Homeowners fall behind with their mortgage payments for many reasons; unemployment, medical issues, divorce or separation, a death in the family or even property damage as a result of Hurricane Sandy. Whatever the reason, if a homeowner falls too far behind with their mortgage payments, their lender will commence a foreclosure action. The purpose of this action is to get the court’s permission to sell the property at a public auction. Once this takes place, the new owner of the home, usually the lender itself will forcible evict all occupants from the home. The most effective way to prevent this is to negotiate a mortgage modification agreement with the lender so the homeowner is no longer behind and keep their home.
Before retaining us, many of our clients had been trying to modify their mortgage loans for months and sometimes years. Some of them even paid various out of state ‘modification companies’ thousands of dollars to help. When we checked with the lenders, we usually found that other than sending the lender an authorization letter, these modification companies did absolutely nothing. Other homeowners attempted the modification procedure themselves; however, many of them found that their lenders were unresponsive, denied that it received paperwork that the homeowners had sent them, lost documents that they sent them and when they called the lender, either placed the homeowners on hold forever or sent them to a different person each time they called, each representative telling them something different from the last.
At Michael A. Kinzer, Attorney at Law, our goal is to prevent this from happening. Specifically, we intervene on the homeowners’ behalf and work with the lender to modify the mortgage loan to lower the interest rate and place the missed payments at the back end of the loan and/or spread them over the life of the loan. We can even possibly reduce the balance of the loan to the fair market value of the property. We are experts in preparing the paperwork the lenders need in order to approve a modification, the diverse programs our clients may be eligible for and the various formulas lenders use in order to approve or deny a mortgage modification application.
If you live in either Nassau or Suffolk Counties and have received legal papers to foreclose against your home or even if you are just behind with your mortgage payments, please give us a call to set up a free in person consultation regarding your situation.
The information on this website is not intended as legal advice and no attorney client privilege exists as a result.
CHAPTER 7 BANKRUPTCY
Most people who are interested in filing bankruptcy are looking to file a Chapter 7. That’s because it’s the easiest, quickest and least expensive, in terms of attorney fees, form of bankruptcy and usually accomplishes all or most of what they are trying to do by filing bankruptcy, specifically, get rid of debt as quickly and easily as possible. A Chapter 7 bankruptcy starts with the filing a petition with the Bankruptcy Court. This petition should implicitly state that all or most of the petitioners’ monthly income is consumed by their monthly living expenses. More specifically, after rent (or mortgage), food, clothing, utilities, car payments, insurance and any and all other normal and necessary monthly expenses of living are paid, there is little or nothing left. The petition also will show that the petitioners have significant debt, whether they are in the form of or any combination of credit cards, medical bills, personal loans or any other type of debt. Because there is little or no income to pay this debt after the petitioners pay their regular monthly expenses, the petitioners are unable to pay this debt. As a result, they are filing the Chapter 7 in order to eliminate the debt.
In order to be eligible to file a Chapter 7, the petitioners must pass something called the ‘means test’. This is a test to see if the petitioners actually should have any money left over at the end of the month after their bills are paid. The ‘means test’ involves a complicated formula and is made up of 2 parts. If the petitioners pass either part, they are eligible to file a Chapter 7. These tests are based upon certain expenses that are particular to the petitioners and other expenses which are pre-determined for the petitioners depending upon their family size and the state and county in which they reside. The tests are also based upon the petitioners’ income over the past six months. For instance, if the petitioners are trying to determine if they are eligible to file in July, their income from January through June is used to make this determination. As such, if income and certain expenses change from one month to the next, the numbers to determine eligibility change with them So if the petitioners are not eligible to file in one month, they may be eligible to file in the next month and visa-versa.
Once we have determined that the petitioners are eligible to file a Chapter 7, we must determine if the petitioners will lose or are likely to lose some assets if they file a Chapter 7. This is because in consideration for filing a Chapter 7, the court appoints a ‘Chapter 7 trustee’ who has the right to take from the petitioners and sell certain assets belonging to the petitioners. These assets are called ‘non-exempt” because under law, the petitioners have the right to exempt or prevent certain assets from being taken by the Chapter 7 trustee. As a result, in order to determine whether or petitioners would lose or potentially lose any assets, we would have to carefully go through their assets and their respective values.
If the petitioners pass the means test and we conclude that they are not likely to lose any significant assets, they are prime candidates to file a Chapter 7. If you are interested in filing a Chapter 7, please give Michael A. Kinzer, LLC a call at 631-321-4444 to make a free, no obligation appointment at our Farmingdale, NY office on Route 110 just north of the Southern State Parkway.
CHAPTER 13 BANKRUPTCY
ABOUT CHAPTER 13 BANKRUPTCY
Chapter 13 bankruptcy is the opposite of Chapter 7 bankruptcy. In Chapter 7, individuals who file for bankruptcy (called “bankruptcy petitioners”) risk losing certain property, while in Chapter 13, there is absolutely no risk that they will lose any property. However, unlike in Chapter 7, Chapter 13 bankruptcy petitioners will have to submit a plan to the court that will require them to make monthly payments for the next 3 to 5 years in order to pay back a percentage of the debt they owe. All payments are made directly by the petitioners to a court appointed Chapter 13 trustee who in turn, after taking a commission, will make payments to these creditors.
In most circumstances, it is preferable to file Chapter 7 rather than Chapter 13 as Chapter 7 does not require monthly payments to the trustee. It also requires less work on the part of the attorney and as such, the legal fees are lower. Additionally, Chapter 7 petitioners will receive their discharge in approximately 3 months after they file while Chapter 13 petitioners will have to wait until their entire plan payments are paid, typically 3 to 5 years. As individuals can only start re-building their credit once they receive a discharge, it will take a Chapter 13 petitioner significantly longer to re-build their credit as compared with a Chapter 7 petitioner.
However, there are several instances where it is preferable or necessary to file a Chapter 13 rather than a Chapter 7.
First, when the petitioners do not qualify to file a Chapter 7 as their income is too high to qualify for Chapter 7 and it is unlikely we will be able to show lower income or increased expenses that will offset this income in the near future.
Second, the petitioners have significant property that they are likely to lose if they file for Chapter 7.
Third, a Chapter 13, unlike a Chapter 7, can be used to stop foreclosure actions. Once a Chapter 13 is filed, the foreclosure action is suspended and the mortgage lender is required to accept monthly mortgage payments again. The petitioner will then make monthly payments to the Chapter 13 trustee, who will in turn pay the lender the arrears it is owed. The monthly trustee payments have to be large enough so they pay the mortgage lender all of their missed payments over a maximum of 5 years. Once the plan is paid in full, the Chapter 13 petitioners receive their discharge and the foreclosure action is ended. However, if the petitioners do not have sufficient income to make these payments to both the Chapter 13 trustee and the mortgage company, they can file a Chapter 13 petition, commence making reasonable mortgage payments to the Chapter 13 trustee and negotiate within the framework of the Chapter 13 to modify the mortgage.
Fourth, individuals can only receive a Chapter 7 bankruptcy discharge every 8 years. As a result, if the petitioners already received a discharge in the last 8 years, they will not be able to receive another one. However, there are many times it is necessary to file a bankruptcy to protect against wage garnishment or preventing bank accounts from being frozen. Monthly plan payment individuals are required to make to the Chapter 13 trustee are usually significantly less than the payments that would be taken from their paycheck through a wage garnishment.
If you are interested in filing for or learning more about Chapter 13 bankruptcy, please give attorney Michael Kinzer a call at 631-321-4444 to make a free, no obligation appointment at our Farmingdale, NY office on Route 110 just north of the Southern State Parkway.