We’ve written a series of blog posts answering common questions regarding bankruptcy and property foreclosure. Call (262) 827-0375

Is Bankruptcy a good option to avoid home foreclosure?

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Bankruptcy is a legal process that allows individuals and businesses to eliminate or restructure their debts. It involves petitioning the court for protection from creditors, allowing them to wipe away certain types of debt or reorganize payment plans on outstanding debt. When filing for bankruptcy, an individual can choose between Chapter 7 and Chapter 13.

For individuals facing home foreclosure, filing for bankruptcy may be a good option because it can provide temporary relief from creditors while they attempt to restructure their finances. When you file for bankruptcy, an automatic stay is put in place, preventing creditors from initiating legal action against you. This includes stopping pending foreclosure proceedings as long as the automatic stay is in effect. It also allows time for the debtor to make arrangements with the lender, such as modifying loan terms or negotiating lower payments, so they can continue living in their home.

Types of Bankruptcy

Chapter 7 bankruptcy is the most common type of personal bankruptcy that can help you avoid foreclosure. It involves the liquidation of non-exempt assets and dischargeable debt. Any remaining balance on these debts will be eliminated, allowing individuals to start fresh with their finances. However, filing for Chapter 7 does not necessarily halt foreclosure in process. If you own your home and have equity in it, the trustee may be able to sell your property and use the proceeds to repay creditors.

Chapter 13 bankruptcy is another option for individuals facing a home foreclosure. Unlike Chapter 7, Chapter 13 does not involve liquidating assets; instead, it allows debtors to restructure their payments so they can pay off their debts over three to five years. This allows individuals to keep their homes and make payments that are more affordable for them. For instance, they can reduce their monthly payments, reduce the interest rate on their loan or even have part of the principal balance forgiven.

When Can Bankruptcy May Be a Viable Option?

Bankruptcy may be a viable option for individuals facing home foreclosure if they can prove to the court that their financial hardships are preventing them from making payments on their mortgage. This could include job loss, medical bills, or other unforeseen circumstances.

Bankruptcy should only be used as a last resort when all other options have been exhausted because of its long-term implications, such as a damaged credit report, higher interest rates and difficulty obtaining loans. Filing for bankruptcy is a serious decision that should not be taken lightly. Consult widely with financial advisors and attorneys to understand the implications of this process before moving forward.

Steps Involved in Filing for Bankruptcy

1. Gather All Necessary Documents

You must submit various financial documents, including personal income statements, bank account information and a list of creditors and assets. Ensure that all documents are current and accurate.

2. Complete the Required Forms

The court requires several forms to be completed accurately and thoroughly before your case can be considered. These forms include the bankruptcy petition, assets and liabilities schedules and a financial affairs statement.

3. File the Forms with the Bankruptcy Court

You’ll need to file your forms with the court in your local district and submit all necessary documents along with a filing fee.

4. Attend the Creditors Meeting

This meeting is held to review your case and allow creditors to ask questions. You’ll need to have all of your documents ready and a list of any debts you plan to discharge in the bankruptcy process.

5. Receive Your Discharge

Once all steps in the process have been completed and creditors have received payment, you’ll receive your discharge from bankruptcy. This document will indicate that your debts have been eliminated and you are no longer responsible.

Bankruptcy and Financial Effects

Filing for bankruptcy can have a dramatic impact on your personal finances and credit score. It will stay on your credit report for up to 10 years, making it difficult to obtain loans or credit cards in the future. Credit scores will also drop significantly, which can further delay any future attempts to borrow money. For instance, if your credit score was 700 before filing for bankruptcy, it could drop to as low as 500 afterward.

Furthermore, due to the lower credit score, you may be required to pay higher interest rates on future loans and credit cards. High interest rates can make it challenging to pay off debt. Additionally, creditors may require a co-signer or collateral for you to obtain financing. Getting a co-signer or collateral may be difficult when you’ve filed for bankruptcy.

A good credit score is still achievable after bankruptcy, but rebuilding your credit will take time and dedication. This can be done by making timely payments on existing debts, establishing new lines of credit and avoiding taking out more debt than you can afford. You can eventually recover your credit score and financial health with patience and diligence.

Alternatives to Filing for Bankruptcy

Filing for bankruptcy isn’t the only option when faced with overwhelming debt. Consider other alternatives such as credit refinancing, loan modification or debt consolidation. These options allow you to reduce your monthly payments and sometimes lower interest rates, helping make the debt more manageable.

Credit refinancing involves working with lenders to replace existing debts with smaller loans at a lower interest rate. The reduced payments can make it easier to pay off debt. Similarly, loan modification involves negotiating with creditors to lower interest rates or extend the length of repayment plans.

Debt consolidation involves a new loan to pay off debt at a lower interest rate. While this can make it easier to manage debt, it is crucial to understand the terms and conditions of the loan before agreeing. Some agreements may include hidden fees or other charges.

Under the loan modification option, you work with your creditors to restructure the terms of your debt such as the loan amount or repayment schedule to make it more affordable. The process usually includes providing financial documents such as pay stubs and expenses to demonstrate your current financial situation.

Conclusion

Filing for bankruptcy can be difficult, but if you understand the process and weigh the potential financial effects, it may be the right choice. Alternatives such as credit refinancing, loan modification or debt consolidation are also available if you need help managing your debt. Whatever option you choose, staying informed and taking proactive steps to rebuild your financial health is crucial.

What Happens in Foreclosure & Bankruptcy?

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When you’re having financial problems, it is likely that all of your household bills are affected, including your mortgage payments. While shelter is a basic survival requirement, you may have prioritized immediate needs like food, etc., and neglected your mortgage payments. When you fall behind on mortgage payments, your home may be foreclosed on, and suddenly, the possibility of losing your home looms large. There are ways to save your home. In this post, we’ll explore the interplay between foreclosure and bankruptcy.

Timing is crucial

Under federal law, your mortgage lender cannot officially begin foreclosure proceedings until you have missed four months of mortgage payments. Within that time period, you can take the initiative by filing for bankruptcy before any foreclosure begins. If you have received notice of your lender’s intent to begin foreclosure, you can still forestall it by filing your bankruptcy petition. Even after the foreclosure has begun, filing bankruptcy will interrupt it.

Automatic Stay

Whenever you file bankruptcy, all collection efforts of all types are automatically halted. That means that even if foreclosure proceedings have been initiated, they must be paused. This gives you valuable time to develop a strategy that may save your home. The experienced attorneys at Burr Law can negotiate on your behalf and work with your specific circumstances to preserve your most valuable assets, including your home.

Chapter 13 Bankruptcy

In Chapter 13 bankruptcy, you devise a repayment plan that will clear your secured debts over a three to five year period. This plan will include your past-due mortgage payments, and your continuing mortgage payments. Because your attorneys work with you to create the plan, it ought to be one that you can achieve. Again, the experts at Burr Law can work with your particular circumstances to help you make a realistic plan. As long as you make all of the required payments for the length of the repayment plan, you will avoid foreclosure and be able to stay in your home.

Importantly, if you have a second or third mortgage on your home, Chapter 13 bankruptcy may well serve to eliminate those debts. Typically, Chapter 13 entitles bankruptcy courts to recategorize second and third mortgages as unsecured debt. Unsecured debt receives the lowest priority in Chapter 13 bankruptcy, and usually does not have to be repaid at all.

Chapter 7 Bankruptcy

Chapter 7 bankruptcy is also known as liquidation bankruptcy. It eliminates debt completely by selling your assets. So it sounds as though it would mean that you would lose your home. However, that is not usually the case, especially if your home is your only or primary residence. There are exemptions in Chapter 7 bankruptcy, and one of the most important is your home, known as your homestead. The law in Wisconsin allows an individual filer an exemption of up to $75,000 in value in a homestead, and a couple filing together would have an exemption of $150,000. Other exemptions can also be applied to your home. The experts at Burr Law can make sure that you receive all exemptions possible.

Chapter 7 bankruptcy also forgives the homeowner for tax liability for losses the mortgage or home-improvement lender incurs as a result of the homeowner’s default. This may be debt that you have not even considered, but is important in determining which bankruptcy type to pursue. This law initially applied to the years 2007-2010, but has been extended five times and now applies to debts forgiven in the years between 2007 to 2020. Again, this is an aspect of bankruptcy that your attorneys can advise you about.

If you are concerned that your property may be foreclosed upon, or if foreclosure proceedings have already been initiated against you, contact the professionals at Burr Law. We can guide you to the best solution so you and your family can stay in your home.

Is It Better To Have A Foreclosure Or Bankruptcy?

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When you’re feeling extreme financial pressure, especially when it involves being behind on your mortgage, you probably feel assaulted on all sides. It might be easiest to avoid dealing with the situation, but we all know that ignoring it won’t work for long. In this post, we’ll explore what foreclosure and bankruptcy actually mean; in order to decide which is better for your particular situation, though, you should seek the advice of one of the experts at Burr Law.

Who Is The Actor?

Foreclosure happens TO you. Your mortgage company or bank initiates foreclosure on your property when you are behind on your mortgage payments. You do not have control over the timing, or any other part of the process. On the other hand, you CAUSE bankruptcy. You make the decision to pursue bankruptcy, and which chapter to file. You decide when it is best to begin the process and which exemptions to go with (Wisconsin is one of only 16 states where you can choose the state or federal exemptions).

Will You Definitely Lose Your Home?

The purpose of foreclosure is for the bank or mortgage company to reclaim your home, so you would no longer be able to live there. Once the foreclosure process has been begun, you have few options to prevent that from happening. And all of them need to be approved by the mortgage company. You can try to negotiate a loan modification or a forbearance, though usually the time to do that would be before the foreclosure has started. The only real way to guarantee that you will not lose your home is to pursue reinstatement of the loan. Wisconsin redemption law allows you to have the mortgage reinstated any time before or after judgment, but before sale. However, Wisconsin’s redemption law is complicated, and it also changed significantly on April 27, 2016. Even if foreclosure has begun, when you file for bankruptcy, all collection activities must cease. So that automatic stay pauses the foreclosure. In bankruptcy, whether you file Chapter 7 or Chapter 13, there is a very good possibility that you will keep your home. If you have a second or third mortgage on your home, that can be declared unsecured debt and entirely eliminated by Chapter 7. The past due mortgage amounts can be considered along with all other secured debt and a reasonable repayment plan devised.

Will You Still Be In Debt?

There is the danger that you might face a deficiency judgment after the foreclosure process ends. What this means is that your bank or mortgage company is not able to recover the entire amount owed to them and therefore they are legally allowed to go after you to recover that excess amount. For example, if you owe $350,000 on your mortgage and the bank sells your property through foreclosure for $250,000, it can then file a claim against you for $100,000. So it is possible for you to end up homeless, and still significantly in debt. With Chapter 7 bankruptcy, all unsecured debt is completely eliminated and you should emerge from the process completely free of debt. In Chapter 13 bankruptcy, your debt may be much less than it was, and you will have a 3 to 5 year plan to repay your creditors that the court approves.

What Happens to Your Credit?

Whether you go through foreclosure or through bankruptcy, your credit score will be affected. Foreclosure stays on your credit record for 7 years; bankruptcy for 10. That doesn’t necessarily mean that bankruptcy is worse for your credit than foreclosure though. If you’ve been paying all your credit card bills, but not your monthly mortgage, your current credit score may be high; foreclosure will cause a significant drop, and you will lose your home. Once you have gone through foreclosure, it will be extremely difficult for you to get another mortgage. In bankruptcy, there is a good chance that you can keep your home, and while the bankruptcy remains on your credit report, it does eliminate all unsecured debt. Another factor to consider is the state of your credit score currently. If you are in significant financial distress, it is likely that your credit score is already low. Bankruptcy may decrease it further, but the actual effect will probably be small. There are credit cards designed to help people re-establish creditworthiness after bankruptcy.

The choice between foreclosure or bankruptcy is complicated, and it is best to speak with the professionals at Burr Law. We can analyze your specific situation and advise you on the best course of action for you.

Bankruptcy: Should You Consider Filing When You Face Foreclosure?

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When a lender decides to foreclose on your property, where do you turn? Filing for bankruptcy may not seem like the obvious answer, but it might be a viable solution in some cases. Here’s how these concepts all add up under Wisconsin law.

Foreclosure Fundamentals

Foreclosure is when you are behind in mortgage payments and a bank, loan servicer or other lending institution decides it’s going to seize your property. Thanks to the lending contract you signed, they have the right to grab your home, office or other asset and sell it for the cash.

Of course, there are some limits to this power. Banks usually only foreclose when you’ve missed three (3) payments or more. If it looks like you’re not going to pay, then the lender will want to cut its losses.

Bankruptcy As a Self-defense Mechanism

The glaring problem with foreclosure actions is that they don’t always leave consumers with room for error. Lenders can be quite aggressive about recovering their losses and fail to consider the human impacts.

Bankruptcy is an effective last line of defense because it instantly implements an automatic stay. This puts a halt to creditor actions such as

What Happens Next?

After a bankruptcy filing, the automatic stay will remain active until the case wraps up in a few months. Life doesn’t always play out so perfectly, however. If a lender files a motion to lift, or cancel, the automatic stay, then your breather might be cut short.

Are creditors trying to make things tougher? The lender just wants to get its money back because you are behind in mortgage payments. Reducing the length of the stay makes it possible to sell your property earlier.

Upholding the Automatic Stay

Fortunately, you can fight back. When lenders try to get stays canceled, they typically make the argument that they’re losing money. You might counter by

  • Showing that a mortgage’s equity, or property value minus lien balance, is high enough to cover the lender’s losses, or
  • Providing the lender with court-approved adequate protection, such as interest-only cash payments, during the case.

Making a Smart Choice

When lenders foreclose, families can lose their homes and the lifestyles they’re used to. Professionals might have to give up the vehicles that are critical to their careers.

Foreclosure cases can be tricky to predict. Bankruptcy may let consumers divert bad situations toward better outcomes. It doesn’t stop the foreclosure forever, but if you’re behind in mortgage payments, putting things on hold could help you get back to a state of financial balance.

Want to learn more about how bankruptcy types like Chapter 7 and Chapter 13 might help you push back and even stop foreclosure until you regain your footing? Talk to bankruptcy attorney Michael Burr at the Burr Law Office.

What is Foreclosure Fraud?

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Did you know that some banks have foreclosed on homes using forged documents? As this video reveals, some banks attempt to take consumers’ homes illegally in a phenomenon known as foreclosure fraud. Click below to watch the story and learn how to spot clues that may save you from losing your property.

According to one victim, his servicer told him not to pay his mortgage while they worked out a loan modification. They then notified him that they have lost his modification application—six times. Days away from losing his home, this consumer discovered that his bank was using phony documents to push him out of his home.

Foreclosure fraud is a criminal act, and companies must be held accountable for these false documents. An experienced attorney can help you avoid these types of situations and get you the help you need. Attorney Michael Burr takes care of each case from start to finish, ensuring his clients are properly attended to.

If your bank has threatened to illegally take your home, call Milwaukee bankruptcy attorney Michael Burr of Burr Law Office at (877) 891-1638. He will stand up for your legal rights against big lenders.

Bankruptcy Consequences: Skipping Payments

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Many people avoid filing despite increasing debt because they are afraid of how the process will affect their credit score and ability to rebuild their finances. However, not filing for bankruptcy with a lawyer when you no longer have the ability to pay your debts can have dire bankruptcy consequences.

Wage Garnishment

One of the first steps your creditors will take when you neglect to pay your debts is to garnish your wages. The maximum amount that can be garnished from you paycheck is usually 25 percent of your disposable income if it is greater than 290 dollars, or any amount greater than 30 times the federal minimum wage. While tips are generally not garnished, your wages, salaries, commissions, bonuses, and pensions can all be garnished until your debt is paid.

Liens and Levies

A lien refers to the legal claim over your property by the government or a specific creditor. A levy, on the other hand, refers to the actual seizure of property in order to satisfy a debt.  Individuals who fail to pay their debts without filing for bankruptcy may face one or both of these penalties. In the event that a levy is put in place, your creditor has the right to repossess and sell property that you own, such as your car or home—as well as property that is yours but held by another party, such as your bank accounts, retirement accounts, dividends, and even the cash value of your life insurance policy.

Foreclosure

Individuals who fail to pay their mortgage for a prolonged period of time may face foreclosure, a process in which the rights to your property are taken away and the property is sold in order to satisfy unpaid debts and liens.

Don’t let outstanding debts increase your risk of repossession, foreclosure, or other bankruptcy consequences . Get the legal representation you need by contacting the Burr Law Office at (262) 827-0375. You can also set up an FREE initial consultation by visiting us online.

When Do I Need to Begin Worrying About Property Repossession?

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If you’re experiencing financial difficulties, you may have stopped making payments on secured debts like cars or electronics. The consequence of this action is commonly called repossession. Because you have defaulted on the loan, you are no longer entitled to keep your car, home, or other item. Repossession of a home is usually called foreclosure, and it works differently than repossession of cars or electronics.

Understanding Repossession

As soon as you miss a payment, your lender can repossess your car or other possession. However, many lenders wait until you have missed two or three payments before repossessing your item simply because the process is expensive and time-consuming. You will receive one or more notices of missed payments, notifying you that you are in danger of repossession. At this point, you usually have the option of making up missed payments and keeping your property. If you fail to do so, you can expect repossession.

After Repossession

Your property will be sold at an auction. You will be notified of the date and time of this sale, so you can attend and buy back your property, if you choose. To do this, you must pay the balance of the loan and the costs of repossession. If the property sells for less than its fair market value, the lender may pursue a deficiency judgment and force you to pay the difference between the sale price and the fair market value. Though this is possible, it doesn’t usually happen.

If you’ve missed payments on a car, electronic equipment, or other valuable item, you could be in danger of repossession. In some situations, declaring bankruptcy may be a good strategy for stopping the process. To learn more, call (262) 827-0375 to schedule a consultation with a Milwaukee bankruptcy attorney at Burr Law Office.