Mortgage Companies Are Taking A Long Time to Foreclose, Isn’t That A Good Thing for Me?
As discussed in a previous blog post, it is taking mortgage companies an extraordinary period of time to foreclose on properties these days. Unfortunately, the delay in the foreclose process seems to be a “double-edged sword” depending on the homeowners’ goals.
In some cases, it is a benefit to the homeowners, since they may be able to live in their home for a year or more before the foreclosure is completed. This delay allows the family to stay in “their” home and allows their children to finish the school year in a familiar setting with friends and teachers they adore. In other cases, it is purely a financial decision. The delay provides time for the family to save money, since they are not paying the mortgage loan on the house or rent on another property. When the day comes to move out of the home, the family has the funds needed for moving costs and for the security deposit and rent on the new apartment or house.
On the other hand, the family down the street has made the decision to move on with their lives and have already moved out of the house. The house represents a negative time in their lives and they want a fresh start in new surroundings. In other cases, a member of the family has accepted a new job in another state, so they have no option but to move. These homeowners want the mortgage company to foreclose as soon as possible so this chapter of their lives can be closed. The family has moved on, unfortunately the house is still legally their responsibility. These families receive stack after stack of letters from the mortgage company offering workout plans and other alternatives to foreclosure. On top of that, the homeowners association (HOA) is sending threatening letters regarding tall grass growing in the law, mosquitoes in the swimming pool, and delinquent assessments, dues and fees. The HOA is threatening to file a lawsuit against the homeowners if they do not pay the debt. Pay a debt to the HOA for a house they do not live in? Yes, the HOA assessments, dues and fees are still the homeowners’ financial responsibility until the property is no longer in their names, so the HOA debt must be paid. As the old saying goes, these families can’t get the “monkey, aka house, off their backs”!
As a result, the delay in foreclosing on a house can be a good or bad thing depending on the homeowners’ goals. As the homeowners, you can ask the mortgage company to expedite the foreclosure sale but often that is unsuccessful. You can also look at signing a deed in lieu of foreclose or possibly quit claiming the property to the mortgage company. These options will be covered in a later blog.
Can I Still Tithe or Give to the Church If I File Bankruptcy?
There is no doubt about it, bankruptcy will (at least for the short term) have an effect on your everyday life where finances are concerned – from your living situation, the way your bills are paid, how you can get credit and so on and so forth; but does it also effect being able to tithe or make donations to your church?
Typically the answer is ?no, you should still be able to tithe and contribute to your church?. In your monthly budget there is a specific place for you to list the amount that you plan on giving to the church in the future. There is also an area in the petition to list all gifts/donations made to the church within one year before filing bankruptcy and that average will also be used in your means test for qualifying for the bankruptcy.
Keep in mind though, the bankruptcy Trustee will allow the tithing or charitable contributions if there is a history of giving. Let me explain why. The bankruptcy courts are worried about people who have too much disposable income each month (which could determine wither they file a Chapter 7 bankruptcy or Chapter 13 bankruptcy) all of a sudden “finding Jesus” as a way to dispose or get rid of that disposable income problem. If you have a history of giving to the church then you usually will have no problem with the bankruptcy Trustee. However, if you decide to start giving large amounts of charitable contributions to the church, for the first time, at the same time you decide to file bankruptcy the courts could have an issue with your newfound religious yearning.
If you have been tithing to the church the bankruptcy Trustee or bankruptcy courts may require a written letter from your church (or any charitable group for that matter) showing you have been giving the amounts stated in your bankruptcy petition. The bankruptcy courts also look at what percentage of your income you are giving to your church each month. Your contributions have to be within reason.
If you are someone who tithes or donates to your church on a regular basis you will need to make sure that these donations/gifts are listed in your monthly budget. Also, you may want to go ahead and gather copies of any payments you made to your church within the last year just in case they are needed or requested at a later time.
Is the Information on My Bankruptcy Petition Private?
For many, filing bankruptcy can be a very stressful, emotional and embarrassing time in your life. Ask any bankruptcy attorney, and they will tell you this is a question they are asked quite often. Most people would prefer to not tell the world of their financial problems and keep the information in their bankruptcy private. However, bankruptcy is a public filing and is a matter of public record.
So what does public record mean?
Public record usually refers to any information that is filed and/or maintained by a government agency, such as a court house. When you file for bankruptcy, your case is assigned to a district of the United State Bankruptcy Court. Your bankruptcy then becomes Public Record and the information in your bankruptcy is made available to the public. However, certain information in your bankruptcy, such as social security numbers, loan numbers and other identifiers are kept private and cannot be accessed by the public. Federal Bankruptcy law requires that notice of your bankruptcy case must be sent to all your creditors. This includes every individual and business owed, as well as any co-signor(s) of loans.
The chances of your family, co-workers, friends and neighbors finding out you?ve filed bankruptcy are unlikely, unless you owe them money, they co-signed on a loan for you, or they specifically go looking for it. We are also asked all the time whether or not bankruptcy will appear in the local newspaper. The answer is, it depends where you live. Some local papers will run a list of people who have filed bankruptcy. However, if a paper is running a list of people who filed bankruptcy then the chances are the paper doesn’t have a high readership anyways.
It?s important to remember you are not alone facing financial hardships. You?re filing bankruptcy to take control of your financial situation!
Can I Purchase a House While in a Chapter 13 Bankruptcy?
While in a Chapter 13 bankruptcy, you must get permission from the bankruptcy Trustee to incur any new debt. This includes a mortgage if you want to purchase a new house. When you are serious about buying a new home within a Chapter 13 bankruptcy, you should let your bankruptcy lawyer know. They will get in contact with the Trustee for you and let him or her know that you would like permission to incur debt. They will file a motion with the court for this. Once the trustee makes a decision, the attorney will let you know.
What is the Impact of Bankruptcy On Getting Financial Aid For School?
I’ve filed for bankruptcy and now I want to go back to school. I need a loan to be able to do this. Can I still get a student loan?
Filing for bankruptcy should not affect your ability to get students loans that are federally funded. As long as any other student loans that you may have are not in default and are being paid back, a student typically should not have any trouble getting any new federal student loans because of the bankruptcy.
Privately backed student loans are a different story. Private student loans typically take your credit into consideration so that may make them more difficult to obtain after having filed for bankruptcy. But it is still possible to obtain private student loans after filing. They do look at your previous credit, but having a bankruptcy on your credit is not the only determining factor. The lenders will typically looks at more than just that. If a parent has gone through bankruptcy and the child is applying for a private student loan, then it is only the child’s credit history that is being looked at. One way that there might be a problem with getting this loan is if the parent is required to co-sign for it and they have filed bankruptcy before.
We understand that after filing bankruptcy you, or your children, may want to go to school to further their education. Most student loans are “need based”. This means they are based on your income each month. Filing bankruptcy obviously does not increase your income (although it may increase your disposable income). Therefore, you would still be eligible for students loans despite your bankruptcy filing.
Can I Take Out A 401(k) Loan After Filing Chapter 13 Bankruptcy?
As long as your 401(k) is ERISA qualified and was exempted (protected) in your bankruptcy petition, you can most likely take a loan against the account while in an active Chapter 13 bankruptcy. However, you MUST get the court’s permission!
When you are filing for bankruptcy, one of the top concerns is to protect your assets. There are federal and state exemptions available to protect any equity or funds in your possessions. A 401(k) plan is a common account that should be protected from the bankruptcy creditors. Through the case of Patterson vs. Shumate, there is no limit to the amount that may be protected under this exemption as long as the plan or account is ERISA qualified (Employee Retirement Income Security Act of 1974). You will need to provide documentation proving the plan is ERISA qualified, such as a copy of the plan summary that includes the ERISA statement.
To obtain a loan from your 401(k) while in a Chapter 13 bankruptcy you must get the court’s permission. Your bankruptcy lawyer can do so by filing a Motion to Incur Debt. You would have to appear in front of the judge to get the judge’s permission. The judge will usually grant permission to pull from your 401(k) loan if you can provide a good reason for why you need the money. This, typically, needs to be something that is a necessity, not just a “want”. An example of this may be if you need money to purchase a vehicle after another one has broken down or if you need money to pay medical expenses that were incurred after the filing of the bankruptcy. Discuss this with your bankruptcy lawyer before starting the loan withdrawal process.
What If I Move During My Bankruptcy?
Your mailing address is very important while you are in an active bankruptcy. Your attorney as well as the Trustee and/or Bankruptcy Court, send you important documents during your bankruptcy for a number of reasons, such as updating you on the status of your case or sending you your final decree which lets you know your case is closed.
In a Chapter 7 bankruptcy, from your filing date, you will receive your Final Decree within 4 to 6 months. As long as you have a mailing address that will remain the same during that time period, there should not be an issue. However, in a Chapter 13 bankruptcy, it will be 3 to 5 years before you receive your final decree. Therefore, it may be more likely for you to switch residences. You should notify your attorney of your updated address, so they may file a notice of address change with the bankruptcy court. This is important because it will ensure that you receive important and time sensitive information from the bankruptcy court.
Also, please be aware that if you are selling your home, you must request permission from the Bankruptcy Court to transfer that property while in an active bankruptcy, regardless of which chapter you file.
