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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.

How Debt Collections Work

debt-150x108If you have debt, such as credit cards, there is a timeline followed by your creditors in collecting these debts.

Thirty Days

If you miss a payment on one of your debts by more than thirty days, the creditors will immediately start making phone calls and sending you letters about paying the debt.In some situations, the lender will also report to credit reporting agencies that you were more than thirty days behind on the payment of a debt. If you should find that you cannot

make a payment, you should call the creditor and explain your financial circumstances and advise the creditor when a payment will be forthcoming.

Sixty Days

You now are two months behind in paying the debt. This will cause credit cards to go into collection activity. This is an area maintained by the creditor to deal with nonpayment of credit cards. The amount of collection activity will become more forceful. The creditors may warn you about some type of delinquency action to be taken against you. The creditor will contact credit bureaus and provide them with information that you are sixty days behind. It is still not too late to contact your creditor and try to work out some type of payment plan.

Ninety Days

You are now three months behind on paying your debt. The creditor, in most situations, will cancel or suspend your credit privileges. You will definitely be reported to a credit bureau concerning your delinquency. Late fees and interest will be charged to your account. This may be the last time you have an opportunity to reactivate your account by entering into a payment plan. The creditors will become confrontational if a payment plan is not worked out.

Charge Off and Litigation

After more than ninety days, a creditor can charge off your debt as un-collectable. This may trigger the matter being sent out to a third party collection agency or collection lawyer. The collection agency or collection lawyer will send aggressive letters and make very aggressive phone calls trying to motivate you to pay your debt. They will also threaten

you with legal action if the debt isn’t paid. Should the collection activity by the collection agency be unsuccessful, your debt may be turned over to a collection lawyer who will institute a lawsuit against you. Should you receive a summons and complaint with regard to the debt, it is important you either go to court and submit a written answer to the summons and complaint or retain counsel to represent you.

debt1-150x150Bankruptcy

If you have multiple creditors chasing you regarding the payment of credit cards or other debts, bankruptcy may be an option for you. There are two types of bankruptcies available to individuals, which are Chapter 7 and Chapter 13 bankruptcies. The filing of a bankruptcy will stop debt collection activity, stop foreclosures from moving forward and assist you in re-establishing your credit in the long run. Chapter 13 bankruptcies, in certain situations, can also eliminate second mortgages.

There are many myths that people believe regarding bankruptcy that are simply untrue. Should you have questions regarding debt collection activity or bankruptcy issues, feel free to call the Law Offices of Schlissel DeCorpo. Our office has filed hundreds of bankruptcies and assisted our clients in numerous lawsuits against them regarding alleged debts. Feel free to call us for a free consultation

Home Foreclosures On Long Island

foreclosureschlissel-150x150In the month of July, 2010, 800 homeowners in Nassau County had their homes foreclosed on (foreclosure is the start of a proceeding by a lender of financial institution to take the home back). In the same month, 170 homes were taken back by the lenders on Long Island. This is an increase of 86% from July of 2009.

Although the Obama administration currently has a program to help individuals who have had their homes foreclosed on, the average homeowner in New York has not experienced any benefit from this program. Most individuals who apply for mortgage modifications under the various existing programs get turned down. Those who are approved often receive a modification for only three months. The three month modification is simply not long enough to allow individuals to get back on their feet. Many aspects of the existing mortgage modification programs simply do not meet the needs of individuals who apply for modifications.

The foreclosure process in New York can be quite long and time consuming. Homeowners who find themselves facing a foreclosure lawsuit can retain counsel and tie up a case in court for years.

Mortgage Modification:

The mortgage modification process can be very aggravating for a homeowner. After diligently submitting all necessary documents, the homeowner sometimes finds him or her self in a never-never-land. Telephone calls to the mortgage processing company typically go unanswered or the individual who does answer is clueless as to the situation. After numerous phone calls and attempts to discuss the matter with a mortgage company representative, the result is obvious frustration. It quickly becomes apparent that the banks are not serious about the mortgage modification process.

A good way of dealing with the failure of a bank to properly process a modification application is to bring it to the court’s attention during the statutorily mandated settlement conferences.

Our office has represented individuals with financial difficulties involving issues of bankruptcy, mortgage modifications and foreclosure defense for many years. We understand the aggravation and torment an individual goes through when dealing with the prospect of losing their home. We are experienced in fighting to allow our clients to stay in their homes by putting pressure on banks and financial institutions.

Should you have any questions regarding mortgage modifications, foreclosure defense and/or bankruptcy, feel free to contact us at 1-800-344-6431, or by email.

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