Facing foreclosure? Talk to an attorney
The May 5 Citizen-Times featured an article from USA TODAY’s Christine Dugas titled “When is it worth walking away from a mortgage?’’ The article did not mention the important legal issues that any homeowner should know about as soon as possible if they may be facing foreclosure.
First, there may be options to save your home, even if you have been turned down for help before. OnTrack WNC (housing counseling services) can help many homeowners find solutions to save their home. But if there are legal problems with your loan or the way it has been handled, or simply if you are at risk of foreclosure, only an attorney can assist you with the important legal issues you need to know about.
Most important, there is no time to waste. The sooner you know what your legal rights, obligations and options are, the better. Pisgah Legal Services offers free legal aid to those of limited means, many local bankruptcy attorneys offer free initial consultations, and low-cost advice is available through the N.C. Lawyer Referral Service. So motivation, not money, is your first hurdle to getting help. Don’t wait — reach out for help.
Once foreclosure is filed, it is especially important to get legal advice — whether you are still trying to save your home, know it’s a lost cause, or just aren’t sure. Legal representation at foreclosure can make a big difference in any case and, most important, can help you make the best decision about your at-risk home.
Chapter 13 bankruptcy may offer a solution to save your home. Filing bankruptcy stops foreclosure and other legal actions that are pending, and with an approved Chapter 13 plan, you can be given three to five years to catch up your home loan, even without your lender’s cooperation.
Other Chapter 13 benefits may include relief from second mortgage loans if the home is “underwater” (worth less than owed) and can help buy time to sell your home if you have equity, or you need time to move. But, as they say, “restrictions apply,” and only a bankruptcy attorney can help you figure out if Chapter 13 is right for you.
Deciding whether to give up on trying to save your home involves important legal issues every homeowner needs to know about, especially if you end up owing money — a deficiency — on your home loan after you lose or give up the home. A deficiency on your former home loan raises two legal issues you don’t want to ignore: your personal liability; and your possible hidden tax consequences from owing the deficiency. Money owed for a home loan deficiency, like any debt, can be sued on to get a money judgment. But a former homeowner has important rights, too: exemptions may protect what you have left after a foreclosure, you can’t be jailed or have your wages garnished to collect a debt, and it is against the law for creditors to harass debtors. And Chapter 7 bankruptcy can provide a “fresh start” by eliminating debt while allowing the debtor to protect exempt and future property.
Tax-wise, a deficiency left over after you lose your home can bring an unpleasant surprise: If the deficiency is reported to the Internal Revenue Service as “forgiven debt,” you will likely owe taxes on that amount, as if it were income. There are three exceptions that avoid tax liability for forgiven debt (“insolvency,” “residential foreclosure,” and bankruptcy), but it is especially critical to get early legal advice, because you can lose important rights if you don’t take the right steps before your deficiency gets reported to the IRS as “forgiven debt.”
It’s bad enough to face the stress and fear of possibly losing your home, but it is so much worse if you are “lost in the woods” because you don’t know your legal rights, obligations and options. Confidential advice from a knowledgeable attorney who is on your side can make all the difference to help you find your best way out of the “woods” when you are at risk of losing your home. Don’t face the crisis alone, and uninformed — get help, and the sooner the better.
Walton Davis, of Black Mountain, is a tax law attorney with Stone and Christy, P.A.; Asheville bankruptcy attorney Kevin Radey runs the firm of Kevin Radey and Associates, PA; and William J. Whalen is senior staff attorney, Pisgah Legal Services.
Read the original story at Asheville Citizen-Times here: http://www.citizen-times.com/apps/pbcs.dll/article?AID=2013306020013