Epperson and Rich PA – Means FAQ

 

Can I keep my house and car if I file bankruptcy?

• Yes if you are current on the payments. You can “reaffirm” the debt, which means you agree to remain responsible for the debt.

What is a short sale?

• This is a negotiated sale of your home to a third part whereby the mortgage lender agrees to accept less than the full amount owed on the mortgage. This may keep a mortgage foreclosure off of your credit records.

Do you know what your tax liability is if you do a short sale?

• You might be subject to taxes. When selling a home in a short sale debt relief and mortgage debt forgiveness are taxable, and the borrower may have to pay income taxes on the amount of debt forgiven.

Can you avoid the tax liability?

• Yes, if you qualify as an insolvent under IRS rules. You discharge the debt through a bankruptcy.

Will you get a release from the mortgage lender in a short sale?

• Yes, usually if the lender decides that short selling the property at a moderate loss is better than the loss it will suffer from foreclosure and may often release the borrower.

Can the mortgage lender sue you for a deficiency?

• Under certain circumstances, if there’s a difference between what you owed on the mortgage and what the bank can sell it for, the bank may seek a deficiency judgment against the barrower.

 

What is a 1099C?

• A notice that is given to the IRS and the debtor that the debt has been cancelled. The amount of the debt that is forgiven is deemed taxable and is required to be included in the debtor’s tax return.

 

What is a 1099A?

• This is similar to a 1099c but the barrower has abandoned the property.

Should you stay in your home or start looking for a place to move?

• There are various options and various time limits. Some options such as, deed in lieu of foreclosure, and “cash for keys” require the barrower to vacate the premises by a certain date.

 

What happens if you have a second mortgage?

• Upon the foreclosure of the first mortgage, you will still owe your second mortgage. The second mortgage lender can sue you for the money you owed.

 

What is a principal reduction and does it really happen?

• This is not common, but may be a possibility under certain circumstances. With a mortgage modification you may be able to have your mortgage principle reduce and your monthly payments lowered to an amount you can afford.

What is refinance?

• This is the rarest of options because in today’s real estate market very few homes have sufficient equity to meet a lender’s criteria for refinancing. However, depending on a lender’s underwriting requirements and the equity you have in your home, you may be able to qualify for a new mortgage on your home, paying off the mortgage that is in foreclosure.

 

What is foreclosure defense?

• It is a legal challenge against the mortgage lender’s foreclosure law suit.

Is foreclosure defense worth it?

• Usually it is, at the very least it gives you time to explore your options and decide the course of action best suited for your situation.

 

Can I keep my home if I file bankruptcy?

• Yes, your homestead is usually exempt and you can keep it if you are current on the payment and you are able to continue to make future payments.

 

What does upside down and underwater mean?

• “Upside down” refers to our “under water” loans with negative equity, if other words, you owe more on your house than it is worth.

If I have missed mortgage payments or I am in foreclosure is it possible to catch up?

• Yes, through a chapter 13 bankruptcy you may be able to file a plan that allows you to catch up all missed payments and reinstall your mortgage in good standing.

 

What is a foreclosure suit?

• When a homeowner is unable to make payments, the lender can sue to have the court sell property and apply the proceeds to the debt owed to the lender.

What can I keep if I file a Chapter 7 Bankruptcy?

• You are allowed to keep your exempt property. That normally includes the homestead, $1,000 of equity in a car or truck, $1,000 worth of personal property (furniture etc.), your pensions, IRAs, 401 (K) etc., and the wages of the head of the family.

What is garnishment?

• Garnishment is where a creditor gets a judgment against a debtor, and obtains a court order to seize the debtor’s bank accounts and/or a portion of the debtor’s wages.

What is the bankruptcy automatic stay?

• The automatic stay comes into existence upon the filing of a bankruptcy petition and it prohibits a creditor from taking any further steps from collecting a debt owed by the debtors. It can stop lawsuits, repossessions, garnishments, and foreclosures.

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