How does it work for people that have a second mortgage?

If you have a second mortgage on your home and you don’t have equity in your property and your home is underwater, we can get rid of it in a chapter 13 bankruptcy and as long as you successfully go through a chapter 13 and get a discharge that second mortgage will go away forever.

Some people might have maybe a second home or an investment property. What happens in that case?

For investment properties, you have an option. You can always file a bankruptcy and give it up if you don’t want it. But if you want to keep it and let’s say it’s providing a decent amount of rent to cover the principal interest, the homeowners fees and all those things, you can actually reduce the principal on your investment home in a chapter 13 bankruptcy as long as you’re willing to pay the balance in five years with about 5% to 6% interest. So let’s say for example you owe $200,000 on a condo but the condo’s only worth $60,000. As long as you can pay $60,000 over a 5 year period with about 5% or 6% interest, you can actually keep your condo and keep on renting it out, collect rent, and own it free and clear in 5 years. That is the magic of Chapter 13.

If someone falls behind on mortgage payments and is facing foreclosure, what do you advice people to do when a foreclosure notification arrives in the mail or a foreclosure lawsuit is served upon them?

Well, as soon as you get served by a foreclosure complaint, you need to go and see an attorney because you have 20 days to file or response to the complaint. If you do not file a response, they will get a default judgement against you. Basically, when they serve you with the lawsuit, they have started a war and you have the option of doing something and fighting back or not doing anything at all. I suggest to people that they fight back because even if nothing happens in their foreclosure case and even if they never win their case, you can get anywhere from a year or two years in that house without having to make a mortgage payment. We have defenses that we can legally file in your case that will keep you in your house for a long, long time. The one thing I always suggest to people is “Don’t sleep on your rights, fight for them and don’t ever leave your home. Stay in the home until the last day, until the sheriff  actually comes and says..man, you have to leave your house now.”  

What happens after you file bankruptcy? How long will it take someone to get back on their feet?

Usually, chapter 7 takes about 3 to 4 months to complete. The way you’ll know it is completed is you get an order from the court.  It is called Discharge of Debtor. A discharge means a complete forgiveness of all your debts. Certain debts like recent taxes, student loans, restitution, and many other never get discharged. Immediately after that, you can contact me and I can start  credit restoration for you. I can give you more than 100 different ways on things that yo9u can do to restore your credit and improve your credit score while I do my thing trying to remove the bad things from your credit report. Within 12 to 18 months it is not uncommon for you to have a score of 650 or above. Sometimes within a few months of you getting a discharge, you get offers from credit card companies offering you credit cards. Some people are very shy. They don’t want to take credit cards. I say take every credit card that they offer you. Just use them wisely. Don’t do it like the last time. That’s all because you will need these credit cards to build credit. In a chapter 13, you can actually start fixing your credit the moment you file your bankruptcy. You don’t have to wait for 5 years until the bankruptcy is over. I have plenty of clients that I’m working on right now who are in an active bankruptcy and they already have scores of 650 and above.

Should people be fearful of losing their home if they file bankruptcy?

Not necessarily. You don’t have to ever worry about losing your home just because you file bankruptcy. In a chapter 13, you have the option of making your back payments and your current payments and catching up so you can keep your home. Many people have this impression that if I file a chapter 7, they’re going to take my home away and that is not true at all. The only way a bank can take your home is when they go through the foreclosure procedure and sell your home at the foreclosure sale. Nobody can make you leave your home even a day before the foreclosure sale.  The mortgage company cannot just come and lock you out of your house. It doesn’t happen that way. Give me a call and I will explain to you step by step how that works. Chapter 13 like I said is a reorganization and you have the option if you have the ability to come current on your mortgage payments and keep your house. If your house is underwater, we can also try to get you a loan modification through a chapter 13 bankruptcy. There is a better than 50 percent chance of success that you may get a loan modification through a chapter 13. If you do not like the loan modification you get in the Chapter 13 case, you can reject it, and convert your case to a Chapter 7 if you qualify. There are various options that are available to you. But the one thing is for sure and that is you will not lose your home just because you filed a bankruptcy. I do offer a Free Initial Consultation where I will explain in detail your rights, remedies and obligations. I guarantee you that you will leave my office much wiser than when you came in.

What are the factors that you should consider when you’re doing either chapter 7 or chapter 13?

Chapter 7 is usually done by people who have a lot of debt especially credit card debts, hospital debts, defaulted leases, rent, and other kinds of debts that you cannot afford to pay anymore because of health or employment issues. Most people who file a Chapter 7 do not have too many non-exempt assets. For example, in bankruptcy, you’re allowed to keep certain amount of assets. Anything more than that, you actually have to give it to a trustee so that he can sell it and pay your creditors even though the creditors may get pennies on the dollar. That’s the purpose of bankruptcy.  To be fair to you and to your creditors. Most people, unless they have a large monthly income from some source, are qualified for chapter 7. If not, with proper planning, we can qualify them in a few months or down the road whereas chapter 13 is filed by people who want to keep some of their assets. For example you may have a car worth $20,000 which is completely paid off. If you filed a chapter 7, the Trustee will take your car, liquidate it, and pay the money to your creditors. Whereas if you file a chapter 13, you can keep the car and just pay the value of that car without interest, without penalties over a period of 36 months up to 60 months to your creditors. So that’s the big difference is if you have assets, you need to file a chapter 13. If you don’t have assets, a chapter 7 would be perfect for you.