by evolveAdmin | Jun 29, 2012 | Bankruptcy
For many in the Orlando area it has become common to owe more on your home than it is currently worth. A recent decision out of the Eleventh Circuit Court of Appeals offers a new avenue of relief for struggling homeowners who may soon face foreclosure. In McNeal v. GMAC Mortgage, LLC, the court found that in a Chapter 7 bankruptcy an individual can “strip off” a junior lien. The bankruptcy term “strip off” means that an unsecured lien is removed in its entirety. What is an Unsecured Junior Lien? A homeowner purchased a home for $200,000 in 2004 and financed $165,000 through a mortgage. The value of the home increased and in 2006, the homeowner consolidated debts with a second mortgage of $40,000. In 2012, the home is now valued at $150,000. The homeowner owes $158,000 on the first mortgage and $35,000 on the second mortgage. The second mortgage is a junior lien and is unsecured, because the house is no longer worth the amount owed on the first mortgage. How Does the Case Benefit Underwater Homeowners? Prior to this case, an individual who was underwater and facing foreclosure could only strip a junior lien, such as a home equity line of credit or a homeowner’s association lien, with a Chapter 13 filing. The individual pays back a portion of the debt they owe under a three- or five-year plan in Chapter 13. Banks holding those junior liens receive a portion of what was owed and are treated similarly to other unsecured creditors. In the past a homeowner might have needed to file a Chapter 13 solely to strip off junior...
by evolveAdmin | Jun 11, 2012 | Foreclosure Defense
Florida has been hit hard by the foreclosure crisis. Many in the Orlando area wonder when the glut of foreclosures will work their way through the system and home prices will stabilize. In March, Orlando experienced an increase of almost 50 percent in foreclosure filings. Florida had the second highest number of foreclosure filings in the country during the first quarter of 2012. The Orlando metro area reported 2,997 foreclosure filings in March. That means that one in every 314 homes had received a foreclosure-related filing. A foreclosure proceeding includes notices of default, auction notices and bank repossessions. However, a homeowner may be able to successfully fight foreclosure if the bank committed errors in the foreclosure process. Consulting an experienced foreclosure defense attorney is one way to find out whether any errors exist. Even if when the process has been handled correctly, other options are available. Some of the options that exist for those who are facing foreclosure include: Reinstatement Forbearance Loan modification Renting Bankruptcy, refinance and sale Each option has benefits and drawbacks. For example, reinstatement is one of the simplest options for those facing foreclosure. In a reinstatement, the homeowner only needs to request the amount that is due on that date, and does not need the lender’s approval to reinstate the mortgage. For a mortgage to be reinstated the homeowner must be able to pay the amount that is in default, usually several mortgage payments, and any fines or late fees. Homeowners can reinstate a mortgage up until the day before the foreclosure sale. The right course of action depends on your particular facts and situation. These options...
by evolveAdmin | May 7, 2012 | Bankruptcy
The Florida Bankruptcy Court recently came down hard on Bank of America after it ignored a Florida debtor’s discharge and continued to call the debtor thirty-eight times trying to collect on debts. The court ordered the bank to pay the debtor for emotional distress and attorney’s fees. A debtor’s discharge is a legal action intended to protect a debtor. Following a discharge, collection agencies are not allowed to send letters or make phone calls asking for payment. This gives debtors time to collect their finances without harassing phone calls and other communications. Creditors can file an objection to the debtor’s discharge. All creditors get notice of the debtor’s filing and a deadline to object. The court will not always grant a debtor’s discharge if the debtor concealed assets or has not fulfilled the necessary discharge requirements such as taking classes on personal financial management. Not all debts are dischargeable in a Florida bankruptcy petition. The most common non-dischargeable debts are those for child or spousal support or willful injuries to another person or their property. Student loan debts are also usually not dischargeable, but sometimes a knowledgeable Orlando student loan help attorney can help. Collection Agencies May Not Know of Discharge Bank of America has ignored debtor discharges in the past. The Bank will give the debtor’s information to outside collection agencies even though the debtors have a discharge. One court ruled that Bank of America took “clearly inadequate” steps in order to determine if a debtor had a discharge. Another woman spent three years working with Bank of America after they had sold her account to a collection agency. The woman...
by evolveAdmin | Apr 10, 2012 | Mortgage Assistance
As many Americans rush to file their 2011 taxes to meet the April 17th deadline, some may wonder whether they have to pay tax on forgiven mortgage debt. Many individuals who have had mortgage debt forgiven after successfully negotiating with a mortgage company may find they owe tax on the forgiven debt, though there are exceptions to the rule. Income Tax on Forgiven Debt The IRS requires individuals to pay income tax on forgiven mortgage debt. Historically, this includes any loan modifications that reduced the total amount owed on a mortgage and mortgage debt forgiven in the event of a foreclosure. The IRS provides this simplified example on its website: If a homeowner had a loan of $10,000, paid back $2,000, then defaulted on the loan, there was a cancelation of debt of $8,000 and that $8,000 is taxable income. Any amount of canceled debt over $600 must be reported to the IRS, even if it qualifies for some of the following exclusions. What Types of Forgiven or Canceled Debt is Non-Taxable Fortunately, a law passed in 2007 protects homeowners who have had mortgage debt forgiven through foreclosure. The Mortgage Forgiveness Debt Relief Act applies to most homeowners who have had debt forgiven on their principal residences. Rental or business properties are not eligible. The forgiven debt must exceed $600 but be less than $2 million and been forgiven between 2007 and 2012. Other canceled debt may also be non-taxable. Debts discharged through bankruptcy are not considered taxable income. Homeowners that can claim insolvency may also be exempt from paying tax on canceled mortgage debt. A homeowner can claim insolvency if his or her...
by evolveAdmin | Mar 20, 2012 | Foreclosure Defense
The last day of the Florida legislative session saw the quiet death of several bills that would speed the foreclosure process for some homes. The sponsors hope the legislation will help spur economic recovery in the state and plan to try again next session. Florida has suffered a heavy blow from the real estate crisis of the last few years. At times, it has been among the top states for mortgage delinquencies, foreclosures and falling real estate values. The real estate market has been crippled by a glut of foreclosed properties with an estimated 368,000 foreclosure cases working their way through the Florida courts. In February, RealtyTrac noted an increase of almost 53 percent for South Florida foreclosure filings compared with the same period in 2011. These properties in foreclosure inhibit the improvement of real estate prices. Uncertainty over when foreclosed properties will sell within a neighborhood, and at what price, depresses the selling price of all properties. An Added Burden on Borrowers Many consumer advocates complained that the proposed legislation to speed the foreclosure process limited consumer rights and reduced borrower protections in the case of wrongful foreclosures. The current language of the bill would speed the foreclosure process by allowing a bank or other lender to request a “show cause” hearing and receive an immediate ruling from a judge on whether a legitimate defense existed. The legislation also reduced the time a lender could seek to collect a deficiency balance on a foreclosed property from five years to one year. This was one provision that consumer advocates approved. Overall the proposed changes to Florida’s foreclosure law would have benefited the banks...
