Bill Bronchick

Bankruptcy, Foreclosure, & Credit - How it Affects You
by Bill Bronchick

The "Ask the Wiz" board has become inundated with questions about bankruptcy, foreclosure, credit and how it affects your business, your finances and your real estate.

The following are answers to common questions:

Q: "WHAT IS THE DIFFERENCE BETWEEN CHAPTER 13 AND CHAPTER 7 BANKRUPTCY"?

Chapter 7 Bankruptcy is a complete liquidation of your assets and debts. With few exceptions, all of your debts and contractual obligations are wiped out in Chapter 7 Bankruptcy. However, all of your assets may be subject to liquidation and sale. There are some exemptions in bankruptcy; that is, some items that you cannot lose in bankruptcy. These items are set forth in 11 United State Code Section 522:
  • Real property, including co-op or mobile home, to $15,000 Disability

  • illness or unemployment benefits

  • Life insurance payments for person you depended on, needed for support,
  • Life insurance policy with loan value, in accrued dividends or interest, to $8000

  • Unmatured life insurance contract, except credit insurance policy

  • Alimony, child support needed for support

  • ERISA-qualified benefits needed for support

  • Animals, crops, clothing, appliances, books, furnishings, household goods,
    musical instruments to $400 per item, $8000 total

  • Health aids

  • Jewelry to $1000

  • Lost earnings payments

  • Motor vehicle to $2400

  • Personal injury recoveries to $15,000 (not to include pain & suffering
    or pecuniary loss)
    Wrongful death recoveries for person you depended on

  • Crime victims' compensation

  • Public assistance

  • Social Security

  • Unemployment compensation

  • Veterans' benefits Implements, books & tools of trade to $150
There is not much to keep, but state law may provide additional (or different) exemptions. In addition, good advance planning may allow you take advantage of the exemptions to their fullest extent. A good bankruptcy attorney can help (this is why you should shop for talent, not price when choosing a bankruptcy attorney).

Chapter 13 bankruptcy is like a forced settlement on your creditors (called "reorganization"). In most cases, you will be paying back 100% of your debt (especially secured debts, like mortgages), but on a 3 to 5 year payout. Chapter 13 is good for people who own a house, are still working and can continue to make monthly payments. If you are not working and your debts exceed your assets, Chapter 7 is usually more appropriate. You can always start Chapter 13, then convert to a Chapter 7.

Q: WHAT DEBTS ARE NOT DISCHARGEABLE?

With some exceptions, the following debts remain even after bankruptcy:
  • Child support & alimony

  • Student loans that became due less than 7 years ago

  • Federal and state income tax obligations less than 3 years old

  • Debts for restitution from criminal convictions and drunk driving

  • Debts the bankruptcy court decides where from intentional acts, fraud or
    wrongdoing (e.g., lying on your bank loan application).
Q: WHAT IS CHAPTER 11 BANKRUPTCY?

Chapter 11 is reorganization for businesses and individuals with debts too large for Chapter 13.

Q: WHAT HAPPENS IF MY TENANT FILES FOR BANKRUPTCY?

The filing of a petition for bankruptcy (7 or 13) automatically "stays" any collection efforts of creditors. This means you cannot evict a tenant for foreclose upon a borrower (or, if you have started, must stop proceedings) who has filed. This "stay" does not last forever; you can march into bankruptcy court and request that the stay be lifted against you so that you can proceed with the eviction. Thus, bankruptcy may only delay an eviction a month or two.

Q: HOW LONG DOES BANKRUPTCY STAY ON MY CREDIT REPORT?

Information about your bankruptcy can remain on your credit report for up to 10 years.

Q: I WAS DIVORCED, AND MY SPOUSE GOT THE HOUSE -
HOW CAN I GET MY NAME OFF MY MORTGAGE?

You can't. If you borrow money to purchase or refinance your home secured by a lien on your home, the lien remains when you transfer your half of the property to your spouse. However, the promissory note you signed for the debt still remains your obligation. If your ex-spouse is now in default, you should get try to get a deed back. Once you own the property again, you can negotiate with the lender, rent the property or sell it. Once you give up your ownership, you are out of luck, yet still on the hook.

Q: MY HOME LOAN IS IN DEFAULT - WHAT HAPPENS NOW?

If you are default on your payments, the lender can commence foreclosure proceedings to take back the property. This can take anywhere from 4 to 9 months, depending on what jurisdiction you live. In addition, the lender will have to evict you from the property after the foreclosure is complete. Since most lenders do not start proceedings until you are in default at least three months, you may have up to a year or more to remain in the property. Furthermore, you have a legal right to contest the foreclosure proceeding (if you have legitimate legal defenses, such as improper procedure) or even file for bankruptcy. Properly used, the legal system can buy you months of time. However, if you abuse the system, you can be sanctioned by the court, be required to pay fines and be denied discharge in bankruptcy.


Bill Bronchick
William Bronchick, CEO of Legalwiz Publications, is a Nationally-known attorney, author, entrepreneur and speaker. Mr. Bronchick has been practicing law and real estate since 1990, having been involved in over 600 transactions. He has appeared as a guest on numerous radio and television talk shows including CNBC Power Lunch. He has been featured in Who's Who in American Business, Money Magazine, the Los Angeles Times and the Denver Business Journal. William Bronchick has served as President of the Colorado Association of Real Estate Investors since 1996.


Bill Bronchick Products (9)
CoursesHow to Create a Bulletproof Corporation
CoursesHow to Create Your Own LLC and Family Limited Partnership
CoursesStep by Step Guide to Land Trusts
CoursesUltimate Guide to Buy and Hold
CoursesUltimate Guide to Fix and Flip
CoursesUltimate Guide to Owner Financing
CoursesUltimate Guide to Wholesaling
SpecialsWealth Protection Library
CoursesWealth Protection Strategies


Copyright Notice
Copyright 2002-2018 All Rights Reserved. Published with Permission of Author. No part of this publication may be copied or reprinted
without the express written permission of the Author and/or REIClub.com.

Back to Top

Free Newsletter
Name:
Email:

Article Options
Printer Friendly Page
Send This to Friend

Author's Articles
10 Easy Tips for Finding Investment Properties
10 Inexpensive Ways to Spruce Up Your Rental or Rehab Property
60 Days To Your First Bargain Purchase
7 Real Estate Contract Buyer Clauses Checklist
7 Reasons to Use a Land Trust
7 Ways To Buy Foreclosure Property
9 Goal Setting Tips For Real Estate Investors
9 Mistakes New Real Estate Investors Make
A Review of the National Consumer Law Center
All About Property Disclosures
Apartment Investing - Investors Now Is the Perfect Time!
Are Real Estate Seminars Worth the Money?
Are You a Newbie at a Real Estate Club?
Are You Clear On What is a Good Deal
Are You Waiting on the Sidelines?
Bankruptcy, Foreclosure, & Credit - How it Affects You
Bankruptcy, Foreclosure, & Credit - Part II
Basics of the Real Estate Contract
Be a Smart Investor... Do the Math
Big Brother Is Watching You, New (Bad) Legislation Coming Your Way
Bubble, Schmubble - Flipping Works in Any Market
Bull vs. Bubble
Bulletproof Your Wealth with Family Limited Partnerships and LLC's
Buy A House - Get Thrown in Jail?
Buying at the Foreclosure Auction
Collecting Money Owed by a Tenant
Common Investor Legal Mistakes
Common Sense Mortgage Tips
Contents of a Good Short Sale Package
Contract for Deed
Create Monthly Cash Flow Without Any of Your Own Money or Credit
Dealing with Real Estate Agents
Dealing with the Dealer Issue
Dealing With the Due on Sale Clause - Part II
Do You Need a License to Flip Real Estate?
Equity Sharing & Partnerships
Essential Contract Clauses
Essential Contract Clauses II
Explaining Foreclosure Options to the Homeowner
Five Big Mistakes Newbies Make
Flipping Properties for Cash Profit
Flipping Versus Holding - Which is Better?
Get That Property Out of Your Name!
Getting Started as a Real Estate Entrepreneur
How Much Cash Should an Investor Keep in Reserve?
How to Create a Real Estate Cash Cow
How to Determine Property Values in Today's Market
How to Get a Hard Money Loan
How to Save Up to 90% on Title Insurance
HUD Properties, FHA & Title Seasoning
Illegal Flipping and Lender Seasoning
Investing in a Changing Market
Investing Outside of Your Local Area
Investing Strategy - Master Lease Option for Apartments
Keep a Positive Perspective in a Negative Market
Know Your Real Estate Laws
Learn the Landlord-Tenant Rules!
Lease Option a Junker!
Lease Option Tips & Strategies
Lease/Option 101
Lease/Option vs. Contract for Deed
Lease/Options & the Equitable Interest
Mortgage Broker vs. Mortgage Banker
Non-Income Verification Loans
Owner Financing Mechanics
Personal Property Trusts
Real Estate Investing Financing 101
Real Estate Investing is Just Like Weight Loss
Reduce Taxes By Investing In Real Estate
Risks of Buying Real Estate in Emerging Markets Out of State
Scripting Common Objections from Foreclosure Sellers
Setting Your Financial Goals
Seven Ways to Flip a Property
Should the Government Bail Out People in Foreclosure?
Should You Disclose on Short Sale Flips?
Should You Do Real Estate Full-Time?
Should You Use an Attorney's Fee Clause?
Tax Issues on a Subject 2 Deal
Tax Lien Investing 101
Ten Myths Preventing People from Succeeding in Real Estate Investing
The Basics of “Short Sales”
The Bona Fide Purchaser
The Ethical Real Estate Investor
The Forgotten Owner Carry
The Mortgage Elimination
The New Limited Liability Company
The Not-So-Handy Man's Guide to Fixing and Flipping Properties
The Property Recording System
The Role of Insurance in Asset Protection Planning
The Wrong Way to Invest in Real Estate
There is No Due on Sale Jail
Top Ten Ways to Get Sued - Guaranteed!
Understanding Loan Terms
Understanding The Mortgage Loan Market
Using A Home Equity Line Of Credit To Buy Properties
Using a LLC IRA for Real Estate Investing
Using Facebook as a Real Estate Investor
Using Trusts for Personal & Business Privacy
What Every Landlord Should Know About Discrimination
What to Do if a Tenant Abandons the Property
What You Need to Ask Before Joining a Coaching Program
Where to Incorporate: The Answer May Surprise You!
You Have to Sell a House to Get it Sold
Zero In On Motivated Sellers


Author's Products

How to Create a Bulletproof Corporation

How to Create Your Own LLC and Family Limited Partnership

Step by Step Guide to Land Trusts

Ultimate Guide to Buy and Hold

Ultimate Guide to Fix and Flip

Ultimate Guide to Owner Financing

Ultimate Guide to Wholesaling

Wealth Protection Library

Wealth Protection Strategies