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Foreclosure And Your Credit Score

foreclosure defense and bankruptcy attorneysIf your home goes into foreclosure it will have a negative impact on your credit score. However, the nature and extent of the negative impact may be different than what you believe it to be. When a financial institution brings a foreclosure lawsuit related to a mortgage default, the institution will normally report to the credit agency there is a foreclosure or a home has been foreclosed upon. This information on your credit score will not necessarily impact on the outstanding balance it shows you owe on the mortgage. The credit report will most likely continue to show the entire outstanding balance of your mortgage being due and owing on your credit report. This negative credit material can stay on your credit report for seven years.

Sales Of Homes In Foreclosure

At the end of the foreclosure process, if the bank is a successful, your home will be sold. In the event the sale of your home at the foreclosure sale does not pay off the entire outstanding debt due in owing on your mortgage, the remaining balance may be shown on your credit score as a “deficiency “. The financial institution may be able to bring a proceeding to collect on this deficiency amount. If they do not take action to collect this deficiency they can report it to the Internal Revenue Service as a forgiven debt. This will cause you to receive a 1099 showing the deficiency as income to you in that tax year. This will cause you to pay income taxes on this deficiency debt!

Foreclosures On Second Mortgages

When the financial institution forecloses on a first mortgage, the second mortgage may continue to be maintained on your credit report by the credit reporting agency. The second mortgage will not show it was foreclosed on because it is a separate and distinct financial obligation.

Bankruptcy And Foreclosure

It may be necessary to file a Chapter 7 bankruptcy to eliminate deficiency judgments related to first mortgages and the personal obligations on a second mortgage. To better understand the inferences and long-term impact on your credit score it is strongly suggested to contact either a bankruptcy lawyer or foreclosure lawyer.foreclosure and bankruptcy  assistance

Strategic Defaults

Walking Away From Your House

Strategic default is the new concept in how homeowners are dealing with mortgages on homes that are underwater. A strategic default is simply when you stop paying your mortgages . Many homeowners are considering strategic defaults on their mortgages. It is estimated that over eleven million homes are now underwater in America. More than three and a half million homeowners are behind in their mortgage payments. There are already a million and a half homes currently in the foreclosure process.

The New York Federal Reserve estimates that there are an additional 3.6 million foreclosures that will be taking place in the next few years. Does it make sense to keep paying a mortgage on a home where it will be many years before the home regains its former value? A columnist named James Surowiecki recently wrote in the New Yorker Magazine that paying mortgage payments for a home that is underwater is “setting a pile of money on fire every month”.

Mortgage Payments: A Moral Quandary?

For some families there is a moral quandary in making the decision to stop making mortgage payments on a home that is underwater. Should families be embarrassed or feel they are going to lose respect as they break their mortgage contract obligations and stop paying their mortgage? Companies utilize the bankruptcy process to default on their financial obligations when they feel it is appropriate. So why shouldn’t individuals consider it is a business decision as to whether they should pay their mortgage payments when their home is underwater and it is unlikely it will ever get back to its former value at anytime in the near future?

Penalties For Not Paying Your Mortgage

Obviously the first penalty is that your home will eventually go into foreclosure. However the foreclosure process in the State of New York, as in most other states, is a slow process. This means you won’t be forced to leave your home in the short run.

The second issue involves your credit score. Not making mortgage payments will definitely have a negative impact on your credit score. It is estimated that your credit score will go down a minimum of 85 to 100 points if you default on making mortgage payments.

Strategic default is not something to be taken lightly. It should be considered as a last option. Your first option should be to make a mortgage modification. Mortgage modifications allow you to rework your mortgage to more favorable terms.

If you decide to strategically default you should save the funds that had formally been allocated to make mortgage payments. This will give you the ability to retain an attorney to fight the foreclosure in court. It will also give you money for a down payment on an apartment that you may need to rent down the line.

Tax Implications of Strategic Defaults

If a portion of your debt is forgiven by a financial institution the forgiven amount is considered taxable income by the Internal Revenue Service. You may end up receiving a 1099 from your bank that you will have to declare on your income taxes. You should talk to a tax professional with regard to how to handle this tax issue.

Strategic defaults are not for everybody but more and more people are making this choice!

Foreclosure Lawyers

If your house is in foreclosures we can help you. The Law Offices of Elliot Schlissel have been helping New Yorkers stay in their homes. To start with we can help you with the mortgage modifications. We are familiar with the problems mortgage modification programs have. We can also assist you with a forensic audit with regard to your mortgage. Should you be served with a summons and complaint we will appear in court for you and attend settlement foreclosure conferences. During these conferences we will press the financial institutions to cooperate in giving you a mortgage modification. We will submit answers to the formal compliant submitted by the banks. Our answers will allege defenses such as defective mortgages, defective foreclosure law suits, predatory lending, foreclosure fraud and other real estate related defenses.

We will advise you with regard to all of your foreclosure options. One of your options may be a foreclosure related bankruptcy. There are two types of bankruptcies that can be utilized in foreclosure. A Chapter 7 bankruptcy and a Chapter 13 bankruptcy. There are benefits and drawbacks to each of these bankruptcies. When you file bankruptcy it immediately stops creditor harassment. All debt collection activity has to come to an end when a creditor receives notice of a bankruptcy filing. Foreclosure proceedings also are immediately frozen upon the filing of a bankruptcy. At the end of the bankruptcy process you receive a discharge of your debts. We educate our clients with regard to reestablishing credit and the end of the bankruptcy. There are many bankruptcy myths such as you will never receive credit again that are simply untrue. At your initial free consultation with our office will we describe the bankruptcy process. We will explain to you what bankruptcy exemptions are and why it may be necessary to file bankruptcy. Feel free to call us for a free consultation 1-800-344-6431, 516-561-6645 and 718-350-2802.

Warren Buffet’s Advice: Buy a Home You Can Afford, Not Your Dream Home


Warren Buffet is the third richest man in the United States. He is a very frugal man. He purchased his home in 1958 for $31,500. It is a 6,000 square foot home. He still lives in it! In a recent interview, he stated, “our country’s social goals should not be to put families into the house of their dreams, but rather to put them into a house that they can afford.” In a February 26, 2011 letter he wrote to shareholders of his company, Berkshire Hathaway, he stated, “home ownership makes sense for most Americans, particularly at today’s low prices and bargain interest rates, but a house can be a nightmare if the buyers eyes are bigger then his wallet and if a lender, often protected by a government guarantee, facilitates his fantasy.”

Warren Buffet purchased his home for $31,500 when he was 29 years old. That is more then four decades ago. Imagine if you could purchase a 6,000 square foot home for that price today!

Home Services of America

Warren Buffet owns Berkshire Hathaway, Inc.  His company, in turn, owns Home Services of America through a subsidiary titled Mid American Energy Holdings Company. He also owns Clayton Homes, one of the largest companies in the United States, which is involved in the manufacture of environmentally friendly, factory built homes. Last year Clayton Homes produced more then twenty three thousand homes.

Warren Buffet Receives 2010 Medal of Freedom

The highest honor awarded to a civilian in the United States is the Medal of Freedom Honor. Warren Buffet was the recipient of this award from President Barack Obama in 2010.

Clayton, Mr. Buffet’s company, is very unusual. It holds the mortgages on the homes that it builds in its factories. Although Clayton was hit hard in the recession, it did better then most financial institutions. Mr. Buffet recently stated that if home buyers throughout the United States had behaved like Clayton’s buyers of manufactured homes, there would be no foreclosure crisis in the United States. Warren Buffet is a very wise man!

Warren Buffet lives modestly. He’s a very conservative investor who has been extremely successful in investing in non speculative investments. His strategy for homeowners, that they should only buy homes that they can afford and not their dream homes, reflects what the real estate industry will be moving towards in the future in the United States. The ownership of a single family home fulfills the dreams of many Americans. In the future they will need to have smaller dreams!

Foreclosure Lawyer

Our law office can help you with any of the following issues: mortgage modifications, mortgage modification programs that fail, foreclosure court conferences, foreclosure litigation, defective foreclosure lawsuits, predatory lending issues, bad faith by financial institutions, defective mortgages, real estate related issues, Chapter 13 bankruptcies, Chapter 7 bankruptcies, stopping foreclosure, and advising you as to the types of bankruptcy that may apply to you. Please take a look at our foreclosure blog. Feel free to call us should you have foreclosure defense or mortgage modification problems or bankruptcy issues.

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