What Outcomes Does Individual Bankruptcy Have

Whenever a person files for bankruptcy the results on their financial status is quite apparent but likely the hardest effects are related to their ego. Few people will charge on a credit card or obtain loans with the goal of not paying them back.

Generally something happens in their life, such as sudden medical expenses or the loss of their job that finds them unable to meet their obligations. A number of the effects of filing for bankruptcy are almost immediate while others might be longer lasting.

A lot of the debt tackled in bankruptcy is unsecured, just like credit card debt or medical debt. If the man or women is filing Chapter 7 bankruptcy, once the court approves the bankruptcy, these will simply go away for good. Nonetheless, if there are secured debts, such as an auto loan or a house loan, it is possible the car will be taken back and a foreclosure will be filed against the home.

In case you file for Chapter 13, you cannot choose which bad debts are included and which aren't. All debts, secured and unsecured are listed and the complete amount of debt will be the amount on which your monthly payments are based. Nonetheless, if you fail to make the essential payments the bankruptcy court trustee allotted to oversee your case, will advise your creditors and your case can be terminated. If that happens you can attempt to file for Chapter 7 bankruptcy and hope to have it okayed by the court.

Most often, the first effect you'll see is the fact your creditors stop calling you, provided you gave them the name of your bankruptcy lawyer, but they will also stop permitting you to use your credit cards. If your individual bankruptcy also incorporates medical bills your doctor or hospital may refer you to another health care professional and refuse to take you as a patient.

Repairing Your Credit after an Oregon Personal Bankruptcy

While bankruptcy can be helpful for many people, it is critical to know the positives and negatives before you declare bankruptcy. Virtually all Oregon bankruptcy legal professionals can explain what exactly you will need to do, what the legal requirements are for filing bankruptcy, and whether you qualify for Chapter 7 or Chapter 13 bankruptcy.

The most popular is Chapter 7, in which all of your debts are eradicated. With a Chapter 13 bankruptcy you will be entered into a program that allows you to pay off your debts in a period of up to five years. When you finally speak to a bankruptcy lawyer you can then take the steps to file for the one that meets your requirements.

Following bankruptcy you might have to go through some challenging times, but your overall money picture could possibly be better than before. Since newly released changes in federal bankruptcy laws require you to undergo financial counseling, you might be better able to budget your money and with that new-found discernment you can start to regain your credit after an Oregon personal bankruptcy.

There are a lot of lenders that see the word bankruptcy and at once turn their backs but there are a lot of more that understand that you have basically hit the reset button on your finances and are starting all over again. Actually, some like the thought that you have no debt and the lack of ability to file again for personal bankruptcy for at least seven years.

Numerous credit card providers may be happy to give you a chance to regain your credit starting you off with high-interest credit cards with a low limit of $200 or $300. However, before you apply it’s essential to remember that after you go to court for bankruptcy it will not be finalized for at the least six months.

How Filing for Bankruptcy Impacts Your Future

Filing for bankruptcy of course can wreck your finances for a while but it can be difficult for your ego. Very few people will charge on a credit card or acquire loans with the intention of not paying them back. Typically something happens in their life, such as unexpected medical expenses or the loss of their job that finds them not able to meet their commitments. A few of the effects of declaring bankruptcy are almost immediate while others can be longer lasting.

Most of the debt tackled in bankruptcy is unsecured, just like credit card debt or medical debt. If the man or women is filing Chapter 7 bankruptcy, after the court approves the bankruptcy, these will just disappear. However, if there are secured debts, such as an auto loan or a mortgage, it is possible the car will be reclaimed and a foreclosure will be filed up against the home.

If you file for Chapter 13, you cannot choose which bad debts are included and which aren't. All debts, secured and unsecured are listed and the total amount of debt will be the amount on which your monthly payments are based. If you neglect to meet your agreed upon payments, your court trustee will tell your creditors and the case will be terminated. If that happens you can try to file Chapter 7 bankruptcy and hope to have it permitted by the court.

Regularly, the first effect you will see is the fact your creditors stop calling you, provided you gave them the name of your bankruptcy attorney, but they will also stop permitting you to use your credit cards. If your personal bankruptcy also incorporates medical bills your doctor or hospital may refer you to an alternative health care professional and refuse to take you as a patient.

The Way To Choose A Bankruptcy Lawyer or Attorney

If you feel you have virtually no other alternative than to file for bankruptcy, you will need to begin the process right away. If you really feel it's in your best interest to start a bankruptcy petition, you'll be in need of an attorney who can help you through all of the confusing inter-workings of the bankruptcy progression. By working with your attorney, you can feel far more confident and secure with a generally very scary process.

When selecting your bankruptcy lawyer, it's essential to find one you are relaxed with. You will be required to talk a bunch about your life and your prior experiences with your legal representative, so it's essential you can do it without holding back.

If you would like to get the most support from your attorney at law as possible, you'll need to totally disclose your fiscal predicament to them. It's also critical to pick a legal professional with experience in bankruptcy procedures. If you don't know anyone personally who deals with bankruptcy, ask your close friends or find online recommendations. Money may possibly be another crucial issue. Ask your attorney what their rates are in advance.

If you feel awkward with the costs, find another lawyer. After all, you don't want to pay a high price for an attorney when you're attempting to find a way out of debt to start with. If you have the ability to have a sincere communication connection with your bankruptcy law firm, the entire process will be significantly less stressful.

Bear in mind you are legally able to do your own bankruptcy paperwork. Nonetheless, you'll likely quickly find you are in way over your head. The process is lengthy, irritating and difficult to understand. Consequently, having a professional by your side to assist you on the way can be excellent. So, if you're even thinking of doing your own bankruptcy paperwork, make certain you're all set for a challenge.

Short Sales and Deeds in Lieu of Foreclosure in Oregon and Washington

Short Sales and Deeds in Lieu of Foreclosure

A short sale or deed in lieu may help avoid foreclosure or a deficiency.

Many homeowners facing foreclosure determine that they just can’t afford to stay in their home. If you plan to give up your home but want to avoid foreclosure (including the negative effects it will cause on your credit report), consider a short sale or a deed in lieu of foreclosure. These options allow you to sell or walk away from your home without incurring liability for a “deficiency.”

To learn about deficiencies, how short sales and deeds in lieu can help, and the advantages and disadvantages of each, read on.

Short Sale

In many states, lenders can sue homeowners even after the house is foreclosed on or sold, to recover for any remaining deficiency. A deficiency occurs when the amount you owe on the home loan is more than the proceeds from the sale (or auction) -- the difference between these two amounts is the amount of the deficiency.

In a “short sale” you get permission from the lender to sell your house for an amount that will not cover your loan (the sale price falls “short” of the amount you owe the lender). A short sale is beneficial if you live in a state that allows lenders to sue for a deficiency -- but only if you get your lender to agree (in writing) to let you off the hook.

If you live in a state that doesn’t allow a lender to sue you for a deficiency, you don’t need to arrange for a short sale. If the sale proceeds fall short of your loan, the lender can’t do anything about it.

How will a short sale help? The main benefit of a short sale is that you get out from under your mortgage without liability for the deficiency. You also avoid having a foreclosure or a bankruptcy on your credit record. The general thinking is that your credit won’t suffer as much as it would were you to let the foreclosure proceed or file for bankruptcy.

What are the drawbacks? You’ve got to have a bona fide offer from a buyer before you can find out whether or not the lender will go along with it. In a market where sales are hard to come by, this can be frustrating because you won’t know in advance what the lender is willing to settle for.

What if you have more than one loan? If you have a second or third mortgage (or home equity loan or line of credit), those lenders must also agree to the short sale. Unfortunately, this is often impossible since those lenders won’t stand to gain anything from the short sale.

Beware of tax consequences. A short sale may generate an unwelcome surprise: Taxable income based on the amount the sale proceeds are short of what you owe (again, called the “deficiency”). The IRS treats forgiven debt as taxable income, subject to regular income tax. The good news is that there are some exceptions for the years 2007 to 2009. To learn more, see “Income Tax Liability in Short Sales and Deeds in Lieu,” below.

Deed in Lieu of Foreclosure

With a deed in lieu of foreclosure, you give your home to the lender (the “deed”) in exchange for the lender canceling the loan. The lender promises not to initiate foreclosure proceedings, and to terminate any existing foreclosure proceedings. Be sure that the lender agrees, in writing, to forgive any deficiency (the amount of the loan that isn’t covered by the sale proceeds) that remains after the house is sold.

Before the lender will accept a deed in lieu of foreclosure, it will probably require you to put your home on the market for a period of time (three months is typical). Banks would rather have you sell the house than have to sell it themselves.

Benefits to a deed in lieu. Many believe that a deed in lieu of foreclosure looks better on your credit report than does a foreclosure or bankruptcy. In addition, unlike in the short sale situation, you do not necessarily have to take responsibility for selling your house (you may end up simply handing over title and then letting the lender sell the house).

Disadvantages to a deed in lieu. There are several downfalls to a deed in lieu. As with short sales, you probably cannot get a deed in lieu if you have second or third mortgages, home equity loans, or tax liens against your property.

In addition, getting a lender to accept a deed in lieu of foreclosure is difficult these days. Many lenders want cash, not real estate -- especially if they own hundreds of other foreclosed properties. On the other hand, the bank might think it better to accept a deed in lieu rather than incur foreclosure expenses.

Beware of tax consequences. As with short sales, a deed in lieu may generate unwelcome taxable income based on the amount of your “forgiven debt.”

Income Tax Liability in Short Sales and Deeds in Lieu

If your lender agrees to a short sale or to accept a deed in lieu, you might have to pay income tax on any resulting deficiency. In the case of a short sale, the deficiency would be in cash and in the case of a deed in lieu, in equity.

Here is the IRS’s theory on why you owe tax on the deficiency: When you first got the loan, you didn’t owe taxes on it because you were obligated to pay the loan back (it was not a “gift”). However, when you didn’t pay the loan back and the debt was forgiven, the amount that was forgiven became “income” on which you owe tax.

The IRS learns of the deficiency when the lender sends it an IRS Form 1099C, which reports the forgiven debt as income to you.

No tax liability for some loans secured by your primary home. In the past, homeowners using short sales or deeds in lieu were required to pay tax on the amount of the forgiven debt. However, the new Mortgage Forgiveness Debt Relief Act of 2007 (H.R. 3648) changes this for certain loans during the 2007, 2008, and 2009 tax years only.

The new law provides tax relief if your deficiency stems from the sale of your primary residence (the home that you live in). Here are the rules:

Loans for your primary residence. If the loan was secured by your primary residence and was used to buy or improve that house, you may generally exclude up to $2 million in forgiven debt. This means you don’t have to pay tax on the deficiency.

Loans on other real estate. If you default on a mortgage that’s secured by property that isn’t your primary residence (for example, a loan on your vacation home), you’ll owe tax on any deficiency.

Loans secured by but not used to improve primary residence. If you take out a loan, secured by your primary residence, but use it to take a vacation or send your child to college, you will owe tax on any deficiency.

The insolvency exception to tax liability. If you don’t qualify for an exception under the Mortgage Forgiveness Debt Relief Act, you might still qualify for tax relief. If you can prove you were legally insolvent at the time of the short sale, you won’t be liable for paying tax on the deficiency.

Legal insolvency occurs when your total debts are greater than the value of your total assets (your assets are the equity in your real estate and personal property). To use the insolvency exclusion, you’ll have to prove to the satisfaction of the IRS that your debts exceeded the value of your assets.

Bankruptcy to avoid tax liability. You can also get rid of this kind of tax liability by filing for Chapter 7 or Chapter 13 bankruptcy, if you file before escrow closes. Of course, if you are going to file for bankruptcy anyway, there isn’t much point in doing the short sale or deed in lieu of, because any benefit to your credit rating created by the short sale will be wiped out by the bankruptcy.