Archive for September, 2013

Does Filing Bankruptcy Stop Debt Collection Automatically?

Sunday, September 15th, 2013
article by admin

Bankruptcy’s Automatic Stay is an extremely powerful tool that protects you from debt collection during a case, though you can lose that protection under certain circumstances.  But first, what is the automatic stay and how do you get it?

Stop Debt CollectionStop Debt Collection

You get a stay automatically from the Court at the time a case is filed [bankruptcy laws are full of exceptions, so always contact a lawyer to learn how bankruptcy would affect you]. That stay stops most debt collection activity, such as lawsuits, foreclosure, garnishment, collection letters, and collection phone calls and generally prevents many types of bad debt collection stuff from happening to you.

If your creditor does not like the way it is treated in bankruptcy it can ask the Judge for relief from the stay.  Words have special meaning in the bankruptcy context.  Let me explain some of them in simpler terms.  Relief from the stay means the stay no longer stops the creditor from trying to collect money or property from you.

Your creditor has to prove in a court trial that it is entitled to relief from the stay, and you are given notice of that trial date and a chance to defend yourself.  Only certain types of creditors can win these trials.

The automatic stay law, 11 U.S.C. 362, allows a creditor, with an interest in some property, to protect that interest in that property if that creditor is not adequately protected by the bankruptcy.  Adequate protection is another one of those bankruptcy phrases that has a special meaning.  It means the bankruptcy must provide a way for that creditor to receive at least the present value of its interest in your belongings  or some payment to prevent its interest from losing value during the bankruptcy case.  Some examples of creditors with interests to be protected include lenders who have a lien on your car or a mortgage on your house.  If your bankruptcy does not offer them something, then they can ask the Judge for permission to proceed to collect their debt against you or to take your belongings.

Carolyn Secor is a Clearwater bankruptcy attorney and Clearwater foreclosure attorney serving Palm Harbor, New Port Richey, Oldsmar, Tarpon Springs, Seminole, St. Petersburg and the Tampa Bay area.

If you would like more information on our practice, please consult our website at:

www.bankruptcyfortampa.com
or call (727) 254-1704.

New Time Table For Getting A Mortgage After Filing Bankruptcy

Tuesday, September 3rd, 2013
article by admin

The Federal Housing Administration, in a major policy change, has announced easier rules for people looking to get a mortgage after bankruptcy:

The Federal Housing Administration will allow a bankruptcy debtor to get a mortgage backed by FHA in as little as one year after bankruptcy – if certain minimal criteria are met. The one year time frame also applies to short sales and even foreclosures. This is yet another acknowledgment that the “stigma” of bankruptcy has been replaced by the “necessity” of bankruptcy.

The one year time frame also applies to short sales and even foreclosures.This is yet another acknowledgment that the “stigma” of bankruptcy has been replaced by the “necessity” of bankruptcy.

FHA Recognizes Bankruptcy Shouldn’t Make You Less Creditworthy

In a letter to lenders dated August 16, 2013,FHA Commissioner Carol Galante states:

As a result of the recent recession many borrowers who experienced unemployment or other severe reductions in income, were unable to make their monthly mortgage payments, and ultimately lost their homes to a pre-foreclosure sale, deed-in-lieu, or foreclosure. Some borrowers were forced to file for bankruptcy to discharge or restructure their debts. Because of these recent recession-related periods of financial difficulty, borrowers’ credit has been negatively affected. FHA recognizes the hardships faced by these borrowers, and realizes that their credit histories may not fully reflect their true ability or propensity to repay a mortgage

The FHA will consider borrowers who have received a bankruptcy discharge or short sale or foreclosure more that one year prior if the borrower experienced an Economic Event and can document the following:

  • Prior to the economic event, the borrower had good credit and that certain credit impairments were the result of a Loss of Employment or a significant loss of Household Income beyond the borrower’s control;
  • The borrower has demonstrated full recovery from the event; and
  • The borrower has completed housing counseling.

Filing Bankruptcy Is An Economic Event

The FHA defines an Economic Event as “any occurrence beyond the borrower’s control that results in Loss of Employment, Loss of Income, or a combination of both, which causes a reduction in the borrower’s Household Income of twenty (20) percent or more for a period of at least six (6) months.”

There seems to be an enormous gap in the definition, though. This definition does not take into account a borrower who becomes sick or disabled or who must care for a relative who becomes sick or disabled but who does not experience a decrease in income. So, the definition should be expanded to include borrowers who experienced an increase in expenses equal to twenty (20) percent or more for a period of at least six (6) months. But for now, this is a start.

Clearly, FHA’s new policy is reflective of today’s economic reality.

As Americans start to come out of their foxhole and reenter this battered economy, they find themselves straddled with accumulated debt and massive negative equity in real estate – be it their home or investment properties.

In order to fully recover, many Americans are turning to bankruptcy to get a fresh start. The FHA understands this, and seems ready to help people get a mortgage after bankruptcy.

Carolyn Secor is a Clearwater bankruptcy attorney and Clearwater foreclosure attorney serving Palm Harbor, New Port Richey, Oldsmar, Tarpon Springs, Seminole, St. Petersburg and the Tampa Bay area.

If you would like more information on our practice, please consult our website at:

www.bankruptcyfortampa.com
or call (727) 254-1704.