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First,
you need to realize that there are 2 types of Bankruptcy
1.
Chapter 13: Chapter 13 bankruptcy is a repayment plan that
will restructure your arrearage. More than 95% of all Ch. 13 bankruptcies
filed fail. When you file the Ch. 13, this will postpone your foreclosure
sale until the meeting of creditors also known as a 341 meeting.
This usually takes place 60-90 days after you file. Also, when you
file a Ch. 13, you are paying for 2 attorneys, your attorney to
file and another to take payments and disperse the money to the
creditors. At the meeting, you will have to face your creditors.
Many times this can be very intimidating. The bank will ask for
their money or for the judge to give them a relief of stay.
The relief of stay is asking for the foreclosure to continue. If
granted the attorney will re-start the foreclosure process over
with a set foreclosure sale date around 30-45 days later. IF you
do not have some money for reinstatement for the Mortgage Company
or bank, the judge will likely grant the relief of stay. As you
can see, bankruptcy will stop your sale, but it is only temporary.
Now, you have to deal with the foreclosure process all over again
plus now your credit is in worse shape than before because you now
have a filed bankruptcy that is showing up on your credit file.
2.
Chapter 7 – A Ch. 7 bankruptcy is when you request
complete debt relief. When you file a Ch.7, you are trying to receive
a discharge from all your debts that you list in your bankruptcy.
If you get a discharge, this will relieve you of all your debts
that are listed. Now, the bank can still get a relief of stay with
a Ch. 7 Bankruptcy. Even if you receive a discharge, the bank can
still take the home through foreclosure. When you get a discharge
this relieves you from the debt and the responsibilities of the
debt, however the Mortgage is attached to your house as a protection
for the bank and their interest. Therefore, the bank can foreclose
even if you have received a Ch. 7 discharge. Bankruptcy will destroy
your credit rating, therefore be careful when you speak with Bankruptcy
Attorneys, this may be the only option that they know of. In other
words, when you talk to someone that does bankruptcies they will
influence you to file bankruptcy, when you talk to a mortgage officer
or bank official, they will want to influence you to get a loan
because that is what bankers do, if you talk to an investor they
want to buy your house, because that is what investors do, SO be
careful and look out, find someone that does not have an agenda
that can give you strategic advice regarding your current situation.
The rate of people that declare bankruptcy for a second time is
as much as 50%.
In some instances,
bankruptcy may be a good choice, but all too often it causes more
stress and problems for the individual. So try to resolve without
the use of bankruptcy.
“I
am walking away, I am just letting the bank have it”
This phrase
has been all too popular as of late. Recently I have seen numerous
homeowners that are throwing their hands in the air and say, “I
am just going to let the bank have it”. My question is - why?
Do you know the effects of having a foreclosure on your record?
Did you know
the bank could still come after you for the
debt?
STOP
& Read this Next Section as I feel this is some of the Most
Important Information that You Can Know!!
The
Effects of a Bank Foreclosure
If the bank
forecloses, usually an investor tries to buy the home for a discount
once they take the home back. This is called a Bank REO (short for
Real Estate Owned) Investors constantly are looking for bank owned
properties or REO’s because usually they will take a discount
just to get it off of their books. Now, if they bank takes a loss
on the property – Guess what? – They are going to come
looking for you to pay the remainder. “How do they do that?”
You are asking. They hand the file over to an attorney to file a
lawsuit resulting in a deficiency judgment, which could attach to
any piece of property you may own, result in garnishment of wages,
or a sheriff sale on personal property. They also can forgive the
amount that you owe and give you a 1099 for the balance of their
loss, which means you would be forced to pay tax on the amount that
was lost on your property. Once I saw a
gentleman get a 1099 from a Nationally well known bank in the
amount of $67,000.
Do
Not Let This Happen to You
Right now, action will overcome the anxiety that you may be feeling
so create an action plan and write out all of your goals and plans
that you want to accomplish from this unfortunate situation.
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