SHORT SALES
A short sale is just like a regular sale of real estate, except that you sell the property for less
than the balance owed to your mortgage lender(s). In exchange for your participation, we insist
that the mortgage lender cancel the debt remaining after the sale.
The primary reason is to discharge the mortgage indebtedness. If you have already accomplished the
discharge through bankruptcy, a short sale is still useful because it can be the best way to
get your name removed from the title and eliminate the expense of the property. Also, you may
receive a monetary incentive at closing, as much as $10,000.
Foreclosures generally take much longer than short sales (830 days on average). During the foreclosure
process, you are still responsible for maintaining the property, and you have liability as the
property owner. Foreclosures can be more damaging to credit. A short sale, on the other hand,
takes 4-6 months on average. After the closing, you will have no further responsibility for the
property as the property will belong to someone else.
Generally, because your mortgage lender pays the expenses of a short sale, a short sale is completely
free for the client.
A short sale will affect how your mortgage account is reported to the credit bureaus. Foreclosures
are typically reported as charge offs, the worst possible credit declaration. In contrast, short
sales are reported “paid” or “settled” for “less than full balance.”
If you have received, or will be receiving a bankruptcy discharge, you will not be taxed on the mortgage
cancellation after a short sale. If you do not have a bankruptcy discharge, you should consult
with your tax advisor as there may be a loophole to prevent any tax on debt cancellation.
Absolutely, yes. The waiting period is generally 3 years for an FHA loan. There may be a shorter
waiting period if you can show extenuating circumstances. The waiting period is usually significantly
longer if you allow your home to be foreclosed.
CHAPTER 7 BANKRUPTCY FAQ’S
Please note: This handout is for informational purposes only and is not meant to be legal advice. Always seek the
advice of a professional before filing a bankruptcy case.
Chapter 7 is the legal process of obtaining a fresh start and eliminating debt.
Most types of debts. Some common exceptions are student loans and parking tickets.
The average amount of time the case will be open is three and one-half months from the filing date.
After you give us your documents and complete your online credit counseling, we can usually file
your case within 3 business days or less.
Yes, almost always. If there is a possibility of losing an item in the bankruptcy, we will warn you
in advance.
Chapter 13 is a debt consolidation, whereas Chapter 7 is for debt elimination.
No. But if you have too little debt, Chapter 7 may not be the best option for you. Ask us at your
consultation.
This depends on your total income for the last 6 months, on your household size, and on your expenses.
We can almost always determine your eligibility at the initial, free consultation.
The case will be reported on your credit for 10 years. You also must report all of your items of
value (assets) to the bankruptcy court. In unusual cases, assets can be sold in Chapter 7 bankruptcy.
Proof of income and the last 2 income tax returns that you filed. You will also need to complete
a pre-filing credit counseling course.
If you filed Chapter 7 more than 8 years ago, you can file Chapter 7 again now. If you filed Chapter
13 before, and you did not finish it, you can file Chapter 7 now. If you filed Chapter 13 more
than 6 years ago, and finished the plan, you can file Chapter 7 now.
You will need to take 2 courses, one pre-filing and one post-filing. The deadline to take the second
course is 45 days AFTER your meeting with the trustee. We recommend taking the courses online
at
www.debtorcc.org. The fee is $14.95 for the first course and $9.95 for the second course.
The Court fee is $335. Our attorney fees vary depending on case complexity. We only charge reasonable
fees. We will quote your fee after the free consultation, if not earlier.
No. While the bankruptcy may lower your score in the short term, you will have the opportunity to
raise your credit score when the bankruptcy is completed. Many of our clients have obtained car
loans, mortgages, and business lines of credit within three (3) years of filing for bankruptcy.
Yes. The minimum waiting period is 3 years after case is discharged, for FHA mortgages.
If your car is paid off, you can keep the car if the blue book value is not too high. We will let
you know. If you owe money on the car, you have the option to surrender the car to the finance
company and eliminate the debt on the car, or to keep the car and to continue making payments.
We pull your credit report and import all creditors from the report into the bankruptcy petition.
After we give you your credit report, please tell us about any creditors that are not listed.
Parking tickets, collection agencies, payday loans, medical bills, and utilities are often not
listed in the report.
Yes, the law requires all creditors to be listed. If you have a car loan or a mortgage, you will
almost always have the option to keep the account and continue making payments.
All auto drafts will be suspended upon the filing of the Chapter 7. In most cases, documents can
be signed to restart the auto drafts, but in the meantime please make your payment manually.
Usually, no. It is almost always the case that all credit card accounts will be closed. You may be
able to obtain new credit card accounts when the bankruptcy is over.
Sometimes, yes, but the rules are complicated. Ask us during your consultation.
Generally, no, unless you have a substantial hardship, such as a severe disability.
Unfortunately, no. Only in Chapter 13.
Yes, if the reason for the suspension was parking tickets, municipal fines, or auto accident with
lack of insurance.
No, discharge of debt in bankruptcy is not taxable.
Once we file your bankruptcy petition, all collection activity must stop. Please allow at least one
week for this to happen from the filing date, because some creditors receive notice via US mail.
Almost always, no. You will have to attend a meeting with the bankruptcy trustee. We will give you
the date, time, and location when you file. You will have at least 30 days’ notice. These meetings
last an average of 10 minutes. We will be with you the entire time.
You will be asked some questions, mostly about the things you own. We will prepare you so that you
will know most of the questions in advance.
Social Security Card and Driver’s License (or State ID). Also bring something to do, as the wait
times can sometimes be long.
Yes, but if you are honest with the Court about your income and assets, it would be very unusual.
We can almost always inform you in advance of any risks of denial.
You can file on your own without your spouse. However, unless you are separated, the law requires
your spouse’s income and expenses to be listed in your Petition.
Generally, no. But, if you have any joint debts, those accounts may be closed, and the closing of
the accounts may affect the non-filing spouse’s credit.
Yes. You will receive in the mail, at the successful conclusion of your case, a discharge order.
Keep this order in your files.
CHAPTER 13 BANKRUPTCY FAQ’S
Please note: This handout is for informational purposes only and is not meant to be legal advice. Always seek
the advice of a professional before filing a bankruptcy case.
Chapter 13 is a plan to repay your creditors. It consolidates your debt into one monthly payment,
which is made to a trustee, who distributes it to your creditors.
Anywhere from 3 to 5 years, based on your household size and income.
Chapter 13 is a debt consolidation, whereas Chapter 7 is for debt elimination. In Chapter 13,
you have to make payments for 3-5 years. After you do that, the debt you didn’t repay is
eliminated.
Chapter 13 has certain advantages over Chapter 7. You can use Chapter 13 to get rid of parking
tickets and tollway violations. You can stop a foreclosure and catch up on a mortgage. You
may be able to eliminate a secondary mortgage. You can undo a repossession. You can get your
driver’s license reinstated. Also, Chapter 13 may be necessary if you don’t qualify for Chapter
7 because you have too much income or assets.
The Court fee is $310. You will usually have to make an additional down payment to our office
to file, but most of the fees will be included in your consolidation. When you hire us, we
will be your attorneys for the entire duration of time you are in Chapter 13.
You can always file Chapter 13 whether or not you filed bankruptcy in the past. If you filed
a Chapter 7 in the last 4 years, you are ineligible to receive a Chapter 13 discharge, but
you can still file Chapter 13. Ineligibility for discharge just means that you would still
have debt when you complete your Chapter 13, but get all other benefits of filing.
You will need 4 years of tax returns (or less if you did not need to file), and at least 60 days
of paystubs. Sometimes we will need 6 months of paystubs. You also need to complete a credit
counseling course at www.debtorcc.org (cost: $14.95).
We can answer this question after we analyze your income and expenses, after you tell us what
you own, and when we have a list of your creditors. We do this at your consultation.
Payments to the trustee start 30 days after the filing of the case. You must start paying any
debt left outside your plan (such as a mortgage) in the next month following the month in
which the case is filed.
Payments can be withheld from your payroll (for example, if paid twice a month, one half payment
can be deducted each pay period). You can also pay by cashier’s check or money order, or
online by ACH transfer. The trustee will give you more details.
The trustee represents your creditors. The trustee collects your payments and distributes the
payment to your creditors. The trustee also holds a meeting to verify the information in
your petition. The trustee may attempt to argue for an increase in your plan payments. Ultimately
the judge, not the trustee, decides whether your plan will be confirmed.
While Chapter 13 is a public record, only creditors, the trustee, and recipients of domestic
support (such as child support) are actually notified of the filing.
Yes, you do have to include all creditors who you owe in your petition. Sometimes, student loans,
mortgages, and car loans are listed, but not included in the payment plan.
No. While the bankruptcy may lower your score in the short term, you will have the opportunity
to raise your credit score when the bankruptcy is completed. Many of our clients have obtained
car loans, mortgages, and business lines of credit within three (3) years of filing for bankruptcy.
We will pull your credit report. Please make sure to tell us about any creditors that are not
listed in your report, such as payday loans, medical bills, parking tickets, and collections.
Usually, no. It is almost always the case that all credit card accounts will be closed. You may
be able to obtain new credit card accounts when the bankruptcy is over.
We can use Chapter 13 to reduce the interest rate on your car loan to as low as 5 percent. For
older car loans, we can sometimes reduce the principal. Your car loan will almost always
be included in your plan.
Yes, if the reason is parking tickets, speeding tickets, or other municipal violations. We can
get your car released within a week of filing.
If you are behind on your mortgage, all of the back payments will be included in your Chapter
13 Plan. Foreclosure will stop. You must continue making your regular mortgage payments after
we file your case. A junior mortgage can possibly be eliminated.
Yes, but only for investment property. For your primary residence, you may be able to eliminate
a junior mortgage.
We will usually include your student loans in your Chapter 13 Plan, in which case the lender(s)
will receive a small payment from the trustee during your plan. However, because we cannot
eliminate the student loan debt in Chapter 13, we recommend that you continue to pay down
your student loan debt on your own during your plan.
Chapter 13 will remain on your credit report for 7 years from the date of filing. During the
Chapter 13, you will not have much access to credit, but you can probably borrow to purchase
a car if needed.
You can file on your own without your spouse. However, unless you are separated, the law requires
your spouse’s income and expenses to be listed in your Petition and factored into your plan
payments.
You will almost never have to attend court. A meeting with the trustee is required – you will
need a social security card and driver’s license (or state id).
All collection activity is stopped. Roughly 45 days later, we will attend a short meeting with
the trustee who will ask you questions about your income, expenses, and assets. After the
meeting, the Court will decide whether to approve your plan at a confirmation hearing.
There is no minimum. Currently, the maximum debt is $394,725 for unsecured (such as credit cards),
and $1,184,200 for secured (such as mortgages and car loans).
All auto drafts will be suspended upon the filing of the Chapter 13. For any accounts that you
are paying separately from your Chapter 13 Plan (usually just the mortgage), you will probably
need to make these payments manually without auto draft.
Sometimes, yes. This will depend, based upon the trustee and Judge that your case is assigned
to. If you are required to turn over your refund, you can minimize it but having less money
withheld from payroll for taxes.
If something happens that changes your financial picture, call us. We may be able to lower your
Chapter 13 payments, or even convert your case to Chapter 7 so debt can be eliminated.
You are free to dismiss your case at any time, but if you do so, your creditors can start collecting
again, and you will lose all of the benefits of the Chapter 13.
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