According to an article in the Star-Telegram, Fannie Mae is offering homeowners facing foreclosure the option of leasing their home instead of going through the foreclosure process.

The article said:

“The government-controlled company, through its new “Deed for Lease” program, will allow borrowers to transfer ownership to Fannie Mae and sign a one-year lease, with month-to-month extensions after that.”

Homeowners who want to rent instead of own must provide proof that they can pay the rent; but they won’t get a lease longer than a year. And just in case you don’t understand the “benefits” of this “wonderful” program, Fannie Mae Vice President offers these words, ” The program will eliminate some of the uncertainty of foreclosure, keeps families and tenants in their homes during a transitional period, and helps to stabilize neighborhoods and communities.”

Oh really?  So let’s see…homeowners facing foreclosure are supposed to just hand over their properties to Fannie Mae without a fight.  After paying thousands of dollars in upfront costs and tens of thousands over the years they paid a mortgage, now they’re suppose to just become renters?  Gives us a break!  The truth of the matter is that Fannie Mae’s balance sheet is riddled with foreclosures and Fannie Mae knows that going through the foreclosure process on thousands of homes will cost them tons of money.  They don’t want to do that. What they prefer is that homeowners simply sign over their homes to them and become renters in what they once owned.  Don’t fall for it.  Don’t allow Fannie Mae to play your emotions and manipulate you into handing over your home. You can keep your home and gain leverage to negotiate the terms of repayment using bankruptcy.  Lenders know that bankruptcy is a powerful tool so they are coming up with all types of games to steal homes without facing bankruptcy or even a foreclosure process. Before accepting any “deed for lease” program or other ridiculous versions of it, consider all of your options, especially bankruptcy.

Have you noticed the commercial centers near you growing a little quieter lately?  If so, you’re not alone.  Commercial real estate nationwide has taken a beating that has many experts fearing the worse.  Vacancy rates have soared while rents have hit rock bottom. And many property owners are struggling to avoid foreclosure. Some have even filed for bankruptcy.  According to the report Emerging Trends in Real Estate, which was released to Reuters, the commercial real estate market is looking at its darkest days in 2010.

The article said:

“Commercial real estate values will fall 40 percent, on average, from their peaks in mid-2007, and up to 50 percent in some sectors, according to the 2010 edition of Emerging Trends in Real Estate…It will be the worst commercial real estate decline since the Great Depression, eclipsing the 1990s savings-and-loan crisis, according to the report.”

Retail and office commercial real estate will be hit hardest as job losses continue and consumers grow more cautious.  For those commercial real estate investors who bought at the top of the boom, foreclosure and even bankruptcy is likely. A matter of fact we may even see a foreclosure crisis in the commercial real estate sector that mirrors or even dwarfs the residential foreclosure crisis.

According to an article in Bloomberg, more Americans filed bankruptcy in October than in any month since changes to the U.S. bankruptcy code were put in place in 2005.  In the month of October alone, bankruptcy fillings for individuals rose 25 percent from a year earlier to 131,200 filings.  And since January 2009, there have been more than 1.2 million bankruptcy filings, surpassing the 1.1 million bankruptcy filings for 2008. That number is expected to grow.

The article said:

“The American Bankruptcy Institute estimates personal filings will reach 1.4 million by the end of the year. That would still be less the record 2.1 million bankruptcies in 2005, when 630,000 Americans filed in the two weeks before bankruptcy law revisions made it more difficult discharge debt.”

The high number of bankruptcy filings is being fueled by more job losses and record high unemployment nationwide. And another factor often not mentioned is the increased number of business bankruptcies that are creating a domino effect in the marketplace.  Many businesses who file bankruptcy implement huge job losses before and after their bankruptcy filing just to survive. Those unemployed workers are finding it difficult to secure comparable work in time enough to avoid exhausting their savings and defaulting on their credit. Eventually they are forced to file bankruptcy to get a fresh start.

Most debtors considering bankruptcy hope that they will qualify for Chapter 7 bankruptcy; but if they don’t they can become very disappointed. If you are unable to qualify for Chapter 7 bankruptcy, don’t despair. Although discharging all of your debt in Chapter 7 bankruptcy has it benefits, Chapter 13 bankruptcy also offers its own set of excellent benefits for debtors:

1. Chapter 13 bankruptcy will allow debtors to make reduced payments which can amount to a much lower percentage of what they pay now.
2. Chapter 13 bankruptcy still offers automatic stay protection, which stops creditors from taking collection actions against you while you’re in bankruptcy.
3. Chapter 13 bankruptcy simplifies repayment of debts by allowing the debtor to make one easy payment which will be distributed to creditors.
4. Chapter 13 bankruptcy allows debtors an opportunity to repay delinquent debt over a 3 to 5 year period, free from creditor harassment and threats.
5. Chapter 13 bankruptcy only remains on your credit for 7 years.

The Star-Telegram has announced a free foreclosure prevention workshop.

Date: Saturday, November 7, 2009.

Time: 9am – 2pm

Location: Dallas Convention Center, 650 S. Griffin St.

The workshop is designed to help homeowners facing foreclosure discover their options for preventing foreclosure.  Homeowners will also have an opportunity to meet with their mortgage servicing company and/or a housing counselor to discuss their situation. The workshop is sponsored by the Hope Now Alliance, the Obama administration’s Making Home Affordable Program, NeighborWorks America and the city of Dallas.

BEWARE: Some foreclosure prevention workshops may not present you with all of the facts. Make sure that you get information from several, unrelated sources before making your decision about what to do about your foreclosure. Also note that some foreclosure prevention specialists may not mention all of your options, especially your bankruptcy option.  Bankruptcy stops foreclosure immediately, gives the borrower more leverage when negotiating with lenders; and it doesn’t increase the profits of mortgage lenders and servicers. So there isn’t much motivation for them to mention your bankruptcy options.

After filing Chapter 11 bankruptcy on Sunday, CIT Group is hoping that it will fair better than previous financial companies who have filed bankruptcy.  According to an article in the Star-Telegram, most financial companies who file for bankruptcy are usually liquidated or sold.

The article said:

“But the real test will come from CIT customers, who could decide to take their business elsewhere… Just as a bank would fail if all of its depositors tried to get money out at the same time, CIT wouldn’t be able to survive if too many of its customers close their accounts. Some have already been pulling their business in recent months as CIT struggled for survival, but it’s still too early to know how many will remain.”

CIT Group has several factors working to its benefit, 1) Chapter 11 bankruptcy will allow the company to reduce its debt while continuing to operate normally, 2) if CIT Group’s bankruptcy plan is approved it could eliminate $10 billion in debt and 3) due to a difficult lending environment, its customers may not have many other options when it comes to securing credit.  Also, CIT Group provides certain types of financing this difficult to get elsewhere. But despite what happens one thing is for sure, once CIT Group emerges from bankruptcy they will be a much smaller company.

Do you have a secured loan with a co-signer? When you file Chapter 13 bankruptcy there are a few ways that you can minimize or even eliminate future creditor actions against your non-filing co-signer. Here are your options:

1. You can return the property to the lender. For example, if you and a co-signer have a loan on a vehicle, you can surrender the vehicle to the creditor during bankruptcy. But beware; if the creditor is unable to recoup the full amount of the loan, they may go after your co-signer for the balance. If you choose this option, do your research to determine how much of a loan balance you will have after the property is sold.
2. Your bankruptcy plan could provide for payment in full for the creditor which would protect your co-signer from future collection actions. You can even request that the loan with a co-signer is given a larger portion of your monthly payment. It’s not guaranteed that the request will be granted; but it is a possible option.
3. Modify the loan in bankruptcy. You may be able to change the terms of repayment to the lender. For example, maybe you will pay only the principal on the loan plus part of the interest. But once again, if you do this, the lender may still go after the co-signer for the balance.

Before filing for bankruptcy, it may be wise to discuss with your co-signer the possible impact on their finances.

According to an article in the Business Journal, Super 88 LLC, an operator of Asian supermarkets filed for Chapter 11 bankruptcy on Monday after a deal to sell the chain was derailed by two other parties claiming to have deals to buy individual stores. Because the deal to sale the company did not go forward, the owners of the supermarket chain felt compelled to file bankruptcy so they could protect their assets from over 200 creditors.

The article said:

“In documents submitted before the U.S. Bankruptcy Court District of Massachusetts, the company said it had between $10 million and $50 million in financial liabilities with roughly 200 creditors. Its assets are valued between $1 million and $10 million.”

The bankruptcy will put a stop to collection actions by Super 88’s creditors which will give the potential buyers and the owners an opportunity to settle their disputes in court.  Creditors will most likely receive a portion of the proceeds of any sale. But how much will need to be determined by the bankruptcy court. If Super 88’s liabilities are up to $50 million and they only have assets of $10 million max, the money from the sale of the company may be the best chance that the creditors have a getting repaid.

When debtors consider filing bankruptcy, they need to make sure that they plan carefully and work with a qualified bankruptcy attorney to make sure they are doing everything within the law.

Here’s what you should do to prepare for your bankruptcy:

1. Gather all of your financial documents. That includes pay stubs, creditor bills, bank account statements and any other financial records requested by your bankruptcy attorney.
2. Stop using your credit cards. A matter of fact, you need to stop using your credit cards or other credit lines as soon as you decide that you are going to attempt to discharge them in bankruptcy.  If you use your credit cards right before filing bankruptcy you may not be able to discharge that debt in bankruptcy.
3. Maximize your exemptions. Exemptions are assets that cannot be seized by creditors during a bankruptcy or sold by the bankruptcy trustee. Work with your bankruptcy attorney to discover your exemptions. Texas has a generous amount of exemptions for debtors who file bankruptcy and it is completely legal to protect your assets using bankruptcy exemptions as along as there is no intention to defraud creditors or manipulate the bankruptcy system. Once again, work closely with your bankruptcy attorney to make sure you’re operating within the law

According to an article in the Dallas Morning News, the Commerce Department reported that new home sales have dropped in September by 3.6 percent.  Some analysts expect that the drop off in sales is a result of potential homebuyers delaying their decision to buy a home due to the expiring tax credit which will end November 30, 2009.

The article said:

“It has been taking longer to close a transaction this year because it’s taking longer to get approved for a mortgage and to have a property appraised. Those time lags could make buyers nervous they won’t be able to complete the deal before the Nov. 30 deadline to take advantage of a tax credit of up to $8,000 for first-time buyers.”

In an effort to combat the effects of rising foreclosures, legislators are now considering extending the homebuyer tax credit through March 31 and then gradually phasing out the program over the year. Many critics call the tax credit unnecessary and ineffective in counteracting the effects of the foreclosure crisis.  The truth of the matter is that potential homebuyers are motivated to buy because the tax credit is seen as “free money.”  Homeowners facing foreclosure like the tax credit because it puts more potential buyers on the market.  And the mortgage industry likes the tax credit because they now have a “cash fat” market to unload a backlog of foreclosure onto. But will this tax credit really combat the foreclosure crisis in the long-run?  Probably not.  Many homeowners are buying homes using the tax credit, but if they are not financially stable they may eventually end up in foreclosure too. As we develop programs to encourage Americans to buy homes we need to make sure that those programs don’t become responsible for the next wave of foreclosures.

In the bankruptcy case of Hartline, James M. and Heather K.; In re the bankruptcy court ruled against the bankruptcy trustee who wanted to avoid a credit’s lien due to administrative errors.

The details of the bankruptcy case:

The debtor-husband purchased a motor vehicle on Nov. 18, 2006. The purchase was financed by the defendant who applied for a certificate of title noting the debtor as the vehicle’s owner and the defendant as the lienholder on Nov. 29, 2006. On March 13, 2008, the defendant applied for a duplicate title because the original title was lost. The duplicate title was issued the next day. It referenced the original title; but failed to list the defendant as the lienholder. To correct that error, another duplicate title was issued on March 18, 2008.  On May 8, 2008, the debtor and his wife filed for Chapter 7 bankruptcy and the bankruptcy trustee filed an adversary proceeded to avoid the lien saying that the duplicate title (with its changes) was issued within 90 day of the debtor’s bankruptcy filing and was an attempt to perfect the title. However, the bankruptcy court ruled against the bankruptcy trustee, noting that the title was in fact perfected on November 29, 2006, that the errors were administrative and that the duplicate title was not an attempt to perfect the title after the fact.

Bankruptcy Judge Richard Stair Jr. said:

“What occurred was nothing more than an administrative error which does nothing to affect the integrity of the defendant’s lien.”

The recession has been hard on retirees for a number of different reasons, but at least they have a good option to turn to.

According to an article in Newsweek, the “over-55 crowd” is now the most likely to file for bankruptcy.  A confluence of events lead to this, and here are some of the causes: they are helping their kids and grandchildren, their homes have dropped in value, and the generation as a whole has been known to carry a lot of debt.

The article in Newsweek describes the situation surrounding the group by saying:

“Older Americans are heading into and through retirement with a boatload of debt.  They’re carrying everything from mortgages and home-equity loans to big credit-card balances, and many are finding the burdens harder and harder to bear.  In the last eight years, the over-55 crowd has become the age group most likely to declare bankruptcy, according to the AARP.  The statistics are unsettling.  More than half of people 50 and older who carry debt spend most of their monthly income paying it down.  An AARP study released before the worst of the current recession hit found that a quarter of those folks spend more than 75 percent of their income on their debts.  Americans 65 and older who carry credit-card balances saw their average balance rise to $10,235, up 26 percent from 2005, according to Demos, a public-policy research group.”

The good news for this age group is that bankruptcy can be a good option for them.  The article also went on to say that bankruptcy could benefit these individuals.  It said, “Assets in IRAs and other retirement accounts are protected from bankruptcy judgments up to $1 million, so people with big medical debts can declare bankruptcy and get to keep their nest egg.  Depending on the rules of their state, they might be able to hang on to their home, too.”

As you probably know, Texas is one of the states where you will be able to keep your home.  It’s a shame that many older people are struggling with their debts.  In many cases they don’t have to.  They can most likely eliminate many of their debts, and if they can’t eliminate them, they can have the debts restructured to a more manageable level.

If you or an older friend or relative falls into this category, don’t struggle underneath all of your debts.  By filing bankruptcy, a huge weight will be lifted and you can move on with enjoying your retirement.  Anyway, please contact a bankruptcy attorney today to find out more.