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ASSISTING LONG ISLANDERS AT THE SAME LOCATION FOR 25 YEARS WITH THEIR MORTGAGE AND DEBT PROBLEMS

FRIENDLY, AFFORDABLE AND KNOWLEDGEABLE Chapter 7 Chapter 13 Loan Modifications
Reading about credit score rankings can feel reminiscent of getting your report card in grade school. There is a lot of talk of "good" credit, "bad" credit, "poor" credit and "great credit."

Consumer scoring is linked to an organization called FICO, which stands for the Fair Isaac Corporation. FICO is not the only organization that develops consumer scoring guidelines, but it is arguably the largest and best known, as well as one of the most widely referenced and used.
The thought of losing your Long Island home because of an unforeseen financial hardship can keep you awake at night. You might be struggling to make ends meet because of job loss or an unexpected financial setback. Anxiety sets in because you do not know how you are going to make your mortgage payments and cover your daily living needs. Take a deep breath. There are options available that will help you keep your home and gain control of your debt. You can choose to lower your monthly payments by obtaining a loan modification, refinancing your mortgage, or filing bankruptcy. Whichever option you choose, it is important to contact your mortgage servicer or bank as soon as possible. The longer you wait, the fewer options you have.

What Is Loan Modification?

A modification is a form of loss mitigation designed to protect both the borrower and the lender. The lender agrees to change the terms of the mortgage to make monthly payments more affordable. Lenders can permanently change the terms of the mortgage by:
  • Extending the duration of your agreement
  • Adding past due payments to the unpaid principal balance
  • Reducing your interest rate
  • Forbearing payments for a short-term
  • Changing your mortgage type (for example changing an Adjustable Rate Mortgage (ARM) to a Fixed-Rate Mortgage)
Some Long Island homeowners may benefit from the government-sponsored Flex Modification program created to assist borrowers who have Fannie Mae and Freddie Mac home loans. The program can reduce a borrower’s mortgage payment by around 20 percent by adding the past due amounts to the outstanding loan balance, modifying the interest rate, extending the loan terms, or setting aside some of the principal balance before recalculating the monthly payment. This is called a forbearance and is a temporary option to get you back on your feet. You may be eligible for the Fannie Mae or Freddie Mac Flex Modification program if:
  • The loan is a conventional first mortgage
  • The borrower has enough income to make the monthly payment, and
  • The loan was acquired at least 12 months before Flex Modification evaluation
There may be other programs offered by your state. For example, the New York State Mortgage Assistance Program (MAP) provides a zero percent interest deferred payment mortgage loan up to $80,000 to New York homeowners who have exhausted all other avenues of help. This program is available statewide, so it does not matter whether you live on Long Island or in Buffalo. According to the New York Housing Conference, you can use the funds to bring your mortgage current, get a modification, or pay off property tax arrears. Typical loan recipients are low- to moderate-income homeowners with an average household income of $53,311. Long Island residents can receive assistance and personal counseling through the Community Development Corporation of Long Island

Modification Eligibility for New York Homeowners

Eligibility varies from lender to lender, but the process begins by completing and submitting an application with the required documentation to the lender. The list of required documentation will vary but the following documents are generally required:
  • Proof of income and an expense finance worksheet
  • Tax returns for the last two to three years
  • Proof of additional income such as alimony, social security, disability, child support
  • Bank statements, and
  • Proof of your hardship which can be a hardship letter or affidavit
  • Proof of additional debt such as student loans, credit cards, and car loans
If find yourself having difficulty with the modification application or you feel your lender is not abiding by state laws, consider contacting our Long Island office and we can guide you through the process. You do not need to hire an attorney to obtain a loan modification, but employing a qualified professional can make the difference between keeping your home or losing it foreclosure.

Refinance

Refinancing your loan replaces your old loan agreement with a new one and can be completed by either your current lender or a new one. To qualify for a refinance, you must be creditworthy and not owe more than the house is worth. While creditworthiness is not a major concern with a modification, a lender or bank does require that you be able to make the new payments. Unlike a modification, you may have to pay closing costs and other fees to complete the mortgage refinance process.

Mortgage Modification and Bankruptcy

Chapter 7 and 13 are the most common types of bankruptcy filed by individuals. Chapter 7 bankruptcy is a liquidation process in which the trustee sells non-exempt assets and uses the proceeds to pay creditors. There are no provisions in a Chapter 7 bankruptcy that allows you to keep your home, but it gives you time to find other housing or enter a loan workout plan with your lender. There is nothing that states your lender cannot agree to a modification after you file a Chapter 7. However, this is at the lender’s discretion. A Chapter 13 bankruptcy generally allows you to keep your home and pay creditors under a court-supervised repayment plan over three to five years. Once the court approves the repayment plan, the lender cannot foreclose. Additional advantages of a Chapter 13 bankruptcy include:
  • Automatic stay (an injunction that temporarily prevents creditors from pursuing or continuing credit collection actions)
  • Extending your secured debt over the life of the repayment plan
  • Protecting third parties such as co-signers
  • No direct contact with your creditors. Payments are made to the trustee who disburses the payments to the creditors
According to the United States Courts, you do not need an attorney to file bankruptcy. However, due to the long-term legal effects surrounding a bankruptcy, hiring a bankruptcy lawyer who will work to protect your rights, recommend the best bankruptcy for you, and guide you through the process adds an additional blanket of security should a problem arise.

If you would like more information on the home loan modification process, or if you have questions regarding bankruptcy filing, considering contacting The Offices of Adam C. Gomerman. Our Long Island based team of attorneys has years of experience in advising clients on the home loan modification process and personal bankruptcy process.

Bankruptcy can feel like a life sentence for a credit score. The good news is most filers see their score return to near-600 or better within a year, according to recent data from the Consumer Financial Protection Bureau (CFPB); by two years, more than half are in the mid-600’s. In fact, you can begin repairing your creditworthiness in as little as six months. Once the report improves, filers often come to appreciate, rather than regret, the virtual “blank slate” Chapter 7 discharge offered.

If you’ve filed, or are preparing to file, for Chapter 7 bankruptcy, there are a number of steps you can take to quickly repair your credit. In general, rebuilding your creditworthiness comes down to quickly securing a line a credit you know reports to bureaus responsible for scoring; carefully maintaining a low balance, while still using your credit; and actively monitoring your credit score throughout for errors and discrepancies. There are pitfalls, such as receiving too many application denials too quickly, or not correcting errors on your report in a timely manner. Once you understand the basics, however, it becomes easier to fix your credit.

Credit reporting works by analyzing your ability to repay debt. This ability is quantified in two ways. The first way--and simplest, immediately following a Chapter 7 discharge--is a low debt load relative to income. Chapter 7 will discharge most, if not all, of your current debt, making this a bigger issue later in your creditworthiness quest. The second way reporting agencies analyze your creditworthiness is through your demonstrated history of repaying debts, such as making card payments. Though it may seem paradoxical, that’s why it’s important to secure new credit as soon as possible following discharge. But you have options, such as getting someone to cosign on a new loan. Above all, you need to manage that new debt carefully--federal law prohibits another Chapter 7 bankruptcy discharge filing before eight years have passed from the previous one.

Your lawyer might offer additional information about fixing your score, particularly in relation to the details of your filing. For most, however, your lawyer will primarily focus on managing the bankruptcy case itself. Most of these cases allow people to easily improve their scores on their own, following discharge

First steps to repairing credit after your bankruptcy

Before you do anything else, stay on top of any obligations not discharged by your Chapter 7 filing. Typically, these include student loan payments, child support obligations, alimony, back taxes, monetary court judgments and any debt you chose to reaffirm through the bankruptcy. Reaffirmed debts might include payments on a loan for a car that you use to commute to work. Failure to continue these payments will further damage your ability to repair your creditworthiness.

** Read out 8 Tips to Repairing Your Credit blog post for in-depth information on this topic **

Employment

One building block to rebuilding your score is employment. Stable employment is necessary to fix your credit in earnest. Before you apply for any kind of loan, you need to start generating consistent income. If you were employed when you filed for Chapter 7, then you’re already in a great place to repair your credit. Where possible, some experts recommend avoiding changing employers while rebuilding your credit. Multiple job changes can reflect poorly on your ability to repay. However, that warning should mostly apply to those leaving for similarly-paying jobs. For those taking a better job, an increase in salary or pay rate will likely counteract any negative impact from the change of employers. You should check with your attorney if you are unsure whether to take a new job.

Securing your first credit line

Though difficult, rebuilding your score means getting a new line of credit as quickly as possible following discharge. This can seem like a “Catch-22”--you need creditworthiness to build creditworthiness. As such, your first post-bankruptcy credit line will typically carry a high-interest rate or will come from a “secured” line. Secured lines work by requiring you to lay down a deposit equivalent to the credit line. For example, you’ll provide a deposit of $500, in exchange for a card chargeable up to $500. This might seem like the proverbial money-from-one-pocket-to-the-other, but the key to this other “pocket” of income is that the secured money spent counts towards your score.

Other options available to rebuild credit include:

  • Retail store cards
  • ”Credit builder” loans
  • Asking a friend or relative to cosign
  • Becoming an “authorized user” on an existing card

Whenever you have someone cosign for a card or loan, remember to choose someone whom you can trust and who has, themselves, maintained good creditworthiness. Likewise becoming an “authorized user” should only be an option for accounts owned by someone you have direct access to and whom you feel you can trust. A breakdown in their creditworthiness is breakdown in yours.

Whatever option you find, it’s important to check that the company reports to the three bureaus that track scoring--Equifax, Experian, and TransUnion.

Keys to Managing Your Credit After a Bankrtupcy

Most Long Island residents who are under financial duress look for relief. Some need a fresh start and some need a financial plan to prioritize debt, but most importantly, people need help. One such way to get assistance is by the protection of the bankruptcy laws. For an individual, there are two chapter filings that can provide relief, and they are Chapter 7 and Chapter 13.

To provide a sense of comfort, the term bankruptcy does not necessarily mean that you lose everything. This is a common fear, however, there are certain exemptions that are in place that allows you to protect your property. These exemptions allow certain items to be protected against being sold in the repayment to creditors. These exclusions vary from state to state and is totally dependent upon where you reside. Regardless of the state that you live in, an attorney is necessary who will work on your behalf. The Law Offices if Adam C. Gomerman are licensed in the State of New York and are happy to speak with any Long Island resident regarding bankruptcy and the oftentimes confusing questions surrounding asset protection and bankruptcy exemptions. 
Millions of Americans, and thousands of Long Island residents, are drowning in a sea of debt. This debt has many different causes. Some people are faced with underwater mortgages for houses they never should have bought. Other people are forced to pay massive medical bills or run up tens of thousands of dollars on credit cards. These people are often overwhelmed by the process of asking for help or applying for discharge. This feeling can be mitigated somewhat by the emergency discharge process. Emergency bankruptcy is by no means a solution to a person's financial problems. Instead, it is a tool that a person can use to stem the damage from their obligations and eventually get back on track. If you are looking for emergency bankruptcy filing in New York or on Long Island, contact The Law Offices of Adam C. Gomerman today to speak with an experienced Long Island bankruptcy attorney.

Why would one need an emergency bankruptcy filing?

The process of gaining official debt liquidation or repayment is a time-consuming one. It can involve signing and processing a number of forms and aggregating a considerable amount of financial data. This process can be stressful for a person who has nothing else to do. But people who are going through discharge are incredibly stressed and face pressure from a number of different areas. They are often being harassed by creditors and bill collectors. The tactics of many bill collectors are ruthless and unscrupulous. Some collectors knock on a person's door and directly demand the money that is owed. They can call at many hours of the day and constantly send pieces of mail threatening wage garnishment. In many instances, bill collectors will try illegal tactics such as impersonating law enforcement. They count on people facing overwhelming bills to be too overwhelmed to fight back and file charges. In many instances, that assumption is correct. Some parts of the bill collection system are irreversible. Many banks will have a foreclosure sale for people who are far enough behind on their debts. These sales are final and cannot be undone. Therefore, people sometimes need an emergency option to stop the foreclosure system at any time. Emergency creditor relief filing is useful for these situations. A person can go through an immediate filing and secure an immediate halt on a foreclosure procedure. They can then work their way through the procedure and secure protections for their property. Preparing a filing is much easier when a person is able to do so in the comfort of their own homes.

Types of bankruptcy Long Island, New York

Along with filing for official protection from their creditors, individuals looking for an emergency filing on Long Island or New York need to determine what kind they are filing for. Chapter 13 is a common form that involves a person setting up a sanctioned debt repayment plan out of their regular income. This type of bankruptcy is for people who have a considerable income and still work a job. It can be less debilitating to a person's overall credit score and credit history than a Chapter 7 discharge. In Chapter 7 in NY, a person secures discharge of their debt except for special cases such as student loan debt. Chapter 7 discharge takes away many types of property from a person and sells that property in order to help discharge debt. Creditors, like credit card companies and hospitals holding medical bills, line up and are paid according to the importance of their bills as determined by a court. Some creditors will receive nothing in a process that reflects the risk they took on when they made a loan or extended a line of credit. People who go through Chapter 7 often are unable to borrow money for seven years. They have to start over financially from scratch but are able to do so without fear of foreclosure or constant calls from bill collectors.

Steps to filing for bankruptcy on long island

There are multiple steps to filing for bankruptcy on Long Island. The first step to an immediate bankruptcy filing is filling out a skeleton form. This form has a number of sections that must all be filled out quickly. There is a general information petition where an individual lists their identifying information, the basics of their situation, and what chapter they would like to file under. A person fills out this form along with a list of creditors and their addresses. This list is essential to informing these persons that they need to stop all collections procedures while a person is filing for official protection from their creditors. Then, a person needs to address the credit counseling requirement. They must show that they have attended credit counseling and that it has been unsuccessful in allowing them to meet their credit obligations. Finally, there is the filing of a form of dismissal along with the skeleton form. The form of dismissal provides for a legal justification to dismiss a case if the full amount of paperwork is not turned in within 14 days. All of these forms are filed together along with a fee. If a person cannot pay the fee or wants a payment plan, they can file a form requesting a waiver. All of these forms are quickly reviewed and put into action. Once the Long Island court accepts the emergency filing with the blessing of a lawyer review, they can immediately send out notices to creditors stopping all actions. The creditors then have 14 days to wait until it becomes clear what a person is going to do. If the person does not file their paperwork, they can go back to wage garnishment or foreclosure in order to retrieve their bills. But if they succeed in filing the paperwork, they are once again halted and have to go through the discharge process.

What to do next?

Any individual who is considering an immediate bankruptcy filing in Long Island needs to first consult an attorney and a financial adviser. The financial adviser and attorney will help an individual gauge their financial situation and determine if discharge is right for them. Many people feel overwhelmed by their bills and simply want out as quickly as possible. Professionals will help a person determine if they need to go this drastic step and what they need to do. Most courts in NY require that a person also go through credit counseling before filing for bankruptcy. The person should follow the suggestions of credit counseling as they attempt to work their way out of their debt problems. If a person has to file for emergency bankruptcy, they should first start by quickly filling out the required forms with the help of an attorney. Then, they should focus on filling out other required forms associated with creditor protection with the help of a lawyer. These forms include itemized lists of different pieces of property and means test forms as well as lists of expenses and income. Such forms help a court better ascertain a person's financial situation and the best way for creditors to receive as much as they reasonably can. A person needs to put all of their time and effort into filling out these forms on time. Missing a filing deadline can be debilitating in many ways. It can lead to a person being poorly treated in any future discharge filings as well.

Conclusion

An emergency bankruptcy filing should be viewed as a final step in the debt repayment process. People should do everything they can in order to avoid this drastic step. It may not be particularly helpful in the bankruptcy process after the emergency declaration has been granted. Enlisting the help of a lawyer may also cost money that a person does not think they have. But the process may be worthwhile if it means the difference between keeping or losing one's house.

To speak with a qualified, experienced bankruptcy attorney on Long Island today, contact our offices immediately to schedule your consultation.
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