admin on January 12th, 2009
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The decision to file for bankruptcy is a tough one for the homeowner, but a choice millions of Americans are making each day as a result of the collapse of the housing market. While contemplating bankruptcy, the major concern of the homeowner is what happens to the home after filing. However, depending on the choice of filing chapter 7 or 13 bankruptcy, the homeowner can decide the fate of the home.
A chapter 13 bankruptcy allows the homeowner to not loose the home. The chapter 13 bankruptcy will reorganize the homeowner’s debt and create a payment plan. The homeowner will be required to provide a financial plan to maintain the home loan, satisfy the court’s payment plan to meet past due balances and any other financial obligations. If a Chapter 7 bankruptcy is chosen, the home will be relinquished to the titled lender and a foreclosure auction will take place after the bankruptcy is discharged. Oftentimes, homeowners file a bankruptcy to stop a foreclosure and allow more time to weigh financial decisions which will decide their home’s fate.
The majority of foreclosed or bankrupt homeowners eventually buy another home after their financial ordeal is long behind them. However, a re-establishment of a financial profile must be planned and properly managed before homeownership is to be re-considered. By rebuilding a credit profile the bankrupt homeowner is evidencing financial responsibility, creditworthiness and increasing the likelihood of purchasing another home sooner rather than later. A substantial savings should be accumulated, as buying a home after bankruptcy may require a larger cash down payment. FHA offers low down-payment mortgage loans and will finance the purchase of a home by a chapter 7 filer in as little as 3 years. In addition, a chapter 13 bankruptcy filer can refinance their existing home out of bankruptcy, as long as there is enough equity in the home to pay the bankruptcy claim. Some private mortgage companies will finance home loans after bankruptcy is filed as long as the borrower can prove to be financially able to afford the mortgage and maintain cash reserves. Anyone considering buying a home after bankruptcy should be mindful that a sizable down payment and higher than market interest rates may be a requirement of the home mortgage.
Bankruptcy can offer the homeowner a way to keep their home when a foreclosure is threatening or allow a homeowner to walk away from their home and gain a fresh financial start. Congress is considering changes to bankruptcy laws to allow the bankruptcy judge to re-write the mortgage terms to meet the present value of the home and the homeowner’s ability to pay for housing. However, the decision to file for bankruptcy should be based on the homeowner’s honest ability to sustain all financial responsibilities and not with the emotional attachment to property.
admin on December 20th, 2008
Bankruptcy filings have increased by 30% over the last year according to statistics from the US Bankruptcy Courts. As of November, over 1 million people have filed for bankruptcy. Although bankruptcy is not the end of the road for the person or corporation filing, it does represent a near final option for many facing financial distress.
Many of those filing bankruptcy this past year have been a direct result of the worsening US economy. Individuals and corporations file for bankruptcy to seek protection from creditors. Bankruptcy can provide a debtor some breathing room while assets are sold to pay creditors or a reorganization of finances is made to repay debts.
The three most common forms of bankruptcy are Chapters 7, 11 and 13. A Chapter 7 bankruptcy provides the filer with a “fresh start” as all debts are satisfied and limited to what can be obtained from the liquidation of the filer’s personal assets. A Chapter 13 bankruptcy is a filing process that will allow a consumer to re-organize debts to repay creditors and possibly maintain possession of various assets to include a primary residence. The Chapter 11 bankruptcy is used by companies seeking to reorganization finances whether assets are liquated or maintained.
The bankruptcy courts expect the growing trend of bankruptcy filings to continue while the nation’s economy is expected to continue to slide as the federal and state governments scramble to cure the financial markets.
admin on November 18th, 2008
Bankruptcies are on the rise as Americans adjust to dealing with record-high consumer debt, reduced credit and job losses. Generally through tight economic times, the American homeowner was able to tap home equity to manage finances. However, declining home values and the decreased ability to borrow money has many homeowners struggling to simply hold unto their homes. Many Americans, under financial stress, have managed their daily finances with high-interest and penalty-laden credit cards. This behavior, coupled with the historic financial times, has created an economic environment prone to increased bankruptcy filings.
The bankruptcy filing rate has increased on average 8 percent per month over the last two years. These filing statistics are split between chapter 7 and chapter 13 filing petitions and have grown by 34 percent over the last 12 months. The Chapter 7 bankruptcy provides the petitioner the ability to clear all consumer debts. Although the assets of the petitioner will be sold to pay any outstanding debt, the petitioner is able to receive a “fresh start” with their financial lives. The Chapter 13 bankruptcy will re-organize consumer debts to be repaid by the debtor and allow a homeowner to keep their home while repaying defaulted and delinquent debts. As the economy continues its downward spiral, the number of foreclosure notices continue to grow and more restrictive borrowing guidelines surface, the Americans consumer will be left with few choices outside of filing for bankruptcy.
admin on May 4th, 2008
A bankruptcy petition contains the main petition and then schedules that define things like your debts, assets, income, expenses, ability to repay to your debts, business information, and previous financial information like your total income for prior years, recent debts you may have paid off, and your intent for debts you currently have. Let’s take a look at each section:
Voluntary Petition Form 1 - This bankruptcy form is where you will inform the court of what chapter of bankruptcy you are filing, your name, address, attorney or non-attorney bankruptcy petition preparer, other bankruptcy filings that are related, and some statistical information about your debts. Included as an exhibit will be your statement of compliance with the credit counseling requirement.
Schedule A - Schedule A of your bankruptcy will list all of your real property, generally defined as anything attached to the earth such as a home or condo.
Schedule B - On Schedule B, your personal property will be listed. Personal property is pretty much everything you own that is not connected to the earth, such as cars, clothing, books, furniture, jewelry, bank accounts, retirement accounts, tax refunds, tools, animals, etc.
Schedule C - Schedule C contains the exemptions you choose for your property. Each state has their own bankruptcy exemption list and monetary amount you can claim on each exemption, and there are federal bankruptcy exemptions that can also be chosen in some states.
Schedule D - Secured debts go on Schedule D of the bankruptcy petition. Secured means a piece of property that has a loan against it, typically a home, car, furniture, or retirement account.
Schedule E - Unsecured priority debts are listed on Schedule E of a bankruptcy. Unsecured means the debt is not attached to a piece or property. Priority debts include, but are not limited to, things like support obligations, taxes, claims for death or personal injury while the debtor was intoxicated.
Schedule F - All other unsecured debts go on Schedule F of the bankruptcy petition. Medical bills, utilities, and credit card debts are the most often listed.
Schedule G - Schedule G includes executory contracts and unexpired leases. Typical debts listed here include cell phone contracts and leased vehicles.
Schedule H - Any codebtors to debts are listed on Schedule H.
Schedule I - Schedule I will include all income, place of employment and any dependents that rely on you for income.
Schedule J - Expenses are listed on this section of the bankruptcy petition, including household expenses, medical expenses, any recurring expenses like car payments, additional taxes, etc.
Statement of Financial Affairs - The SOF contains 25 questions that cover everything from previous addresses you have lived at, past marriages, past income, debts you have recently paid, to environmental notices you’ve received and information on businesses you own or partially own.
Statement of Intention - In a chapter 7 bankruptcy a statement of intention tells the court what you plan to do with your secured debts.
Means Test - The new bankruptcy means test contains 56 questions on your income and expenses, though most people will only have to answer 14 before it’s determined that they are not abusing the bankruptcy system and are therefore eligible for chapter 7 bankruptcy.
Creditor Matrix - The creditor matrix is simply a list of each of your creditors with their business name and address. This list is what the court uses to send notices to each of your creditors.
Statement of SSN - This sheet will verify your SSN for the court.
Certificate of Financial Management Course - This form is typically filed after the petition once you have completed the new mandatory financial management course as instructed by the court.
There may be other forms that need to be completed with your petition depending on where you are filing, if you are filing by yourself or with a petition preparer, need a homestead deed, or need to serve creditors on your own.
