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______________________________________________________
FAQs
Bankruptcy
Foreclosure Mediation
| Free Bankruptcy Consultation |
Loan Modification
Short-Sale
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FAQ's
Bankruptcy
How long will my bankruptcy show on my credit record?
The Fair Credit Reporting Act, 6 U.S.C. Section 605, is the law that controls credit reporting. The law states that credit
bankruptcy case is filed. Other bad credit information is removed after seven years. The larger credit reporting agencies
belong to an organization called the Associated Credit Bureaus. The policy of the Associated Credit Bureau is to remove
Chapter 11 and Chapter 13 cases from the credit report after seven years to encourage debtors to file under these
chapters. The bankruptcy court has no influence over these reporting policies. Importantly, you may be asked at some
point in time whether you have every filed for bankruptcy, and even though it will not show on your credit report,
bankruptcy petitions are public records.
Will filing bankruptcy stop my wages from being garnished?
Yes, once you file bankruptcy, you are under protection of the court from most creditors. If you provide our office the
correct contact information, we will immediately notify the garnishing creditor and/or sheriff that you have filed a
bankruptcy petition. This will stop garnishments immediately.
Are all of my debts canceled by the Bankruptcy Court?
No, certain debts are not discharged by the US Bankruptcy Court. Examples include taxes, school loans, any debts
resulting from fraud, alimony and child support payments. Other debts are discharged only if your petition is approved by
the US Bankruptcy Court. There are numerous variables that factor into whether or not the Court will issue a discharge,
be sure to ask your attorney during your consultation about any concerns regarding particular debts you may have
When will I get my discharge?
Individual debtors are eligible to receive their Chapter 7 discharge 60 days after the 341 meeting, unless a creditor objects
in a timely manner, or the court orders otherwise. Most often, where no complaint objecting to the discharge is filed, the
debtor will receive a discharge within five working days after the 60 day period has passed. If a notice of amendment to
schedules is filed to add creditors, the discharge will be delayed an additional 30 days from the date of filing the notice.
Foreclosure Mediation
When will the bank start the foreclosure process?
The answer to this question varies based on the lender, the Trustee, the number of other foreclosures being processed,
etc. Generally, most lenders will record a notice of default & election to sell after you have missed 3-6 months of
payment. They are required to send you the notice by certified mail and include an Election of Mediation form. You only
have 30 days after receipt to return the election form along with other documents to the State of Nevada Foreclosure
Mediation Program and the Trustee. Once you elect mediation, foreclosure can not proceed until a mediation is held.
Currently, mediation may be scheduled within 2-3 months after you submit your election form.
What happens at mediation?
During mediation, the homeowner has an opportunity to negotiate with their lender in order to avoid foreclosure. Most
often, lenders would prefer to investigate loan modification options but often will discuss short sale, deed in-lieu and cash
for keys. The lender is required to provide specific documents at mediation, failure to do so could result in negative
consequences for the bank, and they may not be able to proceed with foreclosure if they fail to adhere to the rules and no
agreement is reached. Similarly, the homeowner must present documents at mediation and participate in good faith or else
they may be subject to sanctions if imposed by the Court, including having to pay the lender's attorneys fees in extreme
circumstances where bad faith is found.
The purpose of mediation is to create a win-win scenario for all parties, but it is important to note that not everyone is
financially positioned to keep their home, even if a loan modification is offered. Each case is different and each outcome
is different.
Short Sale
Will the bank issue a 1099-C?
Yes. The banks are required to report all "cancelled" or foregiven debt to the IRS. Just because you receive a 1099-C
does not mean you will definitively have to pay income tax, but it is extremely important that you consult with a qualified
tax professional prior to making the decision to short sale, as well as a qualified attorney so that you fully understand the
consequences of a short sale.
Will there be any tax consequences to doing a short sale?
Only a qualified tax professional can advise you on the tax consequences you may face, as there are numerous variables
regarding each person(s) individual financial situation that has to be evaluated before such advice can be rendered. Our
firm does not provide tax advice. It is our experience from assisting home owners with short sales and foreclosures, that if
the home is sold at foreclosure auction, the lender will issue a 1099-A for the amount the lender lost due to the sale.
However, in a short sale, most lenders will issue a 1099-C for the difference between the unpaid prinicpal balance and the
short sale amount. Generally, if the lender is enclined to seek a deficiency judgment, they will not issue a 1099-C. Again,
we stress the importance of consulting with a tax professional to analyze your specific situation prior to moving forward
with a short sale.
Why should I do a short sale? If I am going to have to move anyway, why shouldn’t I just allow the bank to
foreclose so I can stay in the house rent free for longer?
The main benefit of a short sale is that, in many instances, you can still stay in your home rent free just as long as if the
house were to go to foreclosure and you will still be able to show your mortgages as “paid in full” vs. “foreclosure.” The
amount of loss to the bank is usually less in short sale, thus the amount of the 1099 to the homeowner in a short sale is
less. Either way, you will want to have an attorney dealing with the lender to minimize your risk and negotiate on your
behalf to get the best possible outcome.
I want to do a short sale and have a second mortgage, does this make me ineligible?
No. Both of your lenders will need to be satisfied in some way to complete the short sale. If your first lender will be paid
off by the sale, then you just negotiate the terms with the second lender. There are government programs that may create
an incentive for the 2nd to sign off on the short sale, during your consultation our attorneys will discuss the available
options and help you process the paperwork in order to determine if you are elible.
If a lender forecloses, can the lender still sue me for the “deficiency?”
The lender on any 1st mortgage has up to 6 months from the date of trustee sale to pursue a foreclosed-upon borrower
for the deficiency. If there is a 2nd mortgage, they may have up to 6 years to file suit for breach of contract
Loan Modification
What is loan modification?
Loan modification means negotiating with your bank, in order to change the terms of your loan in an effort to create an
affordable payment. A successful loan modification also means that you don't lose your home to foreclosure or surrender
it in bankruptcy.
Will the Lender include late charges in the Loan Modification?
Mortgagee Letter 2008-21 states that accrued late charges should be waived by the mortgagee at the time of the Loan
Modification.
What is HAMP?
HAMP is the Home Affordable Modification Program that was initiated by the Obama Administration to help
homeowners and to stop the foreclosure crisis. Participation in HAMP was required for all lending instittutions that
accepted TARP money during the bailout. Within 2010, there have been numerous institutions opt-in to HAMP because
of the finanical incentives to lenders for placing homeowners into HAMP modifications
HAMP is premised on affordability. The threshold amount of an affordable mortgage payment is 31% of gross income.
Generally, if your current mortgage payment is more than 31% of gross, then you may be eligible for HAMP. There are
other provisions that our attorneys will discuss with you during your consultation, but this is the general starting point. If
the payment is not affordable (over 31% of gross) a series of financial tools are implemented in what is called the
"waterfall."
The lender will first reduce the interest rate to as low as 2.0%, if this results in an affordable payment (under 31% of
gross) then the waterfall ends. If not, the lender may extend the term to as much as 40 years, however, several investors
have restricted the ability of servicers in that regard and the term cannot be extended. In the event that an affordable
payment is not reached or term extension is not permitted, then the final step of the waterfall is principal forbearance.
Principal forbearance is not to be confused with principal forgiveness. Forbearance simply means that they reduce the
unpaid princpal balance by a certain amount (typcially not more than 30% of the total) and set it off to the side in a "silent
second". This results in a lower payment, but a large lump sum that will be due at the end of the term, or when the house
is sold. Principal forbearance can be beneficial in that it does not collect interest under this program, but beware that if the
housing prices do not recover by the time the note matures, you may not be able to get refinancing to cover the
forbearance amount or sell the home for an amount large enough to pay off the note in its entirety. It is truly important
to consult with a qualified attorney to analyze your entire finanical situation and explain your options. HAMP has
benefitted many, but sometimes it only prolongs the inevitable.
How long will my bankruptcy show on my credit record?
The Fair Credit Reporting Act, 6 U.S.C. Section 605, is the law that controls credit reporting. The law states that credit
bankruptcy case is filed. Other bad credit information is removed after seven years. The larger credit reporting agencies
belong to an organization called the Associated Credit Bureaus. The policy of the Associated Credit Bureau is to remove
Chapter 11 and Chapter 13 cases from the credit report after seven years to encourage debtors to file under these
chapters. The bankruptcy court has no influence over these reporting policies. Importantly, you may be asked at some
point in time whether you have every filed for bankruptcy, and even though it will not show on your credit report,
bankruptcy petitions are public records.
Will filing bankruptcy stop my wages from being garnished?
Yes, once you file bankruptcy, you are under protection of the court from most creditors. If you provide our office the
correct contact information, we will immediately notify the garnishing creditor and/or sheriff that you have filed a
bankruptcy petition. This will stop garnishments immediately.
Are all of my debts canceled by the Bankruptcy Court?
No, certain debts are not discharged by the US Bankruptcy Court. Examples include taxes, school loans, any debts
resulting from fraud, alimony and child support payments. Other debts are discharged only if your petition is approved by
the US Bankruptcy Court. There are numerous variables that factor into whether or not the Court will issue a discharge,
be sure to ask your attorney during your consultation about any concerns regarding particular debts you may have
When will I get my discharge?
Individual debtors are eligible to receive their Chapter 7 discharge 60 days after the 341 meeting, unless a creditor objects
in a timely manner, or the court orders otherwise. Most often, where no complaint objecting to the discharge is filed, the
debtor will receive a discharge within five working days after the 60 day period has passed. If a notice of amendment to
schedules is filed to add creditors, the discharge will be delayed an additional 30 days from the date of filing the notice.
Foreclosure Mediation
When will the bank start the foreclosure process?
The answer to this question varies based on the lender, the Trustee, the number of other foreclosures being processed,
etc. Generally, most lenders will record a notice of default & election to sell after you have missed 3-6 months of
payment. They are required to send you the notice by certified mail and include an Election of Mediation form. You only
have 30 days after receipt to return the election form along with other documents to the State of Nevada Foreclosure
Mediation Program and the Trustee. Once you elect mediation, foreclosure can not proceed until a mediation is held.
Currently, mediation may be scheduled within 2-3 months after you submit your election form.
What happens at mediation?
During mediation, the homeowner has an opportunity to negotiate with their lender in order to avoid foreclosure. Most
often, lenders would prefer to investigate loan modification options but often will discuss short sale, deed in-lieu and cash
for keys. The lender is required to provide specific documents at mediation, failure to do so could result in negative
consequences for the bank, and they may not be able to proceed with foreclosure if they fail to adhere to the rules and no
agreement is reached. Similarly, the homeowner must present documents at mediation and participate in good faith or else
they may be subject to sanctions if imposed by the Court, including having to pay the lender's attorneys fees in extreme
circumstances where bad faith is found.
The purpose of mediation is to create a win-win scenario for all parties, but it is important to note that not everyone is
financially positioned to keep their home, even if a loan modification is offered. Each case is different and each outcome
is different.
Short Sale
Will the bank issue a 1099-C?
Yes. The banks are required to report all "cancelled" or foregiven debt to the IRS. Just because you receive a 1099-C
does not mean you will definitively have to pay income tax, but it is extremely important that you consult with a qualified
tax professional prior to making the decision to short sale, as well as a qualified attorney so that you fully understand the
consequences of a short sale.
Will there be any tax consequences to doing a short sale?
Only a qualified tax professional can advise you on the tax consequences you may face, as there are numerous variables
regarding each person(s) individual financial situation that has to be evaluated before such advice can be rendered. Our
firm does not provide tax advice. It is our experience from assisting home owners with short sales and foreclosures, that if
the home is sold at foreclosure auction, the lender will issue a 1099-A for the amount the lender lost due to the sale.
However, in a short sale, most lenders will issue a 1099-C for the difference between the unpaid prinicpal balance and the
short sale amount. Generally, if the lender is enclined to seek a deficiency judgment, they will not issue a 1099-C. Again,
we stress the importance of consulting with a tax professional to analyze your specific situation prior to moving forward
with a short sale.
Why should I do a short sale? If I am going to have to move anyway, why shouldn’t I just allow the bank to
foreclose so I can stay in the house rent free for longer?
The main benefit of a short sale is that, in many instances, you can still stay in your home rent free just as long as if the
house were to go to foreclosure and you will still be able to show your mortgages as “paid in full” vs. “foreclosure.” The
amount of loss to the bank is usually less in short sale, thus the amount of the 1099 to the homeowner in a short sale is
less. Either way, you will want to have an attorney dealing with the lender to minimize your risk and negotiate on your
behalf to get the best possible outcome.
I want to do a short sale and have a second mortgage, does this make me ineligible?
No. Both of your lenders will need to be satisfied in some way to complete the short sale. If your first lender will be paid
off by the sale, then you just negotiate the terms with the second lender. There are government programs that may create
an incentive for the 2nd to sign off on the short sale, during your consultation our attorneys will discuss the available
options and help you process the paperwork in order to determine if you are elible.
If a lender forecloses, can the lender still sue me for the “deficiency?”
The lender on any 1st mortgage has up to 6 months from the date of trustee sale to pursue a foreclosed-upon borrower
for the deficiency. If there is a 2nd mortgage, they may have up to 6 years to file suit for breach of contract
Loan Modification
What is loan modification?
Loan modification means negotiating with your bank, in order to change the terms of your loan in an effort to create an
affordable payment. A successful loan modification also means that you don't lose your home to foreclosure or surrender
it in bankruptcy.
Will the Lender include late charges in the Loan Modification?
Mortgagee Letter 2008-21 states that accrued late charges should be waived by the mortgagee at the time of the Loan
Modification.
What is HAMP?
HAMP is the Home Affordable Modification Program that was initiated by the Obama Administration to help
homeowners and to stop the foreclosure crisis. Participation in HAMP was required for all lending instittutions that
accepted TARP money during the bailout. Within 2010, there have been numerous institutions opt-in to HAMP because
of the finanical incentives to lenders for placing homeowners into HAMP modifications
HAMP is premised on affordability. The threshold amount of an affordable mortgage payment is 31% of gross income.
Generally, if your current mortgage payment is more than 31% of gross, then you may be eligible for HAMP. There are
other provisions that our attorneys will discuss with you during your consultation, but this is the general starting point. If
the payment is not affordable (over 31% of gross) a series of financial tools are implemented in what is called the
"waterfall."
The lender will first reduce the interest rate to as low as 2.0%, if this results in an affordable payment (under 31% of
gross) then the waterfall ends. If not, the lender may extend the term to as much as 40 years, however, several investors
have restricted the ability of servicers in that regard and the term cannot be extended. In the event that an affordable
payment is not reached or term extension is not permitted, then the final step of the waterfall is principal forbearance.
Principal forbearance is not to be confused with principal forgiveness. Forbearance simply means that they reduce the
unpaid princpal balance by a certain amount (typcially not more than 30% of the total) and set it off to the side in a "silent
second". This results in a lower payment, but a large lump sum that will be due at the end of the term, or when the house
is sold. Principal forbearance can be beneficial in that it does not collect interest under this program, but beware that if the
housing prices do not recover by the time the note matures, you may not be able to get refinancing to cover the
forbearance amount or sell the home for an amount large enough to pay off the note in its entirety. It is truly important
to consult with a qualified attorney to analyze your entire finanical situation and explain your options. HAMP has
benefitted many, but sometimes it only prolongs the inevitable.
| At Connaghan and Newberry, in Las Vegas, Nevada, we represent clients throughout Clark County, including North Las Vegas and Henderson. We also represent clients in San Diego, California. Please read our diclaimer. |
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