Kentucky Bankruptcy Lawyers Blog

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.

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.

Continue reading "Louisville Bankruptcy Can Help Stop the Rise of Foreclosures" »

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.

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.

Continue reading "Proposed Law Would Open Retirement Savings To Pay Mortgages, But Louisville Bankruptcy Is Wiser" »

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.

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.

Continue reading "Kentucky Deficiency Judgments on the Rise, But Louisville Bankruptcy Stops Them" »

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.

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.

Continue reading "Louisville Still Suffering From Housing Mess, But Bankruptcy Stops Foreclosure" »

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.

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.

Continue reading "Louisville Bankruptcy Can Provide a Fresh Start for Families, Children" »

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.

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.

Continue reading "Kentucky Bankruptcy and Student Loans " »

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.

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."

Continue reading "Louisville Foreclosure Defense Attorneys Continue to Monitor Kentucky Real Estate Market" »

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.

Bankruptcy does not change the terms of your mortgage. Your payments and interest rate remain the same. Filing a Chapter 7 Bankruptcy will only provide you with temporary relief from a foreclosure. Once the Bankruptcy proceeding is complete (generally about 3 months), the creditor is free to proceed with the foreclosure. If a foreclosure had been started prior to your filing bankruptcy, the creditor may simply pick up where it left off after the bankruptcy is over. The creditor may also seek to proceed with foreclosure before the bankruptcy is over by filing a motion to terminate the "automatic stay."

The second way you can lose your house is if you have too much equity. Equity is what you would get for your house if you sold it, after paying off the mortgage and any other debt against it. If you file Chapter 7, you are only allowed a certain amount of equity that you can have in your house and still keep it. The amount that you are allowed is called your "homestead exemption." The amount varies by state. In Kentucky, it is $20,200.00 per person. In Indiana, it is $17,400.00 per person. If you own the house with your spouse, each of you is entitled to that amount of exemption.

If your equity exceeds those amounts, then the Bankruptcy Trustee will sell your house and pay the excess equity to your creditors, after taking a fee for himself. Many people filing Bankruptcy do not have a lot of equity in their house, so if they are current on their payments their house is safe. Keep in mind, a Chapter 7 Bankruptcy is a liquidation proceeding, so there is a limit to what you can keep. If your equity exceeds those amounts, you should consider Chapter 13.

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.

What are the tax consequences of a short sale? Prior to 2007, a short sale accompanied by a release of personal liability created taxable income to the borrower. For example, if you owed $150,000 on your house and sold it for $100,000.00, with the mortgage holder agreeing to release you from the balance, the $50,000 forgiven would be treated as taxable income for that year. However, The Mortgage Debt Relief Act of 2007 provides that debt reduced through mortgage restructuring, as well as mortgage debt forgiveness, is excluded from income. Up to $2 million of forgiven debt is eligible for this exclusion or $1 million if married but filing separately. The exclusion only applies to property that is the individual's primary residence, not rental properties. Furthermore, the exclusion does not apply if the release of the debt is due to services performed for the lender or any other reason not directly related to a decline in the house's value or the taxpayer's financial condition.

Before agreeing to a short sale, one should consult with a competent tax professional in order to assure that the transaction meets all of the requirements of The Mortgage Debt Relief Act of 2007 in order for the forgiven debt to be excluded from income. Keep in mind that this law does not apply to forgiveness of other types of debt such as credit cards.

MY HOUSE IS IN FORECLOSURE.
WILL BANKRUPTCY HELP ME SAVE IT?

Filing a Chapter 13 Bankruptcy can help save your house provided that you have the ability to resume making your regular monthly mortgage payments within 30 days after your case is filed.

Keep in mind that there is no type of Bankruptcy that allows you to change the monthly payment, term or interest rate on your mortgage contract. What Chapter 13 does, however, allow you to do is to take all of the past due payments and spread them out over a 5 year period of time. It also allows you to take any other debt you have and put it into a 5 year payment plan. So for someone who has fallen behind on his or her mortgage payments as a result of a temporary set back, such as job loss or illness, but now has the ability to resume payments, this may be a good solution. Although you cannot reduce your mortgage payment, you may be able to reduce your payments on other debts such as credit cards and car loans, which may then make your mortgage payment more affordable.

A foreclosure proceeding can be stopped by the filing of a Chapter 13 Bankruptcy as long as the case is filed prior to the conclusion of the auction sale. If the sale has already taken place, then it is too late to file Chapter 13 and save your house.

In order to get a Chapter 13 case approved, you must show that you have enough disposable income to pay your mortgage payment each month and make the required payments under the Chapter 13 plan.

Chapter 13 is generally fairly inexpensive to get started because in most instances the legal fees are paid through the Chapter 13 plan and the only required up front money is the filing fee and the costs for required credit counseling.