Short Sale Blog

Here is the latest short sale news at Seattle Short Sales. We assist hundreds of Seattle area homeowners with short selling their home and avoiding foreclosure.

Five Hidden Benefits of Bankruptcy

Seattle Short Sales - Thursday, February 07, 2013

People who are considering filing bankruptcy are often concerned that there may be negative effects. Some people are concerned about their ability to find credit after bankruptcy. Others are concerns with keeping their finances private. And almost everyone worries about how a bankruptcy will impact their credit score.

What many people do not know is that there are actually a surprising number of positive effects of filing bankruptcy. Here are just 5 ways that bankruptcy can have a positive effect on your finances.

1. Get better financing rates

For consumers who have serious credit problems, the interest rates offered on credit cards, car loans and other forms of credit are very poor. If your credit problems are serious, you may not even qualify for this type of credit at all.

However, for debtors like this, filing bankruptcy will actually significantly improve the availability of credit and the interest rates offered. This happens because creditors know you will not be able to declare bankruptcy again for many years to come. As a result they will be more willing to lend to you, because you will be unable to discharge the debt in bankruptcy for a long time.

This option is most attractive for people who usually handle their finances well, but who have been pushed to bankruptcy as the result of some misfortune. This has become much more common in recent years after many people lost their homes to foreclosure as a result of the recession. If you have suffered a temporary setback that is keeping you from obtaining new credit, you may want to consider bankruptcy as a way to get better rates.

2. Keep employers from discriminating against you

These days, employers are careful about checking the credit history of people they hire or promote before making an offer of employment. The fear of missing out on a future job might scare some people away from exercising their right to declare bankruptcy.

However, what most people do not realize is that employers cannot use your bankruptcy filing to disqualify you from employment. In contrast, they are fully able to consider debt that has not been discharged in bankruptcy to deny you employment. What this means is that people with a poor credit history who have not declared bankruptcy are in a worse position than those who have. So, if you have poor credit history which is preventing you from getting a better job, filing bankruptcy can help eliminate this barrier.

Additionally, bankruptcy may be a good way to keep your current employer from learning about your debt problems. Many consumers hold off on filing bankruptcy until their creditors start using the court system to get money. Often, this means filing a garnishment against the consumer’s pay check. If you file for bankruptcy, these creditors will no longer be able to garnish your pay check and your employer will not need to know the intimate details of your finances.

3. Use bankruptcy to raise your credit score

Many people considering the option of bankruptcy are concerned about the impact a bankruptcy will have on their credit rating. While bankruptcy can negatively impact your credit score in the short term, this is not always true on the longer term.

In fact, some consumers with very high debt loads actually see an improvement in their credit scores. This happens because the information as it appears on your credit report regarding late payments or unpaid balances is removed, and marked as “Included in Chapter 7 Bankruptcy” or “Included in Chapter 13 Wage Earner Plan”. Additionally, your credit score is partly based on a comparison against people in similar situations. So, after filing bankruptcy, your credit score is compared against others who have declared bankruptcy, which can actually make your finances seem much better.

Even for those who do see a decrease in their credit score due to bankruptcy can rebuild their credit quicker than if they had not filed bankruptcy. After your bankruptcy, your outstanding debts are no longer considered delinquent, so they stop weighing your credit score down. Once this happens, you can again obtain credit with reasonable interest rates, and manage your debt load. If this is done carefully, you can rebuild your credit score into the 700s fairly quickly. 


4. Get your driver’s license back

If you have lost your Washington driver’s license as a result of too many tickets, you can file a Chapter 13 bankruptcy to get your driver’s license reinstated. You will still have to pay back the entire balance owed on these tickets, but you will not be subject to any interest or penalties, and you will not have to wait for the fines to be paid off before you get your license back.

As soon as you file bankruptcy, we can send your petition to Olympia and seek reinstatement of your driver’s license. Although you will still have to pay the balance of the tickets, you may do so over a repayment period.

5. Stay in your home

Many people believe that filing bankruptcy means they will lose their home. This is not true. In fact, if you are behind on your mortgage payments and are facing the threat of foreclosure you may be able to declare Chapter 13 bankruptcy to keep your home. You will have to start paying your mortgage again after you enter your petition, but you may be able to negotiate a better interest rate. Additionally, you will be required to pay your back-mortgage payments, but you may do so over the length of your Chapter 13 plan, which is usually three to five years. This is often a much better prospect for homeowners than foreclosure.

Bankruptcy can also be an effective means of lowering your mortgage payments.  Prior to the recession, many homeowners either bought new homes with two mortgages, or took out Home Equity Lines of Credit on their existing homes. After the housing bust, many of these homes became worth a lot less than the value of the mortgages. What this means for many homeowners is that they are now paying more on their multiple mortgages than the house is worth.

If you are in this situation, there is an option to eliminate your second mortgage or Home Equity Line of Credit in a Chapter 13 bankruptcy. This process is called “Lien Stripping”. The first mortgage on the house would remain the same, but you would pay a fraction of what you owe to the second lien, then have it discharged at the completion of your Chapter 13 bankruptcy.

Seattle Short Sales has a team of experienced and successful real estate specialists dedicated to working with distressed homeowners. We close, on average, 12% of all short sales per month in King County. In the last 24 months, we have negotiated over 756 short sale approvals, and discounted over $81 million of mortgage debt for distressed homeowners.

In addition to our short sales negotiators, our team includes dedicated professionals advising and advocating for homeowners in the fields of: loan modifications, bankruptcy, debt settlement and collection defense. As part of our service, we offer unlimited attorney and CPA consultations.

If you are a homeowner who is struggling to make ends meet, and would like to learn more about the options available to you, please go to: http://seattleshortsales.com/homeowners/
 

How to Use Bankruptcy to Stop Your Foreclosure

Seattle Short Sales - Monday, January 28, 2013

Many homeowners who are under the threat of foreclosure do not consider filing bankruptcy as a strategy to get their finances in order. They may think that bankruptcy means that they will have to give all of their property to the court, or that they will have to start over completely. This is not true. In fact, the majority of consumers do not have to give any of their possessions to the creditors! Many people have successfully used bankruptcy to avoid foreclosure and to stay in their home.

Here are just three ways that filing bankruptcy can help you if you are facing the threat of foreclosure.

1. Delay, or even stop the foreclosure sale

Filing bankruptcy stops all debt collection actions immediately. This includes foreclosure.

If you are under the threat of foreclosure, filing for bankruptcy immediately before the foreclosure sale date can help delay the process while you work at getting your finances together.  A Chapter 13 bankruptcy will allow you to get back up to date with your payments and keep your home. This works very well for those homeowners who have faced a temporary setback which caused them to get behind on their payments, such as temporary unemployment or an injury.

Through Chapter 13, your unpaid mortgage balance would be consolidated with your unsecured debts, to be paid through a payment plan over the course of 3 to 5 years at a rate you can afford. For those who simply cannot afford their mortgage payments at all, filing bankruptcy will delay the foreclosure process temporarily while you search for new living arrangements.

2. Reorganize your debt

Many people who face foreclosure are simply over-extended. Medical bills or overuse of their credit can leave people struggling to make all of their bills payments each month. At this point, many homeowners find they simply do not know what to do. They feel over their head, and may simply give up - when what they really need to do is to start prioritizing their debts.

Filing bankruptcy can allow you to eliminate your credit card payments, medical bills and other debt that is weighing you down. By eliminating these debts you can refocus your resources on priority debts, such as your mortgage - and save your home. If you are faced with too many bills every month but need to stay in your home, consider using bankruptcy as a way to keep reduce your overall debt and get your mortgage payments back on track.

3. Eliminate second and third mortgages

Many people were enticed by low interest rates and rising property values to take out a home equity loan on their property in the years before the housing market crash. For many of these homeowners, their home is now worth less than their combined mortgages.

If you are one of these homeowners, a Chapter 13 bankruptcy can remove the second (and third!) mortgage on your home. It will allow you to pay only a portion of what is owed on those junior mortgages, without going through foreclosure.  You pay that portion of what you owe over the course of three to five years. At the end of that time, any remaining balance on your junior mortgages would be eliminated.

If you have multiple mortgages on your underwater property, consider using Chapter 13 bankruptcy to reduce your monthly payments and get your finances under control.

Seattle Short Sales has the most experienced and most successful real estate short sale specialists working with us. We close, on average, 15% of all short sales per month in King County. In the last 24 months, we have negotiated over 756 short sale approvals, and discounted over $81 million of mortgage debt for distressed homeowners.

A short sale can improve your credit, and help you to avoid foreclosure and get a fresh start. As part of our service, we offer unlimited attorney and CPA consultations.

If you are a homeowner, and would like to learn more about short selling your home, please go to: http://seattleshortsales.com/homeowners/
 

Combining Bankruptcy and Short Sales For Total Relief

Ross Kilburn - Tuesday, March 22, 2011
Click here to download our Special Report: Combining Short Sales and Bankruptcy for Total Relief.

...The old adage, "If the only tool you have is a hammer, everything looks like a nail" completely applies to the world of distressed real estate. Too often, homeowners in financial trouble will consult with a real estate agent, a real estate attorney and a bankruptcy attorney and get three completely different prescriptions.

Sell!
Foreclose!
File Bankruptcy!

When you are faced with potential financial liabilities that number in the tens or hundreds of thousands of dollars, a limited or biased approach to solutions can be catastrophic.

Here is an example: A homeowner has two liens. The first lien is for $350,000 and the second lien is for $100,000. The housing market crash has reduced the value of the property to only $325,000. The homeowner simply can't make both mortgage payments any longer and needs advice.

The real estate attorney might recommend letting the property simply go to foreclosure. However, this will result is the junior lien holder being wiped out at the foreclosure auction, enabling them to pursue the borrower for the $100,000 owed.

The real estate agent might recommend selling the property and doing a short sale. This could work, but may still result in a situation where the junior lien holder preserves their deficiency rights for up to six years.

What is one possible creative solution? Do a short sale, followed up immediately by a Chapter 7 bankruptcy. This step will remove the possibility of the junior lien holder coming back years later looking to collect on the $100,000.

Another creative solution: File a Chapter 13 and strip the junior lien off of the property. This converts it from a secured lien to an unsecured lien. Then, convert the bankruptcy filing from a Chapter 13 to a Chapter 7 and completely wipe out the second lien note. Possibly do a loan modification on the remaining first lien, and keep the house!

As you can see, once you start combining disciplines, the possibilities for a pro-active, creative solution increases immensely. In order to help you understand some of your options, Seattle Short Sales, Inc. in conjunction with Jonathan Smith, Attorney at Law, have written the ultimate guide to the intersection of short sales and bankruptcy.

Click here to download our Special Report: Combining Short Sales and Bankruptcy for Total Relief.

For personal help, please call our office at 800-603-3525.

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