Cold French Fries . com » Bankruptcy

Reclaiming Your Finances

marcus — Thu, 03 Dec 2009 01:44:15 +0000

If you are like millons of Americans you are seeing the glimmers of evidence that the economy is turning around. The three years the nation has suffered under the failing economy has tested the financial planning abilites of most households. However, as you face your future and decide upon financial directions to travel, remember the number one rule of reclaiming your finances….address your issues head on. Call your creditors and at the very least, acknowledge them and try to design a debt management workout plan. Its best to consult with an attorney on the possibilties and consequences of bankruptcy, but ignoring your debts could lead to future financial stumbling blocks. Stumbling blocks such as law suits that could lead to judgements, garnishments of bank accounts or income. Oftentimes these garnishments come “without” warning until after lein have been placed on assets…however, the real warning is coming right now. If you owe…don’t simply think that these debts will just somehow fix themselves…you have to act.

Investors Slowing Loan Modification Process

marcus — Tue, 23 Jun 2009 20:07:31 +0000

According to Mortgage Bankers Association, over the past two years, 1 in 6 homes in the US have experienced mortgage distress as a result of the nation’s economic crisis, which was spurned by the housing market collapse. President Obama’s newly inaugurated administration made the housing crisis a priority and issued a loan modification program that compensated mortgage banks to modify delinquent mortgage loans. As a result many mortgage lenders have begun to modify delinquent home loans, thus preventing foreclosure and bolstering a saddened economy burdened by increased homelessness statistical reports. However, as the Wall Street Journal pointed out last week, many of these modified loans are rejected by the investors that hold these home loans in their investment bonds.

When mortgage loans are made, the company/bank that lends the money, pools the mortgage with other mortgage loans of similar terms, interest rates and risks. These pools are securitized (in short – packaged in a various dollar denominations and given an investment grade and interest rate) and sold on the bond market. US mortgage backed bonds are popular investment instruments and are purchased around the world by individuals and other countries’ governments as relatively safe investment…until two years ago.

So going back to mortgage loan modifications…when these investors get notice requesting permission to reduce a mortgage loan payment through a loan modification, the notice is essentially saying, would you, the investor, mind reducing your income from a bond and decreasing your investment portfolio substantially? The negative response by many of these bond holders/investors are causing many loan modifications to face rejection and a return to a foreclosure status after homeowners and loan servicers alike believe the loan is modified. Many housing finance experts think these investor actions will cause another flood of foreclosures over the next six months. Coincidently, if the homes go to foreclosure, the likelihood these investors will lose most of their investment is high. US Senator Durbin (D) has been arguing the defeat of the bankruptcy reform that allowed bankruptcy judges the ability to re-write mortgages of petitioners (someone filing bankruptcy) is the necessary teeth needed to motivate banks and investors to modify the very mortgage loans that caused the current economic depression.

Bankruptcy Notes for the Homeowner

marcus — Thu, 28 May 2009 18:38:55 +0000

The decision to file for bankruptcy is a tough one for the homeowner, but a choice millions of Americans are making each day as a result of the collapse of the housing market. While contemplating bankruptcy, the major concern of the homeowner is what happens to the home after filing. However, depending on the choice of filing chapter 7 or 13 bankruptcy, the homeowner can decide the fate of the home. In either situation, consultation with a licensed legal profession is always highly encouraged.

A chapter 13 bankruptcy allows the homeowner to not lose the home. The chapter 13 bankruptcy will reorganize the homeowner’s debt and create a payment plan. The homeowner will be required to provide a financial plan to maintain the home loan, satisfy the court’s payment plan to meet past due balances and any other financial obligations. If a Chapter 7 bankruptcy is chosen, the home will be relinquished to the titled lender and a foreclosure auction will take place after the bankruptcy is discharged. Oftentimes, homeowners file a bankruptcy to stop a foreclosure and allow more time to weigh financial decisions which will decide their home’s fate.

The majority of foreclosed or bankrupt homeowners eventually buy another home after their financial ordeal is long behind them. However, a re-establishment of a financial profile must be planned and properly managed before homeownership is to be re-considered. By rebuilding a credit profile the bankrupt homeowner is evidencing financial responsibility, creditworthiness and increasing the likelihood of purchasing another home sooner rather than later. A substantial savings should be accumulated, as buying a home after bankruptcy may require a larger cash down payment. FHA offers low down-payment mortgage loans and will finance the purchase of a home by a chapter 7 filer in as little as 3 years. In addition, a chapter 13 bankruptcy filer can refinance their existing home out of bankruptcy, as long as there is enough equity in the home to pay the bankruptcy claim. Some private mortgage companies will finance home loans after bankruptcy is filed as long as the borrower can prove to be financially able to afford the mortgage and maintain cash reserves. Anyone considering buying a home after bankruptcy should be mindful that a sizable down payment and higher than market interest rates may be a requirement of the home mortgage.

Bankruptcy can offer the homeowner a way to keep their home when a foreclosure is threatening or allow a homeowner to walk away from their home and gain a fresh financial start. Congress is considering changes to bankruptcy laws to allow the bankruptcy judge to re-write the mortgage terms to meet the present value of the home and the homeowner’s ability to pay for housing. However, the decision to file for bankruptcy should be based on the homeowner’s honest ability to sustain all financial responsibilities and not with the emotional attachment to property.

Considering Bankruptcy and Have a 401k?

marcus — Tue, 19 May 2009 02:58:02 +0000

Americans are considering bankruptcy at a nearly unprecedented rate. In addition, there is a growing consideration of a “hardship withdrawal” of 401k retirement accounts in a last effort to access cash necessary to meet financial obligations and possibly avoid a personal bankruptcy. However, the penalties and taxes charged for prematurely tapping of these pension funds may be the least of the obstacles to negotiate before actually obtaining access to the much needed funds.

If one is considering withdrawing from a 401k account and filing for bankruptcy, it may be more beneficial to consider filing for bankruptcy before turning to the 401k retirement account. By law, the 401k retirement account is protected from bankruptcy and all creditors, as long as the money remains in the account before the 59th birthday of the account holder. Anyone holding a 401k account in these economic times should consider the following 1) what to do with the 401k account should changes in employment occur and during a bankruptcy filing and 2) what to consider should the funds within a retirement account come under immediate need during a bankruptcy.

Employees must consider professional management of their 401k in case of loss of employment or change of job as unemployment levels reach record proportions. Employers generally forward the retirement account holdings to the former employee after employment ends. The immediate experience of unemployment may place additional strain on a household’s finances and the temptation to access one’s retirement account early can become even more enticing. However, receiving cash from a retirement account prior to bankruptcy will appear as income and may make qualifying to file for chapter 7 bankruptcy more difficult. In addition, if the retirement account holder becomes unemployed and rolls over the 401k to an IRA or Roth IRA, then depending on the state, the retirement funds may become part of the bankruptcy estate and paid out to creditors. A consultation with a state-licensed financial advisor should be sought in all cases. Each state has differing laws on the bankruptcy estates allowable administration of certain qualified retirement accounts (non 401k) in a bankruptcy case.

If the use of the 401k account funds is needed after filing bankruptcy, the chapter of bankruptcy will determine the process to access the funds. Loans on retirement accounts are popular and allow the account to remain intact without incurring penalties or taxes on the account loan proceeds. Loans on 401k accounts are not able to be discharged in a bankruptcy, they must be repaid. If the loan on a retirement account is requested after a discharge of a chapter 13 bankruptcy, the loan must be approved by the court trustee. It is customary in all chapter 13 filings that any new debt incurred by the filer must be approved by the bankruptcy court trustee and addressed within the payment plan. However, after a chapter 7 bankruptcy is discharged, a retirement account can be collateralized for an un-penalized and untaxed loan or entirely withdrawn minus penalties and taxes, if premature withdrawal is applicable.

Retirement accounts are an often tapped assets as households endure a growing need for cash. However, enticements to access these funds should be avoided without proper consultation by state licensed financial or legal advisers to determine if retirement account plans qualify under the state’s law to become a part of a bankruptcy estate.

Senate Helps Housing, Limits Bankruptcy Judges

marcus — Thu, 07 May 2009 04:11:12 +0000

Wednesday, the US senate passed a bill that would make it easier for “risky” credit homeowners to refinance into a lower interest rate mortgage, insured by the government. The measure to allow bankruptcy judge to rewrite the mortgage terms on a primary home for bankruptcy filers failed on a separate vote last week. However, bankruptcy judges will retain their ability to rewrite the mortgages terms on vacation homes and investment properties of bankruptcy petitioners. The bankruptcy allowance was supported by President Obama, but was heavily lobbied against by the banking industry. The bankruptcy provision passed the House of Representative version of the bill in March.
The Senate and House housing bill components will expand the existing $300 billion program to help risky credit mortgage holders refinance into a new mortgages insured by Federal Housing Administration. The program known as “Hope for Homeowners” has been a huge disappoint for many because of its strict guidelines and its inability to help nearly a .125% of the 400,000 homeowners Congress had hoped to assist prevent foreclosure. Before the US House and Senate send the bill to President Obama to sign into law, they must agree on a single version of the bill.

Housing Recovery Held Up By Banks

marcus — Thu, 30 Apr 2009 18:54:45 +0000

The financial markets stand to benefit the most when the housing market recovers. The House of Representatives passed a new bankruptcy provision that will allow bankruptcy judges the ability to modify the mortgage terms of a bankruptcy petitioner’s primary home loan to avoid foreclosure. This provision would serve as a last option tool for homeowners that could not achieve a loan modification through negotiation with the financial institution holding the mortgage loan. A similar bill has to pass the US Senate before an already supportive President Obama can sign this act into law. This new bankruptcy reform will assist in bolstering consumer confidence, if for no other reason than a basic necessity of human existence, shelter, is no longer threatened. Consumer confidence statistics are directly linked to the health and sheer existence and success of business and credit markets, thus translating to banks going back to business as usual and a strengthening economy.
So why are the banks standing in the way of a provision that will aid the very homeowning taxpayers that are bailing the banks out of the consequences they created within the housing market? The bill is a corrective measure for the current housing environment and has a suggested life span of 2015. The banks lobbyist have built there opposition of this new bankruptcy law around fear. Fear that the consumer will suffer higher interest rates and tougher loan qualification standards. However, the real fear lies with the banks, as the bankruptcy judges would be enabled to reduce the principal (loan balance) to reflect the current market values. Banks fear this power would cause them to suffer additional losses, although the overinflated market values of two years ago were knowingly caused by the banks. Currently, the bankruptcy judges can rewrite mortgage terms on investment properties for bankruptcy petitioners, and investment property loan interest rates are no more than a point higher than primary home interest rates and the loan guidelines a bit more stringent….but when homeowners are unable to refinance because of negative equity, missed payments, a tough employment market and are still recovering from credit abuse, maybe higher rates and tougher guideline can be withstood until 2015 for the sake of homelessness prevention. Seems like the banks are still serving the American public cold french fries in their self-preservative efforts. However, the sooner Americans become financially literate the sooner a weaning of our needs on banks will be realized.