When people hear the word bankruptcy, they think “fresh start”. While they aren’t completely wrong, it’s generally never that simple. Filing for bankruptcy can be very confusing, time-consuming, and expensive….
FREQUENTLY ASKED QUESTIONS
Check out our most frequently asked questions.
Q: What are the Pros and Cons of Declaring Bankruptcy?
A: At Bartifay Law, we understand that struggling with debt is more than just not paying your bills. Just as each individual is different, so too, are their debt situations. If you find yourself drowning in debt with no clear way through, you may be considering bankruptcy as an option. If this is the case, let’s take a look at when it’s best to file and what type of filing is right for you.
Q: What are the pros?
A: Debt Forgiveness– With a Chapter 7 bankruptcy filing, you’ll have the opportunity to start fresh with a clean slate. For Chapter 13, you’ll need to pay for a period of time before debt is eventually forgiven. Either way, this is the biggest advantage of filing for bankruptcy.
A: No More Collector Calls– In the case of Chapter 7, you will be legally protected from debt collectors that call and solicit repayment.
A: Rebuild Credit– With a bankruptcy filing, you will be able to start building your credit again, having debts forgiven or repayment plans structured.
A: No More Credit Cards– Without access to credit cards you’ll be able to develop healthier spending habits that will help prevent you from making the same mistakes.
Q: What are the cons?
A: Limited Borrowing Opportunities– Because your credit has been reset, it will be a challenge to borrow or get approval for credit without exorbitant percentage rates.
A: Public Record– When you file, it becomes part of the public record, allowing anyone to access your filings.
A: Cost of Filing – Filing isn’t free. If you choose to hire an attorney, that will be another expense.
A: Stress – Studies have shown that individuals struggling with debt or who have chosen to declare bankruptcy tend to find themselves in poorer health because of increased stress which, in turn, leads to poorer health choices.
Q: What are the different types?
A: There are three main types of bankruptcy. Chapter 11, Chapter 13, and Chapter 7.
Q: What is Chapter 11 bankruptcy?
A: Chapter 11 bankruptcy is much less common because it mainly focuses on businesses or individuals with large amounts of debt. In the case of Chapter 11, the process is long and your finances are controlled by a court appointed trustee, and you will be required to repay debt over time.
Q: What is Chapter 7 bankruptcy?
A: Chapter 7 bankruptcy is far more common and what most people are considering when they file for bankruptcy. With Chapter 7, your debts will be forgiven and the process is relatively quick in comparison to the other two types. In the case of Chapter 7, the debtor could be forced to liquidate assets to repay part of their debt. In order to file for Chapter 7 you must qualify.
Q: What is Chapter 13 bankruptcy?
A: This type of filing is also common. Chapter 13 differs from that of Chapter 7 in that the debtor will essentially be placed into a forced repayment plan, usually over a period of 3-5 years. In a Chapter 13 case, you will not be forced to liquidate any property and requires employment or a regular source of income. In most cases, a trustee is appointed to oversee the repayment process.
Q: How can Bartifay Law Offices help?
A: Bankruptcy can be a stressful and complicated process, but it doesn’t have to be. Here at Bartifay Law we specialize in handling Chapter 7 and 13 Bankruptcy. Call or stop by our offices today for a free consultation.
Q: What are the best home retention options?
A: Millions of individuals are struggling to pay off their mortgages. If you find yourself behind on payments by 60 days or more, you may have been issued a foreclosure notice. When faced with the threat of losing your home, especially when compounded by other debt factors, doing nothing can seem like the best choice. We encourage you to take action, as there are many home retention options available to you.
Q: How do I prevent foreclosure?
A: We understand that it can be a stressful and embarrassing time. As the bills pile, the phone starts ringing off the hook with debt collectors, and you begin to feel as though you’re drowning. It seems like there is no way out, that losing your home is inevitable. This is not the case. Several options are available to help you keep your home and avoid foreclosure.
Q: How can loan modification help?
A: Loan modification is a great way to alter the terms of your current mortgage, lowering the monthly payment. Depending on your mortgage, you may qualify for a few different types of loan modifications. In most cases, contacting your current loan provider will get you the proper information on how to get started.
Q: How can forbearance and repayment plans help?
A: These plans temporarily suspend or reduce the amount of your loan payment. If you cannot make payments because of a medical condition, natural disaster or because of a personal injury, this is a good consideration. In most cases, this requires a good history of on-time payments.
Q: How can bankruptcy serve me?
A: Filing for bankruptcy may be a choice when facing foreclosure on your home. If you’ve successfully modified your loan and gotten current on payments, in certain states it may be possible to keep your home in a Chapter 7 bankruptcy filing. However, a Chapter 13 bankruptcy filing is much more likely to allow you to keep your home through a structured repayment plan.
Q: How can refinancing help?
A: This isn’t commonly an option for behind borrowers. Refinancing usually requires payments to be current and is essentially replacing your current loan with a new one. If you can see that the payments on your home are becoming too much, this may be a great way to proactively avoid falling behind on payments or facing foreclosure.
Q: Do I have other options?
Some people prefer to cut their losses and move on. If this is the route you wish to go, options that can free you up from the debt of your mortgage are available.
Q: How can Chapter 7 bankruptcy help?
A: This form of bankruptcy will relieve you of your debt and is usually a process that takes 3-6 months. If you just wish to start over, this may be a good choice for you.
Q: What is a short sale?
A: Many borrowers owe more on their mortgages than their home is worth. By working with your lender, you may both come to an agreement on an acceptable amount of loss for both parties, and choose to sell the home for an agreed upon amount.
Q: What is forfeiture?
A: If your mortgage lender is willing to accept this option, you simply return the home to them in exchange of forfeiture of the loan.
Q: How do I take action today?
A: The most stressful thing you can do is nothing. Falling behind on the payment of your home does not guarantee its loss. Nor does it mean you have no power to change your situation. By doing nothing, you create a more stressful environment for you and your family. Act now by contacting Bartifay Law Offices for a free consultation in your home retention options. Our attorneys specialize in foreclosure, loan modification and bankruptcy.
Q: How do I modify my mortgage?
A: Millions of people struggle to keep up with their mortgage loan after falling behind on their monthly payments. If you’re past due on your payments by 60 days or more or facing foreclosure, or your loan is upside down, meaning the money owed on your mortgage is more than the value of your home, then you should consider a mortgage modification. You’re not alone in facing these issues, and Bartifay Law Offices is here to help make things simpler for you.
Q: What is mortgage modification?
A: Many homeowners will choose to do nothing when faced with the foreclosure of their home, either because they don’t know other options exist or because they fear the process is too complicated. A mortgage modification is simply a “change to any original terms of a loan.” Usually a modification is pursued in order to lower the interest rate of the loan or to lower the monthly payments. For homeowners that are struggling to keep up with higher mortgage rates, a modification to their loan can be life-changing. This is different from a loan refinancing, where you are essentially replacing one loan with another. A refinancing requires a new application and credit check.
Q: How do I qualify for a loan modification?
A: In order to qualify for a Modification of your current mortgage, borrowers must usually be delinquent, either 60 days or more past due on payment or very near defaulting on the loan. Another way you may qualify is if you’ve recently incurred a hardship, which may be, but is not limited to, the death of a spouse, loss of job, illness or if you have a disability.
If Fanny Mae or Freddie Mac own your loan, you may qualify for the Flex Modification program, which is a special program intended to give lenders more flexibility with borrowing criteria.
Because each loan servicer may have different types of modifications with different qualifications and criteria, each loan will have different modification services available. For this reason, contacting your borrower and seeking the advice of an attorney is recommended.
Q: How do you modify your mortgage?
A: This process varies from lender to lender. The first step is to always contact your loan servicer directly. If you are behind on your payments, contact your provider immediately, as there may be more options available to you the sooner you call. Many borrowers will avoid any calls from their lender because they fear confronting their nonpayment and prefer to avoid any embarrassment or debt collectors. This may be a poor decision, as some loan servicers will actually reach out to offer assistance. If you’ve been avoiding any calls from your loan provider, it may be worth picking up next time they call.
Q: Do loan modifications affect my credit score?
A: Loan modifications may have a negative impact on your credit score. Though the overall impact will be much less than defaulting on your current mortgage.
Q: What will happen to my payment rate?
A: In most cases, the terms of your loan will be extended. A lower monthly payment requires the loan to be paid over a longer period. It is possible for the interest rate of your loan to increase. This means you will pay more money to the servicer over time, though this is certainly preferable to defaulting on the loan.
Q: When is it time to hire an attorney?
A: Facing foreclosure on your mortgage loan is stressful. Most people will not know what to do in this situation. The first step for any borrower should be to contact their loan servicer, as they will be able to help clarify whether you qualify for a modification or not. If, however, you remain unsure what to do, have been denied a modification and wish to appeal, or would rather a professional handle your filing, contact the professionals at Bartifay Law Offices today for a free consultation.
Q: What is Foreclosure?
A: Foreclosure investment is a difficult venture. In order to be successful, one must be prepared to invest a large amount of patience and ingenuity. It’s a tough road to hoe involving deep knowledge of different trends as well as local property. But, what is foreclosure? Per dictionary.com, foreclosing is “to deprive (a mortgagor or pledgor) of the right to redeem his or her property, especially on failure to make payment on a mortgage when due, ownership of property then passing to the mortgagee,” and a foreclosure is “the act of foreclosing a mortgage or pledge.” This may sound like the bank is taking back something it already owns. However, this is not totally the case, as the property itself was never owned by the bank. The bank foreclosed on the mortgage and therefore took the property.
Q: Why Do Owners Go Into Voluntary Foreclosure?
A: Voluntary foreclosure is rare. Here are a number of scenarios in which they may occur:
- Property issues
- Issue with other occupants
- Debt issues
Q: What Are The Stages of Foreclosure?
A: The Act 91 Notice of Intention to Foreclosure typically happens after four to six months of missed payments. Once an owner is on notice, they are then placed under a reinstatement period that lasts until the sheriff sale, which takes place at the county courthouse. The bank may file the foreclosure complaint 33 days after service of the Act 91 notice. Default judgment may be entered 30 days after service of the complaint. The property is then moved to sheriff sale within around 60 days. The high bid at sheriff sale will receive the deed.
Q: How Is Foreclosure Different From A Short Sale?
A: A short sale is when the property is being sold for a rate that is lower than the amount owed on the mortgage. A foreclosure happens when the bank takes the property when the owner fails to make payments.
Q: What Is An REO?
A: REO stands for real estate owned. Buying an REO is similar to buying through a short sale, except the property is already owned by the bank. The property was acquired by the bank via a foreclosure. The owner would need to vacate and make an offer to purchase in order to reacquire an REO property after foreclosure.
Q: What Is A Promissory Note?
A: According to dictionary.com, a promissory note is “a signed document containing a written promise to pay a stated sum to a specified person or the bearer at a specified date or on demand.” A promissory note affords personal liability for the mortgage payment to the bank.
Q: What Is A Deficiency Judgement?
A: A deficiency judgment is an unsecured money judgment against the borrower whose mortgage foreclosure sale did not make sufficient funds to pay the underlying loan in full. A deficiency claim must be asserted within six months of the sheriff sale.
Q: Is It Possible To Still Have Mortgage and Judgment Debt After Foreclosure?
A: An owner would have liability for the first mortgage deficiency if the bank successfully pursues the deficiency claim. The owner has liability for any secondary mortgages or judgment liens that were not paid off at sheriff sale.
Bartifay Law Offices
If you live in the Pennsylvania area, contact Bartifay Law Offices. Our law offices can help you prevent the above and other financial hardships. Call today at 412-824-4011 for consultation regarding mortgage foreclosure defense, bankruptcy, and mortgage modification.
Q: How Does Mortgage Loan Modification Work for Homeowners?
A: The goal for so many of us is to one day be a homeowner. It can be a struggle to get there, but it feels great once you do. You’ve gone through all the steps; you’ve checked your finances, and you’ve used many free mortgage calculators online. However, life sometimes happens. And if, for whatever reason, you fall behind on your mortgage payments, you may find yourself in the unfortunate situation of the bank foreclosing on your house. When that happens, it’s possible you might be eligible for a mortgage loan modification.
Q: What Is A Mortgage Loan Modification?
A: If you find that your bank is foreclosing on your house, it’s possible you’ll be able to get a mortgage loan modification. A mortgage loan modification is a process where the terms of a mortgage are adjusted from the original terms of the mortgage contract that was agreed to by the lender and borrower. These are separate from refinancing. The refinancing process involves replacing a loan with a completely separate mortgage.
Q: How Does It Work?
A: If you’re able to acquire a mortgage loan modification, the bank may convert from a variable interest rate to a fixed interest rate, extend the term of your loan, and/or reduce your interest rate. If you’re in a situation where you’re facing foreclosure, these modifications may be your best bet in keeping your home.
Q: How Do You Get a Mortgage Loan Modification?
A: If you’re interested in getting a mortgage loan modification, an attorney can provide very useful assistance with collection of documents and communication with the lender. Otherwise, you’ll need to be extremely diligent. You’ll need to prove that you’re experiencing a financial hardship. A borrower must also submit paycheck stubs, a budget, and whatever else the bank may request. You’ll need to make sure that you’re in contact with the bank and re-reviewing all the documents. You may have to re-submit documents, but that’s a very common part of this particular process. You may also have to complete a trial period with the new amount in order for the mortgage loan modification to be completed.
Q: What Are The Different Types of Mortgage Loan Modifications?
A: There are some banks that offer their own loan modification programs. These can be either temporary or permanent. Some lenders will allow some to refinance to a lower rate even without a hardship. However, if you’re unable to refinance, you may be able to change your mortgage rates via the federal government. While the Home Affordable Modification Program expired in 2016, there is a new foreclosure-prevention program called the Flex Modification Program. This is mainly available for those with mortgages affiliated with Fannie Mae and Freddie Mac. Additionally, the Home Affordable Refinance Program, or HARP, is available until December 31, 2018.
Q: Why Shouldn’t You Get A Mortgage Loan Modification?
A: While a loan modification can be very helpful in certain circumstances, there are some potential downsides. For instance, it’s possible you’ll see a negative impact on your credit score. While not as bad as a foreclosure, it could be difficult to get out from under. Additionally, if your mortgage is given additional length, it may mean that you’re in debt even longer. However, while those hardships may make it difficult down the line, it may be your best bet depending on your situation.
Q: Why Choose Bartifay Law Offices?
A: If you live in the Pennsylvania area, call Bartifay Law Offices, P.C. today at 412-824-4011. Our law offices help people form a dynamic financial plan for your future. Contact us today for a consultation regarding mortgage foreclosure defense, bankruptcy, and mortgage loan modification representation.
Businesses or individuals that are struggling to pay off their debts, as a last resort, will often elect to file for bankruptcy. According to some bankruptcy lawyers, Chapter 11 bankruptcy may be the prudent choice if you own a business that has been heavily invested in, has accrued large amounts of debt, is incorporated or is a limited liability company. Filing chapter 11 allows the business to restructure its finances, requiring it to continue operation as a way to maximize the return to creditors, investors and owners. Chapter 11 bankruptcy is much less common, and can result in a much more laborious and drawn out litigation process.
Here are several things to consider before filing for Chapter 11 bankruptcy.
Bankruptcy Lawyers – No Time Limit
There is no legal limit as to how long a chapter 11 case can go. Some cases may last as long as a few months, while others could go on for years. Consider whether or not you are willing to undergo such a process before you decide to file for chapter 11 bankruptcy.
Debtor Continues to Operate the Business
In some rare instances, the court may appoint a trustee. However, the most common instance is for the debtor to remain in control of the day-to-day operation of the business. This is referred to as “debtor in possession,” or DIP. Common reasons for appointing a trustee include incompetence, fraud, or gross mismanagement of the debtors affairs.
Debtor Loses Control of Major Decisions
Once Chapter 11 bankruptcy is declared, the court takes over all major decisions of the business by requiring approval on (but not limited to) any one of the following:
- Sale of assets
- Entering into or breaking out of a lease agreement
- Expanding or shutting down business operations
- The changing of contract agreements with vendors
- Altering or expanding licensing agreements
- Retaining and paying legal fees and expenses to attorneys
Creditors Have a Say
In most cases, Chapter 11 bankruptcy filings are voluntary. There are times, however, when creditors will group together and file an involuntary Chapter 11 petition against a debtor. In addition to this, once a Chapter 11 bankruptcy claim has been filed, creditors will have the right to support or oppose the major decisions that need court approval. In such a case, the creditors will take a formal vote, but only after the plans have been proposed. Oftentimes, the creditors will elect a committee to handle such issues, retaining the right to hire additional attorneys or individuals at the debtors expense.
Finally, the debtor is responsible for putting together a reorganization plan, or a detailed plan in which the debtor outlines a strategy to restructure the financial affairs of the business. The debtor, in most cases, will have 4 months with which they may come up with this plan on their own. This is referred to as the “exclusivity period.” In most cases this includes some form of reduction in operational costs. This reorganization plan acts, essentially, as a contract of repayment between the debtor and the creditors.
The final step in the filing process is approval from the court, something referred to as “confirmation.” If the plan is found to be feasible, fair and equitable and the actions of the debtor to be taken in good faith and in the best interest of the creditors, then the court grants confirmation.
Should You File Chapter 11 Bankruptcy
If, after taking all of the above information into consideration, filing for Chapter 11 bankruptcy seems in your best interest, consider that in studies and reports conducted, only 10-15% of business that filed for chapter 11 bankruptcy are successfully reorganized. Most cases end in dismissal, often by both parties. For more information or to speak with our bankruptcy lawyers call us today.