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Cash for Keys

Losing your home is never easy. No one thinks that one day, the home they’ve spent so much time and money trying to build, literally and figuratively, will have to be turned over due to often unforeseen and occasionally unfair reasons.  Millions of Americans experienced this during the 2008 financial crisis and now with Covid, the issue arises again.  The good news is, once you’ve dealt with the reality that your home will likely have to be turned over to the bank, you can look at options.  One of the best ones is called…cash for keys.  

When you’ve decided to walk away from a house you can no longer afford, don’t overlook the opportunity to be paid to move out.

Cash for keys started during the foreclosure crisis in 2008.  Banks that were often forced to foreclose were finding that the occupants of the house would often strip the house bare of anything of value.  We saw a house where even the kitchen cabinets and toilets had been taken out.  The banks who were foreclosing were having to take huge losses because of the amount of work prospective buyers were looking at having to do to get the house habitable again.  So…banks figured out a solution.  

The banks determined that it was advantageous to both them and the occupants to pay the former owners money to help them move and voluntarily surrender the house.  The former owner gets cash to help move and start over again and the bank gets the house on a schedule, with the property in good order.

Time = $$$

Typically, you see the banks are willing to give you more money the faster you get out.  Move out in two weeks and we’ll give you more than if you take two months.  

Why pay

All this said, why does the bank pay for quick possession?  That’s easy:  It costs less than having to get the former owner of the home tossed out by the authorities, it’s faster AND the money comes with strings.

Until the foreclosure actually goes through, you’re still the owner of the house and you have every right to live there.  You also have every right to take from the home you own whatever you want and sell it.  You could literally strip the toilets, cabinets, appliances, etc. out of the house and sell them to your neighbor (that happened). I actually encourage anyone who is thinking about walking away from their homes to to live there until the jig is up. When the banks actually do get ownership of the house, they often have to get a court order to get you out of the house.  

All of this takes time and time, as we well know, is money.  

More $$$ leads to better feelings

Better feelings leads to less damage to the property.  It’s faster, it’s cheaper and it usually leaves the house in much better condition for the bank to resell. In order to get the cash, the former owner will have to leave the house in good condition with all of the fixtures and agreed upon appliances in place.  

It also solves the problem that the former owner has…no cash.  It allows them to fund their move and it keeps the house in livable condition so the bank can make more money reselling the house.  

Let’s make a deal

If you’re facing foreclosure, don’t panic.  If you want to try to save your house, call us immediately.  Don’t wait until the day before the foreclosure to talk to a good bankruptcy lawyer.  It’s too late then.  

If you’re ready to walk away, still call us, you don’t want the bank to try to sue you for any arrearages or slap a massive tax debt on you after they get the house, sell it for nothing and “forgive” the rest of the loan (that can technically be considered income). 

If you want to save your house, we’ve got you covered. If you want to walk away, we have negotiated several cash for keys deals for our clients.  It may even be enough to pay off your bankruptcy, fund your move and leave some money in the pot for you.  

Either way, it’s a good idea to give us a call if you’re in a pickle.  We can help you settle the foreclosure issue once and for all and get you back on your feet.

 

Foreclosure Plan B

Bankruptcy stops foreclosures, that’s a given.  Thanks to the automatic stay, a bankruptcy stops foreclosures dead in their tracks. 

Bankruptcy is the silver bullet to stop a scheduled foreclosure sale, guaranteed. 

There’s only one problem though, and it is the single biggest reason why people are unable to stop a foreclosure and it’s something that we’re all guilty of at one time or another.  Procrastination. 

Procrastination hampers your ability to save your home when all else fails.  The moment you get a foreclosure notice, you should start interviewing bankruptcy lawyers, even if you think you can work something out with the mortgage company.  

There are a lot of ways that you can try to stop a foreclosure but those other ways usually involve liquidating assets or making some kind of deal with your existing lender or a new lender to save your bacon.  The problem with those outcomes is, the other party has a choice in the matter.  No matter what you do, they can choose to go back on what you discussed or not discuss anything with you at all.  

In the last few months we have seen a number of clients with mortgage forbearance that will come due all at once.  Meaning those payments you missed in March, April, May and June are all going to be due at one time.  I don’t know about you, but I don’t have enough money laying around to make 3-5 months worth of mortgage payments all at one time.  What we are seeing is that people are expecting to be able to refinance or get a mortgage modification.  The problem with all of that is, the lenders have a choice and they may choose to deny those, especially if you’ve suffered a recent job loss. More often than not, mortgage mods don’t go through and people are often left looking for a bankruptcy lawyer with only hours to spare before their house is sold on the courthouse steps. 

Last minute foreclosure defense

Filing bankruptcy, even just a skeletal one, is time consuming.  To file bankruptcy, you have to do things in a certain order.  You meet with an attorney, you take the credit counseling class, you pay your filing fees and then your case can be filed.  All of that takes time and if you skip a step, it can throw the whole case into limbo. Another thing you need to take time to decide is what chapter is best for me to file.  Beyond all of these other challenges, you’ve got to come up with the paperwork necessary to file bankruptcy.  You need to be able to put your hands on bills, pay stubs and tax returns at a minimum.  Like I said, the automatic stay puts a stop to all collection activities against you but once you’ve stopped it, then what?

What is the next step I need to take in order to save my home.  That’s where an experienced bankruptcy lawyer comes in.  They’ll figure out if you qualify for a Chapter 7 or 13.  They’ll help you figure out if you can afford the house going forward and they will provide you with an honest assessment of your situation so you can make an informed decision that can help you get the best outcome for your particular situation. 

Last lawyer on the bench

Here is where procrastination comes back to bite you.  If you wait until the last minute to file, you’re left with a lot fewer choices when it comes to an attorney.  Generally speaking, same day appointments aren’t going to be available for the best bankruptcy lawyers so you’ll be stuck with someone who may not be as reputable or frankly has no clue what they’re doing.  

Is that the person you want holding the fate of your single biggest asset in the palm of their hand.  A guy whose most appealing quality is the fact that they have some free time on their hands? The reality is, the best lawyers are going to be busy.  They’ve got other cases to work on and they frankly may not be willing or able to drop everything to handle your case.  

Line up help ahead of time

If you’re working on solutions to avoid foreclosure, whether that be a refinance or a mortgage modification, you need to be shopping around for a bankruptcy lawyer at the same time.  

You need to interview your lawyer and know what each of them will need to file your case (HINT: what they should need should pretty much be the same if they’re being honest with you). You need to understand your options and know how your choice will impact your overall financial picture.

If everything goes as planned you won’t need bankruptcy.  However, if something goes wrong at the last minute, you have a plan B.  If you find yourself needing to discuss your options, contact the caring attorneys at Harmon and Gorove today for a free, no obligation consultation to learn how bankruptcy can help you with your foreclosure issues.  

 

Cosigning is ALWAYS a Bad Idea

We understand how hard it is to say no, especially to a friend or family member.  Let me say this loud and clear, when a family member of a friend asks about cosigning a loan for them, RUN FOR THE HILLS! JUST SAY NO! DO NOT UNDER ANY CIRCUMSTANCES SIGN THAT LOAN!

No matter how sure you are that they won’t default on the loan, you may even feel it in your soul, DON’T DO IT.  If a lender is asking for a cosigner, there’s a good reason. It’s because they believe that the primary borrower won’t be able to make their financial obligations.  More often than not, the lender is right.

When it comes to cosigning, you’re being asked to guarantee a debt.  If the primary borrower doesn’t repay the debt, you’re on the hook for the debt and the creditor WILL come after you. You’ll be on the hook for late fees, collection costs, attorneys fees and the principal balance of the loan.  If the debt goes into default it WILL show up on your credit report. The bottom line is, cosigning is always a bad idea.

Cosigning is always a bad idea.  Have I made myself clear up to this point? Cosigning a debt puts you in the worst possible situation.  You receive no benefit from the loan you’re cosigning. You aren’t getting a student loan to improve your education, you’re not getting a house to live in and build equity in, you’re not getting that flashy new car to ride around town in. You’re just on the hook for all of it.  You can have you bank accounts and assets seized, your paycheck garnished, you could be subject to litigation and you could ultimately end up in bankruptcy.

We understand that it’s difficult to refuse to help someone you love.  Telling friends or family members no is one of the toughest things you can do. However, it may be the best thing you can do for your relationship.  Think about what your relationship will be like if your friend or family member defaults on the loan or even just misses a payment. That’s going to show up on your credit at a minimum and will likely bring your score down 20 or more points.  The damage that cosigning can do to relationships can not be understated. You’ll be left with a loan and a relationship that will be severely damaged from here forward.

If you’ve cosigned a loan with someone who has missed payments or defaulted on a loan completely and you find yourself on the hook for their mistakes the attorneys at Harmon and Gorove can help.  We are experts in dealing with these kinds of issues through the bankruptcy code.  Contact us today for a free, no obligation consultation about how we can help you get out from under these debts and get your life back.

The Great Things about Chapter 13

Most people come in to our office wanting to do a Chapter 7.  They think it’s the best thing possible because it lets them cancel all their debts. While for some people, that’s a good thing, for others it can cause a lot of problems.  I happen to think that Chapter 13 bankruptcies allow for the most flexibility which is why I believe that should a 13 be a good option for someone, they should definitely pursue it.  Below, I lay out a list of reasons why I believe a Chapter 13 is a great option for certain people.

Chapter 13 cases are great because:

  • The amount of money you repay to your creditors can be as little as 0%. While that sounds too good to be true, it is, depending on your individual situation of course.
  • You keep your stuff, unless you don’t want to.  You keep your house, your business, your car, etc.  No one is snooping around trying to find things to sell.  
  • You can amend a Chapter 13 during the case.  If your income goes down, you lose a job, or you just go out on maternity leave, the plan can be amended to accommodate those life changes.     
  • You can dismiss your case if you want.  You can literally just walk away. While that isn’t necessarily a good idea, you can do it, unlike in a Chapter 7 plan.
  • The automatic stay protects you for the entirety of your case.  You can’t be a victim of foreclosure or repossession if you abide by the plan.
  • If you’re behind on your mortgage, the amount you’re behind can be included in the plan and caught up over the course of the plan.  
  • If you have a really big interest rate on your car, the amount of the interest rate can be reduced to a lower rate.  
  • The IRS HAS to abide by the plan and let’s be honest, no one likes the IRS.
  • Your attorney’s fees are included in the plan.  You don’t have to come up with the money to pay your lawyer up front.  

Other advantages to Chapter 13s

If you do have to file a Chapter 13 case, you’re eligible for another Chapter 13 (should you need one) a whole lot sooner than you can if you had filed a Chapter 7.  In fact, its ok to file a second Chapter 13 two years from the filing of your first case.  

Generally speaking, a Chapter 13 is off your credit a whole lot sooner than a Chapter 7.  Usually, a 13 is gone two years after you complete a 5 year plan.

Unlike working with a debt settlement agent, your Chapter 13 Bankruptcy is enforced by the full weight of the federal court system.  ALL your creditors must abide by it or the face severe penalties. NO creditor can opt out and at the end of the Chapter 13 Plan, the debt you owe them is gone, one way or another.

In the end, a Chapter 13 case is a great way to get back on your feet after a period of financial difficulty.  Our attorneys have filed THOUSANDS of Chapter 13s and we have decades of experience successfully shepherding cases through the court.  Contact our office today for a free, no obligation consultation to find out of you qualify for a Chapter 13 case.  

2nd Mortgage Lien Stripping in Bankruptcy.

A 2nd mortgage or home equity line of credit (HELOC) can be a very tricky situation when it comes time to file bankruptcy.  Unfortunately, due to the housing collapse and the Great Recession of 2007, many people in this country have multiple mortgages or other types of loans attached to their homes, often a high rates of interest.  Despite what people may think, 2nd mortgages and HELOCs CAN be stripped and removed through the 2nd Mortgage Lien Stripping process in a bankruptcy if you have the right circumstances.   

Here’s how they’re treated by the bankruptcy court

A HELOC in Chapter 13 bankruptcy:

Chapter 13 bankruptcies require debtors to make payments to the holder of their primary mortgage holder as well as a Chapter 13 Trustee.  The Trustee’s job is to distribute these payments among the creditors who hold priority status. In a Chapter 13, your HELOC debt may ultimately be discharged as the lender will have likely gotten a percentage of the payments you made into your case through the trustee’s office.  

A HELOC in Chapter 7 bankruptcy:

In a Chapter 7 Bankruptcy, you can cancel the debt on your home equity line of credit.  The only problem with this is the fact that you can’t cancel the lien that the creditor has on the house.  As a matter of fact, the HELOC lender could possibly still foreclose on your house after the bankruptcy has concluded.  While it would only benefit them if there was equity in the house, there’s still technically no way to stop them from doing this.  The best way to avoid a foreclosure after a Chapter 7 has concluded is to sign a reaffirmation agreement with your HELOC lender during the bankruptcy.

Second mortgages in Chapter 13:

2nd Mortgage Lien Stripping is possible when a second mortgage isn’t secured by a home’s value and can potentially be eliminated in a Chapter 13.  Homes that are underwater may have second and third mortgages that aren’t secured by the value of the property anymore due to the fact that the amount of the loans total more than the current value of the property.  One thing to remember though is that discharging a second or third mortgage will have no effect on what you owe on your first mortgage and you will still have to pay that mortgage in full.

If you find yourself facing the reality of foreclosure due to a second or third mortgage on your home and you think that 2nd mortgage lien stripping may be right for you, come see one of our experienced attorneys at Harmon and Gorove today.  Our attorneys have decades of experience handling cases like this and they can advise you if you will benefit from this valuable tool under the bankruptcy code.  

Cramdown: reducing the principal on secured debts

When considering filing a chapter 13 bankruptcy, you may find yourself in the position to be able to reduce the principal balance of a secured debt to the actual value of the property (car, household item, etc.) it is secured by. When you reduce this amount of debt in this way it is known as a “cramdown” and can be a very valuable tool in your bankruptcy case that can potentially save your automobile, real estate investments, and other personal property you have pledged to secure a debt. Because of the way the law is written, you aren’t allowed to use the cramdown provision on your primary home  but using it in other aspects of your financial life can net massive savings.

When your attorney initiates a cramdown, you’re taking the value of a secured item like a car and reducing the balance you owe in order to match the item’s true book value. When this happens, the crammed down amount is then placed in your unsecured debt in your Chapter 13 case. A cramdown can be extremely beneficial in certain cases and might allow you to pay only a small percentage of your unsecured debt.  Filing things this way could result in all of your unpaid unsecured debt being discharged at the conclusion of your Chapter 13 case. There are many other advantages to cramming down your loans with a Chapter 13. This includes reduced interest rates, the potential to stretch the payments across a greater period of time which might very well reduce monthly payment amounts to a more affordable level. Another fantastic benefit is that you can escape liabilities on any deficiencies by using a mortgage cramdown on investment real estate.

As with much in life, the cramdown in a Chapter 13 seems often seems too good to be true. While this is not the case, it does come with certain guidelines that were passed by Congress to place certain restrictions on how, why and when you can initiate a cramdown. The cramdown restrictions to remember are the 910 Day (roughly two and a half years) Rule on car loans, the One Year Rule on personal property (think TVs, furniture, etc.), and the restrictions on investment real estate mortgages.

The attorneys at Harmon and Gorove are extremely experienced in using cramdowns to the benefit of their clients.  With decades of combined experience, our team can help you find out of you qualify for a cramdown in a Chapter 13 and help you successfully navigate the intricacies of a Chapter 13 Bankruptcy so that you may emerge on the other side debt free.  Call our office today to set up a free consultation with an experienced and compassionate Chapter 13 Bankruptcy Attorney.