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How do I negotiate a lower house payment?

Why Would you Need to Negotiate a Lower House Payment?

If you bought your home in the beginning part of the 21st century or earlier, recent changes in the housing market may have you, like many other people, in a tough financial situation for a couple of reasons:

Higher interest rates

Interest rates have generally declined in the past few years, setting record lows that have not been seen for 40 years or longer.  If you are still paying a monthly mortgage based on a high interest rate, it means you are making a higher payment than you would be paying if you financed your home today.

Lower property value

With the current economic turmoil in the United States and other parts of the world, there has been a rash of foreclosures as people have been unable to continue to make their mortgage payments.  The large number of foreclosures has flooded the housing market with a higher-than-normal number of available properties.  This surplus has led to a decrease in general in the value of real estate.  As a result, if you are one of those who have been lucky enough to be able to continue to make your mortgage payments, it is likely that the value of your home has decreased.  This means you may be making payments on a mortgage where you owe more money than your house is actually worth.

If you are in a situation where you face one or both of the above issues, along with other strains on your finances such as a loss of employment or high interest payments on credit card debt, you may be considering bankruptcy or other options to reduce your outgoing cash flow.  One option you may not have considered is negotiating a lower house payment.

While mortgage companies would certainly prefer to keep receiving regular monthly payments in full at your current interest rate, they are well aware of the large number of people who are no longer able to maintain those payments.  Therefore, it may be in the mortgage companies’ best interest to work with you to keep you making some form of payment, rather than being stuck with a house they do not want.

You heard me right:  a mortgage company or bank does not really want your house.  Banks and mortgage companies are structured to in large part make money on the interest they earn by loaning people money.  When they finance your mortgage, they generate revenue through the interest you pay (as well as late fees if you cannot pay on time).  They would prefer not to have to take your home.  When they do, this means they lose the revenue stream related to your payment and the interest while they incur expenses related to seizing and selling the house (e.g., attorney fees, real estate fees, loss in value if they have to sell the home at a lower amount than it was originally worth on their books).  Therefore, mortgage companies can at times be incented to work with you in negotiating a lower house payment.

Ways to negotiate a lower mortgage payment

Ask for it

You are not the first person who has considered requesting a lower mortgage payment.  Mortgage companies and banks generally have a Loss Mitigation Department (although it may be known by a different name than this) to which you can present your case for a reduced mortgage payment.  Through a loan modification, the mortgage company may extend the term of your loan, convert the loan to a different type of loan (e.g., a fixed rate from an adjustable rate), or add missed payments to the loan balance so that you can resume normal mortgage payments going forward.  If a mortgage company is willing to work with you on reducing your payment, they will want to see financial statements and other documentation to prove you are experiencing financial hardship.  But keep in mind that although a mortgage company may in theory have incentive to work with you on a loan modification, they are often very inefficient at carrying out the process.  This may mean that stepping through the process in its entirety may be long and time-consuming.

Should I Refinance my Home?

If current interest rates are significantly lower than what you are paying at present, refinancing your mortgage to that lower rate can reduce your payment.  Even though you will have to pay various fees for the mortgage company to carry out the finance, which may be rolled into the balance due on the mortgage, the lower interest rate and longer payment term that come with refinancing can reduce your monthly payment.

Filing bankruptcy

While declaring bankruptcy should not be done lightly, it is an option that may allow you to re-negotiate your mortgage with your lender.  But a bankruptcy is generally not going to allow you to reduce the principle balance you owe on your mortgage outright; rather, it is going to lead the mortgage company to work with you in performing a loan modification as described above.  Therefore, bankruptcy should only be considered as a last resort if you have unsecured debt or other financial issues that bankruptcy can help address.

Whatever your situation, it can be tricky to gather all the needed information to make an informed decision about what to do without obtaining professional help.

Hiring a Bankruptcy Lawyer?

A bankruptcy attorney can help you perform this analysis.  A bankruptcy attorney will have experience in working within the bankruptcy and other laws applicable in your state to determine, based on your current situation, what makes the most sense for you.  Such a consultation is available free of charge and with complete confidentiality, if you simply fill out the short form available below.  So please get the help you need today in making this tough decision.

How do you know when it is time to file bankruptcy?

Is it time to file bankruptcy?

You like many Americans may be feeling the financial repercussions of the downturn in the economy.  While the expense of day-to-day living goes up, even those who are employed may feel like they are falling further behind because their salary increases, if any, are not keeping pace with their expense increases.  And if you are like many who have lost your job, the situation is even more dire.  You may be able to make ends meet a bit longer because you can continue to put charges on your credit card, but the interest charges are growing exponentially and your balance is fast approaching your credit limit.  Soon you may not have the money to make payments on your car or home.  With your money running out, where can you turn?

If your situation sounds similar to the one described above, one option you may have to consider is bankruptcy.  Bankruptcy is a legal process that provides a method by which an individual can get a fresh start, reducing or eliminating their debt so that they can afford to function day-to-day.  While you may have a very negative view of bankruptcy, because you may see it as humiliating and not upholding your end of the obligations you agreed to meet with various creditors, you need to keep an objective viewpoint as you evaluate your options.  Remember that bankruptcy laws were put into place to help good people like you who may have simply made some unfortunate decisions or had things happen that were out of their control.  And creditors are aware that bankruptcy protection is a situation they may face with some of their debtors.

Before you declare bankruptcy, here are some things you should consider when making the decision:

What should I consider before filing bankruptcy?

While bankruptcy is a powerful tool designed to help people like you and me, bankruptcy should be used as a last resort.  You should first try to contact your creditors to negotiate a payment plan or explore other payment options they offer.  You can also work with a credit counselor, who may be able to negotiate a lower interest rate on your behalf.  But if you do seek to work with a credit counselor, be sure to take steps to confirm they are a reputable organization.  Many debt consolidation firms that promise offers of help to individuals in debt often leave those individuals in worse shape than before they started.

Am I better off declaring bankruptcy before my assets are exhausted?

Because there are different types of bankruptcy, including Chapter 13 bankruptcy that involves a restructuring of your debt rather than an elimination of it, it may be wise to declare bankruptcy sooner rather than later.  Declaring bankruptcy while you have some assets remaining may allow you to better use those assets to help with the restructuring, rather than simply using them to make payments on high-interest credit card or other debt when the chance of recovering does not appear likely.

Do I have assets I want to protect?

If you declare bankruptcy, many of your assets may be liquidated to help pay balances owed to creditors.  Such assets are known as non-exempt property.  Non-exempt property includes things like balances in checking and savings accounts, family heirlooms, and vehicles owned beyond the first vehicle.  However, your home and the first vehicle you own are examples of exempt property, which are assets that the bankruptcy proceedings cannot force you to liquidate.  If you are facing foreclosure of your home or repossession of your automobile, bankruptcy can put a stop to these actions and give you time to eliminate or restructure other debt.  Change to your other debt, along with possibly re-negotiating your payment with your home or automobile creditor, may allow you to keep your home and car using your existing income.

Regardless of your individual situation, declaring bankruptcy can be a frightening process that should not be done lightly.  Therefore, it is generally wise to seek professional advice when making this decision.

Hiring a Bankruptcy Lawyer?

You do not have to make a decision about declaring bankruptcy on your own.  Bankruptcy attorneys have the training and experience to objectively evaluate your situation and make a recommendation as to whether bankruptcy is right for you.  If you complete the short form below, a bankruptcy lawyer can review your situation and perform any needed follow up to help you make a decision.  Remember, this review is 100% confidential and there is no further obligation to you after an initial review.  Therefore, you have nothing to lose by completing the form today.  Please do so to get the help you need and to take some of the burden of making a decision about declaring bankruptcy off your shoulders.

How does filing bankruptcy affect a workers’ compensation claim?

If you have been injured on the job, you may be in line to file a workers’ compensation claim.  This claim is a benefit that is designed to replace lost income while you recover from your injury, as well as to pay medical costs related to treatment of your injury.  But what if a bankruptcy is brought into the equation?  How will that bankruptcy affect your workers’ compensation claim?  Will you be able to keep the benefit payments you receive?

Whether you were about to file for bankruptcy, believe you may need to file for bankruptcy because you receive less income now that you cannot work, or you are already making payments as a part of a Chapter 13 restructuring of your debts, bankruptcy can have an impact on your workers’ compensation claim.

At the federal level, workers’ compensation claim benefits are considered exempt property.  “Exempt property” is a bankruptcy term that refers to property that cannot be liquidated by a bankruptcy court or trustee as a part of a bankruptcy.  This means that in general payments you receive as a part of a workers’ compensation claim—whether recurring payments or a lump sum payment—will be yours to keep, even if you receive the payments while in the midst of the bankruptcy.

However, the final disposition of workers’ compensation claim benefits is not this clear cut in all situations.  While the federal bankruptcy code defines workers’ compensation benefits as exempt property, each state has the choice to opt out of the exemptions provided by the federal bankruptcy laws.  Therefore, some states have created their own list of exemptions and allow you to choose the exemptions—either the federal or state exemptions, but not both—that work best for your situation.  The remaining states have created their own list of exemptions and require that you use the state exemptions, not the federal exemptions.  Therefore, it is a wise idea to consult a bankruptcy attorney to confirm which exemptions are permitted in your state.

One final note: If you previously filed a Chapter 13 bankruptcy and are currently making payments related to the bankruptcy restructuring plan, you need to let your bankruptcy attorney as well as your workers’ compensation attorney know about your injury.  If you receive less income from your workers’ compensating claim than you did while working, you may need to work with your bankruptcy attorney to restructure your Chapter 13 payment plan based on your new income level while you recover from injury.

How can I hire a lawyer to help me with my bankruptcy while considering the impact to my workers’ compensation benefits?

By completing the short form below, a bankruptcy lawyer will review your specific situation.  This lawyer will know the bankruptcy laws in your state and be able to address any questions you have about how a bankruptcy will affect your workers’ compensation benefits.  This review is 100% confidential and there is no obligation to you.  Therefore, seek help today in getting answers to your questions about workers’ compensation benefits in light of a bankruptcy.

How does filing bankruptcy affect my back taxes?

If you are experiencing financial difficulties because of a loss of employment, divorce, a lawsuit or judgment, or for other reasons, you may be considering bankruptcy as an option to alleviate the financial liabilities and accompanying stress.  Bankruptcy is a legal process a person can use to get a fresh start—that is, to restructure or eliminate their debt so that they can afford to live on their existing income and begin to re-establish their credit.  While bankruptcy should not be used without exhausting other options and confirming it will help in your specific set of circumstances, it is a viable option that you may need to consider.

It is possible that part of the financial obligations that you cannot afford to pay includes taxes.  Whether payroll, property, or state or federal income tax, taxes can amount to a significant obligation.  Therefore, an important question you may be asking is: Can a bankruptcy be used to eliminate my back taxes?  The answer is yes, but it depends on the timing and classification of the taxes involved.

What types of taxes can (and cannot) be discharged by filing bankruptcy?

The taxes that can be discharged by filing bankruptcy does not have a straight-forward answer simply based on the type of tax.  For example, it is not as simple as saying that federal income tax liabilities are always or are never dischargeable.  But there is a classification system used to categorize taxes when considered in a bankruptcy situation.  This system uses two classifications: a Priority Tax Claim and a General Unsecured Tax Claim.

Priority Tax Claim

A priority tax claim is never dischargeable in a bankruptcy; you will have to pay 100% of these taxes.  A tax is a Priority Tax if it meets one or more of the following criteria:

Sales Tax and Income Tax Withholding

These taxes (also known as Trust Fund Taxes) are often collected by a business (from the customers and employees, respectively) and should be remitted to the appropriate taxing authority.  Whether you failed to collect these taxes or you collected them and did not pay them to the appropriate taxing authority, these taxes are not considered your property and therefore they must be paid even in a bankruptcy.

Taxes Secured by a Lien

Whatever the type of tax, if the taxing authority has filed a lien on your property related to the tax, the tax is considered a Priority Tax up to the available value of the property not already covered by a higher-priority lien and must be paid even in a bankruptcy.

For example, take a situation where you own a home worth $200,000, have a mortgage with a balance of $180,000, and a tax lien (whether from property or other taxes) of $30,000.  In this situation, the mortgage lien is the first or higher- priority lien, so it is secured up to the full $180,000 value of the mortgage (because the property at $200,000 is worth more than the mortgage).  This leaves $20,000 (i.e., $200,000 minus $180,000) in value that can be used to secure part of the tax lien.  Therefore, this $20,000 amount is considered a Priority Tax.

Income Taxes for Previous Three Tax Years, Assessed in Past 240 Days, or Related to an Unfiled or Fraudulent Return

Income taxes are Priority Taxes if they are a). due for tax returns filed in the three tax years preceding the date bankruptcy is declared, b). tax assessed within 240 days of the date when bankruptcy is declared, or c). tax due on an income tax return that was never filed by the taxpayer or that was filed in a fraudulent manner.

General Unsecured Tax Claim

A General Unsecured Tax Claim is a tax that is either old or not secured by a lien against a property.  In short, these taxes are ones that do not qualify for any of the above methods of becoming a Priority Tax.

General Unsecured Tax Claims can be discharged either fully or partially as a part of a bankruptcy depending on the type of bankruptcy filed.

Do the types of taxes that can be discharged vary depending on the type of bankruptcy filed?

While the types of taxes that can be discharged in a bankruptcy are not dependent on if you file Chapter 7 or Chapter 13 bankruptcy, the amount of tax that can be discharged is dependent on the bankruptcy type.

As noted above, Priority Tax Claims must be paid at 100% by the taxpayer as a part of a bankruptcy, regardless of the type of bankruptcy the taxpayer declares.  For General Unsecured Tax Claims, a Chapter 7 bankruptcy can be used to fully discharge the tax liability, so the taxpayer will pay 0%.  With a Chapter 11 bankruptcy, the taxpayer will pay a percentage between 0% and 100% of the General Unsecured Tax Claim.  The percentage of the General Unsecured Tax ultimately paid will vary from case to case, depending on the specific situation of each individual’s bankruptcy.

Can a bankruptcy attorney help me determine if my tax liability can be discharged through bankruptcy?

Yes, a bankruptcy attorney will have the experience, training, and knowledge of the bankruptcy laws to review your specific situation and determine if a bankruptcy can be used to eliminate some or all of your tax liability.  You can obtain this professional help by completing the short form below.  When you complete this form, there is no obligation to you and the review is 100% confidential.

Determining how the bankruptcy laws apply to different types of tax is a difficult subject to analyze.  Therefore, please complete the form below to get the assistance you need today.

How does filing bankruptcy affect judgments against me for credit card debt?

If you have credit card debt that you cannot afford to pay or have even reached the point where the credit card company has sued you and obtained a judgment against you, you may not know where to turn.  But one option you should at least consider is declaring bankruptcy.

Bankruptcy is a powerful tool that exists to help individuals with more debt than they can afford to pay.  Even if a credit card company has obtained a judgment against you, a bankruptcy can eliminate that judgment and give you a fresh start, so long as the debt was not created under fraudulent circumstances.  For example, if you decide that you are going to declare bankruptcy, but before you do, you make additional charges on your credit card (thinking that the bankruptcy will simply make these charges go away), the creditor can file an action to request that the debt not be discharged.

It is important to point out that there is a difference between a judgment and a lien.  A judgment results from a ruling by a court in favor of your creditor, which states that you must pay the specified amount of money.  A lien is when a creditor that has obtained a judgment against you then has that judgment attached to your assets, such as real estate.  If you sell the asset, any proceeds from the sale will have to go toward payment of the lien.

As noted above, a judgment from a credit card company can be eliminated as a part of a bankruptcy.  But a bankruptcy may not be able to eliminate a lien depending on the timing, circumstances, and location under which the lien was filed.  Therefore, it is generally a good idea to have the specifics related to any judgments or liens reviewed by a bankruptcy attorney before making a decision.

Declaring bankruptcy is not an option you should consider lightly, as it can have significant long-term consequences.  These consequences can include having the bankruptcy reflected on your credit report, impacting your ability to obtain some jobs, increasing the difficulty and cost of future loans you are able to obtain, and forcing you to sell assets you would otherwise prefer to keep.  But if you already have a judgment against you for credit card debt, declaring bankruptcy may still be the best option.

How can I obtain help from a bankruptcy attorney related to a credit card judgment?

If you complete the short form below, a bankruptcy attorney can review your specific situation to give you further advice.  A lawyer who is trained in bankruptcy proceedings and who has worked with other clients with situations similar or identical to yours will have the necessary experience to evaluate what next steps are best for you.

As a bankruptcy may have repercussions that last for many years, consider all available options before entering into bankruptcy proceedings.