Law Offices of David P. Leibowitz LLC
Lakelaw is a registered assumed name for Law Offices of David P. Leibowitz LLC
A gentleman came to see us yesterday. He had some questions about his finances and he wanted to tell us about a property he held out of state. He didn’t know if he should consider bankruptcy, a foreclosure on that property, or some other solution to his cash flow issues.
As a manager of this property he took great pride in it. Most people have pride in their homes and properties, especially if they invest time and money into repairs and construction. That is a wonderful and normal human feeling.
In this case, I suggested that the man sell the property, even though it was about to produce enough rents to cover the mortgage, taxes, and overhead. Why?
We took a look at his whole financial picture and saw some clues that he should look to sell now instead of exploring a bankruptcy or a foreclosure.
1. His family didn’t wish to take over the property from him if he would sell it or deed it to them.
2. He spent a great deal of time with the management of the property. This is a fine hobby but took away time he could have been spending with his family here.
3. The neighborhood isn’t fantastic, and he didn’t feel like he would be comfortable living in the property.
4. Rents were going to increase, meaning it would be profitable.
5. The real estate market is slowly getting better, leading to better sales.
The point was that he should sell high and try to recover what he owes on the property. If a short sale was required, he could explore those options as well. Changes to his income and expenses eliminated the need for a bankruptcy filing, and a foreclosure would lead to the same result (losing the property) but with a long stain on his credit and increased legal fees, as well as a potential claim by his second lender.
He came to see that the most flattering feeling he could get from this property would be an offer to purchase. After all, nobody really wants to buy lousy, poorly maintained properties. It would be a compliment to his hard work.
When it is best to sell or give up real estate? Here are some general thoughts
1. When the real estate requires so much work and money that it would become a money pit.
2. You don’t want to hang on to the property forever, and the market is as high as it will be in the foreseeable future.
3. It doesn’t generate any or enough rental income to cover the mortgage and upkeep.
4. It is dangerous to live in
5. It is no longer affordable based on your current income due to a decrease in income or increase in expenses
If you can’t or don’t want to retain real estate – either your home or other property – call or e-mail us to set up an appointment. We can review how you can better your finances through a sale, a short sale, deed-in-lieu of foreclosure, a regular foreclosure, or a bankruptcy.
Freddie Mac and Fannie Mae back over half of the nation’s mortgage loans. Because they were exempted from the recent foreclosure settlement the Attorneys General reached with the biggest individual servicers (Chase, Bank of America, Wells Fargo, Citibank, and Ally/GMAC), many loans are still in crisis and these two semi-governmental bodies haven’t really addressed their role in helping our mortgage crisis.
A new loan set to go into effect on June 15th for Freddie or Fannie backed loans will require the giants to respond to short sale requests within 30 days, with weekly updates after. With some short sales taking over 10 months to complete, this process hasn’t been effective as an alternative to foreclosure. Impatient buyers will back out, leaving the parties without a way to walk away from the property without completion of the foreclosure process. During this time, the borrower’s credit will suffer for each month the mortgage isn’t paid on time.
Short sales have their advantages if they are completed quickly. The servicer can provide cash incentives for the borrowers to leave and they don’t need to wait out the required redemption period. The borrowers can have the comfort of knowing they’ve done their best to eliminate any damages caused by their lack of payment. And if this property is the borrower’s home, the forgiven debt won’t have to be taxed (at least until the end of this year).
Of course, any law that is meant to force a response from a slow, bureaucratic body is only as effective as its enforcement. But given the rude and inefficient way in which many borrowers are treated when they try in good faith to conduct a short sale instead of heading into foreclosure or bankruptcy, it may be a welcome change and hopefully match buyers and sellers properly, and perhaps put a dent into the number of homes – and homeowners – in crisis.
No. Social Security, like most government assistance, is completely off-limits to creditors. This means that creditors cannot take Social Security payments. As a society, we have decided that those who are unable to work should not harassed by creditor garnishment. Social Security payments are not large amounts of money, so Social Security recipients should be able to keep their benefit payments for personal needs.
There are two important things to keep in mind. First, creditors can still collect against non-exempt assets. This means that creditors who have judgments can take property not shielded by the laws of the debtor’s state. After the creditor takes the property, it can sell it in order to pay off the debt. If that process does not completely pay off the debt with the sale, the creditor can keep taking non-exempt property until the debt is paid in full. It is important to remember that creditors cannot come after ALL of your property, only property not protected by statute.
The second thing to remember is that there is nothing preventing a creditor from asking for a payment. Often, a creditor will ask a Social Security recipient if he or she would be willing to continue making payments. There is nothing preventing a debtor on Social Security from agreeing to an arrangement. That said, a debtor should remember that Social Security payments are off-limits to creditors and the creditor will not be able to take Social Security payments without the debtor’s consent.
If you have questions about Social Security payments and debt, or any other consumer matters, please feel free to contact the professionals at Lakelaw (866-LAKELAW, or 262-694-7300 in Wisconsin). We specialize in helping people get their financial houses in order while treating clients with Care, Kindness, Courtesy, Respect, Professionalism and Dedication.
This post was drafted by Nicholas Strom, Lakelaw attorney
Until recently, a homeowner or renter who fell behind with Wisconsin Electric/WE Energies in Wisconsin for gas and electric service could file an action under Section 128.21 of the Wisconsin Statutes to prevent a disconnection.
The Chapter 128 filing is a common filing in Wisconsin and is an attractive alternative to bankruptcy in some cases. It is usually cheaper than a Chapter 7 bankruptcy, and very easy to file. All that is needed to begin is a petition asking the circuit court of the county of residence to accept the repayment plan. The plan will allow 36 months or less to repay a selected list of unsecured creditors (no car notes or mortgages) in full. It stops interest and fees from continuing and allows time to pay off debts without having to go into bankruptcy. It also creates an order preventing wage garnishments and other actions to collect on judgments.
However, thanks to a recent ruling from a Milwaukee county judge, WE Energies is no longer required to accept this payment plan to prevent a disconnection. Instead, consumers will have to call in to WE’s toll-free number (800-843-4565) to set up payment arrangements to prevent their service from being shut off.
§128.21 filings can still be appealing but may not be the solution when it comes to past due utilities. If you are a Wisconsin resident, you may be eligible. Please call us at (262) 694-7300 to discuss bankruptcy and Chapter 128 as options to solving financial crises, including outstanding utility bills.
Posted by David Leibowitz on September 21st, 2010 in Alternatives to Bankruptcy
We at Lakelaw have been saying this for years. Debt settlement firms say “don’t file bankruptcy.” We say steer clear of debt settlement firms. And we’re not alone. Here’s a great video from MSNBC which explains it in detail.
Do you want to try it yourself? Go for it. Try to settle those debts by yourself. Or call Lakelaw. We know what the going rates are and we’ll be glad to help. If you have the funds to avoid bankruptcy, wonderful. If you don’t don’t worry. We’ll help you file bankruptcy and get the fresh start that you need and deserve.
For financial freedom in Illinois and Wisconsin, call us at Lakelaw – 1 866 LAKELAW. That’s 866 525-3529.
If you are facing foreclosure in Wisconsin, you’re not likely to suffer a deficiency judgment even if your house has lost a lot of value. What’s a deficiency judgment? That’s a judgment against you for the difference between the amount owed on your mortgage and the value of your house. So many home-owners find themselves “upside-down” – the value of their homes are less than their mortgage. They don’t see any reason paying for something worth less than it is worth. They don’t think of their home as a wasting asset. So they stop paying on their mortgage. It may be cheaper for them to rent.
Foreclosure is not a good thing. You will lose your home. You’ll have to move. But you probably won’t have to pay a big judgment to the mortgage company. That’s because in Wisconsin, the lender on residential real estate has a choice of waiting 12 months from the time the foreclosure case starts before the foreclosure is complete or 6 months. If the lender selects the 6 month waiting period, which is almost always the case, the lender must give up any rights to a judgment for the difference between the loan and the value of the home – the deficiency judgment.
So if you face foreclosure in Wisconsin and that’s your only big debt, you at least may be able to avoid the need to file for bankruptcy.
Call us at Lakelaw to discuss your options – we’re at 262 694 7300 and we help people with mortgage foreclosure and bankruptcy throughout the State of Wisconsin.
Posted by David Leibowitz on March 28th, 2009 in Alternatives to Bankruptcy, Business Bankruptcy, Alternatives to Bankruptcy, Assignment for the Benefit of Creditors, Chapter 128, Dissolution, Uniform Commercial Code Sale
Chapter 11 is used to help businesses reorganize. It continues to be an important tool. There are many important options which a small business and even a medium sized business should consider when facing financial difficulties.
Is the business fundamentally sound?
If the business continues to be viable, think about what went wrong. Think about how it could be fixed. Think what the business would look like if you fixed it. Then think about whether your creditors are better off if your business is fixed and continues to be viable. If you can think positively about all of these questions, and if you have some cash to fund the reorganization of your business, Chapter 11 can still be a good idea. There are some down-sides to chapter 11:
Alternatives to Chapter 11
There are several alternatives to chapter 11. Lakelaw handles all of these for small and medium sized corporations, limited liability companies and other business forms:
Liquidation of the Business
In the event that you feel that your business can’t be saved, there are many possibilities. Bankruptcy under chapter 7 is only one possibility. Here are some others:
Each of these vehicles has upside and downside. So when in doubt, call us and we’ll evaluate your particular situation and then help you make the right choice for you and your business.