According to the latest reports, over 4000 Iowans who have a Fannie Mae or Freddie Mac mortgage loan are delinquent in their payments. The number of delinquent borrowers is even higher when you include non Fannie or Freddie loans. For some delinquent borrowers a sheriff's sale is the final step to getting out from under a home they can't afford. Many people are deciding to walk away from mortgages that now far exceed the value of their home and their monthly budget. But other borrowers are just as committed to trying to save their home. Unfortunately, the methods being used to avoid foreclosure aren't always as successful as people hope they'll be. Lost paperwork, unkept promises and long delays are common complaints among people seeking mortgage loan modifications. Some clients give up after years of trying.
If you're able to get a modification that results in a significant interest rate and reduction in the principal owed it can be a good start to getting back on your feet. But the majority of loan modifications involve only interest rate reductions and an extension of the term, meaning that the payments in default are added to the back of the loan. Interest in default is capitalized or added to the principal so that a borrower now has an even larger loan balance and is paying interest on interest. Borrowers offered these type of modifications need to seriously consider whether a Chapter 13 bankruptcy, where no interest is paid on the arrearage and the loan balance never increases, wouldn't be a better option. Although interest rate reductions aren't available in a Chapter 13 bankruptcy, it is possible to strip off mortgages that are wholly unsecured. For example, second and third mortgages that are no longer supported by equity in the house can be stripped off and treated like credit cards.
Whatever option a borrower chooses, it's important to not let the process drag on. More than once in the last few months we've been contacted by homeowners who had been told by their mortgage lender they would receive a loan modification only to have their home sold at sheriff's sale. When foreclosure is imminent contact us at www.thompsonlawoffice.net to discuss your options and decide whether a loan modification or Chapter 13 bankruptcy would be the best way to avoid a sheriff's sale.
Friday, February 22, 2013
Thursday, February 21, 2013
ELEVEN REASONS TO CHOOSE FILING CHAPTER 13
- Catch up on back mortgage payments at 0% interest.
- Catch up on car loan payments and repay vehicles loans at low interest rates.
- "Cram down" the loan on a vehicle or other property purchased more than two and 1/2 years ago to its fair market value.
- Recover recently repossessed vehicles and repay the loan at low interest rates over time.
- Strip off your underwater 2nd or 3rd mortgages.
- Discharge property settlement obligations from a divorce decree.
- Repay recent tax debts and back child support over time.
- Protect non-exempt property at risk in a Chapter 7.
- Repay private student loans on your own terms.
- Protect co-debtors on loans being repaid in full through the Chapter 13 from further debt collection.
- Retain the ability to pursue prepetition claims against creditors for unfair debt collection or consumer fraud.
Judge Sanctions Credit Union
Last fall one of my Chapter 13 clients came to me with complaints that a credit union listed in his bankruptcy as a creditor was sending him letters demanding payment of a debt already being paid through his Chapter 13 plan. The credit union certainly knew of the bankruptcy because it had filed a proof of claim and had received monthly payments from the trustee for over three years. We advised the client to wait until the credit union had sent multiple letters and then we filed a motion against the credit union for violation of the automatic stay.
The automatic stay protects debtors while they're in bankruptcy from the continued collection of debts by their creditors. We received an Order from the U.S. Bankruptcy Court in favor of our client. The court's Order states in part that, "Congress intended the automatic stay to stop "all collection efforts, all harassment, and all foreclosure actions and prevent creditors from attempting in any way to collect a pre-peition debt." The Judge awarded our client $500 for every letter he had received and awarded our attorney's fees so our client had to pay nothing in attorney fees and got money from the credit union also.
The lesson here is that if you're a bankruptcy client in either Chapter 7 or Chapter 13 please notify us immediately at www.thompsonlawoffice.net of attempts to collect a debt listed in your bankruptcy. Keep your documents and phone logs as evidence. The same is true for clients who have already received their bankruptcy discharge. We can obtain the same kind of damages for discharge violations against creditors that continue to try to collect debts after a bankruptcy discharge has been granted.
The automatic stay protects debtors while they're in bankruptcy from the continued collection of debts by their creditors. We received an Order from the U.S. Bankruptcy Court in favor of our client. The court's Order states in part that, "Congress intended the automatic stay to stop "all collection efforts, all harassment, and all foreclosure actions and prevent creditors from attempting in any way to collect a pre-peition debt." The Judge awarded our client $500 for every letter he had received and awarded our attorney's fees so our client had to pay nothing in attorney fees and got money from the credit union also.
The lesson here is that if you're a bankruptcy client in either Chapter 7 or Chapter 13 please notify us immediately at www.thompsonlawoffice.net of attempts to collect a debt listed in your bankruptcy. Keep your documents and phone logs as evidence. The same is true for clients who have already received their bankruptcy discharge. We can obtain the same kind of damages for discharge violations against creditors that continue to try to collect debts after a bankruptcy discharge has been granted.
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