Peter Francis Geraci A Bankruptcy Blog - Chapter 7 & 13

A man came into Peter Francis Geraci’s Crystal Lake office and met with bankruptcy attorney Jason Nielson. Like so many people, he was laid off from work and fell behind on his mortgage payments. He applied for a loan modification through his mortgage company. He was denied a lower mortgage payment and help from his financer.

 

The client returned to work and could afford the house but not the arrears. His house was to be sold at a sheriff sale the following day. His mortgage company refused help so he called Peter Francis Geraci.

 

Illinois bankruptcy attorney Nielson met with the client drafted his paperwork and filed a Chapter 13 bankruptcy petition the same day. If you have a sheriff sale or are in foreclosure, Peter Francis Geraci attorneys can help you save your home. 

 

Are foreclosure rates dropping?  Yes. What does that mean for you?  Nothing.  If you are behind, you are behind.

 

The Mortgage Bankers Association reports 6.3 million mortgages over 30 days past due.  If you are waiting for loan modification, keep dreaming.  Peter Francis Geraci of Geraci Law LLC says:  “Our clients are doing something about past due mortgages.  They are filing Chapter 13 repayment plans and working on their modification during the Chapter 13.  That lets you control your debt, and gives you added leverage with the mortgage company.  It is a little known secret that if you file Chapter 7 or 13, banks will work with you just as before, and your chances of success may be better.

 

The longer you wait to be proactive on your home, the further you get behind. In a Chapter 13, you are able to spread the back payments into a 3-5 year repayment plan. The farther you are behind, the higher the payment is going to be. Be ahead of the curve and call  Peter Francis Geraci Law in Illinois Indiana and Wisconsin for a Chapter 13 Debt Repayment Plan to stop foreclosure, and get your mortgage current, for as little as $274 to file in as little as one day.

 

There is a moment when you realize you cannot afford your home anymore. It may happen when you lose your job or hours are cut. Or when you check your savings account and there is nothing left over. When you come to the realization, it is important to understand your options.  So begins the what to do with my house guide…

 

Loan Modification

 

The original purpose of loan modifications was to help an estimated 3 to 4 million homeowners save their homes.  According to a report done by the Office of the Special Inspector General for the Trouble Asset Relief Program (SIGTARP), only 168,708 permanent loan modifications have been approved.  This is a year after the program!

 

Loan modifications can take months. If you have lost your job and your only income is unemployment, a loan modification will not work. You can call your mortgage company about working with you while you’re unemployed. But understand, unemployment does not count as income. Unemployment can run out (in approximately 2 years) or change. It is not a long term solution for your or your mortgage financer.

 

Bankruptcy will not modify your loan.  But if you have other debt, you can file a Chapter 7 to eliminate the other bills and free up money to pay your mortgage. If your mortgage payment is $850 and you pay $600 per month in minimums – a solution is discharge credit card debt and use $600 to pay your mortgage!  Eliminating the debt-income ratio issue could also help you with a loan modification application in the future.

 

There is no harm in applying for a loan modification. You could be one of the few who is accepted. It is crucial to understand loan modifications are NOT guaranteed. It is up to your mortgage company to modify your loan. A bankruptcy discharge is!

 

Short Sale

 

A short sale is an agreement with your mortgage company to sell your home at less than what is owed.  Short sales like loan modifications are long, tedious and strenuous processes. More often than not, the short sale falls through and you still go into foreclosure.  

 

It is not as simple as the ads and the flyers you receive from realtors.  Understand you are asking the bank to take a loss on their investment. Before the bank agrees, you will need to provide bank statements, tax returns and other financial documents. Your financer wants to make sure you have no other means to pay your mortgage.

 

A short sale can still destroy your credit report. A deficiency meaning the difference of what you owe and how much the home is sold for. If the deficiency is reported to the credit bureau, it would show as a settled debt.  This is still negative! Not to mention, you could receive a 1099-C during tax season. You would pay tax on the deficiency.

 

If your credit is going to plummet anyway, why leave your home early? An average foreclosure takes 20 months – why not stay RENT FREE at your home? Let the property go through foreclosure, if there is a deficiency call Geraci for a bankruptcy. Mortgage deficiencies are dischargeable debt!

The housing bubble is going to burst – again. The big difference is the housing bubble is a foreclosure bubble. With the foreclosure rate slowing and the unemployment rate (in many states) rising, the burst is bound to happen soon.

 

Foreclosure rates could be slowing for numerous reasons. The biggest reason probably is the scrutiny of mortgage companies’ foreclosure process.  A person used to lose their home after being delinquent for 6-8 months. Now, it could take up to a year (s) for a homeowner to actually be evicted.  Mortgage companies are required to provide HAMP options and in some counties, mortgage counseling services before a foreclosure judgment can be entered. In some cases, a homeowner could be behind 9 months before being contacted by a foreclosure attorney.

 

The decrease in the amount of foreclosures filed does not mean there are fewer homes in trouble – it means there are more delays by banks to actually take homes. A loan modification application can delay a foreclosure for months (in some cases years). A mortgage company cannot foreclosure on a property without offering a HAMP modification opportunity and the backlog of applications and homeowners with arrears could delay even the most efficient of foreclosure attorneys.

 

This is seemingly good news for struggling homeowners who can stay in their homes until they return to work (and file a Chapter 13 to get caught up on the arrears) or find a new living space. But at some point, the foreclosure bubble will burst and many will find themselves with an expedited foreclosure and a pending sale date.  This happens often after a loan modification is denied. After months of faxing, e-mailing, and mailing the same documents to a mortgage company, a homeowner could find a summons for foreclosure on their front door.

 

It is easy to ignore the collection letters and the notices – even when the notice is being handed to you by a process server. Since foreclosure generally takes over a year, a person can gather a hefty amount of mail from mortgage companies and attorneys. I have heard people say, “My mortgage company told me if I want a modification I should not make my mortgage payment.” The answer is your mortgage company is suing you because you are going into foreclosure! A loan modification can be denied and the default amount, late fees, court costs, and interest can add up to a substantial amount. At this point, your mortgage company is probably done working with you. Often, your mortgage servicer will demand the entire amount to stop the foreclosure proceedings.

 

Checking and actually reading your mail is important – especially if you want to save the house. Once the foreclosure attorneys get their ducks in a row, the number of foreclosures will start to match the increasing number of people with defaulted mortgage payments (in Chicago, the number of defaulted mortgages increased from last year, while the number of filed foreclosures decreased 20 percent).

 

Once the foreclosure attorneys work out the backlog, I predict there will be a storm of foreclosure filings and sheriff sale dates. You are able to stop a foreclosure sale by filing a Chapter 13 bankruptcy before the home is auctioned off. If your home is already sold, your Chapter 13 bankruptcy option is gone. Do not wait until the last second – contact Geraci Law LLC. If you have waited until the last second, Geraci Law can file your case in as little as a day to save your home.

 

A new mayor took office in Chicago this week and has some ambitious plans to curb the effects of foreclosure. Mayor Rahm Emanuel in the 2011 transition report called for the mortgage providers to develop a strategy to prevent foreclosures. In the report, the new mayor demanded an inventory of abandoned buildings and to invigorate older foreclosure programs.

 

Current foreclosure prevention programs are available to Chicago residents including foreclosure counseling available through HUD-approved agencies. In 2010, the city sponsored “Fix Your Mortgage” events (using $1 million in stimulus funds) and helped over 2,200 homeowners with foreclosure. The report does not indicate whether the homeowners kept their homes or vacated the property.  According to the Department of Housing and Urban Development (HUD)’s Web site, the events help homeowners find out if they are eligible for a HAMP modification. 

 

The 2,200 homeowners pale in comparison to the 25,000 homeowners with a foreclosure filed in 2010. The success rate of the event is pretty comparable to the national success rate of loan modifications. Many people who apply do not qualify from the onset and despite submitting documents for a modification – a foreclosure is still inevitable.

 

So the success rate is pretty terrible in the Chicagoland area.  The national mortgage deficiency decreased last year and Chicago’s increased! According to the Chicago Tribune, approximately 7.75% of Chicago homeowners are at least 60 days behind on their mortgages – compared to the national average of 6.19%.  The city is helping a minimal percentage with counseling – but what if you are in foreclosure? What if you want to save your home? These questions do not seem to be answered by the counselors or a loan modification application nor the 22,800 other people faced with foreclosure last year.

 

A foreclosure crisis is not going to be curbed by housing counseling. Most people do not find themselves in foreclosure because they never had housing counseling – most people fall behind because of loss of income, high amounts of debt, or they were never able to afford the house to begin with. Counseling a person on the foreclosure process is not going to help them save their homes or retain homes years from now.

 

Bankruptcy is the way to do so. A chapter 13 is a repayment plan – through the federal court – allowing a person to catch up on mortgage arrears.  Depending on your individual situation and value of your home, a chapter 13 could eliminate your second mortgage. How’s that for a modification? You could pay back a small percentage of what you owe to unsecured creditors (i.e. credit cards, medical bills, etc.) and eliminate your second mortgage. If you can afford your home, Geraci Law, LLC can help you save your home.

 

If you cannot afford your home, if you could never afford your home – counseling is not going to help. You are able to apply for a loan modification; however the major mortgage servicers do not consider unemployment to be income.  Often, an unemployed person will apply for a modification only to endure years of “we lost your documents” or “it’s been transferred to someone for review.” If you are receiving unemployment with few job prospects, the probability of you qualifying for a loan modification is almost nonexistent. 

 

Again, a bankruptcy could help you. A chapter 7 bankruptcy would eliminate all of your other debt including medical and credit card debt and protect you against a mortgage deficiency (if one were entered).

 

Good luck to our new mayor. He was elected to a difficult position in a city where mortgages are falling further and further behind. Mayor Emanuel governs an entire city – as an individual you need to look at what is best for you. If you want to save your home, contact Geraci Law, LLC to find out your best option to get out of debt.

Earlier this week, there was an article on MSNBC’s Web site addressing how bankruptcy can save your home.  This is a national news service advertising the numerous benefits of a bankruptcy.  In the article, journalist John W. Schoen said, “Bankruptcy laws, after all, were established to provide an orderly process for people in financial trouble to reorganize their debts, start fresh and rebuild their lives.”

 

Schoen’s article focused how a Chapter 13 bankruptcy can save homes from foreclosure. Homeowners who were out of work for a couple of months and are getting back with a steady income can save their homes. If you can afford your home, you can keep your home. Let me repeat, if you can afford your home, you can keep your home. File a Chapter 13 bankruptcy and stop the foreclosure proceedings. 

 

If you every tried contacting your mortgage company about a missed payment or modifying a loan, you are well aware that stopping a foreclosure without a Chapter 13 is nearly impossible.  Most mortgage companies will not accept payments once a foreclosure has been filed – even if you have money to pay on the arrears. A chapter 13 is your solution! Your mortgage company cannot proceed with a foreclosure if you have a filed Chapter 13 bankruptcy.

 

I am not a statistician but I think you can link the increase of bankruptcy filings and the decrease in foreclosures. For example, in Illinois in February, there were 109,178 bankruptcy filings. This number can be attributed to using tax refunds to pay for bankruptcy filings and other numerous causes for the jump from January. However, the number of foreclosures in Illinois also declined. According to RealtyTrac, there were 9,592 foreclosure filings. This number is 45% lower than February of last year.  So more bankruptcies were filed and fewer foreclosures were filed – coincidence? I think not.

 

It’s hard to argue the numbers are not related. The negative stigma of bankruptcy is being replaced by the benefits to struggling consumers. Articles like Schoen’s can replace the negativity around bankruptcy. The ongoing joke is if you walk into a party and say you filed for a bankruptcy, half of the room would say they filed also. Everyone needs a little help especially when it comes to your home. Just a reminder, if you can afford your home, you can keep your home – examine your Chapter 13 options.

To read the article click here

“I love romantic walks on the beach, bubble baths, and losing sleep over my $10,000 in credit card debt!” …not a likely response you’ll hear on The Dating Game, is it? According to a 2009 survey issued by Credit Card Statistics, people are more likely to discuss classically taboo topics like their weight and political views before they admit to how much they owe. Those recognized off-limits topics hold the same possible consequence as debt: rejection. So, why is it that Bachelor #1 would rather dish the saga of his man gut or his political crush before ever admitting that he – like most Americans – gets the occasional call from a bill collector?

For one, debt is hardly something to brag about. Even saying that you’re paying down a debt sets off the red flag that you owe at least one creditor money; do you think your date wants to stick around to find out how many more you owe? The fact alone that people are keeping this dirty little secret hidden under the rug indicates they’re not only ashamed of it, but they’re scared of it. And yes – debt is scary. It means constant harassment from creditors, lawsuits, garnishments, foreclosures…the future is long and grim when you’re buried with debt. Unlike weight and political association, which fluctuate by the day, debt either goes down at a snail’s pace or grows quietly and ominously like a tumor. “So, can I call you later?” No, thank you.

Fortunately, there is a way to clear one’s debt faster than it took President Bush to leave office, and definitely more efficiently than a liquid-only diet. For those who qualify for a Chapter 7 bankruptcy, they can go from debt-stressing to debt-free in as little as four months. With a Chapter 13 bankruptcy, people start seeing their debt drop consistently every month – beat that, Biggest Loser! Before you know it, your debt will be the last of your problems and then the only numbers you’ll be paying attention to will be the ones on your phone, and not on your credit report.

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What is really surprising is that only 1 of 100 people who should file bankruptcy, actually do! Example: You get a foreclosure notice. Instead of filng Chapter 7 or Chapter 13, to get rid of credit cards and other debt, so you can afford your mortgage, you just keep on paying your credit cards, and worse yet, abandon your home. Another example: You get sued by a creditor for $3,000 money you owe, for an uninsured accident, or credit cards, or medical bills. Instead of taking care of it and either eliminating it in Chapter 7, or getting a low payment you can afford for all bills in Chapter 13, you do nothing, your drivers' license gets suspended, your checking account is subject to garnishment, and so are your wages. Both are sad. Creditors are so so happy when you do nothing.

Mortgage modifications are a fiction in many cases

Qualified borrowers must live in their homes and have loans that were issued between January 2005 and June 2007. Additionally, they must be spending at least 31% of their gross monthly income on mortgage debt to be eligible for the program.

They can be up to date on their existing mortgage or in default, but either way borrowers must prove that they will not be able to keep paying their existing mortgage - and attest that they are not deliberately defaulting just to obtain lower payments.

Before homeowners can get FHA-backed mortgages, they must first retire any other debt on the home, such as a home equity loan or line of credit. Borrowers are not permitted to take out another home equity loan for at least five years, unless it's to pay for necessary upkeep on the home.

To get a new home equity loan, borrowers will need approval from the FHA, and total debt cannot exceed 95% of the home's appraised value at the time.

Qualified homeowners facing foreclosure can apply for lower fixed-rate, 30-year mortgages backed by loan guarantees from the Federal Housing Administration. The original lenders would have to agree to take a loss on their loans.

They also is availble about $15 billion in housing tax breaks, including a credit of up to $7,500 for first-time homebuyers who bought homes between April 9, 2008, and July 1, 2009.