Avoid Filing Bankruptcy
With all of the information you have read here about mortgages and bankruptcy, a wise question to ask is how to avoid filing bankruptcy in the first place. In this day and age of economic uncertainty, declining property values, high unemployment, declining wages and an increase in the costs of goods and services, it is difficult for many people to avoid borrowing more, stretching out payments for a longer period of time, borrowing from their savings or worse, mortgaging their childrens’ futures just to stay afloat.
My Story Avoiding Of Bankruptcy
As a parent, I know that in the middle of the last decade, my wife and I at times had to make these difficult choices. Fortunately, the amounts we had to borrow from our savings were not so high that we wound up finally declaring bankruptcy, but we did come close. I remind the reader that I was in the mortgage business for well over 15 years and was in the trenches, so to speak, on a daily basis and my income was reduced because of the mortgage crisis.
Avoiding Bankruptcy Starts At Home
The very first thing we did to avoid bankruptcy was reduce unnecessary expenditures. That meant taking day trips to the mountains or the shore as part of our vacation time instead of being away for a week or two at a time. We had to reduce the number of vehicles from two to one to reduce the amount of gas we used, vehicle insurance and maintenance and our children had to make do with a little less.
Another thing we did was not take out new credit or any new loans, we paid off credit cards and started taking care of and maintaining the houses we owned ourselves. I am in no way a handy man, but basic things like lawn maintenance, any electrical repairs I did myself. We even replaced our carpeting ourselves because our daughter is highly allergic to carpeting glues. Another way to reduce these expenditures is to limit shopping excursions as much as possible.
When Bankruptcy is Unavoidable
Assuming one has done some of the things I just outlined and bankruptcy is now unavoidable, how can the process be made as smooth as possible? First of all, pay off as much as possible before filing. Please note that the courts will want to see a list of all debts and credits on a balance sheet.
There have been instances of people going to court to file either without this list or have conveniently hidden monies. These monies are typically not reported to the IRS, are assets that are hidden in other relatives accounts, have been moved to minor childrens accounts,etc. This is not only un-ethical but illegal.
If the amounts are high enough, one could be prosecuted for fraud under the RICO Act. So, a complete listing of all assets and debts is required. Be prepared with bank statements, stocks, bonds, etc. A bankruptcy attorney will give you a list of all that is required. Lawyers will charge you over $500 if you are short on cash you may want to get a bankruptcy software, which is low cost bankruptcy assistance program (costs less than $50).
Be advised that creditors have a right to dispute one’s ability to pay the debts, the amount owed and any communications you have had with the creditor in regard to their attempt to collect the debt. One major pitfall is any attempt on the part of a creditor to collect on a deceased parents’ debt. As strange as this sounds, it does happen. When my step-father passed away in 1994, the hospital called me on several occasions to collect on his unpaid hospital bill. I was never listed as the responsible party for his debts, yet they listed his debts on my credit report. It took many calls to their attorneys from my attorneys as well as cease and desist notices sent to the hospital to stop contacting me.
Which Regulations Protects You
Under the current FDCPA regulations, I could have filed a lawsuit against the hospital. Another pitfall one can encounter in filing, is for one not retaining correspondences between yourself and the creditor.
Strange as this may sound, creditors do NOT always have accurate information. This is because their accounting departments are split between loans in default, loans in good standing, collection departments, servicing,legal etc. and it does happen that these departments do not always “talk” to each other. Keep all correspondences you receive and any canceled checks you may have.
You may have to contact your bank for statements showing these payments. You should insist on correspondences in writing. Telephone calls can become heated, recollection of these calls can be sketchy and since there is frequently a lot of emotion involved, exact recall may be difficult. If all this seems way over your head, or you think it should be done professionally, you are right. A bankruptcy software is a low cost alternative assistance when filing bankruptcy.
Now that bankruptcy is a certainty, it is imperative that all parties resolve these issues sans heated emotions. Accurate record keeping is critical as is full disclosure on the part of the borrower.
Read These Post On Bankruptcies:
- Do You Know All Your Alternatives To Bankruptcy
- Can You Refinance After Bankruptcy?
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- Get Your 80/20 Mortgage Loan Approved in 2012