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The Truth About Bankruptcy
Having trouble paying your mortgage payments? Loan modifications are not a do-it- yourself project.
At our Columbus, Ohio law office, we are seeing many people who have tried to work through home loan modifications on their own. Many people do this in an effort to save money, which is understandable. Recent news articles confirm what I am seeing, foreclosures are still climbing (BusinessWeek, January 14, 2010) and the majority of loan modification applications never turn into permanent loan modifications (usatoday.com, January 16, 2010).
Sadly, many borrowers spend weeks, even months, dealing with lenders only to run out of time and have their homes enter foreclosure and end up in a sheriff’s sale. Mortgage companies claim the reason that most loans are not permanently modified is that they do not receive the proper paperwork from the homeowners.
When homeowners have an experienced and skilled attorney working on their behalf, lenders are much less likely to misplace paperwork. The attorney ensures that the proper paperwork is submitted in a timely manner and that it is in the format that will be acceptable to the lender. In addition, the attorney holds the lender’s loss mitigation department accountable for their role by following up and making sure they meet their legal duty to mitigate and to fairly apply the HAMP program.
At Koffel Jump, we are one of just a handful of law offices (the only one in Ohio) to have EMODIFY. EMODIFY is a new state-of-the-art loan modification program designed by former employees of lenders familiar with the loss mitigation process. It allows clients to begin their loan modification on-line, if they desire. The information is submitted to one of our loan modification attorneys for review with the homeowner by teleconference or office conference, free of charge. EMODIFY assists the attorney in quickly determining homeowner eligibility and, therefore, whether or not a loan modification is the best legal solution. EMODIFY also places all of homeowner’s documentation into the preferred format that has been required by lenders —thus streamlining the loan modification process. The attorneys at Koffel Jump then stay on top of our clients’ loan modifications and communicate with the lenders on our clients’ behalf. Once approved for a trial modification, our attorneys will follow your through the trial period until a permanent modification is approved.
If you are having trouble paying your mortgage, or if you anticipate that might have difficulty in the future, now is the time to contact an experienced attorney. If you reside in Ohio, Koffel and Jump can handle your home loan modification for you. Contact our Columbus, Ohio office to schedule a free consultation with an attorney.
The Changing Face of Bankruptcy
The changing face of bankruptcy may surprise some.
According to a new study “The Vulnerable Middle Class: Bankruptcy and Class Status,” by Elizabeth Warren, Harvard Law professor, and Deborah Thorne, Ohio University professor of sociology, members of the middle class are the new face of bankruptcy.
A recent USA Today article previewing Thorne and Warren’s study describes how homeowners, college graduates, and small business owners, once thought to be a small percentage of bankruptcy filers, are now filing for bankruptcy at much higher rates. This study reflects what I am seeing in my Columbus, Ohio law practice, where we handle more bankruptcies than any firm in central Ohio. Many of my clients are college educated, hard working middle class families. Many are also white collar professionals with considerable assets.
If you are facing what seems like insurmountable debt and you are considering bankruptcy, I know that this is not an easy time for you. No one who has worked hard to advance a career, buy a home, and build a future wants to file for bankruptcy.
If you are considering bankruptcy, the best place to start is to schedule a consultation with an experienced bankruptcy attorney. An experienced bankruptcy attorney will use his or her knowledge and skills to protect your financial future. During a consultation in my law office, an experienced attorney will carefully evaluate your unique financial situation and give you recommendations on your best course of action. Our attorneys are experienced in handling mortgage loan modification, chapter 7, chapter 13, and debt settlement cases.
Because of the recent economy and the decline in home values many are now in financial situations that they wish they were not in. With the right legal representation, you can protect your assets and find the right financial solution for your future.
Please contact my Columbus, Ohio law office to schedule a consultation.
-Mark Jump
How Can I Avoid My 2nd Mortgage by Filing Bankruptcy?
If you file for Chapter 13 and the value of your home is less than you owe on your 1st mortgage and you also have a 2nd mortgage, Chapter 13 allows you to reclassify your second mortgage (i.e. remove it from your deed and pay it as an unsecured creditor) and pay back only a percentage of what is owed to your unsecured creditors (credit cards and balance of what was a 2nd mortgage).
Many people who qualify for Chapter 7( a“fresh start” provided by a complete discharge) choose to file for Chapter 13 because Chapter 13 will enable them to stay in their home (and afford their home) by reclassifying their second mortgage. A second mortgage cannot be reclassified under a Chapter 7. Because of this fact, a Chapter 13 may ironically provide more debt relief to some consumers than a complete discharge in Chapter 7.
If you are behind on your mortgage payments, under a Chapter 13 you will get caught up over 5 years (this is called “curing”). Falling behind on your second mortgage will have no bearing on reclassifying the second mortgage.
How do you decide if you should file for Chapter 7 or Chapter 13? You should sit down with an attorney who is experienced in bankruptcy and he/she should look at your entire situation to find the best financial solution for you.
For more information on bankruptcy in Ohio, contact my office at 614.556.4522
Mark Jump
Debt Settlement vs Bankruptcy
As an Ohio attorney with more than 15 years of experience in helping clients through bankruptcy, clients often ask me if they should file for bankruptcy or go the debt settlement route. The answer to this question depends on your financial situation.
Chapter 7
Certain income guidelines must be met in order to qualify for Chapter 7. However, if you do qualify for Chapter 7 (which provides for complete relief of debt and is a called a legal discharge) this route is usually the most appealing. If you are researching Chapter 7, you have probably come across the income charts that establish Chapter 7 eligibility. You should know that even if you do not fall into the eligible category as shown on these charts, you still may qualify for Chapter 7 through a means test. An experienced bankruptcy attorney can determine if you qualify for Chapter 7.
I should mention here that there is a misconception that if you file for Chapter 7 you will lose all your belongings. Ohio law allows for several personal property exemptions under Chapter 7 and unless you have considerable assets, you will probably not be affected. Contact my office at 614-556-4522 for more information on filing for Chapter 7 bankruptcy in Ohio.
Chapter 13
Chapter 13 allows individuals and families with higher income and assets that may not be fully exempt under Chapter 7 to protect those assets under Chapter 13. Under a Chapter 13, you may only be required to pay a portion of your unsecured debt depending on your assets and income. It is a court protected repayment plan through a trustee and may last between 3 to 5 years depending on whether or not your income is higher than the average income for your family size. It is not unusual to pay as low as 10% of your unsecured debt (i.e. credit cards, medical bills etc.) and to be able to re-write vehicle loans that are upside down. Some second mortgages may even be removed from your deed and paid at the same amount as your credit card debt. Because of the ability for some Chapter 13 filers to modify their vehicle loans and almost wipe out second mortgages (not available under Chapter 7), many people that otherwise qualify for Chapter 7 actually wisely elect to file Chapter 13.
Debt Settlement
When I arrange a debt settlement for a client, it is typically for a client who does not qualify for a Chapter 7 and who would be required to pay back more through a Chapter 13 than what he or she would in a debt settlement. In some debt settlement cases, you may be able to settle your debts for 40%-60% of what you owe.
Debt settlements are not without their drawbacks. Creditors involved in a debt settlement will usually require you to make a lump-sum payment in order to settle the debt for the 40%-60% mentioned above. In addition, in a debt settlement you may be issued a 1099 for the amount that the creditor did not require that you pay. This is called debt forgiveness and is taxable if your assets exceed your liabilities up to the amount forgiven. For example, if you are issued a 1099 for $20,000 that you saved and your assets exceed liabilities by only $10K, then only $10k is taxable. Note that if you have a retirement plan this will be counted as an asset in a debt settlement but retirement plans are exempt under bankruptcy.
Conclusion
Many people are surprised to learn that that their credit rating will not be more negatively affected by bankruptcy than by debt settlement. In addition, for most people, bankruptcy may be more financially advantageous than debt settlement. Unfortunately, many of my bankruptcy clients get involved with debt settlement companies before they see me. The debt settlement companies will not discuss bankruptcy with you because they do not understand how it works and if they did understand how it works they would have to explain to you that is in your best interest to file bankruptcy – and not hire them. If you are considering bankruptcy or debt settlement, a consultation with an attorney experienced in both debt settlement and bankruptcy should help you clear up your questions and concerns and find the right financial solution.
Mark Jump
For more information on filing bankruptcy in Ohio contact my Columbus, Ohio office at 614.556.4522
Will Chapter 7 bankruptcy ruin my credit?
This is a question that I am often asked and it is understandable that you would be concerned about how your credit will be affected by bankruptcy. If you are considering bankruptcy, it is likely that you currently have poor credit. Of course, the ideal way to repair credit is to pay off outstanding balances, pay any new bills in a timely manner, and to be careful not to borrow too much. Unfortunately, circumstances, often beyond our control, such as job loss, a serious illness, or an unaffordable mortgage can result in insurmountable debt.
A bankruptcy will remain on your credit report for ten years. However, this does not mean that bankruptcy will ruin your credit. Many people fear that they will not be able to obtain credit for ten years following their bankruptcy. It seems I meet with at least one new bankruptcy client every other day that has this misconception. My clients’ experience tells me this is simply not true. Depending on your employment and income situation you are likely to be offered car loans and credit cards shortly after your bankruptcy discharge. Just today, I talked to one of the car dealerships that works with my clients and they now have four (4) lender that will underwrite Chapter 7 debtors even before a discharge so long as the 341 Meeting of Creditors has taken place. Some people are able to purchase a home within two or three years of a chapter 7. These loans do usually come with higher interest rates, but keep in mind that we still enjoy historically low interest rates. So, a high risk home loan may be 8-9% and a high risk car loan may be 10-12%. Plus, incurring new credit after your bankruptcy may actually help you rebuild your credit.
Many people are surprised to learn that they will actually have a more favorable credit rating after their bankruptcy than they did before bankruptcy. This is due to both the change in debt to income ratio and that a person who has just gone through bankruptcy is less of a credit risk than a person who looks like they are on the verge of bankruptcy. If you stop to think about it, it makes sense. If you were lending money, would you lend to someone with $50,000.00 of credit card debt and no solution or someone your took the initiative to resolve their debt and came out of bankruptcy with $0.00 credit card debt. After bankruptcy, you are a blank slate because you have a fresh financial start. Ironically, you are a better credit risk for filing Chapter 7.
In the months and years following a chapter 7 discharge, if you carefully manage your finances, you should be able to obtain car loans, credit cards, and even qualify for a home mortgage. I have been doing this for more than fifteen (15) years and represented thousands of individuals and families in Chapter 7 and this has been their experience.
For more information on bankruptcy in Ohio, contact my Columbus, Ohio office at 614-481-4480
Mark Jump
