When you file for bankruptcy, you are given the change to rise out of a financial crisis with a clean slate. The Chapter 7 Bankruptcy Code is the quickest and easiest way to achieve these results. How does it differ from Chapter 13? What are the negative aspects to Chapter 7 Bankruptcy?
Under the Chapter 7 Bankruptcy Code all non-exempt property is sold and the proceeds are distributed to the creditors to pay off the debt. Most of the time, the borrower has little or no assets to liquidate, so the "cleansing period" takes place quickly.
This process is often referred to as "liquidation" or a "straight bankruptcy". With this type of bankruptcy, the borrower can start anew. In the process, most debts are discharged within months of filing the bankruptcy petition.
When an individual files Chapter 7 Bankruptcy, a trustee is appointed to administer all non-exempt property, sell what assets are available, and distribute the proceeds to the appropriate creditors. There are no payments made from the debtor to the creditors...a major difference from Chapter 13 Bankruptcy.
Under a Chapter 7 filing, the debtor receives a discharge on all debts that can be discharged, such as child support, most taxes, student loans, etc...One good thing is that the debtor is usually allowed to keep their primary residence and their car.
Whenever you have chosen bankruptcy as your best option, engage the services of a competent attorney who specializes in bankruptcy. Bankruptcy has clear, defined rules that must be adhered to. Once you have chosen your attorney, allow them to do their job and follow their advice...never be a micro manager. Delegate to your attorney...it is Empowering!
Wednesday, May 27, 2009
Wednesday, May 20, 2009
Chapter 13 Bankruptcy...Your Options...
Filing for Chapter 13 Bankruptcy is for individuals who intend to continue to pay off their debts. This usually incorporates better terms and little to no interest charges. Unlike Chapter 7 Bankruptcy where all the debts are liquidated, Chapter 13 will utilize the debtor's regular income to pay off the creditors.
Under the U.S. Bankruptcy Code, the debtor is given up to 5 years to repay the creditors in the filing. While the debtors property is not liquidated, the court administers a new interest free plan for the repayment of the debts. A written plan is drafted to provide details of the repayment. The repayment usually begins within 30-45 days after the case has started. Sometimes the debtor will disburse to a trustee who will take charge of disbursing money to the creditors as per the plan. Other times, the debtor can pay the creditors directly. Regardless of how the plan is set up, the debtor and the creditors must strictly adhere to the terms of the plan. The creditors are prohibited from trying to collect excess sums from the debtor.
Under a Chapter 13 filing, a debtor who manages to complete all necessary payments in the plan is given a full discharge. The repayment plan is set up by the court irregardless of requests by the creditors. To be able to file for a Chapter 13, the debtor must have a regular and continuing income.
When a Chapter 13 Bankruptcy is filed, the following happens:
A.] Determine whether Chapter 13 is the best solution for the debtor.
B.] Prepare a budget.
C.] Examine individual cases to figure out whether Chapter 13 is appropriate or
or whether other alternatives can be explored.
D.] Determine and implement methods of dealing with secured creditors.
E.] Devise a Chapter 13 plan and fill out the forms.
F.] Pay the filing fee and complete the process of filing the forms and pleadings.
G.] Attend whatever meetings you maybe required to attend...i.e. creditors, court
hearings, etc...
H.] Obtain a discharge once the payments have all been made, and the plan terminated.
While this may seem like a simple procedure, in fact it is a rather complicated legal proceeding, and you are best advised to retain an qualified bankruptcy attorney to assist and guide you through this process to ensure that your best interests are protected...this is Empowering...
Under the U.S. Bankruptcy Code, the debtor is given up to 5 years to repay the creditors in the filing. While the debtors property is not liquidated, the court administers a new interest free plan for the repayment of the debts. A written plan is drafted to provide details of the repayment. The repayment usually begins within 30-45 days after the case has started. Sometimes the debtor will disburse to a trustee who will take charge of disbursing money to the creditors as per the plan. Other times, the debtor can pay the creditors directly. Regardless of how the plan is set up, the debtor and the creditors must strictly adhere to the terms of the plan. The creditors are prohibited from trying to collect excess sums from the debtor.
Under a Chapter 13 filing, a debtor who manages to complete all necessary payments in the plan is given a full discharge. The repayment plan is set up by the court irregardless of requests by the creditors. To be able to file for a Chapter 13, the debtor must have a regular and continuing income.
When a Chapter 13 Bankruptcy is filed, the following happens:
A.] Determine whether Chapter 13 is the best solution for the debtor.
B.] Prepare a budget.
C.] Examine individual cases to figure out whether Chapter 13 is appropriate or
or whether other alternatives can be explored.
D.] Determine and implement methods of dealing with secured creditors.
E.] Devise a Chapter 13 plan and fill out the forms.
F.] Pay the filing fee and complete the process of filing the forms and pleadings.
G.] Attend whatever meetings you maybe required to attend...i.e. creditors, court
hearings, etc...
H.] Obtain a discharge once the payments have all been made, and the plan terminated.
While this may seem like a simple procedure, in fact it is a rather complicated legal proceeding, and you are best advised to retain an qualified bankruptcy attorney to assist and guide you through this process to ensure that your best interests are protected...this is Empowering...
Thursday, May 14, 2009
Empower Yourself By Knowing The Basics Of Bankruptcy
Making the decision to file bankruptcy is not an easy one. You have to balance the potential damage to your credit, loss of assets, and any attached stigma against the rising hassle of late fees, penalties, phone calls from creditors, and soaring interest charges.
Any decision to file bankruptcy requires careful consideration of a lot of factors. If your bankruptcy is successful, an enormous amount of your existing debt and pressure will be lifted off your shoulders. Your credit will be damaged, but this can be re-built over time. Shedding this debt and the associate pressure might just be what you need to start rebuilding your financial future. It is important to explore all the options. Bankruptcy might not be right for your situation...however exploring this option will give you the knowledge to make the right decision...an Empowering one.
You need to make a critical assessment of your financial condition. Creating an accurate picture of your assets, liabilities, and cash flow will be a start in the right direction. There are numerous services on the internet as well as locally, to educate yourself on the bankruptcy procedure. These are all good, but you should take the time to consult with a qualified bankruptcy attorney to ensure that you have a clear, unbiased, view of how you should proceed.
If at any time you have seriously considered bankruptcy, you need to educate yourself on all aspects of bankruptcy. Bankruptcy is not for everyone, however do not wait until your car is being repossessed, or your wages are being garnished before you act. Be proactive and assertive with proper planning...an Empowering move.
There are two types of bankruptcy...Chapter 7 and Chapter 13.
Chapter 13 evolves around debt reorganization and a repayment plan typically over 3-5 years. During this time, provided you are making you payments in a timely fashion, your creditors cannot take any action against you. Chapter 7 is associated with shedding all debt. Your nonexempt assets are liquidated to mitigate your debts. Exempt debts...debts that cannot be liquidated...include your primary residence, your vehicle, certain items of personal property, tools and work equipment, as well as numerous other categories of property.
After you case is finished and all debts that were discharged are forgiven, the bankruptcy proceeding is closed. You may not file again for seven years. Bankruptcy is a viable options, but not for all cases. You must carefully weigh the positive and negative points prior to making a decision. When you are faced with these types of financial challenges, be proactive. Put together a plan, be assertive...be Empowered.
Any decision to file bankruptcy requires careful consideration of a lot of factors. If your bankruptcy is successful, an enormous amount of your existing debt and pressure will be lifted off your shoulders. Your credit will be damaged, but this can be re-built over time. Shedding this debt and the associate pressure might just be what you need to start rebuilding your financial future. It is important to explore all the options. Bankruptcy might not be right for your situation...however exploring this option will give you the knowledge to make the right decision...an Empowering one.
You need to make a critical assessment of your financial condition. Creating an accurate picture of your assets, liabilities, and cash flow will be a start in the right direction. There are numerous services on the internet as well as locally, to educate yourself on the bankruptcy procedure. These are all good, but you should take the time to consult with a qualified bankruptcy attorney to ensure that you have a clear, unbiased, view of how you should proceed.
If at any time you have seriously considered bankruptcy, you need to educate yourself on all aspects of bankruptcy. Bankruptcy is not for everyone, however do not wait until your car is being repossessed, or your wages are being garnished before you act. Be proactive and assertive with proper planning...an Empowering move.
There are two types of bankruptcy...Chapter 7 and Chapter 13.
Chapter 13 evolves around debt reorganization and a repayment plan typically over 3-5 years. During this time, provided you are making you payments in a timely fashion, your creditors cannot take any action against you. Chapter 7 is associated with shedding all debt. Your nonexempt assets are liquidated to mitigate your debts. Exempt debts...debts that cannot be liquidated...include your primary residence, your vehicle, certain items of personal property, tools and work equipment, as well as numerous other categories of property.
After you case is finished and all debts that were discharged are forgiven, the bankruptcy proceeding is closed. You may not file again for seven years. Bankruptcy is a viable options, but not for all cases. You must carefully weigh the positive and negative points prior to making a decision. When you are faced with these types of financial challenges, be proactive. Put together a plan, be assertive...be Empowered.
Wednesday, May 13, 2009
Short Sales And Tax Implications
If you are considering a real estate short sale of your home, be prepared to receive a form 1099-C for the amount of the lender's losses. In the eyes of the IRS, this is considered "loan forgiveness". You may be responsible to pay ordinary taxes on the amount of the 1099-C.
If you settle a debt with a creditor for less than the full amount owed, you may be required to report this forgiven debt as regular income, with certain important exceptions. The forgiven debts include money owed after foreclosure, property repossession, or credit accounts that you don't pay.
If a lender writes off a debt of $600 or more principal balance, they must send you and the IRS a Form 1099-C at the end of the year. When you file your taxes on that respective year, the IRS will require that you include the amount as income.
While you may not receive this form from the creditor, the creditor may have submitted one to the IRS. If you do not list the income on your tax return and the IRS has the information of the transaction on file, you could get a tax bill or a request for an audit.
There are several exceptions to this as stated in the IRS tax code. For example, you do not have to report the income if the write off of the debt is intended as a gift, your debts are discharged in a bankruptcy proceedings, or you were insolvent prior to the settlement with the creditor. Always consult a qualified tax professional when contemplating your situation. Remember, information is power. It is Empowering.
This information is not intended as legal or tax advice. Always consult your tax professional or attorney prior to making any decision regarding these types of situations.
If you settle a debt with a creditor for less than the full amount owed, you may be required to report this forgiven debt as regular income, with certain important exceptions. The forgiven debts include money owed after foreclosure, property repossession, or credit accounts that you don't pay.
If a lender writes off a debt of $600 or more principal balance, they must send you and the IRS a Form 1099-C at the end of the year. When you file your taxes on that respective year, the IRS will require that you include the amount as income.
While you may not receive this form from the creditor, the creditor may have submitted one to the IRS. If you do not list the income on your tax return and the IRS has the information of the transaction on file, you could get a tax bill or a request for an audit.
There are several exceptions to this as stated in the IRS tax code. For example, you do not have to report the income if the write off of the debt is intended as a gift, your debts are discharged in a bankruptcy proceedings, or you were insolvent prior to the settlement with the creditor. Always consult a qualified tax professional when contemplating your situation. Remember, information is power. It is Empowering.
This information is not intended as legal or tax advice. Always consult your tax professional or attorney prior to making any decision regarding these types of situations.
Monday, May 11, 2009
Short Sale...Is There An Upside?
In this day of real estate market crashes and you owe more than what your home is valued at, you might qualify for a legal, lender approved solution known as a Short Sale. This can be accomplished by negotiating with your lender to accept a sale of your property to a third party for less than the current balance of your mortgage.
The Short Sale transaction, in today's soft real estate market, is a viable and sometimes necessary option. It is a legal way of moving outside an "upside down" situation. It is much better than foreclosure or bankruptcy, as typically the credit is preserved or minimally damaged. Lenders are becoming more motivated to accept short sales for a number of good reasons. It can be a "win-win" for all parties...even the lender.
You as the homeowner "win" by getting out of a financial predicament via a clean transaction and a salvaged credit score. Allowing the property to go to foreclosure will typically damage your credit for up to seven years.
The lender "wins" by avoiding timely and costly foreclosure proceedings which could lead to an even more costly expense of being owned by the bank.
The buyer "wins" by purchasing a property at good market value...one that typically has not gotten trashed at this point. Often times, short sale properties are in very good condition, with minimal damage...a "win-win" for all parties!
But with every "silver lining", there is a dark side...a down side...stay tuned...
The Short Sale transaction, in today's soft real estate market, is a viable and sometimes necessary option. It is a legal way of moving outside an "upside down" situation. It is much better than foreclosure or bankruptcy, as typically the credit is preserved or minimally damaged. Lenders are becoming more motivated to accept short sales for a number of good reasons. It can be a "win-win" for all parties...even the lender.
You as the homeowner "win" by getting out of a financial predicament via a clean transaction and a salvaged credit score. Allowing the property to go to foreclosure will typically damage your credit for up to seven years.
The lender "wins" by avoiding timely and costly foreclosure proceedings which could lead to an even more costly expense of being owned by the bank.
The buyer "wins" by purchasing a property at good market value...one that typically has not gotten trashed at this point. Often times, short sale properties are in very good condition, with minimal damage...a "win-win" for all parties!
But with every "silver lining", there is a dark side...a down side...stay tuned...
Friday, May 1, 2009
New Help For Individuals With 2nd mortgages...
This week, the Obama Administration unveiled a fresh set of incentives for mortgage servicers to help strapped U.S. homeowners. The U.S. Treasury will tap into a $50 billion housing rescue fund (TARP) to pay off mortgage investors and reduce monthly payments for millions of borrowers.
Under this new program, the government will pay mortgage servicers $500 up front and $250 a year for three years for successfully modifying or erasing a second mortgage, such as a home equity loan. According to a senior administration official, "It will be a shared effort with lenders, investors, borrowers and the government to ease or extinguish second-lien mortgage payments." It is expected that a significant amount of big banks will sign up for the updated federal program to bring relief to troubled homeowners. Once those firms sign necessary contracts, they'll generally be obligated to modify second liens when they've initiated a modification on the first.
Second liens typically have a higher interest rate than primary mortgages but those second liens will have a lower rate under the modification plan. The interest rate will go at least as low as the interest rate on the first and it will fall much further to get there.
The administration also announced a set of incentives for servicers and lenders participating in the Hope for Homeowners Program, which aims to restore homeowners' lost equity by encouraging lenders to write down loan principal. The administration said it will take steps to incorporate Hope for Homeowners into its loan modification program. Servicers will be required to determine eligibility for a Hope for Homeowners refinancing. Where it proves viable, the servicer would need to offer this option to the borrower.
Under the program, servicers must agree to modify all second mortgages where the first mortgage has already been modified. To qualify for payment, servicers must extend the term of the second mortgage and reduce the interest rate to match the first mortgage. Then, the government will share the cost with the servicer of reducing the rate down to 1% for amortizing loans and 2% for interest-only loans.
Borrowers will receive payments of up to $250 per year for as many as five years if they stay current on the loan. The payments will be applied to pay down principal on the first mortgage.
Changes to the Hope for Homeowners program are designed to place it in line with the taxpayer-assisted loan modifications. Launched last fall to help troubled borrowers refinance into more affordable government-backed loans, it has failed to gain traction due to onerous borrower requirements and the nagging problem of second liens. The administration announced a $2500 up-front payment to servicers that refinance borrowers into the program. Meanwhile, lenders that originate the new loans will receive $1000 a year for three years, as long as the loans stay current.
Officials also say that they will continue to remove other bureaucratic encumbrances and expand incentives where needed to steer more homeowner away from default...a very "Empowering" move...
Under this new program, the government will pay mortgage servicers $500 up front and $250 a year for three years for successfully modifying or erasing a second mortgage, such as a home equity loan. According to a senior administration official, "It will be a shared effort with lenders, investors, borrowers and the government to ease or extinguish second-lien mortgage payments." It is expected that a significant amount of big banks will sign up for the updated federal program to bring relief to troubled homeowners. Once those firms sign necessary contracts, they'll generally be obligated to modify second liens when they've initiated a modification on the first.
Second liens typically have a higher interest rate than primary mortgages but those second liens will have a lower rate under the modification plan. The interest rate will go at least as low as the interest rate on the first and it will fall much further to get there.
The administration also announced a set of incentives for servicers and lenders participating in the Hope for Homeowners Program, which aims to restore homeowners' lost equity by encouraging lenders to write down loan principal. The administration said it will take steps to incorporate Hope for Homeowners into its loan modification program. Servicers will be required to determine eligibility for a Hope for Homeowners refinancing. Where it proves viable, the servicer would need to offer this option to the borrower.
Under the program, servicers must agree to modify all second mortgages where the first mortgage has already been modified. To qualify for payment, servicers must extend the term of the second mortgage and reduce the interest rate to match the first mortgage. Then, the government will share the cost with the servicer of reducing the rate down to 1% for amortizing loans and 2% for interest-only loans.
Borrowers will receive payments of up to $250 per year for as many as five years if they stay current on the loan. The payments will be applied to pay down principal on the first mortgage.
Changes to the Hope for Homeowners program are designed to place it in line with the taxpayer-assisted loan modifications. Launched last fall to help troubled borrowers refinance into more affordable government-backed loans, it has failed to gain traction due to onerous borrower requirements and the nagging problem of second liens. The administration announced a $2500 up-front payment to servicers that refinance borrowers into the program. Meanwhile, lenders that originate the new loans will receive $1000 a year for three years, as long as the loans stay current.
Officials also say that they will continue to remove other bureaucratic encumbrances and expand incentives where needed to steer more homeowner away from default...a very "Empowering" move...
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