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Recent Blog Posts
A Fresh Start with the Child or Spousal Support Lien on Your Home
The good news is that if you are behind on child or spousal support, with a resulting lien on your home, you can safely protect that home.
If you are behind on your support payments, your ex-spouse and support enforcement agencies have tremendous tools to use against you to try to force you to catch up. And if you own a home, those tools include the support lien that is very likely imposed on your home’s title. Chapter 13 “adjustment of debts” gives you a powerful tool with which to fight back.
Child/Spousal Support and Bankruptcy
Bankruptcy is admittedly limited in its ability to help deal with child and spousal support debts. But the way it can help sometimes makes all the difference.
Chapter 7 “straight bankruptcy” is not able to directly help other than to free up money so that you can better afford to pay any ongoing monthly support, and to catch up on any previously unpaid support. Any lien that you might have on your home remains throughout that time. And you have no protection from collections under that lien.
A Fresh Start with Unpaid Property Taxes on Your Home
Falling behind on property taxes is dangerous, and scares your mortgage lender. Bankruptcy can help you deal with both.
Is Chapter 7 “Straight Bankruptcy” Enough Help?
It possibly can give you enough of a fresh start with your other debts so that you can catch up on your property taxes. But doing so while keeping your mortgage lender also satisfied is difficult to pull off.
If you’ve fallen behind on your property taxes, sometimes just writing off your other debts would give you enough financial breathing space so that you could catch up on your property taxes. Tax foreclosures usually don’t happen until you’re years behind, so you may have a fair amount of time to get current.
So find out from your attorney how much time you would have to catch up. Some tax creditors will set up a monthly payment plan with you. Find out if that would be available to you and if you could afford the payments once you discharged (wrote off) your other debts.
The Judgment Liens that Can Be "Avoided" from Your Home's Title
Bankruptcy can’t get rid of most creditor liens on what you own. But judgment liens on your home are an exception.
Our last blog post was about judgment liens, why they are so dangerous, and how both Chapter 7 and 13 types of bankruptcy can deal with them. Today’s blog post explains what determines whether a particular judgment lien can be removed, or “avoided,” and how that’s done.
The Rules for “Avoiding” Judgment Liens
If a creditor has sued you and gotten a judgment, and your name is on the title of any real estate, including your home, most likely that creditor now has a judgment lien against that real estate.
If you file bankruptcy, the debt that was the basis for that judgment would in most cases be legally discharged (written off forever). But the judgment lien is legally separate from that debt. The lien could survive the bankruptcy discharge, unless you qualify for judgment lien “avoidance.”
A Fresh Start by "Avoiding" a Judgment Lien on Your Home
Bankruptcy doesn’t just give you a fresh start by writing off debts. It frees up your home by often getting rid of its judgment liens.
Writing off debts is good. But if a creditor got a judgment against you, and you own a home, most likely that debt has also turned into a judgment lien on the title of your home. You’re not going to get much of a fresh start on your home if it continues to be saddled by a judgment lien or two.
Bankruptcy is relatively good at writing off (“discharging”) debts. But getting rid of liens can be trickier. However, both Chapter 7 “straight bankruptcy” and Chapter 13 “adjustment of debts” do provide a way to get rid of, or “avoid,” judgment liens.
Today’s blog post is about judgment liens, why they are so dangerous, and how both “Chapters” of consumer bankruptcy can be very helpful in dealing with judgment liens. (Then the next blog post will be about whether a particular judgment lien can be “avoided,” and how that’s done.
Consumer Warning: A Scam Targeting Bankruptcy Filers
Watch out for phone calls seemingly from somebody you think you should trust with reliable sounding information, requesting fast money. You Wouldn’t Be Fooled by This If you get an email written in imperfect English from somebody saying she needs your help to move a huge amount of money out of her African country, and that you’ll get a healthy percentage of that amount if you just provide your bank account information, you probably know better than to respond to that email. Here’s a part of an email which is an example of these advance-fee scams, in which you’re invited to send money to a stranger on the promise of some fast money for you:Dear Beloved Friend,
I know this message will come to you as surprised but permit me of my desire to go into a business relationship with you.
... my late father came to Cotonou Benin republic with the sum of US$4.2M which he deposited in a Bank her in Cotonou Benin Republic West Africa for safe keeping.
A Fresh Start by "Stripping" Your Second Mortgage
Stripping your second mortgage could give your home the very best fresh start by saving you a tremendous amount of money.
If You Can’t Afford the Monthly Payments on Your Home
Last week we compared three ways to save a home in which you’re behind on your mortgage payments: mortgage modification, a forbearance agreement, and Chapter 13.
Mortgage modification is the only one of these three which lowers the monthly payment on your first mortgage. A forbearance agreement just gives you a number of months to catch up on missed mortgage payments, during the same time that you are also required to make the usual monthly mortgage payments. Chapter 13 is similar except giving you much longer to catch up, up to 5 years. Stretching out the catch-up time greatly reduces the amount you have to pay per month compared to a forbearance agreement.
The problem is that mortgage modification is difficult to qualify for. Whether using a governmental program or one provided directly by your mortgage lender, there is a quite narrow window that your income must fit into in order to qualify. So what do you do if you don’t qualify for mortgage modification but still can’t afford what you have to pay each month towards your home?
A Fresh Start on Your Home with Chapter 13
Adjusting your mortgage and other home-related debts under Chapter 13 can often give your home the very best fresh start.
Our last two blog posts have been about two options for when you need help making mortgage payments: a mortgage modification and a forbearance agreement.
In a nutshell, a mortgage modification reduces the monthly mortgage payments through a permanent restructuring of one or more of the terms of the mortgage. A reduction in the principal amount of the mortgage debt is seldom included. So while modification can help in the short-term--if you’re fortunate enough to meet the relatively tight qualifying standards—be careful about what it costs you long-term.
With a forbearance agreement the monthly mortgage payments don’t change. The lender simply gives you a certain number of months to catch up on the unpaid mortgage payments, while at the same time you must also make your regular monthly mortgage payment.
A Fresh Start with a Forbearance Agreement
Whether you’re about to fall behind on your mortgage or have already done so, a forbearance agreement avoids foreclosure while you catch up.
Quick Definition
A forbearance agreement gives you short-term relief to deal with a temporary period of financial hardship. Your mortgage lender agrees, either in advance or after the fact, to accept a period of reduced or suspended monthly payments in return for your agreement to return to full monthly payments and catch up on the missed payments within a certain length of time. The lender agrees to not foreclose—to “forbear” from foreclosing—as long as you make the agreed regular and catch-up payments. You are given this grace period to bring the mortgage current and then return to making just the regular monthly payments.
Compared to Mortgage Modification
Forbearance agreements are usually much easier to qualify for and quicker to negotiate with the lender. After all you are not changing most of the terms of the mortgage—almost always the regular monthly payment, the interest rate, and the length of the overall mortgage don’t change. You’re just forgiven for a period of time of being in default on the payments, and are then required to catch up relatively quickly. A forbearance agreement does not make your mortgage more affordable long-term, but rather gets you back in good graces with the same mortgage you signed up for originally.
A Fresh Start with a Mortgage Modification
Mortgage modification may reduce your monthly payments but not likely reduce your balance owed. So it costs less short-term, not long-term.
Quick Definition
A mortgage modification is a permanent restructuring of one or more of the terms of the mortgage intended to make it more affordable on a monthly basis.
Compared to Forbearance Agreement
A mortgage modification is intended to deal with the permanent unaffordability of the mortgage payment, while a forbearance agreement deals with a short-term unaffordability.
With a forbearance agreement the monthly mortgage payments don’t change. The lender simply gives you a limited time to catch up on missed mortgage payments, while you must make your full regular mortgage payment as well. If you simply don’t have the cash flow to do that—even after writing off most or all of your other debts in a Chapter 7 “straight bankruptcy”—than you should look closely at mortgage modification.
A Fresh Start on Your Home If You're Behind on Your Mortgage
If you are behind on your home mortgage & want to keep your home, do a mortgage modification, a forbearance agreement, or a Chapter 13 plan.
The Three Options
Here’s a summary of 3 ways to get a fresh start on your mortgage:
- A mortgage modification is a permanent restructuring of one or more of the terms of the mortgage to make it more affordable. This usually involves a reduced interest rate, the conversion of a variable interest rate to a fixed one, an extended payback period (often to 40 years), or a deferral of paying part of the principal. An actual write-off of any of the principal is very rare. A number of governmental and in-house lender programs may be available. The process can be complicated and eligibility requirements are quite rigid. The reason is that they are intended for homeowners who neither make too much nor too little—who definitely need the help but also stand a decent chance of successfully meeting the terms of the modification.
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