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 | Jul 29, 2011 | Bankruptcy
While Florida bankruptcy filings show a decline compared to last year, experts say the percentages may be skewed. Most economists are not celebrating yet; they do not believe that Florida is quite yet on the mend as unemployment remains high throughout Central Florida. Some believe the drop-off was caused by a temporary backlog of foreclosure filings from lenders due to the accusations of fraudulent paperwork in 2009-2010. While banks sort though legal issues and company tactics, delinquent mortgages have been put on the back burner, slowing the number of foreclosures. The Hidden Benefit of the Foreclosure Backlog: No Mortgage Payments Some Florida homeowners who have lost their jobs or have otherwise fallen prey to the Great Recession are benefitting from the backlog. As lenders slow the rate at which they are filing foreclosures, many people have been able to live ‘rent free’ in their home, allowing funds to be used elsewhere. Living without a mortgage payment and being able to stay in their home is enabling some homeowners to get back on their feet financially, avoiding or postponing bankruptcy. The timing of a bankruptcy filing is a critical issue for anyone considering bankruptcy relief; the lack of a mortgage payment has given some Orlando-area families additional time and money during these difficult times. Bankruptcy Options for Floridians Individuals have two main bankruptcy options, Chapter 7 and Chapter 13 bankruptcy. A Chapter 7 bankruptcy, if filed correctly, will allow the homeowner to eliminate unsecured debt and keep their home. A Chapter 13 bankruptcy allows you to restructure all debt including your mortgage in order to make payments more manageable. A Chapter 13 filing...
by evolveAdmin | Jun 15, 2011 | Bankruptcy
Here’s the typical scenario: You owe more than what your home is worth. You have someone who will buy your house for what it’s currently valued at (called a short sale). Your mortgage lender agrees to the sale; the paperwork and sale are finalized. You give the keys to the new owner, move out and are relieved that you no longer are stuck paying for a home that just isn’t worth the money. You walk away and start over. But wait, it’s not over. You may still owe the bank the balance of your mortgage minus the money that was brought in from the short sale. This is called a deficiency and the bank has the right to collect that money from you even though you no longer live in nor own the house unless you received a “written waiver of deficiency judgment” from your bank upon the sale of the home. Florida law allows lenders up to five years to file for a deficiency judgment. Once the judgment is entered, your mortgage lender can collect the amount by garnishing your salary or bank accounts, placing a lien on any other real estate you may own or attacking any source of equity you may otherwise have other than your homestead. A deficiency judgment does not have to be pursued by your bank right away. In fact, many Floridians are just now receiving notices for homes that were sold by short sale two or three years ago. For many, a short sale may seem appealing as an answer to mortgage troubles. But, more often than not, bankruptcy is a better option. Whether you are...
