Paradox of Personal Bankruptcy: If you have no assets, you may wind up paying more for your bankruptcy! Or being unable to file at all!
Many people in the United Kingdom are filing “no-asset” bankruptcy cases, what we in the United States call Chapter 7 bankruptcy (where they have nothing for creditors to lay claim to in order to get repaid). These cases are stretching the bankruptcy system’s resources so thin that they’re faced with a dilemma. Either create a tax so the government funds the cost of administering the bankruptcy through the system OR raising the filling fee to offset the costs. Those who have the least ability to pay for bankruptcy will then be faced with a choice: pay even more for their bankruptcy or wind up falling into a no-man’s land where they will become part of an underclass that can’t get out from under their debt and get a fresh start. Will the United States be far behind?
Falling Behind on Your Mortgage After Bankruptcy: Hopefully you didn’t reaffirm your mortgages!
Justin Harelik, a Los Angeles bankruptcy attorney, offered up some great supporting evidence of why you SHOULDN’T reaffirm your mortgage if you’re going bankrupt. You should continue to pay any mortgage you have, if you can. But bankruptcy protects you if your circumstances change again and you’re unable to pay them. The lenders can’t sue you if you’ve already gone bankrupt. You can walk away if you need to and, because the debts were included in your bankruptcy, they’re discharged.
If you want to stay in the home, you just keep paying on your mortgage. If you fall behind, and you have more than one mortgage, you may be able to stay in your home, even if you can’t pay the other loans. If your home is worth less than you owe on your first mortgage, and you find yourself falling behind, it might be in your best interest to keep your first mortgage current even if it means letting the other mortgages fall behind.
Your risk of having your second or third lender foreclose on you would be pretty minimal, and here’s why. Your second or third mortgage lender wouldn’t get any payoff to beginning a foreclosure against you. If you’re already upside down on your primary loan, then any amount your home fetched at foreclosure would first go to pay off that loan. Your first mortgage lender has priority interest – they get paid first before your home equity loan or second mortgage, HELOC etc. So even though they CAN foreclose, they generally won’t. Because they’d spend a fortune in legal fees and get back absolutely nothing in return. And since the mortgages were included in your bankruptcy, they can’t sue you. Save your money and start building a financial plan. And take a look at what in your financial beliefs may be causing you to repeat the same pattern of the debt cycle by getting a copy of our Break the Debt Cycle For Good CD/Workbook or instant download. It’s a great next step in building up financial security in your life.
Boost Your Chances of Getting Your Loan Modified: The one step that truly can get your mortgage lender to say yes!
Struggling with getting your lender to do a loan modification? You might find that your chances are better if you file Chapter 13. According to Jacksonville, FL bankruptcy attorney Chip Parker, if you’re in Chapter 13 bankruptcy, the loan modification process is, on average, three times faster than if you’re NOT in bankruptcy. Bankruptcy isn’t the right solution for everyone. To help you decide for yourself whether or not bankruptcy is your best option right now, download a free copy of How to Know if It’s Time to Declare Bankruptcy.