Can a homeowner complete a short sale of his or her property after a Chapter 7 bankruptcy or Chapter 13 bankruptcy has been filed?

The answer is generally yes as long as certain requirements are met.

In Chapter 7 bankruptcy, a Motion must be filed with the bankruptcy court in order to force the Chapter 7 trustee to abandon his or her interest in the property. This can be done by showing that the person that filed for Chapter 7 bankruptcy does not stand to earn any profit from the short sale of their property. Exhibits that … Continue Reading

Can tax debt be eliminated  in bankruptcy?

Both Chapter 7 bankruptcy and Chapter 13 bankruptcy allow taxpayers to discharge federal and state income taxes when certain requirements are met.

In order for income taxes to be dischargeable in bankruptcy, the following must be true:

The taxes owed must be at least 3 years old from the “due date” of the return, including extensions.
The tax returns must have been filed at least two years before the bankruptcy case is filed.
The taxes owed were assessed more than 240 days prior to the filing of the bankruptcy.
The tax returns were not … Continue Reading

As tax season is fast approaching, many people are wondering if they have to pay taxes on debts that have been charged off or forgiven by creditors.

Debt that is charged off or forgiven can be considered taxable income. This can come as quite a shock to people who are struggling to pay their bills.

When a credit company or mortgage lender charges off or forgives debt that is owed, the borrower gets sent a 1099-C tax form from the creditor. In such a situation, the amount charged off or forgiven can be reported as taxable income to the borrower. The IRS … Continue Reading

Increased student loan debt is forcing a larger amount of borrowers and their parents into filing for bankruptcy according to a report recently issued by the National Association of Consumer Bankruptcy Attorneys.

The rise in student debt has been attributed to increasing costs to attend college, budget cutbacks impacting financial aid, and the persistently weak job market that graduates must try to navigate.

Unlike many other forms of personal debt such as credit card debt, student loans are extremely difficult to discharge in bankruptcy, which means that student loan debt often survives the bankruptcy.

In order to discharge student loan … Continue Reading

Many people have asked me if they can force their lender(s) to accept what is the current fair market value of their home. Chapter 13 bankruptcy allows homeowners with a junior mortgage or equity line to “avoid” or “strip” that junior mortgage in Chapter 13 bankruptcy if the property in question is the primary residence of the homeowner and the property is upside down with respect to the senior mortgage(s). The amount owed to the senior lender(s) on a primary residence can not be modified through Chapter 13 bankruptcy.

However, if the property … Continue Reading

Filing for bankruptcy may actually help to improve a person’s credit score and ability to get credit. Although this may seem counter-intuitive, once a person files for bankruptcy and receives a discharge in Chapter 7 bankruptcy or Chapter 13 bankruptcy, often times many if not most of the debts that person was previously burdened with are wiped out. As a result, this person’s debt to income ratio starts to look much better to lenders.

Lenders also know that once a person receives a discharge in bankruptcy, that person generally is not able to file … Continue Reading

Homeowners with a junior mortgage or equity line can “avoid” or “strip” that junior mortgage in Chapter 13 bankruptcy if certain requirements are met.

Assuming that the person is eligible to be in Chapter 13 bankruptcy, he or she can have the junior mortgage be treated the same as unsecured debt such as credit cards and medical bills.

To avoid the junior mortgage, the property at issue needs to be a person’s primary residence. In addition, the value of the property and the amount owed on each mortgage are extremely important factors. Essentially, the amount owed … Continue Reading

According to a new report from Zillow, the number of borrowers who owe more on their mortgages than their homes are worth took a huge jump in the fourth quarter of 2010. A full 27 percent of borrowers are now underwater on their mortgages, up from 23 percent in the previous quarter, according to Zillow.

Distressed sales such foreclosures and short sales continue to make up a large share of transactions resulting in further downward pressure on home prices.

Of course, continuing high unemployment and underemployment levels coupled with flat wage growth for many Americans is also a huge reason why home … Continue Reading

Recently there has been a lot of press about “foreclosure rescue scams.” A common scenario involves promising desperate homeowners that foreclosures against their properties will be stopped due to predatory lending on the part of banks. The use of “forensic audits” is a common selling point.

While it is true that banks gave out many risky loans over the past decade, homeowners facing foreclosure should be extremely cautious when hearing words like “guarantee” or claims of abnormally high success rates.  Due diligence is always recommended.

One thing that will stop a foreclosure sale right away is the filing of bankruptcy. This is … Continue Reading

According to the October Mortgage Monitor Report released by Lender Processing Services, as of the end of October 2010, foreclosure inventories are 7.4 times historical averages and rising.

In the month of October, 263,000 loans entered the foreclosure process. The total inventory of foreclosures is nearly 2.1 million loans with another 2.2 million loans in the “greater than 90-days delinquent, but not yet in foreclosure” status.  Delinquencies remain elevated – currently registering at 2.7 times historical averages. The total U.S. loan delinquency rate is at 9.29 percent while the total U.S. non-current loan rate is at 13.20 percent.

This data indicates that … Continue Reading