5 Things Mortgage Companies Don't Want You to Know
2 Ways to Beat Credit Card Companies at Their Own Game
Rebuilding Your Credit after Bankruptcy
Dangers Presented by Home Equity and Consolidation loans
Bankruptcy Myths – Get the Facts
Self Test – Take this Simple Test to See if You Should File for Bankruptcy
5 Things Mortgage Companies Don't Want You to
1. They are not interested in working out your mortgage arrears with
you. Mortgage companies through their “Loss Mitigation Departments” will
have you fill out all kinds of financial statements and require you
to provide extensive financial documentations, all under the guise of
a loan workout. At the end of the process, which will take
months, the best deal they will make is for you to pay at least half
of your arrears up front with the balance of arrears paid over 6 months
in conjunction with your regular payment.
2. The mortgage company will not put the foreclosure proceeding
on hold while you are dealing with the Loss Mitigation Department.
In fact, most times the mortgage company won’t offer you any
kind of deal until they have a foreclosure judgment.
3. Once a foreclosure proceeding is instituted, you now owe not
only your back mortgage payments, but also attorney' fees,
court costs, and potentially Sheriff's commissions. Depending
on how far along the foreclosure proceeding is and how much is owed
on your mortgage, these fees and costs could be as much as $7,000
- $8,000.00. These fees and costs must be paid prior to your being
able to reinstate the mortgage.
4. By filing a Chapter 13 bankruptcy petition early
in the foreclosure process you can save on many of the fees and costs
that a mortgage company will charge. Your prospect of successfully
completing your Chapter 13 case is greatly increased because the
arrears that you will need to pay back will be much lower. Call
Capone and Keefe at to discuss this option.
5. Once a foreclosure proceeding is instituted against you, the
filing of a Chapter 13 bankruptcy can actually help raise your credit scores.
The Chapter 13 stays the foreclosure proceeding and you will once
again begin making mortgage payments, which your mortgage company
is required by law to accept. Capone and Keefe have an extremely
successful track record of refinancing Chapter 13 debtor's
out of bankruptcy, once the debtor has re-established a good payment
history with the mortgage company and the trustee. This can take
as little as 6 months. Call Capone and Keefe to further discuss this
option at . Back to Top
2 Ways to Beat Credit Card Companies at Their Own Game:
1. Take out new cards with low or 0% introductory interest rates
and transfer balances from the high interest card to the new card.
Keep track of when the introductory rate will expire and then transfer
the balance to a new introductory rate card. This way, the monthly
payment you make will actually pay down the principal balance and
not just pay the interest. **Make sure to cancel the old credit
cards once the balance is transferred, as open credit cards, even
without balances, negatively impact credit scores**
2. File a Chapter 13 petition and pay back some portion of your
credit card debt over a three to five year period at 0% interest,
and receive a discharge of the unpaid balances. Call Capone and Keefe
at to further discuss this option. Back to Top
Rebuilding Your Credit after Bankruptcy
As anyone can tell you, it is nearly impossible to live a normal life today without credit. The bankruptcy laws were enacted largely to give Americans without credit a fresh start. The bankruptcy laws provide debt stricken citizens with an alternative to continuing to live year after year, from paycheck to paycheck, with an ever increasing debt burden and an ever declining credit rating.
Many people, after filing bankruptcy, are surprised to find that their credit scores actually improve for the simple reason that their debts have been eliminated by the bankruptcy. While the bankruptcy filing can remain on a credit report for ten years, the credit score, which is the important part, will begin to improve immediately.
Within the first few months of filing, you will start to receive credit card offers from companies that used to decline your requests for credit prior to your bankruptcy filing. Within two years of filing, government mortgage lenders are required to offer you the same rates of interest as anyone else so long as you've paid your debts in a timely manner after bankruptcy. Many lenders consider you a better credit risk after the filing of a bankruptcy petition for two reasons: first, you can only file a Chapter Seven bankruptcy every eight years; and second, upon discharge, you have no other debts to speak of.
Obviously, the idea is to file once and get it right so that you never have to file again. Here are some tips on reestablishing your credit rating so that you can make bankruptcy filing truly a financial turning point and a fresh start:
- Apply for gas credit cards and store cards at businesses where you would normally just pay cash. Pay charges back in full each month or at least pay in a timely manner. Do not carry large balances on the cards.
- Apply for a secured card where you deposit cash and charge against it. Pay any advances back over a two month period so that they will reflect as positive marks on your credit report.
- If you are unable to obtain a loan on your own merits, find a relative or friend to cosign for you and pay the loan in a timely manner.
- Find a mortgage broker or car dealer who holds himself out as "bankruptcy friendly". Attempt to purchase a used car so that you do not get hit with depreciation that occurs during the first two years of a new car purchase.
- Stay away from payday loans that are at high interest rates and are a "bad credit" trap.
- Write a letter to each credit reporting agency explaining the circumstances that lead to your filing. You are entitled to include a statement in your credit report explaining why you had to file bankruptcy. If circumstances beyond your control were the cause, this can only help.
- Write to each credit reporting agency for copies of your credit report. Make sure that all of your pre-petition debts are properly notated as being discharged or paid through your bankruptcy. Make sure that none of your pre-petition debts are still being listed as delinquent, ie. 90 days late, 120 days late etc. If these debts are still being notated incorrectly, you are entitled to write the credit reporting agency and contest each such debt.
- Open a savings or checking account. Try to deposit 5% of your weekly paycheck into the savings account. Lenders may look at this to determine if you can handle money responsibly.
- Live within your means. Remember to not unnecessarily increase your debt to income ratio by taking on credit to purchase luxury items that you DO NOT NEED. Your payments on consumer debt should equal no more than 20% of your disposable income after deducting costs for housing and vehicles.
- Pay your rent and utility bills in a timely manner for at least a year.
- Apply for a secured credit card, where you deposit money and borrow against it. Do not purchase consumables (food, gas, and other things that you use up within a few days) with the credit card. The idea is that you want to be able to pay off the purchases before the item is used up.
- Make sure you don't apply for too much credit at once. Numerous inquiries to the credit reporting agencies will negatively impact your credit scores.
- Since student loans are generally non-dischargeable in a bankruptcy, make sure you make you payments in a timely manner, and if possible, pay extra each month to begin to pay down the principal. Back to Top
Dangers Presented by Home Equity and Consolidation Loans
Home Equity Loans
The major drawback of all second mortgages, home improvement loans, and home equity loans is that the creditor requires the borrower to put their house up as collateral for the loan.
Once you as the borrower give a creditor a lien on your real property, then you have given the creditor the ability to foreclose on your property if you are unable to make the monthly payment. This is true even if you are current with your first mortgage.
Home equity loans are often sold by brokers to and ultimately used as a "solution" by people who don't have enough income to repay their unsecured debts. This all too often results in long-term payments that are beyond their means. This sad fact is all the more tragic when you consider that each state has laws that protect a certain amount of home equity from creditors. Additionally, the federal bankruptcy laws allow you to discharge your unsecured debts and keep the protected equity in your home. Unfortunately, when people opt to pay off all of their unsecured debt through a home equity loan, rather than filing a bankruptcy, they turn dischargeable debt into secured debt. Thus, if they end up having to file a bankruptcy later on, they get stuck with a lot of debt that would have been discharged if they hadn't taken out the home equity loan.
While home equity loans may be attractive because they usually offer low interest rates and lower monthly payments, the total amount of payments often adds up to much more than the amount of the original debt that was consolidated. The total amount of interest that you pay over such a long period of time, usually 15 to 30 years, can be huge. Home equity loans can quickly turn disastrous for many people, given the frequently changing economy and unstable job market. Banks offer these low rates because they know that they can foreclose on the property if you fail to pay back the loan. Furthermore, when interest rates are low, borrowers are especially vulnerable to getting in trouble with home equity loans. Most home equity loans are variable rate loans, and the interest rate charged by the bank increases as the Federal Reserve Board increases the prime rate. As interest rates increase, a once affordable home equity loan payment may dramatically increase, making the home equity loan payment unaffordable.
Borrowers often need to be wary of hidden lender costs that quickly run up the cost of the loan. Borrowers are usually responsible for paying for title insurance, a new appraisal, origination fees, commitment fees, and possibly brokers' fees. Other disadvantages of home equity loans include "balloon payments" and "teaser rates." A "balloon payment" requires the borrower to pay off the entire loan within a certain number of years. This usually results in having to take out an additional loan and accordingly incurring more fees and costs. Borrowers without great credit might not be able to obtain a loan large enough to pay off the existing home equity loan and thus, will quickly find themselves facing foreclosure. A "teaser rate" is a low introductory interest rate that can increase during the term of the loan, sometimes by several percent, drastically increasing the total cost of the loan. Some home equity loans can be "flipped" into a new loan with a higher interest rate and add other additional costs.
Many people who take out home equity loans ultimately discover that they end up owing more money on their houses than they are worth. Obviously, this is extremely risky, and although the real estate market traditionally appreciates over time, it is dangerous to rely on real estate appreciation to ultimately meet the total amount owed on your home. Many people find themselves in situations where even selling their home would not generate enough money to pay off the home equity loan, after having to pay off the first mortgage and account for closing costs.
Home equity loans can be beneficial in the right situation. However you should always consult an attorney before using your home as collateral and potentially creating a larger problem down the road. Please contact Capone & Keefe at to discuss your situation.
Debt Consolidation Loans
Debt consolidation loans are personal loans that allow people to consolidate their debt into one monthly payment. The payment is often lower than the total payments of their current loans because this loan is spread out over a longer period of time. Although the monthly payment is lower, the actual cost of the loan is dramatically increased when the additional costs over the term of the loan are factored in. The interest rates on personal debt consolidation loans are usually very high, especially for people with financial problems. Lenders frequently target people in vulnerable situations with troubled credit by offering what appears to be an easy solution.
Debt consolidation loans can be either secured or unsecured. Unsecured loans are made based on a promise to pay, while secured loans require collateral. Upon default of the loan payment in a secured loan, the creditor has a right to repossess any of the items listed as collateral for the loan. Many lenders require the borrower to list household goods as collateral in order to obtain the loan. Upon default, the lender may repossess any of the items on the list. The federal bankruptcy laws allow you, in many cases, to remove the lien on the household goods listed as collateral and eliminate the debt.
Be wary of these debt consolidation loans, especially when the lender requests collateral. With the high interest rates and aggressive collection practices, this can be a recipe for disaster. Please feel free to contact Capone & Keefe at to discuss your situation. Back to Top