We have done enough short sales to see our fair share of bankruptcies occur. There is an impact to a homeowner’s credit and their short sale if they file bankruptcy. Homeowners in need of filing need to speak to an experienced attorney if they are considering bankruptcy as an option to stall a foreclosure or capture their deficiency from a short sale. I would even suggest they find a bankruptcy attorney that also specializes in Real Estate.

Rapid Property Relief, LLC works with several experienced attorneys. When we meet with homeowners facing foreclosure or with mounting debt, we always refer our clients to attorney’s who we have worked with in the past or that we know see the value of a short sale as opposed to foreclosure.

I was granted the distinct opportunity to interview one of the attorneys we work with and refer homeowners to. Attorney Jessica Greenwood, from the Law Office of Todd Beauregard, spoke with me about the impact of bankruptcy on a homeowner’s short sale. My interview is now (audio clip) live on our site for any homeowner who wants more information about a Massachusetts or New Hampshire bankruptcy.

Let’s go over the highlights of the interview:

Rapid Property Relief – Which homeowners should be filing bankruptcy?
Attorney Jessica Greenwood – There are three types of homeowners that should file a bankruptcy:

The homeowner who can afford their mortgage, and are current on it but simply have a lot of credit card debt.
The homeowner, who can afford their mortgage, however fell behind due to an unforeseen circumstance but has since recovered. Filing a Chapter 13 Plan can help to cure an arrearage and help a homeowner stay in their home.
The homeowner who cannot afford to keep their home, they can file a Bankruptcy and surrender the home and be alleviated from the debt from the house.

Rapid Property Relief – Can you explain the difference between Chapter 7 and Chapter 13 for us?
Attorney Jessica Greenwood – In both cases it is necessary to determine income and asset protection levels,
this will help you structure your case and determine chapter.

Chapter 7: In order to file you must be below a median income that is defined state by state. Once you determine you are below a median income, you are able to list your assets, keep those which you are current on the payments and surrender those assets in which you decide you no longer wish to keep.
Chapter 13: A Chapter 13 case is a repayment plan of all or a part of the debt you owe. Unlike a 7, this requires some form of a payment plan. In this type of case, you can keep assets even if you are not current on the payment and provide for payment in the plan.

Rapid Property Relief – When would you tell a homeowner NOT to file bankruptcy?
Attorney Jessica Greenwood –

If a homeowner is in the middle of obtaining a loan modification, it is absolutely best NO to file until that is complete unless there is an emergency that would dictate otherwise.
If a homeowner has too much equity in their home or assets that the Bankruptcy Code does not provide protection for, it would not be advisable to file.
At times a homeowner has no other debt except for the home, and then I would not advise filing the Bankruptcy just to get rid of the home. I would suggest a short sale or a deed in lieu of foreclosure before the bankruptcy. Not all lenders are issuing deficiencies these days and it may be putting the cart before the horse by filing a Bankruptcy.
If the homeowner is attempting a short sale, and a foreclosure is impending then a Bankruptcy can stop the foreclosure and allow for more time for the short sale to go through
Chapter 7 Bankruptcy – once filed the bankruptcy cannot be voluntarily dismissed by the debtor.
—- i. By filing a complete petition before the foreclosure, requires the lender to abide by the Automatic Stay and postpone the foreclosure sale
Chapter 13 Bankruptcy – once filed the bankruptcy can be voluntarily dismissed by the debtor
—-i. Some Attorney’s will file a Chapter 13 to obtain the “automatic stay” for the debtor and allow the case to dismiss without a discharge
— ii. This is not advisable. (1) This is abuse of process of the system and the attorney and the debtor can suffer the consequences and (2) the debtor’s credit already has the ‘bankruptcy’ mark.

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If a debtor’s income is too high for a Chapter 7, and needs the bankruptcy protection to stop or delay a foreclosure, then a Chapter 13 Plan can be formulated to pay off any other unsecured debt while surrendering the home and allowing the short sale to move forward

Rapid Property Relief – When should a homeowner in Massachusetts or New Hampshire file bankruptcy in conjunction with a short sale?
Attorney Jessica Greenwood - Unless the bankruptcy is needed to post pone a foreclosure, it is best to file the bankruptcy after the short sale

Rapid Property Relief – How and Why does a bankruptcy affect a foreclosure auction?
Attorney Jessica Greenwood – Once a debtor files for Bankruptcy, whether 7 or 13, the debtor has the protection of the “Automatic Stay”. This provides a ‘shield’ against the creditors. The creditors cannot foreclose, repossess or collect on any debt until the Automatic stay is lifted or the case is closed. Because of this Stay, the bank cannot foreclose on a home while under the automatic stay and thus the sale is postponed until the lender foreclosing gets relief from stay or the case closes.

Rapid Property Relief – How fast can someone file bankruptcy if eligible and facing foreclosure?
Attorney Jessica Greenwood – Bankruptcy filing is electronic and can be done in a very short time period, however, in order to file a list of documentation is needed and to draft a full petition does take some time. If an extreme emergency, an attorney can file a ‘shell’ petition; however there is a very limited time frame to supplement the filing.

In order to be prepared for all scenarios, a homeowner should closely watch the impending foreclosure date, and if it appears that a bankruptcy is imminent to stop the foreclosure OR imminent due to a large deficiency or credit card balance, the homeowner should consult with an attorney two weeks prior to the foreclosure date. This time frame will lessen the stress of the homeowner and the attorney attempting to help the homeowner.

Rapid Property Relief – How does a bankruptcy affect a person’s credit?
Attorney Jessica Greenwood – Bankruptcy is a notation on your credit report for 8 – 10 years. Most creditors are giving new credit almost immediately after a bankruptcy, however car loans and home loans you will likely need to wait at least a year or two before obtaining good rates. The best way for a debtor to recover from bankruptcy on their credit is to get a secured credit card immediately after the case discharges, making sure the secured credit card reports to the credit bureau, and if the debtor has secured debt they are keeping, keep the payments on time.

Rapid Property Relief – Credit wise what’s worse; Bankruptcy and a short sale or bankruptcy and a foreclosure?
Attorney Jessica Greenwood – Again, Bankruptcy is a notation on your credit report for 8 – 10 years. If you wish to be a homeowner again in the near future, it is better to short sale than to foreclose. Although foreclosure is sometime inevitable, if you can short sale first, it looks better on your credit in the long run (especially to mortgage companies).

Rapid Property Relief – What process does a homeowner follow if they are in the midst of a short sale and want to file bankruptcy?
Attorney Jessica Greenwood – If you file a bankruptcy in the midst of a short sale, you need to work with your attorney to ask the Trustee to “abandon the asset” from the bankruptcy estate. When you file a bankruptcy, all your assets become assets of the bankruptcy estate. Let the Trustee know you are working on a short sale with your lender and more than likely the Trustee will ‘abandon’ the asset and allow the sale. The rest of the bankruptcy will proceed.

Rapid Property Relief – Can a homeowner file bankruptcy YEARS after completing a short sale if the lender has “reserved the right to pursue the deficiency?
Attorney Jessica Greenwood – Yes. There is not a statute of limitations on how old the debt will have to be to discharge it.

Rapid Property Relief – It seems like some attorneys could care less about short sales if the homeowner files bankruptcy. Why do you think that is?
Attorney Jessica Greenwood – I can’t speak for all attorneys, just what I have seen …Going through a short sale can be stressful to a homeowner who is probably dealing with other stressors. The attorney may feel it is easier for a homeowner to just file a bankruptcy and let the lender foreclose. I tell my clients that if they work with the right short sale negotiator and realtors then it should feel just as seamless as allowing the bank to take it back.

Rapid Property Relief – What is the difference between deficiency and deficiency judgment in short sales in NH and MA?
Attorney Jessica Greenwood – Both states: When you sign a promissory note, you promise to pay back the entire balance, plus cost to the lender. Thus when a foreclosure occurs, or at times a short sale, the lender loses money and has the right to pursue collection efforts.

New Hampshire: The last law on the books for NH collection of a debt due to a mortgage loss is 20 years. Now, it is highly unlikely that a lender collects 20 years later, there are defenses to this such as ‘Laches’, an undue delay on behalf of the creditor. Most often it is within 1-5 years.

Massachusetts: The claim on a mortgage note followed by foreclosure is 2 years, however if they sue on that debt within 2 years and obtain a judgment, then its swiftly preserved for 20 years

Rapid Property Relief – What is your thought on approvals with boilerplate language that states the lender reserves the right to pursue the deficiency?
Attorney Jessica Greenwood – Boiler plate is what it is, boiler plate. You probably are not going to get a lender to remove the preserving language. The best way to protect homeowners is to read the fine print and try to get language in the short sale approval letter that states “ABC Lender will not, under any circumstance, pursue homeowner for loss sustained due to the sale amount of XX”

Rapid Property Relief – If a homeowner is considering a bankruptcy to stall a foreclosure, or capture deficiency from a short sale, when would you tell them to contact you?
Attorney Jessica Greenwood – The sooner the better! If you are entertaining a bankruptcy, the homeowner should have a consultation with an attorney at the beginning of the short sale process. This way, the homeowner is armed with all the knowledge they need with regards to the short sale process, the bankruptcy process, and how, if they have to be, are tied together.

We at Rapid Property Relief specialize in preforeclosure acquisition. We have see our fair share of homeowners file bankruptcy. What I’d like to add to the above information is if a homeowner files bankruptcy before the short sale is complete, the “stay” will add at least 30-60 days onto your short sale, provided you are still allowed to proceed with the short sale and only an experienced attorney will be able to tell you that.

Again, feel free to download the audio file of my interview with Jessica. There was a lot more information in the audio file and I streamlined it for this blog. If you are a homeowner considering bankruptcy, Jessica practices in Massachusetts and New Hampshire and can easily assist you. Please contact her today at:

If you are considering a short sale, I’m more than happy to work with you. We utilize attorneys, accountants, Realtors, and work as a team to assist you in the process. We keep all homeowner information confidential and treat you with the utmost respect.

Do I need a lawyer to file bankruptcy? The short answer is “no.” But filing your own bankruptcy can be very costly. The penalties for making a mistake can be severe.

The main reason people choose to not hire an attorney for bankruptcy is to save money. That’s a lot like saving the cost of a map when you are somewhere you’ve never been before. You would be very lucky not to get lost along the way! In this article I am going to explain to you why you must have adequate legal representation in bankruptcy.

If you are thinking about filing bankruptcy you are probably thinking, how am I going to pay my attorney fees when I am already having trouble paying my bills? We will work with you and do our best to help you find a way to gather the money together to file for bankruptcy. When a person represents himself or herself in a legal matter it is called “proceeding pro se.” Frequently, I see debtors who think they know how to represent themselves in bankruptcy court, but that is generally not a good decision.

What Happens if I Make a Mistake on My Bankruptcy Petition?

It is inevitable that mistakes will be made. The consequences for not properly listing your assets or attempting to hide them can be much worse than the loss of your possessions. Fraudulent concealment or false statements are punishable under the law. The federal government investigates bankruptcy fraud and prosecution can lead to a 0,000 fine and/or 5 years in prison. While merely making a mistake will not typically result in jail or fines, the stress of fixing the mistakes and going through the process of having the United States Trustee haul you before a judge can feel worse.

In addition to possible fines or jail time, messing up your bankruptcy petition will likely lead to having your discharge denied, or revoked if a discharge has already been entered. The whole purpose of filing for bankruptcy is obtaining the discharge. Any money you perceive you are saving will pale in comparison to the costs you will incur while suffering from trying to file yourself. An attorney can help to avoid mistakes or fix mistakes if they are made.

How Will I Know If Bankruptcy Is The Only Option For Me?

Setting aside the issue of properly reporting information on your bankruptcy petition, there is still the issue of deciding if filing for bankruptcy is in your best interest. Many times people who think bankruptcy is their only option find that they have numerous other choices when they consult a bankruptcy attorney. The experience of a knowledgeable bankruptcy attorney can be priceless. Let the attorney quickly and efficiently advise you of all of your options.

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How Long Does It Take To Prepare A Bankruptcy Petition?

You also have to consider how much your own time is worth. In order to be fully informed you are going to have to research the bankruptcy process, rules, and regulations before starting your petition. Pro se litigants should be familiar with the United States Bankruptcy Code and the Federal Rules of Bankruptcy Procedure. Attorneys spend years learning the bankruptcy process. This is not something that can be learned in an evening.

It is crucial that you have the proper knowledge when approaching a bankruptcy case. Of course, there are many books that explain how the process works and how to prepare a bankruptcy petition. Any good book will be hundreds of pages long, but no single book will be totally inclusive. Yes, any American consumer can file their own bankruptcy petition. However, there are so many traps for the unwary that even attorneys who do not regularly practice bankruptcy often get their clients into hot water.

When Is The Time Right For Me To File Bankruptcy?

The first step in filing bankruptcy is determining when the petition should be filed. A debtor has the right to determine when the correct time is best to file. Tax refunds, asset preservation, and many other aspects of the success of your bankruptcy are all affected by when a bankruptcy petition is filed. Some clients want to file for Chapter 13 bankruptcy to save a home. The timing of a foreclosure and the timing of the bankruptcy can directly affect each other. It takes an experienced attorney in each area to resolve the conflicts created by each.

Timing may also affect whether the debtor passes the means test and thus qualifies for a Chapter 7 bankruptcy. Debtors are allowed to maximize their rights to the extent allowed by law, and filing the case at an opportune time is not an indication of bad faith, but an acceptable exercise of rights granted by the Code.

Many debtors do not realize that certain conduct which may have occurred years before filing can have a major impact on the success or failure of a bankruptcy. For example, giving away assets or transferring an interest in real estate can result in significant litigation in the bankruptcy case. Such matters are regularly reviewed by bankruptcy counsel before a bankruptcy petition is filed. There are many reasons why assets such as automobiles, stocks, and homes cannot be transferred before bankruptcy.

Who Is Going To Look At What I Prepare?

With the overhaul of the bankruptcy code in 2005 a new, more complicated means test was developed. The means test was created as a method of developing a uniform system of qualifying debtors for bankruptcy. Once your petition is complete it will be scrutinized by both the trustee and the office of United States Trustee to ensure everything is accurate, all of the requirements under law are met, and that you qualify for bankruptcy. Of all the people I have seen file for bankruptcy pro se, only three have completed the means test correctly. Ironically they still messed up their petition and had to pay an attorney to fix the mistakes.

In every bankruptcy case, the debtor must appear before a bankruptcy trustee at a 341 meeting. The essential purpose of the trustee is to investigate the debtor and determine if there are any assets that can be taken for the benefit of creditors. The type of exemptions you can use and the amount of each exemption can be complicated and vary from state to state. If it’s not done correctly, the debtor faces losing property that otherwise might not have been lost. A well seasoned bankruptcy attorney will know how to take the steps so that you avoid any complications or embarrassing situations at your 341 meeting with the trustee.

In conclusion, you may make the choice to file for bankruptcy on your own to save attorney’s fees only to learn that you’ve made a mistake that will cost thousands of dollars more than the attorney would have. Pennywise, in other words, can end up being pound foolish. A completed bankruptcy petition is anywhere from 30-50 pages long or longer. Although it is written in plain English it can be very overwhelming, especially for somebody who has never seen one before. The petition requires numerous schedules, budgets, and proper debt and asset information be listed.

Think of your bankruptcy attorney as investing in a GPS system that will guide you step by step. Contact a bankruptcy attorney in your area for a consultation so that an he or she can show you how the bankruptcy process can help you get a fresh start.

More Bankruptcy Articles

If I file Chapter 7 bankruptcy, how long until I can get a new credit card? Is it wise to get a card as soon as I can after my case is discharged? In this video, Memphis bankruptcy attorney Darrell Castle discusses getting a new credit card after a Chapter 7 bankruptcy. For more information, visit darrellcastle.com

financiallawgroup.com The Financial Law Group is located in Warren, Michigan in Macomb County. The Financial Law Group provides Chapter 7, Chapter 13 and Chapter 11 Bankruptcy services throughout Macomb County, Oakland County, St. Clair County and Wayne County and across Southeast Michigan.
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Is Bankruptcy Right fpr you?

Chapter 7 bankruptcy and Chapter 13 bankruptcy offer different forms of protection. If you’re facing a financial crisis, a local bankruptcy attorney can help you determine whether Chapter 7 bankruptcy or Chapter 13 bankruptcy might be the right answer for you.

Generally speaking, Chapter 7 bankruptcy is intended to wipe the slate clean by discharging unsecured debt—debts like credit card debt, medical bills, and unsecured loans. Chapter 13 bankruptcy, on the other hand, is intended to give a debtor time to catch up past due payments over a period of 3-5 years, while keeping secured property like houses and cars.

What is Bankruptcy?

There are two types of consumer bankruptcy. Each is intended to help consumers in financial crisis, but the solutions offered are very different.

Chapter 7 bankruptcy, or liquidation, is more common. A Chapter 7 bankruptcy may eliminate a lot of unsecured debt (credit cards, medical bills, old utility bills, unsecured personal loans, etc.), and can generally be completed within just a few months. In a Chapter 7 bankruptcy case, the trustee can liquidate (sell) non-exempt assets to pay creditors, but most people who file for Chapter 7 bankruptcy don’t have any non-exempt assets, and so are able to keep their property while eliminating unsecured debts.

Chapter 13 bankruptcy is often the solution of choice for people who have a lot of secured debt, such as car loans and mortgages, and want to keep the property that serves as security for the loans. In a Chapter 13 case, the debtor enters into a repayment plan that allows 3-5 years to catch up on past due payments.

New Rules
Since the bankruptcy law change in 2005, there have been a lot of misunderstandings about bankruptcy. For instance, many people have been led to believe that almost no one can file for Chapter 7 bankruptcy anymore. That’s simply not true. Although the new bankruptcy law that took effect in October, 2005 added some hoops for debtors to jump through, consumer bankruptcy attorneys and credit counseling agencies have found from the beginning that the Chapter 7 means test actually prevents very few debtors from filing under Chapter 7. In fact, some credit counseling agencies have said that by the time most debtors come to them for the newly-required pre-filing credit counseling, they have no other realistic option! The safety net of bankruptcy is still available to most consumers in financial crisis.

What is Total Bankruptcy?

Total Bankruptcy is sponsored by participating consumer bankruptcy attorneys from across the country, and provides hundreds of pages of free consumer bankruptcy information, articles, blog posts, and other resources on its website at www.TotalBankruptcy.com. Total Bankruptcy’s President, Kevin Chern, is the former managing partner of the largest consumer bankruptcy law firm in the United States, and has personally filed thousands of consumer bankruptcy cases.

Although Total Bankruptcy provides extensive free information about Chapter 7 and Chapter 13 bankruptcy and regular updates on bankruptcy news and developments, many consumers need help understanding how the bankruptcy laws apply in their particular circumstances and making good decisions about their next steps. A consumer bankruptcy attorney may be the best source of that information, so Total Bankruptcy makes it easy for consumers by scheduling free, no-obligation calls with local bankruptcy attorneys.

www.TotalBankruptcy.com