Bankruptcy: Should You Consider Filing When You Face Foreclosure?

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When a lender decides to foreclose on your property, where do you turn? Filing for bankruptcy may not seem like the obvious answer, but it might be a viable solution in some cases. Here’s how these concepts all add up under Wisconsin law.

Foreclosure Fundamentals

Foreclosure is when you are behind in mortgage payments and a bank, loan servicer or other lending institution decides it’s going to seize your property. Thanks to the lending contract you signed, they have the right to grab your home, office or other asset and sell it for the cash.

Of course, there are some limits to this power. Banks usually only foreclose when you’ve missed three (3) payments or more. If it looks like you’re not going to pay, then the lender will want to cut its losses.

Bankruptcy As a Self-defense Mechanism

The glaring problem with foreclosure actions is that they don’t always leave consumers with room for error. Lenders can be quite aggressive about recovering their losses and fail to consider the human impacts.

Bankruptcy is an effective last line of defense because it instantly implements an automatic stay. This puts a halt to creditor actions such as

What Happens Next?

After a bankruptcy filing, the automatic stay will remain active until the case wraps up in a few months. Life doesn’t always play out so perfectly, however. If a lender files a motion to lift, or cancel, the automatic stay, then your breather might be cut short.

Are creditors trying to make things tougher? The lender just wants to get its money back because you are behind in mortgage payments. Reducing the length of the stay makes it possible to sell your property earlier.

Upholding the Automatic Stay

Fortunately, you can fight back. When lenders try to get stays canceled, they typically make the argument that they’re losing money. You might counter by

  • Showing that a mortgage’s equity, or property value minus lien balance, is high enough to cover the lender’s losses, or
  • Providing the lender with court-approved adequate protection, such as interest-only cash payments, during the case.

Making a Smart Choice

When lenders foreclose, families can lose their homes and the lifestyles they’re used to. Professionals might have to give up the vehicles that are critical to their careers.

Foreclosure cases can be tricky to predict. Bankruptcy may let consumers divert bad situations toward better outcomes. It doesn’t stop the foreclosure forever, but if you’re behind in mortgage payments, putting things on hold could help you get back to a state of financial balance.

Want to learn more about how bankruptcy types like Chapter 7 and Chapter 13 might help you push back and even stop foreclosure until you regain your footing? Talk to bankruptcy attorney Michael Burr at the Burr Law Office.

Home Foreclosure Bankruptcy Attorney

Can I Buy a House After Bankruptcy?

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How Will Bankruptcy Change Your Life? 7 Ways . . .

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Filing for bankruptcy is a major decision. The circumstances that lead to the decision are usually not very pleasant either. Whether it’s the loss of a job, a major medical procedure, or simply overspending, overwhelming debt can be a major stressor on you and your family. And once you’ve filed for bankruptcy, your life will change. Here are seven ways that bankruptcy will change your life, and what you can expect.

Waukesha bankruptcy attorneyWhile the final outcome of filing for Chapter 7 or Chapter 13 is intended to be positive, there are negatives that come with it. If you decide to file, here’s the bad news that you can expect:

The Bad

  1. Credit Score
    According to Experian, one of the major crediting companies in the U.S., filing for bankruptcy drops credit scores by an average of 80 points. However, it could be much more depending on your specific situation. This reduction in credit rating leads to less trust from future creditors, which ultimately leads to you paying higher interest rates and fees. The bankruptcy will also remain on your credit report for 7-10 years. However, all is not lost. With a newfound emphasis on paying your bills on time, you may be able to establish a more favorable credit rating in as little as two years.
  2. Credit Cards
    Milwaukee bankruptcy no credit cardsYou may be wondering, how or why you’d get a credit card after bankruptcy. As for how, once you file for bankruptcy there’s a good chance you’ll receive new offers for credit cards. While it may seem odd that credit card companies offer credit to people who’ve previously filed for bankruptcy, there are actually creditors who target this high-risk pool. Why? Because they charge higher interest rates and fees, and with these higher fees it’s profitable for them.While the higher rates can seem overwhelming, the opportunity to reestablish your credit rating is actually a plus. If you’re able to consistently pay off your credit card bill each month, it can help improve your credit rating. However, the last thing you want to do is get caught up in more debt. But if you have the money and commitment to paying your bills in full each month, this can be a good option.
  3. Housing
    Once again, we’re going back to your credit rating… Once you’ve filed for bankruptcy, and your credit rating has taken a hit, it can be difficult to find housing. Simply put, you’re seen as a higher risk. So whether you’re trying to rent a new apartment, or applying for a mortgage to buy a new home, expect that you’ll pay higher fees. That may be in the way of a higher interest rate for a new home loan, or a larger deposit for a rental. Yes this is annoying, but it’s important to understand that creditors are merely trying to protect themselves against potentially not being paid.
  4. Employment
    It’s true that it is illegal for employers to ask you about your credit during an interview. However, employers can legally run a background and credit check on you. This may not be an issue in some industries, but in others, such as the financial services industry, it’s common practice. If you are subject to a credit check, and you sign a release letting a prospective employer review your credit, your prior bankruptcy and lower credit score may make it difficult to land the position. Right or wrong, some employers view low credit as a sign that you’re not very responsible.

This may all sound overwhelming. But now that we’ve got the negatives out of the way, let’s look at how bankruptcy can have a positive impact on you and your family.

The Good

  1. Debt eliminated and stress reduced
    No longer having to carry burdensome debt is a huge relief. Over the years we’ve had clients tell us that after their debt was eliminated, they slept better, were less anxious, were happier, and their family life improved. And despite some the aforementioned downsides of bankruptcy, life following bankruptcy was significantly better. With both Chapter 7 and Chapter 13 bankruptcy, your unsecured debt will be discharged. This includes credit cards, car payments, and medical bills. (However, it does not include some debt, such as alimony, child support, and student loans.)
  2. No more collection calls or lawsuits
    Milwaukee bankruptcy don'tsConstant calls from collection agencies can be extremely stressful. If you’ve ever received these calls, you may have noticed that the collection agents can be very harsh, and even threatening. And the longer you owe creditors, the longer the calls go on for.However, the good news is that once you file for bankruptcy, creditors are no longer legally allowed to make such calls. In addition, creditors are no longer able to sue you, or repossess your possessions.
  3. No one has to know
    Many of our clients come to us with lots of embarrassment about their financial situations. And yes, in some instances, this may be justified. We won’t sugarcoat it. But in many cases, especially in cases involving medical bills and job loss, there’s no reason to be embarrassed. Life happens. Still, most of our clients are concerned about privacy. They don’t want people they know to find out about their bankruptcy.The good news is that your finances are your business. Your family, friends, and co-workers don’t need to find out. You can keep it private. The only time your bankruptcy filing would come out would be if you file for a new loan or credit line.

So there you have it, the good and the bad of filing for bankruptcy. Just remember, bankruptcy isn’t forever. After 7-10 years it’s wiped from your record. If you pay your bills on time following your bankruptcy, you’ll be well on your way to reestablishing your credit.  And in the meantime, you’ll get a fresh start financially and, in all likelihood, be much happier once you file bankruptcy, stop the credit harassment, and have a clean slate for you and your family.

And of course, if you live in the Milwaukee / Waukesha area, and need someone to talk to regarding your financial situation, don’t hesitate to give Burr Law Office a call at (262) 827-0375.

When Do I Need to Begin Worrying About Property Repossession?

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If you’re experiencing financial difficulties, you may have stopped making payments on secured debts like cars or electronics. The consequence of this action is commonly called repossession. Because you have defaulted on the loan, you are no longer entitled to keep your car, home, or other item. Repossession of a home is usually called foreclosure, and it works differently than repossession of cars or electronics.

Understanding Repossession

As soon as you miss a payment, your lender can repossess your car or other possession. However, many lenders wait until you have missed two or three payments before repossessing your item simply because the process is expensive and time-consuming. You will receive one or more notices of missed payments, notifying you that you are in danger of repossession. At this point, you usually have the option of making up missed payments and keeping your property. If you fail to do so, you can expect repossession.

After Repossession

Your property will be sold at an auction. You will be notified of the date and time of this sale, so you can attend and buy back your property, if you choose. To do this, you must pay the balance of the loan and the costs of repossession. If the property sells for less than its fair market value, the lender may pursue a deficiency judgment and force you to pay the difference between the sale price and the fair market value. Though this is possible, it doesn’t usually happen.

If you’ve missed payments on a car, electronic equipment, or other valuable item, you could be in danger of repossession. In some situations, declaring bankruptcy may be a good strategy for stopping the process. To learn more, call (262) 827-0375 to schedule a consultation with a Milwaukee bankruptcy attorney at Burr Law Office.