Bankruptcy. That word alone is powerful. Bankruptcy once carried a negative stigma. The word was frightening – the beginning of the end.
Since the downfall of our economy, bankruptcy can be a saving grace. The negative stigma has been lifted and more people are filing for bankruptcy in order to get a financial fresh start. In 2011 there were over 1.4 million bankruptcy filings in the U.S. The first 6 months of this year, there were nearly 700,000 bankruptcies filed.
If facing a delinquent mortgage, filing a Chapter 7 or Chapter 13 may be a viable plan of action for you. Bankruptcy laws can be helpful against a foreclosure under certain circumstances and used in concert with other tools of foreclosure defense.
Bankruptcy cases represent complex legal matters. Retaining an attorney is paramount to ensuring your rights and interests are best protected. It’s to the homeowner’s advantage to hire a foreclosure defense/bankruptcy attorney to fight against your lender’s attorneys. It’s vital if a homeowner is about to be foreclosed on to not to waste any time getting to an attorney’s office for a consultation. It’s important to choose an attorney who also has specific experience in litigation and real estate law, besides foreclosure defense and bankruptcy.
Many homeowners believe they can walk away from a home, let it be foreclosed on and their problems are solved. Nothing could be further from the truth. The lender can pursue and get a deficiency judgment against the homeowner. The homeowner could end up owing hundreds of thousands of dollars more with the deficiency, the accrual of interest fees, and the lender’s attorney’s fees. Basically, the homeowner’s credit would continue to be destroyed due to a home they no longer own or live in.
Your mortgage is a 2-part legal contract. One part is the promissory note in which you promised to repay the amount borrowed. The other part is the mortgage or deed of trust called a security instrument. The security instrument allows the lender to place a lien on your home or other real estate before foreclosing on your home if you default under the promissory note.
A Chapter 7 can discharge any of your personal responsibility on a mortgage. A Chapter 13 is more complicated especially in terms of your mortgage. Basically, the Chapter 13 allows you to consolidate your debt and pay it off within 3 to 5 years.
When a bankruptcy is used for a fresh start, a home buyer, with a little effort, can qualify for a competitive mortgage in as little as two years after bankruptcy and three years after a foreclosure. Many have been able to restart their lives, free from the pressure of collectors. Make sure all your documents have the same foreclosure date and are accurate. These documents may include your property deed, court foreclosure actions, property tax records and credit report. If obtaining a mortgage three years later, the lender will go back and check the 3-year date before approving your new mortgage. Non- matching dates will hold up or deny a mortgage.
After a bankruptcy discharge, check your credit report. All debts should be closed and discharged. Make sure creditors are not reporting collections and open accounts in default. If they do, take further action (a letter from your attorney) or your credit will continue to erode your score. You have a fresh start – don’t let it slide.
Any loans not discharged through bankruptcy such as student loans should be paid on time. If applying for another mortgage, or any loan – the lender will be looking to see if you learned your lesson. Prepare an explanation as to why you filed for bankruptcy. Most bankruptcies are filed because of unemployment due to the economy and a legitimate “excuse”.
The most powerful plan you can have is to have correct and timely knowledge, an experienced foreclosure defense/bankruptcy/real estate/litigation attorney and to seek the attorney’s advice early. The attorney may very well be able to help you stay in your home and help you get back on-track.
Keith A. Gantenbein, Jr. is a foreclosure defense attorney located in Denver and servicing all of Colorado. He also handles bankruptcies, mortgage negotiations, lender liability, real estate, civil litigation, contracts and landlord/ tenant. If you think you will be facing foreclosure, or are in the foreclosure process, or wondering whether to file bankruptcy, contact Keith Gantenbein at (303) 618-2122 for a one-hour consultation where he will discuss your situation and go over all your options with you.