Bankruptcy vs. Loss Mitigation
August 22, 2012 By The Neustein Law Group, P.A.
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There are differences between bankruptcy and loss mitigation when it comes to solving your mortgage problems. A Broward County foreclosure attorney explains. When you are facing foreclosure, you may consider alternative measures such as bankruptcy or loss mitigation. It is important to understand the differences in evaluating which option might be best for you.
Overview of Bankruptcy
The decision to file for bankruptcy is a serious one. Before taking the plunge, it is important to understand how it can impact your future.
There are 2 types of bankruptcy: Chapter 7 and Chapter 13. In a Chapter 7 bankruptcy, all or part of your debt may be completely erased. There is also the risk that your personal property may be sold in order to pay back creditors.
One of the benefits of a Chapter 7 bankruptcy is something called automatic stay. This will stop most of your creditors from collecting what is still owed to them, at least on a temporary basis. This gives you time to protect your home, your bank account, and your wages from being garnished. However, this protection only lasts so long. More importantly, the filing of a bankruptcy should be the absolute last thing you should do (chronologically). It is much more important to defend the foreclosure on the merits of the case prior to filing for bankruptcy. If time is what you need to arrange for a loan modification, arrange a short sale, or figure out your next move, this will give you the most.
At the same time, you are essentially handing over your property to a bankruptcy court, which means you cannot sell your property without permission. There may be a few exceptions that an attorney can explain in further detail.
Chapter 13 bankruptcy is more like a repayment plan in which you pay off some or all of your debts over a period of time. The timeframe will depend on how much you owe as well as your income.
This can be a good option if you are at risk of foreclosure. It may allow you the opportunity to pay your mortgage or make up late payments over a certain period of time. The automatic stay can be helpful here in that your foreclosure process may be stopped until a plan is put in place. However, there is no guarantee that you will be allowed the chance to participate in a repayment plan.
While these are ways to potentially save your house, there are bankruptcy alternative that may be better. One example is loss mitigation.
An Overview of Loss Mitigation
Loss mitigation may allow a variety of options that can help homeowners save their house. This can be done through various options such as loan modification, forbearance, or refinancing.
If it is found that the mortgage just can’t be managed, then a deed in lieu or short sale might be the way to get rid of mortgage debt. Of course, this also means losing the home.
One of the potential problems with loss mitigation is that unless something drastically changes in the homeowner’s income, they are likely to face foreclosure again. So it may just delay the inevitable.
And with the options of a short sale or deed in lieu, it does not necessarily help if there is a second mortgage on the house or if there are other serious debt issues at play.
Contacting a Foreclosure Attorney
Deciding whether to file for bankruptcy or to pursue loss mitigation can be a complicated decision to make. There are pros and cons to both options of which a typical homeowner may not be aware. It may be in your best interest to discuss your current financial situation with a foreclosure attorney to determine what option is best for you in your current situation.
ABOUT THE AUTHOR: Frederick A Neustein, Neustein Law Group, P.A.
The Neustein Law Group PA is a boutique Florida law firm, which has focused on complex commercial litigation and foreclosure cases for over 40 years. Charles Neustein, a former municipal court judge, has practiced law since 1968. Frederick Neustein has practiced law for 20 years and has several years experience working for the banks and overseeing foreclosure cases from the bank's perspective. The firm's main office is in Miami Beach with satellite locations are in Ft Lauderdale, Boca Raton, West Palm Beach, Orlando, Tampa, Jacksonville and Sarasota. One of the firm's focus areas is the cost-effective representation of clients with homes or investment property located in Miami, Broward, Palm Beach County and throughout Florida. Their attorneys and staff have focused on helping owners and investors defend and stop bank foreclosures, home foreclosures, Commercial Foreclosures, complex commercial litigation and bankruptcy since 1968. Their goal is to help stop foreclosure.
Copyright The Neustein Law Group, P.A.
More information about The Neustein Law Group, P.A.
Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.
The decision to file for bankruptcy is a serious one. Before taking the plunge, it is important to understand how it can impact your future.
There are 2 types of bankruptcy: Chapter 7 and Chapter 13. In a Chapter 7 bankruptcy, all or part of your debt may be completely erased. There is also the risk that your personal property may be sold in order to pay back creditors.
One of the benefits of a Chapter 7 bankruptcy is something called automatic stay. This will stop most of your creditors from collecting what is still owed to them, at least on a temporary basis. This gives you time to protect your home, your bank account, and your wages from being garnished. However, this protection only lasts so long. More importantly, the filing of a bankruptcy should be the absolute last thing you should do (chronologically). It is much more important to defend the foreclosure on the merits of the case prior to filing for bankruptcy. If time is what you need to arrange for a loan modification, arrange a short sale, or figure out your next move, this will give you the most.
At the same time, you are essentially handing over your property to a bankruptcy court, which means you cannot sell your property without permission. There may be a few exceptions that an attorney can explain in further detail.
Chapter 13 bankruptcy is more like a repayment plan in which you pay off some or all of your debts over a period of time. The timeframe will depend on how much you owe as well as your income.
This can be a good option if you are at risk of foreclosure. It may allow you the opportunity to pay your mortgage or make up late payments over a certain period of time. The automatic stay can be helpful here in that your foreclosure process may be stopped until a plan is put in place. However, there is no guarantee that you will be allowed the chance to participate in a repayment plan.
While these are ways to potentially save your house, there are bankruptcy alternative that may be better. One example is loss mitigation.
An Overview of Loss Mitigation
Loss mitigation may allow a variety of options that can help homeowners save their house. This can be done through various options such as loan modification, forbearance, or refinancing.
If it is found that the mortgage just can’t be managed, then a deed in lieu or short sale might be the way to get rid of mortgage debt. Of course, this also means losing the home.
One of the potential problems with loss mitigation is that unless something drastically changes in the homeowner’s income, they are likely to face foreclosure again. So it may just delay the inevitable.
And with the options of a short sale or deed in lieu, it does not necessarily help if there is a second mortgage on the house or if there are other serious debt issues at play.
Contacting a Foreclosure Attorney
Deciding whether to file for bankruptcy or to pursue loss mitigation can be a complicated decision to make. There are pros and cons to both options of which a typical homeowner may not be aware. It may be in your best interest to discuss your current financial situation with a foreclosure attorney to determine what option is best for you in your current situation.
ABOUT THE AUTHOR: Frederick A Neustein, Neustein Law Group, P.A.
The Neustein Law Group PA is a boutique Florida law firm, which has focused on complex commercial litigation and foreclosure cases for over 40 years. Charles Neustein, a former municipal court judge, has practiced law since 1968. Frederick Neustein has practiced law for 20 years and has several years experience working for the banks and overseeing foreclosure cases from the bank's perspective. The firm's main office is in Miami Beach with satellite locations are in Ft Lauderdale, Boca Raton, West Palm Beach, Orlando, Tampa, Jacksonville and Sarasota. One of the firm's focus areas is the cost-effective representation of clients with homes or investment property located in Miami, Broward, Palm Beach County and throughout Florida. Their attorneys and staff have focused on helping owners and investors defend and stop bank foreclosures, home foreclosures, Commercial Foreclosures, complex commercial litigation and bankruptcy since 1968. Their goal is to help stop foreclosure.
Copyright The Neustein Law Group, P.A.
More information about The Neustein Law Group, P.A.
View all articles published by The Neustein Law Group, P.A.
Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.
