mdoLaw.com Bankruptcy Blog
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Mortgage servicers can no longer deny HAMP
loan modifications on the basis of the applicant (you)
being in bankruptcy

Starting today, June 1, 2010, mortgage servicers may no longer deny a HAMP loan modification to borrowers simply because the borrower is in a chapter 7 or chapter 13 bankruptcy.

Download the new Treasury Supplemental Directive 10.02 for more information.

You still have to ask for the modification; this change does not mean that you automatically receive the modification. In fact, there are still a host of other reasons why you might not qualify.

Which is why you would do well to speak to a chapter 13 bankruptcy attorney: so that you have a backup plan in place for when the foreclosure sale date is imminent and your loan modification people are still saying "any day now" (but not giving you the permanent modification).
June 1

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Will filing Bankruptcy ruin my credit rating?

In most cases: "no." In fact, in my experience filing bankruptcy will actually IMPOVE your credit rating after the bankruptcy process is over (around 100 days).

In most of my client's cases, their credit score has already been damaged from non-payment of bills (or even just non-payment of the first mortgage).

Why might your credit rating go UP after filing bankruptcy?

1) Once your bankruptcy filing is 'approved' (the legal word for this is "discharged") and your case is closed, your credit rating actually goes up almost 100 points, which in many cases turns out to be higher than when you first filed.

2) Once your debts have been discharged, your debt-to-income ratio is significantly lower.

3) You cannot file a chapter 7 bankruptcy for eight more years, so any creditor that extends you credit knows that you will have to pay them.

Although many people feel too proud to go through the bankruptcy process, bankruptcy was designed to give people who need it a fresh start. Wouldn't you rather put this behind you rather than screen all of your calls to avoid the creditors and bill collectors?

btw, if you recently filed bankruptcy and have not completed the process (a chapter 7 bankruptcy usually takes about 100 days from start to finish), there is no way creditors will approve any further credit (except maybe a new landlord).
May 22

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How long will a Foreclosure affect my ability
to get a home loan?

Possibly forever.

Notice that I did not title this entry "How long does a foreclosure appear on my credit record?" The answer to that question is "up to seven years." Actually, a Foreclosure should not appear on your credit record for more than seven years but you might to need to have the credit reporting bureaus remove it for you. They tend to 'forget' to do that sort of thing. But I digress.

A "Notice of Foreclosure" in Washington State is a recorded document; its recorded at the local County Recorder's Office. Forever. Even if you fully paid off your mortgage payment delinquency before the cut-off date, the best that you can do is get a "Cancellation of Foreclosure" recorded.

You cannot 'un-record' a Notice of Foreclosure.
May 4

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What is the difference between a Mortgage Trustee
and a Bankruptcy Trustee?

Huge difference. 

The ‘Mortgage Trustee’ (or more accurately, the “Trustee of your Deed of Trust”) is the person or company who is doing the foreclosure proceeding on your house.

The Bankruptcy Trustee is a man or woman who is charged by the Bankruptcy Court to look for non-exempt assets and if there are any in your case, to sell the assets to pay your creditors (in most cases, all of your assets are exempt; in other words you get to keep everything).  They also investigate your financial affairs to make sure that you are telling the truth in your filings.
April 21

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How long does it take to file Bankruptcy?

Not Long; sometimes as fast as 90 minutes.

We can do an emergency bankruptcy in as little as 90 minutes (although we prefer having more preparation time). An emergency filing gives you all of the same protection that a regular filing does; it stops Foreclosure, wage garnishment, eviction, etc.

Also, we file Bankruptcies electronically, so other than a few federal holidays, there is no "closed" period when you cannot file. The Bankruptcy court uses a 24 clock so we can file for you at any time.
April 16, 2010

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Is it better to Short Sale my house or to file Bankruptcy?

That depends on your situation but from my perspective as a Washington Bankruptcy attorney, it is usually better to file bankruptcy.

Here's why:

Unless your lender agrees to waive off on (forgive) the deficiency (which is unlikely), after the sale you will probably still owe the lender $20,000-$120,000+. Your obligation on your promissory note (or promissory notes if you have a second mortgage) will not be discharged unless your lender agrees to waive the deficiency. Also, if there is a second mortgage with a different lender, the likelihood of the second lender agreeing to waive off on the deficiency is close to zero. There is no motivation for the second mortgage holder to forgive your debt since they will not be receiving any Short Sale proceeds.

The only way that this can work for you is when there is either a) only one mortgage or two mortgages, both with the same lender and b) you convince your lender to forgive the deficiency.

Otherwise, the following will probably happen: you finish the Short Sale without the lender's agreement to forgive the deficiency, you take a 100+ point hit on your credit record, your credit report continues to suffer because of non-payment on your promissory note(s), the lender sues you for non-payment on the promissory note(s), then you have to file bankruptcy anyway. And your credit report is now as low as it can get.

On the other hand, if you had simply filed a Chapter 7 Bankruptcy in the first place, your credit report would be MUCH higher, most (or all) of your other debts would be gone, and you would have been on to bigger and better things much earlier and with much less stress.
April 12, 2010

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Prior Bankruptcy & Foreclosure Blog Entries:

Should I wait to file Bankruptcy to see if my
Loan Modification is accepted?

Can my bank come after me for a deficiency if I let
my house go to foreclosure?

What is a deficiency in a foreclosure action?

If I file a chapter 7 bankruptcy, can I keep my house?

Do I need to take a class before I can file for bankruptcy?

Does it cost more to file bankruptcy if I am married?

Can I file bankruptcy by myself, even when I am married?

Will filing bankruptcy stop (or delay) foreclosure on my home?

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Upcoming Blog entries will include:

Will Bankruptcy stop my Foreclosure if its within eleven days of the Foreclosure Sale Date?
What does it mean to be 'Judgment Proof'?
What is a "Deed in Lieu of Foreclosure"?
Does Bankruptcy stop Wage Garnishment?
Do I still have to pay my Student Loans if I file Bankruptcy?
Should I hire an attorney to help with my Loan Modification Application?
What is worse for my credit score? Bankruptcy or Foreclosure?
What is different about a chapter 13 Bankruptcy?
What kind(s) of debt can I get rid of if I file Bankruptcy?
What type of Bankruptcy can I file if I am unemployed?
If I haven't filed Bankruptcy yet, what can I do to get creditors to stop calling me?
What happens if I am a co-debtor on a loan and I file Bankruptcy?
Will they take all my property if I file Bankruptcy?