Foreclosure

October 5, 2010

Banks stop foreclosures in 23 states

Foreclosures will slow down throughout Country with recent developments but not so fast for California homeowners.

While news of foreclosures slowing down based on banks and lawyers questionable methods is great news it won’t be helping Califonia homeowners as much as other states. California has non-judicial foreclosure which means that within a deed of trust there is typically a power of sale cause. After a notice of default, the owner of the property(bank) will typically sell the property at a trustee notice of sale which gives the borrower 21 days. At a trustee sale, the lender will typically bid the amount that is due plus costs if there is not a bidder. The borrower has no right of redemption and deficiency judgments maybe purused in non-judicial foreclosure. That essentially means that the lender can sue you for their loss on the property and you could get a 1099C for their loss which can sometimes have the effect of making you accountable for their loss as income for tax purposes in the following year.

The issue the banks are facing on judicial foreclosures are that people are signing afffadavits about documents that they are not familiar with and have not reviewed. The affadavits say certain facts about the case including what is owed which signer says he has personal knowledge of. They are doing this to the tune of 10,000 affadavits a month which they could clearly not have personally reviewed in order to get a summary judgment and avoid going to trial which is more expensive. They tried to streamline the machine of foreclosures and in the midst they perverted the justice system. The banks in their carelessness have shown. Foreclosure attorneys have been questioning the standing of MERS(mortgage Electronic recording system) for years and have had some success so this ruling by judges who have timely questioned banks foreclosure processes which will help homeowners. As a bankruptcy attorney it will likely not allow me to delay filing petitions so I can keep home owners in their homes longer because the trustee sales will go an as usual since lenders almost always foreclose outside of the judicial system. Many people who live in their homes for free while the bank drudges through the foreclosure process are able to put their financial houses back in order. For states with judicial foreclosure this will be a relief for homeowners who try to rebuild their savings and move on with their lives after falling off a cliff with the loss in equity that their homes went through.

August 17, 2010

Should I continue to pay on an underwater house or walk away and file bankruptcy

by Christopher Hewitt

Everyday I have clients that wonder whether they should continue to make payments on a home that has lost so much value. I think you need to consider whether you are in an interest only loan and the payments will reset to something that is not affordable. The other consideration I take into account are what the prices for a rental would be and if its similar then potentially staying in your home is a better bet depending on how far behind on your mortgage or upside down you are and therefore the length of time it will take to build equity. As a bankruptcy attorney I believe it is imperative to go over all options with a client and let them make a informed decision.

July 21, 2010

Foreclosure comes with tax consequences that bankruptcy can eliminate

by Christopher Hewitt

Don’t allow a bank to foreclose on your home without first talking to a bankruptcy attorney. Foreclosure can come with huge tax consequences that could be eliminated in bankruptcy. When a mortgage is written off you can potentially get a deficiency judgment but there is also a likelihood of receiving a 1099 at the end of the year. If you are allowing a home to go into foreclosure you are probably not in a position to pay income taxes on the amount that the bank did not collect on your mortgage due to the foreclosure. The amount that the bank lost is treated as income to you and paid at your normal tax rate. This can easily double or triple your tax liability in the following year. If you surrender your house in bankruptcy there will be no tax liability.

July 20, 2010

Failed loan modifications can be fixed in a chapter 13 bankruptcy

by Christopher Hewitt

As a riverside bankruptcy attorney I have been getting more frequent calls from people who have been trying to work with their lender in getting a loan modification. In order to qualify for a loan modification lenders often tell home owners that they cannot be caught up with their payments. Many homeowners have fallen behind on payments in hopes of getting a loan modification which often don’t ever come to realization. Banks are notorious for stalling on these loan modifications, losing paperwork, having you constantly send in new pay stubs and other qualifiers when it seams like there only motive is to drag this housing crisis out. Inevitably the day comes where the lender lets the client know that there is a notice of foreclosure pending and potentially a trustee sale. Fortunately there is a solution.

Chapter 13 Bankruptcy allows people to put their late payments(arrearages) into a chapter 13 plan and pay off their late payments over a 3 to 5 year period. The filing of a chapter 13 bankruptcy will stop the foreclosure process immediately and give you time to take the full amount that you are behind on your mortgage and pay it back over either 36 or 60 payments depending if you are above or below the median income for your household size. You can also pay pennies on the dollar to your unsecured creditors and discharging all those debts once your plan is complete. In order to qualify for a chapter 13 bankruptcy you will have to have enough disposable income to pay off your arrearages over the payment plan period. This usually means having a current income that pays your average expenses and leaves you with enough money to fund the plan. Don’t let a failed loan modification lead you to believe that you can’t keep your house. Often times bankruptcy is a much better option and you can realize a greater benefit. You can even get rid of a second or third mortgage in bankruptcy if your house is worth less than you owe on the first. Talk to an experience riverside county bankruptcy attorney and know your options before you allow the bank to take your home.