Tuesday, September 28, 2010

How can a Deed in Lieu of Foreclosure Create Debt Relief?

A Deed in Lieu of Foreclosure is an option for some homeowners who have fallen behind on their mortgage payments. In essence, this option will cancel the loan on the home for the home buyer, as he or she will give the deed (ownership) of the home back to the lender. It's different from a foreclosure because it's a straight-up deal -- an effort to avoid foreclosure is beneficial to the consumer and the lender because they both get something out of it -- the consumer gives up his home to avoid foreclosure, the lender accepts the deal to avoid losing profits on a property.

In most instances a deed in lieu of foreclosure is easier on consumer credit history and has a distinguished advantage above short sale in that the homeowner is not the responsible party for finding a new home buyer.

While it may not be easy to just walk away from an investment, it may be easier to walk away than enter a short sale, which is very damaging to credit history, or accepting foreclosure, which is also harms credit substantially.

If you can successfully offer your lender a deed in lieu of foreclosure, you'll have to walk away from your property completely, but it will in many instances be your best choice. You may still have to file for bankruptcy in certain circumstances, for example, if the home was what you used to collateralize debt with another lender, or if you are still left behind on other payments on car loans or credits cards.

It might be up to you to prove to your lender that the deed in lieu of foreclosure is good for them too -- they're not in the habit these days of wanting to hang on to more real property, but by the same token, they're not big on paying for all of the paperwork and rigmarole of foreclosure either.

If you think this is a viable option for you, discuss it with your bankruptcy attorney first to be sure there are not other choices that won't work better for you.

Saturday, September 25, 2010

Should I Sue an Abusive Debt Collector?

Sometimes debt collectors get out of control with phone calls to your home or office, and even in some instances, calls to your relatives and other people who you live with or have lived with in the past.

There is a fine line between what consumers may consider abusive and what the law considers abusive. There is a time and there are certain circumstances that would make it appropriate to sue a collector, but you need to know exactly what circumstances these are so you don't waste valuable time.

First of all, you have to have documented proof that a collector has broken the law. For example, did they call you after 9PM? Did they call you repeatedly after 9PM? Was the person or people you interacted with from the collector rude or use harsh or profane language? If they did, and especially if they did so repeatedly and you can prove it, then suing a debt collector might be the right thing to do.

Unfortunately, if you just feel inconvenienced by debt collectors and feel it isn't fair that they are contacting you, you won't have grounds to sue. That said, if you can prove your case in court that a debt collector has harassed you or treated you in a manner outside of what is considered appropriate, you may be entitled to certain monetary losses, such as those associated with a psychologist, or money you paid out to change your phone number in an attempt to discontinue excessive or abusive collector phone calls.

Tuesday, September 21, 2010

Is Bankruptcy Harder on My Credit Score than Foreclosure?

This is a great question that many clients I have ask when considering filing for bankruptcy in Portland or Vancouver.

The truth of the matter is that it depends, but oftentimes, people fear bankruptcy because they think it will be the worst of "two evils." It can often be the case that bankruptcy is easier on your credit score than a foreclosure.

To be 100% truthful, whether you opt for bankruptcy or foreclosure, there will be a negative impact on your credit. That said, foreclosure does damage without providing any positive results, namely, helping to restore your credit as a Chapter 7 or Chapter 13 bankruptcy will. In addition, a foreclosure does not wipe debt you owe to creditors and typically has a longer lasting negative impact on your credit score. As if that weren't enough, having a foreclosure on a property on your credit history will make it a great deal harder for you to purchase a new home in the future.

When you file for bankruptcy it will start your credit history from the ground up and allow you (in most instances) to have a fresh start for your financial health. In some cases, people who file for bankruptcy can bounce back within 24 months or so, as they make a strong effort to stay on top of bills and apply for any credit lines they can -- ensuring, of course, that they make their payments on time, even if it's with a secured credit card.

Regardless of what the general "rules" are, you need to consult with a bankruptcy attorney to know whether bankruptcy is the right choice for your financial future.

Friday, September 17, 2010

Is a Short Sale Better Than a Foreclosure for My Bankruptcy?

This is a common question among those facing bankruptcy, especially bankruptcy brought on by falling behind on mortgage payments. So what's the right answer?

When dealing with the bank that you have to pay your mortgage to, if you opt for a short sale and they agree, this allows you to sell the house for a value lesser than what you initially paid. If the bank accepts this agreement with you, you will no longer be held responsible for any more mortgage payments on the home (as it is no longer yours as of the date it is sold to the new owner.)

This allows you some breathing room, and while you will no longer own the home, you will have the money that you would have had to use to pay the mortgage to pay for other outstanding bills and/or for rent elsewhere.

The disadvantage is that it's pretty much up to you to find a new buyer for the home, and the bank that you have the loan with will have to agree on the new price of the home. If you're not quite sure what the bank will go for in terms of the price of the home, it can be an uphill battle. That said, most banks will work with you to some degree because getting a mortgage of some kind from someone is better than having the home go into foreclosure, which leaves it up to them to price and sell themselves.

Make sure that you discuss all of your options with your bankruptcy attorney -- short sales are not always the best answer for every consumer, especially given the state that the home is located in. It's always best to know which option best suits you and your chances at a better financial future.

Monday, September 13, 2010

Behind on Student Loans :: What can Happen and What are Your Rights?

Are you behind on your student loans? There are a few things you need to know that could happen in this instance.

Of the major consequences, the IRS can actually step in and use any monies you may have received in a tax return toward the payment of your student loan. They are lawfully able to do this until your loans are paid off in full.

That said, you are free to argue the IRS in their effort to remove partial portions of your tax return, but you must have good reason to earn this right. A helpful resource for obtaining information on your rights is www.studentloanborrowassistance.org (the official website of the National Consumer Law Center.)

Another possibility when you fall behind on your student loans is that earnings from your paychecks can be garnished. A debtor of a student loan may lawfully garnish up to 15 percent of the wages you earn.

But again, you may fight a garnishment from a debtor. In most cases, the best option for those behind on their student loans is to discuss the issue with the debtor and work out some kind of deal to either obtain an extension or at the very least get the debtor to lower the amount that they are garnishing from your wages.

For help with dealing with student loans in the midst of a personal bankruptcy, contact the offices of Tom McAvity by dialing 503.860.6868 today.

Thursday, September 9, 2010

Bankruptcy Protection for American Servicemen and Women

It seems only fair that those who have defended our nation should have a little extra protection when it comes to debt relief. This is exactly what the Servicemembers' Civil Relief Act offers. The Act covers all active duty military service persons. So what's the reasoning? Part of the reason is that it was determined that American military personnel earn less than "normal" income they would earn if they were to be working civilian jobs.

One of the provisions of the Act is protection for service persons to have the ability to lawfully terminate leases from both residential and commercial spaces. In addition to this protection, servicemen and women are protected against most forms of foreclosure. This includes those service people who have been inactive for three months or less, and protects them against credit unions, lenders, banks, or individuals they may owe monies to. This measure is only available to those service people who had a mortgage before they became active service persons.

There are several other protections made available to military personnel. Your personal bankruptcy attorney can help you decide which of these is appropriate for you once they have an understanding of the whole scope of your bankruptcy filing.

But if you are an active service person of the US military in any capacity, let your bankruptcy attorney know so that you can get the best possible protection available to you.

Sunday, September 5, 2010

Bankruptcy and Retirement Plans

Many of Tom McAvity's clients have a special concern when it comes to their 401(k)s, IRAs, and other retirement funds. So how will bankruptcy take its toll on these financial accounts?

Thankfully with the change in bankruptcy law made by congress in 2005, most retirement funds are safe from creditors, but there are some caveats. While defined benefit plans, Keoghs, and 401(k)s (among others) have unlimited protection from creditors, other retirement funds such as ROTH and traditional IRAs do have limits. Specifically, there is only guaranteed protection on these types of IRAs up to $1,095,000 for each individual. Important note: This means that the combined value of these retirement funds will be added up, and of all of them, you will be protected up to $1,095,000. So to be clear, you're not exempt per account, it's a cumulative exemption on all accounts added up.

Many people considering bankruptcy want to know what will happen with loans they have taken from their retirement funds. To answer this question, you and your bankruptcy attorney will first have to determine which type of bankruptcy you will file. In chapter 7 bankruptcy, you will have to pay back the loans because chapter 7 bankruptcy protection does not cover what you owe to yourself, only what you owe to others. Conversely, when you file for chapter 13 bankruptcy, loans made from retirement funds can be discharged. In addition, you will make payments on what you owe to your creditors over five years (in most cases, sometimes three years depending on the bankruptcy.)

Wednesday, September 1, 2010

Out of Control Debt Collectors: What you need to know

Millions of Americans are suffering under the duress of debt with little relief until and unless they are in a position to file for bankruptcy.

In the meantime, debt collectors oftentimes go way out of bounds in an effort to collect what they perceive they are owed. There are rules about how collectors must behave, and here are a few things you need to know about what collectors are not allowed to do:

Collectors may not:

  • send you mail that appears to be official or legal documentation,
  • tell you that you may be imprisoned or otherwise detained because of your debt,
  • tell you they can come take your property to pay the debt,
  • call or otherwise get in touch with third parties (with the exception of your attorney, the initial creditor to which you owed, or the credit bureaus,
  • call you identifying themselves as an entity other than a collector,
  • call you all day long everyday,
  • tack on additional fees they call "interest" when in fact it is not,

And perhaps most importantly, they cannot call you ridiculously early or ridiculously late -- calls must be between the hours of 8AM and 9PM.

If during a call with a collector you are spoken to harshly, or the agent uses foul language or shouts at you, this is also against the law.

If you have experienced any of the above you may contact the Federal Trade Commission (FTC), at www.ftc.gov/ftc/complaint.htm -- and of course, let your bankruptcy attorney know if you have been a victim of collector harassment.