What is Lien Stripping?

Chapter 13 lien stripping eliminates junior liens when your property is worth less than the remaining balance of your primary loan. For example, if you owe $300,000 on your first mortgage and your home only has a market value of $250,000, you can strip a secondary mortgage.

When a court approves the stripping of a lien, after your discharge those lenders can no longer collect debts on that lien or threaten to foreclose on a home for missed payments. Under current bankruptcy law, this lien stripping is only available in Chapter 13 bankruptcy. It is not now available in Chapter 7 liquidation cases.

Why You Can Strip Liens with Chapter 13 Bankruptcy

When filing under Chapter 13, you can strip liens on real property considered “wholly unsecured.” So what makes a lien unsecured? It means that in the event of a sheriff’s sale, no money will be granted to the lender. If a house worth $150,000 is sold and the primary lender is owed $200,000, that means the secondary mortgage lender will not receive money for the loan. All of the money on the foreclosed-upon property went to the primary lender. If you have a second and third mortgage but you owe more money on your first mortgage than what your house is worth, you can get rid of your second and third mortgages.

What Happens to a Stripped Lien?

When you successfully strip a lien when filing for Chapter 13 bankruptcy, the lien undergoes the same treatment as other unsecured debts. Unsecured debts, such as debt accumulated from a credit card or medical bills, are discharged when you finish filing for Chapter 13. The lenders of unsecured debts may receive a small amount, or they may receive nothing. Once the lien is discharged, the lender has to remove it from your home, or in the case of a credit card, the lender has to wipe out the debt.

How Lien Stripping and Chapter 13 – Can Save Your Home?

Lien stripping when filing Chapter 13 bankruptcy reduces your overall debts, which may enable you to financially recover and pay off your primary mortgage. Fortunately, Indiana is a judicial foreclosure state. This means that even if a house is foreclosed upon, residents still own their property until the conclusion of a sheriff’s sale. When filing Chapter 13 bankruptcy, mortgage lenders have to comply with the established court-approved debtor’s repayment plan. If someone filing under Chapter 13 gets a repayment plan approved that involves monthly payments plus delinquency charges, they can potentially save their home from a sheriff’s sale.

Get Assistance with Chapter 13 and Lien Stripping with Sawin & Shea, LLC

If you’re an Indiana resident struggling with debt, consider seeking legal assistance. Sawin & Shea, LLC has experienced attorneys that can help you through the process of bankruptcy and lien stripping. Our compassionate attorneys have a great deal of experience in handling bankruptcy cases and will help take the next step in overcoming your debts. We even offer additional guidance after your bankruptcy case concludes.

Get a free consultation today by calling 317-759-1483, or you can click here and schedule a video consultation!

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Normally, filing for a mortgage forbearance is a reasonably straightforward process. You would have simply contacted your lender and provided any necessary documentation for them to determine your eligibility for reduced or paused payments until you got back on your feet. With the CARES Act, asking for forbearance was made even more simple due to the fact that most individuals were universally suffering from pandemic-related hardships. However, the situation was a bit more complicated for those already in bankruptcy or considering it.

What is the CARES Act?

After the pandemic hit and it was evident that Americans were struggling to make ends meet, the government took action and enacted the CARES Act. The Coronavirus Aid, Relief, and Economic Security (CARES) Act (2020) was created to provide relief and assistance for workers, families, small businesses, and other industries. Through this act, a number of programs were implemented to directly address specific issues related to the onset of the pandemic. One such program was the COVID hardship forbearance program.

How Does the CARES Act Affect My Ability to Seek a Mortgage Forbearance?

The COVID hardship forbearance program is available to most individuals suffering financial hardship. However, there are some stipulations. To be eligible, you must:

• be experiencing financial hardship directly or indirectly related to the COVID-19 pandemic
• have a federally backed HUD/FHA, VA, USDA, Fannie Mae, or Freddie Mac loan

*If your mortgage is not federally backed, you would need to check with your service provider as they may offer other similar options.

Outside of Bankruptcy:

For those not dealing with bankruptcy, the CARES Act allows those affected by the pandemic to ask for forbearance to suspend payments on their federally-backed mortgage loan for up to six months. In some situations, borrowers may be able to extend the forbearance for an additional six months.

Due to the CARES Act, lenders must allow this forbearance if borrowers meet the two conditions listed above. This act ensures that extra interest and fees will not accrue during the forbearance, and the borrower’s credit rating will not be affected.

While in Bankruptcy:

For borrowers in a Chapter 13 bankruptcy or considering filing for bankruptcy, the situation can vary depending on the jurisdiction. However, when the CARES Act was passed, new language was added to the bankruptcy code that may allow those in mortgage forbearance to still file for bankruptcy.

While the bankruptcy code does not have any clear guidelines for this particular situation, considerations may be made based on your local district’s bankruptcy court regulations. Generally, when changes are made to a Chapter 13 repayment plan, such as a mortgage forbearance, all parties must be notified. This includes all creditors, the Debtor’s attorney, the servicer, and the Chapter 13 trustee.

How to Provide a Temporary Mortgage Forbearance Notice While in Chapter 13 Bankruptcy

Currently, there are no set rules for how to give notice of forbearance for those affected by the pandemic while already in or considering bankruptcy. However, the National Association of Chapter 13 Trustees recently provided a few basic options for how mortgage lenders can go about the process:

1. File a general notice with the bankruptcy court on the docket indicating the terms of the forbearance.
2. File a general notice on the claims register outlining the terms of the forbearance.
3. Send a physical letter to the Chapter 13 trustee, the bankruptcy filer, and all other interested parties indicating the forbearance terms.
4. File a notice of payment change on the bankruptcy court claims register outlining the forbearance terms.

Of the options above, there is no right or wrong choice. Each option will come with its own set of advantages and disadvantages depending on your locality. Services should utilize whichever option works best for them and the local bankruptcy district.

How Sawin & Shea LLC Can Help

At Sawin & Shea LLC, we understand how devastating the pandemic has been, especially for those who were previously struggling and considering bankruptcy. Our team has years of experience helping those suffering from unmanageable debt. We believe in providing compassionate and understanding representation to all of our clients. Our attorneys have experience in bankruptcy cases and are here to help you through the process every step of the way. Contact us for a free debt relief consultation.

The post The CARES Act, Consumer Bankruptcy, and Mortgage Servicing appeared first on Indianapolis Bankruptcy Attorneys of Sawin & Shea.

As most of the information out there talks about joint property and debts being affected, many individuals think they can just transfer property to their spouse’s name to solve the issue. Unfortunately, it’s not so simple. In most cases, a judge will reverse the transfer, especially if it is apparent that it was done to evade creditors. If you are unsure of what you can and can’t do and what will happen when you file, you can reach out to an experienced bankruptcy attorney for help. They can guide you through the process to work towards the best possible outcome for you and your family.

What Happens to Our Property When I File for Bankruptcy?

Before we jump specifically into what happens when you transfer property, let’s first clarify the ways that property can be affected. In most situations, your bankruptcy will not affect property that is owned separately by your spouse. However, anything jointly owned is not necessarily safe, and how it is treated will depend on whether you live in a common-law or community property state.

Common-Law Property

Indiana is a common law property state, not community property. This means that any property your spouse owns separately in their name usually is not at risk. However, any property owned jointly is considered part of your bankruptcy estate. If you do not have enough exemptions to cover these assets, they can be taken and liquidated in a Chapter 7 bankruptcy. If the property is taken, the trustee responsible for selling the property to pay your creditors will pay your spouse the value of their interest in the property. In Chapter 13 bankruptcy, non-exempt interest in joint property affects the percentage of debt that you pay back to unsecured creditors and there is no liquidation of the property.

What Happens to Property Transfers When I File for Bankruptcy?

Even though common law property states do not typically include your spouse’s separately owned property in the bankruptcy estate, there are some situations when their property can still be affected. Property transfers, for example, are still susceptible to being reversed and taken.

Transfers Can Be Reversed

Large item transfers, such as a car, a house, a sizeable financial account, or any other significant property, are at risk of being reversed in a bankruptcy case by a judge. This is because when transfers like this occur, judges know that it is done to avoid the property being taken by creditors. Transfers made right before you file for bankruptcy will seem particularly suspicious, but even transfers made 2 to 4 years previously still have a high chance of being reversed.

Most people do not plan to file for bankruptcy years in advance. However, on the off chance that you do think it might be something you’ll have to do, you can transfer the property four years or more ahead of time, and it may reduce the likelihood of a reversal. In the rare case where a judge still attempts to reverse a transfer made four or more years previously, it may be necessary to work with an attorney to fight the reversal of the property. Even before you make a transfer, speaking with an attorney is wise. These situations are very complex, and you can easily lose your property entirely if you are not careful.

What About Non-Traditional Transfers?

Non-traditional transfers are situations that might not seem like a blatant transfer of ownership on an asset but may still be considered a transfer and reversed in the case of bankruptcy. For example, if you and your spouse receive joint-funds but invest in a property your spouse owns separately, a judge might still view that as a transfer. Or, perhaps you sell a property that was owned jointly and then buy a new property in your spouse’s name only—that can be viewed as a transfer as well. Even if these “transfers” were done without the intention of evading creditors and were decisions made before you were even considering bankruptcy, they might still be seen as assets and included in the bankruptcy estate.

How Sawin & Shea LLC Can Help

Filing for bankruptcy is a stressful and challenging process. We understand how devastating losing property to creditors can be in these cases. At Sawin & Shea, we believe in providing compassionate and understanding representation to all of our clients and are determined to help you achieve the best possible outcome. Our attorneys specialize in bankruptcy cases and are here to help you through the process every step of the way.

Contact us at 317-759-1483 or send us an email for a free consultation today!

The post Can I Put My Property in My Spouse’s Name and File for Bankruptcy? appeared first on Indianapolis Bankruptcy Attorneys of Sawin & Shea.

• Facts about selling your home while going through bankruptcy
• Details about Chapter 7 and Chapter 13 Bankruptcies and your house

If you are struggling to pay your mortgage and other bills, the good news is that the CARES Act (Coronavirus Relief and Economic Security) has extended the deadline for when the foreclosure moratorium is due to expire. It was due to end on March 31st, 2021, but now June 30, 2021, is the expiration date.

The not-so-good news is that a moratorium is not the same as amnesty. The forbearance agreement that you entered into with your mortgage lender has allowed you to go several months without making mortgage payments, but you will still owe those payments when the foreclosure moratorium expires. There is nothing to stop your lender from demanding all of your missed payments after June 30, and you will be foreclosed on if you aren’t able to pay this (by now considerable) debt.

If you don’t have a federally connected mortgage (although almost 70% of homeowners do have mortgages somehow supported by the federal government), you weren’t able to take advantage of the moratorium in the first place, so you are probably facing pressure from your lender and are concerned about being foreclosed on.

In both of these cases (money that will be due or money that is overdue and with no way to pay it), you are probably at the point where you are thinking about selling your house and also about declaring bankruptcy.

This is a situation where timing can be extremely important. You will need the advice of an experienced bankruptcy attorney as soon as possible!

Can you sell your house if you are in a foreclosure situation?

Yes, but it is extremely difficult for the following reasons:

• Buyers will know that you have your backs up against the wall and will take advantage of that by making low offers.
• Even more likely is the fact that buyers will not want to take the risk of buying your house in case you are foreclosed on before the sale goes through (in which case, there can be no closing because you will no longer own the house).
• Buyers also don’t want to involve themselves in a property that may have liens against it.

Chapter 7 Bankruptcy

• If you file for Chapter 7 bankruptcy, you may be able to stay in your house for a little while longer before you are foreclosed on.
• You may also be able to discharge all of your other debts before those creditors can put a lien on your house.
• Once you take away the worry and constant pressure of creditors constantly contacting you, it will be easier to focus on getting your house on the market.
• If your house sells after you have safely declared Chapter 7 bankruptcy, you can keep a portion of your equity rather than having it go to your creditors. In Indiana, the Homestead Exemption allows you to keep $19,300 of your equity. If you and a spouse own the house jointly, you each get that amount and you could be entitled to keep more. (During Chapter 7 bankruptcy, the Trustee will not sell your house if the Bankruptcy Homestead Exemption covers all of the equity.)

Chapter 13 Bankruptcy

Chapter 13 is a personal reorganization bankruptcy. It provides protection from creditors, while a plan to deal with debts is put together.

• If you file for Chapter 13 bankruptcy, you can buy yourself more time to consider selling, although you will have to resume regular mortgage payments and cure arrears through the reorganization plan to stay long-term.
• A Chapter 13 filing can stop foreclosure up to the point of a sheriff’s sale. The reorganization plan then gives you three to five years to catch up on payments you were behind on as part of the monthly plan payment.
• Before you can sell your house (or buy another one), you have to get approval from your Chapter 13 Bankruptcy Trustee or the Court.
• The Homestead Exemption Act is the same as in Chapter 7, so you are still able to keep $19,300 in equity per homeowner and sometimes more.

Sawin & Shea Is Here to Help

No situation is completely straightforward, so don’t try to maneuver the intricacies of Indiana’s bankruptcy codes on your own. At Sawin & Shea, LLC, we understand that hiring an attorney to help you file bankruptcy is scary. We are committed to providing compassionate and non-judgmental representation to all of our clients. Our attorneys have helped thousands of people just like you get the fresh start they deserve. We are here to help.

Speak to an attorney today at (317) 759-1483. Or contact us online.

The post Can You Sell Your Home if You File for Bankruptcy in Indiana? appeared first on Indianapolis Bankruptcy Attorneys of Sawin & Shea.

There are many reasons why people resist bankruptcy, but some are based on fiction rather than facts. Maybe you’re avoiding bankruptcy merely because of a mistaken impression about it, so let’s clear things up.

Assuming It Is Rarely Needed

If you think bankruptcy is rare, think again. Plenty of people file for bankruptcy each year — possibly including your friends and family, even if they didn’t tell you about it.

In recent years, just over 750,000 Americans per year have filed for Chapter 7, Chapter 11, or Chapter 13 bankruptcy. For some years, this figure has been as high as 1 million Americans per year.

Thinking Employed People Do Not Need Bankruptcy

Job loss is certainly one of the top reasons for choosing bankruptcy, but it’s not the only reason. Many people who file for bankruptcy are employed but are still struggling to manage their monthly payments.

Medical debt is a top reason. Other common reasons for bankruptcy include divorce, excessive use of credit, new illness or disability, failed business ventures, and unexpected life circumstances that create debt and/or lower the household income.

Fear of the Future

People sometimes avoid bankruptcy because they’re afraid it will prevent them from accomplishing their life goals. This isn’t the case at all. Life after bankruptcy could look much better than it does now.

Here are some positive things that happen during and after bankruptcy:

• Collection calls stop.
• Your bills become manageable.
• You have a clearer view of your finances.
• Your credit score starts to rise again.
• Your financial burden eases, and you get a fresh start.

Worrying About Your Credit Score

Although many people assume that bankruptcy will ruin their credit score forever, that’s not true. In some cases, your credit score will suffer temporarily as you go through bankruptcy, but if you’re already failing to pay your bills, your credit is taking a huge hit as it is.

When you opt for bankruptcy, your credit will be on the upswing within a few years. It may even occur much faster than that. Just months after filing for bankruptcy, many people find new credit card offers in their mailboxes because the credit bureaus are already reporting a better score.

Wanting to Buy a House

Contrary to popular belief, bankruptcy doesn’t ruin the dream of becoming a homeowner. During a Chapter 7 bankruptcy, you’ll likely be ineligible to get a home loan. But afterward, it’s a different story. Some people in Chapter 13 bankruptcy cases can qualify to purchase a home while the case is active.

Many mortgage lenders are willing to work with homebuyers who have previously been through bankruptcy. As long as you’ve continued to pay your bills while avoiding getting yourself deeply in debt again, you should be able to buy a house.

If you’re already a homeowner when you file for bankruptcy, talk to your bankruptcy lawyer about using a homestead exemption to keep your house. Exemptions protect certain property and prevent you from losing it during bankruptcy.

Preferring to Keep Things Private

Maybe you’re worried about filing for bankruptcy because you don’t want everyone gossiping about you. But bankruptcy isn’t as public as you might think. The days of publishing personal bankruptcies in newspapers are long gone!

Bankruptcies are public information, but it takes a specific search of courthouse records to find them. Your bankruptcy won’t be published on social media. In most cases, nobody knows about a bankruptcy unless you tell them about it.

High-Pressure Tactics from Creditors

Finally, we’d like to address fears that arise from creditor harassment. Creditors often put immense pressure on debtors, and they might even tell you half-truths or outright lies as a way of tricking you into making a payment.

Don’t let creditors pester you into believing payment is the only option. Bankruptcy uses the law to stop creditors from contacting you. If creditors continue contacting you during your bankruptcy period, they risk breaking the law and owing hefty fines.

Feeling Resistant to Bankruptcy? We Can Help.

If you still have questions and worries about filing for bankruptcy, please reach out to the team at Sawin & Shea. It’s normal to have these concerns, and we’d love to help ease your mind about the bankruptcy process and its potential benefits for you.

We have great compassion for people who are buried in debt. At Sawin & Shea, we offer a free video consultation so that it’s easy to clear up any questions you may have and get you on the road to financial recovery.

Sawin & Shea — Indianapolis Bankruptcy Attorneys

Filing for bankruptcy is not the end. It’s the beginning of a new financial life for you. The Indiana bankruptcy attorneys at Sawin & Shea can help you get rid of overwhelming debt and advise you on life after bankruptcy. We are here for you during this life-changing process.

Please do not hesitate to call us today at (317) 759-1483 or send an email for a free consultation. We are ready to help.

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