What you need to know about debt and what you can do about it.
Too many of our clients have a common problem. Their house is not worth what they borrowed on it, their income for various reasons has decreased, and they owe too much money and their debt levels are increasing daily.
Lets start with understand debt and your home.When you bought your home, you probably took out a mortgage. Whatever you came up with in cash at the time of closing was the equity you put into the house, and the balance of the purchase price was borrowed money. A mortgage is the security given to the bank to protect the money they lent on the house. If you fail to pay the mortgage, the lender can foreclose on their mortgage, and take the house from you by putting the house up for sale at a foreclosure sale. The lender bids the value of their mortgage, plus interest, and attorney fees and costs, and if anyone else outbids the lender, then the highest bid gets the title to the house; if no one else but the lender bids on the house then the lender gets the title on the house.
If the value of the house has fallen in value, the amount of the mortgage may be greater than the present value of the house. If this happened to you, then you are upside down in the house, which means that you owe more money on the house than what you can sell it for. Your equity in this case has eroded away to no value. The bank may also be upside down, which means that if the bank took the ownership of the house back via a foreclosure sale, and sold it, the bank would get less than what they lent on the house. It's a loosing deal for everyone involved. A short sale means that the bank is willing to sell the house for less than what they are owed on the house. If the bank agrees to do this, then one of two things can happen. The bank can continue to claim that you, as the borrower, stilI owe them the difference between what you borrowed and what they sold the house for, or the bank can simply walk away from the deficiency and forgive your indebtedness.
Your mortgage lender needs to make a business decisions whether or not they are willing to accept a short sale, take less on the house than what is owed. They also need to make a business decision on whether or not they will release you from the deficiency judgment.
In order for the bank to access whether or not they will accept a short sale, the bank needs to have all the present information on you, the borrower. They want to see what assets you have, what debt you have, what your living needs are, what your income is, and whether or not you have the ability to repay the loan, in part or in full. Think about it, why would a bank take a loss on a property it you have plenty of money in the bank to pay them back?
If you have an attorney represent you in the short sale, a huge part of the representation is the preparation of the documents shovving your financial situation. The bank wants to see your income tax statements, and all of your financial statements. They want to see everything about you. Attorneys are not normally great at putting together a financial package, so we use a trained accountant to do this for us. Attorneys are qualified at making an argument why the bank should take the offer that we want them to take, and the accountant that we use is an important part of the process to put together a package about you that is credible, and sellable.
The other key element of the short sale is the value put on the home. We use realtors that can create a credible argument as to what the present value of the house is, and this is the second aspect of the short sell package that needs to be done to get a short sale approved for you.
What if you want to keep the house and continue to live in it. In this case, then you need your attorney to make the best argument of the bank accepting a loan modification for you. Again, the accountant's package is used to argue what you can afford to pay. The Realtor is used to argue what the real value of the house is, because if the lender thinks that the house is worth greater than what you are willing to pay in a renegotiated mortgage, then the lender will simply want to get you out of the house and then sell the house.
What about your other debts. Debt settlement is when we again use the accountant's package to argue that you cannot afford to pay the credit card or other debt that you have, and convince the creditor to reduce the debt and take the reduced payment (called a debt settlement) over a period oftime (2-3 years normally).
It will take time to resolve your debts. Unfortunately, if you are not making your mortgage payments, then the foreclosure process will begin. This will then be a race between how fast the negotiations will take and when you loose the house at the foreclosure sale. Foreclosure defense is when we argue on your behalf in front of the foreclosure Judge why the lender should not get the house back. Even if we loose the argument, it takes additional time to hear the arguments which delays the court process. We will never make a frivolous argument, as this is not ethical and no proper attorney would ever do this. But reality is that there are almost always arguments that can and should be made on your behalf which provides you with all of your legal rights, and justice will be served, but it may take longer for your justice to be served than others who fail to make any legal defenses to the foreclosure.
Once you have resolved your debt crisis, you also need to try to begin the process of restoring your credit. We work closely with ethical credit restoration companies to eventually achieve the goal of re-establishing a higher credit rating for you. One of the biggest problems that so many people have is that they contracted with none attorney companies and paid large retainers for help; never got the help, and actually got into worse shape financially than before they hired these companies.
We believe that we should be paid on results. We also believe that you should have full knowledge of where your money is going, and we set up a tracking system with each of our clients so you will see every dollar that you place in escrow with us by logging into the account set up for you and allowing you to track every penny from day one.
We also have a package that only attorneys can offer you. We combine the foreclosure defense, the loan modification and/or Short sale negotiation, and the debt settlement into one package, as they belong together. We will work with your existing accountant, or we will refer you to our accountant to prepare your unique financial picture to present to the lender(s). We will work with your existing realtor, or we will refer you to a Realtor who we know will do the work necessary to assist us in getting the short sale approved, if applicable to your situation. Lets face reality; if you are going to loose the house in a foreclosure anyways, and if the bank refuses to re-negotiate your mortgage, then you need to try to get the short sale approved as it is for your benefit to do so.
We are not bankruptcy attorneys. However, we can refer you to a bankruptcy attorney if that is your only viable option. We do, however, contact your creditors and notify them that we are your attorneys, and that they have to now contact us regarding your debts. This will give you piece of mind that a professional is dealing with your creditors and you no longer have to take those nagging phone calls. We like to meet our clients face to face and discuss their situation vvith them. We do not charge you to meet with us. Just like you need to see if you want to hire us, we also need to meet you and see if we want you as our client. Our clients have to be frank and honest about their situation. We will invest our time in you, but you need to provide us with the information we need about you and your situation in order for us to be able to help you. If you have no income and no assets, then you need a bankruptcy attorney, as we cannot help you. But if you have income, and want to resolve your financial problems by legally reducing your debts and paying the resolved debts per the agreement that you enter into with your creditors, and eventually work your way back to financial soundness, then we have a lot to talk about and we look forward to hearing from you.
