Home Archives for Mortgages

Do I Have to Pay Income Tax on Forgiven Mortgage Debt?

Posted on March 8, 2009 Written by

Mortgage Debt Forgiveness, IRS Tax Tips, March 5, 2009 –TT-2009-44

Here is a tax tip from the Internal Revenue Service about mortgage debt forgiveness:

If your mortgage debt is partly or entirely forgiven during tax years 2007 –2012, you may be able to claim special tax relief and exclude the debt forgiveness income.

Normally, debt forgiveness results in taxable income. However, under the Mortgage Forgiveness Debt Relief Act of 2007, you may be able to exclude up to $2 million of debt forgiven on your principal residence. The limit is $1 million for a married person filing a separate return.

Taxpayers may exclude debt reduced through mortgage restructuring, as well as mortgage debt forgiven in a foreclosure. To qualify, the debt must have been used to buy, build or substantially improve your principal residence and be secured by that residence. Refinanced debt proceeds used for the purpose of substantially improving your principal residence also qualify for the exclusion.

However, proceeds of refinanced debt used for other purposes (for example, to pay off credit card debt) do not qualify for the exclusion.

If you qualify, you claim the special exclusion by filling out Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness, [Read more…]

Filed Under: Mortgages

Do Mortgage Arrears Get Paid Interest in Chapter 13 Bankruptcy?

Posted on March 8, 2009 Written by

DOES THE MORTGAGE CREDITOR GET INTEREST ON THE ARREARAGE PAID IN THE PLAN?

By Jan Hamilton, Standing Chapter 13 Trustee

Frequently, arrearages on real estate mortgages are paid through the plan. Do they bear interest or not? If they do, at what rate?

While Judge Somers has (essentially on behalf of all of the judges in Kansas), ruled on certain language in plans relating to mortgages, (In re Seal, Case No 05-17262, order entered March 6, 2007), the decision leaves open the question of whether interest is to be paid and at what rate.

Section 1322(e) was enacted as part of the Bankruptcy Reform Act of 1994 to overrule the Supreme Court decision in Rake v. Wade, 508 U.S. 464, (1993). [Read more…]

Filed Under: Chapter 13, Financial Help, Foreclosure, Mortgages

Judicial Modification of Mortgages in Bankruptcy to House Floor Wednesday

Posted on February 23, 2009 Written by

Judicial mortgage modification in chapter 13 bankruptcy is expected to be considered on the floor of the U.S. House of Representatives as early as Wednesday of this week.   The proposed law eliminates the ban on restructuring primary residential mortgages to help people save their homes from foreclosure.  The law change will help people in foreclosure who don’t want to file bankruptcy also,  Chip Parker, Jacksonville bankruptcy lawyer, writes in the Bankruptcy Law Network blog.

The bill will be part of a large package of financial services legislation.  You can support judicial modification of mortgages in chapter 13 bankruptcy by calling or faxing your Kansas Congressional delegation today.  Here is how to contact your member of Congress:

  • Sen. Sam Brownback,  (202) 224-6521, fax (202) 228-1265
  • Rep. Jerry Moran,  (202) 225-2715, fax (202) 225-5124 
  • Rep. Lynn Jenkins, (202) 225-6601, fax (202) 225-7986
  • Rep. Dennis Moore, (202) 225-2865, fax (202) 225-2807
  • Rep. Todd Tiahrt, (202) 225-6216, fax (202) 225-3489
Filed Under: Chapter 13, Foreclosure, Mortgages

Do I Have to Reaffirm Car Loans, Home Mortgages?

Posted on February 17, 2009 Written by

If you are behind on a car loan or a home mortgage and you can afford to catch up, you can reaffirm and possibly keep your car or home.  If the lender agrees to give you the time you need to get caught up on a default, this may be a good reason to reaffirm.  But if you were having trouble staying current with your payments before bankruptcy and your situation has not improved, reaffirmation may be a mistake.  The collateral is likely to be repossessed or foreclosed anyway after bankruptcy, because your obligation to make payments continues.  If you have reaffirmed, you could then be required to pay the difference between what the collateral is sold for and what you owe.

If you are up to date on your loan, you may not need to reaffirm to keep your car or home.  Some lenders will let you keep your property without signing a reaffirmation as long as you continue to make your payments.  Sometimes lenders will do so if they think the bankruptcy court will not approve the reaffirmation agreement.

Source: Your Legal Rights During and After Bankruptcy:  Making the Most of Your Bankruptcy Discharge Pamphlet, National Consumer Law Center, Boston, MA, www.nclc.org.

Filed Under: Discharge, Mortgages, Trustees, Vehicles

Do I Have Other Options for Secured Debts Other than Reaffirmation?

Posted on February 16, 2009 Written by

You may be able to keep the collateral on a secured debt by paying the creditor in a lump sum the amount the item is worth rather than what you owe on the loan.  This is your right under the bankruptcy law to “redeem” the collateral.

Redeeming collateral can save you hundreds of dollars.  Because furniture, appliances, and other household goods go down in value quickly once they are used, you may redeem them for less than their original cost or what you owe on the account.

You may have another option if the creditor did not loan you the money to buy the collateral, like when a creditor takes a lien on household goods you already have.  You may be able to ask the court to “avoid” this kind of lien. This will make the debt unsecured.

Source: Your Legal Rights During and After Bankruptcy:  Making the Most of Your Bankruptcy Discharge Pamphlet, National Consumer Law Center, Boston, MA, www.nclc.org.

Filed Under: Discharge, Exemptions & What You Get to Keep, Mortgages, Vehicles

Should I Reaffirm a Debt?

Posted on February 15, 2009 Written by

If you are thinking about reaffirming, the first question should always be whether you can afford the monthly payments.  Reaffirming any debt means that you are agreeing to make the payments every month, and to face the consequences if you don’t.  The reaffirmation agreement must include information about your income and expenses and your signed statement that you can afford the payments.

If you have any doubts whether you can afford the payments, do not reaffirm.  Caution is always a good idea when you are giving up your right to have a debt canceled.

Before reaffirming, always consider your other options.  For example, instead of reaffirming a car loan you can’t afford, can you get by with a less costly used car for a while?

Source: Your Legal Rights During and After Bankruptcy:  Making the Most of Your Bankruptcy Discharge Pamphlet, National Consumer Law Center, Boston, MA, www.nclc.org.

Filed Under: Discharge, Mortgages, Vehicles

Do I Have to Reaffirm the Same Terms?

Posted on February 14, 2009 Written by

No.  A reaffirmation is a new contract between you and the lender.  You should try to get the creditor to agree to better terms such as a lower monthly payment or interest rate.  You can also try to negotiate a reduction in the amount you owe.  The lender may refuse but it is always worth a try.  The lender must give you disclosures on the reaffirmation agreement about the original credit terms, and any new terms you and the lender agree on must also be listed.

Source: Your Legal Rights During and After Bankruptcy:  Making the Most of Your Bankruptcy Discharge Pamphlet, National Consumer Law Center, Boston, MA, www.nclc.org.

Filed Under: Discharge, Mortgages, Vehicles

Lenders Halt Foreclosures Three Weeks

Posted on February 13, 2009 Written by

JP Morgan Chase & Co., Citigroup Inc., Morgan Stanley and Fannie Mae have announced they are halting home foreclosures until March 6, 2009, while the Obama administration develops its policy for helping the U.S. housing market.

Filed Under: Foreclosure, Mortgages

Can I Change My Mind After I Reaffirm a Debt?

Posted on February 13, 2009 Written by

Yes.  You can cancel any reaffirmation agreement for sixty days after it is filed with the court.  You can also cancel at any time before your discharge order.  To cancel a reaffirmation agreement, you must notify the creditor in writing.  You do not have to give a reason.  Once you have canceled, the creditor must return any payments you made on the agreement.

Also, remember that a reaffirmation agreement has to be in writing, has to be signed by your lawyer or approved by the judge, and has to be made before your bankruptcy is over.  Any other reaffirmation agreement is not valid.

Source: Your Legal Rights During and After Bankruptcy:  Making the Most of Your Bankruptcy Discharge Pamphlet, National Consumer Law Center, Boston, MA, www.nclc.org.

Filed Under: Discharge, Mortgages, Vehicles

NPR Airs Story on Judicial Mortgage Modification in Chapter 13 Bankruptcy

Posted on February 12, 2009 Written by

Here is a report that aired on National Public Radio this morning about the judicial mortgage modification bill pending in Congress.

“On Capitol Hill, Democrats are supporting a bill that would let judges block home foreclosures. The measure would allow bankruptcy judges to alter home loans. Industry insiders say that would cause more harm than good, but economists disagree.”

Listen to today’s National Public Radio story

on judicial mortgage modification in chapter 13 bankruptcy.

Filed Under: Bankruptcy Legislation, Chapter 13, Foreclosure, Mortgages

Do I Have to Reaffirm Any Debts?

Posted on February 12, 2009 Written by

No.  Reaffirmation is always optional.  It is not required by bankruptcy law or any other law.  If a creditor tries to pressure you to reaffirm, remember you can always say no.

Source: Your Legal Rights During and After Bankruptcy:  Making the Most of Your Bankruptcy Discharge Pamphlet, National Consumer Law Center, Boston, MA, www.nclc.org.

Filed Under: Discharge, Mortgages, Vehicles

Congress Considers Judicial Mortgage Modification in Chapter 13 Bankruptcy

Posted on February 11, 2009 Written by

The Helping Families Save Their Homes in Bankruptcy Act of 2009 is pending in Congress.  If passed, chapter 13 debtors will be able to  rewrite their delinquent mortgage loans by lowering the loan balance to the value of the home, reducing interest rates, eliminating the variable rate and fixing the interest rate, and stretching out the mortgage over 40 years.  The goal is to lower the payments enough to make them affordable for the borrower to keep the home and avoid foreclosure of the mortgage.

Mortgage bankers want your home not your money. They oppose the law change and are lobbying against the proposed legislation.

Filed Under: Bankruptcy Legislation, Chapter 13, Foreclosure, Mortgages

Mortgage Loan Modification Programs

Posted on February 11, 2009 Written by

Here is a collection of voluntary mortgage loan modification programs from various lenders in the United States collected by the National Consumer Law Center, America’s consumer law experts.

Some lenders will modify and some won’t.  Mortgage modification agreements are being offered by some lenders. But all mortgage modification agreements are not equal.  Here’s what’s happening in the real world, today.

Relying on lenders to do voluntary mortgage modifications has not been successful thusfar.  Less than 10% of the voluntary modifications result in reduced principal, more than half capitalize the unpaid interest onto the loan balance, and a third of the modifications reduce the monthly payment while almost half have monthly payments increases.

Filed Under: Financial Help, Foreclosure, Mortgages

What Is Reaffirmation?

Posted on February 11, 2009 Written by

Although you filed bankruptcy to cancel your debts, you have the option to sign a written agreement to “reaffirm” a debt.  If you choose to reaffirm, you agree to be legally obligated to pay the debt despite bankruptcy.  If you reaffirm, the debt is not canceled by bankruptcy.  If you fall behind on a reaffirmed debt, you can get collection calls, be sued, and possibly have your pay attached or other property taken.

Reaffirming a debt is a serious matter.  You should never agree to a reaffirmation without a very good reason.

Source: Your Legal Rights During and After Bankruptcy:  Making the Most of Your Bankruptcy Discharge Pamphlet, National Consumer Law Center, Boston, MA, www.nclc.org.

Filed Under: Discharge, Mortgages, Vehicles

Do I Still Owe Secured Debts (Mortgages, Car Loans) After Bankruptcy?

Posted on February 10, 2009 Written by

Yes and No.  The term “secured debt” applies when you give the lender a mortgage, deed of trust, or lien on property as collateral for a loan.  The most common types of secured debts are home mortgages and car loans.  The treatment of secured debts after bankruptcy can be confusing.

Bankruptcy cancels your personal legal obligation to pay a debt, even a secured debt.  This means the secured creditor can’t sue you after a bankruptcy to collect the money you owe.

But, and this is a big “but,” the creditor can still take back their collateral if you don’t pay the debt.  For example, if you are behind on a car loan or home mortgage, [Read more…]

Filed Under: Discharge, Exemptions & What You Get to Keep, Filing Bankruptcy, Mortgages, Vehicles

Save Your Home with Bankruptcy

Posted on February 3, 2009 Written by

Legislation is pending in Congress to change the law to allow judges to modify your home mortgage in chapter 13 bankruptcy. Delinquent mortgages could be stretched out to 40 years, principal due on the loan reduced to the value of the home, and adjustable rates changed to a low fixed rate if the Helping Families Save Their Homes in Bankruptcy Act of 2009 passes.  Judicial modification might lower the payments enough to make it possible to afford to stay in your home.

Contact your elected representatives today by email, phone or fax. This legislative, which President Barack Obama has pledged to sign, is on a fast track but opposed by the many in the mortgage and banking industries. Here is the contact information for contacting Congress: www.savehomewithbankruptcy.com/lobby.htm.

Filed Under: Bankruptcy Legislation, Chapter 13, Mortgages
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