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Articles Posted in Home Foreclosure

Fiscal cliff fears were at a fever pitch just a few weeks ago, amid a growing chorus of concerns regarding numerous tax hikes. raysoflight.jpg

One aspect of all that which was seldom discussed was the expiration of the Mortgage Forgiveness Debt Relief Act. Kentucky foreclosure lawyers know that for those who are underwater right now on their homes, this is a critical piece of legislation, and expiration of debt forgiveness would have almost certainly meant bankruptcy if their home went into a foreclosure or short sale.

The most basic explanation of this act is that it got homeowners off the hook for the remainder of money they owed to the bank following a foreclosure or short sale. So let’s say, for example, you bought your home for $150,000 and now it was only worth $115,000. You were able to sell it in a short sale for $110,00. Most banks know that they weren’t likely to receive the remaining $40,000, and so often, they would simply “forgive” that amount.

But prior to the mortgage forgiveness act, you would be liable to pay income taxes on that money – as if it had actually been cash in your pocket. So while you wouldn’t have had to pay $40,000, it would very likely have bumped you up into the next income bracket. In this instance, you would have been on the hook for an additional $8,000 in taxes.

For someone whose home had sold for $100,000 less than what they owed on the mortgage, they would have been responsible for roughly $20,000 in taxes.

The tax break has been extended through the end of this year. What this means is that if you are underwater on your home and concerned about potentially falling into foreclosure or being forced to conduct a short sale, you really don’t want to wait until the end of the year, as it could end up costing you quite a bit more.

We are dedicated to ensuring the best outcome for your individual circumstances. It helps to have as much information as possible when making financial decisions. Sometimes a short sale makes the most sense. Sometimes a Chapter 7 or Chapter 13 bankruptcy filing will better serve your needs. We are committed to finding the solutions that work for you.

Most people who are in this situation probably already realize it, and may just be putting off the inevitable because they aren’t eager to deal with it. This should give you some incentive to do so.

Being underwater on your home doesn’t necessarily mean you’ll be forced to foreclose or complete a short sale, particularly given the recent foreclosure abuse settlements reached by a number of banks. Some of these agreements require banks to work with homeowners who are underwater under more generous terms. But having a legal advocate on your side to barter about those terms can be extremely helpful.

Some signs that you need to seek help right away include:

  • You’ve endured an unexpected life change – lost your job, went through a divorce or suffered a serious illness. These incidents put you at increased risk of defaulting on your mortgage.
  • You’re grappling with serious financial struggles. If you have maxed out on your credit cards or are having trouble paying your everyday expenses – particularly keeping up on your mortgage – you’re going to need help. The good thing about choosing our firm is that we have experience in handling both foreclosure defense and bankruptcy filings, so we have the experience you require.
  • You have missed three or more mortgage payments. This is a huge red flag, and you should not delay getting help any longer. The sooner you get help, the better your chances of securing a deal.

The extension of the Mortgage Forgiveness Debt Relief Act is one bit of good news in all this. Call us today, and we can likely give you more.

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A proposal to arm homeowners with more information about their mortgages and potential alternatives to foreclosures is the aim of a new proposal laid out by the U.S. Consumer Financial Protection Bureau. higher.jpg

Our Louisville foreclosure defense lawyers understand that the proposal would apply to the entire mortgage servicing industry, one which has never before been regulated by such requirements. This is certainly part of what got us all into this financial mess in the first place.

The rules have been submitted for public comment. If approved, they would become effective Jan. 1, 2013.

Many homeowners would likely see it as a welcome reprieve because, despite a $25 billion national settlement that was reached among the five largest banks and attorneys general from 49 states earlier this year, some terms of that agreement have yet to be implemented. In fact, the Office of Mortgage Settlement Oversight reports that there have been over 1,000 complaints from homeowners who said their banks refused to work with them to negotiate a loan modification.

This is where having an experienced foreclosure attorney is critical. Cutting through the red tape is what we do. The banking and mortgage servicing industry is notorious for giving people the runaround and making it difficult to obtain a principal reduction on their loan. It’s more profitable for them to simply foreclose on it and find a new buyer – even if that takes months or years. In the meanwhile, we have millions of people losing their homes to foreclosure.

Part of the problem with the settlement that’s already been reached is that it doesn’t apply to all banks or mortgage servicers – only those five that signed on.

The new rules proposed by the federal government would apply industry-wide, and should help reduce the amount of bureaucracy involved. Still, if you’re about to lose your home, it’s wise to invest in an attorney who knows the system well and can help you navigate a positive outcome.

Essentially, the new guidelines would require greater transparency and create a legal framework requiring banks to work to keep people in their homes whenever possible.

Among the proposed rules are:

That mortgage bills sent each cycle would have to specifically show how much of the payments will address the principal balance, how much the homeowner is paying in interest, whether there are any fees and the amount of any escrow. Additionally, it would show the due date and amount of the next payment and an explicit warning about any fees for late payments.

Mortgage servicers would no longer be allowed to simply spring higher interest rates on borrowers. They would be required to inform homeowners of an adjustable rate as early as 7 months in advance.

A homeowner’s account would have to be credited on the same day the payment is received.

Mortgage servicers would no longer be allowed to bill borrowers for so-called “force-placed” insurance, unless the company has first notified the homeowner and additionally has reasonable proof that the insurance policy was dropped in the first place.

In the above scenario, if a homeowner can show their mortgage company that they in fact do have homeowners’ insurance, the servicer would have to end the force-placed insurance within two weeks and refund any fees paid.

If a homeowner requested any information or filed a complaint regarding certain errors, the mortgage company would be mandated to respond within five days.

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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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Two Georgia lawmakers have proposed bills that would allow homeowners to take out money from their retirement accounts, penalty-free, to pay for mortgages, The Atlanta Journal-Constitution reports.

While the lawmakers believe this could help cut into the country’s real estate and foreclosure mess, this would simply ruin a person’s finances in order to save their house, which has likely taken a large hit in value.
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Louisville bankruptcy lawyers would advise a consumer struggling with foreclosure to set up an appointment today and consider the benefits of bankruptcy in Louisville rather than spill their retirement into a house saddled with an upside down mortgage.

Louisville has been hit hard with foreclosures, as foreclosure tracking company Realtytrac reports that on average 1 in 259 housing units is in foreclosure citywide. This puts most of the city in a “high” foreclosure rate, while only three zip codes are in a “low” foreclosure rate. Those areas see 1 in 1,627 housing units in foreclosure.

This city certainly isn’t an exception to the housing woes that have hurt our country. But that is no reason for a person to toss away their life savings for a house. Many people who want to keep their house can go through bankruptcy and come through the process in much better financial shape. Under Chapter 13 bankruptcy in Louisville, consumers can set up payment plans over a 3 to 5 year period to payback most of their debt and still keep their houses.

Under this new law, homeowners would have the option of taking money from their retirement portfolios and rather than pay a 10-percent penalty on what they withdraw, they could take it out without penalty to make a housing payment.

The bill sponsors — Sen. Johnny Isakson and Rep. Tom Graves, both from Georgia — believe that the bills would allow for a recovery in the real estate market while keeping people in their homes.

Louisville bankruptcy lawyers hope that Americans are smarter than that. Why would a person ruin their future savings — which are meant to provide food, shelter and medical care — for a house that has plummeted in value? People would be much wiser to keep their savings, declare bankruptcy. Whether or not they decide to keep the home.

Isakson said he believes that the only way the economy will recover is when the real estate market bounces back. And he thinks that the bill he has proposed will contribute to that by reducing foreclosures and stabilizing home values.

Graves said the bill allows people who have been responsible enough to save in the past, but who have lost their jobs, to not be punished by the tax laws and still pay their mortgages. The tax law now, he said, punishes those who want to put their retirement savings into their home.

Retirement funds are designed to help those who get to an age where they can’t work anymore. And if they can’t work, they can’t earn money. Having a house to live in is critical, but there are alternate housing options available. Retirement savings is required to sustain a bright future even if the present is bleak.

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Deficiency judgments are on the rise, as banks continue to look for ways to make up the millions of dollars lost through the glut of foreclosures nationwide, The Wall Street Journal is reporting.

A deficiency judgment is when the bank takes a home through foreclosure and then sells it at auction for less than the loan amount and goes after the original homeowner for the difference. In many cases, this can mean a borrower is saddled with a judgment of $100,000 or more, depending on market value.
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Luckily, there is a solution and it’s filing for bankruptcy in Louisville. If a person is hit with a big deficiency judgment, they likely can’t pay it off if their house just went into foreclosure. Therefore, consulting with an experienced Louisville bankruptcy lawyer can help consumers get out from under not only that debt, but other forms of debt, such as credit card bills, medical bills and other money owed. In other cases, it can protect a consumer from dealing with a bank or a deficiency judgment in the future — once they have gotten back on their feet financially.

As The Wall Street Journal states, banks are making that more and more difficult these days. As they struggle to generate revenue after the downturn in the real estate market, banks are now going after homeowners with a vengeance.

The news article highlights the case of a man who lost his job and stopped making payments on a vacation house he owned in Florida. After the foreclosure went through last year, he thought it was over.Then he got a call telling him a deficiency judgment had gone through and he owes $193,000 to the bank. The man said he never considered the bank would go after him, but he said he’ll be contacting a bankruptcy lawyer to seek protection.

There are 41 states, including Kentucky, that allow deficiency judgments. In Kentucky and Indiana, judgments are allowed after the homeowner fails to answer a foreclosure lawsuit within 20 days after they are served in-hand or by certified mail with the paperwork. Once a deficiency judgment is awarded, the mortgage lender can seize assets like bank accounts to satisfy the balance of the debt and garnish up to 25% of your wages. Only a Chapter 7 or Chapter 13 Bankruptcy filing can stop that from happening.

While lenders don’t say which homeowners they target for deficiency judgments, analysts believe they are going after homeowners they believe have the funds to make the payments, but choose not to. Many people have considered a strategic default, meaning they stop making payments because of a decline in value.

Many states, however, allow lenders up to 20 years to go after a homeowner for a deficiency judgment, which gives banks a lot of time.

Attorneys who handle foreclosure defense told the newspaper they have seen a drastic increase in judgments as banks have been urged by shareholders to try to make back the money that has been lost. There is also a secondary market for debt, as investors attempt to get the judgments so they can go after borrowers through debt collection agencies or bankruptcy court.

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Recently released mortgage foreclosure numbers by the foreclosure monitoring website RealtyTrac reveal that Jefferson County and Louisville in particular are facing a difficult time in dealing with houses that are being taken away by banks.

The company’s data shows that in some parts of Louisville, 1 in 241 housing units were dealing with some type of foreclosure action in August. On a more detailed level, the 40216 zip code had 57 foreclosure actions, most in the city. The top five Louisville zip codes dealing with foreclosure in August:

  • 40216: 57
  • 40229: 50
  • 40272: 40
  • 40211: 37
  • 40218/40291: 34

The numbers don’t lie — people are hurting. Whether unexpected medical bills or job loss, many Louisville residents simply can’t pay their monthly mortgage payment. Even though they’ve spent years making payments and love the house they’re in, the banks are ruthless and are willing to do just about anything to maximize profits.
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But there is help. Filing for bankruptcy in Louisville stops the foreclosure process dead in its tracks. Once a person files for bankruptcy, creditors and lenders are no longer allowed to contact them. Creditors are directed to deal with the bankruptcy court.

Consulting with an experienced Louisville Bankruptcy Lawyer is the first step someone in this position should take. These are difficult financial times and homeowners should get advise on how best to deal with the current economic client in how it relates to their homes.

More data from RealtyTrac for August:

– 4,569 foreclosed homes in Jefferson County, KY
– 1 in every 541 homes are in foreclosure countywide
– 608 foreclosures filed in Louisville alone
– 7,097 foreclosure homes statewide
– The average foreclosure sales price is $84,223
The Dow Jones Newswire is reporting that in the Louisville metro area, houses posted the largest foreclosure discount compared to non-foreclosure homes. RealtyTrac research found that prices here are 54 percent below the average for non-foreclosure homes. This underscores the problem with our real estate market and the fact that things aren’t changing any time soon.

When someone files for bankruptcy, creditors can no longer collect, yet homeowners often can stay in their homes while the foreclosure process is ongoing. In many cases, the homeowner can come through the bankruptcy process still keeping assets, such as vehicles that were purchased in advance of filing.

After the process is complete, an eligible bankruptcy client will have debts against them discharged and they can again begin to live life free from creditors hounding, wages being garnished and other harassing tactics taken by lenders and the collection agencies they employ. If you are tired of living in fear and frustration because of your credit problems, consult with an attorney today.

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Kentucky foreclosures have affected 38,000 children, according to a report that found the state’s poverty and economic woes have led to one of the worst child-health rankings in the nation.

Our Louisville bankruptcy attorneys note it is the latest report on the impact of the struggling economy on our young people. We recently reported on our Kentucky Bankruptcy Lawyers Blog about the high number of students struggling to pay student loans.
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Meanwhile, recent reports indicate the average family is able to save only 16 percent of a child’s college education, down from 24 percent just a few short years ago. And the U.S. Department of Labor is reporting teens are having trouble finding jobs — in part because under-employed adults are filling positions often occupied by our youngest workers.

The most recent report ranked Kentucky 41st in overall child well-being. Twenty-six percent of children were living in poverty — the third-highest in the nation. Only four states had more households where one parent was unemployed. Families are being squeezed financially from every direction. No parent wants a child to feel the impact of financial problems. If you are struggling with bad mortgage debt, real estate debt or credit card debt, we encourage you to get proactive and meet with a Kentucky bankruptcy attorney to discuss your options.

Kentucky residents are seeking Chapter 7 bankruptcy protection in record numbers — and with good reason. A bankruptcy filing can stop foreclosure, stop garnishment of wages or other collection efforts — even stop phone calls and other creditor harassment. You and your attorney can then decide the best course of action to secure your financial future. In many cases, you can keep your home or car if it makes financial sense to do so. Most retirement accounts are also protected from seizure.

Chapter 13 Bankruptcy in Louisville is another option. It allows a consumer to establish a repayment plan over 3 to 5 years; most unsecured debts that remain unpaid are forgiven at the end of the plan. Large assets, such as houses, brokerage accounts and family businesses are not impacted.

Filing for bankruptcy can be particularly beneficial for residents dealing with mortgage foreclosure. It will stop the foreclosure process and allow you to remain in the home rent free through the conclusion of your case.

The 38,000 children dealing with foreclosure in Kentucky was less than the national average — but even that was not good news. Pollsters say that’s likely because so many families have already lost their home to foreclosure, combined with the fact that the state has always had a high number of renters.

Business First reports 1 in every 2,312 homes are in foreclosure in Kentucky.

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Our Louisville bankruptcy lawyers continue to assist a record number of clients who want to free themselves from insurmountable debt caused by predatory lending, job loss, unexpected medical bills and bad real estate debt.

Those considering bankruptcy in Kentucky may also be struggling to pay student loans. As we reported recently on our Kentucky Bankruptcy Lawyers Blog, it’s easy enough for high school seniors and young college students to get in over their head — predatory lenders make it so by doing all they can to rope them into taking on debt via student loans, credit cards and car payments with high interest payments.
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Sometimes the very colleges they attend get in on the act. Because student loans are one of the few debts that can be difficult or impossible to jettison via bankruptcy protections, students continue to struggle with loans long after graduation. For-profit colleges have a poor track record of piling debt on students that will take years or decades to repay. The Lexington Herald-Leader recently reported concern over the student default rate in Kentucky.

The report opened with the case of a middle-aged couple who had nearly $70,000 in loans for a pair of uncompleted associate degrees. As many as one-third of students at a Daymar College campus defaulted on loans due in the last three years. In all, 35 of 81 Kentucky schools eligible to participate in federal student loan programs had default rates higher than the national average of 13.8 percent. Daymar is being sued in U.S. Court by 140 current and former students.

In general, student loans are one of the few debts that cannot be discharged through bankruptcy (in most cases). But that’s not to say bankruptcy won’t assist someone struggling with student loans. By ridding yourself of credit card debt, bad mortgage debt, and other unsecured debt, a consumer can more readily pay down student loan debt and rid themselves of that burden altogether.

Chapter 7 Bankruptcy will permit those who pass a debt-to-income ratio test to eliminate most debts entirely. Others, including those who have large assets they want to keep, can file a repayment plan through Chapter 13 bankruptcy. Certain assets, including most retirement funds, remain protected from seizure throughout the process.

In other cases, when a consumer’s rights were violated, there may be additional legal remedies. Kentucky Attorney General Jack Conway is among the attorneys general in 17 states who are investigating whether for-profit schools have violated consumer protections. Aside from the high default rates, other clues that something is amiss include student complaints, inadequate educational accreditation and deceptive marketing practices.

The average Kentucky college student graduates with $19,112 in student loans.

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Forbes Magazine reports more and more Kentuckians are opting to rent rather than to own, according to figures collected during the 2010 Census.

It’s another sign of the toll the foreclosure crisis has taken. Our foreclosure defense attorneys in Louisville
continue to help struggling homeowners. Whether it’s a short sale, a negotiated settlement, a strategic default or a foreclosure, consulting with an experienced law firm is critical when dealing with a bank or mortgage company. The unethical practices of banks have reached epic proportions at this point. False or forged paperwork submitted to the court and robo-signed documents and forged notaries are just the tip of the iceberg. In other cases, banks have agreed to terms with a homeowner on a modification and then later rejected those same terms and used the resulting arrears to foreclose. And they have agreed to a short sale and then pursued a deficiency judgement against the homeowner for the balance.
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We have long passed the point where you could call up your bank, come to terms, and count on what the person on the other end of the phone tells you. In some cases, banks have agreed to terms and then sold the loan to another bank that dishonored the agreement!

NBC6 News in Graves County reports one of every 1,879 Kentucky houses are in foreclosure.

Filing for Chapter 7 bankruptcy in Louisville offers a fresh start. In many cases, it can put you back on track for owning your next home in as little as two years. If you do nothing and permit bad debt to linger on your credit report, it may be years before a bank will take a serious look at approving a loan.

Forbes Magazine reports nearly 11 percent of Kentucky’s 1.9 million homes were vacant. Renters occupied nearly one-third of homes. Homeowners in 25 percent of homes had paid off their mortgages — down from 35 percent a decade ago. A total of 207,199 housing units were reported empty — up nearly 10 percent from a decade ago.

Issues impacting the housing market include the glut of foreclosed homes, prospective homeowners who are waiting for a better economy before taking the plunge, the high unemployment rate, and former homeowners who have gone through the foreclosure process and joined the ranks of the renters.

“People are trying to maintain a little more flexibility,” said Brenda Weaver, of the Kentucky Housing Corp. “So if there is a change in their job situation, it’s easier to get out of a lease on an apartment and pack up and move than it is to try to sell a house.”

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IF I FILE CHAPTER 7 BANKRUPTCY CAN I KEEP MY HOUSE?

This is one of the most frequently asked questions by those considering filing bankruptcy. The answer to this question, like many others, depends on your situation.

There are two ways that you can lose your house if you file bankruptcy. The first way is if you fail to make your mortgage payments. This is no different than if you had not filed bankruptcy. Failure to make your mortgage payments will result in the bank or mortgage company starting a foreclosure process against you. This is a judicial proceeding that eventually results in your house being sold to the highest bidder at a courthouse auction. Although you are permitted to stay in your house while the foreclosure is in process, once it is complete and the sale takes place, you are required to vacate.

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