Bankruptcy Information

Home Prices Signal Recovery May be Here

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Home Prices Signal Recovery May be Here

NEW YORK (CNNMoney) — A sharp boost in home prices during the spring could signal a recovery in the long-suffering U.S. housing market, according to an industry report issued Tuesday.

The S&P/Case-Shiller national home price index, which covers more than 80% of the housing market in the United States, climbed 6.9% in the three months ended June 30 compared to the first three months of 2012.

“We seem to be witnessing exactly what we needed for a sustained recovery; monthly increases coupled with improving annual rates of change,” said David Blitzer, a spokesman for S&P, in a statement. “The market may have finally turned around.”

Two other key indexes covered in the S&P/Case-Shiller report also showed gains. The 20-city index was up 6% for the quarter and the 10-city index rose 5.8%.

National prices were up 1.2% compared with a year earlier, and the 20-city and 10-city indexes also gained year over year. It was the first time all three measures showed positive annual growth rates since the summer of 2010, when generous tax credits for homebuyers were in place.

There have been several positive industry reports over the past several weeks. In July, new home sales were 25% better than a year earlier; existing home sales gained 10% year over year; and developers applied for 30% more residential building permits.

The steep increase in home prices “feels really good after six years of straight down,” said Mark Zandi, chief economist of Moody’s Analytics.

He cautioned that the results may overstate the case for the housing recovery a bit. The mix of homes being sold has changed lately, with fewer repossessed homes on the market. Those sell at big discounts to conventionally sold homes and had been propelling prices downward.

The home price improvement is expected to have a positive impact on foreclosure rates, according to Michael Fratantoni, vice president for research and economics for the Mortgage Bankers Association.

Foreclosures have already been falling and could drop some more if the upswing in home prices continues.

As home values increase, home equity rises, and fewer mortgage borrowers will be underwater, owing more than their homes are worth. That will give them an asset to tap should they run into a tight financial patch.

An improving housing market will also give homeowners more confidence in the investments they’ve made in their homes.

“There has also been a lot of concern about strategic defaults,” said Fratantoni. “That should ease now. When home prices go up, people have a financial incentive to hold onto their homes and they’re less likely to walk away.”

Rising prices are likely to push potential homebuyers off the fence, where many have been waiting out the price decline, according to Doug Duncan, chief economist for Fannie Mae.

“Their perception that we hit the bottom takes out the risk of buying into a falling market,” he said. “That should increase demand, particularly if they also believe that mortgage rates have reached a bottom as well.”

Each of the 20 cities covered in the report recorded a gain in June, compared with a month earlier. Detroit prices jumped 6% for the month, the most of any city. Minneapolis prices climbed 4.8% and Chicago prices rose 4.6%.

In Phoenix. home prices were 13.9% higher in June than 12 months earlier, the highest gain of any of the 20 cities covered.

Several cities were still in negative territory year over year, including Atlanta, where they were off 12.1%. New York prices were down 2.1% on an annual basis, and Las Vegas prices were 1.8% lower.

For Zandi, all the positive news on housing carries over to the rest of the economy.

“Housing is beginning to act as a tailwind for the recovery,” he said.

San Diego County luxury homes for sale

Mortgage Closing Costs fell 7 Percent for Homebuyers

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For information about Southern California luxury real estate in Los Angeles County, Orange County and San Diego coastal homes, call Bob Cumming of Keystone Group Properties at 310-496-8122.  Keystone Group Properties serves discriminating buyers and sellers of exclusive real estate in Newport Beach, Dana Point, Laguna Beach, Laguna Niguel, Coto de Caza; and Marina Del Rey, Manhattan Beach, Hermosa Beach, Dove Canyon, Ladera Ranch, and San Juan Capistrano; and Palos Verdes, Pacific Palisades, Mission Viejo, Rancho Margarita, San Clemente, Redondo Beach, Santa Monica, Venice, Malibu, and Irvine, Bel Air, Beverly Hills, and Beverly Glen California.

Mortgage closing costs fell 7% for homebuyers

NEW YORK (CNNMoney) — Federal regulations are helping to significantly reduce the amount new homebuyers are paying come closing time.

The average cost of closing on a mortgage has fallen by 7.4% over the past year, according to a recent survey by Bankrate.com. At the end of June, a homebuyer looking to close on a $200,000 mortgage with 20% down paid an average of $3,754, $300 less than 12 months earlier.

Included in those costs are origination expenses, such as application fees and the cost of doing credit checks, and third-party fees, such as those paid for title searches and insurance.

The decline can be attributed to new regulations that require lenders to be more accurate when estimating closing costs for borrowers, said Greg McBride,

Bankrate’s senior financial analyst.

The regulation, which was put in place two years ago as part of the Real Estate Settlement Practices Act requires lenders to provide a “good faith estimate” of third-party fees that is within 10% of the actual amount the buyer will pay.

“The big drop in third-party fees indicates the lenders are doing a better job at estimating what the costs will be,” said McBride.
with scissors and the bogeyman probably aren’t keeping you awake at night, either.

The fact that everyone is scared to dabble in—much less commit to—housing makes it a close-to-perfect investment based on Mr. Buffett’s principle. But buying real estate is a good long-term investment for many more reasons, some of which have only become apparent in recent weeks.

The most striking: Housing prices rose sharply from April to May. The S&P/Case-Shiller Index rose 2.2% in 20 of the nation’s big cities. Prices shot up more than 3% in Chicago, Atlanta, San Francisco and Minneapolis. Even Detroit’s housing market scored a gain, inching up by 0.4%.

Nationally, the increase was the first in seven months. More importantly, the increase matched other data and empirical evidence this spring that foreclosures slowed and inventories were shrinking. Simple economics suggests that as the supply of distressed property slows, buyers will be forced into higher-price properties.

In addition, interest rates on 30-year fixed mortgages have tumbled below 3.5%. For those who can get credit, these aren’t just historically low rates; they are one-sided deals tilted toward borrowers.

Other good signs: Housing starts rose 6.9% in June. Home-building stocks are on the rise, with the Philadelphia Housing Sector Index up 27% so far this year. And for those who can invest in property, rents continue their ascent. Prices are at a 10-year high, with the median unit renting for $710 a month.

Real-estate website Trulia found that it is cheaper to buy than rent in each of the nation’s 100 biggest metropolitan areas.

In other words, if you can buy a home today, you can save the difference it would cost you to rent even if you stay in the home just five years. If you can buy a property and rent it, it is almost certain that the rent will cover the cost of the financing—and the property will appreciate.

Here’s where the fear comes in. From 30% to 50% of existing mortgages in the U.S. market are underwater, depending on the estimate. That means many borrowers are trapped in their homes and loans. They either can keep paying and hope prices will improve or walk away, putting downward pressure on home prices.

Foreclosure rates have leveled off, but market analysts believe an increase is likely.

Here’s why. Since the financial crisis, 3.7 million homes have been foreclosed on, but an additional 1.4 million remain in the national foreclosure inventory, according to CoreLogic, a real-estate research firm.

Finally, a housing recovery won’t happen, or could be snuffed out, by a rotten economy. There’s never been significant growth in housing with high unemployment. And as Dow Jones’s Kathleen Madigan noted, “Potential buyers must feel secure with their job prospects before they commit to long-term mortgages. Higher loan standards mean banks want to see an applicant’s solid income history before lending.”

There is plenty to be afraid of when it comes to home buying. But in the current investing climate, housing presents an attractive long-term investment that should hold steady or even have upside surprise in the short term.

Fixed-income yields have fallen to historic lows, and the stock market has traded in a range, rising and falling skittishly on jobs, growth data and the news from Europe.

Recently, I was forced to choose between renting and buying. I decided to buy because it offered immediate monthly savings compared to renting, not to mention a mortgage-interest deduction.

So this is at least one case where I’m putting my money where my keyboard is.

Mr. Buffett would remind us that investments of any kind are not without risk. Each should be considered with the investor’s time horizon and appetites. But he also has acknowledged that real estate is especially attractive when financing is cheap, there is pent-up demand and prices have been driven down by a spooked market. Put another way, it’s time to be greedy.

Write to David Weidner at [email protected]

Coto de Caza CA homes for sale

Will Short Sales Hit Homes Sales?

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For information about luxury real estate in Southern California in Los Angeles County, and coastal Orange County and San Diego, call Bob Cumming of Keystone Group Properties at 310-496-8122.  Keystone Group Properties serves discriminating buyers and sellers of exclusive California properties—Newport Beach homes; Manhattan Beach to Santa Monica beach homes to exclusive Los Angeles homes in Beverly Hills and Bel Air.

Will Short Sales Hit Homes Sales?

By AnnaMaria Andriotis

Could a new government program to help distressed homeowners wipe out recent gains in home prices?

On Tuesday, the Federal Housing Finance Agency announced new guidelines that are supposed to make it easier for homeowners to sell their home in a short sale. In a short sale, a home sells for less than the borrower owes on the mortgage. In addition, the new guidelines, which kick in on Nov. 1, allow homeowners with a Fannie Mae or Freddie Mac mortgage to pursue a short sale even if they haven’t fallen behind on their mortgage payments but have a hardship, such as a job loss or divorce.

Consumer advocates say change will help some of the borrowers who’ve been unable to sell the estimated 11 million American homes worth less than the value of their mortgage, according to CoreLogic. However, not all homes would qualify in this new program.

And while the changes provide new hope to distressed homeowners, experts say they could negatively impact home prices in neighborhoods that get an influx of new short sales. A rise in short sales will result in “downward pressure on home prices until we clear out the majority of these distressed properties,” says Jack McCabe, an independent housing analyst in Deerfield Beach, Fla.

Home prices had been rising in recent months, a trend experts say is due to the limited inventory and the smaller number of distressed properties on the market. In July, median home prices were up 9.4% from a year prior, according to the National Association of Realtors. That marked the fifth back-to-back month of year-over-year increases in home prices — the longest streak since 2006. Inventory was down 24% from a year prior. And distressed sales—including short sales and foreclosures—accounted for 24% of July sales, down from 29% a year prior.

For its part, the NAR says it’s called for an expedited short sales process to help boost inventory. The FHFA says it expects short sales to settle at market prices and that they’ll help avoid foreclosures and long vacancy periods that result in declines in home values.

Still, data suggests that the impact on homeowners who aren’t in distress could be lower home values in the near term. Even if short sales fly off the market, they’ll likely go at a discounted price. According to the NAR, short sales sell at prices that are 15% lower than regular home listings on average.

Instead, the benefits for homeowners could be bigger in the long term. “It’s a better idea to clear out the backlog of distressed homes rather than delay the process in the name of supporting [home] values,” says Brad Hunter, chief economist at Metrostudy, a housing market research and consulting firm.

Santa Monica homes for sale

Finally, It Is Time to Buy a House!

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For information about fabulous value for distinguished Southern California luxury real estate in Los Angeles County, Orange County homes, and homes in San Juan Capistrano and La Jolla, call Bob Cumming of Keystone Group Properties at 310-496-8122.

Finally, It Is Time to Buy a House!

Warren Buffett famously once said: “Be fearful when others are greedy, be greedy when others are fearful.”

And if you’re not instinctively scared of the housing market, then global warming, saturated fat, running with scissors and the bogeyman probably aren’t keeping you awake at night, either.

The fact that everyone is scared to dabble in—much less commit to—housing makes it a close-to-perfect investment based on Mr. Buffett’s principle. But buying real estate is a good long-term investment for many more reasons, some of which have only become apparent in recent weeks.

The most striking: Housing prices rose sharply from April to May. The S&P/Case-Shiller Index rose 2.2% in 20 of the nation’s big cities. Prices shot up more than 3% in Chicago, Atlanta, San Francisco and Minneapolis. Even Detroit’s housing market scored again, inching up by 0.4%.

Nationally, the increase was the first in seven months. More importantly, the increase matched other data and empirical evidence this spring that foreclosures slowed and inventories were shrinking. Simple economics suggests that as the supply of distressed property slows, buyers will be forced into higher-price properties.

In addition, interest rates on 30-year fixed mortgages have tumbled below 3.5%. For those who can get credit, these aren’t just historically low rates; they are one-sided deals tilted toward borrowers.

Other good signs: Housing starts rose 6.9% in June. Home-building stocks are on the rise, with the Philadelphia Housing Sector Index up 27% so far this year. And for those who can invest in property, rents continue their ascent. Prices are at a 10-year high, with the median unit renting for $710 a month. Real-estate website Trulia found that it is cheaper to buy than rent in each of the nation’s 100 biggest metropolitan areas.

In other words, if you can buy a home today, you can save the difference it would cost you to rent even if you stay in the home just five years. If you can buy a property and rent it, it is almost certain that the rent will cover the cost of the financing—and the property will appreciate.

Here’s where the fear comes in. From 30% to 50% of existing mortgages in the U.S. market are underwater, depending on the estimate. That means many borrowers are trapped in their homes and loans. They either can keep paying and hope prices will improve or walk away, putting downward pressure on home prices.

Foreclosure rates have leveled off, but market analysts believe an increase is likely.

Here’s why. Since the financial crisis, 3.7 million homes have been foreclosed on, but an additional 1.4 million remain in the national foreclosure inventory, according to CoreLogic, a real-estate research firm.

Finally, a housing recovery won’t happen, or could be snuffed out, by a rotten economy. There’s never been significant growth in housing with high unemployment. And as Dow Jones’s Kathleen Madigan noted, “Potential buyers must feel secure with their job prospects before they commit to long-term mortgages. Higher loan standards mean banks want to see an applicant’s solid income history before lending.”

There is plenty to be afraid of when it comes to home buying. But in the current investing climate, housing presents an attractive long-term investment that should hold steady or even have upside surprise in the short term.

Fixed-income yields have fallen to historic lows, and the stock market has traded in a range, rising and falling skittishly on jobs, growth data and the news from Europe.

Recently, I was forced to choose between renting and buying. I decided to buy because it offered immediate monthly savings compared to renting, not to mention a mortgage-interest deduction.

So this is at least one case where I’m putting my money where my keyboard is.

Mr. Buffett would remind us that investments of any kind are not without risk. Each should be considered with the investor’s time horizon and appetites. But he also has acknowledged that real estate is especially attractive when financing is cheap, there is pent-up demand and prices have been driven down by a spooked market. Put another way, it’s time to be greedy.

Write to David Weidner at [email protected]

Life After Bankruptcy

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Call Bob Cumming of Keystone Group Properties at 310-496-8122 about Los Angeles area beach properties, Orange County homes for sale and coastal real estate south to San Diego.

Life After Bankruptcy

EVERY month tens of thousands of people file for federal bankruptcy protection, mostly to wipe out debts and start anew.

Many of these filers mistakenly think that it will be many years before they can obtain a mortgage or refinance an existing home loan, if they ever can — perhaps because notice of a bankruptcy filing typically stays on a credit report for 7 to 10 years. In reality, they could become eligible in as little as one year, as long as they work diligently to improve their financial picture.

Mortgages guaranteed by the Federal Housing Administration are permitted one year after a consumer exits a Chapter 13 bankruptcy reorganization, which requires a repayment plan that is often a fraction of what is owed, and two years after the more common Chapter 7 liquidation, which discharges most or all debts. Conventional mortgage guidelines from Fannie Mae and Freddie Mac, meanwhile, call for a wait of two to four years.

“There’s a lot of other things that go into your ability to get approved” for a mortgage after a bankruptcy, said John Walsh, the president of Total Mortgage, a direct lender based in Milford, Conn.

The most important point, he and other industry experts say, is that consumers re-establish their credit and show that they can manage it responsibly. They can do this by paying rent and utility bills on time, or perhaps by obtaining a secured credit card, according to Mr. Walsh.

If a bankruptcy filing was the result of a one-time occurrence, like the death of a spouse, divorce or illness, the waiting period to apply for a mortgage may be reduced. Lenders will often want borrowers to write a hardship letter explaining their situation, backed by documentation like hospital bills or a court-approved divorce settlement. If the person has paid back 85 to 95 percent of his debts during the bankruptcy process, he will need to mention that in the letter as well, said Bruce Feinstein, a bankruptcy lawyer in Richmond Hill, Queens.

But examples of shortening the waiting period through hardship letters are “few and far between, and tough to get,” Mr. Walsh said.

Mr. Feinstein says he has seen a few clients qualify for a mortgage only two years after filing for Chapter 7, though generally borrowers can obtain a loan quicker after a Chapter 13 reorganization, because of the partial repayment of debts, he said.

As Mr. Walsh noted, “Chapter 13 is a little more responsible” way to go from the lenders’ perspective, so lender guidelines are a bit more lenient.

Almost 70 percent of personal bankruptcies are filed under Chapter 7, according to the American Bankruptcy Institute, a research organization. The institute data noted that last year there were 1.362 million personal bankruptcy filings nationwide, down from 1.53 million in 2010, and closer to the norm over the last 15 years. At the end of the first quarter of this year there were 311,975 filings, which is 5 percent less than the first quarter of 2011.

Rebuilding credit after a personal bankruptcy will take some work. Mr. Feinstein suggests that individuals maintain or take out one or two credit cards and routinely use them. “If the payment’s due on the first, make sure it’s paid by the 25th” of the previous month, he said.

A personal bankruptcy filing will have a larger impact on a credit score than any other credit issue, according to a July report by VantageScore, which provides credit scores to lenders. Filing for bankruptcy protection will reduce a credit score by 200 to 350 or more points, it said, compared with a decline of 80 to 170 points for a foreclosure. VantageScore’s scores range from 501 to 990.

For the larger rival FICO, bankruptcy could cut a credit score by 130 to 240 points.

By VICKIE ELMER (09/13/12)

Orange County CA homes for sale

 

Foreclosure or Bankruptcy: Best Course of Action?

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For information about luxury real estate in Los Angeles, Orange County, and coastal San Diego homes for sale, call Bob Cumming, Keystone Group Properties, at 310-496-8122. Keystone Group Properties services buyers and sellers of distinctive Southern California real estate from Newport Beach to La Jolla to Beverly Hills.

Foreclosure or Bankruptcy: What Might Be the Best Course of Action?

While millions of Americans are severely impacted by the economy, we find that more and more families are falling behind in their mortgage payments. A number of families have already or will be faced with the decision of what to do. Is it better to lose your house to foreclosure or file for bankruptcy protection?

Neither option is good for future credit considerations. A foreclosure will remain on your credit history for 7 years, while a bankruptcy remains for 10 years. In spite of the fact a foreclosure stays on the credit report for less time than a bankruptcy, mortgage lenders and banks look more seriously at foreclosures as normally a bankruptcy does not include the house.

It is suggested to contact your lender even if you are behind in payments or have received an official “notice of default” saying you’re several months behind, you still have time before the formal foreclosure process begins.

Foreclosure should not be foregone conclusion. Try to avoid it. The first question you need to decide is whether you want to keep your house or give it up. If you want to keep it, you need to try to work out a plan to get back on track. This involves either making up for the missed payments – which you can do all at once or try to spread out – or coming up with a new plan. One option is to have the loan modified – at a lower interest rate, for example. Or you can ask for “forbearance,” which basically means the lender suspends payments until you can get back on your feet. If you’re in over your head and bought too much house, though, these options probably aren’t going to help. It is suggested you consider professional help in modifying your loans.

It is against California law for an organization to collect up-front fees. If you consider wanting professional help, it is suggested you interview a number of attorneys and law firms and get references. Look at the alternatives and most importantly listen to professional advice and form your own opinion. Make a decision only after this process.

You may have to consider moving. Even if you do lose your house, you don’t want a foreclosure on your record when you go looking for a smaller house or a place to rent. One option is to ask the lender to hold off on foreclosing until you sell. If your mortgage is bigger than your house is worth, you are looking at what’s called a “short sale.”

You can also try something called a “deed in lieu of foreclosure” – which basically means you turn over your house to the lender and walk away without owing anything. But you’ll need to work this out with the lender: you can’t just walk away.

While it’s possible to work out one of these solutions with your lender on your own, you may have better luck with the help of someone who specializes in the process. A good attorney who knows real estate law can help, but you may not be able to afford that. A credit counselor (from an accredited, non-profit agency, not the slime balls who spam you with bogus promises of making your debts “go away”) is another option. Lenders are more likely to go along if a competent third party is there to help smooth the process. California law does not permit upfront fees to credit counselors or parties claiming they can modify loans. Fees can be paid to California licensed attorneys provided they are providing a service. It is suggested you interview a number of attorneys and law firms and make a decision only after this process has been completed.

If all else fails, you may have to consider allowing foreclosure to proceed – or filing for bankruptcy. It depends on each person’s situation. It is suggested one consult with a good credit counselor and a bankruptcy attorney who can review your options and walk you through the various options.

To summarize, the key is to start this process early on and before a notice of default is received.

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General Bankruptcy Information for So Cal Homeowners

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For information on properties in Southern California— San Diego County coastal real estate  and Marina Del Rey beach homes , call Bob Cumming of Keystone Group Properties at 310-496-8122.

If you are thinking about filing bankruptcy, this page will provide general information about a Chapter 7, Chapter 11, and Chapter 13 Bankruptcy. It will help you understand what the law allows. We would be happy to refer a bankruptcy attorney to you for further consultation.

WHAT IS CHAPTER 7 BANKRUPTCY?

One of the main purposes of Chapter 7 Bankruptcy is to give a person who is hopelessly burdened with debt a fresh start by wiping out most debts. A Chapter 7 Bankruptcy is a liquidation proceeding. The debtor receives a discharge (elimination) of all dischargeable debts usually within four months. Note that some debts, listed below, are not dischargeable. The debtor turns over all non-exempt property to the bankruptcy trustee who then converts it to cash for distribution to creditors. In the vast majority of cases the debtor’s assets fall within the exemption provisions,  and he has no assets that he would lose, so Chapter 7 will give that person a fairly quick “fresh start.”  To qualify for Chapter 7 Bankruptcy a person must meet the Means Test. He or she must gather information about his/her assets and liabilities, and apply the Means Test formula to them. Please Google “Chapter 7 Bankruptcy Means Test” for more information.

WHAT IS CHAPTER 11 BANKRUPTCY?

Chapter 11 Bankruptcy is known as a reorganization bankruptcy. Through a court approved Plan, a debtor may restructure obligations to creditors and pay them over time, or may liquidate assets to pay creditors. The debtor remains in control and does not turn over assets to the trustee.

WHAT IS CHAPTER 13 BANKRUPTCY?

Chapter 13 Bankruptcy is also known as a reorganization bankruptcy. Chapter 13 Bankruptcy is filed by individuals who want to pay off their debts over a period of 3 to 5 years. This type of bankruptcy appeals to individuals who have non-exempt property that they want to keep. It is also an option for individuals who have predictable income that  is sufficient to pay reasonable expenses with some amount left over to pay off debts.  To qualify for Chapter 13 Bankruptcy a person must: Reside, have a domicile, a place of business, or property in the United States, or a
municipality;  Have a source of regular income; and on the date the petition is filed owe less than $360,475 in unsecured debts and less than $1,081,400 in secured debts. Note: The amounts are regularly adjusted to keep up with the cost of living. Google “Chapter 13 Bankruptcy Means Test” for current information.  Corporations and partnerships may not file a Chapter 13 Bankruptcy. If you filed a prior Chapter 13 Bankruptcy and the prior proceeding was dismissed within the last 180 days, you may not be able to file a second petition and should check 11 U.S.C. sec. 109(g).

WHAT CHAPTER BANKRUPTCY — 7 or 11 or 13 — IS BEST FOR ME?

Chapter 7, Chapter 11 and Chapter 13 Bankruptcy Qualifications Compared:
Chapter 7 Bankruptcy: For individual debtors. There is an upper limit as to income (see Chapter 7 Bankruptcy Means Test), but no limit as to amount of debt. Chapter 11 Bankruptcy: For individual, corporate and partnership debtors. There is no limit as to income, and no limit as to debt. A debtor may “stretch out” payments to creditors with their consent beyond the 3 to 5 year time limit of a Chapter 13 Bankruptcy. Chapter 13 Bankruptcy: For individual debtors. There is an upper limit as to amount of unsecured and secured debt.  Debtor is required to have a source of regular income, but there is no limit as to income. Debtor must pay creditors under the court approved Plan in 3 to 5 years. Debtors who qualify for both Chapter 11 and 13 may prefer to file under Chapter 13 because a debtor in a Chapter 13 is entitled to various procedural and substantive advantages, including a broader scope of discharge, than in a Chapter 11. Please consult a bankruptcy attorney about your particular situation to determine what is best for you. Keystone Group Properties dba Southern California Home Source would be happy to refer a bankruptcy attorney to you.

BEFORE FILING BANKRUPTCY, A CREDIT COUNSELING COURSE IS REQUIRED.   HOW DO I FIND ONE?

At least five days before filing a Bankruptcy Petition (with exception for emergencies), you are required to take an approved Credit Counseling Course. It can be taken in person or over the phone.  A list of approved credit counseling agencies may be found at the California Bankruptcy Court Central District’s (includes Los Angeles and Orange Counties) website:  www.cacb.uscourts.gov click information, click Self Service Center, click Credit Counseling Courses.  A list of approved credit counseling agencies also may be found at the United States Bankruptcy Court’s website: ww.uscourts.gov/federalcourts/bankruptcy click Bankruptcy Resources, click Approved Credit Counseling Agencies and Debtor Education Providers.

WILL FILING BANKRUPTCY HELP ME KEEP MY HOME?

Filing Chapter 7,11 or 13 Bankruptcy will delay foreclosure but will not stop it.

Chapter 7 Bankruptcy:

Filing a Chapter 7 Bankruptcy Petition will freeze foreclosure proceedings for a short time. The lender usually files for Relief from Automatic Stay and asks the Bankruptcy Judge to be able to proceed with the foreclosure. The Judge usually grants this request. Chapter 11 and Chapter 13 Bankruptcy and Loans on Debtor’s Principal Residence:

In a Chapter 11 and Chapter 13 Bankruptcy, a person obtains court approval of a Plan to pay creditors. The home loan or mortgage creditors on debtor’s principal residence would be a part of that Plan. If a debtor is not able to make payments, then there may be foreclosure, short sale, or deed-in-lieu.

“Lien stripping” in a Chapter 11 or Chapter 13 Bankruptcy:

“Lien stripping” may reduce the over-encumbered value of real property to current market value. It is only available for an individual debtor, not a corporate or partnership debtor. It is not available on a 1st trust deed on debtor’s principal residence. It possibly may be used on a 2nd trust deed, or on real property that is not debtor’s principal residence (2nd homes, investment properties, commercial property). “Lien stripping” described generally: the real property’s over-encumbered value is reduced to current market value; the amount that exceeds current market value is treated in the Plan like unsecured debt and may be reduced; debtor pays the current market value, the secured debt.   In a Chapter 13, a debtor must pay creditors, including the secured debt, in 3 to 5 years. In a Chapter 11 Bankruptcy, a debtor has a longer time to pay creditors. Please consult a bankruptcy attorney for further information.

WHAT ARE THE MOST COMMON REASONS FOR A CHAPTER 7 BANKRUPTCY?

The most common reasons for a Chapter 7 Bankruptcy are: unemployment; large medical expenses; seriously overextended credit; marital
problems, and other large unexpected expenses.  A Harvard Study reported that half of US bankruptcies were caused by medical bills
(MSNBC). The study was published online in February of 2005 by Health Affairs. The Harvard study concluded that illness and medical bills caused half (50.4 percent) of the 1,458,000 personal bankruptcies in 2001. The study estimates that medical bankruptcies affect about 2 million Americans annually – counting debtors and their dependents, including about 700,000 children.

WHAT DEBTS ARE ERASED BY A BANKRUPTCY?

Most unsecured debt is erased in a Chapter 7 Bankruptcy, or reduced in Chapter 11 and 13 Bankruptcies, except for: Child support and alimony; Debts for personal injury or death caused by debtor’s drunk driving; Government guaranteed student loans; Tax debt and money owed to government agencies.

Note on Private Student Loans: On June 7 2007, a US Senate Bill was introduced to make private student loans dischargeable in bankruptcy, as they were before 2005, so that again they would be fully dischargeable in bankruptcy. Please consult a bankruptcy attorney for the most recent state of the law.

More information about debt that may not be dischargeable and may survive bankruptcy:

The following debts are not erased in both Chapter 7 and Chapter 13. If you file Chapter 7, these will remain when your case is over. If you file Chapter 13, these debts must be paid in full during your Plan. If they are not, the balance will remain at the end of your case.  Debts you forget to list in your bankruptcy papers, unless the creditor learns of your bankruptcy case.

Child support and alimony; debts for personal injury or death caused by your intoxicated driving; student loans from government organizations, unless it would be an undue hardship for you to repay; fines and penalties imposed for violating the law, such as traffic tickets and criminal restitution.Whether recent income tax debts and all other tax debts are dischargeable is a complicated area. Usually they are not dischargeable.

Please consult a bankruptcy attorney for more information. In addition, the following debts may be declared non-dischargeable by a
bankruptcy judge in Chapter 7 if the creditor challenges your request to discharge them. These debts may be discharged in Chapter 13. You can include them in your Plan, and at the end of your case, the balance may be wiped out.

Debts you incurred on the basis of fraud, such as lying on a credit application; credit purchases of $500 or more for luxury goods or services made within 90 days of filing; loans or cash advances of $750 or more taken within 70 days of filing; debts from willful or malicious injury to another person or another person’s property; debts from embezzlement, larceny or breach of trust, and debts owed under a divorce decree or settlement unless after bankruptcy you would still not be able to afford to pay them, or the benefit you’d receive by the discharge outweighs any detriment to your ex-spouse (who would have to pay them if you discharge them in bankruptcy).

WILL MY CREDITORS STOP HARASSING ME?

Yes, they will!  By law, all actions against a debtor must cease once the Petition is filed. Creditors cannot initiate or continue any lawsuits, wage garnishes, or even telephone calls demanding payments. Secured creditors such as banks holding, for example, a lien on a car or a home loan, will get the stay lifted if you cannot make payments, and act to repossess or foreclose.

WILL MY SPOUSE BE AFFECTED?

Your wife or husband will not be affected by your bankruptcy if they are not responsible (did not sign an agreement or contract) for any of your debt. If they have a supplemental credit card, they are probably responsible for that debt. However, in community property states like California, either spouse can contract for a debt without the other spouse’s signature on anything, and still obligate the marital community. There are a few exceptions to that rule, such as the purchase or sale of real estate; those few exceptions do require both spouse’s signatures on contracts. But the day to day debts, such as credit cards, do NOT require both spouses to have signed. Please consult a bankruptcy attorney for more information. The following are community property states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin.

WHO WILL KNOW?

Bankruptcy filings are public records. However, under normal circumstances, no one will know you went bankrupt. The Credit Bureaus will record your bankruptcy and it will remain on your credit record for 10 years.

WILL I LOSE MY JOB BECAUSE I FILED BANKRUPTCY?

No. U.S.C. Sec. 525, prohibits any employer from discriminating against you because you filed bankruptcy.

WHAT DON’T I KEEP?  HOW MUCH AM I ALLOWED TO KEEP?

In a Chapter 7 Bankruptcy, assets in excess of the allowed exemptions, or non exempt assets such as real estate and boats, will be liquidated by the trustee. Please Google “Chapter 7 Bankruptcy Exemptions” for more information. In a Chapter 7 Bankruptcy, you are allowed to keep certain assets, depending on the state in which you reside. Please Google “Chapter 7 Bankruptcy Exemptions” for more information.

MAY I KEEP ANY CREDIT CARDS?

Whether a debtor keeps credit cards after filing bankruptcy is up to the credit card company. If you are discharging a credit card, they will cancel the card unless you reaffirm the debt. Even if you have a zero balance, the credit card company might cancel the card.

WILL I EVER GET CREDIT AGAIN?

Yes! A number of banks now offer “secured” credit cards where a debtor puts up a certain amount of money (as little as $200) in an account at the bank to guarantee payment. Usually the credit limit is equal to the security given and is increased as the debtor proves his or her ability to pay the debt. Two years after a bankruptcy discharge, debtors are eligible for mortgage loans on terms as good as those of others, with the same financial profile, who have not filed bankruptcy. The size of your down payment and the stability of your income will be much more important than the fact you filed bankruptcy in the past. The fact you filed bankruptcy stays on your credit report for 10 years. It becomes less significant the further in the past the bankruptcy is. The truth is, that you are probably a better credit risk after bankruptcy than before. Please Google “build credit after bankruptcy” for more information.

WHEN WILL I BE DISCHARGED FROM BANKRUPTCY?

One of the major purposes of a Chapter 7 Bankruptcy is to erase debt and to give a person a fresh financial start. The debt is erased when he or she is discharged. This happens 3 – 5 months after the Chapter 7 Bankruptcy is filed. At that time all debts (with some exceptions) are written off.

I FILED CHAPTER 7 BANKRUPTCY BEFORE.  WHEN MAY I FILE AGAIN?

A person may file Chapter 7 Bankruptcy again if it has been more than 8 years since he or she filed the previous Chapter 7 Bankruptcy.

IF I USE A CREDIT COUNSELOR, WON’T I GET A BETTER CREDIT RATING THAN IF I FILE BANKRUPTCY?

No, you will not. It will cost you less money and you will rebuild your credit rating faster if you file Chapter 7 or Chapter 13. Be cautious if you are considering using a credit counselor. Also read about the problems of unscrupulous companies in the credit counseling industry, and the action the IRS has taken against “non-profit” credit counseling groups following widespread abuse.

WHAT DOES IT COST?

It costs about $300 to file a Chapter 7 Bankruptcy. A bankruptcy attorney’s fees vary but should be in the range of $1,000 to $3,000. Many bankruptcy attorneys will give you a free initial consultation. You can keep the fees down by being well organized and well prepared. You may also be able to keep the fees down by not requiring your attorney to attend the Section 341 (a) Meeting of Creditors with you. The fees for a Chapter 11 or 13 Bankruptcy are higher.  Please consult with a bankruptcy attorney about fees.