Q. I cannot afford my mortgage. How do I avoid foreclosure?
A. Your best first step is to contact an experienced New York foreclosure defense attorney, like Michael H. Schwartz. We can advise you of your options and develop a strong foreclosure defense for you. Among potential options are:
- Loan modification, in which you and the bank agree to a change in terms of the mortgage, which allows you to catch up and remain current with payments.
- Mediation is available in New York after you are sued in foreclosure and is required before the bank can take any further action on the foreclosure proceeding. In mediation, a neutral third party who is trained as a mediator facilitates discussions as you and the lender negotiate terms for paying your mortgage. An experienced foreclosure defense attorney should represent and advise you during meditation.
- Bankruptcy halts the foreclosure process, giving you time to find a solution to your financial troubles. Bankruptcy also allows you to address other debt, such as credit card balances and car loans. A bankruptcy case may allow you to modify the mortgage, reduce the interest rate, extend the payment terms, forbear the arrears, reduce the amount owed, simply repay the arrears over a five-year period or let you walk away from an unwanted home and be debt free with no tax consequences.
New York bankruptcy and foreclosure defense attorney Michael H. Schwartz can assist and advise you in absolute confidence if you are behind on mortgage payments and face foreclosure proceedings. Mr. Schwartz has helped thousands of New Yorkers facing financial problems like yours keep their homes and preserve their future financial well-being.
Q. I know homes appreciate and that I have equity in this property. Could the bank owe me money if it seizes and sells my home?
A. Yes, it could happen, but not too likely for the reasons stated above. But, if the loan is satisfied and all expenses related to the foreclosure are paid, there could be money left over. You may be able to recover that excess money through further State Court legal action called a “Surplus Proceeding.”
Q. If the bank forecloses, does that settle everything or could I still owe the bank money?
A. You could lose your home in a foreclosure and still owe the bank money. A home sold at auction in foreclosure typically brings in 64% of its true value, so that in most cases even after losing your home to foreclosure, you are still in financial, legal trouble. It is best to discharge the amount that will be owed, by filing bankruptcy before the foreclosure sale to prevent any tax on the amount not received by the bank, as the Department of Treasury (IRS) considers that “imputed income.”
Q. If the bank forecloses on my home but doesn’t sell it right away, can I stay in my home?
A. The lender or whoever buys your home at auction could decide to manage it as a rental property and rent it to you. More likely, you can expect the new owner to begin eviction proceedings to have the court order you to vacate the property.
Q. What happens to my house if the bank forecloses?
A. When a lender forecloses on a mortgage loan, the banks divest themselves of the homes acquired through foreclosure by selling them at auction. Typically, the court will appoint a qualified independent party to handle the sale of your home. In New York, you are still responsible for the amount that the bank does not receive after the sale of your home.
Q. I cannot afford my mortgage or the monthly cost to live in my house. If I let the bank foreclose and take it off of my hands, will it hurt my credit?
A. Yes. A foreclosure will damage your credit rating. Your credit rating plays a key role any time you apply for new credit or a loan, so it should be protected. The higher your current credit score, the more impact a foreclosure will have. For example, FICO (Fair Isaac Corporation) is the largest credit rating service. FICO credit scores are generally from 300 to 850, with 680 being considered “prime.” An even higher FICO score of 750 could drop by about 150 points after a foreclosure. A lower credit rating of 600 could fall by 100 points or so. In addition, a foreclosure remains on your FICO credit report for 7 years.
Q. I’m terribly embarrassed by my financial troubles and the prospect of foreclosure on my home. Can a lawyer keep other people from finding out if the bank forecloses on my mortgage?
A. Once legal proceedings in a foreclosure begin, it becomes public record. This means anyone can go to the courthouse to get this information or find this information online. But, if you contact Michael H. Schwartz as soon as you get behind on your mortgage and realize catching up may be a problem, we can stop foreclosure from happening.
There are several options available to help borrowers in trouble save their homes. The sooner you seek help, the better your chance to avoid foreclosure proceedings and save your home. All of your discussions with Michael H. Schwartz, P.C., remain confidential.
Q. I have fallen behind in mortgage payments. How soon will my bank try to foreclose on my loan?
A. In New York, a mortgage loan lender may begin foreclosure proceedings on a borrower who falls three months (90 days) behind in payments. However, some banks will wait for as long as four to six months (120 to 180 days) or even years before resorting to foreclosure. But once your account is in arrears, even with one payment late or missed, you are likely to hear from your bank or lender.
If your lender has not offered to work with you to help you get up to date with your mortgage payments, Michael H. Schwartz, P.C., can advise you about multiple strategies you may pursue. Remember, the initial consultation about whatever financial problems that prevented you from paying your mortgage on time is free.
Q. What should I expect in a New York foreclosure proceeding?
A. If you have fallen behind on mortgage payments, you can expect to receive a letter from the bank or its mortgage loan servicer to advise you of the missed payments and to make arrangements for payment. If you cannot pay what is due on loan to make your account current, a letter will be sent to advise that the bank will “accelerate” or “call in” the loan, which means it is asking for the entire loan to be paid immediately.
At this point, you may still pay what’s required to bring your payments up to date, and end further proceedings. If you do not, an attorney for the lender will serve you with a summons and complaint. This describes why the lender is foreclosing and begins the foreclosure action.
Once a summons and complaint are served, you have 20 days to respond if you received them by hand from the attorney, or 30 days otherwise.
At this point, you need to answer the complaint with a defense against foreclosure, which requires legal knowledge – hiring a foreclosure defense attorney. If you fail to answer the complaint, you will be considered to have defaulted on the foreclosure proceeding and the lender will be able to proceed to take possession of your home.
With the help of a foreclosure defense attorney, you can ask the bank to modify the terms of the mortgage and, with a payment schedule you can meet, keep your home.
Q. What does “foreclosure” mean?
A. Foreclosure is a legal process in which a lender (usually a bank) seeks to take possession of a home or other real property after the borrower (homeowner) has fallen behind on mortgage loan payments. Typically, a bank in New York will begin foreclosure proceedings if a homeowner is three months (90 days) behind in payments. If the foreclosure is successful, the bank will be allowed to take and sell your home at auction. Sometimes you will hear the term “foreclosure” to refer to a house that a bank has taken back after a sale at the end of the foreclosure proceeding.
Do I qualify for the Foreclosure and Debt Cancellation Act?
The Mortgage Forgiveness Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualify for this relief.
This provision applies to debt forgiven in calendar years 2007 through 2017. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married filing separately). The exclusion doesn’t apply if the discharge is due to services performed for the lender or any other reason not directly related to a decline in the home’s value or the taxpayer’s financial condition.
The amount excluded reduces the taxpayer’s cost basis in the Home home. More details. Further information, including detailed examples, can also be found in Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments.
How does the whole process work in New York?
For over 35 years I have been constantly revising and streamlining the process to make filing bankruptcy as fast and painless as possible.
Our time proven process works like this:
1. Call me.
You will have a free consultation, either on the telephone or in person. In-person consultations are preferable and necessary in many cases.
Whether we speak on the phone or in person I will ask you a brief set of standard questions to make sure that bankruptcy is the right decision for you AND which Chapter is best for you, such as:
You will be given a guaranteed written fee quote and two copies of a retention agreement and all of the notes from our consultation along with the information required to be provided by Congress.
2. You return one copy of the agreement signed with a deposit (at least $200) towards the total legal fees and costs. We accept cash, personal checks, money orders, etc. You can also pay online at any time by clicking the Payments button on this website. (You do not need a PayPal account to pay us online)
3. We will send you a simple package containing:
- Document checklist;
- Credit report order form;
- Simplified questionnaire;
- Pre-filing counseling course information (you can take the course on the phone or on the internet: it only takes about 90 minutes);
4. After the fees and expenses are paid, we will contact you to review the documents and the questionnaire.
5. Your case will be prepared, reviewed by you and me and usually filed within the same month.
6. Of course, we can file cases in One day when necessary.
7. In about 3 to 5 weeks after your case is filed you will be interviewed at a meeting by a lawyer called a trustee.
8. We will send you in advance of the meeting, the standard questions that will be asked of you by the trustee.
9. You will meet with me in my office prior to the meeting and review all of the questions you will be asked and also review all of the papers that we filed for you. I am the ONLY attorney that does that.
10. I will be at the meeting with you. If the case is not filed in White Plains, I may hire an attorney at my expense that will be familiar with your file to attend the meeting. I remain fully responsible for your case and in the event any issues arise at the meeting I will resolve them at No Charge.
11. In over 90% of our cases the trustee will recommend that you be granted a discharge of your debts within a day or two of the meeting.
12. I will email you notice of the trustee’s recommendation as soon we receive it.
12. In about 60 days after the meeting you will be granted your discharge.
13. I will email you as soon as we receive notice of the discharge.
14. Occasionally, the trustee will require additional information. We will assist you at No Charge in satisfying the trustee.
15. Sometimes a car loan needs to be “reaffirmed”. We will assist you and attend the Court hearing for the reaffirmation at No Charge.
How long does the whole process take?
Once your case is filed, it is closed in about 4 months.
The time it takes to get the case filed depends on how fast you pay the fees and expenses and provide us with the necessary information.
How long will bankruptcy stay on my credit and will I get credit again?
And even if I don’t ever want to see a credit card again, can I buy a house in a couple of years.
The short answer is that a bankruptcy filing will stay on your credit report for 7 to 10 years.
BUT you more than likely get credit card offers right away.
A recent law school law review article stated that on average after you receive your bankruptcy discharge (no later than when your case is closed), you will receive an average of 14 credit card applications per month for the next 12 months. Generally, the offers are sent from the same lenders who claim you will not get credit if you file bankruptcy.
AND there are home lenders and car dealers that will put you into a nice new home or car right away at reasonable interest rates.
How is this possible?
It is all because of the way credit works in this country.
Before 1999, when you wanted credit, you went to the bank or lender and fill out an application, a credit report was done and the lender decided whether or not to lend you its money.
Everything changed with the repeal of the Glass-Steagall Act by the Gramm–Leach–Bliley Act in 1999. The Glass-Steagall Act had been passed into law after the great depression to keep separate investment banking which issued securities and commercial banks which accepted deposits.
Today, with the repeal of the Glass-Steagall Act, banks sell their loans and your credit card purchases to debt buyers who then sell them to debt aggregators who bundle them into bonds, cut them up into smaller bonds and sell them on Wall Street. The bond funds are called collateralized debt obligations (CDOs) and mortgage-backed securities (MBSs).
In essence, when you apply for a credit card, loan, home loan, etc., the lender gives you credit on paper and then makes its profit from selling off your promise to repay the purchase or the loan.
The lenders who give you new credit after bankruptcy have nothing to lose and everything to gain by giving you the new credit. The lenders make their profit in selling off your promise to repay the credit card purchase, car loan or mortgage to the debt buyers on Wall Street.
How long until I can get my life back on track?
1. Once you hire us as your attorney, stop making payments to your creditors.
Once we receive your signed agreement and the deposit you can stop making payments on all of your credit cards and loans (except of course for secured loans such as a car or house that you want to keep or a non dischargeable loan such as student loan).
If you have given any of the creditors or collection agents post dated checks, stop payment on the checks or close your bank account. If you have set up an automatic payment plan with the collector and your bank account, stop it immediately even if you have to close your bank account.
2. When can I use my bank accounts or get new credit?
Subject to certain exceptions, once your case is filed you can use your checking and savings accounts, open new checking and savings accounts, get new credit cards and otherwise get back on track on with your life.
3. What do I do about that debt consolidation program or debt resolution program I signed up with?
Stop making any payments to those so called “debt consolidation programs” or “debt resolution programs”. If you have given any of the programs post dated checks, stop payment on the checks or close your bank account. If you set up an automatic payment plan with the program and your bank account, stop it immediately even if you have to close your bank account.
What about those creditor calls?
These creditors and collectors call me day and night, what can I do to stop them?
1. As soon as you hire us as your attorney by sending us a signed agreement and a deposit, the next time a creditor or collection agent calls, say three simple things:
- I am filing for bankruptcy;
- My attorney is Michael H. Schwartz, P.C.;
- My attorney’s telephone number is 800-666-9743.
And hang up.
2. If a debt collector calls you again, he or she has violated Section 11 USC. Section 1692 (The Fair Debt Collection Practices Act).
Get me his or her name and address.
I will take it from there.
How much does filing for bankruptcy cost?
In reality, nothing, because the cost to file bankruptcy is a small fraction of what you would repay to your creditors if you did not file bankruptcy.
In actual dollars, our fees start at $1899. There are also about $400 in costs involved, such as the Government’s filing fee, credit report fee, and fee for the credit counseling courses.
How do I pay this fee?
It starts with a deposit of $200 or more.
You can pay the balance monthly. The only requirement is that we are required by law to receive the entire payment before the case is filed. No attorney can legally take fees after the case is filed.
Are there any additional fees?
No. Our fees are guaranteed and given to you in writing. If there is anything that will cost more money, for example removing judgment liens if you own real estate you will not be charged unless you agree to the fee in advance.
Are there alternatives to bankruptcy?
In a word: No! Either you repay the debts in full or you declare bankruptcy.
What about Debt Consolidation and Debt Resolution companies?
Debt Consolidation or Resolution companies operate under the same standard business model. The Debt Companies collect a monthly payment from you. After a number of months, say 6 to 12, the Debt Company has a few thousand dollars of your money. The company then contacts your smallest creditor and attempts to work out your debt by reducing the amount owed. The Debt Company may even be successful at first.
Why does the Debt Company not succeed?
Simple. Unless you have only one creditor, your other creditors will not wait their turn in line. One by one they will start to sue you.
The result: all the money you gave to the Debt Consolidation or Resolution Company is wasted. Thousands of dollars gone and you are still in debt. Even worse: You are now getting sued and must rush your bankruptcy case to prevent your wages from being garnished or your assets frozen.
My credit report says that my debt is Charged off. So I don’t owe it, or do I?
Federal law requires that creditors mark installment loans as a “Charge Off” after 120 days of being past due.
Credit cards, also known as revolving credit accounts must be charged-off after 180 days.
The sole reason for declaring a debt a Charge Off is to give the creditor a tax exemption on the debt.
The charge-off, does NOT mean that you do not owe the debt.