I speak to property owners, realtors and mortgage brokers often, sometimes daily. Here’s the latest picture. Very few homeowners have enough equity to qualify for refinancing or for selling to make sense (because they won’t even break even). Properties are not moving. They are sitting on the market for 6 to 12 months. Deed in lieu offers are becoming more prevalent as owners simply try to avoid foreclosure sales and walk away calling it “even” with the lender. Forbearance agreements are always an option for those who have some funds saved but many don’t have the initial payment the lenders demand – usually half of the reinstatement amount. For those who want to save their property and who have regular income, Chapter 13 remains the best option in the current market.

The credit industry has a lot of propaganda out there to discourage bankruptcy filings. Much of it is totally false. Bankruptcy is still alive and well. Many people fall on hard times because of temporary problems – job loss, death in the family, divorce, injury, medical illness, etc. If someone is considering bankruptcy they should be applauded. It shows that they are trying to take a step in the right direction. That they want to get back on their feet. To regain control of their financial lives. Today, I was very gratified to get a call from a client who had filed Chapter 7 about two years ago. I had not heard from him since then. He told me how I had changed his life. He now had a house and a mortgage. He had rebuilt his credit. He was about to get married. He thanked me for setting his life back on track. Of course, he deserves most of the credit. He was the one who sought my help out initially. That is all it takes really. Once a client makes the choice that they don’t want to live in debt any more, there is usually a way out. A way to get a fresh start. But there are so many false ideas put out there by the big credit card companies, mortgage lenders and collection agencies. Here are some of them . . . Read more

With the housing market slowing down, most appraisals are coming in at least $50,000 lower than what they might have been a year ago. At the same time, some subprime lenders have closed shop and mostly all it seems have restricted their lending guidelines. With loans harder to find and less equity available, many homeowners cannot refinance like they had planned. Many are stuck with adjustable rate loans that had attractive teaser terms – low early monthly payments – but which will reset to much higher payments soon. All this is creating a situation where the only remaining alternatives to get out of foreclosure are to try to settle, sell, or file Chapter 13. For those who do not have some savings on hand to pay the lender in a forebearance agreement, they may find that their lender will not work with them at all.

However, if they have income, Chapter 13 is still a very good solution. It can give them a chance to catch up on the mortgage arrears and other debts and save their property. Lately, more and more people are calling me to discuss this alternative. I can usually quickly determine in a phone consult (which I have been offering for free) whether Chapter 13 makes sense or not. Most people do not really understand how it works or how it might help them. But with the other options becoming more restricted lately, I think Chapter 13 filings are about to increase. For many people, Chapter 13 can be an excellent alternative – it gives them 3 to 5 years to catch up on debt while they are protected from foreclosure, lawsuits and creditor harassment. To make my clients more comfortable with their decision to file Chapter 13, I also offer them the alternative to try to help them obtain a forbearance agreement first, something I can handle for a fraction of the cost of a Chapter 13. If I can keep someone out of bankruptcy, I will. But it is always reassuring to know that even if the lender won’t settle, the client has the fall-back option of Chapter 13.