Consumer Bankruptcy and Foreclosure

As popular as bankruptcy is today, it's nothing new, going at least all the way back to the Bible's Book of Deuteronomy, which simply states: "At the end of every seven years you must cancel debts." If only it were that divinely simple.

All these centuries later, a bankruptcy filing still offers forgiveness for many debts, or at least provides a payment plan to make them more affordable. But rules and regulations can rain down on an applicant like a plague of frogs.

Bankruptcy can be a highly effective tool for getting back on your financial feet. But it's a serious step with long-range consequences, and financial advisers generally say it should be considered only as a last resort. Used unwisely, it can do more harm than good.

Keep in mind another, more sobering quote from Deuteronomy: "There will always be poor people in the land."

Several types of bankruptcy are available, but most consumers file under Chapter 7 or Chapter 13.

These two bankruptcy flavors are markedly different in how they work and in their outcomes.

Generally speaking, Chapter 7 is for people so mired in debt that there's little chance they'll ever be able to pay what they owe. If the filing comes to a successful conclusion, many of the most crippling debts - including those owed to credit card companies - could be erased and a fresh start begins.

However, that fresh start might be without car, home and other key possessions. Although much is protected in a Chapter 7 bankruptcy, the court trustee who oversees a filing has the right to seize some belongings and turn them into cash for creditors.

A Chapter 13 filing, sometimes called a wage-earner bankruptcy, is more complex. It's for people who can pay what they owe - or at least some of it - but need extra time to make good on the debts.

One of the main reasons to use a Chapter 13 filing is that it can stop a foreclosure. This type of bankruptcy demands not only a steady income but also the discipline to stick with a court-approved payment plan for several years. Only about a third of Chapter 13 filings are seen through to completion.

No matter which type of bankruptcy is filed, there's one common key to a successful outcome. Just as your mother taught you: Honesty is the best policy, and not just for moral reasons. The people that work in this field are very good at detecting an avoidance of the truth.

If you're caught fudging the numbers or trying to hide property, a bankruptcy can be canceled, possibly leaving you in worse financial shape than when you filed. There's a much better chance of being caught at this than being caught cheating on your taxes.

Foreclosure help for Miami-Dade families

Miami, Florida, like many other US cities, is suffering from a drastic rise in home foreclosures. According to foreclosure filing statistics from the Miami-Dade County Clerk of Courts , county foreclosures in 2009 are up 62% since last year.

Besides Help for Homeowners Program and Homeowner Affordability and Stability Plan offered by the Federal Government, the City of Miami's Department of Community Development Foreclosure Program is assisting eligible, low income homeowners that are facing foreclosure within the city limits

The program will supply qualified applicants with $7,500 to assist homeowners pay for late fees and delinquent payments associated with their home mortgages.

The program is only available to property owners that posses one property and, if eligible, are receiving foreclosure prevention counseling from a HUD-certified counseling agency. There are six other qualifiers home owners must meet to be eligible for this program. To view the complete list of requirements visit the City of Miami website .

Applications are currently available at the Department of Community Development, 444 SW 2nd Ave., Second Floor, Miami, FL 33130 and on the web for downloading at:

www.miamigov.com/communitydevelopment

Applications will be accepted at the Department of Community Development. Assistance will be provided on a first-come, first-ready, first-served basis. For additional information on the program, please call 305-416-2016 or 311.

Foreclosures Predicted to Soar in California

California is about to get hit by another foreclosure wave.

Pre-foreclosure notices in the state jumped by 80% in the first quarter of 2009 from the previous quarter, according to a new report from DataQuick Information Systems of San Diego, a sign that foreclosures in California will rise sharply in the coming months.

Foreclosure moratoria and a state law that slowed down foreclosures had artificially depressed new foreclosure filings at the beginning of the year. The newest data shows how those foreclosures are wending through the system as lenders play “catch-up.”

Some 135,000 default notices were sent out in the first three months of the year, an 80% increase from the fourth quarter of 2008 and a 19% increase from the previous year period. That’s higher than any quarter DataQuick has measured since its tally began in 1992.

The DataQuick report also found that foreclosure activity was spreading out from the state’s most affordable (and batteredOK?) inland regions, reaching areas that have been less affected to date. Those affordable housing markets, which have 25% of the state’s housing stock, accounted for 47.5% of all default activity during the quarter, down from 52% last year. Notices of default jumped by 40%, for example, in San Luis Obispo County on the central California coast. Defaults were up by 38% in Los Angeles County and by 35% in San Francisco.

Mortgages made in 2006 were the most likely to trigger a default notice, and those loans had a 8.5% default rate. Loans made in 2005 had a 4.9% default rate, while those made in 2004 had a default rate of less than 1%.

Texans could get more time for homes in foreclosures

Texans who fall behind on their mortgage payments would get more time to try to save their homes under legislation approved by the Texas Senate.

Under current law, Texas homeowners have just 20 days to cure a loan default before lenders foreclose on them. It is one of the shortest foreclosure notice periods in country.

The bill approved Friday, a top priority of Attorney General Greg Abbott, would extend that period to 45 days. The bill passed unanimously and now moves to the state House.

Foreclosure Bailout Information

The government's foreclosure bailout program, unveiled on Wednesday, February 18th, doesn't start until March Fourth. At that time it's up to the homeowner to contact their lender. And that's when lenders start taking applications for loan modifications.

In the meantime, gather the paper work like you would with any refinancing and do what housing counselors are doing ... learn all you can about the program.

The government program is meant to stop home values in the Tri-State and nationwide from falling. The help is for people behind on their payments and even those who aren't behind but are at risk of that happening.

An offer of an interest rate reduction or even principal reduction could be the catalyst behind making things "better". It could help many two income families that are now one income due to job loss.

In general you qualify if your mortgage payment is greater than 31 percent of your gross monthly income. It's voluntary on the part of lenders but the program also allows for bankruptcy judges to modify mortgage terms and that may be motivation.

This program isn't for homeowners already in foreclosure, "It's likely that if you're already in foreclosure this may have a spillover effect to improve the modifications we can get."

Housing counselors understand the frustration of homeowners who aren't in need of mortgage help and see tax money used on others but point out if your neighbor's home is in foreclosure your home value drops by thousands.

"The government today said $6000, but studies in Hamilton and Clermont say it's $10,000."

This isn't for people who just want a better interest rate. But if you do qualify for the program and haven't been late on your payments, I've been told loan modification should not impact your credit rating.

Finally, if this program might be for you consider having a housing counselor walk you through it. Call 211 for a referral.

Contact Your Lender Immediately

Many people avoid calling lenders about money troubles because we:

1) Feel embarrassed discussing money problems with others.

2) Believe that if lenders know we are in trouble, they will automatically rush to a collection agency or foreclosure (seize property for failure to pay a mortgage debt).


But lenders want to help borrowers keep their homes because:

1) Foreclosure is expensive for lenders, mortgage insurers and investors.

2) HUD and private mortgage insurance companies and investors like Freddie Mac and Fannie Mae require lenders to work aggressively to help borrowers facing money problems.


Lenders have workout options (choices) to help you and:

1) These options work best when your loan is only one or two payments behind.

2) The farther behind you are on your payments, the fewer options are available .


Don't assume that your problems will quickly correct themselves:

Don't lose valuable time being overly optimistic.

Contact your mortgage lender to discuss your circumstances as soon as you realize that you're unable to make your payments.

Look forward to your lender being willing to explore many possible solutions, without guaranteeing any one particular solution.


Finding Your Lender

Check the following sources to contact your lender:

Your monthly mortgage billing statement

Your payment coupon book

Information to have ready when you call:

Your loan account number

A brief explanation of your circumstances

Recent income documents:

+ Pay stubs

+ Benefit statements from Social Security, disability, unemployment, retirement, or public assistance

+Tax returns or a year-to-date profit and loss statement, if self-employed

+A list of household expenses

Expect to have more than one phone conversation with your lender. Typically, your lender will mail you a "loan workout" package. This package contains information, forms and instructions. If you want to be considered for assistance you must complete the forms fully and truthfully and return them to your lender quickly. Your lender will review the complete package before talking about a solution with you.