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Articles Posted in Get Rid of Mortgage

It’s certainly a buyer’s market in the real estate world, but what does that mean for those who already have a home and are being hampered by a possible foreclosure?

Proof of the problem can be seen on foreclosure tracking website RealtyTrac, which shows that much of Louisville is in a high foreclosure rate right now. Ten of the 24 ZIP codes are in an area where as few as 1 in every 228 housing units is in foreclosure in Louisville.
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Yet, our Louisville bankruptcy lawyers have also noted that at the same time that many residents are dealing with a foreclosure, The Courier-Journal is reporting that the Kentucky Housing Corp. is offering its lowest mortgage rates in 40 years.

The state-chartered housing finance agency is offering borrowers with certain income limits, credit scores and other criteria 30-year, fixed-rate mortgages at 3.375 percent on the low end. The agency provides rates for first-time buyers and those with moderate incomes, but consumers must work with agency-approved lenders.

This all sounds great if you’re looking to cash in on the depressed real estate market and get a great deal. But what if you already bought your dream home and ended up with a bad interest rate because it was a seller’s market?

Flash forward a few years and now you may have hit a tough stretch financially with someone in your family losing a job, getting hit hard with a major medical bill or having to worry about the rising costs of day-to-day bills? For those with a variable mortgage rate that suddenly has spiked, leading to higher payments, this could be an especially troubling time.

Losing your home to foreclosure is never a good option. In fact, it can be devastating to children who could have their world turned upside down by having to move. If your credit score has taken a hit because of missed payments and other financial troubles, a foreclosure can make matters worse.

So, why not try to keep your house? One clear way is through a Louisville bankruptcy. Filing for bankruptcy immediately stops foreclosure in its tracks. Whether the family is receiving its first missed payment notice or the house is scheduled to be auctioned off at the courthouse, filing for bankruptcy can stop foreclosure.

What filing does is halt any attempts creditors have made to get money or possessions from you, including wage garnishments and foreclosure. This then allows your Louisville bankruptcy lawyer to use the laws on the books to help you get out of your debt.

Bankruptcy laws are supposed to help the consumer get out of debt after other methods haven’t worked. These judges are trained and expected to provide help for everyday people who have gotten stung by high interest rates and a house with an underwater mortgage, meaning it is worth less than what the homeowners is paying on it. It’s a bad situation that can be made better with bankruptcy laws that were created to help.

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SURRENDERING YOUR HOME IN BANKRUPTCY: PART 2

by: Tracy L. Hirsch, Attorney

One of the hardest decisions a family has to make is deciding to surrender their home in a bankruptcy proceeding. Often times, this means allowing a home to go through the foreclosure process and discharging their mortgage obligations in a Chapter 7 bankruptcy. Many homeowners are concerned about the foreclosure process and their obligations to their mortgage company once their bankruptcy process is complete.

IF I CAN’T AFFORD MY HOUSE PAYMENT, DO I NEED TO FILE BANKRUPTCY?

With many people struggling to make ends meet in today’s uncertain economy, mortgage payments are becoming increasingly difficult to manage. As a result, many individuals face the prospect of having to give up their home. Oftentimes, the immediate reaction of someone who can no longer afford their home is, “I need to file bankruptcy.”Although bankruptcy may ultimately turn out to be necessary, if giving up your Kentucky home is the only reason for the bankruptcy filing, you may be jumping the gun.

In order to understand why bankruptcy may not be immediately necessary in order to get out from under a mortgage, one needs to understand how the foreclosure process works. In most states, including Kentucky and Indiana, creditors are required to utilize a process called judicial foreclosure. The way it works is this. Once there has been a default, the creditor initiates the foreclosure process by filing a Complaint in the Circuit Court of the county where the property is located. The creditor must then obtain service of the Complaint on the debtor in a manner permitted by law. Once service has been obtained, the debtor then has 20 days to answer the Complaint. The purpose of this is to allow the debtor to assert any defenses that he may have. If the debtor fails to file an Answer to the Complaint, then the creditor gets a default judgment.

Is a Short Sale Right for Me?

In order to answer this question, we must first explain what is meant by a short sale. A short sale is a sale of one’s real estate for less than is owed on the mortgage. In order to accomplish this, the mortgage company must agree to accept less than its full balance. A short sale cannot be accomplished without the consent of the creditor.

A short sale is probably a good idea to consider if you owe more on your house than it is worth and cannot afford the mortgage payments. However, In order for a short sale to be beneficial, the short sale should be accompanied by a full release of personal liability, or at least by a significantly reduced balance on the amount of debt left over after the sale. Many times a mortgage company will agree to a short sale but will not release the borrower from personal liability or offer any type of restructuring or forgiveness of the remaining balance. This means that the creditor will still be able to collect the “deficiency balance” from the borrower. (Although some states prohibit collection of these balances, both Kentucky and Indiana permit creditors to collect deficiency balances).This type of short sale benefits only the buyer (who probably got a good deal on the property) and the real estate agent who got a commission for arranging the deal. Real estate agents love short sales because it is a way for them to earn extra money, so be wary of real estate agents trying to talk you into a short sale which may not be in your best interest.

CAN I GET RID OF MY SECOND MORTGAGE IF I FILE BANKRUPTCY?

Because of the decline in property values over the past few years, there has been a lot of discussion about “lien stripping” of second mortgages. Lien stripping means taking a debt that is secured by a mortgage and converting it to an unsecured debt or quite literally, stripping the mortgage off. This post will discuss the circumstance in which this relief is available through bankruptcy.

It is generally understood that consensual mortgages or deeds of trust on real estate that is one’s principal residence cannot be eliminated through bankruptcy. This is true regardless of whether one files a Chapter 7 or Chapter 13 bankruptcy. In fact, these types of mortgages cannot be modified in any way. By filing Chapter 13, one can take up to five years to make up missed payments, but the amount of the monthly payment, the principal balance and the interest rate cannot be altered.

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