Archive for January, 2016

Mortgage Modification with Bankruptcy

Monday, January 25th, 2016

You may be wondering if you an apply for a mortgage modification if you have filed for bankruptcy. Mortgage modification houseis still available when you file for bankruptcy.  You can be considered for modifications under the Making Home Affordable Programs such as The Home Affordable Mortgage Program (HAMP) before, during, or after you file for bankruptcy.   If you apply for a modification through these programs while your are in bankruptcy, your servicer may allow you to submit your bankruptcy schedules in place of the lengthy application that is generally required.  The bankruptcy court in South Florida has recently implemented its own mortgage mediation program to encourage foreclosure resolution in bankruptcy. Whether you take advantage of mediation program or pursue your modification outside of the bankruptcy court, your application must still be considered.

How Bankruptcy Can Affect a Modification Application

Bankruptcy may make a modification more affordable if your attempts to modify your mortgage have been hampered by
•excessive unsecured debt, such as credit card or medical bills,
•second mortgages or junior liens, or
•mortgages on rental or investment property which exceed the value of the property.

If you receive a Chapter 7 discharge prior to obtaining your mortgage modification and did not reaffirm your mortgage debt, your mortgage holder is required to consider you for a modification without requiring you to reinstate your personal obligation on the loan. This makes modification less risky because if you ever default, the mortgage holder can take back the property but cannot obtain a deficiency judgment against you for the difference between the amount recovered from the sale of the house and the amount you owe at the time of the foreclosure.

Under the Making Home Affordable Program, you must be considered for a HAMP modification if you or your attorney submits a request while you have an open Chapter 7 or Chapter 13 bankruptcy.  Under the program guidelines, your servicer may even accept recently filed bankruptcy schedules in place of a portion of the lengthly application usually required.

If you are already in a trial modification when you file for bankruptcy, your mortgage servicer is required to work with you and your attorney to obtain any trustee or court approvals necessary to complete the modification process.  This includes extending the trial period for up to two months to give you time to obtain court approvals. If you are approved for a modification during your Chapter 13, under certain circumstances, your servicer may be able to waive the trial period and enter directly into a permanent modification.

If You Have Already Modified Your Mortgage

If you entered into a modification on your homestead property prior to your bankruptcy filing, in most cases, you can continue to make the modification payments and retain your home when you file for bankruptcy.

Carolyn Secor P.A. focuses its practice in the areas of Bankruptcy and Foreclosure Defense in Clearwater, Florida.  For more information, go to our web site
or call (727) 254-1704.

Means Test, Liquidation Test

Friday, January 8th, 2016

If you are considering filing for bankruptcy, you will fill out some paperwork for what is called a “Means Test” and a Liquidation Test”.bankruptcy court

According to the United States Department of Justice:

Most individual debtors filing for bankruptcy relief are required to complete a version of Bankruptcy Form 122. Official Form 122A-1 (Chapter 7 Statement of Your Current Monthly Income), Official Form 122A-1Supp (Statement of Exemption from Presumption of Abuse Under § 707(b)(2)), and Official Form 122A-2 (Chapter 7 Means Test Calculation) (collectively the “122A Forms”) are designed for use in chapter 7 cases. Official Form 122C-1 (Statement of Your Current Monthly Income and Calculation of Commitment Period) and Official Form 122C-2 (Chapter 13 Calculation of Your Disposable Income) (collectively the “122C Forms”) are designed for use in chapter 13 cases.

A debtor must enter income and expense information onto the appropriate form (i.e., the 122A Forms or the 122C Forms) and then make calculations using the information entered. Some of the information needed to complete these forms, such as a debtor’s current monthly income, comes from the debtor’s own personal records. However, other information needed to complete the forms comes from the Census Bureau and the Internal Revenue Service (IRS). This Web site reproduces the Census Bureau and IRS Data necessary to complete the 122A Forms and the 122C Forms. The source data reproduced here is also available directly from the IRS and Census Bureau using the links at the bottom of this page.

If you are considering a Chapter 13 Bankruptcy, where you are able to retain certain assets, and you enter into an agreement to repay creditors over a period of time, you need to fill out a “Liquidation Test”. According to the Legal Consumer website:

Chapter 13: “Liquidation test” / “best interest of the creditors test” of 1325 (a)(4) — issues, timing, computation, deductions

The “best interest of creditors test” of � 1325(a)(4) — also informally known as “the liquidation test” — requires that unsecured creditors in a Chapter 13 case be paid at least as much through confirmation of a proposed Chapter 13 plan as they would receive if the debtor’s case were liquidated under Chapter 7 of the Bankruptcy Code.
It is important to remember that number is not arrived at simply by adding up the value of the property; you are also allowed to reduce that amount by the administrative costs of selling the item, etc. to arrive at the true amount that unsecured creditors would get in a Chapter 7 case.

This may all sound complicated and confusing. Why not come in for a free consultation with Caroline Secor.

Carolyn Secor P.A. focuses its practice in the areas of Bankruptcy and Foreclosure Defense in Clearwater, Florida.  For more information, go to our web site
or call (727) 254-1704.

Considering a Second Mortgage?

Monday, January 4th, 2016

Back during the real estate boom, many homeowners found second mortgages a convenient and relatively inexpensive source of a saving your homeloan. However, when the market dropped, many people found themselves “under water” and unable to sustain their payments. One of the major reasons for filing bankruptcy has been the ability to escape the burden of the second mortgage payments.

If you have a second or third mortgage, you may be able to eliminate second and third mortgages while keeping your home.

Before we discuss how we can help you remove a second mortgage, let’s discuss what a second mortgage is and why people often turn to them to help ease financial issues.

What is a Second Mortgage?

A second mortgage is literally what it sounds like. It’s a mortgage lien on your home in addition to your primary mortgage, which is also a lien on your home.

A lien is defined as: a right to keep possession of property belonging to another person until a debt owed by that person is discharged. When you have a lien on something, that means you have a right of possession to that thing. When the debt is fully paid, then the lien is released.

When you take out a mortgage, the lien holder is the bank or lender that gives you the mortgage loan to buy the house. The lien will then be released by the bank or lender once you have paid off the amount you owe.

A second mortgage often takes the form of a home equity line of credit (HELOC) or a home equity loan (HELOAN), and can range in size from $10,000 to $500,000 or more.

Reasons for Second Mortgages

There are a number of reasons why you might want to take out a second mortgage on your home, including:

  • having cash available if there is an emergency such as a job loss or illness
  • you have a good mortgage rate on your first mortgage and you do not want to refinance (we’ll talk more about refinancing later)

Interest Rates and Second Mortgages

If you default on your first mortgage and the house is foreclosed on, the lien (a bank or lender) on that first mortgage has first claim against any money that is recovered from an auction of your home.

Basically, the first lender has the first right to any money. Only once the first lien holder is paid can a second mortgage lien holder be paid. This is often why second mortgages are called “junior liens” or “subordinate liens” for this reason.

This is also the reason why interest rates on a second mortgage will be higher than interest rates on a first mortgage. Often times several percentage points higher.

A second mortgage can either be fixed-rate (often called Home Equity Loans) or adjustable-rate mortgages (ARM).

Home Equity Line of Credit

Second mortgages can also be available as a Home Equity Line of Credit (HELOC).

This is an adjustable-rate mortgage (ARM) which functions more like a credit card in that a homeowner is given a maximum credit line, a debit card, and checks for spending. When the homeowner purchases something, that amount is then added to the credit line’s balance. It’s important to note that interest also accrues.

The interest rates are based on the Prime Rate, which is the Fed Funds Rate plus three percentage points.

Are Second Mortgages a Good Idea? Maybe, Maybe Not

A second mortgage can be helpful because it allows you the opportunity to access the equity in your home without having to break the first mortgage. It also provides you with a line of credit should you need extra money as the result of a job loss or illness. It can be a good short-term financing solution and all other avenues have been exhausted. Still, it needs to be considered for what it is – an additional lien on your home. For that reason, it’s advised that you refinance your first mortgage.

Carolyn Secor P.A. focuses its practice in the areas of Bankruptcy and Foreclosure Defense in Clearwater, Florida.  For more information, go to our web site
or call (727) 254-1704.