Mortgage and Foreclosure Law Blog

Last time I explained that you could keep your car and home in Bankruptcy, if you want, and depending on the type of Bankruptcy you file; but what other property can you keep? This is an important question because many people don't realize that it's a common situation for the Bankruptcy Trustee to force the sale of assets to pay creditors. For simplicity we are going to cover just a little about Federal Exemptions as opposed to State Exemptions.

You can exempt household goods such as furniture, clothing, appliances, and the like. The aggregate value that can be exempt is $10,775. Jewelry can be exempt up to $1350 as long as it is held for personal and family use. There is also a "wild card" or "any property" exemption. This is an additional $1,075 for property not already covered/exempt. There is another $2,025 exemption for "tools of trade".

You can also keep most Life Insurance policies as long as they don't have a cash value. Life insurance policies, which do have a cash value get complicated; but generally can be exempt up to the cash value of $10,775.

Many people have expensive health aids like wheel chairs/scooters, artificial limbs, even specially equipped vehicles. These can all be exempt and although there are gray areas, if it qualifies there is no dollar limit.

There are also exemptions for all kinds or retirement benefits and other rights to future income. This gets complicated and is too extensive for this blog entry. As you can see there is a lot to consider when filing a Bankruptcy. If you have further/specific questions contact us! Consultations are free.

One of the things I try to do in my blog is answer questions that people ask me on almost a daily basis. One of those that I haven't addressed yet involves bankruptcy and specifically Chapter 7. You may remember from an earlier post that all your debts are discharged in a Chapter 7 Bankruptcy. In other words, you won't owe them anymore.

The question I get from so many people is, "Can I keep my car and can I keep my house?" The answer is Yes! If you have a car loan, you can keep your car and re-affirm the debt/loan. Once your Bankruptcy is discharged, your loan servicer will send you papers to Re-affirm your debt. Basically an agreement where you agree to continue paying on the loan.

If you own your car, it is exempt and you can keep it. By Exempt, I mean that you won't have to sell it to pay off your debts. You can be in a Chapter 7; but let's say you have three cars and two of them are collector's items and classics. The Bankruptcy court may force you to sell those to pay off some or all of your debt. You will be able to keep at least one car. If you have multiple family members they can usually keep their car too.

You can also keep your home. Not a vacation home; but your primary residence. That's if you want to keep it. You can walk away from it too. It used to be that everybody would just "stay and pay", meaning that you just continue to make your mortgage payments after the bankruptcy. Nowadays it is a good idea to consider asking your mortgage company to re-affirm your mortgage after the bankruptcy. There are good and bad results from this. The good is that you can qualify for a Mortgage Modification later if your debt is re-affirmed. Further, you eliminate some troubles when you are ready to sell the home. The downside of re-affirming your mortgage after a Bankruptcy is that you can't walk away from it later if you get into financial trouble. So that is a personal preference/balance that each debtor has to decide on his/her own. Next time I am going to to into more detail about exempt property and what you can keep and have to get rid of during a bankruptcy.

Hi Readers! So last time we were going over Bankruptcy and how it can help with foreclosure. I was going over the Automatic Stay that is put in place upon filing and how that stops collection activity. Of course foreclosure is collection activity. The banks don't just sit there and take it so to speak. They have options too. The most common is the Motion to Lift the Stay, which if granted allows the foreclosure to continue.

Now, what if the bank has already filed a foreclosure notice? Unfortunately, bankruptcy’s automatic stay won’t stop the clock on the advance notice that most states require before a foreclosure sale can be held (or a motion to lift the stay can be filed). For example, before selling a home in California , a lender has to give the owner at least three months’ notice. If you receive a three-month notice of default, and then file for bankruptcy after two months have passed, the three-month period would elapse after you’d been in bankruptcy for only one month. At that time the lender could file a motion to lift the stay and ask the court for permission to schedule the foreclosure sale.

Many of you know that consumers generally have two options for Bankruptcy, either a Chapter 13 or a Chapter 7. I say generally because there are other options; but they rarely apply. Just a side note, they are named after the Chapter they reside in, in the Bankruptcy Code. So let's start with how a Chapter 13 works to help.

Many people will do whatever they can to stay in their home for the indefinite future. If that describes you, and you’re behind on your mortgage payments with no feasible way to get current, one way to keep your home is to file a Chapter 13 bankruptcy.

How Chapter 13 works...in general. Chapter 13 bankruptcy lets you pay off the “arrearage” (late, unpaid payments) over the length of a repayment plan you propose—five years in some cases. But you’ll need enough income to at least meet your current mortgage payment at the same time you’re paying off the arrearage. Assuming you make all the required payments up to the end of the repayment plan, you’ll avoid foreclosure and keep your home.

What if you have 2nd and 3rd mortgage payments? Chapter 13 may also help you eliminate the payments on your second or third mortgage. That’s because, if your first mortgage is secured by the entire value of your home (which is possible if the home has dropped in value like so many these days), you may no longer have any equity with which to secure the later mortgages. That allows the Chapter 13 court to “strip off” the second and third mortgages and recategorize them as unsecured debt —which, under Chapter 13, takes last priority and often does not have to be paid back at all. For more information on what happens with a stripped off mortgage see my earlier post. We'll continue with Chapter 7 next time.

Hi Again Dear Internet Readers! Today I'd like to start a multiple part series on Bankruptcy and How you can protect your Mortgage from Foreclosure.

Did you know you can avoid or delay foreclosure of your home by seeking bankruptcy protection? We love to help borrowers like you work out a deal with their lender to modify your mortgage to a payment you can afford. That is our main goal. However, there are people who are in such bad shape financially that the Bank just won't work with them or qualify them. For these people the bank proceeds with foreclosure. If you are facing foreclosure and cannot work out a deal or other alternative with the lender, bankruptcy may help.

The foreclosure process takes several months. You should always pay attention to letters from the bank and especially from their attorneys. You should have plenty of notice before you come home to a locked house with an eviction notice. During these several months you should be working with your bank or an attorney (like me ;-) ) in order to try options to "save your home." However, if you've already tried and failed with these measures, now is a good time to consider bankruptcy as a possibility for avoiding or stalling foreclosure. Here are some ways that filing for bankruptcy can help you:

The Automatic Stay: Delaying Foreclosure

As soon as you file for Bankruptcy the court issues an order commonly referred to as the "automatic stay". This is an order to all your creditors to immediately cease all collection activities against you. Make no mistake, your lender is a creditor of yours. In fact, this procedure is so powerful you can file for bankruptcy and get a sale date stopped in the same day! Please don't ever do this though. The automatic stay will typically last about three to four months.

Your lender can file a motion to lift the stay. If the lender obtains the bankruptcy court’s permission to proceed with the sale (by filing a “motion to lift the stay”), you may not get the full three to four months. But even then, the bankruptcy will typically postpone the sale by at least two months, or even more if the lender is slow in pursuing the motion to lift the automatic stay.

There is much more to this and I'll go over it in my next post....

Hi Readers! Here at SJ Mobley & Associates we end up with a lot of questions from confused clients regarding charge offs of their second mortgage. Let me give you an example of what I'm talking about. Let's say you have two mortgages; the first is for $300,000 and the second is for $50,000. For simplicity let's say you bought your house two years ago and the house was worth $400,000. Thus two years ago you would have had $50,000 worth of equity in your home.

Let's jump forward to today. Now, in this housing market, your home has dropped in value and is only worth $250,000 (a very realistic situation for too many people). You now have no equity in your home. Now, finally let's say you can't afford to pay both your first and second mortgage. We offer solutions for lowering payments on both; but sometimes people get into a situation where they have to stop paying their second mortgage entirely.

This is a situation where your second mortgage would charge off as bad debt and become unsecured debt. The reason is that there is no equity in the home to foreclose on. Two years ago, in this situation, the holder of your second may have decided buy out the first mortgage and sell the home to recoup their $50,000. Now, that doesn't make financial sense. So in this situation, if you don't pay your second for at least 6 months, it will charge off as bad debt; but what does that mean?

That means the holder of your second makes an accounting entry and "writes off" the $50,000 you owe them as a loss. However, they will continue to collect on this debt. Usually they send it to debt collectors who will harass you for months. Eventually, if you are employed, they are likely to send the debt to a law firm to sue on, for collection.

So what have you done by letting it charge off? Most likely you have just bought some time. If you are judgment proof (no assets and either no job or living off retirement) then you have essentially rid yourself of this debt. If you are not judgment proof, like most of us, then this is not a good route to take. If you are in a situation where you can't afford your mortgage; but want to stay in your house, you need to get help. We consult for free everyday. The best options for most people include Mortgage Modification, Bankruptcy, and debt settlement. Call us for ideas on all three 303-488-3405.

Hello all,

Welcome to S.J. Mobley & Associates, LLC's blog! This is our first post so I'd like to introduce you to our Firm and primary areas of practice: mortgage law and foreclosure defense. Whether you intentionally found us while searching for foreclosure and mortgage information or you randomly clicked on this link out of boredom, we hope when you sign off you're glad you visited. I'll keep this post short and sweet and hopefully leave you wanting more...in which case, stop by in a few days because we'll be posting several times a week! Be assured, the posts will have more substance than this one does. But for now, I just want you to get a feel for who we are, what we do, and why we do it.

First, about our Firm. We are a group of consumer advocate attorneys who entered the legal profession with the goal to help people and improve society. Yes, I'm sure that's what all attorneys are supposed to say, but we live by these principles; each of our attorneys has a passion for volunteering, working with charities, and helping others (children, elderly, animals...you name it). The legal profession IS about the law, but even moreso it's about you, our client. We develop a personal relationship with each of our clients and put our all in every matter we touch. Nothing makes us happier than to hear a client say how comfortable they are with us. That's the way an attorney-client relationship should be. Enough about us...

So, what is mortgage law? Most of my friends who know I practice mortgage law think I deal with foreclosures day in and day out. Granted, in this economy we have our fair share of clients facing foreclosure, but mortgage law is much more than foreclosure defense. Mortgage law is a fairly complicated field because it deals with many areas of law: contracts, securities, landlord/tenant, collections, and most importantly federal and state consumer protection laws. We even occasionally run into mortgages that require us to look at criminal statutes or wills/trusts. Every day brings a new challenge and an opportunity to help people in need. We examine loan documents and conduct loan document audits, looking for federal and state violations to use in foreclosure defense or leverage in loan modifications. We negotiate with General Counsels for all the major lenders and work out solutions to let our clients stay in their homes. There's a lot of long days but it's all worth it when we see the look on our clients' faces when we tell them their house is no longer in foreclosure or that we just saved them hundreds of dollars on their mortgage payment.

That's just a bit about us. We would love for you to stop by the Firm or drop us an email so we can learn a bit about you. During the next few weeks I'm going to address the mortgage crisis: how we got here, why we aren't getting out, and when we can expect it to go away. We hope to see you back here often!

(Hmm....so much for short and sweet. Hey, I'm an attorney what do you expect?) Have a great day!