Livonia Michigan Bankruptcy - Michigan Bankruptcy Blog

Livonia Michigan Bankruptcy

Michigan Bankruptcy Blog

One of the most common questions people ask me when people are lookingNew FHA Mortgage After Bankruptcy to file bankruptcy is how long will it be until they will be able to receive credit again after filing bankruptcy.  Now new rules from the Department of Housing and Urban Development will allow borrowers to get a new FHA mortgage in just one year after you file bankruptcy. 

Prior to this change, borrowers wanting to get an FHA mortgage had to wait at least three years to get a new mortgage after filing bankruptcy.  This new change is excellent for my clients that have had to file bankruptcy to get a fresh start. It’s going to allow people to get back into home ownership in just one year after filing a bankruptcy or losing their home to foreclosure. 

The simple fact is that most of my clients are filing bankruptcy for their first and last time.  Most of my clients have had an once-in-a-lifetime economic catastrophe event that was largely beyond their control. The foreclosure and bankruptcy were isolated events and not a general reflection of their financial management.  Most of my clients file bankruptcy because it is their only way to truly get a fresh start!

The new rule for getting an FHA loan after filing a bankruptcy in little as one year will simply require the borrower to show documentation that the delinquencies or default were the result of an “Economic Event” beyond their control.  The borrower will also have to complete an approved counseling program and meet all of HUD’s other guidelines for a new loan.

An “Economic Event” is something beyond the borrower’s control that results in income loss, job loss, or both.  By definition almost all of my bankruptcy clients have experienced an “Economic Event” hence the reason of them filing for bankruptcy. The “Economic Event” must have reduced the borrower’s household income by 20% or more for a six month period.

Also, borrowers who wish to obtain an FHA loan after a bankruptcy must be able to demonstrate that you have attempted to gain satisfactory credit after your bankruptcy.  To show this you will have to show that all credit kept after your bankruptcy is current and not showing any late payments on your credit report for the last 12 months. 

The 12 month waiting rule specifically applies from the date of discharge of your Chapter 7 bankruptcy.  For example, if your Chapter 7 bankruptcy is discharged in September of 2013 then you could be eligible for a new FHA mortgage in September of 2014.  For Chapter 13 bankruptcies, you are eligible as soon as your discharge is issued so long as you can show that all of your Chapter 13 bankruptcy payments were paid on time in the 12 months prior to your discharge and any credit you were paying directly is current with nothing showing late for the last 12 months.

The result from these changes is going to allow a lot of my clients to be able to move on with their life at an even faster pace after they file bankruptcy.  None of my clients ever come to me because they want to file bankruptcy.  They come to me because something in their life has happened and they are in need of professional help to give them a fresh start.  Now with these new mortgage regulation changes my clients are going to be able to recover even quicker then ever before! 

Peter Behrmann is a Livonia Bankruptcy Attorney.  From my Livonia, Michigan location, I represent clients throughout Metro Detroit and beyond, including Garden City, Wayne, Westland, Redford, Dearborn, Taylor, Ann Arbor, Belleville, Northville, Novi, Farmington, Farmington Hills, Plymouth, Canton, and the Counties of Wayne, Oakland, Livingston, and Washtenaw. My practice is limited to helping consumers like you file Chapter 7 and Chapter 13 Bankruptcy.

Keeping a House in Chapter 7 Bankruptcy

Posted by Peter Behrmann, Esq. On January 11th

Keeping a House in Chapter 7 BankruptcyHome in Chapter 7 Bankruptcy

 

So you want to keep your home and file Chapter 7 bankruptcy.  In a Chapter 7 Bankruptcy the debt that you owe to the mortgage company will be discharged, however the mortgage lien will remain on your home. 

 

So here is what happens:

(A) You have received a discharge in bankruptcy;

(B) You did not reaffirm the mortgage;

(C) You still have the property; and

(D) You have continued to make payments according to the terms of the original loan.

 

In a nutshell:

This scenario is very common, and it gives you the best of both worlds. The underlying debt has been discharged, but the creditor still has a lien on the collateral. As long as you continue to make the payments they can’t bother you or the collateral. If you ever default, then they can foreclose, but they can never claim that you owe them any money. That would be a violation of the bankruptcy discharge.

 

In a little more detail:

When you took out this loan you signed papers which gave the creditor two different rights:

(1)  to collect money from you(This was the note you signed); and

(2)  to take the property away from you if you failed to make the payments or if you otherwise defaulted on the terms of the loan (This was the mortgage you signed.)

 

The bankruptcy discharge eliminates their right to demand money from you (The Note), but in most cases it does not affect the lien that they have on your property (The Mortgage) This creates the interesting situation described above, where for most purposes the mortgage remains in effect, but you now have the absolute right to walk away at anytime if that turns out to be the right thing for you.

 

This is especially true if you have always been current on the payments for this particular loan. They are not allowed to foreclose unless you are in default, and despite what your contract might say, the law does not consider bankruptcy to be a default for these purposes.

 

The bottom line:

If you want to keep the property, just keep making the payments and be sure to comply with any other contractual terms, such as paying local property taxes and maintaining valid insurance. If you eventually pay off the loan you will own the property outright. If you ever decide that paying for the property is not in your best interest, whether that’s because you can’t sell it for enough to pay off the mortgage(s), or because you simply can’t afford to make the payments, or because the house burned to the ground, you can simply walk away and there’s nothing the mortgage company can say about it. They can still foreclose, but that’s all they can do.

Peter Behrmann is a Livonia Bankruptcy Attorney.  From my Livonia, Michigan location, I represent clients throughout Metro Detroit and beyond, including Garden City, Wayne, Westland, Redford, Dearborn, Taylor, Ann Arbor, Belleville, Northville, Novi, Farmington, Farmington Hills, Plymouth, Canton, and the Counties of Wayne, Oakland, Livingston, and Washtenaw. My practice is limited to helping consumers like you file Chapter 7 and Chapter 13 Bankruptcy, and Foreclosure Prevention.

“Y” is for Years between Bankruptcy Filings

Posted by Peter Behrmann, Esq. On August 6th

“Y” is for Years between Bankruptcy Filings

First things first, 90% of our clients have never filed bankruptcy before.  However, if you have filed bankruptcy in the past it is very important that you understand the years required between Chapter 7 and Chapter 13 bankruptcies.

The first issue to understand is the reason there are limits on the number of times you can file bankruptcy and receive a discharge. The most basic reason is to prevent people from taking advantage of the bankruptcy process.  Bankruptcy is a powerful tool that has helped countless people in times of financial stress, but it is not to be taken advantage of and having time limits in place prevent abuse of the bankruptcy process.

If you have previously filed a Chapter 7 Bankruptcy and wish to file a second Chapter 7 Bankruptcy there must be 8 years between the date you filed your first Chapter 7 to the date of your second filing.   One of the most common misconceptions is that the time frame is 6 or 7 years.  The time frame was extended to 8 years with the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. 

If you have previously filed a Chapter 7 Bankruptcy and wish to file a second Chapter 13 Bankruptcy there must be 4 years between the date you filed your first Chapter 7 to the date of your second filing.  

If you have previously filed a Chapter 13 Bankruptcy and wish to file a second Chapter 13 Bankruptcy there must be 2 years between the date you filed your first Chapter 13 to the date of your second filing.   In theory, this time frame will almost never be a factor because most Chapter 13s take longer than 2 years to complete.

If you have previously filed a Chapter 13 Bankruptcy and wish to file a second Chapter 7 Bankruptcy there must be 6 years between the date you filed your first Chapter 7 to the date of your second filing under most circumstances. 

 

Peter Behrmann is a Livonia Bankruptcy Attorney.  From my Livonia, Michigan location, I represent clients throughout Metro Detroit and beyond, including Garden City, Wayne, Westland, Redford, Dearborn, Taylor, Ann Arbor, Belleville, Northville, Novi, Farmington, Farmington Hills, Plymouth, Canton, and the Counties of Wayne, Oakland, Livingston, and Washtenaw. My practice is limited to helping consumers like you file Chapter 7 and Chapter 13 Bankruptcy, and Foreclosure Prevention.

Photo Credit: Leo Reynolds

 

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“T” is for Trustee in Bankruptcy

Posted by Peter Behrmann, Esq. On June 19th

T” is for Trustee in Bankruptcy

When you file bankruptcy in Detroit you will have a Trustee appointed to review your case.  There are two different types of “Trustees” that may be in involved in your bankruptcy case, Chapter 7 trustee’s and Chapter 13 Trustee’s.

Chapter 7 Bankruptcy Trustee:

In a Chapter 7 Bankruptcy, the Trustee is appointed by Department of Justice to review your case for accuracy and to the extent possible take any property or assets you have that are not protected by your bankruptcy exemptions and liquidate them to cash for the benefit of your creditors.  Your Chapter 7 Trustee is only paid a small amount of money to review your case, but has the potential to make more money by discovering assets you did not disclose in your bankruptcy, or by liquidating assets that are not protected by your bankruptcy exemptions.  Because of the Chapter 7 Trustee’s responsibilities it is very important that you tell me about any and all assets you have when you are filing Chapter 7 Bankruptcy.

Chapter 13 Bankruptcy Trustee:

In a Chapter 13 Bankruptcy, the Trustee is appointed by the Department of Justice to collect your Chapter 13 Payments during your case and to make payments to your creditors on your behalf.  The Chapter 13 Trustee’s obligation is to your creditors, not to you, so their desire it to have you pay as much possible in to you Chapter 13 Bankruptcy.  Our desire is to have you pay an affordable payment to the Chapter 13 Trustee that offers a fair distribution to your creditors, but allows you ample amount of income to live on and not go further into debt while you are in bankruptcy.    Because of the Chapter 13 Trustee’s responsibilities it is very important that you tell me about all of your sources of income and all of your living expenses for me to create an affordable Chapter 13 repayment plan when you are filing Chapter 13 Bankruptcy. 

 As you can see above a Chapter 7 Trustee is more interested in your assets, where as a Chapter 13 Trustee is more interested in your income and expenses.  Regardless of what bankruptcy you are filing with me, my advice is always to provide me with all of your income, assets, liabilities, and expenses, and let me guide you through whatever form of bankruptcy that is going to give you the greatest possible benefit for your financial situation. 

 Peter Behrmann is a Livonia Bankruptcy Attorney.  From my Livonia, Michigan location, I represent clients throughout Metro Detroit and beyond, including Garden City, Wayne, Westland, Redford, Dearborn, Taylor, Ann Arbor, Belleville, Northville, Novi, Farmington, Farmington Hills, Plymouth, Canton, and the Counties of Wayne, Oakland, Livingston, and Washtenaw. My practice is limited to helping consumers like you file Chapter 7 and Chapter 13 Bankruptcy, and Foreclosure Prevention.

Photo Credit: LeoReynolds

 

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