for.

Both Fannie Mae and Freddie Mac are two of the lenders who are pursing deficiency judgments against former homeowners. Fannie Mae has hired debt collectors to pursue people in thirty-eight states, and Freddie Mac has pursued debtors in seventeen states.

Not only are the lenders pursing the deficiency balance, they are also pursing interest on that money. The Post interviewed one former homeowner who is being sued. He owes $95,500 from a $375,200 mortgage, plus at least $21,000 in unpaid interest. He has been charged $19 per day (almost $600 per month) since the foreclosure. And that interest keeps growing.

Once a lender is awarded a deficiency judgment, there are numerous ways they can go about collecting those funds. Bank accounts can be seized, wages can be garnished and liens placed on properties.

If you have been involved in a past foreclosure, consider consulting with an experienced Arizona bankruptcy attorney to find out what steps you can take to protect yourself before the former lender files a deficiency judgment against 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.

Image courtesy of FreeDigitalPhotos.net

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.

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.

Retaining Assets During Bankruptcy in Arizona

Posted on October 17, 2012 by Staff Writer

For many Arizona residents, bankruptcy is the only option to escape the crippling burden of debt or foreclosure. Chapter 13 is commonly called the “wage earner’s bankruptcy,” as workers can continue to keep a portion of income that they earn during bankruptcy to help get their feet back on the ground. Filing a Chapter 13 bankruptcy is a bit more complicated than the straightforward Chapter 7. According to the U.S. Federal Bankruptcy Courts, a Chapter 7 provides for “liquidation,” which means “the sale of a debtor’s nonexempt property and the distribution of the proceeds to creditors.”

In Arizona, according to the Arizona state bankruptcy courts, a Chapter 7 bankruptcy provides for a Homestead Exemption, of up to $150,000 for either a home (including mobile homes), plus the land upon which the home is situated. Personal property exemptions can be up to $4,000 and money, benefits, and proceeds up to $20,000. There are a few other property exemptions—making Arizona one of the best states in which to file a Chapter 7 bankruptcy—but if you’re interested in retaining the majority of your assets, including money earned while in the throes of bankruptcy, filing a Chapter 13 might be better for you.

The biggest advantage of a Chapter 13 over a Chapter 7 filing, according to the U.S. Bankruptcy Code, is that “Chapter 13 offers individuals an opportunity to save their homes from foreclosure.” If a person files for Chapter 13, he can “stop foreclosure proceedings and may cure delinquent mortgage payments over time.” In a state such as Arizona, which was hit particularly hard by foreclosures and the imploding of the housing market, a Chapter 13 filing might be a better option for cash-strapped residents.

If you or someone you know is considering bankruptcy, don’t go through it alone. Contact a dedicated Arizona state bankruptcy attorney today.

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Financial Future Improving for Valley Residents

Posted on October 11, 2012 by Staff Writer

According to a recent article in The Republic, bankruptcy filings in the Phoenix area are continuing to drop at a rapid rate. According to the U.S. Bankruptcy Court located in Phoenix, there were 1,809 bankruptcy filings last month, a figure that is nearly 26% lower than the 2,431 bankruptcy filings that occurred in August, 2011. This is the 19^th straight month of declining bankruptcy filings for the area. Similarly, on the state level, there were 2,479 bankruptcy filings statewide in August, which represents a 23% decrease from August, 2011.

These figures come amidst other modest improvements in the local economy, such as fewer loan defaults and slight improvements in housing prices. Although there have been marginal improvements in employment growth, the overall employment market for the area still appears to be rather sluggish. Local economists, however, are expecting at least moderate economic growth over the next several months and into 2013.

Researcher Credit Karma also reported that Valley residents are carrying substantially less credit card debt, a factor that traditionally results in increased bankruptcy filings. The average Valley resident is carrying $4,948 in credit card debt, which is approximately 16% lower than the average credit card debt load for a Valley resident in August, 2011. Likewise, average mortgage loan and student loan balances have dropped, although auto loan balances have increased.

Despite these positive statistics, however, the nation remains mired in an economic slump, and many Arizona residents continue to struggle with mounting debts. If you and your family are in this situation, then bankruptcy may be an option for you. Consult with an experienced Phoenix bankruptcy attorney today, and explore the different avenues of debt relief that are available to you, including the various types of bankruptcy proceedings.