Senate Bill 2636 (Harry Reid, D, NV), which contains a provision that would allow for the modification of home mortgage loans in bankruptcy, will be up for a vote by the full Senate next week.
I urge anyone out there to contact your Senators and urge them to pass this legislation and specifically to keep this provision in the legislation.
According to NACBA, the National Association of Consumer Bankruptcy Attorneys this is our best chance at getting real mortgage relief this year! Please ask your fellow attorneys, family members, and clients to do the same.
Obviously, this piece of legislation is strongly opposed by mortgage bankers and their allies. We need strong support from you to get this done!
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March 7th, 2008 at 3:22 am
Hay, thats good, oh and too bad for all the mortage co, who have stollen our economey and our lives, we need intervetion and help. I am so glad that alot of people can save thier homes. I wish that the sub prime lenders could be under more survalliance.I have an loan that is killing my chance to ever recoop my investment. I am hoping that the December 07 bill will be signed by our President to help us.
So anyway, to all out there having this stuggel, keep your chin up, cuz, I know it will get better, because of us The People.
April 25th, 2008 at 4:13 am
Okay, so if this passes, I pray it does. Than maybe all of us will have part of our lives back. Kool
April 30th, 2008 at 2:54 pm
Can you still file chapter 7, and let your house foreclose?
May 11th, 2008 at 12:02 am
Well, this is another example of legislation that has stalled. Instead, there are other pieces of legislation being introduced. Namely, in the House of Representatives, there is a piece of legislation introduced in April, 2008.
It is H.R. 5679 “Foreclosure Prevention and Sound Mortgage Servicing Act of 2008.”
May 11th, 2008 at 12:04 am
Brenda - Generally, you can file for chapter 7 and discharge your mortgage balance if the mortgage company doesn’t get all of its money through the foreclosure sale.
May 11th, 2008 at 4:13 am
Im in a situation similar to Brenda i guess. But I intend to have a pro shortsale my house & possibly not being foreclosed. My credit cards & loans are very high (I got in trouble with rentals) and Im hoping to chapt 7 after thats over, whether it be foreclosure or shortsale. I just got an “owner financed” house so I can provide my family a home and not under a bridge. Life can get rough!! Will this work?
May 12th, 2008 at 5:11 am
Greg - I think your plan could work. I would get some tax advice if I were you though as you might have some tax liability from the short sale of the house. The tax liability likely would NOT be something you could discharge if you file bankruptcy soon after the short sale.
May 12th, 2008 at 7:48 am
Richard, Thanks for your reply. Will the tax threat be any different if I were to file chapter 7 instead of shortsale ? By the way I have a rental house that is upside down and my primary that is also upside down. I am so bogged down by credit cards & such from trying to keep this whole thing afloat that I have to do something fast. Where might I get sound tax advice for the state of Missouri concerning a situation like this?
May 12th, 2008 at 7:58 am
Richard, Greg again… I, for some reason thought that a shortsale would be a better alternative than bankruptcy. I have no equity to be hoping for, so, if a chapter 7 would be just as well and protect me from the tax hit then thats what I’ll do. Do they come back to you for the tax amount if it is sold on the courthouse steps too?
May 16th, 2008 at 5:54 am
What happened to Richard??
May 17th, 2008 at 6:28 pm
If we’re not yet behind on our mortgage payments or car notes and we currently owe more than they’re worth how do you decide if you should file Chapter 7 or 13? It seems that 7 would be a fresher start based on the short read I’ve done so far.
May 21st, 2008 at 4:36 am
Greg - I’m still here. :-) The tax problem would exist whether there is a short sale, or a foreclosure. Bankruptcy is simply eliminating any obligation to pay anyting to the mortgage company. The mortgage company simply gets whatever they can out of the foreclosure sale (or through the short sale). I hope that answers your question.
May 21st, 2008 at 4:38 am
Beth - It sounds like a chapter 7 could work for you and if you continue to pay your mortgage payment (since there isn’t equity in your house) you can keep your house! As far as specific advice about your situation and whether a chapter 7 or chapter 13 is better, I would encourage you to talk to one of our lawyers about that. You can even submit a request for a free legal evaluation on the site. We’ll call you!
May 30th, 2008 at 8:38 am
Must you have your current taxes filed in order to file chapter 7?
June 2nd, 2008 at 4:07 pm
What do you if your attorney will not respond to your questions or situation. I have not been able to file because He just is Too Busy. Can I get my money back to go to a different attorney or do they charge you a fee eventhough it’s not your fault? All I want to do is file, have paid all my money and have all of the paperwork into the lawyer. Help Please. The attorney will not return my phone calls so I do not even know what to think.
June 12th, 2008 at 3:21 am
If I file chapter 7 or 13 will this action stop payment’s on my home? or reduce the sub-prime amount on these loans
June 18th, 2008 at 9:34 pm
Seems that legislation has not helped us very much. Unfortunately I dont think they are in touch with the consumer and how this has affected our families. Everywhere I go I hear of others who are foreclosing and filing bankruptcy. Its horrible. I never thought I would be in this situation
June 27th, 2008 at 9:27 pm
I own a business with commercial property. From business income, I hardly make up the mortgage payment. If I foreclose/short sell on the commercial property and if the lender write off the left over mortgage debt, will I be liable to receive 1099? If I receive 1099 and I declare personal chapter 7, will I be able to eliminate IRS debt? Please let me know. Thank you. Since I have SBA loan for my business, do you think the lender will negotiate the principal amount and lower it? Please help me.
June 30th, 2008 at 11:16 am
Generally you would get a 1099 in the situation you describe. However, I would consult with a CPA or tax attorney for specific advice about that.
Income tax debt is only discharged in bankruptcy in very limited circumstances.
Whether the SBA will negotiate new terms with you, I don’t know. You can always inquire. You may also want to consider restructuring your debt in a chapter 13 or chapter 11 case.
July 19th, 2008 at 11:41 pm
I have had my discharge hearing on June 27th. I now feel like the clock is ticking and I have had no luck in finding a properrty to rent. Any Suggestions? Also, I was not even given atimeframe as to exactly when I must vacate my property> Any Suggestions?
July 21st, 2008 at 7:46 am
I’m currently filing a Ch. 13 bankruptcy and after reading this blog..I want to file a Ch. 7 if I can keep my home. Do you have the right to decide which chapter I want to file?
August 2nd, 2008 at 11:59 pm
I am in a terrible situation–total financial ruin and to make matters worse my husband wants a divorce. Jointly we are already 2 months behind on the mortgage and up to 2 to 3 months on credit card payments. We have over $30K in credit card debt and when we started to fall behind on everything the late fees and over the limit fees made it impossible to pay the minimum payments. My husband said he talked with an attorney who told him we make too much money to qualify for bankruptcy jointly. However, we can file for dissolution and then bankruptcy separately. I am at a loss. I think if we could file bankruptcy it would relieve some of the financial stress that caused our marriage to suffer so much. In the meantime, I am getting collections calls every day every hour of the day including work. Any adivse would be greatly appreciated.
August 7th, 2008 at 12:11 pm
If I owe 300,000 on my house and the bank can only get 200,000 for the house after I walk away or do I owe taxes on the $100,000?
August 9th, 2008 at 9:52 am
Most of our debts are in my name. Can I file instead of jointly to hopefully save my wife’s credit? How will that affect our home since that has both our names on it? Thanks…
August 13th, 2008 at 11:54 pm
Erin - You don’t have to leave your property until the foreclosure sale completes. You will get a notice. In the meantime, you should be saving as much money as possible because you want to be in a position to offer a bigger security deposit which should make it much easier for you to rent a place.
August 13th, 2008 at 11:57 pm
Sherry Andrew - Certainly a person has the option of choosing whatever bankruptcy they want. However, there are qualifications that must be met and depending on the status of payments on your house and the equity in the house, there could be good reasons to stay in your chapter 13. I would encourage you to discuss the specifics of your situation with your lawyer. I can not give specific legal advice in a blog, of course.
August 14th, 2008 at 12:01 am
Lori M - You have some very specific questions which should be addressed in a one-on-one meeting with a lawyer. Your income is relevant to determine chances of success in a bankruptcy case so the situation your describe is feasible.
August 14th, 2008 at 12:05 am
Steve Burk - Outside of bankruptcy you might owe a deficiency balance to the creditor (depending on the state you live in). You also could owe tax obligations. However, bankruptcy can be a good way to eliminate your liability on the deficiency balance. Bankruptcy is also an exception to the IRS rule that says “forgiven” debt is taxable income to the debtor. When you file a bankruptcy you do not have to pay taxes on debts that are discharged in bankruptcy. There is also an “insolvency” exception to the IRS rule.
August 14th, 2008 at 12:14 am
Paul - It is possible to file an individual bankruptcy that does not involve your spouse. I don’t know what would happen to the house as I don’t have enough information to form an opinion. Whether or not you could keep your house and file for bankruptcy would be something a lawyer at a consultation could give you an opinion about. Credit is a tricky thing. Your spouse’s credit will likely show that you filed for bankruptcy since you are joint on the mortgage. However, her credit can not report that she filed for bankruptcy, only that you filed. Theoretically, that fact should protect your spouse’s credit rating. Though, your spouse will now have sole obligation on the mortgage and that could affect debt to income ratio and that also is considered when scoring a person’s credit.
The bottom line here is that a bankruptcy is appropriate to eliminate debt. If you have debt you can’t afford, your credit (and potentially your spouse’s credit) will be adversely affected. You will not be able to rebuild the score until you eliminate the debt. If you can’t afford to pay the debt, the most effective way to eliminate the debt could be a bankruptcy case.