To File or Not to File For Bankruptcy?
That is the excruciating question many homeowners ask themselves these days as they struggle to fight against shooting adjustable arm mortgages borrowed during the sub-prime era. When I was growing up, the “B” word was taboo and people who filed bankruptcy were looked down upon.
How about those pay option arms? The key is paying interest only. If you have been paying just the minimum all these years and nothing to your principal or interest, your negative amortization continues to mount, but with no extra money and resources, how can you pay? Contact a loan officer to see if you qualify for President Obama’s debt relief mortgage program called HARP just released in November.
Bankruptcy Serves as a Surgical Tool to End Financial Bleeding
After being involved in one of the most intriguing conversations on finance, Bankruptcy Attorney, Rick Abelmann, shed some light on the subject. He believes that bankruptcy is designed as a financial surgical tool that is aimed at giving second chances to those who are bleeding from a cancerous illness. I have seen that illness snowball into bills piling sky high and homes taken right from under people by mortgage lien holders. Meantime, their interest rates continue to rise due to late payments and their inability to pay creditors. If you are at this point, seek professional help and relief.
Abelmann talked numbers and chapters with me that we only hear about in the daily news, such as 7, 11, 13, and 20. What I got out of the enlightening financial session is that contrary to what I was taught as a child, bankruptcy is aimed at helping those who can no longer help themselves, providing they have gone through all their ethical and moral obligations.
Personal Bankruptcy is equivalent to major surgery. You don’t want to go under the knife for open heart surgery if you are only suffering from heartburn. In other words, don’t file for bankruptcy unless you have been diagnosed with a deadly financial disease that is affecting your relationships, self-esteem, ability to fight foreclosure proceedings, about to lose your home due to an acceleration clause on your note, or you no longer have food or money and you are now in survival mode.
So many in this market take advantage by running up their credit bills knowing that they can clean things up with a bankruptcy. But, there are also those who are suffering legitimately with upside mortgages after years of diligence and dedication to their work places. The world economy is out of your control and you are not to blame.
How Do You Know if and When it is Right to File Bankruptcy? Is it Ethical to Do So?
I once had a co-anchor at KGMB-9 News tell me that people who file for bankruptcy are unethical. I agree that some financial or real estate gurus who take advantage of this financial management tool have abused the system because they deliberately run up their bills before going bankrupt, but there are genuine hard-working people who have lost their jobs, families, or are undergoing serious illnesses, therefore, they are down on their luck. Others have gone through ALL their hard-earned savings, can’t find work and are truly destitute.
Personal bankruptcy is known as the debt management tool of last resort, it may be the only thing to do after you have depleted your finances and resources. However, if you decide bankruptcy is the way to go, you should do things properly and be educated on the subject. The following links may help you do just that.
Helpful Links When Filing For Bankruptcy
- Hib.uscourts.gov: Here you will find bankruptcy forms, local rules, and district guidelines, opinions, and reference materials. You can browse the internet and look for bankruptcy attorneys. However, through my research, I found that this firm had no hidden fees and takes the time to explain the different chapters for FREE. His clients say there are no hidden costs either when they decided to file. The most reasonable fees that I have heard of.
- TotalBankruptcy.com: This Website explains Chapter 13 and how to prevent foreclosure, and helps those who are behind on payments.
- ConsumerAffairs.com: Consumer Affairs has a great article on the pros and cons of bankruptcy.
- Greenpath.com and Abacuscc.com: are websites you can go to for online credit counseling. Before filing, you need to present your attorney with a credit counseling certificate.
If all else fails, you may need a Realtor to help you short sale your home. Sometimes, the banks take years before they foreclose on a home, and you may need a good attorney to negotiate a prepayment plan and an experienced short sale Realtor to assist in selling your home.
Contact me if you need a free analysis of your home, I would be happy to help.