Need Disadvantages To Filing Ch. 13 Bankruptcy
I am meeting with a women in foreclosure Monday to see if she will sell me her home. Numbers are sounding good so far, won't know until I see the home and run my due diligence. She is meeting with her atty to discuss Chapter 13 bankruptcy on Tuesday. If this property looks like it has potential what are some of the downsides I can share with her regarding Chapter 13?
She ultimately has to decide what is her best recource but I would like to show her the benefits of selling to me vs. filing Ch. 13.
She did say she has lived in the house for 40 years. If she has strong emotional ties she may not want to sell. However she sounded intrigued by what I had to offer...money for her equity and a fresh start.
If her financial hardship is or was temporary, and she can afford/qualify for a Chapter 13 to save her home.... the positives outweigh the negatives.
Be supportive, and if the bnk fails (most do) you'll be there to snatch it up.
Why no equity after 40 years?
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Short Sale Practitioners can't predict, or guarantee results... but can take steps to insure the likelihood for success....[ Edited by TheShortSalePro on Date 05/29/2004 ]
checkout if you could be forced to unwind your purchase.
Many yrs ago, doto a business going south, I had to contemplate bankruptcy.
I asked if I could sell my condo to someone, and he said if it's w/in 6 mo of the filing, it can be considered a fraudulent convience.
Basically I would have been dumping assets.
I won't consider buying if she decides to go Ch. 13. She is recently divorced and has been on disability for a year with limited disability income that does not allow her to cover the mortgage. She said if she goes the Ch. 13 route she has some friends who would be willing to be boarders in her home and pay rent to almost cover the entire mortgage. She sounds interested in selling and starting anew but she ultimately needs to decide.
She said ch. 13 gives her 36 months to fix her situation? Not sure what her disability is and how soon/if she can work again. What are the downsides to CH. 13? How is it structured? What does the mortgage company do in the interim?
I have an opinion for you but since we (you) do not know all of the facts, consider the following:
First of all, tell the lady that a CH 13 will only delay the inevitable foreclosure, cause her arrearages to soar sky high and she will most likely end up with a foreclosure and a bankruptcy.
I run into this all the time in my Loss Mitiagation business: Most bankruptcy Atty's are just as scum low as most real estate agents. It is unlikely that Mr.Atty will tell this gal the true consequences of a BK.
Bankruptcies can be filed, in most cases, the same day as the auction and can be effective in stalling the auction. Ergo, BK is the last option but NOT a solution.
Get a letter of authorization from lady and a financial statement to see if she can afford to live there. If she can't afford to live their, get pay-off and reinstatement figures from the bank and help the gal get on with her life.
Be helpful and not a greedy pig like some of these dippy so-called investors. Help this lady out and do the right thing as it will come back to you many times over.
I do anywhere from 5 to 15 of these transactions a month here in Dallas and spend more time getting people out of bankruptcy so the bank and I can make a deal to save the loan OR so I or one of my investors can acquire the property or note at a fair price to all.
Hope this helps,
C- :-o
The 36 months is probably the repayment plan to be worked out through the BK process. If she misses a single (re)payment during that 36 month process, all bets are off and she'll be right back in forclosure, and I think you can file Chapter 13 no more than every 6 months (don't quote me on this...still learning). If she has no history of making payments on time to perfection, all she will accomplish is the postponement of the inevitable for a few months and add a BK blemish to her credit in the process.
I'm with TheShortSalePro. Sounds like she's living well above her means and refinances her equity 'till there's none left to work with. She needs to see the reality of her situation (hard to do), and find a way to transition to living beneath her means.
I'd say use Chapter 13 only when the auction date is too soon to make the sale happen. File the emergency petition at your Fed. BK court prior to the sale, then notify the trustee or sheriff after the auction takes place. It will take time for the trustee/sheriff to invalidate the sale and schedule a new auction. The emergency petition buys you 15 days of "automatic stay" to complete the BK paperwork. Don't complete the paperwork and the Chapter 13 is dismissed as if never filed. Do your due diligence and make the sale happen as soon as you can after the case dismissal and before the next auction date (this means inspections, if any, lining up insurance and title insurance, etc.). Having the BK dismissed will help with the blow to her credit report, and buys her time to avoid having the double whammy of a foreclosure on her credit report as well.
Of course, your best bet is to convince her to sell before time is so short that you have to file a Chapter 13.
Thanks for all the responses so far. What are the major disadvantages to Chapter 13?
anyone?
OK, speaking from my position as executive director for a non profit housing charitable organization...
The downside to Bankruptcy Chapter 13 is that they are oversold, irresponsibly in my opinion, by bankruptcy attornies as a magical cure all.
Unless the proximate cause to financial distress > default is resolved, the Chapter 13 won't work.... Don't know the actual percentage, but awhile back 90% of Ch13s failed.
The downside is that the distressed homeowners get their hopes up....
If the Chapter 13 works... it's a much better alternative to losing the home.
The stigma of bnk isn't what it used to be.
[addsig]