“Bankruptcy Creditors pushed and pushed and pushed…until we couldn’t be pushed no more. When you see bankruptcy as the pain relief, you start to look forward to the end, no matter how bad it might seem…you just want it to be over….–Lauren McKenzie, Portland, Oregon
Bankruptcy is not the end of the world, provided you have your health, family & faith.
“I don’t know what to do except file bankruptcy, but I know this mess will be over,” says Lauren McKenzie of Portland, Oregon.
Caught with one of those bad mortgages, Lauren’s monthly house payment has shot up 31% (from $3,000 to $3,930) and she’s missed two payments.
“This is outrageous…I want to avoid bankruptcy…I am sick to my stomach, and I have no idea what to do!” states McKenzie.
Whoa, Lauren! Hold on. Before you start throwing out the “B” word, step back for a moment & examine your options as I’m happy to share with you…
Click Read More below now for Lauren’s crash course in bankruptcy indoctrination…something she never dreamed could happen.
AVOID BANKRUPTCY
1. Contact your mortgage lender(s). McKenzie cannot afford this exploding house payment. Bankruptcy should be the last option. Before BK, you absolutely should contact your mortgage lender(s) and negotiate a “loan modification.”
Today, your mortgage lender(s) want to work with you, as they realize the alternative is not in their best interest.
**NOTE** Don’t think for one minute your mortgage lender cares about you…they don’t. At this time, they don’t want to foreclose. Unless your house has equity (difference b/t what you owe and what the house is worth minus closing costs), your mortgage lender will work with you.
Some lenders are voluntarily adjusting your mortgage balance to reflect today’s values. These mortgage lenders realize that stupidly adding your unpaid amount onto the back of your loan and offering you a lower monthly payment is only putting a used band-aid on the problem.
The lenders understanding today’s housing market are first confirming you can afford the newly adjusted price and payment. If so, they are taking a $250,000 mortgage amount on a home today worth $120,000 and they’re “writing down $130,000. On this $120,000, they’re establishing your monthly payment.
1. Short sell your house. If for some reason you run in to a 100% STUPID mortgage lender unwilling to work with you, get yourself a proven Short Sale EXPERT…a licensed Realtor SPECIALIZING in short sales. Make this Realtor PROVE he/she successfully has CLOSED short sales transactions. Find out HOW this Realtor hopes to protect you.
For Some People, Bankruptcy Provides A New Beginning!
Lauren sees no alternative, and she is aware of the new bankruptcy laws (in effect October 2005).
“This seems to be the last resort for me,” Lauren admits. “The clock is ticking…they (mortgage lender) have accelerated the loan (Acceleration Clause in mortgage).”
1. File for bankruptcy protection. Before filing for bankruptcy protection, you will have to attend a mandatory credit-counseling session held by designated groups throughout the country.
New Bankruptcy Laws Erase Last Hope For Many….
Under this new law getting your debts canceled is more difficult! For some people, getting debts canceled will be impossible. And you can thank the credit card issuers for the more stringent laws.
For Lauren, her counselor will recommend a Chapter 13, which immediately halts a foreclosure sale and freezes all collection actions for debts that predated the bankruptcy filing.
The court then approves a repayment plan that determines which creditors get paid back and when.
Under that arrangement, she will have up to five years to pay missed mortgage payments, essentially forcing the lender into a repayment plan and forcing a time frame that most lenders would not otherwise accept.
But while trying to make good on past debt, Lauren must keep up with her regular mortgage payments and other living expenses. Can Lauren afford these increased mortgage payments?
From bad to worse, Lauren’s home probably is not worth what she paid for it…she probably owes more than it is worth. Should she continue making payments on a house she cannot afford?
These are the kind of painful decisions Lauren will need to make.
A Chapter 7 bankruptcy is total liquidation. Whereas, a chapter 13 bankruptcy is commonly referred to as a ‘wage-earner’s” bankruptcy with a repayment plan. During a Chapter 13, a person is able to reorganize their debts rather than eliminate them entirely.
Obviously, you’ll want to direct your questions about bankruptcy to an attorney specializing in bankruptcy. Most of these attorneys offer free 30-minute consultations.
Common Questions:
1. How much do I have to repay if I qualify for an Chapter 13? The trustee assigned to your case takes your current income and monthly debt and uses a formula to calculate what’s left at the end of the month. Unless you have student loans, tax liens or unpaid child support (which you’ll pay in full), your unpaid creditors might divide a couple hundred dollars a month. That’s it. With a Chapter 13, your repayment period either is 3 or 5 years. That’s it.
2. Will bill collectors take my possessions? What you (have to) give up depends on the state in which you live, according to bankruptcy attorneys. In Florida, if you own your home and you’re not behind in payments your home can be kept out of a bankruptcy. So can your furnishings and your car, unless your furnishings include an expensive art collection.
3. What should I do after my BK is discharged? It’s strongly advised you get copies of all three credit reports for each person (you and your spouse, for instance) declaring bankruptcy to confirm accuracy. It’s not uncommon for accounts included in BK not to appear as included in BK.
4. How do I re-build my credit after my bankruptcy is discharged? Whatever debt you did not include in a bankruptcy needs to be kept current & paid on time. You also want to follow our suggestions about secured loans and cards inside our members-only area. We also offer “piggy-backing” suggestions for your consideration.
How it works:
When you file Chapter 13, you:
1. Repay a portion of your debts through a payment plan.
2. Give the money to a bankruptcy trustee appointed by the court, and the trustee pays the money to your creditors. This lasts typically 3-5 years.
The chapter 13 bankruptcy is not discharged until all payments have been made. Therefore, while in bankruptcy you are prohibited from getting any new loans, credit cards, or any other sort of financing.
Also, a vast majority of people who file Chapter 13 never complete their repayment plans, which causes the bankruptcy to be discharged (thrown out of court).
Unlike Chapter 7, filing a Chapter 13 can stall a foreclosure, repossession, and help take care of back taxes. If you have assets, such as a house or vehicle, that you wish to keep, Chapter 13 bankruptcy is more feasible than Chapter 7 bankruptcy.
In order to file a Chapter 13 bankruptcy, you must:
1. Have a stable, regular income with some type of disposable income.
2. be able to prove your ability to stick with your court-appointed repayment plan; otherwise, the Chapter 13 bankruptcy will not be approved.
After the bankruptcy has been filed, it can stay on your credit for up to 10 years, making it more difficult to apply for a mortgage, vehicle loan, or credit card. Your ability to obtain credit will improve as time passes.
Before I sign off, know this: about 1 1/2 years ago, friends confided in me they needed “out of debt bearing down on them.” They determined bankruptcy was the solution. They had planned to reaffirm a couple debts (they were 100% certain they could handle those). I recommended a plan to help them re-establish credit as quickly as possible. They followed my roadmap. Recently (about 1 1/2 after discharging a BK) they just bought their dream home with 720 (ish) credit scores. Great house. Great interest rate. Great news, huh? You see, it’s not the end of the world. Good people overcome bad experiences.
Bankruptcy creditors are NOT the worst challenge we can face in life.
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