Category Archives:
Chapter 13 Bankruptcy

How do you stop a foreclosure on your home?

There are various ways to stop a foreclosure on your home.  Unfortunately, some may be less realistic based on your situation.  The following are some of the ways to stop a foreclosure:

  • Chapter 13 bankruptcy: When a typical chapter 13 bankruptcy is filed, the automatic stay immediately goes into effect.  The automatic stay acts as an injunction against your creditors and will stop the foreclosure from moving forward.  The chapter 13 effectively allows you up to 5 years to pay back what you are behind, made through plan payments administered by a chapter 13 trustee.  The key to a chapter 13, is it must be filed before the sale date of the home set by the judge in the county foreclosure case.  You should consult with a bankruptcy attorney as soon as you are made aware of the foreclosure so he/she can explain in more detail the chapter 13 bankruptcy process.  Cleaveland & Cleaveland, P.L. offers a free consultation to discuss whether a chapter 13 would be a good option for you.

 

  • Cure the arrearage: This option is not usually realistic for most people facing a foreclosure.  If you have the available funds to bring the mortgage current, then this may be an option for you.  Even if you are working out a cure with the bank, we strongly suggest you make sure a response is filed to the foreclosure lawsuit within the time prescribed so a default is not entered against you.  Cleaveland & Cleaveland, P.L. can help you with this if you need legal representation.

 

  • Modify your loan with your mortgage holder: A mortgage modification will typically take the whole balance of your loan (including the arrearages) and create a new loan. After the loan modification is approved, the bank will typically have you on a 3 month trial period to help make sure you will pay the new loan amount.  Once the trial period is successful, the modified loan becomes permanent.  After that, they should dismiss the foreclosure case filed against you.  Since the mortgage modification process takes time, Cleaveland & Cleaveland, P.L. can help you with this if you need legal representation in the foreclosure.

 

  • Refinance with a different lender: Many times, if you have a sufficient amount of equity in your home and your credit score hasn’t dropped too low, another bank may refinance the loan to pay off the current mortgage holder that has filed the foreclosure against you. Once the old loan is paid off in the closing of the new loan, the foreclosure action should be dismissed. This also may take a sufficient amount of time to complete.  Cleaveland & Cleaveland, P.L. can help you if you need legal representation in the foreclosure.
Posted in Bankruptcy, Chapter 13 Bankruptcy, Foreclosure Defense |

How long does it take to rebuild my credit score after filing bankruptcy?

One of the biggest misconceptions about bankruptcy is the assumption that a person’s credit score will be terrible for a long time after filing bankruptcy.  In reality, bankruptcy is typically one of the fastest ways to improve your credit, other than paying off your debt within a relatively short period of time.

In many cases, it takes about 2 years after your bankruptcy discharge to rebuild your credit to over a 700 credit score.  In a Chapter 7 bankruptcy, it typically takes about 3 and a half months from the day you file the bankruptcy to get your discharge.  Many people’s credit score is higher within 6 months after their discharge than it was before they filed.

Many people receive applications for credit cards soon after their bankruptcy is discharged.  One of the best ways to improve your credit after a bankruptcy is to use credit after your bankruptcy, but responsibly.  Getting a credit card to charge your food and other normal monthly expenses, and then paying that credit card off at the end of the month, will help you rebuild your credit and help avoid the interest associated with most credit cards.  Interest on most credit cards is only charged if you don’t pay off the balance every month.

The reason why your credit improves so fast after a bankruptcy is because of 2 factors:

  • You can only file and receive a discharge in a Chapter 7 bankruptcy once every 8 years. The creditors know this.  That’s why you start getting credit card applications soon after you receive your discharge.  In the eyes of the creditors, you are typically a much lower credit risk after a bankruptcy than you were before the bankruptcy.
  • After a bankruptcy, many people are debt free. Having no debt will likely make you much less of a credit risk than you were before you filed bankruptcy.
Posted in Bankruptcy, Chapter 13 Bankruptcy, Chapter 7 Bankruptcy, Debt |

Bankruptcy v. Debt Negotiation Company or Debt Consolidation Company

I regularly have clients that consult with me for bankruptcy after they have hired a debt negotiation company or debt consolidation company.  They are usually consulting with me because they are unhappy with the company they hired, and are many times, being sued by their creditors, even though they thought their debts were being handled.  Most of the regret I see from my clients relating to bankruptcy is them wishing that they chose the bankruptcy option first rather than wasting their time, money, and sanity dealing with a debt negation company or debt consolidation company.

I, Michael Cleaveland, worked as an attorney for a firm for 10 years representing creditors.  I have first hand knowledge of how creditors view these companies.  I now only represent consumers, but I took with me a wealth of knowledge from working for the creditors. Below are some important things that any person should know before choosing to hire a debt negotiation company or debt consolidation company:

  • You don’t have a “right” to settle your debts for pennies on the dollar (as I have seen advertised on TV). The creditor may choose to accept less than what you owe, but it is completely at their discretion.
  • You may be subject to a 1099(c) if you settle your debts. This basically means the portion that was forgiven may count as income to you and you may have to pay taxes on it.  There are no 1099(c) tax consequences such as this by filing bankruptcy.
  • If you hire a debt negotiation company or debt consolidation company, you are not legally protected. If the debts are delinquent, they can still bring lawsuit against you. Your creditors can simply ignore any offers made from these companies. If you file bankruptcy, you will be legally protected from your creditors.
  • Debt negotiation companies or debt consolidation companies typically have you pay a monthly amount to them, in which they save in an account. After they take their fees, they try to negotiate settlements.  However, since it usually will take many months, if not years, to save enough money to settle your debts, many consumers find themselves facing lawsuits, judgments, or even garnishment, before they are able to settle.
  • Bankruptcy is typically a cheaper option. Many of these companies charge consumers thousands of dollars in fees and do not resolve all of their debt issues.  Bankruptcy is usually much less expensive and will legally give you a fresh start.
  • Bankruptcy may be better for your credit score than negotiating your debts. In a typical Chapter 7 bankruptcy, you get a discharge of your debts about 3-4 months after you file your case.  If my clients use credit responsibly after their discharge, they typically have over a 700 credit score within 2 years after their discharge.

There are many other advantages that bankruptcy offers that debt negotiation or debt consolidation does not.  I strongly recommend that prior to making any decision, you speak to a knowledgeable bankruptcy attorney to discuss all the pros and cons based on your individual situation.  Cleaveland & Cleaveland, P.L., a law firm located in Jacksonville, Florida, offers a free consultation to discuss your options relating to bankruptcy.

Posted in Bankruptcy, Chapter 13 Bankruptcy, Chapter 7 Bankruptcy, Debt |

No HAMP? Now what? Other options to save your home from foreclosure…

The Home Affordable Modification Program, better known as HAMP, was launched by the U.S. Government in 2009 with the primary goal of helping struggling homeowners avoid foreclosure by reducing their monthly mortgage payments. As HAMP has now closed, homeowners are struggling to find options to avoid losing their home to foreclosure. If you are one of these homeowners that has been let down by the mortgage modification process or are running out of time to save your home from a foreclosure, a chapter 13 bankruptcy may be the next best option for you to consider. A chapter 13 bankruptcy can allow you to save your home from a foreclosure sale by paying back the arrearages, or the amount you are delinquent on your mortgage at the time of filing, through the chapter 13 bankruptcy plan over a period of five years. Along with the arrearages, your regular monthly mortgage payment will be paid through the chapter 13 bankruptcy plan. Upon completion of the chapter 13 bankruptcy, you will be current on your mortgage payments with the mortgage arrears paid in full, and your unsecured debt listed in the bankruptcy will be discharged.

Posted in Bankruptcy, Chapter 13 Bankruptcy, Foreclosure Defense |

Can creditors still contact me after I have filed a bankruptcy?

The constant reminder of your financial difficulties is not only annoying, but can cause severe stress and anxiety. One of the many benefits of bankruptcy, whether filing a chapter 7 bankruptcy or a chapter 13 bankruptcy, is that something called an automatic stay goes into effect. This stay automatically prohibits most efforts to collect on any debts that were obtained prior to filing the bankruptcy, which include lawsuit proceedings, wage garnishments, and harassing letters or telephone calls. If you are attempting to save your home from foreclosure, this stay can even stop or postpone sale dates on properties.

How long you have protection through this automatic stay depends on which type of bankruptcy you decide to file. When you file a chapter 7 bankruptcy, the automatic stay typically remains in effect from the day that you file the bankruptcy case to about 45 days after the first 341 Meeting of Creditors. When you file a chapter 13 bankruptcy, this stay typically remains in effect until the bankruptcy case has been dismissed, the bankruptcy case has been closed, the creditor asks the court permission to lift the stay, or the debtor has been granted a discharge.

If creditors contact you in attempt to collect on a debt that you incurred before you filed bankruptcy, they may be in violation of the automatic stay. Under 11 U.S.C. Section 362(k), it allows the imposition of sanctions where a debtor suffers from a creditor’s willful violation of the automatic stay. A willful violation of the automatic stay occurs when the creditor knew that there would be a violation of the automatic stay if they contacted the debtor, but continued to do so anyway. An award of actual damages, including attorney fees and costs, may be awarded by the Court.

Bankruptcy was created to provide people with relief. The automatic stay is only one of the many benefits of filing bankruptcy. Not only does filing a bankruptcy stop the constant harassment, wage garnishments, and lawsuits, but it also gives you the opportunity to have a fresh financial start and rebuild your credit once you receive your bankruptcy discharge.

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Posted in Bankruptcy, Chapter 13 Bankruptcy, Chapter 7 Bankruptcy, Debt | Tagged , , , , |